Data Centers Are the New Fracking

(laughs) - What a nightmare.

- Are you in the good one?

- I'm in the good one, I'm back. - Are you in a target card tell? - When we crossed over to American airspace, I was like, wait, so start from the beginning. I needed, give me the whole thing.

So you're giving the speech. - Giving a speech, trying a home. - This is a lot of you there. There's people there for an event. There's a group there and then,

sorry, you saw the news on Sunday. There's a little action in Southwest Mexico, but made it back after four or five years. - What was the event there? - Was it something international in Mexico?

- Yeah, it was just like an international group and it was a good opportunity to speak to that event and didn't foresee that they might be so trouble. - I love Mexico, by the way, I was there. Might be my last time, I know.

I was like, "Be my last time." I was at a place called the Moroma. It's like North of Cancun.

You find the Cancun that drive up the coast.

- That's more like East Coast in Mexico.

“In the Belmont, Moroma, I think it's one of the best hotels”

I've ever stayed in. There's 25 guests there. That's for something, something tiny at any one time. And I'm so sad, I can't, like I would love to go back to Mexico.

- Maybe real a little bit. - No, I understand. - All right, so they tell you, so what happens? You have a flight and the hotel says,

"Nobody's leaving?" Or you just know. - Yeah, the hotel was really pretty insistent that everyone's staying just waited out. So we did-- - We did. - We did the federal alleys,

like the hotel security was pretty insistent that people stayed, just wait for things to cool down. And fortunately, they did. And then was able to get out yesterday, Wednesday? - Did you have to smuggle anything?

- No, I got some to kill it back over the border there. - Which is good. - Dude, we're happy to have you back. You almost destroyed the show this week. So I know.

I know, I was worried. - I mean, I was definitely worried about your life. But also, the show is, you know, it's a big deal. (audience laughs) - All right, so happy you here, dude.

All right, how are we looking, John? - One minute. - Okay. All right, so guys, we do the headphones so you can hear-- - Yep. - So you can hear everything. - Yep.

- You can hear yourselves, thought. That way, if you get a little bit further from the mic, your own ears will tell you, oh, sit up. - Dan, how about the state of the union address? - All right. - Oh, man.

- All right, it was a full movie. - Two hours. - There's two hours. - Two hours? - Did you watch all the thing? - Of course.

“- Well, I think it's the most entertaining thing there is.”

I think it's better than most regularly scheduled events. - Don't question, there's lots of commercials, right? - No, no. - No, no commercials, straight. And he can just keep going, right? So, but it's very different.

Like Bill Clinton used to just go policy policy policy. Trump just talks, he's got the whole show going on. He's bringing out the hockey team. He's bringing out the 200-year-old soldiers getting medals. Like it's--

- I thought that was dope, but not the entire hockey team was like, brought in. - Yes. - And they got a standing ovation. I thought that was really cool. - Pretty great.

- Everybody in the room stood up for them. - Yes. - The big takeaways from the thing seem to be one.

He basically was like, I'll do whatever I want with Tara.

I thought we'd go the other way. I thought he would like look directly at the Supreme Court justices and tell them off. - Yeah, fired. - No, and studies like L.O.L. watch.

So, all right, that was a big one. And then the other one, did he really? Everyone's like, oh, he trapped the Democrats. He knew they wouldn't stand up for protecting Americans being job number one.

- Sure. - I don't know. Does that, like, that big of a moment? - Yeah. - So, let me just take one step back.

He needs the Supreme Court on three other decisions, like the Voting Rights Act and Lisa Cook. He's probably not going to get him on Lisa Cook. So, there was no reason to go stick his finger in their eye because his point is like, I'm just going to do it another way.

You're just saying I couldn't do it by A, but. The second point is that he's trying to inject himself onto the ticket. Midterm elections are usually about a referendum on the president. He's not on the ballot.

So, he was like, okay, I'm going to make this about immigration. And he's like, I'm for American citizens, you're not.

“The question that you have to ask though,”

does that help in the target districts? Like, short hills, New Jersey, and Orange County, California? That immigration issue is less of an issue there. But you could see where he's going from today until the election.

And that is that it's going to be the Democrats are going to have to run against him. And he's making it about immigration. Is that where he's the strongest for the independent voter? Yes, he's very strong.

Like, if you look at the panel, right? If you look at the polling, his polling numbers are awful, okay? But what is 36%, 36%, like that's 35 seats. He's going to lose in the house. If you look at a relative comparison on immigration

and other policies, he's actually even with the Democrats. He's slightly ahead on immigration. So they see that as some sort of opportunity. So they're going to push on that. They're going to push on that this summer.

And they're going to push on it. I would say my takeaways from that state of the union are actually a little bit different. He's got a real issue on data centers. So he was like, hey, I've come up with a way for Microsoft

to pay for their own energy and start to ease voter concern on data centers.

it was like 45 minutes into the speech or something. And so it kind of got missed because there was a lot of other stuff. That was very important to say. Let's put a pin on that one. What's the second thing?

The second thing is on taxes.

Where he basically was trying to tell everybody, I get this massive fiscal stimulus coming in 2026. We passed a bill last year. And you got zero from that in 2025. It's coming in 2026.

“And that's why he started out there in the beginning on that”

to try and say that while people were still warm and watching. So much energy. His support is narrowing unlike the stock market. Am I right? Nailed it.

Well, I mean, I think what's remarkable. What is that? What is the segue? Stock market guy go. The poll numbers are where they are.

And the market's basically what? 2% off the highs. Yeah. Now 50,000. I can't believe he's not 40% at least.

Where are what's the national average on gas prices right now? I didn't probably $2.25. Right? $2.25. Yeah.

$2.25. That's $2.25. Right.

So you have what are perceived tell-ins maybe in an old view of the world,

which are not manifesting in higher poll numbers. It's just-- All right. Controvia, hold on. Let's get the show started.

“Let's get those through the content before the content.”

Whoa, whoa, whoa, stop the clock. Here's a word from our sponsor. Curious about crypto are not sure where to start? Start with Grayscale. Grayscale is the world's largest crypto focus investment platform

and has been in crypto for over a decade. That's a long time when you consider how early we still are in crypto adoption. In markets like these, education matters more than ever. Grayscale provides research, insights, and long-term perspective

to help investors better understand digital assets and the evolving crypto ecosystem. Whether you're exploring crypto for the first time or look at the deep in your knowledge, let Grayscale be your guide. Visit Grayscale.com/compount to get started.

Today's show is sponsored by Janice Henderson Investors where we believe working together is the way to work better. Like combining your portfolio plans and our in-depth strategy, your valued assets and our valuable insights, your mission and our vision.

Always working in perfect harmony

to find the right investment opportunities. Janice Henderson Investors investing in a brighter future together. Visit JaniceHenderson.com. Welcome to the Compound in Friends. All opinions expressed by Josh Brown, Michael Batnik,

and their castmates are solely their own opinions and do not reflect the opinion of Redhall's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Finds of Redhall's wealth management may maintain positions

in the securities discussed in this podcast. All right. Thank you, Mr. Cole. Ladies and gentlemen, welcome to the best investing podcast in the world.

My name is downtown Josh Brown. First, I've listed as welcome. Last time listeners, sorry. I did my best. With me today, my co-host, Mr. Michael Batnik.

Hello. All right. The crowd is going wild. Thank you. I love you.

All right. And we have two very special guests making their inaugural appearances on the Compound in Friends. With us today, Daniel Clifton, Daniel is a partner, a portfolio manager,

and head of policy research at Straticus, Asset Management. Where he leads the number one rank, Washington Policy Research Team, on Wall Street, per institutional investors, all America, research, survey, glad to know that.

Thank you. Good, it's big. His work underpinsed, all right, it's enough. Chris Barron, Chris is a partner and head of technical and macro research at Traticus, where he serves

on the firm's Asset Allocation Committee. Chris is consistently ranked among Wall Street's top macro analyst by institutional investor and all star charts. And all star charts, Jason. Jason is a big fan.

You know, he's a huge man. This is actually Jason.

“This is the first time I think in the history of T-Kaf,”

we've had three different people from the same company between you and YouTube talk. Amazing. Is that right? I think it's got to be.

That's actually a pretty good point. That's an honor. Yeah. John, can I play a clip? What are we doing?

Can I do it? All right, wait, why am I-- Oh, how do I-- wait, make a connect? It's too. Can you play a clip?

Yeah, I'm sending it there. All right, we'll do some drugs in between. All right, we'll not play. We'll not play in the clip. Guys, that's a Daniel.

All right, let's send this Daniel. You pull it out of the dock. Do you have access to it? All right, pull that out. Let me know when you ready to play it.

Give me the, give me the eye, all right? What are you setting up, Josh? What are we about to say? I don't even know. I forgot already.

Okay. Why do Americans hate AI?

But it's not. I know. That's the irony, right?

I mean, we're sitting here.

“You know, I wonder almost if it does, is that actually like the bullish outcome here?”

