The "Titanic" indicator flashes, Elon's $1 trillion pay package, Draftkings vs Robinhood

Ladies and gentlemen, welcome to an all-new edition of What Are Your Thoughts? Starring me, Downtown Josh Brown, and my partner, Michael Batnick. We had an awesome show for you, and I'm so excited that you're here. I'd like to give a shout-out to our sponsor, Grayscale, curious about investing in crypto and not sure where to start. Start with Grayscale. More on our friends at Grayscale in just a moment. Tonight's show is pretty loaded. We get into, believe it or not, quantum computing.

We look at some of the biggest falling knives of the year and ask the question of whether or not any of them are worth taking a look at. We cover the Elon quote unquote trillion dollar pay package and the Titanic indicator. Whatever that is, I think we have a really interesting discussion around internals in the stock market. And if we're not looking at that, what should we be looking at? So stick around. You're going to love the show. I'll have the boys send you in right now.

Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

Okay. Mm-hmm. We all set? We all good? Technically? Technically speaking? Okay. Fundamentally. All right. Hey, guys. Welcome. Welcome to an all new edition of What Are Your Thoughts? As you could probably tell, we are slightly ahead of schedule pre-taping. If you are watching live on YouTube, the chat is live.

So we're all with each other watching. Anyway, Michael and I, every week on Tuesday, get together and discuss the biggest stories in the market, all the things that are moving stock prices. um all the the latest developments and we have an absolute blast doing it for those of you watching on video welcome and for those of you listening to the audio version you know we love you all right we have a sponsor tonight we're going to uh

Give a quick shout out and we will get on with the show. Michael, who do we have? Josh, curious about investing in crypto. I'm not sure where to start. I am. Great scale. Grayscale is the world's largest crypto-focused investment platform and has been in crypto since 2013. That's a long time when you consider how early we still are in crypto adoption. Gosh, right is this.

Grayscale also offers the widest selection of crypto investment products in the U.S., over 30 different funds for investors to choose from. That's plenty of choice for both first-time crypto investors. That's plenty of choice for both first-time crypto investors.

I got to put the mic down. You may not be considering crypto for your portfolio. Are you doing it? I'm doing it. But whenever you're ready, Grayscale can be your guide. Grayscale, invest in your share of the future. Investing involves risk. including loss of principal. For more information, visit greyscale.com. Thank you, Greyscale. Sorry on behalf of Josh. Let's get to the show. All right. My bad. My bad. All right, guys, this is...

I think an interesting week because you just have had this explosive comeback in large cap tech yet again. Like every time it looks like these stocks are. faltering a little bit or the headlines have turned negative, the next day you get this huge rally in the NASDAQ and you get the same old, same old. And I know people are looking for a turning point.

And they're pulling out all the stops, trying to find reasons why we're about to have one. It just like it's 24 hours. And then the next day, it's like, oh, my God, the Mag 7 is up again. The AI trade is back. Is that the way you are interpreting it? That is exactly right. And until we see-

a 2000 level type of divergence where you see the rest of the market crashing and only the leadership holding up the index. I think a lot of this data that we're about to talk about is interesting, but I think it might be noisy.

So for example, I'm about to bring the noise. And it's good noise. It's quality noise. Dean Christians at Turning Point Market Research, who used to be at Sentiment Trader, they do great stuff. So they have this thing called the Titanic signal. And what that means is they're looking at the S&P 1500. When you have stocks that recorded more 52-week lows than highs for five straight sessions.

Within a week of a multi-year high, the results on a forward basis are mixed to not great, not catastrophic by any means. But here we're looking at all of the previous examples since 1950. Actually, since 1920. And it happens not a ton. Looks like there's like 20 signals or so. And the upshot is this. Over the next four weeks, it's been positive just 40% of the time.

So they're not saying turn bearish or crash is imminent. But over the next couple of weeks, historically, when you have this type of environment where the index is at an all-time high, But a lot of stocks are making 52-week lows. It just signals maybe yellow light. That's all. Is it a lot of stocks making 52-week lows or is it just more 52-week lows than highs? Correct.

But by definition, that's kind of a lot. Especially in a bull market. It's not a lot, period. It's a lot when the whole overall market is near an all-time high.

So I think the point that I was trying to make last week where it's like calm down when we're thinking about like stocks getting killed is that things have been so good for so long. So this duality research company that I keep mentioning does incredible work. I didn't realize that we were just on the fifth longest momentum run since 1950 when measured this way. So they said the S&P 500.

snapped a 137-day win streak without two consecutive RSI closes below 50. How nuts is that? 137 days without two consecutive closes on the S&P RSI below 50? That's the... Did they say the fifth longest streak since 1950? That's how good it's been. It's been relentless. The market has not been letting you in at an index level. How long does 137 days go back?

Is that July? It's a long time. There's 20-ish days in the month. I mean, that's a lot. That's seven months, basically. No, they can't be. Do they mean calendar days or market days? I would assume market days. OK, I mean, it's a lot either way. I think we would we would both agree. So back to turning point. Why is it called the Titanic signal? What is it? I don't I assume that literally like the Titanic sinking or does it mean something else?

Iceberg? It's like an iceberg? Oi! Oi! Put back the table. The chart and table. Do they pay any attention to which stocks are making 52-week lows or is that not important? I don't think they went that deep. Because here's what I want to ask you. What's making a 52-week low right now? Write this second. Yeah. What does a 52-week low list even look like? Are the names even recognizable? Because I...

I'm just trying to picture what would be on there besides consumer staples. And I don't even think materials are on that list right now. So let's say by 52-week lows. Airbnb is certainly recognizable. Okay. There's a lot of names on this list. Allstate. I hope I'm doing this right. There's a lot of names. Apollo. Okay. I mean, look. I just need more. Before I am willing to declare Titanic signal activated, I need to know what stocks are making 52-week lows, not just the fact that there are more.

Stocks making 52-week lows and 52-week highs. Well, hang on. I don't want to put words in their mouth. They're not suggesting like everybody went to cash. I'm just saying this is a quantifiable system. And the results looks mixed over four weeks. Now, listen, you might say, I don't care about four weeks. All right, fine. Fast forward. I don't care either. But this is the more interesting conversation. We've been saying that because the index is so top heavy.

because the top 10 names are basically 40% of the index, you're going to have these very weird occurrences where there's great breadth, but the max seven falls and the index is down. You're going to have the opposite day where... It's reversed and there's tons of noise. So last week we were talking about how far the- I'm sorry, I just, I got to interrupt you. The most prominent stocks on the 52-week low list right now, just for context.

