The Compound and Friends - Would You Give Money to Adam Neumann?

Episode Date: August 26, 2022

On episode 59 of The Compound and Friends, Devon Drew joins Michael Batnick and Downtown Josh Brown to discuss Jackson Hole, Adam Neumann's new venture, crypto regulation, the best performing stocks since March 2020, using AI in asset management, and much more! This episode is brought to you by our friends at Masterworks. Visit https://masterworks.art/compound to skip the 10,000 person waitlist. See disclaimer at mw-art.co/x. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/disclosures/ Inclusion of advertisements by podcast sponsors 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: https://abnormalreturns.us5.list-manage.com/track/click?u=f8843b0fc6f0ed7d35e67dcf5&id=33b07916d1&e=4e0f612ef0. Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Are you a Knicks fan? Well, I'm a New Jersey Nets fan. What is that? Get out. Last night, Josh texted us an article to Donovan Mitchell. He goes, I'm told it's a done deal. So I said, who is telling you these things? I want a name.

How old is Justin? Yeah, my 13-year-old son. He goes, it's Justin, his 13-year-old son. He said it's a lock. Hey, man, the 13-year-olds, they're on the Twitterverse, and they're on the TikTok, and there ain't no things before we open them. So KD is going to stay? He's going to stay, yeah.

Oh, that's going to be a nice relationship now. Yeah, it'll be good. Things will be cordial. No, but it's good because, like, Ben Simmons and Kyrie, they're all very stable. They'll make it work. It's going to be a great locker room, very cordial environment. They'll figure it out. Why do you think he a great locker room. Very cordial environment. They'll figure it out.

Why do you think he's going to stay? Because there's nothing better out there? There's no buyers. Right. Nobody wants anything to do with that. You got Knicks fans? Yeah. That's interesting.

Interesting. That's interesting. So I got this really nice note from Art. So I went on halftime today, and Leisman's out in Jackson Hole for the big Fed thing. So when is that, tomorrow? I didn't mean to, but I was just like, I'm a little bit off message here, but this doesn't really matter that much and nobody wants to hear that. But Art sent me a funny email, Art Art Cashin about the origin of Jackson Hole, how basically it started in 1982 where they gathered the whole Kansas City Fed there because –

I hate to do this. What? I just Googled it. It says first held in Missouri in 1978. I don't know. But the first time they did it in Jackson Hole was 82. I'm telling you. And the reason why is that Paul Volcker wanted to be near fly fishing.

It's like the origin of the event. No? Wait, where did you say it was? The first time they did it in Jackson Hole was 1982 because they couldn't get Paul Volcker to commit to going if it wasn't near fly fishing. That's all true. That's a true story. I didn't know this. Jackson Hole, they said that's a shorthand for the Federal Reserve Bank of Kansas City's annual economic policy symposium.

Correct. I didn't know that. But I'm just reading. This is the journal. This is just the Wall Street Journal. First held in Missouri in 1978. Are you hard of hearing, I'm just reading, this is the journal. Don't, this is just the Wall Street Journal. First held in Missouri in 1978. Are you hard of hearing? I'm telling you.

Are you hard of reading? I'm telling you the first year they did it in Jackson Hole and not in Missouri was 1982. Is that compute? Oh my God, dude. Duncan. I didn't have my coffee today. Honestly, keep your hand on the mute button today. Put my mic on!

All right. All right, so just one more time. It was 1978. I understand that the meeting started in 1978. I'm just kidding. I'm just kidding. But that's a true story. Oh, did you see the news out of China today?

No, is it good? What? That they're not going to- US-China near deal to allow audit inspection of New York-listed Chinese companies. It's a big deal. You know what the deal is? They're going to make the auditors fly to Beijing to inspect the company's records. I swear on my life.

I actually read past that. We're going to have to go get them like in Dark Knight. No, they physically don't want- We have to go bring them back. They physically don No, they physically don't want it back. They physically don't want the information to leave the country. Christian Bale will be on a plane next week. No, but imagine you work for like one of

the big auditing firms and they're like that shit they used to email you? How do you go to China? No big deal. No big deal. Are they going to make senior management do it? Yeah, I doubt it. Yeah. Somehow I doubt it.

There's some 31-year-old who's going to be there with his phone under surveillance. All right, we clicking it up? Michael, could you keep your mouth like two inches? I feel like I'm leaning very hard. Yeah, you don't need to be that close. Okay. Put my mic down! I will click it up.

All right, John, let's go. Let's go. It's a long time. Let's get it on. Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be

relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Duncan, did you know that in the year 2022, in a year when the IPO market dried up, in a year where the U.S. stock market is down, Masterworks has sold six paintings with an average net return of 29% to investors. Unfortunately, none of my seven paintings have sold,

but they're still the bad cat of the year, right? It's always hope. I think Michael's art portfolio is the second half story. On top of that, Duncan, Masterworks portfolio has generated a net annualized dollar weight appreciation of 15.3% since 2019, September 2019. To learn more, visit masterworks.art.com.

59. We took 59 of these already. All right. Time flies when you're having fun. My God. All right, here's how we're going to start. First of all, happy birthday to Duncan. When is your actual birthday?

Saturday. My God. What do you have planned? I might run a 5K. On for a birthday. Really? Not for my birthday, but it happensK. On my birthday. Really? Not for my birthday, but it happens to be on my birthday. You just might actually. Where is the 5K being held? Prospect Park. Okay. You could do

that, I feel like. Yeah, it's close. Okay. Are you known for speed or distance, like endurance? Neither. You're not? Alright. But you enjoy it? Yeah, yeah. Alright, it's a great way. I'll probably do the same thing on my birthday. It'll be a 1K. Devon Drew is here.

Devon is the CEO of DFT Partners. You are a SaaS distribution platform for asset managers and RIAs. And prior to DFT, 16 years at all sorts of gigantic asset managers, Merrill Lynch, J.P. Morgan, Alger, Vanguard. Which was your favorite? What was your favorite work experience of all of those admittedly large, well-known firms? So I would have to say my favorite was one that you didn't mention, American Century Investments. You don't want to put it in there? It was definitely in there. It must have been oversight. But definitely had a great time at American Century. Spent five years there.

Still remain very close with everyone. Our sales meetings were just great times and really felt like we were a family over there. It's pretty easy to sell American Century. It's just Ken Huebner all day, right? So with American Century, the easiest selling point is it sounds like American Funds. So whenever time a client's like, yeah American Funds growth from America I'm like yeah yeah let me just write down that we have a new ticker actually and uh so yes that was the easy yeah definitely I tell you something messed up that's really true though the guys at uh

Oppenheimer the brokerage firm used to uh use Oppenheimer Funds which is completely unrelated Oppenheimer Funds was uh CIBC right it was it was Canadian company but the guys at Oppenheimer Funds, which is completely unrelated. Oppenheimer Funds was CIBC, right? Yeah, it was. It was a Canadian company. But the guys at Oppenheimer would sell Oppenheimer Funds because it was like easy. It was easy sell. Yeah, I mean, that goes on.

Different time, right? No doubt. When were you, what was your last stop out of those firms? Was it Vanguard? So Vanguard was my last stop, yes. Okay, all right, awesome. So we're going to talk about this platform you've built, which as soon as I saw it, I totally got it.

And I see what the opportunity is. And I think people are really going to be into it. But this week, I think we have to kind of start with some of the economic data that we're getting. Jackson Hole is like – I guess it starts tomorrow. They will livestream Powell's presentation. It's from Missouri? From Jackson Hole, believe it or not. So what are we, Mike, what are we looking at here?

All right, not to lead off. You know, I'm sorry I started the show on a sour note, but it's what it is. We got the economy softening, and we've got some data that's coming out this week to confirm that. We got S&P Global flashed U.S. composite PMI,

which is a fancy word for just saying like private sector type stuff. So S&P wrote, U.S. private sector firms signal a sharper fall in business activity during August.

The decrease in output was the fastest seen since May 2020. The rate of contraction also outpaced anything recorded outside of the initial pandemic outbreak since the series began nearly 13 years ago. Material shortages, delivery delays, hikes in interest rates, and strong inflationary pressures all served to dampen customer demand. If there is one bright spot in the report, I'm not sure there's a bright spot, but firms increase their selling prices at the softest pace in 18 months. You could say that's because inflation is peaking, maybe demand is slowing, a combination of things, but not particularly rosy. And again, this is not like a Yahoo Finance article. This is like straight from S&P. They don't do hyperbole.

