Animal Spirits Podcast - How to Talk To Your Clients About Ray Dalio (EP. 482)

Episode Date: September 17, 2026

On episode 482, ⁠⁠⁠Michael Batnick⁠⁠⁠ and ⁠⁠⁠Ben Carlson⁠⁠⁠ discuss: AI human extinction fears, the biggest AI risks, why things go viral, why the stock market is so confusing right now, how to think about bearish hedge fund managers, why bonds offer a good deal right now, Fed rate hikes, government debt fears and more live from Future Proof in Huntington Beach, CA. This episode is sponsored by Betterment Advisor Solutions and Janus Henderson. Learn more about Betterment Advisor Solutions at https://betterment.com/advisors Investing in a Brighter Future Together. Visit https://www.janushenderson.com/ for more information. Sign up for The Compound newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Us On Social Media: Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Find complete show notes on our blogs: Ben Carlson’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠A Wealth of Common Sense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Michael Batnick’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Irrelevant Investor⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

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your mission and our vision. Always working in perfect harmony to find the right investment opportunities, Janice Henderson investors, investing in a brighter future together. Welcome to Animal Spurts with Michael and Ben. It is Tuesday morning on the West Coast, 1020 so that I'm not doing math. I don't do calendar math.

That's 1 o'clock. 120 ET. And here's what we're going to do. So we're going to do probably 25, 30 minutes right here. And then we'll do the live show that we're dealing with Colin Roche, where we're going to talk about how to talk to our clients about Ray Dalio. All right. Last week, we opened the show.

I opened the show with a little, a mini monologue about how I viewed the state of the market. I felt like the discourse was getting repetitive. really nothing new was happening. And then boom, boom, boom. We got the perfect internet discourse. An anthropic employee resigned and said, I can't do this anymore. Everybody internally thinks that there was a 10%

or greater chance of the civilization being wiped out. And then Dario responded with, we do need to slow down. Sam Altman quote tweeted and said, yes, Elon Musk is on board. Of course, Trump thinks it's a hoax and there's nothing to see here. But I say it's the perfect internet discourse

because obviously, extinction would impact all of us equally. And obviously, nobody knows what's going to happen or the motivation. bullish for the stock market, though, because earnings are spread across a lower base. That's true. But the point is anything goes.

Nothing is out of bounds. any opinion you have, let it fly because who could prove you wrong? Very extreme. That's the thing with putting probabilities on something like this. No matter what number you give, it's going to cause a reaction.

I guess my initial thought here, and the funny part was this guy resigns, people are saying, hey, he worked at Anthropic for six weeks, no big deal, and then a guy who still works at Anthropic in AI safety said, no, no, he's right, it's 10%.

That was the funniest part. He went rogue. Everyone was like, no, yeah, yeah. Actually, we agree with him. I don't know. I guess the extreme sentiment of, here's the AI extremes. Some people think, and this is the Ed Zittron, AI is a useless technology.

It doesn't work. It's a piece of crap. Other people say, no, no, no, it's going to destroy humanity. And the third extreme option is it's going to create a utopia with 20% economic growth. No one's going to have a job. It's going to cure cancer. I guess my whole thing, my grand rapids head, is leave me out of all the extreme opinions.

I don't think any of those extreme opinions are going to happen. And I think the extreme stuff basically never happens. Well, let's hope not. My question is, one of the angles is, well, yeah, of course they're trying to scare everybody and saying this is the most powerful technology ever because they're going public and they need to raise that a $2 trillion valuation. My question is this, how is this a fundraising strategy? Well, that's the hardest thing to wrap your mind around with these comments is what is this is the Charlie Munger thing.

Like, show me the incentives and I'll show you the action. Like, what are the incentives of the people saying stuff here? Like, what do they get out of this? And so some people say, no, no, no, no. The reason anthropropic people are saying this is because they want to pull the ladder up behind them and they don't want any competition. And it's really hard to know. It seems like people, you know, the VCs have a certain opinion because they want their investments to work out. And the AI employees have a certain opinion because they want their shares to be worth it.

And so. But how does this boost their valuation? I just don't find that to be a credible. I understand everybody wants to have the cynical take. I kind of, maybe I'm a naive schmuck. I kind of take this at face value. I think these people really do, a lot of people really do believe this. That's the thing.

I think they do. So Derek Thompson had an interesting observation. He quote tweeted this guy, Jacob, who resigned. And Derek said it's so interesting to me, what narrate his breakthrough and when and why. Folks out and around the labs have been warning about AI risks for years. And I think he's right. Like, this is not a new thing. No.

They've been talking about this for a long time. And this, for whatever reason, as Derek points out, he said, this gentleman quits anthropic and his post gets 100 million views in 16 hours. How and why narratives catch on when they do is mysterious. It is just like the Satrini post. The stuff that the Satrini guy said a few months ago was not new saying, hey, AI is going to come take a lot. People have been saying that.

But for whatever reason, that thing goes crazy viral. and then they also get potentially bought because of it. It is... Somebody emailed us and I thought he had a really good take. And he was like, guys, well, let me just read him. He said even experts can be sucked into a mania. You guys know the importance of people... I'm sorry, you guys know of important people

in the financial world who have gotten way too excited about something that didn't merit it. Same thing happens to scientists and mathematicians. And that makes sense. like even financial professionals are no less susceptible to bubbles and manic behavior than anybody else

and he's saying like why should you expect anything different from people in tech they're also being seduced into a mania I suppose my only non-intelligent take here is that just like these people just because they're in it doesn't mean they know what's going to happen

and I feel bad like saying tech people always make these grand pot proclamations, but these are the same people who said, Web 3 in the Metaverse are the next thing, and crypto is the next thing. Yeah. But I'm just saying they don't have a great track record. They have a, listen, tech people are great at making products that move us ahead to the future.

