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The FED – keeps rates unchanged SpaceX announcing IPO plans Investors cautious on CaprEx spending plans And our guest …

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This episode is brought to you by our good friends at Interactive Brokers. And are you ready to take control of your financial future? Meet Portfolio Analyst from Interactive Brokers. The free all- in-one dashboard that lets you consolidate, track, and analyze all your financial accounts in one place. You don’t need an IBKR account to use it. Just connect your accounts and see your complete financial picture, investments, your performance, and allocation all in a single screen. Plus smarter. Yeah, you can be smarter and plan smarter with IBKR’s new tax and retirement planners built around the goals and market assumptions that are yours. Get deep portfolio insights and detailed risk assessments and compare performance against more than 300 benchmarks. Plus, manage with confidence thanks to GIP’s verified returns. Are you ready to get started? Sign up for portfolio analyst free for everyone at ibkr.comfreepa. Interactive brokers. The best informed investors. Choose interactive brokers. Remember sipc. The disciplined [music] investor is all about you, your money, and the markets. Sit back and get ready [music] for this edition of the disciplined investor podcast. This [music] episode of The Disciplined Investor is sponsored by Horowits & Company. If [music] you’re looking for a portfolio manager, look no further. Horowits & Company. From seed through harvest, [music] cultivating financial success. [music] >> The Fed keeps rates unchanged. SpaceX announcing IPO plans. Investors are cautious on capex spending plans for tech companies. And our guest today is the one and only Frank Kerio from Kurio Research. All this and much more on episode number 958 of the Disciplined Investor podcast. [music] [music] Hey there, it’s Andrew Horowitz. It’s chilly. The whole country is cold. [music] It’s cold here down in South Florida. Actually, this weekend 30° to wake up to that in South Florida when we’re talking about freezing temperatures. Of course, that causes all sorts of problems for the crops down here, the oranges, and we’re just not we’re just not used to it. I mean, it’s it’s pretty cold. That doesn’t uh at all compare to some of the cold that you’re do, you know, that you’re seeing out there, but okay. Okay. It’s going to pass. Stay indoors, stay safe, stay warm. It’s like anything else, whether it’s a weather event or a market event, usually things resolve and things get back to normal. That’s what we saw a little bit last week, right? A little bit of an event that happened after the earnings calls from the the tech companies where their capex was uh pretty uh significant. And we also saw maybe a postfed letdown in that they’re not going to just simply reduce rates and cut rates on a regular basis, but they’re going to look for data. And back, let’s start talking about that. Uh, if I didn’t introduce myself, I am Andrew Horowitis. I am the host of the disciplined investor and uh, of course the um, the co-host of DH Unplugged where John C. D’vorak and I get together each week and talk about things related to well markets, news, and everything in between. If you want to find out more about what we do, how we do it, go over to the disciplinedinvestor.com. I’ll give you more information on that in a second. But let’s focus in on the Fed, shall we? Let’s start the the show today with that because there was no change. Fed had no change in their statement. And they said things like in support of our goals, the committee decided to maintain the target range for the federal funds rate at again a range of 3 and a half to 3.75%. I still am in a quandry why we can’t just have a fixed rate. Just say it’s going to be, you know, 3.25% and be done with it. This range thing is pretty ridiculous. Obviously, it gives them a little bit of wiggle room when it comes to who pays what and what is paid. But there we are. The Fed also said that available indicators suggest the economy, the activity in the economy has been expanding at a solid pace. They said job gains have remained low and the unemployment rate has shown some signs of stabilization. At the same time, they they confirmed that inflation remains somewhat elevated. Now, two of the Fed voting parties dissented. Voting against the action was Steven Mirren and Christopher Waller, who preferred to lower their target range for the Fed fund rates by a quarter percent at the meeting. So, what else? What else do we have? We have um well, you have tariffs, right? Um, what do we have last week? We had we had Canada, we had issues with China, and we had more issues with well, Greenland’s finally over. And then we had the potential for um tariff increases on South Korea or increases, not potential, I guess. and and and even so the markets in South Korea, the Cosby hit an all-time high. The day that the announcement was made by increasing the tariffs because they weren’t living up to their end of the bargain on the plan and the framework that was being proposed, the market dipped 1% in the overnight hours, but picked up and ended up three and a half% higher after the president of South Korea said, “You know what? Hey, we’re going to stick to what we’re doing. Don’t worry about it.” a lot of those kinds of bluffer blustering and puffery that goes on that reverses pretty quickly. Few things I want to talk about today. I want to talk about the highly anticipated SpaceX IPO. It’s now actively in motion. We have multiple reputable sources that are telling us and confirming that the company is preferring somewhere around a mid June IPO. And this will be one of the largest, possibly the largest IPOs in history. They’re aiming for a valuation of $1.5 trillion dollar, which is nearly double the $800 billion valuation from the private secondary share sales that they did back way back way way way back in December. So, we’re talking about a month of time that this stock potential has doubled. a little absurd. I know there’s great things, right? There’s great things with this. Bank of America, Goldman Sachs, JP Morgan, Morgan Stanley, they are all the banks that are going to be running this thing and they’re going to run this hard. Now, the company’s looking to uh raise somewhere about $50 billion. So, there’s going to be about a I think about a three or 4% float on the deal. And this will be the largest capital raise in IPO history, surpassing the $29 billion that uh we saw in 2019 by Saudi Aramco. Remember that? Everybody’s like, “Oh, wow. That was a big one.” Now, Starland does have $ 8.5 million subscribers, hundred billion dollars or close to no, excuse me, 10 billion, not 100. No, 10. [clears throat] I don’t know why I was thinking 100 10 billion in annual recurring revenue. And SpaceX is is is planning to use the IPO proceeds to accelerate Starship development, build orbital data centers, which means data centers that are well, it’s they’re thinking about putting data centers and things on Mars, but right now we’re just going to get into space. Kind of interesting. And fund the Mars and Moonbased Alpha initiatives. What’s interesting about this right now is that Elon Musk is finally going to IPO this because he had long since wanted to keep this private due to a lot of the factors involved in what he could do, right? He has to give up some of the control here in theory, but why not? I mean, this has doubled in a month. So, capitalize and rugpull is what I see coming here. We also have to discuss today Tesla’s earnings. We could talk about Microsoft with with Frank and all, but we have to talk about that. I thought that while the earnings were okay on Tesla, there was this really moment when the revelation that the S and the Y are no longer going to be in production. And you can’t have sexy without an S or a Y. Right. Right. S or X. Sorry, let me let me correct that. It’s S or X, not S or Y. the X and the X. Still can’t have sexy without the S or the X. But the other thing that was really I thought huge was this spend that’s going to be taking place on chip manufacturing and warehouses for that and the change to really focus in from the production of the cars that are bringing in revenue, right? the S and the X to building humanoid robots and robo taxes. And we don’t even have any idea of the TAM or the potential revenue from the robots and and probably from the robo tax. Everybody’s all shot up and excited about the robo taxes, but we really we don’t have an idea really of what the reach is for that. But we’re going to get on all this. We’re going to talk to our guest about this. I want to make plenty of room for discussion because, you know, when Frank and I get together, there’s a lot to talk about. Not a lot of room for each other to talk cuz the other one is talking about what’s going on. But with the information flow from Frank is incredible. Of course, the show notes, everything that you want to find out about Frank and about what we’re doing here, you can go over to the disciplinedinvestor.com. And I mentioned that we have plenty of information on there, the strategy on there, you know, for clients. And I would encourage uh in these particular uncertain times, there’s no better time to get a second opinion on your portfolio. And yes, our portfolios have been doing great this year. There’s some good things that are happening internationally with commodities and all that. And maybe yours are too. But at the same time, you know, things happen. All of a sudden, investments go a little sideways. Markets go crazy. VIX pops to 20 like it did on Thursday. And all of a sudden, there’s a change. We’ve been riding along a wave for a long period of time here, folks. We know this. You know this of nothing matters. Just let’s push it in. Every dip is to be bought under all circumstances. There is no variation to that rule. That’s the theory that’s in the markets. That’s how we see it. But again, there’s no better time for a second opinion on your portfolio. Head over to the disciplinedinvestor.com and check it out. Now, before we get to our guest, I think it’s important to know and to bring this up again that Interactive Brokers has key competitive advantages for sophisticated and disciplined investors like you. IBKR’s margin loan rates, listen to this, are from just 4.14% to 5.14%. In fact, IBKR was rated one of the lowest margin fees by stockbrokers.com. Did you know that? I want you to compare IBKR’s clients low margin borrowing cost the other brokers like Schwab or Erade, Fidelity, Vanguard who charge hundreds of basis points above IBKR’s low rates. Listen, the best informed investors choose Interactive Brokers and Margin is only for experienced investors with a high risk tolerance. because you may lose more than your invest initial investment. Rates are subject to change. Get started today at ibkr.com/compare. That’s ibkr.com/compare. Interactive Brokers is a member of SIPC. Now, let’s bring in Frank. He’s an equity analyst with close to three plus decades of experience covering small and midcap stocks. He’s a newsletter. We actually have the link to his free trial of his newsletters over on the disciplinedinvestor.com for show notes episode number 958. He has been the editor of several wellrespected newsletters with major companies as well as one of the top performers with the street.com where he significantly outperformed the markets during his tenure. He was also a research analyst. Did you know this for Jim Kramer? He’s also host of the really great podcast called Wall Street Unplugged. Frank dives deep. This is what I like about him and why I bring him on. He goes deep into trends of some of the things that are happening right before our eyes and some of the things that are undiscovered, finding what I think is great opportunities for all of us. So, let’s bring him right on. Frank Kerszio. So, welcome back, Frank. How are you? >> I’m doing good. How you doing, buddy? >> Good. I know you’re just back from Vancouver, so you’re used to the cold. Although you live in in in well, I was going to say warm warm Florida, but it’s not as warm as it was. I was talking about that at the top of the show, how it’s going down to the 30s this weekend and you know, throughout the weekend it’s going to stay there and then uh into next week. But um how was Vancouver? >> It was nice. It was in the 30s there, right? So uh and I think we’re getting 19 degrees, so it’s pretty crazy. But uh you know uh but it was amazing because this is a mining conference that I’ve gone to pretty much for the past 10 years. Been covering the sector around 15. Have great contacts in it. Some of the biggest names in the industry and it really been a a a crap show for a while, right? And even last year it wasn’t really that good. This year it was insane. I mean it there was it took me 20 minutes to get my badge. There was it felt like there was a thousand people there. These people paid $2,500 each. It was jammed. It it was very very packed. standing room only in in a lot of the the speakers and presentations. Uh and good for them, right? I mean, they’re doing deals. They’re rocking and rolling. I mean, everything’s on fire. On fire is probably I’m not doing it justice by saying with silver like, you know, triple digits, gold. I mean, was it going up? >> Was this like a big like back in the days of, you know, major tech rallies and Bitcoin bros kind of thing that everybody was excited because the mining is just off to the races right now? >> It’s just off to the races. And I don’t think it’s for the reasons that that people are saying where, you know, you have high deficits. We’ve had high deficits since the 70s every single year, right? Just gets higher and higher no matter who’s in office. Uh, you know, you have this end of the world. I I think it’s more about the policies of Donald Trump where it’s more, you know, a little bit protectionism and, you know, you’re seeing demand in these sectors and you’re seeing rotation. You’re seeing uh, you know, you don’t have to worry about ddollarization or anything like that and craziness. you’re going to, you know, but you are definitely seeing a rotation where central banks are buying more gold, more silver, and and you’re seeing the retail investor come in. And the retail investor, as you know, >> is getting bigger. I think it’s what 20 25% of trading activity. I think I saw Morgan Stanley say a couple weeks ago. >> But the other thing, but but the thing that people, it’s interesting you mentioned that because the thing that I I believe that people don’t really understand is that 25% can act as a very big crowd and that doesn’t mean it’s 25% of the daily trading. the institutions can be sitting on the sidelines for a minute twiddling their thumbs not actually investing in silver at the moment and that 25% horde if you will right is is actively investing in it for one reason or another and moving things dramatically >> so that 25% is a big crowd that can you know especially if maybe even 10% could be a big crowd if it’s if they’re really going on momentum but let’s let’s talk about silver for a second because we know that so this renewed momentum um excitement And the you know the drivers of strength you talked about a few is it the idea that we have uncertainty is it idea you know the idea of deficits the dollar uh you know seeing a debasement and devaluization of the dollar but there’s some talk about the back back to the silver as a metal for industrial use and more importantly two things in particular one it’s the idea that silver is um you know used in semiconductor s and the more machines we have for AI that are being generated by various companies etc or the chips etc that silver is going to be used but two this this unproven idea that silver can be used in a mixture and compounding to create uh longevity of the lithium ion batteries that causes them not to have to be thrown out or extracted from a car after a certain period of time thereby making batteries pretty much um you know have have a much much much longer shelf life. So talk on those two topics. >> Uh I don’t know if it it’s so much. I mean it’s I the fundamentals that are taking place right now are different and that’s why people are so used to saying this is a cyclical market. Well it’s a cyclical market. You could base cycles on on whatever right the economy when it comes to these metals and commodities. It was the worst cycle we’ve seen I want to say in at least 40 years. And these are from people I’ve talked to have been in the industry for 40 years like the Rick Rules and you know the Cordaines and stuff like that. So uh you know Frank Gusters uh these these are all stars that have been in in this industry forever. And when you’re looking from 20112 through 2021 really I mean this is a market where gold went higher gold stocks and silver stocks got annihilated. Uh it it’s usually every 3 four years that’s a long period but now you could argue I wouldn’t call this a secular market but this cycle is going to be prolonged I think much longer than everyone believes. I came back from the conference. I saw these guys speak. A lot of them were like, “You should be taking profits.” In all fairness, they said that 6 months ago when silver was 70, it’s 60 and it’s, you know, well over 100 now. And, you know, gold was at least $1,200 less than where it is now. You know, well over 5,000. So, it’s different because the dynamics where you have the policies of the current administration with Donald Trump, that that’s significant, right? It’s more US-based. Okay? So, you know, it’s worrying other countries where you could just raise tariffs. Okay? Okay, we need alternatives. Okay, that that and that’s something that’s not going to change, right? So that’s something for the next three years that’s different than okay, we’re seeing our deficits go up to 40 trillion and all this stuff, right? Deficits continue to go higher, but also the AI trend is is very real. And now when you have an administration that’s saying, hey, these are critical metals, the rare earths, you’re looking at gold, you’re looking at silver, you’re looking at at uh copper especially, right? And then you’re looking at uranium. And not only are they critical metals, we’re understanding that if we’re going to grow and AI is this massive serious trend that I still feel like most people don’t understand how big this trend is that we’re going to need access to these metals without any interference where we could have, you know, 90% or whatever uh taking place in China, we need to get them done here. So they’re taking stakes in actual companies which adds to this bullish thesis of these metals where now the biggest risk is getting these mines developed right the biggest risk is the funding part. Now you have the government coming in writing loans and then you have private equity that gives private equity opportunity saying okay we have the government backs stop here now we could go in usually permits take 10 12 years that’s going to accelerate the process this is a different market for commodities than we’re used to seeing and I think this is going to be prolonged at least for the next you know you can go into three four five more years even longer for this where maybe you’re going to see the pullbacks in gold silver I think a little par parabolic right now and could pull back 30% and still be up tremendously over the past 12 months but I think you going to see this prolonged where any pullback is going to be met by a buying opportunity for gold, silver, especially copper and uranium. >> It’s interesting because there has been that going on already where there’s a bit of a pullback here and there whether it’s because and in fact I think the CTFC changed their requirements on margin where it was a dollar amount now it’s a percentage deal which changed things because they were going to have to actually in theory they’d have to start increasing margin rates like daily by the kind of moves that we’re seeing. They’re not used to these kinds of moves. Uh, you know, we we saw this back when there was the cornering of the silver market back when by the Hunt brothers, remember that? Uh, you know, kind of trading places kind of story. But you talk about, and you said this several different times, the policies of Donald Trump. So, just give me a quick down and journey on what you’re talking about. uh the government taking stakes in companies uh putting these critical metals on on these lists where you’re saying okay these medals are critical it’s a threat to national security uh we need these medals because of AI and AI is going to run the future >> so what we do is by the way what we do is so now our policy is either use the brute force of the United States government to buy into companies or use the brute force of the military threat to take stuff that we want. Is that how kind of we work now? >> You know what it I guess. And for anyone listening to this podcast, No, no, but listen, if you want to go there, there’s a million podcasts in politics and you can have fun and hold up signs and run into people and get pissed off. You’re we have a job here, you and I. You have to make money on stocks. >> No, no, but I think people need to know what what the base policy is so we can understand what to do. Therefore, >> base policy is this is that the government is going to continue to take stakes in companies that they deem that these metals are critical and that we need these things and that includes, you know, more fabs and that’s why the Intel uh deal went in. Now, now you can hate this and say this is so different. This is socialist as an investor. >> I don’t I don’t like it only because I was told not to like it for years by our government. Our governments our governments for the last 50 years, I’ll say 20 years, have been all about, you know, the whole idea of state-owned industry is bad, right? that’s not capitalism and and how do we do such thing and we’re going to fight that and we’re going to go against that and we’re going to put tariffs against China because their trade isn’t unfair and we’re like okay well let’s just do that too. It’s very confusing to investors I think. >> I don’t think it’s very confusing at all to be honest with you really. >> I think you Yeah. Invest in the companies that the government’s investing in. It’s very simple. >> Okay. Well, that’s not confusing, but it’s confusing how they changed their tune is what I’m saying. >> Well, I mean and and more so, Frank, just one more thing and then I’ll let you talk about this. What happens in the next administration? Do they purge all that? >> And that’s a good question. You have a three-year runway for for this. And that could happen. And I think if that’s going to happen, the Democrats need to move way away from the left because >> uh you know, the policies that they have right now are just not supported to the point where, you know, if you don’t agree with their policies, they destroy your life, right? And that that’s that’s a bad that that you know, and you see that because you have Elon Musk who who’s a Democrat >> who went Republican. You have Joe Rogan. I mean, these these are huge, right? had, you know, the crypto community. >> President Trump is a Democrat. >> I mean, you had a crypto community Democrat and then they tried to shut down that industry, which Trump used to advantage. So, it depends what they want to do, but it’s the current policies that are never that people are never going to adopt what’s going on right now and they need to go more back to the middle if that happens. But that’s certainly a risk. That’s a risk for years from now. But right now, what Trump is doing is saying, “Okay, America first.” Uh, a lot of countries been taking advantage of us, which is a fact. you can look at the deals and all the deal flow and and you know we’re the biggest country in the world. We should be getting the best deals. People shouldn’t be taking advantage of us. And that’s why everybody’s kind of bending the knee to us and saying, “Okay, we’re not going to do this. We hate the US.” And all a sudden a deal works out. And again, if you listen to the media, they’re going to blame that on Trump and whatever. But the bottom line is >> we’ve said this for many years and we have been on your podcast even 161 17 and all this tariff nonsense and we always say use the greatest buying opportunity ever and you made a fortune listening to us. >> That’s going to continue to happen, right? And when we’re the biggest best country in the world with the biggest economy in the world, right, we could buy our goods anywhere and it it’s going to be more expensive if we go outside of China. Yes, it is. But they can’t sell their goods anywhere, right? And that’s that makes us very very powerful. And he’s using that as leverage, which is why you’re seeing, you know, gold, silver go high, a lot of countries buying, starting to get off the dollar and sell some of their dollar holdings. They can’t obviously get out of it completely and destroy their economies. Uh, so you know, with that and also again, politics aside, my job doesn’t make you money. If you’re looking at what they’re doing, look at the Intel deal and how much they’re up on already. Look at almost all these rare earth deals. It it cuts the tape. I don’t think it’s fair and I don’t like it politically, right? I don’t like it. I’m just saying that it eliminate it’s going to make these rare earth miners develop much more quickly, which they weren’t even on schedule. They weren’t even on the map to get developed in the next couple of years. And that’s huge because we need these metals and that’s going to make these companies go higher and higher. And I think the government next you’re going to see him taking stakes in uranium companies that are pro-American uh with mines here. You got UEC, you got Encore. Those are two that that I think have tremendous upside. They’re already have tremendous >> symbol. What’s the symbol on Encore? >> Encore is What is the symbol on Encore? >> So there’s Kamico, but that’s Canadian, right? >> No, yeah, it’s Canadian with with uh Yeah. So, Encore because I I don’t know if it trades. I think it might have um >> Let’s see. >> Yeah, seems >> I’ll look it up as you do it as a Encore. >> It’s so funny because I actually owned this for like 10 years and I just never looked at it. So, it’s EU uh is a symbol. >> EU. Yep. >> E. So, so what about you know one of my theories is that um and we just just started investing in this for clients by the way >> uh through our managed growth strategy uh TDIMG and uh the idea that quantum computing for this reason let me tell you the reason the thesis is that if you don’t have this under wraps and it actually comes into fruition if other places have it especially the black hats and the other guys out there that we don’t want to have this they can basically in a second de enrypt the entire Pentagon and rip right through all of our stuff. And therefore from a security standpoint, we need to have uh companies owned by and and not controlled but but pieces of uh so that the government can really have that protection. Thoughts? uh I think that trend is very very far out and if you’re believing in it then the biggest beneficiaries are going to be Broadcom AMD and Nvidia who have to supply the chips which are which are going to need even faster chips than are available today which you know Nvidia is the king of those that would be the best way to play it and the best in terms of riskreward profile but you know very far away from that and uh you know a lot of this stuff isn’t going to happen >> it’s actually a safe way to play it Frank >> a safe way to play it >> a safe way to play it >> a safe way to play it I mean you want to do it Yeah, you have D-Wave, your ion Q, you have um you have u Regetti and a few of these other guys that are out there. Plus, of course, some of the major names also that that kind of are doing this the even IBM for that matter, right, with with some of the systems. >> And remember the amount of power that’s going to be needed. We have a massive energy crisis right now. Uh more massive than than anybody believes uh other than the hyperscalers and and the White House. And this is why they’re taking stakes in companies because we need rare earths. We need the energy. We don’t have the energy. We’re modeling it. All the models are dead wrong. I’ve been studying this for three years are dead wrong. They’re modeling on large language models and we all know large language models is you know takes up much more energy compared to the normal Google search and they’re all modeling out for the next this isn’t modeling out for 105 years. We’re talking about three, four years, right? And what they’re not modeling out right now, and you could listen to last week of Meta’s call of agentic AI is here, right? It’s here. You you have bots doing everything for you. And when you have agentic AI, this is autonomous. This isn’t large language models where you put in a couple of prompts. That’s okay. That takes a lot more energy, but that’s what it’s being modeled on. And if you’re looking at a Gentic compared to large language models, it’s using probably 30 to 60 times more energy. Just to be I I need to stop you because this is a really important point here and I don’t want to gloss over this but basically what we have is the the the let me just kind of give a little bit and then I want you to fill in some of the blanks here. >> What we had first was Google search which is okay I’m interested in this recipe for this. Can you tell me this? And you get a billion results and you got to search through those to figure out what you want and then you had the sponsored. You had to kind of weed through those and then you figured out okay and then you have to look through 20 things. you are the person in charge of your own destiny after you get your basic information. >> Then we have these large language models which basically sucked up all this stuff. And by the way, uh I didn’t get my thank you letter from Google or Facebook or anybody else for utilizing my data, but anyway, you’re welcome. Um as is anybody else listening. They took all that and they then created this massive process to do what you did, bake it down into usable features and that’s where you just get that answer right in front of you. Right. Next stage is when the computers are able to actually think independently to a degree, not act, but at this point that’s called inference. Inference is kind of the next thing. We’re on the cusp of that right now. Some say we’re there, by the way. And inference is that next level of of AI which makes computing or makes makes uh the AI a smart a a um intelligent and I don’t I don’t want to call it sensient because it’s not but an intelligent uh being if you will. So it can actually do some thinking reasoning and all that. Your next level and the holy grail is agentics. Agentics is taking all of that the reasoning the thinking and all that and then making decisions almost on their own which you start thinking about Terminator. You start thinking Terminator. Um, scary. Yeah, but that’s where that’s what you’re talking about. You’re talking about that. So instead of using a ounce of water for a Google search and the cooling down of all the facilities and the large language model search, which is your open AI chat GBT using a cup of water or so of that into next inference, which is maybe a half a gallon to maybe three gallons of water for agentics kind of uh activity and action and all of that requires energy. So you think about the differential between all that you’re talking about something that is multiples and and and and actual you know factors above right I mean here’s the stats it’s 0.3 watt hours of electricity for a typical Google search you need 25 times more power for a single chat GPT query and then if you’re using aentic AI which is the next step and that’s what they’re modeling on they’re modeling the 25 times more power if you go to Agentic AI it’s 79 times times more power than large language models. Let’s put some numbers behind it really quick and make it simple. If you’re looking at Goldman Sachs and you’re looking at McKenzie, two comp wellrespected companies have forecasts. They’re forecasting anywhere from by 2030 around 100 125 gawatts of electricity. Gigawatts of electricity. If you model it based on agentic AI, >> is that per year? Is that per year? >> No, that’s by 2030. So that’s the the full capacity of what we’re going to need to support our requirements. So that’s what we’re going to need in that’s we’re going to need in facilities to pump out. >> Yes. To pump out. We have and this is just the AI, right? So this is to put in perspective. We have like 80 right now and they say it’s going to go to we’re going to need there’s estimates up to like 150 to 200. If you include a Gentic AI, it’s more like 327. And the difference between that is trillions, tens of trillions of dollars in spend. And we don’t have the capacity on the grid. And that’s why you’re seeing these deals by hyperscalers that I’ve never seen anything like it in my life. They’re going to open up Three Mile Island, which is 5 years away, >> and you that you hopefully you get state, local, federal approval, which is going to be very, very hard to do. After that, Microsoft is signing a 20 they sign a 20-year contract to lock in that energy for 20 years. You have Oaklo, it’s not generating revenue. They don’t have scalable. >> Amazon’s in there and then just there’s another deal done and pumping all sorts of money in. They’re banking on it’s still unproven by the way. >> They have they have no choice because there’s no energy out there. They need portable energy because there’s not enough on the grid. And this is where you see that’s why uranium is going through the roof, right? And you know, another alternative. So, you know, we need this energy. It’s why if you look at uh natural gas turbines, this is the first time it’s happened in history because I I hate alternative energy as an investment. You lose 99% of the time in alternative energy, right? Whenever you’re getting a subsidized, you lose. And we’ve seen that throughout the years. It’s not a long-term strategy. You could trade them all you want. I’m just saying buy them longterm. We just spent 10 trillion to build solar last 10 years, solar and wind, and it’s literally the same percentage as you know fossil fuels that we’re using over a 10-year period, but we wasted 10 trillion. Those are facts. >> Mhm. >> When you’re looking at solar, this is the first time, not solar panels, right? Because we’ve seen subsidies come down to those. When it comes to battery storage, solar companies for the first time are economical. These companies are going to be on fire pretty soon. And I’ve never recommended solar companies, but solar companies have focused on battery storage. Okay, Scholes is one of them. That that’s a good company. You can look up a symbol for that. This doing a lot of research on these things. Uh there’s not a lot of them, but those that are focusing, look at their numbers. They’re going to pay dividends. They’re buying back stock because it’s first time it’s economical. It’s cheaper than natural gas turbines when it comes to electricity because it’s disrupting the entire market. Electricity prices are going through the roof. I have great contacts that build these data centers for the hyperscalers. I got some that that are on the boards of electricity telling me the Microsoft deals that they’re signing are 15% increases over the next three years and they’re signing in 1 second. So >> some of these companies like if you look at the Invesco Solar ETF, it owns things like um First Solar, Nphase, GCL, Sunun. Are these not the names we’re talking about? You’re not talking about the generals because I mean F first Solar is just down. These are all down a lot. Yeah, they’re down a lot because so you know if you’re looking at at some of these companies, let me see if I can find uh just a short list for you guys. Uh let me see this way I can get because you know the research let me bring up the research. I didn’t I didn’t know I was going to go there in this interview but you know we go deep. We go deep. >> No we go deep and this is you know we don’t have all this stuff so you know which is cool but this is um so there’s two two companies I would definitely recommend and let me get to them right now. So uh you have Scholes which is one and next tracker is another one. So NXT. >> Yeah. So NXT is in the solar ETF but that’s you know >> Yeah. Look at NXT and I mean we recommended these companies in September and October and you know how bad solar is doing. Scholes is up 35%. Next track is up 33% for us. Those are two. >> So the differential here what you’re saying is that these solars have the capacity to actually also store >> battery storage. Yes they have battery storage technology and these are two of the leaders. So, next track NXT and SHLS. Those are two companies. And if you could see, look at those compared to the rest of the solar companies. These guys are going to be printing money for decades because now it’s actually cheap. Never thought I’d say that about solar. Again, I never really recommend solar by life, I don’t think. But these are two companies that were doing great on because when the dynamics change, the fundamentals change, you got to be willing to change. >> I think also the other thing is that even if um there is so much need for energy going to be in the future, assuming we we stay on the same trend and track, right? Assuming this all happens and all of a sudden it doesn’t be like one day somebody says gh forget the AI let’s move on to the next thing but assuming we go through this and it continues on the same trend of track there’s going to be a lot of energy needed and whether that is going to be completed by nuclear whether it’s going to be completed by some other who knows magic right you know fision fusion I don’t know whatever the fact of the matter is that this even as a complement to the other energy sources is going to be beneficial solar >> yeah beneficial absolutely I mean you just You have to find I mean when you see companies like Oaklo that that are signing contracts and this stock is absolutely through the roof whatever whatever the valuation >> we had this last year we had SMR in Oaklo for our clients last year I don’t even want to talk about how much money it was made it was absurd >> I mean and you know they’re signing deals right they got big backings by Peter Teal and stuff so so you know you’re looking at some of these companies what I love is is I was able to invest in Bloom Energy in in the 20s that’s a company that >> Oh remember that one. Yeah. Yeah. >> Yeah. So Bloom Energy has done well and this is they’re signing deals. They have great great technologies. So you know solid oxide fuel cells and this is actually like they have a model which they’re much far advanced where they they can produce this at scale now and now you’re seeing them get tons of contracts. They just signed two billion contact with American Electric Power. So >> there’s some of these names that are incredible. Anybody that owns megawws and this even goes for the Bitcoin miners. So Bitcoin miners that’s called tier one. What they’re doing is they’re transferring from tier one to tier three. Why would they do that? Because each megawatt tier one, which is Bitcoin mining, is roughly a million dollars. It’s 15 times more when you convert them over to tier three. And you have the biggest companies in the world with the deepest pockets that are in dire need of energy. So, if you have companies like that, uh, you’re going to do very well. DGX is one, Digip Power. They own a ton of electricity. We’ve been in this since a dollar. Uh, it’s three, went as high as six and came down a little bit. And this is a company that that’s in this transition pretty much ahead of most of these Bitcoin miners. Uh they’re sitting with a full capacity of 400 megawatts of power. Uh you know, and they’re going to convert a lot of this over. They own the actual power. They have these assets that are probably worth three times the price of the stock right now. This is what I’m looking for in in in terms of energy in the sector. Anyone that has megawatt megawatts is huge. >> All right. That’s good stuff. Love it. Love it. Um I want to continue on with this uh AI that I want to segue into. I want to talk about private credit uh because I have some things that I I I just some things that make you just go what’s going on there. Um and I want to talk about some of the earning season. But let’s let’s continue on with this this discussion this idea of are we in a bubble or not? Now we saw some earnings come out from various companies. Some are really good like Facebook is uh you know going back on their spend huge amounts of money they’re spending um but they’re making some some real u headway. One of the things that really was interesting in the conference call last week was the discussion about how they’re flattening and um streamlining their various teams where it could took uh you know maybe a team of 20 to do something for a while they’re flattening down to one and there’s a whole >> I don’t know if you’ve seen this whole undertone in the markets about u leaders and of of companies coming out and talking about and specifically pounding the pavement about that AI is not going to reduce headcount. Right? this whole idea, which makes no sense to me, but you know, I don’t know if they’re doing it just to make sure people don’t freak out, you know, and keep working. Keep working. What? Don’t worry about it. When we get the machine to do your job that you do exactly right now, don’t worry about it. We’re not going to fire you. Why would we do such a thing? No. No. You know, because if they did, then people would be like, “Uh, I’m gonna slow roll this. I’m not doing I’m gonna make this take 20 years to to to develop >> capex spending on companies. We’re talking about $60 billion now into open AI from a various bunch of players now. And also we saw the soft bank is possibly doing 30 billion which questionable whether that’s included in the 60 billion. U Microsoft is going to be spending. Microsoft got hit down about 12% after their earnings. People are getting very concerned about spending in some areas right the overspend. Do you think we’re at a point, an inflection point that where we were before was, “Oh my god, they’re spending. That’s great. We’ll ride the stock up.” Now it’s like, “Wait a minute. This spend is now a concern because we don’t know how much we’re going to recapture.” And the big question that came out last quarter or so with Open AI promising everybody and then the poster child of what was really going on, which was Oracle falling from from grace. Is that something or is that all just garbage? I think there’s good there’s massive separation that we’re seeing right so so when we look at this is why Microsoft got tanked Microsoft said this is the reason why it tanked purely they’re spending more money and their margins are going lower next year okay >> Meta on the other hand remember Meta they always used to increase spending and the market punished them they never punish them anymore because those guys spend money and they return more money on their investments than any anybody anything I’ve ever seen right I mean they bought uh >> you Instagram for two billion. Remember that? I don’t know if you remember that. They wanted it to to crucify uh Zuckerberg. >> Well, that’s what he was doing. >> Well, he was doing the he was doing the metaverse and he was like, “Okay, where’s the payoff here?” >> Not even the metaver. I’m talking about Instagram. He bought Instagram for two billion, [laughter] right? And they made fun of him and they said, “You should kick him off.” And he’s not a good CEO. That’s what is $800 billion asset at least now. I mean, it’s insane. I mean, these guys spend, they know what they’re doing. But for people who are saying this, and I think it’s a it’s a story and and and people just read stories without looking under the hood like we do, at least what I do. uh you know when it comes to fundamentals and stuff like that. I know you do it as well. But to tell me that this isn’t benefiting the companies, look at what they’re reporting. They’re reporting record profits across the board. This is the first time I know I’ve been doing this for a long time, 30 years. You’ve been doing it probably just a little bit longer. Uh have you ever seen a market at all-time highs where these companies are reporting profits at all-time highs and they’re actually laying off employees? Why do you think they’re doing that? Because AI is working. >> Yeah. Exactly. Exactly. >> Right. So, so for them to think about this and the Fed actually to come out last week and and Powell say, “Well, you know, just like regular, you know, technology and and you know, we see these trends where you lose some jobs and you gain some jobs.” I’m going to put this in simple terms. Doing this for 30 years, I’ve never seen a trend in my life where you can’t see the scalability. Okay? So, what does that mean? It means when you scale, you always want to scale. It’s great for business. Okay? So, you create the iPhone, you’re like, “Oh my god, this is a great product. We’re going to scale.” Well, you could see the scalability because only everyone who is alive could own an iPhone, right? So, you see the end of it. Okay, this is the amount of people. This is your total address of the market. You cannot see the end of the scalability for AI yet. Like it the productivity gains that you’ve seen are almost infinite. They keep going better and better and better. And that’s why you’re seeing these companies continue to increase their spending. They were spending 70 billion a year ago. Now they’re spending, you know, Meta came out and said we’re spending 125 billion on AI, 165 billion total. next year. That’s next year, >> right? So, so and you’re looking at probably up to 600 over 600 billion from the top six. You got the top four, which you guys probably know, but then you throw in, you know, Oracle and Alibaba, you know, 600 billion in a year they’re spending on this the >> Let’s put that in perspective, but people to be absolutely clear, that is a butt ton of money. Seriously, that is an absurd that is that is [clears throat] more than some GDPs of countries around the world. It is a huge amount of money. I think it’s 125 billion is the cancer the cancer market basically is 125 billion a year. So just to show how much how bigger this is, right? >> And by the way, this is also money that is not being th is not being put in for instant gratification, right? This is not like we’re buying stuff and it’s going to give us a um xfold benefit because of this or that. This is kind of this is the just an installment, right? This is an installment plan that’s maybe another bunch coming next year. >> Well, here here’s the biggest transition and this is something else I bet that that’s you know original thesis where everybody wants to get into AI, right? Like a year ago, two years ago, oh, we we need to get into AI. It’s the biggest thing ever. And now you’re what you’re seeing is companies saying, “Wait a minute, wait a minute. Okay, even if we create an AI department, you’re going to have Google come by and say, okay, hey, you guys are really good. We’re going to basically poach the whole and spend, you know, $10 million, which is like a penny to us, right? I mean these companies are generating 80 billion a quarter right now which Microsoft just generated right and they’ll poach everyone from you. So what they’re doing is they’re going to Google and they’re saying hey we want to use all your AI services and Google says even better you can use all cloud services. What we want is the APIs. We want the kings of the kingdom. We want access to all of your list which is hundreds of thousands sometimes millions sometimes hundreds of millions depending on a retailer and saying we’ll work with you. We’ll create models. You can use our whole entire AI system and every time a search comes up, it comes up immediately. You could use Gemini 3.5 and you’re seeing these deals. That’s the next wave where I think it’s an easy layup to make money in AI. Have you seen the chart of Wayfair? Have you seen the chart of Dollar Trees and Dollar Stores? Have you seen a chart of Gap? Gap. Have you seen that? All those have one thing in. They all sign deals with either Google or Open AI to run their AI services. And look at those charts of those stocks and how much they’re up. I mean, granted, you know, the market’s come down a little bit last week, but once they did that, they’re basically saying, “Okay, instead of competing, now we’re going to partner.” And it’s almost like the Nvidia thesis from 10 years ago that every no one loved to do in technology. I’m not partnering with anybody. I keep my own IP. And Nvidia said, “Look, we’re going to partner with everyone in the world, right? And build our own systems, not just the hardware, but the software around this, right? And that’s why they’re so big in 4 trillion whatever >> uh you know, market cap.” >> So, you’re seeing a lot of these companies like an Under Armour. You look at like crappy retailers that that that want to learn more business instead of these companies all these companies building their own AIS. They’re partnering with the hyperscalers which is making them much much bigger which is generating more money through their cloud and now they can offer services where hey okay uh now someone’s going to want something Etsy just to sign a deal. I bet you’re going to see Etsy stock go through the roof. Etsy, right? You’re like really Etsy. But now, if you look at the deals that they sign, any product that you’re going to list or that you go, it automatically it gives you a one-click buy to Etsy if it sells it. One click buy right here. Here’s how you buy it. Boom, in two seconds. No, the whole thing would be not only that, it would be, you know, that that um you have a party coming up and the system, you know, your birthday coming up, a 50th birthday for somebody and um you get presented with um you know, a very refined Etsy customized plaque, I don’t know, for somebody that comes up in your uh you know, your AI daily lookie. >> Yeah. >> And then you’re clicking like, yeah, that’s good. I’ll buy that. or or three or four different sites, by the way, that have similar ones that you could buy and check the prices. Like, for example, it’d be very nice to have a really good >> ride share comparison tool that can tell me Lyft or Uber so I don’t get ripped off by either of them when I order something. >> Yes, exactly. And listen, I’m not say I’m not saying that, oh my god, everything. I’m just saying AI is not even close to being a bubble. If it’s in a bubble, one, we have great contacts that build these data centers. Once we know this isn’t, you know, an ego thing. This is just a data thing, right? Look at look at how much these companies are spending. They’re increasing their spending means that this trend is going to continue for a while. Doesn’t mean all the stocks are going to go higher. If you look at >> Nvidia, Nvidia, Microsoft, even Meta after its move, all three of those stocks are down over the past three months with with Microsoft being down 22%. So people like this is going to blow up. I would say Microsoft down 22%. It’s kind of like a blowup, wouldn’t you? >> Yeah. So, you know, you’re gonna see this rotation. And the rotation, I think, is the layup is one, you’re seeing AMD do better, and and you know, catching up a little bit. Still not even near Nvidia, but you’re seeing that momentum. You’re seeing, you know, great out of Broadcom. So, so there’s just a separation. And as you go along this AI trend, look what’s happened to the memory companies, right? When you’re looking at at, you know, the Western Digitals, the Seagates, the Microns, like out of nowhere. Have you seen those charts? Holy cow, that’s the next stage. Oh my god, these prices going through the roof because of AI. You know, Oracle was late to the party. So it was Dell was a little bit late to the party and their stock did well and some of those are pulling back. So you’re going to see separation in this industry. It’s going to provide great buying opportunities. And for me that’s what I love because when anyone can throw a dart and make money, they don’t need us. >> We have to separate through this stuff. And you know we have amazing winners. I mean uh Celestica is one that that we just sold for uh I believe it’s a 500% gain. You know just having having great contacts in the industry saying there’s no switches. I’m like what the hell is a switch? And they were like, “Well, it’s like PVC pipe, right? Picture you don’t have PVC pipe. You can’t live in a house if you don’t have that.” >> So, they didn’t have there was a huge shortage. This is one company that got it right. And once they did, they had incredible pricing power. And you have the biggest companies in the world with the deepest pockets are like, I’ll order 5 million of those because we need them. >> And this is a company that went from 40 to basically 350. >> Uh, so that’s the the trends that I want to see. I love the energy part. I still think it’s money to be made. I love the retail part of partnering with some of these companies where it’s going to benefit them tremendously and it benefits obviously to Google because now they got access to these clients. They know everything that you’re going to do every minute for the rest of your life which is great that they could sell a fortune of advertisers which is why Meta and Google are absolutely crushing it and yeah there’s just different areas that are going to benefit as this trend continues to go on and it’s very very strong right now. >> So let me let me summarize a few things. Number one, follow this strategy. invest when governments are investing in something. That’s number one. >> Absolutely. >> Number two, AI is not in a bubble. Energy is going to be a big issue here. Look for companies that can supply that energy to the industry and to the world over the next number of years because it’s not going away. >> Hold that thought really quick. If you want >> to see when this bubble is going to end, there’s one company you look at, very simple, Taiwan Semi. They make all the chips for everyone. You looked at their last quarter, they raised they raised their kager, which is a compounded annual growth rate. Raised it by another 15% annually to 2029. So they’re expecting instead of 40, they’re expecting like 55 57%. Most companies would be happy with a 12% 15%. They raised it an extra 15%. These are the companies that this is the company that gets their orders first. So video calls and says we need a million chips, you know, all everyone, all the biggest chip companies, right? and then they deliver the chips to Nvidia. Nvidia delivers them to the customers. So you see this chain. That’s where it would happen first. If you see Taiwan semi come out and say, you know what, we’re not really seeing the spending as we saw the increase. That’s when you know maybe you should take some off the table. Until then, that’s the company you need to look at every year. >> And and by the way, this this doesn’t mean there’s not going to be corrections in between. >> Of course, you know, that’s markets go. Yeah. >> Let So that’s two things we said. you know, the urgent trend of looking at some of the things that are happening now into the future. Um, the capex spending, which is going to translate into revenue over time, the reality check that the AI is going to replace jobs. I think we kind of just for a second touched on that, didn’t get into it, but that’s okay. Um, and and um I want to uh talk about private credit and then finish up on earning season, a few different things that are going on. >> Private credit. All right. So, let’s let’s kind of discuss this for a second. What is private credit? Well, it’s what it’s what it sounds like. It’s private credit offering. So, it’ be like um it’d be like you lending money to me, Frank, right? That’s a private credit transaction. That’s a private loan. So, we’ve got this ma it’s gotten it’s gotten enormous. I think it went from like in the last five years went from like a trillion dollars like three to four trillion dollars of known private credit that’s out there right now. Um and the bank stepped back. they didn’t want to offer, you know, they they the rates weren’t what they wanted to uh lend at. Um the latest shift is in the way lending is getting done. And the question is, is private credit, which we’ve seen a breakdown, by the way, for example, last week was um Black Rockck TCP, which a publicly traded company, symbol TCPC, and it disclosed a 19% decline in net asset value for Q4. for Q4 2025. Right now it trades at about a 25% discount to NAV and the fund is down about 46%. This is Black Rockck by the way. This isn’t just like, you know, ABC ETF fund something or other, right? This Black Rockck, they would hopefully have good lending standards. That’s the issue that concerns me. The as big as this whole private credit environment got, we have a situation with did we once again step out of bounds when it came to lending standards? And is this something that could be pro? It doesn’t be problematic like a crash of the system, but is the private credit area something that is putting up antennas and kind of making you a little uncomfortable? It’s not making me uncomfortable because it’s easy to see this market and this market is a disaster. So, so you know this is the private credit markets exist because this is like, you know, they’re going to take on more risky loans, right? With the banks that won’t take on these loans, but the private even though when it comes to private equity and these companies, what they do is, you know, they’re leveraging. But when they leverage they’ll take these companies and these is private credit right so the hope is that you know we want to have a liquidity period which is a company going public or it gets taken over. Now, when you have these private equity funds, which is all about private credit, they usually have a pay period of 3, four, 5 years, and they’re sitting on assets on their books that are declining in value, right? So, when they’re declining in value, they can’t get them off the books. There’s no liquidity period in sight. And what it’s doing to investors is they’re sitting on this dead asset. So what they’re doing is I have someone that that’s one of the biggest in this industry. He’s been doing it for 30 years who’s starting funds in the consumer food space, which I love because I’m like consumer food, right? I love when people tell me idea like I’m like you’re crazy. And he’s like, look, they they’re sitting on companies that they bought that they’re selling for 10 cents on the dollar that they need to get off the balance sheet, right? >> One, they’re going to bring in money and then they could take that money and leverage it and go into another idea because it’s dead money. They don’t have that dry powder. And two, they have to get rid of this because their investors are really ticked off because they’re sitting on this as something that they used to be able to sell right away, right? And just, you know, take these companies private, fund them, leverage, and then repurpose them, and they IPO much higher price, right? And they make fortunes on it. That’s not happening now. So, it it’s big. We could see it though, which is really good. And there’s other companies and guys that I know who are very wealthy that that are saying, “Hey, you know what? We’re using this as an opportunity to buy these assets dirt cheap. It frees up money for these companies.” But I I’m never worried about something that you could see. It’s the things that you don’t see when you didn’t know. >> Well, that’s what I’m talking about. I mean, it seems like this is all of a sudden cropping up. We don’t see it because we can’t see it. That’s the problem. >> The [clears throat] private the private nature of this for Yeah. For for a while. Like I’ve been when I say a while, for like the last year, it’s really been bad because it’s this went on steroids after, you know, the government was pumping money like crazy. But now a lot of these things in 2021, 22, you’re looking at 25 26 27. What’s going on? Well, we’re sitting on these things and you’re seeing the value of these assets actually decline now, right? Where they were worth a lot more and they’re like, how what are we doing with these? We can’t sell them. We’re going to take, you know, so they want to get them off their balance sheets and there’s other funds that are taking this and rolling them up and creating spaxs and throwing out this business and you know, it’s just like, >> well, we’ll see what’s going to happen. I mean, specifically in home improvements, certain tech adjacent borrowers, e-commerce rollups, you know, these are the things that are kind of concerning me. And when I say concerning me, you know, I I have very little if no exposure to this for clients. But the question is what’s the knock-on effects in some of the other credit areas, you know, that’s something I mean the problem is more of aformational because I think we need to know and have clarity about the functionality of a market and the smooth running of a market in order to make good decisions. I mean that’s the bottom line there. And this is a part you know four trillion is not a small part of a you know small thing. It’s it’s a pretty good chunk. >> Yeah. And what makes me nervous, by the way, I is really housing like like the housing market, the fundamentals are deteriorating very very quickly right now. You’re seeing a ton of supply come in the market. People can’t sell the house. Last month, was it 16 17% of buyers who signed a contract canled their contract. I’d never seen that before. Right. And you’re seeing it because it’s not just the interest rates, which you could see, okay, they’re higher. It’s the insurance, it’s the taxes, it’s, you know, this massive inflation going on. people like >> the fact that your health insurance cost for me for example 1,300 a month for the crappiest insurance you could find. >> I know. And how how are you, you know, how do you see this huge economic growth and we can get away with tariffs and just manipulate different things and our exports are better now and we’re going to see a strong GDP number over 4% next quarter. How do you go longterm without housing as that catalyst which is one of the biggest drives of economic growth? Everybody, you know, you buy furniture, you buy everything, you know, and to me the housing market is is frozen right now and it’s getting worse. And that’s one of the things that does worry me. >> Let’s uh finish up on the area of um earnings and a few other things there. We saw some earnings come out. Banks pretty good. I mean banks and uh the major money centers generally speaking. Yield curve benefited them. Trading benefited them. Deal flow benefited them. It was just I mean I don’t know there was not a lot of holes there that I saw. there was some tick up in um as we would think this following discussion of private credit of um you know delinquencies on car and credit credit cards short-term revolvers etc. But um generally speaking, I didn’t find any major holes in the financial sector earning >> major holes. Uh let me put it to you this way. The four largest banks generated 117 billion in revenue and over 31 billion in profits. >> For the quarter, >> right? That’s what I’m saying. >> It is the greatest environment probably in the last 30 years for banks because we all know if interest rates go higher, they they do better. They have the net interest uh you know income, right? and and that was supposed to go down like two years ago. I was supposed to see rates much lower and they were all forecasting we’re going to see this lower. If you’re looking at at JP Morgan is forecasting next year to generate a hundred billion dollars in NII their net interest income and now what do you have? You have economy that’s doing well as well. So now they’re able to get the investment banking fees and fees on on bonds and and trading fees. It’s just every single line of their business. I feel like I’m looking at my or when they report like everything’s up 25% 25%. It’s it’s yeah, it was insane. Like the numbers they’re reporting are just insane. >> And usually when I say there was no major holes and all, we could always find something in the financials. I I couldn’t see much if if anything. >> The loan the loan loss provisions for every bank have gone down. >> You think they would go up? They’ve gone down other than than I think it was JP Morgan because they had they took over like you know Goldman’s credit card and stuff like that. That went down as well. Yes. >> So So then we have um industrials. Look at Caterpillar for example. And I mean obviously they they benefit on the mining and construction to a degree. Um and industrials did did pretty well as well. I mean we’re even seeing starting to see um energy start to tick up a little bit here as prices come up. We starting to see you know benefits. I mean yeah some of the consumer areas, restaurants, things like that still, you know, maybe better than expected. I mean we saw the cruise lines come out last week. Royal Caribbean. Wow. You know uh guiding up guiding up. Um, so >> notice how they’re guiding up while Las Vegas Sands Vegas is getting crushed. I mean, >> crushed. >> Right. >> Right. >> Mhm. >> Crushed. >> I mean, I don’t know if you you went on vacation lately. I mean, you go to these hotels. >> Always. >> You walk in and they’re like, “Oh, by the way, it’s, you know, $50 a night extra for what?” Um, for whatever, just just because we’re charging you that >> because you asked me the question. Now it’s 75. [laughter] >> Yeah. It’s like, it’s for your car. I don’t have a car. Uh, it’s for the refrigerator. I don’t have a refrigerator in the room. >> Right. >> No, no, it is nickel and dime. It’s gotten terrible. Then you don’t get service. You don’t get maid service unless you beg, right? Um I was just in Mexico. Mexico was fine, but you know, and you got waters, >> Airbnb, Verbbo fees. I mean, what are they up 20%? It’s insane, right? So, cruises makes sense from a family makes sense. That’s why >> Oh, yeah. You know, going to like a a Disney trying to stay on a Disney property. I think we did some number. It was like five grand minimum >> for a week with a family of four. >> That’s without the tickets. >> Right. Right. Right. Tech. Now, we’re talking about tech. I mean, we talked about the capex and the opportunity there. Pretty good. Uh we don’t think we need to beat that one. 74% of companies as is usually the case beat EPS earnings and outlooks relatively good. A lot of guide higher. Interesting. We’re seeing some some weakness in the the the the SAS companies, right? The the CRM, the Service Now’s the AI, >> right? Well, you know, which they should be utilizing AI. But this goes right back against my entire thesis of AI. So when does Salesforce not do well? Salesforce should be tracking employment. It’s a simple simple strategy, right? To look at this. The more people that are working, the more people using Salesforce, the more people are paying for Salesforce, etc. You know, there there’s some corporate contracts with unlimited, but you know what I’m saying, right? The enterprise contracts. >> But what’s interesting is Salesforce has been even with that giant deal they got last week, a $5 billion government deal. Do you see that stock still cratered? Service Now not doing well. I think there is >> service now snowflake uh >> writing on the wall though that AI is going I’m not going to stop my belief in this until I see something otherwise but AI is going to take jobs and that’s okay maybe they’ll be placed somewhere else it’s also going to change the education system in the future people don’t necessarily need to I hate hate to say what I’m about to say but think you [laughter] know it’s a different situation where you have you know if you need to have automated division vision on something, you know, where you have a you have something and you just and it automatically tells you what the tip should be. You don’t have to do multiplication of what my 15 18 20% should be, which by the way, somebody put a 30% suggested tip in front of me last week. I was very aggravated, let’s just say that. >> Oh, they they just all Oh, the best is when I went to Disney. I went to Disney and ate uh there was a conference next to uh what is it? What is it? The Disney area that has all the restaurants and stuff like that. >> Oh, uh downtown Orlando. Downtown Disney. Yeah, basically. So, so I went there and we got tacos for for three for a couple of my workers and the guy’s like gives me the tip thing and it’s like, you know, it says 15, 20% whatever. And he’s like over my shoulder. I’m like, “What the hell?” So, I gave him like, you know, I think I gave him 15%. Then I found out, you know, how much it cost? $250 for tacos. >> How was that? >> Because because they charged us uh 20% gratuitity, which he didn’t tell me about. >> Oh. >> And if I And then he put the tip in my face and said, “Here, 15 20%.” >> That’s your bad. That’s your bad, Frank. >> Yeah, that that’s my fault. The first thing was just a credit card with the tip. It didn’t even say like, you know. >> Oh, that’s a new thing, too, right? They just give you that that blank like what I order. I don’t know. Whatever. [clears throat] >> Quick thing before I go. What you mentioned, if you’re thinking about buying these software companies, one, you might be better because you’re looking at the very very expensive with with Snowflake is like trading like 100 times forward earnings. You got Service Now trading at like 30, but Salesforce is 17 if you want to try on that one. However, before you do, go and do some research on anthropic. We took Gemini 3.5 right now is the best, right? based on you know these private leaderboards. Anthropic is by far the best when it comes to coding, operating computers, complex tasks, right? So these software developers, this is like financial analysts, consultants, accountants, you know, this is what the CRM systems, right? And very very expensive. I mean Salesforce.com is crazy expensive. Anthropic could do this for you now. It does it for you now. >> What does what does what for you? Wait, wait, back. >> The coding. You don’t need to know how to code anymore. >> Yeah, that’s like lovable. Have you tried lovable.ai? >> No. My son was in my office. He said, “Check this out.” He put some prompts in. He said, “Look, I need a website that does this. It has a form on it. That and I’m like, you’ve got to be kidding me.” >> Yeah. >> Like in an instant. I’m like, “That is beautiful.” >> There’s someone that did three prompts and created a video game. It was like snowflakes coming down. They were jumping over the snow. Three prompts. That’s, you know, the coding that it took it would take to do something like that. You could just go in and do. By the way, Grock, the the the app, if you haven’t done this, people, you want to have fun, >> download the Gro Gro act, Grock app. G R O K, that’s Elon Musk Xi. >> The imagery and imagination where you take an image and you just put it into there and it makes it do something and then you put a prompt like have these people jump up and down, spin around. It literally takes I’m not kidding. A image, one image, an image that can turn it into an whatever you tell it to do and within less than a minute it does this. It’s that’s unbelievable. >> It’s unbelievable industry. That’s why they’re all worried. >> You realize that my computer take jobs >> our computers in our office. I have a of a mac daddy of a of a laptop with and other computers. Do you know how long it would take to generate that kind of uh 5 10 second clip? And you do that stuff. You create that. Do >> you know how long that would take? Do you know how long that would take? >> It’s unbelievable. Unbelievable. >> Yeah, that’s cool. >> Unbelievable. My good friend Frank Kerio. Kersio research. Uh you can find him at kursier research.com. He has um some free offerings for sample newsletters, all sorts of things. Check it out. We’ll have the links information on the show notes page of episode number 958 on the disciplinedinvestor.com. Frank Kurzio, always wonderful being with you. Always love coming on the podcast. Always open for you, man. I’ll be there for you. Thanks, buddy. Appreciate it. >> All right. Thanks. And thanks everybody for listening. We’re going to end the show right there. Ran a little bit over. Of course, when Frank and I talk, we do not stop. And uh thank you for joining me [music] this week and every week. I’ll see you again real soon. This podcast is intended forformational purposes only and does not constitute [music] personalized investment advice. 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WORST DAY EVER for SILVER Cold Snap in Florida – Massive Critter Drop New Fed Chair named Pausing on space PLUS we …

