Fear Buying AI & Automation Stocks — With Downtown Josh Brown
Channel: Alex Kantrowitz
Published at: 2024-10-16
YouTube video id: jnTbF_v0Z4U
Source: https://www.youtube.com/watch?v=jnTbF_v0Z4U
let's talk automation the big Tech trade and the state of the economy with the one and only downtown Josh Brown that's coming up right after this welcome to Big technology podcast a show for cool-headed nuance conversation of the tech world and Beyond we're joined today by Josh Brown the CEO of ver Holz wealth management the host of one of my favorite shows the compound and friends he's also a CNBC contributor and the author of a great new book you weren't supposed to see that Secrets every investor should know Josh great to see you welcome to the show so great to be back thank you Alex thank you for being here um I think this is your third time on the show so we always appreciate having you on this time we're going to talk about your book to begin with and then in the second half we're really going to go through all the big tech companies including your perspective on companies like Nvidia Amazon and Apple so folks should stay tuned through the entire uh show to get Josh's thoughts on what's going on with the big Tech trade and these big tech companies in particular but let's start with the book there were so many um perspectives in there about the market that I read and was like okay now it makes sense taking a step back and we're going to talk about Co in a second but let's just start with the big Tech trade what you really say is something that stems from automation or fear of being automated which I thought was a very interesting perspective on it so I'm just going to read from this is from a blog post that you include within the book and sorry I'm going to read your book and out loud and maybe you should do it I don't know but I'll try it this way we'll see how it goes do you say we're in an age where we're being told AI is about to start writing its own software machines are going to be trying legal cases and diagnosing illnesses writing songs and architecting buildings giving Financial advice and driving our vehicles every day more articles about this or that breakthrough there are no limits there are no protections it's bordering on lawlessness people have never felt more ill- at ease about their own reason for existing and this is manifesting itself in trillions of dollars being thrown at of course the companies that are doing all this Automation and behind all this AI Facebook Google Uber Nvidia Apple Amazon Alibaba the list goes on so let me ask you this to begin with do you think that this is really fear of automation or just that this is where the economic growth is going in the economy because we haven't yet seen a decline in let's say employment because of automation yeah I think that there any time that we're going through a wave of disruptive technology this sort of thing is prevalent but I think AI is different than all previous waves of Technology because I think everybody immediately grasps how much of their time is spent doing things that if any any other means of getting those things done were possible the employer would default to those other means so so this is like not new but um you know obviously there were people that were by hand running calculations and then calculator came along so I'm not breaking a new ground here but I think in the case of AI its ability to it's its ability to uh effectively ape humanity is what sets it apart from prior waves of technology so I think that that kind of like uncertainty that all right well what's going to be my place in this world if this this new technology is so good at doing what I do and and doing it faster um this is not about being replaced by a computer at this point everyone's very comfortable in the world of computers this is about having someone's Essence at work be distilled down into an equation and the equation doesn't need Healthcare um so like that that's why I think there's that sense of for boting and I think like a certain portion of the population is smart enough to understand new jobs will be created as a result of this we don't know what they will be or your job at your company is going to morph into a different version of that and you're going to be empowered to get a lot so there is a portion of of the population that understands that but then there's a portion of the population where it's just like well uhoh you know what what what is this mean for my future my ability to earn a living uh maybe I don't want to change the way I do my job or maybe I don't want to switch Industries uh or maybe I'm not comfortable having more and more of my work require me to have a co-pilot riding alongside of me and for those people I do think there's some element of like allocating to technology because it's like well if this is going to replace me can't beat him might as well join him and so that was what that post was about interestingly I wrote it in 2017 um way before chat GPT or AI were on everyone's lips so in the book I I wanted to bring that up to the present and uh you know one of the things that's held up really well is that we might be in the first fear-based investment bubble ever normally when you have an investment bubble it's greed in this case there's an element of I better invest in this um and so that's what I thought was really different about this time around I'm going to push back on your idea here but first I want you to tell uh one of my favorite stories in the book which is that you had a friend who's a grer yeah and what happened friend of a friend and what happened to them when they started to see big Tech encroaching on their territory so somebody relay this story to me I think the it's a it's a guy that owned a bunch of grocery stores in Suburban New Jersey and when he saw Amazon getting into delivering food it was like oh okay uh I may maybe instead of putting all this capex into my supermarkets I'd be better off just just buying Amazon stock and uh again this might be 2014 or 2015 and I think he's okay now I think did fine I haven't check I haven't checked in with the person who told me the story but I would imagine if he were allocating to Amazon rather than spending money on his own uh capex to improve his Supermarket he's probably gotten a much higher rate of return on on his investment and I told that story as sort of a metaphor for the way a lot of people were thinking in those in those days right fear-based investment cycle which is again talking about how you've been able to sort of take some of these broader themes and put them into terms I wasn't fully uh thinking about like that's one of them but now comes the push back right which is that yes you could say that and maybe this is individual investors have that fear and they are pushing this way um in the stock market but when you think about what's actually happening in the economy the story that I think the tech Giants would tell and I don't think it's an entirely illegitimate story is that they are building the platforms that are enabling broader economic growth for everyone whether that's supplying co-pilots or AI or even cloud computing right because of what they're building we have an economy that is growing and the economy is growing quite nicely you know people were talking about the fact that we were going to be in recession now or not in recession and so yes a lot of the growth is going to ACR to the companies building these platforms that sort of are the Catalyst for the growth economy but we still have a growth economy and so maybe it's it's not push back we we agree yeah totally agree with you okay I I I don't I don't think I don't think that what I was trying to convey is that this is the end and AI is going to put everyone out of a job I was trying to convey the sense of for boing that people seem to have been feeling at the earlier stages of this rally in 16 17 18 um this is really the dawn of This Magnificent 7 idea back then they were calling them the Fang stocks but it's the same kind of thing um Tesla wasn't yet a part of it and it wasn't really about AI it was just more about you know you own a business whatever you do let's say it's a pharmacy or you know let's say it's like a shipping and logistics company or whatever it is and then you've got this company