Don't Try to Beat This Market — Here's What to Do Instead

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We're discussing the market's reaction to the 10 US ceasefire and we're also looking in an update on Big Tech and also the Halo stocks with the man who actually invented the turn to Halo. This has been all the rage on Wall Street recently. It is the new investment trade, the new investment thesis in the world of AI and the guy

who created it is here. He's in the building, Josh Brown, Josh. Thank you for joining us. I am not in the building. You're not in the building.

I'm in the height we can see in coral gables. Coral gables. That's fine. You're on spring break too. Sort of, but I like to work as much as possible when I'm on vacation.

This is me vacationing on a podcast. Is this really work for you? I mean, you love this now. You love joining this podcast. I love you.

I love you. That's the truth. I got to tell you, I say no to, I don't know, a hundred things a month, but anytime, you guys need me, Scott, Prophecy, podcast, Ed, I'm just, I'm in. I love you guys.

We always need you and we really appreciate it.

You and I had a lovely dinner the other week as well. We had, what do we have? We had some ribeye. I think we had the whole menu. We had the entire menu, very on-brand.

It was a very good time. We're very glad to have you on the show, Josh, and we want to get right into it because we know that you have some jet skis to attend to, probably, maybe you're doing some I have things to do people to say. So, the jet skis can wait for it.

All right, well let's start with our first story here. Our last week's development in Iran left investors trying to make sense of a rapidly shifting situation.

First, President Trump threatened to wipe out the country.

Then came news of a ceasefire, which was supposed to include reopening the straight of Hormuz. The markets rallied in response, but within 24 hours, the straight was still jammed and confusion emerged over the scope of the deal, specifically whether it applied to Lebanon, where Israel had continued to strike as below.

By the following day, stocks were retreating and oil was climbing again, so the details remain unclear, and the situation is still fluid. One thing is clear, Trump has escalated dramatically again. And then he is again stepped back from the brink. So all of this raises a key question for investors, how do you navigate an environment

like this? Josh, stocks rose, people thought, okay, maybe the straight's open. Now, maybe we have a deal, maybe we have a ceasefire, wasn't totally clear.

“What do you make of how the markets reacted, what do you make of the situation in Iran?”

What are we supposed to do about it as investors? So paradoxically, you think about a professional hedge fund manager, someone who, as a

macro issues.

“I'm going to be on top of currency movements, commodity movements, oil price spikes,”

volatility spells and stocks, I'll be involved in the rate's market. I'm going to have a view on global GDPs, by country, et cetera, et cetera. That person is collecting a fee of 220, and they are professing to have the ability to do this on a consistent basis, putting aside the madness of how impossible that sounds. I suppose there are a handful of people who have demonstrated that they can make these calls

repeatedly, or not lose too much money when they make a call that goes wrong, because they not a hedge, and it's, it's, it's their life's work. It's a 24 hour, seven day a week profession. Most of your audience ed are not sitting in that seat. Most of the people listening to us right now do not have that responsibility.

They haven't told a third party that they are managing money for and charging a lot of

money for that, for that privilege that they can do that. So my answer to your question would be, why try? So the paradox of the individual investor is that by not having that responsibility, they actually are in a pretty good position to ride this out and not react to everything that happens.

Someone's watching, no one's paying attention. You have a brokerage account, maybe you have a joint account with your husband or your wife, got an IRA, you've got your 401(k), maybe you have a portfolio somewhere where you're a little bit more active. That's fine.

You're not being graded, you're not being judged, no one is expecting you to know the next move, the Trump will make the next 15 points up or down in WTI crude. It's not part of your purview. You don't have to do it, you obviously can't do it, but it's not the type of thing where

“you need to act like you have any sort of edge.”

And so I think this is the type of market where regular investors are in a much easier position than the type of investor who is claiming, I'm going to get this stuff right. All the time, I'm going to be at the forefront of all these trends and changes and juxtapositions and I'm going to figure out the puzzle, don't bother. So I know it sounds good, so then like what do you actually do?

I think there's a couple of things.

The first is set the rules in advance, now is not a good time, right?

