The Compound and Friends - The Degen Dow, Trump’s Shadow Fed Chair With Jim Bianco, RIP Art Cashin

Episode Date: December 3, 2024

On this TCAF Tuesday, Josh Brown is joined by Jim Bianco, President and Macro Strategist at Bianco Research to discuss: the bond market, if Bitcoin could actually reach $13 million, the Fed's political dimension, and more! Then, at 39:45 hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick! This episode is sponsored by YCharts! Visit: https://go.ycharts.com/compound and and get 20% off your initial YCharts Professional subscription when you start your free YCharts trial and tell them we sent you (new customers only). WAYT survey: https://www.surveymonkey.com/r/ZH7WNM7 Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Ladies and gentlemen, welcome to the compound and friends tonight's show is sponsored by white charts Click the link in the show notes to explore why white charts is the go-to platform and get 20% off your initial Why charts professional subscription when you start your free trial and tell them we sent you new customers only? Go to go dot white charts dot com slash All right, guys, it's a big show. I'm talking to my friend, Jim Bianco of Bianco research. Jim is a portfolio manager. He is a research maven. He is an expert on the Fed and DeFi and markets and bubbles

and all sorts of great stuff. And I wanted to get Jim's take on some of the recent headlines. I asked him about MicroStrategy. I asked him about whether or not Jay Powell has to worry about being forcibly removed from his post and so much other good stuff. And then right after that,

it's an all new edition of What Are Your Thoughts with myself and Michael Batnick. As always, we talk a little bit about the Santa Claus rally slash catch up trade that looks likely isn't definitely happening, but we think it might. We also unveil for the first time ever the DGEN DAO. These are the 30 craziest stocks in the market. We created an index. We equal weighted them. You're definitely going to want to hear more about that. Plus, a heartfelt tribute to Art Cashin, who sadly passed away this week. Art made it to 83 years old.

He is a national treasure, a living legend, a presence on the New York Stock Exchange since 1959. And Michael wanted to say a few words. All right. It's a big show. Thank you guys so much for listening. Hope you enjoy and if you do, please leave us a rating and review.

All right, I'll send you there right now. ["The Compound and Friends"] Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of riddholz wealth management This podcast is for informational purposes only and should not be relied upon for any investment decisions Clients of riddholz wealth management may maintain positions in the securities discussed in this podcast Alright guys, I'm here with Jim Bianco my my old friend Jim, and he is the president and

macro strategist at Bianco Research, a provider of data-driven insights into the global economy and financial markets. Prior to Bianco Research, Jim was a market strategist in equity and fixed income research at UBS and an equity technical analyst at both first Boston and Shearson Lehman. These days, Jim is the portfolio manager at Jim. What's the fund called wisdom tree? Wisdom Tree Bianco fund WTBN is its ticker. All right.

So this is your one year anniversary. You're actively managed. It's a total return bond fund. And you told me you are top 15% of the funds in that category, according to Morningstar. That's pretty great. How do you feel? Feel good. I mean, we've had a very good year and we're hoping to build on that in 2025. That's awesome. I love to see it. I wanted to talk to you about the market melt up. When I watch markets start to get wild, you're one of the first people I think of. I've read your research over the years.

I've heard and seen you speak hundreds of times and yours is the take that I've been dying to get. So here's how I want to start this. Has the market gotten too excited for Trump's pro-growth policies and the state of the economy going into next year? Is it not excited enough or is it the right amount of excited? What would you say? I would probably, if you're going to ask me the question in those ways, I put about the

right amount of excited with a caveat. With a caveat, we're talking at the end of 2024. And I know crypto is up 100 plus percent. And we know that the stock market's having its second 25 plus percent year, unless something crazy happens in December. Gold is even up 30% this year. And there's this expectation among investors that a crappy investment now returns you 20%. And that's kind of your baseline because that's been the baseline for the last couple of years. Okay, I get that. But there's going to be an offset to that. And the offset to that is as we think that the economy is going to go, we're going to have

deregulation, we're going to have tax cuts, we're going to have earnings, everything's going to go. You got to get on board risk assets like stocks, interest rates are going to go up. Why? Nobody wants bonds. They suck. They only return four or five percent, not 20. Well, their yield will keep going up and going up and going up until they finally attract investors. There's an old adage, you know, in the bond market that yields usually keep rising until they break something. And the question that investors, you got to ask yourself is everything looks good. The economy is going to be strong. Earnings are going to come through. All these stocks are going to do well.

Well, what about bonds? What if we go to 5% in the 10-year note? What if we go to 5.5% in the 10-year note? Is that got the potential to drag that performance? That's your offset, I think right now, because otherwise, if the argument is gonna be, no, we're gonna have 6,600 on the S&P by the end of next year, if not more,

and we're gonna have another good year in all these risk assets. Oh yeah, and then there's gonna be hundreds of billions of people that are gonna, or hundreds of billions of dollars that are gonna wanna buy the bond market at the same time and be happy with a 3% return. I guess the question would be, where would the sellers come from that would enable bond yields to get up to 5.5% because

this year you had these huge rallies in stocks and in gold and in Bitcoin, like you mentioned, but those were accompanied by record inflows to fixed income ETFs. So who are the sellers of bonds that would put us into that situation, do you think? Well let's keep in mind too that record inflows into pretty much any type of ETF this year. True. You know, the crypto set a record, stocks are going to go over a trillion dollars this year, bonds have gotten a record too. So there's basically been a headlong rush into ETFs.

I think it's more of the relative performance game is really where it is because so much of the gains in the last couple of years have been very strong in all of these other markets that we're going to start looking at relatively. Okay, maybe I was in the bond market. Maybe I did return four or five percent. Or cash. Right. Maybe I was in cash. Right. And you would look in the abstract and say, well, four or five percent is, you know, it's okay. But then you look at what you missed and everything else. Right. And then you could see what you missed and everything else. And then you could see that reallocation.

And that's the thing that I think that you have to think about. The way I termed it, the offset. If stocks go, if risk assets go, if corporate bonds continue to tighten, what's to stop this other than some prediction that gloom and doom will hit us and the economy will fall into the sea. Sure, that could happen. I don't see it happening. But short of that is this offset that no one will want the safe asset and that their yields will continue to rise. Remember, as we talk right now, we're at about 422 on the 10-year note. We started the year 388. So we've had a year of rising yields while you've had that record inflow in the bond funds. And I think that if bond funds are going to continue

to have that record, then I think they're going to have to look more competitive with stocks. Is there a 10-year note yield level that you think sufficiently gets the stock market's attention and people say, wait a minute, maybe it's not all risk assets. Maybe I need to think again about abandoning the bond market. I think it's probably somewhere around four and a quarter to four and a half. We're slightly below that. And I've thought that and then that kind of got run over by the election. We got so much euphoria because of Trump won. And again, the euphoria means tax cuts, deregulation, stimulus in the economy

that the stock market ran. But I think it's around four and a quarter, four and a half. And let me give you a reason. If you were to look at valuations in the market, and really what I'm parroting here is Robert Shiller. And this is what he won his Nobel Prize in economics on and is Shiller PE, cyclically adjusted PE ratio or CAPE, which is now at about 38. If you inverse that and get the earnings yield, which is around 2%, add into that a risk premium, an equity risk premium, and inflation, and I'll bottom line it for everybody, the valuation in the stock market is so high that this moment forward, you should expect over the long term about a 6% yield in the stock market, maybe seven. Now, that doesn't mean next year is going to be six or seven, maybe next year is another 20, but there'll be an offset to that,

my famous word here offset. You'll have a negative year in the future that kind of gives you about a six or 7% return. Well, if the bond yield is now, you look at the 10-year yield at around 4.5%, that's like three quarters of what you can get out of the stock market with a lot less risk because bond market is still going to give you a positive return this this year So it will give you most of the stock market with a lot less risk And the reason I bring that up is that's the fundamental difference between now and five years ago five years ago We were in the Tina era There is no alternative and everybody had to be in stocks and the 60-40 portfolio the 40 leg

Bonds was crash insurance. You bought bonds because they would rally if the stock market crashed. Well, fast forward to the end of 24, all of a sudden the bond market's arguments look a lot like the 80s and 90s. It's a lower beta risk-adjusted competitive version of the stock market, given valuations in the expected returns that you should be looking at. That's a hard argument to make now because I don't think people are really thinking about bonds in those terms. They're either thinking about them as still being crash insurance.

