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- [00:05]
A
Hello, welcome to Sleep Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spires, New York Times. Hello, I'm here with Emily Peck of Axios.
- [00:20]
B
Hey, Felix.
- [00:22]
A
And we are in 2026. Finally, we have put 25, 25 behind us. We never need to think about it ever again. Wait, actually, we're gonna spend a whole fucking episode about 2025. It was a really interesting year. A lot of important things happened and we just want to talk about what happened in the stock market, which was kind of surprising. What happened in the deal making market. What's going on with Berkshire Hathaway? And yeah, maybe if we understand what happened last year, we're going to have slightly clearer eyes going into this one. It's a meaty, all encompassing conversation and is coming up Slate Money.
- [01:06]
C
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- [01:36]
D
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- [02:13]
E
Welcome to the new year.
- [02:14]
A
Welcome to the year. Emily, can you, can you sum up 2025 in like a noise from your lips?
- [02:21]
B
I mean, I believe the sound was so is that good? Are we on?
- [02:27]
A
I feel like we are recording and I want to talk about Stonks and I want to talk about that take, which is a take that I've seen quite a lot, which is in any normal world, a year where the S&P 500 went up by 19% or whatever it was would be like, wow, that's amazing. This was a great year for the stock market and yet no one seems particularly happy about it. And I think there are two reasons. Two main reasons. Well, three if you include Trump, but we don't like talking about Trump around his Butt So two main reasons, which is number one, that stock market investors just want to make the most amount of money regardless. And it turns out that if you invested anywhere else in the world, you would have made more. So the European stock markets, the Asian stock markets, or even the Brazilian stock markets, they all outperformed America. So America, although it did well in absolute terms, feels like it underperformed the rest of the world. Well, it actually did underperform the rest of the world and people like, ooh. And then the other part of it, which we'll get to a little bit later, I'm sure, is the dollar that, you know, if you're not a dollar based investor, then most of those gains get wiped out by the decrease in the value of the dollar. So like the stocks go up in dollar terms, but then the dollar goes down in euro terms or in peso terms, whatever. And then so like net, net, your gains in the US seem pretty meh.
- [03:59]
E
Well, that and also I think people are a little nervous that The S&P's performance is so heavily dependent on AI.
- [04:06]
B
Yeah, I'd say that's another factor there. Everything I read is like, well, if not for AI, the economy would have been much worse last year. If not for AI, the stock market wouldn't have seen any gains. If you take the AI heavy companies out of the stock market, it doesn't look as impressive, et cetera, et cetera, et cetera.
- [04:24]
A
Well, I mean, yeah, but like, in order to believe that story, you have to consider, you know, Google and Apple to be AI stocks, which I just don't think that they are. I mean, obviously these companies are trying to move into AI and adopt AI with varying degrees of success. But like, I really don't think that someone going out there and buying shares of Apple is like, I'm making a bet on AI.
- [04:48]
E
I think they are. I mean, not entirely, but all those stocks are very expensive right now. And I think they've gotten more expensive because they're making bets on AI. Not that they wouldn't have been dominating the index in the absence of AI, but I do think it's driven a lot more value for them than, you know, if they weren't doing that, I think, I mean, when you.
- [05:08]
A
Sure, but you can. Elizabeth, my point is you can say that about almost any stock, right? Like every company on the, in The S&P 500 is out there talking loudly about its AI strategy and how it's going to become much more efficient and productive and yada yada yada because of AI, Apple included. And you can definitely make some kind of a counterfactual case that Apple or any other stock would be less expensive were they not out there shouting so loudly about AI. But like that's true of everyone.
- [05:39]
E
So the wouldn't the, you know, things like the Russell 2000 would be up more than 12%.
- [05:44]
A
That's why I said S&P 500 and.
- [05:45]
E
The Russell 2000 but also the Magnificent 7 account for about a third of the growth this year. So if you take them out and then look at the rest of the index, what's the growth level and would that be normal?
- [05:57]
A
No, you're absolutely right Elizabeth, and this is exactly why I'm trying to make this distinction between AI stocks on the one hand and the MAG 7 on the other is that it is true that there is a huge amount of capex in AI. If you look at that for 4.3% GDP figure that we just had a huge amount of, that is AI. The economy is reliant and the stock market and to some degree is reliant on the kind of optimism that is engendered by AI. And yes, there is a lot of concentration in the stock market and the mega cap tech stocks are a really large proportion of all market capitalization. All of these things are true. The only thing I'm pushing back on is this idea that the mega cap tech stocks are ipso facto AI stocks. I think virtually all large cap stocks have an AI component to them, but the number of actual AI stocks in the S&P 500 is basically one. It's basically Nvidia.
