The Bitcoin Presidency & The Dawn of a New Robber Baron Era — ft. Josh Brown

Summary

Prof G Markets Episode Summary: "The Bitcoin Presidency & The Dawn of a New Robber Baron Era — ft. Josh Brown"

In this episode of Prof G Markets, hosted by Scott Galloway and Ed Elson from the Vox Media Podcast Network, the hosts delve deep into the implications of the recent U.S. presidential election, focusing on the surge in cryptocurrency valuations and the emergence of what they term a "New Robber Baron Era." Special guest Josh Brown, co-founder and CEO of Ritholtz Wealth Management, joins the discussion to provide expert insights on market reactions, sector performances, and future economic trends under a potential Trump presidency.

---

1. Stock Market Reaction to Trump's Victory

Barry Diller begins by contextualizing the stock market's atypical behavior leading up to and following the election. Unlike previous election years characterized by heightened volatility, this period saw unprecedented stability and growth:

"We had a below average Vix. We had no back-to-back daily sell-offs in the S&P 500. And we basically had a rally that started sometime in the middle of August..."
(12:00)

The positive market response is attributed to investor certainty post-election, mirroring historical trends where markets favor stability over political uncertainty.

2. Federal Reserve and Jerome Powell's Position

The episode touches on the Federal Reserve's recent interest rate cuts and the steadfast stance of Federal Reserve Chair Jerome Powell:

"The Federal Reserve cut interest rates by 25 basis points, as expected. In addition, Federal Reserve Chair Jerome Powell stated that he would not resign from his post if asked to do so by President Elect Trump."
(04:16)

Scott Galloway commends Powell's management of the economy, suggesting that his policies have fostered growth while keeping inflation in check:

"This guy pulled off a soft landing in hurricane winds. He showed huge balls, raising interest rates 500 bips in 14 months, which was just unheard of."
(05:20)

3. Cryptocurrency Surge: Bitcoin Hits Record High

A significant portion of the discussion centers on the cryptocurrency boom, particularly Bitcoin reaching an all-time high of $89,000:

"The value of the global cryptocurrency market has topped $3 trillion, with Bitcoin hitting a record high of $89,000."
(04:23)

Scott refers to the election as "the crypto election," highlighting Trump's strategic embrace of cryptocurrency to garner support from crypto enthusiasts and investors:

"You could safely brand it the crypto election... I think this was a brilliant move because crypto is probably just as..."
(06:44)

4. Shopify's Stellar Earnings

Shopify emerges as a standout performer, with third-quarter revenues up 26% year-over-year, surpassing analyst expectations:

"Shopify's third quarter revenue rose 26% from a year earlier, beating analyst expectations."
(04:23)

Scott praises Shopify's innovative approach to democratizing e-commerce and leveraging AI tools, positioning it as a leader in the sector:

"Shopify zigged while everyone was agging... They started raising the rents and one of the ways they do that and capture more and more shareholder value is they own the data."
(15:04)

Ed Elson adds commentary on the evolving landscape of investor relations, advocating for more dynamic and engaging communication strategies akin to TikTok-style updates:

"My prediction has been... we're going to see a massive surge in sort of quick TikTok style earnings updates..."
(16:38)

5. Market Predictions and Trends with Josh Brown

Josh Brown provides a comprehensive analysis of the market's current state and future trajectory under a Trump administration:

a. Small Cap Stocks Rally

The Russell 2000 index, representing small-cap stocks, saw a substantial jump of nearly 6%:

"The Russell 2000 just takes the 2000 largest market cap, small companies, and it's a little bit random of what's in there."
(39:45)

However, Brown cautions that this surge is unlikely to sustain long-term, drawing parallels to past market behaviors where small caps periodically outperform larger counterparts:

"The history of small caps versus large caps is one of oscillation. They have These periods where small caps outperformed..."
(40:18)

b. Bitcoin's Future Trajectory

Brown expresses skepticism about predicting Bitcoin's valuation due to its lack of cash flows but emphasizes the growing institutional acceptance and potential governmental adoption:

"There are no cash flows, so I can't say, oh, here it's cheap, here it's expensive. The only question that matters with bitcoin is are more people going to want to own it or less people..."
(46:31)

He anticipates that governmental stockpiling of Bitcoin could propel its value beyond $100,000:

"If the government decides they have 211,000 bitcoins right now... that's going to start getting."
(50:17)

c. Sector Performance Insights

Brown highlights various sectors reacting to the election outcome:

• Regional and Small Banks: Benefiting from higher net interest margins.
• Industrial and Travel Stocks: Experiencing significant rallies.
• Gold vs. Bitcoin: Gold saw a decline post-election, diverging from Bitcoin's surge.

"We saw small caps rally in 2017 as part of the quote, unquote, Trump trade... so we're not going to see it now."
(41:34)

6. The Dawn of a New Robber Baron Era

A pivotal theme introduced by Brown is the emergence of a "New Robber Baron Era," drawing historical parallels to the late 19th century when wealthy industrialists wielded significant influence over the economy and politics:

"We are probably going into a robber baron age where very, very smart, very wealthy people have the most influence."
(50:17)

Brown predicts that affluent individuals and tech magnates like Elon Musk will centralize decision-making power, asserting that this era will further exacerbate wealth disparities:

"Their influence is going to Trump the evangelicals... their influence is going to Trump the anti-China wing of Republican politics."
(50:10)

7. Media Industry Outlook

The discussion shifts to the media sector, which Brown expects to struggle under Trump's administration due to potential regulatory actions and diminishing growth prospects:

"If I were trying to think of an industry, this is smaller than a sector. You have sectors and then you have industries or sub-industries. If I were trying to think of a sub-industry that could possibly be the most flat on its back right now... traditional and or mainstream media."
(52:18)

He doubts the feasibility of anticipated mergers within the media landscape, citing financial constraints and the lack of growth drivers:

"The fantasy that, like, next year we're going back to 3 trillion and all these media companies are gonna find dance partners, I just don't see."
(53:27)

8. Conclusion: Navigating the Future Market Landscape

Barry Diller wraps up with a sobering outlook on the economic future, emphasizing wealth accumulation as a primary strategy for individuals to navigate potential political and economic turbulence:

"The next four years, what you're going to see is the rich get richer... arm yourself with money. It is the only way to make change."
(55:13)

He advises listeners to focus on personal financial growth amidst the shifting market dynamics, underscoring the importance of strategic wealth management in uncertain times.

