The Compound and Friends
00:57:47 · Josh Brown, Alex Altmann
[00:57:47] S0: Versus the environment that most of us have grown up in. So tell us what you think is... What's going on here? What's the implications? [00:57:55] S1: So we we did... We produced this chart a few months ago, and and I'm I'm quite happy to say that it's... A lot of it was based upon predicted or estimated for 2026, and for the most part, we've been pretty accurate on this. So, and the easy bit is IG. We know really what gross issuance, Sorry. This is just an equity. So we know broadly what the m and a slice is gonna be because a lot of... Most announced m and a is sort of completing in the year, so that... That's sort of easy. [00:58:24] S0: So the deals that were announced in twenties... The deals that were announced in the first half of twenty six Yeah. You you have a reasonable amount of certainty, like most of them will go through, and they'll happen in the second half of twenty six. [00:58:35] S1: Exactly. So how much stock is getting issued, how much stock is being retired from the m and a. Okay. And then and then, obviously, from the actual... The issuance perspective, we also have at the money offerings from hyperscalers. We have converts. We have, you know, any other, additional equity raises that need to be done. And then, obviously, we have IPOs. Right? So IPOs is probably the bigger moving target, that and the At the Money offering. And, obviously, we had one large out... IPO this year. [00:59:03] S0: We'll have the two biggest of all time inside of six months. [00:59:06] S1: Well, I mean, who
00:59:06 · Alex Altmann, Josh Brown
[00:59:06] S1: Well, I mean, who [00:59:06] S0: knows what what and then Anthropic if it if it works. [00:59:09] S1: SpaceX and Anthropic, obviously, OpenAI got punted into into 2027, we think. So... But, obviously, this is just a '26 forecast. So the idea being... And the the one thing that we didn't solve for... We we solve for, what we guessed, is that the buybacks... You'll see that the the the red line or the red bar is basically flat year on year. So what we did was we... Executions in buybacks are always gonna be less than announcements. Everyone, like, loves to highlight, oh, $1,200,000,000,000 of announced buybacks. I'm like, yeah. But if you... [00:59:36] S0: What authorized but not completed? [00:59:38] S1: Correct. And and and the execution rate is typically somewhere between 6070% of the authorization. They never they never complete all of it. And so we we basically said, alright. We'll keep it static year on year, which I actually think is quite a generous number because of... You know, let's face it. All these businesses that are doing buybacks historically are now doing a massive CapEx program. So I don't even know if we're gonna reach that kind of buyback number. But given the benefit of the doubt to say, yes, they'll do approximately the same number as last year, You can clearly see that the gross issuance has exploded. A lot of that's because of IPOs. And, consequently, you've you've... You haven't increased your buyback.
00:59:38 · Alex Altmann, Josh Brown
[00:59:38] S1: Correct. And and and the execution rate is typically somewhere between 6070% of the authorization. They never they never complete all of it. And so we we basically said, alright. We'll keep it static year on year, which I actually think is quite a generous number because of... You know, let's face it. All these businesses that are doing buybacks historically are now doing a massive CapEx program. So I don't even know if we're gonna reach that kind of buyback number. But given the benefit of the doubt to say, yes, they'll do approximately the same number as last year, You can clearly see that the gross issuance has exploded. A lot of that's because of IPOs. And, consequently, you've you've... You haven't increased your buyback. [01:00:16] S0: Blue bars along the top. Exactly. It is now double the size of last year ish, like, just eyeballing the issuance, the new stock. Yep. Does this keep... I mean, can it... Is there a theoretical limit where it has to stop?
