Worst Quarter in 4 Years, Oil vs Stocks, Win Rates From Buying Corrections, the Case for T and VZ

18:42Downtown Josh Brown:um s &p probably negative eight percent at its worst and dow jones a little bit better negative six percent at its worst and again today we got a bounce what's better what's better than

18:52Michael Batnick:multiple compression on investor anxiety that doesn't come to fruition because if you get the multiple compression then and then you get the earnings falling yeah that's that's that's a deadly combo we didn't get that but well we'll see i mean i hope not but um but absent that that absent like the fundamentals changing investors wanting to pay less for the same dollar of earnings as they're growing I don't know I like that nine times out of ten what's this strategist chart you want to pop this so people are unexcited um about the stock market In fact, Todd shows that this is the weakest inflow for equity markets, equity ETFs specifically, in nine months.

19:41Michael Batnick:Nine months. Yeah.

19:43Downtown Josh Brown:People have just - People have had it. They've lost interest.

19:46Michael Batnick:And again, they could change their mind very quickly. And let's say today was the day. All right.

19:53Downtown Josh Brown:Here's the journal. U.S. stocks set to deliver their worst quarter in nearly four years. And the point that they're making is it wasn't that long ago that this was supposed to be an awesome year. Still could be. We're only three months in. Here's the journal. Flashback to December. Economic growth was accelerating. The Federal Reserve appeared poised to make further interest rate cuts, and markets had moved past the uncertainty created by U.S. disputes with its international trading partners. Together, the trends pointed to the potential for double-digit returns, and investors came into 26 confident the rally was about to sweep up many of the stocks that sat out the rise of big tech and AI.

20:38Downtown Josh Brown:Quote, we had a perfect backdrop for a broadening. All the stars aligned. That's Michael Kantruis from Piper Sandler. I like him. Then this just put a huge pause in it. Okay, lesson number one, I don't care what the setup is, and this goes for a bullish setup like what was just described or a bearish setup, something will always, almost always come along and interrupt it. It doesn't have to be a permanent interruption that changes the direction of the trend, but absolutely it's never going to be easy. Yeah, it's just a little jab, a little jab. We did have a great setup. Think about it. We had financials rocking last year.

21:23Downtown Josh Brown:The healthcare stocks joined the party.

21:25Michael Batnick:Not just last year. Not just last year. RSP, the equal weight hit an all-time high in March. In March. In March. So all of this bad quarter stuff, it happened in the last 30 days.

21:36Downtown Josh Brown:Yeah. And so that's lesson number one. Here, hold on. Quote, by some measures, stocks remain on solid footing. Analysts are projecting a sixth straight quarter of double digit earnings growth for S &P 500 companies during the first three months of 2026, according to FactSet. These are the earnings we're about to get in about 10 days from now. Some investors are impressed. Stocks haven't fared even worse this month, given the circumstances. So this is lesson two, I don't care what you think the outlook is for earnings. I don't care what your bottoms up analysis tells you. I don't care if you sit on every conference call under the sun and do channel checks and whatever bullshit you do.

22:25Downtown Josh Brown:You can't control the multiple that investors are willing to pay at any given moment. That's a moving target. There is absolutely no way to predict it. There's no way to know when it's going to expand. There's no way to know when it's going to fall. A lot of people think they have inside information. Oh, rates are coming down, so multiples should expand. Oh, yeah? Has that been your experience this year? We've had a 19 % multiple contraction this year, and the last moves from interest rates were lower.

22:57Michael Batnick:25 % on tech with double-digit earnings growth.

22:59Downtown Josh Brown:Right. So that's lesson two. Let me read the rest of this. Quote, the recent volatility has mitten some winners. Stocks in the S &P energy sector are up 39 % this year on track to notch their best quarterly performance ever. Other asset-heavy industries, they wanted to say halo, but they were afraid to, such as materials, also outperformed as investors scout for companies that would be tougher AI to disrupt. Why can't they just put my name? That's literally, they're saying it without saying it. and many analysts are sticking to their original targets of modest stock market, blah, blah, blah, blah.

23:39Downtown Josh Brown:So that's lesson three. It's not like in a normal correction, every stock goes down. In 2008, every stock goes down. Most corrections are not 2008, which is, I know people think like, oh, correlations go to one. Yes, in a crash. In a crisis, yeah. That's right. In a dip, in a correction, it's not true that you're going to get this washout where all stocks go to a correlation of one and everything is red every day. It really doesn't work that way. It's very rare. And in this particular moment, you absolutely did have safe havens in your equity portfolio. Stocks that did not fall with the rest of the market.

24:30Downtown Josh Brown:Or at least not till the end.

24:31Michael Batnick:Dude, Walmart, very green. Costco, very green. Caterpillar and Deere, bright green. The hardware, computer hardware, SanDisk up 168%. Like a lot of things worked this quarter. Johnson & Johnson, I mean, say nothing about energy, of course.

