Barron's Streetwise - Perps, Buybacks, Bond Funds, and Women's Basketball

Episode Date: July 10, 2026

Jack answers listener questions, and walks back a garbage can tip. Learn more about your ad choices. Visit megaphone.fm/adchoices

Are you one of those media strategy people clicking through slides, scrolling spreadsheets? Yes? Good. This is for you. Because on Spotify, there's an audience that's different. Locked in. Loyal, invested. They're called fans. Fans don't just listen to music. They feel seen by it, like it belongs to them. So when your brand shows up on Spotify, that's who you're talking to. And you're right next to artists like me, Lizzo. So, are you ready to talk to fans?

Spotify Advertising. You're among fans. Hello and welcome to a special listener question edition of the Barron Streetwise podcast. I'm Jack Howe with me, our audio producer, Emily Sommelin. Hi, Emily. Hi. What kind of topic is that we're going to get to? This week we're talking about bonds, stock buybacks, women's basketball, perpetual futures. Women's basketball perpetual futures or women's basketball, full stop, perpetual future?

Probably the second way, right? For women's basketball, there's always a future, Jack. Okay. And one listener blames you for his grievous injury. Well, sorry in advance for that. And let's get into it. It's a listener question special, always exciting. I understand we're going to try to get through five this episode, Emily.

I am a rambler, but we're going for five. Is that right? Yeah. Okay, let's block out a minute for each and then 35 minutes on women's basketball. Anything else? I'm not an AI bot for those who were worried. No, people thought you were AI? Apparently, I mean, I guess I'm just so even toned, so even keeled.

I think they maybe meant it as a compliment, right? You speak in a polished way. That and I consume an ungodly amount of water. All right, well, start chugging. And who do we have first in the listener questions? First up, we have Terrick from Mount Juliet, Tennessee. Terrick wants to understand essentially why you would ever buy a bond fund versus individual corporate bonds. They just want some safety in their portfolio and they appreciate your nudist philosophy, Jack.

I'll explain. Go ahead. So Terrick wants to protect their income when things get bad. Gold seems high priced. Crypto seems like speculation. But how do you do bonds right on your own? Okay. It's a great question, Terrick. First of all, my philosophy is financial nudism, and it's basically a stripped-down approach to managing your portfolio.

I dislike most stuff that people pitch and talk about. I don't think you need much. But I do think you need bonds. Bonds are important. And you don't buy them because the returns are great. You buy them for the safety. You buy them for the portfolio ballast. And when you say, why would you ever buy a bond fund as opposed to individual bonds?

Here's what I think you mean. I'm going to take a guess. when you buy individual bonds, you have a choice to hold them to maturity, and that maturity you get your money back. And that's very defined. You know exactly what you're going to get and when. And as long as you're buying safe bonds,

you're not taking much risk at all. If you buy a bond mutual fund, however, you don't have a maturity date. The bonds in the portfolio mature, but what you have is a share price for a mutual fund. And that share price is going to fluctuate from day to day to according to the level of interest rates, how people are feeling about bonds

and so on. So you don't have this option to get all of your money back at maturity. It's possible that the value of your investment goes down. Why would you ever want to do that? Why wouldn't you want to take the more defined route of owning individual bonds? I'll give you two, possibly three reasons. We'll see how it goes. The first one is it takes a lot of money to properly diversify a bond portfolio. You can get higher yields on junk bonds for sure. You take extra credit risk. These are companies that are not slam dunks in terms of their perceived ability to repay you all the money they're borrowing. So that's something you definitely want to diversify. I think to properly diversify a bond portfolio across high grade bonds, maybe some lower quality bonds, maybe even a little bit of junk,

and then all different maturities, all different types of issuers. I'll say the dollar amount starts at a million dollars. Might be a couple of million dollars. And then you also want to pay attention to your fees. If you buy into a bond index fund, you don't have to worry about that. You're buying a diversified portfolio and if it's an index fund, chances are the fees are pretty low. And keep in mind while what I said a moment ago is true about how you can hold individual bonds until maturity, when they do come due, you then have to reinvest that money. There's some reinvestment risk there. You don't know the rate that you're going to be able to put that money to work at after your bonds come due. If you have a big diversified portfolio

