Why AI Momentum Stocks Got Killed, OpenAI's Confidential IPO Filing, Apple Launches Siri AI

14:03Downtown Josh Brown:Dell, for people that are listening, it's AMD, Dell, Sienna. It's the AI ancillary trades on AI CapEx. We're not talking about hyperscalers. We're talking about the companies that sell them stuff. And yeah, that's the scene of the crime. Vic's 20 and a half today at its worst. No, no, no, 23. Was it 23? Okay. So what's the difference? It reversed it by 3 o 'clock this afternoon, as it always does. I have one chart for the bears.

14:34Michael Batnick:No, I have two. All right. The ratio of S &P 500 momentum versus low vol stocks is nearing the tech bubble peaks. This is the unwind. And this is a real good one. This is a real good one. This is meaty, Josh. So Berkshire, I don't know if you realize this, but the extent of the underperformance over the past year is something like we haven't seen since the top in 2000. You don't want this stock. Over the past year, Berkshire has underperformed the S &P by 26%. But I'll do you one better. So this bounced, by the way. in April. So in April, the spread was 48 freaking percent, dude. I didn't realize it was that big.

15:12Michael Batnick:It was 48 % in April. And this just goes to obviously what everybody wants, AI and what's powering it and what nobody wants, which is an insurance conglomerate.

15:23Downtown Josh Brown:Can I ask you a question from the chat? Please. E. Rudolph says, one data point that I have not heard anyone address is that Thursday of last week was the first day of the end of the PDT rule, which has to change the dynamics. I don't even know what that is. Okay. Pat, the pattern day trader rule was officially eliminated. This is such a Trump era thing. So when, when I was a branch manager at broker dealer, we had a pattern day trader, uh, list. So we had certain accounts where on a regular basis, They were repeatedly placing trades, unwinding those trades in the same day. And if they weren't coded correctly or whatever, they reached some sort of an extreme.

16:10Downtown Josh Brown:These people got marked as pattern day traders, which meant there was an additional hurdle to get their trades executed. Somebody had to sign off on it. I mean, this is 20 years ago. But they eliminated the pattern day trading rule. So permanently removing the requirement to maintain$25 ,000 in a margin account. That's now been replaced by a real-time risk-based, I'm reading this, intraday margin system. With the upshot, traders now face fewer barriers to intraday trading, though specific brokerage implementation dates may vary. So as a FINRA rule that was in place until June of 2026, any customer who executed four or more day trades within five rolling business days using margin were heavily restricted unless they maintain$25 ,000 account balance.

17:05Downtown Josh Brown:So of course, in the modern era, we got to get rid of that. Anything that stops gambling is obviously something that we have to take care of. So I don't know. It's a good question. Do you think there's enough pattern day traders who had their activity released and that changed the way things were acting?

17:25Michael Batnick:No. If the restriction is a$25 ,000 balance and that's been relaxed, that's not moving billions and billions of dollars.

17:31Downtown Josh Brown:10 million customers of brokerage firms?

17:33Michael Batnick:I don't know. Perhaps. I would reject that, but I don't know. Okay. All right. I'm good. I'm good to move on. I have more stuff in the doc later to revisit this topic. You want to do the Apple stuff?

17:45Downtown Josh Brown:Yeah. So Apple, let me get a quote on where Apple closed. It was pretty ugly today.

17:55Downtown Josh Brown:Bear with me.

17:56Michael Batnick:It was down 3.6%. Bear with me.

17:59Downtown Josh Brown:The pattern day trader rule is holding my quotes back. Yeah. Down almost.

18:03Michael Batnick:You have male pattern day trader. You're a male pattern. Male pattern day trader. It didn't really balance with everything else at the close.

18:11Downtown Josh Brown:Yeah. Down 4%. It stayed there. Anyway, I think there was a lot of enthusiasm going in to this announcement because the stock price was making record highs. It got up to, I want to say, 315, 320-ish. What was that level? 315. Yep, yep, yep. All right, 290 in an instant. And so they had their WWDC conference, which is always very closely watched. This year in particular, everybody knew that they were going to release their re-release, their AI strategy and a lot of actual products that they plan to deliver this year. And I guess the only way to put it is the street was underwhelmed and investors were underwhelmed, or at least underwhelmed relative to the rally and the stock going into it.

19:01Downtown Josh Brown:I did want to play a clip from the presentation itself, John. Let's take a closer look, starting with how Siri is a much more capable assistant. I want to get right into it and show you a few things that you can now do with Siri in your day-to-day. Let's start with something simple but super useful. Say you've heard about a local concert. When's that Suki Waterhouse show in SF?

