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0:01:45 >> Today’s number, 790.
0:01:47 That’s how many islands are in Scotland,
0:01:49 130 of which are inhabited.
0:01:53 Ed, in Scotland, if you buy a three-year-old whiskey,
0:01:55 you can call it Scotch.
0:01:56 Any younger than that?
0:01:58 It’s just bad parenting, Ed.
0:02:09 [MUSIC]
0:02:10 >> Ed, I’m in Scotland.
0:02:13 I’m in Scotland.
0:02:15 >> I couldn’t tell from the haunted house behind you.
0:02:18 You got to tell everyone where exactly you are in Scotland and
0:02:20 why you’re there and what the occasion is.
0:02:22 >> I’ll go in reverse order.
0:02:27 I’m turning 50 and the naked, I look 49 and 7/8.
0:02:31 I am here and 100 of my closest friends are showing up.
0:02:34 By the way, you were came in at 102, so you just missed the list.
0:02:36 >> Just missed it, just missed it.
0:02:38 >> You just missed the list.
0:02:44 I mean, I’m outside of Aberdeen at a place called the Five Arms and no joke.
0:02:47 I’ve got, we’ve taken over a hotel.
0:02:50 We’ve been planning this for two years and all my,
0:02:54 basically my entire life is flying in over the course of the next 24 hours.
0:02:58 This isn’t airing until Monday, so it’s almost sort of,
0:02:59 I don’t worry that I’m hexing it.
0:03:04 Anyways, I’m here celebrating a nice moment in life, Ed.
0:03:05 I never thought I’d get here.
0:03:09 I never thought I’d be here at this point, so I’m very, very happy to be here.
0:03:12 That’s probably the alcohol speaking, but I’m actually,
0:03:14 I am actually very happy to be here.
0:03:15 >> Any anxiety?
0:03:17 >> It’s funny you even asked that.
0:03:19 >> Better be fun, better be fun.
0:03:20 >> I’ve been thinking a lot about that.
0:03:22 I do have anxiety.
0:03:24 I’m already sort of just hoping it goes really well and
0:03:25 that everyone else has a nice time.
0:03:29 It’s really, when I was your age, Ed, I didn’t have enough anxiety.
0:03:31 I almost got kicked out of UCLA three times.
0:03:35 I was on academic probation and then if you get less than a 2.0 the next
0:03:38 semester or a quarter, you go subject to dismissal.
0:03:39 I was subject to dismissal.
0:03:42 I was on academic probation, I think four or five times.
0:03:44 I was subject to dismissal two or three times.
0:03:46 And I just wasn’t worried about it.
0:03:49 I just didn’t care, my God, I’ll just take an easy econ class and get a B and
0:03:51 everything will be fine.
0:03:54 And I should have been more worried about my life back then.
0:03:58 From the age of 30 to 40, I think I had exactly the right amount of anxiety.
0:04:03 And anxiety is a key attribute or trait for survival.
0:04:07 You’re supposed to be anxious about shit because there are things that can kill you.
0:04:11 And then from about the age of 40, 45 on, I’ve been too anxious.
0:04:15 I don’t, and unfortunately I get anxious the day after I drink alcohol.
0:04:18 So I’m pretty much anxious, kind of five, six days a week.
0:04:20 But yeah, now I worry about fucking everything.
0:04:24 I don’t worry about my kids, I worry about business.
0:04:25 I don’t worry that much about you guys.
0:04:26 >> I couldn’t tell.
0:04:28 >> Now I do, do you feel like you’re an anxious person?
0:04:33 >> Well, I think hosting is a very anxious thing because you’re inviting
0:04:36 a bunch of people, they’re taking time out of their day,
0:04:39 in this case their entire weekend, to come and celebrate you.
0:04:43 So you kind of, there’s all this pressure to get everyone to have a good time.
0:04:47 I’m a terrible host because I get anxious, I’m always checking in on people,
0:04:48 making sure they’re having a good time.
0:04:50 And then I think I become annoying.
0:04:54 I think the best hosts are the one who can do all the work, get anxious beforehand,
0:04:58 and then just totally let go, have a good time, let people do what they want to do.
0:05:02 Don’t be too controlling, those are the best hosts and I am not one of them.
0:05:04 >> Jesus Christ, don’t be so fucking mature.
0:05:06 Like when did this happen to you?
0:05:08 Seriously, no, that’s good advice.
0:05:12 I’m muslin, my answer for that is good beer and edibles.
0:05:14 >> Yeah, exactly, that’s a good idea.
0:05:16 >> I want to get through, I want to get everybody here.
0:05:18 I want Saturday night, I want the speeches to go well,
0:05:23 I want everyone to feel welcome and loved, and then I’m just going to let loose.
0:05:26 So I’m not going to drink because I get very emotional when I drink and
0:05:31 I’ll just be walking around sobbing all the time, which kind of brings the whole vibe down.
0:05:32 Yeah, I’m real happy to be here.
0:05:36 Anyways, enough of that shit, get to the news, get to the news, Ed, what’s going on?
0:05:38 >> Let’s start with our weekly review of Market Vitals.
0:05:45 [MUSIC]
0:05:49 >> The S&P 500 rose, the dollar was flat, Bitcoin climbed, and
0:05:54 the yield on 10-year treasuries hit a 52-week low, shifting to the headlines.
0:05:58 The consumer price index increased just 2.5% from a year earlier and
0:06:02 eased slightly from July, that is its lowest level in three years.
0:06:07 And in other economic news, median household income rose 4% in 2023 to
0:06:12 more than $80,000, that’s the first increase since 2019.
0:06:16 Oracle’s revenue came in higher than expected, rising 7% year over year.
0:06:21 Cloud services became the company’s largest business, with revenue up 21%
0:06:26 from a year earlier, and shares rose 15% to a record high.
0:06:29 Wall Street is limiting the amount of hours that young bankers can work.
0:06:34 JP Morgan announced it will cap hours for junior investment bankers at 80 hours a week.
0:06:36 Bank of America already had a cap in place, but
0:06:41 it has a new timekeeping tool that will more closely track the hours its junior
0:06:43 bankers work.
0:06:48 And finally, OpenAI is releasing a new AI model known internally as Strawberry,
0:06:53 which is trained to spend more time coming up with an answer before it responds to a prompt.
0:06:57 The new model will be able to solve multi-step math and coding problems.
0:06:58 Scott, your reactions?
0:07:01 Starting with the inflation and economic data.
0:07:06 >> So inflation, the consumer price index just 2.5% down from I think 2.8 or
0:07:11 2.9 last quarter, it’s almost at its target 2%.
0:07:13 And then household income rising 4%.
0:07:16 I mean, basically you have the Goldilocks economy.
0:07:22 Now, the psychological problem that happens is one, social media loves shitposting and
0:07:28 there’s a certain gravitas and intellectual vibe you get when you’re a pessimist.
0:07:31 But and people just love to shitpost our government.
0:07:34 And also people credit their own grit and
0:07:37 character for their household income increasing.
0:07:41 But when diapers go up in price or oil goes up or gas goes up in price,
0:07:43 they blame whoever’s in office.
0:07:48 But this is about as strong as economy as you could point to anywhere in the world.
0:07:51 The problem is, I would argue, is that we don’t distribute it equally.
0:07:56 Just as that technology philosopher said as William Gibson or
0:08:00 someone else said that the future is here, just not evenly distributed.
0:08:01 Prosperity is here.
0:08:06 An unbelievable economy is here, it’s just not evenly distributed.
0:08:11 And I think of, I think of what, I mean,
0:08:14 we’re writing a post on a mercenary malice about minimum wage.
0:08:20 And I believe that the one thing you could do most seamlessly to reduce
0:08:24 diabetes, high blood pressure, depression, suicide,
0:08:29 decreased divorce rates would be to raise minimum wage to 25 bucks an hour.
0:08:33 Instead of building a gigantic apparatus, which all these government programs are,
0:08:34 which tend to be somewhat inefficient.
0:08:39 Instead of a thick layer of unions, which are trying to protect workers whose
0:08:42 intentions are noble but are very inefficient and sometimes corrupt.
0:08:47 Just put more money in the pockets of Americans with a minimum wage of 25 bucks
0:08:49 during a period where employment is this strong.
0:08:53 Do you know what percentage of American households that make less than $75,000 a year?
0:08:59 >> I’m gonna guess 20%.
0:09:01 >> Get this, 50%.
0:09:04 Half of American households make less than $75,000 a year.
0:09:08 What would raising minimum wage of 25 bucks an hour do for them?
0:09:10 Anyways, a bit of a tangent.
0:09:15 But I’m very happy about CPI only dropping to 2.5%, what are your thoughts?
0:09:17 >> Yeah, just on that point.
0:09:20 So I mean, one thing we should point out is that that household income number
0:09:22 is inflation adjusted.
0:09:25 So it is somewhat meaningful.
0:09:31 There is one statistic that was in that same report that came from the Census Bureau.
0:09:36 And that was that the poverty rate in America fell.
0:09:40 But the number is quite staggering.
0:09:46 It fell from 11.5% to 11.1%.
0:09:51 So that means that there are 37 million people in America
0:09:54 who are still living in poverty.
0:09:57 And to your point, I think we spend a lot of time
0:10:01 analyzing a lot of technicalities in the markets.
0:10:03 And we should be doing that.
0:10:07 We think about the yield curve and interest rates and P/E ratios, et cetera, et cetera.
0:10:08 And there’s value to that.
0:10:15 But I think there is also value in keeping the big picture front of mind.
0:10:20 And the big picture is that one in 10 Americans cannot afford basic necessities to live.
0:10:25 So I would hope that it also reminds us that while, yes, we are doing pretty well
0:10:28 on a relative basis when we look at other countries.
0:10:32 If you look at just America from an absolute perspective,
0:10:34 we could certainly be doing a lot better in this country.
0:10:36 Oh, I 100% agree.
0:10:37 There’s, I mean, more stats.
0:10:41 One in five children in America live in a household that’s food insecure.
0:10:45 Whatever all the blessings are of the fruits of our riches,
0:10:51 we do, in my view, a pretty shit poor job of distributing and allocating resources,
0:10:55 despite the fact that we just have so much of it.
0:10:56 Now let’s talk about oracles earnings.
0:11:01 You kind of own this, Ed.
0:11:02 Talk about oracle.
0:11:05 Well, one segue that we could use here is that, you know,
0:11:09 you’re talking about wealth inequality, income inequality.
0:11:15 Larry Ellison, who is the founder of Oracle, added $14 billion to his net worth
0:11:17 in one day after these earnings.
0:11:20 He is now the fifth richest person in the world.
0:11:21 He is ahead of Bill Gates.
0:11:28 His net worth is, wait for it, $168 billion.
0:11:31 It’s just staggering.
0:11:33 We can get into a conversation about that,
0:11:35 but I think we’ve already covered the inequality part.
0:11:39 Let’s talk about the Oracle earnings themselves.
0:11:42 Earlier this year, I said I was bullish on Oracle.
0:11:45 My thesis here was that Oracle is kind of the fourth musketeer
0:11:47 when it comes to cloud computing.
0:11:51 The options are basically Amazon, Google, Microsoft or Oracle.
0:11:56 And my view was that Oracle is a really attractive company for AI companies,
0:11:59 especially AI startups, because Oracle is the only one
0:12:02 that isn’t actively developing its own LLM.
0:12:06 So if you’re an AI company and you want to compete with the likes of Microsoft,
0:12:11 who’s developing a co-pilot and working with Open AI and ChatGBT,
0:12:12 or Google with Gemini,
0:12:16 you probably don’t want to be also paying them to keep your lights on.
0:12:18 You’d probably rather go with a compute provider
0:12:21 who you ultimately won’t be competing with.
0:12:23 In this case, that would be Oracle.
0:12:25 And I think we are seeing this play out.
0:12:28 If we look at the actual earnings here, revenue growth was up 7%,
0:12:30 which is fine, not great.
0:12:34 Cloud revenue was up 21%, which is very strong.
0:12:35 But the most important number here
0:12:38 was the remaining performance obligations,
0:12:41 which is basically code for booked revenue
0:12:43 that is going to come in the next 12 months.
0:12:45 That number was up 52%.
0:12:48 So they’re clearly partnering with a lot more companies
0:12:50 who want to get their computing power.
0:12:53 Morgan Stanley is now estimating that AI revenue
0:12:57 will increase from 15% of Oracle’s total cloud revenue
0:12:59 to more than half by 2027.
0:13:02 So that’s why Oracle is at an all-time high.
0:13:06 The stock’s up 50% year-to-date.
0:13:10 I think it’s essentially emerging as one of the AI juggernauts.
0:13:11 Well, you called it.
0:13:15 You sort of said this was the big AI company that no one’s talking about.
0:13:19 And I would say probably Larry Ellison and maybe Reed Hastings
0:13:22 are the least talked about CEOs who’ve been the biggest players
0:13:24 in the world of tech.
0:13:26 By the way, if you ever want to go to a great hotel in Palm Springs,
0:13:28 which I know you’re thinking about,
0:13:31 Larry Ellison, this is what people were the $160 billion do
0:13:33 or whatever he’s worth.
0:13:35 He has a winter home out there that’s spectacular.
0:13:37 He built this world-class golf course and spa,
0:13:40 and obviously it kind of sits fallow,
0:13:41 so he turned it into a hotel.
0:13:43 He also owns an island in Hawaii.
0:13:44 I don’t know if you’ve seen this,
0:13:46 but he owns the island of Lanai.
0:13:49 I think it’s the largest private island in the world,
0:13:51 and I think he’s built four seasons on there, too.
0:13:55 I’ve stayed on Lanai when I’m back in my previous life.
0:13:57 I used to go there with my ex-wife.
0:14:00 We’d stay at the Lodger Quelle and we’d go to Lanai.
0:14:01 Hold me, Ed.
0:14:03 Hold me.
0:14:06 Anyways, stay at the sensei.
0:14:09 Look, they’re doing an amazing job.
