Transcription
All right, we're here. He's back. I see some concern 'cause we came on at 5:01. Some concern in the chat. Let's see. Georgie D says, "My wife gets mad at me when the show runs over." We're going to, we're going to stop at six on the dot. I swear. I swear to you. George Washington asks, "Where's JC?" "Not tonight. Not tonight." Mamba teacher Nixon 5. Yeah, I guess so. I guess so.
Uh, so many celebrities at the Garden last night. I saw Michael Bloomberg. Did you see somebody jumped into Bloomberg? Was it Jose Alvarado? I think it was Jose. Yeah. Yeah. He, he like ran into, ran him over in the stands, but he, and then I saw, I guess it looked like Michael Bloomberg's grandson was like, "Are you okay? Are you okay?" He was like, "Yeah, I'm fine." Um, who else? Eli Manning sitting next to Derek Jeter. Unbelievable. This is like unbelievable for New Yorkers. Even like the A-listers were relegated. Like Chris Rock wasn't in the front row. It's like, "Sorry, dude. Like, we have Jay-Z there."
Um, I drew up a play for the Knicks for game four. I'll share it here. Maybe they'll hear it and they'll use it. So, I want Male Bridges taking the ball up. Okay. Um, and then basically what I want is, um, Fat Joe to kick Tracy Morgan right in the crotch, making him vomit all over the sideline. He slips in it like a banana peel and cat cuts to the hoop.
What do you? You know what? I was about to cut you off. I'm glad I did it. Uh, that's. Yeah, let him, let him cook. I love it. I love it.
All right. Uh, the president was there last night and the mayor. The president sat in Jim Dolan's box. The mayor claims he had a $1,000 ticket to stand. I don't know how I feel. There was no $1,000 tickets. Yes. So, I know that. Not, not a one. I know that. I'm hearing in the chat, Josh's PRP is out of control. It is though. Low key. Dude, it really is. It really is. And you are PRPing like there's no tomorrow. I'm having a renaissance.
All right, guys. Welcome to uh, What are your thoughts? The world's greatest investing live stream. We do this every Tuesday at 5:00 p.m. for uh, first-time listeners. My name is Downtown Josh Brown. Here with my co-host, Michael Batnik, as always. Michael, say hi. What's up, guys?
All right, we have uh, a packed show tonight. Tons of stuff going on. But first, a word from our sponsor, Betterment Advisor Solutions.
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10 out of 10 read. Michael, why don't you take it away?
All right, we're going to start with Friday. Um, Friday was a deep shade of red, like really ugly. Um, and what happened was the biggest winners of the year, and we've been talking about it all year, the biggest winners are winning in a big league way. They got hit the hardest. And Sherwood Media has this beautiful chart illustrating this. So, what we're looking at, uh, is the year-to-date return, okay, versus Friday's return. And SanDisk, of course, is the winner of the year, up over 500% even after the decline. It got smacked. Um, all of the, all of the AI winners really, Dell, Western Dig, Micron, you name it. They got smacked. And you know what? It's okay. I think it's okay. Uh, it was, it was definitely a needed little slap on the wrist.
Could you put that back up? You know who it's not okay for? So, these little stocks that starts with a, What are these? A A O I Ax I Z. It's like a. What? What am I? AX TI. I'm sorry. It's, it's like an eye chart. Um, AER, the people that bought these things right at the top. That's what's not okay for. Cuz yeah, people that are like, "Wait, what do I own? What?" And we know, we know a lot of the, the buyers in these stocks, the primary reason they're buying them is 'cause they're going up. Sure. And that's the date, you know, that's that's part of that's part of the game. If that's the game that you're going to play, that's how that game sometimes, uh, comes to an end. What was interesting about the sell-off is that I, I did see despite there being a lot of deep dark red on the screen in the big names, the big winners, there was also a lot of green. So I asked Chart Kid, said, "Hey, this thinks something's funny going on. Why don't you throw up a scatter plot?" So he did, and sure enough, it, there was a huge outlier. So what we're looking at on this scatter plot is the one-day return on the Y-axis. Okay? And, uh, on the X-axis is the percentage of stocks advancing. And this follows a pretty, pretty tight pattern for the most part. Um, where the best of days, right? You're up 4%, basically every stock participates. You're down 5%, basically every stock is is red. Okay. On June 5th, the index was down 2.6%.
But we've really never seen anything like this because 48% of the index was actually positive. And what you saw on Friday, and what we're going to talk about today, or what happened today, is rotation. Money went to different areas, and that has been the story of not just the recent bull market, but of like the multi, the decade-long bull market has been the money going from place to place.
Right. And I think, uh, Sani was on TV today. He made this point of like, the torque of these rotations. Huge. Has never been stronger. Yeah. And I, so part of me feels like some of the selling in the big momentum year-to-date winners maybe is people getting ready to buy SpaceX in the aftermarket at the end of this week. So, but a lot of it has to be algorithmic. A lot of it has to be people who are up huge in these trades, up 100, 200%. Part of the risk management is, if this thing has a negative 5% day, I want, I want out of the position. And everyone running that same playbook at the same time, um, with software is what produces a moment like what you're describing. That and so it's the pot shops all in on the same trade, and the retail traders all in on the same trade, which produces an event like Friday. So, staples outperform tech, the biggest single-day spread since October 2000. Now I have more. Plus 9% versus XLK. I have more on this later in the show. Um, so basically tech was down 6%, staples were up three, something along those lines. Maybe it was six and a half, two and a half, but whatever. Um, look at this downtrend, man. Like this, this rubber band was stretched so far. Tech has been outperforming staples pretty consistently, literally since 2017, almost uninterrupted.
