Brian Belski Returns! | TCAF 249

We're on the record now.

Okay, we're on the record.

So, Brian, yeah. Um, the last time we were here was November. Feels like a long time ago.

It was three. It was. It was three days after I launched Humalless.

Come on.

Yeah, man. Yeah. You guys did a special live thing with me. I knew it on uh.

Well, you can't you can't have as long of a career as you've had without being right a few times. You got to get something's right. And you have got to get some things right. Get a lot of stuff wrong.

So, check this out. So, um, Felski calls, yeah, reiterated his 2025 S&P target of 7,000, but whatever. More importantly, pushes back on the AI bubble label on MAG 7, increasingly uncorrelated earnings reactions among the group. Um, you saw dispersion there. You expected the performance to broaden out beyond mega cap into AI into value, dividend growth in small and mid.

Great call, Brian. And uh, you saw regional bank M&A as midsize banks. Uh, so whatever you favored a barbell. Sean said he actually nailed it.

Yeah.

Like he.

Well, Sean, Mr. You nailed it, which is important.

You really did. That was good stuff.

Thank you. Thank you.

It was good stuff.

It's Do you want to thank? Do you want to thank anyone?

You know, every time I say something on there's still and I try my best now when I'm on the show, I don't say thanks for having us. I don't say that anymore because I got so much crap from Wapner.

And why, why boil us?

Well, because it's a thanks for having me.

Yeah. Yeah.

Well, no, but but I am a collective of all this fantastic team that I have. So, I always say thanks for having us.

Oh, thanks for having us. Like, thanks for having our.

I know you mean it sounds weird. Am I But you mean you're a nice guy. You don't mean it to be You don't mean to be a douche when you say it. It sounds.

No, no, I don't mean to be a douche. I don't mean to be a douche. Um, so no. Despite the tan.

Dude, I had to I went to Minnesota. I went to Minnesota the Friday of Memorial Day weekend and I'm like.

I I had a change of life and I moved downtown in 2019. So then I I in 2020 I was there for the George Floyd stuff. And then that really shook Minneapolis. And it was fun to live downtown Minneapolis before that. And then even the last six or eight months things have changed there, man.

Are they getting better?

No. So, I was there in 2023, I think, when the Giants beat the Vikings in the playoffs. And it was I I stayed downtown, honestly. And it was I I came in here and said, "You're welcome for CAT for as it was. It was very depressing."

It's depressing.

Yeah, it was tough.

So, I think I got to do something different.

Well, Minneapolis sort of became like ground zero for the culture wars. Yep. Like both sides are growing increasingly, I don't want to say violent, but like aggressive. You have people for violence. You have like citizen journalists exposing the daycare centers. You have like the all the protesters are still out in the streets. It just.

If it's just an unexpected place to be the ground zero for the culture wars, but that's what's.

Yeah. But if you So I grew up there and I love um history. Hopefully be able to talk about one of the books I'm reading right now later in the in the broadcast here. But um Minnesota has always been a place for kind of off-the-wall politics. Like Eugene McCarthy, you guys are too young to remember.

Jesse Ventura was a pro wrestler and he became governor.

Yeah.

Um, and so they've always been kind of goofy on the political side, but it's gone it's gone way too far and there's a lot of people leaving Minnesota. I mean I part of that was I didn't I think I I I love my Twins. I go to the Twins games. I'm not feeling great walking back to my condo from the Twins game. So, I'm like, I'm going to spend more time in Florida. Plus, it's 1,000 degrees. It's 1,000 degrees everywhere. It's It's hot here in New York. It's It's 105 in Minnesota. Where would you rather be? Naples, Florida, 100° or Minneapolis, 100°?

Uh, so.

Oh, so you're All right. So, you're But so, you're going to be in Naples, but then you need like a a summer place to live.

Yeah, because a couple things. It is super hot in Naples. Um, the flights are prohibitive. Like when I I'm in Naples right now because I need to get out of Minneapolis for a little bit and hang out. But to fly up here, two Delta flights, one at 7 a.m. and one at 7:00 p.m., that doesn't work for me. Um, and so I fly United mostly. Um, but um, the flights are very prohibitive. And if I want to go west, anywhere west of Alabama,

Yeah,

you're connecting through Atlanta or through Houston or something. And that that's.

What what is it? Fort Myers airport or.

Fort Myers. So if you think about it, it's an hour from my place in North Naples. It's an hour and 45 minutes to Fort Lauderdale. Fort Lauderdale, great airport. So if you think about it, like it's going to take me an hour and a half to get to New York after this, right? So I mean, you think about that on a relative basis,

But still every time you got to go to Fort Lauderdale.

So professionally, where would it make sense for you? Is it Chicago or is it like New York?

New York.

Okay.

At some point, I mean, let's, you know, baby step.

That's such a that's such a huge deal to like set up in New York. Well,

this is an impossible place to live. I don't know if you know that.

I I think I think the company's always going to be incorporated Delaware Corporation and then headquartered in Naples,

But you need but you need talent. So, where are those people going to be?

All over the place. I mean, we're have a distributed everyone works from home.

Okay.

So, I have two people in New York, one in Seattle, one in Florida.

Okay.

And this is by virtue of these are the people that you want and they happen to be in those places.

Very much so.

So, we built our firm the same exact way. And then somewhere along the line, the thing that we realized is that in certain capacities, some workers are better off uh independent like just work from home or in a wei work whatever based on their role and their personality.

Yeah. And then in some cases it's like you know what we actually need to cluster a few places where we can get multiple people together and we have so we have both but we built Chicago's uh 16 people. They come in every day and the and the roles that they have at the firm it actually makes sense for them to be in person together.

They're in uh the salt shed uh which is do you know what that is.

Downtown?

Yeah I know the area. It's not too far.

So, but it made sense for based on the role uh Chicago is an operations hub for us. If you're just a if you're just working at all day task after task after task and you have very little in-person interaction, that's not the same as being an adviser and talking to clients. Like I feel like um the operations people, a lot of them would prefer to be together. U so that's like one example. And then Charlotte, we started the cluster. We we're opening a new office in August in uh Charlotte. So, we're always going to look like what you described for the most part, but then we've we're going to have like hubs.

Well, you know what's interesting?

I think that's that's like that's like how it's going to go for everyone. I think.

One of the first times I was on the compound um I said something controversial, shocking um that I believe that everyone's going to go back to work in the in the following fiscal year. And I got absolutely ripped in the comments and I I never read the comments.

Why? Because like the health issue.

Yeah. It's just people weren't back to we weren't back to work in Wall Street. I think we're like 2 or 3 days in. And then then it was in I think I said within within 12 months we're going to be back to work. Everyone's going to be back to work. And my son Ashley's the one that said, "Dad, you got to look at these comments on you on the YouTube."

Never do that. No.

Don't do that.

No, don't do that. So anyway,

Well, I do think that we're going to get some big corporations who who kick off the 4-day work week. I think it's like inevitable and I think it's actually going to surprise people, but Wall Street could be one of the first areas where they basically say unless you're in a client-facing role specifically and need to be in the office, we're we're we're not expecting you on Fridays.

Wait, hold on. 4 day work week or day or in in person 4 week.

4 day in person work week on Wall Street. I think it's coming.

But work on Friday, just not from home. I mean, just work four days in the office.

Yeah. No, I don't mean don't. I shouldn't I shouldn't have phrased the way.

I think you're I think you're working 5 days. The thing is on Wall Street, people are working seven days a week.

Um, because nobody ever doesn't answer an email or return a call. So, it almost doesn't matter. But I I do think companies are tired of fighting their employees over Fridays, especially in the summer. And it's almost pointless because all of these companies are more profitable than ever and giving their employees more um giving their employees more latitude than ever. So it's just ultimately as the next generation takes over eventually someone's going to say, "Okay, you know what? Don't worry about coming in Fridays. Just make sure you're hitting your numbers."

Yeah. I think everybody works different. I think some of us, especially Gen Xers, have to learn that the next two generations, they learn different than we did. And they work different than we did.

Um, but I do believe that the next two generations, the millennials and the Gen Z's, they have a harder time with interpersonal skills.

Yes.

