The Compound and Friends - Dark Matter

Episode Date: January 10, 2025

On episode 173 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Julie Hyman and Doug Boneparth to discuss: the rising 10-year, the real estate market, Presidential volatility, the labor market, private equity, quantum computing stocks, and much more! This episode is sponsored by VanEck. To learn more about VanEck's Uranium and Nuclear ETF, visit: http://www.vaneck.com/NLR Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Did you watch any of the funeral? I mean, I watched. It was on. It was a weird day today to be in the office, but the stock market's closed. Is this how normal people live? I wondered that. Right? Isn't it so weird? I could have meetings. And indeed, a lot of people in my office were having meetings. Do you know how many times I refreshed the ticker page?

Did you? I can't help it. It's a force of habit. Like, what's going on with my life. It's a force of habit. Like what's going on with my life? It actually, it felt luxurious to me. Thursday's my writing day. I write our morning brief newsletter on Thursdays for Friday. And usually I have to do that like in between other things.

I've even been known to finish it like during the show, during commercial breaks. So you had no shows to make today so you could just write. What's the topic to Jure? Well, we're going to get to it. Should I tease it? Should I do a tease? What we call in the biz? Do a tease.

Bond yields. Bond yields. Are they good? It depends. We'll find out. It depends. Where do they fit into your diet? Will bond yields fit into your diet?

Stick around. So I watched a little bit of it. They had, Joe Biden gave a speech, which I thought was pretty good. And it sort of was like a sub tweet about Donald Trump. Cause the whole thing was about Jimmy Carter's character and why character matters, cause I think that's the fit. Like if you ask somebody what they think of Jimmy Carter, that's like probably the main thing people point to,

is how modest he is. I never met him. Never met him. He's sort of like the anti-Trump. He still lives in this like Ranger Ranch style house. Lived a life of service, right? So you want to laugh? He had to sell his business to become the president.

How quaint. It was a peanut farm. Yeah. Right, yeah. I think that president- I'm thinking about the conflicts. Yeah was a peanut farm. Yeah. I think that president... Think about the conflicts. Can you imagine the conflicts? I think that president is over forever. Today he would be forced to put the peanut farm in a blind trust.

He would have to sell peanuts from the White House. What do you think that would be? I don't know. I don't think any president will ever really have to do that again. Which opens up the window to more types of presidents who want to keep their business. How could you tell them they can't? There's an argument to be made that like, hey, you've spent 30, 40 years of your life building a business, some enterprise, and you got to divest yourself of it. Like, it was Mitt Romney that was going hard into that point.

I think you limit, I think you limit the well of potential people that you might want to run the country. Yes. If you're going to make them all sell their businesses. Can we talk about the election of 2028? Yeah, who are you voting for? Gavin Newsom or Donald Trump Jr.? What do you think?

Elon Musk. You're going to vote for him? He can't run. Are we changing the law so that he can run? Yeah. Probably. Well, you got a chunk of that for a sec. He can do whatever he want now.

If he's from Greenland by then, it'll be the 51st date. You know who the most famous person from Greenland is? Tell me. I don't know. It's got to be someone. We're going to look it up right now. I don't know. Guys, we ready?

It does have to be someone. I'm out of banter. Some of the worst banter you've honestly ever done. Listen. I'm looking forward to the election of 2028. I don't know what to tell you. I'm out. And do you know who's the most famous person from Greenland?

Oh. Listen. Did you find it? Did you find it? Did you find it? Yeah. No one ever recognized. Whoa, whoa, whoa.

Stop the clock. Here's a word from our sponsor. Today's show is brought to you by VanEck. Listen up. There is a huge wave of demand currently and on the horizon from hyperscalers for data center power. And many of them have already looked to nuclear as a solution in the short to intermediate term.

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slash n l r. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right, ladies and gentlemen, welcome. Welcome to episode 173. All right. We're now rocking with the best investing podcast you've ever heard in your entire life. I stake my whole reputation

on that. Doug, what do you think? Yeah, you should do that. You listen to a lot of investing podcasts, though? Just this one. Just this one. See? Told you. And Michael's. Guys, we are doubly blessed today. We have two of my favorite people.

One is a repeat guest, longtime friend of the show, and one is her first appearance ever. Amazing. Hopefully not the last. Allow me to introduce you to Julie Hyman. Julie is a host for Yahoo Finance Live. Julie has been a financial journalist for more than 20 years covering events,

including the great financial crisis. That doesn't deserve an applause. The collapse of drugmaker value, I remember. And the rise of the meme stocks. Before joining Yahoo Finance in 2018, Julie worked at Bloomberg Television as a senior markets correspondent, anchor, and retail reporter. That's where I met you. Yes.

Yes. I was there for a long time. Those were the days. In many ways, those were the days. Were those the days? I sort of feel like they were. In what way were those the days. In many ways, those were the days. Were those the days? I sort of feel like they were. In what way were those the days? I'm not sure.

I feel like everybody's all about 90s nostalgia right now. Yeah, that's a thing this week that's going on. But like, when did we, what year was it? I probably- Post financial crisis. I'm going to guess that I met you in like, 2010, 2011. I was doing a lot of Bloomberg back then. Most people don't know that about me. I was doing that show that I was doing a lot of Bloomberg back then most people don't know that about me

I was doing that show that Matt was doing it like 11 o'clock at night. What was that? Who was that show on Bloomberg? I mean there were so many different you mean Miller Miller. Yeah. What was he doing? It was weird. It was great. If it was if it was Miller it was weird. He's so weird. I love that guy So I was doing a lot of Bloomberg radio. I even co-hosted the radio and I did a bunch of Bloomberg TV. So I'm guessing I would have met you around that time, 2011-ish. 2011 was a good time. Yeah, it was a wild time. With us also today, Doug Bonaparte.

Doug is the president and founder of Bonafide Wealth, an independent RIA focused on serving high achieving millennials, along with his wife Heather. He is also the co-author of Money Together, their forthcoming book on love and money. When is it forthcoming? When is it coming out? I feel like we can talk about it. We have a publication date as of like two days ago.

It's October 28th. Are you on... 2026? It's a Tuesday. Are you on pres 2026? Are you on presale? Are you available for presale right now? I technically think you can pre-order this right now. Okay. I wasn't prepared to say that to anyone, but yeah.

Okay, give us like the elevator pitch. Why should people buy the book? Because in our lives, you're a team with your partner and money is never not going to be a thing that you have to deal with. It's not a game you can win. It's going to evolve. It's going to change. It's cliché to mention the statistic of how many relationships don't work out because of money. Yeah. Most. My first wife.

Let's fix that. Let's make this possible to communicate around the things that make a strong and unstoppable financial team. What's the writing process like with any, not just your wife, but any partner? Do you switch off chapters? Don't get divorced is the number one thing. No, no, no. What's the process though? Who does what? We did this in Heather's voice. She's the better writer. So there are over 75 interviews of couples, over 35 interviews with professionals and

experts in their respective fields. So while I'm out there getting interviews and sitting in those interviews and coming up with collaborating with the ideas that we have, we're gonna use her voice, we're gonna use her writing style because she's a prolific writer and everyone's gonna see that. Did you guys turn the mics on yourselves?

Yes, we weave our story throughout the entire book, but I have to tell you, the people we've interviewed, I cried twice reading this book. There are some really exceptional stories that are relatable to any reader. I'm so, so privileged to talk to those people. I love this. Very exciting. Most investing in money books are geared toward,

I mean, I know you know this, are geared specifically toward an individual reader. This sounds like something that, like, let's buy two copies and then talk about it. You are going to read this book and grab your spouse and say, Read this part. This is us. Like, Ivarodsky did that with fair play. You're going to do that here with money.

Alright, we're very excited for you, Doug. And of course, we will include a link to where people can see the book for pre-order. So can we talk about rising 10-year yields? Julie, you wrote about this. I did. We're front running your piece a little bit. You are. Well, but by the time this comes...

It'll be fun. Yeah, it'll come out Friday morning. So, I mean, and I'm certainly not the only person to notice this, right? Like we've seen stocks pull back since mid-December at the same time that yields in the 10-year have gone up by like 50 basis this, right? Like we've seen stocks pull back since mid-December at the same time that yields in the 10-year have gone up by like 50 basis points, right? So the question is why is it a problem? Because yields went up other times, especially last year, and it didn't seem to be a problem for stocks. And at the time, everybody was saying to us in interviews, well, it matters why yields are going

up, right? And if yields are going up because people are optimistic about the economy, then it's not as much a problem. But yields kept going up even when the Fed was cutting, which seemed to be puzzling everybody also. And now yields are going up and inflation seems to be coming back. And that is not making people as happy as it was, you know, when that wasn't the case. Can I quote you? Sure. I don't know if I've ever been quoted in myself.

I'm going to quote you quoting others. There is debate over what level in the 10-year yield would be especially problematic for stocks with consensus coalescing around 5% and markets have already gotten a taste of that. The less closely watched 20-year treasury hit 5% this week. Yields notwithstanding most Wall Street strategists. Urien Timber from Fidelity. I know you talked to Urien, friend of the show as well. And Michael Arone from State

Street think that earnings, not fiscal policy, not the Fed, will determine where stocks go. Okay, sure. But 5% is going to get people to sell. And I don't know 100% why that's the case. I just know that it's true. You got a take on that? I want to see if it blasts through it. I think that's what gets people really spooked here. So not stopping at 5.

