Bespoke. This is how i want to kick off the conversation. The last four septembers for the s p 500, 2020 were down 4 . 2021 down near 5 . 2022 down more than 9 . 2023 down more than 5 . That sounds bad. The last three q4s, 2020 up almost 12. 2021 up almost 11. 2022 up 7. 2023, question mark. Do we have a repeat . Does history repeat itself . Do we have a good Fourth Quarter for stocks . I believe it will be a positive quarter. Ive said that on air. You have significant quarterly weakness, well talk about the reasons why in a second. I do think the prevailing trend of 2023 takes hold once again, and its led by mega caps. Its led by technology because in this environment, they are the companies that represent quality. They are the companies that can endure with a 30year treasury trading 4. 70 as you come on air. Thats why were seeing the s p in retreat right now. Coming to the quarter end, youve broken below the 50Day Moving Average, below the 100Day Moving Average for the s p. You took out yesterdays low. Now its in sight. The 200 intraDay Moving Average. The end of the quarter will be sloppy, it will be messy, the price of oil 52week high today, towards 94. Inventories at ridiculously low levels. Yields higher. You have in front of you in the near term a lot of challenges. I think earnings come through and youll get a positive return in q4. That sounds all good, Energy Behind it. Why is the nasdaq in the worst of the majors over the last month as rates have risen . I would say that it was the clear leader in 2023, and i think when you have an environment where its obvious that its risk off, you will generally tend to see the leadership in the market as an atm. I think thats whats happened. Farmer jim, made a call about a week ago, and these are your words, i believe youre going to get a rip your face off rally into the end of the year. So you think history stays in tune here, septembers bad, the Fourth Quarter begins, and then you have a run to the finish. Im going to stand by the call. I agree with everything joe just said. I do think and youve been saying it since july. Ive been there with you, that september would be september. It always has a reason for september being september. This one is obvious the market is adjust to go higher Interest Rates. But Interest Rates arent going to keep going higher. I know jamie dimon says differently. I dont think theyre going to keep going higher because inflation is coming down. We can talk about oil, but lets talk about rents that are coming down fast, goods deflation. Buy a toaster and youll see what i mean. The point im driving at here, you have a strong economy, look at durable goods today. You have an inflation coming down. You have a fed that looks like it might be done. You put this all together and you have a price correction here for a very logical reason, and this is a good time to be buying, which is what im doing. Im with joe on this. Number one, did you buy a toaster recently . I actually did. Okay. 29. I needed a toaster. Goods inflation is coming down. Housing inflation is coming down. The problem is that when you try and get somebody to service the toaster i hope you bought a good one for 29 but if you need service on it, Nonhousing Services Inflation is not coming down fast enough. Yeah. Thats one of the issues. Yeah. Now youre also betting the economy is going to obviously remain resilient enough that youre going to have a race to the finish, correct . Yeah, yeah. I love what you just did, because what you just did, and you stopped short, which is fine, you started laying out the risk. Theres a ton of risk out there. You want to keep going on the uaw strike, student loan repayments picking up, obviously there are risks. There are always risks. Thats what opportunity comes from. And with the s p 500 off roughly 7 from that late july high and, joe, i think you are exactly right, the 200 Day Moving Average is another 1. 5 . Im not going to cry over that. But you have to acknowledge this year the trend is higher. Im parroting everything you said, joe. The trend is higher. This is a good position for Fourth Quarter santa claus rally. Im surprised by the results of our delivering alpha invest or survey. Question one, do you believe this is a bear mark rally or a new bull market . Jenny, 61 of those who answered this question said its a bear market rally. Twothirds. Does that surprise you. Well, you know what, i actually answer that had question and then i wrote in and wrote you should have given us a third option. I dont think itss binary. Which way did you vote . Forget the writein. How did you vote . I think i put bull market but i dont remember. I was frustrate that had there were only two. Here is what i think, i think were in a long period of consolidation. What i do in these frustrating markets remember the conversation we had after the show two or three weeks ago and you were like this market has to just start going up, its killing me. I dont remember that. And i said buckle your seat belt. It will be a long time of torturous and painful and you shook your head, i hope not. Its miserable. Its miserable on the s p 500. I wanted a third option because i think what were doing is were consolidating. Why i think i might have put bear market i mean bull market i cant remember were in a perpetual long bull market. Its up 8 over time. I believe that is true and on track. When i guet frustrated i look a 30 years. Its upward trending but there are multiyear periods its consolidating. I didnt like either of those. This is going to be, jason, a hard to swallow fact for many if this is a bear market rally. Many were banking on it was a new bull market and we havent just gone through this period thats essentially a long drawnout head fake and were going to revert back to what the misery of 22 looked like. For me as it relates to whats going on, the copout is seasonality. September is the worst month in the market. Yes, inflation is coming down, core