In short
Long-term U.S. Treasury yield “breakout” and what it implies for stocks; off-balance-sheet lease obligations tied to AI/data-center buildouts; whether the “SaaSpocalypse” in enterprise software is easing; and Bill Ackman’s latest investing vehicles and portfolio.
Guests/backgrounds
Bill Ackman is discussed as the investment subject (Pershing Square). Other recurring hosts are Mike and Josh (co-hosts/analysts). The episode cites Jeff Cox (CNBC) and Anshul Pradhan (Berkeley’s Capitol), plus Robin Brooks (rates strategist).
Key claims
Long-end yields rose gradually (not a sudden shock) and are being driven by deficit concerns, corporate debt issuance, and global “debt binge” vulnerability; the 10-year matters more than the 30-year and is still range-bound. Off-balance-sheet data-center lease obligations (e.g., Meta’s Hyperion) are large but contractually modelable; markets appear to be “pricing” them via credit spreads/hedging rather than ignoring them. Enterprise SaaS selloffs may be stabilizing after deal/news catalysts (e.g., Workday). Ackman is shifting toward “permanent capital” vehicles.
Notable examples
U.S. July budget shortfall $432.3B; 10-year sideways since Sept 2023; Meta disclosed $347B lease obligations not yet started (rent begins 2029); Meta stock reaction vs Microsoft/Amazon; Anthropic revenue ~$65B annual run rate; Silver Lake talks to acquire Workday (stock +19%); Ackman top holdings include Microsoft (~12%), Uber (~12%), Meta (~11%), Brookfield (~10%), Amazon (~8%), Restaurant Brands (~8%), Visa/Mastercard, and a new Netflix position (~4.9%).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOCurating Financial Topics
0:45 to 3:15
Discussion on how the podcast curates content differently from financial TV.
“So Michael and I went to dig through the rubble and see what we could pull out of there.”
Lazy Boy's Earnings Report
3:15 to 4:00
The hosts discuss Lazy Boy's recent earnings and its relevance in the market.
“Did you know that Lazy Boy is a publicly traded company?”
Bond Yields Discussion
5:02 to 6:14
Exploration of the recent trends in bond yields and their effects on the stock market.
“Before we even explain what's going on, I want to start with a question for you.”
Factors Influencing Bond Yields
6:14 to 8:12
Discussion on various factors affecting the increase in bond yields, including corporate debt.
“I'm going to quote Jeff Cox, who writes, great reporter, veteran at CNBC.com.”
Long-Term Economic Outlook
8:12 to 10:33
Hosts analyze the future of long-term yields and their implications for risk assets.
“Depending on where you sit, you may not buy that argument for why, but what you can't argue is that this is a persistent rise in rates, meaning the selling of long-term bonds.”
Global Debt and Political Instability
10:33 to 14:01
Examination of how global debt levels and political instability impact markets.
“So this comes from Robin Brooks, who is, I'm not going to say perma bear, but definitely more on the pessimistic side.”
Economic Overview and Debt Concerns
14:01 to 16:47
Exploration of current economic conditions and implications of rising debt levels.
“And they're happening with the backdrop of an AI boom and potentially higher economic growth.”
Market Reactions to Interest Rates
16:47 to 18:55
Discussion on the impact of interest rates and market behavior during summer.
“I mean, that's really what we're – It's throwing journalists and pundits.”
Off-Balance Sheet Financing Explained
18:55 to 23:30
Explanation of off-balance sheet financing and its implications for companies like Meta.
“And we spent all this time talking about CapEx, how it's supposed to reach a trillion dollars.”
Concerns Over Meta's Financial Obligations
23:30 to 28:09
Analysis of Meta's financial obligations and their impact on stock valuation amidst legal issues.
“Not all of this compute and all of these data centers are going to turn out to be good projects.”
Show all 27 chapters
Market Positioning and Default Swaps
28:09 to 29:18
Learn about market positioning strategies and the implications of credit default swaps on major tech companies.
“Yeah, I mean this is – look at this, dude.”
Reflexivity and Technology Stocks
29:18 to 31:48
Explore the concept of reflexivity in stock prices and its impact on tech companies like Anthropic.
“Do any of these little nudges up in the other names, Meta, Alphabet, Microsoft, Amazon, NVIDIA, do any of these other squiggly lines look like they're finished going higher?”
Workday Acquisition Rumors
31:48 to 34:55
Discuss the recent rumors surrounding Workday and the stock market's reaction to potential acquisitions.
“This is the thing that's enabling us to look past or not even look past, but to mentally be comfortable with a trillion dollars in annual CapEx in 2027.”
AI Industry Messaging Changes
34:55 to 37:19
Analyze how leading figures in AI have adjusted their messaging and its effect on the market perception of the SaaS industry.
“I don't think that's the case right now because while the share prices are not back at 52-week highs for most of these names, they're not on the lows and they've stopped falling.”
Understanding Enterprise SaaS
37:19 to 39:40
Delve into the reasons behind the persistence of enterprise SaaS and the need for corporate accountability.
“And instead of the news cycle being about how great OpenAI's products are, it's how crazy is Sam Altman?”
Navigating Market Volatility
39:40 to 40:45
Learn strategies for dealing with market volatility and the challenges it poses to investors.
“And Salesforce is the perfect entity that you can yell at or sue when something goes wrong.”
Current Stock Market Trends
40:45 to 42:00
Examine the current trends in the stock market and the indicators of potential future movements.
“Andy Thrasher shows it a little bit differently, looking at the number of one-month lows with large, mid, and small, and then all.”
Market Trends and Anomalies
42:00 to 44:28
Discussion on market indicators and unusual trading patterns in the current year.
“showing the cap-weighted index in black with the blue equal weight and underneath in the pink.”
Introducing Bill Ackman
44:28 to 45:24
Insight into Bill Ackman's controversial character and recent ventures.
“I think we'll look back at this and have so many examples of things that will be relevant in the future or obscure things where we're like, hey, remember that actually happened before?”
Ackman's Portfolio Changes
45:24 to 48:20
Analysis of Bill Ackman's recent portfolio changes and investment philosophy.
“I know that he's very controversial and I know he aggravates people.”
Evaluating Major Holdings
48:20 to 52:29
Examination of Bill Ackman's major stock holdings and their market performance.
“it's just been like an Ackman-heavy period of time.”
Understanding Ackman's Investment Vehicles
52:29 to 56:00
Overview of Ackman's investment vehicles and their structure for long-term capital.
“to, if you, let's say you look at this portfolio, you look at the track record of Bill Ackman, you just like the guy, you like his ideas.”
The Complexities of Pershing Square
56:00 to 58:42
Discussion on the intricacies of Bill Ackman's Pershing Square investment strategies and structures.
“What he should do is he should buy back stock.”
Evaluating Ackman's Performance Claims
58:42 to 1:01:18
Analysis of Bill Ackman's claimed performance metrics and the realistic returns for investors.
“Not quite what was going on at Berkshire.”
Market Conditions and Investment Timing
1:01:18 to 1:04:14
Considerations for investors regarding current market conditions and timing for new positions.
“And I respect that a lot more than the parade of mutual fund managers who are 300 basis points away from the S &P in one direction or the other.”
Spotlight on Spotify and Market Strategy
1:04:14 to 1:09:44
Discussion on Spotify's market position, business model, and potential for growth.
