Welcome to 2026

13:01Downtown Josh Brown:the thing that youtube has that that no one other than spotify has it's that and that's why it's strategically important netflix is battling youtube for control of the living room tv this is not about what's on people's phones only like people are watching this show right now on TVs in their living room. So Netflix can't just allow YouTube to start monopolizing more and more of people's living room time. That's the battle.

13:29Ben Carlson:It's going to be a bad look if and when these shows go crawling back to YouTube and go, oh no, we made a huge mistake.

13:35Downtown Josh Brown:Oh, because the numbers aren't going to be there? I can see that happening.

13:40Ben Carlson:It's just not as easy to click on Netflix as it is on YouTube for some people, I think. Yeah.

13:44Downtown Josh Brown:And the other thing is that Netflix controls its algorithm more tightly, meaning like Netflix in what becomes a hit more so than YouTube does. Like YouTube has an algorithm, but they're not picking favorites. The winners tend to be the shows that are really good at mastering the algorithm. Like what makes people click into a thumbnail? What makes people continue to watch? What do we have to do in the show opening to keep people like if you're, if you're already a popular show, I guess you have to worry less about that. So I feel like YouTube is safe. YouTube will be fine. They'll keep having podcasts.

14:22Downtown Josh Brown:But they lost a couple of marquee podcast video things. I just trust Netflix more than any.

14:28Ben Carlson:Like to handle the current situation, whatever happens with them and Warner Brothers, I trust Netflix to navigate that better than any other streamer. I don't think you can give the other streamers a benefit. Even Paramount with all the stuff they're building. I think you do give it to Netflix.

14:41Michael Batnick:The main point is not that, oh, no, they're competing with YouTube. That's not like breaking news. They know who they're competing with. The bigger story is that it's a two-headed monster. Disney hasn't added subs in three years. Paramount, Prime, the free stuff, whatever else is out there. Peacock, forget about it. It's a two-headed race, and I don't think that YouTube doing amazing is necessarily like the end for Netflix, hardly.

15:06Downtown Josh Brown:When they announced the bid for Warner Brothers, I sold 85 % of my Netflix, not because I think there's anything wrong. I could just picture a year of back and forth about what they have to do to get the deal done I think there are going to be like political you know very public fights about you know people that represent the interests of Hollywood guilds like screenwriters and directors and actors I just I don't think I think this is going to be super messy and so I just wanted to not have that dead money and so this is a big difference between if I miss the bounce I miss the bounce

15:41Michael Batnick:a big difference between me and Ben I have no patience so like Ben will wait it out a year and buy more if the stock goes nowhere or down which is probably the right move but I like to buy stocks that are going up in bull markets

15:56Ben Carlson:I actually think it's a good deal

15:59Downtown Josh Brown:for them if they can do it because they end up with a lot of production synergies and they end up with an incredible library that they can create a lot of new content So I think it's a good deal. But from a portfolio management standpoint, I don't want to sit and watch this and trade between 90 and 100 for the next year while we figure out whether or not it's actually going to happen. And so one strategy, and again, if you own it in a non-taxable account like I do, one strategy is to put a buy stop limit at 101, good till canceled, and just leave the cash aside. And your account will automatically buy the stock if it starts to break away out of this range that it's been trapped in.

16:48Downtown Josh Brown:And that way you don't have to guess. You let price kind of put you back into the stock. But so long as it's languishing here in the 90s, I got to be free to do other things. So I'm bullish on Netflix, but not yet, I guess would be the way I'd put it. Can we do Uber? I think this is – the stock went up 35 % last year. So nobody would say that it was one of the losers of 2025, but it's in a 18 % drawdown right now. I want to read something from Jonathan Boyar, who has this forgotten 40 list. Barron's picked up some of his picks. So he looks at like 40 stocks from the prior year that were forgotten or left in the dust and tries to pick names that will have a better year prospectively.

17:41Downtown Josh Brown:It might seem odd to characterize Uber, whose shares have surged more than 35 % this year, as underappreciated by investors, but Boyar argues that Uber trading at 16 times 2026 estimated earnings before interest, taxes, depreciation, and anorization remains a bargain. The consensus forecasts on Wall Street are that EBITDA will increase by 34 % this year. that's 25 and another 26 % in 2026. So if they grow cashflow by 26 % this, this coming year and the stock is selling at 16 times, you have to ask yourself, doesn't it seem like everyone just believes automation is going to render this platform worthless.

18:26Downtown Josh Brown:Okay. I was going to ask what else could be happening here.

18:28Ben Carlson:You're the Uber guy. So I want to talk about this later in the show, but I'm in the Phoenix area and I took my first Waymo. And it was as magical of an experience as everyone says it is. And I thought, so what happens to Uber in this self-draft? Like, where are they on that?

