Perps, Buybacks, Bond Funds, and Women's Basketball

Summary

Barron’s Streetwise Podcast: “Perps, Buybacks, Bond Funds, and Women’s Basketball” (July 10, 2026)

---

Episode Overview

This special listener question edition of Barron’s Streetwise, hosted by Jack Hough and audio producer Emily Sumlin, unpacks five diverse finance and culture topics sourced from listener questions. Ranging from corporate bond funds and stock buybacks to the rising impact of women’s basketball and the mechanics of perpetual futures (“perps”), the episode brings Jack’s signature blend of approachable, mildly irreverent insight to serious financial themes. The episode closes with a thoughtful discussion on the future of the U.S. national debt.

---

Key Discussions & Insights

1. Bond Funds vs. Individual Bonds

Listener: Tarek from Mount Juliet, TN
(02:05 - 06:13)

• Question: Why would someone buy a bond fund instead of holding individual bonds for defined safety?
• Jack’s Take:
  • Bonds play a crucial ballast role in a diversified portfolio, delivering safety more than stellar returns.
  • Individual bonds let you hold to maturity for a fixed return and are lower risk if well-chosen.
    “When you buy individual bonds, you have a choice to hold them to maturity and at maturity you get your money back. And that's very defined… If you buy a bond mutual fund, however, you don't have a maturity date. The bonds in the portfolio mature, but what you have is a share price for a mutual fund. And that share price is going to fluctuate…” [03:08]
  • Main reasons for bond funds:
    • Diversification is hard without a large pool of capital (Jack suggests $1–2 million minimum to do it “right”).
    • Fees tend to be lower with index funds, and reinvestment risk is better managed in a rolling fund.
      “If you buy into a bond index fund, you don't have to worry about that. You're buying a diversified portfolio… the portfolio is constantly reinvesting that money at prevailing yields.” [04:49]
    • Active bond fund management can also be worthwhile if the fees are kept low.

2. Stock Buybacks and Employee Stock Awards

Listener: Mark
(06:13 - 10:38)

• Question: Why don’t companies report stock awarded to employees in the same breath as buybacks? Is the number insignificant?
• Jack's Explanation:
  • Companies highlight buybacks because the narrative is positive (“We’re returning value!”) and omit details that dilute that story.
  • However, audited financial statements do net out these transactions—see the cash flow statement for issuance vs buybacks.
  • For investors calculating “shareholder yield,” it’s important to include net buybacks (subtract new stock issues, including those to employees). “You’re right…why don’t they also say, we also issued gobs of stock to our employees as compensation?…It’s because they’re trying to say good stuff about themselves.” [06:54]
  • Memorable moment: Jack’s lighthearted digression about his garbage can transport “hack,” and a listener’s joking “injury report.”
    “I gotta be honest, Mark, I wish you and Alexis a speedy recovery.” [06:54]
    • Runner up: Jack’s “asphalt” dad joke and a story about the dangers of driveway garbage maneuvering. [09:15]

3. Women’s Basketball & Nike Sponsorships

Listener: Bruce
(11:23 - 14:08)

• Question: What impact have Nike’s deals with players like Caitlin Clark had? Are they financially significant for Nike?
• Jack’s View:
  • Clark’s impact is still developing; signature shoes launching this fall are expected to sell well, potentially to both boys and girls.
  • Nicole Uenoscu's (NY Liberty) “Sabrinas” have already proven there’s strong demand—crossing the once “boys only” boundary in basketball shoes. “What I have noticed…Sabrina’s sell well among both girls and boys. It’s not just a girl shoe…That just increases the market potential.” [13:20]
  • The success of Sabrinas bodes well for Clark’s line, which Jack expects to be a “needle mover.”
  • Jack apologizes for overlooking the women’s impact in previous basketball market commentary.

