The Pomp Podcast - #1379 Anthony Pompliano & Phil Rosen | Will The Stock Market Crash?!

Starting point is 00:00:00 What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up, guys? Bang, bang. Today is a special episode. I've got Phil Rosen, the co-founder of Opening Bell Daily here with me. We talk about the U.S. economy. We talk about

Starting point is 00:00:40 whether the stock market is going to crash. We talk about home affordability. And at the very end of this, I tell you, if I was president for a day, what I would do to try to help solve home affordability so that people could chase the American dream. Today's conversation is a lot of fun. I learned something from Phil. Hopefully you guys learned something from both of us. Here is my episode with Phil Rosen. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.

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Starting point is 00:04:06 promo code POMP100. Bet online. The game starts here. Betonline.ag. Go check them out today. pom good morning good morning how are you doing great it's great to be back um the big news today on wall street was jp morgan's top strategist uh marco klanovich has they announced that he's leaving i don't know if he's leaving or they're letting him go but he was the most bearish guy on wall street i think he had the s&p 500 outlook at 4200 and right now it's at 5500 So I wanted to, we could start there. What is your take on how stocks are going to perform for the rest of the year, given that they're just ripping?

Starting point is 00:04:49 Yeah, maybe the stock market is going up so high that the bears are quitting is one way to look at it. But what I think is probably more likely, you know, the stock market is a byproduct of what's happening in the economy, not so much that the stock market drives what happens in the economy. And I think that's a really important distinction because monetary policy obviously has been, you know, kind of very volatile across the U.S. kind of central banker, you know, world. But also what we have seen is we have seen a brand new set of businesses that have taken off as well. So if you start to unpack some of the data, right, we have this very kind of multi-outcome situation.

Starting point is 00:05:31 So on one hand, you have the S&P continues to hit all time highs. You have the highest concentration of the top five stocks. It's now like 25, 26 percent, which never happened before in history. You also see incredible outperformance for the tech sector specifically. The S&P 500 tech sector is compounding over the last five years at over 25 percent, almost 26 percent annualized. And so when you look at that, you say, wait a second, like the public market tech companies are outperforming the average private market venture capital funds. And so naturally, you're going to get these incredible numbers. Now, you can look at that and say, well, if it went up 25, 26% every year for the last five years on average, does that mean it's going to keep happening? Like, is the momentum in play? And you and I have talked about before, buying stocks at all time highs in kind of an index

Starting point is 00:06:22 usually is a pretty good move based on the historical data for the next six months, one year, two year, and three year. But also, are there going to be corrections? Stocks just don't go up forever without dips or corrections along the way. And so I think that's what people are trying to figure out. But what do you think? You spend a lot of time all day analyzing this stuff. What are your thoughts? So everyone I'm talking to, all the Wall Street strategist bankers they're pretty bullish for the rest of the year and you know they're looking at very low vix right now the stock market just had its best six months in an election year i think in 50 years something like that and um there's a ton of money in uh money market funds and that's

Starting point is 00:07:05 gonna i think it's like six trillion bucks right now and a lot of these guys are telling me that could go into equities whenever the time comes in the next few months um i think this morning's news with uh jp morgan strategist it is a it's probably a good sign for the uh the bulls because it's the final bear capitulating and it's um it's getting harder and harder to be bearish and uh yeah even especially with the election coming up uh the second half of an election year is better i think and we've already had 15 gain in the s&p 500 um but something i want to drill in on a bit the concentration of gains has been very tech heavy and um is there do you see any risks of maybe a bubble popping or are there any parallels to the dot-com era well i think uh the

Starting point is 00:07:59 dot-com bubble was a classic you know kind of necessity for the development of a technology you need a bunch of people to kind of see a couple of different either companies products you know pieces of technology. And they say, oh, wait a sec, I can peek around the corner. This is going to be massive. And then what ends up happening is everyone pulls out their checkbook and everyone just starts putting money everywhere. The venture capital start writing checks. The public market starts allocating capital. Everyone is so excited about the promise of the technology. Well, if you go back to 99, 2000, 2001, those promises actually came true now. Like the internet is awesome, right? It just took 15, 20 years for it to play out. And so the capital

Starting point is 00:08:41 the excitement, the hype got ahead of what actually was true in 99, 2000, 2001. And so you needed the correction. You needed to kind of go sideways for a while. And then, okay, now the technology is caught up. What I think is happening now is there's a bifurcation in technology. There's AI stocks, and then there are technology companies. The technology companies, for example, let's say something like Facebook, right? Yeah, sure. Facebook is trying to figure out AI stuff as well. But like, Facebook's a real company, right? There is not a lot of downside for a company that is producing as much revenue and cash as that business is. And so can the stock go down? Sure. But it's not like it's going to drop 50 plus percent and not get immediately bid back

