Sleep at Night Portfolio, Big Tech Earnings Week, Spotify Blows Up, Josh on Joby

15:14Downtown Josh Brown:And if they can't, there's going to be some question about the wisdom of their continued spending in this area. There's also some talk about their own chip rollout. They have a two nanometer chip that they built with Broadcom. And let's put the chart up real quick. Just to give you guys, I mean, this is in no man's land. There's nothing really to say here. The chart in and of itself would not make you want to be bullish or bearish. No, you know what?

15:43Michael Batnick:There's something to say. Nobody knows. There's a lot of uncertainty in this name. Like a lot. I know that's the nature of investing. But like, look at these swings.

15:51Downtown Josh Brown:Yeah, I think that's right. Like these are$100 per share swings on a regular basis.

15:56Michael Batnick:Which equates to like literally hundreds of billions of dollars in market cap swing. People are just guessing.

16:02Downtown Josh Brown:Yes. Okay. Give me Apple chart while I'm talking. Last one. So this will get Thursday. This is the company not spending on AI or not in it.

16:14Michael Batnick:This is the cleanest one, technically.

16:16Downtown Josh Brown:I think we have a cup and handle forming here, but we'll see. consensus$1.94 per share for the quarter, which be 17 % year over year earnings growth and revenue of$109 billion. Tim Cook just announced that he's going to transfer away from the CEO role. He'll stay as chairman. John Ternus will be taking over. We talked about him last week. No need to rehash. Ternus is a product guy. He's an engineer. He's been involved in all of the biggest things Apple has done in the last 25 years or so since he's been there. This would be the first CEO transition since Cook came in from, oh, Uvraj94 wants to know how I pronounce nanometer.

17:06Downtown Josh Brown:That's actually the way I said it is the way that you're supposed to say it. It's not nanometer. So go back to eating crayons. um what else was i saying oh apple you just lost a viewer forever it's fine apple did uh did have a record-breaking q1 143.8 billion dollars and china was the bright spot in that report which caught people by surprise um and again back to what i said it's the least capital intensive ai story we don't even really know what they're going to do with ai we know that Siri sucks and needs an upgrade and that they've been failing at delivering that for two years. And so maybe that's the surprise.

17:50Downtown Josh Brown:They might tell us that they have something agentic coming out this summer and people will get very excited for that. So the big number here that analysts care about is services. That's the highest margin business at Apple. 30.4 billion is the expectation, that would be a 14 % growth rate. Of these four, which of these are you the most excited to listen to?

18:17Michael Batnick:Not Apple. I would say the Microsoft, honestly, it's too much for me. I never really understand what he's saying. It's too technical. Probably, I think the Zuckerberg one is relatively digestible. That's the one that I feel like he speaks plain English. Let me blow your face off your body. You know the chart that we've made showing Apple by various segments in terms of the trail on 12-month revenue? So I had a chart could update it this morning. $226 billion in revenue for the iPhone over the last 12 months. Ready for this? Yeah. Put your crayons down. NVIDIA. Crayons down. NVIDIA,$216 billion.

19:02Michael Batnick:Apple has done more revenue with the iPhone over the last 12 months than NVIDIA. Really? Wait, wait. Say it again. Say it one more time. $226 billion for the iPhone. $226 billion in revenue for the iPhone. $216 billion in revenue for NVIDIA. All of NVIDIA. All of NVIDIA. Yeah.

19:25Downtown Josh Brown:What were we talking about the other day where the iPad is bigger than Charles Schwab by revenue or something like that?

19:29Michael Batnick:Yeah, the iPad's done 29. Schwab did 24. McDonald's, that McDonald's, did 27. So services did 113. You said it's looking for 30. So annualized 120. Tesla did$97 billion. Johnson & Johnson did$96 billion. I mean, it's just stupid.

19:48Downtown Josh Brown:So you're saying Facebook and Facebook meta is the one that you're most interested in listening to because you understand what he's saying the most. It's like the most straightforward business.

19:58Michael Batnick:The Microsoft call is too technical. There's too many different business lines. And Satya is too. He speaks like an engineer and I don't understand what he's saying.

20:06Downtown Josh Brown:He's just open my head.

20:07Michael Batnick:I don't understand. Yeah. The Amazon. Amazon is just this. There's a lot of different areas of the business. So for like the cleanest story into what's happening right now with big tech, I like meta.

20:19Downtown Josh Brown:I think the AWS segment of the Amazon call is probably the highest signal other than Microsoft. And yeah, it's a good point you make. I don't really listen to the Microsoft call. I read the highlights. And maybe that's why. And I never really thought about why I don't like listening to that.

20:38Michael Batnick:It's very technical.

20:40Downtown Josh Brown:I like the Apple call. they're it's just the facts ma 'am like yeah they're not freewheeling they don't they don't like give you off the cuff really they're extremely buttoned up apple is almost like listening to a bank report um but i just i personally as a shareholder just get so much out of that but it's not an exciting it's very rarely an exciting call and almost never an

21:05Michael Batnick:exciting reaction because you know why he thanks the employees they speak a lot about their global

21:08Downtown Josh Brown:initiatives. Like it's boring. Right. It's it's extraordinarily by the numbers. Yeah. And it's and it's it's not a it's it's not that much fun. All right. Let's talk about earnings in general. You're up now. All right. So yeah, there's something special going on here.

