Animal Spirits Podcast - Talk Your Book: The 3 A's of the U.S. Economy

Episode Date: February 9, 2026

On this episode of Animal Spirits: Talk Your Book, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠��⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Bill Mann, Chief Investment Strategist at Motley Fool Asset Management to discuss: asset prices, artificial intelligence, affluent consumers and what it all means for the stock market. 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. Check out the latest in financial blogger fashion at The Compound shop: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://idontshop.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ 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. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ 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. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Motley Fool Asset Management. Go to fooletoffs.com to learn more about the Motley Fool 100 Index. It's ticker TMFC and the rest of their ETFs. That's Fooletefs.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management.

This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits from Michael and Ben. On today's show, we speak to Bill Mann, one of our favorite guests to have on about the stock market. And I said something, you know, about the golden age of, what I say?

Of what? finance of asset prices? Golden age of asset prices. At some point, this will end. And we'll enter a new cycle and there'll be a recession and a bear market. And then that will end. And then that will be another bull cycle. And on and on we go.

I say this all the time. Doesn't party you just want to fast forward to be like, just get on with it already? Like, what is, are we still going to be doing this in 2029? Like having these same conversations? We could have said this thing in 2017 and we would have been like, geez, we still didn't get the comeuppance. and it's 2026 already. Yeah, I think a lot of newer listeners are acting as if these conversations

about the length of the bull market is new. Like, quite literally, it was getting long in the tooth in 2016. That's what it felt like, of course. But the thing, you said, like, the golden age is going to go away. But our talk with Bill, he talked about how everything is just more financialized.

Think about it. Like, people are betting on words people will say in speeches now and stuff. And, like, in gambling and day trading and all this stuff, like, that financialization, of our economy is not going away. That's only going to be continued to grow and grow and grow in everything that can be financialized in some capacity probably will in the years ahead. It already

has been. Yeah. I also think during these conversations, maybe we lose sight of the fact, even though we bring it up all the time, that it's earnings and margins. And that's it's it's not like, it's not like, why are people, why is the stock market at a record high? Because earnings and margins are. Right. Right. And when earnings and margins dipped in 2020, to, guess what happened to the stock market? Got killed. And so that's it. So what's going to, if we switch it to like the business side of things, what's going to slow down earnings and margins? Probably AI overspend, right? Like all these data centers that were just overbuilt and but it's funny though. The thing that could take us down is the thing that's trying to increase

margins even more, right? They're investing to make things for everyone, everyone, quote, unquote, more efficient. Right? So even if you get the comeuppance, the other side of it, hopefully, is technology that makes the margins improve even more. All right.

The bull market lives on. We'll see. Listen, it's just, the risk is always the same. The biggest risk is just a recession, like a nasty recession. That's the risk. And I guess you could say,

the longer this goes and the more the spending builds and builds, the harder that fall could be, even if it's kind of a mild recession. Yeah. I don't, is this Howard Mark said this? Somebody said this. The best, the worst loans are made in the best times. And so maybe that's, maybe that's what's happening today is there's too much debt and people are getting sloppy and I don't know, maybe that's it. Who knows? Or 10 years from now, this is still going to end. Who knows? Yeah, that too. All right. So here's our talk with Bill Mann. Bill is the chief investment strategist that Motley Foo has at management. Always a good discussion with him. Bill's got a great laugh. Guy likes to laugh. Funny guy, right? So here's our.

talk with Bill. Bill, welcome back to the show. Great to see you guys. All right. So I like this concept you have. You're talking about how the biggest things that are driving the markets right now are the three A's asset prices, AI, the affluent consumer. And I want to start with asset prices because I think this is still a relatively new thing where the markets are just so much more important than they used to be in the past. And I talked about this a little bit because Andrew Ross Orkin was talking about the 1929 stuff in his book, which is really good. But I said the biggest difference between now and then is just that the stock market just matters so much more, right? There's so many more people invested in the stock market. There's the 401k and IRAs and the Robin Hood,

and it's just easier than ever to invest, and there's just more people invested. I don't know, 60% or something of the households. Time that works every time. But 60% of households have some ownership in the stock market. And it's just more important than ever these days. And to your point, it's like a self-fulfilling prophecy where it's so much more important to household consumer spending and sentiment and, how they feel about things and that translates in the economy. So it's like some people say the stock market is not the economy, but in a lot of ways,

it has a huge impact now, way bigger than it ever has before. So I'm just curious what your thoughts are on there. First of all, Michael, it's way too early for a Sex Panther reference. Never. Never. Yeah. It's an interesting point to describe the breadth of ownership and exposure to the stock market. I think it even goes beyond that.