They're not great at predicting what the outcomes of that future are going to be. Is that fair? Two things can be true. What you just said is true. It doesn't make, it doesn't make me take these threats less seriously. I'm not completely dismissing them. How about this? I am more concerned that there's going to be a cybersecurity incident

in the next 10 years than human extinction. Like, that, to me, is a way higher probability event that AI bots are going to swarm something and we're going to lose all our passwords and Duncan's going to get hacked again and loses. Like, that, to me, is people losing their banking information or credit card, whatever it is. That's a way bigger threat than AI is going to see humanity gone.

Duncan, you want to get on the mic? What are you laughing at? What's so funny? It happened to my parents, too. My parents had $20,000 taken from their credit card, put into their checking, transferred out, like that kind of stuff. It's very scary. All right, Ben Thompson, our source of truth for what's going on in this world.

Because basically the story is Dario and the industry is now saying, we need regulation, we need to all be on the same level field. the problem is, China's not slowing down. And so it's a prisoner's dilemma type of situation. Ben Thompson said this. It's sometimes hard to shake the sense that people in tech are quite literally too online.

Losing the internet might feel like extinction. I can certainly relate. But the important point is that it is digital, which means enabling AI to touch grass depends on physical infrastructure operated, manufactured, and controlled by humans. And as long as that is a case, I have a hard time accepting the imposition of an authoritarian regime based on a premise that isn't yet proven.

How about this? So this was the immediate pushback. Listen, if we slow AI in these frontier models, China's going to win. And that's the initial pushback. And I understand that pushback. But here's the thing. If we win AI, guess what? China's going to copy it.

If China wins AI, we're going to copy it. Why is this such a game that's one country. has to win. I don't understand this. Yeah, that's a good point. But no, Ben Thompson had some fair point, like fair pushback. And I do think, listen, if you listen to the tech people talk, it's like

they're living in another reality because say the top 1% of people using AI are using it for these agents that do all the work for them or their personal assistant. And I personally, I still have not come to the point where I thought AI has changed my life. Like, it is a very

cool technology. It has helped me do some research. that would have taken me hours and hours in the past that I can now do in minutes. Well, how is that not life-changing? I mean, that's a high bar. Like, yeah, it's not having kids. But I feel like the tech people who are using these, like the top-end models are like, oh, my gosh.

No, I think that disconnect between them and the rest of the world has never been greater. All right. So on that point, I agree with you. Ben Thompson again said this is an attempt by a specific political movement in San Francisco, moving in conjunction with one of the major political parties, to insert itself in the operations of every AI company,

nominally in pursuit of a goal that is futile. I find the constant because of China admonitions to often be tiring, but in this specific case, it's absolutely justified. Quote, pacing the frontier in a world of geopolitical competition with China is stupid and not going to happen. And that really ought to end the whole argument. So they're not slowing down. It is kind of funny that, like, the idea that China is going to slow down

because we are going to, like a giant wink from them. I do think that, like, if we're talking about what the actual risks are of this, so have you read or listened to the 1873 book? Yeah, I finished it. Okay. That's very good. So the whole... I thought it's kind of boring.

It's one of those financial... It was a little too long. But that's true. But it's one of those things where it's like, I've read about, oh, the long depression in the past and this deflation the last 30 years. Like, I don't know. That seems like kind of a big deal. So it was just...

There was more to it than I thought. But my big takeaway from that book is, yes, there was an economic downturn, but it wasn't that severe. It was the policy that came from that downturn that caused the problem. And I think that is the big, the next big potential financial crisis is going to come from policy, a policy error. And it's going to be the Fed or the government overstepping or like it's going to be one of these things where the overreaction to something happening is going to cause the error as opposed to the thing it's, itself. And I think that that's potentially like, Duncan's about to have a meltdown. Who uses planes to market anymore? AI trusted by advisors. Of course. hilarious. Very, uh, very timely. That's the banner

flying behind this. But doesn't it seem like the policy prescript, like, I don't trust either political party to regulate this. I have a lot. I, I'm a patriot, Ben. I have full faith in the government. Yeah. I was thinking about this. So I had this in the, in the dock. last week before prior to, I think it was Wednesday when all this shitstorm happened. And I was thinking about the stock market. And two things I was thinking about. The discourse around the stock market, I think, would be a lot easier if the stock market was either going up into the right or down into the right.

And the stock market is having a good year. The S&P is up 12%. It's up 17%. But it's weird because valuations are falling while the stock market is rising. So it's like, it's kind of like you could, you can spin it both ways. And I think this is something that I have a problem with. I feel like this is one of my biggest blind spots. I have full faith in the stock market. Maybe sometimes too much because I talk to you about this. So mortgage rates this year have gone from 6% to 7%, the 10 years gone from 4% to 5%. Inflation has gone from 2.5% to 3.5%

like just that macro backdrop, you go, oh my gosh, that is not good. But hey, the stock market's up 13% on the year. So things are fine. sometimes there's too much trust from us financial professionals in the stock market telling you it's okay, so it's okay. Well, it's been a pretty good predictor. It has. It hasn't steered us wrong recently. I mean, at some point, obviously, it'll get it wrong. But the other thing I was thinking about is I wrote, I don't think we're going to have a meaningful sell-off until there's an event. I don't think it's going, I guess I suppose it could be interest rates. Maybe maybe 5% of the 10 year isn't what does it, but maybe it's 5.3%. Who knows? Maybe maybe this is that.

But I think in the background, the earnings acceleration is keeping a pretty high floor in the market. And if there is some sort of slowdown, fine. Well, earnings should still be fine because free cash flow of the hyperscalers will replenish. Right. And it will be fine. And then again, we had that event. And so people were thinking about, holy show, what's the stock market going to do on Monday when it opens? And semis had their worst day relative to software.

all time. I think semiconductors were down five. Software was up 5%. And I didn't know this until I checked a second ago. Semis, some people might be thinking, Mike, you're looking at the wrong stocks. Don't talk to me about the SP being up 12%. The semis were up 80% to July.

