Prof G Markets - What’s the Right Investment Strategy for 2026?

Episode Date: December 15, 2025

Scott Galloway and Ed Elson synthesize the wide range of views guests have shared on what 2026 could hold, and lay out how they’re thinking about investment strategies for the year ahead. They then turn to the escalating battle for Warner Bros. Discovery, explaining why the showdown between Paramount and Netflix may just be getting started. Subscribe to the Prof G Markets newsletter  Order "Notes on Being a Man," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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the average credit score decreases after a state legalizes online sports gambling. Yet, true story. My credit score is like my sex life. I didn't used to have one and now it's just bad. What do you think, Ed? Pretty good. That's okay. It's okay. Actually, you know what? My credit score, it's a lot like my sex life or my dating life in New York and that is every time I pull out my credit card, she and it go down on me.

That's so wrong on so many levels. What do you think of that number? Your credit score goes down by 12 points on average if your state legalizes sports betting. I thought that was a fascinating number. Yeah. All right. Have you ever had a credit card rejected on a date?

I have. That's a good move. By the way, I didn't get laid that night. I know that's a shocker, but I was especially, like, usually I wouldn't have sex, but after having my credit card declined, she immediately went and had sex with someone else. I just thought of that. Actually, I think I have had that. I had it with drinks at a club with a bunch of guys.

I was like, I got it, I got it. I put the card down. Credit card has declined. My friend has to come in and step in for me. It was brutal. That used to happen to me so much that I still can't use credit card. cards about getting nervous. Every time I swipe my card, I expected to come back, not approved or rejected or something. I still, I like to carry cash. It makes me feel like a mobster. I like cash.

Well, we got a lot to get into here. So may I move us along? I want to know a little bit more about the real Ed going into the holidays. What's going on, Ed? How are you? I'm doing well. I'm doing well. I've got Christmas parties this weekend. You're such a complex, interesting person. I'm glad I asked. Fuck this. Claire, what's going on with you? Not much, Scott.

I was really hoping we could get away with moving on. Oh, you guys aren't even being nice to me anymore. See, this is, let me just give everyone a 401 what happened. Ed has not had his review in bonus conversation yet, so he's laughing and being nice to me. Claire's like, fuck you, old man. let's get on. She had a review yesterday. So she's done. The money has already been wired. She's out. She's probably already accepted a job running like Salesforce podcast America or something. I've collected the bag. It's time to go. Let's move it on. All right, you guys win. Let's move into the episode.

Okay. Let's do it. Over the last few months, we've had an incredible lineup of guests from professors and journalists to investment strategists and analysts and economists, all with their own take on what 2026 might look like. And we're going to just play a quick collage of some of our favorite moments. If I came to you and I offered you a robot that could do your job for you, does that make you better off? Yeah, it's not hard, right? Well, that robot more or less exists and it's called AI. Now, let's take the same scenario. I invent a robot, but I sell the robot to your boss.

You're out of a job, brother. Peniless, nothing to do by the side of the road. The point here is these two scenarios have the same technology, a robot that can do your job. One of them is a land of plenty and beauty, where we're called to our higher callings, and the other is one of misery for many of us. What we have here is not a robot problem or an AI problem, but an ownership problem.

So I'm more convinced that there'll be a destruction of value in the markets, but probably more akin to something like 1999 than 1929. What I think I don't know about today is I think it's harder to fully understand where all the leverage is today than we used to know. You know, after 2008, so much of the loan market in this country moved to private credit. We don't really know all the disclosures about that. Some of that's connected into the insurance industry now. So there's a lot of sort of questions that I have. And I also think this AI boom, which is sort of the euphoria. I mean, it's how much of that whole boom is being powered by leverage.

So not to say that you look at, you know, meta and Google and all the big tech companies are obviously throwing a lot of their own cash at this problem. But also they're taking on some debt. But they're also now partnering with all sorts of private credit funds and doing all sorts of other things. There's all sorts of other component parts of this ecosystem that are being powered by leverage. To the extent that there's going to be a correction, there's no place to hide in stocks. I can't see a way because if the mag then go down by 40%. It's not like the industries are going to hold their value while this happens.

The panic that that's going to create is going to ripple through stocks. You're an investor primarily investment stocks and bonds. My advice is, even though historically you might never have invested in not. non-financial asset categories, this might be a time where you think about, you know, kind of at least moving a portion of your portfolio, a bigger chunk than ever into cash or something close to cash or maybe even collectibles, things that I've never owned collectibles, but, you know, for the first time in my investing history, I'm saying, maybe I should hold something that is not going to be effective. Inflation goes to 10%. There's a market and economic

crisis that is potentially catastrophic. It would be kind of shocking if you didn't have some kind of profit-taking correction in 2026 at some point on the order of 10 to 15%. It would be, I'd be really surprised not to see that. I actually think Michael and I are pretty aligned in the sense that I think there is going to be a drawdown next year. He says he wouldn't be surprised. But to me, it doesn't mean that's the end of the end.

actual bull market. In fact, I think stocks fully recover. Those were some of the highlights that we've heard. And it is clear that there is no single consensus. There's similar themes happening. AI is obviously very important. That was the most important thing in 2025. But then questions of, is there a bubble? Is there not a bubble? How large is the bubble? What is the impact going to be on the markets? A lot of different takes from very reputable, respectable people with very interesting answers. But the question that we have yet to answer is, what do we do with all of this? What should we actually be doing with our portfolios heading into 2026? So that's what we're going to get into today. Scott, let's just start with your

reflections on the collage and then perhaps your answer to that question. The thing that kind of summarizes what someone said, and I can't remember if it was a guess, I've never seen a market the more people hate. And that is people just aren't feeling very good about this market. They look at it and think, okay, we're just sort of, it's almost like when you're waiting for someone to break up with you, you just kind of wish they'd get over it. Like you're too wed to the relationship and you're just sort of waiting for the next shoot a drop. Kind of describes basically my entire love life, 18 to 38. You're just waiting for the end. And this market, we're just waiting for like, I almost feel like that people would be.

