The Compound and Friends - S&P 6,000, Elon wins, replacing gensler, remembering Mac McQuown with Robin Wigglesworth

Episode Date: November 12, 2024

On this TCAF Tuesday, Robin Wigglesworth of the Financial Times joins Josh Brown to discuss the passing of Mac McQuown, the founding Director of Dimensional Fund Advisors, and the history of market indexing. Then, at 33:18, hear an all-new episode of What Are Your Thoughts with Josh and Michael Batnick! Thanks to YCharts for sponsoring this episode! Make sure to catch Josh on the next YCharts webinar by signing up at: https://ycharts.zoom.us/webinar/register/6617303217309/WN_NtP3oRGISTqI39HztpCajw#/registration Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ 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

Ladies and gentlemen, welcome to the compound and friends. Tonight's show is sponsored by our friends at Y charts. Guys, why charts is an incredible tool and it has been for a really long time. And Michael and I have a really long history of using white charts to not only produce all of the shows that we're doing on YouTube and elsewhere, but to power our business. And I'm quoting now from my friend Sean Brown's annual CEO letter to YCharts shareholders and employees, the things that they introduced just in the last 10 months of this year, Quick Extract, which is a tool that allows you to extract portfolio data and text from

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So if you're a financial advisor and you want to make better use of your time and have better data at your fingertips and better tools to run your practice, I urge you to check out Ycharts and tell them the compound sent you. I also want to tell you that this show is going to be a lot of fun. First of all, it's Michael Batnick and I doing What Are Your Thoughts, but we're doing What Are Your Thoughts from Ambler, Pennsylvania, which is our new – it's Philadelphia. So this is our new tax hub. And basically we built RWM Tax, which I think this year will do more than 500 families taxes for them. And these families are wealth management clients at Red Holtz Wealth, but also all of the tax

consulting that every client needs at some level or another throughout the entire firm. So I want to congratulate Bill Swede, Bill Artsaronian, and their tax team. And so excited that we now have a physical headquarters in Philadelphia, one of my favorite places and the future is bright for RWM tax. And thank you so much to the city of Philadelphia for allowing us to build what we wanted to build there. But we're going to do what are your thoughts. But before that, we've got Robin Wigglesworth. And I asked Robin, who is a columnist and the editor of the Financial Times

Alphaville, to come on and talk about Mack McQuown, who is a giant in the asset management business. Some say the father of index investing. Mack passed at 90 years old. Robin wrote a beautiful tribute and I invited him on to talk about why Mac's story is such a great story and all of the things that happened as a result of his big innovation. So we'll talk to Robin, then it's Michael and I. I'm so glad to have you here tonight. Have a great time listening to the show and please, if you enjoy it, tell your friends and tell perfect strangers. Best way to do that is to leave us a rating or a review on Spotify, on Apple podcasts

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Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hey everybody, it's Josh Brown and I am here with Robin Wigglesworth. Robin is making his first appearance on the Compound channel. I'm super excited about this. Robin is the editor of the Financial Times AlphaVille site and the author of the book Trillions, how a band of Wall Street renegades invented the index fund and changed finance forever. I've asked Robin to come on the show to commemorate the passing of literally the godfather of index investing, John Mack McQuown, who passed away about a week and a half ago.

Robin wrote a beautiful tribute and eulogy to Mack as he was known in the FT. And I wanted to bring him on to tell us more about why Mack was so important to what is right now the most popular strategy for investing, at least in the United States and possibly soon the entire world. Robin, welcome to the show. So nice to see you. Yeah, thanks so much for having me on, Josh. Real privilege. And you are coming to us live from tropical Oslo, Norway. Yeah, it's subtropical right now. Let's put it that way. November in Norway is not a warm place. All right.

Fair enough. I want to quote from your piece and then we will react to it. You said, pioneers sometimes get undue credit for simply being the first of many trying to reach the promised land. Even if they had never been born, their discovery would have happened around the same time anyway. Other times they become the figurehead of what was really a collective breakthrough. But if there was a true father of passive investing, then it was John Mack McQuaun, who FT AlphaVille has learned sadly passed away yesterday, aged 90.

Index funds certainly had many intellectual parents. Giants like Louis Bacolire, Harry Markowitz, William Sharpe, and Eugene Fama. Vanguard's Jack Bogle was a powerhouse behind their growth into an industry-shaking phenomenon. McQuown had many able colleagues who played important roles in the genesis of passive investing. He's lesser known than those other names that you cited, but based on your piece, it appears that Mack was really the first person to put the idea of indexing to work with actual dollars. Tell us a little bit about where his place is in the history of indexing. Yeah, I think he's the quiet giant. Look, there were lots of people that helped him. He worked at Wells Fargo at the time, and Wells Fargo was then a fairly small pissant bank in the

West Coast, right? Because there were regulations that prevented banks from growing across states, and they wanted to use computers, this new, hot new thing called computers, to maybe try and do something more ambitious. And Matt led those efforts. And yeah, he had lots of great colleagues and he lent on a lot of brilliant people who are rightly famous for the role they've played in financial theory and financial economics. But you know, sometimes these guys, I think we all sometimes need somebody who's a doer, like Matt was a doer.

So he took all these great ideas. He actually turned it into an actual practical reality, something that exists in the world. And I think without, it would have happened anyway at some point, but I think it would have been radically slower if you hadn't had somebody who's incredibly stubborn as him kind of plowing a furrow in the front. So you quoted David Booth, founder of Dimensional Fund Advisors, who was a friend of Max. And he said, quote, to bring about fundamental change, you need great thinkers and researchers, but you also need implementers. People like Mac don't win Nobel prizes.

They implement the ideas of the guys who do. He's a catalyst. What was he doing in the early 1970s that put him in the position to take this idea and build something? Well, so Mac was basically a farm boy. He grew up on a rural farm and he was the first in the family to go to university. And it was at university at university actually randomly came across one of these big old Massive hulking IBM mainframes and he loved mechanical contraptions He was studying to becoming a mechanical engineer and that's kind of how he first fell in love with computers And you know when he graduated went he was an engineer on a Navy destroyer

And then he ended up at Smith Barney after he did an MBA at Harvard But you know Smith Barney didn't care an MBA at Harvard. But you know, Smith Barney didn't care what computers could do. He worked in investment banking. So on the side, just kind of for fun, him and the professor basically used a computer to find out stuff. And he was talent spotted essentially by the chairman of Wells Fargo at the time, a guy called Ransom Cook. And Ransom Cook gave him an unlimited budget to basically set up like a Bell Labs inside Wells Fargo to research what you can do.

Bell Labs for finance, right? Yeah, basically. I mean, I often call it, it's the Manhattan Project of finance because they basically hired almost every single financial economic superstar that existed then, and frankly was to emerge later on at some point consulted for them. And he kind of took all those ideas and turned into something real.

And that kind of culminated in the first index fund in 71. I think, you know, two years before some other people got there and quite a few years before Bogle founded Vanguard. Okay. years before some other people got there and quite a few years before Bogel founded Vanguard. Okay. So the first, the first index fund is not quite a fund. What it is, is a, I guess these days we would call it a separately managed account perhaps, but it's money being put to work on behalf of a corporation.

Do I have that right? Yeah. Okay. It was actually Samsonite. The luggage. Okay. Yeah, exactly. So the one of the kids of the founding father had studied at Chicago, had kind of become a complete kind of zealot when it come to efficient markets. He'd been a gene farmer students and he asked when he returned to manage, help manage the company, looked at the pension plan at Samsonite and he was a, you know, this grab bag

of crappy active products. And he said, well, this isn't theoretically sound. Is anybody doing something that's theoretically sound and Pharma and the others all pointed them to Mack and Wells Fargo. So this is in the late 1960s and the Samsonite family business has an investment fund and it's invested in all these mutual

funds that are underperforming the market. And it seems that the son of the founder or grandson of the founder looked at this and said, why are we doing it this way? This isn't working. Yeah, that was pretty brave at the time, right? I was going to say at the time, I think for most people, they were less concerned with is there a better way to invest and more concerned with just like, what are the returns? Are we making money or are we not?

Yeah. I mean, can you imagine even today, people don't like reading financial theory. It's super boring. Yeah. And back then, this is pre-internet, right? So lots of people didn't even know about the research that was coming out of MIT and Stanford and Chicago. But this guy just hadn't been the right person at the right time who was introduced to the right person that could actually turn into something real. Okay, so this is back to you. Having someone finally willing to back its research,

Wells Fargo enthusiastically set up an entirely passive strategy funded with $6 million from Sam Sinai's pension fund, which would invest in all of the New York Stock Exchange's 1,500 stocks. At first, it was a disaster. Holding an equal dollar amount of each of the NYSE stocks was a logistical nightmare as Wells Fargo had to constantly rebalance the fund. In 1973, it set up a fund that simply tracked the S&P 500 and folded Samsonite account into it.