In the heat of the moment, that was maybe not the best time to decide like all of the things that you're going to do with your portfolio, but when things are calm, take that opportunity to say okay, things are pretty good, let's say January this year. I understand that every year there's a 14% decline in the market on average, there's some sort of a freak out last year, it was tariffs, this year it's Iran, next year it'll be

an alien invasion. How do the rules of my portfolio work, when do I remalence, when do I get more aggressive, hopefully it's into a cello off, not into a rally, when do I make decisions about global allocation, or do I not make those decisions, how do I want to tilt my portfolio, which factors do I want more exposure to, and which do I want less, has anything in my life

changed where I have to revisit my investment policy statement, do I even have an investment policy statement, or do I just wake up every day and think I'm supposed to try to make money? So when you do these things in advance and then you stick to them, stick to these rules, you can get through period of time like this where every day is as uncertain as the last.

So one day we're going to wipe out an ancient civilization and it will never come back

again. And the next day, China steps in, urges Iran to agree to certain things so that the president has something he can tweet, that represents a de-escalation, you get the biggest fall and crude in a really long time and an explosion to the upside and stocks, and then overnight like minutes later, Iran is claiming that we're violating the ceasefire and here we go again,

the whole cycle repeats, why bother?

“You have no edge, so I think that I have spent most of the last 15 years aggressively counseling”

people to not pretend that they're in the seat and that they have this responsibility of nailing the crisis, calling the top, calling the bottom. It's unnecessary, the returns of investment markets have been spectacular, none of this sort of tap dancing has been necessary.

to him can make any predictions around to stand what's going on in his head and this is

“something that I said last week like when it comes to what's happening in that guy's mind”

and yes, he has a lot of power and it does matter and if you did know what was going to happen, you'd probably make a lot of money, but no one knows more about what he's thinking than you do because he's a complete bowling ball, there's no way to actually predict it, perhaps unless you're in the room with him like 10 minutes before he makes the decision in which case there might be a lot of people who are actually all making a lot of money

on that and we can get to that in a second and we probably should because there was some

kind of sketchy trades that we saw during the week in the build up to the ceasefire quote deal. But just to push back into your point a little bit, so I'm totally with you, like no one knows what's going to happen here on the idea that you have an understanding of what's really going on in Australia for most, you really know what Trump's going to do and I'm

going to trade on that, that seems a ridiculous premise, however it is possible and this is

“I think the thing to consider, or I guess this is the question, is it possible that the events”

this week have structurally changed something that may adjust your longer-term investment strategy

going forward, maybe it's that you now believe that we live in an extremely volatile world, that there are now threats of or implicit threats of nuclear warfare and that wasn't really the case before, or maybe you believe that we now do live in a world where oil prices are going to be extremely volatile, more so than we've seen in the past, or at least that maybe the insurance premiums and the risk premiums to get oil into your nation, into your car, into the tank,

that those are going to go up and therefore this is just, we're paying a higher premium for energy in general, do you believe that we are at this point that we must contend with the possibility that something has structurally changed here, or are we living in more or less the same world as we were last week? These are all very real risks, but risk is the reason why you get paid, but if there's no risk in the markets, then the multiple on earnings would be a hundred times earnings

because, you know, why just pay 90 times earnings, you could pay 100 times earnings, there's no risk. So the risk is the reason we get paid, and I would argue a couple of things, a lot of these risks are in the process of being baked into the cake and have been for quite a long time. It's not as though every stock is at an all-time high, a huge, when we think about the Russell 3000,

so this is the preponderance of all US stocks, basically. If you're not on the Russell 3000,

you basically don't exist. So that is the Russell 2000, which is small caps, and the Russell 1000, which is large and you know, mega large and some mid. So this is the market, a huge portion of the Russell 3000 is negative year on year. We have a gigantic percentage of stocks that are in 20% plus 12 rounds or what you and I would refer to as a bear market. We've had multiple compression in the market this year, so most of the mega cap text stocks peaked in November,

market overall didn't peak until January, and since then, we have seen the forward earnings multiple fall from 23 to 19. So we were 23 times earnings, which is fairly rich, I wouldn't suggest 19 is cheap, but what I would suggest is a lot of risk is being baked in. How is it possible that the S&P 500 is only down slightly on the year, but the multiple turn earnings is falling almost 20%. Because earnings have been growing, while stocks have been shredding water or falling. And so

arguably it's less risky now than it was three months ago. I know that sounds insane, but you know, we're selling at a lower multiple from an investment perspective. From an investment perspective,

