Mm-hmm

... seems like we're kinda normalizing.

You go back to the '80s and '90s, people recognize that a 7% mortgage was fairly typical.

Um, your prior gress ge- guest, Jeff Rosenberg, implied we really didn't know how good we had it when rates were zero, mortgages were 3%, and it was free to borrow.

And so this i- means that era is coming to an end, and we're shifting from monetary stimulus to fiscal stimulus.

How ...

The-

Mm-hmm

What are we doing wrong right now? What do we need to avoid?

So I think people and it really depends on who you are, where you sit, what your portfolio is like, where you are.

People are looking at the bond market and drawing all sorts of interesting extrapolations.

There's a little bit of panic, not a whole lot.

Oh, my God, what does this mean? Is this the war? Is this the tariffs? Is this inflation? What's going on? Some of that certainly is a factor.

But when I look at this market and I look at the history of interest rates going back 50, 60 years, this seems to be after 25 years of Zerp and QE and zero interest rate.

Seems like we're kind of normalizing.

You can do well, but you can't generate a lot of wealth.

Interstellar before.

Here's the thing about watches.

Nobody needs a watch.

Your phone is much more accurate than $100,000 Patek or whatever you want to buy.

So if you're going to go down that rabbit hole, you have to ask yourself why.

Like, if you want to just flex and show off a Rolex, that's a terrible waste of money.

Like, these watches, we really haven't talked about this.

Is it their skill or is it the market? Or were they

So do you think overall this very recent announcement about the acquisition that Vanguard acquired Altris, do you think that is overall a plus for the industry or maybe does it impact certain parts of the industry more so than others?

so before i answer the question full disclosure we're investors in altruist the deal puts money in my pocket there's my bias the reason we were excited about altruist is the idea of a clean sheet custodian built from the ground up with technology software i love the idea of altruist challenging the established legacy players There's a little bit of a David and Goliath in that battle.

Like, all right, they're going to be a little faster, a little more nimble.

It's just so hard when you're relatively small and less than a decade old to compete with these trillion dollar behemoths.

If all these other entities are 800 pound gorillas, the 1200 pound gorilla steps in.

You know, when Vanguard launched their robo-advisor, the digital platform, it very quickly scaled to $100 billion.

It became the biggest robo-advisor there was and then kept going.

And, you know, Fidelity and Schwab better look out, honestly.

[laughs]

The emotions around it are amazing.

PS, we kill tens of millions of sharks per year as a species.

They kill three or four of us, so it's not a fair fight.

Denominator blindness is one.

Survivorship bias is another.

I just wrote something earlier this week about a piece of research that is called the failure gap.

Since it's relatively recent and we all lived through it, what do you think were the biggest investment lessons from the COVID market crash? Investment lessons.

What do you think about that? Is that going to cause more bad behavior or is it a good thing?

So when there's a new technology, you certainly want to become adept at using it and learn how it can make you more productive, more efficient.

At the same time, So there was really – the perfect example of this was early days of AI.

Hey, this is going to replace radiologists and people who read MRIs and x-rays.

It's a fascinating op-ed a few months ago about a radiologist who said not only has AI not replaced my job, it's made me much better because what AI accelerates at – is the middle cases, not the extreme in either direction.

So the boring daily grinds that anybody can do within that profession, but it's just really time consuming.

AI is great for that sort of stuff.

Can you tell us more about that?

How do you filter from a lot of noise out there?

Who do I listen to? How do I not? First, there's a very robust wall between my long-term financial plan and portfolio and the daily firehose of news, noise, opinion, commentary.

So that's number one.

What happens on a random Wednesday morning in 2026 really isn't relative to the average person's retirement in 2046.

People kind of forget that.

The business of investing distracts us from the practice of investing.

And then number two you know, just basic economic theory that markets, they may not be perfectly efficient, but they're mostly kind of efficient.

Tell us a little bit more about that.

Perfect

... dead on? Great.

All right, so three points of the discussion, and I kinda rejiggered the poll questions.

Uh, you know, bull and bor- bear markets, what are they? What's a market cycle anyway? How much do valuations matter? And, and is this a bubble? So let's, uh, plow right into this.

Um, so here are the survey questions.

We'll come back on this.

By the way, I hate presentations with text, but I know people are gonna be looking at this afterwards, so th- these sort of slides are for them, not you.

Yeah

Let's get Barry's take.

So trying to time the market is problematic for two or three reasons.

The big reason is it turns out that most people can't do it, not with any degree of regularity and consistency.

The first issue is clearly.

taxes.

If you're trading in a taxable account, especially a short-term trade, well, Uncle Sam is your partner for 30% of your returns.

Do you think that the market's going to drop 30% and you're going to get in perfectly? If you do that, well, then you're a break-even because now you're paying taxes.

Let's find out why that can be misleading.

So I'm not perplexed.

You know, you could look at other things that undergird the market, like the rule of law, which the Supreme Court has been damaging.

A $90 trillion marketplace has grown to nearly half of the world's market cap because of sanctity of property contracts and rule of law.

And that's been undercut by SCOTUS.