18:43Downtown Josh Brown:I think, like, a quarter of their fleet will be autonomous by the end of the decade. Like, it's going to be the same thing.

18:48Ben Carlson:But you trust them to, like, make this happen? Because the Waymo experience was— They have no choice. It was ungodly. It's like I was—my kids kept telling me to shut up about it because couldn't stop talking about how cool it was. and once you do it, you go, oh my gosh, this is like, I can't believe we did this. How do they do this?

19:07Downtown Josh Brown:Can Uber do that? Yeah, well, they are doing it. So they have partnership with Waymo in two different cities. So that's what they're going to do?

19:15Ben Carlson:They're just going to partner with Waymo and they'll be the interface?

19:17Downtown Josh Brown:No, they're going to partner with everyone. So the Uber worldview is that what's best for them is for there to be a highly fragmented fragmented autonomous vehicle market globally. And it would be great for there to be hundreds of players all over the world. And they partner with as many of the players as they can to bring those autonomous vehicles onto the Uber app. So they're doing it. They've got a partnership in Saudi Arabia that's already online, or UAE rather. They've got partnerships in England and Germany, here in the United States. They're working with WeRide. They're working with AVRide.

19:57Downtown Josh Brown:They're working with Pony AI. They're working with Waymo. There's a company backed by NVIDIA called Wave in Europe. They're working with them. The worst thing that could happen for Uber is that Tesla and Waymo carve up the whole autonomous landscape because then neither of them need Uber. So what Uber really needs is for there to be this thriving ecosystem of hundreds of players.

20:22Ben Carlson:The Waymo app was very good. I'm setting the temperature before I get in the car. I'm telling it when to unlock. It blew my mind. I'm sure the people who have used it are used to it now, but it is so cool. Holy cow. Wow.

20:37Downtown Josh Brown:The other wild card here, the benefit to both Uber and I guess to a lesser extent Lyft, because they probably won't be as good at forging these partnerships, the most expensive part of the Uber ride is the take rate to the driver. If that goes away and Uber is able to successfully incorporate millions of autonomous vehicles into its app, its profitability should skyrocket even if they have to split that with the providers of the cars. Dara has said that he thinks the way this market shapes up is that the autonomous cars themselves are toaster ovens. Like they're amazing technology now but ultimately they'll be commoditized.

21:20Downtown Josh Brown:He thinks there will be whole fleets of AVs that are owned by private equity. Private equity will basically treat these like timberland or commercial office buildings. It'll just be a cash flow.

21:32Ben Carlson:The biggest surprise to me that I had no idea that the Waymo cars are Jaguars. It was a really nice ride. The car was really nice.

21:39Downtown Josh Brown:The cars cost Waymo$150 ,000 each. Do you know how many rides they have to complete? And the rides are cheap because they're doing what Uber did.

21:47Ben Carlson:I couldn't believe how cheap the rides were. For a 20-minute ride to dinner, it was$10 or something last night. So obviously they're trying to get Mindshare, and then they'll jack the prices up.

21:57Downtown Josh Brown:The other thing that makes Uber shareholders nervous is Tesla. And he's going to have his own app. And Elon has publicly stated he's not doing deals with anyone. It's going to be an all Tesla ecosystem thing. And he's still talking about regular people turning their own cars into Ubers, which I would take the under on. I think I took the under on Airbnb a long time ago. I just didn't think that hotels would be dead. And that ended up being the right bet. Airbnb has a really nice niche. They almost have it to themselves other than Vrbo. But like the hotels have never been busier because not everybody wants that.

22:38Downtown Josh Brown:And not everybody wants to turn their home into a boarding house. I don't think everybody wants to turn their car into a taxi. I know I'm not doing it. So I think they'll have like a selection of the Tesla population that thinks that's really cool. While they're at work, their car is out completing rides. I don't see that being something that like more than 10 % of people do. I don't know. What do you guys think?

23:03Michael Batnick:I agree with you. Uber had a good 2025 because it had a really bad 2024. The stock is basically flat since February 2024. So there is the growth story that continues, but investors just aren't buying the sustainability of it. They're just not. And they might be wrong, but that's the story. Adobe put this chart up.

23:24Downtown Josh Brown:I don't have a ton to say on this. I own it. I have a fairly tight stop here. I'm not willing to ride it to new lows. Here's another company where the market thinks nobody is going to pay professional licenses for AI creation tools now that Sora and Nano Banana and all these other products are proliferating. And I sort of don't agree. I think AI is going to become a tool that professional designers use, but they're still going to want to pay Adobe for pulling all those tools together into one ecosystem and having the highest grade professional version. What do you guys think?

