The Normalcy Trade With The Abnormal Brian Belski
58:48 Share

On the Tape.

iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. Welcome to the Risk Reversal Podcast. I'm Dan Nathan, joined always by Guy Adami. Guy?

Hello, Dan. All right. This is one. This is one that is three months in the making here. That gentleman you just heard laughing at guys enthusiasm is Brian Beltsky. He is the chief investment strategist at BMO Capital Markets. Brian, welcome back to the pod. Oh, my gosh. Thank you. I'm humbled to be here. Well, humbled. Maybe there's if you're listening to this, maybe there's a tone of sarcasm in that.

But we have been waiting months to have you back. You are easily one of our most fun guests and obviously very informative. You were last here on November 8th. It was a couple days after the election. There was a lot of enthusiasm about this pro-growth agenda that was going to come back.

I guess, the United States here. At the time, we talked about a lot of the kind of initiatives or some of the return to some of the trade policies and tariffs and the like here. And you were cautiously optimistic about a lot of stuff. So let's kind of just, what's changed for you in the last few months or so? If anything, you have a $6,700 price target on the S&P 500. That is up towards the upper

bound of a lot of your peers. So talk to us. What's going on here? Well, thanks for having us. And I'm sorry I haven't been back prior to that. I like to explain my schedule sometimes to the millennials or the Z-ers, as I like to call them. And I'm busier than a one-armed paper hanger. People don't understand that joke. But anyway, hey, thanks a lot for that.

So nothing's really changed. You know what's interesting about that 6,700 target? So I was here November 8th and then about a week later we put out our 2025 forecast. We tend to put it out earlier on election year, following election year because everyone's freaked out and last year was no different. So I put out my 6,700. I was high in the street for like maybe two weeks. Then everybody started cranking up their numbers, right? Yeah.

So what's happened since then, the majority of those same people that cranked up their numbers above 6,700 now have revised lower. Which actually makes me bullish when they do that. Because I was actually quite nervous when after we put the 6,700, and I'll use the Ricky Bobby quote, if you're any first, you're last. And so everybody was bullish. I'm like, oh, shit. I do not like it when people are bullish. So they caught up to you is what you got to do. They caught up to me. Yeah.

And as you know, we've been a longstanding bull. We think that U.S. stocks are in the midst of a 25-year secular bull market and secular bulls. You can have cyclical bears and cyclical bulls. This is year three of the cyclical bull that started in November of 2022. Blah, blah, blah, blah, blah. So what's changed is I think actually...

And the path to normalcy, which we've been talking about for two or three years now, has actually accelerated. Can you define normalcy really quickly? So I'm a little older than you. Just a tad. Just a tad.

And I remember the 80s and 90s in terms of market returns. And if we go back historically and you look at the average market return is high single digit, low double digit when you throw a dividend on there. Earnings growth, same. There's usually a trading range in terms of 10-year treasuries. Now, I'm not a fixed income dude. I'm an equity dude. And then valuations, kind of high teens to low 20s.

I think the biggest trap, and we've talked about this on your show in the past, is picking a PE number and then sticking to it. Anyway, I think that's where we're going. So since we were on last, we've had the collapse of the MAG-7. We've had deep seek. Then we've had the tariff tantrum. And even yesterday, market recovered 5% from the 10% correction. And then Trumpy comes out and starts talking about tariffs. He had markets down.

And so you take two steps back and take a look at the market. What hasn't changed, though, is the reactive short-termism. The world's coming to an end. You would think that we're in a recession and that we're in a deep, deep bear market. The market's down fucking 3%.

year to date. Honestly, honestly. But yet we're so focused on trying... I'm sorry for swearing. We're so focused on making the big call. The market, the market. If you take a look at the stocks, 493 stocks versus the seven, they're doing awesome. So that's the normalcy trade. I think in the theme of kind of...

Sticking with the Will Ferrell theme, Ricky Bobby, now let's go to SemiPro, and Jackie Moon. Everybody love everybody's. Own a little bit of everything. And you don't have to be so concentrated in the tech or so concentrated in bonds or so concentrated in financials. I think there's an opportunity to kind of own a little bit of everything. And I think that's where we're going 80s and 90s.

Brian, when you hear Treasury Secretary Besant, then President Trump, when I think he spoke to Maria a couple of weeks ago, talk about

And I'm paraphrasing because I don't have the exact words in front of me, but sort of short-term pain to get to the other side. My instincts suggest he's not talking about the economy as much as he's talking about the stock market because those questions came sort of in the wake of that bit of a sell-off that you just talked about. So what does that mean to you, if anything, that sort of short-term pain to get to the other side? I think a 10% correction. I mean, I hate it when people lose money. I hate it.

And we're now above $10 billion in terms of the money that we manage for our great wealth management channel at BMO for about $10.5, $10.7, something like that.

And so I hate it when stocks are down. But at the end of the day, we were getting a little bit too frothy at the end of 2024, especially with some of the Mag7 stocks. And we saw this rush into those names. I never liked that. Plus, as I said in the beginning segment, there was way too much bullishness guy. And so 10% correction, pretty healthy.

And the way that we've snapped back, this is the fastest 22, was a 22-day correction, fastest that we've seen, certainly post-GFC. But at the end of the day, we need to kind of find new levels here. So I would be surprised if we go back and retest the low. That would be another opportunity to buy. I don't think we're going into a bear market. I don't think he means bear market. I think he means exactly what has happened, this 10%.