“I think I could guess what you bought without even – hold on.”
Reflections on Challenges and the Final Season of FX's The Bear
1:11:06 to 1:11:31
Discussion focuses on personal challenges and the final season of a popular show.
Transcript
Automatic transcript. May contain errors.0:14Yeah. Look at us. We look good, Mike. Look at you. No, we like we. We're doing good. Michael and I had to go pick up the pieces of our demolished little pocket Long Island office today. For those who are not in the know, a car drove through a plate glass window and wrecked our office. But a lot of things survived. It wasn't our car. A lot of things survived. So Michael and I went to dig through the rubble and see what we could pull out of there. Do you know I got an injury during the rubble cleaning? I was wiping off something and a piece of glass from the car lodged itself in my finger. Oh, here we go.
1:03This white guy's gonna sue me now. I think it was a Honda. Just by the damage on my finger. It felt like Honda. Don't sue me. Alright. Holy cow, we have so much to do today. I'm just, I'm looking at the doc and I'm realizing there's a lot happening. I do want to say one thing before we say hello to the chat. the difference between what we do and financial tv an hour of financial tv they literally have to get to every single thing happening in the market like of of note we're not bound by that we're not we're not television this is something different so a lot of people are like oh how come you don't talk about this or how come you miss that yeah there's by definition there's a lot that we're going to miss.
1:53I don't want to say we're curating, I think, or we're filtering. I think what we're doing is curating. Like we're not, we're not a filter. And we're saying like, we're only saying the things that matter and everything that we don't mention doesn't matter. That's not what this is. When I say curating, we're trying to pick the things that we think are interesting or important. And I mean, it's hard. Most of a lot of things I'm just feel deeply unqualified to talk about even things that we talk about on here like i don't know everything about everything that's a really good point too and uh guys we don't want to come on and talk about things that we have no idea what we're saying or if we do we'll try to treat it in a funny way and we'll tell you this is like out of our lane but the market seemed to care about this so here it is um but so that's that's how we're coming up with what we're going to do a lot of you guys are like oh I like seeing the topics on the screen we're doing something totally different uh we will have topics on the screen but they'll take the form of headlines and we're working on our lower third it's getting a little bit better each week um but having that static one third of the screen just list the six or seven things we're going to talk about is not a great use of on-screen real estate so bear with us as we evolve but uh things are things are coming along really nicely I think.
3:15Anything to add to that? Did you know that Lazy Boy is a publicly traded company? I did know that. They just reported earnings in the after hours. I said, Lazy Boy? They make futons? LZB? That's right, Josh. Great poll. The stock is cratering. But these sofas... In the housing boom, that was like a GPU stock. in 2005, 6, 7, people were trading housing plays the way that we trade memory stocks now. Ethan Allen was a rock and roll stock. Restoration Hardware. Lazy Boy. These were stocks that moved. That's the only reason I know it. They're still doing$2 billion in sales. Big company. I have no idea.
3:58Let's get to it. My chair is a Lazy Boy. No shit. How about that? Guys, we have a sponsor tonight. Right. Franklin Templeton. Michael, tell us all about it. Josh, do you think target date funds are all the same? Think again, dummy. Franklin Templeton's retirement advantage target date funds feature a flexible glide path and can adapt to changing markets by adjusting stock and bond weightings at any time. And unlike most target dates, Josh, retirement advantage funds aren't simply bundles of other funds. Franklin Templeton's portfolio management team has comprehensive oversight of their underlying strategies.
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5:11Well done, sir. All right. Let's talk bond yields. Let me just start with it. Before we even explain what's going on, I want to start with a question for you. Are you surprised at how well the stock market has held up so far given the rise in bond yields? basically that's been taking place in slow motion all summer? Or are you not surprised at all? That's the key. You said it. Slow motion. For now, so far. Well, yeah. That's what I'm responding to your question about so far. So we went from 4 % at the beginning of March up to 4.7%, and it's been a slow, steady grind. If it was a more violent move, if it happened in two weeks instead of five months, then the stock market would be a lot lower.
6:00But the market has had plenty of time to digest higher interest rates. And guess what? I'm not surprised only because the stock market has responded to earnings, and it doesn't seem particularly concerned with yields right now. Okay. So this is happening around the world. It is not just the treasury bond. I want to start with that. I'm going to quote Jeff Cox, who writes, great reporter, veteran at CNBC.com. He says the 30-year bond in particular is trading around its highest level since 2003. I had it as 2007, but I might be looking at the 20 and 30-year, like the long bond, the average, and he's just looking at the 30.
6:43But I had it as the highest in 19 years. Either way. The 30 is 07, but either way, keep going. Okay. So basically, it's$40 trillion in government debt right now. The longer term debt is where the yields are really moving higher. And this is what Jeff has to say after speaking with a bunch of Wall Street shops. Fixed income strategists described the run that began in June to a number of variables. Intensified concern over a budget deficit The budget deficit is now bigger year to date Than for all of 2025 Like we blew through last year So we'll just put that out there Inflation in an ominous holding pattern I think it's not quite so ominous But that's another thing Moderating data A rash of corporate debt issuance This is the other thing people are saying Corporates have been floating a lot of debt I think 20 or 30 % more than in all of last year, year to date.
7:50And a lot of that has to do with the AI data center bill, which we won't get into. Why would that push government yields higher? Because it's competition. These are AAA rated bonds and they have a higher yield. And so when people choose to buy alphabet paper instead of a treasury bond, theoretically, that's one less buyer. Okay. Depending on where you sit, you may not buy that argument for why, but what you can't argue is that this is a persistent rise in rates, meaning the selling of long-term bonds. So let me quote Anshul Pradhan, who is the head of U.S. rates research at Berkeley's Capitol, said on Monday, These are not new forces, and the rise in long-term yields has been gradual rather than sudden.
8:39What is notable today is not the existence of these pressures, but that they appear strong enough to overwhelm individual soft data releases. Three independent releases argued for lower yields this month. Long-end yields moved higher anyway. So that's the interesting thing. The economic data is either surprising to the downside or coming in soft versus expectations. Not the government data, but when they talk about independent. So we get 100 different reports every month. And I think that's the surprise. Wait a minute. The economy is fine, but the data is surprising to the downside. Why is the long end climbing?
9:23And the reason is people would rather be doing other things than holding 30-year treasury bonds. What are your thoughts about that summation of what's causing things? Yeah, I think that's mostly right. But here's more important. The 10-year is so much more important than the 30-year. I know that's where the term premium is and that's where the economic uncertainty and the deficit concerns is all out there. but that's a tiny part of the overall government pie. It's 1 % of new issuance. I think it's like 5 % or something like that of outstanding bonds. It's a much smaller piece of the market. And most asset prices are priced off of the 10-year and not the 30-year.
10:07Mortgages, everything keys off of the 10-year. And the 10-year is still within range. It's been going sideways. Yeah, it's at the upper end of its range, but it's been going sideways in this range since September of 2023. So if you tell me, if you could tell me, okay, I know with certainty that the 10-year will break out of its range and it'll be 5-5 by the winter, I would say sell risk assets. But I would say that that would put pressure on risk assets. Absolutely. And that's not where we are. Well, I'm really glad you brought that up because that is where the Bears now believe the puck is going, the 10-year.
