The Compound and Friends - The Bogle Effect

Episode Date: April 8, 2022

On episode 41 of The Compound & Friends, Michael Batnick, Eric Balchunas and Downtown Josh Brown discuss: direct indexing, Eric's new book on Jack Bogle and Vanguard, active managers and ESG, stock splits, and much more! This episode is sponsored by KraneShares. To learn more about KraneShares' suite of China-focused and climate themed ETFs, visit: kraneshares.com/?adsource=wealthcast Check out the latest in financial blogger fashion at: https://www.idontshop.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/disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

You wait, I need my hat. I can't wear these- I can't wear this without a hat. Here, wait, wait, wait, stop. Nah, nah, I'm not doing that. I'm not doing that. I'm definitely not doing that. Yeah. And no computer, right? What about- what about this one? Oh, now it matters? What about that one?

What about this one? That's dope. Put that on. There you go, buddy. Look at this. Oh! So exciting. Yeah. One for me? Yeah.

Alright, I will let you know that I- You're in this book, too. Am I? Yeah, you- I think I have like five Ritholtzers in here. I bought- I did buy a copy. I might have set the record, by the way, for Ritholtzers in a book. What's the record? What's the record?

Dude, congrats. Congrats on probably my book. Josh, Barry, you. Nick. Nick is not in it. Blair. Anthony. Tony.

Okay. Tony and who else? Ben. Oh, you got Tony Isola in here? Yeah. All right. Now definitely. He's one of the people in the end that I say is carrying the torch.

Okay. Is this a Wiley production? Who did this? Anthony's a good interviewer. He goes off. I was going to say – He's underrated, I think. Tell Eric about Tony's first blog.

Oh, dude. So we hired Tony right after we launched the firm, like two years after. And he was one of the first people we hired that was already an advisor. And it's him and his wife. And Tony's like, we make a deal on the spot because we love him immediately. And he's like, my blog, what about my blog? I'm like, you get to keep it. He's like, no, but I want to keep doing it for the firm.

I'm like, yeah, of it he's like no but i want to keep doing it for the firm i'm like yeah of course let's take a look and his blog is called malice for all just ready to murder people blood splatter across his logo i'm not even making this up and the theme of the blog is i'm gonna kill these people that are ripping you off like i'm gonna i'm gonna end them so i'm like all right here's the deal we're gonna bring your blog on but we're gonna change the name maybe calm down a little and maybe tone it down a little bit but it was like um about annuity sales people yeah that were pillaging faculty lounges all over america he's like one of those teachers that goes in – or a cop that decides to purposely do central – south-central Los Angeles. He's going to the worst possible place to do what he does. He's like Joe Clark.

He's Joe Clark. That's it. Right. So he – I kind of get his like – Who's Joe Clark? Lean on me. Lean on me guy.

The principal that went into the worst school in Newark. You guys are Xers. That's true. Xers are honestly, the more time goes by, the more I'm convinced. The Xer is the pinnacle of society. Wait, I saw a chart yesterday. I can't remember who did it. We got DiCaprio.

We got Tiger Woods, Brady. That's not bad. We invented rap music. Yeah. Like what? Indie, grunge, Kirkwood. We have all the good stuff. How about we grew up outside?

One of my favorite memes is like – Do you have Nick Cage? Is Nick Cage an Xer? He might be a little bit older. He's not a boomer. It doesn't mean like don't mess with my generation. We woke up in the morning, went outside, built a tent, walked in an abandoned building, jumped over train tracks. No.

So I saw a chart yesterday showing like population birth between like, and it just completely missed 64 to 81. Yeah, they don't even include it. And somebody tweeted, I guess there are no babies in 64 to 81. Whenever they do anything that's generational in financial articles, it's always boomers, millennials

and now Z. They don't even mention us. There's an ETF for Gen Z, an ETF for millennials. But we like it that what's cool is that we like it. Leave us out of mention us. There's an ETF for Gen Z, an ETF for millennials. But we like it that way. What's cool is that we like it. Like, leave us out of your bullshit. We hate you both. Did you ever see the meme of the millennial

and the boomer yelling at each other and the Gen Xer feeling the Gen Z's Halloween bucket with vodka? It's so perfect. How old are Xer's parents? Like, what's that generation?

Are your parents boomers? Old boomers. Silent generation. Old boomers. Yeah. No. I'm definitely, my dad is definitely a boomer. Wait, so my dad.

He grew up on like Bob Dylan and all that stuff. Who are the, yeah, the millennials parents are the first boomers. What year was your dad born? Because my dad's 59. Okay, so my dad's 53. Yeah. He must have had you a little, like, how old was he? My dad was 22 or 3 when he had me.

That's like... I was a third. That's probably why. So my dad was a little bit older. They got divorced. Yeah, same. I ruined everything. Sorry, dad and mom.

Nick Cage, 1964 is when he was born. He's right on the cusp. He's on the cusp. He's got elements of both. He really does. He doesn't have boomer energy. He's a weirdo. that's it's all he's just weird it's all x no the quintessential xers are like winona rider um kurt cobain oh oh oh um uh like like marrow's place uh a lot of experts like win I think, are reinventing themselves lately.

Like they kind of shifted out of that, you know, she was in Reality Bites and all that stuff. Alyssa Milano. Now she's the mom. Yeah. Alyssa Milano and Neve Campbell. What's that show that they were on? Something Five? Party of Five.

No, Melrose. But I'm saying like the boomers that most. No, those are exers. I meant the exers that are most emblematic. When you ask an exer, like, who is one of you? I feel like it's like a very small list that we all agree on. Eddie Vedder? No, like, yeah, of course.

He's one of us, but I feel like Winona is like the top of the pinnacle. Yeah. The top of the chart. Also, she had that kind of like... She was in every movie. She had The Rise, The Wilderness, and then the sort of adulthood. And, she had that kind of like... She was in every movie. She had The Rise, The Wilderness, and then The Sort of Adulthood. And then she had Alien Resurrection.

Most... And then Kurt, and then like Tupac. They all died. All the rock stars of your age died. Only Eddie Vedder is alive. Did you ever process that, that we lost every rock star? Well, if you go back and listen, especially Alice in Chains.

Layne Stanley's dead. Lyrics are hardcore. I mean, they are real. Compared to some of the shit coming out now. Because they were heroin guys. I know. They had a lot going on. They weren't.

But they were creative, too. So. And they were all, you know, I have a theory on why it came from Seattle. Because the weather sucks. I have this theory on, like, there's a correlation between bad weather. It's depressing. Yeah. So they just hung inside and wrote music and did drugs and whatever.

And that's why it's – also I think our generation was very creative. We didn't have cell phones. We couldn't like text, so we had to just do stuff. So I think that's a combination that produced a lot of good art. Dude, Chris Cornell is dead. Scott Weiland is dead. Yes. Chris Cornell is dead.

The guy from Sublime that nobody knows his name. Yeah. Taylor. The guy from Blind Melon is dead. Chris Cornell is dead. The guy from Sublime that nobody knows his name. Yeah. Taylor. The guy from Blind Melon is dead. Who else is dead? Everyone. Taylor Hawkins just died. Taylor Hawkins just died.

Not a lead singer, though. We're being very specific. Definitely counts. Definitely counts. Yeah. We're missing what Biggie. What? Biggie Tupac?

No, no, no, no. We're missing a big one from that era who is dead. Cornell? It's easier to do who's alive. Well, Farley was kind of a rock star. Only Billy Corgan and Eddie Vedder are alive. Everyone else is dead. That's pretty much it.

Green Day. They're not dead. They're a little bit later. They're a little later. They're not grunge. They're not the same. All the grunge guys are dead. But wait a minute.

Green Day's album came out the same year. If he's not dead, I would not sell him life insurance right now. It's terrible. What do I do from Spin Doctors? Is he alive?

Come on, stop it. What? We're not claiming Spin Doctors. That's all you. That's not what's happening. What about Nickelback? That's all me.

Come on. All right, now we're done. Hey, did you ever see the movie Multiplicity? With Michael Keaton. Yeah, it's underrated, right? Every copy gets worse and worse. Nickelback, to me, is the third or fourth level copy of Pearl Jam.

Too easy. Nickelback. Wait, they're after Creed? Pearl Jam, Stone Dome Pilots. Creed? Creed, Nickelback. Oh, that's savage. Yeah.

Nickelback's like the band version of the guy from Multiplicity who tried to put pizza in his wallet. Do you know that Mark Zuckerberg made a Nickelback joke? And there was a backlash led by Avril Lavigne, who was married to the Nickelback singer. She is? She did this whole thing like, how dare you use my husband and his band as a punchline, blah, blah, blah. And then she divorced him like six months later. Can we just say, speaking of Nickelback, that's the best analogy I've ever heard.

Blaming ETFs. What's the analogy? Oh, blaming ETFs for a bubble in the stock market is like blaming MP3s for Nickelback. Oh my God. It's so good. Think about the generation of bands Michael grew up with. It's like some of the worst shit you can think of. What are you talking about?

Live? It's like- Seal? It's like Sum 41. It's like... Sum 41. No, I was like 15 when that happened. Did you just say seal? Yeah, I said seal. Kiss from a Rose?

Kiss from a Rose was huge. I was like nine years old. It's not a band. I'm kidding. All right. Big song. All right. Eric, thanks for coming.

Wait a minute. I grew up on Nirvana. That was the early 90s. All right. I'm trying to... How old were you in like 93? We have to start the pot at a certain point. We have to start the pot at a certain point.

But I had all the siblings. I was listening. Yeah, yeah, totally. 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. Today's episode of The Compound and Friends is brought to you by Craneshares, who is known primarily for their China internet ETF, KWeb. But did you know, Duncan, that they also have a suite of carbon allowances ETFs? Ben and I actually had them on a podcast a couple of months ago talking about the Crane Shares global carbon strategy. So they're doing all sorts of interesting things. They've got some fixed income, some global thematic above and beyond just the China internet exposure. They've got a lot of stuff going on. If you are interested in learning more about Crane Shares, visit them

at craneshares.com. That's with a K, crraneshare.com There he's back. John is back. Welcome back. Good to have you. Oh shit, I didn't know you were on the cover. I'm on the cover of this book. Duncan, how are you, my friend? I'm good. That's all you got for me? I mean, yeah, I'm ready to go.

Nicole, say hi into the mic. Hi everybody. Alright, gang. All right. Gang's all here. And is this your second appearance with us, Eric? It is. Okay. You guys were generous enough to have me back.