T-Mobile, ADP, that one's interesting. Marsha McLennan, which is insurance. Adobe, very idiosyncratic problems there. Constellation Brands, Gen Z doesn't drink. Dexcom, I don't know why. Trade Desk, their own issues. Chipotle, Nike. Monday.com, Surgery Partners, and Oscar Health, which is political. So I- I don't want to explain away each one of those individually. I want people to understand it's not IBM, ExxonMobil. It's really specific stuff going on on that list.

Totally. No, you're 100% right. Fiserv. I mean, think about what's going on there. I guess that's where I would draw a distinction and say Titanic off.

Not Titanic on. I would agree. I would agree with you. All right. So last week we spoke about that the median stock is at a 90% drawdown, which isn't much different than. what it's been for the last 10 years like this is normal this is this is not this is very very very normal chart on please john okay what's super interesting though

What I had chart could do was, all right, this tells you nothing. There's nothing here. Give me like some sort of baseline. Normalize this for me. So next chart. So I had him do this chart where it's how far the index is from an all-time high. versus how far the median constituent is. And then give me the difference, okay? So this is the thing, Josh. This is the thing. So it's been like this forever.

Or forever, said differently, forever since the launch of ChatGPT. Look when this happened. Very interesting. So since the bull market started, or I guess close to the start of the current bull market in early 23 with tech recovering, we have seen an increasing spread between the median drawdown in stocks versus the S&P's overall drawdown.

Correct. And that's it's growing. So that's what I said. Like a lot of this stuff is going to be noise. That's why it's because the index is so top heavy that. You have to take whatever Titanic and whatever else comes next. You have to take it with a grain of salt unless you really see again.

Not to belabor the point, but unless you see the new 52-week load list really expanding, like really expanding, until that happens, I'm not that concerned. I would put it another way. I almost want to track. the S&P 100. And tell me when that 52-week low list expands. That is so much more meaningful to me, knowing what we know about index composition overall. And look, like...

Microsoft's in like a decent-sized drawdown for itself since earnings. Meta is in a big drawdown, 24% and worsening. And the headlines going against Meta have not been great lately. in terms of people leaving the AI team, et cetera. I want to know when stocks, maybe not that large, but I want to know when the S&P 100's 52-week low list is booming off the bottom. And that has more signal. Right. Well, it almost doesn't matter because like, let's say the S&P 100.

What sectors do you think are heavily represented there? Communication services, tech. We know what it is. Tech, financials. Disquestionary financials. You already know what's in there. Right. So I want to know. I think maybe we'll rerun this next week and let's see if we can create our own version of the Titanic signal, but only focused on the stocks that matter to the modern market. And also-

You had JP Morgan making a 52-week high yesterday. How bearish can you be? I also want to point out, looking at the S&P 1500 may have been important historically. Think about how many quote unquote Russell 2000 divergences we've seen over the course of the last 15 years. Not one of them, not one of them has been a canary in the coal mine. They just haven't, they haven't been important.

At best, at best, they've been concurrent indicators of like economic data, but not S&P. And if anything, they've been the opposite. When they've been a divergence, they catch up. Like that's when you want to buy the breakdown. I agree. Let's do our own Titanic signal, but let's look at lows. Let's look at 52-week lows in the S&P 100 and let's see. Historically, over the last five or 10 years, that's been a better.

signal than this one. I'll get chart kit on that. But anyway, shout out to Dean. They do great work over there. All right. This next segment that we're about to do, Josh, it's brought to you by Fidelity Trader Plus. No, no. We're not there yet. We're not there yet. Oh, we are? Oh, okay. We are there. I'm sorry. Okay. I stand corrected. Okay. I stand corrected. So this next segment is brought to you by Fidelity Trader Plus. Check out the new platform that syncs your data across mobile.

web and desktop, we are going to be highlighting the work of friend of the show, Yuri and Timmer, who is easily on the Mount Rushmore of Chartist. Like he just, he's got a unique style. He does things that you've never seen before. So for example. Ben and I were in Vegas last week when we were talking about the CAPE ratio and you don't really hear too much talk about it these days. And one of the reasons why it's so particularly useless right now is because literally...

Who cares about the data from the index 10 years ago and the earnings? NVIDIA GPUs didn't even start until four years ago. It's completely dog shit. So Urien has, and I've never seen this before, he has a five-year cape. which makes a lot more sense. So check this out. It's more relevant. Chart on. So the five-year CAPE ratio is, I mean, also it's not cheap. I mean, obviously, but to me, this is much more relevant than the 10-year.

So this is taking the earnings per share of the S&P 500 over the last five years and coming up with a price earnings ratio, which I suppose, like, what does this really do?

It's all post-pandemic pretty much. It smooths out the volatility of earnings a little bit. You're not just looking at quarter to quarter, year to year. You're looking at an average of the last five years. So is the purpose of this to say- that if you take out the pre-pandemic economy, that five-year period, we're not as expensive as...

the regular 10-year cape would indicate? Is that the purpose of this? No, no, no. I would say that this actually reinforces what we already know. Stocks aren't cheap. No shit. We know. We know that. I just thought this was interesting. I guess, what do you do with this information? Because the knee jerk reaction would be, well, if they're not cheap, we shouldn't be buying or we should be lighting up. What do you do with any information? Honestly, we're talking. No, I get it. I think, I think.

One of the things that you continue to hear is that forward returns fall as you're paying higher valuations, which of course is obvious, makes intuitive sense. But the thing that gets lost in that equation is not if there's... not if there's above average earnings growth. That's the lesson that we've learned over the last 15 years. Cape is not in a vacuum. Why are stocks expensive? Oh, here's why.

Huge earnings growth as far as the eye can see. Now I get it. I'm so glad you said that. So the next chart breaks down the MAG7 versus the, I'm sorry, my bad. It breaks down the equal weight trailing PE. versus the cap weight. Did I say that right? Equal weight versus cap weight. And look at the spread here. It's enormous. So the cap weight trailing PE is 26 times, which is obviously on the high side, but look at the rest of the market.