Okay, fine, but now they're not. And guess what? Semis are almost in 20% drawdown. And the stock market is down 4% or so. Did you know that? Yeah, 3%. The rotation inside of the market remarkably strong, even with like the breadth of rating. It's still, there's still some support under the stock market for now anyway.

Um, all right. One of the complaints I had last week about being duped by AI all the time, just how annoying that is and will be. Great example. That Clay Matthews bullshit. First of all, that wasn't funny. Fuck off. Right? That's stupid nonsense. I must have missed this. So Clay Matthews was, uh, was caught by TMZ,

and other outlets. His face looked like Gaston from Beauty and the Beast. Just the chin out to hear it looked totally ridiculous. And everybody's like, what the hell did this guy do to his face? He had like implants in his legs.

He looked totally ridiculous. And it was fake. It was like a promo for Cesar's or some bullshit. So you got got got, is that what you're saying? Everyone got got. And it wasn't even AI. I think it was makeup, but it's just annoying.

All right. AI also, someone planted an AI video of me seeing karaoke last night at the bar. That didn't happen. So Ben, so Ben had a great time last night. I was sleeping at 9.30. And Ben sang his song. Is that from cocktail or? No, it's from Top Gun. Everyone has to have their karaoke song. My karaoke song is you've lost that loving feeling, which Tom Cruise sings at the bar to Kelly McGillis and Top Gun. that's my that's my karaoke song I don't remember that scene okay um he taps her on the shoulder

and he says to goose and goose says don't do it don't do him out and he yeah it's a classic incredibly 80s yeah Ben you were telling me that you've

Daniel you gotta put me in Michael in the Navy outfits for Top Gun or is that oh hell yeah no no no put us in the I want to be wearing the jean shorts

yeah on the volleyball for the thumbnail yeah absolutely um you've got some comedic observations Ben Not comedic, but just I had some travel observations. Go ahead.

Okay. First of all, last night, a lot of people commented, someone actually said, did Michael find a stylist? Because you have upped your fashion game. Wrong. It was, did Michael hire a stylist. Yes. And I did not. I've just self-taught.

So here's my problem with fashion. I think the, by far, the best material in the summer in nice weather is a linen shirt. Okay. I think that is by some people... Oh yeah, but last night, but I've got a linen take. I'm saving it for tomorrow. Go ahead.

Some people would say it's Searsucker. No, linen is by far the best. You have a nice pair slacks or horse. What the hell is Searsucker? You don't, Searsucker is the blue and white stripe. Oh, okay, okay. But here's the problem. You wear a linen shirt for five minutes,

and it looks like it's been crumpled up in the corner. And it's impossible to wear a linen shirt without getting wrinkled. Right? Right. I thought it was, I thought your tape would be a little bit. special than that. Okay, I got nothing else. Here's a question. Why is every body lotion at a hotel lemon flavored, lemon scented? You know it's true. If you, any hotel in the world, besides like maybe a four or five star hotel, everyone is lemon sentient. Why is that the case? It's a good point. Right? Okay.

One more. So our airport, they totally are redoing the airport. And this is the first time I've seen this before. Maybe you've seen this in New York. So I go to drop my bag off. I usually am a carry-on guy, but we're here for a few days. They had self-service baggage pods at our airport now. You go up, you scan your boarding pass, you put the bag in yourself, you scan the ticket on your bag, the baggage, whatever, and it shuts and it takes your bag for you. Someone's not doing it. The amount of confusion I saw on people's faces, you know when you see baby boomers try to use a self-checkout at a grocery store. And like, why, they're like,

uh, why people at the airport that have never flown before, this is a horrible idea, right? Yeah. I mean, for me, it's fine because I get in and out faster, but it's a terrible, terrible idea. All right, anything else? I think that's all I got.

Okay. We got a good email. Have a thought experiment that is perfect for you two to ponder. First, what is something that you saw around the house growing up that represented rich to you? Good example for me. If you had a kitchen island, you were rich. Or if you had a water dispenser in your fridge, you were rich.

Pretty good. Now try to think of anything that denotes rich today. Mine would be if you have a built-in refrigerator, you're rich. What are yours? So I emailed him back and I said, what do you mean built-in refrigerator? Aren't they all sort of built in? What he meant was a refrigerator where it's part of... Oh, it looks like the cabinets.

Yes. Okay. And I said, ah, that looks very nice. So, I think back in the day, I think probably I thought if you had a pool, you were rich. Mine was HBO. If you had HBO when I was growing up, you were rich. Because my parents never got us the movie channels. And I can only watch it on, like, remember once a year they'd have the free weekend?

Yeah, that was a good weekend. So how did you watch Sopranos? Were you in college? I had to catch up on it later. Okay. Because that's why I missed it, because we didn't have HBO. Yeah, I didn't either. I did not grow up in an HBO house.

All right, here's, so. But today I feel like there's so many markers of being rich that you might not even be rich if you have them. Okay, well, here's one that I think, that I think it costs money. I don't know if, you know, people live beyond their means, but this costs money. A heated driveway. That's probably more common where you are. The biggest house on our block has a heated driveway, and I'm always so jealous of them because their driveway is perfectly clear in the winter without all big ice chunks and such.

But think about modern houses compared to the houses that we grew up in. I feel like most houses have an island, or many do. Yes. It's not rare at all. Yeah. That's the thing. There's a lot more, I feel like it's more subtle now, the rich stuff. What about how could I not say mudroom?

Yeah, so you build your own mudroom twice, then you're rich. All right. The trailer for Artificial has, which is the Sam Alden movie starring Andrew Garfield gave serious social network vibes. Did you say it? I'm not going to watch that. I'm not going to watch the New Mark Zuckerberg one. I'm sorry. You don't have to apologize.