That's how lazy I was. I didn't write down the bio that I wanted to do for you. But we're going to let you fill that in. You are the host of one of the best podcasts in finance. It's called Trillions, put out by Bloomberg. How many years have you been doing that now? Four or five. Okay.

Same co-host, right? Yeah. Joel Weber, the editor of Businessweek. You guys do a great job with that. And are you putting something out every week? Every other week. Okay. Do you ever take a break?

No. Okay. It's exhausting, right? Well, also it's sponsored. So they have a contract. You need to pump out 52 episodes. So the producer's hardcore about it. So if you guys were like,

we don't feel like it this week, they would just find two more people coming? Yeah, and occasionally I have an idea for one in a week between the two weeks, and they're like, no. So it's both, just stick to the 52. No spontaneous pods. All right.

Shout out to Trillions. And you pop up on Bloomberg bylines, you writing, and you're on Bloomberg TV once in a while. Yeah, well, they reincarnated or resurrected a show that I co-hosted with Scarlet Fu called ETF IQ, which is on every- Takes me right back to my childhood. They resurrected it.

Did anyone know it left? No. Okay. Yeah, you're right. It's true. Well, no, no. I will say. It's like we brought friends back.

Yeah. Well, listen, it's important to me. It's like we brought friends back. Yeah. Well, listen. It's important to me. Shout out to Scarlet Folk. Yeah. So there was a couple people who tweeted at me after the show was off for a couple weeks. They're like, wait, is your show on? It was like five people.

You got canceled. No, I said that all the half an hour shows on Bloomberg went dark because all the producers had to work from home and they could only do like the regular show. And the specialty shows were all shut down. So over the past couple months, they've been re-rebirthing all these shows. And so now it's Matt Miller, Katie Greifeld and myself doing a show on ETFs every Monday at 1 p.m. OK, we'll look we'll look for that. We'll look for that. How's Matt Miller doing?

He's good. He's he's really fun to work with. He's energetic and good at improvising. Is he bald? Yeah. He's a fellow bald. Yeah. Do you know that he had a late night show on bald? Yeah. He's a fellow bald. Yeah. Do you know that he had a late night show on Bloomberg?

Yeah, I remember it. He used to talk Grateful Dead lyrics and stuff. Before I was doing CNBC, that was like one of the only shows that booked me. And it would be like Matt Miller, me, and like another guest. It could be anybody. It could be another Bloomberg reporter

or it could be like a chief strategist from Johnny Montgomery or something. And he was nuts. Like he would spend like 15 minutes talking about motorcycles and I'm like, are you sure this is on the air? Like people are going to watch this? Yeah, it was like 8 p.m. or something like that. Well, that's late night for my thing. Yeah, it's like late night.

Yeah. Honestly, I think the network needs a little of that. I think that show – I remember watching it and just – it was very laid back. No, he had a great – he was like Craig Kilbourne. Yeah. He had a great personality. They should have made that – they should have kept that going. They need more of that on financial television.

I think they need different kinds of programming to just accent this sort of like, I don't know, like Tesla fed repeat. Right. Because that never gets old. Today's show, sponsored by Crane Share. Do I have that right? Okay, so we're going to talk about that a little bit. That's a big ETF story right now. That might have been the story of 2021.

I think it's a big, I think it's a- Top 10. One of, one of. Top 10. All right, but you are an ETF. That was a buy the dip. No. Buy the dip with reckless-

They kept buying it. I know. We've never seen anything like that. It was like that scene from Wolf of Wall Street. We're not leaving. They were not going to leave. They were like, this is going to go up. The fund fell 56% in 2021 and the flow just –

Took in $8 billion. There has never been an ETF that's had price action versus inflows like that ever. I would say. Not to that degree. And also, it's such a specific fund. China Internet, it's now the biggest China ETF. Yeah. Bigger than the broad ones.

Well, it makes sense that that's more popular than, I don't know, China Utility Fund. I don't think anyone's waking up in the morning and saying they got to be into that. Well, I'm saying it's bigger than like MSCI China ETF. I do believe that that would be true. So before we do anything, and we're going to get to this later, but I do want to mention that you are the author of a forthcoming book for the people that turn this show off within like a few minutes. I just want to make sure we get to this. So this is called The Bogle Effect. And how long have you been working on this? About two and a half years. But there's some

stuff in there that has just been research I've been building for five, six years. Yeah. I think you're the right guy to have written this too, because you've got a front row seat for just the ETF industry exploding into trillions in assets and how influential Bogle's ethos, is that the right way to put it? Like his, I don't know, he wasn't a huge ETF fan even. No. But I think he had a big influence on the ETF industry regardless. Yeah. One of the reasons that I wrote it is I started to make a lot of connections between what he did in the 70s, setting up a mutually owned fund company and things that happened today that you don't really think are tied to him. For example, with ETFs, when the first ETF was going to be created by Nate Most and Steve Bloom of Amex. They went to Bogle and they said, why don't we trade the Vanguard 500?

Bogle's like, get the hell out of here. Get out of my office. I hate trading. But you're a nice guy. Here's some tips on the design. I think you could use some help on that. And they went up and sold it to State Street and the rest is history. But when they priced it, the expense ratio, they priced it the same as the Vanguard 500 index fund, which was 20 basis points.

There is no – it's my theory, and I feel pretty strongly about this. No Vanguard, maybe that happens, but it's 80. And if it's 80, it could be used as a niche trading tool, but it does not sweep the country. So even – You don't think it would have gotten down to being a cheap product eventually? I don't think so. There's no incentive for anyone to do it, right? Almost. Wall Street asset managers,

they're incentivized to try to get the most from the client. He's just an anomaly. And that's why now a lot of the industry is governed by Vanguard's mutual interest structure. So the reason the ETF inherently began as a cheap way to get market exposure is because Bogle took a lunch with the guys that launched the first ETF. Yeah. And the fact that he just had had the Vanguard 500 index fund was launched. And by that point, it got whittled down to 20 basis points. I think it

started at like 50. But that mutual ownership structure keeps lowering the fee every year. So it was at 20 when Nate Most launched his ETF. And to price it at 20, that's a good start for that industry. Because that sort of sets the tone that these things are supposed to be cheap. Had it been 80- But it didn't have to be that way. It didn't have to be that way. Because Nate Most and Steve Blum, honestly- Right. What if he pitched the idea to Ron Barron first? It probably wouldn't have been 20 basis points.

Yeah, probably 150. And you know what? They would have gotten away with it because they wanted to have a trading tool. And you know from ETFs that are trading tools like the leverage ones, they're 95 basis points. Nobody cares because you trade it. But by making it 20, it really, I think, opened the door and inspired when Barclays got ETFs that, hey, this could be a retail product. And so again, that influence is major. So I premise that ETF industry would probably have 4% or 5% of the assets it has today if there was no Bogle and mutual ownership structure. So a lot of the book really comes back to the fact that indexing is – there is no such thing as passive. Like the S&P is run by a human committee. It's just large caps.

Everything is active really. But what's good about indexing, what people love is because it's cheap. And so my premise in the book is that really, it's low cost. That is the thing, not necessarily indexing. It's just that happens to be indexing was one of the things that he made low cost. Well, would you say low cost and low turnover? Yes, you got it. And this brings up the main thing. The committee is not picking new stocks every week. That's where it's different than an active fund. You're right. But you are making a large cap bet.

You have no small caps in there. You probably have a little tilt towards growth. But the S&P is great. Bogle liked it, although he preferred the total market at the end of the day. But I think the main theme of the book, and I almost called it this title, was addition by subtraction. I feel like that's generally his life's work was taking what you were getting and then start to take stuff out of it. Let's take a little expense ratio. Let's take some trading out, turnover, brokers, this, that, and the other.

And then you're left with basically the whole market with no friction. You know what he wasn't really taking out of it though or what Vanguard doesn't take out of it? The marketing spend. Like that part stays. It's just that there's no 12B1 fees. They're not like charging the shareholders to help them do more marketing, which is a very peculiar thing about the traditional 40-act fund. It is. And I think that was one of their big sins and why they got so disrupted.

The 12B1 fee, the promise was, hey, we're going to take your money and market the fund. And that will lower the cost. And we'll get big and then we'll lower your fee. But they never did. They never did. So I have a whole chapter basically looking at why active mutual funds were so disruptible. I think if they had passed on a little of the economies of scale, I don't think they would have been as easy to disrupt by Vanguard and index funds. But there was just too much money.

I know. Nobody does that voluntarily. I admit in there. I'm like, look, if I had one of these companies, I would sponsor a sports stadium. I would hire new people. I'd get a cool new office i'd buy a third home because i'm i'm just that's i'm i admit it but that's why the book's on this guy because he was weird you sir are no jackbo no not at all i'm weak and i would take i would just let's just establish that one more thing aside from just the index one which which is obviously revolutionary, is like his whole ethos of stay the course. Yeah. So there's a section in there about the 60s. He went into the 60s at

Wellington. He kind of sold his soul out to this growth manager. The go-go years. The go-go years. And when the 60s crashed into the 70s, he had basically, and I think you had it in your big mistakes book, he had made Wellington, which was supposed to be prudent and balanced, pretty much an equity fund. And it went down the same as the market it provided no protection like it did in the night at 29 crash and he i think really that tattooed in his brain forever and at that point he was like i'm never going to sell donuts again and so if you look at his speeches whether it's in the 80s or the 90s yeah like like a sugar sugar yeah the book, he compares – the reason he went and merged with those growth managers was that he said, I felt like I was selling bagels, but everybody wanted donuts. He felt he had to.

By the way, those investors were like the Jerry Tsai was the Cathie Wood of his time. Absolutely. Yeah, there's a lot of parallels. That cycle will never stop repeating itself in some way, shape, or form. But that's what makes The State of the Course also something I think he deserves credit for because the speeches – there's a book called Character Counts, which he wrote, which is all the speeches in the 80s and 90s. It's kind of cool hearing him give a speech in like 86, and I'm thinking, well, I'm basically trying to collect a Don Mattingly rookie card. This is where the movies that are popular. And the speech sounds exactly like he would say it in like four years ago. So buy and hold comes from him.

