Nvidia GTC Highlights, Uber Is Too Cheap, Cliffwater and the Private Credit Panic

18:41Downtown Josh Brown:Well, so right. The difference between, I mean, hey, Siri, what time is it? I'm sorry I did that to everybody. The difference between asking a natural language question to AI and getting a response versus, hey, take care of this for me. Like, deal with my customers from 7 p.m. until 7 a.m. when they come back to work, when my employees come back to work. Deal with my customers overnight. So now we're not leaving voicemails anymore. Now we're getting into a realm where companies are going to be able to program their customer interaction. And if it's done well, it'll feel seamless with the way they're dealing with customers in the daytime using humans.

19:27Downtown Josh Brown:And it's not like there for everybody. It'll take time. We will all grow increasingly comfortable with those interactions and satisfied with how they turn out. But this is back to the main point. This is not training models anymore. This is now the meter. The meter is always running because we are constantly using the thing that's now built. And that is that inference inflection point that he's talking about. They talked about a new CPU. CPU is linear processing, similar to what we are all accustomed to with our PCs. but also it's an important part of running data centers. You do need high power CPUs.

20:17Downtown Josh Brown:They talked about Nemo Claw, which Jensen seems obsessed with. That's an AI agent platform that people are building on. And Chardon, they brought out a robot. It's an Olaf robot for those who are into Frozen. Who is it? And they did this in partnership. Do we have this picture? They did this in partnership with Disney. And this is basically to show now the physical manifestation of all this AI. And you can't do robotics without AI. And so like these aren't two distinct technological waves. These are highly overlapping things that are happening all at once. And they're reinforcing each other, which is part of why I'm so bullish on NVIDIA, the stock.

21:09Downtown Josh Brown:Because I don't think the robotics thing is anywhere near being priced into the current valuation. But as we start seeing more and more real-world products running NVIDIA Silicon in the physical space, that will change. You know what has NVIDIA chips in it? Those little buckets that roll down the street in Miami, the delivery robots? Yeah. That's serve robotics running on AI chips from NVIDIA.

21:39Michael Batnick:Why do you think the stock isn't working? Do you think the street is worried that Meta or Oracle -

21:44Downtown Josh Brown:I told you. Go ahead. No, I think people believe, and probably they're not wrong, that the NVIDIA chips are pricing themselves out of a lot of everyday applications, and you will see TPUs from Alphabet and others. you will see, I'm not gonna say cheaper, I'm gonna say more abundant, lower cost chips be able to take a lot of workloads and people are worried about market share. So that's one. Two, we still have this drama hanging over us about the financing of data centers. And if the financing to data centers in any way gets called into question to the point where people pull back the reins, the first company to feel it is going to be NVIDIA.

22:36Downtown Josh Brown:They'll feel it more than anyone because where do you think the orders are coming from? When you hear them say trillion dollar backlog, well, where do you think that money is coming from? That's coming from the builders of data centers who need the chips to make the data centers work. So to me, those are the two things hanging over NVIDIA's valuation. There was a third thing that I think is no longer an overhang, which is their China business. And in fact, relations between the US and China seem to be thawing. And Nvidia said they're getting the H200 business back this year. Now, investors are not going to give them credit for that in the form of the stock going up because there've been so many fits and starts with Nvidia and China.

23:21Downtown Josh Brown:Can they do business there? Can they not do business there? So I don't know that you'll get a multiple boost from that, but it's a negative that's been kicked out from under it and is no longer something that we could say is keeping the stock down. I want to get to this too. This was really interesting. Somewhere in the middle of hours worth of commentary, Jensen said they plan to use 50, 5-0 percent of their cash flow in the second half of this year on shareholder value creation activities like dividends and buybacks?

24:02Michael Batnick:It was actually the CFO who said that.

24:05Downtown Josh Brown:Okay. Do you think the shareholders care about a token dividend being paid? I don't.

24:14Michael Batnick:Not the short-term shareholders. I think the long-term shareholders care, of course.

24:18Downtown Josh Brown:Okay. If this is going to start to look more, I don't mean utility in a denigrated way, like it's boring. But if this is going to look more utility-esque with just this constant inferencing-related cash flow tokens being generated, then maybe the dividend actually makes a ton of sense. But my bias with tech stocks is I just feel like the shareholder base would much rather see the flow trend. I agree. Yeah. But listen, you think about the amount of cash flow being generated here. There's no reason not to do both. Apple did both. Most of the large technology stocks have figured out how to do both.

24:58Downtown Josh Brown:And imagine this thing is paying like a 1 % dividend yield and it starts shrinking the float by 2 % a year. I can imagine that. The boost to earnings per share as a result of that, as well as bringing in new shareholders who never even considered owning the stock. So I think it goes 250. I hope it happens this year. I hope I don't look like an asshole. This is not investment advice. But the other thing I think is there will not be a bell. They're not going to tell you. It's just one day, I think. It's been consolidating for six months. Well, I think it's there.

25:32Michael Batnick:I think the rubber is meeting the road. I think the 200 moving average is the road.

25:35Downtown Josh Brown:Right. People are like, well, what's the catalyst? They had their earnings. They were blockbuster earnings. They had GTC. Well, it's a fair question. You don't need a catalyst. Higher prices, that's a catalyst. Well, here's the catalyst. imagine it goes to 200. It's been sitting between 180 and 190 for six months. Yeah, that's all you need. Imagine it goes to 200. That's all you need. What do you think happens then? Think about that. What do you think happens? Everyone that watched it at 180 for six months goes, oh, no, no, no, no, no. I'm doing this 30 years. I'm 49 years old. I'm not saying it has to happen.

