These Are Wall Street’s Predictions for 2026

26:17Yeah, it's still positive. She's still forecasting a positive return, which is what's interesting about all this stuff. And we were talking about the earnings estimates, right? There's a decent range of EPS estimates that all these strategies have, somewhere between 300 and 320 per share for the S &P 500 and 26. But that's still at the low end, that's still double digit earnings growth year over year. Something that FACSA does this study, which is really cool. And they go back and see, you know, how earnings expectations beginning year compared to earnings expectations at the end of the year. And they did this going back to 2000.

26:52And, you know, excluding like these, you know, people, you know, these crisis years like 2008 and 2007 COVID 2020. outside of these very sort of outlier years, the average margin of error between the earnings per share at the beginning of the year and what actually happens at the end of the year is about 1%. And like even this year, at the beginning of the year, analysts came into the 2025 predicting on average 274 EPS for the S &P 500. Where is it at right now? 271. It's a rounding error when it comes to the earnings forecast. So something to be said about a lot of these strategies, and this speaks to the quality of their fundamental analysis.

27:39And we can talk about analysts and companies massaging earnings or whatever. But the quality of the research is reflected in the fact that these earnings estimates coming into the year are usually very accurate. Where the price targets go wrong is the premium you put on the multiple. Yeah, and that's impossible. That's impossible. How can anyone do that? Right. I mean, I guess you could use interest rates. You could use geopolitical risks. But like, honestly, you're making it up. Listen, everyone's tried to do that research. And I did a post. I sent out a newsletter, I think, about exactly a year ago, trying to make these connections.

28:18And it's like, especially on a one-year basis, there is no relationship, whether it's interest rates, whether it's strategist price targets, whether it's PE ratios, whether it's the Fed beginning to cut – whatever it is, there's no relationship between a single metric and one-year returns following. You might get really strong returns. You might get below average returns. It's so hard to predict what's going to happen in a given year. Sam, we're going to leave it there. You are one of our favorite people, and I know the audience is so appreciative that you dropped by. Thank you so much. We'll talk to you soon.

28:55And happy New Year, my friend. Thanks for having me. Nice New Year, guys. All right. Cheers, Sam. Let's run through a couple of charts before we move on. Let's put up consensus expected earnings estimates. So what Sam was talking about is the earnings. So I'm in the camp that this is like the most important thing. And if this comes in as advertised, which, of course, we can't know for sure, I think it'll be a good year for stocks. Maybe not for MAG7 or maybe – who knows? But just generally speaking, this type of rise in estimates, analysts are not so insane that they would get this directionally wrong.

29:35They might get the magnitude wrong. What do you think about that? Well, that's very not controversial. Stocks follow earnings. So this is the only thing that matters. And I love the setup. Chart back on, please. I love the setup for small cap stocks. Not to do technical analysis on earnings expectations. But not to know. I mean, I can't ignore it. It's breaking out. But with lower interest rates coming, I think, and with productivity gains coming, I think, from AI, you could see a material move higher. And if that happens, and if these stocks get a re-rating higher because they're not expensive, you could see small caps.

30:15And I have that later in the day. You could see them smash next year, gain 30 % or more. Give me this profit margin chart. Same story here. Come on, man. If this goes up, forget about it. Yeah, I think you want to buy this breakout in profit margins. Yardeni was talking about 15 % profit margins next year. Can you imagine? Nobody's ready for that. That'll give you your 21 times multiple. That'll justify your 21 multiple. I'm so annoyed. I had Chartgoat make an incredible chart on the top 100 margins versus the next 400, and I forgot to put it in the doc. All right, we'll save that for the new year.

30:50We'll do it next year. All right, expected earnings growth by sector. Let's spend two seconds on this. This is nuts to me. Materials. We're looking for 28.5 % expected earnings for tech, followed by 21 % for materials. That's a commodity story that's playing out in commodity price. I sort of get it. Industrials, 15%. Again, please don't get it twisted. That is basically - Basically, that's AI build out and I guess airlines. Real estate sucks. Only up 5.3 % expected earnings for next year. Energy still sucks. Less than 7%. Staples, fine. I'm not expecting fireworks there. But that's your setup.