Yeah. I mean, Guy and I have been talking about this on the pod. I mean, this is not exactly something you can control, right? We've seen from Trump 1.0, when you go back and forth with the trade tariffs and the threats of it, and really without very clear concessions laid out. I mean, sooner or later, the threats don't have a lot of teeth. And then you have a market that doesn't believe what's coming out of Washington. And then who knows what happens? And that

I just want to ask you one question about the other 493. Okay. And this brings me back to 2021. You know, once you started seeing some leadership rollover, some, you know, once you start seeing some of the most speculative stuff, whether it's SPACs or recent IPOs or crypto or NFTs, you know, it really, it's,

kind of was leading the way for the broader market because the S&P in 2022 made a new all-time high in the 1st of January, but so many other stocks had been weakening, so many other risk assets. So now I look around and you just mentioned the 493 and I'm looking at my main fact set board and it's kind of, you know, made up of

a bunch of different sectors, maybe hundreds of stocks. And I don't see a whole heck of a lot of stocks trading particularly well. Most of them are down a lot more than the S&P down 3%. So I'm looking at the fateful eight, as we like to call them. We threw Broadcom in there. The only one that's up on the year is...

is Facebook. Then I'm looking at the semis. They're all down other than Intel. We know that they just had a management change. I'm looking at software. The only ones that I see up or I can't even find any. Palantir is up 21%. I go to the internet. There's a few names there, but who cares about the internet? I'm looking at networking stocks. Retail for the most part is down.

Banks are up marginally if they're up. JP Morgan's up 4%. So I don't see a lot of stuff that acts particularly well. Maybe energy's up on the air. Talk to me about that because what would be the next leadership? How do you put a near-term bottom in this secular bull that you're talking about? Well, I think a couple things. I think

momentum now has shifted into the defensive sectors or what people think are defensive. I mean, if you look at consumer staples companies, the consumer staples is the most expensive sector in the market. They're not growing anymore. What kind of products do they have? Aside from we've had problems with

Shot across the bow in terms of the consumer, in terms of Costco and Walmart. Those are the two names you want to own anyway. I mean, when's the last time you went to Gristiti's and bought a can of cream of mushroom soup? You probably did that this morning, by the way. He's making green bean casserole tonight.

But, I mean, you buy that stuff around Thanksgiving. Look at General Mills. Terrible earnings. Kellogg's. I mean, we're not buying those companies. But at the end of the day, because it says defensive in page 72 of your business book, you're buying it. Same thing with utilities. Utilities from the electric utility side of things have done well this year. Energy, why? Because I think it was so under-owned last year. Now we've seen a momentum move.

So I did some math. If you take a look at periods on a 12-month rolling basis,

When WTI is flat or down, 80% of the time, energy is down. So WTI is down or flat. So I'll take the math. I think it's hard to be bullish energy. But the only reason why it's up is because people are hiding there. So I think actually we're going to have a reversal back into financials, some industrials, consumer, parts of consumer, and tech. When people get...

When people get worried, they buy liquidity. And I think that's what happened. Going back to your 2021 thing, I think we might have talked about it on this podcast, The Four Horsemen of the Apocalypse, which really led the big pullback in 2022. Cathie Wood, I like you, Cathie. Congratulations to you. But it's all great and everything. Cathie Wood, the meme stocks, crypto, and SPACs, right? All got crushed. So...

And then 2023, though, let's take two steps back and think about this. 2023 was all about a massive reversal from oversold tech stocks, period, period. And that's what got everything going. And then at the end, it was AI. And then 2024 was AI. And we know the rest of the story.

But I think actually you're going to have a coming out of this guys. I think you're going to have certain parts of the mag seven or the faithful, faithfully, faithfully certain parts of the faithful. Do you like it though? I mean, it's not faithful. It's fateful. We did faithful. Yeah. Guy and I came up with this. I want to say, no, no, don't,

You want me in this thing. I came up with this in mid-December. Do you remember when Broadcom rallied 40% based on their guidance in two days? And all of a sudden, it joined that kind of trillion dollar club. And so the idea was forget Fang, forget Mag7. The Mag7 is implying that they're magnificent for all intents and purposes. Have they been magnificent over the last couple months or so? So the fate of the market is in the hands of these eight stocks. Go with it. Hey, Belsky, if you want to use that next week on your piece, get in there. Yeah.

I might. I might be making some changes. Wink, wink, wink. Wink, wink. So again, I would say parts of the faithful eight will work, not all of them. And here's the deal too. If you're running live money like we do. So in our large cap portfolios, we own 50 stocks. In our small mid cap portfolios, it's kind of 65 to 70.

How can you honestly, how can you be overweight in NVIDIA? It's almost impossible to do that. You can't because of the fluctuations. Same thing with, let's say, like Broadcom is a very volatile stock too. So you also mentioned semiconductors. So let's put our fundamental shoes on. Our fundamental shoes and our models have always said that semiconductors are the most

the most volatile earner in the entire technology sector, let alone the S&P 500. Now that has kind of come through. So I think what happened was people were buying stocks because they were going up. And that's going back to the deep seek, the momentum thing. That was the first shot across the ball about momentum. Stocks are getting crushed. NVIDIA, we're buying NVIDIA because it's going up. That's not the reason why I buy it. Same thing, we're buying Europe because it's going up. Come on. I mean, honestly. Honestly.

So I think there's going to be parts of the Mag7 that work. I'm sorry, the Fateful Eight that work. I think there's going to be parts of financials that work. I think we're going to have a true stock pickers type market. And I think on the other thing too, I think people have been hiding in healthcare. And the healthcare thing is really interesting, guys, because last year everyone was in Lilly, right? Everyone was in Lilly. Lilly was part, at times, Lilly was a Fateful Eight. Yeah.

And so you've seen a broader distributing performance in healthcare. But I think what you're going to see is pretty decent performance across the board. And you're going to have the haves and have nots. And I think small cap is going to come along for the ride as well. All right, Brian, consumer sentiment is interesting. And you'll say it's somewhat backward looking. And I know...

The point historically could always or almost be viewed as contrarian. But the numbers we've seen recently have been, we've gone from basically all green to all red over the course of a month, month and a half. My point and question is sometimes these things become self-fulfilling. And if people continue to feel poorly about things, they'll stop spending. And when you have an economy that's predicated on that, that could be potentially problematic. Thoughts on that?