---

Notable Quotes

• Scott Galloway:

  "This guy pulled off a soft landing in hurricane winds. He showed huge balls, raising interest rates 500 bips in 14 months, which was just unheard of."
  (05:20)

• Barry Diller:

  "We are probably going into a robber baron age where very, very smart, very wealthy people have the most influence."
  (50:17)

• Ed Elson:

  "Companies just need to radically rethink the way they do investor relations."
  (16:38)

• Josh Brown:

  "The only question that matters with bitcoin is are more people going to want to own it or less people..."
  (46:31)

---

Key Takeaways

1. Market Stability Post-Election: Contrary to typical election-year volatility, the stock market experienced significant growth and stability following Trump's victory, driven by investor certainty.

2. Federal Reserve's Role: Jerome Powell's adept management of interest rates has been pivotal in sustaining economic growth and controlling inflation, earning him admiration from commentators like Scott Galloway.

3. Cryptocurrency Boom: Bitcoin's unprecedented surge to $89,000 reflects increasing institutional acceptance and strategic political endorsements, signaling a transformative shift in financial paradigms.

4. Sector Performance Divergence: While small-cap stocks and certain sectors like industrials and travel thrived, traditional media and gold lagged, indicating varied sectorial responses to political and economic changes.

5. Emergence of a New Robber Baron Era: The consolidation of power among affluent and influential individuals suggests a return to an era where wealth dictates economic and political landscapes, potentially widening socio-economic gaps.

6. Media Industry Challenges: Anticipated regulatory pressures and financial constraints pose significant hurdles for mainstream media companies, limiting growth and merger possibilities.

7. Strategic Wealth Management: In the face of evolving market dynamics and political uncertainties, prioritizing personal financial growth and strategic wealth management becomes essential for individuals aiming to thrive.

---

This episode offers a comprehensive analysis of the intertwining relationships between political outcomes, market reactions, and emerging economic trends. With expert insights from Josh Brown and robust discussions led by Scott Galloway and Ed Elson, listeners gain a nuanced understanding of navigating the complexities of today's financial landscape.

Transcript

[Scott]

Support for the show comes from the new season of Crucible Moments, a podcast from Sequoia Capital.

[Ed]

What is a Crucible Moment? It's a turning point where we face.

[Scott]

A tough decision and our response can shape the rest of our lives. These decisions happen in business too, and Sequoia Capital's podcast Crucible Moments gives you.

[Ed]

A behind the scenes look, asking founders.

[Scott]

Of some of the world's most important tech companies like YouTube, DoorDash, Reddit, and more, to reflect on those critical junctures that defined who they are today. Tune into season two of Crucible Moments today.

[Ed]

You can also catch up on season one at cruciblemoments.com or wherever you listen to podcasts.

[Ian Mitchell]

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[Josh Brown]

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[Scott]

$2,100. That's how much Wicked dolls are going for on the secondary market after a misprinted URL leading to a porn site was discovered on their packaging. True story. Ray Bradbury wrote a book about Mitch McConnell having sex. Weird, right? It's called Something Wicked this Way Comes that makes me happy. Ed, how are you?

[Ed]

K I'm doing very well. I'm excited. You just arrived in New York this morning, right?

[Scott]

Yeah. Do I look like it? Do I look like I've been through fucking five time zones and done two hours of podcasts already? I mean, look at me. Jesus Christ. I look my age, which. Which is really old.

[Ed]

It looked like perfection. How was the flight?

[Scott]

It was fine. I got up at o dark hundred hours, took off at 7. Yeah, it was fine.

[Ed]

All right, good. You seem in good spirits.

[Scott]

I feel like I'm delirious.

[Ed]

Okay. You're delirious. It'll catch up later.

[Scott]

Yeah, no, I feel pretty good. What's going on with you?

[Ed]

I'm pretty good. I'm going to come see you later this afternoon. I'm going to pretend to be your producer because I just want to go meet one of my favorite comedians whose podcast you're going on. I don't know if I can mention the name yet, but I think you can.

[Scott]

Why not?

[Ed]

Theo Vaughn.

[Scott]

And I don't know. I'm so not with it. I don't know who Theo Vaughn is. Why do you like him?

[Ed]

He's just hilarious. Has very eclectic strange guests on. Not. Not that. Not that you're either of those things.

[Scott]

Yeah, I'm one of those things.

[Ed]

He had Trump on.

[Scott]

Oh, good.

[Ed]

But I forgot we're not allowed to mention him. Yeah, I think it'll be a very interesting podcast. He's a very weird dude, so it'll be a good dynamic.

[Scott]

Yeah, I'm excited about it and I'm excited that you sound excited, honestly. And I'm also meeting with. I'm meeting with Barry Diller this tonight at the Carlisle Hotel. Gosh, can I be any wider? I'm meeting with Barry Diller at the Carlisle.

[Ed]

Love that. At the Bowl.

[Scott]

Where else would I meet? No, what do you mean? Yeah, we're meeting the bowling alley. If I go into a hotel, I'm either like banging a pro or I'm in the bar. You know what? That's how I can tell if the young man is a male escort. Is he? Returns my eye contact. The bar, the Four Seasons.

[Ed]

Oh, okay. Yeah. Well, should we get into some headlines?

[Scott]

Yeah, that's a good segue to headlines around business news. Go for it. Let's talk about gdp.

[Ed]

Don't worry, I'm used to this.

[Scott]

Now is the time to buy. I hope you have plenty of the wherewithal.