Totally. And he just – I think the 60s were like I'm never, ever going to take the bait again no matter how tempting it is. We're just going to stick to this premise and lock into it. And that's hard to do given how seductive some of these cycles are. But I like how he had to personally blow himself up doing it the wrong way to arrive at that message. And that's so important for investors to hear. These people who are on the Mount Rushmore, they screwed things. I mean, Michael wrote a whole book about this. They screwed up and that's why they figured out the right way to do this. So it's okay if you blow up your first or second portfolio iteration. You can learn from

your mistakes and look who else had to pretty much everybody else who matters. Also a very underrated communicator. His books were good. Yeah. I have a whole review of some of the books in the back and I ranked them. And as, as he got older, he got looser and a little more savage, but he, he was really a good writer. The last few years were, I don't give a fuck, Jack.

Fire and brimstone. Like Vanguard would spend like $30 million promoting their emerging markets ETF and Bogle would just be like, don't buy it. Yeah, so it's funny you noticed that because – Don't buy emerging markets or ETFs for that matter. Next question. I found that fascinating because the first time I interviewed him, the first time I walked in, he goes, did you see the, the FT article? And it was about him trashing ETFs. And he goes, that got me into a lot of trouble around here. They don't even talk to me anymore. They talk

to the media and he's, he just, I could tell there was this pretty big riff between him and he's right on campus. They're like a hundred yards away. And I just, that was the first time I got exposed to this. But then as I started researching his books, talking to him and re-listening to my interviews, I realized this guy trailblazed so many things, smart beta, quantitative investing, at least democratizing it, ETFs, international, Vanguard rules in all these areas. And he would just dump on this stuff like all the time. And the only, and he really, he got this stuff like all the time and the only and he really the he got to the point where he was like anything that wasn't the total market index fund garbage was garbage dude you know how funny that is like conceptually you picture like ben and jerry's

but like jerry is sitting there like like trashing ice cream yeah or anything that's not chocolate and vanilla yeah and they have 88 flavors. Cookie dough is garbage. He's like, what is this with Jimmy Fallon on the pint? What are we doing here? This garbage. Like it's, it's, it's amazing that he would just be off the reservation all the time.

But to Vanguard's credit, they were, I mean, they were okay with the choice that we're going to fire him. But to Vanguard's credit, they, they weathered thated that push and pull and let him continue to be vocal and not that he could have stopped them. Before we get to our first official topic, I just saw an article. This is from Bloomberg. It was syndicated by an advisor hub. Long-only mutual funds trailed their benchmarks on average by a full percentage point last month, the worst performance since 2002. And you've made this point that people like bash index funds or they're responsible. And Bogle makes this point over and

over. Active managers set the benchmark, right? They are the ones that are determining how much money is going into Apple and Amazon and Facebook and indexes are free riding on that. So how is it in a month, and I don't have the numbers in front of me, like where a lot of these tech stocks underperformed last month that the active managers, that wasn't their time to shine. Good question. And on my guess, just – I haven't looked at that. But my guess is that they tilted into some of those high-growth FANG names a little too much because sort of like the way a bond manager might tilt into high yield. We're doing this later, and the answer is oil, not tech.

Oh, they didn't have oil. They didn't have oil. They didn't have oil because that's out of style with millennials. But oil is so tiny. Oh, they didn't have oil. They didn't have oil. They didn't have oil. That's almost out of style with millennials. Oil is so tiny. That can't even move the benchmark. Yeah, but when oil goes up 40% in a quarter, it does affect your- My guess is, let's say the S&P was 25% tech, 2% oil.

What were they, like zero and maybe 30? Yeah. Something like that. That's like the ESG fund. It does matter. We're like ESG fund. It does matter. We're going to do that later. This week, the big story was

direct indexing at Fidelity and Schwab. And my take on this, look, they have to do it because this is where the puck is going. Vanguard did it too.

Vanguard did it too. So like Vanguard, Fidelity, Schwab, God bless all three. We're clients of all of them. We're fans of all of them. We're fans of all of them. But they are engaged in like this never-ending Me Too competition on a very big scale. If one of them does something, the other two have to have an answer.

Yeah. And, you know, you never know which one will do it first. You just know the other two will be right behind. You know, I know we did direct indexing last time, and I think we kind of covered it all. Let's run it back. Yeah, we're just going to play that. You want to go smoke a cigarette or something? No, I don't know if you want me to like pounce on the direct indexing thing or –

Well, what do you – Because I have another point about your – the big three and stuff. Yeah. Just a point in the book which I just want to highlight because I didn't know – He's not going to stop at this book. I know. Well, it speaks to the idea that all these firms are in competition now and it's like who can be cheaper? But this was his dream scenario.

And he had this quote in one of his books where I was like, oh, I can't believe someone would say this. He's like, I'll know that the Vanguard mission is complete when we start seeing our market share erode. Yeah. And I was like, that's crazy. I mean, just think about that. Like who would ever say that but i think that's perfect scenario from his point of view now whether vanguard is more in the competitive like oh we're going to get schwab i don't know but i think bogle wanted to see

everything just go down you could throw black rock in there actually it's the four of them totally uh all right so here here's what we got schwab launched direct indexing what are they calling it they're calling it personalized Personalized indexing. Personalized indexing, which is a little bit of an oxymoron. It's either personal or it's an index. That is essentially what everybody's doing now. We're proponents of direct indexing or custom indexing. Their version on their platform is going to be a minimum of $100,000.

Most of them start at $250,000. So that's, I guess, an improvement in terms of how many people could use it. Fidelity is a minimum of $5,000, which I'm not at all surprised by. What's your take on just the way they've entered this market? Are they too late?

Is it just beginning? Do they have the right offering for the moment? So you're going to mock me, but I have a chapter in the book. I know, I know. Unbelievable. Good for you. I hope you sell a billion copies. I'm not going to mock you. No, no, no.

So, the chapter is called The Fall and Rise of Active. Okay. So, that legacy closet indexing active, I I think is slowly going to just go away. Very slowly. Or get small. Very slowly, but it will. There's just no flows there anymore.

But different ways are spouting up. Direct indexing to me is a new face of active because when you do these picking and choosing, you're now active. You're just doing it on your own sort of premise, I guess. It's algorithmically active. Yes, but you're still – And you're now active. You're just doing it on your own sort of premise, I guess. It's algorithmically active. Yes, but you're still- And it's personal active. Yeah, but you're still veering away from a benchmark and it charges a little more. It's like 40 basis points. The Fidelity and the Schwab, I think, are both 40.

The Bogleheads hate this for some reason. Why do they hate it? I don't necessarily hate it. If you want that portfolio, fine. I think what they would say is, well, let's say you start being active, and then over 50 years, that 40 bips plus maybe some active mistakes you make by trailing the S&P. Who gives a shit? Who could add up to a few hundred grand? And what if you end up ahead? Yeah, it's possible. I just think it's a new form of active. And I think Fidelity would much rather you do direct indexing than buy their zero-fee index fund. Obviously, costs matter.

But what about if the fact that you get like personal satisfaction out of this and it's worth the $40,000? Totally. That's worth something. And even in the Robinhood crowd, I have a little part in there about ROE, return on entertainment. It's fine. Yeah. I'm not – I'm just trying to put – in the book, I have both sides. I have Nate Geraci saying this isn't great and I have Michael Kitsis who loves it.

I'm like – What is Nate's argument against it? Because I have a lot of respect for his point of view. Yeah, just that it tries to reverse a bunch of trends at once and I kind of see that cheap, passive and – So it's a little bit more expensive. Cheap. It's a little more active. Passive and simple.

Yeah. And it's a little bit less simple. But it doesn't have to be that complicated. What if you just say, you know what? I really hate Wells Fargo, for example. I don't want to own Wells Fargo. I don't think that people are going to start trading their personal index. Here's Schwab's quote. Each investor is different, and we are now able to leverage our significant scale, deep portfolio management expertise, and commitment to innovation to expand access to

personalized solutions that will enable them to invest in ways that meet their distinct goals. That's the CEO of Schwab Asset Management. Meaning, the active component of it doesn't have to be about, we think we're smarter than the market. There are people who want an index, but they have different goals than someone else who wants an index. So the way they personalize it might be to add more risk or take less risk. You also can't buy the S&P 500 ex-Facebook. True. And by the way, if you have a portfolio of five ETFs, that's a direct indexing in a way.

You basically have five ETFs. Those are all active choices. So I think if you're – again, if you're a Bogle-esque Puritan and you're veering away from the total market, which they view as the best frictionless way – Oh, he would hate this shit. Yeah, I would hate it. Yeah, he wouldn't. I don't think he'd like it. He's rolling in his grave right now just hearing us talk about it.

Well, that's one of many things. I mean – What about – By the way, thank – we have a little part in there. I asked Jason Zweig. I'm like, Jason Zweig, what if he was alive for the Robin Hood thing? He was like – Oh, my God.

It would have killed him. It would have killed him. It would have killed him. That would have killed him. His head would have exploded. Oh my god. What about taxless harvesting we haven't spoken about? Like that's a thing. That matters.

That – Surely – and Bogle, heavy into taxes in his books. He brought that in a lot. He considered that something you really need to work. That's why – he used that to weaponize against active. He thought they were not good with the taxes. But I think he might like that. I just think, again, Bogle I found over the course of the book, especially international, like everybody who – even his closest friends disagreed with him there.

They liked international and ETF. So he was just so pure that he was really a man alone in that everything outside of the direct and total market. But he also was willing to make exceptions in his own life where it made sense. Totally. His son ran a hedge fund and an active fund and he invested in both. And he said, family's family.

Oh, he had a great line in his book. I remember quoting. I can't remember what he said. Life is messy, he basically said. Yeah, it was basically something like that. Like sometimes there are more important things than just dollars and cents. Threatening 22% of the separately managed account industry's total assets, up or down, it's going way up.

Wait, direct indexing is SMA? It's 22% of all SMA assets. In other words, the rest is institutional? No. The rest is actively managed stock picking picking. Okay. Fundamental analysis. Oh, I see. I see. Parametric's big.

Yeah. I mean- $362 billion in assets in direct indexing strategies, projected five-year growth rate of 12.4% ahead of both exchange-traded funds. So this is going to outgrow ETFs, outgrow mutual funds, obviously. This is surly data. I think that 12.4% sounds low. I think it sounds high.

Again, I see direct indexing carving out a niche, maybe 5%, 10% of the whole fund universe. Because of how complex it is? Yeah, just like go to a car dealership. How many people who buy a car at a Lexus dealership need some kind of customization? They're fine picking one of four cars. This is just generally how people shop. So who is this for? Millionaires?

I think so. People who are rich and really hate taxes. Right. I think that's a great deal. So that's a wealth management client? Yeah, sure. Okay. Yeah.

