transcript

Speaker 1:
[00:00] If you guys are actual friends, like we are. Yes. Yeah? Tell us about it.

Speaker 2:
[00:04] They go tip to tip, you guys.

Speaker 3:
[00:06] When they hug it out, they do.

Speaker 2:
[00:08] There's a story behind that.

Speaker 4:
[00:09] That's a mutual friend of ours, but yeah.

Speaker 1:
[00:11] How long do you guys go back? Wait, you have a friend named Tip to Tip?

Speaker 3:
[00:15] He told me, he told me.

Speaker 4:
[00:16] That's a great nickname.

Speaker 3:
[00:17] We're not gonna say who it is.

Speaker 2:
[00:19] We cannot say who it is.

Speaker 3:
[00:20] No, no, no, no, no. I can tell the story if you want it, Josh. Yeah, you tell the story. Don't say the name, don't say the name.

Speaker 2:
[00:27] So, we aren't gonna say the name. But it's honestly hysterical. It's really, I met Adam. We have a lot of mutual friends. He came to meet me in Fort Lauderdale. We're having lunch. We're a client of his firm. And he goes, this guy, you know, I know him well. We're mutual friends, this, that and the other thing. And he goes, he's a real tip to tip guy. And I said, what does that mean? What does that mean? And he goes, you know how when some people hug you and shake your hand, they kind of lean the shoulder to the side, he comes in straight and hugs you. And he said, it is full frontal. I could not stop laughing.

Speaker 1:
[01:06] I respect that.

Speaker 2:
[01:06] The entire lunch.

Speaker 1:
[01:07] Yeah.

Speaker 4:
[01:08] No, we both, to be clear, we both really love this guy.

Speaker 2:
[01:11] Like, it's not- We love him.

Speaker 4:
[01:12] And he's like the only person I would say I know that he can get away with it. Like, right, like it actually, Todd Brandon-

Speaker 3:
[01:20] It's a very well-known person. So you call Rob Sechan.

Speaker 4:
[01:24] We were talking about it and then he called our mutual friend and was like, did you laugh historically when you were talking about it?

Speaker 2:
[01:29] I could not stop.

Speaker 4:
[01:31] Cause it resonated. He's done it to him too. He's tipped to hip, tipped to tipped to hip.

Speaker 2:
[01:35] Most people aren't tipped to hip.

Speaker 3:
[01:37] Tipped to hip is okay. Tipped to hip is a lot.

Speaker 1:
[01:40] Does this guy also-

Speaker 2:
[01:42] You can't, you can't.

Speaker 3:
[01:43] No, no, no.

Speaker 4:
[01:44] He's amazing.

Speaker 2:
[01:44] He's amazing.

Speaker 3:
[01:45] It's Michael Jordan.

Speaker 1:
[01:48] No, no, no, I had a great joke that was not appropriate for the airwaves.

Speaker 3:
[01:51] Yeah, let's not do that.

Speaker 2:
[01:52] The equivalent of him.

Speaker 3:
[01:53] All right, boys, you ready to rock today? Something tells me this is gonna be one of the all timers. I just, it's in the air. I don't know if it's spring. I don't know if it's you guys, maybe a little bit of both. I've been looking forward to this all week. What about you?

Speaker 1:
[02:06] All month.

Speaker 3:
[02:07] All month.

Speaker 1:
[02:08] Where's Homebase for you?

Speaker 2:
[02:11] Depends on who's asking, but mostly for.

Speaker 1:
[02:13] Me.

Speaker 4:
[02:13] The IRS.

Speaker 2:
[02:15] Mostly for.

Speaker 1:
[02:18] If you guys don't mind.

Speaker 4:
[02:19] Oh, yeah.

Speaker 2:
[02:20] Oh, sorry.

Speaker 1:
[02:21] Bob, you look very smiley. You take an edible before you come on?

Speaker 2:
[02:23] No, this is me.

Speaker 1:
[02:25] He's pumped.

Speaker 3:
[02:25] I'm telling you. It's in the air.

Speaker 1:
[02:27] All right.

Speaker 3:
[02:27] It really is.

Speaker 4:
[02:28] Remind me. Wire on the right or the left.

Speaker 3:
[02:31] Wire on your left. All right.

Speaker 2:
[02:34] Is it smashing down my flow?

Speaker 1:
[02:36] You look great. I had flow back in the day. I was a nice 18 year old. Had some hair. Not anymore.

Speaker 2:
[02:43] It's possible again these days.

Speaker 1:
[02:46] No, it's not. Josh, is it possible?

Speaker 3:
[02:48] No, you have to go to Turkey. Then it's possible. It won't be your hair, though. It will be from a dog. But you can get it from a dog.

Speaker 1:
[02:54] You have to decide the dog?

Speaker 3:
[02:56] You can get it from a dog.

Speaker 1:
[02:59] All right. All right. Let's pod. Two seconds. So what else is going on, boys?

Speaker 3:
[03:05] Oh, I heard a crazy story about you.

Speaker 2:
[03:10] You look nervous. You're sweating.

Speaker 3:
[03:12] You were doing Closing Bell with Leslie Picker. And right before the segment, you looked up her credentials to make sure that she was up to the level to ask you why you think the market's going up or whatever. She's going to ask you.

Speaker 4:
[03:28] That's not true.

Speaker 1:
[03:29] There's no way.

Speaker 3:
[03:29] It's not true.

Speaker 4:
[03:30] I did look up her credentials, but that was only because I was trying to just resonate with something about her background. It wasn't to see if they were up to this.

Speaker 2:
[03:38] Trying to connect.

Speaker 4:
[03:38] Just trying to connect.

Speaker 1:
[03:39] Sounds crazy. You know, the first time Adam was on, he was super duper sweaty.

Speaker 3:
[03:43] She's not mad about it. But she thought it was funny.

Speaker 4:
[03:47] I really feel bad she took it that way. I was actually impressed with her. No, no, no.

Speaker 3:
[03:49] Not in a bad way. She's just like, all right, am I good now?

Speaker 4:
[03:53] No, she was very impressive. I've been on with her many, many times before. I just looked her up.

Speaker 1:
[03:58] That is awkward.

Speaker 4:
[03:59] Sometimes you're like, oh, you went to UCLA. You know, whatever. I was just trying to connect, you know? And I didn't prepare.

Speaker 3:
[04:07] I was screwing with her on the commercial break because I was looking up. She was up for a Gerald Loeb Award, and I was asking the producers to verify it. Can you please verify that Lesley was nominated for this award? Shout out to Lesley Picker.

Speaker 5:
[04:21] Yeah. All right.

Speaker 4:
[04:23] I hope she sees that I genuinely was...

Speaker 3:
[04:25] She loves you. All the fun.

Speaker 4:
[04:27] Episode 239.

Speaker 3:
[04:30] Oh, wow. 239.

Speaker 1:
[04:32] Whoa, whoa, whoa. Stop the clock. Here's the award from our sponsor. Support for this show comes from public.com. If you're actively involved in your portfolio, you'll probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge.

Speaker 3:
[04:46] On public, you can now create AI agents that handle all of these tasks on your behalf. Just describe what you want to do in plain English.

Speaker 1:
[04:55] Like if the VIX hits 25, buy a put option on the S&P 500.

Speaker 3:
[05:00] Or, if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the rest.

Speaker 1:
[05:11] Monitoring the market, watching your conditions and executing your strategies exactly as defined. Public is the world's first agentic brokerage and investing platform driven by your intent, not just your clicks.

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Speaker 1:
[05:28] Go to public.com/compound and earn an uncapped 1% match when you transfer your portfolio. That's public.com/compoundpaid for by Public Investing, brokerage services by open to the Public Investing Inc, member FINRA and SIPC, advisory services by Public Advisors LLC, SEC registered advisor, complete disclosures available at public.com/disclosures.

Speaker 3:
[05:51] This episode is sponsored by ClearBridge Investments. Amid rising geopolitical tensions and continued market uncertainty, investors are looking for stability. Even before recent developments in the Middle East, stocks backed by real assets were gaining momentum and can offer more predictable cash flows as volatility increases. Position your investment portfolio for wider equity participation with fundamentally driven ClearBridge active equity strategies. ClearBridge, a Franklin Templeton company. Go to clearbridge.com to learn more.

Speaker 5:
[06:39] 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.

Speaker 3:
[07:01] Rob, we've done this 239 times so far. 238, going into 239.

Speaker 2:
[07:06] And this is my virgin experience. I kind of rank at the bottom.

Speaker 3:
[07:09] We ran out of people.

Speaker 2:
[07:11] Bottom of the order.

Speaker 3:
[07:13] All right, guys.

Speaker 4:
[07:14] They didn't trust you to go on solo either. They had to like, have the chaperone.

Speaker 1:
[07:17] I needed training wheels.

Speaker 3:
[07:19] Training wheels. If AP is here, we know it's going to be okay. Adam Parker is one of the fan favorites on this show. Let's do your intro first. Adam is the CEO and founder of Trivariate Research. Prior to Trivariate Research, Adam was the founder and lead portfolio manager of Trivariate Capital, an equity long short hedge fund. Adam is also an investment advisor board member for Rob's firm, New Edge Wealth. Is that around? When did you guys first meet?

Speaker 2:
[07:50] A few years ago.

Speaker 3:
[07:51] All right, all right. And making his first appearance on The Compound and Friends, I'm so excited about this. Rob Sechan is the CEO, managing partner and co-founder of New Edge Wealth and co-managing partner of New Edge Capital Group. Rob was an advisor at Morgan Stanley. A director at Lehman Brothers is not his fault. And a director at UBS prior to founding New Edge, he has been recognized by both Barron and Forbes as a top 100 financial advisor. Give it up for Adam and Rob. Welcome to the show, guys. All right. Question one. No, I'm kidding. We have to start, guys, we have to start with software. There was another blow up overnight and into today in ServiceNow. This seems to be like a recurring nightmare where every week, it's another or every month, it's one, two, three of these stocks, they're already in 50% drawdowns. And then they report what looked like a good quarter on the surface, and they go even lower. Let's start there. Is there an end in sight? What do you think?

Speaker 4:
[08:57] Do you want me to go or do you want me to go?

Speaker 2:
[08:58] It's up to you. I'll start. I mean, I'm not ready to call a bottom in the group, but certainly there's a lot of value being created. It's oversold. We've owned a lot of positions. As you know, we owned Adobe at one point in time. We keep trying to rotate into the higher quality names, so maybe we can participate if there is a turnaround. But it seems like these stocks are guilty until proven innocent, and this trend of short software, long semis is going to be in place for as long as it's in place. You look at what More Capital always says. Every now and then, Louis Bacon, something comes along and knocks you into a different atmosphere. Something came along and knocked them into a different atmosphere, and it's not changing. And it may not be changing for a while, but that doesn't mean that value is not unlocked. I think it's a good sign to be able to at some point in the future, in the form of earnings that sustain.

Speaker 3:
[09:56] You know, it's a good sign. I want to call Fidelity and ask them if they could hide my software positions from me so that when I log in, I don't have to look at them. I already know they're down.

Speaker 4:
[10:05] I have a view on this.

Speaker 3:
[10:06] Yeah, I assumed you did.

