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0:00:34 Today’s number 41,000.
0:00:39 That’s how many social media posts have the hashtag #tiktokrefugee at the time of this
0:00:40 recording.
0:00:43 Ed, what is a negative thought?
0:00:44 What?
0:00:45 TikTok.
0:00:56 That’s kind of an existential one.
0:01:01 It’s like that joke I heard that a Holocaust survivor ends up in heaven and he says to
0:01:05 God, “Hey, I’m thinking about telling a Holocaust joke,” and he’s like, “No, no, no,
0:01:06 Holocaust jokes.
0:01:07 It’s just not funny.”
0:01:11 And then the Holocaust survivor says, “Well, I guess you had to be there.”
0:01:13 It really gets you thinking.
0:01:14 Two bombs in a row.
0:01:18 Well, I wanted to go after the Catholic church, but I was worried our interns are going to
0:01:20 be witnesses in the lawsuit.
0:01:22 Yeah, you’ve never done that before.
0:01:26 My role model, Sam Harris, I’m totally backbelling right now, says, “If you’re wealthy and you
0:01:29 have people who love you unconditionally, you should speak your mind.”
0:01:30 I’m speaking my mind.
0:01:31 That’s very good.
0:01:33 Have you seen what Sam Harris has been saying about Elon Musk?
0:01:34 Well, you tell me.
0:01:35 What is he saying?
0:01:37 I know it, but the viewers don’t know it.
0:01:41 I’m trying to remember it exactly, but he basically described how he fell out with Elon
0:01:47 Musk and Elon Musk made this bet with Sam Harris where he said, “I will bet you a million
0:01:54 dollars that we will not see 35,000 cases of COVID in the United States.”
0:01:58 And Sam Harris was like, “Well, that’s ridiculous because the estimates that we’re going to
0:02:02 have a million deaths, not cases, but deaths in the US.”
0:02:04 He says, “Why don’t we make it a little fairer?
0:02:09 How about I’ll take you up on the bet, except let’s make it three and a half million cases,
0:02:10 not 35,000.”
0:02:14 And Elon said, “No, no, no, make it 35,000 cases.”
0:02:20 So then a week later, they find out that there have already been 100,000 deaths plus several
0:02:21 more cases.
0:02:24 Sam Harris reaches out, says, “I think I’ve won the bet.”
0:02:30 Elon ghosts him and then starts to deride him on social media.
0:02:37 And now Sam Harris, because he’s shitposting him even more, is dealing with strangers coming
0:02:41 up to his house and making death threats.
0:02:44 And it’s all because Elon Musk has been shitposting him.
0:02:48 So I just thought it was just a powerful indictment of Elon and his character.
0:02:54 I think we all know this, but I love that it’s coming from one of his former best friends.
0:02:57 One of those two tells the truth all the time.
0:02:58 One of them doesn’t.
0:03:00 And you guess who is who.
0:03:08 So when Sam says something, you can trust it’s the truth or that he’s a good actor.
0:03:10 And I find it gives people the benefit of the doubt.
0:03:12 I’m an enormous fan.
0:03:18 And one of those individuals serves as a role model for me as a father and as an American.
0:03:21 So anyway, so what’s the difference between COVID and a priest?
0:03:22 Just kidding.
0:03:23 I’m not even going there.
0:03:25 I’m not even going there.
0:03:26 I’m not even going there.
0:03:30 Tell us what we’re talking about today, and then I’ll get into my job and read us the
0:03:31 headlines.
0:03:35 Today’s episode, first off, is presented by Funrise, two words, first word, cut and second
0:03:36 ching.
0:03:39 We’re whores, but we’re expensive whores.
0:03:41 Whenever the ad people call me and say, “Will you do this ad?”
0:03:44 I’m like, “I don’t know how much are they offering?”
0:03:49 We’re going to be talking about United Health’s first earnings call since the CEO shooting
0:03:52 in a banner year for the big banks.
0:03:54 Ed, what else is going on?
0:03:55 What are we doing here?
0:04:04 Let’s start with the weekly review of Market Vitals.
0:04:09 The S&P 500 rallied, the dollar fell, Bitcoin climbed, and the yield on tenure treasuries
0:04:11 dropped, shifting to the headlines.
0:04:17 The Consumer Price Index increased 2.9% in December from a year earlier and rose just
0:04:19 0.4% month over month.
0:04:26 Core CPI also came in lower than expected, providing further evidence of easing inflation.
0:04:29 That encouraging report drove all three major indices higher.
0:04:34 Meta is laying off approximately 5% of its workforce as part of an effort to phase out
0:04:35 lower performers.
0:04:39 CEO Mark Zuckerberg stated that the cuts are essential to ensure the company maintains,
0:04:42 quote, “the strongest team possible.”
0:04:46 And finally, the Supreme Court has upheld the federal TikTok ban, but the app’s future
0:04:48 remains uncertain.
0:04:51 Trump has stated that he may issue an executive order to delay the enforcement of the ban
0:04:53 for at least 60 days.
0:04:59 Scott, starting from the top, pretty positive CPI report, especially the core CPI, your
0:05:03 thoughts on inflation tamping down a little bit.
0:05:05 Yeah, well, the market had a collective sigh.
0:05:09 It had its best days since November 6, and bond yields moved lower.
0:05:16 The S&P erased its 2025 losses year-to-date and popped 2%, the 10-year fell 15 basis points,
0:05:20 which, as we keep saying, is now the adult in the administration.
0:05:25 Treasury yields are a benchmarking for borrowing costs across the economy, and when yields
0:05:29 drop, borrowing costs become cheaper for businesses and consumers, essentially a tax cut, which
0:05:32 can stimulate economic growth.
0:05:34 So I think this is good.
0:05:39 More inflation, I think it strips out more volatile things, including, I think food and
0:05:40 energy, what it strips out.
0:05:45 And the reason that we have that is because, as you said, food and energy prices are very
0:05:46 volatile.
0:05:53 So generally speaking, economists prefer to use the core CPI when trying to understand
0:05:54 these trends.
0:05:56 It’s funny that we’ve become obsessed with inflation.
0:06:00 I remember you were too young for this, like 15 years ago, all we could talk about was the
0:06:04 Greek sovereign bonds defaulting, and that was going to infect Europe, and we just became
0:06:05 obsessed with it.
0:06:08 It seems like now we’re obsessed, and maybe it’s more justified now.
0:06:11 Yeah, I was thinking about that when I was 10 years old.
0:06:12 Oh, there you go.
0:06:13 Rub it in my face again.
0:06:14 We know you’re young.
0:06:15 We know you’re young.
0:06:18 So inflation has sort of become the thing that everyone’s going to keep their eye on,
0:06:23 and I’m fascinated by what’s going to happen in terms of inflation or how we’re going to
0:06:27 link it to the rebuilding of LA, but it’s going to be really interesting to see what
0:06:32 the tenure does over the next few months because, well, the Fed has been cutting rates.
0:06:34 The tenure said, “Hold my beer,” and it’s not coming down.
0:06:39 I mean, it’s sort of almost like further mistrust in our institutions.
0:06:44 The markets would choose to follow the tenure in terms of its own interest rates.
0:06:46 It’s now saying, “Oh, we don’t care.”
0:06:50 Yeah, I think the most interesting thing here isn’t necessarily the inflation data itself,
0:06:54 but the market’s reaction to the inflation data, and as you point out, the thing that
0:07:00 has, I think, been slightly confusing people, or at least grabbing their attention, is the
0:07:06 fact that the stock market has been sliding over the past few months, certainly since
0:07:11 the election, and also, as you say, the 10-year yield is rising, meaning that people are selling
0:07:13 off their treasury.
0:07:18 So investors have just been anxious about the economy, and I think the question has been
0:07:20 like, what are they specifically anxious about?
0:07:22 Are they anxious about Israel?
0:07:23 Are they anxious about Ukraine?
0:07:24 Is it something to do with Trump?
0:07:31 And I think this reaction, where you had the inflation data come in softer than expected,
0:07:38 and then suddenly the market ramps up, and you see an increased demand in treasuries,
0:07:43 that’s basically the confirmation that the number one concerns for investors right now
0:07:44 is inflation.
0:07:48 And this is the market trying to tell us, this inflation thing, you might have thought it
0:07:52 was over, but we don’t think it’s over yet, and this is something we cannot forget about.
0:07:58 And I think the hope for investors would be that Trump, as he swears in for his second
0:08:04 term, will be thinking about this, and perhaps rethinking some of his fiscal policies that
0:08:08 are expected to increase inflation over the next year or so.
0:08:12 So I think it’ll be interesting to look at the inflation, and also, as you say, very
0:08:16 interesting to look at the 10-year yield, because that’s sort of the signal like, how
0:08:22 confident are investors in the economy really, as you said, the adult in the room, which
0:08:23 I think is a good way to put it.
0:08:29 Well, look at the trifecta here of inflation is putting a chill over immigration, both legal
0:08:34 and illegal, tariffs, and the expectations of deficits.
0:08:39 It’s literally like, how could we vent away to start spooking the market?
0:08:41 And I expect the 10-year to go higher.
0:08:42 We’ll see.
0:08:47 Your reaction to Mark Zuckerberg’s announcement, yet another announcement, he’s laying off
0:08:48 5% of the employees.
0:08:51 Look, there’s one kind of, there’s only one kind of person that likes Mark Zuckerberg,
0:08:52 and that’s shareholders.
0:08:58 And I find that he just approaches his business as a new pred capitalist.
0:09:00 This is the part of him I respect the most.
0:09:06 And I’m a big believer in capitalism, and part of capitalism is that there are winners
0:09:11 and losers, and you can’t reward the winners without punishing the losers.
0:09:16 And I’m not calling these people losers, but I used to talk about this a lot, or I do talk
0:09:20 about, oh, I’ve never managed a big business, but I’ve managed businesses with hundreds
0:09:24 of people, and I’ve always thought it’s important to fire people.
0:09:27 And I find over the short term, it’s bad for morale, and over the medium and the long-term,
0:09:33 especially if you do it as what I’ll call, not layoffs, but kind of performance-based
0:09:37 terminations and say, we appreciate you.
0:09:40 There’s a reason you’re working so fucking hard, and it pays off.
0:09:44 And if you aren’t working hard and you aren’t good, this isn’t a place for you, and it might
0:09:49 not be your fault, it might be part of the culture’s fault, but my approach as a board
0:09:54 member and as a CEO has always been, you know, when things aren’t working, and you start
0:10:00 making excuses, the worst days I’ve had professionally are when I know I need to lay off somebody.
0:10:02 And I constantly delay it.
0:10:05 I come and think, okay, I got a firebob.
0:10:08 And then I’m like, oh shit, and I delay it to the next day.
0:10:13 And intellectually, I know, or the way I approach it is, your gut is almost right.
0:10:15 When it’s not working, it’s not going to work.
0:10:19 And I find the sooner you make the decision, I’m fairly repacious and Darwinian about
0:10:22 making the decision, the more generous you can be.
0:10:27 So I think you’re fairly Darth Vader on the actual decision, but then you turn into Mother
0:10:32 Teresa because the sooner you can lay off somebody, you say to them, one, you may be
0:10:34 pissed off, you may not agree, but I don’t want you to be scared.
0:10:37 We’re going to give you a lot of severance.
0:10:41 Stick around, figure out the communication strategy to the rest of the firm or to the
0:10:42 broader world.
0:10:44 So it doesn’t ding your brand.
0:10:46 How can I be helpful?
0:10:52 But I’m fairly Darwinian about the decision and his saying corporations need more masculine
0:10:54 energy is just fucking stupid.
