Only One Thing Can Stop the AI Crash, Worst Drawdowns, Blue Owl vs Apollo

27:40The semis were in a 35 % bear market by April 8th. Did you know that? I don't even remember it. I know what happened. Yeah, they got whacked into the Stone Age. All right. Berkshire Hathaway. So this is Warren Buffett's – one of his last trades of his life. if you bought Google. Well, he retired. He didn't buy this. I know, but whatever. Berkshire Hathaway under his watch, technically for the last couple of months. They did this in the summer. Berkshire Hathaway disclosed 4.3 billion to$4.9 billion worth of Alphabet. You know what's funny? Us two schmucks, we sold to Warren Buffett. Oh, literally.

28:20I think I sold it in June, but close enough. I sold it lower than where they bought it. I looked. Don't think I didn't look. What was I going to say? So they bought almost 18 million shares. Loop Capital upgraded Alphabet today from a hold to a buy. Tough scene. Raised their target to 300. Didn't really help. The stock looks better than the others right now. I think the Halo from Berkshire buying. But they like the name. It didn't do much. Let me do a one-year Google price performance. If you want to know where I sold, just find the lowest point in the chart. I think I'm June. I forget. Pretty damn close to the lows.

29:06I either sold right before or right after the lows. And, of course, look at it smiling back at me. No, but it's perfect. Look at this chart. Look at the smile in this chart. Yeah, you dumb bastard. All right. So Loop saying Google's core ad business is actually reaccelerating. Search is showing stronger pricing. and improving click-through rates, which helps reinforce their view that AI cannibalization fears were overstated. Overstated by me. They're saying the Google Cloud platform is being driven by higher margin AI workloads. That's so weird. I just read that workloads were lower margin for AI.

29:42Who knows anything? They're also emphasizing Alphabet's balance sheet strength, cashflow plus slower CapEx intensity versus their peers. Yeah, wait a minute. I thought Redbush was talking about unit economics. Maybe they're looking at a different Alphabet. They didn't downgrade Alphabet. They downgraded Amazon and Microsoft. Loop says Alphabet's still the best risk reward among the mega cap AI names and much less exposure to the severe CapEx burdens that Amazon and Microsoft are facing. All right. What I think this all boils down to is what's changed in the last two weeks is not the fundamentals.

30:23of the AI race. And I think everybody still understands that these companies sort of have to continue if they want to be relevant and competitive in the future. I think what's changed is what is the cost of it going to be? And is there a payback that's going to come soon enough to justify the cost and also the way it's being paid for, all the debt. So I want to remind people why everyone was bulled up on these stocks in the first place. We're not all delusional. Raymond James is projecting that cloud revenue for AI will explode in the next five years to nine times its current value. Thank you, John.

31:05So what you're looking at here is the revenue from AI cloud products and services. This is what Ray J thinks they'll be able to charge all of the companies and people on earth that want to utilize this tech. Like it's not this mass fever dream of nonsense. You know, it's not like we're all kidding ourselves. Like this is the opportunity that they're all investing for. So and that's like on an annual basis. So I want to remind people that the problem is who's going to pay for it? and how. So this is from the journal. Taxpayers die. Yeah, sure. Eventually. JP Morgan's fundamental research created a financial model that projects total investment in global AI infrastructure through 2030, taking physical limitations into account.

31:57You know what the physical limitations are? There are already so many plans for data centers and connecting them to the grid that Companies like GE Vernova are telling Wall Street, we're booked out until 2028. If somebody came to us with a new project, we couldn't say yes to it until 2029. The physical limitations are you have to connect natural gas turbines to these transformers, which look like gray house-shaped boxes or box-shaped houses, and to get physically the electricity, that's that limitation. But the point is they're saying it's$5 trillion to build all the stuff that's been committed to.