Speaker 4:
[10:09] I want to be kind of like, I feel like I started all my meetings recently with everything I'm saying could be wrong. I'm not going to go into my comments, but we've had some pretty bad calls this year, I'd say, at the sector level. I'm just saying, I'm pretty self- I'm pretty honest about that. We've had some good calls and bad. We've recommended healthcare that's been crap. I could go through it, but we've been seeing the ball clearly on software. It's a good call we've had, and our call has been when the multiples contract like they have, what comes next is they miss on earnings, and then eventually they miss on sales. And so I'm not surprised on Now at all. It's one of the ones that people love and defend the most. And the reason I think these companies are going to miss on earnings is because the analysts have 80% gross margin and the same net margin every year going forward, 27%, 28%, 29% in their models. And how are they going to attach all the AI tools that their customers need without some spending? And if you're a JP Morgan CTO or Morgan Stanley CTO, you're going to pressure them on pricing eventually because you're going to realize, wait guys, we can attach our own tools. We have a massive organization. So there may be value gets unlocked, but I think what's going on, some of the names, but I think what's going on is they miss first on earnings, and then eventually they miss on sales. And what the analysts are so used to doing is saying, I'm calling my CTO contacts, they're telling me they're never getting rid of now. I call the IR guy, we think it's a SaaSpocalypse, we cry on our beer together, and none of that's what's going on. It's not about today's fundamentals, it's about the distribution of outcome of 2030 fundamentals. So some will work and some won't, but the median software company is gonna be bad.

Speaker 3:
[11:36] So UBS finally last week came out and said, it's not the bottom, and here's why. We talk to CTOs, and they're all using the same term, cost containment. None of them are gonna accept this automatic role.

Speaker 4:
[11:48] They're gonna pressure pricing, right?

Speaker 3:
[11:50] But how much of the earnings power of the software group for the last few years has just been like, we are indispensable, we are the system of record for these customers, they can't get rid of us, we also have the ability to raise prices, and nobody does shit, and now it's not so automatic.

Speaker 4:
[12:06] I think that's right, and I think the other thing is like, when it comes to software selection, kind of maybe perversely, the ones you wanna buy are the expensive ones.

Speaker 3:
[12:13] You don't wanna buy cheap software. I heard you saying that. Could you explain what you mean by that?

Speaker 4:
[12:17] If you take this premise that like, maybe we all know individuals are idiots, but the market collectively is smart, right? When you get stocks that get cheap, on average, they're cheap for a reason, which is the probability they're disrupted is higher, right? So, the ones that are more expensive, the security software, cadence and synops, they're more expensive for a reason, which is their technological obsolescence risk is lower. And so when you go back and study what works in the rebound, it's not the slow growing ones that are cheaper, it's the fast growing ones. So some of these are going to work. I kind of viewed a little bit like a lot of software is going to turn into like, you know how a company wants to fire a million people so they hire McKinsey and McKinsey says, you should fire a million people, and then they fire a million people and they say, the experts told us to do it. Some software is going to turn to that, right? Because imagine you're at New Edge and you're like, I clod coded some security, Rob, let's implement it, right? And then somehow there's a breach of all the advisors, like you're fired and he's probably fired for being a dipshit for listening to. So you're just going to pay CrowdStrike or Palo Alto or whatever, just because you have to have an expert in case something goes wrong. You may get some of that happening in software for sure, but the ones that are more expensive are more expensive for a reason, and that reason is they're less likely to get this wrong.

Speaker 3:
[13:28] It's got to be hard because I know you're clod coding your face off. I know your team is like my team, like every firm, the people that are involved with tech are going crazy right now at every company in America. It's hard to then look at the board and look at stock prices and be like, I want to fade this.

Speaker 4:
[13:48] I'm close with a number of his employees, and one of his guys who's a stock picker comes to a lot of our events, and he won the best stock picker at our main event last year and has crushed it in tech and in our sector.

Speaker 2:
[13:58] All technology based too. I hope he listens to this.

Speaker 4:
[14:02] I hope he listens to this and he will shout out.

Speaker 2:
[14:05] Jay is his name. He's unbelievable talented. But we've leveraged tech throughout the start of our ecosystem. It was a tech enabled solutions firm. We built New Edge on top of institutional grade infrastructure. We didn't start it out of a private bank. It wasn't an idea in my basement. It wasn't built upon my practice. It was built on infrastructure, on rails. And that infrastructure allowed us to bring in technology, plug and play different things, and try them religiously. We rolled out Quad Enterprise to everybody a month ago. So we're trying to be on the front edge of kind of everything we do. In portfolio management, we have a very quantitative approach. You know, I slept at a holiday inn last night when I go on TV, because the reality of it is, is we're sometimes reverse engineering the story out of the math that drives the positioning that we're going into. And you can see, you can see a lot of these things, but I am amazed. It's like I have 15 analysts working for me in my fingertips. So when I was a banker back in the days at Morgan Stanley and doing analysis, some MD would come to me, we'd iterate, and then I'd go back to him two days later. I am doing that same thing. We're working on an acquisition right now, several, and I'm doing that same thing, and it's instant feedback. You can kind of interact.

Speaker 4:
[15:31] You know what you make me think of? He's probably like me, where I just have too many interns, because I say yes, can my daughter, can my nephew, can her, okay. The problem is, they don't have any skill. It used to be I'd be like, hey, go tell me all the acquisitions Microsoft made in the last five years and summarize what technologies they're buying and selling.

Speaker 2:
[15:46] Now they do.

Speaker 4:
[15:47] I'll do it in two seconds and go back. So I don't want them to do it for the other, nine days and nine hours and 48 days.

Speaker 3:
[15:53] The intern fans the machine.

Speaker 2:
[15:56] Well, I would tell you that the intern now, the average is gonna be good to great and the great is gonna be game changing for the enterprise. I just can see efficiency happening all over the place. So while we might not lay anybody off as a result of this, I can tell you our pace of hiring will slowly, I'm hearing this everywhere, and then ultimately profitability is gonna explode as a result of productivity. And I think that's endemic in the market.

Speaker 3:
[16:29] So here's the problem then. So then here's the problem. You have, I don't know what it is, 150, 200 enterprise SaaS companies in the public markets. Forget about pricing because no one's gonna be able to pull off a big enough increase. The real problem is most of these companies are selling by head count. And what we're all saying here is head count may not shrink, but it ain't gonna grow to the extent that it used to anywhere.

Speaker 2:
[16:59] I'd like to know his view on that, because the reality of it is, what does that mean for profitability for these companies if they still have essential kind of infrastructure and tools, doesn't that ultimately make their profitability explode as well? And isn't that a positive thing at some point? And so, should we just watch the earnings themselves?

Speaker 1:
[17:20] Hold on, we have charts for this. John, so ironically, throw up chart five. So, ServiceNow reported this morning down 18%, not bad. We have their headcount by department.

Speaker 2:
[17:30] It was my final trade two days ago, or yesterday.

Speaker 3:
[17:33] You say the earnings, have you learned nothing from me?

Speaker 2:
[17:35] I do it all the time.

Speaker 3:
[17:36] Oh my God.

Speaker 1:
[17:37] Yeah, we've all been there. Q1 2025, 26,698 employees. Q1 2026, 29,732. John, go to the next chart. Their stock-based comp is exploding. Have they not gotten the memo at all that the street does not like this? Look at that.

Speaker 4:
[17:56] So it's breaking out.

Speaker 3:
[17:57] SBC didn't matter until it really mattered.

Speaker 4:
[17:59] Yeah, stock-based compensation is, now we're going down the twig, down the branch, down the tree, but it's just a beta factor. So when tech outperforms the ones with lots of stock-based comp, outperform when underperforms the ones with lots of underperforms, so it's just a beta factor because it's like an already intensity factor. But you could have died on that hill. You would have lost a lot of money on the stock-based comp hill over the last 15 years. So you got to manage risk around it. But I kind of agree with Rob's point, or big time I agree with it, it's about productivity. And the question is, what's in the price? Look at Walmart, maybe it's the ultimate poster child. What would make the market go parabolically higher? One of the things would be Walmart gets on, it says, in 2030, we'll have less employees than we have now.

Speaker 3:
[18:37] Which might actually end up being the case.

Speaker 4:
[18:39] It might, and there's a reason it trades at whatever, 38 times forward earnings. It's not because they have 3.5 percent net margin or whatever the number is now, it's because you're in the prices 5 or 6 eventually. They're going to nail predicting how many jugs of milk or whatever.

Speaker 2:
[18:51] I think that's too early. His point, we are at the tip of the spear for these companies figuring out whether they can make that migration, figuring out the implications for the business. You guys probably are too. We are too. We're learning as we go. And we're learning at a pace that I've never seen before.

Speaker 1:
[19:12] So I wonder why Wall Street hates, why the country hates Wall Street. You just said what would make Walmart really go parabolic if they come out and said by 2030, we're going to have less employees.

Speaker 4:
[19:22] So economists and stock people are, they've never been more incongruous. Like if you, I remember when I was at Morgan Stanley, our economists would say stuff like, I want capital spending and I want hiring. And I'm thinking, if I own a stock and they announce either of those two things, I'm selling it immediately, right? Like there's a giant disconnect between.

Speaker 3:
[19:37] That doesn't sound good.

Speaker 4:
[19:38] Right, right, like I don't want hiring at my company.

Speaker 3:
[19:41] More potential customers with higher paychecks is one.

Speaker 4:
[19:44] More health care. So the GDP and the economy are kind of different than picking stocks, right? I mean, look, you had a guest on last week or the week before, a personal friend and favorite of mine, Encore Crawford.

Speaker 3:
[19:58] Do you know 70,000 people and counting have watched that episode? She is such a star.

Speaker 4:
[20:02] I know her for a really long time.

Speaker 3:
[20:03] I met her through you.

Speaker 4:
[20:04] And you skipped a couple of things about her in her bio, one of which is she has a PhD from Stanford and the other is she has the number one performing growth fund in the last 12 months in the entire of all growth managers. But we gave her her props. She said something that is totally awesome, and I've stolen it from her for the last week, which is people who are bearish on AI don't get it. If you think it's a bumble and it's over.

Speaker 3:
[20:28] She said it's nonsense.

Speaker 4:
[20:30] And everything sounds smarter when she says it for sure. But I just feel like we're on the precipice of it. The reason there's earning estimates that are 18% for the S&P this year and 17% next year and 43% in tech this year and 25% next year is because you're like in the... We might be in the fifth inning of the stocks, but we're in the first inning of hitting the numbers.

Speaker 1:
[20:51] You think that's why small caps are breaking out? Part of the reason? Uh...

Speaker 4:
[20:56] Yeah, maybe something could be.

Speaker 3:
[20:58] We know that the S&P 493, so Nomag 7, earnings are supposed to be up 15.0, let's call it 16%. There's got to be some AI productivity in there.

Speaker 4:
[21:09] There's got to be.

Speaker 3:
[21:09] There has to be.

Speaker 4:
[21:10] There's got to be.

Speaker 3:
[21:11] Why else would that happen?

Speaker 2:
[21:12] Well, there is...

Speaker 3:
[21:14] It's not 8% GDP growth.

Speaker 2:
[21:16] But there is underlying economic strength, right? Just if you look at the price action of just about everything, whether it be spreads, it is telling you that there is a miss between positioning and what's happening in the underlying economy. I don't think there's anybody better at reading the tea leaves than Tom Lee. I think we could all agree that this is the best data guy out there. Tom Lee sees around corners. It's freaking unbelievable. And how does he see around corners? He's watching these cross-asset movements, right? And, you know, one thing that scared me, you might have said it on your show, is he kind of thinks there's going to be this, like, mid-year pullback that scares the shit out of everybody.

Speaker 3:
[22:02] He thinks they're going to test the new Fed chair at some point.

Speaker 2:
[22:05] Yeah, so, and...

Speaker 3:
[22:07] Meaning if...

Speaker 2:
[22:08] I don't know why Mr....