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This episode is sponsored by Interactive Brokers. And Interactive Brokers has key competitive advantages for sophisticated investors just like you. IBKR’s margin loan rates, for example, are from just 4.14% to 5.14%. In fact, IBKR was rated one of the lowest margin fees by stockbrokers.com. Compare IBKR’s client’s low margin borrowing cost to other brokers like Schwab, Erade, Fidelity, and Vanguard, who charge hundreds of basis points above IBKR’s low rates. The best informed investors choose Interactive Brokers. Margin is only for experienced investors with high risk tolerance. You may lose more than your initial investment. Rates are subject to change. Get started today at ibkr.com/compare. member SIPC. >> Hello and welcome to D’vorak Horowitz Unplugged, an hour-long discussion of activity in [music] the financial markets around the world featuring columnist John C. D’vorak and money manager Andrew Horowitz. This conversation [music] is casual and unrehearsed. Let’s join John and Andrew now. [music] >> I’m John Cavorak >> and I’m Andrew Horowitz and >> it’s the 3rd of February 2026. I got to tell you something. I’m hot. I’m hot under the collar, but cold below the collar. It is freezing here. It’s like >> It’s about 65 here. >> It’s like 30 It was 32 degrees this morning. That’s in That’s in South Florida. >> Is that from the bomb cyclone? >> It’s either the bomb cyclone, the arctic vortex, or the uh There was another thing they had too, wasn’t it? An arctic blast. >> Blast. >> One of those. And you know what happens down here that is very important to understand and to know about and be careful of when the temperatures get down below 40. Do you know what that is? >> Uh old people just drop dead in the street. >> Close. Very close. Actually, seriously, very close. Iguana side. It’s It’s a mass problem. They just fall out of the trees. There’s full out of the trees and they just And if the iguanas are down there, >> there’s a lot of iguanas. like a lot like to to a point that I can’t put any flowering plants in my backyard that may be somewhat tasty to them because they’ll strip them down in a day. It’s a big problem there. They’re also called down here for those in the redneck bill the chicken of the tree. >> People eat them. [laughter] >> And you’re allowed to shoot them here. So, >> shoot them. >> You’re allowed to shoot them. I’m serious. I’m not kidding. So, uh, they fall out of the trees and they just lay there and you think they’re dead, but they’re really not. They’re like in a in a in a mass dormant hibernation mode of some sort. And what happens is that when they warm up, if they warm up without totally freezing, I mean, if they freeze, they’re dead, right? >> Yeah. But if they get like into the 32s and they don’t really get fully like the blood doesn’t get frozen then and the heart doesn’t fully they go down to this deep deep deep deep hydrronation and a lot of people what happens is they take them and they just grab them and they maybe I don’t know put them in their car or something to throw them out and all of a sudden they come to life and they [laughter] start scratching everything >> yeah I know the idiosyncrasies of Florida. [laughter] >> Florida man scratched to death by uh hibernating a iguana. [laughter] Well, here we go. We got a lot of really great things to talk about. I mentioned I was cold below the collar but hot above the collar because there’s a lot of things that going on that you and I have talked about uh and some things that were kind of a little nutty. But number one, we did have last week the absolute worst day ever for silver >> ever on record. We’ll talk about that. And that and that that ties out, by the way, to the same day just so happens that the new Fed chair was named. >> So, >> oh, that’s an interesting coincidence. >> Yeah. So, so I kind of did a little research on this um and brought this whole thing full circle to understand really kind of some of the dynamics there. Uh there’s a pause on space, which is not the space bar. I’m talking about the space up there with what’s going as well. Um, so the markets we have the issue about silver and gold, platinum for that matter too. Uh, Bitcoin plunging. We’re in a crypto winter. You’ve heard that before. So what’s cryp what’s what’s Bitcoin down to? >> It was like it was it’s been down to I’ll pull it up right now. But it was down to I think 76 and change at the low there. um kind of at about 78. It’s been popping up. 76 is kind of a magic number. I think 76 half or 77,000. And the reason for that is that that is a big there is a big piece of Bitcoin owned by Michael Sailor Strategy or Micro Strategy with an average cost overall of about 77,000. So there’s a thinking that when it gets to that point, he’s going to load up again and start buying. So therefore, those out there are picking it up. Ethereum crashed. You got Tom Lee’s Bit Mine uh company down about six billion now on that investment. He was on TV a couple days ago talking about how not a big deal. Not a big deal. The reason is that um it pays about they staked it so it’s about a $400 million interest payment on it annually. So they’re making that. But oh Tom, uh if you’re down six billion, I don’t care that you’re getting the income from it. You’re down 6 billion. And what happens when people want their money? They’re going to take a huge loss. So that’s going on. Uh we’re going to do a deep dive today in January economic results. I thought we would kind of go through that. We haven’t done that in a while to really go through the nitty-gritty of what’s going on. >> True. Yeah. >> Um and the US dollar is rising from multi-month lows, which is another reason why you probably saw that big move on big convergence of items and things that happened over the last week or so. Uh EM is still powering ahead and Elon Musk did a uh I I guess I’d call it a financial PT Barna move last week with a few things with regard to SpaceX, XAI, Tesla, all that. Doing once again something that’s probably not going to be done, but who cares? Nobody Nobody fights, you know. Yeah, it’s fine. Say what you want to say. [laughter] >> Yeah, big guy. So, by the way, just to to reel us back to the iguanas, it’s called being cold stunned. They’re they’re in a cold stunned state >> and they just fall out of the trees. >> Oh, they can’t hold on. So, they just fall out. They just fall and they’re just laying in the in the street. >> Pass out up in the tree and down they come. Huh. >> Yeah. So, they could live in this 40°ree weather for a while, but again, below freezing is is a problem. That would be great because they are a nuisance. That’s why they you’re allowed to kill these things. and they’re everywhere. There there are some areas that you’re like, why is why is the grass moving like that and like realize, oh my god, it’s all those green iguanas just scurrying around everywhere and they get big and then they turn orange. >> Yeah, they can get pretty big. We had a pet iguana for a while >> and then what do you do with it? You put it outside for it to multiply and populate down here in Florida probably. >> Uh we sent No, we actually literally put it in a box and sent it to Florida. [laughter] open before Christmas, perishable. Very nice. Well, right on schedule. You know, even though we see some cold snaps around the country, the fact of the matter is that polar polar vortex, the Arctic blast, what do you call it? The Arctic, what was it? The Arctic >> bomb cyclone. [laughter] >> The bomb cyclone. Remember when we talked about this and how natural gas was spiking up dramatically and it was spiking on the futures, it was spiking on the spot. Um, this and I said, “What do we say?” We said, you know, just be this is a great lesson to watch, >> not to panic because this kind of thing, especially when it’s weather related, will come down almost just as fast as it went up. >> Right? >> Natural gas was down 25% on Monday, down about 28 30% from its recent high. Still about 50% higher than it was before the spike, but there’s still a lot of winter out there. and Pakahani Phil what on Monday Groundhog Day uh six more weeks of winter. So not that I m maybe traders look maybe the pucks of honey fill fund will buy natural gas on that. I don’t know. >> Yeah, I doubt it. >> Yeah, I doubt it too. But this is right on schedule. You know, it didn’t take too long. Could you have made money on it? Probably. uh maybe if you shorted natural gas futures, you know, maybe if you short the natural gas too much work, >> but yeah, this is or maybe buy some options on it for that matter. But a lot of this is priced in the people that know this, the models that they go with, just to let you know. No, it seems easy. It see and we knew it was going to happen, but the models already account for a lot of that volatility inside. >> It’s impossible. Yeah. You have to be that you have to be that’s a specialist’s job. >> Exactly. Exactly. Being in the pits during those periods are probably not stress free. >> Yeah. Yeah. >> All right. Some more about let me talk about some things that are getting me a little hot and you tell me what you think because I I respect your opinion on these things especially when it comes to technology. So this first item Jensen Wong we know him of course the uh the the leader of Nvidia guy >> Mr. Leather jacket. leather jacket fella. Uh he um he said this weekend that the company’s proposed hundred billion dollar investment in open AI was never a commitment. Specifically said never a commitment and that the company would consider any funding rounds one at a time. He said it was if it was never a commitment they invite us they invited us to invest up to 100 billion and of up to 100. Hey, John. Uh, if you want, you can give me up to, you know, $100,000. I I don’t want I I won’t take a dime over. Just $100,000. >> Okay. >> Yeah. They invited us to invest up to hundred billion dollars. And of course, we were we were very happy and honored that they invited us, but we will invest one step at a time. Now, I want you to remember that slug of information and think about all the other things we’ve been talking about, the circular financing, the vendor financing, the uh daisy chain, as my dad would probably call it. You know, this this everybody’s getting a little piece of the action from somebody else and somehow at the end of the day, you’re just doing, you know, you’re just you’re just you’re just it’s it’s financial masturbation. as opposed to >> Yeah. A circle jerk would be a better way. >> Circle jerk. Yeah. So now let’s take that point and let’s add to the next point which came out I think it was Monday. No, Sunday night. Sunday night Oracle announced that it will do a fundraiser in the form of both equity and debt because they need some more funds to build more data centers. I like the way they put it as a fundraiser, as though it’s like a charity. >> Yes. Oracle. Now, let’s hearken back to do you recall that Open AI No, that Yeah, the Open AI said they were going to invest up 300 billion into Oracle, shot the stock up to the moon. Remember that whole one? >> Oh, yeah. We watched that very closely and knew it was a it was a fake out. And then Nvidia is funding Open AI with commitments that are not commitments. And we realize that Oracle had too much debt and their free cash flow is a problem for paying that debt service. And there’s all sorts of other things. and Oracle stock came way down and everybody started questioning whether or not and how not whether or not how it would be possible for Open AI to fund that far out over the next three three years four years on on revenues that they don’t even they’re not even close to getting revenues I’m not talking about earnings revenues forget about the fact you got to cut back take off expenses off that how are they going to have capex in those kind of numbers in those in that many years. What they did was they created this very interesting um oasis of finance, something you see in the distance that may or may not be there, but you hope to be there. When you get there, you can only think about all the wonderful palm trees and coconut juice and the nice, you know, hot springs and cold water and the fan the fans by the by the lounge chair, you know, that kind of thing. And if you think about all these things, just these two things in particular together, this whole thing is really in question because if this one didn’t commit to that one, how is that one going to commit to that one on money they don’t even have? >> I know. It’s and it’s it’s like the same process that they pushed at us only backwards in reverse. >> It’s unbelievable. So now instead of everyone getting this, you getting this money and I’ll pass it to this guy and he passes it to that guy, he passes it to this guy, then they pass it back to me. Now it’s no, I’m going to pull it from this guy and well then they’re going to pull it from that guy and it’s going to get pulled and pulled and pulled uh the other way and so there’s going to be no money in the system. It’s pretty funny. There was never anything to begin with. >> No, it was all bull crap. That’s the point. And now they’ll try to massage No, they got to be careful. They can’t, you know, Nvidia can’t say we’re not doing this because that don’t forget Nvidia, >> which is exactly what they said, by the way. >> Right. But Nvidia is giving money to OpenAI. So Open AI can for them to open AI to buy more Nvidia chips. >> Yeah. >> And then OpenAI is giving more, you know, uh, money to Oracle so they can then expand the Open AI and and use their platform. I >> Yeah, open AI is done. >> It’s crazy the whole thing. only all all the people watching this say say that that company’s over. >> Do you remember when Sam Olman was when he originally came out as a non-owner because it was a charitable SL or not charitable was a nonprofit. >> Yeah. and how Sam Alman was against all the things about profitability and all this and it was going to be you know for the good of people this whole thing right and he wasn’t going to take he was taking some like ridiculous salary and he had no ownership >> what happened he was the ultimate altruist >> yeah well they were called what was the name of that group effective altruism or something or something like Quakers. He’s a Quaker. >> Well, whatever he is, he we saw the writing on the wall. >> Yeah, really. >> There’s money to be made. >> Yeah. Well, look at that. Hello. So, but but you look at him and he is a the ultimate salesman, you know, posing in a highly intellectual engineering suit or managerial or whatever you want to call it, but it’s it’s really a a shill game here, which is what’s going on. That’s what’s going on, right? >> Shell game. >> Shell shell shell game by the shells. Shilling it. Yes, I agree. Shell game. All right. Uh, a little uh quick side note because I I I learned about this this week and I wanted I think I think you’ll probably know about this. I was looking at um a particular type of wine and trying to understand about this wine and found out something about let me see if I can pronounce this correctly, please. Uh, botricus sinera. >> Betritus. >> Betritis sinera. You know what that is? Obviously, it’s a it’s a fungus causing gray mold on grapes causing >> Yeah. >> Yeah. Causing bunch rot. >> Uh or or what’s what’s really known in the wine world as the noble rot which concentrates sugars and creates high value dessert wines. cuz I was looking at short turns. >> Yeah. I’m surprised you haven’t already been over this. >> I have not. I never >> shocked actually. >> I’ve never >> It’s like a very weak spot. It’s one of the greatest products in the world. >> Yeah. I So, I have this dinner coming up and for the the closing uh wine pairing, you know, it’s all paired and um I had to find something for the dessert. It was a very heavy uh chocolate kind of uh packaged. Not packaged. >> It’s it’s a heavy port. >> Yeah. So, port I was going to do. >> Sorry. I would have gone with port. >> I did port the last one. That’s why I didn’t do it this one. So, I went with the sautturn that would kind of work and I kind of had a look at this >> cuz it actually has turn and chocolate is not my favorite combination. But, but can please continue. >> It’s not only chocolate. There’s also some fruits in there. So, that’s why that’s why I thought it would work. >> Um, but yeah, the and I never heard of this. A tokaji. >> Tokai. >> That’s what I said. [laughter] A tokai. I am not familiar with these. I’m sorry. This is not part of my wine repertoire. >> Yeah, I guess not. >> This this level of of dessert wine of sweet wine is not. >> You got to get into wait until you get to the ponios. There you go. >> Oh gosh. >> Uh so >> that’s the amount of dry grapes that they mix into with the tokai. >> Now is that why sometimes you see on raisins a little bit of like dust or is that something different? >> No, that’s yeast probably. >> So they got this gray mold. that sucks out the juice, if you will, and then just leaves all the concentration. Very cool. >> Well, there’s more to it than that. For one thing, the betritis adds a fla a very distinct flavor to wine. Very distinct. And that’s part of the appeal is that flavor. That flavor, especially when it’s high, es and especially if you like it, which is the betritis flavor is generally spoken in those terms. How much betritis does it have? you you the question will be asked and how it’s it really has a lot of betritis flavor. People will say that in analyzing the wines and the ones with ex with extremely high betritis taste are the ones that are the most uh cherished by people who like saw turns and and there are they are uh remarkable. Uh, it’s always been a go-to for me u in in uh social situations. It it loosens people up. >> Yeah. It loosens them up. >> Yeah. >> Really? Better than a whiskey. >> Oh, yeah. >> Ah, interesting. I want to get into some uh now that we got past that something a little bit always a little something something uh for our listeners. But I want to before we’re going to I want to talk about the economic points of interest from January and go through all of them. By the way, the partial shut partial government shutdown this week for whatever reason because in the past we had government shutdowns. We didn’t really ever have a uh we didn’t skip jobs numbers, but it seems like that’s a thing now. We skip the jobs numbers. There may not be jobs Friday because of the uh of the partial the half day government shutdown. >> That’s what they’re saying. Yeah. >> So, I don’t know what that’s about. >> I’m not sure what they’re up to. >> And and then the other problem is what that does is it taints the employment number. Why I say that is now it was like, well, maybe not all the information is there. Whatever comes out could be good, could be bad. It doesn’t matter. and did basically just disregards the entire employment number, which by the way, historically has been one of the most important things for markets. So now we just did a fake news on that and destroyed any kind of uh use for that report for who knows how long. Once again. Once again. >> Yeah, that’s a good point. >> Always always doing the same thing. Yep. Let me uh let me for a moment, let’s talk about Interactive Brokers. Let me let me um ask you a question folks out there that’s listening. Are you ready to take control of your financial future? Meet financial future information. The best stuff that you’re going to get something you need to understand called portfolio analyst from Interactive Brokers. The free all-in-one dashboard that lets you consolidate, track, and analyze all your financial accounts in one place. You don’t need an IBKR account to use it either. Just connect your accounts and see your complete financial picture, your investments, your performance and allocation, all in one single screen. Plan smarter with IBKR’s new tax and retirement planners built around your goals and market assumptions. Get deep portfolio insights with detailed risk assessments and compare performance against more than 300 benchmarks. Plus, manage with confidence thanks to GIP’s verified returns. So, you’re ready to get started. Sign up for portfolio analyst free for everyone at ibkr.comfreepa. Interactive brokers the best informed investors choose ibkr member sipc John. That’s a pretty cool thing because a lot of people are always looking for seriously looking for like uh I don’t know how I did. I don’t know where my stuff is. I I don’t you know that’s that’s not easy. >> Most people don’t have time for it, >> right? This this is really you just you just you just plug your stuff in. You just go in there and you kind of um link your accounts, right? They’re all secure. It’s all, you know, very carefully encrypted and then it just pops up on a screen for you. It’s really cool. Portfolio Analyst at IBKR. Um all right, let’s start with the employment numbers is where we left off and let’s talk about the January employment numbers that maybe people care about or don’t. We had 50,000 new jobs and um the earlier months were revised lower. Somehow the unemployment even though we didn’t put anybody on >> terrible numbers. >> They dipped to 4.4% though. >> Yeah. Well, that you know that can be that can be jiggered. >> Yeah, that’s the statistical part of it, not the raw numbers. >> You know, you can fool around with that number and make it go up and down, but but this 50,000 number is no good. >> No. and and the earlier months were revised lower. So, we know there’s something going on there. >> And there and they were no good to begin with. >> Right. Long-term unemployment didn’t change. Labor participation rates um slipped to 62.4. So, that means that there’s less people actually available to be working. Uh we know that hourly average earnings rose about.3. They’re up about 3.8% over the past year. Uh weekly jobless claims stayed close to last year’s level. So, I mean, the employment situation, you know, it is, we’ve seen it, it’s hasn’t changed much. Um, there’s other things going on. Uh, we saw last week on Wednesday a Fed rate decision. Federal Reserve kept interest rates unchanged in the 3.5 to 3.75. I will tell you before my career is over, if there is anything I could wish for, anything I could wish for is to go back to one freaking number instead of this range. I can’t take the range. Is it who gets 3.5 and who gets 3.75? Why is there a range? >> There shouldn’t be a range. >> That’s what it is. I think that started with Bernanki. >> They came up with this range. So, most policy makers agreed the economy continues to grow at a solid pace. Though job gains are slowing, inflation uh remains above target. Two committee members supported a small rate cut. These is um Mirin and Waller, which we know Mirin is an administrative shill and Waller wanted the job as Fed chair. So he was kind of brown-nosing right up to the end there. >> Well, it didn’t work. >> No. Uh Powell said, you know, clearly there’s a weakening labor market, calls for cutting, a stronger labor market, uh says that rates are in good place. It is no, they don’t have any base. They they don’t know what’s going on. They’re just they’re just following along what’s going on and trying to not in my opinion upset markets. That that’s all they’re doing right now. They they talk about upside risk to inflation. They talk about downside risk to employment and that’s not a big deal for them anymore. But uh they think they’re at a good place right now. They did get a stronger financial forecast. The outlook for the economy since the last meeting. Things are heating up a little bit. We see that in GDP productivity. We see it in a lot of numbers. So, you know, our initial claims are are are holding in right above the 200 what 10,000 per week. Not bad. So, they said most of the o overrun in goods, the pricing issues are because of tariffs. But we think tariffs are likely to move through and be a one-time price increase, which there is some truth there. There’s a lot of truth there. If we have a 10% price increase, if we have a 50% price increase in a widget this year and it stays that because the tariff, but the 50% stays on, we don’t have any further inflation next year, do we? >> Right. >> Right. >> No more inflation, but price sticks still as high as hell. >> Well, people keep, you know, and I don’t understand this. They don’t they don’t emphasize this enough in the media especially that that um inflation is cumulative. >> It’s like compound interest, >> right? >> And so you know if it goes up and up and up and up and up and then then the inflation rate goes to zero. It doesn’t mean it starts going down. That would be deflation. They don’t want that. Whatever you do, you can’t have that because then people will just stop buying everything by their nature. Oh, I’ll just wait till it gets to zero. >> Right. >> And um and the public at the Lord said, “Well, yeah, he stopped the inflation rate, but the prices are still high.” Yeah. Hello. >> I know that. It’s ridiculous. It’s ridiculous. Yeah. I don’t know. So, GDP, federal budget, economic growth remains strong. We know that GP GDP is rising in an annual rate of of annualized 4.4% 4% which is driven by strong spending higher exports reduced import dues imports due to the tariffs we know that the imports coming down um federal deficit for December rose to 145 billion >> for the year for the year year-over-year it’s not better >> balance the budget >> yeah uh income this was interesting income and consumer spending this for January personal income and consumer spending rose >> both in October Deber >> that was the last one year over year they were up consumer price index in December was only at.3. Shelter, food, and energy all contributing. When they say all contributing means those were all higher. That’s so they don’t say that they’re higher. This is this is the kind of verbiage that’s used to just >> Oh, that’s a good good catch. Yeah, you’re right. >> This is the kind of verbiage that’s used, you know, um to, you know, when >> to bamboozle the public, >> right? There were six guys. Three of them, Johnny, Joe, and and Jack beat the crap out of uh you know, Bobby. So, no, you don’t say that. You say, “Yeah, there was a fight and three of the three of the people at Johnny Jo contributed.” It softens the whole thing, doesn’t it? Contributed. >> Yeah. Yeah. >> Contributed to breaking his nose. Um but but it sounds better than blaming, right? If I said it different way, I would say with shelter, food and energy all coming in higher than expected and really causing the inflation rate to bend higher. Oh, what? Versus contributing, you know. >> Yeah, that’s what you do. >> Pursu this is the way that we do this to soften everything. Producer prices also increased. Inflation uh slowed in the consumer in in the the producer place compared to 2024. housing. Um, existing home sales rose in December. Uh, number of homes is still low for sale. In other words, there’s not a lot of supply on the market right now. And that’s a combination of a couple things, right? It’s a combination of one. Uh, John, if your house moved up from, I’m just picking a number here, 200,000 to 400,000 over the last number of years, and you want to move, the probability if you want to stay somewhere in the area that you’re going to live, you’re going to want to buy a house is probably 400,000 or so, right? You may you may back it off, but still, where if a horizontal move is going to be a $400,000 house, you sell your house. >> What’s the point? >> What’s the point? And if you kind of go and and let’s say you go to a $500,000 house, all right, you spent an extra $100,000, right? But now what happens is that you don’t have any property tax, excuse me, you don’t have any capital gains probably because you got uh available $500,000 of gains that you could offset, right? Um but now you’re going to have tax on a $500,000 house versus a $200,000 house when you first bought it. >> Most states have a a portability going Yeah. So that’s that’s a problem. Um so the so the homes for sale is a product of not just oh everybody you know oh you know we got to get more supply on the market. Yeah. Yeah. In a way you do and that will bring down the price of housing because you’ll have an over supply at that point. Hello. But it’s not the fact that you know they talk about 7 million houses need to be built. 7 million. We’re we’re lacking seven million for all the Gen X’s and the the the you know all the people that >> all the people that can’t afford a house. >> Right. For all the Exactly. Exactly. Exactly. Manufacturing industrial production in uh last the last reading was uh up4%. So not that much 2% off of the year. Manufacturing output increased. Mining activity declined which I thought was really interesting. Mining activity declined. I’ll say it again. Mining activity decline. Does that make sense to anybody? >> You got you got you got things running through the roof. You got gold, silver, platinum, platinum. You got you got these prices running like crazy and mining. You know what? I I price I don’t think I want to find more of the metal that just shot through the roof. No, no, no. I’m not interested. No thanks. How crazy is that? Can you imagine being a fisherman, a commercial fisherman, the price of salmon goes to like 800 a pound. like, you know, I’m not in the mood to fish today. [laughter] The dumbest thing I’ve ever heard. >> I What? Well, there’s got to be some rationale here. What is the point? Are they skeptical? I It It’s beyond my understanding. This is beyond my prayer. These kinds of stupid things. the the this just shows everybody some of the things we talk about and pick out in the economic reports how it it it takes it it’s we’re first of all a big country right it’s like being a big business there is so many parts of the business that go into the uh profitability and the outlook and when you have a business that is so large you can’t do proper accounting on a monthly basis, let’s say, you have to wait. So these numbers, we got to look at more like quarterly numbers and trends. For whatever reason, when I first started in the business, for about 15 years, the economic numbers were extraordinarily important for markets and um we watched them very carefully, still watch them very carefully, but recognize that the markets don’t give a crap about most stuff. Well, as you pointed out years ago, it was when when quantitative easing began and they started around with the numbers and the money supply and everything in between. It it made everything irrelevant. >> Exactly. Exactly. Couldn’t say it better. Import and export prices rose slightly through the end of the year. Okay. Earnings, let’s talk about that. Uh roughly one-third of S&P 500 companies have reported Q4 earnings and overall results are still strong. Um 75% of companies have beaten EPS estimates. So that’s slightly um when I say slightly below long-term averages, it’s like the long-term average like 76. So I don’t think it’s a big deal. Uh revenue beats remain solid at 65%. companies are reporting about a 9.1% earnings above estimates which is well above the five and 10 year surprise averages. So that’s pretty good. Um >> yeah, but that that could be because of creep where you you know the over time people start doing estimates purposefully wrong. >> Well, and then you also have buybacks that are also raising estimates >> and there’s buybacks and there’s a lot of reasons for these changes. Well, plus you have analysts that usually pull back before the actual results so that you have the lower bar for comp. Don’t forget most analysts are working for sellside. That’s what you see out there. So, if you have an analyst, if I’m an analyst, John, and I’m dealing with D’vorak, Inc. And we talk, we spend time, you’re like, you know, things are good. I think we’ll do about uh 8% better than last year. You and I talk about it. I put out the analyst. I’m like, you know, I think they’re going to do about 5 and a half% more than anticipated compared to last year. Why? Because I’m probably an owner of your stock or I want people to enjoy the benefits of that stock ownership. And if I come in with like I really think you’re going to do a lot more in your sandbagging and I’m going to call it out at 10% and you only come in at eight, then all of a sudden the stock is going to come down. It’s a very massaged process. >> Yeah. Yeah. And which means it’s bogus >> to a degree. Yeah. Don’t forget most most companies that are doing their conference calls, they’re sitting there knowing what’s happening to the stock every time you say something and people are are giving you commentary in your ear and probably right in front of you on a giant whiteboard uh saying, you know, yay nay. Look at the stock. Say something different. Walk that back. Talk about something else. Move into the next discussion. >> Yeah. It’s like Max Headroom movie. [laughter] M Max Max had room. Remember that? He would stutter and stuff. >> Oh yeah. Yeah. Yeah. He did that pretty good. >> Why did we Why did we have to have a Why was this this in highly intellectual being stutter? What was that about? [laughter] >> Did it make a I don’t understand. >> That’s a funny I don’t know. It was It was just a personality quirk. >> Yeah. It And not only that, why was it almost look like the Well, the right word is it was glitching out. something you talk about a lot, the glitch on No Agenda, which you and Adam Curry get together and talk about uh things, stuff, and all sorts of news items on Thursdays and Sundays each and every week. Uh must by the way, seriously, a must listen. 2:00 must Well, you’re also recorded, but you’re it’s a must listen weekly. >> I don’t say that a lot. >> It is a must listen. We we have insight that they don’t have any place else. >> I agree. I agree. But it’s a glitch. It was a glitch. Um what else do we got here? The S&P is on track for uh what about 11.9% year-over-year earnings growth, marking the fifth straight quarter of double digit earnings growth. That’s pretty good. Healthcare se sector shows the largest earnings declines and that happens to be because of what’s going on with well an aging population. It’s the uh uh payments back from um Medicare and Medicaid and uh it’s not as much of you know bad loss um that’s going on. It’s really the reimbursements. So >> yeah, wait until we see the fraud in California be revealed. >> Ah, it’s coming. You know, they say Warren Buffett once very appropriately said that, you know, during the high tide everything’s great. During the low tide is when you start seeing all the muck and mire. I’m paraphrasing, right? You know, the broken glass, the condoms, the bottles, >> the mess, >> the mess, you know, and when tide comes down, that’s what’s happening in the healthcare area. It’s all of a sudden, you know, it’s not being I don’t want to say covered up, that sounds bad, but not being obfiscated uh by the the high tide. You get to see everything that’s happening. Tesla got to talk about that sexy no more. Do you know why they’re no longer going to be selling the S uh or the X? That’s it. They’re stopping production entirely on the Model S and the Model X crossover by the end of Q2 2026 to focus on what? Autonomous technology and humanoid robot robots. Autonomous was it? Optimus. Optimus. Yeah, you got the Let him watch some more cartoons. Can we have the Fred Flintstone something? You know, the Optimus Prime that was from, of course, Transformers. >> Yeah. The uh this is very screwy. I mean there no one’s these robot there’s not going to these robots aren’t going to happen. I mean, I’ I’ve already seen one round of these robots back in the day in the 80s when Nolan Bushnell had his little robot that was the talk of the town at the ComX show in the one of the I forgot what year, but 86, I think, or ‘ 87. And it was like this little robot that would go around and and grab beer. Uh and they had a demo and it was going to be the year and everybody was predicting the year of the robot. Maybe even been before that year of the robot. That was in the 80s. The year of the robot and there there was no year of the robot. There’s no year of the robot coming. >> Yep. >> Especially this I mean this elaborate robot that Musk is designing. This That’s not even doable, >> right? What’s the battery life? >> Well, here’s the problem. Here’s the problem here. There is is there any I’m sure they speculated and they put something down on paper or on the back of a napkin or something and they got together with Chimath Palo Hapitia and they put something on one piece of paper, right? What’s the TAM for either of these? How do we know how many people are actually going to use the not the autonomous driving, but the robo taxis, right? How many people are actually going to buy humanoid robots? Is there really a market for that over a Model X or a Model S sedan? >> Not that I can see. I I have no plans of buying. What am I going to do with it? >> I What you would you have a human robot in the house? >> I don’t I don’t know what I don’t understand. >> What would it do? >> I don’t know. But >> is it going to help you cook? >> I won’t even have Alexa in the house because I don’t want people listening. I don’t know what I’m saying, but I’m just not interested. Well, I don’t have I’m with you on that, but what’s the uh I’d rather go on the air. Uh [laughter] >> I hate when people listen to me. >> I hate it. And so uh I I just don’t know who’s going to who would buy one of these robots. What is it going to do? The Because you can’t do the you can’t put the dishes in the dishwasher yourself and you think a robot can? I don’t think so. >> I don’t know. This is like from him watching the Jetson when Rosie the robot was there or Lost in Space. I I don’t know. This is something. It’s like, you know, >> clean countertops. I mean, is that what you’re going to have it doing? >> I really don’t understand. Is folding clothing. I’ll do that. Folding clothing. I like that one. Do the wash. >> Just throw them in a Just throw them in a drawer. Do Do clothes actually need to be folded? >> No. No. Whoever made that up is ridiculous. But again, I don’t know what the real t the TAM on this is, right? the whole total addressable market on either of these items and how I think I think two things. I think >> is there any research on this? I don’t think so. >> I don’t I mean they must have I’m sure they’ve done something. >> No, I I believe there’s no way because >> he just he’s just overriding and saying we’re just doing this. >> That’s my opinion. >> How about another side of it? How about the other side of it that the Model X and the Model S are selling like And >> now you’re talking, >> right? And you know what? We saw that I think it was in the Netherlands, 88% drop. There was two different countries, three different countries in Europe. I mean, the sales of of of Tesla in Europe are just pukeish. Really bad. So maybe there’s something to be said about how they’re not really selling and he sees the writing on the wall. Let’s close this down. Save oursel. And by the way, let’s say we’re doing something else. So it doesn’t look like we’re really worried about the sales here. Those are two major cars in their arsenal. I mean, clearly the other one sell better, but the S is, if I was to have a Tesla ever, it would only be the the S. >> Yeah. The S is the prettiest one. >> Yeah. So again, then he talked about big capex like a $20 billion capex to to build this out and to make a manufacturing facility for building their own chips. So Friday with all this information stock doesn’t go down, it goes up. Why? SpaceX looking for an IPO in June. Valuation moved up from about 800 billion supposedly down to 1.5 trillion all of a sudden. Now there’s a discussion merging X AI into SpaceX and possibly even uh Tesla into XAI. >> Yeah. Yeah. He likes to do that kind of that kind of deal. >> Not only that, it’s >> almost like a reverse merger with your own self. >> It doesn’t make sense to put Tesla there. I’ll give you if you have to the um >> what made sense with the solar operation he had. >> Well, and and how you rolled Twitter to make it look like you weren’t losing money there. The the the shell game on this is unbelievable. The idea that Tesla would be merged in here, anything’s possible. But why not say that after you have really horrific earnings, you say you’re shutting down the production of two of your properties that are making a lot of money for you, a reasonable amount of money to something that’s unknown. You’re going to do a $20 billion spend and everybody’s like freaking out about it. The stock goes down and you’re like, “What can I do to rescue it?” I know. Let’s scare the crap out of anybody that’s short and was questioning it by saying, “You know what? we may roll this into and take private or take, you know, reverse merger it um merge into uh SpaceX, which everybody’s all hot about. You just say that without any real meaningful Listen, he said he’s he’s done this for years. He said things that have really no actual truth. 420, remember that? Remember the 420? >> Yeah. It was also the the the tube. >> Yeah. >> Uh >> yeah. All that. It was that was the uh hyper hyperloop. >> Yeah. Hyperloop. Uh there’s the number of of different things. >> But you know, you say stuff and you don’t know who to believe. He’s strong enough. Look, you don’t want to go against him. He’ll sue the crap out of you and he’ll win only because he has, I don’t know, throw, I don’t know, 100 million at it. Who cares, right? At the attorneys. So something to think about. We have a new official, wait for it, we have a Fed chair that has been appointed by President Trump has to go through the congressional hearings and and approval process. Of course, uh Kevin Worsh, Kevin Worsh, my opinion, out of all the >> What is your opinion? >> Out of all the ones that he was going to choose, I like it. >> Now, that means >> you like him the most. >> Yeah. Which means he’s probably not going to get in somehow. Uh, I like him because his history is historically, now there’s been a while since some of this, but historically he’s been a bit of a deficit hound. Uh, he seems to be the least of the psy, the political psy. I thought that the Hasset was just no good. Um, although I would have had so much fun with his collar for years. >> Yeah, you and the collar. >> Oh, it’s horrifying. >> That bare feet at the airport. >> Yeah. Yeah. Um [clears throat] the um Rick Reer interesting interesting fellow like him. Imagine a lot of money. Interesting. Um non-academic. [clears throat] Um who was the other one? Uh Waller. Interesting. Eh I don’t know. Not sure. Uh going to be also a a political pawn, I think. But I don’t think Walsh is. And that’s when I think markets got initially kind of spooked. And that’s what set off the whole silver um plummet. maybe that they think he’s going to be more hawkish. Silver plummeted 31.4% to settle at $78, making it the worst day since 1980. Just at that point, it was down 35% during the day. The worst days plunge ever in history. >> It was the worst decline in in in anything that has ever been seen since 1980 when the famous or infamous Hunt brothers crashed the market or crashed because of Hunt. >> Yeah. Well, that’s what I think a lot of people were thinking >> that Worsh was the reason that set it off. >> Well, no. I think they were also thinking that when silver started to go that this was that it was a it was a fake up. Anyway, like the Hunt brothers or somebody something was going on and had to be corrected. >> Uh get out. >> Gold was down 10%. >> Gold saw a drop of 10% in the >> gold makes more sense. >> It was also a record by the way. Oh yeah, that’s a pretty big move for a precious metal. >> 12% interest. Bitcoin is now down 25% from its recent level only two weeks ago. So now with all of this markets were a little upset. Now there’s some conversation creeping in. We see Elizabeth Warren, a few others saying, you know, no good. No good. Well, it doesn’t matter who was picked. No good. Uh, will Trump backpedal on the Kevin Worsh if Worsh is not going to play ball with him? Talk to his supporters in Congress and tell him, “Listen, I appointed him. I want it look like there was uh somebody going in there that’s not a political pawn. Don’t confirm him if the market’s, you know, could act squirly squirly like this.” and then we’ll put somebody else in because you know they’ll have they’ll have um approval uh uh uh they’ll they’ll get worn down. You can’t put the process. You put somebody up there. It’s a two-eek process. All this goes on, the hearings, the people, you know, the stone throwing that goes on and name calling and all that. And then by, you know, all right, not confirming him. How many times can you do that? Now, there are some people that say, “Look, we are not going to approve anybody until the lawsuit with Powell is resolved. until until also the Supreme Court comes out with a real decision whether or not he could fire him because you know what if we just approve somebody then Trump could just fire him. So lots going on there. Lots going on there. Uh, a couple of things here. We got to talk about uh Apple earnings. Oh, uh, we walked back, by the way, just this week on, uh, let’s see, we walked back this, we walked back that. What else are we going to walk back? Walk back Korea. Korea was down five and a half% overnight on on on Monday night. Uh, that was pretty rough. Uh, let’s see what else that that market’s been skyhigh hot. We also saw, what was the other one we saw? Oh, we saw a Oh. Oh, we have a deal. That’s all we have is deals. We have frameworks. We got deals. We don’t know what the hell’s in any of it. >> You know, it’s all bogus. >> We don’t We got a deal with India. We’re going to immediately reduce the tariffs on India. >> Yeah. Okay. >> So, this is after >> just fabulous Indian products we’re bringing in. >> What’s really interesting, >> Jaguar? I guess about it. Volvo, is they Indian now? uh I mean there’s a lot of things that that you know the Indian Indian Indians make you know small crap products uh they have a lot of technology of course and a lot of uh intellect but what’s interesting about this is this comes right on the heels that Modi spent like a whole day talking right in a huge conference how they have all these things in place to now defra the terrorists by doing internal uh not I don’t call it stimulus but internal programs to activate uh consumption and and domestic demand this whole plan now I don’t know tell me something if that’s going to be the case and it somewhat nullifies the impact of terrorists from the United days. Why all of a sudden so fast do we have a deal from India? Like India caved. Why would they cave if they have all this other stuff going on? Or did we cave again? Like, hey, tariffs aren’t going to work with them, so you might as well just give in. >> Well, again, it’s one of those things. It’s like Greenland. We don’t know. We have no idea. >> Forget about Greenland. That’s not even Oh, we have the Epstein files. That did come out. We saw some Epstein file stuff. >> Yeah, that’s good stuff. And some of this stuff in the Epstein files just is aggravating. It’s like, you know, there was an email from someone. And first of all, how is there so many files and so many pictures? Where is this stuff come from? Did this guy just have incredible records? What What was the deal? Who has stuff like that? Was it just all the email? >> A lot of his email. So the email accumulates. >> Three million pieces just released. Who has >> six? Who has that kind of stuff? I mean, >> and then also the uh then there’s some interview that’s been released and then um then there’s a bunch of random stuff that says stuff like, “Okay, go ahead and kill him.” Just weird, you know, notes that nothing to do with anything. >> Who Who keeps that kind of stuff? >> Well, I had my room here. It’s >> John. >> I have a few items. >> If you do if I had a note that I was passing somebody, which I wouldn’t do. Yeah. Hey, you know what? Do me a favor. Knock off D’vorak. >> I don’t think I’d be holding on to that. >> Well, yeah. Why would you? >> What am I holding on to that for? There’s so much. >> No, I No, I re I think some of this stuff’s been created by AI to be honest about it. >> That’s interesting. Then then you have stuff like, oh, you know, there was uh emails going back and forth from Epstein to somebody about buying a plane. I’m thinking, who cares? Like does that implicate the person they sent out a note? There was an invitation sent to you know an invitation was sent to Andrew. It is not true. Andrew uh you know Hamilton to come to the island. Okay. Did he go? No. So who cares? That’s that. You know what I mean? This is stupid. I don’t understand. I don’t understand what the point of I really don’t. But that’s me. What do I know? Apple earnings. This I know about Apple reported blowout first quarter earnings on Thursday predicted growth of as much as 16% >> in their current quarter. Yeah. >> They said sales >> because of big big sales of the iPhones. >> Yep. Big sales of iPhones. They said sales could have been even better >> better if the company could just secure the chips to meet the customer’s demand. They can’t get the chips which is a problem. I mean it’s it’s it’s gone into massive >> they making their own chips. >> Well, they got their their they got their own mass uh main chips, but like some of the chips for um uh things like um NFC, right? And the chips for Bluetooth and uh you know, pick pick all this other stuff. We’re not talking about the main processor. They’re what is it the M something or other? >> Yeah, whatever it is. M >> Yeah, the M whatever they have. But I’m talking about the other peripheral chips that are in there. There’s all sorts of stuff going on. you cell chips, Bluetooth chips, Wi-Fi chips, uh you know, antenna rays, whatever. >> They make those, too. >> There’s stuff in there that they don’t. >> We know they use chips from all sorts of companies. >> Yeah. Well, I don’t see the appeal. >> Well, nonetheless, the fact of the matter is the company reported about a 42.1 billion of net income, which is pretty good. About six billion higher than a year ago period. They saw particularly strong results in China, which is kind of interesting, including Taiwan and Taiwan and Hong Kong. >> Sales in the region 30% >> because they clone that. They clone that product in China. >> Yeah. >> And you can get it for 25 bucks. >> And you got plenty of other really You got the Huawei, you got the um >> and Huawei makes a terrific phone, >> right? Who makes the fold foldable? That’s uh that’s Samsung. Samsung. Yeah. And then there’s also the uh the other one, the other really good one. Uh >> I see it, but I can’t say it. Uh They’re the first ones that that cloned the or sim made a similar phone to the iPhone. Now they have a car, too. Whatever. Can’t remember. >> Car. >> They have a car also. Yeah. Um >> Chinese company. >> Yeah. Chinese phone phones. Uh Xiaomi. >> Oh yes. Uhhuh. I OnePlus, Oppo, Vivo, and Honor. Those are the other ones in China that make Chinese. Yep. Known for uh Yeah. running the Hyper OS and they all have a lot of good things there. So, um they say that, you know, they’re constrained. So, that was kind of interesting to say that from Cook. I thought it was was the stock was up a bit, no great moves. Actually, was up more on Monday than it was the two days preceding or two days after their uh earnings. And a final note before we get to the game, uh, Blue Origin, you know, this is the company owned by uh, Amazon/Jff Bezos or Jeff Bezos really. Um, it’s going to pause its tourist flights to space for no less than two years to prioritize development of its moonlander and other lunar technologies. This reflects their commitment to the nation’s goal of returning to the moon and establishing a permanent sustained lunar presence. What the hell does that mean? Have they ever been to the moon? Have they ever even got a ship into orbit? What have they done? >> They’ve only done um Well, with Taurus, they’ve done the low low orbit, right? >> Is that an orbit or just an up and down? >> They up and down. Up and down. >> Yeah. So, what >> they just got to the to the to the edges and then came down. Um it’s like a it’s like a carnival ride. >> Yeah. A very expensive joy ride. So then um yeah they they they didn’t uh I don’t think that um obviously like Musk’s move obviously what’s happening here is nobody wants to do it so therefore let’s switch gears and repurpose this somehow but my bigger issue is >> that could be >> what’s the sustain there’s a lot of the same stuff going on John come on you know that right >> yeah don’t look there they do it they they they juggle just enough to make you they distract you so you don’t see us all the game, >> right? >> Yeah. Look at there’s a there’s a bowling ball I’m I’m juggling. Oh, no. Look at there’s a bowling pin. Wait a minute. That’s different. >> The You’re still juggling. >> I’m still wondering what this means by sustained lunar presence. Sustained lunar presence. >> Put a base. A base. >> They’re going to put a base there. >> Yeah. >> So that we can go up there and freeze to death. I I know what you do up there. Dig rocks. >> Yeah. So, um, maybe they’re going to put data centers on the moon, which is I think the >> Well, they want to put nukes up there so you can have nuclear power. >> Nuclear power, not nuclear weapons. Okay. So, you’re going to get nuclear power with a really long extension cord. Is that what you’re saying? >> They’re going to beam it back with microwaves. >> Oh, come on. Seriously? What do you do? >> That’s what you do. >> No, you don’t. >> Yeah, that’s what you do. >> They haven’t done it. How are they going to do it? >> They haven’t done it. They’re not going to do it. But that’s what that’s what you do >> right now. What I was thinking data centers on the moon, which is clearly, by the way, the next Pink Floyd album that’s coming out. >> If you know, >> good name for an album. >> If you know the, you know, Pink Floyd has a >> Yeah, I get it. Dark Side of the Moon. >> Um, which I used to really like Pink Floyd till I found out that Roger um >> Waters >> Waters is a massive anti-semite. >> But that is a lunatic. Yeah, but that too. That too. >> He’s a massive anti-semite, but he’s also hates Trump and he’s got all these other issues. The guy’s he’s lost it. >> Yep. Exactly. >> Toxopplasmosis >> is my guess. >> The name for the album or what he has. >> It’s what he has. It’s got to be. >> Hang on. >> It’s my my is a game that we Sorry. Go ahead. >> I’m sorry. My current thesis is that toxopplasmosis is behind most of the stuff going on. >> I don’t know what that is, by the way, but it sounds really awful. >> That’s the cat. That’s that cat brain parasite. >> Oh, really? Do we have to do we have to wear masks now again? >> No. You It’s been around forever. This is I’m I’m now convinced that it’s responsible for the dark ages. And you know, house cats have never been a thing until after 1920. They only became popular after World War I. And then they became super popular after World War II. And then they became they shouldn’t be in the house because they they contain this parasite in their poop and people catch it and and 20% of the US population has it as we speak and a lot of them are these raving lunatics because it creates anger. They think it may be responsible for schizophrenia and other brain damage. I would suggest that Howard Stern may may be a victim of it because he’s personality changed when he married the wife who is a cat rescue person that can cap people. It’s just one thing after another. It just keeps adding up. >> Well, one person, you know, >> essay coming out. Essay coming out shortly >> on Substack, right? >> Yeah. I already put it in the newsletter, but I can elaborate. >> Here’s the point. There is one person at least, if not two, that will not get that because I will never have a cat. Not because of this, because of the cat. I don’t want cats. >> You don’t like cats? >> I don’t like cats. Not that I don’t like cats. I’m not having cats. >> In fact, if you don’t like cats, you probably don’t have toxoplasmosis because this particular parasite makes you like cats. >> Oh, >> it was designed, it was designed as a cycle. So, it would get out into the wild and mice would eat it. And the mice would like cats and then the mice would go and they go try to befriend a cat and get eaten. And that was the whole idea because the mouse, you know, because the cats are lazy. They don’t want to go chase a mouse when they when the mouse would come up there. The whole thing is dynamite. It’s a great process, but you know that that means you don’t want cats in the house. House cats. >> Yeah. Yeah. Yeah. Yeah. All right, let’s get to the game. This is a game that we play. It’s not a solicitation to buy or sell any security. It’s not a recommendation of any kind. Nothing on the show should be considered investment advice or a recommendation. If you choose to invest in any of the stocks mentioned, you should know that it may carry risk along with the risk of a loss of principle. You should also seek out professional financial advice for your particular situation. We assume no risk as these are not to be considered recommendations. Horowitz company, myself or John Cedavor may invest in any of the securities mentioned and we’ll disclose that on the website under the weekly stock pick section. You can go to dhunplug.com and see all the names we discussed in the segment along with the performance information from the date discussed as well as any additional important disclosures. >> Yeah. So things are looking pretty good generally speaking. >> Yeah, we got one uh back there. Crisper, your crisper thing is falling off a cliff. >> Yeah. Yeah, it’s it’s fascinating. >> And and Gabella is not Well, it’s dead money, but it’s not doing much. >> Sky West, you pick that. That’s doing good. >> Sky West is down on mine. >> Oh, it was up a little bit uh since I think the last update. >> Well, we’ll see what happens next week. >> Yep. Uh but >> I got nothing new. I got nothing new. But you do. >> I got one. We’re going to throw up. Uh, not throw up. We’ll throw on. [laughter] >> I’m going to throw it up. >> I’m going to puke this one up on you. Um, Ion Q. This is one of the one of the five or six quantums that we follow and the price got pretty reasonable. Uh well, they’re all overpriced, but there’s some discussion about what they do and the potential for use um in certain applications that may be um being looked at for preventative measures. Let’s say for um you know, things like um you we need to get some kind of quantum going for the good guys because the bad guys get the quantum, we got a problem. Would you agree with that? if it ever works if and there’s a lot of discussion uh between the administration really trying to fasttrack a lot of this and also the big players in Nvidia and Jen Wong all talking about quantum and it’s starting to come so I thought you know what for a long shot we’ll throw a quantum name on there >> I I admire your your uh courage [laughter] >> yep so I bought some personally bought some for clients so let’s see how it works but All things good. All things good. All right. Until uh until next week. I bid you a do. >> I bid you ad do. >> I see you later. Bye. See you. >> You’ve been listening in on a conversation with John C. D’vorak and Andrew Horowitz. Hope to be with you again soon. Bye-bye. [music] >> Now, I’m not broke, but badly bent. I’m not down to my last scent cuz I got a dollar, but it’s my last dollar bill. Yes, sir. In [music] my pocket there’s a debt. All my dough is nearly spent, but I got a dollar and it’s my last dollar bill. [music] Oh, I’d love just one more buck. Fortune left me by chance. Now, here’s a hint. I feel like a men. You can hardly tell by a glance. I don’t care. No millionaire. Can’t give me the [music] ice stack cuz I got a dollar. My last dollar bill. [music] This podcast is intended forformational purposes only and does not constitute personalized investment advice. Investing involves risk including the possible loss of principle and past performance is not indicative of future results. The views and opinions expressed are those of the hosts and the guests and may not necessarily reflect those of Horowits Company Inc. an investment advisor registered with the US Securities and Exchange Commission. Registration with the SEC does not imply a certain level of skill or training. Advisory services are only offered to clients or prospective clients where Horowits Company is properly registered or is excluded from registration requirements. 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Employment Report Solid The Tech disruptors are getting disrupted… Growth vs Value – an abrupt change. Guest – Cullen …