10:39Could be, yeah. Chart on. Okay. Okay. So this comes from Robin Brooks, who is, I'm not going to say perma bear, but definitely more on the pessimistic side. Is he British? Got him. I don't know, but first name Robin. Do we name boys Robin in the United States? Not since Winnie the Pooh. And that was Christopher Robbins. Yes. So that wasn't even his first name. Either way. I think the last male Robin born in the United States was Batman's sidekick. No, Williams. Oh, that's a good call. That's a good call. Anyway, we're going to go ahead and say allegedly British. But he's a super thoughtful guy, great writer.
11:26And I wanted to show you this chart while we have it up. This is 10-year, 10-year forward government bond yields. And he's showing you all over the world with one major exception, Switzerland. this is happening. And what is a 10-year, 10-year forward? It's what the market thinks the 10-year yield will be 10 years from now. And so you're seeing all these yields clustering between 4 % and 7%. And this is every continent, every developed market. The UK is in here. The US is in here. And so let me just quote Robin because he's smarter than us on this topic and certainly has a better handle on it. Ten-year, ten-year forward bond yields, what markets price for the ten-year yield ten years from now, are rising all over the place, but they're up the most where the stock of debt is high and political dysfunction is acute.
12:22I fingered Japan as deeply distressed in Sunday's live stream. He didn't want to Japan? You're such a child. As it happens, Japan's ten-year, ten-year forward yield is up most over the past ten days, followed by the UK, France, and Italy. Markets are homing in on the most vulnerable places. There's obviously the question of what sparked the sell-off. U.S. yield curve has seen very pronounced bear steepening since the last Fed meeting on July 29th. That's been dragging up the long-term yields everywhere. Spike in oil. Bonds don't like instability. The war in the Persian Gulf is still on fire. This kind of finger-pointing misses the point, in my opinion.
13:03When you have a lot of debt, run unsustainably large budget deficits, you're vulnerable to any old shock that comes along. It's not about the shock, but instead the mess we are making of fiscal policy on a global scale. So it's a debt binge everywhere. Nobody thinks there's any consequences all at once. Now you have corporates issuing bonds at the highest rates that we've seen in a really long time. and it's just, it's become too, you're right, it's become too much. Well, an optimistic take, and he's right. Like everything that he said is right, that the countries that have the most perceived political instability, the highest deficits, like they're being punished the hardest.
13:48The other point is these yields are kind of normal. We're not talking about 7%, 8%, 9 % where it's like, holy shit, guys, we have a major issue. We're going to have like a funding crisis. That's not what's happening. These are pretty normal rates And they're happening with the backdrop of an AI boom and potentially higher economic growth. So I don't think it's like 100 % glass half empty. Back to Jeff Cox. The US saw a budget shortfall of, listen to these numbers,$432.3 billion in July. The widest single month gain since March of 2021. and that would lock in a$2 trillion deficit for the full fiscal year, which ends on September 30th.
14:32So I mentioned$40 trillion is total government debt, and the public portion of that$40 trillion is about to hit 100 % of GDP. Well, goodness for investors. One more. Debt financing costs. This is the other big one. 1.1 trillion through July will hit 1.37 trillion. That's just the cost of servicing debt. That's up 84 billion over 2025. And we're only in August. The government will now spend more money on debt financing, not paying down debt, paying the interest on the debt than anything else in the budget other than Medicare and social security. Who are they paying the interest to my friend us the holders of the debt so and it's increasingly it's increasing spider-man meme it's increasingly u.s investors so if the government wants to keep uh funding this party of spending i don't know that i'm all for it but it's i don't i don't know i don't know how bad it is i listen i get the concerns we're going to talk about we're going to talk about corporate debt and balance sheet stuff in a second i would just lastly point out u.s companies have issued 1.7 trillion in bonds year to date.
15:48That's 27 % above last year and more than all of last year combined. That is why what's with all the spending? So like drunken sailors, I say, well, that's debt, not spending debt issuance to fuel the spending. Um, so you know what? And I said this on, I said this on TV on a Monday, I did closing bell until Adyar Denny tells me to worry about bond vigilantes, I'm not going to. And he coined the term and he got the last word in this piece. The bond market is actually finally working the way it should work. It's allocating capital efficiently. It wasn't doing that when the Fed was rigging the bond market by keeping the yield close to zero.
16:30So this is kind of back to market driven interest rates. He's like sanguine about it. So my answer is that I am too. It looks normal. This is what a textbook yield curve looks like. Fine. It's fine. I think that's right. I just think the five handle is throwing people because of how long it's been. Who's it throwing? I mean, that's really what we're – It's throwing journalists and pundits. The market is not throwing. Oh, people in the chat are saying this. Do you think it's just because like it's like a slow summer week or two, like everyone's in the Hamptons. The news flow has been slow. Earnings are mostly over.
17:06and so they're using this as a way to get attention? Oh, I thought you said that's why the markets are responding. I was going to say people are always on their phone. I don't think that matters where people are, if they're in their hands or not. No, I think it's – listen, I would expect this story to be covered regardless of the time of the year. It is a story. This is a market-moving story. I get it. Let's blaze through the charts real quick. Here's the 10-year treasury just to set the table for you guys. To Michael's point, much ado about – I'm sorry. You're right. My bad. Much ado about nothing.
17:35We are up 51 basis points on the 10-year, but we are 25 basis points below the 2023 high. Thanks to ChartKid, Matt, and Sean for these visuals. Here's the 30-year that everyone's carrying on about. Look, undeniably, it's at the upper end of its range over the last five years. But what the hell does the last five years mean? We came out of a pandemic. It was a totally abnormal starting point. Here's the yield curve one more time. and again to michael's point this the yield curve is supposed to curve it's it should look like this i don't think we want to see it race to six percent um but so long as it's somewhat gradual uh these are not like insane rates for a 30-year uh uh bond like the the bond holder should demand 5 % or more to lock their money up for that period of time.
18:32Yeah. All right. Sticking with the topic of debt concerns,
18:41the off balance sheet stuff is going to be a perpetual topic until, I don't know, it's not going away. It's just starting, frankly. So the Wall Street Journal did a story about this and they showed the percentage change from a year earlier. And we spent all this time talking about CapEx, how it's supposed to reach a trillion dollars. Can you explain what it is, off balance sheet for the viewers? So Meta is a great example. Meta is building a data center, the Hyperion Data Center in Louisiana, but they are not paying for it directly. It is not going on their balance sheet. And therefore, theoretically, bondholders are not punishing them or investors are not punishing them because it's not on their balance sheet.
19:23So Blue Owl and other investors, and there's a separate entity, they take in all the credit risk. Of course, Meta is backstopping this. So it doesn't matter. Off balance sheet, on balance sheet, this is not catching anybody by surprise. In 2008, when all this shit blew up and you looked at all the insurance company holdings that were holding all this toxic paper, everybody was like, wait, how the hell did we get here? So - Or like, what is it? Like, what is a CDO squared? Jared, what are these instruments? Today, we talk about them all the time. In comparison, this is way out in the open. Nobody has caught off guard.
19:58It's the opposite. So this in and of itself being like the next thing to blow up the market, I suppose it could be, but it's usually not the thing that is staring us right in the face. So anyway, we speak about the CapEx and you look at the numbers, you say, holy cow, that's a big number. They look small in comparison, at least in terms of like the year over year change for for what's going on off the balance sheet. And Apple, for example, I'm sorry, Alphabet, for example, look at this. So the CapEx, and these are bigger numbers, but the off balance obligations are up 800 % year over year. And here's how the accounting rules work.