Speaker 3:
[22:08] If Josh says something that the market doesn't expect, there'll be a big overreaction.

Speaker 2:
[22:12] Yeah, yeah. Yeah, so, but when he's looking at these things and seeing what's happening in, you know, quality names like the semis and what's happening in software, he's listening and many don't, right? Many get sucked up in the headline narrative of what's happening in the war. And they start to think second and third derivative effects of what that could be. But what is it today? What is it?

Speaker 4:
[22:44] Yeah, I mean, I think if... Like, the way to think about it might be if the street's got 43% earnings for tech, and yeah, a lot of it's micro and video, but let's just say it's got 43% growth, and let's say the real number's 30, and it's got 25 next year and the real number's 15. Tech's not gonna be 45% cheaper a year because it stayed flat for the entire next 12 to 18 months. Like, unless there's a much bigger growth scare coming in 28 or 29 or something, like the odds are just the absolute level of growth is high enough that things work. And so I think the market woke up to that a few weeks ago. But like, where could people be complacent? Like, I did a big risk dinner this week with a bunch of risk officers. And like, nobody thinks, yeah, it's not exactly.

Speaker 3:
[23:23] Rob wasn't invited to that?

Speaker 4:
[23:25] No.

Speaker 3:
[23:25] Okay. I wasn't.

Speaker 4:
[23:26] Yeah, Rob, not his crew.

Speaker 3:
[23:30] The annual value at risk dinner.

Speaker 4:
[23:31] But like, what people are, like, if you say what are people complacent about, it's probably that everybody thinks oil eventually is going to come lower and probably faster. So like, right now nobody's taking their numbers down for input costs in industrials or for, you know, select, you know, energy-sensitive consumer, because they just think, eh, you know, second derivative of Hormuz news is positive. If I get bad Hormuz news, market's on 40 bips. If I get good, it's up 150. So like, you know, whatever.

Speaker 3:
[24:05] Nobody wants to look like an asshole again for going risk off.

Speaker 4:
[24:08] You called 17 to last zero, like, tariff problems. So I'm not being the Hormuz problem guy, right? So like, people are a little bit, you know, so I'm not saying that's going to happen, but I just think people are playing for, so like on the Fed, like, I'm not sure cutting rates is going to be bullish for multiples.

Speaker 2:
[24:24] It can't happen, frankly. How can it even happen? It creates an inflation expectation problem that is going to be pretty dramatic, I think. It's why you have to own some energy in the portfolios. It's kind of like a, like a tail hedge to this.

Speaker 3:
[24:39] Do you think most market participants would prefer the price of gasoline go back to three and change versus another 25 basis point weight cut? I do.

Speaker 2:
[24:49] I do, too.

Speaker 4:
[24:50] Yeah, for sure.

Speaker 3:
[24:51] Yeah.

Speaker 1:
[24:51] No doubt.

Speaker 3:
[24:52] Well, that is a higher likelihood of that, to Rob's point.

Speaker 4:
[24:55] But also, like, it depends where you're on the cycle. Like, when it was the end of 2022 and you perfectly covered your Nvidia, Tesla and Meta shorts, which are all down 65%, and you started buying them max long on Jan 1, your logic-

Speaker 2:
[25:06] Actually, it was December that I bought them.

Speaker 1:
[25:08] You guys had the positions in your bank.

Speaker 4:
[25:10] You run a lot. You got to get them in. Okay. So then your logic was, well, the Fed's closer to the end of the hiking cycle than the beginning. Eventually, a combination is coming. The Fed action is going to be super bullish for multiples. Nailed it, right? But the question is now three plus years later, if they get incrementally dovish, is that really, like, all awesome? Or is it because, like, stuff's slowing and therefore, like, at some point-

Speaker 2:
[25:29] Yeah, it becomes a growth scale.

Speaker 4:
[25:30] Yeah, it's a little bit different.

Speaker 3:
[25:31] I'd rather have the gas price come down. Is the semiconductor rally the most out of control thing you've ever seen?

Speaker 4:
[25:36] No.

Speaker 3:
[25:37] It's not?

Speaker 2:
[25:37] I think it's completely- I think it's justified, too.

Speaker 4:
[25:40] Is it the most out of control thing? I've seen a lot of out of control stuff at home.

Speaker 3:
[25:42] I think it's so completely out of control. The pace of it and the relentlessness.

Speaker 1:
[25:46] Micron is bigger than Johnson & Johnson.

Speaker 4:
[25:48] Okay, so, look, I'm a, you know, I used to be a semiconductor analyst.

Speaker 3:
[25:53] Hold on, hold on. Last 16 days, 35% for the semis. 16 days, it is the best rolling 16 day, I know it's a random number, but it is the best rolling 16 day period in the history of the SMH. Never before, and I understand the reasons, I don't live in a cave, but like, people will just buy anything semi-related every single day.

Speaker 4:
[26:17] I think when you look at semis and you look at tech, you really have to look at it, like even software, look at software X Microsoft and with Microsoft. When you look at semis, you know, your tech book is gonna look like it grows more slowly and is more expensive than the tech index unless you're overweight Micron, trades at four and a half times next year's earnings and is growing like 100 percent, right? So, you know, we know it's cyclical, but.

Speaker 2:
[26:42] You gotta see something that comes along and challenges the probability of that outcome. And I don't know that we're-

Speaker 3:
[26:50] Of them earning enough.

Speaker 2:
[26:51] Right, that is right. And as long as earnings get, it's hard to see right now, but you know, the pianos don't hit you in the face, they hit you in the back of the head.

Speaker 3:
[27:00] Nvidia has grown earnings substantially in each of the last four quarters. Stock has not gone up.

Speaker 4:
[27:06] I think the stock will go up and go up a lot.

Speaker 3:
[27:08] I know, but I'm saying, two things can be true. You can have a stock price that just refuses to go along with incredible fundamental news, which is all we've ever seen from Nvidia.

Speaker 4:
[27:18] But my friends' estimates, plus or minus, I don't know if somebody can, I'm sure somebody will comment on this, but like, there were roughly 50 bucks in earnings and earnings per share for next year before they reported, and they're roughly 100 now. So the magnitude, one of the things we're doing right now we're researching is, look at all the companies where two years earlier, the analysts estimates were most off, like ever, on earnings and capital.

Speaker 1:
[27:39] Is this high on the list? And those are the best stocks.

Speaker 4:
[27:41] And this guy, yeah, in both directions, look at the ones where they're way off too high too, just to see if there's a pattern. But like, this is one of the bigger free cash flow estimate misses ever in 25 years in the market. So when you say it's crazy, like yeah, the price action's massive, but it's also one of the crazier fundamental improvements too.

Speaker 3:
[27:57] It's such a huge change and nobody knew it was coming.

Speaker 4:
[28:01] Like, rough order magnitude, people had like a billion and a half in free cash flow for next year, and it was like three and a half billion over two years, and now it's 80 billion over the two. The magnitude is like zeros off.

Speaker 3:
[28:12] Yeah.

Speaker 1:
[28:13] Adam, I want to do one last thing on software before we leave that. So you talk to a lot, you have a lot of hedge fund customers. I'm imagining that nobody wants to touch software, although I'm sure there's a lot of dip buyers that got their hand burned. But ServiceNow, for example, so they report this number, a number of customers with $5 million ACV on Chart 3, please, and they went from 434 customers paying $5 million up to 630 in Q1 with a 97% retention ratio. Now, their margins came down, but this is still a good business.

Speaker 2:
[28:45] 100%.

Speaker 1:
[28:46] The problem is nobody...

Speaker 2:
[28:46] It sits on the macro. I mean, you're going to have to manage all this.

Speaker 1:
[28:50] But the stock is down 18% today.

Speaker 3:
[28:52] You can't fight that. They did 22% revenue growth. They hit the numbers. And the stock still lost 20% of its value after being down 50-something percent. Isn't that scary?

Speaker 1:
[29:03] So when you talk to your clients, what's their view? Is everybody like, I can do this on Invesible. How do I buy this?

Speaker 4:
[29:10] So the only thing I'd parse into what you asked me is, I think it really depends if you're a long-only or a hedge fund. Most hedge fund money, they don't have to own any of this stuff. Or they can pair off. So it's really more the long-only guy who is what he is. He's a software analyst. Why does GM make cars? A software analyst has got to pick winners and losers in the group and identify how to outperform the software benchmark. And the PM's job is to figure out what exposure to the aggregate group should be. So I think most analysts are going to say, I want to own stuff where the revenue is accelerating. And if you look at a two-by-two grid of beat on revenue, beat on earnings, missed on revenue, the worst bucket is what now reported, which is you find on revenue and you miss on earnings. Because the market doesn't know where the clearing margins are, but you just expose the fact that like your margins in the out year are lower.

Speaker 1:
[29:58] And margins came down. Their guidance from margins came down.

Speaker 4:
[29:59] So it's not trading 18% lower today. It is, it might be trading 4% lower on 2030. Like you have to warm yourself up to that idea of like the uncertainty on the margin profile just changed. There are assets, including now could be one of them. And I'm just not smart enough to know that this could be like a great entry point in a two or three year, but I need to see some price action that we all know are going to shake our head yes, where a company misses and doesn't go down.

Speaker 3:
[30:22] What does that look like?

Speaker 1:
[30:23] It doesn't go down.

Speaker 3:
[30:24] That's what it is.

Speaker 4:
[30:25] I haven't seen a single penalty for missing that hasn't been harsh. Today was the first day where I thought a couple of beatings were good. URI, Texas Instruments up massive. And you know, but if we track this thing, the penalty for missing versus reward for beating ratio, and not only has it been very skewed toward the penalty harsher, but it's like cheap stocks missing and going down more than expensive stocks that are missing.

Speaker 1:
[30:47] So what type of market does it happen in?

Speaker 3:
[30:50] A toppy market.

Speaker 4:
[30:52] Like, yeah, I think the good news, I guess, is more companies are beating than missing. So that's why the market's fine. But like if more companies start missing, like we can't buy stuff where we don't have any evidence. Like the best thing ever is like, you know, the old days, like Caterpillar misses and it's hunch. And you're like, all right, game on. Like, I mean, missing is hunch that I don't mean.

Speaker 2:
[31:12] Missing, missing, yeah. But we're not seeing it.

Speaker 4:
[31:14] Missing is annihilated, right? Yeah.

Speaker 3:
[31:16] Put this tech multiple compression chart up. This is a thing. What do you guys make of this? I think it's seven. Yeah, here we go. So let me narrate this for the people that are listening, not watching. We're starting in 2020. Right around COVID time, we were at 16 times for tech's forward PE ratio. Peak out in the 2021 bubble at 28.7, fall to a low of 18.5 during the year of efficiency, 2022. Then we rally through 2024. We hit an all time, not all time, all time in this chart, 32 times forward earnings, drops early 2025 to 21, back to 31 at the end of 2025, one of the best years ever. And now here we sit at 19, huge derating on forward earnings. Very quickly, very fast, very unexpected. I don't remember reading any strategists saying.

Speaker 4:
[32:11] Microd's estimates are up 100%.

Speaker 3:
[32:13] Is that all this is? Is the growth rate growing faster than people can?

Speaker 4:
[32:16] If the estimates are for 43% growth in earnings this year, then you can have multiple being high because the E went down or because the E was not and the P went up. But in this case, it's more the E.

Speaker 3:
[32:27] The E is going up really fast and pricing isn't keeping up with it.

Speaker 4:
[32:30] Give me one nugget. If you look at the S&P 500, the whole 500, Q126 versus Q125 year over year growth, 45% of the entire S&P 500's growth was from Micron and Nvidia.