So it's hard to reconcile both.

the philosophy of what they're doing other than random partisan spasms.

How does this impact me? And I think you just answered it.

Well, let me put on my recovering lawyer hat and say we've had 90 years of precedent that says when Congress passes a law creating an independent agency and the president signs that law and Congress funds that agency, it's a process to keep them independent.

I'm curious if you think there are other, gonna be other losers here that, you know, there is a finite amount of capital for IPOs of these types of companies, and when you have SpaceX on top of OpenAI on top of Anthropic, do you think, generally speaking, the, uh, the rest of the Magnificent 10 gets hurt?

I don't really think so.

There's, there's a great chart out of Deutsche Bank that looks at the market capitalization percentage of new issuance, new stocks, IPOs, as a percentage of total market, market cap.

And if you look at the last peak, that was '20 and '21 during the little bit of that SPAC frenzy that we saw, and at, at the worst point in '21, 2.2% of the total outstanding market cap of US equities were new issuances.

That collapsed in 2022 to something like less than 0.2%.

Here we are.

We're just about at the halfway point of 2026, and that's 0.8%.

Is there a point at which Barry Ritholtz says, "Okay, folks, we need to bring our horns in"? And what are the metrics you look at?

I'm curious if you think there are other, gonna be other losers here that, you know, there is a finite amount of capital for IPOs of these types of companies, and when you have SpaceX on top of OpenAI on top of Anthropic, do you think generally speaking the, uh, the rest of the Magnificent 10 gets hurt?

I don't really think so.

There's, there's a great chart out of Deutsche Bank that looks at the market capitalization percentage of new issuance, new stocks, IPOs, as a percentage of total market, market cap.

And if you look at the last peak, that was '20 and '21 during the little bit of that SPAC frenzy that we saw.

And at, at the worst point in '21, 2.2% of the total outstanding market cap of US equities were new issuances.

That collapsed in 2022 to something like less than 0.2%.

Here we are.

Is there a point at which Barry Ritholtz says, "Okay, folks, we need to bring our horns in"? And what are the metrics you look at?

What's the biggest return one of your clients has had via their Cowboy account?

So we've, we've had people that have had some Bitcoin when it skyrocketed.

We've had clients that had a lot of Tesla that blew up, you know, in '20 and '21.

It, it exploded.

Heading into the pandemic, so people that in their account had, like, Teladoc and Zoom and Peloton, and they just exploded.

But what always happens, it's so hard to sell something 'cause most of our sells...

Like, I owned Apple when the iPod, not iPhone, iPod came out.

But what's the takeaway, which is that, like, new stuff can get overhyped?

But what are some of the most dangerous, you know, cognitive biases that investors kind of fall into? What are some of the traps there.

So I'll give you a few of my favorites.

So everybody's familiar with overconfidence, right? We tend to be a little too confident and we think we believe in things.

Hey, my research will help me find a better stock or I have a good feel for the markets.

I'll be able to avoid The next downdraft.

But when you go deep into the psychology that underlines that, there's a concept called Dunning-Kruger.

And what is David Dunning is a professor at University of Michigan, and he did a study to see how well people can evaluate.

What did you see back then that maybe others didn't pick up on soon or fast enough? So I'm going to tell you about 2000,

Sure

...

I, I follow the war.

As an investor, it, here's the really crazy thing.

Wars, terrorist attacks, assassinations, these things don't really impact the market 'cause they don't really affect what drives the market.

If you look at a long-term chart...

And, and by the way, all the usual caveats, war is terrible.

This is a false belief, easily disproven with a few data points and charts." Why is this relevant right now, all-time highs versus all-time lows, the lows being consumer sentiment?

... one of the biggest financial markets in the world, and I, I don't know what the alternative would be.

So if you look at the past half-century of growth and deficits, there's a pretty tight correlation there.

And who wants to say, "Okay, we're gonna, we're gonna be good accountants and good stewards, and w- we will s- the government will spend less, it'll tax more, and we'll have a balanced budget," but instead of having a 2.5, 3.5% GDP, you're gonna have a 50 basis point or 95 basis point GDP.

Do you wanna make that trade-off? I sure as hell don't.

I like 3% growth.

Uh, t- uh, under 1% means you're not seeing wage gains, you're not seeing asset class appreciation.

Like, v- you're, you're playing Jenga with the entire US economy, and it's not like deficits are off on their own.

It doesn't exist.

How soon before all this recovers?

It, it, some of it is relatively quickly.

A lot of it'll take a while to, to get back to normal.

Um, but that's really the random question, the big unknown.

You know, when you tariff the world and, and sort of alienate your trading partners and, and geopolitical partners, you have the ability on your own to say, "Gee, maybe this wasn't the greatest idea.

We're gonna turn this off," or, or not.

But when you start a war, you lose the ability to say, "Okay, we're gonna end this now," because there's a second party involved, and they, as it turns out, have a say.

How strong do you think our economy is right now?

Remind our audience, in case they forgot.

All right, so, so, look, uh, necessity is the mother of invention.

We have not allowed China to get the latest, greatest chips.

