Sell-side Indicator (BofA) is almost on Sell, Vix is still asleep, the Bear Case revisited, FICO massacred | WAYT?

Fair Isaac

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Josh Brown · Ritholtz Wealth ManagementBearish

  Fair Isaac's credit-scoring monopoly vanished in one summer as Rocket and United moved to VantageScore after its price hikes.

  FICO's monopoly was ripped away in a single summer as Rocket and United shifted to VantageScore, which Rocket says qualifies more buyers and saves borrowers about $1,600 per loan. After FICO raised its price from 60 cents to as much as $10, the advantage vanished 'overnight' like an earthquake. Analysts have cut the stock and securities-fraud investigations are probing whether management misled on regulatory risk.

  “This monopoly was ripped away from Fair Isaac in the span of the summer of twenty twenty six.”at 34:54

• Michael Batnick · Ritholtz Wealth ManagementNeutral

  Fair Isaac is down 60% as VantageScore erodes its pricing power, but fundamentals haven't deteriorated; he won't call it a buy.

  FICO was the best-performing S&P 500 stock since 1990 as of November 2024 but is now down about 60% and the worst S&P stock this year. A federal housing regulator move let VantageScore (owned by the three credit bureaus) be used, and Rocket went from 0 to 41% and United from 0 to 26% usage within months. FICO's pricing power is gone, yet fundamentals haven't deteriorated (guidance raised, heavy buybacks), so he won't call the stock a buy and says no one knows the right valuation for the new company.

  “It's very unusual to see a stock down 60% with little fundamental deterioration... I'm not saying the stock is buying. Have no idea.”at 35:21

NVIDIA

Across the shows: 9 speakers in other episodes, 10 bullish and 3 bearish calls, past 30 days

• Michael Batnick · Ritholtz Wealth ManagementUncertain

  Nvidia's compressed multiple reflects its roughly $6T scale more than earnings sustainability, and nothing can push the multiple higher.

  Nvidia at almost $6T and an all-time high is bigger than several S&P sectors combined, raising a scale question about how large it can grow. He thinks the compressed multiple says more about scale and what investors will pay for such a large company than about earnings sustainability, and asks what could push the multiple higher, concluding nothing can.

  “I don't know that NVIDIA's compressing multiple says as much about the sustainability of the earnings story as it says about scale... how much investors are willing to pay for this company, just given its size.”at 40:47

• Josh Brown · Ritholtz Wealth ManagementNeutral

  Nvidia's multiple stays near 21x despite huge earnings growth, and its buybacks and cash flow help support the broader market.

  Nvidia at ~$6T is larger than staples and energy combined, yet trades near 21x earnings despite ~85-90% earnings growth because active managers are structurally underweight and will not overweight it. Nothing management can show will push the multiple higher; instead Nvidia uses exploding free cash flow to buy back stock and make equity investments, effectively supporting its own market cap and, in turn, the broader market. Brown frames this as a capital allocation challenge and an unprecedented dynamic.

  “They have a treasury that's exploding with free cash flow... they're buying back stock... And I think it's helping to hold the market up, quite frankly. It's crazy that one company's cash flow is enabling it to support its own market cap.”at 42:20

Meta Platforms

Across the shows: 7 speakers in other episodes, 11 bullish and 3 bearish calls, past 30 days

• Josh Brown · Ritholtz Wealth ManagementBullish

  Meta's roughly 30% stock rally after launching Muse changed bond-market sentiment, so bond buyers followed the equity signal on Meta.

  Meta's stock ripped about 30% in two weeks after launching its Muse product, and he says that shifted the debt conversation. Fixed income buyers watch equity prices, so with a hot new product to monetize, investors stopped treating Meta bonds like CoreWeave bonds. The bond market is following the equity signal, not leading it.

  “the minute Meta launched Muse and the stock price ripped 30% in two weeks. All of a sudden, I think that changed the conversation about the bond offerings to fund the AI data centers”at 27:53

Apple

Across the shows: 3 speakers in other episodes, 0 bullish and 2 bearish calls, past 30 days

• Josh Brown · Ritholtz Wealth ManagementUncertain

  An antitrust win forcing Apple to cut its App Store take rate below 30% would be catastrophic, but it's slow-moving.

  A powerful official, likely under Democrats, could eventually win an antitrust case forcing Apple to open the App Store at a take rate below 30%, which would be catastrophic for Apple. But the process is slow and no single person has the power to demand it, so the risk is real but distant.