Um, and you know, when you're growing up in the business in the 80s and 90s like I did, you had to learn when people were lying to you because you could tell by the but you could tell by the questions they were asking, by the answers they were giving and look in their eyes. And I think where analysts have all become lemmings, no disrespect, and they all kind of dropped their earnings all at once, right? Or right, they dropped their earnings all at once. They're all, you know, because of Spitzer in 200. Everyone forgets all this stuff.

The the good old fashioned days of sitting down with a CFO or CEO and talking about their numbers. Nobody I don't think that people do that anymore or they do it over screens or.

Nobody has time to do it. So they do it on Zoom. Yeah. Or or they don't do it at all and they're relying on spreadsheets and models and you know looking at what other people are doing and I I don't I don't know I don't know that we're even going to notice this change. I think it's just going to be this gradual thing and then all of a sudden we'll all notice it like but it's I I can't imagine it not coming.

I still feel like I'm cheating when I'm home and I'm home a lot. I'm home most days. I still feel like somebody's gonna tap me on the shoulder be like this isn't like get back to get back to the real world. It's been but this is it. It's not going back.

My goal is once I have a certain asset level I'm gonna I'll have an office and I want people in the office because I just think it's you need to collegial especially with a smaller group.

But I mean when you own your own business I'm working eight days a week.

Yeah.

And right every 25 hours a day doesn't matter.

So and I don't expect my people I've never expected my people to work like me even when I was at big firms. Don't be like me. Please don't be like me. But it's just the nature of the beast that we're in.

Would you set up in New York or you're not sure yet?

I probably would if I get the right asset number that I'm looking for.

Okay. Which is one trillion?

I hope.

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Wow.

249.

249 on the 250th birthday of United States of America. What do you think about that?

I think it's amazing.

Brian, a lot of people think you're secretly Canadian. Do we want to clear that up today?

I am an American. Capital A. That's right.

All right. People think that because you're from the north. Yep.

And you worked for a Canadian bank for a long time.

Yep. I know.

But that that that should go away now. That chapter's over.

All right. All right. We're so happy to have you back.

Thank you.

You guys are in for a treat. Uh, fan favorite, uh, host favorite, one of one of my favorite people on Wall Street, and he kills it here every time. We're so excited to have him back. Ladies and gentlemen, please welcome Brian Bellski.

Wow, thank you so much. Brian is the founder, CEO, and CIO of Humilis Investment Strategies. Humalis Investment Strategies is an independent portfolio advisory firm built on the principles of conviction, humility, and disciplined strategy. Brian has held roles at firms including Beimo, Oppenheimer and Company, Meil Lynch, Piper Jaffrey, Dane Bosworth, and William O'Neal. This is his 36th year on Wall Street. Unbelievable.

Do we got the shot? All right.

You got the shot.

Hey, dude, thank you for being here. We appreciate it.

Thank you so much.

Why are you Why are you tanner than me? I'm I'm actively working on my tan. Is it just coming natural to you or how how are we doing this?

Jeans. Okay. Good jeans.

Those Minneapolis. Yeah.

Minneapolis jeans. Those Irish and Polish jeans. Uh, no. I've been spending a lot of time in Naples the last couple of weeks. It's been hot in Minnesota. So, where would you rather be? In Naples by the water, by the pool, or in Minnesota or.

I'm going to Bokeh uh two days.

Yeah.

So, I'll be there for you. I love You guys are down there for for a show. Yeah.

Was that May when you were there?

Yeah. Uh.

March.

March. Yeah.

So, right during the peak.

Oh. When we came to to Naples. Yeah.

February.

February.

Yeah.

Of last year.

I get excited when I when I pull into my parking lot of my condo and there's three cars in the parking lot. Oh, it's fantastic. I can get I live in North Naples, so kind of South Bonita, I like to call it. I'm not in the bougie part of Naples. I can't afford that. But I can go downtown in like 12 minutes.

Yeah. Do you go to the Blue Martini?

No.

Why not? Come on.

That's my That's our favorite place.

You took us there.

I did. I did. That's my new favorite place in the world.

You know the place across from the Cava Lounge that you you don't remember?

I don't remember.

I want to say one thing about about Naples that I observed. People there are having a lot more fun than in other places in Florida. Like Miami is very a lot of obviously partying, but away from that it's like very serious. A lot of business. Y.

West Palm now looks more like Wall Street than than anywhere else in Florida where I where I am in in Bokeh. It's not a party atmosphere. It's more relaxing. Naples is fun. Like the people that I witness that live there at least part-time, they seem like they're really enjoying life.

You know, I personally fly into Fort Myers and when I hit that exit to drive by seed to table and then to my house, I take this deep breath. It's so relax. It's my happy place. I had a change of life.

Six and a half years ago. Um, and um, I moved to Naples. I've been going down to Naples for 20 plus years and working at Meyer Lynch for so long. We used to do all activities and big conferences at Ritz Carlton property. So, been going there and then the Twins play in Fort Myers, Minnesota Twins. So, I've been going there for a long time. To live there is completely different.

And so, tonight when I get home, I'm going to walk to the Gulf of America and put my feet in the water and just breathe. Uh.

This is way too much geography. Can we talk stocks?

Yep.

What's that main drag called? Fifth Avenue.

Yeah, Fifth Avenue.

Yeah. All right. What a what a cool place. All right. Uh.

We're going to start with first of all just a a little bit Michael did the recap of all of the calls that you had made which turned out remarkably well. Where do you think we stand heading into the second half in the equities market? Like what is the big picture opening line you're giving to clients to kind of give them a an idea of what you're thinking right now?

Well, shocker. We're still bullish, but I think the headline would be beware of the second derivative less positive.

So tell us what that means.

Well, we've had this amazing earnings growth ride, better than everybody thought, but what goes up must come down. And this don't be don't take this for me to be negative because our work shows that in an earnings driven market um when the market is driven by earnings versus multiple expansion or momentum, typical returns on an annual basis are something like 10 to 12%. Much less so than what we've seen the last couple years which has really been more about momentum and peer driven but if you're looking at 20 to 25% growth for the S&P 500 whatever number you want to look at might be different tomorrow um are we going to be 25% for the next four months probably not I mean it would be fantastic don't get me wrong with the AI revolution and all of that but the chances are earnings are going to slow down a little bit for big cap stocks for large cap stocks and I think people given the fact that we're so innateely focused on every little data point. If there's any kind of slowdown, people are going to sell. But I think that ultimately drives what our broader trade is, which is the broadening out trade and more normalization and all this kind of stuff. So, I think it's going to be choppier than most people think. I think personally, uh, there's too many bulls out there. Um, but it's funny because you have the bulls, everyone's calling for a correction, too. Have a correction.

Well, always constant.

It's constant. And so you don't have to be a hero to try to time the market. I think stocks are higher. How about this? Stocks are at all-time highs at year end. I think in between there we got some fun. This year we had a handoff from kind of mag seven centric market where people wanted to own the data centers and the hyperscalers and now they seem to be more uh they seem to be more attracted to the companies who are selling products and services to the data center buildout and they've been less excited about owning the hyperscalers themselves. I know this week there was a nice bounce for a lot of the MAX 7, but generally speaking, those stocks are mid- teens to mid 20% off of their highs. They haven't really participated. They've actually been a net detractor up until the last couple of days from the S&P's year to date.

Oh, I know.

So, we have this handoff. So, the question is, it sounds like you think the handoff will continue, but the choppiness comes in because these things don't happen in a straight line.

Yeah. Nothing's linear. And I do think that well, first of all, you don't have to own everything, right? You don't have to own everything. I think that you're going to see some uh rebalancing back into Microsoft. Microsoft's the one that I'm kind of focused on. You think 34% return on equity, 78 billion on the balance sheet, 25% earnings growth, quarter after quarter, consistent. So that one to me doesn't make sense in terms of being down 23 or 24% year-to-date. It does from a.

Well, and the nar got stuck in the narrative. It's the biggest software stock in the world.

Yeah. Well, well, exactly. So like full disclosure I was telling you when we were walking in people were teasing me Bowski underperformed in June by 1%.

Well, I don't know Micron I mean if you come on if.

That's pretty good.

Right?

Anyway, Micron is is now down 21% from its high a couple days ago. So you talk about.

It didn't take long. No.

So you think about we were talking earlier about never look at the comments, right? So I was on closing bell last week um and the day that Micron came out with earnings and they asked me and I'm like, you full disclosure I don't own the stock but I pulled the nothing's linear for long and this this is way overdone.

