Million Dollar Payout, Oracle Earnings Preview, Risk On, the Case for Salesforce

14:44Downtown Josh Brown:Like 212 bottom? Which bottom? Please don't. I'm very impressed by that. Your call is important to us. Yeah, let's see.

15:00Michael Batnick:Don't worry about where I bought it. I'm up 3%. So my average price is... Oh. Oh, 215. So I bought it and then I bought more. So I don't know where my first buy list, but 215.

15:13Downtown Josh Brown:Okay. Look, I'm rooting for a positive outcome here. I'm not one of these people that is looking for drama or looking for news just for the sake of news. I would love to see the company come out with a good report and affirm all of the spending and all of the necessity for the spending. that the bulls want to hear. And I'd love to see the stock bounce a little bit and continue higher. I'm not currently long, and I have to be honest with you, I'm sort of worried. I'm sort of worried. I think it might be a situation where almost no matter what they say, it won't be good enough. But maybe that's not the case.

16:00Downtown Josh Brown:And we're all going to find out, and it's not going to take very long. We're going to find out this time tomorrow. Let the record show.

16:06Michael Batnick:No, my first buy was November 14th, so not the bottom. In fact, I did not buy the bottom.

16:13Downtown Josh Brown:What do I think what? What do you think? What area of the market do you think is most at risk of a not great outlook or a not great report? I think it's the chips.

16:23Michael Batnick:On the heels of this? Like if they miss, what's in trouble? Not if they miss.

16:29Downtown Josh Brown:Let's say they beat, but they don't give strong enough guidance or the tone of the call isn't positive enough. because the chips, the semis just made a record high like today or yesterday.

16:43Michael Batnick:What is the highest beta, the name that's most highly levered to the chip story? Is it CoreWeave? I don't know. Yeah, it'd be interesting.

16:53Downtown Josh Brown:I wonder if all those power providers and that whole electricity trade can hold up if Oracle falls because they're sort of like one of the biggest customers for all of the like AI data center components and the electricity. So look, I'm worried, but I also don't think that any of these companies could jeopardize all the spending they've done already by giving anyone the impression that they're not gonna follow through with it.

17:25Michael Batnick:I'm less worried about the report itself. I'm not worried about the report itself. I would be surprised if they're like, oh, guys, what we told you in September didn't pan out. But I think the worry would be that the market doesn't care, sort of like it did with NVIDIA in the short term. The market just wants to sell it anyway. All right.

17:43Downtown Josh Brown:Does Michael Burry get on the call and ask a question in the Q &A? You're joking. No, I'm asking.

17:53Michael Batnick:No.

17:54Downtown Josh Brown:Is that a thing that could happen?

17:55Michael Batnick:No.

17:56Downtown Josh Brown:Cannot. No? Okay. No. All right. Would they let him through? No. Even if he tried? No. These are sell-side analysts. He's not on the call. I'm just asking, could he get on the call? No. Is it possible? You've never heard a buy-side firm get on a call and ask a question? A one-man. Greenlight Capital has done it.

18:16Michael Batnick:He's a one-man operation. He's not getting on the call.

18:18Downtown Josh Brown:All right. All right. Just curious. All right. So we're rooting for you, Michael. We're not making too much of this. This is a big deal.

18:28Michael Batnick:If I lose money, it will not be the first time. So it's okay. Whatever happens, I'll be okay. Yeah, well, we know.

18:34Downtown Josh Brown:All right.

18:35Michael Batnick:Where are we going, Dex? Okay. Okay. This next segment is brought to you by PIMCO. To learn more about their suite of ETFs, visit PIMCO.com slash ETFs. I've got a chart for you. I believe this is from, oh, it says it right there on the bottom. This is from Goldman. Check this out. Not new, but nope, nope, nope. There we go. All right. The 10 largest companies represent 41 % of the market cap of the index. and 32 % of the earnings. So this is hardly breaking news to say that everything hinges on the top 10, right? That's it. That's the story. I was very surprised by this next chart. Here we go.

19:21This is a value composite.

19:24Michael Batnick:And the reason why I was surprised, I'm like, wait a minute. So what this is showing you for the listener, whatever value composite you're creating, multi-factor, just one of price to sales, price to book, EBIT, whatever it is, they all look like this. Obviously, it went nuclear in 2000 and in 2020. But what surprised me was the extent to which these names came in, the value spreads came in. Reason-wise, this is a global value composite. Josh, did you know that international value stocks are absolutely, did I delete this? Maybe I did. Are absolutely beating the pants off of the index, like S &P and global.

20:08Michael Batnick:International value stocks are up like 35. Thanks. So I'm talking about this with Ben today, completely underreported. I think maybe because it's only been a year and if you like zoom out, it's like a glitch. Not a glitch, it's a blip. It doesn't register at all. If these, if value international stocks and value stocks continue to work, pretty international value. In 2026, it's going to start to make headlines.

20:34Downtown Josh Brown:I think one of the reasons it's been so underreported, and I know Ben shared that chart with us where Italy, like the country's stock market, beat the S &P over the last, what was it, three years? One year? I forget what it was.

20:49Michael Batnick:I think it was three. Right.

20:50Downtown Josh Brown:I think one of the reasons it's been so little remarked upon is because nobody owns those stocks. You know, if you're doing stories at the Wall Street Journal, you go to an editor and either you have an idea or they assign something to you. And they're not assigning articles about international value stocks because who is the f***ing reader? Who's clicking that? Other than me, you, Meb Faber, and like nine other losers, nobody else cares. We care because we have nothing better to pay attention to. So that's one of the reasons why this is not being reported on. And then it's the stocks themselves.