Speaker 2:
[32:41] If you believe this geopolitical risk leads to slower economic trajectory, markets are going to pay up for that growth and you're going to see that go right back up.

Speaker 3:
[32:51] Because if there are less companies growing, they'll go right back to the old playbook.

Speaker 4:
[32:57] If the E comes in and it's on-chun multiple, the stocks will be 40% higher or Micron will be up, or whatever. So it's a multivariable world and you just showed one variable. Or whatever the criticism is.

Speaker 1:
[33:09] What were you telling Client, what did you make of the stair-step lower during the war? The fact that the market just wouldn't puke. What was that telling you? I know it's hindsight now, but.

Speaker 4:
[33:19] It made me more bullish.

Speaker 3:
[33:23] Same. We didn't have a panic, we went lower.

Speaker 4:
[33:26] I came into the year thinking.

Speaker 2:
[33:27] So that's actually what kept us invested completely through that. Now we did upgrade quality, like I said. When you get any volatility, it's a great opportunity to kind of pivot to a higher quality name in the same sector that's not getting derated as much or has shown more resilience in their earnings.

Speaker 3:
[33:46] Oh, because you say, wait a minute, we can now own this.

Speaker 2:
[33:50] Yeah, especially if you're a long-only relative investor in a certain class, whether that be dividends, value, growth, and you're kind of managing to a benchmark in a portfolio construct, and you can say, okay, now I can own this, I could never own this. I mean, for so long, we never owned Nvidia until it traded below 30 times earnings. We waited it and we missed a lot in doing that, but boy, did we buy it at the right time. So, if you can still employ your discipline, and when volatility creates the opportunity to upgrade quality, and you can move from X to Y, you do it. And that leads to a lot of outperformance.

Speaker 3:
[34:30] Volatility, though, to your point, within a reasonable...

Speaker 2:
[34:33] Within a reasonable band.

Speaker 3:
[34:35] Like not a freefall where all of a sudden it's like, wait a minute.

Speaker 2:
[34:38] That's that whole different atmosphere thing.

Speaker 3:
[34:40] We didn't get that this year.

Speaker 2:
[34:42] And you won't get it from geopolitical. You get those from financial issues. Right? So this credit issue that we kind of... I don't really believe, you know, I know a lot of people do, but I've been an ardent defender of the equity that sits beneath it and the economy being strong enough that these private equity firms are not walking away from these businesses and the credit's going to be fine. And the market's kind of telling you a little more, at least the more public markets that spreads are remaining contained. And listen, a lot of the credit in private credit sits at the highest tier of the capital stack, so you got to wipe out a lot before they're wiped out, right? So from my lens, it is that that is more of a concern than anything because that's the liquidity that feeds the ecosystem that we all thrive off of.

Speaker 4:
[35:35] Financial conditions.

Speaker 2:
[35:36] Now, I will say that if you cannot raise money going forward, we talked about this on the other show, the reality of it is, is if your forward ability to raise capital from private investors has been impaired, and that was your growth strategy, right? Toast. And they're not coming back right away, but the institutions are staying in because they see the value of this. You're to be more discerning because you have to be, because you don't have as much capital. And so the strong are going to get stronger, they're going to get financed, and the weak are going to require more investment, and some of them will get it, and some of them won't.

Speaker 4:
[36:16] Maybe buy some KKR.

Speaker 3:
[36:18] I've thought about those, son.

Speaker 1:
[36:20] Look at this, some Blackstone.

Speaker 4:
[36:22] Yeah, I know. I mean, Blackstone, I didn't know which one you're going to show, but yeah.

Speaker 2:
[36:27] So I tax law sold, not me, the team, tax law sold Blackstone. I got a lot of shit on it on the show because I was such a champion of these things, but it was just tax laws.

Speaker 1:
[36:38] So you bought something else?

Speaker 2:
[36:39] We didn't buy something else in the space, but we would likely go back in to Blackstone.

Speaker 1:
[36:44] All right, so Blackstone got whacked off today. It's down to 6%, and this is the private credit fundraising on a gross basis by quarter, okay? Down almost in half, not quite, 3.3 billion in the prior quarter, down to 1.9 billion. This is growth, not net, okay? I don't think there were outflows. So a dramatic, dramatic slowing, but not to zero.

Speaker 2:
[37:03] So think about this.

Speaker 3:
[37:03] This is the media narrative pausing people who are about to allocate.

Speaker 2:
[37:09] 100%. Of course. And it's also human nature and advisors, we're advisors, to say, hey, do I wanna try to take advantage of this or do and steer into the eye of the storm? Most people don't do that. Most investors, the success that we've had as a company, period, is identifying areas where forward returns are headed higher.

Speaker 3:
[37:34] But pricing has not come down in this underlying market.

Speaker 1:
[37:37] It's a flow storm, that's it.

Speaker 2:
[37:38] So that's right. But let's use a different example in when we had the tech crisis and in venture companies having trouble raising money and it rerated down and they pivoted to venture debt. There was an enormous opportunity in venture debt because they didn't want to sell equity at those levels. And if you steered into that storm, just in a different way, right? What it led to is higher forward returns. And you see that episodically in markets. So I think one of the great challenges that advisors have is keeping investors invested and how you do it is by identifying the high optionality within the underlying crisis. They will have a greater probability of success on the other side.

Speaker 3:
[38:28] But if I read a headline that said, six months from now, great news, or I would say horrible news, all of these leveraged loans are now trading 20% cheaper than where they were, the thrust of that article would be written as a way to bash the private credit industry.

Speaker 2:
[38:49] And you go right in.

Speaker 3:
[38:50] But then I would say, I love it, I haven't bought any of this shit yet, this is my opportunity.

Speaker 2:
[38:55] 100%.

Speaker 3:
[38:56] I don't think, I agree with you, I don't think most people think that way, number one, and for financial advisors in particular, what do you think most of their clients would say back to them? Hey, let's buy some of this asset class that The Wall Street Journal is screaming bloody murder over on the cover of the newspaper. Why would we want to do that? That sounds crazy.

Speaker 2:
[39:16] And I would say, did you see Blackstone's partners step in to buy, take a gigantic chunk of their own money and buy this? You think they're doing that because they have massive concerns about the asset class?

Speaker 4:
[39:30] So you just bought 10 million bucks of stock, that's why I mentioned K-Care, I didn't know the Blackstone, but I saw they bought. The pushback I got was somebody was like, oh, the guys have got a billion dollars. I'm like, yeah, but people don't like throw 10 million out on purpose. I'm like, the person's signalling the company.

Speaker 3:
[39:45] But right now, the price, with a few obvious examples, it's not like the leveraged loan market is in distress. It isn't. It's not like there are these massive discounts.

Speaker 2:
[39:56] But the narrative gets sucked in and pushed out so quickly.

Speaker 3:
[40:00] I think I like the equities better than the products, would be my comment.

Speaker 4:
[40:04] Oh, for sure.

Speaker 3:
[40:05] I like the equities better. I'd rather be a GP. If I could buy KKR and Blackstone at 25% discounts.

Speaker 4:
[40:11] I got pitched a year ago from somebody on a private credit pocket. I was looking at it. It was like unlevered 13% private credit return. And I was like, sorry, I don't want to be the annoying client, but who's lending to me at 13% unlevered? Because how many, I mean, what is this? Is it like nail salons and orange counter? Who needs 13% for me? This math doesn't make sense. So the stocks are probably, on a two year view, better.

Speaker 1:
[40:37] But the stocks are cut in half, the credits, the private credit is still training one for one.

Speaker 3:
[40:40] That's my point. You're not getting a discount in the underlying, you sure are getting a discount if you come in at the GP level, buy the stocks. So, all right, you want to do this chart with the highs?

Speaker 1:
[40:51] Yeah, so there's, so part of the narrative over the last couple of weeks is, yeah, we're hitting all time highs, which is awesome. Feels good, feels better than being down. But there's not a ton of stocks making 52 week highs. So, this chart is from Jason Gepford, sentiment trader. So, he's looking at the S&P 500 return after the first record, it's specific, but whatever, after the first record high in one month, and under 5% of issues are at a 52 week high. That's kind of odd, under 5%. And it's a mixed bag to down, it's not great. Positive 33% of the time one month out, 33% of the time two month out, 42% of the time three month out, six month out. I mean, these are not great numbers. And it's not like one time, it's happened, oh shit, in 29, all right, 83, 90, 93, 95, 2015 and 20.

Speaker 4:
[41:42] Do you want me to shit on this?

Speaker 1:
[41:44] Yeah, please.

Speaker 4:
[41:45] Okay. I'll just start by saying, I don't think this kind of stuff is helpful for predicting subsequent return. This is not statistically significant. The market's way more concentrated, different than it used to be. You guys are financial advisors, I'm not, but I can empirically show you that any kind of breadth metrics do not effectively help you make money. They're usually volatility gauges. So if I were one of Rob's advisors or Rob and somebody said, I'd like to time my market entry here, I would say you will destroy value using this kind of data over your career. Whether it's VIX or moving average convergence versus breadth or whatever.

Speaker 3:
[42:17] You don't like probabilistic forward return studies in general.

Speaker 4:
[42:21] I know this isn't statistically significant. I know it's not a... You know, it's all like, how relevant is the 1929 data to 2026? Like, all you really said is that there's some big stocks that are up a lot. So not, you know, and not all of them are. Okay.

Speaker 1:
[42:34] Good. Good debunk. Let's take a quick look.

Speaker 4:
[42:36] But like, I want to just kind of be like, that could work right now. I'm just saying, if you gave me a thousand of these charts over the next few years, I'll take the under and more than 500.

Speaker 3:
[42:44] I actually don't think anybody invests based on that. I think people use that.

Speaker 4:
[42:48] You want to be fully invested in equities. You don't want to make one month market calls.

Speaker 3:
[42:52] I think people use stuff like that to justify something that they're already going to do anyway.

Speaker 2:
[42:56] When it comes time to buy, I promise you, when it comes time to buy, none of your clients are going to want to buy. So if they were super smart and got out at exactly the right time, they've got to stay in the game. The question is how you're positioning within staying in the game. And I think it's gotten a little tougher because of the index concentration. You have markets, so you can't kind of pick your spots within that in many cases. And so a lot of times you can use math to marry both technicals and fundamental factors in a way that can maybe put you in a better position on either side of that move.

Speaker 4:
[43:37] And you guys know better than me, it all is a function of how rich the person is and how much assets they're on. If you got Mr. and Mrs. Richbags who are 80 with 200 million bucks at Microsoft stock, they're solving a different problem than some guy. It's all a function. What's the charity? What's the taxes? So it's really hard to make a blanket statement about that, but I definitely wouldn't be deploying saying, like, let me sell my S&P exposure because of some breath metric from 1929.

Speaker 1:
[44:00] You might like this. You might not. Tell me if this makes sense to you. John Chartin. Todd Sohn shared this. The semiconductor sector is 16% of the market, the S&P. Energy, healthcare, staples and utilities are 90%. Talk about touching tips. These things are very close.

Speaker 2:
[44:23] Why isn't that, why isn't that rational?

Speaker 1:
[44:26] Why is this not rational?

Speaker 2:
[44:28] Right now.

Speaker 1:
[44:29] I'm asking you guys.

Speaker 3:
[44:31] What is the profitability of these staples and utilities, stocks, sources?

Speaker 1:
[44:35] Okay, I would guess, you would know better than me, that if you add up the profitability, just earnings, and maybe that's not the right metric, of energy, healthcare, staples and utilities, especially healthcare in there, it would dwarf semis. But maybe not because of the video.