0:14:12 The stock’s trading at a forward P/E ratio of 25.
0:14:14 Microsoft and Amazon trade at 32,
0:14:16 which kind of connotes that there might be
0:14:18 some additional juice here in terms of the stock.
0:14:23 Oracle and Nike are the two stocks I have in my NYU savings
0:14:25 or 401K or whatever it is.
0:14:26 When I started there, they had some matching programs,
0:14:28 so I listened to the future, Scott,
0:14:29 and I started maxing it out.
0:14:32 I went to Nike, which is literally shit the bed.
0:14:35 And Oracle, which is good to hear, is doing really well.
0:14:37 Should we talk about limiting the number
0:14:39 of hours young bankers work?
0:14:42 Please, I am so excited to get your take on this.
0:14:43 What do you think of it?
0:14:44 – I’m up two minds here.
0:14:49 So, I was part of,
0:14:52 my first job out of college was at Morgan Stanley.
0:14:56 And I have never worked with a larger concentration
0:14:57 of assholes.
0:15:00 These were just like not nice people.
0:15:03 And it defined the term abused children syndrome.
0:15:05 And that was when I was young and in finance,
0:15:07 they all fucking hated their jobs.
0:15:09 I mean, sorry, there’s like one or two people
0:15:10 or big deal makers and a lot of that.
0:15:12 But for the most part,
0:15:14 they were really smart people or overachievers
0:15:17 who got jobs and investment banks.
0:15:18 And by the time they were 30,
0:15:19 they were making back then, you know,
0:15:22 $300,000 or $500,000, which is a lot of money.
0:15:24 And they just couldn’t leave.
0:15:26 Most jobs are usually one of two things.
0:15:28 They’re either very interesting,
0:15:31 but a lot of pressure, a lot of stress,
0:15:34 or they’re incredibly boring, right?
0:15:37 But easy, not a lot of stress.
0:15:39 And investment banking was this unique combination
0:15:43 of a job that was incredibly mind-numbingly boring
0:15:46 with a massive amount of pressure placed on it.
0:15:48 I remember being at the printer.
0:15:50 This is, I’m dating myself.
0:15:50 And we would have to,
0:15:53 this is the person printing the S1.
0:15:55 And there was this company called Bowen
0:15:56 and all these other things.
0:15:57 And they would take me to football games
0:15:58 or out to dinners.
0:15:59 And they always had like hot people
0:16:02 who would want to take you to a baseball game set.
0:16:05 You would spend $120,000 printing the prospectus
0:16:09 of the IPL Morgan Stanley was taking out at their printer.
0:16:12 And my job was to go to the printer and spend all night
0:16:14 proofing the prospectus.
0:16:16 First, I proof it forward, then backwards.
0:16:20 Because literally it was cause for you to be terminated,
0:16:25 i.e. fired, if base rental payments on page 68
0:16:27 of the prospectus had an imposter fee
0:16:31 and base rental payments on page 136 did not.
0:16:36 And I worked, I worked probably, I don’t know,
0:16:39 60 to 80 hours a week in some weeks, 100 hours.
0:16:41 I remember there were some times where I would go in
0:16:44 on like a Thursday and basically would just go,
0:16:47 you know, kind of 60 hours straight.
0:16:49 And you weren’t allowed to leave as an analyst,
0:16:50 you’re the most junior person.
0:16:52 You had to be there before anybody else
0:16:55 and you couldn’t leave until everyone’s senior to you left.
0:16:56 Even if you didn’t have work to do.
0:16:58 I had a chair thrown at me.
0:16:59 – What’d you do wrong?
0:17:00 Do you remember?
0:17:03 I remember is the Orange County Transportation Authority
0:17:04 were issuing bonds and we had no chance
0:17:07 of getting to business, but we had to get it out
0:17:08 and we didn’t get it out in time.
0:17:13 And so this VP, his name rhymes with Stephen Dworkin,
0:17:16 see above asshole, came into the office
0:17:19 and threw a chair and or threw a chair at me,
0:17:20 whatever, I probably deserved it.
0:17:22 But like that’s the kind of shit you would just,
0:17:24 if someone threw furniture at an employee in this day
0:17:27 and age, they’d be fired.
0:17:31 Now, having said that, this notion that somehow,
0:17:36 if you genuinely believe Jamie Dimon or anybody else,
0:17:39 that these people shouldn’t be working that hard,
0:17:42 then institute a culture where you compensate
0:17:45 and reward the managers based on feedback
0:17:46 from the junior employees that they’re providing
0:17:48 some semblance of balance.
0:17:50 ‘Cause the notion that you’re somehow gonna electronically
0:17:53 track how many hours people are working is just bullshit.
0:17:57 And also I used to go in on a regular basis
0:18:01 on a Tuesday morning and then leave on a Wednesday night.
0:18:03 I would work 36 hours straight, why?
0:18:06 I immediately summed up, having gotten in at Morgan Stanley
0:18:09 where I didn’t deserve to get a job offer, but I did,
0:18:11 that I wasn’t as well-skilled,
0:18:12 well-educated as the other people.
0:18:15 Not because UCLA wasn’t a fantastic education,
0:18:17 but because UCLA was the kind of place
0:18:19 ’cause it was a public school and it had classes
0:18:21 with 400 people where you could hide and not work.
0:18:23 And I was one of those people.
0:18:27 So I showed up to Morgan Stanley woefully underskilled
0:18:28 and I knew it.
0:18:31 The other 87 analysts were just better than me.
0:18:33 So I thought, okay, what are my advantages?
0:18:35 You always wanna ask this as a young person,
0:18:36 what are your advantages?
0:18:40 My advantage was that I didn’t have a girlfriend.
0:18:43 I didn’t have many friends at that point living in LA.
0:18:45 I was living at home with my mom.
0:18:47 I didn’t have any dogs, any hobbies.
0:18:50 And I was also quite fit and very disciplined
0:18:51 where I could take a lot of pain.
0:18:54 So I said, I know, I’m gonna show these folks
0:18:56 and I’m here to play and at least once a week
0:18:57 I’m gonna work the night through.
0:19:01 And this was the kind of culture that rewarded that.
0:19:05 So if you were really serious about having bankers
0:19:08 or young bankers work less, it’s pretty simple.
0:19:10 Hire more fucking junior bankers.
0:19:14 So there’s more bandwidth and create a compensation system
0:19:17 for their bosses that changes the culture such that it’s like,
0:19:21 no, we were gonna make you a VP, but we’re not
0:19:24 because the word is everyone in your group
0:19:26 is especially the junior people
0:19:28 are working fucking 80 hours a week
0:19:30 and we don’t reward that here.
0:19:31 We punish it.
0:19:35 I do believe that there are companies
0:19:38 that position themselves in the marketplace
0:19:41 and people where they say, okay, this was the implicit deal
0:19:43 at Morgan Stanley, it’s still the implicit deal.
0:19:45 I think at Goldman maybe less so now.
0:19:47 We own your ass.
0:19:49 You have no life.
0:19:51 All your relationships, they’re gonna suffer.
0:19:54 Your health, probably gonna suffer too.
0:19:55 Oh, you love New York?
0:19:56 Well, guess what?
0:19:57 You’re not gonna experience much of it
0:19:58 over the next few years
0:20:01 ’cause you’re gonna experience the bowels of Goldman or Morgan
0:20:02 and guess what?
0:20:03 In exchange for that,
0:20:06 we’re gonna get you further, faster economically
0:20:09 and professionally than you would anywhere else in the world.
0:20:10 And you know what?
0:20:10 I signed up for that.
0:20:11 That’s what I wanted.
0:20:14 And a lot of young people want that.
0:20:17 So anything that risks health, okay,
0:20:19 that’s a whole other ball of wax,
0:20:21 but there is an entire generation,
0:20:24 including myself, of young people who say, you know what?
0:20:27 I will give you everything in exchange.
0:20:28 I want more.
0:20:30 I’m surprised you’re not more harsh
0:20:32 on the junior analysts and junior bankers
0:20:34 who have been complaining about this,
0:20:36 who are saying how terrible it is.
0:20:38 The hours are so long
0:20:39 that we’re struggling with our mental health.
0:20:42 I mean, this is why this is all happening
0:20:45 is because people my age are complaining about it.
0:20:46 And you mentioned that point
0:20:49 that when you went into banking as an analyst,
0:20:50 that’s what you signed up for.
0:20:53 You knew what you were signing up for
0:20:54 and you came to play.
0:20:57 And so the idea that you have people
0:21:02 who are experiencing what is regular in banking,
0:21:04 people my age who are saying that this is too much,
0:21:06 they can’t handle it,
0:21:10 you have decided by going into banking
0:21:13 that you wanna be a millionaire,
0:21:15 likely a multi-millionaire.
0:21:17 That’s something that you have decided you want for yourself.
0:21:19 You have also decided that you want to make
0:21:23 close to $200,000 in your first year out of college per year.
0:21:25 These are things that you want.
0:21:27 And if you want these things, be clear
0:21:29 that you should be willing to work yourself so hard
0:21:31 that you start to struggle mentally and physically.
0:21:33 That’s the game that you’re signing up for.
0:21:36 And if you don’t like it, then go do something else.
0:21:37 I think that’s fine.
0:21:39 But the idea that you would complain
0:21:41 having gotten yourself into that position,
0:21:43 knowing what the stakes are,
0:21:46 knowing how difficult it is to build wealth in America.
0:21:48 Yeah, you’re gonna have a pretty shitty week.
0:21:50 You’re gonna lose some sleep.
0:21:51 Two things.
0:21:52 One, I agree with you.
0:21:54 And two, I don’t wanna ever hear you bitch
0:21:56 about anything about this company yet.
0:21:58 (laughing)
0:22:03 Now, at some point, the difference here,
0:22:05 the only thing I will caveat this with is that
0:22:07 in order for the American economy to grow,
0:22:10 we’ve needed to bring in women.
0:22:12 And it’s also makes sense that women should be afforded
0:22:15 the same economic opportunities as men.
0:22:18 Where that culture doesn’t work is when women start
0:22:19 using their ovaries.
0:22:21 And that is when you create a culture
0:22:24 of people expected to work 60 to 80 hours a week,
0:22:25 what you’re essentially saying
0:22:28 is no one’s allowed to have kids here.
0:22:30 So, while I can see that type of culture
0:22:33 for the young analysts, it’s unhealthy to create,
0:22:35 I think that type of culture with people
0:22:37 as they start to think about starting families.
0:22:40 ‘Cause distinctive all the bullshit around the modern man,
0:22:42 women disproportionately shoulder
0:22:45 the responsibilities with children.
0:22:48 So unless we create a work environment
0:22:50 where we respect the fact that the species
0:22:54 needs to procreate, we wanna create corporate America
0:22:58 an opportunity for women to maintain acceleration
0:22:58 in their careers.
0:23:01 I mean, if you look at compensation in corporate America,
0:23:04 it’s actually been chewed up between men and women
0:23:09 until women have kids and then they drop way down.
0:23:14 So I buy that all hands, hunger games, culture.
0:23:17 You don’t like it, go somewhere else.
0:23:18 We’re gonna pay a shit ton of money.
0:23:22 We own your, and I appreciate your perspective on it.
0:23:24 I think things change when people get older though
0:23:26 and they start thinking about families
0:23:29 because if you’re gonna expect people to work 80 hours
0:23:31 a week, what you’re saying is we don’t want mothers here.
0:23:31 – 100%.
0:23:32 – And that’s a problem.
0:23:37 – Let’s finish out with this new model
0:23:38 that has been released by OpenAI,
0:23:40 known internally as Strawberry,
0:23:43 known now publicly as 01.
0:23:46 Any thoughts on this new, very powerful reasoning model
0:23:47 from OpenAI?
0:23:51 I love the fact they’re saying that we have a model
0:23:53 that’s gonna take longer to figure shit out.
0:23:57 It’s like, you know when you press on something online
0:24:00 and it spins a wheel like, oh, it’s thinking
0:24:02 or it’s finding you deals right now.
0:24:05 It’s searching for the best deal on the web
0:24:07 and it has a guy like with a magnifying glass
0:24:08 and he’s searching.
0:24:10 It’s like, it gives you this emotional feeling
0:24:13 that someone else is working for you.
0:24:14 I would just like to know,
0:24:16 do they need to slow the thing down
0:24:17 or are they trying to pretend
0:24:19 that this is being more thoughtful?
0:24:20 I don’t know, what are your thoughts?
0:24:22 – Well, I think that is the question
0:24:24 and no one’s really been able to try it yet
0:24:25 apart from internally.
0:24:27 So I think we should try it out,
0:24:30 but just a few stats that they have listed.
0:24:34 They put GPT-4 and this new one, 01,
0:24:35 this new reasoning model,
0:24:37 they put them up against each other
0:24:40 to do the qualifying exam
0:24:43 for the International Mathematics Olympiad.
0:24:47 GPT-4 got 13% of the problems right.
0:24:50 This new one got 83% of the problems right.
0:24:53 They also had it do a jailbreaking test.
0:24:57 GPT-4 scored a 22 on a scale of zero to 100
0:25:00 and the new 01 model scored an 84.
0:25:02 So it does seem like this new model,
0:25:05 it’s more mathematics minded,
0:25:09 is just incredibly powerful.
0:25:11 – I just get the sense that as technology
0:25:14 becomes more about frictionless flow
0:25:16 and network effects and agility,
0:25:18 that if you have the ability to get out ahead
0:25:20 in front of established leadership
0:25:22 and then have access to cheaper capital,
0:25:25 they can raise tens of millions of dollars.
0:25:27 No one can keep up with them right now.
0:25:28 They have a great team,
0:25:30 they have a great leader in Sam Altman.
0:25:32 You know, this just, it does feel like,
0:25:35 like I said, it feels like they’re running away with it
0:25:38 and we’ve been saying this for a while.
0:25:39 – We’ll be right back after the break
0:25:42 and we’ll have a good look at how the debate moved the markets.