I mean, I think the people who might be against it would just say to themselves, why mess with success? You've got a three basis point total index fund. You can get all the bonds for three. Just, it's beautiful. Don't mess with success you've got a three basis point total index fund you can get all the bonds for three just it's beautiful don't mess with it vanguard that's sort of what i think the response vanguard acquired a company called just invest which was a billion dollars in managed assets when they bought it um uh blackrock bought aperio yeah uh they paid over a billion dollars that was a direct indexing company. And didn't Morgan Stanley buy Parametric?

They did. Yes. Fidelity. By the way, Morgan Stanley getting into ETFs. We're about to talk about that. Okay. Do you mean to stop? Is it in the book?

Yeah. What page is it? One more thing on this. One more thing on this. I love Fidelity. Fidelity, I love you. Fid Folios is DLA. Oh, yeah.

They should have called me i know what are they what are they fid fidfolios you have an idea i could like come up with 20 ideas like literally standing on my head that are better than fidfolios i feel like uh i i don't know i i feel like they didn't really think that one all the way through. I bet you they paid hundreds of thousands of dollars for consultants. I'm positive. What's ironic is they might end up having the best product because Fidelity often has the best version. Because they're never the most expensive. They're never the cheapest.

The shit that they make always works. Yeah. So they might actually have the best version with the worst name. And Fidelity, even though I think – Are we sponsored by Fidelity any time soon? They're mallealleable though they're malleable they killed the spartan name right that was bad that was confusing it's been called fidelity fidelios wouldn't that have worked no no that's that's the password from eyes wide shut duncan yeah he loves that movie yeah you're fired

all right he went to the party. So Morgan Stanley. So there was an article over the weekend, a profile on their COO. This is Barron's article. What's the guy's name? Let's just set this up right. This guy's killing it for them. Jed Finn, great name.

How Morgan Stanley built an Asset Gathering Machine. Garmhausen wrote this at Barron's. I thought it was really good. Okay, go ahead, Michael. No, I was going to toss it to you before we get into the story. What are they doing with ETFs? Because I saw you've been writing about them. Yeah, so they were one of the last big holdouts.

That said, they're one of the first big wirehouses to get in, which is interesting because they have $200 billion in other ETFs. So they could actually move some money over to their own in-house brands. Oh, so meaning JP Morgan has their own ETFs for the wealth management business. Goldman Sachs has ETFs and the wealth management business. Yes. Morgan has a wealth management business, no ETFs. I'm talking about. That's right.

That's right. So we call it BYOA. Yes. We think there's a big – For your own assets. Yes. Why – it's better than pay the other guy. And it makes sense.

It won't work for everything. We've seen that nobody – even if you're Morgan Stanley or JP Morgan, you're not going to move to their generic S&P. That brand is – you want the S&P. But like, I don't know, Develop Market International, they might move to the generic. Short-duration bonds. Yeah, fine. I actually think something like an ARK. Goldman Sachs has their own innovation.

They have that index. You can replicate that in-house. Nonprofitable tech index is Goldman's. I saw the – I wrote a whole note saying, you guys, why wouldn't you launch this at like 20? It's ARK. You could Vanguard ARK at 20 bips. I do think Cathy's brand name would retain some of those assets, but this is not a bad idea. For now, but if you're pushing Goldman clients into it, you can do that.

Apparently, I think the person I asked said something about, well, there's licensing with the name and the index. Well, you know, you also can't build an ETF on top of an index called not profitable tech. I say you can. Maybe Goldman thinks it's just too crazy sounding. Or just change the name of the index. In this day and age, that's actually exactly what you should do. I know. You should call it piece of shit tech stocks.

And people will throw money in it as they create memes. I agree. What's the levered version coming out? Levered piece of shit tech companies. John, I'm sorry for all these bleepable events. My bad. I'm very caffeinated. By the way, the Morgan Stanley, I also think that

the CEO was on... The Morgan Stanley. Did I say the Morgan Stanley? Tell us about the Morgan Stanley. You know what's cool? Morgan Stanley. Did I say the Morgan Stanley? Tell us about the Morgan Stanley. The Morgan Stanley. You know what's cool? Morgan Stanley. Drop the – go ahead. Tell us about it. OK. Hold on.

You got – you just – All right. Keep thinking. Hold on. Let me come back. OK. Here I am. OK.

So Morgan Stanley got – their CEO was on Bloomberg TV like, I don't know, eight months ago saying, we bought Eaton Vance. We bought Parametric. This is the way. And I thought, and my thought was, what they're trying to do is sort of bypass the ETF pterodome. They're going to go right to direct indexing and hope they just don't have to deal with that market. The fact that they're jumping in, I think, is a sign that the Parametric flows aren't that great. I cannot get the people over there to send me the numbers, but my guess is there are a couple billion tops,

and ETFs just took in a trillion. So to your point, I think those two factors, they're like, yeah, maybe it might be the big thing in 10 years, but look at the numbers last year. We have to do something. That's my guess. I don't, this is not a diss. I know a lot of great advisors at Morgan Stanley. I don't think the average Morgan Stanley FA has the sophistication to sit with a $2 million household and walk them through the nuances of direct indexing in a way that it would really be worth their time to even try. It's so much easier to just do what they've already been doing. So to that point, I really think that this is a killer product for RIAs. Not that RIAs are smarter. product for RIAs. Not that RIAs are smarter. It's just more worth their time considering how much more they own that relationship relative to a bank owning a relationship and having a salaried

employee. It took us, it took, it didn't happen overnight for us where we were like, all right, here's this new index product. Like let's get it. It took us, we had to learn how to talk about it, let alone teach the clients. It took us like weeks and months easily. Yeah. I mean, Michael Kitsis, who I interview for the book, is very bullish on this. But he, like I said, I thought his bullishness was from the advisor's point of view instead of the investor. There's different levels of bullishness. You could be bullish on it being an amazing tool for advisors and not think it's going to take over the industry or the world. I think that's sort of where I am.

It's not going to take over the world. That's where I am. Yeah. So, OK, let's say 10 years from now, if you have mutual funds, ETFs, and direct indexing all, quote, as a sort of pie chart, what market share do you think direct index would have relative to ETFs and mutual funds? Well, I just told you it's 22% of all SMAs. I would say it's like 40% of all SMAs, and that's a lot of money. That's a lot of money. That's about – I think SMAs have what, $4 trillion?

So we're talking about $1 trillion? Well, we're saying it's a trillion bucks. So in 10 years, ETFs will pass mutual funds, correct? I think so. Yeah. So I don't think this ever gets bigger than ETFs. No. ETFs are too simple.

They're too simple. They work. They work really well. I think that if it's a fifth the size of ETFs, that would be big. That would be huge. I think that if it's a fifth the size of ETFs, that would be big. That would be huge. Yeah, and so that's how we – ESG and direct indexing are two things that we're – we're not bearish on them per se.

We're bearish versus the hype. You sometimes see someone come out and really say this is going to kill – I mean – or ESG. I'm bearish on ESG ETFs. Yeah, and they'll be like, oh, it's going to be $4 trillion. I'm like, whoa, whoa, whoa. Anything trying to dislodge three basis point total index, I just can't. It might nip at the sides of that. There's no reason for it.

It's just too hard to dislodge that. If you back out the flows into BlackRock from their model portfolio, what are ETF ESG flows look like? Probably not that strong. I think BlackRock, I mean, I got to say, we call that the BYOA. If you take BYOA out, I think that's 40% of all ESG ETF flows. Yeah, I'd say easily. And the biggest ETFs are all the BlackRock. What's BYOA? If you take BYOA out, I think that's 40% of all ESG ETF flows. Yeah, I'd say easily. And the biggest ETFs are all the BlackRock. What's BYOA? BlackRock.

Bring your own assets. BlackRock put their ESG fund into their model portfolios. I don't know if that's like – I don't know if I read that. So that counts as inflows. Yeah, they took – they replaced IVV with it, ESGU. Now, keep in mind, ESGU is the S&P. If you look at the holdings, it's got such a small active share. They couldn't do it if they went hardcore ESG.

Yes, but it makes me feel so much better. Right. It's a feeling. ESG is selling a feeling. Oh, man. Massive. So that's 2020. So the only thing here, by the way, it was a billion.

Now it's at 25. This is just model portfolios. Probably. I mean, they get their sales people on it. What else could it be? One to 25 billion so they but i will say once you put it in the model it goes up to you know what's 7 8 billion it seems like a popular etf so bya can actually kickstart some organic flows too because assets are marketing but you know what that's like that's like netflix they're like oh sandra bullock's new show where she's blindfolded the

whole time is the biggest hit in the world. It's like, yeah, you put it on the homepage. You could make it the biggest show. And by the way, BlackRock could do that with any ETF at any time. This is SPY versus ESG. Yeah, it's the same thing. Apple Music could decide who's the number one selling artist in the world today. You're right.

We basically said BlackRock, they should teach this pr move in business schools because um larry thinks out saying esg is the future this is great and then when they do the conference calls and the quarterly calls they brag about the assets but i'm like well come on kind of directed it yes good for them though i know i mean yeah it it's fair to tall it out but it's also fair to say, you know what? But that's their advice. Totally. Because they're an asset manager. To that point, it's not hurting anybody.

It's not hurting anybody. And it's cheap. It's only like 15 bits. The performance is exactly the same. So if you want to be ESG, who gives a shit? It's the same performance. Well, here's what someone would say, and this is where they get dragged on Twitter, is you could get IVV for three. So it's honestly five times the cost.

Whatever. I know. But now you're down to... Oh, BlackRock's getting dragged on Twitter. They have $14 trillion under management. How will they ever recover from that? I know, they got actually. Oh my God, they're going to close.

A legitimate BlackRock meme? No, hold on. Your mom's calling. Dinner's ready. A legitimate drag, if you want to make one, is that Fink was acting all holier than thou and then pushing flows into their own property. Well, my thing is – I like lecturing the CEOs. My thing is if you're that wealthy and you have private jets and that's your choice of transportation and you – I don't know.

Are you really living an ESG life? OK, fine. You have these funds, but like- You're definitely not. There was a study that the top 0.01% are responsible for a good chunk of the carbon emissions. Duncan's living that ESG life. Crypto mining alone, you're killing the environment.

You're offsetting it a little bit with your ETF choice. It's hilarious. So back to Morgan Stanley, they brought in 438 billion of net new assets last year. That's crazy. A lot of that is taken directly from other people. I don't know who they're taking it from. The premise of the article is they found all these new funnels to – they have 15 million relationships with clients.