24:49Downtown Josh Brown:Sorry. Jay Hampton says, Halo has been around forever. Jay, I will throw you out a window. It is absolutely not. I invented it on February 8th. All right. What are we doing? Oh, oh, oh, oh, oh. So here's the Donald Trump truth social. All of those countries that can't get jet fuel because of the Strait of Hormuz, like the United Kingdom, which refused to get involved in the decapitation of Iran. I have a suggestion for you.

25:18Michael Batnick:Wait, what?

25:19Downtown Josh Brown:This is Trump. This is prior to the rally. Number one, buy from the U.S. We have plenty. And number two, build up some delayed courage. Go to the strait and just take it. you'll have to sign that yeah you'll have to start learning how to fight for yourself the usa won't be there to help you anymore just like you weren't there for us iran has been essentially decimated the hard part is done go get your own oil president djt i love this get your own oil in other words all right you don't want to help no problem you're the ones that have the problem getting the oil though, not us. I mean, it's factually true.

26:03Downtown Josh Brown:It's a problem for the whole world to have gas prices at$4 rather than three. But the oil issue itself is really, it's Japan's problem, it's Korea's problem, it's Europe's problem more so than it's ours. Now, we created this problem, but I mean, it's factually the case. Get your own oil is not bad. I don't hate it.

26:27Michael Batnick:Okay. Okay. The last couple of years, it's been all about the max seven, strip them out and the S &P has gone nowhere. Earnings have gone nowhere. I mean, that's not entirely true, but I'm exaggerating. And the reverse happened in the first quarter. So of the whatever of the, how many points did we lose? Of the 500 something points that the S &P 500 lost in the first quarter, 75 % of those points, child on please john 75 75 of those percent of those points came from the mag 7 with microsoft

27:00Downtown Josh Brown:and it's 34 decline leading the charge wow how about that look at this look at this i've never really seen a point attribution done this way this truck hit matt obviously this is pretty impressive so these are the stocks that gave you the the that gave you most, not all, but most of the gain over the last couple of years. And that's exactly where they took the market cap from when they wanted to sell. Is that the right way to interpret this?

27:30Michael Batnick:So the story is very easy. We all understand where the compression is coming from. As these companies transition from asset light to asset heavy, ostensibly, there we go, I said it, their cash flow is going to come down, their margins are going to come down, and investors front run that to the tune of a 34 %

27:47Downtown Josh Brown:decline and now facebook's trading at 16 times earnings so nvidia 15 nvidia 15 on next year's number you're going to grow earnings 74 this year 30 something percent the following year all right so it's a good story it's a sub 20 multiple so i've got what are we doing i've got

28:10Michael Batnick:nine stocks for you that i'm gonna that we don't spend a minute on each tops uh i want to ask you are these stocks, I got one ETF, are these fat pitches? And we could define the fat pitch as either, yes, this is the bottom, or maybe it's not the bottom, but just hold your nose and come back in three years.

28:30Downtown Josh Brown:Sorry, to clarify, we're saying fat pitches. Is this a fat pitch?

28:35Michael Batnick:What, you thought I said something different? It's a fat pitch. Right. So all of these stocks got whacked off to varying degrees. and now I'm asking you, Mr. Brown.

28:47Downtown Josh Brown:Did the whack-off of these stocks create a fat pitch?

28:50Michael Batnick:That's right. Okay, so we're going to start with IGV. These names were in a 35 % drawdown and credit to you for buying them on Friday. They are obviously at critical potential support. Fat pitch, bottom.

29:09Downtown Josh Brown:Yes. So do these two things have to be the same? No, no, they don't. So we could say fat pitch, but possibly not the bottom because that's how I feel about these software stocks.

29:19Michael Batnick:Yes, that's fair. That's fair. Okay.

29:21Downtown Josh Brown:Some of these software stocks may have bottomed unless we're going to have like a market-wide crash, then forget everything I'm saying.

29:28Michael Batnick:I'm talking about the group. We understand there'll be winners and losers. So in three years, will this have appeared in hindsight to be a fat pitch?

29:34Downtown Josh Brown:Yeah, I think so. Even if it's not the ultimate low, we are in fat pitch territory. and I love all the little pitches that are in this index. Like when I look at the individual names, I look at the individual IGV holdings. There's things in there like Palo Alto and CrowdStrike and Palantir's in there. And of course, Microsoft is in there.

29:59Michael Batnick:There's all sorts of pitches in there. So, all right, NVIDIA was in a 15 % drawdown and this says JC false breakdown. all over it.

30:11Downtown Josh Brown:Yep. So who is selling NVIDIA? NVIDIA falls from 215 to 170, and then there are sellers in the high 160s? I think this is awesome.

30:24Michael Batnick:Is that like a moron? This is all computers. I think it's just like, all right, it's breaking a level, just dump it. To me, that's the sexiest pitch. I think this is obvious. If yesterday's lows don't hold, then the next 10 % is lower.

30:42Downtown Josh Brown:My average cost is too low for me to add to it, but this is exactly what I would be doing. If I ran a mutual fund, I wouldn't even care if I was a growth manager or a value manager. I'd be buying it either way. Sell it all to me.