bonds via an index fund, there's money constantly coming due in the portfolio and the portfolio is constantly reinvesting that money at prevailing yields. So that's another advantage, another reason why you might want to own a fund. And I'm talking here about index funds. I'm a big believer in cheap index funds if we're talking about large cap stocks in the U.S. There are certain asset classes where active management can make sense. And I think the bonds is one that's well worth a look. If you have a stock index, the companies are usually weighted according to their stock market value fine when you have an index of bonds often the companies or issuers are weighted according to the amount of bonds they have outstanding that gives you a heavy weighting in the entities that owe the most

and i'm not sure that that's exactly the skew you want if you have an actively managed bond fund the manager can put a little more thought into where your money ought to be tilted you just have to make sure that you keep fees very low so taric bonds are a great idea for you certainly better than the other things you mentioned crypto and so forth and you should consider a bond fund either an index fund or an actively managed fund that you like so long as the fees are low. And thanks for the shout out on my nudism. Emily, who do we have next? Our next question is from Mark, who is wondering why when companies report stock buybacks,

they don't also report stock awarded to employees the same year. Is it just too small a number to worry about? Also, Mark writes, I've been trying your one arm out the window to drag the garbage cans down our very long driveway. I've broken my radius and Ulna indented my Lexus. So thanks for that. Expect to hear from my legal team.

I think it's important to point out. First of all, I don't remember mentioning my garbage can secrets. I guess I must have. These were not recommendations, folks. I stand by my investing advice on this program, my garbage can advice. I'm making it up as I go along.

I got to be honest. Mark, I wish you and the Lexus is a speedy recovery. Here's the thing about the stock buybacks. You're right. First of all, for people who don't know, what does it mean when a company buys back stock? Company has extra money. They go out and they buy some of their shares and they basically take them out of trading. And it reduces the number of shares outstanding. And that mathematically increases earnings per share. And theoretically, it should over time increase the value of remaining shares. It doesn't always work like that one for one because there's a lot of moving parts that affect company value on the fly.

But that's the idea. So when a company says, hey, we bought back gobs of stock, why don't they also say, we also issued gobs of stock to our employees as compensation? And it's a pretty simple answer. It's because they're trying to say good stuff about themselves. And, you know, when you do that, you don't have to say everything. You can go out there and say, hey, everybody, I lost 15 pounds. And then you don't have to say, well, I gain seven of them back.

But companies are not allowed to do the same thing on their audited financial statements. right so if you look at a company's quarterly reports the shareholders or annual reports you're going to have three main tables there two of them measure how much money a company makes and one of them measures the value of stuff a company has and owes so the stuff one is the balance sheet the money-making ones are called the income statement and the cash flow statement and it's on the cash flow statement that you will find entries that will net out for you stock issuance how much did they issue how much do they buyback and what's the bottom line. So that's probably the clearest place to get the information you're looking for. To your point, if you're using this measure in any kind of analysis to tell you

whether a stock is a good deal, let's say you're somebody who's trying to calculate the total shareholder yield. And by that, I mean the dividend yield you receive plus the spending on stock buybacks as a percentage of the outstanding shares. If you're doing that, then it certainly is important to net out issuance. So you want net stock buybacks plus dividends to give you the shareholder yield. Does that make sense? Emily, are the radius and ulna parts of Mark or parts of the Lexus? I think those are parts of Mark, right? Those sound like Mark parts. I was afraid of that. Sorry again, buddy. My first choice is telling my son to bring up the garbage cans. My second choice is I'll roll down a window and reach out and grab one and hold it to the side of the car. That works really better as a passenger than a

driver, again, not advice. Definitely not my third choice because I tried it once and I ended up walking funny for a week was, my wife is driving. She said, I'll raise the tailgate on the back of the vehicle and you sit in the back. There were two cans instead of just one. So I couldn't hold it out the window. She said, you sit in the back and just, you know, you'll pull these up while I drive the car. I said, the driveway is steep and, you know, you got to go slow and study because if you go fast, I'm going to fall out of the car. She said, no, it'll be no problem. It's going to be fine. So I sat in the back. This woman, I didn't even know this car could accelerate like that, first of all. She must have put that pedal to the ground because it was like a, it was like a Wiley Coyote Roadrunner situation.