So I had, uh, Nick Kohas and Jessica Rae on the channel yesterday. A lot of you guys listening or watching now were able to catch that. And they did this thing where they looked at rolling 50-day returns of the XLK versus the S&P. And they said, what has gone on in the last 50 days? And remember, this is inclusive of the, the March, uh, Iran war sell-off. In the last 50 days was a six standard deviation event. I think tech outperformed the S&P by 29% over that. Here it is. Geez. Great job. Great job, John and Duncan. Um, look, I mean, look at the extreme of this extremity. Yeah. Or the extremity of this extreme because what ends up, what ends up happening is like, you know, it's too much at a certain point, but is that at four standard deviations or at five or at six? Oh, it was at six. That was where it was too much. And nobody knows when that moment's going to come, but it is going to come. And so I asked them, is Friday like really meaningful the way that sort of petered out? Like, is that, is that something that is going to be a blip like deepseek when we look back in three months, or will this have been like a meaningful moment? And Nick's comment was, of course, we can't know for sure.
What did he suspect? Well, he said, "I don't ignore reversals of six standard deviation moves." Okay. Okay. Fair. Um, take it up with him. No, no, no. Fair.
All right. So, I wanted to talk to you about this story, um, last week. So, this is now stale. It's May 27th, which is like two trading months ago, right? Eight years ago. Yeah, basically. But I, but it's important and I'm glad that I still have it on the screen. So, Robin Hood lets customers use AI to trade stocks and make credit card purchases. And this demolished chart off, please. This demolished Schwab, Raymond James, LPL. I asked you, whoa, why are these stocks? I looked up and they were down 11%. I said, what's happening? You sent me this.
Um, okay, the narratives turn so fast. Two weeks ago, when this was published, we were still in "AI is going to kill everything" mode. That's the market that we were in, right? Um, and then software had a really powerful bounce, like a really meaningful bounce. And it was like, "Oh, I guess like software is asterisk on that." Let me finish. And then I was like, "Well, well, maybe software isn't dead after all." And now on Friday, it was like, "Uh oh, the labor market is accelerating." Like, that's really weird. So now we should sell the stocks that we were loaded up on because the Fed is going to have to hike and maybe AI isn't killing the job market, so it's not as effective as it might be. And therefore, it's like, not the story is not the story is stretched. Let's sell them. The point is, we are spinning. There is a lot of indecision and indecisiveness. When you have the 9% down days like we saw a monster intraday reversal today, there is clearly so much, um, so much, there's a gigantic chasm between what people think is reality and what is reality. And we're, we're doing this every day. I asked Sean on Friday, um, you know, we write, we write the best stocks in the market column. I, I, so I'm looking at a blood red tape and I said, "Well, what's up?" Like, on our list. And he said, "Makes no sense because presumably the market's falling. They're worried about interest rates going up or not coming down. Real estate." Real estate. We wrote up, uh, uh, Simon Property Group and, um, Prologis. Both of them made new, uh, 52-week highs today and both broke out today. Um, we wrote those up this morning. And you know, to your point, the chasm, like people are looking at what's going on on the screen and then racing to come up with a narrative. And so the narrative on real estate is everybody's worried about AI disruption. Meanwhile, companies are hiring faster than ever. Therefore, more human bodies. Therefore, real estate should, uh, remain a good investment. Therefore, I buy, uh, Prologis, which is becoming a data center landlord after having been an e-commerce landlord four years ago during the pandemic, and Simon, which is a proxy for people shopping. I don't know. They both broke, they both broke the [ __ ] out. What do you want me to? New York commercial real estate office space? Well, that's so, that one I didn't even look at. I'm, I'm just talking about the ones that, that are on our list. So, um, but I, I, I think this like ad hoc, "Well, what, what's going down? Let me come up for the story with the story for why. And then what's going up? Let me come up with that story. Okay, great. But tomorrow again, we might be in a new rotation and you could take that story and you can line a bird cage with it because it's not going to be worth anything."
Yeah. And so I think just respecting the rotations, understanding that you're going to get caught up in a few of them. It doesn't necessitate, taking action or reacting. Uh, I think it's important in this market and it's hard for people to do.
Dude, that is such a key point 'cause I feel the impulse myself in a big way and everybody does. We're all human beings. But when you see this type of thing, the, the tendency to, "All right, I got to get rid of this and then buy that because this isn't working today." It is, that is a gravitational force.
Um, let's do some other stuff on what got killed Friday and what the follow-through was, uh, on today's reversal. So, this, the scatter plot is great. Sean made this. We're looking at, and this is, he made this at like 2:30, so a little bit dated because it was, there was a big bounce, but here we go. Um, so there was, there was a very tight correlation between what got whacked off on Friday and today. Yeah. Look at this. Yeah, it's the same stocks. It's the same stocks. It's D, for people that are listening, it's AMD, Dell, Sienna here. It's the, it's the AI, uh, ancillary trades on AI capex. It's not, we're not talking about hyperscalers. We're talking about the companies that sell them stuff. And, uh, yeah, that's that's the scene of the crime.
Um, VIX 20 and a half today at its worst. No, no, 23. It was not 23. Was 23. Okay. So, so what's the difference? It reversed, it reversed it, uh, by 3:00 this afternoon, as it always does. Um, I have one chart for the bears. Uh, no, I have two. All right. The ratio of S&P 500 momentum versus low vol stocks is nearing the tech bubble peaks. This is the unwind. And this is a real good one. This is a real good one. This is, this is meaty, Josh.
