Prof G Markets - Is Breaking Up Intel The Right Move? + The New Gold Rush

Episode Date: February 24, 2025

Ed and Josh Brown, co-founder and CEO of Ritholtz Wealth Management, open the show by discussing January’s housing starts data, X’s latest funding round, and the growing wave of companies emulating MicroStrategy’s approach to bitcoin. Then Josh unpacks the potential breakup of Intel. He breaks down how Intel’s leadership struggles led to its decline and explains why having a true visionary at the helm is crucial for a chip company. Josh and Ed also break down gold’s record-breaking surge and explain why banks are rushing to fly the commodity into the U.S. Ed questions whether gold is really a smart investment, while Josh explains why owning it outright might not be as valuable as people think. Subscribe to the Prof G Markets newsletter  Join us for a live recording at SXSW Order "The Algebra of Wealth," out now Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Welcome to Prof G Markets. So Scott is still away, he's still on the slopes. We're beginning to think he's quite quitting. But we're not too worried about that because today we have one of our favorite guests on the show. You've heard him before. We have in the studio the one and only downtown Josh Brown.

Josh, thank you so much for joining me. I will be doing my best Scott impression. You'll tell me after how it went. I can't wait to see it. Where are you? You're not in your usual studio. I am in Naples, Florida, which is Chicago's version of, I guess, Southeastern Florida.

So this is Gulf Coast, Western Florida. And I love it here. I've never been before. We're seeing wealth management clients and colleagues and we're doing a live version of our podcast tonight in town. So it's, it's exciting. Very exciting. And we should plug your podcast, The Compound. I know you don't like doing a promotion. Last time I asked you where our fans could go follow you and you said, don't follow me. So I'm just gonna tell the fans straight up, go check out the compound.

Let's just get into the show. We've got a lot to get through. So let's start off with the market vitals. The S&P 500 hit a record high. The dollar declined, Bitcoin was flat and the yield on 10-year Treasuries fell, shifting to the headlines. US housing starts slowed in January, with new residential construction falling 9.8%. Builders scaled back construction due to harsh winter weather, while also grappling with challenges from high mortgage rates, tariffs and inventory shortages.

Elon Musk's X is in talks for a funding round at a $44 billion valuation, that's the same price Musk paid for it over two years ago. The funds would be used to support new initiatives, including video products, and to help pay down some of the company's debt. And finally, Michael Saylor's move to transform MicroStrategy into a Bitcoin Treasury company has inspired a string of copycats. At least 78 public companies have followed suit, including a meal delivery service and a coal mining firm.

Also GameStop shares jumped 20% after revealing it was considering a Bitcoin investment. So Josh, we'll just start with this housing starts data. I will say right off the bat, this is extremely disappointing to me. Just given all of the conversations we've had around the cost of housing in America, the median home price today is $420,000 in America. The median age of a home buyer is 56. And, you know, Scott and I have talked about this

before. Our view is pretty simple. The way we solve this is we build more homes. And so I see this data, housing construction actually going down. And just as a young person who, at some point, would like to buy a home, I hope, it makes me a little depressed. So let's just get your reactions to this housing start state. So perhaps any thoughts on why this is happening? I think the obvious answer in this case is the right answer. You had freezing temperatures affecting residential construction. And if you've got companies in that environment that want to pause or delay a groundbreaking by a week or two.

I don't think it's going to have a substantial longer term impact. And if you actually seasonally adjust that number, January was really down 8.4%, which again is not great, but not as bad as the nominal headline. And I'd like to share with you that home building was actually up 24.9% in the Western region of America, which obviously is not being affected by freezes. And so it's the headline sounds worse than the reality. And I think the bigger issue that we have is the cost of labor to build new homes is high and rising and not necessarily in step with the disinflation that we've had in other parts of the economy.

And it's sticky and it'll be stickier still as the ICE raids and some of the things that are going to happen with immigration become more and more front of mind. So if you're worried about anything, that's really the thing that you should be most worried about. And the home building stocks, just if you're watching those for SignalEd, the XHB is up 1% so far this year. Within the XHB, which is the ETF that owns all the home building stocks, 17% of those companies are above their 50 day moving average. 23% are above the 200 day moving average. And about 59% of all companies in the S&P 500 are above the 50.

61% are above the 200. So those stocks are all well behind where the overall market is. And I do think that there's room if you're an investor in the space for there to be a little bit of a catch up trade mortgage rates fall a little bit more in the second half of the year. And we get a bounce back after the weather. You could all of a sudden be reading really good headlines, I guess, is what I'm trying to tell you.

