The Joby bull case with Charles Lemonides, Roaring 2020’s with Ed Yardeni, Alphabet vs Nvidia

27:34Your firm is called ValueWorks. Traditionally, most people don't equate value with investing in flying cars. So I wanted to ask you to talk a little bit about how this fits in to the type of investing that you guys do. And like, how does your investment process work to the point where you buy Joby and you say, we're going to hold this for multiple years, despite the fact that there are no like traditional value metrics that make sense yet? Well, yeah, I rebelled against the label value investor early in my career because I never thought. Luckily for you, because it hasn't gone well. Well, I did eventually turn around and settle on the name ValueWorks for my firm because initially, you know, my sense of value meant you buy lousy businesses cheap.

28:24Yeah. And you simply ply your craft in the bottom half of the valuation continuum, trying to find something that isn't really terrible, but is priced really terribly. You know, what I do is actually try to find things that are really exciting growth stories, but are trading at an attractive valuation. Our tagline is quality assets, compelling valuations. Quality assets, compelling valuations. Right, right. And how you determine valuation is always a little bit specific to a company. Why did I think Joby was attractively priced when we stepped into it? Well, they had two-thirds of the share price in cash, and they had invested that amount again in building their product up to the point they had done it.

29:12So I was getting in at a very significant discount to what they had already invested in building this thing. And I think that eventually building this thing will be a money-making proposition. So we're sort of doing the same thing in Rivian today. You know, they've invested$30,$40 billion in getting their business to where it is right now. And I say invested, some of that's operating losses, but it's still money that had to be spent to get here. And if getting here is a good thing, then being at a discount to what was spent to get here is probably cheap. I'm seeing the Rivians on the road. There were probably 20 of these EV manufacturers that came along five years ago.

29:54Most of them are gone. But the Rivian like sort of caught on. It worked. It worked. They're selling 50-ish thousand a year at the high end. I drive one. I think it's a good car. And I think that, you know, the barriers to entry to the next guys are going to be pretty harsh because there have been a couple that have gone broke. And the value of those cars has evaporated. Of course. And, you know, if you own a car and the manufacturer goes out of business. Not great. Especially if they've only built 20 ,000, 30 ,000 over their lifetimes, right? Right. I mean, if Tesla would go bankrupt tomorrow, someone would figure out how to service your Tesla.

30:33Right. Right? If that company wasn't there, there's so many of them on the road, someone would service it. Right. When it comes to any other EV maker, you know, if they're out of business, your car is worth of paperwork money. So listening to you talk about Carvana and Rivian and Joby, I wouldn't use the term like broken growth stocks. but maybe like the right way to think about it is companies that have made big infrastructure investments in their own future, but then other investors have given up. And that's when you get interested in taking a look because, Hey, look, they already spent the capital.

31:09They already built the thing. And the thing is there today. And the thing is working as may not be working as well as you. It's a really interesting strategy because most growth investors, when everyone else gives up, they give up too. Oh, right. And sometimes you're right to give up because sometimes the business is a fail. But if the business is not really a fail and they're just out of favor at this moment and they've just had hiccups, look, we own Instacart also, which I think fits right in that role. Oh, yeah, perfect. Right. I mean, I think they're a leader. I think they've built their business.

31:40I think it cash flows nicely. And I think people have moved on because of whatever number of reasons. Okay. Including DoorDash being a tough competitor. So you think 2026 will be transformational for the eVTOL space because finally there will be a commercial service, even if it's just a handful of these around the world. There will finally be a cash flow attached to each vehicle. They'll lose money, but so what? It'll represent the start of people exchanging money to ride in them. And that's like a major turning point. And the growth opportunity is pretty darn massive because. How big do you think this space could be?

32:21You know, they're going to be doing tens of billions of dollars worth of sales seven to ten years from now. It's going to be a big deal. Is that the reason to get in now? Is the chance that it works is the reward is great enough to justify the risk of it not working today? Absolutely. And to fine tune it too much, you know, this price is right and that price is wrong, could be a very big mistake. Is there a hurdle for you to add other names besides Joby? Like, what's the deciding factor? Is it more about your own portfolio and not wanting to have too much exposure to the space? No, I don't wouldn't mind having another name in the portfolio.

33:00The valuations haven't been there for us. We looked at Blade long and hard as a business. And, you know, the valuation never made sense. We never made the same value argument. We don't make the same value argument with Archer. We don't make the same value argument with Eve. You know, we do make that. We don't make the same value argument with Lucid. I think Lucid is, you know, one of the ones that might not work. Yeah. But we would, you know, we have our eyes out for other ideas. You know, we walked the Dubai Air Show and kicked tires at a whole bunch of different places. And it wasn't just because we wanted to be sure we were right about ours.

33:37Yeah. It was because we were looking for other ideas. Of all the holdings in your portfolio, what do the value works investors get the most excited to hear about? Is it this? A lot of people like Rivian and Offalaya a lot. A lot of people like Instacart a lot. They don't love Spirit Aerosystems, but they're being bought by Boeing, and we're getting at Boeing really cheap when we buy that. Nobody likes office property investors. That's a dead instrument we own on office properties. Yeah. And it's being a bit bumpy right now. But do you use that as a signal? Like in terms of like, maybe people are too excited about this and too pessimistic about that.

34:19Or do you try to tune that out and just focus on the value? You know, I think you make a mistake when you put too much emphasis on whether there's enthusiasm for it today or not. You know, you don't want to focus on like, oh, I'm buying it at the high and that's bad. Or I'm buying it at the high and that's good. You want to focus on, I'm buying it at this price, and the stuff behind it is worth this amount. And that's either more or less. And the stuff is either going up in value or going down in value. And stay with that. And look, yesterday's price is not a good indicator of tomorrow's price.

34:52Well, fair point. I think we can leave it there. Charles Lemonides of ValueWorks. Is ValueWorks.com or where can we go to learn more? ValueWorksLLC.com. valueworksllc.com. Charles, thank you so much for coming. We'll keep in touch with you on Joby, and hopefully we'll have you back. Thank you very much. Total pleasure. All right, guys, thank you so much for listening. Thank you for watching. Smash that like button, and we'll talk to you soon.

35:39Okay. Ladies and gentlemen, welcome to your favorite live stream, podcast, what have you, on stock market, the economy. My name is Downtown Josh Brown. If you're here for the first time, my co-host is Michael Batnick. Michael, say hello to everyone.

35:56Michael Batnick:Hello. You know, this is more your beat than mine. I usually don't do this, but I got to say, I think we're doing some of our best work. Like this really is the best show in the world. I said it. There we go. I'm comfortable. It's true. I appreciate the degree to which you believe in what we're doing here. Guys, the live YouTube last week hit a record. Josh, it took a while, but I'm coming around. You're finally with us. All right. Guys, we hit a record number of viewers live, I think, last week. I see the chat is full today. Say hello to a couple of people real quick. Chris Hayes is back. I see Georgie in the chat.

36:29Riley Anderson. Kelly SF. What's up? Wildcat Creek Cattle gave us the P sign. How are you? Everybody's talking about my quarter zip. This is how I always roll. I know it's trendy now. I've been wearing quarter zips for at least 25, 26 years. So this is not me being on trend. This is just what I am. Joe Altomoro says, what's up, Pounders? What's up? All right, we have a sponsor. Let's do a quick shout out. Betterment Advisor Solutions. Michael, tell us about Betterment.

