The Compound and Friends - The Inside Story of the Bitcoin ETF Race With Matt Hougan, Trading the Hateful Eight, Goldman and Morgan Report

Episode Date: January 17, 2024

On this episode of TCAF Tuesday, Josh Brown and Michael Batnick are joined by Bitwise CIO, Matt Hougan, to get a behind the scenes view of the Bitcoin ETF approval process. Then, on an all-new episode of What Are Your Thoughts, the guys discuss: the Barron's Roundtable, financials reporting, stocks for 2024, AMD, Virtual Reality, and much more! Thanks to Public for sponsoring this episode. Go to https://public.com/compound to lock in a 5.1% yield on your cash. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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. Wealthcast Media, 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

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Okay. So something really extraordinary happened over the last couple of days. Never happened before. We had 10 ETF issuers or nine, I think it's either nine or 10, whatever. A lot of ETF issuers all hit the market at the same time for a product that essentially is all tracking the same underlying investment. So of course, I'm talking about the Bitcoin ETFs. And we've seen competing factor products, let's say, come along where two ETF sponsors say, oh, we're going to do dividend growth. So you'll get two, three, usually not on the same day, but there will be a cluster. And we've seen this with other strategies. We've seen this with other asset classes. We've seen it with commodities. But again, it's usually one or two, and it's not normally on the same day or in the same week.

In this case, we had 10 of these things hit the market in one shot. That has not happened before. This is why people are calling it the Bitcoin ETF Derby. And it's fascinating. And I don't think there will only be one. I think more than one can win, but probably not 10. So what's going to separate the winners from the losers? And how did this even come about? We had a conversation with somebody who was on the inside of these discussions, part of the 11th hour paperwork changes, somebody who had been interacting with regulators and just part of this thing where these products went from persona non grata to, all right, fine, launch them. But

do this, do that, do the other thing. Matt Hogan is the CIO of Bitwise. Matt has been around the industry for a long time. He was the founder of ETF.com, which grew into a huge business. He was an early believer in ETFs back when a lot of people had a lot of problems with them. And he looked at digital assets in much the same way. So Bitwise is one of the entrants in the Bitcoin ETF Derby. We'll talk to Matt about what it was like getting his product approved at the last minute and why he thinks the Bitwise approach will be a winner in such a crowded space. So stay tuned for that. And immediately following, it's me. It's Michael Batnick. It's What Are Your Thoughts? We have a lot of fun on this week's show. We talk about the hateful eight. These are the eight most

despised NASDAQ stocks, just in terms of how far down they are from their old highs. And we're going to pick a few to play for 2024. We also take a look at financial earnings. We've got numbers from Goldman Sachs, Morgan Stanley today, Charles Schwab is on the way, and a whole lot of other stuff. So if you love the show, we appreciate you leaving us a rating, a review. I'm going to send you there right now. We appreciate you leaving us a rating, a review. I'm going to send you there right now.

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 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. Hey everyone, it's Josh Brown. I am here with Michael Batnick. As always, Michael, say hello to the folks.

Hello, hello. All right. We are talking to Matt Hogan and Matt has had quite a week or maybe quite a two or three week period. You're always very calm. I can never tell if you're excited by anything. What's the story with that? I'm pretty excited about this one, Josh. I'll tell you that.

I'm pretty excited. You guys can't see him, but Matt is smiling from ear to ear. And you should. It's been a really long road. So just by way of introduction, Matt is the chief investment officer at Bitwise Asset Management. Give us an overview. What is Bitwise? And then we'll talk about what just happened. Sure. Bitwise is a specialist crypto asset manager that was formed to create the first crypto index fund. We run the largest crypto index

fund in the world. I think what makes us unique in crypto is we focus on the advisor space. That's what we built the business to serve. So today we offer 19 products. We manage north of a billion dollars in assets and we help advisors understand the crypto market and then allocate to it through products. And we've been doing it successfully for seven years. Matt, you've been around a long time

and you're not crypto native. You are like Michael and I from the world of TradFi. Your background is ETF.com, fabulously successful. You've been involved in the publication, the related conferences. What made you one day wake up and say, my future is in digital assets. I want to do this Bitwise thing. Oh, man, the beautiful thing, you know, we built ETF.com for 15 years and then sold it. It was a phenomenal ride. But what I took away from that is if you back up to the early days of ETFs, everyone hated them. Remember EFTs,

the congressional hearings about how ETFs were destroying American entrepreneurialism? Yes. Weapons of mass destruction from the financial times. I mean, people hated these things. But it was so great to be part of an industry where you knew the technology was better, it was going to make the financial world more efficient. So after we sold ETF.com, I wanted to run it back. And what's another technology that everyone hates, where there are congressional hearings, where people don't understand it, but where it makes the underlying financial system

more efficient, faster, and unlocks new opportunities? That was crypto. And so one way to think about my career shift is I'm just running it back to double down on the success I had, watching ETFs go from a few billion to 7 trillion. And now I'm watching crypto do the same thing. Matt, six years ago, when you jumped headfirst into crypto, if you could have fast forwarded, there's been obviously tremendous

success in terms of the performance of these digital assets. It's now a legitimate asset class. I think that's indisputable at this point. I know you tweeted about the S&P. The S&P. S&P is now covering stablecoins. There's been some serious advancements in the asset class. But in terms of, you said it's going to change the financial system for the better. Do you think that crypto has fallen short or is it still early? How do you compare those two points? Yeah, it's a great question. I think it's still early and maybe it's fallen a little bit short. I don't necessarily lay, well, that's not true. Crypto deserves a fair amount of blame. We've made a number of missteps. There's been FTX, LUNA, etc. So we've stepped in our own issues a few times.

At the same time, we faced just an extraordinary level of regulatory pushback and legislative pushback that I didn't expect. But when you dig underneath the surface, we have made enormous progress, right? There are now digital dollars that move at the speed of light 24-7, 365 that you can access in any country around the world there's uh defy exchanges that do as much trading volume as coinbase with zero employees you can get margin loans instantaneously and bitcoin is on its journey to being an apolitical currency rail you have blackrockRock launching Bitcoin ETFs. So a huge amount of

progress. I'd say it's a mixed result. We've exceeded expectations in some ways, and we haven't come as far as we wanted in other ways. But I have a lot more, actually, more conviction about crypto today than when I joined Bitwise six years ago. The deeper I got into it, the more I'm convinced it's on the same journey of ETFs. It's going to be just as disruptive. Hey, Matt, not a single, I think I'm right about this, not a single one of the nine current Bitcoin ETFs uses the word currency or cryptocurrency anywhere in its title or description. Do I have that right? That is exactly right.

Okay, so from my perspective, that is the biggest change in the framing of the topic. So I spoke on conference panels in 2017, 18, 19, And cryptocurrency was like the, that was the nomenclature that we used. Nobody uses that anymore. Now it's just crypto. You're right. It's either crypto or it's digital assets or it's Bitcoin like as the brand. And by the way, I think that's what it should be because I never bought into these as a currency, but I did buy into them as some sort of an asset. Even if you want to advance the theory that these assets will eventually calm down in terms of volatility and become more dollar-like, they don't need to be accepted as currency in order to have meaning to the financial world. to be accepted as currency in order to have meaning to the financial world.

It's so right. I think it's the original sin of crypto was labeling them currency because then in people's minds, you should be using them to buy coffee. And because no one sees anyone buying coffee with Bitcoin, they assume it's worthless. They say it's a failure. Well, Satoshi did that because the original white paper was, hey, we need some sort of a currency that's not under a central government's control because of all the problems that we've just seen during the financial crisis. So that original sin is embedded in the legacy of the white paper itself. But it's nice that we've moved past it and we're not pretending that these are as fungible as dollars are in an economy. Matt, we're 15 years or so removed from the white paper.

And one of the big criticisms of Bitcoin is there's no use case. It doesn't do anything. But is it enough? It works. That's what it does. It works. It just does exactly what it's supposed to do. Whether or not you're going to use it to buy a Starbucks, that's not what it does.

It works. That is exactly right. It lets you store wealth without relying on a third-party institution. Why is it that we can only store wealth or send wealth by going through a corporation? We don't need that to be true. And Bitcoin works. It works during bull markets. It works during bear markets. It worked this year. It worked during the 2022 crash. Every 10 minutes or so, it settles a bunch of transactions. And it's

settling more transaction volume than PayPal, most years more than Visa now. So I think it's doing pretty well. So Matt, I think that one of the fundamental roadblocks to it being accepted for what it actually does well, you and Michael point out, is there's no 1-800 number and people make mistakes or people get tricked. There are bad actors using US dollars too. So there are bad actors in crypto. There are hacks. And I think with large sums of money, individuals maybe more so than institutions, but institutions also, people don't like the sense that no one is in charge. And that's why I think the Coinbases of the world will have a role in the crypto economy

because, yes, instantaneous settlement is great without a third party overseeing it. But if you can inject a third party in there that's got some culpability for something, that's what the regulators want to see. And I think one of the things that got your product and the other products over the goal line was being explicit with the SEC and showing the regulators there are checks and balances in this ecosystem. There are people that can be held responsible when things don't run well. Can you talk a little bit about that? Yeah, I think that's exactly right. I mean, that's, you know, if you think about the SEC, they rejected Bitcoin ETFs in 2013. It's been more than 10 years.

