The Compound and Friends
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
01:05:37 · Josh Brown, Alex Altmann, Michael Batnick
[01:05:37] S0: risk. The bulls might be trapped at least for the time being until expectations change or prices change. [01:05:44] S1: Yeah. So people say, like, what what would get you more bullish? Well, you know, again, our our quant framework would be helpful for that. But, really, just for me, the clearing price of risk being lower just would be, quite frankly, very healthy for this market even if it comes with some near term damage. [01:05:57] S0: We could [01:05:58] S2: use a little bit of a slap on the wrist. It's been a minute. [01:06:00] S1: It has been a minute. [01:06:01] S2: You know? Been below 20 forever and ever. [01:06:02] S1: And the largest pullback we had so far in 2026 around Iran, I think, was eight and a half percent. Not enough. It's... It wasn't a lot. So the... In my head, I've got between seventy one and seventy two hundred, which is around the two hundred day moving average. Right? That gets us down to about 17 and a half times forward NTMPE. [01:06:19] S0: Take a lot of risk out along the way to get, like, at that level. You're just repricing everything, basically. [01:06:25] S1: You reprice everything, and then we... I think we can go again. You know? I think there's probably another round of chip financing. There's probably another interesting [01:06:31] S0: More innovations that people get excited about. [01:06:33] S1: Yeah. Like, I mean, did you remember when the iPhone came out, the most exciting bit of technology at the time was when you had that app that you could, like, drink a beer. You know? It had the gyroscope in it.
01:06:33 · Alex Altmann, Josh Brown, Michael Batnick
[01:06:33] S1: Yeah. Like, I mean, did you remember when the iPhone came out, the most exciting bit of technology at the time was when you had that app that you could, like, drink a beer. You know? It had the gyroscope in it. [01:06:43] S0: The beer app. [01:06:44] S1: Yeah. Like, clearly, that was not peak iPhone. Right? So I don't think we've yet even discovered or even imagined what peak AI is gonna look like years from now. So I'm being a very... I'm trying to be very open minded about the bullish aspect of AI too. Everyone's like, oh, you're just a bear. I'm like, first of all, I haven't been a bear all year. And secondly, like [01:07:02] S0: And it's tact... What you're saying is tactical. [01:07:04] S2: We've spoken to bears. This is not... This is No. [01:07:06] S0: Because then you get into q one, and some biotech company says, we just got through a phase three trial 30% faster than we would have without AI or the robot starts showing up in workplaces. It's just... Like, there'll be more to it, but I do agree with you. Like, alright. Now we're getting these tech earnings and the reaction is negative. Yeah. Where do we go from here if not a a repricing reversal? [01:07:31] S2: The CapEx spend, as we're seeing... As we're learning with these earnings announcements, it's exhausted. People are just not buying up... Buying it anymore, the stock price. [01:07:38] S0: People don't wanna hear it anymore.