somewhat relieved if it just went down 20% and some air got let out in a weird way. And the other thing that strikes me about this whole thing is the term that the market continues to climb a wall of worry. We don't, I don't like this market. Things are overvalued. Oh, the S&P's up again. It's just everything can, there's a little bit of a dip and then it just keeps going up. So it just, it strikes me how anxious people are, how they are cautiously pessimistic is another great term. In terms of, well, I'll get your reactions and I'll tell you how I'm responding, and it might not be the right thing, but how I am actually shifting capital around. Yeah, my reaction is very similar. The wall of worry, I think, is the best way to put it. I think Tom Lee really nails it when he says,

Yes, we are experiencing returns right now. The stock market is going up. But if you talk to anyone about it, people don't feel good. People are mostly speaking with bearish sentiment. And we're seeing that in the news too. And we looked at some of the news sentiment recently. And we are seeing a lot of bearish sentiment in the news. So I think the wall of worry is a great point.

I don't think there are aspects to this market that people aren't aware of that could surprise us. I mean, this AI bubble thing, we all know what's going on here. We all know the circular deals. We all pretty much know what's happening with the leverage, though, to Andrew Ross Sorkin's point. There's a lot of private credit in there that perhaps might be distorting things. But overall, most of us kind of know what the risks are, which I think should ultimately lessen our concerns heading into 2026.

And I will just present to you my sort of macro thoughts. on the bear case for 2026 and then the bull case, and then we can get into what you're doing about it and how we should be thinking about it. So the bear case, what would it look like and why would a significant drawdown in 2026 actually happen? For me, I've got three major themes. So the first one is that AI is a bubble.

So we've talked about this a lot on the show. We've seen the AI CAPEX. which came out to $350 billion this year. That's up from $200 billion in 2024. We're seeing huge amounts of borrowing, Amazon, Google, Microsoft, Meta, Oracle, which, of course, had its bad earnings last week. They have raised together more than $100 billion in debt this year.

It's more than three times the average of the previous nine years. Plus, we've been seeing the circular deals where Nvidia invests in Open AI, and then Open AI takes the money and buys compute from Nvidia, which of course is very concerning. So we've talked about that. I think people understand that. And I think there is still a chance

that there could be some sort of triggering event. I think that it would happen most likely with OpenAI that would cause some drawdowns in the market that might be painful. So that's the first thing. The second thing is valuations just look expensive. So you've got the S&P trading at 31 times earnings right now, which isn't dot-com levels,

but it's like just before the... dot-com levels. It's like 1999 levels. And that is expensive. And to Aswat's point, it's a little uncomfortable to invest into a market when valuations appear to be that expensive on a price to earnings basis. That's number two. And then the third reason is that maybe we're just due for a correction. And that is we've had a really good three years. We had 24% return in 2023, 23% return in 2024. We are on track for a 17% return in 2025. So that's three big years in a row, which would make you think, okay, this is not very usual that you get this level of return so consistently across multiple years. So maybe we are just due. Those are the

bare case components there, and that's three of them. Now I'm going to just tell you, my anti-bear case. And the reason I'm not saying bull case, I'm not that bullish. But I think these are three good reasons why actually we won't see a bear market and a significant drawdown over the year. The first is interest rates. And that is rates are coming down. Rates are now at their lowest level in three years. We're going to have one more cut in 2026. That is according to the Fed. But this is also Powell's Fed. The reality is Trump's going to get a new Fed chair in there in May. and that new Fed chair might just be a sycophant and we'll just continue to cut rates.

And if you have a lower interest rate environment that should lift earnings across the board. And so the idea of investing, or sorry, not investing or shorting or selling when we're entering a low interest rate environment to me doesn't make a lot of sense. The second is deficit spending. We've got the big, beautiful bill, which is going to add roughly $480 billion in fiscal support.

We're going to pump money into the economy. It's going to accelerate GDP. growth. And yes, it's extremely irresponsible over the long term because the amount of money we're going to borrow. But if we're just looking at 2026, that's free money coming in there that's going to definitely prop up the market.

And then the third reason is AI might be a bubble, but as of now, it's not a particularly dangerous bubble. And that is there are a few AI companies that are behaving dangerously, I would say Open AI, Quarweave, Oracle, maybe Palantir. But the big tech

companies that really, really matter, Microsoft, Google, Meta, Amazon, they're not. They actually have a ton of cash on the balance sheet. They already have these incredible businesses that work with or without AI. And the reality is they're just making a large bet, and they have the money to make that bet. And maybe it doesn't work out, or maybe it does work out. But the reality is whether or not AI works, Microsoft's going to be fine, Google's going to be fine, meta's going to be fine, Amazon is going to be fine.

so that is the reason why I would not land in bearish territory. I'm not fully bullish, but I'm, I think we're going to have sort of stagnant, sort of subdued returns next year. I don't think it'll look like 23, 24, 25, but I don't think that we're going to see an overall negative market by the end of 2026, is my view. Yeah, I thought that was really tough. I think most of it comes down to one. one of two things, an exogenous event that we can't yet even anticipate. No one was anticipating except for some really thoughtful CIA analysts 9-11. Bill Gates and a few other people saw COVID, but none of us, I don't think we're expecting that. The weird thing is about these natural disasters is in some ways they're less damaging to the market because the markets have traditionally ripped back so aggressively after an exogenous event, whether it's COVID or 9-11, that now people see these things.

They want to see the moment there's a dip at all, everyone's like, bye. So the recovery time is getting shorter and shorter. The narrative, I just think we're just cyclicality, just probability, valuations, everything you talk about, mean for me that the likelihood of some sort of drawdown is just greater than it isn't. And I think it kind of mostly all centers around AI.