You've got to own bonds because if everything goes to hell, the bond market rallies a lot, or they're still mesmerized that everything returns 20% and I'm not interested in the thing that has nowhere near a 20% return potential. So as a recently outperforming bond manager, you've got to choose which risk lever you're more willing to pull. And I guess sometimes you might be willing to pull both. But if you were to tell people where the better risk is, is it duration risk and going further out onto the maturity curve or is it credit risk,

which right now it looks as though we're at record low tides. There doesn't really appear to be much juice in taking credit risk here because the market is not pricing any. So what do you tell people is the appropriate way to think about how a bond portfolio might outperform next year? Well, in our portfolio, we are currently underweight credit risk and we are underweight duration risk. So we are positioned so we're less sensitive to the rise in yield so we would underperform

less. Where we overweight is in mortgages or convexity risk. Mortgage spreads are enormously wide. It's bad language, but they're very wide right now. If you want to get a 6% yield with no credit risk, you can get it in mortgages. I like the mortgage market a lot. We're well overweight in mortgages and also international. Like we're long the dollar, we're long dollar based bonds and we're long inflation protected securities bonds. Those are the areas that we think are the best areas in the bond market in order to get some return. Quick word about the bond market, just real quick. We all know in equities, you got to buy an index because

active equity managers can't beat the index over the long term. That's been well-known research. The research in the buy market is the opposite. It's about 50-55% of active managers can beat the index. The index comes in about the middle of the pack. And so active strategies have a benefit in the bond market that they can be generally outperforming strategies to begin with. You don't have to be extraordinary to outperform an index in the bond market like you do in the equity market. That's interesting. So your answer to the conundrum of do I want credit risk or do I want rates risk is to say none of the above, I'll go anywhere else and you find mortgages as a place that you can go overweight.

Yeah, that and inflation protected securities would be another one because I think that the inflation premiums will build and you'll benefit by performing there. And being long the dollar against short currencies, we have a position in that as well too, thinking that dollar-based assets will do better than global assets. In the future, we might change that one, but right now, we're long that way. Jim, can we detour into crypto land for a couple of minutes? Sure.

Okay. Michael Saylor recently laid out a thesis where the price of Bitcoin gets to $13 million per coin. And I believe that he believes. I have no evidence to say otherwise. You seem a little bit skeptical like something like that can happen without creating hyperinflation because just think of the wealth that would be created in that kind of a scenario, unless that Bitcoin 13 million coincides with all traditional assets collapsing in regular financial

markets. Am I crazy or does that seem crazy? No. To answer the first part of your question, I think Saylor does believe 13 million and that is not just a marketing ploy. And if you listen to his words closely, I think he is worried about the traditional financial system. This is me interpreting him as well. So let me put some numbers on it. Bitcoin is $100,000 today. He thinks we'll get to 13 million in 20 years. Bitcoin is $2 trillion in

market cap. In 20 years, if it gets to 13 million, it'll be $250 trillion in market cap. How big is 250 trillion? Yeah, I was going to ask you. Can you give us some context for 250 trillion? The world stock market today, the world stock market is 120 and the world GDP is 100. So it would be bigger than today's world stock market and world GDP. Now that is a tremendous amount of wealth. So let me restate the question this way. Let's say that we go to from 100,000 to 13 million in 20 years. Today $100,000 will buy you a top fully loaded cyber truck that runs around $100,000.

Will you be able to buy 130 of those when we get to 13 million, or will you still be able to buy one cyber truck when we get to 13 million in 20 years, because you've doubled the amount of wealth that the world has. And if you double the amount of wealth, the world has prices, people are going to bid for stuff and prices are going to go up. So I actually think I would say, look, there's a reasonable argument to make that Bitcoin goes to 13 million. I know what I've tried to argue is you won't like it because you're still going to get one Cybertruck maybe last,

maybe you'll get a used Honda. Yes, but if your wealth is in traditional financial assets in that scenario, you're not even buying the wheel on a Cybertruck in order for this to actually play out that way. Right, right. The assumption here is, the assumption everybody has is when it goes to 13 million, that the stock market will be up five or 10X at the same time, would be at nearly 500 trillion in assets. But don't worry, I could take that $13 million and I could still go buy a Hampton Summer

Home because no one else is going to have a $13 million coin trying to bid on a Hampton Summer Home, or I could go buy a Lambo. But that logic is not possible because on the way to 13 million, certainly, it'll be adopted by everyone on earth, including every central bank, every corporate treasurer, every pension fund, every insurance company. That's how it gets to 13 million. So in that scenario, is everybody rich and therefore no one is rich? That's exactly what hyperinflation becomes, right? That the prices of everything go up a lot, but they match the gain that you get in this extra

wealth. Now, if there is, and this gets to your DeFi question, right? What if there is on the other side, we look at crypto as a disruptive force. It's a better financial markets version. And we say, look, I don't want to issue stocks, I want to issue tokens, I don't want to issue bonds, I want to issue revenue tokens, which would be the equivalent of a bond. I want to trade in the crypto space on some of the crypto exchanges as opposed to the New York Stock Exchange. And we then see a migration over to crypto, if away from TradFi, that would actually maybe work. There was an argument, I don't,

I know Josh, you'll probably remember this. There was an argument to be made about 10 years ago when Apple became the largest stock in the world. How did it get its market cap to be the largest stock in the world? Because every other phone maker, Nokia, Palm and everything else, their market caps got sucked into Apple.

And that Apple grew because it was the replacement for everything else. Well, 250 trillion could happen if that $120 trillion of stocks and bonds and everything else gets sucked into the crypto space and it goes up and they go down at the same point. So like I said, Apple did make it to the largest market cap about 10 years ago with Palm going out of business and Nokia going out of business and the rest of them, Blackberry going out of business because they all ran into the Apple iPhone. Well, you can make a similar kind of argument for crypto going to 13 million without hyperinflation, but that would be enormously disruptive to the financial world as we try to pivot

to a new type of instrument. I'm not saying you can't do it. I'm just saying it won't be an easy road. It couldn't do that on its own without there being major effects felt everywhere else, from the price of goods to the valuation of all other assets. It would be really difficult for that to just take place in a vacuum.

I agree. And for those that argue, you see these memes online that 10 years ago, a Bitcoin bought a pizza and now buys a cyber truck. Yes, because going from zero to $2 dollars didn't produce a global wealth effect. But now that you're at two trillion and you're talking about 130x bigger gain, you're talking about a major global wealth effect that would take place in an asset that is just a store of value right now, as opposed to being a financial system. And that would then create all that wealth. All you got to do is just look at crypto Twitter, right?