  “somebody could actually win an antitrust case that gets them to open up the App Store at less than a 30% vig. Yeah. That'd be catastrophic. The thing is that's slow moving.”at 37:48

Valero Energy

• Josh Brown · Ritholtz Wealth ManagementNeutral

  Refiner Valero benefits from a de facto oligopoly with no new US refineries since the 1970s, though regulatory change is far-fetched.

  Refiners (Valero, Phillips 66, Marathon) are the top three performers in the XLE, helped by diesel strength and a de facto oligopoly because no new US refinery has been built since the 1970s. A single regulatory stroke allowing new entrants would force a rethink of pricing power, though Brown calls it far-fetched. He notes the stock has gone from ~$100 in late 2024 to $400+, and that their Porterhouse strategy had to trim Valero for violating position-size limits while remaining long it as the biggest holding.

  “we haven't built a new refinery in this country, I think, since the nineteen seventies. So you sort of have three companies that own all refining capacity, Valero, Phillips, and Marathon, which are the numbers one, two, and three performing stocks in the XLE this year.”at 38:20

American Express Company

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Michael Batnick · Ritholtz Wealth ManagementBearish

  American Express getting mauled is the meaningful consumer warning, since it reflects top and middle of the K-shaped consumer.

  Within consumer discretionary he treats most weakness (McDonald's, Home Depot, Pepsi) as idiosyncratic or rate-driven, but American Express getting mauled, along with Walmart and TJ Maxx, is the warning that matters. Brown agrees it reflects the top of the K and much of the middle of the K, making it a better signal than Home Depot given the known housing weakness.

  “Amex. That's screaming. American Express is an important stock, and it's getting mauled.”at 51:28

ARK Invest ETFs

• Michael Batnick · Ritholtz Wealth ManagementBullish

  A breakout in a composite of ARK's seven ETFs signals genuine risk appetite as money rotates from staples into speculative growth.

  A composite of Ark's seven ETFs of speculative growth names shows a technical breakout, which he reads as evidence of real risk appetite; money is moving out of defensive areas like staples and into risk-on areas like technology and the stocks Cathie Wood fishes in. He says Cathie might be back, though it can reverse instantly and the buyers are behind it for now.

  “If you look at where money is going to, it's going away from defensive areas of the market like staples... and it's going to risk on areas like technology and in particular, the stocks... the pond that she fishes in. The market... can reverse at an instant, but the buyers are behind it for now.”at 53:37

US stock market outlook

• Michael Batnick · Ritholtz Wealth Management

  Despite poor breadth, US equities should resolve with the rest of the market catching up to the index, not a decline.

  Breadth has deteriorated sharply: the unbroadening has tech at new highs while only one in three stocks outperform the index, stocks above their 200-day fell from 75% to 40%, and 29% of the Russell 3000 is in a 30%+ drawdown. Yet he is optimistic because a theme of this bull market is that breadth divergences resolve with the rest of the market catching up to the index, citing Duality Research showing tech-led divergences to the downside were not sell signals while the true warning came when the rest of the market strengthened as tech weakened. He hedges that this is not set in stone and later says he is no longer bullish on the Mag 7 as defensive.

  “one of the themes of this bull market is that anytime you see the breadth divergence, it is the rest of the market that catches up to the index. That is not set in stone forever and ever. But right now, that has clearly been the trend.”at 46:36

• Michael Batnick · Ritholtz Wealth Management

  Consumer staples like Pepsi are weak because a 3% dividend yield can't compete with 5% Treasuries.

  Staples like Pepsi are weak because higher interest rates make a ~3% dividend yield unattractive versus a 5% Treasury. Money is flowing away from defensive areas like staples and toward risk-on areas such as technology and speculative growth.

  “Pepsi, you could explain away higher interest rates are terrible for consumer staples. Why would you want Pepsi's three percent dividend yield... when you could buy a treasury for five?”at 51:17

• Josh Brown · Ritholtz Wealth Management

  Investors seeking defense in 2026 default to Apple, Microsoft and Nvidia, making the Magnificent Seven partly defensive.

  He thinks investors who want defense in 2026 default to Apple, Microsoft, and Nvidia as the easy button, since staples and utilities are hobbled by rates. He concedes the stocks aren't cheap and that they are used as offense as often as defense, but says there is a defensive flavor to the buying.