21:28Michael Batnick:So Warren Pies tweeted a chart that like I don't know. Speaking of technical, this is like way over my head. But the point is this. Throw the chart on. The point is this. Warren said a historic earnings boom is developing, estimates growing faster than they did in the mid-90s or late internet bubble years. Only COVID recovery period started greater inflection. But this is the point. The boom is unique because it is not coming off an EPS drawdown recovery. So we're seeing earnings accelerate. And it is primarily tech. Next chart, please. It's 43 % blended and actual. and this is a moving target.

22:03Michael Batnick:But holy shit, 43 % for technology, almost 14 % for the overall index. Gee, I wonder why stocks are at an all-time high.

22:12Downtown Josh Brown:I think if you pull NVIDIA and Micron out of that technology earnings growth composite, it's fairly a different picture, but it's still - Wrong! Come on. Next chart.

22:27Michael Batnick:Tell me where these earnings are coming from. I asked Matt, why are you taking – so this is tech, ex-Microsoft, Apple, and NVIDIA. And I said, why are you taking Microsoft, Apple, and NVIDIA out of here? And he said it's because it's a Bloomberg standard chart. So I said, okay, fair enough. But this is without NVIDIA. All right. So it's – wow. Okay. It's higher. Huh. Interesting. It's higher. So here's why. It's all about chips. How are they doing this? It's all about chips. Look at this. It's semis. so adam was saying like micron is trading at like five times forward earnings and i was like wait what so i said matt make make me a chart of micron and sanders like what the hell's going on here next chart please i mean what would you expect here what would you expect a stock 12 month earnings per share what would you expect a stock to be doing that 10x is its revenue i'm sorry its earnings and 50x is its earnings over a 12-month period.

23:26Michael Batnick:Will you expect the stock to go up? I think so.

23:28Downtown Josh Brown:So for the people listening, Micron was earning$9 a share in March of 25. And now the forward estimate is for$85 a share. Sandisk is even crazier. They had$2 in earnings per share expected for the forward 12-month period in March of 2025. That's a year ago. It's unbelievable. And now it's at$99. We may have never seen anything like this in our lives. I've never seen anything like this. I don't know that anyone has. I really don't. I think the most shocking thing about this is that so few people, if anyone, was able to predict it.

24:06Michael Batnick:And you know what's funny? And this is like a good reminder for all of us that in hindsight, this seems so obvious. Not to me. The chip thing in particular.

24:15Downtown Josh Brown:Oh, oh, oh. Today. But yeah, Encore told us like she knew it was coming, but then thought she must have been wrong. Right. That was interesting. Because no one else seemed to agree and the stocks weren't working. So she said to herself, I must be totally wrong about this because these stocks are not going up. And then like six months later, it just launched.

24:40Michael Batnick:Next chart shows the growth in forward EPS versus the price. And hey, look at that. The market's not stupid. but in fact, it's pretty damn smart. So the stocks that are growing their earnings the fastest are -

24:51Downtown Josh Brown:Have the best performance.

24:53Michael Batnick:Are going up the most. That's usually how it works.

24:55Downtown Josh Brown:It's almost as if it's not a bubble. It's almost as if this is about earnings growth, which is what we all - Always has been.

25:05Michael Batnick:Always has been.

25:05Downtown Josh Brown:Dude, every investor, like even value investors, even dumpster diving value guys, is they all kind of proselytized the same sermon to us all about how earnings, earnings, earnings. Well, here it is. Here, this is what you say is important. Now you're going to say it's a bubble because you don't own these stocks? Not my fault. Not my fault they started rallying off of high valuations. That's what happens sometimes.

25:36Michael Batnick:And even value investors, it's not just about the valuation support. Obviously, that's a big ingredient. But I remember the pseudonymous guy, Jesse Livermore, in 2016 wrote a post for O'Shaughnessy Asset Management. And it honestly blew my mind because he demonstrated the fact that there is an earnings inflection, which is why the value stocks get re-rated. It's not magic. Earnings do trough out and go higher. And that's what it's all about. It's all about earnings. If you can predict the future -

26:06Downtown Josh Brown:What's the source of value performance you're saying? It's like it comes for a reason. The earnings turn.

26:12Michael Batnick:And if the earnings don't turn and they keep going lower, the stock price will follow it. That's it.

26:18Downtown Josh Brown:You would think this would be obvious, but it's not.

26:21Michael Batnick:Well, it's because we invest day to day. At least I do. I'm guilty of this. I trade day to day too often. We have a guest on TCAP this week. And we're going to talk about long-term investing. And he said, listen, over the long term, a stock cannot meaningfully diverge from its earnings trajectory. And we're talking like over a 20-year period. If the business earns 20 % compounded, the stock's not going to earn 50. And same thing, if a business is declining, that's what the stock is going to do. It just works. Yeah.