My retort would be the last time that consumer sentiment was this low was November of 2022. That was two weeks after the bull market started. That's two weeks after the bull market bottomed in October of 2022. So it's just one measure. You saw, I mean, we're not seeing widespread signs of that. We're seeing...

individual companies come out and say things. But I think what's happened was this massive secular shift toward under promise and over deliver from investor relations and CFOs in terms of talking about their companies. That's number one. Then you have other companies that have literally operational issues that have not done very well in terms of their fundamentals and they've come out and they're trying to kitchen sink some of this stuff on the consumer side. So

What we have found, and I remember back in 2008 when I was head of US strategy and sector strategy at Merrill, we went to an overweight in consumer discretionary. People thought we were nuts. That's exactly when you want to buy consumer discretionary.

when it looks like we're going into recession. So that ended up being a decent call. So I think the problem with the consumer discretionary sector, quite frankly, is some of the two best stocks are staple stocks, Walmart and Costco. That's number one. Number two, you have Amazon and Tesla in the consumer discretionary sector. I don't think Tesla is a consumer discretionary stock. I don't. I think it's more of a tech stock, quite frankly.

But our resounding theme across the fateful eight, let's call them, they're comprised of three sectors, right? So technology, consumer discretionary, and communication services. Our call would be on a sectoral basis that encompass the fateful eight.

You want to barbell it. You want to neutralize or underweight the faithful eight, and you want to overweight the others. So what would be the great example in tech land? You want to underweight or neutralize Apple, NVIDIA, Broadcom, and overweight Palantir, Oracle, which we have. That's why we're outperforming.

Well, Guy, O&P, that was a big component of your hope trade two years ago. Oracle and Palantir. That's a few anagrams ago. Yeah, and you would say that you were a bit early on those and early in this business is...

Well, sometimes pays. Let's go back to this idea of normalcy. So we're talking about kind of mid to high single digit returns, mid to high single or maybe single high single digits. High single digit, low double digit returns over the next three to five years. So, you know, we've come out of this period where returns have been 25 percent for the last two years in the S&P. We've had double digit returns.

earnings growth this year coming in, it was expected to be like 13% or so. We're seeing that coming down a little bit over the course of Q1. Some folks are saying if we're in a recession, we could be as low as $240 in S&P 500 earnings for 2025. You're scratching your head or doing something or whatever. Okay. So let's talk about where's that going to come from? Where's the negative? So here's the deal. Here's the problem that I have with this.

So coming up with an earnings number is an academic practice. It's an academic practice. We do it because we're asked to do it. And we have three earnings models. We have three price models and we have three macro regression models on the overall market. Okay. So how are we going to get to 250? Where's the earnings number going to come down?

And I challenge people from a sectoral and stock basis to come up with the data that would show that. That's number one. Number two, the numbers have come down 150, 175 basis points. We're still above the great financial crisis average.

We are. So, okay. So again, we're acting like the world's coming to an end. And I think it's because of this whole notion of why the consumer's worried because we have become a bullet point society. Wait a minute. I just got a text. Oh yeah. Okay. We don't read anything past the bullets or the text. We don't. So that's why it was consumer slowing down or slowing down. Well, last time I was on a plane, which was two, two days ago, oversubscribe. Uh,

hotels oversubscribe. Yeah, but they've taken capacity down in the airline space. They have, but, well, they will. I mean, I live in a special, it's a special story because I live in Southwest Florida, which all the flights go away after Mother's Day. There's no flights out there. But we're still seeing pretty, and United and Delta have come out and said, well, you know,

we're slowing things down a little bit. But we forget about Delta owns their own refiner. Delta is by far the best one from our view, but they're being more cautious as well and that's okay. But the Fed's probably going to cut later this year. If oil prices remain low, they're going to be fine. But I think we've been so reactive that we're reacting to the one or two negative data points. So going back to the earning side of things,

Is it going to be the biggest contributor to earnings going forward, we believe, is only partially tech? It's going to be financials.

We think financial is going to be a really, really big part of earnings going forward. And if interest rates are going down, we're going to have loans coming through, we get credit in good place. We get the wealth management channel is amazing in the big banks, but also from the brokerage side of things and the asset management side of things, they're making money. So I think that that is an understated number. And then if we do have M&A activity later in the year, that's also going to be a big deal.

All right. So Brian, real quick. So just to get a little granular, and I know you're going to push back on this, but serious delinquency rates in terms of credit card for the US consumer, that's 90 days plus.

has jumped to about 11.5%. And that's the highest we've seen in probably 13 or so years and levels that we probably saw during the great financial crisis that you just talked about. And that's with us not in a recession, which I think we all agree. So is that in any way concerning or is that just sort of nitpicking or cherry picking? I think it might be cherry picking. Let's see if we see some duration on that. I think duration will be the key thing. And I do think that

banks or credit cards could come up with new lending facilities going forward as well to alleviate that. You know, credit is still very good. And if you take a look at, you know, credit spreads are in very good condition. And again, I think from a lending perspective, the bank balance sheets are very strong.

And so I think that there could be some positives there. All right. Yesterday, which was Wednesday, you were on the halftime report. Oh, no. Are you going to pick on me? With our good friend, Scott Wapner. You know, you said a couple really interesting... Most of it was interesting. Most of it. You know, you just mentioned the R-word recession. And it was really interesting because over the last...

I want to say four months, and I think this is probably something that's kind of bugged you a little bit, is like recession got back into the investor vernacular, or whether you're a strategist or market participants in general, right? And so you said there are no signs of recession and that a slowdown is not a recession. So my question for you is that

Again, will the market sniff out the slowdown, which it is right now? And to Guy's point earlier, it doesn't seem like the administration or the treasury secretary seems particularly worried about the stock market. And at what sort of scenario can we get, break through those lows of the S&P 500 at 5,500 and then find ourselves

back down, I don't know, you know, 5,200 or something like that and have a good old fashioned 15% peak to drop decline and no clarity on trade and tariff and the slowdown here or whatever. And, you know, go into another bear market that we saw in 2022. Only 20% for the bear market, number one. Number two, let me ask you a question. Did you sell at the peak?