This is predating the use of all the software and the computers that we have now. I'm trying to picture somebody or a room full of somebody's with a pen and a pad and just trying each day to make sure that the fund owned the same amount of shares as the overall market had available. And then you've got mergers and acquisitions, you've got IPOs, you've got all sorts of things that change what's in the New York Stock Exchange. It almost reminds me of the I Love Lucy sketch where she's shoving chocolates down her apron

and into her mouth just to keep up with the machine. Yeah, I mean, I still shudder to think about that hard work that had to go into some of those first products. I mean, it's just a different world, right? I mean, right now we think of index funders, super vanilla, like literally you could set it up yourself probably on an interactive brokers account. But like back in the day, this was mega hard.

They actually had to go to Wells Fargo, went to Solomon Brothers and convinced the head of equities at the time, a guy called Mike Bloomberg, to authorize what became the first portfolio trades. They'd actually trade big chunks of stocks that represent an entire index, but that was entirely new. They had to negotiate that and set it up from scratch. It was hard yards. Okay.

So, all right. So now you've got this product launched. Nobody knows about it. It's not like, to your point, Wells Fargo is a West coast bank. It's not an asset management powerhouse. It's not, it's not running television commercials. So it's still a kind of obscure thing. And eventually they settle on the S&P 500 as something easier to track than the overall New York Stock Exchange. Do you think that that was a pivotal

moment for the S&P 500 as an index? Is that the first time that was being used as a benchmark for asset management? People didn't really use benchmarks at all. So the S&P 500 had been born in 57. And it was at the time, it was kind of technological marvel because it actually could be calculated like every, I think, six minutes to begin with and eventually every two minutes. And that was just wild in the days when frankly most indices were still compiled by journalists like me working at places like the Wall Street Journal or the Financial Times. But it wasn't that big or a popular index. That's why they

use the NYSE, like all the stocks of the NYSE despite the logistical problems, because the S&P just wasn't that big an index. But it was kind of the genesis moment, I'd say, for the S&P as a real trackable, usable index. And very quickly, a few other funds as well around that same time, and American National Bank of Chicago and Battery March and Boston, they also use the S&P 500 and the rest is history. Okay. So this starts as separately managed accounts, but then a couple of other people

come along in various areas of the country and either they're inspired by this idea or they arrive at it on their own and it's a long time ago, so I'm sure there are competing stories, but you've got Rex Singfeld, who I think eventually becomes involved with Dimensional and is a Eugene Fama protege. He launches an S&P 500 index fund for a bank at Chicago. At the same time, Dean LeBaron, who's in Boston, launches a product for Battery March, which I think that's Jeremy Grantham's first employer. Do I have that right? OK.

Yeah. All right. So they are considered to be pioneers as well. They decide to do this in a mutual fund format rather than separate accounts. And so they get some credit for the legacy of the index fund. Yeah, I think they should. I mean, they are frankly giants and pioneers. And they arrived

at the same space and for different reasons, like Rex Sinkville, he's like an efficient markets guy. He calls himself the Ayatollah of efficient markets. Like he's, he's Gene Farmer's high priest. And he'd studied with Farmer and he basically did kind of have the first S&P 500 index fund. But actually it was a bit of a kind of a trick because he took over a small crappy fund that the American national bank of Chicago had already and converted it into a passive index fund. So he had, he had the first assets in a mutual fund structure. Dean LeBaron, my understanding actually launched a mutual fund structure first,

but it couldn't sell it to anybody. And he just did it because he loved the idea of kind of annoying all these colleagues, like the idea of a passive fund. So he just did it because he's in this kind of quite zany iconoclast. And he didn't actually raise a dollar for the fund until 74. And the, uh, Wells Fargo fund wasn't actually a fund. Like you say, it was a basically a separately managed account. It just had some institutional money

and they didn't track the SP 500. So I think all these three guys and the people around them and they did lots of the hard work deserve, I think a lot of credit. But in my view, Mac, he was the guy that got it done. Like when Rex and Dean was doing something battery much, they were very well aware of the work and how advanced Mack had already come at Wells Fargo on the West Coast. Yeah, so right. Mack proves that this can actually be done. So, okay, so that takes us through 74. Now, in 1976, Jack Bogle enters the picture and launches the first

index mutual fund. So there are other funds before him, but he's the one that I think productizes it in the most facile way for people to actually invest in it and utilize it. Yeah. I mean, not to denigrate Jack Bogle, who's one of the greatest people I've ever met. He truly is a absolute giant, but he was not an innovator. And sometimes if you pushed him, he'd admit it.

In fact, he actually got a lot of the raw data and some of the work from Wells Fargo because they weren't competing. Wells Fargo only offered accounts for institutional clients. They were prohibited from getting into retail. In fact, David Booth briefly worked at Wells Fargo before he found Dimensional as a Mac's assistant to set up a retail fund and he got killed by, by regulations.

They couldn't do it. So Mac gave a lot of their data and literally some of the coding work they've done to Jack Bogle's assistants to help him set up something for retail investors. But Jack Bogle's, of course, his superpower was always selling it, selling this story. And he really took this great idea. And Mac couldn't have done that. He was not a storyteller in the same way. That needed somebody like Jack Bogle at the right time. Okay. So the story is going to get really crazy when you find out what this $6 million Samsonite

account ends up becoming the kernel of. But before we get there, so McQuown leaves Wells Fargo in 1974, you wrote, exhausted by all the battles with the bank's new management. And then this investment unit at Wells Fargo ultimately is sold to a British bank and becomes Barclays Global Investors, which many of us refer to as BGI. And BGI still exists. Tell us what it ends up becoming. Well, today it's basically the vast majority of BlackRock. Which is an $11 trillion asset manager, one of the largest publicly traded companies on Earth.

That's the outgrowth of the Samsonite P fund, which I just find to be an amazing, amazing, uh, turn of events. Yeah, no, that's $6 million in that Samsonite fund, uh, became like the central part of something called Wells Fargo investment advisors. And that is now essentially it's obviously been subsumed several times. It's changed its name many times over the decades, but it essentially manages $7 trillion for BlackRock today. That's all the ETFs, all the IHS, all the index stuff, institutional retail, the whole jamboree.

So, so in your conversations with Mack, did you ever pick up any sense that maybe if he could have done it over again, he would have stayed longer or he would have possibly started his own asset management firm. I know it's a million years ago, but it's interesting to think about someone who creates this thing that grows into what it's grown into, but spent almost the entire time on the outside having done it and moved on. Well, I talked to Mack a lot about this actually, because I think it is really fascinating, because it's always fun to explore people's doubts, regrets,

what they might have done differently. One thing that with Mac, he was not unduly burdened by doubt. Like most of us are crippled by doubt all the time. That was not Mac. I mean, maybe he felt it occasionally, but he never showed it to me. When I asked him, did he ever think this was going to become as big as it was, he was like, yes, obviously it's a great idea. Great ideas become big. Obviously, it would happen. But I don't think he ever regretted not staying at Wells Fargo because at his heart, I think he loves starting new companies, doing new things. And the crazy thing is like Mac had a huge post Wells Fargo career as well.

And, you know, those are very successful things. Like some of the engine that's at the heart of Moody's was something he founded. An alternative credit manager, systematic credit manager called DCI was acquired by Blackstone a few years ago. He runs a very successful vineyard and restaurant out in Sonoma, but he always liked new things and I don't think he was ever going to be the guy that would have turned Wells Fargo, Wells Fargo investment advisors into what it is today. You need different types of CEOs, different types of executives that like accompanies lifespan and I think he's very smart to recognize that he loved doing stuff for the first

time, not necessarily grow it into this kind of empire of investing. I think it's also important to point out that we now think of indexing as this dominant style of investing and of course it is, but most of that has taken place in the last 10 years. It's not that Vanguard wasn't large, it was, but it wasn't quite as dominant and as well known. Just by one name, people hear the word Vanguard and they associate it with a gigantic asset manager 15 years ago.

I'm not sure if they would have. 20 years ago, I'm not sure if they would have 20 years ago. I'm not sure if they would have. It certainly didn't have the renown of some of the bigger firms on Wall Street. And there was really nothing sexy about it. So it's I suppose, uh, Matt got to watch late in his life, this evolution where eventually almost the whole world came around to this idea that he had had in the late 1960s, early 1970s. That's a pretty remarkable way to spend the later years in your life, to see everyone agree with you. Yeah. I mean, I can't even get my own family to agree with me. So,

seeing the whole world come over to the way you think. Uh, it must be a pretty magical thing. And I, I'm pretty sure he took a lot of quiet satisfaction out of that. Given that, like you say, these guys were not popular when they started in the seventies. They were not popular in the eighties. They're not popular in the nineties. And frankly, they're not even popular today, even though they've clearly won the war, basically, it's now it's just a question of like, how total is their victory going to be?

Yeah, I think that's right. I would agree with that take. Are there any other Mack McQuowns out there that maybe haven't gotten their due, but based on the research that you did for your book, have been really important to this investing movement that you think are worth mentioning now? Well, I do like when you bring Dean LeBaron and Rex Sinkfield up, just because I think they didn't get there first. In my view, Mack is the man, but Rex and Dean are incredible people.