19:26Michael Batnick:Siri can draw on current world knowledge to ground its answers to your questions. Okay, looks like the concert is on July 26th.

19:35Downtown Josh Brown:How can I get tickets?

19:43Michael Batnick:Okay, you have to enter a lottery to get the tickets. Remind me to sign up when the lottery opens.

19:56Michael Batnick:Okay, got a reminder. Now let's hear one of her new singles.

20:02Downtown Josh Brown:I don't know. We can't play that. All right. So if you're listening, not watching, what's happening on the screen of the phone as he talks to it, it is responding to his commands or his questions in almost real time. I did notice he's talking while the thing is like buffering. And maybe that was by design. So there wouldn't be that big of a gap between the command or the prompt and the response. But it is interoperable. Siri is working with multiple apps as he's asking it to do things. It's pulling up ticket information. It's pulling up dates. It's instructing the calendar to set reminders. And then it's going right into playing a song by who is that?

20:46Downtown Josh Brown:I don't know how that is. Suki Waterhouse? I thought I was hip. I thought I was with it. Apparently, I'm not. But the point is, it's not multiple conversations with Siri. It's all happening inside of one interaction. This is the beginning of a gentic Siri. This is the thing that they should have done 10 years ago, quite frankly. I didn't know that it needed AI. But historically, that would have been five different hey, Siri's to get to it. Right. And so now it's all happening within one conversation. And Siri remembers what was the step previous. You don't have to reiterate everything. OK, so I don't know that that should blow anyone's doors off, obviously, because it didn't.

21:31Downtown Josh Brown:But I do think that people will get accustomed to using it and it will prevent people from going to a third party chatbot for a lot of things. once it just becomes like the obvious no fuss way to get information or talk to your apps and tell your apps to do things. What are your thoughts?

21:52Michael Batnick:This is not – I'm stealing a thought from Ben Thompson. The next level of this is instead of set a reminder on my calendar, please enter the lottery for me. They're not there. Go the final distance. That's right. So Siri is such a piece of garbage. John, throw out my conversation that I had with the boys. It's a little bit – here we go. All right. So I said, I know I'm, so this is Siri, okay? I used our talk to text. I know I'm beating the drum to death, but half man spelled Haifman, H-A-F-E-M-A-N. That's what it heard. But Haifman was so bleep bleep good. How bad is Apple? How the bleep do you hear?

22:32Michael Batnick:And I'm literally talking.

22:33Downtown Josh Brown:You're cursing it, Siri?

22:35Michael Batnick:I'm talking. What kind of animal are you? Listen, let me finish. I said, how do you hear half space man and write half man spelled half man again? And why does man have two N's spelled N's? LOL. I said N not end. This thing is such a giant turd. It just doesn't work at all. Can I stop you? Consistently.

22:58Downtown Josh Brown:What they launched last night is not available till September. So you're using 2015 technology.

23:05Michael Batnick:No, I understand.

23:05Downtown Josh Brown:They say that they're – 2015?

23:08Michael Batnick:2015? Come on.

23:10Downtown Josh Brown:But they say all of those little translation-related things are going to be fixed. That's heinous. No, everyone agrees. Nobody would say otherwise. But what they released is not even available yet. I know. That's old Siri.

23:25Michael Batnick:Let me tell you one other idea. Robin said, hey, what's Ryan's number? This happens all the time where you ask a friend for another friend's contact. Why do I then have to go into my contact list? hit the number, hit the info, hit the share, hit the create. Why can't Apple's Siri intelligence respond? These are the three Ryans in your contact. Which one would you like to send to Robin?

23:46Downtown Josh Brown:I completely agree. That's like such basic shit. And it's because they haven't done it yet. Like, come on, man. Here are some reactions.

23:57Downtown Josh Brown:Let's see.

24:01Downtown Josh Brown:WWDC2026 is Apple's AI credibility test. Apple does not need to win AI by having the biggest model or the loudest demo. It needs to make AI trusted, useful, and invisible across the ecosystem. So they did an entire panel session during the presentation with multiple Apple people specifically diving into privacy. And the fact that none of this stuff was going to take place in a cloud somewhere. This is like on device. This is very important. This is like on-device stuff so that if you're talking about personal information with Siri, it's not like there's some data center in Arizona that's just like randomly running that information through it.