So Berkshire, I don't know if you realize this, but the extent of the underperformance over the past year is something like we haven't seen since the top in 2000. I want this stock. Over the past year, Berkshire has underperformed the S&P by 26%. But I'll do you one better. At, so this, this bounce, by the way, um, in April, so in April, the spread was 48 freaking percent, dude. I didn't realize it was that big. It was 48% in April. And this just goes to obviously what everybody wants, AI, and what's powering it, and what nobody wants, which is an insurance conglomerate.
Um, can I ask you a question from the chat? Please. Um, E. Rudolph says, "One data point that I have not heard anyone address is that Thursday of last week was the first day of the end of the PDT rule, which has to change the dynamics."
I don't even know what that is. Okay. P, the pattern day trader rule was officially eliminated. This is such a Trump era thing. So when, when I was a branch manager at a broker dealer, we had a pattern day trader, uh, list. So we had certain accounts where on a regular basis, they were repeatedly placing trades, unwinding those trades in the same day. Um, and if they weren't coded correctly or whatever, they reached some sort of an extreme. These people got marked as pattern day traders, which meant there was an additional hurdle to get their trades executed. Somebody had to sign off on it. I mean, this is the, this is 20 years ago, but, um, they eliminated the pattern day trading rule. Um, so permanently removing the requirement to maintain $25,000 in a margin account. That's now been replaced by a real-time risk-based in, I'm reading this intraday margin system with the, the upshot traders now face fewer barriers to intraday trading, though specific brokerage implementation dates may vary. So, as a FINRA rule that was in place until June of 2026, um, any customer who executed four or more day trades within five rolling business days using margin were heavily restricted unless they maintain $25,000 account balance. So, of course, in the modern era, we got to get rid of that. Anything that stops gambling is obviously, uh, something that we have to take care of. So, I don't know. It's a good question. Do you think, uh, there's enough pattern day traders who had their, none of, that their activity released, and that that changed the way things were acting? No. If the restriction is a $25,000 balance and that's been relaxed, that's that, that's not moving billions and billions of dollars. 10 million customers of brokerage firms. I, I don't know. Perhaps I, I would reject that, but, um, I don't know.
Uh, okay. I'm good. I'm good to move on. I, I have, uh, more stuff in the dock later to revisit this topic. You want to do the Apple stuff?
Yeah. So, Apple, let me get a, let me get a quote on where Apple closed. Was pretty ugly today. Uh, bear with me. It was down 3.6%. Bear with me. The pattern day trader rule is holding my quotes back. I'm down almost. You have male pattern day trader. You're a male pattern. Male pattern day. Um, it didn't really bounce with everything else at the close. Uh, yeah, down 4%. It stayed there. Um, anyway, I think there was a lot of enthusiasm going into this announcement because the stock price was, uh, making record highs. It got up to, I want to say 315, 320ish. Uh, what was that? What was that level? 315. Yep. Yep. Yep. All right. 290 in an instant. And so they, they had their WWDC conference, which is always very closely watched. This year in particular, everybody knew that they were going to release, um, their re-release their AI strategy and a lot of actual products that they plan to deliver this year. And I guess the only way to put it is the street was underwhelmed and investors were underwhelmed, or at least underwhelmed relative to the rally in the stock going into it.
Um, I did want to play a, a clip from the presentation itself. John. Let's take a closer look, starting with how Siri is a much more capable assistant. I want to get right into it and show you a few things that you can now do with Siri in your day-to-day. Let's start with something simple but super useful. Say you heard about a local concert. When's that Suki Waterhouse show in SF? Siri can draw on current world knowledge to ground its answers to your questions. Okay, looks like the concert is on July 26th. How can I get tickets? Okay, you have to enter a lottery to get the tickets. Remind me to sign up when the lottery opens. Okay, got a reminder. Now, let's hear one of her new singles.
I don't know. We can't play that. All right. Um, what he's, what, so if you're listening, not watching, what's happening on the screen of the phone as he talks to it is responding to his commands or his questions in almost real-time. I did notice he's talking while the thing is like buffering, and maybe that was by design so there wouldn't be that big of a gap between the, the command or the prompt and the response. Um, but it is interoperable. Uh, Siri is working with multiple apps as he's asking it to do things. It's pulling up ticket information. It's pulling up dates. It's instructing the calendar to set reminders. And then it's going right into playing a song by. Who is that? I don't know that. Suki Waterhouse. I thought I was was hip. I thought I was with it. Apparently I'm not. Um, but the point is, it's not multiple conversations with Siri. It's all happening inside of one interaction. This is the beginning of agentic Siri. This is the thing that they should have done 10 years ago, quite frankly. I didn't know that it needed AI, but like historically that would have been five different "Hey Siri"s to get to. Right. And so now it's all happening within one conversation and Siri remembers what was the step previous. You don't have to reiterate everything that you. Okay. So, I, I don't know that that should blow anyone's doors off, obviously, because it didn't. But I do think that people will get accustomed to using it and it will prevent people from going to a third-party chatbot for a lot of things once it just becomes like the obvious, uh, no fuss way to get information or talk to your apps and tell your apps to do things. What are your thoughts? This is not, I'm stealing a thought from Ben Thompson. The next level of this is, uh, instead of "Set a reminder on my calendar," "Please enter the lottery for me." Go the final distance. That's right.