37:01Michael Batnick:That's right, Josh. Today's show is brought to you, in fact, by our sponsors at Betterment Advisor Solutions. If you happen to be thinking there's got to be a better way to grow my RAA, you're not alone. With Betterment Advisor Solutions, we do the heavy lifting so you can focus on what matters most, your clients. From improved service that makes asset transition smoother to fast paper-free onboarding that delights clients on day one, we've built a digital-first platform designed to streamline your operations and make life easier. Now, if you're thinking, wow, they take the paper out of paperwork?

37:31Michael Batnick:That's right. Grow your RIA your way with Betterment Advisor Solutions. Learn more at Betterment.com advisors. Betterment.com slash advisors. Come on now. Investing involves risk, performance not guaranteed. All right, Michael, there's something he wants to get off his chest real quick about the Warren Pies episode that we did last week. What did you want to say? All right, getting off my chest is a bit strong, but I'll say this. Had you asked you and me and most people at the end of Thursday, after a day where the NASDA, I'm sorry, the S &P gapped higher by 1.5%, closed down by as much. Very unusual.

38:09Michael Batnick:On great earnings, I would have said, yeah, probably we go lower the next few days at a bare minimum. If you told me that the next three days, the market would take back all of the losses, that you would gain 3.5 % and have the best three-day session since May, I probably wouldn't have believed you. And the market, If you're not humbled by this market, you're a psycho. I'm so glad you said that. And while I talk, just put up this chart that illustrates this reversal. It's unbelievable. So like we're looking at the last few candles, the last few days. That big red one is Thursday. Chart off. So the point is we're talking with Warren Pies on Thursday morning.

38:47The show is going to air Thursday, the next day, Friday. and we have no way of knowing that we're going to have a gap up, a crash, and then the following day we're going to start gaining most of it back. Very difficult to do a market-related show on any sort of delay. But we sort of got bailed out. Ooh. Is that? Who could that be? Oh, my goodness. Wow. We have living legend Ed Yardini in the house tonight. This is so exciting. You know, it's such a coincidence that you stopped by because we were going to talk about your research over the weekend. And it's so much better to have you here to do it.

39:32I want to add, if you don't mind, without making you blush, I want to give you your flowers. I was I was saying this weekend to a couple of people and I said to you as well, of all of the research that I read, and it's pretty much everybody. buddy, you have been the most consistently right in the post-pandemic period talking about this roaring 2020s concept. And it's almost note perfect the way it's played out. And I think you drew that parallel between the Spanish flu of, I guess, 1918. Okay. And then the recovery from that leading into this roaring 2020s. And they had back then the radio and some other technologies.

40:15Of course, we have AI, but it's just been remarkable and you've stuck to it. You never declared victory. You never said, all right, I got it right. It's over. You've been sticking with it and it sounds like you're sticking with it for 2026. I'm definitely sticking with it for the rest of the year and going into next year. And then through the end of the decade, I'm talking about 10 ,000 on the S &P 500 by the end of 2029. And that's only likely to happen if the economy remains resilient, as it has for the past several years, absorbs shocks remarkably well. And that'll only happen if earnings are remarkably strong.

40:59So that's my base case. I mean, I can see alternative scenarios. You know, I'm not saying that things can't go wrong, but I have been seeing a lot of similarities with the 1920s. 1920s ended badly. I don't think this is going to end badly. I think I'll be talking about the roaring 2030s. So no rest for the weary. From your lips to God's ears, roaring 2030s. We'd be very happy with that.

41:25Michael Batnick:To what do you think the economy owes the stock market for its resilience? Is it a combination of the hyperscalers as well as fiscal accommodation? Like we've had so much shit thrown at us over the years. And we just continue to grind through. Not perfect, of course. There's pockets of weakness. You don't have to squint too hard to find them. But by and large, in the aggregate, we're going up and to the right. Yeah, I think there are a few reasons why the economy has been so resilient. We had a terrible, great financial crisis back in 2008, 2009. We did restructure the banking system. system. The credit markets develop some very important shock absorbers like the funds that are always looking for distressed assets.

42:20When a private credit blows up, it blows up in a diversified portfolio. So somebody's going to get a haircut on their rate of return, but it's not like the banking system suddenly goes into a credit crunch. So I didn't think we'd have a credit crunch. And we didn't. We had a financial crisis in 2023 that lasted, what, about one Friday? And then by Monday, it was - Yeah, weekend. Yeah. The Fed is really good at playing whack-a-mole in the financial markets and throwing liquidity in the Fed put. They've kind of become real masters of the Fed put. But the other important development, which I think I got was the, and I have an inside track on this.

43:00I'm a baby boomer. And the baby boomers are, all my friends are retiring. I'm not. I'm still working for a living. I got five kids and still helping them out. But my friends who had maybe two kids are young adults. They're all cruising around now. They're going to restaurants. They're checking out their health care provider just to make sure they can climb Mount Machu Picchu on their next vacation. And they're spending money. They have$80 trillion of net worth. Just your friends. Just my friends. So they're not bothered by higher interest rates. They love them. Are you kidding me? They absolutely love them.

43:42And they love the fact that they can't spend money fast enough because as they're spending the money, they keep looking at their net worth and it keeps going up with the stock market. So, again, it's the wealthiest retiring generation ever. And by the way, from my observations, a lot of my friends are helping their young adult kids with things like mortgage down payments, mortgage payments, helping out maybe with the grandchildren's after school activities. So a lot of that just isn't really being captured by the standard talk about, you know, there's only one kind of consumer and not really understanding the varieties of consumers.

44:20And then, as you mentioned, I've been talking about the digital revolution. The digital revolution started in the mid-60s with IBM mainframe, and it's evolved to the point where we now have AI. To me, AI is just an amazing application. It's kind of like, you know, we had Word and Excel back in the late 90s. And once everybody used them, it was like, is that all we have? Well, along the way, we've got a lot more applications. But AI is an application that lends itself to just about every business and all of our personal lives. And I think it's just kind of starting. And, you know, technology is something where you can rent.

44:59I mean, when you go on the cloud, you can rent Microsoft Office now and you don't have to upgrade it. You can have one IT person working remotely. So all these factors have been very conducive to the resiliency, the economy. And oh, by the way, we do have a rather large federal deficit. And I've been telling people, I'll worry about it. I'll worry about the debt. I'll worry about my friends, the bond vigilantes. I'll worry about all that when the bond vigilantes worry about it. Right now, the bond yield is 4%. It's pretty calm. Yeah, we heard a similar sentiment from Steve Eisman, who basically said, I'm on Wall Street 35 years.

45:38I've been hearing about bond vigilantes the entire time, the deficit. I'm sure it'll matter one day. It's not going to stop me from investing today.

45:47Michael Batnick:Hold on, Ed, you invented that term, did you not? That's correct. Bond vigilantes. Yep. So that's how long people have been worried about the bond vigilantes. I have a shelf just on my bookcase just devoted to books from the 80s and particularly in the 1980s. Things like, you know, Living Beyond Our Means, The Debt Bomb. I mean, when I wrote my piece in July of 1983 and introduced the concept of bond vigilantes, I said they're worrying about$250 billion in annual deficits. Now we're talking about one and a half to two trillion. Yeah. I want to go through some of the specific things that you said to set up this roaring 2020 scenario.

46:31And I guess – and I have your charts. So I'll set you up and you could explain what we're looking at in the chart. To start with, S &P 500 operating earnings rising from$268 per share this year to$310 next year,$350 in 2017,$400 in 2028,$450 in 2029. this will require the S &P profit margin to rise to record highs in the coming years in response to faster productivity growth. And John, I think we have that as figure eight. If we could want to pop that on screen so Ed can react to it. Yeah, that's it. Yeah. I just wanted to show that I think, admittedly optimistic, but I think a realistic scenario that could get us to the kind of earnings level that would justify the S &P 500 climbing to 10 ,000.