26:55Downtown Josh Brown:Right. And we overcomplicate it with all these other factors. And we talk about multiple expansion and compression and re-rating. and because that's in the short term, those things do exist. Yeah. But okay, it's a really good point. Give me this chart. This is quarterly results for S &P 500 companies year over year, okay? So I want to call your attention. So it's a 16.1 % growth rate this quarter versus the same quarter a year ago. And that's despite the fact that gasoline prices are up. I don't know, 25%, 30%. And not only is this not financial engineering, because these companies are actually contending with higher input costs and somehow still reporting bigger profits, but revenue is up 9.7%.

27:48Downtown Josh Brown:You can't engineer higher revenue unless you're literally recognizing revenue early and committing accounting fraud. This is what's literally going on. Next chart. This is by sector. I'm just showing you S &P 500 companies by sector versus a year ago, like what the revenue and earnings growth rate is. And we know technology already. It's a 40 some odd percent earnings growth rate jump over last year. But revenue is like 24 percent. This is not just like AI driven efficiencies. There's a lot more happening here. every single sector has revenue growth versus the same quarter last year. And only two sectors have negative earnings growth.

28:39And those are energy and healthcare, which we barely pay attention to energy because

28:45Downtown Josh Brown:it's the commodity fluctuating. And I don't fully understand what's going on with healthcare. But every sector has revenue grown, which I thought was notable. What are your thoughts?

28:56Michael Batnick:um i'm wondering why there's such a big gap like where's the leverage coming from for materials to have i don't know it looks like 10 earnings growth not even i mean revenue and then like 30 earnings

29:08Downtown Josh Brown:growth uh yeah prices hedges i don't know financials listen companies it's not like so straightforward like it's not so straightforward in those groups companies are very very good at uh

29:23Michael Batnick:expanding the bottom line. Yeah.

29:27Downtown Josh Brown:So let me read this to you. Sales and profit eclipsed Wall Street expectations at Halliburton, the Houston-based global oil services company. The energy landscape changed meaningfully in just 60 days. And now companies are racing to invest from Norway and Nigeria to Argentina and Brazil. So that's a company where the price of crude shoots up$30,$40 a barrel and natural gas demand takes off. And all of a sudden there's all these projects that didn't make sense in January that people want to get into in March. And that's the nature of like materials, energy, some of these sectors is like prices change the reality for fundamentals almost overnight.

30:11Downtown Josh Brown:night. Anyway, this is important if you are an investor and you think we're in some sort of a tech bubble. Yeah, things are going great for tech stocks. But like I'm showing you market-wide, we're looking at fundamental improvement for both earnings and revenue. It's every sector in the case of revenue growth. I want to do this permanent portfolio thing. Do you know what the permanent portfolio is?

30:38Michael Batnick:In my head, I have an idea. I think it's It's cash, stocks, long-term bonds, and gold. In my head, that's what I think of, 25 % of each. 25%.

30:48Downtown Josh Brown:OK. That's the way I learned it. But there's other derivations of it. But basically, that's it. So Michael Hartnett, who is a strategist at Merrill Lynch, and I think one of the best market watchers, market thinkers out there, he has this thing called a sleep like a baby portfolio.

31:07Michael Batnick:Too many words. And it's similar.

31:11Downtown Josh Brown:So what he's saying is 25 % stocks, 25 % long-term treasuries. So specific. Okay. 25 % commodities, not gold, although that would include gold. And then 25 % cash and T-bills. So almost the same thing. So the permanent portfolio is that, except instead of commodities, it's gold. The permanent portfolio came along in the early 80s as a direct response to the inflationary devastation that had been visited upon the investor class in the 1970s. Like that the permanent portfolio was like the solution to that secular bear market, which went on from 68 to 82. It was absolutely grueling. You didn't just lose money in absolute terms But you also lost money in inflation adjusted terms And so they came up So Harry Brown Who was a market Philosopher, politician He was like a He was like a polymath Came up with this idea And then they built a mutual fund based on it Which still exists But let's show this tweet from Mike Sicardi Because he's pulling the He has the Michael Hartnett chart John, can we get this up?

32:32Downtown Josh Brown:Maybe we won't.

32:33Michael Batnick:I think we deleted it.

32:35Downtown Josh Brown:Oh, cool.

32:37Michael Batnick:No, Charkin recreated it.

32:39Downtown Josh Brown:All right, so we did our own. Yeah. I asked Charkin and Sean to take a whack at this. So this is us taking Hartnett's Sleep Like a Baby portfolio, and I think ours is way better, obviously. Well, by the way, hold on.

32:54Michael Batnick:So Hartnett annualized his 2026. Yeah. So ChartKid did the same just to recreate it. But that's a way to do it.

33:02Downtown Josh Brown:He's saying like on a year-to-date basis, it's annualizing a 26%, 27 % return. Yeah. And so we're just doing what he did to show that it's having a good year. It's having a good year. My opinion, it's having a good year because we threw oil into the commodities portion of this. And stocks have been doing great.

33:24Michael Batnick:The next one shows gold instead of commodities.