32:40What they did was they calculated how much new revenue these companies would have to generate to justify spending$5 trillion on these AI supercomputers. And what they came up with is AI products, chat GPT, all the enterprise stuff that Anthropix sells, et cetera, would have to create an additional$650 billion a year indefinitely just to give investors a reasonable 10 % annual return. Who was that? Who's the$650 billion? JP Morgan. So just to put that number in perspective,$650 billion a year, that's more than 150 % of Apple's annual revenue. OpenAI's current revenue is about$20 billion. So think about the distance between$20 billion and$650 billion for AI revenue to get to just for investors spending that$5 trillion to earn back 10%.

33:40Yeah. That would equate to every – Yeah, that's good. Hold on. That would equate to every iPhone owner in the world agreeing to pay an extra$35 a month for products and subscription. Like just to try to like figure out like what is the payback. So if you ask me like what's changed fundamentally nothing, what's really changed is the way we're thinking about the bill. What is the cost? When do we recoup it? And how are we borrowing the money to do it? That's the really big change here. And the spark was lit. When Sam Altman was asked, hey, wait a minute, you're doing$13 billion in revenue. How are you going to pay this$1.3 trillion bill that you amassed over the next 10 years?

34:22And he basically said, he hung up and said, I can't wait for you to short my stock. He went like this. Yeah. So yeah. So all of the questions, all of the reasons for the air coming out recently, I think it all makes sense to me. Right? Like all of it. It all makes sense. I don't think anybody's dumb for selling. All right. You're up. All right. I want to talk about some charts that I found in the Daily Chartbook, who does a daily... Well, it's a chartbook, daily, and it's great stuff. So this is from Citadel Securities. Retail investors continue to add into weakness, becoming the new price setters.

35:01Well, I'll be damned. During the latest pullback, retail flows showed one of the largest buy-the-dip events on record. Unbelievable. Look at that spike. I guess they know how to disentangle retail buyers from institutional buyers. Like they know what they're looking at. Yeah. Vanda Research does this as well. There's also something called a – they have a retail risk on risk off index. Roro. Citadel. So this tool tracks whether retail investors are increasing or reducing exposure to different forms of market risk. This week saw the fifth strongest retail dip buying in the past two years. So stocks are dipping, and we're buying.

35:45I'm going to tell you something. How often do they run this? Weekly? Every four. I don't know. I'm assuming, yeah. Looks like it. We don't know what NVIDIA will bring. So I'm just going to tell you, if it's more of this for the rest of the week, I think that retail, that Roro shit is going to be way less. I think there is, I think retail buys the dip really quickly and with tons of conviction. I just don't think they do it on the third week. Completely agree. Completely agree. There was a great article in the FT talking about, they call it the squid game market. How Asian retail traders are driving US meme stocks.

36:30I didn't come up with that name, so don't get mad at me. Look at this. I mean, this is wild. So they say, known for their - It's like a little racist. Yeah, I think so. Known for their high-risk tolerance, herd behavior, and use of leverage, South Korean traders have piled into US markets this year. Their holdings doubled$170 billion at the end of October. And what they're particularly keen to buy are the crazy shit. So Ionic, IONQ, is a huge, huge holder of theirs. It's the fifth most popular US stock for South Korean investors. They do a lot of the leverage shit. Like they are having a party.

37:10You know, it's interesting. The Asian stocks got murdered overnight. And that's like new because, yeah, they have AI exposure. Like Europe was down 1%. And I think Asia was down two and a half or three, like as a group. Some of those markets got just absolutely annihilated overnight. They're sort of acting like our market. And it's weird, right? Because they don't have Amazon and Microsoft and Meta in their indices. I mean, they have other companies that are exposed to the theme, but this kind of went global over the last 24 hours in a way that a lot of US tech sell-offs just historically haven't or should not have.

37:57And I sort of feel like that's new. What do you think? Yes. Funny you should mention, because I don't pay attention to Asian markets that often, but I did see a headline this morning. I said, hmm, different. Yeah, they beat them up. Look at this table from our friend Todd Sohn. So the levered long single stock ETF drawdowns. So the monster ones, I'm sorry, not the monster, my bad, the micro strategy ones from Defiance and T-Rex, down 95 % and 97 % from 52-week highs. Oh, my God. And still, MSTU, is that at the peak? Wait, wait, stop. 500, no, I won't stop. 97 %? $557 million in this thing. Let me see if that's...