Yeah, the momentum into it. If we hit it and we flail around there and we come down a little bit, we'll be like, oh, that's like April or, oh, that's like October of 23. Maybe earnings will come through and we'll see around there and we come down a little bit. We'll be like, oh, that's like April, or oh, that's like October of 23. Maybe earnings will come through and we'll see rosier patterns. But if it blows through. You think you're gonna have clients ask you,

hey, does it make sense to take a little bit less risk? I think clients are gonna be wondering how long duration they should have been or need to be moving forward on their fixed income portfolios. Well, cash is over. Yeah. Well, so that's the reason people sell. People don't sell stocks at a 5% 10-year for no reason because they think it's like some

unwritten rule that that's it's because it's a competing asset class and it's guaranteed. So if you think you're going to do worse than 5% in the stock market this year, then that's a really easy trade off to make. Even though bonds are also total return, but like that's the reason why that could be a threat to the bull market kind of thing. What else did Urien say when you talked to him? So he talked about inflation too and being a little bit concerned about inflation,

but overall he is bullish. I mean he also talked about the, you know, sort of the term premium on treasuries versus stocks and sort of the competition that you're talking about to some extent. He still likes Bitcoin because he's like that for a while. In a 5% yield environment. Yeah, I mean, he likes it regardless of anything else, which is mostly the case when people

like it. But he also is fairly optimistic about earnings growth, regardless of what happens, excluding that. And that's kind of been consensus-ish of people that we've been talking to lately, is that they are pretty optimistic about earnings. And it's always interesting to me when somebody says, well, don't pay attention to the Fed, don't pay attention to fiscal policy,

because those things obviously could have some impact on some earnings. I think the view is just that it won't be widespread enough to. More of an impact on sentiment than on earnings, at least in the short term. One of the big stories this week is about that you mentioned the term premium. And I wanted to just bring this up because if we think that the reason why the 10-year yield matters is the why, why it's rising. So this is one of the puzzles on the street and Bloomberg wrote about this today.

I'll quote Bloomberg, it's the buzzword on Wall Street and in the hallways of the Federal Reserve and Treasury Department. It's blamed for triggering bond sell-offs, shifts in debt auctions, and interest rate policy. Few agree on exactly what it reflects or how to measure it. It doesn't matter. The term premium is a powerful new force in the market. And the gist of this is it's the portion of the yield that's unexplained by inflation expectations. There's something else going on there. And maybe that's financial risk generally, or maybe that's risk specific to U.S. debt,

or maybe that's concerns about President-elect Trump's new policies. But like that term, I mean, Bloomberg calls it the dark matter of Wall Street. And the reason why is they asked a bunch of people to measure it or explain it, and they got a wild array of different measurements and different explanations. We have a chart. Let me show you this. This is Bloomberg's chart. This is the term premium itself, and it got up to almost half a percent, which in bond

yield terms is sort of a big deal. Backed off a little bit, but it's not zero and it's not below zero anymore. So we had negative term premium for a while. Now we have positive term premium and this is what people are talking about on the street. So we have the largest unexplainable premium. Well we'll find out the reason later. That's how this works. Stay tuned. If I could chime in with one more reason, maybe,

but I don't necessarily agree with this reason, but it's something that someone said to me recently. John Hilsenrath, who you guys probably remember, is like the Fed whisperer at the journal. Where the hell did that guy go? He's consulting now. Yeah, he's consulting now. And so he was on with us the other day,

and while we were on, we were talking about Fed minutes. And then after we went off, he said, next time we gotta talk more about yields, he thinks maybe there's a little more bond vigilantism creeping back in the market. I don't know that I buy that yet. I mean, I talked to Rick Reader last year and he said, markets pay attention to the shark closest to the boat.

And, you know, the deficits are not the shark closest to the boat right now. What is the shark? Inflation. Yeah, I don't know what he would are not the shark closest to the boat right now. What is the shark? Inflation. Yeah, I don't know what he would even think the shark is, like at this moment, because he's bullish, but I mean... That's the Fed's shark is not whether or not people are going to boycott US bonds because of our national debt. If that was...

The Fed's shark is still inflation. If there was concerns over our deficit and debt, and maybe that's showing up in the strength of gold and Bitcoin, but it would show up in dollar weakness. And that's not happening clearly. The dollar has been in a secular bull market for a long time. Exactly. So I don't know that this is happening yet,

but it is, I mean, certainly people were talking about it a lot around the election. And there was another interesting note out from Jason Dre over at UBS, who I think we're talking to tomorrow, who talked about MAGA versus DOGE. In other words, the different impulses in the administration cutting versus spending and like, what is that going to do to deficit? So I think, I don't know that it's being felt in the markets like that tangibly right now, but we're still, we're going to be talking about this for the next four years.

I think it's just an expression of people saying, this is not as low risk as you think it is to be in the bond market or to be in cash. I don't think that anyone thinks that we're gonna get this like surge of bond vigilanteism and people are gonna dump their treasuries. I don't know that whatever I just showed you would represent enough fear to say that. Yeah, I think to Michael's point, it's like.

Yeah, but I mean. I also think this Michael's point, it's like... Yeah. But I also think this is good. It's generally a good thing. Like, how long did we bemoan the fact that investors or savers were being punished? And now nobody's saying they're being rewarded, but they are. Because it's a much better environment. You can get some good yield and perhaps, you know, if you still believe rates are going to come down,

there's your appreciation while you wait. I mean, that's kind of where I've been hoping to get. We're there. Yeah. But we kind of robbed of it as rates are not going, we're not getting the appreciation on the bonds you bought, you know, more cheaply. Remember bond proxies?

We're going back up now. Remember bond proxies in like 2013, 2014? It was preferred stocks, it was junk bonds, it was AT&T dividends. Like now we don't need proxies, we have actual bonds. I think it's a great thing. I think what's really happening, that is no longer punishing savers, they're punishing realtors.

I mean that's... That's one way to put it. I mean that's literally who's paying the price for this for the last two years. We just had four rate cuts last year, and the 10-year went up 100 basis points. And nowhere has that felt more acutely than somebody trying to get people to take out a mortgage and buy a house.

And just last month you were told you're not getting half as many rate cuts this year as you were. So this chart shows the 10 year yield before and after the first Fed cut. Yeah, it's crazy. Normally, obviously when the Fed is cutting, the long end goes down too, and this is the exact opposite. Just a very unusual.

Did you guys see the latest mortgage rates? With 7.2? Yeah, it's crazy. 6.93, the Fannie and Freddie rate anyway. That was my joke yesterday. Nice. It's like the highest since July. Now that rates have come down,

I'm excited I can refinance my 6.5% mortgage at 7%. Congratulations to you. So I spoke to somebody who's been a Realtor for 25 years this week. He said he sold one house this year. Like one house. And where he is located, there is no new construction. It's just turning over houses and houses aren't turning. And then I spoke to a mortgage broker I'm friendly with.

And this is fire and brimstone. He's just like, I don't understand what's going on. Like, we just got four rate hikes. Why won't Wall Street let us have the rate hikes? Why are they putting the rates back up? And I don't really have a great answer for him because we did get 2.5% inflation. So for whatever reason, it's not working the way they thought. The real estate

market is as frozen as I think it's been that we can remember. How long can we keep pointing to lack of supply as the largest explanation or the larger explanation? It is though. As long as it exists. As long as it exists. And that's for the foreseeable future. I don't understand how we're going to build and construct like that. I don't understand how we're going to build and construct. We were saying, Michael, you and I two days ago, or yesterday, if all this AI spending stuff wasn't going on and the market was conforming more to the housing cycle, which is what it

normally does, we would be like 0% GDP. Stock market would be at 4,000. Yeah, I think the stock market would be at least 15, 20% lower. So I think it's not great. But we are still in a bull market. Let's go into some of these charts. We're in the third year now of a bull market. And I don't know, what are the ramifications here? So it just gets a little bit dicier, year three does,

than years one and two. I guess just by definition, we've got this chart from Todd Sohn showing all of the different paths. And there's not a million of them, but nevertheless, the dispersion is pretty notable. Like there's nothing here whatsoever other than a lot of spaghetti on a chart. What's the red line? That's the average. Oh, the median.

That's the median. That's what year three of a bull market looks like. It doesn't look that great. Listen, I would take this. I'd sign up for this. If we can get back to back 20% years in a sideways year, who says no? Not many. Take a breather.

I think most people would sign on for 20, 20, what do we have, 24, 27 flat. I mean, listen, I think that stocks going up 20% year after year sets yourself up for something dangerous. Like to me, this would be very healthy and welcomed. I mean, listen, I think that stocks going up 20% year after year sets yourself up for something dangerous. Like to me, this would be very healthy and welcomed. I returned to normalcy. Let's go to the next one. So 2024 was interesting in the sense that it was a complete continuation of 2023. Also from Todd Sohn, what we're looking at is the top 10 contribution or contributing stocks as a percentage of the overall total.