33:27Downtown Josh Brown:Right. When you go back to the permanent portfolio, it's a much more muted version because you don't have oil in here. So instead of commodities, you have gold. And just put the first one back. So for those listening, the sleep like a baby portfolio that HeartNet is talking about is up at an annualized rate of 27%. And we're a little bit more than a quarter in a month, or maybe we're a quarter in a month through the year. So it's a little bit early to me annualizing things, but I get it.

33:58Michael Batnick:So this is a portfolio. So this is a great strategy because if you don't have the temperament to hold on to stocks and take all the smoke, and let's be honest, it's very difficult, obviously, in the bear market to do. Not everybody wants all the smoke. Average is 8 % in an up year, which is great. Only 5 % in a down year, pretty freaking awesome. The problem is it doesn't protect you from FOMO. So when the market is up 20 % and then 19 % and then 24%, you're like, what am I doing? So it's personality-driven like everything else, but it's not bad.

34:35Downtown Josh Brown:I'm so glad you said that. This concept goes into hibernation in a bull market. People stop talking about it. And then when there's a crash, all of a sudden you start to see the permanent portfolio content come back. And you could do it worse. It works. No, I don't think it's bad. But to your point, like it's a permanent portfolio, but there's a tradeoff. You're not racing the stock market in a bull market. And after five years of a bull market, you'd probably be looking at this thing like, what the hell did I just do? Right. Look what I just missed out on. Put up the permanent portfolio one more time, guys.

35:17Downtown Josh Brown:So when you do it with gold, this is what it really looks like, not the commodities. So you get – Michael, when you say like the most important thing here is how few negative years. Yeah. And those negative years are like a lot. The average down year is minus 3%. So you almost can sleep at night with this permanent portfolio no matter what's going on except a runaway bull market.

35:48Michael Batnick:Right.

35:49Downtown Josh Brown:Then you're not sleeping at night. Then you're cursing yourself for being such a coward.

35:52Michael Batnick:I feel like this is like, there's a very type of investor that buys these things, right? It's people that are wary of government debt and whatever. And for those people, like this is sensible. I understand.

36:03Downtown Josh Brown:Put up the hit rate. I love that they did this. They did this at the last minute for us, Charquette and Sean. So this is the, what we want you to understand about this, guys, is that there's a price to be paid. If you want something that's permanent and simple to understand, like 25%, 25%, right? If you want that, and if you want sleep like a baby, you could have it. But here is the price that you pay, and here's what you give up. The SPX, the best year back to 1928, is plus 52%. The best year, the sleep like a baby portfolio has ever given you is 27 % or half. And the permanent portfolio is 39%, which is actually pretty great.

36:55Downtown Josh Brown:Now you go to these rolling performance periods, the best ever, the percentage of positive annualized returns for the S &P on a five-year basis is 88%. That sounds awesome until you remember that 12 % of the time you're down. The sleep like a baby and permanent portfolio are more like 95 % positive.

37:21Michael Batnick:98 % is like, that's like, you're almost never down. I mean, obviously we just showed that you're down.

37:26Downtown Josh Brown:So that's the cost. That's the benefit. Anyway, Hartnett's saying, without getting into I like the whole thing. Money does grow on Cs. He's saying the four Cs are the key to this year. Curve steepeners in the bond market, consumer cyclical, chip stocks, and commodities. That's too cute. Very cute.

37:49Michael Batnick:What are we doing here?

37:51Downtown Josh Brown:Not as cute as Halo. All right. Let me just for fun show you. There is an actual mutual fund based on the permanent portfolio. And there's a whole company that exists just to manage it. And this is what they are showing is their target portfolio structure. Give me the pie chart. So they have gold 20%, silver 5%. Then they're doing 10 % in Swiss franc assets. Another 15 % in real estate and natural resource stocks. Then aggressive growth stocks is 15%. And 35 % are dollar assets. So that's their – I guess that's how they actually run. Let me show you. This is the all-time performance since inception.

38:38Downtown Josh Brown:It's amazing. That's 2 ,000%. You can do way worse. And that seems incredible. It is. Until I show you it versus the S &P total return.

38:48Michael Batnick:But it's not the same thing.

38:50Downtown Josh Brown:But still, the S &P total return of 4 ,000 % is 4X.

38:54Michael Batnick:Yeah, but you know what? You got to – But did you sleep at night? Yeah, you did. You really did.

39:00Downtown Josh Brown:You did sleep at night. You really did.

39:02Michael Batnick:So I didn't realize this. The fund family, it's actually called Permanent Portfolio Family of Funds. I wonder if somebody else owns that. So that particular strategy has almost$7.4 billion in it. So good for them. They're delivering value to their investors.

39:20Downtown Josh Brown:It's good. You'd love to see it. Jonesy, 1289, smart ass is saying, hey, la meter.

39:29Michael Batnick:Go sniff glue. that's good okay um all right good stuff all right let's uh oh let's do this real quick so our friend alex at duality research showed what happens to semiconductors after a momentum thrust

39:47Downtown Josh Brown:and uh it makes me uncomfortable the way you say thrust thrust i really lean into it yeah So the average return – You pronounce every letter in that word. Every single letter. The average return after said thrust after 63 days is 12%, okay? Yeah.

