We Study Billionaires - The Investor’s Podcast Network - TIP420: Inflation Update and the recent FOMC Meeting w/ Cullen Roche

Starting point is 00:00:00 You're listening to TIP. Today's guest is a fan favorite, and that is Mr. Cullen Roach. Cullen brings the best contrarian viewpoints, and when you dig into them, you realize they're rooted in first principles thinking. In this episode, we discuss ramifications of the most recent FOMC meeting, which was happening while we were recording, why Cullen thinks inflation has peaked in that the risk of recession is low, why bonds are still appealing in a low-interest, high-inflation world. The Greenspan conundrum series I bonds. recent comments from billionaire Jeremy Grantham, the benefits of diversifying, especially into low-cost index products and a whole lot more. Personally, I've been a long-time fan of Cullen's, and this was my

Starting point is 00:00:39 first conversation with them. It was a lot of fun. So I hope you enjoy the always insightful, Cullen Roach. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to The Investors Podcast. I'm your host, Trey Lockerby. I'm here with Cullen Roach, back on the show. Cullen, we've never spoken, but I've been a big fan of years for a long time. I'm really excited to have you back. And let's dig into it. How are you? Good. Trey, thanks for having me. It's great to be on again. Well, this is a very timely discussion because as we're speaking right now, the FOMC meeting is happening.

Starting point is 00:01:31 My bet, if we're making bets, you know, in real time here, is that, you know, they'll probably stay hawkish, but that the market will rally just because that doesn't make any sense to me. And that's usually what happens in markets. What are your thoughts? Yeah, so this is good. We've got 14 minutes until the real-time decision. So we'll be live when this actually goes on. But if you look at like Fed Fund's futures, Fed Fund futures are saying there's going to be no change today that they're probably going to hike four times this year. And that'll be the May, June, and maybe like August, November timeframe. So, So my guess is that they're not going to raise rates today, but that if they do something

Starting point is 00:02:12 that's more aggressive, it'll be on the balance sheet side. I think they're just going to continue to taper. So they're going to let the balance sheet continue to run off and not reinvest, not do anything too shocking. I think the Fed has been, they've been so measured at patient up to this point that I think we're finally starting to see some signs that inflation might actually be peaking and starting to roll over going into summer in the end of the year. So I think they're still data dependent. I think they're still going to wait. They've waited this long. They're not going to

Starting point is 00:02:43 shock the market and do like a 50-bip or a hundred-bip hike, I don't think. So all of this is incremental to begin with and going to have a relatively small impact in the long run. So I don't think they're in a huge rush. So my guess is that they're not going to do anything today. It's going be kind of status quo. The market's going to be relieved from all of this. And so, you know, we can all kind of get on with our lives and stop worrying about what the Fed is doing at this particular, you know, meeting. So, no, that point you just brought up is interesting about inflation peaking. You've talked on our show a little bit about how if you think about the creation of money, it's coming from the fiscal side, meaning we're running that deficit and then the

Starting point is 00:03:24 QE happens after the fact, which not a lot of people appreciate. But I'm curious to hear what signs you're seeing, are you just saying the amount of spending is going down? Are you looking at, you know, the fact that lumber chart has corrected? Are you looking at used cars? I mean, what are the variables going into that opinion about inflation peaking? Yeah, it's a lot of that. So my guess is that the data is going to start, the year-year data is going to start to look like the rate of change is probably peaking in Q1, Q2 here. So my guess is that inflation is probably going to remain high well into probably at least May. But by that point, you'll start seeing the 7% headline CPI roll over to something closer to like 5 to 6% by end of summer. We might get

Starting point is 00:04:09 as low as like 4 to 5% by the end of the year. So these numbers are still, I mean, historically speaking, these numbers are still going to be pretty big. They're going to be big all through the year. But we're starting to see some signs that a lot of this is easing. And you mentioned the big one, in my view, is the fiscal spending side of everything. We've seen this with the recent politics around Build Back Better, that people and politicians are finally starting to get scared about inflation in a really meaningful way. And, you know, COVID was so important to understand relative to the financial crisis, because to me, what the COVID recession really proved relative to the financial crisis was that fiscal policy is the big bazooka. So the big difference between

Starting point is 00:04:52 2008 and 2020 was that both periods involved the Federal Reserve implementing these huge balance sheet increases. The difference between the two was that the Treasury and the U.S. government spent a ton more money this time around than they did in the financial crisis. And my opinion is that aggregate demand was primarily a result of all of that government spending. So it's not that the Fed balance sheet and their so-called money printing has no impact. It's that the real asset creation is initiated at the treasury level. So the treasury expands their balance sheet. And then what QE does is it really, it creates this portfolio rebalancing effect

Starting point is 00:05:36 where the Fed isn't really printing assets in a technical sense. What they're doing is really they're expanding their balance sheet, changing the composition of the private sector's balance sheet. And this has all sorts of other multiplier knock on effects. You know, you could argue that like it forces people into other assets, for instance. I mean, there's a multiplier effect through that, for instance. But at a pure balance sheet level, it's the treasury spending that really causes the aggregate balance sheet expansion.

Starting point is 00:06:02 And that is why we saw such a difference in the rate of change of inflation in 2020 versus 2008. So we're seeing that is going to, it's not going to go negative this year, but it's pealing back in a huge way. We're coming back to like deficits that are more normalized relative to the pre-COVID period. So big pullback in the relative size of government spending is going to start to really have a meaningful impact going into the summer and especially the later part of 2022 and 2023. And so the other big impact here is that you're just starting to see the rate of change. It's slowing in a lot of these assets because, frankly, they just went up so much. So like when you look at like the rate of change of like use cars or lumber, like the rate of change was so big on a year over year.

Starting point is 00:06:50 basis relative to last year, that you had this huge statistical bottoming effect where it was almost like, like a good example is like looking at the stock market where when the stock market falls 50%, and then recovers back to where it was, if you look at the year-over-year rate of change, you had a 100% rate of change basically on a year-over-year basis looking at now. How sustainable is that going forward? Well, if the market only goes up 20%, well, the rate of change all of a sudden in the data it starts to look like it's really disinflationary in sort of inflationary terminology. And that's a big part of what we're getting now.

