The Compound and Friends - Economic Freakshow

Episode Date: June 25, 2021

On this week's episode of The Compound & Friends, Michael Batnick, Amelia Garland, Jeremy Schwartz, and Downtown Josh Brown discuss: Powell on inflation Do bonds still serve a purpose? A Bitcoin ETF In defense of lifestyle creep California's rent forgiveness Insane return expectations And much more! Follow Michael: theirrelevantinvestor.com Follow Amelia: twitter.com/Garlandgoeswest Follow Jeremy: twitter.com/JeremyDSchwartz Follow Josh: thereformedbroker.com Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

So what we do before we get started is we do one karaoke song of your choice. Yeah, you get to pick. Really? The guest gets to decide. I sang karaoke on this podcast once, but they didn't align the music to my singing and put it on and it was... Must have sounded good. It was terrible. I also chose Don't Know Why by Nora Jones, which was...

Can you hit notes like that? Yeah. Can you sing? Can you sing? I waited till I saw the sun. We should do karaoke. Are we rolling mics? We are.

All right. Amelia, you're going to be famous. Can you mute your mic just a little bit? Yeah. You know what's weird? So Jim O'Shaughnessy did a podcast on mimetic behavior. You keep referencing that. Should I listen to that? No, because listen.

You don't think about that on a daily basis that we just copy everybody. I thought about that because I bought Altoids. Did you really? I never bought Altoids. Altoids are a meme now? I have Altoids in my office. When I go to Walgreens next, are we getting Altoids?

Oh, I buy Altoids. I was on CBS. I said, you know what? I'm going to get some Altoids. It's the extraordinary... Is this still the captions? The extraordinarily strong mint? Curiously strong mint. Close enough. And this is the strongest flavor.

Wintergreen. Not only did I buy Altoids, I bought those. Yeah. This is the one. That's the best one. I had Krispy Kreme today for the first time in about three years. Did you get it free because of, did you show your vaccination card? No.

You get it free. They're going public. I paid two bucks for two donuts. You should have. Two bucks for two, actually it was $2.09. There's no inflation in donuts. I had Chick-fil-A for the first time in years. How much was it?

It was expensive. Yeah. In this economy? It was like 24, I got a salad with my chicken. Wait, 24 what? It was $24. Dollars? For what?

For Chick-fil-A. For chicken? Did you have a bottle of wine? Wait, what did you- So inflation has hit Chick-fil-A. Yeah, what exactly did you get? A Caesar salad and 12 nuggets.

12 chickens. 12 chickens. That's a lot of chickens. Let's be honest. 12 nuggets. 12 nuggets. Oh, nuggets, okay. That's a lot. Were you taken let's be honest. 12 nuggets. Oh, nuggets. Okay. That's a lot.

Were you taken aback? That was like 24 bucks. Krispy Kreme is going to be an IPO. 4 billion valuation. It didn't go well the first time. Actually, that's a misnomer. What do you mean it's a misnomer? It's not a misnomer.

I used the wrong word. But that's not necessarily true. So they did file chapter 11 in 2005, but they went public at the top. And for five years, they were the best performing stock before they, before that. Before it went bankrupt? Before it went bankrupt.

So you're, you're, you're partially right. Why did you look at this? I read that a few weeks ago when it was going public. Well, I traded it in real life. Did you? And I didn't make money. I didn't make money. So S&P closed at an all-time high today.

What do we think? What do we think? Bullish? Not bad. Okay. Did NASDAQ also? NASDAQ did too. Now I'm bullish.

How many all-time highs this year? A lot. For the S&P, a lot, right? 20? I don't know. I have no idea. I'm making it up. Jeremy, you know?

How many highs? Many. Several highs. Several highs. I saw this last year. I don't know. I have no idea. I'm making it up. Jeremy, you know how many highs? Many. Several highs. Several highs. I saw this last year. I saw this yesterday. The S&P, I know we know that the market did well last year, but it's just fucking crazy reminding ourselves that S&P was up 18% last year.

Triple better than average. 18%. Fastest ever decline. Fastest ever rebound. All right. Are we ready to go? This is industry stuff guys don't this is real professional don't get distracted caddyshack three and

welcome to the compound and friends all opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. So, all right. So, first of all, welcome back to an all-new edition of The Compound and Friends. Those of you who are listening, we appreciate it. We've got a great show on tap today.

Duncan is here. Michael Batnick is here. John is here. Amelia Garland is with us today. Amelia is the head of audience development at CityWire. That's the right title? Yes. You got it. Nailed it. All right. Jeremy Schwartz is here. And Jeremy is the global head of research at WisdomTree. How's everybody feeling? Feeling great. Great to be back in New York. First time in 15 months.

This is your first time in Manhattan. Wow. I mean, I'm still blown away by that. You didn't have any errands to run? Nothing at all? Commute from Philly, the first time on Amtrak, first time in a hotel. Busy on the Amtrak? It was packed. The station was kind of empty in both Philly and New York, but the train was packed.

Last time Jeremy was here, that Chick-fil-A was like $14. Yeah, so I was going to say, you got here, and within the first hour, you spent $25 on chicken nuggets. So you're definitely in New York now. Definitely worth it. Yeah. So I was going to say, you got here and within the first hour, you spent $25 on chicken nuggets. So you're definitely in New York now. Definitely worth it. Absolutely. And all right. So first of all, you guys haven't met each other, but you know her dad. And my brother.

It's a small asset management industry. And we were together at a conference in Chile, one of my favorite places I've ever hosted a conference with Chilean private wealth clients a few years ago. How many people show up to an asset management conference in Chile? Well, we have a strong Latin American presence, and we probably have 30 to 50 clients there. Okay. And do they buy U.S. funds from you guys? The pensions, I mean, it's interesting. Pensions down there actually love ETFs. I mean, institutionally, it's even more,

I'd say they're further along, whether it's Chile, Peru, Mexico, big ETF buyers. Like we're talking like the major pensions in Chile, which everybody's for savings there. Like everybody's saving like 15% a year and they have choices of six places they could put. These institutional buyers love the ETF structure. They didn't have this whole legacy thing. They were able to build that from scratch. I think they just like the simplicity. They don't want to talk to us when they come in and they come out.

They could easily execute a trade. They have no paperwork with us. Right. They can sneak out of an ETF as fast as they can get in. That's exactly right. Fair enough. We're going to talk about what happened this week and do some headlines. I think the Fed

downplaying the threat of inflation this week. Markets didn't seem phased by that. I think the markets are still just like go along to get along. There are no bond vigilantes. I feel like let me to get along. Like there are no bond vigilantes. I feel like, let me go to this. He testified before Congress and the Republicans were really looking to push

on whether or not we're going to have hyperinflation like the 1970s and 80s. And he was basically like very, very unlikely. And this is his actual quote. What we're seeing now, we believe, is inflation in particular categories of goods and services like Chick-fil-A that are being directly affected by this unique historical event that none of us have ever lived through before. All true. And then he's basically saying extremely strong demand for labor, goods and services

compounded by a supply side caught a little bit flat-footed. I guess there's nothing in there that the evidence would say is not true. I mean, that is the reality that we're all living with. And I feel like stocks, at least, are pretty okay with it so far. I don't know. What do you think? are pretty okay with it so far. I don't know. What do you think? The markets like if they view it as transitory, so the Fed's not going to tighten.

When you saw after the last meeting, the headlines were reading hawkish surprise because the dots, the sort of dot plot, started moving like a year earlier. So Professor Siegel, I've worked with for 20 years now, called that one, you know, the week before. He's like, these headlines are going to be a hawkish surprise. And he still thinks that they need, that it's going to be a continually hawkish surprise,

like throughout the summer, that the taper is going to be announced before, that the dot plot could go from 2023 to 2022. Even in September dot plot, he thinks you could have some people calling for, not the consensus, but go from 2023 to 2022. Even in September dot spot, he thinks you could have some people calling for, not the consensus, but a few people saying 2021, because he's very, he thinks this inflation is not transitory at all,

thinks a lot of the money supply in the system is going to put inflation pressures. Wait, Professor Siegel does? He's a big inflation, is a big thing, yeah. Hmm, wasn't he a,'t he a Fed watcher? He was an economist? So it's funny. I mean, he's known for stocks for the long run,

but his training at MIT was, his PhD is in monetary economics. So he was trained really to be as an economist. And then he sort of learned the markets and stuff through research and his own learnings at Wharton. But so his background here is in monetary theory. So one of the things that I keep coming back to is that we thought that inflation was going

to come from demand. It instead came from supply shocks. And we haven't even seen the demand trickle through. So what's going to happen? You don't think it's both at the same time? I mean, it's starting to happen. But I think it's more supply than demand at this point. Yeah, it's global supply chain disruptors.

