SpaceX IPO With Rupert Mitchell, Consumer Discretionary Is Not an Econ Signal, Halo ETF Launches

22:16Downtown Josh Brown:So this is incredible. And the red number toward the bottom middle, the shortfall. So I know you gave us the 50 ,000 square foot view, but basically like that's the dollar amount that you think we don't know where it's going to come from to get to the amount of money they're raising. I'm being pretty charitable, right? About that. 42 billion. That 30 % sticking with retail, right? And also giving full credit to the passive demand with the proviso that that's got to find a warehouse before the passive guys can buy it. So you have to stress out of it. And anyone can download this from the research piece.

23:00Michael Batnick:Rupert, I have a question for you. Obviously, I hope you're wrong. And not because you don't seem like a very lovely guy, but nobody wants you to be right. I don't want to be Pollyanna either. I mean, I just, I'm just, you know, that's why I was asking how, how much conviction you have. Cause if you, I feel a lot better now, if you were saying like, no, I'm, I've, I've been in this business a long time. I've done these deals 90%. I would have said, all right, um, Josh. So I feel, I feel better about it, but let me ask you this. I would have, I would have thought that if, if this was going to go South and obviously it might, we'll find that in a couple of weeks, I probably would have thought that shares of Tesla in anticipation of raising money to buy this deal, I probably would have thought that shares of Tesla would sell off in front of this, and it hasn't.

23:43Michael Batnick:Is there any signal in there to you whatsoever? So for me, the mid-curve trade into the SpaceX IPO was to short the hell out of Tesla, right? Because all of the fanboys were going to migrate into Musk's favorite baby.

23:58Downtown Josh Brown:Raise capital for the new one. That's the one thing that makes me think that 1 % polymarket price on the merger is the wrong price, right? Because the shorts would get completely run over if that trade happens, right? Yeah. So that makes me pause for thought, certainly. Yeah, I mean, I think that there's an interesting dynamic. Just if it happens, right? Think about all of that transit. that you've got 60 % of a 2 trillion and rising company transitioning into the passive world, right? Because all of these guys that have got these really low basis, they've made their 40, 50, 60 baggers. They're selling now, right?

24:50In most cases, they've got a fiduciary obligation to sell now that they've been in the investment for 10, 15 years. And this one you're going to hate, Josh, because I know that you don't like equal weight indices. But I think that the RSP, the equal weight S &P, is going to outperform the MAG-7, right, until this deal is fully seasoned, right? That's my prediction.

25:21Downtown Josh Brown:The seasoning is, what, two years before they eat? It's going to take nine, 12 months for this all to sort of equalize, right? So even if I'm not predicting sort of fireworks of, you know, doom at 11, which, you know, I think there's a risk, right? But I think if the syndicate and everyone thought that that was going to happen, right, I think they would move to plan B pretty quickly. Because, you know, there's a lot of people that have got a lot of skin in the game here. And, you know, it's the investment banks, prime broker balance sheets, they're going to have to support that transition to the passive funds.

25:57And if they're worried about liquidity generally, you know, that's going to contribute towards a plan B.

26:05Downtown Josh Brown:I want to ask you, during the Snowflake IPO, this was a situation. So this is the fall of 2020. it was the biggest IPO ever I think at that time or maybe like neck and neck with Alibaba or something but like it was huge and a lot of the hedge funds that were sort of had like a VC bent to them I don't know the D1s the O2s that yeah those guys yeah so what they ended up some of them ended up doing rather than make the sell decision or the whole decision they distributed the stock to their LPs, which is the third option that people forget exists. Depending on the fund, many funds have the ability to say, you know what?

26:47Downtown Josh Brown:We don't know if it's the right time to sell Snowflake. We were smart enough to get you into it 100x ago. And now we're going to put that decision in the hands of the LPs. We're actually going to distribute the shares that they got. Do you think in a situation like this where like everybody understands that this is the ultimate unknowable, like there's no multiple, there's no real cash flow, like everybody gets that this is pixie dust? Do you think there will be a higher likelihood of funds just saying as soon as they're able, you know what? You figure it out. We made you money. Take it. I think that would be the right thing to do.

27:31That's what I would be doing as a CIO.