20:33So I spoke about Meta earlier. Their Hyperion lease obligation will remain off balance sheet until it starts paying rent. All right. Again, this is on the calendar. I think it's 2029. So this is something that every analyst in the world can model. It's in the price of the stock. It's in the price of the credit default swaps. Nevertheless, these are large, large numbers. Are you surprised that the market seems to be less concerned with it? Or do you think that, no, actually, meta stockholders are definitely concerned with this? No, I think the market is concerned with it. And I think it's kept a lid on stocks like meta.
21:10and it's been problematic for FaceTiming me for a change. It's like talking to a wall. I almost want to take the call and do this with him on air right now. I think he has an alarm set to call us Tuesday at 5.30. I think he has a mental block about this. We tell him, I don't know. How long have we been doing this show? Seven years? I think he has a disease. Tuesday at 5 o 'clock? I'm going to kill this guy. All right. The purpose of doing these things off balance sheet is really interesting too. So let's say you're Blackstone or Blue Owl or KKR or whoever is going to finance a gigantic data center project, right?
21:58Because they're not building little ones. They're only building gigantic ones at this stage in the game. you go to the people who are going to fund this with their investments and their fixed income investors they're not like stock people they just want the money back plus interest you go to them and say the tenant is meta and meta actually is not going to take on any debt but they're going to own a little bit of equity in the project and they're willing to commit to like 10 years lease. I don't know what the details are for the one that we're talking about. But like Meta is saying we will pay the rent for 10 years.
22:39Okay. That's a really easy sale to people that are private credit portfolio managers because they look at it like, all right, basically it's a Meta bond, but it's not. It's not clear because we've never seen a big one of these end up in court. Who's really finally, finally, finally, finally on the hook? What we do know is these are multi-billion dollar projects. They're extremely complicated, expensive. They take a really long time. And we haven't seen a tech giant in a courtroom battle against an East Coast private equity firm that's like, what the fuck? What do you mean you're pulling out? What do you mean you're not using the data?
23:24What do you mean you don't care? Like we've never seen it. I have to believe this is going to happen at some point. Not all of this compute and all of these data centers are going to turn out to be good projects. It's just there's not really a – there are laws on the books, but there's not really a practical roadmap for what these things look like should they come undone. I think, and this is definitely outside my lane, that all of the terms and options of the deal are very much specified in the contract. You can only imagine the amount of legal fees that's going on to put these things together.
23:59Yeah, Meta disclosed$347 billion in total obligations for leases that haven't kicked in yet. I hope they're good for them all. I really do. I read an article today that Meta is probably going to lose. There are 29 states suing them over child protection. they might have to pay as much as$200 billion in fines. And this is not federal where you can call Donald Trump and get yourself out of it. This is states. If they have to pay hundreds of billions in fines, what does that mean for all the ratings on all this off-balance sheet stuff? Not to mention MetaZone debt. It can't be good. It can't be considered a positive development.
24:50it. The stock looks really shitty. John, throw up the earnings reaction. So I stole this chart format from Warren Pons and Fernando. They do great work and they've created this chart before looking at what happens to these stocks going into and coming out of earnings. All right. So time zero is you're lining up when they all reported and you see a big, big, big difference between Microsoft, which got the gigantic boost from the cloud data. Same thing with Amazon versus Meta. Meta can't get out of its own way. The stock is approaching recent lows. It looks terrible. I think people are just looking at this and saying, remember when Meta was like this asset light, high earnings growth, crazy profit margin thing?
25:36Man, I wish we had those days back. I wish I, remember when this was an advertising company? and now it's a data factory business and we think at some point they'll cry uncle and rent all this compute out and that'll be the thing that turns the stock let me ask you this but now they're saying they're not doing that they're saying we're going to use the compute ourselves you are 350 billion dollars worth of leases are you sure that's probably the thing that that the last lever they can pull is to say, all right, we probably don't need all of this compute. Here's the deal with Amazon or something.
26:18I think the likelihood of – I think Meta's earnings are fairly predictable, right? It is not like a – it is the biggest advertising machine on the planet except for Google. You more or less know what you're going to get. You don't know what the spend is going to be, but you more or less – you could triangulate around their earnings, okay? So right now, it's trading at 17 times forward earnings as all this bad news is It's working its way through the Python. How low can this thing get? Can it get down to 13 times? Could it get down to like Berkshire taking a stake in it? The thing is that you can't model panic.
26:53And I'm not suggesting there's going to be a panic in Meta stock. But there was a panic in Oracle stock. It's ongoing. It's a slow motion panic. And Oracle's got a great bit. You know, Oracle's got an amazing business. I don't know if it's as good a business I don't know if it's as good a business as Meta's but it's a great business people have made money as Oracle shareholders for decades and there was a panic in the equity and it was caused by the debt you're right John let's talk about Exhibit 2 from Bank of America so they say hyperscaler US investment grade index debt can go from$288 billion at year end 25 to$659 billion by year in 27.
27:37I guess it's conceivable that they could pass the big six US banks, which is absurd. And again, this is what's on the balance sheet. This is them tapping the public debt market. And Josh, you're right. This is obviously weighing on some names more so than others. Oracle, for example. So Oracle has a ton of debt, a ton, ton, ton of debt. They are super tied up with the contract with OpenAI, and the credit default swaps look nothing like the other hyperscalers. So I don't – Yeah, I mean this is – look at this, dude. All right. So I don't necessarily think that the market is legitimately pricing in even the potential of a default with Meta or even Oracle for that matter.
28:24I think, and again, outside my lane, I think a lot of this is hedging and trading and a quick way to bet against the AI trade. I don't think that anybody is actually buying a five-year credit default swap, paying a million dollars to protect 10 million. So for Oracle, for example, all right, that's 211 basis points. It's$200 ,000 a year on$10 million worth of protection. It's going to cost you a million dollars over five years. I don't think anybody is actually laying that out. I think it's more of a trading vehicle. What do you think? Right. So people are positioning because if there is a crisis, they'll be positioned.
29:04And this is a great way to get a lot of leverage there. You get a lot of leverage. You get a really rapid move. And then you got to hope the counterparty is willing to market appropriately and make good on the trade. But that's a whole other story. I think one more time with that chart. Do any of these little nudges up in the other names, Meta, Alphabet, Microsoft, Amazon, NVIDIA, do any of these other squiggly lines look like they're finished going higher? I don't know. I think they all get over 100. All right, fine. 100 basis points in spread. I think all of them. Well, what does this do to the equities is the question as that plays out.
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29:48So far, not a whole lot. But it's crazy how many stocks are 100 % reliant on this not blowing out. But it's the opposite. The entire NASDAQ. Yes. But the reason why Oracle's spread looks like that is because of the equity. Yeah. Agree. because it's George Soros created this term called reflexivity, where the prices for an asset dictate the reality for a business or a sovereign government or whatever the case may be. But then it's like a feedback loop where then things worsen in the real world, which then reflects again back into prices. And you get sort of this spiral, and that can be up. It's not always negative.