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This episode is brought to you by Interactive Brokers. And ask yourself something. Will the year-over-year change in the US CPI exceed 2.6% in February? At IBKR Forecast Trader, the yes recently priced at 48% and the no at 50%. But markets move fast. Forecast contracts let you turn your views into trades on future events like the economy, climate change, and politics with simple yes or no prediction style contracts. Explore trending data, spot the trends, and if you get your prediction right, you earn $1 per contract at settlement. Plus, you’ll earn 3.14% APY on your investment with an interestlike incentive coupon, and you’ll get $3 for signing up with IBKR Forecast Trader, which you could use for any purpose or to start trading. Forecast contracts are not suitable for all investors. Go to ibkr.com/for and turn your views into IBKR forecast trader contracts today. Last trading day for this contract is March 11th. [music] The disciplined investor is all about you, your money, and the markets. Sit back and get ready [music] for this edition of the disciplined investor podcast. [music] >> This episode of the disciplined investor is sponsored by Horowits & Company. If you’re [music] looking for a portfolio manager, look no further. Horowitz and company. From seed through harvest, [music] cultivating financial success. [music] >> How’s that for a pretty solid employment report? The tech disruptors are getting disrupted. Growth versus value and abrupt change. And our guest is Cullen Ro, author of the best-selling book, Your Perfect Portfolio. All this and much more on episode number 960 of the Disciplined Investor podcast. [music] [music] [music] Hey, hey, hey, and welcome to the Discipline Investor podcast. This is Andrew Horowitz and thanks for joining me this week and every single week talking about money and finance and everything in between to try to make you uh a little bit more uh well financially stable, secure, and free. That is what we’re trying to do here each and every week. Last week, well, that that show was packed with information, wasn’t it? If you haven’t listened, we talked about software mageddon. We talked about the fallout from AI disruption and other sectors that happened. and we’re going to talk about that as well this week. We dug into precious metals. Um we we oh we talked about diversification which we’re going to have a little bit of a discussion with again also with our guest today because he’s all about that and there’s a great response from that discussion. And I got to tell you, thank you all for your emails, your comments, and I, as I mentioned, now probably more than ever in the past year or so that I can think of is a real good time to start getting down and dig into your portfolio. Consider taking a very hard look at what you own. The reality is that things are a little bit different. was seeing a very big change in the leadership in the markets. And by the way, many of you wrote me, you went over to the discipline investor, you clicked on either the ask Andrew or anything else that was in there and you said, “Hey, what do you think about this?” And that you were going to get down and start looking at this and you’re going to roll up your sleeves and you’re going to get involved. Yes, some of you asked me to help you, which is fine. I could do that. But what is really great is that you’re taking this thing seriously because we live in a world and an environment and an economy that is ever changing. And that being said, we need to be present to all the things that are happening, not lazy, not uh just hoham. So what’s different this week? What’s different this week than we had in the past? Well, last week we had that monster move like a week and a half ago on that Friday when the Dow Jones Industrial Average average blew out over 50,000 and and and now we turn around and where are we today? Well, the VIX tipped above 20 this week. We saw this massive rotation that is taking hold, right? We saw that the move from uh growth to value. We see that potentially we have some type of military action in the Middle East. Maybe, maybe not. I don’t know. Uh and that’s probably the reason why crude has been moving up so nicely in the past few weeks and why commodities and in particular even with gold and silver and platinum and platium doing what they’re doing has been holding up really well. We are we going to go into a war conflict in the Middle East again? I don’t know. But the markets seem to be sniffing out something. But I thought that the real under the radar situation that’s going on that end up being I think above the line like front and present right there in front of our eyes no need for any kind of specialty glasses night vision or radar sonar anything was all about disruption this disruption that’s going on you know we saw some of the companies like Upwork horrible earnings outlook horrible numbers stock cave down 25%. What kind of work is done at Upwork to give you an example of what’s going on? Well, pretty much almost anything that could be done on a computer, right? Like software and web web development. They do things like um creative design work. They do translation, writing, editing, marketing, SEO, sales. They do things like uh accounting and legal. they do possibly get hired by somebody do admin and customer support. This is the poster child for something that can be disrupted with the likes of artificial intelligence of where we are today. We don’t have to get into the next levels of where they are. They can be disrupted today. And they’re seeing that this company apparently on the bottom line. And that is why we’re seeing other companies get so skittish in the current market environment that we’re in now. In fact, we also saw this week another potential, although I don’t think this was I think this was overdone a bit. We saw a new financial AI that could take a look at tax returns and other financial forms and make informed tax decisions. And that sunk the companies like Schwab, Morgan Stanley, and there’s a few others that got clocked with all this forced explanation that we’ve been hearing from the companies that are embracing AI, that they’re not going to lead to job layoffs and all this. Okay, I’m calling BS. I have before, I’m going to say it again. And while AI, by the way, may not dislodge an, you know, an ex an Etsy creator or crafter, whatever they’re called. Maybe someone with very specific mechanical skills, although there are some robots coming, some robots already there. There are plenty of other areas that can be impacted. There’s no question about this. So investors are selling first and they’re asking questions later. That’s what’s happening. We saw the likes of Dell highf flyier recently. Everybody loved it. I like Dell. Uh why? Because they’re selling machines. They’re selling a lot of them. Problem is they got some problems. The cost of chips and some of the materials that go into the device that they’re making have been so elevated. Not that we have any inflation by the way. They’ve been so elevated. They’ve been absorbing much of this cost. They’re on a 5day quote basis, meaning you want a quote from Dell for a particular project. It’s only good for 5 days cuz prices are changing so quickly. This company has a huge footprint in the AI space, in the tech space, but they’re getting smoked recently because of all the extra costs that are going into this. Pretty interesting time. We’re seeing that there’s a huge amount of capex that’s going on. Investors are captivated right now. maintaining that general generally bullish tilt. Couple days down, then boom, right back up. Right now, is that going to be around forever? I can’t tell you. But what I do see is the moves have been massive rotations for now. Huge gains in areas that have underperformed, over outperformed, putting into areas that are uh have underperformed. And this is why we’re seeing this massive spread. For example, value, staples, financials, energy versus growth, tech, consumer discretionary, biotech, 10% spread there right now, 10%. The value on the large cap side, you look at the Russell 1000 up 5.5% year to date. The growth down 4.5%. That’s a 10% spread. Wow. in only a short period of time. That is amazing. This is the whole point of diversification. That’s why we’re going to get to talking with our guest uh in a minute. We’re going to do that because I think there’s there’s a lot we’re going to learn here today. Before we do that, I want to talk about again interactive brokers because you listen, I know, you know, you do a great job. You research your investments, right? You analyze markets, you manage risk. But did you research your broker? In 2025, IBKR clients outperformed the S&P, the S&P 500. Retail clients, well, they average about 19.2% while hedge fund clients average about 28.91% compared to the 500 S&P 500 index of 17.9%. IBKRS, Here’s why. You got to really understand what’s going on. IBKR’s lower trading costs, their competitive rates, efficient execution, and access to more than 170 global markets helped investors keep more of what they earn and put more capital to work. Makes sense. Over time, your broker is important. The broker you choose makes a difference. Interactive Brokers, member SIPC. If you care about performance, find out why the best informed investors choose Interactive and Brokers at ibkr.com/2025. All right, let’s get to our guest. Get to our guest, Colin Ro. He was on years ago. We’ll talk about that. He founded uh discipline funds to helped investors obtain access to low fees, diversified portfolios that helped them stay the course and meet financial goals. His primary expertise includes global macro portfolio construction, quantitative risk management, monetary economics, financial accounting, and behavioral finance. It’s a lot. And prior to establishing his own business, he worked at Mel Lynch Global Wealth. He worked on a team overseeing about a half a billion dollars in assets. And upon leaving there, he managed a private investment partnership. It took advantage of reporting irregularities ahead of major corporate events. So, he’s been on the show before. Let’s welcome let’s get into it. Let’s talk with him because I’m pretty excited about his book and what he has to say. So, Colin, how are you? >> I’m doing great, Andrew. Thanks for talking to me. >> Yeah, you know the you know, you’ve been on the show twice before. And um the last time was August 2023. We discussed asset allocation. We talked time horizon. We talked rich risk. Back then it was the Fitch downgrade. Uh we talked about cash as an investment, discipline investing. That was in 23. >> The time before that was way back in 2015, by the way. >> I don’t know if you remember that. >> You don’t like talking to me very much. >> I know I was all these delays. >> What’s going on? Um, we talked about China Robo Robo. We were talking about robo investing back in 2015. >> So, >> yeah, remember that. Remember the robo advisor? >> Yep. Yep. >> Boy, I guess they didn’t kill all the financial advisors. >> I know, right? The death of of the death of this or that industry is well overblown in all occurrences. Um, so let’s talk about I want to start with with the current market conditions, some things that are going on from your perspective, right? From your unique perspective, and then I want to talk about your book. I want to get into it because I have a lot of things after going through it and reading it. Um, I I I have a lot of dog ears on, you know, bend downs and sticky notes and things shoved in this thing. Um, but let’s talk about current market and um, valuations. >> Yeah. How how should investors think about >> I don’t know you want to call it high I’m going to say high valuations I’m going to say the word high valuations in the context yeah in the context of their portfolio. Yeah, I mean this is I I think especially from a a valuationsbased perspective, this is one of the most interesting and difficult times to allocate assets because the the really the thing that is really interesting to me about this environment is when you look at especially things like the historical cape ratios of the market, the the market is really all over the place. it’s very very differentiated across different regions and even different um styles and sectors of the the economy. And so like specifically when you look at the current environment, I mean the the cape ratio for instance of Europe right now is about 22.85 versus the United States is 39.21. And so, >> and ours, by the way, just to put in perspective, if you look at a chart, this goes back to like 200 and what was it like uh it was back like 10 years ago or so that that and then and then we rolled over hard, >> right? Yeah. And so the the really interesting thing about this data though is that the before basically before the financial crisis, the these two regions and really most of the world, it correlated very very closely. So, like in 1999 during the tech boom, the the cape ratio, which is this is the cycllically adjusted PE ratio, which is like Andrew said, it’s the it’s basically the trailing 10-year cycllically adjusted PE ratio of the market. In in Europe in 1999, it was 42. In the USA, it was 45. So, this was really tight back in in 1999 during the tech boom. And then valuations collapsed. They fell a lot during the the financial crisis of course and and the the post-T tech bubble era. But then since then there’s been this crazy crazy divergence where the United States has massively outperformed everything that’s been largely techdriven and now you have this huge disparity where Europe looks very Europe and really the rest of the world looks very attractive from a valuationbased perspective. The United States look looks incredibly expensive especially on a relative basis. Yeah, that’s that’s what I was going to ask is the word relative going to come up here? That that was an important thing because you talk about 22 which is not low either from a cape in when we look at Europe, right? When we look at the European Cape, it’s not it’s not >> light, it’s just relatively so much less. In fact, when we look at value and growth, growth has been smooshing value. At the top of the show, I talked about there’s like a 10% differential this year so far year to date between large cap growth and large cap value. Large cap growth is up 5 and a half%. Large cap >> uh large cap value is up 5 and a half%. Large cap growth is down 4 and a.5%. >> And so I I’ll tell you how I kind of think about this and how I compartmentalize this stuff especially when I’m talking to clients and other investors. I think of this stuff very specifically across different time horizons where I like to try to quantify actually what a financial planner would call like the sequence of returns risk. meaning the the way that the returns are likely to materialize in the future because I think the a mistake a lot of people make with high valuations is I think they assume that future returns necessarily have to be much lower or um maybe even negative and I don’t necessarily think that’s true. The way I would frame this is I would say that the the risk of a much bumpier ride is elevated when valuations are high because valuations are functionally they’re they’re basically just expectations. So the the multiple that’s built into the the expected earnings going forward is very very high in the current environment. And so if you get any sort of disruption to those expectations, you get a lot of volatility. Whether that could be, you know, if the AI trade doesn’t materialize or some unknown event transpires, a recession or something like that, you get a lot of bumpiness in the the future way that the returns will materialize. And so in a year like 1999 when valuations are super high and expectations are really high, you have crazy high sequence of returns risk where the the interesting thing about buying the market if you bought the exact peak of the tech bubble back in 2001 or 2000 the the return since then has actually been 8% per year. you’ve done really, really well, but of course you went through a 15-year period of horrific downturn, right, to get to that point. And so, your sequence of returns risk was really, really terrible in there. And so I would frame it the same way now where if you are loaded to the gills with AI and nothing but US technology and growth stocks, you may not necessarily generate lower expected returns, but you should expect the volatility that comes with those returns to be much higher than it would be on average compared to say, you know, an environment where valuations are much more reasonable or especially if you’re buying, you know, the rest of the world, the European stocks or emerging market stocks, the likelihood for a a a less volatile ride in those uh parts of the world, a better riskadjusted return, as a you know, a financial nerd might put it, is probably a a a more probable outcome. And so, and we’re kind of starting to see that actually the, you know, the the financial markets right now, I mean, the last year, God, foreign almost doubled domestic. >> Unbelievable. And now it’s our emerging market small caps international are absurdly. >> It’s like let’s just stop and call it a year. >> Yeah. I mean you could I mean foreign [laughter] the foreign markets right now what are they up you know 10 11% already. So you know you’re seeing this in the domestic US market is up you know 1 2%. So you’re seeing this huge you know and and it’s not I don’t know a lot of people have been calling for this to occur um you know for a long time and it’s looked very very bad but it’s all of a sudden it’s happening very very quickly where the you know th those relative um cape ratios might compress they might compress a lot more going forward. >> So there’s two things about that and I want to tell you about one theory I have and I want to dig into a little tidbit underneath the surface of what you just talked about and just bring it out. I want to kind of like tease it out if you will. And you talked about the idea that the cape ratio um with regard to um the expected returns. They talk about like oh it’s elevated and that means we’re going to have negative returns. Everybody’s like oh first of all I think we both would probably agree that trying to market time on valuation is an impossible task. >> Yeah. >> Just you can’t do it. Secondly, >> totally >> the thing that you I think that we I want to talk about just briefly is this idea where most people believe that when we’re overvalued means we have to have some kind kind of significant corrective action negativity right across the board somehow or within a sector to bring us down where in fact the reality is we don’t necessarily have to do that. We could just temper >> yep the return. So instead of getting I’m just going to pick a number the 25% a year that people are expecting from tech stocks they may only be a mere 8% per year. >> Yeah. For the next few years. And I I think that’s the the exact right way to frame this is that you you know if you have let’s say 25% returns going back the last 10 years with um let’s just say 20% volatility or what you know the the statistitians would call like standard deviation. Um, I think going forward if you got say 10% returns with 25% volatility that would not necessarily that would not surprise me at all to see an environment like that. And that’s the what that results in. It results in a worse riskadjusted return. It doesn’t necessarily mean that you generate bad returns. 10% is still a fantastic outcome. >> Tremendous. Tremendous. But it it it you you I think people should look at this sort of an environment where if you’re if you’re loaded to the gills with AI stocks and growth stuff. Um you should expect some bumpiness along the way there where and and higher bumpiness than we would regularly see on average. >> The thing I was going to talk about too and I would like to know your opinion on this my theory that this is kind of a loosely put together like this makes sense from a basic standpoint. You know you take down technology in the US by 2%. Right? you have this this this major run over over the last year and two years, three years, five years, pick it up, you know, whatever you want. Instead of it being, you know, a 15% position in your portfolio, now it’s 18%. I got to take 3% down. 3% down in that particular uh environment is a chunk of money that now all of a sudden they’re going to move. Where are they moving it? They’re moving it to Europe just for a simple rebalance. That 3% that was taken out of technology is a huge number, right? Because it’s, you know, you follow what I’m saying? it’s going to now be pushed into these lower valuation, thinner traded, less liquidity stocks. And I wonder if some of that when you start moving that massive money that you’re taking from into the smaller companies with less liquidity, uh if that’s one of the reasons that we’re seeing such a dramatic move in some of the EM uh small cap international and developed international. >> Yeah, I think that totally makes sense. I think that you’re, you know, and gosh, I mean, not to get into like the the geopolitical aspects of all this, but you’re you’re starting to see, you know, this whole like sort of dollar debasement narrative around the, you know, the globe and the, you know, the the United States has become, you know, we’re obviously not isolationist, but we’re coming on a relative basis, a little more isolationist. And so I think the rest of the world is looking at their own asset allocation and they’re they’re moving away a little bit from dollar denominated assets and you know that may be part of it is political part of it may be just a sensible rebalancing mechanism that a lot of especially foreign investors are going through where they’re you know they look at the valuations in the United States and they’re saying you know what we’re going to buy a little more um international small cap and whatnot and just to diversify the portfolio and I I think that makes a lot of sense. Um and you know but I I think in terms of the the thing for me that I try to communicate especially to clients is that I really try to talk about this over time horizons where like I would say that right now you know going back to that kind of sequence of return risk concept. I would say that the this the the time horizon over which you can reasonably predict the technology sector now to generate a stable return is longer. you have you might have to be more patient with the way that technology generates its returns versus something like if you’re buying like domestic value or if you’re buying international stocks. I think the the time horizon of those instruments is a little shorter. So, if you’re someone who is hyper sensitive about the the short-term moves of the market or even inside of like, you know, multi multi-year time horizons, um the the growthy stuff, the tech stuff, the concentrated parts of the market, they’re going to test your patience. And so I think that that’s a really solid argument for if you’re really time-sensitive about this, you need to have more diversification in your portfolio because you’re just going to get really bumpy returns, I think, from from things like the NASDAQ 100 and the the more growthoriented parts of the US market. >> You know, it’s this this last six months, and I’ll stretch it to a year, has been the year of, oh my god, they’re finally right. Right. Yeah. You look at Peter Schiff who is calling for the dollar debasement and you know the whole idea that well it’s more than a debasement. It’s more a dollar, you know, evaporation uh in his his mind, but he was he was just talking about gold and silver for years. Nothing happened, right? Yeah. >> Um the guys that I talk to all the time from the various, you know, the Goldman’s, the JPs, all these guys are kind of trying to feed you some information here and there coming up with, you know, this is the year of the emerging markets. Like, okay, you know, Meb Faber, Meb, you know, Meb, he’s been he’s been preaching for how long? Which he’s right, by the way. I I not I’m not taking anything away from me. I love him. But he’s been talking about and trying to educate people for years about are you kidding me? You have how much of your investments in US only not in the rest of the world where the rest of the world is this >> uh the funny thing is it’s the year of you know things turning around or maybe just uh some one thing just not working >> gold and silver interesting right you know we see this massive volatility we see that parabolic move that was I saw as an exhaustion uh gap that one day that it went up I don’t know what it was some ridiculous number to the top end of where silver was uh I think SLV ETF was somewhere for about $125 a share or something like that. Um, >> and is this still something that’s viable, important, or is it just another asset that has been exploited to a point that it’s not even investable? >> Yeah, I mean, yeah, the the way I would describe this is it’s it happened gradually and then all at once, you know, with with all these different markets. So, yeah, I mean, it’s a it’s interesting. I mean, I I think it it’s a it’s a lesson in why diversification matters to to different investors. And so, I don’t know, for me, international investing is more so about currency hedging. So it’s interesting to talk about this in the framework of the the dollar debasement trade because and this is one of the things I talk about in the book is I I display the data over which the the different currency regimes impact different styles of returns across different markets uh across the globe. And what you see is when the dollar goes down foreign markets beat the pants off of US markets. And so [clears throat] for me it’s not so much am I trying to pick where is going to be the best performance for me owning international stocks is really it’s an exercise in dollar hedging basically that you get a you know you don’t necessarily have to just follow the Peter Schiffs of the world to get a dollar hedge. You you can actually hedge your dollar exposure to a large degree by owning different types of equities. And so when the when the dollar goes up a lot and the US companies are beating the pants off of of foreign companies, you know, you get you get periods like 2010 to 2024, whatever it was, that period where the the US stock market just annihilates the foreign markets and then when the dollar reverses and if it reverses in a big way like it has in the last sort of 18 months or 24 months, um you get this huge seismic shift in a reversal where um the foreign markets market then start to beat. But the the more important thing is from a for a domestic investor, you’re getting a very specific type of dollar hedging where you didn’t even have to own gold in the last 24 months to get a dollar hedge. You just had to own a global portfolio of equities because you got huge huge outperformance from that international slice. >> You know, I talked about that last week on this very show. I talked about looking at your international em. said, make sure if you’re trying to get your biggest bang for your buck or to be pro in my opinion to an extent there’s there’s different reasons for different things, but look at whether or not your portfolio whether it’s in the foreign bond fixed income slash or in equity is it dollar hedge because you could a lot of times you don’t know right there this and all of a sudden you’re like ah that’s great I got this dollar going down I got this no you are dollar hedged that yeah blew out 5% of your return right there so so be careful when you’re looking at this let’s let’s go on to um one more thing and I want to talk about the book [sighs] there’s a lot of uh a lot of discussion about AI right you know we’ve been seeing this and I and I’ve been talking about this too the if if the disruptors have been disrupted that is what I am seeing right now the idea that the Zillow’s the docuigns the Upworks the you know you you pick the names right out there which uh are out there the asan as the these are the the the the even even to a degree the big guys right the big like like uh Salesforce. So you have all these companies out there that were the disruptors that were um you know I don’t know we’ll call it you want to call it first level tech uh efficiency and [clears throat] you know um uh uh productivity bene you know beneficiaries. Now all of a sudden things are a problem, [laughter] right? We see industry after industry all of a sudden freaking out and flinching with AI. In fact, >> just earlier last week there was a discussion from altruist.ai which where you could upload your I don’t know your tax forms and a few other forms and all that and uh voila they do all this work for you and some of the guys like I was talking about this at the beginning of the show Schwab, Morgan Stanley, a few others got just beat the crap in a day is AI generally speaking um from our portfolios what how should we be looking at this gosh I mean this is one of those things that I it’s very it’s very very hard to decipher what is going on because the and this is part of the problem with the the world today is that things are changing faster than they’ve ever changed And you know, I was reading this piece. There’s a great piece by Matt Schumer called Something Big Is Happening. Uh people should Google it and read her read it. It’s on Schumer’s website. Schumer is a he’s involved in the the kind of on the ground in the the whole AI ecosystem. And he talks about how there is this seismic shift that’s going on that really has not even started to impact things. He basically was saying that like, you know, in short, the the AI is starting to to rewrite the code for the AI. And so he’s a developer involved in writing AI where all of the sudden the people developing the software that is transforming everything are no long they’re they’re basically irrelevant inside of developing the software itself. And so you can start to see this world where when people who were that involved in actually developing the software become irrelevant. Well, what does it mean for the rest of us where this software eventually just starts doing all of the other things around the world? And and I don’t know. I mean, I think that there is there are definitely there are pockets that are going to be disrupted and probably eliminated. And that’s the scary thing from an employment perspective is that this isn’t like um you know the innovation of like the car is something that a lot of people would look at and say like oh well this is gonna it’s going to ruin all of the mail delivery services and you know the the Wells Fargo delivery service from you know horse and carriage is going to go away and you know that that’s a really interesting way to look at all of this because the the adoption of the car was different than today because it it took God it took really like 50 years for cars to get really widely adopted. It wasn’t until really like people came back from World War II and even like you know Vietnam and then really started to you know the average American then really owned a car w in a widespread manner. This is happening much faster. So this is this is different in that sense. I don’t I don’t think I I buy into quite the the narrative that this is gonna like destroy the employment market and because there’s kind of a catch 22 in there where you know the the paradox in all of this is that if the the AI start really destroying a lot of jobs well the demand for AI then goes down because people won’t be able to afford to buy all these crazy subscriptions to you know all these different services and so there’s there’s kind of a paradox in there where the you know unless the unless you have somebody else coming and fill the the spending void. You know, if you get enough employment, well, we reach a point where people aren’t even buying this technology in the first place. So, and the other thing is like this is still very I think sort of niche in terms of its impact and the way it’s going to materialize out over different sectors because until this becomes something that is like for me the the moment where this becomes really scary is when when I wake up one morning and I see robots walking across a construction site. That is the scary moment where you kind of >> know you know that >> it’s going to happen. I have no doubt. I think it’s going to happen in our lifetimes. But um you know I that’s really scary because at that moment those robots are doing even the most manual of labor. The one thing is that’s the last thing. This whole thing Colin is I call this I’ve been calling this for years. When we saw some of the productivity and efficiency come out um consumption cannibalism whereas you have a robot or you have a let’s talk about a robot in an Amazon uh warehouse, right? They don’t need to take breaks. They don’t need to have a vacation. They don’t whine to HR, right? Nobody’s, you know, harassing them. uh nobody they don’t need to uh ask for a raise. They don’t need to take a lunch break. They don’t need a smoke break. You know, this is where all of a sudden this happens and we see all these potential things. Now, what happened was productivity got better, more people made more money, there was more consumption. I get it. But this is kind of like that. I see this as a little bit of the tweaking of the potential for that consumption cannibalism where all of a sudden people may be out of work in certain areas or not necessary. Look at for example um uh graphic artists. I mean man you could you can go to Grock and ask a just a very simple thing. It will do a whole image for you. That’s beautiful. >> Yeah. >> Beautiful. You know you used to have to send that out. You wait to the guy tweak it up to you know you send it to Upwork which by the way stock was down I don’t know 25% this week on just piss poor earnings. You could do something like how about this? I look at your book I read I’m like hey chapter 12 the counter cyclical rebalancing portfolio. Chapter 13 the Bernstein no-brainer portfolio. I have an idea. I’m going to feed that into IIAi and say, “Do me a favor. Analyze this. Take your time. And I want you to spit out what is the most appropriate for this. And I want you to help me work the rebalance on this on a regular basis quarterly.” >> Yeah. >> You know, I’m just saying just something like that. You know, you wrote it, my friend. You gave it to us. You gave it to us. you’re you’re thinking about this I think the exact right way where you’re taking a creative approach to utilizing AI that I think these are the those are the use cases that where people are going to actually add a lot of value utilizing this software and you know it’s the it’s it’s hard it’s impossible to predict where all this is going I I think that I think if I was a if I’m a creative entrepreneur utilizing this software, the boy, the world is your oyster. I mean, I think that the the upside is limitless for those types of people who can really creatively use things like this. If you work at like a big clunky Fortune 500 company, you know, punching tickets, uh, you know, that those jobs, those companies actually, weirdly, I think are much much more at risk than like because that’s the that’s the thing. I think AI is the ultimate disagregator. It is the ultimate decentralizer because it it gives people who want to operate from a fully autonomous and sort of decentralized position >> a huge incredible value ad potential. So whereas this is much more disruptive for big big firms that are doing things that are very repeatable processes that these large language models are just really really good at doing. >> And we’re not even talking about inference >> eliminating those those jobs. We’re not even talking about uh inference or or nowhere near agentics yet, right? We’re yeah, we’re getting there. But can you imagine where where you deploy that? That that’s what people are freaking out about. Let me talk about the book. The book is called Your Perfect Portfolio. By the way, I don’t know who [clears throat] picked out the uh particular texture for this uh cover, but it’s it’s it’s very soothing. You got to get this book and and seriously, people get the book and just to feel the cover if nothing else. Um but you got to do that. Uh yeah, I see >> that’s what the book is for. The book is for I call it I call it good sleeping material. So I made it very comfortable in case it puts you to sleep right on top of it. >> I could have this instead of a fidget spinner. I’ll just kick the book take [laughter] um no no great great stuff. The book is called Your Perfect Portfolio: The Ultimate Guide to Using the World’s Most Powerful investment strategies. U got some good uh commentary from Morgan Howel, which by the way, are you good friends with Morgan? Because I want to get on my show. He was on years ago. I haven’t been able to. Somehow we’re not connecting. I’ll ping him. He He’s Yeah, Morgan’s an old Morgan’s an old buddy of mine. Um we God, we were, you know, both lame bloggers back, you know, 20 years ago before. Yep. >> You know, anybody knew who either of us was. Morgan is um >> cat just astronomically more famous than I am. >> So, I saw he sold 10 million copies of Psychology of Money. >> Unbelievable, right? Unbelievable. But yeah, if you could do that for me. So, let’s talk about this. First of all, I’m going to ask you straight up. What do you what did you you learn from writing this book? >> Boy, I I learned a lot about all of these different strategies. me, you know, the the most I I think educational piece for me was actually studying the history of all of the different strategies because I it’s funny when you talk about the so so people kind of know the the book is sort of an overview of of mainly 20 famous strategies from either Warren Buffett strategy to like the Boglehead three fund strategy to factor investing to the all-w weather portfolio all these different styles and strategies and I kind of go through and I tear them fall apart. And I kind of try to objectively analyze them, but I also like ripped through the history of all these. And so it was it was really cool like looking back and really studying the history of what where did these strategies come from and why are they a thing and why do they work the way they do? And so like for me, I loved like going through the history of like the 6040 strategy was really interesting. So that’s 60% stocks and 40% bonds. And it was really interesting to to kind of study the history of that one because it doesn’t have an origin story kind of like a lot of the other >> point. I was thinking about that just as you said it like cuz all these other ones have like a bit of an origin story who’s who’s famous for >> they have they have an origin story or a founder some famous person who’s attached to the strategy and the 6040 doesn’t. And it that one’s interesting because 6040 is arguably like the most famous and widely used strategy of all of the strategies. >> I’m taking credit. I’m taking credit. I invented [laughter] 6040 and prove me otherwise by the way. And >> but yeah, it’s weird because it didn’t seem to have this origin story and so I kind of I I don’t know if I exactly got the history right, but I kind of traced it back to the Great Depression and um you know the the old Wellington fund that was created um back then. And so it was it was interesting because the the origin story there it actually like runs through um you know not only the the Wellington fund but then you know John Bogle ends up running the Wellington fund at you at some point in his career through the the 60s and 70s and you know that this materializes into Vanguard which obviously everybody knows of of Vanguard now. And so, but the the the story there is basically that um the the fund itself was created right before the Great Depression and the the founder of it had been or the manager had been burned in the past and he created a a more balanced type of portfolio hoping that hey, if I if I load this thing up with a a big slug of bonds, if the stock market were to go down a lot, I wouldn’t get as harmed as say an all equity portfolio. And it’s funny cuz the the portfolio is built basically or implemented right before the Great Depression. It falls 40%. Which is you know pretty catastrophic by by most measures but it did way way better than 100% stock portfolio which fell 80% plus during that period. And so it becomes kind of widely adopted because it creates this more balanced type of return. And it’s it’s stood the test of time through World War II and the the inflation of the 1970s and then obviously in the last 40 years the the 6040 has kind of become the you know the gold standard and asset allocation to a large degree because it’s just so diverse and so balanced and so but it was cool to kind of trace that back to the Wellington fund and the this more balanced type of asset allocation that now has become very very popular but wasn’t really so popular throughout all of history. You know, it’s interesting you talk about early in the book you talk about and you and I think you argue quite well that there’s no universally accepted optimal portfolio. Even the book is called your perfect portfolio, right? It there’s no per there’s no perfect portfolio uh per se. There’s just out there on the shelf. I remember post the 6040 and as we got into the Harry Marowitz, William Sharp, uh Briten Bower Hood and you know, pick your poison of who else you know, DFA funds, all that stuff. I was like so engrossed with getting we need one more percent in the commodities and I think that will be perfect, you know? Yeah. The the efficient frontier and all that. And then one day I’m like, what am I doing? Like seriously, it was like a year into this. I’m like, hold on a second. This is silly. 1% even if I’m wrong, doesn’t mean anything. That was the whole point, by the way, of these studies, right, of of of uh of of the major uh uh pieces of white papers that were put out about all this. And I got kind of, you know, soaked up in this, but um how do you how do you how did you kind of distinguish between a portfolio that’s kind of uncomfortable versus one that’s genuinely misaligned with, you know, who the people are that are investing in it? Yeah. Well, I mean, that’s the main message of the book is that there there really isn’t a an overarching perfect portfolio. There’s only a portfolio that’s perfect for you. And so, the you know, part of the one of the analogies I used in the the book was to dieting and that there, you know, there’s all these interesting dieting studies and one of them found that basically the there they studied all these different sort of fat diets and what they found was that they all worked, but they only worked for people who stuck with them. And so, you know, the that’s one of the messages of the book is that, hey, here are a whole bunch of really good strategies. These will probably all work fairly well if you stick with them, but you’ve got to find the one that’s right for you. And that’s kind of the main message of the book is that we’re all different. We’re all unique. We all have different financial goals and needs, and you’ve got to find a portfolio that you can ultimately stay loyal to and stick with. And if you do, that portfolio will probably serve you pretty well. But you’ve got to find the one that’s right for you because if you’re incompatible with it, you know, it’s kind of like finding a spouse in a lot of ways. That’s the other metaphor I use in the book a lot is the you know finding a good portfolio is like finding a spouse and someone you can stay loyal to and someone that you know you you don’t want to do you like I spent a lot of my 20s having you know not real one night stands but portfolio one night stands where I was constantly flipping and kind of tweaking and changing things trying to optimize everything to to make it better and better. And I finally realized like, hey, actually, I need to just find something that is good enough for me because perfect really is the enemy of the good in this process. And you have to find something that is just it’s good enough for you that is going to solve your financial goals hopefully. And you stay loyal to it. And you got to make changes of course on the the fringes over time because your life is going to change and the the portfolio needs to be rebalanced and you know reallocated to be consistent with the the underlying strategy and your changing goals. across time, but you have to find a process especially that is something you can really stick with and stay loyal to and that that’ll be your perfect portfolio in the long run. >> I have this envision of you in your 20s with like a dating app afro portfolio swiping left and right. [laughter] >> Exactly. That’s that’s pretty much who I was. >> And then and you know the other thing is uh I want to also put this uh analogy metaphor depending on how you want to look at this. I don’t ever remember which is which. You know, when you have people in the kitchen, there’s some people that like to cook freestyle and there’s some people like to bake. >> Some people like to be like, I need a quarter cup, a teaspoon, and you know, for 42 milligrams of the whatever it is, right? And some people like, hey, throw the garlic in the pan, throw the wine in the pan, you know, get it around, mix it up, throw some salt, get on the plate. >> Yeah. >> So, so there’s but but that person can’t be the baker and the baker can’t be that person. And if you ever try to do so, you’re probably gonna be miserable >> and then you’re not going to want to do it. And that’s exactly what you’re saying with this. So, let’s talk about um you talk a lot about behavioral discipline, investor psychology, and and I I think if I I guess when I kind of wrote this down because I was taking notes, I was reading, you often emphasize that that behavioral risk is often more damaging than market risk, which is kind of a adjunct of what we’re talking about here, right? So, which portfolio structures do you um do you look at as as maybe doing the best job of pro protecting an investor from themselves, right? Not just from volatility because that again that’s what you’re talking about, but I want to expand on that. >> Well, that’s the hardest part about all this I think is that people are constantly chasing performance and looking at where the grass is greener and those shifts often times occur at the worst possible times. And so one of the things I emphasize in the book is that don’t don’t spend so much time chasing to where the grass is greener because often times you when you you know you you go to where the grass is greener and you’re buying you know a lawn that is actually on the verge of dying and then you have to you know you’re going to realize that lawn is dying. You’re going to look across the yard and you’re going to see you know grass growing where you just were and you’re going to flip back to that one. And you want to avoid that process because it it just results in suboptimal returns because you’re constantly chasing to where the returns are actually the worst and the the risks are the highest. And so, you know, for me, it it it really does depend. I mean the the portfolios that are more diversified that do sort of a more of a sort of I guess an all-weather style of investing strategy where you sort of you have to acknowledge that the grass in some part of your portfolio is always going to be brown and that’s actually not necessarily a bad thing. I think a lot of people look at their portfolio and they sometimes think well gosh you know the the foreign equities in my portfolio really just they’ve done so dreadfully compared to the US equities. I’m just going to I’m going to ditch them completely. And then you get, you know, years like the last couple years and the the international piece blows the pants off of the the domestic piece and you realize, ah, I should have just, you know, I should have watered my own lawn. I shouldn’t have just been jumping around. And so I think that sort of all-w weather style strategy where you’re you’re very broadly diversified and that, you know, for some people that might just be stocks and bonds across very, you know, structurally different time horizons. It may be something more like, you know, the permanent portfolio where you’re buying something very intentionally to own things like gold or commodities and you’re hedging against very specific regime structures where you’ve got kind of this all-weather portfolio that you’ve you you got to get into something like that knowing that in the long run in totality it’ll serve you very well. But there’s going to be times where pockets of that portfolio do really poorly. And that’s one of the it’s one of the big lessons from diversification is that, you know, one of the quotes I love from Brian Portoy is that good diversification is learning to hate some of your portfolio all the time. And that’s really true. It’s that you’re you’re never going to find a portfolio where the whole thing is performing really really well all the time. And and that’s perfectly fine. And so again, kind of going back to that perfect is the enemy of the good is that you don’t necessarily want your whole portfolio to be perfect all the time because it probably means your portfolio actually isn’t that diversified. Because that’s one of the things you have to acknowledge is that when the stock market gets really hairy and starts going down, you need if you if you’re going to remain comfortable inside of that thing, you need other hedges. And those other hedges are they’re not going to perform as well. when the stock market is rip roaring and doing really well, those hedges are not going to be doing well. And that’s just the trade-off that you have to accept in in part of this process. >> So, I’m going to give you something for your next book. Uh something that I wrote about in my first book, which is the flower garden. So, I’ve been talking about this for I don’t know 15 years. Um and that when we build a portfolio, you want to look at it as a flower garden, similar to your grass. Um, but in that flower garden, if you have things that only pop up once a year and you fill your whole garden with that, they look beautiful for a month or two, but then you just got this arid dirtridden patch of dry that goes into mud and it looks horrible, but then it pops back up. That’s great. Whereas, if you had roses, heliconas, and impatients that come up, and you have annuals, and you have semiannuals, and you have evergreens, by the way, which are like your money markets, right? Never never changing color. something is going to hopefully pop at any given time. Now, unless we have a hurricane that comes or a tornado that rips through everything like tornado uh 2022, uh you know that that’s going to be the kind of thing and we’re going to call it all weather, but I call it my flower garden that we can kind of visualize something in bloom at any given time of the year. >> Yeah. Well, hey, that’s why you need inside plants. [laughter] >> Exactly. That’s why I need fake plants. Let’s >> I like that. The the flower garden strategy. >> That’s what we do. Um >> All right. I need to add a chapter. You want to write it for me? >> Yeah, I’ve written it right. I can give it to you. We can just bolt it on the back. Um so in again in in in this book, which by the way, you can go over to the discipline.com for show notes episode number 960 and the link right to Amazon will be right there so you can grab the book. I can encourage you to do so. Um and also by the way tells you more about Cullen and founder of the disciplined funds which is missing a D clearly for the disciplined investor but there is no relationship with us but he uh also does a a grouping of uh uh ETFs uh called the discipline funds but I want to ask you about that. So one of the things you talk about and then I think it reflects also in your actual real life investment strategy is um the idea of uh define duration right this could you could you explain exactly what that is >> yeah so really I I’m sort of extending the idea of bond duration to other instruments specifically mainly the stock market I think the stock market is very hard for people to remain disciplined with in large part because people don’t understand the time horizon over which they should judge the stock market. And so what I basically have done with this methodology, I’ve created a way of actually trying to assign a time horizon to the stock market. So to to use kind of a simple example, if you we’re we’re really trying to quantify like what a financial planner would call the sequence of returns risk inside of this instrument. And and that’s the risk that if you were to buy a 100% allocation in the stock market today and let’s say it fell 50% tomorrow, what is your temporal risk in that instrument? And so if you were to apply something like a cape ratio and assume the let’s just assume the future expected returns of the US stock market are 5% in real terms. Um well, in that scenario, if the stock market were to fall 50% and generate a a 5% annualized return in real terms from there, it would take about 14.2 years for you to break even. And that’s your point of indifference. Basically, that’s the time horizon over which that instrument has no sequence risk for you anymore. And so when you embed this into a broader sort of like bond duration methodology, you can start to assign very specific time horizons to the instruments where we can look at something like the stock market and say, well, in today’s environment, 14 years for a retiree who’s very sensitive about the way they’re going to generate their returns, 14 years is the time horizon over which they need to think about that instrument. And so I utilize a very sort of structured asset liability matching process inside of my planning processes where like I’m going in and for somebody I work with, I’m I’m quantifying the the expenses they have and the liabilities they have and then we’re we’re matching instruments to give them actually a time horizon over which they know they have principal certainty of that instrument. So for me, >> the stock market is this very sort of long-term instrument where if you’re thinking of it in inside of like your retirement plan, you’ve got to think of it as a a decade plus long instrument because that’s functionally what its sequence risk is potentially across different time horizons. Whereas something like a money market fund or a T bill, something like that, [clears throat] you can match that thing to, you know, your emergency fund, your annual expenses. something like a a five-year bond, you can match that to, you know, if you if you’re planning to buy a house in at some point in the next five years, you don’t really know when, you could reasonably go out and buy a fiveyear bond and, you know, if that thing’s got a a duration of about five, you kind of know what your sequence risk is inside of that instrument. And so, for me, good financial planning is all about really understanding time horizons and the way we’re going to apply certain assets to match certain goals. And so I created this methodology that I call define duration to try to help people kind of implement more of like a an asset liability matching process where they can go in understand their liabilities and expenses over time horizons and then build a a really diversified portfolio that isn’t just diversified across asset classes so much but is very strategically matched to very specific time horizon so that the investor can look at the portfolio and say ah >> well I own $100,000 of T bills because I needed $100,000 for a home down payment in the next year. And I know that’s not going to beat the stock market, but it’s serving a very specific temporal goal inside of my portfolio. >> Right. It’s also not going to make them buy a $65,000 house in a year, >> right? Yeah. So you can match these things very quantifiably though where the whole portfolio is basically serving a a really a financial planning based set of goals rather than the you know sometimes we we put together sort of cookie cutter portfolios like a 60/40 where you know your 6040 is great it’s diversified but what is the underlying goal of the instruments in there it’s not always necessarily very clear. Yeah, I hear you. Cullen Ro, your perfect portfolio. Uh, get it wherever you get things. Uh, it’s going to be available at I’m sure at all fine fine uh bookstores that are remaining out there that are actually standing up or uh right on Amazon. >> You can go there or go to uh the discipline.com >> Amazon Heramman House. >> Yep. All those places. It’s great. Thanks for coming on. We’ll have you on uh again soon. Great book. Appreciate you coming on and and and imparting all this great knowledge as well. >> Awesome, Andrew. Thanks for having me. >> All right. Thanks. That was really interesting. The book is great. He is a He is a really interesting fellow and I appreciate him coming on. We’ll definitely have him on again more than five years from now. [laughter] I’ll tell you right now, we’ll definitely do that. Thanks for joining me this weekend and every week. Uh we’re working our way into the middle part, the heart of February. A short month for markets. Uh oftentimes a little bit of a squirrely month for markets, but here we are. Thanks for joining me. Make sure to go over to the disciplinedinvestor.com. see what’s available there, the various strategies that we manage for clients just like you. Whether it’s uh the the the our specialty of dollar cost averaging through opportunistic and timebased DCA dollar cost averaging or whether it’s our lobster trap mentality or even uh investing like the flower garden. All this is available to you. Make sure to go over there if you want some really clean advice. Yes, we manage IAS, we manage uh noniras and trusts, and we do estate planning. We have wealth management. All that is available to you. So go on over to disciplined investor. Just reach out. That’s all you have to do and we’ll make sure to get back to you and figure out how you can be best situated and into the hands of uh your future financial security. Thanks for joining me this week and every week. I’ll see you again real soon. This podcast is [music] intended forformational purposes only and does not constitute personalized investment advice. Investing involves risk, including the possible loss of principle and past performance is not indicative of future results. The views and opinions expressed are those of the host and any guests and may not necessarily reflect those of Horowits & Company Inc., an investment adviser registered with the US Securities and Exchange Commission. Registration with the SEC does not imply a certain level of training or skill. Advisory services are only offered to a client or prospective clients where Horo is a company is properly registered or is excluded from registration requirements. Any mention of thirdparty companies, products or services is provided forformational purposes only and does not constitute an endorsement. Hypothetical scenarios or forward-looking statements are for illustrated purposes and should not be viewed as guarantees. Content is intended for US residents only and may not be applicable in other jurisdictions. Listeners should consult a qualified financial adviser before making any investment decisions. Please visit our website for additional information, disclosures, as well as a copy of our form [music] CS. Advertisements are not related to the host or affiliates and are not considered recommendations by the host of the show or [music] any affiliates of Hollywood company. >> [music]

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Join Kalshi Today: http://kalshi.com/r/MOSES Danny and Dan Nathan hit bank earnings and why mega money-center banks look …