0:11:00 But saying we’re a big company, we’ve hired like crazy, we probably have AI, you know,
0:11:01 we can do more with less.
0:11:04 We’re going to take out the bottom 5% of performers.
0:11:07 I think it creates a very tense environment for about a week.
0:11:09 And then over the long term, I think it’s good.
0:11:10 It’s the right thing to do culturally.
0:11:15 I think it’s a key component of capitalism and also what people don’t also acknowledge
0:11:20 is those 5% at Metta, they were going to go nowhere fast.
0:11:26 And so the ability or forcing them to go find somewhere, somewhere they’re going to do better.
0:11:31 Someone laid off at Metta in wherever they are, San Francisco or the seventh ring of
0:11:37 hell or Tatooine, wherever they, whatever bond layer they’re holed up in, they’re going
0:11:38 to be fine.
0:11:45 So they may not realize it, but I would bet 80 to 90% of them will look back and go, that
0:11:48 was kind of a blessing in disguise because I went somewhere where my skills were just
0:11:50 more appreciated.
0:11:51 You mentioned AI there.
0:11:55 I think this is especially important given what Zuckerberg said on the Joe Rogan podcast
0:11:58 about AI and its use at Metta.
0:12:05 Probably in 2025, we at Metta, as well as the other companies that are basically working
0:12:14 on this, are going to have an AI that can effectively be a sort of mid-level engineer
0:12:17 that you have at your company that can write code.
0:12:21 And once you have that, then in the beginning, it will be really expensive to run and then
0:12:22 you can get it to be more efficient.
0:12:28 And then over time, we’ll get to the point where a lot of the code in our apps and including
0:12:33 the AI that we generate is actually going to be built by AI engineers instead of people
0:12:34 engineers.
0:12:41 So interesting because he’s basically saying that in 2025, this year, mid-level software
0:12:47 engineers at Metta will probably be replaced by AI, then follows up with that with this
0:12:53 announcement that he’s laying off 5% of the workforce, which is 3,600 people roughly.
0:12:57 I think from a business perspective, he’s making all of the right decisions.
0:13:03 He’s cozying up to Trump, he’s embracing AI, he’s fostering this competitive workplace
0:13:06 culture, which is all good news for shareholders.
0:13:12 But the thing that I don’t fully understand from a more PR perspective is the timing of
0:13:13 all this.
0:13:18 And that is, these are all controversial things to say.
0:13:21 And he has made these announcements in a matter of days.
0:13:28 And most of them, quite frankly, have made him out to be or look like a dick or out of
0:13:29 touch in some way.
0:13:32 I mean, he’s totally alienated the left.
0:13:38 And meanwhile, on the right, from what I’ve seen on X, formerly known as Twitter, most
0:13:42 Republicans are finding him disingenuous because they think he’s groveling to Trump
0:13:45 and just doing whatever he can to enrich himself.
0:13:49 So I think there’s two parts of this.
0:13:53 There’s the business side, which I think is genius, but then there’s the public relations
0:13:59 and image side, which I feel like it’s not the best idea to be making all of these controversial
0:14:04 announcements that don’t make you out to be the nicest guy in the world within a matter
0:14:05 of days.
0:14:07 Yeah, I kind of think Honey Badger don’t care.
0:14:10 And he’s putting this news out, starting it out with the kitchen sink.
0:14:11 He’s got a lot of negative press.
0:14:14 The news cycle is very crowded.
0:14:19 This story will come and go in 24 hours because everyone’s going to be totally obsessed with
0:14:25 this bad reality show and all these people bending the knee to the new king of Westeros.
0:14:26 True.
0:14:27 Maybe it’s perfect timing.
0:14:29 As a matter of fact, I think we should laugh about 50% of our staff.
0:14:30 What do you think?
0:14:31 Yeah, exactly.
0:14:33 I was waiting for that.
0:14:35 Let’s just touch on TikTok.
0:14:43 So we’re recording this before we know actually whether it is going to go lights out or not.
0:14:45 But let’s just play hypothetical here.
0:14:49 Let’s just sort of imagine that TikTok does disappear.
0:14:53 And let’s just think about what that would look like and what would happen in the economy.
0:14:57 And I’ll just start off with an interesting analysis from Bernstein, which is an advisory
0:14:58 firm.
0:15:04 So they found that Americans watched TikTok in 2024 for a cumulative 3.3 trillion minutes,
0:15:06 which is just pretty astounding.
0:15:13 And assuming that 100% of those minutes will be migrated to other platforms if TikTok shuts
0:15:21 down, they estimate that 5% of those minutes will go to Snapchat, 25% will go to YouTube,
0:15:28 and 60% will go to Instagram and Facebook, and the remaining 10% will go to other platforms.
0:15:35 And so when you consider the fact that last year TikTok generated an estimated $22 billion
0:15:40 in U.S. ad revenue, and to be clear, that is an estimation because TikTok is a private
0:15:43 company and they don’t really release their financials.
0:15:47 If we assume that and if we assume that Bernstein is correct with their analysis, then that
0:15:54 means that Metta overnight will add an extra $13 billion in revenue next year, which would
0:15:59 increase Metta’s annual revenue by almost 10% in one go.
0:16:05 So I would like to get your reaction to that statistic, but also just what do you think
0:16:06 is going to happen here?
0:16:10 What does a media ecosystem look like with no TikTok?
0:16:15 So Metta’s price of sales ratio was about 10.
0:16:19 You say they’re going to get about another, what, $13 billion in revenue, you think?
0:16:20 Assuming all of this goes to plan.
0:16:26 So assuming the $22 billion, assuming the 60%, it’s all hypothetical, but yes, that
0:16:27 is the number.
0:16:33 So that’s hypothetically a $130 billion increase in value, Zuck, that’s about 15%.
0:16:39 So that’s about a $20 billion if, I mean, Zuck would really like to see TikTok get banned.
0:16:43 I mean, there’s a couple of things here, one, I think it’ll dramatically improve my relationship
0:16:45 with my 14-year-old.
0:16:48 I think that the majority of, and I’m only kind of kidding.
0:16:53 I think the majority of agitane anxiety in my household is over social media usage and
0:16:54 specifically TikTok.
0:16:58 And for the people out there who are saying this is bad parenting, that means you don’t
0:17:00 have kids and please shut the fuck up.
0:17:04 Yeah, but you’re making one mistake, which is I don’t think he’s just going to suddenly
0:17:06 stop scrolling on his phone.
0:17:08 It’s just going to migrate somewhere else.
0:17:10 Yeah, that might be right.
0:17:14 My observation around the TikTok ban is the thing I’m most disappointed is a bunch of
0:17:19 Democrats, including Wyden and Markey and Wyden was the famous co-author of what is arguably
0:17:23 the most damaging legislation in history, section 230, have all of a sudden, they’re
0:17:27 all of a sudden scrambling to try and extend the deadline, right?
0:17:30 Even Democrats are saying, is there a way we can figure out a way?
0:17:33 And I think this has bigger ramifications than TikTok.
0:17:39 And that is we’re likely going to be in several pretty serious confrontations with Xi Jinping
0:17:45 over the next 10 years or the CCP, whether it’s Taiwan or trade agreements.
0:17:48 And quite frankly, Ed, we’re blinking.
0:17:53 The president signed into law a ban on TikTok saying you need to divest or by January the
0:17:58 19th, you know, whatever it was, six months or nine months, we’re banning you and here
0:17:59 we are.
0:18:01 And we’re blinking.
0:18:04 China has called, China has said, hold my beer.
0:18:06 I’m not, at this point, I’m not divesting.
0:18:09 And we’re saying, oh, wait, wait, wait, let’s give them more time.
0:18:12 Do you really think they’re going to divest if we give them more time?
0:18:15 All we’re saying is we’re not serious.
0:18:19 So I think this is sort of indicating that we’ll blink first across this and perhaps
0:18:23 more important negotiations.
0:18:31 I will tie a bell on this conversation with TikTok users have been migrating in mass
0:18:36 to a different app called Red Note, and this is this Chinese version of Instagram.
0:18:38 Yeah, another Chinese one, right?
0:18:39 Exactly.
0:18:43 It was the most downloaded free app in the US Apple store last week.
0:18:46 And this is the best start right as that migration was happening.
0:18:55 Duolingo, the language learning app reported a 216% spike in US users learning Chinese.
0:18:59 So you got all these people who are on TikTok who are deciding they’re going to go to a
0:19:00 new platform.
0:19:06 And that new platform happens to be another Chinese social media app called Red Note.
0:19:08 I don’t think this is going to be a lasting thing.
0:19:13 I think people are mainly doing it as a meme because it’s kind of funny to just go to another
0:19:14 Chinese app.
0:19:19 It’s sort of a metaphorical finger to the US government, I think.
0:19:23 And I think these TikTok users are very upset about this ban.
0:19:27 But I just find it hilarious that, I mean, they’ve just substituted one Chinese app for
0:19:28 another.
0:19:29 The new one is Red Note.
0:19:33 Okay, we’ll be right back after the break with a look at UnitedHealth’s earnings call.
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0:20:59 We’re back with ProfG Markets.
0:21:03 UnitedHealth released its first earnings report since the death of executive Brian Thompson.
0:21:07 While the company posted record full-year revenue, its quarterly revenue fell short
0:21:11 of analyst expectations and the stock fell more than 4%.
0:21:15 During the earnings call, CEO Andrew Whitty paid tribute to Thompson, reflecting on his
0:21:17 dedication to his job at the company.
0:21:22 He then pivoted to address larger issues within the healthcare industry, placing significant
0:21:27 blame on drug companies for driving up healthcare costs nationwide.
0:21:33 So Scott, we were talking before the earnings call about what we thought might happen, and
0:21:39 you made this interesting point that you thought that they would try to, in some way, sandbag
0:21:44 the financials, i.e., they don’t want to be appearing too profitable right now, given
0:21:47 everything that’s happening in the news with UnitedHealth.
0:21:51 And so maybe they’ll somehow downplay how well they did.
0:21:58 Well, I have one insight to report, which is that the company hit full-year revenue
0:22:02 of $400 billion, which was a record for the company.
0:22:03 So it was a big year.
0:22:07 But in the press release and in the earnings call, which we listened to, they actually
0:22:09 never called it a record.
0:22:14 They just said revenue increased 8% to $400 billion.
0:22:19 And in any other situation, you would think that a company would want to brag about this.
0:22:23 They’d want to brag about the fact that they hit record revenues in 2024.
0:22:25 They decided not to on this occasion.
0:22:33 So my question to you, was this an intentional decision by UnitedHealth to downplay their
0:22:34 financial results?
0:22:35 Okay.
0:22:38 So imagine this earnings call.
0:22:43 Our thoughts and prayers go out to the family of Brian Thompson in the wake of this tragedy.
0:22:49 But on the plus side, our willingness to deny people claims and tell them that their, not
0:22:55 only does their wife have lung cancer, but we’re going to bankrupt them because we figured
0:22:57 out a way to deny the claim.
0:22:59 And it’s really paying off for us.
0:23:02 We had record revenues.
0:23:05 And then pause and wait for the applause.
0:23:13 There was no way, no way he was going to get on this earnings call and do anything but
0:23:17 sound sanguine and like things are hard for us.
0:23:19 This was, we were talking about this yesterday.
0:23:27 I can’t imagine a more stressful IR pre-earnings game than what was going on with the CEO.
0:23:32 I started saying, no, no, no, no, don’t say the word we’re optimistic.
0:23:33 Look sad.
0:23:34 Look bereft.
0:23:37 Look like things are really hard here at United.