30:57Michael Batnick:I want to read you a quote. This is from Delta Airlines CEO. This is a recent quote. our consumer is really healthy we live at the top end of the k that people talk about the premium end of the k and that's where over 90 of our revenue is sourced from that group of folks want to travel they're investing in themselves they're investing in the experience economy we've seen eight of the top 10 sales days in our history this quarter and five of those just within the past two weeks within just the last week of this past march even with fuel prices even with the war going on our bookings are up 25 year over year so i ask you josh american express there is a high degree of overlap this stock fell 25 i think on fears that there will be what is this pricing in that there will be crazy i'll tell you what it's white collar displacement it's the ai fears okay

31:53Downtown Josh Brown:It's just a trini stock. Okay. Okay.

31:55Michael Batnick:Is this a fat pitch? Down 25 % based on nothing.

31:58Downtown Josh Brown:You know what? I'm heavy long Berkshire Hathaway, which has a huge American Express position, but I would buy this stock right now if not.

32:08Michael Batnick:Okay. I absolutely would. I think that's a fat pitch. I think that you're going to look back and say that felt 25 % for no reason.

32:14Downtown Josh Brown:Yeah. You know how I'd phrase it? If you buy American Express, how much is it down? 25? It was down 25 % on no news. Okay. If you buy American Express down 25 and there's another 20 further from here. Yeah, back it up. Everything else got destroyed too.

32:35Michael Batnick:Yeah.

32:35Downtown Josh Brown:You didn't look any dumber than somebody buying any other consumer discretionary name, financial name, what have you. Yeah. So I would buy it.

32:44Michael Batnick:John, I think it might be out of order. What's my next chart here? This is Oracle. Okay. No. All right.

32:50Downtown Josh Brown:Not a bad pitch. It's definitely a pitch. I'm glad you asked.

32:52Michael Batnick:I'm glad you asked. It's a little pitch. Oracle was down 58%. Technically, I do love this setup. The risk reward is so clean. Like your out is so freaking obvious, but not a fat pitch team.

33:04Downtown Josh Brown:But it's like a dirty little pitch because every one of these bounces along the way looked so convincing in the moment. But we have somebody in the chat, higher human, ask to find fat pitch, please. So like when you're in the batter's box in baseball, the fat pitch is like the strike thrown right down the middle that all you have to do is swing and the fat part of your bat is going to hit the ball and you can almost close your eyes and hit it into the outfield or further. That's a fat pitch. So Oracle, to me, even if the war ends tonight, yeah, and even if they deliver on earnings this quarter, neither one of those things is going to erase the questions that have driven this stock into this very intense downtrend.

34:01Downtown Josh Brown:It may be bottoming now, maybe forming a bottom. It's not a fat pitch because it's hard for me to picture a V. it's hard for me to picture it getting back to those it never belonged at those highs is part

34:15Michael Batnick:of the problem here i love the i love the stock setup but the case that you just made is spot on um and they're obviously under pressure from open ai's lack of ability to pay them 300 billion dollars in the next five years or whatever they committed to um all right what do we got next yeah not all pitches are worth hitting all right this is a little this is uh not a stock we talk a ton about, but Paramount, it won the deal. It's buying Warner Brothers and quietly - It's the worst short I've ever seen in my life. Quietly. The stock is down like - Quietly. 55%. I dare you to buy it. I'm not buying it.

34:55Downtown Josh Brown:How much? They're going to have$120 billion in debt?

34:58Michael Batnick:Lots of debt. Lots of debt.

34:58Downtown Josh Brown:I would rather buy the debt than the equity. I don't know what the - I have no idea what the coupon is. I'm pretty sure they won't go bankrupt. Fill that chart one more time, John. Is this chart sub 10 bucks? This is going to$6. All right. I'll buy it at six. This is going to$6.

35:19Michael Batnick:Next chart.

35:19Downtown Josh Brown:Not for me.

35:20Michael Batnick:Next chart. All right. Micron.

35:25Downtown Josh Brown:Ooh. I missed the whole run.

35:27Michael Batnick:All right. Here we go. No, you didn't. No, you didn't. So they They just reported a couple of weeks ago, the revenue was up 75 % quarter over quarter and 196 % year over year. Their DRAM, which is 79 % of their total revenue, was up 207 % year over year. And yet, so the stock hit an all-time high on March 18th, and then it fell 30%, and it put them a big fat hammer today. Fat picture now.

35:55Downtown Josh Brown:I think for a trader, this absolutely qualifies. For an investor, I'm not sure. Agree. I agree. The history with these stocks is that they always top concurrent with the top of the memory pricing cycle, not the demand cycle. Don't get me twisted. There's a difference. The demand for memory chips versus the pricing of NAND or flash memory back in the day, it's not. So these stocks historically price a top when pricing tops. And then, of course, the demand stays strong and the analysts defend it. And it just becomes like a it's like it's like Vietnam. If you're an investor, it's it's real tough to be in these things on the way down.