24:09Michael Batnick:I agree. I'm in it with you. And I also am not going to ride it much lower. But I think one of the big stories of 2026 is going to be that AI is making these software companies more efficient as opposed to the view that they're going to really eat into their business. So why is it down so much then? Well, because the view, the prevailing view is that Adobe is not necessary if you could code so cleanly on Chad or Gemini or whatever. And I don't believe that. And the earnings per share keep hitting an all-time high. But obviously the market is not buying that either.

24:44Ben Carlson:My only take here would be like the narrative of this story is going to change 10 different times still. Like it's going to go back and forth a million times until people really figure out what's going to happen.

24:53Downtown Josh Brown:Like an amateur person, an amateur person who owns a candle store can go on ChatGPT or Gemini and say, create me a flyer for a 20 % sale that I'm going to run on my website tomorrow, and they can have it in 30 seconds. And that might've been something that they would pay a graphic designer for. So that's the negativity on Adobe. But I feel like the word of the year, the Merriam-Webster word of the year for 2025 was slop, as in AI slop. And I just don't think that everyone is going to outsource graphic design to AI. If you're making a movie poster for Odyssey, which you think is going to be a billion-dollar movie, you have people using Adobe's creative suite to produce that.

25:50Downtown Josh Brown:I think there's a professional market that never goes away. Is that enough for Adobe? If they lose all the amateur users of Photoshop and all this stuff, but they maintain the professional market. Is that enough? Have we taken enough of a discount in the stock to account for that? That's the central question around why this thing has sucked so much. I'm not saying I know the answer, but it's in almost a, what's the drawdown here? 45 % drawdown. They took half its market cap in two years. So put that chart back up one more time. I don't know. Did it bottom at the end of the year when all the tax law sellers finished and now it could levitate higher?

26:32Downtown Josh Brown:I don't know. It's a tough bet. I'm making the bet, but I'm not very confident.

26:39Ben Carlson:All right, so we have Sean track a basket of all these loser stocks for the year and see if it outperforms. Yeah. You buying a basket of these losers versus the market?

26:51Downtown Josh Brown:CRM, Salesforce. This was a – I don't know. Is it still in the Dow Jones or did they pull it out? Michael, do you know?

26:58Michael Batnick:I think it's still there.

27:00Ben Carlson:They don't let them out that easy, do they? It just got in there.

27:05Downtown Josh Brown:I don't know if it's still in or not. I know they added a lot of other big tech stocks. All right. This has been a wreck for a while. It's in a 28 % drawdown. In a year where technology stocks, last two years technology stocks have done incredibly well, this thing just seems to go nowhere. It's another name where the narrative is they're going to get their ass kicked by AI. Enterprise users are going to need less headcount, less employees, therefore less seats that they're paying Salesforce for. That's part of the story. The other part of the story is people are going to write their own code, write their own software to operate their businesses.

27:44Downtown Josh Brown:And as a result, Salesforce will have less dominance over the market when companies become more proficient in creating their own workflow, software, et cetera. using AI.

27:57Ben Carlson:They have a secret weapon though. They have McConaughey. They're paying Matthew McConaughey.

28:02Downtown Josh Brown:True. You do have to factor that in.

28:03Michael Batnick:What if the market is right and very early and this happens eventually in five or 10 years and the revenue, the business, whatever, continues to grow but the stock is just dead money because investors are collectively looking out. I don't care about the next 12 or 24 months. The terminal value of this business is a lot lower than it is today.

28:26Downtown Josh Brown:This has happened. Like we saw this, there was a time when one of the best categories of tech stocks were PC makers and Dell and Hewlett Packard. And there was a company called Compaq and Intel. And there was like this whole ecosystem in the stock market of companies that were highly involved in PCs. And it's not that people don't buy PCs anymore. It's that investors just don't value that business as being worth much. Dell had to go private and then come back out as a public company focused on data center and cloud. At the time they went private, they were like one of the biggest PC makers in the world.

29:07Investors valued that business at nothing, like less than one time sales.

29:12Downtown Josh Brown:It was worse than an automotive business. So there's a universe in which we just decide enterprise SaaS is not worth anywhere near the multiples that people used to pay for these stocks and that absolutely could be the case and salesforce can say quarter after quarter hey look we grew earnings by 10 again and wall street could say great congratulations i don't want any part of this so i agree with you that's like that's like maybe an underappreciated risk for not just salesforce obviously that would have implications for hundreds of software uh stocks so i'm with you on that all right should we move on Yeah.