I actually agree with them that the market wasn't mature enough in 2013 to have a Bitcoin ETF. But now we have regulated third party custodians that exist under state trust charters with multiple years of experience that have insurance in place from firms like Lloyds and Aon. We have KPMG doing audit on our ETF. We have tax firms producing 1099s on our ETF. We're trading with firms like Jane Street and Macquarie and Cumberland. These are big institutional names that have been operating in finance for years. It's really a mature industry. Maybe the best example of this, you know, for years, crypto was offshore, it was unregulated. The largest futures exchange in crypto right now is the CME, right? The largest

source of liquidity for futures volume today is the regulated CME group that trades, you know, every other regulated futures in the world. So we've moved into an institutional era. That doesn't mean you can't still self-sovereign Bitcoin and hold it yourself with your private keys and never talk to a bank. But it does mean that regulators can get comfortable that they have enough insight into this area to allow an ETF to launch. The financial columnists love the irony of crypto in 15 years going from entirely decentralized. We don't need any authority to, hey, look how great this is. Jane Street is involved and the New York Fed and the SEC and Fidelity. And it's I mean, you got to admit, it's a little bit delicious.

It's mildly delicious. There is a little bit of delicious irony there. But I'll tell you a fun fact from our ETF lives. Before the gold ETF launched, people thought that that would disrupt people buying gold bars and coins. But the volume of gold bars and coins bought after the ETF 5x'd in the five years after that ETF launch. And the reason was, the reason was it brought gold into the mainstream. It grew the pool so much that

even though there was some competition, self-sovereign gold grew. So it is deliciously ironic. And I get that. And I think underneath the surface, Bitcoin will find a way to Bitcoin. And I think underneath the surface, Bitcoin will find a way to Bitcoin. So can we talk a little bit about the ETFs? Yeah. Okay. Did you expect there to be this many approvals in the small window between, okay, fine, to, hey, look, they're trading? I expected there to be maybe like a couple and then a few would come later. But this is it.

They're all out. And what was that like? Like everybody, it seems like it was like 11th hour stuff. Like people were making phone calls on Sunday nights and language was being amended live in these filings. Tell us like from the inside, what was that like without getting yourself into trouble? It was exhausting was what it was like, Josh. I mean, yeah, you never before had 10 plus issuers launching a commodity product on the same day. I'm surprised that everyone got out because we were pushing our lawyers pretty hard to turn around filings in 24 hours. And the SEC was getting back to us within 24 hours. I've never seen a government agency work so quickly and efficiently with 10 different filers. It was incredible.

So I was surprised everyone got out. It was exhausting because there was this giant fee war, right? There was this huge compression. And every night we would spend hours of game theory, thinking about the individuals in charge of each issue or trying to figure out where to price. And then you do it and you put it to bed and you go to sleep. And then I'd wake up in the morning at 6 a.m. Hunter Horsley would be calling me, telling me to like, let's run it back. Let's do it again. I was so tired. It was a lot of fun, but it was, it was exhausting. So Matt, Eric Balchunas calls it the pterodome, and you guys are in it with everybody else. And the pterodome refers to just the vicious, aggressive nature of competitive forces within

the ETF world. So the Bitwise Bitcoin ETP Trust, ticker BITB, I want to talk about the fees. ETP Trust, ticker BITB. I want to talk about the fees. So you have a 0% fee with a waiver of six months and or $1 billion. It looks like you're, you took an almost $300 million. So you're going to get to a billion relatively in relatively short order. Can you, can you explain to the audience what is, what exactly does that waiver mean? Yeah. It means for the, I believe it's the first six months of the trust, there's no fee at all. So Bitwise is paying the cost of custody, of tax, et cetera. The expense ratio is zero. And then after that period, there's a fee of 20 basis points. So 0.2%. There is a billion dollar cap on that waiver. We may exceed that.

And if you get over that, it's just prorated. Wait, Matt, meaning if you take in a billion dollars in the first week, then that will supersede the six-month provision? That is correct. Yeah, that's how all these caps work. You still honor the 0% fee on the first billion. So if it's 2 billion, the fee is effectively 10 basis points, if that makes sense. It gets spread out. Hey, Matt, let's double click on that. A year ago, I would have guessed the industry standard fee would be between 70 and 100 basis points. If you look at the most popular actively managed equity ETFs, they're all around 70, 72. That seems to be where the active, it's almost like an equilibrium, right? Okay. And there are

some reasons why some big issuers, they just planted their flag there and everybody else kind of like tossed their hat somewhere around that ring. You guys are not, I mean, you guys are in this asset gathering scramble that's way more aggressive. Is that because these are effectively commodity funds or is that because it's just so pent up? Like you guys have been working on this so hard, you almost can't afford to be too high of a fee to miss the mark and not get the ad. What is driving that fee decision? I think the public would love to hear it. Yeah. I mean, first of all, let's talk about how great it was. Two weeks ago,

the largest Bitcoin fund in the US charged 2%. We're at 20 basis points. That's a 90% reduction in a handful of days. That's an incredible savings for investors. Yeah, the short answer is we have to be relevant, right? Bitwise is building a crypto asset manager for financial advisors. We have to be relevant out of the gate so that we can compete long term for flows. We think long term we can win in this market because every day 60 plus people get up at Bitwise. All they think about is crypto. We have a 20 person distribution team talking to financial advisors. We'll talk about it when bull markets are happening, when bear markets are happening. We think we'll win. But in ETFs, if you don't get out of the gate strong, if you don't

have sufficient trading volume, if you're not trading at tight spreads, and our ETF has been trading at penny or two penny wide spreads, you can't compete. It's very hard to come from way back in the field to establish a leadership position. You need to be near the front. And I think that drove everyone to be very competitive. We were happy to launch with the lowest fee. But yeah, it really compressed it. Matt, so you guys had a monster day one. I think you were either number one or number two. You can correct the record. Number one. Okay. Congratulations on that. Take us under the hood.

How does that work? Do you have customers lined up, ready to go out of the gate? Do you know where the flows are coming from? What does that whole process look like of launching an ETF? up, ready to go out of the gate? Do you know where the flows are coming from? What does that whole process look like of launching an ETF? Yeah, it felt like you had to hit on every possible point. So even last year, we started doing more brand advertising. We did the most interesting man in the world advertising. Amazing, by the way. Thank you. It was a lot of fun. But we realized we were coming into market against giant firms like BlackRock and Fidelity. We had to level up public understanding of Bitwise. And so we did that. You can't pre-sell an ETF, right? So you can't talk to people

specifically about an ETF before it launches, but you can build a relationship. So Bitwise had been building relationships with advisors for seven years. I think we did 20,000 meetings last year to give you a scale of the discussion level. And all that translates into some level of flows. You can also have discussions around seed and anchoring and those sorts of things. So we were thinking, we sort of felt like in order to compete, we had to win in everything. Pre-brand marketing, day of marketing,

seed, expense ratio, you know, discussions and familiarity with people leading up to the, to the launch. And, uh, we did, we did very well in day one and did pretty well in day two. And we feel, we feel like we got out of the gate fast enough. If you could fast forward six months from now, a year from now, what do you think is going to determine who, who some of the winners are and why some others fall behind? Yeah, I think there are probably three factors. One is fees. You have to be competitive on fees.

I don't think anyone who's outside of the 20 basis point range is going to compete. People just won't pay 50% more for exposure. We're 20% cheaper than BlackRock. Maybe that's enough. But in that range, I think it's really important. The second I would say is crypto expertise. I really do think advisors want crypto expertise. You know, there's so much news in this space that when there's a story in Congress or there's a regulatory development or something happens on chain, they want someone to call and they want someone who knows how to trade crypto under the hood. And the third will just be brand and persistence, which is kind of together. Brands will attract

their value, but people who are out selling this every day is what's going to matter. You still have to get on national account platforms. You still have to go meet with people in their offices. You still have to do lunches. I think over time, that will be the determinant. Who is out there actually talking to advisors about this? Assuming there are five ETFs that have liquidity, it's who's following up every day. Matt, I made the comment on TV on Thursday when all these things started trading. We were down at the New York Stock Exchange and there were a bunch of posts. And, you know, Son and Shine was walking around with his retinue. And he's a really big part of the story.

