The Compound and Friends
00:38:53 · Daniel Clifton, Josh Brown
[00:38:53] S1: But by the way, you know what this reminds me of? This reminds me of municipal bonds after the Obama midterm, where the Republicans had a very similar election. Oh, the Republicans are going to kill state aid. They're going to take away your ability to force you into bankruptcy. Everybody just sold the municipal bonds and said, wake me up. And then, you know what? It turned out to be the greatest trade ever, where you could buy California municipal bonds tax free for, you know, like 12%, 13% [00:39:21] S2: So what you're saying to clients is that chaos is a ladder, and there are opportunities that are going to be created because we're shooting first and asking questions [00:39:30] S1: Exactly. For But you've got to wait it out. And I always... Again, seasonals are important, but this is my sixth midterm election in markets. And I've always said the S and P 500 has not declined in the twelve months following a midterm election since 1938. Most of my clients think that stuff's We do. [00:39:46] S2: Let's put this to this chart. This is chart one. This is this is Dan's chart. This is the S and P 500. In the twelve month period following midterm elections, the average return is plus 14.8%, and it's uniform. So they're not all great years, but a lot of them are. Yeah. I think this is super helpful. Yeah. Unless you think this is such an aberration that it's gonna break this pattern. It's always an aberration,
00:40:12 · Daniel Clifton, Michael Batnick
[00:40:12] S1: and Okay. It never breaks the So, this happens because you get these big equity market sell offs in the midterm year. The market assumes the worst, and then that doesn't happen. And why does it happen? These guys are going to get in there in January, they're already going be thinking about 20 And if you're doing a big thesis for our clients the morning after the election, seven a. M, I've 2,000 institutional investors on the phone, and I'm like, Kevin Warsh needs to pay attention to what's happening in this data center stuff. Because if you are going to have fewer data centers, then he shouldn't be raising rates as much. No. Right? And so you've got to have a monetary policy response. So you were talking before rates come down, rates start coming down, you start getting more clarity. Congress is starting to talk about, hey, let's do a budget deal. Let's hand out some stimmies ahead of the election. The market's going to be able to read through that. So, you've got to take your lumps. And it is crazy because we were sitting here right before the Iran war in February, like days before the Iran war. And if I told you that day, like, we're going to war and oil's going 100, you'd be like, the equity market decline probably would be greater than 9%. And we were 9%. We didn't get a big sell off. [00:41:22] S0: Well, but even right now, we're down 5%. [00:41:23] S1: 5%.
00:41:23 · Daniel Clifton, Michael Batnick, Josh Brown
[00:41:23] S1: 5%. [00:41:24] S0: The problem is so NVIDIA is in a... So NVIDIA's in a bear market. It's down 21%. Problem is everybody's like, oh, NVIDIA's 14 times earnings. Well, is it really? Yeah. Mike won us three times four earnings. [00:41:34] S2: Is it still? Michael it and I were just talking about that. We've witnessed over twelve months now of multiple compression for all of, not all, most of the large companies like the Broadcoms and the NVIDIAs of the world that are selling into this boom. The multiple compression has been severe. The only reason the stocks haven't really suffered is because they're growing earnings faster than the rate that we're compressing their multiple on the street. But like, I don't know. The market probably didn't see this election coming, but the market never believed that the pace of this level of earnings growth was gonna continue into '27 and '28. Interesting. It never believed it. [00:42:18] S0: I know [00:42:19] S1: it right. So that was right. [00:42:20] S0: If NVIDIA's earnings are 5% lower over the next twelve months than we expected them, the stock could fall 40%. Wow. Wow. I mean, I'm making that up, but it really can. Yeah. Yeah.