I think the market is being driven by the unrealistic expectations built into the valuations of companies now representing 40% of the market. And so it feels like one false move, you know, even just good results, not great results, much less a study comes out showing that, you know, 80% of startups are using open weight Chinese models and some big companies with big contracts are canceling them with anthropic and open AI. and moving to these Chinese open weight. I just think there's a variety of things that could say, okay, this business is going to grow 60%, not 200% a year, meaning their stocks should be down 70%. So, and if they go down, and if you look at every company in the Magnificent 10,

they've had drawdowns of 60 to 90% at some point. And it just feels like we're due. And the problem is that the markets are much more fragile now. If these companies lose half their value, the markets, the S&P loses 20, Whereas when these companies lost more than half their value in 2000, the market lost, where it had a 5% impact. These companies are just now, if invidia sneezes, the entire global economy is going to get walking pneumonia. Because our, we've become kind of anti-fragile. I don't want to say, no, I was going to say fragile. Anti-fragile is robust. We're we can have, I mean, to a certain extent, Ed, again, the markets, these indices are such damaging metrics because they give the illusion of prosperity and that everything is healthy.

And I would argue that if we wake up in a year and Open AI and Nvidia and the Magnificent are much higher than they are now, that that will connote a certain amount of chaos and labor markets and real societal pain. Because the only way I think these companies move higher is if they show that companies are massively increasing their earnings by buying the site licenses by finding efficiencies, which is Latin for layoffs. We're at a fork in the road right now. And that is built into these expectations of these stock prices is the notion they're going to increase revenues amongst their client base by $5 trillion or find efficiencies of $5 trillion or some combination of the two. I don't see an incremental revenues from these. I don't

see Pepsi making more money from these things. I see them making greater earnings because they can outsource or get rid of 70 or 80 percent of their compliance customer service and legal costs and brand management. And great. So PepsiCo stock will go up. Fantastic. They will lose, you know, they could potentially lay off 10 percent of their workforce every year for the next four to six years, which will create huge tumult in society, in the labor markets. So, I mean, answer the question. I think that's an interesting question. If you had to go to sleep for a year, would you rather wake up and find out these stocks had doubled or they'd been down 40 or 50 percent? And I'm not sure I'd pick the former. Yeah, I think I agree. Yeah. If Nvidia is at $8 trillion,

and it's bigger than the German and the Japanese stock market combined, Have we found some new way of making a ton of money off of AI that I don't see? I think the two ways you make money are probably autonomous and robotics, but even those involve a massive destruction and labor. So if we woke up and said the stocks have doubled, that would mean that literally the middle class got massively kicked in the nuts over and over the course of the next 12 months. So again, we obsess over the markets, and I get it, and we get this notion that, and like, who knows what Trump's going to try and do if we have some P keeps going up?

So I agree with your assessment, but your assessment kind of distills down to the following. Like the rest of us, you don't know. I don't know. But my prediction, if I'm making a prediction here on what will the market do, is that returns will be meh. It'll be just a meh year across the board. So I don't know, but I'm saying I think that that's what it's going to be because I think you have these two gigantic forces facing up against each other, which is that in a lot of ways, we are due for a correction, and a lot of the AI expectations are simply expectations. And we are going to see like, okay, show us the revenue, show us the business, show the real impact on the bottom line, show us how this has completely transformed your business as you were pricing it earlier. and I don't think we're really going to see that, or if we do see it, I think it's going to kind of disappoint us.

I'm going to realize actually it was going to take a lot longer than we thought, but you also have at the same time this other large force, which is you've got Trump in here, who really wants the market to go up, and he has a lot of power to make that happen, whether that's through the Fed chair and through influencing these interest rates, and I do think we're going to come down more than just one more cut. I think we're going to have more because I do think he's going to influence what happens here with these Fed decisions, as well as the big, beautiful bill, and the unbelievable deficit spending. So those two powers are confronting each other, and it's going to come to

a head this year. And so that leads me thinking, they're both formidable forces, I guess is my point. And I think that that would lead us into a place where, you know, maybe you do see a drawdown, but then you kind of come back up and ultimately you end the year, sort of low, low single-digit growth. We'll be right back after the break, and if you're enjoying the show, send it to a friend, and please follow us if you haven't already.

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Not another wrong turn. Visit camh.ca to help us forge a better path for mental health care. We're back with Profi Markets. I find I can't trust my emotions, and that is I have a bias, a huge bias against Trump, President Trump. I think it's a stain on the American experience, so I naturally look for a connection or rationale for why the market is going to collapse under his watch. When he was elected in 2016, I thought, this guy is a village idiot, and I literally sold all my stocks. I'm like, there's just no way this guy should be in charge of it or have. any influence or the U.S. economy. I still can't believe you did that. Oh, trust me, I've done

much stupider things. Have you ever been out with me drinking? That's like, that's literally, that's a bronze medal of the gold medal of stupid decisions I've made throughout my life had. Anyways, so I sold everything, incur a huge tax liability because my stocks had run up, and then bought back in six months later at a higher price when I realized I was acting like some dumb, you know, dumb jerk. So I probably destroyed, granted, I've never had, you know, I was diversified by that point. I had most of my money in L2 or most of my net worth in L2 and real estate at that point or a lot of it. But I probably lost 10% of my net worth in 40% or 25% of of my stock market value by acting out of emotion. Also, what I find is that when people hate

a market like this, it usually goes up. And that is, again, this notion of climbing a wall of worry and that it's when you're expect, it's, it's really interesting that the stuff you're expecting to take the market down or the disasters you're expecting usually don't happen because people start preparing for them. It's the shit you're not expecting that gets you, right? Because naturally when you start worrying about something, you start preparing for it or hedging against it. It's the things you're just not thinking about that sneak up and grab you. If I had to pick one person just to listen to, okay, you can only pick one. And to run my portfolio, it hands down would be Professor Demoderin.

I find he has just an ability to take his heart outside of his body when he's making decisions and just make purely unemotional decisions. And I've always just found him just almost like a little bit. Sociopathic's a negative term, but he just seems totally unfazed by whether met is good or bad for the world. He just looks at the numbers. And I remember him telling me, oh, no, it's a great buy right now. Yeah, Yeah, maybe kids are cutting themselves, but it's an amazing buy right now. He's, and so I would trust Aswath, and Aswath, quite frankly, freak me the fuck out. When he basically started saying, I have never... It was crazy.