that's got a trillion dollar market cap at the first time ever and just endless cash flows hundreds of billions of dollars in cash uh tens of billions in in cash flow every quarter and anything that you're doing if they want to at the snap of a finger they can just build it better faster and make it so that you no longer have a livelihood that has not happened to everyone in the economy but it certainly has happened to people in the economy and nobody knows when it's their time and if you look at what Amazon is doing with Pharmacy for example you understand that um um the neighborhood uh uh pharmacist's uh livelihood is now probably on the clock and it's not just the neighborhood pharmacist all you have to do is look at a chart of CVS which is in a 60% draw down from a tie or look at Walgreens boots Alliance which is in a 90% draw down these companies are going away as we speak Walgreens stock is crashing on the market today uh they said that one in four stores are unprofitable that's unbelievable in 2015 that was a $90 stock and today 9 years later it's a $9 stock and it's not coincidental that we now have a situation where comp opportunistic companies like hims and hers as an example or row are utilizing the cloud and they're utilizing uh and they utilizing technology to reach a huge audience of people that are just as happy to get their uh drugs delivered to them as they were to walk into a CVS and maybe accidentally buy a candy bar on the way out like that that when when you look at that as a as a business owner and you recognize how powerful both Walgreens and CVS were across America not that long ago 100% you're you're nervous and so it's not that the economy is in trouble it's that people feel as though their personal livelihoods are potentially in trouble and it's hard to know where the next disruption is coming from and who's going to be affected and it's you know it's happened before it's not first time in history but it's it's a legitimate concern that people have right and hence they invest in big Tech because that's the sure thing well yeah I mean you you say you say to yourself well I might be out of work but at least I'm going to make some money uh investing in this disruption and uh it's not crazy so on the on the Walgreens front I kind of blame Walgreens for this not the internet I mean you open yourself up to A disruption when your experience is bad and you know you think about like a Dwayne Reed store which intentionally designs itself as confusing so you do find those candy bars before you get what you need and no wonder people would rather shop on the internet so a lot of these old school Industries I mean I obviously it's it's troubling what's happening to them but it's like always there's always two sides of this which is a yes the internet is causing trouble for you but also B if you were better at what you did people would stick with you I'm curious I'm curious what you think had CVS so CVS spent like huge amounts of money to buy uh Etna and to buy KARK so bought buy an insurance company buy a pharmacy uh Pharmacy benefits manager and basically ver take take a vertical approach to what was obviously going to be a consolidating industry those deals did not work out well um the synergies never showed up Etc regulatory headaches had they instead said instead of taking $70 billion doing this m&a we're going to cannibalize ourselves we're going to close half our stores we're going to cut our dividend we are going to suspend our earnings guidance for the next 36 months and in instead we are going to build the definitive way that people are going to get their drugs we're going to have drones and we're going to have our own shipping and Logistics and we are going to revolutionize this industry I don't think the stock makes a new all-time high on that news now in hindsight we say well they should have invested and they should have it's really really hard to cannibalize yourself in the face of a a a a a competitive threat it it's obviously in hindsight sometimes the right thing to do really hard in the moment to make the decision that that's what you're going to do especially when you have a shareholder base in the public markets that's counting on you know reliability and and dividends Etc so that's I from my perspective I don't even know what they could have done differently I I have an idea so this is one of my favorite Jeff bezos's Clips may be my favorite Jeff basos clips and I'll try to recite it decently for memory but basically he's sitting down with the financial report reporter who's trying to pin him down on whether they're an internet business or whether they're a brick and mortar business because they have a website but they were building all these warehouses and the warehouses kept showing up on the balance sheet and this reporter keeps pressing Bezos on it he goes internet or physical company and Bezos looks at him and literally says internet schnet we don't care what bucket you put us in we're going to be the best company serving customers and it doesn't matter what category we're in that will be our competitive advantage so I think with the CVS honestly um or Walgreens whatever it might be if they would have taken the money they invested in that or whatever whatever they they were doing with their business plan and said all right we are going to pay our cash years double we're going to you know maybe spend some money to to design our stores better we're going to have competitive hiring process because now these people are being well paid so we're going to attract better candidates and we're going to make people feel good when they're in our stores as opposed to like you know wanting to get out of them as fast as they possibly could like it's no coincidence that Amazon built a store that the technological innovation is you don't talk to a person you scan in you take what you want and you walk out and it's send to a bill like they saw that pain and that's how Amazon gets ahead simple oldo business stuff the guy that developed the touchless technology for Amazon's retail uh was just pushed out of the company and they are closing a lot of those Amazon ghost does um because there just didn't seem to be anything magical that made people want to go to them so I agree but I do agree with you those stories are a horrible experience right um I just I just make the point that it's not obvious in the moment that the right thing to do is to trash your earnings projections and do this radical overhaul and reinvestment when you are running a company with tens of thousands employees and you're not you know these are not tech-savvy people by Nature it's it's it's not like uh it's not like these chains are being run by former Microsoft Engineers so it's it's it's it's a tough thing and if it's tough for uh Fortune 500 companies imagine how a regular business person must feel when they're being told like oh you have to compete know not only do you have to compete with you know the local store across town you have to compete with like uh Seattle's best it's really that's really unsettling but this is this is my point here which is that I think that these companies cannot compete with tech companies by being more Tech and maybe that limits their growth over time the only way to to possibly compete with big Tech and to compete with AI is to be more human right it's to make people feel good like that's something that technology has a really tough time with you're about expences you're right about that but uh they to that's what they told the independent book sellers uh 20 years ago that's they said lean into like how much your customer loves the experience the the problem is twofold the customer might love bookstores but only occasionally when they actually want something conveniently that's never going to be the best option uh and also Americans don't read books anymore which we can talk about if you want to yeah but we definitely drugs it didn't work exactly I mean yeah I I think yes some verticals might have been declining but um yeah it's just really tough to compete with these companies based on technology and it it's definitely interesting that Amazon did uh you know is pulling back on this go experiment although maybe there'll be some licensing down down the road but I think they definitely seized on the pain