0:23:43 It’s just, oh my God, things are tough for us because he could not get on this earnings
0:23:48 call and you just pointed out, and I said, find out what’s going on.
0:23:51 Record revenues, but they have record revenues.
0:23:55 Any other company that had record revenues would be like, I’m proud to announce that
0:23:57 we experienced record revenues.
0:23:59 Didn’t say that, did he?
0:24:06 And this has inspired an interesting conversation around the correlation between denying people
0:24:11 their healthcare coverage and profitability and a nation where it is much easier to get
0:24:16 an assault rifle or build a ghost gun than it is to get health insurance and possibly
0:24:20 get that fucking health insurance company to cover your claims.
0:24:26 The argument from the CEO, and he addressed this head on, the argument was that United
0:24:30 Health is squarely not to blame for the high cost of healthcare in America.
0:24:36 And he said quite clearly on the call, which we listen to, that the ones who are to blame
0:24:37 are the drug manufacturers.
0:24:43 In fact, he argued that United Health and the pharmacy benefit managers that United Health
0:24:48 runs, like OptumRx, he argued that they are the ones responsible for actually keeping
0:24:50 costs down.
0:24:57 Now I don’t know if that’s true because the industry is extremely complex and I just
0:25:01 struggled to wrap my head around it, but there is evidence to suggest, and this was laid
0:25:07 out in this report by a representative, Comer out of Kentucky, that actually pharmacy benefit
0:25:09 managers drive costs up.
0:25:14 They say their job is to decrease costs, but they also benefit from a dynamic where drugs
0:25:19 cost a lot because the higher the price of the drug, the larger the rebate and the way
0:25:25 these benefit managers make money is through taking a cut of that rebate.
0:25:29 And I was thinking about all of this and just the complexity of the issue, and it brought
0:25:35 me back to something that Luigi Mangione said in his manifesto, and I want to be clear,
0:25:38 I am not glorifying this guy, what he did is terrible, let’s just put it out there,
0:25:39 but this is quite interesting.
0:25:44 He said in the manifesto, “These companies have simply gotten too powerful and they continue
0:25:48 to abuse our country for immense profit because the American public has allowed them to get
0:25:49 away with it.”
0:25:55 Obviously, the problem is more complex, but I do not have the space, and frankly, I do
0:26:00 not pretend to be the most qualified person to lay out the full argument, but many have
0:26:05 illuminated the corruption and greed decades ago and the problem simply remain.
0:26:11 And interestingly, I found that this relates a lot to a conversation we had last week about
0:26:15 another big problem in America, which is the cost of housing.
0:26:20 I criticized the real estate investment firms, the companies like Blackstone and Greystar
0:26:26 and Cushman and Wakefield, and you pointed out to me that actually the issue is probably
0:26:29 more nuanced than just these big firms are bad.
0:26:33 And my pushback was essentially, “Well, Scott, I don’t care about the nuances, I think the
0:26:38 problem is so bad, I’m no longer interested in discussing the finer details.”
0:26:44 And I find myself at this point again, and I think this is the rift we are contending
0:26:49 with now in America, because yes, these issues are complex.
0:26:54 Yes, maybe United Health isn’t solely to blame for the cost of health care in America, but
0:27:01 I wonder if there comes a point at which we will just reject the argument of nuance, reject
0:27:06 the argument of complexity, and say, “You know what, enough is enough, maybe we don’t
0:27:12 understand this, maybe this is way more complex than our simple regular folk can understand,
0:27:18 but the outcome is very clear, we are getting screwed and you must do something about it.”
0:27:25 So I guess my question to you would be, are there ever situations, do you think, where
0:27:31 the answer actually isn’t to try to understand the nuances, but instead to just wholesale
0:27:35 reject the arguments of the other side, in this case United Health, and say, “You know
0:27:39 what, no, we’re not listening to this anymore, something has to change and we don’t care
0:27:41 how it gets changed.”
0:27:50 I like your indignance and your outrage is legitimate and it’s authentic and justified.
0:27:53 You have to have nuance, even if you want to move to solutions, you’re going to have to
0:27:59 understand the nuance of the very complicated situation, and in his instance, or in the
0:28:05 case of the CEO, inspiring a question, “Is it the insurance industry or is it the pharmaceutical
0:28:06 industry?”
0:28:13 Yes, and what you have is essentially in a capitalist society, if you don’t have certain
0:28:17 guardrails and a certain understanding that certain regulatory intervention in the operating
0:28:21 system is needed or capitalism collapses on itself, we seem to be moving towards kind
0:28:27 of the collapsing part, and that is, when you put a profit incentive around prisons, you
0:28:31 end up with the most incarcerated public in the world.
0:28:38 When you put profit incentives around rejecting claims, or you let pharmaceutical companies
0:28:44 basically concentrate, and there’s so few of them that they can command ownerless pricing,
0:28:48 and then you let them engage in Citizen United, where they can give Democratic and Republican
0:28:54 senators and Congresspeople $700,000, $800,000 a million, they will pass laws that say, “All
0:28:56 right, every nation in the world is paying less for these pharmaceuticals produced in
0:29:02 the U.S., but we figured out a way to pass laws to transfer capital from citizens to
0:29:07 these institutions,” and we’ve given them also let these insurance companies reject
0:29:08 claims.
0:29:15 So, having a profit incentive, in fact, certain social goods, creates externalities that
0:29:19 are really hard on the American public, and we end up in a situation where we’re paying
0:29:26 $13,000 for healthcare versus $6,500 in the G7, despite the fact we’re living less long
0:29:28 more anxious, more depressed, more obese.
0:29:33 So, we have hit the point where, okay, we need to do something about this.
0:29:36 You do have to have a nuanced argument to move to solutions.
0:29:40 Now, I do believe that the only way to get America to a solution is probably through
0:29:46 basic language, it’s pretty simple to understand, this good, this bad, and an idea that’s somewhat
0:29:47 simple.
0:29:52 So, people like Medicare, I would argue there’s a few basic things we need to do, and this
0:29:58 again, lacks nuance, which you seem to like, but maybe lower the age on Medicare from whatever
0:30:03 it is, 65 a year, and eventually have national and socialized medicine.
0:30:09 I’m not sure we should have, the UK system is as much as people complain about it.
0:30:13 It costs their citizens half as much, and there’s a layer of private care.
0:30:19 I engage in the private system, and that takes about 10% or 5% of the populace, they are
0:30:23 less stressed on the public system, and we got to get used to the fact that some people
0:30:25 are going to have better healthcare.
0:30:27 That’s a component of a capitalist society.
0:30:32 I also believe we’ve got to figure out a way to put most or all consumers on the hook for
0:30:37 some of these payments, so that they start shopping and they consumerize healthcare.
0:30:42 And then it just gets, the issue gets complicated and more nuanced, like, okay, well, let’s go
0:30:44 to the source of the problem.
0:30:49 We can talk about how to reduce cost-treating someone with diabetes, but until we reduce
0:30:54 the number of diabetics, it’s kind of just rearranging the deck chairs on the Titanic.
0:30:59 So we’re going to have to figure out a way to have someone in every school only preparing
0:31:05 fresh food for kids, such that they don’t start off, enter into the world obese.
0:31:09 How do we get rid of, how do we reduce the power of the food industrial complex that
0:31:13 is putting all of these dyes and shit in preservatives?
0:31:15 We’re going to have to put physical fitness back in the school.
0:31:22 I do think I want every day a list of all of the representatives and senators taking
0:31:26 money from the healthcare industrial complex and realize that they’re compromised and saying
0:31:31 we need sweeping legislation, moving towards maybe a national healthcare system, moving
0:31:39 towards programs to take obesity from 40% back to where, in Japan, it’s 4%, it’s fucking
0:31:40 4%.
0:31:43 Imagine what that does to healthcare costs when you don’t have high blood pressure and
0:31:47 diabetes to live with in a nation.
0:31:50 But I like simple programs, lower the age you qualify for Medicare every year.
0:31:55 Everyone pays 10% of their healthcare costs and all of a sudden they start going, wait,
0:31:58 I’m going to find the cheapest place to get an MRI.
0:32:03 Think about every consumer product advertises this is great and it’s less expensive.
0:32:06 When did you hear that on a pharmacy ad?
0:32:10 We can bring your blood pressure down from four bucks a pill, not 80 bucks a pill.
0:32:15 I mean, here sometimes with Viagra, right, Viagra 399, I see that on the internet.
0:32:19 But when’s the last time it said, okay, I’m going in for a mammogram and I know the cost
0:32:21 and I’m going to shop around.
0:32:24 So I think there’s several big structural changes.
0:32:26 I do think nuance is required.
0:32:31 It has gotten to a tipping point and your outrage has to be expressed by voting for people who
0:32:37 are willing to take hard change and ignore the people who have given them money, who have
0:32:42 weaponized and have regulatory capture that have taken healthcare costs from $6,500 to
0:32:43 $13,000.
0:32:44 Yes.
0:32:48 Galloway 2028, a chicken in every pot of sea, Alice in every cupboard.
0:32:52 By the way, I was looking on our Reddit page, people talking about what would happen if
0:32:53 you ran for president.
0:32:58 One of my favorite comments was that Trump would come up with just a great nickname for
0:33:01 you and one of the suggestions was that you would be Mopey Scott.
0:33:02 Mopey?
0:33:10 One of the suggestions was that your nickname would be Eaw and mine would be Tigger.
0:33:12 That’s good.
0:33:13 That’s good.
0:33:18 We’ll be right back after the break with a look at earnings from the biggest banks in
0:33:19 the US.
0:33:23 If you’re enjoying the show so far, hit follow and leave us a review on property markets.
0:33:36 Support for the show comes from the Funrise Innovation Fund.
0:33:38 Think of the five biggest names in AI today.
0:33:40 How many of these companies do you own shares of?
0:33:41 Probably not many.
0:33:43 Maybe one, maybe two.
0:33:44 Why is that?
0:33:47 Because the open AIs and anthropics of the world are still private.
0:33:51 That means unless you’re an employee or a VC, you’re out of luck.
0:33:54 So it isn’t hard to see why venture capital has been one of the most prized asset classes
0:33:55 in the world.
0:33:58 But unless you’re worth eight or nine figures, you likely don’t have access to these funds.
0:34:00 The Funrise Innovation Fund is different.
0:34:03 It’s already raised more than $150 million.
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0:34:31 We’re back with Prof2Markets.
0:34:35 Fourth quarter earning season kicked off with Citigroup, Goldman Sachs, and JP Morgan
0:34:37 all beating analyst expectations.
0:34:39 Overall profits were stronger than expected.
0:34:44 JP Morgan had a particularly standout year as the bank reported the largest annual profit
0:34:46 in U.S. banking history.
0:34:50 As we’ve seen in previous quarters, a key driver of growth was investment banking.
0:34:58 Goldman’s investment banking revenue rose 24%, Citigroup 35%, and JP Morgan 46%.
0:35:04 So Scott, really strong quarter can get into some of the more of the specifics, but any
0:35:07 just initial gut reactions from these impressive earnings.
0:35:08 They had a great quarter.
0:35:12 When we were doing the editorial call, I was trying to understand why.
0:35:15 And one of our analysts said it’s because of volatility and trading.
0:35:17 But my guess is everything’s up across.
0:35:19 I would imagine M&A is starting again.
0:35:21 I’ll be curious if the IPO market comes back.
0:35:26 The other part of the business that is the best part of the business is wealth management
0:35:28 because it’s much more consistent.
0:35:32 I know that some of it is when interest rates go up, you have an easier time charging a spread
0:35:35 between deposits and mortgages.