That's your prerogative. They're trying to make it like social network. I feel like they're trying too hard. Could be right. The new trailer for the new M-night movie, which... Wait, wait, I thought you were anti-trailer. Now we're back on trailer. Well, it's a fair point.

It's a fair point, Ben. There are some trailers that you can't avoid. So here's the trailers that I do avoid. The independent ones, like, obsession backrooms, I raw-dog it. The invite, no idea what was it about. But there are some trailers that when you go to the theater, you can't avoid them, because they show them before the movies, right?

Wait. M. Night Shyamalan did a movie with Nicholas Spark. Who's Nicholas Sparks? He's the guy who did the... Oh, is he Beast? No. He... Yeah, he did like love...

What was the Ryan Gosling? Love story? Nope, he did the notebook. That's a bizarre combination to me. Wait, is he an actor? No, he's a author who wrote the book, the note... He did the movie The Notebook.

All right, anyhow, I am... I love M. Knight. I can't quit him even though his movies are very, very... The Josh Hartnett movie was unwatchable. Trap? I loved it. Awful. Terrible. Very well.

Extreme, extremely, highly watchable. Highly watchable. So the new one is with Jake Jalenhall and I am. All right. I am. I mean, I will watch all the movies. Not feeling it. It looks pretty, pretty poopy.

Okay. Ben, have you, you've been saying this, and we got a few emails about this, that Apple has really stepped up their game. Someone did say that. I thought you said that. I did. Someone else emailed us that. It's Apple is turning into HBO. The quality of stuff that they put out now, silo is a very good show.

But the marketing is such dog shit. I don't even know what's on the... They don't... So my wife and I watch May Day, which, as you know, I'm a Ryan-R-R-R-Reylton-Stand. How? Every time you say that, I die a little. He's had some ups and downs in his career.

I'll put it that way. A Ryan-Mettled Stan. So there's this movie called May Day. I came out on Apple. My wife and I are looking for something to watch. We go, wait, there's a new Ryan-R-R-Reyl movie on Apple. It is highly entertaining. It has...

So they have a lot of top-gun, references in the movie. It takes place in the 80s. It's kind of top gun meets behind enemy lines, meets every Ryan Reynolds movie you've ever seen with him telling jokes and being sarcastic. And it is highly entertaining. For a movie that goes straight to streaming, I'm telling you, give it a try. It's called May Day. It's my wife and I got done with him and go, I can't believe how entertaining that was. I don't think I will. Okay. So my daughter now was moved on to the Twilight movies. But wait, hold on. Sorry, just real quick on the Apple thing. The reason why I brought it up is because they destroyed last night at the Emmy.

they cleaned up. Most awarded network, by far. It makes sense. It's a very high. I had of Max, Netflix, Prime, and all the others. I mean, they're obviously spending a lot of money because they have so many big names. What were you saying about your daughter?

So she's watching the Twilight movies, which I'd never watched before. I remember the books were huge. Kristen Stewart and Robert Pattinson. It's kind of like actually impressive Robert Pattinson is such a big actor now that he didn't get sort of pigeonholding that. That's true.

So you've seen this meme before of the guy standing on the, and looking, this is the hoity-to-to-y meme. It's Michael, Michael Sheen, is that the guy's name? This looks like Jason Pereira, the financial advisor, with hair. I never realized this meme,

the origin, it's in one of the Twilight movies. My daughter's watching this, and he's a vampire, and I go, that's the meme. Oh, Mike, I was Leo in the movie, going, that's the meme. I also had no idea, and I have to be honest, I don't even know what this meme is representing.

I don't get it. It's someone, we could use this meme for what is something that's, it's a person who's acting hoity, hoity, and rich. Okay. I'm better than you. Got it. Okay.

So I rewatched aliens for the first time in a long, long time after listening to it on the rewatchables. I watched it

with my son too of a week ago. And I listened, I watched the extended cut because on the rewatchables they were talking about it being an option. So I watched it.

And it's a pretty important omission that in the extended cut, you find out that Sigourney Weaver, which, by the way, two things. Sigourney Weaver was f***ing incredible in that movie. Unbelievable.

Number one. Number two, Sigourney is not a real name, is it? I can't imagine it. It's the type of thing that I thought about it, like I was somebody like that's about it was. I said, wait a minute. That's not a real name, is it?

You know, there's no other Sigournys. Anyway, when she was gone... I got to snort on Daniel. So she was in the pod cryogenically sleeping or whatever for 57 years and her daughter died when she was in outer space and so her maternal instinct toward Newt

who is definitely the weak length of the film was a huge part of the story and they cut it out I didn't realize that either after watching the movie my son fell in love with Bill Paxson and for the whole week he kept saying come on man everything he said man at the end of My son kept saying that to me.

Come on, man. So that movie, could you imagine seeing that in 1986? It, I mean, some of the flying stuff didn't work, obviously. But it is amazing. So I watched the last 20 minutes with my kids, and they were jaws on the ground. It has, that movie has precursors to Avatar. With the yellow thing. Yeah.

I know you're an aliens fan. I still think that the original alien is far superior to the sequel. Well. We can agree to it's great. You can be wrong. That's okay. I mean, Alien's a great movie, but Far Superior is insane. All right.

So, anything else, Ben? Any final thoughts? No, future proof is, once again, amazing. There's 5,600 people here, and we got our shot. We'll send the production team, our picture of us. We always get our shot at the initial cocktail party. I mean, that's one of the best parties of the year. The first night cocktail party.

That's unreal. The vibe is just immaculate. The sun is setting. There's thousands of people in this one space. There's music on. There's Monday night football. It's really hard to explain how cool of an event this is if you don't come to it. That's right.