Every age of the age and wealth, every step along the spectrum in terms of age and wealth. They're unlocking value from E-Trade. They're probably converting a lot of the larger accounts at E-Trade into Morgan Stanley Wealth Management clients. They bought the stock plan administration business, which deals with corporations and their employees. That's another funnel. And they seem to have, I think, come up with a better business model than whatever Goldman Sachs is trying to do in wealth management. What's your take from the outside looking at all that? Hang on, Eric, before you get into this. Look at this chart, three years. Morgan Stanley is crushing JP.

I didn't realize this. Not sure why. 100% versus 36. That's a big spread. Over five years too. Everything you just described is I think the hustle you're going to have to do to survive, again, what I would call the Bogle effect. Everything is going to like three basis points. You've got to get creative. You've got to hustle.

Die for loose balls. That makes sense. Own the client. You've got to do all kinds of things just to avoid having your assets taken from you by BlackRock and Vanguard. Right. There's now a willingness among the wall street banks to cater to everybody there's no such thing as white shoe anymore goldman launching marcus um acquiring gigantic uh ria platforms and stuff united morgan stanley buying e-trade it's almost like we don't care how old you are we have something for you we don't care what level your portfolio. We have something for you. We don't care what

level your portfolio balance is. We have a service that would work. That like to me, that's a really big change. That's really probably inspired by your like what your book is talking about. That is the Bogle effect on Wall Street. Yeah. And one of the things I also thought was like, you know, Vanguard came out in the 70s. And at that time, everything was commission-based and brokers. In fact, I even called the section reform brokers because when you're talking about where the assets come from in Vanguard, the advisors, the reform brokers are the biggest growth area. Yeah. And I talk about like the fact that Vanguard may have had something to do with the RIA movement because you could not get their funds where you were. You had to leave.

Weren't they one of the first custodians for RIAs? And they didn't do – they didn't love it? They got out of the business? I don't think so. But if they were, I didn't get that story. OK. It predates me being on the RIA side. All right.

Moving on. I want to ask you what – here, I have some notes. I have some notes from your book. Vanguard – the money that Vanguard raised over last – let's say since the pandemic started, it like accelerated. And there was so much talk in the media about Robinhood, which is a big story. But really, the flows to Vanguard exploded higher. And it was silent. Like we weren't even like, there weren't articles being written about it the way that they're used to be.

They took an $80 billion year to date this year. The rest of the industry, $15 billion. So they're not- Negative $15 billion. Negative $15 billion. Okay. So Vanguard is plus 80. The rest of the industry is negative 15.

What's going on now? Is it just momentum carrying through? Yeah. And two things on that. One, you're right. They took in 300 and I think 30 billion last year. Now in 2014, 2015, they almost hit or was 2016. Let's pause on that number.

That number is so big. It's 1.5 billion a day. That number for one year is so big. It's $1.5 billion a day. That number for one year is so big. I know. It's unbelievable. And there really wasn't much talk of it. We've got to – Now we're getting used to it.

Dude, we got desensitized. How much does Robinhood have under management? $25, $40? I don't know. I don't know. $40 billion? I don't know. And Vanguard took in $330 billion last year.

Yeah, no. Vanguard takes in like one arc every month. I mean, they're just really astounded. And I think the theory on why Vanguard – the other thing is when the going is good and other people actually see inflows too and their assets are going up because the market is going up, I think everybody just looks good. Vanguard is better. Fine. are fine. But it's when a bear or flat market hits that I really try to stress here that their market share is going to explode because their relativity is going to be amazing because not only does the bull market subsidy stop lifting your assets and offsetting your outflows,

it becomes a tax. And so your assets start going down and the outflows are hitting, and you got panic boomers leaving your fund, their market share will continue to grow. And why do people still invest in Vanguard in a bad market? That goes back to the early days, I think, where they forced people to come to them. So people were coming to them. They were astute. They were like, you know what? This makes sense.

I'm going to go do this. And they are, I think, resigned that this is the best deal they can probably get. They don't pay stockbrokers at Wells Fargo to sell Vanguard funds. That's right. So that's what you mean by come to them, meaning they don't pay stockbrokers at Wells Fargo to sell Vanguard funds. That's right. So that's what you mean by come to them. Yeah, they had to come to them. Bogle used Field of Dreams a lot. I guess he saw that movie in the 80s.

Yeah. I know it's his time. Oh, by the way. Actually, Malvern is a little like Iowa. But anyway, he was like, build it and they will come. He was just like, look, let's make the best possible product and they'll beat a path to our door but then there was a story gus sauter told me that i thought was also i think novel of the character and just just i don't know um discipline sauter's an early vanguard executive yeah he was the cio yeah for like 15 years when they launched etfs he knew

bogle very well he knew brandon very well anyway he said that when he first got there, some big institution wanted to buy into one of the funds, but they were only going to be short term. And Bogle said no. And he thought, wow, because there's good money or bad money. And so he, in the early years, only took good money, long-term money, and it was money that found them that was very astute and knew what they wanted. He had integrity about inflows. Yes. So that core is why I think you see flows into their funds versus flows for other people that tend to be market sentiment correlated. So double timeout. First of all, Vanguard, it's just a one-way flow. They just always keep buying. But you've been saying this for a while, and you've been 100% right. Active managers have often said, just wait till bear market.

That's when we're going to outperform. That's when we're going to get flows. They have that exactly backwards. That should be their worst nightmare. If anything, they should be fine with the outflows because as long as the market goes up, it offsets it, and they can really extend the length of time they can sort of milk it. So a lot of actively managed mutual funds, their assets have grown with the market, not because of flows. So when the market falls, their assets kind of the flows come out.

Active equity mutual funds 10 years ago had $3 trillion. They've seen $2.6 trillion in outflows since then, but now they have almost $6 trillion in assets. Jerome Powell. It's all Jerome Powell. Yeah, I blame the Fed for that. So the bond side, a little better. Active bond funds have not seen the exodus, but they haven't seen a bear market. Let's talk about bond funds. Holy shit. This year, it's getting ugly. Bond funds could go through what equity just did. Worst start for global bond funds since 1990. So look at this. This is IEF. It's a seven to 10 year treasury.

By far, by far, by far the worst return. We have that on screen. By far the worst return going back to inception of 2003. This is bad. That's off the cliff. So Eric, I've been saying that not only have bonds not been dampening the returns of the stock market or the declines, they've been causing it. How come all these funds that –

This is the reverse Fed trade, right? It's the Fed put or the like commative policy. In reverse, of course. So it all went up together. Put that chart back up. It's probably going to all go down and get together for a little while. And bonds worse though. How come all these funds that are leveraging bonds aren't blowing up yet?

Like the closed-down funds? We just don't know. Talk it to your mic. Like the hedge funds. Why aren't they – I think we'll see one at some point. Someone's going to blow up, right? Oh, like the risk parity funds?

I hate saying that because then like someone's going to – Jake's going to go crazy on Twitter or something. But seriously, if you're like double and triple leveraged treasuries, how have you not blown up yet? It's also a lot of exotic bonds. There was a few examples we used in the March 2020 sell-off. There was this one fund that came so close to having to just implode. And it had all kinds of weird, not just MBS, but just structure and all kinds of really out there stuff.

I only buy blue chip Russian convertible equities. But it was an open and a mutual fund. Yeah. And I would argue some of the active fixed income managers don't like those funds. I think some of the funds go pretty far out there, but I do think we'll see one at some point have to just halt redemptions

or just say we're overextended. The only thing I would say about this sell-off is unlike March, 2020, where 180 billion left bond funds in two weeks. That's insane. You have only – you have 100 billion this year leaving bond funds or 90 after, what, three months? It's much more orderly. So as long as it's orderly, I think it can just bleed and then adapt later.

It's just – well, the downward spiral starts to speed up where the more flows, the more they got to sell bonds in the market, which lowers the price of bonds, which means the return goes down and the people start to panic. Well, that downward spiral – If you're a saver though. I don't think so. You're not being punished anymore. So where – 2.6% yield on two-year money. Where do you think –

It's not bad. Where do you think – so we were even talking about this on the show. Like is it possible that money is coming out of bonds and into stocks? I don't think so. I think money comes out of bonds and goes into money market funds. A little, because if you look at the outflows from active equity mutual funds, they're a little less severe than normal, which tells me there's probably some rebalancing. Yeah, a little bit. Oh, so it's rebalancing.

Okay, that makes sense. A little. But you can't just say, oh, it's rebalancing. Like some people on Twitter were like, oh, it's just rebalancing. No, no, no. The thing with bond mutual funds is if you look at their historical flows, they really take – They're always positive, right? Right.

Until rates go up and the market goes down. The taper tantrum, 2018, March 2020. And every time they started to go down, the Fed came in and said something dovish. It is kind of hilarious though because you would think that as interest rates come up, money should come into bond funds because they're becoming more attractive. Well, no, because – yes, but all the funds own bonds worth less because you can get the new ones at higher rates. OK. That's the problem. All these funds own bonds that are just not worth as much as they were like last year.

It's a portfolio that's already down versus newly issued bonds at higher yields. Yeah, but the more rates go up, the more you can get more high yields. And yes, they can – that's why in my first book, you had a great quote. You said, how do you deal with rising rates? You're like – you did it the way your grandpappy did it. I forget. You ladder. Laddering really – if the fund ladders, I suppose ultimately they will be able to do what you say.

But at the time, I guess all their bonds are the ones worth less. But that doesn't explain investor flows because I'm saying money should come in as rates rise. It shouldn't leave. The explanation for – Well, no. The reason the money is leaving is because the returns are down. Like if you look at- No, I understand.

Double line, yeah. Listen, negative, like a negative monthly performance- In bonds? That just triggers people. I get it. But people are afraid that, oh shit, I lost money in bonds.

And people are having all sorts of crazy reactions because they've never seen this before. That's right. And they think it's going to get worse, which I understand, but no, it's actually going to get better. Yeah, I mean, what are they waiting for? Are they going to pull out now and and then just wait till what there's a positive return. Maybe, I don't know. But I just, I just know that bond flows tend to be correlated with the, like the red or green,

you know, if they're green, they see money. So to eat bond ETFs, are they heavily used by hedge funds and institutions as trading vehicles? So isn't that – doesn't that partly explain – like if you have that as your risk-off piece and it's down 4%, you're like, we're getting out of this. We're shortening up duration or we're going into cash or something. Well, you bring up a good point. A lot of mutual funds institutions use HYG, TLT, LQD, and they use it – They're not buying 800 bonds. They're just buying the index.