31:43So people are – it's not a shock to me that you see a Freeport-McMoran trading the way that it is lately. um all the gold stuff have a look at our co in a minute yeah uh industrials have been very exciting into year end again shouldn't be a surprise this is where people think we'll see the earnings growth um what else are we oh earnings revisions these are great charts uh this is forward earnings revisions by sector on a on a year-to-date basis this is the analysts moving their estimates And what you can see is exactly what you'd expect to see. Tech and communication services and financials have had the biggest revisions higher by far.

32:28And energy, of course, negative 10. So that's the setup going into next year. Any parting thoughts on Wall Street consensus strategist targets for next year? uh no i guess i would just close with what sam said which is we pay attention to the price targets but like there's a whole report underneath this that they're actually get that is like 130 page pdf and it's very rich and nobody reads it i used to i used to make an attempt to read a few of them i just time for that i don't well i don't know that i've ever walked away from it and said okay this is something that i want to take action on i just think i think we all benefit from absorbing the opinions of very smart people.

33:13And then we all get a great laugh six months into the year when, of course, it looks nothing like what most of them said. And that's part of the game. It's part of the cycle that we're all in. So, all right, you're up. All right, let's run through some charts. There's a real face blower here, Josh. I had ChartGoat, Matt Cermonaro, make me a chart showing the number of stocks that doubled this year compared to previous years. And we've got 13 year to date. And the surprising thing here is that's a lot of doubles, Josh. More than 2021, which was by all accounts a bubble-like year, 12 stocks gained 100%.

33:53Wow. So the most since 2013. How about that? Wait a minute. 13 S &P 500 stocks doubled this year? That's right, Josh. Huh. I hadn't even really thought about it. You probably don't know this. I wonder if this includes stocks that joined the S &P during the course of the year versus stocks that started out in the S &P. That is a good question. That is a good question. So I'll tell you. We don't need to know the answer. No, I'm looking at the stocks. I got white charts right up here as I always do. You have the doubles? I got the doubles. Or the top performers? I got the doubles. All right. We're going to start from the top.

34:36Sandisk, 569. What? She. Western Digital. Sandisk. 293. Seagate. Micron. These are all stocks from the 20th century. I mean, these are the stocks. Memory drives. Yeah, these are the stocks. I used to trade these stocks when I was 19 years old. Unbelievable. Number five. So Robinhood, that was added to the index this year, right? Newmont. Warner Brothers. Palantir, another one that was added. Lamb Research. Apple Lovin. Comfort. Carvana, KLA Corp. I don't even know what that is. GE Vernova. Same industry as AMAD and LAM Research. It's semi-capital equipment. And Tapestry. Do you know what that is?

35:17Yes. Tapestry is the combination of Coach and I want to say Michael Kors or Coach. It's a consumer. All right. So get this. Right now, the number is 15. So there's two. GE Vernova and Tapestry just climbed over. So we have 15 stocks year to date. John, throw that chart back on. We have 15 stocks. So still the highest is 2013. Unbelievable. Not a bad year. You know what? It's actually a great year because it's not all AI stocks. It's kind of cool that there was a Warner Brothers special situation. Remember, I'm the idiot that bought it at seven, sold it at 10. But it's kind of cool that there were a lot of other stories that worked that we're not all AI.

36:05We make this a lot. This is a day old, so it looks a little bit different. But these are the year-to-date returns for the S &P 500 stocks. And we're looking at this visual from Finviz. Josh, anything stand out to you here? Or what stands out? The more things change, the more they stay the same. What grabs your eye? Amazon, Tesla, Google, NVIDIA, Meta, Microsoft. And I know some of these stocks are decently off their highs. They still all had great years. whoa whoa whoa whoa whoa Amazon did not have a great year it's up four percent uh fine that's Apple's up eight percent yeah but Apple made a record high interest it's up eight percent there was not a great year Google had a great year I did so NVIDIA is up 40 percent year to date I didn't realize that NVIDIA was having such a strong year I guess I forgot because it got destroyed did it hit 190 today again it had a very good day but NVIDIA's had a had a roller of course over a year the stock from liberation day it fell from like 150 down to 86 dude it lost it lost a trillion dollars or something during that during that pullback it fell more than 40 percent yeah and then it went from 86 up to 210 back down to once i mean it's had it's had a hell of a year but put the chart back up um here are some big standout stocks these are my candidates for stocks of the year, Lilly and Walmart.