So Siri is such a piece of garbage. Um, John, throw up my conversation that I had with the boys. It's a little bit. Here we go. All right. So I said, I know I'm, I, this is Siri. Okay. I used, I used talk to text. I know I'm beating the drum to death, but Halfman, spelled H-A-F-M-A-N. That's what it heard. But H-man was so bleeply good. How bad is Apple? How the [ __ ] do you hear? And I'm literally talking. Cursing. You're cursing at Siri. I'm talking. What kind of animal are you? Listen, let me finish. I said, "How do you hear Half space man and write Halfman spelled Halfman again? And why does man have two N's, spelled N's? Lol." I said N, not end. This thing is such a giant turd. It just doesn't work at all.
Can I stop you? Consistently. What they launched last night is not available till September. So you re, you're using 2015 technology. No, I understand, dude. They say that they're, but 2015, 2015. Come on. Yeah, but they say all of those little translation related things are going to be fixed. That's heinous. Um, no, we, everyone agrees. Nobody would say otherwise, but what they released is not even available yet. So you're, that's old Siri.
Let me tell you one other idea. Robin said, "Hey, what's Ryan's number?" This happens all the time where you ask a friend for another friend's contact. Why do I then have to go into my contact list, hit the number, hit the info, hit the share, hit the create? Why can't Apple's Siri intelligence respond? These are your three app. These are the three Ryans in your contact. Which one would you like to send to Robin? I completely agree. And it's because they haven't, they haven't done it yet. Like, come on, man.
Um, here are some reactions. Uh, let's see. WWDC 2026 is Apple's AI credibility test. Apple does not need to win AI by having the biggest model or the loudest demo. It needs to make AI trusted, useful, and invisible across the ecosystem. So, they did an entire panel session during the presentation with multiple Apple people specifically diving into privacy and the fact that none of this stuff was going to take place in a, in a cloud somewhere. This is like on-device. This is very important. This is like on-device stuff. So that if you're talking about personal information with Siri, it's not like there's some data center in Arizona that's just like randomly running that information through it. And that's what I think makes this so hard. Apple has always been the king of privacy and they're trying to not, um, innovate so fast that they break that trust. I think it's a huge part of the Apple story and I think it explains a lot of the delay. Um, they apparently are willing to move faster though than they used to because they fired their head of AI and they brought in this guy Mike Rockwell. And Mike Rockwell is the guy that built the Vision Pro, which was a commercial failure, but within Apple, they deem it to be a massive technological success. Like it was a very difficult project and he delivered it. He had been lobbying to take over AI internally for a long time and they finally handed it to him and, um, that's a really big development. The other thing, uh, I wanted to, I wanted to share this with you. Wearables are going to be a very big deal for Apple going forward. Um, obviously AirPods were a smash hit. The watch became a hit, although it wasn't at first. People forget this. Um, here, app, uh, Apple is accelerating development of three new wearable devices. Um, the company's ramping up work on smart glasses, a pendant that could be pinned to a shirt or worn as a necklace, and AirPods with expanded AI capabilities. All three are being built around the Siri digital assistant, which will rely on visual context. Um, the glasses. So Meta works with Ray-Ban. Google works with Warby Parker. Apple, after talking with third-party companies, has made the decision to manufacture the glasses themselves in-house. I think that's meaningful. Um, the early prototypes connect via a cable to a standalone battery pack and an iPhone, but the newer versions have components embedded right into the frame. They'll use high-end materials, acrylic elements to give the glasses a premium feel. And basically, the glasses will have two camera lenses, one for high-resolution imagery and another dedicated to computer vision. And they learned that from Vision Pro. So basically they want to be able to give the device environmental context, help people interpret their surroundings, measure distance between objects, and they want people to wear the glasses all day as an AI companion. The glasses are going to rely on the phone for processing. So a lot of the heavy lifting is still going to happen on the phone, but the glasses will keep you from having to pull your phone out of your pocket. They will tell you things on board your face. This is really the start of augmented reality and walking down the street and having AI talk to you and tell you what's going on, or vice versa.
Um, let me ask you this question. Would you wear the glasses? Not only would I wear the glasses, I will wear the glasses. And I think the glasses are going to be a massive hit. I think it's going to be a new. I do. Okay. I'm all in. So.
Let's talk. Let's talk pendant real quick. Wait, hold on. Hold on. Here's my one thing on the glasses. So you go to a sporting event. I was on the Knicks game last night, or you're going, you're on a vac, wherever you are. So if I can wear the glasses at the Knicks game and somehow in the future, there is a way for for this, um, machine to catalog and pull the best clips of the game, the best highlights and deliver it to me for future use or whatever. It's just like, I think all of that is coming and I think it's going to be really freaking cool.
