The Compound and Friends
00:44:11 · Josh Brown, Michael Batnick
[00:44:11] S0: Yeah. I think we will end up with more memory on the market somehow. The Chinese, the Koreans, they're not just... The Chinese. No, they are actively working on bringing more memory for their own benefit. I can't imagine it stays this way. So I understand why do the for the next couple of years, but [00:44:36] S1: Why did the memory stocks get whacked off to the extent that they did? We were talking with Alex last week. I really think it's positioning. I think there's just too much Yeah, [00:44:43] S0: people trading on margin, 100%. Like double ETFs and options, and there's more going on than just the fundamentals. [00:44:51] S1: I understand that it's pricing in like the peak that that's never going be worse than this or better than this. And I get that. That's why I traded four times earnings, but I think a lot of the unwind that I think a lot of the narrative that we're seeing is price driven, not fundamentally driven. And it was a lot of leverage, a lot of piling in.
00:44:51 · Michael Batnick, Josh Brown
[00:44:51] S1: I understand that it's pricing in like the peak that that's never going be worse than this or better than this. And I get that. That's why I traded four times earnings, but I think a lot of the unwind that I think a lot of the narrative that we're seeing is price driven, not fundamentally driven. And it was a lot of leverage, a lot of piling in. [00:45:06] S0: Dude, what went on in the KOSPI this summer was downright chaotic. This is an entire country stock market caught up in two or three tickers. And people they had to pass new rules about trading and leverage. People absolutely lost their minds. And the thing to keep in mind is you turn on CNBC or you open up your brokerage app and you look at stock prices, just always remember what you're seeing is an equation with three variables. What are today's fundamentals? What is the sentiment toward the companies? And then what are people guessing about future fundamentals that are unknowable? And it's some combination of those three things that's dictating the prices. And then if you have a lot of leverage layered on top, it's another variable that is equally unknowable, which is which people have to sell or who's being forced to buy in the case of a short squeeze. And it's like, then you could throw the fundamentals out the window. And so this idea that we could just glance at the screen and get the vibe check of the state of the AI trade at any given moment in time, it's bullshit. It's a mirage.
00:45:06 · Josh Brown, Michael Batnick
[00:45:06] S0: Dude, what went on in the KOSPI this summer was downright chaotic. This is an entire country stock market caught up in two or three tickers. And people they had to pass new rules about trading and leverage. People absolutely lost their minds. And the thing to keep in mind is you turn on CNBC or you open up your brokerage app and you look at stock prices, just always remember what you're seeing is an equation with three variables. What are today's fundamentals? What is the sentiment toward the companies? And then what are people guessing about future fundamentals that are unknowable? And it's some combination of those three things that's dictating the prices. And then if you have a lot of leverage layered on top, it's another variable that is equally unknowable, which is which people have to sell or who's being forced to buy in the case of a short squeeze. And it's like, then you could throw the fundamentals out the window. And so this idea that we could just glance at the screen and get the vibe check of the state of the AI trade at any given moment in time, it's bullshit. It's a mirage. [00:46:24] S1: It's also ping ponging. It's ping ponging back and Josh, forth the other just take a quick victory lap. I know we did this already, but about this Apple stuff. You were 100% right about Apple becoming the edge. So there's some good data from Yahoo Finance about this. [00:46:36] S0: Probably means time to sell because now everybody's saying it's the hedge. All right. Put the Oh, first that's chart a [00:46:45] S1: great chart.
00:46:45 · Michael Batnick, Josh Brown
[00:46:45] S1: great chart. [00:46:46] S0: Yeah. Is this coming from Jared Blikre? I don't know how to pronounce his name. I like the guy. [00:46:52] S1: How do you spell it? [00:46:52] S0: He's b l I k r e. I like the guy. He's doing really great. [00:46:58] S1: That's that's true. Yeah. Blicker? Is is the r silent? Is it Blake? [00:47:05] S0: Believe the r is pronounced like a q because he is Macedonian. Anyway, I like the guy. He's a good writer, and I think he's covering the market in a really intelligent way for Yahoo Finance. This is Apple turning into a hedge. So what you're seeing here is the share of days Apple stock rose while the SOX, which is the Philly Semiconductor Index, fell by 2% or more. And this is by year. So this is every year. And this year, 65% of the time, when the stocks is down 2% or more, Apple is higher. What does that tell you? It is literally exactly what we said was going to happen. Apple is like the anti AI large cap tech trade. Put up the second one. Apple's CapEx, it almost can't be seen on the chart. It's so small. So this is CapEx over the last four quarters. I guess the difference over the last four quarters, Apple has grown by 10,000,000,000 Amazon has grown by $215,000,000,000 [00:48:17] S1: And they said that it's going be meaningfully higher next year. [00:48:23] S0: Yeah. So, I thought we got this one right. And there's a whole video on it from whenever September, if anybody Before wants to
00:48:23 · Josh Brown, Michael Batnick
[00:48:23] S0: Yeah. So, I thought we got this one right. And there's a whole video on it from whenever September, if anybody Before wants to [00:48:30] S1: we move on to the next topic, Bespoke had an interesting chart. Google searches for AI bubble exploded in the last week of October to more than twice the previous autumn highs. Would you consider that a warning sign or a contrarian signal? And honestly, I don't know. I mean, I'll in tell six months. [00:48:44] S0: No, it's not a contrarian signal because people have been saying bubble the whole time. How do you time that? People are saying bubble three years ago. No, no, first time Hold The first time in video, you broke a trillion dollar market cap, people said bubble. [00:48:57] S1: Literal Google searches, not squishy stuff. [00:49:02] S0: Explain it. Wake me up and we could see the OpenAI searches too because now those are 20%. [00:49:08] S1: Alright. So next topic. [00:49:10] S0: What do we have? [00:49:11] S1: Unless there's anything else you had. [00:49:13] S0: Are we doing I mean, this [00:49:14] S1: is a good segue. This is a good segue to hedging. [00:49:16] S0: Alright. Oh, I wanna do the Kevin Warsh thing. Just a quote. React to this. [00:49:21] S1: Uh-huh.
00:49:21 · Michael Batnick, Josh Brown
[00:49:21] S1: Uh-huh. [00:49:22] S0: It's in The Wall Street Journal on October 28. Quote, there was a narrative for a while, maybe even in this room, over the course of the last several press conferences that tighter monetary policy is, quote, not going to have any effect on AI because the returns that investors are expecting are so different, Warsh said, quote, I was skeptical of that view. Interest rates get in the cracks. Interest rates affect, directly or indirectly, almost everything, end quote. What are your thoughts? [00:50:05] S1: So that certainly was the narrative. It's not anymore. Wasn't. Yeah. And two weeks ago, when the Neoclouds really fell out of bed, Last week, we played the clip from the CEO of, of Nebius saying that certain certain debt is just closed. Just certain funding is just not available anymore. And so it took everything down with it. Yeah. But I don't know [00:50:32] S0: In the cracks being the interesting part. Like, the the the Neoclouds, which I have more on later in the show, that's what he means. That's what's in the cracks. [00:50:42] S1: So I don't I don't know that it is effect. I don't know that interest rates today, certainly not overnight rates. I know everything is priced off of that, I suppose. I don't think interest rates today are impacting the hyperscalers. I think it's a lot of other shit that's impacting the price. [00:50:56] S0: I would just say it's part of the story. And maybe it's the most unexpected part if you were to rewind back to January. Was anyone worried about interest rates impacting the financing costs for all