38:42Wait, wait, wait, wait, I don't understand. This is in dollars or in market cap? Sir, that's percent. Price. Wait, the 2X long micro strategy ETF is in 100 % drawdown? Like it's almost zero? It's down. Well, it bounced today. So yeah, basically. Now it's only in a 93 % drawdown. Oh my God. I'm just eyeballing some of these. I didn't even know they had 2Xs for – there's a 2X for super micro? Need it. You got to have it. What's wrong with you? What crack-smoking Muppet is 2X long SMCI? Holy shit, boss. What are we doing here? So this thing, okay, so that chart, put it back on for a sec. That number, the AUM, that's as of today, dude.

39:28So the T-Rex MSTU at its peak at$3.4 billion. Now it's$550 million. What the hell are people doing? why is there that much money dude it's squid game were you not paying attention isn't this this is like walking into vegas like walk up to the first table you see so oh blackjack i love blackjack here's four million dollars like let's let's play like yeah it's this is like people are getting their balls off yeah did you know is it good is it is it like sort of good i mean it's bad because we know on the other side of the trade is Ken Griffin and he's going to buy 10 more, 10 more apartment buildings in Brickell.

40:17We understand like where this money goes. It doesn't disappear. It's transferred to somebody else. So from that perspective, it's not great for like wealth inequality because it's all going to Jane Street and Citadel. But is it like good because these are young people who need to get their education now before they do this with real money. Is it good? Is it good? No, it's not good. Who is it good for? It's great for Ken Griffin. But isn't it the right lesson? It's not good. Let's just be clear. It's not good. There is a double levered BMNR, the Bitcoin, the Bitminer, Tom's thing. There's a double.

40:57Right. You needed a double of that. A double of that? Listen, this is unfettered capitalism. Who launched the double It's T-Rex. It's T-Rex. B-minor. So if there was a demand for these products, you know, they'll be launched. Listen, the only thing better than Tom Lee is double Tom Lee. So I get it. It's just, I don't understand the dollar amounts here. Like, why are these so big? Why are these? Why were these so big? So 570. So this thing just launched because it's not old. And it was just immediately$575 million. Like, that's a lot of money. So is this good? No, it's not good. It's actually so f***ed up.

41:38No, it's not good. Come on. It's like really bad. And there's nobody on – nobody's watching this. Like we – societally, we have decided deregulation and like anybody can launch anything and play at your own risk. And the apps are encouraging it. And there's like – like there's nobody coming to save any of these people. Nobody. So this is serious money. Listen, when you have the double levered SPY ETF and you touch those hot stove and you learn your lesson, okay. But this, like why does this need to exist? I'm going to say one thing, and this will be unpopular, but I don't care. I'm as for deregulation as the next person, and I do think adults should be allowed to do what they want to do within reason.

42:22I think we should draw the line at like scams. but like if something is a bet and a bet goes against you and you're an adult, like, you know, that's, that's just the way life works. Don't, don't bet money. You can't afford to lose. Okay. I'm, I get it that that's where the fault lines are, but I also think that in the midterm elections, if the Democrats have a little bit of a wave and they take some seats, it's going to be nervous time for the people that are running around wall street, acting like robber barons, launching f***ed up products and convincing people to do really dumb things. And ultimately, if you ever, I don't know if it'll ever happen again, if you ever get a Democrat in the White House who brings in their own SEC person and they decide, you know what, let's do a look back and see who was taking advantage of the public, like a lot of this stuff is gonna get drugged back out onto the carpet.

43:18Like I think right now we're in an environment where people are just like, Like I get to do whatever I want. As long as I disclose and disclaim, I can launch anything. I can encourage any kind of behavior. And that might not always be the case forever. Who's to say where the line is? This one is good. That one is bad.