“I would also point out, and this is really the key thing, earnings are growing and not just”

for the seven tax stocks that everyone talks about, earnings are growing in most sectors in the S&P 500. And the really, like the war, whether it goes on for three months or three weeks or three days or three years for that matter, the war is going to resolve itself. There's nothing as an investor that you can do to speed that process up, and there's no possible way that you can truly understand

and you have interest rates that are not rising. You've got like supportive interest rates,

many people think that they're too high. Some people think they're just right because of the threat of inflation being passed through the prism of higher energy prices. But if you have an interest rate picture like the one we have and you have an earnings growth outlook like the one that we have, once this war does come to an end, stocks probably resume their upward trend. That's been the history. So now you think about a global portfolio away from just the US market,

year to date as of the close yesterday, merging markets are up 5%. Develop markets XUS, so the way to think about that is Europe and Japan, up 2.4%. Europe itself is flat.

The S&P 500 is negative 3%. Now we look at things on a rolling one year basis, which is more important.

Year to date is arbitrary. On a rolling one year basis, developed markets XUS are up 48%. I'm a little bit more. 48%. Merging markets are up 55. The US is only up 34. So investors with global portfolios looking back at their rolling one year return, it probably like what crisis? Like what, what is everyone carrying on about? I'm making tons of

“money still feel pretty good. I think the US underperformance is the externality of what you're”

talking about. The political instability, the uncertainty that Trump's next move, etc. I think that's already being reflected in the fact that international stocks are now outperforming US stocks on a one year basis. I know it sounds crazy, but it's been a really long time since we've been able to say that. We'll be right back after the break and if you're enjoying the show so fast, send it to a friend and please follow us on YouTube, Spotify or wherever you get your podcasts.

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We're back with property markets. This does put Europe in a more vulnerable position than the U.S. But it is interesting to you point, like the way that the multiples have expanded in other markets compared to the U.S. Would kind of say a different story, everyone's saying, oh, the U.S. is insulated from this. But actually, if you look at the one year, what we've seen in terms of multiple contraption, the U.S. has multiple expansion in other markets, it might say a different story.

To just put a button on that, it's systematic. So of course, there are risks to Europe, there are the rest of the United States, some of those are risks in common, some of those are idiosyncratic to the particular region. But I want people to understand this because I know the average person, like they'll look at the NECA, they'll look at maybe the footsie, like they'll look at like a European index Japanese index, but they won't really understand

the extent to which this is happening. When you look at international stocks versus U.S.,

“every version of international stocks are beating U.S. stocks. This is year to date, okay?”

Low volatility international up 8.5%, versus 3.7% in the U.S., international growth up 5.5, that's versus negative 2% in the U.S., momentum, international 9.2% year to date, versus 1.3% U.S., quality. So the best companies, international plus 7.1% U.S. plus 1.8. Shareholder yield. This is a factor where we take dividend plus buyback. 6.6% international versus 3.3% U.S., that's a double value. International value stocks plus 6.4, U.S. plus 4.5.

It almost doesn't matter what stocks you buy, what style, what strategy, if you are in any way at least equally weighted globally relative to the benchmark to U.S.,

your portfolio looks amazing right now. And it is that global rotation that we were talking about last year.

Everyone was saying it was the sell America trade, which wasn't quite right, because yes, it'd be connected to the rise, but it was really like more of a whole America trade, and then add some add some international into your portfolio. JP Morgan has emerging market earnings per share growth for this calendar year at 44,000%. 40. And then you say, why are emerging markets outperforming or why are multiple expanding in emerging countries? Isn't the world a risky

plot? Yeah, everyone understands those risks and these stocks were too cheap anyway. Right. And so you get the double benefit of earnings growth plus multiple expansion. I'm telling you, if EM can grow earnings 40% this year, we're going to be doing shows at the end of this year, people saying, oh, why don't I own more emerging markets? We're not there yet, because the things I'm pointing out to you, nobody knows this stuff except for pros. For us, you're already

“just going to look at their portfolio and say, what the hell did I miss? Why aren't I in Brazil?”

Well, to be fair, we have been, we have been making that claim for about a year now. Good. And we were people said that we were US Duma's and that we were, we had TDS, et cetera.

And we tried to push back on that as much as we can. But it, I mean, it has been an incredible trade.

