Prof G Markets - Searching For Value Outside the U.S. — ft. Lyn Alden

Episode Date: March 20, 2025

Ed and Scott open the show by discussing Klarna’s IPO, Google’s acquisition of cybersecurity startup Wiz, and Lip-Bu Tan’s new plan for Intel. Then Lyn Alden, independent analyst and the author of Broken Money, returns to the show to break down the latest stock market correction, explaining why it’s a natural part of the market cycle. She explores whether we’re about to see a rotation from U.S. markets to international ones, unpacks why she doesn’t think federal spending will come down under Trump, and gives her take on the national crypto reserve. Finally, Lyn shares an update on her portfolio and reveals the key investment themes she’s focused on for 2025.  Subscribe to the Prof G Markets newsletter  Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice 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

Support for the show comes from public.com. If you're serious about investing, you need to know about public.com. That's where you can invest in everything, stocks, options, bonds, and more, and even in a 6% or higher yield that you can lock in with a bond account. Visit public.com slash prop G and get up to $10,000 when you transfer your old portfolio. That's public.com slash prop G. Paid for by public investing, all investing involves the risk of loss, including loss of principal. Dei went from workplace darling to persona non grata in I should also disclose I am an investor in public. DEI went from workplace darling to persona non grata in the blink of an eye. The thing that I loved is when I saw that the president's executive order was named ending illegal discrimination. I was like, what? Oh my goodness.

Thank you for that gift. Why one workplace diversity expert is embracing the change and what it could mean for your job. That's this week on Explain It To Me. New episodes Sundays wherever you get your podcasts. Hi, I'm Neil Epitale, Editor-in-Chief of The Verge and Decoder is my show about big ideas and other problems. We're in your feed twice a week. On Mondays, we have interviews with some of the most influential names in tech and business, taking a deep look at how high profile leaders make decisions and navigate our uncertain

future. And on Thursdays, we bring you analysis of big ideas and breaking news, looking at how tech has reshaped the whole world and how all of it fits together. Listen, wherever you get your podcasts. Today's number 40. That's the percentage of college basketball fans who have admitted they've called in sick to watch a March Madness game. True story. When I worked at Morgan Stanley, I called in sick and my boss said, you don't sound sick. And I said, well, I've been fucking my pet rabbit all day. Does that sound sick enough for you? Welcome to Prop G Markets. Today, that's right, first job. Can you imagine what a great employee I was? Today, we're speaking with Lynn Alden,

independent analyst and the author of Broken Money. But first, it's time for banter. Ed, did you have a pet rabbit? No, I did not have a pet rabbit. And I just want to say- Did you have any pets? I did. I had a dog, and I've told you about that.

The dog you didn't like. That's right. OK, you remember. Yeah, you're the first person I've ever met. It's like, yeah, I wasn't a big fan of my dog. I wasn't a big fan of my dog. He was lame, and he bit other dogs. I think I've said this before.

I just want to point out, I tweeted about this on Twitter. You're still on Twitter. I also posted on threads. Yeah. I'm going to cast a wide net. Okay. Sorry. Go ahead.

So I, I see me watch white Lotus this weekend. Uh, I did. Yeah. So the scene that everyone's talking about where Sam Rockwell is talking about getting railed by other men as he's a, yeah. Right. Yeah. Correct.

I call that a Tuesday night. Okay. So the face that, that the guy, that the other men as he's, yeah, right? Yeah. Correct. I call that a Tuesday night. Okay, so the face that the other guy makes, that's me at the opening of every single show on this podcast. Sex is a poetic act.

It's a metaphor, metaphor for what? Are we our forms? Am I a middle-aged white guy on the inside too? Or inside? Could I be an Asian girl? Right. I did see that thread and people loved it. Your reaction?

I've always thought a decent, a non-zero probability is my end is very similar to Kung Fu star Keith Carradine. There were several prostitutes involved in Thailand. And I thought, you know, if you're going to go, go out with all guns blazing. I mean, did you ever see Kung Fu? Had a white guy playing like a monk who could kick the shit out of like,

it was kind of politically incorrect, but very kind of politically correct at the same time. And then next half hour I'd be like, okay Tonto, like smell the ground for other savages. Right now I feel like the guy in white leather. I'm like, oh, oh really? Hmm. I didn't know that. And then, and then you know what I'd watch? Let's go through.

I mean, it would be impossible for me not to be like pretty fucked up based on the steady diet of media. I watched two hours a day, four episodes of I Dream of Jeannie. We were one of the first communities in Orange County to get cable TV and they had Jeannie on four times a day. I watched all four of them. So I grew up, my formative years were, yes master or go to your bottle Jeannie.

Anyways, I'm like fucking Alan Alda. I've come a long way. Ed, what did you grow up on? I grew up on SpongeBob SquarePants and Dexter's Laboratory. That just means you should be abusing drugs. I don't, that's not that. Claire, come in here. What did you grow up on?

I actually grew up on the same show as you did, weirdly, because I didn't have cable. So. Oh, wow. yeah, I basically watched PBS Kids, and then this channel called MeTV, which just played reruns of all those old shows, like I Dream of Jeannie, Bewitched, The Brady Bunch. Yeah, all your favorites. Did you watch Partridge Family?

Of course. Yeah, that was pretty good. That was my favorite thing about Brady Bunch was that Greg was fucking the mom, Florence Henderson, and the dad was closeted and died of AIDS. Obviously very tragic. The Brady Bunch was not what it appeared to be. It was not what it appeared to be. God, get me out of this.