40:07Michael Batnick:And we're at 29%. It's like too much. It's like way too much. It's off the charts.

40:13Downtown Josh Brown:Well, today they reversed finally.

40:15Michael Batnick:Yeah, but did they? I mean SMH was down 3%.

40:22Downtown Josh Brown:Right, after being up 40 % in three weeks. So in other, this is going straight up.

40:31Michael Batnick:I never heard this term before. I'm sure you have. The ludicrous list. Josh, you know about this?

40:36Downtown Josh Brown:No.

40:36Michael Batnick:No?

40:37Downtown Josh Brown:What is that?

40:38Michael Batnick:So Bespoke tracks this. And I actually did see somebody else reference it recently, maybe because they did. One way we have taken tabs on a general level of frothiness in equity markets is a screen for the number of stocks meeting a general criteria. All right? So here we go. stocks with a market cap above$500 million, a price-to-sales ratio above 10x, and a doubling in the stock price year over year. At the moment, there are 175 stocks meeting this criteria.

41:11Downtown Josh Brown:This is like the classier version of the D-Gen Dow. Correct. That's exactly right. All right. So what's in the list? Do we know what's in the list? I'm sure it's a lot of semis. The point is the list is now very large because a lot of stocks have done this. 175 stocks are over half a billion market cap, price to sales above 10 and have doubled. Yeah, I believe it.

41:35Michael Batnick:So the collective market cap is at like$2 trillion. And it looks like it's about – no, more,$20 trillion. And it's about a quarter of the entire Russell 3000 market cap. Holy shit.

41:50Downtown Josh Brown:I mean, you just – it's like every semiconductor. It's every power supply company, every like telecom network and component company. Like you just think of like huge categories of stocks where there are tons of tickers and you could picture it.

42:10Michael Batnick:It's a party. It's definitely a party.

42:12Downtown Josh Brown:It's a party. All right. I wanted to just point out on this semiconductor reversal thing. I asked Sean for this for CNBC today. You know, people buying stocks that are parabolic on like the 12th day of a rally. It's almost I was saying like people don't even know how to buy stocks anymore. Because like they never were taught anything. They just opened an app and started trading. Imagine buying a stock that's up 12 days in a row betting on 13. Now people are like, yeah, but then they went up six more days. Okay, that's the trades. That's the trade you want to – that's the bet you want to make. I guess you could do it.

42:55Downtown Josh Brown:So we wrote a column for CNBC Pro yesterday morning, Monday morning. And the message was, yeah, these stocks look amazing, but pump the brakes. here are better entries for microchip technology broadcom uh nvidia nvidia i like the entry actually yeah it's an intel and like just the the concept of just forget about the price and forget about the shape and how parabolic just solely on rsis professional investors don't buy stocks with an 84 RSI because what you're buying at that moment is the highest momentum stock in the entire market. And it never, it's never the right entry. It's like, it's the thirstiest thing you could do.

43:49Downtown Josh Brown:So we looked at the RSIs of the biggest chip stocks going into the market today when they all reversed. On was an 88 RSI. Can you imagine? No stock should be an 88 except for the day it comes public. It doubles. ST Micro 87, Intel 83, AMD 80, Marvell 78, Texas Instruments, which should never have a 76 RSI, 76. Monolithic Power, 76. NVIDIA, 76. Qualcomm 74, Broadcom 74. Then you look at the DRAM stocks. Look out. Something called Kyoxia. You guys could correct me on that. I don't know. Is that a Korean company? I don't know. 81 RSI. Seagate, 77. Western Digital, 75. Dude, hold on.

44:50Michael Batnick:Seagate is up 14 % in the after hours last time I checked.

44:55Downtown Josh Brown:Buy it now. Hurry up. You know what? But the SMH 50 % above it's 200 day. It's all too much. Yeah. Anyway, if you learn nothing else from this time that you spent with us this evening, like professionals are not buying 85 RSI. It doesn't mean the stock can't go higher. But just like you are putting the odds so far in the wrong direction versus yourself when you do stuff like that. you might win sometimes the amount of times you're going to get burned are significantly uh higher in quantity is that a fair statement to make yeah this is like taking a fadeaway shot

45:38Michael Batnick:at half court like you just you don't it might go in but probably not it's right it's not impossible

45:43Downtown Josh Brown:to make money don't do it's probably the wrong move to me i think most most most most of our

45:49Michael Batnick:viewers definitely know that and i think the people that are buying it in general are like very short-term in nature. I don't think anybody's initiating a new long-term position.

45:57Downtown Josh Brown:I don't know. No, because you know there's a lot of people that will buy a top. They don't know what's the top at the time.

46:03Michael Batnick:I know it has to be.

46:04Downtown Josh Brown:It turns out to be the top and they're not selling because then that would mean they were wrong and nobody wants that. Yeah.

46:11Michael Batnick:All right. Let's do Spotify. So they've got new leadership in there and on their report, they said, we are pleased with our performance in Q1.

46:24Downtown Josh Brown:No one else is.