Because if you need something in a world where like nominal growth is pretty high to keep the Fed easy in 26 to 27, is that the unemployment rate going from three and a quarter or certain four and a quarter to five and a quarter? Is that kind of that structural shift in employment that gets the new Worsh Fed to cut a hundred pips whenever one thinks they're only going to do 25 or 50?

That I think is the big question. Is the asset bubble actually in front of us if we're cutting into what is otherwise a pretty sound economy here? No. No, been a while.

I. Oh, wait. I was in this trade. In the higher time friends, we're bullish, so I thought the damn, it's just like you taught me.

I bought the dance and he can't dip it. What do you do to add when the dip keeps dipping with you, he has nothing left to buy. I got nothing left to buy, and you don't even hear. I mean, I blew the account down.

That's great. I was one day away from hell. It's been a while. Is that fake? All right.

So that's actually a scene from Interstellar. And don't remember that part. That's the water for the ship. Yeah, yeah. All right.

So in other words, it's possible if we start seeing those unemployment. If we start seeing headline unemployment deterioration, it's possible that the market comes around to the idea that wait, actually, maybe this isn't so terrible because now we don't have to talk about inflation anymore.

“Well, so I think the feds ability to figure out whether this is a structural shift in unemployment”

or a cyclical one is they're unlikely to be able to make that distinction. So if we're going to be cutting in an environment where nominals probably six, six and a half anyway, that sounds like a relatively bullish outcome, not a bearish outcome. And you know, what are you saying? I mean, another day today, NASDAQ's down what, percent and a half, more adventures than

the planners. This is the fourth day this year in two months where you've had NASDAQ down at least a percent and more stocks up than down. Last year in totality, all of 25, only three days. So far, four of those thus far in 26.

I mean, this is the market of the many is the list of-- This is those RSP days where it's RSP over SPY and we're having a lot more of that. This has just begun. I think we love it, but it's hard to see this persisting where the market is within two and a half percent, three percent of an all-time high.

As we see further deterioration of the mag seven and video, which is down to six percent, five percent, we'll talk about, like, there's a limit to how much the mag seven can win the market with the equal it's still turning. I think, like at some point, I think this will turn. Yeah, I don't disagree.

“And I think when you look at the only kind of real comparable period, we're breathed”

out a lot better, and the index came in. It's March of 2001, now ultimately, at the end, everything fell. Right. 2001 was not a good environment for the, quote, average stock or the act of manager. Everything going down.

But for about a year there, it's the only period in history where breath gets better for 12 months, and the index goes down in 22 seconds on that though, 9/11. Yeah, that's later. So that comes later though. Okay, fine.

Another asked to risk. Real recession. Okay. I mean, what was going to happen though was, it was a very, very mild recession, consumer spending

went up, yet the market went down 50 percent.

Go back to like 1990, very deep recession. Marker only goes down 20 percent. So this idea that there's symmetry between the depth of an economic decline and what the market gives you, history would say, it's just not the case at all. One good earnings peak in the dot com.

I'm going to guess they peaked probably second or third quarter of 2000. So after the market baked, because if you remember, the big tech names were still printing good numbers into like summer fall of 2000. You had that big reflex rally in the NASDAQ into October of 2000. Right.

You almost made a new hot. You, you may have made a fractional new high in the NASDAQ in like September, October of 2000, because they are still printing the earnings from the prior years binge on computer equipment because people were trying to get ahead of Y2K, I mean, it sounds so stupid now. But we had like this one million capex cycle, people literally thought their computers

would be useless. If you bought them to on good news and peaked on bad news, this business would be easy. Yeah. Unfortunately, it's the other way around. All right, guys.

So I want to show you a chart.

This is the week that the full backlash against AI finally went mainstream.

It is now become, I think, a huge popular, not a financial issue, although we're turning against AI in the stock market, too, for different reasons. What I'm showing you here is unemployment rate for recent graduates versus all workers. And this is get, I mean, it doesn't look like much at this distance, but this is becoming

I think households are realizing that there's recently graduated sons and daughters, can't get hired.

“And the only thing they can think of, because these kids have gone to top universities,”

work their asses off, the only thing they can think of is, this is because corporations are taking away and see a approach. They want to see whether or not the AI can do what the typical entry level could.

I mean, these are Excel monkeys, basically, not getting those entry level jobs.

That's one, Sam Alpman, every appearance he makes is worse than the one before, terrible public speaker, the company, the best in the company could do is use him ceremonially, not as a thought leader on 90 minute podcasts. And now you have people using Chachi BT every day, using Claude, using Gemini, in some cases, didn't even know they are, because it's just built into the products they use.

They love using it, but here are some of the polling numbers of an AI, and then I want you guys to react to this. 50% of Americans are now more concerned than excited about AI, only 10% say they're more excited than concerned. That's pure.

57% of Americans say societal risks of AI are high, only 25% say benefits are high, also pure. 5% say they trust AI, quote, a lot, 41% say distrust AI, the remainder say they a little bit distrust.

30% of U.S. adults report using AI tools weekly, 30% of never used it at all.

62% say it'll increase worker productivity, 61% say it will eliminate more jobs than it creates over the next decade, last two, 69% say the U.S. government is not doing enough to regulate it, 77% say Americans do not trust business or government to use AI responsibly citing privacy bias and accountability. Everybody hates this shit.

Here's the cover time magazine, Daniel, thank you. I don't know if this is like really a cross-section of America, but just like representative of what went on this week, I want to hear what you guys think, what changed all of a sudden,

“why is this all of a sudden now becoming a top of mind issue?”

Well, first, let me say, you started off by saying more and more people are using AI. So they're saying they use it and they don't like it. Right. I think there's a bit of a contradiction between the two of those.

There are two major issues, the first one you highlight it with the unemployment rate.

People are like, why would I like this if you're going to raise my electricity bill and I'm going to lose my job from that? And particularly where the data centers are being built, they're in more rural areas and there's a lot of skepticism around it. I got to tell you, this goes right into the heart of Trump space.

I've seen, I've been in focus groups with Trump voters saying I want nothing to do with this AI stuff and he believes that AI is existential for the U.S. dominating the next generation and if we don't do it, China's going to do it. Dan, it's part of his capex boom though. These numbers are the Trump economy.

Absolutely. And the base doesn't like the output of that of that capex. Absolutely. And so he's got to figure out how to get around that.

“And that's why I think what happened at the state of union this week was important.”

If you're seeing that the private sector companies are going to get better access to energy and pay for that energy. It delays some of the concern on the energy side and the electricity side. By the way, electricity prices are going up. None of this is related to data centers.

It's just higher cost in the system that are inflationary and people are just connecting it to AI or they're connecting the unemployment that we just saw to AI itself. This is a pop. This is Ivan Kreisberg. In the latest example of data-sembranimbiism, a proposed 27,000 square foot AI data center

in New Brunswick, New Jersey will become a public park instead. Yeah. The city decided to block it and they had a city council meeting protesters lined up. They said, forget it, there have been 25 data center projects canceled in January alone. I don't even hear about any of these.

That's hundreds of billions of dollars in the resources have described local resistance as one of the most significant challenges the sector faces. Yeah, you think? They don't, they don't like the sound, they don't like the idea of air pollution. They don't like the water usage.

They don't like the idea that it'll raise local electricity demand demand demand. Yeah, but better reals. Better reals is, you know, we have the way to go with the bed. But you have a really hot take here, data centers of the new fracking. That's exactly right.

So we went through this 15 years ago, we went through this 15 years ago with fracking. Fracking was the economic promise. By the way, we were coming out of the financial crisis. And so this was seen as a way to get more jobs, more investment or trade deficit or better foreign policy.

There were so many benefits to that. And you're talking about contaminating water possibly or earthquakes. I mean, this is beyond just the economic issues of the local nibbiism.

about banning fracking. I remember, okay?

Like, and like the XON XTO merger clause that if we ban fracking this deal is not

“going to happen, that's how real it was at one point.”

And it's interesting because Boon Picken used to say, it's okay if New York ban fracking. Okay. Not fracking. We're not fracking in New York. He's like, we don't need that now.

Eventually, they'll do something where they're going to need fracking at a later point. As long as we got it going on in the right places, okay? And you have it going on in the right places right now, which is Virginia out through the mid-west. Okay? But when you have the governor Virginia stand up, which is the heart of the data centers

because the CIA data centers are there. And she's like, I think we should slow this down. That's a real signal to the market. Or Ron DeSantis saying, hey, maybe we should take a closer look at some of these data centers. Virginia is the biggest cluster, and that goes back to AOL being based there.

And they just, they knew how to do this stuff there. Right. It's really, if you haven't taken a tour down there, it's really worth the tour. But then go in the diner right down the street from the micron factory that this is all building around.

It's a very maga, very, very Trump oriented diner where you feel the local opposition.

So what I'm arguing is, what did the energy industry do to ultimately win on fracking?

They got ahead of this. They were able to out the benefits of it. They were able to bring out supporters of it. And what we're finding is that the energy industry was way ahead of the debate. They understood that there was risk.