If it weren't for Grayscale and their landmark lawsuit, none of these would be trading right now. So I don't know if you called them and said thank you or yes. Absolutely. Yeah. I thank them on the floor of the exchange. I know those guys are great for them. And now you can compete them into dust, but you said thank you. All right. So this is my point. Is there room for multiple Bitcoin ETFs to exist? I said, yes, there is. And the reason that I think there is, is because I believe they'll be used differently. The grayscale product is going to probably, even though the fees aren't being reduced to the same extent that you guys are, it still probably has the most liquidity right now because it had this huge headstart. It still has a lot of brand awareness. That ticker symbol

appears in millions of brokerage accounts, I believe. Okay. There's value to hedge funds that want to trade in and out of Bitcoin during the course of the day, where there's enough liquidity for them to do that without affecting price. And we know that because we've seen the way certain emerging markets ETFs that are priced way higher than others continue to be utilized for trading. So that's one use. You seem to be making the opposite bet. I read an interview where you said that it's really the advisor relationships that are going to be the edge for Bitwise. So I want to quote you and then have you react to your own quote. Yeah. I mean, I will say, I do think there'll be multiple

winners. I don't think this is a case of winner take all. Grayscale will have that trading volume. BlackRock will have its relationships. Fidelity has its customers. ARK has Cathie Wood and a lot of retail demand. We just think the native audience of this ETF, the native long term audience is financial advisors. Retail investors can access crypto in multiple ways. Hench funds can use futures and other derivatives to access liquidity. The people who will buy and hold this asset class are, in our view, people who couldn't access it before, but want one to 5% of their portfolio in crypto. I think that's financial advisor.

So that's your edge because uniquely, BlackRock's got great advisor relationships. I don't know if they're particularly aiming at that market in the way that you are right now. This is you. You said the vast majority of wealth is controlled by either financial advisors who help other people invest or institutions. That's 80% of the wealth. So we went from zero to $44,000, I guess, per Bitcoin, essentially capturing only one fifth of the market. And what ETFs do is they open up the other four fifths. And that's really substantial, particularly at a time where there's a relative scarcity of supply of new Bitcoin coming onto the market. And that's why I think people underestimate it.

I agree with myself. That sounds great. That sounds great. I think that is true. You would forgive the majority of financial advisors for maybe waiting a few months to see which of these things blows up, if any, given how much headline risk there is for fiduciaries. I don't think it's going to be an overnight 1% sleeve in most financial advisors' asset allocation. It looks like you agree with me based on the vigorous head shaking. I'll tell you what we see. And we've been working with advisors for six years. What we see is they study it for a handful of months,

then they allocate in their personal account, then they allocate for one or two clients who are asking for it. And then maybe they allocate across the sleeve at 1%. And then maybe they up that to two and a half percent. But those last two steps don't happen for everybody. The first group does study personal account, one or two clients. So this is going to be a, you know, this is a multi-year story. Anyone who thinks this is success or failure will be determined in a week is just wrong. This will roll out over months and quarters and years. Matt, I can't think of anybody who can answer this question better, given your background at the intersection of ETFs and Bitcoin.

One of the tricky things about the ETF with Bitcoin is that it trades on the stock exchanges and there are normal market hours. Bitcoin is an incredibly volatile asset class. And probably like everything else, less trading is better than more trading. But that being said, if Bitcoin is down 8% overnight because there's a leverage wipeout and I want to take advantage of that opportunity and buy more, I can very easily do that at any custodian, any exchange that sells Bitcoin. I can't do that with the ETF. So how long do you think it's going to be before we get extended hours,

maybe 24-7, including weekends? Do you think that's in the future? I think it's in the long-term future, but it's going to be a while. It's going to be a while. I mean, we've had these issues in ETFs before in emerging markets and other places that aren't open at the same time. But it feels inevitable to me. Like long term, it feels inevitable. But I think it's multiple years. But that is a risk people need to understand about these ETFs.

You know, we launched on Thursday. We traded through Friday 4 p.m. It's not opening until Tuesday, right? I mean, that's an eternity in Bitcoin. Hey, Matt, I want to talk about the potential for the asset class. This is more from you. Having spent 15 years in the ETF industry, you watched the gold ETF launch. We talked about it a little bit before. You mentioned that when the gold ETF first launched, gold was a $2 trillion market. Today, it's a $15 trillion market. And you believe that the ETF has contributed significantly to that.

So taking that logic and applying it to digital assets or Bitcoin in particular, do you feel that there is that level of maybe not $15 trillion, but just that exponential adoption curve for digital assets now that they can live and breathe inside of a Schwab account, inside of a Fidelity account as a ticker symbol. Tell us how you see that developing. Absolutely. Do you remember pre-gold ETF? I did. Michael wasn't born yet. They were gold bugs. They were weirdos.

They were ornery weirdos. That's right. That's right. Now they're just ornery because there's nothing weird about buying gold in an ETF. That is right. But now, yeah, now gold can sit down at the dinner table with stocks and bonds and real estate and have a conversation. Crypto is going to be the same thing. I absolutely think it's that kind of exponential growth.

Think about a world where regulators and Congress are extremely hostile to Bitcoin. And then think about a world where BlackRock and Fidelity offer Bitcoin ETFs and are out there talking to people about this asset class every day. I just think, I think it's night and day. I think there's no way this isn't a many, many trillion dollar industry as that grows into maturity. Now, it didn't happen overnight in gold. It took multiple years. But, you know, could this asset class, not Bitcoin specifically, become a $10 trillion market? Of course it could. Ironically, the fact that there are now multiple options for mainstream investors to add this to their portfolio, in my opinion, and this is more delicious irony, this significantly reduces the possibility of another Sam Bankman freed or the asshole from

Celsius. Like these guys have now been deprived of the oxygen that fueled their growth. They had this massive information asymmetry. They had this situation where they appeared to be the only game in town for people that wanted exposure. I don't think you could get another SBF in today's world. And I think that changed overnight. reality, had there been well-oiled machinery of ETF trading all along, it probably would have been more protective versus what we ended up with, which is offshore circuses. How do you feel about that? I couldn't agree more. FTX wouldn't have happened.

Celsius wouldn't have happened. That's right. Because people would make the easy- Who would send their money to the Caymans if they didn't have to? No way. You wouldn't do it. No way. No way.

And that's been true throughout crypto's history. It's been- It's funny how that works out. I mean, this is an argument that people have been making for 10 years. Give us the ETF and the criming might stop. That's right. We didn't see it that way. And by the way, we'll save hundreds of millions of dollars each year in fees, right? It's literally a win-win. The world's a better place

than it was two weeks ago. Last question for me, Matt. Not to be too short-termism, but I'd like to talk briefly about the recent performance of Bitcoin. People are saying it's sort of sold the news, maybe a little bit disappointed that it didn't just go vertical. I mean, it's up 50% over the last three months. I don't know exactly what people were expecting. What are your thoughts on how it's traded since last Wednesday, Thursday? I think it's been great. I mean, yeah, two days, two days in the regular markets. It was also up 155% last year. When? Moon. It's coming, Josh. Look, this was a well-choreographed event. So your baseline assumption should be it was priced in. Priced in doesn't mean that it sells down to 30 grand.

It just also doesn't mean it sells up to 30 grand. It just also doesn't mean it sells up to 60 grand. It means met. And actually, although we got some volatility, the end result was kind of met. We're about where we started. I think, you know, I've used this analogy before. Crypto natives have a good framework for this, which is the halving. Every four years, the amount of new Bitcoin being produced falls in half. Prices tend to rise around that because it impacts supply and demand, but they don't rise on the day of the halving. They rise in the years surrounding it. And that's the same anticipation. It's an investment market. People don't wait for the news to react to it. That's exactly right. But when you look out over the next year,

you sometimes, investing is complex. Bitcoin's price is set by supply and demand. When you look out over the next year, there's a $7 billion reduction in new supply from the halving, which occurs in April. That's when the amount of new Bitcoin being produced falls in half. That takes seven- So that's when it's going to go up. What day in April? Yeah. Easy there. Easy there. I'm not even going to there. I know, but I'm not even going to say, but you have $7 billion out and then you have ETFs. They took in $1.4 billion in their first two days. Maybe they'll take in $10 billion this year. That's a supply and demand shock. I think that will be priced in. I think we're ultimately going to trade to new all-time highs this year. But it'll take a while.

It'll take some months. Matt, it looks like it's 4 o'clock in the morning where you are. I can see pitch black out the window behind you. So I want to just say thank you for getting up to do this with us. Let's tell people where they can read more about the Bitwise ETF. First of all, what is the official name of the ETF? It's the Bitwise Bitcoin ETF now. Okay.

And where can people read more about the risks, the portfolio, how you guys manage it? Because I think there's going to be a lot of curiosity now. Yeah, absolutely. I'd say two things. First, go to bitbetf.com. That's the website. B-I-T-B.