Speaker 2:
[44:49] Well, here's the thing, I'm sorry.

Speaker 4:
[44:50] No, you hit it, I love it.

Speaker 2:
[44:51] I didn't mean, it is, what is happening to forward guidance? Is really what is the driver?

Speaker 3:
[45:00] The prices are following.

Speaker 4:
[45:01] 2030, what's the 2030 distribution of outcomes?

Speaker 2:
[45:03] Yeah.

Speaker 4:
[45:05] And what's the constitution? The S&P is a quirky index. Like, you know, it's 35%, the grade eight, you know, Broadcom plus the other seven. It's probably 60% in AI ETF, semi ETF. I mean, if you take like G.Vernova and Vistra and Consolation and Eaton and Electrification and Cat.

Speaker 3:
[45:23] They are derivative beneficiaries, sons of industrials.

Speaker 4:
[45:26] Well, he said straight, it's about the forward expectations. Like, that could be wrong. It could modify itself. But like, yeah, what you just said is semis have been better than energy stocks. Yeah, no shit.

Speaker 3:
[45:34] So, but like, hold on, hold on. Is there an upward bound to this?

Speaker 4:
[45:37] The probability you were going to show a chart that I wasn't going to shit on was incredibly low.

Speaker 2:
[45:44] Especially from a competitor.

Speaker 3:
[45:47] Is there an upward bound to this?

Speaker 4:
[45:49] Of course.

Speaker 3:
[45:50] What is it?

Speaker 4:
[45:51] Six months before semis, 30%? Semis estimates proved to be too high.

Speaker 3:
[45:55] Okay.

Speaker 2:
[45:55] I have to disclose that we are happy consumers of strategists.

Speaker 4:
[45:58] Yeah, Treader's a great guy. And I like, there's no, there's no credit. There's a big world, lots of people do interesting stuff. But like, I just think when it comes to like, statistical significance or this kind of, it's an interesting observation, but like, it kind of makes more sense to me. Like, you asked me a while ago, like, is this the craziest thing you've ever seen? Like, I've seen a lot of crazy stuff. Not really. It's more crazy to me when like, zero revenue stuff goes crazy. Or you know, like that's a little bit more weird to me than my crunch rates at four and a half times next year's earnings. The earnings are 100% higher than they were a few weeks ago. And there's a shortage as far as I can see in their core product. And you can't produce anything without that.

Speaker 1:
[46:31] How does a price fund balance? Like, I know it's when buyers and sellers sort of match up, but like, how should investors think about, I can't buy this now.

Speaker 3:
[46:39] So a Sandisk, Micron, like, how do you...

Speaker 2:
[46:43] Usually, this is just the fact of the matter. The price movement once it starts, until something knocks it off that trajectory.

Speaker 1:
[46:53] An object of emotion stays emotion.

Speaker 2:
[46:54] I do.

Speaker 3:
[46:55] I do.

Speaker 2:
[46:57] And it's absolutely true.

Speaker 3:
[46:58] You know what I say all the time, and I say this on the show especially, people say I took a profit, I took a profit, nothing wrong with taking a profit, and then I look at the...

Speaker 2:
[47:06] Sure there is. You pay taxes, you miss...

Speaker 1:
[47:08] That's a great buy signal.

Speaker 3:
[47:09] I look at the chart, and the chart always looks like this grind higher, and my comment is like, okay, but why today? Why don't you just trail it? If you're nervous, throw like a 10-day moving average stop loss, trail it behind the share price, and let the market take you out. Why are you deciding that this is over?

Speaker 4:
[47:29] You know, just evaluate the sell-ex post and say, did my sell work versus some comparable basket bait adjusted, and that destroys value.

Speaker 2:
[47:35] I was not even English, and I love that one.

Speaker 3:
[47:38] I'm saying like, do real work.

Speaker 4:
[47:39] Like, do real work. You can value weight where that trading decision makes sense. Like, we're all agreeing. I just, you know, we do this for a living. I get people's portfolios.

Speaker 3:
[47:46] I'm just saying, you have a stock that's been going up for three years.

Speaker 2:
[47:48] Today's the day you took a problem.

Speaker 4:
[47:51] I'll say it differently. I'll say it differently. Do you think if you buy stocks that were just up 100% today, you'll make more money, or should you buy stocks that were just down 50% for the previous one?

Speaker 2:
[48:02] Up 100%.

Speaker 4:
[48:03] For sure.

Speaker 3:
[48:03] Obviously to who? Not obvious to everyone.

Speaker 4:
[48:06] Who cares what it already did? All you're trying to think about is what do I do today and what's going to happen in the foreseeable future?

Speaker 3:
[48:12] You care what it already did if it's gone parabolic and you were the last asshole buying it. If it's a grind higher that went, that took time, I can buy that chart.

Speaker 1:
[48:25] Not a stock that doubles in three months. That's different.

Speaker 3:
[48:27] It's the rate at which it went up.

Speaker 4:
[48:29] Actually, I'm not saying I'm surprised, so there's no surprise in my voice, but you actually had a good idea there. We'll study that. We can look at stocks that have gone up 100%.

Speaker 3:
[48:36] Oh, I've already done this work. I will send you my work on the subject. It's called The Best Stocks in the Market. I will not get bullish on a stock that just went from 30 to 60 in a week. I understand it could go to 90, but if you just don't do those and focus on the stocks that climb. That's institutions.

Speaker 1:
[48:55] You know why you can't study that? Because a lot of the stocks that go from 30 to 60 today, that's the meme shit, and that didn't exist in the back desk.

Speaker 4:
[49:01] Okay, so we can study that. We can study every stock.

Speaker 3:
[49:03] I'm saying it's different.

Speaker 1:
[49:04] No, no, no. I'm just saying.

Speaker 4:
[49:06] Don't challenge me.

Speaker 1:
[49:07] Dude, my point is the Reddit boards were not here in the 80s.

Speaker 3:
[49:12] Can we do something that you just wrote up? Spin off playbook?

Speaker 2:
[49:16] Yeah.

Speaker 3:
[49:16] Okay. This is original Adam Parker research.

Speaker 2:
[49:21] Trivariant.

Speaker 3:
[49:23] I'm going to quote you to you, and then I'd love for you to go off.

Speaker 4:
[49:28] Hopefully, this isn't as bad as my health care call. All right.

Speaker 3:
[49:30] No, no, no, no, no. You said in 2025, the median spin off reached a 26 year peak transaction size of 3.3 billion across 11 transactions. So far this year, only one spin off has been completed. It's Comcast, Spunoff, Versant.

Speaker 4:
[49:49] Channel you and I both come from.

Speaker 3:
[49:50] That's right. But two have been announced, MSGS and GPC, which you'll tell us about. Several more are rumored. 20 spin offs were announced in 2025 that have yet to be completed. And six of these companies are mid cap or larger. In today's research, we provide context around the spin off performance, analyze historical market reactions and supply our playbook for the future. I want to say one thing before you go.

Speaker 1:
[50:15] What is a spin off?

Speaker 3:
[50:15] I love spin offs. Dating back to my time as a retail broker, telling stories, begging for money. We pitched the parent companies of spin offs ritualistically. Almost didn't matter what it was. Because the pitch to the people on the other end of the phone was, you own 3Com, guess what? You're also going to get POM.

Speaker 2:
[50:40] People love catalysts.

Speaker 3:
[50:41] I love a catalyst and I get 2 stocks for the price of one. They didn't understand the fact that the price of the parent would adjust on IPO day. They just love the idea.

Speaker 2:
[50:52] Remain Co.

Speaker 1:
[50:52] Adam, for real, I know why I come to Rob. Adam, why do companies spin off companies?

Speaker 4:
[50:59] Usually, I think the primary reason would be a tax reason, right? It's usually a tax reason. So like if you meaning like if I'm, we both used to work at Morgan Stanley, and I sell Discover because I made a ton of money on it. If I sell it to somebody else, I have to pay taxes on it. If I spin it, there's a massive tax. So I would say that's the primary driver, but it could be unlocked value. You think there's an underappreciated asset. It could be that there's a-

Speaker 3:
[51:27] New management of the spin code, which would be more focused on that one business.

Speaker 4:
[51:31] Capital structure optimization, dis-energy. There's a list.

Speaker 2:
[51:34] Valuation.

Speaker 4:
[51:34] But I would say taxes are usually the driver. Now I guess there's a lot of things you can do. First of all, what you used to sell, I would say, I can empirically show, is not a good idea. The spin codes do better than the remain codes.

Speaker 3:
[51:49] I'll go back to 1998 and apologize to people.

Speaker 4:
[51:52] The spin codes typically on average do better than the remain codes. But it's an interesting point you're making. You may be thinking of something really kind of interesting, which is one of the signals that works in quant, and it's kind of pesky, and it works, is a signal called low price. So we think about how stupid that is. Low price means it's no denominator. Like just generally stocks with a lower price, and stocks with a higher price. And you can study that.

Speaker 3:
[52:15] Because we tell people like to buy low price stocks.

Speaker 4:
[52:16] Because they think it's like $2 is better than $4, independent of like denominator.

Speaker 1:
[52:21] Yeah, buy low.

Speaker 4:
[52:22] So your logic of getting two stocks instead of one is kind of funny and probably used to work.

Speaker 3:
[52:27] It did work.

Speaker 4:
[52:28] Yeah, but recently, in the last decade plus since there's been like computers, the spin codes usually do better because typically when they spin them, they know the numbers and the estimates are pretty achievable for the next couple quarters. They have a path toward margin expansion or something the market likes. And usually they're spinning something in a different industry. So, you know, there's some rationale. I think, you know, we have a lot of clients that are law firms and boards and managements of companies. And I think they're just all looking to unlock value. If you're a 40, 30, 50 billion market cap company, 20, 30, 40, you're sort of thinking like, is there a plan I can get big? Can I get to 100 billion someday? How do I do it? How do I unlock value? And so you're just looking at transactions. You're just saying like, can I buy something? Can I sell something? Can I do something with my capital structure? And I think more importantly, if you're a good person, you probably want to be perceived as a good steward of capital over your tenure managing the company. I think spin co's are topical.

Speaker 3:
[53:19] So you're saying the spin is better than the parent? Or the parent's better than the spin?

Speaker 4:
[53:22] On average, the spin's better than the remain co.

Speaker 3:
[53:25] But on average, it's tricky, because some of these are so specific.

Speaker 4:
[53:28] Generally, you want to buy the spin co, not the remain.

Speaker 3:
[53:31] Okay. I mean, it makes sense to me, just anecdotally, thinking about some of the big winners from spinoffs that I, like Zoetis coming out of Pfizer.

Speaker 4:
[53:39] G.Vernove. Monster.

Speaker 3:
[53:41] G.Vernove is a monster. Like, some of these, I think, are 10 baggers, and I remember what they came out of.

Speaker 4:
[53:46] The original 12 month performance out of the UTX spin where you got, you know, Carrier and Otis and Raytheon.

Speaker 3:
[53:52] Sandus was a 20, was it a 2025 spin or 2024?

Speaker 4:
[53:56] Maybe, I don't remember.

Speaker 1:
[53:57] 2022, I think.

Speaker 4:
[53:58] Yeah, a couple of years ago, yeah.

Speaker 3:
[53:59] Okay. I mean, this is-

Speaker 4:
[54:00] But we just think generally, if you're a human being analyzing stocks, like, where can you add value? Machines are going to kill you in a lot of places, but humans are going to add value whenever there's like a management decision making, creating or destroying value. I love analyzing stuff like M&A.