27:33Downtown Josh Brown:That's what you would do if you were running a fund that owned this. Because the insider stock is all loose anyway, right? So you're not protecting your investors by staying strong and keeping the float tight. That's all loose. So you should absolutely distribute in specie this investment to your LPs and say, right, you call it, right? This is a stock at 100 times revenues. That may make sense in some universe. And we can talk about universes here. Okay. Last one I wanted to ask you. Do we start saying MAG8 right out of the gates? Because this is, I think, instantly going to be five or six in market cap.

28:22Downtown Josh Brown:And as sort of an ancillary, a lot of people are saying NVIDIA is the thing that's going to get sold. the hardest for in order for people to own spacex i don't know why but i'm seeing that everywhere do you have any insight into why people think that doesn't make a great deal of sense to me i mean you know elon with a lot of money building space building colossuses and colossuses too and he's a big customer he's he's gonna he's gonna keep the flywheel going for jensen right yeah but i i just think it's, I wouldn't try and single out, I'd keep it much more high level, look at, you know, long RSP short mags, right?

29:06And I think that works as a trade. Once this thing's priced, you know, once this thing's out of the gate, then the machinery is rolling now. And that is just going to put a huge amount of pressure at the top of the stack, on the top of the S &P. Okay.

29:24Downtown Josh Brown:I told you 15 minutes. We kept you for 30. I can't tell you how much the audience and I and Michael appreciate having your insights. This is obviously a major historic moment for the stock market. And your writing has been really making this much more clear to people that don't have insights directly into these types of deals. So we really appreciate it. Thank you so much, Rupert. thanks so much for having me on guys. It's been fantastic. And guys, we'll drop a link to Rupert Substack. It's a blind squirrel macro, and he's also got a podcast. So if you enjoyed learning from Rupert the way that Michael and I have, there's more where that came from.

30:06Downtown Josh Brown:Thanks again, Rupert. Have an awesome day. All right. Cheers. What do you think?

30:13Michael Batnick:You know, it's interesting. I thought that a lot of the narratives that I'm seeing out there are an artificially low flow to inflate the stock.

30:22Downtown Josh Brown:Yeah.

30:22Michael Batnick:And then the index inclusion is just further pumping. So you know what? Who cares what I think? Throw up this polymarket thing. By the way, this to me, this is the vision and the premise, in my opinion, of prediction markets. This shit can't be gamed. Nobody knows where this is going to lay. But I take a decent amount of signal in something like this. I think this is very cool.

30:46Downtown Josh Brown:The dollar amounts are tiny though still. I wish they were bigger.

30:50Michael Batnick:I mean, well, they'll get there. They'll get there, but it's not nothing, dude. So most of the money is, and this is the closing market cap, I guess, on day one. Most of the money, and to Josh's point, it's not a gigantic, but it's$143 ,000. It's not nothing, is between two and$2.5 trillion. Okay.

31:09Downtown Josh Brown:So that's where the market on poly market has settled out in terms of people's expectations of where this thing will. So that would be bullish if that happens, frankly. No?

31:21Michael Batnick:Yeah. So there was two different conversations that we were having with Rupert. One is what happens in the first two weeks in terms of like who supports the float until the NASDAQ 100 comes along and starts to buy. And then longer term. I think the valuation stuff to me is kind of boring.

31:35Downtown Josh Brown:I think we all want - He didn't even want to do that. Right. It's like everyone said, anything that you could say has already been said.

31:43Michael Batnick:um the the mission the mission uh did read a little we worky the consciousness of the the hell did we say read it um our mission is to build the systems that technology is necessary to make life multi-planetary to understand the true nature of the universe come on yeah and to extend

32:00Downtown Josh Brown:the light of consciousness to the stars all right the light of extend the light of consciousness to

32:05Michael Batnick:the star all right i'll buy the crystal right so so eric newcomer said this may be one of the largest leaps of faith Musk has ever asked investors to take. And a great tagline that is.

32:15Downtown Josh Brown:That's like for a movie.

32:16Michael Batnick:It's good. And you know what? I'm so excited to see how far they leap with him. Like he is a singular inventor, creator, founder, entrepreneur, carnival barker. Like he is a one of one.

32:29Downtown Josh Brown:I was going to say, it's like a combination of jobs, Edison, but then also P.T. Barnum, but also P.T. Barnum, like all rolled up into one. He's a one-on-one.

32:42Michael Batnick:So here's another good quote. And think about something clever to say. O'Mallick said, at$1.75 trillion, SpaceX is asking investors to price in the orbital data centers, the Mars mission, the chip manufacturing, and the plan to build the infrastructure of a type 2 civilization. The believers won't know the difference. The faithful have been well-rewarded before. They have also occasionally learned that their Messiah is known to blow air hotter than the exhaust of those rockets. Well done, sir.