0:35:40 Yeah, I think that’s definitely — I’m just higher net interest income in general with
0:35:41 higher rates.
0:35:44 I mean, I’ll just go over it really quickly.
0:35:46 I think there are two main drivers here.
0:35:49 One is the investment banking revenues, which we’ve seen.
0:35:54 So we’re seeing this increase in deal making, more M&A, which of course is great for the
0:35:59 investment banks because their job is to facilitate those transactions, and they charge a fee,
0:36:00 which leads to higher revenues.
0:36:04 And this is no different from what we saw last quarter.
0:36:06 Investment banking revenues were up by a similar amount.
0:36:11 So I think the takeaway here is, people have been wondering, is M&A coming back?
0:36:14 It’s been in a slump the past couple of years.
0:36:19 I think this is our confirmation from these bank earnings, yes, M&A is officially back.
0:36:24 I think we can expect that trend will continue, and that’s especially likely under a Trump
0:36:25 administration.
0:36:32 The second big driver of this growth is newer, and that is the trading revenue, as you mentioned.
0:36:37 And this is the money that the banks make for facilitating and executing the trades
0:36:41 of their clients, trades for stocks and trades for bonds.
0:36:45 Now, the explanation that you’re seeing a lot of in the media, which you also referenced
0:36:52 there, is something like market volatility increased trading revenues, which is sort
0:36:57 of a true statement, but it’s also a little bit of a misdirect because I think the real
0:37:02 reason we’re seeing these sales and trading desks making so much money last quarter is
0:37:08 that last quarter trading volumes exploded, not just the volatility, but the volume.
0:37:11 So you had more stock trading, more bond trading.
0:37:14 And the question, of course, is why did that happen?
0:37:17 And the answer is quite simple, is it was the election.
0:37:24 I think this is a reminder here of the power of stories and narratives in markets, because
0:37:31 what this election did is it sparked a flurry of new narratives from investors about what
0:37:35 may happen in the future, who’s going to benefit from a Trump administration, who’s
0:37:40 going to get burned, what’s going to happen to interest rates, and it’s all those stories
0:37:45 that create this energy in the market that propel people to make trades, to take bets,
0:37:47 to speculate on the future.
0:37:48 Acquire a company, right?
0:37:49 Yeah.
0:37:50 Exactly.
0:37:51 And of course, who benefits?
0:37:54 It’s the middlemen, which are the banks.
0:37:58 So I think that’s what really happened here is the banks were the beneficiaries of an
0:38:03 environment where quite simply interesting stuff was happening in the markets.
0:38:07 And the question now is, will that continue?
0:38:11 I would argue probably not, not to the extent that we saw in Q4, but having said that, Trump
0:38:13 is a very erratic person.
0:38:17 He’ll probably make some pretty controversial decisions, and I’m sure that will lead to
0:38:22 lots more interesting stories that lead to new investment theses and new trade.
0:38:26 So that’s sort of a breakdown on, I think, why we’ve seen this explosion in banks in
0:38:27 the past quarter.
0:38:31 I thought that was cogent, because what you’re summarizing, and I hadn’t zeroed in on, is
0:38:37 wait-and-see is the worst words in the world for a services industry or financial institution.
0:38:42 They don’t want people to wait and see what happens with the election around going public,
0:38:46 acquiring a company, reallocating the portfolio, moving, whatever it might be.
0:38:49 And the last kind of six months have been sort of wait-and-see.
0:38:53 And then once we had clarity around the election, whether you like the outcome or not, people
0:38:59 move to getting shit done and trading and buying and making bids for companies and doing
0:39:00 their debt offering.
0:39:03 Okay, we’re going to wait and see if interest rates come down.
0:39:04 Well, they are.
0:39:05 They are not.
0:39:06 So let’s just get on with life.
0:39:11 But I actually, I think that was a thoughtful analysis of the situation.
0:39:15 Something Jamie Dimon said on the JP Morgan earnings call, and this is a bit of a pivot
0:39:21 here, but I found this fascinating, he said, “This is a fantastic quarter, highest annual
0:39:25 profit in the history of American banking, $59 billion, just enormous.”
0:39:30 But then he said, “Two significant risks remain.
0:39:34 One going in future spending requirements will likely be inflationary, and therefore inflation
0:39:36 may persist for some time.
0:39:43 Additionally, geopolitical conditions remain the most dangerous and complicated since World
0:39:45 War II.”
0:39:47 Your reactions to Jamie Dimon’s comments.
0:39:50 I think he’s thoughtful and he kind of likes the camera.
0:39:55 I mean, he makes, look, Jamie’s, I don’t know if you saw him at six minutes ago, that was
0:39:56 very powerful.
0:39:57 He’s also very handsome.
0:40:00 I think he should have been Treasury Secretary just based on his looks.
0:40:03 He looks like he should be Treasury Secretary.
0:40:05 I love that term cautiously pessimistic.
0:40:08 I think that’s super interesting.
0:40:11 Geopolitically, are things more dangerous now than they’ve ever been?
0:40:12 I can’t tell.
0:40:16 I can’t discern between my depression and actual world events.
0:40:22 It does feel like water is at a simmer and about to boil everywhere, and it does appear
0:40:25 that the markets are climbing a wall of worry.
0:40:32 So do you take that, I mean, people would say that he’s the guy who is most in touch
0:40:34 with what is happening in the world.
0:40:39 It’s his job to understand what is going to happen tomorrow and the next day.
0:40:43 I mean, the fact that he’s calling this the most dangerous geopolitical condition and
0:40:50 the most complicated since World War II, does that make you more concerned at all, or is
0:40:52 it just a statement?
0:40:53 Well here’s the thing.
0:40:58 And Jamie is super smart, super insightful, and has no fucking idea like the rest of us.
0:41:05 And somewhere there might be someone mixing up some crazy biohazard or bioweapon that
0:41:11 they learned how to mix up using bleach and common household items with some AI LLM that
0:41:13 has no safeguards on it.
0:41:18 Or we might find that Israel is actually stabilizing the Middle East and the kingdom is going to
0:41:22 normalize relations, or we’re going to find that AI seeps into the economy and creates
0:41:26 incredible productivity and blooms of 1,000 different unicorns.
0:41:33 I mean, I can make an argument both ways, or the U.S. and China kiss and make up, or
0:41:38 that inflation runs rampant and the markets begin to crash as there’s a reallocation
0:41:44 of capital, at least markets crash in U.S. reallocation of capital into markets.
0:41:45 This all comes back to the same place to me.
0:41:49 And that is, I was a consultant, so what would go out is I would try and find people smarter
0:41:54 than me and then pair it back, their viewpoints in different boardrooms.
0:41:57 And I loved, I got very into the idea of scenario planning.
0:42:01 And scenario planning is don’t try to predict the future because nobody can.
0:42:07 The butterfly flapping its wings in the Brazilian rainforest can cause a rainstorm in Orlando.
0:42:10 And there’s just no way you can predict what this butterfly is going to do today.
0:42:16 What you want to do is outline a number of potential scenarios that seem somewhat realistic
0:42:23 or likely, and then develop a strategy that fits to the best outcome across a number of
0:42:25 those potential strategies.
0:42:32 And so your job as an investor is to recognize that, yeah, Nvidia could go down 80%, but
0:42:35 wait, yeah, it could double.
0:42:38 So what you want to do is diversify.
0:42:40 And what is in your control?
0:42:44 What is in your control is to spend less than you make and have automatic savings plans
0:42:47 recognizing that time is going to go faster than you think.
0:42:53 And then to try and diversify, right, such that all the things that are outside of your
0:42:58 control, whether it’s the Islamic Republican Iran realizing they’re losing the battle and
0:43:03 about to be overthrown, so they declare war on somebody or weaponize one of their proxies,
0:43:05 who the fuck knows?
0:43:11 But diversification and controlling what you can control, and also just for your own
0:43:15 mental health practices, and I’m trying to figure this out right now, find people and
0:43:21 things that give you comfort and give you joy and distract you from being on fucking
0:43:27 TikTok all day or watching the inauguration, i.e., watch aerial firefighters and listen
0:43:30 to InXS all day Monday.
0:43:39 Because if the inauguration and the fact that we are bringing in, making DUI hires for Defense
0:43:43 Secretary, I love that DUI hire versus DEI hire.
0:43:44 I love that.
0:43:45 That’s good.
0:43:46 That is good.
0:43:47 That triggers me.
0:43:48 That upsets me.
0:43:52 Find places in your life that give you comfort and give you peace, and you’re going to find
0:43:54 those places in your relationships.
0:43:58 You’re going to find them in physical fitness, and you’re going to find them in a recognition
0:44:03 that the 98% of your life is really good and is really positive.
0:44:09 But going back, circling back, and the way you protect yourself against the unknown, which
0:44:15 neither Jamie Dimon nor anybody else really knows, is diversification and consistently
0:44:18 investing regardless of where you think the market is.
0:44:21 Let’s take a look at the week ahead.
0:44:26 What’s the earnings from Netflix, Johnson & Johnson, and American Express, Scott & Pritchons?
0:44:32 I think inflation is going to pop up, and I think that a lot of Trump’s policies are
0:44:37 going to come to a head around when we move to the rebuilding part of the program around
0:44:43 the LA fires, and that is the expectation of deficits, the crackdown on immigration,
0:44:49 both legal and illegal in terms of the costs of rebuilding a home, tariffs that will have
0:44:55 reciprocal tariffs if they do anything stupid enough to impose these things.
0:44:58 We’re talking about a Canada, China, or Mexico.
0:45:06 I think that the LA fires are going to continue to be in the news for how they highlight Trump’s
0:45:11 massive inflationary policies as evidenced by the cost to rebuild are going to be just
0:45:18 extraordinary, and people are going to point directly to immigration, policy, tariffs,
0:45:21 and the expectation of deficits.
0:45:26 And I think to our point, the most important person in the administration who’s going to
0:45:29 play an enormous role is going to be the bond market.
0:45:34 And I think this guy, I find that luck over the long term is perfectly symmetric.
0:45:38 When you have a huge win from an investment standpoint, you want to pull in your horns
0:45:43 because it means you’re due to get pretty robustly smacked.
0:45:46 And when things aren’t going well for you, I find that you want to try and stay optimistic
0:45:50 and maybe take more risk because you’re due for some good luck.
0:45:55 I think this guy has jumped from lily pad to lily pad, and he’s going to hop onto a snake.
0:46:01 And I think that snake is, I think, the return of inflation.
0:46:04 This episode was produced by Claire Miller and engineered by Benjamin Spencer.
0:46:06 Our associate producer is Alison Weiss.
0:46:10 Mia Silverio is our research lead, Jessica Lang is our research associate, Drew Burris
0:46:13 is our technical director, and Catherine Dillon is our executive producer.
0:46:17 Thank you for listening to ProfG Markets from the Vox Media Podcast Network.
0:46:22 Join us on Thursday for our conversation with Rich Greenfield only on ProfG Markets.
0:46:27 Lifetimes
0:46:35 You help me
0:46:38 In kind
0:46:42 Reunion
0:46:47 As the world turns
0:46:52 And the dark flies
0:46:56 In love
0:47:05 That’s right, that’s right.
0:47:08 Just so you know, we are whore-hears, we are whore-hears.
0:47:09 Whore-hears.
0:47:10 Whore-hears.
0:47:12 Our name is George, and that’s Vanyel.
0:47:13 We are whore-hears.
0:47:15 No, we’re whores, but we’re expensive whores.
0:47:18 Whenever the ad people call me and say, “Will you do this ad?”
0:47:21 I’m like, “I don’t know, how much are they offering?”