B-I-T-B, that's the ticker. You can read about the low cost, what it holds, et cetera. And, uh, and then go to bitwiseinvestments.com. I'll make one, one note. I write a weekly CIO memo. If you want to know what my thoughts are on the market, you can get that for free, whether you invest in our fund or not. Very cool. You're listen, you're, uh, you're, you're doing the thing. I know how hard you guys work for this. It's here. You're doing it. It's working. Uh, we don't know where the price is going, but we just know that there are now vehicles that people can utilize. It seems like it's a, uh, a relief off everyone's shoulders,

probably including the regulators. I think that's right. And you know, it's day three. Let's see where we are at day 300. I think it's going to be pretty fun. All right. Well, thank you so much for getting up to do this with us. Matt Hogan, ladies and gentlemen, check out BitB. Check out BitWise. What is it? BitWiseInvesting.com? BitWiseInvestments.com. Yep. Bitwiseinvestments.com. All right. We'll talk to you soon. Thanks so much, Matt.

Thanks, guys. All right, gangsters. Tuesday night. Gave you the day off yesterday. No markets. Today, I expect everybody to be focused. Justin Carrington is here from Australia. Good eye, mate.

How'd I do? Was that good? Mike, was that good? Is that like good day? Good eye. Good eye? Good eye i do was that good mike was that good is that like good day good eye good eye yeah like good day but it's yeah yeah yeah not bad not bad all right garrett peterson is here roger is here kelly sf what's up dave wilson we see you joe out tomorrow micro gx cliff Joe Altomoro, MicroGX, Cliff Everybody's here So glad you guys are here Hi Pam Hi Michael Skyrose Tonight's show is sponsored by our friends

At Public and The Public App Michael, what's going on with Public these days? I'm still In my treasuries I was just looking before we hopped on I mentioned this last time But you get The interest just comes every day. This is what it looks like.

It's straight up. Up until the right. And what's bad about that? Those sweet, delicious six-month US treasuries. So one of the big conversations right now amongst all the financial companies that are reporting is how much cash sorting is going on or how likely it is that their customers will remain in money market funds or treasuries or whatever. This is the question.

This is the question. And we'll have some opinions to share later on in the show. Thank you so much to public.com slash compound. Make sure you click the link. There's all sorts of disclaimers there as well. And get yourself set up. It's really easy. I use it myself. Okay. We had nine Bitcoin ETFs come public in one day or in two days.

This is kind of a derby. I was making fun of it like the derby. No, that's what it is. It's like a derby. I was making fun of it, like the derby. No, that's what it is. It's like a horse race, nine horses bolted all at the same time. It's pretty cool. Nate Karasi called it, or I think it was Nate, called it the Kentucky Derby. Yeah, no, I like it.

Originally, I was like, oh, rolling my eyes, but that's what it is. Yeah. It is. Sure. So we don't hate that. Can you tell me – let's give our viewers this table really quickly. All right. So what you're looking at here is the ticker. You're looking at the name of the fund itself.

You're looking at the issuer. And then it's assets under management as of, I guess, yesterday, right? So can you tell me, Mike, confirm for me, Grayscale hasn't lost any of its AUM, even though it's the highest cost issuer on this list. The other funds are now bringing money in, but they're not necessarily taking it from GBTC. Am I reading that right? That's not true. I think Grayscale lost quite a bit of money.

I don't want to throw out an exact number, but it's a lot. I thought they were at $27 billion last week. No, it was more. No, they're losing money. They're losing money. No, I would assume. I just thought it would happen quicker. Dude, it did.

I'm telling you. It didn't happen overnight. I'm just going to Balchunas' feed. I mean, I think it was – I don't want to misquote anything, but like $500 million on day one, it was not nothing. I guess in one day, that's a lot. Yeah, it was not nothing. But it's still – all right, but it's still more than 20X the next closest. It's still gigantic relative to the field, but it's only been three days.

Dude, if you hold GBTC, which was up, how much was it up last year? 400%. Yeah. Huge. Crazy number. If you're holding that in a brokerage account, you're not selling. No. Why? Because you're going to pay the taxes. If it's a taxable account, you're not selling. No. You're going to-

Because you're going to pay the taxes. If it's a taxable account, you're going to pay the taxes. I mean, listen, the fees are high, but you're not paying those taxes just to get- Fees are high. Right. The fees are high, but they're not as high as a capital gains tax. They're not capital gains high. So a lot of the money is trapped.

It's a really good point. Okay. The iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund look to be neck and neck. The former is $500 million. The latter is $427 million. I would imagine that those two can stay neck and neck because both companies are equipped with about the same amount of marketing firepower. are equipped with about the same amount of marketing firepower. So maybe you could make the argument that iShares has an edge in talking to, I don't even think I'd make this argument, actually. I almost feel like they are talking to an identical type of investor. What do you think?

Well, BlackRock is more advisor-based. Like there's not a- But is it though? Fidelity is the second largest custodian for financial advisors in the world. But regular people are going to fidelity.com. Do it yourself. Most people are not,

retail is not going to ishares.com. That's advisors. But they run commercials directed at retail investors. Who does? I shares TV commercials. Yeah. So I don't know. So, all right, here's my opinion.

Anyway, but on iShares website, splashed across the homepage, access Bitcoin. Right on the homepage. Oh, yeah. Oh, yeah. So what's your take? My take is Fidelity, first of all, Fidelity didn't get bullish on crypto a month ago the way that Larry Fink and BlackRock pivoted. They put in a filing and then all of a sudden,

all he wanted to talk about was Bitcoin. Yeah, when did they launch Fidelity digital assets? Not yesterday. I don't know, 10 years ago? There were articles in 2017 about Abby Johnson mining Bitcoin in her office. So now you could argue, if that's the case, they should be even further along than they are. I think they just play it very cautiously. Fidelity is very conservative. I guess they could have done what Grayscale did

and launched a trust, but there would have been so much negative publicity from that approach that they probably just figured, you know what? We'll wait till everyone else goes and then we'll just outspend them. And they have direct access to more individual investors than anybody on this list. So I think that they're going to stay neck and neck with BlackRock for a while. That's just my guess. I agree with that. So Ben was underwhelmed

by the $1.4 billion that they took in. I think that's a lot of money. What's that? Yeah, I was going to say, I have no patience though, as you know. What did you just say?

Did you say baby? What was that? I'm like a baby. Like if it's not $10 billion on the first day, to me, it's like, I don't even want to talk about it. I think that I expected much more.

I've told you. I thought this would be this massive price catalyst. And it's been three days, so it's a little bit childish. But a billion dollars is not a lot of money. I mean, it really isn't. For 10 ETFs, it's just not a lot of money.

You thought the ETF would be a big catalyst on day one? Yeah. For price? Yeah, because I thought not just money coming into the ETF, but people front-running the money coming into the ETF. I just thought we'd see more of it. But they did. They did.

At the end of October. They did already. At the end of October, Bitcoin was at $30,000, and now it's at $44,000. It's a huge move. No, you're right. You're right. What do you think these look like at the end of the week? The numbers?

Do any of them break a billion this week? Yeah. You think so? Yeah. Okay. Bitwise, 225 million. Cathie Wood, ARK21 shares, Bitcoin ETF, 111 million. Our friend Jan Van Eck has a horse in the race. Van Eck,

Bitcoin Trust, 82 million. Best ticker, total. Franklin Bitcoin also, I mean, we're friends with everybody on this list. We almost can't choose favorites. This is Franklin Templeton, right? Yep. Okay. Franklin Bitcoin ETF, 50 million. Invesco Galaxy Bitcoin. They teamed up with Novogratz? Yes. Okay. 23 million. Wisdom Tree, also a friend of ours. Wisdom Tree Bitcoin Fund, 3 million. And Valkyrie Bitcoin ETF. We don't know these people, do we? I don't know them. Valkyrie? No? Okay. 1 million. All right. So those are the products. And yeah, I mean, I guess they'll keep attracting capital. If Bitcoin runs to like 75,000, every one of these firms will like 10X.

That would be my guess. The question is, can the flows alone push the price up to 65 or 75,000? Yes. I don't feel strongly in either direction. Tell me why. I think that if this thing were to run stupidly, and I'm not saying it will, but I think that actually you'll have more retail money coming in, but these ETFs were for advisors and advisors are less likely to chase a parabolic move. I would think until, until they start hearing from their clients that they're in Bitcoin ETFs and making all this money. And why aren't you like incorporating this

into my portfolio? I don't know about that. It hasn't happened yet. I'm just saying it's a thing that could happen. Could. I mean, I would guess that sentiment will follow price in this asset class like every other. So I don't know. Just my take.

I think there's no reason to think that investors aren't going to be yelling at their advisors for missing this because they do it all the time. So. Yeah, I don't know. We'll see. Anything else to say here? We have Matt Hogan on the audio podcast tonight. We have Matt Hogan on the audio podcast tonight. So for those of you who want to hear the inside take on the crypto derby, that is right from the horse's mouth.