46:25Michael Batnick:As all of our KPIs met or exceeded guidance. The business added 10 million MAUs versus guidance for 8 million. While subscribing and additions of 3 million were in line, revenue was in line with guidance and grew at an accelerated 40 % year-over-year basis. Gross margin exceeded guidance and expanded to 133 basis points. Fast forward. Overall, we view the business as well positioned to deliver improved growth and margins in 2026 as we reinvest to support our long-term potential. You don't want to read that when the stock is down like 11 % on the day. They beat the shit out of this thing.

46:55Downtown Josh Brown:And it was already down. It was already in a drawdown.

46:58Michael Batnick:So it wasn't the worst quarter. They're right. They're right. The problem is it wasn't what they delivered this quarter. It's what they guided to next quarter. It's not great. It's just it's not good. And the stock is not growing the way the company is not growing the way that it should be. A lot of problem with the ad supported tier. And it's not a cheap stock at all. So you just can't miss like this.

47:19Downtown Josh Brown:Biff Grebles points out it's in a 45 % drawdown from the summer. I didn't even realize that. It's getting, this is reminiscent of what they did with Netflix. Yeah. And it's a very similar type of business. It's about subscribers and spending money on content that you then distribute amongst those subscribers. I mean, it doesn't look like a bad quarter. I don't know what the. It wasn't a bad quarter. I don't know what people thought they would get. It wasn't a bad quarter. The guide was bad. The guide was bad. I mean, it's, you know, you can't call it a bubble. I'm sorry. You can't say the market's a bubble and then have punishment for companies that miss or make and just don't give strong enough guidance.

48:05Downtown Josh Brown:That's not a bubble. This is not a bubble. A bubble would be like, oh, whoops. The guy's a little light this quarter, but don't worry. We'll get him back at the end of the year. It'll be a second half story. And the stock goes up 20%. That's a bubble.

48:19Michael Batnick:The market's saying, no, we don't believe you.

48:20Downtown Josh Brown:It's a very disciplined market, and they are beating up companies that don't do everything exactly perfectly, which brings us to Robinhood.

48:30Michael Batnick:Yeah, so Robinhood is - Double miss. I feel a little bit better about missing the rally from 70 to 100. The stock is now back at$75. And this is, so we spoke a lot in the first quarter. There was one, I think it was with Farmer Jim, actually, where we were talking about like the bulls have left and the retail participation like is out. Like they are gone. They left the building and this is the crowd that left the building. So let's go through some of their charts. Um, all right. I want you to focus on the bottom two. So we've got total platform assets down from$322 billion in the previous quarter,$307 billion, um, today.

49:15Michael Batnick:But the problem, Josh, is that they had net deposits of$18 billion. So net deposits of 18 and yet total assets on the platform are down 15. How does that happen? People lost money? People are losing money, which brings me to the next slide. Look at the financial results. Because you're doing dumb shit. Look at the financial results. Yeah, net income is down pretty bigly. What does that say? Earnings per share, that can't be right,$605. Whatever it is, their financial results are going in the wrong direction. All right? Because people are trading less. So transaction-based revenue for crypto was down 39 % for the quarter, quarter over quarter.

50:05Michael Batnick:And options-based transactions are down 17%. It's not fun when you're losing money. So the customer's chilled out. They'll be back, no doubt. but it was a tough quarter. Now, longer term, you know, Robin's doing a lot of great stuff but it was a tough quarter and crypto is a big part of their business and it's not going great.

50:25Downtown Josh Brown:Hey, I'll give you the other side of the story. I think we just heard from Jane Street and I know that Jane Street's not the counterparty for every single Robinhood trade.

50:40Michael Batnick:No, you're right. You're right. They are.

50:42Downtown Josh Brown:Bloomberg News is able to write financial reporting stories on Jane Street because Jane Street, I think, has bonds. And because they have publicly traded bonds, it necessitates a certain amount of SEC filings on the company's financials. But they are effectively a trading shop and a hedge fund, and they are private. But because of that publicly traded bond thing, we get some reporting there. Bloomberg just reported, this is insane. Q4 revenue for Jane Street,$15.5 billion with a B. Total 2025 revenue of$39.6 billion. And total 2025 EBITDA of$31.5 billion. Jane Street made$30 billion effectively in free cash flow last year.

51:38Downtown Josh Brown:and that's more than now mark dude that's one of the biggest companies on earth nobody can name a single person who works there let alone the ceo or any of the partners 99 of people on earth have never heard of it and those that have don't even know where they're headquartered or what they do 30 billion dollars in annual cash flow and their counterparties are these numb nuts at robin hood like taking flyers on crypto shit and zero day options. Like, do you honestly think that those levels of trading were sustainable? Like people run out of money at a certain point. So this is who you're trading against.

52:26Downtown Josh Brown:Like la cosa nostra of the financial universe. They're killing you. They're eating you. Every time you press buy, they press sell. They love it. Keep doing more of it. And it's, listen, man, when I was coming up, if you were day trading, you were day trading against some other schmuck sitting in their own basement and you couldn't meet each other eye to eye. And there was a market maker in the middle. That market maker was barely making any money too, right? This is a different world. Now you are trading against the greatest traders of all time. And they're not even human. They're literally software programs designed to relieve you of your holdings.