Starting point is 00:07:25 So it's not that it's not that prices are falling or that inflation is going to be low necessarily. It's that you've got this sort of statistical topping effect that's going to start having a big, big impact in a lot of these indices going into the later half of this year that is just by definition, by the statistical nature of it, is going to start to cause a big, a lot of the year-over-year rate of change in this data to start to moderate going forward. So if I'm hearing you correctly, what you're saying sounds like you think recession risk is very low, but the markets seem very unstable. I mean, this start of the year I just saw a graph has been the worst start of a year in the S&P 500, I think, ever. So they're very wobbly. What

Starting point is 00:08:09 what's the risk of financialization to which financial asset prices can create these negative feedback loops that trickled down into the real economy? This is a super interesting topic to me, especially now as the economy has transitioned over like the last, especially the last like 30, 40 years and financial markets have become much more democratized, much more accessible, a much bigger part of our everyday lives. Financial assets and asset prices have become much more important to the way everyone consumes and invests and lives their lives. And so, you know, this isn't the old days where it was like the economy, the U.S. economy used to basically just be a bunch of railroads, basically. And when the railroad companies, you know, spent too much or whatever or didn't spend enough, you had booms and busts. And today, it's so weird because, like, looking at like the NASDAQ bubble, you could basically argue that the NASDAQ bubble and the ensuing recession that occurred was to a large degree sort of a venture capital recession. It was a corporate-based recession that resulted from essentially too much

Starting point is 00:09:14 funding going into bad entities that resulted in a big asset price bubble. When that bubble, when the air came out of that bubble, it filtered through the economy in a big way that caused a recession in a broader sense across everybody's balance sheets. And so financial crisis was more of a real economy recession that turned into a financial crisis because of the way that the housing market imploded. But you have, you have similarities between the two of those recessions in today's market where not only we had a huge venture capital boom, a huge boom in, you could argue, a lot of nonsense. Like, you know, if you look at like a chart of like Goldman Sachs' non-profitable tech index, like that thing's still up. It was up like 400% at one point last

Starting point is 00:10:00 year. It's fallen like 50%, but it's still up like 200% or something. The numbers are crazy. You look at the SPAC boom. There's been a lot of money flowing into a lot of things that are now starting to look like they never made any sense. And you could argue that like there's pockets of crypto that look like that. So this is fairly broad. And then you've got the housing element on top of all of this where the housing market has boomed in a huge way, looks, in my opinion, a lot healthier than it did in 2006, mainly because the people that are buying these homes, their balance sheets are dramatically different than the people who were buying homes back in 2006. So you don't have quite the speculative nature of everything going on, but there is a very plausible scenario here

Starting point is 00:10:48 where the stock market falls 25%, house prices fall 5 to 10%, and you get a statistical recession because people stop spending, in essence, because they got essentially balance sheet that were overinflated from a lot of what happened in COVID, and you just get some give back. So, you know, what's the probability of a recession right now? It looks pretty low, I mean, frankly, because the economy looks, it still looks really good in general. But you can get a situation where you have this weird sort of feedback loop where the stock market falls a lot, in part because sometimes it just goes up a lot. So the stock market, I always tell people, the stock market needs to go down in the short run

Starting point is 00:11:29 sometimes so that it can go up in the long run. The weird part about that is sometimes people overreact to the stock market going down. So it's not implausible in my view to see a scenario in 2022 or 2023 where you've got asset prices falling significantly, creating this feedback loop where consumers are kind of pulling back. And then you have the risk of, you know, what's happening in three minutes with the Fed, where maybe they do make a policy mistake. Maybe the Fed does shock everybody. You know, maybe they do boost rates to the point where they raise rates to, you know, two, three, four percent, invert the yield curve. And inverted yield curves pretty much always cause

Starting point is 00:12:07 these sorts of financialized economies to start getting wobbly. And so, you know, it's not that you've got no recession risk here. It's that you've got a recipe for a lot of things that could transpire that could result in a recession. So I wouldn't say the risk of recession here is zero. In fact, I would say that the boom in asset prices, to me, maybe doesn't cause recession worry, but it certainly causes portfolio worry for me. Now, touching on real estate there, for example, it's especially interesting. You and I both live in California where we've seen this unbelievable increase. That certainly doesn't seem sustainable. But to your point about folks' balance sheets being better off than they've almost

Starting point is 00:12:44 ever been, what do you attribute that to? The fact that no one's been traveling and their income's been going to pay down debt, is it the fact that, you know, the lumber cost did shoot up and to build a home becomes really expensive and there's just less inventory? Another way to reframe the question is when I was talking to Kyle Bass, he mentioned that the house price to income ratio right now, it's only about 5.4. Whereas in 2008, I forget the exact number, but it was much, much higher. Meaning as high as these prices have gone, they're still looking really good on paper as far as the people who are buying them and their credit ratings, et cetera. So what is the main driver? Was it all the stimulus that went into the economy a couple years ago?

Starting point is 00:13:26 Yeah, you could argue that a lot of it was the, you know, the government spent a ton of money. So it's, you know, the governance balance sheet is such a weird thing because the government in aggregate, we all technically do owe, we're all liable for the government's spending in the long term. We pay for it in terms in real terms. We pay for it in inflation in essence. So those liabilities may not be, you know, Trey and Cullen's technical liabilities, but we end up being liable for them in other ways. But from a pure balance sheet perspective, when the government sends out truckloads of money,

Starting point is 00:14:00 our balance sheets, private sector's balance sheet looks bad. better. So a lot of it is that, a function of, you know, corporate profits increase as a result of government spending if households don't save it. So a lot of it just flowed straight to corporations as a result of the government's deficit. And that resulted in the logical increase in asset prices that we've seen across like the equity markets. And so you've had a big boom in the equity side of portfolios in large part because the government had this humongous package that they unfurled to combat COVID. So combine that with low interest rates and you have a scenario where, you know, on paper, the assets look a lot more valuable than the

Starting point is 00:14:44 liabilities now. So people look really good in terms of net worth calculations right now. And combine that with low interest rates and the ability to borrow. Yeah, it doesn't surprise me that we're in this sort of scenario. But again, you know, kind of going back to our previous point, you know, how fragile is all of this? How sustainable is everything that has been going on? That, to me, is a much murkier answer. Well, I think we're seeing how fragile it is because even the Fed talking about needing to discuss raising rates has tanked the market, especially in big tech and other industries. So it brings to mind this quote from Jeremy Grantham that just came out. And he's obviously a big bear very often, but he's been right. I'll be at early.