4. Perpetual Futures (“Perps”) and the SpaceX IPO

Listener: Scott from New Jersey
(14:08 - 21:16)

• Question: What are perpetual futures, and how do they relate to SpaceX and its IPO?
• Jack’s Deep Dive:
  • Perps are not traditional futures—they’re more akin to swaps, with no set expiry; mainly retail speculation tools popularized in crypto markets, now expanding elsewhere. “Perpetual futures, despite the name, are actually not very much like traditional futures. They’re more like something called swaps.” [15:12]
  • On platforms hosting “perps,” longs and shorts exchange small cash flows continually, and margin/leverage is very high (10–40x).
  • Losses can be significant—Jack references the FTX collapse and Sam Bankman-Fried (“a perpetrator who traded perps”). “If that sounds bad, it’s because it’s bad. SBF is currently serving federal time…” [18:45]
  • U.S.-approved versions now exist for some assets (e.g. Bitcoin perps via Kalshi and Coinbase).
  • For speculative stocks like SpaceX, offshore perps offer pre-IPO exposure but are inaccessible to U.S. residents. Jack prefers the eventual, regulated stock market approach.
  • Potential beneficiaries: Robinhood, Virtu, and notably ICE (Intercontinental Exchange), which might gain from the growth of regulated perps. “JP Morgan writes that perps may catch on…they’re unlikely to gain a following among institutional traders and hedgers. It says that ICE likely has more to gain than lose.” [20:17]
• Memorable Quote:
  “…hold out for those names I just mentioned to launch as onshore post IPO Perpetual Future Cash Flow Participation Units. Those are otherwise known as stocks.” [21:05]

5. U.S. National Debt Future

Listener: Claudia from Minneapolis
(21:20 - 25:03)

• Question: What happens as the U.S. national debt explodes past $31 trillion? Are we heading toward inevitable default?
• Jack’s Outlook:
  • Jack sees runaway deficits as “escape velocity,” with emergency-level spending the status quo—no easy cuts or tax increases in sight.
  • “Default” is unlikely because the U.S. prints its own currency—but that means the real risk is sustained, elevated inflation rather than technical default. “My best guess is that it ends with higher inflation than we’d like to. By that, I don’t mean Zimbabwe level inflation… I mean…running inflation a couple of points higher than that for a prolonged period.” [22:24]
  • For the long-term, Jack’s advice is to favor assets that can adjust for inflation—primarily stocks over bonds or gold. “Stocks represent companies which are run by smart people who can sit around and think about ongoing business conditions. … That gives you, the shareholder, a fighting chance against inflation over the long term.” [23:26]
  • Jack acknowledges that this is not a cheerful answer, but suggests discomfort, not disaster, is most likely if policymakers eventually act.

---

Notable Quotes & Moments

• On bond diversification:
  • “I think to properly diversify a bond portfolio across high grade bonds … I’ll say the dollar amount starts at a million dollars, might be a couple of million dollars.” [04:10]
• On corporate communications:
  • “You don’t have to say everything. You can go out there and say, ‘Hey, Everybody, I lost 15 pounds.’ And then you don’t have to say, ‘Well, I gained seven of them back.’” [06:59]
• On financial “perps” and FTX:
  • “If that sounds bad, it’s because it’s bad. SBF is currently serving federal time in Lompoc, California, and with an expected release of 2044.” [18:45]
• On inflation as policy:
  • “Inflation can deal with debt … if you’re talking about moderately elevated inflation in the national debt, I think that’s a good reason why you want to make sure that you’re invested in things for the long term that have a proven ability to keep up with the rate of inflation.” [23:00]

---

Timestamps of Important Segments

• [02:05] – Bonds: Funds vs. Individual Bonds (Tarek’s Question)
• [06:13] – Stock Buybacks Net of Issuance; “Garbage Can” Story (Mark’s Question)
• [11:23] – Nike, Women’s Basketball, and Signature Shoes (Bruce’s Question)
• [14:08] – Perpetual Futures (“Perps”) and SpaceX IPO (Scott’s Question)
• [21:20] – U.S. National Debt, Inflation, and the Future (Claudia’s Question)

---

Tone & Style

• Conversational, witty, with expert financial clarity.
• Occasional asides, dry humor, and playful banter—especially around personal stories and quips about financial jargon or the “Matrix.”
• Jack regularly balances technical explanations with accessible metaphors and analogies.

---

Final Take:
This episode is an energetic, information-rich exploration of core financial topics prompted by real listener concerns and curiosities, tied together by Jack Hough’s straightforward, approachable style—equally at home with market mechanisms and the challenges of suburban garbage can retrieval.