36:46Downtown Josh Brown:All right. I could be wrong. Great, great company. Great stock. Right. Biff Griebel's is pointing something out important. It's so cyclical that by the time it's topping, that's when it looks the cheapest. It's like four times earnings. And people that don't understand how cyclical this space is, they'll be like, oh, it's so cheap. Yeah, that's the point. That's what cyclicals trade. They're the most expensive at trough earnings. So they deceive you. You think that the valuation is out of whack. No, what you're missing is that the earnings cycle is going to kick in. And then when they're trading at five times earnings, eight times earnings, you get deceived because you don't understand the earnings are about to evaporate.

37:32Downtown Josh Brown:And that's why they're so cheap. And these are tough stocks because they're doing unbelievably well.

37:39Michael Batnick:Unbelievably well. I got two, maybe three more. I think the short-term momentum looks good. I totally agree with you. All right. What's next? Robinhood. Down 57. 57. 57. A perfect storm, a perfect storm of crypto getting killed and of retail traders saying, this, I don't want to do this anymore. It's not fun. Okay.

37:59Downtown Josh Brown:I think this is going to be reminiscent of Facebook 2022. I think Vlad is going to have a year of efficiency moment. I think they're not as focused as they need to be right now. They, a year, six months ago, this was like the hottest stock in the world. I think it was one of the best S &P 500 names of 2025. That's not long ago. And now it's all about venture and prediction markets. So they had like every asset class that they were levered to, every hot trade, they were like, they were getting credit for. And a lot of that stuff is reversed. And people don't want private assets. They don't want venture.

38:42Downtown Josh Brown:I mean, they want SpaceX, but it's just not the same fever pitch. Nobody wants Bitcoin. Nobody wants ETH. Nobody wants stable coins. Nobody wants to hear about tokenized stocks. It like the moment passed. And in the meanwhile, they're going into a lot of areas like RIA custody, that it's not clear that they'll ever make money there. So I think at a certain point, he's going to have to face his shareholders and say, okay, here's the deal. We're going to get more focused. we're not going to go in 12 different directions at once. We're going to double down on the things that are really profitable and the market will like it when he does it.

39:22Downtown Josh Brown:I don't know how much more pain has to happen in the share price before he has that realization.

39:28Michael Batnick:Last one, BlackRock. So BlackRock is getting hit. Stock was down 23%, I believe, and it got swept up in the private credit stuff they do own hps which is a serious contender in the space but yet it's a it's not a rounding error it's about i don't know two percent of total assets it's a much bigger part of their earnings because these are these are higher fee products but blackrock is blackrock and this is a

39:56Downtown Josh Brown:fat pitch it's not this is one of the obvious blackrock one of the best companies in all of Financial Services, one of the top corporations on the planet. It's not clear to me, though, the investment case in the equity of BlackRock. It's basically, it trades based on the strength of the markets. We had a terrible quarter for stocks and bonds in Q1. Therefore, the stock is down. If the stock and bond markets rally in Q2, yeah, you'll make money long BlackRock, but you'll also make money along the markets.

40:31Michael Batnick:I would bet you that BlackRock's earnings. Do you understand what I mean, though? I understand exactly what you mean. It's a proxy for the market is what you're saying. I get it. And you're not wrong. BlackRock, I would bet, has out-earned the index for almost every year for the last 15 years.

40:46Downtown Josh Brown:Well, because they take market share every year. It's an incredible business. I'm just not sure. Because effectively what they sell is access to public and private markets. and investment strategies that are directly, the AUM fees that they bill on all of their strategies are almost perfectly correlated with the rising and falling of those assets. So if you're already invested in stocks and in bonds, do you also need BlackRock? Well, I don't know if you need anything.

41:18Michael Batnick:It fell double what the market did, more than double what the market did on fears that do not necessarily pertain to the core part of the business.

41:24Downtown Josh Brown:Okay, so it could absolutely be a fat pitch that I just feel like there are so many others that it's like not the one. It's not the only fat pitch in the ether. There's so many.

41:39Michael Batnick:And that concludes our segment. That was fun.

41:43Downtown Josh Brown:That was fun. Did you agree with most of my takes? I feel like we agreed on almost everything.

41:48Michael Batnick:I do.

41:49Downtown Josh Brown:Okay. Oh, this is good. Adam Parker basically stomped on all this. poppycock about.

41:59Michael Batnick:Oh, shit. I'm sorry. Can I just say one thing? I apologize. I forgot to lead the segment with this, and this is important. John, my bad. So I have two charts in here in topic two that are very important, otherwise we would skip over them. So Sherwoods has a chart that shows an unprecedented divergence between stock prices and earnings estimates. In other words, you've never had stocks fall this much while the forward EPS is this high. There was an extreme dislocation. And not only that, but earnings revisions are going higher, higher. They're being taken up. Now, this might be way wrong, but this is a positive backdrop given the multiple compression that we just started.

42:40Michael Batnick:All right, back to you. Sorry about that.

42:41Downtown Josh Brown:I think that's why you can't panic sell. Now, if earnings revisions level off and even go in reverse, we'll have a different conversation. You and I would be the first people to talk about it. We're not here to cheerlead the market and defend every single thing that happens. We call balls and strikes. But if you think earnings are the most important thing when it comes to future returns of stocks, and I think most rational people do, what do you want us to tell you, that earnings are going to be negative? Because they're not, at least not based on the consensus. All right. Adam Parker basically was like, why are you still talking about breadth and internals?