47:26I think by 2030, which gets us into the next decade, we'll get up to$500 a share. The market discounts, it looks forward. And if the market gets kind of as optimistic as I do, and in 2029 starts looking forward to the new decade, I think we'll be discounting something like$500 a share in earnings. And you multiply that by a PE of 20 and you get 10 ,000. Yeah.

47:55Michael Batnick:And where do you get those numbers from, those operating earnings? Well, basically, I extrapolate what the growth rate of earnings has been in the past. And it's usually, you know, six, seven, eight percent is the kind of trend growth that we have. And the question is, is it going to be six or is it going to be eight? And, you know, I've got more of the optimistic side. So, you know, I start out with a projection of revenues. Then I come up with earnings and I look at what the implied profit margin is and say, well, is that reasonable? And so I think this is a reasonable scenario. And again, I'm not trying to pretend that things couldn't go awry, but so far, so good.

48:37Figure 10, John, forward PE of the S &P will range from 18 to 22 over the rest of the decade. I feel like there's a portion of the investor population, mostly professionals who just feel this like almost magnetism toward a 15 PE, a mythical PE that of course we could see it. We had, we temporarily had it in 22. And if we have a recession, you'll definitely get it again. But absent that, like 18 to 22 seems to be like the new standard range. And I hate to say it out loud because that's probably... We don't want to use that curse. We don't know what it is. Permanently high plateau. We don't want to say things like that.

49:26You know, this time it's different. But look, it all depends on what you think about the prospects of a recession. The economy since the beginning of the decade has absorbed a lot of shocks, as I said. The pandemic was immediately followed by a two-month lockdown, causing a two-month recession. The two-month recession was followed by social distancing, which affected services. Social distancing then was followed by, well, we had a war. Russia attacked Ukraine. So in 2022, 2023, we had a spike in inflation because of the war and because of supply chain disruptions. The The Fed came in and went from zero to 550 basis points on the Fed funds rate.

50:10Everybody said that's definitely going to cause a recession. I disagreed with that. I said the Fed's going from zero, which was the abnormality. Five and a half percent wasn't the abnormality. And I kind of took a stance that the economy would be resilient. And then what? Well, then nothing happened. And no recession when the Fed raised interest rates. And now we've had tariffs. So we're testing the Smoot-Hawley thesis, the idea that this is going to end badly the way the 1920s ended, which was really something that happened in 1930. And here we are with the economy at an all-time record high.

50:47The challenge today, of course, is the labor market. Kids coming out of college are finding it very, very hard to find a job. I think part of that is AI. The baby boomers are retiring, but not at 65. They're kind of hanging around, and that's creating fewer maybe job openings. But whatever is the problem in the labor market, I think the fact that GDP has been so strong is proof positive that we're kind of in a productivity boom. And that's the whole thesis of the roaring 2020s, like the 1920s, is that there's a technology-led productivity boom, which generally speaking, there's nothing wrong with it.

51:26I think maybe there could be a couple of years where people have to kind of reskill themselves to find jobs. But productivity is like fairy dust. It's better growth, lower inflation, better real wages and a better profit margin. Yeah. And I think just that concept of having the boomers still living and spending in their 70s as though they're in their 50s and supporting grandchildren like people in their 30s would have supported their own children. That's a really big element, especially in places where we live like Long Island, Ed. And I think that's – I guess it's a demographic thing that was hard to foresee 15 years ago, but that's sort of how it's playing out.

52:11I mean, look, there's no doubt that there is an affordability issue. It's become a hot political topic of late. We know that, you know, you go out to a restaurant, you go to a grocery store, you buy, I mean, auto insurance. I got five kids and the youngest ones are in their 20s. And insurance just for one is$4 ,000 a year. I mean, there's no way kids can afford that. So I think there's a lot of parents helping out their young adult kids. And, you know, that's kind of helping to offset the affordability issue for some people. Of course, there's a lot of people that are doing very poorly here. But from a macroeconomic standpoint, when you add it all together, the consumer unbalance has been remarkably resilient.

52:59I want to get to the result of the exercise. Figure 11, you have the S &P 500 on track to rise to 9 ,000 to 11 ,000 based on the earnings expectation and the potential multiple that we talked about by the end of 2029. So that's 10 ,000 by the end of the roaring 2020s, which you note would be up from 3 ,230 at the end of 2019, representing an increase of 210%. And you ask rhetorically, is that amount of gain delusional? Not really, since it was exceeded during three of the previous decades. Since the 1920s, there have been three roaring decades in which the stock market gained over 200%. So what you're laying out here is not only feasible, there's precedent.

53:52Yeah, take a look at, can you flash figure 12 on the screen? Here's - Figure 12, there we go. All right. Walk us through this. Yeah. I mean, those are straightforward. It's the decade percent changes going all the way back to the decade of the 1920s. And we've exceeded 200 percent a few times here. We did it in the 20s. We did it in the late 40s. And then almost almost did it last decade. Yeah, almost did it last decade. So the bottom line is that there's nothing unusual about a roaring stock market. We've had it before. And just because I make the allusion to the roaring 1920s doesn't mean that it's that unique.

54:42I want to finish by just telling you it's so refreshing to listen to people of your generation who are optimistic about the future. I think there's sort of like a disconnect sometimes when you're talking to people who have seen a lot of history and you would expect them to be more optimistic given everything that they've witnessed in their lifetime. But it goes the other way. In many cases, they sort of feel like the golden era is long gone and all that's ahead of us is misery and strife and class warfare and all of the problems that we read about each day. But you have very notably gone the other way.

55:25You've been right from an investment perspective. And I think you've sort of served as a beacon for people that want to hear somebody with wisdom and experience say something positive. So on behalf of all of our viewers and listeners, I want to say thank you for that. Can you tell us about Quick Takes and why people should check it out? And we're going to post a link to that while you're talking. Yeah, well, on Wall Street, I basically provided macroeconomic and strategy research to institutional investors. We had a lot of individual investors, financial advisors, asking us for a product for them.

56:03And so we created Quick Takes. It comes out almost every single day. And it's basically very market-oriented. We all know these macroeconomic indicators and political developments occur. And what we try to do is relate them to the market, to house the market. Same thing you both do. But we just put in some more charts in it and kind of have a basic theme that we're pushing. So yeah, anybody who wants to have a look, just go to yourdennyquictakes.com and give it a try. All right, yourdennyquictakes.com. Check it out. I read it whenever it hits my inbox. And once again, Ed, on behalf of the viewers and listeners, thank you so much for surprising us tonight and walking us through your take.

56:52We very much appreciate it. Thank you. Great to see you, Ed. Happy Thanksgiving, Ed. All right. Wasn't that a delight? Wasn't that cool? Legend.

57:01Michael Batnick:It's nice to hear from somebody with an optimistic take. I agree. Is any of that something that you would, I don't want to say like take issue with, but if you were to push back on that, I have an idea of where I would push back. Where would you, if anywhere? I do think the S &P is going to 10 ,000. So there wasn't anything that he said that I thought was so outlandish, but I'd be curious to hear your take. I think that a market or economic or both sort of event could just delay the timetable. I do think – I've said to you for the last 10 years that I've known you, I think I'm going to live to see Dow 100 ,000.