37:33Walmart is on the verge of joining the trillion dollar club and has completely transformed itself into a tech giant that happens to be really good at retail. And monster, monster year, not just, it didn't go up 500%, but just like this emergence of the company. And last week, officially, it began trading on the NASDAQ, which is super interesting to me. it's the largest company ever to switch exchanges. I didn't hear that. Yeah, it was New York Stock Exchange just went to NASDAQ, which I find fascinating. Lilly hit a trillion dollars, became the largest healthcare company in the world, largely on the basis of the obesity and diabetes drugs, of course.

38:22And I thought that was a really big story. JP Morgan to me is personally, it's a big story. It's one of my longest held stocks. Berkshire Hathaway, Charlie Munger died. Warren Buffett announced his retirement. Stock's going to finish the year green and fairly close to a trillion dollars or a trillion dollars. On the financials front. So JP Morgan up 36%. Wells Fargo up 35%. City up 70. So yeah, that's the thing. City. City is up 70%. Morgan up 43. Goldman up 57. And are there areas of the financials that I was long in during the year and I've since sold they didn't really work at all, actually?

39:01S &P Global, Intercontinental Exchange, New York Stock Exchange. C &M had a good year, but like capital markets did not. Well, they did OK. Here's who had a bad year. Very bad year. Salesforce, UnitedHealth, the CEO got shot in the street. The stock is still in a 30 or 40 % drawdown. I can't squint and see it. Just a horrible, horrible year for United Health. Really bad year for Nike. Really bad year for Chipotle. Target. Starbucks basically sat out the rally. It's not down, but it's not up. Target annihilated. These are some pretty big American brands. And they're not giant market caps because I barely see them on this thing, on this graphic in front of me.

39:48But those are some of the standout negative stories of the year. The other two negatives, and these are more broad, software stocks. We mentioned Salesforce, but just chart back on the whole group, Adobe, ServiceNow. Like a lot of them had a really rough year. And then the other area, and this is a little bit smaller, next to Google and Meta are the telecommunication stocks. Charter down 40%. Comcast down 21%. I don't even follow those. I had no idea Charter was that bad. Really bad. So it was a mixed year, like winners and losers, which is awesome. All right, next chart. So Matt made me this chart, and we're looking at this.

40:31On top is the S &P 500 return. So you see the 493 in gray, and you see the MAG7 in blue. And then on the bottom, you see the MAG7 contribution to the overall gain. and uh for the first time since 2021 the mag 7 was responsible for less than half of the overall move so the index is up 17 the mag 7 uh contributed 8 of that so it's still huge obviously can't not be but this is good stuff right but this is great news for the people um who stayed the course and didn't listen to all that concentration bullshit uh over the last couple of years that's kept people for making money. The people that bought into that narrative that Vanguard and BlackRock ruined capitalism and that it was a huge risk to the stock market because if anything happens to Apple and Nvidia, we're all in trouble.

41:31The people that bought that hook, line, and sinker, I think sat out a lot of the gains of this year and probably last year. And this news that not only are a lot of these mag sevens in disperse situations at this point and not moving up in lockstep along with etf inflows but actually they are not contributing to the upside of the market to the extent that they used to that concentration crying should stop like right now what do you think well i do agree that i don't like if people are using that to escape people out of the market but it is true i mean the top 10 stocks are like 45 percent of the index whatever it is So if they were to come crashing down, but like, yeah, no shit.

42:13Obviously, if they come crashing down, we're all going to be in pain. They did. They came crashing down. The world didn't end. They came crashing down in March and half of them came crashing down in November. And we know what happens. People reallocate, maybe not to another stock, but the money does not sit idle in people's brokerage accounts. It just doesn't. not a 3.75 % interest. It's not. Look at this next chart. This is a beauty. So we're looking at the S &P 500 year-to-date returns in bubble charts. And on the left-hand side, as we mentioned, you've got all of these stocks that are doubling.