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Welcome to the On the Tape podcast. I’m your host, Danny Moses, and today, Tuesday, January 13th, I filled in for Gaia and joined Dan Nathan for Market Call, which you can catch on the risk reversal YouTube channel, and also included it here as well. So, please enjoy the banter. We talked about the kickoff to bank earnings and the NFL playoffs, as well as a proposed 10% cap on credit card interest rates. We also hit the yen, silver, and gold and the rotation going on in the markets as the energy sector is finally getting its due as oil makes a move higher. We talked about that stuff and a whole lot more. But before we get to that, I wanted to try and break down a few things out in the markets making noise. Starting with the most important, the Federal Reserve and Jerome Pal’s a video response to receiving a subpoena from the DOJ after being accused of lying to Congress about the cost of renovations at the Federal Reserve buildings. Equity futures traded down sharply Sunday night, recovered a bit, and then closed higher on the day Monday, and bond yields after initially moving higher settled in as well. The hope here is that this is just more noise, and this isn’t something that gets resolved prior to Pal’s term ending in May. What this really is, like the other charges against other Fed board member, Lisa Cook, is more of a pressure campaign to reshape the Federal Reserve board and make Pal step down from the board of governors after his term as Fed chair ends. And I would note that his board seat does not expire until January 2028. Just think of this like the Supreme Court where the justices are also appointed by the president. And I think it’s important to provide a quick overview of the Fed and who holds the power and who votes at the FOMC every time we see a Fed rate decision. The FOMC is comprised of 12 members, the seven board members, and then five regional bank presidents out of the 12 total, with the head of the New York Fed always holding one of those five. and by a majority they set and make interest rate decisions. The seven members of the board, including Pal and the six others, have their terms expire anywhere from January 31st, 2026 in the case of Steven Moran, who was recently appointed to Lisa Cook, whose term does not expire until 2038. I would note that these six governors were appointed, three by Biden and three by Trump. and the board has the power to hire or fire regional bank presidents. So, it isn’t hard to imagine what a few changes could do to the makeup of the FOMC and Fed policy. So, even with Pal’s Fed chair term running out this May, his term being a board member doesn’t end until January 2028. So, expect the noise and pressure to continue. I would highlight two KOI contracts I’ve been watching and trading that seem like decent trades on the yes side. Will Trump try to fire pal try to fire pal as a Fed chair or governor at any point in 2026? I would say yes and it’s sitting at 58%. You can read the rules, but just trying is not doing. So I think it’s going to be yes. And the second one is will the FOMC have an emergency meeting at any point in 2026 out of the scheduled meetings at 18%? I say yes as well as an emergency meeting might not just be about rates. And remember, if you go to Koshy and sign up, you can use this link and promo code to get started. Most of the other news in the markets has been geared towards housing affordability and helping the consumer. Both are admirable and where practical should always be looked at, but in practice could have unintended consequences. As it relates to housing, we have seen a repeal of certain tariffs related to housing supplies and building products. And Trump has directed the GSC’s Fanny May and Freddy Mack to begin purchasing $200 billion worth of mortgage back securities, believing that it will result in lower mortgage rates and tighter spreads. Remember, up until late last year, the Federal Reserve was running off billions of these mortgage back securities every month via quantitative tightening and still holds roughly $2 trillion worth of these securities. So now we have QE quote not QE with the Fed purchasing T bills and this proposed mortgage back security purchase coming this time around from Fanny and Freddy all with the goal of reducing interest and mortgage rates that might work but home prices could actually rise as a result and offset that benefit. We also had the proposed institutional home buying ban to keep private equity away from home ownership with the hopes that less competition would lower prices for real buyers. That might be the case and you would have additional supply hitting the market and that would indeed lower home prices. But the builders themselves have been benefiting from this investor demand and might face increased supply issues and reduce their activity as an offset. Then we had Trump’s proposed 10% price cap on interest that credit card companies can charge consumers. Again, there are many things that sound great. It might get voters turned on. That is very unlikely for two reasons. One, it would require an act of Congress maybe, but it would result in millions of people with no access to credit as the banks and credit card companies could not justify underwriting these card holders without the ability to charge higher rates for the riskiest borrowers. Ironic that the administration wants to control credit card rates, but approved the largest credit card merger in history with Cap 1 and Discover that now control roughly 20% of the market and also dismantled the CFPB whose job it was was to ensure that the corporate America wasn’t gouging the consumer. We will continue to see policies announced that are intended to help the US consumer, which is admirable. But the actual implementation and/or byproducts of these policies may end up backfiring. The most important one being the Fed losing its independence and the lack of credibility and confidence in our financial system which could ensue. So, please enjoy this edition of Market Call and Dan and I go over our NFL picks at the end of the show. >> All right, welcome to a very special edition of Market Call. Not because Guyami is not here. It’s because Danny Moses is here. Danny Moses of the On the Tape podcast of the Danny Moses show that’s going to be on Scripts TV very soon. Danny’s going to give us the 411 on that and a Substack. We’re going to show you where you can subscribe to that. Danny, welcome to the market call. >> Dan, great to be here. It’s been a long time you and I one- on-one doing something. So, should be fun. >> It really is. You know, back in the early days of the On the Tape podcast, you remember um maybe it was after a year or so, we had like a murderers row of guests for like week after week after week, but then we decided we were going to interview each other. Do you remember that? It was like getting the backstory or whatever. That was really fun. Um but we’ve uh been able to do this together for five years, over five years. We’re coming in >> and I remember when you weren’t a great NFL football picker and now you can’t lose. So, we can get to that at some point maybe in the show. So, >> all right. By by the way, yeah, you you destroyed me one season. You were you were you were on an absolute bender. Um you know, I will say this that, you know, I got out of the gate really strong. Um there was a couple weeks where you didn’t hear much from me um on the picks. Bill’s just nodding his head over there. But I’ve had a couple weeks this weekend I went 4-0. Um a few weekends ago I went six and I it was insane, you know. Um but again, >> while last, bud, because it >> I know, but you know me. I’m not I’m not doing it big. Um while you were gone or while we’re while you were down in FLA um you know we’ve been uh watching the markets this year. Um you know it’s been it’s been choppy I’d say the least. I mean I think a lot of the themes that we um had last year or at least in the last three months or so carried through uh to the middle of this year. Um you know Mike Wilson on the Risveral podcast it dropped on Friday of Morgan Stanley obviously you know he said something interesting. is like I don’t really care about the calendar, you know what I mean? Like do you like unless you’re a portfolio manager and you have benchmarks and you know what I mean? Like you have quarterly reporting like does the calendar matter to you Danny? >> I think there are behavioral parts that you know to Mike’s point that might last short term but over long term and he’s a longterm guy fundamentals will matter but certainly towards the end of the year you can get a chase the beginning of the year you know the setup rolling. We’ve seen that a few times that we’ve talked about over the last few years on the podcast that certain things that underperformed might outperform and look at names like energy and materials and things that were left for dead in 20125. You come in with a clean slate and I always go back to Boston, right, to the portfolio managers and get in their heads and how they think about overweight, overweing certain sectors, underweing. you can afford to take a risk early in the year in my opinion as a portfolio manager to overweight a particular sector and then still have time to make it back over the course of the year. So I don’t know I I tend to think there is a behavioral finance aspect to the start of each year for sure. >> Yeah, that that’s an interesting point. um you know a lot of these let’s call it pod shops in the hedge fund world you know when you and I were very active let’s say in that 20 years ago you know it wasn’t like you you weren’t running a really tight net meaning like your net exposure you know I mean long versus shorts now they’re very tight and that’s a really difficult game’s a lot of risk management on that but to your point when you were just ripping it back in the day and there was like you know pretty good incentives you start out the year and you start taking a lot of risk because to your point you got all year to make it back, which some difficult years, you know, it just gets worse and worse. I think that’s worth saying. >> And to use an NFL analogy, if you’re up for the year the month of December, you’re just trying to run the clock out, right? So, you’re doing everything. Just don’t commit a penalty. >> Don’t mess up. So, anyway, enough. Yeah. >> Well, listen, uh, throw some some questions um into the chat, peeps. We’re going to answer some. It’s really fun to have Danny here, especially on a day like today where we had JP Morgan’s earnings and then we obviously have, you know, a slew of the money centers and then the investment banks. Um the rest of this week we’ll talk a little tech. Um I know Danny um you’re not allergic to it, but you’re focused on other areas of the markets. Maybe we’ll talk a little energy. We’ll talk um home builders. We definitely got to hit the credit cards and we’ll do that in connection with the banks. Um where do you want to go here, Danny? like do you want let’s just start with the earnings this morning because you and I talk about this a lot or you’ll hear a lot of pundits talk about this is that often obviously banks come every quarter right out of the gate and oftentimes they will set the tone for earning season especially like when you have a run into earnings season the way we have in this group in particular. So what what did you hear this morning and and what do you think might be a theme that kind of carries through the rest of the week? >> Well, the banks themselves are expensive when you talk about the bigger banks of JP Morgan. So it would take a lot the stocks to keep moving higher, right? Kind of avoid avoid the bigger issues. So big bucks, no whammies kind of here. So I think it’s a healthy pullback to a degree. You do have the regulatory what were tailwinds for the most part still in the banking sector with an occasional headwind like this nonsense 10% cap, which we could talk about on rates for credit cards and so forth. So it’s kind of a mixed bag, but so goes the market. So goes these large Wall Street banks. you know, the IPO calendar, M&A, all those things are kind of connected. And Mike Mayo, I know, has been very vocal recently, very smart guy. He’s covered the banks longer than I have. And, you know, he’s shifted here to kind of earnings uh from kind of book values historically. So, normally in this part of the cycle, yes, you use earnings and ROIs are decent, but remember, when things start to turn down, book value is kind of the lower and we are at a very high book value level for a lot of these banks. So, I guess Dan, a long-winded way of saying they’re somewhat priced to perfection, but they’re probably priced correctly. You just got to trade these things around the margin. So, again, I I think they’re do nothings here, but they’re great indicators for the overall health of the market in my opinion. >> Yeah. I mean, when they guide up or or when they report net interest margins, let’s say up 4% or something like that. I mean, that’s great, but what does it mean when you have a stock that’s performed like this trading all-time high after a huge rip, you know, off the lows in April, trading at nearly three times tangible book? you know it it’s you these aren’t sectors that can kind of do this sort of outperformance or guide up in a manner you know what I mean and you know there was one thing that you saw that investment banking fees were down year-over-year and let’s just pull up Goldman for a second because I I I think a lot of this move Danny you know in the last 25% nearly in the last month or so is predicated on the fact that we’ve heard all this anthropic going to go public space you know open AI these are going to be you know massive windfalls we know that golden and Morgan will be lead left. You know, one of them on one, one of them on the other, you know, that sort of thing. And, you know, I say to myself, okay, is JP Morgan’s fees at the expense of of gold? And maybe we’re going to know in a day or so. You know what I mean? Like that sort of thing. But again, talking about price to perfection, talking about from a sentiment standpoint, let’s just say their guidance on fees is not great. You know, they don’t have as much exposure to net interest margin, you know, all that sort of stuff. So, I I just think that’s interesting. If you thought JP Morgan was priced to perfection into their print, I mean, this one, just look at the move it’s had in the last week and a half. >> Yeah, these are market proxies to a degree, but I want to highlight what you mentioned. So, I think the banking fees in the quarter were down year-over-year, but overall, I think if I’m not mistaken, they were decent year-over-year overall. Um, and I think some of that’s a free pass in terms of the government shutdown and all the noise that things get pushed forward to Q1 and Q2. But you bring up a great point again, so goes the market. So you could this could quickly close up. So I think there’s a wealth effect on the consumer and I think there’s a wealth effect on the banks. Everything to your point starts in the investment banking area and then it comes down to oh you’re trading the IPA, oh it’s an M&A, you’re trading the AR, oh you it’s all kind of related there. So it is the horse that leads the cart for sure. But again, I’ll just say it won’t take much to kind of push this into the kind of neutral to negative um outlook, right? In terms of people’s sentiment. So I think that’s pretty much what it’s going to be driven by. No doubt. Um, you know, one thing I would just mention and and this it’ll be interesting to see what the broader impact is on markets in general. You know, you have JP Morgan down nearly 3%. I mean, it’s sort of like a knee-jerk sort of thing. We could see it back up if we have a different vibe in the markets, but I wanted to highlight something and and again, I’m I’m kind of um I want to hear Doug Cass um you know, from the street.com and Cabba’s Capital um what his take on this. I say this all the time as it relates to banks and financials in general. you know, he’s forgotten more about the space than I’ll ever know. But on the market front, you know, I think it’s interesting if you want to pull up a tweet he had this morning, um that uh you know that we we were up 18 handles pre-market, which seems like the way the market is disposed most days, you know what I mean? and 18 handles, you know, on an S&P that’s trading near 7,000. While that’s not a lot from a trading perspective, if you catch that move, right, which it looks like, you know, Doug did right here, it’s actually a good market if you want to trade little chops, you know what I mean? And so, let’s pull up the S&P futures here for a second because I want to look at some levels. Um, and you know, one of the reasons with the futures and I like on a short-term basis is that you can set stops, right? You can take little chops at things, if you will. Let’s tighten this up a little bit if you want to look at a six-month or so because, you know, we’ve seen this series of sort of higher lows. We did see that one test in late November that looked like, okay, maybe we had kind of had them here if you were bearish, but you’ve seen this sort of, you know, really low V. We have a VIX that’s what around 15 or so. Danny, what are what are some levels here? Because this is not a definitive breakout by any means, right? Um, and I’m just curious how you’re thinking about the broader market here. I think the equal weight’s probably a better way to look at it. But I will tell you that again with such tech heavy part of this chart, I mean the cues, it’s hard to really even tell those two apart to a degree. And I kind of gave up trying to necessarily call the S&P 500 as much as you know various sectors where you want to overweight or underweight. But listen, a CPI number that’s 0.1% better than people would have thought it’s going to drive the market up a little bit, then it settles back in. I think there’s bigger issues right now maybe to Doug’s point that you you know certain things that are deemed to be dovish and or a little bit better aren’t that aren’t that meaningful over the overall valuation of the market and again almost like the banks the market is pretty much priced to perfection right so it doesn’t take a lot to have the VIX shoot up to 20 to 25 which we’ve seen stay up there maybe for two or three days but Pavlovian we’ve seen over the last couple years those get bought to a degree you know um with the exception of kind of the massive draw down um last April that we saw right for just a major tariff event. But so you just got to kind of trade around. You’re right. I think if you make if you use these markets to kind of make trading decisions on on names that are out there, just be cognizant that it’s not always going to be fundamentals that are going to drive those. But it will give you opportunities to buy on weakness when the overall market is weak and to sell into strength when the over market strength. So I would say from a bottomup perspective on the names that you’re trading and just be honest with yourself. Is it caught up in market and the indices and the passive flows and getting the benefit out of that? Does it deserve to be where it is? And the flip side of that is when the market gets crushed, know what you own and buy the quality on the way down. That’s kind of how I use it. Dan. >> Yeah. I want to hit a couple of those what I think are quality names that have gotten hit off some headlines. But really quickly, I just want to hit the the what something that you just said about the S&P uh market cap weight versus the equal weight. And that’s actually been my view. Um you know, we were talking about it on this podcast. I remember um you know talking about it on CNBC a few weeks ago when people are you know I was asked like what are some of the themes that you think um for 2026 and it was partly this you know this was not confirming the new highs in the S&P 500 for most of the fall right and here we are we have this and a lot of it has to do with that concentration that you’re talking about where right now on the year and again this is two weeks you know this is outperforming the market cap weight nearly you know 2 to1 um so I think it’s worth noting I want to pull up the daily spark from Apollo from torstston because I think this is interesting um you know he’s highlighting the concentration not just in the stock in the performance but also earnings and then when you think about capex too which is broader right to the you know to GDP and the contribution there um thoughts on this because it’s basically what you’re saying but it’s not just from a price performance standpoint there’s also big economic implications. >> Yeah. So, if I’m looking at that correctly, I mean, the earnings are growing obviously in those companies, but there’s a lot of momentum. I guess when I look at that thing, I’m like, that’s momentum in that trade to a degree. And use Tulsson’s accent, that looks very risky to me. Kazo, um, it looks very risky obviously here. So, that just tells me that again, it’s too concentrated, too much reliance on these names, right? But again, these are names for the most part with decent balance sheets with the exception, you know, of a couple where the macro is still very strong. They’re very uh big, so you know, safety numbers, they’re very liquid and so forth. And so it’s a lower risk way to express these themes. But Dan, again, it won’t take a lot for those to potentially turn. And I had Carter Worth on on the tape last week with Vinnie Porter for an episode of Bourbon and Charts where by 30 minutes in, we were all hammered. Except Carter brought up a great point, which was back to that RSP equal weight index, which is that that the other sectors act like a sponge to absorb what might happen here. and we called them spongeworthy categories, right? Whether it was materials or energy or what it might be. And you look at the move in oil, if I could just shift for a minute, it doesn’t take a lot for WTI oil, uh, you know, to kind of move up and what will happen to the sector that historically has been 7% of the S&P, right, which has been under 3% when you look at energy stocks. And so, again, you know, that the Torstson slide kind of aside for a minute, I just think there’s so many great opportunities. It has been a stock pickers market here for a while. Even though we’re so focused and obsessed with passive flows, there is a lot out there and it is a sleepy market. You can really do a lot of stuff here, Dan. Sorry to go out on a on a leave that chart completely, but if look at the chart of the XLE and forget about the Venezuelan noise and Exxon Mobile not being allowed. Forget all that. Like these things have potentially have really big legs from here. Big. So again, that stuff that kind of stuff excites me. Um, so >> well, we’ll hit energy in a sec, but I wanted to just kind of stay in the macro for one second. This is also something that Doug Cass, you know, forwarded or put in one of his notes on the Street Pro. Um, and it’s coming from our main man, Rosie. Um, and you know, one of the things that kind of stuck out to me, I think the guys have the tweet here. Um, you know, and by the way, I I it’s one of my first reads every morning. I mean, Doug sends a lot of great stuff out, but I also read >> Even Doug some love. Doug. >> Well, no, no, no. Because you know what? You know what the thing for me? >> Yeah, >> I’m not I haven’t been on Twitter in a long time. And one of the things, you know, I literally have been off I think for two years. And one of the main uses I had was using it as like an RSS feed, right? So I’d follow all the news organizations and then I would follow like lots of people like Doug and David and you and a whole host of other people. And it felt like a great place, right, to kind of get a very curated sort of feed. But then you get sucked in by all these stupid like >> Yeah, you need some more balance following me and Rosie. He can be very detrimental. >> No, but you know what I’m saying. I mean, like, you know, I had a couple hundred follows, which was a great thing if you get wake up in the morning and you’re like, but I don’t get them anymore. So, Doug sends out a lot of great stuff. I do I’m really heavy in the emails and you know what I mean? Like that’s one of the things with Torson every morning that comes out, that one chart. He also has a chart book that he updated and we’re going to put that in the show notes and maybe Amanda will throw it in the YouTube chat here. Um, but let’s pull up the the uh post from Rosie for a second. and he was talking about this in in Mornings with Dave, but um you know Lindseay was on, he’s a former Fed governor, you know, he’s waxing about soaring GDP growth. I think this is really important. Never once mentions that three quarters of that 4.3% thirdarter print came from a huge savings rate draw down and a contraction in import volumes, strip those contributions out, and the economy expanded at the grand annuals annualized pace of 1%. Okay, so Larry Lindsay, he’s all he’s all in on this administration. Um I think he had a role in the first administration and these guys are picking their own facts. There’s a like an intellectual dishonesty that just doesn’t make sense. You could say, well, that happens in every administration. This is the one though that I I just you know it the the administration, the treasury that you know they will repeat these sorts of things or maybe it comes from them and I just find it you know one of those things if you’re buying stocks you’re buying the market right here because you think that GDP is inflecting higher and we are going to have the sorts of gains that we’ve never seen before and it’s going to cause we have a great stock market. What is it discounting? And I’m not saying sell the market here or this or whatever. I go back to your point. There are many opportunities. You want to buy something in one sector or this and that or whatever. But again, you don’t have to buy the market cap weighted because to me that’s the biggest risk. If you do have a draw down, if we go down 10 15%, which the stock market does on average almost every year, some of your favorite stocks that concentrate these two major indices are going to be down 30 40%. That happened in the spring. So don’t think that can’t happen again, Dan. >> Well, don’t let facts get in the way of a good story. But I would say this, all this stuff is kind of ignored, you know, better than expected, worse than expected, however you want to, you know, talk about it and keep think, you know, include certain numbers, take certain numbers out. But the bottom line is that earnings have been growing, right? And the point you make is that in a down market, in an up market, no one asks questions. In a down market, those things start to matter like like the facts. But I would flip it a little bit. I would argue almost the other way. Okay, so the economy is not really growing. Okay, Fed should be cutting rates then potentially. Okay, how are we going to use that to help? So I see both sides of but for sure a lot of those numbers are convoluted and you know they change on import and export and all the stuff and gold especially had a huge impact there. So I think earnings is the big driver and until those start to drop those things won’t matter. >> All right, but the slide before shows the big earnings contribution is the concentration that we’re talking about. if you have any sort of slowdown um you know that’s one of the big issues um what do you mean by gold and silver are big participants in that >> well if you go back to that chart the exporting of gold the US was exporting lots of gold it it it skws kind of the >> exporting it not for like the sort of economic reasons you might be a big exporter of you know industrial you know this or that or whatever or or soybeans or this they’re we’re exporting them because these countries want it back. You know what I mean? Like >> um let let’s talk about it. I I got to get back to some of these um these credit card names. But while we’re on gold really quickly, um and silver for that matter, um you’ve been a huge gold bug. Guys been a huge gold bug. You guys have also been talking about silver for a while. It’s one of those things that, you know, I don’t think you expected the sort of breakout that we’ve had, but you expected a sort of catch up to gold. Or maybe you did ex you know um you know uh >> well silver has an industrial demand aspect to it that gold really gold’s jewelry obviously and then you know central banks are buying it um because fiat currency hedge but silver kind of got into this perfect storm of data center buildout um obviously EV and solar and it’s really used as you know in in the industrial space and so what I think happened was last summer um during kind of all these data center announcement. If I’m if I’m procuring stuff and it’s everything from caterpillar tractors to concrete, oh, and we need silver. We need 22 million ounces of silver for data center. I think when they went into the markets and there’s actually physical demand for it, right? I think it kind of bet on itself. So, you had a perfect storm, I think, for silver here, right? And you can go over silver gold ratios from here and there. You can do a lot of these other ratios over time. But what’s really interesting, Dan, is I don’t know how real I mean, there’s obviously a squeeze going on in the silver market, but I don’t think there’s as many speculators in silver as people will lead you to believe. I think these are real physical demand for silver. And that’s why none of these things are working. These margin requirements going up almost on a daily basis, right? More last night about trying to create margin on notional value, not just risk, not not just value risk. So, I don’t know, Dan. It feels like silver’s going to continue to move higher here. >> Um, and I think you’re going to see potentially funds get carried out. We don’t know who they are yet. Yeah, >> speculator funds have been short. So, let’s keep in mind, we saw the nickel trade years ago resolve uh not in a great way in my opinion on the LME over in London. You know, one large buyer obviously over in China. And who was the counterparty? Some of the big banks. So, silver’s there separate. Gold I could think continues to move higher. I think we’re going to go I think we’re going to double again here again over the next few years. And I think every pullback is a buying opportunity for all the reasons that are kind of out there from inflation or or cutting in the face of inflation or geopolitical risk, what have you. I think gold’s here to stay. So, and gold’s still in my mind not a large part of people’s portfolios. >> That that was like a Tom Lee Bitcoin prediction you just did there. So, >> I know. I felt I kind of felt Yeah, >> we’re going to time stamp that. Go back to silver for one second. If you give me a 10-year chart, a log chart, please, I’d appreciate that. Um, you know, that blip in April is just fascinating. I mean, like, look where look where silver was, right? It got below what what did it get down to there? Um, so, you know, you see it. It’s it was >> 30 bucks and we’ve turned up. >> It was just a blip. Look at that. I I listen, this has become a meme stock. I mean, or a meme, whatever you want to call it. I just think you got to be really careful here. And I’m looking at that 200 day moving average like 45 bucks or so. Dude, this this could be back there so quickly. I what if if you if it really wasn’t the sort of industrial demand that a lot of silver bull bulls are speaking to. It’s not like we just had you know the sort of silver demand from industrial purposes. Okay. Um that would cause you know 150% rip or 200% rip. I mean in my opinion you know what I mean? Like what do I know? You know, >> Dan, I got to push back for a minute on that because >> I don’t think that enough work had been done on that. I think the real silver bulls, and I wasn’t one of them, uh, to a degree, you really came around on this thing kind of last summer, is that it’s actually just numbers. I mean, silver doesn’t really get mined. It’s kind of a byproduct of copper. But but when all these things were were done and planned, whether it’s EV conversions and the Samsung battery that Tesla’s going to use to convert their fleet to a 600 mile battery which could be charged in 9 minutes, which would be amazing for the EV space, right? Yeah. >> The thing you need silver for it. All these solar all these solar panels, you need silver for it. So it did fall in and look at the look at the you know chart of copper as well, but silver is really a byproduct of of mining other metals. I’m not saying it can’t pull back, but I’m saying there is a part of an industrial application of this that has that was underappreciated for a while. And so, you know, I I think listen, I’d buy the pullback, honestly, if I were. Now, listen, data centers start to get cancelled. Hold on. Data centers start to get cancelceled. If that were to happen or the economy were to really slow, all these things have an economically sensitive part to them, right? And then I think that’s where you can see a pullback. But, >> you know, people thought these things I just >> Yeah. If you’re buying silver here and you’re not short, okay, like you’re you’re not covering, you know, you should be neutered. >> Well, I’m just saying, you know, bring up a chart like I so be able to procreate and have somebody come into the market at some point like neuter neutered. >> I’d rather own the minors. I’d rather own name. >> All right, so wait, hold on. We have a little question here, Danny. Okay, so and we’re gonna hit a bunch of these questions, people. I promise. This is from Andrew Wartz7975. I’m not going to even make the the guy joke that you’re the 700 or 7,975th Andrew Wartz. I just guess I just did it. How you thinking about miners here, Danny? I mean, I love them. You know, I think they’re still lagging gold to a degree. um specifically one which is actually part silver and part gold which I think is the ultimate which is CDE. Uh I’d bring that one up um here. They’re very volatile. Got to know what you own. But listen, price of energy having gone down like it has until recently is also a huge positive for the miners. That’s their big cost input, right? When when they’re mining stuff. So I’m an owner here. Again, back to being in Boston. Put my portfolio manager hat on. this sector is so small as a percentage of the S&P and Pneumont is the only NEM is the only S&P 500 name in gold mining right I I just think these things are still underallocated especially where gold is sits now as we approach 5,000 whether that’s going to be the big blowoff top you know near-term or not again not to sound like Tom Lee but you know Dan I’ve been on this gold trade as long as you’ve known me we were at we were at $1,700 talking about it okay you and I years ago so I just think again we’re in the early innings. Ton of volatility. You’re going to be right. I buy every dip in the miners um and in the in the gold physical. So, >> all right, quick Tom Lee story. Um >> yes, >> last week um I was at an Italian joint downtown um and I was seated in the front. In the back there’s this separate room. And you know, I’m with two guys. One is a tech founder and here in New York. And the other was um his twin brother actually who runs a uh construction business does a lot of like you know what whatever you call it gradeA uh buildouts in New York City you know a lot of office stuff or whatever and and and another friend of ours and out comes Tom Lee and and listen Tom’s a friend it goes back a long time you know what I mean and and I’m as somebody who talks about markets every day on our podcast and on Fast Money and you know you’ve been in the game a long time and you’ve been doing a podcast for 5 years and you speak at events and you know what I mean it’s hard okay it’s hard you open yourself up every day right to being wrong or right and people just kind of cherrypicking whatever and I think with Tom who’s been very right you know and doesn’t I I don’t think he gets particularly bearish every time so he’s got this kind of rockstar sort of mentality but the point is Tom’s walking out he and I see each other I stand up we you know have you know quick pleasantries that sort of thing he has he starts introducing me to these five guys we’re following him one name brand hedge fund, another name brand hedge fund, another name brand, you know what I mean? These are all PMs there. And and and what I thought was really funny is they were all following him out, right? It was a long like thing or whatever. And the one of the guys I was with, and again, neither one of these guys were in the markets, but they like follow the markets closely. He goes, “Tom, Tom, where’s Bitcoin going?” And I can’t remember the number, but the number was high. It was like 300,000 in a year or something. I don’t even >> much higher. He thinks it’s much higher than that. But yeah. >> Yeah. But I mean like you know this is sort of indicative of the environment we’re in. And he’s talking about a risk asset that can’t get out of its own way. >> Well, if you’re again on Wall Street, if you’re long and wrong, you’re okay. If you’re short and wrong, you lose your job. So it pays to be to do that obviously. And listen, give Tom credit. Although he still owes St. Jude $1,000 from a couple years ago, I bet. Sorry you bring him up. By the way, by the way, Nanny, I’m sure he’s a very charitable man. >> I know he is. I just wanted to remind him. >> Okay. So, um I’m sure he’s watching. Going back to um and this is part Okay, we have a question here and I I just want to hit that and maybe I can wrap it into um you know something else that we’re talking about here. So, um where is it? Okay, so this is from Connie Vogle. Connie, thank you for being here. um where are we exactly in the economic cycle and one of the things I would just want to talk about this contribution of the consumer okay which is a big part of the economic cycle Jamie Diamond this morning says the you know the consumer remains resilient they get a lot of data as it relates to credit and usage and you know all that sort of stuff which comes to Danny a little bit of how you’re thinking about let’s just kind of wrap this together with the proposition by the white house that we put a that they put a 10% cap on credit card rates. Okay, this is a space you know very well. Yesterday, American Express got hit pretty hard. COF um got hit really hard. They have very different credit portfolios and and you know dynamics um and the like. But today we’re seeing Mastercard and Visa both down nearly 5%. And obviously that’s about transactions. So let’s do this as a two-part. Okay. one, let’s talk about these stocks in particular and their reaction to this proposition. And the truth is it, you know, it it’s they can’t just it’s not executive order. They just can’t do that, right? But let’s talk about the stocks and then what you think it means for the economic cycle. >> Let me answer her question first in terms of where are we in the economic cycle and then I’ll go backwards if that’s okay. So >> of course, >> so I think so and it all kind of ties in. I think the soft landing has had already occurred kind of in, you know, two early 2025. You know, policies here and there, tariff that kind of jilted it in a in a way and maybe cause near-term inflation. So, I think that’s already occurred. The question is where do we go from here? It’s midterm election year. We’ve already seen the White House try to do everything they can to help the US consumer, whether that’s in housing, whether that’s in credit card rates or whatever it might be, right? So, that’s kind of the backdrop here. So, where are we? We’re kind of in a no hire, no fire type type economy. Um, but here’s the risk to this economic cycle is doing things shortsighted by pressuring the Fed to lower rates by firing s certain board governors on the Fed that could turn in the in the face of potentially inflation that has yet to really moderate that could spur that on. So, you’re taking near-term risk to kind of grow the economy andor the markets at the expense potentially of longer term detriment to the economy. So, that’s kind of that as it relates to this ridiculous 10% cap. And by the way, the only time you hear anybody arguing or bipartisan something coming out is when it hurts potentially rich people. You say to yourself, “Well, that’s counterintuitive. Why would a 10% cap hurt rich people?” Because they benefit from the subsidizing obviously of all the people that are paying 15 to 20% which allows them to finance other things cheaply. So credit card companies cannot exist or they will not provide credit to literally 70 to 80% 70 to 80% of the consumers if that was the cap because one you couldn’t sell those credit card loans in the in the ABS market right it wouldn’t function so it’s not practical right so but and then all the housing initiatives which they want to do everyone wants to make housing more more you know affordable but you can’t get that done just with a snap of their fingers or a certain policy so I don’t know if I answered your question but yeah >> AMX so let me get back to so MX doesn’t really carry a lot of balances or charge a lot of interest anyway. Cap one would be the one that obviously that combined with Discover. If you were so concerned about the about credit card companies, why did you approve a company that now controls north of 20% of the credit card market, but that’s but it’s it’s not practical. It won’t happen. >> Was that approval last year under the Trump or was it >> Yeah. Well, the final approval came kind of in the spring of last year, but it was effectively approved by the all, you know, all the Fed and stuff like that. They had to approve it prior. But yeah, it was basically blessed in May. But I guess my point is that like you can’t you’re not just going to fix this. It’s not going to happen. And um so all these things that they’re doing, listen, let’s get the price of oil down. Great. Helps us consumer. Let’s get mortgage rates down. Great. Helps the US consumer. Let’s stop private equity from buying homes. Great. Maybe that makes housing more affordable. I could argue against that in terms of it’s helped the builders over time by sucking up supply on the market. So again, a lot in there obviously, but um again, I think we’ll still we’ll continue to see kind of pro economy, pro-consumer policies, whether they’re practical or not, get thrown at this economy. >> Yeah. I mean, listen, and and I think for you and I to sit here and be very specific about what it means for these stocks and what it might mean for the economy, it’s it’s not, you know, something where we’re not sympathetic to folks that rely on credit and they’re willing to pay those high rates. You know what I mean? like um it’s one thing if people are buying flat screen TVs or as Trump says $37 for their kids and too many pencils and stuff like that um on credit, you know, no one needs $37 uh for their kids and you know, paying I’m I’m being I’m joking here. >> Yeah. >> But, you know, here here’s a headline from Bloomberg and I think this is kind of important. JP Morgan says everything on the table to fight 10% credit card cap. If if it were to happen, it would be very bad for consumers, very bad for the economy. that’s the CFO of JP Morgan. Um, okay. So, you know, we’re going to see a bunch of pullback or push back. Um, on the economic cycle though, I I just want to pull this up because we obviously had CPI this morning, which, you know, was not um, you know, it it’s it was, you know, up less than expected, but it’s still at 2.7% annualized. And actually, Doug and I were talking about this, you know, so few people are talking about the cumulative rate. I went to chatbt and and you know, this is what comes up over the last five years. You know, look at these percentage increases. It’s one thing to say 2.7%. But overall, it’s up 28%. Food at home is up 18%. Gasoline is up considerably. Rent on primary re residents up two 22%. You see it, it goes, you know, on and on and on. Medicare services up 18%. Electricity up 19%. Um, you know, these are really big cumulative increases and they’re affecting not just folks who are lower earners, you know, you and I have lots of friends who, you know, I I mean, who are saying that things are expensive, you know what I mean? Like, you know, and I saw a Whole Foods commercial last night during that um that Pittsburgh game that I know I know that you just thought was, you know, Texans minus three. And we’re going to get to that. somebody who wants your NFL picks. We’re going to get to that. Was just oh my god, it was like a layup. But during that during the game, I saw a Whole Foods uh commercial where every frame had the words low prices. Low prices. Now, Whole Foods is not thought of as it’s not like Trader Joe’s, you know what I mean? Or stuff like that. I just think that that is permeating the psychology of consumers, both high and low earners. Do you agree with that? >> Yeah. I don’t care what CPI says, GDP says, people the higher cost of living for sure and the economy is not as strong, you know, and and we and we kind of know that and it’s a K-shaped economy and so the lower end obviously, you know, continues to get pinched and the problem with the CPI numbers and so forth is it sets policy, forget the Fed for a minute, but for like social security checks to go out and the rate that those are dependent upon. So to your point, if it’s not including andor it’s underestimating certain things or whatever it might be. So just it’s it’s how people are feeling and and numbers are never going to describe that in in in that way. So I think we’re going to continue to have this battle, Dan, of push and pull in the economy and I think we’re just going to continuously stretch the K-shaped economy um outside of the letter, right? Yeah, so to speak. >> Um let me just see if there’s another one that lines up with Okay, there was a question JS9870. Um, do you boys uh have any thoughts on USB off this uh silly I mean I I don’t know if you have any thoughts on USB but you know you just gave us the 411. Um what what about um Mastercard and Visa Danny and so obviously they don’t take credit risk but it is a transactionbased business. So the idea would be and these are expensive stocks as everyone knows especially relative to let’s say the money centers city bank JP that actually have considerably large um credit card portfolios. H how are you thinking about those? I mean down nearly 5%. Those are those are big moves. >> Yeah. Um more related like you said to consumer spending. Although let’s not forget um probably someone said hey go um Durban bill remember that one? Let’s go after Vis and Mastercard for debit fees. And so part of the argument could be here let’s go squeeze Vis and Mastercard as a way and then you’ll be able to charge lower rates because if you don’t have to pay the house too much money and the toll keepers you can. So I imagine part of it is a regulatory overhang while not directly is an ancillary play on why these stocks might be down is is my guess and so they they could be targeted here. So, >> okay. Um, energy really quickly. You you talked about it before. Crude oil is um above 61 or 60 for the first time. Yeah. Bit and you see that downtrend um you know that even if you want to go back to the fall so you have a little bit of a breakout that 200 day moving average. I mean to me you know that looks like a level where you could sell it. I think >> I mean let me just say that you’ve given Doug Cass a lot of love today. Let me give Peter Bookbar some love. >> Yeah, by the way. Okay, Peter, >> not only friend of the show >> but great friend personally. Um, and he he actually spy the way. So >> bad, but energy had a great piece yesterday. The structural issue in energy, right? It’s like when oil dropped to 55 a few weeks ago and the stocks held, that’s when you said, “Okay, it’s washed in terms of nobody owns these stocks.” Yeah. If all it would take would oil to just move a little bit and you would see that, you know, people coming into the names and so listen, I’m not going to try to predict where oil is going to go. But these energy companies have gone through an M&A cycle cleaning up their balance sheets, right? These are like something they’ve never experienced before. So in this cycle, no one’s going to tell them to drill baby drill. No one’s going to, you know, the rig count keeps going down. Everything is setting up for them, you know, in my opinion, in a way to own these stocks in general. So if you do get oil somehow going to $70, these stocks are going to be up 30 to 40% in minimum in my opinion just because again no one owns it. So >> So you think buying the XLE is the best way to do it? I mean you know guy is in Exxon Mobile and Chevron and so listen I I love Exxon. I mean that’s a name I’ve been you know owning here for a while. XOM and uh so you can own any of them but Rig RI Tidewater is one of the cheaper names out there. We just did a write up in our Substack of TDW. That’s a great one. And Dan, I want to talk before about strategists on the street and so forth and looking for information. These Discord channels within like the Substack, and you’re on our Substack, so you see it are unbelievable. And I’m not saying you have to go to our Substack and sign up. What I’m saying is >> I’m saying that I’m saying >> no, you can say that. But the ideas that you can get and the thoughtfulness in terms of the work behind it, it’s an incredible community. And let me just say this, we just had a uh late late December um you know part of after 2000 after the dotcom bubble in 2003 you had like a lot of a lot of rules enacted for Wall Street on the separation of um research and banking that thing just got completely repealed by the way. So if you thought research on Wall Street was >> wait so Henry Blahett hey Henry you’re back if so so my my point is if you thought that research before was somewhat compromised to get banking fees look no further than the repeal of this thing. So again I it is such a bespoke stockpicking environment and a bespoke research environment. If you’re willing to do the work and dig in you can find a lot of really interesting ideas outside of the mag seven. So >> by the way I’m I’m a huge Henry Blahett fan. Um he and I go back I’m sure you was he worked with Henry Bladget >> you know he’s these guys I mean listen he got tagged you know he was by 30 years old back then does that make sense probably you know what I mean and you know >> I was with him he was on a pay phone in Tallahassee I was taking him to Florida State you know retirement system yeah >> and he was on the phone when he made one of these calls on Amazon from a pay phone >> dude and the stocks doubled over the next like but my only point is he got tagged for a couple glib emails about the stocks that he covered And you know it was tied to like like you know he had to be bullish because the Maril Lynch wanted to do banking with him you know I mean it just um is what it is. Um I want to hit uh what’s your heart out as we say in the business Danny. >> Okay I want to hit this Japan thing too that someone >> I know I know but what’s your heart out because I want to hit a bunch >> noon. >> Okay. All right let’s go baby. Um so we’ll get to Japan um in a second because there’s a good question there. Um so you’re buy you buy the XLE to play the energy thing. um you’re buying a dip in maybe some of these credit card names. Um and then all right, so let’s let’s do this because make me smarter on this. You and guy have been talking about the weakness in the yen, okay? And it’s a unwind of the carry trade. The last time we saw these sorts of levels, okay, was July August of 24. The market saw the the stock market saw major palpitations. Why? people were buying yen, right, cheap, using it to invest in, right, uh, higher yielding, you know, assets. One of those was the MAG7, right? Like just think about that because that was like a theme you could get on. So now when you think about, you know, yields where they are and the unwind of this sort of thing. I mean, how important is this? Explain this to us. Okay, talk to me like I’m an idiot because I kind of am about currencies. Okay, so the yen’s been getting weaker here obviously and it’s they already have inflation and people had thought that the Bank of Japan was going to be hawkish and obviously start to raise rates, right? We saw some of that. They’ve done that. They have a meeting, you know, in a few weeks here where now it turns out it looks like not only they not going to raise rates, the current prime minister in Japan is now calling for a snap election as part of the LLD to take over basically the government. And that would be very kind of progrowth at the risk of inflation type strategy. So now you’re seeing the yen weaken which historically to your point is good for risk assets except for the fact that Japanese rates if you look at the 10-year yields and two-year yields you’re breaking through 30-year levels here are now running hot. So you’re you’re inflating. So the stock market is going up there, right? You can look at this. The stock market’s been running. But now you’re getting into a dangerous territory. Why? Because the debt to GDP ratio you thought is bad here. It’s worth it’s over two and it’s like 2.4 times there. And if they have to come in and start defending their currency, right, for they’re going to be using where are they pulling that from? So you’re now at a point where again central banks and sovereign nations that have tons of debt, what are their choices? Do you become fiscally responsible and slow down this huge export economy that they have? So you’re feeling inflation in Japan. They’re willing to ignore it for now. You run the stock market, you’ll weaken the end. But at some point, Dan, it’s pay the piper. And if the big thing here and why Scott Bessant made noise today was if Japanese rates continuously move higher as an alternative to US treasuries, they are the largest holder Japan of US treasuries. That’s all Bessant cares about. He wants to make sure they won’t be selling US treasuries in order to come in and defend their currency. And that’s the implication that it can have on the market from here. So, >> okay. >> I hope that made Did that make sense or did I too? No, I I I you know, I mean, you’re not that much of a wonk, Danny. Um >> uh here’s a good one. Okay, this is from Eric Clifton. Eric Clifton, uh 611 or 1611. Um how does every single down day get bought? You know, it it is the case. Now, I I will bring it back to what you just described. there’s going to be an upday that turns into a down day and then you’re going to see some sort of action whether it’s the snap election, it doesn’t go the way that the, you know, the prime minister thinks in Japan and you see some big currency move and then you’re going to get things a little sloppy. You know, there’s also a scenario, Danny, where I think there’s a pocket of risk that exists in the private markets that is not appreciated. And I want to go back to late last year when SoftBank that was meant to fund $40 billion in Stargate and other um obligations, you know, here in the US to build out these data centers and the like. Well, what did they do when they didn’t exactly have the cash to do it? Now, they have to go to sovereign wealth funds in the Middle East. Okay? But they had to sell their Nvidia stake and they did. You know what I mean? They used that to fund this. So if OpenAI has and I actually think it’s going to happen. I mean like I I think they’re gonna in 2026 they are not going public. They might not be able to raise they have to raise a hundred billion dollars at higher levels than they did last year. They did it at 200 at 500. They were going to do it at 750. They’re talking about 850. If that doesn’t happen, you know what I mean? they actually have to raise at 600 billion. Then at some point the spot dries up a little bit and then you get fund managers and there are a lot of crossover funds. Boston they own these things in the private market and they don’t have liquidity to the size of the positions they have. Well, what are they going to sell? They’re going to sell the things that they can and that’s in the public markets. And so I think SoftBank proved that. And by the way, Soft Bank’s down like 30% from the highs. I don’t know if they can pull that up, you know, late last year. So, talk to me a little bit about >> I don’t know how to even retort to that. I will say that, you know, >> look at that. That’s Soft Bank. >> I know. I I will say that um that uh these private uh share owners gave Open AAI the ability to sell $6 billion worth of stock at a $500 billion valuation. And if you look at the stockbased comp number, Porter was writing about this the other day. >> I can’t even tell you how high it is. It’s it’s in the tens of billions of dollars at OpenAI. Think about that for a second. Stockbased comp and a private company that’s yet to go public. We talk about that in public companies. It’s massive at OpenAI. So, I don’t know how sustainable they’re going to need to go public, Dan, to your point, to get liquidity at some point, but you know, Nvidia’s everybody’s coming in giving them money, signing deals because they want to partner with them obviously. But again, out of my area of expertise there, Dan, but I totally hear what you’re saying. And listen, Masa’s son three years ago basically said, “I’m out of the markets. I’m done. I’m not going to take risk anymore.” Well, he has gone full boore, risk on everywhere. And so, I think people are going to get nervous obviously that he might be getting a little bit over his skis here. >> Well, and and then just to to kind of answer the question, why does he get bought? Well, the fever hasn’t broken yet in this AI trade, but then you’ve also seen money rotate into, let’s say, financials and energy and some other spaces. Um, you know, you just mentioned Nvidia and I just actually mentioned it too. Look at this information article and this is a great example. So, this dropped this morning or this just dropped. Okay, this is uh China restricts Nvidia chip purchases to special circumstances. So, when you think about this, okay, Nvidia rallied off this. Go pull up a day chart on Nvidia. You know what I mean? Like, yeah, the stock hasn’t acted particularly well over the last few months. It’s trading where it is. Like, how does that happen? The stocks, look at that flip. The stock initially sold off. >> I don’t know. I mean, look at the other news out there. I don’t again I’m >> No, that’s the news. Look at But that article hit at 11:27. >> You see that quick, you know, drop and then look where it is. It’s up like a few bucks from there. So to me, the fever hasn’t broken. That’s why they buy them. They still And this is the behavior in 2021, by the way. Like we saw this. We’re podcasting, you know, uh, you know, every other day. Um, so that is what it is. Um, let me hit a couple things here, Danny. Um, >> NFL, where we going? >> We got a Listen, you said you could stick around. Okay, >> so let’s let’s do this. This is Sbuck 4783. Great show, guys. Thank you, Sbuck. Um, a fan for years now. >> What is your take on a firm? This goes back to kind of some of the credit stuff in general. I know this is an area um that you look at very closely because you find fintech interesting um because it’s just an extension of these other themes. Talk >> I mean there’s two ways to look at it. Got obviously it’s going to get hit on the news for capping interest rates uh 10% for credit card companies. These guys fall somewhere in that world in terms of user rates and so forth. So it would be an alternative obviously for credit to go right because they don’t fall under that under that under that spell. Um listen buy now pay later from macro perspective continues to grow. I do think that it poses itself again as a technology company but the end of the day they have risk sharing arrangements with a lot of private equity companies. If credit starts to underperform the consumer it will back its way up. Maybe it’s not now so they’ll continue to grow. And as people as the K-shaped economy continues to stretch on the lower end, people are going to look for alternative solutions for credit and a firm’s going to benefit from that. They’ve signed great partnerships, etc. I’m nowhere in the name at the moment. It’s not something I would be long here because I do believe at some point if we were to go into a credit cycle, it would get hit here. And again, it’s dependent. Let’s not, it is dependent on the financial markets to keep buying the paper that they’re producing in order to keep growing. That’s it. I don’t care what anybody like that’s and if and if credit starts to underperform the the the price people are willing to pay for those loans goes down and it and it hits the profitability of these companies. That’s it in a nutshell. So I’m nowhere again it’ll have some regulatory noise around all the stuff we’re seeing, but I’m, you know, neutral. >> All right. Um T-Mobile, there’s a question here and I want to hit this. >> That’s yours. >> Oh, I I can answer questions. I’m just throwing it out there and you can respond to what I’m saying. Danny, let’s >> No, I’m saying I make sure that wasn’t towards me. I mean, I’m allowed to answer a question. Okay. So, >> T-Mobile, this was like the big outperformer um in the space. Obviously, in the wireless space, you have Verizon and AT&T. And what’s interesting to >> do so T-Mobile, they have the Land Man, they have uh Billy Bob Thornton doing these commercials. He’s like, “Ah, this used to suck and now it’s great.” And then they have um which Wilson? Uh Luke Wilson. Luke Wilson’s doing the commercials and they’re trying to get all down and hokey. These are two Dallas or Texas guys. And I know that I know Luke Wilson’s from Dallas because my wife, you ready for this? My wife, >> she went to the senior prom with Luke Wilson. >> Interesting. Wow, what a step down. Uh, anyway, go ahead. Sorry. >> Well, first of all, I met He’s got this fake I mean, he really leaned into that Texas accent. Okay. kid went to like a fancy high school in Dallas, Texas. Okay. And I know a lot of folks from Dallas, and they don’t talk like that. Okay. So, you know what? Have a ball. >> He was able to seduce Rachel McAdams and your wife. I mean, that’s incredible. Congratulations. >> I think he dated Gwyneth Paltro in the 90s. >> Wait, we’re talking about Owen or Luke? >> Luke. >> Oh, Luke. Sorry, I went to Owen Wilson. >> Luke’s less of an illustrious career, if you will. Okay, really quickly. So, let’s just pull up the TMU. All right. have that there. Okay, this stock, look where it is. Um, it’s down from 275 down to 190. And you know, all these things, Verizon, they’re trading very poorly. Um, AT&T trading very poorly. This is one where if the market or a group, if the market were to get heavy or start to sell off, you know, if you look at some of these defensive sort of sectors, um, you know, this might be interesting. utilities XLU pull that thing up. And so I just want to make a point about T-Mobile after this is like this stock and they trade cheap. Okay, so let let’s go to and by the way utilities could be an interesting one here been when you talk about demand for data centers and the like and this was you know trading very well. I don’t know I I would look at utilities the XLU but go back to T-Mobile for a second here. You know, this is a company that is expected to have a reaceleration in their earnings and sales in 2026 from 4% 25 to 15% earnings growth and then in uh revenue growth high single digits trades at about 16 and a half times. If that is like if that’s affirmed when they report, I think this stock’s a buy. I’ll just say that. So, I’m looking at T-Mobile and I’m looking at uh utilities and those could be interesting, especially if you are um bearish. Okay, Boeing. I I got I got no opinion really. I saw some huge orders that they have. Um there’s a question on Boeing. Um and that is coming from and I just can give a little shout out because we appreciate you um being here. Maybe Amanda can pull that question up. You know, 300 by the end of the year. I don’t know. That thing’s had an absolute rip. I I don’t buy breakouts like this. Um that’s just my sort of personal um take. And I think we’re kind of done with the questions that we can both answer. Um really quickly before we get to um a question about DraftKings because you were on that thing when it was running, you got bearish on that thing. I know you’re bullish on prediction markets. Um but really quickly on DraftKings, uh the question is, give me a second here. Maybe Amanda can pull that up. That’s from Allar1 SJ. Last time Danny was on, he was bearish on DraftKings. Um, has he changed that view with DraftKings getting into prediction markets? Good question. I think the stocks in no man’s land, they were forced into prediction markets from a defensive standpoint. They needed to join the party because they couldn’t have Kowi and others acquiring 18-year-olds in California and Texas because if it ever became online gambling approval, they would not be able to get those customers back. So that’s why why they’re doing it. It’s a no man’s land here. I I think Iboda numbers in 2026 are going to come down here. I’m not short the name here. I think they’re they could get a bump if you see legislation against the prediction markets or more noise from some of these states that want to ban the prediction companies from operating in their states. These things could get a boost. But this is this is a i gaming piece to it as well which are getting approval in various states. So a lot of crossurrens to me it’s a do nothing. Um, you know, again, Genius Sports was a name I loved at five bucks. Um, sold a lot of it kind of the 1213 level. If that were to drop below 10, I’d be much more interested in owning that than I would DraftKings at this point. So, I I I still think the landscape has changed for sure. The thought that prediction markets weren’t going to have an impact. They did. Um, you’re seeing a proliferation of them now and they’re everywhere. So, I wouldn’t own the stock. I wouldn’t short it here. How’s that? >> Okay. Um, Wavy McFly. Wavey’s with us here um every day. Thank you, Wavy. Which sector is Danny most bullish on? Thanks. Exclamation point. >> Probably energy as a sector is I’m most bullish on. >> You already gave it. We You don’t >> I >> already gave it energy. >> Thank you, Wavy. All right, last thing. You just We started the show um with NFL picks. Uh you have been very good this year, by the way. So, let’s just rip through them. You know, NFL uh the NFC West with three teams. >> West is the best. >> Yeah, it it’s that’s insane. Okay, so let’s talk about these games really quickly. You’ll give your picks. I’ll give mine my picks to click. Buffalo at Denver. Denver was uh off last week. Uh Denver minus one and a half at home. What do you got? >> I’m going to take Denver. I’d love to see the Bills win it, but I’m going Denver minus one and a half. >> Okay. I am also going Denver minus one and a half. I think they beat the Bills by like 10. That’s my >> Bills are banged up. Denver had a week off. It means a lot in the NFL. having a >> love Josh Allen. Um I just think that this Denver team um they >> By the way, do you know that last week’s road win for the Bills in the playoffs was the first time that he’s won a road playoff game. Okay, >> that’s it’s nuts. Ner’s um I love that the Niners took down the Eagles um in Philadelphia uh the other day. I like this team. I know you’re going to say they’re banged up. Seattle, I told you I have no feel for that team. I really haven’t seen them play all year. So minus seven Seattle at home, number one seed. Yeah, third time they’re playing this year. I don’t like that game at all. It’s probably too many points. I think Seattle wins, but I’m short Sam Darnold for sure moving forward after that. So, >> stay away from that game. Yeah. >> Yep. I’m staying away too. Houston at New England. Uh New England. This is going to be what their second, you know, playoff game since what in three years or something like that. Um and uh obviously they won um last week or the other night. I mean, >> last night they beat Pittsburgh. You talking about New England or Houston? >> No, I’m talking about New England. Yeah, Houston really opened that thing up. Okay, so you have New England at home. Um, minus three. I think this is a team of destiny. Um, so minus three at home over the Houston Texans. Danny, what do you got? >> I like, you know, I like the money line there. Minus 162. If you go to Cali, it’s probably like, this is why I love the prediction markets more because it’s blends the 136 and 162. But, um, three is kind of the number is what I think it would be. But I’m am I do think that the Patri will win that game. So >> I’m taking the Patriots minus three. And by the way, I probably had I want to say 50 NFL bets this year. I haven’t I have not pushed on one game, which is kind of interesting. So >> well, if you notice if you notice the way the bookies like to do half points anyway, so they can always win or lose. So >> I like this at minus three. I’m gonna take it at minus three. All right, Rams at Bears. Just full disclosure, big Bears fan here. Um I the Rams minus four and a half. I already took it at minus three and a half. Uh >> no it’s three and a it opened at four and a half. It’s now three and a half. >> Okay. So I I have Bears getting three and a half at home. Again, a little bit skewed by my love of this team and the drought that they have had. This team is exciting as hell. The reason why I like them getting three and a half is I think if the Rams win, it’s going to come down to the very end and I think it wins by a field goal. So, I like getting um three and a half your thoughts. >> I concur. I think the Rams probably hold on and win. Uh Chicago’s gotten lucky a few times to be where they are. I’m rooting for the Bears. U if I had to take it, I would take the Bears plus three and a half here, but I think the Rams win that game. So, um that’s what I think. So, >> all right. I think you’re going to have a Bears New England Super Bowl, a rematch of the 85 Super Bowl. Danny’s shaking his head. All right. We we’ll do we’ll do the NFC and the AFC Championship. Okay. We’ll do it next week, Danny. All right. All right. Thanks everybody. Thank Danny, thank you for being here. I want to hit really quickly. You’re doing away from uh On the Tape, which drops every Wednesday. This is your second year. You took that thing over. Um it’s been great. And you get this great participation from uh Vincent Daniel and Porter Collins. We love it. The big short guys. Okay. Where can they find you guys? It’s not just on the tape. Go to YouTube, follow it, follow it in their podcast stores. That’s on the tape. What else you got? >> I got the Danny Moses show launching on Scripts News uh in about a week. Look at >> that. >> Um yeah, there it is. Um so >> where do you find that? Where do you find the Danny Moses show on Scripts News? >> Well, so they have a lot of local stations around the country, so I think they’re going to start to put it out there Friday nights at 7. It’ll probably look like, you know, combination of but between the ferns and something else. I’m just kidding. But um no, it’ll be great. Uh filming it here in Palm Beach in the NBC studio. They own a bunch of local stations around the country. So I’ll have guests on. It’s a 30 minute show with eight minutes of ads, so it’s really 22 minutes of content. So um they want to take a chance on me. It should be a very fun venture. And um so look for similar guests on the tape, but that audience and they can find it on on scripts.com. It’ll be streaming on their YouTube channel as well. I’ll make sure to send that out. I’ll keep everybody posted. So, >> all right, very last thing. The Substack. Give us the name. Give us where to find it. This thing has been awesome. I haven’t seen the script show just yet. Obviously, I’ll listen on the tape, but what I love here is the multidium platform. And the other thing is you guys have a Discord. You guys are inter interacting with those folks that you just talked about that are so good. Um, so you and you and uh and Vinnie Porter, you do this Friday night uh dirty and you do which is a post and you do the what are we doing which is a pod. You’ve had Michael Lewis on your commentary. You guys are awesome. Where can people go subscribe to your Substack? >> They go to Substack. What are we doing? Contrarians at the gate or what are we doing on the desk? I think docsubstack.com. Just come find us. It won’t be hard to find us when you when you obviously type their names in. But yeah, it’s been fun. We do do a weekly podcast called the Friday Night Dirty. It’s audio only and it goes to paying members and we’re up to about 5,000 total members here and we’re approaching kind of a thousand in the paid category. But I will say these people that are coming in and they are contributing a ton. As much as we’re giving out, we’re getting more back from people that are actually sharing their ideas as well. So that those Discord channels and Vinnie and Porter are in there all day answering questions and so forth. So it’s like a live teleathon going on in that place. So you get access to their Discord channel and you get to see who they’re interacting is and they get a lot of idea generation from there. So awesome, awesome, awesome. I honestly I can’t recommend it enough. I was one of those first of 1,000 people. Um so go check that out. Um obviously um subscribe to our Substack, which is really our newsletter where we’re giving a little commentary. CC Lagader, my main man. Um he’s writing a lot of great >> When did you start a Substack? What are you doing? When did that happen? >> You told us. You told us. We gota >> I gotta join. I’m gonna pay. >> Yeah. No, but I mean, listen, what it is, it’s our content and it’s commentary and um a lot of great stuff there. So, go subscribe to that. All right, Danny Moses, I could have done this for two hours with you. Um I hope we covered enough ground. We really appreciate all uh appreciate you all being here. Uh we will see you tomorrow at 11:00 a.m. I will not be on. I know that’s probably a great reason for a lot of you guys um to go watch it with Guy and uh I know that he’s got Carter and he’s got Liz uh Thomas. So uh great week coming up here. Thank you guys all very much for being here. Danny, >> thanks guys. Thanks Dan. >> Thanks for listening to the On the Tape podcast with Danny Moses. If you like what you heard, please subscribe on either Apple or Spotify to the weekly podcast and please leave a rating and review positive only. You can also watch on the on the tape channel on YouTube and give us a thumbs up there as well.

