- 3 months ago
Category
🗞
NewsTranscript
00:00Paul, thanks so much for your time.
00:02I want to first ask you about Robinhood before we get to the markets,
00:06because I know you have a big conference with JPMorgan tomorrow, right?
00:09We do. We have a conference tomorrow.
00:12There's still a few tickets that are available.
00:15We have some great, great speakers.
00:18I'll be interviewing Dario Amity, who's the CEO of Anthropic.
00:23So actually, he's the person that should be answering your AI questions, not me.
00:28I can't what there's so many I want to ask him on a we've also got Ken Griffin and Jamie Dimon.
00:34It's going to be it's going to be a fantastic and a very informative and educational day.
00:39Will all of those guys participate in pick a ticker?
00:44Because this is a contest you do with Bloomberg, right?
00:46Right. So pick a ticker is you pick one long, one short.
00:51It's a six month. It's a six month contest.
00:54Think of fantasy football meets the markets, because this year we're going to allow you to change your picks,
01:02I think, two or three times during the six month process.
01:06So you put in 10,000 bucks.
01:11It's going to go to charity.
01:12It's going to 75 percent is going to go to Robinhood to help the least among us in New York City,
01:17which sadly has twice the national poverty rate.
01:22And I think we've all got a vested interest in making sure New York not just survives, but thrives,
01:28because obviously Wall Street, which is the I guess the reason for so much financial wealth
01:33that all your viewers have, is something that we need to be able to in New York City have a
01:40again, a thriving cities because the most important city in this country has got to always succeed.
01:45Yeah. I mean, you have raised, I think, three billion dollars over the time since you founded
01:50Robinhood for fighting poverty in New York.
01:53I want to ask about Wall Street and specifically about this equity market.
01:57I do watch our competition.
02:01I saw your interview with Andrew last week.
02:03You said this is like October of 1999.
02:06But after that, as you pointed out, you know, the stock market doubled.
02:10We had a drop in October, like an 11 percent intraday drop, but then the stock market doubled
02:15to March of 2000.
02:16Are we still in line for a doubling of this market?
02:22Well, it's so funny because you'd mentioned that 54 percent of fund managers think that
02:27we're in an AI bubble.
02:30If it's a bubble, it's it's a small one.
02:33If you just think about and again, how do you actually define bubbles?
02:36If you think about the bubbles of the past three or four decades, the NICI in 89, NASDAQ
02:43in 99, biotech 2000 in the just after 2011, 12, China 2007.
02:50All those were four to six hundred percent gains.
02:54The NASDAQ's up 200 percent off the bottom.
02:57So I don't know whether we're going to blow off like we did in 1999.
03:03Is it possible or all the ingredients in place?
03:07I think clearly they are.
03:10For me, the the one thing that you can never, ever forget is that a year from today, assuming
03:18that the president gets his wishes, that the Fed funds rate is going to probably be in the
03:24two and a half.
03:25You know, I think there I think they would like to see it at two and a quarter.
03:30So I think two and a half to 75.
03:32Obviously, whoever the new Fed chair is going to have to be able to intellectually move that
03:38board, a majority of the board.
03:40He's probably whoever the new Fed chair.
03:42Let's say they've got six solid votes.
03:44So he'll have to find one more.
03:47And I don't think it'll be that hard to do.
03:49But if you're if you're going to have two and a half percent overnight rates or 275, that's
03:55a really compelling story for higher equity prices.
04:00Well, not just that.
04:01I mean, you've got Neil Kasar on our opinion team yesterday laid out the argument that this
04:06is not the same as 1999 because these companies are so profitable.
04:09Right.
04:09Ninety five percent of the S&P 500 is expected to post earnings growth next year.
04:14And the average earnings growth is 16 percent.
04:16It's obviously a lot more for the mag seven or the great eight.
04:21Plus, you don't have the same kind of leverage that you had back then.
04:24You have less than 100 percent debt to equity.
04:26And in 1999, it was more than double that.
04:29Right.
04:30Well, the only thing I'd say is I don't think you've got the leverage necessarily in the
04:34corporate balance sheets yet.
04:36You clearly have leverage within the equity ecosystem.
04:40And by that, I mean, you just had a proliferation and explosion in derivative products.
04:46I want to say that levered ETFs are up 250 percent since the 2022 bottom.
04:54And I want to say there's four or five hundred with another another couple of hundred in the
05:00pipeline.
05:01So you're clearly creating derivative leverage, whether it's in the options market.
05:07We see single stock options.
05:09We just see options activity exploding.
05:13Everywhere you look, there's greater leverage, again, in the equity infrastructure for what has
05:21become really trader nation.
05:24We have the highest percentage equity holdings by individuals in history.
05:28We have, again, more levered activity.
05:32You don't see it in margin debt because margin debt is actually an old anachronistic tool.
05:38You see it more so in the options markets.
05:41You see it more so in the levered ETFs.
05:44So it's somewhere down the road.