What does everybody buy? You know, have fun staying poor is what their argument is. They think that this thing is going to go up and they're all going to own Hampton summer homes and they're all going to drive Lambos. The problem is that that wealth that it will create is going to be offset with the prices. I guess this is the part that I could never wrap my head around. If this is a manmade instrument and two of the primary allures of it are the network effects because there's enough buy-in and there's enough Bitcoin maximalism that just

people have accepted as a store of wealth combined with the proscribed scarcity of the amount of coins that will ever be. Okay, I understand those two things. I just don't understand why another coin couldn't have the same exact features. Let's take Solana. There's a certain amount of Solana that will ever exist and everyone uses it in the now dead NFT market. But hypothetically, if it found another use, all of a sudden, that would be as attractive or almost as attractive as Bitcoin.

Why wouldn't there be five versions of Bitcoin rather than Bitcoin itself going to 13 million a coin? Well, that's a good question. I mean, it all depends on what- It's theoretical. I don't know the answer, but I know it's the question. I would say that the answer to the question is, what do you think that the crypto space is going to try and do? If you think it's a store of wealth, then if you think of it's a medium of exchange

and that it has a hard cap of 21 million coins, there is value for that, but there isn't $250 trillion of value for that unless you get hyperinflation. But if you would draw it bigger, like take the ETH network or Solana or some of the layer 2s, like the polygons of the world and stuff, they then become the transaction coin for a whole new financial system that has trading and lending and borrowing and insurance and gambling and lotteries and everything else, then the value of that network grows exponentially. So I don't think that the idea is that we need $250 trillion worth of a medium of somewhere to store our wealth like gold. Gold never got to,

throughout the 5,000 years we've used gold as a store of wealth, it has never gotten to that level of any kind of economy that it's ever been used in the gold standard. But yet, Bitcoin is gonna get to that level, not unless you have hyperinflation. Gold can assume that kind of level of value in an economy that is collapsing through hyperinflation. So like all I'm trying to say is that I want to hear somebody give me the argument that we're going to go to 13 million and everybody's

going to be fabulously wealthy and there's going to be no impact from that fabulously wealthy. Like I said, they all think you've got to own Bitcoin. It's going to go to 250 next year. It's going to be a million in three years. And like I said, when it gets to a million in three years, you'll be able to buy 10 cyber trucks. Or is there going to be some kind of a impact in terms of what happens to prices of everything else as it continues to rally? Because now at $2 trillion, it's become a real asset. It is not just something you were buying pizzas with 10 years ago that no one noticed.

I want to talk a little bit about some of the stuff that's happening at Fed, at Treasury. I know this is something that you're very passionate about. I've learned a lot about both of those organizations through listening to you talk. I guess we could take them in either direction, but I would just point out over the weekend, Judy Shelton threw her hat in the ring. She's been throwing her hat in the ring for a long time to potentially take over for Powell in 2026. And she wrote a piece called Trump Should Challenge the Fed's Policies, which sounds

like it would be catnip for Trump world. I could picture somebody printing that out and running into his office, waving it around. That's pretty much what he wants to hear. But then the arguments she posed in the op-ed are fairly untrumpian. She criticizes inflation in the stock market as having benefited the top 10% of Americans, which is true. I think Trump likes the stock market going up, especially when he's in the seat. So what did you make of her comments and her candidacy to run the Fed at some point in the future?

So just to start off, I'm a big fan of Judy. Recall that in 2019, Trump appointed her as a Fed governor. That's right. And she failed to pass Senate approval. She didn't get 50 votes. It happened at the end of his term, I think in December of 2020, Chris Waller was voted through at precisely the same time. So given that she's failed at the Senate already, I think that's a tall order for her. Most likely, he's got Kevin Warsh tapped as the-

So let's talk about Kevin. Yeah. So Kevin is a former Fed governor. So he's already sat in the seat. Before that, if you want to go inside baseball with him, he married Jane Lauder, Ron Lauder's daughter. Trump has known Ron Lauder of the Estee Lauder family fund money. Trump and Ron Lauder have been friends since they were in grade school from 10 years old and Trump has known Jane Lauder since the day she was born and she married Kevin Warsh about 20 years ago. So he attended their wedding so he's known Kevin Warsh for a long time. So it seems like Warsh is probably because he didn't get the Treasury job or the National Economic Council job looks like he's going to be groomed as the

next Fed chairman. It's pretty clear if Trump is not going to reappoint Paul. Now, is Trump going to fire Paul? I don't think Trump's going to fire Paul. I don't think he needs to have that. I don't think it's worth it. It seems like a lot of effort for something that is not really going to benefit him as much as it's gonna cost him.

But what he can do is he can, and it's being referred to as the shadow Fed. And what the shadow Fed is, he might, Paul's term ends in May of 26. So how about in May of 25, you appoint Kevin Warsh to replace Paul? There's no rule that says you have to wait till 30 days. You say this is the new guy, he's coming inevitably.

Right, and I'd like the Senate to approve him earlier rather than later. And then all of a sudden, he's got a microphone where he gets to opine from the cheap seats on what the Fed is gonna do, and his voice is taken very seriously. Jim, if he does that for a year, how collegial will the response be when he actually gets into the chair?

Don't you think the other Fed governors, especially the voting members, anytime he comes out and countermands whatever they've decided, don't you think that'll rub people the wrong way within the organization or is that the point? I think that's the point. Okay. I think that that's the point. And I think, you know, let's be clear on if he rubs the organization the wrong way,

how would he rub the organization the wrong way? If there's a scenario in 2025 that the Fed says, look, the economy is doing strong, inflation might not be completely licked, maybe we should be raising rates. Trump would be correct to say, you cut rates seven weeks before the election by 50 basis points.

A Fed has never initiated a rate cut that close to an election before. Then I win and you wheel around and you start raising rates. You're looking very political. So that would be something that you would probably hear Warsh argue about. Maybe there's legitimate reasons to do it and there probably will be, but the optics will look terrible on it. And if Warsh wasn't there to criticize them, there'll be others that'll make that same point. If the Fed were to find reasons to continue to cut rates into 25, I don't think Warsh would really be,

you know, critical of those type of moves. So it just depends on which way it goes. By the way, I should say for the record, I do like Jay Paul. If it was up to me, I would reappoint him. But obviously, Donald Trump doesn't think the way that I think. Jim, in the Trump era, or one of the hallmarks of the Trump era has been this idea that we have these norms in government, in institutions, and we think that those norms are extremely fragile. And then he comes in and he breaks that norm.

And a lot of people expect the world to come to an end the next day, and then it just doesn't. And everybody just kind of like not releasing his tax returns. He was the first presidential candidate in modern history to refuse to do so. And then like it just didn't matter. And now I don't know that they'll ever be able to force any presidential candidate from either party to release ever again. They might volunteer to because they just decide, hey, this doesn't hurt me. Who cares?