They have an incredible backstory and have had incredible careers after what they did as well. So I think that is always fun. I do sometimes think, you know, the quiet, boring executive sometimes gets overshadowed by their more imperial founder. So for example, at Vanguard, when I dug into the history of Vanguard, obviously, Jack, Jack Bogle was, you know, Titan. Not just in finance, but I'd say in industry in general. But the guy that actually kind of made Vanguard what we know today was his deputy, Jack Brennan. Sure.

And they eventually had a horrible falling out. But like everybody I talked to said, like, Jack Brennan was like a world class CEO, the best CEO you've never heard of. He could never have founded the company. He couldn't have, couldn't have innovated. He couldn't have sold it in the way that Jack Bogle did. But Jack Bogle couldn't run a giant company. That's why the end Vanguard actually rather brusquely Albert him aside to put Brennan in the CEO job. So yeah, Brennan I think sometimes doesn't get his full dues. So while I have you, I think there's more to be said on Vanguard in 2024 heading into 2025.

So you've watched, as the entire industry has watched, a changing of the guard, so to speak, as a new CEO at Vanguard. I think he is a figure that is deliberately now in place to bring about change, which is probably different from the last time they named the new CEO, where maybe they were looking for continuity. Tell us a little bit about your observation of maybe some change to come at Vanguard. Yeah, that was fascinating. And I don't really have my arms fully around exactly what it's going to mean for Vanguard, but it is a very clear change move.

I mean, this is a company that like for a long period, like everybody who was the CEO or senior there had at some point been a personal assistant to Jack Bogle. Like his spirit is like it's embedded in the walls, but they'd all basically kind of assisted for him at some point. It was like a, a rite of, of passage for any sort of young buck that they had high hopes for and going from that to Salim Ramji, like a former McKinsey consultant, a former BlackRock guy. Uh, that was, yeah, that's a revolution.

And I don't think we can underestimate, you know, how bigger change that could be. But I think the board has been very strategic at Vanguard, impressively so, about knowing when they need something different in the CEO job. So for example, the shift from Bogle to Brennan and Brennan for McNabb, they've all brought different focuses and different things to the job. And then they've quietly, very professionally stepped aside and let the next person take over. Um, I mean, you know,

And this person comes in and then this person, uh, Salim Ramji comes in. Um, again, that pedigree McKinsey to BlackRock to Vanguard. It's very un-Vanguardian to the observers of this company and the users and the clients. There was some sense during the final years of the Tim Buckley tenure that he did not pay significant amounts of attention and or respect to the professional user of Vanguard funds, the financial advisor. And there was definitely some friction there, you know, low boil friction, nothing crazy. The other thing was that there was talk that Buckley should have paid more attention to

the technology and the service. And I'm guessing those are the number one and two things that the board at Vanguard or whomever was on the search committee had hoped that Ramji would be able to remedy. Yeah. I mean, Buckley, I think knew this. The thing is that's fascinating with Vanguard is technology problems have dogged them since the 80ies. I talked to people that worked in like in the black Monday crash of 87, who said that, you know, when the phone rang, Vanguard nearly didn't answer it. It was, it was a very bad period for them and they, they did well

investment wise, but just as you know, holding the hands of clients and helping them are being available, it didn't really work. And I think they've struggled with it. This is not a new thing. And I think actually getting somebody external in is a way of really shaking this up and, and, and recognizing that this is like, we've talked about this for decades now, and it's just getting worse rather than better. So we need something new here.

And clearly like, he's a very impressive guy. And I've talked to people I've, when he was impressive guy. And I've talked to people when he was a Black Rock, I've talked to people who work with him that he's very efficient and very smart. And basically I think this is gonna be his main job. Yeah, I was gonna say every business, Wall Street business or otherwise is faced with the same triangle.

Like you can have it fast or you can have it cheap or you can have it highest quality, pick any two. So if you're Vanguard, I think they would argue we are fast and efficient, we are cheap and we are the highest quality product. Of course, everyone would make that case for themselves. But Vanguard does seem as though they're going to have to make a decision. If they're going to step up, let's say the quality part is on the,

the efficiency and the speed is like the service. If they're going to step that up, they might not be able to continue to make the products as cheap as they have. Like it seems like there's a point at which they're going to have to make a choice. Yeah. Well, I think that the point that you raised that there's some of the more professional users have been unhappy with Vanguard is a good one. choice. Yeah, well, I think that the point that you raise that there's some of the more professional users have been unhappy with Vanguard is a good one. And actually, it's the most perplexing because that can be fixed. Like the IT stuff is hard, like you're essentially trying to fix a jumbo

jet whilst it's in the air, right? You can't take down all of Vanguard and spend a few months rebuilding it from scratch. You just can't do that. So you're always iterating. But when it comes to this kind of focus, this idea that they haven't been, not aggressive, because that's not necessarily in their culture, but responsive and helpful to kind of some of the core users, I think that's been a focus issue. And they can do all of this.

The dirty secret is that Vanguard is of course very profitable. I mean, they talk about like as if they are doing this for peanuts for people, as a charity. They speak as if what they do is a mission and in many ways it is, and that is very part of their culture. But like, you know, Tim Buckley and the other guys, they all, they can put food on the table, right? They're doing fine. The company is very profitable, but they kind of got a little food on the table. They're doing fine. The company is very profitable, but they kind of got a little bit flabby.

They've tried to do lots of things. They've retrenched in certain areas like Asia. They made a Tilted Asia in China, and they kind of pulled back a little bit from that. And I think they realized that basically getting the customer service, the tech, these are just like foundational things. And the age when they could just rely on just being cheap.

I mean, still working for them. They're still getting massive inflows. But I think they realize. They'll be fine. I think they were among the biggest gatherers of assets this year yet again. And I don't think anyone's worried. I do think there was a sense amongst people

who sit in my seat, the independent wealth channel. We had been championing Vanguard and utilizing Vanguard products. And Tim Buckley said, you see what we just did to asset management? We're about to do the same thing to financial advice. And all the RIA said, oh, okay, no problem. And called their Black Rock wholesaler. And there was certainly a sense that, Robin, we're going to have to leave it there. But I wanted to I wanted to just say thank you so much for coming on and telling us about Mack McQuaun and his contribution to it, to what is now the most popular investing strategy in the world.

It's a it's a really great story. And you told it so lovingly and personally. And I really appreciated reading it and I wanted my audience to be able to hear directly from you. So thank you so much for doing that. No, no, thanks for having me on. It's a real honor, Josh. Absolutely. And we'd love to have you back. Everyone follow Robin Wigglesworth on Twitter and LinkedIn and the FT AlphaVille and all the usual places. And we will talk to you soon.

Hey everybody, it's time for an all new edition of What Are Your Thoughts? My name is Downtown Josh Brown with me as always, my co-host, Michael Batnick. Michael say hello to everyone. Hello everyone and everybody. Let's tell people where we are. Where are we exactly? You look like you're like, you've got a blue hue in the background. We're in, that's because we're in a spring state.

So it's sort of like a little blue, a little red. We're in Pennsylvania. That's where we are. Yeah, we're in Taxylvania, which is the official headquarters of RWM Tax. We launched a tax business under the umbrella of Ritholtz Wealth Management, and that tax business has now grown to serve over 500 families, and we gave them an official headquarters. It's in Ambler, Pennsylvania, which is about 16 miles north of Center City,

Philadelphia, and feeling pretty good seeing the town for the first time. It's pretty nice. I feel great. Very cute little neighborhood. It's so cute. All right. So we have a sponsor tonight before we get into the meat of what we're going to do, so to speak.

I want to tell you guys about something I'm doing with YCharts that you will be able to attend. I'll be joining YCharts that you will be able to attend. I'll be joining YCharts CEO, Sean Brown, on December 3rd. We're gonna have a discussion on the biggest trends of the year and everything happening as we coast into 2025. We'll be talking about a lot of topics that are super relevant to advisors,

actionable takeaways on all of the things that impact client portfolios. We'll talk about AI, direct indexing, crypto. And I wanna remind people, your YCharts professional subscription is waiting for you at YCharts, and you will get 20% off if it's your initial subscription. Just head over to, what is the,

it's, I don't know, it's a whole long webinar. Just click the link in the description and- Yeah, just click the link. Click the link. Tell them why short sent you. Click the link. All right, so I think you're starting us off this week. What do you got?

I am, you know what's funny? There was a Fed meeting last week, like one that actually- Oh, was there? They did something, they lowered rates, and sort of went under the radar. I think there was something that maybe dominated the storylines last week, but they did lower rates.

Yeah. Do you, does it even feel like they did though? Because bond yields spent the week basically rising, knowing that they were going to lower rates and maybe that was one of the biggest post-election surprises, the degree to which I think the 10-year rallied and it doesn't feel like a week where we just got a rate cut. Not just the 10-year because that would be like, all right, there's economic growth and inflation expectations building and like all that good stuff. The two-year, why is it two-year ripping?