53:07Downtown Josh Brown:I like my chances. Still want to do it? All right. Feel free. Anyway, sorry to just inject a dose of reality. What brings the Robinhood trading enthusiasts back to full strength? Like another bubble? Dude, they didn't leave entirely.

53:30Michael Batnick:Like Q1 transaction-based revenue for options was$240. It was$260 this quarter. Equity was stronger. I mean, they're still at it. So higher prices. But they're still there.

53:42Downtown Josh Brown:But they need crypto to come back because that's, I don't know, is it 20 % of their profit?

53:52Michael Batnick:It was$134 out of$623. But like in Q3, for example, it was$268 out of$730.

53:58Downtown Josh Brown:All right, so I think Bitcoin back at$100 ,000 gets the juices flowing again at Coinbase and Robinhood, and nothing really else can substitute for that. Agreed. So, all right, we'll see if it happens. While I don't approve of short-term speculation, I love long-term speculation. And today's Make the Case is about the most speculative stock I own. and nobody should listen to this and think I'm giving them investment advice. This is a long, long, long, long, long shot bet. I think it will require at least five to 10 years in terms of holding period to justify the amount of risk I'm taking. And that is probably not everyone's cup of tea.

54:44Downtown Josh Brown:But here it goes. Talk about Joby. I went to, Michael, did you know I went to the Joby test flight of their eVTOL, the first run ever from JFK Airport to the west side of Manhattan. And it was yesterday at the Blade Helicopter Lounge on 30th Street and 12th Avenue. So this whole thing took place over the Hudson. It sort of looked like the set for like a Spider-Man set piece, like with big cranes and helicopters in the sky. and then this thing comes in for a landing. And John, give me some footage. So I'm standing right underneath this. So Joby bought Blade, which is the helicopter taxis, mostly for wealthy people to get to the Hamptons.

55:37Downtown Josh Brown:Look at this thing, dude. Look how smooth. There's a pilot in there, no passengers. The pilot is obviously a professional and they will, I think, be making five of these a month for the foreseeable future, manufacturing and trying to ramp that up to 50. So there aren't a lot of these on planet Earth just yet. This is the audience and we're all cheering because they successfully landed. Pause this. You see the propellers? Yeah. Okay. So when the thing is sitting like this and it's about to lift off, that's the position of the propellers. They are perpendicular to the ground. Once it lifts off to its cruising altitude, those props come forward like a plane.

56:28Downtown Josh Brown:They're parallel to the ground, and then it flies on a fixed wing. And then when it's going to come in for a landing again, the props will go vertical, and it'll lower itself to the ground. The difference between this and a helicopter, four major differences. The obvious one is the sound. This thing is silent. It's like something out of Dune. It's hard to explain how insane it feels to watch that thing land in front of you and it doesn't make a sound. Helicopter sounds like a thunderstorm, especially when you ride under it. You literally have to cover your ears. It's so loud. Two, the propellers themselves, There are six of them on this craft And they're built The system is built with double redundancy You can lose two of those props And fly under four of them Very, very important for safety A helicopter is one rotor If you lose the big rotor, you're going down No ifs, ands, or buts The only question is how fast And are you spinning in a circle in the descent?

57:37Downtown Josh Brown:Terrifying um the third thing is you know why they don't land helicopters on skyscrapers in new york anymore when because they were literally blowing jet fuel exhaust into the air conditioning systems of buildings where people were working like they used to take helicopters off of hospitals like this was normal news choppers would take off from like the roof deck of a building that people were working in. They were blowing exhaust into the AC that people were breathing in. I'm laughing at my answer, Wend. Don't ask me scientific questions. Okay. Anyway, so these are battery. And the thing about Joby is they're going for vertical integration very much like Tesla once did, like SpaceX does now.

58:24Downtown Josh Brown:They're writing the software. They're training the pilots. They're manufacturing the craft. They're making their own battery packs, full vertical integration, not cutting any corners, really thinking through the manufacturing from start to finish. When is this thing going to be live? It is live. You just looked at it. So next month -

58:44Michael Batnick:You know what I mean.

58:46Downtown Josh Brown:Look at this guy. So next month, the EIPP takes effect. This is the eVital, chart off, eVital integration pilot program. By integration, they mean starting to integrate these things in the low earth orbit with like airplanes and literally at a federal level, overhauling air traffic control to account for the fact that these are going to be in the sky. Later this summer, the taxi, the air taxi service that's partnership with Uber and Joby will be flying in the skies above Dubai, the United Arab Emirates. And it will not be long before these things are happening uh taking flight from new york to the airport so i think there's a hundred mile range so the hamptons might be a little bit of a stretch or montauk might be a little bit of a stretch but um how long would you approximate it would take to get from jfk to the west side of manhattan 10 minutes by car oh forgot about it two hours yeah gotta be two hours let's say charitably at 2 a.m it might be an hour it would be horrendous seven minutes yeah okay now think about somebody in a car accident who needs to be airlifted to a hospital this

1:00:11Michael Batnick:versus a chopper or this versus an ambulance on wheels get to the joby um anyway joby is uh one of probably my most speculative holding i don't think that uh i wouldn't call it pre-revenue

1:00:27Downtown Josh Brown:because they got$100 million in revenue from buying Blade annually. An eight pre-market cap. It's like$8 billion. $8 billion. It's a really – look, one of the things with Joby is every time the stock price gets momentum, they do a secondary, and I get it. They've raised billions of dollars in cash, and they're going to need it because they're burning probably$500 million, and these things are going to cost a lot of money to manufacture. That being said, they talk about this guy, Joe Ben, who I met yesterday. Do we have that picture? This is the CEO. That's why it's called Joby. There he is. His name is Joe Ben.