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In this episode of On the Tape, Michael Green, portfolio manager and chief strategist at Simplify Asset Management, returns to …

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In this episode of On the Tape, I am thrilled to welcome Michael Green back to the pod. Mike was last on in April of last year. We discussed many topics including market structure in the role of passive versus active investing as well as Mike’s career path which included the infamous Volmageddon trade while working in the Peter Teal family office. Mike [music] currently serves as portfolio manager and chief strategist at Simplify Asset Management and is the author of Yes, I give a big on Substack. But before we get to Mike, I wanted to reiterate how it’s [music] more important than ever to be mindful of where and what you invest in these days. I have talked before about the pros and cons of deregulation in the financial markets, but I fear we are moving too quickly and what might be to the detriment of the retail investor. Barren posted an article earlier this week and highlighted the fact that the CFTC’s Chicago office has gone from 20 trial enforcement lawyers to one. This is the capital of futures trading. To put this in perspective, enforcement actions brought in over $17 billion through 58 enforcement actions in 2024 and only $9.2 million through 13 enforcement actions in 2025. According to the article, five of the six attorneys at the agency that received a reduction in force notices last summer and one that retired early had a combined 103 years experience at the agency. As of last Friday, there is now one trial attorney working with three remaining investigators and one parillegal in the Chicago office. This was the office that handled the case against Binance and FTX. If the Senate passes the Digital Asset Market Clarity Act already passed by the House, the CFTC would be given jurisdiction over the crypto industry that currently sits with the SEC and that’s in addition to regulating the explosive growth in the prediction markets. One of the CFTC trial attorneys that was let go said, quote, “If I was a different person, I would launch a crypto scam right now because there are no cops on the beat.” This Baron’s article follows a Wall Street Journal story at the end of last year that was entitled, “Trump administration upends prosecution of white collar crime.” It describes notable changes in the enforcement of the Foreign Corrupt Practices Act, which fell off of a cliff in 2025 that also included a six-month freeze on new cases. The Justice Department and the Securities Exchange Commission, which share authority to investigate violations, brought about 33 cases a year against companies or individuals between 2015 and 2024. This year, the Justice Department brought six new FCPA cases, and the SEC brought none. So, as white collar crime might go unpunished and or in some cases get reversed through pardons and drop cases, it’s more important than ever to protect yourself. My guest on the pod today will certainly arm you with knowledge that might help. Mike, welcome back to the pod. You were on the pod in late April 2025 and at the time we were decoding the on again offagain tariff policies and the impact it was having on the macro and the markets. It’s almost 10 months later and while there’s like a bit more clarity on some things, there’s obviously still a lot to decode out there. So let’s start with that. Give me your thoughts on kind of the big picture and you know the macro and we can dive in from there if that’s okay. Yeah, I mean, you know, it’s funny. I think we talked about this at the time. Um, you know, there were a lot of calls, particularly in in light of the S&P having sold off around the tariff tantrum, that somehow or another tariffs were going to set off a wave of inflation, that, you know, we’re going to see um extraordinary price increases, that it was a terrible policy that was somehow or another going to reinstate the components of the Great Depression. And of course, all of that was somewhat validated by the rapid sell-off that we saw in equities. Um, you know, at the time I said, and I continue to say that really the only thing that actually matters to the behavior of equity markets is flows. We knew mechanically what had happened um was largely tied to Europeans and Asians effectively voting with their feet and taking their money home. We saw a very little of it, a very little amount of US retirees selling. And the point that I just continually emphasize is, you know, yes, you’ll go through periods of this sort of friction and uncertainty and it can cause people to change their positioning. And that happening in a market that is, as you know, I believe, heavily influenced by passive to become much more inelastic will cause large swings in prices. But the minute it’s over, the minute people kind of have gotten their positioning where they think they want it, then the dominant force just becomes the flow of money into 401ks and passive and stock buybacks, etc. And it and it’s really not telling us that much about the economy in terms of its behavior. And so, unfortunately, I think we’re right back into the same place, right, where the markets are telling us one thing. And yet, we are seeing very clearly a slowing in the economy broadly. jobs are being um downgraded. Tomorrow we should get, you know, really terrible numbers in terms of the revisions on the QCW um the quarterly uh census unemployment and wages. Um, you know what we know is is that the approach that has been taken by many government agencies is to quote unquote massage the data not by virtue of trying to conspire to present false data but simply because they have a different approach to doing it. In the case of the BLS, they estimate the number of new businesses that are being created and that number is just wrong, right? Their their methodology is wrong. We know exactly why it’s wrong. They will eventually change it. Um, but they’ll, as they always do, they’ll probably change it at the worst possible moment. So, you know, where we sit today, we’re seeing rising financial distress. We’re seeing more bankruptcies. We’re seeing rising unemployment broadly. Wages are getting hit. Um, and it does eventually set up the conditions that cause a meaningful correction, but I just don’t think we’re quite there yet. >> Wait. So we’ve had five or six kind of mini corrections if you want to go in the last year where VA has spiked and to your point lasted sometimes a day, sometimes two, sometimes three and it always seems to reverse course to your point because the flows are unrelenting in terms of passive. >> So is it the horse or the cart here? Meaning people actually end up having less money to put in the markets or will the market sell off and cause them to have less money? So where does that kind of meet there? I would say >> yeah I mean I I think the point that I would emphasize is you know the uh the Twitter meme of why not both. Um you know the simple reality is is that wealth creates collateral collateral creates borrowing and spending capacity and so if prices fall there is less of that. Um on the you know the other component as we were talking about is that flows require people to have jobs to contribute to their 401ks. Um, and it’s not just that component as well. With Federal Reserve having hiked interest rates to relatively high levels, in an environment in which there’s a lot of cash outstanding, that’s created a huge slug of income. That basically means boomers don’t have to sell their portfolios in order to meet their lifestyle objectives. They can live off of the interest income that’s coming from their fixed income portion of their portfolio. This sets up conditions where you know like my honest model at this point is is that the most likely catalyst that will ultimately undermine the system is that we will begin to see deteriorating economic conditions as we flow through this year. We will have a new Federal Reserve chairman. Um the market tends to not be very uh kind to new Fed chairs. And for all of the the thoughts around managing the balance sheet or raising or lowering interest rates to fight perceived inflation, um my hunch is is that, you know, Wars will cut interest rates relatively aggressively when confronted with with weak economic activity. At least in my model of the world, that actually reduces government fiscal transfers to the wealthy individuals that own the stock market and potentially creates the catalyst for a more meaningful selloff. But as I as I always emphasize like this is a stochastic phenomenon. We we know it will eventually occur by trying to offer the exact mechanism by which it’s going to occur. I simply devalue the overall forecast. Right? This is a fragile market that has unique exposures to extraordinary overvaluation and securities that are increasingly disassociated from the underlying fundamentals. Um those conditions rarely end well. So when you combine obviously this kind of buy the dip mentality with the Fed has your back and I think you just described a situation that they’re going to have your back near term in a midterm election year. So if you think worsh is going to be more doubbish than people think which I totally agree with you that the that this white house and or the government will do whatever it takes to you know for 2026 midterms doesn’t feel like there’s going to be a huge catalyst barring something we’re not thinking about at least in the next quarter or two that would occur to kind of reverse that psyche and the moral hazard that kind of exists. And you’re right debt’s not going away. We’re going to go over 40 trillion I’m sure at some point this summer. We’re not fixing any of those structural issues, but it’s, you know, is this a timing issue then in your point or what is it really tips the scales then if you’re describing kind of a dovish um buy the dip mentality that’s still kind of out there? >> Well, again, the vast majority of the buy the dip actually is mechanically built into markets. So, when you think about a 401k system, I’m contributing a fixed amount tied to my income every single twoe pay period. That doesn’t, by the way, flow in the day you contribute it. it’s actually contributed into a pool. Those pools are then smooth. So there is some evidence of like Fridays having slightly higher flows than you know Wednesdays. But the the reality is is that that is a somewhat smooth flow. And if you just mechanically think about it, constant stream of dollars coming in, prices go down, you buy more shares. Um until we get to a point in which the withdrawals or the need for income associated need for cash effectively associated with um lifestyle safety whatever exceeds those contributions you know that the the market is an up and to the right phenomenon. >> It’s fair and I think within the structural aspect of the market and the passive we’re going to get into other things here I promise. um we’re so concentrated you know by definition of how these passive indices are constructed into 10 names controlling X but within that I think one thing that’s not talked about enough is the wealth effect and the point you’re making if you were to get a sustained selloff in the market it would then trickle through the economy the same way I think the economy is being held up by people that own the market have experienced growth and I will throw crypto into that as well since I think it’s so retailheavy give me your thoughts on that and and what impact that could have kind an unwind of the wealth effect. >> Well, you know, crypto, Bitcoin in particular, has actually been a wonderful test case of my theories around flows. And I, you know, um I’ll fire back up my computer and show you a couple of charts, but you know, the simple reality is is that the flows in and out of Bitcoin ETFs now, at this point, explain north of 75% of the price action in Bitcoin. That’s an extraordinarily high R squared just to, you know, to emphasize that point. Um but you know, yes, it’s a collateral asset that unfortunately is heavily owned by younger people in particular. Um and that’s the group that’s under the greatest pressure in today’s world, right? It’s not so much the boomers who again are benefiting from relatively high interest rates, certainly higher than they anticipated when they began accumulating financial assets um or at least, you know, really accelerated over the past couple of years. We talk a lot about the wealth effect. We often ignore the income effect. And so, you know, just to parameize that very quickly, the estimates of incremental spending tied to an increase in in $1 in wealth is about two cents. This actually matches up with a lot of the data we see on withdrawals, etc. Um, so you know, a dollar lost out of the market adds, you know, subtracts two cents from spending. A dollar added to the market adds two cents of spending. You can clearly see how that’s stimulative on the way up, but it also in magnitude is nowhere near as large as the income effect of an interest rate increase. When you have um interest income, people treat that as stable and much more tied to a life cycle phenomenon. The marginal propensity to spend out of interest income is around 70 cents on the dollar. And so the give or take $1 trillion dollars of incremental interest expense that the US government has taken on with Jerome Powell’s interest rate hikes has actually proven to be incredibly stimulative in my view of the world. Um and my big fear is is that they don’t understand this. I’ve seen no indication that they fully appreciate the role that they themselves have in in creating loose financial conditions. One thing that’s out there now that there’s more ETFs than stocks is that it actually has become a great stock pickers market. At first it wasn’t. When passive came on the scene and was growing because portfolio managers were forced to just kind of follow the trend they needed to outperform certain sectors, overweight, underweight, buy the biggest names within them. But it feels like we’ve now reached the point where if you’re doing bottom up work in the market and just step away from the macro for a second, there’s some huge opportunities. It might require patience. But it is amazing how we’re getting these huge moves sometimes higher just by names that have been either underfollowed or underowned that are all of a sudden getting attention again. What are your thoughts on that? And is that lost art of kind of active management feels like it’s coming back here? >> Yeah, almost nothing I see suggests that it’s really about the active management or the selection of the securities. is much more about the flows into those spaces. So, you know, gold would be a really good example. I wrote about this last year. The evidence was pretty clear that the traditional flows that had gone into gold had been diluted by Bitcoin. And that was actually blinding people to the opportunity of the gold price to push significantly higher if something were to change around that. And unfortunately, that’s exactly what we’ve seen. shares outstanding in the GLD alongside the buying that’s coming out of China, which has very similar characteristics to it. You know, those flows really do help explain what is going on with the price. It’s always this simple. If a lot of money tries to go from one allocation, let’s say a $70 trillion allocation to the S&P 500, if you take 1% out of that and try to buy the Russell 2000, you’re literally talking about 25% of the market capitalization of the Russell 2000, right? You try to buy 25% of the shares of anything and it’s going to go vertical. And that is what we’ve seen in small caps as people tried to rotate. It’s exactly what we’ve seen as people tried to rotate into gold or into commodities. These are very small markets relative to the market that people are drawing capital from. Um and so I like while I agree with the overall observation that many people have been rewarded by um sticking to investments in areas like materials or areas that would be traditionally more associated with negative outlooks as compared to particularly positive outlooks. Um I I unfortunately think it really is the same underlying phenomenon, a deeply inelastic market where more money is trying to go in than the space is capable of of uh uh accommodating. >> Well, let’s stick on that topic for a minute. So you talk about flows into the S&P 500. There’s only one gold miner in it, pneumont. That’s it. So when you think about, you know, a Boston fund manager and how they have to make decisions and so forth, you brought up materials, which is, you know, two to three% waiting in the S&P 500. It can be ignored, but one of the things I’m getting at is that flows have self-fulfilled how uneven these sectors have gotten. And so I guess you’re answering it, but I guess what I’m saying is if a portfolio manager wants to make the decision to start underweighting technology and allocate more into materials, industrials, energy, and gold, which falls under, you know, materials, that’s a powerful secular move. To your point, the math might be difficult, but if it were to occur on a sustained basis, there’s huge opportunity. That’s the point I’m trying to make is that within the sectors that are underw weight, you know, within some of these names, there’s opportunities. That’s all I’m getting at. I I know it it we’ve gotten to a point where it’s almost impossible to fit the elephant through the mouse hole, but that’s kind of where I’m going with that. >> Yeah, I I I think that’s right. And that is one of the things that it, you know, we have to be very very cognizant that the momentum that we think about historically that was correctly identified by Cliff Aznes back in the 1980s um turns out to be effectively a subset of the overall class of momentum. Um uh for those of you who know my relationship with Cliff, that would allow me to define Cliff as a small problem. Um you know, the underlying characteristic of uh momentum is the idea of information diffusion, right? Danny figures something out. He buys a security that causes the security to rise modestly in price. Mike sees the security rising in price, starts to dig into the fundamentals, discovers what Danny has discovered, buys an addition that causes the price to rise. Other people follow along in that process, right? That information diffusion is is a special case of momentum. There’s a second form of momentum that is actually created um by what I call the price weight spiral within passive which is that as money goes into the index it differentially affects the largest stocks in the index. Um they are less liquid relative to their market capitalizations. becomes particularly extreme at the largest companies. And so that money coming in to buy Apple, for example, causes Apple’s price to rise faster than the rest of the S&P. That means that the next dollar into the S&P will buy more of Apple than it will of the other stocks. That reinforces momentum through simply a price waiting mechanism. Um the problem with that is that it’s very hard to change that, right? It’s very very hard to change that. And so this is part of what has led to me, you know, seeming to be really arrogant and dealing with people on like international stocks or small stocks, etc. Until we change our our mechanisms for allocation, until we return more capital to those active managers, those discretionary managers that you’re highlighting, unfortunately, I don’t think it’s a secular trend. I think it’s really just a rebalancing or a short-term cyclical trend. and and so far it looks like that’s playing out again. >> Yeah, I guess you would need a large market selloff um sustained market selloff in order for that to kind of change. So on your and then we’ll close out the passive theme here, but uh on your I give a fig on Substack, you just wrote a really interesting piece which addresses this which it’s not just about the trends, it’s actually the rules themselves. And you wrote something regarding um specifically and you can explain this the 5x free float multiplier which is part of a proposal and the fast entry uh which is part of a proposal and basically self-fulfilling that even a large company market cap wise that has a small float uh at the detriment of people that will be buying it and the benefit of insiders etc. explain that because that’s just a rule and if it goes forward you’re pointing out it’s just unfair and and not a not a great structure. >> Well, it what it does I describe it as the spackification of the of the QQQs, right? Um spaxs were the mechanism that allowed many lowquality companies to come public in the 2020 to 2022 time period. That was simply a function function of index arbitrage. um this fasttrack IPO status effectively what NASDAQ is proposing to reinstate with some particular wrinkles around it that candidly I think are absolutely crazy is very similar to what would transpire with spaxs. So spaxs as you know have been around forever. They’re basically a mechanism for hedge funds to buy a little bit of volatility and hide the amount of cash that they have in their portfolio because it’s a cash instrument with the option to acquire something. um they were not eligible for index inclusion and the total market indices broadly the tool that’s used within most target date funds um you know because they were cash instruments and not operating companies. If they made an operating acquisition they would be subject to the same inclusion rules as a traditional IPO. Um, and this proven to be a disaster because the traditional rules of an IPO, a traditional S1 perspectus and road show requires a healthy and vibrant active manager community willing to deviate from their benchmark and take a risk on a new untested name. Spack shortcircuited that with a modification called the FastTrack IPO. The fasttrack IPO is almost identical to what is being discussed by NASDAQ, which is the idea that if the company is big enough, it exceeds a certain threshold that it should have been eligible for inclusion in the index in as few as five days upon making the that operating acquisition. In 2020, that cutoff was about a billion half dollars. Now, nobody had ever seen a billion half dollar spax. So nobody thought to do this but the minute they began to emerge we actually saw unfortunately the same dynamics which is that the only liquidity available in spaxs is insider selling insiders are restricted from selling typically for 20 days in a spa more particularly it’s typically 20 days above a 20% threshold and if the largest buyers in the market the index funds are required to buy in as few as five days per the terms of a fasttrack IPO you can figure out the immediate imbalance right? There’s a lot of buyers and not many sellers. NASDAQ has proposed with this rule change that is, you know, that is open in the comment period. I encourage people to check out my work at Yes, I give a FIG and take a look at that piece. Um, I’m always willing to extend subscriptions to people who request it. So, just hit me on Substack if you’d like to read the piece. And I helpfully made it very easy for people to comment to the NASDAQ on this. What NASDAQ has proposed here is is that they would allow rapid inclusion of companies that were large enough to enter the NASDAQ 100. And if that wasn’t actually enough, again, a mismatch between the insiders and the index buying, they then proposed to magnify the float by effectively 5x, which would allow a company to issue very few shares, making very few shares actually available for the public to settle trades while requiring index providers to buy literally five times as much as is actually available. like this would become the happiest hunting ground for financial fraud I can imagine. Um and it really is disappointing to me that at this stage in the game that the index providers don’t appear to fully understand the impact or if they do understand it are treating it very cynically. Um you know this is just bad. It’s like it is not not not just unfair is bad. It is literally designed to extract money from the retirement system of the average American to hand it to Elon Musk. >> So, it’s safe to say if NASDAQ is trying to court Elon Musk or Sam Alman to come on their exchange when they go public, this would be the best way to potentially do it. To your point, >> it would be an extraordinary tool to attract large listings to um the NASDAQ, which you know, to be fair to them. Ostensibly, the index is distinct from the listing business. Um, this looks awfully suspicious. >> Fair enough. All right, so let’s talk a little bit. We touched on it briefly. I want to talk about the kind of the AI impact on the markets and the economy. I know we mentioned how topheavy some of these indices are because of AI related stocks and we mentioned before the white collar jobs kind of what are your real thoughts there and what inning are we in kind of on on this? Are we just at the beginning potentially of seeing these impacts? And do you expect the job impact to be as big as it as it might be? >> Look, I I fall into the camp very similar to my good friend Josh Wolf that ultimately technology creates more opportunities for employment. It gives us more possible combinatorial answers that allow us to increase, you know, the opportunity to solve problems for people, which is really what employment is all about. Um, with that said, the idea that that happens smoothly and it happens equally to all people is absolutely untrue. Right? When we see waves of technology, when we see waves of innovation, it unfortunately impacts local individuals far differently than it does the aggregate population. So there will be a surge in population or in jobs in India created by telecommunication for example that can be done at much lower cost than it can be done in the United States. AI is an incredible technology that as a content creator I use on a continuous basis. In many ways I describe it as I suddenly am you know I have 400 first year analysts. I would actually argue that the advances in AI have probably pushed them to second year or even first year associates at this point. All of which are incredibly motivated to solve the problems that I put in front of them. I just know need to know how to ask the question the right way. And I also need to have the domain specific knowledge that allows me to look at their answers and say no that’s not right. Go back and try it again. Um most of the hallucinations are are solved by that component. Right? If I don’t have any knowledge of the the topic, it’s very easy for me to post fake information. If I know the topic really well, like that, you know, you’ve been through this process. You’ve had analysts. The simple reality is they are really smart. They’re extraordinarily well read. They’re very motivated. And you can’t trust them as far as you can throw them. Right? So, this is the same underlying phenomenon. It’s just it’s radically cheaper. My AI bill is somewhere in the neighborhood of $1,000 a month right now as a professional user. if I was running an equivalent amount of brain power in terms of analysts, I’d be running a $12 million a month um sort of expense. So, this is a true innovation. It is really powerful. I have no question that it’s going to lead to some extraordinary breakthroughs. Certainly led me to accelerate my work in areas. But the net impact for many people is the uncertainty is creating a lack of hiring particularly for young workers who are coming out of college who may not have been exposed to AI in a way that makes them immediately productive members and enhancing the capabilities of a firm. And the firms are increasingly looking at and say I’m really uncertain about the economy. I’m really uncertain about the impact of this new technology on my business. Why would I hire somebody only to have to fire them if it turns out that X, Y, or Z turns out to be true? That slow rate of hiring is really isolating itself in the younger population. And today we just got the, you know, the information that we’re now down 8% um another year. This is the fourth consecutive year that first year college grads are seeing their wages fall. So this is, you know, this is a rough time period and it’s particularly rough for young people, which is made all the worse by the fact that we have relatively high interest rates that are creating conditions under which the older population is like, hey, things are pretty good. I got money to spend. Um, and you know, simple terms, yes, I think AI is going to be an incredible revolution. Yes, I do think it’s going to create localized job loss and it’s going to create frictions for new entrance into the labor force. Um but it will eventually resolve itself and the answer is not to engage in sabotage and you know throw wooden shoes into uh data centers. >> All right. So with that Mike kind of um morph that into kind of the K-shaped economy and kind of what we’re seeing and we’re going to go off the rails to the top of the K all the way up and on the bottom and what what’s the next letter that that would look like? But uh it’s something cursive I’m sure. But uh >> yeah yeah I’m trying like maybe a capital Q or something. Um, >> uh, you know, it’s interesting. So, I got pulled into this debate around affordability, etc. through a piece I wrote called My Life is a Lie, the $140,000 poverty line. Um, you know, that really was just kind of a voyage of self-discovery as I dug into some of these topics. Um what’s really interesting about it is that it actually turns out that there are emergent properties of economies that are bifurcated between capital holders and those who primarily use their labor. Um it largely turns out that that most of the conditions that we actually experience are a function of volatility. And what we’re really describing when we’re talking about somebody who is poor or who is less well off is they lack the buffers in life that allow you to avoid a hard reset. Right? You and I are fortunate enough to never really have to worry about a medical condition creating a system a condition of bankruptcy um or a car breaking down causing us to lose our job or anything else. Right? Those buffers allow us to basically continue to play the game and continue to compound in both our income and wealth. For people who are at the lower level, there’s something I refer to as the valley of death, which is this idea that between about 40,000 and about $100,000. As you make more income, you lose more benefits and you’re effectively having the safety net withdrawn even as you’re working harder. That’s what I think is really driving this K-shaped economy that there’s effectively about 40% of the US population who is now underresourced enough that a minor event can cause them to basically have to start all over again. And that’s what our K-shaped economy is about. And we need to recognize that while we may not agree with how everybody chooses to participate and behave in society, we’re doing ourselves a tremendous disservice with the current narrative that, you know, that 40% of the population is less intelligent, therefore less valuable, is you know, naturally poor, they’ll always be poor, etc. Um my work really suggests that that’s not what is really going on. That it really is this function of volatility buffers that you and I have been able to accumulate by virtue of being, you know, born into relatively stable families, being given excellent educations, being given the opportunity to participate in highincome uh careers that allowed us to establish that that difference. I you know, look, I’m not a dumb guy. I know that. But the simple reality is is that, you know, none of this would have mattered if I was living in Paleolithic times. I’m not a particularly fast guy. I would have made a delicious meal for a saber-tooth tiger. And, you know, the world wouldn’t have been treated to my Substack or my contributions as a portfolio manager. Um, yeah, I was a really pudgy kid, man. Um, I would have made good eating. Um, so you know, the simple reality is is that that’s a lot of what technology is about is building those buffers that allow people to take that next step in a somewhat unimpeded fashion. And a lot of my work is just suggesting that we’ve gone too far in this in the pursuit of efficiency by saying, you know, we’re only going to hire the brightest. We’re only going to hire the smartest. we’re only going to allow the participation from those who achieve a certain impremature by being a you know Harvard graduate or a pen grad or a Stanford grad. Um this the simple reality is is that that undervalues a sizable fraction of our population and candidly I don’t agree with people who think that those at the lower end of the of society aren’t active and measurable contributors to our overall well-being. One last thing, Mike, just back to the macro for a minute. We touched on Bitcoin. We talked about gold, but we really didn’t talk about those two asset classes in terms of your thoughts on them here and the signals that they’re sending. I know you’re not a you’re not an anti- Bitcoin guy. You’re not I think you’re like me, you’re not a pro Bitcoin guy. Thoughts there. And then what is gold telling us? And the second part of that is what is the US dollar telling us and where do you see that going and where should we be concerned? >> Yeah. So well first of all actually um I am uh what is perceived as anti- bitcoin. Um I think unfortunately that there is a deep misunderstanding in our society of what money is and therefore we’ve allowed a narrative to persist somehow or another. Bitcoin is a solution. I would suggest it’s a speculative asset in search of a narrative. Um and anything that creates a narrative that causes money to flow into it should be clear from my discussion of other assets that can cause the price to go up regardless of value. Uh, I did an experiment on Twitter the other day where I repeated the the very famous Francis Golton experiment of how much does an ox weigh and asking people somewhat, you know, randomly. And as you might expect, the wisdom of the crowds came back and told us, you know, that an ox weighs somewhere between 1500 and 2,000 pounds, which is almost spot-on with the actual weight of an adult ox. I asked the same question, how much does an adult higandorfus weigh? And the answer was actually a radically different distribution. And it was heavily weighted to the tales, right? Meaning people thought that the vast majority of people thought that Higandorfus weighed very little or weighed an infinite amount. Bitcoin’s the same thing. What the hell is it? Is it a store of value? Is it a peer-to-p peer payment system? Is it the next digital gold? Is it a um uh you know um uh distributed ledger that allows us to quickly and easily audit? Um, is it a mechanism for transferring wealth across state lines that we otherwise call moneyaundering? Um, you know, we we actually don’t know what it is. It’s a higorphus. And so, how much is it worth? Well, either zero or a lot. And it just depends on where it is in that process that helps to define it. This is actually what a lot of my recent work on passive and the strategies behind it highlight that we effectively have become a society that doesn’t really know what we are investing in or buying. And so there is no meaningful difference between Bitcoin as you know Ben Hunt calls it you know with the TM after the trademark after it or a Higendorfus or an Nvidia separated from its fundamentals. We don’t know what the right answer is and so we’re willing to project a wide range of outcomes on it. Um, it makes me sad in Bitcoin more than anything else because I think it has largely been sold under fraudulent terms and I think many individuals are going to find themselves with a distinct lack of trust in a system that allows it to fail because they will view it as an assault on them personally having bought into the idea. This is one of the saddest stories associated with the original Ponzi scheme. Right? Most of the victims of Charles Ponzi actually believe that the US government took their money, that they shut him down, that it wasn’t his fault, he wasn’t the bad guy, etc. I’m sure somewhere out there in the audience some screaming, “That’s true. It wasn’t his fault. He was a good guy, you know, etc.” Um, you know, but I think unfortunately we’re going to find that Bitcoin ends up being the same thing. Um and you know the last thing our society needs is a further undercurrent of trust um being cut out from under it. Um gold is you know I I do fall into the Keynesian framework. I think that it is ultimately a barbarous relic. With that said it is a barbarous relic that does have a unique feature that Bitcoin doesn’t have. If the gold mining network stops, gold remains gold, right? It doesn’t actually require everybody to continue to participate and mine and maintain the sanctity of the blockchain in order for it to preserve its character. What really kicked off with gold was when Russia invaded Ukraine and the US confiscated Russian reserves or more accurately eliminated Russia’s ability to utilize those. Our you know the world’s largest exporter China looked at that and said okay this is this is bad. We can no longer hold treasuries. And so they started buying gold. Um, interestingly enough, they were buying gold at the same time that Americans were selling it because they were off buying Bitcoin. And as a result, you had kind of two offsetting components that meant the gold didn’t move very fast. Uh, sometime around 2024, Americans woke up and they’re like, “Oh, you know, we should maybe buy some of this gold stuff.” Look at central banks accumulating it around the world, right? You know, the narrative of the dollar is collapsing is always a fun and relevant one. Um, and the combination of those two is effectively, you know, the elephant through the mouse hole, right? We’re trying to squeeze more money in there. And you can see this in the disassociation between fundamental values and the prices in particular in places like China. Um, less impact in the United States where we have more smoothly functioning financial markets. Um, it is also, by the way, one of the reasons why the Chinese stock markets played a key role in my analysis of an understanding of what passive was actually doing. Um, but I think that’s really what’s happening is is that we we, you know, we basically have a little bit of a mania of people saying, “Wow, things are so bad. I just want to get out of this. I don’t want to actually invest. I want to put my money to the side. I want to move away from something that has a counterparty exposure.” Or even if I didn’t pay attention to Mike Green and his arguments against Bitcoin, you know, that thing’s going down. I might as well buy the thing that’s going up. Um, and so I really unfortunately think that’s what’s going on. I think it is telling you that trust has been damaged and eroded in the system. Whether that is foreign countries believing that the US will protect their access to their assets or whether it is Americans believing that the government has taxing capacity and is effective at what it’s trying to do. There’s just an awful lot of people who are trying to get out of the system right now. I think fiat currencies, to your point, the role of the dollar is that gets devalued, debased, whatever you want to call it, people will flock to a hard currency. And for a while, Bitcoin was stealing gold’s thunder up until up until a few years ago. Now, a 5% move in in gold is the entire market cap of of Bitcoin here. So, it’s, you know, it’s certainly changed. So, I take back my comment that you’re neutral on Bitcoin. Although, I think from the standpoint is I don’t think you’re going out and shorting it because it’s an unknown thing. to your point you just made the argument against yourself would be it could go to 200,000 because it can just easily go to 10,000 is 200,000 so there’s no point so if that was my takeaway I think that’s the correct one >> yeah no I think that’s fair the only trade I’ve done in Bitcoin in the past couple of years was a bet between myself and Peter McCormack was a noted Bitcoiner um in which he forecasted that you know Bitcoin would definitely hit 100,000 and was willing to offer five to one odds against it um but the funny part is is that you know so I had to put up 20,000 and that it wasn’t going to hit 100,000 and he was going to pay me a h 100,000 if it didn’t hit 100,000. Right? That allowed me to go out and buy that same option in the market at one the price he was offering it to me. And so it actually ended up being an extraordinarily profitable trade for me which you know Bitcoiners of course didn’t understand. Peter when I tried to renew the bet with him on a million dollars was like dude how much money did you make off this bet? and he was extremely disappointed that I didn’t lose money. I made money on the bet. Um, that took the joy out of it for him. But that’s like Danny, you know this, that’s what Wall Street is, right? Our objective is to make money no matter what. And if you give us the terms and you express a strong enough belief in anything, we will fleece you. Well, my that’s a great way to end, I think. I don’t know if it’s a great way to end or not, but uh you can follow you on X at Professor Plum or Prof Plum99, right? >> Yep. >> What’s that story by the way? The 99. Are you gonna give that up? What What is that? >> The 99 literally was um it’s pretty funny, actually. So, uh yeah, I graduated from the University of Pennsylvania in 1992. had started the PhD program there, dropped out to go to work in uh the private sector um when I realized that finance was nowhere near far along enough for for me to really do the stuff that I wanted to do in a deeply theoretical way. Um but you know in the early Unix systems you had to decide on an email handle, right? And you know I it would be presumptuous to be Professor Green. Mr. Green was a character in uh Clue and that also was kind of boring and probably taken I can’t remember exactly and so I I jokingly put it as Professor Plum. That was my original email handle in Unix. Um when we shifted to internet um uh email systems, somebody had already taken Professor Plum and so I just shortened it to Profl Plum99 in 1999. And that’s where the Prof Plum 999 comes from. Uh the character that you’ll see there is you know an even more balding uh Vini from the Princess Bride and you the rationale behind that is just really simple. Um you know look again I’m a smart guy. I know I’m a smart guy but I am not the smartest guy in the world and I certainly don’t understand the rules of every game that I’m playing. The character of Vini is interesting because he is really really smart but he didn’t understand the game that he was playing when the most important terms were on the line. It never occurred to him that there was ioine powder in both gauntlets. And so, you know, the one thing that kills you when you’re really smart is overconfidence. And, you know, I I keep that avatar to remind myself that you can’t be overconfident. You may not actually know the rules of the game you’re playing. >> Fair enough. And just remind people on Substack, it’s a great read. Yes, I give a fig. You can you can follow Mike there and subscribe as he says, reach out. He’ll send you some uh some of his notes as well. So, Mike, I can’t thank you enough for coming on. It’s a crazy world and market we’re living and look forward to having you back on in the future. >> Thank you for having me on, Danny. >> And make sure to check out another episode of the Danny Moses Show this Friday at 7 PM on Scripps News where my guest will be Peter Bookfar, chief investment officer at one point and author of the book report. And while there are no more football picks this season, I hope you caught my picks last week, which included the Seahawks, Kenneth Walker the third as MVP, and the mention of the word wind during the broadcast. And there is now golf and horse season upon us. So, be sure to tune in. Thanks for listening to the On the Tape podcast with Danny Moses. If you like what you heard, please subscribe on either Apple or Spotify to the weekly podcast and please leave a rating and review, positive only. You can also watch on the On the Tape channel on YouTube and give us a thumbs up there as well.

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Today, we are joined by Rob Carver to unpack one of the most volatile weeks seen in commodity markets in years.

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Imagine [music] spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes, and their [music] failures. Imagine no more. Welcome to Top Traders Unplugged, [music] the place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today’s conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past and past performance does not guarantee or even infer [music] anything about future performance. Also understand that there’s a significant risk of financial loss with all [music] investment strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here’s your host, veteran [music] hedge fund manager Neil’s Krup Larson. Welcome or welcome back to this week’s edition of the systematic investor series with Rob Carver and I Neils Castro Llassen where each week we take the pulse of the global market through the lens of a rulesbased investor. Rob, it is uh wonderful to be back with you uh this week. First time in 2026. Hope you’re doing well. How are things in the uh in the UK? >> Yeah, it’s doesn’t seem I mean 2026 is only a few weeks old, but it seems like a hell of a lot’s happened. So, particularly in the market. So uh so yeah, it’s all quite exciting. >> It is all all very exciting. And actually speaking of exciting, we have a great lineup of topics uh today um which I think people will really enjoy. U we’re going to be tackling a couple of new papers, an article and uh a couple of questions that came in. So uh so this is all uh super exciting. Rob, as you know, I always I’m always curious to uh hear what’s kind of been on your radar since we last spoke. um but not from the topics we’re going to be talking about. But if there’s something else that you found interesting um then uh >> let us know. >> Yeah. Well, I was I was hoping by now I would have seen the new Melania film, but um unfortunately I’ve not had that opportunity and it looks actually looking at the viewing figures worldwide, not many other people have as well. So, so hopefully I’ll get a chance to review that next time I’m on. Um so I’ve saw an interesting um paper published by Alliance Bernstein. I don’t want to talk about it today, but what made me um sort of impressed was the title of this paper. Um and I actually for reasons that were becoming obvious, I actually had to ask my son who did German at school how to pronounce this word in this title. So the title of the paper is about TPA total portfolio approach which we’ve discussed before. title of paper is portfolio design as um Gazamkensk the total portfolio approach and apparently a gazam is is to is something like a total piece of art and it’s apparently it’s a term coined by Vagnner in relation to his operas. So, uh, so yeah, that that intrigued me. But it it goes to show if you’re working as a salesside analyst, you you desperately got to try and make your stuff interesting, right? And one way of doing that is coming up with a title that that makes people stop and think and go, “Well, that sounds weird at the very least.” And it worked because I to be honest, I probably wouldn’t even have glanced at that paper were it not for the the funky title. So, uh, so yeah, if you’re interested in TPA and Vagner, then uh find that Alliance Bernstein paper and enjoy it. >> That is quite funny. I mean, since I have to come up with a lot of titles and headlines every week for the podcast episodes and the emails we send out, uh I’m always interested in in a catchy uh method of uh getting people to uh you know, listen or open what we uh what we share. I have to say I didn’t expect a German word to do the trick, but I might have I might have to try it out. >> Well, there we go, Neils. There we go. All those long compound German words just waiting to be used in your your email subject lines. >> Clearly. Clearly. Okay. Well, let me tell you what caught my interest. And I know this first topic definitely caught your interest as well. And instead of putting it in the trend following section, I think we’ll we’ll discuss it now. Um maybe spend a little bit more time on it. And it is what happened uh in the last uh week or so. Well, actually the last uh few months, but it kind of uh really came to a head uh on the last day of January. >> Freaky Friday. I’m I’ve decided I’m going to christen it freaky Friday. >> Freaky Friday, especially if you’re trading precious metals and especially if you’re trading silver. And actually, I would say this week uh has been pretty uh interesting as well. So why don’t you tell us a little bit about your silver experience and um maybe we can then talk a little bit about kind of the the good old days and and why silver is not gold uh in in some way. >> Yeah, I mean so um I obviously trade silver um it’s a a futures contract. It’s liquid so it would be on the table for me to trade. Now, I’ve talked about this before, but the way I trade um futures is a little bit complicated, and it’s mainly to do with the fact I have a relatively small portfolio. So, I have a notional exposure to 250 futures contracts. Um many of those I couldn’t trade anyway because of regulatory restrictions. Of course, they’re not liquid or they’re too expensive. Silver does not fall into that category. Um, and then I basically dynamically optimized my portfolio every day to match to get the best possible match I could do to a sort of abstract portfolio, which I could have if I had a notional value running into the hundreds of millions of dollars, which sadly I don’t have. So that will mean that it often that I won’t necessarily have a position in a given instrument even if I have quite a strong forecast on it. Um, now silver though I do have a position and I did have a position in I should say. Um and if I look at my history of exposure to that position, uh it is quite interesting. Um now again it’s slightly complicated by the fact that that I have this dynamic optimization but broadly speaking you can sort of say that CTAs generally will have positions that are a function of two things. The strength of the trend and the volatility of the instrument you’re trading. Um, now that’s obviously a broad brush thing because of course some CTAs will take basically binary positions. So they’ll, you know, they’ll kind of go from fully short to fully long. Um, others will sort of do what I do, which is sort of continuous adjust adjusting forecast. So getting, you know, the moment the trend starts to look positive, they’ll kind of increase their forecast and that would increase the position, all other things being equal. And of course they’re not, which is what we’ll get into in a second. Um and also of course some CTAs take volatility into account when they initially buy a position but then don’t make any further adjustments to that position as volatility changes. Um so we can characterize the silver story over the last few months as a a positive bullish signal getting stronger. Um this is all up till last Thursday obviously because obviously on freaky Friday things change very dramatically. Um but at the same time the volatility also increasing. Um so my position broadly speaking and the position of anyone trading like me would be a function of those kind of two effects. If I could actually look at my position of of my exposure to silver I can see that um although I was trading it on and off last year um the kind of current position um I I bought some on the 27th of November and I bought some more on the 3rd of December. Um and that would have been down to the the forecast increasing um and then actually on the 31st of December I sold a contract and that would have been inevitably because the volatility had increased. So though the combination of those two effects often lead to these interesting effects um and then subsequently um on well actually not on freaky Friday itself because I have a daily rebalance. So I didn’t do any trading in silver during Friday itself cuz my position was based on Thursday’s close which was kind of normal if you like. Um but so on Monday, so that’s a couple of days ago now. Um I actually then sold that um contract and that would have been again because volatility had increased. Um it’s my trend signal is still long because um you know unless you’re trading an insanely quick trend following system one day of negative returns even a day like Friday where silver dropped by the most in one day since and you know you you’ll remember this Neils of course about >> it was decades at least >> decades ago many decades ago I think 40 45 46 years 47 years ago to exact. Um, so that’s why I then I then sold sold out of that that silver position on that day. So that that’s kind of interesting. Now a big question is did I you know useful question to ask is well did I actually make money doing this? And the answer is yes I did because although silver dropped precipitously on Friday, it only dropped back to the level where it had been a few weeks beforehand, a couple of weeks beforehand. Um so I can actually give you hard numbers. So, I bought I bought into my silver position um at levels of $53 and $59 uh per ounce, respectively. Um and then I sold at the end of December at $71. Um and I sold again at $81. So, just looking at those trades, you know, that was nice. That’s a profitable trade. Um, of course, what that misses out is that in between the the end of December and the the freaky Friday, the price briefly went up to, you know, $110 $120 an ounce, I think it was. Um, so that that’s kind of that’s kind of my my kind of story with silver. Now, um obviously that would be different for someone who doesn’t do the continuous volatility adjustment because what they would have done is seen the value of the silver in their portfolio kind of get bigger and bigger and bigger um and then not done anything about it and just hung on to that. Um and as a result would have basically would have seen a massive run up in value and then freaky Friday would have resulted in a quite substantial drop in value. Um and we’ve got the sort of monthly returns for January now for many CTAs and uh certain CTAs and many viewers this podcast will know who we’re talking about who take very large um leveraged positions and have very high risk and do don’t do this volatility adjustment. I think at one probably went from being about sort of 50% up for the month to being 25% up for the month. Now 25% up for the month is still amazing. Um, but the actual one day loss on on freaky Friday would have been, you know, very substantial indeed. >> I I think I can help you with the precision. Actually, think about being up 72% on the Thursday and ending the month up 27%. No names here of course, but it is it was it was a large move. I will say by the way there is I guess one other way that you could even though the you could say largely the trend is still up for silver in many respect. But of course if you were using a hard stop uh as one of your rules and that stop may be calculated from what has been the most recent high of some sort maybe with a V um stop uh linked to it. I guess you could have also been stopped out on Freaky Friday because the move was so big, but it really depends on your specific rule. >> It does. Yeah. And because I don’t use um stop-loss rules. Yeah, you’re absolutely right. Any any stop-loss I mean, I’d say that because um it depends again on how what you do with your stop-loss rules as your position runs up. So um when I if I was to run a system using stop losses which I don’t as I said but I design it so that the the initial entry the stop would be set as a a a rat a multiple of the current volatility. Um now if you as the price runs up and the volatility increases if you then also increase your stop at the same time then the position you know having said that you know a 25% fall probably still would have breached any reasonable stop >> but importantly if you do do that if you do increase your stop width you also should reduce your position at the same time otherwise you’re basically taking more and more risk effectively on the position. um if you don’t increase your stop level as volatility rises then you you’re you risk basically being shaken out of the position too early. Now on Friday that would have been fine because it would have been very nice if you’d I don’t know you know how realistic would it have been to have executed at a tight stop on Friday. I don’t know how how rapid the move was. Um but um it would have been you know you probably would have done better than somebody with a much looser stop. Um but you know that also meant you would have been shaken out on a much smaller move in the middle of a bigger trend which would been the wrong thing to do. So um you’ve got to be careful if you are using stocks how you adjust them as volatility changes just as I adjust positions as volatility changes. You you mentioned kind of you know if you had the ability to uh to uh trade on Friday um clearly it was a hugely volatile day. There’s a not that many people I’ve I’ve heard from in terms of a logical explanation as to what happened. I’ve seen some speculations about a a large US investment bank causing all of this, but I don’t want to speculate on air on that. But do do you have a sense or it’s something you you monitor in some way how how liquid because I think maybe because silver and gold and platinum, they’ve all been going higher uh in the last uh many months and of course it’s been great for trend followers. Maybe people have kind of maybe become a little bit complacent thinking there these are all the same to trade and they think oh they’re all going to be as liquid as gold which is super liquid market um but but but they’re not the same um in in my view and um and I so I don’t know from your perspective in terms of liquidity and those kind of risks um if you have any thoughts on what happened. Um >> yeah, I mean obviously because I’m trading a relatively small amount of money, my kind of have a fairly broad liquidity filter. So I I would probably take positions in in um in instruments where a lot of big CTAs would either not bother or have a very small position indeed. >> Um so silver, you know, there’s no no question of silver not falling into the liquid bucket for me. So that that wasn’t an issue. But I I think the one kind of thing that does happen um in in markets that are not as liquid as you know the most liquid markets is that obviously if something runs up in price and you get a slight pullback well all the buyers are gone right everyone who wants to buy is bought. So there’s no one sitting around waiting to buy off you. Um so you know people treat liquidity as a constant number as a constant number of volume of contracts they can expect to trade. But of course it isn’t right and we we know that in market crisis liquidity disappears and that that happens everywhere. Uh and obviously the less liquid the market is to begin with the more likely that is to happen. Um, and I think there is a risk if you if you know, let’s say something gets hot, right, and it runs up in price and lots of people start trading it, maybe you hadn’t traded it before, and you look at the volume and the open interest numbers and you think, well, I can build up a pretty substantial position here because there’s a lot of volume going through, there’s a lot of open interest going through. Um, you build up that big position and then and then if the class, you know, if the price starts to move adversely against you, then everyone jams into it’s like the the the cinema with only one fire door, right? everyone gets jammed trying to get through the exit at the same time and the liquidity you thought was there wasn’t there and part of that’s just that that can be driven by a few things right part of it could be driven by the fact that yeah a lot of these people are silver tourists who don’t normally trade silver um and the you know what you really need to do is go back a year or two years and say well over a longer period of time what does liquidity look like um the other thing is the classic thing where if everyone’s trading similar kind of strategy I mean if everyone is trend following um if everyone is doing vol adjustment um and that does you know don’t forget that CTAs do vol adjustment but so do risk parity funds um and so do other kind of quant strategies um so anyone who sells on the hint of volatility spiking that the more people there are in a particular market like that then will magnify the move I mean the approximate cause of all of this supposedly was the fact that a a relatively sane person got elected to the to Fed chair next and we’ll talk about that in a second I guess but as to the mechanics of why it affected silver more than gold and silver went down more in price than gold. I mean, we can speculate all day, but I think the main lesson here is is for me is risk management. Um, and the two key things about risk management are position sizing um and diversification. Um, so on Friday, I lost 3% of my total account value because I have a reasonably diversified portfolio. Um, if I was very highly concentrated in silver, that would have been a much bigger number. Um, and because I adjust my positions according to volatility as it changes, again, I was relatively protected from a large move, whereas, as we’ve mentioned, funds that don’t do that and have much more leverage potentially are exposed to even bigger moves. And yeah, month over the month, still profitable. Great work, guys. But, you know, it scares the hell out of me, the possibility of that happening, I have to say. Yeah. Well, first of all, I mean, I think just to comment on that number, I think that that the number you mentioned was pretty among people with that kind of annual volatility that you run it at. I think 3% is is very decent and I think that’s kind of what I saw on on the day from the people I can uh follow. Um, so I think the industry as a whole did really really well. Um and as you say of course the larger CTAs will be doing something similar to what you do meaning uh adjust the position along the way which means again just maybe to it reiterate for people because I remember during the uh cocoa debacle where prices also had a kind of a similar move as we saw in silver where it becomes kind of a parabolic and gold for that matter kind of a parabolic move. It’s very easy to blame the quant funds uh to be behind the parabolic move, but I would hazard to to to say that most CTAs probably got into silver more than a year ago for sure. And the majority of the larger CTAs, they they’re the ones who have been selling silver all the way through January, as you rightly said, maybe even through um December as volatility started to uh expand. We’re just going to have to reduce our notional exposure. Um so we’re actually kind of trying to to be the buffer here um and and limit these parabolic moves. if if anything I think that is important to say because most people will will think the opposite. Um, the other thing you touched on is risk management. And I just want to maybe share, and I I I I won’t do this story justice in any way, shape, or form, but of course, a lot of people remember silver specifically from the story of the 1970s where the uh I think Texas oil billionaire Nelson Bunker Hunt. He became convinced that the US dollar uh would would fail. I mean, it’s kind of almost like deja vu uh at the moment. Anyways, in his mind, silver was not real money. That was kind of or I I [snorts] should say silver was not just an investment for him. It was real money. So, he started to buy silver and he did it physically and he chartered, you know, several of these Boeing 707s and he flew that silver, as far as I understand, uh millions of ounces of silver to Switzerland to be stored in in vaults. Um and um and so again this for him was not about making a lot of money necessarily. It was about kind of controlling and making sure that the wealth he had built uh wouldn’t disappear. Well here comes the problem. I mean he kept buying but he kept buying now for borrowed money. So the leverage of his position um became you know quite high. Um and very similar story as to what happened uh last week. Um as the volatility uh rose uh what happened in in 1979 price-wise was that silver went from $6 to about $50 an ounce. Um and that causes a problem for the exchange. So com started to change the rules on margins. We saw the same thing happening I think in January one or once or twice where margin got increased and at some point the people who have b who have made made money but they’ve made money from borrowed um or speculation from borrowed money to keep up with the margin calls at some point at some point they run out of of of money and so did he so um I think don’t know the details but uh he ended up having you know a catastrophic uh experience experience. Um maybe he still ended up making a little bit of money but but not nearly as much as he had. And I think there was some agreement about paying back um debt. So risk management um and not letting positions get completely out of control by pyramiding and so on and so forth are all very important lessons. And even though this happened back in the 70s, as we can clearly see, they get repeated over and over again, just in different markets at different times. Um, but I think the beauty of all of this is the fact that many of the managers that we um we talk about, they’ve all been around for decades. We we’ve kind of know this. It’s part of our DNA. We don’t get emotionally attached to it. We manage our risk in a systematic, dispassionate way. And that’s [snorts] super important. And regarding this idea that people should also remember that gold is not sorry silver is not the same as gold. I’ve heard stories or or information about the fact that the reason why this is important is that silver you don’t mine very much silver directly. It’s only like 30% of the production actually every year is specifically mined as silver. The rest comes from a byproduct of gold and copper. So it’s maybe less controllable or the supply side maybe is a little bit uh harder to to um predict and therefore it can um maybe also be the reason why silver can be a much more difficult much more volatile market to trade compared to gold. But these are all very important points in my opinion. >> Absolutely. I think it’s may also worth briefly mentioning I think that Friday and actually continuing to this week we’re seeing a lot of dislocations across markets generally. So you know long short quant equity factors have gone to barmy. Um apparently AQR’s um long short fund had both one of its worst days and also one of its best days in the last few days. So that’s interesting. >> Um Bitcoin of course is selling off massively. Um there’s been kind of disruptions in the particularly in the sort of stocks related to AI. So it’s all kind of interesting and at least at the moment you know touchwood fingers crossed um you know my trend following portfolio seems to be coping pretty well with all of this. Um so so yeah it’s an interesting time. >> Can I just mention I mean we talk about precious metals as if it was the only thing that moved. >> Yeah. >> March natural gas uh just to just to mention from the 9th of January to the 30th of January it um was up something like 60%. And then on the 2nd of February in one day it lost 26%. Similar move to more more or less to silver. And this is this is again this is weather related. This is due to the to the massive storm. So >> So we can’t blame that we can’t blame that one on the Fed share. >> Well, we can try but okay. Um we’ll speak about him in a second. But >> what’s interesting about it is, and this is why I think we’ve been advocating uh for so many years now on the podcast, and that is >> people need to realize how important it is to have the commodities as part of their trend following universe because this is where we sometimes see lots and lots of opportunities. Um and often, uh at times where there might be a riskoff event, we didn’t see any riskoff event here in equities. they didn’t really bother too much about what happened. Um, but they’re just wonderful in terms of opportunities. Not always, for sure. Um, but at times, and this is why we like them. But speaking of what you said could be the reason, I don’t know that it really was, frankly. Again, I hear this story in my back of my mind about a certain investment [snorts] bank that uh was um, you know, behind a lot of this. Um but yes, at the same time, we were told uh that we will have a new uh if if confirmed, we will have a new um Fed chair with the name of Kevin Walsh, >> which was a surprise to me because anyone who listened to the Christmas specials will know that my outrageous prediction for this year was that the new Fed chair would be Baron Trump. So, um fortunately, I didn’t >> You’re already out of the uh predictions. Oh my god. Yeah. Tough tough start to the year actually. Anyways, um tell me what you think about uh this. Not that our opinion is particularly uh insightful, I’m sure, but what what are your thoughts? >> Um I must say, so you know, I think I kind of wanted to sort of fess up that I’m not a fan of the current president of the United States, and this will come as a surprise to many people. Um and I I was of the opinion when he came into office a year ago that it would be very bad for markets. Um and mostly mostly I’ve been I admit I’ve been wrong. Um there was obviously the tariff tantrum um and which you know did something very silly and non-sistatic and solve all of my equities. So that was that was that’s cost me a fair bit of relative performance sadly. Um but um generally speaking, markets have kind of shrugged off, you know, to an extent. And maybe that’s because of, you know, Trump always chickens out the taco trade. Um maybe maybe no one really takes him seriously. Who knows? Um but um the I think there was an expectation that he was going to appoint someone to the Fed who would be basically in line with his wishes. So um now and there’s sort of a view that um if you look at the spectrum of people who he could have appointed um then that this guy is on the kind of more sensible and sane end of that spectrum. I mean he does he does have some opinions that are less mainstream around things like QE and the bed balance sheet and so on and so forth. But in terms of just interest rate setting actually in you know some some people have said well actually this guy is quite hawkish um if you look at his you know look at some of his um decision- making over the years. Now a key question is you know given that Trump has installed or you know let’s assume he gets confirmed and and I think he will do to be honest because I think the this you know the the Senate and the House will be just so relieved. they’ll be like, “Yeah, okay. This, you know, this this guy’s probably better than any other option we could get.” So, they I think he will be confirmed. Um, and this will all happen before the midterms anyway. So, I think numerically the numbers are there. Um the question is once he’s actually there given given that he’s been appointed um you know by someone who demands