But like that's an example of a norm that's just gone. You're hearing a lot of people who are Fed watchers, a lot of people who are institutionalists, people from the financial media, people from center left politics, people from the chamber of commerce wing of the Republican Party who are just kind of like traditionalists. You hear a lot of concern that having a president meddle with the Fed to the degree that Trump sounds like he wants to will somehow break the institution or break the markets or ruin confidence in the dollar. Is there some credence to any of those arguments about preserving the norms and not trampling the Fed or attempting

to influence the Fed more so than other presidents historically have? Just how do we get comfortable with what it looks like is about to happen here? I think we have to start looking at the current state of the institution itself right now and say, is this really the way that Congress set it up? Jay Paul was interviewed by David Rubenstein and Bloomberg back in the summer, I think July. And he talked about how he literally talked, he said, look, the week before the MFED meeting,

which would be next week in our terms because the next meeting is the 18th. He calls every member of the FOMC, has a half hour conversation with them and asks them how they're going to vote, what they want, what they're interested in. And he basically tries to find a consensus so that he gets a 12-0, maybe 11-1 vote every single meeting. He thinks that's a virtue. If we allowed the Chief Justice of the Supreme Court to do that, to cajole all the other associate justices so that every vote on every law was 8-1 or 9-0, we'd have a revolution in this country. The members of the Federal Reserve governors

and the district bank presidents are not there to serve Jay Paul They're there to serve the American people and should be independent voices. So you think more public debate Coming from within the Fed is healthier Kind of a team of rivals approach they arrive at policy But it's louder and it's more disagreement and less kumbaya. You like that better. Every central bank does it that way. You'll have six, three, five. Most of them have nine voters. You have six, three, five, four votes at the Bank of Japan, the Consensus Society,

at the Bank of England. The European Central Bank doesn't release the vote tallies, but we know that there's disagreement with, they have 27 voters, within their voting ranks, there is disagreement within that. That is healthy and that, otherwise, what's the point of a governor? If the governor's job- Let me take the other side. Is that unduly disruptive in times of emergency where it's very important the Fed speaks with one voice and acts?

And that doesn't happen all the time, but there are times when I think the American people and the markets in general, what they want to hear is this is the right path forward and we're doing it unanimously. Isn't there some power to having that be the optics? In an emergency, you do need that optics. And in an emergency, I think you would get that optic if you had responsible Federal Reserve governors that understood what was happening. If you go back to 2020, the last crisis that we've had, and you read what the Fed was doing, if the Fed had adopted

my approach, there wouldn't have been much disagreement on what they were doing in 2020. Well, let's use a more squarely example. 2023, I know this is FDIC more so than Fed, but effectively, without Congress being involved, without any sort of public review of anything, the authorities decided we're going to dispatch with these three banks and we're going to basically back up all of the rest of the banks. And this is just the way it works now. I feel like that probably saved the market in 2023 and set up the AI rally that ended up giving us a huge bull run. If you had more debate while these banks were failing, you probably would have had more

time for more contagion and a different outcome. Yes, but you also, if you had more debate, you might have had a preemptive of that as well. What I'm thinking about is, you're right, you're talking about when Silicon Valley and Signature Bank and Silvergate Bank failed all in the same week and eventually Republic went, the Fed created the bank term funding facility, the BTF in order to give cheap money to all of the other banks to keep them going.

They did it in three days. Right. It's hard to do. They would have done that in three days earlier. But I also think if you back up, and we do know from congressional testimony that in February, the month before, maybe January, two months before, the Fed was given a presentation by a couple of staffers about the unrealized losses that were being mounted at banks because of the big rise of interest rates

and how that could propose a systemic risk problem. And unlike page seven or eight of the slide deck, they used an example, Silicon Valley Bank. They were told that this bank was teetering and they didn't do anything about it. Now maybe if you had a bunch of independent voices in January, a couple of them raised their hand and said, wait a minute, Mr. Paul, what about this?

What are we gonna do about this instead of, that's an interesting theoretical exercise. Thank you very much, now let's go to lunch. We have to deal with this problem before it metastasizes into a crisis. Maybe we would have had that kind of discussion. But I think when you get to a crisis, I agree that at that point, there's really only one path.

My criticism has always been, I didn't criticize what Bernanke did in 09. I didn't criticize what Powell did in 2020. The criticism comes, and this is where alternate voices would happen, is you did what you needed to do to get us out of the crisis. But in the case of Bernanke, you did it then for another seven years when we didn't need to do it. QE.

You do it too long. And so maybe what the argument, I would if I was a Fed governor would be, I'm all in on all of these crisis management tools, but I'll be raising my hand sooner rather than later when the crisis is over. We don't need to keep shoveling free money at everybody for years afterwards when the crisis is done. That's such a great point. It's something that, it's something that, look, I don't know nearly as much about central banks as you do, but it's something that just instinctively as a normal person, you watch quantitative easing go on for seven years.

It's like, we're not actually in a crisis anymore. Maybe this is out worn, it's useful. Maybe we don't need $13 trillion worth of international bonds selling at negative interest rates. We might have gone way past the line and I could think of five or six different examples of what you're saying where you don't have to understand the banking system perfectly. You just have to have enough common sense to realize COVID being a great example COVID being a great example and the pandemic and the aftermath. To what purpose are we still funding 2% mortgages when one of the biggest economic problems in the country right now is housing affordability? Who is this meant to help?

I can't think of why we're still doing what we're doing. Why are we buying mortgage bonds in a housing affordability crisis? So there's a lot of examples of that. And I think most people would absolutely agree with what you're saying. You're right. I would argue that the answer is political. They're afraid to stop these programs because they're afraid that, oh, if we end the program because we don't need it and the stock market wobbles for a couple of weeks or a month,

then everybody yells at us and it's our fault. So let's just keep going with it. Look, the Fed is very political. There's an argument that's been said that the Fed is not necessarily partisan, but they are political. What that means is that they don't sit, I don't think they sit around the FOMC boardroom table

and say, we don't want Donald Trump as president. So what kind of policy can we do to not make him president? I don't think they do that. But I do think they look around the table and go, how is what we do going to be perceived on our reputation? And maybe we ought to consider our reputation, like do we want to end ending buying mortgages? Because what if mortgage bonds spike up or prices fall because we're not supporting them and mortgage rates go up even higher?

People are going to yell at us and say it's our fault. So therefore there's this inertia to not change after they've instituted these programs. Well, I think the idea of there being a stalking horse shadow Fed chairman who's got a microphone in front of him and the attention of the president is probably going to lead to a lot of Fed related news this year. I feel like you're going to have a ball one way or the other. And we'd love to check back in with you again.

I want to, I want to tell people where they can learn more about your research and, and your money management. You are Bianco research.com is the mothership you You're on Twitter, at BiancoResearch. That's correct. And Jim Bianco on LinkedIn. Those are the two social, oh, and BiancoResearch on YouTube. We have a YouTube channel too. So those are our social media where you can find out

about us. BiancoAdvisors.com to find out about our index. And WTBN Wisdom Tree Bianco Nancy is the ETF that tracks our index. Jim, you're the man. Let's not wait so long to do this again. Thank you so much for joining us and everybody follow Jim and we'll talk to you soon. Ready? What are your thoughts? See, people don't know there's lyrics to this song.

They think it's just... That's how it goes. Ladies and gentlemen, welcome to what are your thoughts? My name is downtown Josh Brown here as always with my partner, my friend, my mentee, Mr. Michael Batnik. Michael, say hello to the folks. I mentor you a little. Come on.

Give it up. All right. Shout to everybody who joined us for the live premiere. We always appreciate it. Thank you guys so much for being a part of the show. And we're going to have a lot of fun tonight. We have a lot to go over first. I'd like to give a shout out to our sponsor, best sponsor in the world. Why charts, Michael, please read highlighted text and then riff.

I will not do that. Listen, what do I use why charts for? You might ask everything I say, including keeping warm. Look at this. Look at the swag. Yeah. Or this to my walk to Starbucks. I wanted all over town today. I use Starbucks.

Nope. I use why charts to drink my Starbucks. I use why trust for economic data. I've got dashboards. My dashboards are not your dashboards. They're proprietary. They're customizable. I've never seen your dashboard, Josh, but believe me, it's not as good as mine. Yeah.

