S&P 500

So that takes us nicely into the segue.

So public investors have the S&P 500 and other indices, right? So then I think you personally answered, but why? Let's dig into why it's so difficult for there to be an equivalent benchmark in profit equity.

I think historically there was lack of familiarity with the asset class coming from the main benchmark providers and the commercial data sets that are available out there.

And I would also argue that with allocations to private markets continuing to grow, the methodology that was out there five years ago is not... suitable anymore to answer the questions that the boards and the CIOs are asking themselves.

And what I believe the benchmark needs to evolve in private markets is a similar place where the benchmarks in public markets have evolved to over decades.

And what it means is you have the same unit of risk equalized between public and private markets.

And so in public markets, we have S&P 500, and we all know the methodology is to look at performance of the 500 largest companies in US and aggregate their performance in a time series fashion.

And I'm looking for an equivalent of that in private markets, where you have private market investments done out of private market funds, And those investments and performance of those investments aggregated over time in a time-serious way and performance for those investments reported by sector, by size, by different fundamental measures.

OK, let's suppose I gave you the index.

I said it's against the S&P 500 like everybody else.

No, no, that's not enough.

But to tell me why I should, so tell me why I bought it, my beta.

So it's mean reversion is dangerous.

So what's the alternative to using a backward-looking premium? User? User? the opposite forward-looking premium.

There you go, right? And how do we get a forward-looking premium? We estimate an implied premium by looking at where the S&P 500 is today.

That way, we're not saddled to the past.

This April, the director of the SEC's Division of Enforcement noted in a conference speech that there was immense investor interest in artificial intelligence and that fake AI or AI washing has the potential to mislead investors, harms consumers, and violates federal securities laws.

FactSet shows that 199 of the S&P 500 companies mentioned AI on their first quarter earnings calls.

This is the highest number of mentions on record, with the prior record having been set in 2023.

Of course, many of these firms will actually have an AI strategy.

And that's assuming just 9% returns, which is just the stock market.

Just put it in the S&P 500 and don't do anything with it.

That's not doing crypto.

That's not learning how to...

Yeah, let's talk about just generally the markets.

When people are, when I'm on TV, when we're doing these podcasts, different shows, when we talk about markets, people are referring to the stock market and the S&P 500.

So we've had a great, again, I've been doing this for over 30 years.

Yes, sir.

And the one, if I had to pick one fact that drives the overall stock market, all these concerns that we just talked about, whether it was tariffs and taxes and oil prices and how can the markets even be up where they are right now? And the reason I've had to point to one factor is earnings growth rates.

Earnings growth.

Of those S&P 500 companies.

Yes.

Over in stocks, October was brutal for Intel, down 45%, and Reddit down 35%, while Meta and Nvidia also slipped double digits.

Amazon's cloud business now brings in more revenue than 476 companies in the S&P 500, and Microsoft's Azure growth jumped to 48%, though spending is going through the roof.

Next week is packed with earnings with Apple and Palantir on Monday, then AMD, Shopify, Uber, Applovin, Cloudflare and Airbnb.

In altcoin land, Ethereum is up about 1% near $2,266.

Back in Bengen's era, you could get substantial yield from both stocks and bonds.

Today, if you look at the S&P 500, the dividend yield has compressed down to around 1.2%.

And while the 10-year Treasury bond has recently hovered around 4.25% to 4.37%, the forward-looking equity returns are deeply concerning.

Right.

That's enough to make anyone think twice about going public before Anthropic.

As for the IPO index, that lost 2.2% this week compared to a 0.6% decline for the S&P 500.

So recent IPO performance has trailed as volatility picks up.

And Reddit was the week's biggest loser this week in the index, down 36.4% despite beating on Q3 earnings.