43:23Downtown Josh Brown:I'm just going to quote him and then we're going to flash this table. He wrote this over the weekend. The S &P 500 price is down 6.96 % year to date, the worst quarter of this holds since Q2 2022. Only 18 % of quarters in the last 98 years of data we analyzed have been worse. So that's something. And almost all of those instances were in deep recessions or crises. This year reflects a combination of near universal bullishness at the beginning of the year, resulting in high earnings expectations, a belief that AI productivity would create an incremental impact, and an accommodative Fed. Geopolitical unrest has certainly caused a large unwind, but under the surface, there have been enormous single stock moves and a skew that It should have led to many long only managers outperforming the index.

44:20Downtown Josh Brown:While the index is down 7%, 57 % of stocks have beaten the market so far this year, and 42 % are up in absolute terms. 108 stocks are up more than 10 % this year. Give me the table. This is taking those numbers I just read and showing you what that looks like in terms of the stocks that are doing better than the market or worse. Adam says, we point this out because every time we do TV, I don't know why he refers to himself as we. Someone says that they think breadth is good for equity markets. Chardoff, we have shown several times over the years in our research that common breadth indicators do not have any predictive value for market level returns.

45:12Downtown Josh Brown:And while that might sound like a good soundbite to those who don't know better, it's actually sort of particularly silly given how much the market was up in 2023 to 2025 with low breadth, and it's down this year with good breadth. So this idea that we need to have a certain amount of stocks going up, we've just witnessed a three-year period where the reverse was true. Very, very bad bread for a bull market in 23 and 24 and 25. Most people would agree. And yet, did way better than how we're doing now that we have all this broadening. I think it's a really fair point. What do you think?

45:56Michael Batnick:I think, yes. Listen, if you are bullish in a bull market, you would ideally like to see more participation. But to your point in Adam's, that is hardly a prerequisite for the market going higher in the short term or long term. It works either way.

46:09Downtown Josh Brown:It works either way.

46:11Michael Batnick:Right. So I think that where I think it's particularly interesting is at turning points. So for example, if you see indexes making new lows, but the number of stocks making new lows is not confirming the decline, like you're seeing that number of new lows dry up or not expand to what JC would say. I like that, right? You would like, oh, okay, maybe it's, okay. But absent that, absent extremes turning points, which are really hard to define anyway, I think people spend way too much time on this. I think he's right. Okay.

46:44Downtown Josh Brown:Sam Rowe on earnings. This is a fun one. He references this moment in 2011 where David Bianco, do you remember that name? I do. Yeah. I think he was at Merrill at the time. He was the only strategist who was raising his forecasts for earnings and stocks, U.S. stocks. That's a courage. In 2011. So for people that weren't trading in 2011, we were in the midst of what looked like another 2008. Less than three years later, it was double dip recession. And in Europe, they had an actual recession. And a stock price crash, a bond market crash, sovereign currency crash. And he was raising his expectations.

47:33Downtown Josh Brown:And Bianco ended up being right by 2012. We were headed back toward the 07 highs. And Sam brings this up because another strategist had the balls last week to raise his S &P 500 price target for this year.

47:50Michael Batnick:You're damn right I did.

47:51Downtown Josh Brown:So, yeah, it wasn't you. So I'll tell you the story via Sam. He said, I was reminded of this episode, referring to the David Bianco thing, this week because Barclays, Vinu Krishna, raised his year-end target for the S &P from 76.50 to 76.50 from 7 ,400. This despite the market pulling back amid heightened uncertainty and elevated energy prices stemming from the conflict in Iran. Quote, this is Vinu Krishna. Our baseline is that concerns over AI disruption, private credit, and geopolitics reflect real and material risks, but ones that will nonetheless fall short of derailing the current growth cycle at this point in time.

48:41Downtown Josh Brown:And the key to his call is earnings. He is looking for$321 a share up from where he started the year at$305. And Sam reminds us, if you only have one metric, it should be earnings. They're the most important long-term driver of stock prices. Here is why he's raising his, here's why Krishna is raising his number from 305 to 321 per share for the S &P. Big tech beat and raise cycle. Q425 earnings confirmed big tech and broader TMT continue to outperform an AI-related demand. Industrial production inflecting. Barclays sees industrials as direct beneficiary of the cyclical backdrop and AI CapEx. Stickier inflation equals higher nominal earnings per share.

49:35Downtown Josh Brown:Put that in your pipe and smoke it. Their economists are predicting higher core PCE, which actually increases the earnings expectation Give me this table. This is Krishna's bull case, base case, and bear case. His bear case is a 10 % fall from here, 5 ,900 on the S &P, which would be an 18.5 multiple on 11 % year-over-year earnings growth. The bull case is 25 % higher than here, Michael. What do you think about that? I love it. I do love it, Josh. Is there anything else in here? it's all about tech earnings upside or not all about, but very much about. And then let's skip to, I don't know what chart this is, S &P 500 calendar year, 2026.

50:28Downtown Josh Brown:Forget about that. Go to match charts.