Starting point is 00:09:23 up, right? And so you can go through a number of these companies, Google, Amazon, etc. There's a lot of opportunity, I think, for people to make the argument. These are real companies with real you know, financials that are continuing to improve, et cetera. Now, those technology stocks, although there is some overlap, are different than many of these stocks that are benefiting from kind of AI. So NVIDIA being, you know, obviously the prime example, but I think there's a couple of others as well. And in that situation, I think people are saying to themselves, AI is going to be huge. I can peek around the corner. The question is, is it right now? Or well, we see some deflation in the excitement there because people realize, hey, it's actually

Starting point is 00:10:03 going to be like 10 years from now until we can do this. And, you know, if you start to unpack this, like open AI and chat GPT, it's certainly a private market, you know, business or nonprofit, whatever they're calling it now. But it was a, you know, kind of phenomenon globally that opened everyone's eyes. Like that was the moment everyone peeked around the corner. And so NVIDIA is benefiting right now from tons of excitement, tons of people saying, hey, I need compute, I need chips. I need all this stuff. The question is not only can NVIDIA continue to dominate because they need to service their customers. That's like a self-inflicted wound thing, right? Either the customers all go away or NVIDIA makes a mistake. I don't think a lot of these

Starting point is 00:10:42 customers are going to go away because the customers aren't only going to NVIDIA. They're also trying to build their own data centers, their own technologies. You're seeing competition show up, which I actually think is something that becomes pretty interesting. And so to your question about like, is there downside? There's always potential downside, right? But that money that's sitting in the money market funds, like they're chasing yield. When that yield starts to drop because we cut interest rates, like that cash is not just going to sit there and earn nothing. And so it's likely to go back into the equity markets, which will serve as this kind of tailwind. And so I tend to be a much bigger future bull, but I'm also not a trader. I don't care what

Starting point is 00:11:18 happens in the next three months or six months. What I care about is over the next five years, stocks be higher or lower it's really really hard right now to make an argument that they're not going to be higher five years from now than they are today is there any risk of the enthusiasm for ai running out in in the near term i think that uh you already see some portion of the population have less excitement today than they did previously for example uh when chat gbt came out i mean it's all you heard about everyone's using it every day etc people outside of a work environment i don't know how many people are still using it so like what is the retention number there now they've driven billions of dollars of revenue so obviously there's some good retention

Starting point is 00:11:58 that's happening but if you knew what that retention number was that'd be an interesting data point a second thing is um there's kind of like i think of it as like the nerd segment of ai and then there's the like consumer segment the nerd segment is you know you start getting into um i was listening to an interview with mark zuckerberg recently and he was talking about uh there's companies like openai and a few others that are building kind of one llm to service everybody what facebook believes is that you're actually going to have different models for different use cases so they're creating a creator model and that creator model is specifically tuned to help people who want to create content it's not going to be good at doing anything else right

Starting point is 00:12:38 so you go to the parallels of like maybe the bitcoin world there used to be people who mined bitcoin on their laptop now there is something called an asic an application specific integrated circuit right whose specific job is to mine bitcoin and do nothing else and so this kind of push and pull between specialization versus generalization is already creating you know fractionals uh fractionalization of the the nerd segment they're in right it's kind of like the hardcore crypto people they're in crypto these people are in ai the consumer i think likes the idea what they're trying to figure out is like how does it improve my life i don't care about the tech i actually couldn't tell you a single thing about the model or the chip or this rat what i

Starting point is 00:13:17 want to know is when i go to google now and i google something i see google is using ai at the top are the answers right like that's where the excitement will end up coming and so i think that that is still a question mark um but the good news for the nvidia's of the world etc they don't need the consumer right what they actually need is they need their customers which are other businesses other model providers, et cetera, to keep showing up. But you use AI every day, I see, in opening bell to create the artwork. And so what has your experience been? And how excited are you? Are you more or less excited than you were when this stuff first came out? I think it's become such an integral part of my day that it's actually not exciting.

Starting point is 00:14:00 Now, I use it to generate images, and sometimes I use it to generate create ideas for things to write about. I don't use it to write things, but it's pretty good at ideation. But I'm also, as a reporter, I think that's a very specific trade to be using a large language model. But I know very few people that use it on a regular basis, which is why I think the enthusiasm is kind of tapering out. But I don't know if that's been reflected in the market yet because yeah all these tech stocks are still going a lot higher yeah it one other thing that uh people seem to not really be talking so much about is if the ai promise is real and these companies are actually able to produce as much productivity as they claim um there should be a

