The Compound and Friends
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.
01:07:38 · Josh Brown, Alex Altmann
[01:07:38] S0: People don't wanna hear it anymore. [01:07:39] S1: And you know who the first were to to really sort of cry wolf about that? It was Uber. No. It was the Asian investor... Investment community. Because even at this... At the... When was this? Right at the beginning of September, that's when I was out there in Hong Kong and Singapore. And I came out there with, like, my big, oh, I don't know where the AI revenue is gonna come from. I'm being really smart about this. And I went out there, and every single meeting every single meeting, I had pushback. Being there would be like, what do you mean? Like, the semis are trading so cheap and this and that. And I would give them my whole rationale as to why I I I I was sort of cautious. And at the end of the conversation, 90% of them would go, yeah, we agree with you. [01:08:15] S0: Oh my god. I Look at you. Look at you. [01:08:20] S1: Love that. [01:08:21] S0: And then... And... But so that's... So the realization for you is, okay, there's this facade of everybody wants to seem positive, but everybody has that same reservation or that same concern deep down. [01:08:32] S1: Yeah. I mean, look look at the poll poll I sent around today. The vast majority of investors still want to be bullish. Right? They want to buy semis because they're cheap. Right? They want to be in the AI trade because they use it and they [01:08:46] S0: I think they wanna be seen as they get it is another big component to this. [01:08:50] S1: Mass... Very much on the West Coast, though.
01:08:50 · Alex Altmann, Josh Brown, Michael Batnick
[01:08:50] S1: Mass... Very much on the West Coast, though. [01:08:52] S0: Yeah. People don't wanna be the anti AI guy. You look like a crazy person or a loser. [01:08:57] S1: Well, also, chances are if you've been anti AI any period for the past three years, [01:09:01] S0: you You look like an idiot. [01:09:02] S1: Or you've been out... You've lost your job. [01:09:03] S0: You've lost your... Okay. I agree with that. [01:09:05] S2: So allies for the year end, but we're not super bearish. Just a little bit bearish. [01:09:08] S1: No. I'm I'm... Like, as I said, I mean Tactically bearish bearish. [01:09:12] S0: Due to positioning. Yeah. [01:09:12] S2: There we go. Perfect. [01:09:14] S0: Is that fair? [01:09:15] S1: I think it's pretty fair. [01:09:16] S0: Why do they call you ulti? [01:09:18] S1: Why do they call me ulti? So when I when I started in high school... [01:09:23] S0: Because I have a better nickname for you, but I'm not gonna say it until you you say why. [01:09:26] S1: Oh, I thought you were gonna say it off off [01:09:28] S0: the air. No. I wanna hear... Like, where where did the nickname come from? [01:09:30] S1: Okay. So in my... When I went... Gone to high school, there were five Alexes in my class. Five Alexes, two Alisters, one Alec, and one Ali. K. Right? So everyone got last name. Everyone got... I I went to this sort of, like, fancy school in London. [01:09:44] S0: I can't believe it. [01:09:45] S1: That's where the... The accent's real. And and and so everyone got called by their by their last name. Right? [01:09:51] S0: Oh, okay.