21:29Downtown Josh Brown:Like you look at what's in these indices. You know, like Canada is up 31 % this year. Why? Because gold went up. Like, and banks. Italy, the story is banks and a little bit of auto. But you go country by country and you realize it's really boring companies that people just don't care about. So we pay attention because we're invested in international value stocks.

21:56Michael Batnick:Put that chart back on. But my point, I guess another point is this. In 2021 and 22, as these value metrics were getting to or past where you were in 2000, this was widely reported, right? Like a lot, a lot, a lot, a lot. And now that they've come down, nobody cares anymore. Yeah.

22:18Downtown Josh Brown:If only they did more AI. All right.

22:21Michael Batnick:Anyway, I wanted to - What's this next one? I have a good chart for you. So did you know the S &P value index looks an awful lot like the S &P? Throw up this table. So these are the top three weights in the S &P value ETF is Apple - What? Microsoft and Amazon. Did you know this?

22:43Downtown Josh Brown:Do words have no meaning anymore? these are that apple is a value stock on what basis on what on what metric amazon what are they

22:54Michael Batnick:valued at what are they valuing them based on all right so look at this next chart so i honestly i didn't look under the hood into the methodology for this but the chart on the right the chart on the left shows you yeah the s &p on the x-axis okay the weight and yeah ive which is the s &p value on the left. So it doesn't own NVIDIA, interestingly. It doesn't own Google or Meta. But if you look at Microsoft, it's basically in line. Apple and Amazon, basically in line. So I

23:27Downtown Josh Brown:don't know what they're using, but look at - Wait, what is MFUS, the multi-factor ETF?

23:36Michael Batnick:This is Pimco's Rafi product.

23:39Downtown Josh Brown:Okay, got it.

23:40Michael Batnick:So they similarly are very underweight, but it looks nothing like the chart on the left. Like this is actually giving you value-ish exposure. Okay.

23:53Downtown Josh Brown:So the return should be wildly different. And they are. Or divergent enough where it makes sense.

24:00Michael Batnick:So obviously the S &P value, which is – it's S &P, has destroyed anything else with an actual value bend. Right.

24:10Downtown Josh Brown:So are we saying that the S &P value is not actually a value fund right now? That's what I'm saying. Given the top holdings.

24:18Michael Batnick:The top three holdings are, what is it, Amazon, Apple, and Microsoft? Yeah. In what universe is Apple a value stock?

24:26Downtown Josh Brown:Okay. So if the value factor actually works from here, works like outperforms the market, then an active value manager has a pretty good shot at doing better than the value index itself.

24:41Michael Batnick:So there's also something called pure value. Like S &P has a pure value index. So the S &P value, the IV has like$50 billion in assets. The pure value, which is not Apple, Amazon, and Microsoft, nobody wants. There's like a billion dollars in there.

24:58Downtown Josh Brown:Wait, what's in that? That like screens out anything that's over a certain valuation or Or how do they come up with that one?

25:05Michael Batnick:I don't know the methodology, but that's actual. Like you look at the top two names, you're like, yeah, I get why this is a billion dollars. It's the actual value stocks that nobody wants.

25:12Downtown Josh Brown:Right. Look, I think it's like, it's just hard to envision a scenario where you get like multi-year outperformance from a pure value index. No, it's not. It's absolutely not.

25:26Michael Batnick:If the AOI trade goes south. Dude, if the AI trade goes south, of course, value is pure value. No, I agree.

25:32Downtown Josh Brown:That's what it would take. It would take a bear market for the AI stocks. You'd have to be bearish on the AI stocks. Dude, OpenAI has a trillion dollar valuation.

25:43Michael Batnick:It's very easy to conceive a scenario in which value outperforms.

25:47Downtown Josh Brown:Yeah. I think it's half a trillion, but your point is well taken. All right. Duncan, give me my thing on the screen.

25:59Okay.

26:00Downtown Josh Brown:Do we have like the wording or no? Anyway, it almost doesn't matter. So this was a post where a 20-year-old lottery winner was offered a million dollars or$1 ,000 a week forever, right? So let's say she lives to 100, 80 years of$1 ,000 a week, something like that, or lives to 80, right? 60 years of it. And she chose$1 ,000 a week. and I looked at the comments and it's amazing, but like as many comments as there were, oh, she made the right decision, she did the right thing. There were as many comments saying, this idiot doesn't understand inflation. And I sort of feel like the right answer to this, I know there's a right answer to this financially, of course, there's a calculation, but then there's also like a right answer that's lifestyle driven or just like based on how somebody wants to live their life.

27:02Downtown Josh Brown:So before we get to the right answer, I was curious what your answer would be. You're not 20, you're 40. You win the lottery tonight and they say, we'll give you a million dollars now or we'll give you a thousand dollars a week forever. What do you do?

27:18Michael Batnick:Well, you nailed it, Josh. I'm not 20, I'm 40. Right now, give me a million dollars and it's no hesitation because there is a time value of money. There is a financial calculation. If you were to just plot this in a spreadsheet and forget about taxes, it gets really complicated. The$1 ,000 a week will never catch up. It just won't. If you compound that whatever percent on$1 ,000 or whatever percent on a million dollars, the$1 ,000 will never catch up. However, as a 20-year-old, here's a few things that you give yourself if you're doing$1 ,000 a week. You give yourself peace of mind. You give yourself flexibility.