Why is it two-year ripping? The dollar ripped and it didn't have the feel of a post-rate cut environment Thursday. Oh, here's one of the weird things. They had the Fed decision on Thursday instead of Wednesday to accommodate the election which took place Tuesday. And that FOMC meeting is a two-day event. So maybe that threw me off a little bit. But it just, hey, we got 25 basis points.

I don't think anyone thought it would be anything otherwise. And it was like a little bit of a non-event, I guess. We spent all this time trying to figure out how many cuts, what month the cut's going to come. Then they came and everyone yawned because there was a much bigger thing happening. And maybe that's like a nice takeaway for investors. These things out on the horizon that you think are going to be these massive catalysts, sometimes they become an afterthought.

And that's what I think the FOMC meeting this week was. We had the first rate cut in September. We had the second one last week. And yet, money market accounts or money that's invested in cash, whatever, keeps going higher. Yeah. Right? Yeah. Almost as though they're not cutting weights at all.

Hey, let's not bury the lead, though. What else happened this week? All right. So another thing that happened was the S&P 500, I don't know quietly or not, hit 6,000. Yeah. And I was reminded, or I reminded myself, hey, what were the lows in March 2020?

I don't remember. So I went to the chart and I pulled it up. I said, it's crazy. Holy shit. The lows in 2020 for the S&P were 2,200. So we're up like 2 and 1 half x. And for a while, there was a lot of, not a lot, there was people like, hey, is this of not a lot there's people like hey

Is this a generational buying opportunity? Is this a generational laws? Will we ever see the March 2020 laws again? And You know that was up for debate in it now at this point. I would say god. I hope not This is one of the things that you say all the time that the drawdowns are temporary, but the gains are permanent I I could envision a scenario where we have a very bad bear market, of course. I can't envision a scenario that's so bad that we go back to 2000 on the S&P, which of course, I wouldn't say it's not possible. I'm just saying it's really hard to picture that happening. And that's not that long ago.

It's only four years ago, but we've put so much distance between there and here. It seems inconceivable that we would have an event where the earnings picture deteriorates to the point where people want to sell stocks at S&P 2000. Well, so it would take a larger decline than the GFC to get there. So at 2200, we're at 6000. That's, yeah, 63%. I guess anything's possible, but what would have to happen for the market to fall 63%, I shut out to even think. And are you ready now to lay out your timeline

for S&P 7000? All right, so here's how we get there. Now, I'm only teasing. But so one of the, so let's try to pilot,000. All right. So here's, so here's my, here's how we get there. Now I'm only teasing, but so one of the social, so let's try to pilot. Let's try it on. Uh, all right. Uh, mint and it keeps, it keeps growing. So I, I think I made this chart for the first time. I don't know, 17, maybe 18.

And one of the things that I did not include on this chart. So for people that are listening and not watching, it's, it's a chart of the S and P 500 going back to the bottom in 2009. And we're up, I don't know. Well, I do know. What? The chart is called, there's always a reason to sell. So we're up almost tenfold, almost tenfold since the bottom 2009. And what I did was I put all of these different political, geopolitical, stock market events, like exogenous events, anything in here that would have caused investors to hit the sell button or get defensive or worry about the future. This is the wall of worry right here. And one thing that I had chart could add to this that wasn't there at the time was Apple hitting a trillion dollars.

Chart off, please. That would have been like the coup de grace. Oh, as a reason to sell. Yeah, dude, it was. It literally was. There was tons of articles about Apple hitting a trillion. Is it sustainable? How much trees don't go to the sky? How many times was that written at the time?

And now it has been brought to my attention, for myself, that there are now nine trillion dollar companies in the S&P 500. Nine chart table on. So we've got Nvidia at three and a half trillion, Apple and Microsoft just behind. And when I say just behind, oh, Microsoft's only $400 billion behind. That could close tomorrow. You've got, oh, you know what? My bad.

There's, all right, there's eight companies because Google is twice here. million behind that could close tomorrow. You've got, oh, you know what? My bad. There's eight companies because Google is twice here. So Google, Amazon, Meta, Tesla, and Berkshire. So we've got eight companies that are worth a trillion dollars. And one of the lessons that I've learned over the last 15 years, and maybe this is the resulting, but I don't think it is, is using market cap in a vacuum as a reason to think something or to do something is a really bad idea.

What should be the denominator of looking at a stock's market cap? Should it be the whole stock market? Growth, earnings? What I'm saying, there's a way to use the dollar amount of a market cap to tell a story of the current conditions of the market, but it's gotta be the dollar amount of the market cap as a percentage of something, or as a function of something. So my point is, if you had just said,

oh my God, Apple's a trillion dollars, how much bigger can it get? Well, what are its revenues? Exactly, exactly. Well, what's right? What are the fundamentals of the business? Is a trillion dollars like somebody smoking crack in the corner and just hitting the buy button or is there a reason why it's a trillion?

And now, of course, it's almost four trillion. Look, I distinctly remember when Apple first became a trillion and Microsoft might have beat them to it. I forget. They were neck and neck. Nvidia had happened like yesterday. I think Nvidia added $2 trillion in like a year. But once one company does it, then it shifts the, they call it the Overton window. It enlargens the Overton window, which is like the defined area in which conversations can take place.

So what once seemed inconceivable to have a trillion-dollar publicly traded company, now not only is it not inconceivable, but if you ask most investors, name five that aren't on this list that go to a trillion. They could all tell you some names. And now, look, we have an insurance company worth a trillion dollars, Berkshire Hathaway. It's not AI. They own a lot of Apple, but nobody would describe that as a tech giant. So not only do we have technology companies worth a trillion, we have communication services and we have insurance. It's not inconceivable to me that we could see Walmart like someday be a trillion and then we'll have a pure retailer

So this is this is the new this is the new normal is the way I would phrase it. Do you know? Let me ask you to take a guess. What do you think is a ninth place? Or what's the ninth company the company that's closest to a trillion, but not quite and I have the table again You're not gonna guess but yeah John, throw the table up. I'm not going to guess. If you do, I would be very impressed. OK. I'm probably not going to guess.

You're not going to guess. OK, go. So it's Broadcom. Yeah, Broadcom is $ 818 billion right behind that is Right behind that is either I Lily and then right behind that is Walmart and JP Morgan. So Okay, that's right. Can I say one of the remarkable things about Broadcom as a result of several mergers and I guess Inertia the ticker symbol is it's a VGO. It's weird because it was something called a Vago. And I bet you a hundred people on the street in Times Square could tell you

in videos ticker symbol like eight, like 60 of them. I bet you zero of them could tell you a broadcom's ticker symbol or B, what does Broadcom the company do? No chance. They would think it's a broadband. They would think it's like if they guessed, they would think it's some kind of like a broadband company or something. So here we are. Will any other countries have trillion dollar companies in our lifetime?

Oh, yeah. Like, okay our lifetime. Oh yeah. Like, okay, go. ByteDance. ByteDance, probably the close, probably, but ByteDance is not even public yet. It's not gonna be a trillion before it comes public. Tencent, I would say Tencent, which owns a big chunk of ByteDance would be my guess.

And then maybe, I don't know, is it nuts to say LVMH? Could somebody get there? Is that crazy? That seems implausible, where is it now? But everything would get there, I don't know if I give it enough time. You know, 20 years ago I would have guessed like Toyota or something.

I would never say that now. No, you would have guessed Walmart. Walmart or Exxon. But 20 years ago I would have, no way, trillion dollars. Are you kidding me? Because a trillion dollars then is not the same thing as a trillion dollars now. Is that why? Or we've just never had businesses this large.

Well, it's two things. Number one is a trillion dollars is an inconceivable amount of money. Number two, your brain, and I've said this before, your brain can't process exponential growth or compound interest. Can we spend a second on the distance between S&P 5000 and 6000 being much smaller than the distance between 4000 and 5000? And how like this is one of the benefits to long-term investors is that to get to the next milestone happens faster usually because the percentage distance between gets smaller and smaller. So from 6 to 7 is much smaller than from 2,000 to 4,000, which is a double.

And we've seen that math work with the Dow. I feel like the Dow crossed 30,000 and went straight to 43,000. There was really not a lot of time elapsing in between. But it took forever to get from 10 to 20. So when people say, oh, let me guess your target is S&P 7,000, it's not that far away. It becomes much more conceivable as the numbers go up just mathematically. And people have to adjust the way they think about the distance between these milestones now, which is fun.

I'm a big fan of milestones. All right. Let's keep moving. Where are we going next? What do I have here? So one of the big surprises from the election is not only did Trump win the White House, but we now have a unified government. And that's pretty rare.

It does happen. But we have one party in control of not only the White House, but House of Representatives and the Senate. And Jeff DeGraaff at RenMack basically said all the stuff that you've heard about how divided governments and gridlock is good for the stock market, that's just chatter. Here's what it actually looks like. And we have a great chart. So what you can see here, the red line is a composite of what the stock market does in the 200 or so trading days after an election featuring a unified Republican government.