So the record year was 2007. The second record was 2023, where around 69% of the returns came from only 10 stocks. And then you saw a repeat of that in 2024. And on the flip side, stocks that sucked wind in 2023 also sucked ass in 2024. Which is an unusual... Julie, that's a technical term. Yeah. Sucked wind to sucked ass. That's how we do it. When you you talk to people is just one of the things that people bring up the most they say suck When does no no like the concentration or no of course they talk about concentration all the time

And they keep saying the broadening is coming just like they keep saying small caps are gonna start to do better Do you know why and neither thing has happened because that's what they're selling Right, they're selling a strategy that differs from the index. They have to believe that. Well, and what's so funny to me about this argument is like, you know, oh, things need to broaden. Why do they need to broaden? So that they can sell value. Right, but I'm saying in terms of like, oh, to keep the rally going, things have to broaden.

No, they don't. Well, they haven't. Or they broaden temporarily, and then narrow, and the rally keeps going. As long as, you know, and I also keep seeing these charts like, oh, the Mag-7 growth is going to decelerate, their earnings growth is going to decelerate a little bit, and everything else is going to accelerate a little bit,

but there's still a big gulf between the two. As long as the Mag-7 growth is going to decelerate a little bit and everything else is going to accelerate a little bit, but there's still a big gulf between the two. As long as the Mag-7 growth is still happening, why can't they continue to lead the market? This coming year is another year where the Mag-7 is going to out earn the rest of the market, I think by a lesser degree. But still. I mean, look, for your classic 60-40 investors 40 investors ready 20 investors where you have that 12% allocation to mid caps or seven to small caps, right? It's kind of starting to have interesting conversations with clients or you know, what do we have these mid caps and small caps? And what do these even do? I don't know.

And we have to say you're going to be glad that they're there when you're unhappy with momentum and large growth and you pull out your Ibbitson chart and you go back two decades to where that is and you have to believe in stats and believe in long periods of time and constantly remind your clients. It's just now becoming that conversation when you're looking at your risk adjusted portfolios. It does feel like we've reached a critical point

that it feels like people think that the past is gonna to continue indefinitely. Well, we almost had it, right? You saw the broadening happen. It started to, that rally in the end of September. Yeah, it was there. I was stoked. I was like, this is the bull market of bull markets now.

Like everything's firing on all cylinders. And we retreated from that. Small caps gave up their entire post-election pop. Like gone. All time highs. We had all time highs. All of it. Some of these things just work better tactically

than long term. Like, there's room to say, you could have a period of time where small caps lead large caps. Should you think that that could be a 10 year period of time? I don't think anyone should think that. Really? I just don't. Come on.

Do you think anyone believes that? Yeah. You think there are people that believe small caps? So now all of a Do you think anyone believes that? Yeah. You think there are people that believe small caps? So now all of a sudden you think diversification is stupid? No. I don't, I think they work better tactically than they work strategically because of how hard it is.

That is like literally recency bias talking. I know. Come on. But recently, that's how I feel. It's hard. All right. Somebody's like, why do I own international stocks? Well, that's very simple It's to make small and mid caps look good

So this is a purpose for everything in a portfolio I would just say it's really hard for people to picture right now a situation Where you have an over 10 year period of small cap out points. It's 37. It's high. If you look at forward earnings estimates, especially for the Mag-7, it's fucking high. It's very easy for me to picture a world where this doesn't persist. I'm not saying it's going to stop today or tomorrow,

but if you think beyond the next 12 to 24 months, I could easily see a scenario where the rest of the world doesn't look as bad as it has been in the last 10 years. When your client needs a six% or 7% average return to solve their retirement planning scenarios, and they're getting 13% to 17% on their 80, 20, or 60, 40, take your pick, and that includes them holding mid-caps and small caps, are they

going to feel good knowing that the story of you're going to be happy that they're here for the times when the AI story or the grocery is not there, I think is worth it. I really do. They're outperforming what they need to get to retirement at 55. Hold on. Think about it, 2022, if you were saying this, hey, you know what? F*** everything. Let's just own the Mac 7.

Amazon fell 50%. So did Google. Nvidia was down 70%. And so was Meta down 75. Netflix down 75. Crushed. Yeah. Like how quickly we forget. So some of the outperformance is because things went down less. Because I don't remember small caps having a great year in 2022. They were not down nearly as much as the mega cap techs.

Do you think that, do you think that, do you think that clients or investors even look at what did the Russell 2000 do at the end of a year like this last year? Or they just care about how their portfolio did? First they look at the Mag 7 and what it did for them. They're not focused on what didn't work. They're focused on what did work. They're like, hey, why don't we have more, like literally calls, why don't we have more NASDAQ?

A few calls for why mid caps at all, sure that's there. I think that's, and then the second point. So the NASDAQ's compounding at like 20% a year or something. And when you build a financial plan for clients, you don't ever build a plan that requires 20%. So what that means is after three years of that, after five, seven years, more than once, you're going back to that family and you're saying, good news, we are way ahead of where we originally projected we'd be.

Thank Tim Cook and Sundar and Zuckerberg. But we have to make a decision. Are we gonna roll the dice into next year or are we gonna change the plan or what are we gonna do because- What do most people say? I couldn't guess firsthand. My guess is that people a little bit up their spending plan and a little bit dial down the risk.

And it's something in between rather than one or the other. I don't know, you would know better than I do. With a client getting that much closer to retirement, let's say, and they were chilling 70, 30, right? They loved the idea of like, hey, 60, 40, you know, 10% shaving it back. Let's go back a little bit. Everyone feels good about that.

But also I'm going to buy a second home. Or 10 years ahead of when I thought I could. I think they'll start talking about those intermediate term goals with a little bit more desire for them. But I think when you start having more detailed conversations around it, they'll come to the conclusion this is either a really bad idea or a good idea. You think roughly the same kind of thing? Yeah, I think... People are more likely to dial back the risk than they are up there.

I think stocks have given investors a gift over the last, I don't know, 10 plus years. And now that bond yields are getting 5% plus, like the ability to dial it down and still be okay is a beautiful thing. Yeah, I will say this though. Younger investors, my youngest investors are, you know, your 30 somethings. They're like, can we add... They're the ones who are saying, can we add more growth in NASDAQ portfolio? Leverage. After having already done it.

And I'm like, that 10% NASDAQ sleeve on top of your 35% in the S&P 500 might be good enough as far as risk on goes. Plus the fart corn sleeve, so you know. Yeah, you want to diversify. Julie, you have this great graphic with presidential volatility. So the Trump regime to start. When is that? 20th?

Monday, yeah. What's today? Today is the 9th. So it's a week from Monday. A week from Monday. Yeah. Sorry, a week from Monday. Okay.

So you say despite all of the tweets and crazy things, the volatility of Trump 1.0 was pretty muted. Let's put this graphic up, John. So I looked at the VIX, but then I thought, okay, well maybe like individual stocks were more moved by his tweets, right? When he would tweet about something specific, a specific sector. So I looked at the VIX EQ, which is single stock volatility also. But both of them, and I looked at it starting the day after the election rather than waiting for inauguration day because that's when the reaction started in stocks.

And so the VIX averaged about 17.7 in that period of election day to election day in Trump 1.0, and it averaged 19.7 under Biden. And you might say, oh, but it was the pandemic. Well, the pandemic of course started when Trump was still in office. And so you saw that spike in volatility. He had the vol spike in his presidency.

Exactly. So even with that vol spike, the average volatility was still lower in the first Trump term than under- 2017 was the calmest year ever. Oh, that's crazy. It was eerie. But not like, there's such a disconnect, right? first Trump term than under- 2017 was the calmest year ever. Yeah. That was crazy. It was eerie.

But not like, there's such a disconnect, right? Because the news cycle is not calm, right? He was not calm, he was not quiet. And so, you know, it's just, I guess, a good reminder like not to be reactive to his commentary on fiscal, you know, his press conferences where he talks about Greenland and Panama and whatever else. You know, the other side of that is that if you put the S&P 500 on here, it actually did

better under Biden than under Trump. We're going to react. We're not going to react to Greenland and Panama, but we're going to react to tariffs. I think the deportation stuff happens before the tariff stuff. And I think it's going to be fairly disruptive in cities. And I think you're going to start hearing from chamber of commerce types, people that ordinarily would be Republican, making a lot of noise in op-ed pages like,

do not rip my employees out of the country. But I don't think that's going to impact the market at all. So, all right, I'll take the other side. I don't know how to quantify it, but I think that's going to be the first time Trump stuff actually hits the market at all. So, all right, I'll take the other side. I don't know how to quantify it, but I think that's, that's going to be the first time Trump stuff actually hits the market. So everyone understands what's going on this week has literally nothing to do with Panama, it's about getting this guy, Hegseth pushed through and ending all of the disputes around some of the people that he's nominated to cabinet positions.

If he has people chasing their tail, talking about the Gulf of Mexico, then that means the operatives in government have the cover to just kind of like push these things through and make it so people stop talking about them. Everyone like who's been in Washington for the first Trump administration understands that's how it works. The markets are ignoring it because the markets are smart. I don't think the markets are gonna ignore the roundups if and when those happen. I think that'll probably be the first time that people say oh wait a minute he wasn't just giving speeches at rallies like he's actually gonna do this.

