Stocks After an Oil Spike, Internals Gone Wild, Bcred Problems, Nvda Stuck

14:35Downtown Josh Brown:I'm watching some of the software stocks individually bottom out. And that's why I wasn't totally surprised. Because if you think about what was going on before the strike on Iran, the market was like just in one of its most miserable funks that we've seen in a long time. And it was all about AI driven disruption. So when I started to see those stocks go green individually, one after another, um, it told me that this could be more meaningful. Like this could be, this could be a real bounce.

15:07Michael Batnick:I also, I'm not, not kidding. Like I looked, I thought that Bitcoin would have gotten just destroyed on a risk off tape like this. And it

15:15Downtown Josh Brown:didn't it stabilized uh matthew bird in the chat josh forgot asml exists okay first of all uh asml's in europe not the united states second of all uh not quite a competitor to amat they're they're doing lithography advanced lithography and it's an amazing stock but it's nothing to do with what we're talking about so all right um i want to wait what did i want to where did i want Can we put up the tiles?

15:46Michael Batnick:So this – I screened this at about 2 o 'clock in the afternoon. And to me –

15:53Downtown Josh Brown:This is all the ETFs.

15:55Michael Batnick:Yeah, the obvious standouts, the international, just blood red for obvious reasons.

16:01Downtown Josh Brown:Yeah, I mean I'm trying to think of like where were the places that you could hide. Internationally? The short sold – no, just period. Like the short ETFs were all green. I mean, for obvious reasons. USO was green. That's oil. UNG was green. That's gas. I mean, there was not much here to work with.

16:23Michael Batnick:Software was up 1.6 % today. I added to ServiceNow, by the way. Me and the CEO, I'm buying 20 shares or whatever it is, and he's buying a little bit more. We're in this together, buddy.

16:33Downtown Josh Brown:You know what they finally got to today and yesterday? They finally got to the halo stocks. that's just classic like risk-off behavior in the market. Put up the bottom 20 performing S &P 500 stocks. But dude, this is nothing.

16:47Michael Batnick:Like, are you kidding me? On what very easily could have been a very risk-off tape, this is like pretty muted.

16:57Downtown Josh Brown:I think it's notable like these 7%, 8%, 9%, and 10 % individual stock sell-offs, none of these are the stocks that were hurting us prior. It was a new reason to sell a new batch of stocks. Yeah, these were winners. You got Ford, Newmont, NRG, Carnival, Albemarle, Norwegian Cruise. They were hitting some stuff that really had nothing to do with the sell-off prior to. Let's do the scatter plots.

17:28Michael Batnick:All right, this is wild. So going back to 2012, we've never seen a day like today. How about that? normally these, the, so we're looking at the S and P 500 and emerging markets indexes. And of course, generally speaking, they move in line with each other. One goes up, the other goes up. Generally speaking, we've never had a day where international, I'm sorry, emerging market stocks fell nearly 5 % where the S and P was down on the 1%. Really interesting day.

18:01Downtown Josh Brown:It's yeah. And it's just like, I, I just feel like the, emerging market stocks have been so strong for so long. And a lot of times people don't understand this. A lot of times when a lot of times when you see something like what you just showed us, it's not because people are now bearish. It's because you sell what you can. And when you're up 20 % in a position and you need to take risk off or you need to lower your exposure, or you're trying to like chill the volatility out of your overall portfolio, it's so easy to sell the thing that you're up 20 % in. Like not sell all of it, but like sell some of it.

18:43Downtown Josh Brown:It's a much easier trim than to sell something that you're already down 10 % in. And people misinterpret that. They look at that as like some sort of like opinion being rendered on whatever the asset is, whether it's gold or emerging markets. Sometimes, especially if you're a professional and other people are judging you, it's easier to sell the thing that you're up in a lot. And I'm a case in point. I'm not bearish on Devin. I needed liquidity. There's some other stuff that I want to do. It was an easy sale. I was upping it from the minute I bought it. It moved fast.

19:15Michael Batnick:Next. So South Korea was an example of that. South Korean stocks. But there also was a legitimate reason to sell them. So South Korean stocks prior to the last two days were up 160 % year over year. Like these things have gone vertical. And the index is weird. It's like all Samsung and a few other big electronic companies. It's not all, but it's like highly concentrated.

19:33Downtown Josh Brown:It's half SK Hynix and Samsung. It's half memory chips basically.

19:37Michael Batnick:So their market fell 9 % today. Worst one-day drop since COVID. But there's a big reason for this.

19:45Downtown Josh Brown:Super concentrated. So they are heavily reliant on imported energy.

19:52Michael Batnick:So check this out. I had Claude make this. Net energy imports as a percentage of energy use. and they got nothing internally.

20:02Downtown Josh Brown:Yeah. Yeah. So it's not like it's not a shocker that people would want to be sellers there.

20:10Michael Batnick:All right. So you mentioned software stock stabilizing. This is over the last five days. I grabbed this chart at about two o 'clock, so it might be not exactly right, but it's close enough. So over the last five days, IGV is up 8%. And to me, Intuit is the poster child. And it's exactly we haven't really spoken much about. But it really is the poster child of software because of AI. Intuit is TurboTax. It's MailChimp. It's Credit Karma. And one other thing that you would be like, this doesn't need to exist.

20:45Downtown Josh Brown:It's literally a collection of software products where you would say to yourself, why am I paying for this?

20:52Michael Batnick:Right. But it bounced 22 % in five days.

20:56Downtown Josh Brown:Let's see that chart.

20:59Michael Batnick:Let's go. Here we go. Intuit. So up 22 % ServiceNow, up 12%.

21:05Downtown Josh Brown:Intuit gained back 22 % of its market cap in the last five. Okay. That's interesting. What else is on here? ServiceNow, Workday, Salesforce, Adobe. Right. These are all the poster children for the AI threat to SaaS.

21:22Michael Batnick:Apparently, Burry got long Adobe. I saw some.

21:26Downtown Josh Brown:I already did my knife-catching act in Adobe. It didn't go well.

21:30Michael Batnick:I cut my hand on Adobe, but I'm in service now in Salesforce.