My dashboard is like IMDB is one tab. And then I just, uh, I got off the white charts webinar today with Sean Brown. We kind of did our like, uh, state of the advisory business and trends for 2025. It was a lot of fun. We used a lot of, uh, white charts charts and a lot of compound charts. Shout to Sean and Chart Kid Matt. One of the interesting things was about we took polls. What percentage of people think that they're going to be using alts and, and

private equity, private credit or, or which categories they think they're most likely to use. But we did a lot of stuff like that. So if you're an advisor and you care about this stuff, definitely recommend checking out the YCharts webinar with me and Sean Brown. Guys, if you've never used YCharts Professional before, click the link in the show notes and get 20% off your initial white charts professional subscription. Tell them we sent you it's go.whitecharts.com slash compound.

Okay. You're up first. Take us in. Oh, am I? Oh, I thought this was you. Okay. All right. So we around here and Wall Street generally speak a lot about the Santa Claus rally.

Yeah. Right. Which is the simple idea that the market tends to rally from a period of, I don't know, JC, Jeff Hirsch, they've got the stats, but like towards the end of the year, and especially in a year when the market is up, there is a tendency for people to chase it to your end. And that's like sort of true, but actually maybe not exactly as true as we thought. Callie Cox, chief market strategist at Red Bulls World Management, she brought some data. In a post she wrote, Callie says, since 1950, in years when the S&P 500 has been up 20%

or more through November, the index also rose in December about 75% of the time. That sounds promising, says Callie, until you hear that in all other years, the probability of a rally in December was 74%. Gosh damn it, Callie. Wait, really? This is shattering. I haven't read her piece yet. This is shattering one of my long held beliefs.

So in every year, whether the market's up 20% or not, the chance of it rising in December is 74%. Yes, I don't know that this necessarily negates the fact that Santa Claus does come to a rally in the stock market. It's not even Santa Claus, it's like basic seasonality. Yeah, yeah. We know that there's a 50% chance that the stock market will make its high for the year

in either December or January. Nicholas and Jessica Raeve have been doing great stuff on that. 50-50. So you can't say that about any other two months of the year. So I don't think that this is necessarily disproven, the Santa Claus rally, but I thought it was interesting because I've never seen it laid out that way. She also shares that, chart on please, only once in the past 22 years Has the best performing sector from January to November also?

Been the best performer in December and that would pour a little bit of cold water on this idea The chase idea. Okay. So in other words, alright, but so I don't think it does and I'm gonna tell you Well, tell me why you think it pours cold water on the idea of performance chasing. Just a little bit, just a little bit. But why, but like why? Because you would think that people would tend to chase the hottest sector, no? Michael, Michael, Michael.

No, I'm just kidding. No, I'm just kidding. My, my conception of the year-end- By mentor, ladies and gentlemen. Yeah. My conception of the performance chase was not that people would necessarily chase the biggest winners, although of course you could picture people doing that. It's that they look for catch-up trades elsewhere and they say, what didn't go up as much yet? Or might even if they're suicidal, what went down the most?

I never thought of the catch up trade as, oh my god, I missed meta all year. The stock was 200. Now, it's 400. Let me buy meta. I've always thought of it like I missed meta. Alphabet's not up as much. Let's ape into Alphabet for the last. But you think like the market thinks that way? No, I think portfolio managers think that way. Portfolio managers do not say, what's up the most? I want to add it so I look like a clown in front of the IC who I have to report these trades to

at the end of the quarter. So I think the way portfolio managers think is, well, what's the trade that I haven't missed yet? So I think the chase is a market wide phenomenon, but I think the way it manifests itself is people looking for catch up. So, I mean, that's just how I've always thought of it. Here's another seasonality thing. So goes January, so goes the year, right?

That's something people in Washington say. As goes January. So as goes, not so goes, as goes. Okay. So I thought this was a great chart. I think, who did I pull this from? Was this Daily Chartbook Maps? This was at Goldman Sachs. I'm saying, who is the via via? Where did I get this from? I think it was Daily Chartbook via Goldman Sachs. Okay. So what we're looking at for those who are listening is the median monthly flow into equity mutual funds and ETFs as a percentage of total AUM.

And this goes back to 1996. And what I noticed right away is look at January, biggest bar on this chart. So a lot of decisions on where people are allocating assets happens in January. Yeah. You know what? Would you have guessed this if I asked you what month has the median monthly flow been highest as a percentage of total AUM? I think I would have guessed January. I think I would have. I would have said December or January. And December actually it's negative, which also makes sense.

This is people withdrawing money either for Christmas or to pay taxes. Let's assume something along those lines, right? Well so I like the data that Callie shared, but I also can't be convinced that there is not some seasonality element. If the market's done great all year, there's no reason to think that December won't be a good month unless something comes out of nowhere and takes us off track. Do you know where Santa Claus is from? Freeport?

Turkey. Turkey. Yeah. Not a lot of people know that. I didn't know that. Was he there to get hair implants? The model of what Santa Claus became, like the proto-proto version in folklore, it's Turkish. And all that Sinterklaas stuff from the Netherlands is not up. We have the elves. Look at this. Hey boys. Hey, boys. Oh, a double hug. A double hug. What could be? Look at this guy. Look at this guy. All right, get off screen. Love you guys. Go.

I love you. Go, for real. Coby, we're under time constraint. Yeah, go ahead. Keep going. All right, so you were saying... So I was explaining Santa Claus. Mr. Claus. It's really Frank L. Baum, the creator of The Wizard of Oz

and all those great characters, who creates the version of Santa Claus of Oz and all those great characters who creates the version of Santa Claus that we know in the modern day. There were a lot of like cartoons from magazines and newspapers in the late 1800s, early 1900s New York that like if you were to point to where's like this Americanized Santa Claus from but the original Santa Claus folklore is Turkish. Okay. We're going to introduce the DJen Dao. I'm so excited about this. So I think that if we were to make a list of the biggest themes of 2024, one of those themes would have been degeneracy.

Can we agree on that? Like that's been like one of the things that people have done the most in the markets. The leverage ETF chart that we shared that about about last week, it's one of the charts of the year for sure. Yeah, 100%. So people, and I guess this makes sense, you're in year two of this massive bull market and back to back years plus 25% for the S&P. Of course, people are like, what else could I do? Options trading, leverage ETFs, Bitcoin trusts, AI.

It's just like, this is like one of the big things. And you were dead right. I want to give you credit. In 2022, Ben or me or maybe both of us posited this idea that like, the apes are dead, the Reddit, the Wall Street bets, it's like it's over. You were like, dude, these people are never going away. And you could not have been more right about that.

And I was on the other side of that. I thought it would take a generation for people to lick their wounds and wanna speculate again. It took a month. We are so back, baby. Anyway, please. Yeah. I guess just the thinking was that they were just going to move from whatever's working

to whatever's working. And that's exactly how it played out. Okay. This is a Wall Street Journal article from July of this year, just to define the term degen. The article says, quote, degenerates are swarming the stock market. A risky style of trading is roaring back in popularity, driven by amateur traders who call themselves degens and pile into long shot trades that proudly have nothing to do

with the conventional ways of assessing investments. Some are flinging cash at specific stocks or cryptocurrencies just to be part of a movement. Others are sticking around for the jokes and memes. Degen can be a noun, adjective, or verb in their language shared mostly among young men. It's a self-deprecating identity that some have traced back to the term degenerate gambler. Behind it is an ethos that values audacious bets on the market and is skeptical of investment norms. You only live once, so why bother with traditional advice? Yeah, I think we have an epidemic in this country of 20-something year old

men who are way too online and way too unengaged with the real world, probably not dating enough, probably not thrilled with their careers. And they have sought refuge in degeneracy in general, not just in stocks and crypto, but in sports betting, in harassing people on the internet, etc., etc. It's not great, but we can have some fun with it, right? There's no rule saying we can't see the silver lining here. It's made the market a little bit of a circus

and it's given us a lot to talk about. And it's been making the headlines pretty much every week. There's been some insane thing taking place. And who doesn't enjoy a little bit of that from time to time, yeah? Yeah. Are you a degen, Are you border? Are you on the border of human slash degen? You getting close? Um, yeah, no. I mean, you don't seem degen to me

as much as maybe you were 10 years ago. No, I don't like, I don't, uh, I am and I'm not. Like, I bet every single weekend I bet on every next game. Yeah. So I've got like that, but I don't, uh, I am and I'm not like I bet every single weekend. I bet on every Nick's game. Yeah. So I've got like that, but I don't like ape into investments. No, you don't. It's just so antithetical to like, even though I'm tempted, like, I'll be honest, last week, I almost bought the micro strategy dip, but it's just, it's just so far field from like what I believe in to be.