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0:26:32 You ever wonder how people in Silicon Valley sleep at nine?
0:26:34 Well, apparently very well
0:26:37 on some of the most innovative sleep technology out there.
0:26:39 Aid Sleep is revolutionizing the way we sleep
0:26:40 with what they call the pod.
0:26:43 You can add the pod to your current mattress
0:26:45 like a fitted sheet to automatically cool down
0:26:47 or warm up each side of your bed.
0:26:49 They’ve just launched the newest generation of the pod,
0:26:51 the pod for ultra.
0:26:52 It can cool down each side of the bed
0:26:55 by 20 degrees Fahrenheit below room temperature.
0:26:57 It can also track your sleep time, sleep phases,
0:26:59 heart rate, and even your snoring.
0:27:02 And you know who’s gotten to try out the new pod?
0:27:03 What do you think, Ed?
0:27:05 Tell us about your experience with the pod.
0:27:06 (laughs)
0:27:08 – I love it, Scott.
0:27:08 It’s great.
0:27:11 It tracks my sleep, my heart rate.
0:27:14 And the best part is that it cools down my bed for me,
0:27:15 which is awesome.
0:27:19 It’s a great little addition to your nighttime routine.
0:27:23 – Go to aidsleep.com/propg to use code PropG
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0:27:43 Go look at the S&P 500.
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0:27:48 was once founded by venture capital firms,
0:27:51 producing billions of dollars in profits in the process.
0:27:54 The hard truth, however, is that the biggest venture funds
0:27:56 are almost entirely funded by institutional investors
0:27:58 like endowments and sovereign wealth funds.
0:28:01 So unless you knew a guy who knew a guy,
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0:28:06 did not get to participate in the pre-IPO growth
0:28:08 of any of those blue chip companies.
0:28:09 And it’s happening again.
0:28:11 Look at the biggest names in AI.
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0:28:19 The FunRise Innovation Fund is finally changing that.
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0:28:59 Let’s go back with Prof. G. Markets.
0:29:01 Vice President Kamala Harris and former President Donald Trump
0:29:04 faced off in what will likely be their only debate,
0:29:06 and the verdict from the markets was clear.
0:29:07 Harris won.
0:29:09 Bitcoin started to slide as soon as the debate began
0:29:11 and was down 4% by the morning.
0:29:15 Trump media stock tanked 15% when the market opened
0:29:17 and ended the day at an all-time low.
0:29:20 Meanwhile, solar stocks rose with the potential Harris
0:29:22 presidency boating well for clean energy.
0:29:27 Scott, this is basically the opposite of what happened
0:29:29 in the July debate when the markets were signaling
0:29:33 that a Trump presidency was basically certain.
0:29:35 What are your takeaways from the market’s reaction
0:29:36 this time around?
0:29:39 Well, I’m busy this weekend, but if you want,
0:29:42 we can hang out next weekend and do transgender operations
0:29:45 on illegal aliens in prison this weekend.
0:29:48 And my mom said I could bring a friend.
0:29:49 And then we’re going to eat Leia.
0:29:50 I was just about to say.
0:29:53 I want you to know Leia and Gangster are safe.
0:29:54 They’re safe.
0:29:58 I saw an illegal immigrant putting honeyglaze on their fur
0:30:00 and I figured out something’s wrong here.
0:30:05 I mean, watching her, the debate started at 2 a.m.,
0:30:08 London time, and by 3.15, I’m like, I’m out, she’s won.
0:30:10 I just, it doesn’t matter.
0:30:12 She could throw up on herself the next 15 minutes.
0:30:16 What will be more interesting, well, or as interesting,
0:30:21 is what industries do well or poorly based on the fact
0:30:23 that she’s maintained her momentum.
0:30:25 And I think as we’ve talked about,
0:30:29 you have the alternative energy ETFs went up,
0:30:31 Bitcoin went a little bit down.
0:30:35 His stock was off 13 or 15%, Donald Trump media,
0:30:38 meaning that basically the shareholders of that company
0:30:40 think the likelihood he’s going to become president
0:30:43 is down by 13 or 15%.
0:30:46 But it’s, I thought it was fascinating.
0:30:47 I’m obviously not a big Trump fan,
0:30:49 so I was really happy with it,
0:30:53 but it’ll be interesting to see what stocks.
0:30:55 I mean, so far it’s hard to read a lot from the market.
0:30:56 What are your thoughts, Ed?
0:30:58 – I think she did an incredible job.
0:31:01 I mean, it was obvious that she was far more prepared
0:31:02 than he was.
0:31:03 I mean, he doesn’t prepare,
0:31:07 but the amount of prep that clearly went into this,
0:31:10 the amount that she had her talking points ready,
0:31:13 she had clearly practiced a lot and it really came through.
0:31:16 Two things that I noticed about her
0:31:18 that I thought were really impressive.
0:31:21 One was her facial expression when he was talking.
0:31:26 She clearly knew exactly what facial expressions to pull,
0:31:29 and it just, it framed everything he was saying.
0:31:30 It made it look so much more ridiculous
0:31:34 when she would sort of smirk and smile and laugh
0:31:36 at everything he was saying.
0:31:38 I thought that was really impressive.
0:31:39 The other thing I thought was really impressive
0:31:42 was the handshake that she went in for at the very beginning.
0:31:43 – Total power move.
0:31:46 Total power move, just walking in there
0:31:49 and being assertive and also respectful and also direct.
0:31:52 And I’m wondering if maybe you have any insights
0:31:57 for any learnings on ways that that can be beneficial
0:32:00 to you, to an individual in the business world.
0:32:03 Has there ever been a time perhaps where,
0:32:06 being assertive with your body language,
0:32:09 with your physical body language in a business setting
0:32:12 has perhaps benefited you or you’ve seen that play out?
0:32:15 – My first boss, Carter Cordener, actually,
0:32:17 as I was shitposting everyone to Morgan Stanley,
0:32:20 actually a lovely guy who took a real interest in me.
0:32:24 He taught me, he said, “When you go into a meeting,”
0:32:27 he said, “unless everyone’s already, unless you’re late,
0:32:29 “walk around, go to them and shake their hand
0:32:31 “and introduce yourself.”
0:32:35 And I wouldn’t have done that naturally as a 22-year-old.
0:32:36 I would kind of sit higher,
0:32:37 waited for someone to introduce myself.
0:32:39 He said, “No, go around the table
0:32:42 “and walk to everyone to say, ‘Hi, I’m Scott Gowain,
0:32:43 “shake their hand.'”
0:32:46 And I mean, that sounds, and I kind of reminded me of that.
0:32:48 She went over to them.
0:32:50 I thought it was fantastic.
0:32:52 And something I tell my boys,
0:32:55 anytime they meet somebody, they walk up,
0:32:57 they square their hips, they square their shoulders,
0:32:59 they make eye contact, they shake their hand,
0:33:00 and they introduce themselves and say,
0:33:03 “It’s nice to meet you,” and they hold eye contact.
0:33:07 And I can’t tell you how many parents comment on it.
0:33:12 As a kid or as a young professional,
0:33:16 and I didn’t get this, get the easy stuff right.
0:33:17 The difference in your brand,
0:33:19 when there’s an eight o’clock meeting
0:33:23 and you show up at 7.55 versus 8.05,
0:33:25 it’s just get the easy stuff right.
0:33:27 For 10 minutes, you set a different tone
0:33:29 about your own brand.
0:33:32 Going back to Trump media stock,
0:33:35 which fell to a record low,
0:33:37 a lot of that is, of course, because of the debate,
0:33:40 but then there’s also a little wrinkle,
0:33:43 which is that the lockup period expires next week.
0:33:47 And what that means is that the early investors,
0:33:49 as this was a direct listing,
0:33:51 the early investors will finally be able
0:33:53 to sell their shares.
0:33:55 And one of those early investors, of course, includes Trump.
0:33:59 So just a prediction question for you,
0:34:03 come September 19th, do you think Trump will sell?
0:34:04 – It’s a tough one.
0:34:09 I don’t think so ’cause the brand of,
0:34:13 on the first possible moment that he sold, if he does,
0:34:16 could take the stock down so far so fast
0:34:17 that he ends up hurting himself.
0:34:20 If I were him, I’d put in a planned sale program.
0:34:21 And this is what a lot of CEOs do.
0:34:24 They say, all right, I have a ton of stock.
0:34:28 Every 90 days I’m gonna sell X number of shares.
0:34:31 And what that does is it takes out the interpretation
0:34:34 by the hecklers, right?
0:34:36 Oh, she sold a bunch of shares.
0:34:38 That must mean she doesn’t like it.
0:34:39 And she didn’t sell shares this quarter.
0:34:41 So she must be feeling bullish.
0:34:44 If you just say, I’m putting in place a planned sale program
0:34:48 and I’m gonna sell 400,000 shares every 90 days,
0:34:50 that doesn’t spook the market.
0:34:52 It’d be interesting to know what the other sellers are,
0:34:53 but here’s the thing.
0:34:58 If you own this stock, unless you believe he’s gonna win,
0:35:00 and that this is in fact become a tracking stock,
0:35:03 and that he’ll figure out a way in sort of a kleptocratic
0:35:05 fashion to support the company.
0:35:07 This company has zero value.
0:35:09 This company has negative value.
0:35:10 It’s not growing.
0:35:12 It’s user base is flat to down.
0:35:15 I think it does single digit millions of dollars
0:35:17 and it’s losing hundreds of millions.
0:35:20 I mean, it’s not a company.
0:35:24 And so if you have a lot of people trying to run
0:35:27 through a crowded door here, it could be a real problem.
0:35:29 Now, the moment everyone, what I have found though,
0:35:31 generally though, with stocks is when everyone’s freaked out
0:35:36 about the lockup period expiring, on that day,
0:35:37 a lot of times the stock goes up
0:35:40 because what you’re talking about,
0:35:42 the fear you’re talking about is reflected
0:35:44 in the stock right now.
0:35:47 And so if in fact, there aren’t a bunch of whatever
0:35:49 it’s called, Form 5, so I forget what it’s called
0:35:51 when you have to sell stock as an insider.
0:35:53 If not as many of them, everyone’s gonna be watching this.
0:35:56 If not as many of them are selling,
0:35:59 and the expectation of massive sales has already been built
0:36:02 into a stock that’s off, I know, 40% in the last 30 days
0:36:05 or something, or 60% in the last three months,
0:36:06 then the stock may go up.
0:36:08 In other words, I’d be very careful
0:36:10 trying to play around this,
0:36:12 but what I’m fairly confident saying
0:36:16 is this stock will be less than a dollar at some point
0:36:19 in the next 12 months if he is not reelected.
0:36:21 – Yeah, I think that’s an interesting point.
0:36:24 I think what’s interesting also is the timeline here
0:36:27 because he sort of needs to time this.
0:36:29 I mean, supposedly he needs the cash, right?
0:36:31 Because he’s got all these lawsuits.
0:36:33 So you’d think that he’s probably gonna time this
0:36:36 based on whether or not he becomes president,
0:36:40 because if he becomes president, he bothers himself
0:36:41 and the lawsuits go away.
0:36:43 He’s not necessarily gonna need the cash.
0:36:45 So it really is all hinging on that.
0:36:48 I think if he loses, he’s gonna then need
0:36:51 to really time it correctly because, you know,
0:36:54 the stock is probably gonna plummet at that point,
0:36:55 but he’s gonna need the liquidity,
0:36:58 but only in the situation where he doesn’t
0:36:59 win the presidency.
0:37:01 So it’s a very interesting situation.
0:37:02 He’s probably the first,
0:37:04 he is the first person in history
0:37:07 to be in a situation like that.
0:37:09 Just as we wrap up here, I just wanna point out
0:37:11 as we try to relate this to markets,
0:37:14 I mean, who is this gonna benefit?
0:37:18 I mean, the takeaway really here is the race is on.
0:37:21 That wasn’t, that didn’t feel like the case a few months ago,
0:37:23 but clearly it is now.
0:37:25 That’s what the predicted markets are showing
0:37:27 is that we have an extremely tight race
0:37:29 and who is that going to benefit?
0:37:30 It’s gonna benefit advertisers.
0:37:32 So I think we should be keeping an eye
0:37:34 on all the broadcasting stocks.
0:37:37 So Fox, Disney, Warner Brothers, Comcast,
0:37:39 I think we’ll see huge earnings from them
0:37:40 in the next quarter.
0:37:42 And then also we should be thinking
0:37:45 about the local stocks, local broadcasting.
0:37:48 So, you know, Gannett, Nexstar, Tegna,
0:37:51 I think these are stocks that are gonna see a big bump,
0:37:53 a big run up in the next few months or so
0:37:57 because we’re gonna see a huge amount of advertising
0:37:58 in the districts that matter.
0:38:01 We’ll be right back after the break
0:38:03 with a look at sovereign wealth funds.
0:38:16 – This episode is brought to you by On Investing,
0:38:19 an original podcast from Charles Schwab.
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0:39:14 – We’re back with Prof2Markets.
0:39:17 Former President Trump recently said that if elected,
0:39:19 he would like to create a sovereign wealth fund
0:39:20 for the United States.
0:39:22 After that speech, the White House also revealed
0:39:24 they were already working on a proposal
0:39:26 for the exact same thing.
0:39:28 Sovereign wealth funds are state owned investment funds
0:39:30 and they’re typically used in economies
0:39:32 that rely mainly on resource extraction
0:39:35 such as Saudi Arabia and Norway.
0:39:37 While there’s currently no national sovereign wealth fund
0:39:40 in the US, there are several state level funds
0:39:43 like Alaska’s permanent fund.
0:39:47 Scott, what are your thoughts on a US sovereign wealth fund
0:39:48 and do you think this is a good idea?
0:39:51 – So sovereign wealth funds have a layer on top of them
0:39:54 where they have an objective outside of just straight ROI.
0:39:57 So the biggest funds or the funds that every hedge fund
0:40:00 manager in the world is going, you know,
0:40:04 hat and hand to are in the Gulf, Adia, PIF.