Here are the problematic elements. Again, back to Apple's focus historically on trust. Somebody wearing the glasses says, "That girl is super hot." "Hey, Siri, take a snapshot. Save that for me." Yeah, it's an issue. I mean, there's a lot of issues. I don't know how to. I have no, I have no, obviously I haven't spent the. And I don't even want to go further than that, like pedophile [ __ ]. Like, I don't even want to. Okay. The pendant. So, OpenAI is working on this and others will too. This is something either pinned to your shirt or worn on a chain with a hole through the device so that it could be supported like an amulet or like a medallion. Um, what is that going to do? It's going to have a camera on it. So you're not wearing glasses, but you've got this thing pinned to your chest. Okay. And it's looking at everything that's in front of you, and it's listening. And possibly you're tapping it like Star Trek and giving it instructions that it then sends to apps on your phone. Would you rather wear the pin or the glasses? I think, uh, well, no, nothing. It's the size of an air. It's the size of an AirTag. I would say the glasses, I think, but we'll see. Okay. I think I'm a necklace guy in this situation 'cause I already wear glasses, you know, 18 hours a day I have sunglasses on. Um, listen, it's, it's all, it's all exciting. I don't want to be a hater. Like what they showed in the video, I don't really care about the stock price reaction. Well, they didn't show any of these devices. Even, even the beginning of the "Hey Siri, what's going on? Put on my calendar." Like, yeah, that's cool. It's useful. I will certainly adopt that. I agree with you. "Hey Siri, when is the." Pre-sale? Let's, let's use something I actually want to go to. You know, Rush is on tour again. Okay. They're going to play four shows in MSG. They have a new drummer. She's an absolute animal. Um, there are clips of her all over social media 'cause they played their first show last night. Um, will Paul Rod, Paul be in the audience? I'm, I would assume this is going to be a very big show. Okay. "Hey Siri, when are the Rush dates at MSG?" They give you the dates. Okay, great. On which of those days am I planning to be in Manhattan? You'll be in Manhattan for show two. Buy me tickets. I need four. I need hundred section. Buy four tickets. Text me Michael Batnik and Justin Frankle and and Adam and let them know we're going. Yeah. Like that's the right. Yeah. Okay. We're not there. But so then we don't have it until we have it. I don't think the stock price is going to rally on this [ __ ].
Well, here's the bottom line. Are, so the real, the only thing that matters. Are they going to sell more devices as a result of this? 100% agree. And I think they will. I don't know what moves the needle. Everyone's already there. But it's cool, man. It's, it's. When you see your friend interacting with his Siri and getting [ __ ] done. Yeah. I got to have it. Yeah. Or somebody you like in a meeting with and you're like, "Whoa, what the hell is going on here?" Oh, that's just my agentic Siri, [ __ ]. That's cool. That's cool. You're going to want it. Okay.
Um, all right. More on, more on the question. I want to talk about this. I've said this before and it's really true, and you mentioned this earlier when I said it's no big deal, where you're like, "Well, it is a big deal if you bought at the top." True. A correction only feels healthy when it's other people's stocks, right? So, I, I understand that if, if you bought the Nasty ETF two weeks ago when we spoke about it, whatever, and now you're down 20%. Yeah. It doesn't feel so healthy. It actually feels pretty, pretty nauseating. I get it. Um, so let's go through some of the [ __ ] that's happened. So, the quantum computing names, um, fell 13% in five sessions. Look at the one that these names are on. Okay. Just straight up. There's a quantum computing ETF. Of course, there is. Well, no, there's multiple ones. This was actually QTM. So, shout out to Wisdom Tree. This was the Defiance one had like AMD and other stuff in there. This is the real [ __ ]. Um, the space ETFs fell 20%. Um, the DGEN Dow, look at, look at this. Like, yeah, rolled over pretty aggressively. So, here, so here's the deal. I think corrections like this are healthy for a million reasons, but even just for, like, we get lulled into into complacency when you've had such a long bull market, and I don't mean like the last like 10 years. I just mean like, like since the March lows, right? We, we have like a false sense of security and sometimes we, um, as human beings, we fly too close to the sun and we need to be reminded, "Oh [ __ ], like I was overexposed. Whoops. Like I did it again." It, it happens. And, um, I was writing this morning about the correction. The VIX was at 22. It closed at 19. RSP was 1.5% the equate of off its all-time high. Spoiler alert, it's 7.74 basis points of its all-time high. And to me, Nothing. There's two things happening here. One, there is a slap in the wrist of, um, a very crowded trade. Throw up this chart from Todd Zone. Cumulative sector ETF flow since the March 30th low. It's only tech. Literally, it's only tech. Tech has taken in $30 billion and everything else has had outflows. It's, it's, it's the whole thing. So I have two more charts and then I will. That is a killer. That is a killer chart. So every dollar since March 30th that's come into the market has come into a tech ETF on a net basis. All of it. Holy [ __ ].
Um, all right. The five, I'm going to skip one chart, John, and then we'll get back to this one. The 5-day outperformance of the S&P 500 versus S&P 500 XAI is the biggest on record. Zero Hedge tweeted this. So, just a, a massive, massive unwind. We haven't seen anything like this in the last five years. And where did the money go? It went into, oh, healthcare, for example. Healthcare's best five-day relative rally since 200 freaking 9. So, the money is rotating. Um, but if I were to throw another bone to the, to the bears of, "Well, are we going to chart? Are we going to look back and say that Friday was actually a meaningful reversal day?" Maybe not tomorrow, but like in the grand scheme of things, I would point to this chart. Record outperformance of Loval versus the NASDAQ 100. So here's what we're looking at if you're listening. The bottom pain is what matters in these charts. Well, all right. Well, they both matter. So on Friday, uh, on, uh, on Friday, the Loval Index outperformed the NASDAQ 100 by 6%. We haven't seen that level of outperformance since the dot bubble imploded. And outside of that, there's really only been three other dots. There was a random one in 1987. Well, not random. Um, there was one in the GFC. But all of the other red dots occur in the run-up and the unwind of the dot bubble. And, um, I'm not going to just sweep that under the rug. I'm not saying that this is the top, dun dun duh, but, you know, it's, it's not nothing.
You know what the animal spirits do though in this market? So they rotate into healthcare and they start buying biotechs. Like that's not risk-off. So the low V thing is risk. I mean, that's obviously meaningful, but I, so I'm trying not to make too much of Friday because I just know the mentality of the modern investor is a gambler and they'll just, whatever. All right. What, what's going up? I'll just buy that. Like they'll, they'll do that [ __ ] and it, the game goes on, the rules change, or, or it's a new game is the better way to put it. But the casino never closes.