I did that. You know, you're also knocking on 40 and you have two kids and it's impossible to have time for that. When I started investing, I was trading options out the ass and I got over it. All right, well listen, maybe we just invented a vehicle for you to trade because we have created and you're seeing this guys for the first time ever,

the DGEN DAO. I wanna tell you a little bit about the methodology of our index and I want to stress. This is not investible It's not an ETF don't buy these yet. Yeah We're in talks. All right 30 components This is the most me me high beta absurd trading vehicles in the market Favored by the Robin Hood stock to its Wall Street bets crowd. These are long only investments and there are no ETFs in here. These are Bitcoin related stocks, gaming and gambling companies, Cathie Wood, AI, Trump, space stuff, Reddit stuff, Reddit itself.

All the major DGGen food groups are represented. I think we ended up equal weighting these. We started with 45 names. We removed the 15 that were too small by market cap and equal weighted what was left. I don't know if we have a drum roll, but let's throw a chart up of the DGen DAO performance. Look at this. Look at this. But I don't have the components here. Do you have the I want to that was the whole point, right? No, it's here. No, next try. There it is. Oh, it is. What? Oh, these are the tickers.

All right. That's cool. An equal weight basket of the 30 most egregious meme stocks. They're not all meme stocks, but they're like most egregious. They're meme. First of all, shouts of Sean and chart kid, Matt and Callie. We had a lot of help internally on this. Um, first of all, look at the left pain before we get into the tickers. Does that surprise you? That, uh, that performance that eight 80 plus percent drawdown now, but like, dude, we were there, but look how it's like turning up. Yeah. I want to get long. Now look at just the year to date in the right pane. So we base to 100, it's at 149. It's up 50% year to date. I think it's 44% year to date is what

Sean shared. And that is obviously way ahead of the S&P 500. This thing is ripping into your end. So you own one of these stocks? I own Nvidia and Reddit. Oh, you own Reddit. I forgot about that. I do. And obviously both look amazing. All right, let's go through some of these names. Tell me if there's anything on here that you think doesn't belong. A, a lot of people know ACHR. Do you know this company Archer? No, no, I don't. This is like space stuff. Okay.

So it's not, yeah. Straz was telling me about this. Yeah, of course he was. Um, all right. AMC goes without saying, uh, app love and APK is the best. By the way, did you, you made the case for this and then you didn't buy it. Yeah. Idiot that I am.

It went up. It went up. Uh, I think maybe 200%. So idiot that you are. Remember when Coinbase was going to zero? Yeah. Well, back to back my two best calls the last couple of years. All right.

Coinbase is on there. Uh, Carvana of course has to be DJT. Of course we put in D. DJT, of course. We put in DraftKings and Flutter. Flutter, a lot of people know this. British company trades here. Parent of Fandool. Yeah, I had no idea.

JC told me about this. What is GEO? GEO? I have no idea. Let's see. GEO is, oh, it's GEO Group. I have no idea. What is this thing?

Engages in the ownership, leasing and management of secure facilities. The f**k. This is a meme stock. Maybe it's. All right. We'll have to ask the boys. We're too old. Whatever, dude. Just buy it. Just buy it. GameStop, Hims and Hers, of course. Robin Hood has to be on here. Yes. Lucid, which is electric cars.

Mara, which is a blockchain mining, whatever. Also now a Bitcoin trust. MicroStrategy, which is probably one of the biggest market caps on here. Nvidia, can't not include it. What's PD? PD, PagerDuty, how'd this make it? Is that PD?

P-diddy? This doesn't look like it belongs at all. No, there must be a reason. What's PD? PD, Pager Duty. How'd this make it? Is that PD? This doesn't look like it belongs at all. No, there must be a reason. It must be a meme thing or something. I don't know what it is. Pound's here, Roblox, Reddit, Riot Blockchain goes the self-explanatory, Rivian, which is electric trucks, Rocket Lab, which this is the thing people buy because Tesla's price is too high.

You know who told me about this thing 10 points ago? Joe Fahmy. And I didn't listen. It's a money losing space rockets, blah, blah, blah. Worked. RUM, which is Rumble, which is another now Bitcoin trust. SMCI, which was like, it was Nvidia, and then it was like a short, and then they said they had to investigate their own financials, and then they cleared themselves, which is really funny. But anyway, that stocks, one of the wildest

stocks in the market that's on here. SoFi, okay, I kind of get it. Soundhound, which is AI. S-O-U-N. Haven't checked it on this in a while. Oh, it's ripping. Of course it is. It's in the DJ and down, Michael. Yes. Why is you on here? What is this? Uranium? Udacity. Oh, Unity software.

Unity, not Udacity. Unity is like a big gaming one. Unity is metaverse stuff. All right. And VST, which that's really interesting. That's this is like this is the utility. This is the utility that's powering all the AI data centers. But look at this. Just look at the performance and you'll understand why it's here. Yeah. Looks good.

This thing is out of control. I think it's the I think it's one of the only S&P 500 names that's up more than Nvidia. And it's like, it's a former utility that now trades as an AI proxy. I'm quite surprised that the DGEN DAO or something similar does not currently exist. It might have, we've never heard of it. I don't know. Like there might be, well, there were the ETFs like member, um, member Van Ecke launched the thing with Port Roy, Buzz.

Yeah. Buzz. But so this is something different than that. Yeah. However, I also do think that people like to really DJ and they're not looking to buy an ETF and show, you know what I mean? Like they want to be active. They want the Jews.

They want to trade. Yeah. Well, we're definitely not selling this, but I will say it's up 44% year to date again So if you want if anybody's listen anybody wants to make an ETF and pay me royalties Anyway, I think we should follow this thing on like a semi. Yeah. Well, we definitely will and You know last week. I was telling everybody listen forget signs at the top. It's only the obvious in hindsight I was telling everybody, listen, forget signs of the top. It's only obvious in hindsight. Boom.

Josh Brown, Michael Batnick launched the DGEN Dow on their podcast. That might be one of the signs of a top. That could do it. All right, let's talk more about some of the stuff going on inside of the market. So this chart, again, is a via via from Daily Chartbook via JP Morgan.

We're looking at options retail market share as a percentage of total. What? Who is doing this? What? Can I ask you a question? 20% of options trading is retail. Am I reading this right?

You know what? It's funny you ask because I'm not exactly sure. But whatever. You know what it is. It's a mania. It's a mania, but it says stock number of trades as percentage of total orders. So that part threw me off. But be that as it may, it's a mania. Okay, next chart asset manager positioning at extremes. Not surprising. You know, not surprising, but this, this did surprise me, Josh.

Next chart. Uh, AAII bears bearish sentiment shot up. Not, not to extremes at all, but like, you don't usually see this in a bull market. Can I save you probably seven hours of your life? Don't spend five minutes a week on this. Like, like that'll save you seven hours a year, let's say. No, I don't. I don't.