How do we get out of this? How do I get out of this? GDP, AI. All right, let's get to the headlines, Ed. Now is the time to fly. I hope you have plenty of the well above. Buy now, pay later firm Klarna has officially filed for an IPO on the New York Stock Exchange. Analysts estimate its valuation is around $15 billion, and has a sharp decline from its $46 billion peak during the pandemic. Google is acquiring cybersecurity startup Wiz for $32 billion to strengthen its cloud

security offering. Back in July, the companies were in talks for a $23 billion deal before Wiz walked away from the deal. Now, Google expects to close on its largest acquisition to date next year. the companies were in talks for a $23 billion deal before Wiz walked away from the deal. Now Google expects to close on its largest acquisition to date next year. And finally, Intel's new CEO Lip Bu Tan is just days into his tenure and has already outlined his new plan for the company. His strategy includes revamping chip manufacturing with a focus on chips that power AI servers.

Scott, let's start with Kloner, which is looking to IPO now. This is a buy now, pay later company. I've been pretty critical of buy now, pay later in the past. I think you have too. My view is that this is basically just a misleading rebrand of a product that already has a very negative reputation in society and that product is debt or credit. People do not like debt, they don't like credit,

they don't like these banks that make money, offer the people they service defaulting on that debt and that credit. And so companies like Klarna and Affirm, which is another BNPL firm, and Afterpay, they came in, they said, hey, we don't like debt either, we hate those big mean banks, So we have a new product. It's called Buy Now, Pay Later.

It lets you purchase things now, and then you delay your payment of those items in the future. And of course, this is literally the definition of debt. It's just repackaged in a different format with a different brand and a different name. To be fair to Klona, they have sort of cleaned up their act. They're a lot more forthcoming now about what they're actually selling. But I'm still a little bit wary of this company because I'm especially wary looking at the

language in the prospectus for this IPO, which begins with this tirade against traditional banks. The CEO says that Klona is an amazingly diverse group of people with really one thing in common, and that is their resentment of traditional banks. So I'm still a little bit iffy on buy now, pay later and Klauner, but the company is doing quite well. Revenue's up almost $3 billion, expects to go public at a $15 billion valuation. What do you think of Klauner's potential IPO, Scott? So I agree with you. I'm not a fan of the BNPL space and basically it's sort of the way it works is you can walk up to the till at a retailer and they say, would you like to buy $300 worth of stuff?

And you get automatic credit right now. And the retailers love it because it inspires additional basket size on the spot. it inspires additional basket size on the spot. And it's sort of tapping into people's young people's, and I'd be curious what the age, the numbers here are offering them cheap and easy credit, which sometimes leads people to bad places. Having said that, you can't infantilize people. They get to make their own decisions, but it's yet another kind of easy credit way of juicing retailer sales.

I would argue these guys seem to be really solid operators. And that is they went from a loss of a quarter of a billion dollars in 2023 to a $21 million profit last year. And they claim, and some of this is marketing, but some of it's also probably real that they've really embraced AI and And that they're from 2022 to 2024, Klarna cut sales and marketing costs by 38%, R&D costs by 9.5%, and customer service costs by 29%. So, you know, cutting your customer service costs by a third is real.

Meanwhile, its revenue has surged 48%. So their story is a compelling story. We're using technology and management discipline and AI to decrease costs while not losing growth, which results in a massive increase to the bottom line. There's been some analysis that says the savings from AI have been overstated, but this is smart from an IR standpoint. 15 billion feels reasonable to me.

I don't know if they're growing faster than the other guys, but I would bet this actually gets a pretty warm reception in the marketplace because they're very good at using the term AI. They used, they said AI or mentioned AI 142 times in their prospectus. Their strategy of, from a comms perspective, trying to create a Klarna is synonymous with AI is both smart and effective. And I think they'll get a nice pop here. What's, what's also interesting is they decided to list in the U S and it's

really interesting, the umbrella brand of U S listing increases your market cap by the analysis that the team brought together, that the average company listing in the U S trades at a multiple of 24 versus 18 in the UK. Now you might argue it's there's more growth companies and they deserve a higher valuation, but some of it is definitely the halo or the brand halo of going public on a U S exchange, which tends to attract the best companies globally and they've decided to opt for a listing on the NYSC.

I thought that was kind of interesting. Your thoughts? I think one thing to mention there, you're asking about, you know, proposing the idea that they're targeting young people. That is exactly what they're doing. 70% of their users are Gen Z or millennial. And as soon as you look at the logo, that makes sense. It's sort of this sort of Gen Z-ified clean logo

with a pink background. And some of their marketing campaigns, I find quite funny, they have partnered with high profile celebrities, including Paris Hilton, ASAP Rocky, and Snoop Dogg. So this is definitely targeted to young people. Again, I have no issues investing in the IPO. I agree with you. I think this is a very reasonable valuation, but I do think if you are a user of Clonr, and if you are someone who's young and you somehow think that you're getting a great

deal by paying with Clonr, oh, maybe I'm circumnavigating credit card debt. I just want to remind you again, this is no different from that. This is credit. It's basically the same as using a credit card. It's just packaged differently. You're still borrowing money. Let's move on to this acquisition of Wiz by Google. This is very interesting because 10 months ago, you and I were discussing the same headline, except it was that they were requiring Wiz for $23 billion. And we talked about how that was going to be a huge win. You warned Wiz employees, many of whom would have made millions off of this, not to get too excited. Because we believe that given the situation from a regulatory perspective, maybe this wouldn't go through. And then a

couple of weeks later, the deal was actually called off. Wiz said they were walking away from the deal and they said that they were going to pursue an initial public offering instead. So here we are 10 months later. It's the same deal, except this time it's for $32 billion. It's 40% higher than when we last discussed it. Scott, what do you make of this and what do you think changed? They, they tried to do this 10 months ago.