That's right, Ben. All right. Here is our conversation with Colin Rush. And we're back. So after the camera turned off, Duncan asked me if I wanted to apologize to Matthew Reese because apparently he did quite well the Emmys last night for Widows Bay. And what else, Duncan? Okay, so I thought he was exceptional in Widows Bay, but I didn't care for him in Beast

Inside Me, so. I thought he was great. He's also. I won't apologize. The Americans is one of the most underrated shows of the past 15 years as well, and he's awesome in that show. I highly recommend if you're looking for something to binge, watch that show. So it's good.

Sometimes it takes a big man to him, and he's wrong. And see. Hello. Let's go. Let's make some noise. Oh, this guy almost took a tumble. That would have been something. Ah, all right.

I feel like we're sitting on the same side of the table at a restaurant right now. You're really close to me. Bring it in. Bring it in. All right, so this is animal spirits for those in the audience that don't know us. My name is Michael.

Ben's name is Ben. And in thinking about what we were going to do for this event, I was struck by a lightning bolt of inspiration. Second time I've used that analogy at this event. Here's what happened. Two weeks ago, an advisor slacked me and said, hey, one of my clients is asking about interest rates.

You know, just wants to know what we're thinking about our fixed income allocation. And so I gave him some talking points. He said, hey, let me just, I'll forward you the article that he was talking about. So, all right, gave him talking points about what we should say, how we're thinking. I saw the article. I clicked on the headline. And the headline was, is somebody smoking marijuana? Smell that?

The headline was this. It's a time. Only at future proof, I guess. It's time magazine. Okay. It's a time magazine. very mainstream article publication and the title is the bond market supply and demand problem by ray Dallio and I read the intro and Ray Dallio said the big debt cycle

degenerative process that follows these dynamics can easily easily be seen and understood by studying historic cases across many countries and is as predictable as demographic changes. Really? It's that easy, Mr. Dahlia. Anyone who has studied monetary history and should know that all monetary orders have eventually broken down and blah, blah, blah.

I called my advisor and I said, I demand to be on the call. I can't take this guy anymore. Mr. Ray Dallio has been scaring our clients for 10 years plus, and I won't put up with it anymore. Right? It's enough.

So hang on. And so I actually got an email from our client. This is a month ago. He said, okay, Ray Deallio is worth over $20 billion. So he knows something that's for sure. And the guy has run one of the most successful hedge funds in history. He said a lot of people certainly believe in his thinking, not saying he's wrong, but are you down with his current thinking or at least some of it? And so Michael and I thought, well, who better to talk about the dynamics of macro than someone that we've learned a lot about?

So Colin Roche, originally of pragmatic capitalism, which is now been retired. now at Discipline Fund. So Colin come out. We've learned more about Macro from Colin and also. Please welcome Colin Roche. Let's go. I'm going to sit over here. So, all right.

The title of the show today is how to talk to your clients about Radalia. We've got a problem. Cullen's got some insights. All right. So, yeah, the 10-year just pierced 5% for the first time since 20-23. I'm not saying that all of his concerns are completely unwarranted, but I feel like I'm taking crazy pills. Sure, there is risk with bonds,

but why aren't we talking about the reward? It is finally time, high time, I should say, to be enjoying fixed income. Colin, am I crazy? There's nuance in this discussion that, I mean, first of all, I think... Well, there's not. Well, Ray's obviously brilliant in a lot of ways. When you write a book about how countries go broke,

I think you fall into a position where you naturally have to then defend that position. There's no backtracking from me. That's literally the name of one of his books, How Countries Go Broke. And you guys know, I mean, I've written an egregiously embarrassing amount of content on this topic. Because in large part, I went through this whole process after the GFC, where when the Fed was doing QE and everything was going on after the financial, crisis and the government is, you know, spending all this money and stuff, I had a lot of clients who were asking that very question. You know, this is going to either cause hyperinflation or the

country is going to go broke. And that period was really interesting for me because at that time, I'm actually contacting a lot of people in Japan because Japan had done all this stuff for 20 years. And I'm talking to people like Richard Koo and famous macroeconomists who had been having these conversations in Japan for 20 years, where the Japanese thought the same things. the country's printing a lot of money, we're doing QE, the country's going to go broke. And I learned a lot during that period in large part because how countries go broke is very specific and very nuanced. And I think that the thing that's really important about the United States is not only

that the United States can print its own currency, but the United States very specifically does not borrow in a foreign currency. And that's really the crucial aspect that I think distinguishes the United States from a lot of countries that actually go broke. So the one thing that worries most people is, okay, the debt is gone from, I don't know, 25 trillion before the pandemic to 40 trillion now. Interest rates are rising. So that means, of course, the barren costs are higher.

Interest has a percentage of GDP is higher. Debt to GDP is as high as it's been since World War II. And it's like this is happening not in a crisis. This is happening in a kind of not booming economy, but a growing economy. Yeah. Right. So deficit spending is so high. And it doesn't seem like either political party.

is ever going to change their stripes. It certainly feels like nothing stops this train of government spending. So is there anything about the government debt that concerns you? Yes, and I think that's where the nuance comes in, is that when you have these discussions with people, I think you have to specify, first of all, what is the risk? Because when we talk about countries going broke, when a country goes broke, it impacts all of the debt.

It means that you default on every single liability that the government has. And that creates an emotion where you've, feel like you have to eliminate all of that asset from your portfolios. And that's, I think, simply not the right risk in the United States. The risk is not that the country is going to go broke. The risk is that a lot of this government spending can cause inflation. And we all kind of know, you know, like the interesting thing about COVID is that when we see the government really try to create inflation, the government can succeed. They spend, you know, one of my favorite data points from that period was that government spending as a percentage of GDP went up to 40%.

