Don't Try to Beat This Market — Here's What to Do Instead

Subscribe to the Prof G Markets Youtube Channel Ed Elson and Josh Brown unpack how markets have responded to developments in Iran and explain why regular investors are in a better position to ride out the volatility than they think. They then explore Josh’s recent move into software stocks, highlighting opportunities in the sector. They also discuss why the Magnificent 7 is struggling while HALO stocks are gaining momentum right now, and take a look at the upcoming IPOs from SpaceX, Anthropic, and OpenAI. Subscribe to the Prof G Markets newsletter Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 1:35Ed Elson?

  Welcome to Prof G Markets. Hold on.

• 1:39Josh Brown?

  Sorry, sorry, sorry, sorry, sorry.

• 1:41Ed Elson?

  This is our cold open.

• 1:53Ed Elson?

  Welcome to Prof G Markets. Scott is still out. He's on spring break, but we have a very special episode for you today. Today, we are discussing the market's reaction to the tenuous ceasefire. And we are also looking at an update on big tech and also the halo stocks with the man who actually invented the term halo. This has been all the rage on Wall Street recently. It is the new investment trade, the new investment thesis in the world of AI. And the guy who created it is here. He's in the building, Josh Brown. Josh, thank you for joining us.

• 2:26Josh Brown?

  I am not in the building.

• 2:27Ed Elson?

  You're not in the building.

• 2:28Josh Brown?

  I'm in the Hyatt Regency in Coral Gables.

• 2:31Ed Elson?

  Coral Gables, that's fun. You're on spring break, too.

• 2:34Josh Brown?

  Sort of, but I like to, I like to work as much as possible when I'm on vacation. So this is, this is me vacationing on a podcast.

• 2:43Ed Elson?

  Yeah. Is this really work for you? I mean, you love this now. You love joining this podcast.

• 2:47Josh Brown?

  I love you. I love you. That's the truth. I, I gotta tell you, I say no to, I don't know, 100 things a month. But anytime you guys need me, Scott, Prof G Podcast, Ed, I'm just, I'm in. I love you guys.

• 3:03Ed Elson?

  We always need you and we really appreciate it. And you and I had a lovely dinner the other week as well.

• 3:08Josh Brown?

  Yeah.

• 3:08Ed Elson?

  We had, what did we have? We had some ribeye.

• 3:11Josh Brown?

  I think we had the whole menu.

• 3:12Ed Elson?

  We had the entire menu.

• 3:14Josh Brown?

  Very on brand.

• 3:18Ed Elson?

  It was a very good time. Well, we're very glad to have you on the show, Josh. And we want to get right into it because we know that you have some jet skis to attend to probably. Maybe you're doing some.

• 3:30Josh Brown?

  I have things to do, people to say. So the jet skis can wait.

• 3:36Ed Elson?

  All right. Well, let's start with our first story here.

• 3:47Ed Elson?

  Last week's developments in Iran left investors trying to make sense of a rapidly shifting situation. First, President Trump threatened to wipe out the country. Then came news of a ceasefire, which was supposed to include reopening the Strait of Hormuz. The markets rallied in response, but within 24 hours, the strait was still jammed and confusion emerged over the scope of the deal, specifically whether it applied to Lebanon, where Israel had continued to strike Hezbollah. By the following day, stocks were retreating and oil was climbing again, so the details remain unclear. And the situation is still fluid, but one thing is clear: Trump has escalated dramatically again, and then he has again stepped back from the brink. So all of this raises a key question for investors: How do

• 4:31Ed Elson?

  you navigate an environment like this? Josh, stocks rose. People thought, okay, maybe the strait's open now, maybe we have a deal, maybe we have a ceasefire. Wasn't totally clear. What do you make of how the markets reacted? What do you make of the situation in Iran? What are we supposed to do about it as investors?

• 4:51Josh Brown?

  So, paradoxically, you think about a professional hedge fund manager, someone who, like, as a stated premise, tells their clients, "I am going to specifically navigate all of these geopolitical macro issues I'm going to be on top of: currency movements, commodity movements, oil price spikes, volatility spells in stocks, I'll be involved in the rates market, I'm going to have a view on global GDPs by country, etc., etc." That person is collecting a fee of 2 and 20, and they are professing to have the ability to do

• 5:32Josh Brown?

  this on a consistent basis. Putting aside the madness of how impossible that sounds, I suppose there are a handful of people who have demonstrated that they can make these calls repeatedly, or not lose too much money when they make a call that goes wrong, because they're not a hedge and it's their life's work. It's a 24-hour, seven-day-a-week profession. Most of your audience, Ed? Are not sitting in that seat. Most of the people listening to us right now do not have that responsibility. They haven't told a third party that they are managing money for and charging a lot of money for that, uh, for that privilege that they can do that.

• 6:17Josh Brown?

  So my answer to your question would be, why try? So the paradox of the individual investor is that by not having that responsibility, they actually are in a pretty good position to ride this out and not react to everything that happens because no one's watching. No one's paying attention. You have a brokerage account, maybe you have a joint account with your husband or your wife, got an IRA, you've got your 401K, maybe you have a portfolio somewhere where you're a little bit more active. That's fine. You're not being graded. You're not being judged. No one is expecting you to know the next move that Trump will make, the next 15 points up or down in WTI crude. It's not part of your purview.