And it does make you consider the question like, how would the US stock market be performing right now if we didn't have tariffs? And if we didn't have a war with Iran emerging, you'd have to think that if the stock market would be absolutely ripping because of that incredible earnings growth, which we will get to in a moment in our second story. I just want to, as you wrap this up, get your reactions to another development in this insider trading saga that we

continue to see here, $950 million worth of oil futures was sold just a couple of hours before Trump

“announced that ceasefire with Iran. I think that is probably less concerning, because I think it's”

feasible that these traders were actually just thinking like he is going to talk out. And I think

It does raise some calls for concern. But then in the prediction markets, three accounts made more than $600,000 betting on the ceasefire. They are the same accounts that correctly bet on the date and the timing of the US attacks on Iran. We don't know who those accounts are because it appears that our law enforcement just has no interest in investigating this. In fact, we saw that actually over at the SEC, there were attempts made to investigate the staff and

the woman who tried to make those attempts was ousted dismissed from the position. We saw similar things happening over at the FTC, but that's maybe a separate story. I just want to get your reactions to this insider trading issue, because I mean, as an investor, it seems as though there is a growing number of people who are close to the president, and we don't know who they are, and we can't definitively say that it is exactly happening as the way that we are claiming. But it seems that

there's cheating. And I just wonder what you make of that and how it affects your faith in markets and this game of investing that we have dedicated our careers to. I read the same articles you

do, so I don't have any insight into what happened, whether or not it happened in the first place.

“I think one of the reasons you like me, and I think one of the reasons I like you,”

we're a little bit of a yin and yang. I think where you're very idealistic, I'm extraordinarily cynical, and I think, and I just, this is like my 28th year on Wall Street. I just think this stuff goes on, whether we're aware of it or not, everywhere around the world, all the time, Republicans, Democrats, old people, young people, it's human nature where people have an information advantage, they will seek to do something about it, and we have no idea.

So it doesn't upset you. Well, upset me to the point of like I can't carry on with my day, not really. That's not what I'm saying. Does it upset you at all? I mean, I would prefer it if it didn't exist, but I think we have to acknowledge, unfortunately, this is, this is the world we live in,

and the problem is, this instantly becomes politicized. So there will be people that look at this

and say, the MAGA world, they're tipping each other off and they're trading on war developments, and maybe they'll even be congressional investigations. I have no idea. But the problem is, the other side will say, well, you're talking about my team, what about your team? Why is Nancy Pelosi a better trader than Stanley Drucken Miller? 100%. I don't want to see it's a waste of time

“even talking about it. I think the way I would phrase it is like, you're not going to, if you're”

on the red team, you're not going to convince the blue team that they've ever done anything wrong, and if you're on the blue team, you're not going to convince anyone on the red team. I'm on the green team. Why can't we just agree that both sides are doing it and agree that it's bad and agree that I will strongly agree that there are people who are willing to do whatever it takes to get rich on both sides. One side may be pretends a little bit more that they don't, but

I'm on the green team. I need to focus on my job, what I have to do, the people I'm responsible for. It would be great if we lived in a world where nobody was trying to get away with things, but you know that's not this world, and I know that's not this world, and I think it could become a distraction if you let it make you feel that you can't win, or the system is rigged, or why even bother investing, it's all fake. A lot of people look a lot of people after the

great financial crisis never came back to investing again, because they saw a lot of the people who

were responsible for the crisis, really not software any consequences, and in some cases, be issued bonuses the following year, and they just looked at that and they said, this whole thing is a joke. I'm out. I don't like that. That's negative. I think that's negative for the US investors psyche, and so I'm not for it, and I'm not dismissing it. I'm not telling you, I don't care about it. I think what I try to get across is like, okay, fine, that's a side show for most of us,

we need to focus on ourselves. Yeah, fair enough. I mean, I think the takeaway being just because there's cheating doesn't mean that you shouldn't play the game. You got to play the game if you

“want to get rich, and if you want to build economic security. But if the system is rigged in a big”

way, I mean, you want to fix that in some way. I mean, it's not a good thing that people will come up with financial crisis, and they said, this is rigged in a lot of ways, which was true.

investors who comes to the conclusion that this whole thing is stacked against them, and I do think that that's a negative sentiment that we, we need law and order, we need security's regulation, we need cops, we need people who are keeping everyone honest, but you're not going to get everyone,

“and not everything that looks like the scandal actually turns out to be one. Yes, yeah. I think”

one thing we can take away is this should not make you not want to invest anymore. If that's your takeaway, then you're getting into real trouble. I'd expect more of it in the future. Yeah, yeah, fair enough. We'll be right back, and for even more markets content, sign up for our newsletter at profgmail.kits.com. Support for the show comes from SoFi. Let's face its students are slowing down your financial goals.