Starting point is 00:14:49 lift in gdp and if we get a lift in gdp then we should actually have a bunch of advantages where are undisciplined monetary policy mistakes could be maybe not resolved but the blow could be lessened and so if you think about one of the most important metrics in the american economy is debt to gdp there's two numbers right we know debt's going to keep going up because you have politicians who are going to make that decision and they're not going to stop but the gdp number like the ai world may actually be a huge boom there and so could you have politicians continuing to lay debt onto the economy and maybe you can't drop debt to gdp but could you keep it flat right because you have this productivity boom and so i don't know what the answer is right i i think that

Starting point is 00:15:38 there's an increasing chance that that is likely um and those are the things maybe that are the most interesting to me because what it does is it's not just about a single company getting a you know productivity boost or saving cost and driving more profit which is powerful but it's an economy-wide thing where actually the private market may take into their hands we have to create a solution to this problem because the politicians are drunk and they're not going to stop spending do you see the political the next few months of politics uh having a big sway on the market are you not entertained i would i don't know i didn't see the numbers for the debate i got to imagine the debate was very popular there's a lot of people who were watching um you know look

Starting point is 00:16:24 it's this very weird thing where, let's talk about the national debt, right? Republicans and Democrats all contribute to the national debt. And so each side likes to blame the other side. Oh, we don't, you know, we're much more fiscally conservative, but look at these people. They're horrible, right? If you go back and you look, Clinton, Bush, Obama, right? Trump, Biden, all of them, they all contributed to the national debt. It's a structural issue. They have to do it or they risk pushing the economy into a bad situation. So I think that you can kind of take away the red versus blue when it comes to that. Now, if you go and you look at the stock market, I think that the number I saw was the stock market's up over 200% since 2016 election,

Starting point is 00:17:06 200%, right? For an economy and a stock market that historically goes up at 8% a year, that's pretty good. And what you can actually see is that it went up under Trump and it went up under Biden. And so red versus blue, two people who obviously, you know, have huge disagreements about, you know, according to debate, who's the best president ever? You know, who's got a better golf swing, all these different things that they were, you know, debating. But stock market kept ripping. And I think a lot of it is people in the short term in the stock market care who the president is. But what we find out over and over again is that the United States is very unique in that the president has power but does not have enough power to have some massive impact um and i

Starting point is 00:17:52 like i think it was um uh supreme court uh justice uh anthony scalia i think is the one um who was asked one time you know uh explain the political process in the united states and he goes you know the one great attribute of the united states no one ever credits the united states with is deadlock the way that the system is built with three branches of the government and this constant you know, check and balance, it's very hard to get things done. And he goes, and you all think that's a bad thing. It's actually one of the greatest parts of America is because it dampens volatility in either direction. So it's unlikely that Trump or Biden is going to do something that is so egregious that the stock market is going to, you know, go down 30, 40%. It's also unlikely

Starting point is 00:18:37 that either one of them is going to do something where uh it is going to go up 50 right and so if you look like the 25 annualized return for the s p tech sector some of that was under trump some of that was under biden and so it's just this element of like politics is a great intellectual exercise but for your investment portfolio not taxes not wage growth but just your investment portfolio. Both of them over the last eight years have been great. And so that violates a lot of narratives. And so what I think ends up occurring is people lump in everything else, wage growth, taxes, inflation, et cetera. And that's actually a holistic evaluation. But if you just look at the portfolios, you've done well under both of those two presidents. And so it pulls into

Starting point is 00:19:34 question like maybe it's not the president's maybe it's actually just a economy and a structure and like you know america's awesome and you know stocks are gonna keep going up yeah i mean if you're just buying s&p 500 every month for every you know for years on end i think it's pretty agnostic to who's in the white house um what are some of the conversations you're having with other investors like as far as how you know maybe how they're positioning for the election or for the rest of the year or whether they're trying to account for any risks? I don't think that there is consensus. So maybe I'll just throw out a couple of anecdotal points. I have a friend who has told me multiple times he's considering selling all of his crypto on election day

Starting point is 00:20:19 and asked him why. And he said, that is potentially one of the tops of a crypto market. He goes, depending on who gets elected. Now, again, does it actually depend on who gets elected or not? Unclear. But one thought process, I don't necessarily agree with that, but I think it's an interesting data point. I think that there are a whole nother group of people who, with these prediction markets, there is Kaleshi, there is Polymarket, there's a couple of these. And people are saying, well, actually, why am I going to position my investment portfolio, which is really just an indirect way to try to take a bet on this election? Instead, i can go to a prediction market i can just bet on the election right i can isolate the outcome that

Starting point is 00:21:00 i want to bet on and expose myself to financially um so i think that's an interesting development those you know we're kind of sort of around but not in in the way that they are today uh in the last couple elections and then um i think that there are a lot of people and you and i've been talking about this uh recently um home ownership is really bad right like in terms of the the ability for people to afford a home um a lot of them will uh yell and scream about the political candidate they disagree with as like they're the cause um but again i think it's a structural thing and uh if you think of the average american your home makes up the majority of their net worth and so if they are not able to buy a home then they either have to take what money they have remaining

Starting point is 00:21:44 and go put into the stock market you know in kind of other investable assets or they sit in cash and And so in a weird way, home affordability may have one of the biggest impacts on investment portfolios, even though it's your primary home, it still is the bulk of the average American's net worth. And so it is unclear to me that either candidate has an ability to get home affordability to a better place, because I don't think that it is something that policy can necessarily drive. It is something that supply-demand and the previous inflation shock has created, and you can blame one, both, whatever you want, but in terms of moving forward, you get to be president for the day.