The tech industry is slow. So you've got all this regulation, legislation popping up, and they're slow. They got to come in and say, hey, you know what? You don't like this? Here's the medical innovations that are going to happen from this.

You're worried about your local electricity prices. There's how much your local property taxes are going to go down because we're building this factory in here. There's a way to do this. The tech industry has just been slow.

“What's the tracking, the answer is obvious, $2 natural gas does the correct correct?”

Correct. But it took a while to get there. What's the obvious way for the tech people to, is it just jobs like look how many people were employing in these places that were erecting the data set there? One of the problems is they don't create a lot of jobs.

There's not a lot of construction jobs, and there's definitely not jobs inside the data center itself. So you've got to make it about property taxes. If I'm in a town with a lot of kids and a data center comes in, that's more money for education than that town.

It'll be a good argument. Hey, it's this or a nuclear power plant. Yeah, right? Right. You're back.

You're back. This is such a better way to do it, right? But I think that there's going to be, the great thing about federalism is that there's going to be states that are going to be able to get this thing done, and you don't need it all.

Bernie Sanders and Vermont, they're going to ban data centers in the next couple of weeks. We don't really need that. The irony of the fracking revolution, just to extend the metaphor, is that probably last on the list of beneficiaries were the publicly traded stocks of the frackers themselves. Totally.

I mean, the last decade. Think about the irony of this whole environment.

The first chart you showed was the unemployment rate for new college graduates, right,

which has exploded, try to get a plumber to your house, try to get electrician. You can't. Right. So God bless the trades. It is a bull market in trades.

You know, you show the time magazine cover from this week. The irony is six weeks ago, who was the person of the year, all the AI titans, seven of them, right? Right. Right.

Now, we talk about chat, G.B.T. and Sam Altman, look at soft bank.

“It kind of tells you all you need to know.”

What's the stock down? Maybe 45 or 50% from the highest? No. I mean, find me a financial crisis or a tech crisis where soft bank doesn't have their finger tips on it.

Right. So you have that backdrop. Is that going on? Is that the poster child for the referendum on what we think open AI is worth on a day-to-day basis or is it or a goal or is it both?

Someone, I think, a mutual friend of ours asked me a good question a few weeks ago. Is it Chris? If open AI was a publicly traded company, what would the chart look like? Yeah. Oracle?

Oracle or soft bank or Microsoft, right. I think the market's been pretty vocal in what that chart would look like. You know, then you fast forward here a little bit. Talk about the loss decade for energy from let's call it 2008 through really 2020-2021. Is the loss decade there, ironically, over as perhaps some loss decade in some new group

might be in here. I'm a big believer that the trends that are in place or the trends that are developing only get reinforced by what news follows. It's not news that sets the trend, right? The trend gets in place and then the narrative shows up in total.

I think that's right. Right. So it's price first. Of course. Then it's narrative.

Because the market is smarter than the journalism. So, you know, it's not just six weeks or eight weeks of 2026, go back to really September October of 25 when this RSP of our triple cues thing started to develop. All the incremental news flow since then has been in this direction of this new developing trend of, we call it the market of the many, right?

And, you know, in this populous world that we're living in, it's a very much a populous

The market of the many here, what's made new highs this year, midcaps, equal way, value line. Everything else. And why I see, where's the Q's? All right.

So, let me ask you, you mentioned earlier, the market would be so much easier if it topped on bad news from other news. Daniel, chart 14. So this was the week that officially nobody wants software. No.

Like, it's dead. AI has replaced it. It's over and we're getting a pretty strong bounce today. So you have a chart showing that, we've had a pretty good flash. What are we looking at?

So as we kind of say in the title, you know, in the zip code in the ballpark of where at a minimum, I would expect relief. I mean, it's this a good chart, absolutely no, it's the trend down, of course.

But when you get these periods of just indiscriminate, selling, shoot first, ask questions

“later, I think, as shorts, you probably have to cover, or maybe set another way, start”

thinking about, hey, what could actually go right from this condition? Go back a year ago. So it's January's headboring of 2025. I thought Google was supposed to be the big loser in this. It turned out to be the big winner.

It's tough. My point is, in such a moment of technological advancement and uncertainty, you better keep a real open mind for how the playing field could evolve here, 70% of software stocks made three month lows last week. I mean, that is a COVID type level.

That's a liberation rate type level, almost. I think at a minimum, it's a lot to cover your shows. So look at the bottom. Yeah. Now, the trend is broken.

Obviously, like, it's going to take time for these names to heal. Every rally should probably be sold into, at least a little bit. Good. I think that's fair.

Kilti until proven innocent.

Yesterday, yesterday, so workday, reported a not so good quarter. Guidance came down.

“The stock was down, 9% pre-market, I think, and ended up closing up 3% yesterday.”

Followed through today. Followed through today. There was an article yesterday from the journal, the new hot trade, shorting AI companies. Yeah. Nobody's selling anymore.

I think you've gotten to the point of complete indiscriminate weakness where you have to think about what could change. Let's think about this a different way. Let's think about it on the numerator of the semi-versauffware pair, right? Because a lot of attention has spent on how bad software is.

When you look at the semis, I mean, you've had silver-like parabolic moves in some of these names. Should Micron B-bot here, at 150% above a 200% above a 200%. I won't do that. But I also didn't buy at 150% ago.

Should I next B-bot here? Should Samsung keep on here?

I'm just saying, I think if we've learned anything in the first eight weeks of 2026,

be very, very careful with the parabolic-looking charge. It was silver in late January early February. We saw that go, quantity of shooting stars. Memory to the end. Right.

And the process of which this was all played out over the last few years is fascinating to me. Because it's so different than 99. I mean, 2024 was all hyperscalers, right?

“Just got to own hyperscalers, life is easy.”

25 was all about memory, right? It was Samsung, high-nix, micron, right? What looks best in semi-world today is probably equipment, right? That's the one place where you haven't seen the blow-off. You haven't seen the parabolic-looking charge.

KLA. And I say it's different in '99 because there was no rotations in tech in '99. They all worked until they all went up every day. They all went up every day. It wasn't like, oh, today we're going to buy the semi-shast.

And next week it's going to be so awkward. So actually, I would say that there is a trade that looks like that right now. And it's led by corning, which is the hottest stock of the year. And there's a lot of small caps in this trade. People don't even know these names, names like EOSE, and these are companies in the Russell

2000 that supply electricity generating equipment to the utilities and/or data centers. Things like industrial sized surge protection, it's a company called Entersis that makes electric batteries. No, well, so there's a whole host of these stocks where the charts, they look like crypto is in 2021.

Yeah. That's the rotation. People are discovering, oh, this company is electrical, I don't care what it does, they're going to be earnings. And it works.

I mean, just go to a big cap world for a minute. You see the same thing with the strength of the industrials. I mean, for all this talk about a market that's got defensive this year with staples and some healthcare, I mean, anything in the kind of derivative of the AI world in the industrial supply services.

Look at Harry or the reversal after a pretty good bear market or train or PWR or poker hand-off in. I mean, these are certainly still very much, very much in gear. I'm a little bit more skeptical, Josh, of like, okay, this rotational mood that the market has is just about owning small of a large because if you look at Russell 2, it's just

not a good index. I mean, the top of Russell 2, I would hardly say, is like some real old economy, non-spec, I mean, it's a very speculative index. I think this is more about equal weight over like Q's than it is about small over large. I spread a conspiracy theory today on TV.

Yeah. I said that I think earlier this week or over the weekend, a memo went around, not like

behind the scenes.

And what I think happened is that the software moguls got to these AI guys and basically

said guys shut the f*** up, stop talking about job loss and replacing people. Yeah. Number one, it's not going to end up being true. We're not all getting disrupted. And number two, you're going to have some very unhappy customers for your stupid AI

products and we're not going to buy them. And all of a sudden, Jensen won comes out and he wants to spend, I'm going to guess 25% of his post earnings remarks on the fact that SAS is not only not going to be disrupted, it will be the tool that these agents are trained on to use. They're not going to invent their own software products.

The AI agents coming out of the big AI shops will, in fact, become the most prominent

“users of SAS products because that's what the humans they're interacting with use.”

I thought it was a very nuanced and important point from Jensen, I also think it was deliberately told to him, you have to put a stop to this. Yeah.

We're not talking about stocks down 5%, we're talking about companies that have lost hundreds

of billions of market top collectively and they are some of the biggest customers for anything AI. I'm pretty sure that that's the word that went around because all of a sudden you saw the disruption hippies disappear, nobody was making appearances like that this week, after last week, and you have some of the biggest voices in AI now saying, no, no, no, no,

we're not going to have job or we're not going to have job loss. So what do you think, like, is something like that even possible? Yeah, absolutely. You think they could be a coordinated, like, guys you're going the wrong direction with this.

So, let me also add on top of that, the private credit is very levered up to the software names as well. They need that stop to stop. Right. So you've got to pull it all together and if you don't, then the industry is going

to be much more regulated, and they want to head that off. The oil industry itself has been trying to advise them that they're doing this wrong, saying based on our experience, so because they want to provide the energy to the data centers. So it is a concerted effort.