And Matt is the CIO at Bitwise, and he's been very involved in getting these things launched. So if you want to listen to us later, you'll enjoy that conversation. OK. Matt is the most coherent, sane, rational voice in crypto, in my opinion, or at least right near the top of the list. He almost doesn't even belong in the asset class. There's nothing crypto about him, which is nice. Yeah. Yeah. That was a great conversation. All right. I want

to talk about the Barron's Roundtable. And why do we always talk about this? I think we all know what's obvious is that, listen, nobody's recommending that you make changes to your portfolio based on what these people are saying. Nobody can see the future. But nevertheless, it's interesting to see what people think today. So that's the value that I get out of reading it. It's nice to see where people that are controlling real pools of money are. And as usual, as always, there isn't at the Barron's Roundtable. This is going to be a stock picker's market talk. It's always that way out, I picked out four blocks that I wanted to riff on. So this was the consensus. This is from David Groh. He's the chief investment officer

of T. Rowe Price. He said, we are probably not going to have a recession in 2024. Interest rates, what's that? Good. Interest rates will likely come down, but stocks are expensive. There's no margin of safety. The macroeconomic consensus has to be right to support stocks here. I would agree with that. I agree with Bill that it will be a minus or plus 5% kind of year. That was basically the consensus among the round table if I had to sum it up. So there's not a lot of euphoria, at least out of these people. Nothing resemb sum it up. So there's not a lot of euphoria, at least out of these people. Nothing resembling euphoria.

Barron's used to have much more colorful people on this round table. Like they used to have Bill Gross on this thing. And I don't remember some of the, I don't remember like all of the names, but they used to have, they used to have like much more colorful characters who would never be talking about plus, minus 5%. So just an observation. Gabelli's always here. He was on here again. Sonal Desai said, given the massive bond and equity market rallies at year end, financial conditions take us back to when the Fed funds rate was 1.75%.

Wow. The market has eased for the Fed. was 1.75%. Wow. The market has eased for the Fed. So maybe because the market has done so much of the heavy lifting and easing already, maybe we don't get the six rate cuts that are priced in or whatever it is. That would not be bullish. No, you're going to have to get some rate cuts or they're going to start saying that we're too tight. They're going to start saying that rates are a drag on productivity and potential GDP, and we're underperforming. What trend? They can't hold those rate cuts back all year. They could probably do it for the first six months, though. If I had to know one variable from the future, 12 months from now, I'd be like, tell me where

rates are. Now, and Fed funds rate. But we could be at 3% because we're just being less restrictive. Or we could be at 3% because there's an emergency rate cut. Obviously, I hope the former, not the latter. So even knowing where rates are wouldn't necessarily give you that much information. Was anyone in the round table far out of consensus on rate cuts this year? Was anyone like no cuts or hikes? Yeah, there was one person who was like, you guys are smoking crack. There's no way. I'm paraphrasing. I don't

think they actually said that. Who was it? Was it Barry Ritholtz? Who was it? Here's another one. Lisa Su, the CEO. I forget who said this. I forgot to give him credit. The CEO of AMD is talking about a $400 billion accelerator GPU market by 2027. That is a massive ramp from $45 billion today where NVIDIA's data center revenue sits. It implies more than a trillion dollars of data center and cloud AI spending by 2027. And I think if this actually happens, then this is more important than any macroeconomic headwinds or tailwinds. Well, can I say one thing? It was last year.

We did not have an economy last year that would otherwise justify a 50% run in the NASDAQ. And you did not have earnings growth X these gigantic tech stocks. Earnings were flat last year. If you take these out, it was much worse. So if you have that kind of earnings growth from the largest market cap weights in the market, it could be yet another year

where the fundamentals of very large companies becomes much more important to the headline earnings than blah, blah, blah, macro, blah, blah, blah. So that's what happened last year. I mean, I suppose it could happen this year. If it does, there are a lot of stocks that are still too cheap relative to what that would imply. And yeah, I mean, look,

the most out of consensus thing you could say is that the NASDAQ crushes the S&P this year. Like nobody thinks it can happen again to the extent that it just did. It totally could. Totally could. Totally could. Here's one more. You always have these. I mean, this is just because of course somebody had to say this. Monetary policy has been highly contractionary, but our chronic fiscal deficit is a disaster. It was $1.54 trillion last year, but will rise to an estimated $1.57 trillion this year and $1.76 trillion next year. The deficit is running at about 6% of GDP, which is unsustainable. The national debt is now $34 trillion, or about

1.23 times GDP. We are on a perilous course. Now, I'm not saying this person is wrong. I'm just saying that this is always in there. Always. Okay. If you please, sir, who said this? This is a fixed income person for sure, right? It's got to be. Yeah.

You don't know who it was. Speaking of that, gunlock hit the headlines this afternoon. 75% chance of a recession. Stocks are too expensive. I mean, sure. I gonna tell you who said it watch how good i am at this this is gonna be a this is gonna be a fixed income manager for sure for sure i'm searching for? Monetary policy.

Okay. Scott Black. He's been on this thing forever. You know who he is? Delphi management. Scott's good. All right. Not a Bond guy. No.

Not a Bond guy. All right. All right. Not a Bond guy. No, not a Bond guy. All right. Financials reported last week. We don't have to rehash the banks, but let's get into Goldman and Morgan.

Goldman Sachs, Morgan Stanley were this morning, and then Schwab is tomorrow. Let's start with Goldman Sachs. Like on the surface, it's a great rebound after – it's a horrible year. And it was not a good quarter either. But it was like definitive progress for David Solomon's efforts to clean this mess up. And he didn't make most of the mess. The theme of the call was – they kept saying we're narrowing out – Under the sea.

What? What was the theme? We're narrowing- Under the sea. What? What was the theme? We're narrowing, yeah. What is this, a bat mitzvah? We're narrowing our strategic focus. Okay, good. Good idea. We know that.

So they got rid of- I think they're already getting credit for that. Green Sky and the loan book at Marcus, and they're refocusing on what they're good at. They got out of this General Motors credit card deal they had. They got out of the Apple deal. Looks like Apple got rid of them, but either way. Did you listen to the earnings call? No.

Mike Mayo is such a ball buster on these calls. I love it. Yeah, he's great. He's not a ball buster. He asks tough questions. He has buy ratings on all of them, so he could break a little balls. It's okay. They don't get mad at him because he's just been around forever.

You know what I mean? He predates all of the CEOs, and when they're gone, he'll still be there asking questions. You know what I mean? It's like complaining about Mike Mayo is like complaining about the weather. What are you going to do about it? Let me share a couple of things with you that Sean and I pulled out. So first, revenue came in at $11.3 billion, up 7%.

That beat the $10.8 billion expected. Earnings were $5.48 versus $3.51 expected. There's some messiness here. versus $3.51 expected. There's some messiness here, but basically earnings 2 billion for the quarter of 51% year over year. They had eight straight quarters of earnings declines, and then they finally were able to beat on the number.

Investment banking revenue is still down. It's down 12% year over year banking revenue is still down. It's down 12% year over year. Trading is still down. It's down 3%. Those businesses come back after the market comes back. So that should be this year. That's how that works. Somebody asked a question about activity following the stock market. He was like, yeah, basically. Well, that's always been my point. Why own Goldman Sachs? Just buy the NASDAQ. There's no way Goldman's going up if the market just went down. Stock looks good.

I mean, the stock looks good right now. Yeah. Stock looks good. It had a monster run. It's at prior resistance, and it's not giving anything back. It's trading well. They're not hiring people, which after most years, like 2023, you would see these banks loading up on new employees

to capitalize. They learned their lesson. Headcount is down 1%. The quarter strength came from asset and wealth management, which is a smaller part of their business than it is from Morgan Stanley, which we're going to talk about in a second. But revenue in that division was up 23%. I'm not exactly sure how they're making that money. Alts. So they hit, I think they gave a 10-year target, I think it was 10 years, of $250 billion or something like that in alternatives, and they hit it. So I think that's where a lot of the money is coming from. So they're making their money by taking wealth management assets and putting them into their own liquid

alt funds or alt funds. I don't know if they're liquid or not. Liquid or not liquid. They said 40%. I believe it was 40% of the net flows were from their wealth management clients. Okay. So not fiduciary activity, but nonetheless, clients want alts, advisors want alts. Advisors want alts. Here's alts. Alts pay Goldman a lot of money, much more than three basis points on an ETF. So, okay. So that's the answer to the riddle. Because no one else had news like that. And let's get into Morgan Stanley now.

Or do we want to pop a couple of these slides real quick? Just tell people what this is. Put this up. What's notable about this? I know it's what I just laid out. I mean, investment banking fees weren't down that much considering how much activity had slowed. It's not terrible.

Oh, FIC was better than expected. It's fixed income, commodities, currency. I think that was a bright spot. I don't think it was great, but I think it was better than expected, which probably helped. All right, next slide. So this is just Goldman Sachs price.