Starting point is 00:15:29 very often. And, you know, he's saying that we are in the fourth super bubble of the last century, and we're basically approaching the end of this extravagant pricing in housing, in equities, and bonds, and commodities. I mean, we are in the everything bubble, and he's calling it a super bubble that is at its peak or near its peak. So as a pragmatist, which I know you are, do you buy into this idea of these super bubbles? And what would you take away from Jeremy's quote? Yeah. So, by the way, the Fed kept rates unchanged. You've heard it here. Nothing super shocking.

Starting point is 00:16:03 I don't think. I don't know how the markets are responding in real time, but I'm sure they'll do. They tend to go up and down and be crazy on Fed Day. So who knows where they'll settle. But so yeah, we can stop worrying about the Fed at least for like 24 hours, right? Until we start talking about the next meeting. So the Granthum comments are super interesting. I mean, it is crazy.

Starting point is 00:16:21 Like when you, like the thing that I can't wrap my head around with COVID is, yeah, from a fundamental level, I guess the government's deficits add to corporate profits, American households don't save. So it makes sense that all of this kind of flowed to the corporate balance sheets and boosted equity prices. But that stimulus is a one-time shock. And so it's interesting to think of this not only in terms of like the stock markets rate of change, but in terms of the future inflation rate of change, because you think of this government stimulus as having caused this one-time shock to the economy across this sort of like 20 for 36 month period, well, you would expect some give back at some point because the rate of

Starting point is 00:17:03 change just isn't sustainable. So this huge boom, you know, like it's crazy to look at the S&P 500 from where it was before COVID and then the trough of COVID. And to see now we're still up like 100% from the bottom. So there's this weird scenario here where you can make a really reasonable argument that the stock market could give back 20, 25% of its. gains and where are we? We're still, we would still be above the pre-COVID levels, which is wild to think about when you think of especially in terms of like the economy, like what has really

Starting point is 00:17:39 changed that much in the last two years? So, you know, Super bubble, I don't know. I, I hate thinking in extremes like this because I think that what, when you start talking about things like market crashes and like booms in these sort of really crazy boom bus cycles, I think, I think that tends to result in people having these really hyperbolic reactions in their portfolios where they feel like, oh, well, Jeremy Grantham's calling for a bubble to burst here that's going to be catastrophic. That means that I probably shouldn't own any equities, for instance. And I just tend to think that sort of thinking in extremes is it tends to be a hyper form of market timing that just very rarely plays out the way people expected to across the time horizons over

Starting point is 00:18:30 which they expected to. So me personally, like when I look at this sort of an environment, I think the range of potential outcomes here, this is, I mean, for the record, I think this is one of the hardest investing environments I've ever seen. I mean, like there are certain periods where you can look at things like, you know, for a long time, like I've been looking at bonds, for instance, saying like it's a no-brainer to own bonds at above like 4%. Whereas today, it's like, That's a lot more difficult conversation to be having, especially when you look at things in real terms. But today, specifically, the range of potential outcomes looks so disparate to me, meaning that, like, I could see a scenario where the stock market just continues to kind of flutter higher, where,

Starting point is 00:19:13 or maybe it continues to, maybe it just muddles through. Maybe we return to kind of more of like a 2010, 2020 type of environment. Or I could see a scenario where Grantham ends up being right. And you get this like, what if we get a deflation? What if home prices fall more than people expect? What if we get some sort of weird exogenous shock? You know, China invades Taiwan and Russia invades Ukraine and like, you know, all the, you know, hell, all the shit hits the fan all at once around the whole global economy.

Starting point is 00:19:42 You could start getting a lot of weird stuff happening here where you do get this, like, big exogenous shock that causes a recession or like a big geopolitical crisis. where you get this big downturn, fear-based downturn in financial assets that turns into this sort of snowball effect that we were alluding to earlier. But I don't know. That's the thing that's so confusing about this particular environment. We had such a big, seemingly irrational boom here that it has facets of totally rationality and facets of rationality based on like the basic accounting of it all and the government stimulus, where I think, I mean, personally today, I think that like I'm much more aligned with like a Ray Dalio type of

Starting point is 00:20:29 all weather approach to this sort of environment versus like someone like Grantham who tends to be very strictly equity focused and really hyper focused on trying to pick the right places to be inside of the equity market. Me personally, I think this is the perfect environment for just like ultra, ultra diversification because I don't think anyone really knows what the next two, three, four years are going to hold. And the potential outcomes are so broad, broader than I think they've ever been in terms of what the actual outcomes could be. Let's take a quick break and hear from today's sponsors. All right.

Starting point is 00:21:10 I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord. in every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses. and building technology under censorship and authoritarian pressures. These aren't abstract ideas.

Starting point is 00:21:55 These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations, and conversational. conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedom Forum.com with patron passes offering

Starting point is 00:22:36 deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs

Starting point is 00:23:23 while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, Demystifying AI at Netsuite.com slash study. The guide is free to you at Netsuite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people

Starting point is 00:24:04 overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics.

Starting point is 00:24:33 So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions, and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing... Sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB.

