Steroid Era With Spencer Jakab, the F***’s Going on With Strategy?, Margin Debt

**Josh Brown** (0:12)
Michael, the chat is booming right now, I have to say.

**Michael Batnick** (0:16)
So it's the stock market.

**Josh Brown** (0:17)
Yeah, all the gangsters are here. There's a lot going on. Oh, thanks for all the Nike updates, guys. I appreciate it. I don't know what's going on.

**Michael Batnick** (0:26)
Don't be salty. This is the life we chose.

**Josh Brown** (0:29)
Yeah, imagine it was up 4%. I would be insufferable right now.

**Michael Batnick** (0:33)
That's true.

**Josh Brown** (0:34)
All right, we're gonna get to Nike later in the show. I wanna say a quick couple of hellos to the chat.
A lot of our OGs are here. Matt Stavick in the house, C Paul Breezy, what up?
Just Dave is here. Have you seen Michael Jordan lately? He's gained a few pounds. I think he's earned that, Dave, to be honest. Georgie D says, squawking friends, okay? Not sure where we're going with that. Shapiro, full-time pounder, we appreciate you, brother. Thanks for being here. All right, and everyone, I don't get a chance to say hi to. I see you. I'm thrilled to have you here. All right, one more. Jackie Jimratt is back from the greatest city on earth, Philadelphia. Debatable, Jackie, but we love you. Thank you for being here. All right, tonight's show is brought to you by IMGP. Wait, what is it? It's DBMF, a market leading managed futures ETF.
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**Michael Batnick** (1:42)
That's right, Josh. When inflation increases and stocks and bonds move together, DBMF aims to provide a new generation of investors access to an alternative way to diversify through a single liquid active ETF according to Bloomberg. It's, quote, how to beat hedge funds at their own game. Okay, to learn more about the alt solution for the model revolution, check out www.dbmf.com.
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**Josh Brown** (2:24)
Thank you to the folks at IMGP. We appreciate you.
All right, so we're going to talk about earnings, which obviously is the main story in the market this year.

**Michael Batnick** (2:34)
It's a bonanza.

**Josh Brown** (2:35)
Earnings growth is significantly better than economic growth.
Earnings growth is the reason why we are where we are in the market. We are not getting here. Thanks.

**Michael Batnick** (2:45)
Oh, who the what?

**Josh Brown** (2:47)
Who could that be?

**Michael Batnick** (2:48)
Dad?

**Josh Brown** (2:49)
Oh, my God. It's Spencer Jakab from The Wall Street Journal. Ladies and gentlemen, what brings you to the neighborhood tonight?

**Spencer Jakab** (2:57)
And I thought I'd check in, talk about earnings growth. So I jumped into the discussion.

**Josh Brown** (3:02)
You overheard us talking about earnings growth and you decided to come by. Well, we appreciate it. It's you know, it's such a coincidence that you're here because we were literally about to talk about your excellent piece in your newsletter for The Wall Street Journal this morning. It's just like one of those serendipitous things.
It's hard to explain even. So, all right. We're super happy.

**SPEAKER_4** (3:23)
We're both on the call. Thank you.

**Josh Brown** (3:27)
We're super happy to hear.
Spencer, I want to quote you and then I want you to react to it. You did this really, as I mentioned, really good piece about the earnings growth this year. And your title was Earnings Forecasts Are On Steroids. And it's clever, it's a good way of thinking about it. I think it's exactly right. There are a lot of asterisks to what's happening to produce the sort of earnings growth that we're getting this year.
And then this is exactly what you said. The first clue about how unusually profitable the quarter has been is that analysts raised their earnings per share forecast for the S&P 500 by 3.4% since the end of March. And you note, analysts typically lower their earnings expectations during the quarter, which that's how we get all these surprises in the next quarter. But the average reduction has been 2.7% over the last 40 quarters. Okay, so right off the bat, this is a very unusual situation where we're actually raising the ante in the midst of the quarter itself. Tell us more.

**Spencer Jakab** (4:32)
Well, you got a couple of things going on. You know, one is that what's holding up earnings is that you have these hyperscalers spending a lot of money, but it's only going to the P&L pretty slowly because they've extended the depreciation of all these chips and equipment and servers that they're buying. And it's revenue, it's immediate revenue and profit for other people in the market. And so that's kind of turbocharging the earnings. But there's going to be a, you know, help to pay for that later on when it goes into reverse. Another thing, though, is very interesting is that the stakes in these still private AI companies, I mean, Anthropic, Open AI, but also other companies you haven't heard of, a lot of them are, the stakes held by companies like Nvidia, Alphabet, those stakes have to be revalued according to accounting rules, according to GAAP accounting rules.