And it's not like we have a thousand samples of this, but we certainly have enough to be able to say this line doesn't look all that much different from the unified blue line when the Democrats have all three houses, which of course is also rare. Both lines seem to have done better than a divided government where the White House is not controlled by the same party that controls Congress. What's your takeaway when you look at this chart? I think when we have a unified government, everyone's for the most part on the same team,

wrong in the same direction, which sounds kind of f**ked up to say because we all are on the same team, but it makes it a lot easier to get policies and agendas done. And the market seems to respond to that positively. Yeah, but there's that old canard that like the stock market like Squidlock like the stock market would prefer nothing change. That's not well, not according to this case in this case, not according to that chart. That's number one. Now, some people would say, no, you have to look at the whole four years. Okay, fine. But the other aspect of this is when tax cuts are on the line, I think the market is pretty okay with a unified Republican government that wants to extend those tax cuts.

Well, tell me the last time we had a united government or a unified government where inflation was falling, the Fed was cutting and the S&P was up 25% on the year at zero times. It's a very, very unique set of circumstances. I completely agree with you. I wanted to show you this thing about Tunis. Did he tweet this or retweet it? All right. So John Authors did a piece for Bloomberg and it's about how the Trump rally is not such a big deal. And Eric says, got to appreciate the mental gymnastics to try and minimize the post-election stock market rally. Here's one saying that 100 years ago, Herbert Hoover, 1928, there was a rally just as good

as this one so everyone can just chill. I understand the drive that would lead a journalist to say, no big deal. It's a very big deal. The way this market responded, both going into the election and then as a result of it, is one for the ages. And I think this is going to change all of the way investors think about future elections. I don't think we're going to have to be doing so much work in advance to calm people down. I think people are going to start looking at elections as buying opportunities.

What do you think? No, I disagree. First of all, that article is absurd. This is way more like the election of 1812 than 1928. No, I don't think so. That was what I was thinking too. It reminded me more of the James Madison election. I think that every four years, people get nervous that whoever they didn't vote for

is going to tank the market. I don't see anything changing that ever. Really? Certainly not just the results of one election. But I have so much, but I now am armed with data from the last five elections that say you want to be long for the election. Yeah, because data change is how people behave. No, it doesn't matter. that say you want to be long for the election. I'm just saying one of the things we pointed out

on a previous show or maybe Callie did this in one of her pieces, even during the non-concession moment after the last election, stocks were fine. We had a 25% rally or a 12% rally in the period of time because you had other news going on. You had a COVID vaccine. I'm just saying other things take place on the heels of the election. Had nothing to do with the election, as you mentioned. And people, listen, people are not influenced by data. I mean, you know this better than anyone. It's feelings. Well, one of the, so I was talking, people are not influenced by data. Okay? I mean, you know this better than anyone. It's feelings. Well, one of the, so I was talking to Scott Gallo yesterday for their show. I don't know when it's coming out, but one of the conversations was like, the two most

important variables for stocks are earnings and interest rates. Both are going in the right direction and have been all year for investors. If you are worried about the earnings piece of the puzzle, the extension of tax cuts into 2026 would definitely have made you feel better, like literally on a dime. Let me ask you this. What's more likely from November 12th until year end? We've got another seven trading weeks-ish. Market is 10% higher by the end of the year or 10% lower by the end of the year from today. My guess would be higher.

Yeah, not close. I would say like, I don't know, if I had to put one versus the other, like the way that Polly market does it, I would say 75 cents on yes, something like that. Because people, you have to chase. And I mean, please don't take that as you, the listener. Michael is giving you, the listener, permission to chase away. No, in fact, I would give the opposite advice. But professional investors that have been trailing their benchmarks or have been under-invested,

people aren't taking, it's not profit taking right now. It's an overwhelming amount of demand for stocks. Yeah, I think there's a, I think, look, we had a melt up last year. We sort of had a melt up in 2022, which was a bear market. We had one anyway. It started in October and gained ground into the year end. Like by the end of the year, stocks were great. Melt up seems likely to me.

I could be wrong. I don't know. But if I had to bet, if you put a gun to my head, I don't know what would be the case for a 10% drop, just like profit taking, I suppose that's possible. Yeah, that seems unlikely. Yeah, anything's possible. Anything's possible. All right, I wanted to just mention,

it looks like this is now official. So depending on when you watch or listen to this, but it looks like we know who the secretary of the treasury is going to be. It's a gentleman named Scott Besant. Peter Schiff. Oh, okay. Sorry. No, not this time. Maybe in term three. Scott is the founder and CEO of the Key Square Group, and he had already served as an economic advisor during the Trump campaign, and he raised a ton of money for the campaign. He was a fundraiser, and that was the path that Steve Mnuchin took to get into the secretary of the Treasury position. So Besant recently met with Trump to discuss potential role in the administration.

And now what I am seeing on the news wires is it's all but done. I suppose he went down to Mar-a-Lago and it seems like people are saying this is in the back. One of the other candidates for this was another hedge fund manager that our viewers will be acquainted with, John Paulson. And that's a thing that could have happened. I don't know that that's a better job than Paulson's job right now. He's got like a young, hot influencer girlfriend. He's got billions of dollars. He doesn't really have that much to worry about. He can raise money for candidates and kind of just be himself. That seems like a better job than all the scrutiny that comes along with being in that seat. But

sometimes people want to serve their country and they want the prestige that comes along with that. One of the other people that had been mentioned was Howard Lutnick from Canter, Fitzgerald, who is a huge name on Wall Street. The public became familiar with Howard because his firm was almost decimated during the 9-11 attacks. And he was kind of like a heroic figure. He helped pick up the pieces. He was at all the funerals.

He raised a whole bunch of money for the families affected. And he was very involved with the Trump transition team. But it looks like they gave it to Scott Bessant. And I suppose at some point today, we'll get official word of that nomination. Any thoughts on that one? No, nothing more than what you laid out. I'm not familiar with these people. I wanted to hear your thoughts on the choice that's in the air right now for SEC chairman. It's increasingly looking likely that Trump's going to pick Dan Gallagher.

Dan Gallagher already served as an SEC commissioner, and he is the chief legal compliance and corporate affairs officer at Robinhood Markets. He's also been a very outspoken critic of the current SEC chair, Gary Gensler. This one would be quite a boomerang, like quite a 180 in terms of the country's direction on crypto if Dan Gallagher gets the job. What do you think about this? Yeah, this is the big one. I saw somebody tweet, I can't remember, I would love to give credit to whoever did it, but it was something like Coinbase has added five times, 10 times, whatever the number was, its last 12-month revenue in market cap or earnings

or something like that. Which just goes to show what an overhang the regulatory environment has been, not just on Coinbase, but anything even related to crypto. This is the big one. We'll talk about this in a minute, but the move in crypto markets is something to behold. This is one of the aspects of the current setup that I'm so bullish about for 2025. If we're no longer worried about tax cuts being extended, and now we're more focused from a policy perspective on deregulation, having people like Dan Gallagher and former

hedge fund managers and people that are coming from that world. I think Gary Cohen probably comes back, it sounds like, as an economic advisor directly to the White House, like having Kudlow back in the mix, having people that are stridently pro markets and pro business. We are way off on an annual basis on M&A. We are way off on IPOs. Yeah, the only real capital formation we've seen lately is money going into private markets, which I'm not saying is bad, but there's a ton of capital formation happening in private credit, private equity, they're sitting on trillions of dollars. They're not getting great exits these days on their investments, which is why they're all launching continuation funds, but that's a story for another day. But we've seen capital formation in crypto, believe it or not. But what we really need is another thousand companies coming public over the next four years that are

high quality, profitable companies. And we want people to fall in love with the idea of the markets once again. These people sound like the right people if that's the direction Trump wants to go, which I assume he does. I like it, to be honest with you. I would say what's the bear case? It's either going to be a policy mistake a policy mistake, maybe tariffs, sending earnings or whatever. But to your point, he's surrounding himself with people who are very much have their eye

and ears to asset prices. And they're not going to be surprised by the market's reaction to some of the policies. So I guess valuations maybe, but there needs to be, there needs to, I think Nicole's tweet, math is not an edge, okay? We all know that the forward PE, the trail in PE of stocks is towards the upper end of the range. We all know that.

But absent some sort of shift in sentiment in this or that, that's not a bear case. There needs to be something that knocks investors off their current sentiment trajectory and what that is going to be, who knows? But yeah, the setup is good. Yeah. There's a couple other names for SEC Commish. One of them is Jay Clayton coming back, which I suppose is also possible. He's pro crypto.

Paul Atkins is another former SEC commissioner currently being considered, worked with Trump in 2016 on the transition team. And he is somebody that was pro Bitcoin. Mark Udea, or Ueda, I don't know how to pronounce that, another current SEC commissioner. He's held several roles at the SEC. And then Clayton. So all of the names in consideration have one thing in common. They don't think Bitcoin is a security.