57:45So like S &P 10 ,000 and we're at 7 is not so outrageous. Maybe the timing doesn't work and it doesn't happen by the end of this decade because we have like another bear market year, like a 2022. Perfectly fine. I don't need it to happen by the end of the decade, I guess, would be my comment. And I don't think that Ed would disagree. We have these like minor meltdowns. They don't feel minor in the moment. I shouldn't minimize the impact of them. But I feel like those just delay the inevitable. And so if we don't get S &P 10 ,000 by New Year's Eve, 2029, I think ultimately it comes anyway. Can I tell you something?

58:26Go ahead.

58:27Michael Batnick:The S &P is where right now? 6 ,800 or something. Okay. So 6.8 to 10 in four years is what CAGR? 67, 65. Okay. So check this out. Dude, it's way less than you think. It is 10 % a year. I mean, it's a lot. It's a lot. It's above average, but it's not outrageous. Barely. It's barely above historical average. Literally barely. All right. So let me get this straight. You PGing this for us? No, I am not. Listen, I could. What's the Tommy Boy line? Whatever. You know what I mean? What's the Tommy Boy line? Which one? I could shit in a whatever and guarantee it. No, no, no. You could get a good look at a T-bone by sticking your head up a bull's ass.

59:18No, it's when he's guaranteed the break pads. Or you could just take the butcher's word for it. That's what it is. But that's a line.

59:26Michael Batnick:I know that is a line. That's not the line that I'm thinking of. That's the best line of the movie. Anyway, Ed is the man. Let's move on. Let's get bearish.

59:36Michael Batnick:So it was – we are three weeks removed from Sam Altman. inadvertently pulling the pin out of the grenade and chucking it into the market. Thanks a lot, Sam. Thank you, Sam. Although I guess the wall of worry that he introduced, I think ultimately is a good thing. But throughout this chart, so since those comments, OpenAI's major suppliers, this is from Sherwood News, investors are under stress. We're talking about SoftBank, Microsoft, AMD, and Oracle. I just saw after the close, Deirdre Bosa posted another chart that was similar, showing Google exposed infrastructure versus open AI. And the divergence, holy mackerel, since he said what he said, has been pretty incredible.

1:00:21Yeah, so it's like this interesting thing. It's like this Game of Thrones-esque, like the opening montage of Game of Thrones that they play during like the opening credits with the different kingdoms rising up. I love that. And then you think about like, there's the kingdom of Alphabet and all of the companies that are in deals with Alphabet, which NVIDIA does supply them, by the way, which we're going to talk about at the end of the show. But like this idea that the kingdom of Alphabet is currently rising. And we talked about this with Kramer the other night. Like we don't have a stock price for open AI.

1:00:58I do not think that stock price would look like Alphabet right now. I just don't. And I can only judge - Right. I can only judge by the last few companies that OpenAI has signed these massive bilateral deals with. Their share prices are behaving in such a manner that tells you the buy side doesn't believe the sell side that these earnings from these deals will actually materialize. That's it. That's the it's a huge dichotomy in the market right now. And to ignore it would be sort of ridiculous. Well, I wish we had that stock price.

1:01:34Michael Batnick:We don't. Dude, how much did Meta fall? Meta was down 25%. NVIDIA, as of this morning at the lows, was down 16%. CoreWeave as a proxy, obviously a much smaller company, but forget about it. I think OpenAI, if it was public, is down at least 30%. Microsoft, dude. Microsoft is the ultimate OpenAI proxy on the publicly traded stock market. Just look at Microsoft versus Apple, price action-wise. These are effectively, these stocks became sort of interchangeable as the two largest, most earnings reliable Mag7 names. And Microsoft and Apple do not look the same. Microsoft is suffering as a result of being the company that is currently consolidating OpenAI's losses into their quarterly statements.

1:02:26Like they're on the hook. They're working with them. They're benefiting. but then they're also on the hook.

1:02:32Michael Batnick:John, throw up that Mag 7 rolling sticks today. Skip the next chart just because we're on this topic. Look at this. So shout out to Sean who was able to - This is a great chart by Sean. To figure this out. This was not easy to make. So we're looking at the correlation within the Mag 7 over the last 60 days. And prior to the most recent episode, they were all moving in unison for the most part. It was one big trade. and then the something changed and they're all being treated very differently as they should it's great um just looking in the chat a lot of opinions on this topic uh see paul breezy says open ai publicly traded stock would be the timu version microsoft that might be extreme um georgie says nvidia is an eight-year roller coaster yeah mostly up with some spills along the way.

1:03:25Apple wins all the time, according to Mark. I don't know. Look, I think, you know what the really interesting question is? Does that dispersion continue into year end? Or is now the time you pull the trigger long on the lab of Max Evans?

1:03:40Michael Batnick:I think they all catch a bid. So do I. That's been the history. That's been the history. People are still underweight. There's a melt-up at the year end coming, I think. Obviously, So, you know, who could be wrong. But I think that one thing that is not, we're not talking about anymore. You don't, here's what doesn't happen during a bubble. You don't get multiple compression. Throw this chart up, please, from ChartKid. This was the forward PE of tech on, before NVIDIA reported. It was 32 times. And then a day or two later, I'm sorry, a month later, my bad. My bad, this is a month later. A month later, it was down to 27 times.

1:04:18Michael Batnick:This is a - Let me stop you. The gray dot is the new forward PE. You don't have to stop. That's what I was saying. Chart off. Well, I'm trying to figure it out. No, you don't have to figure it out. It's self-evident. Everyone who's - I need a second. Everyone who's listening and watching - I need a second. They're very smart. They're very smart, Josh. I need a second. So we had a - You are a slow visual learner. I've always said this. This is a healthy - And now we could say it's healthy in hindsight because we've taken the losses back. But this is great stuff. We've got lots of doubt. Bring it.

1:04:51Michael Batnick:It's great. Show the doubt is wrong. Can I have that chart again just so I could fully absorb it? This is the biggest – the tech sector, just eyeballing, looks like it's the biggest re-rate, lower or higher, of all the sectors. That's right. Healthcare and staples have re-rated higher since October 29th. Healthcare in particular. Healthcare in particular, the stocks have rallied hard is the other way to phrase that. I mean, that's basically what we're saying. Yeah. Okay, really interesting. But not something that happens in a bubble. You don't see multiple compression. Ramza 675 says, Michael Burry lowered the forward PE, LOL.

1:05:31Thank you.

1:05:32Michael Batnick:I don't know if I totally disagree with that. No, no. He definitely introduced a lot of doubt. Nobody was talking about their depreciation schedule before him, I don't think. So he elevated a surface of the – Chanos maybe – but you're right. Like Bury very notably threw a rock into the pond and we're still experiencing the ripple effects. And maybe it ends up not mattering or maybe it does, but the market is paying attention. You know what's great? Like how does this end? I think we say that a lot as if it ever ends, as if the market doesn't open the next day and the next week and the next year.

1:06:06Michael Batnick:It never ends. But getting back to how we opened the show, that sort of price action is, let's not gloss over that. That's like seriously bearish. When you have a blowout earnings report and the market just says, nah, no. Like, my point is this, we're three days removed. If we're six months out and that was the top, I wouldn't be shocked just because that is very bearish price action. Now, hopefully, the last three days have put that in the rear view mirror, but it's not over. It's never over. You know when it's over? When Burry does his Cassandra Unchained sub stack for two weeks and people stop paying attention and these stocks all reverse and make new highs?