Very much in line with historical numbers. What is that? 18? 18. Okay. So if you equal weight every stock in the index. The market is not quite as expensive as the cap-weighted version. And again, it's 18 times is not what you would historically say is like a discount to history, obviously. Right. 18 times is not 1999. Okay. So now, now, now in, in fairness to the bears, it's a bit of a parlor game because why would you equalate it?

Like the reality is that the biggest stocks in the market are also among the most expensive. So like why we're equalating it to make ourselves feel better that it's not a bubble. So allow me to tie a bow on this. So Urien says since 2022. The MAG7 is up fourfold. So it is. Next chart. But its earnings are up threefold. Right. Valuations are up there at 36 times for the MAG7. But earnings have been the...

dominant driver, period. Yeah. Not margin, not PE, not PE expansion, which is what a lot of people who have been stubbornly bearish continue to bang on about that were. paying higher and higher and higher valuations for stocks. Yeah, but justified. We're paying higher valuations for stocks because they're earning more money than people expected a year ago. Systematically, it's happening every quarter at this point.

So that game will end, hasn't ended yet. So that's a good explainer for where we are. All right, I want to pivot to some Schwab stuff. First of all, here's our friends at Public. making a definitive statement about whether or not sports betting should be side-by-side with investing in the same app. So this is Life Abraham. He says, we ran an ad in the Wall Street Journal today.

This is a full-page ad for people listening, not watching. Wealth is not one in a bet. If you're looking for a broker that's not also your bookie, we invite you to try Public. And of course, full disclosure, Public is a frequent sponsor of the compound. What did you think about that statement that they're making? I love it. They've been very clear every time they advertise with us.

We are a serious investment platform for serious investors. We are not here for gamblers. And their platform shows that they're doing great work on fundamental analysis and all sorts of stuff. And they're making a stand. And whether or not it's like...

you know, a good business decision, whatever, whatever. We'll see. But I love that they're doing it. What do you think their VC backer said if and when they were consulted? We are going to draw the line here. We are not onboarding the next generation of investors who are. conflating gambling with investing? What do you think the money behind the company said? I would assume-

that their investors are deeply aligned with what they're doing. There's a reason why they gave them money in the first place. This is not a pivot. They've always been of the ethos that we're not doing that. We're not rating confetti down on our users. So I would imagine that they're doubling down and they're all for it, if I had to guess.

Public doesn't call itself the anti-Robinhood, but a lot of people, when they're trying to understand the brokerage ecosystem, that's the way that they're thought of. It's like, okay, it's free trades. It's a super, super slick user interface. like works at the speed of an app, not a clunky brokerage platform. But the big difference is they are not incentivizing their users to gamble in the way that Robinhood is. And that's sort of, it's almost like a moralistic divide.

And it's definitely a different investing philosophy. You know, like Robin Hood, the ethos is whatever people want to do, we're going to create the best way for them to possibly do it. Yeah, I see both sides. And then public is like. Yeah, we're going to try to encourage people to do the right things. So I think that's the – so this is like very on brand for that difference in philosophy.

Go ahead. I want to talk – oh, please. I want to just talk about the encroachment of sports betting in general into the brokerage world and vice versa because I do think it's sort of a two-way street. I know the online casinos and the big gaming places would love it if the investment houses would stay out of their business, but it's obviously not going to happen.

And at this point, there doesn't appear to be anybody who wants to stop it. There are some state regulators that are coming out against this and racing to institute some sort of a ban in state. But at a federal level, it just, it looks like it's going to be game on here. And there's going to be a ton of crossover between these three things, prediction markets, sports betting, and stock trading. What are your thoughts?

Prediction markets, sports betting, and stock trading. Yeah, I think that the street is overestimating the impact. to which these will have the prediction market specifically on DraftKings and Flutter. These stocks are both getting hit pretty good. I listened to some of DraftKings earnings calls quite literally.

Every single analyst call was asking about prediction markets. And I think that this is going to be- Because they're nervous. The analysts covering these stocks are nervous. I think that this is going to be similar. to OpenAI is going to kill Google. I just don't believe that people, I don't believe that customers of DraftKings and FanDuel, myself included, are going to leave that app.

and go to the prediction markets where I'm guessing the user interface isn't as good. I'm guessing the analytics aren't as good. I'm guessing the parlay experience, which is basically the whole business isn't as good. And I think that this is severely overblown. Now, if investors are using this as an excuse to... dump a company that is still in a very competitive environment. DraftKings is still not GAAP profitable.

They're still losing money. Now they're losing much less money. They're doing much better. But I think that this is an opportunity to buy DraftKings rather than say that they're completely effed. All right, chart back on. So as we speak, Flutter, which is the parent company of FanDuel and DraftKings, DraftKings is an almost 18% drawdown from its January 2025 high.

And Flutter had been doing a little bit better and then just completely fell apart and is now down 10%. And these are, look, these are companies that like whether they like it or not. They are going to be facing Robinhood for this market because Robinhood wants sports betting on its platform. That's not a drawdown chart, by the way. What is it? It's way worse than that. This is year to date. DraftKings is in a 43% drawdown. And Flood is 25%. So DraftKings is getting killed. And yes, it's true.

I just want to quote this guy, Jason Robbins. He's the chairman and CEO of the co-founder. He said this in the prepared remarks. So they said the word predictions 42 times on the call. This is in the prepared remarks. He said, I'd also like to touch on the recent rise of predictions. We have experienced numerous ways of competition in recent years.

mostly from well-capitalized companies that have built or acquired strong sports betting product offerings. And those have had minimal impact on DraftKings revenue trajectory. He goes on to say, we are excited about our pending launch. of DraftKings predictions and its potential to expand our total addressable market in the coming months. We expect DraftKings predictions to enter many new states with sports events contracts, unlocking a new customer base and revenue stream.

Nearly half the country's population remains without access to legal online sports betting. but there are several other companies offering federally regulated predictions in all 50 states. So he's basically saying like that should pave the way to more legalized sports betting. Then he last says, to close out my thoughts on predictions, I would leave you all with three key takeaways. And the first is that...