And you see venture capital getting involved in buying up houses and buying up veterinary practices. So much of our lives, whether we want to believe it or not, have become financialized. You can even take it into student loans. I mean, all of that is super, you know, it's got a lot of exposure to what's happening in the markets, what's happening in the credit markets. it didn't really used to be that way. And because of this, the level of asset values in this country, mainly the stock market and then the housing market, have just such a way of reflecting back into the economy in terms of current spending. And, you know, it's always been that way.

The economy is ultimately at its core, a game of confidence. but what gives you confidence? And it's not necessarily what people's salaries are. And it's definitely in the bottom 60% of the economy here. It's definitely not really related to what salaries are and what employment is. Bill, I was about to drop an incredible chart on your head. Not that you could see it. I was going to describe it.

But damn it, I asked chart for the wrong chart. All right, here's what I was trying to ask for. And I think that what he did was, all right. So this morning I was listening to the CEO of Pimpco on an odd lots podcast. And they were talking about debt, obviously. And the Buffett indicator, which looks at debt to GDP, he said something like, what about like household assets as a percentage, like compare debt to household assets? because Americans are so much wealthier, not than the government, but like maybe we're looking

at the wrong inputs. So Matt, Matt, this trial is household debt as a percentage of GDP, which I wanted to show household assets. But this just goes to like the bigger picture of what you were saying, is that, and if this is like a generational top, I will hand up and apologize, are we living in the golden times for like, because obviously it doesn't feel like that in many ways, but just from the point of view of asset prices? Is this the golden age of asset prices? I think you have to, you know, and I always, I always take a little bit of Umbrage with like a debt to GDP number because, you know,

one's basically a current account number and then one is, you know, one is one is long-lived. Assets is kind of the same thing, but it is very much true that a lot of spending comes from the confidence that comes from those overall asset values. And it, and it does include, your household, your household assets, right? Like, like, I think that there is a huge part of the population in this country, let's call it the top 10% for sure, but, you know, probably the top 40% that that feels like they can go for quite a long time with a lower level of income because of the level of assets that they do have. So, yes, in terms of, in turn, I'm, I hate to call it a, you know, I hate to call it a golden age because you can flip on the news and you see,

people are hurting. People are hurting at a lot of different levels of this economy. But I think that you can say that we have an optimized, financialized economy right now to see how many eyes I can get into a single sentence. Well, get into that. That's the other side of it. You talk about the affluent consumer. That's the opposite of the other people hurting. And I think the hard part for a lot of people in this economy is that if you look at all the stats going back to post-World War II era, it was a huge growth in the middle class. And now the middle class is shrunk, but a lot of it is because people are moving up to the upper class. And so we're hollowing out the middle, so you have the low and the high. And I think that's the thing that really gets

people. But you have this affluent consumer class and whatever you want to call it, the top 10% or the top 20 or whatever it is, powering most of the consumption. And their share is growing. So it's like, what can slow that down? That's the question because a lot of times it seems people say, you know, the stocks return to their rightful owners in a bear market. But usually that means the people with the money. So bear markets for a little bit, even, even, you know, even playing field a little, but then it just, the people who have the money buy the stocks and are down, and then it goes back up and then they're fine. So I guess like what stops the affluent consumer? What is it? Just a nasty financial crisis and recession? I think so. And it

would really have to be a nasty one because if you, if you really think about it, the stock market's performance has not really been, has not really been correlated to those assets, you know, those assets growing over that same period of time, literally since the global financial crisis in 2009. I mean, they've, they've moved generally in the same direction, but they haven't moved in lockstep at all. And they don't show short-term correlation between each other in a way that we might assume that they would. So I think that a, you know, I think that a recession that really gets into lending

and really gives people fear that they can't convert their long-term assets into current assets, that's what it would take in order to stop that trade. I do wonder, I mean, there's all sorts of, of ways that this could stop. And talking about the debt and the assets, like Ben and I were talking about this last week, the debt is good. That's not going away.

And the assets are what's creating this confidence. And you hit asset prices 30%. And yeah, that confidence will turn in a second. I also don't want to act like we haven't seen the assets get hit because we have several times in the past 10 years. It's not like this has been. Of course. Yeah.