that the consumer was feeling most which is that I mean I'm sure you've had it you're like waiting for you have to go to a meeting you need one thing you're like all right I'm going to quickly pop into this Walgreens next thing you know you're like 15 minutes late because that line just moved so slow let I'll I'll see you Walgreens and I'll and I'll raise you the self checkout lane at the supermarket oh man which is ninth circle of hell nobody knows how to do it we've had these things now for 15 years nobody it's it it's like it's like watching people land on an alien planet and try to figure out how to start a fire no doubt and they now need two people at my superm market to help everybody at those self checkout Lanes those two people could have just been cashiers and we could have called it even so yeah I know it's true I mean that's where I get most of my podcast listening done I'm too speed waiting to check out stoping shop so um so let me ask you one last part about this which is that okay let's say we do so let's say we do go from this like uh era where people end up having their work automated or taken over by these conglomerates or technology how does that shift the nature of our economy is it increasing inequality or what exactly does it do to I don't know so so you know more about this than I do but like let's say hypothetically you have a job you're coding um at Microsoft and then they put this thing on your computer that helps you and all of a sudden you're able to code twice as much over the course of 20 business days in a month as you were three months prior because you become really Adept at utilizing these these AI tools and you become better at your job the company becomes more efficient and everyone's happy but then like what what happens after that cuz now there's a new Baseline on how much work you're expected to complete um like it's not like you'll you can't you can't go backwards you can't say all right I'm going to revert back to okay so now everyone's doing more getting paid the same doing more and then all of a sudden that that that ride along AI That's watching you work and helping you and offering suggestions all of a sudden it starts dictating to you because they improve that software or the software improves itself because it's generative and it's seen enough and it knows where Alex continues to make mistakes and before you even get a chance to to make that mistake it's already in front of you either telling you what to do right or doing it for you before you can mess it up and that it reminds me a lot of the road toward uh full self-driving or or self-driving or or autonomous vehicles every time I lease a car it's a little bit judger it's got a little bit more opinions about how I shift lanes and I'm you we're used to it and we're getting these haptic little Taps and buzzes on our elbows on our asses and the steering wheel shakes a little and we're probably becoming better drivers but also we're getting very accustomed to having somebody be in charge of us and it's not going to be long before the car is just better than us of course it will be why wouldn't it be and so I don't know how long that takes did the haptics get like stronger um but like you know what I mean or do those noises where you're not breaking fast enough and it tells you no no no no really break really Break um so again I'm not painting this as a negative thing we could all probably be more productive if we're sitting in a car rather than holding the steering wheel for an hour I I totally agree with that my point is the expectations on the part of our employers are just going to go up as we become more Tech enabled so we're doing more not necessarily being paid more and many of us are going to reach the point where the quote unquote co-pilot actually should just be the pilot and again maybe that's great maybe that frees us up we could all be painters we could all go to Tahiti and and and and paint and paint but like I'm I understand the I understand the part in people's minds where this is not necessarily going to be great for them personally oh without a doubt I mean I wouldn't minimize that for a minute I mean one my thought is that if we do end up having effective co-pilots it won't necessarily be you're doing twice the work is that you're actually doing the work you want to do and I mean that's that's a great outcome as opposed to like having cleanup code and like you know build every like guess same same thing like right now with open source right a lot of the code is available but you can just build on that instead of having to build from scratch and you're actually able to do things like there's no software company who says um we have a limited road map once we build that we're good like they always every software company wants more capacity to do more things and so therefore like if the AI can help code you can just end up building more um in the best case scenario are some people going to be on the street because of it yes yes are they probably going to be on the street because they're working at the worst companies and not the best ones also yes that's my perspective yeah and it and it will happen with or without AI eventually so I I I I definitely see that and that's a best case scenario what you're outlining it's like all these people can take the 20 or 30 or 50% of their job that's just wrote kind of like just like going through the motions because somebody has to do it and they could throw that out and let some some other let that get done via technology and they can do the other half of their job that they really are appreciated for and the part that makes them creative and unique the thing is not everybody is a creative not everybody wants to do something other than root tasks there are a lot of people who find comfort in that type of work and that's what they want to do and they're not suited for a world where they get half their time back and they're supposed to come up with creative ways to impress their boss it's just not it's not going to be a win for everyone I agree I mean and you know I think that there's another great Jeff Bezos scene where he's uh with Walt Mossberg at uh the recode conference and he's talking about what it take us Amazon's been doing this since the mid-20s and I wrote about this in my book about how they've sort of gone automation before everybody else it's always been a priority for basos and he's sitting with Mossberg and talking about how you're going to work at a Hightech you're working at a tech company you have to be prepared for that type of change and he goes if you don't you can find a different job that doesn't value it as much he's like go work in insurance and then he like pauses and he goes well insurance now is already becoming Tech enabled and Mossberg is like well you have an iPad but even more I think basos was thinking one or two steps down the line which is that you have um you you will have machine learning that will be assessing damage that we'll be doing predictions and here we're we're here already like what does an actuary do right does that get taken over by technology so for me yeah I think that like I'm not celebrating this change um it's going to be it will be hard in some ways um but I I ultimately do think that the we we live in the more optimistic scenario and I also think that less less people are interested in the rote work than we might imagine I think if you think about it people people some people might just not want to work um but I do think if you show up for a job some people are going to be interested in doing something meaningful and like copying data one Excel sheet to another is not the thing that makes them happy yeah I I so I'm equally hopeful that um we're going to unlock time for people and it seems that the amount of work that you have to do will always expand to fill the amount of time that you have that's just like no people don't in America people do not sit around um so so I I agree but one one other component of this which let me just say that you could be one of the big Tech Engineers that take they have two jobs right they in the work from home uh era they were working for like Google and Facebook at the same time so right we don't will be able to figure it out say sorry for the second so a little bit closer to home uh there are now 