- [07:02]
B
It's really interesting actually now that you guys are sort of quibbling on this, to think about Google, which especially in the, towards the end of the year really started, the stock really started soaring because people saw it as an AI stock. Which is interesting because when ChatGPT first came out and when AI, you know, first became clear it was going to be this big consumer product, it looked like Google was the big loser. It looked like, oh, Google, like AI is clearly going to displace search. That's where Google makes all its money. Therefore AI is going to crush Google. And now here we are at 2026 and Google is perceived as an AI stock, an AI company and no one is really saying like a little bit.
- [07:51]
E
Of Schrodinger's equities here. It sort of doesn't matter what the underlying revenues are. If people perceive it as an AI company, that's what's going to drive market valuation.
- [08:01]
A
I think I, I See, I'm going to push back a little bit on what Emily is saying here. I think undoubtedly Google had a good year in the stock market, but I'm not sure that there's anyone out there who considers Google to be an AI company where, you know, I want to buy the AI story, therefore I'm going to buy Google. I think you're absolutely right, Emily, that the, the AI risk to Google is very much on the downside rather than the upside that you know, we are, we have already seen AI in general and ChatGPT in particular eat a lot of the search market and that number is going to go up and Google's home grown Gemini AI isn't cutting the mustard. You know, all there are big problems to Google's revenue model insofar as, you know, we're entering this world of AI and they're struggling with that. And I think that it is interesting to me that the stock did well in the face of those problems. And I would just push back on the idea that it did well because suddenly everyone changed their mind and said, oh, now Google is an AI company now I don't know anyone who said that.
- [09:14]
B
Well, we had a piece in Axios, I believe, because people realized, I mean, Google could have released a product like ChatGPT in back in 2022, but it didn't because it was just more cautious. The argument I've seen is that they have the technology, they have the expertise and the know how to do AI, if not just as well as OpenAI, then perhaps even better and they have the infrastructure and they have the cash flow. So I think there were people towards the end of the year being like, oh, hang on, wait a second, this company like has a lot of the stuff that it needs to triumph ultimately over OpenAI.
- [09:54]
A
Yeah, but if you think about it, you know, if OpenAI is kind of the market leader in terms of valuation, right, and OpenAI is worth, you know, who knows how much it's worth but call it half a trillion dollars and Google is worth what, like 3 trillion, something like that?
- [10:10]
B
Some bajillions, you know.
- [10:12]
A
So like even if you give Google, Google's AI expertise credit for being worth like as much as OpenAI or even more, most of Google's value is not AI.
- [10:25]
E
True, I don't, but I don't think you have to go that far. I think, you know, if we look at the overall composition of the index and maybe it's useful to look at who the losers are, you know, and right now it's consumer staples Retail and managed care. And that's all because people have less money to spend. And they're a little bit pessimistic about the outlook given a weakening labor market and expectations about interest rates.
- [10:49]
A
And also, just to be clear, all of those companies are coming down from, if you rewind to a year ago, where we were at the beginning of the year, which was a very healthy stock market. And one of the reasons why I continue to insist on being impressed by the performance of the US Stock market, all of these asterisks notwithstanding, is because it had already been on such an amazing run. They're rising even further, even in percentage terms, but mostly just in absolute terms is kind of impressive. You don't get back to back years like that. Almost ever in the stock market. It's very impressive. And so, yeah. Are there some stocks that went down rather than up? Yes, I mean, there always are. But if you look at the level of those stocks that you're talking about, most of them, the consumer staples, the fast food, whatever, you know, there are, you can pick out individual stocks that are doing really badly. But the sectors in general, they don't seem to be pricing in massive pessimism. They're just not pricing in as much optimism as they were a year ago.
- [11:59]
B
But like you said at the outset, something feels wrong, something feels not kosher. Right. We have this AI bubble. Everyone's a little stressed about it. We have like gold and silver doing super well because people are afraid maybe they're using it as a safe haven. Unclear yet. We have crypto doing not well. Would you think it would be doing well because of people?
- [12:25]
A
Well, crypto is a prime, prime, prime example of what I'm talking about. Right. Is that. Yeah, again, if you're looking directionally, crypto is down rather than up from its highs. I think it's still up for the year though. Right. I think bitcoin is. Went up in 2025 rather than down. We should check that. Emily is frowning, saying, I don't think so, but we can look that up.
- [12:50]
E
Down.
- [12:51]
B
Yeah, it's down.
- [12:52]
A
What did it do in the year overall?
- [12:54]
B
Down 6.6% for the year.