  “I think the Mag seven is defensive in a way that utilities and consumer staples are not... I think they're being used by stock market investors as defense as frequently as they're using... Being used as offense.”at 54:13

• Josh Brown · Ritholtz Wealth Management

  Consumer staples aren't truly defensive; they're rate-sensitive and squeezed by oil prices and a weak bottom of the K-shaped economy.

  He argues staples and utilities are not truly defensive right now but rate sensitive: they face high oil prices, weakness at the bottom of the K, and competition from 5% bond yields against their ~3% dividends. As a result, investors seeking defense are defaulting to Apple, Microsoft, and Nvidia.

  “I don't really think consumer staples are terribly defensive. I think they're rate sensitive. People choose between the dividend, they get there, or an interest rate from somewhere else.”at 54:33

• Josh Brown · Ritholtz Wealth Management

  Utilities share staples' problem: dividend-focused defensives lose appeal when bonds yield about 5%.

  He says utilities share the same problem as staples: dividend-focused defensive stocks lose appeal when investors can earn about 5% in bonds, so they are not functioning as defensive havens in 2026.

  “Utilities have the same problem... And so what are people doing who wanna get defensive in the modern market of 2026? I think they're buying Apple, Microsoft, and NVIDIA.”at 55:09

• Michael Batnick · Ritholtz Wealth Management

  The Magnificent Seven are not defensive, and Batnick has become less bullish given the breadth divergence.

  He rejects the idea that the Mag 7 are defensive, saying that framing is just muscle memory from stocks that historically got investors out of trouble, and that the divergence has made him less bullish.

  “I'm not bullish anymore... The max seven, they're not defensive. Just stop.”at 55:55

Market sentiment, positioning & volatility

• Michael Batnick · Ritholtz Wealth Management

  Market's message is stay bullish on US equities despite the near-sell-signal and rate risks; a decline would need a surprise.

  He reads the market's message as stay bullish despite the BofA sell-side indicator nearing a sell signal. Rising rates and multiple risks haven't dented stocks, and a real decline would need a surprise because investors already know about rates, inflation and the Fed. He expresses surprise that the VIX is still 16 and the index is hitting highs.

  “I listen to the market... right now, I think the message is pretty clear, and I don't think it's telling you to sell even though it's very easy to draw that conclusion.”at 4:12

• Josh Brown · Ritholtz Wealth Management

  US equities keep punishing bears: record highs, no 5% pullback, rising earnings, contracting multiples, and strategists too burned to turn bearish.

  The market has repeatedly punished anyone who sold or turned bearish over the last 17-18 years, and the index is at an all-time high with no 5% pullback. Earnings keep beating and guidance keeps rising (e.g. 36% Nasdaq earnings growth), yet multiples are contracting despite the market being up 14%. He summarizes 2026 as 'no fear, tons of doubt' and says strategists are reluctant to get bearish because they keep getting burned.

  “the message of the market is I dare you to sell... We're not even in a 5% pullback from the high, which is pretty remarkable given all of the things that we're contending with.”at 4:45

• Josh Brown · Ritholtz Wealth Management

  BofA's Sell Side Indicator near a sell signal shows strategists bullish, but it's no hard stop on the bull market.

  BofA's contrarian Sell Side Indicator is 30bp from a sell signal, showing strategists increasingly bullish in their recommended equity allocations. He treats it as another arrow for contrarians, not a hard stop on the bull market. He adds an asterisk that strategists are afraid of being wrong-footed and 'Mike Wilsoned', which keeps allocations high and may blunt the signal.

  “I would not say a break above this red line puts a hard stop on the bull market, but it's just one more notable thing that the street has grown increasingly bullish in terms of their allocation recommendation.”at 9:19

• Josh Brown · Ritholtz Wealth Management

  VIX is pinned near 16 because mega-cap stocks pacify it, despite rising FX and bond volatility; an October flush is possible.

  Renaissance Macro's Jeff DeGraaff chart shows the VIX flatlined near 16 since March while FX and bond-yield volatility rise, which Renmac finds ominous. Brown attributes the calm VIX to the mega-cap stocks (Apple and Nvidia at records, Microsoft stabilizing, Meta rallying) that dominate the S&P. He allows that the setup could precede an October flush followed by strong earnings.

  “These are the gigantic stocks that are pacifying the VIX, or the holders of the S and P.”at 15:02

• Josh Brown · Ritholtz Wealth Management

  Brown expects a VIX spike in October or by Thanksgiving because equity volatility diverges from FX and bond volatility.