10 different companies in and then on top of which these are startups but then on top of which you're getting offerings from zoom and Salesforce and big existing Enterprise software companies but there are 10 different companies specifically building AI note taking for financial advisers so I have 27 client facing financial planners at my firm the most valuable use of their time is talking to clients like without a doubt if the more time that the more FaceTime that they're giving our clients the better and anything that they're doing that takes them away from that is not time well spent for the most part but the thing is in order to prepare for a meeting with a $10 million family um that you're managing money for and handling their taxes and their insurance it's like maybe 45 minutes to an hour worth of prep before you go into that meeting you have to go back and look over everything that's already been done what's still to be done what accounts have we open what are the returns what so you have to prepare you can't just walk into that meeting like oh hey uh H H how's your golf game this summer all right so there's that then you do the meeting it's an hour it could be two hours depends on what's going on then you come out of the meeting and there's probably 30 minutes to an hour of post meeting um kind of debriefing of the rest of the staff we need to open this type of account we're doing a wire we're funding this charity right now uh we need to call this person's uh attorney about some estate paperwork the AI chat the AI chat bot that's going to be a notetaker during the meeting is now capable of prepping my advisor within 5 minutes all of the highlights of the last three calls here's what you need to know then you do the meeting and then you come out of the meeting and that same uh piece of technology is able to send an email to everyone who is on the meeting here's a summary here's what was said here's who said it here are the action items and not only can It summarize the action items in an email it can actually send instructions through the CRM to the financial advisor's admin who will then have to take action based on those this is tremendous this is an incredible thing that's going to make it so that my advisers probably have an extra two hours a day talking to clients rather than you know dictating uh action items I love this but then I had a second thought which is right now we have a junior advisor riding along On some of of these calls that Junior adviser is getting reps in these meetings listening to the discussion and taking notes and following up and executing all these tasks after when I don't need that person who's probably a 24 year old getting I don't know 85,000 in their first year when I don't need that person and none of the other firms need that person and that goes on for 5 years you've kind of hollowed out the way that you've historically trained young advisers and paid their salaries worthwhile to the firm now what where do those people enter our industry from who makes use of them how do you how do you get money back for the cost of supporting them for the first couple of years because as you know Alex there's no wealthy family that's going to be happily assigned a 24y old advisor right you know absent somebody that's a little bit more senior so look it's an existential question for just like how do we train entrylevel people in this country if we're creating endless amounts of software that can do entry-level jobs better than a kid right at a college can do and I'm sure we'll solve it I'm sure they we'll come up with something or we'll turn into Japan for the next 30 Years where young people have absolutely no hope for the future and don't think that they will be able to be as prosperous as their parents or their grandparents it's I I don't have the answer but I know it's the big question okay I have two followup points on that first the point that you made made about the software that will take the notes for financial advisors that exists in every single discipline um not necessar the software but the same problem in the technological opportunity just think medicine for example my father just retired he was a podiatrist he spent half his life doing paperwork right and this it's going to be a thing in the past like him having to sit in the basement um filling out these electon electronic medical records no doctor is going to have to do that again because this is all going to be generative AI the doctors will simply check the output and the list goes on in every single profession Absol I think that this is the benefit from this versus like maybe there's like that small percentage of people who enjoy taking the you know doing the Note review or enjoy doing the paperwork this is going to be a huge benefit and I can't believe I'm being this optimistic about it but now thinking it through I think it'll be a huge benefit now now for for the junior junior uh entry level work it's a I think it's a real issue um but here's like two thoughts on that first for a firm like your it's probably going to be important to have a strong bench of young Talent so even though it might not pay off like right away there might be some incentive for you to to have them in in the what do I do what do I do what do I do with them if uh if the AI notaker that Salesforce provides me or Zoom provides me or Microsoft provides me is more useful and costs nothing like what do I do what do I do with that Junior person if I don't need them in the meeting and how are they going to learn to to be an adviser if they're not needed in the meeting yeah so there might be just more extended training but I think the the the second point that I wanted to make here and by the way like maybe that's too sunny it probably is too sunny now that I'm saying it out loud but the second Point here is that you know we do have declining birth rate in the US and in the developing world uh developed World in general right and so you're just going to have much fewer uh sort of people seeking jobs in those entry in those entry level Fields than we have now and you know you might need the AI the reason why Japan has pushed so hard into AI automation um sort of the I think you even talk about this in your book The factories that are just like lights out factories where you don't have anybody is because they needed it like in Japan they didn't have enough of those young people seeking jobs and in the US and in China in particular that's going to be a major issue as we look 10 20 years in the future I guess the question is the next I guess for me the next five years yeah I mean they always talk about how like in a technological shift there's going to be pain and that's probably what's going to happen well listen I I I like to be optimistic too and I I just I guess uh I guess just from my perspective it's worth it's worth bringing out both sides of this yes companies are going to become fabulously profitable as they Institute all this amazing technology that's coming down the pike and it's already happening and of course we're going to get rid of a lot of busy work that people should not be doing anymore if they don't need to 100% I agree but the second order effect is like how do you be an entry-level employee in the age of AI we're going to find out yeah no I I don't I don't think you're off base at all I'm bringing that up it's going to be a problem without a doubt and you know you mentioned okay maybe if people have their work automated they'll just have a good life and they'll paint or something like that uh but that sort of brings us to the most interesting part of the book at least from my perspective where you write about what happened during covid um when we had all the stimulus and people were empowered and um effectively basically people were empowered to do whatever they want and effectively the economy broke because of it uh and yeah catastroph cat paradoxically it's not great when everybody has all the money they need it's it's catastrophic for for capitalism so I think I should just read this this um section of the book because it's so good and I like condensed a little bit but you write capitalism felt like it offered possibilities for everyone for the first time ever this is in the co times everyone had money everyone had options there was a bull market