Right. It's not clickbait. So there's a chart. So, I mean, it's a downturn that is not as steep as the pandemic lockdown, obviously, but it also is not resolved as quickly, I guess, my perspective. What are your thoughts about what we're living through right now and some of the stuff that you're hearing and seeing? Well, I always try to follow the money. So when I look at VC activity in Q2, it declined significantly from, if you look from peak levels reported in Q4 2021 and Q1.

And we expect activity to remain relatively volatile in the current environment. So from a, you know, I know from a private markets perspective, it's like the feedback that not only myself, but also larger VCs are saying is it's going to be a bumpy road, right? They're buckled up for it. They're not like we're going to whistle past the graveyard. Ford just cut 3,000 jobs. Maybe specific to like, you know, ICE and electric, but still. If you're not talking about a downturn that's like more of a classical downturn

than a pandemic lockdown or a great financial crisis, but just like a straight up regular recession, which I think Wall Street has the odds at 50-50 at this point in the next 12 months. What does that do in the asset management industry? How much do people really change what they're doing? Because we had Joe Terranova on the show last week. He was saying like, okay, take this data, take that data. Okay, great. Now what? Now what do you do with it? So I know you talk to a lot of asset managers. What are you hearing from like what people's plans are to adjust for what seems pretty likely to be coming?

Yeah. So at my last organization, you know, was a small $9 trillion asset manager called Vanguard. You know, it's funny. So even if you look at the volatility during the pandemic, they actually reported the least amount of volatility among trading amongst clients, right? So that just goes to show with asset managers I'm talking to are saying buy and hold, right? Like remember your overall thesis of why you're investing

in our small cap growth or in our large cap value, right? So, and if your time horizon is indicative of, you know, 10 to 12 years from now, these are very solid companies that are, will be able to stand the test of time. So stay, you know, so stay and hold the ground. When you think about how little outflows there were from Vanguard, uh, two years ago when the, when all hell was breaking loose to me, that's like one of the most shocking things that happened that really nobody did anything. And like, even anecdotally, most of the stories I heard from advisors were clients calling in and saying, I want to give

you more money. Right. You must've heard a lot of heard a lot of stories like that. So I ended up, from my position, raising the most money ever during 2020. For the first time in my career, my phone was actually ringing, and it wasn't my mother. Inbound. Exactly, inbound, saying like, hey, listen, we have this client. We want to utilize this. And that's what happens. If there's a volatility, there's a high correlation of going to, uh, managers that have, you know, that, that reputation for, um, you know, being conservative in nature. Right. And, and you've seen that this year,

you've seen that last year, um, which makes, you know, which makes my, my, you know, which makes my platform that much more desirable to be able to kind of break in. So what do you think was behind that willingness to stick it out? And, And will that willingness still be here in the next recession? Do you think investors have gotten smarter? I think the access for information is there. Not only the access for information, but folks like yourselves being able to educate the end client and make it into graphs and charts and be able to show, well, this time isn't different, right? We've had X amount of bear markets over the past 50 years, and we've always come out of that,

come out of it stronger. So stay the course, buy what you know, stick to your investment thesis to why you originally invested. That seems to be getting through, though. And maybe the answer is more financial advisors are building financial plans. And so when they're interacting with clients in those crucial moments, there's some rhyme and And so when they're interacting with clients in those crucial moments, there's some rhyme and reason behind why they're saying stick it out. It's not just like, well, our chief strategist thinks the market's about to bounce here. That's not the conversation. Right. It's more goals-based, right? So when you're having that goals-based, like, okay, well, when you came to me and you said you want to retire in 25 years

and your goals was X, Y, and Z. Did that change or not? Right. Right. Exactly. I guess the pushback, and I don't disagree with anything that you guys just said. The pushback would be that that contraction happened so quickly. The bottom happened in 24 days.

And people are paralyzed. It happened too fast to do anything. Same with the bounce. Right. And it wasn't prolonged. And it was exogenous. And everybody understood that not that stocks would recover as quickly as they did. I certainly did not think they would.

But it was not an economic recession. And I think right now so many Americans really feel the pinch. And so I don't know if the average American is the average investor class, but I feel like people really feel like things are getting worse. Let's look at this Joltz report. So this is job openings. So this was the big stat that the bulls would trot out. 11 million or whatever it was. They would keep saying there's 11 million open jobs.

There's only 5 million people unemployed. There's two jobs available for every job seeker. And I guess to some extent it was true that we've had a very tight labor market. But that story is like imminently going to come apart. I don't think most people believe the 11 million job openings. And what is, all right, so the latest report, they fell by 1.1 million between March and June.

So we only get this quarterly, this data? I think it's monthly. It is. All right. But this could collapse very quickly. I'm not saying it will, but like these job openings, you know, I don't say that they were fake job openings, but I feel like this number could come down very quickly. So I don't really believe the data because of work from home. You could have like 50 ads running saying that you have job openings.

Two people respond and you close all 50. Were they ever, did they ever really exist? Right. So. Think about all the people that, you know, during, during the pandemic were like, you know, we're just not going to work anymore. We're fine. And all of a sudden, fast forward to 2022, it's like, okay, well, you know, let's, you

know, let's change that up. Let's actually, you know, get not one job, but four jobs. Right. And, and, and like you said, all the part-time work and and the different uh platforms like upwork right where you know you don't have to you know really report kind of what you're doing and have freelance you know five freelance jobs at a time did you read anything about this in the last week or two everyone's talking about quiet quitting did you read anything about that you know what that is yeah yeah i was uh reading something about the call what's quiet quitting um they don't say anything they just pretend they're still working there, but they stop working?

Yeah, pretty much. So no two weeks? Like office space? I'm not going to be here. Yeah, exactly. I won't be here tomorrow. No, no. They don't even say that.

They're like, just don't do the work. Oh. So mentally. Or they just start doing significantly less. They just like scale it back, and they're barely doing enough to stay. Yeah, like they're doing enough so that you don't fire them, but they're not acting as though they have a job.

How many members of our firm are currently quite quitting and can you identify them, please? It couldn't be any more than five or six. That wouldn't be terrible. That's about 10%. It's a good attrition rate. Some of the data is clearly worsening. New and existing home sales are falling off a cliff. But I think Josh and I spoke about this the other day.

I think a better way to frame this like mentally, I think it's healthier to frame this is not that things are getting so much worse, but things were so abnormally skewed to the upside that things are just getting more normal. And because we're coming off such high numbers, the year over year change, quarter over quarter change is like very bad. But in reality, it's like not that bad. We have down home prices though for the first time in three years. So that's like a – it's like no longer slowing anymore. Yeah, but my point is you could say, okay, let's just say the home prices fall 10%.

Okay, fine. Meaning home prices are only up 30% over the last 18 months. Like, yeah, they're going to fall from the peak. Obviously, that is going to happen. That did happen, but it doesn't mean that things are so bad. Peloton, most obvious, least shocking earnings miss of the quarter. Let me ask you this then. So they announced a partnership with Amazon yesterday.

I didn't read the details. They're going to be available to be sold on Amazon. Great. Does that mean that you don't get going to be available to be sold on Amazon. Great. Does that mean that you don't get people to install the bike? Doesn't matter. The point is- That's like I announced a partnership with Amazon because I'm going to make French lip bracelets

and sell them using AWS. But Peloton was up 20% yesterday and took it all back today. Is the market that dumb? Yes. Because people don't read past the headline. You know what I'm saying? But people didn't know the earnings was the next day? I guess people are short the stock.

They get squeezed. The stock makes a big run up. And if you're unsophisticated, you look at that and say, wow, people are bullish in Peloton. I think I saw that they're not going to be reporting earnings anymore. Is that possible? No, that can't be possible. They're registered. They're not giving guidance.

They're not giving guidance. Go back private. Stock is in an 88% drawdown from its high, which is pretty bad. Free cash flow is negative $2.6 billion. And they only added 4,000 subs this quarter. And they're projecting flat subs for next quarter. Yeah, I think we added more subs than Peloton did. I think so.

I mean, to me, this has to go negative. How shocked? Are you surprised by this at all or no? What has to go negative? Subs. I think their subs will not be flat next quarter. I think they're now going to have attrition because people are fully outside. Fully outside.

Nice day. but i don't know where you go from a from a product innovation standpoint i mean they came out with the the new version of the bike which was a tougher one to even hit hit prs they came out with the tread like they came out with the tracking system yeah like what do you what do you do next i mean i only think they could probably do next is maybe a rowing machine or like get a partnership like soul cycle and like an equ. No, you just need another pandemic. What's the big deal? That's really it. Revenue for

the fourth quarter is 30% below last year. What turns that around? Now it's $679 million and here's the two big problems. They burned through $412 million in cash last quarter, which is down from $650 million.