Starting point is 00:25:09 That's Shopify.com slash WSB. All right. Back to the show. Well, you brought up bonds and how they are getting harder and harder to understand or find a reason to invest. So I'd like to turn the attention to bonds for a little bit. Since yields have been so low for so long, it's obviously easy to see why so many investors consider bonds almost like this endangered species. I mean, if you read Twitter or if you read the news, I mean, a lot of people have this narrative. But I know, for example, what you're talking

Starting point is 00:25:39 about in your own ETF, for example, it's very diversified. You do hold bonds. Now that inflation has reared its head, even though it might be peaking, do bonds serve less and less of a purpose in a portfolio? And if not, then why? It depends. I mean, bonds are, so the way I like to think of bonds is basically, if you own high-quality bonds, bonds are basically cash-like instruments that pay you in today's environment, a much higher rate of return than cash will over time. So, you know, it's tricky. I think that you need to be very specific about your time horizon. You're owning any type of fixed income instrument because bonds are, they're not just fixed income instruments. They're fixed maturation instruments, meaning that they are fixed across specific time horizon.

Starting point is 00:26:27 Me personally, like, I'm a big fan of like asset liability matching portfolio management strategies where you take, like, let's say that like you want to buy a house in Southern California today and you just happen to be lucky enough to have the $20 million it takes to actually be able to afford that home, well, you've got to be able to bucket that money for a down payment across a specific time horizon. So let's say that like you've got this sort of unknown, say, two to three year time horizon. Well, it could make sense to, you know, if you have the flexibility where you're saying, you know, oh, I don't want to leave that in the bank for the next three to five years because I know it's going to earn zero. It could make sense to buy a three to five year bond where

Starting point is 00:27:09 you're likely to earn some interest across that time horizon and not take the sort of principal risk, the credit in it that you would have in say like a junk bond or the stock market portfolio. So, you know, when you bucket things across specific time horizons, it makes a lot of sense to own bonds for specific time horizons. The other thing is that bonds are just even in an environment where they generate really loads, amp in the equity market risk, well-earning a rate of return that is at least positive relative to cash. So it's interesting to look at even like a period like 1940 to 1980. If you look at that period, interest rates rose the whole time. So people have this misconception that even if interest rates rise, that that means that bonds have

Starting point is 00:27:55 to lose money. And in fact, a 10-year treasury bond, if you owned a constant 10-year treasury ETF, for instance, from 1940 to 1980, you just clipped like a two and a half percent coupon the whole time. So in a balanced portfolio, it dampened the equity market volatility in that portfolio by 50%. So you earned a lower rate of return, but you beat the pants off of cash, and you dampened your equity market volatility inside that portfolio. So if you're somebody that wanted a diversified portfolio, you still wanted to earn, you know, even as measly as two and a half percent is, it was better than zero. So, and it certainly was better than exposing yourself to the hyper volatility of like the 1970s, for instance, and all the behavioral biases that potentially come with that.

Starting point is 00:28:40 So the answer is it depends. But in my view, bonds aren't dead. Bonds will never be dead because they'll always be demand from people who want to earn a nominal return that's superior to cash. And yeah, it's true. From like 1940 to 1980, they get walloped in real terms. I mean, that's just part of what happens in a rising interest rate environment. But the kicker is that if you built a diversified portfolio, your equity piece over that time, and especially if you owned like commodities or any other diversified asset classes, your aggregate portfolio beat the rate of inflation over that time period. So you kind of, this is why this sort of an environment, to me, is so great for all weather style approaches because you can kind of have your cake

Starting point is 00:29:24 and eat it too through these approaches. You can have nominal stability through either, even if it's cash or bonds across certain time horizons, you can have exposure to the equity market. market if things continue to go up and be strong in the long run. And you can own other assets that protect you from inflation specifically in certain ways. So I think people love to sort of picking shoes. And the reality is that people have different needs, different time horizons. And if you have these sort of shorter term time horizons, and especially if you have behavioral biases relative to thinking, for instance, that the stock market is overvalued, well, bonds as a dampening asset class in that portfolio make a ton of sense, just because they're less volatile

Starting point is 00:30:07 relative to the stock market. One narrative that I'd be curious to hear your opinion on is the fact that foreign governments are buying less and less of our treasuries, because if you look at it right now, foreign treasuries, I think, make up 13 to 14 percent of the national debt we have. I mean, the treasuries they hold. China is only in the three and a half percent range. A lot of people think, I think they hold a lot more than they do. but are those percentages dwarfed because of the fact the Fed is buying so many,

Starting point is 00:30:35 meaning is there a base effect, so to speak, of what's happening in those percentages that make it look like they're owning less and less, or are they truly buying less and less treasury bonds? They are buying less in a relative sense. I'm not sure how much it really matters in the long run. So people like to think of bonds, government bonds, especially as having some degree of credit risk and people think that a lot of people think that like the U.S. government's going to somehow go bankrupt even though it can literally print U.S. dollars, the default risk on U.S. government

Starting point is 00:31:06 bonds is zero. It's just the example that I like to use, though, to understand this is that imagine if the Treasury just financed all of their spending by literally printing actual physical dollars or sending people actual deposits. Like say the Federal Reserve, say the bond market wasn't involved in any of this and that the Federal Reserve couldn't even do QE because if the Treasury just issued dollars straight up from the beginning, issued deposit straight into people's bank accounts, whether there would be, there would be no QE to do. So it's interesting to think like if the Fed did that, would people

Starting point is 00:31:42 say, would people have the same logical thought process about the demand for this stuff that they do about the bond market? So if the, if the Treasury went out and dumped a big dump truck of cash out in front of the U.S. capital tomorrow, is there an environment where people, People would say the demand for those things is going to be zero. And I think the answer is, sure, maybe in a hyperinflation environment, but you're making specifically you're making an inflation argument. You're not making an interest rate argument in the traditional bond sense of like rising interest rates where the credit quality of an instrument or entity is declining.

Starting point is 00:32:19 You're making when it comes to government currency and government liabilities, in that instance, you're making specifically an inflation. argument. And you're predicting that inflation is going to be very, very high, where the demand for those dollars is going to be low relative to everything else. But the kicker, the point I'm really getting at is that the U.S. government cannot and will not lose control of the interest rates on its own liabilities because it has the ability to definitively structure those liabilities in a way that only they can control whether or not interest rates rise. So it literally, if the Federal Reserve came out and was like, we're setting the rate on 30-year

Starting point is 00:33:02 treasury bonds at zero. The overnight, the 30-year treasury bond would go to 0%. The treasury combined with this policy would come in and probably say, okay, we're not issuing any more bond. Now we're going to do what Cullen actually said. We're going to only issue deposits. We're going to only issue cash. Our interest rates on everything now are zero.