Starting point is 00:22:26 How do you make homes more affordable? Maybe the only argument that I might say, okay, that's got a lot of weight to it is deregulate the housing market and allow people to go build housing. But if you actually look at a lot of that regulation, that's not national regulation. It's local zoning and processes, et cetera. And so, you know, it's not a sexy headline, but like maybe for home affordability in your area, your local city council or your like local representative matters way more than who the president is. and uh people don't like that because they're like oh my city council's like full of you know idiots or my city council's full of geniuses right like depending on which side you're on um so it just makes it much harder what do you think the president should do like housing well just you're gonna be president for the day right and uh you've gotta uh kind of get the u.s economy in a better place are there certain like levers that you think pulling would uh would be effective

Starting point is 00:23:23 Yeah, I mean, honestly, if I was president, I think it would be super impossible to attack the debt. So I'd probably maybe ignore it for the whole, at least for the day, if not the, you know, the term. Yeah, deregulating housing, that's an interesting one. I don't know enough about it to say how I would do it or if I would do it. um yeah certainly the i think regulation generally maybe we've gone a bit overboard as far as um what's possible and what is yeah i maybe maybe that's the wrong uh might be the wrong guy to ask that question actually um do you have a a one day um outline of what you would do i don't think anything could get done in one day but i do think there's some like important decisions um that the president has to uh has to make um i do believe that there is uh stuff that can be done around housing and um again uh from a national standpoint it is much harder than at the local level but but i think that just encouraging more uh investment there um you know

Starting point is 00:24:29 we live in a world where um boldness and ambition is actually discouraged for our political leaders and so an example would be imagine a president saying hey uh for the next 12 months we are going to have a housing boom and the way we're going to have a housing boom is that we are going to do a b c and d things to empower every home builder in america we need to build one million houses right it's estimated that we probably have a deficiency of at least a couple hundred thousand if not a couple million. But as a country, we are going to set a goal to build 1 million houses in 12 months. You call every home builder in America to the White House and you say, most countries look at the men and women in uniform that they are willing to send to defend their freedoms

Starting point is 00:25:23 as this like national service. Right now in this room, you home builders, we're going to rely on you because we have millions of Americans who can't afford a home and it's a supply demand imbalance. And so what we are going to do is you're going to tell us what you need. And for 12 months, you're going to build as many homes as you possibly can. And you're going to give up, you're going to build 50,000 homes. You're going to build, you know, 200,000 homes. And you just go through the line and you say, I'm going to hold you guys accountable to doing this. If you guys do this, the government will give you a financial bonus. You think we'll build a million homes? We'll have a million homes in nine months instead of 12, right? But that is much more the way a corporation would work than a government. And so that's just not the mood, the approach, all this stuff.

Starting point is 00:26:14 Um, but I think that it shows there is a potential solution. It just takes that boldness, that ambition, et cetera, to go do it and to make a big deal about it. Right. You know, we, we have, um, you know, we give out presidential, uh, medals of freedom again for people, national service, you know, all this kind of stuff. Give one to the home builder that builds the most homes over the next 12 months. Right.

Starting point is 00:26:41 Make them a national hero. Because right now, one of the biggest problems facing America is home unaffordability. So if somebody went and put 100,000 people who didn't have a home off the street, we would say that's an amazing person. Look how philanthropic they are, et cetera. It's not exactly the same. but man if we were able to celebrate one or many of the people who are able to solve this problem and treat them the way that we would treat an astronaut or treat a scientist with a big breakthrough or whatever it would inspire more people to say what other big problems are there

Starting point is 00:27:19 in our society let's go try to do that and so i just think that like it's really hard to see a politician doing that in today's day and age right because like they just get you know attacked the second that they say anything um but that's the type of stuff i think uh if you're the president maybe not for a day but for like a month like yeah you do that type of stuff and i think that there's a ton of benefits um that actually would start showing up in economic data you know pretty quickly sounds like the only things that would work would be breaking all the red tape around being a president um i think we uh we covered a lot of stuff and um yeah thank you for having me on the show absolutely thanks so much for doing this

Starting point is 00:27:56 We'll be right back.

The Pomp Podcast - #1379 Anthony Pompliano & Phil Rosen | Will The Stock Market Crash?!

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