0:40:06 And generally speaking, the jig is sort of up there
0:40:10 and that is those funds, those sovereign wealth funds
0:40:13 have the objective of trying to transition their economies
0:40:15 back away from a fossil fuels economy
0:40:20 to tourism, services, education.
0:40:23 And now when you go there, they’re mostly only willing
0:40:26 to fund companies that are gonna bring business
0:40:29 or find other capital to bring business into the region.
0:40:32 They’re no longer about, oh, you’re a Korean national
0:40:36 born in Japan, we’re gonna give you $100 billion
0:40:40 to go play in traffic and invest in, you know, US startups.
0:40:42 That I think those days are over.
0:40:45 In general, the best marketing in the world
0:40:47 is tobacco companies.
0:40:49 A company whose primary product is death, disease
0:40:52 and disability that figures out a way to sell a product
0:40:55 at 96 points in margin and create these very aspirational
0:40:57 brands, that’s the best marketing in the world.
0:41:00 The second best marketing in the world by sector
0:41:02 has been the financial services sector that has convinced you
0:41:07 that they can outperform the S&P because they have
0:41:09 these old guys and suspenders and all these models
0:41:13 and people from the smartest schools and wealthy people
0:41:14 like to believe they should have access to something
0:41:18 different so they continue to invest in these funds.
0:41:22 And if you added up all hedge funds, all mutual funds,
0:41:25 all internal investments, I mean, it’s an enormous industry.
0:41:28 Everyone on CNBC, they have underperformed the S&P
0:41:30 by the amount of their fees.
0:41:32 So what you’re basically doing is buying the S&P
0:41:35 but giving some guy with the highly credentialed
0:41:38 and highly aggressive and unbelievable living.
0:41:43 And the same is true here, these funds as your data shows
0:41:45 have underperformed the larger market.
0:41:46 Now they say they can justify it because they say
0:41:49 if we’re Alaska, we’re the Norwegian wealth fund,
0:41:51 we wanna increase influence around the world
0:41:54 or we wanna bring more jobs to Alaska, fine.
0:41:56 That’s a secondary objective.
0:41:58 The reason I’m not a fan of this in the U.S.
0:42:01 is that we don’t really need this.
0:42:04 We have more capital formation than any country
0:42:07 in the world by a factor of five, 10 or 100.
0:42:11 We don’t need, I don’t think to try and aggregate capital
0:42:13 to have influence through capital.
0:42:15 We do it through the dollar.
0:42:17 We do it through sanctions.
0:42:19 If we say to a country, we’re shutting you off
0:42:22 and you can no longer do business in dollars,
0:42:26 two thirds of the world has trouble doing business with them.
0:42:29 So we kind of have, unless we decided we were building
0:42:32 a sovereign wealth fund to try and, I don’t know,
0:42:35 I don’t know what objective they’d even place on it.
0:42:36 But to me, generally speaking,
0:42:38 when you get the government involved in something,
0:42:40 you’re going to pay an inefficiency
0:42:43 or an administration tax.
0:42:45 So I just, I feel like this is redundant
0:42:46 and not really needed.
0:42:48 This feels to me like more of a chest beating
0:42:50 kind of fun thing to talk about.
0:42:52 It doesn’t, I don’t see the rationale here.
0:42:56 – And it also isn’t clear at all how you’d fund this thing
0:43:01 because, I mean, the characteristic of a sovereign wealth fund,
0:43:04 I mean, what makes it different from any other pile of money
0:43:05 that’s in the government’s jurisdiction?
0:43:09 One of the differences is that it’s separate
0:43:11 from the central bank and it’s separate
0:43:12 from your finance ministry.
0:43:14 So in our case, that’s the treasury.
0:43:17 So Janet Yellen would not have control over this thing.
0:43:20 And then the second difference is that typically
0:43:22 the way that you fund it is it comes
0:43:26 from an unusual excess or surplus of assets.
0:43:30 So in Ireland, for example, which we’ve discussed before,
0:43:33 Ireland is a tax haven for big tech companies.
0:43:37 It collects huge amounts of tax revenue
0:43:39 from companies like Google and Apple and Microsoft.
0:43:42 And therefore they run a budget surplus.
0:43:46 They’re at around $10 billion in budget surplus in 2024.
0:43:48 Saudi Arabia, another example,
0:43:49 they’re just a giant oil farms.
0:43:51 They can sell a shit ton of oil
0:43:54 and they have all of this excess asset.
0:43:56 They have a budget surplus of around $30 billion.
0:44:00 So, that’s the way that other countries fund
0:44:01 their sovereign wealth funds.
0:44:03 That you have a lot of money left over.
0:44:06 So my question for Harris and for Trump
0:44:10 and for the White House, where the fuck is our money?
0:44:12 We don’t have any excess money.
0:44:16 I mean, we’ve been running a trade deficit since the ’70s.
0:44:19 We fund our entire economy with debt.
0:44:20 How are you gonna pay for this?
0:44:22 There is no money left over.
0:44:24 There’s nothing really left to sell.
0:44:27 So, I mean, I was confused and looked into this question.
0:44:29 How are they gonna fund it?
0:44:31 Biden and Harris don’t have an answer
0:44:33 or at least they haven’t stated it.
0:44:36 Trump’s answer, he says that we’re gonna fund it
0:44:39 with tariffs, that his tariff plan
0:44:42 is going to reverse the deficit.
0:44:45 And then once we are running on a surplus,
0:44:47 because of his tariffs,
0:44:50 we’re gonna be able to create the US sovereign wealth fund.
0:44:52 So, my read is similar to yours.
0:44:55 It feels like this is mostly a bunch of posturing
0:44:58 and it seems as if both sides here seem to think
0:45:02 that a US sovereign wealth fund
0:45:04 basically just sounds cool.
0:45:07 – So, the only time Democrats and Republicans agree,
0:45:09 the only thing to pass for bipartisanship
0:45:10 is they both come together.
0:45:13 Republicans wanna come taxes and spend more on defense.
0:45:16 Democrats wanna raise taxes
0:45:17 and spend more on social services.
0:45:18 So, they come together and say,
0:45:21 “I know, let’s cut taxes and spend more money.”
0:45:24 The only thing that they cooperate together on
0:45:26 is reckless spending the results
0:45:29 and unbelievable deficits on your generation.
0:45:31 Whenever Harris and Trump agree on anything,
0:45:33 it’s the stupidest fucking idea.
0:45:36 It’s like a tell, no tax on tips.
0:45:39 Okay, only 2% of American make tips.
0:45:41 The majority of them don’t pay any federal income tax
0:45:43 and you want the waiter to get a tax kept
0:45:44 and not the dishwasher.
0:45:47 This is just fucking stupid.
0:45:49 So, this strikes me similar to Congress
0:45:51 that if Harris and Trump agree on something,
0:45:54 it means it’s a really bad idea.
0:45:56 And this will go to my prediction.
0:46:00 Something else they agree on is also a really bad idea.
0:46:03 Ooh, I’m teasing my prediction at, I’m teasing it.
0:46:06 People can’t wait, people on the edge of their seats.
0:46:08 – Yeah, I can’t wait.
0:46:10 Just skip ahead if you’re listening.
0:46:15 Final question, say we did create a US sovereign wealth fund.
0:46:18 It’s called US Ventures.
0:46:19 Who’d be the general partner?
0:46:25 – I’d like to see Britney Spears.
0:46:28 I mean, why not?
0:46:29 I mean, let’s be honest,
0:46:32 not any of you have any fucking idea what they’re doing.
0:46:35 Britney Spears and Coco the monkey.
0:46:38 I’d like to, and they just throw darts.
0:46:41 Or we find those dogs that can smell bladder cancer
0:46:45 and urine and say to them, all right, can you pick a stock?
0:46:48 It would make any fucking difference.
0:46:51 As long as they’re diversified, shit, I don’t know.
0:46:53 Who would you want to run this thing?
0:46:55 – I’m pretty convinced by you.
0:46:56 Let’s go Britney Spears.
0:46:58 Maybe throw Peter Thiel in there.
0:46:59 – Well, Peter Thiel had a fund
0:47:01 and it did really well until it didn’t.
0:47:03 He was in the hedge fund business.
0:47:04 I forget the name of it, it had some like.
0:47:06 – Well, he’s also founder’s fund, so.
0:47:07 – Clarion, yeah, no, Clarion.
0:47:09 It was called Clarion or Clarion.
0:47:12 He had, well, the founder’s fund is in his wheelhouse.
0:47:15 The guy is a great investor in terms of VC,
0:47:18 but he had a fund that invested in publicly traded stocks
0:47:19 and it did really well.
0:47:21 I think this was back in the arts.
0:47:23 And then it did really not well.
0:47:25 And I think David Hasselhoff.
0:47:29 I would like David Hasselhoff to run the US stock fund.
0:47:32 And the guy who was the lead singer from Flock of Seagulls,
0:47:34 I’d like to get him involved.
0:47:36 I’d like to get him involved.
0:47:37 It doesn’t matter, Ed.
0:47:39 – Let’s take a look at the week ahead.
0:47:43 We’ll see US retail sales and housing starts for August.
0:47:45 And all eyes will be on the Federal Reserve
0:47:49 as it delivers its interest rate decision for September.
0:47:51 Scott, finally you can tell us our prediction.
0:47:53 – Okay, as we reference,
0:47:55 anytime Trump and Harris agree on something,
0:47:57 it’s a ridiculously stupid idea.
0:48:00 They both agree that the acquisition of US Steel
0:48:03 by Nippon Steel should be blocked.
0:48:06 So let’s talk a little bit about US Steel.
0:48:09 This is basically a shout of itself, a former icon.
0:48:12 It was at the turn of the 20th century,
0:48:14 one of the most important companies in the world.
0:48:16 It became the most valuable company in the world
0:48:17 for a hot minute.
0:48:19 It was the first company to ever reach a billion dollars
0:48:21 in revenue by the end of World War II,
0:48:24 it employed a third of a million people.
0:48:28 Now, US Steel employs 20,000 people.
0:48:32 4,000 in Pennsylvania, very strongly union.
0:48:35 5% of the global US Steel market is controlled by Japan.
0:48:38 4% is US and China’s like 50 or 60.
0:48:40 China’s basically just run away with the Steel market.
0:48:43 And the US is no longer competitive in Steel
0:48:45 for a variety of reasons.
0:48:48 Probably most specifically, we decimated
0:48:50 Japan and Germany’s infrastructure,
0:48:52 but the one advantage of that was that they got to build
0:48:54 from the ground up and think about innovation
0:48:56 and they’re just better at it.
0:48:58 And then China came in with an emerging Steel industry
0:49:00 and it’s just blown by everybody.
0:49:05 But it’s been politicized, you know, US Steel, right?
0:49:09 This is pure jingoist nationalist bullshit.
0:49:11 Japan, there’s some sort of security risk.
0:49:14 So they’re saying, oh no, we can’t sell it to Japan.
0:49:17 Japan is more American than many States right now.
0:49:20 Japan is an unbelievably strong ally.
0:49:21 They’re great with technology.
0:49:23 They produce Steel more efficiently than we do.
0:49:27 This is a lifeline for US Steel,
0:49:32 a company that is now worth a whopping $8 billion, right?
0:49:35 So NVIDIA loses 30 US Steel’s in one day last week,
0:49:38 but we’re worried about the Japanese coming for US Steel.
0:49:41 This is such bullshit.
0:49:43 So my predictions are following.
0:49:45 I don’t think this thing is gonna go through.
0:49:46 And of course, the unions have said,
0:49:49 raised their hand and said, we’re uncomfortable with this.
0:49:50 Okay, great.
0:49:52 You should join the Riders Guild to make sure
0:49:54 that you fuck over your constituents
0:49:57 with a bunch of posturing, the results and the layoffs.
0:49:59 And that’s what’s gonna happen here.
0:50:01 This acquisition is gonna be blocked
0:50:03 for purely political reasons.
0:50:06 You’re gonna see layoffs and you’re gonna see US Steel stock,
0:50:10 which is at 35 sub 20 bucks within 12 months.
0:50:14 In addition, the more mendacious part of this
0:50:16 is that if you’re a small company, a business,
0:50:20 a big business, what you want is your stocks to go up
0:50:22 because there is the possibility
0:50:24 of an international company coming in
0:50:26 and acquiring your company.
0:50:29 When we start coming up with bullshit nationalist reasons
0:50:31 why companies can’t buy American companies
0:50:34 that pose no security threat whatsoever,
0:50:37 it reduces the price, the takeover premium
0:50:41 of every company that has strategic value
0:50:42 to international players.
0:50:45 This is just so fucking stupid.
0:50:47 It makes my hair stand on end.
0:50:51 So my prediction, this is not gonna go through
0:50:53 for purely political nationalist reasons
0:50:58 and US Steel stock is gonna be below 25, 20 bucks a share
0:51:01 in 12 months and those 20,000 precious employees
0:51:04 at US Steel are gonna be more like 10 or 12,000
0:51:05 ’cause US Steel is gonna have no choice
0:51:10 without a big brother subscale to start closing plants.
0:51:16 – This episode was produced by Claire Miller
0:51:18 and engineered by Benjamin Spencer.
0:51:20 Our associate producer is Alison Weiss.
0:51:21 Our executive producer is Catherine Dillon.
0:51:23 Mia Silverio is our research lead
0:51:25 and Drew Burris is our technical director.
0:51:26 Thank you for listening to “Prophecy Markets”
0:51:28 from the Vox Media Podcast Network.
0:51:31 Join us on Thursday for our conversation
0:51:34 with Chris Anderson, only on “Prophecy Markets.”
0:51:37 (upbeat music)
0:51:43 ♪ You help me ♪
0:51:47 ♪ In kind ♪
0:51:52 ♪ Reunion ♪
0:52:00 ♪ As the world turns ♪
0:52:05 ♪ And the blood flows ♪
0:52:07 (upbeat music)
0:52:10 (upbeat music)
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0:00:41 >> This episode is brought to you by On Investing,
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0:01:45 >> Today’s number, 790.