- [12:57]
A
Okay. All right. So like, you know, by bitcoin standards.
- [13:00]
B
That'S basically back in the fall, it was like 120k and now it's like 89.
- [13:05]
A
Right. But you know, bitcoin is one of the most volatile asset classes in the world. If it's down 6% for the year, that's within, you know, that's like been.
- [13:13]
B
On quite a journey. It goes always.
- [13:18]
A
So. Exactly. My point is that if you compare these things to where they were at their all time highs, there are things that are well below their all time highs and bitcoin is definitely one of them. But if you just take a step back and say like bitcoin is worth $80,000, that's like completely insane and ridiculously high.
- [13:39]
E
Well, I think, you know, some of the pessimism outside of things like bitcoin and this is leading into our next segment. A little bit has to do with things like juxtaposing the US Markets against the global markets and looking at these countries who are trying to rebalance away from the US because of tariff uncertainty, policy uncertainty, things like that. It's like, how does that affect the companies in the index who are not primarily AI or perceived as being AI companies?
- [14:08]
A
Or more to the point, how does that affect. A little bit earlier we were talking about should we be looking at the Russell 2000 or the S&P 500? And I was saying I'm looking at the S&P 500. If you look at the Russell 2000, you get many, many more sort of purely domestic American companies in there. In the s and P500, it's nearly all global companies. And if Germany starts making big domestic investments because they want to reduce their reliance on the United States, that's fine for a big American company that has a lot of operations in Germany, they can just keep on there. And globally speaking, companies are doing pretty well. And actually, I do think that one of the reasons why The S&P 500 is doing relatively well is precisely that all of those foreign revenues For S&P 500 companies are looking much more valuable now that the dollar has declined by 10%.
- [15:01]
B
Yeah, I think that's why people feel bad. And everyone is writing this story about the US stocks underperforming international stocks because it's the first time that's happened since 2009, apparently.
- [15:12]
A
Yeah, but you have to like, it has to happen sometimes. I mean, like, I'm not.
- [15:16]
E
It's funny because I know we don't really want to mention Trump here. You know, the two biggest targets of Trump's trade war were supposed to be Mexico and China. And they've both come out winners, kind of. The MCSI China index is up 29% versus the S& P. Mexico is made out really well in the trade war.
- [15:38]
A
Yeah. Mexican stocks aren't doing that well. Chinese stocks are largely uninvestable. Honestly, like the smart move, if you're making the Trump Play. My colleague John Otters has this, what he calls Hindsight Capital column every year where he's like, with hindsight, this is what I reckoned was going to happen. And it did. No, but the smart move was to basically say J.D. vance is going to piss off all of the Europeans and basically say that the United States doesn't give a shit about NATO anymore. This is going to cause the Europeans to massively increase their defense expenditure, and this is going to cause European stocks in general, but European defense stocks in particular to go through the roof. And that definitely happened.
- [16:18]
E
Yeah, that's true.
- [16:20]
A
And, you know, again, like, I think of Chinese stocks in contrast as being, you know, a little bit more like bitcoin, to be honest. Like, number one, it's hard to invest in, and number two, they just move around all over the place for a whole bunch of reasons. I don't think that, you know, Chinese stocks go up is a sign of enormous health in the Chinese economy so much as it's a sign of they had gone down so much that, you know, it feels like dead cat bouncy. There's still a huge amount of bad debt in that country.
- [16:50]
E
Yeah. Although there's some AI enthusiasm there too.
- [16:53]
A
Yeah. I mean, China has a strong amount, but again, that's the whole thing, right? Chinese companies, there are very few, if any, like, pure play Chinese AI companies. It's all what I was talking about earlier, which is like, AI is this sort of magic potion that you put into your P and L of whatever industry you're in, and then it makes you more productive and more profitable. And you can see that kind of optimism in China, and you can see that kind of optimism in a bunch of different companies. Like my former employer, Thomson Reuters. Its stock is through the roof because something, something AI, something that no one can really explain, but everyone's like, AI is great.
- [17:38]
E
Is there a little bit of a chicken egg thing issue there where it's, you know, if you're a hyperscaler, you're one of the few companies that have the resources to really build up AI assets and infrastructure in a way that pure play AI companies that are starting from scratch can't. And that would be probably similarly the case in China. So it's sort of, you know. Are the hyperscalers primarily AI companies? Maybe not, but they are probably the only companies that have the resources to actually excel in the space.
- [18:07]
A
Well, I mean, hyperscalers are, you know, in a weird way, they're the sort of pick and shovel stock of the AI boom.
- [18:14]
B
What's a hyperscaler.