We will pursue this opportunity. We will compete and we will win. OK, but so here's the problem. So they are now going to go. They're going to play offense, which I think is smart. And they're going to put prediction markets. onto their platforms. So in other words, the prediction market company like a Kalshi, for example, could say, why do you need to look at all these complicated stuff like odds and

you know, plus 150, minus 270. You don't need any of that. Just tell us who you think is going to win. And here is the price of the contract. So from a simplicity standpoint, they are onboarding probably the youngest. least experienced gamblers who just want to express an opinion on something. And if it's sports, the user interface is way easier than what DraftKings and FanDuel are putting in front of you. That's for the-

The simplistic person who doesn't understand gambling lingo and doesn't really care to learn. Okay. That's a segment. But is that a big business? Well, I mean, here's where I'm going with that though. That segment will grow up. And do you want to try to onboard them when it's a higher cost to acquire that customer later when they're already very comfortable with the tools they use? That's why DraftKings has to go on offense.

not just play defense, but they actually have to go into these markets and create sports contracts in the prediction format versus the traditional Vegas odds format.

Put that statement back up. Think about the statement. Those competitors have had, quote, minimal impact on DraftKings revenue trajectory. Yes, we know. Chart off. We're not worried about the revenue trajectory. We're worried about the cost trajectory. We're worried about how much more advertising you now have to do versus new entrants to the market, including extremely powerful players.

that are well-capitalized like Robinhood. So that's the issue here. Oh, it's not a non-issue. I'm not trying to make believe that it's not an issue. I am simply saying that I think the 43% drawdown... I don't know where the right number is. Might already be overestimating it. Yeah. All right. So Robinhood. So Robinhood said, here's what Vlad said. Prediction markets are really on fire.

It's hard to believe that we launched this just about a year ago with the presidential election markets. We've doubled volume every quarter since then to 2.3 billion contracts in Q3. And the month of October alone. was up to 2.5 billion contracts. So October by itself was bigger than all of Q3 combined. So it is, they said, it's at $100 million annualized revenue run rate already. It's not nothing.

I'm curious. I doubt anyone sharing this. I'm curious how many people place these bets and then never log in again because they're using small dollar amounts and they lose interest. Well, so I think a lot. Because sports has the ability to hold your interest. throughout the course of a season. And if you're a lifelong football fan, you don't need somebody to keep stoking your attention. You are very aware it's football season. If you start placing random shit bets about like,

Who's going to win the Oscar for best picture or who's going to win a coin toss at a football game? That's the thing. Like how many people are like, all right, that's like, do they lose interest in the way that the app gaming? Like Candy Crush has lost interest. I don't know the answer. I think they do. I think so too. That being said, there is some tangible evidence that there is an effect already at both DraftKings and FanDuel.

Bank of America downgraded both stocks to neutral from buy. And they cited specifically. the rise of prediction market platforms. There are other headwinds too, as one of several factors eroding margins. Calci is operating in the US. but Polymarket is coming back to the US or coming to the US. I don't even think they're facing the full force of these two platforms, but they will be in 2026. And I think the market's discounting that. Okay.

I also think – I don't want to get – there's like a whole bunch of partnerships being announced by these platforms as well, which looks like – all right, let me give you a couple, okay? Polymarket today announced a multi-year partnership with PrizePix, which is a sports gambling app. It's a very simple one to use. It's not for hardcore sports people. It's like...

pick which player is going to score the first basket in the Lakers game tonight, stuff like that. But they're going to integrate prediction markets into Polymarket Will, into the PrizePix app. They also signed a deal with the NHL. for league data and branding visibility. So Polymarket's coming on strong with partnerships. Kalshi, similar thing. They are starting to talk to all of the...

different leagues and, you know, they're like, they're funded. So they're also not going to go away. But if you think that this is already being priced in, then DraftKings to me would be the obvious buy just because of how much more, how much lower it is. than Flutter. Here's where I think this thing could get bigger than maybe I'm thinking. If there's enough, let's say, respectfully, dumb money.

Because these are people that are not doing quantitative research if you're betting 10 bucks. If there's enough volume there, then maybe you can see some institutional money come onto the platform and just eat their lunch. You know what I mean? Yeah. Like institutional gamblers? Yes, yes. Oh my God, what a world. Like not literally Jane Street just coming in and just quantitatively clipping these people, but something like that.

Yeah, no, you think the guys sitting at Susquehanna and Jane Street and Citadel aren't licking their chops? Like, here's a multi-billion dollar marketplace with the dumbest f***s in the world who think they know who's going to win a... a baseball series. They don't even directionally have to know the outcome of the games to figure out how to trick people into placing the wrong bets. So I'm not saying they're doing that.

I'm saying I'd be shocked if they weren't talking about it, especially if this gets bigger and bigger. I think that's a really good point. I thought it was interesting that Charles Schwab's CEO, Rick Worcester, used his address. at the Impact Conference to draw a line in the sand, sort of. So I wanted to go through that. So Schwab kind of has this reputation, well-earned, as an advocate of the American investor.

They are considered to be sort of like a paragon of long-term investing and proper investing. And sure, they have gamblers on their platform like every other brokerage, but they don't seem to be going out of their way to build products for those people. They seem to be very focused on just normal investing.

not going that far. They're still not even doing crypto to the extent that the other brokerages are. There's a lot of things about Schwab that is kind of slow money-esque. The Impact Conference is an RAA event every year. And here's what Rick Worcester said, quote, only 5% of the people that go on gambling apps pull out more money than they put into the gambling app. It is the opposite.

of the benefits of being a long-term investor. He also said, I just don't want young people in our country to think that betting on the Monday night football game is equivalent to being invested for the long-term in stocks and bonds. Then they put out some content showing the difference between sports betting and investing, drawing that distinction between like speculation versus.

goal-oriented and time horizon-driven investing. So they're sort of like, they're sort of drawing that line in the sand. And then they said, the company said they are monitoring the space and regulatory landscape closely. with respect to prediction markets, but they don't seem to even be considering it. And I guess my question to you is, they didn't say that they would never integrate sports betting.

into the app. They just said that they won't, but they didn't say we will never. Do you think at some point they might cave if we see all of the other competing brokerages, and there are many? just start to onboard at a furiously faster rate than they do amongst the younger demographic? No, I don't think it's going to be furious. I think it's going to be a really shitty business. It's going to be really expensive. I don't think that all of a sudden these type of companies are going to say it.