• 7:02Josh Brown?

  You don't have to do it. You obviously can't do it, but it's, it's not the type of thing where you need to act like you have any sort of edge. And so I think this is the type of market where regular investors are in a much easier position than the type of investor who is claiming, I'm going to get this stuff right all the time. I'm going to be at the forefront of all these trends and changes and juxtapositions and I'm going to figure out the puzzle. Don't bother. So I know it sounds glib. So then like, what do you actually do? I think there's a couple of things. The first is set the rules in advance. Now is not a good time, right?

• 7:47Josh Brown?

  In the, in the heat of the moment, now is maybe not the best time to decide like all of the things that you're going to do with your portfolio. But when things are calm, take that opportunity to say, okay, things are pretty good. Let's say January this year. I understand that every year there's a 14% decline in the market on average. There's some sort of a freak out. Last year it was tariffs. This year it's Iran. Next year it'll be an alien invasion. How do the rules of my portfolio work? When do I rebalance? When do I get more aggressive? Hopefully, it's into a sell-off, not into a rally. When do I make decisions about global allocation? Or do I not make those decisions? How do I want to tilt my portfolio?

• 8:31Josh Brown?

  Which factors do I want more exposure to? And which do I want less? Has anything in my life changed where I have to revisit my investment policy statement? Do I even have an investment policy statement? Or do I just wake up every day and think I'm supposed to try to make money? So when you do these things in advance and then you stick to them, you stick to these rules, you you can get through a period of time like this where every day is as uncertain as the last. So one day, we're going to wipe out an ancient civilization and it will never come back again. And the next day, China steps in, urges Iran to agree to certain things so that the president

• 9:15Josh Brown?

  has something he can tweet that represents a de-escalation. You get the biggest fall in crude in a really long time and an explosion to the upside in stocks. And then overnight, like minutes later, Iran is claiming that we're violating the ceasefire. And here we go again. The whole cycle repeats. Why bother? You have no edge. So I I think that I have spent most of the last 15 years aggressively counseling people to not pretend that they're in the seat and that they have this responsibility of nailing the crisis, calling the top, calling the bottom. It's it's unnecessary. The returns of investment markets have been spectacular. None of this sort of tap dancing has been necessary.

• 10:00Ed Elson?

  And it does seem especially ridiculous in this context where not even the people closest to him can make any predictions or understand what's going on in his head. And this is something that I said last week, like when it comes to what's happening in that guy's mind, and yes, he has a lot of power and it does matter. And if you did know what was going to happen, you'd probably make a lot of money. But no one knows more about what he's thinking than you do because he's a complete bull Like it, there's no way to actually really predict it. Perhaps unless you you're in the room with him like 10 minutes before he makes the decision. In which case there might be a lot of people who actually are making a lot of money on that.

• 10:40Ed Elson?

  And we can get to that in a second and we probably should because there was some kind of sketchy trades that we saw. During the week in the in the build up to the to the ceasefire quote deal. But just to to push back into your point a little bit. So I I'm totally with you like. No one knows what's going to happen here and the idea that you you have an understanding of what's really going on in the straight up. For movies you you really know what Trump's going to do and I'm going to trade on that. That seems a ridiculous premise, however. It is possible, and this is, I think, the thing to consider. Or I guess this is the question, is it possible? That the events this week have structurally changed something?

• 11:23Ed Elson?

  That may adjust your longer term investment strategy going forward. Maybe it's that you now believe that we live in an extremely volatile world. That there are now threats of or implicit threats of nuclear warfare. And that wasn't really the case before. Or maybe you believe that that we now do live in a world where oil prices are going to be extremely volatile, more so than we've seen in the past. Or at least that maybe the insurance premiums and the risk premiums to get oil into your nation, into your car, into the tank. That those are going to go up and therefore this is just we're paying a higher premium for energy in general. Do you believe that? We are at this point.

• 12:08Ed Elson?

  That must that we must contend with the possibility? That something has structurally changed here? Or are we living in more or less the same world as we were last week?

• 12:18Josh Brown?

  These are all very real risks. But risk is the reason why you get paid.

• 12:22Ed Elson?

  Right.

• 12:24Josh Brown?

  If there if there's no risk in the markets. Then the multiple on earnings would be 100 times earnings because. You know, why just pay 90 times earnings? You could pay 100 times earnings, there's no risk. So the risk is the reason we get paid and I would argue a couple of things. A lot of these risks are in the process of being baked into the cake. And have been for quite a long time. It's not as though every stock is at an all time high. A huge when we think about the Russell 3000. So this is the preponderance of all US stocks, basically. If you're not in the Russell 3000, you basically don't exist. So that is the Russell 2000, which is small caps,

• 13:05Josh Brown?

  um, and the Russell 1000, which is large and, you know, mega large and some mid. Um, so this is the market. A huge portion of the Russell 3000 is negative year on year. We have a gigantic percentage of stocks that are in 20% plus drawdowns, or what you and I would refer to as a bear market. Um, we've had, um, multiple compression in the market this year. So, um, most of the mega cap tech stocks peaked in, uh, November. Um, market overall didn't peak until January. And since then, we have seen the forward, uh, earnings multiple fall from 23 to 19.