That's what's happening. And I think, though, if people don't want to see another taper tantrum like we saw in 2013, not to go against Professor, but I do think the market isn't ready for the Fed to taper. And it seems unlikely that the Fed would risk that. Taper tantrum was a bigger event for bonds than stocks. Yeah. Like, just looking back, I looked at the S&P max drawdown.

Seven or eight. I mean, we've had worse corrections for no reason at all. By the end of the year, the equities were doing pretty well. He called for tremors throughout this year from this, or the market's going to continually adjust as they, at least his view, you're going to start to continue to see these hawkish surprise headlines. And then it'll be a little downdrafts, but generally it's going to be very robust profits, very robust economy.

So still good for stocks, but you will likely see. The other thing with this is it's a freak show. There's no precedent for any of this. This is the Wall Street Journal. The U.S. economic recovery is unlike any in recent history. Powered by consumers with trillions in extra savings. Typically it doesn't happen during a recession. Business is eager to hire and enormous policy support.

New businesses are popping up at the fastest pace on record. Again, not something we usually associate with the environment a year after a recession starts. Quit rates, the highest level back to the year 2000. American household debt service burdens at their lowest level since 1980. Again, you don't see that right after a recession. And the Dow Jones up 18% from before the pandemic started. Home prices 14% higher in the same period of time. So I guess, I'm guessing

Professor Siegel would probably agree. It's very hard to think of any analog in economic history for this. And it feels more like a natural disaster recovery than a recession recovery. And yet the labor supply shortages are something he said he hasn't seen ever in his lifetime. And the spending that we put in the system, and what's different this time is usually have all these imbalances cause you to go to recession. Here we shut down,

but we've done called 6 trillion in total relief. When you look at all the combined packages of how much we put in the system, and that's why these M2 money supply growths, which is checking accounts, like how much cash is in the system. And that's why these M2 money supply growths, which is checking accounts, like how much cash is in people's checking accounts, is up 40%. Think about how big that number is.

The annual growth in money supply was 5% a year, 5.6% a year for 30 years, and then it was 12% a year. It's going at a pace that that is what the pace of the inflation of the seventies and eighties. So we don't know what the ramifications of all this are going to be. It's

way too early to say, obviously. Well, what are, what are advisors talking about, um, with their clients, Amelia? Like when this subject comes up, what do you keep hearing? Cause I know you, you talk to more RIAs than maybe anybody I know. So like what kinds of things are you hearing that they're relaying to their clients because it's so unprecedented? Well, I think it's been a concern. It's been the topic of inflation has come up, especially this week, as we've seen, but they don't believe we're going to head towards hyperinflation like we saw in the 1970s and early 80s as the same deflationary forces that have kept inflation low over the last 20 years are still in effect, right? Globalization, technology, aging demographic. So it's something

that they have to educate clients on. I mean, it's advisors that have lived through these cycles. No, as you said, Josh, I mean, we've never seen anything like this. It's much more akin to a natural disaster than- There are probably a thousand advisors total who lived through the 1970s. So none of us have that as a reference point. Yeah. Advisors are younger. I think it's a lot of them educating themselves, but they haven't lived through it, but also trying to manage the expectations of what their clients are expecting, especially in portfolios too at the moment. And they're positioning in portfolios with fixed income in general.

That's changing a lot. Like how are you in positioning them? I think the 60-40 portfolio is changing too with the impact of the inflation at the moment. Yeah, I think like people are more open-minded to alternatives than they've been in a long time just because of the forward returns math. And maybe you'll correct me, Jeremy,

but it looks pretty shitty to me. Like record high multiples for stocks and record low bond yields or close to record low bond yields. And you wrote about this. So I want to pull, do we have this, do we have these charts from Jeremy's piece? So I thought this was like,

I thought this was a really good framing. You were writing about the diversification that you normally would get from bonds versus stocks having gone away, or at levels that rarely seen this century is the way you phrased it. What are you telling us here? So the core, we pulled a chart,

and this is from my friend Warren Pies at 314 Research. He came from Ned Davis, started his own research firm. We became a client and really interesting analytics. And this shows that stock bond correlation going back. And historically, bonds have been this ultimate hedge for stocks, that we have risk off, bond yields fall, bond prices go up, and that's sort of the basics of the 60-40. But since the 1980s, you've had one of the greatest bull market in bonds, because yield just continually fell. And so now the question is, if this inflation narrative changes, that's when this correlation can break down, that bonds can start – bonds and stocks can start to go down together and bond yields rising could be one of the catalysts to get stocks to go down. So let me push back on this a little.

Obviously, bonds are what – nobody's excited about bonds. I'm not excited about bonds. But we've been having these exact conversations since probably 20 – I mean 13, 12. It's been a long time that bond rates have nowhere to go but up, which was not true. But- We learned. But they've continued to come down

and stocks have continued to go up. So I'm not saying that just because it's worked to date that we should expect it to repeat going forward. I certainly don't. But what if, out of fears that rising interest rates are going to, which is obviously going to be bad for bonds, it's going to bring down the stock market, what if the cure is worse than the disease? So you go looking for ways to hedge your portfolio, to mitigate the risk, and then you go into a Frankenstein portfolio and totally f*** yourself up. That's fair.

I mean, I think that's an issue. I mean, so what do you do besides, you know, the bonds are, you get your principal back, right? That's the upside. That's the great thing. And so that could be the best thing to do. You don't get your principal back, right? That's the – That's the upside. That's the great thing. So that could be the best thing to do. You don't get your principal back. At 4.5% inflation. After inflation, you don't.

Even if we think it's transitory, it probably doesn't return back to trend. Like inflation probably is now 2.5%, 3% versus 1% to 1.5%. So you're not getting your principal back. The tips, I mean it's priced into the market today. If you look at the tips yields, which are the after inflation adjusted bond yields, those are negative 80 basis points today. So you're basically giving the government for every $100,

you're taking $92 back 10 years from now with your inflation adjustment that you're talking about. That's, you would think that's insane. Like, why would you do that? Well, you're doing that with the expectation that if there's a 20% sell-off in stocks, you'll have that dry powder. I can't think of any other good reason to do it. And there are sensible alternatives to just stocks and bonds,

but there's also a lot of really nonsensical ones as well. Well, that's what I was going to ask. What do you think is a replacement for this? Because I think in the article you mentioned commodities and looking at, I mean, Bitcoin, I know we're getting into that eventually, but Bitcoin's lost half its value, right? That's very volatile. Yeah, it turns out not a great inflation hedge. Not a great inflation hedge. There's trade-offs, right? There's trade-offs for everything. So I totally get the fact that

bonds are not exactly exciting right now, but I still think they serve an important role in somebody's portfolio. Unless not everybody's able to stomach a 30% drawdown in 20 days, which is what we had last year. Yeah. I do think, though, there's still $10 trillion in negative yielding debt, which tells you that zero isn't the floor

and you can rally below and still offset your losses and equities. I think it can get lower, but I know. Negative rates here breaks the banks. Like it wrecks big sectors of the economy the way that it has in Europe. Yeah, look at Europe. What do you do with commodities, Jeremy?

So you're looking at commodities since 1998. They started acting like stocks. Is that what you're showing us? So the chart I showed was, since 98, you basically had bonds that on practically all the days, it was something like 87 days, bonds on the worst days for stocks, bonds did well. And commodities didn't do well during those worst days

in recent times. But pre-98, it was sort of like a coin flip and commodities were just as good of a diversifier in certain environments. On the worst days for stocks, commodities could sometimes offset that. And that's where I do think if Siegel is right that this inflation narrative is the main scare, that's where you're looking for things that would, you know, bonds could go down more. And then that's where things like commodities would be one of the natural places. Jeremy, don't you agree that we have to take a lot of that historical data with a grain of salt?

Corey's written about this a lot, especially commodities, the financialization of commodities. Pre-1998, how did investors access commodities? They really didn't, through gold mining, mutual funds. And certainly- The futures market was tiny. There was no retail. And certainly the bond market today,

obviously interest rates are a lot different today than they are back then, but Fed intervention, participation, whatever you want to call it, foreign demand, the makeup of the bond market today is also very different than what it was pre-1998. So I love historical comparisons, but I just think you have to be careful a little bit.

How you look at it, yeah. Don't you also think though that a lot of the inflation is coming from the wealth effect, which is the stock market booming? And if people get scared about inflation, stocks sell off. Yeah, who cares about bonds? No problem. Just put your money in stocks.

They never go down. I mean, the money supply issue is cash in people's checking accounts. So it's beyond just the traditional wealth effect. Yeah. Didn't you worry about this, right? The reclassification of M2? Didn't you write something about that? Or the accounting, not shenanigans,

but the reclassifications? There was this M1 thing and M2 thing, and yeah, they did reclassify some of that. So it's not to say that they didn't print a shitload of money, but there was also some reclassification issues that... M2 is the better number to look at, whereas M1 had this big spike because of – What's the difference between M1 and M2 when people look at like the data of cash in the economy? What are they looking at?