loyalty whether if he then will he then basically do as he’s expected to do which is just to kind of cut rates and keep the former real estate developer happy. Um or will he not do that and then have pressure put upon him like the current Fed chair has pressure put upon him? Um and if and then will he then crumble and say okay fine I’ll do what you say or will he like the current Fed chairman has fight back and say no you know you’ve appointed me now I’m basically in you know independent I’m going to I’m going to do what I think is best. Um so yeah uh it’s an interesting um it’s interesting and I think the the true answer is no one really knows and this is true of most things related to the current president. No one really knows what’s going to happen uh in May. I think it’s May when Pal’s terms up. No one really knows what’s going to happen. So, um I think the the the reaction was if that you know I think that was quite a big reaction to be honest if if that really is approximate cause. Um and you know if you actually look at say the bond market where you could which you could argue is the most direct measure of this it was a roughly muted mood in the bond market. Um, so I haven’t got the figures to hand, but I don’t remember anyone’s, you know, I don’t remember the, you know, the 2-year bond kind of moving by sort of 50 basis points on the day, which is what you would have expected if this genuinely was like a a novel and interesting piece of information. But, uh, so I think everyone’s relieved, got a bit carried away with their relief perhaps, and but as to whether this is good news or bad news for the bond market, for the economy generally, we’ll have to wait and see. I I think you kind of touched on hit it on the nail here because or hit the nail on the head here because the reaction in the financial markets were very muted. So this thing about him being the cause of a silver selloff, I think it had much more to do with positioning and how people had been piling into this and they talk about the Chinese retail investor and all that stuff. I really don’t think it had anything um to do with him really. But of course we always uh hear the in the news that there is some kind of cause you can point to. I think you’re um I mean for people who don’t know but um as far as I can tell uh his father-in-law is a massive financial backer of Trump. So obviously it may not be that surprising that he got the job. Having said that, let’s not forget it was Trump who appointed Powell. So you never know as you say once they are in and they can’t be >> something which he appears to have forgotten as well. >> Right. and and you know once they are in they really should concern themselves about their own legacy and not so much the legacy of others and then do the best possible job. So we don’t know and then also let’s not forget he is one of is it 12 votes uh in total I mean it’s not like he can decide what interest rates are going to do. He has to uh compel or convince uh or force uh others to go in his direction. Now, there might be one or two that he’s very easy to to convince. Um, Stean Moran, Steve Moran, and and and maybe another one, but >> but we we’re still waiting for this Supreme Court decision as to whether Trump can effectively then pack the rest of the board with whoever he wants. Fire and high will. Yeah. >> Yeah. Yeah. All things up in the air, but but what you could say in general is of course that um because you mentioned this thing that Yeah. it a year ago you weren’t too uh bullish about equities but I mean at the end of the day however high this market goes it could still all end you know pretty pear-shaped uh because of all these things that are bu building up to it it’s always the timing of these things that impossible to to know but we’ll see and I think as again as as we mentioned many times in in in what’s going on with what’s going on in the world right now being a systematic diversified uh investor um I think is so much better than trying to make any sense of this from a discretionary point of view. Uh even though those who get it right will probably get it really right, but you can really get it wrong as well. So >> yeah, well discretionary Rob sold all of his equities in April last year and systematic Rob is up since then is up, >> you know, 20 25%. So >> I think you should listen more to the systematic Rob. >> Clearly clearly. Anyways, talking about quote unquote the systematic Rob um before we move up to the trend following part and I know maybe we’ll have time I’m not so sure to go back to this uh point about AI but what did hit my radar just uh this morning related to AI was just this headline I think in in Financial Times that Google said that it’s planning to double its capex this year to as much as $185 billion to really bet huge on AI. Now, I know they just announced results and they made profits of something like 130 32 billion. So, I mean, they have a lot of money to spend, but still doubling the AI spend to almost $200 billion. I mean, this does sound like a bubble to me, but who knows? >> Yeah, we’re both old enough to remember 99200, right? So, >> yes, we are, unfortunately. Anyways, let’s uh talk about some trend following updates uh before we dive into a really, really interesting article. People should really look forward to this. Anyways, uh not surprising. My trend barometer is having a great time. It finished yesterday uh which was um Wednesday at 64. That’s a super strong reading. And of course uh what it really tells you is that there is a lot of breath because the percentage or 64 means that there are 64 of the market that in the portfolio it tracks that are quote unquote trending. So it’s it’s about breath uh in the environment right now. So that’s the important uh part and if we look at uh I mean we already alluded to the fact that January was a strong month for for for managers. Um February is off to a really good start as well. uh mainly this time driven by as far as I can tell uh the financial sectors like equities, a bit of currency, some of the fixed income markets even are supporting the um uh uh P&L this month and and also uh things like natural gas, a little bit of meats, some of the grains. So the breadth of the trend environment as far as I can tell um is is pretty good. Um, so before I um I dive into the numbers, uh, Rob, anything you want to add to kind of, um, where we stand and and and your from your vantage point um, overall? >> Yeah. Yeah. So, um, I actually don’t think I’ve got a position in natural gas sadly. Um, >> well, the ball is huge. So, size would be a bit too big for my tiny account. So, yeah. And the one thing I would add, and I know not everyone trades it, but um Bitcoin obviously I think the market that’s on everyone’s lips this morning, at least on X Twitter, is is Bitcoin. >> Oh, really? >> Um and I think most CTAs would trading it would probably I mean I trade it just for the futures, just to say. >> Um most CTAs who trade it would probably be short. Um and that that’s it’s actually my biggest short position at the moment. So >> um that that will um that might be kind of doing some interesting things for some people as well I would say. Uh but definitely yeah know I I’m also um my my risk is a little bit higher than it has been for a while. So that kind of matches up with your trend barometer. Definitely. >> Yeah. Okay. Um cool. All right. Good stuff. Um let’s run uh through the numbers quickly and then we’ll dive into um the first article. Um so these are numbers are uh as of Tuesday because the Wednesday numbers have not been published at the time of we’re recording today. Um but as I mentioned uh a positive start beat up 50 up 33 basis points up 5.38% so far this year. So very strong. Um sen index up 27 basis points up 5% so far this year. Uh sen trend up another half a percent in February up 5 and a quarter for the year. And uh the short-term traders index also up 13 basis points and up 2.37% so far this year. Uh the Msei world index on the other hand is down half a percent so far in February as of last night up 1.76 for the month. And the US aggregate bond index uh so far pretty flat in February and was pretty flat in January. So that means we’re pretty flat for the year. And the S&P 500 uh down 81 basis points so far in February and [music] up 63 basis points so far in 2026. >> [music] >> Now, before we get to the [music] article, we actually got two questions in from uh Pedro who wrote in, and let me just run through those with you before we dive into it. Uh the first question, and this is a long one, so I’ll probably probably butcher it a little bit. I’ll do my best. Estimating realized book correlations from P&L. Rather than estimating pair-wise asset correlations, I’ve been thinking about measuring the daily correlation of my entire book’s return using something like um a uh exponentially um way weight weight moving average. The logic is that this uh already factors in both asset correlations and signal correlations as expressed in realized P&L. I understand this adds noise, but the alternative assuming a high fixed high correlation like 7 doesn’t match reality for my book. My average realized correlation is much lower. So assuming 0.7 means I consistently undersshoot my vault target. Is there a sensible middle ground here or a better way to calibrate this? interesting point because um also uh if you listen to which I’m sure you do Rob uh last week’s conversation with Katie, we did actually talk about uh not so much correlations but certainly also V and how that really can have a huge impact um as we just talked about with silver in terms of uh your overall position size and and so on and so forth. >> Yeah. Um, I’m a little bit unclear about this question. So, I’m going to make some assumptions and and apologies Pedro if my assumptions are wrong and I’m answering the wrong question. But what I think you’re talking about is imagine you’re trading a bunch of instruments. So, you got a bunch of trend following systems, one for silver, one for gold, one for, you know, S&P 500 or whatever. And then what you need to do is essentially scale um kind of work out what the sort of total leverage is required on that to get to a given risk target. Now if all assuming that you’re doing volatility targeting and everything I mean it’s got the same volatility that means the only thing that’s going to change your your risk outcome is the correlation of those things. So if they’re per so if they’re perfectly correlated, if you’re targeting say a 15% risk target on each of them, you’ll end up with a 15% risk target on the entire book because it’s perfectly correlated. Now if your if your correlation is less than one, which is hopefully the case because we love diversification in in trend following space. We absolutely love it. We like we like nice low correlations. The lower that correlation is, the more likely it is that um you’ll you’ll undershoot your risk target. So instead of getting to 15% on your whole book, you’ll only have 10 or perhaps five. And actually um the the kind of when I actually do this exercise and work out how much I need to increase my position size to compensate for the diversification effect across instrument, I get numbers of between four and five. So a 15% risk risk target would turn into just 3% risk if I didn’t do this this scaling up. So the question Pedro is asking I think is how do we actually kind of calculate this number? Um now he’s saying use a fixed correlation of 7. My gut feeling is that he’s got that 7 from one of my books and it’s a slight misunderstanding on his part because 7 is actually um roughly speaking the ratio between the correlation between the underlying instrument returns and the correlation between what happens if you trend follow the those instruments because trend following them redu because you’re trend following them you’re not going to get you’re actually going to get a lower correlation on than if you were just holding them long any positions on each. So that’s where I think the seven comes from. So in answer to the question, how should you actually estimate this correlation? Well, yes, it’s a perfectly reasonable thing to do to look at the the P&L stream that comes from silver, the P&L stream comes from S&P 500 and then measure the correlation of those. And Pedro’s exactly right that will basically be factoring in both um asset correlations and signal correlations. And yeah, you can use you can get can just use a rolling estimation window of about 6 months works quite well. or you know if you want a smoother correlation estimate you can use an exponential waiting of correlation that that’s also fine. Um so so yeah I think the answer is yes. Um I’m not sure what he means by adds noise. Um maybe he means referring to the fact that if if you used a fixed because of the correlation estimates always changing that will result in some extra trading but to be honest that is as long as your correlation estimate is quite slow like 6 months is pretty good then that’s going to be effectively irrelevant because your actual underlying trading process would be giving you a much much bigger effect. >> Yeah I think that’s a a beautiful answer. He had one more follow-up question that is predictability. He says the research suggests correlation is weaker pu uh is is weakly persistent um but that the best forecast is often just the long run average with the main predictable component being volatility regime. Do you find it worth adjusting correlation assumptions based on V regime or is a constant conservative assumption sufficient? Um so th this is a little bit again I think there’s a bit of confusion in the maybe in the way the question is phrased from PE’s understanding. Now most of the academic research on on estimation is around the estimation of covariance matrices not correlation matrices. Um now a coariance matrix is is basically what you get if you combine a volatility and a correlation matrix together. Um because in most kind of financial optimization you it’s the co coariance matrix that you use if you’re doing you know your marovitz you invert your coariance matrix. Um, now what I found and and what the academic research finds as well is that the predictability of volatility and correlation is different >> and it’s better to estimate them separately and then combine them together if that’s what you want to do. So volatility for example is much more predictable than correlation and I think that’s kind of what Pedro is saying and that’s true that’s correct. >> Um, but the other thing is that but correlation is still pretty predictable. Um, so if if you want some hard numbers, so off the top of my head, if you do a regression of next month’s volatility on last month’s volatility, you get an R squar of about.35. If you don’t know what R squ is, don’t worry, but 35 is pretty good. Okay, that’s pretty good. Um, and for correlation, you get something more like 0.2 or 0.25, which isn’t quite as good. But if you were to try and do to try and predict you know means which is the other moment of the distribution you would you’d get nothing. You just get noise. So that it’s it’s these things are relatively predictable. Um now the other thing about correlation is the as I said you probably want to use something like about a six month rolling estimate versus about a one month rolling estimate for V. So the the kind of correlation structure changes more slowly than the volatility structure changes. Um so what I personally do and what I recommend if is is to is to yes is to actually estimate these things separately. Um if you are using the the correlation and the volatilities for this scaling thing that we’ve talked about already well then the things you’re actually playing with are should already be at the same target. So you don’t actually need to estimate a volatility estimate. Um obviously you will still need your volatility estimate for position sizing as we’ve already discussed. Um but for actual the sort of riskmanagement kind of portfolio construction part the nice thing about doing things in a voltargeted way is you you don’t need to estimate vols again you just assume that your volt targeting works which as a first order approximation is fine then you just focus on your correlations and then you can focus on estimating your correlations in the best possible way. So it’s quite a technical it’s quite a technical answer but it’s quite a technical question and I think if you understand the question you’ll understand the answer if if you don’t then don’t worry too much about it. >> Yeah. No perfect. Absolutely. Thank you for uh for doing that. Okay. Well as um we just talked about predictability and there is another thing that’s very predictable and that is uh when we do review papers uh which we do very often on the podcast it’s very predictable to say that it’s most likely uh from either man or AQR. And yet again, here we are. Now, in the interest of time, I don’t know if we will have time for both. Um, because I think the first one we’re going to be doing is the man paper. It’s a super good paper. Um, I’m going to try and remember to uh put a link to it. Uh, but this is a paper about not really about better models or faster signals. It’s really about what markets managers to, you know, kind of choose to trade and therefore what kind of trend following uh they’re running. But I’m going to let you uh take us into the paper and I’m going to follow along and see if I have any any thoughts along the way, but um I’m going to turn it over to you. >> No, it’s a very good paper and it’s actually almost maybe three papers in one to be honest. So there’s an awful lot of content here. Um, now the it’s been written by three people. And I have to say it’s now been so long since I’ve been away from AHL that I don’t know who know any of these people are. Um, I’ve never met any of them. But so that that also means I shouldn’t be biased in loving this paper because it’s not like it’s been written by an old friend of mine who’s going to buy me a beer in exchange for mentioning it. So be reassured. Um, so the I guess the the main thing that they sort of do in this paper is say well actually there are there are kind of different kinds of markets, right? And we’ve already discussed, you know, the fact that different markets have different levels of liquidity, for example. Um, and they they what they say is, well, we’re going to divide um our market universe into three categories. Traditional markets, alternative markets, and alternative esoteric markets. Um, and I I guess although a lot of that is liquidity, um, so you know, then they’ve got this really nice graph. It’s figure five if if you’re following along at home. Um, which shows liquidity and and um on one axis and complexity on the other the other axis. So esoteric markets maybe less liquid but not necessarily. So one of their esoteric markets they’ve labeled as China. Mhm. >> Um I think they might mean futures markets in in China rather than the whole country. Uh another one is physical cryptocurrencies, many of which are relatively liquid of course. Um but those are quite high on the complexity axis. Um whereas on traditional markets they put cotton futures um which are they put low complexity because I that you know here I guess complexity means more like a future um but that they have actually on their graph those are less liquid than China and physical cryptocurrencies. So it’s quite it’s a bit richer than the the normal categorization um around liquidity or around you know are these futures not futures. They look at both. Um but then what they they do is say well the interesting thing about um these these different markets is kind of where the money comes from. Um now finance people love doing something called a factor decomposition. Basically what a factor decomposition does is say well given um you know um that I’m making some money from this portfolio can I identify um sort of where the key sources of those returns are from um and in trend following um one thing you can do is is to say well it looks like you know um if you do something like a PC principal analysis it looks like a lot of the return in my trend falling portfolio is actually coming from a kind of risk on riskoff factor which I’m trend following. So um you know if you look at 2008 for example um CTA’s made a lot of money bonds went up equities went down that was a perfect example of that of that factor in action. Um and then you basically then what you can do is say well what’s left over what I get left over that isn’t explained by that factor return and that’s they call that the idio syncratic return. Um so you could argue that that you know the returns we saw in January where as we’ve said bonds have gone nowhere equity slightly up you know finan February’s looking a bit different maybe but financial markets generally didn’t you know that kind of first principal component didn’t contribute much well so maybe it was more something idiosyncratic around gold and silver you know or or something else or natural gas um so what they they they do is say well if we look at this this idea of decomposing into you The main things explaining a portfolio return and the idiosyncratic return. The key thing that’s interesting about these alternative and esoteric markets is that a much bigger proportion of bare returns are idiosyncratic. They’re not coming from these these these big factors. Um and in hard numbers um you know so roughly speaking in traditional CTAs about half the returns are from factors and about half of idiosyncratic actually it’s probably more like 45 55 45% idiosyncratic 55 or so factors. Um but in these unusual markets those these alternative and esoteric markets it’s more like 1/3 2/3. So only about one/ird is coming from the the main factors and 2/3 is idiosyncratic. So the main thing about alternative markets is they give you an exposure to weird stuff to weird sources of return. Now if you’re doing any kind of portfolio construction, um you like weird stuff, okay? You like diversifications, we’ve discussed, you like idiosyncratic returns. If the only returns in your portfolio were coming from trend following a kind of equity risk on risk off return um you you know that that’s going to be not very helpful right to you you want to be able to be trend following other things as well getting itic returns from lots of different places. So what that means is is in a completely unconstrained portfolio if you do a standard portfolio optimization you’re going to want to have quite a lot of these alternative and esoteric markets and of course this is uh one of the common themes of I think ever since I’ve been talking to you Neil’s alternative markets which obviously is a you know has been a big thing for AHL um but also for for people like Floren Court for example was a rest and settle CTA that focus just on alternative markets and most big CTAs have have gone into alternative markets to a greater or lesser degree. Um so this is kind of something that that that’s not a surprise um that that we already know about. Um and if they do this this kind of um sort of standard portfolio optimization, they find that um only about 30% of their portfolio needs to should be going into these traditional markets. Um which isn’t a lot, right? And just to emphasize again, this is unconstrained. So this this assumes you’ve got no issues with liquidity and you can put as much into the weird stuff as you as you possibly want, which a big CTF of course can’t do, right? Um because the they’re they’re just too big. And then they have um the rest of that portfolio, the 70% is in is in a mixture of alternative and you know alternative esoteric and and there’s a bit of a breakdown and I can see that they put 5% into crypto for example. So the the crypto balls would would love that I’m sure. Now one question that again we we keep returning to is why should we invest in CTOs? Why should we invest in trend and following? And it it and it depend I think I’ve mentioned this before. It depends on whether you are looking at it as a standalone product or as something that goes alongside an existing 6040 or some other traditional kind of assets. All right. Now, if you’re doing as a standalone product, you want, you know, to the first order approximation, you want a maximum sharp ratio. You’ll do this kind of standard portfolio optimization. And so, as a standalone product, as a CTA without constraints around liquidity, what you would do is offer something that was 30% traditional, 70% alternatives, and that would be the best product for the investor to buy. But most people, of course, don’t aren’t doing that. Most people uh are putting a slice of trend following into their 60/40 portfolio. We’d like it to be a bigger slice of course, but you know that’s life. Um and that means what they’re looking for is an element of tail protection. Um and it’s a pity we don’t have Katie with us because of course she she wrote the book. Um and but um they’re looking for for some kind of you know crisis alpha tower protection whatever you want to call it. So what um the these guys did was say, well, what if we um instead of looking at uh a portfolio optimization that basically just treats all states of the world the same, let’s focus in on periods when equity markets fell because what we want to do is find the best portfolio for that scenario because that’s when people really want to benefit from from what CTA performance is like. So they constructed their their their correlation matrix um differently um to to account for that and what they found um was that the traditional portfolio the traditional trend for things you trend for like you know >> so the liquid markets let’s call >> the liquid well remembered Neil it’s not just about liquidity it’s about it’s about so basically it’s it’s kind of it’s futures traditional futures markets that a CTA would have had in it 30 years ago before people started doing all this weird stuff like trading German power and CDS and all this kind of stuff. Right. Exactly. So, it’s things that are >> relatively liquid but also basically futures and therefore for a CT relatively simple. But more importantly, it’s things that have a that whose returns are mostly being driven by this factor risk rather than this idiosyncratic risk. That’s the key point about this article. That’s the key innovation in how they categorize markets, I think. Um now it turns out that that actually what you want to do in the crisis situation is not have 30% traditional markets. You want to have 50% traditional markets and then obviously the the nontraditional stuff gets squeezed down to a smaller fraction. And the intuition behind that and which they explain is because it’s that that total facto return that thing that’s that you know that that thing that explains most of the risk of traditional markets that makes traditional markets look bad from a kind of generic optimization perspective because they haven’t got much idiosyncratic risk. It turns out in a crisis that’s what you want. Okay, that’s what you want. And this kind of makes intuitive sense because in a crisis um you basically want to just make fairly big bets on going 2008 going short equities long bonds. You’re not really going to need your your fancy um you know other weird markets there to to sort of help you. Um and of course there is a risk that many of those markets um might have issues around liquidity which is another thing that they they talk about next or around for example whether you can go short um because a lot of these things in a crisis you’d want to go short because a lot of them trade light risk on assets um because because um you know that things like well we talked about cryptocurrency you know spot cryptocurrency for example does that um so that that’s kind of the the interesting thing now. Um they then take this a step further and say well all this time um you know um we’ve been kind of assuming that we’re completely unconstrained. Um but actually another fantastic thing about about CTAs and or about anything that trades futures um is the fact that they’re very cash efficient. So if I look at my own futures account um which has a a kind of a relatively high risk target for by institutional standards by you know not all some people are a bit crazy of course as we discussed but you know my my I’m probably running at about one and a half times the volume of say AHL is on most of their funds. Um I’m only using 30% of my cash’s margin. So you know a typical CTA that number is 20%. And that’s super cash efficient. Um and that that makes them very attractive from a structuring perspective. Um so the next thing they they did was say well let’s say we want to um go a bit further and say well actually we want to kind of maintain this cash efficiency. Now your the non-futures markets obviously aren’t as cash efficient. Um most of them have margin requirements that are higher than f well all of them have margin requirements that are higher than futures. Some of them even have 100% margin in the sense that you just you can’t margin them. You have to just put put up cash essentially. Um and if they do that again it’s not a surprise but but then what happens is is we we get even more into traditional markets. So we end up with 70% in traditional markets um and uh just just 30% um in the the alternative markets. Um and one final point to make is that when is cash efficiency most important is when we need cash. >> Yeah. >> When do we need cash? When the world’s ending. So you know in 2008 um the fact that CTAs had plenty of cash, daily liquidity, no gating meant that many people use them as cash machines just you know. So we had this was a weird situation where although although you know CDS industry made a lot of money at the same time people were withdrawing it because it was a source of of ready cash that wasn’t available elsewhere. Um, so that that that’s yeah, so that’s the that’s the article. I mean, so there there’s a lot of really interesting things there and like many like you know my many AHL articles, it’s very well written, not technical, lots of nice graphs, very well presented and yeah, for me at least some really interesting innovations around a few different topics. >> Yeah. No, I couldn’t agree more. People should definitely go and download it and and um and read it and as I said, I’ll try to remember put in the link in the in the show notes. But I just want to kind of summarize uh all of this just to make sure people really get the the importance of this. Um and that is if you were just kind of trying to maximize and looking at your trend portfolio uh in isolation and you say oh what could be what you know what kind of market portfolio should I go for when I’m looking to maximize my my long-term sharp of of that um in all periods? Well, you would go for a portfolio that probably trades more markets. That’s kind of what they they uh um conclude. However, as Rob rightly say, a lot of investors and certainly I would say most investors that I come across, they include trend following and CTAs specifically because they want to have something that really does well for them when equity markets are not doing well or when bond markets are not doing well. And in their work they find that then you need to find managers who are more focused on the traditional markets the more liquid markets the the classical futures markets we’ve been trading for the last 30 40 years um and go with one manager that that does that and then on top of that and I think I completely agree this is the interesting point they make um and that is if you then also are uh an investor where you might need to get some cash out in in terms of a crisis If your private equity fund is not giving you any money or drawing down or whatever comes during a crisis, then you need to be even more focused on managers that trades the the classical liquid futures markets. Um because the ca the the uh cash efficiency is important. Um and um and so I I thought it was really well done as well and um and to make that point um the way they did so that everybody kind of understand the difference between the choices we all have to make as managers. So it’s not really all about kind of returns. It’s also about you know um what’s the best manager fit for me uh in terms of what my objective is with investing with the CTA. uh that should lead you down the path of identifying a smaller number of managers that might be relevant for for for for you. So really good uh paper kudos to the team uh for for writing that the next paper which we won’t have time to do justice. So we’ll we’ll wait with that. Um but it’s also a a super interesting uh paper. Um we’ll see if we wait until Rob comes back or maybe we’ll do it beforehand. But um it’s something that is also super relevant uh in the current environment and what with what’s going on in some of the um in some of the markets. I don’t know if you want to spend 5 minutes, Rob, it’s your uh it’s your call >> uh on the Financial Times article you sent me uh this morning. I have not read it myself, so I don’t know um what’s in it, but but please do if you want to spend five, seven minutes on that. >> Yeah. So the the the article’s on the FT alpha valal alphavville part the FT which is important because that’s actually be in front of the pay wall so anyone can read it. Um and it’s called the quant shop AI lab convergence. Um, and uh, it’s it’s kind of interesting because basically what they do in the article is they draw parallels between kind of finance quant and AI quant for one of a better word. Um, and their sort of thesis is that that basically these people are becoming more and more like each other. Now obviously there’s always been a um a crossover between um the the sort of worlds of finance quant and you know software engineering more more generally and kind of um you know so and and and obviously a lot of places are using well let’s let’s be careful. So in finance, in systematic finance, we’ve always used something that I suppose you could wave your hands and call machine learning. Now machine learning to some people has to be very complicated, but um for example, if you’re running something like a simple regression, which is a very simple a relatively simple way of of working out, for example, as we’ve just done, you know, how how much money you should give to a particular market. And you could use a regression to do that or you could use an optimization. Those are forms of machine learning. Um they’re forms of what you might call supervised machine learning because the we’re sort of telling the computer what to do and then it’s giving us the numbers that come out. Um so that that’s you know all the systematic finance is machine learning although some some you know some people say oh no that can’t be machine learning because it’s it’s too simple but but you know then they can never tell me where the boundary is. So I say well no it must been machine learning. Um now then then you have something which you might call unsupervised machine learning and that kind of then blends into our AI and LLMs and neural networks and all this kind of stuff. Um and um the the sort of I think there’s um certainly a lot of people trying to use AI uh and that goes for every industry of course not ours. Um I think pretty much every every fund um of a decent size will have some kind of AI thing going on. Um and uh how much of that there is is an open question. How much of it is just a marketing thing is just is an open question. How much of it kind of blue sky research like a you know let’s buy a call option on this technology and you never know we might find something that no one else can do um is an an open question. I think the people who are doing it best are ones who are using it in very tightly defined areas. Um so things like for example execution research I think that’s where it’s potentially more interesting because that’s where something like um well first of all you got a lot of data. Um so you you know we’re building our kind of normal models with 50 odd years of daily data. Um and you know in execution research you’ve got tick data which is you know obviously much much richer much faster there’s much more of it so it’s much more suited to something like building any kind of nonlinear analysis which would include something like training an LLM on that data. Um, all that aside though, um, the article is quite interesting because rather than just making the obvious point that, you know, well, everything’s AI now, you know, which is a slightly lazy argument. And I and I I do think they they do, and this is probably because they’re talking their own book, they do slightly overstate, I think, the amount of of AI that that that sort of is going on. Um but they do kind of go further and say well if you actually look at the kind of workflow uh in quant finance and the workflow in our that’s similar um you know if you look at the the sorts of people that are being hired um if you look at the technology stack um if you and even they even say well if you look at the the the way that kind of people are employed so you know we’re used in we’re used in finance to sort of non-competes and gardening leave and and things like that and and signing on bonuses. Well, they they’ve got that ini in AI now. And you know, you hear stories of people being offered kind of nine figure sums to move from from meta to from move to move from open AI to meta. So, so actually, you know, it many of the top AI researchers are making far more money than than any p quant finances, sadly, I have to say. Um, so so yeah, it’s it’s quite quite an interesting quite an interesting article. I am a skeptic of this stuff. I’ve said it before, I’ve said it again, but I still found it an interesting article. So, it must have been good. [laughter] >> Fair enough. Fair enough. Anyways, um we have come up to uh a little over the hour. So, we’re going to wrap up uh our conversation today, Rob. This was uh fantastic. Thanks so much for spending all the time uh looking into this and and for answering the questions for Pedro. Uh I hope everybody found it useful. Um because I think actually our conversation today touches on on so many uh important points when it comes to CTAs and trend following and investing in general and all of that stuff. So if you want to show your appreciation for Rob and and all the other co-host uh please go to your podcast platform of choice um and leave a rating and review. Uh it really does help and uh we really appreciate uh the support we uh can get. Um if you have a question for next week where I will have two guests uh Andrew Beer will come back and he will be joined this time by Tom Roble from Sockgen. Um so you can send uh your questions uh as usual info@ toptraders onblog.com. I’ll do my best to to uh get them in front of Andrew and Tom u when we speak. Um but for now for today uh from Rob and me, thanks ever so much for listening. We look forward to being back with you next week. And in the meantime, as usual, take care of yourself uh and take care of each other. [music] >> Thanks for listening to Top Traders Unplugged. If you feel you learned something of value from today’s episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you’ll be sure to get all the new episodes as they’re released. We have some amazing guests lined up for you. [music] And to ensure our show continues to grow, please leave us an honest rating and review in iTunes. It only takes a minute and it’s the best way to show us you love the podcast. [music] We’ll see you next time on Top Traders Unplugged.

Description:
A familiar portfolio map is being redrawn. Ian Harnett traces the regime shift from disinflation and reliable bond hedges to a world …

Transcript:
that four-way coalition that they outlined [music] starts to fracture very dramatically. And at that point, I really would be selling the dollar. [music] That’s going to be the point at which you’ll say, “Well, hang on a minute. This is just there’s there’s a lot of rogue rogue [music] elements here.” And so unless there was something that materialized to stabilize the ship very dramatically. So that to me seems to be the one of the biggest [music] gray swans out there. [music] Imagine spending an hour with the world’s greatest traders. Imagine learning from their experiences, [music] their successes, and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the [music] world, so you can take your manager due diligence or investment career to the next level. [music] Before we begin today’s conversation, remember to keep two things in mind. All the discussion we will have about investment [music] performance is about the past and past performance does not guarantee or even infer anything about future performance. Also understand that there’s a significant risk of financial loss with [music] all investment strategies and you need to request and understand the specific risks from the investment manager about [music] their product before you make investment decisions. Here’s your host, veteran hedge fund manager Neils Krup Len. [music] Welcome or welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. This is a series that I not only find incredibly interesting as [music] well as intellectually challenging, but also very important given where we are in [music] the global economy and the geopolitical cycle. We want to dig [music] deep into the minds of some of the most prominent experts to help us better understand [music] what this new global macrodriven world may look like. We want to explore their perspectives [music] on a host of game-changing issues and hopefully dig out nuances in their work through meaningful [music] conversations. Please enjoy today’s episode hosted by Alan Dunn. Thanks for that introduction, Neils. Today I’m delighted to be joined by Ian Harnet. Ian is co-founder and chief investment strategist at Absolute Strategy Research. Uh the firm has been in existence uh just coming up to 20 years now. So celebrating their 20 year anniversary this year. Ian’s a veteran of the markets. He’s been around uh for about four decades in markets now. Started off as an economist at the Bank of England and then worked with sock gen west and UBS uh where at UBS he was chief investment uh chief European investment strategist. So Ian, great to have you on. Um how are you? >> Thanks very much for the invitation Alan. >> Not at all. No, I’ve I’ve followed your work um through your career at at various times. So great to have the chance to to chat and u as uh we always do to start off we like to get a sense on how you got interested uh in markets and I suppose before that even economics what was that >> well you know I I have to say I’m afraid it goes back a long way that I think I wrote my first economics article on on the the shape of inflation when I was probably at primary school. >> Okay. Uh and but that was of course back in the 197 in 1970s and um you know that uh that was when inflation was quite rampant. that my father was a an accountant um and was we obviously talked about finance but it was also very much at school um you know where first of all I found out that I actually quite enjoyed economics when I did at a level but also in history um learning about the impact of of great economists like um canes um you know in the pre-war post-war period so you know it’s and thinking well actually maybe this is something that can make a difference to the world rather than just you know, being an interesting academic study. >> Very good. Well, these days you’re trying to make a difference to people’s portfolios, I guess, and it’s we’re at an interesting juncture. I know you’ve written a lot lately about the I suppose you might call it the regime shift in the world and you know, we had Davos recently and uh uh Carney speaking about a rupture and and I know that’s a theme you’ve picked up on. Um, I mean to put that all in context, I mean, how would you kind of characterize that regime change, the most salient features of the new regime? >> I think the the the key thing that um we’re talking about at Absolute Strategy is the is the way that um the relationship between stocks and bonds that all of us have known for that 40-year period, it’s really changing. um that after four years where central banks have consistently missed their inflation targets, we’re starting to see people saying, “Hang on a minute, maybe the way out of this debt problem is a little bit more inflation um and you know um less reliance on um you know, keeping the the the nominal side of the economy under control.” and that that encourages a shift away from having bonds as the safe asset or the natural hedge in your portfolio if you’re if like you know most funds are going to be probably more than 50% invested in equities. >> Yeah. And I mean obviously we had the experience in 2021. Inflation spiked. You know as you say it was the first it was for most of us it was the first real experience of inflation. You know obviously you would have had it back in the 70s and maybe we you know some of us might remember that some. Yeah. Yeah. But but it was really you know prior to that people talked about the possibility of a resurgence of inflation but it people didn’t really believe it but to see it inflation rates get back up to whatever it was 7 8% maybe even a little bit higher >> was was something and and obviously then in 2022 we saw equities and bonds >> sell off together proving the points that the spawn equity correlation is is not um always going to be negative >> since then obviously inflation’s come down and and there’s mixed views obviously it’s still running well above target in the uh so you know close to 3% but there are still those who believe well take out the impact of tariffs that it would probably be closer to 2%. So yes there are plenty of people that that kind of would agree with your I suppose synopsis of maybe inflation being more of a challenge but then it’s not it’s not a universally held view. I mean what do you think is the going to be are the key factors that will keep inflation more elevated here? Well, I think I think you know when you think about some of the um changes that we’re seeing in society and you know the investment that will need to be made that shift in the economic structure tends to create um increased costs. The second thing I think is to to recognize you know that a world that becomes more fractured um you know where we get this weaponization of trade, economic growth, you know potentially um less uh globalized that those long thin supply chains that allowed companies to access the lowest cost possible price of labor, lowest possible price of goods um and the lowest price of capital, you those those are changing and and that is likely to push inflation pressures uh up um as well. So you know those are the kind of things I think Alan that make us feel that structurally inflation is going to come down. Tactically the thing we’ve been talking to clients about is that every central banker in the world should be entirely grateful to the Communist Party of China. >> Okay. um because actually the the exported deflation in goods prices is actually doing a lot of the work um of holding inflation down. >> If you look at service sector inflation in the US, even in the Euro zone, it’s 3 4% still. Um so, you know, I think that that central bankers need to be a bit careful about patting themselves on the backs. >> Yes, for for sure. And I mean, we’ll probably get into China in a bit more detail later, but just on that point, is that something you see, I mean, hitting a limit? Obviously, there’s a lot of people saying that this the rest of the world isn’t going to absorb China surplus on an ongoing basis. How do you see that playing out? >> Well, I think that, you know, that’s one of the big problems for China, which is that they do have to generate more of a domestic um growth narrative. and our China economist Adam Wolf who’s excellent you know is um is still very concerned that with the housing market and uh which is a key source of wealth and confidence for for Chinese consumers still under pressure that that’s very difficult to achieve unless you have a a big fiscal expansion and that’s what the you know Chinese authorities don’t really want to do and yes but clearly in a world a more fractured this more fractured world America’s not going to want Chinese dumped goods. Europe is not going to want those dumped goods either. Um and so that’s going to make it a much more complex trading environment for everybody. >> Yeah. Um I mean you’ve touched on you know the weaponization of of credits of capital. Um obviously it was very much to the four at at Davos when you know when when Trump floated the idea of more tariffs in Europe and then the debate was around well what can Europe do? Could Europe, you know, try and impose some measures uh to to dissuade investors in investing in treasury? So, I mean, how we’ve already had the weaponization or conflict in trade, so obviously capital could be the next frontier. How do you see that evolving? >> I think we’re seeing it I think we’re seeing it occur relatively softly at the current time. um you know but it could shift to being a much more aggressive method you know which is that if President Trump takes against Canada uh for example then you know if why you know if we’ve got tariffs on goods why shouldn’t American fund managers that are overinvested in Canada for example um you know have to pay a sir charge on that you know eventually you do get to the case where you could potentially get capital controls um reemerging and you clearly something back to the 1970s, but let’s hope that we don’t get to that stage. But I think what we’re seeing is that particularly say for somewhere like Europe, Europe has a problem because you know if you um if you we still have a number of you know separate economies rather than you know capital markets union in a world where you’re relying on your domestic capital much more because you know you you know you see investors saying right I’m going to stay at home or or governments even directing you to stay at home. Um, you know, a bit like Rachel Reeves in the UK trying to encourage the, you know, the the retail investors here to invest in the UK, >> then Europe actually just doesn’t really have very effective capital markets. And so, you know, even Germany, you know, where with the type of fiscal expansion they’re talking about for both infrastructure and for defense, well, there’s a lot of debt issuance coming through >> and if it has to all be absorbed by Germans. >> Yeah. >> You know, then that’s German institutions and that that’s problematic and again could push by some of these bond attire. >> Okay. And I mean obviously there’s been a lot of talking suggestions in Europe. we had draggies report out and um you know there’s been a a recognition of of the need to to do something in productivity and and equally the likes of Mcron has talked about this the you know the potential >> European surplus of capital and trying to redirect that back. Um sounds like you’re not very optimistic on anything dramatic changing in Europe in terms of kind of mutualized debt issuance or anything like that. No, you know, I I think the um you know, one of the things again we’ve said to our clients is that actually the best thing that could happen to the Euro zone is a French finan uh debt crisis. Um because to get a capital markets union emerging in anything less than 5 years and the the fi it’ll be here in five years is something that we’ve heard for at least the last five years. Um and you know I suspect we’ll hear it for the next five years if we don’t. Europe has lacked that Munich moment for capital that it had for defense and it really took a very unsuttle comment by JD or set of comments by JD Vance 15 minutes turned on it on its you know of European policy on its head. Um we need something like that to galvanize European um politicians. Um, and you know, uh, the Draghi report, Draghi’s comments recently, they’re not enough. You’re going to have to have something that’s large enough that it doesn’t completely destroy the European Union. Um, but important enough that, you know, the rest of the Europe has to say, right, we’re going to stand with this and create, you know, um, bonds. And actually, that would be the strongest way to challenge America. But if Europe created a large safe asset, yeah, you know, to offset as an alternative to treasuries, there’s $9.6 trillion of EU money currently invested across US treasuries, US equities, and US credit. Um, you know, that might well not be um retaliatory repatriation. Yeah. uh which obviously would be very much the weaponization but but more economically driven repatriation >> and I mean from the US side obviously we’ve had um you know a number of conflicting uh crosscurrens in terms of the weaponization of capital on one hand you know you’ve had um I suppose a tacid approval of a weaker dollar is one thing but at the same time a desire for the dollar to be be the reserve currency you’ve got um you know this these deals that they’ve cut to attract capital in as well. Uh but at the same time concerns about funding the deficits and and obviously going back to Moran’s paper some kind of extreme kind of policy proposals around trying to maintain um capital inflow. So I mean in this world of more fragmentation potential capital wars do you see the US been more of a winner or a loser or or at more or less at risk? Well, at the moment I think they’ve been a very strong winner. Um, if you look at the White House uh website, you know, President Trump is talking about having secured um a 9.6 trillion. So quite interestingly, that’s the same amount as the as Europe could shift offshore that bringing capital into the into the US and as you say quite often um in exchange for a reduction in tariffs. Um so you know looking in more detail at that that national um allocation there’s a commitment of about $6.7 trillion dollar you know that’s a big amount of money from national governments and the net effect is that that’s actually um seen tariff levels come down the median tariff levels come down for those countries that are playing that game with America um from 25% to 15%. Um so you know the point we’ve been making is that this is um it’s almost like paying tributes to the monarch um you know and there’s some academic um work around neo royalism for those people that want to have a look um that that you know the the the policy wonks are going down this route you know that that actually getting access to the monarch you have to pay upfront for it. This is very so America I think is is doing a very good job from their perspective at trying to offset the risks of that capital flight. Um and you know with Europe saying that they you know they would do a $600 billion deal. Um Europe’s actually at the moment saying we’ll play by your rules. So that sounds to me like America winning. >> Yes. Now I mean there is a bit of skepticism around some of these numbers. I mean, every time >> Trump loves to to to quote a 500 billion, it seems like for every a baseline for every deal and then there’s always a question, is this stuff that was going to happen anyway or not? But it sounds like you think there will be genuine flows. >> I think the point that we’ve made to people is let’s imagine that this was all funneled and this is, you know, this is not the case at the moment. Yes, it’s being funneled at the discretion of uh President Trump or um being funneled through individual areas. But let’s say this was funneled through a new um sovereign wealth fund and there was that discussion about a US sovereign fund being created and only a third of that number materialized. you would still be talking about a fund that is as large as the noes bank and the noes bank you know is one of the nine is one of the 10 largest holders of nine of the 10 largest US companies just think what that you know that impact um you would have in terms of capital market allocation and we’re actually already seeing seeing it with some of these direct investment deals that America the American government’s doing in terms of of aiming to secure mineral rights and and resources generally around the world. >> Yeah. Um I mean taking a step back and looking at at what what’s been achieved to date. Obviously we’re we’re probably over just over a year into Trump uh 2.0 and I mean for a lot of the first year there was kind of discussion like what what’s the what’s the ultimate objective here? Is it, you know, re-industrialization of the US or is it just uh to fund the deficit with the tariffs? I mean, you mentioned this kind of neo- royalist era, which does sum it up very well. Um, I mean, what’s your take? What’s the uh economic ideology if if there is one driving this? I think we believe that we that that the Trump administration and remember this is a broad alliance of three or four different groupings. The Republican right um you know the tech bros, the unilateralists and then the multilateralists. But what they’re coming together to do is to roll back the economic and social structures to back towards the Reaganite era. They’re trying to create a new Republican era that will survive for 20 years in much the same way that you know that that Reagan Thatcher axis um did in the in the 1980s. And you know I think that is where they are trying to get to. Um and I think both of the things that you mentioned Alan are on the agenda in terms of the re-industrialization of the United States. But but I also think that let’s go back to Scott Bessant’s three arrows. Um and you know he loves uh Shinsza arm but but it he came up with the 3% GDP growth 3% deficit and 3 million barrels per day more energy. And you know, I think what lies at the heart there of this is the Republicans aiming to get the deficits under control through higher nominal growth. So this is another reason why we’re much more comfortable with the idea that the economy will be run hot to get those debt ratios under control. Um but to offset the inflation risk to some extent, you need that energy. You need cheap energy. Um, and that’s I so I think this is at the heart of of of what we’ve also some of the other policy measures. But here’s a it seems to me to be a very broad brush and a very ambitious project that the Republicans are working towards and the midterms are going to be a big test of that. >> Yeah. Before we get on to midterms, I mean, do you think that’s realistic? I mean, it it had a great ring to it 33. Uh but you know obviously we’ve had the the big beautiful bill which made zero progress in towards heading towards a 3% deficit. Um now obviously the great hope is as you say that economic growth is strong. Um and there was talk about deregulation. Obviously we’ve seen that with respect to maybe uh AI and crypto stuff like that. Um and obviously productivity has picked up although it’s debatable what’s driving that. Yes. Um so I mean do you do you buy into that narrative of a >> supply that we can I think we can still see that the momentum behind those ideas. So the deregulation of finance will be a you know and banks we’ve clearly seen the deregulation around the crypto areas. Um I think what um Scott Besson understands probably better than most and I think I think he’s a very accomplished economist and and investor is that the counterpart to the public sector deficit is the private sector surplus. So the only way to get that 3% debt ratio that that they want need effectively to keep the the rate, you know, the interest payments under control is that they have to get investment coming through. They have to get consumer spending. And historically, the only way that really you’ve got the deficits down for governments in terms of debt to GDP >> is you’ve always had to get the rest of the economy to take on debt. >> Okay. Yeah, >> debt to GDP ratios actually have never come down apart from 19 since the 1950s since 1952 briefly and then in the post pandemic period, but they stabilized where they started pre- pandemic. You look at total debt ratios. So, you know, I I think, you know, I think that’s at the heart of this. They’re going to run try and relever the housing market, relever consumers, you know, let them borrow against their crypto assets. >> What could possibly go wrong? >> Exactly. Well, you mentioned running the economy hot and obviously we’ve had the announcement now of War as the uh nominee to be Fed chair. And again, lots of uh different views on War and he has at times sounded hawkish and at times sounded doubbish. um how do you think he’ll play it in the in in the early days? >> I I I think you know the the thing that strikes me about um chair elect uh Walsh and I had the pleasure of listening to him at the Atlanta Fed conference a couple of years ago where you know he was actually he you know in front of a number of Fed presidents regional presidents it did seem as though he was chairing waiting even at that stage. So he is taken very seriously. Um his ideas I think are taken very seriously within the Federal Reserve system. Uh would be my perception. And so I think that he is likely to want to deliver those lower interest rates that President Trump will suggest. But you know what I would like to point to is that the the speech that he gave that day, you know, um in 2024, and I think a couple of other people have picked up on it, was actually about bringing the level of the central bank balance sheet down. >> And and it also fits with an an article that Scott Besson wrote about the scope, you know, curtailing the scope um of the the Federal Reserve and the the range of activities of the Federal Reserve. So, you know, the way that I could see this playing out is that actually the the negative surprise for markets could be that that chair Walsh says, okay, no more bond purchases, no more MBS purchases. We are going to reduce the size of the of the balance sheet, but you know what that reduces global liquidity. Um and so you could get those bond yields coming down or or you know interest rates coming down because you know we actually start to see you know some of those some of the froth coming out of markets and in the past rates have responded when the froth has come out of market. So it it may not be quite as um market friendly as I think a lot of people would like. Um but I can see how he could reconcile getting um you know rates down but you know it’s it’s probably around that um you know QT accelerating QT. >> Yeah. I mean is that I mean obviously the the Fed has totally shifted how it conducts monetary policy into this excess reserve system. So >> there is some debate as to what he says is is really plausible because obviously when they tried to before it’s led to problems in the repo market etc. And I and I think you know one of the things that’s been a feature of the discussions I’ve listened to over the last couple of years is the discussion about the ample reserve system. And so I think there could be some quite interesting technical changes and it wouldn’t surprise me that you know we see some of at the same time that there’s there’s deregulation for banks that there might be some you know changed views around how the reserve um programs work and you know maybe the US moving something closer towards you know what we see in Europe and the UK. >> Okay. So taking all of that together, it sounds like you’re quite upbeat or modestly so on on the US economic outlook. Is that fair to say? >> Yeah, for the moment, Alan. Um, you know, it it seems uh you know, maybe it’s the uh I don’t know whether it’s contraonential or not, but but actually we’re sticking with that overweight US view. Um, you know, it is a very unusual environment to have doubledigit earnings expectations >> and expectations of rate cuts. >> The closest that we came to it were 1996 and 1998. On both occasions, equities gained 20 to 30%. >> And the point we’ve made to clients is that it’s so unusual that it’s unlikely that it’ll persist to the end of the year. you know, uh it may do and you know, this is the game that that you know, the administration are trying to play. Strong growth, lower rates. Um but if it doesn’t, well, which way would you like it to converge? >> Historically, if you get lower rates because earnings growth is tanking, then that’s never been good for equities. Normally, you know, the over the last 12 interest rate cycles when you’ve had a pivot, you know, I think um you know, 10 out of the 12 were negative and the median decline was about 20% or 24% I think was the figure that we that we calculated. Yeah. >> So, you know, the markets will actually be much healthier, ironically, if we manage to keep nominal growth healthy and rate expectations start to get revised out. >> Yeah. Um so I think that that’s a more stable environment for markets. >> And what I mean I think the general sense my understanding is uh of investors is of fairly bullish sentiment at the moment kind of reflecting what you’re saying growth out looks looks good but then the Fed’s still expected maybe to ease at some point if not sooner rather than later. I mean I know you do your own asset allocation survey in absent strategy research. >> What are you seeing in that survey? So, so you know the the asset allocation survey is still you know giving us that same kind of outcome around um both the global economy uh and also the um the outlook for equities versus bonds. I think the the the interesting thing is that people have become more ambivalent about the direction of bonds. >> They’ve also become a bit more ambivalent about the the direction of inflation as well. So you know it’s there’s there’s question marks that are opening up here. Um but what we’re we are seeing is that that a bit of a move towards what one might class value trades things like commodities um emerging markets. So there’s a recognition that the core investments that you’ve perhaps had over the last um you know 10 years uh you know are starting to to lose some of their shine. >> Okay. I mean obviously you not only are you doing the survey you’re speaking to a lot of investors. I mean when you talk to them about this regime change in in the global economy and also as you mentioned at the outset that change potentially in the bond equity correlation. Are you seeing many tangible changes in portfolios on the back of that? So, so not really. And one of the points that we make is that that historically when you get to get the rotation out of the US, you need three things. >> Okay? >> First of all, the dollar needs to come down. Well, we’ve seen a bit of that, but it’s stabilized. Um, secondly, you need the global economy to grow rapidly and you know, can can that happen without China being a bit more dynamic? The but the third and most challenging element is that the US roe have to disappoint relative to the rest of the world you know and and you know at the moment given how how much that those margins those roses are being driven by the US tech companies effectively you’re saying you’ve got to have a tech blow up. >> Yeah. Um and if that happens, the risk is that you would then move to what we call a correlation one event. >> Yes, >> the markets come off, everything, you know, loses and then you want to be in low beta. >> The trouble is that some of the things you might want to rotate into emerging markets, commodities, historically, you know, they can be quite quite high beta. So, so you know what we’re seeing from clients is that one or two people are making that rotation a bit more towards commodities, a bit more towards um the emerging markets, but they tend to be larger funds who say, “Look, you know, I’m I’m so large, you know, I recognize that Ian um but I’m so large if I don’t start now, I’m never going to get there.” So, you know, it’s >> Well, it is something we’ve seen. We’re recording on the the 5th of February, but in the last week or so, maybe a couple of weeks, this, you know, outperformance of value versus growth, you know, we’ve had days where the the the uh the NASDAQ is down, but the Dow is holding up or even up, you know, and and if you look at the sectors, industrials and materials doing well >> and we’ve had this uh >> yeah, I’ve just heard this expression, this SAS coalyp, I only heard of heard of that one today, but obviously the software the SAS sector is getting hit badly. I mean, as you say, normally if you get a big sell-off, everything gets dragged down. Is this I mean, if you were sort of advising on strategy, sectoral allocations, are you >> at the moment? We would we’re sticking with that um more positive cyclical view. Okay. >> Um you know, because you know, you you’re and and you know, the com the interesting thing about value is that non US value has been outperforming for about 18 months. Okay. >> If you think the banks, you know, European banks have been on a roar, um, you know, global basic resource stocks have been up, you know, since the start of 2025, you know, I think up 50 60% almost relative, you know. So, so we’ve seen we’ve seen non US value outperforming growth already. I think that the challenge for people and I think this is one of the the big you know something that my colleague Will Moss wrote about for our clients um you know very recently ahead of the SAS SAS apocalypse um which which is the irony is that people are using thinking that by rotating into private equity and private credit they’re diversifying away from tech. What the last week has shown them is that actually the largest holdings of private equity and private credit are in tech and actually you know listed um uh high yield has got less tech exposure than private credit. >> Okay. Yeah. Interesting. Yes. >> So you know how you diversify in this environment >> Yeah. >> is is really challenging I think. >> Yeah. That’s interesting. I mean it just shows you what the labels are put on things. Don’t doesn’t matter a whole lot. >> Absolutely. I can’t say anything. Having worked for investment banks for 20 years, I couldn’t possibly comment about that. >> Yeah. Yeah. But it’s true. I mean, high yield would traditionally have higher exposure to things like energy, wouldn’t it? >> Yeah. >> Yeah. >> And, you know, one of the things that we’ve been talking to clients about thinking about where you can get, you know, superior returns and and if you there’s a very high correlation between equities and high and and and credit. >> Yeah. um high yield credit I think is actually a really interesting asset class now because it’s it’s one of the few things that does have what it what it says on the on the tin >> right >> um you know so investment grade >> post GFC we saw a big rise in the lowest grade investment grade tripleB from about 30% pre GFC to over 50% now you know a lot of the um a lot of high yield stuff got revamped into to to investment grade or the if it wasn’t it wasn’t capable of being you know got away in the public markets it’s gone to the private markets yeah >> so actually high yield I think really is you know what you’re dealing with you know the scale of risk so you know I I think that you know this is this is you know if you want that enhanced yield I would actually go into to that space rather than to sorry a bit of a digression No, no, it’s I mean definitely private credit is uh is topical at the moment and what you say is definitely >> I mean >> and as long as and as you know the key point for about about that we say for for for credit and credit really is important because you never have a bare market in equities without having a bare market in credit. >> Exactly. Yeah. >> Um but you you’re not