And that's kind of my point, right? But it's just not necessarily that it's linked to the stock market. Yeah. All right. So let's get into the stock market. We are living. We're recording this on January 26th. And it's an interesting time as it always is.

But we've seen the Mag 7 really as a group goes sideways for the last couple of quarters. And you're starting to see a broadening out of different stocks within the 493, the Russell 2000, the Russell microcap. And investors are going into industrial stocks and utility stocks. out of tech stocks. It is, it's a different playbook. And who knows if this is a, a blip and it will revert right back to the MAG 7 after the report earnings and it's everybody back in the ship. Or is this a regime change where, you know what?

Maybe we're rethinking like how big these companies can be. There seems to be like, there seemed to historically been no, no way to slow them down. But I saw a chart the other day comparing the size of Nvidia to, like, like, I don't know, 25 blue chip, blue chip stocks. Yeah. And maybe investors are like, hey, you know what? Yeah, this is a transformative technology. Yeah, the margins are insane.

But like, there's other stuff out there. And we don't need to pay, we don't need to pay, we don't need to buy four trillion dollar companies. There's other things to look at. There's a certain math. And this is, I'm just going to throw it out ahead of time. This is a stupid way to think about things. And yet, sometimes I think.

things are stupid and yet somewhat useful, which is you take a look at Nvidia, for example, for moving towards a $5 trillion company, and just divide that by the population of the world. And just say, this is what is expected in terms of earnings for Nvidia right now. Forget any growth. Forget any growth in the stock price. Forget any, you know, forget any, you know, the reason you own a stock presumably is because you believe it's going to go up over time. And I really do struggle with the large numbers that are involved in terms of the amount of,

you know, the amount of earnings that are discounted into the current price just based on how much economic activity has to flow back to these huge companies. So I don't know if you guys think about things the same way or if you agree with me. That's a really stupid way to think about things. No, I mean, I've never compared, I've never thought about Nvidia versus the global population. I think that's totally idiotic. But I think you're right because Chartkin made a chart showing that like Nvidia's actually got in cheaper over time.

The FOIP has come down from 70 down to 35 and it's a reasonable price to pay. And I would agree. But why in the world? How in the world can a company that is bigger than the stock market of Japan get a premium on its multiple? it wouldn't make sense. It would be bigger than the Fed's balance sheet. Yeah.

And so eventually, like, is it an earnings bubble of Nvidia that's going to normalize? Even a market multiple sounds reasonable despite the fact that it has changing the world, despite the fact that it seemingly has no competitors, that its margins are sky high. That like, and all of that, I don't know, a normal multiple seems right to me. Yeah. And thank you for humoring my, you know, my, my, my, my. my thoughts out loud on this. I think that these large companies really are going to have to become, they're going to have to become income stocks. These are companies that are really going to be,

are going to have to reward their shareholders by paying out large dividends over time. Have to. Because I just, I don't see how they can continue to keep that level of assets in and reasonably expect even a market level return. Although I would say, you know, again, This isn't, you know, the MAG 7, they are some of the best companies and the best economic engines that have ever been devised. So I'm not making any, you know, I'm not making any declaration. But, you know, as you said, at some point, they become so existentially large and so large relative to other things that it's really hard to see how they are going to make every, you know, every dollar of assets do anything other than being returned to shareholders. Well, one of the strange things about this cycle, and I don't know how long you want to define it if it's been 10 or 12 years. Even the Nifty 50 was only a few years, like the buy, you know, one decision stocks to buy.

But wait, Pat, hold on. There's been multiple cycles. Like, I think the mobile thing was the cycle. The cloud computing thing was a cycle. Then we had the COVID and the rate hike. Like, I think the latest cycle, even though it's been a long one, the one that we're talking about today is AI. It's 20. Yeah.

But it's just all these same stuff. that's the thing. These stocks have moved with this, and they've been the winners after every time. So I think the hard thing to wrap your head around if you're a student of market history is the fact that usually the companies that everyone knows that are the highest quality and they have the premium valuations, usually those stocks end up underperforming or at least perform in line with the market. They don't, they're not the ones that are given the premium and outperform by a wide margin like these companies have. And I think that's going to be the hard part for a lot of investors if that should ever switch. And I don't know, people keep saying it can't last forever.

feels like it has lasted forever. I'm sure if you're an active manager, it feels like it's lasted forever. But I guess my question to you is, is AI the thing that levels the playing field? Is AI the thing that actually makes these other companies catch up a little bit? Because they're not the ones who have to put all these resources in, right? The ones spending trillions of dollars are the big tech companies. And they're not, they might not be the ones that, the only ones that see the benefits of it. Could it be that these smaller mid-sized companies actually gain most of the efficiencies without having to have a big cost outlay in terms of their R&D for it? It's so funny, Ben, thinking of these companies that are fantastic at generating returns on equity as being the risk assets because of the investment, you know, the investment that they have to make to build out something that doesn't yet exist.