All right, I guess we're gambling too. I don't think so. But they did that with crypto. And we watched them do it. It happened within the last 10 years. Everyone, everyone on Wall Street who started out. Retweeting Charlie Munger lines about rat poison and now... We're institutionally investing in crypto. We're trading crypto. We're doing block trades in crypto. The spreads on crypto are still a mile wide. It's a very, very, very lucrative business. This is not.

Okay, I respect Mr. Worcester for coming out and definitively saying we're not doing this. I respect Live Abraham for the same reason. I'm not opposed to sports betting. I just don't understand the necessity. to have it be in the same app with investing unless it's just a money grab. And I think the thing that will make this difficult for Schwab that they've planted their flag here is if.

They just start losing this next-gen customer to an app that lets people do whatever they want, and it sticks. Because then they're going to have to cede this whole generational cohort to Robinhood. I mean, this is obviously crackhead activity for the most part, but like it's still activity and it's still new account growth. So if you think it flames out in six months.

from now we're like remember when people thought they should gamble in their investing you know what i i do think that's going to happen i think two things i think it's it's a thing and it's here to stay and it could be it could be a lot bigger than it is today But also, I think this idea that everybody's going to be predicting, not gambling, I mean predicting, I just don't buy it. You know why? Because with stock gambling, at least the market's open tomorrow.

The stock was down 8% today. It could come back tomorrow. When you make a wager, a prediction, when it's done, it's done. And you either make money or you lose all your money. It's an options trade. So people get sick of that shit. Yeah. Because that feels like lighting money on fire. I think that's a really good point. Also, like when you're gambling in a stock market, it's unless you're doing like a zero a day.

It's not like you're putting up $500 and you win or lose $1,000 or it goes to zero. A really bad trade is you lose 30%. It happens. You're not losing 100% every time you bet. So I'm bearish on this whole thing. How long before we're seeing the apps say, we will give you brokerage margin against your securities to play sports wagers? Can that be far behind?

Barry just goes, you want to call? No, I'm just talking to a mic. All right. Shout out to Barry. All right. You're up. What do you got? Birthday, Barry. What do you got? Okay.

this K-shaped economy stuff, it's too much. Happy birthday. Too much. Grab, grab him by the shoulder and pull him on the air. Come here. He's gone. I want to say happy birthday. Okay. So. Torsten Slack showed this chart, the Atlanta Fed measure of median nominal wage growth. And he shows the lowest wage quartile.

to the highest wage quartile. And I think, not I think, the thing that they are trying to convey, the place where your mind goes on this map is the orange line crashing and it is separating itself. from that is the lowest wage separating itself to the downside from the second, the third, and the highest wage. And you can't look at this chart and look at the line all the way on the right without looking to the left. Look at the gains.

by the lowest wage quintile, quartile, excuse me, during the pandemic. So I had ChartKid, hey, you know what? I need some context behind these numbers. Please remake this chart and show me the spread between the low wage growth. the low wages and the high wages. And from 2015 to 2023 and really hitting a peak, you had the low wage people out, not out earning.

having a higher wage growth rate. Now, listen, nobody, certainly not me, is saying that, oh, low-wage people have done so great. That's not the point. But the point is they've had more gains. than high-wage earners up until recently. And now we have companies that are talking a lot about some of the pressure on low-wage consumers without talking about the fact that you bury them. with price hikes. So you're seeing all of these fast casual restaurants say the same thing.

But you know who you're not hearing say the same thing, that low end is struggling? How come the banks aren't reporting that? How come it's only companies that are getting their bells rung because the low wage and everybody is saying, no, I'm not spending $14 on a slopole anymore? OK, I think you've just fallen into a classical mathematic trap with that wage growth for the lowest income group because it's off a lower base. So, of course, during the pandemic.

it rallied relative to everyone else's wage gain. We also had like no net immigration for that period of time. We have that again. So like, I guess what I'm trying to say is the people that are doing those low wage jobs were so in demand during the pandemic because of how many other people just were unwilling to work if they didn't have to. And those are the people that literally needed a paycheck and had to.

And I just think like that was a really unique period of time. If you go back to the 1970s, I promise you- Hold on, hold on. Before you give a history lesson, my only point is this. You can't look at the right tail of that chart today.

without zooming out. That's the point that I'm making. I'm not saying that the low-wage earners were having a party during the pandemic, because you're right. They were the people that needed to be there. My point is, if you're using that chart to say that they're no longer making as much... Their wages are not growing as fast as the other parts of the country. And therefore, like, that's the part that I have issue with. Yeah, no, I don't disagree with that. But that's not the case. That's not.

The average hourly wage is not even the main premise behind the K-shaped economy. The premise, at least from my perspective, is... People that have investable assets versus people who are living check to check. It's not even about what the dollar figure shows on their W-2, although that's obviously a big part of why they can't invest.

what that dollar amount is. But the real story of the K-shaped economy is who has the luxury of doing a job, an email slash cell phone job, and who has to actually stand behind a counter? or at a warehouse in person. That's the K-shaped economy. And then furthermore, who has financial assets that are benefiting from asset price inflation or the ability to borrow against them, and who doesn't?

It's not about this group was making $18 an hour and it only went to $19 an hour. That's, it's almost like, it's part of the story, but it's almost incidental to the bigger picture, which is. In the current K-shaped economy, if you don't have financial assets, you absolutely cannot keep up with the people that do. And that's always been true, but it's never been more true. Okay, true end.

I guess where I was going with this conversation is that we are listening to the earnings calls from these fast, casual restaurants, okay? And they're all blaming the low-end consumer. without talking about some of the idiosyncratic things that have been happening in their space, overexpanding, overcharging, and we listen to them and conclude, okay, the consumer's getting crushed. How about this?

PNC Financial Services Group, they said we were just looking at the deep dive on October numbers. Spending is robust. And while it's a little bit stronger at the upper end, and obviously it is, I'm not saying it isn't. While it's a little bit stronger at the upper end, it's still actually hanging in there among lower end customers. And just because they're not choosing to eat at Sweetgreen anymore, it doesn't mean that...