27:51Michael Batnick:Forget about time value, money, inflation. I think We all understand the math part of it. But guess what? Who's to say that a 20-year-old would be able to properly handle a million-dollar windfall, even if it's cut in half after taxes? What if you blow it? What if you make a few bad decisions? So if I'm 20, I'd probably take the$1 ,000. Now that I'm a grown-up, I'm happy to take the million dollars. Okay.

28:14Downtown Josh Brown:I think that's my answer too. And I'm older than 40. So$1 ,000 a week is less meaningful. But also, it's a function of where you're at in your life. Yeah, that's it. Because if you say this to a billionaire, what the hell do they want to bother with a$1 ,000 a week check for? What is even the meaning of that? Probably making a million dollars a month in interest. So there's a component to this where it's like, who are you? Not just how old are you, but what's your current financial situation where one answer makes more sense than another. and the thing about being a billionaire and taking a million dollars is not gonna change your tax bracket.

28:55Downtown Josh Brown:For her, it might change her tax bracket. If she takes a million dollars, the IRS is gonna look at that like she made a million dollars this year and she'll be in the 37 % federal tax bracket immediately. And we don't know what state and we're not gonna get involved with state and local taxes. So instantly that decision does have an impact. Whereas a thousand dollars a week will not jump her up to a higher tax bracket. So that's the first thing. So I don't know if she'd lose half in taxes, but it'd be close enough. The actual calculation on how long it would take for that weekly payment to get to a million is 19 years.

29:33Downtown Josh Brown:So for her, she'll be 39 years old by the time that starts to look smart. And lifetime, that gets to like 3 million. Like assuming she makes it to, I think the number was 80. in the age.

29:47Michael Batnick:But hold on, but she's going to invest the money. So you have to assume some growth.

29:54Downtown Josh Brown:Well, that's my next question. Are you more likely to invest the money if you get a million dollar lump sum? Or are you more likely to invest the money if you're getting a thousand a week? Because in my opinion, what's more likely to happen with a thousand dollars a week is you're just going to raise your living standards and you'll add expenses that you can quote unquote handle because you have the money coming in. So I actually think the million dollar lump sum more likely to be invested.

30:18Michael Batnick:And also if you're 20 years old and you get a million dollars, guess what? You're buying yourself a few things, right? So, but listen, I think this young lady did the right thing for her. I'm sure she thought a lot about it. And a thousand dollars a week for life is not bad despite what the math says. It's okay. It's not the worst choice in the world.

30:37Downtown Josh Brown:One comment said, you're all wrong. The right answer is take the million dollars and buy a million more lottery tickets, which I thought that wasn't bad.

30:48Michael Batnick:Yeah, but hold on. You know what else? Windfalls are not good psychologically and mentally for people's well-being. Everybody comes out of the woodwork, right? Obviously, hey, let me some money. You make a bad decision or two. It's not healthy. It is not normal to inherit such a large sum out of absolutely nowhere. It's one thing if you grew up in this lifestyle and you grew up with money and you got an inheritance that you already knew was coming. and it was planned for and accounted for. That's one thing. But to just have a half a million dollars just land on your head, you're probably going to do something foolish.

31:17Michael Batnick:I would.

31:19Downtown Josh Brown:At 20, you're going on a big trip and you're buying a really nice car.

31:24Michael Batnick:Yeah, yeah. The money's not going to be nice.

31:26Downtown Josh Brown:You might also do something really nice for your parents. And maybe it's like, all right, yeah, I'm not investing it. I'm doing something that makes me feel good instead and I want to buy my parents a house and for the next 50 years, that's my investment. I get to see them grow old in a house that I bought for them. Great term. I don't know what the return on that is. That's what I decided to do. So there's somebody in the chat. JB buys a BMW M3. Is that John Suarez? I'm going to buy an M3.

31:57Michael Batnick:You definitely would have bought an M3.

31:59Downtown Josh Brown:How many pairs of sneakers am I buying with a million-dollar windfall? But I bring this up, and we can move on after this, because there are things in finance, in investing and personal finance that the mathematical answer and the right answer are not always aligned depending on who you are and what it is about yourself that's important. So there's a lot of things where it's like, oh, I'll just get a calculator. I'll get a spreadsheet. There's a lot of things where, okay, the numbers are the numbers and we could sit here and, Oh, and like we could sit here and do inflation calculations. Like what is$1 ,000 a week really going to be – what kind of buying power is that going to have in 20 years?

32:46Downtown Josh Brown:Probably way less than it does today. Like we could do all that stuff too. But like sometimes the right answer is person dependent. And I think that's something that we lose sight of.

32:55Michael Batnick:You know what doesn't show up in the spreadsheet? Not to belabor the point I just made, but your friends asking you for money. Like everyone you ever met. Big time. That doesn't show up in the spreadsheet. So you're 100 % right. All right, anything else?

33:10Downtown Josh Brown:No, I was curious what you would say. And you actually gave me the answer that I thought you'd give, and I agree with it. So we can move on.

33:18Michael Batnick:Let's talk about the stock market. I know I keep referencing the show we did a few weeks ago with Warren after the NVIDIA earnings. I just can't believe that we're here again. I mean, I guess I can, but it's just, it's wild how the market just does what it does. We are fully in, I don't know if you know this. I mean, I know you know this. We are fully in risk-on mode in the stock market right now. Maybe. Maybe.