• 13:49Josh Brown?

  So we were 23 times earnings, which is, you know, fairly rich. I wouldn't suggest 19 is cheap, but what I would suggest is a lot of risk is being baked in. How is it possible that the S and P 500 is only down slightly on the year, but the, the multiple to earnings has fallen almost 20%? Because earnings have been growing while stocks have been treading water or falling. And so arguably it's less risky now than it, than it was three months ago. I know it's, I, I know that sounds insane, but you know, we're, we're selling at a lower multiple. From an investment perspective, right. From an investment perspective, um, I would also, I would also point out, and this is really the key thing.

• 14:31Josh Brown?

  Earnings are growing and not just, um, for the seven tech stocks that everyone talks about. Earnings are growing in most sectors in the S and P 500. And the really like the war, whether it goes on for three months or three weeks or three days, um, or three years for that matter, um, the war is going to resolve itself. There's nothing as an investor that you can do to speed that process up. And there's no possible way that you can truly understand the depth of it, the extent of it, the duration of it. If you have earnings growth, which is what we have, and you have interest rates that are not rising, you've got like supportive interest rates, many people think that they're too

• 15:16Josh Brown?

  high, some people think they're just right because of the threat of inflation being passed through the prism of higher energy prices. But if you have a, an interest rate picture like the one we have, and you have a earnings growth outlook like the one that we have, once this war does come to an end, stocks probably resume their upward trend. That's been the history. So now you think about a global portfolio away from just the US market, year to date as of the close yesterday, emerging markets are up 5%. Developed markets ex-US, so the way to think about that is Europe and Japan, up 2.4%. Europe itself is

• 16:00Josh Brown?

  flat, the S and P 500 is negative 3%. Now we look at things on a rolling one-year basis, which is more important, year to date is arbitrary. On a rolling one-year basis, developed markets ex-US are up 48%. Unbelievable. 48%. Emerging markets were up 55, the US is only up 34. So investors with global portfolios looking back at their rolling one-year return, it probably like what crisis? Like what, what is everyone carrying on about? I'm making tons of money still, feel pretty good. I, I think the US underperformance is the externality of what you're talking

• 16:44Josh Brown?

  about. The political instability, the uncertainty about Trump's next move, et cetera. I think that's already being reflected in the fact that international stocks are now outperforming US stocks on a one-year basis. I know it sounds crazy, but it's been a really long time since we've been able to say that.

• 17:01Ed Elson?

  We'll be right back after the break, and if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.

• 17:19Speaker 00

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

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• 18:53Ed Elson?

  We're back with prof G markets. This does put Europe in a more vulnerable position than the US. But it is interesting to your point, like the way that multiples have expanded in other markets compared to the US would kind of say a different story. Everyone's saying, "Oh, the US is insulated from this." But actually, if you look at the one year, what we've seen in terms of multiple contraction, the US versus multiple expansion in other markets, it might say a different story. To just put a button on that, it's systematic.

• 19:25Josh Brown?

  So of course, there are risks to Europe, there are risks to the United States, some of those are risks in common, some of those are idiosyncratic to the particular region. But I want people to understand this because I know the the average person like they'll look at the Nikkei, they'll look at maybe the FTSE, like they'll look at like a European index, Japanese index, but they won't really understand the extent to which this is happening. When you look at international stocks versus US, every version of international stocks are beating US stocks. This is year to date, okay? Low volatility, international, up eight and a half percent versus 3.7% in the US.

• 20:08Josh Brown?

  International growth, up five and a half, that's versus negative 2% in the US. Momentum, international, 9.2% year to date versus 1.3% US. Quality, so the best companies, internationals, plus 7.1%, US plus 1.8. Shareholder yield, this is a factor where we take dividend plus buyback. 6.6% international versus 3.3% US, that's a double. Value, international value stocks, plus 6.4, US plus 4.5.

• 20:47Josh Brown?

  It almost doesn't matter what stocks you buy, what style, what strategy, if you are if you are in any way at least equally weighted globally relative to the benchmark to US, your portfolio looks amazing right now.

• 21:02Ed Elson?

  And it is that global rotation that we were talking about last year. Everyone was saying it was the sell America trade, which wasn't quite right because the S and P needed to rise, but it was really like more of a hold America trade and then add some add some internationals into your portfolio.

• 21:19Josh Brown?

  JP Morgan has emerging market earnings per share growth for this calendar year at 40, four zero percent.

• 21:26Ed Elson?

  Yeah.

• 21:26Josh Brown?

  Forty. And then you say, why are emerging markets outperforming? Or why are multiples expanding in emerging countries? Isn't the world a risky place? Yeah, everyone understands those risks and these stocks were too cheap anyway.

• 21:42Ed Elson?

  Right.

• 21:43Josh Brown?

  And so you get the double benefit of earnings growth plus multiple expansion. I'm telling you, if EM can grow earnings 40% this year, we're going to be doing shows at the end of this year. People saying, oh, why don't I own more emerging markets?

• 21:58Ed Elson?

  Hundred percent.

• 21:58Josh Brown?