And by the way, sometimes you've got to burn your hand on the stove and then go, okay, we're handling this in the wrong approach. So some of that might be them just self-pleasing themselves in the software and in the AI industry. They have a guy go out, you have a guy go out on TV, national television, and tell

me anchor, like half of all jobs aren't going to exist by 2030.

“Think about Microsoft's customers, be like, are you high?”

Yes. Why would you send this guy out to say things? Even if you think it's true, which, by the way, half of all jobs by 2030, this is what you think. All right.

Let's say you actually think that. Why are you saying it? Yep. Okay. Yes.

I think that's over now. What I think there's something else going on here, and that is that the capex is actually broadening out outside just the data centers, all right, address the AI. And look at what we did in one big beautiful bill. We have a hundred percent expensive of capex, a hundred percent expensive of research and

development, and a hundred percent expensive of factory building. So if you're in the non-AI world, you're like, this is my shot to be able to get this factory out. Right, and boom, they're all going in, farm as going in, right? Like, you see all these other industries, and so there's a bit of a broadening out.

And some of these small caps are going to be feeding into that, but maybe it's not some of the AI. So I just think that we, like, if you look at the companies that are lobbying for those

provisions, they're massively outperforming this year, like 15, 20 percent over the S&P 500.

There's something happening here where you're going to start seeing more capex, and the industry itself have to have that AI data center, the other side does work. Yeah. You need both of them for the economy to work this year.

“I think, you know, haven't you seen enough over the last year, where you should be really,”

really skeptical of anyone who is just such with a forceful narrative here? I mean, you've got people that know exactly what's going to happen. I don't mind if you have a strong opinion based on price here, but if you have a strong opinion based on narrative, and then the environment with a narrative, I think feels like it changes every six months in a very meaningful way.

I think you ought to be really skeptical of that, and you know, just think about these last couple of weeks. It's like all of a sudden, people found the connection between areas, blue, owl, kick-a-r, car-lile, and software stocks. I mean, when did the private capital stocks start to weaken?

They went negative in our work last April, right? Relative strength gives you clues about what's shifting. When did this, I think Microsoft went negative in our work, maybe January, February of last year. How about Adobe or Salesforce?

I think that you're prior, right? So the market can give you hints or clues of what you should be thinking about. And then suddenly this week, everyone makes this connection that blue owl and Apollo, or state-type discovery. How did you know, private equity has been buying software companies?

Really? Right.

If there's some tradable low here in software, again, I would say, cover shorts in the private capital stocks. So I think one piece of evidence that this rotation can continue is what we're seeing within video today. The stock has gone sideways forever.

Dang, a chart now, I'm pleased. Beaton race could not possibly be doing better. Like, look, I mean, it's whole areas. I think I don't know if this is the biggest sequential increase since Q2 of 24 when it like double that an hour, but from 57 billion up to 68, and I think what we're learning is that

you can't trade at a premium multiple when you're the biggest stock in the world. And even still, Daniel, try to love him, please, even after the sideways movement for the past year or so, it is still a trillion dollars bigger than staples. And I don't know what, what could Nvidia possibly say at this point, the stock is on six percent.

What could they possibly say for the stock to go higher? Well, let's make a couple points here. I'd say number one, let's not forget Nvidia did have a 50 percent decline last year, right? I think it went from 160 to roughly 80 at the liberation day low. So you had one minute to buy that tip.

Right. I mean, what do we learn about the semis?

As secular as you want, I'm believe they are in the cycle, they're always cyclical, right?

In the end. You go semi by semi by semi, every three years, they all go at 50 percent all the time, right? So I'm not sure there's like big downside here in Nvidia. 170 has kind of been the pivot on the stock for the better part of the last six months. Could I come up with a world where it's 140 to 150?

Of course I could. But I think the bigger story, and you hit it at it, this isn't hit the take today. I mean, we're more advanced than the climbers on a day within video down six percent. You have the software stocks rattling that the semi software pair was like the 99.9999th percentile historically.

So, you know, beyond guard for these nasty mean reversions.

“And the only way I know how to prepare for them is to believe price, not narrative.”

Even the last like the whole way, it's down 20 beefs. That's it. That's it. Revenue is up 90 percent, you're a rear, are you surprised the stock is, so I've noticed

that the stock never goes up after the report earnings.

It runs. It runs. I've noticed that the stock never goes up after the report earnings. It runs. It runs.

Remember the last quarter, too. Remember the last quarter. We were in Austin doing this. It rallies, then reports. People think there's going to be this big climactic thing that happens and it drops like three percent.

Every quarter, last quarter, it opened up 6 percent and closed down four, something like November 21st, right? So the stock opens up, you know, 6.7 percent. I'm in a meeting. This is, you know, 9.30 in the morning, I'm in Baltimore.

By the time the meeting's over, if the stock's down, 5.6 percent. Right. Are you in the meeting being all bullish about in the video? No. And look, not for us.

It's gone. It's gone sideways. Right. That's how I said down. You know, I think what's so remarkable about this, like, don't even try to tell me

for a second that people are positioned for this.

Don't even try to tell me for a second for what? For this revenge of the old economy or the average stock, I mean, for 15 years, all you've had to do is own things like, don't even pretend to tell me, this is where the positioning is like, I am so skeptical when I see the Bank of America, fund managers survey that says, you know, everyone's, you know, most overweight RSP and underway cues.

There's just no way. No way. I'll never forget. This is 6, 7, 8 years ago. We're doing our macro conference in New York.

I'm doing a fire site chat with Byron Ween, Lake Great Byron Ween mentor Jason Trader to

“myself to Dan and I asked Byron, I said, byron, tell me what you remember about 1982, right?”

82 is we know kind of the top and rage, race of start to fall, equity of start to turn up. And he laughed at me in front of 400 people and he said, Chris, I didn't know it was 82 into 85. Right.

It's so, it's such a great important point. It's so easy in this business to look back with hindsight and say, oh, look at the, look at the regime shift, it was so obvious, we're in a regime shift right now. I don't think people are positioned for it. Maybe in like the tactical sense, the tactical focus on other than me, they aren't.

I've been talking about this regime shift as being a new paradigm that is nothing to do with what we're all accustomed to. We live in this world where it's small versus large value versus growth, tech versus non-tech, or defensive versus cyclical. And I think that this trumps all of those paradigms and it comes down to AI immunity versus

not. Well, no pun intended. If this trumps everything, Dan isn't this the market that the Trump administration wants, right? They want this revenge of the old stocks.

Well, it got the copper stocks at record highs. So, is that what they was, was that the goal? I, you know, at the risk of giving an narrative here, I think we're shifting out of the post Berlin wall environment. Berlin wall went down, the world globalized, inflation comes down, interest rates come

down.

“That's why you want to own asset like companies, high PE's, less geopolitical volatility.”

That's all reversing now.

And that means that there's going to be demand for resources.

“And that's why you want to be in this kind of second, I think in a long-term shift of being”

in industrials and materials because you want to be able to have access to this in a scarce world. I think we're at the very early stages of this process have. Is there a world in which we see industrials at the top of whatever this cycle is going to be?

Let's say this continues for another two years. Is there a world in which industrials earn a multi-decade high multiple because of the scarcity of the facilities that they have on short? Because if so, then you got to look at companies like the LNG terminal, and you got to

look at companies that are manufacturing the things that we deem essential.

And by the way, this includes some semi companies now because they're building Apple chips and Phoenix. So you could end up with a situation where we pay tech like multiples for industrial stocks, no one's position for that right now. Look at this through the lens of two pictures.

I don't know if you can bring them up. I think two charts, one was discretionary versus energy. So long-term chart, maybe 20 years of discretionary relative to energy, like a lot of people out there are still behaving, you're still talking about like this being the consumer decade or the continuation of the consumer decade.

Consumer peak relative to the S&P in November of 2020. It's been five years since discretionary. Last night. Last night.

“Ironically, we went to the bottom, late '08, right?”

You have 12, 13 years of tremendous outperformers from consumer. That's over. Look at discretionary versus industrials. This is not a consumer economy. This is a capex economy.

Look at consumer relative to energy. I mean, talk about another major shift. So, I mean, these are the big changes. And I know, Dan, you see it in your stuff too, that I think we have to sit back and say, okay, if this is a new regime, number one, am I playing by the right rules, right?

That is essential to our process.

What is the rules set for the regime that we're in? And number two, am I positioned to play with this? Meaning like, how do we trade differently now versus how we use the trade? Absolutely. I mean, we talk about the video, Dan, what five or six percent today.

Look at the reversal up and freeport today. Yeah. I mean, they hammered that thing at the open, right back to the highs. The market is telling. No, it's cool about this.

Only people, our generation and older even know what these stocks are, the old FZX. So, I'm sure Todd is probably all over this. This is Vannex, Real Assets, ETA, R-A-X. I mean, to monster. As you guys know, there's no one better than Todd in the ETF landscape.