33:39Downtown Josh Brown:No, no. Make the case. Make the case. I'm not sure I agree, but.

33:44Michael Batnick:We are not in risk-on mode? Okay, I'll make the case. Technology stocks are up 11 days in a row. This is fairly rare. In fact, going back to the turn of the century, it's happened two other times. I would think that's risk-on. But wait, there's more. It's not just technology. It is, I don't know if you've paid attention to this, the Russell 2000, the micro cap index, which has gone nowhere for years, and the equal weight index are all at or breaking out to new highs. And how about the risk sniffer? Need I remind you of the risk sniffer? Can you smell that, Josh?

34:24Downtown Josh Brown:Oh my God. This is my favorite. This is my favorite thing.

34:27Michael Batnick:All right. This is from our friend at Duality Research showing. The high yield credit spreads, discretionary versus staples, high beta versus low volatility. He says, listening to the best risk sniffers in the market, suggests this rebound is getting all the confirmation it needs. Grant Hawkridge at Stock Market TV has a risk on, risk off ratio. And in the risk on bucket, you have copper, high yield bonds, the Aussie dollar, semiconductors, and high beta stocks. In the risk off, you've got gold, treasuries, yen, utilities, and staples. So this is a ratio chart. And it's at the highest levels of 2025.

35:05Michael Batnick:I don't know how you could make any other case that today, this is no commentary on where we'll open tomorrow or next week. But right now, this is emphatically, this is not my opinion, this is a risk on market, but I'd love to hear the other side of it. All right.

35:22Downtown Josh Brown:I agree with you that based on all of those data points, it's obviously risk on. Even Bitcoin seems to be showing signs that it wants to get off the mat. And that's another risk sniffer item that I think is worth us keeping tabs on. It's not quite a springboard off of$85 ,000, but I think it's sort of important to see that moving with the markets. Given the fact that a lot of people were saying Bitcoin liquidity issues were spilling into weakness in the NASDAQ. Okay, I don't know if that's true or not. That's a thing that people were saying. Not long ago, eight days ago. So, okay. So that being up is another feather in your cap.

36:02Downtown Josh Brown:I want to point out that headline risk can very quickly take us right back into risk off mode, like within minutes. And let me show you something that popped up today. Wait, time out.

36:16Michael Batnick:Of course I agree with you. These things aren't at odds with each other. If Oracle, who wants a bomb tomorrow?

36:24Downtown Josh Brown:I know what you're saying. I know what you're not saying. But my point is, in true risk on mode, we laugh at negative headlines. Okay. We're not doing that.

36:35Michael Batnick:Yeah.

36:35Downtown Josh Brown:Chart on. Give it. All right. This is JP Morgan absolutely rolling on a random. I know. Well, I was on TV while it happened. You were sniffing. Absolutely rolling. I was sniffing risk while you were still on your second dream this morning. Holy shit.

36:57Michael Batnick:I didn't. Yeah, this is an ugly candle. My God.

36:59Downtown Josh Brown:Yeah. Holy shit is right. So this is. All right. So JP Morgan is cruising along in risk on mode, as you say, all day. And then at 1238, a headline from a conference in New York hits the tape. And this thing just fucking rolled. And look at it. Wow. It was almost 319 this morning. closed almost below 300. Okay? And that is, and is it a trillion dollar market cap? No, but whatever. Is it 800 billion? Yeah. Whatever. I mean, this is a blue chip, Dow component, 100 year old financial that fell out of the sky intraday, like a six, 7 % loss on a comment from a conference. Do you want to hear what the comment was?

37:47Downtown Josh Brown:Sure. I'd love to. Pretty innocuous. This is a woman named Marianne Lake, who is a very high-ranking executive at J.P. Morgan, and she used the word, quote, fragile to describe the consumer. And after that, the Dow Jones spent the rest of the day rolling over. Here's what the journal said. J.P. Morgan Chase's stock fell more than 4 % Tuesday after the bank told investors it will spend billions of dollars more in expenses next year. At the Goldman Sachs conference in New York, consumer chief Marianne Lake told investors the bank had just completed budgeting for next year and is planning$105 billion, largely because of higher costs in her division.

38:31Downtown Josh Brown:The bank is expecting expenses this year to be$95.9 billion, and analysts had anticipated$101 billion of expenses next year. So let me catch you up on this. the street thought it would be like 101 billion in expenses next year she just said more like 105 the disparity of 4 billion it's big but it's not that big in the context of jp morgan's business but it's where she sits in the bank that mattered to the market because she's on the consumer side so when we hear about a 4 billion dollar uptick in expenses what we're all saying is wait a minute more expenses on the consumer side sounds like charge-offs sounds like credit card shit or mortgage shit or car loan shit or whatever the stuff that she oversees and that is why i think the market got spooked not just jp morgan look at an intraday chart of the dow the whole thing started rolling in the minute she opened her mouth and didn't stop so my point is if we were truly in risk on mode, this would not have gotten anyone's attention.

