The Compound and Friends
00:57:22 · Michael Batnick, Daniel Clifton
[00:57:22] S0: Yeah. You know that chart? [00:57:23] S1: Exactly. But you could see why it can have an outsized effect. A political outcome can have an outsized effect just because of that weighting. [00:57:29] S0: So, the chart that shows it's data center construction, I think office construction. Yep. You've seen that floating around? [00:57:34] S1: Yeah. [00:57:34] S0: So, that topped, right? Or bottomed, depending on which way you're looking at it? [00:57:37] S1: Yeah. And I would expect that you're going to see more. We go through the lobbying disclosure reports of every company, and you have to see the non AI companies that are lobbying on energy permitting reform and R and D tax incentives. It's Kimberly Clark, a sleepy consumer staple. They make diapers, but they're now building factories in America. So, you're going to start seeing some non AI building data coming in, [00:58:04] S0: not Okay? Just office And [00:58:06] S1: let me give you this other issue. What Warsh wants to do with the Fed is very important for real estate. He's literally saying, look, the model since the financial crisis has been to increase the balance sheet. When you increase the balance sheet, it increases the money supply, and that increases inflation. He's literally going to start in the next couple of weeks deregulating the financial service sector. Very big financial deregulation coming out. The idea is to start having the banks buy the treasuries by unlocking their capital and start to bring down the Fed balance sheet.
00:58:06 · Daniel Clifton, Josh Brown
[00:58:06] S1: let me give you this other issue. What Warsh wants to do with the Fed is very important for real estate. He's literally saying, look, the model since the financial crisis has been to increase the balance sheet. When you increase the balance sheet, it increases the money supply, and that increases inflation. He's literally going to start in the next couple of weeks deregulating the financial service sector. Very big financial deregulation coming out. The idea is to start having the banks buy the treasuries by unlocking their capital and start to bring down the Fed balance sheet. [00:58:35] S2: Meaning they can go above and beyond where they can now at, what, buying treasuries
00:58:35 · Josh Brown, Daniel Clifton
[00:58:35] S2: Meaning they can go above and beyond where they can now at, what, buying treasuries [00:58:40] S1: or We're making going to make them have less reserves holding. That frees up capital. Next year, we'll do what's called the liquidity coverage ratio and make changes to that, and that really boosts the banks. For every $250,000,000,000 balance sheet reduction we get, that's one less rate increase I've to do. So, when I meet with my real estate clients, I've been to funerals that have been more cheery than some of these meetings. It's like death. Okay? So, there's a reason why there's nothing else happening except data centers. And if Warsh is successful and this will really culminate with his balance sheet commission that he's got coming out if he's successful and he's able to get inflation down without jacking up rates as much as people anticipate, I think that's going to be a positive for the real estate, and you'll start to see some of these other sectors. So the reason that's important is if data centers are coming down, I've to match it with something else. And I think that we're
00:59:31 · Josh Brown, Daniel Clifton, Michael Batnick
[00:59:31] S2: There going have a little more of is one other thing that's happening. And I was out at dinner with Scott Galloway the other night, and he said to me, however big of a deal you think this data center thing is, this pre election, he doesn't mean like moratorium. Yep. He means more like AI. Yeah. He's like, I'm pretty sure GLP-1s are a bigger deal. Oh. And healthcare sector stocks have been absolutely ripping since, let's say, September. A lot of growth managers who didn't wanna be 80% chips in AI, they're looking for secular growth opportunities, and they're finding them in pharma, Eli Lilly, biotech, all of the life sciences equipment, Yes. The AI related healthcare stuff that's like- [01:00:21] S1: Yes. Gonna speed up dryer [01:00:22] S2: stuff. Okay. Separately, but the same theme, I keep a list of the best docs in the market. Yeah. And every week I have healthcare names being added to Absolutely. Sean and I were writing about them. Yes. [01:00:37] S0: I just- I love that side, Link. [01:00:39] S2: No. But so I do think that there's something big happening that's not... Now it's not gonna be as big in terms of construction, but in terms of societally altering the way that we live. Yes. This is another really big story. [01:00:52] S1: Absolutely. [01:00:52] S2: What's the house view on [01:00:54] S1: this So first, this is the twelfth midterm election year out of the last 14 where health care outperforms. Yeah, it's It's outperformed on average by 10%. Yesterday's click was 10%. [01:01:09] S2: Yeah.
01:01:09 · Josh Brown, Daniel Clifton
[01:01:09] S2: Yeah. [01:01:09] S1: Okay. So we came in and we were bullish on health care, bullish on staples, which seemed insane in January. And it's all working exactly the way we thought it would work. [01:01:18] S2: Yeah. [01:01:18] S1: Okay? Now, when the Democrats come in, they want to do something called an increase in the National Institute of Health budget. It sounds stupid, right? Like, oh, whatever that means. Tick for tick, every dollar that goes out of NIH goes right in the life science tools earnings, okay? And the health care analysts are [01:01:35] S2: like, no, they're diversified. Thermo Fisher, Thermo Fisher, Agilent. All times. [01:01:40] S1: Agilent. Illumina, they just had bad earnings. But man, the stock's just been on fire. Yeah. So you look at this. Right? Like, my my colleague, Chris McGrath, every day, the federal government releases what they spend money on, every line item, and he matches it up to stocks. He can do retail sales proxy with this stuff. It's amazing. And it's tick for tick on life science tools. Then you throw in that AI is going to help with drug discovery. That's a direct beneficiary for these companies. [01:02:06] S2: Yeah. [01:02:06] S1: Okay? There's If they can get the compute. Right. So if you now you need the compute. Exactly. So now you have the Democrats winning. That's their ask. K? Their second ask is that they don't want the OBB Medicaid cuts to come in. K? These stocks didn't respond all election cycle. Centene, Molina, HEA, THC. These things are going nuts. Right? So it was up 12% the day after
01:02:06 · Daniel Clifton, Josh Brown
[01:02:06] S1: Okay? There's If they can get the compute. Right. So if you now you need the compute. Exactly. So now you have the Democrats winning. That's their ask. K? Their second ask is that they don't want the OBB Medicaid cuts to come in. K? These stocks didn't respond all election cycle. Centene, Molina, HEA, THC. These things are going nuts. Right? So it was up 12% the day after [01:02:31] S2: So the intermediaries that the government pays Pays. To deliver services to people. [01:02:36] S1: But what we didn't know on election day was that the Texas legislature was going to flip. Now that's a non Medicaid expansion state, which did the Obamacare Medicaid. If you... That's the largest segment of Medicaid expansion of any state. It hasn't done it. And if that governor does it, you've just increased the market share of [01:02:57] S2: So, all these your House view remains bullish on a lot of these areas of health care. Not indiscriminately, but like... Okay. [01:03:04] S1: Now, as you go into year three of the presidential cycle, health care is not that great. By the way, the worst sector for stocks in year three of a presidential term is tech, which is quite interesting given everything that else is going on. But we love the healthcare story right now. But I would just caution, and I think this is very important for your listeners to understand. Josh, listen up. The Democrats are going to come in and make healthcare their number one priority. It has been no part of this campaign. [01:03:35] S2: But what does that mean? What do want to do with it?