Stock went up a little bit. It was been straight down since then. But if you read the comments was wrong.

I mean I you know I don't own the stock. I mean so so anyway. Anyway.

For somebody who never reads the comments, sounds like you spent a lot of time reading the comments.

Glances at the comments.

Well, someone told me again, you got to read.

It was your son. It was your son. B, let me ask you this. So, you said that um you expect earnings to the growth to not be as strong. Obviously, you're not expecting negative earnings.

No, no, no, no. If if it goes, Michael, if it goes from 25 to 20, people are going to go, "Whoa."

Right. Right.

Well, let me Okay, so let me put it to you this way. The earnings growth is in large part being driven by the hyperscalers willing to go to zero on their free cash flow. Yeah.

Right. Like that is powering a large part of the earnings because their spend is Micron and AMDs and everybody else's earnings. They have been steadfastly committed to higher and higher and higher spend. So do you think that's going to re reverse itself or what where do you think it's going to.

It has to slow down. It has to slow down. It.

Has to. It has to.

They say it's not.

But yeah, they're telling you now. Okay. Well, of course they are.

Because they want to go to the marketplace, right? If they're going to go to cash flow to zero, they're going to have to go and get money in the market. Yeah.

Why do you think why do you think Oracle's been been.

Why raise money though if you were going to slow down? So, why would Google be selling stock after 15 years of 10 years of buybacks if they're not going to accelerate spending? What would be the reason?

I don't know.

Okay.

I I actually don't know.

But you Google one of my favorites, too. No matter what, these companies are gonna have to slow down.

They have to slow down.

What the hell is happening with Oracle? I know we have a lot to discuss in the doc, but it's like going straight down.

I know that's another one of my.

This is problem child.

This doesn't look like the other ones.

I mean, it's going straight down.

I just Yeah, I I'm still sticking with Oracle. I'm sticking with Microsoft. I'm sticking with pound.

Do you think Oracle is trading? Because I think in the in this in the late winter, early spring when everything else was going down, it made a lot of sense. It was linear. It was wait what did Sam Alman just say to on the on that podcast? Everybody's antennas went up and he was acting very defensive and Oracle just said like investors said there's no way that 5year $300 billion contract is money good. No way. And that.

Or the open AI business.

Yes. And that announcement was responsible for Oracle's 30% gain in September 2025 or whatever it was. Y.

Um, so do you think it's still trading on AI fears or what the Okay.

I do. I do. So you think about too them going out in the public marketplace and taking all that money, but you think about how Oracle was a value stock in tech for a long time and they were early adopters into investing in the AI and so then then all of a sudden all the relationship with OpenAI and the stock took off. So I think that's unjustly being punished. So I'm sticking with Oracle and and Microsoft. I am.

What do what do you think about whether or not the meta news this week where they're now going to be like an outsourced uh cloud for other players the market rallied the stock and then gave almost all of it back to.

I'm not a believer. I'm not a believer.

It is that does that even make sense if you're a meta shareholder is that what you would want to see them investing in.

How is there excess compute? I don't understand. I thought all we hear about is shortage.

Right.

They're they're going to start renting out their excess.

Look how fast that game went away.

Yeah. Two seconds. Two seconds.

Like like 24 hours later people are like, "Uh, what is he doing?"

Wait a minute. These are the same I think the I think um the market has said, "Well, wait a minute. Aren't these the same guys that were doing like sunglasses and stuff a little bit prediction markets?" Like they seem very just very not focused.

They call it flailing. Yeah. The Meta. Now, I don't know [ __ ] and I could be totally wrong and they could surprise everyone. Meta just the way like I think about it, they're the best user of AI on earth to generate revenue like.

Because of the ad spend.

The product is you cannot put your phone down anymore. If you're if you're on Instagram.

You literally cannot put your phone down. It is just.

So good at holding people's attention.

And getting people to send it to their friends and getting people to engage with it. They have perfected reels. It is completely addictive. Nobody saw me on Tik Tok anymore.

And I have a physical device. It's called a brick where I literally have to stop myself. I have to lock myself out of my phone because I am addicted to Instagram. I tap on and I tap off and I try and leave it tapped off.

Right. So, so that's AI. AI enabled them to not only make the world's most addictive product, but uh that's not nicotine, but also the monetization of it. It's perfect. So, they have this thing. It's the best in the world and it spins off a ton of cash. But I don't think people would look at the way that they reinvest that cash and say that they are any good at that. You seem to be really bad at it. Actually.

I have a sorted past with with Meta. I um.

Say more.

How sorted.

Well, in uh the fourth quarter of 2018, I sold the stock. I blew the stock out completely. That's when they changed the name of the company.

To Meta.

To Meta. Was that long ago?

We're going into the metaverse and we we're we're going to.

Push aside WhatsApp and Instagram and Facebook and we're still going to own it, but we're going to try to go in this other direction. I'm like, they don't know what they're going to do. And I took all my meta position, put it into Google. Haven't owned it since. Now he doesn't know what he's talking about.

You know what the ROI was on that? They spent $80 billion and lost $80 billion. It's the most amazing.

See, there you go. So then, so I'm like, okay. Then during the vid, they came out and said, "Wait a minute. We're going to come back. We need to focus on our core competencies."

Good idea.

Which are WhatsApp, Instagram, and Facebook. Now they're doing this. So.

And now they're going to build the NeoCloud.

Yeah. So, I think the pick to click is Google. I still think Google. And if you look historically except for the you know since really historically um Google and Meta from a price performance basis they're very correlated right but I think they're going to something that we talked about when we were here last we're going to have more stock picking more differentiation yeah and look at communication services in particular terrible performing sector year today you know AT&T but.

Verizon they're crashing.

Verizon Netflix.

Wait, one one thing on onet on meta before we get off this topic. It seems to me, and I could be totally making this up, that in between every quarter, we talk about what a bad job Meta is doing and they're doing all this [ __ ] and they're not focused. And then every 90 days, we say, "Holy [ __ ] they made how much money and the stock rallies."

Because they they have the best advertising business in the world that's not called.

I really feel like every 90 days we're like, "Wow, this is the best business in the world." And then in between, we spent time.

Yeah. How he's going to how is he going to light that cash flow on fire this month?

Yeah. Maybe. I mean, full disclosure, I was looking at this stock hard because we've talked about it on the show. You were talking about Nike and about how I like to buy companies in my value port.

Sorry, Brian. That's Meta on Google over the last year. Yeah.

Holy [ __ ] I didn't realize it was that bad. This.

Yeah. So, this is really.

Meta is down. Meta's down 18. Google's up 100.

Yeah. Yeah. Since liberate, you're right. My god.

Anyway, so in my value portfolio, I love to buy companies that operationally have tripped.

Nike for a while. Um, bought Starbucks a couple years ago. Um, Netflix is in there now. Lulu's in there now. I'm like, man, try buy what Meta is. It's time to buy Meta.

16 times earnings.

It probably is. It.

Probably is. But let's see how 16 18. How cheap is How cheap is the stock?

It's like 16 17. I think.

It got a little Let's be That's too cheap. Who car? Nobody likes Facebook.

Yeah.

Everybody knows.

Not No Facebook, no Insta ever. I'm not on.

Well, if you if you if you were, you would be as addicted as everyone else. They're really good at what they do. The problem is these initiatives in AI make no sense to anyone. They're going to build open model LLM. Nobody wants it. Okay, fine. Now, we're going to build productivity tools for the workplace. Is anyone asking for meta at work? Like on the planet? No way. Nobody trusts them.

You know what's interesting about this though? So yesterday, Meta popped 10%. Oh, so so now the new thing is we're going to build a data center and rent out compute because we saw Elon Musk do it with XAI and they got uh appreciated like maybe we'll be appreciated as a company that could deliver this. It took Alphabet and Amazon like 15 years to build these businesses.

Yeah.

Meta is going to spin it up to get the stock price to go up.

But so listen to this. So Meta was up 10% yesterday on the news. Core Wee got killed naturally. Meta is giving back a lot of the gain today and core reef is still going down today.

And Oracle is going down.

Which I mean this.

So the market is saying like we don't really like any of this.

Yeah.

Anyway, all right. Uh, what's this what's this chart on Smid? Can we can we move to like where uh.

Anyway, what's this [ __ ].