42:54All the way on the other side, you've got the stocks that got killed, Trade Desk, Lulu, which we spoke about a bunch. I love this visual. This is so good. And then the middle of the pack, it's the MAG-7 names. And yeah, the market caps are huge. So they still accounted for half of the returns, basically. But I think only two of them are outperforming, Google and NVIDIA. Actually, Tesla. Tesla's having a good year. Yeah. But Microsoft, Meta, Apple, Amazon. Middle of the pack. All underperformed. Yeah. Now, given their size, I mean, it's actually great to pull out an 8 % or 10 % year and underperform the S &P.

43:32But still, on a total return basis, be a great place to have your money invested. Like Apple, I feel like, is having a decent year in that regard. Like it held up despite some pretty vicious narratives about things the company was screwing up. Yeah, 9 % total return for$4 trillion stock ain't bad. All right, let's move on to the Russell. So Duality Research has this unbelievable chart where they show the S &P 500. Okay, that's the black line, the big black line. And then they show the relative performance of the sectors on a cap-weighted basis versus an equal-weighted basis. And the big takeaway here is they also throw in the black line on the relative side, okay?

44:19And the takeaway is the Russell 2000 has not only been in large caps since the November lows, but it has actually outperformed every single S &P 500 sector. Wow. See the two black lines on the right? Yeah. That's the Russell 2000. How's that? Right. So that's a fancy way of saying regional banks had a good end to the year, basically. Like that's the driver for the Russell 2000 is rates coming down, the promise of more rate cuts next year, and the yield curve steepening sufficiently so that the regional banks got some love because that's what's really dominating the sector. It's 19%. The biggest weighting is healthcare?

45:03Industrials too. Health care is in industrials and financials. And so it's not just banks. I mean, obviously, that's not part of it. But all right, one more. One more on the Russell 2000. So on the top, we've just got the price breaking out to an all-time high. It's certainly been a minute. My God, it's been a minute. Then they show the Russell 2000 versus the S &P 500. Maybe at an inflection point, we'll see. Who knows? It's been obviously in a downtrend for years and years and years. Snapping the downtrend, potentially. Members above the 200-day looking good at the upper end of the range. What's the number?

45:36Is that 67? 67 % of Russell 2000 stocks are above their 200. Yeah, it's about as high as - That's a goddamn bull market. Yeah, it's about as high as it's been in a minute. And then lastly, the 15-day rate of change also. The Russell 2000 versus the S &P. Really what you love to see. So we've got rotation. You've got different areas of the market performing. Going into a 26, I like them. I like small caps. All right. Did you know the average car sold in the United States this year broke$50 ,000 for the first time ever? New car? Is that nuts? That just seemed – I mean, it snuck up on us. Yeah. Well, the smaller models, they don't sell them anymore.

46:19Like there's no cars under$30 ,000. They just – they don't exist. Well, I wanted to go there in a second. I don't want to go there yet. But let me just share this. The average monthly car payment – this is not a lease. This is like for people that finance their cars. The average monthly car payment in America is now$760. Yeah, that's a problem. You know how much money that is? Yeah, it's backbreaking. It's crazy. It's crazy. But that's the average, which means half or more. This is where I wanted to go with this. Obviously, this is in response to people being willing to pay it. because there's a such thing as just not getting a new car.

47:02So this is that thing where everyone – where you're like, oh, the economy is fine. The consumer is fine. I was just on the plane to wherever the hell and the plane was full and people yell back at you and Ben. You guys are out of touch. You guys, millionaires, blah, blah, blah. No, dude. People in America are buying cars on average at$50 ,000. They're not forced to. So these prices are in response to this willingness of the consumer to pay that. They might not be happy that they're paying it, but they're also not paying it at gunpoint. What are your thoughts? Ooh. Michael's out of touch. Well, let me just say, I'm very happy.

47:48I am right. I am right. I hate my Jeep. God, do I hate my Jeep. But I love the payment. It's$550 a month. Yeah. Go get another one. Watch what happens. I don't know about that, man. Like what are people supposed to do? Not pay it? Used car. Lease a car. Are the prices that much different? For a used car? Yeah. Sure. Are you kidding me? Buy the five-year-old Chevy Tahoe versus this year's Chevy Tahoe? Are you crazy? Yeah. Do you know what the average price paid for a car in early 2020 right before the pandemic hit was? I do. I read the article. Would you like to share it with the audience? Go ahead.