  He expects a VIX spike in October or by Thanksgiving because stock volatility is flatlined while currencies and fixed income show heavy volatility (Jeff DeGraaff's chart), October is historically volatile, midterm elections loom, and there is a slow-motion interest rate shock. He admits it isn't based on hard evidence, ignores the breadth internals as a signal, and is advising clients egregiously overweight stocks to rebalance, while saying he'd welcome a dip because he has cash to deploy. He would be proven wrong if bank earnings show a strong consumer and no credit losses.

  “How could stock market volatility flatline with this much volatility in currencies and fixed income? ... I just feel like we can't really have that much of a divergence and escape a short term doubt of volatility.”at 48:23

US rates & the Fed

• Josh Brown · Ritholtz Wealth Management

  With the Fed biased toward tightening, growth and inflation are in a bad-outcome quadrant; a 6% ten-year yield could hurt stocks.

  Renaissance Macro's market cycle clock places growth and inflation in the quadrant historically associated with bad outcomes (2018, 1987) when the Fed is raising rates. The Fed appears on pause through October but its bias remains tight, with tightening more likely than cutting. A 6% ten-year yield would, in his view, 'get the job done' in hurting stocks, though he doesn't expect it.

  “6% on the ten year would get the job done? Maybe. I mean, probably. I wouldn't argue that.”at 17:57

• Michael Batnick · Ritholtz Wealth Management

  Near term, rates easing and the rest of the market ripping is the constructive alternative to a VIX spike.

  He frames the near-term choice as rates easing to give a reprieve so the rest of the market rips and pushes the index higher, versus a VIX spike. He and Brown indicate they'd love the former but Brown bets on the latter; Batnick's own lean is the more constructive scenario given his breadth-catch-up thesis.

  “What's more likely for the duration of this month? Interest rates come in, give a little reprieve, and the rest of the market rips, pushing the index higher. Or we get a VIX spike because something happens.”at 59:22

AI infrastructure & data centers

• Michael Batnick · Ritholtz Wealth Management

  Michael Burry's GPU depreciation bear case is undercut because years-old GPUs like the H100 still rent at undiminished prices.

  Burry's bear case was that hyperscalers understate depreciation by extending asset lives and that chips would lose value fast. A16z data shows even years-old GPUs like the H100 still rent at undiminished prices amid a massive shortage, which undercuts the thesis. He also notes Burry's goalposts keep moving and that being negative so long has meant missed gains.

  “the reports of obsolescence greatly exaggerated. They showed the GPU is getting more valuable over time... The ones that are years and years old are not budging at all in terms of what people are willing to pay to rent them.”at 23:07

• Josh Brown · Ritholtz Wealth Management

  AI data center buildout continues despite political backlash, and Micron's rising guidance shows Burry's depreciation thesis is melting.

  Despite political backlash and moratorium calls, enough construction is underway and enough municipalities welcome data centers that the buildout continues. Micron's guidance is being ratcheted up rather than tempered, so he believes the orders and the replacement cycle, and thinks Burry's depreciation thesis is 'melting like an ice sculpture'.

  “there is enough construction currently in progress that's not going to be stopped, and there are enough states and municipalities that do want them.”at 24:33

Credit markets

• Michael Batnick · Ritholtz Wealth Management

  Hyperscaler bond financing isn't a bear-case pillar today: Paramount's debt offering drew $150 billion of orders against roughly $52 billion sought.

  A hypothetical bear case was that investors would stop showing up to hyperscaler bond auctions. A Paramount debt offering drew $150 billion of orders, nearly triple the ~$52 billion sought, showing the large amount of capital looking for a home. He says the credit-market pillar of the bear case isn't working today, though it may in the future.

  “Potential investors placed orders of $150,000,000,000 of Paramount debt... This idea that Amazon or Meta is going to have trouble building out the infrastructure from fixed income investors, not today.”at 26:13

US consumer

• Josh Brown · Ritholtz Wealth Management

  Banks' upcoming earnings are the tell: continued strong consumer and no credit losses would prove Brown's bearish short-term view wrong.

  He sees financial earnings as the key tell: his bearish short-term view would be wrong if upcoming bank earnings again report a gangbusters consumer, no lending losses, and no credit card concerns going into Q4. He does not expect the downside shock to come from technology earnings but from financials, so continued business-as-usual there would make him concede.

  “Where I will be wrong is if we start getting earnings reports from the financials, and once again, they come out and tell us consumer is gangbusters. No lending losses in sight. No concerns about credit cards... I will shut the fuck up.”at 49:59