[Ed]

The Federal Reserve cut interest rates by 25 basis points, as expected. In addition, Federal Reserve Chair Jerome Powell stated that he would not resign from his post if asked to do so by President Elect Trump. The value of the global cryptocurrency market has topped $3 trillion, with Bitcoin hitting a record high of $89,000. Crypto related stocks also saw gains as the demand for digital assets surged following the election. And finally, Shopify's third quarter revenue rose 26% from a year earlier, beating analyst expectations. That's its sixth consecutive quarter of greater than 25% revenue growth. Excluding logistics, the stock rose more than 20%, 25% following that earnings report. Scott, your thoughts starting with this Fed cut, but perhaps more importantly, this interaction between the reporter and Jerome Powell, who is pretty unequivocal. He would say no if he was asked to resign.

[Scott]

I don't, I mean, I can't predict anything this guy's going to do. When I say this guy, I mean President Trump. But I think if there's anybody that you'd want to renew their contract, it would be Chairman Powell. What he has pulled off is just remarkable. And you're going to see very soon, 7, 10, 30 days, President Trump start to take credit for this incredible economy. And this incredible economy has been brought to you and granted, similar to the future. As William Gibson said, it's not evenly distributed. I think that's mostly because of tax and fiscal policy that shoves a ton of prosperity and opportunity into the 1%, into corporations. And the, the shareholders of this corporation see above the 1%. But in terms of growth of the pie and our ability to keep inflation lower than any other nation, despite how bad it is to create growth greater than any other nation, everybody was predicting a recession. We didn't have it. This guy pulled off a soft landing in hurricane winds. He showed huge balls, raising interest rates 500 bips in 14 months, which was just unheard of. This guy, this guy doesn't just get the gold medal, he gets everyone else's medal. So I don't understand why Trump would pick this fight. But we're projecting, maybe we're speculating. He hasn't picked that fight yet. It seems like the media wants to pick a fight. So I think this might be a bit of a nothing burger. What are your thoughts?

[Ed]

It's worth maybe just summarizing what the law actually says about this. So the President actually does have the power to remove a member of the Board of Governors of the Federal Reserve. And that is a position that Jay Powell holds. But the President needs to have what is called a cause. What actually does that mean? What is a cause? This has been debated in the courts, but historically it has been interpreted as, quote, inefficiency, neglect of duty, or malfeasance in office. So this is only really viable if Trump can prove to a court that Jerome Powell did something really bad during his tenure, which would be really, really difficult. The other reason it would be difficult is that in the law, there's no reference of the chair itself. It only refers to members of the Board of Governors. So, in sum, this would be a really complicated legal battle. I don't think it's a battle that Trump really cares enough about to go out and fight. But my prediction for this would be, you know, Jerome Powell's term is up in 2026, so it's not that long. I think that Trump will let him serve out his term. And in the meanwhile, if anything goes wrong, Trump can always just say, I told you so, which is a position he loves to be in. He can just say, you know, I tried to get rid of Jerome Powell, I didn't like him, but the deep state didn't let me.

[Scott]

We'll see. But I agree with you. It's probably not the Hill he wants to die on. Crypto, you know, we call this election a lot of things. Inflation, immigration, incumbency. I've been calling it the testosterone election or the kids are not alright election or struggling men election. Everyone wants to brand it. You could safely brand it the crypto election. And that is crypto showed up. Trump flew into the storm waving a big crypto pirate flag. It was a brilliant move because crypto is probably just as. Democrats were hoping that people focused on bodily autonomy would be one issue. Voters, and some of them were. But I think there was a lot of overlap with people who are already going to vote for Harris. He went right after the Brous Bro and Brovilles in crypto and said, I'm your man. And there's a lot of people who've bet a lot emotionally and financially on crypto and probably think this is my man. And so this was a smart strategy on the industry. I wouldn't be surprised if it continues to go up if there's talk of creating a super fund backed by the government where the government puts $100 billion into into Bitcoin, which could take the thing to God knows, God knows where. What would be also interesting is to look at MicroStrategy, which has sort of become a tracking stock, and Michael Saylor, who everyone thought was crazy, including me. Oh, Jesus Christ. In one year, MicroStrategy is up sevenfold. MicroStrategy is basically a levered bitcoin bet. At this point in the last one month, it's up 73%. In the last six months, it's tripled. Jesus Christ. I know this guy and he told me to buy Bitcoin at 18,000. He's been on the pod a couple times. We got to get him on the pod. Bright guy. Anyway, this is, it's interesting. As a no coiner, I'm a little bit bummed. I have some consolation, and that is I still own my claims in ftx and FTX holds a bunch of coins. So as is the reason that the value of those claims has skyrocketed. So that's some Neosporin for me, deciding that I didn't understand it, so I wasn't going to go into it. But this has been, this is arguably the crypto election. What are your thoughts, Ed?

[Ed]

Well, I'd like to know if. Do you think you're going to change that? Are you going to buy some Bitcoin at some point?

[Scott]

Yeah. But one of my many flaws as an investor is I always think things aren't cheap enough or I'm always waiting for them to come down. And when I look at bitcoin, it's an asset that has offered, I think it's been up, I don't know, 18 or 20% a year for the last 10 years. But it's highly volatile, which means in my view, at some point it's going to be probably for a brief time back at 50, 40 or $30,000. So I never like to buy into strength and that's a flaw of mine because sometimes you just never get the opportunity to buy. But I do think, I keep telling myself the next time it looks like it's got a bit of a correction or a bit of a drawdown, I will buy some bitcoin. I think you have to give it to this asset, that it is now a legitimate asset.

[Ed]

Why do you say that? Because of the price or the institutions buying it. What do you think has changed?

[Scott]

I think it has established credibility as a store of value. Because the genius in my mind of Bitcoin that the others don't have is that it has this incredible mechanism of trying to mine the coins. And every incremental coin gets harder and harder and more expensive to mine. And they say they're going to stop mining coins at 21 million. And people, the markets seem to believe that. And because if you think about the incremental supply coming on the market of bitcoin, it's less than the supply of incremental gold. It's way less than the supply of incremental dollars. It's less than the incremental supply of oil. So this is an asset class that has wide adoption across institutional investors. It now has a regulatory framework or regulators that are going to be friendly as opposed to policing it, but trying to create an operating that supports it. And it has an administration running the world's largest economy that is now going to, you know, has basically blessed it and said that we want to get, we want to get off our heels on this thing and onto our toes. So I would argue this is as legitimate an asset class right now as a lot of other shit. I just wouldn't be surprised if it. If it hits $100,000 in the next 30 days. Having said that, I'm not buying right now. I always do this, and a lot of times I'm wrong. I'm going to wait for a correction or a drawdown before getting in. How about.