They said no, and then suddenly they're down to do it again. Trump, uh, basically Jonathan Cantor and Lena Conner are no longer there to threaten. I mean, if they get a good, if they're going to go public and they think they're going to get a great valuation and there's a chance that they'll go through six or nine months or 12 months of headache, trying to battle the DOJ or the FTC and maybe end up with a negative decision, let's go public. But if it's Google showing up and saying, why would you even risk it? We're back.

We're going to close in 30 days. The Trump administration is very friendly. They've, you know, fired the FTC and DOJ people. There's, we have pretty decent the FTC and DOJ people. There's, we have pretty decent certainty of clothes. And we'll up our, we'll up our price. Why take the risk and why put up with earnings calls? And every senior manager here is about to be worth a shit ton of money.

And they don't have to, they don't have to digest their stomach and go on CNBC and put up with pesky analysts. So this was Trump and it sounds like they increased the valuation and boom, we're off to the races. I think they're smart to do this. I mean, if you can get basically a public filing is a few things, one, it's a disclosure of certain data, but it can also serve as basically a kind of a whistle

or what I would call speak now forever, hold your peace to any company trying to acquire them. Cause once a company is public acquiring it is, or, you know, really difficult and you gotta get shareholder approval and there's a media class action suit saying you're buying us for too little. And there's all sorts of sec issues around acquiring

a public company. It's pretty clean and pretty easy to acquire. Um, a private company as long as the FTC and the DOJ aren't going to get in the way. So what changed here? Trump changed. I'm in agreement with you that that's why they did this. Where we might disagree, I think they are mis-assessing the positions of the DOJ and

the FTC under Trump. Because as we discussed with Jonathan Cantor, who used to lead the antitrust division at the DOJ, these new heads at both the DOJ and the FTC, these people are not soft on antitrust. These are the people who decided to continue the frameworks that were established under Biden. They're very tough, they're very active, and they're very much focused on big tech and on cracking down any and all monopolies that are emerging in that industry. So if Wizz has done this under the assumption that they're now in a more lenient environment when it comes to antitrust, I would encourage them to go look at Andrew Ferguson's resume, who's leading the FTC, go look at Gail Slater, who's leading the antitrust division at the

DOJ. These are not the big tech sympathizers you think they are. It might've seemed that way based on Trump's positioning and having all those guys over for lunch at Mar-a-Lago, but the leaders of these agencies themselves are not gonna be cozying up. I don't think it's gonna be the cakewalk that they think it is, but we'll see.

If I were to predict, I don't think it's going to be the cakewalk that they think it is. But we'll see. If I were to predict, I don't think this necessarily falls through. But I do think we're going to see massive scrutiny and it's again going to be a one or two year ordeal because the other side note to this is that it's Google's largest acquisition by far. So I think this is going to be long and drawn out. But I do agree with you. I think they, they saw a regime change and they said, okay, now is our time to strike. Let's go over the proposed changes for Intel as outlined by their new CEO, this guy, Lip Bhutan. So we've been talking about Intel a lot and the issues that have been ailing this company. And here's what he wants to do with Intel now.

This was reported by Reuters. He wants to focus more on AI. As we know, Intel has been more focused on this standard computing. He wants to restructure the company, likely in the form of layoffs. So he's going to fire a bunch of people. He wants to quote, revamp the company's manufacturing operations. I don't really know what that means. I think the big question that remains here, which we do not have an answer to, is whether

he's going to break the company up or not. I think a lot of people are expecting that he's going to split it into the chip design business and then also the chip manufacturing business and go for an all out corporate breakup and operate those two as separate companies. So far, we don't know, we can only speculate. So Scott, your reactions to the new Intel CEO and your thoughts on what might happen under his leadership. So Tan was on the board and he resigned from the board after dispute with then CEO Gelsinger about layoffs. This stuff never gets out into the public arena that a board, I've had,

I've had pretty serious fights with other board members and CEOs. The fact that it escaped the room, that Tan had left the board over a disagreement about how many people to lay off at a place place like Intel, where everyone's like playing golf at Woodside Country Club together, I mean, that means it was really heated and that Tan was pissed off. And then what's even more interesting is the board called him back and said,

hmm, you were right, do you wanna come be the CEO? So this is really, this is like high-dudge in boardroom drama. When a board member leaves, he's so pissed off at the CEO. So this is really, this is like high-dudge in boardroom drama. When a board member leaves, he's so pissed off at the CEO. And then the board fires that CEO and calls him and says, come back as the CEO. And this is a company that I think the markets say there's a lot of potential theory, a lot of IP, a lot of brand, a lot of distribution, probably a lot of fantastic human capital, and that it is arguably been one of the worst

management companies over the last two or three decades, given the space it's in. And evidence of that is the new CEO coming in and acting like he's aggressive, he's bold, he's going to shake shit up. The stock's up 25% in the last few weeks. He's already added $20 billion or $25 billion in market cab, just by virtue of this aggressive CEO who believes he has a vision. You know, he's also pulling a clarna and mentioning AI a bunch.