going to get a bare market in credit until you have cash flow crisis. So this is where that nominal growth so so the phrase we’ve used to clients is nominal nominal nominal nominal GDP growth if it’s over 4% then your nominal earnings are going to be fine and that means your nominal cash flow will not be challenged and that’s the mistake we made in 2023. So, you know, put our hands up. We don’t always get it right. You know, we thought the slowdown that was likely to come and did materialize in real terms, but because inflation was still high, the nominal earnings, the nominal cash flows weren’t stressed. And so, we didn’t have a big market, you know, as large a market, you know, sell off as we might have had. So, you know, that for us is really what we’re focusing on with clients. We’re saying watch those nominal numbers, watch those nominal cash flows. Um, and even in the in things like the tech sector as well. [music] We touched a bit on you know the the dollar and um weakened last year somewhat but [music] not you know um not dramatically and you know sentiment certainly got quite negative towards the dollar as last year progressed with at times it was the sell US mentality um and then it’s probably dipped down a little bit at the start of this year but but has recovered and then was it last week or the week before you know there was talk of the Fed were checking rates in dollar yen which is kind of a highly unusual event. um what’s your sense on you know say from a fundamental perspective the fundamental drivers and then what’s the US administration are they changing tac with respect to the dollar with you know that checking on rates um I I think that the the the point we’ve made about the dollar is that our chief economist Dominic White has um done some great work um around you know what kind of dollar um rates you would need to reequilibrate the current account and the trade account and the capital account. Um, and that points to a decline of something like 15%. >> Okay. >> But the question is when >> and against whom? >> Um, and I think that’s one of the and that’s one of the challenges that you have, you know, if you want the dollar come to come down, something has to appreciate. >> Yeah. >> Uh, and clearly, >> you know, it doesn’t seem as though the Chinese authority is going to be very keen on that. Um Europe, you know, is is probably also, you know, wary about seeing the euro go very much higher than this. Again, you know, this is one reason why the euro the European inflation rates have been under control. Um you know, but but you know, it’s going to depress growth to some extent uh at some stage. Um and historically, you know, that might see, you know, the euro rates or people think twice about, you know, whether euro rates would go up and effectively the euro is doing the kind of monetary tightening that rates might have done potentially. Um so you really you’re left against the yen. Um and you know that is the problem there is how much of unwinding that yen carry trade >> will then disrupt um you know other financial flows globally. So you know that’s the the big risk but you know the big decline in real effective exchange rate terms has definitely been the yen. >> Yeah. So you would say that that’s the one that’s the outlier then that that’s the one that should be material. >> Absolutely. We’ve got a lovely chart of BIS real effective exchange rates back to you know 40 odd years. We love our charts. We love our history. Yes. >> Um and you know if you renormalize it around 2012 and you can see that you know Japan’s been allowed to devalue >> against the rest of the world. You know this has been you know they are you know under the Biden administration they were very definitely seen as the floating you know the the unsinkable aircraft carrier. And you know that you know is one reason why we still like Japanese equities. You know we think that you know they’re seeing their roe going up. You know they’re getting big competitiveness gains from this. >> Yes. And obviously they’re running monetary policy with negative real yields. So that’s I guess positive for the equity market. >> Yeah. And and you know our view would be that some normalization of that over the next couple of years seems very likely. the trend towards higher higher interest rates in Japan will probably continue but it’ll be at a at a at a slow pace I suspect. >> I mean there has been this fear that we would get a blow up in the JGB market and higher yields. It could have big second order impacts but we have had a huge run up in yields but no major impact on currencies or elsewhere. I mean has that been a surprise? Yeah, I think the fact that the you know the the currency moves haven’t been that large. >> Okay. >> Personally, I you know looking at the the US dollar yen chart, it seems to me that to really unwind, I know people will say, oh well the technicals suggest that the carry trade is being unwound and you know look at the you know the the um >> the longs versus shorts. But if you look at actually how the currencies behaved, it really needs to get back to about 120 I think to unwind and appreciation from there would really start to cause problems. But the idea that we could see some repatriation to Japan um away from international assets as yields go higher seems to be perfectly sensible. But I was looking at some numbers earlier this week. You know, the Caribbean has higher exposure to US US assets than um than Japan does now, but of course that’s hedge funds. >> Hedge funds. Yeah. >> So, >> yeah. >> Yeah. There’s there’s other sources of risk that could come through and and bumpers on the market. >> Yeah. Well, I mean, the one asset that you could say we’re seeing the fears about the dollar or fiat currencies in general is obviously gold and >> and then obviously silver as a corery. I mean people’s pointed to the the debasement trade but but I mean it is striking the magnitude of the move we’ve seen in gold. I mean you’ve been >> a student of economics and and markets going back to the 70s. I I think like it’s fair to say the moves we’ve seen now have been as great if not greater which seems surprising. I mean how do you why do you think we’re seeing such big moves in in metals markets at the moment? So I think we’re seeing a a a range of factors coming together, Alan. Um first of all, you know, we’ve been talking about of gold and and alternatives to the dollar for a number of years. So David Ba, my co-founder and myself very strongly believe that the bricks plus group, you know, have come together because they want to get away from being beholden to the US authorities and their control of the financial system through the dollar and swift. >> Yeah. Um, and you know, even back in the aftermath of the pandemic, uh, sorry, the the GFC, Bob Zurlic, who was the, uh, the the the head of the World Bank at the time, proposed that there should be a, um, a new global currency built around, you know, effectively a a commoditybacked SDR. >> And I think that that group are taking that to heart. And we’ve seen those bricks pass purchases of gold, central bank purchases of gold, you know, rising almost monotonically for the last two to three years >> in the aftermath of the of the Ukraine invasion and the the sanctions on Russia. So I think that that process is coming into playing into it. But then on top of that, you know, as you know, if you do think that central banks have missed their targets for multiple years, then you might start to to look for other asset classes. um but but also this willingness to to move towards um a range of alternative assets as a as your inflation hedge. Um so I don’t think it’s necessarily just a debasement trade and you know sadly all our models have broken down um in terms of real yields and the dollar and you know so that that to me says that it’s this structural story that is also playing a role here. And do you think it’s it’s literally I mean do you think these central banks are possibly accumulating enough gold to create a new system anchored on gold? >> Well, I I I you know I think it’s it’s going to be more than gold because it’s going to have to but then we you know for those of us that have been around long enough there were lots of stories about China over accumulating copper. >> Okay. Yes. >> And other other type of base metals. So I something bas some some some kind of of shift where you did see something supported and you know a some kind of nominal anchor you know of backing currencies I don’t think is an impossibility to see within the next 10 years but the point we’ve made to clients is that the shift away from the dollar has been taking place for almost 20 years. Yeah, >> it’s lost, you know, it’s its share of of global reserves, currency reserves has come down, you know, 10% over that over that 20 year period. It’s been a trend decline. So, um, but the shift up in the gold side is very definitely, you know, accelerating. But again, the point we make is that all that’s happened in terms of people’s reserves is that they’ve gone back to where they were in 1998 just before just as we were introducing independent central banking. So um you know maybe we’re just people are recognizing that the experiment with independent central banking inflation targeting you know is probably coming to an end. >> Interesting. I mean that that was another feature of the old regime. Obviously we had globalization, falling inflation and um and obviously central bank independent central banks and inflation targeting. I mean you were probably well obviously you started at the Bank of England in in the old era when it was between the bank and the treasury. I mean what will that look like do you think? I mean the reason they went to independent central banks is because politicians meddle on interest rates and eventually you get higher inflation. Is that ultimately where this plays out? It was to try and gain credibility for the politicians. Yeah. Um which was actually, you know, again, probably a way of just trying to let them spend more uh ironically. Um but but the the mechanisms in a non-independent framework work well because you actually see monetary policy and fiscal policy working together to get the best outcome for the economy. I you know I I’m probably at the extreme and I’m not sure that independent central banking has worked well for society. >> There’s an asymmetry in terms of um you know willingness uh not to raise rates because they don’t want to be blamed for a recession. >> So anytime unemployment goes up they’ll cut rates but they don’t want to raise rates when you know as we saw in the inflation shock inflation goes up. So it’s actually it’s been tremendously beneficial for financial markets >> for profits >> for for for the rontier class as it’s referred to >> but that was arguably asset purchases and you know a particular byproduct of the financial crisis and the influence of Bernani I guess and people like that >> but but you know for if you look at capital if you look at labor’s share of national income Yeah the rise in inequality >> you know and then we wonder why we have greater um >> you know populism high levels of populism. So I actually think I think I personally think that a shift towards a more balanced um central bank treasury relationship is probably quite healthy um >> for society as a whole you know the alternative becomes much less palatable. Yeah, and we I mean we can obviously see that that taking shape to an extent in the US already, you know, with you know Wars and Bessant both talking about you know a Fed Treasury Accord again or and I think that that you know the the markets might be nervous about that and they might well be right to be nervous about it because again what it would argue for is probably a bit higher inflation, >> wages being allowed to get, you know, a bit more um purchase relative to profits >> um and bond yields being modestly higher um but again you know they will the administration will try and stop that rise in bond yields because they want to rele the housing market so you know and that’s why low low energy prices are so critical to them. >> Sure. Um >> and if we were to get that type of dynamic obviously we can see it possibly playing out in the US and I mean you know I guess in the UK uh even during co there was nearly direct financing of of the of the deficit obviously in Europe it’s different we’ve got a treaty uh very hard to unwind all of that but could you have this kind of two-speed scenarios more independent in some places and do those places have stronger currencies then or or not or how would you say that You know, well, and maybe that is the the answer. They would have the strong currency, but remember that Christine Lagar came from the the dark side. >> Sure. Yes. >> So, you could argue even there we’ve seen some politicization of the central bank and certainly a voice that’s more attuned to the political um environment. >> Yeah. Interesting. Um we mentioned the midterms very briefly earlier on and and and I think uh we were talking earlier you know you were saying um there is this sentiment out there that maybe we’ll just have this administration and eventually things will return to normal and if that was the case maybe the first step towards that would be a Democrat resurgence in the midterms. What how are you seeing it? Currently, you know, the predicted markets are only suggesting a 20% uh clean sweep for the Republicans, 37% for for the Democrats. Um I think the administration will do everything that they can to try and win those, you know, to to certainly limit the losses on the midterms and preferably win them, you know, and certainly keep control um of the uh of the house if they can. My big fear for markets is that if it becomes certain that the Republican administration are going to lose in a big way, >> then I think the risk of interign warfare at the heart of the US administration becomes great. >> Um, and that that four-way coalition that I outlined starts to fracture very dramatically. And at that point, I really would be selling the dollar. That’s going to be the point at which you’ll say, “Well, hang on a minute. This is just there’s there’s a lot of rogue rogue elements here.” And so unless there was something that materialized to stabilize the ship very dramatically. So that to me seems to be the one of the biggest gray swans out there. >> So presumably for the moment their playbook is to get the economy running hot this year if possible and and that to boost >> prospects for the Republicans. >> Yeah. and you know keep keep unemployment low, keep households happy um or as happy as they can be if you believe the uh some of the the survey numbers. Um there’s I think there’s quite a lot of doubt around those. Um but but you know the the risk is that if that doesn’t happen um you know then you’re uh you’re in for a for a a much bigger um period of volatility and particularly if you know President Trump just says well he did say prior to the election you know the the 2024 election that that do we need do we need midterms and so you know I’m sure the rubbishing of the electoral process you know will start soon if if it looks So it’s going that way. >> Yeah. Um I mean we’ve talked about this uh regime shift changed international order talked about impact on the US uh Europe to an extent. Um I mean where where are the others other winners and losers in this new environment internationally? >> Well I think that you know we we see um you know the world probably fracturing into four elements. Um there’s actually some international relations theories that suggest that five is the optimal number, but at the moment we can’t work out where the where the fifth would be. But the four groups would be fortress America um with Canada despite Mark Carney’s desires um actually having to link up with America and and Mexico. You know, the US MCA negotiations this year will be critical. um you have the Asian um block you know coalesing around China. I call it slerotic Europe um because I really don’t see much of a of a of a driver there without capital marketing. But then there’s a non-aligned block of uh the Middle East, India, Turkey, South Africa, you know the bricks without the R and the C really. um that that you know would be an interesting group that where I think investment opportunities will be be strong and if we see a rotation towards either commodities or emerging markets they all stand to to to gain. The other area that we’ve um emphasized is um uh and David Bow, my co-founder, you know, is is particularly keen on is this idea that if we do see a Trumpian, you know, Monroe Donro policy emerge and the Western hemisphere is viewed as America, then a a rightward shift for a lot of Latin American economies as the as the counterpart to gaining access to a US security umbrella would actually see the potential for a lot of rerating in in um Latin America. >> Yeah. And um it sounds like um Europe is a loser in this uh environment. And you know, one of the things we heard a lot of last week is the end of the rules-based system, international system, which it’s kind of a term nearly synonymous with with with Europe. >> Yeah. Europe Europe is built around a a rules-based system and and the you know the the framework that Europe has is a very rules-based framework you know but um regulation is is is its core competency >> um and I might say overregulation at times so yeah you know I think Europe the risk for Europe is that it does get left behind with the demographics and you know it is regulating um growth areas like AI very aggressively. Now that again that may be the right thing for the very long run for society but you know for the next 5 to 10 years it could see capital and labor uh and intellect you know if go elsewhere where it where it can experiment more freely and and develop more freely. >> Yeah. Um I’m just conscious of kind of bringing it together in terms of like asset allocation. I’m sure a lot of your plants you’re working with are thinking about asset allocation not just for the next kind of >> 3 to 6 months but kind of 6 months to 3 years or 5 years even. I mean >> there’s a lot a lot of uncertainty there as you we don’t know how the midterms are going to play out. We don’t know how that would impact dollar but I mean if you were thinking about ass allocation on that time frame what are the obvious or the high conviction shifts. I think that the thing that we’ve been talking to people about is to identify um the pri the entry points that they would want to make for some of the assets that are likely to be long-term winners in a world of stronger nominal growth and higher inflation and positive uh stock bond correlations. So that does take you towards a more valuedriven um framework rather than growth. It takes you towards uh dividends and income and it takes you towards commodities uh and emerging markets. >> Yeah. Uh, as I say, the risk is that if you have a hiatus moment, >> yes, >> um, you know, making those moves early, you know, probably won’t damage you too badly relative to other areas. And I think we are starting to see signs that the growth bubble, and we do believe the AI bubble is a bubble, um, that that is coming to a close. But you know the that rotation I think is one if it if we’re right it’s going to be a five to 10 year rotation. >> Yeah. >> That means you don’t have to be in in it for the first six months. >> And I mean one of the parallels people have been drawing recently is kind of with the 90s the mid are we kind of are we closer to 95 or 99 and um but equally I mean you could equally draw parallels with the kind of late 60s and nifty50 and you know the the the higher inflation environment there. I mean, you’ve been in the markets for four decades. Do you see obvious parallels between now and period in the past? >> Parallel I worry about is 1929, I’m afraid. >> Okay. Right. Yeah. [laughter] >> I think if we’re in that 1990s parallel, I think we’re definitely past I think we’re we’re into the 1999, you know, we’re we’ve talked about this being the endgame for the AI bubble. We’ve got everything that you need, you know, exponential returns on a log scale, buying each other’s companies, you know, in M&A activity, buying each other’s goods, doing that via vendor financing. But the last bit of this is always excessive capex. >> And the problem is that you run out of people to sell to. >> Yeah. >> They have the cash flow crisis and then you just get your your margins absolutely whacked, you know. Uh but but remember that most bubbles when they burst they do give back over the next five years everything that all the outperformance that they ran at relative to >> Yes. Yeah. Well interesting. Yeah. Um conscious of time and we do like to uh as we wrap up just get you some reflections. I mean you’ve been in the markets long time for people who are now starting off in your career maybe want to get better at macro at economics. I mean, what do you think? Any things you’ve read or done that have been very helpful for you in your career? >> So, I think that there’s there’s lots there’s just I’ve I I you know, >> a lot of books behind you. A lot of books behind me. Um there are tremendous number of helpful books. Reading, you know, is is is really important. But but I think the other thing is to recognize is that in the last five years a lot of people feel that macro hasn’t been important and isn’t going to be important anymore. Um and I think that’s a very dangerous assumption. So understanding where we are in the economic cycle and thinking about those macro relationships um I think are is is very crucial and you know reading you know excellent commentators you know who are strong in their macro like John or um and Rob Armstrong not wanting to to limiting to that but but those are people that I’ve enjoyed listening to working with over the is um you know and and just getting yourself more up to speed. Hard to identify any any particular books and that’s one of the lovely things about the being a strategist rather than economist. There’s loads of textbooks about economics. There are very few about investment strategy. >> Right. Interesting. Yeah. Well, maybe you’ll >> address that someday now that you’ve hit your two decade anniversary. >> Yeah. But thanks very much for coming on. Um obviously our listeners can follow your work at absolute strate strategy research um and things like that. >> Yeah, exactly. Um well great thanks a lot and from all of us here at Top Traders Unplugged, thanks for dialing in and we’ll be back soon with more content. >> Thanks for listening to Top [music] Traders Unplugged. If you feel you learned something of value from today’s episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you’ll be sure to get all the new episodes as they’re released. We have some amazing guests lined up for you. And to ensure our show continues [music] to grow, please leave us an honest rating and review in iTunes. It only takes a minute and it’s the best way [music] to show us you love the podcast. We’ll see you next time on Top Traders Unplugged.

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Today, we examine a year that looked chaotic but felt familiar to trend followers. Gold surged, equities rotated globally, and …

Transcript:
Imagine [music] spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes, and their [music] failures. Imagine no more. Welcome to Top Traders Unplugged, [music] the place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today’s conversation, [music] remember to keep two things in mind. All the discussion we will have about investment performance is about the past and past performance does not guarantee or even infer [music] anything about future performance. Also understand that there’s a significant risk of financial loss with all [music] investment strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here’s your host, veteran [music] hedge fund manager Neil’s Krup Larson. Welcome or welcome back to this week’s edition of the systematic investor series with Andrew Beer and Tom Roble and myself Nils Castell Lassen where each week we take the pulse of the global markets through the lens of a rules-based investor. [snorts] Andrew and Tom, it’s great to have you both here. Um it’s been a while. Um but how are you doing? [snorts] >> Tom, I’ll start with you. I know you were traveling last night, so you must uh you must >> Yeah, very well. Thanks, Neils. Very well. I was in uh I was in Sweden and it was interesting to see how uh how attitudes to hedge funds seem to be slowly shifting maybe there. >> I’m sure we’ll talk about that. And yourself, Andrew, how are you doing? >> Things are good. Things are good. Excuse me. Sorry. We [clears throat] had a great year end um you know multi- person session and it’ll be very interesting to talk about things that have happened in just the past six weeks which seems like it’s been about six months of activity. >> I know. I know. It’s crazy. [snorts] Anyway, we got actually pretty uh strong lineup of various topics as you said. Some of that will be inspired from what we talked about at the in the group conversations and maybe also some new stuff that we normally don’t talk so much about in this specific series. But of course uh as we always do, I’m always curious to know kind of what’s uh been on your radar, what’s caught your attention the last uh few weeks. Um I’m going to kick it off with you, Andrew. Anything in particular that you uh you’ve been noticing? Well, I mean, I think that look, it’s not an original topic at all. I’m totally fascinated with AI and how the narrative around it is shifting. Uh the [clears throat] um you know, I mean, some recent things and and um just in terms of both the power of it, but also the the pace at which things are changing. I’m not an expert at all. And I I’m sort of realizing that um you know part of what I need to be thinking about more actively in terms of um uh myself and our our strategy as a business um is is really where AI fits into it as it’s evolving. Now fortunately I have a couple of partners who are extraordinarily capable at it. Um, so it’s not that we’re not we’re not focused on it, but um but there’s something interesting that happened recently where um our PR firm uh usually I I’m very very involved in anything that we do that goes out into the public domain and while I was very distracted on other things in December, uh they basically took podcasts of mine as well as material that we had done and did a killer two-minute video that is well I’ll released in the next day or two that basically but it’s my voice but it’s my AI generated voice it’s the content is incredible but by people who really are not experts in this field so it just for me it was just it it sort of encapsulated that there’s something this there’s something very very profound in this um and uh so you know watching what’s happening the markets and how people are trying to figure this out I think it’s it’s going to be disruption galore and I believe that that is actually going to be very very positive for for for trend falling we need real economic change to to make money >> as long as you promise there’s always going to be the real Andrew that shows up on the uh on the podcast and not AI Andrew. >> So So my my my theory is that is it actually um that that people who actually have human connections to other people in this like the asset management business is is a people business. Um I don’t think asset allocators are going to say uh you know what let’s have AI pick the next hedge fund for me. I think it’s too risky and it honestly it takes all the fun out of the business. Um, so I think that but I think understanding the ways in which it can be leveraged. Um, and uh, I I just I think this is what everyone’s going to be thinking about for the next 20 years and and seeing it happen in real time. It’s just, you know, endlessly fascinating. >> It’s interesting. Just before we hit record, I asked Tom if he was going to the eye connections conference in Miami in a couple of weeks. Um, and both Tom and I will be there. So of course if anybody’s listening and they have a lot of money to allocate they should definitely reach out uh to us in the app. But having said that it kind of is interesting to with what you say because here you have probably the largest conference where you put together 5,000 people or whatever the number is in in one convention center for for two or three days. And uh so you can either say AI is going to um uh either completely change that and nobody really needs to go to these events or it’s going to strengthen it and say no as you say Andrew no we do need the personal connections we do need to sit down uh physically and talk uh and so on and so forth. Very hard to tell at this stage. Yeah, I look I think I mean one of one of my favorite investors um uh that be something they done last night where they basically used AI to do a whole asset allocation analysis and and like he said it took him about 15 minutes and the results are pretty astonishing and and one thing that was actually kind of encouraging about it is that it actually did say all right if you want to achieve these investment objectives it it you know it brought managed futures as one of the core um elements of doing that. So you know so there there’s a way in which the promulgation of this kind of technology and knowledge will also um uh you know help the average alligator to be more sophisticated about this space to cut through a lot of the noise in the space which is what you know I think you and your your guests do incredibly well. Um and so uh so I mean >> look everything’s going to be the what what’s the uh uh you know the only constant is change and um and and seeing how it how it plays out in all the various manifestations. I think it’s just going to be incredibly interesting. So >> I don’t think it’s the same investor, but I have a client as well who’s AI savvy and he sent me something uh like a couple of months ago where he had given uh three two or three different AI platforms uh kind of a a question about asset allocation for the next five seven years, you know, based on the fact that he was based in Switzerland and this is what he was looking for. And as you say, not necessarily specifically mentioning any strategies as far I remember. And that also came back with a fairly large allocation to to uh trend following. Uh so um so yeah, so the information must be out there since they’re picking up on it. Um so that’s interesting. >> My my my my oneline response after reading his analysis was super intelligence is here because I like the conclusion. [laughter] >> Anyways, Tom, um I mentioned that you’d been traveling. Not sure that that’s what’s really been on your radar, but what has been on your radar the last few weeks? >> Yeah, it’s really been many discussions with with investors and managers around the shift away from from the US dollar and from the US in general. I think uh global markets really did change in 2025 and the perception as investors is that the period of US exceptionalism is is maybe over. M >> I mean uh in April liberation day really hit markets uh but we did end up with a fantastic recovery in 2025. The S&P ended up 16%. But was the conclusion that the US has won at capitalism? I think for a US investor based in US dollars that’s a fair enough conclusion but for the rest of the world um you can’t go back to the same state where America where you know American assets are all that matters. Um I think the risk in the US is perceived as as potentially higher than it was previously. Um and the rest of the world is now clearly looking at the country’s markets through an entirely different lens. You know, normally you have non-American investors can rely on the US dollar to rise in times of stress and the US dollar has enjoyed the status of being a safe haven currency for assets. But for non you non-domemestic investors in 2025 the weakening of the US dollar meant that actually a euro investor uh with the same S&P 500 investment was up just 2 and a half% last year >> uh and actually potentially negative for other indices. So I don’t think investors are necessarily looking to sell American investments or avoid them entirely. It’s just a rethinking of what assets investors are holding and and a real kind of analysis of US risk and how they choose to engage with that risk. >> It’s a completely selfish observation. Uh here in Switzerland uh the Swiss National Bank distributes some of its profits every year I think to all the Cantons and of course it is well known for having huge investments in US tech stocks and so on and so forth. So, I I hope someone um you know is listening and and maybe reconsidering that strategy if if you’re right, Tom. >> Well, there’s two things to think about. I mean, I think there’s a very valid argument that global equity markets don’t have the capacity for a wholesale shift in in investor assets away from the US. But there’s definitely a thought about outside of tech, what am I, you know, what is the sort of asset that that we’re accessing in the US and can we get it elsewhere? >> Yeah. Well, we’re going to talk a little bit about that. I know Andrew has some some topics on that. Um, but I um on my radar a few things that caught my attention, but the first thing is more a question for you and that is of course we are in the middle of the Winter Olympics. So, I’m curious to know if you have like a favorite sport that you’re watching or that you want to make sure you are going to watch uh in the next uh couple of weeks. >> So, I I mean I So, I I’ve gotten very down on the Olympics um uh in that uh you know, one is I I don’t think you should have 37 sports like per I mean 37 events per sport. Um uh you know it like I sort of grew up in an era when the Olympics was special because you had people who were you know toiling as waiters in at ski lodges and that yet were finding six hours a day to ski and and to kind of compete at the at the international level. There was something very like this was their moment right every four years you had this opportunity to become a Mark Spitz or a Bruce Jenner or somebody who goes from total obscurity to becoming kind of a national hero. uh you know the American hockey team in 1980 and you know it’s a little bit like in in US sports where they’ve added more and more playoffs because they’re very very hygienerative and here and here I was I was at the gym this morning and watching I can’t some snowboarding competition but it could be snowboarding you know/v1 you know whatever whatever like like sub some some subset and then also with the the barrage of promotion around individual athletes and and and the elevation of them I just it’s to me It’s just lost a lot of its its the special quality to it. But that’s that’s going to make me sound incredibly old and and >> [clears throat] >> uh and and and and cranky. >> What about you, Tom? >> In the UK, we don’t have many uh many snowy mountains or frozen lakes. So, for us, it still has that special element, I think. Um I’m definitely following the curling. The curling is is quite interesting. All the curling stones are still made in Scotland, so it’s very exciting. Um and uh and we we seem to be very very good at the um the luge and the the sliding events. So we definitely following that. But you’re right, Andrew, there’s never been a time for interest in niche sports as as around an Olympics. >> I hate to break it to you, but actually one of the things that caught my attention that I’m really looking forward to is actually one of the new sports at the Winter Olympics. Um they they they call it skio, but it’s actually ski mountaineering where they first have to climb the mountain before they ski down. I’m very excited to see what that is going to be like. That that seems like a fun uh fun thing to do. But in general, I kind of know what you’re getting at uh Andrew in terms of too many things doing the same. Anyways, more um interesting from a financial point of view, something that caught my attention. I don’t know if you saw this, but Google has issued a 100red-year bonds, I think, this week. I thought that’s kind of interesting. I I don’t know what that tells us about their expectation to uh interest rates if they’re issuing a 100red-year bonds at these levels. Um but that apparently has not happened since 1997 where Motorola issued a 100red-year bond. So, that is pretty rare. And then the other thing um that caught my attention, I kind of quickly shared it uh with you a little bit unfair because it was with short notice, but it’s just this um email um that I received from uh Dan Rasmusen uh over at Verdat. And I don’t know Dan uh at all, but I know he’s involved in kind of the private equity uh world. But he was written writing an artic or a a an email about sort of some of the differences uh between hedge funds and private equity. And the heading was why hedge funds got better while private equity just got bigger. And I think there is some interesting aspects to that um observation for sure. Uh my key takeaway uh and feel free to um to weigh in here, but my key takeaway was um if I remember correctly that hedge funds in his view simply had to improve because of the competition and the attention that private equity was given um by by investors for so long. Um and to a large extent um maybe operating in liquid markets with mark tom market and all of those things that we do in in the liquid all space for sure [snorts] basically meant that they became better um better managers better structures better processes etc etc and I think that’s kind of an interesting uh observation I don’t know if you agree with it or have another take and >> oh I okay I think from our side I think we we see renewed interest in hedge funds kind of across the board. Um and part of it is people got out over their skis to use an Olympic analogy um uh in their exposure to private equity and the way people often would do it was that they would overcommit to it with the expectation that they would get money back in a certain period of time. And so the fact that kind of the the money coming back didn’t really materialize while they still had the commitment outstanding meant a lot of allocators were simply had too much exposure to it. And that’s also driven kind of the secondaries market. Um, you know, I think I think when you’re in a persistently long bull market, also the fact that and and look, Dan has done great research on the return characteristic of private equity essentially being some version of leverage equity with, you know, the wonderful feature that, you know, you could pretend that there’s you don’t have to mark things to market. Um and uh but I think I think now when you’re when people are thinking about all right where equity market valuations are and what the expected returns over the next 10 years and leverage on top of it and being you know up to their gills and things like software stocks that could be disrupted. Um you know maybe having long-term leverage long equity exposure is not as attractive as it used to be. And in a world where the macro environment is shifting back to to to Tom’s point about this migration, I I wouldn’t say it’s a m like a wholesale migration out of US assets, I would say that the the attitude used to be FOMO about the US markets and now has has has come to people saying like, well, wait a second, like like you know, this used to be the the global bastion of of of rule of law around business activity in terms of predictability and and clearly things have changed. Um and so um you know so I think in the context of that you think who has the ability to make money on a going forward basis and then you know you point to the hedge fun industry which has done I mean pretty I mean certain hedge funds have done astonishingly well in this environment and so that’s drawing attention back to it which ultimately I think will be good for all of us. >> Yeah. Do you come across private equity a lot Tom? >> It’s it’s it’s something we come across as discussions with investors because it’s part of their alternatives portfolio. It’s part of the it’s part of the portfolio allocation and I think you’re right it’s become a a big part of what investors do but we we’ve been in an unbelievable environment for 15 years more than 15 years and is that environment going to persist for equities we we don’t know but it I think when I was last on the podcast we were talking about the macro environment for let’s just sort of call it sort of global macro hedge funds so a hedge fund that can go into any asset class deploy assets long short in a relative value kind of perspective and take advantage of any kind of inefficiency. We are, you know, that that environment for hedge funds is is only gotten better. We’ve got stubborn inflation. We’ve got geopolitical dislocations and tensions. We’ve got commodities bursting back onto the seam and asset class which has been underappreciated with compressed volatility for a long long time. Um, and we’ve got interest rates still relatively low but higher than they’ve been for a long period. And it it just looks like a very interesting time for tactical trading strategies that can deploy assets across markets long and short. >> Yeah. No, we’ll we’ll dig into that some more. Let me just quickly run through where we are on the scoreboard, so to speak. Uh my own trend barometer finished yesterday at 50 and that’s still a pretty productive environment for trend following. Um and it has more importantly been very consistent the last few weeks as data also uh will be supporting. Uh these numbers are as of Tuesday of this week. Um and the beta 50 is up 1.48 in February, up 6.58 for uh the year. The sock gen index up one and a quarter for the month and up uh 6% or so um for the year. Stocken trend index up 1.65% uh for the month, up 6.43% for the year. and the stockchain short-term traders index up about half a percent uh so far in February up 2.78% uh so far this year and in the traditional world MEI world up 94 basis points in February up 3.22% to 2% so far this year. The uh S&P US aggregate bond index up 41 basis points uh in Feb and up [snorts] 60 basis points in uh 2026. And finally S&P 500 is pretty flat for Feb up 1 and a half% so far this year. [music] I was wondering before we go a step back a little bit and maybe we talk a little bit about your uh your own review Tom that you put out uh in the last day or two um this more comprehensive uh look at 2025 but I I wanted to also ask you a little bit and and of course Andrew you can jump in as well about [snorts] uh the first uh six seven weeks so far this year um obviously been very constructive uh clearly continuing where we left off in 2025 Is there something uh about the uh the new year that you’re noticing, Tom, that you find particularly interesting or um anything? >> Well, I think understanding 2025 performance and the second half of the year in particular does help us understand what the beginning of 2026 looks like. Because one of the conclusions we came to when we were writing and analyzing what happened last year was that um performance and opportun opportunities for trend following came from a real really kind of diverse number of markets. Um, we obviously saw standout performance from metals and precious metals again this year have been a key performance driver, but it wasn’t just metals. And it’s interesting hearing about your trend barometer because we run a similar exercise where we calculate breakout models over um almost I think uh 200 or 5 500 different parameters from very short-term to super long-term across all different markets that are sort of potentially tradable by CTAs. And on average last year the zed scores so the opportunity sets is similar to your kind of barometer I think uh was pretty poor. So last year your selection of asset classes and the way you allocated risk and managed risk was really really important because there weren’t opportunities broadly across all equity markets and all on all and all currencies and all bonds. In fact you bonds was really poor last year. So what we’ve seen, I think this year is a continuation of that theme where we’ve got really important market trends. And if you’re not trading those markets, you’re going to be missing out on something. So I think last year, for the second year in a row, commodities was one of the key performance drivers. And 2024 was very similar, but it wasn’t coming from the same place. In 2024, we saw trends in the soft commodities, so cocoa, coffee, as well as precious metals. in 2025, it’s really been the precious metals that have been the key performance drivers. Um, and if you weren’t trading them, as I said, then that wasn’t available to you. But also, you know, there were some really, really strong trends in other markets. Um, and that’s again continued this year. So, for this year, we’re in our trend indicator, we’re seeing really good trending markets in Cosby, Niki, the Swedish OMX, and IBEX 35. So these are sort of lesser smaller European equity indices often that aren’t necessarily the go-to financial markets that people are looking at. >> It’s funny you say this thing about yeah if you weren’t trading all these market like the softs and some of the other medals you would be missing out but but not if your name is Andrew because he does not trade them but he did not miss out last year. That’s all I can say. Um but uh let’s let’s stay with with this year and then we’ll maybe dive a little bit deeper into the your your report Tom. But any any thoughts from your side Andrew for this year? >> CTAs generate alpha when they’re early contrarian and right. Okay. The second half of last year they were dialing up equity risk after liberation day. They were holding their gold position. and they were you know so basically I mean from our perspective if you look at last year it’s golden equities and predominantly non- US equities um and uh and it was it was and it was you know either maintaining that exposure after liberation day now now human strategists after liberation day were really rattled and really wrong in that we were you know the inflation is going to come soaring back we’re going to go to a deep recession I think use the term self-inflicted you know nuclear economic annihilation or something like that I mean it was it was people really thought and and and this is again the enormous advantage of CPAs is they don’t care if if you know as long as they see it kind of bouncing off the lows and and however they end up measuring it um or or continuing a trend and I think that’s continued into this year. I think it’s it’s you know I think there’s an arbitrary end date as of at December 31 but it’s been look we started talking about a rotation to non- US equities. You know we’ve been people have been talking about a fundamentally driven rotation into non- US equities for 15 years and it hasn’t worked. Um it’s consistently underperformed US equities but it’s been it’s been happening for the past couple of years and I think it goes back to the risk premium issue that we talked about. Um and uh and on gold, you know, gold was a failed trade for a decade and a half. You know, it was it worked really well for a period of time. You had a lot of very very smart people in 2010 expecting this proflegate monetary policy to drive up gold. It didn’t for a very very long time. And and you know, while most people had essentially abandoned the trade, um look, in 2022, gold didn’t go up, right? I mean, this that was the moment everyone was waiting for in gold. inflation’s going to come back and gold is going to pay off and gold didn’t go up in 2022 and then it starts soaring in 2024 for very very different reasons. So, so I I don’t think it’s complicated. I think it’s non- US equities. I think it’s an emerging markets versus US equities and and and I think it’s gold which encapsulates the whole metals complex. So, >> yeah, I mean it’s been interesting for me to see uh for example and I know this is early days, right? But um clearly the uh the momentum in some of the key markets from 2025 spilled over to 2026. So in January definitely the same themes uh in terms of leaders and of course precious medals uh despite a massive selloff the last day of the month uh still came out ahead for most managers I’m sure but the leadership has changed a little bit in February. It’s not so much medals uh anymore. Um we seem to be shifting more towards uh equities in certain parts of the world as as you rightly pointed out. Uh net gas has been more productive for sure. Um and even some of the currencies are starting to uh to to to support um which it doesn’t happen that often. Um but but uh yeah, so that’s been kind of interesting for me to to to see. Now Tom, I wanted to give you the chance to uh if there were more because it’s a pretty comprehensive paper you you uh just published. So if you want to dig out some more of those uh things that you felt was really important. Um I know we will talk about some of the topics uh as well because we will dive into uh I think Andrew had sort of specifically gold, silver uh you know uh and and some specific markets to talk about. Is there anything that stood out when you wrote the report, you thought, “Wow, that actually did surprise me a bit because and let me frame that if you if you missed the last couple of episodes of this uh podcast, Tom. What I what I’ve said to to uh people when I’ve been speaking with them uh in the first few weeks of this year was that in many respect, I think we can all agree that last year was very unusual. We can say that about almost every year. But last year was another um unexpected set of events that we saw. Yet from a trend following perspective, it was a very familiar year. Few markets did all the heavy lifting. Then you had a few markets that lost a little bit of money and you had a lot that didn’t move much either or. So from a trend following perspective, I mean, if you didn’t know what took place during the year, you would just say, yeah, just another trend following year. Maybe a little bit on the on the low side. Uh okay, fair. But but um yeah >> I completely agree and I think that’s why the conclusion that we came to of the allocation of risk was so important. You know, normally we see some sort of speed factor and I think Katy Kaminsky’s done some really interesting analysis on the speed factor in previous years and we normally see a much stronger preference for longerterm models outperforming. But it’s the classic sort of uh contradiction about how you marry your investors who maybe can’t always look at the performance with such a long-term lens versus the the performance of models there where you can sort of show systematically that being longer term and into longerterm trends does pay off. So it’s really the allocation of risk last year that was the key thing and how you managed that risk. Um and then you know we were monitoring performance this year as those trends continued. I think the trend index peaked at 7% is as you correctly said it’s now at 6 12%. But the range of the individual manager returns is still pretty same same. So I think the best trend followers are up about nearly 15% and still there are some up nearly that that amount. I think that’s on a slightly higher volatility target than many, but we still got many managers in that 10 to 15% range. Um, and and many just hovering just below the 10% in sort of eight 8 or 9%. So, CTAs have definitely allocated risk and managed risk very well. If you want to see what an unriskmanaged approach to trend following looks like, please ask us for the data on the SG trend indicator, which is our hypothetical model-based portfolio, which with with very limited u risk management, and you’ll see some very interesting swings in the precious metals markets, but I think you know in general a couple of weeks ago, many CTAs were down a small amount, but they had a laser focus on on risk. So not only allocation of risk but managing of of positions is silver has caught a lot of headlines but it’s not as big a market as gold and so maybe the allocation of risk to that market wasn’t as big as many people might assume and there was definitely a close monitoring of what the risk looks like in that market. So we’ve had CTAs kind of building proprietary models over the years to help them work out when trends are overextended, when trends are reversing. Um, and I really think there was a looking at trend strength and looking at is the are these trend are these breakouts really supportable? Uh, and I don’t think CTAs has had as much risk to precious metals as as you might think. I I looked at a CTA report today and there was a much bigger allocation of VAR to equities and FX. >> Yeah. No, I mean we can dive into that. I know there was one of uh Andrew’s topics actually. We can jump around a little bit if you want to stay on on sort of the theme of of gold and silver and how these were traded. Um I know you had some some um questions about this. Uh Andrew. Well, so yeah, I mean I mean I Tom, I think sort of answered the point about about So look, I mean, you look at 2025, right? And gold is up 60%. Right? I mean I mean this should have been a banner year for the space, right? Equities were up a lot, right? So you had very very very distinct trends and it’s continued into this year obviously and yet the space was flat, right? and and and in Tom’s analysis which mirrors what Nick Baltus was talking about um in year end and Katie has has um you know talked similarly was was you know short-term models really detracted from performance last year and and Tom’s report which everyone should read has a great analysis basically on a factor by factor and you know using his his trend indicator but you know you’re up 20% or something in in in long-term trend according to that and you’re down you know 12, 13, 14, 15 and short-term trend. You know, again, as as we’ve looked at the space and we’ve looked at the shorter term models, we just don’t see really positive sharp ratios in it. They sound great, right? They but our view is they’re a riskmanagement tool and they’re often a costly risk management tool. If you’re going to allocate a meaningful amount of money to something that has a zero sharp ratio over time, uh drives up your trading cost, it creates all sorts of sorts of other issues. So um so I think I think that’s sort of the hard the hard narrative part about the space right now is is it feels like things are trending like crazy. So why isn’t the space doing better? This year they are. But last year it was also getting you know it was making money in in our side it was making money in gold and non- US equities um was about about half the performance each and then you got whipsaw and and hope you didn’t lose too much money in in rates and currencies. I mean, I think last year, if we just stick with that for for a little bit, you’re absolutely right. When people look at the year, they will say, “Well, hang on. Equities were up a lot, so why didn’t trend followers make more money in equities?” It was very select equities that we could make money in because it really was all about the April uh deleveraging thanks to liberation day. So, if you were if you are, you know, obviously you execute once a week, so you have a different way of of interpreting what happened. uh managers who are much more frequent of course uh we have a different way of interpreting. So I do think that for sure the fact that we had to delever the equity long side uh for a while and I think maybe some managers even uh got short uh at that stage that obviously would have cost uh some so I agree with that. Um but people obviously need to understand the the way we got to the to the strong equity year wasn’t in a straight line. uh whether it was in a straight line as you rightly said is in the medals and I think most people made all all of their most of their profits in medals or some select equities um a couple of them also in the say short JTBs uh and so on and so forth what what is most puzzling to me and this may not be very popular with some of my friends but but I I’ll I’ll venture into it anyways in a sense you’re kind of right because we have the discussion about being a classic trend follower where you don’t adjust your position and being kind of maybe a more modern trend follower, we do adjust our positions all the time. And so last year, uh, which may come as a surprise to people, even though we made most money in in precious metals, we were selling precious metals all year, right? So our largest exposure was a long time ago in precious metals. And then you could say, well, that’s not great when when the trend is so strong. You should just have stayed with it. You would have made a killing. And there were one or two that probably did exactly that. But of course, we also know they kind of had a a huge um surprise on the last day of January. Um and had that day for example continued on the Monday with the same velocity instead of a rebound some of those managers could have been in real trouble in my estimation of how it took place because some managers will when you get a big draw down like you in silver and and gold prices uh on Friday the 29th or 30s whenever it was you may trigger your signal you may trigger your stop but you may not execute that trade until the next day. So had the next day been down another 20%, things would have been different. But for the larger managers who don’t um have static position size, you know, we were just basically reducing our risk along with volatility expanding. So yes, you could say it’s a little bit of a shame when you have two or three markets that really move strongly that we didn’t make more money. But on the other hand, from what I can tell, and this is by no means any criticism, it’s just an observation. But I do see many managers who or not many but there is a handful of managers who talk about this. Oh, you should never touch your position size. You should just stick with it and that’s how you really capture these big outliers. But the problem is they their performance was not in any way, shape or form better last year. And why is that? And I think it has to do with the fact that they often trade three four 500 markets. And therefore any one market even if you don’t touch your position size becomes a very small risk allocation in reality. And that’s always been my view that there not it’s not a wrong or right. It’s just a difference. But if you really want to have punchy returns and make those 50 60 80% returns yeah then you actually have to have a fairly small set of markets but then be very gutsy about your um risk allocation and stick with it. But that opens up another set of uh risk issues. >> Yeah, there’s a there’s a London CTA manager who is uh very committed to trend following, very committed to commodities and trading a small number of markets and letting risk run. I think we all know who it is, but it’s it’s the end product something that’s palatable to investors um when they have these pressures on them from an investment committee and they have strategic asset allocations that they have to follow. I think I think you end up creating something which is difficult to sell to investors when you have something like that. >> Yeah. I mean you don’t need many investors. I mean frankly so so so you know we and I think that’s what I like about the space is in a sense that if you have a certain profile you want to express then you can probably find enough investors who will um who will want to join you it’s just a different set of investors but I I agree with you uh on that topic >> it’s something that comes up and it came up this week about the role that your hedge fund or your CTA is playing in the portfolio and it’s something that we’ve heard about this we have as our core risk asset equity risk and we’re trying to diversify that. >> These large asymmetric returns are really good and trend following is really good at diversifying that and so the investors sort of continued fascination with multistrat isn’t necessarily meeting the requirements or the objective that uh CTCTA maybe does when you get these large moves and you want to have these asymmetric portfolio diversification. Yeah. Any thoughts, Andrew? >> Again, I think about the space very differently than than than than most people in that I view it as an allocator, right? And that’s originally we got into the space as an allocator trying to figure out how do we we love the signal of the space, but how do we access that in the most efficient, straightforward, you know, liquid way that we can. Um I mean to me the de the alpha in the space um is like like I think about I remember the moment in September of 2020 when we started shorting treasuries right I remember the moment when we were starting buying gold um and you know we’re buying gold well below 3,000 uh when we started shorting the yen around 105 106 or something like that like like those were really contrarian really early calls and and and you because again I sort of straddle this world and the world of people who are trying to make these judgments um on a regular basis. I also again I started a commodity firm called Pinnacle Asset Management back in the 2000s and and it was a fundamentally driven commodity firm where you had guys who knew more about the you know somebody like John Arnold knew more about the fixed price natural gas swap market than anybody ever in the history of planet earth, you know, then or now. Um and and and the way that they viewed CTAs was they waited for the day when CTAs when some signal went off somewhere and CTAs were selling because they were in effect they were kind of straddling between being market makers and trying to think about you know sort of the fundamental supply demand characteristics of the markets. And so I to me when I think about alpha in the CTA space as an allocator, what I care about is when they pick up something that whether as I said, you know, early contrarian and right and it’s big and you can make money in it. Like how does that happen? Right? So you’ve got an asset that’s worth around 10. Let’s say just just assume it’s sort of a basic model. There’s a lot of noise around it, right? So just based upon sentiment or whatever whatever it’ll go up to 11 and then back down to 9 and then back up to 11 back down to 9. And so the basic model is that when you have people with local knowledge of that market who are maybe sitting on trading desks or high frequency traders, whatever you want to want to call them, you know, it generally the smart money selling at 11, buying at 9, selling at 11, buying at 9 and and and the kind of the sentiment is driving these prices around but with no change in fundamental value. The valuable trends for CTAs are when it’s something’s at 10, fair market value is 10, and then the information changes. Something in the world changes and fair market goes to 11. And the people with local knowledge like it more at 11 than they liked it at 10:00 and and then it goes from 10 to 11 to 12. And the smart money likes it more at 12 than they liked it more more at 11. that’s means the world is changing and that they know something about it. They have some special insight that that the world is slowly adapting to this information and they think it’s going to play out. And so when I think about what happened in you know 2020 24 25 and and this year and I think about longer term versus shorter term models in a sense the shorter term models are the ones that are going to get whipssawed violently when you have these changes in sentiment like we had last year but there’s no real change in in the state of the world right whereas the longer term models are the ones that say you know what this shift from I I know I get it you know everybody with their investment committees basically has been talking about a shift out of US assets and out of US equities for a long time, but we can see it in the prices and we can see people people moving their money at the margin and and so we’re going to get behind it regardless of what we’ve what we thought about things 6 months ago. So by that definition of alpha, short-term models detract value. It’s not it’s not the exposure that I would want. And and I think and I think I think people have conflated risk management with um if you’re going to introduce something into your into your portfolio and allocate a lot of risk to something with a zero sharp ratio, no thanks. Not for me. >> I don’t know if you remember, Andrew, did you manage to keep because obviously you do things completely differently to an underlying manager. Did you manage to keep a fairly static allocation to goal last year? >> No, it bounced it bounced around. You know, when we think about the variation between us and the the hedge funds, um, you know, there are kind of four drivers of variation and we t we tended to get all right, all of them right last year. You know, in 2023, they all went against us and we underperformed by 500 basis points. It’s the only it can happen, but it’s it’s, you know, it’s the only time it’s ever happened to us. We outperformed a lot in 2024 and 2025. Um, Sloan has helped us last year, right? And and if you look at our performance um you know so one is our performance around liberation day was much better than the index and it was better for two things is one I think your position 297 when you’re VA is spiking and you’re d-risking after liberation day I think you are making somebody’s P&L in that local market I think you are the amateur outsiders who somebody has pressed a button to sell it and and you’re not executing at at you know there the liquidity dries up in that market because they can see you coming. That’s why you have all these things on zero hedge about what CTAs are doing. Now translate that into a market where you’ve built your career for the past 25 years trading that market every single day. Um Charlie Charlie Maggar actually from uh uh who runs Altus which is the subadvisor to simplified CTA hedge fund used to run the metals desk at Goldman and he’s talked a lot about this that when you have that kind of local knowledge and you have systematic traders coming into the market it’s it’s you know that’s your P&L right there. So, so, so see, so I I think this diversification into a lot of excess positions, you know, non increasingly non-core positions, I think it hurt people after liberation day. It exacerbated the draw downs. I think that’s a market structure problem that that you know, when you’re building these models, you have to make certain assumptions about implementation costs and I don’t think most people factor in um uh getting taken advantage of by local traders. Um and and then the second was we still had some risk on. we were slow to derisk and and balanced when Trump Trump changed his mind. So, so that kind of blows up the idea that actually having and now I mean in in in Tom’s data interestingly uh really short-term models were fine during that you know they actually they they actually preserved capital much better than longerterm guys um uh during that initial period. It was actually later when when uh when they started to get get get chopped up. But again, so look, I think of as an allocator and I think I think you know back to the point that you and Tom have made that investor preferences are often to live in paralyzing fear about what a bad lipsaw looks like and as you say whether there’s a bad Friday turns into a horrible Monday, which is what happened with SVB, right? You know, and and so so it can happen. I just don’t think you’re paid for as an allocator. you lose too much. Like it’s it’s like saying, “Well, let’s do a long-term trend model and then and then buy out of the money puts on equities because that’s what we’re afraid of.” Fine. You’re just not going to have a business after 5 years. >> We got a few different topics mainly from you, Andrew. So, I’m going to kind of um defer to you uh which one you’d like to uh to bring up. We talked about the gold and the silver. We tried to get into kind of a little bit more the nitty-gritty about how uh managers probably uh were different and how they handled uh this. Where do you where would you like to go next? >> Well, since I’m on a rant about about product design, [laughter] how let’s talk about the liquid alternative space. Okay. So, so the broader liquid alternative space, which means, you know, hedge fund strategy since we’re talking and we’re talking about Dan’s article. Um uh so hedge fund strategies in mutual funds and ETFs and now increasing sorry mutual funds and and usage funds and increasingly in ETFs it has been an astonishingly bad category like the ratio between intelligent people and serious firms who’ve launched products relative to this the the total utter lack of success from an investor perspective is is pretty astonishing. You’re talking about hundreds of products that have been launched. Each one when they get launched is somebody sitting there saying, you know, we’ve got some great way of doing equity long short or market neutral or or or this or that. The returns over 15 years according to Wilshire’s data is between two and 3%. And the fee structures on average is about 200 basis points in a in a period of time when equity markets have gone up 14%. Uh a year over that period of time. So this is worse than throwing darts, right? I mean, if this was a sports team, you would be asking, “Are you throwing the game on purpose? It’s horrendous.” And and I think I had this sort of epiphany last year as I was thinking about it. Um because we’ve only done a very very small number of products over time because and we and we because we’ve always had a view that like like for us, if we launch a bad product, something that doesn’t work, it’s our reputation. It it it’s a huge percentage of our time gets allocated to it. In fact, we ended up shutting products that we didn’t we didn’t think were scalable, even though they did fine from a performance perspective. But a typical firm has a huge distribution infrastructure to support and they have no view on which is the best product that they’re going to launch. There’s no one who approaches this from an investment perspective. what would I want to own over the next five years and how am I going to get that in the most efficient way actually with with actually one exception which SEI hired us 10 years ago with that mandate to help them build a usage fund where they basically said can you find a way to construct a a a a an absolute return product with a beta point2 cash plus 5 gross and you know all- in expense ratio less than 100 basis points and no asset liability mismatch um and and you know you figure out how to kind of kind of build it. But I think I think the problem on the product development side is that most products that are developed in the space are developed by sales people who think they can sell it over the next year or two. It’s a hot area and they’re going to launch something that they where they think there might be incremental demand. And and I compare that to the hedge fund industry if I looked at Dan’s article is that generally when hedge funds launch new products because there’s a great investment opportunity. You know, they’re going to buy real estate in Greenland something else like >> don’t do that. [laughter] denominated in Bitcoin like I mean you know but they they they think there’s something real there and they’re going to put their own money behind it and they want to do it in it’s completely backwards in the liquid alts world and that the guys who are building