Well, no, they buy the ETF as a moat around the bonds to cash people in and out. So it's like a cash, like a, it's almost like holding cash, but you actually get beta to the market. That way you don't have cash drag. Although cash drag would help now. So I think a lot of them did buy these ETFs as moats to get beta. So they, if somebody got out of your fund, you could sell it. We see this because when there's bond mutual fund outflows, the ETFs start to trade at discounts a little bit.

I guess I hadn't realized that. Because that's the first thing they sell before they go to the bonds. They've got to eat through the ETFs. It's easier to sell the ETFs than to start calling bond brokers, bond dealers. Yes. Okay, got it. So we've got the Fed, $95 billion of liquidity coming out of the market, or that won't be continually going into the market.

And there are starting to see some cracks in the stock market. Like the Russell 2000 looks like shit. Home builders look like shit. Transports are crashing. And yet, the index for now is like sort of still hanging in there a little bit. What do you mean, the S&P? The S&P and the NASDAQ. The S&P is – isn't the S&P like pretty resilient?

I'm impressed at how well it's held up after all. What is it? 4% off its all-time highs after all this? No, it's – It should be so much worse. What, 6%? Is that all it is? Oh, my God.

If stocks really correlated to headlines, we would be in a 20% bear market. The S&P is just the baller. That's why it's the king. I mean, it's – It's crazy. You know, it just – you get tempted by the cues, but at the end of the day, that index is something special about it. Eric, VGK outflows are going into the S&P.

I'm absolutely convinced. Europe is guaranteed a recession, OK? They're getting almost a third or more, depending on who you ask, of their oil and gas from somebody that's actively like thinking about bombing them. By the way, also the S&P, you know how people are like, oh, it's just large caps and all these like 10 mega caps. It's all weighted by like these 10 companies.

Sam Rowe had this great point, which changed my perspective of the S&P, which is that those 10 companies are like 12 companies in each. It's like 120 companies. Yeah, Google's like 70 companies. Yeah, if you look at it that way, it's very diversified.

And that's, I think, part of why it's so strong. You sound super complacent. That's the last thing someone says before the bottom falls out. By the way, speaking of the bottom falling out and index funds, I would ask you guys this. I think if I were to talk to you guys about, like, let's say you held VTI in your personal account. Is there anything that would get you to sell let's know right because my daughter's wedding right that's the lifestyle i'm talking in the market is and is that because you're resigned to the fact that there's nothing better you could do it's what are you going to jump in don't have time to try to do

something my default setting is the market will be higher 10 years from now that's always my default setting so i don't give a shit if it gets cut in half or worse. I'll be buying. This is why passive will remain strong in bear markets. A lot of the people who are like, oh, it's going to bring the market down. And I have a section of this in the book too. Weak hands is what they call it. I'm like, no, these are the strong hands.

These are people who rarely sell. I think the next correction will be money coming out of active because there are older boomers who were put there by their broker. So there's less loyalty and they're older. They don't want to like lose the money. And I think that's going to be where the stress comes from. Passive will actually probably be a bid in the next – either the bear market is four or five years. But then I was on the Resolve podcast, and those guys are like, yeah, but what if you – what if these index funders have to eat shit every day for six years?

At some point, they will capitulate. It doesn't work that way because the buyers are dollar-cost averaging. They don't give a shit. They don't even know. Now, what about alts? Like say you have 60-40 and like it all went up together. Now it's going to go down.

Do you guys consider like adding an alt or something that like maybe could go up and sort of offset you a little? Do we consider it? Yeah. We do it. Yeah. And we do that already.

And what do you use in that alt bucket? We have our own strategy. What's it called? We're not allowed to promote. I think one of- Is it like a, does it have a short component? See my wink? No, we don't show anything.

How is it alt though? Because it's trend following. Okay. Oh, I see. Okay. One of the problems, and I'm casting a wide net, so don't make offense to this because there's obviously great solutions out there. Generally speaking,

one of the problems with strategies that try to limit the downside is they can't survive the upside. And for that reason, like CTAs, for example, or managed futures, like they're doing great this year, by the way, I think,

but they've been horrible for a decade. And that's just really, unless you are a dyed in the wool quant and you totally, totally get it, even then. But to put that in front into a client account that can be dead money for 10 years while the S&P triples is just really hard. That's why my proprietary timing system

enables me to know when to put the alt on. So I'm actually timing the market timing. So Eric, not only will I never sell, but I will, to plug another book, I will just keep buying. How about that? Very nice. Way to work. That was very subtle. Last thing on Bogle before we

move away from that. Two things. I think you wrote this. Vanguard's moving to advisory business. We'll send them into many un-Bogle-ian places for better or worse. Jack would not want to see Vanguard. How do you spell un-Bogle-ian places for better or worse. Jack would not want to see Van Gogh. Wait, how do you spell un-Boglian?

I don't know. This guy wrote it. I wrote it in the notes. It works. Un-U-N hyphen. That's hilarious. Un-Boglian places. Duncan, write that down.

I use his name. I have Bogolosophy in there. I got Bogometrics. What do you mean by it? Just to entertain myself. Wait, so the rise of index, was that a Bogosans? The what? A Bogosans.

Yeah. It was a Bogosans. So what do I mean by that? Why is it un-Boglian to give financial advice? Yeah, I think he just didn't want that much. That's a general thing. He didn't like them being so big. But Vanguard investors got older, and I think the natural thing is to have wealth management to help them now that they're wealthy.

And so they launched this business. It's only 90 percent Vanguard clients. Oh, that's a big pool to draw from. But that business, if you want to be up there with a major full-service advisor, wealth manager for very wealthy people, you got to have private equity. You got to have a direct indexing, SMAs. You got to have – you might even have to have crypto. You got to pay up for advisors or they're going to leave. Well, by the way, listen to this.

They have so many advisors. They have over 1,000 advisors, CFPs. Yeah. They have more CFPs than anyone. But they're under 40. They might – I mean they probably have some like system where they can just – That's the thing though. So then they're competing with Schwab and Fidelity's branch system, which is tough.

So there's a whole section in there on where advisory is going, and Kitsis was probably the great guy to ask about this. And he sort of said, look, there's – probably half the business is really brokers who aren't like CFPs. They're probably going to get vanguarded. But if you're doing niche work, you're local or you do high touch or you have something special, those will be the survivors. Vanguard is not trying to build that. No, they're going after that like very vulnerable, like disruptible middle. What's the new CEO's name again? Mortimer.

No, no, no. No, no, literally. Tim Mortimer. No, no, no. No, no, literally, Tim Mortimer. So Buckley said publicly when he came in as CEO, he said, like- I'm coming for you. No, we are going to do to the advice business what we did to the asset management business, and they are working on it like every day.

So that's where the margin is. They're not alone, but yeah, although I- Yeah, I- Doesn't mean they'll succeed, but that's where the margin is. They're not alone. But yeah, although I – yeah. Doesn't mean they'll succeed, but that's what they're doing. Yes. And that's where I think they've got a partnership with a private equity firm. I think ultimately Vanguard, if they're going to try to have all these things available to their clients, at some point they could say, you want crypto? Get out of here. Or go get it yourself.

But like – Get out of here. I think at some point they're going to have to have all these things. And I just know Vanguard. They're going to go and like look at the marketplace and go, this is all like high cost shit. We're going to have to either work with a partner who will lower their fees for us in a partnership or do it ourselves. You know what's unboglian? NFTs.

Very unboglian. You said that Bogle and Vanguard are arguably more... Can you imagine Bogle and NFTs? I would love to see a Barron's reporter asking Bogle about like ape NFTs. He'd throw his cane at him. You said Bogle, Vanguard, arguably more DeFi than much of DeFi.

What do you mean by that? So you know how like crypto and DeFi are all like, oh, we're, you know... Disrupting. We're disrupting. We're over here. It's like minting billionaires right and left. The fees they charge are really high. The intermediaries are really making a killing selling populism. They make up for it by how convenient it is though. LOL. Yeah. I mean, that's something where I think Vanguard took,

if you go into an index fund and you buy and hold it, Wall Street gets none of that money. It's basically taking it out of the casino completely. It starves the machine. And I don't know if crypto is starving the machine. I think they're turning into the machine to some degree. They're feeding the machine. It's the most profitable business there is. They put a bull in front of the crypto exchange that looks like the Wall Street bull.

I thought that was weird. Like aren't you supposed to be like fighting – they're slowly – and then – Wait. front of the crypto exchange that looks like the Wall Street bull. I thought that was weird. Like aren't you supposed to be like fighting? They're slowly – and then – Wait, where's the crypto exchange? In Miami. At the Bitcoin conference. They put a bull, but it has laser eyes. And it's – anyway.

Gross. Crash, please. Did you notice that when Morgan Stanley or Goldman Sachs says, oh, we're like – either we're bullish crypto in a note or they start saying we're going to trade it or service our – Yeah. The crypto crowd really likes that. I feel as though there's a tension between their message of populism and like anti – They love disruption, but the only thing they love more is when the New York Stock Exchange and Goldman Sachs get involved. Then they get really excited. I agree.

So they don't care about disruption. They want higher prices for their coins. Yes, and so I think even though Vanguard is part of the system and is an asset manager, Then they get really excited. I agree. So they don't care about disruption. They want higher prices for their coins. Yes. And so I think even though Vanguard is part of the system and is an asset manager, it's pretty defied. I mean the ethos especially. It's the original defied. And it's true like vegetable type defied. There's nothing funky going on.

How about just the radical act of building that in the middle of nowhere Pennsylvania? They didn't build it in Philadelphia. They didn't build it in New York, Boston, Chicago. Like that in and of itself – and Schwab did that too. They went to San Francisco. Like they started as outsiders. That was like the original DeFi. I totally agree with you.

Active managers in Q1. We alluded to this earlier. ESG was not anyone's friend. Uh, we have John throw this up. So the dark blue is the S and P index return. The light blue is the average fund return. And that yellow diamond is the percent, uh, beating the index. Why is it getting harder? All right. Only 8%

of core large cap funds beat the index in the month of March. And where are we? I'm not even mad. I'm impressed. Like how? Where are we for the 22% of all funds

are beating the S&P 500 in the first quarter. It's getting harder. Nobody knows the future. That's the – you just can't get around that fact. Who would have thought that oil would be kicking ass after – people have pronounced it dead. This is Savita Subramanian at Bank of America. What hurt in first quarter? Not owning energy.