  We're not there yet because the things I'm pointing out to you, nobody knows this stuff except for pros.

• 22:03Ed Elson?

  Except for us.

• 22:05Josh Brown?

  Your audience is going to look at their portfolio and say, what the hell did I miss? Why aren't I in Brazil?

• 22:10Ed Elson?

  Well, to be fair, we have been, we have been making that claim for about a year now.

• 22:13Josh Brown?

  Good.

• 22:14Ed Elson?

  And we were, people said that we were, we were, we were US doomers and that we were, we had TDS, et cetera. And we tried to push back on that as much as we can, but I mean, it has been an incredible trade. And it does make you consider the question like, how would the US stock market be performing right now if we didn't have tariffs? And if we didn't have a war with Iran emerging? You'd have to think that the stock market would be absolutely ripping because of that incredible earnings growth, which we will get to in a moment in our second story. I just want to, as we wrap this up, get your reactions to another development in this insider trading saga that we continue to see here. Nine hundred fifty million dollars worth of oil futures were sold

• 22:58Ed Elson?

  just a couple of hours before Trump announced that ceasefire with Iran. I think that is probably less concerning because I think it's feasible that these traders were actually just thinking like he is going to taco. And I think that was maybe quite reasonable in the context of the other scandals that we've seen. It does raise some cause for concern. But then in the prediction markets, three accounts made more than $600,000 betting on the ceasefire. They had the same accounts that correctly bet on the date and the timing of the US attacks on Iran. We don't know who those accounts are because it appears that our law enforcement just has no interest in investigating this. In fact, we saw that actually over at the SEC,

• 23:41Ed Elson?

  there were attempts made to investigate this staff. And then the woman who tried to make those attempts was ousted, dismissed from the position. We saw similar things happening over at the FTC, but that's maybe a separate story. I just want to get your reactions to this insider trading issue because. I mean, as an investor, it seems as though there is a growing number of people who are close to the president and we don't know who they are and we can't definitively say that it is exactly happening as the way that we are claiming, but it seems that there's cheating. I just wonder what you make of that and what it, how it affects your faith in markets and this game of investing that we have dedicated our careers to.

• 24:22Josh Brown?

  I read the same articles you do, so I don't have any insight into what happened, whether or not it happened in the first place. I think one of the reasons you like me and I think one of the reasons I like you, we're a little bit of a yin and yang. I think where you're very idealistic, I'm extraordinarily cynical. And I think, and well, I'm just, this is like my 28th year on Wall Street. I just think this stuff goes on whether we're aware of it or not, everywhere around the world, all the time, Republicans, Democrats, old people, young people. It just, it's, it's human nature where people have an information

• 25:03Josh Brown?

  advantage, they will seek to do something about it and we have no idea.

• 25:09Ed Elson?

  So it doesn't upset you?

• 25:11Josh Brown?

  Well, upset me to the point of like, I can't carry on with my day. Not really.

• 25:15Ed Elson?

  That's not what I'm saying. Does it upset you at all?

• 25:20Josh Brown?

  I mean, I would prefer it if, if it didn't exist, but I, I think we have to acknowledge, unfortunately, it's, this is, this is the world we live in. And the problem is, this instantly becomes politicized. So there will be people that look at this and say, the MAGA world, they're tipping each other off and they're trading on war developments. And maybe there'll even be congressional investigations. I have no idea. But the problem is the other side will say, well, oh, you're talking about my team. What about your team? Why is Nancy Pelosi a better trader than Stanley Druckenmiller?

• 25:57Ed Elson?

  Hundred percent.

• 25:57Josh Brown?

  So you almost like, it, I don't want to say it's a waste of time even talking about it. I think the way I would phrase it is like, you're, you're not going to, if you're on the red team, you're not going to convince the blue team that they've ever done anything wrong. And if you're on the blue team, you're not going to convince anyone on the red. I'm on the green team.

• 26:15Ed Elson?

  Why can't we just agree that that both sides are doing it and agree that it's bad and agree that?

• 26:21Josh Brown?

  I will strongly agree that there are people who are willing to do what, you know, whatever it takes to get rich on both sides. One side may, one side maybe pretends a little bit more um that they don't, but I'm on the green team. I need to focus on my job, what I have to do, the people I'm responsible for.

• 26:42Ed Elson?

  Fair enough.

• 26:43Josh Brown?

  Um, it would be great if we lived in a world where like, nobody was trying to get away with things, but you know, that's not this world and I know that's not this world and I think uh it could become a distraction if you let it um make you feel that you can't win or the system is rigged or why even bother investing? It's all, you know, it's all fake. A lot of people, look, a lot of people after the great financial crisis never came back to investing again.

• 27:11Ed Elson?

  Hmm.

• 27:11Josh Brown?

  Because they saw a lot of the people who were responsible for the crisis really not suffer any consequences and in some cases be issued bonuses the following year. And they just looked at that and they said, this whole thing is a joke. I'm, I'm out. I don't like that. That's, that's neg, I think that's negative for the US investor psyche. And so I'm not for it and I'm not dismissing it and I'm not telling you I don't care about it. I think what I, what I try to get across is like, okay, fine. That's a sideshow um for most of us, we need to focus on ourselves.

• 27:47Ed Elson?