33:08Downtown Josh Brown:So I said this on TV the other day. not in defense of Elon or not that anyone cares if I defend them or not, but he does deliberately do this thing where he says self-driving cars in three years and then seven years goes by and they don't exist.

33:23Michael Batnick:Yeah, they're coming. But he has, I don't know if this is in the Isaacson biography,

33:28Downtown Josh Brown:but he has like explained it. He's like, well, if I give a realistic timeline that's further out, then everybody just takes their time. If I put a more ambitious timeline up, people break their neck to get there. And they may not get there. But imagine if they weren't killing themselves to get there, how long everything would take. So there's a methodology to this. He's not crazy. He might be crazy. But this particular thing that he does is there's a point. I guess there's a point to it. And how about raising money?

34:02Michael Batnick:Hey, you need to be a little bit crazy with your goals in order to raise the amount of capital that he has. Here's another really good one. And this is the stuff that pisses people off. Musk's company, this is from, I think I pulled this from the journal. I can't, forgive me. I can't remember who I pulled this from. So SpaceX bought, this is nuts, dude. SpaceX bought$131 million of Cybertrucks. What are they, Armageddon? Remember the movie Armageddon? They had the Cybertruck on the planet. So SpaceX -

34:28Downtown Josh Brown:They bought a million of them?

34:30Michael Batnick:$131 million of Cybertrucks. At the manufacturer suggested retail price. He can't even get a discount. Here's another one. Okay, in 2025, SpaceX also purchased$506 million worth of Megapack energy storage products from Tesla. Meanwhile, Musk's XAI has paid Tesla about$731 million since the beginning of 2024 through February 2026. It's funny. a lot of people, myself included, thought that I thought Starlink was the company. I really thought that that's what it was. That was the backbone of this company. And apparently, he's selling it like, no, forget about Starlink, not forget about it. But it's the enterprise application at the AI level.

35:15Michael Batnick:Showed this TAM that he made,$22 trillion. So Starlink is whatever. The Starlink broadband is sort of an afterthought. I thought that was the whole company.

35:25Downtown Josh Brown:It is the whole company, fundamentally. It's the only, it's the, you know, there are NASA contracts and then there's the Starlink revenue. But like the cash flow is coming in from Starlink, which is hugely successful and is not even close to full penetration of its own individual TAM. And really doesn't have any competition to speak of. It's got companies that would like to compete and might. in five years. Last week, we talked about Amazon Leo and some of the things holding them back, starting with they don't have their own rockets. They have to rent space on other rockets to put their satellites in space, whereas Elon's already got 8 ,000 satellites in orbit.

36:11Downtown Josh Brown:Not a pipe dream. It exists right now. So Starlink is a great business, but he has always done this where he's bootstrapped the growth of the company from like a starting point of like, here is some revenue coming in that we can then build on. Like that's not that if you're, if you've been long Tesla, then you recognize this playbook. He's not selling this as though Starlink is the endpoint.

36:39Michael Batnick:Starlink had 2.3 million subscribers at the end of 2023. The year later it was 4.6, then it was 9.2. Now it's 10.3 million. I said this to Ben on the pod today. I love people that do the work. There's a lot of people that read the headlines and they look at the numbers and they don't read shit. And the one that got all of the headlines or all the attention was Starlink's ARPU, the average revenue per user going down dramatically. And people are like, what in the world? You got to be kidding me. Okay. Well, thankfully we have people like O'Malek who actually took the time to read it. And he said, there's an explanation for this.

37:11Michael Batnick:It started with maritime terminals. They paid between$250 ,000 to$250 ,000. The highest paying customers are military. And then it was in the airplanes, and they spend$12 ,500 to$25 ,000 per month. He said consumer residential is where the growth is now. It is the lowest paying tier and outside of North America, increasingly price sensitive. Fast forward. So the mix explains -

37:40Downtown Josh Brown:to households in Brazil. But he said - They're not paying what the original buyers were paying.