Transcript

[A]

Access to affordable credit helps me pay my employees, but I don't really need it.

[B]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See, banks and credit unions help small businesses make payroll.

[A]

This bill would cut the vital resources

[B]

they need while increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[A]

Hello, and welcome to a special listener question edition of the Baron Streetwise podcast. I'm Jack Howe. With me, our audio producer, Emily Sumlin. Hi, Emily.

[B]

Hi.

[A]

What kind of topics are we going to get to this week?

[B]

We're talking about bonds, stock buybacks, women's basketball, perpetual futures.

[A]

Women's basketball perpetual futures or women's basketball, full stop. Perpetual future, probably the second way, right?

[B]

For women's basketball, there's always a future, Jack. Okay. And one listener blames you for his grievous injury.

[A]

Well, sorry in advance for that. And let's get into it. It's a listener question special, always exciting. I understand we're going to try to get through five this episode. Emily. I am a rambler, but we're going for five. Is that right?

[B]

Yeah.

[A]

Okay, let's block out a minute for each and then 35 minutes on women's basketball. Anything else?

[B]

I'm not an AI bot. For those who were worried.

[A]

No. People thought you were AI Apparently.

[B]

I mean, I guess I'm just so. So even toned, so even keeled.

[A]

I think they maybe meant it as a compliment. Right. You speak in a polished way that.

[B]

And I consume an ungodly amount of water.

[A]

All right, we'll start chugging and let's. Who do we have first in the listener questions?

[B]

First up, we have Tarek from Mount Juliet, Tennessee. Tarek wants to understand essentially why you would ever buy a bond fund versus individual corporate bonds. They just want some safety in their portfolio and they appreciate your nudist philosophy. Jack.

[A]

I'll explain. Go ahead.

[B]

So Derek wants to protect their income when things get bad. Gold seems high priced. Crypto seems like speculation. But how do you do bonds right on your own?

[A]

Okay, it's a great question, Tarek. First of all, my philosophy is is financial nudism. And it's basically a stripped down approach to managing your portfolio. I dislike most stuff that people pitch and talk about. I don't think you need much, but I do think you need bonds. Bonds are important and you don't buy them because the returns are great. You buy them for the safety, you buy them for the portfolio ballast. And when you say, why would you ever buy a bond fund as opposed to individual bonds, here's what I think you mean, I'm going to take a guess. When you buy individual bonds, you have a choice to hold them to maturity and at maturity you get your money back. And that's very defined. You know exactly what you're going to get and when. And as long as you're buying safe bonds, you're not taking much risk at all. If you buy a bond mutual fund, however, you don't have a maturity date. The bonds in the portfolio mature, but what you have is a share price for a mutual fund. And that share price is going to fluctuate from day to day according to the level of interest rates, how people are feeling about bonds, and so on. So you don't have this option to get all of your money back at maturity. It's possible that the value of your investment goes down. Why would you ever want to do that? Why wouldn't you want to take the more defined route of owning individual bonds? I'll give you two, possibly three reasons. We'll see how it goes. The first one is it takes a lot of money to properly diversify a bond portfolio. You can get higher yields on junk bonds for sure. You take extra credit risk. These are companies that are not slam dunks in terms of their perceived ability to repay you all the money they're borrowing. So that's something you definitely want to diversify. I think to properly diversify a bond portfolio across high grade bonds, maybe some lower quality bonds, maybe even a little bit of junk, and then all different maturities, all different types of issuers. I'll say the dollar amount starts at a million dollars, might be a couple of million dollars. And then you also want to pay attention to your fees. If you buy into a bond index fund, you don't have to worry about that. You're buying a diversified portfolio. And if it's an index fund, chances are the fees are pretty low. And keep in mind, while what I said a moment ago is true about how you can hold individual bonds until maturity, when they do come due, you then have to reinvest that money. There's some reinvestment risk there. You don't know the rate that you're going to be able to put that money to work at after your bonds come due to. If you have a big diversified portfolio of bonds via an index fund, there's money constantly coming due in the portfolio and the portfolio is constantly reinvesting that money at prevailing yields. So that's another advantage, another reason why you might want to own a fund. And I'm talking here about index funds. I'm a big believer in cheap index funds. If we're talking about large cap stocks in the US There are certain asset classes where active management can make sense. And I think the bonds is one that's well worth a look. If you have a stock index, the companies are usually weighted according to their stock market value. Fine. When you have an index of bonds, often the companies or issuers are weighted according to the amount of bonds they have outstanding. That gives you a heavy weighting in the entities that owe the most. And I'm not sure that that's exactly the skew you want. If you have an actively managed bond fund, the manager can put a little more thought into where your money ought to be tilted. You just have to make sure that you keep fees very low. So Tarek, bonds are a great idea for you, certainly better than the other things you mentioned, crypto and so forth. And you should consider a bond fund, either an index fund or an actively managed fund that you like, so long as the fees are low. And thanks for the shout out on my nudism. Emily, who do we have next?