39:41Downtown Josh Brown:We would not have seen the price action that we saw. So in a real risk on moment, we laugh at danger. Danger is our middle name. And this market, she said the consumer is fragile. Look how fragile stock prices were as a result of that. And it was to the minute that it started. So that's why I can't fully agree with you, even though you have the ratios on your side and the ratio charts and the risk on the risk sniffer indicators on your side. I'm looking at I'm looking at price action on headline risk and I'm saying, nah, we're not we're not right back. This is a more fragile market than it was in October, November.

40:22Downtown Josh Brown:And now I know because Jamie Dimon was also talking in October and people were laughing. He was doing his risk stuff also and nobody paid attention and now they are. That's my slight divergence from what you're saying.

40:40Michael Batnick:Do you remember Carlos Danger?

40:44Downtown Josh Brown:You're damn right I do. Was that the wildest shit ever?

40:48Michael Batnick:That was the skinny governor. What was that guy's name?

40:53Downtown Josh Brown:That was wild. The sex pest from New York. What was his name? He had an alias. That was the greatest thing ever. Who was that? The Jewish guy. Anthony Weiner. How could we forget?

41:07Michael Batnick:Thank you, chat.

41:10Downtown Josh Brown:Where is that guy now?

41:12Michael Batnick:I don't know. We could use some more. Carlos Danger. No, it's a fair point. I agree. I don't disagree with anything you said. Let's keep moving. All right. When all's going on. Wait, I'm sorry. I'm sorry. I'm sorry. I'm sorry. The one thing before alts. So we do have a Fed meeting tomorrow and I want to show a chart. This is interesting. So it appears that the S &P, I'm sorry, that the Fed is going to cut rates. And Subaru Trade has a great chart showing what happens after the Fed cuts rates while the S &P is within 1 % of an all-time high. It's not that rare. So a lot of overlapping periods, but 1985, 86, 89, 90, 91, 95, 96, 19, 24.

42:02Michael Batnick:I mean, it's happened. And short term, very mixed, very, very mixed. One year later. Why would the...

42:14Downtown Josh Brown:So what is it one year later? What's the typical... Oh, they're all green. All green. Okay. They're all green. So every time the Fed has cut rates within 1 % of an S &P 500 high, the stock market – and it looks like noticeably higher.

42:30Michael Batnick:Look how sick the chart is on the bottom. The chart on the bottom shows one year later, and it shows the average forward return. Now, obviously, this is an average, and it's never – it's not going to follow this path. Nobody is saying that. But just the point is the visual tells a very good story. Very choppy in the short term, like not even short, short to intermediate term. but give it nine months and things have been pretty good.

42:52Downtown Josh Brown:15%, the average return a year later is 15 %?

42:57Michael Batnick:Yeah.

42:57Downtown Josh Brown:Wow. Wow. And wait, chart back on. I love this chart. I really do. Look at all the drawdowns though on the way. Yeah, dude.

43:07Michael Batnick:To me, that's the thing.

43:09Downtown Josh Brown:The first six months have been choppy as shit. Anything can happen. Anything can happen. Look at that. As much red as there is green one month later. It's like half and half.

43:19Michael Batnick:Yeah.

43:20Downtown Josh Brown:So slow your roll, everybody.

43:22Michael Batnick:Okay.

43:22Downtown Josh Brown:All right. All right. Let's do this. When alts go wrong. So I don't bring this up because I'm trying to scare people out of alternative investments or trying to paint every alternative investment with a brush and say that they're all problematic. But there are, and there always have been my entire career, some very prominent examples of really bad situations with alternatives. There's a lot of reasons for why. The first being the public has no idea what the hell they're buying. The second being that information asymmetry attracts bad actors into the industry or people who only say that they care about risk but really don't, or even people who don't know what they're doing and get lucky and managed to raise a lot more money than they should have.

44:18Downtown Josh Brown:So sometimes investments go bad and nobody did anything wrong. It's just investments go bad. But the less information the public has, the higher the likelihood that that's going to be an outcome. So that's one thing with alts. Another thing is obviously the higher the fees, the higher the hurdle rate to actually make money. Like you buy something that's extremely high fee. Like you first have to earn back what you just paid in fees before you could even get to the point where you're in the black. And then the third issue is the economy has an outsized impact on non-traded investments where people like need liquidity no matter what and prices get crazy as a result of having a lack of price discovery.

45:04Downtown Josh Brown:So alts, when they go wrong, can go really wrong. And I wanna share this story and I wanted to get your reaction to it. There was a company called Yieldstreet that has so thoroughly wrecked its reputation that they had to change its name. It's now called Willow Wealth. But unfortunately, the investments that have gone bad still have to report because they still exist because this is part of being an alt. It's not like a hedge fund that goes bad. They just liquidate the fund and close it. CNBC.com is reporting that they continue to report losses to investor clients long after the name change. a new round of$41 million in losses from real estate deals that are now in default.

45:47Downtown Josh Brown:Yieldstreet launched 10 years ago and their stated mission was to widen access to alternative investments to Main Street. Anytime you hear that as the pitch, you should grab your wallet. Nobody wants to democratize anything to anyone in real life. So anytime you hear, oh, we're doing this for Main Street, LOL. Here's a quote. As Yieldstreet tries to distance itself from a rocky past with a new name and ad campaign, its customers are dealing with the present reality that is increasingly dire. They lost money in real estate projects in Houston, in Nashville. They had an$89 million wipeout in marine loans.

46:31Downtown Josh Brown:Are those boats? I don't even, what do you think that is?

46:35Michael Batnick:Individual investors should not be investing in marine loans, whatever in the world that is.