So they're burning less, but they have $1.25 billion left and a $500 million credit line. But worse than that, subscription revenue is now bigger than equipment sales. So you would think that would be good. The problem is it's all tiny. Subscription revenue for the quarter,

$383 million for the quarter. So it'll be over a billion incription revenue for the quarter, 383 million for the quarter. So it will be over a billion in subscription revenue for the year. Equipment sales are falling so fast though that you're not going to get the subscriber growth. But now subscription is bigger than equipment. And if they now get into net negative subs, then really what are you going to tell people? They're not going to sell more of the bike because the used bike market is flooded. So I don't know. To me, this was the least shocking of all the earnings reports.

But I think it's partly a Peloton story, partly an economic story. Anywhere you look where someone's selling durable goods, right now, they're starting to feel it. They're starting to struggle. So we talked about on Tuesday that unfortunately for the S&P 500, goods are more important than services, even though in the economy, it's a services-based economy at this point. So, all right. There is good news, though.

There is good news. Give it to me before I kill myself. Shipping rates. Remember like the Shanghai to Los Angeles? It was taking forever and the cost went up exponentially. That is crashing. That is actually crashing,

which is a good thing. What actually, what? But why is it crashing? Because things are getting normal. Because demand is falling off. Well, no, I think a lot of supply chain issues are fixing themselves. Maybe there's a combination of the two.

But profit margins for S&P 500 companies are at an all-time high. We got news today that GDP contracted less bad than was initially reported. They reported a 0.9% decline. It was actually 0.6% on the revision. One factor was an upward revision of consumer spending, which accounts for the bulk of economic output. One of the things that we keep talking about is that the economy is messy. Not every company is feeling the impact of all the different cross-currents together. Retailers are getting killed.

Nordstrom was down 20% yesterday. They obviously got clocked by inventory. But then other companies, particularly hospitality, travel, consumers can't get enough of it. So I feel like this is the moment, though, where it becomes really apparent that things have materially changed. Forget about just people's sentiment. You're now going into, I think, the first holiday season of the pandemic period, right, where sales conceivably could be like, like last year, nobody's worried about sales. They're worried about, uh, can, will the goods arrive on time? Right. So now I, I don't know. Now I feel like it's different. What do you, what do you see out there, uh, this year versus last

year? I mean, travel first and foremost. I mean, I've been living on a plane for the past year and you know, I feel like, I mean, let's just call it United, I'm Premier 1K and used to get upgraded automatically. Now I'm flying out of Norfolk. Premier 1K, they put you on before the pilot. But now I'm 35th on the upgrade list. So you're seeing, I feel like people are traveling a lot more. The airports are more packed than I've seen them, granted, in summertime. But still, even in quiet times, people are just just out and traveling more spending, you know, spending more money. Hotels, you know, like I'm a last minute kind of guy and I go in and oh, this hotel for this conference is actually booked. So let me stay, you know, let me stay in the next city over. Right. So even for like, you know, future proof. Right. I mean, the got a room though. You good? I do. I do. I'll be hopefully rolling out a cot next to you.

I have a secret block of rooms we can open. We can unlock a seat. It's all about who you know. But also, so getting back to like some positives, initial jobless claims are coming off the lows, like abnormally low lows, lowest all time, I believe. They're ticking up. But again, I would think like a better mental framework

is just things getting more normal is healthier than like things are getting bad. Yeah, 3.5% unemployment is not normal. And 2% unemployment among college graduates is not normal. It's not that you don't want people to have jobs. It's that if that's going to be the new normal labor market, then companies will not be able to hire. So like the normalization story is, I think, the silver lining. But so how, I mean, one of the biggest stories is housing, which is I think 18% of the economy,

but psychologically it's a much, much, much bigger piece of the pie. And the bid ask spread on housing is three miles wide, right? Because sellers feel like they could have gotten a price 12 months ago. That's much better than it was today. And buyers are like, well, first of all, mortgage rates, the economy, everything is different. And so I think like transactions, not I think you just look at existing and new home sales transactions are just like freezing up. Yeah. But if you have to ask like, which way will this break? If, if existing sales have fallen to the point where the market is barely moving,

prices won't stay. They'll drop like the market. It doesn't every market in the world clear eventually. So yeah. But if you're, if you're at a sub 4% mortgage, like you can't move depending on your financial situation, depending on where interest, depending on where mortgage rates are, mortgage rates go back can't move depending on your financial situation, depending on where

interest, depending on where mortgage rates are. Mortgage rates go back to 6%. Yeah. Well, listen, you had two years to sell your house to pretty much anyone for any price. So what's, what's the market like where, where, where you are? Well, I actually put my house on the market and it's, um, I'd write, you know, writing that inflection point where, um, rates went up and prices started going down. So it's actually been on the market without one offer for 60 days. And that's where two of my neighbors sold identical houses within days. You waited like six months to- I waited like a couple months too long.

But to that point, where do you go, right? Rental prices are up 22% year over year. Places like Miami and a lot of larger city, New York City. I should have got a place back here during pandemic when they were giving away for free. With that said, there's still an equilibrium, right? If you look at housing starts and people that need houses, right? I mean, still that's roughly about a million in difference between the two. So it's like, you know, where are you going to go?

There's not enough houses. That's why it's hard to get too bearish. There's not enough houses. It's hard to get too bearish on housing prices. Like I think that the floor is very high because there's still way more people that want a house than people to sell a house. That need a house. That need a house. You have three months inventory nationally in the housing market.

You have a demographic. That just shot up a little bit, but still. Fine. So three to four months, you have a demographic boom of people that are home-buying age. So I think they'll keep the market at some sort of equilibrium, unless you tell me mortgage rates are going to 9% or something, which I don't think anyone thinks is like... I think millennials

are the ultimate relentless bid. Yeah, because they're 37 and they're miserable. And they need to get... I'm not miserable. Speak for yourself. How old are you? 37. That's where I was going with that. What are you going to say next? They're bald? You have your house. Speak for yourself. How old are you? 37. Yeah, that's where I was going with that. What are you going to say next? They're bald?

You have your house. You're good. All right. Devon, would you give Adam Neumann money? The WeWork guy? Man, that's tough, man. That's tough. Sounds like a no.

It sounds tough. Especially as a solo founder. Sounds like a no. You know, I wouldn't. Burn through a ton of cash, ton of capital at his last venture. Andreessen just valued his company at a billion dollars for a very similar, in my mind, concept than WeWork. But on the flip side, he's betting on millennials and Gen Zs living a nomadic lifestyle, right?

And not wanting to get locked into, you know, these leases paying exorbitant prices. We don't even know what the product is. I don't even know what it is. It's Flow. There's a deck. There's a deck, right? There's a deck. You have to assume Andreessen saw the deck.

Okay, I think they're trolling. That's not my take. It's somebody else. I saw somebody else. No, seriously. It's the largest that they've ever made. It's the largest investment they've ever made. You don't think that's intentional?

You don't think it's like a giant F you to the media? If you want Adam Neumann, you've got to pay for Adam Neumann. We're founders first? Well, let's talk about what this really is. It's called Flow. We don't know what it is. It's a community-driven – I will tell you what we know so far.

It's a kibbutz. I mean I'm just telling you. Adam Neumann's whole shtick is that he grew up on a kibbutz in Israel, which is like communal living. He grew up on a kibbutz in Israel, which is like communal living. And it's like everybody shares the crops or whatever. And like they all pitch in and do different parts of what has to be done to make the community work. All right. What are you talking about? You really think this is a kibbutz?

I'm telling you literally what he is saying. He is modeling this company. Stop. Just stop. Why would I just stop when it's the truth? It's a billion-dollar kibbutz. But Andreessen's getting this at a discount, right? Because if WeWork was valued at $50 billion.

He still owns 10% of it. Yes. No, I swear to God. Okay, listen to me. Like all the best ideas in Silicon Valley, this is Esquire. Details and explanations are scant. The homepage for Flow appears to borrow from Hun Culture's live-life love mantra with its own interpolation. Live life in Flow. Promising or threatening to arrive in 2023.

So basically, Michael, Adam Neumann took the money out of WeWork before it collapsed or during the collapse. He bought $90 million worth of residences across New York and California. As of this year, he owns 4,000 affordable apartments all over the world, and he values that portfolio at a billion dollars. That's what Andreessen Horowitz is investing in. It's not an idea. It's 4,000 apartments. So what? You're going to be able to jump from one to the other?