I don't have the exact detail in my mind of what is that main difference. It had to do with checking accounts versus savings accounts and what savings accounts were reclassified. There was an arcane technical detail. Either way, we know everyone has more cash than they've ever had before. I just feel like if people get scared out of the stock market and if home prices stop going up, some of the edge comes out of inflation. I think the Fed's measure of inflation, they're looking at core PCE. They're looking at things that I think get taken care of if people stop acting so bullish.

I also think we're not focusing on the right thing here. For years, we had low nominal GDP growth. And now we could be in for a boom. And all of a sudden we go from why aren't we growing to we're overheating. And aren't stocks like the best hedge for inflation because a lot of the costs, the increase in costs can get passed along to consumers? It's crazy. People are predicting GDP growth of roughly 7% this year and potentially up to 5% next

year, which we haven't seen since before I was born, which is before 92. So are we overthinking this? No, we often say, when you look at the 70s and 80s, you had 6% inflation for two decades. And dividends on the S&P also grew over 6% a year for those two decades. So they've been able to participate in high inflation decades, low inflation decades.

And so stocks are one of those ultimate real assets to your point that they, the companies grow prices and then sales. And you're going to get massive dividend growth this year. All the companies that there was an announcement today, who, who somebody raised their dividend by 17% today. It was a, it was a big brand, a big giant company. Sorry. I can't remember who it was. All of the,

all of the companies that basically did not do dividend increases in 2020 for good reason, or even suspended their dividends. Goldman is saying most of that hasn't even come back yet. And you guys are very dividend-oriented or total return-oriented. Yeah, I have a dividend. I was doing a weekly dividend monitor during the crisis because there were so many cuts, particularly from small cap companies. If you looked at the difference between large caps and small caps last year, it was maybe 5% down on large caps,

but 25%, 26%, 30% down for some of the mid and small cap. On how much they were paying out in dividends? Total dollar values. Kroger. Kroger was a company. Kroger raised their dividend by 17% today. That's crazy.

This is Goldman Sachs on dividends and buybacks. We forecast S&P 500 dividends to grow by 4.5% a year on average over the next decade, including 6% growth this year and 6% growth in 2022. There's your inflation edge right there. 4% is a low number. I mean, if you go back to 1957, when the S&P started, it was over 5% a year. And I would argue it's actually going to be higher because of all the buybacks people do. The per share numbers on the S&P, because we're doing as much buybacks today, that's reducing the share counts and would, I think, lead to higher. You have to combine the two.

I was looking at Yardeni. He updates this on a daily basis at dividends and buybacks. And we're going to be past, I think, Q1 2020. We're going to be past that in pretty much no time at all. All right. So the're, all right. So the peak for buybacks was Q4 2018, which was about a year after the tax cuts for corporations. And then it's been down ever since. Last year, obviously, it almost disappeared.

But this year, already by middle of June, U.S. companies have announced 567 billion buybacks, which puts us on pace for a record. Goldman sank 726 billion for 2021 in buyback activity. Corporates and now 10 million new retail investors who have opened accounts for the first time competing for stocks. who have opened accounts for the first time, competing for stocks. So even if you have inflation, it's hard to figure out a better solution, at least in my mind.

You're going to get a boom in dividends, buybacks, and people accumulating stock because what else are they doing with their money? I mean, we agree. I mean, we talk about the new 60-40 is sort of like, we were calling it the 75-25, and sort of that low expected return in bonds that we thought that was more, sort of bonds being more expensive than stocks being expensive, even though the US stocks are, quote-unquote, expensive. Like, bonds are more expensive compared to their long-term averages. And so that 75-25, we've been moving things to like a 3% goal and 3% commodities and sort of Siegel models that we work on together.

But yeah, we definitely agree that the case for stocks in a 60-40. If 75-25 is the new 60-40, then the advisor's role is to just say to a client, look, you're going to have to deal with more volatility. That's the answer. The answer, unfortunately, is behavioral. It's not, you know, what's the, the answer unfortunately is behavioral. It's not, you know, what are the, what are the best places to put the money?

Like, it's just part of the game now. That's what this pandemic showed, right? And advisors had to, I mean, had to have conversations they've never had before to clients. And everyone had an idea of what their risk tolerance was pre this pandemic,

but that completely changed afterwards. Yeah. No, no, no advisors ever walked their client through a global pandemic. No. And hopefully never again. No, no living advisor.

Knock on wood. Yeah, exactly. So I think the idea of volatility, the idea of risk has just changed dramatically in the last year and your risk profiles have had to evolve. And as you said, Josh, I mean, it just really connects again to behavioral finance, incorporating those principles. What does it mean? All right. Here's the optimal portfolio. That's the good news. We'll do 75-25. The bad news is you have to live with bigger drawdowns, maybe more frequent drawdowns than you otherwise would have in order to accomplish the goals that you told us you want to accomplish. And it's not,

you know, it's not magic. That's just the answer. So, all right, let's move on to Bitcoin. Balchunas did a really interesting poll. What is the SEC's biggest true worry? Because we're all saying like, what the hell are they waiting for at this point, right? So Balchunas said, what's their biggest worry? Delaying and delaying and approving a Bitcoin ETF.

And the largest answer, like by a substantial margin with 46% of the votes, was worried about USD slash government. What does that mean? That I guess the government feels threatened by Bitcoin. They're working on their central bank digital currency. But who within the government has the power to call the SEC and be like, don't approve it because it's going to wreck the dollar? You don't think so? No.

Come on. This is just the standard. Who does that? The Treasury? Janet Yellen? Who is calling the SEC? I don't know who. This is just the standard Twitter narrative of, like, you know,

the fears about the government coming in and attacking. That's what you would expect from Twitter to respond. So you know this much better than we do. Yeah, by the way, they didn't. Eric Balchunas didn't poll employees of the SEC. He polled Twitter. He polled Twitter. So what's SEC's biggest worry,

according to Twitter, is the poll. Okay, fine. He polled Twitter, but I think talking to RIAs, it's a complete mixed bag on this because most believe the SEC has a responsibility to provide access to crypto because they have in no way restricted investing in this product whatsoever before. And it's a more traditional way to get access to crypto because they have in no way restricted investing in this product whatsoever before.

And it's a more traditional way to get access to it. But I think the bigger hurdles, which were brought up in an article we put together at CityWire by Morningstar, Ben Johnson there, I mean, one of the big hurdles they say is the potential for fraud and manipulation in the underlying market. What's the SEC going to do about that?

But how can they, I mean, how can they get past that? Yeah, what can they do? I mean, it's more regulation, I guess, but it's... So this is their, in our view, this is their real concern. Do you guys have anything filed for this? We have products in Europe and we have filings.

And so we're obviously having ongoing dialogue. And this is the pushback that you get. So the manipulation concern is that there's unreg you get and they're so the manipulation concern is that there's unregulated exchanges and and there's studies that show like these spoofing trades and other types of trades that have these what what Corey Hosking calls cascading liquidations where there's all this leverage in the system and then you get a few spoofs and then these things start cascading and and you get the leverage on wines and all those things.

And so that is on their mind, the manipulation – what they call manipulation on exchanges that they don't regulate. So their concern is they approve a few exchange-traded products for this and they are doing so without really fully being able to – I don't want to say control, but monitor what's happening with the underlying asset itself in a way that they can with stocks, for example. I mean, what's strange is you now have a futures market. So you have the Bitcoin futures market, and you've got also, they've approved certain trust products. Now, the certain trust products have this additional thing that you can't create and redeem. So people can't get their money out. They can trade at big discounts to the underlying.

Yeah, if you give Grayscale or Osprey and Bitwise, those are the three publicly traded trusts. If you give them money as part of the private placement, that money is not liquid the next day in the way that an ETF would be. So that's the challenge. You've approved certain structures or you've allowed them to trade for whatever reason, and the ETF would solve certain things on top of that.

But investors are going to get exposure to Bitcoin. Well, they're doing it either way. That's the thing. That's what doesn't make sense. And some people, so they're allowing MicroStrategy to issue more shares to buy more Bitcoin. And I got several emails last week because we were saying, who's buying MicroStrategy? Like, people are buying it as a Bitcoin proxy. Yeah, it's a strange one.

Yeah. So now, all right. So now you have this situation where people are doing it anyway. And then, like, I would also just like say, you really have no way of knowing how much manipulation is in the oil market either. There's literally a group of countries who call themselves a cartel. You're going to tell me that's not a manipulated market? They announce their manipulations. They literally say this is what we're going to do to cut production, and then we're going to raise production, and then they all cheat.

Or to a lesser extent, the meme stocks. Meme stocks, Dogecoin. Look, that was market manipulation. Look at Musk. He's fine for what he did there. I mean, I think market manipulation is everywhere lately. Well, it's just this doesn't really pass the smell test. Like there are so many other more dangerous products, in my opinion, that they have no

problem improving. Why is there so much leverage in the Bitcoin market? It's already four times more volatile than stocks. Why do people feel the need to buy the most volatile asset they can and then also leverage it? It's called fun. That's what it's all about. Not fund, because that's not approved yet.