He is clearly the markets are happy about change disruption and for God's sakes do something. There's real assets here. So it'll be interesting to, it'll be interesting to see what he does, but he's very successful. He served as, he was the CEO of Keynes Design Systems and the company was up 33x while he was there. And he's already sort of paid for his salary several, you know, exponentially,

just by virtue of the market is excited. Maybe not as much about him, but more specifically, Maybe not as much about him, but more specifically, just the prospect of serious, serious change. Your thoughts. Yeah, I think it's important what you mentioned there about his time on the board of Intel. So yes, he was the CEO of Kader's Design Systems, which is this software company that actually makes the software that Nvidia uses to design their chips.

So he's deep in the AI game. He joined the board of Intel in 2022, and then he resigned in 2024. And as you point out, it's because he had these disputes with the CEO, Pat Gelsinger, who he thought was too nice, too bureaucratic, wouldn't lay people off. He thought he was too risk averse.

All of these criticisms that made him very unpopular at the time, but in hindsight, he was totally on point. And so it does certainly feel to me at least that he's almost the perfect guy for the job. He's been inside the machine, he's seen under the hood, and he was the only one who said, hey guys, none of this makes sense to me. I don't like the way this is set up." And he got ousted, or maybe he resigned. We don't really know what happened, but I think it does make sense to bring him back because he's the only one who called bullshit when it really mattered.

We'll be right back after the break for our conversation with Lyn Alden. If you're enjoying the show so far, be sure to give Proffesion Market to follow wherever you get your podcasts. Support for the show comes from Zbiotics. I love a good cocktail, but I could do without feeling like garbage the next morning. That's where Zbiotics comes in. Zbiotics pre-alcohol probiotic drink is the world's first genetically engineered probiotic. It was invented by PhD scientists to tackle rough mornings after drinking.

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registered securities options and bonds in a self-directed account are offered by public investing Inc member FINRA and SIPC complete disclosures available at public.com slash disclosures. I should also disclose I am an investor in public. The support for the show comes from indeed, you know, when you're in the middle of a I should also disclose I am an investor in public. The support for the show comes from Indeed. You know when you're in the middle of a meeting and someone asks who was supposed to be on top of that and everyone collectively realizes in real time that no one was ever on top of that?

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Always happy to be here. So I'd like to start with your reaction to this sell-off that we've seen in the stock market. So the S&P 500, it's down around 10% off of its high. It's officially entered correction territory. We're seeing all of this anxiety around tariffs and geopolitics and people talking about recessions again. correction territory. We're seeing all of this anxiety around tariffs and geopolitics and you know people talking about recessions again.

I'd like to just start with your initial reaction to the drawdown. Any thoughts on this correction and perhaps any thoughts on how this compares to previous corrections in stock market history? Sure, so you know, there's been a pretty good couple of years in the market. So, 2023, 2024 were both good for the market. One of the things I emphasized was the size of fiscal deficits during that time, which were generally stimulative and all has been equal positive for markets in a nominal sense, as well as GDP running nominally on the hot side. And when we enter this year, some of that is slowly changing. So there's potentially fewer upside surprises in store, more downside uncertainty, things like tariffs, things like, you know, attempting to tackle the fiscal deficit in pretty kind of shock and awe ways, kind of the start of the administration. And so I think it's natural, especially because equities were priced at a pretty high valuation.

Now in this whole kind of decade long period, they've been on average a little bit more highly priced than like very long term averages. But even given this kind of cyclical ebb and flow evaluations, equity markets were a lot more highly valued than, for example, they were in the beginning of Trump's first term, if you use like a comparable baseline. So the combination of pretty high valuations, a lot of global capital all stuffed into U.S. markets, overweight U.S. and especially overweight U.S. large cap growth has been very much the consensus play that keeps winning. And I think for the first time in a while there are some challenges to that. And so I think the sell-off is natural.

Partially how deep it has to go will depend on policy decisions. There tends to be a somewhat feedback loop there. So don't really mind 5% corrections. We start getting to 10% and people aren't really sure where the end game is. They start making noise and you see kind of rhetoric shift around that. And I think one of the ways to mitigate it was to have a fairly diversified portfolio. So for a long time having international exposure was kind of an anchor on a portfolio. Whereas in this particular sell-off, international equities on average did better. It's kind of early rotation potential as well as owning other types of assets. I mean, gold's

poking around at all-time highs. And so it's kind of funny because when I look at a portfolio, it's like nothing to write home about, like a look at a portfolio, it's like nothing to write home about, you know, like a kind of a week, you know, month, month long period or more. But on the sentiment on social media, from what I've seen, has been pretty kind of surprised. And I think it's mainly because the things that underperform the most tend to be the consensus. So some of the large cap growth underperformed the S&P and then the S&P underperformed global. And that just kind of messed up a lot of people's positioning. Yeah, it does almost feel like all of the truisms of finance and portfolio management

are suddenly true again. It's like, you shouldn't just be overweight US tech, you should also invest in dividend stocks and international stocks and treasuries, et cetera. A lot there that's very interesting that we will definitely get into. I do quickly just want to get your take on tariffs and this tariff policy. I'm sure we're all getting bored of it, but I do want to get your position because I think everyone we've talked to has had the same view, which is this is a bad idea and it's bad execution.

And I actually just read a tweet from our friend Morgan Housel and I love this. I think it's very true. He said, nutritionists fiercely disagree on what's the best diet, but all seem to agree that sugar is bad. The same seems true for economists and tariffs. I would like to get your view because I don't think you're, you know, you're an outside of the box thinker, I would say. I just want to check in. Do you have a different reaction to tariffs? Is there anything positive about this or is it mostly bad?