Yeah he's the wild card guy right? Yeah. We've grown accustomed to him saying wild card things that don't actually materialize. And to your point about, like, I don't know what to point to other than what my guts, but like things kind of seem like there's going to be a lot more action than speak. Well, it's every president, the first year they get in, they start doing things. Like, so he's going to do things. And some of them will be good, some of them will be not so good, but I do think we're going to get a little bit more volatility in Q1 than we've seen so far since the election. So many opportunities for that increased fall like right now.

Yeah. So if you're under invested, maybe. So how are you planning it? Yeah. Doug, what's the go-to move? Investing in the Northwest Passage, right? So if we take Canada and Greenland and, you know, ice is receding.

If the canal is blocked, where do you go? Oh. I don't know. Shipper road. Oh, man. So, Doug, you talk to a lot of people, not just clients, but you're a social butterfly of sorts. How are, anecdotally-

Michael called you a butterfly of sorts. It's not the first time. What's going on with employment? People good? Michael called you a butterfly of sorts. It's not the first time. What's going on with employment? People good? Generally speaking, yeah. From a wide array of sectors and industries that our clients make up, there's been a few and far between.

There's been a handful of job loss throughout 2024. I can't really count on too many people who didn't recover from that. I had some folks take some exit packages and now they're doing that beautiful double dip of they still got their package and they're able to be picked up, picked back up at, at, but at the big companies like Metta, you know, like cool. I'll leave, you know, a huge telecom and go do brand strategy for, for Metta. So I saw that, look, you know, it's taking a month longer. To what? To get rehired. To get rehired than it was just a year ago. It was like six months now. It's seven.

It was five minutes three years ago. Yeah, you can get a job if you wanted it. Now it is getting longer. I think that's pretty normal if you ask me for the point you made of just how fast it was. But I think also there's been a lot of a reality check with what people get paid, right? So if you go to the software engineering side of things, right, we no longer see that here's your 180 grand to be the entry level software. You're gonna get 135 for that and we're gonna we'll bring you back in for it. Wall Street Journal did a piece this week. Unemployed office workers are having a harder time finding new jobs. More than 1.6 million unemployed workers have been job hunting for at least six months. Put this chart up. That's a lot. 6 million unemployed workers have been job hunting for at least six months. Put this chart up. That's a lot.

So you can see this is material. This is not bumping along the bottom anymore. I don't have a chart that goes back longer than this. My gut instinct is that this doesn't stop here. Julie, what do you think? I mean, listen, like I see... This is US workers unemployed at least 27 weeks. I mean, listen, my social butterfly-ness is within the media industry, which- Wow, that's a whole other-

I forget about it. You might as well be a coal miner. Yeah, basically. Yeah, yeah. Don't rub it in. But, you know, does it go- I don't know, or does it just go back to so-called normal levels, right? Like-

Right now, that's where it is. Yeah. The experience of the last three years is not normal. This might be what normal levels are. Right, right. That's what I mean. Like, it either hovers around here or maybe goes up a little bit, but, I mean, my gut says I don't know that it gets enormously worse. Yeah. Here's the journal. As of November, more than 7 million Americans were unemployed.

More than 1.6 million of those jobless workers have been job hunting for half a year. Here's the journal, as of November, more than 7 million Americans were unemployed. More than 1.6 million of those jobless workers have been job hunting for half a year. The number of people searching for that long is up more than 50% since the end of 2022. But again, the end of 2022 is not normal. There's maybe one more wild card we should mention, which is AI, right? Like, over the past year, there were all these executives who were saying, oh, it's not going to take your job, it'll help you. You know what it's actually going to do? It'll help you do your job better.

I think it will. You know what they're going to do with AI, though? They're not going to do, I don't think they're going to do mass layoffs. I think it'll be the attrition. Right. They'll just let people gradually retire and not replace them. And that takes a really long time for people to really process that that's what's happening. But I could picture that scenario.

And if you're observing that happening over a long period of time, it provides the opportunity to re-skill or if you're in college and you're like, oh, what am I going to go? Don't go into the job that's not hiring for the last six years in that particular position because you know AI took it over. So you major in something else or find a different skill that is applicable to that. That's a better version than we're cutting 10%

of our workforce permanently thanks to AI. I don't know that anyone wants to announce that even if it's true. Well, Klarna, you know, the find out pay later. Yes. We interviewed the CEO last month and he said, we are not recruiting anyone anymore. Like, we're just not recruiting first up.

Ever. I mean, for now. Certainly for now, they're happy with the headcount they have, which they cut after their valuation went down, but then they did replace a bunch of people with AI. Yeah. And those jobs are not coming back. I think he's the most vocal that I've heard

specifically coming out and saying, we've already seen the change. I think it's probably happening other places. It's just not being talked about as much. Are you seeing it at all in your world? I'm not seeing replacement yet, right? And I got to say, like, I don't know, how do you guys feel when you're going to read an article that says I summary at the top or like I don't like it either

I've never clicked it. No, no, no, no. I don't like the articles that are AI generated I'm not gonna say anyone's name, but there are certain publishers Like you click it once click it twice see it the third time you're like, oh Like, you click it once, click it twice, see it the third time, you're like, oh, software wrote this. Which means there's no color, there's no context, it's like this cookie cutter thing that they just changed the numbers.

And maybe that's valuable to people, I don't find any value in it. When I read something, I kind of like the author to weigh in with an opinion, and you know there's not gonna be any real opinion in there. So, but I get it, it's a really fast way to churn out content if that's the game like the author to weigh in with an opinion and you know there's not going to be any real opinion in there. Right. So, but I get it. It's a really fast way to churn out content if that's the game that you're in.

The mood is going to shift though here if this keeps going. In a survey of consumers by the Conference Board in December, 37% said jobs were plentiful. For context, in 2022, 57% said jobs were plentiful. So this is not necessarily people that can't find a job. This is people hearing from family members and friends that they're struggling, which again, maybe is normalized. It's just something that we haven't really heard for a couple of years.

So that's kind of where we are. We have a jobs report tomorrow. Doug, you got something on this? Yeah, I think it's more just- What's the number going to be? I hope it, whatever it is, I hope it extends, whatever it is, I hope it extends. You just want everyone to have fun. I want everyone to make money and have fun. Yeah, I totally agree with you. I want good times. Why would I want anything other than that?

But I would tell you this, when it comes to people who are currently employed, one thing that I've gotten in the habit over the last several quarters is telling clients and people, like, if you're happy where you are right now, this is the perfect time to go out and do something. And I think that's the habit over the last several quarters is telling clients and people, like if you're happy where you are right now, this is the perfect time to go out and see what else is out there.

Call your recruiter, talk to your former bosses and colleagues. I don't think there's ever a bad time to be seeing what your talent is worth, how much pay you could get. Because when things do shift, right? That's when everybody's doing that. And it's exponentially more difficult.

There's less opportunity. Yeah, now is where there's the opportunity. So for anyone listening to this who's happy, don't sit on your hands. You more than likely will end up staying right where you are, but you'll feel that much better knowing what was out there and what your worth is, and best case scenario, you find something killer.

Yeah, Duncan, John, you could ignore everything that he just said. You guys should stay here though. Okay, cutting government workers is a wild card here too. This is a huge part of the job growth, especially at the state level. If this Doge stuff is going to become a reality, we're going to be having a different conversation. Where are all those people going to go?

What are they going to do, we're going to be having a different conversation. Where are all those people going to go? Yeah. What are they going to do? Greenland. For a job? I don't know. Fishmen? I don't know. I don't know either, but it's a huge part of what we need to remain intact.

So if these plans to cut government spending are serious, at a certain point, someone's going to have to get fired. Otherwise, it's just talk. Right. Because that's where the money goes. If the Doge thing happens, the amount of short-term pain and volatility will be breathtaking, I think. And you've crossed your fingers that it leads to that long-term payoff. Like, you know, quote something something Argentina, you know. Okay, here's another wild card. Your employer tells you we need you here five days a week.

How does that change the calculus on the job that you're in or whether or not you want to keep it? JP Morgan is discussing a plan to require all of the banks, 300,000 employees to return to the office five days a week. There are a lot of firms doing this, but they're mostly Wall Street firms, mostly banks. I think because they pay the most for the most part, they have more power to be able to

exert on their labor force. What if they're trying to shrink their labor force? That was what I wanted to ask you. Or maybe they want people to quit and it's cheaper than letting them go. Exactly. That's 100% it. I'm glad we're talking about it

because I don't think it gets talked about nearly enough. So you have input. Number one, like the managing the hybrid remote work for very large companies like a JP Morgan with 300,000 is extra, first of all, it's difficult to begin with. At 300,000 people, this is probably downright impossible for a five person firm. Yeah, of course you can make that happen too. This is clearly in my mind more of a financial forward decision that it's clearly not a people

forward decision, right? You get this opportunities like it's giving McKinsey and consulting vibes here. So you find the employees who are maybe phoning it in kind of sitting back at home and they're gonna quit. Those are the people that this is a deal breaker for. The people that are the least engaged. Correct.