This is fun. Jeremy, is Bitcoin an asset class? The narrative that seems to have dominated is this digital gold narrative. And actually, the use case is that's... That died. That's over? I'm saying that, well...

What is it then? It started as digital currency, peer-to-peer, and now it is the store of value. It's digital gold. So I think it's... So it didn't die. No, I'm saying the use case argument, in my opinion, has died.

The use case is trading. I'm not saying the use case is dead. I'm just saying that as a narrative is over. Right. I mean, the narrative I see dominating all the discussions is you've got this 21 million fixed supply. That's the ultimate amount that you're eventually going to have. And the question is all the demand that comes in. Are there going to be more people who want access?

And it's a classic demand supply question. And so the question is what is going to be more people who want access? And it's a classic demand-supply question. And so the question is, what is going to be the ultimate demand? So Bill Miller put it very simply. He's like, listen, the supply is increasing at a 2% annual pace. Do you think demand is increasing more or less than that? And I thought that was very well put. And I'm on the side of it's going to increase more than 2% a year. I think crypto is an asset class.

I don't see how you could say it isn't at this point. This is Nick Colas at Datatrack. Name an asset class that can lose a trillion in value over just a few weeks. Crypto. Without noticeably harming any other capital market or global economy. The answer is virtual currencies. Why is that? Because its value, more than any other capital market,

is atomized all over the world. So he's saying this started out global. It's not U.S. stocks. It's not Russian bonds. It's not the Thai baht. It's everyone. It's its own thing, truly. But it's already everywhere. Do you buy into that? There was no Fed to the rescue during the liquid. People are saying, you get a market that clears. You have these leverage liquidations. There's a clearing price that it all settles out. You see where the real demand is, and there's nobody stepping in to the rescue.

I love it. I don't want to see it in the stock market, but I think regulation is very important in the stock market. I think circuit breakers are very important. But in the crypto market, I love how it's self-regulating. You don't think Elon Musk takes the place of the Fed for Bitcoin? I do. Well, you've got the micro-strategy people.

Yeah. I think he plays a role. What do you mean? I think there are like five people who are the unofficial Bitcoin Fed. I think Novogratz. I think even though they all tell you they're bullish all the time, they still seem to be able to move the price with whatever new thing they announce or don't announce or whatever memes they share. That has as much of an impact intraday on digital currencies. I think that's fleeting. I don't think that's going to stay in place forever. I have a question that's maybe a bit of a stretch for you guys. Do you think Bitcoin

is the antonym of ESG given the carbon intensive process of mining Bitcoin? Meaning like you can't be an ESG, you can't say that you care about ESG and also own Bitcoin? I mean, it's a bit of a stretch.

I know that, but curious. I don't know anything about it. It's a tough topic. We've done some writing on it. I mean, and not every coin is the same. So Ether

was set up in this what's called proof of work. That's what Bitcoin has, is proof of work. All the miners are trying to guarantee the transactions. Ether is currently set up in this sort of proof of work type system, but they're talking about moving to this proof of stake where you show 32 Ether and that becomes a node that guarantees these things on the blockchain. And that's supposedly the ESG solution.

So you don't have to crank through all those calculations, every computer in the world at the same time. Right. So it's a different model. But the ultimate question on this comes back down to, do you think Bitcoin has a purpose? So if you don't think it has a purpose, then you're going to say it's anti-ESG.

But if you think there's actually a real use case and it's adding value, then it's in a way no different than any other use of energy. It depends. Use case for who? The argument that resonates for me is people in developing countries where they have a very volatile currency and their government is unstable. If they want to get paid in their native currency and convert that into Bitcoin because they think it's going to have greater purchasing power. I totally, that totally resonates with me. But is that a big enough use case to justify a $2 trillion asset class? That's the, that's the question.

Well, that's, that's Bitcoin. And then that's very, that example is a real visceral example that everyone, look, my, my, my ancestors came to America literally with like bits of gold and, and like maybe if they were lucky, a diamond sewn into the lapel of their jacket. That's how you moved wealth. Imagine if they had a smart wallet. Could you, right. Could you imagine, could you imagine if they could have done that? But Bitcoin is only one part of it. Like to me, the smart contracts is the way more interesting

thing. I've been trying to get my house refinanced for five months. It's ridiculous. The amount of paperwork and nonsense, that's like nonsense that goes back and forth is just beyond absurd. So I think – I really earnestly believe that blockchain fixes a lot of this nonsense. All right. So let's get into this lifestyle creep thing because while you're trying to refinance your house to buy an even bigger – what are you trying to do anyway? I don't even know. I'm trying to get a lower mortgage. Just get a lower. That's it?

Yeah. All right. You wrote this thing about lifestyle creep that I thought was really good. And I think, Amelia, you liked it too. I loved it. Jeremy hated it, but you liked it. I'm definitely paying, what was it, $60 for someone to come and do my laundry? It's the best money I spend.

I have to go to a laundromat, which I actually am starting to love. I feel like I'm old school. I get my headphones on, listening to some really cool beats while I'm doing it. Right. But you're doing your own laundry. I'm doing my laundry. I'm carrying it. I'm hauling it.

Cause I wait. Why do it once a month? Listen, I let it build to the very last minute and I'm going down the street. I'm carrying it on my back. I'm sweating. It's a process and I hate it. I know it's coming every week.

And honestly, reading this article, I think I just got to either. I can give it to them and they can do dry and fold and deliver it. But I'm like, that's $40. It's just, it's really not that much. And compared to how much exhaustion comes into the process. My number one rule at my household is whatever my wife wants, she gets.

And in this case, basically, yeah, I completely agree with your post there. Like you got to, we pay for that kind of stuff just to make, make it a little bit easier. What's the point? Like, what's the point of being successful if then you mentally punish yourself every time you go to spend more money on something that you wouldn't have spent? Like, aren't you supposed to have lifestyle creep? And I think that's, that's, that's my point is that, uh, but, but it's funny because what I didn't talk about was the other side, which is obviously everyone understands the dangers of it.

Nobody talks about the positives of it, right? Yeah. Now, the dangers are obvious. Not that this is dangerous, but you can't go backwards, right? Wait. So what are you doing? So you're paying – so Robin works. You work.

Right. You're a dual-income household. You have two kids. Young kids. Yeah. So if you could afford it, neither one of you should be doing laundry. All right. So I know this sounds like I

have delegated my wife to do the laundry. True. I do everything else. That's not true. But she's not going to want to do the laundry at 8.30 after the kids go to bed. It's absurd. So the danger is in general. So yesterday she said to me, because she's a teacher or she's a guidance counselor she'll be off for the summer. She goes, can we still have people

come to the laundry during the summer? And I was like, oh great here we go. Here we go with that lifestyle, Queen Robin. Yes. But here's the thing. Sure answer, yes. You can't go backwards. Yeah. No.

So in the last two weeks on Howard Stern was Tom Arnold and David Crosby. Both broke. Like literally, both of them broke. Tom Arnold – Tom Arnold had somebody doing his laundry. Yeah, no. Yeah, that's how – Huge mistake.

That broke the bank. But you can't – once you get accustomed to a certain lifestyle, like you're not going to all of a sudden unwind that. I think it's the boats, the houses, the cars. It's the fixed expenses that bury you. It's not the – those little services I think are the things that you should do. That's what you should spend money on. Like to me, right now in my life, the most valuable thing that I have is my time. And anything that I can pay for to save time, I'm going to spend money for that.

So Sprinkles doesn't let me get away with that argument because I'm always like, why do I have to do this? Do you have any idea like how much I could read? Well, what do you do? Or how much I could write? What do you do that you don't want to do? We don't have enough time on this podcast. Let's start. No, honestly, I'm not, believe me, I'm not really complaining.

I'm kind of complaining. But my argument is always what you just said, where I'll be like, I would rather spend the next hour reading a book and I feel like, or writing something or responding to emails. I feel like that's a better use of my time. Why can't we just pay somebody to do that? God, your house is immaculate. True. Who cleans the house?

Sprinkles. Sprinkles, okay. We have people come once a week to really clean, but you can't. If you send her a birthday card, she will read it over the garbage can. Nothing accumulates in my house. Things come and they go.

Impressive. Yeah. No, it's very impressive. Thank God because I would just let things pile up. But anyway, I feel like you're right. Once you adjust your lifestyle with these small luxuries and you keep doing it, you keep doing it, at a certain point it could get out of hand.

But I do think- So the danger is if you get accustomed to a Range Rover, you're not going to go back down to a Kia. And that's the dangerous part. Unless you have to. Unless you're forced to. That's not pleasant. But I liked your point. I think there's a middle ground, right? You save what you can and

spend on the things that make you happy. I think this pandemic has shown your point exactly. Time is money, right? Invest in yourself and invest in the things you love. And I think you'll just have a happier life and things will feel better long term. Here, here. Let's get into this thing. Let's get into this thing with Tony Stick.