To what extent do you think tariffs are going to play a role in this? It's good to hear that there's a positive read on this. I think Scott and I have a tendency to just see the negative in everything. But, you know, we've got 30% of softwood lumber coming from abroad, 32% of appliances coming from abroad. There was also this new data from the National Association of Home Builders, There was also this new data from the National Association of Home Builders, and they found that home builder confidence had its biggest drop since COVID. It fell 13 points. And I think a lot of that we could probably assume is a response to the possibility that

tariffs are about to be slapped on all of these materials, and suddenly the cost of constructing homes is going to go up. Now, I don't want to just blast Trump immediately at the cost of constructing homes is going to go up. No, I don't want to just blast Trump immediately at the top of the show. Yes, you do. I listened to the show. You forget. I listened to the show and it's a really good point. Like the home builders are people too, and they are susceptible to the media

and they were hearing about nonstop tariff stuff. A lot of the things that we think might be tariffed won't We know that this is part of the the negotiating tactic of the administration We know it because number one we had a full term of this and the number two We already we have people in the administration winking at us just talking about this stuff like, yeah, it's a tariff, but so like that'll run its course. And the reality is that if you're in the business of homebuilding, your job is to make money on the homes that you build. It's not to race in and try to fill the void of, oh my God, we're 1.5 million homes, short what we need to be for the millennials, oh my God, we're 1.5 million homes, uh, short, what

we need to be for the millennials and blah, blah, they don't care about that. They're in business and business finds a way. So they have to replace foreign suppliers with us suppliers and us suppliers are there to meet the demand at a reasonable price. That's what's going to happen in the end. They want to build homes and make a profit on the homes. That's what they're really here for. So I think you have to have some faith that commerce and, um, American style

capitalism will find a way regardless of what roadblocks get thrown up by, you know, international trade wars or, or whatever. And one of the things I want to say to you and to your listeners and viewers, it's really easy to buy into worst-case scenarios. Train yourself to think about what could go right. And sometimes it doesn't work out. But if you look at these things and you say, okay, but what could go right? You're immediately one step ahead from most first level thinkers who read a negative article, process it as negative, and then embed that negative expectation in their minds. Like, what, okay, but what could go right?

So here's an example. What could go right? Now you have confidence really low amongst home builders because they think there are going to be all these monkey wrenches. Let's say those monkey wrenches are not thrown into the works. All of a sudden, that confidence returns. And we see a pattern of this happening all the time. Trump or no Trump.

This is a mindset shift that I think investors need to make. Yes. Let's move on to the X valuation, this funding round that's going to value X at $44 billion, the same amount Elon paid for Twitter. How many shares can I put you down for? It's going to be, it's going to be none for me. How about you? Would you invest in this?

No. Well, so here's the thing. It's an advertising business. Are there any shortages of ways for public market investors to bet on advertising? Not really. If you really want to be invested in ads, you can be invested in ads in a myriad amount of ways, none of which involve all of the volatility and potential risk and the mercuriousness of the CEO of this project. Like you can skip all of that and just invest in ad-based businesses.

And there are plenty to choose from. So from my dollar, the answer is no. The other big question here is like, how did they land on this number as evaluation? We basically have no signal into what this thing is actually worth. And this is the big question that we've been asking. And it's very hard to know because we don't see the financials anymore. Um, ever since it went private, but the best signal that we got was from Fidelity, which owns a stake in X and they valued the company at $10 billion.

And that was just in December. So I guess the thing that I can't really wrap my head around is how could these new investors, whoever they may be, justify a new valuation of $44 billion when just a few months ago, it was valued at less than a quarter of that? I wonder if this might be due to Elon's association with Trump, maybe having that connection makes people more excited and more bullish on the company.

Maybe it also has to do with XAI, Elon's new AI startup, which is reportedly raising in a $75 billion valuation. Maybe they think that X, the social media platform can capture some of the value of the AI company. Or maybe they've just quadrupled their revenues overnight, but I highly doubt that. So what do you think, Josh? What do you think these investors in this potential round for X are seeing that the

guys over at Fidelity two months ago didn't see? I think it's the halo effect of Elon Musk. He has a ton of momentum in terms of the zeitgeist of the country moving in the direction of what he's done with free speech on the platform. And you could absolutely hate the stuff that you come across on the platform and that's fine. But a lot of people just like the fact that it exists. And they see Metta kind of following Elon into this, which is, when was the last time

Metta or Facebook ever followed Twitter into anything? So they kind of see that, you know, the vibe shift in the country, especially amongst young people, but really in places that surprised people, among African American voters, among voters living in border towns in Texas. Like none of these people were supposed to have had, heard that rhetoric from Trump and Elon Musk and had that resonate with them and yet they did. And so I think advertisers feel a little bit more emboldened about, you know, being willing to place ads

on the X platform where six months ago they would not have. I think some of that is being reflected in the valuation. I also think the valuation is made up to begin with the 44 billion is what he paid for it. So this is him saying, Hey, I didn't destroy any value here. Things are better than ever. So there's some of that. I also think there are people willing to buy a stake in this just because

it gets them, you know, uh, in the room. It's like, yeah, I invested in your ex platform. Now allow me to talk to you about this other aspect of my business. And so a really cheap way for, uh, a big investor to buy in, so to speak, is to buy some equity at X and, uh, rub elbows with the people that are perceived to have a lot of momentum. Yeah, absolutely. I mean, we certainly saw all of these blue chip advertisers fleeing the platform. And it feels like what might be happening now is they're starting to come back,

especially after the election. Do you think we might see that that swing back? Yeah, because it's not just happening on X. Google is pulling out all these, um, you know, black history month and women's history month, they're pulling all that stuff off the calendars. You are not going to see the pride month displays at target and, and, uh, elsewhere that you've seen in previous years, all that stuff's going to be downplayed. Corporate America is recognizing that they were pushed to go way further in one direction than the average person in this country really wanted to follow. And so now they're tacking all the way back in the other direction.