And it's averaged about, in the last 25 years, it's ranged from like 20 to 25%. And we're back down to that 25% range. So we kind of know that when the government tries hard enough, they can cause big time inflation. So if default is not a risk in the United States, then the conversation you need to have with clients is that, well, what is the risk? The risk is inflation. And inflation impacts different assets in very different ways. And I think that's where the nuance and there's elements of Dahlio's argument that are very right

in the sense that the longer you are, especially on the treasury curve, the further out you go, the more exposed you are to less and less inflation protection. And I think that's an environment where today becomes really interesting because the dynamics have changed even since COVID. because when you look at things like, like a 10-year TIPS yield is at 2.6% today, that's really attractive. It means that if inflation averages 5% over the next 10 years,

the client is going to get a roughly a 7.6% nominal return over the 10-year period. On an asset that is essentially risk-free over the entire 10-year period. Isn't that good? That's really attractive. So I think there's an element there where you can still say, you know, should you be buying 30-year treasuries? That's still maybe a little crazy to me,

and that's the element where Dahlia was maybe right. But, but geez, I mean, like, a T-bill is yielding 4.6% today. Hallelujah. I mean, like, if you've got a one-year liability and you're trying to communicate to a client that, hey, you know, you're buying a new car in 12 months, and we're going to put this money in a one-year T-bill, and you're going to yield 4.6% that whole time, that's like a no-brainer. You're getting basically probably an inflation-adjusted return on that asset. And you have zero probability of that asset going to zero because of default. So that's where the nuance is really important inside this conversation.

All right. Let me get away from the nuance and just go full bore one more time. So I'm sure this drives you nuts as it does me. You more so because you know this stuff better than I do. but Dahlio is talking to a public audience, right? Like Time Magazine is a general listener, a readership. And he said, to understand the U.S. position today, imagine that you are running a big business called the U.S. government. I'm sorry, which big business is?

None that I know. Does Apple print their own money? I don't think so. Then he goes on to say, like, federal debt held by the public is six times annual revenue. And how is this relevant? $240,000 per American household. Okay. Yeah.

What does that even mean? Colin, you always point out the fact that you have to look at the assets too. There's got to be a denominator there. But I think one of the things that I've come to realize is that I think to be a hedge fund manager, you have to be generally pessimistic in some ways. If you listen to people like Paul Tudor Jones and Stanley Druck and Miller, I think their disposition naturally is pessimistic. Whereas most advisors, I think, have more of an optimistic bent to them.

And I think you have to think about the personality. too, and the fact that he's a salesman, he's always been a salesman, and how do you get people to invest in a hedge fund? You scare them. Yeah. Yeah, I mean, that's a good point. It's a, I mean, as a hedge fund manager, you're probably persistently more concerned about risk management, and it's the things that can blow you up that are worrisome. Whereas for your average household, your biggest risk is really, what is it? Probably long-term inflation and being able to fund your short-term needs. And so that's, I think, a perspective that in general, most of us, who are helping household, we probably have a big equity overweight, just inherently, because

most of our liabilities are probably in the future. They're probably tilted towards equities in some way. And that means that inherently, there's a balance there to some degree of how you're going to manage the asset allocation. But in the long run, if you're helping households, there's a lot of logic in having a default optimistic position where you just sort of say that, hey, we have to be optimistic to some degree because the equity market is the best head. against the long-run risks that most of us face. Colin, you think a lot about asset allocation. You're an advisor to your own clients.

In the post-GFC period, I really do feel like interest rates, the Fed, pushed people out onto the risk spectrum. That's not an opinion. Everybody was saying that, and it's true. Especially as an advisor, it was a difficult conversation to be delivering a 1.4%

nominal yield on bonds to our clients, charging 75 basis points or whatever you charge. Like, that was a hard conversation to have. And so slowly but surely, 6040 became 6535, 35, 35, 25, 25, 85, 80, 20 in some cases. And it worked very well for everybody that did embrace risk. Now, 6040 is back. People are talking about it's dead? It's so back. you can actually deliver a very attractive, real, after-tags,

here's the fee returns. Here's the pushback, though, that I've heard. Okay, so you can get, call it 5% in high-quality bonds today, which people would have, like, crawled over dead bodies to get 10 years ago, right? Because for 15, this is the highest yields we've had in, I don't know, 17 years or something, since before the GFC. The pushback now is, of course, no one wants to own bonds in a bull market. Like, why do I care about 5% on the stock market is going up 15% per year?

But then people say, well, if I'm getting 5% take away inflation, take away taxes, what's left? Which obviously- That's full market behavior. It is because nobody says it in a bare market. Obviously you're paying taxes in the stock market too and you're paying taxes or you're taking inflation out of that as well. But it seems like people are looking for excuses to not own bonds. Well, I mean, this is also sort of classic bare market behavior where, I mean, when the equity market goes down a lot, people have the same exact reaction where they start looking for all

the other alternatives. And what you're seeing in the bond market in the last, you know, really since COVID, basically, is that exact same phenomenon where prices have gone down a lot and people are now, now they're all scared of it. When the time to be scared, of course, was in 2019 when a 10-year treasury note back then had a modified duration of eight and a half and was yielding 1%. I mean, the risk reward there was insanely low, whereas today that same exact instrument still has a modified duration of eight and a half. but it's yielding 5%. So your cushion is so much better in this sort of environment that the risk reward has substantially changed.

And I think that's one of the reasons I love talking to clients about time horizon based investing in large part because this is such an easy concept to communicate to somebody that when you're buying a five-year treasury note, that thing has a modified duration of what, 4.8 or so.

It's yielding 5%. The cushion inside of that instrument is completely offsetting the interest rate risk inside of a one-year period. And so you can communicate that concept to somebody where, look, we're going to buy bonds out to five years because we know that at five years, your cushion is virtually offsetting exactly what the interest rate risk in that instrument is. We're going out to 10 years, 20, 30, okay, now maybe we're setting ourselves up for a little bit

of, you know, behavioral risk where, you know, if you're buying 10 or 20 year treasury bonds and the Fed decides to raise rates and interest rates go up by 2, 3%, 3%, percent, more, who knows what happens in Iran and all the craziness with inflation, and suddenly you start getting more of this whipsaw and treasury bonds. Well, you know, that's a risk you've got to communicate to people. But I think when you can communicate that, especially that zero to five-year time horizon is really easy to communicate to people, and they get it because they understand, people don't understand modified duration. They don't understand factor investing in style, you know, boxes and stuff like that. But they understand, hey, I'm buying a one-year treasury bill.