50:32Michael Batnick:So same thing. So this is at exhibit A for advice.com for advisors, if you want to get this for you. This is the actual earnings trends. Okay. This is real reported numbers for both the large, the mid, and the small cap indexes. And they're going up and to the right. And also, look at the consensus expected earnings estimates for the next 12 months. Up big league. And if you expect this to materialize, we don't trade the economy or the labor market.

51:14Downtown Josh Brown:We trade stocks.

51:15Michael Batnick:We trade stocks. People forget that. Everybody is well aware of all the rest involved, and the economy is not great. We covered that last week, but that's not what we're trading. We're trading businesses. So they're going up to the right.

51:28Downtown Josh Brown:Yeah. One more thing in this segment. It's been a shit show for 60-40.

51:34Michael Batnick:Ah, stop it.

51:35Downtown Josh Brown:Well, I mean, it has. No, it hasn't. No, it literally has. Give me that chart. So this is the yield on the 10-year treasury. And you can see they indicate the start of the war. We were just below 4%, now at 4.5%. And that happened fast. A traditional portfolio of 60 % stocks and 40 % bonds has lost 6.3 % since the fighting started in late February. At the same time, falling bond prices have driven up the yield. The borrowing costs.

52:13Michael Batnick:I'm just saying. 6%. Come on.

52:15Downtown Josh Brown:Mortgage rates jumped to 6.38 % last week. Not great. It's yet another bad quarter for stocks where bonds didn't help. And we've been having a bunch of those in recent years, in the last five years.

52:30Michael Batnick:It does seem like more recently you have this environment where higher interest rates spook stocks and that's not good for stocks and it's not good for bonds obviously and it's not good for the 60 40 because it's great for private credit um all right so here's the opposite of private credit there is uh there is this phenomenon on uh on wall street where we are getting products where there's a mismatch of liquidity of uh what can be traded so where i'm going with this is Matt Levine wrote about this. Fundrise has a venture fund. Now this venture fund is I think four years old. So it was a legitimate private placement for investors to access privately traded companies.

53:22And then it came public.

53:25Michael Batnick:I guess this is a closed end fund. I don't know what this is. Is it an ETF? I don't know.

53:30Downtown Josh Brown:Either way. It's a closed-end fund, and not all of the assets in it can trade. Okay. But the share price is going to reflect either a premium or a discount to the assets that it holds. So it can't be an ETF.

53:45Michael Batnick:So the story is the float is little, float is low on this product because there is a lockup. So if you invest in the private placement, sort of like an IPO, you can't just dump it onto the open market. So there's a lot more demand than there is supply. Right. So Matt says, Fundrise Innovation has about$679 million in assets under management, and more than 10 % of the fund is not locked up, according to a spokesperson. That's it. Wow. Okay. So this is the opposite of the private credit problem. A lot of individual investors want exposure to SpaceX and Anthropic and OpenAI and the other hot private companies in the fund.

54:24Michael Batnick:Those companies all have more or less visible stock prices, but normal individual investors can't buy those stocks so you could do it through this thing so this thing came public try it on

54:34Downtown Josh Brown:please it ran up 450 this is the dumbest thing it went from 100 to 600 basically in like five days

54:42Michael Batnick:and then it crashed 80 percent and this is we doing and this is not the first time this has happened this happened with a fund x over x ovr and there was another one dxyz what is that dxyz The XYZ was another one. So these are public proxies for private companies. And this is now the third time. It just doesn't go well.

55:06Downtown Josh Brown:It's really just four or five stocks that people want access to. They want SpaceX because it's like SpaceX, Starlink, XAI. It's all in one thing. They want Anderle. They want Stripe. They want Databricks. Anthropic. Anthropic. There's like a small handful of private companies that should be public based on how big they are. And some of them will come public later this year. And so these vehicles are accumulating shares in those companies from insiders who need to get liquid, mostly employees, right? So maybe some VC is selling, but for the most part, it's employees who are able to get liquidity for their shares.

55:50Downtown Josh Brown:So anyway, the fund did well.

55:52Michael Batnick:Like if you invested in this fund when it was a private place - Privately. Do we know why they came public?

56:00Downtown Josh Brown:Well, there had to be a reason.

56:01Michael Batnick:Democratization? I don't know. They couldn't have done it for this. I don't know. Democratization? I don't know. But anyway, just be careful out there.

56:11Downtown Josh Brown:What is the lesson? Because you're saying the liquidity mismatch. So this is the reverse of the -

56:20Michael Batnick:Yeah, this is the obvious. Probably don't buy something that ran up five times in four days. i mean for starters probably probably not a great thing to do all right let's keep it moving why do

56:30Downtown Josh Brown:people need to own this spacex so badly that they'll do this themselves what do you what do you think it's like a stat like a status thing or i i also do i think there's a lot of just greater

56:41Michael Batnick:full stuff in here it's like it was a good trade listen if you bought it at 100 you got a 300 you

56:44Downtown Josh Brown:you tripled your money in two days this like a meme stock on like on uh reddit or robin hood like Well, anything that goes from 100 to 600 is going to become meme-y. Like, of course, because think about how much attention that attracts. There's a SpaceX proxy in the publicly traded market right now. It's called Rocket Lab, RKLB. If you're so horny for SpaceX that you need to buy some contraption that owns a little bit of SpaceX stock, I'm not saying like run out and buy Rocket Labs, but it's the same story. And arguably, it's two companies competing for the same contracts. And it's its own publicly traded company.