No, no, no, no, no. Let's let's get.

What are you spitting here on Smid? What's Smid stand for?

Let's get into the Bellski charts. Let's go.

All right. This is the first one. Smid for people who are unfamiliar is small and midcap combined. Yeah.

That's how you think about them. That market.

I do. Okay.

So, the S&P 1500 is the S&P 500, the S&P 400 midcap, and the S&P 600 small cap. So, we run money called a Smid portfolio relative to the S&P 1000. And so, if you take a look at the S&P 1000 with respect to performance in June was was they they flip-flop. They've completely gone off. But what's interesting, if you take a look at the S&P equal weighted versus the Mag 7, same kind of thing. So, our call all along has been that you always want to go to where you always want to skate to where the puck is going. Everybody hates.

Wow, you're a genius.

Listen.

Good. It's a good It's a good idea. I like to skate to where the puck was 10 minutes ago and wait for it to come back.

Or you can, you know, or you can stick handle.

You can stick handle and then get your ass kicked cuz you have your head down, right? Anyway, um.

This is why they think you're Canadian. All these hockey analogies.

I know. Minnesota, by the way.

Gordon Bombay.

Gordon Bombay.

We're like a Hansen brother. Um, who by the way are from Minnesota.

H.

Anyway.

Unbelievable.

Believable, right?

Yeah. Yeah. Um, so we've said all along that that from a fundamental perspective, if you take a look at earnings growth, price to free cash flow, and actually next 12 months earnings, you look at the small cap market, SML versus the S&P 500. Amazing. Amazing.

Is it?

Yes.

What's the What's the expectation for small cap?

28% something like that.

Earnings growth for when? Next 12 months. And what is it for large cap?

23 24 something like that.

Is that small or smid?

Small SML.

Okay. What is what is driving I don't mean like the narrative like oh rates whatever like literally at the sector level where the earnings are financials there's a lot of big fin there's a lot there's a big financial presence in there there's consumer discretionary in there tech.

So why are regional banks because you spoke about this last time they're on fire like what's the story.

Well, our theme for financials and regional banks has been um in the regional bank side of things consolidation. I really think consolidation's coming um and we've had some decent consolidation from that but the theme is the big and the small the really big guys and the really small guys are going to benefit. Small guys are going to benefit because of the relationship side of the business. And oh, by the way, the smaller banks in regions of the country that are growing like let's say Montana or Wyoming or Idaho or the South.

Growing meaning people are moving there.

People are moveing there and companies are are moving there as well because tax advantages or whatever.

Those companies are winning uh business away from the big banks. Okay. So whether or not it's Glacier Bankor, which we own, is winning business from Chase, let's call it in Bosezema, Montana, or we own this company called Senovas that got bought out by Pinnacle. They're in the southeast of the US, right? So we're moving to the southeast, we're moving to Alabama, we're moving to Georgia because of cheap taxes and all that kind of stuff and cheaper to cheaper payrolls. So those banks are winning business from the really big big guys from a relationship standpoint. They're having a beer, they're playing curbage on a Friday night, all that kind of stuff. Where the the regional banks don't have the capacity to be able to take on the big banks and they don't have the relationship power to take on the small bank.

They're in the middle, but they are they're becoming super regionals.

Well, they're going to have more I think they're going to become I think they're going to have some super combos. They're going to see some consolidation that.

Like PNC is aggressive now. Citizens is aggressive. Um.

Well, it's a super regional like a a big small bank like when true like when two regionals merge.

Okay.

And all of a sudden they start to get some of those benefits of scale but they're not quite Bank of America. So they don't have capital markets business let's say but they become powerhouses in middle market lending and and commercial banking.

So I'm in Citizens Financial. the number one heliloc bank I think in the country or something like that's their specialty and they are a conglomeration of a bunch of smaller banks and I I would argue it's not really a regional anymore. It's like a super regional and I don't you don't think that's a sweet spot though because they're stuck in the middle. You like the smaller and the bigger?

I like the smaller and the bigger just from a fundamental perspective. Um, the scale of the scale of the large ones make sense to me. the small ones make sense just from the fundamental side of things and with if you look at balance sheets too and cash flow for that you have to you have to kind of roll up your sleeves and do um the work to look at some of these banks balance sheets to make sure to see what their loan quality is I think and I don't build strategies around consolidation but I think you're going to have some super consolidations like I'm just throw it out there.

The white house is allowing it all of it.

Truest buys US bank or I mean or I combine something like that. I I don't know. I don't know anything but you're going to have more Midwest banks combined. I really think you are.

Who is tr T truest is Mnt bought America. I I forget.

No, it was Sunrust and um Bank out of North Carolina. Um.

Okay. Not not not important, but like that that's the kind of thing that you think we'll see.

Yeah.

Okay. Um, away from banks but within financials, what else looks good to you right now?

Like some insurance companies like Unun uh is an is an interesting um company. Um, I don't I I want to like Blackstone again. I want to go back into there. My contrarian hat wants me to go back in there, but.

The headlines are not going to be good for a while.

No, I can't do it.

But but Blue Owl rallied a little bit today on less bad than expected.

Like redemptions were 19, I'm instead of 25 last quarter, whatever it was.

Well, okay, let's let's think about this. Why not just buy Oracle?

What do you mean? Well.

Instead of buying a troubled financial one.

Because financials are trading on software distress too or perceived. Yeah, that makes sense.

Right.

Right.

What about any take on So, I bought CME today. These stocks so CME, SIBO,

The NASDAQ,

Um, ICE,

They're all down huge.

And a little bit different a little bit away, but S&P and Moody's also got crushed, but what do you think about like the exchanges?

Um, Schwab Schwab looks interesting. I like the exchanges. I think they're cheap.

I think they sold off. I'm not even kidding. On the Koshi perpetual listing Yeah. news and fine, it may be they're a threat, but are they that big of a threat to suddenly start crashing?

No.

Let's uh do this earnings chart. Chart three.

Chart three.

The first quarter reporting season was historically strong. I'd also point out I think this was the best quarter ever for the stock market.

Did Did I read that wrong?

No way.

Or one of the best. What did I read?

It was very good.

I read something. Maybe it was the best earnings quarter ever.

I think it was earnings.

Okay. All right. So, that's what you're showing. You're showing.

It was the most fun quarter ever between the Knicks and the men's national team.

It really was. The Knicks the Knicks really took the vibes over the top.

So when most people look at this chart, they say, "All right, when does it mean revert?" Like when does when do we give all this back or how many quarters worth of earnings growth are we pulling forward to get this result? What do you think when you look at a chart like this?

I look at the big I look at the big bottoms and tops, right? Right? Look how bullish you should have been in in 2020 when when the bottom fell out and then you had a little bit of a you had a little recession in 2022, but man, earnings came back. But look at how the recovery from 2022 it's been pretty steady and then I'm you know you could see 80%. You could see that you could see that number. What if I'm wrong, right? What if I'm wrong and you see 30% growth?

Yeah.

Then I'm I could be wrong.

What if you underestimate it? Then the S&P is 10,000 next year.

Yes.

Yeah. You looking at a Dow 75,000 S&P.

I'm still on board with my 25 year secular bull. I'm still on board. I think we have 7 to 10 years left.

Let me ask you this. I'm glad you you mentioned that. A lot of people think about the stock market. We use analogies for shorthand. What inning is it? What time is it? What if or what do you what do you think about this? The AI powered revolution, the economy that we're coming towards, it can be the top of the second inning. We don't have robots. We're still very early. Basically, nobody's using it. It could be the top of the second inning as far as this whole thing is concerned. But what if the stock market's in the eighth inning? And how do we know? And it wasn't that too dissimilar in like 99 where the it was still early for the internet.

I understand what you're saying.

But the stock market had already discounted all of it. So the internet was in inning one. the stock market was in inning 11.

Could be because I think so man I'm sounding bearish um I think we're going to have a recession sounding nuance.

Whoa whoa whoa what did you just say.

I think we're going to have a recession at some point.

Oh cap at some point.

I thought going to give us more than that.

Think about it so so let's say we're in the second or third inning of the revolution and market's getting a little tippy we haven't had a normal normal recession for all intents and purposes since 2001. Really?

What do you mean?