[Ed]

I feel like these crypto conversations, we just always go in circles. I mean, it's just we always have this conversation again, right? Like, it plummets and everyone's shitting on it, and then it comes back and then we're all questioning. I mean, I guess the thing that I'm thinking right now is one, this was predictable. I mean, if Trump wins, this is an asset class that is predicated on hype and on Internet personalities and in large part on con men. In a lot of cases, Trump is sort of the holy trinity of all those things. So you couldn't create a better mascot for crypto. And now he's also going to be president. So, you know, bitcoin's rallying. I expect it will rally even more. I think that 100,000 as a price target over the next 30 days is completely reasonable. I could easily see that happening once he's in there. I think it's going to be a different story because then we're going to have to start asking, like, the actual questions. Like, you know, he's talking about this strategic bitcoin reserve. Well, what would that actually look like? What is the function of that reserve? Can he get it through Congress, which he needs to do. You know, we're going to see pro crypto regulation. What does that actually mean? I mean, bitcoin is legal everywhere. There's nothing preventing anyone from owning bitcoin. You can buy it, you can put it in your 401k. We have institutions that are creating these Bitcoin ETFs, like, the world is pretty pro bitcoin in general. So what will Trump do that actually makes it more functional or makes it more valuable? Those are sort of the questions that we're going to have to eventually ask once we get to January 20th. I could imagine a year from now, or probably even sooner, once he's actually in there and he's talking about how this will actually work from a regulatory perspective, suddenly things are going to get a lot less exciting. And I'll bet you'll start to see crypto Prices start to moderate. But we have this conversation a lot and we'll talk a bit more about it with Josh Brown in a moment. Moving on to Shopify. Amazing quarter revenue increased 26% year over year. I have one thought that I'll table for now, but maybe I'll just first get your reactions to Shopify's earnings if you have any.

[Scott]

The company's really well run. I would argue this is the most interesting company out of Canada and I love the story of Shopify that Amazon had this approach where we use massive capital to offer consumers and our suppliers a better deal. The majority of the revenues at a very low price flowed through to the retailer on their third party platform which is now makes up more revenue than their actual retail site where they take license to the inventory and then over time when they ended up with 50% share and you kind of had to be on the platform if you wanted to grow your E commerce, which every company has to do, they started raising the rents and one of the ways they do that and capture more and more shareholder value is they own the data. If you're on their platform, you really don't know much about the end consumer. They own the packaging. Shopify zigged while everyone was agging and said no, we like customers, we want to. If you're a small company selling surfboards in Delray beach, we're going to let you control your packaging. We're going to make it cheap and easy for you to have a really good looking website. We're basically going to democratize E commerce. And then what they've kind of done, it almost feels cloud like they flipped on a lot of interesting tools, AI tools that appeal to bigger brands. And so it feels like it's kind of elegantly adopted this AI slash cloud feel to what is effectively a web services or infrastructure. It's not even web services, it's an E commerce infrastructure. Company in some more power to them and a great company doing really well. What are your thoughts?

[Ed]

Yeah, so I just have one point about investor relations which I find quite interesting here. So one of the things I talk about in this Gen Z talk that I've given to companies about how to better get through to Gen Z. One of the points is just that investor relations is very outdated right now and as the demographics of your investor base change, that is the age your strategy in investor relations needs to change as well. And the reality is that the way IR works today, it's just not suited for a 25 year old brain. These earnings calls and These press releases, they're boring, they're complex, they lack quick insight. Companies just need to radically rethink the way they do investor relations. And my prediction has been, I think I made it on this podcast that we're going to see a massive surge in sort of quick TikTok style earnings updates where the CEO will get in front of the camera, sort of run through what happened over the quarter, maybe throw in some visuals to make it more interesting. That's exactly what Shopify did this quarter. So the president got on the mic, it was like a 3 1/2 minute summary. Here's what happened. They blasted it across social media channels. This is something that Spotify has been doing too. I think that's the way to do investor relations in 2024. And I think we're going to see a lot of public company CEOs follow suit because I think everyone's realizing these press releases, these earnings calls, these decks, they're just outdated.

[Scott]

Yeah. So my third book Post Corona Number 4, New York Times bestseller, was basically the big theme in there. It was the word dispersion. And that is Amazon effectively said, okay, we're going to cut out malls and skip leapfrog, that's part of the supply chain and disperse retail and get it closer to the consumer. Netflix kind of skipped fiber optic cable and went to net neutrality, or skipped Comcast or Time Warner and said, I don't need to go through the cable company. I'm going to get my own information and I'm going to use this free cable company called the Internet. This is really what you're talking about, is the same thing. And that is there is an infrastructure around managing your communications, around shareholders. There's investor relations, there's Barron's, there's CNBC, there's analysts, there's investment banks, there's the SEC. And then CEOs are going, fuck that. I'm going to get a phone, I'm going to practice my lines and I'm going to walk around my office and say, this is what happened this quarter. And I'm going to go straight to the end consumer, specifically the retail consumer, who oftentimes is willing to pay a price that may seem irrational in the short run. And I can boost my earnings calls. Right. I can to a certain extent. Jensen Huang selling out Arenas is dispersion. He's not trying to get on CNBC or in the Wall Street Journal. He's like, I'm going straight to the end investor. And not only that, not the institutional investor. I'm going straight to the retail investor. Yeah, I agree with you. I think you nailed this prediction. I think you're going to see what's going to be hilarious is you're going to find some old mainline companies with CEOs who brighten up a room by leaving it trying to do something fun and interesting. And it's just, it's going to be an SNL sketch.