- [18:16]
A
The people building data centers, basically people.
- [18:19]
E
Who can buy because they have incredible cash flow and they can just spend the money.
- [18:23]
A
So if you, if you want to buy a bunch of compute, you're going to in one way or another be spending a bunch of money on these hyperscalers. And so yeah, they definitely count as a pure play AI stock along with Nvidia, but there aren't any trillion dollar hyperscalers.
- [18:36]
B
Is that like Oracle?
- [18:37]
A
Well, so Oracle is interesting, right, because it's spending on hyperscalers, but it's also trying to build its own. And Oracle is also interesting because, you know, we've had this conversation in the past in terms of should we be worrying about a bubble? And that's like, you know, the front cover of business week is like AI bubble, bubble, bubble, you know, so much bubble talk these days. But like, for me, the point at which you start really becoming worried about bubbles is when there's leverage, when there's like excessive leverage in the system. And certainly if you're looking at Nvidia, Apple, Google, Amazon, Microsoft, those companies have nothing. There's no real leverage in those companies. Oracle is the big exception. Oracle is the one that is actually going out there and borrowing hundreds of billions of dollars to try and invest. Precisely. It doesn't have the kind of balance sheets that those other companies do. And most of its big AI related revenues are in the future. It's not really making the massive money right now. But yeah, I do think that even if you count Oracle, Hyperscalers, Palantir and maybe a few others as relatively pure play AI stocks and even Oracle, Oracle has a massive legacy business anyway. But yeah, even if you count it as an AI stock, I think it's hard to make the case that the stock market as a whole is rising on the strength of AI stocks. You really need to stretch and start making the case that companies like Google and Apple and Amazon AI stocks, and certainly in the case of Google and Apple, I just, I can't do it.
- [20:22]
B
Okay? I think the bottom line is that the stock market went up a lot more than people thought it was going to go up. Especially if you go back to April.
- [20:30]
A
Oh, for sure. When the stock market was down 20% and everyone's like, tariffs are going to kill the world, right?
- [20:35]
B
And instead of everyone being excited about this, everyone's like, oh, this isn't good. Especially because look what happened around the world. Everyone did better than America and America's number one and this is disturbing, blah, blah, blah.
- [20:46]
A
And that's the bottom line, you know, who's doing well. And we do need to talk about this. The one Magnificent Seven stock that we haven't mentioned, bless him, is Tesla. And we just had another release on Friday of Tesla's quarterly vehicle delivery numbers, and they underperformed again. And they've been falling steadily for over two years now. And I can't remember who said this, but, like, it's pretty clear at this point that Elon is bored with cars. He's just moving on from cars. And Tesla is an automaker. And so you'll be like, if the number of cars that it's selling is going down, down rather than up, and Elon is bored with cars and no one thinks the cars are the future. Obviously Tesla stock will be going down, but Tesla's all time highs and the company's worth $1.7 trillion or something.
- [21:38]
E
Okay, my theory is that Tesla is partly a meme stock at this point. And the meme has always been. And I think he's. My argument is not just that he's bored with cars. I think he's always been less competent than people perceive him to be. And now that Tesla's kind of hitting a wall and they have some problems that are a little bit trickier to fix, it's clear that he's not going to be able to come in and save everything.
- [22:03]
A
It's not clear, Elizabeth. $1.6 trillion of investors are saying the opposite. Like, it might be clear to you and it might be clear to me, but. No, but meme stocks are worth like $100 million. They're not worth 1.6 trillion. Like, I don't.
- [22:17]
E
I think the same dynamic can apply.
- [22:19]
A
These are big institutional investors who are buying Tesla and who are owning Tesla. It's not retail.
- [22:25]
E
That would not be the first time institutional investors bet on Elon and not really the fundamentals of the company. There are people that helped him buy Twitter, which made no sense. That deal made no sense from a perspective.
- [22:38]
A
Correct. But that's exactly what I'm saying. There's just such a huge difference between a $40 billion purchase of Twitter and a $1.6 trillion market cap for Tesla. I feel like these distinctions, these orders of magnitude differences are important and we should take them really seriously because, yes, you can always find like a Cathie Wood or something. He'll be like, yay, Elon's great. I'm going to buy the stock. But I don't think there are enough Cathie woods out there in the institutional investor World to really explain this kind of valuation for Tesla.
- [23:13]
E
I think it's a major variable.
- [23:14]
A
That said, I don't have like a better explanation.
- [23:17]
B
Well, it's obviously Elon that makes Tesla stock go up price.
- [23:21]
A
Right?