I'm getting 4.6% on this. No, duh. That seems pretty compelling. Yeah, I agree with you. Not to be so arrogant as to say this, but I will say it. I feel like absent something going off the rails and Ray Dalio being correct, that there is real risk. Okay, so absent the 10-year going from 5 to 8, which would be really bad,

here's what I'm going to say. I don't think bonds can hurt us anymore. Like, they did. I think people are still scarred from 2022, understandably so. But if you can't say this about stocks where you show a client, okay, here's what we know for sure. If the 10-year rises 150 basis points, yes, price will fall 3.8%. Whatever it is.

But people aren't thinking about the other side of the coin, which is first, not just the income, but what happens if the economy doesn't? slow down. Like, there's also going to be a benefit, an uncorrelated, negatively correlated, hopefully benefit, which has not existed. And I get that people are like shell-shocked. But I really think that, as you can tell, I'm beating the dead horse. I got a question for Cohen on this. So the Fed raised rates today, right? My question is this. Does it matter as long as the, the hyperscalers are spending so much money on AI? Like, can the, how far would the Fed have to take it to slow the economy if the only thing that seems to matter is the AI buildout.

It seems like the only way to really slow the economy is to slow that buildout. And so the Fed raising rates is not going to stop the war in Iran. It's not going to stop hyperscalers from building this out unless the debt burden got so high that they couldn't borrow. Like what is actually going to slow the economy? I mean, that's the ironic thing about Warsh being the guy who's raising rates is that the guy who probably controls interest rates is the guy who probably controls interest rates is the guy in the White House right now.

So I'm actually, like I've been saying all year that the probability of them raising rates was very low because I was shocked. I would be shocked going into the midterms that anyone would continue to push. So you didn't think there was going to be a rate increase today. I mean, at the beginning of the year, I did not think there was going to be rate hikes. I thought there was going to be rate cuts, if anything. So, I mean, we're getting into variables that are inherently unpredictable to begin with because nobody can predict exactly, you know, the, I mean, you're playing, you know, 3D chess

when you get into inflation. You didn't know there was a war coming. You didn't know it right. Right. And nobody thought the war would persist as long as it has to this point. So, I mean, who knows? Like, here's the thing. If we really, you know, we go all in and on Iran and let's say that oil goes to

$300. What happens to inflation in that environment? I mean, it probably goes, who knows, six, seven, maybe eight percent. Who knows? Because oil has this, you know, this huge impact on everything because it impacts diesel fuel and diesel fuel impacts all the trucks around here. And that impacts everything that's being delivered. And who knows how long.

all that's going to last. So, you know, that's the risk. You know, I'm inclined to agree with you, Mike, that that is an outlier risk, but you're getting into like inflation predictions then, which are, you know, I've spent most of my career trying to model and understand inflation, and I'll be the first person to tell you that nobody knows what inflation is going to do over the course of the next six, 12, 24, 24 years, you know, who knows? It's just market pundits like to say the cure to high prices is high prices. And on the one hand, that obviously makes sense. I saw a stat today that the average gas prices, whatever it is.

It's like $460, I think, nationally. That's costing consumers. What is it in California, $1260? Yeah. Yeah, $6.50, I think I saw the other day. That's costing consumers, I think, an incremental, is $100 billion possible? $10 billion? Whatever it is, it's a big number.

I don't know if it's $10 billion or $100 billion. Whatever. My point is this, or my question is this. Is that enough to slow the consumer down, finally? Like, does gasoline matter to the economy anymore? The screwy thing about interest rates especially, and this is one thing that is pretty empirically understandable, is that it works. The Fed's policies work mainly through the real estate market. They slow debt consumption, basically. And the main way households

consume debt is through mortgages. And the real estate market has been obliterated in that sense. Yeah, it's completely frozen. So prices haven't gone down, but prices have actually stagnated, which is kind of phenomenal, given the supply constraints that you have in the real estate market. And so I think to Ben's point, like, yeah, the Fed has probably done a lot of what it can do in terms of slowing the economy with interest rates. And, you know, how much more work can be done. Yeah, I doubt that this rate hike is going to have a big impact on inflation in the next few years, especially if you continue to see the big AI spend. I mean, the real problem with the whole AI issue right now is that these companies are obviously

spending huge amounts of money on, you know, investment and data centers and everything. And that's causing this very, you know, what I think is sort of a near-term boost in inflation because that's flowing through to electricity and you're starting to see the impact of that in the short term. I think AI is incredibly disinflationary in the long run, meaning that I think the rate of inflation slows because of AI, just because, I mean, once you get to a point where robots really are meaningfully doing a lot of the work across lots of components of the economy, unit labor costs collapse. And there's so many deflationary knock-on effects of that, that in the long run,

it's hard for me to envision a world where AI isn't extremely disinflationary. And the weird thing going back to Dahlia on all that is that the government probably has to get more involved in everything because of that. Because if you start to ever see real job losses and real wage collapses, well, the government then starts to inherently get more involved in everything because they're the offset. They're the only entity that can actually come in and actually pay people in an environment where there's real meaningful job losses. So if you're like trying to rank recession risks right now, how much of a risk is it that for whatever reason? There's not an ROI there. The debt costs get too high, the burden that the hyperscalist do whatever pullback.