Speaker 3:
[54:12] Can we show your charts? Can we show?

Speaker 4:
[54:14] Oh, shit, I know Yandy. I know Yandy.

Speaker 3:
[54:16] All right, John, let's go through this. You could just narrate for us briefly what each of these-

Speaker 4:
[54:20] I'm surprised you find this is super interesting. I just, I mean, thanks for anytime you throw our work on the screen.

Speaker 3:
[54:26] Trivariate, ladies and gentlemen.

Speaker 4:
[54:27] I'm all in, thank you. No, I guess I just think that the law firms and the bankers are pitching management teams on doing stuff, and one of the things that they can point to success for is spinning. And I just surprised there haven't been more. You can tell on the left there's been 20, 30 of these things a year, and there's only been a couple recently, and I just feel like there could be a wave of these things going forward. Generally, mid-cap companies do it, not mega-cap companies.

Speaker 3:
[54:53] Look at the returns. SpinCo is black, RemainCo is blue.

Speaker 4:
[54:59] Maybe, I don't know what the next slide is. Can you show me what else you download? A couple more, maybe, flip ahead. How many did you put?

Speaker 3:
[55:04] Every single thing that you overdid.

Speaker 4:
[55:06] Keep going, keep going. I'll show you the rest of them.

Speaker 3:
[55:08] Even the ones you didn't publish, I found them. One more, one more.

Speaker 4:
[55:10] We'll see what you have. I think there's like a line chart. The one on the right here is the mean industry group relative returns. This is how the stock did versus its industry. I didn't want it to be like SanDisk was awesome and you're not normalizing for the industry, right? So the black line is the typical SpinCo performance and that x-axis is the number of days. So like kind of 250 new trading days in a year. So two years out, the average spin beats its industry by 10 percent and the average remain kind of lags by a couple.

Speaker 3:
[55:36] So I mean, that is statistically significant.

Speaker 4:
[55:38] It's a real number.

Speaker 3:
[55:38] And that's robust across sectors.

Speaker 4:
[55:40] Pretty much. Yeah, pretty much.

Speaker 3:
[55:41] I mean, OK. Yeah, love it. Well done. Well done. Now, Rob, would you like to unveil your research on spinoffs?

Speaker 2:
[55:50] We don't have that in the bag. I mean, it's Trivariance research.

Speaker 4:
[55:53] No, but you know, whatever.

Speaker 2:
[55:55] Why would we do it twice?

Speaker 3:
[55:58] I wanted to ask you about some of your favorite stocks this summer. So let's, you and your team gave us a couple of talk about, let's hear what you're thinking.

Speaker 1:
[56:07] Hold on, we're skipping spring? Is this like, these are only going to work in the summer?

Speaker 3:
[56:09] Yeah, only for the summer.

Speaker 2:
[56:11] I don't know if I can operate with that level of precision. However, I think it's a balanced way to think about how you invest at this time in possibly going in the summer. And it's a marriage of putting together the highest conviction names that are at their all time highs. No question. Married with some beneficiaries of that in energy, energy specifically, and married with energy producers that I think could benefit from further crisis in the Middle East. And then, for the sake of Adam, we put in Gilead because we think you got to have a health care name in there. And so you're putting weight on two different skis and adding something a little different that I think is reasonably attractive.

Speaker 3:
[57:03] We've got Broadcom here, this is from your team, king of custom silicon, data center networking infrastructure, position to win as hyperscalers, spend more. I mean, this stock has obviously been a huge winner. I know you guys have made a lot of money with it. You still like it here?

Speaker 2:
[57:19] We do. The object in motion stays in motion. They're on track for 60% revenue growth this year. They have industry leading profitability. They're a leader in both custom silicon data center. Is that working hardware?

Speaker 3:
[57:34] The market is not stupid. Could you have more? Taking this stock to where it's taking it?

Speaker 2:
[57:38] No, not at all. I think where the market was stupid was in April of 23, where you had all the other names doing what they were doing, and this one was left behind, and it was trading as a teenager at that time.

Speaker 1:
[57:50] Oh my God, I just said it's at a trillion. It's two.

Speaker 2:
[57:53] Yeah, it's unbelievable.

Speaker 3:
[57:56] Lamb Research.

Speaker 4:
[57:56] Nvidia's 4.8.

Speaker 3:
[57:57] I love this. I love this stock. It's up. We wrote it up for Best Stocks to Market last August. That's up 170% since then. I want to point out, we wrote it up at an all time high. People were angry, like, now you're saying you like it, it's up however much, it's up another almost 200%.

Speaker 4:
[58:16] I always like stocks at higher prices than I used to not like them at.

Speaker 2:
[58:18] It's up 297% over the last year.

Speaker 3:
[58:22] I mean, they basically control their entire business.

Speaker 2:
[58:25] They're a quasi-monopoly. They're essential in the chip manufacturing equipment.

Speaker 3:
[58:32] What is NRG?

Speaker 2:
[58:34] NRG's a derivative beneficiary of what's happening in AI. Power's the bottleneck. You know, Vistra Energy as well. We were on Vistra. We had such a move. It was, I think, the number one performing stock. I'm trying to think of the year.

Speaker 3:
[58:47] VST, that thing was insane.

Speaker 2:
[58:49] We bought it in January. At the end of the year, it moved so much that we decided to diversify because NRG was lagging. So we kept Vistra. We added NRG under the same portfolio theme. It's down from its highs in February. It's down about 20%.

Speaker 3:
[59:05] It's taking natural gas and getting that into the electricity that the data center needs.

Speaker 2:
[59:11] They need it. And they're big in this bring your own power deals where they sell directly to the data centers, which is kind of a unique and novel strategy. And I think it's going to work. And it's trading at 16 times right now. APA. APA is more of a-

Speaker 3:
[59:28] Glass from the past for me.

Speaker 2:
[59:29] Yeah, just an E&P name. It is up 58% year today. It's off 14% from its recent high.

Speaker 3:
[59:37] Do you need Iran to stay f***ed up to stay long this time? Or do you like it either way?

Speaker 2:
[59:41] You need things to not open quite as quickly. I think this is going to be a beneficiary of America doing what we're doing from a production standpoint. And it's a great combination of a lot of diversified production across regions, products. They have a healthy total yield, 12% between buybacks and dividends. It trades at seven times.

Speaker 3:
[60:07] It's crazy.

Speaker 2:
[60:08] This is an interesting business to us. And then lastly, Gilead, which has...

Speaker 3:
[60:13] You did that for Adam?

Speaker 2:
[60:14] Well, yeah.

Speaker 4:
[60:15] Diversification.

Speaker 2:
[60:17] Diversification.

Speaker 3:
[60:18] No, the stock looks great. It's actually been a strong... In this group, the group has sucked for a while. But this is one of the good ones.

Speaker 2:
[60:25] This is one of the winners. I think you have to have some exposure in this space. Again, this is the upgrade in the quality. They're dominant in HIV. They're doing unbelievable things in oncology. They have 50 drugs in various stages of development. They're enormous, and you have to be enormous to be able to do what they're doing. And there's upside in their pipeline based on progress. So we tried to think, I asked the team, this is not me. I'm going to take no credit. This is Jay Peters. This is Cameron Dawson. This is Brian Nick, our investment team. They're super. And I asked them, I said, I want a balanced view where you have option. We can ride the current wave we're riding. You have optionality to the crisis. So three names ride the current wave, right? Power, and then the two semis. You have option to crisis in the Middle East. And then we get some stability where you're not going to have a lot of price or performance, we want to health care.

Speaker 3:
[61:22] Are you surprised that the health care stocks aren't getting any credit in advance of being perhaps the biggest beneficiaries of utilizing AI?

Speaker 4:
[61:34] So, look, it's been our secret.

Speaker 3:
[61:35] Why aren't people figuring it out?

Speaker 4:
[61:36] It's been a barriers over with call. It's been a terrible call, unlike the software one. This has been a bad call. And I'm trying to figure out like what could untether me from the thesis. I'm trying to be like intellectually honest, like could anything change my mind?

Speaker 2:
[61:50] Long-term should be no, by the way.

Speaker 4:
[61:52] Yeah, and I'm worried about it because I don't want to be the jerk who just...

Speaker 3:
[61:54] Is that your thesis? That AI is going to be bigger for these companies than most?

Speaker 4:
[61:59] So what the market's telling me is there's a zero percent chance healthcare is the best performing sector over the next five years. And I think it's like 30 or 40 percent. I just start with like I want to arbitrage that difference. I think the whole point of all of this shit is that we live longer and we're more productive while we're alive. So if I take that premise, I don't understand how healthcare revenue per share is going every year, 30s and early on, SB 500. We have lots of old people that demand services, tool, diagnostics, drugs, managed care, hospitalization, whatever. That's steady. We have tons of businesses with lots of employees, low margin and lots of revenue, meaning as long as I can predict my customer employee behavior, margins should go up. It's a classic AI productivity potential. They do, as he just pointed out beautifully, have low correlation to AI semis. So you don't want to buy low correlation, meaning like they suck, but there are a bunch of healthcare stocks, Lily and others, that are up 10% or more in the last six months and are uncorrelated, so some of them could work. I'm very tethered to the thesis and bullish.

Speaker 3:
[62:55] It makes sense to me.

Speaker 1:
[62:56] Which names do you like?

Speaker 4:
[62:57] McKesson, Cardinalson, Cora, Quest, LabCorp, even stuff that blew up recently, because you're still young, but you can't go to the doctor and not end up sending something to LabCorp, Quest. There's zero chance they won't grow above GDP, and there's still dudes with like, when we were kids with the glass microscope, but the efficiency potential is massive. And I would even say, Manage Care, UNH had a good point this week, stock was finally up, like, I run a business. Let me tell you who raises pricing on me 9% every year, and guess who doesn't give me 9% more services? So I think they're going to earn more money in 2030, and I don't think there's any political will from either side to change the algo. If you tell me that some party's going to come in and implement massive austerity, then I'll change my mind.

Speaker 3:
[63:41] So it sounds like healthcare away from big pharma.

Speaker 4:
[63:44] I think there's still some good big pharma. I mean, I'm not against Lily and Merck and other stuff.

Speaker 2:
[63:48] Lily's unbelievable.

Speaker 4:
[63:49] But I'm not embedding yet. What I'd like to do is be correct on a five-year view, and then there's all kinds of like computational chemistry ETFs that retail guys are buying, and I'd like to sell my correct overweight into that euphoria five years from now. But that's, I got a lot of good shit that had happened before I get to that call.

Speaker 3:
[64:09] I want to ask you about about New Edge and founding the firm and Adam, by all means, chime in. Like when I first met you, you were UBS. You had one of the biggest teams in the firm. You were not talking about going independent, but I'm sure you were thinking about it, as most people at large firms often do. What have you learned since coming into the RIA space? Obviously, you've built a massive platform, big firm, hired a lot of people, met a lot of people. What are some of the things that you think you've learned in the last couple of years since doing that? What is it, four years ago? Five.

Speaker 2:
[64:51] Five years ago, and we've grown from 8 billion to 105 billion in assets.

Speaker 3:
[64:56] Amazing.

Speaker 4:
[64:58] It's not as good as Micron, it's not as good as Micron as I heard it, but it's pretty good.

Speaker 2:
[65:01] But I think the things that I've learned are one, there's a lot of noise in the ecosystem. Not everybody can do what they say they can do. And what that does is it creates a lot of paralysis in this migration that we're seeing from advisors at big firms to advisors at more entrepreneurs. I mean, look at what you've done here. You walk into this office and think, oh my god, this is great. I mean, you're adding value in a different way. And you're adding value by sitting center. And when you're a client of the street versus a competitor of the street, you have a structural advantage that's very meaningful. You don't have one arrow that you can pull out of your quiver. Let's say you were doing a loan for somebody. You're going out to multiple providers. You have tools.