Okay, you didn't. Nobody else did either. So this peak to trough analysis is bullshit. I will say that because that's a scare tactic, number one. Number two, if we start to see a massive slowdown, is the Fed going to cut? And what are the 14-year-olds going to do with the Fed cuts? Are they going to buy stocks or sell stocks? Anyone? Anyone? Bueller? They're going to buy stocks. Number three, let's go back in your collective memory.

I feel like I'm acting like Italian. I'm bringing the fire. That's amazing. Anyway, let's go back in your collective memory. When do recessions happen? Recessions happen after you over-inflate things in terms of the economy. Do you think we were overdone last year in the economy? The stock market was up two years in a row. But in terms of wages and jobs and all, no, we were not. No.

The last recession that we had that was not because we were coming out of a bubble was COVID. I mean, once in a lifetime deal, right? Once in a generation or two or three generations. Okay. Think about the recession before that was coming out of a bubble. What was the bubble? The great financial crisis.

Prior recession, we had a double dip recession in the early 2000s. One was because of 9-11, but the one before that was a capacity-led recession caused by tech. The one before that was in the 90s. I was at William O'Neill & Company. That was a consumer recession in 1990 based on a massive recovery in asset prices in 88, 89 into 90. And then we had the war in Kuwait. So what's the big bubble here?

coming out of. Now, some would say that we had, if we were going to have a recession, we probably should have had it in 22 or 23 because that was the last kind of true bubble-ish type behavior. 0% interest rates, the four horsemen of the apocalypse.

throw a dart, any kind of meme stock or Cathie Wood stock or crypto, it's all going up with no fundamentals and everyone was chasing it. But the key thing about 2022 was after that, we erased some of that because of the massive pullback in technology and the massive wealth transfer out of equities and just sitting in cash. Because I know from being...

doing what I do. Our wealth clients were sitting on cash waiting for the buy. So I think that's a different thing. So I challenge anybody that talks about the recession. Recessions usually come after this huge move in both the economy and the stock market. Yeah. And I would just say it's the psychology, the fear of the recession, which

causes folks to move out. And, you know, just one thing, a guy and I talk about this a lot. Obviously, we're in a show called Fast Money. Guy's been doing it since day one. And I think it started guy in the throes of the financial crisis. Right. And nobody knew there was going to be this, you know, really nasty bear market down 50 percent, that sort of thing. But what we know in being in touch with our viewers of that program or our listeners or viewers of our podcast is that a lot of folks make really bad decision near the top and they make really bad decisions near the

bottom. Right. And so we don't run money the way you do 10 billion plus and it's slow and steady wins the race. And you have these, you know, quantitative models that do a lot of the heavy lifting, but then you're kind of putting a lot of really smart quantitative stuff in and around it. Right. So like, that's the one thing. And one of the reasons why I think we have a really smart audience is because we get the psychology of some of this stuff and we get some of the reasons why people do that. All that said, you know, when the markets rip, you know,

raging, you know, up 50% after a couple of years, you know, we're not the guys saying, you know, the, you know, the, the sky is falling sell, sell, sell. But what we're saying is continue to do the dollar cost averaging, be smart about the most speculative stuff. Does that make some sense? A hundred percent. I always tell people that, you know, it's opening day baseball today and I'm a huge baseball fan, 25 straight years, uh,

of having Minnesota Twins season tickets. I'll be there next Thursday. Please don't judge me for what I look like or my behavior later in the day. Anyway, think of Rod Carew. Rod Carew, singles and doubles, flirted with 400 in the mid-70s. The key thing about Rod Carew is he would have a home run every once in a while, and he'd also steal home.

And people forget that about him. So I think so much of what I've encountered with my competitors, economist strategies, trying to hit the home run, trying to hit the home run, let's make the big call in the recession or the big correction call. And I just think they haven't sat across, they sit across the table from a lot of hedge funds who have actually underperformed, but they haven't sat across the table from someone that's giving them five, 10 million dollars.

Because once you tell them to sell, they're not coming back, brothers and sisters. They're not coming back. So that's not being flippant to say, you know, the markets are going to go down sometimes and we'll be more defensive at times when we need to shift some things. But at the end of the day, I think you have to kind of think more like that instead of trying to make

The big call. I will, I will reiterate. I was nervous. I was really nervous heading into January with these 7,000, 7,100, 7,200 people making these, these assumptions based on they missed the move in the first place. And so, um,

I'm comfortable with 6,700. I reserve the fact that if we have a deeper pullback, then obviously from a mathematical perspective, I think it'll be more difficult to get to 6,700. We'll cross that bridge if and when we get to it. But to get to 5,200 in the case that America's still got the best companies in the world,

Um, and that would be, that would be the next great buying opportunity in the secular bull market. I think you got the Strohs next Thursday. I think your first five or six games are on the road, by the way. Yeah, they open it. They open in St. Louis today. They got the Strohs for the second year in a row. Um,

And even though we have Correa on the team, when he comes up to bat, no one boos him. But when the Astros come up to bat, they'll still cheer cheaters. No doubt. After all this time. I mean, you can get fat on the White Sox in Chicago because that might be one of the historically bad teams. With all that said.

And I hear what you're saying about the Fed coming to the rescue and stuff, but I know you know this. I mean, the Fed cut in September. Tenure yields were 3.6. They proceeded to go to 4.8. So at any point, does...

interest rates concern you or where they are? Or are we just sort of this benign range, you know, floating between sort of 410 and 46 and it really doesn't mean a damn thing? We said a couple of years ago when we got on this big normalization trade, I think the range ultimately for the next, let's call it three to five years is 350 to 450. It's a wide range, but 350 to 450, that's actually pretty good from a historical perspective. The average 10-year treasury going back 80 years is 5%.