in people forming their own llc's and starting companies a bull market and sitting on their asses and doing nothing a bull market Market in quitting jobs a bull market in whatever they felt like doing indulging their Hobbies accepting flexible hours moving their residents taking college classes while being employed secretly having two full-time employers quitting without quitting being paid for waking up in the morning taking extended periods of time in between gigs making a big career change whatever people wanted to do they could do freedom on a previously unimaginable scale and that was the problem widespread Prosperity it turns out is incompatible with the American dream the one and only way our economy works is when there are winners and losers that's what we learned at the conclusion of our experiment you weren't supposed to see that now the genie is out of the bottle for one brief Shining Moment everyone had enough money to pay their bills and the financial freedom to choose their own way of life and it broke the economy in half so this this idea that we could end up in Utopia which a lot of people especially folks like in the in the sort of extreme um area of AI like the the thinking parts of AI talk about basically your perspective is we had this already in covid when we gave out stimulus people were empowered in a way they never were before and it broke the economy uh it got out of hand we had the nft craze inflation and then effectively the government was like let's restrain this and break it and then you saw the rise in interest rates and the attempt to uh spark a a recession you you really got to read the you really got to read the full chapter of that book um if if you not you uh if you're listening to this listeners yeah yeah because what I lay out is the sheer amount of spending not just spending stimulus so that's fiscal policy monetary policy it was just it was so endless it was like 20s something trillion dollars plus 0% interest rates Plus a raging stock market that allowed anybody who wanted to to go public I mean it was just like this once in a-lifetime situation where we flooded people's bank accounts with cash we flooded people's 401ks with gains um the value of suburban real real estate went through the roof like just everything all at once made people feel for the first time ever everyone that they could do whatever they wanted and the result was 9% inflation in the United States uh and that's just headline if we got get into individual components forget about it there are things that quadrupled in price that'll never go back again the UK had 11% inflation um we we we we cannot ever again run this experiment because effectively what happened was the people who really hated their jobs were able to just not show up and do them so you would check into a hotel and there was nobody to clean the rooms so they would say to you all right we're the hotel's open CO's sort of over but we don't clean your your hotel room you had restaurants begging people doubling the salary and then doubling again begging people you had trucking companies that couldn't find drivers the ports shut down you could literally couldn't move shipping containers because people are doing like uh I I fixed bicycles startup in their backyard and I listen it's not for me to say who doesn't deserve to get their happy ending that's not right all I'm saying is the reason capitalism works is you have people at the top of the Heap that have already made it probably because they killed themselves to get there and then you have people who want to be where they are and are willing to do the jobs that are necessary in order to get there so you have the super rich and you have the lowest income households but then you have this group in the middle the middle class the middle class has to otherwise it falls apart the middle class can't ghost quit they have to show up to their job and not only do they have to show up to their job they have to buy lunch next door to their office they like they have to do these things and if they don't if enough people don't do these very normal things everything breaks down and that's what we went through we had an 18-month period of just the most bizarre science experiment and it turns out the American dream doesn't work if we all get it at the same time so and and again it's not for me to be the Arbiter of who gets to quit their job and and and start the company of their dreams and who has to show up for work I'm not saying that that any one person should determine that I'm just describing a situation where you can't have everybody be in a place where they feel fine about either working or not right and it is crazy that the Federal Reserve was basically like we need to for try to force a recession to get people back to work they never said it but that was the explicit policy aim they we we need to crash this economy to get people back to their jobs it's crazy it's I mean it didn't work they weren't able to do it thank God we we got inflation down anyway uh despite their efforts but they you know listen if uh what's what's so wild is that um you basically had people become professional baseball card traders you had people leave New Jersey and move to Montana like not like two people like millions of people did something completely different for 18 months some people became amateur Bakers some some people myself became very casual alcoholics like we just everybody got to like live their version of I do whatever I want now and one of the craziest things Alex even like a year ago there's an element of this that's still with us like I remember going to I had to go to the mall to do a return I was helping my wife with something on like a Wednesday at 10:00 in the morning and I look around and the mall is full what the hell are all these people doing you know what they're doing they're walking around with airpods taking customer service calls while they shop and do errands like that's like that's literally what's going on it's still going on so we're we're probably permanently changed as a society as a result of the the co period I don't I don't see how we get everybody to forget about it let me ask you this Josh do you think this could have worked if we didn't have the inflation but the inflation is caused by it it's but okay let's say that I maybe this is an an impossible hypothetical and if it is call me out on it but let's say that um you know most of the inflation was caused by the fact that the supply chain was broken and we know it was broken during Co that sh a container went from from China to the US went from $2,000 to $20,000 and that was reflected in consumer prices um if we could find a way to do this sort of policy that allows people the flexibility to do what they want and keep inflation in a reasonable rate do you think it makes sense because I'm also speaking as someone who's you know one of those peoples that did that career shift started the podcast you know in August 2020 quit my job in May 2020 so like that flexibility actually ended up being quite good for me and I think you know probably added to some economic activity if we could have people find you know the true yes you can turn customer service into chat Bots and people are satisfied with the outcome of those interactions to a reasonable degree and then if you can turn every McDonald's and Starbucks into um a combination kiosk vending machine which sweet green is doing with salads right now in uh in Manhattan go to the go to the uh one pen Plaza a outlet of sweet green I own the stock full disclosure it's a vending machine they have a machine in there that makes between 500 and 800 salads an hour during the work week you order from a screen and the Machine makes you a salad and the calibrations of ingredients and dressing and it's perfect it's it's a it's a machine-made Flawless chopped salad it's if you think about how many people do you need to make 500 salads dur during 12 to 2 p.m. on a on a Monday I don't know is 15 people 20 people so if those people don't need to be anywhere there anymore because the kiosk is taking credit cards cash isn't Changing Hands nobody has to monitor the the salad assembly line because it's a computer with with very powerful Machinery attached like if that's where this is all headed then absolutely there's a there's