48:3138 ,000. So I can't do the math in my head, but that seems rapid to go from 38 to 50 that quickly. There's one more thing from here I thought was really interesting. Oh, in the third quarter, this is a journal article. In the third quarter, Americans carried$1.66 trillion in auto loans, up$300 billion compared with five years earlier. And they're not exactly doing that at the lowest interest rates in a generation. So again, this gets back to my comment. I know it pisses people off. And I know it sucks. And I know for people that are on a fixed budget, it's very painful. But where do those prices come from?

49:15Not from outer space. this is what the market will bear. And the minute that's not true, the minute that's not true, because new car sales fall off a cliff, you f***ing watch what happens to the prices. You're right. And if you think about, like people are sharing charts about auto subprime or auto delinquency payments and the chart, the data is the data. It's not great. but and also if it were that bad you wouldn't have ally which is the biggest player in this space up 32 percent year to date and at multi-year highs if things were that dire if people were really buckling and i know yeah they're pissed off i i'm pissed off it's too much um but the businesses are okay all right you're up um all right what time is it all right let's keep this real quick i just thought this was notable mark rowan the grown-up in the room in uh in private asset land is in risk reduction mode.

50:13So the FT said, Rowan's comments came in private meetings at a Goldman Sachs conference, according to the people who attended. Rowan is Apollo. That's right. He said, quote, we believe that prices are high, that rates, long rates are not likely to plummet, and that we have enhanced geopolitical risk. As a firm, we are in risk reduction mode. We preach risk reduction. Our balance sheet is in risk reduction mode. And if you're allocating to opaque areas of the market, this is probably, on the one hand, you don't love to hear this because it's like, wait a minute, what's wrong? But good. I'm sorry.

50:47What does risk reduction mean in the context of private equity and private credit? Some of the lending that they are doing, they are taking a closer look. They are pulling back. They said specifically on CLOs. They are cutting their exposure in half. They are being careful about the loans that they are making. Now, I wasn't at the conference, so I can't get into more specifics. But what's interesting is if you look at - Less lending, less allocating to certain types of loans. I would just say more, I'm putting words in there, more careful lending. Because can I say one thing? Like when somebody that manages public equities or public debt says that they're in risk reduction mode, there is a thing that they can do immediately to have that be manifested, which is to sell.

51:31That's not an option in the price. Well, they could sell companies they own to another private equity firm. So maybe, but you can't just one day be like, all right, we're reducing risk. Take down our exposure in the portfolio by 20%. That's not a thing. Okay, what you can do is stop throwing more money into certain types of investments. You can get more conservative in the types of things that you're funding, et cetera. So that's what this is really about. I think it's interesting that our friend Michael Sijmore has a sub stack, Altco's mainstream. And every week I read his post and he always updates the AGM index as he calls it.

52:11And he has a chart of all of the giant sponsors and he looks at their market cap and the market cap change and their AUM and they're all taking in money, say for one company. And yet the market is skeptical. Also as somebody who, I respect risk. You love to see the hesitation. It's healthy. Maybe not for shareholders, but in general, it's a good thing. Well, I think they need more exits and they're starting to get them on the equity side. I think this is a really critical thing. The secondary funds that have launched that have enough capital to start taking primary sponsors out of 2022, 2021, 2020 vintage.

52:53I'm getting 17 emails a day from secondary funds. Right. But it's a very vital thing that has to happen now is those funds have to raise capital, and many of them have, and they have to get active because the whole machinery breaks down if just pulling somebody out at random. If KKR made an investment in a software company in 2018 and they're still sitting in it in 2028, that's problematic. It makes it hard to raise funds from your bread and butter institutional and family office clients if they still don't have liquidity from a series that was launched a decade ago. So you need that. So you need more exits starting to get them at least on the equity side.