1:06:48Yeah, yeah. That's when, but your, but your bigger point, which I agree with, you know what the difference is between us and let's say listening to a sports podcast on the ringer, the season ends the game at this, the season never ends. The game is never over. One season bleeds into the next. There's no dividing line in between the two. It just, it's the never ending story. I think it's what I love about it. So I try to make this point on the air today. we were talking about Alphabet hitting$4 trillion in market cap or coming damn close. And it's just like, dude, think about how many storylines within AI and the Mag 7 have come and gone this year.

1:07:32And think about how many went in 180 degrees the other direction. In April, Google was finished. Now, Google is the king of AI. In May or June, what the hell is wrong with Apple. They're falling behind in AI. Why can't they just buy perplexity? Blah, blah, blah. Now the stock's at an all-time high.

1:07:55Michael Batnick:Tim Cook won't even mention AI on his quarterly calls. How about who's going to beat the Microsoft OpenAI combo? Nobody. Now those stocks can't get arrested. So whatever we're at on Oracle, Oracle went up$200 and then gave it all back a month later. Like no one's talking about trillions of dollars coming and going in one company's market cap on the back of an announcement. So whatever narrative you have about these individual kingdoms within the AI game of Thrones, just understand they still rise and fall. And we might be saying an entirely different thing about any and all of these companies six months from today.

1:08:35It happens all it happens. It's frustrating, but it's also pretty cool. And it happens all the time. All right. I wanted to do some stuff on strategy because I think this is a really big story. I am aware that the market cap is just not all that big anymore, but I still think it matters because as recently as a year ago, basically MicroStrategy and Michael Saylor had given birth to a brand new, I don't want to say asset class, but a brand new category of publicly traded company. Like at some point you had the first ever oil and gas trust publicly traded. At some point you you had the first ever real estate investment trust.

1:09:18At some point, you had the first ETF. Like new things do get invented and then stay forever. And people act like they came along the time of the dinosaurs. They've always been with us. No, along the way, we invent things. Strategy a year ago looked like they invented a new category where it's a company that raises a ton of money, equity and debt capital and accumulates a digital asset as quickly as it can. Faster than it dilutes its shareholders. Faster than it dilutes its shareholders, thereby becoming a category killer, a must-own stock. And we had a few imitations. But where we are with strategy, and we have a video of Sully asking Tom Lee, who has also launched a digital asset trust bitminer, which is for Ethereum, like strategies for Bitcoin.

1:10:14But let's play that clip. Let's bring up, guys, if we can, MSTR.

1:10:18Michael Batnick:That is the company formerly known as MicroStrategy, now just known as Strategy. The stock's down 50 % in three months, Tom. It's down about 65 % from its highs in the middle of July. is micro strategy down because bitcoin is down or is bitcoin falling in part because the strategies of the world the michael sailors of the world have to sell the crypto because their equity is going down what's the chicken what's the egg yeah well uh again you know uh because of my world in research and on BitMine, we are really plugged into all the trading desks and all the clients that trade. Anybody who has a sizable Bitcoin long position, okay, let's say it's more than a billion, they have very limited ability to hedge it in crypto derivatives, like calls.

1:11:14The max they can do is maybe 5 % of their holdings. And then if you go to traditional CME exchanges, their contract sizes prevent someone from hedging a billion dollar portfolio. However, someone can use MicroStrategy's options chain, which is so liquid, to hedge all of their crypto. So MicroStrategy is essentially absorbing all the hedging pressure that the crypto industry is trying to do to protect their Bitcoin longs. So the reason MicroStrategy is a leading indicator, it's actually the only convenient way to hedge someone's long is to short micro strategy or buy puts that's what we're seeing today this this is the kind of stuff tom it's one of the main reasons that we bring you on because you understand what i would consider the engine oil of the stock market right we know how the engine works or people think they do but inside that engine there are gears there are pistons there are things that are occurring that for 99.9 of our audience they don't do this for a living we get it this is a really important interview i'm going to let you go tom um we are watching micro strategy or strategy watching bitcoin and we're watching possibly 77 000 which you think might be kind of a washout period correct yeah that's right tom de marc who is an advisor to bitmine very well known really giving a lot of insights yeah uh he's watching that actually micro strategy at this level here probably is when you want to ratchet into the longs and Bitcoin maybe just a few thousand dollars lower.

1:12:48Okay, that is, of course, friend of the show, Tom Lee. I love Brian Sullivan, by the way. He's very good. Such a great dude. I saw him the other day. I was out in Englewood Cliffs for something. I hadn't seen him in probably two years. He towers over me. I don't know if you realize. He's like six, seven. Large man. All right, anyway, what did you think about the point that Tom was making that a lot of the pressure on micro strategy is just because it's like the easiest way for people to hedge big money in Bitcoin itself. It's like the options chain is more liquid and a quicker way. And that ends up putting a lot of pressure onto the digital asset treasury stocks.

1:13:32Yeah.

1:13:32Michael Batnick:I mean, I would defer to Tom on that. I think that he knows a lot more about this than I do. The story makes sense. It checks out. But the bigger point, I think if you're selling micro strategy down here or strategy. I guess there is a hypothetical world where this thing unwinds. They need to puke up their Bitcoin. I think it's a lot lower than what Bitcoin is today. I don't see that happening. I don't think strategy is a zero. And I'm not buying it, but I definitely wouldn't be selling it. I think they can raise money. I think if everyone's talking about some mythical level, 72 ,000, where Saylor gets a margin call and he has to sell.

1:14:08I don't think that's how it plays out.

1:14:10Michael Batnick:I don't think that number is accurate. Even if it were, I think he makes a few phone calls and sells more preferreds. I think there's a lot of people that are dying, dying for Saylor to go to zero and for him to have to – They do not like him. For him to have to liquidate, be forced to sell, to meet margin, whatever, whatever. I would be moderately surprised. Would I be shocked? No, I wouldn't be shocked. But I don't think that's how this plays out. I don't think he's going anywhere. And to your point, I think that he would – I think it's more likely that he has the ability to reach for a life vest than he'd go to zero.

1:14:47Michael Batnick:I don't see that. So do I. All right. Let's do some charts. Here's three years of micro strategy or now we call it strategy performance. Effectively, this was, I don't know, a$10 or a$20 stock. They come up with this idea to convert this software business into a Bitcoin accumulator. And you can see the result. It was, I wrote about this on my blog the other day. I forget the number that I came up with. I think it was a 3 ,000 % return between when, 3 ,050 % return from when they announced in August of 2020 through last Thanksgiving when this thing became like one of the biggest stocks in the market.

1:15:37I mean, it was just absolutely wild. There were no other stocks in the US stock market in that time that did anything even close to 3 ,000 % is 7X. and I think NVIDIA or 10X, excuse me. I don't know, 30, excuse me, 30X. Yeah, wait, what? I'm sorry, 30X and NVIDIA did 10X over the same period. So like it truly, it was one of the great winners. Now we're going to look at the NAV, which is the net asset value versus the market cap. uh michael will probably make fun of me for some reason that i i don't understand but i'm looking at this in billions of dollars and i'm just trying to get to so catty look at you i don't know maybe maybe i maybe i'm looking at it the wrong way but what i'm trying to figure out is like the market cap of the stock versus the value in dollar terms of how much bitcoin they hold yeah and it is now trading at 0.93.

1:16:41So it is a discount to its underlying holdings of crypto after having traded as high as 2.8 times its Bitcoin. What are your thoughts? Okay.

1:16:54Michael Batnick:So I wasn't going to make fun of you, but what I was going to do - But now you will. But as I point out, that I took your chart and I enhanced it. Next chart, please. So this, Josh - What a dick. All right, go. No, this is a better visual. You are a visual learner and I fixed it for you. So I'm a slow visual learner. You are a slow, yes. This is the spread. John, toggle back. This is the difference of these two lines. So what we're looking at to your point earlier is next chart, please. Micro strategy used to trade at a monster premium. The market cap was almost$80 billion more than the value of the Bitcoin that it held.