37:45Michael Batnick:It's not a mystery is my point. That mix explains the slide from 99 to$66 an hour between three years. Maritime and aviation grow slowly and pay well. Consumer grows fast and pays less each year. But I think the bigger point that I am genuinely so curious to fast forward, how does the market absorb all of this supply that is coming? And yes, it's a$2 trillion market cap. The float is relatively small. The numbers are big,$50,$75 billion. But to Rupert's point, if there was success early on, it unlocks more float faster. And what might that do to the market? So Chartkin made this chart. This is not inflation-adjusted, but whatever.

38:23Michael Batnick:Not whatever. It's not inflation-adjusted. OK. In the dot-com bubble, what fueled the bubble was a true, and Josh, you were there, a true IPO mania. Yep. Like an insatiable amount.

38:36Downtown Josh Brown:Like three to five a day, five days a week.

38:39Michael Batnick:Okay. So in 1998, the US markets, the US IPO has raised$34 billion in money, and then 65, and then 65 the year later. From 1998 to 2000, nominal dollars, SpaceX, Open Ionanthropic are estimated to surpass all of the money raised in those three years. Yeah.

38:59Downtown Josh Brown:And these are the big differences. Obviously, the quantity of deals was much higher than but lower quality. Not that I'm saying these are all high quality or there aren't issues with these. People would go to Verisign and buy a URL and call Goldman Sachs and start working on IPO paperwork. It was literally like we launched a website. You also had existing companies build a tracking stock for the online part of their business and IPO that. So like a really funny example, Donaldson Lufkin, Jenrette, DLJ, sort of like a smaller version of Goldman Sachs, but it was a big deal 25, 30 years ago. They had an online brokerage website, barely any customers.

39:58Downtown Josh Brown:They call the DLJ direct. They IPO'd it. Like you could do that. Just because. It would be like a way to raise equity capital to build your website. So we just had, I don't know, 1 ,000 IPOs, and most of them were kind of a joke. We had some good ones, but most of them were a joke. This is very different.

40:19Michael Batnick:Coming back to today, I think that, listen, I don't know if this is going to be a top or the obvious. I feel like in hindsight, if this is a top, this would be, with the benefit of hindsight, the most obvious top we've ever seen.

40:31Downtown Josh Brown:which is why I have, that's what I, exactly what you just said is what I have in the back of my head. It's too obvious. It's too easy. It's too, how could it be so obvious that the biggest IPO of all time coming public via the biggest showman of all time who will literally say anything. Um, and every big, every major investor is already look, looking for the exit. They've been in the stock forever. Like how could this, how could it be so obvious? Of course it won't be the top.

41:02Michael Batnick:You know, you know, the breaking bad scene where Mike is like, you stupid bastard, we had it all and you it all up or something like that.

41:09Downtown Josh Brown:Yeah.

41:10Michael Batnick:Oh, is that how we're going to look back at Elon is like, you dumb asshole.

41:13Downtown Josh Brown:Um, you did the combination of this anthropic and open AI or going public inside of a year. It might be too much.

41:21Michael Batnick:It might be too much.

41:23Downtown Josh Brown:I don't know you know me I'm the primary where's the money coming from guy like this is my whole thing so for me I just don't believe that there's two trillion dollars on the sidelines

41:37Michael Batnick:stop saying that it's not two trillion dollars that's the market cap it's not the buying power

41:41Downtown Josh Brown:I understand I don't think there is 80 billion for him there's another 40 billion for open AI another 40 billion for Anthropic

41:50Michael Batnick:it does sound like a lot of money when you put it that way

41:52Downtown Josh Brown:I don't think it's in cash. I think it's got to come from somewhere. Where is it going to come from? If they sell my stocks to buy this thing, I'm going to be pissed.

42:04Michael Batnick:All right. I like your next topic.

42:07Downtown Josh Brown:All right. This is one of those things where this is – we're going to provide a service to the public. We're going to put an end. We're going to put an end to something that too many people do. Way too many people do. They look at the consumer discretionary sector of the S &P. And then they look at the consumer staples sector of the S &P. And they tell a story about the economy. And it's f***ing nonsense. It's a great intuition. Like, oh, if we look at maple syrup and canned fruit, that's like the stuff people have to buy. And we compare that to the things that people might want to buy, like leather jackets and pickup trucks.

43:00Downtown Josh Brown:And we can sort of see like the priorities of the consumer or we could see how the institutional investors are betting. Are they buying the staples because they're worried or are they buying the discretionary because they're bullish on the economy? Throw it out, it's garbage. It's always been garbage, but never more so than it is right now. Here's what I want to show you. This is the consumer discretionary ETF. Just the price, okay? It is at or close to highs. That's fine. Let's not use this as a story to say that the consumer spending appetite is this or it's that or it's the other thing. because when you actually decompose what's in here, you realize this is just being led around by two very large, very important stocks.