46:41Downtown Josh Brown:So$89 million in loans disclosed in September, 78 million lost in a report in August. In total, according to CNBC, Willow Wealth investors have lost$208 million. So this Yieldstreet was a FINRA-registered broker-dealer and registered investment advisor, so it's a hybrid, with$1.86 billion in client assets. And they build itself on the website as the leading alternative investments platform and it's just it's one of these things where people put money in it's illiquid we're not even in a recession and these loans are going bad at a rapid rate not now they've changed the name

47:23Michael Batnick:they're trying to start over but it's not so simple so these were real estate the the the loans that went bad or the investments that went bad were in real estate which absolutely was in recession not excusing the fact yeah um did you see their rebrand do you know about hampton dumpty you know about hampton dumpty no okay i want to know you do what is this daniel let's just play this please you gotta see

47:49Downtown Josh Brown:the name's hampton i know i know i look a lot more put together right but hey i've come a long way from my humpty days this is bad see i've learned a thing or two about crashes and falls

48:01Michael Batnick:oh bonfire turns out you shouldn't put all your eggs in one basket oh tempting that's why i invest with willow wealth their online platform makes it simple to diversify my portfolio with private markets i get exposure to everything from fine art and real estate evocative right still got

48:21Downtown Josh Brown:two sports and entertainment whoa easy there plus portfolios including private markets have outperformed traditional ones for the past 20 years. Not that it's a competition. Diversify your portfolio to help rise above public market volatility and muddle up your game.

48:39Michael Batnick:Like me. Those who know, know. All right, enough. Literally, Hampton Dumpty, can you even?

48:46Downtown Josh Brown:No. That's not AI. That's actually their commercial? That's like, is this a joke? Seriously? Who is that? somebody said Wolf of Wall Street coded 100%. The chat is going to chat. So listen to this. Humpty D's.

49:08Michael Batnick:As for CNBC's reporting on the new real estate defaults and rising tally of losses, the Willow Wealth Spokesperson spokeswoman called it quote, a rehash of news on investments from five years ago. Like why are you rehashing old losses? Like just, so what they were doing is stuck in it. What they were doing, as I understand it, is they were making their own investments. I'm not sure of anything. I don't know if there was a third-party sourcer involved in these real estate deals. I have no idea. But what they are doing now, they have pivoted to working with established brands like Carlisle and Goldman at Steps Owner on their website.

49:43Michael Batnick:So whatever they were doing, they stopped doing that for obvious reasons and are now doing something different. But here's what irks me amongst the many things, is they have a chart on their website. Show this, please, John. Daniel, excuse me. Daniel's in the house tonight. Growth of$100 ,000. All right, so here's the problem. They show$128 ,000 over the past 10 years versus a private markets portfolio. And when you view the disclosures, because I'm such a sleuth, Josh, what I found was the private markets portfolio is 40 % private equity from Prequin, 30 % private credit, and 30 % private real estate.

50:21Michael Batnick:No beef with that. Here's a problem. You can't invest in these indexes, number one. And number two, financial indices assume the reinvestments of dividends. And here's the coup de grace. Do not reflect the impact of fees. Well, excuse me. Oh my God. Excuse me. Because according to CNBC's reporting, those firms also charge their own fees. So I'm talking about the other ones that I mentioned. leading to all-in annual costs ranging from about 3.3 % to 6.7 % per fund. Guess what? The numbers don't look as good as they did with fees included. This much I can tell you. Thank you for your attention to this matter.

51:06Downtown Josh Brown:I mean, can you run that? Is that legal? Just because you put a little link that says, see disclosures, and then it's like a complete lie? That seems absolutely insane to me.

51:23Michael Batnick:It's disclosed. It says you can't invest in the index, and it discloses it. I don't know if it's legal or whatever. I'm guessing it's legal. I don't know. I'm not a compliance officer.

51:30Downtown Josh Brown:All right, so what they're doing now is taking a 1.4 % fee, and they're, thank God, giving the money to people that actually know how to invest. Yes. Goldman Sachs, Carlisle, Stepstone Group. Not that that's a guarantee of anything, of course.

51:45Michael Batnick:Well, they're not going to lose. Did CMC report a third of the real estate loans are either in default or in pair? Goldman Sachs and Carlisle

51:57Downtown Josh Brown:are probably not going to default by one third. I don't think so. All right, so now they're taking a 1.4 % fee because they're great at marketing with Humpty Dumpty commercials. Hampton Dumpty, excuse me. Right, and they take your money and they give it to these other funds that are charging themselves 3.3 % to 6.7%. per fund. So how does anyone ever make money here? I think it's obvious how you lose money. Just wait a while. But how do you even ever make money? All right. So again, this is not let's just bash alts. I'm sure there are better versions of this. I'm just making the point. If you don't know, then you don't know.

52:42Downtown Josh Brown:And this is the kind of thing that has happened to other people and uh you could lose money in the public stock market really easily people do all the time could lose money in publicly traded bonds people lose money in public reits 100 but it's different to have like defaults and wipeouts and uh be be charged up the ass while you wait for that potentiality that's a whole different dimension of risk that is very different from losing money in public markets. And I think, look, it's not to say, oh, this is every alt. It's just to show people what a really bad, like worst case scenario could be. Yeah, so it's unfortunate.