21:36Downtown Josh Brown:Anecdotally, I got a really nice bounce in toast, which I added to at, I don't know, 27 maybe. Go ahead. So a big activist value act just bought four and a half million more shares. They're at, I think, 8 million shares now or something like that. And that is Mason Morfitt's firm. It used to be Jeff Ubb. And Value Act is one of the best activist hedge funds there is.

22:01Michael Batnick:You know, you love your activist. Can I tell you something? I forgot to tell you this. I was listening to a book about General Electric called Lights Out. And as I'm listening to it, my ears perked up because they said financial – what do they call you? Financial – I don't know. financial pundit blog or whatever they called you josh brown tweeted nelson peltz is a genius yes this is a this is a 2017 do you remember sending that tweet no but he is a genius 2017

22:32Downtown Josh Brown:multi-billionaire you do love your activists i do um service titan caught a little bit of a bid too the other one i'm which one oh this was for construction stock i'm destroyed in this is the toast for the trades.

22:47Michael Batnick:Right.

22:48Downtown Josh Brown:So they handle all the billing and they handle all the software and all the job scheduling for all of the trades. And, um, what's the ticker here? TTAN. It's, it's only been public for a year and two months. Nobody knows what it is. I'm one of the only people that even know that it exists, but you don't think that your handyman

23:06Michael Batnick:is going to be vibe coding for some reason.

23:09Downtown Josh Brown:I just highly doubt electricians are going to try to create their own billing software. I don't know why I have this out of consensus opinion, but I really like that business. I really like their market share position. And it reminds me of Toast. I think both of these stocks have an amazing opportunity to be the AI providers to their respective verticals.

23:35Michael Batnick:So obviously nobody knows where software stocks go from here, I would shut it to make a one-year prediction, let alone like a one-day or two-day. So who knows? Maybe this is not the low. But if this is not like a local low, like if these stocks roll over and take out the most recent lows, oh my god, is it going to be so ugly?

23:56Downtown Josh Brown:Wait, wait, wait. Is it too far to ask the question of is it a rotation? Because if all these software stocks are bottoming. Now let me show you the other side. Momentum got absolutely demolished this week. So give me, um, give me these two charts one after another. Let me see. All right. This is MTUM. This is like when people talk about momentum, this is the first ETF that people think of. It's the granddaddy of momentum style ETFs. Uh, they, they sort of finally got around to wrecking this thing. Here's another one. This is the Invesco, S &P 500, Momentum ETF, SPMO. I'm not really fluent on the differences between these two.

24:41Downtown Josh Brown:This one seems to have lower beta for some reason. I don't track

24:47Michael Batnick:the Invesco one. For example, one of the names that's been working is like healthcare stocks have been working and they whacked them off today big time.

24:56Downtown Josh Brown:They whacked them off hard. Yeah. I agree.

24:58Michael Batnick:So there is rotation. And this is like this just keeps happening. There are so many stocks that are getting killed, and yet the index is going sideways. I don't know. In the short term, if you're just looking at the stock market, forget about the news, okay? I'm not talking about earnings or macro or interest rates or any of your opinion. If you are merely looking inside and at the market, it's hard to be bearish.

25:23Downtown Josh Brown:Don't you think? So I think Santoli, Michael Santoli was saying like, we keep escaping.

25:29Michael Batnick:Yeah, it refuses to go down.

25:31Downtown Josh Brown:And we're escaping the same way via rotation. Rotation. What could be better? That's how that's the get out of jail free card so far. Like, why are we hovering within 5 % of the S &P 500 all time high with all of the insane things going on? The get out of jail free card has been rotation. And it's – look at this like this, just what the NASDAQ has been going through and we're alive.

25:56Michael Batnick:Yeah. So I have a bad make the case for tonight. Spoiler alert. I should have made it to American Express. So American Express is one of these companies that got whacked off hard, excuse me, by the AI fears, right? Because this was like the white-collar worker. Like the white-collar worker is going to get hit. So this stock was down 20%. And this is like – this has been the secular winner for the upper K. And they said, OK, the upper K is like a little bit wobbly. This stock was down 20%. Like not overnight but why? Because people are afraid of about 10 % unemployment and it finally hit a white collar worker.

26:36Downtown Josh Brown:They hit everything. They got like – they got JP Morgan under 300. They got Berkshire back under 500.

26:41Michael Batnick:And meanwhile, the index is 2.2 % from the high.

26:44Downtown Josh Brown:I know. Well, it's sort of miraculous, but that's been the secret so far. Let's do oil. Did you expect to see more when you saw the future Sunday night? Do you expect to see a bigger move out of oil? I don't think I did. It felt big, 6%. Was that what it was, 7 %? Yeah. I sort of think that oil could be a sell. like they they took out the they took out the Iranian Navy there's not the Strait of Hormuz stuff the the ships are not going through the Strait of Hormuz now because they're nervous not because they can't but like that was one of the first things the Israelis and the American pilots went for the ships Trump said the ships are at the bottom of the of the strait I'll take I'll take his word for it.

27:38Downtown Josh Brown:I think that's why you didn't get such an extreme reaction. Also, Iranian oil is not on the market. Like it's literally, it's embargoed. Like it's, the Chinese buy it. So if the Chinese have to substitute Venezuelan oil and Iranian oil and they have to come to the regular market or whatever the mechanics are, maybe there'll be a little bit of a squeeze of supply. But like, this is not like the whole world was awash in oil from Iran. That's not how the oil market works. That's why you're not seeing a 20 % move in crude. Like I think in people's imagination, that's what they would expect. It's just not the reality of how that oil market works.

28:20Michael Batnick:So I don't follow this stuff closely at all.

28:22Downtown Josh Brown:Didn't European natural gas prices go nuts? Yeah, but they just – that's a – they always do. They always go nuts because they don't produce their own natural gas. They are wholly reliant on Russia and then whatever we can ship out of our LNG terminals from New Orleans. The Europeans require natural gas from off continents, similar to what we were just saying about South Korea. So the moment there is some sort of geopolitical event, that's one of the knee-jerk things that happens in the commodity markets. Give me my WTI crude spot price. I don't know man if you would have told me even 10 years ago you would have told me in 2015 there's going to be a thing that happens on a Saturday night where the United States and Israel team up to knock out the entire leadership of Iran I would guess crude's at 100 and it just goes to show like how much things can change and uh I think I thought this was really interesting Give me the next – give me the XLE.