43:50Downtown Josh Brown:But I want to make a different point, which goes a little bit further. This is the Staples ETF. Put this one up. And we're dividing it by the, excuse me, we're dividing discretionary by Staples here. So it's a ratio chart. So 1.4, the way to think about that is 40%. move by the discretionary versus the staples. And a lot of people would look at that and say, well, that's indicative of how strong the consumer is or how good investors feel about the strength of consumer appetites. Do I have you so far? You with me on that so far? These are the things people would say? Okay. All right. Now, when we take a look at the equal weight consumer discretionary, this is going to control for those two gigantic stocks, which I'll mention in a second.

44:42Downtown Josh Brown:That's the purple line. So now obviously doesn't look as good. So we're comparing this to the consumer discretionary. The regular sector is an orange, the one that everyone talks about. That of course, over the last year is up 16%, but the equal weight is up only six. And so if we're gonna say that this says anything about the consumer, we're gonna have to say that the equal weight is the more legitimate it. I don't agree with the premise that it's saying something about the consumer, but I would say like if we have to, let's at least equal weight it. And here's why. This is the price of gasoline is in blue up 58 % over the last year.

45:26Downtown Josh Brown:And what you can see in this chart is that the orange line, which is just the regular consumer discretionary sector, holding up pretty well, and the purple line starting to break down right around the time that gas prices really accelerated. And that's not an accident. I think that is the true state of the consumer discretionary situation is in purple. And I think the driver of a lot that happens in that equal weight index is the price of gasoline. Not the only, but right now, the most important one. This comes from Ed Yardeni. Give me the next chart. I want you guys to understand what's actually in the consumer discretionary.

46:09Downtown Josh Brown:10 % is apparel, retail apparel. So this would be like Abercrombie and Fitch and Lululemon and Gap. Then we've got like all retailers, 9.3%. And then when you look at everything else in this index, this is year to date. This is year to date. So all of that gain is coming from those two categories that I mentioned. Everything else is detracting. Casinos are down 17%. Auto parts are down 13. Home improvements down 10. Even hotels, resorts, and cruise lines are down almost 10. Home building, we know the story there. It's shit. Restaurants are down. Automobile manufacturers, which are also in discretionary, are down.

46:53Downtown Josh Brown:The sector is not in good shape. It's being artificially propped up. Ed points out give me this next chart this is market cap and the earnings and we're talking about the share of the index so the sector is 9.8 % of the S &P's market cap next chart shows you Amazon and Tesla which are 62 % of the market cap weighted consumer discretionary 62 and rising pretty much every week for the last uh i don't know uh the capitalization share is in blue so that's the percentage of them so in 2018 they were 18 now they're 62 they're almost the entire average um when when you think about that and um last one this is just breaking it down in cap size.

47:53Downtown Josh Brown:The S &P 500 is in blue. This is the consumer discretionary stock price, but by cap size. So the discretionary names, the S &P 400, those would be mid caps. That's in red. They look much worse than blue. And then of course, small cap discretionary in the S &P 600 look the worst, actually are negative versus 2021. So the more you go down in cap size or the more you equal weight, the more the consumer discretionary theme comes back down to earth. And it's all being distorted by those two gigantic stocks that are now almost two thirds of the index. So doing ratio charts, doing storytelling surrounding, surrounding consumer discretion and consumer staples.

48:45Downtown Josh Brown:It's always been nonsense. But these days, what you're really saying is stocks versus two gigantic companies. And that's my shtick.

48:59Michael Batnick:I agree with almost everything you just said. I don't think it's always been nonsense. I think there used to be simpler times. The market wasn't as dynamic and it used to make a lot more sense than it does today. But I completely agree with the premise of looking at these two areas of the market and concluding anything about the economy, pump the brakes. Here's why. Look at restaurants, for example. A lot of them are doing really poorly. Oh, the consumer must be not able to afford a lot of these prices. Yeah, partially true. Obviously, part of it is an inflation story. You know what else is part of this story?