And I have to admit, I'm like, I've I very much lost touch and lost track with what people are up to. But I love Tony. And I guess this went on on Twitter last week or the week before. Amelia set this up for us. What? Yeah, actually Jeremy should,

because Jeremy got the shout out because you dad never met him, right? I had never met Tony and I, I, I put it in here because Josh, I talked to him and, and he told me how he met Tyrone Ross was from you and how I met Tyrone Ross was from you.

Okay. And so they put in this Twitter thread, how, you know, Tony was having his, take care of his, his kids. He felt gratitude for all the food he had. And he started, he made a, you know, donations, a matching donation. I'll give a thousand dollars to no kids hungry. What was the tweet? My wife is gone today and I'm charged with lunch.

I opened the fridge to plenty of food, really whatever the kids wanted. The gratitude is real. So let's fill some kids bellies. I'll match up to a thousand dollars for any donations made to at no kid hungry today. And then he tagged a couple of people. He tagged Tyrone. Um,

and then people just went nuts. So, so Jamie Carson from, uh, Jamie Hopkins from Carson came on and, and put, put a thousand dollars and did it. Ty put $1,000 and did it. Tyrone put $1,000 and did it. I've been a friend of Tyrone's.

We've been at Wisdom Tree. We've gotten close to him. We're actually investors in OnRamp and big fan of Tyrone's. And I know he supports No Catan. I've wanted to get behind it for a while. And I was hosting a barbecue and I had like three racks of ribs. A couple of beers and you. And I was like, I and I had like three racks of ribs. A couple of beers in you. And I was like, I got to do it.

And so then I matched Tyrone and Jamie and also did $1,000. And it basically just started taking off. And he got up to about that day, about $20,000 for a little bit hungry. You know how many kids twenty thousand dollars fee i found i found out that like 70 cents feeds a kid for a day um based on the way the food pantries work because i did this for my book signing my virtual book signing i asked people if they wanted an autographed copy to make a donation they told me at the this long island cares uh harryin Food Bank, they were like 70 cents is like one kid one day. And when you hear that increment,

you're just like, holy cow, this is powerful. So Tony raised 20, is that the number? You got to 40, didn't it? You got up to a crazy number. That inspired me. I just went to that site and set up a monthly donation thing because I give to Charlie at the end of the year, but why not automate giving the way that I automate

like my savings so I was happy to do that and then right and alright so I guess that's like the part of Twitter that I miss is like my friends doing cool stuff like that that goes viral and everyone else jumps on the nobody nobody DM'd me or sent me a text so I didn't hear about it I would

I would have put some money in I guess I could do that yeah but it's the power of community right that's yeah the fin twit world we live in it's a good peer pressure you see the people doing it i said you know thanks for the nudge like so sometimes doing stuff like that making the announcement could look a little bit gross it's like give because you want to give but in with this when it motivates others to get inspires people it's not gross yes totally so when it inspires other people to give. But with this, when it motivates others to give. When it inspires people, it's not gross. Yes, totally.

I agree with that. So when it inspires other people to give, it's f***ing amazing. We raised, wait, I didn't do anything, but Tony and you guys raised 30 or whatever, $40,000 for kids. Like that's amazing.

I predict that somebody, maybe Tyrone, somebody's going to formalize this amongst like financial, I don't even know what you call our community. Some of us are asset management. Some of us are advisors. But like just financial –

Financial professionals. Somebody will formalize this and do this for real like big, big numbers. I'm surprised nobody has yet. But maybe I'll do it. I think it's really cool. I was excited when I saw this, and it was news to me. Let's talk about this California rent forgiveness thing. What's going on here?

That's crazy. What's going on is they had more in aid than they needed. Who's they? California. So California got – Federal aid. California received a ton of federal aid, and thank God their fiscal situation was not as dire as they originally anticipated. So they had money left over, and they're using it to wipe away some rent.

But there are some details in here that are insane. So they're looking to pay 100% of unpaid rent. Some people are saying that this is a political stunt. It doesn't fix anything. It's abandoned. It's political posturing. I totally get that because this is not fixing anything. It's just a one-time deal. But what's nuts is this will be available to residents who earn no more than 80% of the median income in the area. So in San Francisco, a family of four would have to earn less than $146,000 to qualify. That's a lot of money.

That statistic is crazy. That's a low-income resident of San Francisco. So, I mean, but it's not just California. 22 states have unused pandemic relief money. Idaho, for example, I don't know if this is because a lot of people moved to Idaho, is on track for a record-breaking $800 million surplus. Because a lot of people moved there. Boise is like the new boomtown. Boise.

But what's going on in California is pretty rough. So whose rent gets wiped out? People who are earning less than 80% of the median income in what, their county? I forget what the exact details were. So if they owe rent they owe back rent this was like that meme where you just shouldn't pay rent right like uh nick fp or something like that was always talking about not paying rent on on twitter well they had them they had like a they had a moratorium that you can't well that you can't make somebody pay rent, but I guess that ends.

And then do you still owe the money? Do you still owe back rent? I don't know. I think this wipes it away. I mean, that's pretty powerful. I'm guessing New York doesn't have a surplus, or am I wrong? Well, we're using that. I think that's going towards infrastructure. Biden just discussed this.

They're going to use the American Rescue Plan. I think if it's like $400 billion being repurposed infrastructure, I think it still has to be approved by Congress, but they were talking about that today. So they're going to use it purely for that. All right. So this, this is rough. This paragraph is just brutal. California already has more than half of the nation's unsheltered homeless population. Each, each night, about 114,000 Californians sleep outside or in their cars. The cost is no mystery. The state has a 700,000 median home value, and renters are among the nation's most burdened.

27.3% of tenants pay more than half of their pre-tax income in rent. That is not—you can't live that way. So they haven't built appropriately for the amount of people there. But I think that's the argument, right? Should the government be spending on that or the homeless issue? I mean, same with New York, right? I think we have 90,000 people on the streets, so it's not good. San Francisco, though, I mean, traveling there for work, it's a dire situation. New York is, and you see after this pandemic, I think there's more.

Yeah, no. I mean, obviously, we're in New York, but the stuff in San Francisco seems like an emergency. Well, it doesn't seem the right way to allocate that. And listen, as far as wiping out, some people might not like this opinion, but I feel like wealthy people have enjoyed enough breaks, like giving some money to people that like really and truly desperately need it. Like, are we really going to get upset about that?

If you wipe out the rent for people, they're going to still spend, they're going to spend money in the economy. That's not just going to a landlord. It's not like the money is lost for doing that. Like it's, it's a form of stimulus. Again, the problem is this is a one-time shot in the arm. It doesn't fix the underlying disease. Well, this is the debt forgiveness discussion you're going to have in all sorts of places,

like the student debt issues that they've talked about. Same thing. Exactly. It's not like money that you when you do debt forgiveness for student loans, you're basically making it so that people can buy a home earlier or upgrade their apartment or

spend money on furnishings or travel. The money still gets spent. It's just a question of who's the final recipient of it. But I guess the thing is, so what do you do about people that just finished paying their student loans? What do you do about the next wave of borrowers? It doesn't fix anything.

The bigger issue is, what do you do about the people that paid off their own student loan? That's what I'm saying. And then get super triggered. Yeah. Or you paid your rent, and you feel like you shouldn't have paid your rent,

and all these other people paid their rent. That's where I'd be. I'd be in the don't pay rent category. Yeah, I did the right thing and now I'm getting screwed. Now everyone's, yeah. I totally get that. Everyone's getting away with it.

So return expectations are absolutely insane. The Texas did this global investment survey. John, throw some of these charts up. So they surveyed 8,500. Listen, I'm a big anti-survey guy. I take these with a boulder of salt. But still. I love a survey.

They surveyed 8,500 investors with at least $100,000 of investable assets. Retail investors. Retail investors. Okay. And the average expected, Jeremy, listen to this, long-, real return expectations, 14.5%. 14.5%? 14.5%. For when?

Real, long-term. I didn't specify. Here we go. And this is on a year-by-year basis. So they just, the more stocks rise, the more bullish people get. Now, what do we think? React. I mean, if real after- returns on the US under five,

and I mean, the long terms were six, seven, six and a half to seven. And at above 20 PEs, which is where we're selling, it's likely below five. I mean, a little bit below five. Now, higher inflation, so maybe you get eight. So it's funny. Investors have been bullish for a long time.

And I've been on the other side of this calling for lower returns. I guess people have been like not bullish enough because we've gotten 15% a year for the last five years. But this can't continue indefinitely. John, throw the other charts. So this breaks it down by geography. So US investors are a little bit out of their minds.