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and MLS 696891. Hi, I'm Renee Brown. And I'm Adam Grant. And we're here to invite you to the Curiosity Shop. A podcast that's a place for listening, wondering, thinking, feeling and questioning.

It's going to be fun. We rarely agree. But we almost never disagree, and we're always learning.

That's true. You can subscribe to the Curiosity Shop on YouTube or follow in your favorite podcast app to automatically receive new episodes every Thursday. How is Trump's psychology having an impact on the great power conflict? There were folks who for years could never imagine the U.S. carrying out limited strikes on Iran, right? If you go back to the 12-day war, he dropped those bunker busters, right? And you had presidents through multiple administrations who

never would have gone to full-scale war with Iran, and here they are. I'm Pete Barara. In this week's CNN's Chief National Security Analyst Jim Shudo joins me to discuss the Iran war, our freeing alliances, and the rise of Russia and China. The episode is out now. Search and follow stay tuned with Pete wherever you get your podcasts. We're back with property markets. While all of the chaos with the war has been unfolding,

it's been hard to focus on anything else, and the headlines are sometimes changing by the hour, but one trend has been consistent through this whole year. So far, tech stocks are getting hit,

hard. Microsoft has fallen more than 20 percent here today. Oracle is off over 26 percent.

Salesforce is down more than 30 percent. As a whole, the IGV, which is the software index, is down more than 22 percent this year. Josh, this is really interesting for a lot of reasons. Max Evans lost nearly $2 trillion, actually sorry, more than $2 trillion in market cap, yet to date.

“And you actually went in and you bought IGV, you bought software stocks. I believe it was last week.”

So give us your views on what's happening in the tech sector right now, and why did you buy why you bullish? I don't know that I'm insanely bullish on software. I just looked at, I looked at a full-scale panic and just indiscriminate selling of these names for months. And at a certain point, I said this looks carried away, stepped in, but that's on a trading basis. And I'm up a little bit from there, but I just look at the top 20 holdings of the IGV.

These are some of the best companies in the world. Salesforce, Microsoft, Palantir, CrowdStrike, Palo Alto, Networks, and it's not that I don't think that these companies are at risk of AI-related disruptions. Some of them are at more risk than others, but they're all going down.

They're all down anywhere from 25 to 50 percent. It's not as though saying, oh no,

AI is going to eat their lunch. Like that's not a unique point of view. That's the consensus.

I don't know that that bounces sustainable, or it turns into a noble market. But I do want to

“gently correct something that you said about text docs getting killed. It's actually not true.”

Software stocks are getting killed. Text docs are doing great. I know that sound. I know people like, wait, what's happening? Away from the hyperscalers that are currently pursuing the biggest capex spending cycle of all time. And away from software, SaaS enterprise software, text docs are doing great. And what the text docs that are doing great have in common is, they're benefiting from this AI capex wave, and they are physical technology companies. Hello, if you will, they have

heavy assets and low obsolescence risk. We give you some examples. Sienna is a company that makes

networking equipment switching routers, Cisco, servers, racks, etc. Dell. He stocks are all at

“or near all time record highs, corning, fiber optic cables, also part of the data center”

capex build out. Then you look at some of the chip companies, jable circuit, they call it jable these days. You look at Sandisk. You look at Micron. You look at Broadcom. In video, these are all companies that are benefiting from that capex spending cycle that's been hurting the Mag7 tech names. So one half of that equation or the spenders, the other half of the recipients, the recipients are going up, straight up. Some of these charts look like the Empire State Building. So it is

not true that tech is getting killed. It is true that mega-cap tech is not having a great year. But even within mega-cap tech, there's a pretty big separation between, for example, meta and Apple. Apple is not having a great year, but Apple is more on the hardware side and significantly more halo. They will benefit from all of this AI capex without having contributed to any of it. Their capex is actually negative versus last year. Meanwhile, if you log into

the chatGPT, log into cloud, Apple is getting paid the Apple tax. 30% in the first year, 15%

thereafter of the revenue coming from the usage of these products in the iOS environment. So Apple is halo. It's physical. It's the devices themselves. Phones, AirPods, iPads, watches, MacBooks, et cetera. So it's tricky. The technology market. It's tricky to say it's all doing this or it's all doing that. There's a extreme bifurcation. It's interesting because on the halo point, it does seem as though the momentum, so just server knows, you create this time, heavy asset,