One of the main culprits of active's underperformance in first quarter was their ESG friendly portfolios. Active funds were 27% underweight energy in Q1, where it was the best quarter for energy since 1970, 44 percentage points versus the S&P 500. And you know what? Not their fault. I mean, I don't blame them. Their underweighted energy itself detracted about 33 basis points of alpha year to date. So what do they do now? Go chase oil stocks? Is that the right response? This is inherently why a lot of people have dropped out and gone indexing. They think, well, maybe they catch a right call, but then the next call is off. What are you going to do? It's too hard. It's so hard. You know, it's just hard. I mean, anybody who's tried to do it on their own knows how hard

it is um to get every timing and call right but to michael's point it almost feels like we should have had this shift at some point where it got easier again it's getting it's getting worse yeah because a lot of people were like well oh um all the retail left they go indexing now the people left the poker table are like the real smart people with all the computers but then robin hood came in and you think they were easy but then like they actually did pretty well um they were really risk you know risk on um and some of them did pretty well and then actually what those pros started following the robin hood crowd and sort of like trying to ride that momentum that they had but i just think it's ultimately that not knowing the future is just... It's insurmountable.

What can you do? What can you do? Or not being able to do that reliably is the whole thing. Yeah, I talked to Barry once and I was like, Barry, you know you... How many hours deep? Barry's the only guy we had to do

double episode of our podcast. We called it Use Your Disillusion 1 and Use Your Disillusion 2. He had more material than episode of our podcast. We called it, use your disillusion one and use your disillusion two. He had, he had more material than one episode. Yes. Yes. We have to break it up into two.

That was the one time where we actually broke the rule, the 52 episodes. We had 53 that year. I once heard Barry on the phone with a reporter. It was on speakerphone. Barry used to take all his calls on speaker, which was a pleasure for me when we were sitting offices next to each other. I actually heard the reporter be like, all right, Barry, I got to go.

I've never heard a reporter try to get off the phone before with a source in my entire existence on Wall Street. He is very fascinating. That was one of our best downloaded episodes, though. People like to – my mom loved it. We love Barry. My mom was like, this guy is really interesting. You know what he doesn't phone it in if you have him on your show he gives you he gives you all of it and he

like instead of like saying like uh a response to be like alex i'll take uh cognitive bias for 100 like that's the way he kind of like will get into an answer and it's fun yes well fun fun fun for sure he's been described as a golden retriever. Like, oh, a person. Like he just loves people and he loves talking. Yeah, no, he's great. But that's why the audience loves him because he gives you the full Barry. All right, let's talk about stock splits. What's going on here? Put this up.

All right, so this comes from Lindsay Bell. She's the chief market and money strategist for Ally. So stock splits have basically gone away. And I think I was over indexed to how many stock splits there were, just given the big ones that we've seen over the years. We saw Apple, did Amazon split, right? Amazon split, Tesla announced split. So there really haven't been that many. And this surprised me. So there's an index that they have of, it's called the two for one index, which is from S&P Capital showing the S&P versus the two for one index. I would have thought that the stock split indexes, you see like these stocks pump on these news and you're like, well,

this is the dumbest thing ever. Actually, if you were to systematically invest in these companies, they haven't outperformed, haven't gone to kill. And how would you do that? Because you're going to buy them after they go. I don't know. I don't know the methodology. Haven't gone to kill, but haven't outperformed. And how would you do that? Because you're going to buy them after they get out. I don't know the methodology. That's the problem, though. They announce a split after the close. It's like an M&A or something. So you're going to pay up 6%

the next morning, or in Tesla's case, up 20%. Probably not the best. They will try an ETF for this, though. Totally. What? A stock split ETF?

Yeah, you'll see. I bet there is one. What do you think? There might have been one, but I forget. Somebody, the guy who did the uranium miners tried a stock split or something like that. I got to look, but it was- That's crazy. Why do you think? There might have been one, but I forget. Somebody, the guy who did the uranium miners tried a stock split or something like that. I got to look.

That's crazy. Why do we think? Stock split in ETF. Listen, if something's working and there's some news coverage or like, don't try it. Why do we think that stocks go up on the announcement? Is it because that there's more potential dollars coming in from smaller investors? Because people think that other people are going to buy it. That might actually be a thing.

It is a thing. It's actually not a money loser. If you did that, A, everyone smart would laugh at you, and B, you made money. It's one of those things that shouldn't work, but continues to work. What are we doing here about Tiger Global? I don't really have much to say about them.

Eric, do you have anything to say about Tiger? They basically they, kings on the way up and killed on the way down. It's hard. Down 38% since December 2020 versus Nasdaq up 16%. I think JD.com was their biggest holding. I think that was it. They were in early so they made 47x on the way

up and when this thing gave back, it's their biggest holding. Okay. It's a little arcy in, yeah, I mean. Did anyone do the meme with Winnie the Pooh where it's like Ark wearing a t-shirt and then under it like Tiger Global with the monocle? It's not bad. Yeah, it's not bad.

By the way, John Bogle Jr. was telling me that he was an active manager and he would talk to his dad, you know, Bogle, about being active and Bogle would just be like, it's a hard business. How old is John Bogle Jr. now? I want to say 55-ish. How old is the third?

Like his kids? I don't know. I don't know if there's a John Bogle. Wait, are you telling me John Bogle Jr. is a Gen X? Can we claim him? Is he one of us? Is he into Stone Temple Pilots? Get him on the phone.

If he's Gen X, he's pretty mature. Okay. I thought he was- He's an older X. He's like Barry. He's a geriatric X. Barry's an older X. Yeah, I think he's like Barry's age.

Born in the mid-60s is an older X. They were really into Caddyshack, that part of our generation. Yeah, yeah, yeah. And Stripes. They think Stripes is- Barry just- Lawrence of Arabia. Barry just got me the book

on the making of Caddyshack I'm like why did you buy this for me for you what are you supposed to do with that that's the same publisher or the literary agent I have he made that book oh yeah

yeah I haven't read it yet I was at his office and I said oh that looks cool he's like oh you can have it is it good have you read it

this is going to be an unpopular take with the older Xers it does not age well Caddyshack I rewatched it recently it's not funny it's just not that read it? This is going to be an unpopular take with the older Xers. It does not age well. What? Caddyshack. I rewatched it recently. It's just not that funny.

It's not that funny. Dangerfield is the only good thing. Rodney Dangerfield did Somebody Step on a Duck. It killed me. That was the first belly laugh I ever had in my entire life. I was like six years old. But it's not that funny. Something about Ted Knight being frustrated is pretty good.

He's so good at being frustrated. It feels good. It's not enough. It's not enough. Okay. I don't know. I haven't seen it in a while. But listen, I'm just telling you that if you saw it today

for the first time with a clean slate, you'd be like, I don't get it. I don't get it. What's the big deal? We did this bond chart already. I think we're into favorites, guys.

By the way, Eric, that doesn't take anything away from the movie. For example, I recently saw Top Gun for the first time. Really? And if I saw Top Gun

when I was eight years old, it would be the best movie ever. Unfortunately, I saw it when I was 35 years old. And it's just, you know. Okay, out of five stars, what would you give it? Listen, I appreciate the fact that it meant a lot to people at the time. You can unwind that. As a person

watching it, like, let's say it just came out and you had to rate it. But it would have like let's say let's say it just came out and you had to rate it but it would have come out today because it's so 80s you're right they're up in each other's faces going who's the best

of the best it's like it's all just sort of 80s very Cold War like Rocky IV literally everybody's sweating and glistening

it's a time capsule it's a time capsule they're playing volleyball on the beach with lathered up in jean shorts they definitely so everything's lathered

like Rocky got lathered a lot of lathering in the 80s we're gonna lather you next with lathered up in jean shorts. They definitely are. So everything's lathered. Like Rocky got lathered. A lot of lathering in the 80s. We're going to lather you next time. Lather you next time. We're going to build you a Bond lather. The best Tom Cruise movie is Cocktail. I recently saw that.

That's better. I want to get your reaction to that statement. Cocktail's better. Is that the best? Is that peak TC? The fact that he could make a movie about a bartender that good and make it 100 million dollars i think it's probably it's one of the best movies that's his best accomplishment it's one of the best movies hang on best tom cruise is a few good men it's not his movie though it's jack's movie no it's not jack's anybody could have played his

part jack's in it for 11 minutes anybody anybody could have been Tom Cruise in that movie. Any actor could have played the role of the lawyer. Jack makes the movie. There's no movie without Jack. I'm just telling you. That's like the calculus of that movie. You could have switched out every character. That to me is not a classic Tom. You can't make Cocktail without Tom Cruise.

Correct. You can't make Top Gun without Tom Cruise. What about Tropic Thunder? That's a good part for him. Oh, Les Goodman? Is that his name? Oh, that's one of my favorite TC performances. I wouldn't call it a Tom Cruise movie, but that is as good as he gets, I would say.

You want to share any thoughts about Tom Cruise? Is Tom Cruise in the Bogle effect? I'm trying to think. I have a good chunk of pop culture references. Who plays Bogle who plays Bogle I don't say well there is no actor

that said I do reference that he did look like latter day Henry Fonda whenever I saw him speak he always looked like on Golden Pond era I only saw him once

Henry Fonda I know who plays I know who plays him he's dead though James Cromwell James Cromwell's not dead he's not dead spread f***ing rumors

on this podcast. I'm sorry. He's alive. He said that movie yesterday. I'm sorry. All right. I think we're good. Somebody on Twitter the other day said when Gabelli put an ETF out that tracks automation

and it's 95 basis points, and someone's like, if Mario saw this, he'd be rolling over in his grave. And Mario's on Twitter. Sorry, James Cromwell. He's on Twitter. He'd be rolling his grave because it's not 150 basis points. He wouldn't like that 95 stuff. All right.

Let's wrap up. Let's do favorites and we're going to get out of here. We're going to Sparks tonight? Yeah. This is going to be a big night. Yeah. We're taking 20 people out. Somebody might get whacked.

By the way, yeah, I'm surprised. We were talking earlier. I'm surprised they don't play up the Gotti thing and put like a- I don't think they want to. Or have a dish on there that's called the Gotti. Did you listen to that podcast, Our Thing? I'm fascinated. We were talking earlier. I'm surprised they don't play up the Gotti thing and put like a- I don't think they want to. Or have a dish on there that's called the Gotti. Did you listen to that podcast, Our Thing? I'm fascinated. It's fascinating.