But the bet that they're making is that there's a subset of the population that's going to want that communal living. Yeah, like a dorm. I look at it like a dorm, though. Like in college. Like, you're going to, like, he, what? No man's bet. I know. What?

What product wants to live in a dorm? Well— People that don't want to commit to year leases, right? So he's betting on that nomadic lifestyle of folks, the same folks that aren't going to go back to work and that are— In New York City? No, no, no. Listen, here. Newman has long been a champion of this arm of his business, partly because of his time spent in a kibbutz in Israel when he was younger. The idea of

co-living in a commune-type space, I would blow my brains out, appealed to him. He was trying to do that with WeWork, so now he's going to do it with apartments. I don't think it's the worst idea ever. I really don't. They had a

WeLive down by Wall Street, and I actually went there. A buddy of mine was living there and working at it there. And I'll be honest, it was kind of packed. Andreessen says, quote, many people will live in places far away from where they work, and

many more will shift to a hybrid environment. For many of these people, increased screen time and reduced in-person interaction will cause challenges that are not just limited to work, such as alienation and loneliness. This is not a good path for anyone, and it needs to be addressed directly right now. What's the show on MTV? The Real World. The Real World.

Yeah. That's what this is. Yeah, everybody doesn't want to live that way. That goes well. That show goes for like six weeks, and they'll want to kill each other at the end of it. Let me say one thing. This doesn't have to work. It just has to be able to be sold to the public.

You understand? Okay. I'm not buying it. I would say this. I feel bad for Adam. Adam was in the penalty box during this whole crypto NFT meme stock bubble I think he would have f***ing crushed it

like in that environment I think that I think that was a sad it was a missed opportunity for him WeWork almost came public in 2019 at 50 billion dollars so it came out instead as a SPAC it's worth

it was worth 8 billion when it de-SPAC'd now it's worth 3 billion that was the S1SPACed. Now it's worth $3 billion. That was the S1 to end all S1s. Business media went crazy. Elevate your consciousness? What the hell are you talking about? But think about it.

From $50 billion valuation to $3 billion, what it's worth now, you could make the case that by pulling the deal, or by having this be a SPAC, the sponsors saved the public like 45 billion in losses. Because I think WeWork would have ended up worth 3 billion, had it come public as a regular IPO.

There was a report and there was an article in Forbes. The headline is, WeWork co-founder Adam Newman's real estate startup sounds an awful lot like one he invested in two years ago. So here's the lead. This is pretty good. When staff at real estate startup Alfred arrived at work last Monday morning, they were surprised to discover that their largest investor, former WeWork CEO Adam Neumann, appeared to have started a rival company and raised $350 million to compete against them. So he gave them $20 million at the start of the pandemic.

And then he invested again. He had two board seats. He doesn't, no more board seats, but I read the article and there's actually, he actually did something good. So they were raising additional funds, his company, Alfred. And in some sort of the terms

that there was a clause that if they raise more money, Adam Newman would have had warrants that converted that would have given him 51% of the company. He didn't take them. Oh, that's so good of him. We're not not calling him a hero, but he didn't take them.

But here's what I would say as far as this goes. Isn't this competition? Is that so, so bad, investing in a company and then doing something similar? How unethical is that? I'm just asking. I'm not sure I feel very strongly. I guess it's been, I mean, it's been done before. People work at a company and then start a competitor.

It's not like, he didn't invent doing that. It just, everyone remembers that. Does anyone remember why the IPO fell apart? You remember? Yeah, it was the S1. Elevate your consciousness, all that nonsense. Incorrect. That was fine.

They were pricing the deal. This literally fell apart two days before it was going public. We had a problem with the valuation, correct? No, worse. Details came out that he was double dealing. He was buying real estate and then leasing it back to WeWork. Think about that. Oh, and then it came out that he sold the name We

to the company for $5 million. What name did he sell? Well, once the floodgates broke, then all the stories started coming out about like smoking blunts on private jets with employees and then it became floodgates. But the proximate reason

why the IPO syndicate, the sponsors, were like, okay, we're not doing this was because details started to emerge about him literally buying real estate, like jumping ahead of WeWork and then leasing it back to them. Do you think though had the S1 been not completely f***ing insane, would those details have come out? Maybe not. Probably not. Because the S1 was so nuts that the entire business world for 72 hours or however long it was, it was

nothing but that S1. But I still think it was going forward. I really think people were like, wait, wait, wait, what is he doing? My point is, had the S1 not been so crazy, would they have uncovered that detail? Oh, maybe not. You're right. That definitely sent reporters on a mission to be like, wait be like wait what's going on was he buying the real estate from a like offshore holding company or no but just the point that like he was buying and

selling it to them though right he was jumping in the middle he was running his own company what in the world so we work is about to i'm making shit up WeWork is about to lease six floors in a building owned by Steve Ross related companies. And then he jumps in the middle. He does the lease or he buys the building and then he goes and leases it to WeWork himself personally through an LLC. Anyway, this guy's good at making money. This guy's good at making money.

Yeah. Right. So the company doesn't have to make money. I'm sorry. Listen, I will observe judgment because I'm genuinely curious to. They just have to be able to sell the stock. I will reserve judgment. I'm genuinely curious to see what this is. But if it's what you're describing.

I just told you it's college forever. Wouldn't you want college life forever? I'm short. You down for college forever? I'm mentally short that company. Man, I personally wouldn't. You'd be into it. I would not be into it.

Come on. One month a year. One month. Short term lease. I'd do a into it. Come on. One month a year. One month. Short-term lease. A week. What's the demographics for this? You. Me?

No, it's not you. No, it's a 27-year-old, not a 37-year-old. If I had to guess, right? It's somebody that's ready to be away from their parents. It's Nicole. Is it you? No, you're too young for this. No, but there is communal living in Murray Hill.

It's Anna Delvey, right? Yeah. Oh, it's Anna Delvey. No, you're right young for this. No, but there is communal living in Murray Hill. It's Anna Delvey, right? Yeah. Oh, it's Anna Delvey. No, you're right. There is communal living in every city. There's that one neighborhood where it's all kids that just graduated college. Is there like the wheel, like chores? I guess the question is how do they scale it?

Do they have that network, that community all over the world? Kind of like a Soho house for 25-year-olds. Well, so how about this this if you go visit your friend who's in one of these and it's dope like you're you're like one floor is billiards the floor below that everyone's watching like a football game on a flat screen one floor below that there's an open bar you might be like why do i live in this stupid boring apartment building i don't know my neighbors i'm lonely i don't have building? I don't know my neighbors. I'm lonely. I don't have a girlfriend.

I don't have a boyfriend. Like maybe this is what I actually really want. So that's the way that we work, the original WeWork. Wait, did he say open bar? Open bar. I don't know. I just covered my short. Yeah. So are you long yet?

I'll say more. All right. Anyway, so no take. You're not in. You're out. I'm out. Even if Andreessen personally shot you an email, he was like, hey, you want in? You might be in. I need more details. We need more details. We need more details.

I think we need to know more. I think we need to live in one for a few weeks. All right. Crypto. So not crypto price up or down. This idea that Wall Street is starting to embrace the technology and start to actually build things on the blockchain, I think is really interesting. Paul Vigna did this thing at the Journal this week about Goldman and JP Morgan starting to process some trades using the same technology that's behind cryptocurrency markets. Isn't this the thing that we originally heard in 2017 that was going to happen that sparked? I don't remember hearing that. The original bull market. You don't remember everyone being like, I don't like Bitcoin, but I like blockchain. You don't remember that whole thing?

Yeah, that was the thing. That sounds like it's where it's going right now. Didn't Vanguard do something with blockchain technology? Vanguard is there. They were bullish on blockchain, but- settle trades or something completely against the actual cryptocurrency. Yeah. So they're just like JP Morgan. And they're all they're all trying to figure out, you know, how to, you know, how to build implement this technology into, you know, they all like Playboy for the articles.