Speaker 3:
[65:53] You're sitting at Goldman Sachs. You're doing that loan through Goldman Sachs. If you're a customer of Goldman Sachs, give me a quote, OK, I'm going to go to RBC, see what they say.

Speaker 2:
[66:02] You're not with them.

Speaker 3:
[66:03] Yeah, I agree with that.

Speaker 2:
[66:03] You're across from them.

Speaker 3:
[66:05] I agree with that.

Speaker 2:
[66:05] And yet, New Edge is a gigantic client of Goldman, JP Morgan, all the different banks, all the different capital markets groups, all the different asset managers. And I do think size and scale matters. There's something else that's kind of happened in the industry. And I don't want to mask the good fortune and luck that I had in doing this in 2000, just as this was taking off at the higher end, not 2020, at the higher end of the market during COVID. It looks easier than it is.

Speaker 3:
[66:36] Oh, I couldn't agree more. Say more about that.

Speaker 2:
[66:39] And you need a good partner. So I did not start New Edge. We did an LBO of a business with a tremendous partner in Parthenon Capital. And that operating business threw off cash flow. Again, it was an infrastructure business, providing institutional-grade infrastructure in the 401k industry to Fidelity, John Hancock, Paychex, Creative Planning. And they had a great business, but they wanted to do something else. So we bought the business, and we built a wealth business on that same infrastructure that was bulletproof, cheating, starting halfway up the mountain. I didn't have to go in and worry about, that I had a tech team. I had not only a tech team, but I had profitability to hire the best and brightest. So the good fortune that came from that simple decision of not worrying about how my computer was going to turn on in the morning. That's why I love these entrepreneurs that do this grassroots and bootstrap this unbelievably hard.

Speaker 3:
[67:40] It's way harder than it looks.

Speaker 2:
[67:42] Now you have partners that can help you get from A to B. So when I think about what we do, is we have a fully evolved ecosystem where you can join us and use the platform turnkey, here's everything, you got all the support, the compliance, the anything you need. Or we are going to sponsor you in your entrepreneurial endeavor. And we have the best business in the world to do that, that's run by my partner, Alex Goss. We also had some very fortunate hires and partners in this business. Chuck Warden, who was the founder of the business that we bought, Parthenon, who's the private equity firm, John Strauss, who ran every major private bank on Wall Street, JP. Morgan, Morgan Stanley, UBS, ran them all. Bob McCann joined us. UBS and Merrill Lynch. So we had these credentialed folks that when you're looking off the cliff and you're an advisor and you're getting ready to jump, you still can't see the bottom. Okay? And you want to know that there's knowledge, know-how in people down there that are going to help you navigate every decision, whether you're starting your own thing on our platform that's run by Alex Goss.

Speaker 3:
[68:56] To that point, like somebody coming out of an environment like a Bank of America or a Morgan Stanley, there might be things they don't love about those banks, but the one thing that's undeniable is they have a ton of support.

Speaker 2:
[69:09] Like they don't wake up in the morning like, that's what was missing in the market place, is this fully supported DNA. And so, I'm no longer the CEO. You introduced me as the CEO. I am the founder, okay? So, I made a big hire last year.

Speaker 3:
[69:24] You hired somebody to talk to, to speak to that CEO role, so that you could be Rob Sechan.

Speaker 2:
[69:32] I can be Rob Sechan.

Speaker 3:
[69:33] I did the same thing.

Speaker 2:
[69:34] So, it is a great thing. We hired James Jesse. You know him from Morgan Stanley days, I'm sure. James Jesse ran Morgan Stanley International, but then he went with Devesh and helped start Iconic. Okay? Wanted to come back East Coast. That was our good fortune. We also, because of the profitability from the business that we bought, were able to hire people like Cameron Dawson, who I think is one of the most fascinating thought leaders in the industry. So, when you marry all those things together, and you can create an entrepreneurial environment that is doing the right thing, and trust me, net present value of doing the right thing creates more value than anything. So, great technology. They're not rolling out enterprise entropic. Not a single firm yet. They're trying it. We are fully rolled out. They're not using tech that betters price, execution, visibility in the assets. They're not partnering with Adam. They're not partnering with Tom Lee. They're not working with families. They're not surrounding those families with high-end intellectual capital. And they don't have access to each other's shit. And we have access to everything. And so, when you have a better mousetrap, it is undeniable that the migration will happen when there's more confidence and less confusion. But everybody tries to tell that story, and not everybody can deliver that story. And as such, advisors haven't moved in mass yet. Once a few of the big ones fall, as you know, Josh.

Speaker 3:
[71:08] You think the Wirehouse Exodus hasn't even really started?

Speaker 2:
[71:13] It's here.

Speaker 3:
[71:14] Wow. So the corner office is... I know five guys that were five billion plus dollar teams, duos, just at one firm that have left in the last two years.

Speaker 2:
[71:28] That started about two years ago. You can't believe our pipeline.

Speaker 3:
[71:32] Yeah.

Speaker 2:
[71:33] You just can't. The one thing that I would say is firms that can't address the entrepreneur that wants to have their own CIO, not Cameron, and others that want to have that, we have those bookends and a leader that has operated in the wires and in the probably one of the best firms in the independent space and iconic, I think that is confidence-inspiring and I think we've become a partner of choice.

Speaker 3:
[72:03] I mean, it's growing at 70% per year. If you have advisors in your ecosystem, let's say you had.

Speaker 4:
[72:09] By the way, I just want to say that was like a highlight of this.

Speaker 3:
[72:12] Great speech.

Speaker 4:
[72:13] It was just electric.

Speaker 3:
[72:14] Yeah.

Speaker 4:
[72:14] I'm just saying.

Speaker 2:
[72:15] I'm really passionate about this.

Speaker 4:
[72:17] I loved it. I just think like, I'm not saying the stock part wasn't great, but I'm just saying like the EQIQ combo that just came out from Describe This Business was electric.

Speaker 1:
[72:26] That's why I do more of that.

Speaker 4:
[72:27] I'm not being serious. You felt it, right? It was sort of a fuse got lit.

Speaker 1:
[72:31] It was cooking.

Speaker 3:
[72:31] It was awesome. If you have an advisor who's a card carrying New Edge like all the way in who comes to you guys and says, you know what, this has been great, but what I really want is to have my firm under its own name, have my own CIO. So now you have a place where that person can go where they don't have to leave.

Speaker 2:
[72:49] Come in straight.

Speaker 3:
[72:50] So I think that's powerful.

Speaker 2:
[72:51] Right turn, left turn. We have businesses over here that we bought into card carrying businesses. Remember, when we buy you in, you are owning the same stock that we did in the LBO. No difference, not like some of the firms that had failed in the past. We have the advantage of being the vitamin water versus the Gatorade, right, and all this. We have a second mover advantage, and it's been pretty powerful to identify the flaws of our predecessors. What ends up happening is if you just do the right thing for the advisors, meet them where they are. I think you're advantaged in this too, guys. You're a firm that was started by advisors for advisors. That is a huge advantage because why are you going to do something that damages yourself? Now, what I recognized is there could be a better day-to-day nuts and bolts leader than me. I am a champion of the organization. I have one concern. How do those divisors that believed in this field of dreams that we bought and built, how do we drive value for them both in their practice, in serving their clients, and then ultimately in the equity value that they've taken on in the company. And I take that very seriously, and if it means shooting myself, I don't care.

Speaker 3:
[74:14] So this is a very big thing. By the way, very well done.

Speaker 2:
[74:19] Thank you.

Speaker 3:
[74:20] This is a very big thing. At a certain point, you have to make the decision, what is my highest value to the firm? Is it sitting in eight meetings a day and micromanaging 50 people, or is it being me and bringing in professionals to handle the things that I do?

Speaker 4:
[74:37] I think no matter what you do, you have to think about that right now. Obviously, I'm in a different business, and it's a small scale, but we have guys who, like whenever, I've become very self-conscious about this. When I'm in front of my computer typing, and one of the quant guys who works for me is standing behind me, I know they're thinking like, this guy doesn't know how to use a computer. The best use of Trivariate's time is not when I touch the keyboard.

Speaker 3:
[75:01] Not when you are grinding through.

Speaker 4:
[75:04] If I am doing something, they're like, no, no, no, no, don't do that. So I started realizing, all right, and all this AI stuff too, it's like we gotta be, I don't know. I mean, honestly, I never really heard you articulate that. I'm not surprised at all, but it was awesome listening to that.

Speaker 3:
[75:22] You like the entrepreneurial part, though, of what you're doing.

Speaker 4:
[75:24] I love it. I totally love it. I don't like.

Speaker 3:
[75:28] You're not one of these guys that say, just let me do my research. You actually enjoy building the business.

Speaker 4:
[75:33] I like thinking about what the enterprise is going to look like. We have this newsletter business that you know about TriVector. We'll probably end up doing some stuff on the asset management side. I'm doing some stuff with Investor Relations, who I do stuff for law firms and boards. I'm joining the board of a public European company next week is when it's official. So, I'm just always trying to do new stuff and learn stuff, and I like doing the work, and I like talking to people.

Speaker 3:
[75:56] To other guys who sit in your old seat as chief strategists on Wall Street, I like to come to you and say, hey, what's it like being independent?

Speaker 4:
[76:05] It's a little bit like your conversation you were just having, which is like, you might have disgruntled issues with the big firm and the bigness disease of the big firm you work at.

Speaker 3:
[76:16] But you're getting a lot from them.

Speaker 4:
[76:17] But you're also getting a lot. And so, when you go on your own, you're going to be washing the dishes and putting the mayo on the sandwiches the first couple of years, and you've got to decide, am I rich enough to take the risk, and if it doesn't work, and be like, you know, or whatever, there's like considerations that go into it.

Speaker 3:
[76:31] Michael and I were literally licking envelopes, like in real life.

Speaker 4:
[76:35] We don't have a dishwasher at Tri-Barrett, and like all the young kids don't understand that like I'm the one who washes their mugs, and that's like today. That's still like, so, you know, so like, whatever, like you got to do that, but like at the end of the day, for me it was worth it, I was the point where I wanted to take a shot, and I love it. But like, I love listening to you guys talk about, you know, a five year plan.

Speaker 2:
[76:57] Everybody does it differently, but I don't know anybody that would say, anybody, I wanna go back.

Speaker 3:
[77:04] I wish I could go back, I've never heard it. It's like moving to Florida.

Speaker 1:
[77:07] Does anyone say shit, this is terrible.

Speaker 4:
[77:09] You're talking to a guy who's on a 720 tonight.

Speaker 3:
[77:12] No, I know. Hey, last thing we wanted to get to, BMNR, you were, okay, so Tom Lee launched, what is, how do I explain it?

Speaker 1:
[77:21] It's a ether treasury company.

Speaker 2:
[77:23] Yeah.

Speaker 1:
[77:23] It's like a micro strategy for ether.

Speaker 3:
[77:25] All right, so Tom Lee launched, you got added shortly after.

Speaker 1:
[77:29] And they're doing, that's what they're doing, right? They're like 5% of all standing ether.

Speaker 2:
[77:32] Did you know that I said treasury company? I think Ethereum's a bit different than Bitmine, or Bitcoin rather. Ethereum, BMNR is Bitmine. You know, when I looked at this, I thought this was a charlatans game for a long time. I even shit on and on TV.