[B]

Our next question is from Mark, who is wondering why when companies report stock buybacks, they don't also report stock awarded to employees the same year. Is it just too small a number to worry about? Also, Mark writes, I've been trying your one arm out the window to drag the garbage cans down our very long driveway. I've broken my radius and ulna indented my Lexus. So thanks for that. Expect to hear from my legal team.

[A]

I think it's important to point out, first of all, I don't remember mentioning my garbage can secrets. I guess I must have. These were not recommendations, folks. I stand by my investing advice on this program. My garbage can advice. I'm making it up as I go along. I gotta be honest, Mark, I wish you and Alexis a speedy recovery. Here's the thing about the stock buybacks. You're right. First of all, for people who don't know, what does it mean when a company buys back stock, company has extra money, they go out and they buy some of their shares and they basically take them out of trading and it reduces the number of shares outstanding and that mathematically increases earnings per share. And theoretically it should over time increase the value of remaining shares. It doesn't always work like that. One for one because there's a lot of moving parts that affect company value on the fly. But that's the idea. So when a company says, hey, we bought back gobs of stock, why don't they also say, we also issued gobs of stock to our employees as compensation? And it's a pretty simple answer. It's because they're trying to say good stuff about themselves. And you know, when you do that, you don't have to say everything. You can go out there and say, hey, Everybody, I lost 15 pounds. And then you don't have to say, well, I gained seven of them back. But companies are not allowed to do the same thing on their audited financial statements, right? So if you look at a company's quarterly reports to shareholders or annual reports, you're going to have three main tables there. Two of them measure how much money a company makes, and one of them measures the value of stuff a company has and owes. So the stuff one is the balance sheet. The money making ones are called the income statement and the cash flow statement. And it's on the cash flow statement that you will find entries that will net out for you stock issuance. How much did they issue, how much did they buy back, and what's the bottom line? So that's probably the clearest place to get the information you're looking for. To your point, if you're using this measure in any kind of analysis to tell you whether a stock is a good deal, let's say you're somebody who's trying to calculate the total shareholder yield. And by that I mean the dividend yield you receive plus the spending on stock buybacks as a percentage of the outstanding shares. If you're doing that, then it certainly is important to net out issuance. So you want net stock buybacks plus dividends to give you the shareholder yield. Does that make sense? Emily? Are the radius and ulna parts of Mark or parts of the Lexus? I think those are parts of Mark. Right?

[B]

Those sound like Mark parts.

[A]

I was afraid of that. Sorry again, buddy. My first choice is telling my son to bring up the garbage cans. My second choice is I'll roll down a window and reach out and grab one and hold it to the side of the car. That works really better as a passenger than a driver. Again, not advice. Definitely not. My third choice, because I tried it once and I ended up walking funny for a week, was my wife is driving. She said, I'll raise the tailgate on the back of the vehicle and you sit in the back. There were two cans instead of just one. So I couldn't hold it out the window. She said, you sit in the back and just, you know, you'll pull these up while I drive the car up. I said, the driveway is steep and you know, you got to go slow and steady because if you go fast, I'm going to fall out of the car. She said, no, it'll be no problem. It's going to be fine. So I sat in the back. This woman, I didn't even know this car could accelerate like that. First of all, she must have put that pedal to the ground because it was like a, it was like a Wile E. Coyote roadrunner situation. That's why they call it asphalt, by the way. When you have a spill like that at 53 years old, it's not like when you're younger. You don't just bounce right back up. You just lay there for a long time. Just think about your life choices. What do you say we take a quick break here? I'm going to rethink my garbage can strategies. You chug another three liters of water. We'll be back with another few listener questions.