You know, BMO has learned that we're not going back to zero. That's not normal, by the way. Not normal, nor is it to have these years that we've had. I mean, think about this. The incredible reversal we had from March of 2020 to the end of 2020. And then 2021 with the craziness. That's not normal. 2022 with the massive pullback. And then the way that inflation went up like an elevator. That's not normal either. The inflation in the 70s was much more, it was like the baton death march.

with respect to what's happening with the dual deficits and the oil embargo. People forget all about that. And also people forget that President Nixon in the beginning of that was actually trying to cut wages, where the person in the office beforehand was trying to raise wages. So, I mean, there's a lot of different inputs that you have to kind of think about this. But

To have the type of volatility we had in 20, 21, 22, 23, 24, not normal. Let's wash it out. So now your next question is going to be, okay, Belsky, let's do a control-alt-delete, baby. Let's wash this thing out and be down 20%, 25%. I know you're thinking that. And so if everybody is thinking that on the macro side, my guess is probably not going to happen. So is it 10% to 15%?

Yeah. Is that the kind of pain? Yes. Does Trumpy then look at the stock market and go, you know what? I can deal with pain. He still, after all of this, he still measures the stock market. I'm telling you he does. Well, and you think that was kind of the slight, you know,

Like he changes tune a little bit right late last week down 10% By the way guy and I have been in that camp. We never really believed that well We couldn't figure out and guy already asked you the question is Treasury Secretary Besson saying he's focused on the 10-year guy Just used the example when they started cutting interest rates in September. You saw what the 10-year did, right? So, you know again

No one knows how that's going to play out. I think we're in the camp that if they start cutting interest rates for a weakening economy, that's going to play out a little differently than it has in the past, given some of the unique situations in and around inflation. I know you're probably a fading, you know, you fade that,

narrative but if we have a longer than expected trade war then you start saying to yourself if we get into 2026 and the economy is somewhat sluggish right we still have you know inflationary fears sticking around because we have supply chains that are in disarray and we have a lot of geopolitical stuff going on well then all of a sudden you have a lame duck president right as we get closer to the midterms you have the stronger likelihood that the republicans lose the house

And maybe you don't get tax cuts or an extension of the tax cuts. And we've made this point again and again, and I'd love to get your take on this, is like they've kind of done it ass backwards this time. The first time around, they went after the tax cuts. It was a tailwind for the economy. It was a tailwind for risk assets. And then they went after trade.

Yeah, I mean, I think that the goal from taking two steps back is from, I think that they're trying to focus more on the revenue side and cost cut. I mean, the whole Doge thing is interesting because to me, you know, the operating performance of company is very important.

And so why can't, why shouldn't it be important for the, for the country as well in terms of cutting these costs? And that, that becomes a political thing. And then you become, you know, I think you obviously already have your preconceived notions, whether or not you like Musk or like Trump that in that clouds everything first. But at the end of the day I think what we could end up seeing is this forced

return to normalcy where we have the correction, we snap back, and then we enter 26, 27 into that single digit return type situation. And oh, by the way, that's okay. That's okay. Especially if we're going through this new environment where we're cutting costs in the federal government, we're trying to cut taxes, but we're also dealing with maybe lingering inflation in a Fed that maybe doesn't cut.

I mean, that might be something to think about. But that doesn't mean that stocks are going to be down 10% or 20% next year or heading into the midterms, which there's got to be a ton of work done on the other side before anybody can come and say that the midterms are going to be unsuccessful for the Republicans because the Democrats have a lot of problems.

Introducing Event Contracts from CME Group for individual investors who want a new, less complex way to trade some of the world's most recognized futures markets. They're smaller, lower cost, with predefined risk. Event Contracts let you trade your views on daily up or down price moves in equities, gold, oil, and more. The markets you know and use every day. Take a position by choosing a side with Event Contracts from CME Group.

Learn more at cmegroup.com slash eventcontracts. iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. With Robinhood Gold, you don't need a silver spoon to eat up the financial favors of the 1%. Robinhood Gold allows others to get the rates and perks usually reserved for the high society. Now the resourceful individual with Robinhood Gold

can earn the very liberal rate of 4% APY on uninvested cash and be rewarded with a handsome 3% retirement boost on qualifying IRA contributions. Robinhood Gold provides the privileges of a high net worth for any net worth. These generous benefits are now available for only $5 per month. The new gold standard is here with Robinhood Gold. Sign up at Robinhood.com.

Gold membership is offered by Robinhood Gold, LLC.

So, Brian, I'm locked in. I'm listening to everything you're saying. And if I'm interpreting it correctly and synthesizing it the right way, you think some of this is overdone, which leads me to small caps, which specifically leads me to small and regional banks, which I would imagine you would submit, provide some opportunity given the sell-off and given your view on where things are going. I love small and mid-cap banks. I love them. You know, First Citizens is one of the best banks.

performing financial stocks last year. We talk about a roll-up play. So if you're a stock picker, right, you want to look at the product or service, the company management, and what they've delivered on. They've done it all. Take a look at a company called Glacier Bancorp in Montana. The

We're going back to, we probably learned the business around the same time. This is a relationship business. So they're getting the business from the local person where even though JP Morgan or Bank of America may have a bigger balance sheet and be able to afford that client a better term, but they're doing it because of relationship side. And so you have to kind of dig through the, dig through the,

through all of the analysis and all of the filings to find those types of gems. But we really like the small mid cap banks with clean balance sheets. Then you have the kind of the mid area that I think the kind of the regional banks that maybe all grew up thinking it was a regional bank. I think they're going to have a hard time competing with the small banks and competing with the big banks.