And maybe, of course that'll go too far too, but like X is uniquely positioned to get back to the original question. If you want to demonstrate that you're about profits and making money and satisfying the customer, a really easy way to do that is to be back in business with Elon and with X. And just to say like, look, here's where our customers are. This is where they are emotionally and spiritually and we're there too.

It's a really easy signal flare to fire in the air. And you're going to see, I think you're going to see advertisers back. Let's move on to a micro strategy. Multiple companies now copying the playbook where you just basically buy up a bunch of Bitcoin. I look at these companies and the common thread I see among all of them is that they're all shitty companies is what I would say. I think back to what Michael Saylor said on this podcast, which is that before he got

into Bitcoin, MicroStrategy was struggling too. So I'm seeing this Bitcoin strategy, it kind of looks like the get out of jail free card for shitty struggling businesses. Do I have that wrong or do you think that's sort of what's happening here? Nah, you nailed it. And we've seen versions of this before. In 2017, there was a wave of small and micro cap companies adding the word blockchain to their official corporate name. Like literally changing the corporate name to something blockchain and immediately getting a boost in their valuation because Bitcoin rallied up to 18,000 that year from like 9,000. And it just became the zeitgeist and dead-end companies that didn't have much going on.

It was like an overnight way to add market cap. Of course, it failed spectacularly in 2018 when the price of Bitcoin crashed. So none of this is surprising. And I think the interesting thing that happens here, in the short time, it actually bolsters strategy because you have a lot more entities that are buying up Bitcoin and you know, as the scarcity of Bitcoin becomes more, more of a widespread idea, obviously companies that own a lot of Bitcoin will benefit over the longer term though, or the intermediate term if this continues

and grows, I think you'll lose the premium that strategy has to its value of Bitcoin. So right now it trades at a premium to the amount of Bitcoin it owns because people believe in not just the value of the Bitcoins, but the strategy of accumulating more. So it's selling at a premium to, if this were a closed end fund, we would say a premium to NAV or net asset value. The premium will shrink if there are five of these companies, if there were 10 of them that attain any kind of size.

So that's one interesting thing that could happen where all of a sudden the company's strategy starts to trade at closer to just the value of its Bitcoin. Cause it loses that scarcity premium because there are so many imitators out there in the market. I'd love to get your thoughts on Michael Saylor's strategy in general. I look at what he's doing.

I'm very skeptical of it. You know, you, you, you described the premium to NAV there. And a lot of why that's happening is because he's basically securitizing the value of Bitcoin to issue bonds and then using the bond proceeds to buy even more Bitcoin and just levering and levering and levering. And to me, at a certain point, it starts to look more like a Ponzi scheme than anything else. The whole thing feels extremely unstable, especially when you bring up those historical comparisons of adding blockchain to these companies. It feels very similar to that. And then add on top of that, the fact that the

NASDAQ has now decided to include this company in the NASDAQ 100. This adds a whole new dimension of concern for me, because now you have millions of people in pension funds and people's retirement accounts holding this thing that arguably doesn't have much value or at least that isn't generating real cash flows in a normal regular way that another company would. Perhaps I'm being too negative. Does this make sense to you? It works and it makes sense. So long as the price of Bitcoin goes higher. I'm sorry, but that's the reality.

You're not comforting me. He owns 2.28% of all of the 21 million Bitcoin that will be available. So the available now and available in the future. That's impressive if you think that Bitcoin is going substantially higher. He's got a $31,000 cost basis on that Bitcoin. That cost basis will rise as he continues to buy, but the bet is the demands for all of the other Bitcoin available will grow more quickly than the new supply coming on net of whatever he's buying.

And these other companies that are aping the strategy are way more ridiculous. So here are a couple, Semler Scientific. This is a quote unquote chronic disease detection company. You could see why they'd want to buy digital assets. It makes perfect sense. They bought 871 Bitcoin for 88 and a half million dollars. They used a convertible bond that they issued in January.

Its stock price is up 120% since buying this crypto and they're calling it their primary treasury asset. Here's another one. MetaPlanet based in Japan. They're calling themselves Asia's strategy. Last year they switched from developing hotels into becoming a Bitcoin treasury company. The stock price has gained more than 2000%. My God. So I guess what I'm trying to tell you is don't get mad at strategy.