24:46Downtown Josh Brown:And that's what I think makes this so hard. Apple has always been the king of privacy. And they're trying to not innovate so fast that they break that trust. I think it's a huge part of the Apple story, and I think it explains a lot of the delay. They apparently are willing to move faster, though, than they used to because they fired their head of AI, and they brought in this guy, Mike Rockwell. And Mike Rockwell is the guy that built the Vision Pro, which was a commercial failure. But within Apple, they deem it to be a massive technological success. Like it was a very difficult project, and he delivered it.

25:29Downtown Josh Brown:He had been lobbying to take over AI internally for a long time, and they finally handed it to him. And that's a really big development. The other thing, I wanted to share this with you. Wearables are going to be a very big deal for Apple going forward. Obviously, AirPods were a smash hit. The watch became a hit, although it wasn't at first. People forget this. Here, Apple is accelerating development of three new wearable devices. companies ramping up work on smart glasses, a pendant that could be pinned to a shirt or worn as a necklace, and AirPods with expanded AI capabilities. All three are being built around the Siri digital assistant, which will rely on visual context.

26:18Downtown Josh Brown:The glasses, so Meta works with Ray-Ban, Google works with Warby Parker. Apple, after talking with third-party companies, has made the decision to manufacture the glasses themselves in-house. I think that's meaningful. The early prototypes connect via a cable to a standalone battery pack and an iPhone, but the newer versions have components embedded right into the frame. They'll use high-end materials, acrylic elements to give the glasses a premium feel. And basically, the glasses will have two camera lenses, one for high resolution imagery and another dedicated to computer vision. And they learned that from Vision Pro.

27:03Downtown Josh Brown:So basically they wanna be able to give the device environmental context, help people interpret their surroundings, measure distance between objects. And they want people to wear the glasses all day as an AI companion. The glasses are gonna rely on the phone for processing. So a lot of the heavy lifting is still going to happen on the phone, but the glasses will keep you from having to pull your phone out of your pocket. They will tell you things on board your face. This is really the start of augmented reality and walking down the street and having AI talk to you and tell you what's going on or vice versa.

27:45Downtown Josh Brown:Let me ask you this question. Would you wear the glasses?

27:49Michael Batnick:Not only would I wear the glasses, I will wear the glasses and I think the glasses are going to be a massive hit. I think it's going to be a new, I do. Okay. I'm all in. So -

27:57Downtown Josh Brown:Let's talk pendant real quick. Wait, hold on, hold on.

27:59Michael Batnick:Here's my, one thing on the glasses. So you go to a sporting event, I was on the Knicks game last night, or you're going, you're on a vacation, wherever you are. So if I could wear the glasses of the Knicks game and somehow in the future, there is a way for this machine to catalog and pull the best clips of the game, the best highlights and deliver it to me for future use or whatever. It's just like, I think all of that is coming and I think it's going to be really freaking cool.

28:25Downtown Josh Brown:Here are the problematic elements. Again, back to Apple's focus historically on trust. Somebody wearing the glasses says, that girl is super hot. Hey Siri, take a snapshot, save that for me. Yeah, it's an issue. I mean. There's a lot of issues. I don't know. I have no, obviously I haven't spent the same time. And I don't even want to go further than that, like pedophile shit. Like I don't even want to. Okay. Okay, the pendant. So OpenAI is working on this and others will too. This is something either pinned to your shirt or worn on a chain with a hole through the device so that it could be supported like an amulet or like a medallion.

29:06Downtown Josh Brown:And what is that going to do? It's going to have a camera on it. So you're not wearing glasses, but you've got this thing pinned to your chest. Okay. And it's looking at everything that's in front of you, and it's listening. And possibly you're tapping it like Star Trek and giving it instructions that it then sends to apps on your phone. Would you rather wear the pin or the glasses?

29:33Michael Batnick:I think, well, no.

29:36Downtown Josh Brown:It's the size of an AirTag. I would say the glasses, I think, but we'll see. Okay, I think I'm a necklace guy in this situation because I already wear glasses. You know, 18 hours a day I have sunglasses on.

29:50Michael Batnick:Listen, it's all exciting. I don't want to be a hater. Like what they showed in the video, I don't really care about the stock price reaction.

29:54Downtown Josh Brown:Well, they didn't show any of these devices. No, I know. This is just like part of this bar.

29:57Michael Batnick:Even the beginning of the, hey Siri, what's going on, put it on my calendar. They're like, yeah, that's cool. It's useful. I will certainly adopt that.