inflation is starting to come down. If i look at some of the indicators i feel have pushed the market down on the run, dollar on the run, transports are obviously in correction territory. As i look at the chase, a lot of folks are going to look to chase the run that i see in the Fourth Quarter and i think earnings. Even if, joe, the answers to the question on delivering alpha survey whether you think theres going to be a recession, the winner 41 said mid24. If you believe a recession m mid24 do you think enough money behind a chase into the end of 23 or stay and cash, cash equivalents, treasuries, areas that offer less risk than stocks if you see eight months from now, nine months of recession . The recovery in q4 will be a reaction from strong earnings. Look into 2024, i absolutely see the economy weakening. I am never one to believe you completely move into cash. Is it attractive right now to look at the treasury market and to see a 5 yield . Yes, without question, it is. I would look at other areas that traditionally when i say traditionally, the last five years havent really rewarded investors. Thats looking at things like emerging market debt, at potentially extending duration thinking about the next three to five years and then coming back to the commodity market where there is the strongest conviction you can find in terms of what the fundamentals represent. If youre studying fundamentals, you have generative ai which is impacting technology in mega caps, you have cyber security. Outside of that in the equity universe its very difficult to find positive thesis in the market. We know about that. The treasury market, and you have a significant amount of shorting going on right now from the hedge fund and speculative community right now theyre right, and the Federal Reserve did nothing to push up against that, i dont think theyre right because of inflation. I think theyre right because of the concerns about the debt supply, because japan and china are stepping back from buying our debt, and i think theyre right because of the concerns surrounding the economy being stronger than the Federal Reserve was comfortable with. Tomorrow we have some great guests. Ill be talking with brad g gerstner and bill ackman. Moves in the market, i wonder what this expresses in terms of belief on where things are going. Jenny bought docusign. Right. Why . For growth strategy. When joe said its hard to find places of conviction, i think thats too broadly but if you look back to the 2020 bubble stocks, the stocks that bubbled up and got slapped back down to reality, there are interesting fallen angels. A 7 Free Cash Flow yield. Check that box. Thats surprising. This is crazy. Of those subscribers 1,000 of them generate revenues of over 300,000. Only 1. 4 million paying subscribers like gilman hill, we use docusign but count as one. Its interesting. Operating margins are 25 . And then you look at the earnings. And theyre consistent. Revenues are supposed to grow high double digits, earnings should next year. You can mine through and find High ConvictionCompanies Even if you cant paint a broad picture. Also in that space, we havent bought yet but looking at zoom info and etsy and ulta beauty, companies that pulled forward during the pandemic. Everyone was so disappointed they didnt sustain the huge levels. Its kind of a neat time to be out there because even though the market is too high for my comfort, i dont like things broadly. Beneath the surface theres cool stuff going on. Nice move in that stock as were talking about that. Jason, i guess it begs the question whether it is, in fact, time to look at some of those more high flying, at one time higher valuation, Growth Stocks and maybe say mega caps have run as far as they can for a little bit, and some of these other growthy stocks need to catch up, and theyve been decimated, many of them, names like the one jenny bought. 100 . I think whats super interesting when you look at high beta, that expresses where sentiment is for growth. So if i look at the names ive owned, twilio, shopify, docusign is a compelling story to take a look at it. For me, i think, as i look at this orderly selloff that weve seen over the last month or so, i would be looking at mega cap tech names as opportunities going into the Fourth Quarter. I think earnings will be solid, and i think these are parts of the market you need to be in. Another growthy name on our list is data dog becausejoe sold it. Why did you do that . Sold the remaining half in early may. I purchased the stock at 86 and sold half somewhere around 93. Monday on the close, sold the remaining half at 88. Its really a rotation within the market. I picked up some qs last week, i have significant respect for valuation. I do not want to be in stocks where i believe the need for them to be reliant on the debt market is present, in particular where we see the cost of capital as a continuing moving target. Im not ready, to your point, to go to the place where a lot of nonprofitable companies maybe appear to be given the significant declines theyve had since 2021 appealing. I would rather sit on the sidelines with that. What im doing here is managing around the risk, rotating within the portfolio, and thats why im completely out of data dog. You dont like the docusign move . I like docusign. Its a unique company. I know you like using it. But you dont like the stock . Its a unique company. I think it has the potential to stand out against the rest of the universe of what we would call Long Duration nonprofitable. I do think this is a company that can be bought at some point, so theres the m a value. If you ask me, look, do you want to own docusign, because of the fact i think Long Duration assets still challenged, the answer would be no. Follow . I think its interesting because i dont look at long i dont look at docusign as Long Duration. Why not . Theyre profitable here and now. Before, earlier in the show, when scott, you asked