I've known Aswath for 23 years. I've never heard him say, I can't think of what to buy right now. When he says baseball cards and collectibles... Baseball cards. Yeah, but you're going deep in the barrel. By the way, I'll come back to how that's impacted my own person. investing, but I thought, oh my God, after I got off the, after I listened to him, I don't make any financial decisions now, no matter what's happened without talking to a bunch of people and giving

my time, myself time to regulate. After that, I thought, I immediately need to like sell half my stocks, maybe more, and develop a bit of a cash hoard. And then I started remembering, I have never been able to time the markets. I have never, I've been investing in stocks since I was 13, I've made more money in stocks than I've made buying and selling businesses, and I've made a lot of money buying and selling businesses. But I've made the majority, the 60, 70% of my net worth has come from, granted, I needed a capital to invest that I got from selling businesses. But as a percentage of my, if you look at my total net worth and all the money I've spent, two thirds of it has come from capital made in the markets from capital I got from selling businesses. And I have never once been able

to say, oh, I'm selling now. And then a year later, the market's down and I go back in and buy stuff on the cheap. I've never been able to figure that out. And it seems so simple when you hear it. It's like, oh. Yeah, in theory, it makes just a ton of sense. And you don't know, because when shit starts going down, you think it's going to continue to go down and then it rips back up or it goes down. You think it's a great buying opportunity. And then it goes down another 20%. It sounds easy in theory. I remember, by the way, I just got invited back to Davos. So I don't know if I told you that, Ed. fucking 25 years later, they invite me back.

Anyways, but I remember being in line going through security, and I saw this guy with curly hair, and I'm like, I recognize this guy. And he introduced himself to me, and he's like, Michael Dell. I'm like, oh, hey, Michael, I'm Sky Calloway. We're both entrepreneurs, similar, similar weight class. Look what happened to his career. Look what happened to mine. Anyway, and we started talking, and I think Bush was president.

This is how long ago this was. I think it was, Clint was just leaving off. I was there in 99. And he was really excited about George Bush. I'm like, no, I think the market's over value. And he goes like, he's like, oh, you're trying to time the markets. He's like, my experience is that's really hard. And I remember thinking, oh, he's Michael. There's a reason he's Michael Dell. He's right. It's really hard. I have never been able to time the market. So in general, in this lens to, okay, I don't like to give a financial advice, even though I do. Is that true? But I think it's more important to say, what are you doing with your actual fucking money. What are you doing? That is what you really believe, right? Yep. And what I'm doing is I've decided, all right, of all people that ended up saying something really interesting about the markets, Tony Robbins said something that it was stuck with me. He did an analysis of investing. He did this book, like, The 20 Best Ideas. And if you look at bull markets, generally speaking, there are 12 days of enormous upside. And if you miss any of those

days, you underperform the market. And the only way you don't miss those days is to always be in the market. And so one of my tenants that I still hold on to is I am always in the market. Now, I take leverage up and down. I have felt sort of insecure about the markets for the last four years. So I have paid down, and this is a story of privilege, I've paid down all my mortgages. I don't have any, I have a small amount of debt on my real estate, but almost none because that gives me firepower. And also what I've done is I've been diversifying like crazy for the last two or three years, mostly because I'm traumatized

by having lost all of my wealth, not once, but twice. And so I've been diversifying. What I am also doing is the following. I am making some moves. I have a home in London, and I'm thinking of most, like, we're thinking, okay, we're moving back to the U.S.

Should we either sell it or rent it out? And I wish I'd never sold a house. I wish I'd still held all of them. But I'm thinking, okay, I would like to have some cash. I'm really long real estate. I have 40, maybe 50% of my net worth in real estate, maybe more like 60%, because I get to, I like it. I like the fact psychologically. I don't have to check my stocks every day. If it goes down, I don't know about it. There's a consumption effect. I buy really nice homes. I enjoy visiting them. I'm hoping my boys will come visit me. I just enjoy it. I like to fix up homes. I'm good at it. So, but I am so long real estate now that I think, okay, You talk a big game about diversification, maybe take some capital off the table. And also, interestingly enough, when everyone's saying that real estate prices are going to crash in the city, that means you should probably go long. Everyone's been predicting a crash in London because of non-DOM. I have found, at least people I'm talking to, luxury sales are kind of quietly quite robust right now. And I don't, the data says something different, but the people I talk to here are getting their number for their homes because a lot of people seem to be moving here, which shocks me. But anyways, same New York. Luxury sales are way up right now. Despite mom, Donnie was supposedly going to scare every billionaire, millionaire out of New York, luxury sales have had their most robust month

in a long time since he was elected. But I'm thinking about getting out and I'm doing a couple things. One, and this is a total story of privilege. I get access to certain investments where if I go on the board, I get additional equity as an advisor. So I'm trying to, if you will, do more of those and take money out of the market and invest in small companies where I get equity plus. So I invest alongside a VC, and it's like paying negative carried interest. I agree that's not helpful to people because they don't have access to those deals. What I've also done, I went and bought for the first time a very expensive piece of art because of what Demotron said. And I've never done that before. I don't know anything about art, but after speaking to Demotron,

I thought maybe I should put some money just for fun into a piece of art in case, you know, unfortunately I can't shove it up my ass and head to my bunker in New Zealand. But if shit gets real and the zombie apocalypse happens, it's going to be me in a kitchen knife in front of this piece of art trying to fend off the zombies. But more than anything, what I'm doing is I'm about to make substantial investments in Section, which is the company that upskills the enterprise for AI. It's part of the adoption layer, as we call it, that I started in 2018 or 2019. I'm about to make a multimillion dollar investment there because the valuation will be pretty good.