Where it sucks though, let's go to the other side. So I get that. That's where the financial function outweighs the headline. But where this really does suck, and this is the minority of people, is the family of hardworking professionals who radically changed their lives during COVID, moved two hours away. They've demonstrated their ability to work hard while being at home raising families and kids,

and they've reshaped their entire life and they're being called. And now you're gonna yank it away from them. Yeah, let's be honest. That is horrible, but it is dwarfed by basically everything else we just said. Do you think companies should say, this is our policy for people with children under 10,

and this is our policy for everyone else? Oh yeah, that'll be popular. I mean, that's tricky. I mean, I do think sometimes when they come out and say this, there is a little bit of wiggle room, even though on the surface it doesn't sound like they're wiggle room. I mean, when they first came back with three days a week,

it wasn't really three days a week for some of these firms. So I don't know this latest one, how much wiggle room there really is. But yeah, it's really tricky if you would say, what if I don't have small kids, but I have elderly parents? Is that even legal? No, it's totally illegal.

But you can kind of make that, small businesses are making this an unwritten policy. Like, oh, he's got two kids, he's helping his wife, shut up. That's happening. I know for a fact it's happening. Exceptions will be made. Exceptions will be made. JP Morgan can't do that.

Even if they wanted to, which they definitely don't. You can't tell one employee that their expectations are different from someone else's based on their home situation. But it happens. But it does happen. I know. You can't write it down. Yeah. Right. That's what I'm saying. Where legality meets fairness in terms of what we can talk about here.

You're 22, fresh out of college, get your butt into the office, surround yourself with people, learn from them, because guess who's there? The 68 year old who doesn't want to go home and be with, you know, his family is all grown up and is escaping their spouse from being in the corner office. They might actually have a lot to teach you if they're even willing to talk to you. But the middle there, the family, like the exception, what do we do there?

That's a real issue. I'll give you a bigger one. There are certain roles at companies where being in person is way more important than not. And can you make a different policy for different types of employees at the same corporation? I know that's happening too. Like, oh, these are the software guys.

I don't care where they are. You're in sales. I want to see you. Will we see case law in labor law around this over the next 10 years? So hey, for all the labor attorneys out there, it's time to shine. Here's where your billable hours might be.

Wouldn't you think less of somebody who's 23 years old and they want to sit in an apartment, like by choice? I kind of do. How do you advance your career if you're by yourself? Really depends. What do you think you're going to learn sitting in your, first of all, what's wrong with you? Why would you rather sit in an apartment

than be with your coworkers? Second of all, how do you think you're going to get better at this? Really depends on the job. Because we could go through the list of things where you could be traveling the world, doing your job, interacting with people. But that's your job, traveling the world.

Well no, I'm saying you're doing that for fun because you can do your job remotely. How does your senior, your superior recognize your talent if you're behind a screen all day? How would they even know the quality of your work? It depends on what your work is. And not just the work, but it's more than just the quality of your work? It depends on what your work is. And not just the work, but it's more than just the quality of your work, it's your personality.

Now, yeah, I think you're throwing the baby out with the bathwater to think you can't create managerial systems that can accurately reflect how- Oh, we do. More of our employees are remote than here. No, no, the proverbial you, right? Like an organ, JP Morgan had 300,000 people. That was my point. Yeah, of course.

You gotta put down the blanket policy here. But I think in a world where push came to shove, if they really wanted to, with the money and power that they have, don't lie to me and look in my face and say they couldn't figure it out. It's really hard. It's not worth the money.

At least that's what they think. But there's probably a lot of people that say, here's a model. And it shows how over the long term, shareholder value goes up by treating your people in a certain way. And then they can all argue over whether that's true or not. And they'll probably still say, nope, too hard.

Don't want to invest it for whatever reason, like come in the office. And that's how you get a result like that. When was the last time you passed JP Morgan's new headquarters building on Park Avenue? It's been a long time. Oh, you haven't seen it recently? No.

John, can you get a picture up of this? It's nearing completion. That whole area is insane. This will be I think the tallest office building in New York. It's called the super tall. That's the class of building it is. It is the entire square block. I think 47th to 48th Street, Madison to Park. So they got to justify that expense and have everybody in the office. Fun fact, it was a Models before... Gotta go to Moe's. No, one Vanderbilt was a Models. That was one Vanderbilt.

Yeah, yeah. All right. Anyway, if we could find... I don't know, can you find the facade of this thing? There it is. Tell me what you see and I won't point it out until you find it. Oh, now I feel like I'm going to fail this test. When you look at the facade of this building,

what do you say? The Fortress of Solitude, I don't know. I see a bar chart right now. Okay, guys, in case the Solitude is lost on you, those are diamonds. They wrapped the building. They're rhombuses. No, no, they're literal diamonds.

Up, all the way up to the top and all the way down, I think on two sides sides of this thing those are quadrilaterals. They are not quadrilaterals, sir I submit to you. They are come on. That's better. Okay, are these not diamonds? He pulled up a bad resolution Am I hallucinating? Okay Jamie diamond is the boss of all bosses for that. I mean that's not that's not subtle There's his legacy right there. So he needs everybody to come into the office every single day. So if you just built that, you kind of want people to be.

He could have given every employee a diamond instead of building. I don't know why, but I feel like maybe I'm just stereotyping. I feel like if you're a new employee at JP Morgan versus a new employee at Metta and you're a pro, like if you're a programmer, maybe you're not as motivated to go in. Yeah. But if you're like an investment, first year investment banker, you're going to want to be there, right? Well, they have no choice.

That's a 90 hour job. But I guess what I'm saying is it like when you guys, well, what do you think of a 23 year old who wants to just like like it does depend on the job, right? Yeah. So I have an IT, just a client meeting, IT systems administrator for a large consulting firm left hired by JP Morgan and he's going from five days a week at home, all day week at home to- What's his first and last name?

Won't be revealing that. Four to five days a week in office. How many days a week? And he chose that. And he's fine with that. And he said a lot of people he's worked with throughout his career are at JPM. So he's going to get to go in and see some friends.

Yeah. How about that? I think that's important for like your mind. His kids are also grown up. You need to see people. I mean, I like being in the office. I'm in the office every day. I mean I have to be. Are you every day? Every day. Okay. Cliff, how many days does Doug make you go somewhere? Zero? Okay. Do you want to go somewhere though? He's happy? We got an office? Your remote

employee is happy. I have more remote employees than in-person employees. I believe in remote work. I used to tease him, when are you gonna come in the city and do all the fun stuff? And he's like, it's chill out here. I'm like, you do what you want to do. Yeah, yeah. John, chart six is a segue to the next conversation. So we're looking at a chart from Torsten Slock showing the total employment in US commercial banks standing at 1.4 million versus Apollo, Blackstone, KKR, and Carlisle, which is one sliver. I can't do the math off the top of my head.

16,300. 16,300 compared to 1.4 million. That's pretty crazy because these are gigantic market cap companies now. Gigantic, and a bit of an apples and oranges comparison, but there is definitely a convergence between the function of the giant banks and how they're interacting with the economy and the way that the giant banks and how they're interacting with the economy and

the way that these giant institutions. So where that leads us to are they're coming for your retirement plan. And I think, I think in theory, this is a decent idea. I've heard much worse matching long duration capital with long duration assets. In practice or yeah, in practice and implementation, I'm a little bit worried. I think I would agree with that. I mean, I think, like, you guys talk to individual investors

all the time, like, they want a piece of this stuff, don't they? Yeah. Well, if they look at the past returns, definitely. And if we're saying one of the benefits to these investments, there's this illiquidity premium. You earn a higher return because you're giving up liquidity. The 401k is the definition of illiquidity.

You can't pull the money out anyway. Or you can, you pay a huge penalty so nobody does. You could borrow against it, but like that's pretty much it. So when you think about it from that standpoint, if there is a way to do private equity as a retail investor, arguably the smartest place to do it is in your least liquid pool of capital, which is your 401k. So I don't hate it.

So characteristics and time horizon, especially for younger investors lines up to that. But I think who is this really for? I think is the bigger question. I'll take the classic advisor line here. It's hard enough to get people contributing and investing in their 401Ks in the first place. We live in a, like the 401K has now the de facto

retirement savings vehicle for Joe Schmo and everybody else. So if we're struggling to get them into the fund, I mean, the qualified default investment option is only 20 years old, right? That was 2006. Thank God it was, you know, a lot of lawsuits over just sitting in cash. But now we want like PE in there. We just want people to stay invested. Like, can we get the foundational component first before we're saying, oh, by the way...

It doesn't matter what we want. They're coming. Yeah, exactly. So this is from the FT. The private equity industry is preparing to lobby the incoming Donald Trump administration to give it access to broad pools of capital. It has not historically been allowed to tap, including retirement savings, in a move that could unlock trillions of dollars for their firms. The $13 trillion industry is hoping the new White House will revive a derogatory push. So they probably will. It's coming. Oh, it's an amazing distribution channel for these shops, And they'll make a lot of money by getting their products.

Does the financial media know how to talk about private equity yet? Well, that's a good question. They're talking to us more than they ever have before. I'll say that. Middle market lending. Yeah. I mean, you know, that's been a real change since the beginning of my career. I mean, they didn't use to want to talk to the press at all. Because, well, your... Because Yahoo Finance is geared toward investors

that they've never talked to before. So you guys are actually a great outlet for them to start getting normal people accustomed to the particular jargon within P.E. and private credit that none of them have ever heard before. Well, and here's where I do my disclaimer. Yahoo Finance is owned by a private equity entity. Of course.

Apollo. Of course. So, Torsten Salk. Of course. Your colleague. Chart favorite. And one of his frequent charts that I love is the one that shows how many public companies there are now compared to 10 years or 20 years ago or whatever it is.