Goldman Sachs is already trading some bonds and other debt securities for clients on blockchain-based networks such as Ethereum. And the bank is building its own blockchain-based trading platform. JP Morgan has a platform in place already called Onyx. So I guess this is like what people have been talking about all along. Yeah, I mean, I just feel like if you look at, and the important to note is that blockchain as a digital, as a distributed ledger technology, and having the advantages of transparency and traceability

and scalability, efficiency, and also automation is what people are all gung-ho about. So being able to have that digital encrypted ledger with sequential timestamp data makes it a perfect fit for a lot of Wall Street firms. Right, so what coin do I buy? So Tom Farley, the former president of the American Stock Exchange said,

quote, blockchain technology is going to rewire all financial services, end quote. So they keep saying that, and I understand how, because think about how many people in the asset management world are engaged in matching trades. That's what banks are, right? I send my money from my bank to your bank. Bank of America has to talk to Chase. Okay, does he have the funds? Does he have the funds? If this was all just open source and distributed, boom, no, it's over. Dude, the whole DTC system. Think about how much paper is being pushed that if we're trustless or we're database that was open to everyone and we're just a ledger, you probably could save a lot of money.

And if you're Vanguard, that's what you're thinking about. It's like how will the blockchain save us money, not how do we speculate in coins. And does SWIFT go away, right? I mean SWIFT system was created, what, in the 1970s with the global banking efforts that were dominated by, you know, developing nations, you know, like does blockchain replace, you know, replace all the SWIFT and, and, you know, blockchain addressing the account and payment, you know, payment speed, KYC, AML, security, traceability, and just knowing with transparency kind of where funds are going and being able to process more transactions and scale and speed.

So I feel like it frees up capital flow for all markets. Right. And I think the best part is the end user doesn't know the difference. Hey, did NVIDIA report earnings this morning? The end client doesn't really care. Was NVIDIA this morning? Last night. Last night?

Yeah. That was a big update today. It opened down and closed up. So typically something that you want to say. What else are we doing? Oh, so Gary Gensler's op-ed about treating crypto like the rest of the capital markets. He's basically doubling down on this idea that like a lot of these things are securities and the laws are already written. What's so complicated?

Come in and talk to us. And then like Mark Cuban went absolutely crazy on Twitter. Did you see this? He went crazy on Twitter. He's basically like bullshit. What do you mean come in and talk to us? Who do we meet with? Who do we talk to?

So I don't know if that's a great strategy. coming to talk to us. Who do we meet with? Who do we talk to? So I don't know if that's a great strategy, but I guess like the real issue is people just want it spelled out because they're terrified that they're going to build something

that's crypto related and they're going to be used as a test case in a court somewhere. And there's already versions of that. So I'm sympathetic to the fact that a lot of these things basically are securities. I actually agree with that. So tell people specifically, this is a security.

This is not a security. What do you think about that? Yeah, but he didn't really get into that that much. I agree with you. The laws need to be made more clear to the companies. I don't think a lot of the companies are intentionally trying to dodge the SEC. I know some are, but for a lot that are trying to do the right thing, the laws, I don't know. I don't know.

But here's, let me just quote Gensler because I don't want to speculate on what the companies would say or wouldn't say. He said, we can dispense with the idea that crypto lending isn't subject to regulation. On the contrary, the rules have never been around for decades. I'm sorry, have been around for decades. The platforms aren't following them. Non-compliance isn't the inevitable result of the crypto business model

or underlying crypto technology. Rather, it is as if these platforms are saying they have a choice or even worse saying, catch us if you can, end quote. So Getsler is saying that what I just said was completely false, that the rules are clear and these companies are in fact trying to avoid them.

Well, what you'll keep hearing them say is we want rules. But he's saying that they exist. Yeah. So I also think that there's like the issue of like only a handful of companies can afford the amount of lawyers and legal firepower that you need to even like have the to even have these discussions and so it's almost like if the rules aren't in writing in such a way that everyone can understand them then some people are going to accidentally fall on the wrong side i don't know on the wrong side of this but i i don't think this stuff is simple because of how new some of these concepts are. Like what do you do with a DAO, for example?

Like what do we say that is? It's people – nobody runs it, but the users all run it. Is it a corporation? Is the coin equivalent to a stock certificate? I don't really know exactly what to do with that. certificate. I don't really know exactly what to do with that, but like those issues seem like they need more, they need, they need more detail if we're going to say, okay, we regulate this now as a security. So there was, there was a lot of news in crypto last week when they shut down Tornado Cash, which not having, not really knowing much about this, to me that was clearly being used by bad actors.

What is Tornado Cash? Tornado Cash, as I understand it, is a way for you to put crypto into this algorithm that makes you completely untraceable and it spits it back and you get... It sounds like you're watching your money. Okay. How much Tornado Cash do you currently hold?

This is the first time I'm hearing about Tornado Cash. Same. No, it's an app. It's not a thing that you hold. Oh, it's like you're watching your money. Okay. How much tornado cash do you currently hold? This is the first time I'm hearing about tornado cash. Okay, same. No, it's an app. It's not a thing that you hold. Oh, it's not a thing. It's just a service people are using. It's a way to, in my words, wash your crypto. We don't like that?

It's not good? Clean crypto? I thought that's what we were going for. Hey, let me interrupt. Breaking news. This is not breaking, but it's breaking for me. I had Nick Maggiuli run these numbers for me. I was curious which stocks have done the best and worst since the bottom in March, 2020.

And these names are well below, these are the worst names. So Teladoc, for example, is 70% today. Teladoc is 70% lower than the bottom in March, 2020. Wait, say that one more time. Teladoc is 70% lower than the bottom in March 2020. Wait, say that one more time. Teladoc is 70% lower today than the bottom in March 2020. If these numbers are to be believed, which I think they are. So for example, the March 2020 low for Teladoc was $116 a share. Okay. It's $34 today.

Some other losers. Ring Central down 67%. Again, these are relative to each of their March 2020 lows. Warner Brothers, almost 30% below. Peloton, obviously, 45% below. Zoom Video, 20% below their March 2020 lows. Netflix, 22% below. If you were talking to investors about a strategy that overweights growth and companies that are I guess, quote unquote, innovative,

you would have had a very receptive audience, but it didn't take long for that whole thing to... Oh my God, look at that. I'm looking at the chart of Ring Central. That March 2020 low is so cute. You see that? Yeah. The March 2020 low is $150 you see that yeah so the march 2020 low is 150 it's now 45 it was a it was a 450 stock but if you were selling this story how easy would

it have been to just like everyone you talked to would have been like i'm in i'm in and teledoc was the easiest one to sell yeah like this is not and i i'm bullish on like uh not in-person medical visits i'm bullish on that space in general, maybe not the companies, but I think that is going to be a lot bigger in five years than it is today. Yeah. But right. So, so if you're telling that story, like all of these companies have had a huge speed up in the adoption curve for their technologies, it would have made so much sense. Every one of these stocks looks like a bomb hit it. They had an incredible run upup and i i'm a fun

flow guy right so it's like looking at stock specifics is fine but i start looking at okay well huh you start looking at like arc right and you and you look at 2019 at 6.6 billion dollars for their flagship portfolio all of a sudden fast forward a year, that $50 billion with their innovation fund. And you're going to run the same strategy. And you're just sitting there, you're scratching your head and just like, you know what, there could be a bubble here. I don't know from a stock-specific standpoint,

but maybe this is time, maybe valuations are a little stretched. Is that the craziest thing you've ever seen? A manager to just completely come out of nowhere like that? Six funds that go up 100% a year. And I was long. And you know what? I've never seen anything like, I've never seen,

I know they partnered with Resolute Investment Managers and for some distribution force, but to go from 6.6 to 50 in a year is just unheard of. And she did it mostly herself. I don't know what kind of distribution on the ETF, how that even, like distribution on the ETF is how that even, like, distribution on the ETF is not as effective as distribution in a fund, right? It sold itself.

And she did a great job marketing Twitter. But, you know, but yeah, there was a distribution force behind it for the advisor. Oh, there was? Yeah, you know, Resolute was, you know, was behind it. They have a, you know, wholesaler force and they were pumping it. But being able to get on the models and everything.

But once again, going from 6.6 to 50, looking at years ago, I remember when everyone was talking emerging markets, and you look at Oppenheimer's developing market going up to $40 billion. And there's a direct correlation between fund flows and performance when it comes to asset bloat. And his story is as old as time. You just look at it. Okay, this sector is going down. But what's so funny is a year before Cathie Wood's emergence, we were talking about there might never be another active manager again. We were talking about indexing is about to be 70% of the stock market. And then all of a sudden you have the wildest active manager story like in 25 years, let's say.

All right. Let me give you the flip side, the biggest winners. Wait, these are the biggest winners from- From their March 2020 low. From the pandemic lockdown low. Yeah. All right, go. Anterra Resources.