29:50Downtown Josh Brown:What did we decide? We decided none of these are -

29:53Ben Carlson:We had a credit to Michael for giving a great CFA answer there. What's that?

30:00Michael Batnick:What did we decide? I mean, Netflix is obviously the best business here. Like, I don't really care as a long-term investor in the stock, which I'm not. I don't necessarily care what happens in the next 12 months as the overhang from this deal. Is it good? Is it not? Does it go through? What does it look like? All that. Like, in five years, Netflix will be way higher than it is today. Absent like a full-blown market crash.

30:20Downtown Josh Brown:I agree with that. I would agree with that.

30:23Michael Batnick:I would agree with that, too. They'd be the safest bet for sure. Yeah.

30:26Downtown Josh Brown:Yeah. Bankston Mom in the chat is saying Josh is showing his age with the compact reference. Oh, I guarantee you most of the people here have had a compact at some point in their life.

30:38Michael Batnick:It wasn't that long ago. I was about to throw out the gateway. Remember that? Gateway. By the way, this is – no, this is NyQuil. Yes, it is. This is NyQuil. I need DayQuil. No, take the NyQuil. Are you sure? Okay. Do you have any meetings later? I'm going to the doctor after this. NyQuil without a chaser?

30:59Ben Carlson:That's impressive.

31:02Michael Batnick:All right, chart on. Here we go. Okay. All right, take it away. So, no, I need the chart, please. The viewers need the chart. We need the charts.

31:12Downtown Josh Brown:I mean, take the show away.

31:15Michael Batnick:I know what you meant. All right. So Chartgoat Matt showed the average stock in 2025, and he broke it down in deciles, which is equal – 10 equal baskets. And he showed how – what was the 52-week drawdown at the end of 2024? And the conclusion is very interesting. the conclusion is that the stocks that got the shit beat out of them the worst in 2024 at least heading into the end of the year gained 29 on average and also and also on the other end of the spectrum stocks that were closest to their 52 week high also had a great year the second best of the deciles and uh other than that like the third and the fourth were sort of no man's land Like the stocks that were like just sort of whatever, which are some of the stocks that we're talking about, had a horrible year.

32:08Michael Batnick:This is kind of breaking my brain.

32:10Ben Carlson:This can't be normal, right?

32:12Michael Batnick:I don't know. I don't know. What were the stocks that were furthest away? Well, I'm so glad you asked. Next chart, please. Okay. So the y-axis is how far below the 200-day moving average they were at the end of 2024. Okay? And then this is the 2025 return. So like Dollar General, for example, wasn't a 30 % drawdown. Oh, I'm sorry. 30 % below its 200-day. So really extended to the downside. And then it came like 70 % in 2025. The names that got even smoked even further. I'm sorry. This is hard to read. SMCI, for example, was down 50 % or 50 % below its 200-day and it was flat in 2025. Wow. So Micron, obviously, Newmont, Lamb Research, as we mentioned at the top of the show.

33:04Michael Batnick:Right.

33:05Downtown Josh Brown:So the key to outperforming last year was to either be absolutely crushed or be at an all-time high.

33:14Michael Batnick:Pretty much.

33:17Downtown Josh Brown:Very helpful. Let's do the MAG-7 chart. Yeah.

33:21Ben Carlson:I put this in here last night. So this is surprising. I think this will surprise a lot of people. So the S &P was up almost 18 % for the year on a total return basis. Only two of the Mag 7, Google and NVIDIA, outperformed. All of the other Mag 7 underperformed the S &P. Is that crazy for the year?

33:39Downtown Josh Brown:Yeah. Is it wild that NVIDIA very quietly went up 40 % last year? I say very quietly because I feel like it wasn't even controversial at all. it closed fairly close to the high given some of the carnage that we saw in november for a lot of the ai theme stocks this thing was just absolutely fine are you guys surprised by that at all i think

34:02Michael Batnick:it had a rough year though like it was not an easy stock to hold because it went from and went from like 150 down to 85 so 45 drawdown yeah um and then from there it was game on it was a springboard straight higher but then like you had a pretty a pretty decent sell-off 212 down to 170. So yeah, guess what? This is the type of stock where it hurt to ride, and that's sort of the point sometimes. Right.

34:26Downtown Josh Brown:NVIDIA up 40%, but still in a decent drawdown from that October. Well, I don't even know what happened there. By the end of the month, it had gotten up to 212, and then in a flash, it was below 200.

34:39Ben Carlson:But doesn't that chart just prove that we never got the crazy blow-off bubble that everyone was waiting for? It just never happened.

34:45Michael Batnick:Well, thanks to Sam Altman, It would have happened or it could have happened, I should say. Yeah, it happened.