  Yeah, fair enough. I, I mean, I, I think the takeaway being just because there's cheating doesn't mean that you shouldn't play the game. You gotta play the game if you want to get rich and if you want to build economic security. But if the system is rigged in a big way. I mean, you want to fix that in some way. I mean, it's not a good thing that people woke up after the financial crisis and they said, this is rigged in a lot of ways, which was true.

• 28:14Josh Brown?

  Right, and if that becomes a very widespread sentiment, you could knock out a whole generation of investors who come to the conclusion that this whole thing is stacked against them. And I do think that that's a negative sentiment that we need law and order, we need securities regulation, we need cops, we need people who are keeping everyone honest. But you're not going to get everyone. And not everything that looks like a scandal actually turns out to be one.

• 28:44Ed Elson?

  Yes, yeah, I think one thing we can take away is this should not make you not want to invest anymore. If that's your takeaway, then you're getting into real trouble.

• 28:52Josh Brown?

  And expect more of it in the future.

• 28:55Ed Elson?

  Yeah, yeah, yeah, fair enough.

• 28:59Ed Elson?

  We'll be right back. And for even more markets content, sign up for our newsletter at profitemarkets.com.

• 29:13Speaker 00

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 29:42Speaker 08

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• 30:45Ed Elson?

  We're back with Prof G Markets. While all of the chaos with the war has been unfolding, it's been hard to focus on anything else. And the headlines are sometimes changing by the hour. But one trend has been consistent through this whole year so far. Tech stocks are getting hit hard. Microsoft has fallen more than 20% year to date. Oracle is off over 26%. Salesforce is down more than 30%. As a whole, the IGV, which is the software index, is down more than 22% this year. Josh, this is really interesting for a lot of reasons. Mag7 has lost nearly $2 trillion, actually, sorry, more than $2 trillion in market cap year to date.

• 31:30Ed Elson?

  And you actually went in and you bought IGV. You bought software stocks. I believe it was last week. So give us your views on what's happening in the tech sector right now. And why did you buy? Why are you bullish?

• 31:44Josh Brown?

  I don't know that I'm insanely bullish on software. I just looked at a full-scale panic and just indiscriminate selling of these names for months. And at a certain point, I said, this looks carried away. Stepped in, but that's on a trading basis. And I'm up a little bit from there. But I just look at the top 20 holdings of the IGV. These are some of the best companies in the world. Salesforce, Microsoft, Palantir, CrowdStrike, Palo Alto Networks. And It's not that I don't think that these companies are at risk of AI-related disruption. Some of them are at more risk than others, but they're all going down. They're all down anywhere from 25 to 50%.

• 32:28Josh Brown?

  It's not as though saying, oh, no, AI is gonna eat their lunch. Like, that's not a unique point of view. That's the consensus. So I just looked at, so I just looked at it one day and I just said, you know what? This probably bounces. I don't know that that bounces sustainable or turns into renewable market. But I do want to gently correct something that you said about tech stocks getting killed. It's actually not true. Software stocks are getting killed. Tech stocks are doing great. I know that sound, I know people like, wait, what? What's happening? Away from the hyperscalers that are currently pursuing the biggest capex spending cycle of all time

• 33:11Josh Brown?

  and away from software, SaaS, enterprise software, tech stocks are doing great. And what the tech stocks that are doing great have in common is they're benefiting from this AI capex wave and they are physical technology companies, halo, if you will. They have heavy assets and low obsolescence risk. I'll give you some examples. Sienna is a company that makes networking equipment, switching, routers, Cisco, servers, racks, et cetera. Dell. These stocks are all at or near all-time record highs.

• 33:50Josh Brown?

  Corning, fiber optic cables, also part of the data center capex build-out. Then you look at some of the, some of the chip companies. Jabil Circuit, they call it Jabil these days. You look at SanDisk. You look at Micron. You look at Broadcom.

• 34:13Josh Brown?

  Nvidia, these are all companies that are benefiting from that capex spending cycle that's been hurting the mag seven tech names. So one half of that equation are the spenders, the other half of the recipients. The recipients are going up, straight up. Some of these charts look like the Empire State Building. So it is not true that tech is getting killed. It is true that mega cap tech is not having a great year. But even within mega cap tech, there's a pretty big separation between, for example, Meta and Apple. Yep. Apple is not having a great year, but Apple is more on the hardware side and significantly more halo.

• 34:56Josh Brown?

  They will benefit from all of this AI capex without having contributed to any of it. Their capex is actually negative versus last year. Meanwhile, if you log into ChatGPT, log into Claude, Apple's getting paid the Apple tax. It's 30% in the first year, 15% thereafter of the revenue coming from the usage of these products in the iOS environment. So Apple is halo, it's physical, it's the devices themselves, phones, AirPods, iPod, iPads, watches, MacBooks, et cetera. So it's tricky, the technology market, it's tricky to say it's all doing this or it's all doing that.

• 35:40Josh Brown?

  There's an extreme bifurcation.

• 35:42Ed Elson?