26:15Downtown Josh Brown:I'm just telling you that's how it does happen. It always happens that way. Sorry, Apple too. What's a catalyst on Apple? Apple hasn't been a catalyst-driven stock in five years. Who are you yelling at? You. The colloquial you, everyone, all of you. What's a catalyst? Next. All right.

26:40Michael Batnick:Here's the thing that I am the most worried about. And that thing is financial stocks. Adam Parker.

26:47Downtown Josh Brown:That's a good one. Although they went up today. Great. Are you less worried?

26:53Michael Batnick:I am 2 % less worried. All right. Adam Parker said, we are downgrading financials. We have been writing for weeks now that we are teetering on our overweight financial recommendation, and we are now moving to make a downgrade. We no longer see estimate achievability as above average. Financials typically don't perform well after oil spikes, and we are sufficiently worried about credit issues spreading that the risk reward on multiple expansion appears increasingly poor. Reading that OWL or Zion or Deutsche Bank has issues as one thing, but the private credit parts of Blackstone and Morgan are getting their investors, according to reports this past week.

27:26Michael Batnick:And that is enough to make us throw in the towel on our overweight recommendation. Moreover, as we wrote several weeks ago, we are no longer as optimistic that many of the larger financial institutions are AI beneficiaries as we were previously. Large institutions - This is a big one. Yeah. Yeah, because was Nick Hollis saying that JP Morgan's a tech stock? Maybe it was Adam, actually. Large institutions invariably compete on pricing and pay their employees more than when times are good, making it less likely that any AI benefits accrue to the shareholders. Typically, financial institutions will spend money and run AI systems in parallel to legacy systems for some trial periods, potentially making bank efficiency ratios more stagnant than many investors are currently discounting.

28:07Michael Batnick:we should have known when top-down strategies were universally bullish at the year ahead outlooks that we should run for the hills. Well, I'll tell you what, investors are running for the hills. Chart on, please. Bank of America shows record outflows from financials, as in record outflows, as well as biggest outflows from bank loans since April 2025. I suppose if there's any good news here, and I'm grasping at straws, is that they've maybe have been sufficiently de-risked from the sense of investor optimism is clearly gone. But I have said repeatedly, don't show me the surveys. And I understand how people feel.

28:44Michael Batnick:I believe the stock market more than I believe the surveys. And when people were hemming and hung about this or that, I pointed to Capital One Financial at an all-time high or 52-week high. And I said, come on, how bad could things be if Capital One, credit exposure everywhere, is at the top of the stack. How bad can things be if Ally Financial, the biggest subprime lender, is at a 52-week high? They ain't at 52-week highs anymore. Look at this chart. Capital One is in a 30 % drawdown. This is my attention.

29:11Downtown Josh Brown:That's nasty. That's nasty.

29:15Michael Batnick:So I'm not even talking about...

29:17Downtown Josh Brown:Look how fast that happened too.

29:19Michael Batnick:I'm not even talking about the private credit stuff, which of course we'll get to, and the marks and the this and the that.

29:24Downtown Josh Brown:I don't like this at all. I think it's binary. I think if this private credit thing does not spill over into regular lending and regular financial activity in the public markets, I could see a scenario where the XLF goes out at the highs of the year. Because we are getting rate cuts. This oil price spike is temporary, I hope. Hold on.

29:45Michael Batnick:The market says that we're as likely to get a hike as a cut now.

29:48Downtown Josh Brown:Yeah, I don't believe it. But hard as it is to believe. I don't believe it even. I don't believe it. I think the market's overreacting to oil. um teranova was on tv saying something really smart he showed this chart from 2011 to 2013 where the price of oil for three years averaged 95 and the stock market basically did nothing but rally so this idea that 95 is this insurmountable level for oil number one we produce more of that oil here therefore it shows up as like exports and and it's actually profitable activity for US stocks. That's one. A lot has changed in the last 15 years. And then number two, he showed us the chart.

30:34Downtown Josh Brown:We've been here before. We've seen this sustained mid-90s oil price. And regardless, companies found ways to get around it. And we had a rallying stock market. So I don't believe that an Iran related, Strait of Hormuz related oil price spike is necessarily the thing that's going to cause the Fed to completely change course and start. And here's a thought exercise. What the would be the point? Let's say oil is at 95 in two months and the Fed says, well, maybe we should hike. Maybe we should make things worse for the people who are already suffering with higher gas prices. Let's give them higher interest rates on their credit cards too.

31:20Downtown Josh Brown:To what end? What is it? In what way does that solve oil prices? It certainly doesn't. In no way does it solve oil prices. So that's the same stupid ass instinct that the Europeans had in the wake of the great financial crisis. They thought the right move was to hike interest rates. Boy, did they have to about face shortly after. I just don't believe the Fed hasn't learned anything and that we're equally likely to see a rate hike. I totally agree. I would say absolutely no chance. I totally agree with you there. That is not what's going to happen. Trump will put this guy in a gulag if he raises interest rates right now.