34:49Ben Carlson:Which I think is a healthy thing that it didn't happen.

34:53Downtown Josh Brown:Yeah, it didn't even happen in the private market. Like I think he just got financing at the top of the valuation range or something just happened. I read half the headline. I don't care enough because it's not public stock. But like I don't even think for all the controversy about OpenAI, I don't even think it affected their financing in the least. Like I think they were absolutely fine. So I know we had this kind of blow-off moment in November, but other than for Oracle, it doesn't seem to have changed much. So, all right. What else we got here? Oh, this is a great one. What's this breaking down, S &P sectors?

35:32Michael Batnick:This is Duality Research, whose work we reference a lot. They do great stuff. All right, so we're showing the price return. So communication services, let's Google, as we mentioned. Technology, number one and two. So EPS growth, number one is technology, number two is communication services. But then the PE multiple. So tech actually saw the largest valuation contraction, which is kind of wild. The EPS was up 34 % and the price is only up 23%, which is very healthy.

36:02Downtown Josh Brown:Do you guys think most investors are aware of that or no? No. I don't think so either. people just assume people assume like tech stocks went up a lot this year therefore we must be paying up for for them and it's just not it's just not the case this year and i don't think i don't think most people are aware of that um hang on 34 earnings growth with all the money that those companies spent on capex is kind of unreal like all the money that they spent didn't impact their earnings yeah well some of them are on the receiving side in fairness like nvidia is on the receiving side of the capex um i put this together i hope the data is right uh i heard a guy from morgan stanley saying that the starting valuation for the mag 7 right now january 26 is actually lower than where it was in 25 and i was just curious to see that on an individual basis and i threw an oracle and broadcom just for fun so there's some weird uh put this table up there's some weird shit going on here.

37:02Downtown Josh Brown:So Tesla is obviously a big outlier that's bucking the trend. Tesla's a year ago, Tesla was selling at a hundred times trailing 12 months earnings, and now it's 300 times. I just think that that's a change in what people are valuing the company at. It's not a car company anymore. It's a robot and autonomous company. And so that would explain why it's selling at triple or multiple as it was. Broadcom was 190, now it's 72, but you also have to throw that out. They have this VMware acquisition that did some funny stuff with some of the net earnings numbers. But for the rest of these stocks, NVIDIA was a 54 multiple.

37:47Downtown Josh Brown:This time last year, it's 46. Amazon was 47, it's 32. Oracle was 40, it's 36. Apple was 38 it's 36 Microsoft's about flat at 34 Alphabet slightly higher it's 25 it's 30 and Meta 25 now it's 29 so for the most part like thematically these stocks are cheaper on at least trailing 12 months I threw the forward PEs in but that's a tough game to play because we don't actually know what the real earnings will be um but i thought that's that was an interesting observation what do you

38:29Michael Batnick:guys think let me ask you a different question if you had to avoid one mag seven for the next 10 years oh to me it's to me it's pretty easy what is it avoid one mag seven yeah it's easy

38:45Ben Carlson:okay what is it i think it's apple been bearish apple for a while i mean at 32 times earnings yes

38:51Michael Batnick:they can still grow their way through buybacks and stuff but the company's just not growing i don't unless there is unless there is a story that comes out of nowhere which obviously that can happen i think that i would i would least want to be apple i might think the opposite is you

39:09Downtown Josh Brown:i sort of i i sort of think think of it in the opposite way because i would ask you a different question which of these companies products do you almost know for a fact will be in your pocket and on your desktop in five years yeah but that's i don't think that that i don't think those two

39:27Michael Batnick:things are in conflict like apple is apple was up nine percent last year um second worst performing mag 7 stock yeah so i think the reason why it gets a premium is because of what you just said like you know you don't know anything absent like um a piece of hardware from open ai like a category killer could happen i suppose you know that apple's going to deliver monster numbers now then it's not monster growth at all obviously all the growth engine is coming from from services i just think it's way too expensive and i don't see innovation but that's but finish the sentence

40:01Downtown Josh Brown:the growth is coming from services is there any ai service that can survive absent paying apple the toll if open ai decides we're not going to build for the ios ecosystem it's zero even gemini like People's point of access to all of this AI shit is coming through the iOS app store, and Apple's taking a 30 % cut. If you tell me there's a story where that goes away, I'm definitely worried about Apple. But if it's not going away, and they actually get their AI act together this year, and Siri becomes something interesting, maybe even a competing chatbot, I don't know. I feel like the 30 % will make a lot more sense if that happens.

40:45Okay, so then which stock, if it's not Apple, which stock would you least want to own?