Moderna. Anterra Resources, 5,800%. Holy shit. GameStop, 3,500%. Well, that one's driven by fundamentals. We understand. Aventive? OVV? I don't know that one. 2,300%. Avis,

2,200%. And then the rest are all energy. Range Resources, Targa, PDC, Devon, Enphase, those are all up 1100% or more Tesla's up 1100% plug power, nine 75 Alcoa continental resources, Apache mosaic diamond bag. It's all energy. Uh, what, why do you materials? Huh? Yeah. So I, I, I just, I think it's amazing how quickly things changed because in that March, 2020 or April, 2020 period, when oil was going to zero, if you would have told me,

dude, in two months, in two years, we're going to look back and the whole list of the top performing stocks will be dominated by oil. It's almost all energy materials. Actually, the only two, I would have bet on anything else. Cleveland Cliffs. The big ones. Yeah, Avis. Oh, this stands out. LPL, that's interesting. The big ones, the big growth stocks that are on this list.

So Tesla, as I mentioned, is top 10. Tesla's its own ball of wax, right? That's 1,100%. The Trade Desk, which I would put in that high-flying Cathie Wood type basket. The Trade Desk is up 355%. Still, even after getting killed. Did it get killed? Yeah. Oh, yeah.

Cloud Flare, Palo Alto Networks. But it's all energy materials. Speaking of Tesla, what do you think of the single stock ETFs? Are you amazed that they approved that? I can't believe it. I never would have thought it would have got

approved, especially as long as it took to get the semi-transparent active ETFs approved. Which was like, what, seven or eight years worth of attempt? Yeah, it took a while. I was very fortunate to be at American Century when we were first to market there.

But it took a long time. It took a lot of education going back and forth, different baskets being approved. How does the semi-transparent ETF work? They don't update every 24 hours the holdings? They give the manager time to accumulate stocks? Yeah, correct, because you don't want to avoid front-running. So that was the whole thing behind it.

How do you have an ETF without potential front running from an active management standpoint? So a lot of people were saying that defeats the whole purpose of the ETF because there's no transparency. Yeah. So now it's like, well, why invest in a mutual fund when you could have the ETF wrapper with all the tax efficiency and transparency still? And so we'll see what happens next from a product perspective. But yeah, from a single stock ETF, I was very surprised to see that. Remember those things that were called ants? Yeah.

Am I making that up? No, I know. Is that a thing? I know what you're talking about, but I don't think it was called that. Was it an ant ETF? No, but like sometimes transparency doesn't work in the investor's favor. Because if you get a popular manager running an actively managed ETF, and it's clear that they're trying to build a position,

and other people are jumping in front of their trades because they know. Active non-transparency. Active non-transparency. Remember those? It's called an answer. Yeah. That was a thing in like 2017, 16, 18.

I don't know. Did any of them ever take off? Okay. It says the biggest one, according to ETFDB.com, the biggest one is, oh, that's interesting, is Simplify. We've spoken to them before. Good dudes. They've got $457 million in this one.

Fidelity's got one. T-Row has one. But it'll come. I mean, look at the entire ETF market and look at the active semi-transparent, the active in a semi-transparent space outpunching their weight class, right? They're taking close to 10% market share, which is 500 basis points larger than expected, right? So, I mean, it's coming. And a lot of the bigger asset managers are figuring that out, right?

Do you think most mutual funds are going to have an ETF version or even convert? I know how slow that process is, but is that what you think? Yeah, you're starting to see that now, right, with complements being able to be vehicle agnostic. Yeah. And I think you'll continue to see that. I mean, the mutual funds will never die because they're in the 401k plans. to see that. I mean, the mutual funds will never die because it's, it's, they're in 401k plans, but if you're, you know, but if you're, let's say an advisor like yourself and you're like, okay, I could save 30 bips, um, and help out from, you know, help my clients off from a,

from a tax perspective, I'm going to go this route and be able to trade it, you know, be able to trade it freely. There's so much hesitance at some large asset managers to do that, even though it seems so obvious to everyone else. And now the ones that were most hesitant are the most gung-ho because they have to play catch up. But on the active side, it makes especially more sense for obvious reasons. Makes sense. I remember when Vanguard came out with an active ultra short and raised a billion dollars in under 60 days, right?

I was like, oh my, what's going on over here? So yeah, there's definitely appetite for it. From an economy as a scale perspective, that's kind of where a lot of the pushback is. And that's why a lot of managers chose not to go the SMA route as well, because they want the fees from a mutual fund. So I want to pivot and talk about what you're doing,

because when I first saw it, I said, I can't believe nobody's really thought of this before. And I couldn't believe how far along you were without my having heard of it. It's not that you were like building this in stealth, but like I was like, wow, there's like a lot going on here already. So tell us about DFD. What are you building and what problem is it meant to address? The same problem that we've been talking about, right? So DFD Partners is an AI-based distribution platform for asset managers, right? So we're able to leverage data,

we're able to leverage automation, we're able to leverage AI ML to match asset managers that have a product fit with an investor base, whether it's registered investment advisors, wealth managers with the product need. Right? And we kind of talked a little bit about this from a perspective of, let's talk about the larger asset managers. 20 asset managers control almost 50% of all the flows. Yeah.

You take, you extrapolate that out. BlackRock, Vanguard, everyone that- Fidelity, American Funds, right? And from a retail perspective, between BlackRock and Vanguard, they're getting close to 62 cents of every single dollar that comes in the market. So if you're a diverse asset manager, you're a smaller asset manager, you have a hell of an uphill battle. So you're looking at a space in the REA market specifically that's supposed to grow to $230 trillion by 2030. And you're looking at 71% of alternative managers that are now looking at advisor-led strategy as a solution. Well, how do you penetrate that market if all the flows are going to the same managers?

How do you get discovered? How do people find out that you have a solution for what they're trying to invest in? Exactly. So we're, so, so we are the only company and hopefully we can get some pretty good news here soon with the, with the patent that we filed that we're the only company and that could leverage the data the way we do and not just pay data with like your pitch books and your FinTricks and your RA database and your decoders of the world.

But we're actually able to get a full barometer of you as an allocator, as an RIA, not just from what you're doing with your ADVs and your 13Fs and your market metrics of the world, but we're actually able to take your engagement on Twitter and on TikTok and on LinkedIn. So in other words, you are looking at me, let's say I'm an asset manager. So let's say I started up a strategy. I'm building a company. I have, I don't know, $300 million under management. I have a research team that's active on social. And I'm just like, how do I go from 300 million to 3 billion? Like, what is the route to get there? So your platform is vetting me in a variety of ways and then turning that insight over to potential investors?

So I'm taking you as the asset manager, right? And we're creating a profile, right? And then we have data on 730,000 financial advisors, 20,000 single-family, multi-family offices. And then we're cross-referencing that with their ADVs and their Form 13Fs. And we're getting a picture of who they are outside of their day-to-day, right? With their engagement on Twitter and LinkedIn and Reddit. And then we have automation overlay to it. So for instance, we're able to take that data. And most recently, we had a webinar with a really kick-ass manager named Katie Stockton. You know Katie. We did a webinar for her. And out of that, the data, we led us to 1,000 advisors to reach out to.

Out of the 1,000, we had 630 that registered for the webinar. That's incredible. Out of that, we had 382 active participants on that webinar. Out of that 382, we had a 10% engagement on meetings, right? So we had 38 meetings on that and over 15 million in committed capital, right? How else would Katie Stockton, I mean, she's amazing. She does TV. She writes research.

She speaks amazing. She does TV. She writes research. She speaks publicly. But how else would she get 600 people paying attention all at once? So that's what I'm solving for. Solving for tremendous minds, tremendous fund managers, tremendous portfolio managers that don't necessarily have the tools, resources, or headcount to effectively scale their business. Same thing with Channing Capital. Channing is a great manager out of Chicago. They've quietly built a $4 billion asset management arm, right? And they have 90% of their assets are in small cap.

But then you start looking at the numbers. They have a very strong developed and emerging team, right? They also have a very strong large cap value team. Looking at firms like Brown, you know, Eddie Brown is a legend, right? Now, should Brown Capital be 18 billion? Probably not. It should probably be right around 40. But if you look at the underlying not having the distribution force, not being able to

really scale to the, you know, 200,000 RAs out there to get the messaging out. And that's what we're solving for and we're doing that with technology. So it's a two-way platform. You're serving both sides. You're serving the asset management industry because BlackRock doesn't need you, but all of these asset managers

that are smaller than they otherwise would be if they had better distribution, they love the spotlight that you're shining on them. And then you're serving the other side of the platform, which is the end user, RIAs, family offices. They're looking for people that can fit slots in their asset allocation. Right.