And the company is booming, you know, after going sideways for a good six, seven years, all of a sudden it's exploding, which I'm really happy about and didn't expect. I'm also about to make what should be a substantial investment in this company, Prof.G. And that is, this was a company that I thought will be fun, good influence, make some good money, work with people I really like, kind of getting the team back together again to do another company. But I mostly thought this would be a lifestyle business. And now, and because of the good work of you and some other people, and I'm not just blowing smoke, it all of a sudden is in the market's coming to us, podcasting's booming. I'm like, oh, you know, my greed glands are going again. I'm like, wow, we might actually get an exit here or real enterprise value. And you brought this up on the editorial call. I'm in where I've made the most money outside of markets, and that is I'm investing, I hate to say myself, because that sounds egotistical, but I have influence, control, and good valuations in the companies I control. So I'm investing there, and I'm slowly but surely winding down some of my public markets exposure. I'm going to sell my Apple stock. I've sold 60% of it. I'm going to sell the rest. It's trading it a P of, I think, 33 or 35, and it's growing

single digits, amazing company. By the way, thank you, Tim Cook. I bought it in 2010, and it's paid for a lot. I'm going to hold on to Amazon, because that's my big tech stock pick of 2026, but I am not selling a bunch and going into cash. What I'm doing is I'm diversifying. I'm trying to create a basket of wealth such that if the whole market goes to shit, I'm down 30% not 120% where I have been before. And that's how, and I don't know if it's the right strategy. I wish I had. Little Oswath on your shoulder.

Yeah. It's so funny. I have access to the, I have access literally like you to the brightest people in finance in the world. And I still wake up like, I don't know what the fuck to do. I work with Goldman Sachs asset management. I have the brightest tax people in the world. We have access.

And literally I walk around most time going, buy, sell. No, I should buy. I should sell. So my point is, if you're out there and you're not sure what to do, welcome to the club by low-cost index funds and make sure you're diversified. What are you doing it? That was great. I loved hearing everything you're doing. So, by the way, one thing that kind of occurred to me, your point about selling and that you've never successfully just sold at the top and then waited and then got back in. this is one of the great things about value investing is if you are investing over the long term,

if you're following the Buffett strategy, the Benjamin Graham strategy, you never really have to sell. You don't even have to consider that because you're continually buying for the purpose of holding for the long term for 10, 20, 30, 40 years. If you're selling, it's a very, very rare event. So that's just one of the benefits of value investing. You don't have to even ask yourself that question. Okay, as for what I'm thinking about for 2026. So the way I think about it, This is the year of de-risking, and it sounds like it's the same for you. But I think that it's pretty much the case for everyone, and that is, by virtue of this incredible run-up that we have seen over the past three years, particularly in tech,

almost exclusively in tech, almost everyone's portfolio is completely imbalanced right now. And that is, if you were a good investor, if you invested in the S&P every year, if you were dollar cost averaging in, as we recommend, you are now over-exposed to big tech. And that is because, as we've said before, the top 10 stocks in the S&P now make up 40% of the entire index. Since 2023, those 10 stocks have delivered 65% of the total returns in the S&P, in the market. You look at Microsoft, Apple, Amazon, Google, and Nvidia, which together have contributed to half of the returns. And this is a combination of things because the stocks went way up in price, but also they have extremely high weighting in the S&P. The S&P gives more weight to those bigger companies,

which has actually been a great thing for all of us in the past few years because it's those companies that have outperformed. So what to do now, given everything we've just said, I think it's time we take our win, we've had a really good run, and it's time to de-risk and diversify because I can tell you with almost 90% certainty, I would say you're not diversified enough right now, just by virtue of what's happened in the S&P. So how to do that? Things I'm thinking about. First, very easy pick, which I'm doing definitely recommend by the equal weight S&P 500. And it's very simple. Instead of the regular S&P, which naturally over-concentrates into big tech, that's what has happened. Equal weight will just invest you evenly across all

of the companies in the S&P. So it's not indexed. Correct. So the 490 stocks that we keep on saying are being left out, well, this way you give them a little bit more light in the sun. So that's the first thing. Second thing, let's start diversifying into non-tech sectors. So a couple of sectors that I'm looking at that have underperformed relative to the market, consumer staples, also healthcare. And I think you could take a look at many other sectors and figure out which works for you. But those are a couple of sectors which just have not really tracked with the market thus far, and I think I'd do for a bit more momentum. And then the other thing, we've talked about this before as well, but non-US equities, we've talked about it a lot, but you should

be looking at China and India, and if you want to keep things simple, just emerging markets funds. And we called this at the beginning of the year after Liberation Day, and we nailed it. it was a great year for emerging markets. But I don't see any reason why that won't continue, especially if we are in a lower interest rate environment, which historically is pretty good for emerging market stocks. So those are the main things that I'm thinking about. I think it's also worth looking at small caps,

maybe the Russell 1,000 versus the 2000. I like that idea too. And then what are they trading at? They're trading at crazy. The Russell 2000 is at a record high right now, It's up 16% year-to-date. Yes, but I would just bear in mind that we had a huge downturn coming out of COVID. Fair point.

So if you actually look at the past four years, we're only up 5% on the Russell 2000, because there was this gigantic trough. It's at a P of 38 up from its 10-year average of 16. I mean, it just here demoted in my ear. These are companies that are smaller and have, in many cases, they don't actually have earnings because they're a lot smaller, which is why we're seeing that, But I also think that that's a fair, that's, what you're saying is all true. I don't have like

a hundred percent conviction in small caps, but I think that if, if you don't have that exposure already, you should certainly be considering it purely for the sake of diversification. Final thing I would say, and you inspired this, is just investing in yourself. I mean, Asworth told us there's no place to hide. And then we had this whole episode where we were asking the question, what are you supposed to do with your money? if there's nowhere to put it, if there is no place to hide. And he talked about collectibles. I personally just can't get on board with that.

It just goes against everything that I believe in. I think a better strategy is what you're doing, and that is if you don't know what to invest in, you might as well invest in yourself. And I think there are so many different ways to do that. As you say, you're investing in your company that you have control over, that you own, that you can steer the trajectory of.