This looks like a breakout. I mean, I suppose it could be, it could get turned away at 386 is the previous. I don't know. Stock looks good to me. What do you think? And if you, if you zoom out a little bit further back to the end of December, it got turned away here. So yeah, this is the zone. This is the zone it's holding it. So. Okay. All right. And Morgan Stanley. So this is the first quarter that was presided over by Ted Pick, who is the new CEO. James Gorman, who had been there for a very long time, has officially retired. And I guess this quarter is the last of the Gorman era, but Ted Pick was on the conference call. They asked a lot about that, about the transition. I mean, obviously they hope for it to be a seamless transition.

James Gorman had done a really good job. They shared a really great chart of the Open, 15 years of transformation. Yeah, let's take a look at this. So from 2009 to 2014, Morgan was really sort of like Goldman. It was an investment bank. That's what they were known for with a wealth management arm. And now it's almost a wealth management company with an investment banking arm.

So 38% or 39% of their profitability came from wealth and investment management. The other 61% was from institutional investment banking. And it's flipped. It's completely flipped over the last 15 years. It's pretty remarkable. So half the business is wealth management. So they're now up to $6.6 trillion in assets. They've got a target of $10 trillion, which I don't know why they wouldn't get there. They added $1 trillion in net new assets over the last three years alone. Really just incredible stuff. trillion in net new assets over the last three years alone. Really just incredible stuff.

Well, they underperformed on net new assets last quarter and wealth management revenue was actually flat year over year. Morgan Stanley had to live in the same reality as everyone else in wealth management, which is that 5% yields as a risk-free return are really, really difficult to swim against that tide. And so they had a flat year over year. And that's why the stock got hammered today. So Goldman was able to grow its wealth and asset management division because it's shoveling client assets into higher fee funds.

Great, congratulations. It's also growing off a smaller base. Morgan Stanley's wealth business is massive. It's a bigger base, harder to grow. And they had to fight that same tide that we've been talking about. And that's why Morgan Stanley got hammered today and Goldman went up. Would you agree with that? Yeah. Morgan Stanley. So they're targeting 30% margins on their wealth management business. And it's half their business, more than half their business, actually. Problem is they didn't hit it. They missed that 30% number and the market didn't like it. By a lot. It was like 24% or so. And a lot of it was due to, as you mentioned, cash. So they said

22% to 23% of their client accounts are in cash or cash equivalents. And that is not a high margin business for them. Dude, I can't believe that number. They're saying a quarter of their client's money is in cash? It's wild. Like how? How? Think about how big Morgan Stanley is. Is anyone advising these people?

That's like a trillion and a half in cash and cash equivalents. That's a lot of money. But unless you tell me the average age of their client is 75 years old, which I don't think it is, it seems like something – there's not enough advice. If you're doing wealth management, you're supposed to be giving advice. It seems excessive. you're supposed to be giving advice. It seems excessive. It seems excessive. If there's some total of all of your advice

that you're giving all of these clients is a quarter of their assets are in cash, you might want to change the way you're delivering that advice. The stock got hammered today. It's down 4%. I mean, it's a no-man's land. It doesn't look terrible. It doesn't look good.

Yeah. Oh, the other thing, you wonder why they have so much in cash. Look what the chief strategist has been going around saying, Mike Wilson. So you got this confluence of events. You got a risk-free rate that's 5%. You got a chief strategist firm basically guaranteeing recessions and bear markets. I don't think he is anymore, but that's what has been going on.

And I don't know. Maybe they made some acquisitions where there were a lot of cash late in accounts that weren't being advised. And maybe that's what, I don't know. It seems very high. Okay. Is there anything else worth saying on Morgan? Okay. Schwab is tomorrow.

I don't know if you're listening to this Wednesday, you already have the number. You own the stock? I do. Okay. If you're listening to this Wednesday, you already have the number. You own the stock? I do. Okay.

Expectation is $0.67 in earnings per share, which would be a decline year over year of 38%. $4.5 billion in quarterly revenue, which would be down 18%. Schwab has seen two straight quarters of year over year gross profit decline. However, revenue was marginally up those two quarters. So margins have come down two quarters in a row. It's up because so much of Schwab's business is cash management. And if yields go up, if rates go up, they just make more money.

They have a higher revenue line, not necessarily higher profits. Am I reading that right? Yeah, but they got destroyed because money was coming out of and actually going into money market funds and that destroys them because otherwise they kept all of that margin. That's right. Listen, could the stock fall 10% tomorrow? Yeah, why not? If it does, I'll buy more.

But you got to think that all of what we just said is very well known. It's not going to shock anybody. Can we put this chart up? Does this qualify as higher lows? Is there anything here? No, I don't think so. There's nothing here, right? No, no. Okay.

I'm not in this trade. I've been in it since last spring, I think once. Made a little bit of money very quickly. I don't know. For me, it's just too hard right now. I think it's one of the best financial companies in America. I just don't know that I feel that way about its stock right now. I still think we're in a tough environment. But we hope for the best for our Schwab shareholders. But you know what? I am counting on the fact that the

market is going to look past this because that's what it does. Tough times are here for now. Where would you take a profit in this? Like 80, in the 80 area. Let's say they come out tomorrow. They manage to beat fairly low expectations. They announce a huge buyback and say something exciting and the stock gaps of 12%. Would you just take it? No. You wouldn't take it. Okay. No. Okay. It's commendable of you, sir.

Not looking for 12% here. Okay. Taurus and Slack does like a daily chart newsletter type thing. And there's one this week that was really noteworthy, at least to me, it was the outlook for 10 year rates. So they're showing a chart of the standard deviation of private sector forecasters for 10 year interest rates. And at least going back to the beginning of 2019, there, there, there is no consensus. There's actually wild disagreement among forecasters, which I thought was noteworthy. I don't understand the chart. Why is standard deviation the y-axis? What's that? Oh, because there's... All right, I get it now. This is the standard deviation of private sector forecasters' 10-year interest rate forecasts. So this is how far the actual has been from the forecast? No, this is comparing

forecasters to each other. And they're showing, like if there was like a dot plot or something, there's wild disagreement. Oh, so the disagreement is going up. Exactly. Exactly. Okay. I got it. Why do you think that is? Just because of how volatile rates have been in general? Does that create more disagreement within the consensus? I was surprised because I thought that the consensus was for lower Fed funds rate. Now, maybe the disagreement is how far ahead the 10-year has gotten in front of that. So the 10-year is already down to 4.05%. Right. And the Fed funds rate are what?

Five to five and a quarter? So the 10-year is well ahead of that. So there's probably people that think it's appropriate or on the way down. Or no, even if the Fed does take rates from five and a quarter to 400, why should the 10-year not trade at a premium to that? No, I was saying the 10- is ahead of the, is ahead of the two year on the way lower

yields on the way lower. So the 10 year already priced in all those cuts. It's a, it's pretty incredible. And it did it fast. I think it started like mid November and knocked out the whole thing in like six weeks. Really fast. So that's pretty incredible. All right. What are we doing next? Is it me? Oh, I was looking at, I was, I was looking at, I've done a couple of screens over the weekend.

The weather's not great. And I'm just, oh, who do we have at the door? Hang on a second. Oh, look at this. Sean Russo. Ladies and gentlemen, from the research squad at Redhol, look at this. Sean Russo. Ladies and gentlemen, from the research squad at Ritholtz Wealth Management, Sean Russo. Sean, you can't hear them, but they're all applauding. I was looking at some of the worst performing stocks and I thought, what are the most despised names in the NASDAQ?

And what's my metric for despised? I didn't want to look at analyst ratings. Wait, hang on, Josh. I'm sorry to interrupt. However, this is the first time I believe that our audience is seeing Sean Russo. So maybe an introduction is in order. Sean Russo from the research squad at Riddles. More? A little bit. Sean, what can we tell people about you? We can tell them that his mic's not working. And his mic is off.

Duncan, Duncan. Sean joined us two years ago. It's been an absolute godsend. Made our lives a lot easier. Helps us with everything that we come up with for the show, for the company. Research-wise, portfolio-wise, he's been just a godsend. So we love you, Sean. And they're unbelievable what a new whale there we go there's no way i did that

there we go you did do it you got so excited you muted yourself they're roasting you in the comments right now give it to me amateur rookie sean gets an L. I deserve it. So what did you put together tonight for us? So I basically just screened the 20 worst performing, actually the 20 stocks in the NASDAQ that are off the most from highs. And the NASDAQ 100. From their own highs. All time highs, yeah.

Okay. And most of these highs were set in 2021? Yeah, for the most part, yeah. Okay okay let's throw this up on the screen what do we have here so that thick black line after atlassian corp is basically the dividing line those top eight are the hateful eight these are the most hated of the nasdaq, let's call them tech, biotech, communications, PayPal's financial services, but we're including it. I want to run these down very quickly. Sirius XM is the worst. It's 92% below its all-time high. That's incredible. PayPal is not much better, 80% drawdown. Moderna, 79.