57:28Downtown Josh Brown:How about it? All right. Let's do this quickly. Win rates after corrections. This is from our friend, your boyfriend, but my friend Ben Carlson, who reminds us that down months, while not pleasant, are completely normal. And well, let's do this first. Give me the volatility in stocks chart. Ben goes back to 1928. So it's 100 years of data, give or take. He shows we have had 56 times we've seen a 10 % or worse drawdown. Now, obviously, a few of those get way worse, which you can see here. Only three of them have been 50 % haircuts. There are people who spend every minute of every hour of every day of their life worried about that three out of 56.

58:22Downtown Josh Brown:You know what I mean?

58:23Michael Batnick:Yeah. So wait, can I just say one thing about that? As ridiculous as it is to spend your entire life obsessing about the worst case scenario, those worst case scenarios do happen and they do f*** shit up. Like those 50%, not haircuts, crashes wipe out a generation of investors. They can. So even though I think it's overdone how much time and energy people spend worrying about it, they're pretty devastating when they do happen. If you have leverage and you have every dollar you'll ever earn fully invested,

59:02Downtown Josh Brown:how many people does that really apply to? Right. Right. I mean, I was buying the aftermath of 2008. I had no choice. I was like 30. You have to be 90 and worried about not being able to feed yourself until you're 95. Because who else is that really applicable to? Let me get this straight. Every dollar you will ever earn is fully invested in stocks and you have leverage. In that circumstance, I give you permission to obsess over the next 2008. In any other circumstance, I do not. Right.

59:41Michael Batnick:okay let's just say all right well well but i'm retired i won't earn any more money yeah fine the

59:46Downtown Josh Brown:professionals what then you know money in stocks the professionals who their whole personality is wait till the next 2008 those people should be ashamed of themselves because they should know these these probabilities yeah those people should absolutely be ashamed anyway ben says since 1950 if you bought stocks every time the month ended down 10 or worse on average you were up, 15%, 42%, and 72 % in total, one, three, and five years later, respectively. And obviously, if you bought down 20 % or worse, it's similar, even better. And then, of course, 30 % or worse, it's similar but better. These are averages.

1:00:30Downtown Josh Brown:So Ben says, look at the win rates. The guys, the diamonds across the top are the win rates. So forget about, for example, the three-year average buying a month that's down 10%. The three-year average return is 42%. That sounds great. Focus on the fact that it works 93 % of the time. Do you agree with that take? I do.

1:00:55Michael Batnick:Listen, McMurtry posted about this on Twitter a couple weeks ago. This system is rigged to go higher because everybody's entire life is counting on growth. everybody wakes up for the most part and says, hey, I want to have a better existence for myself and my family. And I wanna make more money and I wanna do better. And guess what? That's the system that we live in.

1:01:20Downtown Josh Brown:We made this system.

1:01:22Michael Batnick:It's a great system.

1:01:22Downtown Josh Brown:It's society. Yeah. The system is rigged. Who is it rigged by? Oh, every investment bank, every asset manager, every law firm, every 401k plan, every employee working at a public company, every executive at a public company, every solo investor, every family office. Yes, it's a big conspiracy. And you're sitting in cash talking about 2008. You should have your head examined. Shut up. Stop tweeting. All right. Let's do make the case. I pitched this on TV and then I got interrupted by Trump. But go ahead, Jenny Harrington. Today. Yeah, I know. Today was today was a risk on day. So these stocks didn't do much.

1:02:07Downtown Josh Brown:They were fine. But these stocks are working all year. And we never talk about this stuff. AT &T and Verizon. If you're worried about the economy, these are the stocks that you're looking at. And there are plenty of reasons to be worried about the economy. I think in today's day and age, people would be more likely to skip the bill for their car lease than they would to let their phone turn off. I think this might be literally the most defensive trade that there is. Cell phone towers and the wireless carriers.

1:02:40Michael Batnick:Do you know what the story is here? AT &T doubled in the last two years. There's got to be – what happened?

1:02:46Downtown Josh Brown:I would love to tell you the story. These two companies, Verizon and AT &T, five years ago, the analysts who covered the space had a nickname for these companies. Do you know what it was?

1:02:59Michael Batnick:I don't.

1:02:59Downtown Josh Brown:Dumb and dumber. um verizon spent 10 billion dollars acquiring aol i'm not joking and yahoo and yahoo that was good that was a good purchase and neither of those worked uh obvious to everyone at the time and now um blackstone owns yahoo at &t was worse they bought time warner for 85 billion dollars the way Warner Brothers came into existence was AT &T threw it up AT &T leaned out the car window in the wake of 2021 and threw it up into the street and into the waiting arms of Discovery which is Malone stuff and it was like a merger of Discovery and the Time Warner business and it became Warner Brothers.