49:32Michael Batnick:Supply, valuation. The valuations of a lot of these quick service restaurants were so stupid that they're now normalizing, comps are tougher. There's too many sweet greens and cavas and the Miami Pura Vida. The competition tells you nothing about the consumer. Okay, that's number one. Another area worth looking at or thinking about is the performance of the stock might tell you the opposite about the consumer and who knows in which case. So for example, is Dollar General, would Dollar General or Dollar Tree be ripping because the lower end consumer is in good shape and they're able to buy more stuff?

50:05Michael Batnick:Or would Dollar General be doing poorly because people that are trading down can no longer, like where else are they going to go? Or a third scenario, no, the consumer is doing poorly, but the middle class is now trading down and therefore the stock is performing better. Like it's so messy and you can craft any -

50:22Downtown Josh Brown:Middle class people are going to Dollar General, therefore the economy's bad, but it helps Dollar General stock.

50:29Michael Batnick:Yeah, okay. It's just, it's very convoluted. Stop! Yeah. So I think you really have to look under the hood with this one. I totally agree. Yes.

50:37Downtown Josh Brown:And for God's sake, again, Tesla and Amazon are almost two-thirds of the index. So you're not saying anything about the consumer. You're saying something about whether or not people want to buy those stocks or not. Amen, sister. All right.

50:54Michael Batnick:Let's skip topic three. That's evergreen. We can do that next week. Let's do – you want to do immune to the news? Or do you want to skip it?

51:02Downtown Josh Brown:Well, this was just a question I wanted to ask you. Okay. Are we immune to the news, Michael?

51:07Michael Batnick:No, no, no. I reject that.

51:09Downtown Josh Brown:Okay. This is the way I wanted to phrase it, though. You have Iran, whatever the f*** is going on there this week. It's either a ceasefire or we're going to wipe them off the earth. It's like one or the other. A truce or World War III. Okay. Oil prices related. The Fed now on hold. Maybe hiking also related. Inflation related. tariffs sort of orthogonal um all of these things though have basically become background noise made a record high last week um the dow is over 50 000 so you can't tell me that people are actually reacting to the news um in any meaningful way i think they're just ignoring it um the next thing that's going to happen i bring this up because i think like in a few weeks we're having the midterms conversation like i don't want to have it i don't either but it's going to happen in the market it's going to be in all those stupid surveys um and it's going to start whipping the stock market back and forth or the republicans going to lose the house what does this mean for tax reform what does this mean for this what does it mean for that that's going to be like the the market conversation and part of me feels like oh that's going to be so annoying but then part of me is like, actually, no, we're just going to ignore it.

52:24Downtown Josh Brown:We're ignoring everything. Maybe this will be the thing that we don't ignore. I don't know. What are your thoughts?

52:29Michael Batnick:Yeah, no, I just disagree with the whole premise of we're ignoring the news. The reason, and you say ignoring it because with the backdrop of the market is at the all-time high and therefore we are ignoring the news. No, that's the part that I reject. The market is at an all-time high because earnings and profits are at an all-time high. The market will be going -

52:46Downtown Josh Brown:Therefore, we're ignoring the news and focusing on earnings. That's the question. That's what I'm asking you.

52:51Michael Batnick:The premise of that, and maybe not you per se, but when everybody's saying, why aren't we reacting to this and this? Why are we ignoring everything? We're not. We're focusing on what matters. And investors are focusing on the bottom line. Stop. I agree. But that's, you're not disagreeing with me.

53:06Downtown Josh Brown:I know you want to. You don't like the premise, but that's what the premise is. The premise is, yeah, there's shit going on in the Middle East. um there's geopolitics whatever that means the market doesn't care because it's focused on fundamentals not news correct the fundamentals are the earnings yes so we we we agree the market is better than ever at tuning this all out i don't think kevin warsh got even a 24-hour cycle like in the minds of the average investor we used to talk about the new fed chair like it was the new pope this is so much better and we were and we were catholics that we just know it's like all right new fed chair it's it's trump's son-in-law who is it whatever i don't care next like we're not doing it we're not doing these news discussions anymore in the stock market and i'm sure at some point there will be big enough news there's a guy outside the white house like two days ago firing an automatic rifle do you even know that it happened does anyone saw that briefly could you imagine if that would have happened in 1997 no it's crazy like it would it would have been on the like it would have been on the news for five nights straight so i i think i'm sure something crazy is going to happen and and that's going to make this look great crazy what i'm saying i think we're sort of like in a post macro geopolitical news backdrop for a little while until something gets extreme enough

54:42Michael Batnick:It's because the AI story is so all-encompassing and engrossing.