I wouldn't necessarily have a different reaction, but I think I might come at it from a different timeframe or a different perspective. So one of the things I have been writing about for a while is the structural US trade deficits and why they do matter. And I've kind of pointed out that that's pretty tied at the hip with the dollar being the reserve currency. So basically, compared to most other currencies other than maybe one or two other sizable ones, there's a lot of countries that want to hold US assets or US currency directly. It's basically the biggest, most saleable

network effect for money in the world at the current time. And so a lot of international contracts and trade are priced in dollars. A lot of financing is priced in dollars. So a lot of countries and corporations have dollars on their debt that's not even owed to American entities. It's often owed to European entities or owed to other foreign entities. It's basically cross-border dollar financing. And so that's this really powerful network effect. And so for most currencies, they tend to trade on things like industry differentials, trade balance differentials, things like that. There's kind of this control loop that happens if a currency gets too expensive, too cheap. The dollar is kind of

different because it has this more structural bid on top of the normal things like industry differentials and trade because basically the whole world needs dollars and the way that they get dollars is basically we just pour them out like you know trillions of dollars over time generally through structural trade deficits and the mechanism is that because so many people hold it they kind of inflate the value of the dollar so. So our import strength gets stronger and our ability to export lower margin things shrinks. And so we can be good at tech, healthcare, and finance, but it's hard to be good at manufacturing in that environment. And when you run that policy for decades, you kind of hit more critical parts.

You get more deindustrialization You get rising populist politics and and changes on the electoral map So it's so I start from the viewpoint that the trade deficits do matter and it's not surprising to see that Increasingly become a political touchpoint But I do think that the shock and all-terriff policy is likely to have backlash. I think we're already seeing that. So it's not necessarily to say that I endorse that approach. And the other thing that I generally generally point to is if you kind of look at the administration, there's obviously different actors in it. One of the ways to help at least understand these somewhat intellectual framework that

they're doing is Stephen Mirren wrote a paper. He's Trump's nominee for his chair, chairman of the Council of Economic Advisors. He wrote a paper in November 24. They talked about realigning global trade and it kind of laid out, it's kind of like the more intellectual, like if you were a steelman what they're trying to do, that's the paper to read because that's kind of the, know the more intellectual version which is okay he kind of looks at tariffs, he looks at the trade balance, he looks at some of these things I just talked about, then says okay well which approaches could address that and then what are the risks of using those approaches because he freely admits these are risky tools to be using. So I think that in the context of understanding some of the

voices in the administration to see what they're at least trying to do, I get that. But yeah, I would generally agree with the consensus view that tariffs are more likely to slow down or impair an economy than help it. And how will those tariffs affect the dynamic you described there where we have this trade deficit that kind of works because of the dollar status as the global reserve currency and we've sort of been floating off of this benefit that we didn't necessarily earn perhaps. What do implementing these tariffs do to that dynamic? It adds uncertainty and it adds costs. And so around the margins, it can change where there's things go. Now, the issue is that tariffs can impact in the very short term.

You can just flip a switch and tariffs are on, whereas supply chains take a very long time, especially at scale, to move. So my original background is engineering. So I always kind of look at things from a pretty tangible perspective. It's easy to kind of sit in New York or sit in Washington and kind of look at everything, numbers on a chart. But when you actually are moving facilities, moving logistics hubs and things like that, that's actually a really time consuming thing. So in the near term, it's likely to be inflationary and disruptive. Longer term, I think the best

case scenario is it can kind of signal a priority shift. In that paper, the economist covers not just the tariff side, but also ironically trying to discourage the rest of the world from stashing all their excess value in US financial assets, and overvaluing the dollar because of that. So it's kind of like this one-two punch of trying to make imports more expensive and also trying to discourage excess capital recycling. Len, it was good to see you. One of our big themes for 25 was that the rivers would reverse, that the constant flow of capital into US, specifically US growth, would not only stop,

but that it would reverse. And we're starting to see some signs of this. Do you think this is a temporary blip or is this structural where we might go into a 10 or 15 year period of underperformance of US markets relative to non-US markets? Do you see this as a significant turning point or something that, you know, kind of wait and see? So I think it's a potential turning point and I started writing about that last year

before all the terrorist stuff came into effect, my initial catalyst was the US was entering a rate cutting cycle. And so it'd be the first window since 2019 that could be a catalyst for some of those capital outflows. Now, 2019 didn't really end up doing that because within a year, COVID hit and the big US network tech stocks really benefited from that. And also the US did more fiscal and kind of came out a little bit more explosively than the rest of the world while China and other places were still kind of in contraction mode. And so that didn't work out last time. And so my kind of framework is this is the next window for it.