1:17:35Michael Batnick:and now it is the opposite. It is, the market cap is$6.4 billion less than the Bitcoin that it currently holds. Now, of course, it's a moving target because the price changes, but I think the point is, what I said two minutes ago, I would not be selling it down here. It's over. Chano's coverage trade, it's over. It's at a discount. Can the discount widen? Yeah, sure, why not? But like, I wouldn't be pressing that here. And if you ask me, again, you have to hold this for two months. Do you buy it or sell it? I buy it. I think the problem with just looking at market cap versus underlying Bitcoin ignores some other things about the enterprise value.

1:18:14They have preferreds out there, which are dilutive. And basically, they're not debt, but they represent a future obligation. The company has to pay, make, I think it's 8 % or 11 % or whatever the number is. They have to make pretty big interest payments on that preferred stock. And they have a value. Yeah. And then there, of course, there's also a traditional debt. And I wrote about this on my site and I don't want to go through the whole post that I wrote, but I think the bigger point that I was trying to make is not a criticism of people who own strategy or told you so. I think I was just trying to make the point of like, when you have FOMO, and I definitely did while this thing went up 30X.

1:18:58Everyone does. Of course. Like you, you wouldn't be human if you didn't look at that and say, I should have just bought it. So I definitely felt that. But the point I was trying to make is like there is a cure for FOMO, and it's simpler than you think. A lot of times the cure is just time. Just letting things play out. Nothing is really as great as people think it is when it's going up 30x or 10x. Like there are always flies around everything. Like nothing's perfect. Nothing's pristine. So sometimes just waiting a little while and then things come back around. And the irony is if you had FOMO watching MicroStrategy run up 10, 20, 30x, well, now it's at a discount to its underlying Bitcoin.

1:19:52So if you loved it so much, why aren't you buying it? And this gets me to another point, which is like we don't really want the asset that badly. We want the performance of the asset. And when the perception of that performance continuing goes away, it's like, well, who the hell wants to buy this thing? And that's where I think this stock is right now. What do you think about that idea?

1:20:17Michael Batnick:I think I, no, no, it's perfect. Perfectly said. I could not agree with you more. The answer to FOMO is give it time, whether it's the Oclo or the Rigatoni's of the world. You have to accept as an investor, especially in today's market, which is never not going to be like it is now. OK, the the beehive of investors, the people that are able to bring a story to life that's never going away with the with the advent of social media. There will always be stocks that are 10 X that you wish you owned. You have to just accept that that is part of the game now. And you're either in that game full time and you accept that it's there and you're not playing it or you're not.

1:20:55Michael Batnick:That's it. And so you just have to deal with it. The really great news is that you don't have to play that game if you're not built for it. Nobody is forcing you to. It's a young person's game. Now, getting back to strategy, this is the more interesting part of the story that we haven't discussed yet. So JP Morgan, who, listen, let's be honest, they're no fans of crypto, say strategy is at risk of exclusion for major equity indices as the January MSCI decision approaches. Quote. What is that? I'll tell you right now, with MSCI now considering removing MicroStrategy and other digital asset treasury companies from its equity indices, outflows could amount to$2.8 billion if MicroStrategy gets excluded from MSCI indexes and$8.8 billion from all other equity indices if other index providers choose to follow MSCI.

1:21:48Michael Batnick:So this is probably going to hang over the stock, I would assume. And if it doesn't get kicked out, then it will be a huge lift off of it. But this is, I don't know that I want to get in front of the story either, to be honest. This is a big one. You know what's funny here? The analyst at JP Morgan writing this made a mistake. It would not be outflows. It's not a fund. MicroStrategy is an equity. When people sell Apple, we don't say Apple had outflows. Say people liquidated their stock or they sold it. It's not, it's interesting. Like the JP Morgan person writing this is like thinking of this like an ETF.

1:22:26Right. You're right. It's not outflows.

1:22:28Michael Batnick:He should have said like selling pressure from passive index funds or something like that. You're right. Outflows can amount to 2.8 billion. It should be people mimicking the index might sell 2.8 billion worth of strategy stock. Yeah. Interestingly, also, they're calling it micro strategy. Yeah. So that's kind of interesting too. They know what they're doing. They're definitely pushing his face in the dump. And we have a chart. Is this worth putting up or is there nothing new in here? No, no, no. Okay. Let's move on to the next segment, which is brought to you by PIMCO ETFs. To learn more, check out pimco.com slash ETFs.

1:23:06Michael Batnick:All right, Josh. Chart of the week? What are we saying? Chart of the day? We'll get there. We're not saying either of those things. I want to start out with some of our charts and then I'll bring their work into the conversation. So Ben posted this on his site the other day, the number of years between 40 % bear markets. And the reason, and there are obviously a litany of reasons why we haven't had a great crash that's persisted or blown past 40 % in 16 years, is because we haven't really had a sustained recession. 2020 was a quick man-made recession. Obviously, the fiscal impulse stopped that in its tracks.

1:23:50Michael Batnick:2022, there was pockets of a recession, but you can't have a real recession with the unemployment rate at 4%. However, I had ChartKid show me, well, what about all of the 20 % drawdowns? Now, I made them start at 19 % because we've had a few of those over the years, but this chart looks so much different. We've had a ton. I think we've had five in the last six years. So yes, it's been a while since we've had a 40 % bear market, and that only happens in recessionary bear markets. But look at all of these 19 % drawdowns, effectively quick bear markets. There's been a ton of them. Yeah. I like this chart as a financial advisor, I like the 19 % chart better than the 40 % bear market charts unless and until I run into the person who's obsessed with 1929 slash 2008.

1:24:50And those people exist, but that's not the normal. The normal person is not walking around saying it's almost it's almost Lehman o 'clock. That's like that's not normal behavior amongst most investors i think most investors accept the fact that there are going to be bear markets they don't accept they don't accept the fact that we're always on the verge of a depression right um so i like the second chart better showing the 19 % drawdowns because a they're almost always about to happen or have just happened well you know why

1:25:21Michael Batnick:the length of them is not that long the first chart shows oh shit we're due right we haven't had any pain. And the secretary was like, no, no, no, no. There's been plenty of pain. We've had plenty of bear markets along the way. So which brings me to this chart from PIMCO. So the big distinction is this. There are two types of equity drawdowns. And we've spent a lot of time over the years talking about these two types. There is the non-recessionary equity drawdowns, which on average are a 17 % drawdown. They last five months. And then there is the recessionary equity drawdown, the GFC, the dot-com boss.

1:26:01The knockout punch.

1:26:01Michael Batnick:The knockout, the one that ruins a generation of investors that completely leaves you with PTSD, not believing that things will ever get better. And that lasts an average of 11 months, which sounds light to be honest, but that's 27%. And of course, the point that PIMCO is trying to make is that is when the treasuries really add ballast of the portfolio. But absent a recession, we're not just going to fall 40 % because stocks are overvalued. Do you want to apologize for referring to this table as a chart when it's clearly a table? Sure. Okay. Put that back up. This is really good stuff. Everybody should screen grab this from their phone or their computer, wherever they're watching this.