But I think also if you're just a regular person, maybe it means investing in some coursework or some certification or some education. Like maybe you were thinking about taking a finance course, an online course, but you're like, I don't know if I should be shelling that out right now. Well, if you have cash and you're not sure where it goes, that's a great, this is a great time to consider that. I also think you could even think about your health in this way. Like maybe you were thinking about a gym membership. And but you were like, I don't know, like I'm kind of worried about savings. Well, if we're in a subdued market, then actually now would be probably a good time to consider getting the gym membership. You can always cancel, but that's an example of an investment in yourself, which it makes more sense when you look around and you see that there is a market in which the returns are probably not going to be.

Stella. So I really like that point. I'm not sure exactly what I'm going to do to invest in myself, but I'm going to really think about it and consider ways that I could take some money and figure out how to upgrade myself. I love that. You've convinced me I'm finally, that's it. I'm going to get the scrotum left. We just had our first spit take from Ed Elson. Yeah. Invest in yourself. Join a membership, go to business school. Now staple the twins back a little bit and bring them up. Bring them up.

High and proud. I need a vacation. Inovacation. We'll be right back. And for even more market's content, sign up for our newsletter. at profitlymarkets.com slash subscribe. If you don't smoke, don't start. If you smoke, quit.

If you don't quit, change. Visit unsmoke.ca. When you fly in Emirates business class and you're picked up by your private, luxury, chauffeur-driven car, you'll see that your vacation isn't really over until your flight is over. Fly, Emirates, fly better. Some people would tell you

the iPhone 4 was the best iPhone ever. But there's almost no denying that it was the most dramatic iPhone ever. It was leaked in a bar in California before it ever came out. And then after it came out, there was such a huge scandal that Steve Jobs himself had to hold an event and address it. This week on version history, a new chat show about old technology, we're talking about the whole history of the iPhone 4, what it meant, why it was so chaotic, and whether it really is the best iPhone ever. All that on version history, wherever you get podcasts. We're back with Profi Markets. A couple of weeks ago, it looked like Netflix had effectively won the bidding war for Warner Bros. Discovery.

But last week, Paramount blew the process open with a $108 billion hostile bid, asking Warner Brothers shareholders directly to choose its offer instead. And now, it looks like investors think the fight isn't over. Warner stock surged around 4% last week. and then again, later in the week, as Paramount quartered investors in New York. So, Scott, last time we talked about this, we said, Netflix wins. That's it. Done and dusted.

Now Paramount's back. And now, on top of that, Wall Street seems to believe that this is only just beginning. The bidding war is going to escalate, hence why we see that the stock is moving upward, was moving upward throughout the week. Let's just get your reactions to what's happened in the past few days. Well, one, don't listen to me. The Ellicons are going to walk away with it, I thought. Oh, Netflix is one. Oh, no.

Look, this is an interesting case study and why acquisitions almost never work. Two-thirds of the time, they end up being not accretive to shareholders, which means if you could go back in time, you wouldn't do the acquisition. People still continue to do them for a few reasons. One, a good acquisition can be a tectonic shift. I think the best acquire in history is probably Zuckerberg. Yeah, true. He bought Instagram for a billion.

It's probably worth somewhere between 200 and 500 billion on its own, at least. By the way, a month later, Marissa Mayer bought Tumblr for the same amount of money, and it got sold for $1.1 billion, and it got sold seven years later for $3 million. And at the time, they were both seen as comparable. And he was pillory for the Boy King spending a billion dollars for a company with 19 employees. And then he went on to spend $19 billion for WhatsApp, which I think is going to end up being worth a lot more. So the draw or the thought of making a big changing, you know, kind of groundbreaking acquisition is really seductive. It also can make sense in terms of a roll-up strategy.

So I was on the board of the Yellow Pages Company. It was pretty simple. We'd wait until we got a call from every Yellow Pages Company in the world who said, said, we want out, we're dying. We're like, okay, we'll buy you. We can cut costs faster than your business is declining, which makes it accretive to shareholders. If you bought a blockbuster in 1999, you could buy them for two times cash flow when they went out of business, but they didn't go out of business for 13 years. We made three to five extra money. So there are roll-up strategies. When you're trying to acquire growth assets, occasionally you connect and hit a grand slam,

but most of the time you strike out, and a lot of the time you get beaned in the face. So these things, one, they underestimate the complexity of the integration and cultures. They overestimate the synergies. But the thing that's going to make this acquisition now, looking back and think this probably was a bad idea. And just to clarify, for both, bad idea for both, Netflix, you're talking about both companies right now, whoever gets it. I think the only possible winner here from a shareholder standpoint might be Netflix, because they might make the argument that with whatever it is, a $400 billion, a 25% dilution wasn't. game-changing, and we have wrapped up and put a bow on streaming. And my co-hosted pivot would say she had a really good argument that Scott, it's not about streaming, it's about the

market for eyeballs, and YouTube is a bigger competitor, and she doesn't believe it should be blocking an antitrust. Totally disagree. Yeah, I think it probably should be blocked because I think original content creation based on a subscription model is its own unique market. And that basically Disney, Hulu, Paramount Plus are all basically Apple. TV are all basically fucked. They're all going to be the seven dwarves. And, and Netflix slash HBO would be an unassailable snow white, so to speak. But sorry, I interrupt you. You were going to say, we will look back at this being a bad deal for a reason. It'll be a bad deal for shareholders, I think, for almost in any scenario, because simply put, it's not that these are great

assets. It's not that there aren't synergies to be, to be garnered. But the only way it makes economic sense is if it's a non-economic deal for consumers and labor, and that is it consolidates a market. And my fear around Netflix, and I love Ted Surroundos, I love Netflix. My fear is that consolidating, taking Walmart and the LVMH of streaming will effectively create so much pricing power that are a leak advantage from labor and consumers to the shareholders of Netflix. And there's always a tension, but I think the FDC and the DOJ should they do their job and not have a president And I went, shut the fuck up. The president should have no view on this. I'm going to be involved. Why? So you cannot pay the subcontractors and take the company bankrupt? Anyway, this is what should happen. Highest bidder wins. This is a dual, this is not a dual-class shareholder company. Whoever shows up with the biggest check gets preliminary approval for the deal. They then have 12, 18, 24 months to close. It goes under DOJ and FTC review. We're a very smart economist. and consumer behavior experts, come in and say, is this a distinct market, or is the market