1:03:57Downtown Josh Brown:And they saddled it with$45 billion in debt as like a wedding gift. And AT &T went like this. That's why the stocks doubled because they got this anvil off their back. Anyway, that was then. These companies have become leaner and meaner. They've been deleveraging. They've been doing all sorts of restructuring, all sorts of financial transactions to get out from under all that debt and all that bullshit. And now in the age of AI, arguably, these are two of the most indispensable companies there are. They've made huge bets and built out massive broadband networks. They're selling broadband hand over fist, and they've got the wireless subscriber business.

1:04:44Downtown Josh Brown:Verizon actually put up a great quarter and shocked people with how low their churn was for their subs. I should be mentioned, there was a knockdown drag out fight between these two companies and T-Mobile. T-Mobile got very aggressive, very promotional on pricing. And these three companies just went at it like three piranha in a goldfish bowl. And that era seems to be coming to a close. And rational pricing is recovering. And so these stocks are both working. in my column for best stocks in the market Sean and I did all the levels all the risk management but I think these are stocks that people don't follow anymore Verizon is one of the top 20 yields in the S &P 500 they're so boring but they're not as boring now they're broadband plays and their wireless subscriber business is solid and they got out of a lot of dumb businesses and they're halo They're extraordinarily halo.

1:05:48Downtown Josh Brown:I mean, it's undeniable. You can't do anything with AI if you don't have Wi-Fi and broadband. And like none of that stuff works. So I like these stocks. And I think in the case of AT &T, I think you have a breakout coming. $30 a share to me looks like a very obvious level of resistance. And if it breaks, this thing could be$33,$34 in a second. and you're being paid a decent dividend while you wait for that to happen. Verizon raised its dividend 20 years in a row. Remember being paid to wait? You don't hear that much anymore. You're being paid to wait, my friend. Anyway, I've made the case. Would you buy either of these?

1:06:31Michael Batnick:No. They look good. I don't buy these stocks.

1:06:34Downtown Josh Brown:All right, great. Can I have that last five minutes of my life back then?

1:06:37Michael Batnick:Listen, you can't buy every stock, can you, Josh?

1:06:40Downtown Josh Brown:I might buy one of these. I might fuck around and buy one of these.

1:06:43Michael Batnick:um i so i like i like uh the way that at &t looks way better like way it's gonna go i think it's

1:06:48Downtown Josh Brown:gonna go and um and they're in now they're in the right businesses now they're they they bought frontier they're focused on the the businesses where they make a lot of money and uh you know they're out of the media game and i i think it's a different stock now all right i've got two quick

1:07:02Michael Batnick:mystery charts and we'll get out of here uh chart one please this is a longer term view of a it's a ratio. I did it. So just based on this, Josh, do you think the primary trend of the primary downtrend? It's still a downtrend. Okay. Still a downtrend. Okay. Fair enough.

1:07:21Downtown Josh Brown:Am I guessing at what it is? I've got one more for you.

1:07:23Michael Batnick:And zoom in. This is the last year.

1:07:27Downtown Josh Brown:So it looks better when you just show it to me the last year. I don't trust it.

1:07:32Michael Batnick:okay so this is uh man how do we get this clear this is like we spoke about this earlier in the show it's it's it was all the discussion over the last three years about which is going to work better this group of stocks or that group of stocks in the last three years i mean the last

1:07:48Downtown Josh Brown:10 years we're gonna have this conversation okay so it's united states versus uh you're on the right track but now ifa you're on the right track s p versus yes uh rest of world i don't know what

1:08:00Michael Batnick:is it it's uh it's the equal weight versus the cap weight oh okay so i was wrong yeah but but so but so your instincts were that the cap the cap weight still has the benefit of the doubt versus

1:08:12Downtown Josh Brown:the equal dude just but just buy apple and nvidia and shut up because i'm telling you i'm telling you right now if stocks are going to work this year these i mean this this is where you want to be what are we doing here we're going to look for the the the seventh best regional bank in the Russell 2000, and that's where we're going to get alpha from? We're on the verge of Apple's AI product, and NVIDIA is 15 times forward earnings. What are we talking about, right? What are we talking about, broadening for what?

1:08:49Downtown Josh Brown:Not rhetorical, I'm serious. It's just a mystery chart. Okay, not a bad mystery chart. All right, hey guys, tomorrow is Wednesday, which means an all new edition of Animal Spirits starring Michael and Ben. If you like this show and you've not checked out Animal Spirits, you're going to love it. It's way better than this because I'm not on it. It's a little more sane, but informationally highly nutritious. We'll do Ask the Compound later that day. And then on Friday, we are back with an all new Compound and Friends. Thank you guys so much for joining us for the live. We appreciate it. Go ahead, smash that like button.

1:09:29Downtown Josh Brown:Hit subscribe, go on the app that you're listening to this and leave a review for the love of God. And we'll see you soon. Thanks guys. Good night.

1:09:49Michael 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

1:09:58Downtown Josh Brown:or exempt from licensure.

1:09:59Michael Batnick: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.