29:29Downtown Josh Brown:Little bit blow-off toppy the last two days. I think a lot of profit-taking. Yeah. Just look at the way – but look at the way these oil stocks anticipated this.

29:40Michael Batnick:Yeah.

29:41Downtown Josh Brown:Look at like January 1st for the XLE stocks, which is Chevron, Exxon, Conoco, et cetera, all the big guys. January 1st was like somebody waved the green flag. And it was like, gentlemen, start your engines. And these stocks just methodically ran right up. I think the oil sector as a sector is up 28 % year to date, which is incredible when you think about it.

30:09Michael Batnick:Chris Marone said to us, news always follows price. Or any surprising news, right? Like it almost always goes in the direction of the prevalent trend. Yeah.

30:22Downtown Josh Brown:Well, the mark, right. Cause the market figures it out before the journalists do. And that shouldn't be controversial. Give me, um, Chevron. Like this thing looked incredible going into this. Um, the investing public understood that all these warships being sent to the region, they weren't just going to go home. Something was going to happen. and you can see it. Give me EOG resources. This one looks interesting. Breaking out of a fairly long consolidation. Now retesting the breakout level. This is the type of chart people won't buy because they think they missed it. And that's how you know it's going to work.

31:06Downtown Josh Brown:Let me see what else I have here. Diamondback, Fang. This one's gone. Say goodbye. Occidental, Oxy, I mentioned before. you got a gap and go in this chart you got a golden cross happening this thing will probably be lazy for a couple of days work off that overbought RSI and then it's going to launch again I just know it target resources TRGP gone forget about it all of these were on the best stocks in the market list I wrote about all these this year with Sean we asked chart kid Matt for this This is a ChartKid Matt special. Michael, what's going on in this chart?

31:52Michael Batnick:So, man, this is pretty, huh? We're looking at the red dots. Those represent every time where crude gained at least 5 % two days in a row. And of course, it only happens for a very specific reason. And then what did the stock market do on a forward return? And outside of September 2008, I mean –

32:16Downtown Josh Brown:We won't talk about that one.

32:18Michael Batnick:Outside of that, pretty damn green.

32:23Downtown Josh Brown:For the listeners, the average 12-month return after crude oil goes up 5 % two days in a row, which just happened, is 21.9%. The median is 22%. And the win ratio, which is the thing I care most about, is 83%. That's strong. It's quite strong. Very strong. 83 % of the time, stocks are higher 12 months after one of these two-day oil price spikes. So, and it doesn't, 83 % win rate means 17 % of the time it was lower. Okay? So it's not a guarantee of anything. But I like those odds. Do you like those odds?

33:04Michael Batnick:I love those odds. we have 12 prior instances one of them was 2008 let's assume this isn't then okay so pretty good let me let me show you something else um

33:17Downtown Josh Brown:this is the first i've even heard that this thing exists there's an etf company called defiance you probably know those guys right yeah i don't know the person but i know the company okay did you see the movie defiance what daniel craig yeah yeah i loved it it's an incredible movie right it's about a it's about a family in eastern a jewish family in eastern europe like a whole town they get chased into the woods and they decide to fight back and it's a true story and they end up liberating all of these towns from the nazis and that family i guess some of them ended up in the united states specifically on long island and the founders of the ctf family are the family depicted in the movie no

34:00Michael Batnick:Oh, shit. I had no idea. That's right.

34:02Downtown Josh Brown:I learned that today. The girl, I guess their chief strategist or whatever, was on Squawk. And she retold that story. So this is a family that fought off the Nazis and saved God knows how many Jews in the woods. I don't know if it's Poland or wherever it is. And then they named the ETF company Defiance after the story of their family. Anyway, they have a stock, great ticker, JEDI, J-E-D-I, and it owns all of the drone warfare and munitions stocks. And this is apparently the way that we wage war now in the 21st century. We were sending some of these one-way drones where they're almost like kamikazes.

34:50Downtown Josh Brown:The drone is not expected to make it back. Its job is to crash into a building. We are fighting with those things now. and you could imagine how expensive they are and how much it costs to replace them. Sounds pretty bullish. This is the ETF that owns all the drone warfare stocks. Put the chart up for me. It's called the Defiance Drone and Modern Warfare ETF. I'm not recommending it. Everybody relax. I'm just pointing out that it exists.

35:21Downtown Josh Brown:And I guess I would have expected it to have done more. Here are the top holdings. It does exist. You're right. Here are the top holdings L3 Harris Of course RTX You know it as Raytheon Rocket Lab Elbit Systems Thales Saab So it's international A lot of these are European Kratos Defense Palantir's in this Who else is in this that I know Alright Some of these companies I don't know very well at all And some of them I don't know how to pronounce So I'm pretending that it's not important to read their names. But like, I thought it was interesting that something like that exists when Anderle comes public at probably a hundred billion dollar valuation, it'll instantly be one of the bigger weights in this fund.

36:07Downtown Josh Brown:I would guess that's the one everyone's, that's the one everyone's waiting for. Um, what'd you think of the Bitcoin, uh, reaction to, to all of this?

36:17Michael Batnick:I told you, I was shocked. Uh, month, like Monday morning, this made me feel really good. Like, okay, Bitcoin's up 5%. We're going to be okay. This is not going to be a serious sell-off. And it's hovering at 68 ,000. So the fact that Bitcoin found the bottom and software found the bottom has me feeling pretty positive.

36:35Downtown Josh Brown:I'm going to share a take with you on Circle, which had a nice bounce. I should have made the chart. Huge bounce. I think I asked for the chart, but they didn't get around to doing it. So anyway, Circle had a huge move. And this is from Mizuho, our friend Dan Dolev. Does unstable Mideast help stablecoin? He says Circle shares were up 15 % yesterday, resulting in a 35 % increase relative to SPX. We believe that yesterday's rally was in part driven by the rise in oil prices as Mideast tensions ameliorate. Why is that positive for Circle? Rising oil prices could drive up inflation, lowering the odds of rate cuts.

37:20Downtown Josh Brown:How does it impact Circles revenue? Although more muted rate cut expectations drive just a 1 % increase to our 26, 27 revenue expectations, the 2x increase in right tail risk of no rate cut scenario likely adds more torque. So in other words, if you think there's no rate cuts, and of course, an oil price spike might keep the Fed from cutting rates, circle the stock is the beneficiary. It's a little bit of a Rube Goldberg machine. You have to follow that logic through a lot of twists and turns. I think it's maybe more simple than that. I think it's oligarchs might be more likely to want to plow more of their money into this international digital monetary system.