40:51Michael Batnick:Avoid 1Mag7, which is if it's not Apple?

40:54Downtown Josh Brown:I don't think this is an easy game to play.

41:00Downtown Josh Brown:I couldn't tell you any of them. Maybe Meta makes me the most nervous. Just because the competition between TikTok and Instagram will continue. And it's obviously a fight. Meta is not losing, but they really can't afford to lose it. I can't think of Apple competing with anybody in that same way. I would have said Meta just for the thickness of social media. Yeah, it's actually miraculous that they have held the attention of people to the extent that they have. And their AI strategy is like in no man's land right now. Nobody actually understands what they're doing or what all this money being spent is doing.

41:45Michael Batnick:But wait, the Reels monetization is going crazy from AI.

41:48Downtown Josh Brown:Yes. One of the best monetized products that has anything to do with AI at all.

41:54Ben Carlson:But don't you think that all the AI bots are going to make social media just unusable at some point? Like they're going to have to do something to fix that.

42:03Downtown Josh Brown:I don't know what you do. You put a watermark on everything that's created by AI. People aren't going to care. So, all right. Did you read the assemblies piece to start the year? All right. So this is, I think, for all of our listeners, all our viewers. This should be required reading. I don't want to go deep into it, but I just want to share this one part because I think it's super important for this year. After a rally comprised in equal parts of technological progress A surge in tech cap spending And frenzied speculation We've arrived at the following destination 65 to 75 % of S &P 500 returns Profit and capital spending Since the launch of ChatGPT Have been derived from 42 companies Linked to generative AI without the benefit of these 42 AI stocks, the S &P would have underperformed Europe, Japan, and China.

43:01Downtown Josh Brown:To reinforce the point, tech sector cap spending contributed 40 % to 45 % of U.S. GDP growth over the last three quarters, up from less than 5 % in the first quarters of 2023. So it's not that there's nothing else going on in the economy besides AI, but I guess my question to you guys is, isn't this still the big risk for yet another year 26 that the ai capex story somehow stumbles or changes isn't that like still if you had to rank every risk out there for investors isn't

43:36Michael Batnick:that still the number one of all of the risks that you could foresee this is the obvious answer

43:41Downtown Josh Brown:like right but it's yeah no i agree and people always want there to be a new narrative and they want to say something clever but i sort of still think this is it this is the main thing Ben, what do you think?

43:53Ben Carlson:I start wondering if we're lumping all these into one thing and people want there to be this conclusion, right? It's either going to take off and change the world immediately or it's going to end and the bubble is going to pop. But why can't it be that four or five of these companies don't figure it out and four or five of them do? And if Google is the one that leads the charge, what if there is no end to the story and it just keeps growing and growing and we don't get a conclusion that everyone wants?

44:20Michael Batnick:Literally, you stole that from me last week. No offense.

44:24Downtown Josh Brown:This is Semblis. I mean, I literally said that.

44:26Michael Batnick:Did I not? Did I not?

44:29Downtown Josh Brown:You guys talk to each other too much. This is Semblis. In this year's Outlook, we focus on four major moat risks. U.S. power generation. You might have a make-up dream on that one.

44:39Ben Carlson:I don't know. It's possible.

44:41Downtown Josh Brown:China's ability to scale. Duncan, Paul, I'm a state of my animal spirits.

44:43Michael Batnick:You were there.

44:44Downtown Josh Brown:All right. We'll get to that later. China's ability to scale the tech moat on its own. China's approach to Taiwan and then the ultimate profits earned on 1.3 trillion in hyperscaler cap spending. This year looks to be another version of 2025, a 10 to 15 % correction at some point due to profit taking and a growth scare, but then equity markets end the year higher. Even so, it's the right time to start focusing on these questions. So those are like, give me this chart. This is the tech cap spending in 2025 versus the spending on every other major U.S. infrastructure projects. So you're looking at the black bar versus like four of these things combined, Manhattan Project, Electricity, the Apollo Project, the Interstate Highway.

45:31Downtown Josh Brown:Anyway, Sembalist is the best. And I guess I still come down on the side of like, yeah, this is still the most obvious risk, but it's also the right thing to focus on. Will this continue or not? And if something can make it not continue, we're going to have problems in the stock market. So.

45:53All right.

45:54Michael Batnick:It was another tough year for stock pickers. Only 27 percent of large cap equity mutual funds outperformed the market, which sounds really bad because it is. Try it on, please, John. Nope. Next one. Most active managers are falling behind. There we go. So not quite the worst year. since 07, but not great. I guess it's the fourth worst year. But in fairness, most stocks did not beat the benchmark. So you can't show this without showing the next chart. 33%. I mean, this is wild. This is just brutal. It's impossible.