43:37It's not even a legal argument. It's a moralistic. Like, was this in the best interest of the users of your brokerage platform? Like, how are you going to defend that? You're going to pay the fine. You can't defend it. I'm just saying like if you get a regime change at regulatory bodies who may want to go back and say, we got to clean some of this stuff up from the last era. And that really does happen. And a lot of people right now seem to have short memories of prior episodes where that happened. So I just, you know, it's all fun and games. And I know a lot of people are making a ton of money and I'm not player hating.

44:14But like this stuff doesn't just go away. You launch a product that drops 98 %? Like, you don't, you can't just, well, it was the Trump era. What do you want me to say? Like, that's not how it's going to go. And I know it's not because I've been around for a long time and I've seen the pendulum go in both directions. All right, let's do private credit, our friends in private credit. You are really good about listening to the calls. and I just kind of like vibe comment on this stuff, but you actually do the work. And I wanted you to give me your take on what you heard, the difference between what Blue Owl is talking about versus a firm like Apollo, because it sort of seems like a boys and men, the separation between the boys and the men right now.

45:05Yeah. So tell me a little bit about what you gleaned from listening to what these companies are saying. So I did this this morning with Ben on Animal Service. Excuse me. All right. Then we'll skip this and I'll just listen to that. No, no, no. No, no. No, stop. No, I'm saying I'm prepared. So, okay. I listened to Apollo's earnings calls. Now, for those of you who are unfamiliar, Apollo is one of the gorillas in the private credit room. Mark Rowan, their co-founder and CEO, is an absolute wildebeest. And he was asked very pointed questions about the rate environment and investors allocating away from private credit because these are floating rate securities.

45:45And so as rates come down, they are less enticing for investors. And he answered the question like a f***ing man. He said, yes, listen, let's be grownups.

45:59the opportunity set today is less attractive than it was one year, two years, three years ago. Hey, guess what? You could say the same thing for public equities. I wish I bought Nvidia three years ago. I mean, this is what he said. He said, so yes, undoubtedly, we are tightening our standards. We are being diligent. We are not upping risk. Okay. And it was a phenomenal answer. And then you hear Mark Lipschultz, who was clapping back at Jamie Dimon after the cockroach comment. And so not in fairness, but just in factness. Who is that now? Who is that? So Mark Lipschultz is the founder and CEO of Blue Owl, which is the biggest, it's called GP Stakes company in the world.

46:41GP Stakes is they are seeding a lot of these alternative asset managers. It's a great business. And they're taking unit economics off of that business. Okay. They're also in the private credit game. and you might've heard Blue Owl because they are responsible for doing all of the largest deals with all these hyperscalers. They're financing Metas and all of them. He was asked a question about why their BDCs, which are public vehicles, are getting sold and what investors may get wrong. And oh boy, the difference in the answer and the tone between what he said and what Mark Rowan said could not be more dissimilar.

47:18It was defensive. It was nasty. It was investors don't understand. Well, guess what I understand? The stock is down 50 % from its highs almost. The BDCs are getting murdered. And now the FT did a report that they are trying to merge their private credit vehicle into the public credit vehicle, into the BDC, because they're getting redemptions out the ass. and some of the quotes from the article are so LOLZ, absolute clown of the week awards. So we'll get to that in a second, but at a high level, that's the story. Let's show people what we're talking about in terms of the share prices. So the first chart is the corporation Blue Owl itself, which is basically the GP sitting on top of all of their funds.

48:07This is the equity. Yeah, so if you're a shareholder in this, you own a piece of Blue Owl Capital Incorporated, the company. So whatever funds they launch, whatever fees they collect, whatever deals they do, you're kind of like alongside the GPs. And this thing is a$13 stock now, down from almost 30. It's in a 38 % drawdown year to date. And they're - No, worse, worse, worse. It's down 38 % year to date. The drawdown is way worse. The drawdown's bigger. But there's no, it appears that there's no end in sight. It's a relentless downtrend with very few positive weeks along the way. And I don't know where this stops.