And it's shrunk, right? That there just aren't as many publicly traded companies anymore. So the caveat is there were too many publicly traded companies in the 90s. A lot of them were real pieces of shit. But the other correlation to that is that Torsten Slach also has a stat showing that 87% of all companies in the United States with $100 million in revenue are privately held. And so why shouldn't investors be able to access it? And I think they should and they will. The question is, what are the fees? Which I think they're going to come down dramatically, by the way. I think this is unbalanced.

This will push fees lower because competition and more distribution. But the diligence part, like what is the individual investor even supposed to be looking at? What are they getting? What are they getting? What is it? All of it. No, but like even like investors are going to have to learn about like IRRs and different ways of looking at the return.

They're going to have to learn about all these different fee structures that are inherent to PE that is not relevant when they look at a 40-act mutual fund. So that's going to be the job of the financial media to communicate, yes, this is different from other investments you've made and here's how it's different. Yeah. I mean, the answer to your original question, no, I don't think we know yet how entirely to talk about it. I mean, we haven't even, we were mostly talking about private equity here, but private credit

is on the table too. And to me, that is- Could be as big or bigger. Yeah, and that's more opaque and more complicated, I think, to explain to people. So that also, I mean, you know, even just talking about the corporate bond market people is tough enough without throwing private credit in the mix. So that's also going to be a challenge. If you talk to any P.E. CEO right now and ask what's your priority for 2025. Right. So 20 years

ago in 2005, they would have said China. Okay. I think 10 years ago in 2015, they probably would have been talking about LBOs in the stock market. Right. Like think like valuations were were cheap and small. Now it's just wealth, wealth, wealth, wealth, wealth, wealth. That's it. That's the whole ball game. It's, you got seven trillion at RIAs, probably another 10 trillion at the wirehouses. God knows how much at family offices.

That's it. This is it. We want to talk to wealth management. I don't think, so let me just push back against this a little bit. I don't know how I'm pushing back against, but just I'll just throw this out there. So when people invest in their 401k and they're at a targeted fund

or they're in stocks and they're in bonds, do they really know, do people really know what bonds are? Here's my treasuries, my corporates, my agency back. No, people don't know. And I think that over time, private credit will be viewed as it's what? It's debt.

It's not a bond that trades in the exchange or anything like that. It's not frequently traded, but it's a loan to a company. So we what? Throw it in under the ALTS umbrella? No, it's fixed income. So they do that now, but I think if you just call it fixed income. It will be indistinguishable from fixed income in a few years. That's what you're saying. It was where we're going. So what's the allocation in your 401k?

So what if I say, I'm setting up a 401k for investor who's 30 years old, I'm helping a 30 year old investor with their 401k allocation. Now of course it's not how it really works. What actually happens is your HR person says, here's your password, you log in, there's 600 funds to choose from. You have no idea what any of these terms mean at all.

You end up with a portfolio that's 40% Korean. Well, hold on, hold on. Don't discount the portals that now will be like, hey, we'll invest for you, and you fill out a question there. And I think that- Or you just choose the default. Or the target date fund. But what an opportunity.

If we're going to really dive into the distribution strategy of PE firms, you want to get in the allocation models that are promoted by the plan administrator. It's inevitable. That's the, but that's to me, like, if you can auto into it, oh my God, like that's just free inflows for days. So somebody who's 30 years old,

is it feasible that we can see them be in a situation where it's a 70-30 portfolio, and of the 30 portion that's fixed income, 20 of that is high-grade corporates and treasuries, and 10 of that is some sort of a private credit fund. The AGG with the PD. Yeah, I'm highly confident that's coming. The fund company that figures out how to bundle those things so that it's just one ticker, in my opinion, wins.

I think that's where BlackRock is going. BlackRock's going to do it. Yeah. But does this then, if it's going to happen there, does this then proliferate, it's showing up into allocated funds and into your single fund solutions held in brokerage accounts? They're making a massive push. Listen to any of the earnest calls. And they keep saying that we think credit is credit.

It doesn't matter if it's private or if it's public. The wrapper matters, but it's going to be indistinguishable from one verse to the other. And the feature, it pays a yield. Like that's what we're doing. We're paying a yield. So now in terms of education, I was talking to one of these companies today,

and they're like, listen, it's pretty simple. It's so for plus 600 and one turn of debt. I'm like, yeah, but slow down. Nobody knows what you're talking about. So even if I said, I like you, I like the team, I know what you guys are doing. What am I looking at in terms of diligence? I mean, you can show me the sub documents or the covenants that like, I don't know what I'm looking at. Okay, great. This company is doing $130 million in EBITDA. We're making them alone. Great. Okay. I guess that works. Sure. Why not? But this was your point about, you know, about bonds, You know, when you said, oh, do they even know

what a bond is, right? No. No, but brand name is gonna matter here. So if you're an intermediary, if you're involved with the plan sponsor and you're picking the menu of funds, brands are gonna matter a lot. And saying Apollo or KKR is gonna be important

so that you don't have to talk about due diligence. Do you also get to say like you do with bonds, which they would know, hey, we put bonds in our portfolio to dampen volatility. It's our less risky asset. Are you going to get to say that as well? No volatility. Yeah, there's no volatility. Negative volatility.

Nothing ever moves. You're going to have to couch this in the language that you use when you talk about high-yield bonds. Yeah. Because that's what it is. My point is, it's Thanos. Like, it's coming. Yeah. I guess that's probably directionally right.

I don't know if it's this year. Alright, Doug, you'll have some takes on this. There was an article in the Barons, I think two weeks ago, talking about how Americans are bin shopping, we're addicted to spending, and it's so much easier now than ever to spend, whether it's Instagram or TikTok, whatever. Let me set this up with some data. Americans are expected to spend as much as $5.28 trillion at stores in 2024.

We've got a chart showing the consumer spending as a percentage of US GDP. And this is like really where it stops and starts for me in terms of like the whole economic story that we're talking about. Like a lot of times we're talking about things that are noisy, like the 10 year term premium. Like this is it.

This is it. Line go up? Line go up. People spend, spend, spend, right? We've, you know, in the notes here, it's so frictionless. It is so beyond easy to purchase stuff. Scroll your phone and buy things. Oh my God, I get trapped into like an,

oh, this shirt is, this shirt's so dope on Instagram. How much do you return after you, how many things that you order on your phone do you end up returning? Amazon's the only place where I feel comfortable. All the stuff that you order off my phone are Instagram. I wouldn't even know how to return to like where these like sometimes they come from the UK. I don't even know where they're coming from half the time. And that's you know, that's

not going back unless you're paying like 40 bucks for shipping. And you got to love it when you leave something in your cart and you get like five emails saying or texting, Hey, you left something behind. Yeah, your doorbell rings. Yeah, that makes me annoyed. And I just don't want to buy it. Yeah, same here. I think I like I don't like the hard sell. So I've gotten I me annoyed and I just don't want to buy it then. Yeah, same here. That'll turn you off completely. I think, I like, I don't like the hard sell. So I've gotten, I get annoyed and then I don't buy as much.

Put this next table up, John, if you would. So Doug, to your point. There you go. Percentage of respondents citing the platform as fueling their shopping addiction. This is 12 to 43 year olds. 78% blame Amazon. 15% blame Instagram.

This surprised me, 46% YouTube. Yeah, I didn't know that was a thing. TikTok is almost neck and neck with YouTube at 44%. And then there's pretty much everything else. So TikTok, it's all affiliate marketing, which they think is going to hit 16 billion by 2028. It's a lot of money. Affiliate marketing, so it's an influencer

who has a deal with a cosmetics company. She sits on the camera, does a full face of makeup, and there's a link that you can buy whatever products you just used. Oh, it's real. And that buy now pay later is gasoline on this. I watched Heather put on a story, like things she's sending to camp with our daughter and you can click these things.

And I think like she's like, hey, we made 90 dollars. Like it works. It's not our job, but like it actually happens there. But the part of all of this, I think that is is the extra bit of toxicity or what makes it radioactive is probably the buy now, pay later, you know, programs that get wrapped up into this specifically better than having a balance on a credit card I think it's worse. I think it teaches the ha I think it makes a bad habit here. I worry about the younger generations Because it reinforces bad spending behavior and I think it reinforces debt accumulation. So because it's easier Uh, because they think they can spread it out. Um, I think you're likely to forget it

It makes you believe that I can have this today instead of actually coming up with the capital to buy it. The use of buy now pay later as a credit option allows sharpness to split into multiple payments. It rose 9.6% year over year and contributed to $18.2 billion in online spending during the holiday period. It's an all time high for the holiday seasons.

This is according to Adobe, and Cyber Monday was the biggest day on record for buy now. Yeah, but, though, do you want your stocks to go up or not? I think that a firm would say the alternative to this is not people paying in cash, it's people using a MasterCard and then having that balance follow them around for the rest of their lives. Well, and not only that, these guys will also say that their default rates are low. The people don't forget it.

They actually do pay it back. And they are low. That's the argument that, yes, yes. Shit guys. I get it. But we've only seen these proliferate so far in a good economy. We don't have bad economies.

We don't do that anymore. You see the spending? We don't know, like we don't know what this looks like in a recession. The bigger macro issue around all of this is that we're conflating consumption with happiness. And if you fall into that trap, you're just going to end up trying to fill a bottomless hole that will never be filled and end with disappointment. Speaking of bottomless hole.