Starting point is 00:33:26 The interest rate, by definition, it would have to fall to zero because the U.S. government doesn't have to pay you interest. The U.S. government chooses to pay us interest. The Fed choose to implement rising interest rate policy over time. There's no, like, market force that says, like, they have to do this. You can make arguments that if the rate of inflation is very high that they should. But even with double-digit inflation, Paul Volta, or didn't have to raise interest rates in that environment.

Starting point is 00:33:55 So there's a lot of, I think, nuance in understanding the specifics of government finance that a lot of people relate to like a household that at a basic level, when you're the dominant liability issuing entity in the entire global economy, it's different. You literally have an exorbitant privilege. They do have that ability, as you put it. But you've also mentioned that they're kind of like a guy walking a dog, right, where they can control how they rein the dog in, and oftentimes they overshoot it.

Starting point is 00:34:30 So what is the risk involved of them mismanaging their ability to do what you say? What's the risk of the government making bad decisions? Really high? Maybe not a fair argument. You can make an argument that like now, for instance, with the rate of inflation where it is that you could argue that the second and third stimulus packages coming out of COVID were big mistakes. And you've seen it, you know, across history with the Fed and rate hikes that the Fed tends to overshoot. They tend to be chasing their own

Starting point is 00:35:04 tail to some degree. And I've been writing a lot about the Greenspan conundrum. So for people who aren't aware, the Greenspan conundrum was the period of basically like 2003 coming out of the tech bus to 2007 or so. When the Fed went on this really epic rate hiking cycle, I can't remember where they bought them, something like 1%. They rose all the way to like 5%. And what was really interesting about that environment was that the long end of the curve barely budged to this whole time. So what the Fed expects is that in an environment like right now, the Fed would like for rate hikes to filter through the whole credit structure. They would like to see the demand for 30, your treasury bonds, for instance, fall and that people will go out and start borrowing and using

Starting point is 00:35:49 all this money to do other things. And what's weird is that in these sorts of environments, the curve doesn't move at all. So the Fed raises rates a lot and the yield curve actually flattened. And typically when the yield curve flattens or inverts, you start getting some financial instability because it becomes a lot less profitable for financial firms, in essence, to expand their balance sheets. That's the sort of the simple math of it. And this causes some instability or at least slow down in the economy because the nature of the flat or inverted yield curve. And so, you know, I don't know about causality there.

Starting point is 00:36:25 Like you can make the argument that like it's not so much causal as much as it's, you know, just, you know, that the economy is weaker than the Fed actually thinks. And so when they invert the curve that it's just reflective of the actual nature of the underlying economy. But regardless, when you get these environments like like the pre. pre-housing bubble period or pre-financial crisis period or even like right now, like the 30-year treasury is at about 2%. So you can make a really strong argument that if we're in this sort of greenspan conundrum like scenario, the Fed really has very, very little wiggle room where if they don't

Starting point is 00:37:01 get long rates to move up, where it doesn't look like long rates are moving much. I mean, the short end has already moved up about 1% and the long end basically barely budged. So the yield curve has already started to flatten a lot. It hasn't gotten perfectly flat or inverted yet. But I think what the long end is kind of saying is the economy. This economy is potentially more fragile than the Fed thinks. And if you overreact about inflation, you could end up with a deflation or a disinflation that is much more alarming than the inflation ever was. So it's a risk for certain. Now, with inflation running hot and unemployment low and all these, the environment, we're currently in and having Powell today say they're not going to do anything, what does that tell

Starting point is 00:37:48 you? I mean, what environment will we have to be in for them to be more hawkish than they've been? It'll be interesting. So what's the outlier upside inflation scenario? That's the scenario where, well, what if the wage price spiral theory is a reality? That would be a scenario where wages continue to just sort of spiral higher because maybe aggregate demand is much, much higher coming out of the stimulus than people even expect now. Or you can have another outlier where like oil prices and commodities continue to just shoot higher. You could have, you know, a lot of this is global in nature. So you can have knock on effects from that where you get this scenario where inflation is, you know, not just 7%, but potentially even higher than that. And this actually does start to look a

Starting point is 00:38:34 lot more like the 1970s maybe. That's not my base case. So I'm definitely going to look like an idiot if inflation is like 7 to 10% by the end of this year. But implausible. Like I was saying before, the range of outcomes in this environment are so broad and so uncertain that, you know, I wouldn't, I wouldn't want to own a portfolio where I wasn't at least protected from that scenario. So, yeah, it's definitely a big risk. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. And customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on

Starting point is 00:39:22 one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with Vanta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires.

Starting point is 00:40:00 That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try? The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&B 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for. See a trading opportunity. You'll be able to

Starting point is 00:40:43 trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit plus 500.com to learn more. Trading in futures involves risk of loss and is not super. for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high-yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes, thanks to the

Starting point is 00:41:32 Fundrise income fund, which has more than $600 million invested in a $7.9,000,000,000,000,000 97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses.

Starting point is 00:42:15 This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. This instrument isn't talked about very often on this show at least, but what are your thoughts on the series I bonds that seem to match the CPI number? So right now there's eye bonds that are doing seven.

Starting point is 00:42:36 1.12% yields. What is your opinion on parking your cash into something like that as an inflation hedge? They're great to the extent that they can make a meaningful difference for you. So there's there's really strict limits on how much you can buy. I think it's something like $10,000 per person or something like that. For a lot of people, I mean, if that's a meaningful part of your portfolio, that is on a risk-adjusted basis, getting 7% from a what is essentially a, credit risk-free instrument is a tremendously good deal, probably the best deal you're going to find today. I, again, I typically, I think of bonds as being a nominal hedge in a portfolio specifically. So I don't love the approach of thinking of bonds as necessarily protecting you from inflation.