And if you look from a, like if you're an advisor and you're showing your client the same old cookie cutter, hey, here's your portfolio. Here's your SPDR, here's your QQQ, here's your IWM, small cap. Right. And then there was a study by the Knight Foundation, right? And they said that diverse fund managers have a 10 times harder time raising capital. And then what they did was they allocated a portion of a portfolio to diverse managers, right?

And the end result was performance was the same. So performance was the same and in some cases better. So it didn't cost them anything to allocate to someone who's a non-middle-aged white guy. Like they were able to still manage the portfolio but have someone someone else have a crack at, you know, that piece of the allocation. Right. So I want to, John, can you cue this up? All right. I want to play.

I want to play your hype video. All right. All right. Let's do this. Hey, I'm a 16 year Wall Street senior executive. I've worked at over $12 trillion worth of organizations. I speak the language not only for my clients, which are the asset managers, but their end clients, which are the wealth managers.

And within that, I've raised over $30 billion for my organizations. There is no one that is more capable of putting together an organization to disrupt the $100 trillion industry than me with DFD Partners. Where I'm from, a lot of folks chose football, basketball. For me actually going into finance was kind of going in the opposite way road less traveled. Looking like we do in finance you know you got that tough skin. You have to be able to take the ebbs and flows of the industry but you also have to be a constant professional and consistently raise the bar. I think back

to where I was in my office and seeing the video of George Floyd and seeing his life taken from him. And I look back at my 16 years and 16 years, I've not gotten one person that looks like me hired in the industry. I really had to take a step back and say, well, what is my impact? Yeah, I've been deemed as relatively successful, but what's going to be my legacy? And that's when I got to work. That's when I put pen to paper and started going to work on DFD Partners. Being raised by a single mother who is from an inner city in New Jersey

and seeing her not take any mess from anyone, drive us from Jersey to Brooklyn every day just to go to school, late nights, early mornings, traveling all around the world to be able to provide me a better life. You know, not only do I owe it to her, but I owe it to my community where I'm from to be able to scale this thing up to be a major success. It is my responsibility that the next generation of potential financial professionals are able to see me and use me as that same barometer that I saw from my friends from my friends

and my network early on. And that's what we're standing for at DFD. Yeah, I'm saying, but you're doing the thing. All right. So how does this platform help to help to unearth new asset managers who happen to either be companies that people of color are running or people that wouldn't otherwise get the meeting or wouldn't get the request for proposal when that goes out? How are you actually doing that? Right. So, man, it's a lot, right? So it's a lot of marketing myself, being able to identify these managers. I work with consultants as well, consultants that were able to feed me a list of folks that might fit the parameter for what I'm looking for, because everyone needs distribution, right? And no matter how smart of a portfolio

manager you are, if you're, you know, I was talking to a small cap manager last week who has top one percentile numbers, one, three, five, under $100 million, right? Wow. Because he's just not able to meet the AUM threshold to get into these pensions, to these endowments, to these foundations, and definitely not to the private wealth management business, right? Yeah. So being able to take top quality institutional managers and then take them to Schwab or take them to Fidelity or take them to

Morgan, take them to Merrill, um, to at least start the process to get on a platform. Um, and then also speaking directly to independent RAs like yourself, say, Hey man, you know, like here's, here's, you know, here's the platform and here's the managers that we have on there. You should, you know, you should take a look at some of these managers. What is the biggest hurdle for you? Is it driving more awareness that you even exist? Or is it more like, okay, that's great and all, but we're already on five other platforms and like we're good for now. Like what do you fight against the most?

So everyone wants to scale, right? So everyone sees initially the value of what we're doing. Meaning the asset managers. The asset managers see the value of what we're doing. The biggest obstacle is once we're able to leverage the technology, we're able to get these leads, we're able to do the webinars, then it's like, oh, shoot, I just realized we still don't have the manpower to reach out to these people. Follow up on all this. The good news is I offer an upgraded package that has that ability,

but that was the initial, like, okay, there's 500 people to follow up with. This might take me a year. So that was the initial, from a barrier standpoint, that was the one that I discovered earlier. But at this point now, you can go to any asset manager and be like, we're going to throw an event. I'm going to flood it with people that are going to want to hear your story and how you manage money.

And then we're going to run down all the people that want follow-ups. And you could deliver that. So now we have a leg to stand on, right? So now we have three webinars under our belt. We're able to raise assets. We are able to have an allocator base of $45 billion, right? We're able to have managers at just under $12 billion

with an additional $150 billion in the pipeline. So now it's like, okay, we've been able to prove out this concept. So if you want to scale, let's go. I love this. We have a lot of people that run asset management firms that I'm sure would love to talk to you after hearing this. Before we get into favorites, I want to do this thing on muni bond yields. So I think this is like people are like, well, what's changed this year? To me, this is something that's changed. First of all, you sell a lot of muni bond funds in your time or mostly on the equity side? Muni bonds as well.

Okay. So muni bond yields now 2.79% nominal. So if you're in California and a high tax bracket, that could be 5.75%, almost 6%. Why would you do anything else? Uh, even higher in New York. So for me, if you're in a volatile stock market, that seems like the fattest pitch in the investment markets right now. Tax revenues are through the roof everywhere. They're having a windfall in tax collection, the states and local governments.

So you're not really worrying about funding at this point with a few exceptions. Where's the hole in my story? What do you think? I don't think there's any hole in the story. In fact, that's why you're seeing firms like Mainstay, or I'm sorry, it's called New York Life now, and firms like Nuveen able to just crush it in years like this

with their muni products and their high-yield muni products, especially in New York City, right? You're seeing sales professionals in New York City just sell this and raise billions of dollars a year just selling muni strategies. Yeah. Hey, listen, stock market historically is 8% to 10%. How about 6% almost no risk, a little bit of interest rate risk? And maybe we'll throw a little leverage on it.

Maybe we'll get you up to that 8% with a closed-end muni fund or something. Yeah, get an LP-based. Get an LP. All right. So for me, I don't know. What do you think about this idea? Well, I have some money in New York municipal bonds. I'm just going to have a chart of NYF is the one that I have because that's the New York one.

Leverage or no? No. Total assets under management. Basically, I don't want them high. Yeah. And totally understandable in this environment. I think MUB is the big national one. Let's see.

I assume it's the same there. Yep. Same there, too. Okay. So look at that spike at the end of – That's what you're talking about. They're crushing it with this muni product, that spike right there. So, look, I could envision a scenario where that goes on through the end of this year,

almost regardless of what the stock market does. where that goes on through the end of this year, almost regardless of what the stock market does. So especially, but if you have most Wall Street strategists like the bullish ones, their year-end target's like 4,800, which is where we started, the S&P. If you have a year that's flat in the S&P, I could see a lot of money coming into muni bonds next year

because, and by the way, this is how like multiple compression happens. It doesn't happen because everyone agrees that stocks should be valued less. It's that there's competition for stock money now. And this is one form of- And by the way, if you look at like, I'm looking at here, a chart of AGG.

So you're seeing like a lot of money, outflows of bond funds. It's like 24- It's treasuries. Nobody wants to own treasuries. 24 straight weeks of outflows. I don't think AGG has that much in treasuries though, right? What, AGG?

Yeah, it's a total bond market. Mostly treasuries. But it's like 40, it's like much in treasuries though, right? What, AGD? Yeah, it's a total bond market. Mostly treasuries. But it's like 40, it's like 45% treasuries? I thought it was, whatever, it's a lot. I could be wrong. It's a lot. I think it's all investment grade. It is.

That is a fact. So it's treasury, right, it's treasuries, but it's also a lot of investment grade corporate agency. Right, yeah. I think this is going to continue. It's not that rates are so great right now, but if you can get to that threshold, I think, of 5.5% or above,

that just makes it such an attractive move for already wealthy people. We're talking about a fat pitch at something that's offering negative real returns. You have to not think that you're going to have 9% inflation next year also. I know. You got to believe, Michael.

I believe. I believe. All right. So now is the point in the show where we do favorites. And basically, Devon, like anything you're reading, watching, I know you're on constant airplane travel. So you must have a few tricks up your sleeve to get through all the flying. Yeah. So I'm intimately into my business, right? So I really like thinking of the read on fun flows

and different, you know, as imagine publications and the finsomes of the world. As far, you know, as far as watching, I- What's your go-to for that stuff? Like what, what are your, what are your most important information sources for what you do? So I've probably watched a good amount of your, your podcast, which is, which has been, been very helpful. Awesome. So, so congratulations to you guys. I read a lot of, read a lot of Finsome, a lot of, you know, a lot of Bloomberg just to, you know, just to keep me up to date with, you know, what's going on in the, in the marketplace and hopefully soon, you know, dfd.ai where we of web shaking. Is that live yet? So my MVP is live, yeah. So you can go on. You could create a profile.