And, you know, and they're guessing, you know, they're guessing that, you know, what the tenor of AI is going to be. They're guessing what the payoff schedule is going to be. They're guessing what the economics are going to be. So I think in some ways looking at what's happened, say, you know, from about, you know, the middle of 2025 in the markets till now is that we're seeing sort of a recognition that the Mag 7 and the top 10% and, you know, and the AI companies had such a large component of, you know, of the economy and of the market that there's really only two ways. that you're going to be able to revert that. One is for the other 493 to outperform and do very well, and the other is for the seven to go down. There's no other way for that concentration to solve itself. So naturally, so I look at, I look at the broadening of the market. I look at the relative underperformance of the mag seven over the last, you know, call it seven months. I think it's really good news. I think it's good news for all of us. Me too. I want to get to how you guys see the

world and implement this stuff through your strategies. But before we leave the Mag 7 point, Apple is such an interesting stock because it has been the number one most widely owned stock by retail investors, right, by boomers. Like it just has been forever and ever. And it's gone through multiple cycles, multiple iterations. But you mentioned like the transition to an income stock. Apple sort of is that they're buying back a lot of stock. Their EPS is going up as a result of that. They're paying a dividend. I don't know what the shareholder yield is.

I'm going to guess it's 4 to 5%. Maybe. That sounds high. I don't know. But it's also trading at like the 30 times forward earnings, which it really never did ever. And I don't know if this is a result of just the predictability that Apple is going to deliver what it's going to deliver, even though it's not growing.

I don't know if this is like, Michael, what are you talking about? about. They take 30% of everything and the iPhone is the center of everything. So if AI explodes on mobile, what do you mean? Like, of course, it's going to be huge growth. So I don't know, maybe it's just that simple. But how do you think about the stock like Apple and then opening this up to like how you all at the full think about managing portfolios and ETFs? How do you think about Apple, the second biggest stock in the world? Yeah. So Apple to me is, it's really interesting because they do seem committed under this leadership to buying back shares. And they've done, you know, they've, they've bought back hundreds of billions so far. If you, if you think about what,

you know, if, if you think about what a share of stock is, I mean, there's a reason that in classic finance, that equity is considered to be more expensive than debt, because any share of stock is a perpetual claim on earnings, perpetual claim on assets. So if you remove, if you remove a share of stock, even for a company that has billions of shares, you're removing a claim on earnings, not just for 2026, but forever. So the fact that they have shown no sign of slowing down the repurchase and the retiring of their shares, to me, that makes, it makes a whole lot of sense that their market multiples would be higher than otherwise, because if you think about what a stock price is. It's a discounting mechanism. If you're discounting against a slow,

you know, a smaller and smaller number of shares that can only be helpful for a company that is, you know, that is, that's generating good financial returns if they're buying them well. And, you know, if they're buying them well is a pretty massive, you know, proviso to what they're doing. You know, for us at, I don't know, did that answer your question for how we might think about now? Yeah. Yeah. So for us at the Motley Fool, we have always believed the Motley Fool, which is parent company and sister company of Malibu Asset Management, that also provides the index that our passive products are based upon comes from Motley Fool's research, have always believed roughly in the power law of the stock market, which is the small number of companies. provide the overwhelming return, you know, the amount of returns. And so we have never gone about,

you know, trying to make sure that we are widely diversified. You know, obviously our, you know, our ETFs are diverse, but, you know, we haven't gone into, you know, community banks, for example, for the sake of making sure that we've got a position in community banks. We have, we have, we have focused on the power law component of the market, which is, even if it doesn't happen on a day-to-day basis over time, companies that have certain attributes are the ones that have traditionally driven the stock market and have driven 99 to 125% of the returns. And so that's always been what we have done. That is how all of the passive and active ETFs that Motley Full Asset Management are structured. And then they're just looking at focusing on different parts of

the market. So you don't like to put limits or constraints on sectors, for instance, within your strategies? So we would prefer not to. Now, you know, several of our funds, TMFE, for example, is a capital efficiency fund. And it does, it does have constraints. But, you know, again, just like every, just like every ETF, just like every mutual fund, you know, I think of these as a tool that's supposed to do a job. So TMFC is our flagship fund. It's 100 of the largest companies recommended by the Motley Fool, our sister company. And it is not constrained at all by industry or by market cap. We want for that expression to be, you know, just give me the good stuff.