Like a normal two.

like a run-of-the-mill plain vanilla recession? >> Yep. >> Okay. Are we still capable of having that where manufacturers get over their skis on inventory, the inventory stops selling, all of a sudden they stop ordering? No, >> it's different. >> And we just and we just sort of have like a slowdown as that gets worked through. >> Could we have a Could we >> I don't know. Is that what 2001 was about? >> Well, 2001, >> like what you're describing sounds like like something that would have happened in the 80s. >> 2001 had over capacity of technology, right? >> We had a pull forward. So, everyone had machines that they upgraded at the same time because they literally thought the planes were going to fall out of the sky. That's the Y2K effect. >> All right. Are we not doing that now? Is there too many data? >> So, that that's my point. The question the question might not might be what happens when these capex trends go into reverse? What does that do to corporate earnings for all the companies that are feasting on this spending today? >> Nukes it. >> Uh yeah, I think and then it hits multiples at the same time. >> Could be horrible. >> And then what is the externality of a stock market in reverse? We know what the wealth effect is when the stock market is hitting highs. What does it look like when it's down 20 30%. Is everyone paying Delta for the Delta 1? Is everyone paying Netflix for the ad free experience? Like is is everyone still spending the way they were when the market was going higher? I So for me that seems plausible. That seems like it would be the bare case. >> So when could that happen? If >> as long as the labor market is good, they'll keep spending. >> But why? But the reason it's not going to happen is because we are seeing the demand for AI rise as quickly as they can build it. I don't maybe that stops. The the number one thing is uh the cost of a token. The cost of a token is declining rapidly like 90% over the last which is great news. The problem is token usage is like growing 5x more quickly. The adoption the spend >> until the adoption stops. It's hard to understand why all of a sudden this capex will like stop on a dime. I know people think that's how it's going to end. Maybe they'll be right. But now it's tied to revenue. Now it's companies that are like this is AI revenue. So I I just I don't know. I feel better about it than maybe I did a >> Did you just get bullish again? I just saw a twinkle in your eye. I think you well demand demand demand demand scarcity scarcity scarcity scarcity you never doubt scarcity always trade on scarcity always buy scarcity and if if there's that demand there and there's scarcity for menu or for memory and there's that still scarcity on the AI if we're still truly second it's compute >> then then this thing's going a lot higher than we are at 10,000 >> and the thing is the tokconom the the token economics are being rationalized right now companies are looking at their bills And yeah, the bills are expensive, but then they're looking at the amount of demand and they're saying like, well, we we're now like reorganizing ourselves around this technology. We can't not buy it. We can't not use it because it's doing X, it's doing Y, it's doing Z, it's doing all these things for So, I know like the bears are like any minute now, this whole Jenga tower, someone's going to pull the wrong piece and the whole thing's going to collapse. >> I don't believe that for one second. Okay. I don't believe that one side you say that >> I don't the thing that bothers me as as being a sector analyst for a long time and a strategist that what is what are the indices looked like in four years are we going to be 50% technology in the S&P 500 and then do >> we would look more like the rest of the world if that happened because most countries are dominated by one industry >> well look at Canada has got dominated by three um but let's take this back I actually think within two to three years that Russell, S&P, Msei are going to break apart the technology sector >> again. >> Again, Yep. >> cuz they did it already >> into what semis semis could have its own maybe they should be their own sector at this point. >> Hardware, software. Um, >> ooh, that would be interesting. If so, if software got its own >> if software got its own sector, will it still be big enough? >> It's like 7%. >> Will there be enough market cap left in in the software sector? >> Brian, look at this. So this is the top 25 stocks. >> Yeah. >> All right. So we spent a lot of time talking about the mag 7%. It goes it's so much bigger than that now. The top 25 stocks were 35% of the index when this series starts in 1997. And it was like around there a little bit higher, a little bit lower for the next 20 years. It went from 35 to 54. And >> 25 stocks are half the US stock market. >> I know. >> Wild. And if you don't own them, >> well, that's that's the thing about that's the thing about SMID. Let's go. Right. >> Right. >> The Smid the Smid category, if you take a look at all publicly traded companies in the US that are SMID, small midcap, they add up to the weight of Apple. >> Put up a chart, Dan. >> Um S&P 500 CTR has been topheavy, which is >> CTR. Oh, okay. Got it. Contribution to total return. >> Correct. >> Which has worried some investors. So the question based on this chart is like can you outperform in Smid for longer than a quarter like like just uh the the the nature of the market over the last 15 years has been like all right you'll get that annual small cap rally knock yourself out have fun and then before you know it Meta Apple Microsoft they start going up again and erasing all that outperformance >> this is a nice shot this is a nice shot I don't think it's different this time. We've had a heck of a June and and second quarter for small midcap, but this is also at more elevated 10-year treasuries. If you get 10-year treasuries to go down, then Smith's really going to rock it. >> Okay. >> Um and it's going to be helped a lot by the banks. And >> so, you can outperform for the rest of this year in this Smid trade. I think it's possible. >> I think you can. The other thing too is that if you look at the Russell 2000 versus this the SML or the MID, right? Russell 2000 outperform both those, but the there's a lot of companies in the Russell 2000, Josh, that are don't make they're not making any money. So, you have a lot of fuel in there, a lot of beta, and that's where a lot of the returns came from. You strip those out. That's why I go back to if you take a look at price to free cash flow and just earnings discernability and consistency within the small SML and the mid, it's much better than the Russell overall. You know what's so interesting about what's happening right now? I would expect if you know that the Russell 2000 is outperforming the large, then you would expect looking inside of the S&P itself that it would look the sim similar that smaller stocks in the S&P are outperforming what you just saw. It's the exact opposite. It literally is the top decile. Forget about the hyperscalers. It's Micron and uh is Sandis probably. No, it's not top probably, >> but it's the gigantic stocks in the S&P that are driving the index. And yet the uh Russell 2000 is kicking the crap out of the equal weight S&P. So it's it's not a size thing. It's a sector thing. >> Could be a sector thing and could be a fundamental thing. Oo, right. Interesting. You know what just came to mind? I remember back when I was a young strategist 19989, something like that. And I was on a marketing trip to Boston and I was visiting one of the portfolio managers at Fidelity and he was literally having like a breakdown. He's like, "Bowski, I gotta small cap manager at Fidelity." >> This is an audio medium. I don't know if you know what we're doing here. >> Oh, really? Okay. Okay. Here we go. Uh I'm like Ricky Bobby. What do I do with my hands? >> Anyway, um so I'm I'm in Boston. >> You're welcome, John. John was about to get up from his chair. >> Um and uh so he was literally he's like, "By what to do. I'm a small cap manager. I'm massively underperforming. I'm buying Microsoft." >> Oh my god. Like that was the answer. >> Yeah. So, I was talking to some people that run small they're completely gone. Remember, there's no value managers anymore. There's no small cap managers anymore. There's no dividend growth managers anymore. >> Got knocked out of their chair. >> They're all gone. >> Okay. So, I I like that setup. Let me do chart eight. This this is the broadening the chart on the right, figure five. The number of year-over-year gainers has risen, which runs contra to trends before prior draw downs. Uh, explain explain what you mean by that and and why should we take note of that? Well, more companies um more companies are actually seeing a year-over-year price gain and over the average. And look at that number beginning to go up and especially coming out of coming out of the bare market. >> Yeah. >> It's really interesting and it's still still very very early. And so again, um >> you're saying this is good. >> This is good. >> Okay. >> This is good. >> Okay. You don't have a market top as it's broadening. >> That's another way to phrase don't have a market top as a broad. >> So, so long as we see >> Oh, we did in 2021. >> Silence. So, as long >> we literally did. >> I know. Asterisk. Um, as long as we see that broadening though, it's uh Go ahead. >> Yeah, but look at Dude, look at look at the spike though. >> Yeah, I know. No, I know. It's crazy. Consistent. Very consistent. When it was the same thing with that prior earnings chart, just chuga chuga chuga chuga chug. you see something linear like that. >> 2021 was was we've never seen anything like that. >> That was just the government giving people money. >> Every single stock was up year-over-year, right? That's the same thing like people saying about inflation. They're they're comparing inflation now to 2021. Completely different, right? >> 2020 completely. >> No, this is healthy. So when people say it's