We love Todd. He gives me all the data that we need. It was great and pineapple expressed. Yeah, he won. It's worth it.

But so, that's, that's interesting to me. The Robin Hood crowd does not know the difference between caterpillar and deer or even more obscure examples. They don't know the HVAC stocks. They don't know.

Not that I know them really well, but at least I remember a market where those were leadership stocks. I know the oil names. But know what? They'll find them.

Well, that's, well, so this is my point. They'll be me. They'll be me. You know the environment, know the, that's the really interesting thing where all of a sudden, there's a new shareholder base for stocks like this.

I didn't send you this chart, but I'll pose a question, maybe you guys can answer it.

“If you overlay Palantir and Robin Hood, why are they the same chart?”

Literally tick for tick. Because, I don't know, 10% of the revenue on Robin Hood comes from people trading Palantir options. Same shareholders. Same shareholders.

I mean, we've been in this world where like the speculative economy has flourished basically since the fed balance sheet started to go like holy shit. That is pretty damn good. It's the same, it's tick for tick. And so.

And Robin is a crypto stock, like why would it translate Palantir? Because that's the activity. It's the same people. No, I'm just saying. Hood ornaments of the same thing, right?

They're hood ornaments of this remarkable 15 year episode where the fed balance sheet went from a couple hundred billion to, you know, multi trillion, right? That is over. And the market's telling you that's over.

Okay, so I, this makes me very excited because I was, I always says board.

But at a certain point, watching like year after year, it just be in video Tesla, like, you know, the same 10 gigantic stocks. This is so much better. This is, I think this is more like the stock market than I grew up with. So I'm, I'm into it.

I want to ask, how, so how did the, so I want to ask, how did the fracking story is the right parallel for how the AI trend continues because they get themselves a political lifeline? I think it worked out well in the end. Absolutely. Okay.

Absolutely. How does this work out well in the end? And will it matter for shareholders of these companies? Well, I, when I think it's going to work out, but I'm a little bit worried. In 2012, you had the stars line up.

Yeah. And then he was running for reelection. And he started to realize, well, I can win Pennsylvania in Ohio if I just let this happen because it's going to drive down the unemployment rate, and I'm going to get lower gas lean prices.

So to speak. And climate change was a hoax anyway. So why not? Well, you know, I still think he believed it, but he was like, I'll deal with that in my second term.

Right? And so I gave a speech to 65 oil and gas CEO, so week before the 2012 election, I put one chart up. It was just the unemployment rate of those two states.

I said, congratulations, you just elected Barack Obama to a second term.

I could tell you, nobody in that room wanted Obama to be a second term. He adopted it. Once he adopted it, it kind of cleared the political brush out. You don't have that same situation going on today. You're going to need some event like that to fix this data center.

“That's why the industry needs to basically say, I'll put a tax on myself to pay the”

electricity. That's not an issue for bed at Louisiana. Louisiana, they already have the business and consumer structure to off each other. It in the East Coast, where we're in the PGM interconnected, that is all, it's all intermingled. And so that's why the tech companies have to say, we'll pay for this ourselves.

All that are on the Democrats, smart enough to look at how Bitcoin costs them in 2024. And not make that mistake again, are there pro AI capex Democrats? Do you think that there's a chance that this issue could be, and not just AI build out, but just this whole capex on shorting story, because if Trump loses the midterms, I don't know what that does to this whole capex trend that we're all installing the virtues of.

They're Democrats who would like to see it continue.

So I will tell you that the tech relative to the S&P 500, tech sector relative to the S&P 500,

has been underperforming tick for tick with the Democrats odds of taking over Congress, since the November election. So Democrats had a big night. The market's already thinking exactly what you started to ask. So some of this is just midterm stuff, and it generally gets resolved by the election itself.

Why is that? So all the tech titans went to the inauguration, they made friends with Jared and Jr. And so now they're seen as Republican proxy companies. So there's a rise to the other day. Absolutely.

“So there's a rise to talking about like, you know, going after them because, you know, when”

the Democrats win, if you kids the ring a Trump, but it's more than that, it's that the Republicans have adopted the AI just the same way they adopted the crypto. And the market saying there's going to be more regulation of AI if the Democrats win. But we have, I know you're not big into this, but we have a Harris basket and a Trump basket.

We use it to see how the market's pricing in the election. Our Harris basket has been trouncing Trump by 25% since since in the Harris basket. It's all the basic renewable energy, Medicaid, health care, some tech stuff, all things that would do well because look, if the Democrats sweep, they're going to stop the OBB cuts from coming in.

I'm Medicaid and food stamps. Those stocks are going to rip at the market really. What are those stocks? What are those stocks?

Like Medicaid HMOs, like sentine and Malena, first solar, a lot of the wind and solar

stocks. So the subsidies will stay, the Medicare payments will, the Medicaid will continue to be paid. Absolutely. Those are going to be the biggest winners. But now you're starting to see it in the tech industry.

I want to take Harris's name off that basket. I just haven't built the new baskets this cycle. So we're just using the old ones. I think that might be a federal man or a new Samura Shapiro basket. It could be.

It could be. Okay. All right. One thing. So if tech is now going to go into this period, this pre-election period and sort

of trade is a proxy on the house and the Senate. Yep. I don't know how many multiple points. That's worth to these stocks. But it might not be pretty.

Feature rotation of equal weight over market weight and owning the other sectors itself. The best advice I ever got on this business is when a trend is in motion, all the news flow tends to break in the direction of the trend. Right. What I'm talking about is something that's already in motion.

So use your time to imagine a world where all the news breaks in this direction to begin with. And I think that's what's happening. I think that's what's happening.

“Politically, I think that's what's happening.”

Geopolitically, everything's breaking in the direction of this equal weight over rest of the world. All right. So let's let's start with that theme day. A chart to 16th please.

We've got a breath desk board that chart can met made and we've got every sector, percent above various moving averages, making new highs, making new lows, RSI's above 30 or below 30 above 70. And no stocks are making new lows except for tech, 11% across the board from four week to 52 week.

If you look at the percent above the moving day average, utilities, energy staples, it's real estate materials. There's so much green here. Chris, you shared a chart with us showing that we're at the 97th percentile of stocks making 50 to 2 week highs.

Yeah. That's not, we're not in a bear market. It'd be a very odd bear market. Chart 15. Yeah.

Let's put this up because it's good. It's funny.

Just for one second. I just want, like, if there's one number on this page that stands out to me screaming. We are, we just spent 40 minutes talking about AI and there's 43% of tech about the 200 day moving average. Are you kidding me?

Right. Like if this was 99 and you read a long short fund and I went in there and pitched a tech short, you'd laugh me out of the room. Yeah. Right.

So this is so different.

It was never rotational in 99.

This is 43% of the, and then look at energy, 95% of the 200 days. Chris, do you think that's because the market participants are more sophisticated and they

“don't just hear tech revolution, therefore, buy tech stocks?”

Or are we just as dumb, but we're being more discerning for some other reason? I think it's always the latter. Right. Good. You sit here and you say, okay, 95% of energy above the 200 day.

That sounds so intimidating. Oh, like it must correct. It's overbought. Go back to us that number. Right.

Where do your best energy returns come from over the next 6 and 12 months? When you're that old, bread thrust in energy. Right. So, yeah. So, again, you see these price cycles now spend the time imagining what could that be telling

us. I think everyone gets this, gets the sequence of events wrong in this business. They start with like, what do I think? That's fine. The price.

See to justify it. No, no. What is price telling us? Now, let's spend some time imagining what that could mean. Let me write some science fiction, alternative science fiction from the, we saw earlier

last week. Nobody is thinking about a world in which tech comes back in the second half of the year. Can you even imagine if these hyperscalers start to come back and we left, obviously met us at a fifth to week? Why do we think it was ever?

And obviously in videos, the leader in AI, why do we think it was going to fall? That's plausible. Nobody's talking about it. I don't disagree. I just wonder, like, does it come back as the dominant leader or does it come back with price

up? I mean, we can have an environment that's, I think we're in a relatively broad tape where tech can be part of that. Is it the story? That's what I'm less convinced of.

I think there's, I think there's one chance of that and it's Apple. Apple could be a market leader again. I think it is. It is now.

It's the only one not tainted with these 600 billion dollar Catholics.

Multi year budgets, they sidesteped it. They said, we're just going to throw our Apple layer on top of whatever you guys build. We're going to talk to 70% of the middle class consumers in the world and we'll be very happy owning the consumer AI opportunity that you guys facilitated with your stupid capex.

Josh, I own it. I don't own it because of that.

“I own it period also, but I actually think that there's a world where that's how”

we're telling the story at the end of the year. I own it because it's on the role of I list and I just want to make that clear. And I ended up in the same place. We end up in the same with the same conclusion, whether your story is right or wrong. I don't know.

I don't care. It's a leader in a tricky case. Isn't that sticking out? Why isn't that sticking out to more people? This is the way I want to ask the question.

Why aren't more people talking about the fact that Apple is within a few good days of a record high with the other mag six down anywhere from 65 to 30, I mean, look at the weekly chart Apple. It's good. I know.