a universe in which we can um survive 10 to 15% unemployment and still like have a a fairly good economy I just think uh the the the people that are not working but want to work are not going to be happy and look in the book I reference vaget and if you haven't read player piano I highly recommend this book immediately after you read my book um Kurt wrote this 70 years ago and it's it's it's still relevant because it's about Humanity and so in in the in the future that vaget envisioned back in the 50s basically had white collar managers who ran these massive industrial conglomerations uh conglomerates and you had uh basically people that used to do something for a living and are no longer needed and the ultimate result is an uprising even though those people were being cared for they weren't discarded in the street they had homes built for them they were fed they you know but it's at a certain point you feel just absolutely useless you feel suicidal and that's when the opioid starts like it's it's just not realistic to think that the the version of American and capitalism that you want is a version where a lot of people could just walk around talking to trees all day it's it's just it's not good for the soul people need to feel needed they need to actually be needed and they need to have a purpose and the purpose can't can't just be have as much fun as you can today it's just it's not it's not workable it's you you have to be eating mushrooms in San Francisco um you know in a dorm room conversation at 2: in the morning to think that this is where things should be going it's it's really not well I can tell you a lot of the inspiration for that perspective on where things should be coming should be going uh does come from those which is fine sessions and then then wake up sober up and realize that people need to be wanted and you know this and I know this and you know I look we we have 4,000 clients okay so we talk to people that have done every single thing for a living you can imagine and we talk to people who inherited money we talk to people who were poor until they were 50 and something finally happened for them we talk to people that had early success in their 20s and then lost it all and had to get it back we've heard it every version there is no version of people who are happy and satisfied with their life that has anything to do with I wake up and do whatever I want it's just that's not that's that is not the story that we ever hear the most satisfied people are maybe not the busiest people but the people who genuinely feel that they are most counted on even if it's just by relatives and I I just think that's endemic to humanity it's always going to be that way so it's a lot of fun to grow your own weed bake your own bread um drink seven nights a week whatever people did during that period but it literally could not have gone on longer and if it did it would not have led to anything good societally and uh you know could point to Jan 6 could point to uh the black lives ma matter and and the responses to that um it just it when people had too much time it was too much time for us to look around at each other and get into fights it's just it's not great so I'm I I want I like full employment I think it's better than hey guess what the software does your job for you and you have $5 million in Apple stocks you never have to worry about anything ever again I don't think that the person you say that to is better off two years later we're here with Josh Brown he's the author of you weren't supposed to see that Secrets every investor should know we've been talking a little bit about the book in the first half second half we're going to talk about some of the big tech companies he's looking at in the market more broadly we be we'll be back right after this and we're back here on big technology podcast with Josh Brown he's the CEO of rol's wealth management he also hosts the compound and Friends one of my favorite shows CNBC contributor and the author if you weren't supposed to see that Josh let's talk a little bit about the market coming back uh here for the second half so we also talk a little bit in the first half about how um the FED tried to force a recession well I think this was supposed to be the year that that was supposed to happen the S&P 500 is up 23% year-to dat uh we've been hearing about yeah recession hard Landing uh rates are going down now inflation is lowering so mission accomplished what do you think well I so I had uh on the compound of friends last week we had Dr David Kelly who's uh probably the highest ranking strategist at JP mortgage and great job his perspect his perspective is that the FED really had nothing to do with it we had these temporary uh Supply imbalances all over the economy and we had all these labor market issues again stemming from how stimulated everyone was financially and those things like work their way through the system and reality came back and it turned out that like you know the economy kind of healed itself that I mean that's like a stylized version of what he was saying I'm not as smart as him so I wouldn't disagree with him um I think the FED does play a role but uh there are a lot of people who think like demand for capital is ultimately going to get to where it needs to get to and uh you know the FED can exacerbate the Direction one one way or the other but here we are to your point uh Alex at the end of 2022 the idea that we would have a recession and a hard Landing in 2023 was effectively consensus this is the unanimous opinion pretty much of Wall Street strategists of mainstream economists of CFO survey that they do at Duke University like this was just what people said it's it's happening like this is it we're going to have the hangover from the pandemic era stimulus and there's nothing you can do about it and we didn't and I think a I think a big part of why we didn't was the consumer ended up being more resilient than we thought and it turns out we don't really have an economy that's highly dependent on manufacturing the way that weuse used to so it's not like you know you have a street with 10 people living on it and eight of them go to work at the plant all day and when the plant lays people off the economy goes to it's just not it's just not the version of America we live in right now so that was helpful uh Services driven economy is going to be less susceptible to higher interest rates it's not part of the manufacturing cycle of booms and Buss and inventories and okay says that the second thing is we had this AI Genie come out of the bottle and that nobody could have predict predicted that maybe you could have uh Powell couldn't have um certainly not yeah so GPT hits in November on November 30th of 2022 coincidentally the stock market had bottom two weeks prior we're celebrating the two-year anniversary of the stock market as we speak I don't know if you know this most people don't NASDAQ is up 28% on the Year this year yeah it's crazy it's the growth this year has been out of control so that's all AI so uh so we have a raging stock market we have housing activity renewed because mortgage uh mortgage rats are uh falling finally and people feel less trapped in whatever their situation is um we have inflation moderating the FED has done its first interest rate cut and they started off with a a double cut and they'll probably do another one uh in a couple weeks and uh we have this election that everyone was terrified of and it looks like actually the out come is going to be still up in the air but probably lead to a divided government which is positive for stocks historically uh where no one party gets to do a lot of weird in either direction um and we'll get through this election which is a big bad thing that everyone's worried about and that'll take place and God forbid we have an inauguration where one side concedes that'll be interesting um but so like a lot of the negative potential catalysts that we've been living in the shadow of are fading doesn't mean b something bad can't happen out of nowhere I'm just describing the things that we were terrified about uh and so that's really that's really the story of what's happening right now we've had earnings growth this year we were already supposed to have been in a recession as of last year so it seems as though it's