That's why they call it asphalt, by the way. When you have a spill like that at 53 years old, it's not like when you're younger. You don't just bounce right back up. You just lay there for a long time. Just think about your life choices. What do you say we take a quick break here? I'm going to rethink by garbage can strategies. You chug another three liters of water. We'll be back with another few listener questions. Here we go. Someone's already claiming this is our year. Someone else said that last year too. A round of Jameson, ginger, and lime arrives at a table. Smooth enough for kickoff, smooth enough for extra time. New friends pulling up a stool. Debates about whether that was a handball. Cheers rising like a roar around the room. Because match days are about the shared moments.

Added Jameson to your match day lineup. Jameson, it's what you bring. Please enjoy our products responsibly. Welcome back. We're doing listener cues and A's. Listeners are doing the cues and I'm doing the A's. And Emily is doing the reading slash playing of the questions. Is this a, do we have another reading one next or do we have one we can play, Emily?

Open your ears. We've got one from Bruce, who is, has a bit of a suggestion about Nike after our story. Hi, Jack, this is Bruce. I'm a long-time listener and very appreciative of all the good info you give us. Regarding the Nike story last week, maybe I missed it. But where are the girls in all this? What about Caitlin Clark and the deal that they made with her two years ago? Has that made a material difference in their numbers?

Thanks again for all you do. It's an excellent question. I am a women's basketball fan. First of all, I have a daughter who plays in high school. a lot of time running around at these travel tournaments and so forth. We also watch some college and WNBA games. I am a fan, of course, of the New York Liberty. Caitlin Clark, if there's anyone left who doesn't know, plays for the Indiana fever. She's a great player, but she's also been a transformative force in terms of getting more attention for the WMBA, increasing viewership,

allowing players to argue successfully for higher pay, and so on. And so she has a deal with Nike. you ask if that's been a big deal financially for Nike will know only because we're not there yet. We're just now getting a look at those new Caitlin Clark sneakers. I think they're going to be widely available in the fall. Don't hold me to that. I'm going to guess that the sneakers will do pretty darn well. And I'll tell you what I based that on.

This was not a thing when I was a kid. We didn't have, to my knowledge, somebody out there can tell me if I'm wrong, but I can't think of a women's basketball signature shoe when I was a kid. Everybody wanted Magic Johnson sneakers or Larry Bird sneakers and later Michael Jordan sneakers. I don't remember hearing about female basketball players. It is totally different now. And really who we should be mentioning more so than Caitlin Clark is a player named Sabrina Yonescu who plays for the New York Liberty. She has a line of sneakers. They call them

Sabrina's. It's already a pretty mature product. I think they're up to the Sabrina 3s, I want to say. And what I have noticed, I have kids who play basketball. I'm around a lot of kids who play basketball, Sabrina's sell well among both girls and boys. It's not just a girl's shoe. I don't know if they sell well among older boys, but I can tell you, they sell well among younger boys. And if you can pull that off with these women's line of sneakers, of course, that just increases the market potential. I think Sabrina's have definitely been a needle mover for Nike. Doesn't solve all their problems, of course, but I think the success of those shoes bodes well for the Caitlin Clark shoes. And my apologies for not mentioning the women in my earlier basketball rants.

Let's go John Quill and Stewie and Sabrina and all the New York Liberty. Now then, Emily, what do we have next? Scott has a question about perpetual futures. It sounds very matrix. Does Scott say whether he's wearing a full-length leather coat? No, but he is doing the 180 lean when the bullet dodging. All right, where you bend at the knees and then you just hear you're horizontal to the ground or something like that? No trench coat required.

I got it. It's been a minute since I've seen that movie. I'll probably do it to look at it again. Okay, let's hear, is this Scott? Let's hear Scott. Hi, this is Scott from New Jersey. With the recent SpaceX IPO, there's a term I've been hearing about on TV called perpetual features.