30:38That could be upward or downward. So stocks, sometimes when things are going well in the stock market, let's say it's easier for them to recruit great engineers. Exactly. Or it's easier for them to do deals with other companies because everybody wants that halo effect. A really great example of that right now is Anthropic. They're seen as like the leader in AI. Therefore, every company wants to bring them in for meetings or do deals with them. which means more contracts, which means the valuation keeps going higher. And I think Anthropic on Monday, the news came out, revenue was up 11x over a year.
31:17John Charta. Some ridiculous, what are we looking at? So look at this. Trailing 12-month revenue. Anthropic just disclosed as they're talking to investors, $65 billion annual run rate. That's where they are. Oh, my God. Look at the right-handed side of the chart. From zero three years ago? Is that accurate? Yeah, I think their first dollar was March 23 of revenue. So Netflix does$49 billion in the last 12 months. Coca-Cola did 51. Uber did 55. I mean, this is insane. Insane. This is the thing that's enabling us to look past or not even look past, but to mentally be comfortable with a trillion dollars in annual CapEx in 2027.
31:59What's driving it is the revenue. and they're taking that revenue and they're handing it over to the data centers and saying, thank you for perpetuating this. We'll be back with another fistful of revenue in three months. The music is playing. The music is very much playing. And the bearers would point out, this is nuts. Putting Gemini aside, so much riding on two privately held companies. It is absolutely crazy. It is interesting times. We've been pointing that out for a while. No. Rumors on Workday, and I don't even know what the latest is. I know these things are moving. Okay. Let me say what the news was last week, and then you could take a victory lap.
32:51On Thursday, news broke that Silver Lake was in talks to acquire Workday, a human resource software company. The stock shot up 19%. It halted. 55 % growth in workday shares since late June. A possible sign the AI-driven Sasspocalypse is ebbing. I did say we have to see one of these prominent ones in a take private in order to truly say we're going to stop with the Sasspocalypse meltdown, at least in the stock prices. Maybe not in the rhetoric. What was your reaction when this happened and what's happened since? uh my reaction is i sold right away thank you very much at 218 uh and i'm not taking a victory lap because i i took i took plenty of stabs at work day and service now and didn't come out that far ahead although it was nice to get one victory but the bigger question that you asked is is it over is it can we say that that the bottom is in for these horizontal names not the bottom is the period of time where you could just mindlessly short any of them anytime you wanted Well, yeah, that's done.
33:59It's over. That part is over. I think Palantir and CrowdStrike said, oh, yeah, feel free to remain short. Watch as my share price doubles in eight weeks. So that part of indiscriminately selling everything past software, Visa and MasterCard, the ratings agency, Schwab. Yeah, thank God that's done. That's been over. So that episode's been over. I don't know, though, that Workday and ServiceNow and Atlasia, which reported great earnings, great quarter. I don't know that Salesforce is out of the woods. I don't know that Salesforce price is not going to be lower a year from now. I don't know that I pound the table.
34:36Yeah, I think they probably feel a little bit of pressure coming off, but they definitely don't feel like they've solved the longer-term issue. but I don't think that they're running around in helmets in the basement of the building like Churchill's war room I think that they very much were this spring and I think that that look these guys they all say we just take care of the business the stock price takes care of itself bull fucking shit you look at your stock price every hour you know it every time you put out news you want to know how people are reacting and the best gauge is the stock market And when the bombs felt like they were dropping in May and June, I don't think they felt like they had an inch to breathe.
35:24I don't think that's the case right now because while the share prices are not back at 52-week highs for most of these names, they're not on the lows and they've stopped falling. It's the right thing for management to say, obviously. What else are they literally going to say? But you have companies like Adobe and Duolingo where the earnings per share is at an all-time high and it's growing 15%, whatever it is. The stock's down 70 % because the market – I know we were saying this in the spring. The market doesn't care about the earnings today because they know that in four years, this could be 40 % lower.
35:53Now, the market may have been wrong, but I don't think that we've heard the last of this. You know what else has changed the rhetoric out of the AI, guys? It's really only two guys. Nobody listens to the DeepMind guy. He's not a CEO. So it's really only Dario and Sam whose voices matter. And six months ago, these guys were saying reckless shit every chance they got. Pop on a podcast. Dario's like, oh, casually, 50 % of all white-collar jobs will be gone by 2030. Really? Who the fuck are you selling software to then? like that that's that's what you want to say into him sir the microphone is plugged in all right he's not doing that anymore and actually i don't i'm not a twitter guy but from what i hear his fellow silicon valleyites are ripping him to shreds every chance they get because of those types of pronouncements sam has got a little bit more disciplined on messaging as well his sam sam's home was attacked a few times no i think i think i think yeah Yeah, time to shut up.
37:05Maybe don't be publicly noodling with the idea of anarchy in the streets on a podcast schmuck. You want to go public? You want to do a Wall Street roadshow tour like Elon got where they bring water slides into the lobby at J.P. Morgan? You want that treatment? Stop saying things like that. It's not going to help you raise money. And instead of the news cycle being about how great OpenAI's products are, it's how crazy is Sam Altman? Or how much harm does Dario mean to white-collar employment? That is the wrong way to be speaking a few months before an IPO. They know that. They're smarter than I am.
37:48So they've stopped doing that. I think that's also bought a little bit of a reprieve in the SaaSpocalypse also. So it's just like not in the headlines every second how they're all going to be disrupted to zero. Well, this is a much better market environment and humanity environment because how many hundreds of thousands of people does Salesforce employ? Is it a million or more? Could be. Yeah. Well, I don't think it's a million, but it's a lot. All right. I like this better. Many would say too many. But the bigger picture, and I listened to Kudrosky on Alex's show, Alex Kantrowitz, the big technology podcast.
38:27I actually shared it over the weekend. I thought it was so good. Kodrosky is not like anti-AI. He's just saying like these are not going to be great businesses, specifically the providers of compute. And then the LLMs, he's basically saying they will realize, if they haven't already, that they have no choice but to go into enterprise SaaS themselves. they will be creating because there's hyper deflation in the value of a token it's falling 80 % a year every year for the last four years and he said to overcome that you have to like million X the business or whatever you need to sell something with high profit margins and the thing to do is to productize the compute and the data and create products that corporations will pay you for the other thing is he thinks that they have gravely, the people selling stocks in the SaaSpocalypse have gravely misunderstood why SaaS is even a thing to begin with.
39:31And the reason is people, especially executives at big corporations, they want somebody they can yell at or sue when things don't go right. And Salesforce is the perfect entity that you can yell at or sue when something goes wrong. If your employees are all doing open source shit and working with the data themselves and something goes wrong, who can I sue? Who can I yell at? That third party has to exist. And that is really why enterprise SaaS exists. But you know what? Rewind back to May and April. We were saying these things at the time that you can't just rip out Salesforce. It doesn't work like that.