48:48The next chart though, and this is the thing that I have been harping on, this is the BDC. So this is a Blue Owl product that is itself publicly traded. And basically they are making loans to private companies that are either on better terms or done quicker than what these companies would be able to do with a traditional bank. Obviously, we know because of regulations, the traditional banks, they're not lending as much. They don't take as much of their own balance sheet risk, blah, blah, blah. So that's where this whole private credit boom came from. It came from the last crisis where we decided we don't want deposit institutions that hold lots of money for teachers and policemen to engage in reckless, reckless, engage in this type of risk taking.

49:39So somebody had to step in and they did. And they're all giant companies. But this BDC itself, the concern here is at the end of the day, people own it for the yield. The yield on not just this, but all of the BDCs is predicated on whatever the interest rates are in the real economy. And if you own something that pays, I don't even know what the yield is on this now, but let's say this year it was 9%, 10%. And the interest rate is on its way down. The Fed has been cutting. You already know next year, the yield on this is going to be lower, which generates selling, which has not, which Blue Owl can't do anything about that.

50:20That's beyond their control. They didn't do anything wrong. It's just the natural progression of what happens to yield instruments in the stock market when the prevailing interest rate goes lower. So people are selling it for that reason. But there are also a lot of reporters that are hot on the trail of whether or not a lot of these loans in these portfolios will continue to perform, which has introduced a secondary concern. So now you have this thing selling off and the owners are like, wait, is it selling off because the dividend might go lower or is it selling off because the Financial Times is right and all of these loans are a mess?

51:01And what Lipschitz is trying to get across is these are just fantasies that we have to answer. Like people are making up stories and everything is fine. But wait, there's a third, correct. That was basically his comment. They reported, by the way, at the end of October. So if they reported this week, the questions would be a lot harsher and the bullshit answers that he gave would not fly. But there's a third leg to the stool that is, they are in the perfect storm. The hyperscalers and the data centers that are now coming into question, hey, wait a minute, Meta has an option to opt out of the lease.

51:32They are not where you want to be. And guess what? So thank God. I own Blue Owl, the equity. I sold it early in the year. To be clear, I think if you're selling Blue Owl down here, you're an absolute donkey. Like, I think that even though - And you would not be long the BDC. You're talking about the corporation. I'm talking about the equity, and I would much rather be long than short the BDC, to be clear too. But there is a story there as well. So this is from the FT. Earlier this month, Blue Owl told its shareholders that it planned to merge its Blue Owl Capital Corporation to fund, this is the private fund, okay?

52:05This is the private credit fund, which has$1 billion in assets and was one of the first private debt funds targeting wealthy individual investors. with its OBDC fund, which is the BDC, the publicly listed one, which has 17 - The one that's currently in the process of crashing. So they're talking about merger of the two funds as redemptions of Blue Owl Capital Corporation II have climbed this year to a level where it would eventually be forced to restrict investor redemptions. They've pulled$150 million from the fund through the first nine months of this year, a 20 % increase from last year. Okay.

52:37But here's the clown of the week quote. I'm sorry, Jonathan Lamb, CFO, in an interview with the FT. I think he's on the compounding friends later this week. At current prices, the investors in Blue Isle Capital Corporation 2 could take a potential haircuts on their investments. But he said, and this is the, I can't believe he said this out loud. The merger came with significant benefits, such as the ability to own more liquid shares in OBDC. Excuse me. I thought the appeal was the illiquidity premium. I thought that was the whole point. What are you talking about? Why am I in private credit if you're merging it with a public equity?

53:15What are we doing? It gets worse. It gets worse. Quote, there's no doubt that this is a no-brainer transaction at 95 cents, said Lamb of the new merger. Wait, why? And guess what? There's no doubt? They're not talking about 95 cents. They're talking about 80 cents. No doubt? Excuse me, sir. What in God's name are you talking about? I have doubts. Lots of doubts. Yeah. Do you have a Quotron? There's no doubt. There's only doubt. So anyway. Will that stabilize? Wait a minute. If they do that, could that bring stability to the publicly traded BDC? Now, also the public. Because it's more assets into the portfolio?