[Ed]

I can't wait for that.

[Scott]

Here at Joe's Piping, we had a blowout quarter. Here's my Uncle Vito to talk about our earnings.

[Ed]

It's going to be really bad actually. People are going to realize that this is the way to do it and they're going to like throw these 70 year old dudes in front of a phone and get them to record a TikTok and it's going to be awful.

[Scott]

They'll be like, is it recording? Is I see a red light?

[Ed]

We'll be right back after the break for our conversation with Josh Brown. And if you're enjoying the show so far and you haven't subscribed, be sure to give Profit Markets a follow wherever you get your podcasts.

[Scott]

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[Josh Brown]

Vox Creative.

[Scott]

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[Josh Brown]

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[Scott]

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[Josh Brown]

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[Scott]

One challenge that fraud fighters like Ian face is that scam victims sometimes feel too ashamed to discuss what happened to them. But Ian says one of our best defenses is simple. We need to talk to each other.

[Josh Brown]

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[Scott]

Learn more about how to protect [e-mail] Zelle. And when using digital payment platforms, remember to only send money to people you know and trust.

[Ed]

Welcome back. Here's our conversation with Josh Brown, co founder and CEO of Ritholtz Wealth Management. Josh, thank you very much for joining us.

[Barry Diller]

It's so great to be back.

[Ed]

So we were just off mic saying that you are a little less political than we are, which is what we need right now. But we're going to start with just the stock market's reaction to Trump's win. And I'd love to just get through all of your reactions and let's, let's root this in not being political. As you said just earlier, let's just sort of evaluate what is actually going to happen here, which I trust you to do. So basically every US Index rallied on the wind. So the S and P broke 6,000. The Dow had its biggest weekly jump in a year. The NASDAQ rose. I think we all expected that. I'm not sure what all of us expected that it would rise this much though. So my question to you to start off here, has this very broad rally, has any of it come as a surprise to you? And if not, why not?

[Barry Diller]

So this has been a very atypical election year for stocks. Normally there's this pattern where volatility comes in September and October heading into an election, especially one in which you think there's going to be something contentious or something undecided. And we had the opposite. In the 30 days leading into election day we had not a single example of two back to back negative days for the S&P 500. If you think back to the Wall street consensus over the summer, it was, hey, everything's great right now, but look out, when we get closer to the election, volatility is going to spike. We actually went in with A Vix about 20. For those who are not fully aware of what the VIX is, it basically measures options activity, people who are buying, puts people who are selling, calls, people who are preparing themselves for a market event within a 30 day window. So if you were really expecting a lot of volatility, you would have seen a higher VIX going into the election. The average is about 24 or 25 historically. So we had a below average Vix. We had no back to back daily sell offs in the S&P 500. And we basically had a rally that started sometime in the middle of August when it appeared that the negative payrolls data that scared everybody about a recession was a one off due to the storm. And as a result it was Very atypical versus what you would normally see. That was an interesting tell. The other thing I want to say about the backdrop here is record inflows to money market funds. Record inflows to Treasury Bond ETFs. We're talking about over $6 trillion in money market funds, which is the investment account equivalent of cash. And we're talking about an environment where a lot of people were prepared for chaos. And when that chaos didn't come, they said, all right, well, I have too much cash. What can I buy? So I don't think I was surprised. One of the interesting things, historically, about elections is it doesn't matter who wins. Investors exhale and they put money to work. They like the re. Certainty, which I know is not a real word, but you go from. It's binary. It's flipping a switch. The Tuesday morning of election Day, you have a lot of uncertainty sometimes, and then by Tuesday night, you have certainty. And we saw the same thing happen in 2016. We saw a rally when Biden won. We have seen this throughout history. So it's not surprising at all to people who are students of the market.

[Ed]

So it sounds like the certainty is one thing, and I would imagine, in your view, and probably in Wall Street's view, that also translates to this election, or the result of this election was not contested. It was a clear winner, and we didn't have issues with ballot boxes and fraud and any of these questions that would have caused some instability. I just want to confirm that's kind of what you're getting at there with the certainty as well as the win.

[Barry Diller]

Yeah. And it's unclear that if she had won the popular vote and the Electoral College, that we would have had the same amount of certainty as we had this time, because it's very unlikely that he would have placed a concession call to her within 24 hours.

[Scott]

I think we can be pretty certain that he wouldn't have conceded.

[Barry Diller]

Yeah. So it's. I mean, look, you got. You really have to put your feelings aside. Stocks care about earnings and interest rates, and we already were rallying going into this election, and we didn't know who would win. What does that tell you? What does that tell you? We were hearing it's a coin toss and the market was rallying anyway. What the stock market really wants is not necessarily Trump or Harris or this policy or that policy, the stock market. I shouldn't anthropomorphize the stock market. People in the stock market want an answer. And whatever the answer is, we learn to live with it, we learned to make the best of it and that's what we got, guys. There was a five week period in 2000 where we didn't know if the president was going to be George W. Bush or Al Gore. And I know it sounds weird, but the worst that Dow Jones did in that environment was negative 5%. We didn't get a concession speech in 2020 from Trump to Biden and Trump wanted to litigate the election and we had that chaotic, I don't know, 10 week period into year end, 8 week period into year end and the s and P500 actually rallied 12% from election night into the inauguration. Did you know that stocks went up on January 6th? I bet you didn't. Okay, so what I'm trying to, what I'm trying to get across to the listeners who aren't familiar with the history. Stocks rallied after JFK was shot. We're not emotional on Wall street about our policy wants and needs. It's about earnings and interest rates. So here's the big picture. Earnings are rising and interest rates are falling. You don't need to know in advance who wins the White House in that environment.