30:05Downtown Josh Brown:I agree with you. Hey Siri, when is the… Presale. Let's use something I actually want to go to. You know Rush is on tour again? Okay. They're going to play four shows in MSG. They have a new drummer. She's an absolute animal. There are clips of her all over social media because they played their first show last night. Will Paul Rudd be in the audience? I would assume. This is going to be a very big show. Okay. Hey, Siri, when are the rush dates at MSG? They give you the dates. Okay, great. On which of those days am I planning to be in Manhattan?

30:39Michael Batnick:Yeah. It'll be in Manhattan for show two.

30:41Downtown Josh Brown:Buy me tickets. I need floor or I need hundred section. buy four tickets, text Michael Batnick and Justin Frankel and Adam and let them know we're going.

30:53Michael Batnick:Yeah.

30:53Downtown Josh Brown:Like that's the, right? Yeah.

30:55Michael Batnick:Okay.

30:56Downtown Josh Brown:We're not there, but so we don't have it. Until we have it, I don't think the stock price is going to rally on this shit.

31:01Michael Batnick:Well, here's the bottom line. So the real, the only thing that matters, are they going to sell more devices as a result of this? 100 % agree. And I don't know. I think they will.

31:11Downtown Josh Brown:I don't know what moves the needle. Everyone's already there, but it's cool, man. It's, it's, it's. when you see your friend interacting with his Siri and getting shit done.

31:21Michael Batnick:Yeah. I got to have it. Yeah.

31:22Downtown Josh Brown:You're or somebody you like in a meeting with and you're like, whoa, what the hell is going on here? Yeah. Oh, that's just my agentic Siri, bitch. That's cool. That's cool. That's right. You're going to want it. Okay.

31:32Michael Batnick:Um, all right. More on, more on the correction. I want to talk about this. I've said this before and it's really true. And you mentioned this earlier when I said it's no big deal where you're like, well, it is a big deal if you bought it at the top. True. A correction only feels healthy when it's other people's stocks, right? So I understand that if you bought the NASA ETF two weeks ago when we spoke about it or whatever, and now you're down 20%, yeah, it doesn't feel so healthy. It actually feels pretty nauseating. I get it. So let's go through some of the shit that's happened. So the quantum computing names fell 13 % in five sessions.

32:03Michael Batnick:Look at the one that these names are on, okay? Just like straight up.

32:06Downtown Josh Brown:There's a quantum computing ETF. Of course there is.

32:09Michael Batnick:Well, no, there's multiple ones. This was actually -

32:10Downtown Josh Brown:WQTM.

32:11Michael Batnick:So shout out to Wisdom Tree. The Defiance one had AMD and other stuff in there. This is the real shit. The space ETFs fell 20 % very quickly. The DGEN DAO, look at this. Yeah, rolled over pretty aggressively. So here's the deal. I think corrections like this are healthy for a million reasons. But even just for like, we get lulled into complacency when you've had such a long bull market. And I don't mean like the last 10 years. I just mean like since the March lows, right? We have like a false sense of security. And sometimes we, as human beings, we fly too close to the sun and we need to be reminded, oh, like I was overexposed.

32:52Michael Batnick:Whoops. Like I did it again. It happens. And I was writing this morning about the correction. The VIX was at 22, it closed at 19. RSP was 1.5%, the equate of its all-time high. Spoiler alert, it's 74 basis points of its all-time high. And to me - Nothing. There's two things happening here. One, there is a slap in the wrist of a very crowded trade. Throw up this chart from Todd's own. Cumulative sector ETF flows since the March 30th low. It's only tech. Literally, it's only tech. Tech has taken in 30 billion and everything else has had an outflow. It's the whole thing. So I have two more charts and then I will - That is a killer chart.

33:36Downtown Josh Brown:So every dollar since March 30th that's come into the market has come into a tech ETF on a net basis. All of it. Holy shit.

33:47Michael Batnick:All right. I'm going to skip one chart, John, and then we'll get back to this one. The five-day outperformance of the S &P 500 versus S &P 500 XAI is the biggest on record. Zero Hedge tweeted this. So just a massive, massive unwind. We haven't seen anything like this in the last five years. And where did the money go? It went into, oh, healthcare, for example. Healthcare's best five-day relative rally since 2009. So the money is rotating. But if I were to throw another bone to the bears of, well, are we going to look back and say that Friday was actually a meaningful reversal day? Maybe not tomorrow, but like in the grand scheme of things, I would point to this chart.