38:09Downtown Josh Brown:And some of that ends up in circle. or maybe just it was time for the stock to rally. I don't really know, but I thought that was an interesting take. Gold, not much of a safe haven. I mean, it's... Would you have expected a bigger rally in gold as like a risk-off trade Monday morning? So Monday it rallied.

38:33Michael Batnick:I don't know if it hit new highs. It was damn close.

38:35Downtown Josh Brown:That's the thing. It's already at highs.

38:37Michael Batnick:You know what? It's up 100 % year over year almost. It's like, what do you want from it?

38:42Downtown Josh Brown:Yeah. I guess it's like bin pricing in these tensions ever since Trump got reelected. I feel like it's sort of bin pricing this stuff in.

38:52Michael Batnick:And also the distance, I'm just eyeballing this from its 200-day moving average, has got to be, I don't know, a 40-year record. You know what I mean? So it's going sideways. And so, yeah, I mean, it still looks good.

39:05Downtown Josh Brown:Okay. Still looks good. All right. Let's do this thing on internals. Citadel Securities had, I thought, a really interesting piece talking about the record levels of dispersion amongst stocks beneath the market surface. So we were just saying that rotation has been the get-out-of-jail-free card. It's the thing that keeps saving us. Well, the reason you get that sort of rotation is because there's a lot of zigging and zagging going on amongst individual stocks. You should see my trading account.

39:38Michael Batnick:I'm telling you.

39:39Downtown Josh Brown:They're not all acting as one asset class per se. So this is Citadel, and then I'll get your reaction to this. Only 31 trading sessions into the year. The index may appear relatively stable, but the magnitude of sector and factor reallocation beneath the surface, anything but. Retail participation remains historically elevated. ETF flows are at one of the strongest early year paces on record, and liquidity has thinned during episodic sell-offs. At the same time, AI-driven disruption narratives have accelerated repricing across vulnerable business models, which intensifies the rotation. They say over the last 30 days, the S &P 500 is down 1.4%.

40:26Downtown Josh Brown:This is as of last week. While the average stock in the index has moved 10 % in absolute terms, placing the 8.6 % dispersion spread in the 97th percentile over the last three decades. Throw that chart up. So this is what a stock picker's market looks like. That's what you're looking at is the dispersion.

40:49Michael Batnick:The only other two times this happened was in catastrophic markets.

40:52Downtown Josh Brown:That's why I wanted to bring this to your attention. It's so weird. Yeah. This usually happens. So we have a couple of instances of this. It's the year 2000. And it's 2008 and it's now. It's so weird. I don't feel great about that. No, I don't feel good about it either.

41:08Michael Batnick:So for as bullish as I think the stock market is acting, and I say that because don't take like – it's not that I'm bullish. I think the stock market is behaving bullish.

41:18Downtown Josh Brown:I have another chart on this.

41:20Michael Batnick:Hold on. Let me just say this one thing. It's hard for – I think it will be hard for the market to continue to shrug off these blowups. Like they have to slow down. If investors keep believing that AI is going to kill everything and you just keep having these individual names fall 18 % because of a Claude announcement, I think the market can only take so much. At some point, I think we'll see lower prices. But if this can cool off and this is mostly behind us, then I think we're set up very nicely. I said this last week and I'm fairly convinced that everything that's happened since has proved me right.

42:01Downtown Josh Brown:I really do think that there was a conversation between the SaaS industry, which is a huge spending, powerful group of CEOs, and some of these AI platforms. And I think they're finished with these types of shock and awe announcements and allowing the media to run with this narrative. Conspiracy, Josh? It's not a conspiracy. I think there was a dialogue though because they're not doing it anymore. And actually, the last few big like AI platform announcements were made in conjunction with existing incumbent companies as like partnerships. Dude, these stocks fell 60 % and now they bounce a little bit.

42:46I know.

42:47Downtown Josh Brown:But I think the Jensen Wang commentary after the NVIDIA earnings sort of set a new tone, like saying to the business media and the tech media, you guys are getting this wrong. You don't understand. These tools exist and they work. The agents are not going to invent their own tools for no reason. They're going to be trained on the existing products that exist out there. Even if you don't believe that's true, and I'm sure plenty of people don't, just the fact that that's how the AI industry is speaking now is a change in tone. And I don't think it's like totally accidental.

43:24Michael Batnick:So one of our advisors said to me, hey, I've been playing with these tools over the last couple of weeks and I don't think we're going to need company X, company Y, company Z. and my first internal reaction was, if you're able to do something kind of cool, what do you think these companies that you're talking about are doing right now, the companies that you think that we're going to eliminate? You think they're just like, oh, la-di-da, we have no idea what's going on.

43:49Downtown Josh Brown:Yeah, what's AI? Right. Of course. Well, that's the point. That's the point. And it might be case by case. Of course it is. But just like not to just keep talking about my stocks, But like – Take Uber.

44:04Michael Batnick:Like take Uber for example.

44:06Downtown Josh Brown:Well, Uber – right. Uber has been utilizing AI and machine learning for 15 years. But even if you think about Toast for example, Toast IQ is their AI product. They're selling this to a guy standing behind a bar with a rag on his shoulder and an apron. That guy is not like, oh, cool. I think I'm going to make my own.

44:29Michael Batnick:Right.

44:29Downtown Josh Brown:Like Toast IQ will be one of the highest penetration AI products in the hospitality sector. How do I know? Because of course it will be. And so it's not like, and that doesn't mean Adobe's AI will be successful. They want to be a layer for the creators. Doesn't mean that agent force will be, I think it's going to be case by case. I just don't think it's going to be as black and white and as obvious as everyone thinks it will. I just, I can't imagine that it's one way or the other. Either there's no disruption or there's total disruption.

45:04Michael Batnick:They sold these stocks off 60 % in most cases. Yeah. And now we'll see.