Uh, it's just part of a competitive challenge that we've set up for them, and they figured out ways of doing large li- language models and artificial intelligence, uh, with software shortcuts and with all sorts of very clever......

I don't wanna call it hacks, but very clever, uh, writing of- of code that doesn't need these super powerful, power-hungry, data-intensive CPUs that companies like NVIDIA and AMD and Intel have been putting out in such big numbers.

And so, uh, the- the question becomes, if we're not gonna give them these chips, are they gonna give us these- these rare earth metals, which are so important to defense and technology and EVs and phones and everything else? That's the challenge.

If they don't need our chips, where's our leverage in getting the rare earths?

And it's still doing very well.

Barry Ritholtz, On the Moment at Hand.

Markets always seem confusing, uh, uh, uh, most of the time.

Whe- if you think you understand exactly what's going on, uh, you're- you're probably, um, fooling yourself.

And so we have all these cross currents.

We tend to put things into the context of up, down, black, white, yes, no, when- when the world is shades of gray, when things are more complex.

There are so many cross currents.

People see a softening of the labor markets and immediately start thinking recession.

Yeah.

It's soaring."

So, uh, without getting into a whole lot of, uh, academic, uh, jargon, markets are a future discounting mechanism.

They don't have a perfect vision as to what's gonna happen in the future.

Essentially, markets are estimating a variety of different outcomes.

And the good news is the president inherited a very robust economy.

Uh, corporate America's balance sheets are great, revenues are good, profits are at all-time highs, so the worst hasn't yet come to pass.

This is kind of the canary in the coal mine.

But Bar- a canary in a coal mine, one would think, would cause the markets to tank, because markets are predicting what's ahead, and if PPI is predicting that inflation is going to worsen, why aren't we seeing markets drop more?

Here is Barry Ritholtz on not losing money.

Stock pickers, other than the handful, the half a dozen people we all know are household names, tend to underperform a broad index.

So you can't get alpha if you're not at least starting with beta.

So if you want to make the core of your portfolio a broad index, and then you want to decorate that tree with specific stocks or specific sectors, knock yourself out.

But-

(laughs).

... to strictly focus on picking stocks and guaranteeing that, "Hey, maybe this year'll outperform, maybe this year'll underperform," seems like an excessively risky strategy.

Better to at least guarantee yourself-

Doesn't that make it more difficult for Jay Powell?

Yes and no.

The good news/bad news situation for Jay Powell, the, the bad news is, hey, this is still a volatile real- uh, region.

Uh, Iran can shut down the Strait of Hormuz, of which 20, 25% of oil, a- all the oil in the world passes through.

They have a major impact.

That's the bad news.

The good news is, over the past 15, 20 years, thanks to new technology like fracking, the United States has become far less dependent on Middle Eastern oil than we used to.

Mm-hmm.

How would you say it plays into the US dollar conversation and broadly speaking, policy and economically speaking?

Inflation peaked June 2022.

It plummeted from 9% to 2.5%.

I made the argument at the time that, hey, the 2000 to 20, to the, uh, right up and to the pandemic was an era of driven by monetary policy.

The Cares Act, the first one under President Trump, was the biggest fiscal stimulus since World War II as a percentage of GDP, 10% of GDP.

Cares Act II under President Trump added to that.

Cares Act III under President Biden added to that.

What's your best guess for what happens at the June meeting and beyond?

... for businesses which, if it's not businesses, why are they begging for exemptions, Biggie?

Or the alternative is the manufacturers and exporters to United States will suffer a decrease in margin, but history, to quote the Treasury Secretary, shows that's not what happens.

Consumers pay tariffs.

And even worse, what's supposed to give American manufacturing a leg up, what happens is the domestic producers say, "Oh, these guys could get more money? Let's raise our prices." So tariffs not only cost consumer more money for imports, but it's inflationary for domestically produced goods and services.

(laughs)

We- No, the first term was the Tax Cuts and Job Acts.

He delivered, at least on that, he delivered exactly what he promised.

"We're gonna create giant tax cuts." Yeah, maybe they were a little inflationary, maybe they were a little stimulative, but many of his colleagues and friends love them, and he wants a repeat of that.

The fact that we are seeing people dump out of treasuries, losing faith in the greatest country in the world, the United States of America, what does that tell you? When else have you seen this in your professional career?

So, so 1981, you briefly saw this, but that was after a long, terrible stagflationary period.

Look, when people sell stocks, they flee to safety of bonds-...

when you see stocks and bonds both get sold off at the same time, that's telling you people are selling the US dollar.

This is not merely we're getting rid of stocks and bonds, we are holding Japan, China, all these foreign owners, we hold these assets and what they're doing is saying, "We're getting rid of these, oh, and we don't want your dollars.

We'll take our money in euro and yen and in yuan." And that is very dangerous for the United States.

some smaller countries that are really economically challenged might be saying, "Please, sir, we need a deal." But if you're a developed country, if you're a European country right now, and the president's out there saying, "They're kissing my ass," are you really gonna rock up to say, "You know what? Let's get a deal done 'cause I'm dying to be partners with you again"?

Talk about, talk about snatching defeat from the jaws of victory.