53:36um and then the second thing that you obviously need is for the economy to hold up and i think they'll get both next year so but but i'd like to hear that at least one of these people is talking like jamie diamond and it's and it's mark rowan so all right let's do it yeah let's do the biggest prizes of 25 um i'll go first i unfortunately i was a bit basic here so we probably have overlapping stuff i hope you were creative we do not because i had john check oh wonderful okay Yeah, I'm very smart about that. My first surprise, I believe, was the divergence in gold and Bitcoin. This is supposed to be the year of deregulation, of Cryptopalooza, of Trumpcoin, of Fartcoin, of Melaniacoin.

54:19And the spread has got to be the biggest spread of the last 10 years, I would guess. Maybe not. I don't know. Gold is up 69 % year to date, and Bitcoin is down. Unreal. And that's not even the whole story. There was a moment this year where Bitcoin was up 85 % or something like that. Chart back on. I mean, it was close. It wasn't quite that much, I don't think. Chart back on. I think it was. No. No. These were neck and neck through the first half of the year. All of the spread happened in the fall. Silver made an all-time record high today, a price it's never traded at. Platinum has been on fire.

54:58They're buying copper for some reason. and obviously gold,$4 ,500. And that$5 ,000 number seems like it's going to be a magnet. I feel like it's going to get sucked right up. I bought the silver breakout at$30. You mentioned your Warner sale. It was$70. I bought silver at$30, and I probably sold it at$36. You're like the Hunt brothers. You tried to corner silver, but you yourself got cornered. I think I sold it at$36. Whoa, whoa, whoa, whoa, whoa. That was 1A. 1B. Next chart, please. gold miners 170 are you kidding me these things never work to jan vanek never work hey if you're if you're along that i would switch that out for for actual precious metal i i would do the gold etf and get out of the gold miners etf right now you don't give gold mining etf advice next there will be no follow through in those stocks i promise you i don't care where the price goes they've gotten vertical dude the chart is like hilarious do they just luck i wish you luck i I wish you luck.

55:58What do you got? Biggest surprise for 2025, Netflix surprise bid swoops in when it looks like Paramount is going to run away with HBO, arguably the greatest creator of streaming content. And Netflix, which does not do acquisitions, came over the top with a huge bid. And it seems like a prepackaged deal that was already negotiated. And everybody loved it on both sides. And they went to the White House. They got Trump's blessing. I won't f*** this up for you guys. That's just a monumental moment. And they may not end up with it. We don't know for sure because Paramount's fighting like hell. But right now, my best guess is that they will end up with it.

56:48And now Netflix plus HBO,$50 a month or whatever. So if you don't like your car payments, wait till you see your Tony Soprano payments. Anyway, that's my biggest surprise of this year. Yeah. That's a good one. Okay, what's my next one? Oh, all right. So I feel like, chart off for it, please. Let me just set this up. Going into 2025, I feel like it was peak. Why the F do I own international stocks? The volume got turned up to 11. Chart on. Smashed. Amazing. Did not have this in my parlay. Nobody did, and that's why it worked. Yeah. All right. Back here. Okay. My second big surprise was tariffs ended up being a fizzling narrative for the stock market by the third quarter.

57:39I'm not saying that they didn't matter. And I'm not saying that they weren't impactful on Main Street, on companies, on small businesses. I understand that they had a big impact, but as a stock market driving force, even when Trump would send these random erratic tweets about new tariffs that nobody had ever heard about, the market just completely tuned it out by Q3. Remember Taco? Right. What is that? Trump always caves? What's the O? Caves out? Chickens out. Orchard? Trump always caves orphan. Trump always chickens out. But the market just – it's not that the market didn't believe that there would be tariffs.

58:21The market said, you know what? We think that these companies can handle them and figure it out, and they did. I mean you just look at the earnings growth this year. They did figure it out. We got through it, and it just stopped being a market narrative, and I think that was probably – Shocking at the time. I think it's the biggest – I think it's tied with Netflix as the biggest surprise of the year for most market participants. Okay. My last one, shout out to John for being so nimble here in the chat, being able to make this happen. I ruined this. I ruined this. I had him show it earlier. Chardon.