That's right. It's well said. We need evidence that there's a top. And by evidence, I don't mean one down day. I mean a series, a series of lower highs. And obviously, we're not there yet. We might be there in four weeks. I have no idea. But you have to give the bulls the benefit of the doubt. And the thing that I keep coming back to as like my north star for where we are in this market, and I understand that Micron is up 800%. I get all that. The AI story is in its infancy. As hard as that is to believe, which is a great segue to the OpenAI stuff. The S1. It's just too much wealth has been and is about to be created in stocks. Um, for us to say a one-day crash in memory stocks and AI names is like the end of it. The, the end of this. I'd be surprised. Yeah. I just, I, I can't get there mentally. I mean, you know, could be wrong. Just somebody asked me my opinion, like, "Was that it?" It was a blow-off top. It was a blow-off top in a hundred stocks. But the, the casino is still open.
Um, speaking of casino, OpenAI filed confidentially, which is interesting in and of itself. It's S1 with the SEC around May 22nd, and we all just found that out. The filing was confirmed publicly by the company on June 8th. Um, so here's what we know so far, and then I want to get your reaction. Obviously, Goldman, Morgan Stanley, JP Morgan are co-running the deal. Um, September 2026 is the target window. They really want to beat Anthropic to the door, which I understand, um, given the size of these things, and, you know, neither of them wants to be third after SpaceX, which is this week, right? Okay. Um, analysts are expecting a trillion. The current private valuation, a trillion would be 4x Alibaba's 2014 listing, which at that time was the largest IPO ever. Um, the current valuation is $852 billion. Um, Anthropic filed for their IPO on June 1st, and the valuation talk was $965 billion. So, you can bet that OpenAI wants the top $965 billion. That's where the trillion plus comes from. The revenue growth here, we know is incredible. $2 billion in annualized revenue at the end of 2023. $25 billion as of February. That's a 12% increase, 12 times, excuse me, increase in two years. The losses are growing just as fast. The company lost $1.22 for every dollar that they earned in the quarter. 2026 projected gap losses of $26 billion, cash burn $25 billion for the year. Gross margins 33% in 2025. That is not, uh, that is not what investors are typically putting multiples on stocks like this for. Um, the good news is the Elon Musk lawsuit is out of the way. The filing happened two days after the jury dismissed Elon's lawsuit where he accused them of stealing a charity and turning it into a for-profit company. He lost. It came a week after the Anthropic filing. So this is a, this is a race. Um, one other thing that people are noting is that, um, the Trump administration is extremely, uh, IPO friendly. They want this to happen. They view this as a wealth creation event and another sign that, you know, the US is the hottest country in the world, blah, blah, blah. Um, so very, very little doubt about whether or not if they want to do it, they'll be able to do it. I did make a couple of, uh, charts here. Just put this first one up. I just want to show you, I, um, OpenAI versus Anthropic just on those metrics that I rattled off. We won't go through them again. But the key one that I want you to look at is that 95% of ChatGPT users, of which there are 900 million weekly. Man. Wow. Are are free. Anthropic, 80% of their users are enterprise, including eight of the top companies, of the top 10 companies in the world. They have a thousand companies paying them more than a million dollars a year. These are very different businesses. Mhm.
Um, I told you OpenAI is losing a $1.22 for every dollar earned. That is not the case at, uh, at Anthropic. Next chart. This is the revenue run rate for both. And you can see a clear acceleration of Anthropic versus OpenAI since the start of this year. Like the curve just, the curve just went plaid. Yeah. Um, you know what's weird about about how Anthropic accounts for their revenue? Um, it's not taking anything away from what they're doing because they, they legitimately did blow past OpenAI, but, um, Anthropic, so I, I asked Claude how they book it. Um, Anthropic books that channel revenue on a gross basis. So, it's, it's sold through cloud marketplaces. It counts the total end customer spend as its revenue. Yeah. And then it records what it pays to the cloud platform as an expense, which is a little bit weird, but it's kosher. Like that's, you're allowed to do it that way. OpenAI does it the other way. They only account for the revenue that they're actually getting and not distributing. So the gap is not quite that wide. Um, but look where it was at the beginning of the year. It was very wide, and OpenAI just whoosh past them.
Which one is more traditional for an enterprise software company? I don't know. I, I don't know. I would, I'm making this up. I would guess that OpenAI is the more conservative way to report. I don't know why you would do it the other way, but that's how that's what Anthropic chose to do.
Um, they were able to raise $60 billion with their eyes closed last week. Nobody even heard a word about it. They could raise whatever it got done. The series, they raised a Series H and then announced the S1 the next day. The first quarter operating profit in Anthropic, um, happened in Q2 of this year. $559 million was what was reported. Um, you, you can't find anything, you can't find anything like that. They were, they were at an $87 million run rate two years earlier. Um, so, so they have a thousand customers spending a million dollars annually. Like, name a large corporation, they're probably a customer. Claude Code, they say crossed a billion in annualized revenue within six months of launch. They're talking about gross margins of 40%. Two years ago, it was negative 94%. So, like, they're already at a crazy level of profitability based on their own numbers. Um, we don't know if that will be sustainable because they also spend a lot of money. Um, but having businesses as customers versus individuals, I think is a, a very big difference. I just think it's a, it's a cleaner, easier story for institutional investors. Although, you know, that doesn't seem to be stopping any money being ra. OpenAI raised $120 billion this year already on top of money they raised last year, the year before, the year before that. So, it's, I mean, it's, we're talking about three, including SpaceX, of the biggest companies ever to go public. They might be one, two, and three by the time this is over. And what an incredible moment, uh, for the capital markets if these things actually happen. And, and nobody gets, nobody gets killed.