- [23:21]
B
That's the X explanation. I want to say one more thing, which is I was listening to an episode of Decoder Ring, which is a Slate podcast that's very good and will it and they were talking about, like, what should we cover next year? What are some ideas? Their whole thing is like, they talk about, like mysteries that are right in front of you that you never thought about. Like, they had a great episode once on, like, why is everyone drink bottled water now? Like, how did that come to be? Because when we were growing up, no one drank bottled water. It was just like you drank from a water fountain or you waited till your meal and you had a drink. Anyway, one of the ideas that Willa had in this episode, she was like, we should do something on how like, money doesn't mean anything anymore. Like, stocks, they just keep going up now and people just keep putting money into the stock market and like, it doesn't even mean anything. And there's all these cryptocurrencies and like, like, I just think something big is happening now with money and valuations and enthusiasm about the stock market. And we thought 2025 was going to kind of like quash that, especially after April and Lib day, but then stocks just kept going up, so there's even more enthusiasm and there's even more like government policy trying to get everyone to put their money into stocks. And then there's like even more like enthusiasm and energy behind things that you think, like, shouldn't be worth anything or only worth like crypto. The story of what it is keeps changing. Like it's a hedge against the dollar. No, it's a counterweight to the dollar. No, it's a store of value. You know, like, you're just making up narratives to fit whatever you want to throw the money at. It's like nothing means anything anymore.
- [24:53]
A
I think the money doesn't mean anything. Like, we are beginning to hear much more just over the past couple of months, at least in my experience about the K shaped economy. Like, that meme kind of went away for a while and now it's coming back. And on the sort of upper leg of the K shaped economy, you not only have Tesla stock and Elon being the richest man in the world and all of that kind of stuff, but you also have one of the things that I've been doing in my new job at Bloomberg is writing quite a bit about auction results at the Sotheby's and Christie's or Philips for instance, where there was a $10 million watch that just got sold which was like incredibly ugly. Or Christie's where they sold a $30 million drinks cabinet in the shape of a rhinoceros. Or you know, this kind of thing. Like there's a bunch of just silly money being thrown around in the world of the ultra rich in a way that feels kind of money doesn't mean anything.
- [25:48]
E
Off topic, but what was the ugly watch? Because now I need to google it, see how ugly it is.
- [25:52]
A
Google fp Jean FFC what It was sold by Francis Ford Coppola who was like the sort of co designer of the watch. And it tells the time with this. Like it looks like an armored hand with fingers and depending on which fingers are pointing up like that's the hours. It's a very silly watch. But the retail price is a million dollars if you want to buy that from FPJorn, which you're not allowed to. And then if you want to buy it on the secondary market, it's even more. And then the, you know, the number one first prototype version sold for 10.8 million rich people.
- [26:27]
E
Man.
- [26:35]
A
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- [28:48]
F
Hey Slate listeners. David Plotz here, one of the hosts of the Political Gabfest. And yes, that was superfan Stephen Colbert. You just heard. This year we are celebrating 20 years. We've been around since George W. Bush was in office, before the iPhone existed, back when people had to explain what a podcast even was. And to commemorate this anniversary, we hosted a really special live show in New York City featuring Colbert. He sang, he answered Listener conundrums.
- [29:15]
A
I have a harrowing follow up question. Is he taking over my body? For those 24 hours.
- [29:24]
F
He had lots of thoughts on everything from Trump and Taylor Swift to museum heists and what pastry he'd be reincarnated as. And then he said something that will either shock you or make perfect sense, depending on how well you know us.
- [29:36]
A
Well, I think he'd be. I think he'd be more likely to be a dictator than the rest of us.
- [29:41]
F
So which GABFEST host does Stephen Colbert think would make the best dictator? Listen to our latest episode now or watch the full video on Slate's YouTube page at YouTube.com slate to find out.
- [29:53]
A
We should just also touch on the sort of real economy rather than the financial economy, because I feel like the big sort of hidden surprise of 2025 in the face of all of these headlines about Donald Trump imposing massive tariffs on Mexico and Canada and the world, but especially Mexico and Canada, is that he kind of didn't like in his first term, he signed this thing called usmca, which was the rebranded version of nafta. And all of these tariffs that he's announced have been on the minority of trade with those two countries that don't fall under usmca. And since the overwhelming majority of trade in North America is USMCA compliant, what that means is we wind up having effectively free trade between these three countries. In most things, most of the times. And this has been a big boom for Mexico because now, compared to the rest of the world, Mexican blended tariff rates like 4% compared to everyone else's, like 15% or whatever it is. And so Mexico feels like it has this incredible comparative advantage in terms of exporting to the United States compared to everywhere else in the world. And this has been wonderful for Mexico.