40:13And yet the market is saying, oh, yeah, down 4%. Oh, yeah, keep saying that. down 7%. It's really hard. The market didn't say that people would rip it out. The market said that people would negotiate offer with the salespeople, which would result in lower revenue per user and smaller margins. And that takes a decade to play out. It's really hard to stay long and to fight the market when it's falling like that every single day. Really hard. I can't do it. That's not how I invest. We know people that lean in. like we like we're friends with Jonathan Boyar if he likes a stock at 80 and the market is pricing it for bankruptcy and it's at 40 he's not running from it he's been thought to remember when Microsoft was crashing we're like Jim it's crash he's like I like the business I don't I don't really you know I think the market's wrong so some people can do it better than others hard game to play all right let's talk about the stuff last thing Jackie Jim rat is saying uh Salesforce is 83 000 employees what what what did you say a million did i say a million close no i asked if they okay sorry i don't know i don't know the employee count of every company i'm teasing you amazon is amazon and walmart are like a million each okay so the scale is much lower all right let's talk about the stock market which is uh doing okay better than okay we've got the we've got every advanced decline line from the new york stock exchange to the s p 500 400 and 600 making new highs this is of course, the great folks at All-Star Charts charting this.
41:40Andy Thrasher shows it a little bit differently, looking at the number of one-month lows with large, mid, and small, and then all. And of course, you don't see many new lows in the bull market. There are none, or very few, I should say. And Urien has a great chart. Urien Timmer over at Fidelity showing the cap-weighted index in black with the blue equal weight and underneath in the pink. he's showing the percentage of members above the 200-day moving average and it is the highest level that it's been in quite a long time so you're having the market hit an all-time high with 75 of stocks above their 200 moving average this is about as good as it gets and uh let's do the urine chart.
42:34It's a nice corroborating piece of evidence. It's not predictive. And as you can see, when you get into the 70s, you can get a market pullback. It doesn't mean you will, and it doesn't mean you won't. And a really obvious example of that is, look at this period of time coming into the start of this year. You hit 71, and then before you know it, they pull the rug out from under you with the Iran war, and you're at negative 44. What does correlated mean? I understand narrowing. I understand broadening. What does it mean on the chart where it says correlated? Well, it's when all stocks are moving together, which is a great segue into the next chart from John Krinsky.
43:18Check this out. Krinsky shows the trading days where more than 80 % of the volume is to the downside. And we haven't had any. Jonathan says, it is an anomaly in that there has yet to be even one 80 % downside volume day. The average year sees 21 such days. And we have never had a year with less than five. This is so insane. Chart off, please. Because even the reason why this is happening is because even during the war, you had the energy stocks, I think this is why, you had the energy stocks absolutely ripping. There's been a lot of charts that have like made the year funky where you have like Adam Parker has a chart showing negative beta, Evercore copied it.
44:06I think Adam was first. And the reason why there were so many negative beta stocks, meaning stocks that go up when the market goes down or go down when the market is up, it was primarily energy. And that is just making this calendar year a very odd one to say nothing of the concentration and AI up, software down, software up, AI down. It's just been an unusual year for sure. Yeah. This will be a memorable one. I think we'll look back at this and have so many examples of things that will be relevant in the future or obscure things where we're like, hey, remember that actually happened before? A lot of years bleed into the other.
44:43A lot of years bleed into the other. This is not one of those years. We got the SpaceX IPO. There's just a lot of funky shit happening. Lastly, also from Krinsky, financial stocks are on their longest weekly winning streak ever. Are you kidding me? 11 straight up weeks for financial stocks. What is that? The yield curve? I know the earnings are great, and I know the stock market is great. Everything's working. Yeah. Everything's working. M &A, trading. IPOs, it's all happening. Speaking of it's all happening, dude, this Ackman letter is a lot. Like there is a lot going on with this Pershing Square guy.
45:24I know that he's very controversial and I know he aggravates people. And I know there have been like a lot of reporters who have busted his chops about his ego, his – I just don't – I really don't care. I like him and I'm fascinated by him. I don't know him. I met him once. I met him on the set of my TV show. He came on and did an hour trying to rescue Valiant SharePrice. But I just – I think he's a G. I think he's awesome, and I think he's always interesting.
46:02So big news last week, big news this week. We'll start with this week because it's more fresh. He's launching Pershing Square Ventures, and he's a – Yeah, sure, why not? What's the difference? He's a Twitter addict. I think he checks his Twitter every 10 minutes. And he does, he's famous for these CVS receipt length tweets. And he's, to his credit, he's in the mix. Like he doesn't hide from people. He says what he thinks. People criticize him. He comes back. I don't do that shit. I don't know why he does that, but I respect it. But anyway, so he announced this thing, Pershing Square Ventures. I think it's interesting.
46:43Nobody has done this right. A lot of people are trying. Nobody has done the venture for everyone shit right. I mean, we gave it a shot with Equity Zen. Unfortunately, our timing was not great. I don't think anyone has done this well. But anyway, be that as it may, it's an evergreen permanent capital vehicle that will be able to continue holding investments even after companies go public. So he was on X talking about like it's not fair. I get access to SpaceX and X and XAI or these are opportunities that public market investors are not able to access with good reason. Most of these don't turn into SpaceX.
47:29I know I shouldn't have to say that. Most private private venture-backed startups do not have a happy ending. They just don't. And the ones that do, it's very common that the pedigree behind those things makes it so that I don't care if you're Bill Ackman. You probably are not going to be able to get access for public market shareholders. But be that as it may, if you're going to tilt at windmills and you're going to be on a crusade and Ackman is a crusader, this is like a worthy goal. Because the truth is a lot of the biggest winners in the last 20 years, the public never had a shot at. or the last 15 years, they came public at$100 billion valuation or these days a trillion dollar valuation.
48:17So it's a worthy goal. Anyway, I thought between this week and last week where he talked about his portfolio changes, it's just been like an Ackman-heavy period of time. Why don't we do the portfolio holdings change first and then we'll talk about some of the vehicles that people can use if they want to bet that he's going to be right on these things because he takes concentrated positions, really big swings. He engages directly with the board and the CEO, and he sort of tries to create his own alpha. And to a lot of people, that's an attractive way to invest. What did you think about the current top 10 holdings and the current portfolio?
49:01What was your reaction when you saw this stuff come out? Listen, these are blue chip names for the most part. These are good companies. I was about to say good stocks, but I guess to varying degrees. But he charges an arm and a leg, dude. We're going to get there. This is the portfolio as of the latest filing. Yeah, it's fine. I'm not hating on this at all. 12%. This is across all of his vehicles, which we'll get into. 12 % Microsoft. He's got$567 million worth. Next largest, Uber, 12%. Meta, 11%. Brookfield, 10%. Amazon, 8%. QSR, restaurant brands, that's Burger King, 8%. Visa, 5.6%. MasterCard, the same.
49:50S &P Global, 5%. I thought that one was interesting. Netflix, new position, 4.9%. He's back. Famously, he blew himself up in Netflix in 2022, sold at the bottom, supposedly lost$400 million, one of his worst trades ever. And then Fannie and Freddie are tiny. I thought the Visa, MasterCard, Netflix ads were pretty notable. Situation zero in the chat pointing out MasterCard and Visa are 11 % of all of Zasa. Pretty big bet on credit card companies. What did you make of that one? He nailed it. I'm guessing he bought them closer to the lows. I mean, they went from 52-week lows back in March. Again, another thing that was going to get disrupted by AI sounded ridiculous at the time.
50:35I didn't buy them. Credit to him. Went from 52-week low to a 52-week high in a couple of months. So he nailed those. How should I feel Uber is the second largest position and now Netflix is in its top 10? I own both of those stocks myself. How should I feel? Uber is getting rejected hard at the 200-day. that stock is not going to get back above 80 without a fight it seems to want to get there but it seems to be endless sellers hopefully it's not him out there selling it I know he's I don't know that you know how there are things where you know but you can't substantiate but you just know here's something I know he's on the phone with Dara every single day giving him unsolicited advice just blowing him up every time uber is negative four percent on the day this is his second largest position i know that he is dar is number one headache more than waymo the company just reported earnings a week or two ago and it's doing great the problem is how does this how does this overhang when does it go away it goes away so this as i as i've said we're not going to do a whole uber thing.