34:27Michael Batnick:Record outperformance of low vol versus the NASDAQ 100. So here's what we're looking at, if you're listening. The bottom pane is what matters in these charts. Well, they both matter. So on Friday, the low vol index outperformed the NASDAQ 100 by 6%. We haven't seen that level of outperformance since the dot-com bubble imploded. And outside of that, there's really only been three other dots. There was a random one in 1987. Well, not random. There was one in the GFC. But all of the other red dots occur in the run-up and the unwind of the dot-com bubble. And I'm not going to just sweep that under the rug.

35:06Michael Batnick:I'm not saying that this is the top, but it's not nothing.

35:11Downtown Josh Brown:You know what the animal spirits do, though, in this market? So they rotate into healthcare and they start buying biotechs. That's not risk off. So the low vol thing is risk. I mean, that's obviously meaningful. So I'm trying not to make too much of Friday because I just know the mentality of the modern investor is a gambler and they'll just whatever. All right. What's going up? I'll just buy that. They'll do that shit. And the game goes on. The rules change or it's a new game is the better way to put it. But the casino never closes. That's right.

35:50Michael Batnick:Well said. We need evidence that there's a top. And by evidence, I don't mean one down day. I mean a series, a series of lower highs. And obviously we're not there yet. We might be there in four weeks. I have no idea. But you have to give the bulls the benefit of the doubt. And the thing that I keep coming back to is like my North Star for where we are in this market. And I understand that Micron is up 800%. I get all that. The AI story is in its infancy, as hard as that is to believe, which is a great segue to the open AI stuff, the S1.

36:18Downtown Josh Brown:It's just too much wealth has been and is about to be created in stocks for us to say a one-day crash in memory stocks and AI names is like the end of it the end of this I'd be surprised yeah I just I I can't get there mentally I mean you know it could be wrong just somebody asked me my opinion like was that it it was a blow-off top it was a blow-off top in 100 stocks, but the casino is still open. Speaking of casino, OpenAI filed confidentially, which is interesting in and of itself. It's S1 with the SEC around May 22nd. And we all just found that out. The filing was confirmed publicly by the company on June 8th.

37:11Downtown Josh Brown:So here's what we know so far and then I want to get your reaction. Obviously, Goldman, Morgan Stanley, J.P. Morgan are co-running the deal.

37:23September 2026 is the target window.

37:27Downtown Josh Brown:They really want to beat Anthropic to the door, which I understand, given the size of these things. And, you know, neither one wants to be third after SpaceX, which is this week, right? Okay. Analysts are expecting a trillion. The current private valuation, a trillion before X Alibaba's 2014 listing, which at that time was the largest IPO ever. The current valuation is$852 billion. Anthropic filed for their IPO on June 1st. And the valuation talk was$965 billion. So you can bet that OpenAI wants the top$965 billion. That's where the trillion plus comes from. The revenue growth here we know is incredible.

38:20Downtown Josh Brown:$2 billion in annualized revenue at the end of 2023. $25 billion as of February. That's a 12.5 % increase. 12.5 times, excuse me, increase in two years. The losses are growing just as fast. The company lost$1.22 for every dollar that they earned in the quarter. 2026 projected gap losses of 26 billion cash burn 25 billion for the year gross margins 33 percent in 2025 that is not uh that is not what investors are typically putting multiples on stocks like this for um the good news is the elon musk lawsuit is out of the way the filing happened two days after the jury dismissed elon's lawsuit where he accused them of stealing a charity and turning it to a for-profit company.

39:10Downtown Josh Brown:He lost. It came a week after the Anthropic filing. So this is a race. One other thing that people are noting is that the Trump administration is extremely IPO friendly. They want this to happen. They view this as a wealth creation event and another sign that, you know, the US is the hottest country in the world, blah, blah, blah. so very very little doubt about whether or not if they want to do it they'll be able to do it i did make a couple of uh charts here just put this first one up i just want to show you i um open ai versus anthropic just on those metrics that i rattled off we won't go through them again but the key one that i want you to look at is that 95 of chat gpt users of which there are 900

40:03Michael Batnick:million weekly are free.

40:08Downtown Josh Brown:Anthropic, 80 % of their users are enterprise, including eight of the top companies of the top 10 companies in the world. They have a thousand companies paying them more than a million dollars a year. These are very different businesses. I told you, OpenAI is losing$1.22 for every dollar earned. That is not the case at Anthropic. Next chart. This is the revenue run rate for both. And you can see a clear acceleration of Anthropic versus OpenAI since the start of this year. Like the curve just went plaid.