If you really want to hate something, hate, want to hate the Japanese hotel company, meta planet. Like there are way worse versions of this. If Bitcoin craters to $50,000 strategy, uh, share price will implode. Of course it will. The way you made money in Bitcoin, and I made some, I should have made more. The way that you made money in Bitcoin

was to ask yourself the following question. And I heard this put by Bill Miller, was one of the greatest stock market mutual fund managers of all time. He had an unsurpassed record. He beat the market 15 consecutive years. Nobody, nobody else has ever done that. He got very heavily interested in Bitcoin way early.

And the question that he posed and then answered is the supply of Bitcoin is only going to grow 2% a year supply. Ask yourself this, will demand grow faster or slower? If you answered the question faster, then de facto you had to be bullish on Bitcoin. If you answered it slower, well, you were wrong because the demand outstripped the supply, which is why the price has gone from $50 a Bitcoin to $80,000 to $90,000 to $110,000. So that was like the right way to answer that question. So if you believe that the demand will continue to rise faster than the supply, then you're

probably bullish on strategy and you probably own it in addition to regular Bitcoin that you also hold. It's easy to be skeptical that the demand will stay, but so far that's been the case. People who have shorted this thing have trained tracks across their backs to prove it. We'll be right back after the break with a look at Intel. If you're enjoying the show so far, be sure to give Profteer Market a follow wherever you get your podcasts. They even offer some of the highest yields in the industry, including the bond account's 6% or higher yield that remains locked in even if the Fed cuts rates. With Public, you can get the tools you need to make informed investment decisions.

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Start caring for your home with confidence. Download Thumbtack today. We're back with ProfGMarkets. Intel could be headed for a breakup with the help of TSMC and Broadcom. TSMC is exploring taking control of Intel's US factories, while Broadcom is in talks to acquire Intel's chip design and marketing business. Intel's stock surged 16% on that news, marking its biggest rally since 2020. So Josh, this feels quite important symbolically.

I mean, just going back through history, in the year 2000, Intel was the sixth largest company by market cap in the world. It hit a peak of half a trillion dollars in market value. And since then, it's shed almost 80%. We've seen this AI explosion. Its competitors have exploded in value. Chipmakers like TSMC, AMD, Broadcom, Nvidia,

and now Intel is not even among the top 10 most valuable chip makers in the world. And it appears as though it's going to be split up into two and acquired by the two companies it was specifically trying to compete with, which are Broadcom and TSMC. What went wrong for Intel? DEI. Isn't that what we do now? That's the problem.

It's actually, it's not that far off. Me Too is sort of what, I wouldn't blame the Me Too movement for this, but that's where Intel's problem started. In 2018, they had a CEO who had to step down. I don't have all the details, but he had a relationship with somebody who was working at Intel. It came to light and the board asked for his resignation, which of course, that's how that ends. So please, if you're running a publicly traded company, try to control yourself

around your employees. Keep it in your pants. Yeah. Anyway, that's 2018. And what comes out of that is a succession of bad leadership slash bad decision making. Intel decides in that moment of succession, they have a new incoming CEO and they decide what they're gonna do is they're gonna go full bore into the foundry business. They have this manufacturing advantage. They're one of the highest throughput manufacturers

of chips in the world. And they're better at it than other American chip companies. And they look at the success of Taiwan Semi, which has effectively become like the outsourced manufacturer to all of the chip design companies all over the world. And Intel says we could do that too. And that's going to be a big part of the future of our business. And that was a horrible in hindsight, strategic decision. I think Wall Street hated it in real time.

And keep in mind, this is during a time, the rise of Nvidia, but it's pre-AI. It's 2018, 2019. At that time, Nvidia, it's very well known that Nvidia is going to be a big player in next generation technologies like AR, augmented reality, VR, virtual reality, machine learning, AGI. What Nvidia is doing is parallel processing. They're taking this technology that they initially developed for video game development, and they're pivoting it to these other technologies

where linear processing is not the right answer. So Intel is the linear processing king, the CPU king. Linear processing it's we do this operation, then we do that one, then we do that one. Parallel processing is multiple things at once and if you're going to do autonomous driving for example, you can't wait for a progression of linear compute. It's got to be parallel. So Nvidia is kind of in pole position for the GPU era and Intel is not even there at all. And as a result, they go into Foundry and Foundry is just a terrible smokestack, industrial kind of business, and you're never gonna get the same stock multiple

that you'll get as if you're a chip designer, asset light, where we create the front end of this, and we pay somebody else to do the dirty work. And so they've been stumbling. This is going on for a long time. It well predates the launch of ChatGT and the AI era but of course that only made the disparity between Intel and Nvidia even worse. Companies like ASML overseas and other chip companies arm holdings they all got the memo and

Intel didn't and as a result this is why this company is now a shell of its former self. It's a hundred billion dollar market cap in a land of trillion dollar companies like Broadcom and, and, uh, Nvidia in the last eight quarters or two years, Intel has been profitable on an operating basis in only three of those quarters on a net income basis. Intel has lost money four quarters in a row through the last quarterly report. It's just an absolutely horrendous fall from grace. And maybe the right answer is to put this,

put a nail in the coffin, separate out the chip design from the foundry business, have somebody else take those things over and say goodbye to Intel. And maybe that might be the better outcome for current shareholders than trying to continue to slog it out given the market realities of today

where Intel is in no man's land. Just going back to the decision to get into Foundry, and just to clarify for a little bit, Foundry is basically getting into the actual manufacturing of these chips. Most of the big companies we're talking about, Nvidia, Nvidia is probably the best example, Broadcom, they're designing chips, which is just a better business. And then they pay someone else to produce it for them. And Intel decided they wanted to try to get into the business of actually producing these chips for other companies like Qualcomm.