It's really exciting. I think it's pretty crazy. I was talk, I was talking, uh, with Ben about this today. If there were to be a quote that we would look back on in five or 10 years and be embarrassed, like, "You dumb asses, you really didn't see the top coming," it would be this one. Um, I believe Morgan Stanley said that SpaceX can reach the numbers, so stupid I forget what. It doesn't matter what it was, like three trillion in revenue by 2040. 30 trillion in revenue. Did you see that quote? Yeah. Literally, like trill, three trillion in revenue. Sure. Sure. Why not?
Um, okay. Goldman Sachs calls you. We are the lead underwriter in SpaceX, OpenAI, and Anthropic. Pick one. We'll, we'll hand you a thousand shares. How long do I have to hold it for? Or I shouldn't say the amount of shares. We'll give you.
$100,000 worth of any of these three. The lockup period is one year and then you can sell all of it or you can keep it forever. Which of those three do you want?
>> Uh, well, definitely not OpenAI.
>> Definitely not. Are you sure?
>> Yes, I am sure.
>> So, I'm not sure. I'm not sure. I'm not sure that that will be the right answer in a year from now.
>> No, obviously.
>> But I'm sure that's my answer today. No hesitation.
>> All right, chat. We want to hear what you guys think. Nicole's gonna Nicole's gonna keep her eye out. Um, and at the end of the show, we'll I mean, we're I don't know if we're doing a poll.
>> So, I I would I would I would buy Claw today if I had to if I had to choose, but I do think that SpaceX can be it I think it can be a 10 trillion dollar company as as cracky as that sounds.
>> Okay. So, all right. So, I gave you a one-year holding period. If you had to hold for 10 years, does SpaceX become obvious?
>> I think so.
>> Anyone is anyone going to catch them in 10 years? I say no.
>> I think so. only because what they're doing there. I don't know who their competitor is, right? Like there's Open AI and Anthropic and XAI and Gro and and there's other stuff like I don't know what the mode is there compared to what SpaceX has already built. They're so far ahead of the competition.
>> So, all right. But so then let me so then let me tease this out. If you if that's your take like if it's a 10-year hold, I'll take SpaceX IPO, which I think I agree with, just buy it in the aftermarket, then you're holding it for 10 years anyway.
>> Yeah.
>> So, that's why I think the IPO is going to work because I think that's the conclusion a lot of people will reach is this might be the dumbest of dumbass prices that I'm about to pay, but whatever. I'm going to hold it for 10 years anyway. If enough people have that mentality, and I think they will, I think there'll be support for this.
>> Well, guess what? I could end up looking like an idiot on Friday, but that's what I think.
>> They've engineered the stock to go up. I don't know if it's going to work, but they are doing everything they can to be thoughtful about the amount of supply that is being unlocked. And I don't know, and lastly, we could move off this. I don't know that the the weird unlock that they're doing is better than the one is worse than the 180-day cliff where it's just like that seems very strange, too. I actually kind of think that what they're doing is
>> I like this better.
>> I like this better. I think it's I think it's a worthy experiment.
>> I think this is So, we just talked about this with the last big IPO, Cerebrus. That was the test run and it's too early to know anything because nobody's been unlocked, but that was the first time they did a five-week unlock. Now, when you do a direct listing, which there were some technology companies in the last few years that did a direct listing,
>> Spotify,
>> I think Spotify is a big one. Um I a bunch of software companies did this because they had already raised enough money
>> in the private market that they didn't need to sell new shares. What they needed was the liquidity of the market. So what they did was they just listed.
>> No lockup in that case. So they were free and clear to sell day one. They had to because there were no shares being made available to anybody else. So that is the difference here. This is obviously not a direct listing. This is a gigantic $75 billion share sale. In the case of SpaceX, um we one other thing I did with Nick and Jessica, they took the average IPO return from 1997, 1999, and 2025, modern era. 2025 is like 29%. 1999 was like 70%.
>> What does that mean? If you
>> They overlaid it on the price that SpaceX is going to go public, which is $135 a share. They said, "Here's how you're going to know if it's 1999. Does this thing open at a close at a 70% premium on the first day?"
>> I really hope
>> you're then you're in a bubble.
>> I really
>> then you're in 1999,
>> right? If it's closer to that 29% average of 2025, then we're still in that environment. I thought that was interesting.
>> I I agree, but this is important for the listeners. the amount of stock that was listed for these companies in 1999 versus the amount that's that SpaceX is is listing today or the amount of it's 3% of the float. Like it's it's a tiny amount. So it they're trying they're trying to get it to pop. So it's not apples to apples. All right, um I want to make the case for for something a couple of weeks ago. We were talk you made you made the very astute observation that look to consumer discretionary stocks as a read on the consumer.
>> that was a great conversation. there's there's better ways to do it because it it can get really sloppy really fast. So you could look at the dollar stores or whatever and so like right now I think it's invoked to look at the restaurants and it's like holy [ __ ] how bad is the consumer? So this chart from consensus media shows um the the same store sales growth for all of the all of the names, right? And it's it's all over the place like um but there's been a lot of like dark red
>> public these are public restaurants.