51:51It goes away when it's apparent to the consumer that the roads are flooded with autonomous Ubers. Do you know how long that's going to be? It's going to be years before the average person encounters an Uber AV on a street in the city they live in. It's going to be slow, methodical rollout. I'm still an investor here, but you ask what it's going to take. Unfortunately, that's what it's going to take. Well, here's the other thing. If it does break above its 200 and it goes to 85, we won't be talking about it. There's overhang anymore. So it could just be that too. All right. So I wanted to do a quick, we'll roll through this quickly, primer in how to, if you, let's say you look at this portfolio, you look at the track record of Bill Ackman, you just like the guy, you like his ideas.
52:42He's got a co-portfolio manager who is also building a name for himself and you just say to yourself, you know what? I like that for a sleeve of my portfolio. I want a little bit of like, I want a little bit of direct Ackman. So I thought we, so here's the ecosystem of all the ways that you can do that. I want you to remember that Bill Ackman had his worst two or three years of his entire life in the not too distant past. And what he learned from that is I cannot be managing a hedge fund and at the mercy of my LPs because they are going to want to liquidate me at the absolute worst time. He's made no secret of the fact that Warren Buffett is his idol.
53:24He's made no secret of the fact that his goal in life is to build something bigger than Berkshire Hathaway and live long enough to do it. And so he has been de-emphasizing the hedge fund and raising money into vehicles that look more like permanent capital, a la Berkshire Hathaway's insurance subsidiary, where Buffett got to invest the premiums rather than deal with redemptions. Buffett didn't run a mutual fund or a hedge fund. Okay. So, and Buffett had a private partnership and shut it down in favor of running the public vehicle Berkshire. Anyway, it's the hunt for perpetual capital or like permanent capital.
54:06And that's what this is all about. So, if you actually look at the ecosystem, the first one, We'll do these in order. Pershing Square Holdings, chart on. So this came public in, I don't know, 2013, 14, something like that. It has not really distinguished itself. It's not terrible, but 7.5 % a year in total returns since inception. This trades in Amsterdam, and this was his first stab at permanent capital. this is basically a publicly traded fund that owns the stocks that he owns so all those stocks that we just listed Microsoft, Uber, etc. Brookfield they're all in this thing and what do I mean by permanent capital?
54:51He sold shares in this and he keeps the money it's not a mutual fund where there's money coming in and out redemptions, etc. so he has the capital and he invests that capital let's do let's do the next one PSUS this came public in April it's too soon to have an opinion about it but it's a closed end fund I think he raised 5 billion dollars it is down 22 % from the IPO price which was 50 and it's trading at a nasty discount to its NAV if you're a value investor that's great news I love that Because the actual portfolio nav is basically flat. It's down like a percent. And the stock price, to your point, Josh.
55:38So there's a massive, massive discount on Bill Ackman's face right now. And he's definitely really pissed off about it. Yes. If you think about this PSUS, basically you're paying like a 2 % management fee, which is very high. You're buying the Ackman portfolio. He's got 13 % of this is in cash. And what's interesting is I'm about to show you the holding company that he took public at the same time this April. Pershing Square, PS, is the ticker. So just buy that. Well, it gets complex. So what should he do with PSUS? What he should do is he should buy back stock. Here's the problem. If he buys back stock, it conflicts with PS.
56:28Pershing Square Capital Management because then there's less fees being paid up to that. If he buys back shares at the closed-end level, it hurts the holding company, the management company. So it's a built-in conflict that fucking sucks, quite frankly. I hate it. And I'm sure he's thought about it and he's got a great answer for that when he does a presentation or whatever. But that's the reality. I also think his carry, I'm not 100 % positive, I think his hurdle rate is like 5%, which is not that high. It's not like he's getting fees when he beats the market, which is traditional. Now, why is he charging 2 % for PSUS?
57:08Because he can. Because he has$2 billion still in a traditional hedge fund structure. And those people would howl at the moon if he made this 1%. But stay tuned because another lever he could pull to close the gap would be to lower his fees. This is not what he's known for, is thinking that his skills are worth less. But I'm just pointing it out. Now there's the Howard Hughes Holdings Company. This is the Berkshire clone. So basically, Howard Hughes, yes, named after the famous – this was the company that was started by the famously reclusive, insane billionaire Howard Hughes. Now it's more of a real estate company, and he's trying to turn this into Berkshire Hathaway.
57:51The real estate they own, they own South Street Seaport, but then they also own all these planned communities. So it's land and it's housing and it's buildings. And now he slapped an insurance company on top of it. And then on top of that, the idea is like, I will turn this into my Berkshire Hathaway vehicle. The thing is, Warren Buffett and Charlie Munger never charged a fee to manage money for Berkshire Hathaway. They made their money as shareholders. He's double dipping here. He is a shareholder, chairman of the board. He controls it. And also, he got the board of directors to sign on on him being the allocator-in-chief.
58:31And they're paying him a performance fee and a management fee to manage the cash flow that the insurance company and the real estate assets throw off. Not quite what was going on at Berkshire. directionally it's sort of similar but um he's making a lot more money the way that he's doing this um what else did i want to say all right pershing square p.s let's do that one last so michael you said just buy this yeah this looks better okay so So Ackman, the person, beneficially owns 45 % of this. So as of August of 2026, he owns 181 million shares out of the 400 million shares outstanding. And basically what this thing is, it's the capital management company.
59:25So this is when I say such and such entity is paying fees, paying fee, this is where they're paying it to. So PSUS, PSH, and the Howard Hughes Corporation are all paying this entity to manage their capital. Kabish? You got me on that? Kabish. The guy that was Kabish. Kabish. It depends if you're Brooklyn or the Bronx. He has real skin in the game in all of these entities. but like arguably, if you wanted to bet on Ackman successfully launching this venture fund, for example, and when I say successfully launching, selling it to the street and having the fees being paid, if you wanted to like be alongside Bill Ackman, you buy the management company.
1:00:12The thing is you're not going to get one-to-one upside on the portfolio. So if you want to bet on him as a businessman and an entrepreneur you buy ps if you want to bet on his portfolio and his stock picks you would buy psh which you have to buy as an adr or the new vehicle more likely psus and if you wanted to bet on um the berkshire concept you would buy howard hughes it's a lot Any of these that you buy, you're paying a lot of fees. And you have to just be religiously comfortable with, yes, I am the sort of person that pays somebody 2 % to pick stocks because that's kind of what the setup is.
1:00:58I hope that was helpful for people listening more. You did a good job. But at least you're paying for a concentrated portfolio. At least he's not a closet indexer. I agree, and that's one of the reasons I like him. He's not mimicking the index. He's saying I'm smarter than the market and I'm going to put my skin in the game to show you that I really believe that. And I respect that a lot more than the parade of mutual fund managers who are 300 basis points away from the S &P in one direction or the other. Me too. Every year. All right. I'm going to quickly make the case for, listen, the market's been really calm and really great.