only this market, it's just not true. You have almost 350 stocks are up year over year. >> Can I have the next one, Dan? When segmented by market cap, about half the index has delivered double digit gains. This is super bullish to me, too. >> Yep. >> It means that people are making money everywhere. Not in every stock, but all over the place. >> Per Michael's point, though, look at the 10th one. >> I know. This is so bizarre. I'm having trouble squaring the circle. How is the bottom decile the worst performer and yet the the small cap stocks are winning. It has to be a sector thing cuz otherwise you would expect this to look opposite. You would expect the smaller deciles to be outperforming and they're not. Not even close. Well, >> go to 10. Go to uh go to chart 10. Many market cap segments have a significant number of outperforming stocks. That's the answer. It's like the AI winners in each sector. Uh I don't know what's like uh take industrials. You got tons of stocks in there that are not going up right now. What's so many that are and the ones that are all have one major thing in common? >> AI. >> They're they're selling something or making something for AI. But this is saying the same thing because there's no information on this on this chart. It basically says that half the stocks in every sector in every decileis for the most part are outperforming which tells you nothing. >> But no, but but the point is well which are those stocks? >> Fine dude but it's it's it's half. So go to decileis five. It's literally half. Half are outperforming half are underperforming. My point is look at bar 10. Only 18% of the smallest 50 stocks are outperforming. What the hell is in that group is? >> And I'm sorry I I apologize. because I don't know those 50 stock. >> It's got to be It's got to be software. >> No, it's got to be No, seriously. It's got to be into it. >> I'm think it could get to the bottom of this. >> Maybe it could be a home builder. Maybe it could be a consumer discretionary stock. Maybe it could be a consumer staple stock that have not done very well. >> Yeah, >> that's what I'm kind of thinking. I don't know. >> But there and there's a lot of one-offs. There's a lot of weird companies that are >> a lot of weird companies. >> There was a company up until recently called Dover. You know what they did? >> Yeah, Dover. I owned it when I was at Marilyn actually. They made they made harnesses for horseback riding. >> Yeah, it's a public company making making literally literally horse horse equipment. Like there are a lot of one-off cases. We we shouldn't get bogged down in the 18% that are outperforming in that last desile. We should just think people are making money in almost every sector right now >> except for these pieces of [ __ ] >> Here we go. the the the trade desk. Molson Kors. >> These are specific problems. >> Hen uh yeah. Uh Domino's. What else is name branded here that's getting beat up? Oh, Paramount Shake Shack. >> GoDaddy. There's a lot of Yeah, a lot of I mean >> uh whatever. No, there's no theme that I could see just eyeballing it. >> Stock specific. Isn't that what isn't what this is all about anyway? Stock market is a market of stocks. That >> that's the way that it works. >> That's what we're trying to say. And then also almost maybe by definition the bottom decile in the S&P it's always got to be the lousiest performances otherwise they wouldn't be in the bottom decile. >> Well then they get kicked out and they go to cap. >> Pull up the small cap chart. Uh Daniel can I please have chart 14. Small caps had an explosive first half of 2026. I mean this this not just cuz we changed the color to red for that last bar but to really make you notice it but you would notice it. You could see this amount of space. >> Wow. >> This is a really big deal for this part of the market. It's been a very long time since they've been able to party this hard. Uh I wonder though, is it even possible? I mean, you seem to think it can it could continue. What's what's the longest small cap rally versus large caps we've seen in the last 10 years? >> How long? 10 years. >> Yeah, six months. >> Three Three to six months at the most. In the last 10 years, no, it's been it's really been the '90s. >> So, it's a sector thing. It's 20% healthcare, 19% financials, 15% industrials, and then 15% uh technology. >> Yep. >> There's not a lot of consumer stocks in small mid midland. There's not very small communication services sector. Um healthcare is where the biotechs because biotechs have some pretty good growth numbers. Um and it's the financials. >> I was going to say there are tiny amount of materials in there. >> Tiny amount of materials. >> Yeah. Okay. Can we talk about the bull cycle itself? You say >> year four of the current bull cycle likely to be the most volatile chart 15. >> Um what do you tell people about >> not not it's year four how many more years will be left but we know you're we know you're thinking about this as a much bigger longer secular story. So year four if we get more volatility it wouldn't surprise you in other words. >> No not at all. And I think >> what is it about the fourth year? Well, >> four. >> Josh is big into golf these days. >> It was really supposed to be three, but I think given everything that we saw last year with Liberation Day and this the goofiness of the market and that was kind of manufactured quite frankly. Um, >> and um, this year is more kind of we had the the the war in the Middle East and everything like that, but I think the market's been pretty resilient through the war. I mean, let's be honest. Um, I think if you go back historically, year three is usually the most volatile. I think we just got to push it ahead one year. And the the dominance of earnings, right? So again, going back to earnings driven markets are more volatile than momentum, multiple driven markets. And that's why because I do think the second derivative is going to freak people out. Doesn't matter if you go from 25% earnings to 23% earnings, they're still gonna guide the guidance. >> Still coming off the high. Yep. People don't like that. >> People don't like that. >> Okay. And understandably cuz as the estimates come off the high, you start to think about worst case scenarios. What if they keep going? What if they keep what if what if they keep dropping and they don't have to? That's sufficient to scare people. >> Mhm. >> All right. I totally get that. >> But the summer is pretty typically a quiet period for for the stock market. >> It is. The other thing too is that is that traditionally technology companies um seasonality from the earnings perspective that third quarter is usually a little bit slower too. So, who knows? >> Okay. Um, here's another question. >> Yep. >> What if there is no SAS apocalypse? What if we just What if we just call it off? Let me set this up. There's an analyst at Guggenheim. Do you know this guy? Did you read this? >> No. >> It's an analyst at Guggenheim who wrote I think he saved the sector this week. Guggenheim analyst, this is Baron's John Defucci name. >> Yeah, totally. says there uh where was I? Goo. Okay. Guggenheim analyst John Defucci says now is the time for Wall Street to take advantage of the deep software selloff um despite those AI fears. Uh historically low valuation. You could write the thing yourself. Um, quote, "We believe traditional software companies will at least persist, if not continue to grow at reasonable rates in many instances, but they're trading as if they will not, making one of the best opportunities for patient investors in our careers. We view AI's technology paradigm shift. The leaders of the new paradigm are typically not the leaders of the last one. At the same time, there's significant staying power in enterprise software." He upgrades. What are the upgrades? Service Now, uh maybe work I want to say workforce. I know there's a whole bunch of upgrades that came with that. The IGV is up 11% off its lows from last week, I think, outpacing the bounce in the MAG 7 and obviously going in the opposite direction as the semi NAI trade, which has been negative. Um could this be the start of something more meaningful? Are we going to bring these stocks back to life from the dead? What do you think? I hope so. Um, and Oracle's not going in our direction >> besides Oracle. Which of these do you >> I don't know the other ones. I don't own service now. I don't own a workday. I I worry that the feasibility of of Salesforce and Adobe going forward, do you need that stuff? The answer is I don't think so. >> I think Salesforce, Workday, and Service Now, in my mind anyway, the three like big big big SAS teams that trade together. Adobe is a little bit different, but same idea. But Salesforce, I don't know, man. >> Well, here are those discounts. Service Now 22.9 times earnings uh expected over the next 12 months. >> You can get that Microsoft reaction. How is that discount? >> The 5year average had been >> it's a different five years. >> The 5-year average had been 55 times. Salesforce 11 times forward. The 5-year average had been 30 times. So how about this? What if this is nothing to do with the SAS apocalypse due to AI? It was just a reminder to people that they were paying too high multiples for these businesses and that's the thing that's getting normalized. >> Well, maybe there's too many of these companies, too. >> Maybe there's too many of these companies and maybe we're going to see some consolidation there. >> Uh, yes. Oh, >> if growth for a decent number of software companies starts to stabilize and then perhaps accelerate into the end of 26 and 27, >> Salesforce growth will not accelerate. and the AI death nail will not be as loud even if it doesn't go away. We expect names currently trading as if they'll decline into perpetuity to start to trade as if they'll at least be stagnant if not grow modestly into H. That's not going to it's not going to end well from a lot of these stocks. What about do you think are you hearing anything about money maybe maybe some of the accelerated