40:50Michael Batnick:Yeah. You know what's weird about how Anthropic accounts for their revenue? it's not taking anything away from what they're doing because they legitimately did blow past OpenAI. But Anthropic, so I asked Claude how they book it. Anthropic books that channel revenue on a gross basis. So it's sold through cloud marketplaces. It counts the total end customer spend as its revenue. And then it records what it pays to the cloud platform as an expense, which is a little bit weird, but it's kosher. Like that's, you're allowed to do it that way. OpenAI does it the other way. They only account for the revenue that they're actually getting and not distributing.

41:32Michael Batnick:So the gap is not quite that wide. But look where it was at the beginning of the year. It was very wide. And OpenAI just whooshed past them.

41:41Downtown Josh Brown:Which one is more traditional for an enterprise software company? I don't know.

41:46Michael Batnick:I don't know. I'm making this up. I would guess that OpenAI is the more conservative way to report. I don't know why you would do it the other way, but that's what Anthropic chose to do.

41:59Downtown Josh Brown:They were able to raise$60 billion with their eyes closed last week. Nobody even heard a word about it. They could raise whatever they want. They just announced that it got done.

42:06Michael Batnick:They raised a Series H and then announced the S1 the next day.

42:09Downtown Josh Brown:The first quarter operating profit in Anthropic happened in Q2 of this year. $559 million was what was reported. you can't find anything you can't find anything like that they were at an 87 million dollar run rate two years earlier so so they have a thousand customers spending a million dollars annually like name a large corporation they're probably a customer Claude Code they say crossed a billion in annualized revenue within six months of launch they're talking about gross margins of 40 % two years ago it was negative of 94%. So like they're already at a crazy level of profitability based on their own numbers.

42:56Downtown Josh Brown:We don't know if that will be sustainable because they also spend a lot of money. But having businesses as customers versus individuals, I think is a very big difference. I just think it's a cleaner, easier story for institutional investors. Although, you know, that doesn't seem to be stopping any money being raised. OpenAI raised$120 billion this year already on top of money they raised last year, the year before, the year before that. So it's, I mean, it's, we're talking about three, including SpaceX of the biggest companies ever to go public. They might be one, two, and three by the time this is over.

43:35Downtown Josh Brown:And what an incredible moment for the capital markets. If these things actually happen and nobody gets, nobody gets killed. It's really exciting. I think it's pretty crazy.

43:46Michael Batnick:I was talking with Ben about this today. If there were to be a quote that we would look back on in five or 10 years and be embarrassed, like you dumbasses, you really didn't see the top coming, it would be this one. I believe Morgan Stanley said that SpaceX can reach, the number is so stupid, I forget, it doesn't matter what it was, like$3 trillion in revenue by 2040,$30 trillion in revenue. Did you see that quote?

44:13Downtown Josh Brown:Yeah. literally like trillion three trillion in revenue sure sure why not um okay goldman sachs calls you we are the lead underwriter in spacex open ai and anthropic pick one we'll hand you a thousand shares how long do i have to hold it for or i shouldn't say the amount of shares we'll give you$100 ,000 worth of any of these three, the lockup period is one year, and then you can sell all of it or you can keep it forever. Which of those three do you want?

44:49Michael Batnick:Well, definitely not OpenAI. Definitely not. Are you sure? Yes, I am sure. So SpaceX or Anthropic? I'm not sure that that will be the right answer in a year from now. No, obviously. But I'm sure that's my answer today. No hesitation.

45:04Downtown Josh Brown:All right, chat. We want to hear what you guys think. Nicole is going to keep her eye out. And at the end of the show, I don't know if we're doing a poll.

45:12Michael Batnick:So I would buy Claude today if I had to, if I had to choose. But I do think that SpaceX can be – I think it can be a$10 trillion company, as cracky as that's saying. Okay.

45:23Downtown Josh Brown:So all right. So I gave you a one-year holding period. If you had to hold for 10 years, does SpaceX become obvious? I think so. Is anyone going to catch them in 10 years? I say no.

45:34Michael Batnick:I think so only because what they're doing there, I don't know who their competitor is, right? Like there's open AI and Anthropic and XAI and Grok and there's other stuff. Like, I don't know what the mode is there compared to what SpaceX has already built. They're so far ahead of the competition.

45:50Downtown Josh Brown:So, all right. But so then let me, so then let me tease this out. If you, if that's your take, like if it's a 10 year hold, I'll take SpaceX IPO, which I think I agree with, just buy it in the aftermarket then. You're holding it for 10 years anyway. Yeah. So that's why I think the IPO is going to work because I think that's the conclusion a lot of people will reach is this might be the dumbest of dumb ass prices that I'm about to pay, but whatever, I'm going to hold it for 10 years anyway. If enough people have that mentality, and I think they will, I think there'll be support for this. Well, guess what?