0:47:24 Anyways, support for the show comes from the Fundrise Innovation Fund.
0:47:27 You’ve heard me talk about the Fundrise Innovation Fund before, so I’ll keep this short.
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0:00:34 Today’s number 41,000.
0:00:39 That’s how many social media posts have the hashtag #tiktokrefugee at the time of this
0:00:40 recording.
0:00:43 Ed, what is a negative thought?
0:00:44 What?
0:00:45 TikTok.
0:00:56 That’s kind of an existential one.
0:01:01 It’s like that joke I heard that a Holocaust survivor ends up in heaven and he says to
0:01:05 God, “Hey, I’m thinking about telling a Holocaust joke,” and he’s like, “No, no, no,
0:01:06 Holocaust jokes.
0:01:07 It’s just not funny.”
0:01:11 And then the Holocaust survivor says, “Well, I guess you had to be there.”
0:01:13 It really gets you thinking.
0:01:14 Two bombs in a row.
0:01:18 Well, I wanted to go after the Catholic church, but I was worried our interns are going to
0:01:20 be witnesses in the lawsuit.
0:01:22 Yeah, you’ve never done that before.
0:01:26 My role model, Sam Harris, I’m totally backbelling right now, says, “If you’re wealthy and you
0:01:29 have people who love you unconditionally, you should speak your mind.”
0:01:30 I’m speaking my mind.
0:01:31 That’s very good.
0:01:33 Have you seen what Sam Harris has been saying about Elon Musk?
0:01:34 Well, you tell me.
0:01:35 What is he saying?
0:01:37 I know it, but the viewers don’t know it.
0:01:41 I’m trying to remember it exactly, but he basically described how he fell out with Elon
0:01:47 Musk and Elon Musk made this bet with Sam Harris where he said, “I will bet you a million
0:01:54 dollars that we will not see 35,000 cases of COVID in the United States.”
0:01:58 And Sam Harris was like, “Well, that’s ridiculous because the estimates that we’re going to
0:02:02 have a million deaths, not cases, but deaths in the US.”
0:02:04 He says, “Why don’t we make it a little fairer?
0:02:09 How about I’ll take you up on the bet, except let’s make it three and a half million cases,
0:02:10 not 35,000.”
0:02:14 And Elon said, “No, no, no, make it 35,000 cases.”
0:02:20 So then a week later, they find out that there have already been 100,000 deaths plus several
0:02:21 more cases.
0:02:24 Sam Harris reaches out, says, “I think I’ve won the bet.”
0:02:30 Elon ghosts him and then starts to deride him on social media.
0:02:37 And now Sam Harris, because he’s shitposting him even more, is dealing with strangers coming
0:02:41 up to his house and making death threats.
0:02:44 And it’s all because Elon Musk has been shitposting him.
0:02:48 So I just thought it was just a powerful indictment of Elon and his character.
0:02:54 I think we all know this, but I love that it’s coming from one of his former best friends.
0:02:57 One of those two tells the truth all the time.
0:02:58 One of them doesn’t.
0:03:00 And you guess who is who.
0:03:08 So when Sam says something, you can trust it’s the truth or that he’s a good actor.
0:03:10 And I find it gives people the benefit of the doubt.
0:03:12 I’m an enormous fan.
0:03:18 And one of those individuals serves as a role model for me as a father and as an American.
0:03:21 So anyway, so what’s the difference between COVID and a priest?
0:03:22 Just kidding.
0:03:23 I’m not even going there.
0:03:25 I’m not even going there.
0:03:26 I’m not even going there.
0:03:30 Tell us what we’re talking about today, and then I’ll get into my job and read us the
0:03:31 headlines.
0:03:35 Today’s episode, first off, is presented by Funrise, two words, first word, cut and second
0:03:36 ching.
0:03:39 We’re whores, but we’re expensive whores.
0:03:41 Whenever the ad people call me and say, “Will you do this ad?”
0:03:44 I’m like, “I don’t know how much are they offering?”
0:03:49 We’re going to be talking about United Health’s first earnings call since the CEO shooting
0:03:52 in a banner year for the big banks.
0:03:54 Ed, what else is going on?
0:03:55 What are we doing here?
0:04:04 Let’s start with the weekly review of Market Vitals.
0:04:09 The S&P 500 rallied, the dollar fell, Bitcoin climbed, and the yield on tenure treasuries
0:04:11 dropped, shifting to the headlines.
0:04:17 The Consumer Price Index increased 2.9% in December from a year earlier and rose just
0:04:19 0.4% month over month.
0:04:26 Core CPI also came in lower than expected, providing further evidence of easing inflation.
0:04:29 That encouraging report drove all three major indices higher.
0:04:34 Meta is laying off approximately 5% of its workforce as part of an effort to phase out
0:04:35 lower performers.
0:04:39 CEO Mark Zuckerberg stated that the cuts are essential to ensure the company maintains,
0:04:42 quote, “the strongest team possible.”
0:04:46 And finally, the Supreme Court has upheld the federal TikTok ban, but the app’s future
0:04:48 remains uncertain.
0:04:51 Trump has stated that he may issue an executive order to delay the enforcement of the ban
0:04:53 for at least 60 days.
0:04:59 Scott, starting from the top, pretty positive CPI report, especially the core CPI, your
0:05:03 thoughts on inflation tamping down a little bit.
0:05:05 Yeah, well, the market had a collective sigh.
0:05:09 It had its best days since November 6, and bond yields moved lower.
0:05:16 The S&P erased its 2025 losses year-to-date and popped 2%, the 10-year fell 15 basis points,
0:05:20 which, as we keep saying, is now the adult in the administration.
0:05:25 Treasury yields are a benchmarking for borrowing costs across the economy, and when yields
0:05:29 drop, borrowing costs become cheaper for businesses and consumers, essentially a tax cut, which
0:05:32 can stimulate economic growth.
0:05:34 So I think this is good.
0:05:39 More inflation, I think it strips out more volatile things, including, I think food and
0:05:40 energy, what it strips out.
0:05:45 And the reason that we have that is because, as you said, food and energy prices are very
0:05:46 volatile.
0:05:53 So generally speaking, economists prefer to use the core CPI when trying to understand
0:05:54 these trends.
0:05:56 It’s funny that we’ve become obsessed with inflation.
0:06:00 I remember you were too young for this, like 15 years ago, all we could talk about was the
0:06:04 Greek sovereign bonds defaulting, and that was going to infect Europe, and we just became
0:06:05 obsessed with it.
0:06:08 It seems like now we’re obsessed, and maybe it’s more justified now.
0:06:11 Yeah, I was thinking about that when I was 10 years old.
0:06:12 Oh, there you go.
0:06:13 Rub it in my face again.
0:06:14 We know you’re young.
0:06:15 We know you’re young.
0:06:18 So inflation has sort of become the thing that everyone’s going to keep their eye on,
0:06:23 and I’m fascinated by what’s going to happen in terms of inflation or how we’re going to
0:06:27 link it to the rebuilding of LA, but it’s going to be really interesting to see what
0:06:32 the tenure does over the next few months because, well, the Fed has been cutting rates.
0:06:34 The tenure said, “Hold my beer,” and it’s not coming down.
0:06:39 I mean, it’s sort of almost like further mistrust in our institutions.
0:06:44 The markets would choose to follow the tenure in terms of its own interest rates.
0:06:46 It’s now saying, “Oh, we don’t care.”
0:06:50 Yeah, I think the most interesting thing here isn’t necessarily the inflation data itself,
0:06:54 but the market’s reaction to the inflation data, and as you point out, the thing that
0:07:00 has, I think, been slightly confusing people, or at least grabbing their attention, is the
0:07:06 fact that the stock market has been sliding over the past few months, certainly since
0:07:11 the election, and also, as you say, the 10-year yield is rising, meaning that people are selling
0:07:13 off their treasury.
0:07:18 So investors have just been anxious about the economy, and I think the question has been
0:07:20 like, what are they specifically anxious about?
0:07:22 Are they anxious about Israel?
0:07:23 Are they anxious about Ukraine?
0:07:24 Is it something to do with Trump?
0:07:31 And I think this reaction, where you had the inflation data come in softer than expected,
0:07:38 and then suddenly the market ramps up, and you see an increased demand in treasuries,
0:07:43 that’s basically the confirmation that the number one concerns for investors right now
0:07:44 is inflation.
0:07:48 And this is the market trying to tell us, this inflation thing, you might have thought it
0:07:52 was over, but we don’t think it’s over yet, and this is something we cannot forget about.
0:07:58 And I think the hope for investors would be that Trump, as he swears in for his second
0:08:04 term, will be thinking about this, and perhaps rethinking some of his fiscal policies that
0:08:08 are expected to increase inflation over the next year or so.
0:08:12 So I think it’ll be interesting to look at the inflation, and also, as you say, very
0:08:16 interesting to look at the 10-year yield, because that’s sort of the signal like, how
0:08:22 confident are investors in the economy really, as you said, the adult in the room, which
0:08:23 I think is a good way to put it.
0:08:29 Well, look at the trifecta here of inflation is putting a chill over immigration, both legal
0:08:34 and illegal, tariffs, and the expectations of deficits.
0:08:39 It’s literally like, how could we vent away to start spooking the market?
0:08:41 And I expect the 10-year to go higher.
0:08:42 We’ll see.
0:08:47 Your reaction to Mark Zuckerberg’s announcement, yet another announcement, he’s laying off
0:08:48 5% of the employees.
0:08:51 Look, there’s one kind of, there’s only one kind of person that likes Mark Zuckerberg,
0:08:52 and that’s shareholders.
0:08:58 And I find that he just approaches his business as a new pred capitalist.
0:09:00 This is the part of him I respect the most.
0:09:06 And I’m a big believer in capitalism, and part of capitalism is that there are winners
0:09:11 and losers, and you can’t reward the winners without punishing the losers.
0:09:16 And I’m not calling these people losers, but I used to talk about this a lot, or I do talk
0:09:20 about, oh, I’ve never managed a big business, but I’ve managed businesses with hundreds
0:09:24 of people, and I’ve always thought it’s important to fire people.
0:09:27 And I find over the short term, it’s bad for morale, and over the medium and the long-term,
0:09:33 especially if you do it as what I’ll call, not layoffs, but kind of performance-based
0:09:37 terminations and say, we appreciate you.
0:09:40 There’s a reason you’re working so fucking hard, and it pays off.
0:09:44 And if you aren’t working hard and you aren’t good, this isn’t a place for you, and it might
0:09:49 not be your fault, it might be part of the culture’s fault, but my approach as a board
0:09:54 member and as a CEO has always been, you know, when things aren’t working, and you start
0:10:00 making excuses, the worst days I’ve had professionally are when I know I need to lay off somebody.
0:10:02 And I constantly delay it.
0:10:05 I come and think, okay, I got a firebob.
0:10:08 And then I’m like, oh shit, and I delay it to the next day.
0:10:13 And intellectually, I know, or the way I approach it is, your gut is almost right.
0:10:15 When it’s not working, it’s not going to work.
0:10:19 And I find the sooner you make the decision, I’m fairly repacious and Darwinian about
0:10:22 making the decision, the more generous you can be.
0:10:27 So I think you’re fairly Darth Vader on the actual decision, but then you turn into Mother
0:10:32 Teresa because the sooner you can lay off somebody, you say to them, one, you may be
0:10:34 pissed off, you may not agree, but I don’t want you to be scared.
0:10:37 We’re going to give you a lot of severance.
0:10:41 Stick around, figure out the communication strategy to the rest of the firm or to the
0:10:42 broader world.
0:10:44 So it doesn’t ding your brand.
0:10:46 How can I be helpful?