0:01:47 That’s how many islands are in Scotland,
0:01:49 130 of which are inhabited.
0:01:53 Ed, in Scotland, if you buy a three-year-old whiskey,
0:01:55 you can call it Scotch.
0:01:56 Any younger than that?
0:01:58 It’s just bad parenting, Ed.
0:02:09 [MUSIC]
0:02:10 >> Ed, I’m in Scotland.
0:02:13 I’m in Scotland.
0:02:15 >> I couldn’t tell from the haunted house behind you.
0:02:18 You got to tell everyone where exactly you are in Scotland and
0:02:20 why you’re there and what the occasion is.
0:02:22 >> I’ll go in reverse order.
0:02:27 I’m turning 50 and the naked, I look 49 and 7/8.
0:02:31 I am here and 100 of my closest friends are showing up.
0:02:34 By the way, you were came in at 102, so you just missed the list.
0:02:36 >> Just missed it, just missed it.
0:02:38 >> You just missed the list.
0:02:44 I mean, I’m outside of Aberdeen at a place called the Five Arms and no joke.
0:02:47 I’ve got, we’ve taken over a hotel.
0:02:50 We’ve been planning this for two years and all my,
0:02:54 basically my entire life is flying in over the course of the next 24 hours.
0:02:58 This isn’t airing until Monday, so it’s almost sort of,
0:02:59 I don’t worry that I’m hexing it.
0:03:04 Anyways, I’m here celebrating a nice moment in life, Ed.
0:03:05 I never thought I’d get here.
0:03:09 I never thought I’d be here at this point, so I’m very, very happy to be here.
0:03:12 That’s probably the alcohol speaking, but I’m actually,
0:03:14 I am actually very happy to be here.
0:03:15 >> Any anxiety?
0:03:17 >> It’s funny you even asked that.
0:03:19 >> Better be fun, better be fun.
0:03:20 >> I’ve been thinking a lot about that.
0:03:22 I do have anxiety.
0:03:24 I’m already sort of just hoping it goes really well and
0:03:25 that everyone else has a nice time.
0:03:29 It’s really, when I was your age, Ed, I didn’t have enough anxiety.
0:03:31 I almost got kicked out of UCLA three times.
0:03:35 I was on academic probation and then if you get less than a 2.0 the next
0:03:38 semester or a quarter, you go subject to dismissal.
0:03:39 I was subject to dismissal.
0:03:42 I was on academic probation, I think four or five times.
0:03:44 I was subject to dismissal two or three times.
0:03:46 And I just wasn’t worried about it.
0:03:49 I just didn’t care, my God, I’ll just take an easy econ class and get a B and
0:03:51 everything will be fine.
0:03:54 And I should have been more worried about my life back then.
0:03:58 From the age of 30 to 40, I think I had exactly the right amount of anxiety.
0:04:03 And anxiety is a key attribute or trait for survival.
0:04:07 You’re supposed to be anxious about shit because there are things that can kill you.
0:04:11 And then from about the age of 40, 45 on, I’ve been too anxious.
0:04:15 I don’t, and unfortunately I get anxious the day after I drink alcohol.
0:04:18 So I’m pretty much anxious, kind of five, six days a week.
0:04:20 But yeah, now I worry about fucking everything.
0:04:24 I don’t worry about my kids, I worry about business.
0:04:25 I don’t worry that much about you guys.
0:04:26 >> I couldn’t tell.
0:04:28 >> Now I do, do you feel like you’re an anxious person?
0:04:33 >> Well, I think hosting is a very anxious thing because you’re inviting
0:04:36 a bunch of people, they’re taking time out of their day,
0:04:39 in this case their entire weekend, to come and celebrate you.
0:04:43 So you kind of, there’s all this pressure to get everyone to have a good time.
0:04:47 I’m a terrible host because I get anxious, I’m always checking in on people,
0:04:48 making sure they’re having a good time.
0:04:50 And then I think I become annoying.
0:04:54 I think the best hosts are the one who can do all the work, get anxious beforehand,
0:04:58 and then just totally let go, have a good time, let people do what they want to do.
0:05:02 Don’t be too controlling, those are the best hosts and I am not one of them.
0:05:04 >> Jesus Christ, don’t be so fucking mature.
0:05:06 Like when did this happen to you?
0:05:08 Seriously, no, that’s good advice.
0:05:12 I’m muslin, my answer for that is good beer and edibles.
0:05:14 >> Yeah, exactly, that’s a good idea.
0:05:16 >> I want to get through, I want to get everybody here.
0:05:18 I want Saturday night, I want the speeches to go well,
0:05:23 I want everyone to feel welcome and loved, and then I’m just going to let loose.
0:05:26 So I’m not going to drink because I get very emotional when I drink and
0:05:31 I’ll just be walking around sobbing all the time, which kind of brings the whole vibe down.
0:05:32 Yeah, I’m real happy to be here.
0:05:36 Anyways, enough of that shit, get to the news, get to the news, Ed, what’s going on?
0:05:38 >> Let’s start with our weekly review of Market Vitals.
0:05:45 [MUSIC]
0:05:49 >> The S&P 500 rose, the dollar was flat, Bitcoin climbed, and
0:05:54 the yield on 10-year treasuries hit a 52-week low, shifting to the headlines.
0:05:58 The consumer price index increased just 2.5% from a year earlier and
0:06:02 eased slightly from July, that is its lowest level in three years.
0:06:07 And in other economic news, median household income rose 4% in 2023 to
0:06:12 more than $80,000, that’s the first increase since 2019.
0:06:16 Oracle’s revenue came in higher than expected, rising 7% year over year.
0:06:21 Cloud services became the company’s largest business, with revenue up 21%
0:06:26 from a year earlier, and shares rose 15% to a record high.
0:06:29 Wall Street is limiting the amount of hours that young bankers can work.
0:06:34 JP Morgan announced it will cap hours for junior investment bankers at 80 hours a week.
0:06:36 Bank of America already had a cap in place, but
0:06:41 it has a new timekeeping tool that will more closely track the hours its junior
0:06:43 bankers work.
0:06:48 And finally, OpenAI is releasing a new AI model known internally as Strawberry,
0:06:53 which is trained to spend more time coming up with an answer before it responds to a prompt.
0:06:57 The new model will be able to solve multi-step math and coding problems.
0:06:58 Scott, your reactions?
0:07:01 Starting with the inflation and economic data.
0:07:06 >> So inflation, the consumer price index just 2.5% down from I think 2.8 or
0:07:11 2.9 last quarter, it’s almost at its target 2%.
0:07:13 And then household income rising 4%.
0:07:16 I mean, basically you have the Goldilocks economy.
0:07:22 Now, the psychological problem that happens is one, social media loves shitposting and
0:07:28 there’s a certain gravitas and intellectual vibe you get when you’re a pessimist.
0:07:31 But and people just love to shitpost our government.
0:07:34 And also people credit their own grit and
0:07:37 character for their household income increasing.
0:07:41 But when diapers go up in price or oil goes up or gas goes up in price,
0:07:43 they blame whoever’s in office.
0:07:48 But this is about as strong as economy as you could point to anywhere in the world.
0:07:51 The problem is, I would argue, is that we don’t distribute it equally.
0:07:56 Just as that technology philosopher said as William Gibson or
0:08:00 someone else said that the future is here, just not evenly distributed.
0:08:01 Prosperity is here.
0:08:06 An unbelievable economy is here, it’s just not evenly distributed.
0:08:11 And I think of, I think of what, I mean,
0:08:14 we’re writing a post on a mercenary malice about minimum wage.
0:08:20 And I believe that the one thing you could do most seamlessly to reduce
0:08:24 diabetes, high blood pressure, depression, suicide,
0:08:29 decreased divorce rates would be to raise minimum wage to 25 bucks an hour.
0:08:33 Instead of building a gigantic apparatus, which all these government programs are,
0:08:34 which tend to be somewhat inefficient.
0:08:39 Instead of a thick layer of unions, which are trying to protect workers whose
0:08:42 intentions are noble but are very inefficient and sometimes corrupt.
0:08:47 Just put more money in the pockets of Americans with a minimum wage of 25 bucks
0:08:49 during a period where employment is this strong.
0:08:53 Do you know what percentage of American households that make less than $75,000 a year?
0:08:59 >> I’m gonna guess 20%.
0:09:01 >> Get this, 50%.
0:09:04 Half of American households make less than $75,000 a year.
0:09:08 What would raising minimum wage of 25 bucks an hour do for them?
0:09:10 Anyways, a bit of a tangent.
0:09:15 But I’m very happy about CPI only dropping to 2.5%, what are your thoughts?
0:09:17 >> Yeah, just on that point.
0:09:20 So I mean, one thing we should point out is that that household income number
0:09:22 is inflation adjusted.
0:09:25 So it is somewhat meaningful.
0:09:31 There is one statistic that was in that same report that came from the Census Bureau.
0:09:36 And that was that the poverty rate in America fell.
0:09:40 But the number is quite staggering.
0:09:46 It fell from 11.5% to 11.1%.
0:09:51 So that means that there are 37 million people in America
0:09:54 who are still living in poverty.
0:09:57 And to your point, I think we spend a lot of time
0:10:01 analyzing a lot of technicalities in the markets.
0:10:03 And we should be doing that.
0:10:07 We think about the yield curve and interest rates and P/E ratios, et cetera, et cetera.
0:10:08 And there’s value to that.
0:10:15 But I think there is also value in keeping the big picture front of mind.
0:10:20 And the big picture is that one in 10 Americans cannot afford basic necessities to live.
0:10:25 So I would hope that it also reminds us that while, yes, we are doing pretty well
0:10:28 on a relative basis when we look at other countries.
0:10:32 If you look at just America from an absolute perspective,
0:10:34 we could certainly be doing a lot better in this country.
0:10:36 Oh, I 100% agree.
0:10:37 There’s, I mean, more stats.
0:10:41 One in five children in America live in a household that’s food insecure.
0:10:45 Whatever all the blessings are of the fruits of our riches,
0:10:51 we do, in my view, a pretty shit poor job of distributing and allocating resources,
0:10:55 despite the fact that we just have so much of it.
0:10:56 Now let’s talk about oracles earnings.
0:11:01 You kind of own this, Ed.
0:11:02 Talk about oracle.
0:11:05 Well, one segue that we could use here is that, you know,
0:11:09 you’re talking about wealth inequality, income inequality.
0:11:15 Larry Ellison, who is the founder of Oracle, added $14 billion to his net worth
0:11:17 in one day after these earnings.
0:11:20 He is now the fifth richest person in the world.
0:11:21 He is ahead of Bill Gates.
0:11:28 His net worth is, wait for it, $168 billion.
0:11:31 It’s just staggering.
0:11:33 We can get into a conversation about that,
0:11:35 but I think we’ve already covered the inequality part.
0:11:39 Let’s talk about the Oracle earnings themselves.
0:11:42 Earlier this year, I said I was bullish on Oracle.
0:11:45 My thesis here was that Oracle is kind of the fourth musketeer
0:11:47 when it comes to cloud computing.
0:11:51 The options are basically Amazon, Google, Microsoft or Oracle.
0:11:56 And my view was that Oracle is a really attractive company for AI companies,
0:11:59 especially AI startups, because Oracle is the only one
0:12:02 that isn’t actively developing its own LLM.
0:12:06 So if you’re an AI company and you want to compete with the likes of Microsoft,
0:12:11 who’s developing a co-pilot and working with Open AI and ChatGBT,
0:12:12 or Google with Gemini,
0:12:16 you probably don’t want to be also paying them to keep your lights on.
0:12:18 You’d probably rather go with a compute provider
0:12:21 who you ultimately won’t be competing with.
0:12:23 In this case, that would be Oracle.
0:12:25 And I think we are seeing this play out.
0:12:28 If we look at the actual earnings here, revenue growth was up 7%,
0:12:30 which is fine, not great.
0:12:34 Cloud revenue was up 21%, which is very strong.
0:12:35 But the most important number here
0:12:38 was the remaining performance obligations,
0:12:41 which is basically code for booked revenue
0:12:43 that is going to come in the next 12 months.
0:12:45 That number was up 52%.
0:12:48 So they’re clearly partnering with a lot more companies
0:12:50 who want to get their computing power.
0:12:53 Morgan Stanley is now estimating that AI revenue
0:12:57 will increase from 15% of Oracle’s total cloud revenue
0:12:59 to more than half by 2027.
0:13:02 So that’s why Oracle is at an all-time high.
0:13:06 The stock’s up 50% year-to-date.
0:13:10 I think it’s essentially emerging as one of the AI juggernauts.
0:13:11 Well, you called it.
0:13:15 You sort of said this was the big AI company that no one’s talking about.
0:13:19 And I would say probably Larry Ellison and maybe Reed Hastings
0:13:22 are the least talked about CEOs who’ve been the biggest players
0:13:24 in the world of tech.
0:13:26 By the way, if you ever want to go to a great hotel in Palm Springs,
0:13:28 which I know you’re thinking about,
0:13:31 Larry Ellison, this is what people were the $160 billion do
0:13:33 or whatever he’s worth.
0:13:35 He has a winter home out there that’s spectacular.
0:13:37 He built this world-class golf course and spa,
0:13:40 and obviously it kind of sits fallow,
0:13:41 so he turned it into a hotel.
0:13:43 He also owns an island in Hawaii.
0:13:44 I don’t know if you’ve seen this,
0:13:46 but he owns the island of Lanai.
0:13:49 I think it’s the largest private island in the world,
0:13:51 and I think he’s built four seasons on there, too.
0:13:55 I’ve stayed on Lanai when I’m back in my previous life.
0:13:57 I used to go there with my ex-wife.
0:14:00 We’d stay at the Lodger Quelle and we’d go to Lanai.
0:14:01 Hold me, Ed.