low-ops. There's describes these more physical companies that you're describing here. And it describes a wave that was emerging and developing over the past several months. And it has become a very, very popular and actually crowded trade. As you point out with those charts, it doesn't look like the Empire State Building. Meanwhile, the software names, the application layers have been getting absolutely battered. Companies like Salesforce and service now, and even

some of the cybersecurity names you mentioned, crowd strike, those companies have been getting destroyed. And so I guess the question becomes, like, at what point does either of those trades become overplayed and when does it get old? And it does seem, my view, I mean, you bought IGV, you're saying it was more of a trade play than a real long-time investment, maybe you can elaborate. Yeah, because you know why? Because these things, these things in the short term get overdone.

Like the like a thematic, thematic trades that become popular and crowded in the short term, in the short term, you're right. Like they get carried away and then there's a correction.

“That's what appears to be happening in the software market. Yeah, so, so, look, let's talk about”

those software companies that I mentioned. The Salesforce is the Microsoft's. It's not like anthropic is launching all these products and they're they're sitting at Salesforce eating crayons. Like they are very much aware. Exactly. They are very much aware of how much time, energy and money they need to put into their response to this and what they have going for them is, and

record earnings in revenue and they have the cash flow that will support very,

“very intense R&D and capex as they formulate their AI strategy. They also have the relationship”

with the customer. So, it's I don't think everyone can win, but it's never like that. It's always

competition. Some of these companies grew, the service now, the work days, the Adobe's. In the last 10, 15 years, some of these companies grew almost without competition. Investors in those stocks became complacent. Like, it's Adobe. What replaces Adobe? Nothing. What are you going to tell me that? Figma? Give me a break. People sort of had that. Then a year or two ago, that stopped because we have this new class of technology player that is speedrunning through their innovation

cycle and phropic and perplexity and and an open AI. They're raising a ton of money and they're making partnerships and they have huge resources and they've recruited an unbelievable amount of talent and now it's game on and these software companies, they're not disappearing, but they're competing in a way that they haven't had to for a long time. So, viewed through that prism, the multiple contraction makes sense, but it gets carried away. So, I'll give you the day that I said,

you know what I'm stepping in this is bullshit. There was a story that and phropic was about to disrupt all of cybersecurity. Like, in other words, companies were going to say, oh, let's rip all this Palo Alto stuff out of our network and we'll just vibe code something with cloud and we'll give you a fucking break. There's no board of directors at any public company anywhere in the world that would sign off on on that kind of cybersecurity plan. If the CTO came and presented,

it'll never happen. And so, like, that was the day where I'm like, you know what? This whole thing

is nonsense. I want a business. I'm a Salesforce customer. I would love for there to be an AI driven solution where I could take that six figure expenditure out of my, you know, off of my line items. I'd love to pull it out. The reality is it's a system of record for my business. It's enabling secure sharing of data transmission of information. It's the operating system of the firm. If something comes along that's AI driven, we're going to look at it. We're going to look

“at it. What's not going to be free? Oh, it's free because it's AI. What are people talking about?”

Literally, what are people? So, so I just, I said, you know what, this is gone too far. Even Jensen Wang is made multiple appearances, including on his own earnings call. Describing the extent to which this is stupid. So, I'm willing to believe Jensen over the hedge fund analyst whose five years out of school, who's a disruption hippie and thinks all these companies are going to zero. I'm willing to trust Jensen. Again, it's difficult. It's not, if we think

to publicly trade it so for companies who are under pressure, think about the private equity back software companies that everyone's worried about, the private credit. Yeah, a $50 million SaaS software company that sells to auto dealerships might have to face down an anthropic

“built product that comes in at a much lower price point and can do much more. Guess what?”