But I thought this was interesting. No, I know. But I have been watching this for as long as I've been in the industry. I couldn't tell you what this ever does other than mimic, other than reflect whatever the stock market just did over the prior three days. I don't honestly know what this is an interesting divergence. That's all. Well, because the market went up and this thing shot up, the bearishness. Usually don't see bears. People get bearish. It's not really shooting up though.

It's a minor little... So this morning we got another announcement from BlackRock that they are furthering their entry into the private markets. Before we throw up the chart of the BlackRock versus Blackstone, let's just go through some of the headlines first. So a couple of months ago, back in June, BlackRock, we spoke about this on the show, BlackRock acquired Prequin, the leading private market data solution provider.

A couple of months later, they announced on their earnings call that BlackRock completes acquisition of Global Infrastructure Partners. Global Infrastructure Partners is a private investment company, they invest in a, you guessed it, infrastructure. And then today, BlackRock to acquire HPS investment partners to deliver integrated solutions

across the public and private markets. HPS has $150 billion in client money, give or take, and mostly private credit. They paid 12 billion for that. In stock. And why not? The stock is working, spend it. So BlackRock has been the dominant player in public markets, both in terms of equity, fixed income. They cleaned up. They competed with Vanguard. prominent player in public markets, both in terms of equity, fixed income.

They cleaned up, they competed with Vanguard. They went head to head. I don't want to say one's winning, one's not. They're both winning, but BlackRock has done incredible things there. And now, not surprisingly, they are making a big push into private markets for reasons that we can get into. But one of the obvious ones is that's where the money is. So chart on, please.

BlackRock in their public equity vehicles is that's where the money is. So chart on please. BlackRock in their public equity vehicles is charging, like the ETFs are low single digit basis points. So the chart on the screen is as such. On the left-hand side, we have the assets under management. This is as of the end of the third quarter 2024. BlackRock manages or managed $11.5 trillion of 2024. BlackRock manages or managed $11.5 trillion compared to Blackstone, which manages one-tenth of it, $1.1 trillion, not even one-tenth. Okay. And then we have the market cap as of the same period of time. And BlackRock trails, yes, trails Blackstone, $140 billion to $187 billion. Why is there such a discrepancy given that the managers? Basis points.

It's the fees, it's obvious. That's it. Yeah. So this is the game, and I'm not saying this is, I'm not judging this. We're all capitalists, right? And BlackRock is getting to the game in a big way, probably will lower fees for the industry, because they are the 800 pound gorilla and it's coming. It's here.

What's really interesting about this is BlackRock is managing 10 times the amount of money as Blackstone, but Blackstone is a bigger market cap. BlackRock was a spinoff from Blackstone. In the very early days, Steve Schwartzman and his partners who founded Blackstone recognized that there was value to, even though they were investment bankers doing transactions, there was value to having an asset management arm. And then ultimately, it didn't make sense to be part of Blackstone. They recruited Larry Fink, who had just blown up in a horrible trade somewhere in Boston.

I think he was at Credit Suisse, First Boston, maybe. I think maybe First Boston had to be rescued by Credit Suisse, is the way I read the story. Anyway, they believed in Larry Fink and they brought him in to take this thing over and then ultimately it spun out. But it's really interesting to see now the whole thing come full circle. Blackstone has gone from doing private equity transactions to managing private equity funds. And now BlackRock wants to be in that business 40 years later after all, which is amazing. And they're going to do it via making acquisitions with their very highly valued stock, which of course,

they should. Here's what you get when you do that. You get a built-in sales force that already knows the product. You get a built-in customer base that's already invested in the product. You get the institutional expertise of what buyers will buy and what they won't buy. You get instant market share and you get the infrastructure that enables you to launch new products without having to hire 5,000 experts in building funds. It's really the only way, quite frankly, if you're BlackRock to get into this market. And what's really interesting to me is this is where you're going to see a big divergence between Vanguard and BlackRock. Correct.

Vanguard and iShares will not diverge, which BlackRock owns, but BlackRock, the parent company corporation versus Vanguard, the shareholder owned, mutually owned provider of asset management products, Vanguard is not going to follow BlackRock down this rabbit hole, or if they do, it'll be with a toe in the water, not with a massive acquisition. They dipped a toe with a private equity company, Harbor, I can't remember the last name, years ago. I don't think their clients were asking them for this. No.

So, one thing that Blackstone has that BlackRock previously didn't was the fee related earnings that they talk about on the conference call. Obviously, they're higher with private vehicles, but they're also stickier because guess what? There's no net outflows, right? You can't get out. You can't get out. It's locked up. So from BlackRock's point of view, I think it makes perfect sense. I think for the ultimate buyer of these products, it's gonna be a better wrapper, a better product and probably lower prices. There's so much going on. Yeah, in the interest in like keeping the show under four hours. Let's keep going.

But there is a lot more to say about this and we will say it over time. We don't have to unload at all. All right. I want to spend two seconds on this and we're going to talk more about this on the Compound on Friends at the end of this week. But I want to say rest in peace to Art Cashin and I want to extend our warmest, most heartfelt condolences on behalf of Michael, myself, Barry, everyone at Ritholtz Wealth. I'm just going to quote a little bit from the Wall Street Journal obituary. Art Cashin, most people know him via CNBC.

I was fortunate enough to have known him over the years in person, but he was the living legend on the New York Stock Exchange. He's been involved with CNBC since its invention 25 years ago. He's the guy, when you turned it on on New Year's Eve that was standing in front of hundreds or thousands of traders and they would sing, wait till the sun shines Nelly. Here's a great shot of that. He was just like, not, I don't want to say mascot because that's, that's, that degrades what I'm trying to get across.

He was like the avatar of the floor trader. And he was literally like the embodiment of what it meant to be a New York Stock Exchange floor broker, floor operator. He was the director of floor operations for UBS, UBS having acquired Payne Webber, which he had spent a lot of his career at. And again, frequent guest on CNBC. There's a couple of things I want to say about him. And again, we could talk more about him on

Thursday with with on the podcast. But have you ever heard of anyone or met anyone ever say they don't respect art cash in nobody? Does anyone else in the history of this thing, alive or dead, have that kind of universal approval and respect? No, but nobody. I've never heard a bad word uttered about the man. Never. And generous with his time, generous with his ideas and his insights, supportive of everyone around him, helpful to people that he had never even met, meet you for the first time and ask you what he could do for you. And you know what? He's a volume up guy.

He might be the volume up guy. In the last five years, he hasn't been on the air that much. I think the pandemic was really tough for him because the exchange was his home and I don't think he ever like missed a day there. I don't think he took a lot of vacations. I don't think he took a lot of breaks. So not having that place to go to I think was not great. But prior to that when he was on TV almost every day, if you worked in the business or

even if you didn't, you turned the volume up when you saw that man in front of a microphone And the last thing the last thing I want to say his coverage during the 9-eleven attacks not coverage his commentary his steadfastness His being there when they reopen the exchange like that was spiritually and emotionally really important to New York was spiritually and emotionally really important to New York because it was just like, it was like, oh, okay, things are back to normal. Art is at the exchange and everything's functioning. That was really important to a lot of guys that you and I know. So, all right, anything else you want to say on this or we'll save it for later in the week?

Yeah, no, just universally beloved. I've said it like a million times. Nobody has 100% approval rating. Like, there are people that hate Mother Teresa, people that hate Warren Buffett. Nobody hates Arkesham. And how could you? Right. OK, you're up next.

