The Stock Market is Secretly Getting Killed | WAYT?

Episode Overview

• The episode begins with a deep dive into Palantir's blowout earnings report and CEO Alex Karp's unique, combative communication style aimed at galvanizing retail investors.
• A central debate unfolds about the underlying health of the market, with one host arguing a "secret bear market" is taking place while the other sees a normal, healthy pullback.
• The hosts analyze a series of company-specific earnings reports, highlighting the unforgiving nature of the current market by dissecting major blow-ups at Chipotle and Fiserv.
• The discussion explores broader themes, including the unprecedented scale of big tech companies like Apple and the power of investing in long-term secular growth trends like cybersecurity and digital payments.

Key Concepts

• Palantir's Earnings and CEO Strategy: A detailed analysis of Palantir's impressive growth and profitability, combined with a look at how CEO Alex Karp uses an "us vs. them" narrative to build a loyal base of retail investors.
• Market Health Debate: A spirited discussion on whether the market is experiencing a "secret bear market" due to poor breadth and many individual stocks in deep drawdowns, or if it's simply a healthy reset from overbought conditions.
• The "AI or Nothing" Market: The current dynamic where AI-related companies are rewarded, while any earnings miss from other companies is severely punished, as exemplified by the catastrophic stock drops for companies like Fiserv.
• The Unprecedented Scale of Big Tech: A breakdown of Apple's business segments reveals that individual product lines like the iPhone or iPad are larger on their own than entire, well-known public companies, highlighting big tech's immense scale.
• Corporate Accountability and Capital Allocation: A critique of Fiserv's management for executing a massive stock buyback right before a disastrous earnings report, sparking a discussion on corporate irresponsibility and the slowness of analyst ratings to react.
• Secular Growth Trends: The identification of powerful, long-term trends—such as cybersecurity (CrowdStrike), restaurant payment systems (Toast), and asset-light networks (Uber)—as key drivers for massive investment wins.

Quotes

• At 4:47 - "'This company is minting money.'" - Josh Brown describes Palantir's impressive profitability, which contradicts the early skepticism that surrounded the company when it went public.
• At 5:55 - "'He's galvanizing his base because his base are retail holders.'" - Michael Batnick offers his theory on why Palantir's CEO, Alex Karp, adopts a combative tone against perceived critics and short-sellers.
• At 8:00 - "'Where does the person end and the company begin? There's no line. Because that's what it is to be an entrepreneur and to build something.'" - Josh Brown explains why a founder and CEO like Alex Karp would take any skepticism about the stock as a personal attack.
• At 20:38 - "'Misses have traded 5% lower on average the day after reporting, which is steeper than any other Q in the history of our data.'" - Michael Batnick highlights the unforgiving nature of the current market, where companies that disappoint on earnings are being severely punished.
• At 26:51 - "The stock market is secretly getting killed." - Josh Brown's core thesis that while the main indices are holding up due to mega-cap stocks, a large portion of the market is experiencing significant downturns.
• At 27:53 - "We're just getting a little foam being blown off the top of the beer." - Michael Batnick’s counter-argument, suggesting the market weakness is just a normal correction after a period of excessive optimism and over-extension.
• At 33:37 - "Apple is the best business in the world." - Josh Brown's conclusion after a deep dive into how Apple's individual product lines generate more revenue than entire large-cap companies.
• At 41:38 - "I don't believe this guy... They don't want your slop anymore. They don't want it. There's no value there." - Michael Batnick vehemently refuting the Chipotle CEO's earnings call explanation, arguing that the company's problems stem from declining food quality and high prices.
• At 47:45 - "This is the most irresponsible, reckless behavior I've seen from a company in a long time. This is nuts." - Michael Batnick expressing outrage over Fiserv buying back $1 billion of its stock in the same quarter it released a disastrous earnings report.
• At 1:02:41 - "You had to know that cybersecurity spending was gonna be in a bull market for at least the next half decade to decade." - Josh Brown reflecting on CrowdStrike's success, arguing that the long-term growth trend for cybersecurity was an obvious investment theme.

Takeaways

• To get a complete picture of market health, look beyond major indices and monitor breadth indicators, such as the number of stocks in a significant drawdown.
• Scrutinize corporate capital allocation, as large stock buybacks executed immediately before an earnings release can be a red flag regarding management's confidence.
• In a theme-driven market, be aware that companies outside the prevailing narrative face a much higher risk of outsized punishment for any operational misstep or earnings miss.
• When analyzing founder-led companies, pay attention to how the CEO communicates with and cultivates their investor base, as a strong retail following can serve as a defense against Wall Street skepticism.
• Focus on identifying and investing in durable, long-term secular growth trends, as these can power portfolio returns through various economic and market cycles.
• Break down mega-cap companies into their individual business segments to fully appreciate their true scale, diversification, and competitive moats.