Now, window doesn't mean it's going to happen, but it basically means that it's one of the first higher probability areas in a while. The area of my portfolio that has been more challenging has been expecting a little bit more of a rotation earlier. So I've been early on that trade. So I'm always a little bit cautious to say, okay, this is the big rotation, because I'm mindful of the difficulty of making that call. But I do continue to hold the view that it's more likely than not that this is early sign of things there. There's the initial rate cutting period, then there's all the tariff uncertainty, then there's the fact that I've been emphasizing China because they've been in a balance sheet recession

for a while. They're trying to deflate their property market, kind of deflate bubbles there at kind of a gradual pace. But last year, they started to hit certain pain points on Chinese social media. They were, you know, it was starting to come up and then they were starting to hit red lines in the equity market where their kind of priority shifted. And so my view was that they were going to come out with some sort of hyper stimulus, but that they're going to come out with a series of smaller ones whenever they keep bouncing into these red

lines and that they're starting to put a floor under things rather than a ceiling over things. And so when we see you know European fiscal open up a little bit, not necessarily for great reasons, but European fiscal opening up a little bit, Chinese consumer stimulus opening up a little bit, while at the same time the US is you know still being fairly tight with monetary policy while also around the margins trying to contract fiscal. And then you add tariffs. It's a pretty good recipe for the rest of the world, especially because there's also that big valuation differential and everybody is on one side of the boat stuffed overweight into US markets. So you've talked a lot about something that struck me the last couple

times we've talked is just how impactful it is to have $2 trillion in additional stimulus in the form of deficits. That that's just going to inflate the market or that's going to be tremendously stimulative. Do you think that, and this is a comment wrapped in a, or disguised in a question, do you think that comment wrapped in a, or disguised in a question. Do you think that the renewed emphasis on taking European defense spending from 1.9% of GDP to 3% they're talking that we're about to see kind of a similar multi-trillion dollar stimulus come into the European market that might be very bullish for stocks there? I think yes, but smaller.

It's not the same thing as say, sending checks out to households or PPP loans that turn into grants. And it's not quite as explosive as what we come used to, but it's similar, I think, to the kind of the US 2023, 2024 period where social security was basically pretty big costs of living adjustments and the pretty top heavy demographics that's pouring out into the economy. Even interest expense is pouring out into the economy, which is spendable around the margins. And so defense spending isn't some rapid effects stimulatory thing, but it does trickle out to all the people that work in those supply chains and they're spending power and their

employment. In the marginal sense, we can say that basically Europe's going from low fiscal to maybe moderate fiscal while the US isn't really increasing anymore. On the margins, that fiscal difference has narrowed. I think you do get a similar effect in Europe, just maybe smaller. This is interesting. I mean, we're five months into fiscal year 2025 in the US and the deficit is currently at around one, I think a little over $1.1 trillion, which is a record high.

And that includes the four months under Biden, but also the first month under Trump. And Trump has said he's going to change this. He said that he's going to balance the federal budget. That's word for word what he said. We're going to balance it. And the fiscal deficit is such a huge part of your analysis. It seems to inform many of your investment decisions. What is your outlook for fiscal spending under Trump? He's talked

a big game about cutting spending. We've obviously had Doge, which has been dominating the headlines. Do you think that spending in the short term or maybe the medium term in America will come down or is it going to remain the same? The short answer is I don't think it will come down. It could maybe flatline for a little bit just because of the renewed focus on it. The issue is that the vast majority of the The short answer is I don't think it will come down. It could maybe flatline for a little bit, just because of the renewed focus on it. The issue is that the vast majority of the spending is these really big buckets that are hard to cut. So social security, Medicare, interest expense, defense spending, veterans benefits. And if you look at even, for example, back in the Paul

Ryan Republican era, so the past decade, they were trying to reform social security, Medicare, raise retirement age, trim things, potentially privatize some of it. Whereas in the Trump version of the Republican Party, if you look at 2024 GOP platform, Promise 24 is, don't cut social security or Medicare and don't raise the retirement age, which is normally what you see in a say democratic platform historically. That's where the biggest stuff is. So the optics are the idea that there's a lot of government waste, a lot of employees, and you can start trimming that. And while you can rack up a lot of these like optical wins or dramas, depending on what side of any given issue you are, it doesn't really eat into the biggest things on the pie chart.

you are, it doesn't really eat into the biggest things on the pie chart. Probably the only area that is big enough discretionary speaking is defense, but then the issue there is every single Congress person who has some program in their jurisdiction is going to fight tooth and nail to keep it. So you have to go through all that, let alone the fact that outside of defense and outside of all those big transfer, like those transfer programs, you know, we look at like FAA, Department of Education, XYZ, all those like little tiny slices on the pie chart compared to those really big things. So, my view is generally that all the optics aside, when we look at this in a year or two, while they might have consolidated in some areas, I don't think they're going to really be effective

at touching any of the big things. We'll be right back. With the Fizz loyalty program, you get rewarded just for having a mobile plan. You know, for texting and stuff. And if you're not getting rewards like extra data and dollars off with your mobile plan, you're not with Fizz. Switch today. Conditions apply.

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I am not responsible for what my dad did. This going how you hoped? Happy Face, new series now streaming exclusively on Paramount+. series now streaming exclusively on Paramount Plus. We're back with Profit.G Markets. I want to pivot us to crypto. Trump has established this national crypto reserve that will include Bitcoin, but also many other cryptocurrencies, Ether, XRP or Ripple, Solana, Cardano. He intends to keep buying those cryptocurrencies in regular installments.