[B]

This episode is brought to you by Google Chrome.

[A]

You think you know a browser, but Gemini and Chrome, that's new.

[B]

It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration block.

[A]

Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it,

[B]

ready to make anything online make sense.

[A]

There's no place like Chrome. Check responses, Setup required. Compatibility and availability various 18/. Welcome back. We're doing listener cues and as listeners are doing the Q's and I'm doing the A's and Emily is doing the reading slash playing of the questions. Is this do we have another reading one next or do we have one we can play?

[B]

Emily, open your ears. We've got one from Bruce who is has a bit of a suggestion about Nike after our story.

[A]

Hi Jack, this is Bruce. I'm a longtime listener and very appreciative of all the good info you give us regarding the Nike story last week. Maybe I missed it, but where are the girls in all this? What about Caitlin Clark and the deal that they made with her two years ago? Has that made a material difference in their numbers? Thanks again for all you do. It's an excellent question. I am a women's basketball fan. First of all. I have a daughter who plays in high school. We spend a lot of time running around at these travel tournaments and so forth. We also watch some college and WNBA games. I am a fan, of course, of the New York Liberty. Caitlin Clark, if there's anyone left who doesn't know, plays for the Indiana Fever. She's a great player, but she's also been a transformative force in terms of getting more attention for the wnba, increasing viewership, allowing players to argue successfully for higher pay and so on. And so she has a deal with Nike. You ask if that's been a big deal financially for Nike. Well, no, only because we're not there yet. We're just now getting a look at those new Caitlin Clark sneakers. I think they're going to be widely available in the fall. Don't hold me to that. I'm going to guess that the sneakers will do pretty darn well. And I'll tell you what I base that on. This was not a thing when I was a kid. We didn't have to, to my knowledge. Somebody out there can tell me if I'm wrong, but I can't think of a women's basketball signature shoe. When I was a kid, everybody wanted Magic Johnson sneakers or Larry Bird sneakers and later Michael Jordan sneakers. I don't remember hearing about female basketball players. It is totally different now. And really who we should be mentioning more so than Caitlin Clark is a player named Sabrina Unescu who plays for the New York Liberty. She has a line of sneakers, they call them Sabrina's. It's already a pretty mature product. I think they're up to the Sabrina threes, I want to say. And what I have noticed, I have kids who play basketball. I'm around a lot of kids who play basketball. Sabrina's sell well among both girls and boys. It's not just a girl shoe. I don't know if they sell well among older boys, but I can tell you they sell well among younger boys. And if you can pull that off with these women's line of sneakers, of course, that just increases the market potential. I think. Sabrina's have definitely been a needle mover for Nike. Doesn't solve all their problems, of course, but I think the success of those shoes bodes well for the Caitlin Clark shoes. And my apologies for not mentioning the women in my earlier basketball rants. Let's go Jonquill and Stewie and Sabrina and all the New York Liberty. Now then, Emily, what do we have next?

[B]

Scott has a question about perpetual futures.

[A]

It sounds very matrix. Does Scott say whether he's wearing a full length leather coat?

[B]

No, but he is doing the 180 lean. The bullet dodging.

[A]

Oh, Right where you bend at the knees and then you just, you're horizontal to the ground or something like that.

[B]

No trench coat required.

[A]

I got it. It's been a minute since I've seen that movie. I'll probably do to look at it again. Okay, let's hear. Is this Scott? Let's hear Scott.

[B]

Hi, this is Scott from New Jersey with the recent SpaceX IPO. There's a term I've been hearing about on TV called perpetual futures. Can you explain what they are and how they affect SpaceX? Thank you.

