Most important take away

The hosts believe the market bottom is likely in following a decisive four-day rally, with the VIX settling at 25-26 despite extreme geopolitical rhetoric around the Iran conflict. The massive rotation out of Mag 7 stocks into asset-heavy, physical-infrastructure companies (energy, industrials, semiconductors) represents a durable shift, not just a dead-cat bounce, and value is outperforming growth by the widest margin since 2001.

Summary

The episode covers whether the stock market has bottomed after the worst quarter in four years, the ongoing Iran conflict’s market impact, major sector rotations, the QQQ competitive threat from BlackRock, Jamie Dimon’s annual letter, OpenAI and Anthropic’s massive fundraising and revenue growth, and a biotech sector breakout.

Actionable insights and investment advice:

• Bottom signals are accumulating: Smallest option traders spent one-third of volume buying puts (only third time ever, prior instances were COVID lows). Flows into money markets and cash ETFs over three months are at historic extremes, which typically coincides with market bottoms. Josh gives a 59% probability, Michael 60% that the bottom is in.
• Rotation from growth to value is real: Value outperformed growth in Q1 by the widest margin since 2001. The Mag 7 has lost over $2 trillion in market cap this year, and that capital has rotated into energy (ExxonMobil, Chevron, ConocoPhillips), industrials (Caterpillar, GE Vernova, Lockheed), semiconductors (Micron at $430B market cap, Applied Materials, Intel, KLA, Sandisk), healthcare (J&J, Merck), and consumer staples (Walmart, Costco). Michael believes value outperformance will continue into Q2.
• Semiconductors are the bridge between AI and value: While asset-light software and AI spenders are being punished for margin compression, the semiconductor companies receiving those dollars (Micron, Applied Materials, KLA, Sandisk, Corning) are thriving. The AI trade is bifurcated: spenders down, recipients up.
• Stocks mentioned as beaten down: Tesla, Adobe, Salesforce, CoreWeave, Apollo, Blackstone, KKR, Ally Financial, Capital One, Visa (-20%), MasterCard, American Express (-22%), Robinhood (-54%), Coinbase (-60%), Block (-80%), Nike (-75%), Walt Disney (-50%), Target (-55%), Microsoft, Netflix. These are popular retail-owned names.
• BlackRock launching a Nasdaq 100 ETF (IQQ) at 12 basis points versus QQQ’s 18-20 bps. New money, especially institutional and non-taxable accounts, has reason to choose the cheaper product. However, QQQ’s $376B in AUM has a defensible moat due to embedded capital gains in taxable accounts, derivatives infrastructure, and liquidity for active traders. Tax-loss harvesting between QQQ and IQQ could be a play. State Street also entering the space.
• JP Morgan (JPM): Jamie Dimon’s annual letter highlights ROTCE consistently at 20% vs. Wells Fargo at 14%, BofA at 15%. Stock has outperformed the financials index across 1, 5, and 10-year periods. Josh is a long-term holder, emphasizing the fortress balance sheet and the bank’s ability to acquire distressed competitors (Washington Mutual, Bear Stearns, First Republic).
• AI revenue is exploding: Anthropic’s annualized revenue run rate hit $30B (up from $9B at end of 2025), with 1,000+ enterprise customers spending $1M+ annually. OpenAI raised $122B at an $852B valuation (Amazon $50B, SoftBank and Nvidia $30B each). ChatGPT’s ad pilot hit $100M annualized revenue in six weeks. The enterprise software selloff makes sense because AI spending is cannibalizing traditional software budgets.
• Biotech (XBI, IBB) is breaking out: XBI (equal-weight biotech ETF) looks technically strong with $130 as the upside trigger. IBB (cap-weighted) has already moved. The equal-weight version may have more room to run relative to cap-weighted.
• Mystery chart is Netflix: Hosts are bullish, seeing $120 as next resistance. Risk/reward is favorable with support at $90 (risk 9 points to make 20). Strong fundamentals with recent price increases, live sports rights, and growing earnings.
• What could break the bottom call: An escalation in the Iran conflict — specifically an event like an oil tanker attack or full-scale invasion — would push the VIX above 30 and retest lows. The Strait of Hormuz remains the key pressure point, with Iran effectively taking tolls on 20% of seaborne oil.

Chapter Summaries

Is the Bottom In?