53:51It's a billion dollars. The publicly traded BDC has more leverage. So maybe this will take the leverage down a little bit. I don't know where it goes from here. But all of the smoke that they're inhaling, they deserve. um and to be clear so i think the reaction might be justified is it an overreaction maybe we'll find out um but again uh they're in the thick of it yeah not great the dividend yield is 12 percent on obdc yeah is that it okay uh i mean i don't know if that's i don't know if that's accurate because and up to and up to date because i'm also seeing sources say it's 13.28 oh and And this is the other thing that people don't know about BDCs or they should know.

54:33But, you know, it's not it's not obvious. Like with stocks, like dividend paying stocks, like dividend aristocrats, you don't have like this crazy swing in the quarterly payment. Like they tend to they tend to institute a dividend that they could stick to. They may not raise it a lot each year, but they try not to give you that variability. They try to give you floating. That's right. Right. That's not what's happening with these. The dividend, you can't annualize. You can't annualize it, but you shouldn't because you're just making shit up. All you can go by is what they declare for next quarter and hope for the best for the following quarter.

55:13That's right. One last thing. Let's just look at the portfolio. So as far as what actually is going on in here, this is not bullshit. These are legitimate loans. There's 293 companies in here. I don't know if the marks are valid or what. Obviously, the street is questioning that. But these are legitimate services being provided to companies all around the country. It's a diversified portfolio. I don't know about the covenants, lending standards, or whatever, but all of this is obviously, obviously coming under scrutiny. I wanted to just say as a capper to this, Chardoff, this is what happens. Larry.

55:48This is what happens when you decide our target market for this is the wealth management channel. Respectfully, you could put all the educational, and we talked about this with Shinali on the show, you could put all the educational materials you want in front of the advisors, in front of their clients. When push comes to shove and you need them to act like institutions, they will not, they cannot. They're not institutions. They're people who have bills to pay and dreams to achieve. They're not 100-year college endowments that are funded in perpetuity. You cannot count on wealth management clients behaving like pension funds, you idiot.

56:34So I'm all for democratizing access. I totally get it. I'm not anti, I'm not a hater, but like don't have a vehicle set up where the thing you're counting on is that some schmuck financial advisor didn't sell this to people as low risk because it's bonds. Because I know they did. Because I listen to people talk. And I've been around too long. And I know that some people sold this right. And some people didn't. And this is the FO part of that process. No doubt. No doubt. All right. Let's, where are we at next? Sorry, I got lost in the sauce here. Yo, stock market sell-off. Okay. All right. Let's get into it.

57:18You got some charts here. I got some charts here. All right. Um, let's actually skip the first one. Let's go to the beat and the misreaction. So we've been all over this. The companies that are missing, uh, missing earnings, this is more in pies, by the way, um, are just getting taken out to the woodshed. Is it wood shop? Woodshop. What is it? It was woodshed or shot. No, it's taken out behind the woodshed. Like that's when I remember that taken out. It's like, it's like a child abuse. It's a child abuse metaphor. It's like, like if you misbehaved, your dad would take you out behind the woodshed where nobody could see or hear you scream.

57:52Wow. All right. That got dark. All right. So it's the etymology. Okay. So, all right. Check. Yeah. I'm sorry. Check this out. Etymology. Okay. Go to the next. I'm done with this. Go to the next table, John. All right. Thank you, Sean, the great Sean Russo, top 20 worst market cap drawdowns from their peak. These are numbers, dude. NVIDIA, 594 billion. Meta, 469 billion. Microsoft, 349. Amazon, 328. Oracle, 300. UnitedHealth, 264. Tesla, 220. Broadcom, 215. So what is that? One, two, three. I don't know. There's like a dozen stocks that have lost$100 billion or more in market value. Yeah. And these are, everybody owns these stocks.

58:47Like these are the stocks that are in everyone's portfolio, right? Yeah. I mean, that's like the list. That's the salient point is like, these are the most widely held stocks in the world. Let me show you something. Let me show you something worse. These are the, I asked Sean and CharKid, the largest non S &P 500 market caps that are currently in 50 % drawdowns. Why did you ask this? I'm curious. Okay. So the chart off, I'll explain it really quickly. These are the stocks that when you talk to some investors and they have some hotshot guy who's doing like some SMA for them, like, and I know of programs like this at Morgan Stanley, at Merrill, where it's like, oh, did you hear about this guy, Todd, whatever his name is, he like has this concentrated portfolio of the best growth stocks and they're not in the index.