Because big banks have the capital, they have the balance sheets, they have the multi-divisional assets from its wealth to capital markets to the personal bank and the commercial bank. So I think it's going to be really difficult for, let's call it, Key Corp to continue to compete with Chase.

or fifth, third to compete with Bank of America. So I bet there's going to be, that's where the consolidation comes from those mid that want to be big, but can't compete with the small, can't compete with the big. I think that's where we have the majority of DM&A activity. But through this, I think obviously we've got a lot of banks in this country. I think the asset managers are still in play. I think some of the brokers are in play. And so I think the financials,

actually are an under-owned asset. Remember, they're up huge in the fourth quarter. And part of that was they're under-owned and they were actually throwing up really good numbers. And the correction started with the fateful eight. So you had the generals, then you take out the colonels, which are the financials, then you take out the non-commissioned officers. And so I think what's going to end up happening, if any kind of major correction happens,

If we go down again, take out the generals. Well, the generals are already taken out, so let's take those out again even more so. Take out the colonels, non-commissioned officers, and the next ones at the end of the next... If there is an excursion, ladies and gentlemen, watch for energy to hit, watch for healthcare to get hit, and when that happens, that'll be the low. All right. Let's talk about something that might or might not happen by the time the listener is getting to this pod on Friday or Saturday. So

There's been a lot of excitement about the generative AI trade. The fateful eight has largely accrued most of the excitement or market cap over the last, let's call it three years. We can agree on that, correct? Yep. Yep. Starting with Nvidia, then the hyperscalers, it kind of moved out a little bit to some custom silicon names and the like. And then you've had Oracle and Palantir and a few of these names kind of joined the party.

So when I think about where we are with this, we can all agree that the fever has broken for the most part, largely because Nvidia is now down 25% from its recent highs. And again, you said this was not the horse that you'd be betting on going forward. But there's also been this pocket

of exuberance in the private markets. We've never seen private companies like OpenAI raising at 300 billion or Anthropic, and it goes on and on and on. So right now, as we're speaking, Goldman Sachs, Morgan Stanley, JP Morgan are furiously trying to get folks to give them a bid to buy this company called CoreWeave. It's meant to go public tonight, Thursday night, price. It was originally targeting 3%.

$32 billion market cap. They're trying to raise $3.5 to $4 billion. The news today is that they are downsizing the deal. Now they're looking to raise $1.5 billion at a $23 billion implied sort of range.

This could be an absolute shit show. What does this company do? They buy NVIDIA high-end GPUs. They put them into data centers, okay, that they've built, and then they rent that compute out, okay? So they've been a huge beneficiary of the capacity constraints, the desire for lots of different companies to get compute, right, and access to those GPUs.

But the problem is that when you talk about the word bubble, we're expected, if we get through the end of this year with what all the hyperscalers have suggested they're going to spend, we're talking about nearly a trillion dollars of CapEx. So I think about that, that literally has started by the hyperscalers and a handful of other names in the last three years. You could say that that spending...

is a bubble if we don't have the use cases materialized, right? We have a slower sort of economy. And I think the realization that all these companies have overbuilt. So if you take a lot of that capex out of the economy, that was a long way of getting to this. Then I think you have some difficulty. But I also think core weave and Guy and I've been talking about it for over a month right now. I think this could be a very important footnote, both private and public markets for the generative AI enthusiasm and how it's infected the markets over the last few years.

Lost on pack there. But it's all related to the same thing. Okay. I just want to be really clear about that. Yeah. You can tell I've had therapy. Let's unpack that. So first off, it's not that we're giving up on NVIDIA. We own NVIDIA in several portfolios. I just think it's really difficult to be overweight. That's number one. Number two, you talk about the core weave in this particular thing. We also know the private equity. Private equity is to the current market environment with hedge funds for

2008, 2009. We got a lot of private wealth and private equity. A lot of it. Let's go, let's go, let's go. Number three, I actually, I'm going to spin it positive, shocker, that CoreWeave is not oversubs... If it was oversubscribed, right, that would say, oh my gosh, now we're way over our skis. But the problem is, and the good thing is, we haven't had a lot of deals.

We haven't had a lot of deals. We can't have a bubble until we have a bunch of deals and everyone's making money. I think it's actually from a sentiment perspective, good that they're having a hard time with this because it means people are becoming a little bit more conservative on the trillion dollars.

Depends upon, let's go back to baseball. What are we in? What ending are we in this AI? I mean, you're acting like it's we're in the ninth inning. No, you're, it's the second inning. It's the second inning. But the time horizon, you know, let's kind of stretch it out to like, let's say internet sort of late 90s and really things didn't take hold until we got the mid or latter part of the 2000s where you had these real durable businesses.

Yeah, because we had too many. So that was, I think I might have said it before. So the recession that was caused by the tech wreck was a capacity led recession, right? We had too many tech stocks, too many companies chasing too few dollars, right? So I don't think it's that pronounced this time around in terms of too many companies. Like, by the way,

Palantir, from an AI perspective, I bought Palantir more for the defense side of things relative to AI. I bought Oracle 10 years ago because of the balance sheet and company management. And Larry Ellison is a genius. And you always try to follow the money. I got lucky because of the whole AI thing. And they've got more to go in terms of just that. So I think what's happening is I actually would spin it more as a positive that we're not seeing all of these deals happening.

And I do think that's why going back to small mid cap, I think it's why small mid cap makes sense because from a scarcity versus capacity perspective, there's not a lot of private, I mean, there's not a lot of public companies anymore that small from the market cap perspective. And we're not seeing public or seeing companies go public. So I think there's an opportunity there. All right.

All right. So it's interesting just to sort of my little take on the baseball analogy. I think we all agree we're in the early innings, but we've also seen baseball games where all the scoring is done in the first two innings and the rest of the game is sort of a whole hummer. And that could potentially be what we're setting up for as well. With that said,

Let's play a little stock market. I know you love Apple, but you've also said you sort of like Google over Facebook, which I find interesting here because I think a lot of people would go the other way on that one. So speak to that sort of Google over Facebook phenomenon. When Facebook came out and said they're going, this was several years ago, 2018, they said we're going to focus on the metaverse. And I remember one of my, I met...