1:26:44I feel like this is such a great reference because the next time somebody is talking about equity pullback drawdown correction, whatever, whatever nomenclature, like answer me one thing. Is it a recession with that drawdown or is it just like the normal course of stock market pullbacks, which happen all the time? Because the difference could not be more stark. Forget about the depth, 17 versus 27%. The length is the killer. And five months, an average of, let's just say five months average, meaning some are way longer, versus 11 months, that is a huge game changer in terms of people's ability to get through it.

1:27:31And what changes they might have to make, if any. And so if you know we're in a stock market pullback, but the economy is held up, like you should not be waiting for the knockout punch to be delivered because it's just not what normally happens.

1:27:47Michael Batnick:Well said, my friend. Okay. I think we did that justice. Great table. Not a chart. Not a chart. All right, we're going to finish with this NVIDIA versus Alphabet stuff just because I think it has tremendous implications for the year end. Michael and I are both on record saying if they're going to run the stock market into year end, they'll probably bid for all of these mega cap stocks just because they're liquid. Nobody yells at you. Even if they go down, you're not in trouble with your investor base as a fund manager. They lend themselves to borrowing against. Like there's just a lot of reasons why these stocks will probably get bought as a group.

1:28:32But it won't – doesn't necessarily have to play out that way. Let's pull up Google versus NVIDIA year to date. Google, I'm told by Sean and ChartKid Matt, is on track to have its best year since 2009.

1:28:45Michael Batnick:It's unreal. It was up 102 % then. It's up 69 nice and a half percent this year. and NVIDIA is up 31%. It looks like a loser relative to Alphabet, but it's a pretty good year for any stock. I think most people would agree. But this is a really interesting thing being set up here. I wanted to ask you, do you think a lot of the buyers in Alphabet are pulling money from NVIDIA to do it? It's a 4 trillion dollar market cap. Yes, and I know your big money has to come from somewhere, guy. Yes, and I think it's overdone. I think like this is I think the the ratio the whatever you want to look at the spread between Nvidia I am generally a I don't like when people say those alligator jaws have to close because like I think that's normally Charlotte and bullshit but I think this is too much you want to reverse the reversal yeah I think it's too much do you want to I would I would much rather own Nvidia for the rest of the year than Gemini I'm sorry than Google okay next chart Google is now more expensive than Nvidia How many people do you think know this?

1:29:52Two. Two people, you and I? All right. Google's forward PE minus NVIDIA's forward PE. For the entirety of the last 10 years, NVIDIA has been the more expensive stock. And you can see by that gray kind of stochastic below, that's just measuring the degree to which Google has been a discount to NVIDIA. And now for the first time since 2016, Google sells at a premium on forward PE to NVIDIA. That's pretty insane. Yeah. I love this chart.

1:30:26Michael Batnick:So normally the price drives the narrative. But I think that in this case, the narrative actually is driving the price, which is then also driving the narrative. So here's where we are today. Dan Gallagher at the Wall Street Journal said, talking about Google, The company offers a level of AI vertical integration that even the other big tech companies can't quite match. The recently launched Gemini 3 is a perfect example. Google trained its own frontier AI model on its own networks using its own TPU chips that it designed in-house. That effectively makes Google, this is a good one, that effectively makes Google into a combination of OpenAI and Microsoft with a bit of NVIDIA thrown in.

1:31:09Michael Batnick:Wow. It's good, but it's aggressive. So to which the NVIDIA newsroom, because there's smoke here. The NVIDIA newsroom knows what's going on. They tweeted today, we're delighted by Google's success. They've made great advances in AI, and we continue to supply Google. NVIDIA is a generation ahead of the industry. It's the only platform that runs every AI model and does it everywhere computing is done. NVIDIA offers a greater performance, versatility, and fungibility than ASICs, which are designed for specific AI frameworks or functions. It's such a subtweet. It's such a bless. You know, the Southern people, they say, oh, bless.

1:31:51No, not bless a bee. Bless your heart.

1:31:53Michael Batnick:Bless your heart, yeah. That's like how they say, go f*** yourself to each other, right? Oh, bless his heart. Yeah. So NVIDIA drawing that distinction between GPUs and application-specific integrated circuits or ASICs, which we did a whole episode about that, I don't know, six months ago, a year ago. Can't get into it again. But just this idea of TPUs have been part of the Google story since way before we were talking about generative AI. So it's not a brand new breakthrough technology. They've just gotten very effective at finding ways to be more efficient on cost, plugging up some of the things that they're doing with their own with their own silicon.

1:32:34And I think it's admirable. I think it's a good sign for shareholders that like Google is playing offense and is got their foot on the gas. And if they do a big deal with Meta, yeah, maybe it's a wake up call to NVIDIA about pricing and that they might not have the pricing power that they think. And so to me, the sell off in NVIDIA seems sort of rational. I don't love that they felt the need to answer this. I'm not quite sure. and I also don't love what they did over the weekend, which is the last thing I want to get into. They sent a memo around to the sell side, like to analysts covering the stock, responding to Michael Burry and other short sellers talking about depreciation schedules.

1:33:24Let me just read this because paraphrasing it doesn't do it justice. This is Barron's quoting from the memo. Nvidia also responds to claims that the current situation is analogous to historical accounting frauds Enron, WorldCom, and Lucent that featured vendor financing and SPVs. Nvidia, quote, this is the company. NVIDIA does not resemble historical accounting frauds because NVIDIA's underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity. Unlike Enron, NVIDIA does not use special purpose entities to hide debt and inflate revenue.

1:34:09Is it weird that they felt the need to do that? Like literally invoke the name NVIDIA next to the word NVIDIA? I don't know if I love it.

1:34:19Michael Batnick:Listen, I think the wording is weird. It's not a fraud because their underlying business is economically sound. I don't think the two are mutually exclusive. I think you can have fraud with a good business, but whatever. I don't want to parse their words. The market took$700 billion away from it. I'm not shocked that they responded. In other words, what are they supposed to do? Just let their shareholders get pummeled and not say anything? Their narrative is driving the price action. It went from$5 trillion to$4.3 trillion, and they felt the need to respond. $700 billion is a lot of market cap to go up in thin air over allegations.

1:34:56Michael Batnick:They responded. Bro, I'm not Enron. You're Enron. I mean, it's not. All right. Last part of this. NVIDIA's customers depreciate GPUs over four to six years based on real-world longevity and utilization patterns. Older GPUs such as A100s released in 2020 continue to run at high utilization and generate strong contribution margins, retaining meaningful economic value well beyond the two to three years claimed by some commentators. How much do you want to bet that CoreWeave asked them to say that? One of their biggest customers, definitely among their most vulnerable customers to this type of innuendo.

1:35:38How much you want to bet the comms people representing CoreWeave, who let's just assume are among the top crisis PR firms on the planet at this point, how much you want to bet they demanded, demanded of their supplier, we bought all this shit from you, and now people are saying it's obsolete. You need to go out there and say that it's not. I would bet almost any amount of money that that conversation took place somewhere in Palo Alto or San Jose over the last couple of days. What do you think?

1:36:11Michael Batnick:I would agree with you. People are human and that's how humans behave. This is a developing story. You guys know. It's very fluid. It's as fluid as it gets. We'll stay on it. All right, let's do make the case and then a mystery chart and we'll get out of here for the night. Healthcare. I don't think this is a run-of-the-mill, what's called rotation, that's just like going to come and go and we're going to laugh about it. I genuinely think it has legs because of the level of participation of the components of the XLV and then seeing follow-through in the mid-caps. And there's just a lot happening here on the earnings front that justifies it.