01:00:16 · Josh Brown, Alex Altmann, Michael Batnick
[01:00:16] S0: Blue bars along the top. Exactly. It is now double the size of last year ish, like, just eyeballing the issuance, the new stock. Yep. Does this keep... I mean, can it... Is there a theoretical limit where it has to stop? [01:00:31] S1: Well, there there isn't a theoretical limit, but you... If you sort of hark back to the the .com period, you know, you can obviously see in ninety nine, two thousand, you were dealing with sort of similar explosion in the numbers. I know they look small by today's comparison, but at the time, they were massive. And, ultimately, if you remember what broke the equity market back in .com, we had a prolonged period of of negative equity risk premium, but that had been bad persisted for years. It was the fact that we were just bringing too much paper to the market, and the economics of those deals just didn't make any sense. [01:01:02] S2: Yeah. Right? We got some interesting news in the after hours. [01:01:05] S1: Oh, yeah? Amazon? [01:01:06] S2: Intel down 25%. [01:01:09] S0: Is that bullish? [01:01:10] S2: Amazon. Guys, Amazon down 12. [01:01:13] S1: Is that... Is Intel the one the government owns? [01:01:16] S2: I did also own [01:01:17] S0: a nice chunk. [01:01:17] S2: Don't worry. Sandisk is down nine. [01:01:19] S0: Oh. Amazon Amazon is down 12? [01:01:22] S2: Right right off the bat. Semis were down 4%. So... Alright. Tomorrow's gonna be a day. [01:01:27] S1: There we go. Did I did I mention I'm bearish?
01:01:27 · Alex Altmann, Josh Brown, Michael Batnick
[01:01:27] S1: There we go. Did I did I mention I'm bearish? [01:01:30] S0: Positioning. What what is your outlook between now and the end of the year? That that seems to be your time frame. [01:01:36] S1: Couldn't we have led with that? Because because now now I look like, oh, I'm bearish. [01:01:39] S0: No. No. No. I read all your stuff. I know that you've been, I I wouldn't say getting, like, more risk off, but most of your notes are cautioning. [01:01:47] S2: No. We know you've been wrong all year until now. What [01:01:51] S0: do you what do you tell... What do you... What is the message from the bets research just about the environment, let's say, between now and and year end? [01:02:00] S1: Okay. So backdrop is... I mentioned, Betty, our sort of quantitative framework. So that basically had been signaling various degrees of risk off ever since the end of May. So that... We we were, like, mega bullish through the Iran thing, and then end of May, we were like, okay. This is this is... Our model was just telling us to get out, like, really to reduce risk. And then we had that big momentum unwind in the summer. Right? At the end of August, we we changed our fundamental assessment. We were still cautious on the market, but it was like, okay. We have no idea where these AI revenues are gonna come from. You know, we need a trillion dollars of revenues, basically, by the end of twenty twenty eight to pay for all of this CapEx. All the commitments in CapEx. Yeah. And right now, our run rate for then is gonna be somewhere around about 400. Right? [01:02:42] S0: Okay.
01:02:42 · Josh Brown, Alex Altmann, Michael Batnick
[01:02:42] S0: Okay. [01:02:42] S1: It's just we're we're not there. We need to plug that gap. And so, you know, we went out to Asia. We really just went to the lion's den, spoke to a bunch of investors out there, we're like, hey. This is our whole road map. This is basically where the CapEx is. The CapEx number can't go any higher, 1,200,000,000,000 for next year, one 0.4 for the year after. Like, maybe it moves by a 100,000,000,000 here and there, but we're kind of at terminal point now. I just don't see where the revenue's gonna come from. S and P top line, $17,000,000,000,000. It's about $5,500,000,000,000 of profits. And we will say all of a sudden we're gonna magic a trillion dollars. The cumulative revenue of Apple and Microsoft, two of the most successful tech companies in history since 1990 to today, right, has been $9,800,000,000,000 inflation adjusted. Right? Not even 10,000,000,000,000. Meanwhile, SpaceX are telling you that their TAM's 30. Right? So... Or the the TAM of the universe. [01:03:31] S0: Fairness, their TAM is every dollar ever spent on human capital. [01:03:35] S1: Out in the universe. [01:03:36] S0: Right. [01:03:37] S1: Right? It's not just Ever again. Not just on Earth. So it's the GDP of America. [01:03:41] S0: Have to adjust for Pluto, Neptune. [01:03:43] S2: That's right. [01:03:43] S0: Yeah. Uranus. Okay. [01:03:45] S1: So That's a... You knew that joke.