- [31:18]
E
I think Claudia Sheinbaum gets the award for the world leader who has best managed Trump in terms of getting him to pull back some of his policies that would have been detrimental to Mexico. But also there's a stat that says Mexico captured 25% of the US trade deficit with China, which also seems kind of funny. The Chinese tariffs are actually benefiting Mexico.
- [31:43]
B
That's what happened in Trump's first term. And since Trump's first term, Mexico has become the US's number one trading partner because, yeah, it's cheaper. I think the piece we read in the Wall Street Journal said the effective tariff rate on Mexican stuff coming into the US is like 4% right now, compared with 37% for China. So a lot of US companies are moving manufacturing to Mexico. They have a lot of manufacturers set up on the border to make it really easy to make stuff there. And to Elizabeth's point, Sheinbaum just announced that Mexico is doing tariffs on Chinese goods, too, just to please, I think, the United States and just like to get on Team usa.
- [32:25]
A
Mexico would be importing a lot more Chinese cars if it was left to its own devices, because they want a bunch of Chinese EVs. And it's obviously good for the Mexican economy. And the Mexican consumer, in terms of wealth and income, is really quite close to the Chinese consumer. And it makes sense. And it's not. Doesn't have a huge domestic auto industry in the way that China does. But they're not importing those cars precisely because they're trying to stay on the good side of Trump. But, yeah, do you remember a million years ago when people would talk about friend shoring like we were in the post globalization society, and we're just like bringing all of our trade to our friends. That's what's happening. North America is this trading bloc. It still is a trading bloc. USMCA is still in place, and that's good for Mexico. And I have to say, it's also good for Canada. Like, the Canadians are furious at Trump for various tariffs that Trump has imposed on Canadian exports. But the big picture is the overwhelming majority of Canadian exports remain exempt from all of those Tariffs. Because the USMCA is kind of interesting.
- [33:32]
B
I mean, lurking over 2026. Is Trump going to pull out of USMCA? He has talked about it, and it is a worry for a lot of, you know, US Businesses who have all rushed to Mexico as this, like, safe haven and now are worried that, you know, the rug will be pulled out. I think it won't happen.
- [33:49]
E
This is a taco situation.
- [33:51]
B
Yeah. And the story of this year really has been taco. Like, I know people don't taco about taco anymore, but he's chickening out all the time. Like on New Year's Eve, he delayed for a year tariffs on furniture and lumber. As I was logging in to the chat today to talk to you guys, there was talk about pulling back on the pasta tariffs. Like, no one wants the pasta tariffs.
- [34:13]
A
The pasta tariffs never made any sense.
- [34:16]
B
Who would do that? Who would make pasta?
- [34:18]
A
What Was it, like, 39% tariffs on pasta? 150% tariffs on pasta?
- [34:23]
B
We're all going to have to have Ronzoni. Like, what are you doing? What? One of the stories also of 2025 of. Of last year is just that tariffs weren't as bad. And most of the reason they weren't as bad is because of Trump. You know, chicken.
- [34:36]
A
Even Swiss tariffs, like the 39% tariffs on Switzerland, they got cut, like, more than in half. They're down to, like 15%. So all of those Swiss watch companies can breathe again. Oh, phew. I know you were worried about them.
- [34:49]
B
I was very worried about the watches.
- [35:03]
A
But the other big story of the year, which we really should mention was deal making, which was $4.5 trillion of deals. A huge amount of M and A happening globally, roughly half of which was in America. So, like, America was a major part of this, but it was everywhere in the world. It was. I definitely related to the broader stock market exuberance that we saw around the world. People are like, I have a valuable currency now in my corporate stock. I'm going to go out and spend it. I need to do big strategic things. Often those big strategic things emerges. But interestingly, we are also seeing a record trillion dollars of divestments. Right. These companies are doing big strategic selling off massive subsidiaries. Again, partly because those subsidiaries can probably get decent valuations in the market or from buyers or whatever. So after many years in which the profit engine for the investment banks was very much trading, it is now, you know, the deal makers and the M and A stuff is a much, much bigger deal than it has been in a Long time.
- [36:14]
E
Isn't this in Europe? It's partially a response to Trump policy because there's a perception that, you know, antitrust is not going to prevent any M and A activity here. But it's also strategic consolidation, you know, abroad to compete better with US Companies.
- [36:29]
A
I mean, I feel like European companies are always going to want to compete better with US Companies regardless of the antitrust situation in the United States. So, like, if it makes sense to do it on a competitive level, you know, just to compete with the Americans, then it would make sense to do it regardless of what the FCCC and the DOJ were thinking.