This is the business that TSMC is in. these chips for other companies like Qualcomm. This is the business that TSMC is in. And so they made that decision to go into Foundry, and I think everyone would agree with you, that was a bad decision. They got caught completely flat-footed, this AI boom took off, and then suddenly everyone has these GPUs and Intel's operating

with a kind of shitty CPU business, and then also they're investing huge amounts of capital into building out this Foundry business. I guess from sort of like a management perspective, what could they have done differently? Should they just not have invested in Foundry to begin with? Should they have invested more maybe in R&D, trying to predict AI? I mean, it feels very easy to say, oh, what a terrible decision. It's the wrong people running the company.

In this day and age, if you're going to be at the helm of a chip giant, you have to have a visionary streak that enables you to see around corners and predict you cannot be a bean counter. You cannot be just like an operations guru, but not have a vision of where the tech is going. I mean, you can get away with that for a few years, but ultimately it catches up to you.

It's not a surprise that Broadcom got to a trillion dollar valuation. It's run by Hock Tan, who is a visionary. He's a 40 year veteran of the chip industry and he's been there at the birth of so many milestones in the tech landscape. Jensen Wang, Lisa Su, who runs AMD, these people are running circles around Pat Gelsinger at Intel, who I think has already stepped down. It's a management. It's not just one decision. This is this cumulative decision-making process process and you either get it or you don't. And if you don't, you miss where the market's heading. That's one. Two, a friend of mine, Jason Hsu, who's a Raylient Global Advisors, he had been at

research affiliates. He's a Chinese born investment manager here after the chips act, I had a conversation with him. And there was this whole push to like start the on-shoring and the semiconductor shortages of COVID for the automobiles. And we can't let that happen again. And Intel is going to spearhead this effort to start building chips here in the United States and Arizona and elsewhere. And that we're going to build our own chips. And I think that's the biggest thing that Intel is going to spearhead this effort to start building chips here in the United States and Arizona and elsewhere. And that we're going to build

our own fabs and the government is going to underwrite it and it's going to be great. And Jason kind of said, not so fast, which you have to understand is if you are a highly technically skilled person in Taiwan, you dream of being in an underground white room for Taiwan semi working in a laboratory all day in a hazmat suit. That's like, that's your dream. Your counterpart in America does not have that same dream. Does not want to work in a clean room, 11 hours a day for Intel in Arizona. It's just not what, so our most talented, most brilliant scientists and technically savvy engineers in America do not want what that same person would want growing up in

Taiwan. And so Jason said the idea of us having our best and our brightest living in Glendale, it's not going to go that way. There's a reason for Taiwan's ascension to the top of the heap in terms of chip, chip manufacturing around the world. There's a reason it's there and it's not in Connecticut. Yeah, exactly. Just looking ahead now, so we've got Broadcom, which is eyeing the chip design business, and then TSMC is looking at purchasing the Foundry business. There are a lot of questions over how viable any of this really is.

I've seen some analyst notes pointing out that TSMC has very different equipment to Intel, so maybe you won't have those synergies that people were expecting. Maybe it doesn't actually make sense for them. I think the biggest question mark though is the regulatory approval for this. Because if this deal were to go through, at least for TSMC, you will need sign off from the U S government. So just from a regulatory perspective, how do you think this goes down?

Josh, do you think Trump and the, and the government would ever let this go through? I would just comment if Taiwan semi really wants it, if broadcom really wants it. I would just say gentlemen, prepare to golf. You are going to be spending a lot of time at Mar-a-Lago. Prepare to tweet positive things about Trump and prepare to golf because this ain't going to go through the courts. This is 2025. If you want this deal done, it's got to look like a win for Trump. If the headline is Trump successfully won the game, then you're This is 2025. If you want this deal done, it's got to look like a win for Trump.

If the headline is Trump successfully sells Intel to two of the most successful companies in the world to create new jobs for American workers in red States, you got a shot. If the headlines are going to look more like American failure while Trump was in office, this ain't going to, this ain't going to fly. This is going to be looked at from an optic standpoint, more so than a strategic standpoint. I will say Taiwan Semi is a foreign company, but if they're going to commit to making a go of this kind of semi manufacturing

on American soil, and we say that that's not a bad outcome, that's a good thing, then maybe it could happen. But I don't have any edge on whether or not they'll approve it. You've been working on your swing, Josh? Not nearly enough. Thank God I'm not trying to buy Intel. All right. We'll be right back after the break with a look at the new Gold Rush. swing, Josh? Not nearly enough. Thank God I'm not trying to buy Intel.