That's capitalism. You can't like it on the way up and not on the way down. This competition,

like grow up and here's what the market has done. The internal logic of the market

this year, I identified this on February 9th in my article that I wrote. Every thing that's happened since then has bolstered what I was trying to say, which is that the market's going to figure out. We have been underpaying for companies with heavy assets and overpaying for companies that are cap capital light or asset light is how they call it. So we've been overpaying for these asset light SaaS software companies for 10 years. We've been underpaying for things

that really fucking matter, like companies that own power plants and pipelines way underpaying. Here's what that adjustment looks like. I'm giving you year to date sector performance. Energy up 36%. You think we're going to need energy? Okay. Materials up 10%, utilities up 9, staple 7, industrial 6, real estate plus 5%. You want to guess where every one of those sectors has in common? Halo, Halo, Halo, Halo, Halo. These are all companies with heavy assets on their

companies that are operating a layer on top of a cloud provider. These are companies that have metal steel and timber and bricks and that adjustment is what we're seeing. Here's the other half of the market. Communications negative 4%, tech negative 7, financials negative 8, consumer discretion negative 10. Those are not Halo for the most part, you know, with some nuance which we talked about. Health care is interesting, not acting well this year, but biotex is doing great.

I actually think the world of proteins and molecules is extremely Halo. I don't know how AI does anything other than help these companies speed up clinical trials, discover new compounds, enable all sorts of testing that normally would have taken lots of human subjects and years. I actually think AI is a massive talent for a lot of areas within health care, robotics,

“for hospitals that are on their staff, et cetera, et cetera, et cetera, et cetera. So I think Halo”

is a health care is Halo, but not acting well this year. Maybe that's an opportunity. But I think the market has now organized itself in a very different way than what we're accustomed to in the post financial crisis period. But there is also another distinction that should be made here, which I'm finding very interesting. Just so you know, I also went in and bought some of these names, but I did it in SAS Parkalyps one. I went for Salesforce service now,

Adobe, and also Microsoft, and I think that the Microsoft Self has been stunning. By the way, I'm not up on those trades. I was at one point in time and then we had another SAS Parkalyps.

You never buy SAS Parkalyps one. I'm still, I'm still actually going optimistic because

“to your point. I actually think a lot of these companies are very well positioned for this AI”

revolution. And you think about what's happening. I mean, you made the point with Salesforce. I love what you say. They're not eating crayons. They're actually figuring out how to integrate AI into their systems. All day. This is all they talk about. It's all they do. They're actively growing those AI revenues. Service now is reporting incredibly great earnings. They are also growing their AI revenues. But people say, no, it's all going to be a problem because the new companies

like anthropic and like open AI, they're going to ruin the whole game. They're going to ruin the party. And they're even going to ruin the party for a company like Microsoft. Why? Because yes, Microsoft makes a lot of money for Microsoft Office and that suite of products. But also,

“Microsoft is way over spending their investing all of this capex. They're putting,”

plowing all this money, same with Meta, same with Amazon, et cetera. The thing that just doesn't make any sense to me, that's exactly what Open AI and Anthropica do. I mean, those companies are wasting, not necessarily wasting, but they are spending so much money right now. The unit economics don't make any sense. What would happen if they were publicly traded? Would they get destroyed

by their own products? Really good point. Open AI is a valuation of 852 billion as of the last

amount of funding. Raising money from Microsoft, Nvidia, like the the Savviest investors on the planet are investing into Open AI. Probably comes public. If not late this year, early next year, probably worth at least a trillion dollars. They are, they are committed to 600 billion in spending on compute. That we know of, like, as of today. That's one. They said one and a half trillion out loud at one. Yes. Yes. Now, they are also actively telling anyone who will listen that they

expect to spend the rest of this decade burning, burning tens of billions of dollars, peaking at 85 billion in the year 2028. So two years from now, they're guiding to a burn of 85

billion dollars. Okay. They are talking about profitability in 2030. Okay, maybe. The point is,

they're number three. Exactly. And froppic is two. Gemini is one, or vice versa, depending on if we're talking about enterprise. But that's the number three player in AI right now. And it's mostly consumer AI, for Chatchee BT. The number three player is going to burn 85 billion dollars two years from now. This is the guidance. So that's one. Two, anecdotally, you probably have loads of friends who have sent you a text or an email or a DM. Yo, Chatchee, I just built and clawed. It's so

sad. Look, that's stupid. It sucks more than more than an art project you made in fourth grade.

I put, oh, my playlist. Oh, my Spotify playlist or available on this website, and you could search it by artist. But I don't want to. And it looks like garbage. Yeah, but I made it. When you my son, I don't give a shit. You made it terrible. So, so let's, so all I'm said, I'm not saying go buy every software stuff. I'm just saying like the narrative gets gets, oh, I invented this

“halo shit. But it gets carried away at times. And I think we've, we've been through a few of”

a few of these. And it gets very, very confused, especially when you have this new paradigm where the biggest players in this market aren't publicly traded. So we don't really know what's happening. We don't really know what the valuation of open AI really is. If it weren't being propped up by its vendors that the people from which it buy stuff from i.e. Nvidia, etc. We will buy compute from you and chips and in turn you will buy our stock, exactly. So we don't really know what the actual

market cap of these companies really are. We don't know if, I mean, these companies are projected.