the products are the equivalent of the salesman on the showroom floor you know like designing a a car for you because he thinks you’ll buy it and if it’s a lousy car in three years it’s not his issue um and so I it kind of dubtales with this thing about should CTA managers be making changes to their portfolio models to maximize their risk adjusted returns over the next 5 years things that they have high conviction in or should they be responding to fears about clients about that you know that that that once a year whipsaw that everyone runs into. I mean, I have my my I have I have some thoughts, but I want to I want to hear Tom first. But, by the way, I will I will say um I I have noticed uh on your LinkedIn post, Andrew, that you are you’re certainly not shy of calling out some of your uh competitors. Let’s put it that way. But I’m I’m going to defer >> someone asked you for God’s sakes. >> I I’m going to defer to Tom first. >> Well, we live in a world where Simpsons episodes seem to have predicted most of modern life. And Andrew, I think uh I think there is a Simpsons episode where Homer designs a car from the showroom which then bankrupts the company. So I think your analogy is quite interesting and quite correct. The definitely seems to be some sort of disconnect. My worry in the liquid alts data is and it was something that I came across yesterday in a discussion was the classification is is the key thing and are we talking about real hedge funds in that data or are we talking about quasi alternatives that’s that live in this uh semi-alternative world where it’s kind of multi-asset but being described because it’s a bit of a hot topic or sexy as multistrass or macro when actually it’s just a kind of a GTA kind of tactical asset allocation across multiple different asset classes. The conversation I had yesterday was with someone who was interested in quant multistrap us funds and was telling me that there was a universe of a hundred of these funds and I struggled to name even even two. Um so I think there’s a disconnect in what liquid alternatives is. Um, and what may be represented there isn’t necessarily hedge fund strategies all all the time. But I think you’re definitely right. There’s there’s definitely a mismatch or a misalignment between what hedge funds are creating as product um, and what an investor can satisfy their investment committee with. It goes back to what we were talking about earlier about, you know, has the hedge fund industry improved? you’re always going to get this sort of different areas within the hedge fund industry where you’ve got strategies that become scalable that form part of a larger longer term tactical asset allocation that you want to have as a core holding like a CTA and then pure alpha where you’re going to have strategies that come in and out of vogue um maybe it’s multistrat at the moment huge amount of interest in commodity hedge funds at the moment these were fun these you know commodities was was nowhere 5 to 10 years ago. Um, but now suddenly it’s very very interesting. So there seems to be this sort of split in two within the hedge fund industry of as I sort of said this sort of niche alphas and things that form part of a larger tactical assass allocation which obviously are going to then have costs come down and they’re going to be periods when they underperform. Um, but you got to remember we’re living through an unbelievable equity bull cycle which shows no sign of of of abating. Oh, okay. I mean I mean to to address your point. So on the data side, the you can look at the data in a lot of different ways. It sucks. Okay. I mean, the performance across the board is terrible. And and this is one of those areas where they ended up alienating a lot a lot of people because people make money um on on products that scale up to a couple billion dollars and then they’ve got to, you know, get you you have five products, one of them has a couple good years of returns. You send an army of sales people out to sell it. It scales up to three billion and then it just kind of whittleles down over time and and clients end up end up often not making money. Um uh so I mean look you can look at the multistrand um the multi-manager uh mutual fund and ETF so mutual fund and uh and usage category like even Blackstone gave up on that you know I mean Newberg Burman shut down their fault like it was a failed business model that is um now there some funds in it like Blackstone’s BBX which has done a bit better but again that’s more of kind of a a quant multi-stat product. I mean it was interesting. I mean I was at um I went to a speak at EQ derivatives um a couple of weeks ago was the whole QIS versus premium space and and one of the observations that I had about it is is that people really don’t talk much about returners. They talk about modeling and research and and you know and data and innovations and all these other things. And I kept asking these questions like what’s the realized sharp ratio of the strategy for over what period of time and what do you think it’s going to be be going forward and why? But going back to the point about that is a different example on the product development side where products are created there because there’s an audience that wants to hear you know wants a pitch around engineering. A a guy who I know is quite serious uh quite a serious allocator. He said look if if I had to rank the single most successful allocator to the CTA space over the past 10 years it’s you. It’s DBI. but and and not by investing in funds and not by picking managers but by by saying what’s the signal here what is it we’re really trying to get and how do we do that as efficiently as possible and I look I and and so I think the challenge is for or you know the the the test for people on the allocation side is to get very very clear about what you’re expecting a product to do and how you’re expecting to achieve to achieve it and to understand how to evaluate that and and and the realistic how realistic it is for them to achieve those goals. And so, back to Neil’s point, I often call out people where I think they don’t have a strong view as to whether this is a good idea or not, but they sure but they sure have a good idea that it’s good for them to launch a new product and I just I just think it’s bad for investors. So, you know, obviously thing I feel strongly about. >> No, I mean, this this is a great thing about this. We can have these uh pretty frank discussions. I mean I I think we could probably say with with uh most firms when you when you launch a product, you know, a certain narrative goes with it. I certainly remember your narrative, Andrew, when when you launched your product, right? Um focused on kind of the costsaving in in order to get exposure to CTA returns. But when I look at it, if I’m being very uh frank about it, I I look at your product actually the more I look at it, the more I look at it differently that it’s actually not about the cost savings. Um because I feel at least that the tracking error to the index that it’s trying to mirror is too large for that. So I see it more as an alternative data strategy where you just use a different data set input and and it it has worked really well uh in that sense. Um but of course you know even five or 10 years worth of data we we don’t know what the next 10 or 20 years is going to be like and there may and I and I completely agree with you by the way that there is a lot of products that really shouldn’t be launched and it’s uh and it’s not good for investors to come out there right um but I also you know from having seen this space from the inside for quite a few decades some of these things would just go in and out of favor and Even if you have 5 years of underperformance doesn’t mean the next 5 years, the next 10 years won’t you know you’re going to be the highest performer. It’s really hard to tell. >> But I mean thing things that I try to highlight are when it’s predictable on the front end, right? So standard life GAR. Okay. I I I learned about standard life in 2015 for the first time. They were out telling everybody that a uh largely a long only but also with derivatives built into it multi-asset portfolio could generate could could deliver a a beta of 0.2 to equities and cash plus 5. Okay, that’s a top quartortile maybe a top decile hedge fund portfolio over time. Okay, it’s not realistic. Okay, it was never realistic. It was we have we happened to have done that because we flipped heads or or and but again it went to $90 billion this thing. It was bigger than Bridgewater at its peak. And so I talked about it at the time and I said you’re kidding yourself if you’re going to do a beta like once you start talking about a beta point. too. Unless you start bringing in things that are quite interesting like CTAs and CTAs before fees um then or you know before or reducing your trading costs unless you can bring in something like that getting once you the reduction to beta.2 is also going to kill your return profile um the same thing with a multi-manager funds. I wrote a paper in 2013 basically saying a mutual fund that tries to pick six underlying hedge fund managers and hires them in managed accounts is not going to achieve the return objectives that people were talking about at the time. Um uh you know I said the same thing about risk premia in 2014. G10 currency carry does not have a long-term sharp ratio 1.2. I’m sorry that’s that’s a back test. Okay. And now I think people have realized the drop off between the ins the the the back tested numbers and and the live numbers is something like 75% or something. Um uh you know I mean equity long short as a as a category if you have a beta of 0.5 or point4 to equities it it’s not going to the amount of stock selection alpha and other things you need to do to be able to overcome even the cost of a mutual fund doing it is is you’re likely not to generate much alpha. So I I think there is I think the the allocator community is getting smarter every year about a lot of these points. Um but I think that there is I think I think there is a there are things that work better on it and and and the structural problem that you have is most alternative liquid alternative products are sold not bought. um they the the alloc you know capital tends to go to the largest firms with the largest salespeople who already have people who are invested in multiple products under the same umbrella and it’s it’s an incremental addition to their portfolio. Um uh and the the typical allocator does not like again going back to this being a human exercise doesn’t want to ask the kinds of questions that I’m known for asking. It’s, you know, I I just did a post on somebody who launched a a CTA product with a team of people who, as far as I can tell, have never run a CTA program. Okay, so that is taking a flyer. They put there had basically $300 million of their client capital go into it. Now, if it works, if they get lucky, it’s great. They have a $300 million product that’s done really, really well. If it goes badly, it’s their client issue and they won’t talk about it and three years from now, maybe they’ll shut it down or something like that. Like I so look I mean I’m it’s I’m going to keep calling out things on this in this industry where I think that um people who are standing there waving a a fiduciary flag are not are not acting in the best interest of their clients. It’s interesting you say do you think these products are sold and not bought? I was I was just looking at my screen trying to see if I can get the flow information on DBMF because I’d be interested to know how do you have do you have clients actively coming in and out or is it of your funds or is it more of a long you know very long-term allocation part of the portfolio >> um the the vast I I can’t really talk about DBMF for for compliance reasons but I’ll give you sort of generalizations and purposes. So I I I I wrote the business plan for ABF in 2016 and what it was based on were conversations with allocators who were looking for ways to get exposure to this space u but had had two issues three issues that they were dealing with. One was a line item constraint. So if I talk to Cambridge Associates or Mercer or somebody else they can populate an institutional portfolio with four funds and get some measure of diversification. The the reason AQR went to 14 billion in assets in their mutual fund was because a lot of allocators were basically saying it’s AQR a it’s AQR what can go wrong and B I want to do a 5% allocation space I guess it’s the easiest thing is just to give it to AQR okay that was a catastrophically bad decision not because I mean AQR is an absolutely staggeringly incredible firm but they were taking idiosyncratic manager risk without understanding it So what what I thought was that there was a there would be demand for something that would allow a model allocator who’s not the fund selector who who wants to be in the business of deciding whether it it’s Neil’s or you know or or or somebody else um and and how to assemble that portfolio but rather for the alle somebody overlooking the whole portfolio saying give me as consistent and straightforward exposure as you can to this area in a reasonably priced way. So 85 basis points for you know ETFs was about half of what the mutual funds were at the time and also and and ETFs were were were a a growing vehicle in terms of popularity. Um and so that was so again we built it on the basis of feedback from people who were the decision makers to how to make it better. So back to your point, um the vast majority of the capital are model allocators who there there is somebody there who is who has a series of models for high net worth clients um or mass affluent clients who is trying to it’s usually not a single allocation but usually it’s a core allocation or a within within within within within that bucket. Um so it’s not actively very few of them uh very few allocators actively trade which they should I tell them if you’re going to actively trade you you find something else to trade. It’s not it’s >> you know SG has a very very active and a very diverse and comprehensive QIS business. Um and I feel that the way those products are used and the way those products are approached by clients is is fund is probably more in line with how you describe your client journey about it’s a client engaging and trying to get exposure to a specific asset class or strategy or or theme. So there seems to be very sort of thematic use of these QIS and I was I was actually really surprised to hear that often we have global macro hedge funds who want to access some sort of curve steepener or some sort of thematic play for a finite period of time who will use the QIS as a um a much simpler implementation of a of a of a macro theme. No, I I’m a huge fan of QIS when you know what you’re doing, right? When when you when you are trying to articulate a bet and you are outsourcing execution and financing and everything else to uh to to somebody who’s in most cases is better situated to do it than you know if you’re not two sigma or dehaw or something who who can do it themselves presently. Um, no, it’s just it’s it’s rather I mean what I was referring to is back in 2013 was that the space was being marketed as having these liquid strategies that that you know as having strategies that were sharp ratios that were unrealistic. Um, and I and I think look even even in the US the the use of indices within ETFs and structure and and mutual funds and and and and usage funds. This is going to be it’s going to be a hot bed of innovation not just for capital efficiency not for just for trading efficiency but also because it opens a different category of investors who is not going to buy a 150 or 160 basis point single manager mutual fund in what they do because they have you know lowcost ETF model portfolios that that that require things that are look and feel more betalike. Um so so I mean you know the product innovation is there. I just it’s it’s my my criticism is that there are there are a lot of landmines in the space that have been predictable and honest I’ve been talking about it for 15 years right like it’s and and so um so I think uh I am hoping that as again you know in terms of the investors that I talk to they’re really smart like I tell you I started talking about an AI story about an allocator who really knows what he’s doing and his and his clients are much better off for it. Um uh and and the allocator base will continue to get more sophisticated the same way the QS allocators are much more sophisticated than than than they were 12 or 13 years ago when I first talked to them about about the space. >> I don’t know if this is completely hitting sort of this mark, but I’ll venture it anyways. I mean, of course, we’re going to have product innovation. I mean, you Andrew have been definitely part of that revolution and disrupting the space. And what I what I my concerns with things like QIS is that yes, we know it’s there. We know it’s huge. We have no transparency. We have no idea what the returns actually are. Uh compared to uh quote unquote, if they’re trying to replicate trend following or replicate CTAs or whatever, but we don’t really know how they’re doing because they don’t publish their returns or or anything like that. I guess my concern and and I will and I do know this sounds really old-fashioned when I say it right but it’s great with innovation but I am still concerned that when you come at the problem when you come at something and say yeah we can we can give you that right we can give you the CTA returns or we can give you trend following you know low cost and we’ll do it completely differently but when but often over time when you do things really differently why would you expect to be able to deliver the same outcome. Um, and maybe we have not seen it yet, right? Maybe the way markets have behaved, um, I noticed both Katie and and, uh, and Nick had some analysis where the environment for managers had been in a certain way the last 10 years, but it was completely opposite almost uh, in the first 10 years of of um, this millennium. And so all I’m just saying is I’m open to surprise both ways in a sense that yes, there’s going to be periods where these innovative structures uh outperform um and do really well. And it it kind of looks like, oh, we’ve solved it. There’s another easy way um to uh to do trend following without you having to do all the nitty-gritty stuff that that we do and have done in the last 50 years. But hey, at some point maybe we realize that okay, it works but it doesn’t work all the time. And that’s just my expectation to this space. Um but I do agree that um firms should not knowingly move into this space uh without uh the right experience and and just if they can put investors into products that that uh you know are are not um you know as they build as they should. >> Can I can I come? So, so one of the the >> um when I first looked at trend following models um back in and these were the bank trend following models and and it’s it’s there are it is easier to get the information now that it used to be um when I first looked at the space um I was asking questions that other people were asking which was okay when did you actually launch this index right if you if you launched the index three weeks ago then have you launched other indices that look like this how did those do right So these were the d the these are normal due diligence questions. U I mean the fascinating thing about it was that I think a lot of allocators just sort of suspended belief and decided not to ask those questions because they were under so much pressure to find liquid investable ways of getting things that had had low correlations to equities but that’s that’s that’s a different story. Um the my my issue also was calling it a risk premia, right? So labeling trend a risk premia like as Tom knows their trend indicator can look very different than the stock CTA index can look very different than the soen CTA trend index can. And and so risk premium implies that if the three of us design it, it’s going to look the same. like maybe it’s not the S&P 500 but it’s a little it’s going to be within kind of and and I think that’s been a that’s been a narrative I mean you know the narrative history behind that was after the quants almost blew up in 2007 and before that they were saying you know basically we’re quantitative long short order based lock boxes and we’re going to generate alpha from scratch and and it was like oh my god this is almost long-term capital you know second time and so you know with starting with AQR others the narrative on the space shifted to no no we’re just harvesting risk premia that have been around for 70 years and these are permanent features of the market and and so you know black rockck and aqr and others who jumped into this space talked about this as it’s not risky these are just permanent features of the market and we’re just going to help you to access it in an efficient way that I think was wrong so when I wrote about the trend and I I wrote a paper on on the trend products it’s it’s we know that manager risk as we talk about is very very high in this space. You know the three of us design a model a long-term trend model we’re you know we may have a correlation of point8 we can still be 20 points apart at the end of the year right the the um uh but it was the characterization of it as risk premia implied that xyz bank’s solution would would would be the easy one-stop solution. Now the way sophisticated allocators have adapted to this is not only by going underneath the hood on all these products to a great degree. Um but also thinking about okay so this is your flavor you know this is another bank’s flavor and this is another bank’s flavor how as an investor how how is an allocator do I want to put these together into a package thereby becoming almost like an outsourced uh uh portfolio manager and and again I think that’s a that’s an enormous improvement relative to where where we were 12 or 15 years ago but um but then people can make their then make they can make calls and do we think the team here who has 37 other quant projects that they’re working on. Do we think these are the people that we really want to invest in to to you know to be able to build this particular product or do we want specialized expertise? >> Yeah, I mean with all models whether it’s GTA models, replication models or whatever I mean there is a model risk somewhere uh or an execution risk or whatever that might be but but uh yeah this was great. Um we certainly got around today. Uh Tom, any and Andrew, any final thoughts before we uh wrap up? >> I hope this is the trendiest year we’ve ever seen. >> So do I. [laughter] What about you, Tom? >> Well, yeah, it’s it’s something that seems to happen here. We touched on the the global kind of conferences and uh it’s every year we seem to enter the first half of the year seems to go off with a bang and you know, I agree with Andrew, we want those trends to persist and we want to have good volatility but not bad volatility. Yeah, I mean I think we we didn’t even touch that much on it, but we had written it down that we would talk a little bit more about global macro and all of that stuff, but I think we can all agree that there are a lot of things going on in the world right now. So if you are um you know if you are engaged with strategies that essentially not trying to predict uh too much about where things going to go but do enjoy change uh as a as um as a you know um return driver then yeah maybe this could be a good year for us. Um anyways Tom I look forward to seeing you in Miami in a couple of weeks. Andrew I look forward to seeing you in a few weeks back virtually here. Um, now for those listening, um, if you want to show your appreciation, uh, for Tom and Andrew for all the work they put in in these, uh, conversations, go to your favorite podcast platform and leave a rating and review. It does really help us, and it’s nice to show um, you know, some appreciation for all the co-hosts who uh, put a lot of time into producing these uh, episodes. Next week, Alan will take over hosting for a couple of weeks while I travel. Uh, he’s going to be joined by Mark one week, he’s going to be joined by Jim another week. Uh, so please make sure to send uh your questions to info@toptradersplot.com and I’ll make sure that Alan gets a hold of them. From Andrew, Tom and me, thanks ever so much for listening. We look forward to being back with you next week. And in the meantime, as always, take care of yourself and take care of each other. Thanks for listening to Top [music] Traders Unplugged. If you feel you learned something of value from today’s episode, the best way to stay updated is to go on over to iTunes and subscribe [music] to the show so that you’ll be sure to get all the new episodes as they’re released. We have some amazing [music] guests lined up for you. And to ensure our show continues to grow, please leave us an honest rating and review in iTunes. It only takes a minute and it’s the best way to [music] show us you love the podcast. We’ll see you next time on Top Traders Unplugged.

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Welcome to proven and probable. I’m Maurice Jackson and joining us for a conversation is Giant Bandari, the founder of capitalism and morality and he is also a highly acclaimed adviser to institutional investors. Mr. Bandari, welcome back to the program. >> Oh, thanks very much for having me again, Maurice. >> Oh, it’s always a pleasure, sir. We have a lot of ground to cover today from geopolitics to natural resources and philosophy. Last week, the World Economic Forum concluded and President Trump took the stage to announce a 129:1 regulatory slash and a massive bureaucratic reduction. From your seat, was Davos a celebration of globalism’s end, or are we just watching the debt clock tick faster toward a Federal Reserve note collapse? >> Uh, well, the the the international trade is certainly broken. Uh there will be a reorganization of international trade. Uh there will be reorganization of how countries who countries affiliate themselves with. So the world is indeed going through a reorganization. Uh but the the fundamentals are of globalist thoughts are very much there and are indeed increasing. What you see uh that from is uh the speech of Marani who was uh who gave a typical globalist speech and who was applauded for his virtue signaling and platitudes. Uh things he said were the things people wanted to hear rather than what were the truth. Uh but unfortunately but even if they were the truth those were the truth that do not continue uh institutions that they the way they should be. So in my view globalist thoughts continue but globalist um structure the globalist structure of trade is going to uh shift quite a bit. Um in in my view the non-globalist people are uh people like Trump, Putin and Xi and these are all actually different kind of people with different kind of associations. Uh but the rest of the world is really globalist in its thinking. You know, I never I don’t think many of us never thought we’d see the day where the US and Canada would not be in agreement with one another. And I’m just curious to see what your point of view is. Is this short-term? Is this long-term? Who wins and who loses? >> Well, I think it will certainly continue until the time Trump is in uh presidency. Um I I’m actually amazed as well that Canade, Canada, and US are on the opposite sides right now. Uh but for Mark Khani it is extremely important to to virtue signal uh and that is what he’s doing. He’s a part of a government that has seriously harmed Canada. He’s a part of the government that hasn’t really taken care of uh the protection of Canada in terms of uh its u its independence. Uh and uh Canada has depended on the United States for its security. So they can do virtue signal as much as they want to. But Mark Carney’s speech, his anti-American, anti- Trump speech, which actually goes down very well with the globalist thinking people was uh really the the speech that uh that sounded good in terms of words, but that will harm his relationship with Trump. So yeah, Canada and US will be at loggerheads for the next 3 4 years now. Uh but again when a democratic president comes to power in the US, things will revert back to normal very quickly at least between Canada, the US and maybe European Union. >> You know, speaking of President Trump, since we last spoke in the summer of 2024, I wanted to get your view on the current administration because they’ve been moving at light speed. uh how do you how do you assess them currently where they are one year later? >> I I’m I have become increasingly a fanboy of uh Trump. I think he has done a marvelous job. Uh it’s not that uh he he’s a saint. Maybe his name keeps coming out of Epstein files as well. Uh and I cannot imagine that he had a saintly record. He was a a builder and a constructor in New York. uh so I cannot imagine uh him being a saint. uh but given what we have in the world Maurice uh he is truly a top international leader and again I keep coming back to the three people X G X Ping Putin and Trump who are the people who think for themselves who have uh gone through rough periods of lives uh who have u who who stand on their own feet who have views of their own and who have spines. Now all these three people think differently and do things differently but these are the only three leaders and maybe the Argentinian prime minister Eve Malay but he’s not so influential in the world affairs but these are the four people who have their own views and they stand by what they believe in where whereas the rest of the world is really morally and spiritually crippled in terms of leadership. Uh I just we just talked about Marani. Uh look at the top two people of European Union Ursula and Kaya Kalas. You have to listen to them for 5 minutes and I don’t suggest you listen to them for more than 5 minutes. Uh what they say is purile. It’s it it brims with virtue signaling. It’s really really something that I when I listen to them it comes across to me as if I’m uh listening to a middle class uh school essay. So that’s how purile uh the world leadership is about. Um so at the end of the day u I I think I have to go by what Trump is doing because other people are just spineless and mostly I would say idiots. >> You know in reference to spineless what are your thoughts on the United States essentially abducting uh Venezuela’s president Maduro and is this Noriega 2.0? And actually here’s the bigger question. Is the extraction justified in your viewpoint? >> Well, I don’t know what is justified, Maurice. Look at what has been happening for the last 100 years since the time or maybe 70 80 years under Pax Americana. American governments have competed with USSR and now Russia and China on uh the on countries in Middle East and in Latin America. America in the last three decades that I have watched closely has uh changed regimes in Iraq, Afghanistan, uh Libya leading to emergence of worse people to positions of power because those are the societies that will always have tyrants and totalitarians in in positions of power. And then in the process of changing regimes uh America uh led to indirectly maybe deaths of hundreds of thousands of people. So now you change regimes, you change governments, you de destabilize those countries. Uh compared to that here what you did was remove just the top guy and take him to a a prison in the United States. Now, how is that any worse than what Saddam Hussein faced? Uh, if people recall Saddam Hussein’s and there are videos available, he was dug out of a rat hole uh brutalized uh and killed in a very uh inhuman way and similarly Gaddafi suffered the same fate. So, uh given that background, how is bringing Mudoro, kidnapping Mudoro any worse? Uh in fact I think I admire the fact that uh Trump understands that he does not want to take over control of other countries. That’s what he’s trying in Iran. That’s what he he tried in Venezuela. But ensure that the second level of leadership in these countries works on his instructions at least partially. Now uh your question would be why what gives him the authority to pass on instructions to other countries? But that has how the world worked in the last 70 80 years. That has the how the world has always worked. Um now Mark Khani very uh uh you know in a very virtue signaling way talked about the international rule-based order. What has been the international rule-based order? It has always been America international order. America decides what is right and wrong. Now that’s that is completely another subject whether what America does is legitimate or not. I’m only saying that in the from the perspective in the context of what the world has had for the last 100 years. How is kidnapping a crook who was very likely supplying uh illegal uh immigrants to the US? And I’m I I know it from a legitimate source. Someone you and I know both very well. um knows uh through his top contacts that Maduro was actually ex expo exporting his worst prisoners to the United States. So he was already fighting a war with America. So I I think people should look at it within that context. Now whether America should have influence in in countries outside its borders is another matter but that’s something that no one wants to discuss right now. There’s there has nothing be international rule-based order. United Nation from day one has been a totally useless, crippled organization and they only do uh you know what looks good rather than what is good and they have no teeth anyway. >> Yes. One of the factors that many people do overlook is the asymmetrical warfare that uh Maduro basically unleashed on the United States but we don’t see it in our news dayto day per se. Uh, but we are aware that it does happen or and it still has h has been and currently still is. I want to shift now to Iran. There’s nationwide protests and I’m just curious, is this time different? And if so, why? >> Well, it will never ever be different in human affairs. Maurice, uh, those countries require tyrants to lead them. uh that is the nutrients the culture and psychology of the locals provide that enable tyrants to rise into positions of power. So you will always see tyrants ruling uh countries like Iraq, Iran, Afghanistan, India, Pakistan, Bangladesh. I mean the list goes on and on and on. And you are best off leaving those tyrants in positions of power because if you remove them, the worse will come into positions of power as you see in Afghanistan and you know Afghanistan is probably stabilizing now. But let them organically live their way. Uh it is the the kind of regimes these countries have are organic and natural to them. uh and don’t expect to uh bring many uh moral uh changes in the regimes uh and don’t think that what America and Europeans or the western people believe in will is the is the mind mindset of people in other countries. Don’t think that we are all the same. We are very different people. We could be different species as well. So I think unfortunately one biggest harm that America Americans did was to start assuming that we are all same people. We have same instincts. We all want liberty which is all fake and untrue. So uh stop changing regimes just uh pressurize them enough that they behave uh in a way that does not harm you. And I think so far that is what exactly Trump has done which adds to my becoming a fanboy. uh he has destroyed the nuclear capab some of the nuclear capabilities of Iran. Uh and he has not tried to bring a regime change so far and uh I hope that when he brings in a he pressurizes them enough to change something it will not lead to occupation of Iran because that will actually destabilize things and people will eventually learn to hate America again. Right now they want America to attack but in 6 months time they will have turned around and started hating America. So the best thing for America would be to just remove uh and uh influence the top people rather than bring a full regime change as they have done in Venezuela. Very rational words I have to tell you. Uh let’s shift to India. You referenced them earlier and one of the things that keep I I keep hearing over and over again is that India is an emerging economy and you’ve called this a dangerous conflation. Why is the narrative of India as a rising superpower essentially false and give us some examples of the irrationality that the GDP numbers are holding? Um well India sticks around as an emerging power because it’s the world’s largest democracy and dem democracy as a word is has a almost a sanctity has a religious feeling in the western world very erroneously because democracy is nothing but the rule of mobs. So uh uh India is seen that way and educated people who believe very strongly in democracy really really desperately want India to succeed because they want u their views to work out well which don’t democracy is an absolute disaster everywhere in the world that leads to emergence of spineless mentally crippled people like Marani and Ursula and Kaya Kala asked to emerge into positions of power and including of course Modi who is completely brain dead and who is a tyrant um to emerge into positions of power. So that is but but because democracy world has this sanctimonious position um India is seen as positively um but um what is India’s GDP Maurice? India’s GDP per capita is less than $3,000 per person. Now if you delete the top 10% of those people um the top 10% earners you very rapidly start seeing something like $1,200 or $1,500 per capita which means that every Indian and and and 90% 95% of Indians live on a couple of dollars uh a day or maybe three $3 a day. So this is how wretched poor and backward and primitive uh India is. Uh now supposedly India is growing at 7 and 12% or 6 and 1/2% whatever they say they claim that it’s the fastest growing large economy in the world. Now Maurice we learned in primary and middle school that you can’t compare GDP growth rates of things which are on a completely different baselines. Now, American GDP, Western GDP comes close to $80,000 per capita whereas Indian is about 3,000. Now, there’s such a huge difference that growth rates really don’t matter. Uh you can’t really compare growth rates. But even if at $3,000, if you grow by 6%, you will add $180 to your growth next year. Whereas uh $80,000 you grow at even 2% you will be adding $1,600 per capita which means that you would be eight uh in America you would be adding eight times the growth real absolute growth compared to that of India. So firstly this comparison is uh an uneducated uh comparison. Uh but now move on to whether India’s growth rate of 6 and 1/2 or 7 and 1/2% really legitimate. It’s all fake Maurice. Uh India is getting worse by the day. In the last 10 years that I have been visiting India. Of course I have been visiting India all my life but in the last 10 years I have seen degradation in the country. I have never seen as many beggars as on the street, old women, old men begging for food as I have in the recent past. And the reason is that the economy is actually in my view stagnant and receding despite the positive growth figures. Let’s just break up one very important part of it. It is assumed that half of the Indian economy is informal. So what Indian government does is that it basically in very simple terms uh takes into consideration the formal economy and doubles it up. And I’m making very uh raw numbers here, very rough numbers just to convey an idea. So it doubles up the GD informal sector GDP to conclude what the total GDP would be. But what you have to do is to decide on the proportion of informal uh GDP uh economy by uh surveys and India hasn’t done that survey in the last 15 years I think. So now just that thing tells you how corrupt the numbers are because after demonetization and the uh and the imposition of the new tax structure the informal economy has actually fallen quite a bit. So let’s say informal economy has fallen by 20 or 30%. Your growth rate right away turns into negative if that has actually happened and my guess is that is exactly what has happened. uh grow informal economy has formal in fallen formal economy has fallen increased but Indian government only considers the uh the formal economy and assumes that informal economy is just uh the same size as that of formal economy. >> I’m just curious what is the biggest export for India? >> Well look around yourself Maurice I and tell me if you buy if you know anything in your house that is made in India. India is a non entity. It’s it’s the biggest country in terms of population in the world. One out of five people in the world is an Indian. But tell me what in your house is Indian. Uh what in your what you think about is an invention by India? Uh it is a country which is a non- entity and which is destined to be a non- entity. Now you can you know cry as much as you want. you can you know do fantasize as much as you want but India isn’t going to improve it has never contributed to the world uh it is a drag on the world it is dependent on the world and whatever progress India has seen in the last three decades and I must say whatever I’m saying about India is actually true for all the third world countries um the the all the progress has been because of the free gift of western technology technology which hastened up because of the advent invent of um of uh internet enabled back office works to start happening in Philippines, India, Sri Lanka etc etc. So they progressed very rapidly. The only exception among those third world countries I would say are three China which is actually a fabulous country. Maurice when I go to China I some or usually these days think that I’m in a first world country and increasingly Vietnam and Cambodia but apart from that third world countries are destined to live a a horrible life and let’s not try to change that. Sticking with India uh there seems to be tensions between India and Pakistan. How serious is the threat of a kinetic conflict and does the moral fabric of these two nations even allow for a rational peace? Oh, there will never be a rational peace among those people. Uh they will always fight. That is in the minds of those people. Maurice, uh western people fail to understand that what they take for granted which is let’s say ten commandments. They think that those things are natural uh in human existence. Those things aren’t natural. Um envy runs u envy, hate, uh covetousness runs wild in those countries. is in the third world. So there is no way you can change that mindset. That is changing that mindset is is a process of at least 3 to five millennia. And I’m not exaggerating it. It’s not a process of a few generations or even a few centuries. It will take millennia for these people to change if at all they can ever change. So what happens when you are left without this fabric of ten commandments the the value structure that Europeans created? uh you are left with um uh a society that uh enjoys hating. Uh they hate each other and they cannot exist without hating other people. Uh they uh envy envy is openly expressed Maurice. Now I know this would come as a shock to you but envious people in the west would hide their envy. That is not the case in India and Pakistan. They would openly express their envy. So there’s no rational peace possible among those people. You can sort them out as much as you want to and they will find a reason to fight again. This is like a couple, you know, a couple that fights, a husband and wife that fights all the time and you sit down and sort out all their problems and the next day you realize they have come up with a new totally new problem to fight on. So, forget about a rational peace between India and Pakistan. They are totally incapable of fighting as well. Particularly India because India has no friends. Pakistan is slightly more rational and they have built friendship with China. So now whenever India fights with Pakistan, it will be having a proxy war with China. So India will is in a horribly losing position here because uh you know our Indian leadership is clearly worse than the leadership of Ind Pakistan. So now this is the situation when they have a war as they had last year. India and Pakistan which lasted for four days. Uh it seems that India lost uh very badly. They lost about seven planes, six or seven or maybe eight planes within hours or within the first 2 days and the war lasted for 4 days. So they don’t have the the capability to continue to fight a war the way Ukrainians and Russians or Palestinians and Israelis or is Iranians can fight. These are much superior people than South Asian people. So Indian South Asians have no uh capability to fight for a long time. Every war India and Pakistan has have had lasted for no more than 6 weeks. So that’s how incapable they are of fighting with each other. But this is h what happens Maurice when you have a fight with an Indian he will say his he these are the standard statements you will hear. He will say, “Do you know who I am? Do you know what I can do to you?” So, they threaten more than they actually deliver on those threats. But unfortunately, Maurice, one day comes when your threats snowballs into a full-fledged war. And I think that is not impossible for for those countries. But always remember, they will always fight. They will always be poor. They will always be wretched. And there’s no escape for from from that. And in comparison, I already consider Iranians to be much better people. >> You’ve said a lot there. I’d like for you also to take us now to Bangladesh, which is at a crossroads of chaos right now. What is the mainstream media not reporting about the unrest there and the anti-India sentiment that is currently tearing the region apart? >> Yeah. So, these are different sides of the same coin. Bangladeshies, Indians and Pakistanis are the same people with same the same petty mindset, the [clears throat] same hatemongering, envious mindset. So uh they will always be in chaos. I hold Bangladeshes and Pakistanis into a slightly better regard than I do Indians because at the end of the day once in a while Bangladesh and Pakistanis come to the street to fight for what is right. uh Indians never ever do that. So I hold Bangladeshes and Pakistani to a slightly higher regard. Now uh in India Muslims are being lynched. In Bangladesh Hindus are being lynched. So the these are two sides of the same coin. I have said it for many many years now that the the zenith of Bangladesh’s progress was with ended with the end of Sheik Hassina. Now she was a tyrant. She very likely led to deaths of many people. But don’t imagine for a second that any leader in a country in countries like those can run those countries without uh leading to brutality because that is the very nature of the people in those countries. They are selfish. They are corrupt. Corrupt from the western perspective. Uh I mean Maurice I can hardly ever think of people I know in India who are honest. They are simply dishonest. They lie all the time. So given that those kind of people you will have brutalities you simply cannot have civilization and this will continue. So Bangladesh will will become worse. It will become democratic again in another few months time maybe in a year’s time and I guarantee you it will only be worse because democratic forces will lead to emergence of more fanaticism. Shik Hassina controlled fanaticism. Now most people don’t understand Maurice but the reason UAE, Saudi Arabia, Bahin, Oman are great and they are actually very good countries some of these UAE I could actually live in UAE if I wanted to. Bahin or Oman they are very good countries but the reason they are well sane countries is because the rulers control fanaticism. If you want to pray in Dubai on the street they will come and take you away and probably can you. So uh uh that’s how bad how how well behaved the people are there primarily because the rulers ensure that uh people do not become too fanatic and that’s the same in central Asian republics uh as well which are primarily Muslim countries. So don’t give democracy don’t bring democracy to these countries. It will lead to emergence of fanaticism and mob rule as as it happened in Iran by the removal of Shaha. just let those those countries stay non-democratic. >> I’m just uh in awe with everything that you always say here. [laughter] Well, I tell you what, let’s let’s finish out the geopolitical discussions with China. What has your attention in Beijing right now that the western investor is completely blind to? Well, Maurice, I gave a speech in Vancouver at my capitalism when morality seminar last year and uh you know people usually like my speech but there were at least a few people who completely objected to my speech. My speech was on how good China is and how rapidly it is emerging into a wonderful country. Uh and they some of them just refuse to accept it. And you know I always tell people yes I let’s think about whether China is a paper tiger or not. Look around yourself and tell me what is it around you which is not made in China. Maurice at this point what I’m looking at virtually everything has been made in China. My my camera is made in China. My computer is made in China. My monitor is made in China. My microphone is made in China. So uh I I bought this headset in China for about $7 US or probably less. China is an absolutely amazing country. It is extraordinarily safe these days and honestly Maurice while my heart is in the United States phys in terms of physical safety I find China to be much safer. There is virtually no crime happening in that country these days. Maurice in in at least in cities that I have been to because I you know the only place I can go and sit down is in coffee shops in cities tier three cities included. Um people leave their oses on the table in the coffee shops and go away for half an hour and return back and not worry that their oes would be stolen. So that’s how safe China has become. People talk about this social credit system. I spent maybe a total of 4 months last year in China. Uh I still don’t understand what social credit system is. I have been going to China for two decades multiple times and every year I don’t see it. People are becoming increasingly civilized. People are polite. They are civilized. Their driving is still not great. It’s actually I would hate to drive in China. But that is only because uh they don’t know any better. And learning to drive as a society properly takes a very long time because every cog and screw and nut has to fit in the right way. uh but uh even in the United States uh Maurice try see how people merge into the high come into the highway merge into the highway let’s say in California they they they take the ramp and drive straight into the highway without letting the person on the slow lane continue driving at his pace. So unfortunately changing the driving habits is not easy. But Maurice I am just uh amazed at no end looking at how rapidly China is improving. Now Chinese economy is suffering because of their fight with uh Trump and I in my view both are right. Trump wants to jump Trump need wants to bring some manufacturing back to to the US. He is u very likely scaled that within the next 5 or 10 years China will be able to uh compete with America in in its armed for in terms of armed forces and Chinese economy probably has more um vitality than American economy in the long term probably so in the medium term I would say. Uh so I’m totally amazed and I think people should uh just visit China for a few days. You now can visit visafree for I think 30 days to China. Just go and have a look. Here is the big difference between the west and and the far east Asia. Maurice the west is very solidly rooted in truth seeking and philosophy. That is not necessarily the case in far east Asia. And because of that uh the key innovation and creativity will continue to emerge from the west. Uh that is why my heart belongs to the west. But don’t underestimate China. It’s a lovely country. It’s a fabulous country. It has a country with the rule of law. The policeman isn’t going to take you away at 2:00 in the night and hood you when taking you away. That I have never seen or heard of in the last two decades. And people have a very m misconceived notion of that country. Go and visit it. >> As you state that, I recall and you referenced as well your presentation during capitalism and morality. And there was uh probably I think one or two people that were in >> Oh, thanks. And and thanks Maurice. You helped me uh uh edit and upload those videos. So you of course watched those videos. >> Well, my absolute pleasure, sir. But I’m reminded of the uh the discontent if you will when you were referencing the virtues that you enjoyed about China. And I think you in each case uh your your simple rebuttal was have you ever been there? And each respondent said no. And that’s kind of what I noticed on our number of our previous videos as well or interviews is when you’re referencing the virtues that you like about China, there’s a lot of uh content there. But then the question I always asked is I ask and I I interject sometimes in those comments is have you been there? Because often we we make comments because we’ve seen it on a screen but that doesn’t give you the full narrative whatsoever. >> Well, and that is Maurice a big problem with the educational system. People should be very careful about sending their children to schools. Uh the problem is that uh schools educate you while removing you from realities of life and that is a very strange way of educating people. I think it makes people very bookish. Bookish in the sense that they think that what they read is a is the reality rather than the reality being the reality. So I I think schools have done a horrible job by removing people from the realities of life. I don’t think I can disagree with you and I think many of our audience members are of the same opinion. Let’s pivot to natural resources. Starting with physical precious metals, we’re seeing gold, silver, and platinum each respectively setting new all-time highs. In your view, is this simply a currency debasement story, or are these metals trying to tell the market something more ominous about the global rational fabric? Um well both Maurice uh fiat currencies are headed uh for a complete disaster because uh there’s no way you can in stop inflating them away. So uh that’s on one side. The other side is that wars continue to increase. Uh we and you can’t blame anyone for it. um the you know you can’t blame Trump for it because Trump has only made those uh un uh underflow more uh obvious to to the society which Biden and other administrations were hiding from your visibility but uh those tensions were all were increasing and were there. So the world is changing very rapidly. There is going to be conflict between supremacy of China and the United States. There will be conflicts on places like Greenland, Canada. Europe is probably gone in my view because their leadership is so stupid. You just have to listen to Kaya Kaj Kaya Karas and Ursula for 5 minutes to understand what a disastrous future Europeans have built. So uh in in my view the world is a very unstable people. It is and at best controlled by purile na and naive people in in the in in the in many parts of the world and at least in the first world and very stupid and tyrannical people in the third world. So the the world is going to go continue to go through chaos and that is why people want to uh people will continue to have a temptation to keep uh things that that are more likely to preserve their values. So I think that is why metal prices have gone up so much. Uh but here here is my issue Maurice. these prices have gone up too much too quickly and uh and u u and I think u I was uh always in your show recommended people to buy gold and silver in the past but because I’m an investor I think through things ahead of times uh I bought these uh 10 15 years back 20 years back uh and now they are much bigger parts of my part of my portfolio than they should be so am I going to buy more no uh but uh I think people who don’t own any of these should be paying attention to the uh destabilization of the world that is happening but they should also be looking at China, Singapore, Hong Kong, Taiwan, Japan as possible investment areas in the future and of course the US which is which I continue to love and continue to think is the top country in the world. >> Let me give credit where credit is due. You and I spoke late, I believe it was last weekend, and you shared, Maurice, I believe that the metal prices are going to have a big setback coming here and true to the words, uh, we were actually supposed to interview yesterday. So, it would have been perfect to have the interview done yesterday and then people could see what came to fruition. But we saw that, uh, silver, gold had a significant drop today, I believe. Silver up, silver down 30%. So, your call was spot on. Uh, by the way, I just wanted to give credit there. Yeah, but at the same time Maurice what else would you do because the stock markets fell very badly as well. So uh unfortunately the world is becoming very unstable and uh it is very easy for people to say hey what I got into fell by 30%. uh but uh my guess is that it is not impossible that uh a time might come when you would say hey at least I preserve 25% of my value by investing in this thing and this is how some of the very rich people think today they they invest they buy something worth billions of dollars knowing fully well that they might lose a big chunk of it but they just want a guarantee that a bit part of their propert wealth would stay preserved for them to continue their lifestyles. So we are in a very chaotic environment. I would be very careful about buying buying anything in in a feeding frenzy. That would that is something I have never done in my life. But indeed precious metals have gone up too much too quickly and um and and they might still continue to go up. So I have no way to tell you not to buy but be very careful particularly when uh at these current prices a lot of projects can become mining projects the gold projects. So a lot of gold can start coming into the market in 5 or 10 years time. >> Good insights. And just to share with everyone just so you know that I’m not here to sell my own book. I’m bringing on someone that believes that the metal prices are going to go down and he’s not a big advocate for buying them. [laughter] So I got to be the worst salesperson in the world. But I would like to ask you this. >> Well, well, Maurice, Maurice, people trust people who are truthful. So they might not. And I I I admire you for bringing me on despite that. I am a lot less um optimistic about the gold price today than I used to be in the past. Um and so so but but eventually people find themselves attracted to pe towards people who are truthful. >> Thank you for the kind words. I’m honored. May I ask you this? If you did not own precious metals, could you speak to the person um listening that may be in that position even under these current circumstances, would you still not buy if you didn’t own any precious metals or would you still entertain having a metal and which one would it be? >> Well, I I would always be interested in gold. Um I I think silver has a problem right now because silver prices have gone up too much and that will hurt uh industrial consumption of silver and substitution uh substitutions will start to emerge in uh industrial usages. So silver prices in my view might have gone up too much. I would continue to be in interested in gold also because platinum and palladium are very politically charged commodities. Um, South Africa has a negative influence on the pricing of platinum and paladium. So, I’m more interested in gold. Uh, if I did not own gold with my present net worth, I would certainly be interested in buying it. Uh but when a person who has $2,000 uh in his bank deposit and nothing else uh in his pocket, if he goes to the market and buys silver with that money, I would discourage him because uh it might it might be too much uh for him. Uh for a person who is reasonably well off and doesn’t own any of these things, uh it would certainly be worth having five or 10% of his net worth in precious metals. I have a lot more of it. So, I’m not I’m uh that is why I’m I’m ambivalent today. >> And if you’re looking to buy or sell physical precious metals, please give me a call at 855-5051900. We are licensed brokers through Miles Franklin Precious Metals. Again, that number is 855-5051900. And again, you can call or text me directly. Moving on to resource stocks. Giant, you’re one of the most respected names when it comes to resource stock analysis and arbitrage opportunities. Are there any value propositions at the moment that have your attention that we should consider researching? >> Absolutely, Maurice. And I have now um apart from our two or three companies completely shifted into investing in arbitrage opportunities uh because when the market is frothy I want to protect my downside and arbitrage investments help me with that enormously. So I I have one four companies uh in front of me Maurice I can take you through uh as many as you want. Um but uh let’s start with one company. First company is Winsome Resources on ASX. The ticker is WR1. Winsome Resources and it is being acquired by a by a Canadian resource company and the Winom Resources is trading for 59 cents Australian. I bought bought it for 57 and a half yesterday. So you should be able to buy it for less than 59. And at 59 the arbitrage upside is 25%. And this merger should close sometime in March. So I’m very happy with such an arbitrage 25%. Uh let’s talk about another company um Golden Lake Exploration which is being acquired by um by another major company um um I’m forgetting the name the ticker is MUX but Golden Lake Explorations is ticker is GLM and the arbitrage is 11% right now. It is trading at 12 cents Canadian. My guess is that it will fall to 10 cents. So you can increase your arbitrage upside by being patient in Golden Lake. Um so these are two companies. If you want to hear more, I can give you two more, Maurice. >> Absolutely. I think everyone has their pen and paper out right now, sir. >> Okay. So the next one >> myself. >> Okay. The next one is gold resources. The ticker is Goro Goro on New York Stock Exchange. It closed today at $1.34. The arbitrage upside is 28%. Uh now the last company is uh a very interesting company. Be very careful how you buy it if you do. Uh the company is Electrum Discovery. It trades in Canada under the ticker Ely and it is trading at 11 12 cents. the it is being acquired by an Australian listed company. The arbitrage upside is 50%, 50%. So the ticker is El. Uh here is the issue with Ely. Uh it will get delisted in Canada and the merged entity will continue to uh trade on ASX. So if I had to buy ELY, I would buy in a in a in a brokerage like Interactive Brokers where my uh Canadian listed stock would without any pain change into ASX listed stocks and uh so I won’t have to worry about that issue. If I bought it in in a Canadian brokerage that exclusively trades in the US and Canada, my problem would be that my broker would charge me 10 15% in commission to do a trade in Australia. So be very careful if you want to buy this company, buy it in a on a on a platform like Interactive Brokers. >> Wonderful insights and on behalf of all of us here. Thank you for your insight, sir. This is probably everyone’s favorite part of the show when Giant shares his arbitrage opportunities. Ladies and gentlemen, I’ve benefited from these arbitrage opportunities over the years. uh you know we always reference that one uh Sun Ridge Gold from 2016 but uh your insights have fundamentally changed a lot of people’s lives by just taking advantage of these arbitrage opportunities that just kind of go under the radar and we’re thankful that you’re sharing them here with us uh right here on >> yeah Maurice I don’t think they are necessarily under the radar the what happens is that people are too greedy they want to convert their money into 10 times overnight that doesn’t happen the greed will ensure that you uh break your foot, leg or or nose, uh you will fall. uh but if you’re patient about trying to exploit this 11% 28% 25% and even 50% arbitrage opportunities as a portfolio I’m unlikely to lose money and I’m as a portfolio one of these things one of these mogers might fall apart but overall I will make money and I’m the best thing is I’m least likely to lose money in in a portfolio like this if I make uh 10% a month in In an arbitrage like this, my annualized gain is more than 150%. Now, that’s a fabulous upside, but unfortunately, a lot of people are too focused on investing in something that can make them 10 times their money overnight. And that is uh the reason why they never make any money. >> Wonderful words of wisdom and instructions. And I recall you when we first met years ago, uh 10 years ago actually 2015 I believe it was and uh when I asked you some questions regarding investments and the number one thing you shared with me is you must preserve your capital and this is one of the ways as you’re sharing right now how to do that. In closing, we’ve talked about metals, we’ve talked about stocks, but all this ultimately is a byproduct of philosophy. Now you’ve long argued that philosophy is the most underappreciated tool in an investor’s kit. Why is it so paramount to understand the moral fabric before we even look at a balance sheet? >> Well, because Maurice philosophy, ideas, values like honor, integrity, um ten commandments, these are something which removed humanity from the animal kingdom. We became distinct from animals because of these things. And the world has to pay tribute to the west for it, Europe for it because they were the people who came up with those uh those values and those uh that moral fabric. uh and those values uh and moral fabric led to emergence of massive economic growth which is just one part one symptom of having uh uh have having these values and that is why uh particularly United States will continue to be the center of the of the of gravity of the world because it is a society that is deeply rooted in those values and and in in a in a slightly less a solid way are Canada, other European countries and Australia. But that is what gives uh massive creativity and innovative p innovation power to the western world and that is why they will continue to lead the world in for many years to come. Um and uh if you see Japan, China and other far east Asian countries copied uh western ways of institution building from 1850 onwards after the loss of opium war in China and uh during mi restoration in Japan. So those things even copying the superficial aspects have meant that far east Asia has done extraordinarily well. So philosophy and ideas for me are the keystone of everything. Money is just a symptom of uh that keystone. I would focus on moral values, philosophy and ideas. And I I think that is where Europe many western people will continue to exceed the rest of the world. >> If uh you’re interested in hearing more words of wisdom again as Mr. Bendori just alluded to you can find that under his uh vision and his uh creation called capitalism and morality. Mr. Bendori introduce us to capitalism morality and what is the vision behind it? >> Um well I have been u running this seminar in downtown Vancouver for the last uh 16 17 years now and it has run every year except for a couple of years during co days. I have invited people like Dr. Amy Wax or um Warren Ferrell, Dr. Walter Block, Rick Rule, my philosophical mentor Duck Casey. So, I’ve invited some really top-notch people to speak at the seminar. And my idea to idea here is mostly to convey to the western people that what the the today’s generation might take for granted that is ten commandments a certain moral fabric uh might not be natural to human existence. They were those things were created over uh many millennia long pro process uh in the western world. Don’t take them granted. don’t get get rid of them or they will disappear and maybe before you get rid of Christianity think about it because maybe it is a glue that keeps many of those values together and I think loss of Christianity has at least coincided with the loss of moral fabric in the west. So I my interest is to just remind them that these values and moral fabric do not exist in nature. civilization does not exist in nature and uh let’s preserve what we have in the west. >> Well, as a Christian, I have to say amen. All right. Uh I want to congratulate you first and foremost on another successful year for 2025 on capitalism and morality. It was a a true master class in conturing thought. For those looking ahead, where and when will the next capitalism morality be held? Uh next one will again be in downtown Vancouver 19th of September this year. So I decide on a date much earlier so that I can start uh filling up my program slowly. It is on my website. If you go to jantandari.com there’s a tab capitalism morality. It gives you videos of the past 16 years of uh se the seminar and it will also uh give you the the date of the next seminar and some of the speakers that are going to be there. Looking forward to it, sir. Last question. What did I forget to ask? >> Um, well, Maurice, I think we have talked a lot. Uh, my my only strong recommendation to many people would be to go and visit China if they have never done so. If they haven’t done so, they are losing out on understanding a big part of the world, which is uh which which actually makes you cry sometimes because these people were uh so poor, so wretched. uh when I started visiting China and it has become such a prosperous such a calm such a peaceful country uh it has you know nothing is perfect so don’t judge a country based on based on what you don’t like but look at it as an overall society and I think most people will return from China extraordinarily impressed with those people what they have achieved in fact Maurice I’m a libertarian I’m a very capitalistic guy and When I look at China, I challenge myself if there is something about my understanding which is erroneous because China has invested hugely in um in big industry in capital intensive industry in in infrastructure and I question myself if the I always ask my myself these days if government participation in such sectors is legitimate the way China has done because it has actually given China a bad bond. So I’m always open-minded because I’m always looking for truth. Uh that is the cornerstone of my life and visit China. It’s a lovely and fabulous country. >> Mr. Bendari, it’s been a pleasure speaking with you today. Wishing you the absolute best, sir. >> Thank you very much for the opportunity, Maurice. The information presented on proven improbable is provided for educational andformational purposes [music] only without any express or implied warranty of any kind including warranties of [music] accuracy, completeness or fitness for any particular purpose. The information is not intended to be and does not constitute [music] financial investment or trading advice or any other advice. You should not make any financial, investment, or trading decision based on any of the information presented without first undertaking [music] independent due diligence and consultation with a professional broker or competent financial adviser.