  It's interesting because on the halo point, it does seem as though the momentum, so just so everyone knows, you create this term, heavy asset, low obsolescence, it describes these more physical companies that you're describing here. And it describes a wave that was emerging and developing over the past several months, and it has become a very, very popular and actually crowded trade, as you point out with those charts that look like the Empire State Building. Meanwhile, the software names, the application layers have been getting absolutely battered. Companies like Salesforce and ServiceNow and even some of the cybersecurity names, you

• 36:24Ed Elson?

  mentioned CrowdStrike, those companies have been getting destroyed. And so I guess the question becomes like, at what point does either of those trades become overplayed? And when does it get old? And it does seem, my view...

• 36:40Ed Elson?

  I mean, you you bought IGV. Uh, you're saying it was more of a trade play than a real long term investment. Maybe you can elaborate.

• 36:49Josh Brown?

  Yeah, because you know why? Because these things, these things in the short term get overdone. Like the, like, uh, thematic thematic trades that become popular and crowded in the short term. In the short term, you're right, like, they get carried away and then there's a correction.

• 37:06Ed Elson?

  That's what appears to be happening in the software market.

• 37:08Josh Brown?

  Yeah, so so look, let's talk about those software companies that I mentioned. Um, the Salesforce's, the the uh, the Microsoft's. It's not like Anthropic is launching all these products and they're they're they're sitting at Salesforce eating crayons. Like, they are very much aware.

• 37:30Ed Elson?

  Exactly.

• 37:31Josh Brown?

  They are very much aware of how much time, energy and money they need to put into their response to this. Um, and what they have going for them is, and this is the truth is, they have not been disrupted yet. Most of these companies are reporting record earnings and revenue. And they have the cash flow that will support very, uh, very intense R and D and CapEx. As they formulate their AI strategy, they also have the relationship with the customer. So it's, I don't think everyone can win, but it's never like that. It's always competition.

• 38:11Josh Brown?

  Um, some of these companies grew, the Service Now's, the Workdays, the Adobe's. In the last ten, fifteen years, some of these companies grew almost without competition. Investors in those stocks became complacent, like, it's Adobe. What replaces Adobe? Nothing. What it like, what are you gonna tell me about Figma? Give me a break, right? So people sort of had that. And then a year or two ago, that stopped because we have this new class of of a technology player that is speedrunning through their innovation cycle. Anthropic and perplexity and and and and OpenAI. And they're raising a ton of money and they're making partnerships and they have huge resources.

• 38:57Josh Brown?

  And they've recruited an unbelievable amount of talent. And now it's game on and these software companies, they're not, they're not disappearing, but they're competing in a way that they haven't had to for a long time. So viewed through that prism. The the multiple contraction makes sense, but it gets carried away. So I'll give you the up. The day that I said, you know what, I'm stepping in this is bullshit. There was a story that Anthropic was about to disrupt all of cybersecurity. Like, in other words, companies were gonna say, oh, let's rip all this Palo Alto stuff out of our network and uh we'll just vibe code something with Claude. And we'll, give me a fucking break.

• 39:39Josh Brown?

  There's no board of directors at any public company, anywhere in the world, that would sign off on on that kind of cybersecurity plan. Uh, if the CTO came in and presented, it'll never happen. And so like, that was the day where I'm like, you know what, this whole thing is nonsense. I run a business. I'm a Salesforce customer. I would love for there to be an AI-driven solution where I could take that six-figure uh expenditure out of my, you know, off of my line items. I'd love to pull it out. The reality is, it's a system of record for my business. It's enabling secure sharing of data, transmission of information. Um, it's how, it's the operating system of the firm.

• 40:24Josh Brown?

  If something comes along that's AI-driven, we're gonna look at it. We're gonna look at it. What, it's not gonna be free? Oh, it's free because it's AI? What are people talking about? Literally, what are people, so, so I just, I said, you know what, this has gone too far. Um, even Jensen Huang has has made multiple appearances, including on his own earnings call, describing the extent to which this is stupid. So, um, I'm willing to believe Jensen over the hedge fund analyst who's five years out of school, who's a disruption hippie and thinks all these companies are going to zero. I'm, I'm willing to trust Jensen. Again, it's difficult. It's not, if if we think the publicly traded software companies are under pressure,

• 41:09Josh Brown?

  think about the private equity-backed software companies that everyone's worried about, private credit. Yeah, a $50 million SaaS software company that sells to auto dealerships might have to face down an Anthropic uh uh built product that comes in at a much lower price point and can do much more. Guess what? That's, that's capitalism. You can't like it on the way up and not on the way down. There's competition, like, grow, grow up. And and here's what the market has done. The internal logic of the market this year, I identified this on February 9th in my, in my article that I wrote. Everything that's happened since then has, has bolstered what, what I was trying to say.

• 41:52Josh Brown?

  Which is that the market's going to figure out, we have been underpaying for companies with heavy assets. And overpaying for companies that are cap, cap, capital light. Or asset light is, is how they, they called it. So we've been overpaying for these asset light SaaS software companies. Uh, for 10 years. We've been underpaying for things that really fucking matter. Like companies that own power plants and pipelines, way underpaying. That, here's what that adjustment looks like. I'm giving you year to date sector performance. Energy up 36%. You think we're going to need energy? Okay. Materials up 10%. Utilities up nine. Staples seven. Industrial six. Real estate plus 5%.

• 42:37Josh Brown?