Look at the bottom. Oh my God. Wait, so hold on. So everyone's got high return expectations, but these aren't, are these for people's local markets? 161%. Yes. So they surveyed investors, like just global investors and financial professionals. And the gap between financial professionals and investors is gigantic. So US professionals are expecting 6.7 real, still probably a little bit optimistic. U.S. investors, again, they surveyed 750 investors.

So is that large enough? This is wild. Maybe this is the Reddit traders who's playing with leverage and they're getting two to one leverage and they're going to get it. 17 and a half percent. So all of the professional investors in all of these countries, Italy, Mexico, Singapore, Spain. Hey, where the hell's Japan? They don't invest in equities. All of the financial professionals

in these countries have return expectations, I guess, for their own local stocks of less than 7%. You know who's on the bottom? That's interesting. Italy. Italian financial professionals

are expecting 3.8%. Canada. Where's Canada? Canadian investors, regular investors, are saying 11.2% versus U.S. saying 17.5%. Why are the Canadians so bearish on their stocks? They only have Shopify. We've got five big ones. Right.

They have oil companies, banks, and Shopify. You can do an inverse weighting tied to the lowest return expectations here, probably your highest weight. Jeremy, cook something up. You've spent like 15 years traveling the world meeting with investors. Like as a rule, you find that U.S. investors are hands down the most bullish or not necessarily? I mean I never ask the questions in this exact way. So I find skeptics – I mean we're talking with a lot of institutional investors. It depends who you talk to. And so there's skeptics

everywhere. So I think the people I'm talking to are probably that financial professionals who they're discerning. I mean, they like the U.S. They like the U.S. markets. They probably agree generally with the trend that the U.S. has they tend to be overweight. A lot of people we talk to will overweight the U.S. has, they tend to be overweight. A lot of people we talk to will overweight the U.S. for some other global markets. When you talk to Europeans or Asians and you ask them about U.S. stocks,

are they more bullish on our market than their own? And is that basically recency bias? There's always been this home country bias no matter where you live. You tend to be overweight your own market relative to its size. So that's true in Japan. It's true in Australia. It's true everywhere. But I'd say because we're so big, we're extra susceptible to that.

So a lot of the other markets will have a more global mandate in a lot of what they do. Well, these people better be prepared to be disappointed, severely disappointed. If we see 17.5% long-term returns in the stock market, that would be at 100,000 like in 10 years. In August. What percent do you think is retail doing it themselves versus finding advisors like yourselves? What do you mean? Like in terms of this, so you have the individuals and then you have the financials. Oh, these are 100% DIYers.

Right. So what percent of the investors, like the assets in the U.S., do you think are DIYers versus you as a professional? I've always heard it's a third, but I don't know where that came from. Do you have the number? No. I've always heard it's a third do-it-yourselfer, but I don't know where I heard that number from. I heard that too. I don't have any idea where I heard it from.

And then somebody told me that a lot of the people who identify as do-it-yourself investors also have either a broker or advisor. And they think that they're doing it themselves, but they're not. Or they're giving orders to somebody. Well, Amelia, how many RAs are there?

Right now? God. We have different statistics for that, but 11,000. And then. 11,000 firms. And what's the average number of households per RA? Do we have that data? Within that? Do we think it's like 200?

It's 100 per. It's 100 households per advisor. We're not going to get to the bottom of this, but let's just call it a third. Well, people are going to be disappointed then. But let's say you think it's 17.5%. And we've had 14.5% over 10 years for the S&P 500. Let's say that kept going for another five years. It's been 17% for five years, by the way.

So on the nose. Oh, so maybe that's where they're coming up with that number. So finish your thought. No, I just feel like even if you're disappointed and you don't get the number you thought and you still get higher than average returns, it's not terrible. But we were reading new normal stuff in 2011, 10 years ago, that was telling us to expect lower returns. We saw Mohamed El-Erian speak in 2012, and that guy was smooth as butter just talking about walking slowly away from risk. Yeah. It was a little early.

But in their defense, they run more bonds than stocks. And they were running the economy, which is kind of the part that gets lost. Do you guys have a house view on expected returns for U.S. stocks, bonds, et cetera? I mean, with bonds, you just take the starting yield. So that's where you take the tips yield and you got the negative 80 basis points on the 10-year tips. And I would say for equities, I wouldn't do much better than Siegel's inverse of the P-E ratio today.

So take the 22-P ratio, 1 divided by 22, gives you that slightly below five. And I think that's a pretty reasonable way of looking at the sort of five to seven year type outlook. Okay. Let's go into Soapbox. So basically, I was thinking along the same lines,

demographic change is probably underrated. Just thinking about like, I mentioned 10 million new accounts opened for the first time, like first time investors this year, another 10 million last year. So this year will probably finish even higher. You have 25 million new people in the market, give or take, let's say. They have very different attitudes about what to invest in and why than my generation, older generations. There are going to be a lot of puzzling things that go on in the markets, I feel like, over the next five, 10 years, where the answer is just going to be very simple. This is a new generation.

It's like the demography. Same thing with housing. Ben wrote about housing trends and the role that demography plays. He basically explained why demographics are a bigger force in the housing market than most other things. And he's been saying this for years. He predicted this in 2018. Yeah, a listener emailed us saying like – this is funny. This is like the fifth time we've had somebody email us saying that I'm listening – I just found you guys. I'm listening to your podcast in order. So, okay okay it's a lot of bad takes in there too yeah tons um but ben in 2018 spoke about this so kudos to ben you guys are like the simpsons you know

they product things too so i love i love i love that chart that he had showing how many 30 how many 30 somethings now so this is the 10 most common ages in America. And he got this from the US census. In 2010, the most common age in America was 50. Wow. And in 2020, it was 29. But look, it was 50 and 49 and 48 and 47, 46 in 2010. Those are in the top 10. Now it's 29, 30, 27.

I mean, this matters a lot. Move to the suburbs, you know. The question was always going to be, I mean, I was a Philly downtown person and the question was, we had our two kids. It's like, are people going to move to the suburbs? And everyone said,

no, we're going to stay in the city. We're going to stay in the city. We were a little early, like four years ago, moving to the suburbs. But I think it's the course of life. You go out to the suburbs but i think it's the course of life you go you know you go out to the suburbs amelia just moved to the suburbs of brooklyn yeah i'm in brooklyn heights now guys i'm basically in the suburbs it's like a family everyone's everyone has a family the strollers and dogs we did it we did

it at like 31 and i remember at 25, nobody was moving. Like we were up Upper East Side Manhattan. We had a huge group of friends. And people like slowly, you started to see people trickle away. And then I think 2008, the financial crisis, everybody's just like, I don't care about Broadway shows anymore. I got to get out of here. I got to go get a house. So I think that's going to be a major change is suburbanization. And the pandemic probably just sped something up that would have already happened.

On the financial crisis, right? So the people that have graduated just around when the financial crisis happened, they're finally at the point where they've accumulated enough wealth to buy houses, right? They're in their early 30s, 35, 36. They're bald. They're bald. They're bald. They're aging. They've seen it all. They live through it. They're paying people to do their laundry. They prematurely aged. Exactly. But I think you add

that in, then you add the freeing up of these high income individuals who can go anywhere, right, with virtual working. Of course there's a lack. That's another huge change. I mean, the pandemic, I think, is still the cause of this, right? But I think, to Jeremy's point, I think they were going to go anyway. They were going to go anyway, but I think it expedited.

It expedited the process. I mean, my friends, I'm 28. I actually looked to buy a house, looked in Brooklyn Heights, $1.5 million for a one-bedroom. That's a steal. It may take me a decade to buy that. Come down to Philly. I got to go.

I got to change. Philly's a good deal. Brooklyn Heights is the wrong suburb to buy in. Yeah, yeah. But it's hot everywhere. One of my friends is in the market looking, and there was a million-dollar house. They bid like $50,000 over, no contingencies.

The house went for $1.2. I mean, it's a crazy market. Any part of the country where you could do knowledge work has always been a very strong housing market in the last 10 years. But now you can do knowledge work anywhere, which I think changes things for a lot of like secondary and tertiary areas of the country. So I feel like we're going to ask these questions like what's going on. And most of the time you could just point to demographics. And I think that's going to be a really good answer for a lot of things. Absolutely. Who's going on. And most of the time you could just point to demographics. And I think that's

going to be a really good answer for a lot of things. Absolutely. Who's going next? Amelia. Yes, I'm up. Get on the soapbox. What do you got? Hello. Thanks for having me on the soapbox. So I think a big one we've touched on this Bitcoin crypto. I actually think RIA should pay less attention to all that noise and other retail investor trends and pay more attention to leverage the types of buyers that are entering the space. I mean, M&A is rampant. We break news on that every day. But I also think a huge part of it, too, is the services that you have to offer beyond investment management. I mean, a huge trend in all my meetings is advisors are trying to scale their practice to add on these layers, like we just mentioned, tax and estate planning on incorporating principles

of behavioral finance, education, making sure they're talking to their clients. I mean, they went from being a planner to basically a therapist, right, during the pandemic. So how can they scale their practice to have these services in-house?