Well, a Gentic series coming, I know that because they have three meetings this, they have three of those events scheduled this year. One of those will be ladies and gentlemen, series your agent. Every app in the app store has to cooperate with Apple, otherwise you might as well be out of business.

Like, what if they are the consumer AI play Amazon owns the enterprise withinthropic? And then Sam Altman and whatever is going on there become features. That is a thing that I don't think enough people are recognizing could happen or Sam Altman goes away. I don't know.

Just right. Don't be surprised with any outcome here. Let me ask you this. What do you do with a stat like this? So sentiment trader shared this.

Market breadth has narrowed significantly in three key cyclical areas. discretionary, financials and technology, fewer than 60% of stocks in these sectors are training by their 50 day moving average, despite the S&P lingering in the year 50 to the time. Historically, this specific type of divergence has proceeded a week and volatile medium

term returns for the broader market. So two and a three months later, positive only 30% of the time and and equals almost 20%. Like it's happened. It's not equals to.

I think, you know, it's funny.

There are two things always confused in this business.

People confuse breath and momentum all the time. So we're talking about discretionary with like 50% above the 50 day moving average. That's a momentum reading. We're not in a particularly like robust momentum environment here.

“But I think discretionary I was looking at before I came here has like 70% with their 50 above”

the 200. So you're still in these long term uptrend. So like, let's distinguish between short term momentum concerns and longer term trends.

And then I have this debate all the time, kind of about where discretionary fits right here, because the policy backdrop is as good as it gets. It's time for the stocks now to validate that. But it does feel late cycle like this. I want to say feel.

I'm just saying the types of stocks that are working and the types of stocks that aren't doesn't feel great. I'm not saying that it can't resolve and figure itself out and correct to the upside it easily. It probably will.

That's like it. That's my base. But what do you guys think? That's a different view than Chris, but I see this every four years in the summer time before midterm election year.

Okay, midterm election year's just tend to be much more volatile than non-midterm election year. Well, we know why, because presidents just run it hot into their midterm election year. What Trump is doing is not different than any other president. Presidents usually get growth stronger in year two.

So the equity markets pricing in this cycleical recovery usually happens in the fourth quarter and first quarter of this year. And then as you move into the second quarter, markets price that. Now think about where we're headed for April tax refunds are done. The Fed will no longer be expanding its balance sheet, new Fed chairman coming in, Trump

G meeting. Right? You got all this geopolitical stuff. You got to start pricing in what's divided government going to look like. It's just a lot for the market to digest.

I mean, this is meaningful. Yes. It's important. It's hard to say this is a coincidence. You're getting more real GDP than you're getting in an S&P 500 return.

Think about that. S&GDP and a 2% return on equities. Okay? So that to me is at play here. You could see it in every single just too many tape bombs potential for a tape bomb.

Totally. Right? I spoke at the National Association of Business Economists this week. So it's all like Fed speakers, it's all like economists at companies. And all they're worried about is this trade stuff that happened with the Supreme Court.

Right? By the way, these people don't like tariffs. And my point to them was very simple.

We just lowered tariffs by $65 billion.

Be happy. Take the win. You know? And they couldn't do it. They were like uncertainty.

No. Literally, we're moving to a 10% rate. So let me ask you this. So year one of a presidential cycle from 94 to today, 17%, year 3%, year 4%, 5% year 2, less than 2%.

“Are there a few outliers that bring the average down or is it consistently ugly?”

It's consistently ugly. Now, people will break it up. Is the Fed easing cycle? Is it a second term? They'll do all that.

And it was the moon in the second house next to Jupiter. But I'm pretty simple here. In 2018, your start it, Trump had just had his tax cut. Everybody was wildly bullish. And then we're in the middle of a trade war by April.

And Trump's tariffs are always going to be here. In 2022, we had a former Fed person in February say, we're going to have to raise five times. And like it was like, wildly at a consensus that inflation was coming. And then it was like, we're going to have Biden's inflation. Something always happens in the midterm election year.

Here's the most amazing news about it. You get a, you get a sell-off like it's a recession.

And we've never had a recession in the third year of a presidency.

It's all noise. Funny. Okay. And so the punch line of all this is that the S&P 500 is not declined in the 12 months following a midterm election ever.

Since 1938, like, literally is like ever, right? So the point being, is that you just got to grind your teeth and be more tactical in the midterm election year.

“And that's what that's what everything you're talking about doing is doing that.”

And the great news is it creates a huge opportunity to be there on the other side. My favorite example of the one you talked about as a team, right? Because she also had a new set share in 18. Right? We had that nasty correction.

I think that said you worried 18, you rallied to make new marginal highs in the summer. And then you have October through Christmas. I remember that. What I'll never forget is Powell. I think it was the December meeting using the language where nowhere near neutral.

Ironically, he was right. They weren't nowhere new. Yes, they had to go there. I'm the other side. Totally.

Like, totally. You had Powell hiking and the cheer you're falling out of bed.

That's a very, very powerful statement.

That's something was off. So now think about it, right? Consumer staples are doomed. Well, right? The defense stocks are doomed.

Well, these are all traditionally defensive areas that you're going into. The market senses that by midyear, you're going to have some of this volatility coming into it. And he sends you fake staples right here. Yeah, right?

Yeah. Well, they're all overboiled, technically, almost all. If you look at a relative, both equal weight and cap weight, it has not turned in a relative model yet. Health care has energy certainly has turned upward.

Turned up. Right. So the relative, our longer-term relative model, health care's positive energy's positive materials. Staples have not turned even on this rally.

“I think you still got to be a little skeptical.”

How are you buying staples here at a higher forward P.E. than the maximum? This is a whole lot. This is a whole lot. Like, by the way, this is great chart. So right now staples are 23.6 times earnings versus max seven forward.

Like, come on.

So now you're buying smoker. What's in this Coke, Pepsi, Coke, it's peanut butter and jelly. Peanut butter and jelly, higher multiple than max seven. I want a paper. Ironically, right?

I don't love staples here. I think the relative's too weak. Actually, this chart would make me want to buy it more than sell it. I don't want to own sectors with P.E.'s falling. I want to own sectors with P.E.'s rising.

I mean, valuation is a momentum indicator. They rise in, or have they risen? Right point. I was just saying that like, if-- But forget about the light blue.

If these more P.E. charts, if these were stock charts,

“and you said, are you buying the blue line or the light blue line?”

You're right. But think about it in terms of expectations. Get rid of the light blue line, the max seven. Just look at the blue line, dark blue. Are you buying an all-time breakout in multiple farm multiple for consumer staples?

You're fading that all day. Well, you didn't want to buy the all-time lows in the P.E. Instagram line. I'm just saying that like, I think I come to my conclusion on let's face staples here, not through this avenue.

I'd also love to see what this chart looks like with Costco removed. I think it might look different. I think Costco trade 60 times Costco is a big one. Yeah.

Everything okay? Yeah, everything good. All right, nice to see you. Let's do this. I want to go to this defense department versus anthropics story.

Yeah. I think it's, I think it's very Trumpian, like it's not surprising at all. But it's sort of new because it's not even a public company.

First, why is anthropics so important to the department of

defense in the government? And second, are these headlines hyperbolic? Or is this really what's going on? Hedge Seth gives anthropics until Friday, let me be tomorrow.

So back down on AI safeguards, WSJ didn't know. Anthropics adds new board members at I.S. and IPO. They put this guy, Chris LaDelle, on who was a Trumpian administration. OK, do you know him?

You know Chris? All right. So anthropics basically now has to do whatever the Trump administration says. What do you think this is all about?

And what do you think investors need to understand about this moment in time? Yeah.

“So I think there's a larger thematic view that's reflective in this”

story. Before the Berlin wall went down, there were 60 prime defense contractors, 60. 60, what do we have now? 10, 5, 5.

OK, we forced them all the consolidate. We're cutting down the budget. Now the defense department can't move quickly. So they're going to the Silicon Valley tech companies and saying we need you to define a solution.

Like we have a problem. We need your solution. Like the Andorals. Absolutely. Andorals the best one, best example of the ball.

Right. And so I look at it. And I'm saying not only is there a bid now for these defense these defense tech companies, you're probably going to start seeing some of the larger companies start to split off their parts.

You saw it with L.A. checks.

They basically diverse it and then join to partnership with the

US on what was the old aeroget rocket dying company that they had bought. And so you're going to see L3 Harris merged with with Harris LL3 merge with Harris. Yeah. OK.

And then they bought aeroget rocket dying. But that's important to the whole defense industry that asset. So the government now has 15% ownership. Use that as an example as you start to think about the anthropic.

“And so by since here is I think Lockheed Martin may break up this”

issue, that's like a like a like a tail event of something like that because the parts of it are so much more valuable than it all together. Oh, they might they might do a spin after having done all these mergers. OK.

So this is this is what's going on in defense world right now. OK. Thropic comes in and they have the greatest product for what the defense department needs right now was used in the valence well and right. There's only one place to go.