45:11Downtown Josh Brown:I agree. Biff Grebel says Toast doesn't need an AI product. Okay. But Toast is the billing and payment system for every restaurant in a Marriott all over the world. That's a partnership with Marriott where they are. So do you think Marriott doesn't want AI-derived insights from their billing and other activities delivered to them? I'm pretty sure they do. All right. Let me – are you done? Last chart on this. Back to single stock volatility. The implied vol spread from now to year end suggests that single stocks will be more volatile versus the index at a degree last implied in October 2008. That's great.

45:51Downtown Josh Brown:Is this the craziest thing you've ever seen? Yeah. Love it. Okay. All right. You're up.

45:56Michael Batnick:All right. NVIDIA. So NVIDIA reported last week and very similar to what happened the last time it reported when we were in Austin. Great report. Beat, raise, the whole thing. Stock can't go up. Now, if you zoom out, the stock is behaving totally fine, okay? It was in one of those stocks that was so extended, three miles above every moving average, and it's digested it really well. But it's gone sideways since August 2025. It's a long – right? So it just bounced at the 200-day moving average, which finally caught up to it. So it's fine. It's not like – nothing to be alarmed about. But I think NVIDIA just might be too big to move.

46:41Michael Batnick:So Turning Point Market Research shares their post-earnings performance since the introduction of ChachiBT. And this is three quarters in a row. Where, like, what more can they say?

46:59Downtown Josh Brown:Every one of these quarters was a great report.

47:02Michael Batnick:Dude, and it's not just, okay, chart off, please. What more can they deliver? And what more can they say for this stock to go up? It's impossible. Now, I'm not saying that it will never, but like the quarter that they just had was the biggest sequential increase in revenue, I think ever. And the guidance was not bad. and the stock still can't find a buyer?

47:27Downtown Josh Brown:It's the biggest stock in the world. And I think this is just plain old, like good old multiple compression. It's nothing fancy happening here. I think it's now a forward PE ratio of 22. You know what?

47:45Michael Batnick:This stock is way too big to trade at a market premium.

47:50Downtown Josh Brown:Yeah, it's too big. and there's nobody that doesn't know about its dominant market share. So I think you have just multiple compression. But then the other thing that you have is like real competition. And I'm not talking about AMD. Like a lot of NVIDIA's customers are now looking to ship their own chips to other NVIDIA customers. Like we're hearing about tensor processing units. They don't replace GPUs, but they maybe make it so that companies don't need as many GPUs. They still will need them. But there are a lot of like inference things that can happen with a TPU, which is significantly cheaper.

48:29Downtown Josh Brown:It's a more narrowly focused thing. It's not a replacement for Blackwell chip or a Rubin. Like no one's saying it's like Coke and Pepsi. But these cloud data centers are going to be somewhat cost conscious going forward. And as things get replaced, they're going to be looking for what are my options? And there are options now in the marketplace. Amazon's working on Silicon. Like it's, so it's not, there's not one big NVIDIA competitor that NVIDIA shareholders need to worry about. There's like 10. And a lot of those would be competitors offering new solutions like application specific integrated circuits are NVIDIA's biggest customers.

49:11Downtown Josh Brown:And I have to believe that that is having an impact on the multiple, on the forward earnings multiple and people just a little, slightly less confident that NVIDIA is going to maintain its market share and its gross margins. Here's the head that I don't love.

49:29Michael Batnick:Blackstone plans public company. Okay. Blackstone plans public company for AI data center buying sprees. So Bloomberg said Blackstone is launching a publicly traded acquisition company that will snap up data centers, giving millions of mom and pop, are we democratizing data centers? Millions of mom and pop investors have a chance to bet on the artificial intelligence boom. And why wouldn't they? I mean, look at this chart of digital realty trust and Equinix versus the index. These data center REITs are working really, really well. But, man, I just don't love this.

50:07Downtown Josh Brown:Can I say the very obvious thing? This is exit liquidity. Well, of course. For the data centers that they're already building or have built.

50:16Michael Batnick:It's only ones that are that are built. This is not no, no contracts.

50:21Downtown Josh Brown:No, I understand. I understand. But like we, you and I went to the, you and I went to listen to, um, B we, we went to listen to them speak. And I think like, what is it? 20 something percent of the portfolio is data center. And they, they are, they are very much an important part of the infrastructure of all of this, on the financing side. And now building a vehicle so that there could be like a shareholder ownership makes sense to be the next.

50:54Michael Batnick:So I know exit liquidity sounds really bad, obviously. And I don't know enough about this just to talk super intelligently. It is my understanding that these are already contracted out, that there are obviously tenants in each one of these things. Yeah, they go to, right.

51:11Downtown Josh Brown:They're building it. They finance it. they're building it and meta kicks in money on the equity side and meta signed something saying that they're going to be um utilizing it for five years or for 10 years it gives you the confidence to want to build one of these things the pro what's really interesting is that there's like a scarcity play here almost like cell phone towers nobody communities do not want new cell phone towers even if you tell them it's going to make their uh it's it's going to make their 5g work better or whatever. People don't want it. People do not want these data centers. They're coming out and voting against them.

51:50Downtown Josh Brown:So it is an important asset, and there is a scarcity value. They can't just throw them up as quickly as they were. Yeah.

52:00Michael Batnick:So this is a nice segue to be cred redemption. So you know how somebody could be right for the wrong reason? You could make money even though your thesis was incorrect. I think I was wrong for the wrong reason on some of these alternative asset managers. And what I mean was, I think, not I think, the reason for, now there was obviously smoke, right? It started with, we don't need to do all the history of this, but it started with things that I thought could be hand-waved away. Oh, this makes sense. This is understandable. This is not news to anybody. Oh, this is an isolated incident. And then all of a sudden, it was the software stuff.

52:37Michael Batnick:And that's it. But so I sold Blackstone today and I probably sold it for the bottom. I was telling Ben, listen, I think that the sale that I did at Blackstone is going to look really stupid in, I don't know if it's six months or two years or whatever, because these are predictable fee-related earnings. But whatever, it doesn't matter. So this is my trading account. This is my don't lose money account. This is not like my get married to a losing stock account. So I'm just not interested in the headache because right now the sentiment is so bad on these alternative asset managers. And I think it's going to stay there for a while, rightly or wrongly.