05:49It's a little similar.
05:52I don't think we're there yet, but somewhere down the road, there's going to be there going
05:56to be some, you know, they're going to be some some real issues with that.
06:00Nonetheless, you're long now, right?
06:01I mean, at least last time we spoke to you in June, you said your portfolio would be long
06:07stocks.
06:08You said you'd be long gold.
06:10You said you'd be long Bitcoin.
06:12And those have been great picks.
06:15Check out this chart, right?
06:16Gold alone is a 22 percent gain.
06:20But all of them are well above zero.
06:23Do you hold on to that portfolio?
06:26So I would take them one by one.
06:31I think for stocks, the critical time is going to be the last week here in October.
06:38And we see the when we see the big tech earnings, as well as by that point in time, we'll have
06:43greater clarity on the resolution of the U.S.-China conflict.
06:47I would think that if the Nasdaq is higher going into early November, then you've got
06:55a chance for a real ramp in the last two months.
06:59What happens between now and then, I kind of think the market's going to be on the defensive
07:05until we get to that's going to be a intersection of just so many really, really important data
07:12points.
07:13So so that's going to be a critical time.
07:15I may also have a Fed meeting that week.
07:18So I would think, you know, my prior is, is that it will resolve the upside.
07:23We'll focus on where Fed funds will be.
07:26The market will look ahead six to nine months and focus on that.
07:30Bitcoin and gold are interesting.
07:32They're interesting as a pair in the sense that if I just look at since Liberation Day, you've
07:40had about 40 billion dollars of inflows into a combination of Bitcoin and Ethereum ETFs.
07:48And you've had a like amount of inflows into the combination of gold and silver.
07:52But if you think about it, the vol adjusted 40 billion that goes into Bitcoin because it's
08:01got had, say, five, six times the vol of gold was really a much, much bigger bet on on crypto
08:10than it was on precious metals.
08:12And yet gold has outperformed Bitcoin since that period in time.
08:18So clearly retail has made a mistake in terms of trying to figure out which of the two debasement
08:28trades were going to outperform.
08:31And I have to admit, until a couple of weeks ago, I thought Bitcoin digital gold was going
08:36to outperform, again, the historic stores of value.
08:40I think they're both probably still good.
08:43But my guess is, again, we're here in the fourth quarter, momentum into the end of the year,
08:48that of those two, it appears that gold and silver are going to outperform crypto.
08:54You know, I'm always going to be a trend trader.
08:57I'm always going to follow the momentum.
09:01And I'm not going to be so prideful that I'm going to try to outguess what the market's telling me.
09:07But you do think that we continue to see inflation?
09:11Because I've been talking to Neil Dutta from Renaissance Macra.
09:15He's pushing back on this.
09:17He says inflation hawks need to seek help.
09:20But his main point, I think, is that housing, the shelter component is going to come down.
09:26He said in a note last week, housing prices are likely declining.
09:29The fact that homebuyer demand has declined, even as rates have dropped,
09:33suggests that a deflationary psychology has infected the housing market.
09:38You buy that?
09:39I think I'm probably looking past current conditions.
09:44And I'm just thinking about the future.
09:47And we're in a fiscally constrained time.
09:52So why is it that the president is hell-bent on finding a Fed chair that's going to have easy money?
10:02Because the only way that we can reduce our debt to GDP,
10:06that you can even begin to deal with a 6% budget deficit,
10:10is to have the lowest funds rate you can possibly have to lower your interest costs,
10:15to stimulate growth, et cetera.
10:16The only way to reduce debt to GDP is to have, obviously, nominal growth exceed your interest rate.
10:23So in a situation like that, particularly given where we are in this economic cycle,
10:32where we are now, it's just hard not to see.
10:34And I think this is what the market's looking ahead to see.
10:38Inflation not be rekindled and start up again, 6, 12,
10:44in a more serious fashion, 18 months hence.
10:48You can kind of see it now.
10:51Again, think of this.
10:53We have $370 trillion worth of global financial assets.
11:00$370 trillion.
11:02So when you come to a market like gold, which is $12 trillion, silver, which is, oh, my Lord,
11:10a fraction of that, Bitcoin, crypto, which is, say, $2 to $3 trillion,
11:16it doesn't take very much.
11:19Then you start thinking about the copper markets and some of the other rare earth minerals,
11:24and you think about just individual commodities, good gosh, the ability to elevate those prices
11:31because we have so much, again, money and financial assets.
11:36It just takes a small tweak to really begin to create a rise in the price level.
11:43And I think we'll see that, assuming that we have a new Fed chair who's going to take the funds rate down to 2.5%.
11:52And I think the White House is thinking they'd like to see the funds rate at 2.25% to 2.5%.
11:59Will we see a significant drop in the dollar from that?
12:03Because we had seen, right, in the first half, the biggest drop for the dollar since 1973.
12:09That's the year I was born, so a long time ago.
12:13But we have recently seen the dollar recovering, showing a little bit of strength here
12:20as people look for, I think, safe haven in that.