Why what is it what is it doing for the department of the what is Anthropic doing like not classified, but like generally speaking, what is the use the use case.

Claude right they're using Claude and it has the basically the

artificial intelligence that allows them to be able to do their missions to do it a lot safer. You know, I hear the Belgian government is using a Jean Claude. Thank you. Awesome.

So follow me for me right. They're only going to have one customer and the department of defense is only going to have one vendor and they're going to come to some sort of solution because they're going to need each other. And they're they both need to drop it lost a contract like a

department of defense. Yep. That's pretty catastrophic for their hopes of going public this year. Absolutely. OK.

So all right. So they call the guy up and they say, we don't want any of this woke shit on the algorithm. We don't want Anthropic to be the version of Facebook that we hated doing the 2016 election.

We don't want regular people utilizing Claude and getting answers back that are anti-American anti-conservative policy blah, blah.

OK.

I also think it's privacy and how the US government's going to use

their product for surveillance. Oh, OK. Like it has a much larger implication on how the defense department can use their products. So when you put that together, it created a lot of tension.

And they will figure out a solution because they both need each other. Anthropic was pitching itself as like where the safe AI, where the version that respects privacy and blah, blah, blah. But now it's like, well, can you really maintain that posture if you want to compete with Open AI, who clearly doesn't give a shit?

“And be, if you want to maintain these government relationships that”

you're now going to need. Yep. OK. Yep. And so again, I think it's so integral to the missions of the Department

of War that they will figure out some sort of solution from it. You start off, and you start off big and say, we're just not going to use you anymore if you don't make these changes, but eventually they'll come to a center ground. All right, guys, I got to get to this gold bitcoin and the dollar.

Yep. And I guess we could take them in order if you guys want. Just on gold, we know it's still being accumulated by central banks. It was a ton of retail interest in gold. I'm sure it's still there, but it seems to have cooled off.

Gunned to my head, it's in the penalty box for the rest of the year, or for the penalty box for six months here. You look at, it was like May of those six. You had a very similar power block with gold, decent correction, and chopped for six months.

I think that's more likely here. I think silver's done. OK. The silver is done. OK.

You look at this rally, you've had the silver. People have been vaporized in that way. You have this bounce. And we talk about tepid bounces. You haven't even retraced 50% of the decline.

“At least in gold, I think you recovered two-thirds of the decline here.”

Silver, I think, is finished. Copper's making new highs. Freeports making new highs. They've got very different animal markets telling you where to go. For me, it's copper, gold in the middle, I could go either way.

I think silver probably fished. Let's do Bitcoin. I thought this was the Bitcoin president. What happened? Where did this story go off the rails?

Went off the rails. July, 2025. Why? Stablecoin legislation passed. Stablecoin legislation mitigates the need for regular bonds.

I said that. So you grew with that. Stablecoin is a better version of what we thought Bitcoin would do. Stablecoin is going to lock in the reserve currency, the US dollar. Right.

It's creating US dollars outside the United States in places you couldn't even get it. And it remains digital. So it scratches that itch of anti-surveillance and anti-whatever. You know what should have been an obvious buy in hindsight circle. So they just reported monster earnings.

Tell the destroyer. Everybody that got washed out in Bitcoin, they're still there. They're still there if they got scared, they're just they're transferring their money to Stablecoins. They're not leaving.

Then I could want to shape Morgan.

“Listen, I think best case on Bitcoin here, I mean, if you look at every decline of”

significance, right? And there's been five or six of them over the last 15 or so years. At a minimum, it took six to 12 months of repair time, just flushing everybody.

But it's always made a new high.

Yeah. And I'll tell you what, it is like tech in that regard, you know, you go back to tech in the 80s and 90s. I mean, tech had multiple, multiple 50% drawdowns, many 80 and 90% drawdowns as well. Like, if you go down 90 and come back, you're typically a survivor because it doesn't

four or five times here. So I still have to tip my hat to it in that regard. But I think there's anyone calling you about it. It's in a 50 something percent drawdown from a high six months ago. And I almost feel like no one wants to talk about it anymore.

You know, it's funny, I think Todd was sitting here. You would show you the chart of the our flows from the I bit right now. So like, you're in that liquidation phase, which is always interesting to us. I think it needs time to report it or is that a symptom, oh, it's always a symptom of the emotional.

So withdrawals from I bit is not causing the Bitcoin price to continue to make the low. I think it's symptomatic. Right. What's the undefeated rule of all street?

It's flows that follow price, not the other way. If it was the other way around, we'd all be. So who is somebody has to be selling besides the ETF then? Yeah. I think crypto Twitter just blown up.

It's just. I mean, right. So what happened to it? So like it's Bitcoin. It's Palantir.

It's Robinhood. It's all the same charm. So the equal way to Q is one out of the day at the highs up 16 basis points. I'm there with a not winning video fell five and six. What was breath?

So in video felt the lows. I don't know. In video felt the lows, five down 5.5 and the equal way Q is up 16 beps. Unbelievable. A lot of strength.

Get used to it. A lot of strength. US dollar. Yeah. US dollars are out in full force.

The dollar decline has been a huge tailwind for Japanese stocks, European stocks, maybe Chinese stocks. What are we thinking on the USD? You guys have like a house view. So we think that this is mechanical, political, maybe a mixture.

What's going on? Yeah.

First, let me say that for like 10 years, the US dollar crushed it, US stocks crushed non-US

stocks. I wake up every day.

You know what? You want to own US assets? It's all nonsense.

“What's happened is the US dollar traded in a range between 2015 and 2019.”

COVID came. The US was the best place to be. We went out. We're just going back to that 2015, 2019. Nothing more than that.

Okay. Wait a minute for right now. Okay. That gets you a barrens cover and an economist cover that the US is going to lose. It's reserved for us two weeks.

I wouldn't be surprised if we bounce here. I had them both already. Both. Yeah. Two weeks ago.

And then it's covered, which one? Economists. Economists go to global cover. It's a snake. Is there a third?

Is there a third? I think those are the two. But we don't need USA today. Maybe so. Wait later.

Yeah. Maybe so. But your bullish rates? Well, let me just say. The effective territory that's moved almost perfectly inversely with the US dollar

as well. So, the territory went up the dollar went down. Territory is going down now. Right? The supply chains are already adjusting.

Now, you're going to have a lowered territory. So, I wouldn't be surprised if you get a bounce. By the way, this gets you back to this. How does tech come back? US that question before?

Because, literally, the Japanese yen trade is the NASDAQ relative to the S&P 500. If you get the dollar up in the yen down, NASDAQ's going to start out performing again. So, you just got to be, you got to be mindful of it. But I wouldn't expect a bounce.

The way we think about Trump, three, three parts strategy, tariffs were the first part.

That's basically done. Second part. Or F.C. The summer. Yeah.

That's true. It's been through all those capex expenditures. That's what we're in right now. The third is to get the dollar down more in the range of where it was 2004, 2005, 2005, 2006, for export.

That's the third. But we're not there yet. That's like post midterm when you actually start to see that. So, I wouldn't be surprised if we have another, like, lower on the dollar. But, perhaps, ultimate fighting exports.

I think not. Think it's great. And as you noted, in your two of Trump on now, dollar really pretty good. Yeah. You guys have a chart, Daniel, chart 22, please.

If this, you pose this question. If this was a stock, would you be longer short, and you're showing US market cap as a percentage of global market cap. Oh, boy.

And you are saying it peaked early last year, rally timidly in the second half, 25, and

now we can again, because this roll hard. And that international trade have another six months, a year or two years to go. But, like, that's the thing, like, this didn't peak January 1st of this year.

“Now, this peaked November of 24th, I think, right?”

It's the hyperscalers stop going up though, right? Like, basically, it's a lot more than that. I mean, look at the raging bull market. You have in Japan. Look at the raging bull market.

You have in Latin America. Yes. You know, the Japan thing is really funny to me, right? No one wanted to own Nikke, because they were all worried about JDB yields going up. Well, you know what's stopped happening?

JDB yields have stopped going up. I mean, the 40-year-old JDB yields down 70 basis points since the election. And everyone's still skeptical of owning Japan here. You went nowhere for 40 years in Nikke, nowhere. The breakout was last September, 40-year breakout, and your target's not a double.

But 90-200K in Nikke should be your target there. No one's there. So, this could, this could keep going. I think this is one of the investors or, or position. Nobody buys that chart.

Nobody buys that chart. This is one of those regime-changed moments. Now, in the short term, is this very overdone? Do you get some bounce and tech and some, of course. What's, what's the longer term trend here?

I mean, just to go back to where we were in 2223s, another, you know, 700 bips of market cap relative to what I would be remiss though, if I didn't remind people, there's an industry mixed story here, totally. These markets are, and Hela, so Hela will know, but like, Europe is not a tech market. Japan has tech, but also has big manufacturing exporting banks, like the compositions

are not equal. Let me, let me just say, the political news is different than the investment news. That's a wildly bullish chart. That's what Donald Trump wants. He wants Europe spending money on its own economy.