Can you explain what they are and how they affect SpaceX? Thank you. Thank you, Scott. It's a great question. ahead of the recent initial public offering in SpaceX, that was mid-June, there were some offshore trading platforms that launched what are called perpetual futures contracts that was for traders wishing to speculate on SpaceX's price. And those were for non-U.S. investors, but they were watched by U.S. investors.

And that created a surge in curiosity around a financial instrument that until recently has been mostly confined to crypto. I recently wrote about perpetual futures or perps in my streetwise column in Barrens. I'll explain how they work. It requires a bit of a wonky walk. I also don't think they're for most investors. I realize I'm not exactly selling this explainer to the listening audience. But I tell you what, I'll end with a related stock pick. Ooh, that's like a free set of steak knives.

Now I've got your attention. Okay, perpetual futures, despite the name, are actually not very much like traditional futures. they're more like something called swaps. A futures contract is an agreement to buy or sell a specific asset at an agreed upon time. For example, a thousand barrels of Texas crude in September at a facility in Cushing, Oklahoma. It's a little like options only without the optional part. Futures contracts must be completed at expiration. In reality, speculators typically sell their contracts at a profit or loss before that happens.

Futures contracts tend to be highly standardized with liquid exchange-based trading. Now contrast that with swaps. These are agreements between two parties to exchange future payment streams over a set time period. For example, I agree to give you a fixed interest rate and you agree to give me a variable interest rate. Let's say the secured overnight financing rate, SOFR, plus 1% over the next five years. That's a swap. These tend to be customized agreements and less liquid than futures.

They trade over the counter. Now perps. There was an academic paper more than 30 years ago by the Yale economist Robert Schiller. And he proposed a new way to price rarely traded assets like big office buildings. It involved perpetual derivatives that exchanged their cash flows like rents. And that tactic has been a big hit for something totally different. It's used a lot on offshore crypto venues like hyperliquid strategies, which has recently been doing more than $11 billion in perps volume daily. So how does this work?

I mean, cryptos typically have no cash flows to swap. What they do instead is they use a funding mechanism that keeps the contract price from straying too far from the underlying crypto price. Basically, each perp has a long side and a short side. One trader betting for the underlying crypto, another betting against it. And every hour or several hours, the one who's losing has to pay the one who's winning. And losses for the short side are theoretically unlimited. I know what you're thinking. Jack, is there any way I could take this horrible idea and do it with tremendous amounts of leverage? Funny you asked.

Many perps venues allow traders to risk 10 to 40 times the amount of money they put up. That introduces a risk of bad debts. So offshore perps platforms typically use automated liquid. when traders fall short of margin requirements. If that fails, some of them can tap insurance pools that are funded by liquidation penalties. And if that fails, they can simply haircut the party on the winning side of the trades. Is everyone remember a fellow named Sam Bankman-Fried? He's what I would call a perpetrator who traded perps.

He had a trading platform called FTX. It allowed customers to put up all manner of assets as collateral for perp bets. and SBF, as I'll call him, made highly leveraged perp bets too through his Alameda research hedge fund. But his losses were exempt from FTX's auto liquidation. Instead, they got covered by funds from its customer pool. If that sounds bad, it's because it's bad. SBF is currently serving federal time in Lompoc, California, with an expected release date of 2044. So choose your perps platform.

carefully. There are, by the way, onshore ones now too. The commodity futures trading commission or CFTC in the U.S. recently approved Bitcoin perps for Kalshi and Coinbase. And more approvals seem likely given an alt-finance friendly regulatory climate. You can imagine that there are some publicly traded companies that stand to make money from this down the road. Broker Robin Hood Markets and Marketmaker Virtue Financial come to mind. In a recent report, J.P. Morgan highlights the appeal of Intercontinental Exchange, or ICE. It owns the New York Stock Exchange, and more to the point, it's a powerhouse in regulated futures. And its shares were recently down 31% over the past year. That's in part due to concern about new competition from Perps. But J.P. Morgan

writes that Perps may catch on with some U.S. retail traders, but they're unlikely to gain a following among institutional traders and hedgers. It says that ICE, likely has more to gain than lose. It trades it 15 times this year's projected earnings, and it's been growing earnings by double-digit percentages. Scott, let me bring it back to SpaceX. That one is publicly traded now, but there are other high-profile tech IPOs expected soon from the likes of OpenAI and Anthropic and Databricks. And there are also offshore perps to bet on those, but they're forbidden for U.S. investors. Trading platforms typically use internet geoblocking to enforce that ban.