  You want to guess what every one of those sectors has in common? Halo, halo, halo, halo, halo. These are all companies with heavy assets on their balance sheets, unreplaceable by a chatbot. These are not companies that sell data. These are not companies that, that are, uh, operating a layer on top of a cloud provider. These are companies that have metal, steel, and timber, and bricks, and, um. That adjustment is what we're seeing. Here's the other half of the market. Communications negative 4%. Tech negative seven. Financials negative eight. Consumer to scratch negative 10.

• 43:20Josh Brown?

  Those are not halo, for the most part. You know, with some nuance, which we talked about.

• 43:27Josh Brown?

  Healthcare is interesting. Not acting well this year, but biotechs are doing great. I actually think the world of proteins and molecules is extremely halo. I don't know how AI does anything other than help these companies speed up clinical trials, discover new compounds, enable all sorts of testing that normally would have taken lots of human subjects and years. I actually think AI is a massive tailwind for a lot of areas within healthcare, robotics for hospitals that are understaffed, et cetera, et cetera, et cetera, et cetera. So I think Halo is, uh, healthcare is Halo but not acting well this year. Maybe that's an opportunity. Um, but I think the market has now organized

• 44:09Josh Brown?

  itself, uh, in a very different way than what we're accustomed to in the post-financial crisis period.

• 44:15Ed Elson?

  But there is also a, another distinction that, that should be made here, which I'm finding very interesting. Just so you know, I also went in and bought some of these names, but I did it in, in SaaS Apocalypse One. I went for Salesforce, uh, ServiceNow, uh, Adobe and also Microsoft. And I think that the Microsoft sellout has been stunning. By the way, I'm not up on those trades. I was at one point in time and then we had another SaaS Apocalypse.

• 44:38Josh Brown?

  You never buy, you never buy SaaS Apocalypse One?

• 44:41Ed Elson?

  I don't know. I still, I'm still, I'm still actually quite optimistic because to your point, I actually think a lot of these companies are very well positioned for this AI revolution. And you think about what's happening. I mean, you made the point with Salesforce. I love what you say. They're not eating crayons. They're actually figuring out how to integrate AI into their, into their systems.

• 45:04Josh Brown?

  All day. This is all they talk about.

• 45:07Ed Elson?

  It's all they do. They're actively growing those AI revenues. ServiceNow is reporting incredibly great earnings. They are also growing their AI revenues, but people say, no, it's, it's, it's all gonna be a problem because the new companies like Anthropic and like OpenAI, they're gonna ruin the whole, the whole game. They're gonna ruin the party. And they're even gonna ruin the party for a company like Microsoft. Why? Because yes, Microsoft makes a lot of money from Microsoft Office and the, and that suite of products, but also Microsoft is way over spending. They're investing all of this CapEx. They're, they're putting, plowing all this money. Same with Meta, uh, same with Amazon, et cetera. The thing that just doesn't make any sense to me. That's exactly what OpenAI and Anthropic are doing.

• 45:49Ed Elson?

  I mean, those companies are wasting, not necessarily wasting, we don't know yet, but they are spending so much money right now. They, the unit economics don't make any sense. What would happen if they were publicly traded? Would they get destroyed by their own products?

• 46:06Josh Brown?

  Really good point. OpenAI has a valuation of eight hundred fifty-two billion as of the last round of funding. Raising money from Microsoft, Nvidia, like the, the savviest investors on the planet are investing into OpenAI. Probably comes public, if not late this year, early next year, probably worth at least a trillion dollars. They are, they are committed to six hundred billion in spending on compute that we know of, like as of today. That's one.

• 46:33Ed Elson?

  They said one and a half trillion out loud at one point.

• 46:37Josh Brown?

  Yes, yes. Now, they are also actively telling anyone who will listen that they expect to spend the rest of this decade burning, burning tens of billions of dollars, peaking at eighty-five billion in the year twenty twenty-eight. So two years from now, they're guiding to a burn of eighty-five billion dollars. Okay, they are talking about profitability in twenty thirty. Okay, maybe. The, the point is they're number three.

• 47:09Ed Elson?

  Exactly.

• 47:10Josh Brown?

  Anthropic is two, Gemini is one, or vice versa, depending on if we're talking about enterprise. But that's the number three player in, in, in AI right now. And it's mostly consumer AI for ChatGPT. The number three player is gonna burn eighty-five billion dollars two years from, from now. This is the guidance. So that's one. Two, anecdotally, you probably have loads of friends who have sent you a text or an email or a DM. Yo, check this thing out, I just built in Claude, it's so sick.

• 47:44Ed Elson?

  Like that stupid website.

• 47:46Josh Brown?

  It sucks more than, more than an art project you made in fourth grade. And you have to, oh, so cool, man.

• 47:56Ed Elson?

  That is a hundred percent true.

• 47:58Josh Brown?

  Yo, yo, yo, yo, yo. Check this out. Check this out. I, uh, put all my playlists.

• 48:02Ed Elson?

  Check it out.

• 48:03Josh Brown?