Warren Buffett when I was eight years old, when I started in the business 35 years ago, this old joke, the Dookie Houser of Wall Street. And I had like 15 minutes with him at William O'Neill and company. And he said, never buy anything unless you can understand it or reach out and touch it. And what I said, what the fuck's the metaverse? So I sold all my, all my meta and put it into Google and I've stayed there. So it, because when he said he was going into the metaverse, this company management and how you run a company,

Our legacy businesses of WhatsApp, Instagram, Facebook, not making any money. Then he comes out in 2020 and said...

you know what, we're going to cut costs, we're going to focus on our legacy businesses again, which I didn't really like that flip-flop. By then, we were up big in Google, and I'm like, why do I need to change? If you look at a correlation perspective, up until the last six months, Google and Facebook, or Google and Reddit, basically the same. Now, we've seen some separation there. Google's been hit because of some

some lawsuits and regulations and fear about that. We actually think at under 20 times, we're looking more and more from a value perspective at Google, number one. Number two, the YouTube TV property, not enough people talk about how great that property is. And I think that sports are going more towards streaming. I think the streaming part of it is they make money on that. And I think they can monetize that even more.

And so we're believers in Google. And again, you don't have to own everything in the fateful eight. And one of them we don't own is Meta. Yeah. Well, it's, you know, one of the things that's pretty clear is that Meta lost 70% of its value from the highs in 21 to its lows in 22. And since then it's up 10X or something like that. Right. It's your point about their ability. You talked about management. You talked about moats.

There's a lot of boxes to be checked, like in the things that you like, how you kind of arrive at different buy points for stocks. You know, Meta repositioned a lot of that spend for the Metaverse. And one of the reasons why this company has been doing as well as it. It's one of the only fateful eight that's actually seen meaningful higher earnings revisions. Okay. And the stock has reflected that.

let's talk about Apple because here's one where, you know, there's meant to be a bit of a tailwind from their integration of open AI. And we've seen that that actually hasn't worked out that well for Microsoft, right? The cozying up to open AI. And so Apple has not been able to kind of get Apple intelligence to a point where people are going to upgrade their phones for it. They've just indefinitely pushed out any upgrades to it. How do you think about a stock like this? Because from your notes, we definitely see that this is one of the, one of the mega cap textures.

I love Apple. I love Apple. Apple's got more cash on the balance sheet than the country of Canada. That's my first Canadian joke. But I learned a long time ago, you never bet against Apple, number one. Number two, you always follow companies with cash. And number three, one of my very first entrees into Apple was the early 2000s. And I was working at a place called Piper Jeffery.

And I was the strategist there. And a gentleman by the name of Gene Munster. We love Gene, friend of the pod. Oh my gosh, an amazing man. And he used to give me shit. He's like, Belsky, you gotta look at Apple. I'm like, listen. I said, listen, Linda. I said, I have this music match mechanism from Dell. It sounds way better, right? And that back then, the iPod sounded like shit. And he's like, Belsky, you don't get it. It's about the operating system.

I'm like, okay, I finally got it. So the ecosystem that is Apple, I think we're, now we're so, anything that, if there's any kind of negative data point in AI, sell. And I think it's being reactive. I don't think you bet against Apple. I don't think, talk about management prowess, Tim Cook, come on.

And so I think at the end of the day, further weakness in Apple is actually a longer term buying opportunity. I think Apple's better positioned than Microsoft to some degree, but obviously different companies. But if I'm going to be neutral or overweight any part of the faithful aid in tech, I'm going to be overweight Apple. Yeah.

I don't disagree with that, actually, because they've been such a failure. They've been so late to it. And you think of their installed base of, you know, one and a half billion iOS devices. They will get it right.

There's no doubt in my mind. So if it continues to act defensive, if it continues to be one of these names that people are going to go to, right, when they think there's another leg to this story and they might be positioned very well, I totally get that. I could also make the counter argument about Google is that they have been here from day one, from the moment in late 2022, but then people got infatuated with ChatGPT. They had barred.

disaster of a rollout. They have Gemini in different iterations, disasters of rollouts. They're just getting far behind. And they have seven platforms with over a billion users. Half of them have over 2 billion users. I think what's going on at YouTube TV, I think you are spot on there. But they have risk because they have to almost cannibalize themselves to be successful. They do.

And a lot of folks, I think, are looking at it from a valuation standpoint, and that might be a trap. Well, I think you never buy a stock based on valuation, number one. Number two, the majority of generative AI companies that are unicorns are actually using Google. Did you know that? Well, you mean in the cloud or GCP? Yeah, in the cloud. And so I think that's kind of their base. I think people don't know that. And I do think, again, from a contrarian basis, Google's not going away. Mm-hmm.

And I think given the more downside in the longer term track record of making it work, yeah, they've stumbled a little bit.

but I think they've been unjustly hurt. So we're looking deeper and deeper, deeper at Google in terms of whether or not, I'll admit my mistake and jump on the MetaMachine if I need to. But at the end of the day, I own enough communication services through Netflix and Spotify. I mean, I think about those companies in communication services and where I can have tracking error, number one, but number two, provide alpha on the upside. And so that's obviously come from my position's

in Netflix and Spotify. Brian, before we get out of here, I know you're an avid viewer of the network CNBC. I also know you're an often participant on the network. When you're watching or when you're on sets, what are you saying to yourself, I wish we talked more about X, you're missing this? What's the one thing that you've been watching that's not talked about enough?