Well, I spoke about this with Ben on Animal Spirit Smart, but I don't want to take for granted that everybody that listens to that is going to be listening to this and vice versa. So what I said with Ben is that the Bitcoin is one and it sounds so implausible 10 years ago. Like I was laughing 10 years ago, hand up. Five years ago, maybe not as much. Well, after FTX, the industry seemed dead.

But listen, you might not like it, maybe you do like it, but you gotta give it up. And if you were one of these people who's saying that this is a scam, it's worthless, like please stop. It's tired, it's over, it doesn't sound intelligent, they won. And all credit to them, they created a digital asset, digital currency, whatever you want to call it, and they f**king won. And so credit to them.

I would say two things could be true. You could be right that crypto is filled with scams. One of the things that we've said in the last few years is, yes, that's true, but so were the railroads in the 1840s. They had a massive bubble in fake railroads being funded and securities being sold all over the country, worthless pieces of paper for projects that didn't really exist. That's 200 years ago, we had this enormous bubble in fraud related to railroad securities. They did it with the canals in the 1820s. They did it in the 1700s, if you don't believe me. Google John Law, who was a Scotsman that managed to scam the entirety of Paris.

This is not, here's my point, the presence of huge amounts of fraud and pickpockets and thieves and grifters is not evidence that there's nothing else happening. Like it's just one of those things that comes along with technological revolution. The canals were a revolution. They enabled us to move very heavy things all over from Canada through upstate New York down into the cities.

Could not have built America without them. The railroads obviously were a technological innovation. And yet you had absolute animals robbing people left and right during the development of both of those technologies. We saw tons of fraud around dot com stuff 25 years ago. And in this case, yes, it's not true that everybody working in crypto is a scammer. It is true that every scammer on earth is in some way involved in crypto. You have to get over that.

Of course they gravitate toward it. People are making billions and billions of dollars. Why wouldn't there be scammers all over the place? So it's hard, but it's hard to separate those two things. And now we've had such an incredible 180 from the bottom for crypto, which I think was in early 2023. It's crazy. It's less than two years later. It looked like the industry would be outlawed. And now it looks like the industry is at the center of the universe. The industry is in the White House. They've put people

in Senate seats. Go ask Sherrod Brown. So it's a huge turn of events. And Michael, your take is absolutely right. No matter what you think or how you feel, Bitcoin won. Yeah. It's magnificent maniacs. All right. So more on this. All right.

So it's, there is, this is money making time. Sentiment is heating up. Some things are going crazy. We've got some crazy speculative behavior. We're back, baby. It feels like the last one was just a couple of months ago. It was, in fact, three years ago. But I guess we're doing it again.

So we're going to run through some charts. John, if you please. All right. Bespoke tweeted, the Destiny Tech 100 closed and fund. It's 37% SpaceX. There's a bunch of other private companies in here. It's up 170% since Tuesday's close,

putting it more than 450% above Nav. So you've got, yeah, we're so bad. So you've got that going on. What do I have next? Oh, the IPO. Wait, can you put that back up. Can you put that back up? What is this? This is this invests in venture capital companies, including SpaceX, and people are paying a huge premium before the election to be in this to those people now look less stupid for having done so? I would say yes. Yes, so this is the portfolio. It's 37% give or take SpaceX, 9% Axiom Space,

I'm not familiar with that one, Revolut, Epic Games. For the listener though, this is effectively bought and sold like a stock. It's a closed end fund, it trades on an exchange. It's not like a mutual fund that prices at four o'clock. You can buy it all day, it's more like an ETF. It was 15 and now it's 30 in a week because it has a liquid fund that enables people

to buy into a small position in SpaceX. Stripe is in here. OpenAI is in here. Yeah. This is, I mean, you're right. We're so back. The shades of 2021. What are the next chart?

Yeah, where are we going next? Capital markets heating up. Okay, so- This is the IPOs. Yeah, so the IPO ETF is at a multi-year high. This thing's been, just been in a really rough bear market for a long time since the peak in 2021. This should be a huge tailwind for capital market formation for IPOs.

There's no reason to think that we're not going to see them coming back in 2025. Now, we thought that there would be more in the back of 2024, but it seems like we're on track for more of this. RAOUL PAL, So, I'm playing this through JP Morgan stock and through NASDAQ stocks, NDAQ, which I think just hit an all-time high or multi-year high over the last week or so. I think ICE also works, the owner of the New York Stock Exchange. There was a while where the best publicly traded exchanges like the stocks were the ones that benefited from bond market activity and volatility like the CME. I think that now switches.

I think the stock market exchanges, which by the way are all very much involved in crypto as well, those are the stocks. The other big trade on capital markets heating up, there are probably 10 publicly traded private equity companies. They benefit from a strong IPO market because it enables them to sell their holdings at premiums rewarding shareholders. There are also publicly traded investment banks. But also for that, it gives the investors some liquidity back that they could then recycle

back into these names or to these areas of the market. 100%. Another name to consider is Jefferies Financial Group, which is run by Dick Handler. This used to be called Lucadia, if people remember ticker L-U-K, they used to refer to it as Baby Berkshire, now it's J-E-F, they acquired Jefferies, but Jefferies basically took control of it.

This is like a solid kind of middle to upper market investment bank. Like those types of stocks that people, you know, casual investors don't really know that they even exist. There's like two handfuls of those, let's say. And those are the stocks that are going to work in an environment where the IPO market finally not even rallies, but like just comes back to historical norms. It's been really a drought. What else do we have a chart of? One of the biggest winners of this is Tesla. Over the last four sessions, they added,

John, chart on please. What's the number? Next chart. They added 39%. This was as of yesterday's close in the four days since the election, which seems, I don't know, seems a bit much, seems a bit much. The last time they did this was at the bottom in 2020. And needless to say, the stock is a lot bigger now than it was back then. But that's $316 billion in market cap since the election. So it's all one trade. It's all Trump. It's all risk on and I guess it's all good for now. Speaking of Trump, so this is this from

Matt Levine, the Trump trade. Who's this from? Yeah, Matt Levine. Okay. DJT. So that is basically the holding company for Truth Social. They announced earnings, third quarter earnings yesterday. It lost 19.2. Is that in the Dow Jones yet? Have they announced that yet? It lost $19.2 million on one. They reported on election night, Michael. Do you know that?

I did, that's hilarious. So the revenue's down 6% year over year. Lost $19 million on $1 million of revenue. And Matt Levine asked the question, what makes it worth more than $7 billion? I could think of at least five possible answers. And again, a million dollars in revenue, people. Market cap is worth $7 billion.

Listen. I would say this gets merged into Twitter in the next 12 months. Yeah, that's what people have been speculating. That seems plausible to me. So the one that resonated with me the most in terms of the five reasons why it's worth $7 billion, Matt says it's pure meme stock. DJT goes up based on Donald Trump's power and newsworthiness, and those are up, so the stock is up.

DJT stock was a bet that Trump would be elected president, and he was elected president, so now the bet pays off. And this can continue indefinitely so that Donald Trump as the president will be enough for $7 billion or so of market cap for the foreseeable future. This is not a very sophisticated financial theory, but this far into the meme stock era, I'm sorry, but this far into the meme stock era, it strikes me as totally plausible.

And Matt's right, like that's it. Listen, the revenues don't matter. This is not 1984 or 1956, it's story time. And the presence of the United States. I actually disagree. I think revenues will matter and they're going to get revenues. Think about how many people are now going to want to advertise on this platform to curry favor with the White House for some other purpose.

They almost, I would imagine the salespeople selling ad placement on Truth Social aren't even sharing data about how many users does the platform have. I don't know, like a lot. Good enough. We'll take $10 million worth of ads for Q2 and please give the president our best wishes. You're telling me that's not what's about to happen here? That was one of his five theories.

That's my only theory. Well, I think it's not just one thing. The meme stock thing is right. happened here? That was one of his five theories. That's my only theory. And actually, well, I think it's not just one thing. I mean, the meme stock thing is right. The election's over. So nobody's buying it today for the election. They're buying it today because they understand that this is now the conduit to getting the White House's attention and or favor.

And listen, on MSNBC, they're going to lose their minds every night about this. But this company will have revenue by the end of the year or be merged into Twitter or both. That's what's coming. The stock opened at $44 on Wednesday morning after the election. It's now at 30. So yeah, Emirates, Emirates Air is going to place a, Emirates Air is going to place an ad campaign here.

Like, there's no way that people aren't already thinking of this as a way to boost their own standing in the eyes of the administration. Don't be surprised to see Tesla advertising here. Look, I don't think that it's a viable standalone company, but could it have more than a million dollars in revenue? Oh, hell yeah, it could. Oh, it's definitely going to. Don't fall out of your chair when that happens. So I started as a meme stock, and now it's a bet that people are going to want to please the emperor.