00:42:20 · Michael Batnick, Josh Brown, Daniel Clifton
[00:42:20] S0: If NVIDIA's earnings are 5% lower over the next twelve months than we expected them, the stock could fall 40%. Wow. Wow. I mean, I'm making that up, but it really can. Yeah. Yeah. [00:42:29] S2: Yeah. Five biggest losers from last... I was thinking about this. Like, who are the real who are the real losers? I have just mentally, venture capitalists. Like, we'll see with Anthropic, but whatever they thought they were gonna sell these things to the public for as much. It's gonna be lower, and their business is gonna be more complicated at a minimum. I'm gonna say complicated. It's a euphemism for have fun in congress. Yep. Okay. So that's one group. Israel Yep. Obviously. Yep. Okay. We're not gonna get into that today, but that's an obvious loser. When I make that list, and I'm trying to think who is the number one loser that's not Donald Trump, it's Elon. Yeah. His companies combined. Yep. He has had more dollar amount losses in the last two days than any human being who has ever lived until now and who may yet ever live. What's the number? [00:43:25] S0: It's 110,000,000,000 [00:43:27] S2: in personal losses tied to just- Just Elon. SpaceX and Tesla. [00:43:31] S0: And he spent 400,000,000 on the election? [00:43:35] S1: He knew that the stakes were pretty binary, so there no dollar amount that was going be too small. [00:43:41] S2: So he had to. He had to. There was no choice. And it still didn't work. [00:43:45] S1: And it didn't work. This wasn't about money. Most of these people won without money.
00:43:45 · Daniel Clifton, Josh Brown, Michael Batnick
[00:43:45] S1: And it didn't work. This wasn't about money. Most of these people won without money. [00:43:49] S2: That's another interesting aspect. So I've conditioned myself to believe, like between social media networks, whoever controls them, and super PACs. Yep. Like, basically, it doesn't matter what anyone wants. That's not true anymore. [00:44:04] S0: So that's a win for everybody. [00:44:06] S1: Yeah. It's [00:44:06] S2: So I like that. [00:44:07] S1: Yeah. It's a... And that... But he doesn't. His stocks were not moving. Like, we literally have stocks that can tell you what's gonna happen in the election. The market is just so much smarter about the election than the polling and the and the betting odds, And his stocks never reflected that. Then all of a sudden, Texas went, which again was unexpected in the consensus, and it just dropped because Starbase is now being controlled by Democrats. Okay? And there's going to be fewer data centers. [00:44:34] S2: I think the Starlink problem is going be a big one, too. [00:44:37] S1: So, if we know that, the President knows that, Elon knows that, Elon is way ahead of me in terms of thinking through, there's got to be a reaction function. Trump believes that these data centers are needed to compete with China. And it's a national security issue. My guess is the president's going to figure out how to find federal land. And I don't mean Yellowstone or, you know, the Grand Canyon, but finding federal land where he could start putting some of these data centers. Where? You you got to do an inventory of it. Like, worked in the
00:44:37 · Daniel Clifton, Josh Brown, Michael Batnick
[00:44:37] S1: So, if we know that, the President knows that, Elon knows that, Elon is way ahead of me in terms of thinking through, there's got to be a reaction function. Trump believes that these data centers are needed to compete with China. And it's a national security issue. My guess is the president's going to figure out how to find federal land. And I don't mean Yellowstone or, you know, the Grand Canyon, but finding federal land where he could start putting some of these data centers. Where? You you got to do an inventory of it. Like, worked in the [00:45:06] S2: Oh, like, in the next two years, like, outrun the clock? Yeah. Like, why would [00:45:10] S1: you not do that? Like, if you got open land, they were going to do it for housing. So I think they've already mapped this out. They were going to create these land places to increase the supply cost. [00:45:19] S2: So there are no there are no voters. There's no voters there. [00:45:21] S1: Right? And that's the transition to what Elon really wants, and that's put them [00:45:25] S0: in space. [00:45:25] S1: Right? He he's basically No. [00:45:27] S2: They're saying underwater now. [00:45:28] S1: Oh, underwater. Yeah. [00:45:29] S2: Yeah. Put them deep deep underwater. [00:45:31] S0: The xenomorphs hate data centers. [00:45:33] S2: Hate them. All right. So you would agree though. This is like... You go back to three hundred years of American history. We've never seen a single person take this much of a nosedive financially as a result of one midterm election. Yeah, absolutely.