If one of your friends gets all computery and starts explaining how you can use a virtual private network to get around geoblocking, just tell them thanks, Professor Darkweb, but I'd rather not risk having my account frozen. I recommend you hold out for those names I just mentioned to launch as onshore post-IPO perpetual future cash flow participation units. Those are otherwise known as stocks. Thank you, Scott. Who do we have for our last question? We have a question about the national debt.

Great. Let's hear it. Hi, Jack. This is Claudia from Minneapolis. Our debt recently crossed $31 trillion. And in about 20 years, no amount of tax hikes or spending cuts will be able to stop us from defaulting on our debt. So what are your thoughts on that? What will happen to our economy and how do we prepare for that what looks to be a terrible outcome. It is not a chipper one to end on. I'm surprised to say 20 years. I feel like we could run into trouble sooner than that.

Here's the thing. I think we've done episodes on the national debt and how humongous it is and so forth. And we're, we cross these lines all the time, the debt larger than the size of the economy. I feel like we have reached and passed escape velocity for the national debt. By that, I mean, we seem to be running emergency level deficits, the kind of deficits you would run if you were in a dire emergency and you had to save your economy. We seem to be running those every year now. And there doesn't seem to be political will to do anything about it. And there are not super easy choices left in terms of the spending to cut in order to solve the deficit and the debt problem.

And if you're a politician and you propose raising taxes to pay for the debt, that's unpopular. So I think your question is one that I often ask the finance deep thinkers that I talk to. How does the story end? Is there a benign outcome? My best guess is that it ends with higher inflation than we'd like. By that, I don't mean Zimbabwe level inflation where we're all going to be carrying around million dollar bills in our pockets. I mean, you have a government or a federal reserve that would like to run two to three percent

inflation, but instead ends up running inflation a couple of points higher than that for a prolonged period. If you do that, of course, it's kind of like when you have a mortgage locked in and it seems like a ton of money when you first buy your house, but 25 years down the road, you're making much more than you ever thought you would, and suddenly your mortgage doesn't seem that large anymore. It's because inflation raised the prices of everything around you and raised the amount that you're making, but the amount of your mortgage was fixed and it didn't change. So inflation can deal with debt. It's fine if you're talking about moderate inflation and your mortgage. It's not as ideal if you're talking about somewhat elevated inflation and the national debt. I think that's a good

reason why you want to make sure that you're invested in things for the long term that have a proven ability to keep up with the rate of inflation. I know that gold has a reputation for that, but I think gold can just be too volatile based on speculation. I think stocks are the thing for the long term. Stocks represent companies which are run by smart people who consider and think about ongoing business conditions. If there's a lot of inflation, they can think about how to deal with it by raising prices on the stuff they sell. And that gives you the shareholder of fighting chance against inflation over the long term. Certainly better for the job than bonds, although you do want some bonds, like we said earlier, for ballast safety.

I know that's maybe not the most satisfying answer. Claudia, you use the word default. You don't have to technically default on your debt when you're in the position of being able to make your own money. you just make more money to pay your debt. The problem, of course, is that that contributes to inflation. So that's my best guess about how the story ends. My hope is that it ends with maybe some discomfort but not disaster. And I think that's still entirely possible if we get on it.

I hope that helps. Well, it definitely doesn't help. But I hope it at least answers your question, Claudia. And with that, our listener question special concludes. Got through five. I feel like I'm a decent time. we'll hang your number in the rafters for it. I want to thank the folks who send in questions.

And thanks to all of you for listening. Emily Sumlin is our well-hydrated audio producer. If you have a question for us, you should send it in. Could be in a future episode. What you do is you tape it on your phone, use the voice memo app, and you send it to jack. dot how, that's h-o-u-g-h, at barons.com. You can subscribe to their podcast and Apple Podcasts and Spotify

and wherever you blah blah blah and leave a review. And see you next week.