So altcoins are going nuts. This person on Twitter stat, adpunk9059 says, wow, peanut just listed on Binance. It's up 3.8x to $380 million. And this is, throw a dart. There's a million of these that are just going absolutely wild. What is this? Is this a fake coin based on the dead squirrel? Is that what this is? Peanut squirrel? Yeah, I don't know. What's the story with peanut squirrel? I tried to avoid it.

Don't tell me. I don't care. It's like the liberals murdered somebody's pet squirrel because it was against code to have a squirrel as a pet. Sure. Okay. Yeah, it's enough. So Eric Balchunas tweeted, the Bitcoin industrial complex, that's ETFs plus MicroStrategy plus

Bitcoin. So $38 billion in trading volume today. Throw this chart up, please, John. Lifetime records being set all over the place, including iBit, which did $4.5 billion, which points to a robust week of inflows. Just an insane day. It really deserves a name a la Valmageddon. So flows are going wild.

MicroStrategy, this was yesterday, I believe, or yesterday, again, from Bautrude, micro strategy with a record $12 billion in volume today, about six times what JP Morgan or GE traded just for some context. So yeah, we're back. We are rocking and rolling. Degen speculators, now is their time to shine and they are shining. The degenerate economy is really coming into its golden years. And we were on the air with Jason Zweig two weeks ago, and he said, it's not quite a mania. And I said, we're in the foothills of a mania. I think we're like, I think it's safe to say we have a mania on our hands. It hasn't really sucked in the American public to the same extent that the SPACs and shit

did three years ago, but we're not far. But you know why? Because everyone's just all in on Nvidia. Like they don't need anything else. Oh, that's an interesting point. Like why, why do you need peanut coin when Nvidia goes up 12% a week? You kind of, you kind of don't. That's an interesting-

That's an interesting- So I didn't throw this in the dock, but let me grab this. So Jeff Weininger tweeted, Nvidia's total value is $3.65 trillion, is within- dude, this is nuts- is within a trillion dollars of the total value of Japan's Nikkei 225 index, which itself is valued at 4.65 trillion. This is no small feat as Japan is the second largest stock market in the MSCI all country world index. Again, Nvidia is just a trillion dollars away from being worth more than the second largest

market in the world. So this is nuts. That sounds like something we're to look back on and say we should have known, but there have been so many of them. I know, I know. It's tough. It's tough. It's hard because how many of those have come and gone?

All right, we're going to switch gears. I want to talk about Fidelity. Waseem Breen wrote a really great piece for RAAbiz. Talk about Quiet giants. Fidelity is having an incredible year alongside the rest of the publicly traded markets. They're just making money all over the place. And so much time and so much attention has been spent on Schwab, given the merger and the fact that they're a public company and their stock price got caught up in the little mini bank panic in the spring of 2023, people just kind of stopped talking about Fidelity and maybe they shouldn't have.

So I just want to read you the headline in the first paragraph of this piece and then get your reaction. Fidelity investment surges past $15 trillion on its way to $16 trillion after its CEO made one big contrarian bet and two smaller plays that have the giant hopping. So basically, they added $800 billion per quarter on average in the first three quarters of this year and they've been very early to crypto, which I assume is now paying off. It's 9.2 trillion of administered assets and then another 5.8 trillion in discretionary assets.

So it's about a $15 trillion company as of September 30th. It started the year at 12.6. So if anyone's capitalizing on the market environment that we're in, Fidelity is one of those companies that undeniably is positioned beautifully for this. What are your thoughts? I wonder if Fidelity was publicly traded. Would it look? I think it would look different than Schwab.

It's not a bank. That's not what I was going to say. I think that Fidelity would be at an all-time high. I think it would look different than Schwab. It's not a bank. That's not what I was going to say. I think that Fidelity would be at an all-time high. I think it would look more like BlackRock. I was going to say, I think the profile of how the stock trades would look more like an asset manager than like a bank broker, even though, of course, it is also a broker. But I think you're exactly right. The profit center of the firm is in things like 401k, asset management, fund business.

It's not really in executing trades. So we don't know, we don't, well, definitely not executing trades. We don't know because it's a private company. But if Schwab was getting, was it 50 or 60% of its earnings was through cash, through the bank? Yeah.

I would guess Fidelity was 20%. I'm making that up, obviously. Yeah. Did you know that Fidelity is hiring at an insane rate? It looks like 30, their headcount is up 30% on an annual basis. Think about how many financial companies have been doing layoffs. Fidelity is going the other way. That's the big contrarian bet. Between 2020 and 2023, they grew their headcount from 40,000 people to 74,000 people.

Insane, insane. Which is a net add of 12.5%, 27%, 19%, and 8.9% during each of those years. Where are they hiring these people from? Are these TD Ameritrade cast offs or? Swab? Yeah, I would guess that's what I mean. That's a big part of it. Throw up this infographic.

All right, so what jumps out to you? You know what, dude? We are Fidelity customers at Red Holtz Wealth Management. So full disclaimer, full disclosure, everything that we're saying should be viewed in light of the fact that we are customers, our client assets are both at Schwab and Fidelity. Okay, continue. So three and a half million daily average trades is up 35% year over year.

19.9 million digital engagement with unique individuals. It's a lot, it's a lot of people. It's up 70% year over year. Somebody said one out of four adults in the United States is a Fidelity customer. Who told us that? Was that Urien Timmer? I don't remember.

Yeah, probably. I think he said that. Yeah, yeah, yeah. But he said somebody told him that, so don't hold anybody to that. But if that, well, what's the number? 19.9 million customers interact with Fidelity, is that what it says?

Digital engagement. That's digital, so it's much bigger than that. But think of all the 401k holders. I definitely believe that that could be true. Why not? Listen to this. At its present rate, the number of daily average trades made through the brokerage trend at around 3.4 million will nearly match Q121.

So that was the peak. So we are so back. That was peak stupidity. So it looks like we are back. One of the other things that Fidelity did that was certainly a contrarian bet, all credit to them, it's worked out phenomenally well, is their embrace of digital assets. Of course, after the election, I'm sure they will lean harder into it, is my guess. Their Bitcoin ETF is $16 billion.

This has to be a top 10, maybe a top five ETF for them. And look at the flows into ETH, combination of flows and price appreciation. That is at $630 million. So it's one- I want to say one other nice thing about Fidelity just because it's notable and bears repeating. There's this idea that Robinhood is the only company appealing to young people and making use of social media. It simply isn't true. Fidelity has some stats here that I thought were really... First of all, I am on Reddit. Fidelity is very active on Reddit. There's a

subreddit, Fidelity, and there's like stuff going on there. In addition to which, this is back to RIA Biz, the firm has only begun publicly tracking its social media engagements in the last few years, but at an average of $681,000 a quarter, including a bumper $776,000 in Q2, the annual total will likely top $2.7 million or 23% more than in 2023. I don't know what they count as engagements. Is that like likes on their content or, I don't know, retweets? I'm not a thousand percent sure what they're tracking there, but they are going at it.

Similarly to Robinhood, which is no longer optional. If you're gonna be a brand that resonates with this generation, you need to be on their phones. There's nowhere else that you need to be. You can be sponsoring golf tournaments and that's nice, but you need to be on people's phones all the time. And they seem to have figured that part out. So I guess we'll end this by saying,

congrats to Fidelity. Is that the message here? Absolutely. Absolutely. Pretty cool. So okay. Ben Thompson wrote a piece on Elon through the lens of obviously his involvement in the election and specifically the part that I want to share is his thoughts on with the

benefit of hindsight, are we sure $44 billion was too high of a price for Twitter? So let me just read Ben. So forgive me. I'm just going to read him for a minute. He said, to say this is high risk is a massive understatement. Ever since Musk bought Twitter, he has been hit by an onslaught of judicial and administrative actions, including having his shareholder

approved pay package retroactively undone and being sued for SpaceX not employing refugees, even though as a national security entity, it can't. It seems likely of all of that would have gotten much worse had Trump lost. At the same time, one of the best ways to succeed is to go all in. This is one of the advantages startups have versus incumbents. They have nothing to lose. That Musk operated this way, given he has a lot to lose, is remarkable. It's also why this tweet is true.

And it's a tweet from Galloway Capital that says, historically, when Elon goes all in, he tends to win. Back to Ben. Ben says, Musk clearly knew the stakes. His celebratory tweet was short and sweet. Elon tweeted, game, set, and match. And then Ben ends it with saying, what is fascinating is how this fundamentally transforms

any attempt to evaluate the Twitter acquisition. From a business perspective, it's a massive failure and might always be. Musk paid too much for Twitter as it was, and in the intervening years, the flight of advertisers from the platform has made it worth even less. From a Musk, Inc. perspective, however, X played a pivotal role in ensuring that the incoming administration will do whatever Musk needs at the exact moment that SpaceX is gaining the capabilities to actually make a trip to Mars.