46:25Downtown Josh Brown:I could end up looking like an idiot on Friday, but that's what I think.

46:28Michael Batnick:They've engineered the stock to go up. I don't know if it's going to work, but they are doing everything they can to be thoughtful about the amount of supply that is being unlocked. And I don't know, and Les, we could move off this. I don't know that the weird unlock that they're doing is worse than the 180-day cliff where it's just like, that seems very strange too. I actually kind of think that what they're doing is - I like this better.

46:50Downtown Josh Brown:I like this better. I think it's a worthy experiment. I think this is – so we just talked about this with the last big IPO, Cerebrus. That was the test run. And it's too early to know anything because nobody's been unlocked. But that was the first time they did a five-week unlock. Now, when you do a direct listing, which there were some technology companies in the last few years that did a direct listing. Spotify. I think Spotify is a big one. a bunch of software companies did this because they had already raised enough money in the private market that they didn't need to sell new shares. What they needed was the liquidity of the market.

47:31Downtown Josh Brown:So what they did was they just listed no lockup in that case. So they were free and clear to sell day one. They had to because there were no shares being made available to anybody else. so that is the difference here this is obviously not at the right listing this is a gigantic 75 billion dollar share sale in the case of spacex um we one other thing i did with nick and jessica they took the average ipo return from 1997 1999 and 2025 modern era 2025 is like 29 percent 1999 was like 70%.

48:10Michael Batnick:What does that mean?

48:11Downtown Josh Brown:They overlaid it on the price that SpaceX is going to go public, which is$135 a share. They said, here's how you're going to know if it's 1999. Does this thing close at a 70 % premium on the first day? I really hope so. Then you're in a bubble. Then you're in 1999, right? If it's closer to that 29 % average of 2025, then we're still in that environment. I thought that was interesting.

48:36Michael Batnick:I agree. But this is important for the listeners. The amount of stock that was listed for these companies in 1999 versus the amount that SpaceX is listing today, it's 3 % of the float. It's a tiny amount. So they're trying to get it to pop. So it's not apples to apples. All right. I want to make the case for something. A couple of weeks ago, you made the very astute observation that looking to consumer discretionary stocks as a read on the consumer. That was a great conversation. There's better ways to do it because it can get really sloppy really fast. So you could look at the dollar stores or whatever.

49:14Michael Batnick:And so like right now, I think it's in vogue to look at the restaurants. And it's like, holy shit, how bad is the consumer? So this chart from Consensus Media shows the same store sales growth for all of the names, right? And it's all over the place. But there's been a lot of like dark red.

49:33Downtown Josh Brown:These are public restaurants.

49:34Michael Batnick:Yeah, so Chipotle, Pizza Hut, IHOP, Portillo. It's like whatever, all of them, Popeyes. And if you look at all the way in the right hand, I mean, there's just a lot of stress here. But the point is this. Forget about even where we are today. Look how rapidly this is changing. Is this a read on the consumer? I don't know. Chart off. Guess what? There's a lot of inputs that go into a restaurant. There's labor. There's inflation. There's inputs. There's a consumer. There's preferences. There's location. There's valuations. It's such an idiosyncratic story that to look at the restaurants and conclude something about this consumer, I just think it's bad.

50:08Michael Batnick:It's just not a great idea. Same thing with the dollar stores. It can mean anything. So I think that sometimes it's just better to look at the data. So for example, look at this chart from Goldman Sachs. We're looking at alternative measures of nominal consumer spending growth. It's right here. You've got retail control. You've got Costco. Like you have just look at the spending data as a much more effective input. And finally, I would conclude that if you're looking at the restaurants or if you're looking at the dollar store, shut off, please. Or if you're looking at Target or Walmart or Costco, at least today, like I'm not saying in general, I'm saying right now you might be looking at the wrong thing.

50:46Michael Batnick:Because what I'm looking at to determine the health of the consumer, at least the health of the consumer that is powering the bull market, is hotels. Why? There's not 100 million hotels. There's a few hotels. There's two that are in the S &P. It's Marriott and it's – which one is bigger? It's Marriott and Hilton.

51:03Downtown Josh Brown:Hilton is public.

51:04Michael Batnick:No, and Hyatt, I believe, is in the bus of 1 ,000. Okay, look at these charts. Tell me about the state of the consumer. Is the consumer spending money? Is the consumer that matters to the stock market spending money? The answer is yes.