[A]

Thank you, Scott. It's a great question. Ahead of the recent initial public offering in SpaceX that was mid June, there were some offshore trading platforms that launched what are called perpetual futures contracts. That was for traders wishing to speculate on SpaceX's price and those were for non US investors, but they were watched by US investors and that created a surge in curiosity around a financial instrument that until recently has been mostly confined to crypto. I recently wrote about perpetual futures, or perps, in my Streetwise column and Barron's. I'll explain how they work. It requires a bit of a wonky walk. I also don't think they're for most investors. I realize I'm not exactly selling this explainer to the listening audience, but I'll tell you what, I'll end with a related stock pick. Ooh, that's like a free set of steak knives. Now I've got your attention. Okay. Perpetual futures, despite the name, are actually not very much like traditional futures. They're more like something called swaps. A futures contract is an agreement to buy or sell a specific asset at an agreed upon time. For example, 1000 barrels of Texas crude in September at a facility in Cushing, Oklahoma. It's a little like options, only without the optional part. Futures contracts must be completed at expiration. In reality, speculators typically sell their contracts at a profit or loss before that happens. Futures contracts tend to be highly standardized with liquid exchange based trading. Now contrast that with swaps. These are agreements between two parties to exchange future payment streams over a set time period. For example, I agree to give you a fixed interest rate and you agree to give me a variable interest rate. Let's say the secured overnight financing rate, SOFR plus 1% over the next five years. That's a swap. These tend to be customized agreements and less liquid than futures. They trade over the counter. Now perps. There was an academic paper more than 30 years ago by the Yale economist Robert Shiller, and he proposed a new way to price rarely Traded assets like big office buildings. It involved perpetual derivatives that exchanged their cash flows like rents. And that tactic has been a big hit for something totally different. It's used a lot on offshore crypto venues like Hyper Liquid Strategies, which has recently been doing more than $11 billion in perps volume daily. So how does this work? I mean, cryptos typically have no cash flows to swap. What they do instead is they use a funding mechanism that keeps the contract price from straying too far from the underlying crypto price. Basically, each perp has a long side and a short side. One trader betting for the underlying crypto, another betting against it. And every hour or several hours, the one who's losing has to pay the one who's winning. And losses for the short side are theoretically unlimited. I know what you're thinking, Jack. Is there any way I could take this horrible idea and do it with tremendous amounts of leverage? Funny you asked. Many perps venues allow traders to risk 10 to 40 times the amount of money they put up. That introduces a risk of bad debts. So offshore perps platforms typically use automated liquidation when traders fall short of margin requirements. If that fails, some of them can tap insurance pools that are funded by liquidation penalties. And if that fails, they can simply haircut the party on the winning side of the trades. Does everyone remember a fellow named Sam Bankman Fried? He's what I would call a perpetrator who traded perps. He had a trading platform called FTX, which it allowed customers to put up all manner of assets as collateral for perp bets. And sbf, as I'll call him, made highly leveraged perp bets too, through his Alameda Research hedge fund. But his losses were exempt from FTX's auto liquidation. Instead, they got covered by funds from its customer pool. If that sounds bad, it's because it's bad. SBF is currently serving federal time in Lompoc, California, and with an expected release date of 2044. So choose your perps platforms carefully. There are, by the way, onshore ones now too. The Commodity Futures Trading Commission, or CFTC in the US recently approved bitcoin perps for Kalshi and Coinbase. And more approvals seem likely given an Alt finance friendly regulatory climate. You can imagine that there are some publicly traded companies that stand to make money from this down the road. Broker Robinhood Markets and market maker Virtu Financial come to mind. In a recent report, J.P. morgan highlights the appeal of Intercontinental Exchange, or ICE. It owns the New York Stock Exchange, and more to the point, it's a powerhouse in regulated futures and its shares were recently down 31% over the past year. That's in part due to concern about new competition from perps. But JP Morgan writes that perps may catch on with some US retail traders, but they're unlikely to gain a following among institutional traders and hedgers. It says that ICE likely has more to gain than lose. It trades at 15 times this year's projected earnings and it's been growing earnings by double digit percentages. Scott, let me bring it back to SpaceX. That one is publicly traded now, but there are other high profile tech IPOs expected soon from the likes of OpenAI and Anthropic and databricks. And there are also offshore perps to bet on those, but they're forbidden for US investors. Trading platforms typically use Internet geoblocking to enforce that ban. If one of your friends gets all computery and starts explaining how you can use a virtual private network to get around geo blocking, just tell them thanks Professor Dark Web, but I'd rather not risk having my account frozen. I recommend you hold out for those names I just mentioned to launch as onshore post IPO Perpetual Future Cash Flow Participation Units. Those are otherwise known as stocks. Thank you Scott. Who do we have for our last question?