58:58So I made him pop this on when Sam was talking about AI and the bubble. It's remarkable how quickly this narrative has shifted. All right, nobody's worried about the AI bubble anymore. Wonderful. Great. came along. Surprises that people stopped saying bubble so quickly. They'll be right back at it. Yeah, yeah. Yeah, but like that, show that back for a sec. Like, dude, that is straight up, straight down. That red line collapsing, yeah. Like straight up, straight down. And that is the number of mentions in Bloomberg articles of an AI bubble. The straight up happened, shut off, please. That coincided with the September announcement of Oracle when Oracle stock was up 37 % in a day and every announcement was sending these stocks 13 % higher.

59:44That was some bubble shit. And just give it a minute and it reversed all of it. Yeah, I think we're going to get it back in January. So do I. All right, number three surprise. Robinhood became the stock of the year. Up 220 % at its high, up 250 % on the year. Not from its all-time low, just on the year. 250 % at its peak. The XLF for context did plus 13.7%. So this was the most incredible stock of the year. It was the number one performing S &P 500 name as of today. Probably we'll finish that way. It actually joined the S &P 500 this September. Ironically, it replaced Caesars. So we swapped out one casino for another.

1:00:36And I don't think there's any doubt. I don't think anyone can doubt that Robinhood was like the defining financial stock of the year. It's Trumpism. It's anything goes. It's the regulators aren't so worried about this stuff anymore. No one's going to bust your balls. You want to launch something. You want to do crypto. You want to buy somebody. Do what you want to do. And no stock personifies that deregulatory mentality better than Robinhood. And my hat is off to them. It's not just about the stock price. The fundamentals there have been incredible. Report after report, they know what they're doing.

1:01:16They're taking care of business. And if you're a shareholder in that company, you are having a better year than almost any other stock than any other stock in the S &P. So I thought that was really cool. All right. Those are the big – did you have one more or we got them all? No, that's it. Good stuff. All right. All right. Guys, hit us in the chat with some of your biggest surprises if we missed any big ones or any obvious ones, and we will definitely get to those. We'll read those post-show. All right. What do we have left? We're making the case for Japanese stocks. What's going on? Yeah. So in light of the fact that this was a great year for international stocks, I want to start off next year correctly by top-ticking.

1:01:58No, I want to stop. I think this is going to keep going. This is the best. I think it's the best country market chart there is, the Japanese stock market. Just incredible. I think it went up 26 % this year, the Nikkei 225. So the Nikkei 225 is the Dow Jones of Japan. It's 225 stocks, not 30. but that's the way to think about that. It's very heavily biased toward big industrial companies and banks. I also think it might be price-weighted. It is price-weighted like the Dow. That's correct. Very good, Michael. Thank you. The Topics is more like the S &P 500. It's thousands of stocks, like 2 ,000 stocks, but it's got the tech, it's got the everything else, and it's a little bit more inward looking.

1:02:50It's got the consumer plays in Japan. in there. Whereas the Nikkei 225 is like big global exporters are more dominant. So that's the way to think about those two. The Nikkei is up 26 % this year. They actually had two interest rate hikes, 50 basis points in January and last week, another 25 basis points. And the 10-year yield in Japan went from 1 % to 2%. And that's, I mean, it's radical in Japanese terms. Anyway, the Nikkei crushed the S &P 500. The journal talks about the global tech supply chain, AI optimism, corporate governance reforms, which you and I talked about on the show, where they told all the companies in the stock market, get your shit together.

1:03:36Too many of you are selling below book market, a book value, either make money for shareholders or get off the exchange. All that shit worked. And now they have a new prime minister who's doing a massive three and a half percent of GDP fiscal stimulus plan. And that's why yields are going higher for Japanese bonds. And I think the stock market's reacting positively to that too. They're spending a lot of money internally within the country. And here's the punchline. it's still cheap. It's 16 times earnings. So despite the fact that it's up so much, this is still a way on a valuation basis to diversify away from the S &P, which is 21-22.

1:04:23Let's do some charts. Here's the Nikkei 225 five-year performance. This is a home run. This is a home run. This is a double. 50 ,412 as of today on the Nikkei. Let's do the topics. not as pronounced, but still pretty damn good from 2000 to 3400 in the last five years. I got a wisdom tree hedged Japan. This is the DXJ. This is smaller than I thought. I think it's 5 billion in assets. Are you surprised by that? Yes. I thought it was bigger, didn't you? Yes, it probably was at one point. All right. This looks phenomenal. This is basically buying Japan, but hedging out the currency fluctuations between the yen and owning it in dollar terms.