He wants Japan to get out of its 30-year decline. And they say, "Oh, this is a, this is a terrible thing for the US." And he's like, "No, they're starting to pay their own way that we don't have to carry that low-level." And we sell into those markets.

Yes. Right. Absolutely. You guys have some of the most interesting, thematic ETFs I have ever seen. Thank you.

We're not here to promote ETFs. All standard disclaimers apply. Yep. Right? Okay.

Let's get that out of the way.

“Can you tell us a little bit about the ideas behind these, and who's using them?”

Let's start with this one. This one's a little bit more, well, easy to understand. Macro thematic opportunity to ETF. This is same-tay. Yep.

Is this the flagship ETF? Absolutely. That is the flagship ETF. Okay. When did you launch it and tell us how people use it?

Okay. I guess there's about three and a half years. January 22. So January 22. Right.

So before the bear mark time, that was great. Excellent. And that's run by our investment strategy team at Stratagus.

So Jason Tranner, Ryan Gibbonsky, and, you know, they're basically doing four different

So right now, when you buy an ETF, you're buying a macro theme. You got to know when to get in and when to get out. You have professionals who now do that rotation. It's constantly changing, and they've had two just incredible years. Over last year.

I always tell you, you got to rotate your macro themes.

Yeah. Wait. So what are the themes that are being rotated amongst? So right now, their themes are-- Globalization.

Globalization. Globalization. Yeah. Consumer 2026, kind of the return of the consumer, kind of a multi-polar world, and what's for?

Probably out of four. Yeah. - Yes, that's the ultimate point. - That's the ultimate point.

“- All right, that's what sports team isn't a bad theme.”

- Not that, I wrote. - Street, Street is global policy opportunities, ETF, S-A-G-P, this one sounds like you're involved. That's the one I run. - Okay, okay. - So, tell me that. - So, in 2008,

there were, if you asked the S&P 500 companies, what's their greatest risk? 25% would say the government. That was healthcare and defense stocks, maybe utilities. By 2018, 10 years later,

that number was over 52% saying the US government was their top risk.

75% either first or second risk.

- Okay. - Okay, so this is why policies important. And what we figured out is that lobbying is a factor that could actually influence returns. Companies go in and they lobby Washington with the idea that they're gonna get

some sort of return on their investment. - Right. - So, we had a long history of doing this, just on the large cap space, a very successful period where we were doing it, but we were doing it like private SMA and investors were like,

we need a more public access to it. So, we basically built this little different than our large cap. It has three buckets. It has large cap U.S. equities.

“It has small and meet cap U.S. equities.”

By the way, you get a lobbying win at a small cap level. It really moves the needle relative to those stocks. - Those stocks could double, but we have 40% non-US. Because there is a whole industry of non-US companies that feel that they have to be at the table in Washington

or they'll get beat up on the national ones. - You quantify this or is this more like the things that you're hearing or the things down? - Oh, no, it's all quant. So, there's very little subjective analysis

that goes into this. - So, looking at the dollar amount level of spend. - Okay, so now if I do that, I have the Dow 30 and some tobacco companies. - Okay.

- When we tested it, it didn't work. What we found was that you got to capture the intensity, the lobbying relative to the size of the company. So, we have long owned a company called Vertex in there. Vertex Farmer Suitacles.

They don't spend a lot of money on lobby, maybe $400,000. But they are making people's lives better with cystic fibrosis every single day. And they're down in Washington telling that story

and saying, okay, if you're gonna do drug pricing, we don't wanna get hit, 'cause our drug cost $250,000. - Yeah. - Now you can verse that with Gilead. Gilead cured hepatitis C and had no lobbying dollars

at that point. They didn't tell anybody that they had this revolution that was gonna save the government all this money. And they got burned. They got hit, because the managed care companies were like,

we don't wanna pay $80,000 for this drug. - Interesting. - Okay, so you're bullish when you see it increase in lobbying dollars. - All this. - We love it, and not just in a defensive mood like,

"Oh, I'm in trouble, let me go spend lobbying dollars." You wanna own the compounders. The companies that have built a presence in Washington that could withstand all of this noise and the constant changing of political parties.

- Who are those? - Gilead. It's like a great meta is another good company on that. Lockheed Martin is another good company. You can go industry by industry.

There's going to be leaders in the lobbying level. I'm just giving you the large cap side. I mean, but like, Hyundai, in South Korea, really, really prominent lobbyers in Washington given the nature of their mix of what they're trying to do.

- Sounds like you have a lot of fun running that fun. - It's amazing. - And it's just very differentiated because there's no real relation to any of the other types of fun.

- It's totally different. - It's totally different.

- It's never seen anybody doing that.

- And it's been pretty well. - Okay. - And the last one, Matt Gromo meant to me, TFCM. This one sounds like you have something to do with it. - What I do?

This is the one I run, SAMM, Mary Mary. It's exactly what our processes, right? We're trying to identify through price where the narrative will be in six months or 12 months. So our whole focus is relative momentum.

What is on the relative high list every day?

“And how can we take positions that are way out sized?”

What relative to the sector is? So I'll give you an example right now. We have a double waiting in energy. We have a double waiting in healthcare. That's where the relative momentum has been

for the last handful of months. We have a very big waiting in industrials. This is all about price first narrative seconds. So it's, I think, a very good compliment to kind of our first, how often will you make changes?

I mean, we make changes were so self-disciplined. So we make changes sometimes every day, sometimes every couple days, in terms of kind of managing where is the relative rate?

Like, you have a double energy one day

and then the next thing. - No, no. - Like that, as an example, took four, five months to come to that position, everything we do is incremental. When you're a trend follower or a journalist,

everything is incremental. So we incrementally kind of get to these positions, which is big in healthcare right now, big in energy, a lot of cyclicals on the other side.

“But I think the great thing about this is”

because it's really based on a trend following system, we have the ability to go completely cash, right? I think the true test of any fun manager is what are you doing in a bear market, right? So, you know, God willing, we don't have the bear market,

but we can be 100% cash, we can be 100% bonds, and 100% gold, wherever the market is telling us we need to get to, we can get to in a very agile way before the narrative shows up. - I am launching a ETF.

- I've heard congratulations, so. - We can't talk about this. - No, no, no, no. You don't even know what my product is. - I am taking your fund, the lobbying intensity.

Utilizing your macro overlay, and I'm basically gonna take the best momentum politically, all right, I'm gonna, I mean, I do that.

You guys never looked into like when your stuff aligns

with your stuff, that's gotta be very powerful, concentrations. - I gotta say, we talk about this all the time.

“There's a few times a year, I think where,”

I mean, what dances in DC, there's no one better, he sees it before, it's on the front page of the newspaper. When it's shown up in your work, and it's also shown up in my life. - That's what I mean.

- And then it's my product. - It's kind of bigger, somatic idea that Jason may have. I mean, that's where the magic of our firm, I think comes together, I mean, the fact we've all

been together for 20 years. - Yeah, 20 years. - You also were Markovine. - That's awesome. - That's awesome.

- You guys have fun on the show today? - Oh, we had a voice. - Yeah, we have it on us. - Oh, we are so happy to see you. Can't believe it took us this long to do this show,

but we had the best time. We would love to have you guys back, and we want to let people know where they can get more of your thought leadership, where can they follow you guys?

Where's your, you have like a social network of choice that you put it info out of? - Yeah, no. - If you think so, our website, StraticusRP for researchpartners.com.

- Awesome. - Okay. - Our three TFs, SAGPSAMM and SAMT. - Okay. Twitter linked in, or I get not Twitter right,

X linked in, all the places we traffic. - All right, we're about you, and if you're special, everything is the same. - All right, awesome. - Guys, thank you. - All right.

- We always end the show asking people

to name one thing that they're looking forward to. - Yeah. - And it could be anything. What are you, what are you looking forward to? - I'll give you two.

- World Baseball Classic Championship in March. - Okay. - And the midterm election actually get in here, so that we can go back to normal and get rid of those issues. - That's your Super Bowl, right?

Sort of. - Absolutely. - All right, well, it'll come soon enough. - What about you?

“- Two things, I think the master is just having to be alive.”

I'm happy to be out of Mexico. I think the master is a six weeks away. I'm looking forward to the master's, the best week of the year. And I guess what I'm looking forward, like this is the most exciting macro environment I've ever seen.

Like God willing it continues, this is fun. So we're having fun. - All right, well it's great to hear. Dan Clifton, ladies and gentlemen, Chris Verone, StratigusRP.com.

Guys, thank you so much for watching and listening. - Wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait. Oh no, it's not spread out. - Oh, you shouldn't have. - Stay tuned. - See you. - Happy birthday, dear Josh. - Thank you guys. - Happy birthday, thank you.

- Thank you. - All right, thank you. - Are you on one side? - Thank you. - No, we have to go there. - Yeah. - 49, for the little Christmas. - Nice. - All right, I already thought it was out.

- Good luck. - Okay. - Thank you guys. - Thanks everybody. - We'll see you next week.