All right, we'll be right back after the break with a look at the new Gold Rush. If you're enjoying the show so far, hit follow and leave us a review on Profty Markets. We're taking Vox Media Podcasts on the road and heading back to Austin for the South by Southwest Festival March 8th through the 10th. What a thrill. Chicken fajitas, queso, strawberry margarita, extra shot of tequila. There you'll be able to see special live episodes of hit shows, including our show, Pivot,

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That's voxmedia.com slash S-X-S-W. I'm Josh Mucciio, host of The Pitch, where startup founders raise millions and listeners can invest. For lucky season 13, we looked at 2,000 companies and selected 12 of the very best founders to pitch in Miami. They flew in from all over the country and the world.

My name is Michele and I'm from Italy. I'm originally from Managing Columbia. I was born and raised in Maysville, Kentucky. I'm from Baltimore, Maryland. And I am from Finland. This season, we're diving even deeper into the human side of venture, as these founders pitch the sharpest early stage

VCs in the game. I normally don't like Ed Tech, but I really like you. I echo those sentiments. I do want to push back, though. Toughen up there, lady. That's health care. I feel like I'm the lone dissenter. Ooh, Charles, spicy. So I'm out. I'm the lone dissenter. Ooh, Charles, spicy.

So I'm out. I'm sure when they air this episode, they'll be like, Charles was really dumb. For those who can't see, my jaw's currently on the floor. Season 13 of The Pitch starts March 5th. Episodes are available to watch on YouTube or listen on your podcast player of choice. So subscribe to The P pitch right now. We're back with ProfG Markets. Gold is hitting record highs, up more than 10% year-to-date as investors seek out safe havens amid geopolitical uncertainty.

President Trump's tariff threats, paired with fears of resurgent inflation and higher-for-longer interest rates, have pushed the price of the commodity to nearly $3,000 per troy ounce. Josh, this asset has had its best month in 13 years. I never really understand gold or I really struggle with gold as an asset. What is going on with gold right now from your view and why are investors so obsessed with it in this moment? The best way to understand gold is just take whatever the price is doing and then take whatever the headlines are and concoct a story that enables you to say A plus B equals C.

Like truthfully, if gold goes up concurrent to there being inflation, oh, it's very simple. People are buying gold because they're worried about inflation. If the inflation is rising, but gold is not rising. Oh, it's very simple. Gold already rallied and now the inflation is happening. Therefore the people that bought gold before the rally anticipated the inflation. It's honestly, it's a fucking joke and nobody knows why.

Nobody knows why anything does anything, but they definitely can't explain a gold rally other than ex post facto. So here I will tell you why gold is rallying. Gold started to rally in the winter of 2022 when Russia invaded Ukraine. That is to this day, the predominant reason for why gold is rising. Central banks looked at the way Russia was kicked out of the swift banking system. They looked at the way Russia was sort of deplatformed from the global economy. They said to themselves, maybe we need to diversify

away from the dollar because if we get kicked out of the global banking system, we're going to have to have a way to transact and we're going to have to diversify our currency reserves. So once you reach that conclusion, you realize there aren't really that many other assets that make a lot of sense. Gold is as a result being bought by central banks around the world, especially in countries where they might be concerned about this sort of thing like China, like Iran, like Russia. And so the demand for gold is truly a geopolitical phenomenon. So fine, we'll say the reason for gold's rise

is geopolitics. Okay, I can point to historical examples where gold sold off during geopolitical tensions flaring, but fine. That seems to be the story that most people have accepted. But then the other thing that happens at is the trading mentality shifts and all of a sudden that story becomes so popular that people in their investment accounts start to accumulate gold on the theory that that sort of thing will

continue and so people start to extrapolate the recent past and that's where you get the momentum. So now gold is up 9% annualized over the past 15 years, the nominal terms, 8.8% annualized over the past 10 years. But over the last three years, it's been rising faster. 15% annualized return over the last three years. Over the last one year, it's up 45% and it's up 12% since the year started. So if you think about gold over the long term does not do better than stocks,

but I can show you these five and 10 year periods of time where it far outperforms the stock market. And so people are looking at the momentum there and they're saying, okay, this is a gold bull market. I don't know when it ends, but I need to be there for it. So that kind of feeds on itself. And I think that's where we find ourselves today. I'd love to get your view on gold as an investment in general. I mean, you as a wealth manager, do you think that this is a worthwhile investment?

And I'll just put it out there. I don't really see the value of gold when you can invest in companies that pay dividends and generate cash flows and provide actual value into the world. And then meanwhile, just gold just sort of sits there and does nothing. Here's a long-term reality. Go back to 1928. So we have 86 years worth of data. Stocks have done 11.8%.