joe, qqq, why is that under so much weakness, the immediate thing i heard in my head was because a lot of the qqq is Long Duration assets. And going into this year and all of last year everybody was thinking higher Interest Rates, really damaging, thats made up there. I think thats where we sift through. If you look at a peloton or a lemonade, kind of in the same boat as a docusign, those are Long Duration because theyre not profitable anytime soon but theyve shifted. Some of the fallouts remember, we were on with josh, and josh was talking about zoom and we were surprised how real the earnings are, some are no longer Long Duration in terms of when the investors are getting their earnings from them. Youre pointing out theres treasure amidst the trash totally. A lot of these stocks got unfairly punished too much. Now maybe they needed to come back to earth a bit but some have real earnings. Right. Right now, which suggests maybe their valuations a right now. Maybe they just got taken down to where they should be, and from this point forward can you have reasonable growth. You know what, docusign is down 87 . Do i expect it to go back to those levels . Absolutely not. Maybe theres 100 , 150 return. So its just set up for a functional future. I have some headlines in front of me from the new York Economic Club where bank of america Ceo Brian Moynihan is currently speaking. Three headlines i want to bring you. The fed awon the near term battle on inflation, Interest Rates will probably stay up longer, consumers spent 4. 5 more this september versus last september. So rates up, fed winning, consumers still spending. Thats from brian moynihan. Back to our conversation on mega cap. Jim, yesterday afternoon, closing bell a headline that says open ai is seeking a 90 billion valuation in a share of existing shares a sale of existing shares. A valuation that in january was 30 billion. So threefold increase in valuation, it just raises the question yet again as to whether some of these stocks, maybe not all, are in a bubble. You look at the gains year to date on some of these names, theyre astonishing. Nvidia is up 188 year to date. P palentir 130. You can go down to microsoft and you dont see a gain of 30 . In many cases youre 50 plus across the board. Many p es elevated but not dramatically in several cases. However, you could look at this list like the nvidia, which you just bought more of, pick shovels, i get it. I can see the finish line in some way of how theyre monetize ai. The question i ask you, can you look at other stocks and see a finish line for the monetization question, which justifies not only the stock valuation but the move. This is another question. Theres a reason im buying nvidia. Its not just that im underweight tech or nvidia, the forward multiple, its 26. This was a year and a half ago, two years ago, we were holding our nose at 60 times forward multiple. By margins that are extraordinary, thats why its at a 26 times forward multiple. Now to the other names that you were bringing up, scott, im not participating. That tells you what i think of them. Regarding a bubble, the talk about ai sounds to me bubble like. It does not, however, sound like its imminently going to pop. You talk to people about the in ai and they say things like we havent even scratched the surface of the usage cases for ai and theres a breathlessness with which i hear them speaking about it which is offputting, to me. Isnt that kind of the truth in that, jenny, can you point to monetization of the stocks and others its hype and hope of what we think, but we dont know when the when is. You know what i mean . We were having this conversation, did an Investment Committee meeting and the way i think of how and when it will benefit over the next ten years, it will be everybody. If it werent for the unbelievable progress in software in my career, i would probably need to have a staff of ten people more to do our client reporting, performance reporting, the management of it, instead we have this remarkable software. When we talk about who will benefit from ai, its going to be all of us. That wealth will be spread out. I dont think it will be concentrated in as few hands as a list with just a couple companies suggests. My point is that the few hands now are the ones you can see. Right. The others are more opaque in terms of what you can really think about in terms of whats legit. We asked our Kristina Partsinevelos to take a look at this because shes been thinking about all of this, looking at the stocks, trying to separate hype from hope. Kristina what did you find on the back of this only ai of chat gpt fame . The underlying theme right now is a lot of these companies, yes, a snapping up gpus, and thats helping a company like nvidia. Theyre building out their Ai Infrastructure ahead of demand. And that is a big concern because we dont know how long that lag will be. Mckinsey put out a recertificate report saying the adoption of ai could come within 8 to 27 years. So jenny says that, yes, everybody is going to benefit from these ai applications, but when is that actually going to happen . When is that going to increase productivity for companies, create and monetize ai through their chatbots . That could be years out which puts a question mark around the runup and valuations to the names you alluded to. You have the hardware category, maybe marvell, broadcon, nvidia, but the hardware. So those are some cost that is are happening right now. Five, six years from now, will companies be spending millions and millions of dollars on building out their Ai Infrastructure again . Probably not. So then that comes to the second category which would be ai cloud services. This still has question marks, which will benefit. Aws, theyre great. Theyve been the leader in the cloud. Why did they invest in and tlopic . Is that a sign theyre not as far ahead within the ai cloud world . Microsoft google are doing well as well. What about the other g