like a it's a new bowl market and it's two years old and in your book you describ something called this Relentless bid and you know basically that's everybody's putting money into their 401k is traditional retirement is uh not what it used to be that money 401K money is going into equities and it's just effectively coming into the stock market month after month quarter after quarter and that is relentlessly bidding up the stock prices um and effectively has a put in terms of how low it could be I'm sure I'm butchering this a little bit uh but basically yes we we are seeing earnings growth but how much does that Relentless bid have to do with the fact that like we have gone through this turbulence and the stock market has grown the way that it has yeah so I I don't want people to think that that's like my justification for buying stocks today is that 401K money is going to just keep coming in and levitating the market I wrote that in 2014 and uh originally so it was my way of describing the process by which the actual behavior of the stock market had begun to change because of two things one this wave of price sensitive money by the way uh 401K is $1 trillion okay people are adding to that 11 trillion doll every two weeks when they get paid they do not consult the PE ratio of Apple it's an automated decision the money comes in no matter what's happening in the economy or with politics or the weather or sports like nothing enters people's thinking it's just a wave of money and it keeps coming in um the Boomers the wealthy Boomers they don't even have to take money out they just borrow against it like like if a wealthy Boomer wants to buy a vacation home these days the guy at Morgan Stanley says okay no problem we'll uh Here sign this paper we'll give you a 50% borrow against your treasury bonds we'll give you a 30% borrow against your stocks it's a non it's a non- underwritten loan so it takes 5 Seconds the only thing you have to do is not buy more Securities with it you take the money out of brokage account go buy the house now you don't have to sell your stocks and you have a second home boom magic this is the the Securities based lending is like the is like one of the driving factors of people said Harry there's a guy Harry Dent is a demography guy and his big thing was in the year 2020 every baby boomer is going to turn 70 and they're all going to simultaneously liquidate their portfolios no it's actually not how it played out now they borrow against their portfolios they don't even pay capital gains tax so you have that you have this 401K wall of money coming in and then you have a new business model on Wall Street when I wrote the piece 10 years ago uh Morgan Stanley Merill Lynch now Bank of America um JP Morgan uh UBS all the wealth management units at the big uh investment Banks and brokerages were converting their stock Brokers into to financial advisors and changing their comp model they were uh trying to push them away from commission-based transactional brokerage business and push them more toward fee based Asset Management business and it worked and one of the side effects of that is financial advisors like myself are building Financial plans for their clients and the plan doesn't say to sell stocks uh in fact when the market dips the plan says hey actually you should be buying more stocks and rebalancing because it's going to make the the probabilities for your client go higher so you've got this automatic bid coming from the wealth management side these 7030 6040 50/50 portfolios where when stocks sell off bonds get sold stocks get bought and the effect of these um forces that I'm describing is a dampening of volatility and it is a acceleration of the correction process so it's not that we don't have Corrections um we do all the time they don't last long because the wealth manager with $50 billion under management pulls the lever and there's a firmwide rebalance across all of their accounts and the wall of money from 401ks comes in and oh by the way nobody's actually selling their Securities for any reason they certainly aren't selling it to to live on in retirement so this is like profound to to me I don't know how interested your audience is in this but uh no we are for sure it's it's if I could anthropomorphize the market for a minute I would just say it's like it's like a new person the old Mr Market where everybody was like on Tor hooks every time something would go wrong everybody would Panic nobody panics anymore they Panic by they look at the response to to Israel being invaded look at the response to the Ukraine being invaded look at the response now Iran Iran's uh I don't know within minutes of of obtaining their first uh nuclear bomb people panic by stocks when these things happen it's it's crazy it is crazy but it's happening when the there there was that mini crash on on the beginning of August you'll remember some something went on in Asia I think where the market dropped like 10% in a day uh was first day of my vacation my son I talked about this on the show um my wife and I we landed in irel land uh where we were spending a week and as soon as we got we like did Redeye so we watched the Asian markets collapse overnight and then this was in in Japan something happened in Japan anyway uh a second we get we get on the ground I'm like uh just go buy the S&P 500 and do it as soon as you can and the Market's up like very nicely since then yeah what you're describing is the the Yen carry trade so basically United States cut interest rates and Japan uh and and Japan raised interest rates um they are terrified of inflation for some reason so as a result of that action all of a sudden there's this thing called the Yen carry trade where people are borrowing money in Japanese Yen terms and they are using that money to buy things like stocks and real estate here in the United States Warren Buffett uh is involved in the end carry trade he sold Bonds denominated in Yen and use that to fund the purchase of Japanese equities so Japanese carry trade is something that institutions and hedge funds are using as a way of obtaining cheap funding which leverages you know their buying power and and uh magnifies their returns so when the Japanese raised rates and um United States cut rates it was like a a blip in the carry trade it was a margin call some people had to sell some stuff and then that had a ripple effect Japan had a mini 1987 some of their biggest publicly traded companies like mufg were down 25% in a Flash which is obviously terrifying and then here in the United States we had this crazy wild pre-market um where it people thought like uh stocks were going to like open up down 10% and keep going because the muscle memory of that is still there like people remember these panics these crashes um what ended up happening was it was the best buying opportunity of the Year to your point and we didn't hear from a single panicked person wow not one yeah cuz there's no time cuz even if you wanted to panic the market went green like later that day like like God damn it so you know this and and I think it's a great story that you told Alex because it's um it's emblematic of just this time that we're in right now there's a higher proclivity to panic buy than Panic sell yes okay we have about 10 minutes left let's quickly do Amazon Nvidia and apple if you're up for it so I own all three full disclosure yes uh I I ask you I want to ask you this question about Amazon so I was on uh with you guys on the compound and friends in July I believe and we had a debate you and I about like whether Amazon was looking up or not and you kind of sold me on your viewpoint but I had mentioned that there was some weird things going on with Amazon culture lo and behold September 16th Andy G he comes out with the memo we're going to do 5 days in the office from now on and he also points out as this is the most pointed admission of cultural problems in Amazon history from a CEO he said we have added more layers than we had ever before and it's created artifacts that we like to change that means pre-meetings for the pre-meetings for decision meetings a longer line of managers feeling they need to review a topic before it moves forward owners of initiatives feeling less like they should make recommendations because the decision will be made elsewhere