This is nominal, not adjusted for inflation. Stocks have done 11.8% over the last 100 years. Gold has done 6.6. High quality bonds, US Treasuries have done 4.8. Real estate 4.4. Cash 3.4. So gold has done well, has not done well as well as stocks. And I have to tell you the chasm between 11.8 and 6.6 is

absolutely massive. When you remind yourself that we're talking about compound annual returns, we're not just talking about one year. We're saying like a 30 year investment time horizon. It's not just 50% better, it's substantially better the returns of stocks. And I think that will probably be, always be the case over really long periods of time. But there are periods of time where gold beats stocks

and there are specific years and three year and five year and 10 year periods. So some people use it as a diversifier and portfolio. Some people don't. We do not. There's no reason to own commodities at all individually. And if there is a commodity boom, it'll show up in the stock market. And if you own stocks, you'll get the benefit of that.

So we own oil equities. We don't buy barrels of oil. If you have an S and P 500 exposure, you have gold equities. And if there's a huge boom in gold, those gold equities in market cap terms will become larger proportionally to the rest of the stock market. So you will see some of the benefit of that. But we don't own commodities outright individually. We own stocks and we will get the reflection of those booms and busts via our exposure to the stock market.

In the reporting on this, we hear a lot about the spot price of gold and then we hear a lot about the futures price, gold futures price. Could you just break down for us briefly what that difference actually is and why that difference matters if it does it all. It doesn't really matter unless you're in the jewelry business. The spot price of gold is literally what you're taking. What, when you're taking physical delivery of gold bullion, that's, that's what that price is about. And of course, most people who are trading, they're taking delivery of nothing.

They're in ETFs. They own GLD. The futures market is what producers and what they call commercials use to hedge the volatility of future prices. So as a, for instance, if you're in the business of buying a certain amount of gold over the course of the year as a commercial player in the market, let's say you're a jewelry manufacturer, the big risk for you is that the gold that you have to buy six months from now will rise significantly in price. So you would use the gold futures market

as a way to hedge that risk. You would put on certain trades or collars or whatever your strategy is to try to mitigate the disastrous impact of the price of gold rising 30%, which could wreck the economics of the business that you're engaged in. And vice versa, if you're a gold miner, you know that you need to sell a certain amount of tons of gold a year from now and you're worried the price might be lower, you

could lock in using the futures market. You could lock in the price that you'll be selling gold at. So think of the spot market as being more relevant to companies that are physically engaged in the gold market, buying and selling, or banks that are stockpiling gold, central banks, and think of the futures market as more of a tool to either hedge or speculate on the price three months from now, nine months from now. I bring it up because we're just seeing this very interesting dynamic, but in

that difference, where right now you have gold futures trading at record highs in New York, but over in London, the spot price is significantly lower, and that's where the Bank of England holds all of that physical gold that you're talking about. And because of that spread, it's just a very interesting story that we're seeing. You have JP Morgan and HSBC and all these other banks who, as we speak, are literally

flying gold across the ocean from London to New York. And what we've seen is that they have these concerns over these tariffs, and so they need to get gold out of London and into America as quickly as possible. I'm not sure how important it is in global markets, but it's certainly an interesting visual. Could you just explain how this strategy is playing out and why it is important that the banks do this? Yeah, it's chaotic and it won't, it won't chaotic and it won't last a long time.

That type of frenzy, that type of activity. There are historical examples of that. One of the causes of huge market dislocations throughout history has historically been the movement of gold from one country to another or from the rest of the country back to New York. Like we've had instances where they closed the New York Stock Exchange heading into World War I. And one of the main concerns is all of the gold was about to be sucked out of the banks

in New York and sent to England to finance the prosecution of that war against Germany and they wanted to preempt the chaos that that kind of thing had historically caused. And you have these situations that have arisen in the past where just this seasonal pattern in the springtime, America a hundred years ago is very agrarian economy. Everything was about agriculture and farming. So you'd have all the gold leave the banks in Boston, New York, Philadelphia and it would head to the Midwest and it would be dispersed amongst the farmers who had to, it would

show up in the banks in rural America. The farmers would then be able to fund the cost of seed and equipment and hiring farm hands and people who would help them plant and then the summer would go by There would be specular the gold would return back to New York All that gold would lead to there being excess capital that excess capital would lead to these huge booms in the stock market and people speculating with the money while it was there. And then all of a sudden the banks in rural America would call that gold back because it was time to bring in the harvest.

And you would have this seasonal pattern that resulted in us saying things like, sell in May, go away. Or you would see like October being this month where all of a sudden all hell would break loose on wall street because the gold would leave these financial centers were all this trading and you would have this literal dearth of liquidity and you would like, you would have this drop off in money and in capital and uh,

it kind of became ingrained in the patterns of stock markets and business and commerce. We've been able to neutralize that over time as society has become less agrarian and we don't really have that every October the market crashes because the farmers need their gold back. Like that's not the way the economy runs now. So it is interesting when you see something like this. All of a sudden people are flying their gold across the Atlantic to get it from

one country to another. It's chaotic activity. It's kind of a throwback to the way the economy used to function when everything was on a gold standard. And it's weird. And I guess I would tell you not as an investor to react to that type of thing because it's not likely to be a long lived phenomenon. Yeah.