- [36:48]
E
Yeah, but isn't there like a little bit of a cultural difference where in the US M&A is like an integral part of growth strategy and then in Europe it's more of a last resort, or am I imagining that?
- [36:58]
A
I haven't heard that. I'm not going to say it's false. I do think that for the big, you know, again, if you think about how like Netflix has put in this big bid for Warner Brothers, but that's the only real acquisition that's ever made in its history. Apple has basically never acquired anyone. Yeah, there are definitely companies in America that have grown by acquisition. Berkshire Hathaway being exhibit A back during the dot com boom, you'd have like Cisco buying a new company every three weeks. But I'm not sure that this sort of conglomerate model of like we're just going to keep on buying things and rolling them up and finding synergies feels very contemporary. US capitalism, I feel that was much more of a 70s thing really.
- [37:43]
B
So let's talk about Berkshire Hathaway because yeah, they're still really big.
- [37:48]
A
They're a trillion dollar company. Like it's not just the mega cap tech stocks. There's also now a mega cap conglomerate in Berkshire Hathaway.
- [37:55]
B
They're super conglomeratory. I don't, I just made that up. Thank you. They're old school, mega conglome. They own a bunch of weird different things. And their CEO Warren Buffett, heard of him. He finally stepped down at the age of 95. He thought perhaps it's time for me to step aside and let the young blood take over. So there's a new guy, 65 year old, Greg Abel, super young guy, 65, no problem. Greg Abel, will he be able to to steward Berkshire Hathaway through this next chapter? If deal making was like so hot last year, why is Berkshire Hathaway sitting on a mound of cash, like a record amount of cash?
- [38:36]
A
It hasn't done $380 billion, I think, at last count.
- [38:39]
B
And then I was thinking, like, okay, well, maybe they didn't want to buy anything because things are expensive. But what about they could sell stuff, they could get rid of parts.
- [38:47]
A
Well, they could, but then they'd have even more cash. And in fact, that's what they've been doing. Remember that, like roughly speaking, Berkshire Hathaway is 50% companies it owns and 50% a pile of stocks. And it has been a net seller of stocks every year for the past three years. And that's one of the reasons why it has so much cash, is precisely because they're like, this stock looks expensive, I'm selling. This stock looks expensive, I'm selling. And they keep on selling it, and then it just all goes into the pile of cash. Now, we should say that interest rates were relatively high for most of the year. Bonds returned a pretty healthy 7% domestically. So if you have cash, it's not like it's doing nothing. It's still making money. It's not making stock market returns, but it's making decent returns. But everyone kind of expects interest rates to fall over the course of 2026. That's going to not only weaken the dollar, but it's also going to weaken returns on cash. And so that's going to increase the demands on Greg Abel to like, can you please do something with this cash rather than just keep it in cash. There is definitely a vibe out there in the ether that he's kind of waiting for another 2008 style crash. Like a lot of Berkshire's most successful investments happened in 2008, when he came in with like a huge amount of liquidity and rescued banks and did all these wonderful things and bought up, you know, got warrants and everything. He made an absolute fortune by having a bunch of dry powder when things went to shit. And, you know, if there was a stock market crash tomorrow, you can be sure that Greg Abel would be out there saying, I have cash, I'll buy. But I feel like wait for a stock market crash is not like a sufficient strategy, really.
- [40:28]
E
I think there, there are two questions with regard to Abel. One is that he's typically not been the person doing all the capital allocation. He's an experienced operator who's run several of the companies that Berkshire Hathaway has bought. And that could be a big advantage because he might be able to spot opportunities that other people might not, apart from whether the companies are technically cheap or not. And then the second question is just that Buffett's whole investment shtick forever has been that he's a Benjamin Graham style value investor. So it is really the sort of buy cheap, sell high kind of stuff.
- [41:01]
A
Well, it's buy cheap and never sell is what he does.
- [41:05]
E
Yeah, to a certain extent, yes. Is able going to continue that?
- [41:10]
B
They own so many companies. I was googling while Felix was talking, no offense, Felix. They own Netjets. They own See's Candies. They own bnsf, the railroad.
- [41:21]
A
BNSF is the big one, along with Geico.
- [41:23]
B
Geico. They own Fruit of the Loom, Duracell. Like, it's crazy. This is like very 1970s style situation. Like, are there other big conglomerates like this around?
- [41:35]
A
There's no. There's nothing else compares to. It is. It is very, very much an outlier. To answer Elizabeth's question, like Greg Abel has said over and over again, yes, I will continue that style of investing. Like, no one expects him to be a change agent. He is not coming in with a mandate to change anything. He's coming in with a mandate to just, you know, what would Warren do?