1:01:35I'm sorry. I have to say one more thing. I'm really, really sorry. This is the whole key to the whole thing. he touts this performance number, I shouldn't say touts, that's got a negative connotation. 21 % annual return versus 10 or 11 for the S &P since inception of his fund in 2004. The problem with that is there is probably not one investor on earth who earned that because the drawdowns have been unbelievable, especially in that valiant JCPenney era. Herbalife. Herbalife. That's one. Two, it's jumping from one vehicle to the next. The original fund. Was it Gotham? Was that him? No, no, no. Leave that out.
1:02:22I think this is Pershing Square 04. Gotham was another debacle that predated it. Didn't go well, but he wasn't the only person there. He had the idea, I'm going to buy up every golf course in America or something. It was not great. you almost could not have possibly earned that return with real dollars that they talk about although with his investments he like did create that return so it's it's compliant it's mathematically sound it is real he did do that the question is could an investor have ridden alongside from 04 through now jumped all those different vehicles never redeemed that at any point.
1:03:04Is that realistic? Did anyone actually do that? Not actually. He did. He did. And that's why he's a billionaire. And that you can't take away from him. I just don't think that's a track record that any institutional allocator should look at and say, yeah, I could have earned that and definitely not a retail investor. That's a lot. Okay. So no, it's okay. So the market has, I want to make the case that if you're going to put on a new position, You really have to love it. And maybe just take a second because the market could not be treating us any better than it is today. Chart on. You've got the VIX at 15.
1:03:41You've got the equal weight S &P basically as far above its 200 in moving averages it's been over the last three years. Like to say that the wind has been at our backs is a massive understatement. Okay? So if you're hunting for new positions, just maybe take a beat. The market's treated us awesomely. Like is right this second the time you're saying like, all right, I get it. You want to add a new stock to your portfolio. Is today the day that you want to do that? And you were saying like not necessarily. I'm just saying just maybe take a beat. That's all. Unfortunately, I bought something today.
1:04:14It's the mystery chart. Okay. Love it. Hold on. You know what? I think I could guess what you bought without even – hold on. Let me look at you. Yeah. Okay. So anyway, here's an industry group that continues to lead that on any pullback, I like it a lot. I like it a lot. So this is from Scott Brown, CMT, at Scott Charts. He says, leisure continues to lead. New all-time highs for PEJ today as betting against the consumer's willingness to spend on travel remains one of the worst bets you can make. So shout out to Invesco. I didn't even know that this ticker existed. What is this? But it looks great.
1:04:49And these are the top holdings. You've got Expedia, also a pretty concentrated portfolio. The top 10. Hold on, PEJ? Yeah. So top 10, Expedia, Airbnb, Viking Holdings, Cisco, Starbucks, Hilton, Marriott, Las Vegas, Sands. What is that? Expedition? I can't even read that. I don't know what that is. Lindblad? Whatever. And Cinemark Holdings. I mean, this is real exposure to the spending economy, and it looks awesome. Compounding over 15 years at 10%, which is probably market equivalent. it's had a really good it's had a really good year because people are in the real economy spending on leisure and entertainment you're right so if this pulls back I mean I like it a lot I wonder I feel like travel like specific travel might be better and I'm sure there are travel ETFs by now thematic I want to dive in I want to dive into this thing and see what else is in there what did you buy today you son of a bitch so I made it the mystery chart put it up oh i like this is it spotify it's spotify you're too good at this i can't even play with dude i almost bought this today too we think alike hold on how did you know because i i told you i was looking at this chart today so you saw the 517 and say that's the only 500 stock i could think of right now no no i i would have got an absolute y-axis i literally was staring at this chart today looks all right so rather all right i love this so rather than me describe what's on this chart.
1:06:20Why don't you describe what my annotations are pointing out? Okay. There's a lot of negativity in the name, despite the earnings being pretty solid. I think the hangover of competition, same thing with Netflix, the competition for YouTube and TikTok, we know, we know, we know, we know. There's no more sellers. The stock found a double bottom and it's nothing but higher lows and it's about to break out. I love this. I wish I bought it today. I think a couple of things. I think this is the best business. I think this is the best business in media. I think it's better than Netflix because there aren't 10 Spotify's.
1:06:56It's Apple Music, which sucks and I unsubscribe from and there's Spotify. And I understand that people listen to music on YouTube and they just let the videos play. I am fully aware of that. People that actually care about music and want to hear their favorite songs perfectly and pristinely remastered and delivered in the absolute highest quality format available are not letting a video scroll on YouTube happen. They're on Spotify. Globally, globally, in every country, in every region, humanity loves music. There is something, it's a drug. These are songs are not songs, they're spells. And they put you in a different mood instantly.
1:07:43And people, since the dawn of humanity, have been willing to pay for music. Kenny G. Kenny G, that's right. So I think it's like the best business in media. They beat their shit out of XM Sirius. Almost like they're off the board. Like nobody even talks about the two things in the same sentence. There's no more Pandora. Oh, really? Like every, not really. Like they have literally won and now it's a matter of can they be the first media business to get to a billion subscribers I think they literally could where are they now it's like 400 million how many companies on the planet like it's Apple it's like a tiny list have 400 million people paying them on a monthly basis how many four two I don't know the number.
1:08:46Anyway, this is a trade. I could be out of it in two days. So I don't want to go crazy. Chart back up and then we'll get out of here. I just love the tactic. I love the higher lows. I love the seller washout. That's what I want to point. I want to point this double bottom at 400. I have a stop in below that level because it's a trade. And it could turn into an investment. I don't think they have pricing power I'm seeing in the chat. Okay, that's why they keep raising the price. I don't even understand what you're saying. It doesn't matter. The jury is out if it's going to take out that 200, if the 50-day is going to cross back above the 200-day.
1:09:24But that's what we're setting up for. And you've got a moderately rising RSI. You've got momentum coming in. If we get a golden cross, the Bulls take over this chart. I think 400, you could play off that level. It's 21 % below where we are right now. that's a pretty good risk reward 50 % potential upside this stock was 800 a couple of years ago so let's say 50 % upside versus 20 % downside I like the trade we went way long but guys we did a lot tonight thank you so much for watching thank you for listening I appreciate it songs are spells that is correct alright guys remember tomorrow is Wednesday all new animal spirits we'll get an Ask the Compound Wednesday at 1pm and then we'll get an all new Talking Wealth if you're an advisor you want to check us out it's a separate channel people that care about financial advice and the advisory business we're going to drop a new one of those Thursday at noon Friday morning new The Compound and Friends keep it locked stay with us we appreciate you we love you we'll talk to you soon
1:11:06I'm not giving up. I am selling the building. The final season of FX is the bear. The restaurant is flooded. Everything's either going to be okay. Or not. We are outgunned and we are outmanned. We have each other. FX is the bear. The final season. All episodes now streaming on Disney+.
From the publisher
On this episode of What Are Your Thoughts, Downtown Josh Brown and Michael Batnick break down what’s driving the global bond selloff, why pressure has shifted from the front end of the yield curve to long-term rates, and what it could mean for investors.
Plus: Big Tech’s massive off-balance-sheet AI commitments, whether the bottom is finally in for enterprise SaaS after the Workday takeover reports, a market that keeps going all the way up, and a look inside Bill Ackman’s evolving Pershing Square empire and his search for permanent capital.
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