Give me the good stuff, you know, at the percentages at which, you know, at which their market cap weightings would suggest we should have it. So what is the good stuff? I mean, it's been the Mag 7 for sure. You know, we are much more diverse than that. We have companies like MCOR, for example, in Motley Fool, in TMFC, which is a company which provides services for the electric power industry that provides designs, design, you know, and regulatory work.

You know, that's the kind of thing that, you know, that we identified a while ago, regardless of what you think about. where AI is going. One of the things that it absolutely leads to is much higher use of, you know, production of power, much higher consumption of power. And, you know, we like to be in these industries in a, you know, in a capital efficient way. So as opposed to being the one that's got to go out and, you know, sit in, you know, sit in endless meetings with, with neighborhoods so you can build power lines and build power plants. Just you have a company that designs and, you know, and does the, you know, and does the consulting for the industry. So those types of, those types of businesses

tend to generate really high capital returns. They don't, they're, they're not, they're fantastically capital efficient. And it's the type of company that has, you know, has generally speaking provided great returns over the long term in the stock market. My view is that Motley Fool has kind of like a really much longer term time horizon in terms of like buy and hold, not like buy and hold forever, but is, is that the general? thesis for most of your strategies, or do you have other strategies that have higher turnover? So for the most part, our turnover ratios will fall somewhere between 20 and 30%. So the reciprocal of that is the average stock that's currently in the portfolio is a three to four year hold

within the portfolio. So the Motley Fool itself has, you know, has, you know, recommended NVIDIA in like 2005, I want to say. And they recommended Microsoft in 1998 and never sold. So they very much are committed to long-term holds. I feel like I'm name-dropping, just the biggest most obvious companies in the planet, but did the same thing with Chipotle, you know, back in the day. So yes, very much committed to identifying companies that are doing something special and not really worrying so much about being right about when you buy and when you sell. Bill, the dominant theme as we open the show with today is obviously AI. And it is moving so fast. The reality is nobody has any idea. Yeah. Nobody knows. And I think Google is the best example of this. Chat ChbT was going

to kill the search engine. Oh my God. Let's sell Google. And now it's, I don't know if Google is the second biggest stock in the world, third, whatever it is. Obviously, that was 100% wrong. Gemini came along and, you know, the rest of history. So wrong, hilariously wrong, spectacularly wrong. One of the areas that that's been equally beaten to hell from the stock point of view are the software stocks. Why do you need software when you could just, when I can do it better? Why do you need a company like Salesforce that is structuring unstructured data? That's literally what, that's, That's the bread and butter of AI. I don't know if that's true or not.

I'm not a. Sounds great. Sounds smart. So do you think that we're overdoing it? Now, obviously, software is that's not one stock. There's right a whole basket of Adobe, Service Now, Workday, like, they're all acting as if they're kaput. The market is totally saying, like, you're screwed.

What do you think? I think that there are certain companies that, you know, that they're a company. in software space and in the SaaS space that have been getting by for years, basically that they are services masquerading as companies. And they probably do, some of them probably do have exposure. You're in the same business that I am. And so when I think about software companies or I think about service providers in general, one of the things that I think about is there are things that you would, for regulatory reasons, you would not dare on board. Because, having that, you know, having a service provider provided to you

keeps you from getting in trouble. You know, when the SEC comes in and asks to see your books, you know, and you say, well, I self-clear, okay, well, I have several questions about that as opposed to, you know, as opposed to having software companies provide all of these different services for you. And I don't think that it's all that different in a bunch of different industries. There are a lot of service providers that, yes, there are, you know, there are probably parts of their business that can be undone by AI.

But I don't really, I don't really see the broad disaster that's coming on that the software company prices over the last six months would suggest. But you know what's so interesting is how the market is looking at it, because Adobe is a company that keeps reporting record earnings. Yeah. And yet the forward PE is at an all-time love. I don't know about all time, but certainly multi-deck it low, the stock can't catch a bid. And investors are saying, like, I don't care about your earnings today.