53:14Michael Batnick:Like whether or not the fundamentals deteriorate to catch down with the news, I don't know. Nobody does. But I don't even think that matters because so long as investors want more money out than they're putting in, these stocks are going to be under pressure. um they have john gray on cnbc today uh from blackstone this is like the full court press now

53:36Downtown Josh Brown:they are all and it's not just blackstone all of them they're sending their thought leaders out to do as much media as possible you're seeing these guys pop up everywhere seeing them on tv on bloomberg you're going to start hearing more of them on on the podcasts and uh i look i i wrote this thing last fall or last summer why would you buy any of these bdcs or these illiquid vehicles just be an l just be a a gp like just own the equity well that didn't work out well either well turns out neither neither of these things are good but what's so interesting we haven't

54:15Michael Batnick:even seen the cycle hasn't even turned like the portfolios um i'm using air quotes are fine there's no the fund when they keep saying the fundamentals are fine the fundamentals are fine nobody cares if the fundamentals are fine today. Because B-Cred, for example, 26 % of their portfolio is in software. So yeah, there might not be stress today, but these middle market software companies are doing 250 or$300 million of EBITDA. You don't think there's stress? Are you kidding me?

54:41Downtown Josh Brown:Sometimes my cynicism keeps me out, keeps me from making money. But I find that more often than not, my cynicism when I see a gold rush and I see an activity bubble, I just in my head I just call bullshit on it at first glance and sometimes I'm wrong of course but like in this case I was right I just saw like like whole teams of RIA people being flown into New York City and wined and dined so that like the employees of these RIAs could be taught how to sell a private credit fund and I'm just like who does that if the product's any good like it shouldn't need it a great investment doesn't need to be to be sold that way through there's there's nuance there though because i know of course there's always nuance but but as but i'm generalizing for a reason yeah when i see that level of full court press making unsophisticated yokels get on get on a plane come to new york take them to like a yankees game and then like put them in the penthouse office of one of these companies for like the timeshare pitch, how could that possibly be a good outcome for their clients?

55:59Michael Batnick:You are right. You are 100 % right. And also in 2022, the bond market had its worst year ever, basically. Like no bond investor has ever seen a year like that. And so we had this really weird environment where you had increasing interest rates increasing very rapidly and sort of unbelievably no credit deterioration. So with private credit, investors got the benefit of higher interest rates without the duration and no credit losses. So private credit did amazing in 2022, did amazing. And these asset managers, they said, we have to strike. The iron will never be this hot we will never ever have this opportunity performance correct dude i was at delivering

56:50Downtown Josh Brown:alpha which was at the glass house the cnbc event and it's like i don't even know what like i don't even know the audience is weird it's like uh it has a lot of retail investors but then it also has institutions and then there were like hedge fund people i don't know but like the guys walking around like they just won the super bowl private credit were all private credit guys and they were strutting around. I never even heard of these people. They were getting out of like, um, they were getting out of like black Yukons out front on 10th Avenue with, with the tents. And they were just walking around.

57:26Downtown Josh Brown:Like they just invented a cure for cancer. And I really, that was the first inkling that I had that, Oh, all right. Something has changed because my entire career, nobody cared about this asset class. They were like keynote speaking their asses off. And that was 23. So that's almost three years ago. That's the spring of 2023. And they were selling past performance basically. But in the end, credit is credit. I don't care if it's held privately or publicly. And these are all great firms. They're not bad firms. I'm not saying they're bad products. The fundamental flaw is they're presupposing that they can teach financial advisors and their retail clients to act like they're on the board of a hospital.

58:15Downtown Josh Brown:It's never going to happen. Correct. Sorry. Correct. It's never.

58:19Michael Batnick:Correct. Okay. And also, before we get to the B-Cred thing, let me ask you this. Do you think that in three years, private credit will be bigger than it is today, maybe substantially so, or we're going to look back in 2025 and be like, can you believe how drunk people were?

58:35Downtown Josh Brown:I'm so glad you asked me that question. Ironically, if you're an investor in private credit, what's going on now is the best thing that could possibly happen. Get rid of the weekends. Because the valuations, the valuations, the marks, this is private credit and private equity. Panic in the private markets will create better opportunities prospectively for new dollars going into the asset class. When you have less competition bidding up or putting out loans at pricing that's just like, right, like the pricing on some of these loans is like no margin of safety. It's tightrope walking. And that has to work itself out.

59:19Downtown Josh Brown:And I don't know how long that takes. So we're going to see.

59:21Michael Batnick:We're going to see. So my suspicion is that private credit will continue to grow in size, but we are going to see what these portfolios are really made of. You know what? We'll put a pin in this. We'll get to Mark Rowan in a second. Let's talk about B-Cred.

59:33Downtown Josh Brown:So I want to show people, Like there's been no problem here. This is a table of the historical net asset value of B-Cred, which I think is the – is this the largest? Yeah, it's$80 billion.

59:45Michael Batnick:Now listen, this is not private equity fake marks, okay? These are loans. So yeah, they're not liquid. I mean they're not going to be marked every day. They shouldn't be. But this is like – this is legit. The NAV fluctuates.

59:57Downtown Josh Brown:The NAV is fluctuating like 30 to 40 cents per quarter. It's stuck right where it should be. And then there's a yield on this. Yeah, it's real. It's a bond. But like, it is remarkably stable. Now, the cynic would say, so far, wait, okay, fine. We'll see. Right now, they're doing their job for their investors. I want to also show the growth of$100 ,000. Real money has been made in this space. Yeah. And Michael is right. In 2022, when people's publicly traded bond portfolios, including treasuries, got absolutely murdered, this did act as a safe haven. Now, if you hate these people, then the thing that you could say is, yeah, they cheated.

1:00:43Downtown Josh Brown:They never moved the valuation because there were no transactions and they got away with it. I personally don't think that's the case. That's the whole point. It's loans. It's illiquid loans. I'm making this point. In a lot of cases, it's not syndicated. It's a bilateral agreement. I'm a lender. Michael's the borrower. He and I decide what it's worth because if he – so long as he continues to pay and perform and I'm not selling it to anyone else, the loan is worth what I say it is. And that's the nature of the – it's the difference between publicly traded bonds where the whole market is a verdict.

1:01:21Downtown Josh Brown:Yeah. Or a syndicated loan where you have 40 different buyers and they all end up in court for three years to work something out. In this asset class, it doesn't work that way. And I don't think people understand that nuance. All right.