0:10:52 But I’m fairly Darwinian about the decision and his saying corporations need more masculine
0:10:54 energy is just fucking stupid.
0:11:00 But saying we’re a big company, we’ve hired like crazy, we probably have AI, you know,
0:11:01 we can do more with less.
0:11:04 We’re going to take out the bottom 5% of performers.
0:11:07 I think it creates a very tense environment for about a week.
0:11:09 And then over the long term, I think it’s good.
0:11:10 It’s the right thing to do culturally.
0:11:15 I think it’s a key component of capitalism and also what people don’t also acknowledge
0:11:20 is those 5% at Metta, they were going to go nowhere fast.
0:11:26 And so the ability or forcing them to go find somewhere, somewhere they’re going to do better.
0:11:31 Someone laid off at Metta in wherever they are, San Francisco or the seventh ring of
0:11:37 hell or Tatooine, wherever they, whatever bond layer they’re holed up in, they’re going
0:11:38 to be fine.
0:11:45 So they may not realize it, but I would bet 80 to 90% of them will look back and go, that
0:11:48 was kind of a blessing in disguise because I went somewhere where my skills were just
0:11:50 more appreciated.
0:11:51 You mentioned AI there.
0:11:55 I think this is especially important given what Zuckerberg said on the Joe Rogan podcast
0:11:58 about AI and its use at Metta.
0:12:05 Probably in 2025, we at Metta, as well as the other companies that are basically working
0:12:14 on this, are going to have an AI that can effectively be a sort of mid-level engineer
0:12:17 that you have at your company that can write code.
0:12:21 And once you have that, then in the beginning, it will be really expensive to run and then
0:12:22 you can get it to be more efficient.
0:12:28 And then over time, we’ll get to the point where a lot of the code in our apps and including
0:12:33 the AI that we generate is actually going to be built by AI engineers instead of people
0:12:34 engineers.
0:12:41 So interesting because he’s basically saying that in 2025, this year, mid-level software
0:12:47 engineers at Metta will probably be replaced by AI, then follows up with that with this
0:12:53 announcement that he’s laying off 5% of the workforce, which is 3,600 people roughly.
0:12:57 I think from a business perspective, he’s making all of the right decisions.
0:13:03 He’s cozying up to Trump, he’s embracing AI, he’s fostering this competitive workplace
0:13:06 culture, which is all good news for shareholders.
0:13:12 But the thing that I don’t fully understand from a more PR perspective is the timing of
0:13:13 all this.
0:13:18 And that is, these are all controversial things to say.
0:13:21 And he has made these announcements in a matter of days.
0:13:28 And most of them, quite frankly, have made him out to be or look like a dick or out of
0:13:29 touch in some way.
0:13:32 I mean, he’s totally alienated the left.
0:13:38 And meanwhile, on the right, from what I’ve seen on X, formerly known as Twitter, most
0:13:42 Republicans are finding him disingenuous because they think he’s groveling to Trump
0:13:45 and just doing whatever he can to enrich himself.
0:13:49 So I think there’s two parts of this.
0:13:53 There’s the business side, which I think is genius, but then there’s the public relations
0:13:59 and image side, which I feel like it’s not the best idea to be making all of these controversial
0:14:04 announcements that don’t make you out to be the nicest guy in the world within a matter
0:14:05 of days.
0:14:07 Yeah, I kind of think Honey Badger don’t care.
0:14:10 And he’s putting this news out, starting it out with the kitchen sink.
0:14:11 He’s got a lot of negative press.
0:14:14 The news cycle is very crowded.
0:14:19 This story will come and go in 24 hours because everyone’s going to be totally obsessed with
0:14:25 this bad reality show and all these people bending the knee to the new king of Westeros.
0:14:26 True.
0:14:27 Maybe it’s perfect timing.
0:14:29 As a matter of fact, I think we should laugh about 50% of our staff.
0:14:30 What do you think?
0:14:31 Yeah, exactly.
0:14:33 I was waiting for that.
0:14:35 Let’s just touch on TikTok.
0:14:43 So we’re recording this before we know actually whether it is going to go lights out or not.
0:14:45 But let’s just play hypothetical here.
0:14:49 Let’s just sort of imagine that TikTok does disappear.
0:14:53 And let’s just think about what that would look like and what would happen in the economy.
0:14:57 And I’ll just start off with an interesting analysis from Bernstein, which is an advisory
0:14:58 firm.
0:15:04 So they found that Americans watched TikTok in 2024 for a cumulative 3.3 trillion minutes,
0:15:06 which is just pretty astounding.
0:15:13 And assuming that 100% of those minutes will be migrated to other platforms if TikTok shuts
0:15:21 down, they estimate that 5% of those minutes will go to Snapchat, 25% will go to YouTube,
0:15:28 and 60% will go to Instagram and Facebook, and the remaining 10% will go to other platforms.
0:15:35 And so when you consider the fact that last year TikTok generated an estimated $22 billion
0:15:40 in U.S. ad revenue, and to be clear, that is an estimation because TikTok is a private
0:15:43 company and they don’t really release their financials.
0:15:47 If we assume that and if we assume that Bernstein is correct with their analysis, then that
0:15:54 means that Metta overnight will add an extra $13 billion in revenue next year, which would
0:15:59 increase Metta’s annual revenue by almost 10% in one go.
0:16:05 So I would like to get your reaction to that statistic, but also just what do you think
0:16:06 is going to happen here?
0:16:10 What does a media ecosystem look like with no TikTok?
0:16:15 So Metta’s price of sales ratio was about 10.
0:16:19 You say they’re going to get about another, what, $13 billion in revenue, you think?
0:16:20 Assuming all of this goes to plan.
0:16:26 So assuming the $22 billion, assuming the 60%, it’s all hypothetical, but yes, that
0:16:27 is the number.
0:16:33 So that’s hypothetically a $130 billion increase in value, Zuck, that’s about 15%.
0:16:39 So that’s about a $20 billion if, I mean, Zuck would really like to see TikTok get banned.
0:16:43 I mean, there’s a couple of things here, one, I think it’ll dramatically improve my relationship
0:16:45 with my 14-year-old.
0:16:48 I think that the majority of, and I’m only kind of kidding.
0:16:53 I think the majority of agitane anxiety in my household is over social media usage and
0:16:54 specifically TikTok.
0:16:58 And for the people out there who are saying this is bad parenting, that means you don’t
0:17:00 have kids and please shut the fuck up.
0:17:04 Yeah, but you’re making one mistake, which is I don’t think he’s just going to suddenly
0:17:06 stop scrolling on his phone.
0:17:08 It’s just going to migrate somewhere else.
0:17:10 Yeah, that might be right.
0:17:14 My observation around the TikTok ban is the thing I’m most disappointed is a bunch of
0:17:19 Democrats, including Wyden and Markey and Wyden was the famous co-author of what is arguably
0:17:23 the most damaging legislation in history, section 230, have all of a sudden, they’re
0:17:27 all of a sudden scrambling to try and extend the deadline, right?
0:17:30 Even Democrats are saying, is there a way we can figure out a way?
0:17:33 And I think this has bigger ramifications than TikTok.
0:17:39 And that is we’re likely going to be in several pretty serious confrontations with Xi Jinping
0:17:45 over the next 10 years or the CCP, whether it’s Taiwan or trade agreements.
0:17:48 And quite frankly, Ed, we’re blinking.
0:17:53 The president signed into law a ban on TikTok saying you need to divest or by January the
0:17:58 19th, you know, whatever it was, six months or nine months, we’re banning you and here
0:17:59 we are.
0:18:01 And we’re blinking.
0:18:04 China has called, China has said, hold my beer.
0:18:06 I’m not, at this point, I’m not divesting.
0:18:09 And we’re saying, oh, wait, wait, wait, let’s give them more time.
0:18:12 Do you really think they’re going to divest if we give them more time?
0:18:15 All we’re saying is we’re not serious.
0:18:19 So I think this is sort of indicating that we’ll blink first across this and perhaps
0:18:23 more important negotiations.
0:18:31 I will tie a bell on this conversation with TikTok users have been migrating in mass
0:18:36 to a different app called Red Note, and this is this Chinese version of Instagram.
0:18:38 Yeah, another Chinese one, right?
0:18:39 Exactly.
0:18:43 It was the most downloaded free app in the US Apple store last week.
0:18:46 And this is the best start right as that migration was happening.
0:18:55 Duolingo, the language learning app reported a 216% spike in US users learning Chinese.
0:18:59 So you got all these people who are on TikTok who are deciding they’re going to go to a
0:19:00 new platform.
0:19:06 And that new platform happens to be another Chinese social media app called Red Note.
0:19:08 I don’t think this is going to be a lasting thing.
0:19:13 I think people are mainly doing it as a meme because it’s kind of funny to just go to another
0:19:14 Chinese app.
0:19:19 It’s sort of a metaphorical finger to the US government, I think.
0:19:23 And I think these TikTok users are very upset about this ban.
0:19:27 But I just find it hilarious that, I mean, they’ve just substituted one Chinese app for
0:19:28 another.
0:19:29 The new one is Red Note.
0:19:33 Okay, we’ll be right back after the break with a look at UnitedHealth’s earnings call.
0:19:37 If you’re enjoying the show so far and you haven’t subscribed, be sure to give ProfG
0:19:49 Markets a follow wherever you get your podcasts.
0:19:51 Support for the show comes from the FunRise Innovation Fund.
0:19:55 The investing world seems to be bending towards democratization, but venture capital always
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0:20:59 We’re back with ProfG Markets.
0:21:03 UnitedHealth released its first earnings report since the death of executive Brian Thompson.
0:21:07 While the company posted record full-year revenue, its quarterly revenue fell short
0:21:11 of analyst expectations and the stock fell more than 4%.
0:21:15 During the earnings call, CEO Andrew Whitty paid tribute to Thompson, reflecting on his
0:21:17 dedication to his job at the company.
0:21:22 He then pivoted to address larger issues within the healthcare industry, placing significant
0:21:27 blame on drug companies for driving up healthcare costs nationwide.
0:21:33 So Scott, we were talking before the earnings call about what we thought might happen, and
0:21:39 you made this interesting point that you thought that they would try to, in some way, sandbag
0:21:44 the financials, i.e., they don’t want to be appearing too profitable right now, given
0:21:47 everything that’s happening in the news with UnitedHealth.
0:21:51 And so maybe they’ll somehow downplay how well they did.
0:21:58 Well, I have one insight to report, which is that the company hit full-year revenue
0:22:02 of $400 billion, which was a record for the company.
0:22:03 So it was a big year.
0:22:07 But in the press release and in the earnings call, which we listened to, they actually
0:22:09 never called it a record.
0:22:14 They just said revenue increased 8% to $400 billion.
0:22:19 And in any other situation, you would think that a company would want to brag about this.
0:22:23 They’d want to brag about the fact that they hit record revenues in 2024.
0:22:25 They decided not to on this occasion.
0:22:33 So my question to you, was this an intentional decision by UnitedHealth to downplay their
0:22:34 financial results?
0:22:35 Okay.
0:22:38 So imagine this earnings call.
0:22:43 Our thoughts and prayers go out to the family of Brian Thompson in the wake of this tragedy.
0:22:49 But on the plus side, our willingness to deny people claims and tell them that their, not
0:22:55 only does their wife have lung cancer, but we’re going to bankrupt them because we figured
0:22:57 out a way to deny the claim.
0:22:59 And it’s really paying off for us.
0:23:02 We had record revenues.
0:23:05 And then pause and wait for the applause.
0:23:13 There was no way, no way he was going to get on this earnings call and do anything but
0:23:17 sound sanguine and like things are hard for us.