[Scott]

Josh, always good to see you. So I'm just, I think it's incredible how prescient the market has been. You said, you pointed out that it was rallying. I think it's because the markets correctly predicted and felt that Trump win and thought if corporate taxes are going to go anywhere, they're going to go down and earnings are going to go up. Meanwhile, the credit markets see him as more inflationary and they started. The chief investment officer of Millennium was the first person to call me and say he's won. And I said why do you say that? He goes, because the 10 year spike and the credit markets know he's about to be elected. And also the markets are saying, as far as I can tell, that they don't believe the tariffs are going to be anywhere near as bad as he is threatening. Your thoughts on tariffs and if the market is getting it right, and if so, does that, or if these tariffs go through, I think would be disastrous for a lot of companies. But the market is saying it doesn't believe it. What are your thoughts?

[Barry Diller]

I don't know if I fully agree that the evidence supports this idea that the spike in yields is because of fear over inflation. It might be, I think we don't have enough. It might just be because of a higher expected economic growth scenario. But we're going to find out together. The great thing about markets is that Debates are irrelevant because there's a scoreboard and the scoreboard is what ends up happening to prices. Scott, I think you're right, though. I think the markets did correctly price in that it was going to be clear in Trump's favor. And I think as evidence of that, this parallel story away from stocks and bonds with Poly Market is really, to me, one of the biggest stories of this election cycle. And look, it could have gotten it wrong and I wouldn't be saying any of the things I'm about to say. But there is power in markets and people putting their money on the line rather than taking polls. And until now, this has really been something they've had in Europe and not in the United States. And this is the first election where people are really taking notice of predict it and really taking notice of Poly Market and Kalshi and all of these prediction marketplaces. And I think what you're going to see in the midterms is an almost slavish devotion to what these betting markets are saying. And I think the betting markets were so incredibly accurate on a state by state basis that everyone who follows this stuff is now sitting up and giving these platforms a lot more respect. If you remember the narrative the day before the election, people said, myself included, well, maybe we shouldn't put too much credence in a marketplace that's really just young men, women are not betting on elections in any real numbers. This is dudes. So maybe they are over indexing to Trump because that's what they want to have happen. I thought that too. I don't think that. Today we talk to investors about our investment philosophy. We have a deck. One of the slides in our deck is the concept of the jelly bean jar. The predictions are going to be much more accurate with thousands of people betting how many jelly beans are in the jar than one expert who happens to know a lot about jars and or confection. This is not materially different. Now Poly Market's got the user base overseas. There are not US Hedge funds in there. There are not US retail people that are making investments in a prediction. So the one thing that you could have said is maybe that's where it's over indexing, where it's not picking up enough of the actual electorate that will change. So Poly Market, interestingly, is based in SoHo in Manhattan, but all of its users are overseas. It sounds like a crypto exchange. I think you're going to see a lot of evolution in these betting platforms. And by the way, when they all agree, like for me it's time to shut the. It's time to shut the fuck up and pay attention to what the market is saying. It doesn't mean markets can't get things wrong. I think what it means is it's probably a better system than somebody making phone calls to people's landlines.

[Scott]

What trends do you see? I mean, so certain companies were obvious winners. It feels like Tesla was a big winner.

[Barry Diller]

You think?

[Scott]

Yeah, $119 million to get a $15 billion pop in his wealth.

[Barry Diller]

He's added 30 billion to his net worth.

[Scott]

Oh, it's now 30. There you go. 30x. That's the best trade of 2024. Right. So after the sugar high are the obvious ones like alternative energy is not doing well, oil and gas doing well, some smaller companies that supposedly are immune to tariffs doing really well. Those exposed to tariffs are doing marginally or I would say somewhat or modestly negative. If you look at over the next four years, are there any sectors that you think people aren't registering or haven't acknowledged how well or how poorly they're going to do under a Trump administration?

[Barry Diller]

Yeah, so I think the biggest question is the hyperscalers. So. But I want to get back to that in a second. The biggest reaction in the aftermath of the election was in Bitcoin, the US dollar and small cap stocks. And if you look at the composition of the Russell 2000, the biggest winners within the Russell 2000 were regional and small banks. That makes sense to me. When you saw the 10 year yield explode, even though it's walked itself back a little bit. What that speaks to is higher net interest margins and just a bigger lending spread and a belief in a stronger economy. Those stocks had been beaten up for three years now. So relative to every other type of stock. So I understand that part of it. We saw huge rallies in industrial companies. I understand that part of it too. Oil services stocks are the most interesting to me. I have a personal ownership in a company called Baker Hughes that broke out in a massive way. We also saw the travel stocks explode, which was really interesting. Marriott, Delta, some of the bigger names in, in Consumer Discretionary or the travel companies. So the reaction was like really widespread. Notably gold fell, which I found interesting. I don't have a theory as to why, but it diverged from Bitcoin. Gold has been a huge performer all year. It's actually performed as well as the S&P 500, which doesn't happen every day. But gold fell in the aftermath of the election result. The other thing I would get back to is the hyperscalers. It's unclear whether or not JD Vance claiming that he's supportive of the work being done by Lina Khan, who is a Biden appointee running the ftc. It's unclear if that JD Vance imprimatur is going to be enough to dissuade Trump. Trump from getting rid of everything related to Biden that he possibly can. She doesn't have a lot of friends on the right, obviously. And the only thing I can think of is JD Vance maybe telling Trump no, actually this is good. We want to keep the pressure on these guys for the next four years. We want to give them another assailant out here that they can expend their time and energy fighting against. So that was kind of like an interesting idea. I don't know where the relationship between Zuckerberg and Trump stands. It was not great in the first term. I think we all know Bezos is not the CEO of Amazon, but still going to always be the first thing that Trump associates with Bezos. So we don't know where they stand 100%. We know that there was dissatisfaction on the part of the Trump campaign with the treatment of search results on Google. It's an open question how they'll be dealt with. The one thing I think people feel good about is that Tim Cook knows how to handle Donald Trump. Tim Cook went to the White House, he did the photo ops, he did all the things that he had to do. And Apple got itself an exclusion from the tariffs that would have really harmed the making of phones overseas. I'm guessing Tim Cook has a playbook for this and I'm guessing investors are willing to give him the benefit of the doubt that he will skate through another four years of Trump unscathed.

[Ed]

One of the other winners we were just mentioning there are small cap stocks. So the Russell 2000 jumped nearly 6%.