Starting point is 00:43:26 I think that people should use specifically other instruments in a portfolio. Bonds are really, they're a nominal, a principal stability part of your portfolio, where over, specific time horizons, you kind of know, okay, these bonds are going to maintain their principle and just clip a small coupon. So typically inflation protected bonds, they tend to be more volatile in the short run than, say, plain vanilla treasury bonds, specifically in environments where you need them to be stable. So for instance, in a deflation, tips and inflation protected bonds do typically really poorly. They look not like the stock market, but a lot more like the market than the typical bond market, whereas plain vanilla treasury bonds, for instance, they typically

Starting point is 00:44:12 go up in value significantly in a deflation and kind of, you know, touching on, you know, our previous point about why somebody would own bonds. Like, I mean, if you're a bond trader in this environment, you could make a strong argument going forward that if we end up in a in a disinflationary or deflation environment at some point, even in the next five to 10 years at some point, well, you have to consider the scenario where interest rates in the U.S. on the long end go, to 1% or 0% and we start looking a lot more like Japan and Germany where interest rates are at 0% on the long end. And in that scenario, your long bond that has zero credit risk, it goes up 20, 30, 40, 50% in that scenario. So there's this weird sort of outlier scenario

Starting point is 00:44:56 there where if you had the risk of a deflation or a disinflation, you can make an argument that owning that instrument actually makes sense because on a risk adjusted basis, that would be probably the very best trade in this sort of an environment where for a portion of your portfolio maybe, that outlier long-term treasury bond that everybody seems to hate right now might end up being the best risk-adjusted trade that anybody can make. And that's, you know, weirdly, that's been kind of the best trade for what, 20, 30 years running. I mean, if you could buy a 30-year treasury bond back in 1980 at 12, 13 percent on a risk-adjusted basis, you know, there's a reason why people call Bill Gross and Jeff Gunlock, the bomb kings. It's because having exposure to that

Starting point is 00:45:42 asset class in the last 30 years has been by far the best risk-adjusted trade you could make, especially on a credit risk quality basis. So, you know, the risk reward isn't nearly the same as it was in 1980. But I feel like I've spent my whole career hearing about, how you can own anything except treasury bills. And that's cost people a lot of money taking that position. And so I'm, you know, I'm not a maximalist on anything. So, you know, being the sort of taking the sort of all-weather approach again, it makes a ton of sense to me. I love the all-weather approach. I think especially now when you see your portfolio tank, you can definitely be like, okay, I quit. I just want to buy index funds. It's easy to

Starting point is 00:46:26 to migrate to that philosophy very quickly. What I'm kind of curious about is, you know, say you're going to ETF or index into a portfolio, are there certain industries that perform better than others in a time like this? Like commodities I've heard mixed reviews on, for example. Is there one portion you would allocate or allocate more towards, given what you know, today? I mean, I'm not a huge advocate of like what academics call factor investing. So, like, trying to pick, like, which, either which segments of the market or, I mean, to me,

Starting point is 00:47:00 stocks are stocks or stocks for the most part in picking and choosing, you know, which part of the market to be in. It's kind of a guessing game, to be honest. You know, like looking at like value stocks today still looks like a great relative value relative to like growth, especially like you're starting to see this kind of peel back a lot this year. I think value finally outperformed growth by a huge margin last year. So you're starting to kind of see this maybe reverse. But this is all super custom. It has to be super customized because everyone's needs are so personalized.

Starting point is 00:47:31 But if I was a trader and kind of gunned ahead and forced to pick, you know, where did I want to be, I'd probably want to be tilted towards, you know, high quality stocks with, you know, more of a value tilt. And I'd probably want to be international because the U.S. has been on such a huge tear that has been so growth focused that the risk adjusted outlook going forward to me, looks it looks a lot dicier if you're just betting on the momentum trend of of U.S. tech, for instance, going forward in perpetuity. So, but again, I think the kicker with understanding any of these, especially inflation

Starting point is 00:48:11 hedges, inflation hedges are inflation hedges specifically because they're not principal hedges in the short term. So typically with an inflation hedge, like, even like, if you look at gold or, you know, Bitcoin or the stock market, these tend to be very good long-term inflation hedges. The trade-off is that you trade short-term nominal principal instability for those things. So you get periods like this where Bitcoin's down 25% this year and the stock market is down, you know, 8, 9% whatever. You have periods of instability in the short term where, yeah, you can make an argument

Starting point is 00:48:53 that dollars are the worst thing you can own right now. But you know what? A dollar was worth a dollar on January 1, and it's still worth a dollar today. And so if you like to sleep well, if you like portfolio stability and balance inside of your portfolio, well, again, you're trading long-term inflation instability in a dollar in exchange for short-term nominal principal stability. And that's just the trade-off you have to accept. That's why everyone owns, you know, everyone listening to this owns.

Starting point is 00:49:23 some dollars in their bank account, which is totally rational. I own way more cash and short-term bonds than I probably ever should, according to modern portfolio theory. But you know what? I sleep really, really well because of it. And to me personally, like, yeah, I know that it's, you know, especially as like an investment manager. Like, I know cash is trash in the long run. I know that, but cash helps you sleep well. So, and to me, sleep is really important, especially because I've got two kids under the two and they're driving me bonkers. So it's highly personalized, but I think understanding that tradeoff is really important when you're building a portfolio because that's what life is all about. It's about all these tradeoffs and building balance and things so that you,

Starting point is 00:50:07 you know, you're not too overweight in certain ways where the downside risk is so asymmetric that it exposes you to a catastrophic short-term overreaction or problem in your life. When you say a dollar is a dollar, I just want to clarify something because yes, you're correct. And even if you look at the DXY, if you're comparing it to other currencies, yes, it's the best out of all the bad currencies, right? But even Ray Dalio has come out and said that, you know, when you're talking about inflation, how you measure it, you can use the CPI number, for example, but you have to also include financial assets. You know, and that's coming from Ray Dalio. I found that really interesting. You have to include that. So when you talk about the asset appreciation, especially in homes, and equities and everything we've talked about. Does that work its way into your inflation calculation at all? This one's really messy, to be honest. And so this is part of the problem with trying to understand the CPI. Inflation indexes are really messy. It's so easy to go in and look at like the Bureau of Labor Statistics methodology for calculating the CPI and just be like, this is terrible.