I know you've written a lot and done a lot of research on crypto, especially Bitcoin. I know that you are a Bitcoin bull yourself. What do you make of this National Crypto Reserve and do you think it's a good idea? Well, so there are a couple of different phases of this. There's that he posted on True Social that they would have Bitcoin, Ethereum, and then those three others. That got some backlash, not just among Bitcoin proponents,

but also some CEOs of major exchanges that are involved in multiple cryptos. There's one of the projects in particular that is not well liked by the rest of the space. And that's probably what encouraged some of that backlash. Which one is that? XRP is is particularly controversial in in the space The way that the executive order actually came out seemed to include or take into account a lot of that criticism and probably behind the scenes lobbying Which is they separated Bitcoin from other crypto. So bitcoins part of a reserve

separated Bitcoin from other crypto. So Bitcoin is part of a reserve, whereas crypto, other crypto is part of a stockpile. And those two pools, at least as far as its executive order remains in effect, it could be undone by a later executive order, either by this president or a later one, but under this current framework, the Bitcoin is instructed not to be sold and that Basant and Lutnik are authorized to find budget neutral ways to accumulate more of it. That's how it's worded. Whereas the crypto stockpile, the Treasury Secretary, so Basant, has discretion on how to handle those which could include sales and that they're not really meant to accumulate more other than through the normal

course of seizures and forfeitures, which is how they have all these holdings in the first place. So I actually think that the executive order came out better than it could because instead of going out and buying crypto XYZ that probably passes the Howie test and make certain insiders and VCs rich and was pre-mined and, you know, has an issuer and it's kind of like if the US picks certain stocks to own and not other stocks to own, that's rife with all sorts of conflict. I actually think that they separate it out pretty well. And you know, the thing I wrote about before this all happened is my base case is they ring-fenced the Bitcoin

they already have, which is basically what they did. They're capitalizing it with the Bitcoin they already have from seizures and forfeitures. They'll see if any of those should legally be returned to certain entities. There's a particularly big bucket of those that is probably owed to an exchange. They got hacked. They weren't involved in criminal stuff. So we'll see what happens there. But other than maybe that big chunk, I think they hold that. They might accumulate a little bit more. I generally

take the under on the idea that they're going to go out and buy like a million Bitcoin as some of the proposals have said. So I tend to assume that it'll be roughly the size it is now, maybe a little bit larger because they probably want to get some optical winds of, hey, look, we sold this crypto and we put the proceeds toward a budget neutral acquisition of a little bit more Bitcoin, or we did this and we bought a little bit of Bitcoin, but we'll see. I was just going to say, is this not exactly that an optical win? Because what you're essentially describing is all of the cryptocurrencies that the government

already had from seizing them from illegal transactions. I think people don't really realize that. Yes, we have billions of dollars worth of Bitcoin held by the government, but we only have that because there were there was criminal transactions happening and the government went in there and they seized the Bitcoin. And what you're basically saying is Trump made this whole statement, we're going to become the Bitcoin nation, we're going to go out and buy a bunch of Bitcoin. People pushed back and now he's saying, Oh, actually, we're just going to hold on to the Bitcoin we do have, except there's a new name for it.

I mean, it sounds like essentially nothing has happened on the crypto front. It's not quite that because I think, you know, their policy before was to gradually sell the coins they have. And so merely not selling them is a... So it's well-holding. Yeah, it is a tangible change. Two, it would take a reversal to undo that, which is not impossible, especially if you get a different administration.

It's a ton of free marketing. So a lot of that is just optics. But then it's also like the fact that they did differentiate Bitcoin from other crypto, I think was good. It could have turned out more problematic, more prone of conflicts and things like that. So Lin, you're, I think, presenting what I would call a kind of a neutral and sober view of it. I bring a bias here and that is this makes absolutely no fucking sense to me.

There's nothing strategic about a strategic Bitcoin. There's a strategic petroleum reserve. If we run out of petroleum, that's bad. We can't make tanks, our cars stop. If we run out of Bitcoin, I don't see any existential crisis to the US. So effectively, and I'm very open to pushback here, effectively, and I'm very open to pushback here, we've decided that we're in the business of being asset managers. And seizing stuff and not selling it is not much different than buying it because traditional US policy is when we seize a yacht or assets, we turn it into money and give it back to the victims or we put it into the treasury. So not selling it is not really any effectively any different than buying it.

And when you're running deficits, the net effect of this is we have decided to buy a certain asset class and increase the deficits. So how is this any different than us deciding to increase the deficit and go buy four or five stocks that the president likes who gave him a quarter of a million dollars as the crypto community did? This just feels totally asymmetric or nonsensical. I agree with probably two thirds of it. I think the fact that not selling it

is effectively the same as buying it is true, which is why I mentioned that this is not just an optical change. There actually is substance to it because it involves either not selling or we're selling potentially hundreds of thousands of coins. And so that's fully true. It just means that the purchases

were essentially already made. It doesn't mean that more purchases are coming, but they're still effectively purchases in that sense. And it's also true that it's not like oil where the US could find itself selling deficient in Bitcoin and needs Bitcoin. I think there are other countries where it can serve a more strategic purpose,

which is that if they're if they're worried about getting caught off by like Sanctions or things like that or hyper inflation or hyper inflation? Yeah But like they even just for the fact that they could make a payment To another nation that settles in a half hour with multiple, you know under multiple blocks That that that actually gives them something whereas if you are the US global reserve currency issuer, then effectively the value you're getting is it as an investment.