I think, you know, listen, I'll never forsake our good friend Wapner and the Halftime Show because they've been amazing to me. They're on all the time. I don't think we're, we don't talk enough about what's actually going on in the market.

in terms of the market internals. And I think of the people, they're mostly traders and mostly money managers, but I think I'm maybe one of the only strategists that are in halftime. I think he has got people on closing bell. I don't think he talked enough about the market aside from what's happening that day. Maybe there needs to be, aside from Santoli's talking about what's happening that day, there might be something more that needs to talk about that. I also think too that

that you have a lot of people on CNBC talking about all their great track record or there needs to be some accountability. So what is the track record actually?

You know, we have to show ours because we're published analysts. So we have our series 7, 63, 86, 87, 24, 8, blah, blah, blah, the numbers. So we actually have to be in the public domain. You have a lot of people, why I put this in my fund. Okay, how much is your fund up? Well, you know what I'm saying? And so I think there has to be some more attention to that. But I wish that we weren't, and I know your guys' show of Fast Money is whatever's happening today and what's your stock of the day.

But how long have you owned it? What's your track record? What's going on? What's your market call? And I think there has to be a little bit more of that. Well, it's funny, and I think we're guys going with this is one of the reasons why we started this company is that one of the things that we felt was lacking is just longer form conversations like this. So like, for instance, you're sitting on that desk

And they're going around the horn and Belsey's got 30 seconds, 45 seconds to comment on that. And, you know, we've built this amazing audience. We get tons of feedback. We have lots of engagement. They really like getting in your head a little bit about like in hearing that thought. Like yesterday on the channel, I was giving Jenny crap. Yeah. And I said, I said, you don't like anything.

She said, I thought you don't like anything, Jenny. And then she was going, and then, so then I get all this stuff on the Twitter machine and on LinkedIn. So why are you being such a dick to Jenny? And I mean, I wasn't, it was just like, if you can't make these broad, broad statements in a 30 second, six in that have more, more explanation. She did a good job kind of coming back from that, but I couldn't help it. I mean, she put herself out there. I don't like anything.

Well, maybe I do like this. So, I mean, people are listening to this and they're actually acting on some of these things. And so I take that really, really, really seriously. Well, we take it seriously. And I alluded to the fact, Guy, when you started, Guy's the only original Fast Money member. It started what year? It's 07, Guy. And when I hear you talk about this, and you do it a lot in your speaking engagements and every once in a while, just...

Give Belsky a little 411 on what you were going through in 07, 08, and 09, having to go on that set every day and talk to the people that were having a very difficult time navigating that period. Well, it was obviously the early days of Fast Money. And within months of us starting, the world started to sort of cascade lower. And

We were tasked with talking about things. Brian, I know you were watching. I know you were on the network at those times as well. Talking about things that nobody had ever seen before, let alone ever heard before. So it was a huge responsibility. What you take away from that is, to your exact point, people are listening and they're making decisions based on that. So I've never taken that for granted. And I totally get it. It's easy to sort of say,

You hear a lot of the platitudes that people speak in, but people want specifics sometimes. And they want to hear what your thoughts are in a real-time, honest manner. So it was an interesting time back then, 07, 08 into 09. And again, the early days of Fast Money for me were very formative. It was. I'm glad you brought that up because there's two points. Number one, whenever I see somebody or someone stops me, usually I try not to wear my glasses in airports and they don't...

When I have glasses on, they recognize me for some reason. I don't know why. So I always say, oh, Brian on CNBC. And the first thing I say, I always say, well, thank you very much. And then I say, are we helping you? Is the stuff that we're saying and talking about helping you? Are you making money? And they usually say, yes. Oh, I'm very humbled by that. Thank you very much. But going back to 07, 08, just jam something in me. I remember...

in September and October of 2008. Literally, we didn't know what was happening, right? You could literally say, honestly, I don't know how far this is going to go down. And I was bearish back then. And I remember that Merrill propped me up to talk to some of the very high net worth people. And by the way, you know why they did? Oh, Brian, I've seen you on TV. This was 07. And this was 08, right? I saw you on TV and you really speak common sense and

and you seem like a really nice guy. Can you tell me what's wrong with my portfolio? And we would be on with the brokers in one room and for some of these Hollywood people, like the business manager. And this was back before Teams. So it was like, remember the old days of the conference call? We had all these people on a conference line. And then we had the Black, remember the Blackberries? You could do the Blackberry messaging that no one could see. And I'm getting messaging from the broker saying, don't tell them to sell, don't tell them to sell.

And then one very high visibility client, a movie star said, what should I do with my hedge fund? I said, sell. Remember that was a big break point back in 08. The broker was pissed at me, but then the market went down another 30%. So, I mean, we were ultimately did the right thing because, you know, but

But the TV thing is interesting and we never take it for granted. I think it's amazingly humble to me that we actually, people come up to you and say, thank you. And that's why I always say, the first thing I always say is,

Have we helped you? And what can we do a better job at? Yeah. I mean, Guy and I live by this because, again, we've had amazing proximity to many of these viewers. And now we've created a sort of new following with the podcast and the like. And we say this all the time. No one can make you money, right? You kind of have to do it yourselves. You can like Belsky. You can like Adami. You're taking inputs from them. And hopefully you're making some pretty good decisions in using that. Well, let me just tell you this, Brian Belsky.

I think a lot of our listeners really enjoyed your inputs here and you know, hopefully they're helping them make smarter investment decisions. I, you know, we started out by saying you're one of our favorite guests and we really hope you'll continue to come back here. It's been about three and a half months. I think three and a half months from now, it might look very different than it does right now, but just to,

cautiously optimistic the way you were back in November. Is that fair to say? I think it's fair to say. And we're going to this. We're going to do lots of blocking and tackling, which I think is normal. And it's not going to be as easy as it has been on the upside. And I don't think it's going to be as easy on the downside going forward. All right, my man. Thank you for being here, Guy. And I really appreciate you. We hope to see you really soon. Thanks a lot, Brian. Thanks.