59:44And like, you know, it's like this whole thing. And in a bull market, it looks unbelievable. And it's like, like clients are high-fiving their advisor. But what we're seeing now is what ends up happening to these types of things. And it always does. It's only a matter of time. These are, so these are non S and P 500 names. So theoretically, any money you making these is pure alpha because they're it's not beta right right all right here are the names strategy is is uh 61 percent from its 52 week high atlassian which is team 54 percent circle is in a 74 percent drawdown did you know that before i showed it to you i look i look at this chart a lot but it's wild wild and that's that company sells fucking money market funds just for anyone that doesn't understand.

1:00:35Okay. HubSpot, 58%. Duolingo, 67%. Oclo, 50%. Cagraduritos. Rigatoni Computing, 56. HIMSS is in a 50 % drawdown. And there's real dollar amounts involved. Like strategy has shed 68 billion from its 52-week high. So this is like the part of the market where people were making the most money, like in the first half of the year, first eight months of the year and man it it turns so fast and nobody taps you on the shoulder and tells you when to walk out of the party like nobody of course not if anything if anything you're adding more money to those strategies so dude i'm looking at oclo and we were talking about this this this head and shoulders top which is only obvious in hindsight like duh but so this thing ran to 190 right?

1:01:28It dropped like it consolidated a little bit down to 158, stabilized a little bit. Boom. The, the, the, the door, the bottom fell out behind the woodshed, whatever, went down to 110. Okay. And then here's the dangerous part. I believe it's pronounced Oklo. It's a Japanese for capital loss. So the, so it bounced from 115 back up to 150 creating this, we're safe. Nope, motherfucker. That's the right shoulder. And then boom. So like, even in hindsight, you're like, you understand how people get trapped in these names. It's so hard to get out. It's so hard, dude. If you're not trailing it with a stop, like you could like go to the dentist and it's down 14 % on no news.

1:02:09And it's like, well, what do I do now? I guess I'll just stick it out. Diamond hands, blah, blah, blah. And then the next day it's down another 14%. Like these, when these things get going to the downside, I have two of these in my portfolio, like very small. I have Archer and Joby. Oh, you had a great line last week. I draw the light of flying cars. Yeah, yeah. Well, my flying cars are demolished. Archer is way worse than Joby. They had good earnings reports. And when I say earnings, I'm doing ironic air quotes. You just can't see. All right, D-Gen Dow, let's put this up. Smushed. 20 % drawdown versus 3.2 % over the time period from Gen.

1:02:542023 to now. Is that - Okay. That's right. All right. So this next chart from Adam Parker, this is the point that I was trying to make earlier. I am not making light of a sell-off, okay? I am only saying that there has been so much enthusiasm in the market, and this is a clearing of the decks, a reset. So Adam has a chart that shows the number of top 50 stocks, okay? Giant stocks. The number of top 50 that are up 50 % over various windows. and look at the 12 month on top, there were just too many stocks that were going up too far, too fast. Even if you zoom into six months, you had Oracle, a multi-hundred billion dollar stock going up 35 % on the announcement, which has obviously all gone back and more.

1:03:41It was just too much. And now is the reintroduction of risk, which is healthy in a bull market. You know what's not healthy. What's not healthy is no introduction of risk. What's not healthy is up 10 % every month. That is dangerous. Okay. Giving some back, pullbacks along the way, that sets up for higher prices and take this with a grain of salt. Who the hell knows? I can't see the future, but I like the setup. I think we see higher prices before the end of the year, or at least early in Q1. Okay. Listen, I like the setup better than I like the setup in October when it was 20 straight days of stocks being up a half a percent a day.