downtrends in Microsoft because it's easy to trade on Microsoft because of liquidity because they're chasing chasing uh Micron chasing Intel. Don't you think that could be some of that? >> Totally. Josh is a big money comes out of things goes into other things guy. >> Oh anytime I see something going up >> my first instinct is >> where did the money come from? >> What did they sell? >> That's just the way my mind works. vice versa. When I see something selling off, where's that money going? I just I know it doesn't work that way, but I think that way. No, I understand conceptually the money could literally do anything. It could go to pay the the plumbing bill. I'm just saying I I think that way about uh when I see everybody piling out of software. Of course, the semis went up. What were they going to do? They're going to go buy regional banks. >> He's right. This in 26 is binary. And the best hedge for if you're worried about the AI trade, buy software as much as you want. >> Wait, if Oh, if you're worried, right? Because >> anytime the AI trade has a hiccup, and I'm talking about the narrative, the price, whatever, software rallies every time. Now, software is rallying less and less and falling more each time the trade reverses. Yep. >> But >> what do you do with Netflix now? >> I'm in this. I'm in this stock. I My average 93. >> Let me set this up. This actually happened this week. I swear to God, I'm not making any of this up. Um, all right. I said to Josh and Ben. Netflix, Netflix, Netflix. Um, so Josh and I both own Netflix. >> You like to reveal my private slacks? >> No, it's mine. It's mine. It's mine. So I bought more when it was up 5%. >> I sold it the next day. I So a day later it fell 3%. I said, I'm taking my other half off. >> Good trade. >> And I'm going to buy it back if if it rallies 3% tomorrow. the next day playing it like Buffett and I swear to God I did. I added more. I said never mind I'm selling and I added back and now I'm back full position. Let's go. It's the bottom. >> Do you want to hire Michael as a trader? >> Yes. >> Listen, I when I'm wrong I admit it and I can be wrong every single day. >> It's about being >> I own it. >> What do we do with this thing? >> I hold it. >> I'm holding it too. >> I hold it. >> Cowards. You buy after it goes up and you sell after it goes down. Do I have to teach you guys everything? >> We own it in three portfolios. Four portfolios. We've owned it all the way up and all the way down. We added it to value two months ago because I think >> this stock gets killed every four years. >> Yep. >> This is just one of those times. It always comes back better. >> Could that Well, that could that be different this time? >> Cash, content, and consolidation. Cash, content, and consolidation. This is what that whole sector is about. And I think now given what Comcast is doing, and they're going to spin out, I think there's going to be more I think there's going to be more consolidation the next couple years. And Netflix is going to be the winner. Netflix. >> Oh, wait. It already won. This is this is different. The threat this time is way different. >> They don't think that they won because they think this HBO combined with Paramount is a more plus sports rights is way more formidable than anything Netflix is facing. >> Netflix won. If you look at the viewing time, nothing is close. Um YouTube aside, so in 2022 when the stock got killed, subscriber growth went negative. Yep. and they had a very easy lever to pull which was okay let's just make people actually pay for their subscription >> ad support plus password sharing >> okay they did that and it worked but now is like the dragon like YouTube is the final dragon and I don't know how they beat YouTube like so I own the stock but I think the challenge this time is way harder than any previous overhang the stock has ever gone through because they already did win like they are they did win content they like HBO and Apple, give me a break. >> I don't think they beat Nobody watches Amazon. >> They're not going to beat YouTube. >> But YouTube is the one. >> When they when they made the bid for Warner, >> all of a sudden the narrative around Netflix having won the streaming war changed to wait, why did they think they needed to do that? Cuz it's they're not an inquisitive company. There's a billion there's a million different uh film libraries that have been floating around out there. Netflix never bought anybody. So now all of a sudden they're going to do a a massive one of the biggest media deals ever. And I think people said, "Why do they even think they need to do this, the stock falls, then they lose the bidding war or they pull out of the bidding war. It just gets too intense. Warner's going to win anyway cuz Ellison is best friends with Trump. Blah blah blah blah blah." So they pull out, the stock bounces. >> Yep. And everyone says, myself included, because I'm another [ __ ] Finally, they pulled out of that dumb deal that they should never have been involved in in the first place. >> Stock bottomed, >> had a furious rally >> and then that whole rally falls apart because I talking about second derivatives. I think there was a later reckoning on the part because nothing fundamentally has changed with Netflix since then. This is all sentiment. There was a later reckoning where people said, "Oh [ __ ] they lost Warner. Now they're facing Paramount Warner plus YouTube plus Disney." And what are they and what are they going to do for for growth? What are they going to do? I think the street will react differently when they make a run at NBC Universal, which they will. I think the street likes the idea of Netflix getting into parks. It's a great business for Comcast. great business and that film library is top three film libraries on earth and there's a lot of things that Netflix can do to extend those uh brands within it. So I actually think the stock could rally if they make a bid and it looks like they're going to win >> but they're not going to grow subscribers. So that that phase of the life is over and Netflix the peacock. >> This is a message. This is what happens. >> The the the investor base is transitioning >> from growth to value to people like me who buy it and sell it and buy and sell it and try to find the bottom. >> You're the new investor base. >> But that's what's happening. The story is changing and it's a new investor base and yeah the stock is like cheap but because it's not going to grow the way in your value portfolio. >> Yeah. Okay. >> Yeah. I I added that. >> Is that where you first bought it or transitioned into value? So it's Michael's right. >> Yeah. >> Like that's the process. >> No, we own it in our in our tactical our focus portfolio and then we also we added it a brand new position in our value. >> One of the other issues with it is too big to get bought by anyone else. >> Mhm. >> Um so it has to be an acquirer. >> Anyway, Brian, you don't I know you don't care about this. JC would look at that false breakdown. Hopefully. >> Yeah. See how false it was. >> I just think I think communication services are going to be the surprise sector the second half of the year. I really do. But which ones? >> Netflix, AT&T. >> Nobody likes Disney. >> Nobody. Everybody Disney spot. I love Spotify. It's a great product, too. >> But it's the same thing. It's YouTube. >> Spotify and Netflix have a very similar chart. They tend to trend in the same direction. >> They're both great businesses with huge subscriber bases. >> Do you think Google breaks up and and YouTube on its own? Never. >> No. Huh. >> Why would they do? No. There's a better chance that they spin out Whimo. They're not going to spin out you uh YouTube. >> It's a cash cow. >> It's just Whimo. Whimo should have its own board of directors, its own CEO, its own share, its own capitalization. >> But what what they'll do with Whimo, which will be really smart, is they'll bundle it with Google Maps for the consumer. >> Oh, I like that. >> So that >> Yeah. So cuz Google Maps, I'm guessing it has a billion users. I don't know. >> Let me ask you this, Mr. Bell. >> Worst stock in the world. So in your value portfolio, would you ever >> Nike is the worst stock in the world. >> No, it's not Charter Communications. >> Oh, so Charter bounced. Charter had a very good bounce the other day when Comcast announced that they're doing what they're doing and the stock gave it all back four days later. And this is a stock that is in I mean obviously obviously the cord cutting it's in a secular decline business, >> right? What is the future? What is the best possible future for charter? >> There's no there's no bottom. So you're shaking your head. No, you wouldn't do No. No. >> Too much debt. Too much secular decline. Just no. >> No. >> At no price. >> No price. It reminds me of I'm >> This is the worst stock in the world. >> It reminds me of Boise Cascade. >> Oh, I remember that. >> In the early 90s. >> What is that? >> Oh, it's just a shitty chemical. >> Ended up ended up shitty. Yeah. Why does it remind you of that? >> I just I >> What's it going to do? I mean, I I in a value portfolio, you can look at Okay. debt to equity below one, earnings below the mark, a lot of debt, >> right? Yeah. That gone. Um, >> so there's no PE to the rescue. >> Yep. No PE to the rescue. Where can they operationally turn this thing around and then demonstrate operationally that they can turn it around? They blow up blow up management, come in, say, you know, we're going to focus on broadband. We're going to do this. We're going to go I don't see that coming from them. I don't think they're smart enough. I don't think they have the right product. I don't it's >> and the people running these businesses >> well the hyperscalers are buying the satellite uh providers and all of this is going to come from space and if if Starlink in two years is offering broadband from space at competitive prices that's the that's the last nail in the coffin for all all the the companies that quote unquote used to own the last mile. >> But