all streaming and all video and TikTok and whatever else you do, and we should let it go through? And then it should go under a CFIUS review or a National Defense Security Review, where if it's paramount, and Jared Kushner, as part of the deal on raising money out of the Gulf, does that present a security concern when the Gulf states have influencer control over CNN? So we have very smart people who are supposed to make these decisions, not a guy who's nodding off in cabinet meetings and knows nothing but how to put companies out of business or podcasters. We can pontificate on this. But we should decide. But my sense is I have a view on who would be the right owners or the wrong owners. But my, I mean, Kara really doesn't want the Ellison's to own it. And I'm like, you know what? David Zaslob, David. Ellison, pick your poison. I mean, I don't, I don't, we don't get to decide who we like or don't like. I like Ted Sarandos. That has nothing to do with it. The question is, who shows up with

the biggest check and who can convince regulators that this will not be bad for competition and increased prices and seed advantage from labor and from consumers to such an extent that it's only the shareholders of Netflix that win here. But what I have been on boards and we've acquired companies, they almost never work because, and finally, the thing that has entered the room here that will make this likely a non-accretive acquisition for almost any of these players, unless it's what I call a monopolistic acquisition, see above Netflix, is the thing that's entered the room here is testosterone. I can guarantee you that all of the bidders had a maximum number that they told their bankers 90 days ago, okay, if we can get it for up to, if we

really stretched, Larry and David have said, okay, to the bankers. If we really stretch, we offered 19, we could maybe go to 22 or 24. Every one of these players has had a maximum number. They have all blown by their maximum number. Because this is what bankers are great at. They get you to climb a wall of valuation. When I was selling my company to Gardner, the illusion of a third and a fourth bidder, okay, can you do this? Can you do this? Do this. And then finally when they walk away, okay, if you just come up 10% it's yours and we can move on and their greed glands get going

and if David, if Paramount gets this then David Ellison is on the cover of every magazine and like the winner, the king, the new king of Hollywood. What the fuck does he care about shareholders? He's a 34-year-old looking to like get out of the shadow of his father and and you know,

take, take, I don't know, Sweeney to the Oscars, he doesn't give a shit if this is a low ROI for shareholders. His father's much more shareholder driven. But even his dad might be talked into, we're so close to out. If we just come up a little bit, we win. And that's why his dad ends up calling Trump saying you can't let this happen. That's right. The fact that the Ellisons are even saying that this will pass regulatory muster because we have our thumb up the ass of the president is an acknowledgement of the kleptocracy and cacostocracy we now have in America. Highest bidder that clears regulatory review,

both for defense and antitrust. That's how this should go down, and unfortunately it's not. But I'll give me an example. I met a woman named Ruth Perrette, who's the CFO at Google, total adult in the room. She showed up to Google.

If she was in charge, if she was the CEO of any of these companies, that company would have already said, we're out, thanks very much, enjoy playing in traffic. And there's something about men, testosterone. And it's okay if you distinguish between the sexes as long as you're critical of men, so I'll do that. And that is, these guys have now got their fly down and they're all

sword fighting with their dicks. And they all want this thing distinct to the fact that probably going to overpay for it because they all want to be the winner. And Ruth Perrett, the CFO of Google, when she showed up to Google, and Larry and Sergey were spending hundreds of millions of not billions on like curing death, she's like, okay, it's time to pretend we're grownups and there were fiduciary for shareholders. Stop all the stupid shit. You are spending way too much money on your pet projects and pretending that shareholder money that you are not a fiduciary for shareholders. And she imposed real financial discipline. That was probably probably the most accretive thing that happened at Google in the last 10 years was the CFO who came in and said, all right, let's

pretend we're adults. And this might be fun. And everybody, Larry and Sergey, want to pretend it's a good idea because you're the largest shareholders here. It's not. It's fucking stupid. Stop it. It's not good for shareholders. And she cleaned out a bunch of these projects. These guys have now lost all sense, in my view, but maybe the exception of Netflix, because if they can get this thing by Ted flying to Washington, I underestimated how McAvelli and Ted is, or how shrewdy is, He went and he met with Trump, realizing if I don't kiss this guy's ass, I mean, this has now become all of these guys trying to, trying to curry favor with Trump to make sure they get regulatory review, which is, again, see above, you know, oligarchy, cacistocracy. But this is, they have lost it at this point. It is now hormones have taken over, competitive gene is taken over, and they are all, all they are doing is making, one of crowning. This will be a bad acquisition, maybe with the exception of Netflix, if they can impose true monopoly power, which they might be able to do, which will be bad for consumers in

Hollywood and the creative community. But this will be a bad deal at this price for almost any other acquire. It just won't pencil out. Basically, this whole process is going to create the wealthiest man who destroyed the most shareholder value, and that is David Zazlov. David is going to walk away. He is a beast. I completely underestimated him. All the things I thought he was going to screw up. He's completely proven us wrong. Like, absolutely crushed it.

He's going to make a billion dollars for dramatically underperforming the S&P for five years. By turning this thing into a dick measuring contest. That is what he did. And I thought he wouldn't be able to do it. And he absolutely did. The testosterone is pumping. It's now he's turned it into a bidding war.

And I remember thinking he's trying to make this happen. It's not going to happen. They don't want it. They don't want it enough. He did make it happen. I just wanted to make a little amendment to something you said earlier about, you know, I think you correctly point out. The question is, like, who shows up with the biggest check?