It is horrific. So for example, Buca Capital tweeted, fast food, especially fast casual, expanded too quickly, charged too much, literally trying to raise prices while commoditizing. Don't be so quick to assume the consumer is hurting. GP fee location was up for toast. People are still eating out. They're just voting with their wallet. I guess that's really the point that I'm trying to make. Another one. Wasteland Capital said most of these restaurant stocks.

We're trading at 35 to 100 times forward pH just recently. Many still are. They were valued at a massive premium to the Mach 7. and any comparable growth stocks in tech and AI. This is just a bubble deflating. Bubbles can't be sustained indefinitely. So if we led with that quicker, my point was not that the low-end consumer is doing amazing.

But looking at these numbers and concluding that they're getting obliterated and looking at the stock's reaction and concluding that we're about to fall off a cliff, that's the part that I take umbrage with. All right. It's a fair point. One of the big mistakes to make is to look at stock prices and then come up with a story, an economic story that explains the stock price because you're doing that in the absence of starting valuation.

Exactly. So you could have companies that are doing very well, their share prices aren't, their customer is just fine, but their stock prices are falling because- Maybe the customer base that's doing well isn't doing as well as what people had thought, and therefore the share price comes down. That doesn't perfectly explain the actual economy. So I totally agree with you there, but I also can't ignore it.

And I do view the economy through the lens of the stock market. And I'm looking at a chart of Dine Brands Global, D-I-N. This is the parent company of Applebee's and IHOP. This is literally feeding the bottom 20% of income earners. We could agree on that for the most part. Okay. Over the last three years, the S&P 500 is up 80% and the stock is down 60%.

Then I take a look at Darden. Darden had been hanging in there until the tariff shit started all over again. Just in the last couple of months, the story has completely fallen apart. It was one of the best stocks in the market. It was on our list, started to break down. And we have seen this thing go, this DRI.

We have seen this stock trade from 225 to 171. Looks terrible. There is no bottom in sight. It is breaking. It looks horrific. These are not QSR. This is not Chipotle. This is something different. This is family of four. probably two working parents on a Saturday afternoon or a Sunday night or celebrating a birthday party. These stocks look like that customer has literally hopped aboard an alien spacecraft and left the planet.

Now, they may be falling too fast, and this is not an accurate representation of what's happening with that segment of the market, but what if it is? I contrast the way those stocks are acting with the demand for GPUs. And I just say, if this isn't a K-shaped economy, what is? So I firmly believe.

that we're in this period of time where anyone and anything that caters to the upper 20% of the country is just living in a dramatically different environment than anyone or anything that's catering to the bottom 20%. And it's growing more extreme by the day, not less. And I know there's a big fat middle that we're not talking about. And the middle seems to be doing fine. But the K is K-ing. Here's another stock on the other side of that.

Airbnb. Who do you think stays at Airbnb? What do you think the financial circumstances of people that stay at Airbnb? I'd say pretty good. This stock sucks because it was too expensive. I would not say pretty good. I would not say. I would say the opposite. I would. Wait. Hold on.

I know you don't. I know. I know they have. You couldn't pay me. I know that they have. I know they have an upper end. I know like when you go to a really fancy place like Hawaii, they're really fly Airbnbs. I am aware of that. I don't think that's their bread and butter business. You think the average person that serves in an Airbnb is in the bottom half?

No, I think it's all over the map, but I think where they make their money is probably right down the middle. People that price out an Airbnb relative to a hotel and conclude this will be more fun for... our weekend trip or our family if we do a big house. But I think it's aggressively middle class. I don't know for sure, but I think it's upper class, upper middle at least.

You think Airbnb makes most of its money from the top 10% of listings? No, I didn't say top 10%. Oh, okay. Top 20? I'd be interested. I'd actually be interested to learn. I think the average profile of an Airbnb customer is somebody that's making well above average. I would say three times the median US income. Really? All right. Well, it's not looking good for that stock.

I don't know what the story is there then. You think that's a good counterbalance to real estate sales in luxury? Like, I guess I'm thinking about a different consumer. I'm thinking about the first class passengers on the airlines.

I'm thinking about the people that are in these like Amex lounges that you know we're talking about. Yeah, I think a lot of those people stay in dope Airbnb's. That could be. That could be. Maybe I'm wrong. I don't know enough about it, but I'd love to find out. Either way, I believe in the K.

You don't believe in the K or you just think we've taken the concept too far? No, no, no, no, no, no. I'm sick of every article acting like there's only a small group of people that are doing okay and everybody else, the rest of us.

are struggling. I reject that. That's not true because everything is still too crowded. That's what I reject. That fundamentally cannot be true. I mean, dude, last thing, last thing. When we were at the Lions-Commanders game, how many Lions fans did we see? Are those all top 20% earners? It's half the stadium. So I just reject the idea that everybody's struggling except for the rich people that own stocks. Right. That's the key thing here. I totally agree. That's a random NFL game.

on a Sunday afternoon. That's not a polo match. The people that are at that football game are middle class. They're not all stock market millionaires. Right. Absolutely. I totally agree with you. All right. Let's talk about Elon.

So Elon got approved with a wide margin, 75 to 25 for a trillion. air quote, trillion dollar pay package. And people are up in arms. The stock is only worth a trillion and a half dollars. I had Sean make this chart. Their cumulative revenue since 2020 is only $431 billion. Guess what? It doesn't matter. We passed the headline. So this is from the FT. He's not making a trillion dollars next year.

The deal sets up ambitious targets for Musk to unlock his stock payouts in a series of installments. To reach a trillion dollars, he Musk sextuples Tesla's valuation to $8.5 trillion, boost earnings. 24-fold to 400 billion. and sell millions of robots and autonomous driving subscriptions over the 10 years the plan covers, Musk will receive no salary or bonus. So I don't even want to talk about the shareholder part of it, which was overwhelmingly in favor of it.

leaves, the shares are worth nothing. I just want to ask you this. Imagine voting against this. What's the bull case for Tesla without him? Will he get his trillion dollars? I mean, I think he'll find a way to renegotiate this as we get closer to these deadlines. And yes, he will get it because what the hell, what is plan B? Find a new Elon Musk.