53:26Downtown Josh Brown:So it's bad. All right, we are up to make the case time. We're coming into the home stretch. I'm excited to talk to you about this because we haven't talked about it in a while. Let's put up a long-term chart of Salesforce. this is 10 years stocks in no man's land right now sort of in the middle of the range although inflecting slightly higher in the last week which I'll tell you why in a moment here's a one year technical chart you would not buy this stock with your money or anyone else's money if you could help it doesn't mean it can't go up

54:00Michael Batnick:I don't think it's that bad of a chart I mean it's not great we've seen where worse

54:04Downtown Josh Brown:let me guess you like these bounces off of 225

54:09Michael Batnick:I don't own the stock, but I'm saying, dude, we've seen way worse stocks.

54:13Downtown Josh Brown:I guess what I'm saying is if you're going to buy the stock, it's not because of the chart. Is that fair? Right. That's not a green light in and of itself. The reason why the stock's starting to bounce here, looks like it could bounce here. Value Act Capital, which is one of the most successful activist hedge funds ever. just added$25 million worth of stock this week. So they now have, they bought, I think they bought 96 ,000 shares adding to an existing war chest of stock. They now own 2.994 million shares, which is not, in the scope of the size of Salesforce, that's not that big of a position, but it is a big position in dollar terms.

55:07Downtown Josh Brown:They have a lot of money in Salesforce and they're adding to it. And the reason why this is notable is that the last time Value Act came into the name in size, they actually got someone on the board and the stock had almost 100 % rally inside of a year as a result of changes that they forced at Salesforce. So Value Act is not one of these activists that comes in and starts looking for press attention and saying horrible things about the CEO. They tend to come in and want to work with the board and work with the company. They try to point things out that they think can be fixed. And that's their MO.

55:52Downtown Josh Brown:And it's been successful. They've had a ton of big hits. But they've been buying the stock back. since the last time they came in was late 2022 which was also a bottom for the tech market and early 2023 they revealed their stake in January of 2023 Value Act's co-CEO, CIO, Mason Morfitt was added to the board and in June they bought even more, they bought 428 ,000 shares,$100 million worth and that was at$233 a share. They got up to almost 4 million shares. And the stock spent, the stock had rallied huge in 23. And they, I guess, trying to make it happen again. This time it hasn't happened. And so they're adding to it.

56:44Downtown Josh Brown:They're buying more. But you did get an 85 % rally the first time, the first go around. The other thing that's notable, Michael, is like last time, this time there are other activists coming into the stock at the same time. starboard value which was also in it for that last go around they are they have just increased their stake by 50 percent um so they own 1.3 million shares as of june 30th and maybe that number's gone higher since so starboard is back value act is adding um they have board representation the last time they got aggressive in in buying into the stock they were able to uh help the thing almost double and i think it's notable they've come back to the name what are your thoughts um did you buy the stock no i just bought adobe i can't have two of these pieces of shit on the books at the same time same story though if people people think people think salesforce is uh being disrupted by ai or about to be disrupted by ai and maybe it will be but a lot of times these These are overstated risks that these companies find a solution to.

57:57Downtown Josh Brown:Yeah. Not always. It could be Polaroid. I'm just saying it's usually not Polaroid. It's not Polaroid. It's usually not Kodak.

58:04Michael Batnick:It's not Polaroid. All right. So Salesforce has obviously been de-risked. The recent bounce notwithstanding, nobody's bullish on this. Salesforce is not Polaroid. But I do think that their business model is certainly under pressure and it's not going to go away. Whereas a company like Adobe, I was talking to somebody this week actually about this, who's a big Adobe user. I think that Adobe has a much better chance of integrating AI into their workflows. Whereas I think that Salesforce is going to be under assault by AI solutions that do Salesforce solutions better than they do.

58:47Downtown Josh Brown:okay so adobe's story is that they're going to sit on top of the ai and give their paying professional users access to the best possible versions of how ai can assist them in their workflows correct that's their story i don't know if the street is buying it but the stock seems to have stopped going down well they report tomorrow they report which is why i bought it they report tomorrow as well that's right so that's right we're long um we didn't have time we didn't have time to do a whole deep dive preview into that. And I don't know the company well enough. I can tell you I have a stop loss in.

59:19Downtown Josh Brown:And if they actually report AI negative impact or they guide lower or whatever, I'll get stopped out. I'll lose money, but I'm not married to Adobe. The story on Adobe is buybacks and shrinking the float and the stock having been substantially de-risked it's in a 50 drawdown from its high yeah um salesforce look what's so here's what funny about this when value act and starboard and by the way um uh what's dan lobe's fund called third third uh third point third point they were all in salesforce in late 22 early 23 and the story was that salesforce was spending like a drunken sailor they were like they just had too too much bureaucracy too many employees too much corporate bloat um and and that was like the way to fix it and they bought into that whole year of efficiency thing like they like benioff followed zuckerberg's example and it worked that ain't gonna fix it this time right i don't think the street is selling i don't think the street has gotten bearish on salesforce because of expense management i think they pulled that lever already no it's the business fix this time right the fix this time is more difficult because it's innovation and obsolescence risk.

1:00:38Downtown Josh Brown:I mean, dude, that's like not the same as cost cutting.

1:00:40Michael Batnick:We're talking to companies in our space that are doing a lot of the automation workflows with better technology. That's not going away. Just started. Right.

1:00:50Downtown Josh Brown:No, I guess the question is, does Salesforce, is Salesforce able to hold on to its customers and maybe even potentially charge more because they become the AI provider. Certainly conceivable. Or do they get better margins because they're using AI?