0:23:19 This was, we were talking about this yesterday.
0:23:27 I can’t imagine a more stressful IR pre-earnings game than what was going on with the CEO.
0:23:32 I started saying, no, no, no, no, don’t say the word we’re optimistic.
0:23:33 Look sad.
0:23:34 Look bereft.
0:23:37 Look like things are really hard here at United.
0:23:43 It’s just, oh my God, things are tough for us because he could not get on this earnings
0:23:48 call and you just pointed out, and I said, find out what’s going on.
0:23:51 Record revenues, but they have record revenues.
0:23:55 Any other company that had record revenues would be like, I’m proud to announce that
0:23:57 we experienced record revenues.
0:23:59 Didn’t say that, did he?
0:24:06 And this has inspired an interesting conversation around the correlation between denying people
0:24:11 their healthcare coverage and profitability and a nation where it is much easier to get
0:24:16 an assault rifle or build a ghost gun than it is to get health insurance and possibly
0:24:20 get that fucking health insurance company to cover your claims.
0:24:26 The argument from the CEO, and he addressed this head on, the argument was that United
0:24:30 Health is squarely not to blame for the high cost of healthcare in America.
0:24:36 And he said quite clearly on the call, which we listen to, that the ones who are to blame
0:24:37 are the drug manufacturers.
0:24:43 In fact, he argued that United Health and the pharmacy benefit managers that United Health
0:24:48 runs, like OptumRx, he argued that they are the ones responsible for actually keeping
0:24:50 costs down.
0:24:57 Now I don’t know if that’s true because the industry is extremely complex and I just
0:25:01 struggled to wrap my head around it, but there is evidence to suggest, and this was laid
0:25:07 out in this report by a representative, Comer out of Kentucky, that actually pharmacy benefit
0:25:09 managers drive costs up.
0:25:14 They say their job is to decrease costs, but they also benefit from a dynamic where drugs
0:25:19 cost a lot because the higher the price of the drug, the larger the rebate and the way
0:25:25 these benefit managers make money is through taking a cut of that rebate.
0:25:29 And I was thinking about all of this and just the complexity of the issue, and it brought
0:25:35 me back to something that Luigi Mangione said in his manifesto, and I want to be clear,
0:25:38 I am not glorifying this guy, what he did is terrible, let’s just put it out there,
0:25:39 but this is quite interesting.
0:25:44 He said in the manifesto, “These companies have simply gotten too powerful and they continue
0:25:48 to abuse our country for immense profit because the American public has allowed them to get
0:25:49 away with it.”
0:25:55 Obviously, the problem is more complex, but I do not have the space, and frankly, I do
0:26:00 not pretend to be the most qualified person to lay out the full argument, but many have
0:26:05 illuminated the corruption and greed decades ago and the problem simply remain.
0:26:11 And interestingly, I found that this relates a lot to a conversation we had last week about
0:26:15 another big problem in America, which is the cost of housing.
0:26:20 I criticized the real estate investment firms, the companies like Blackstone and Greystar
0:26:26 and Cushman and Wakefield, and you pointed out to me that actually the issue is probably
0:26:29 more nuanced than just these big firms are bad.
0:26:33 And my pushback was essentially, “Well, Scott, I don’t care about the nuances, I think the
0:26:38 problem is so bad, I’m no longer interested in discussing the finer details.”
0:26:44 And I find myself at this point again, and I think this is the rift we are contending
0:26:49 with now in America, because yes, these issues are complex.
0:26:54 Yes, maybe United Health isn’t solely to blame for the cost of health care in America, but
0:27:01 I wonder if there comes a point at which we will just reject the argument of nuance, reject
0:27:06 the argument of complexity, and say, “You know what, enough is enough, maybe we don’t
0:27:12 understand this, maybe this is way more complex than our simple regular folk can understand,
0:27:18 but the outcome is very clear, we are getting screwed and you must do something about it.”
0:27:25 So I guess my question to you would be, are there ever situations, do you think, where
0:27:31 the answer actually isn’t to try to understand the nuances, but instead to just wholesale
0:27:35 reject the arguments of the other side, in this case United Health, and say, “You know
0:27:39 what, no, we’re not listening to this anymore, something has to change and we don’t care
0:27:41 how it gets changed.”
0:27:50 I like your indignance and your outrage is legitimate and it’s authentic and justified.
0:27:53 You have to have nuance, even if you want to move to solutions, you’re going to have to
0:27:59 understand the nuance of the very complicated situation, and in his instance, or in the
0:28:05 case of the CEO, inspiring a question, “Is it the insurance industry or is it the pharmaceutical
0:28:06 industry?”
0:28:13 Yes, and what you have is essentially in a capitalist society, if you don’t have certain
0:28:17 guardrails and a certain understanding that certain regulatory intervention in the operating
0:28:21 system is needed or capitalism collapses on itself, we seem to be moving towards kind
0:28:27 of the collapsing part, and that is, when you put a profit incentive around prisons, you
0:28:31 end up with the most incarcerated public in the world.
0:28:38 When you put profit incentives around rejecting claims, or you let pharmaceutical companies
0:28:44 basically concentrate, and there’s so few of them that they can command ownerless pricing,
0:28:48 and then you let them engage in Citizen United, where they can give Democratic and Republican
0:28:54 senators and Congresspeople $700,000, $800,000 a million, they will pass laws that say, “All
0:28:56 right, every nation in the world is paying less for these pharmaceuticals produced in
0:29:02 the U.S., but we figured out a way to pass laws to transfer capital from citizens to
0:29:07 these institutions,” and we’ve given them also let these insurance companies reject
0:29:08 claims.
0:29:15 So, having a profit incentive, in fact, certain social goods, creates externalities that
0:29:19 are really hard on the American public, and we end up in a situation where we’re paying
0:29:26 $13,000 for healthcare versus $6,500 in the G7, despite the fact we’re living less long
0:29:28 more anxious, more depressed, more obese.
0:29:33 So, we have hit the point where, okay, we need to do something about this.
0:29:36 You do have to have a nuanced argument to move to solutions.
0:29:40 Now, I do believe that the only way to get America to a solution is probably through
0:29:46 basic language, it’s pretty simple to understand, this good, this bad, and an idea that’s somewhat
0:29:47 simple.
0:29:52 So, people like Medicare, I would argue there’s a few basic things we need to do, and this
0:29:58 again, lacks nuance, which you seem to like, but maybe lower the age on Medicare from whatever
0:30:03 it is, 65 a year, and eventually have national and socialized medicine.
0:30:09 I’m not sure we should have, the UK system is as much as people complain about it.
0:30:13 It costs their citizens half as much, and there’s a layer of private care.
0:30:19 I engage in the private system, and that takes about 10% or 5% of the populace, they are
0:30:23 less stressed on the public system, and we got to get used to the fact that some people
0:30:25 are going to have better healthcare.
0:30:27 That’s a component of a capitalist society.
0:30:32 I also believe we’ve got to figure out a way to put most or all consumers on the hook for
0:30:37 some of these payments, so that they start shopping and they consumerize healthcare.
0:30:42 And then it just gets, the issue gets complicated and more nuanced, like, okay, well, let’s go
0:30:44 to the source of the problem.
0:30:49 We can talk about how to reduce cost-treating someone with diabetes, but until we reduce
0:30:54 the number of diabetics, it’s kind of just rearranging the deck chairs on the Titanic.
0:30:59 So we’re going to have to figure out a way to have someone in every school only preparing
0:31:05 fresh food for kids, such that they don’t start off, enter into the world obese.
0:31:09 How do we get rid of, how do we reduce the power of the food industrial complex that
0:31:13 is putting all of these dyes and shit in preservatives?
0:31:15 We’re going to have to put physical fitness back in the school.
0:31:22 I do think I want every day a list of all of the representatives and senators taking
0:31:26 money from the healthcare industrial complex and realize that they’re compromised and saying
0:31:31 we need sweeping legislation, moving towards maybe a national healthcare system, moving
0:31:39 towards programs to take obesity from 40% back to where, in Japan, it’s 4%, it’s fucking
0:31:40 4%.
0:31:43 Imagine what that does to healthcare costs when you don’t have high blood pressure and
0:31:47 diabetes to live with in a nation.
0:31:50 But I like simple programs, lower the age you qualify for Medicare every year.
0:31:55 Everyone pays 10% of their healthcare costs and all of a sudden they start going, wait,
0:31:58 I’m going to find the cheapest place to get an MRI.
0:32:03 Think about every consumer product advertises this is great and it’s less expensive.
0:32:06 When did you hear that on a pharmacy ad?
0:32:10 We can bring your blood pressure down from four bucks a pill, not 80 bucks a pill.
0:32:15 I mean, here sometimes with Viagra, right, Viagra 399, I see that on the internet.
0:32:19 But when’s the last time it said, okay, I’m going in for a mammogram and I know the cost
0:32:21 and I’m going to shop around.
0:32:24 So I think there’s several big structural changes.
0:32:26 I do think nuance is required.
0:32:31 It has gotten to a tipping point and your outrage has to be expressed by voting for people who
0:32:37 are willing to take hard change and ignore the people who have given them money, who have
0:32:42 weaponized and have regulatory capture that have taken healthcare costs from $6,500 to
0:32:43 $13,000.
0:32:44 Yes.
0:32:48 Galloway 2028, a chicken in every pot of sea, Alice in every cupboard.
0:32:52 By the way, I was looking on our Reddit page, people talking about what would happen if
0:32:53 you ran for president.
0:32:58 One of my favorite comments was that Trump would come up with just a great nickname for
0:33:01 you and one of the suggestions was that you would be Mopey Scott.
0:33:02 Mopey?
0:33:10 One of the suggestions was that your nickname would be Eaw and mine would be Tigger.
0:33:12 That’s good.
0:33:13 That’s good.
0:33:18 We’ll be right back after the break with a look at earnings from the biggest banks in
0:33:19 the US.
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0:33:38 Think of the five biggest names in AI today.
0:33:40 How many of these companies do you own shares of?
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0:33:47 Because the open AIs and anthropics of the world are still private.
0:33:51 That means unless you’re an employee or a VC, you’re out of luck.
0:33:54 So it isn’t hard to see why venture capital has been one of the most prized asset classes
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0:34:31 We’re back with Prof2Markets.
0:34:35 Fourth quarter earning season kicked off with Citigroup, Goldman Sachs, and JP Morgan
0:34:37 all beating analyst expectations.
0:34:39 Overall profits were stronger than expected.
0:34:44 JP Morgan had a particularly standout year as the bank reported the largest annual profit
0:34:46 in U.S. banking history.
0:34:50 As we’ve seen in previous quarters, a key driver of growth was investment banking.
0:34:58 Goldman’s investment banking revenue rose 24%, Citigroup 35%, and JP Morgan 46%.
0:35:04 So Scott, really strong quarter can get into some of the more of the specifics, but any
0:35:07 just initial gut reactions from these impressive earnings.
0:35:08 They had a great quarter.
0:35:12 When we were doing the editorial call, I was trying to understand why.
0:35:15 And one of our analysts said it’s because of volatility and trading.
0:35:17 But my guess is everything’s up across.
0:35:19 I would imagine M&A is starting again.
0:35:21 I’ll be curious if the IPO market comes back.
0:35:26 The other part of the business that is the best part of the business is wealth management
0:35:28 because it’s much more consistent.
0:35:32 I know that some of it is when interest rates go up, you have an easier time charging a spread
0:35:35 between deposits and mortgages.
0:35:40 Yeah, I think that’s definitely — I’m just higher net interest income in general with
0:35:41 higher rates.