[Barry Diller]

Right after that was the biggest reaction.

[Ed]

Biggest reaction. I'd love to get your take on. One, why exactly that's happening right now and two, whether you think this will be a long term trend because what we've seen over the past several years is that the rich get richer. Among the stock market, at least it's the big players, the Mag 7s that have been ripping and the small cap stocks have been kind of left behind. I wonder if we're going to see a reversal of that trend.

[Barry Diller]

I won't bury the lead. It's not going to be a long term trend. The history of small caps versus large caps is one of oscillation. They have These periods where small caps outperformed, followed by these very predictable periods where they underperform, and then the cycle begins anew. And this will be no different. We saw small caps rally in 2017 as part of the quote, unquote, Trump trade. There is an idea on the part of asset allocators that high tariffs represent an opportunity for smaller businesses that are more domestically focused. Famously, The S&P 500 derives, I think, double the revenue from overseas than the Russell 2000 does. So there's an idea that these are companies that will largely be unharmed by tariffs and might even be helped if they've got onshore production. I don't really believe in that. I think that's people taking a narrative and forcing it into an investment strategy. And I think if we really have 20% tariffs around the world, 60% tariffs on China, I think small companies will be equally susceptible, just as the larger cap companies are. So I don't think the infatuation with small caps will.

[Ed]

Why? Because I buy that narrative when I heard it too. I mean, if you're more domestically focused, if your supply chains aren't in America, are you not paying the tax? Why is that not compelling to you?

[Barry Diller]

Go look at 2018 when the tariffs first went on. We had two in one year, we had two 20% little mini crashes in the S&P 500. And ask yourself, how did small caps do in those moments? They did not hold up. They were not a safe haven and people were not making this calculation with their money. Oh, I'm going to sell S and P stocks and buy these little pieces of shit. It's just, it's not the way money managers actually react with the dollars that are entrusted to them. So I don't. If we didn't see it then, we're not going to see it now. That's 1, 2. Who are the customers of small cap companies? Large cap companies. So if large cap companies are struggling because of tariffs, they're going to spend less money and they're going to buy less products from the smaller publishers. So it's not going to play out that way. But I understand the rally. It's important to point out. So the Russell 2000 just takes the 2000 largest market cap, small companies, and it's a little bit random of what's in there. The S&P 600 is a better index to follow. So it's just a competing version of small caps. They're all profitable to get into the S&P 600 so you have less little tiny biotech companies with no earnings. You have a higher amount of industrials and financials in that index. That's kind of, I think, what you want to watch. If you all of a sudden get into a tariff situation and you hear CEOs of those companies coming on conference calls and crowing about what a windfall they're getting because of tariffs, I'll be wrong. I'm telling you right now, in November of 2024. That is not going to be what we're saying in November of 2025.

[Ed]

Stay with us.

[Ian Mitchell]

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[Josh Brown]

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[Ed]

We'Re back with profit markets. I just want to pivot to crypto, which we briefly mentioned there. So bitcoin has hit an all time high. It broke past $80,000 for the first time ever, over the weekend. And the expectation is just laxer, looser, nicer regulation. But Trump has also spoken about building this national strategic bitcoin stockpile. That's exactly the words he used when he gets into office. And with my, from my conversations with crypto bulls, that's really what they seem to be most focused on. Your view on bitcoin right now and is this huge rally warranted, do you think?

[Barry Diller]

I don't know if it's warranted because I don't know how to. I don't know how to judge where the price should be. There are no cash flows, so I can't say, oh, here it's cheap, here it's expensive. I just, I try to avoid doing that. The only question that matters with bitcoin is are more people going to want to own it or less people 6 months from today that nothing else really matters? And when you think of it on that basis, what schmuck would have sold it at 70,000 on the heels of that electoral outcome? Selling it to do what? Like literally, what are you doing with the money? I hope you're eating with it. Because we basically have a bitcoin president coming into power who has largely been financed by bitcoin billionaires. They have his full attention and just instinctively, he doesn't have to understand anything about how blockchain works. All he has to understand is there are rules and these people are against the rules. Well, I'm with the people who are against the rules because they're rich and they flatter me and they were going to support me in the midterms. They got rid of Sherrod Brown in Ohio. This is the senior person on the Senate Banking Committee. They threw him out. It didn't even cost that much. I think it was like 20, 30 million dollars. So he's not stupid. He understands that he should be listening to the crypto people and he's going to. And I think the tacit support on Wall street and amongst institutions, Larry Fink at blackrock, that's going to turn into full fledged order for the age of digital assets. And if the government decides they have 211,000 bitcoins right now, federal government, if they decide that this is a new reserve asset, well, what do you think central banks all over the world are going to have to do? What do you think foreign treasuries are going to have to do? They're going to have to pretty much fall in line. If we start stockpiling bitcoin, that's of course what everyone else is going to start doing, but then they'll start getting.

[Ed]

Rid of their dollars. Right?

[Barry Diller]

Maybe I think the bigger thing to think about right at this point in time, who would sell it? Who would sell it right now, understanding that this might be a thing that the federal government decides they want to buy more of. So the people within the Trump campaign are saying, a million bitcoin. I have no idea if that's realistic. If it is, the price is not going to be. The price is not going to be sub $100,000 for very much longer. And I think everyone understands that. I also want you guys to think about the chase, because if and when Bitcoin breaks 100,000, every asset allocator in the United States that's ignored it or avoided it or talked down about it really is going to be forced to rethink whether or not they should do what the US Government is now doing. So this is one of the most incredible stories in the history of markets. Three years ago, they were arresting people for dealing in crypto, and now the US Government may end up becoming one of the biggest regular purchasers of crypto. And I don't think anyone in the fall of 2022, when they were arresting Sam Bankman Fried, could have pictured a 180 to this extent taking place just a couple of years later.

[Scott]

Distinctive Trump's presidency. Are there any sectors you would stay away from where you think that these things are overvalued or they're going to face macro headwinds?