0:14:03 Hold me.
0:14:06 Anyways, stay at the sensei.
0:14:09 Look, they’re doing an amazing job.
0:14:12 The stock’s trading at a forward P/E ratio of 25.
0:14:14 Microsoft and Amazon trade at 32,
0:14:16 which kind of connotes that there might be
0:14:18 some additional juice here in terms of the stock.
0:14:23 Oracle and Nike are the two stocks I have in my NYU savings
0:14:25 or 401K or whatever it is.
0:14:26 When I started there, they had some matching programs,
0:14:28 so I listened to the future, Scott,
0:14:29 and I started maxing it out.
0:14:32 I went to Nike, which is literally shit the bed.
0:14:35 And Oracle, which is good to hear, is doing really well.
0:14:37 Should we talk about limiting the number
0:14:39 of hours young bankers work?
0:14:42 Please, I am so excited to get your take on this.
0:14:43 What do you think of it?
0:14:44 – I’m up two minds here.
0:14:49 So, I was part of,
0:14:52 my first job out of college was at Morgan Stanley.
0:14:56 And I have never worked with a larger concentration
0:14:57 of assholes.
0:15:00 These were just like not nice people.
0:15:03 And it defined the term abused children syndrome.
0:15:05 And that was when I was young and in finance,
0:15:07 they all fucking hated their jobs.
0:15:09 I mean, sorry, there’s like one or two people
0:15:10 or big deal makers and a lot of that.
0:15:12 But for the most part,
0:15:14 they were really smart people or overachievers
0:15:17 who got jobs and investment banks.
0:15:18 And by the time they were 30,
0:15:19 they were making back then, you know,
0:15:22 $300,000 or $500,000, which is a lot of money.
0:15:24 And they just couldn’t leave.
0:15:26 Most jobs are usually one of two things.
0:15:28 They’re either very interesting,
0:15:31 but a lot of pressure, a lot of stress,
0:15:34 or they’re incredibly boring, right?
0:15:37 But easy, not a lot of stress.
0:15:39 And investment banking was this unique combination
0:15:43 of a job that was incredibly mind-numbingly boring
0:15:46 with a massive amount of pressure placed on it.
0:15:48 I remember being at the printer.
0:15:50 This is, I’m dating myself.
0:15:50 And we would have to,
0:15:53 this is the person printing the S1.
0:15:55 And there was this company called Bowen
0:15:56 and all these other things.
0:15:57 And they would take me to football games
0:15:58 or out to dinners.
0:15:59 And they always had like hot people
0:16:02 who would want to take you to a baseball game set.
0:16:05 You would spend $120,000 printing the prospectus
0:16:09 of the IPL Morgan Stanley was taking out at their printer.
0:16:12 And my job was to go to the printer and spend all night
0:16:14 proofing the prospectus.
0:16:16 First, I proof it forward, then backwards.
0:16:20 Because literally it was cause for you to be terminated,
0:16:25 i.e. fired, if base rental payments on page 68
0:16:27 of the prospectus had an imposter fee
0:16:31 and base rental payments on page 136 did not.
0:16:36 And I worked, I worked probably, I don’t know,
0:16:39 60 to 80 hours a week in some weeks, 100 hours.
0:16:41 I remember there were some times where I would go in
0:16:44 on like a Thursday and basically would just go,
0:16:47 you know, kind of 60 hours straight.
0:16:49 And you weren’t allowed to leave as an analyst,
0:16:50 you’re the most junior person.
0:16:52 You had to be there before anybody else
0:16:55 and you couldn’t leave until everyone’s senior to you left.
0:16:56 Even if you didn’t have work to do.
0:16:58 I had a chair thrown at me.
0:16:59 – What’d you do wrong?
0:17:00 Do you remember?
0:17:03 I remember is the Orange County Transportation Authority
0:17:04 were issuing bonds and we had no chance
0:17:07 of getting to business, but we had to get it out
0:17:08 and we didn’t get it out in time.
0:17:13 And so this VP, his name rhymes with Stephen Dworkin,
0:17:16 see above asshole, came into the office
0:17:19 and threw a chair and or threw a chair at me,
0:17:20 whatever, I probably deserved it.
0:17:22 But like that’s the kind of shit you would just,
0:17:24 if someone threw furniture at an employee in this day
0:17:27 and age, they’d be fired.
0:17:31 Now, having said that, this notion that somehow,
0:17:36 if you genuinely believe Jamie Dimon or anybody else,
0:17:39 that these people shouldn’t be working that hard,
0:17:42 then institute a culture where you compensate
0:17:45 and reward the managers based on feedback
0:17:46 from the junior employees that they’re providing
0:17:48 some semblance of balance.
0:17:50 ‘Cause the notion that you’re somehow gonna electronically
0:17:53 track how many hours people are working is just bullshit.
0:17:57 And also I used to go in on a regular basis
0:18:01 on a Tuesday morning and then leave on a Wednesday night.
0:18:03 I would work 36 hours straight, why?
0:18:06 I immediately summed up, having gotten in at Morgan Stanley
0:18:09 where I didn’t deserve to get a job offer, but I did,
0:18:11 that I wasn’t as well-skilled,
0:18:12 well-educated as the other people.
0:18:15 Not because UCLA wasn’t a fantastic education,
0:18:17 but because UCLA was the kind of place
0:18:19 ’cause it was a public school and it had classes
0:18:21 with 400 people where you could hide and not work.
0:18:23 And I was one of those people.
0:18:27 So I showed up to Morgan Stanley woefully underskilled
0:18:28 and I knew it.
0:18:31 The other 87 analysts were just better than me.
0:18:33 So I thought, okay, what are my advantages?
0:18:35 You always wanna ask this as a young person,
0:18:36 what are your advantages?
0:18:40 My advantage was that I didn’t have a girlfriend.
0:18:43 I didn’t have many friends at that point living in LA.
0:18:45 I was living at home with my mom.
0:18:47 I didn’t have any dogs, any hobbies.
0:18:50 And I was also quite fit and very disciplined
0:18:51 where I could take a lot of pain.
0:18:54 So I said, I know, I’m gonna show these folks
0:18:56 and I’m here to play and at least once a week
0:18:57 I’m gonna work the night through.
0:19:01 And this was the kind of culture that rewarded that.
0:19:05 So if you were really serious about having bankers
0:19:08 or young bankers work less, it’s pretty simple.
0:19:10 Hire more fucking junior bankers.
0:19:14 So there’s more bandwidth and create a compensation system
0:19:17 for their bosses that changes the culture such that it’s like,
0:19:21 no, we were gonna make you a VP, but we’re not
0:19:24 because the word is everyone in your group
0:19:26 is especially the junior people
0:19:28 are working fucking 80 hours a week
0:19:30 and we don’t reward that here.
0:19:31 We punish it.
0:19:35 I do believe that there are companies
0:19:38 that position themselves in the marketplace
0:19:41 and people where they say, okay, this was the implicit deal
0:19:43 at Morgan Stanley, it’s still the implicit deal.
0:19:45 I think at Goldman maybe less so now.
0:19:47 We own your ass.
0:19:49 You have no life.
0:19:51 All your relationships, they’re gonna suffer.
0:19:54 Your health, probably gonna suffer too.
0:19:55 Oh, you love New York?
0:19:56 Well, guess what?
0:19:57 You’re not gonna experience much of it
0:19:58 over the next few years
0:20:01 ’cause you’re gonna experience the bowels of Goldman or Morgan
0:20:02 and guess what?
0:20:03 In exchange for that,
0:20:06 we’re gonna get you further, faster economically
0:20:09 and professionally than you would anywhere else in the world.
0:20:10 And you know what?
0:20:10 I signed up for that.
0:20:11 That’s what I wanted.
0:20:14 And a lot of young people want that.
0:20:17 So anything that risks health, okay,
0:20:19 that’s a whole other ball of wax,
0:20:21 but there is an entire generation,
0:20:24 including myself, of young people who say, you know what?
0:20:27 I will give you everything in exchange.
0:20:28 I want more.
0:20:30 I’m surprised you’re not more harsh
0:20:32 on the junior analysts and junior bankers
0:20:34 who have been complaining about this,
0:20:36 who are saying how terrible it is.
0:20:38 The hours are so long
0:20:39 that we’re struggling with our mental health.
0:20:42 I mean, this is why this is all happening
0:20:45 is because people my age are complaining about it.
0:20:46 And you mentioned that point
0:20:49 that when you went into banking as an analyst,
0:20:50 that’s what you signed up for.
0:20:53 You knew what you were signing up for
0:20:54 and you came to play.
0:20:57 And so the idea that you have people
0:21:02 who are experiencing what is regular in banking,
0:21:04 people my age who are saying that this is too much,
0:21:06 they can’t handle it,
0:21:10 you have decided by going into banking
0:21:13 that you wanna be a millionaire,
0:21:15 likely a multi-millionaire.
0:21:17 That’s something that you have decided you want for yourself.
0:21:19 You have also decided that you want to make
0:21:23 close to $200,000 in your first year out of college per year.
0:21:25 These are things that you want.
0:21:27 And if you want these things, be clear
0:21:29 that you should be willing to work yourself so hard
0:21:31 that you start to struggle mentally and physically.
0:21:33 That’s the game that you’re signing up for.
0:21:36 And if you don’t like it, then go do something else.
0:21:37 I think that’s fine.
0:21:39 But the idea that you would complain
0:21:41 having gotten yourself into that position,
0:21:43 knowing what the stakes are,
0:21:46 knowing how difficult it is to build wealth in America.
0:21:48 Yeah, you’re gonna have a pretty shitty week.
0:21:50 You’re gonna lose some sleep.
0:21:51 Two things.
0:21:52 One, I agree with you.
0:21:54 And two, I don’t wanna ever hear you bitch
0:21:56 about anything about this company yet.
0:21:58 (laughing)
0:22:03 Now, at some point, the difference here,
0:22:05 the only thing I will caveat this with is that
0:22:07 in order for the American economy to grow,
0:22:10 we’ve needed to bring in women.
0:22:12 And it’s also makes sense that women should be afforded
0:22:15 the same economic opportunities as men.
0:22:18 Where that culture doesn’t work is when women start
0:22:19 using their ovaries.
0:22:21 And that is when you create a culture
0:22:24 of people expected to work 60 to 80 hours a week,
0:22:25 what you’re essentially saying
0:22:28 is no one’s allowed to have kids here.
0:22:30 So, while I can see that type of culture
0:22:33 for the young analysts, it’s unhealthy to create,
0:22:35 I think that type of culture with people
0:22:37 as they start to think about starting families.
0:22:40 ‘Cause distinctive all the bullshit around the modern man,
0:22:42 women disproportionately shoulder
0:22:45 the responsibilities with children.
0:22:48 So unless we create a work environment
0:22:50 where we respect the fact that the species
0:22:54 needs to procreate, we wanna create corporate America
0:22:58 an opportunity for women to maintain acceleration
0:22:58 in their careers.
0:23:01 I mean, if you look at compensation in corporate America,
0:23:04 it’s actually been chewed up between men and women
0:23:09 until women have kids and then they drop way down.
0:23:14 So I buy that all hands, hunger games, culture.
0:23:17 You don’t like it, go somewhere else.
0:23:18 We’re gonna pay a shit ton of money.
0:23:22 We own your, and I appreciate your perspective on it.
0:23:24 I think things change when people get older though
0:23:26 and they start thinking about families
0:23:29 because if you’re gonna expect people to work 80 hours
0:23:31 a week, what you’re saying is we don’t want mothers here.
0:23:31 – 100%.
0:23:32 – And that’s a problem.
0:23:37 – Let’s finish out with this new model
0:23:38 that has been released by OpenAI,
0:23:40 known internally as Strawberry,
0:23:43 known now publicly as 01.
0:23:46 Any thoughts on this new, very powerful reasoning model
0:23:47 from OpenAI?
0:23:51 I love the fact they’re saying that we have a model
0:23:53 that’s gonna take longer to figure shit out.
0:23:57 It’s like, you know when you press on something online
0:24:00 and it spins a wheel like, oh, it’s thinking
0:24:02 or it’s finding you deals right now.
0:24:05 It’s searching for the best deal on the web
0:24:07 and it has a guy like with a magnifying glass
0:24:08 and he’s searching.
0:24:10 It’s like, it gives you this emotional feeling
0:24:13 that someone else is working for you.
0:24:14 I would just like to know,
0:24:16 do they need to slow the thing down
0:24:17 or are they trying to pretend
0:24:19 that this is being more thoughtful?
0:24:20 I don’t know, what are your thoughts?
0:24:22 – Well, I think that is the question
0:24:24 and no one’s really been able to try it yet
0:24:25 apart from internally.
0:24:27 So I think we should try it out,
0:24:30 but just a few stats that they have listed.
0:24:34 They put GPT-4 and this new one, 01,
0:24:35 this new reasoning model,
0:24:37 they put them up against each other
0:24:40 to do the qualifying exam
0:24:43 for the International Mathematics Olympiad.
0:24:47 GPT-4 got 13% of the problems right.
0:24:50 This new one got 83% of the problems right.
0:24:53 They also had it do a jailbreaking test.
0:24:57 GPT-4 scored a 22 on a scale of zero to 100
0:25:00 and the new 01 model scored an 84.
0:25:02 So it does seem like this new model,
0:25:05 it’s more mathematics minded,
0:25:09 is just incredibly powerful.
0:25:11 – I just get the sense that as technology
0:25:14 becomes more about frictionless flow
0:25:16 and network effects and agility,
0:25:18 that if you have the ability to get out ahead
0:25:20 in front of established leadership
0:25:22 and then have access to cheaper capital,
0:25:25 they can raise tens of millions of dollars.
0:25:27 No one can keep up with them right now.
0:25:28 They have a great team,
0:25:30 they have a great leader in Sam Altman.
0:25:32 You know, this just, it does feel like,
0:25:35 like I said, it feels like they’re running away with it
0:25:38 and we’ve been saying this for a while.