truly day type of culture taking place in Amazon um but obviously the you know the company has existing assets that are quite strong so what's your perspective on the Amazon trade right now look I think the expectations for Amazon are very low and the stock is selling at uh a discount to the multiple that sold at in the before times in 2019 and they've never ever gotten their premium valuation back and uh you can't the same for the rest of the uh Mega caps and Tech uh meta looks outstanding right now Nvidia looks outstanding um Amazon and Tesla are probably the furthest away from their 52e highs of that group of stocks uh I think Apple made a new high today uh so so Amazon is absolutely being treated as though there were issues there like I don't think when they go into this next earnings report people are expecting any sort of like upside surprise or anything like that so it's kind of in a weird place but you know from my perspective that's why there's an opportunity and uh you know we just went through this cycle with meta the stock was in a 75% draw down people forget it's since I think more than tripled so when when companies have problems and they address them and they admit to them it's like the first step of like hey we have to change something here so I don't know how long it takes for for jasse to get get his act together but uh I think the Stock's going work no definitely I mean maybe this memo that Jesse sent is his year of efficiency memo saying that the company needs to figure it out from a cultural standpoint yeah I mean that's that's certainly that's certainly how it could turn out um there's you know look there is some idiosyncrasies with Amazon in terms of like on the retail side they've been gaining share with the essentials the problem is with the essentials it's not a very profitable business it almost feels like they're playing defense by by pushing that so much just to make sure someone else is not getting those sales so people don't get excited about that there's a lot of questions about um whatever they're trying to do on the on the entertainment side like it's not a clean story it's not right so but again that's reflected in the fact that this is still selling at a discount to its historical its historic multiple and you know the Bears would say well it should and I guess I would agree the real question is will it always goes yeah yeah okay Apple uh as you mentioned hit a new high it's closer to four trillion than it is to three trillion which is to me just nuts because if you think about the context Apple intelligence has been um pretty lukewarm like a true me release uh The Vision Pro has gone nowhere and they have issues in China which is 20% of their market so what do you think explains the sort of um speaking of a clean story and not the sort of disparity there between apple story and its performance um you failed to mention that the Vision Pro probably the thing that people were most excited about for them to launch other than AI has been a flop yeah like unmitigated like nobody is saying that was successful maybe if I forgot it it was anyway but go ahead so here's so I I guess this is the way I would put it and this is a very real politic answer in the end it's cash flows and earnings and do you have them or do you not have them and Apple has them and apple uh basically it's a $200 billion cash horde with which they can pursue $300 billion worth of BuyBacks off the cash flow alone over the next couple of years so they can buy in a ton of stock and uh they are churning out plenty of profits as a result of the services business staying strong and they can have a flop here a flop there an underwhelming iPhone uh uh launch Etc um but in like they get the Ben benef of the doubt from the investor class that whatever's wrong or half baked in the case of uh in the case of the AI effort like they will eventually figure it out and get it right and or like yesterday they dropped a hint I don't know who sourced The Wall Street Journal but like apple is considering a lighter weight headset yeah no because Facebook is uh meta is selling a ton of the rayb bands and now they're going to sell this Orion uh unit so obviously like that's where the ball is so Apple's considering it you okay I'm sure it's like all Hands-On deck internally they they must make sure that the next iteration of the Vision Pro is uh a little less dorky think it's a problem for Apple that meta is beating them to the future of AI and mixed reality yeah I watched um I watched Zuckerberg on stage with the acquired guys talking about like denigrating the phone as the center of the center like like the he basically said you're all suffering from this huge amount of uh recency bias just because the iPhone has been the dominant lens through which we view the internet that doesn't mean it's going to be the case the next 15 years and he kept saying listen if you really want to look at a piece of glass like so he is very clearly uh he is very clearly winning the wearable thing right now and uh I guess I just would say like apple rarely gets there first I think they just get their best and I think I think they'll they'll figure it out okay lastly Nvidia um I think when I was at your office the last time all time high yesterday yeah right it was approaching three trillion and you're like if it hits three trillion I got to offload some or and I didn't um you didn't so so clearly you believe that Nvidia has room to go does it does it eventually tail off or I mean here's the I'll just give like literally 60 seconds on why I think Nvidia might be limited um or like what the case would be that Nvidia is limited right it's that other companies are come up going to come up with specialized hardware for things like inference um that's going to undercut nvidia's ability to sell and also just that um you know that their pricing power might not last for as long as they think it will if people aren't going to have real return on this technology what's your perspective I don't know they just told us they sold out of Blackwell uh chips for 12 months did you okay is that what they said okay yeah so yeah I mean that is that to me that's not a surprise listen this has been this has been this has been the bare case on Nvidia is that the hyperscalers will at some point stop spending and I've made this case before but like the thing is nobody knows when and you know there was talk a year ago Nvidia is Cisco and remember all those slide decks and charts and presentations where they right they overlaid Nvidia over Cisco Circa 1999 uh it's doubled since then it's doubled yes can I tell you one last funny thing on this of course yeah definitely I just got a dividend from Nvidia paid into my fidelity account just just the idea that they're paying a dividend too is really funny to me oh yeah I know it's small percentage wise it's nothing but it was funny right yeah no I mean it's the it's the gift that keeps on giving I mean it's definitely been you've been early on it and to ride it from where you were to where where it is now must be just a an unbelievable High uh yeah it's look it's the biggest winner I've ever had in my life and I don't I think you could live another another hundred years and not see anything like this ever again um so I uh I'm I'm I'm not like uh beating my chest like look I I got Nvidia a lot of people have bought it over the years I just happen to have gotten into it like really really early but before I was excited about AI it was no AI yeah so uh I'm I'm happy about it and I've sold a little bit along the way but I I uh think my position now is maybe a forever position I don't know we'll see wow we'll see okay the book is you weren't supposed to see that Secrets every investor should know it's by Josh Brown you can get it at all bookstores today you can also listen to his podcast the compound and friends on your podcast app of choice and see him on CNBC at the halftime report and every now and again Josh and I show up there together and it's always fun to be on with you Josh great to see you thanks so much for your time thank you Alex you're the best all right everybody thank you so much for listening thanks again to Josh for coming on Ronan and I will be back on Friday breaking down the week's news and we'll see you next time on big technology podcast