31:58Downtown Josh Brown:So I'm inclined to believe we are going to get rate hikes this year. The only real question is, God, let's hope they're not rate cuts this year. Let's hope they're not emergency rate cuts.

32:11Michael Batnick:The other thing, bringing it back to the financials that I don't love. And this could be a total overreaction. This could be an AI overreaction. American Express, which is the premier card for luxury shoppers for the upper part of the K, the stock is in a 20 % drawdown. I would say probably a great buying opportunity, but I hope I'm not wrong because if it goes down 30%, then I don't think American Express will go down 30 % and just the market be completely wrong. I think there will have to be a softening uppercay for that to transpire.

32:42Downtown Josh Brown:If this, if this, we're going to get to the private credit stuff and private equity stuff, guys, we will, we'll do that in a minute. So I don't want to do a whole digression here. Again, if that somehow can be contained and run its course and people stop freaking out and it just sort of works itself out and we don't have a financial crisis that spills out of private credit and becomes the next subprime, which you and I talked about last week, if none of that happens, I think some of these sell-offs in financials will have proven to be really good buying opportunities. I have no proof of this. I'm just giving you my feelings on the subject because, and I get it, it's scary.

33:27Downtown Josh Brown:We've been reliant on the top half of decay and and the wealthiest people doing the most spending. And now we're seeing their asset prices teetering, especially like all the people that are invested in private assets tend to be the wealthiest people in the country. And what is the negative psychology as a result of a private credit panic? Is it people using their Amex black cards less? No. To travel and go to restaurants? But like, it's just, it's premature. It's premature. Let's keep moving. um the securities and exchange commission is preparing a proposal to eliminate the requirement to report earnings quarterly and instead give companies the option to share results twice a year according to people familiar with the matter this was a scoop at the wall street journal and uh i'd love to just hear your top line thoughts on is this good is this bad i hate it

34:24Michael Batnick:happen i hate it why i think the charitable interpretation is that coming public sucks and it does and it's expensive and it's annoying and one of the most annoying things is having to report earnings quarterly um so if that will lead more companies to come public fine great i like that i don't think it will either okay why do i hate it because companies spoiler alert lie And the public, the court of public stock markets keeps them honest. And I understand that there are countries around the world that report semi-annually. They're not Americans. They're not liars. Sorry. So I think you need to hear from these companies every 90 days, not every 180 days.

35:10Downtown Josh Brown:Are you saying American executives are more likely to cheat than executives from other countries? I can't prove that, but yes. Yes. I don't know about that. Yeah.

35:20Michael Batnick:Yeah. I am.

35:23Downtown Josh Brown:Okay. That's a lot. No, it's not. Come on, dude. Are any Canadians in the house? Don't be afraid. You don't think it's true? No, I don't think it's true. Okay. I think in Asia, they have financial scandals every day. Fine. You know what? I can't comment on the likelihood. The Wirecard fraud was a German company. Fine, fine, fine. I'm not saying there's not frauds everywhere. The short sellers refer to Canada as Arctic Mexico. I forget about that. I don't I don't think so, dude.

35:58Michael Batnick:You're pandering. You are so you are so full of shit. You're pandering needlessly. Are we are we saying executives in India, China? I'm not saying that in Europe. Come on. Did I say that executives in other countries will not lie?

36:13Downtown Josh Brown:You literally just said American executive. No, I didn't.

36:15Michael Batnick:I said more likely to. So I'm saying they're more likely. Duncan, get in here. I said they're more likely to lie. I stand by that. I didn't say executives in other countries won't lie. I said, yeah, I think our executives are more likely to take advantage of shareholders. Oh, okay. So you're saying what I'm saying you said. Are more likely, are more likely. You're giving examples of fraud and saying that I said that fraud doesn't exist elsewhere. Of course it does.

36:43Downtown Josh Brown:Oh, thank you, Matt Stevick in the chat. Nortel, it's a big one. All right, it doesn't matter. Be that as it may. Let's say you're right. Let's say you're right about that.

36:51Michael Batnick:I think that less transparency is bad for shareholders. And I don't see how you could say otherwise.

36:56Downtown Josh Brown:Ooh, what about a foreign-born executive in America?

37:00Michael Batnick:Stop. Stop. I don't see how less transparency is a good thing. I just don't. Who benefits?

37:07Downtown Josh Brown:All right. I agree with you. So first of all, I agree on every point that you made other than Americans or scam artists. The first point that you made was the most powerful one. If the purpose of this is to alleviate the concerns of VC-backed companies who are holding off as long as possible, and you're like, hey, great news. Now, instead of doing four quarterly reports, it's just June and December or whatever. those semi-actuals, that doesn't do anything for me. So it's almost like a solution. I shouldn't say a solution in search of a problem. There is a very high cost, both in dollar terms and time and energy compliance.

37:53Downtown Josh Brown:There is a very high cost of being a public company in America. I would argue tough shit. That's the privilege of taking money from American households. You sort of have to just live with it. You're all zillionaires. It's fine. Hire enough people and do your stupid quarterly report. That being said, we have a great chart here. The UK, their standard tends to be semi-annual.

38:23Michael Batnick:Yeah, they're very honest people over there.