Starting point is 00:51:11 Like the way they do this doesn't make sense. This doesn't reflect my actual rate of inflation. And that's just because building a basket reflects the average consumer's price inflation is by definition it's going to end up being wrong because it doesn't reflect what any of us actually end up buying because we all buy different stuff. And so they're trying to implement an average. And, you know, asset prices are really, really messy inside of all this because the BLS and really any price index, any consumer price index is trying to measure things that we actually consume. And so, like for instance, if a hamburger costs $10 today and it costs $20 tomorrow,

Starting point is 00:51:55 well, if you eat a hamburger, and let's say hamburgers are the only thing that you eat in the world, well, you eat that hamburger. When you buy the hamburger, initially you've got a $10 asset, but the second you eat it, you've consumed it. And so that thing is gone. And tomorrow, if that thing costs $20, it costs 100% more. Your living standards have materially declined because the replacement value of your existing dollars has gone down so much because now it costs more to buy these other things. Whereas with asset prices, like with a home, I mean, a home, for instance, is a huge part of CPI and a really messy and controversial part of how all this works because you don't really consume your home in the same sense that you consume like a hamburger. So

Starting point is 00:52:41 when the value of shelter increases, for instance, you're not necessarily worse off. Like, If I build a house for a million dollars and the house for whatever crazy reason is $2 million tomorrow, well, I didn't really consume anything. I invested a lot of money into a million dollar home and it's worth $2 million tomorrow. I'm actually better off. A lot of the people around me are better off because now my comp makes all the homes around us more valuable. In theory, the whole economy is more valuable because of the net worth of all of these homes increasing, makes everybody's balance sheet stronger. So it's really tricky. The CPI is specifically trying to quantify things that we consume and need to replace. And asset prices are just really messy

Starting point is 00:53:29 because they don't, like a home technically gets replaced and consumed over a really, really long period of time. So, you know, like, like termites are consuming the wood in my home right now. So I'm going to have to replace this. Like I actually had to rebuild our whole house like two years ago because it was literally falling apart from termites, basically. And so you consume a house over very long periods time, but then you also have this weird intangible with it where a house is really just a depreciating block of wood that sits on top of a scarce piece of land.

Starting point is 00:54:03 And the land, nobody's consuming land. Nobody can consume land. We can build more on top of it, but you can't physically consume it. And so it makes it, I don't love when people talk about asset price inflation because asset price inflation doesn't necessarily make you worse off in the way that consumer price inflation does. When we consume a hamburger and it goes up in price, you're definitively worse off. Whereas when the value of a home goes up and you've got this so-called

Starting point is 00:54:33 asset price inflation, well, people aren't necessarily worse off. Some people might be worse off in a relative sense. For instance, if you're a renter who was looking to purchase a home, well, you're definitively worse off, but in aggregate, people aren't necessarily better or worse off because of asset price inflation. And in fact, oftentimes, for instance, when the stock market increases in value, typically, you know, if you're a believer in like the efficient market hypothesis or rational thought processes, then typically in the long run, equity market increases are really good. So asset price inflation is not necessarily indicative of things getting worse. And I think that's the problem that a lot of people have when they talk about asset

Starting point is 00:55:12 price inflation is that it's this underlying assumption that it's necessarily bad, where consumer price inflation is definitively bad, especially when it's very high, whereas asset price inflation, it's a lot trickier to quantify that's good or bad. And you can get into all other sorts of like tangential arguments where like, you know, yeah, you could argue that right now, like based on my conversation, like, I think there's been maybe a level of asset price inflation that creates that real economic risk. Is that bad? Yeah, it could be in the short term.

Starting point is 00:55:45 Will it play out to look rational in the long run? Yeah, I mean, the home prices in 2006, they look pretty rational right now. But in the short term, I mean, that caused a lot of catastrophic volatility in the economy in the way that that all filtered through. So it's complex, Trey. I don't have like a really, really simple, clean answer for this one. That's right. That's why we're here.

Starting point is 00:56:06 We like to talk about the complex topics. I raised the question because going back to the Fed and they're speculating that they're going to raise rates, that alone tanked pricing, especially in the high-flying tech stocks, for example. And it's because, one, it's hard to value their intangible assets and their cash flows in the future. But if you start thinking about rates and them raising, then it discounts even more the cash flows into the future. And that brings the values down.

Starting point is 00:56:32 And when you're talking about inflation like we just were, as an individual, I think it's important to understand what your inflation rate is, what you said, what you consume. Because one thing we didn't talk about there is things like health care and travel and other things that you could argue might be consumed, so to speak. And they need to work their way into your equation. And going back to the Jeremy Grantham quote, I think what's simple, what's kind of easy to see is like if we do start incorporating other elements of inflation into the picture, then the market looks extremely overvalued. So when you talk about this super bubble bursting, it's easy to understand because just a slight increase in interest rates could bring this market down 50 to 80 percent,

Starting point is 00:57:13 probably. So it's an important topic to discuss. That does kind of bring up this other idea that I've heard you talk about around mutual funds. And they don't short stocks, right, but they do buy and sell? And they've been net sellers as of late. And do you think there's something there as far as these trillions of dollars that are programmed to buy? and continue buying that increases the indexes over time as sort of like a backstop for the economy in some way? This is a really, this is another like one of these academic debates about like passive versus active and how much of the, you know, like the stock market rally is just the result

Starting point is 00:57:50 of like Vanguard just funneling money into, you know, the stock market endlessly. And I mean, that's not a, that's definitely not an unreasonable argument. I still think that like when you look at the fundamentals of a lot of the underlying entities, for instance, in the in the S&P 500, well, like corporate profits are at record highs today. So like even when you you make the asset price inflation argument, like, yeah, has the Fed influenced asset prices? Almost certainly, you know, but there's also this underlying sense of like fundamental reality where corporate profits actually are just crazy high right now. So is there a sense of like rationality at all this that where it actually makes