know what's interesting about these names and not to twist you could twist your head head in a pretzel somebody's buying these stocks. I mean somebody has to own them. I mean, you think about this. So, what's going to happen with T-Mobile, AT&T, Comcast, and the new new Comcast, right? Yeah. >> And Verizon, what's going to happen? >> Look at AT&T. What the hell just happened? >> Somebody will eventually let there be more mergers, but it could be a real there might have to be a lot of damage first. >> A lot of damage. >> T-Mobile was eventually allowed to buy Sprint. >> Yep. >> And the regulators stopped that for a decade. And then finally they realized either of these companies merge or they won't make it and you're gonna end up with a duopoly anyway. That's I mean that's now >> that's where we're going. And maybe that's what our airlines going that way too. >> They sort of have. >> It's Delta, United >> and you got American and American's a great we we own American in our small midcap because I think >> well they stop. So this is what's funny about the airlines. They stopped JetBlue from acquiring or merging with Spirit. >> Then it went out. >> Then Spirit just goes away and you know what happens? >> Delta. Delta takes all the routes. So what did you accomplish >> by stopping? I don't even understand the logic. >> So you don't have an extra airline. That didn't that's not what happened. >> N >> what happened is those routes went to a bigger player. Brilliant. Great uh practice of uh antitrust law. So, I mean, at a certain point, if these if these uh cable companies shrink, the users shrink, Yeah. I guess they'll all be allowed to merge and then somebody might want to be the buyer of one big fat cable company. That's >> maybe >> John Malone. >> Yeah. All right. >> Nobody wants these sucks. >> Any stock. All right. So, before we in in in conclusion, >> in conclusion, >> what opportunities did we miss? What else are you excited about for the second half of the year? What names have you been buying lately? Tell us tell us what you what you like. >> You know the you're not supposed to have a favorite child, but I've got one. I love the Smid because you can play themes and play fun kind of stories. Like I own this company called Acuity. Acuity makes the tiles. Um, >> hang on. Michael just bought and sold it. >> That's true. >> For data centers. >> That's good. Well done. >> So they make the on the on the ceiling between the ceiling and the top very top of the of of the of the building. That's where the wires are. Okay. >> Oh, okay. >> So, the Acuity makes the tiles that keep everything cool. So, your wires don't >> The wires are in the ceiling. Yeah. And Acuity is cooling them. >> Yeah. From the tiles. >> Oh, okay. Yeah. There's stuff like There's a lot of stuff like that. >> Cool stuff like that. Just I mean thematically or like this this uh we bought this um small cap bank in Western Pennsylvania called FNB. another regional thing that you know takes advantage of where people are moving to, >> right? Yeah. >> Like that. >> So, we do this we do this uh column for CNBC called the best stocks in the market. >> I heard of it. >> They might have mentioned it a few times. >> So, but one of the things that I love so much about it is it forces me to look at names like what you're describing. I would never come across because other people on TV don't talk about them. Their ch their charts look great, which is how they end up on my radar. And then as part of doing the column, Sean and I dive into the story and it's like, "Oh [ __ ] there's a company that actually makes that." Like, >> what was the company that made janitor suits or something like that? Custodial suits. >> Oh, uh, uh, Ventos. Um, there are businesses there there are like businesses that do things that you're like, "That's a public company." >> Holy [ __ ] Alltime high. >> VTR. >> Yeah. Uh, Amphol is one of the biggest winners of the year. AP. I would never have heard of that if I weren't writing it up last summer. It's a like a a signals company that had so many lives before AI was even invented. I think it's like a hundred-y old company. >> Wait, hold on. Give me some credit. When's the last time first you spoke about this this Venus? >> A year ago. >> Dude, that's all that's not wild. >> That's my point of And these are smids. >> There is information. There's information and price. A lot of it. >> So, Michael, how many publicly traded companies now in the United States? 3,500 3,800. Okay. >> So, when we're basically talking about five or 10 all the time. >> Yeah. >> Think about the others. This is where right this is like we're talking stories. That's how I grew up in this business. Stock market is a market of stocks is the greatest country in in the world. We got the greatest companies in the world right here. All these amazing stories that that people don't even know about. And so, that's where that's what I'm excited about still being bullish about the United States and bullish about the markets. And there's different things. But yeah, we have to we have to address what's happening in large cap land. But we also have to think about, you know, dividend growth investing and value investing and small cap investing because I do want to think differently and I want to be positioned where people are not. But you're not going to be different or contrarian to be an [ __ ] You can be a you can be contrarian if the analysis backs it up. So that's why if you take a look at these stories or these companies or these themes or the regions that they are, I don't think people think like that anymore because we're so focused on Nvidia. >> Yeah. >> All the time. Which which is in an 18% uh draw down from the tie. Thanks. >> So uh I'm my fun on the show today. >> No, it was terrible. I mean it's terrible. Every time I come here it's terrible. Fantastic. Thank you so much for the support you guys. >> How do advisers find you if they want to learn? >> Yeah. I want to sell you I want to sell your I want to sell your stuff now. So tell catch yourself up cuz we had you on as you launched the new company >> day three. It's amazing and it's been 8 months. You guys are launching things, announcing things. I'm so excited for you. Tell the audience if they want your research, your products, your asset management. How does it all work together? >> So what we do is is different than everybody else. Um we are a model provider >> to where the puck is going. Exactly. Oh, we know. Thank you. Thanks so much. It's like whopper gives me [ __ ] about humilous humble. Anyway, um so we provide a model. We we do not compete with our clients. Meaning we don't compete with XYZ brokerage firm. We provide XYZ brokerage firm or XYZ RAIA with our model on the focus portfolio >> and they trade it. >> And they trade it. >> They trade it themselves. You give them the buys and sells. Correct. And they enact it. >> Correct. And if they say >> it's a great business, >> I don't I don't agree with your two and a half percent position in Spotify. I'm not gonna buy great. >> So they can customize. >> They have ultimate discretion. All right. >> Okay. >> And so um we've got great partners in Canada where we have three North American ETFs and one mutual fund. Um and then we have three uh North American portfolios in Canada. Basic basically they're combined the US and Canada. In the US we run five separate SMAs. the US focus which is 46 stocks um to beat the S&P 500. We also have an ETF under that too, ticker symbol HIS and um we have a US large cap value. We have a US dividend growth uh US Smid and then an all cap which is the best of the 1500. So the best focused and the best Smid. So, it's mostly uh it's mostly models and then a couple of ETFs where people that are not in the models can >> one ETF in the US and three in Canada and we'll have more coming uh in the US as we continue to grow. We're very blessed and fortunate we have I think we're going to have we're going to be close to 500 million AUM. Um and then we've got you know the funny thing about running that in under a year. >> Yeah. But you know what the funny thing is? You always want you're talking to these people. I'm going to give you 100 million 200 mill. Okay. >> Yeah. No, they're not. >> Yeah. No, they're not. I mean, come on. That's why you wake up at three. >> You need three. You need a three-year track record. You know what? You know, I know. I know. I know. It's a long It's a long game. >> Chugga chugga chugga chuga. But we I've got an amazing team. >> But you have fans at brokerage firms and at RAAS all over Canada, all over the United States and they have been waiting. >> They've been waiting because >> for for the Bellski model. >> Yeah. Because I was in I was at [ __ ] for 13 years and I was in but I was a strategist and analyst in the United States for 23 years before I went to [ __ ] So they kind of kept me under tight um corners at at at Beimo. So we've been really excited to be out in the US market. >> Are you having fun? >> Yeah. >> Okay. >> It's f I mean it's it's >> you're build because you're building your own thing now. >> It's it's it's it's mine. And it's kind of like that line from Braveheart when the guy the the Irish guy goes, "Yeah, it's my island. It's mine." >> Yeah. Yeah. >> It's um it it's it's part exciting and excruciating. And you wake up at 2 o'clock in the morning. Am I going to make payroll? >> You don't have to tell me. Look at me. I mean, come on. Um, uh, when you were naming, when you were saying my bio, CIO, founder, CEO, like I'm chief bottle washer, too. You know, >> you don't know, you're everything, but not forever. >> Yeah, it's amazing. And I have a great team and we've got some great platform partners here in the US and Canada, and we're really starting to climb on um on the assets and performance is helping. So, we're we're rolling. >> I'm so proud of you. Thank you. So happy for you, >> ladies and gentlemen. Brian Bellski. Thank you guys so much for listening. Thank you for watching. Have an awesome weekend. We'll see you soon.