38:25Downtown Josh Brown:Sure. Very charming. Have you read any Dickens, sir? They have as many scam artists per capita as we do all right um but the companies in the uk 250 overwhelmingly almost 100 are on a semi-annual

38:39Michael Batnick:schedule i can't let this go we don't we all day we are the most capitalist money hungry society in the world and therefore people's motivations to do unscrupulous things are higher here because we have the most materialistic society in the entire world. We worship the dollar like no other country around the world. So I'm not saying that there's not scumbags everywhere. Obviously there are, but we bow at the altar of the dollar here.

39:15Downtown Josh Brown:Okay. From the standpoint of incentives, like the benefits of being aggressive.

39:22Michael Batnick:or higher here than most other places. How do our executives get paid? Where does the bulk of their compensation come from? Stock options. Okay.

39:31Downtown Josh Brown:Okay. I'm with you on that. I thought you were being racist again.

39:39Downtown Josh Brown:I like what you're saying now better. Is American-style capitalism and the US stock market more prone to - Because of the way that we've structured, I think there's a lot to what you're saying. I don't disagree with that. It's less insane to me now. All right. So this hasn't happened yet. What's going to happen is a proposal is published, and then it's subject to a public comment period. For 30 days, the SEC listens to what people have to say. And I would imagine you're going to hear the Andreessen cohort come in and say, yes, do this. And in fact, what if we never have to report earnings? And then on the other side, you're going to hear from a lot of the machinery that profits from all this reporting.

40:29Downtown Josh Brown:They're all going to come out of the woodwork to the bureaucracy because because this greases the wheels of their business. Present this as exhibit A, your honor.

40:37Michael Batnick:This this this conversation.

40:39Downtown Josh Brown:Right. Now, what now one thing that I wanted to ask you, by the way, how long have companies been reporting on a quarterly basis. It's about 50 years. It started in the 70s. It became like a standard thing. And then CNBC turned it into like a sport. You know, really like people, companies report earnings, nobody even knew. It's like, oh, they got a letter in the mail a week later. So TV sort of turned it into like the playoffs. Okay. Do you believe, so you don't believe that there will be more IPOs. I'm with you on that. Do you think a lot of companies will take them up on it? I have a few possibilities.

41:26Downtown Josh Brown:Sure. Okay. So this is what I wanted to ask you. Which companies are most likely, if something like this passes, and I don't know the likelihood, which companies are the first ones to say, awesome, see you every six months? Okay. Tesla. Oh, this is my first guess. 100%. And in fact, the idea might have actually originated from Elon telling Don Jr. Hey, this is stupid that I have to go on these conference calls every week.

41:55Michael Batnick:I don't think Elon loves it. I don't think, you know what? We don't need to hear from energy companies, frankly. Time out, Berkshire Hathaway. Ooh, I'm so glad you said that. That's number two on my list. Me too. You know what's funny though? Twinning. Are we twinning? No, because they hate that game. Okay, okay. I hate it. So at first, I had Berkshire as number one to least likely, and then I changed him to the other category because I could see them going either way. I could see them saying, listen, we're long-term investors. Our shareholders are all long-term investors. They genuinely don't need to hear from us every 90 days.

42:29Michael Batnick:I could also see them saying, you know what? It's tradition. More transparency is better. But I have them as number two. Number three. Wait, so here's what's interesting.

42:38Downtown Josh Brown:Here's what's interesting. I bet you Berkshire likes it that the stocks they own will be reporting quarterly, but they hate this so much. They released their earnings on Saturday mornings and they, they have never held an earnings conference call. They don't play the game. They don't talk to the sell side.

42:56Michael Batnick:They always opted. They would rock it off if they could.

43:00Downtown Josh Brown:You have a, you have a third name that you could think of that would, would just stop on a dime.

43:03Michael Batnick:Yeah. I don't think Mark Zuckerberg likes doing it.

43:06Downtown Josh Brown:Oh no. I think he uses it to promote shit. I was going to say Michael Saylor. No, he loves it. He loves it. I've listened to a few of his calls. He loves it. Yeah, but a lot of the earnings on whatever they're doing are completely outside of his control because they have to account for the value of Bitcoin. And it's not like they're doing anything. They're just holding it. He's a showman. He's a showman. He loves it. Okay, so you think... I think the banks will report quarterly forever. Me too. Because they're in the confidence business and it's their way of reminding people how strong their balance sheets are.

43:42Downtown Josh Brown:And I think the banks would be the last sector to ever decline the opportunity to do that every 90 days. Like, all right, things still look good. I have the same thing. They're like in the business of selling that stability.

43:55Michael Batnick:Correct. As far as most likely to take them up on the offer, it's like, yeah, you know what? We don't have to do this. Energy companies. We know what the input is for the most part. They don't really say a whole lot.

44:05Downtown Josh Brown:Oh, like which sector could you live without hearing from? 100%. We know. We know. Once a year on Exxon.

44:13Michael Batnick:Okay, here's the last one on my list. I don't think that David Ellison is going to have very much fun talking to analysts. There is so much debt on that stock. I think he's really not going to enjoy himself.

44:25Downtown Josh Brown:Is the combined company going to have$110 billion in debt or something? Yeah, it's a lot. It's incredible. It's a lot. The whole conference call is like, all right, well, Batman was a hit and we paid down another$4 billion in debt this quarter.

44:39Michael Batnick:Yeah. So there was only two other companies that I could think of that would be least likely to skip earnings calls. And that would be number one, Palantir. I think Alex Karp loves delivering a show for his shareholders. He loves it.