Illumina, 75. Warner Brothers Discovery, 62. DoorDash, 60. Charter Communications down 55%. And Atlassian, which most people call team, the ticker is team, is down 50%. So that's where we divided the list. And the general idea is, Mike, do we run this as a draft? Or you can just take any four you want, regardless of whether or not I take it. Yeah, you know what?

I didn't realize that we were restricted to eight. I used the whole list, but that's fine. Listen, I'm a pro. I could audible. I could audible on the fly. Let's do it. I'll go first. I think it's your best four equal weighted versus my best four, and they could be the

same, right? We're okay with that. Yeah, that's fine. Not all four the same, but all right. Why don't you draft first? What do you got? What do you want to take? Are we going to do one at a time?

Or do you want to just do? Give me four. All right. So I own two of these pieces of shit. So I'll start there. I only own one. I own PayPal and Moderna. And I saw the news on PayPal today. I just don't know that this is new news. Everyone knows that Apple is destroying them. Is that reason enough- Oh, you saw the downgrade from my guy, from Dan Dola.

Yeah. Is that reason enough to own the stock? Listen, I would have much preferred it to be up on a downgrade, but it wasn't, it actually did sell off a pretty decent volume. So, uh, I'm not gonna hold, I'm not gonna stick around for much longer if this thing continues this downtrend. Um, but it's on your list, but it's on my list. It's so cheap. It's like literally the cheapest it's ever been.

It's like for good reason. For good reason for good reason apple is destroying them it's price it's pricing in no growth ever there should be a buyer i feel like at some point like i use venmo probably every week so it's not like completely useless how much do you think you pay uh paypal every time you use venmo what percent i honestly have no idea but i don't even zero zero It's zero. This is the problem. One of the things Dan wrote, Dan's an analyst covering fintech for Nomura,

and one of the problems he lists is after all this time and all this usage, they still haven't figured out a monetization strategy for Venmo. One thing they were thinking about doing was making it so that when you use Venmo at checkout in e-commerce, the vendor pays Venmo for the privilege of accepting Venmo as a payment form.

But I don't know if that ever really turned into anything. So I agree it's cheap, but it's cheap for a reason. I agree with both of you guys. It's cheap for a reason. Listen, it's dangerous to say, oh, it's down 80%. How much? No, it could go all the way down. It's still a $60 billion market cap. So I'm not saying that there's a high ceiling or high floor in the stock. Who the hell knows? All right. You got another one? Number two is Moderna. And I have no... What's that? Why? I have no fundamental thesis here whatsoever other than the fact that it stopped going down. That's it.

Okay. That's it. You think we've seen the worst that we'll see there? I mean, I own the stock. If the pharmaceuticals are starting to act better relative to the market, which they are, If the pharmaceuticals are starting to act better relative to the market, which they are, then I feel like that gives Moderna at least like a nice foundation for the selling to stop. I don't know.

Sean, what aren't we considering with that one? MRNA. I mean, just on an earnings basis, it's damn near as cheap as the S&P 500. So I feel like if they get one good drug or like one good catalyst in the stock, it's going to be a rocket ship because that's not priced in. Ooh, a rocket ship. I like that. Similar to PayPal, I guess. Like nobody is expecting anything positive out of that name.

All right. You got two more? Yeah. DoorDash looks really, really healthy just technically, but I hate this company. I just think it's just beyond egregious. That stock's going up, dude. I know. It looks good. I can't in good conscience

recommend it, though. Warner Brothers, I think there's nothing there. I don't think there's anybody coming to save them. Team looks decent, so I'm going to go with that. Stock looks good there. And then Siri is out. Absolutely no way. I already. So just by process of elimination, process of elimination. Why, wait, why is Siri? Why is Siri uninvestable? It's a $5 stock. You actually pay for it. I do pay for it, but it's been a piece of garbage forever.

Forever. There's no reason to think the thesis is changing here. The company stinks. The chart stinks. Absolutely not. You know what? The product just stinks. But what is the problem?

The problem is that Howard Stern is in his 70s and not funny anymore. And they have nothing to back it up after. I love Howard. I am a lifelong fan since I was a little boy, and I don't listen anymore. That's right. I don't listen anymore. Nobody's paying for that product. There's just too many other options.

All right. You know what? Regrettably, I mean, regrettably, I have to go with DoorDash. I have no other options. So DoorDash, PayPal, Moderna, and a team. Can I make a DoorDash comment? Please. Like, I don't understand why anybody would use DoorDash over Uber Eats. Nobody would. DoorDash is already embedded within Uber Eats. So why? You'd have to be some kind of Amish where somebody handed you a phone for the first time and you liked the logo of one over the other. There'd be no, there'd be absolutely no reason that anyone would ever use DoorDash versus Uber. There's no pricing difference.

And Uber is just, you use it for other things in your life. I'm biased. Before we get to your four, what was your thoughts on Uber shutting down Drizzly? They paid a billion bucks for it. Doesn't matter. You know what they did by buying it? They boxed out anyone else from even attempting. And it's not that they're going to stop delivering alcohol. They're going to move over all of those customers into the Uber app. The Uber app is the everything app. There's no reason why alcohol should be separate.

So they learned the business by buying it. Now they discard the shell and they sucked all the meat out of it. It's like a crab leg. Toss it out the window. What's your four? I'm done with you now. All right. I think I agree with a lot of what your comments were, but not all of them.

I'm going to go Warner Brothers. There is just no way this full year goes by and nothing happens on the M&A front. There's a way. A worst case scenario is they do something strategically dumb that the equity can't recover from, which I agree is a risk. I don't think it's status quo. Also keep in mind, House of Dragons season two is coming back this year. True Detective debuted on Sunday night, which was- Dude, forget about that. Barbie couldn't save him. Come on. All of their hits, all of their hits. People don't necessarily subscribe to an app for a movie, for a TV show that everyone's talking about every week.

That's a different story. That's true. All of their hits are coming back this year. That's true. Did you watch? Underrated the power of that. You're right. Did you watch True Detective yet?

I'm watching it tonight. Of course I did. Amazing. I watched it live and then went back to the football game after. Was it amazing? I just love it. I can't wait. I just watching it tonight. Of course I did. Amazing. Cool. I watched it live and then went back to the football game after. Was it amazing? I just love it. I can't wait. I just love it.

I just love the vibes. I love Jodie Foster. The vibes. I'm so excited. You watching, Sean? Yeah. The vibes are killer. The vibes are so haunted.

Yeah. Oh my God. It's going to be so good to see this. All right. Number two. So that's my number one. My number two, I'm going to take serious because it's a $5 stock. No other reason. Okay. All right. Good enough. Good enough. Here's why. If nothing fundamentally gets better, the stock could still go to seven

just by accident. Sure. Okay. Okay. I'm going to take PayPal. They have a new CEO. It's priced for zero growth. The Apple news, everyone knows that that Apple pay is killing them in the shopping cart. If they come up with something to do, that's better than what they've been doing at any point this year, the stock could be 70 in a blink. So I don't think it's going back to the glory days. I just think I'm being, I'm paying very little, uh, relative to what the potential is. So those are my three. And then I'm going to do, uh, Illumina, which makes equipment for the life sciences industry. And it's just been a controversial stock. Carl Icahn has been involved in this.

It's been absolutely destroyed, but it should rebound with the healthcare sector and with the pharma stocks. It should trade somewhat in line with them. Moderna might be the better pick, but I'm going Illumina because I don't trust the Frenchman who runs Moderna. I don't like the cut of his jib. So that's where I am. Sean, have you recorded mentally our four choices jib. So that's where I am. Sean, have you recorded mentally our four choices? Yes. Got it.

Okay. And we will be tracking the hateful aid throughout the course of the year. Yep. Will there be good natured ribbing? I'll try my best or Michael fires me. Hey, you did a really great job on the show. Thank you so much for popping in to join us. We'll,

uh, we'll, we'll, we'll let you rock and roll. I know I'm going to see you tomorrow, right? Yep. Yes.

Me too. Yes, sir. Good job, Sean. All right. I'll see you in NYC tomorrow. All right. That's Sean Russo.

Ladies and gentlemen, uh, we have anything left. We have, we have one more. Yeah, we got, we got one more.

We got one more. Josh, last week you came to launch and you were telling us about Bryn us about Bryn Talkington's new Ray-Ban Facebook sunglasses. And I was really excited about what you were saying. I have more on this, by the way. I was really excited about what you were saying. Do you want to go ahead? I went to – I was in Hudson Yards yesterday.

Yeah. They have a giant – they have a giant, is it a Sunglass Hut or a Ray-Ban store? Sunglass Hut probably. I don't know. It might have been a Ray-Ban store. Might have been a Ray-Ban store. Anyway,

they have, they have, it's not just Wayfarers. They have like five different models of Ray-Bans with the meta technology. And I was playing with them in the store. I was trying them all on. I think this is going to be even bigger than I thought last week.