Speaker 3:
[77:49] And then you said, let me in.

Speaker 2:
[77:52] Well, then I started to do some work. I started listening to Tom and seeing the things they were-

Speaker 3:
[77:57] You thought MicroStrategy was bullshit.

Speaker 2:
[77:59] No, I just thought the whole ecosystem.

Speaker 1:
[78:01] The whole thing.

Speaker 2:
[78:02] Yeah, I was a non-believer.

Speaker 3:
[78:04] I still think that.

Speaker 2:
[78:04] Now, I'm an evangelist.

Speaker 3:
[78:06] Why?

Speaker 1:
[78:07] What changed?

Speaker 2:
[78:07] And I'll help change your mind. What I'm seeing is a misunderstanding of what certain parts of the crypto ecosystem are. And I think people think is crypto is like a coin. It's infrastructure. It's a value added network that you build apps on. And anytime you drive usage, which is why BMNR bought Mr. Beast, visibility usage to the network, you can profit from the network. And when you think about what's happening in traditional finance, it's fragmented, it's intermediary, and it's slow, and it doesn't run 24 hours. And every one of them is trying to figure out, how do we get to tokenization, digitization, and they don't know how to do it. And Ethereum flips that. It's the safest of all of them. It's programmable. It's real time. It's always on. And BMNR is a holder, and why they got me involved is there's a huge cap gap between institutions that have capital and they need help to translate it, structure it, and make it usable for them in traditional finance. And the next phase isn't about speculation. It's about integration of the financial services platforms onto an entirely new architecture, okay? And when you start to see what's happening in that community and you start to see how it's being ignored by TradFi is what they call it, DeFi being ignored by TradFi, and there's a bridge of the gap between the two.

Speaker 3:
[79:56] But I keep hearing this. The New York Stock Exchange just says they want to be the capital of tokenized assets, right?

Speaker 2:
[80:02] So they'll build that on Ethereum.

Speaker 3:
[80:04] They will.

Speaker 1:
[80:04] So why not purchase by Ethereum if you're bullish on it?

Speaker 2:
[80:06] You can't, and that's the beauty of it, right? That's the beauty of it, because what you're becoming when you buy, let's say, BMNR, and I'm not promoting BMNR, any source of Ethereum, but that's what I know because that's the company that I'm the lead independent director on. They are doing things so that you can earn what is called a staking yield. You can make investments into businesses that are going to be beneficiaries. They call it moonshots. They invested in Mr. Beast. Got a lot of credit.

Speaker 3:
[80:37] If you own BMNR, you get the benefit, if there is one, of the investments that the company is making. It's not just the price of ETH going up.

Speaker 2:
[80:45] And by the way, when you validate, and they have a whole business that they call Maven, which is a validator of transactions, and you get paid to validate, you are getting a 3%, 4% yield.

Speaker 3:
[81:02] You're earning the gas fee. As a node.

Speaker 2:
[81:05] So you're becoming a toll road. And then what you want to do is ensure usage. And that's why I use this as the example. Apps are being developed. So layer zero is kind of the foundational layer. Security and transactions happen on that layer. Then layer two, or apps, or DAPs is what they're called. Sorry, I didn't mean to spit on everybody. Are being built to do functional things. Specialty nodes on that. And it's going to happen quicker, more safely. So when you think about the threat that AI has to everything in technology, wow, wouldn't it be great to have this immutable safety layer that sits beneath that? And so I'm going to tell you, I believe in this wholeheartedly. Now there's others like Solana that are trying to do this more cheaply, but the bulletproof version of this is this. Tom Lee sees around corners. We already know it. He's seen this years ago. Ethereum as an asset, you can own the token, which will give you that yield to your point, Michael.

Speaker 1:
[82:15] Adam, how out of you?

Speaker 3:
[82:17] He's not in yet. He's not out.

Speaker 4:
[82:20] I'll go with a crazy pitch of a different kind.

Speaker 1:
[82:23] What does that mean?

Speaker 4:
[82:24] I'm going to pitch a stock of a different kind. I think Nvidia will be worth $10 trillion market cap by the end of this decade.

Speaker 3:
[82:31] What is it now?

Speaker 4:
[82:32] $4.8 trillion. And I think it's misunderstood a little bit. I think it's a sector. It's not a stock. I think it's really hard to get off the Cuda platform. I don't think that you can do anything kind of modeling-wise and AI of scale without...

Speaker 3:
[82:51] Everyone working in AI is on that platform.

Speaker 4:
[82:54] They lost money for 15 years coding this Cuda stuff. The amount of install base that's there, they're moving full speed ahead. It's just going to be hard to get off it. They're going to grow 15% a year for five years. The revenue is going to double at least. The cash flow is massive. And anytime you get one of these 12-month periods where it pauses out, it's a good time to buy some before it flies higher.

Speaker 3:
[83:12] I'm not selling any.

Speaker 2:
[83:15] You and me got on there.

Speaker 3:
[83:17] Never selling it.

Speaker 4:
[83:19] My view is like, yeah, sure, tactically, I don't like it when they blow out the quarter and the price of sales comes in. But I just think they're going to grow way fast.

Speaker 3:
[83:29] They don't have to buy back. Do you think they're going to ever buy back a meaningful amount of stock? It seems like it's the lowest valuation Nvidia has traded out in a while.

Speaker 4:
[83:38] Just keep investing upstream and downstream. The trade is the power side, like we talked about earlier. So they got to make sure. But how can you function and do anything without their infrastructure? Just think of it as a sector. Stop telling me it's $4.8 trillion and it's bigger than the energy, health care, and you're like, that doesn't matter. What matters is it's a sector that's massively fast growing to the technology that matters the most.

Speaker 3:
[83:56] The bear case on Nvidia was all these deals are circular, blah, blah, blah. No one's saying that anymore. The bear case is now Google's.

Speaker 4:
[84:06] All the big companies, the bear case was I think, one of the bear cases that I don't like is like, oh, all the CapEx comes from hyperscalers and it's like six companies. It's like, no, it's not AWS. Like Amazon isn't one company, it's thousands of companies. So it's not the right way to think about it.

Speaker 3:
[84:19] The bear case is that TPUs from Google and other computing things will be.

Speaker 4:
[84:24] They're not on CUDA, they're not on CUDA. It doesn't matter. It's like, it's great. Look, those of us who have followed Jensen for 25 years would say, sure, there's a lot of bullshit that he spewed in the 25 years. I'm not saying, but I think there's really somebody, just the installed base of folks who are on this platform and the investments they made up and downstream. So yeah, I don't see how you can be bullish on the S&P 500 in a three to five year view and not be bullish on Nvidia.

Speaker 1:
[84:53] Well, I was going to say, if you think Nvidia's 10 trillion, then surely you think S&P's going to 10,000.

Speaker 4:
[84:57] Yeah, they're both, I wrote the S&P was in the 10,000 three years ago. I wrote three years ago, 20, 30, 10,000 S&P. It's not even like weird math. It might be conservative. You're talking 30, 35% in four years.

Speaker 3:
[85:13] That's the S&P long term return is at.

Speaker 4:
[85:15] It just sounds like a headlining number.

Speaker 3:
[85:17] Guys, did we have fun on the show today or what?

Speaker 2:
[85:19] We did. I heard at the beginning of the show with Tom Lee, you were making a little fun of me with my accent, wondering where I was from.

Speaker 1:
[85:28] He doesn't get a Rob Sechan.

Speaker 3:
[85:29] I do an amazing Sechan.

Speaker 1:
[85:30] Do it, do it, do it.

Speaker 3:
[85:31] Come on. I heard at the beginning of the show with Tom Lee, you were making a little bit of fun of me with my accent.

Speaker 4:
[85:38] By the way, did you get...

Speaker 3:
[85:39] Where the is your accent from, by the way? Why do you talk like you're Foghorn Leghorn if you're from Pittsburgh? I don't even understand what...

Speaker 2:
[85:46] You know, we haven't got to see here.

Speaker 4:
[85:49] That's got to be the title of the... You guys are always looking for a title. I think Foghorn Leghorn. I think you just got it.

Speaker 3:
[85:54] So what happened is I got very confused.

Speaker 2:
[85:58] I got very confused. I grew up 26 years in Pittsburgh and then I moved to Connecticut and they didn't mesh well. So I was a yinzer that kind of, I kind of de-yinzed my language.

Speaker 4:
[86:12] I win our side bet on the number of times he was going to mention Tom Lee on this call. I had nine and so I get a little big.

Speaker 3:
[86:20] Can I say one thing to you? This is a true story and I never told you, you and I have had some of the all-time great brawls on Halftime Report. All in good nature. Is that right?

Speaker 4:
[86:32] Yes.

Speaker 2:
[86:33] I didn't know that.

Speaker 3:
[86:34] I know that. Because I keep track. I write them down each day.

Speaker 4:
[86:38] We've never had, you and I have never had one.

Speaker 3:
[86:39] No, no, you and I are golden. No, but Rob and I are good too.

Speaker 4:
[86:42] Is Rob a dick? Is that what you're saying? Is he coming out? No, is he leading?

Speaker 3:
[86:45] Sometimes, listen, we're on the show.

Speaker 2:
[86:47] Is this where I get body slammed?

Speaker 3:
[86:48] Yeah, what's going on here? You've been on the show for a long time since we were in Englewood Cliffs.

Speaker 2:
[86:52] Yeah, 13 years.

Speaker 3:
[86:53] There was one time where you were saying something and I wasn't even on the show, but I was like tweeting at the judge and the judge texts me, goes, why don't you come on and you and Rob can have this. You and Rob can have this. I don't know if you remember this. I was, people won't believe me what I'm saying. I was literally in the gym at a hotel. I must have been in Arizona or something, because I remember looking outside, it was a sunny day. 12 o'clock in the afternoon. I swear I was working out, I swear to God. I go live on the show. Other people are in this hotel gym looking at me.

Speaker 4:
[87:32] Wearing like Lulu.

Speaker 3:
[87:32] And I'm debating you. Anyway, this is the point of the story. Somebody that I'm friends with texted me and said, when you and Rob go at it over a stock, nothing ever besides a stock. He goes, it reminds me of fighting with my brother. You guys are like brothers. I never told you that story. But I truly, I think you're a brother. I really do. I love the debates that we have. Me too. It sounds like these days we agree on a lot of things. I agree with almost everything you said today. And thank you so much for doing the show.

Speaker 4:
[88:03] You know what I agree with? I agree with 105 billion and a lot in the pipeline.

Speaker 3:
[88:07] I agree with that. I very much agree with it.

Speaker 4:
[88:09] Do you agree with that?

Speaker 3:
[88:10] Who can deny the success? Do you agree with that? I agree. I fully agree.

Speaker 2:
[88:13] Thank you so much. It was really fun being here with both of you. This is a great program.

Speaker 3:
[88:19] Well, we're going to come back from dinner. We're going to do the second half of the show. Guys, we appreciate you. I want to let everybody know they should follow Adam and check out TriVector Research. Who is that for?

Speaker 4:
[88:32] TriVector Research is for advisors and individuals. It's a $1,200 a year. We do a lot of like ETF analysis, insights, videos, talk about what we learn from institutions. So love for people to join.

Speaker 3:
[88:42] Awesome, dude. And if you want to learn more about New Edge, go to newedge.com.

Speaker 2:
[88:46] www.newedgewealth.com.

Speaker 3:
[88:49] newedgewealth.com. All right, guys, thank you so much for watching. Thank you for listening. Special thanks to Adam Parker, Rob Sechan. Thanks all to you soon. Take it easy.