0:35:44 I mean, I’ll just go over it really quickly.
0:35:46 I think there are two main drivers here.
0:35:49 One is the investment banking revenues, which we’ve seen.
0:35:54 So we’re seeing this increase in deal making, more M&A, which of course is great for the
0:35:59 investment banks because their job is to facilitate those transactions, and they charge a fee,
0:36:00 which leads to higher revenues.
0:36:04 And this is no different from what we saw last quarter.
0:36:06 Investment banking revenues were up by a similar amount.
0:36:11 So I think the takeaway here is, people have been wondering, is M&A coming back?
0:36:14 It’s been in a slump the past couple of years.
0:36:19 I think this is our confirmation from these bank earnings, yes, M&A is officially back.
0:36:24 I think we can expect that trend will continue, and that’s especially likely under a Trump
0:36:25 administration.
0:36:32 The second big driver of this growth is newer, and that is the trading revenue, as you mentioned.
0:36:37 And this is the money that the banks make for facilitating and executing the trades
0:36:41 of their clients, trades for stocks and trades for bonds.
0:36:45 Now, the explanation that you’re seeing a lot of in the media, which you also referenced
0:36:52 there, is something like market volatility increased trading revenues, which is sort
0:36:57 of a true statement, but it’s also a little bit of a misdirect because I think the real
0:37:02 reason we’re seeing these sales and trading desks making so much money last quarter is
0:37:08 that last quarter trading volumes exploded, not just the volatility, but the volume.
0:37:11 So you had more stock trading, more bond trading.
0:37:14 And the question, of course, is why did that happen?
0:37:17 And the answer is quite simple, is it was the election.
0:37:24 I think this is a reminder here of the power of stories and narratives in markets, because
0:37:31 what this election did is it sparked a flurry of new narratives from investors about what
0:37:35 may happen in the future, who’s going to benefit from a Trump administration, who’s
0:37:40 going to get burned, what’s going to happen to interest rates, and it’s all those stories
0:37:45 that create this energy in the market that propel people to make trades, to take bets,
0:37:47 to speculate on the future.
0:37:48 Acquire a company, right?
0:37:49 Yeah.
0:37:50 Exactly.
0:37:51 And of course, who benefits?
0:37:54 It’s the middlemen, which are the banks.
0:37:58 So I think that’s what really happened here is the banks were the beneficiaries of an
0:38:03 environment where quite simply interesting stuff was happening in the markets.
0:38:07 And the question now is, will that continue?
0:38:11 I would argue probably not, not to the extent that we saw in Q4, but having said that, Trump
0:38:13 is a very erratic person.
0:38:17 He’ll probably make some pretty controversial decisions, and I’m sure that will lead to
0:38:22 lots more interesting stories that lead to new investment theses and new trade.
0:38:26 So that’s sort of a breakdown on, I think, why we’ve seen this explosion in banks in
0:38:27 the past quarter.
0:38:31 I thought that was cogent, because what you’re summarizing, and I hadn’t zeroed in on, is
0:38:37 wait-and-see is the worst words in the world for a services industry or financial institution.
0:38:42 They don’t want people to wait and see what happens with the election around going public,
0:38:46 acquiring a company, reallocating the portfolio, moving, whatever it might be.
0:38:49 And the last kind of six months have been sort of wait-and-see.
0:38:53 And then once we had clarity around the election, whether you like the outcome or not, people
0:38:59 move to getting shit done and trading and buying and making bids for companies and doing
0:39:00 their debt offering.
0:39:03 Okay, we’re going to wait and see if interest rates come down.
0:39:04 Well, they are.
0:39:05 They are not.
0:39:06 So let’s just get on with life.
0:39:11 But I actually, I think that was a thoughtful analysis of the situation.
0:39:15 Something Jamie Dimon said on the JP Morgan earnings call, and this is a bit of a pivot
0:39:21 here, but I found this fascinating, he said, “This is a fantastic quarter, highest annual
0:39:25 profit in the history of American banking, $59 billion, just enormous.”
0:39:30 But then he said, “Two significant risks remain.
0:39:34 One going in future spending requirements will likely be inflationary, and therefore inflation
0:39:36 may persist for some time.
0:39:43 Additionally, geopolitical conditions remain the most dangerous and complicated since World
0:39:45 War II.”
0:39:47 Your reactions to Jamie Dimon’s comments.
0:39:50 I think he’s thoughtful and he kind of likes the camera.
0:39:55 I mean, he makes, look, Jamie’s, I don’t know if you saw him at six minutes ago, that was
0:39:56 very powerful.
0:39:57 He’s also very handsome.
0:40:00 I think he should have been Treasury Secretary just based on his looks.
0:40:03 He looks like he should be Treasury Secretary.
0:40:05 I love that term cautiously pessimistic.
0:40:08 I think that’s super interesting.
0:40:11 Geopolitically, are things more dangerous now than they’ve ever been?
0:40:12 I can’t tell.
0:40:16 I can’t discern between my depression and actual world events.
0:40:22 It does feel like water is at a simmer and about to boil everywhere, and it does appear
0:40:25 that the markets are climbing a wall of worry.
0:40:32 So do you take that, I mean, people would say that he’s the guy who is most in touch
0:40:34 with what is happening in the world.
0:40:39 It’s his job to understand what is going to happen tomorrow and the next day.
0:40:43 I mean, the fact that he’s calling this the most dangerous geopolitical condition and
0:40:50 the most complicated since World War II, does that make you more concerned at all, or is
0:40:52 it just a statement?
0:40:53 Well here’s the thing.
0:40:58 And Jamie is super smart, super insightful, and has no fucking idea like the rest of us.
0:41:05 And somewhere there might be someone mixing up some crazy biohazard or bioweapon that
0:41:11 they learned how to mix up using bleach and common household items with some AI LLM that
0:41:13 has no safeguards on it.
0:41:18 Or we might find that Israel is actually stabilizing the Middle East and the kingdom is going to
0:41:22 normalize relations, or we’re going to find that AI seeps into the economy and creates
0:41:26 incredible productivity and blooms of 1,000 different unicorns.
0:41:33 I mean, I can make an argument both ways, or the U.S. and China kiss and make up, or
0:41:38 that inflation runs rampant and the markets begin to crash as there’s a reallocation
0:41:44 of capital, at least markets crash in U.S. reallocation of capital into markets.
0:41:45 This all comes back to the same place to me.
0:41:49 And that is, I was a consultant, so what would go out is I would try and find people smarter
0:41:54 than me and then pair it back, their viewpoints in different boardrooms.
0:41:57 And I loved, I got very into the idea of scenario planning.
0:42:01 And scenario planning is don’t try to predict the future because nobody can.
0:42:07 The butterfly flapping its wings in the Brazilian rainforest can cause a rainstorm in Orlando.
0:42:10 And there’s just no way you can predict what this butterfly is going to do today.
0:42:16 What you want to do is outline a number of potential scenarios that seem somewhat realistic
0:42:23 or likely, and then develop a strategy that fits to the best outcome across a number of
0:42:25 those potential strategies.
0:42:32 And so your job as an investor is to recognize that, yeah, Nvidia could go down 80%, but
0:42:35 wait, yeah, it could double.
0:42:38 So what you want to do is diversify.
0:42:40 And what is in your control?
0:42:44 What is in your control is to spend less than you make and have automatic savings plans
0:42:47 recognizing that time is going to go faster than you think.
0:42:53 And then to try and diversify, right, such that all the things that are outside of your
0:42:58 control, whether it’s the Islamic Republican Iran realizing they’re losing the battle and
0:43:03 about to be overthrown, so they declare war on somebody or weaponize one of their proxies,
0:43:05 who the fuck knows?
0:43:11 But diversification and controlling what you can control, and also just for your own
0:43:15 mental health practices, and I’m trying to figure this out right now, find people and
0:43:21 things that give you comfort and give you joy and distract you from being on fucking
0:43:27 TikTok all day or watching the inauguration, i.e., watch aerial firefighters and listen
0:43:30 to InXS all day Monday.
0:43:39 Because if the inauguration and the fact that we are bringing in, making DUI hires for Defense
0:43:43 Secretary, I love that DUI hire versus DEI hire.
0:43:44 I love that.
0:43:45 That’s good.
0:43:46 That is good.
0:43:47 That triggers me.
0:43:48 That upsets me.
0:43:52 Find places in your life that give you comfort and give you peace, and you’re going to find
0:43:54 those places in your relationships.
0:43:58 You’re going to find them in physical fitness, and you’re going to find them in a recognition
0:44:03 that the 98% of your life is really good and is really positive.
0:44:09 But going back, circling back, and the way you protect yourself against the unknown, which
0:44:15 neither Jamie Dimon nor anybody else really knows, is diversification and consistently
0:44:18 investing regardless of where you think the market is.
0:44:21 Let’s take a look at the week ahead.
0:44:26 What’s the earnings from Netflix, Johnson & Johnson, and American Express, Scott & Pritchons?
0:44:32 I think inflation is going to pop up, and I think that a lot of Trump’s policies are
0:44:37 going to come to a head around when we move to the rebuilding part of the program around
0:44:43 the LA fires, and that is the expectation of deficits, the crackdown on immigration,
0:44:49 both legal and illegal in terms of the costs of rebuilding a home, tariffs that will have
0:44:55 reciprocal tariffs if they do anything stupid enough to impose these things.
0:44:58 We’re talking about a Canada, China, or Mexico.
0:45:06 I think that the LA fires are going to continue to be in the news for how they highlight Trump’s
0:45:11 massive inflationary policies as evidenced by the cost to rebuild are going to be just
0:45:18 extraordinary, and people are going to point directly to immigration, policy, tariffs,
0:45:21 and the expectation of deficits.
0:45:26 And I think to our point, the most important person in the administration who’s going to
0:45:29 play an enormous role is going to be the bond market.
0:45:34 And I think this guy, I find that luck over the long term is perfectly symmetric.
0:45:38 When you have a huge win from an investment standpoint, you want to pull in your horns
0:45:43 because it means you’re due to get pretty robustly smacked.
0:45:46 And when things aren’t going well for you, I find that you want to try and stay optimistic
0:45:50 and maybe take more risk because you’re due for some good luck.
0:45:55 I think this guy has jumped from lily pad to lily pad, and he’s going to hop onto a snake.
0:46:01 And I think that snake is, I think, the return of inflation.
0:46:04 This episode was produced by Claire Miller and engineered by Benjamin Spencer.
0:46:06 Our associate producer is Alison Weiss.
0:46:10 Mia Silverio is our research lead, Jessica Lang is our research associate, Drew Burris
0:46:13 is our technical director, and Catherine Dillon is our executive producer.
0:46:17 Thank you for listening to ProfG Markets from the Vox Media Podcast Network.
0:46:22 Join us on Thursday for our conversation with Rich Greenfield only on ProfG Markets.
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0:47:09 Whore-hears.
0:47:10 Whore-hears.
0:47:12 Our name is George, and that’s Vanyel.
0:47:13 We are whore-hears.
0:47:15 No, we’re whores, but we’re expensive whores.
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0:47:21 I’m like, “I don’t know, how much are they offering?”
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Scott and Ed open the show by discussing the latest inflation report, Meta’s next round of layoffs, and the uncertain future of TikTok. Then Scott breaks down United Health’s first earnings call since the killing of executive Brian Thompson, explaining why the company appeared to downplay its successful year. He delves into how profit incentives in sectors tied to social goods can create harmful externalities. Finally, Scott and Ed review fourth-quarter bank earnings, explaining why the results are clear evidence that mergers and acquisitions are back.
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