Starting point is 00:58:36 a lot of sense that asset prices are where they are? Like who knows where they're going to be in, you know, two or three years? And you could make, you know, kind of going back to what I was talking about before, I think you can make an argument that like the worrisome thing today is that the rate of change, the fact that it's been based on, for instance, government spending to a large degree in the last two to three years contributing to corporate profits, well, if you're fundamental argument there is that, yeah, this all makes sense going forward. Well, is the market pricing this in in a way that expects this to be the new normal? Like, is the market expecting, you know, the government to run big deficits basically in like perpetuity, for instance? And for

Starting point is 00:59:17 consumer spending to remain high in perpetuity. And there are really reasonable arguments to argue that that's not going to be the case, in which case you have to look at the equity market and consider, well, okay, well, maybe valuations are high for rational reasons, but maybe what the market is overlooking is the potential that the, you know, a lot of this stuff is, especially the rate of change is not going to be the same going forward. So I don't know. It's a blend of both, I think, to be honest. Like there's really reasonable points to be made about the Fed and like, you know, the vanguards of the world are just causing asset prices to go up and remain high. And I think there's also really reasonable arguments that those flows coming into all these assets make

Starting point is 01:00:02 a lot of sense, mainly just because the underlying entities are super strong. Like, you look at the top companies in the S&P 500. I mean, people talk about how, you know, Apple and Google and these big entities make up so much of the weighting of like the entire stock market. Well, these companies are so far head and shoulders above what every other entity, the entire global economy is like, in terms of their corporate performance, well, it just makes a lot of sense. So is that going to change? I mean, who knows? I have no, I don't, you know, one of the reasons I focus on macro is because I think it's so hard to focus on individual entities and what the individual entities are going to do in the future. But again, it's, it's probably a blend of both that the flows make, you know,

Starting point is 01:00:47 asset prices higher, which is sort of, you know, creates this sort of snowball effect. But a lot of that underlying flow makes a lot of fundamental sense at the same time. Now, just for fun, looking at your ETF, I noticed there's not a crypto element to it. What would it take to put GBTC into something like your discipline fund? I'm curious. I hate that ETF. That's not even an ETF, really. I cannot believe that the SEC has not approved and they've allowed that thing and it's huge

Starting point is 01:01:19 premium. That whole thing makes my head explode. the SEC is somehow trying to do what's in the best interest of investors, but they've allowed, you know, the gray scale Bitcoin trust to exist in the nature that it has. Not only is an egregious fee, but it's just not even closely reflecting what the actual price of the underlying asset does. And this is somehow, you know, good for investors. I do not understand that. I never will, I guess. I get increasingly intrigued by likeable market cap weightings of all these assets. And so, So like, you know, the crypto space right now is something like 1, 2%, something like that.

Starting point is 01:01:57 So it's still really small on a relative basis. I probably would have put a crypto piece into the ETF if it hadn't caused so many insurance and regulatory issues right now. So that's a, to be honest, like, you know, going back to the whole SEC thing with the gray scale trust. I mean, right now, we're still so early in the regulatory. work out of all of this that, you know, we need for a lot of, especially like the traditional asset managers, for them to adopt all of this, the regulatory structure has to mature a lot more

Starting point is 01:02:36 before we can start to even adopt all this stuff in the way that a lot of us probably want to. So to be honest, I mean, that's a big part of this is that the regulators are just, they're way behind the ball on a lot of this and they haven't updated the structure. And that means that a lot of us can't access a lot of this stuff because it's, to be honest, it's way too damn expensive to go into a market like that and expose yourself to like the liability risk of not just the compliance side of things, but the insurance side of things and the shareholder risk of everything. So I'd love to, you know, who knows what we'll end up doing in the next five, 10 years.

Starting point is 01:03:16 But, you know, I hope the regulators catch up. And I hope they, you know, I hope they start, you know, getting to a point where. where we can, you know, better, my view is that crypto and in the sort of traditional finance worlds are going to increasingly blend over time, but we're still a long ways from being there. What's your take on that discount to NAV with GBTC? I mean, how is that not getting arbitraged away like every other ETF to its NAV typically is? Who knows? I mean, it's a weird, it's a weird thing. And I would have thought that especially with it kind of has started to look like maybe a spot ETF was going to come to fruition maybe increasingly at some point.

Starting point is 01:04:05 So I would have expected, especially because I think gray scale, you know, I may not, I may not have this right, but I think gray scale is, I think they filed for a spot, right? I think they're, yes, but they're going to convert. I mean, obviously, like this whole closed end fund structure is going to get converted into a new ETF at some point. I don't know. To be honest, I mean, I really, I don't, my guess is it's a regulatory risk, but I'm not, I really, I don't know the answer to it, to be honest. I don't think anyone does. That's what I was asking you. So, Colin, before I let you go, I definitely want to make sure I give you a handoff to talk about your ETF or where people can

Starting point is 01:04:43 find more about you and pragmatic capital and all the resources you've shared because they're amazing. So let them know where they can find you. Yeah, so pragmatic capitalism is my blog. That's where like if you look for, if you're looking for like educational resources and things like that, like the understanding money page is a huge resource that I built. It's a lot of my own work, a lot of outside resources, tons of good stuff there. I typically write, you know, once or twice a week on the site. And then company is discipline funds. And the discipline fund ETF is the ticker is DSCF. And it trades on the New York Stock Exchange. So if you like really boring, all weather, type of portfolios. Check it out. Colin, you're always a voice of reason. I really appreciate you coming on the show. This was super fun. And this is the first time we got to chat. So thank you for indulging me on some of these. But I just really loved learning and love your pragmatic approach. I really do. So thanks again. It's always a great time. Awesome. Thank you, Trey.

Starting point is 01:05:38 All right, everybody. That's our show. If you're enjoying these, please go ahead and follow us on your favorite podcast app and maybe even leave us a review. You're welcome to reach me directly on Twitter at Trey Lockerby. And there's a whole world of resources available. for you at The Investorspodcast.com. Check it out. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to The Investorspodcast.com. This show is for entertainment purposes only. Before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network.

Starting point is 01:06:19 Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP420: Inflation Update and the recent FOMC Meeting w/ Cullen Roche

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.