[B]

We have a question about the national debt.

[A]

Great, let's hear it.

[B]

Hi Jack, this is Claudia from Minneapolis. Our debt recently crossed 31 trillion and in about 20 years years, no amount of tax hikes or spending cuts will be able to stop us from defaulting on our debt. So what are your thoughts on that? What will happen to our economy and how do we prepare for that? What looks to be a terrible outcome?

[A]

It is not a chipper one to end on. I'm surprised you say 20 years. I feel like we could run into trouble sooner than that. Here's the thing. I think we've done episodes on the national debt and how humongous it is and so forth and we're, we cross these lines all the time. The debt larger than the size of the economy. I feel like we have reached and passed escape velocity for the national debt. By that I mean we seem to be running emergency level deficits, the kind of deficits you would run if you were in a dire emergency and you had to save your economy. We seem to be running those every year now and there doesn't seem to be political will to do anything about it. And there are not super easy choices left in terms of the spending to cut in order to solve the deficit and the debt problem. And if you're a politician and you propose raising taxes to pay for the debt. That's unpopular. So I think your question is one that I often ask the finance deep thinkers that I talk to. How does the story end? Is there a benign outcome? My best guess is that it ends with higher inflation than we'd like to. By that, I don't mean Zimbabwe level inflation, where we're all going to be carrying around million dollar bills in our pockets. I mean, you have a government or a Federal Reserve that would like to run 2 to 3% inflation, but instead ends up running inflation a couple of points higher than that for a prolonged period. If you do that, of course, it's kind of like when you have a mortgage locked in and it seems like a ton of money when you first buy your house, but 25 years down the road, you're making much more than you ever thought you would, and suddenly your mortgage doesn't seem that large anymore. It's because inflation raised the prices of everything around you and raised the amount that you're making. But the amount of your mortgage was fixed and it didn't change. So inflation can deal with debt. It's fine if you're talking about moderate inflation and your mortgage, it's not as ideal. If you're talking about somewhat elevated inflation in the national debt, I think that's a good reason why you want to make sure that you're invested in things for the long term that have a proven ability to keep up with the rate of inflation. I know that gold has a reputation for that, but I think gold can just be too volatile based on speculation. I think stocks are the thing for the long term. Stocks represent companies which are run by smart people who can sit around and think about ongoing business conditions. If there's a lot of inflation, they can think about how to deal with it by raising prices on the stuff they sell. And that gives you, the shareholder, a fighting chance against inflation over the long term. Certainly better for the job than bonds. Although you do want some bonds, like we said earlier, for ballast safety. I know that's maybe not the most satisfying answer. Claudia, you use the word default. You don't have to technically default on your debt. When you're in the position of being able to make your own money, you just make more money to pay your debt. The problem, of course, is that that contributes to inflation. So that's my best guess about how the story ends. My hope is that it ends with maybe some discomfort, but not disaster. And I think that's still entirely possible if we get on it. I hope that helps. Well, it definitely doesn't help, but I hope it at least answers your question. Claudia and with that, our Listener Question special concludes got through 5. Feel like I made decent time.

[B]

We'll hang your number in the rafters for it.

[A]

I want to thank the folks who sent in questions and thanks to all of you for listening. Emily Sumlin is our well hydrated audio producer. If you have a question for us, you should send it in. Could be in a future episode. What you do is you tape it on your phone, use the Voice Memo app and you send it to jack.howe that's h o u g h@barron's.com you can subscribe their podcast and Apple podcasts and Spotify and wherever you blah blah blah and leave a review and see you next week.

[B]

Shipping, billing, admin, payroll, marketing. You're managing all the things, so why waste time sending important documents the old fashioned way? Mail and ship when you want, how you want with stamps.com print postage on demand 247 and schedule pickups from your office or home stick. Save up to 90% with automated rate shopping. That's why over 1 million small businesses trust stamps.com go to stamps.com and use code podcast to try stamps.com risk free for 60 days.