1:05:11Here, let me do this. These are the big – these are – what are these? Oh, FNUC. I'm a huge FNUC guy. Oh, these are the top 10 holdings. No, I don't know what this is. Great. These are big-time Japanese stocks here, SoftBank. I don't know. big time japanese stocks a couple more things on this berkshire hathaway once again was five years early to this trade they made their first purchases of japanese stocks in 2019 they bought five percent stakes in each of the biggest five trading houses which is a japanese business um they're like basically merchants for global trade why do we call them trading houses is that because the newspaper calls that's what they call them but they're basically import export merchants and uh what it doesn't matter um between 21 and 23 berkshire increased their stakes they went from five percent to nine percent in each of these giant five companies and then from 24 to 25 they were buying even more um they got management approval from these companies to go above 10 percent limits in Mitsubishi and Mitsui.

1:06:28So Berkshire Hathaway is over 10 percent in those two. It's nine percent in Sumitomo, Marabeni, and eight and a half percent in the Tochu. And I want to show you some more big time Japanese stocks. Riveting stuff, Josh. All right. Sony. No, not so great. Toyota. This one looks awesome. Big breakout this year. Here's Mitsubishi, UFJ, which is the whole conglomerate, not just the engines. Here's Mizuho Financial Group, friend of the show. Dan Dolev is an analyst for them. Here's Nomura, another Japanese investment bank. Looks amazing. Here is Sumitomo, another giant financial group. Huge move in the stock, basically 12 to 20.

1:07:16And here's Honda. Not so great. Toyota looks better. All right. JC would be proud that you're showing me. And a Japanese pharma here at Takeda. This looks like it's about to break out. So that's the story with Japan. And again, I think, yes, they're up a lot over five years. No, they're not up that much over 30 years. And quite frankly, still a much cheaper market than the US with a lot of fundamental drivers. That's my make the case. Are you convinced? I like it. I think it's Japanese. I'm turning Japanese. I really think so. All right. Mystery chart time. Okay. So these are two industry groups within a sector.

1:07:58And we spoke about them today in great detail. And one is obviously doing a lot better than the other. This is semiconductors versus software. You're on the right track, but wrong sector. F*** you. All right. Capital markets versus banks. All right. Very good. I got it. Reveal? Not quite, but basically. Reveal. Banks versus alternative asset managers. Look at that spread, dude. All right. So I didn't get it. I mean, you were in the right sector. That's close enough. Look at this spread. It's not horseshoes and hand-gradeds. You got to get it. All right. Let me see that. Let me take a look at this.

1:08:33Dude, 31 % for the banks and 9 % for their counterparts. That's wild, right? I thought this was the year of alts. What the hell happened? I thought this was it. Halfway through the year, it looked that way. The flows were good. Like the flows weren't bad, but investors are asking questions. The flows were good. The headline risk was bad. That's the way I would phrase that. So this is either, this goes one of two directions. It either dissipates and these stocks catch up or it gets worse and they go way lower. And we're going to find out how much the banks are on the hook for with all this money they're helping finance all these private equity transactions.

1:09:16questions the the fundamentals of these loans that they're making like the the loans are fine at least the loans the marks that they're giving them like the default yeah no but they have to report that stuff and like so far there's nothing there so we'll see great i agree the market thinks uh there's a shoe about to drop so and i i wouldn't know i'll tell you when it happens i wouldn't be the one that knows all right guys thank you so much for watching thank you for listening for everybody who joined us on the live once again we appreciate you don't forget tomorrow is wednesday All new edition of Animal Spirits with Michael and Ben.

1:09:46We'll do Ask the Compound. And we will not have a compound in Friends this week because of Christmas. Yeah. Merry Christmas, everybody. So we're not going to have an Ask the Compound either because Christmas is Thursday. So forget everything I just said. All right, guys. Thank you so much for watching. Thank you for listening. Merry Christmas. We appreciate you. We'll talk to you soon.

1:10:12Thank you.