So in that sense, it's not like oil, it's more like the gold holdings. And then the question is, is it worth adding to our gold holdings? Is it worth adding another kind of monetary-like asset to that? Now, the part that I would see a little bit differently is it's not quite the same as holding five stocks to presidents like because Bitcoin doesn't pass the Howey test, so it's effectively

a digital commodity. It's an asset without an issuer. And so I do put it more on gold in that case with the caveat that it's still a fairly small asset and this does obviously benefit those who hold Bitcoin or that are bullish on Bitcoin. So it does, you know, potentially help certain constituents, not others. And as you point out, many of them did lobby for it. And so I don't, you know, I don't really disagree with that part other than to clarify that I would have, I would see a big difference between them doing with Bitcoin versus them doing with

like crypto XYZ that literally had VCs, founders, a pre-mine, insiders, things like that. It is somewhat different. But at the end of the day, it is basically just an investment decision. If Bitcoin should, over the coming 5, 10 years, go up 5 or 10x in price, then they have effectively made a good investment decision. Whereas if it stagnates, if it goes down, then it have effectively made a good investment decision. Whereas if it stagnates, if it goes down, then it will have been a waste. Now, I think at the scale that they're doing it on,

it probably gets disproportionate attention in the sense that they're not saying, hey, we want to go out and accumulate trillions of dollars with this. They're basically saying the couple hundred billion we have, which is a month or two of fiscal deficits and a pretty small fraction of the gold reserve. I think there is controversy to it, but I put it on small enough potatoes that it is what it is. It's a little bit different than a security. I just want to begin to wrap up here.

I'd love to just check in on your portfolio. One thing I admire about you, Lin, is that you make your portfolio public so everyone can see what you're doing and what kinds of investments you're making. Are there any changes that you've made to your portfolio recently? Are there any investment themes or theses that you are focused on in 2025? So I haven't made any major decisions, but the parts of the portfolio that are working or not working are certainly changing. It used to be that the US growth stocks were great.

Obviously, Bitcoin and MicroStrategy were great. The gold slice has been, I purposely was kind of a bond bear and wanted some of that slice in gold, which has been a good decision. The part that I mentioned before, the anchor, has been the international equities. And to a lesser extent, the US kind of dividend stocks. The US stocks are doing pretty good, but they're not the MAG-7, for example. And the recent rotation is basically saying that there might be some current wakeup on overvaluation among US growth and a little bit of wake up on opportunities elsewhere.

And one thing I like to point out is that it's not just tech. Everybody focuses on obviously the tech is popular and expensive, but I've been highly in the fact that Costco has been trading at 60 times earnings. And it's a, well, like a 45-year-old retailer. I'm not even sure exactly what date, but it's a four or five decade old retailer. It's a great company. I mean, their growth numbers are good. I'm very bullish on the underlying company, just not at 60 times earnings. And so there's actually a lot of things like that that are just priced, maybe not that extreme, but there's a lot of things that are just priced pretty expensively. And so I think we're entering the period where that starts to matter.

But because I have been concerned for that for a while, I'm already positioned for some of that. And the caveat that is that during, you know, where only US growth mattered, the equity side had a little bit of anchor on it, which lately has turned into a little bit of a booster. And so it's not that I'm making changes, it's that I'm noting things that are happening and I get my biggest question now is to see if this has follow through. Because I mentioned that the rotation has been a very hard call to make. I think this has likes to it, but I do want to see continued

evidence that it has likes to it. Scott is rotating out. He's talked about it on the podcast. He's rotating out of US stocks into international stocks. I would say quite aggressively, Scott, you can interject wherever, but from my understanding, Scott, you are dumping all of your Apple, I think all of your Amazon too, and you're going to put it into international stocks. It sounds like, Lyn, you agree it's time to start rotating. For anyone who's listening right now who feels overweight US stocks, how would you do it? How would you rotate out? Would you trim, you know, is there a certain percentage of your US stocks that you would trim in favor of

international? What would the rotation actually look like? I think I would look for areas of overvaluation, things that you're not comfortable with, and reduce those overweight positions. The S&P 500 is very concentrated, the NASDAQ 100 is very concentrated. I do still think there's pockets of value in the US, just generally not in the big US growth. I also differentiate on a company by company basis. Apple is a case that I've not been bullish on that for a while,

just because it's kind of a value stock that's priced like a growth stock. And that's been the challenge. When you look internationally, there are pockets, you know, like, and it's funny because some of them have the same issues. Like Brazil has had some friction lately because of its budget deficits. But the budget deficits have not really been that different than the US. And it's just a matter of whether or not there's external demand for the currency and the assets or not. But I generally find I've been less bearish on Brazil than it seems like the average consensus investor was, especially given some of the valuations and opportunities there. Like I said, I have been bullish on China

with the caveat that there's a small percentage that something geopolitically happens and it entirely messes up that side of the portfolio. Kind of like what we saw with Russia, for example. You know, and so it's like, you know, 90% chance. I was like, these are undervalued, super super cheap You know, they actually became more shareholder friendly So for some of the big Chinese tech stocks were like initiating dividends or buying back shares when they were super cheaply priced And I mean that's that's kind of a change in that space

So more shareholder friendly policies. I do think that there are a lot of pockets out there That are that are quite interesting. And Europe, I have historically found a little bit less compelling, but when it's been dead money for a while and you do have marginal fiscal waking up, it's nice to own some of that. At least compared to American dividend stocks, you can look around and say, are there ways I can diversify my value or dividend exposure. Lyn Alden is a full-time investor, independent analyst, and the author of Broken Money, Why

Our Financial System Is Failing Us, and How We Can Make It Better. Her work has been featured in the Wall Street Journal, Business Insider, Market Watch, and CNBC. She has also served as a consultant to start-up companies, hedge funds, and executive committees. You can find her research at linaldin.com. Lynn, always a pleasure to have you on the show. Thank you again for joining us. Thanks, Lynn.

Thank you. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Allison Weiss. Mia Salvario 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.

If you liked what you heard, give us a follow and join us for a fresh take on Markets on Monday. You held me in kind reunion As the world turns And the dove flies in love, love, love, love