  All my Spotify playlists are available on this website and you could search it by artist. But I don't want to and it looks like garbage. Yeah, but I made, yeah, but I made it. What are you, my son? I don't give a shit. You, you made it. Terrible. So, so let's, so all I'm saying, I'm not saying go buy every software stock. I'm just saying like, the narrative gets, gets, oh, I invented this Halo shit, but it gets carried away at times. And I think we've, we've been through a few of the, a few of these.

• 48:33Ed Elson?

  And it gets very, very confused, especially when you have this new paradigm where the biggest players in this market aren't publicly traded. So we don't really know what's happening. We don't really know what the valuation of OpenAI really is if it weren't being propped up by its vendors, the, the people from which it buys stuff from, i.e. Nvidia, et cetera.

• 48:52Josh Brown?

  We will buy compute from you and chips and in turn you will buy our stock.

• 48:56Ed Elson?

  Exactly. So we don't really know what the actual market cap of these companies really are. We don't know if, I mean, these companies are projected, and this is the, the incredible stat that we got from, from Paul Kudrowski, who we had on the, on the program last week. Anthropic, OpenAI, SpaceX, if they go public at what people expect, it's going to be 3.75 trillion dollars in market cap. That is more than all of the, the inflation adjusted, that is more valuable than all of the dot com IPOs put together. So it's an incredible valuation here that we're about to see. But again, if we saw the financials of these companies, if we really understood, if everyone

• 49:38Ed Elson?

  really had a clear vision in their heads of this is how much OpenAI is spending, this is what the unit economics look like, this is how much money they are losing every time you put a little stupid prompt in on your computer, what would, what would the stock market actually look like? What, what would happen to that stock price? And how would people adjust their expectations of, say, Microsoft, which is down 20% year to date, but we don't have that information. So I think the narratives are getting very confused.

• 50:07Josh Brown?

  Yeah. What they need to do is continue to add users and show revenue growth.

• 50:14Josh Brown?

  And so, um, OpenAI has now introduced advertising. Um, they want to get heavier into code. They want to be much more endemic to enterprise. They want to get ChatGPT and other OpenAI products into Fortune 500 companies. Uh, government use. You saw Anthropic had a, had a dust up with the Pentagon and Sam Altman swooped right in. We have no, don't worry, we have no privacy. You do whatever you want with us. Come on in, right? So they, because they all have to show this kind of like breakneck growth. And if they do, everybody can rationalize the losses, the spending, because they understand that it won't be unprofitable forever. Someday it'll catch up.

• 50:59Ed Elson?

  But they can't do it with Microsoft. They can't do it with the big tech names. I mean, what, what, it seems that we have different expectations, different, different standards here, depending on who you are. We're down with the, with the incredible spending over on the private side, but in the public markets, oh, we're going to get very nervous about that.

• 51:14Josh Brown?

  So Microsoft's unpopularity as a stock coincided with a lot of questions about whether or not, um, Copilot, which is their overlay on top of OpenAI, um, for, for employees, for, for technical employees.

• 51:33Josh Brown?

  A lot of questions about whether or not there was an ROI, if people even were, you know, uh, like the product, you know, if it, if it's sticky enough, even though it's Microsoft. And I think you saw that adjustment in Microsoft's multiple. Importantly, their numbers are still lights out. We look, we look at a thirty, thirty-six percent decline in Microsoft and they have not missed earnings. They have not guided down. They have not, um, disappointed, uh, anyone in any way. It's all perception.

• 52:02Ed Elson?

  And cherry on top, they own a third of OpenAI too. So that's also your risk protection.

• 52:08Josh Brown?

  That's a good place to leave this. You know, as a non-public company.

• 52:13Josh Brown?

  OpenAI has the benefit of only reporting the things that are superlatives and make it look great. Like, they don't, they don't owe the same level of transparency as a public company does for obvious reasons. And I think that's why we saw that story this week where Sarah Fryer is not as confident as Sam Altman is about the timeline of a, of a go public in Q4. Um, you know, the, these are people, these, there are people in Sam's ear that he's listening to, that he's not listening to, but some of those people are saying, yo, once this thing is trading, you actually have to tell us everything, you have to tell the world everything. And they won't all be ready to do that.

• 52:57Ed Elson?

  Hundred percent. Okay. Josh Brown, let's take a look at the week ahead. We will see the producer price index for March. We'll see earnings season kicking off with Goldman Sachs, JP Morgan, Wells Fargo, Citigroup, Bank of America, Morgan Stanley, BlackRock, Johnson & Johnson, ASML, TSMC, Pepsi, Netflix. Josh, we really appreciate this. Any closing thoughts, any closing remarks, anything you've got your eye on before we end here?

• 53:22Josh Brown?

  No.

• 53:25Ed Elson?

  Josh Brown is the co-founder and CEO of Ritholtz, a New York City-based investment advisory firm managing $6.5 billion in assets.

• 53:32Josh Brown?

  It's like seven, it's like seven and a half billion. Come on.

• 53:35Ed Elson?

  Managing $7.5 billion in assets for individuals, corporate retirement plans and foundations. You can also check out his podcast, The Compound and Friends, for more. Josh, we always love having you. Thank you so much and enjoy Coral Gables. I hope you have a good time.

• 53:51Josh Brown?

  Cheers.

• 53:53Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Shalan, Isabella Kinsel, Kristin O'Donoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.

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