It certainly feels very apocalyptic and it's very interesting that gold has this association with geopolitics and inflation, but really just panic. It's like when the world starts to look like it's crumbling, suddenly people start to be interested in gold. Emotional volatility. Exactly. And I would just like to get your final reaction because we had Ray Dalio on the podcast.

And it was very interesting because, you know, he was very concerned about the world from a geopolitical perspective. And I think a lot of people are very concerned about the world geopolitically. I mean, I think back to what Jamie Dimon said in the most recent earnings call, where he said that we are in the most unstable geopolitical time since World War II. And Ray Dalio basically told us, you know, if I were to put my money into anything, it

would be gold. And my reaction, I think is similar to yours, which is, is this really worth the panic? And if we are to panic to the extent that these people say we should, what is buying gold going to do for us? Is that really going to solve our problems? So I guess I'd be interested to get your view on gold from a geopolitical perspective. Does Ray Dalio's view make sense to you? I think gold probably can get to 5,000, just purely on momentum alone, because a

lot of people are worried and there are a lot of reasons to be worried. It's not completely invalid. I think during the course of the Trump administration, if you told me this all ends with some major geopolitical conflagration and gold runs up to 5,000. I would say that's exactly that's completely within the realm of things that you know could be expected. So I don't disagree with Ray Dalio except in the utility of it. So World War Three, we're going to fight China over Taiwan and Russia over Western Europe simultaneously, the fuck are you gonna do with your gold ETF? I'd rather own a farm and food, yeah.

Bullets motherfucker. What are you gonna, oh, but look, I'm long gold miners, don't shoot. The only currency in these worst case scenarios will be like the backbreaking labor that you have the muscle tone to accomplish on behalf of whomever is enslaving you. And it won't be Bitcoin? You want me to spare you? Don't tell me about what's in your Roth IRA. Remember what I told you at the start of this.

Think about what could go right. And worst case scenarios very rarely play out. And if they do, in this case, think about the things that we're talking about. Talking about like multiple nuclear powers, potentially like being goaded into a conflict here. Like it's nothing you do in your portfolio is going to help you. Okay. So don't bet on the don't bet. if you bet on the worst-case scenario if it comes to pass who you're gonna collect from Who's paying out on that debt if we're all?

Squatting around a fire eating a squirrel. So I I am I view my role in this is to understand the risks and And try to help people process them and try to give people the context that risk is omnipresent, ever-present. It's always a thing that exists. We feel it more acutely in some moments than in others. But honestly, it's usually in those moments where everything feels great that the big risks are really about to arrive.

And it's rarely the thing that we're all worried about that actually ends up going wrong. Let's take a look at the week ahead. We'll see data on the personal consumption expenditures index for January. We'll also see earnings from Salesforce, Dell, Berkshire Hathaway, and Nvidia, which will be a huge one.

Josh, this is the part of the show where I asked Scott for a prediction. No pressure, but do you have any predictions or is there anything that you're thinking about in the next couple of months or so that you think that our listeners might want to keep an eye on in the markets? I think Nvidia reports and hits a new all-time high. Yeah. There's a lot of skepticism going into this earnings report. There has been for a while on Nvidia.

Their stock doesn't always rally after they report earnings. Sometimes it rallies into the earnings. In this case, it's kind of been stagnant for a while. I think the conversation is starting to pivot from large language models and it's starting to go more toward physical AI, automation and robots. And I think Nvidia's got the most compelling case for why they will be at the forefront of all these things than any other company in existence. And I think that'll come through in the remarks Jensen Wang makes.

I'm a long-term shareholder here in Nvidia. I've owned the stock since 2015. Uh, so of course I'm biased. I would also point that everyone owns Nvidia at this point. It's the number one or two largest waiting in the S&P 500. If you have a, if you have a pension, if you have a 401k, if you-

2015 is early. I was extremely early to the story and, uh, very publicly so talking about the stock on, on television every week for 10 years. It has been a once in a lifetime stock. It's up 10,000% in that period of time. If I lived another 100 years, I'd probably never see anything like it again.

And I don't think it can continue to rise at the rate that it has. But the reality is it's just not that expensive of a stock because as much as the share price has gone up, the earnings have gone up as much if not more. So I think it'll be a good conference call. I'm hoping to get a positive reaction after. My prediction is that we will, but who knows, anything can happen.

Josh Brown is the co-founder and CEO of Ritholtz Wealth Management, a New York City-based investment advisory firm managing more than $5 billion in assets for individuals, corporate retirement plans, and foundations. Josh, just an absolute pleasure as always. Thank you so much for coming on. Thank you so much for having me, Ed.

Appreciate it. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss, Mia Silverio is our research lead, Isabella Kintzel is our research associate, Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to ProfG Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Mike Moffat only on ProfGMarkets. Reunion as the world turns

And the blood flies In love, love, love, love