1:01:06Michael Batnick:Certainly conceivable. Would not be shocked if that's the world that we're living in where they just use AI to make their shit better. All right, I have a mystery chart.

1:01:14Downtown Josh Brown:I sort of didn't make the case, but what I did, I think, is I'm putting this name on people's radar for two reasons. One, the pessimism about their AI strategy and the threat from AI may be overstated. It's not like the stock is at its high. So that's one. I think the market is very well aware of that risk. And then two, this is a tax loss selling candidate where people are just unloading it into year end. And oftentimes, those are great bounce candidates in January. but you got to get positioned early because you don't know when the sellers are done so it's early what is it december 9th that's right so i'm putting this name on your radar december 9th because you might get to a point where the tax loss related selling becomes exhausted and then you get this air pocket where the stock could lift yeah i'm not saying it will i'm just saying it's very possible with a name like this this is a very big company and still financially very successful.

1:02:16Michael Batnick:And there is a big gap at 430 just waiting to be filled. So at 433, either way. Okay. Anyway, on your radar. I have a mystery chart for you. This is in a sector that is, was strong to quite strong. I'm probably going to give this away. This sector was the weakest, had a sick run and just really rolled hard the last couple of sessions. And I'm not sure why I don't pay much attention to it. This is a stock in the sector that I don't know if you still own or not. We haven't talked about the stock in a while, but you did own it at one point. Try it on, please. This is a long-term view. That's a 200-day moving average.

1:02:59Michael Batnick:The price is above it, but obviously that's not pretty. It's the last three years. I'm sorry.

1:03:04Downtown Josh Brown:This is not the sector. This is the actual stock.

1:03:07Michael Batnick:This is a stock. Next chart. Zoom in a little bit. Not so bad. Not so bad. The I see higher lows. That's what I see. What stock is this, Josh?

1:03:20Downtown Josh Brown:$26 stock. The chat is guessing Pfizer. And I think that would be the only one that would make sense.

1:03:26Michael Batnick:The chat is right. Phone your friends. Great job, chat.

1:03:31Downtown Josh Brown:Love you, chat. Much love to the chat. All right. Dude, what's up with healthcare?

1:03:37Michael Batnick:Healthcare is rolling hard the last 10 sessions. It's very bizarre.

1:03:42Downtown Josh Brown:They rotate in. They rotate out. I know, but it's like straight up, straight down. I would not have guessed Pfizer. I threw in the towel on this name very early this year, so it's been a long time. I don't follow it anymore. I don't really care for it. They made this massive bet, huge M &A deal, and they have nothing to show for it a year later. And it was kind of like a bet the company proposition. It was like a huge dollar value. And the idea was that it would strengthen the company's pipeline. And maybe it is and maybe it will, but the street is not giving it any credit. And there are huge winners in this sector.

1:04:25Downtown Josh Brown:And there are GLP-1 names and there are oncology names. And there are lots of great biotech stocks this year and this is just not one of them in fact it's one of the worst and you know i don't i'm not a value investor i don't really do that it's not my discipline number one it doesn't suit my personality i'm not patient me either i i i just i despise being completely on the other side of everybody i know for for prolonged periods of time um i do tend to believe there's wisdom in crowds. And I think stocks that are going up are a better source of finding stocks that will go up. So that is not my discipline.

1:05:06Downtown Josh Brown:And sometimes when I become a dilettante in that area and I kind of dance in and do a little value investment, sometimes it might pay off, but not systematically it will not pay. So I was bullish Warner Brothers at$6 and I sold it too early. It's$30. It was$27 right now. Like that was a quote unquote value investment in that time. But for every one of those that I could cite that I would have been right on or whatever, like there's many more Pfizer's where I would have been. For sure. Yeah. So nice, nice, nice mystery chart. All right, guys, we're going to wrap up for tonight. Thank you so much for rocking with us to the live chat.

1:05:48Downtown Josh Brown:We love you. Huge part of the show. We love seeing you show up for the live. Thank you for continuing to do that. I think we had a huge crowd tonight. Lots of comments. And you guys are the best. So shout out to all the gangsters in the chat. To those of you listening to us in Spotify land, a rating and review goes a long way. If you love the show and you want to tell other people that it's of value to you, that's the right way to do it. Apple Podcasts too. Tomorrow is Wednesday, which means you're getting an all new edition of Animal Spirits with Michael and Ben. We'll have an Ask the Compound with Ben and Duncan.

1:06:24Downtown Josh Brown:And then Michael and I will be back with a massive...

1:06:29Michael Batnick:It is massive. It is massive. What am I supposed to say? Talking Wealth. You have a big episode dropping tomorrow for advisors that are listening. Check it out. Oh, shit.

1:06:36Downtown Josh Brown:You know what? That's right. If you're a financial advisor and you like the compound, you're going to love Talking Wealth. And we're dropping a bombshell tomorrow. We had some research that we did internally. And I can't wait for you to hear what you have to say. All right, that's it. We love you. We'll see you soon. Thanks again. Have a great night.

1:07:15Downtown Josh Brown:We'll see you next time.

1:07:26Downtown Josh Brown:that can burn and damage your skin. The sun is relentless, but so is our gear. Level up your summer at Columbia.com to spend more time outside and less time slathering on aloe lotion. You're welcome. Columbia. Engineered for whatever.