0:25:39 – We’ll be right back after the break
0:25:42 and we’ll have a good look at how the debate moved the markets.
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0:26:32 You ever wonder how people in Silicon Valley sleep at nine?
0:26:34 Well, apparently very well
0:26:37 on some of the most innovative sleep technology out there.
0:26:39 Aid Sleep is revolutionizing the way we sleep
0:26:40 with what they call the pod.
0:26:43 You can add the pod to your current mattress
0:26:45 like a fitted sheet to automatically cool down
0:26:47 or warm up each side of your bed.
0:26:49 They’ve just launched the newest generation of the pod,
0:26:51 the pod for ultra.
0:26:52 It can cool down each side of the bed
0:26:55 by 20 degrees Fahrenheit below room temperature.
0:26:57 It can also track your sleep time, sleep phases,
0:26:59 heart rate, and even your snoring.
0:27:02 And you know who’s gotten to try out the new pod?
0:27:03 What do you think, Ed?
0:27:05 Tell us about your experience with the pod.
0:27:06 (laughs)
0:27:08 – I love it, Scott.
0:27:08 It’s great.
0:27:11 It tracks my sleep, my heart rate.
0:27:14 And the best part is that it cools down my bed for me,
0:27:15 which is awesome.
0:27:19 It’s a great little addition to your nighttime routine.
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0:27:54 The hard truth, however, is that the biggest venture funds
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0:28:01 So unless you knew a guy who knew a guy,
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0:28:09 And it’s happening again.
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0:28:59 Let’s go back with Prof. G. Markets.
0:29:01 Vice President Kamala Harris and former President Donald Trump
0:29:04 faced off in what will likely be their only debate,
0:29:06 and the verdict from the markets was clear.
0:29:07 Harris won.
0:29:09 Bitcoin started to slide as soon as the debate began
0:29:11 and was down 4% by the morning.
0:29:15 Trump media stock tanked 15% when the market opened
0:29:17 and ended the day at an all-time low.
0:29:20 Meanwhile, solar stocks rose with the potential Harris
0:29:22 presidency boating well for clean energy.
0:29:27 Scott, this is basically the opposite of what happened
0:29:29 in the July debate when the markets were signaling
0:29:33 that a Trump presidency was basically certain.
0:29:35 What are your takeaways from the market’s reaction
0:29:36 this time around?
0:29:39 Well, I’m busy this weekend, but if you want,
0:29:42 we can hang out next weekend and do transgender operations
0:29:45 on illegal aliens in prison this weekend.
0:29:48 And my mom said I could bring a friend.
0:29:49 And then we’re going to eat Leia.
0:29:50 I was just about to say.
0:29:53 I want you to know Leia and Gangster are safe.
0:29:54 They’re safe.
0:29:58 I saw an illegal immigrant putting honeyglaze on their fur
0:30:00 and I figured out something’s wrong here.
0:30:05 I mean, watching her, the debate started at 2 a.m.,
0:30:08 London time, and by 3.15, I’m like, I’m out, she’s won.
0:30:10 I just, it doesn’t matter.
0:30:12 She could throw up on herself the next 15 minutes.
0:30:16 What will be more interesting, well, or as interesting,
0:30:21 is what industries do well or poorly based on the fact
0:30:23 that she’s maintained her momentum.
0:30:25 And I think as we’ve talked about,
0:30:29 you have the alternative energy ETFs went up,
0:30:31 Bitcoin went a little bit down.
0:30:35 His stock was off 13 or 15%, Donald Trump media,
0:30:38 meaning that basically the shareholders of that company
0:30:40 think the likelihood he’s going to become president
0:30:43 is down by 13 or 15%.
0:30:46 But it’s, I thought it was fascinating.
0:30:47 I’m obviously not a big Trump fan,
0:30:49 so I was really happy with it,
0:30:53 but it’ll be interesting to see what stocks.
0:30:55 I mean, so far it’s hard to read a lot from the market.
0:30:56 What are your thoughts, Ed?
0:30:58 – I think she did an incredible job.
0:31:01 I mean, it was obvious that she was far more prepared
0:31:02 than he was.
0:31:03 I mean, he doesn’t prepare,
0:31:07 but the amount of prep that clearly went into this,
0:31:10 the amount that she had her talking points ready,
0:31:13 she had clearly practiced a lot and it really came through.
0:31:16 Two things that I noticed about her
0:31:18 that I thought were really impressive.
0:31:21 One was her facial expression when he was talking.
0:31:26 She clearly knew exactly what facial expressions to pull,
0:31:29 and it just, it framed everything he was saying.
0:31:30 It made it look so much more ridiculous
0:31:34 when she would sort of smirk and smile and laugh
0:31:36 at everything he was saying.
0:31:38 I thought that was really impressive.
0:31:39 The other thing I thought was really impressive
0:31:42 was the handshake that she went in for at the very beginning.
0:31:43 – Total power move.
0:31:46 Total power move, just walking in there
0:31:49 and being assertive and also respectful and also direct.
0:31:52 And I’m wondering if maybe you have any insights
0:31:57 for any learnings on ways that that can be beneficial
0:32:00 to you, to an individual in the business world.
0:32:03 Has there ever been a time perhaps where,
0:32:06 being assertive with your body language,
0:32:09 with your physical body language in a business setting
0:32:12 has perhaps benefited you or you’ve seen that play out?
0:32:15 – My first boss, Carter Cordener, actually,
0:32:17 as I was shitposting everyone to Morgan Stanley,
0:32:20 actually a lovely guy who took a real interest in me.
0:32:24 He taught me, he said, “When you go into a meeting,”
0:32:27 he said, “unless everyone’s already, unless you’re late,
0:32:29 “walk around, go to them and shake their hand
0:32:31 “and introduce yourself.”
0:32:35 And I wouldn’t have done that naturally as a 22-year-old.
0:32:36 I would kind of sit higher,
0:32:37 waited for someone to introduce myself.
0:32:39 He said, “No, go around the table
0:32:42 “and walk to everyone to say, ‘Hi, I’m Scott Gowain,
0:32:43 “shake their hand.'”
0:32:46 And I mean, that sounds, and I kind of reminded me of that.
0:32:48 She went over to them.
0:32:50 I thought it was fantastic.
0:32:52 And something I tell my boys,
0:32:55 anytime they meet somebody, they walk up,
0:32:57 they square their hips, they square their shoulders,
0:32:59 they make eye contact, they shake their hand,
0:33:00 and they introduce themselves and say,
0:33:03 “It’s nice to meet you,” and they hold eye contact.
0:33:07 And I can’t tell you how many parents comment on it.
0:33:12 As a kid or as a young professional,
0:33:16 and I didn’t get this, get the easy stuff right.
0:33:17 The difference in your brand,
0:33:19 when there’s an eight o’clock meeting
0:33:23 and you show up at 7.55 versus 8.05,
0:33:25 it’s just get the easy stuff right.
0:33:27 For 10 minutes, you set a different tone
0:33:29 about your own brand.
0:33:32 Going back to Trump media stock,
0:33:35 which fell to a record low,
0:33:37 a lot of that is, of course, because of the debate,
0:33:40 but then there’s also a little wrinkle,
0:33:43 which is that the lockup period expires next week.
0:33:47 And what that means is that the early investors,
0:33:49 as this was a direct listing,
0:33:51 the early investors will finally be able
0:33:53 to sell their shares.
0:33:55 And one of those early investors, of course, includes Trump.
0:33:59 So just a prediction question for you,
0:34:03 come September 19th, do you think Trump will sell?
0:34:04 – It’s a tough one.
0:34:09 I don’t think so ’cause the brand of,
0:34:13 on the first possible moment that he sold, if he does,
0:34:16 could take the stock down so far so fast
0:34:17 that he ends up hurting himself.
0:34:20 If I were him, I’d put in a planned sale program.
0:34:21 And this is what a lot of CEOs do.
0:34:24 They say, all right, I have a ton of stock.
0:34:28 Every 90 days I’m gonna sell X number of shares.
0:34:31 And what that does is it takes out the interpretation
0:34:34 by the hecklers, right?
0:34:36 Oh, she sold a bunch of shares.
0:34:38 That must mean she doesn’t like it.
0:34:39 And she didn’t sell shares this quarter.
0:34:41 So she must be feeling bullish.
0:34:44 If you just say, I’m putting in place a planned sale program
0:34:48 and I’m gonna sell 400,000 shares every 90 days,
0:34:50 that doesn’t spook the market.
0:34:52 It’d be interesting to know what the other sellers are,
0:34:53 but here’s the thing.
0:34:58 If you own this stock, unless you believe he’s gonna win,
0:35:00 and that this is in fact become a tracking stock,
0:35:03 and that he’ll figure out a way in sort of a kleptocratic
0:35:05 fashion to support the company.
0:35:07 This company has zero value.
0:35:09 This company has negative value.
0:35:10 It’s not growing.
0:35:12 It’s user base is flat to down.
0:35:15 I think it does single digit millions of dollars
0:35:17 and it’s losing hundreds of millions.
0:35:20 I mean, it’s not a company.
0:35:24 And so if you have a lot of people trying to run
0:35:27 through a crowded door here, it could be a real problem.
0:35:29 Now, the moment everyone, what I have found though,
0:35:31 generally though, with stocks is when everyone’s freaked out
0:35:36 about the lockup period expiring, on that day,
0:35:37 a lot of times the stock goes up
0:35:40 because what you’re talking about,
0:35:42 the fear you’re talking about is reflected
0:35:44 in the stock right now.
0:35:47 And so if in fact, there aren’t a bunch of whatever
0:35:49 it’s called, Form 5, so I forget what it’s called
0:35:51 when you have to sell stock as an insider.
0:35:53 If not as many of them, everyone’s gonna be watching this.
0:35:56 If not as many of them are selling,
0:35:59 and the expectation of massive sales has already been built
0:36:02 into a stock that’s off, I know, 40% in the last 30 days
0:36:05 or something, or 60% in the last three months,
0:36:06 then the stock may go up.
0:36:08 In other words, I’d be very careful
0:36:10 trying to play around this,
0:36:12 but what I’m fairly confident saying
0:36:16 is this stock will be less than a dollar at some point
0:36:19 in the next 12 months if he is not reelected.
0:36:21 – Yeah, I think that’s an interesting point.
0:36:24 I think what’s interesting also is the timeline here
0:36:27 because he sort of needs to time this.
0:36:29 I mean, supposedly he needs the cash, right?
0:36:31 Because he’s got all these lawsuits.
0:36:33 So you’d think that he’s probably gonna time this
0:36:36 based on whether or not he becomes president,
0:36:40 because if he becomes president, he bothers himself
0:36:41 and the lawsuits go away.
0:36:43 He’s not necessarily gonna need the cash.
0:36:45 So it really is all hinging on that.
0:36:48 I think if he loses, he’s gonna then need
0:36:51 to really time it correctly because, you know,
0:36:54 the stock is probably gonna plummet at that point,
0:36:55 but he’s gonna need the liquidity,
0:36:58 but only in the situation where he doesn’t
0:36:59 win the presidency.
0:37:01 So it’s a very interesting situation.
0:37:02 He’s probably the first,
0:37:04 he is the first person in history
0:37:07 to be in a situation like that.
0:37:09 Just as we wrap up here, I just wanna point out
0:37:11 as we try to relate this to markets,
0:37:14 I mean, who is this gonna benefit?
0:37:18 I mean, the takeaway really here is the race is on.
0:37:21 That wasn’t, that didn’t feel like the case a few months ago,
0:37:23 but clearly it is now.
0:37:25 That’s what the predicted markets are showing
0:37:27 is that we have an extremely tight race
0:37:29 and who is that going to benefit?
0:37:30 It’s gonna benefit advertisers.
0:37:32 So I think we should be keeping an eye
0:37:34 on all the broadcasting stocks.
0:37:37 So Fox, Disney, Warner Brothers, Comcast,
0:37:39 I think we’ll see huge earnings from them
0:37:40 in the next quarter.
0:37:42 And then also we should be thinking
0:37:45 about the local stocks, local broadcasting.
0:37:48 So, you know, Gannett, Nexstar, Tegna,
0:37:51 I think these are stocks that are gonna see a big bump,
0:37:53 a big run up in the next few months or so
0:37:57 because we’re gonna see a huge amount of advertising
0:37:58 in the districts that matter.
0:38:01 We’ll be right back after the break
0:38:03 with a look at sovereign wealth funds.
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0:39:14 – We’re back with Prof2Markets.
0:39:17 Former President Trump recently said that if elected,
0:39:19 he would like to create a sovereign wealth fund
0:39:20 for the United States.
0:39:22 After that speech, the White House also revealed
0:39:24 they were already working on a proposal
0:39:26 for the exact same thing.
0:39:28 Sovereign wealth funds are state owned investment funds
0:39:30 and they’re typically used in economies
0:39:32 that rely mainly on resource extraction
0:39:35 such as Saudi Arabia and Norway.
0:39:37 While there’s currently no national sovereign wealth fund
0:39:40 in the US, there are several state level funds
0:39:43 like Alaska’s permanent fund.
0:39:47 Scott, what are your thoughts on a US sovereign wealth fund
0:39:48 and do you think this is a good idea?
0:39:51 – So sovereign wealth funds have a layer on top of them
0:39:54 where they have an objective outside of just straight ROI.
0:39:57 So the biggest funds or the funds that every hedge fund
0:40:00 manager in the world is going, you know,
0:40:04 hat and hand to are in the Gulf, Adia, PIF.
0:40:06 And generally speaking, the jig is sort of up there
0:40:10 and that is those funds, those sovereign wealth funds
0:40:13 have the objective of trying to transition their economies
0:40:15 back away from a fossil fuels economy
0:40:20 to tourism, services, education.
0:40:23 And now when you go there, they’re mostly only willing
0:40:26 to fund companies that are gonna bring business
0:40:29 or find other capital to bring business into the region.