The S&P 500 has rallied for four consecutive days despite extreme rhetoric from President Trump regarding Iran (threatening to “wipe out a civilization” by an 8 PM deadline). The VIX at 25-26 suggests markets are not taking the threats at face value. Ed Yardeni publicly called the bottom, citing Trump’s speech and corporate earnings reports suggesting resolution. The hosts discuss what would invalidate the bottom thesis: a major escalation like an oil tanker attack or full-scale invasion. Trini Research sent an analyst through the Strait of Hormuz and confirmed it is not closed but Iran is extracting tolls. Earnings season starts with banks and Delta reporting, which should redirect market focus.

Signs of Panic and Bottom Indicators

Three data points support the bottom thesis: (1) smallest option traders spent a third of volume on protective puts, matching only COVID-era levels; (2) three-month flows into money markets and cash ETFs are at historic extremes; (3) 53% of tech stocks are already up 5% from the local bottom. However, the hosts acknowledge this could be a Q2 rebalance effect rather than a true bottom, as the prior quarter was the worst for stocks since 2022. Confidence levels are modest: 59-60% probability.

Dividends: Do Investors Understand Them?

A tangent into dividend mechanics reveals that according to polling by Meb Faber, only 25% of individual investors understand that a stock’s price adjusts downward by the dividend amount on the ex-dividend date. Most retail investors think dividends are “free money” similar to bank interest. Even among professionals, only 60% understand the mechanics correctly (versus 90% of Meb’s more sophisticated audience).

BlackRock’s New QQQ Competitor

BlackRock is launching IQQ, a Nasdaq 100 ETF at 12 basis points, challenging Invesco’s QQQ at 18-20 bps. QQQ has $376B AUM (45% institutional, 55% retail). Invesco’s original 1999 UIT structure meant they netted almost nothing from QQQ for 26 years due to licensing costs to Nasdaq and trustee fees to BNY. The embedded capital gains in taxable accounts protect existing QQQ holders from switching, but new institutional and non-taxable money will likely favor the cheaper product. The precedent is IEMG overtaking EEM ($136B vs $25B) in emerging markets. State Street is also entering the space.

Buying Winners: The Great Rotation

Return dispersion in the S&P 500 is more than five standard deviations above the long-term average, only higher after the dot-com crash, GFC, and COVID reopening. The Mag 7 has shed $2+ trillion in market cap, which has flowed directly into energy, industrials, semiconductors, healthcare, and defense stocks. The top S&P 500 contributors year-to-date are physical, asset-heavy businesses with low obsolescence (ExxonMobil, Walmart, Micron, Chevron, J&J, Applied Materials, Caterpillar, Costco, Intel, GE Vernova). Value vs. growth spread is the widest since 2001. Meanwhile, popular retail-owned names are deeply negative.

Jamie Dimon’s Annual Shareholder Letter

The 48-page letter showcases JP Morgan’s dominance: 20% return on tangible common equity vs. peers at 7-15%. Stock has dramatically outperformed the financials index over every time frame since the 2004 Bank One merger brought Dimon in. Assets entrusted to the bank have grown to $41 trillion. Josh argues Dimon’s credibility comes from actual shareholder returns, not just commentary. While the letter will never rival Buffett’s in cultural reach, it is essential reading for financial services professionals. The fortress balance sheet and disciplined risk management — plus opportunistic acquisitions of distressed competitors — are the core thesis for long-term holders.

OpenAI, Anthropic, and the AI Revenue Explosion

OpenAI raised $122B at an $852B valuation (Amazon $50B, SoftBank $30B, Nvidia $30B). Anthropic’s revenue run rate tripled from $9B to $30B since late 2025, with enterprise customers spending $1M+ doubling from 500 to 1,000 in under two months. ChatGPT’s ad program hit $100M annualized in six weeks. For context, these AI companies are approaching revenue levels of Charles Schwab and McDonald’s (~$27B). The enterprise software selloff is logical because AI spending is directly cannibalizing traditional software budgets. OpenAI’s acquisition of tech podcast TBPN for ~$100M drew skepticism (including from Ben Thompson of Stratechery), but Josh argues it gives Sam Altman a controlled media channel ahead of a potential IPO — similar to how owning media has been strategic for other tech leaders.

Biotech Breakout

XBI (equal-weight biotech ETF) and IBB (cap-weighted) are both showing strong technical setups after healthcare underperformed throughout 2025. XBI has $130 as the key upside trigger and appears cheaper on a price-to-sales basis than its 2021 peak. The hosts have multiple biotech names in their “best stocks” list.

Mystery Chart: Netflix

The mystery chart is Netflix, which Josh looks at daily. The technical setup shows support at $90 with resistance at $120, offering favorable risk/reward (risk 9 to make 20). Fundamentals are strong: recent price increases, comprehensive live sports rights, and accelerating earnings growth. The stock is consolidating and appears ready to break higher if it can clear $100 and hold.