I mean, the service model has changed. You have to have a value add. I think you have to have something different. This is a good point. Like, if you're an advisor and you're like, how do I do crypto for clients? Yeah. And then it's like, well, wait a minute.

Your clients don't really need that or they might be interested in that, but you don't even know how to give them good answers on taxes. Like, are you addressing the right issue as a business owner, as an RIA owner? That's a good point. And I think loads of RIAs are actually hiring CPAs in-house.

It's a need. And I think there's really complicated tax going on right now, too. If you don't have a CPA in-house to answer that, they're going to go somewhere else that does. We just did that this summer. We brought on an accountant. You did? Wow. See? So we have two now. Philadelphia. In Philadelphia. You just did that this summer. We brought on an accountant. Oh, you did? Wow.

See? So we have two now. Philadelphia. In Philadelphia. You're ahead of the game. For exactly that reason, we surveyed our clients and asked them

if we were willing to do tax work for them, would they be interested? And do you remember what the number was? Like 70-something? Yeah. It's like 70-something percent.

How do you not consider taxes when you're doing planning, location? There's a whole element of designing investment strategies just for tax planning. I've talked with some tax people about really being more thoughtful about even creating new strategies tied to that.

I think that's a really good point. It all ties into planning. You just put up Kits' article on this too. This is later on what I'm reading or what I read this week, but this ties into it too. It's how financial planning, it differs for young clients. So this goes into the next gen. So people think like the complicated times are with the retirees or in the baby boomers because they have more life transition events. But if you look at people

in their 20s to 40s, what do you have? We move jobs a lot, career changes, people buying houses, having a child, getting married, then maybe getting divorced, then getting remarried, right? There's so many. I'm sorry. Aggressive. That laundry. If you don't keep getting that laundry, woman, I'm sorry. All right, so to sum up, Amelia, CityWire thinks that crypto is bullshit, right?

Not the opinions of the house, the opinions of Amelia. So I have the latest City Wire with my friend Carolyn McClanahan on the cover and we love Carolyn have you guys had a crypto cover yet? because I feel like that's coming we've written about it a lot no cover

yeah digital yeah we gotta do that I feel like Tyrone is gonna be the crypto cover he's gotta be I, he's the one. Jeremy, what's up? You mentioned OnRamp before, by the way. Yeah, and let me just sort of piggyback what she was just saying, in terms of maybe they should pay less attention to the price but more attention to the planning and education

and be able to incorporate it. That's what we're trying to do. You want to see what your clients hold. It's in part a responsibility of the plan to know, are they doing stuff? And it's hard to see it today. We could report without giving advice. We don't have price targets,

but we should be able to, if this is your assets, we're delivering a financial plan, this should be part of the plan. So we invested in OnRamp also, and I had reporters immediately being like, so you guys are recommending crypto? No, but how can we do a financial plan for someone if they have, you know, $500,000 in crypto and I'm pretending it doesn't exist?

Yeah. Rather than pulling in that data, which is the purpose of OnRamp. Like there may come a time when we're actively allocating. It's not today. That may happen, but right now, the main thing I think financial planners and advisors have to do is be able to give people answers about whatever crypto they have, how it might impact their planning, how the volatility differs from the volatility of their other assets. You see it the same way?

Yeah, and they just launched something called the Academy that WisdomTree is now producing some content, putting it on the Academy. They're going to have a lot of good thought partners. And it's just an education tool so that people can get their head wrapped around all the different crypto assets, not just Bitcoin and Ether.

They have deep dives on a lot of the different assets. And just general good thought pieces on getting educated to help you help your clients. The integration, I think, is useful. We did a press release saying we're working on models with them so that we've launched a series of models that people want to understand

how to get some education. What, portfolio models that include crypto assets? Yes. Digital assets. Yeah, Bitcoin and Ether. Okay, so the RA, the future, is doing people Yeah, Bitcoin and Ether. So the RA of the future is doing people's taxes and recommending crypto. And hopefully paying...

Yeah, just get rid of that last part and you're good. Hopefully paying taxes for their clients on the crypto. Okay, Jeremy, you're up. So one of the things in the factor world is that a lot of the factors are sort of morphing. So I think one of the things going on

is momentum. For the last decade, if you were borrowing a momentum fund, you often thought of it as the FANG trade. They were what's working. And some of the big indexes, like in momentum in particular, only rebalanced twice a year. Like the MSCI index was a semi-annual. And all the academics

talk about it's like a monthly rebalance. And so it's interesting. They just all loaded up on value just recently. I don't think investors really want momentum because the ETFs are tiny. And what they're getting from M2M is like, I don't want to say a bastardized version,

but it's certainly not the academic interpretation of it. The momentum ETF bought all these value stocks right at the top. And so they're going to change twice a year. Well, we don't know if say a bastardized version, but it's certainly not the academic interpretation of it. The momentum ETF bought all these value stocks right at the top. And so it's going to change twice a year. Well, we don't know if it was the top, but it was not great timing. I kind of know. I'm on TV telling people it was the top. No, I think...

Not the top. So wait, so what are we thinking changes then as people realize that? Or it's just kind of like... Wisdom Tree doesn't have a momentum ETF, do you? What are we thinking changes then as people realize that? WisdomTree doesn't have a momentum ETF, do you? Interesting timing for that. We did launch something today actually called our growth in momentum. We actually worked with Bill O'Neill, one of the original growth investors, and has some really interesting technical analysis stuff. He was the founder of IBD and really was, 50 years ago, one of the leading growth investors.

He's got a monthly rebalancing type index that we worked with to bring to market today. All right, what's the ticker? I don't even think you're allowed. WGRO. I'm allowed to say the ticker is the rule, WGRO. You think there's too much fascination with momentum right now? Well, I think one of the things I was going on was just for the momentum, they are morphing. You want to think about it in a more updated, dynamic process.

But also, I was going to say, I came back to that. We started the conversation that we thought there was going to be more of these tremors from the Fed getting more hawkish. So I think things that are a little bit more defensive, like quality, is interesting. Quality has been the one factor that's really lagged this year. I had a chart showing of the factors. It's been a high beta rally, and quality is like the worst. And I mean, there's been like a 30 to 40 point spread between high quality and low quality stocks. And I would say when I look at traditional things that select like Warren Buffett type high return equity stocks, they're now where they would have been a growth basket before. Like today, they're in the value quadrant of Morningstar. I was going to say, what if like what we think of as high quality, what if the businesses are

just changing so much that low quality businesses, based on ROIC metrics and whatever, are the businesses of the future? And I know that sounds very toppy, and it's different this time, but what do you think? I think it's the cyclical rotation story more than anything. And then what got killed during the pandemic is what's rallying. And then you had sort of the banks, the energy. So it's unique to what's going on now. Not to get too deep into this, but was the interest rate rising, killing the growth stock narrative bullshit now that they've also 1,000 growth is at an all-time high, NASDAQ's back at an all-time high, ARK ETF is rocking again. Rates fell too, though.

Not that much. Well, we thought they were going to 2%, and now they're back under one and a half so they never wanted to right but the mentality around rates changed really quickly what do you think it's a narrative that's driving the market um and they do trade i mean you do see higher rates the growth stocks were selling off this series how much is it tied into just a complete market rotation versus like, is it really, should that 10-year rising 50 basis points actually cause this huge growth sell-off? What if-

It changes the sentiment. But what if all of the sudden you're paying 90 times sales for Zoom and Snowflake and Unity and all those names, and now we're getting like 12% earnings growth in Boeing and Caterpillar. And so we're like getting, it's more earnings growth than anything else. You are getting a lot better earnings growth in the value indexes today. I mean,

the cyclical indexes are going to show better earnings growth because they were so depressed. And they were cheap to begin with. So it's compressed multiples with earnings growth. Like that's pretty, that's a combustible fire. I always say to people, why not just own both? And they look at me with three heads. I understand you want to overweight one or the other. Okay, that makes sense, but why do we have to choose? Because you could just buy one fund and own the world in one fund and then you have nothing fun to do.

That's not fun. Well, that's true too. On that though, do you think that, I mean, these are all US companies we're talking about. Do you think quality only works in the US or does it work globally? I mean, the research tends to think quality only works in the U.S. or does it work globally? I mean, the research tends to show quality has been a global phenomenon.

I think it's a, and I think quality is cheap globally. When I've looked at some of the indexes we track for quality stocks, usually they're at a premium internationally, like call it a three, four or five multiple point premium. Today, the index we have is cheaper than the market. The U.S. one is like cheaper than value indexes, which is. Quality is cheaper than the market. The US one is cheaper than value indexes, which is— Quality is cheaper than value. Cheaper than the Russell 1000 value, despite having a profitability number that's higher than the S&P. Other than GameStop, what are some of the big names in the quality basket right now?