44:51Downtown Josh Brown:And Jensen. He just wants to. He just like he gets revved up for it. And Jensen loves it too. So that's my list. It's a great list. Well done. do you think this will happen? Probably. I think probably. I think it's like 24-7 stock. It's funny. Now we can trade stocks 24-7, but we're going to limit the amount of transparency that the companies are forced to provide us. It's almost like a joke, but this is what we're doing.

45:22Michael Batnick:I don't like it. All right. I'm going to step away from my mic because I'm going to get loud. We were talking all the time about private credit, right? About the gating, the loans, the nav, the this. Hey, guess what? Private credit, these are loans made to company. You either get paid back or you pretend to extend or there's a restructure or whatever. Why aren't we talking about private equity? Are you kidding me? If there is problems with private bonds, what do you think the equity is doing? Yeah.

45:58Downtown Josh Brown:Are you kidding me? Could you imagine the price of the equity? Could you imagine? If we're worried about the debt.

46:04Michael Batnick:Salesforce did$7.5 billion in earnings last year. And Salesforce equity is down almost 60%. What do you think company XYZ with an earnings EBITDA of$250 million, what do you think their equity is down?

46:22Downtown Josh Brown:with leverage are you kidding me what did this guy from what what was the gist of what the guy from apollo said john play this please i'm just curious like when you think about apollo's portfolio on private equity or other in the street like do you where do you see the pain

46:42Downtown Josh Brown:i think i literally think all the marks are wrong is that what you're asking me i think private equity

46:49Michael Batnick:all dude all the marks are wrong now he was talking about the software names but all and guess what this industry has been built on over the last 10 years all of these beautiful recurring revenue sas companies where the earnings and everything's predictable are you kidding me you could set your watch by the cash flows coming in each month so if the loans are bad oh my god dude

47:16Downtown Josh Brown:the equity so the equity so that was john zito from apollo global management and i think apollo

47:24Michael Batnick:like a year ago they're all private credit for the most part i think a year ago they stepped away

47:29Downtown Josh Brown:from the software uh sector uh i was reading somewhere where they they were like more cautious on software than the other lenders um and i i think because of ai disruption and they i don't know. I feel like if I'm going to bottom fish in one of these things in the equity of the private credit companies themselves, Apollo's got to be high on my list. Mine too. Yeah. So I haven't done it. I keep talking about doing it. Today, they all went up a lot. In fact, the top names in the S &P 500, I think Aries was the fifth best stock up 5 % today. Apollo was next up 5%. Blackstone up four and a half.

48:10Michael Batnick:All right, so throw this chart on, John, from ChartGut. So Blackstone, the price, the stock is down, I don't know, 40%. Yeah. And the forward EPS is still at an all-time high. And this is really remarkable, like the disconnect here. And now, I don't think that people selling the stock are idiots, okay? Just to be very clear. I think the disconnect makes sense because the headlines, the outflows, they're not going to stop on a dime. But, and also this idea that it's going to bleed over and it's the next subprime and it's a GFC 2.0. I reject that premise.

48:50Downtown Josh Brown:I obviously could be wrong. There's no evidence of it. So for right now, you can reject it. I just think it's simpler. I think it's even simpler. I don't think you need to be an expert on every investment these companies have and every one of the funds they run. I think you just have to know one very big thing. 2026 fundraising is going to be the worst that they've seen in maybe the last five years.

49:15Michael Batnick:Yeah, since the GFC.

49:16Downtown Josh Brown:In absolute dollar terms, this could be the worst fundraising environment for most of these funds offered by most of these companies. And you don't have to be an expert in tier one and all these liens. You don't have to skip all that. You can end run that.

49:34Michael Batnick:So this is not the same thing, okay? So I'm going to make a comparison that is not apples to apples because Blackstone's B-REIT, none of these companies were real estate, primarily company, real estate dominated companies. It was a piece of their business, okay? Apollo is primarily a private credit company. This is their business. Aries, this is their business. But the B-REIT stuff was so bad. The headlines were so bad because we knew the fundamentals were going to be so bad on office. We knew for a fact that it was going to be a bloodbath, and it was. And we also knew,

50:13Downtown Josh Brown:but we also knew that a lot of the holders were unsophisticated, new to the asset class, and that they would redeem more than they should have, which then creates sales that should never have taken place.

50:26Michael Batnick:And you know what happened? I don't know that this marked the bottom. You had Calper step in with a massive injection of liquidity. They got preferential treatment. And I suspect if we continue to see redemptions on these loans, which we're going to, and let's say that the software loans, yeah, they're not bad today, Mark Lipschultz. The fundamentals aren't bad today. We're not idiots. We all know that the loans are going to be impaired. And if you think we're idiots, watch your outflows for the next couple of quarters. There will be no more inflows. There will be outflows. And so maybe there is an institutional buyer that steps up to the plate and says, you know, we'll take$4 billion off you.

51:04Michael Batnick:We'll do it at$0.85 on the dollar. Give your investors some money back.