46:30Downtown Josh Brown:How do you do this?

46:31Michael Batnick:In this type of environment, good luck. If you're not overweight, the big winners, you're just not going to keep up.

46:38Downtown Josh Brown:So wait, less than 30, is this less than 35 % of stocks had a better year than the S &P?

46:46Ben Carlson:One out of three.

46:47Downtown Josh Brown:One out of three. Yeah.

46:49Ben Carlson:So what you do is you change your benchmark if you're an active manager. I'm not tracking the S &P anymore. I'm doing something else.

46:55Michael Batnick:Go to the Russell 3000.

46:57Downtown Josh Brown:I think the key is you just own the 35 % that do better than the market. Isn't that the cheat code?

47:03Ben Carlson:We keep saying that this is the hardest market ever to outperform it, and it probably is for the S &P, but throw that active chart back up, John. The numbers aren't any that much worse than they were in the 2010s either. This is just – I think this stretch of this past 16 years or so is just trying to outperform the S &P has been almost impossible. Like that's why we don't have any stories of these legendary investors like Bill Miller or whoever.

47:26Downtown Josh Brown:We're not creating new ones. No, they're not. Yeah, yeah, yeah.

47:28Michael Batnick:No way. Is this just what it's going to look like for the rest of – for the next 10 years? Like will there ever be mean reversion in stock picking? I think at some point there's got to be.

47:37Ben Carlson:Well, how about this? In the market. So Josh said the biggest risk is obviously AI. I think I talked about this with Michael last week. And Michael, in my defense for your AI take, I was five beers in doing Animal Spirits last week because I came from the bowling alley. All right. So give me a break. So here's the return since 2019 for the S &P. We're up 30%, up 20%, up almost 30 again. 2022 is down 18. But then we're up 26, up 25, and up 18 last year. So we're going 18 % per year since 2019. Isn't the biggest risk just – it's mean reversion. Like, can we keep doing this for this long where we have returns this high in the market?

48:12Ben Carlson:That's the big risk.

48:13Downtown Josh Brown:I mean, that's to me has to be shown though with earnings growth next to it.

48:21Michael Batnick:That's what I was about to say. Because it explains it. If we keep it up, then yes.

48:24Downtown Josh Brown:So if you're going to keep the earnings growth up somehow.

48:27Michael Batnick:Then yes.

48:28Downtown Josh Brown:Then the answer is yes. But if you're not, then it's not going to be yes.

48:31Michael Batnick:But in a vacuum, it does seem like the obvious answer is this can't continue indefinitely.

48:35Ben Carlson:And it won't. We know it won't. But it can continue for three or four more years probably, right? We know bull markets last longer than people say. Yeah. All right.

48:44Downtown Josh Brown:Which IPO are you buying if you had to pick one? We think all of these are coming to market this year. This is also easy for me. Which one you want to own?

48:54Michael Batnick:Yeah. I mean it's SpaceX, no? How could it be the other two?

48:58Downtown Josh Brown:But at any price? At a trillion dollars?

49:03Michael Batnick:I just don't want any part of OpenAI or Anthropic.

49:07Downtown Josh Brown:I sort of like Anthropic. they are dominating the enterprise ai layer i think they have more corporate customers than any of the other ai services i guess i guess it's going to be a tough story because they'll be up against alphabet and it's it's erroneous yeah they're having success right now but like so what is that sustainable well it's not erroneous it's like speculative that it's sustainable or not, I would say. I don't know if it is.

49:38Ben Carlson:Is it too obvious that none of us would pick open AI? I think if we had to short one of these, all of us would say open AI. Is that...

49:44Downtown Josh Brown:At 500 billion?

49:47Ben Carlson:It seems...

49:49Downtown Josh Brown:I'm paying them and I'm frustrated every day. I'm getting a lot done with it, but it's so stupid sometimes that I can't believe I'm paying$20 a month,$250 a year. like sometimes it's so stupid that i'm just like i i gotta go to gemini i can't deal with this anymore it wants you to pay 200 a month that's why i don't but i don't even know that the results would be materially better it's like and then if if gem a month try try for a month and see if you notice the difference why you're paying the 200 a month yeah what are you getting that i'm not

50:25Michael Batnick:getting as a result of that that's confidential 200 a month is a lot of money i'm getting better performance you know this you know this for sure um maybe i'm a sheep but yeah no but you ever you

50:40Downtown Josh Brown:ever try like the old version versus the new no so that i can't do but i've tried it like compared to gemini and it's uh all right so i'm gonna send you a query i'm gonna send you a prompt and i want to see your result versus mine i have something very specific in mind we'll do that when you're when you're feeling better after your NyQuil wears off. All right, so are we all saying that anything but open AI is the movie? I think you have to pick SpaceX.