54:48Downtown Josh Brown:Yeah. All right. That's all I wanted to ask you on that. All right. We can keep moving.

54:54Michael Batnick:Let's skip everything else. Let's just go to your Make the Case. We could do the Micron stuff on TCAF.

54:58Downtown Josh Brown:Good idea. Oh, we have a good guest for that too this week. Yeah, we do. Okay. Oh, I did want to mention the Halo ETF. So this actually ended up happening. We got the Halo ETF, finally began trading. And I have to read a disclosure because I am involved in it. Halo is offered through Roundhill Financial. I, me, Josh Brown, have a outside business activity where I act in a limited consulting role for Roundhill to advise in their marketing efforts. Investing involves risk, possible loss of principal capital. Nothing discussed should be considered personal financial advice or a solicitation. All opinions are expressed on my own, not the opinions of Riddles Wealth.

55:44Downtown Josh Brown:The way that they built this, I have the top 10 holdings. So basically, it's a rules-based strategy. Roundtail is the ETF company behind DRAM, which I think is the most successful ETF of the year. And they've done some other thematics. What jumps out at you about this top 10 holding screen that we have up here?

56:05Michael Batnick:Obviously, you have a limited role because I see this as equal weighted. So, of course, they don't care what you think at all.

56:11Downtown Josh Brown:They don't care what I think. No, I didn't create the index at all.

56:13Michael Batnick:I know. I'm teasing. What jumps out to me? These are names that – these are not individual stocks anybody buys except for Philip Morris.

56:24Downtown Josh Brown:Okay. So for people listening, AutoZone, TFI, Cummins, J.B. Hunt, Lamar Advertising, Lenox International, Rider System, Magna, Philip Morris, and Autolive. I would say nobody in our audience owns these stocks individually except for maybe Philip Morris.

56:42Michael Batnick:Philip Morris is out. Yeah. So no tech, no financials.

56:49Downtown Josh Brown:And in fact, the index was built by a company called Acros, which is an index provider to the ETF industry. And financials are explicitly ruled out of being owned by the Halo ETF ticker is LOHA, by the way, for people that want to check it out. Apparently, Halo was actual HALO was taken by a biotech company. can't own financials because the rules that they're applying to determine heavy assets, low obsolescence risk, don't apply to financial companies. There's one tech stock in the index, and I've never heard of it. Right now, the index will change, but right now, the companies that made the criteria, and there's one communications services stock, that's it.

57:37Downtown Josh Brown:So in other words, like tech is 1%, communication services is 1%. I think communications is charter.

57:46Michael Batnick:We need to have a broadband conversation. We'll do that one of these weeks. Holy shit, dude.

57:51Downtown Josh Brown:What's that? A broadband conversation? Oh, my God.

57:54Michael Batnick:They look like they're going to zero.

57:57Downtown Josh Brown:And then the other thing. All right. So I have two charts of some holdings in here. Here's Cummins, CMI. Okay. So we're not talking about sleepy stocks. This thing is, I want to say it was$150. It was$200 a share a couple of years ago. It's almost$700. And the other one, Southern Copper, obviously, like, this is a rock and roll stock. It doesn't only go up, of course. It goes up and down. But, like, here's a name that's gone from$60 to almost$200. The reason I bring those two up is I think they're emblematic of this moment. They're halo because they have heavy assets and very low obsolescence risk.

58:42Downtown Josh Brown:No one's going to disrupt the copper mine, like for obvious reasons. And Cummins is making engines. You can't just decide I'm going to chat GPT myself and engine. So these are like quintessential halo stocks, and they're in the index. But they also benefit from the AI story. so while we're betting on stocks that we think aren't disruptable by ai we also sort of in some of the names get the tailwind of all the ai activity i think 36 percent of the portfolio is industrials oh wow and you bet yeah and you better believe a lot of the industrials in that index are ai beneficiaries so um just thought it was interesting the way they constructed the index Anyway, that's my spiel on Halo.

59:29Downtown Josh Brown:I know we talked a lot on the show about me suing people. We're going to do the next best thing. I'm going to help Roundtel out with their product, and I'm pretty excited that I have birthed this into the world. And in many ways, you're a midwife to this product. Whoa, whoa. I've never had that role before. You have helped to shepherd its birth. So that's the story. Love it.

59:56Michael Batnick:All right. Let's – wait, you have a different make the case, don't you?