51:16Downtown Josh Brown:Right. Well, so this is the upwardly mobile top 50 % of the distribution. This is that customer. People in the bottom 50 % are not very often booking hotels. Certainly in the bottom 20%, they're not going on vacations like that. So that is really a read on what I refer to as stock market Americans. Yes. Stock market Americans have not had a post-COVID travel hangover. They just kept going like there's no tomorrow. And everywhere you go, I mean, I just stayed at the craziest hotel I've ever been to. to in my life. So I stayed at the Amangiri, 36 guest rooms on the whole property. They were all there.

52:01Downtown Josh Brown:There is no hotel chain and there is no specific property that's in a desirable location that is seeing anything less than 92 % occupancy or whatever the latest numbers are. And that's a great point. I'd way rather look at that and take the temperature of the consumer that the stock market cares about, aka the stock market American, versus look at a chart of Shake Shack, Wendy's, McDonald's, tell you shit. Shake Shack blew up. It's in a 60 % drawdown because they guided lower based on napkin costs, paper costs, and beef costs. That tells you zero about the state of the consumer. That tells you they're not handling their goods inflation.

52:51Michael Batnick:uh very well it also tells you that glp ones are a real real thing they're having that's a whole

52:57Downtown Josh Brown:other layer they're having a great point so all right you have a mismatch for me i do put it up

53:03Michael Batnick:look at this piece of shit okay what is it uh bitcoin how did you know because of my enthusiasm for presenting it to you i look at charts all day long i own this and i still want it to go to zero

53:19Downtown Josh Brown:I actually think we could be seeing a false breakdown here and we might get a rip higher because I haven't seen people this despondent over Bitcoin since the last time it was in a 50 % drawdown.

53:30Michael Batnick:It's black, dude. But now it's happening in the context of rising asset prices. It's really bad.

53:35Downtown Josh Brown:Chart back on. This is the SpaceX IPO. Talk me out of it.

53:43Michael Batnick:I don't know. You're big on this. I'm just always skeptical. I don't know. You could be right. I can't prove you're wrong.

53:49Downtown Josh Brown:I'm probably wrong because gold also looks pretty bad and silver. And a lot of the things that people were into all at the same time all seem to be like losing favor. And I wish I could tell you there was like some fundamental thing that I knew about. But Bitcoin in a 50 % drawdown with the NASDAQ at all times. Remember people used to say, oh, it's just one trade and Bitcoin is tech and Bitcoin trades with software. and well, software bounced hard, bro. Like cybersecurity software bounced, Oracle bounced. This went lower. Yeah, it's bad. I do think a lot of the gamblers in this shit are people that want to gamble on these IPOs.

54:30Downtown Josh Brown:I do think that there is something to that, but I don't think that could explain a$2 trillion asset class getting cut in half. I don't, the other thing I read was that all these scams, like Trump crypto stuff where the Trump fans got cleaned out. There's just been negative sentiment on digital currencies and digital assets in general this year. Sailor selling. Sailor selling. Sailor. Like MicroStrategy blew people up. It's another crypto winter in the middle of summer. It's cold. It's cold out there. It's cold out there. All right, guys, thank you so much for watching. Thank you for listening.

55:11Downtown Josh Brown:I want to give a shout out to all the people that join us in the live chat on YouTube. We appreciate you. You help us make the show. And we look forward to seeing you next week. Tomorrow is Wednesday. All new Animal Spirits coming at you. Michael and Ben, my personal favorite podcast. We'll also do Ask the Compound this week. And we'll finish the week with an all new edition of the Compound and Friends. And yes, I'm coming back. I do want to see some applause in the chat for the episode Michael hosted solo last week. with Scanda and Neil Dutta. I thought that was awesome. Thank you. I could have listened to it twice.

55:46Downtown Josh Brown:They're great. You were great. Great topic. Anyone curious about the state of the U.S. economy, if you missed the compound on Friends on Friday, catch up before this week. It was an amazing show. All right, that's it from us. We'll talk to you soon. Thanks again.

56:09Michael Batnick:Ritholtz Wealth Management is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Ritholtz Wealth Management and its representatives are properly licensed or exempt from licensure. Nothing on this podcast should be construed as and may not be used in connection with an offer to sell or solicitation of an offer to buy or hold an interest in any security or investment product. Past performance is no guarantee of future results. Investing involves risk and possible loss of principal capital. No advice may be rendered by Ritholtz Wealth Management unless a client service agreement is in place.