They're not relevant because in six quarters and 12 quarters, whatever it is, they're going to look a lot different. And like, this is what's so much fun about the stock market is that we're all doing our best to guess and this is what the market's saying. And it's either going to nail it or we're going to look back and say, could you believe how wrong everybody was that we just thought. that this new technology was just going to, boom, replace this amazing blue chip company that's been innovating for decades.

Well, Bill, when you're looking for these compounders, though, would you rather pick the new up-and-comers or the ones that are kind of mispriced because there's a transition going on? Like, which one would you rather do? I feel like you'd rather do the up-and-coming, but you tell me if I'm wrong. A little bit of both, if you can identify. And we're not super concerned about being the first ones in. And by the way, I've been trying not to giggle for the last couple of minutes when Michael started talking about Google. All I can see is that that WWE meme where the undertaker comes up out of the coffin.

It's a good one. True. It did feel like it was dead for like a month. It did, right? Like it was not an unreasonable thesis. Remember, they had the Bard thing. Remember before Gemini was called Bard? Yeah.

And they did a presentation and it was awful. It was terrible. It was a total disaster. It's almost like we look back and we sort of erase that from the, from the memory books, but like it got sold for good reason. The market wasn't totally dumb. And credit to them, they did what they had to do and they got their shit together and they're winning.

Absolutely. It is one of the most, it is one of the biggest mistakes that people can make in terms of thinking going forward that things that happened in the past were definitely going to happen in the past, right? Like everything is path dependent. And everything is, it was determined in some ways on knife edge decisions, in some ways by luck. You know, and I think in Google's case, the thing that we actually missed is that because of the amount of cash flow, they have coming in from their search business, they almost got like an endless, you know, an endless amount of doovers. That's a good way to put it.

Right? Like, oh, that didn't work. Bard sucked. What about this? $5 billion. How about that? Does that work? No?

How about this? And so eventually, that's, I mean, that's the power of being a company that generates great returns on capital, that, you know, that ability to hit the do-over button now. So getting back to your three themes, just kind of like wrap it up, your three themes. Is that, so we talk about the affluent consumer, is AI going to be the thing, is it just going to make this gap even wider? It seems to me like it's going to be even more of the haves than the have-nots, because. of this technology, the people that utilize it and people that own the businesses that use it, it's probably going to just make the affluent consumer more affluent. Do you see anything that stops that train?

No, I actually don't, but I do see there being, you know, I think what we've done now is manifest most of the assumed growth into the service providers. And at some point, if you think about what AI is, it's an efficiency. tool. What companies are going to use that efficiency tool best? And it, you know, that that may be the HVAC company that's down the street from you that figures it out. And they start to become a roll up company. And so that's where like AI is not the end use. It is not the end case. It's a tool for other, you know, for other companies to use properly and to, you know, and to benefit from. And so I think it's going to be, you know, I think that you're going to see the same level of intelligent management at whatever level manifesting itself and using AI properly.

And we, you know, we can guess who it is because I have a pet theory that people who are smart and management teams that are smart don't cease to become smart, but there are going to be ones that come out of nowhere. Bill, before we let you get out of here, I want you to have an opportunity. to flex the performance a little bit of the flagship, because it's been a brutally difficult period for people that are doing anything other than overweighting the Mag 7. Maybe that's the secret to your success, but tell the people how you've been able to perform as well as you have.

So thank you. Our oldest fund is TMFC, is the Motley Fool 100, and it has outperformed the S&P 500 since its founding by about 220, 230 basis points per, year, which is pretty astounding performance for, you know, for, for a fun that is Wednesday inception? 2018. Yeah.

So that's not a lot of people in that category. Yeah. Yeah. So it's been a, you know, it's, it's been a sensational performer. And it really, it really speaks to the, you know, the power of, you know, of looking for really great companies and trying not to outthink yourself and, you know, allow the great companies to continue to work for you know for you over the long term so uh that fund has about 1.9 billion dollars in assets under management and you know it's it has been you know it's been fantastic for us and it is one of nine

funds excuse me ETFs that we that we have in monthly full asset management perfect what do we send people learn more about your funds uh you can come to amfam funds dot com and there is all sorts of literature and you can find us there perfect thanks bill appreciate it. Thank you guys. Okay, thank you to Bill. Thank you to Motley Fool. And check out Fool E!m for checkout, Fool, et cetera.com. Go learn more and email us, Animal Spirits at the Compoundews.com.