1:00:00Downtown Josh Brown:Yeah, we're not going to do that tonight. We're out of time.

1:00:02Michael Batnick:All right, good. Let's do a mystery chart real quick.

1:00:05Downtown Josh Brown:Let's knock it out.

1:00:06Michael Batnick:All right. Ooh. Okay. So the purple line is the S &P 500. All right? This is the last five years. The orange line – and don't guess yet. The orange line is a country. Okay? Next chart.

1:00:26Michael Batnick:this is an equal weight version this is an equal weight sector version you're definitely not going to get this you're probably not gonna get the other one but i just want to stop stop stop

1:00:35Downtown Josh Brown:equal weight sector version what does that mean it's the first thing of that country so chart

1:00:41Michael Batnick:first chart all right this is a country that has beaten the yeah you could say beat in the pants

1:00:47Downtown Josh Brown:So the orange becomes purple in the next chart.

1:00:51Michael Batnick:The orange is a country ETF. Let's start.

1:00:54Downtown Josh Brown:All right. What am I guessing that the second chart or the first chart?

1:00:58Michael Batnick:Let's do, let's start this one.

1:01:01Downtown Josh Brown:All right. Uh, and it's a country.

1:01:05Michael Batnick:Is this a G7? I don't know what that means. This is like, I'm going to say, I'm going to say, I'm going to say Korea. No, that wouldn't have been more vertical. This is a neighbor of ours.

1:01:14Downtown Josh Brown:Ooh. Our neighbor to the North.

1:01:16Michael Batnick:Yeah. is it canada how'd you know oh this is oil okay oil and oil and gold okay i'll i'll better one do you next chart you're not gonna guess this so let me just tell you this is this is equal weight financials of canada what in the world is happening here oh that's interesting literally

1:01:39Downtown Josh Brown:like it's the wait it's equal weight that it owns all the canadian financials how bizarre is this the banks. What are they doing up there? What is the Canadian financial? Like the five big, the cartel banks?

1:01:49Michael Batnick:Like Royal Bank of Canada, is there a Nova Scotia up there? I guess they benefit. What's going on up there?

1:01:53Downtown Josh Brown:Well, they benefit from higher oil and gas prices and activity and probably sprinkle a little bit of gold on that. And so that Jason in the chat is saying it's all Brian Belsky. That could also be.

1:02:07Michael Batnick:So for as much as we rightly talk, So by the way, by the way, it's 40 % of the index is financials. 40 % is financials. Then it's 19 % energy, 15 % materials, and 10 % industrial. So it's not just energy. Financials are rocking and rolling.

1:02:28Downtown Josh Brown:Can I say one funny thing? Go ahead. Everyone thinks Belsky is from Canada. He's from Minnesota. He's from Minnesota. He worked at a Canadian bank called BMO for a long time. He's no longer there. People just think he's Canadian. He's going to be back on the show this summer. It drives him up a wall.

1:02:49Michael Batnick:Because he sounds it too. That's a problem.

1:02:51Downtown Josh Brown:He used to write research on Canadian stocks also. So he kind of did it for himself.

1:02:55Michael Batnick:Anyway, just do the exercise. If you're thinking that the valuations don't make sense, we're ignoring the news. It's a bubble. Look at global stock markets. They're doing really well. It's not just us.

1:03:07Downtown Josh Brown:That's a really great point. It's a great place to end. we have as Michael mentioned we have an all new edition of the compounded friends coming at the end of the week so much to talk about I'm super excited about it once again special thanks to our guest Rupert who joined us to talk about SpaceX if you were into his stuff make sure to check out blind squirrel macro on sub stack tomorrow's an all new animal spirits coming out with Michael and Ben any next talk Ben doesn't give a shit at all he doesn't want to hear it alright and we'll do Ask the Compound this week so there's a lot happening I also wanted to mention we dropped this like two hours ago also on the channel we did sort of like a I don't know if you'd call it a trailer or a mini documentary it's three minutes

1:03:57Michael Batnick:good stuff

1:03:59Downtown Josh Brown:but we had a big launch party for our Porterhouse portfolio strategy and a lot of the people that you guys have seen on this channel. A lot of the financial rock stars in our orbit came out and I think it'd be a fun watch for you. So go look for that. It's on the Compound channel. All right. That's it from us. Thank you guys so much for tuning in. Thanks for coming live. We'll talk to you soon.

1:04:32Ritholtz 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.

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