1:01:36Michael Batnick:So I'm so curious to see where this goes. If the fundamentals do deteriorate and you start to see some defaults pick up, oh, my God, the press is going to have a field.

1:01:44Downtown Josh Brown:All right, so the reason we're talking about this today is because it came out that investors pulled 7.9 % of their – here, redeem a record, 7.9 % of shares from the B -Cred private credit fund. Now, I thought what Blackstone did was a great move. They have a cap where they could say no more than 5 % in any one period of time. and they said, no, you know what, actually, no problem. Here's everything. And that kept the people pulling some of their money out. Well, everything is 7%.

1:02:23Michael Batnick:It's 7%.

1:02:24Downtown Josh Brown:That's what they named. So they said, here's 7.9. No problem. No cap. We got you. That's number one. Number two, they actually had inflows, not on a net basis, but they said$2 billion in new money came in, came in at the same time that three points. So they had 3.7 to sell. People wanted out, but 2 billion to buy. And so the net was a negative number. Ooh. But the other power move they made is they say$400 million worth of the buying came from employees. So employees of BlackRock, maybe they'll be judged on this come bonus time. did they put up or shut up? But like, I find that to be an admirable solution.

1:03:14Downtown Josh Brown:And they said, if anything, this aligns us even more with our investors. Our employees are buying into the fund.

1:03:22Michael Batnick:I thought that was super dope. So I took a 30 % loss in the stock. Won't be the first or last loss that I take. But I think it will look foolish in hindsight, but that's okay. I'm fine with that.

1:03:32Downtown Josh Brown:I mean, this stock is a falling knife in fairness.

1:03:36Michael Batnick:I usually catch falling knives. Now I'm selling a falling knife. Play the first. Let's hear from Mark Rowan, one of the adults in the room. It's kind of slightly riskier on the face of it. Lending has been outsourced to professionals like you and to people who know what they're doing. The worry is that suddenly you're now getting, in Britain we call Aunt Agatha, coming into these markets. There's more worrying. Look, we're going to have a correction. But it's no different than the correction that's happening in banking. If you look in banking, the dominant banking institutions of today were not as dominant pre-crisis.

1:04:08Downtown Josh Brown:Those that sat out the subprime lending have arisen and become magnified in terms of their fortress balance sheet and market share because they were good managers of risk and good managers of underwriting. I believe the same thing is going to happen in investment markets.

1:04:23Michael Batnick:Investment markets, people made choices. If you wanted a higher dividend, you could take more risk. You could lend to smaller companies. You could do more pick. You can invest in equity and preferred, not just first lien, and you could run with a lot of leverage.

1:04:35Downtown Josh Brown:That felt really good on the way up. That's not going to feel so good on the way down. And there are companies of which we are one, but not the only one, who went all first lien, who went almost all cash pay, who went large companies, who work with low leverage.

1:04:50Michael Batnick:I like where we sit. And Jamie Dimon said it. There's always going to be fraud. There's always going to be underwriting mistakes. But the question is, who's a good risk manager and who's not a good risk manager?

1:05:02Downtown Josh Brown:If 30 % of your portfolio is in one industry and that one industry is being impacted by technology, you have not been a good risk manager. Pretty good. Some of these stocks are going to set up generational buying opportunities. They're not all going to be blue owl and they're not all just going to keep going down and down and down and down. I do think that the portfolios of these companies, both on the equity and the credit side, they got a lot of stuff that people don't want. There's a lot of software. There's a lot of commercial real estate. There's a lot of stuff that people just do not want.

1:05:42Michael Batnick:This stuff, the headlines are going to continue to get bad. They haven't even started to get bad. And the outflows, unfortunately, have probably only just begun.

1:05:53Downtown Josh Brown:To your point, for all this talk, B-Cred's performance, 9.8 % annualized total return since inception.

1:06:04Michael Batnick:Yeah, it's been great. And guess what? Almost no defaults.

1:06:07Downtown Josh Brown:They've done a great job. Yes, yes. And we already are hearing panic. Right. I mean, I agree with you. I think that's why I'm not like, I'm buying Apollo. I'm buying it. eventually you will hear me do that. I don't know when that's going to be. You're damn right I'll be back.

1:06:26Michael Batnick:You're damn right I'll be back. All right. Let's do the – What are these IPOs? It's enough. We could skip it. It's too much already. All right. So I've got a pretty – I've got a pretty – Wait, are we in Make the Case? Yeah. Yeah. This is a very tepid Make the Case. So I was – I've been noticing, as I'm sure you have, like is New York City back? and I'm just talking about just based on the train station. Dude, it is packed early. I took a 715 train the other day. I was like, are you kidding me?

1:06:58Downtown Josh Brown:I think economic anxiety is back and people are showing up, showing their faces in their offices more. I don't think that's an economic story. I think it's a labor market story. People are worried about their future.

1:07:11Michael Batnick:Okay, very well could be. Very well could be. Look at, throw this chart up of SL Green's occupancy rate or vacancy rate rather.

1:07:21Downtown Josh Brown:going in the right direction I don't know if this is the same number of oh it says same store so it's the same amount of buildings we're tracking look anecdotally and because I have inside information from Barry Finkelman who is the commercial realtor to the stars in New York City Barry explained this to me very well three years ago and it enabled me to know what I was talking about because I don't really know this market. But the way that Barry explains it, there was a flight to quality after the pandemic. All of the biggest and best companies, not just public companies, law firms, accounting firms, they wanted to be in the best buildings because they recognized they needed more amenities and nicer scenery to keep people coming into the office and almost like reward them for coming into the office.

1:08:14Downtown Josh Brown:So that flight to quality, it wasn't just about class A buildings in the best neighborhoods. they wanted to be in the top third of the stack. They wanted to be upper third of these buildings. The best views. So it's top floors in top buildings. Those rents are all$250 a square foot like nothing ever happened. The real knife fight is in class B, is in dilapidated 1960s buildings with low ceilings. Nobody wants that. I know, that's the real knife fight, but that's not the SL Green portfolio. SL Green's all A. So I almost – SL Green is one Vanderbilt and I think one Madison, which is Madison Square Park.

1:08:58Downtown Josh Brown:It's the best, most brand-new towers.