51:08Downtown Josh Brown:Not that I'm equating this to the GFC, but people forget Bear Stearns, Lehman Brothers, all had record earnings in 07. All of them. What do you think caused the crash? The bubble that preceded it? Record earnings. The question, how did you have record earnings? How did you generate

51:26Michael Batnick:those record earnings so scary talks aside because this this can be scary i think that the the the five percent liquidity feature thank god that exists i actually think it should i think

51:42Downtown Josh Brown:they should stop launching um so many of these products you don't have to worry about that yeah i don't i because i i just don't pr it's private credit or it's private equity but it's liquid but but it's not really liquid. It's not liquid. Or it's not liquid when you actually want it to be, when other people are trying to get liquidity at the same time. I just think it's a forever mismatch. I'm not criticizing them. I understand why they're raising money from the public this way. I understand the intention of partial liquidity. I just think people are not going to behave the way you want them to.

52:18Downtown Josh Brown:And that brings me to my next question for you.

52:21Michael Batnick:14 % redemption is on Cliffwater. Is this where you're going?

52:23Downtown Josh Brown:Yeah. So, okay. Bank loans to non-depository institutions like regular companies. This is private credit. Hit$1.2 trillion last year. That is a triple versus last year. Not nothing. Okay. Okay. This is a huge business with many players, many very good players who have been in this market for decades. is what I'm going to say is not a recrimination of private capital. Like people need to raise money. People need to borrow money. People put all that aside. How did Cliffwater out of nowhere become the most controversial name in alts in 2026? Because they were big last year. They were big the year before and nobody gave a shit.

53:17Downtown Josh Brown:And whatever they're doing, whatever they have said, whatever they haven't done, they have now landed themselves where there are six different reporters at The Wall Street Journal filing stories on them in the last five days. And that takes something to reach that place. They are now being more heavily scrutinized than any other, even Blue Owl. Nah, Blue Owl is bigger. I'm not saying bigger or smaller. I'm saying the level – because Cliffwater epitomizes the wealth management connection to private credit. That's what I think is one of the main reasons. But are there things that they are doing as a company that's making the situation worse?

53:58Michael Batnick:I wouldn't know. I couldn't know. But here's what I'll say. So Cliffwater, for people that don't know, the reason why they are at the epicenter of this, they've been in the institutional consulting space forever and ever. And they created an index for private loans. And by the way, on the private loan front, over 90 % of companies in the United States with revenues of$100 million or more are privately held businesses. And need to borrow money. They can't just issue bonds for the public, okay? And that's what the banks were for, these syndicated loans. And that's what private credit is for. So it's not all bullshit.

54:34Michael Batnick:Companies, these small businesses, they need money. And these are the providers of capital, okay? So there's nothing like – there's no smoke there.

54:42Downtown Josh Brown:But – Well, there is smoke there. There just may not be fire. There is a ton of smoke there. Boaz Weinstein says there's smoke. The guy from Rubric Capital who's a former SAC hedge fund guy says there's smoke. Doesn't mean there's fire.

54:59Michael Batnick:I mean – I just mean at the idea of private loans. That's what I mean. There is absolutely smoke. There is 100 % smoke. So Cliffwater just got hit with, and they grew from, I don't wanna, were they five?

55:14Downtown Josh Brown:$40 billion fund, like a giant fund.

55:16Michael Batnick:Were they$5 billion in 2021?

55:19Downtown Josh Brown:Well, we know how they did it. They wind and dined RAs and they did it. No, no, no, no, no, no, no, no, no, no, no, no, no.

55:23Michael Batnick:The advisors did it, the advisors did it. The advisors did it. Because, and if you put your clients into this fund and you took your clients out of this fund in a two year window, you're in the penalty box. You are in the penalty box. Whose penalty box are you in? Name names. I want a list of all the advisors that redeemed. I'm kidding.

55:44Downtown Josh Brown:But here's what if the holdings have multiple meltdowns and the marks come way down? Do those advisors still belong in your penalty box? Or do they do the right thing?

55:56Michael Batnick:The advisors. Ah, this is a good question. I don't know the answer. This is a good question. The advisors are stuck between a rock and a hard place. Yes, that I know. Okay. So in 2022, here's the story. Why are we talking about this? Why did it go from 3 billion to 40 billion? In 2022, as the 60-40 portfolio experienced its worst year since 1843, what worked? Floating rate bonds. Private credit worked. There was no recession. There was no defaults. They were up double digits. They paid their coupons and boom, gasoline. Okay? So the advisor said, give me more, more, more, more, more. And believe you me, all of these private managers were happy to supply them.

56:39Michael Batnick:And this is the problem. This is the potential problem that we're going to learn over the next 12, 24 months. Howard Marks says famously, the worst loans are made in the best of times. And this is the worry. There is too much supply of capital. And there's no way that there is that many companies that need these loans. and there were companies competing to give loans. What does competing for loans mean? Worst covenants.

57:05Downtown Josh Brown:Or lowering the rate that people are borrowing at.

57:08Michael Batnick:Worst protection for the borrowers. So there is smoke and we are going to see, and God forbid we enter a credit downturn. Oh my God. God forbid.

57:16Downtown Josh Brown:I don't know the right thing. So I don't know the right thing to do. Okay. What I could tell you is gigantic RIAs in our industry, like$600 billion RIAs,$100 billion RIAs. It's a little incestuous. There are RIAs that are owned by the same parent company in the private asset world that Cliffwater is owned by. Correct. And they're recommending the Cliffwater Fund. I mean, I don't even know, like in a different presidential administration with a different SEC chair. Yeah, that's questionable. That seems nuts to me. But put that aside, I don't even know what the right thing to do is. If you are one of the advisors at these giant firms and they told you, hey, we have a 5 % allocation sleeve to Cliffwater as part of our portfolio.

