Friend of the show, Michael Monahan joins us now PM at founder ETFs.
Good to see you again.
Thanks for taking some time.
Great to be here, JD.
So we are in the, I don't want to say we're quite in the middle of earnings Palooza.
We're kind of well past the halfway point, so to speak.
Better than expected.
Obviously we've got a lot of macro headwinds.
How are you thinking about market performance right now?
Obviously one day ahead of a pretty big CPI inflation print tomorrow, Michael.
You're right, we've had great corporate earnings reports, and you're also right, we've got a complicated macro situation.
We described it as three waves moving through the market.
We've got the Middle East instability, we've got the AICPE build, and then jobs.
Talk to me about the jobs component.
We got the jobs prints for the last month on Friday morning.
We were expecting a positive print of 83,000.
That's a pretty big swing and a miss to the downside. -23000 was the print into Friday's session.
No big surprise that rallied equities, but does it tell us there was maybe a bit more instability under the surface we have to contend with?
I think we certainly do have to watch job numbers.
It's our third wave, sort of bouncing between the Goldilocks of.
Fear of AI displacing jobs, but also if the economy gets too hot, it's going to put Warsch in a tricky spot.
So we think this jobs number gives Worsch the ability to not hike rates, and equities are liking that from a terminal multiple perspective.
Talk to me a bit more about Mr.
Worsch's job here, how easy or probably how difficult it is.
We've got 3 FOMC meetings left this year, one in September, October, the last one for December.
We didn't come into 2026 thinking rate hikes were on the table.
Now we're kind of split for September, but it's amazing how quickly the narrative has shifted, isn't it?
What do you see out of the Fed?
Absolutely.
And that's why we described it in the waves.
The waves come back and forth, and the sentiment has shifted multiple times.
We think we're going to see a Fed under Warsh where he speaks a little bit less, more of the Greenspan style, but I do think the data coming out, we've got a little bit hotter on some inflation metrics, energy as well, but I think these job numbers are going to give him.
The cover to hold rates steady, which we refer to as a phantom rate hike, excuse me, phantom rate cut.
Michael, give me, give me one part about these markets that you're following that you think we are not talking enough about.
I think the payoff in this AI investment is really what we need to focus on.
I was just with, uh, Ron Middlestet from Waste Connections.
It's an industrial stock, right?
Picks up your garbage.
He's been working on AI since 2018.
He's on his Q1 conference call this year, he said he was going to put $100 million into uh, into his AI objectives, and he thinks it'll pay back in $100 million of EBITDA next year.
So this aligns with some of the things that Brett Johnson said on the SpaceX call that you're getting a 1.
Year payback on some of these investments.
I don't think people are recognizing that.
I think more people need to see that and what it will do for corporate profits.
Yes, you mentioned AI and hyperscalers.
I think this is the first time since you and I have spoken, since we've heard from Alphabet, some of the other so-called Magnificent Seven tech stocks.
There's an awful lot of spending that is being done right now with no, not necessarily any promise or guarantee of the future return of those profits.
What have you made about what we've heard on a lot of those earnings calls as of late?
So I'd give a little light pushback on the no chance of earnings.
Remember, Google talks about their business growing at 80% with 35% operating margin.
The Brett Johnson statistic I gave you, the Ron Middlestadt statistic that I gave you, we're putting $1 in and getting a $1 back right away, one year payback.
So we think there's a very good investments.
We do think what's concerning the street is some of these companies that had a near monopoly.
Let's Focus on Google had a near monopoly and display search, but now they're competing against Elon Musk, right?
They're competing against Amazon in these data centers, and so they've gone from a near monopoly into a very good business but with very good competition.
Yes, of course.
All right, Michael Monahan, PM and founder ETS, one of our favorite guests here on the broadcast.
Please come back and see us anytime.
Good to see you anytime.
Great to be here.
You have a great show.