1:09:00Michael Batnick:So I thought – I suspected that SL Green was under pressure. I thought it was a big Mom Donny thing, like less demand. All of these office real estate – all of these office streets around the country are getting murdered. It has nothing to do with Mom Donny. I thought that was interesting. Anyway, I'm not making the case for this, although maybe I should have. I'm making the case. I actually bought the stock today. So I sold Blackstone and I bought DraftKings. And let me take you through my thesis.

1:09:27Downtown Josh Brown:Why are we talking about commercial real estate? I'm lost.

1:09:31Michael Batnick:I almost made the case for Esselet Green, but I didn't. I'm making the case for DraftKings. So we're doing your B-roll and then we get to the A-roll?

1:09:40Downtown Josh Brown:Okay, got it.

1:09:40Michael Batnick:You should have seen it. I had a whole thing on Esselet Green. I said, you know what? I don't want to do this. All right. Now that's conviction. Nope, because a lot of the fundamentals don't really look great. Anyway, all right, DraftKings. Thank God you were never a stockbroker. DraftKings. Yeah, I have no conviction. I starved. You would have starved. I have no conviction. I should have said, yeah, you probably should sell stocks. It's not really that great. All right, DraftKings. I think DraftKings is in the same position as the software stocks in terms of software is under siege by AI. and DraftKings and FanDuel are under siege by prediction markets.

1:10:17Michael Batnick:And I think it is way overblown. Way, way, way overblown. So let me take you through this.

1:10:24Downtown Josh Brown:You're going to be wrong.

1:10:25Michael Batnick:Go. Oh, yeah? I'm only looking for 12%. So shut up.

1:10:28Downtown Josh Brown:Well, now I couldn't help you with that. All right.

1:10:29Michael Batnick:So DraftKings, the stock fell 60%. It fell from like 50-something down to 20. It was – so this is not a great business. Let's be clear. This is not a good business. and it was trading way too richly. It was at six times sales earlier in January, 2024. Nobody wants it anymore. You can't give it away. It was under one. It was under two times sales. All right. In their most recent report, and their CEO is a real guy. He said, we are not seeing a discernible impact from predictions on our revenue. So there's chart on. We're looking at leading prediction operator versus regulated sports book. I kind of don't believe these numbers.

1:11:07Michael Batnick:There's probably something in the fine print because this makes it look like there's no impact whatsoever. Everybody knows or everybody thinks that the prediction markets are going to take a huge bite out of these companies. They cleaned up their stock-based comp in a big, big way, which was totally out of control next chart. As a percentage of revenue, it has gone in the right direction. They finally had a positive gap quarter. Their operating income is going up and in the right direction. And next chart, I think I found the short-term bottom. So I don't love that I made the case for this, but I just think that it's way overdone.

1:11:46Michael Batnick:I don't believe the prediction markets are going to destroy DraftKings and Fandle.

1:11:51Downtown Josh Brown:No, I think it's actually worse than that. They destroy their own customers. DraftKings. All of them. Yeah. This is f***ing terrible. I never would... So I know you're trading and you probably make some money. I would never invest in companies that are bad for, that are like fundamentally like they need to, the cost of acquiring a customer is so high in part because they have to keep acquiring customers because everyone gets burned. Nobody's a winner. Nobody gambling on sports for a year is up. Sorry, they're just not. So the higher usage of the platform, the worse off you are as a customer. It's a shit business.

1:12:34Downtown Josh Brown:and it's not there is no comp there's no do not compare these to the the brokerage stocks the people who have had accounts of charles schwab for 20 years are significantly wealthier all right he's already done listen to say that i will not be able to say that about any of these and now there's this free for all but that number's bullshit the prediction markets have only taken one percent market share no way that's true i don't know how they're measuring that that can't be right. We just use your brain. You know, it's fake. And then consider how much competition there is, not just from the prediction markets.

1:13:11Downtown Josh Brown:Like now you have fanatics is in the fray. All the casinos are using this as a lifeline because they're losing money.

1:13:18Michael Batnick:FanDuel and DraftKings have 80 % market share. Listen, I said at the outset, in my defense, this is the worst make the case I've ever made in my life.

1:13:24Downtown Josh Brown:All right. That was super bullish. I loved it. Let's do a mystery chart. Um, pop me up. Okay. We alluded to a commodity tonight, um, during the show. And this is the publicly traded company that is most associated with that commodity. And I thought of this as a really obvious buying opportunity. If that, uh, trendline, uh, test were to hold newmont you know what it is say it newmont you are the smartest man alive round of applause for michael well i mean that was that was the first guess well no i you could have gone oil could have gone bitcoin i don't know what do you think about this what do you think about this

1:14:10Michael Batnick:you don't trade these types of setups no no uh no it's too easy it's too easy to yeah

1:14:18Downtown Josh Brown:I love that. I love what, put it back up real quick, guys. I love when a stock hasn't revisited its uptrend in a long, its moving average in a long time. And then it falls in there on a completely exogenous event that has nothing to do with the company. I feel like this is a super low risk, super high reward if you set your stop right. Why wouldn't everyone trade this way? I truly don't get it, but I don't know. It had a big downward flush today. recovered about half of it intraday. I feel like this is what people should be doing when they are short-term trading.

1:14:53Michael Batnick:People think that they either missed the move or just my luck, I'm going to buy it and it's going to stop working. That's just how people think.

1:15:00Downtown Josh Brown:That's why the stop, I agree. I agree. If only people understood you want to buy dips in stocks in powerful uptrends and you want to buy retests of the major supportive moving average. If only people did that, they wouldn't have to be on Flutter or whatever the f**k betting on nonsense that's literally impossible to win at. Like if only people understood there's actually a rhyme and reason to how consistently profitable traders operate. All right, I'm short on DraftKings, so you convince me. But they won't listen. Okay, guys, thank you so much for listening. My favorite podcast, Michael and Ben's Animal Spirits is on tomorrow morning.

1:15:38Downtown Josh Brown:The podcast app of your choice and YouTube later in the morning. Don't miss that. We have an all new Ask the Compound later that day with Duncan and Ben. And of course, an all new edition of The Compound and Friends at the end of this week. New guest for us. And we're super excited to bring this guest to you. Thank you guys so much for watching, listening. Thanks for all the likes and the subscribes. We'll talk to you soon.

1:16:15Michael Batnick:Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.