And this is the incredible start that we got from from Paul Kadroski here we had on the on the

program last week. Andthropic, open AI, SpaceX, if they go public at what people expect, it's going to be 3.75 trillion dollars in market cap. That is more than all of the inflation adjusted that is more valuable than all of the dot com IPOs put together. So it's an incredible valuation here that we're about to see. But again, if we saw the financials of these companies, if we really understood if everyone really had a clear vision in their heads of this is how much

open AI is spending, this is what the unit economics look like. This is how much money they are losing every time you put a little stupid prompt in on your computer. What would the stock market actually look like? What would happen to that stock price? And how would people adjust their expectations

“of say Microsoft, which is down 20% year today. But we don't have that information. So I think the”

narratives are getting very confused. Yeah, what they need to do is continue to add users and show revenue growth. And so open AI is now introduced advertising. They want to get heavier into code. They want to be much more endemic to enterprise. They want to get chat GPT and other open AI products into Fortune 500 companies, government use. You saw Anthropica had a dust up with the Pentagon and Sam Altman swooped right in. We have no, don't worry. We have no

privacy. You do whatever you want with them. Come on in. So they, because they all have to show this kind of like breakneck growth. And if they do, everybody can rationalize the losses the spending because they understand that it won't be unprofitable forever. Some they'll catch up. But they can't do it with Microsoft. They can't do it with the big tech names. I mean, what, what it seems that we have different expectations, different different standards here,

depending on who you are. We're down with the, with the incredible spending over on the

private side. But in the public markets, we're going to get very nervous about that. So Microsoft's unpopularity is a stock coincided with a lot of questions about whether or not co-pilot, which is their overlay on top of OpenAI for employees, for technical employees. A lot of questions about whether or not there was an ROI. People even were, you know, like the product, you know, if it's sticky enough, even though it's Microsoft. And I think you saw

that adjustment in Microsoft's multiple. Importantly, their numbers are still lights out. We look, we look at a 36% decline in Microsoft and they have not missed earnings. They have not guided down. They have not disappointed anyone in any way. It's all perception.

I'm chair on top. They own a third of OpenAI too. So that's also your reception.

That's a good place to leave this. You know, as a non-public company, OpenAI has the benefit of only reporting the things that are superlatives and make it look great. Like, they don't, they don't owe the same level of transparency as a public company does for

“obvious reasons. And I think that's why we saw that story this week where Sarah Fryer is not as”

confident as Sam Altman is about the timeline of a go public in Q4. You know, these are people, these, there are people in Sam's ear that he's listening to, that he's not listening to, but some of those people are saying, "Yo, once this thing is trading, you actually have to tell

100%. Okay. Tosh Brown, let's take a look at the week ahead. We will see the producer

“pricing next for March. We'll see you. Learning season kicking off with Goldman Sachs, JP Morgan,”

Wells Fargo, City Group, Bank of America, Morgan Stanley, BlackRock, Johnson, Johnson, ASML, TSMC, Pepsi, Netflix, Josh. We really appreciate this. Any closing thoughts, any closing remarks,

“anything you've got your eye on before we end here? No. Josh Brown is the co-founder and CEO of”

Rick Holtz, a New York City based investment advisory firm managing $6.5 billion in asset.

It's like seven, it's like seven and a half billion. Come on. Not an inch, seven and a half billion.

“No, not an asset. For individuals, corporate retirement plans and foundations,”

you can also check out his podcast, the compound and friends for more. Josh, we always love having

you. Thank you so much and enjoy coral gables. I hope you have a good time. Cheers. This episode was produced by Claire Miller and Alison Weiss, an engineer by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Chalan, Isabella Kinsel, Chris Nodon, Hugh, and Mia Sylvario. Jake McPherson is our social producer, Drew Barres, is our technical director, and Catherine Dylan is our executive producer. Thank you for listening

to "Proffity Markets" from "Proffity Media." If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on "The Markets." You have been kind for you, yeah. As the long time. And the brothers. And love love love. [BLANK_AUDIO]