58:08Downtown Josh Brown:That means all of your clients, 5 % of their money goes into this. And you listened and you did what you were told by the investment committee. And you have a$10 million client who now has a half a million dollars in a Cliffwater fund. Okay? Whatever it is.

58:22Michael Batnick:Yep, that's right.

58:23Downtown Josh Brown:Now, what is the right move? A, call the client and say, I couldn't tell you this thing has 3 ,800 different loans in the book. I am not equipped to comb through and tell you how many are bad. Let's just redeem as much as they'll let us over the next four quarters. Is that the clown move? Or is the clown move to say, nope, I said it last year. Therefore, it must be true. this is the right fund it's the right asset class stay the course and then some bullshit happens yeah okay it's what's the i don't know what's worse okay so obviously the latter is worse

59:03Michael Batnick:and the latter is worse because you'll lose more money but i think you lose the client either way i don't know i don't know but the interesting part is so the advisor basing exactly on what you said is stuck between a rock and a hard place because if you say yeah we should redeem it's like well then why didn't you put me in this three months ago buy this shit for me that right telling me to sell it right so but and also one part of the story that's being not reported enough and the financial media and there is smoke so listen it's their job i'm glad that they're reporting on this they are so horny for a meltdown because it's i agree with you it's such a salacious story it's like see this is they're trying to stuff your 401ks these billionaires but i i get it i i get it the interesting thing though is that these these clients that are requesting their money back they're getting it back at NAV, which is probably more than what the assets were.

59:50Michael Batnick:Right. So if the NAV was in a 50 % drawdown, I think paradoxically, a client might be more inclined to stay the course. I don't want to sell NAV. I'm already down 15%. They got their

1:00:01Downtown Josh Brown:money out. Oh, that's interesting. That's interesting. Right. By the way, this whole conversation we're having and the 15 % redemption request that Cliffwater reported for last month, et cetera, et cetera, is happening against the context where nothing's really gone wrong yet.

1:00:16Michael Batnick:So God forbid, God forbid we enter a credit cycle, a downturn.

1:00:24Downtown Josh Brown:Well, everyone will be affected, but this will look really bad. Now, if you have an advisor that you thought was your fiduciary and they are your fiduciary, they thought they were doing the right thing, that just you need to recognize that they might not be sure what the right thing to do is right now. Most advisors I know want to do the right thing. It's an open question of what is the right thing to do because it's sort of like it's a trap. And the only way out - It's like prison is dilemma. Well, the only way out is if we don't have a credit event in the country and cooler heads prevail and the redemptions trickle away and like these things can continue to operate and the loans are good, then everyone will be fine.

1:01:11Michael Batnick:But the reason why I find that scenario unlikely is because AI will impair a lot of these businesses and a lot of these businesses, unfortunately, and a lot could be 2%. That's a ton, right? That's a ton. Let's say 20 basis points of these companies go to zero. The headlines, dude, they're not going to stop.

1:01:36Downtown Josh Brown:So as an advisor, that's part of your problem. So if you know - Headlines are not going to stop.

1:01:41Michael Batnick:You have to sell first. That's your responsibility, unfortunately. Unfortunately.

1:01:45Downtown Josh Brown:But you can't sell enough for it to really matter at once. It's really tough. What's the lesson for, like we're financial, it's the lesson for advisors, never take a risk for your clients because that's not good. Or is it like if the exit is this much, is this big, but the entry is that big, This is maybe under allocate.

1:02:08Michael Batnick:Well, this is this is the lesson is know what you want. It sounds trite. This is the classic asset liability. Nobody could nobody.

1:02:15Downtown Josh Brown:Nobody could know what they own this.

1:02:17Michael Batnick:I know this is the classic asset liability mismatch.

1:02:20Downtown Josh Brown:All right. Sean did a lot of work on our topic five, but we have run out of time. So I am going to push this over. That's not going anywhere. Yeah, I'm going to push this over into next week. Sean, don't hate me. You got some great charts here.

1:02:33Michael Batnick:I just I want to do one chart for topic six. We'll throw the rest into the TCAF. All right. So I asked Chartgoat to make me a chart of the worst performing stocks going into the Citrini research piece and coming out. And this is a banger certified. Throw it up, John, please. So look at this line in the sand. The red line, the red dots are the 100 worst stocks in the S &P in the 17 -

1:03:04Downtown Josh Brown:On the X axis.

1:03:07Michael Batnick:Yes. The ones that are down negative 9%, negative 10 % or more, okay? With some down 40 % in 17 sessions. So these were the 100 names going into the 17 days prior and then the 17 days since. And look at the bounce, dude. Like this stands out.

1:03:27Downtown Josh Brown:Yeah, there's a lot of software stocks that have since started to outperform the Halo stocks. since that piece hit.

1:03:35Michael Batnick:Thank God we got a little bit of a reprieve.

1:03:37Downtown Josh Brown:Yeah, I own a few of these. That's not just software.

1:03:40Michael Batnick:That's 100 names, and they've bounced pretty strongly. So we'll talk more about the stock market, what's going on. Yeah, we have a great, you know what?