But my version 2 is really going to be something special. When does version 2 come out? End of Q2. Okay. And then you're going to want to make some – Or end of Q3, yeah. End of this quarter? Next quarter.

Next quarter. End of next quarter. Okay. So you're going to want to make a lot of noise when this thing comes out. Yeah. So, yeah. So you know how it is with MVP, right? You get it out. You get the next quarter. Okay. So you're going to want to make a lot of noise when this thing comes out. Yeah. So, yeah. So you know how it is with MVP, right? You get it out.

You get the users up. Just so you know, I'm going to demo my version 2 at FutureProof. That's right. So we're very, very excited about that. And then hired a head of engineer to code it all out and a CTO to manage the team. And they're working overtime just like I am. And you've got a lot of press releases in your future, money being raised, people joining the platform.

You're going to have a lot of news to release in the coming months. Yeah, there's a couple of larger asset managers that hopefully we're in final innings with our conversations and should be some good press. And not only good press, but also some initiatives behind it that we're, we're pretty excited to come out. It's a little bit like, uh, it's a little bit like a snowball. Like when you get a certain amount, then everyone's just in because it becomes a standard thing. How far away are you from that? Man, I'm, I'm, I'm betting on 2023 being a really big year for us okay love this you know whose

podcast you should be on uh you should go on trillions um eric baltunis okay i feel like he's so it's a it's not really an etf podcast anymore industry stuff it's it's but it's asset management industry stuff we'll give you a we'll give you a yeah no we'll love yeah we'd love to love to have a conversation dude very excited for you yeah man i appreciate it uh all right so what do you what so how are you getting through these flights what else are you reading or listening to or watching so i had to run back um house of lies house of cards yeah house of cards i like them both but yeah had to run that back

I know the new season is coming out in November yeah had to run that back and then just getting into Game of Thrones House of the Dragon yeah

what did you think of the first one so I think there was a lot of nuggets that kind of brought you back to brought you back to Game of Thrones

which was which was really cool so I'm super excited for Sunday and you know if I'm super excited for Sunday. And if I'm not on a plane, I'll be watching that. They did a lot to connect this to that. I mean, why wouldn't you? It's one of the biggest smash head shows ever.

But even with the music cues and what else did they do? There were like five things that I was like, oh, look, they're reminding me that I already like this. I stopped watching Game of Thrones. Oh, so you, yeah. Well, a lot of, I don't think a lot of people did, but a lot of people hated the last season. Put a bad taste in your mouth. Yeah. You didn't like when there was a Poland spring bottle on the table?

Oh, they did that? Yeah. What happened with me was I wasn't paying attention. And so in season three or four, I'm like, wait a minute. I have no idea who. So then you got to run that. I can't. I'm an idiot. I'm not watching seven episodes, seven seasons of that. But anyway,'m like, wait a minute. I have no idea who any of these kids are. So you've got to run that by. I can't. I'm an idiot.

I'm not watching seven episodes, seven seasons of that. But anyway, House of the Dragon was amazing, I thought. Duncan, House of the Dragon, are you in? I've never watched a single episode of any of this. Okay. So you have a lot. I have a lot of catching up. You have about a decade's worth of shows.

You have about a decade's worth of shows to catch up on. What's Brewery 424? It's the shirt that I'm wearing today. All right. So what is this all about? Is this guy paying you? No. Okay, great.

He's paying me in beer. Say more. He sent me beers yesterday. So this is the fan of Animal Spirits. He's – if you drink IPAs, Brewery 424. Okay. But why is it good? Dot com.

Because I don't know. The taste? The hops? I don't know. I'm just saying. This gentleman sent me beer and I just want to pay it forward. Dude, you are opening the... You don't even understand what you're opening the floodgates for.

I know. Oh, you do now? Do you want to share your address? Yeah, why don't you just give your... This reminded me. Howard Stern fans will remember when Ronnie Mund got sent something and he gave a plug on the air. That's the worst thing you could do.

And Howard's like, you gave a commercial. I'm not doing this ever again. I like this guy. Yeah. He's a fan. I like him. All right I'm not doing this ever again I like this guy yeah he's a fan I like him do not send Michael random bottles of beer

please I'll take him but you're not getting on the air I will not allow him to do this week after week alright

this is a one time thing leave me alone alright my favorite is House of the Dragon 2 listen I I feel like I need like five more TV shows

though because then it ended and I don't have anything else to watch. Okay. Industry. Yeah. I got to do that. What else?

Um, I saw the first episode of rehearsal. Have you guys heard about this? Um, it's the most bizarre show I've ever seen in my life. It's on HBO. It's this guy, Nathan felt who had a show.

What was that show called? John? Oh, I know who that is. Nathan for you. So the premise, as I understand it, it's so f***ing weird. This guy meets people and they're going through some sort of event in their life.

And he practices with them how it's going to go down. If you've got to get something off your chest, you're in an awkward situation at work, personal, whatever. He literally rehearses with you what you're going to say to the point that like, I only saw one episode, but they rebuilt the place where he's going to deliver this message. And it is just the most peculiar. You have a confrontation coming up with like a family member or something. Yes, it is. He'll let you play it out first.

It is so bizarre. I'm staring at him like, what the hell is this? But you're into it? Not really. Okay. But I'm staring at it. I'm like, what the hell is this? But you're into it? Not really. But I'm going to watch it. So everyone tune in to Michael's least new favorite show. You finished Blackbird?

Yeah, it was great. Blackbird was great. I was all in. So I'm running out of shit. I don't have anything. All right. Well, listen, we're going to make sure everyone knows how to follow you, Devon. So where do you want them to go? You're a LinkedIn guy? Are you a LinkedIn guy? Are you a Twitter guy?

Yeah, all the above. I'm at DFD Partners on all social platforms. Okay. And what's the platform URL one more time? DFD.ai. DFD.ai. And so if you're a potential end user, you're an investor looking for new managers, sign up. Or if you're an asset manager looking for for new managers, sign up. Or if you're an asset

manager looking for help with distribution, sign up. So you're both ways and you can help both groups. Very cool, man. Very happy to see it. Wishing you all the best of luck. You'll come back when the platform 10Xs? For sure. We'll do it remote

somewhere in Miami or something. Duncan has his hand up. What do you got? We have a review. It better be funnier. I don't want to hear it. Yeah. Don't stress me out.

Okay. This one's from WalkOnWonder89. Dream Happy Hour Setup is the title of this review. Okay. I would say this is the best financial podcast out there and a dream happy hour setup. I've learned a ton and it helps keep me grounded in my investing plan and helps block out the noise. My only critique. Here we go. Is that it's true. My only critique is that it's too professional. I wish a few whiskeys were

drinking during the pod so I could hear heavier Long Island accents and hear Tim Dillon like sales stories. He wants to hear me start slurring and I haven't told you about the time. No, that's not what- Thank you for the review. Thank you for the review. We're definitely not going in that direction. If anything, we're going to get more professional.

Leave us a review on Apple Podcasts. Leave us, well, right. The whole purpose of us spotlighting that review is to remind you that if you love the show, reviewing the show is the best way to tell us and it will help more people discover the compounded friends. to remind you that if you love the show, reviewing the show is the best way to tell us, and it will help more people discover The Compounded Friends. So it serves two purposes.

So please, leave us mad reviews on Apple. Like, you could leave one every day. We won't get mad, right? Can you review a show more than once? That's a good question. Yeah, just be on the safe side. Make this part of your daily routine. Just a new five-star routine.

All right. Shout out to Devon. Great job. John, Duncan, Nicole killed it this week. Michael, you were terrific today. I think I was pretty good. Shout out to all the listeners, all the subscribers, all the fans. We love you guys.

We will be back with a brand new episode next week take us out folks that was the warm-up you ready to really do this let's do it we're gonna turn on all the cameras now let's do it man is that fun no it's fun man yeah it's good my first podcast all right yeah Yeah. Yeah. You're going to be doing a lot of podcasts. Man, it's been a while. It's been a while, bro. I'm concerned. You're behind the scenes. Yeah.

Yeah, now I can't be right.