All right. So remember when Michael Burry tweeted sell? In January, February, 2023, we spoke about this and I am not going to disparage Michael Burry because I'm sure that he changed his mind and whatever. Excuse me. It's Dr. Burry. Dr. Burry. Who I will disparage are people who should know better that took this and shoved it down people's throats. He tweeted it. Oh, who knows who knows better you or dr. Burry? Well, I guess me Turns out who knew so again, I'm sure burry changed his mind, right?

Like it's fine But like the people that took this and wrote articles and tried to scare people Shame on you. Is he still doing this shit or is he quieted down? I don't know. Okay I don't know. He. I don't know. He obviously is the architect of one of the greatest trades of all time. This has been very well documented. Nobody can take that away. I don't think that he would say that he's on Twitter to give people financial advice.

Right? Like, so people take it. Look, he's allowed. It's America. He has freedom of speech and he is allowed to share his opinions and express them in any which way he wants just like I am or you are or anyone else. And he's also allowed to do stream of consciousness shitposting which people do it. People have a few drinks, they send a tweet, people wake up in the morning,

they have three cups of coffee and they're on fire and they just tweet stuff. Stop listening. Stop reacting. It's not financial advice for you. And to Michael's point, if you're one of these people who exists to sell subscriptions by scaring others and you use this as ammunition in your scheme, I mean, dick move. And what are you going to say now? What are you telling the people that subscribe now?

Because some gains you can't replace. This is S&P 4000 to 6000. How are you going to make that up to people that you used Dr. Burry's tweet to scare them out of their investments? You really can't. You can't. All right. Let me quickly make the case for, you know what? I was going through a chart off please. I was going through my portfolio. I was like, what have I not made the case for? Do I want to make the case for anything? I mean, everything's pretty extended. You're really putting a lot of thought into this. I like that.

No, no, no, no, no, no, no. You don't need to always have a sexy pic. Okay. My make the case is very simple. I did this one two weeks ago. Did you? Yeah. We there. Are you sure that I was on the show? Fairly certain. I won't do the show without you. So they offer, listen, Duncan tries to replace you every week. I say I'm not doing it without Michael. So well, you know, it was such a good idea that you accepted it into my brain. So all right, let's just go through this real quick. So did you know that technology stocks, which have been leaders of the market actually, actually haven't outperformed the market since the end of May, 2023?

I have a chart of XLK divided by SPY, and you could use the cues or whatever. I understand that like Google and Meta aren't in here but nevertheless, it's kind of wild now. You've guessed this? I don't know. Somebody told me this for the first time last week. They showed me financials versus tech and I didn't know it and I was actually really surprised. Next chart, check this out. This is over the last three years. So I've got Meta, Apple, Microsoft, Amazon, and Alphabet. So the Mag 7 minus Tesla minus Nvidia.

Over the last three years, only Meta and Apple have outperformed the S&P. So the S&P has outperformed Microsoft. What? With the AI? Yes. The S&P has destroyed Amazon, and the S&P has destroyed Google. Next chart, please. If you just zoom into the last year, sort of the same story.

Only Amazon and Meta have outperformed the last year. So over the last year, the S&P has beat Google, it's beat Apple, it's beat Microsoft. You noticed you've kept Nvidia off these charts. Good decision. I did. I did. I did. Okay.

So let's talk about Amazon for a second. Amazon relative to the S&P peaked in 2020. It has since recovered a lot of losses. I mentioned, I was talking to Ben, we just had a really bad bear market in 2022. People just like, don't talk about that. Like we've pretended it didn't exist. Amazon got cut in half, maybe a little bit worse. So if you look at Amazon relative to the S&P, it peaked in 2020 and it's about halfway, give or take to recovering those losses. Yeah. So it looks good relative to the S&P and on an absolute basis, it's about to make a new all-time high. In fact, it did a few weeks ago. So stock looks good. I own it. Well, when I made

the case for Amazon two weeks ago, I said most of the things that you just said, so I agree. And actually, I bought more. customers for AI. And one of the things Jassy said at the event that got a lot of attention was, look, we're not investing money in AI because it's cool. We're investing money in AI to make money. This is about profitability, not just for us, but for our clients. And the Tranium chipset is something that I don't think is really in the stock or maybe it's starting to be in the stock. But if they become one of the biggest technology arms dealers to AI customers, which the combo of AWS and their own chips puts them in a position to do, it's not a grocery store with

a website. It's a very different valuation, I think, on the street. It's not cheap stock, it never is. I think it's 40 times next year's earnings. They have a lot of levers to pull to boost those earnings next year, and they are very aggressively pursuing the AI opportunity, and they actually have aggressively pursuing the AI opportunity and they actually have a user base where it's not theoretical.

They could like literally talk in terms of ROI today, like what's happening on the platform. So I like the story too. I've been selling Alphabet and buying Amazon. So just for make people aware. All right, I'm going to stump you with my mystery chart and then we'll get out of here. Uh, but, or maybe I won't stump you. Let's, uh, let's get that mystery chart up guys. Okay.

I'm not giving you any clues. I will read the clues that are already on this chart. I think I know what it is. Stop market cap since inception. The market cap peaked at 507 billion. It's a hundred billion today What is my mystery chart? Intel all right round of applause Now I'm glad you did

This is Intel versus the semiconductor holder index of which it was once the largest component now It is just a component since the inception of the SMH ETF back in 2000, Intel is down, believe it or not, 30%. Think about that. The SMH is up 603%. See this is one of those examples where not everybody could be Warren Buffett. Because if you held Intel for the last 25 years and this is your reward you are Absolutely hating life Can we put that chart back up? I want to show you where these two charts diverged

It's about 2019 2020 ish This is right around the time the previous CEO of Intel came up with the idea That the business opportunity of the future for Intel was not going to be GPUs or anything so conventional. They were going to rebuild Taiwan Semi as an American company. They were going to double and triple down on fabs. And that's where that separation occurred. Intel is down 57% in total return and has lost $147 billion in market cap during the subsequent CEO's

tenure, Gelsinger. And the reason why we did this as a mystery chart today, Pat Gelsinger has stepped down as CEO. And it is not obvious, internal or external candidates, who wants to step into this thing and try to fix it. So this has been truly disastrous. If you're an employee and you took ISOs to work there, let's say you left another semiconductor company or whatever, you are substantially underwater if you've done so in the last few

years. It is just an ugly, ugly story. Do we have this thing where it got kicked out of the Dow? Do we have that chart? Do we make that chart? Sounds like no. All right. I was going to show you where they got added and where they got kicked out. Here we are. Great job, guys. Awesome. All right. Added to the Dow Jones on November 1st, 1999. We moved from the Dow Jones on November 8th, 2024. I mean, this is- Thank you for your service, Jules.

Dude, this is how long-term stockholding goes really, really, really wrong. Well, guess what? For most individual stocks, it does go really wrong eventually. I think this should be in some of our decks about like why we diversify and single stock risk, because this is like a poster child. Even if it turns around, the ride has been so bad. It's unimaginable. All right. So we're gonna end on a high note. Guys, that's it from us. We want to say thank you to everyone once again for joining us

in the live. We are here every Tuesday at 5 p.m. Eastern. If you're a podcast fan, make sure to check out the compound and friends podcast tonight. I'm talking to Jim Bianco about Donald Trump setting up a shadow Fed governor. This is really interesting. Tomorrow morning, new animal spirits on all podcast platforms. Make sure you tune in. And at the end of the week, Ask the Compound with Duncan and Ben and an all new Compound in France. We'll see you soon.

Thank you so much for watching. Thank you for listening. We love you back. Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ridholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit ridholtzwealth.com. Don't forget to check us out at youtube.com slash the compound RWM.

Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on animal spirits. Thanks for listening.