1:03:48Downtown Josh Brown:I don't want to step on it. We have an amazing guest. You could subscribe to the Compound Insider, which I think we have a link in the description below if you want to know the guest in advance. We have a great guest coming up this week, and we have so much to talk about with that person. I'm super excited for it. Let's do make the case and mystery chart and we'll get out of here. I want to talk about Uber. I know some people might be sick of it. Do you own this stock? I own a lot of it. I'm going to tell you, I think it's going to break its downtrend here because the news flow over the last four days has been incredible.

1:04:26Downtown Josh Brown:I think they're checkmating the entire autonomous opportunity. I can envision a scenario where in five years, it's Uber and Waymo, and then Tesla sort of gets the Tesla fans as their customer, and that's it. And everyone else has to play nice with the Uber network. Because here's what's happening. They just announced a strategic partnership with Zoox. John, let's roll through that real quick. So, John's going to put that on screen. Nope. The other one, the top one. There we go. You see that ridiculous looking horse and carriage-esque Zooks carriage? You see? Whatever.

1:05:13Michael Batnick:All right.

1:05:14Downtown Josh Brown:Well, these live at the Las Vegas airport and soon to be at LAX, I think. Anyway, these are going to be on the Uber app. And Zooks is backed by Amazon. and the and the so what's interesting about these is they have no front they have no back because they they are uh bi-directional so they go this way they go this way both are forward there is no reverse you understand there's no trunk there's no right it's not really a car it almost looks like a cinderella contraption right like a cap like um like somebody turned a pumpkin into a into a carriage anyway um big deal with amazon back uh uh zooks then they followed it up with deal with Nissan and Wave, which is another one of the technology companies.

1:05:58Downtown Josh Brown:Then they had another deal. And then they just announced with NVIDIA, 28 cities by 2028. So NVIDIA to launch L4 software driven robo taxis on Uber. Can you imagine? Is there anyone you would rather have as a partner for the autonomous driving future than NVIDIA? Because NVIDIA is going to be the provider to every OEM, Cadillac, Mercedes, Volvo, Volkswagen, Porsche, Toyota, et cetera, et cetera, et cetera. What NVIDIA has built is the chip and software package so that these OEMs can roll autonomous ready cars right off the factory floor. And that I think is what changes the game. And that is how Uber becomes flooded with autonomous ride options from a million different providers, thereby keeping this a one-on-one horse race against Waymo, for example, or Tesla.

1:07:01Downtown Josh Brown:So these are very big deals. Uber has responded. The stock is up from 70 to hit 78 today. Put the chart back up real quick, guys. I mean, it could roll right back over again and I'll look and I'll have egg on my face, but we took the 50-day. Not a ton of conviction. I thought it should have been up more, but it's possible that the stock has bottomed at 70 and that the next wave of Waymo headlines are not going to be as damaging as the last three months have been. I think this is the cheapest growth stock in the market today. It's 15 and a half times forward earnings. And I had Sean do some charts for me.

1:07:40Downtown Josh Brown:Man, the market hates the stock, huh? Because they don't understand. All right. Uber is in the cheapest quintile of PE ratios within the S &P 500. So it's the bottom 20 % on valuation. It is selling at a 36 % discount to the median stock in the S &P 500 on PE ratio. On forward PE, it's 17.5, not as egregious. the discounts of the median tech stock, 22 times versus 16.4. It's cheap on every metric. Let's show the growth expectations. This is the craziest thing. 35.8 % expected growth. The median industrial stock, which is what Uber is considered, 8.7 % growth. The median tech stock, 13.5%, and the median stock in the S &P, 9.5%.

1:08:39Downtown Josh Brown:Uber is going to triple the growth of the median stock in the market, more than triple, and it's selling at a discount to all of them, a substantial discount. It breaks my brain.

1:08:53Michael Batnick:You usually don't see value-based growth stocks hiding in plain sight like this, but maybe this is one of them. Apple is one. $150 billion market cap doing like 50 billion in revenue.

1:09:05Downtown Josh Brown:That's bizarre. That's growing by 30 something percent. I don't understand it. It is bizarre. I'm with you. I get it. All right, you're worried about Tesla cyber cab, which doesn't even exist. There's a human in the front seat. You're worried about that. You're worried about Google coming and they're going to put Waymo onto the Waze app. Yeah, they probably will. Or they'll bundle it with Google Maps. Yes, they probably will. Fine. But then Lyft is out of the picture and Uber is back to a horse race with one competitor. But the difference is they will have autonomous vehicles from companies backed by Amazon and NVIDIA and all the OEMs and all these other AI startups we haven't even heard of.

1:09:49Downtown Josh Brown:They're all going to list their cars on the Uber app because it's instant monetization. You know how expensive it is to produce a fleet of autonomous vehicles? It's billions of dollars. You want riders immediately. Uber gives you riders immediately. Am I talking to a wall? How do people don't understand this? I feel like I belong in a lunatic asylum. All right. Mystery chart.

1:10:16Michael Batnick:Now, you know what? We got late. My mystery chart's not going anywhere. We can roll it over. It's not timely. We'll do it next time.

1:10:21Downtown Josh Brown:Guys, thank you so much for watching. Thank you for listening. We appreciate everybody who came to the live. You guys rocked the live chat. I love that you all get to catch up with each other each week in the chat for our show. I think it's super cool. Don't forget, tomorrow is an all new Animal Spirits. And we'll be back at the end of the week with the compounded friends. We love you. Good night.

1:10:51Michael Batnick:Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.