It's almost like hilarious that there are, if you're voting against this, do yourself a favor and just sell the stock because you don't get it. You don't understand why Tesla is Tesla and why the valuation is where it is. Instead of voting Elon out, vote yourself out. Go buy shares in an insurance company where the guy's only making $8 million a year because this whole thing is about him making robots. That's it. There's nothing else.

Didn't even talk. Didn't even talk. All right. Eight and a half trillion market cap, 20 million Tesla vehicles, I guess, between now and then. One million humanoid robots. When does he have to do this by? When does he have to deliver? I don't know. 10 years? I don't. It says over the 10 years the plan covers. Let me ask you a question. What's the higher likelihood if they're going to sell a million humanoid robots with Elon or without? Right.

You know what I mean? 10 million active full self-driving subscriptions, operate 1 million robo-taxis, 400 billion in adjusted EBITDA for four consecutive quarters, and then develop a framework for a new CEO. I don't know if he can do all of those things. Let's see, he does half of them. You think they're not going to find a way to pay him just to keep him? Like, what are they going to be like, oh, you almost did it. Sorry.

See you later, Elon. It's the stupidest thing I've ever heard, honestly. Of course he's going to get it. In recent weeks, we've made comparisons to other CEOs talking and acting like this. Sam Altman, Alex Karp. Elon just said, It's going to be the biggest product of all time by far. Optimus is kind of like an infinite money glitch. Nobody's Elon. An infinite money glitch. He is a one of one. I mean, I...

I don't know anything about, like if you're a shareholder, you just, you've put your fate in his hands and so far he's delivered. So there's no, there's really no other way to think about the stock. If you're looking at this and calling balls and strikes on like whether or not they hit their earnings guidance from the prior quarter, et cetera, no one else that's involved in the stock is playing the same game that you are.

All of your fellow shareholders are playing a different game. They believe that autonomous taxis and robots are going to be ubiquitous and that Tesla will make more money at that than anyone else. And if you. And if you're looking at conventional metrics, like how many cars do they sell in Germany, you're watching a completely different sport than the one that you think you're playing. And I just, I feel like by now, everybody should have gotten that through their heads.

I don't know that there's anyone left, really, that's involved in the stock that doesn't get that. What do you think? Yeah, I can't imagine being on the other side of this. If it's pay Elon a trillion. imaginary dollars over a 10-year period, if he gets earnings to $240 billion or whatever it is, $400 billion. Give it to him. He'll have earned it. All right, move on. All right.

I got three stocks. I won't call them falling knives, although others have. I think I already know your answer. We're going to play buy the dip or no. Let's put up the first one. This is strategy. One-year performance. It is now, forget about relative to Bitcoin. This is just the share price of MSTR. It is now at a 50.3% drawdown. It has officially lost half of its value.

from the peak, which was almost exactly one year ago this month. It's a $235 stock. That was $450. Do you buy this? I have zero interest in this. I don't like that it made a new low relative to April 2025 because they actually own more Bitcoin now than they did then. The premium, the MNAP shrank from over 2x or maybe over 3x to 1.2. Listen, maybe they get it back somehow. I don't see how. There's other ways to get leverage in crypto. You don't need them.

I think the gig is up, and I have no interest in that stock. Do you think this stock ultimately will trade at a discount to its Bitcoin holdings? Were you saying this? Most closed-end funds do? Somebody was saying that. I was saying that. And I'm very wise. I'm just pointing out the similarity between this and a typical leveraged closed-end. And leveraged closed-ends come in every flavor. There are leveraged closed-end funds that buy muni bonds.

that buy corporate bonds, that buy REITs or real estate debt, blah, blah, blah, blah, blah. Almost none of them ever traded a premium because why would they? And almost all of them at some point or for most of their life. trade at some sort of a discount to NAV, and that's normal in the stock market. This is the aberration. Why would a company promising to dilute you and consistently raising money in the market

trade at a premium. It almost seems like now, like sort of like a fever dream that it ever did. And I still don't quite understand the rationale. He's going to be really good at buying Bitcoin at the right price. Seems to have been the bull case. No, he was buying Bitcoin fast, and then he was diluting shareholders. And it was working. And now it's not working. So I have no interest. OK. DKNG. I think you want this one. I do.

I mean, 30 bucks has been a level of historical support and resistance. What's that? When? In April of 2025, in August of 2024. It's below. What did I say? 30 bucks? It's lower now. I'm saying it's a 30-31. It's right there. Yeah, I'm interested. 58% drawdown. I don't know, man. I want to be right there with you because I...

I might agree with you that the fear of prediction markets is overblown and this could be an Alphabet-like situation. But then I go back to like, well, what do they really do that anyone else can't do? In the case of Alphabet, like...

They do a lot of things that other people can't do. I know there's a million differences. And to your point, put it this way. I'm not buying it. So I don't want it that badly because ultimately they're still not even profitable, even though they're going in the right direction. I'm not buying the stock. But if I had to choose between the three, this would be the stock. Okay, last one. Also a 50.1% drawdown from the all-time high. Core Weave. Nope.

A $91 stock hit a high of 180-something in June of this year, and it is now officially cut in half from a tie. You're not a buyer. I'm not buying this falling knife. No way. This one is at the same support level that you cited with DraftKings. Well, dude, hold on. It hit that in September. Yeah, but DraftKings had three previous instances of that being a level of interest. This has what? One?

This is one fresh brand new company. I'm not interested. This thing looks terrible. It's at 88 bucks now. This thing looks god awful. Okay. So to recap, it came public at 40. I was bearish. It went to almost 200. I was wrong. But I never flipped bullish. And I'm still bearish. And I still don't understand why they ran it up to 180 other than to humiliate me. I don't know that I can come up with a better reason for why that ever happened in the first place.

Effectively. Wow, that is an incredibly narcissistic thing to say about a $50 billion market cap. Congratulations. Effectively, this company is leasing compute to the hyperscalers and other companies that. need to go bigger in AI. By all reports, it's a great CEO, it's a good company, but from a valuation standpoint, and now you have this new wrinkle.

where people like Michael Burry and Jim Chanos are calling into question whether or not they're pumping up their short-term profits by spreading out the expensing of depreciation over more years than they should. So the controversy- The controversy now, and Dr. Barry has just intimated on Twitter to an audience of a million of his closest friends that on November 25th, he'll be revealing something in this regard. But the new battleground...

