The Compound and Friends
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.
01:03:45 · Alex Altmann, Josh Brown
[01:03:45] S1: So That's a... You knew that joke. [01:03:46] S0: So is the mark... So is the so is the market now going through the throes of this realization that there's just not enough revenue to make any of this make sense until all the prices adjust? Is that what that what we're living through?
01:04:00 · Alex Altmann
[01:04:00] S1: I think we're living through an... A reassessment about... On the ROI debate, which, by the way, has not... It's not the first time. We had we had that debate in 2024 too, and it came with a CapEx hit... Hickey in the summer at the same time with the BOJ and a weak NFP, and the S and P took, like, a 12, 14% Right. Dent then as well. And we had one in 2025, although it was commingled with everything was going on with tariffs. So to have these AI summers and winters is not uncommon. Right? And so the end of August was sort of our demarcation to say, alright. I'm ready to lean into a much more bearish view on AI because of that revenue aspect. And then we also had sort of separately, but related, talked about this sort of competition for capital narrative back in the summer as well. And then we sort of just merged those two stories together, and that's kind of where we sit today. So our quant model is tell... Still telling us be very bearish tactically. Right? Camouflage. And then and then the AI bit and the financing bit. So people say, like, oh, what's the catalyst for the market to go down? I'm like, at this point, I don't really need a catalyst. Right? I'm kind of like, you've got all the ingredients. They're already there. The financing bit's kind of already catalyzing. The revenue bit, I just don't think there is a specific catalyst that we can really lean into. The CapEx commitments are kind of already there, so those numbers aren't changing at the very earliest until probably the full year results in January. Right? So I'm like... And then our quant model is kind of telling you that real rates are high, spot vol correlation is high, that CTAs, vol control... More... Less CTAs, more vol control and QIS strategies are extremely long equity risk right now. Retail is extremely long equity