>> Yeah. So, Chipotle, Pizza Hut, IHOP, Portillos, like whatever all them, Popeye's. And if you look at the all the way on the right hand in I mean there's just a lot of stress here. But the point is this. Forget about even where we are today. Look how look how rapidly this is changing. Is this a read on the consumer? I don't know. Chart, guess what? There's a lot of inputs that go into a restaurant. There's labor. There's inflation. There's inputs. There's a consumer. There's prefaces. There's location. There's valuations. It's such a it's such an idiosyncratic story that to look at the restaurants and conclude something about the consumer, I just think it's bad. It's just not a great idea. Same thing same thing with the dollar stores. It could it can mean anything.
>> So I think that sometimes it's just better to look at the data. So for example, look at this chart from uh from from Goldman Sachs. We're looking at alternative measures of nominal consu consumer spending growth. It's right here. You've got retail control. You got sp you've got Costco. you have just just look at the spending data is a much more effective input. And finally, I would conclude that if you're looking at the restaurants or if you're looking at the dollar store, shut off please, or if you're looking at Target or Walmart or Costco, at least today, like I'm not saying in general, I'm saying right now you might be looking at the wrong thing because what I'm looking at to determine the health of the consumer, at least the health of the consumer that is powering the bull market is hotels. Why? There's not 100 million hotels with but there's a few hotels. There's two that are in the S&P. It's Marriott and it's which one is bigger?
>> Uh Hilton is public.
>> No, it's and and Hyatt I believe is is in the Russo 1000. Okay. Look at these charts. Tell me about the state of the consumer. Is the consumer spending money? Is the consumer that matters to the stock market spending money?
>> The answer is yes.
>> Right. Well, so this is the upwardly mobile top 50% of the distribution. This is that customer. People in the bottom 50% are not very often booking hotels. Certainly certainly in the bottom 20% they're not going on vacations like that. So this that is really a read on what I refer to as stock market Americans.
>> Yes.
>> Stock market Americans have not had a postcoid travel hangover. They just kept going like like there's no tomorrow. And everywhere you go, I I mean I just stayed at the craziest hotel I've ever been to in my life. Uh so I I stayed at the almond giri 36 uh guest rooms on the whole property. They were all there like the no there is no hotel there is no hotel chain and there is no specific property that's in a desirable location that is seeing anything less than 92% occupancy or whatever the the latest numbers are. And that's a great point. I'd way rather look at that and take the temperature of the consumer that the stock market cares about, aka the stock market American, versus look at a chart of uh Shake Shack, Wendy's, right?
>> Uh McDonald's tell you [ __ ] Shake Shack blew up. It's in a 60% draw down because they guided lower based on napkin costs, paper costs, and beef costs. that has that tells you zero about the state of the consumer. That tells you they're not handling their uh their their goods inflation uh very well.
>> It also tells you that GLP1s are a real real thing. They're having
>> that's a whole other layer.
>> They're having an impact. So, all you have a mech for me?
>> I do. Put it up. Look at this piece of [ __ ]
>> Okay.
>> What is it?
>> Uh Bitcoin.
>> How did you know? because of my enthusiasm for presenting it to you. I I look at charts all day long.
>> I own this and I still want it to go to zero. Um I actually I actually think we could be seeing a false breakdown here and we might get a rip higher because I haven't seen people this despondent over Bitcoin since the last time it was in a 50% draw down.
>> It's black, dude. But but now it's happening in the context of rising asset prices. It's really bad.
>> Chart back on. Um, this is the SpaceX IPO. Talk me out of it.
>> Uh, I don't know. You're You're big on this. I'm just always skeptical. I don't know. You could be right. I can't I can't I can't prove you're wrong.
>> I'm probably wrong because gold also looks pretty bad and silver and a lot of the things that people were into all at the same time or all seem to be like losing favor. And I, you know, I wish I could tell you there was like some fundamental thing that I knew about, but Bitcoin and a 50% draw down with the NASDAQ at all time. Remember people used to say, "Oh, it's just one trade and Bitcoin is tech and Bitcoin trades with software and B." Well, software bounced hard, bro.
>> Like cyber security software bounced, Oracle bounced. This went lower.
>> Yeah, bets. I do think a lot of the gamblers in this [ __ ] um are people that want to gamble on these IPOs. I do think that there is something to that, but I don't think that could explain um a an a$ two trillion dollar asset class getting cut in half. I don't I The other thing I read was that all these scams like Trump crypto stuff where the Trump fans like got cleaned out like there's just been negative sentiment on digital currencies and digital assets in general uh this year.
>> Sailor selling sailor selling
>> sailor like Micro Strategy blew people up. I just
>> it's it's another crypto winter uh in the in the middle of summer.
>> It's cold.
>> So
>> it's cold out there.
>> It's cold out there. All right, guys. Thank you so much for watching. Thank you for listening. Um I want to give a shout out to all the people that join us in the live chat on YouTube. We appreciate you. You help us make the show. And uh we we look forward to seeing you next week. Tomorrow is Wednesday. All new animal spirits coming at you. Michael and Ben, my personal favorite podcast. We'll also do Ask the Compound this week and we'll finish the week with an all new edition of The Compound and Friends. And yes, I'm coming back. I do want to see some applause in the chat for the episode Michael hosted solo last week with Scanda and Neil Dada. I thought that was awesome. I could have I could have listened to it twice. They're great. You were great. Great topic. Anyone curious about the state of the US economy. If you missed the compound on Friends on Friday, catch up before this week. It was an amazing show. All right, that's it from us. We'll talk to you soon. Thanks again.