The battleground now is CoreWeave is telling Wall Street that they are depreciating over the course of six years all these GPUs and all this equipment. Jim Chanos and Dr. Berry and other bearers on this story are saying six years, the GPU upgrade cycle at this point at NVIDIA is every 18 months. So maybe you are taking liberties with the length of time.

that you're saying you can depreciate. And what that will lead to in the future then is impairment charges against earnings, which would be a downside shock. So that's the battleground here. And that's why I think the stock looks the way it does. Thoughts?

I'm not interested. In conclusion, DraftKings is the one. Yeah, dude, DraftKings. Too much smoke. All right. We're going to do Make the Case, and Michael has a mystery chart, and we'll get out of here. I'm making the case to not buy quantum computing stocks. Are you surprised to hear that from me? No, these names look terrible. I think it's one of the most fascinating.

potential growth stories in the market. Here's a quick disclaimer. Do not take any of your information about quantum computing from me. without doing your own homework. So I am not a- Shake Shack is one thing. You could listen to Josh and Shake Shack. That's right. That being said, I did look at these. I took a very close look. They're all really exciting.

I think they are so far away from prime time that these stocks could get, they could triple or get cut in half. And it's like flipping a coin or worse, rolling the dice. And I just. I don't see the investment opportunity here. I can't even believe they're public given how early it is in their field. But I just wanted to give people a very quick overview of why I concluded that. And that'll be my make the case. All right.

Let's put up Regetti. So this is the smallest of the three that we're going to talk about. And what's interesting is that the type of... quantum computing that they're pursuing. And there are three types of architectures here. The type that they're pursuing is the most in line with what both Alphabet and IBM are trying to do, which is superconducting.

So this is just their methodology of going about quantum computing. And I'll spare you the explanation because I don't even know what I'm talking about anyway. But if you're really bullish on what Rigetti is doing specifically, Alphabet and IBM will probably do it better and bigger. I don't know that that means their share prices will appreciate. I just know it means that you have a better option if you really want to be invested in that. Do we put up RGTI?

Yeah, it looks so bad. Oh, my God. We have one more. This is how much it's up still in the past year, 2,000%. Right. Even with this massive drop from the recent highs, it's still up huge. Let me show you IBM. Here's a quantum stock that you don't have to risk your life owning. IBM is by all accounts as far advanced on the quantum.

side as any other publicly traded company and is probably working feverishly to maintain that lead. IBM is up 30% a year over the last three years. Not 2,000%, but not bad. Here's Alphabet. Another leader in quantum computing, and it'll probably stay that way. And again, the architecture that Alphabet is pursuing is the same that Rigetti is pursuing, but with access to.

I don't know, millions of enterprise customers, maybe a billion different applications that they can build in. God knows what they could do with this thing. So for that reason, I would avoid it. IONQ is the ticker. Put this up. I mean, this is like crashing right before our eyes. It hit a high of almost 90. Now it's 54.

I guess the charitable way of thinking about this would be that it held its rising 200-day, the last time it had about a volatility in July. But this also looks terrible. IonQ is the largest of the three standalone quantum computing companies. And it is the furthest along in terms of commercialization by some measures. It's important to understand they're not commercializing anything other than companies and other research people that want to experiment.

There's no product here. This is just people that want access to their know-how and equipment. That's what all these bookings are. None of these companies actually have a product that's beyond just, here, use our lab, use this, use that. And then the last one is D-Wave. Let's put up the chart. Also crashing. Also 50 to 20s. This is Qubits, guys. QBTS. Thank you. Here's the one-year performance, though. It's up huge. It was a penny stock that went as high as 50 and is now 29. Wow.

Qubits is doing annealing computing. So IonQ is doing this like captivated ion architecture, whatever that is. And then this is the third type. Annealing is more like... making modifications along the way. They call it optimizing. And supposedly they are further along of the three in terms of actually delivering something to a customer that they can use right now.

It is not considered to be the most advanced version of quantum computing, whatever that will be in the future. But it does have like immediate applications today. So this is the second largest one. So which one do I buy? None. And I'm making the case that you keep these on your radar. You follow the storylines for these companies loosely. And if Jensen Wang is right, and we're more than a decade away from these things.

being like commercially viable, or if the founders of these companies are right and it's right around the corner, like only science will hold the answer as to which of those is true. And so my take would be like, just pay attention. without being invested. I'm shocked. If you could manage that. That is very charitable. The real Josh Brown would say you could safely ignore these names and come back in 10 years. I don't think you can. And they could all be zeros because-

The IBMs and the Alphabets just run away with the whole opportunity. Or they could be like, make like really important breakthroughs. And I will not be the person to tell you which of those two things is going to happen. So I would say. loosely follow these names and watch for milestones along the way. But like, I draw the line at flying cars these days. So that's.

I'm trying to be responsible here, Michael. That was really well done. All right, I got a mystery chart. I'm going to make this very simple. I'm going to give you one clue and one clue only, okay? This is the best performing stock of the S&P 500 this year. The bottom one, my bad, I should have included this. The bottom one, I'll give you the clue there. The bottom one is the market cap.

The top one is the price. The market cap is $118 billion. And to reiterate, this is the single best performing stock in the S&P 500 year to date. It's up 300%. There you go. Robinhood? Boom. Look how good I am at this. You know, I sometimes feel that I don't get enough credit for how good I am at Make the Case because you're better at it than me. But I'm still pretty. I'm still pretty. I meant at Mystery Chart. I'm still pretty good.

You're still pretty good. Listen, you're way better at Make the Case and I'm a better chart guesser. So I think your skills are more valuable than mine. Well, listen, we could end on that note. Always nice where we find an area of agreement. I am better than you.

Guys, thank you so much. Thank you so much for tuning into the show. We miss you when we're not here. We will be back live very soon. In the meanwhile, I want to let you know tomorrow is Wednesday, which means an all new animal spirits with Michael and Ben, my personal favorite podcast.

We'll do Ask the Compound with Ben and Duncan later this week. And then an all new edition of The Compound and Friends, which I think you're going to love. Thank you so much for watching. Thanks to our sponsor. And we'll talk to you soon.