The more you know. I don't want to hear the answer to that. That was like a Jerry Springer episode. That was the final thought. A couple of other Jerry Springer episode. Final thought? Yeah. A couple of other things happened this week worth noting.

We've had this kind of mini bubble, kind of sideshow bubble in quantum computing. So Alphabet came out and made an announcement about achieving quantum computing dominance or whatever and everyone got excited and there were three or four I call them micro cap stocks that all of a sudden exploded and became meme stocks because they were involved in quantum computing. It's a kind of a mini bubble because they're still tiny but these were the stocks that active traders slash gamblers were talking about. Jensen Wang was asked about Nvidia strategy for quantum computing. And he said, number go down.

He said, getting very useful quantum computers to market could take 10, 15 to 30 years. And then John put that chart up. This is what happened. No Qbit quantum computing ink fell 50% This is on the day one day, uh reggae. I shouldn't be laughing reggae computing fell 49 I what is it? Ionq Fell 46% ionic and qb is D-Wave quantum fell 48%. That's my favorite play. You like the D-Wave? Okay.

Jensen the godfather of AI. And then the D-Wave CEO was like, Jensen Wang is dead wrong about quantum computers. Well, I trust D-Wave more than Jensen. Anyway, it's crazy to have a stock get cut in half because some other CEO in an unrelated industry makes an off-handed remark like that. So as much as we're in a casino, we're in a casino with very swift enforcement. There are rules.

There are actual rules to this thing. Where it's not like these stocks were able to just like pretend that didn't happen. Where the owners of these stocks were able to just like pretend that didn't happen, or the owners of these stocks were able to pretend that didn't happen. Have you had any quantum people on the show yet or any analysts talking about this stuff? A little bit, we've had, we had some people talking about it a little bit

when the alphabet thing happened, the picture of the like steampunk looking device that was actually a quantum computer. It looks like a chandelier. I know, I was, yeah. It's kind of cool. I said it's a golden octopus, but chandelier works too. What device are you guys talking about?

The quantum computer that Google made. I showed it to you. And they also had the quantum computing chip separately. The willow is their quantum chip, right? So we did have some people talking about it, and they said at the time, but they're not Chen Siu-Huang, but they said at the time, this is not happening right now. This is like a years down the road thing. But...

He said 30 years. He said 20 was the most realistic. He said it's not 15, but it's probably not 30, it's probably 20. Okay, we won't be dead by then, it's useless. Nobody needs it then. I want it now, daddy. Well, you can have it now, but you can have robots and you can have, you know, all the other stuff.

What is quantum computer? I heard a lot of chatter specifically from, believe it or not, the Bitcoin community when it came to the announcement of quantum because can it break? That's their kryptonite. Yeah, yeah it was. Okay, guess what? Somebody said if there's a quantum computer they're going to f***ing hack the Fed. Why would they care about Bitcoin? It took the words out of my mouth. I do not think that's at the top of the priority stack here. We could solve every puzzle in the world. Let's get Bitcoin.

Let's crack the Bitcoin blockchain. Well, they'll crack people's emails. They'll crack everything. Yeah, it's not the thing you're primarily worried about here. But you learned by following the Bitcoin narrative, you actually learned a lot about this quantitative computing thing. Oh yeah? Let's hear it. No, we just talked about it.

That's their fear and then people were debating as to why. You know, like, you know... These are computers that are more powerful because they're not stuck in this zero or one binary coding thing. It's middle out. Zeroes and ones. It's middle out compression. Zeroes and ones can become ones and zeroes. And can't they also run all of it at once? At once, yeah. Correct. It's middle out compression. Zeroes and ones can become ones and zeroes.

And can't they also run all of it at once? At once, yeah. Correct. Look at you, Julie. I know something. Eddie Elfenbyte taught me, whenever you can't answer a question, you always say, it's really technical,

I don't think you would understand. Yeah. I like that. Eddie's the man. Shout out to Eddie. Duncan, did you hear this Adrian Peterson thing? Yeah, I was reading that. Were you upset by it?

Were you a fan of AP? No, but I mean, it's sad to hear. It's, it's, John, play this, please. According to the USA Today, a Houston judge has ordered AP to surrender property to satisfy the debt. Constables have been ordered to seize assets from his home. A court-appointed receiver has accused Peterson of playing a shell game in order to seize assets from his home. A court appointed receiver has accused Peterson of playing a shell game in order to avoid payment.

Oh, Joe. Oh, Joe. Who doesn't love Shannon Shaw? I was gonna let this whole thing go, but it's almost too, it's almost too funny. Bro, you made a hundred million. And then he borrowed, I think he borrowed like five million in like two years the interest so when you borrow money like that you got to play like 20 25 percent interest

on Joe so it went from five million to like eight million in three years it might be 50% interest all right Shannon sharp ladies and gentlemen all right so this is a big story in sports circles because this is one of the highest paid NFL stars of recent times. Probably made a hundred million bucks, is broke and negative net worth at this point. A lot of bad business dealings. Had a financial advisor who he is now accusing of getting him into a loan where the interest is now worth more than the amount he borrowed.

It kind of sucks because he's a future Pro Bowl, like for sure, one of only six running backs who's ever, I think, broken 2,000. He's just got like this list of superlatives had a 15 year career and Nothing to show for it financially, which is pretty upsetting. I bring this up because and Doug I want to hear what you think There's this idea that it's glamorous To be a financial advisor to pro athletes But the more you think about it It's it's not that it's bad to do that, it's

great to do that to help people. Those are really hard cases. Very hard. Because they make all their money in their 20s, for the most part, and that money has to last a really long time. And the amount of uncertainty around injuries and things that you just can't imagine could happen at any point. The typical wealth management client is making most of their money in their 40s and 50s and does not have that much time that they need to account for in terms of what they save. And you don't really have this sudden injury risk to the degree that a football player might. So these are not glamorous cases to work on.

This is obviously a worst case scenario. What were your thoughts when you saw this? Three main lessons, but I wanted to say it's not dissimilar from some of the YouTube stars or influencers who do particularly well when they're young and they're, you know. Yeah, how influential are these people going to be when they're 45 years old? They are not. I see it with DJs and entertainers just the same. There are tough cases. With athletes, however, the money scripts that they have,

and I'm generalizing here, whether they grew up not well off or it was just kind of tough, you have that kind of creating a compound fracture. What's a money script? Money scripts are the observations and environments that you grew up in around money and how that plays out into your behaviors around spending and money throughout your life. So it's kind of like your money DNA.

Are people trapped in their money scripts from their childhood? They can break them, but it's really hard depending on how severe the trauma is and what that experience is. And a lot of times, and we've interviewed a lot of people like this, they either fall victim to it and repeat the same thing that they have experienced either through their parents or whatever that was, or they go completely the other way and become... Like I grew up poor and I'm determined I'm not going to make the same mistakes my parents made.

You hear that story a lot. Or I grew up, you know, hungry and I'm going to now overstock my fridge with too Too much food go completely the other way and overcompensate for it But three big lessons one the importance of financial literacy clearly to Vulnerability of exploitation by advisors and people you surround yourself with you want to be extremely careful there has advised which is one of the allegations Which is the allegation and three maintaining a sustainable lifestyle which kind kind of dovetails into point number one, a hundred million dollars in immunity bond fund kicking out three, four percent. First of all, you're you're giving 10 percent to the agent. Yeah, OK. So turn that 50 percent. 50 percent is in taxes. So let's turn the hundred into 50. Put a four tax-free coupon on it and what do we get?

You know, $2 million a year lifestyle tax-free. I mean, easy for me to say that, right? But your point about like these are kids, right? And so if I'm a kid and I... Kids that don't necessarily have people looking out for them that know anything. I have one more lesson. John, can you throw this up?

I would encourage people to really look into the penny stocks where you're paying a couple dollars or 50 cents or whatever, whatever. Within five or six months, that money will flip so fast. You'll be like, what? Oh, that's enough. That's Adrian Peterson. He was trading penny stocks. Probably shouldn't be doing that either.

Yeah. I mean, he's got like a colorful history of things he's been doing with his money and car collections. And it's just a shame because you can never replace that amount of money. No. Julie, was your point that a kid who lives one year at a lifestyle of $2 million is going to want more than that because that's their baseline now? Or are they going to say to themselves, oh my God, I'm doing everything I ever want to

do on God's green earth and I can do this every year for as long as I live. because that's their baseline now? Or are they gonna say to themselves, oh my God, I'm doing everything I ever wanted to do on God's green earth and I can do this every year for as long as I live, clipping $2 million coupons? Well, I don't know that they would know what $2 million buys them in a year, but I could see them spending more even potentially if they want a certain. I agree with that.

That's the importance of the financial literacy component and the advisors around you. If someone had simply said, look, I want you to spend a year living on two, I'm going to only give you two million dollars here. Go have a, at the beginning of every month, I'll give you one twelfth of two million dollars. I'm sure his spending was out of control. Could you imagine what his monthly net looked like? The other thing is that when you're a young star, whether it's movies or TV or sports, there's also an expectation. Like, and you have to have a certain outward persona.