0:40:32 They’re no longer about, oh, you’re a Korean national
0:40:36 born in Japan, we’re gonna give you $100 billion
0:40:40 to go play in traffic and invest in, you know, US startups.
0:40:42 That I think those days are over.
0:40:45 In general, the best marketing in the world
0:40:47 is tobacco companies.
0:40:49 A company whose primary product is death, disease
0:40:52 and disability that figures out a way to sell a product
0:40:55 at 96 points in margin and create these very aspirational
0:40:57 brands, that’s the best marketing in the world.
0:41:00 The second best marketing in the world by sector
0:41:02 has been the financial services sector that has convinced you
0:41:07 that they can outperform the S&P because they have
0:41:09 these old guys and suspenders and all these models
0:41:13 and people from the smartest schools and wealthy people
0:41:14 like to believe they should have access to something
0:41:18 different so they continue to invest in these funds.
0:41:22 And if you added up all hedge funds, all mutual funds,
0:41:25 all internal investments, I mean, it’s an enormous industry.
0:41:28 Everyone on CNBC, they have underperformed the S&P
0:41:30 by the amount of their fees.
0:41:32 So what you’re basically doing is buying the S&P
0:41:35 but giving some guy with the highly credentialed
0:41:38 and highly aggressive and unbelievable living.
0:41:43 And the same is true here, these funds as your data shows
0:41:45 have underperformed the larger market.
0:41:46 Now they say they can justify it because they say
0:41:49 if we’re Alaska, we’re the Norwegian wealth fund,
0:41:51 we wanna increase influence around the world
0:41:54 or we wanna bring more jobs to Alaska, fine.
0:41:56 That’s a secondary objective.
0:41:58 The reason I’m not a fan of this in the U.S.
0:42:01 is that we don’t really need this.
0:42:04 We have more capital formation than any country
0:42:07 in the world by a factor of five, 10 or 100.
0:42:11 We don’t need, I don’t think to try and aggregate capital
0:42:13 to have influence through capital.
0:42:15 We do it through the dollar.
0:42:17 We do it through sanctions.
0:42:19 If we say to a country, we’re shutting you off
0:42:22 and you can no longer do business in dollars,
0:42:26 two thirds of the world has trouble doing business with them.
0:42:29 So we kind of have, unless we decided we were building
0:42:32 a sovereign wealth fund to try and, I don’t know,
0:42:35 I don’t know what objective they’d even place on it.
0:42:36 But to me, generally speaking,
0:42:38 when you get the government involved in something,
0:42:40 you’re going to pay an inefficiency
0:42:43 or an administration tax.
0:42:45 So I just, I feel like this is redundant
0:42:46 and not really needed.
0:42:48 This feels to me like more of a chest beating
0:42:50 kind of fun thing to talk about.
0:42:52 It doesn’t, I don’t see the rationale here.
0:42:56 – And it also isn’t clear at all how you’d fund this thing
0:43:01 because, I mean, the characteristic of a sovereign wealth fund,
0:43:04 I mean, what makes it different from any other pile of money
0:43:05 that’s in the government’s jurisdiction?
0:43:09 One of the differences is that it’s separate
0:43:11 from the central bank and it’s separate
0:43:12 from your finance ministry.
0:43:14 So in our case, that’s the treasury.
0:43:17 So Janet Yellen would not have control over this thing.
0:43:20 And then the second difference is that typically
0:43:22 the way that you fund it is it comes
0:43:26 from an unusual excess or surplus of assets.
0:43:30 So in Ireland, for example, which we’ve discussed before,
0:43:33 Ireland is a tax haven for big tech companies.
0:43:37 It collects huge amounts of tax revenue
0:43:39 from companies like Google and Apple and Microsoft.
0:43:42 And therefore they run a budget surplus.
0:43:46 They’re at around $10 billion in budget surplus in 2024.
0:43:48 Saudi Arabia, another example,
0:43:49 they’re just a giant oil farms.
0:43:51 They can sell a shit ton of oil
0:43:54 and they have all of this excess asset.
0:43:56 They have a budget surplus of around $30 billion.
0:44:00 So, that’s the way that other countries fund
0:44:01 their sovereign wealth funds.
0:44:03 That you have a lot of money left over.
0:44:06 So my question for Harris and for Trump
0:44:10 and for the White House, where the fuck is our money?
0:44:12 We don’t have any excess money.
0:44:16 I mean, we’ve been running a trade deficit since the ’70s.
0:44:19 We fund our entire economy with debt.
0:44:20 How are you gonna pay for this?
0:44:22 There is no money left over.
0:44:24 There’s nothing really left to sell.
0:44:27 So, I mean, I was confused and looked into this question.
0:44:29 How are they gonna fund it?
0:44:31 Biden and Harris don’t have an answer
0:44:33 or at least they haven’t stated it.
0:44:36 Trump’s answer, he says that we’re gonna fund it
0:44:39 with tariffs, that his tariff plan
0:44:42 is going to reverse the deficit.
0:44:45 And then once we are running on a surplus,
0:44:47 because of his tariffs,
0:44:50 we’re gonna be able to create the US sovereign wealth fund.
0:44:52 So, my read is similar to yours.
0:44:55 It feels like this is mostly a bunch of posturing
0:44:58 and it seems as if both sides here seem to think
0:45:02 that a US sovereign wealth fund
0:45:04 basically just sounds cool.
0:45:07 – So, the only time Democrats and Republicans agree,
0:45:09 the only thing to pass for bipartisanship
0:45:10 is they both come together.
0:45:13 Republicans wanna come taxes and spend more on defense.
0:45:16 Democrats wanna raise taxes
0:45:17 and spend more on social services.
0:45:18 So, they come together and say,
0:45:21 “I know, let’s cut taxes and spend more money.”
0:45:24 The only thing that they cooperate together on
0:45:26 is reckless spending the results
0:45:29 and unbelievable deficits on your generation.
0:45:31 Whenever Harris and Trump agree on anything,
0:45:33 it’s the stupidest fucking idea.
0:45:36 It’s like a tell, no tax on tips.
0:45:39 Okay, only 2% of American make tips.
0:45:41 The majority of them don’t pay any federal income tax
0:45:43 and you want the waiter to get a tax kept
0:45:44 and not the dishwasher.
0:45:47 This is just fucking stupid.
0:45:49 So, this strikes me similar to Congress
0:45:51 that if Harris and Trump agree on something,
0:45:54 it means it’s a really bad idea.
0:45:56 And this will go to my prediction.
0:46:00 Something else they agree on is also a really bad idea.
0:46:03 Ooh, I’m teasing my prediction at, I’m teasing it.
0:46:06 People can’t wait, people on the edge of their seats.
0:46:08 – Yeah, I can’t wait.
0:46:10 Just skip ahead if you’re listening.
0:46:15 Final question, say we did create a US sovereign wealth fund.
0:46:18 It’s called US Ventures.
0:46:19 Who’d be the general partner?
0:46:25 – I’d like to see Britney Spears.
0:46:28 I mean, why not?
0:46:29 I mean, let’s be honest,
0:46:32 not any of you have any fucking idea what they’re doing.
0:46:35 Britney Spears and Coco the monkey.
0:46:38 I’d like to, and they just throw darts.
0:46:41 Or we find those dogs that can smell bladder cancer
0:46:45 and urine and say to them, all right, can you pick a stock?
0:46:48 It would make any fucking difference.
0:46:51 As long as they’re diversified, shit, I don’t know.
0:46:53 Who would you want to run this thing?
0:46:55 – I’m pretty convinced by you.
0:46:56 Let’s go Britney Spears.
0:46:58 Maybe throw Peter Thiel in there.
0:46:59 – Well, Peter Thiel had a fund
0:47:01 and it did really well until it didn’t.
0:47:03 He was in the hedge fund business.
0:47:04 I forget the name of it, it had some like.
0:47:06 – Well, he’s also founder’s fund, so.
0:47:07 – Clarion, yeah, no, Clarion.
0:47:09 It was called Clarion or Clarion.
0:47:12 He had, well, the founder’s fund is in his wheelhouse.
0:47:15 The guy is a great investor in terms of VC,
0:47:18 but he had a fund that invested in publicly traded stocks
0:47:19 and it did really well.
0:47:21 I think this was back in the arts.
0:47:23 And then it did really not well.
0:47:25 And I think David Hasselhoff.
0:47:29 I would like David Hasselhoff to run the US stock fund.
0:47:32 And the guy who was the lead singer from Flock of Seagulls,
0:47:34 I’d like to get him involved.
0:47:36 I’d like to get him involved.
0:47:37 It doesn’t matter, Ed.
0:47:39 – Let’s take a look at the week ahead.
0:47:43 We’ll see US retail sales and housing starts for August.
0:47:45 And all eyes will be on the Federal Reserve
0:47:49 as it delivers its interest rate decision for September.
0:47:51 Scott, finally you can tell us our prediction.
0:47:53 – Okay, as we reference,
0:47:55 anytime Trump and Harris agree on something,
0:47:57 it’s a ridiculously stupid idea.
0:48:00 They both agree that the acquisition of US Steel
0:48:03 by Nippon Steel should be blocked.
0:48:06 So let’s talk a little bit about US Steel.
0:48:09 This is basically a shout of itself, a former icon.
0:48:12 It was at the turn of the 20th century,
0:48:14 one of the most important companies in the world.
0:48:16 It became the most valuable company in the world
0:48:17 for a hot minute.
0:48:19 It was the first company to ever reach a billion dollars
0:48:21 in revenue by the end of World War II,
0:48:24 it employed a third of a million people.
0:48:28 Now, US Steel employs 20,000 people.
0:48:32 4,000 in Pennsylvania, very strongly union.
0:48:35 5% of the global US Steel market is controlled by Japan.
0:48:38 4% is US and China’s like 50 or 60.
0:48:40 China’s basically just run away with the Steel market.
0:48:43 And the US is no longer competitive in Steel
0:48:45 for a variety of reasons.
0:48:48 Probably most specifically, we decimated
0:48:50 Japan and Germany’s infrastructure,
0:48:52 but the one advantage of that was that they got to build
0:48:54 from the ground up and think about innovation
0:48:56 and they’re just better at it.
0:48:58 And then China came in with an emerging Steel industry
0:49:00 and it’s just blown by everybody.
0:49:05 But it’s been politicized, you know, US Steel, right?
0:49:09 This is pure jingoist nationalist bullshit.
0:49:11 Japan, there’s some sort of security risk.
0:49:14 So they’re saying, oh no, we can’t sell it to Japan.
0:49:17 Japan is more American than many States right now.
0:49:20 Japan is an unbelievably strong ally.
0:49:21 They’re great with technology.
0:49:23 They produce Steel more efficiently than we do.
0:49:27 This is a lifeline for US Steel,
0:49:32 a company that is now worth a whopping $8 billion, right?
0:49:35 So NVIDIA loses 30 US Steel’s in one day last week,
0:49:38 but we’re worried about the Japanese coming for US Steel.
0:49:41 This is such bullshit.
0:49:43 So my predictions are following.
0:49:45 I don’t think this thing is gonna go through.
0:49:46 And of course, the unions have said,
0:49:49 raised their hand and said, we’re uncomfortable with this.
0:49:50 Okay, great.
0:49:52 You should join the Riders Guild to make sure
0:49:54 that you fuck over your constituents
0:49:57 with a bunch of posturing, the results and the layoffs.
0:49:59 And that’s what’s gonna happen here.
0:50:01 This acquisition is gonna be blocked
0:50:03 for purely political reasons.
0:50:06 You’re gonna see layoffs and you’re gonna see US Steel stock,
0:50:10 which is at 35 sub 20 bucks within 12 months.
0:50:14 In addition, the more mendacious part of this
0:50:16 is that if you’re a small company, a business,
0:50:20 a big business, what you want is your stocks to go up
0:50:22 because there is the possibility
0:50:24 of an international company coming in
0:50:26 and acquiring your company.
0:50:29 When we start coming up with bullshit nationalist reasons
0:50:31 why companies can’t buy American companies
0:50:34 that pose no security threat whatsoever,
0:50:37 it reduces the price, the takeover premium
0:50:41 of every company that has strategic value
0:50:42 to international players.
0:50:45 This is just so fucking stupid.
0:50:47 It makes my hair stand on end.
0:50:51 So my prediction, this is not gonna go through
0:50:53 for purely political nationalist reasons
0:50:58 and US Steel stock is gonna be below 25, 20 bucks a share
0:51:01 in 12 months and those 20,000 precious employees
0:51:04 at US Steel are gonna be more like 10 or 12,000
0:51:05 ’cause US Steel is gonna have no choice
0:51:10 without a big brother subscale to start closing plants.
0:51:16 – This episode was produced by Claire Miller
0:51:18 and engineered by Benjamin Spencer.
0:51:20 Our associate producer is Alison Weiss.
0:51:21 Our executive producer is Catherine Dillon.
0:51:23 Mia Silverio is our research lead
0:51:25 and Drew Burris is our technical director.
0:51:26 Thank you for listening to “Prophecy Markets”
0:51:28 from the Vox Media Podcast Network.
0:51:31 Join us on Thursday for our conversation
0:51:34 with Chris Anderson, only on “Prophecy Markets.”
0:51:37 (upbeat music)
0:51:43 ♪ You help me ♪
0:51:47 ♪ In kind ♪
0:51:52 ♪ Reunion ♪
0:52:00 ♪ As the world turns ♪
0:52:05 ♪ And the blood flows ♪
0:52:07 (upbeat music)
0:52:10 (upbeat music)
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Scott and Ed open the show by discussing recent inflation data, Oracle’s earnings, Wall Street’s decision to curb working hours for young bankers, and Open AI’s newest model. Then Scott shares his reactions to the President debate and breaks down business learnings from Kamala Harris’ performance. Ed predicts which stocks he thinks will benefit most from the Presidential race. Finally, Scott and Ed discuss a proposed sovereign wealth fund and explain why it seems unnecessary for the U.S. to have one.
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