You'll get traditional tech companies. You'll get a Microsoft, you'll get Apple. That's like Cisco, Staples. Michael, what's your soapbox? We're kind of running late, so why don't we skip my soapbox? It wasn't interesting anyway. All right. Let's go to favorites.

I'll go first very quickly. I can't stop listening to Tim Dillon's podcast and watching his YouTube. Amelia, you're a huge fan. Josh, do you know he's coming to New York July 15th? You're going? And it's right near my birthday. Where is, so I think we should go for my birthday. Where is it? It's at, um, God, where is it?

I just looked this up. It's a comedy club? Or Caroline's? I mean, he's out of control. I listened to one of his podcasts the other day because Josh put me out there. He's out of control. You made me listen to it last night, so I listened to one of my first ones last night. So I'll just say quickly my first ones last night.

I'll just say quickly, I think he's the funniest person in America right now. I think he's almost like an anarchist, like just burning everything down. And I love it. And I'm here for it. He doesn't care. He's offending everyone. He's fearless. He doesn't apologize.

I think he's the perfect antidote to what Twitter has done to the country where nobody's allowed to say anything anymore. And what's so powerful about what he's doing is that he has his own platform. He could tone it down a notch. He could tone it down a notch and still be great. But like you can't speak to the manager. You don't like what he's saying. You can't tweet. He doesn't have a manager. You can't tweet at HBO or Netflix and say take this guy off because he's doing this all by himself.

I just – I think if you're not listening to him yet and you're easily offended, maybe don't start. But if you like to laugh and you don't get offended or triggered every five seconds, like that might be a good thing for us to put you on to. Amelia, what's yours? Duncan, you a Tim Dillon fan? I'm actually not too familiar. Other than Josh talking about him, I've watched some of his social media content, that kind of stuff.

Dude, like five minutes in, you're going to be like, I can't believe, did he really just say that? But he tackles this. I mean, the one episode, I only listened to one episode. I am not an expert. Which one? I listened to, I think, the last one where he covered the Israeli-Palestinian conflict.

Yeah, he fixed that. He tackled some serious issues. He resolved that. He was also on the Joe Rogan show with Alex Jones, which was interesting. Yeah. Well, so he's like, he's not just saying things to shock people. He's not outrageous for no reason.

He's trying to make, I think, intelligent points. But he makes you laugh. Amelia, what do you got? Michael, I'm not just saying this because I'm on this podcast with you and you're right in front of me, but seriously your piece Blink and the Irrelevant Investor still is moving me this week.

I think I sent it to not only all my colleagues but all my friends because I think it's such a good reminder for all of us and it was so beautiful and thank you for sharing the story of your mother. Thank you for sending me a nice note. I appreciate that. Of course. So first of all, Michael can write.

You're an incredible writer. And I think he's self-deprecating. I don't think he thinks of himself as a writer. I think he thinks of himself as somebody who's clever and can write a 200-word blog post. But Michael can write, it turns out. Well, my favorite quote was, I'm successful because I don't yearn for more. And I think, let's just let that sit. Because that is, I think, a motto we should

all live by. In every aspect of your life, not even work, right? Personally. You came with some more. I came with a lot, guys. I'm sorry. I'm getting excited by what's been going on this week. So I'm a big fan of Patrick O'Shaughnessy and his Invest Like the Best podcast. So I listened to his episode with Howard Marks, which was really interesting.

I mean, they touched on crypto, value, everything. A lot of what we discussed today is Bitcoin, the new gold, all of it. So that was a really awesome episode. And then Kitsis, which we put up earlier. And then I'm a big The Daily listener. Wait, what about Kitsis? Financial planning for young clients. For young clients, yeah.

I love his stuff. I mean, it's super short. Wait, what? I love Kitsis. Super short? Super short. Short compared to the Torah. Wait, what's short about it?

This one. This one was short. This one was short. This one was short, guys. Comparatively, not to the others, but it was a great synopsis of where we should focus in the industry today. He always has very thought-provoking pieces. Well, I think the point that he's making is that it's not easy to bill a young person on assets because they don't have any, but they have as great a financial advice need as somebody that does have a lot of assets. So advisors are going to have to think about how to get paid for working with this client before they –

Michael Wessler. It was a well-done piece. Yeah. It was a well-done piece. He reads probably the same as you, Josh. I mean he is – He's like 50 times smarter than me. But he's –

A hundred. But – But you guys both read so much. But I do read a lot. But Michael is Michael is required reading, I think, for for our industry. Yeah. No, I recommend him to most RAs. That's another reason why.

Jeremy, mRNA vaccines. I read this thing this morning on the way here. Holy cow. It's incredible what's happening. And so you hear of this convergence of technologies and how the pandemic sped everything up and sort of sped it up in the cloud. It sped up and you hear like how everything's coming together. It's like artificial intelligence developments, computing power coming together. And we're about to, I think, have this huge transformation in all sorts of biology based fields.

And these vaccines, I mean, there's now infrastructure. When you learn about what's underlying these vaccines, the mRNAs won't change. They just sort of change the programming. And so they now have this infrastructure to treat all sorts of new things. And some of the key researchers are from University of Pennsylvania, so I also love that they're in my backyard. And it's, you know, they talk about there was like 30 things that they can attack, and they started with five of them.

AIDS, cancer, like all kinds of – Flu, malaria. Flu. So I thought this was crazy, just the sheer amount of money that's been thrown at mRNA research since the pandemic started and how that's like jumpstarting this whole new way to create vaccines and get these things like done. One guy's talking about, you could come up with a vaccine in the morning and have it formulated by the

afternoon. Two days it took them for COVID. I'm only, I'm only sort of half kidding, but if we start to see medical advances, like really big leaps, how long before people are like, listen-

The pandemic was a good thing. No, a bad thing because people are going to be living too long. We're not meant to live that long. That's what you're worried about. We are going to be living longer. The same way that we jump from like,

oh, we're worried, like we skip worrying about good growth. We just go to overheating. It might be the same thing with this stuff. It's going to happen. It's like people aren't supposed

to live to 130. We're overpopulating the planet. We're resource depleted as is. That was my second article, was that we are no longer going to be resource depleted on food. The same technology that's advancing in biology is going to let us grow food in a way that is like 90% less greenhouse gas.

And you're going to actually, it's not going to be fake meat. It's actually lab-grown meat. It's unbelievable. Which to me is still fake meat. It's going to actually be real. I love the idea of lab-grown meat. It's going to be unbelievable. Josh, you and I, we're not going to eat that.

This article said there are 1.5 billion cows on earth. And they're saying that they could take one perfect cow, get its cells, and start making steaks. And they're doing it. I mean, there's three companies today that are already doing it. There's chicken in Singapore that's being sold. Um, there's, they're talking about it. China has grown bats in a lab for us to eat. Yeah. Listen, listen, you had me, you had, you had me at the vaccines. You lost me at the lab-grown meat. But it's going to be a real thing. People should read this article.

The mRNA vaccine revolution is just beginning. This is at Wired. And it's – honestly, it's like one of the most bullish things that I've read. Like just reasons to be upbeat and bullish and positive. How many things they think they're going to be able to attack now that are killing people every year and how quick. Like most of the time when you read about medical breakthroughs, they're like decades away. This seems like it's today.

And the pandemic obviously sped up all of it. So I thought this was a really cool piece. I'm still bearish. Did you bring a favorite this week? Well, what do you mean this week? What did I do last week? Oh, no, no. I was just asking if you brought one. I mean, I reserve my good stuff for the animal spirits.

Fair. I can appreciate that. But, you know, I've been enjoying the NBA playoffs. I mean. Unbelievable. My God. All your Sixers got wiped out. I'm not sorry to see Eagles fans losing.

Trae Young is incredible. Just incredible. Just incredible. So annoying. That's been great. I think this series, Trey Young against Giannis, that we're going to get to watch now. We have one game down. But I feel like this could be way better than watching LeBron and Curry again.

So I'm pretty bullish on the whole thing. Do you have a prediction for the finals? I do think, nah. I guess, well, Suns are going to win. I mean, they're up 2-0. And Hawks are looking good. I don't know. I'd say Suns, Bucks, and Suns win. The Bucks bench is really, really shitty.

I don't know how they could slow them down. So we'll see. But Bogdanovich can't really move much either, and that's a problem. All right. So we're going to keep watching that. So we're going to wrap up here. We don't have an official way to wrap up other than to say, did everybody have fun today?

Too much fun. We did a lot of reading for this too. This was awesome. We want to send everybody to make sure they check out our other podcast, The Gold Mine. Check out Animal Spirits which features Mike and Ben Carlson and thanks for tuning in today

look for us every friday morning and hit the youtube page if you want to see live clips uh of us making the show you could find us at youtube.com backslash rwm thanks for uh thanks for listening we'll see you guys next week all All right, you guys ready to do it for real now? Should we turn on the equipment? Let's do it. And we got, we got all the,

we got all the butterflies out. Why are you giggling? Thanks guys. you