And that is true. And in this case, Paramount has showed up with the biggest check. They've offered $30 a share. Netflix offered $27.75. So they have the biggest check. But the question, so you think, like, Oh, so Paramount has to get it. The other question that is part of the calculation,

just in terms of fiduciary responsibility, is which one is more likely to go through? So there are various concerns with both. With Netflix, it's really an antitrust issue. With Paramount, it's also kind of an antitrust issue, but less because Paramount is smaller, but also, as you say, a national security issue because Jared Kushner is out collecting funds

from all these sovereign wealth funds in the Gulf, and do we want the Gulf states having an ownership in our largest media companies. So that's the calculation that if they're doing this fairly, we'll go into the review. And it could be that they say, we've decided the Paramount deal is less likely to go through. And that is where the Trump relationship starts to play a role. If they do believe that there is a higher likelihood because Trump likes Ted Sarandos more or Trump likes David Ellison more, then that will be part of their calculation too. One wrinkle that should be acknowledged also, Jonathan Cantor pointed out,

maybe we're overestimating Trump's power because Trump could say no, but then the courts could say yes. I mean, the courts could just strike down his opinion. I always get kind of like, well, how much faith do we really have in our court system to sort of hold the president to account? But there are all of these questions happening in here. And it is a really interesting question of fiduciary responsibility. What is the fiduciary responsibility and what is the best decision? Because it's not just the money, it's also the likelihood of the deal happening. This will take two years. And in, I think, six months, the Republicans are going to lose the gavel in the house. And I think in 18 months, there's going to be open, all of a sudden,

the Republicans are going to see the riding on the wall and go, this guy's a lame duck. And he's nodding off in every meeting and I'm going to speak out again. This thing is going to become so politicized and the political force of the last 10 years, Donald Trump, is going to be massively neutered. I think his power is only, his power and influence is only going down. But you're going to see, it's going to be fascinating to watch, but I don't, I mean, keep in mind, Ed, this is a stock that 15 months ago, 18 months ago was trading at eight bucks. It's now at 29. I got to tell you, I've such a David Zasloff fan at this point. I've completely turned around on it. I think he's an absolute legend. I think he's like the worst and the best at the same time.

I'm just in awe of how he's run this auction. He's the Adam Newman of media. I'm going to figure out a way to lose other people's money and make a shit ton of money. If he just surfed and smoked a lot of pot, he and Adam should hang out. He's turned it into that trophy asset that you were talking about in the previous segment that all rich people want and crave because there's scarcity and they want to be there. They want to be involved. He's somehow done that. And people thought it was just this crummy little media company literally 12, 18 months ago. Yeah, but he's done more than that. He's cherry-picked a board of people who are willing to give him ridiculous compensation for adding very little shareholder value.

But he did. He did come up with the shareholder value. He's done it. And he's done in about a couple of months. I'm sorry. What was it acquired? When he did the merger, what was the stock price at? That's a great question.

Let's find out. Oh, okay, hold on. When they announced the deal, Warner Brothers shares were at 2775. So basically, the company's a little... The guy's going to make a billion dollars for adding no shareholder. value when the S&P's up 50%.

Okay. I take it back. Yeah. No, no, no. He's the most overpaid investment banker in history. That's basically what he's done here. And he's created a bidding war. And he's found friends and family to stock the board and say, okay, tell you what, you don't add any value. You vastly underperform the market and we'll give you a billion

dollars. That's what he, there's a skill to finding total succophants and just basically saying in every board meeting, Your job is just to swallow hard. I'm torn. I'm torn. I think I respect him. There's photos of him with all the Hollywood stars on sitting courtside at these basketball games.

I don't know. Let me think. I'm producing a show for Netflix, and I just said Netflix shouldn't get this from Monopoly Behavior. And the other bidder was HBO, and I've just said David Zazlov has found a board members of people who swallow hard.

What do you think my future in Hollywood what it's looking like right now. Counsel culture's dead. You're good. No, I'm not worried about being canceled. I'm worried about a bunch of old dudes saying, we don't need this fucking dick around. We don't need this guy around heckling from the cheap seats.

Fair enough. Oh, God. It's lucky I own a big piece of art. We're going to need to find out what that piece of art is. Are you going to tell us? It's a Brazilian artist. I don't like to talk about my art. It's my second piece of art.

My other piece of art is a picture of Otto Frank sitting in the standing in the attic. where he and his family hit until they were betrayed by people and were shipped off to concentration camps. I just thought I'd change the mood here for a moment. And no joke, no joke, I look at this photo every day and it makes me feel grateful. That's a good piece of all.

I'm going to change the mood dramatically here. I think everyone should find something in their life and a piece of art, a picture, and it can be sad like this one is, or it can be inspiring. But I think everyone should try and identify an object in their life or something and or note or something that makes them feel good about themselves,

good about their situation, grateful, and look at that thing every day. I look at that photo every day. It's the first thing I do every morning as I walk down the stairs and I stare at that photo for a good five or ten seconds. Yeah, I have a friend photo of you in my office

does the same thing for me. And you realize, I will survive. I can get through this. I can get through this. I can get through this. All right. Let's take a look at the week ahead.

Thanks for mocking my moment, Ed. Okay. All right. We'll see the employment report for November and partial October data will be included in there as well. We'll also see inflation data from the Consumer Price Index for November. And Nike, FedEx and General Mills are all reporting earnings. Scott, any predictions? My prediction is that the best performing assets or investments are going to be in weird investments that most people

have access to, but in Venezuelan assets, I think that there's going to be a regime change and an oil-rich and culturally rich Venezuela is going to boom over the next three to five years, and people who take enormous risks and find a way to invest in Venezuela are going to come out with just extraordinary returns. All right. This episode was produced by Claire Miller and engineered by Benjamin Spencer, our associate producer, Alison Weiss and Silvary is a research leader, or research associates, are Isabella Kinsel, Dan Shalonan and Kristen O'Donoghue.

Drew Burroughs is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Profi Markets from Profugee Media. Tune in tomorrow for a fresh take on the markets. Reunion As the waters And the dark flies And the dark flies In love