It's like, wow, it took place here. Did you listen to that podcast? No. Our Thing. Sammy the Bull. It's the best podcast you'll ever listen to. You'll be addicted. You won't be able to turn it off.

Okay. It's the best podcast I've ever listened to. This dude is like confessing to murders and shit. He's making it right now. It's called Our Thing. There's a new episode every day. You going back to Philly tonight? I am. Our Thing. Okay. You're welcome every day. You going back to Philly tonight? I am.

Our Thing. You're welcome. Season one, episode one. It's the number one feedback I've ever gotten from any recommendation I've ever made. Hands down. It's insane. And they're going to make a Netflix show out of it, they said, right? That makes sense. Somebody said so. What do you got? Favorites.

I'll start, actually, because I want to say something really nice about my co-host. Michael and Ben, if you're an Animal Spirits listener, you know all about this, but if you're not, Michael and Ben did an NFT drop

and you guys worked with Audiograph on that project, right? We did, yes. Okay. So basically you took all these memes and fun things from Animal Spirits and the fan base. Duncan and John helped make it. Yeah, Duncan. So some of these are like a lot of fun.

I really love – what movie is that? The Internship. The Internship. All right. It's great. And what do you got? That one. What is that?

The jet ski? Yeah, the second one from the upper left. Yeah, yeah. That's – what is that guy? Old Man Yells at Cloud? Yeah, the second one from the upper left. Yeah, yeah. That's – what does that guy say? Old Man Yells at Cloud? Yeah, something like that. Okay. Anyway, they did an NFT drop.

So they basically sold pictures to their audience and 100% of the proceeds went to No Kid Hungry, which is one of our favorite charitable organizations that actually Tyrone Ross originally turned us on to. You guys raised $100,000 and No Kid Hungry got $100,000. So what happened was- Hold on, no, no. Stop, stop, stop, stop, stop, stop. I mean- Yes. Very good deal, dude.

Thank you. Is that like the best thing you've ever done in your life? It's the best thing I've ever done in my life. It really is, though. I mean, by far. Okay. Other than having children and getting married. I haven't done that many things.

Yes. That's a pretty big deal. Yes. Okay. Without a doubt. Are you blown away by how much money you guys raised with basically pictures of each other? I mean, that's like a lot of money. Don't be distracted during this part.

No, no, no. I need to find something. It's important. Okay. It definitely exceeded my expectations. I need to find something that's important. Okay. So. It definitely exceeded my expectations. Multitasking us the whole podcast. Are all those different prices that they got fetched different prices?

I don't know. I'm not in. Everything is 0.1 ETH. So the first, somehow, Autograph reached out to the giving block. So the first 12.7 of ETH that we sent was matched by the giving block. So that's 25 ETH right there, which is almost $80,000. We ended up selling a total of so far 22 ETH, which is almost $70,000. So we raised well over a hundred thousand dollars for no kid hungry, which is, yeah, it's incredible. I can't

believe it. But what I severely said, wait, let's not, let's not go too fast over that point. What did they say? What did no kid hungry say? Were they like, are you kidding me? Yeah, they're very thankful. They're very grateful. I mean, do they normally get like $100,000 donations? I doubt it.

What do they say? You know, not enough. That's a good point. He's riling me up over here. I feel like- No, no, no. No, they've been great. But the thing that I underestimated,

so we gave a bunch of things for this NFT. It's not just the NFT. You get access to our Google Doc, which people seem to love. And what I really underestimated was we have a Discord channel. And initially I was like, no, no, I'm not doing that. I'm not doing that. It's too much work. I have no time for that in my day. It's so annoying. Guess what? None of those things are true. The Discord is vibrant and lively. We've got a million channels and people are engaging like all day long without our supervision. So I pop in here and there and say, Hey, blah, blah, blah, blah, blah. Like it's awesome. I thought it was going to be a chore. It's fun. Like getting

on that. What is it like a private Twitter? Basically it's more like Slack, honestly, it is more like, look, we've got, we've got finance and bullshit. Their bullshit is just data crimes, recommendations, podcast questions. And under finance is markets, personal finance, real estate, crypto. Look at all these people. How many people are members of the Animal Sports Discord? A lot. It's a lot. And it goes all day.

People are sharing personal stuff. It's awesome. I gave French Cafe recommendations. How much time do you spend on Discord versus Twitter? I'm on Discord a lot. You're not. I pop in and I read the comments and I

Twitter is more your main are you verified in animals like how do people know it's definitely you yeah yeah yeah because because you're a founder of it so they know me

what if I go in there and put your cell phone number it's so much more it's so much it's so much more Eric it's so much it's so much more pleasant Duncan are you in the Discord

yeah oh my god what are you doing in there that's what I'm saying I literally I gave someone Paris cafe recommendations. I do not spend much time on Twitter these days.

I sometimes go to LinkedIn to feel good for a while. Yeah. Just people are like, oh, great job. Thank you. Well, you ain't getting that on Twitter. No. Definitely not. It's just too brutal.

Yeah. LinkedIn's like going to your grandma's, getting a home-cooked meal, and you go back out to the streets. All right. I wanted to say congratulations. I think that's like an amazing accomplishment. Yeah, really. That's cool, man.

Thank you. Yeah, by the way, last thing I'll say. I spent like five minutes on the No Kid Hungry website just poking around. Like I was like literally almost in tears. It's just the fact that this is like a real thing that there's kids hungry is just beyond horrifying. So the fact that we could get them so much money just means like a lot. Yeah, I don't like the fact that they were hungry kids. That shit pisses me off.

Okay, so my recommendation on the way in this morning, I was listening to Linzen has a podcast, Panic with Friends. He was on with Sina Nader. I hope I'm pronouncing the name right. He is the guy that did all of the branding for FTX. And he was telling the story of the pitch to Larry David and what that looked like. And so he says to Larry, do you want you like want to know like about blockchain, whatever? And Larry's like, yeah, all right. What is it?

So he goes, it's like a spreadsheet in the sky where it keeps track of everyone and who owns what. And Larry's like, okay. Meh. He's like, meh. Yeah. Imagine being a fly on the wall to see Larry David get pitched. All right.

Big deal. How much are you paying me? How much do they pay him? Do we know? I didn't want to throw out a number. I saw it, but I wasn't sure if that was verified or not. Anyway, probably a lot. All right, Eric, is there anything you're reading or watching or listening to that you would recommend to the audience before we get out of here?

You guys, I'll go with Netflix. I saw this where I thought he was going to say the Bogle effect. No, I'm not that bad. I already triple dipped during this interview. What are you watching? It's one of those limited series called Archive 81. Never heard of it. I saw it, but I scrolled past it because I didn't know what it was.

It's really cool. It's about a guy who has to restore old videotapes, which I love that concept. It works like a museum. And he's hired to restore these old tapes that were burnt in a fire in like this building in like Harlem or something and he starts to just, the video tapes have some like effed up stuff going on.

There's like a crime on it. And then it's like, that's in the 90s. Like eight millimeter. And the tapes were from the 90s. So it's him sort of dealing with stuff going on in the 90s that he's discovering while he's in this cabin like trying to restore these tapes. I won't go

into it, but just really cool, creepy, a little dark, if you like dark and sinister. Love dark and sinister. The characters are good. Is Tom Cruise in it? He is not. Okay, pass. No Tom Cruise. Hard pass. Alright, listen. This has been a really fun show. The time just flew by. We're going to take

like a five minute break and do part two. This is our 53rd episode. You can refresh your water. This is our 41st episode? The time just flew by. We're going to take like a five-minute break and do part two. So you can – This is our 53rd episode. You can refresh your water. This is our 41st episode? Yeah? I believe that's right. All right.

John, I know I gave you a lot to edit. So we'll end here and we'll give you some time to cut some stuff out before dinner. Duncan, what's up? What's up? The review. Oh, I always forget. Oh, by the way, I love the old school Denver hat. No, it's not Denver.

It's Durham Bulls. Yeah, that's what I thought. Oh, even better. I thought it was Denver too. Did you's not Denver. It's Durham Bulls. Yeah, that's what I thought. Oh, even better. I thought it was Denver too. Did you? Who the hell are the Durham Bulls? They're a minor league baseball team in Durham. Bull Durham?

You haven't seen Bull Durham? Overrated. Overrated. That's a good movie about baseball. I get it. I saw it for the first time when I was 36. My bad. It's not a great movie.

I mean, they're not as good as the Greensboro Bats were, but very good minor league. Dude, it's not great. And it's a very, very heavy dose of Susan Sarandon on top of it. The Sarandon-Kostner thing is weird. Too much. Okay. No Way Out. That's a movie. That holds up. We're not doing this. I have a good

review for us today. We'll do this later. So to be clear, we get too many just like super nice ones, which is great, and I love it, but this one's kind of fun. So it's from Must Love Orcs, and the subject is Hug a Yankee Today. A Hobbit fan. Yeah. Hug a Yankee Today.

I am a poor schmuck in Texas who will inherit some investable money in a few years. I know nothing about investing. Nobody in Texas knows the word schmuck. What are there, 12 Jews in Texas? No one is speaking Yiddish in Texas. I'm calling i'm calling bullshit right now uh i i know nothing about investing which is why i started listening to you i first heard josh on big technology podcast aside from the money josh and the other new

yorkers are entertaining and fit every stereotype about new york that has ever been in movies or on television i keep pinching myself when i hear humans actually talking that way the other new yorkers that said you all build trust and I would rather lose my fortune taking your advice than from any other starched NBA stiff in a high rise. But we love you. Come back here to compliments. Come to Texas sometime for some good barbecue. I have been to Texas, and I will return.

One of my favorite places. That's a really nice review. Send that gentleman a sticker with my compliments. And send him the Bogle effect. And send him a copy of the Bogle effect. Did you sign this for me? I can. I didn't want to presume. Dude, come on. I'll get a Sharpie.

Alright, listen. Thanks so much for listening. You guys are an amazing audience. Thank you for all the reviews, all the ratings. Thank you for following our new TikTok account, which is at the compound news on TikTok. Me and Nicole very much appreciate that. We're going to have some fun stuff up on there for those of you so inclined. New animal spirits coming Monday and Wednesday and another all new the compound and friends next week. See you then. Thanks to Eric. Thanks, John. Thanks, Nicole.

Thanks, Duncan. Kick us out. All right, you feel good? You ready to do this? By the way, the music. You like the butterflies now? Yeah, no, it's good. All right, hit record. It's very easy talking to me.

It's very easy talking to me. It's very natural.