Everybody in the store was trying these things on. Yeah. Like, I really think these are going to go. Okay. My dad, so hardware AI virtual reality is coming in a big way. And I feel like we're not making a big enough deal about it. My dad called me and he was telling me that he got the Oculus. So my dad is retired and he was like, do you know, do you know about these things? And he was just, wait, what? Yeah.

What made him do, is he a video game guy? No. What got him to buy? Where did he buy it? Dude, I have no idea. I have no idea. He was blown away. He was raving about it. I'm like, no, I know. Raving. Wait, like he ordered it? I'm fascinated by this. Like he bought it on the internet?

He saw an ad for it, clicked it, and bought it? He must have. He must have. What does it do right out of the box? I don't know. I've never tried one on. But he's telling me that he's like, I like i was on the mountains in peru and i was here and just raving about it so okay um there was before we get to the vision pro there was uh batnik dad index uh roger weatherford says

things things your dad is into we're gonna going to put them all in a list. Did you see any of the demo of the video that I sent to you and Ben from that company? Pac, he was tweeting about this. Rabbit, the R1, it's kind of cool. Is it a wearable or is it like a device though? It's a tiny little thing that goes in your pocket. So what this thing does, the R1, they already sold 40,000 units. What it does is it basically brings the AI to life. So when you're typing to chat, there's no action. So you could do that, but you could order the Uber through this thing.

You could buy plane tickets. You could tell it to book a flight, book a trip. You're trying to do this and then actually execute it through the hardware. It's pretty neat. So whether or not this is the one, it's not even relevant. The point is this category is going to be gigantic and it's going to be maybe a dud out of the gate. So for example, the vision pro is getting some really, really gnarly, gnarly reviews. This thing hits the market on February 2nd, and there's a demo. Let me just read from Bloomberg's article. The demo begins with a retail worker scanning the user's face with an app in a similar fashion to setting up Face ID.

This scan will tell the employee hosting the demo which light seal, foam, cushion, and band size the customer will need. The light seal, which keeps outside light from leaking in, comes in more than 25 shapes and sizes. The cushions come in two sizes. If a person is wearing glasses, the store will have a device to scan the lenses for... I mean, it's a whole thing. It takes 25 minutes just for the demo and the setup. And Mark Gurman, who covers Apple for Bloomberg, said, the Vision Pro virtual keyboard is a complete write-off, at least in 1.0. You have to poke each key finger, each key one finger at a time like you did before you learned how to type. There is no magical in-air typing. You can also look at a character and pinch. You're going to want a Bluetooth keyboard. So I think that the first version of this thing is going to get destroyed, destroyed

by critics. Now, that being said, I cannot wait for version two, three, four. I still think that even though it's going to stumble up, it's going to be a monster category. It's going to be magic. We had that conversation with Dan Ives. We already know what the headlines are gonna be but it sounds bad it does sound bad yeah i'm sure i'm sure because they're they're putting something out that's a they're not inventing the category they're inventing it from the apple perspective and the version one of all of their shit was silly the first ipod wasn't like a monster hit right out of the gates people looked at it and said that's the stupidest thing i've ever seen. It only holds 50 songs. I think the difference is-

You have to have an imagination. You're right. I agree. The difference is that now Apple is Apple and people's expectations need to be recalibrated because it's not going to be what the iPhone is today, right out of the gates. It's just not. That's true. Look, I'm not buying the first one of this. I'm not the person that buys really the first one of anything. By the fifth one, we can't live without it. How many times?

Yeah, I can't wait. How many times has that played out? I can't wait. So I'm 100% on the same page with you. I have a feeling we're going to be talking about this stuff all year. Okay, you're up. You're going to make the case. Okay.

I want to talk about AMD and technicals. And that's it. I don't want to even talk fundamentals. But John, let's go the chart on. This is a stock that I own. And I'm not trying to pat myself on the back. I'm just trying to teach a lesson, if I may, to people that are buying individual stocks. Never doubt Michael when he's getting wrong a name. That's not what I'm saying. That's not what I'm saying. Dude, I own plenty of pieces of garbage, as I already mentioned. So Josh, I was with you on this day.

This was December 7th. AMD was up 10% on the day. And I said to you, what did I say to you? About AMD or just- I said, I'm buying more. I'm buying more today. I said, listen, this is the professional move. The stock is up 10%-

The hardest trade to make. The stock is up 10% on the day and I'm buying more. And this is a move that I never would have made in my yesteryears, but I've learned a thing or two and it doesn't always work out. But next chart, please, John. AMD is up 25% since that 10% up day. So this is not a victory lap. I'm just saying- No, no, no. The lesson is so important that you're giving

people is that when you see that much strength in a stock, it doesn't automatically mean that you're seeing the end of the move. Like a lot of times – The beginning of a new one. Yeah, a lot of times a huge burst of buying is just a precursor. And people – it's actually rare. It's actually rare that a stock will crash to a new low from a new high. That's not what usually happens. It doesn't work that way.

But it's hard. It's really hard. It's really hard to own something. And then it's up 20%. And you sit there and look at it and like, why are all these other people buying it? Like maybe I need to own more of it than I own, but then I'm going to raise my average cost. It's 10 times easier to take profits than to buy more when buying more is usually the right move. So that's the lesson. Okay. I don't, I don't hate that lesson. Uh, it doesn't always work. It doesn't always, of course, nothing does.

Nothing always, just because something doesn't always work doesn't mean there's no value to understanding it. Okay. I have a mystery chart for you slightly off the beaten path, but I'm not going to make it that hard for you. Okay. Okay. John, if you please. What in the hell is this? Dude, what the hell is this? Bear with me. What is this? All right, go ahead. The clue is in the price and I'm going to give you two more. Clue number two. It's not a stock. No, no kidding. It's not a stock. What is this? It's not a stock. No, no kidding. It's not a stock.

What is this? What is this? It's not a stock. Hold on. Sort of. Go ahead. One more time. Okay.

No, there's another chart. There's another chart there. Give me the other chart. Okay. Look at the price. Oh, I know what this is. I do know what this is. Okay. I think I know what this is.

I only gave you two clues. Is this natural gas? No. Sadly, no. One more clue. It's something we really haven't had to talk about for a long time because it just has not shown up at the party. It's not the VIX.

It is the VIX. Look at you. It's a horrible looking chart. Round of applause. So here's how I bring this up. You see this spike from the first week of the year? Chop back on. See this spike from the first week of the year?

Yeah, spike. That's above the prior high. And I know we don't really do this with VIX. Dude, it spiked to 13. Go ahead. No, but my point is it's like we might have seen the VIX low during the last week of the year or during the Christmas week. And now it just might be like back in the conversation, the lack of volatility. I'd buy that.

I want to go to this next chart. This is the VIX versus the 10-year treasury note yield. Okay. So you see that these VIX spikes are being accompanied with spikes in the yield on the 10-year. Yeah. So bear is paying attention to. That's all I'll say. If we keep getting slightly hot economic data and that 10-year keeps perking up, you're going to see the VIX back in the game.

That's all I'm going to tell you. We had an incredible November, December run for the stock market. It would not surprise me at all if we tread water, chop it up, go nowhere, digest. In fact, it would surprise me if we kept going higher, frankly. So nothing out of the ordinary if we give a little bit back and we get a little spike. Here's my point. If we're like a VIX 15, 16 and not 12, 13 in that environment, you don't just keep adding new stocks to the portfolio because you're not getting rewarded the next day after you bought it. That's how things have been for the last couple of,

you buy something, you're up relatively quickly after if, but that's in a VIX 11, 12, 13 regime. If, if that changes and you're back in that 15, 16 neighborhood where everyone thinks you're about to hit 20 again, you don't just keep looking for new stocks. Josh, you made such a great analogy with Joe and JC about the professional fishermen, professional traders. They know that there's a season for everything. There's a time to fish and there's a time to avoid the waters. That's right. So it bears watching. I'm watching that 10-year yield. The 10-year yield is the most important exhibition in terms of how people are feeling about the higher for longer inflation shit. And if that starts to change, I think stock volatility is going to change right along

with it. And I don't see any real way around it. So just wanted to spotlight that. But you did guess it with two clues, which is not bad considering how weird their chart was. So congratulations. I mean, that's a weird chart. I don't know what Michael's won. We'll find out after what his prize is.

But I want to let you guys know. Hey, everybody. Tomorrow is Wednesday. My favorite podcast is back. All new Animal Spirits with Michael and Ben on Thursday. An all new edition of with Michael and Ben on Thursday and all new edition of the ask the compound. If you want to get Ben your questions,

there's an email that you can use to submit those questions. Duncan, is it still the same email? Do we know? What is it? Yes, it is. And what is it?

Ask the compound show at Gmail. All right. All right. Ask the compound show at g. All right. All right. AskTheCompoundShow at Gmail.com if you want to be part of that show. And then Friday in all new Compound and Friends. Thank you guys so much

for watching tonight. We appreciate it. Thanks for all the likes. We will see you soon. Whether you're just getting started as an investor or you're managing a multi-million

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