You have to project success if you want to get endorsement contracts, if you want to be mentioned positively. So it's not like anyone should expect people in that position to not be superstars. It's just like there's a limit and who the hell knows what the limit is. Ocho Senkow in that video goes on to say that AP flew out 300 guests to a birthday party that featured lions and all kinds of animals. Now you don't advise your clients to do that sort of thing?

For hyenas maybe. We can do a small petting zoo in a backyard. You know how much a lion costs in 2025? Inflation's real Josh. Right. I just think these are really tough cases and I don't look at this and say, haha, you know like I feel genuinely bad because I don't know what you do now. How do you get that back? It's impossible. A lot of cameos. Beat me to it. Quantum computing.

Kevin O'Leary is pretending he's about to buy TikTok. I'm willing to bet anybody $9 billion that in no way, shape, or form is this actually being discussed anywhere other than from Kevin O'Leary's mouth on Fox News or on Twitter. Can I do a shameless plug? I want you to. Guess what? Kevin O'Leary is going to be on Yahoo Finance tomorrow morning talking about this very thing. Well here's the news.

The Shark Tank star has teamed up with other entrepreneurs including former LA Dodgers owner Frank McCourt to lead a bid in purchasing the social media platform from Beijing. None of that's being discussed, which has been required by US officials. However, O'Leary believes he needs help from President-elect Donald Trump to finish the job. This is a quote. Quote, Trump will be who we have to work with to close the deal in the months ahead.

He announced during a January 6th appearance on Fox News. So I wanted to let him know, as well as others in his cabinet, that we're doing this and we're going to need their help. Do you think Kevin O'Leary is the front runner to own TikTok? Does that sound realistic? I don't want to front run the interview tomorrow morning. What are you gonna ask him? I'm not actually doing that.

It's not me doing the interview, so. All right, do you think so? I asked ChatGPT what the probability of Kevin O'Leary buying TikTok. You want to take the other side of my bet? Nope, it says it is effectively zero. It's effectively zero. Well ChatGPT says it.

And then some sentences as to why. Right. But I just like the fact that it literally flat out sound effectively zero. I don't think there's a bandwagon he wouldn't jump on. This is the latest. He's going to pay them a $2,000 a month royalty. I was waiting for the Shark Tank royalty joke, and I am so happy you made it.

No, but don't you feel like in five years it's like O'Leary quantum computing? I think he becomes a quantum computer. It's like super Trumpy to just throw your name on everything. So I don't think that's going to happen. Did he have O'Leary pogs back in the 90s? Probably. Probably.

Alright. Guys, did you have fun on the show today? Yeah. Alright. We loved hanging with you both. And we finished the show every week by asking our guests, what is the thing you're most looking forward to? Doug, let's start with you. Oh, it's ladies first.

No, you go first. Two things. Not on this show, Doug! Okay. Two things. One, AI playing a bigger role in our lives. You know, we're getting cool stuff, but nothing that we go, whoa, we want the next big show. Give me Hal 9000, but without wanting to kill me or do evil things

Yeah, like hey schedule my vacation book the hotels and like literally it does it or presents the options to me You think that's coming this year? I don't know not this year Okay, that's that's my big one, but this year what's coming is helping couples become unstoppable financial teams Oh look at this. There is Doug's plugging the book in What are you looking forward to segmenting Money Together? Would you expect anything less? No, I love it. Julie, we want to hear from you.

What are you most looking forward to? I'll do the business-y one first, which is that I'm excited to continue to cover Elon Musk in 2025. You haven't had enough? I mean, do we really, do we think we're getting a cyber cab? Do we think we're getting the cheaper car? Cab by the end of the year you think so yeah, there'd be like two of them on the road Yeah, uber will go to four dollars. I mean Whatever I think of him like it's a fun story to cover

And obviously whatever happens with him and Trump will be interesting as long as it doesn't Harm too many people I agree that part's going to be fun. That's the... Why don't we set in the line for like, with their breakup? Is it three months, six months? I don't know. I think it could go long. Like, I feel like so many people were on the side of, oh, they're going to have a falling out that I would almost take the other side of it. Well, Musk won't fall out with... Trump won't fall out with Musk. It'll be the opposite. Trump will be like, you're gone, you're annoying me.

Yeah, I don't know. I think if it hasn't happened so far, I don't know if it's going to happen. He's not even in office yet, though. Yeah, but I feel like the other, he had short patience for other people. I don't know. I'm going to give you the fault lines.

Here they are. Tell me. Elon Musk got very animated about H-b visas on Twitter or on X and a lot of other Trump people did too a lot of his new friends these the Founder crowd all the all the VCs and software guys that are now Trump guys They're all pro h1b visa because they need guys. They're all pro H1B visa because they need talented skilled people who are building was arts that makes perfect sense and I actually think that's good for America to okay fine.

So I'm not against it but I'm just saying they were aggressively and I thought that could have been a moment where Trump refuted all of that and he didn't. He kind of was like no no no I agree with Elon Musk. That was interesting. Another fault line is going to be China because the tariff stuff is going to start probably in 12 days. What did we say? Inaugurations in 10 days?

Next Monday. Okay. A week from Monday. 12 days from now, the China saber rattling stuff. And most of it is just going to be a prelude to Trump talking to China. And it's just, you know, making noise. That is Elon's most important market. The Shanghai Gigafactory is extraordinarily important to Tesla. And the Chinese consumer is up for grabs.

There are many Chinese EV players looking to supplant Tesla. That's another potential fault line. Okay. For a lot of companies, not just for Tesla. The third and more interesting one is whatever happens with truth social. Part of me feels like it's obvious that Twitter just buys it and Trump gets a really big check as a result of that. And maybe he's kind of counting on that happening.

And it certainly could happen. But from my perspective, those are the three fault lines where something interesting could happen where the bromance falls apart. Yeah, I mean with the China one, to me that would be the most likely one, but I could also envision a scenario where Musk is the back channel guy.

Yeah, totally. Where he's the one who helps broker some sort of situation that helps both sides save face. But I don't know. I actually think that's the best outcome is that there's some sort of trade talks. And I don't care if we see them in plain sight or don't. I think a worst case scenario is a repeat of 2018 and nobody had any fun in 2018. I think Trump has sold himself on the fact that he believes Elon Musk is the smartest man in the world and he's got him in his corner and he is the greatest tool.

I don't mean that in a bad way, but he's the greatest tool to operate things that he could possibly have. And you're right, it might actually turn out work. Get really annoyed with him and kick him out of Mar-a-Lago. Either way, Julie, I agree. That's going to be fun to watch. What's your non-financial thing that you're most looking forward to? And this one is fresh in my mind because it was just announced. There's a band called Vulfpeck

Yeah Do you guys know this band? No So they played 2019 at MSG and it was like this weird thing because it was this like little band that I had heard of that Didn't have I don't know if they had a label and they played the garden. You like Disco Snails? That's like one of the newer that's one of the side projects ish. My kids sing that song from the summer. What is this band? Are they German? No, they're from the University of Michigan.

It sounds like it. It's a play on the Wolf Pack in the University of Michigan. And so it's Wolf Pack, but then there's like the guy who was the guy, one of the guys who started the band who also puts out music as Wolfman. And then there's some songs that they put out just as Wolf but it's sort of a collective. How did they play The Garden? Very well I thought. No no no but like I've never heard of them.

How did they? Because they have enough of a following and also there are different configurations of The Garden where you don't have to do like the whole 360 situation. How did you get put on to this band? Are you like secretly like a cool indie rock check? Sure. You are though? I mean. I like that.

How did... I don't even remember how I first found out about them. My husband's in the music business. He's a promoter. He does more... He does more like jam band than indie, but you know, so... Have you been to a goose show? I have not been to a goose show yet. So this is... He's not a huge goose guy. He's sort of a... He's a fish guy. So all the guys my age that are not Dave Matthews or fish

are going hard into goose. I'm trying, like I'm listening to it a little bit. I'm not going to a show. These guys are going to shows with like eight dudes. You know what I'm talking about? Yes, and they get a party bus, right? Yeah. I think this band played Radio City or something.

Like I think they're playing bigger. Goose has gotten pretty big. They're at the PNC over the summer. Did you see it? I did. I wanted to. You did want to go. I did. I'm going to vouch for Jilly with Wolfbeck. It's some funky stuff, man. It's really good. You should check it out.

It's fun. It's good. Billy Strings. Are we on the Billy Strings train? There's a lot of good music out there. Billy Strings pops up in a lot of my Spotify Playlists. Yeah, I feel like that's the same like universe now the newer kind of jam stuff. Yeah. Yeah. All right I'm in well, I want to thank you guys both for being here this week. It's been an absolute pleasure you hope to have you both back and Maybe we'll see what ends up happening with all these things we're watching for in the meantime thank you guys so much for listening special thanks

to John Duncan Duncan welcome back by the way special thanks to Cliff yeah Cliff's a man. Can you say something about Cliff? You know just blessed to have Cliff in my life. Cliff works with you at Bonafide Wealth? Yeah. All right yeah I know he's indispensable to you. Number one, man. Alright, Cliff, we appreciate you. Thanks to Nicole, Duncan, John, Graham, who else? Rob, Daniel, Sean, Charter Kid Matt, we appreciate all your help. Guys, thanks for listening. We'll see you soon.

Alright, thank you guys.