12:23Well, look, you've got an FX, you've got a fiat money debasement going on pretty much virtually around the world, right?
12:33The bond vigilantes, though, are being held in check by, again, central banks and populism
12:42that are pushing central bankers to run hot.
12:47So the currency debasement trade has really turned into a gold trade and a crypto trade, right?
12:57Bond vigilantes have been shunted to the back, been put in abeyance,
13:03and instead it's manifesting itself in gold and crypto.
13:07That's really what's going on.
13:09So, again, look at the new prime minister of Japan.
13:13She's already advocating for the BOJ to go slow on normalizing rates.
13:20You can't make it up.
13:21They've got negative 1.5%, and it's almost like they just want to deny that they have an inflation problem.
13:30But so that's what we're seeing.
13:33And, again, at some point in time, we're going to have some precipitous moments in sovereign debt markets.
13:42I don't know whether it's Japanese bond market, the U.S. bond market,
13:46but we're going to have some precipitous times.
13:48And if you just think about it, we're not even close to that yet.
13:54We're not even close to that trust moment we had three years ago where the currency was under attack,
14:01the stock market, the bond market was under attack.
14:03Just imagine if and when we get to that day, which I think was 6% budget deficits in the U.S.,
14:10that day will come.
14:11Just imagine what gold and crypto, for that matter, the dollar, imagine what they're all doing.
14:19We're in good times now, right?
14:21Even with the shutdown.
14:23Yeah, even with the shutdown, we're in good times now.
14:25I wonder what you think about that.
14:27You mentioned rare earths, and even we can't inflate our way out of that problem, right?
14:30J.D. Vance said we have the cards, but it seems to me China has us between a rock and a hard place.
14:36Meredith Whitney put out a note on Sunday, and she says,
14:39you know, don't bother being distracted by 100% additional tariffs that President Trump was talking about,
14:46because aside from the massive dependence on the U.S. industrial complex for these rare earth minerals and magnets,
14:52the U.S. military is 100% dependent on them and is nearly depleted of its reserves.
14:58What can we do about that?
15:00Yeah, I'm sorry.
15:01I don't have a good answer for that one.
15:02I wish I did.
15:03I really don't envy Trump and his cabinet trying to figure out what's going to happen here in two weeks.
15:15I really don't.
15:16I just think of the strategy that it looks like the White House is falling, right?
15:21They take a stake in MP materials.
15:23They take a stake in lithium Americas.
15:26They're trying to ramp up mining so they can produce these things.
15:30And at the same time, they're taking stakes in private companies.
15:33How do you feel about that as a long-term free market capitalist, the U.S. government, getting in and picking winners and losers?
15:40I'm not in favor of that.
15:41And again, the reason why is it's the same reason my concerns are I see concentration risk everywhere I look.
15:52Now we have individual investors with the highest equity allocation they've ever had in the history of the United States.
16:00Really four times that of the rest of the developed world.
16:06So I get nervous about that concentration.
16:09I get nervous about the fact that we have 35% of the S&Ps now concentrating seven stocks.
16:16I get nervous about the fact that this administration, even if all those decisions were smart and correct,
16:24again, if you just think about the number one rule of portfolio management is you want diversification.
16:32That's why our founding fathers created us as a democracy, not a monarchy, because you want that contestation of ideas.
16:41So I'm nervous when I see concentration virtually in anything, again, whether it's in the stock market, whether it's the composition of the stock market,
16:55who owns the stock market, or the decision-making that's getting made in Washington.
17:00It makes me nervous because I don't think in the long run, right, even if all the decisions that President Trump is making are great,
17:07is that going to embolden the next president, who may not make as good of decisions, to do the same thing?
17:12So I'll look at that, and again, it raises caution flags for me.
17:20But you're still long stocks right now?
17:22You're still long the NASDAQ?
17:24I am, I wouldn't say I'm long at this second.
17:28I'm clearly, again, I think there's such a confluence of possibly negative, possibly positive events.
17:36I think I want to kind of wait and see where we are in a week or two time.
17:42But my belief is that we'll be substantially higher by the end of the year.
17:48All right, so just to end on where we started with the Pick a Ticker contest for Robin Hood,
17:53I asked you last time, and I'll ask you again, for players at home, what tips would you give us?
17:59What would you put?
18:02I'll probably, so I think it's going to begin November 1.
18:05I'm sure I'll probably be long the NASDAQ will be my long.
18:10Remember, you see, it's really interesting because the last 12 months of a bull market,
18:18typically you double the annual gains up until that point in time.
18:22But that's to the end of the bull market.
18:25So we've got this situation confronting us where the best part of the market's possibly straight ahead,
18:33but it's also the most dangerous because it could be the top.
18:37So I would probably long the NASDAQ would be my long,
18:41and I've got to think about what my short would be.
18:44It could be, it might be the bond market again, though.
18:50That'll be a bit boring.
Be the first to comment