[Barry Diller]

If Elon Musk weren't in a position to pull his chair up to the desk in the Oval Office, which. So I'm telling people that I think we're going into a new robber baron age. The parallels between what's happening now and the late 1800s should not be lost on anyone. We are probably going into a robber baron age where very, very smart, very wealthy people have the most influence. Their influence is going to Trump the evangelicals, no pun intended, or maybe pun intended. Their influence is going to Trump the anti China wing of Republican politics. They are, I think, going to be at the center of all of the decision making going forward. I would have ordinarily answered your question, Scott, by saying solar and EVs, but again, Elon Musk owns a solar business and an EV business. And I just don't think it's going to be as simple as we're for oil and we hate alternative energy sources. I just, I don't think it'll go that way. So I'm not Sure about any industry in particular other than media. Media companies are well and truly fucked for the foreseeable future. These fantasies that all of a sudden we're gonna have mergers and Warner Brothers is gonna be able to find a deal and, and Netflix is gonna start buying Lionsgate. None of that's gonna happen because I don't think any traditional media companies will have paid enough fealty to Donald Trump personally. We know he's willing to weaponize these agencies against people who he views as being against him. So if I were trying to think of an industry, this is smaller than a sector. You have sectors and then you have industries or sub industries. If I were trying to think of a sub industry that could possibly be the most flat on its back right now in terms of what's about to happen, I would say traditional and or mainstream media. This is not going to be a repeat of 2016 where everybody subscribes to the New York Times. I think there is just a, a fatigue about anti Trump news in 2016. Everybody wanted to subscribe to the Washington Post and the Times because they wanted to fight back and they wanted to hear every outrageous story and they wanted to be armed with information. I have to tell you guys, as somebody who walks outside of my door and talks to people, nobody wants that this time.

[Scott]

Don't you think with Trump though, being seen as sort of anti regulation or not emboldening, probably the ofTC or the DOJ, even if they leave Linacon in position, don't you see a lot of mergers and consolidation coming down in media given the stressors you're talking about?

[Barry Diller]

Where are they? They've been on hold. They've been on hold for a while and it's unclear who is going to acquire these assets.

[Scott]

Well, you don't see a Warner Brothers doing a stock deal for some of the other smaller players or something like that.

[Barry Diller]

I think they would have liked to have merged with Paramount, but they're not in a financial where their own shareholders would think it makes sense. And who is big enough to absorb the $40 billion in debt sitting on the books at Warner Brothers? Almost no one. So they have, I think, done a good job at repaying debt because I think that number was closer to 60 at one point. But that's not necessarily going to change the calculus for who wants to own that stock. You don't have the growth, you've got hit or miss box office. Look, I love $8 stocks, okay? I would love to say that's the buy. It's so hated. It's been so ostracized from people's portfolios, it almost might as well not exist normally. That's a great setup. I just think this fantasy where the Republicans are going to allow $3 trillion in M& A, which is what we had in 2021. This year, we're about 1.6 trillion in M and A. So this fantasy that, like, next year we're going back to 3 trillion and all these media companies are gonna find dance partners, I just don't see. I don't think it's gonna work out. I reserve the right to change my mind, but for right now, I just can't picture it.

[Ed]

I do wanna just go back to this robber baron era that you just brought up, which I totally agree with. I think it would be a very good bet to bet on Donald Trump's friends right now. Do you have any larger economic concerns about this, though?

[Barry Diller]

Well, I think we've had periods before where business interests had outside influence on the White House. I really don't think it's a new concept in American history, and I think of it as kind of a pendulum, and it could be a while before it swings away. I think the next four years, what you're going to see is the rich get richer. I think you're going to see an explosion in demand for people who do what we do, which is wealth management. I think more people are going to come into the wealth management industry looking for help than have ever come before. Keep in mind this is coinciding with a just gigantic wealth transfer from the boomers to Gen X and millennials. And I really think that we're just in an era where smart people are going to stop worrying about all the headlines every day and all the outrage and every stupid joke that every standup comic tells in front of a mic. If that's how you plan to spend the next four years, I just would say just maybe rethink it. Spend the next four years, put your head down, make fucking money. Focus on how you can improve your own life, and the pendulum will swing back. And if you're horrified by some of the things like the overturning of Roe v. Wade or the way we're going to see very cruel deportations of immigrants, if you're horrified by those things, and rightly you should be, the wealthier you are, the more opportunity you will have to do something about it. Screaming on Twitter, crying into a TikTok. All that does is make the people on the other side feel even more emboldened. They love the whining and crying. They're feeding on it. It's their energy source. So if you are virulently anti Trump and I know people who are, of course, I live in New York. Look, if that's what you're about, my advice is arm yourself with money. It is the only way to make change. You don't have to like that. What I'm saying is true. You just have to accept it because everyone else has.

[Scott]

Josh Brown is a co founder and CEO of Ritholtz Wealth Management, a New York City based investment advisory firm managing more than 4 billion in assets. 5555 which bio's outdated. 5 billion in assets.

[Barry Diller]

Did I get tariff?

[Scott]

Wait, hold on. I just got an update. It's 5.2 and assets for individuals, corporate retirement plans and foundations. Josh, these are always hugely popular segments with us. We really appreciate your time.

[Barry Diller]

I love chatting with you guys. Thank you so much for having me.

[Ed]

This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our Associate producer is Alison Weiss, Mia Silverio is our Research lead, Jessica Lang is our Research associate, Drew Burrows is our Technical director and Catherine Dillon is our Executive producer. Thank you for listening to Profg Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

[Barry Diller]

Support for the show comes from AT&T. What does it feel like to get the new iPhone 16 Pro with at and T? Next up Anytime. It's like when you first light up the grill and think of all the mouthwatering possibilities. Learn how to get the new iPhone 16 Pro with Apple Intelligence on AT&T and the latest iPhone every year with ATT. Next up anytime ATT connecting changes everything. Apple Intelligence coming fall 2024 with Siri and device language set to US English. Some features in language will be coming over the next year. $0 offer may not be available on future iPhones. Next up Anytime feature may be discontinued at any time, subject to change Additional fees. Terms and restrictions apply. See att.com iPhone for detail.