in a meaningful way. To you, is that the biggest recession risk that there is? Good question. I mean, in terms of stupid things to try to predict, I think I would rank, trying to predict recessions is probably my top one. But I'll be stupid and say that, yeah, I mean, the hyperscalers are probably the biggest risk to, because when you look at the, what's been offsetting real estate for the last, I mean, it's crazy. When you look at like residential investment and, you know, investment as a whole from corporations, it has actually been declining pretty substantially over the last five years. And that's in large part. But data centers have been offsetting the whole friggin thing, which is incredible. So, you know,

if you start to really get a pullback in data center investment and AI investment in general, what does that do to GDP? Then you're entering Mike's world where all of a sudden real GDP is slowing and all the sudden, you know, two or three years out from now, the Fed maybe is looking at a situation where, you know, maybe we've pulled out of Iran, the economy's slowing, and all of a sudden you're looking at an environment where everyone's talking about rate cuts again. All right. So let's just give Dalyo Bowen and say that he's not dumb and he definitely definitely is not dumb. He said, looking forward, it appears most likely that things will get worse. And I estimate that projected deficits will cost federal debt to rise to roughly 55 to 60 trillion

over the next decade. Is there a breaking point? Like, okay, so let's assume that it does go to $55 to $60 trillion. I mean, it is going there, right? Yeah, so, yeah, I mean, that sounds like that is where we're going, right? So what's the risk? Seriously, what is the risk? The risk is inflation. It's will the government spending cause big time inflation?

And, you know, I think some of the confusion with this or some of the fear mongering around this is just the sheer size of the numbers. I think when people see 40 trillion, they say, holy cow, that's just a gigantic number. How can that possibly be sustainable? And it's crazy, though, because the United States is such a humongous economy. I mean, when you talk about the total financial assets of the entire economy, we're talking about $450 trillion. So, like, yeah, the debt, the government debt is big, but all the other assets are way,

way bigger. And so, yeah, I mean, those numbers can change. And the equity market would change that or real estate prices would change it. But even so, the size of the government's, you know, issued assets are still in the scope of things. You're talking about the economy that is the richest economy that has ever existed in the whole world. Say a lot of our clients that didn't hear. And this is the thing that I always try to communicate, though, is that this is the entity that can tax the wealthiest society that has ever existed in all of mankind. And so when you're talking about whether or not this entity cannot afford.

What you really start getting into is you start talking about a discussion about, well, are you then inherently sort of or implicitly making a prediction about the wealth of the United States? And will the innovative fervor of everybody in this room and, you know, everybody who resides in the USA, will we suddenly, you know, stop innovating and making the world's best products? You know, you're making a really macro-barish argument in that sense because that's where the government ultimately derives its ability to fund. everything. Can I ask you a question about the inflation? The coolest person in the world just drove by. Pause for a second. So I have a question about inflation. Okay, government spending, issuing debt,

theoretically can cause inflation. My question to is this. Isn't all of the government spending on just a few things, on social services, on defense spending? So how does that stuff filter into the real economy and cause inflation? I don't see the mechanism.

I mean, it does. Because you have to consider the counterfactual where if the government wasn't doing all these things, these people wouldn't have the income and the ability to necessarily consume all the things that they can because the government is giving them the ability to do so in essence. So there's that counterfactual. But, I mean, even in this sort of an environment, like, it's interesting, even with the debt dynamics as big and bad as they supposed to. are, you know, we still have, you know, headline CPI is 3.6%.

That's actually not even that high. That's literally the long run average, essentially. Yeah. So, I mean, I know that, you know, I don't want to like sugarcoat it. And I know that inflation is different across different parts of the economy and for different people. But it's especially interesting in the case of like, you know, people with who are getting Social Security and things like that.

Because those are people that, I mean, I see it every day in my, you know, job. I mean, those people consume less and less. as they get older and older. Like, I mean, they're not, and that's part of the longevity debate with all this, is that as you get older, you know, the economy's getting older, and those people consume less and less. So yeah, they're theoretically, they're getting more funding from the government, but they're not the people that are the big drivers of consumer-price inflation.

The 82-year-old? Yeah. So my last question on Dahlio, who, I mean, he's too busy and Burning Man. He doesn't care what we think, obviously. But so I think the biggest risk people keep saying is, well, there's a lot of There's going to be like a buyer strike against, that's going to be the thing. Like, they're going to get too worried about debt and deficits in the United States, and there's going to be a buyer strike on treasuries.

So my question is... It's the opposite. No, people are going to die for all that. So my question is, like, what is the alternative to treasuries? Or couldn't the government just say, you know what? The Fed is going to lower rates and we're going to fund the whole government through short-term borrowing. If there really was some sort of crisis in the treasury market, aren't there a million ways around it? I mean, that's the funniest part of this whole conversation is really,

when you get into these conversations about the USA going bankrupt or something, and you look at basically every single other government option in the whole world, they're all worse. So, yeah, you can say that- China's just as indebted as we are. It may be worse, right? So you can say that, yeah, we're a dirty shirt, but we're the cleanest dirty shirt in the closet. So it's one of these things where, you know, even when you look at reserve currency status, I mean, we're still held as 60% of all foreign currency reserves, which is the next closest one, is Europe. It's like 22% or something. And so it's it's not even close. And would anybody put

European debts on the same level as United States? It's a joke. It's just not even. And the next closest one is Japan. Japan's like 4% of all reserves. And I would I could argue maybe maybe there's an argument that Japanese government debt is, you know, maybe similarly quality as United States debt. But even so, you look at their economy, it's way smaller, less innovative. I just, I don't see where what's the alternative is, I guess, in a relative world of currencies, what's the alternative? What's the alternative? I think that's a good place to end it. Colin, that was awesome.

Thank you very much for helping us learn how to talk to our clients about Mr. Dallio. One announcement, we are hosting an animal spirits happy hour at 545. We're behind the State Street, awesome State Street setup. So we'll see you then. Thank you, everybody. Also shout out to the guys in the front room and at every animal spirit's live event. These guys.

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