If only the FAA in particular will give him the freedom to do so. That alone is almost certainly worth 44 billion dollars to Musk. Okay, the only thing I would add to this that in any way contradicts any of that, so far so good, it's really really hard to stay in President Trump's good graces. We've seen him turn on people, jail people, threaten to kill people. So Elon is somebody that like the fundamental core of Elon Musk is somebody who cannot shut up. So good luck staying in Trump's good graces now that he doesn't need money to win another

election is one thing I would say. The second thing is how is this China situation going to be navigated? China is of supreme importance to Elon Musk. The Shanghai Gigafactory is his most important manufacturing center around the world, and he needs to sell cars in China. It's not like he could tell Trump, hey, tariff all this shit that BYD is making. It's not, it's just, so when the perception is

he is somebody who could pull up a chair to the desk in the Oval Office, but then the boss is tweeting anti-China stuff all over Twitter and the people negotiating the trade packages like Lighthizer come back and what's that maniac, the guy that went to jail, Peter, you know who I'm talking about? The big China hawk that was part of Trump's tariff negotiation team.

Oh, yeah, whatever. Whatever. These are not people that particularly care about Elon's business interests when they're negotiating with China. No, you're right. But just back up. Just back up to the point. It's a fly in the ointment for a Cinderella story.

Sure. Elon won. Elon won. Period. That's my point. That's my point. I'm just introducing one nuance here, which is China's really important to Elon, and it's really important to the Trump

administration for an opposite reason. It's the bet Noir. It's the scarecrow they set up in the field so they could set it on fire. What are the odds that Trump and Musk have a blow up falling out of the next four years? Is it a hundred percent? A hundred percent odds. It's unclear, by the way, it's unclear who's the aggressor in that, because these are two, you know, the movie free solo. Have you seen this movie?

I yeah, great movie. Okay. So the premise of the movie for those who haven't seen it, this is somebody who's basically like climbing mountains without equipment, like, like free climbing, like it's just insanity. And the person was born without the fear gene. There's something about the person's amygdala that doesn't allow them to experience fear. And so they're just bored with life and they have to take risks like this. It's just to feel alive. I mean, Musk may have some version of that from what

I've seen. I just watch horror movies. That's how I get my rocks off or on. All right. All right. We're going to wrap. Last one. No, no, no.

Oh, go ahead. No, no, no. Last one. What else do we have? There was an article in Bloomberg that short sellers have lost $5 billion in the last week betting against Tesla. Fill up this chart. There are no more short sellers.

This was one of some- You're putting up the shortest stock. So again, to the point of Elon winning, and you might not like it, but this is chart. There are no more short sellers. This was one of- You have to be the shortest stock. Again, to the point of Elon winning, and you might not like it, but this is facts. This is reality. He won. It used to be that every share was sold short, and I'm exaggerating, but it was a lot. A lot of people were betting against Trump, and they were wiped out, but there's still

a small percentage of maniacs. I think it's a good idea to put dollars against Elon, and it's not. There was a very popular form of journalism where they would just kind of follow the Tesla story really skeptically and point out all of the inconsistencies and things that Elon would say on conference calls. And that seems to, like Charlie Grant was covering them very aggressively for the time.

But at the time he was teetering and he did pull a rabbit out of his hat. Yeah, no, things changed. That's exactly right. Things changed. And you don't, my point is, I don't think you're going to see a lot of those types of articles in this era analyzing Tesla for flaws. I think it's more likely you're gonna see political reporters covering SpaceX. Totally agree. Yeah and you can't short SpaceX. What a

wild story. Holy shit. All right let's move on. Okay, we're gonna do make the case and then mystery chart and I think you're making the case this week. Oh I'm making the case. Yeah. All right so I didn't bring anything. John if we have my, no no no I have something. I have something. Pitch me Bitcoin Michael. I got making the case. All right, so I didn't bring anything. John, if we have my, no, no, no, I have something. I have something. I have something. I got a little something. I got a little something.

John, if we have that chart that I was asking for, I'd love to show that. If not, okay. Oh, it's Carvana. Look how good John is. But well, all right, so there's no mystery. It's Carvana, but I want to show this. Look at this freaking chart.

You're the make the case. I'm the mystery. Oh, I am definitely not making the case for this. But just look at this chart. This stock was down 99% and is up how many hundreds of percent? Have you ever seen a chart like this? This is really rare. This was zero.

This doesn't happen. This doesn't happen. All right. So I will make the case for something. Wait, back up. You know who gave us this stock at $2? Eric Jackson. On our show.

Credit to him. I hope he's retired. I didn't listen to him. No. All right, so I will make the case, just for a little bit of sobriety, if you are feeling emotionally swayed by the results of the last week, just in terms of through the lens of dollars,

nothing else, oh, shit, I should have bought Bitcoin or I can't believe I've done. Everyone is feeling that way. Yeah, everyone's feeling that, myself included, even though I own it. Just pump the brakes and don't do anything. Wait a week.

Maybe wait a week. And if you miss it, you miss it. Just give it a week. Just give it a week. Don't do anything dumb. Just give it a week. That's a great make the case. That might've been, given what's gone on in the last week,

that might've been the best thing that you could have possibly brought to the audience is to remind people markets are two ways. It doesn't feel like that's possible right now. You'll be amazed. Take a beat. Take a beat. Or, and if you miss Bitcoin, just buy Solano, you'll be fine. All right.

So I want to, I have a mystery chart. We'll do it fast. John, if you please. Okay. I know this chart. This is, I actually don't even want you to guess OK. I know this chart. I actually don't even want you to guess yet. Buy, sell, or hold.

It's an individual stock. Buy, buy, buy. Why? Because there's no treble tops. This could fail right now. But it could fail right now. I mean, I don't know. You feel good about the last print there?

No, but I mean, what is it, a week? All right, so give me a clue. No, dude, I'm showing you a 10 year chart. All right, Media Company, one of the oldest companies, publicly traded companies in America. What? Hyped, very relevant to the events of last week. Oh, oh.

Fox News. FOXI? Directionally close, but the opposite. Oh, Comcast? No, no, no. The opposite of Fox News is... Oh, but this is not Warner Brothers. Nope.

The opposite of Fox News is... MSNBC. MSNBC is the opposite. Yeah, but that's not a publicly traded stock. So what is? But CNN is the opposite. That's Warner Brothers. Sir, your guess. What the f**k, dude? Give me a better clue. I just told you this sector. I told you it's related to the election. I told you it's one of the oldest companies that's publicly traded.

What else do you want me to talk? I told you it's the opposite of Fox News. I failed. I failed. You gave me plenty of clues and I will take responsibility for my failure. What is it? The reveal please. John, if you would.

Oh my God. Oh my God. That's embarrassing. The New York Times. That's embarrassing. Shame on me. I don't believe in triple tops either, but I would sell this. Here's my thinking.

I mean, it could break out right now and I'll be wrong and I'll admit it, but I don't see the same appetite for news post this election that we had in 2016. The heyday for the New York Times and the Washington Post. I don't think people want to hear this shit anymore. I don't think they want to read investigations into the commerce secretaries bribery scandals. Like nobody wants this. Well, but their subscribers do. Their subscribers do. And this thing is consolidating. I'm zooming in. It looks good. Yeah, no, I would buy it. You could buy it here. We saw ratings for the left leaning cable networks over the last week. Some of these shows have been cut in half. What

do you think the New York Times subscriptions are doing? You think they're going up this election? Because they went up last time in 2016. I don't think it's just that. I think the business is finding ways to make more money. So I would rather, I would wait for the breakout, but if this thing breaks out, it's going to 100. By the way, I'm a New York Times subscriber. I love journalism. I love their journalism. I happily pay each month. I just don't think the energy is the same around Washington Post and New York Times this time as it was eight years ago.

I think people have had. I agree fully, but I don't think it needs that for the stock to continue to work. By the way, what do you think the market cap is for a bonus question? 40 billion it's like 9 billion. This is the world that we live in now Tesla was just worth those just worth 50 Tesla's a trillion they could they could start ten companies the size of the New York Times in a week And and laugh about it. Why doesn't you know? I just buy why doesn't Elon just buy New York Times in a week and laugh about it. This is the world now. Why doesn't Elon just buy New York Times

and shut it down and fire everyone? You can't, nobody could buy the New York Times. The Salzberger family controls it as a trust. Oh yeah, everything's for sale. Not this one. This might be the last one to go. All right, hey everybody, thanks so much for watching. We love you, we love your comments,

we love all your likes, and we love all the subscriptions. I want to remind you that tomorrow, my favorite podcast, Michael and Ben star in an all new edition of Animal Spirits on the podcast app of your choice. Later this week, we'll have Ask the Compound with Duncan and Ben. Michael and I will be back with an all new compound and friends. And then this weekend, it's Jill on Money. Keep it locked on the compound YouTube channel and all of our podcasts. And we'll talk to you very soon. Whether you're just getting started as an investor or you're managing a multimillion dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with

building the right financial plan. To speak with a certified financial planner today, visit riddleswealth.com. Don't forget to check us out at youtube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.