1:36:55It's not just a re-rating. It's not just people being like, oh, these stocks are too cheap and getting bullish on them for 10 days. I understand that type of rotation. I could be wrong, but I think this is more. Eli Lilly just became the first trillion dollar name in the category. The first healthcare stock ever. It's joined a group with only nine other names. The Mag7 plus Berkshire plus Saudi Aramco now plus Lilly. And that's Broadcom too. And that's the list. There's nothing else. This is a healthcare stock. I don't suggest that that means all these other stocks are going to go to a trillion.

1:37:36I'm just making the point. People are looking at that as the upside potential if they own a company that hits a really big category like diabetes and GLP-1. So Lilly is Zepbound and Manjaro combined$19 billion in the first nine months of this year in sales.

1:37:56Michael Batnick:Wait, what words did you just use? Zepbound and Manjaro. What are those? Those are the weight loss shots and the diabetes shots that are part of this GLP-1 terzepatide monster. Those two drugs combined did$19 billion in the first nine months of the year. They're now bigger than Keytruda, which is Merck's flagship cancer immunotherapy. And it's the best-selling drug in the world right now. so um analysts are talking about a hundred billion in annual sales by 2030 and uh at a trillion dollars lily is two-thirds the value of meta and worth more than walmart did you know that um double the size of johnson and johnson which is the closest to lily in the whole pharma industry so double the size of number two um i also want to tell you that this is one of the greatest turnaround stories in the history of the US stock market.

1:38:5610 years ago, people were saying this thing should just go private. It's just worthless. They have nothing. And out of nowhere, they found this metabolic market and they ran with it and they got approvals and they launched and they marketed. And it's just an incredible come from behind story. Eli Lilly is a 150 year old business. The founder was fought in a civil war. and 10 years ago, this stock was nowhere. And look at it now. And I think that's really exciting for equity investors. Let's do these charts really quickly. This is Eli Lilly versus Merck, J &J, and Pfizer. It's like another planet.

1:39:40Next chart. This is the market value as a bubble versus all of the other bubbles on the chart. there's nothing even in the same category in terms of not just this is a multiple of sales

1:39:59Michael Batnick:it's revenue and market cap revenue and market cap Eli Lilly is 10 times sales nothing else is close and it's not as big revenue wise as J &J which is a $90 billion revenue company so it's not as big but But it's growing much faster, which is why it's getting that multiple. Next one. Last one. This is Eli Lilly's market cap. Another way to look at this at a trillion versus the 15 largest biopharmaceutical companies. Oh, I like this visual. This is clever. It's a good one, right? Just like to wrap your head around the relative size. And you see like Sanofi, Pfizer, Gilead, Novo, Roche, AstraZeneca, AbbVie.

1:40:50Like none of these are even in the same ballpark right now.

1:40:52Michael Batnick:Dude, I haven't looked at these. Regeneron, Biogen, Gilead, J &J said all time high. I haven't looked at these charts in literally years. All right. So here's my make the case then. We're not saying buy Lilly. For best stocks in the market this week at CNBC, I wrote up three companies that are on my best stocks list. Sean and I did a dive into this measurement and instruments group, which is really interesting stocks. Here's the first one. I want you to do a beauty contest. Mettler Toledo. Oh my God, it's a buy. It's a buy, right? It's beautiful. What a breakout. It's beautiful. Okay. Thermo Fisher, same sector.

1:41:30This is the biggest one. This is a$220 billion. It didn't break out yet, but what do you think is going to happen?

1:41:37Michael Batnick:I don't know. I would maybe chop around 600, but higher. But do you like the base? Yeah, dude. It's almost perfectly bowl-shaped. You got a gap fill in there. Okay. That's TMO. Here's Agilent, which A, this broke out today. Looks great. Yeah. It's going higher. Which do you like the best? This one looks the cleanest to me. You like Agilent? This is a$50 billion market cap. Agilent was a spinoff from Hewlett-Packard in 1999. So it's got a long history trade. Josh, what is the overarching story? Why are these working after years of being - AI! No, no, no. Hear me out. Hear me out. These are ARR businesses now.

1:42:21They used to be sending a salesperson out to a doctor's office or a hospital to sell them a bunch of shit. And now they sell the razor and everyone needs to buy razor blades. All this measurement equipment. once they get installs in these medical facilities all over the world, universities, hospitals, clinics, once they get installs, the ARR just kicks in and they start to look more like software companies. And that's how they've transformed their businesses. I got a few more healthcare on the best stocks list. Sean threw them in just for the hell of it. Biogen.

1:42:58Michael Batnick:Yeah, unreal. Look at this. I was just looking at this. Unbelievable. IQV. I don't know what this is. No idea. Just buy it. Shut up and buy it. Here's STE. This is Steris. This is an Irish company with an NYSE listing. This is about to go. Okay. Like very obviously, RSI not overbought. Anyway, it's interesting to see the degree to which healthcare names have totally taken over best stocks in the market list. And it's fun. I think it's fun. And it's a big sector. Is it the fourth biggest? I mean, it's not. Some of these are gigantic companies. You don't have a lot of these in other areas. It's a big sector.

1:43:39Michael Batnick:Okay. Or maybe it's not. I don't know. I think it is. All right. I had a mystery chart for you, Josh. I jumped the gun. I sent this to John at, I don't know, 2.30, and it did give back a little bit of its gains, so it doesn't look quite as good. But chart on. Again, looks a little bit less impressive after the close. What is it? I haven't. Hold on. You don't cut me off during a mystery chart. I'm talking. I'll tell you. this is a stock that you made the case for a few weeks ago and i said it's a compelling make the case uh i forgot to buy it um but this is a stock and this is a clue that i'll give you this is a stock that's been left behind nobody really cares about it there's no expectations of the name michael all i want to do is zoom zoom zoom and boom boom That was funny.

1:44:33Look at how I nailed this trade. What do you think?

1:44:37Michael Batnick:Well, like I said, the stock closed at a much lower. Do you know that it went up for the reason I said it would? Which is even more satisfying. Throw that back on. The stock closed at$86, so it's not quite as good. But back to you, Josh. Why did you say it was going to go up? Like I telegraphed this, and very publicly, I said you're jumping out of a basement window with a parachute on. This is a company that the forecast was for 3 % revenue growth. They did 4.5. Good enough. All the metrics people cared about were higher. Gross margins were up. They have this segment of the enterprise business, which is companies doing over$100 ,000 in revenue with them.

1:45:18That was up, I think that was up 9%. All the important stuff on the enterprise side, forget about the video stuff. I mean we're customers They're AI products I think it was a 4x increase in AI Companion Which is one of their verticals So I can't sell it I think it's going 100 Oh you bought it I've owned it for I don't know a month or two

1:45:43Michael Batnick:Oh credit to you I made the case and it was long Great call So alright hey I get a lot wrong I got one right Okay guys that's the show Thank you so much to everyone who joined this live We really appreciate you Thank you so much. Want to wish all the Pounders a very happy Thanksgiving. We are going to get a show up for you guys on Friday. We're taking a little bit of a risk in that we're not taping it Thursday night because we're not psychopaths. So it'll be a little bit pre-tape, but it's going to be awesome. Another returning champion and a fan favorite guest. So look for that. Animal Spirits never misses.

1:46:21You'll get that tomorrow morning. And thanks so much for all the ratings and reviews. They go a long way. We appreciate you. Happy holidays. We'll talk to you soon.

1:46:56OmniShade Technologies engineered to protect you from the sun's harsh rays that can burn and damage your skin. The sun is relentless, but so is our gear. Level up your summer at Columbia.com to spend more time outside and less time slathering on aloe lotion. You're welcome. Columbia. Engineered for whatever.