1:01:04Downtown Josh Brown:And they talk about him like the guys that work for him talk about him like he's Thomas Edison. Like somebody said to me, and another investor in the company, Chartoff, said to me, there were like 30 of these guys on earth at any one time. like the Benjamin Franklins of the world, the Elon Musks of the world. And they think Joe Ben is one of those guys. The last thing I'll say about this, they've been working on this for like 20 years. It's not like some project that started in 2021. This is a very, very long-term vision. And they are now like within range of seeing this actually happen in the real world.

1:01:44Downtown Josh Brown:After decades of solving physics challenges and technological barriers, they are there. So I'm making the case. I'm telling you right now, this is not for the faint of heart. I absolutely think the stock could 10x. Also, it could go to zero. I won't be the one that knows for sure. So whatever capital I have invested in here, I'm definitely taking a risk. But that is the bull case for Joby Aviation. What are your thoughts?

1:02:14Michael Batnick:I love, first of all, I hope this works out for humanity. I love that you're making the case after a 50 % plus drawdown. I would feel way less comfortable if you were promoting this.

1:02:23Downtown Josh Brown:I bought more recently since it sold off because I don't give a shit. So yeah, listen, you said all the right things.

1:02:28Michael Batnick:You laid out the case. It is highly speculative and I hope it works.

1:02:33Downtown Josh Brown:Yeah, we'll check. You know what? We'll check back in on this in like five years. Okay, deal. How smart or stupid I look.

1:02:38Michael Batnick:All right, I've got a mystery chart for you. and this is the smallest stock in the Dow and probably coming out at some point because that's what they do. Wait, wait, wait. What is this? Is the Dow component current? This is the smallest stock in the Dow. It had a market cap of$275 billion at the peak and it's now at like 60. There we go. Thank you.

1:03:01Downtown Josh Brown:Great work. What sector? Please give it.

1:03:05Michael Batnick:What sector? Let's say consumer discretionary. It's a scratch.

1:03:11Downtown Josh Brown:Consumer to scratch. Is it a retailer?

1:03:17Downtown Josh Brown:Is it Target? Home Depot?

1:03:20Michael Batnick:You're right track-ish, I suppose. It is - I'll give you one more clue. Okay. Management f***ed up big time.

1:03:30Downtown Josh Brown:I'm seeing guys in the chat say Nike. Is Nike in the Dow? This is in the Dow?

1:03:35Michael Batnick:Yeah, dude. It's$44 stock. It's coming out. It's by far the smallest name. Dude, that's unbelievable. Yeah.

1:03:44Downtown Josh Brown:It's$60 billion? Like, could this go private? Yes. Could this literally, like, could Nike be taken private? Yes.

1:03:54Michael Batnick:Could Nike get bought by the Saudis? Yeah. I don't know what the shelter structure is or anything like that, but that's crazy, dude. Like, what? The stock might have peaked when Shoe Dog came out, the book. Even though it looks like death, the floor is not that much lower than$66 billion equity. I'm not buying it.

1:04:18Downtown Josh Brown:Is Nike relevant to people under 20? I couldn't tell you. Like Nugget? I feel like Nugget wears Air Force Ones, but I don't think he cares about. All the boys wear Jaws.

1:04:30Michael Batnick:They all wear Nike sneakers still.

1:04:32Downtown Josh Brown:Yeah. Shit. One thing I noticed is every time they arrest a mass shooter or some sort of – They're wearing Nike tech. I noticed. There's a lot of Nike tech whenever somebody is shooting somebody. That's enough of that. It's not great. All right. Shout out to Nike. I still love the brand. I still wear a lot of Nike stuff. Maybe I'll take a look at that and catch that falling knife. Guys, thank you so much for watching. Thank you for listening. We love doing the show for you live. So for those of you who join us in the chat, we really appreciate you all coming through each and every week. It adds a lot to the show and we love you for it.

1:05:13Downtown Josh Brown:I want to remind you guys tomorrow's Wednesday, which means an all new Animal Spirits with Michael and Ben. We'll do an Ask the Compound with Ben and Duncan taking your questions. Send your questions to askthecompoundshow at gmail.com. For the latest in financial fashion, check out idontshop.com. where we always have new compound merch just for you. And at the end of this week, I got to tell you, a very, very poignant and special edition, I believe, of the Compound and Friends. I think you're going to love it. And I can't wait to bring it to you. All right, that's it from us. Have a great night.

1:05:54Downtown Josh Brown:Talk to you soon.

1:06:30Michael Batnick:Thank you. may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.