51:11Ben Carlson:You'd have to.

51:14Downtown Josh Brown:I mean, that's going to be crazy. Do you think that's going to happen this year? He said this year.

51:20Michael Batnick:So is SpaceX happening? I think so. Let me ask you guys a question. What did we not talk about today that you are very excited to see what happens over the next 12 months? I'll go first. I'm going to stick with the private credit stuff and the private market stuff. I am just really curious. I don't have strong opinions here, but I'm looking forward to fast-forwarding. Are you buying some of these stocks?

51:48Ben Carlson:Because you've been on this story for a while. Would you buy some of these?

51:51Downtown Josh Brown:Blackstone is one of my largest positions. Well, what's the thing that you're excited to see that like nothing major blows up and these companies are fine?

52:00Michael Batnick:I'm just excited to follow the story because it is meaty. It is very juicy. The conversions from private to these closed-end funds. I'm excited to learn more about some of the deals that blow up. There's blowups in public markets too. It's inevitable. It's going to happen. So I'm just excited to see if this spreads and a lot of the fears come true or if it is actually a better mousetrap than syndicated loans. which by the way, those two things aren't mutually exclusive. Both things can be true.

52:27Downtown Josh Brown:I don't think the economy is bad enough yet to worry about the whole category, but there are some fringe players who have made promises to investors and to financial advisors that they just can't keep. They're going to be – even in a healthy economy, the wealthy consumer is spending like there's no tomorrow right now, but SACS just missed an interest payment and had to file for Chapter 11. So even in a good economy, you're going to have some failures. But I think the fringe players, they're going to experience a lot more failures than a Blackstone will. And that's where the action is going to be.

53:07Michael Batnick:Sacks is a great example. I haven't read the story yet. But I saw that they just raised money not too long ago. And the fact that it's already going belly up, who's underwriting these loans? Yeah.

53:17Downtown Josh Brown:We had a blow up in Boca Raton down the street from me. There's a project called Via Meisner. They just filed for Chapter 11 this week. There's a project called Via Meisner. It's going to be, I think, 366 luxury condominiums in one tower. A second tower is going to have a Mandarin Oriental Hotel. and then the two things will be connected by outdoor amenities and a huge shopping district. This thing is the size of a New York City block. You can't even imagine how large this project is. And they just filed for Chapter 11 today and everybody's owed money. Mandarin Oriental's owed a half a million dollars.

54:04Downtown Josh Brown:They haven't paid taxes. The junk bonds or the banks are all owed money. and this is in an amazing economy for luxury spending. What happened? They can't build it. They can't get it done. The financing is too expensive and I guess they haven't sold enough units and people that bought the units want out because this has been going on for 10 years. It's like a giant white elephant. So my point is there are always, even in a good economy, there are always going to be failures. The test is going to be the fact that these funds are so widely held by relatively unsophisticated investors who have been sold these things by intermediaries.

54:47Downtown Josh Brown:And that's where I agree with you. It's going to be interesting this year, even absent a credit cycle. It's going to be really interesting to see what falls apart.

54:57Michael Batnick:One more thing that I would throw out is can international have back-to-back years of outperformance? Everyone's waiting for a recession for these things.

55:05Downtown Josh Brown:oh for the private that was gonna be my thing like we

55:11well the international stocks sorry my back

55:17Ben Carlson:see this is why you short airbnb shitty internet and uh the pool here broke too uh no but i think the international thing we didn't talk about even does it no one cares international stocks are up 30 and emerging markets are up 35 no one cares so if we get another big year for international and the dollar keeps falling, will people start to care and we'll get a huge inflow of money there? Because no one's talking about it at all.

55:40Downtown Josh Brown:Yeah, it's a really great point. You have country stock markets up 30%, 40%. I think Japan went up 25 % this year or maybe more. And you're just not hearing people pounding the table publicly on international stocks yet. Maybe they need two years in a row of good performance before anybody wants to return into that story. Josh, is there

56:04Michael Batnick:anything that we didn't get to that you're interested about in 2026?

56:08Downtown Josh Brown:Probably, but we're at the 1026 AM mark. Oh no. It's 1026.

56:14Michael Batnick:That's the hard stop.

56:14Downtown Josh Brown:Alright, see you guys. It's time to wind down. Michael, feel better. I want to say thank you to everybody in the live chat who joined us to begin the new year. Great to see you guys and we'll be back on all your favorite shows going forward. Thanks to Ben for joining us and And happy new year. Happy 2026. Here we are.