1:04:16That I did not like. So we'll see. Maybe this age is very poorly, but whatever. All right. I'm going to call an audible. We're going to throw Topic 5 out. It was more AI shit, and I think I'd rather kill myself. Yeah. All right. You're going to make the case with AI. All right. Good. I bought Meta today. You did. 19 times forward earnings. I like it. Dude, it's a market multiple. I don't give a shit. You know what I mean? I like it. I'm comfortable holding it. If it gets murdered, I'll buy more. I swapped Home Depot, which I should have done a long time ago. Obviously, the housing story is not housing.

1:04:46Took a 7 % loss on that in my IRA, whatever. I can't take a tax write-off, but no big deal. I like Meta here. I'm comfortable with it. We need to go into the story. It's down 25%. People are selling for legitimate reasons. I'm buying. You have two and a half months before you have to worry about an earnings report, so that's good. I mean, I think the stock's in the penalty box. Oh, no. It definitely is. No, no, no. No, I mean, like, even if we get a year-end melt-up after all, I don't know that this is one of the leading names in that melt-up. I sort of like the purchase here. I would not be a seller here.

1:05:22We've learned so many times what happens when everybody gets bearish on Zuckerberg. Like, whenever that happens, it's only a matter of time before he pulls another ace out of his sleeve and the stock is ripping back to highs again. and so I feel like that will ultimately happen. It is deeply out of favor. So am I early? Yeah, maybe. You might be early, but I don't disagree with you. I like it. I'm not in the stock at all right now and I was eyeballing it. Last thing, I also bought Oracle. I never owned Oracle in my entire life. I sold Disney and I bought Oracle. I like that last 50 times earnings.

1:05:58Don't care. Throw that chart up. Throw the chart up that we, I'm just kidding, but whatever. We don't have it. All right. Everyone knows the Oracle chart looks like, it looks like shit. Congratulations on your purchase. Thank you. All right. Mystery chart time. Okay. This is ironic. I'm not even going to give you a hint. You don't deserve one. What is it? Is it triple top? You know how there's no such thing as triple tops? Well, today there is. Man, I love it. I assume that we spoke about this name today. Oh, my God. Dude, please get this right. Oh, okay. Facebook. What? There's a price next to the ticker.

1:06:36What are you talking about? I don't know. You just bought Facebook. I don't know. You said, please get this right. I panicked. This is so much worse. Oh, NVIDIA. I'm telling you the price is$3.44. I'm telling you. I'm not cheating. I'm not looking at my screen. What the fuck is the stock? Do the reveal.

1:06:59All right. Whatever. Whatever. You just sold it. All right. For those listening, it's - Dude, when I'm done with the stock, I'm done. I erase this from my memory. You're kidding. Erased. Chart back on. All right, so it is triple top for now. The CEO basically said the three drivers of home improvement spending, all of them are working against the company. One of those is home price appreciation. You don't have it. Another one of those is, I forget what they were. He said no natural disasters. Dude, it's a very, very good company, extremely high quality in every way, just in a moment in time that does not work for their earnings.

1:07:45And as a result, they took down guidance, which is appropriate. This will be a strong buy. And it won't be long. I was about to say, if this goes back to 275, I'm backing up the truck. Somebody in the chat, Rivian Millionaire, is saying first time in 26 years, Home Depot didn't beat. Is that true? That's wild. Wow. Should we chat? Great stat. I believe him. I believe him. That guy's trustworthy. All right, dude, I'm dying. You just sold the stock 10 minutes ago and you don't know the chart. I mean, in fairness to me, I sold it this morning. I had a busy desk. You really wiped your brain clean of that thing.

1:08:20See ya. All right, that's it from us, guys. I'm told we're close to breaking a record for the live. Thousands of you joined us tonight. Let's go. We appreciate it. Thank you. I also want to let everybody know tomorrow's Wednesday morning, which means an all new edition of Animal Spirits with Michael and Ben. We'll do Ask the Compound later this week. And then a very special guest on The Compound and Friends, which we're going to get out to you on Friday. So please keep it locked here on The Compound. We'll see you soon.

1:08:58Thank you.

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