- [41:55]
B
Basically, very like Tim Cook at Apple kind of thing. Like, just keep doing it.
- [42:00]
A
I mean, well, Tim Cook, it's interesting because he came in as an operator, like, you know, and the idea was that Steve Jobs was good at inventing things and bad at scaling things. And that like, Tim's job was to do like, maybe less inventing and more scaling. And he did that extremely well. In this case, everyone's just like, just do exactly what Warren would do. And to the point, to Elizabeth's point, that even includes investing in the stock market, which historically has not been his remit at Berkshire. But this guy Todd Combs, who just went to JP Morgan was, you know, he's like, no, you, I'll go to J.P. morgan. You take over. You do it. Warren has been like, if you know how to value a company for M and A purposes, you know how to value a company for stock market investing purposes, it's the same skill. He has said, like that Abel is really in charge of all that. So we will see. But also like, one of the other things is that an absolutely enormous chunk of Berkshire, it, like you mentioned, Jitteracel and Fruit of the Loom and all the rest of it is Apple. Apple is like the biggest company they own. They have this absolutely enormous chunk of Apple stock which has done incredibly well for them. And there's definitely been quarters where like their entire fucking return has just been like, Apple stock goes up. And so like, he's going to have to start getting comfortable with that kind of thing, of just being so exposed to the vagaries of the stock market. But the other thing is that Berkshire, it doesn't pay a dividend, right? Even Facebook is paying a dividend now. Everyone is paying a dividend. Berkshire is the last company in the world to not pay a dividend.
- [43:32]
E
They did it once and nobody liked it in 1967.
- [43:36]
A
So, basically, the standard thing that happens with companies that are throwing off massive amounts of cash is they use it on dividends and buybacks, right? Berkshire has done a few buybacks over the years, but it hasn't done any buybacks for the past five quarters because it thinks its stock is too expensive. And so all of that money that would normally go to dividends is just piling up in the cash, which is the other main reason why they have so much cash. And so they need. The whole point of Berkshire is that it has all of this kind of quasi dividend income that it needs to put to work. And it has all of this income from insurance policyholders who are like, spending money on insurance premiums every month or every year. And that money needs to be invested as well. And so Berkshire needs to be a good investor. It needs to be constantly investing billions and billions of dollars. And the big problem with Berkshire over the past couple of years is that it just hasn't been able to find anywhere to put that money. And, you know, to the first segment, I think the ultimate answer is going to have to be that Berkshire stops being quite as American as it is, and it's going to have to start looking internationally to make acquisitions, which is one thing that Warren Buffett was never particularly comfortable doing.
- [44:59]
B
Or it's just waiting for the big crash. And everyone should see this as a leading indicator. If Berkshire Hathaway has so much cash and its whole strategy is waiting to spend the cash in a recession or a stock market plunge, then, like, maybe that's the signal. And maybe once the crash comes, they'll invest in all the companies, AI and otherwise.
- [45:31]
A
We should have a numbers round. Emily, do you have a number?
- [45:35]
B
Yes, Felix, I have a number. It is 480. That is the number of colors in the board game Hues and Cues, which I played over vacation and is really fun. And I want to talk about it and tell you the good news about Hues and Cues, because I know we talked about board games and how they're difficult to learn. And I heard about this board game on another Slate podcast, the Culture Gab Fest, I think a few years ago from Julia Turner. And it is a delightful game. It's so fun. It's super easy. There are these 480 colors on the board and all you have to do is describe the color using a word that's not a color. You know, so you say like stop sign or something like that to describe a red or I said domino sugar to describe a certain yellow. Things like that. And it's so fun and it gets you thinking and it's not too complicated and it's not based on luck really at all. And easy to understand. And I recommend it for next year for all of you who will be at home.
- [46:34]
E
I like this game too. And it's particularly fun to play if you happen to partake in edibles.
- [46:42]
B
Good note, Great Note. So, yeah, 480 different colors. You can't play for too long. Cause you're like, I don't. It's another yellow.
- [46:48]
E
You run out of words.
- [46:49]
B
I don't know. But it's so wait, do you have.
- [46:51]
A
To say the name of the color?
- [46:53]
B
You can't say the name of the color. It's prohibited. You have to describe it.
- [46:58]
A
And then I have a bunch of cards which have colors on them and I need to like, pull out the card that's closest to the color I was thinking of.
- [47:03]
B
It's like the colors, the 480 colors are on a grid, like a map. So you pull a card and it'll have the picture of the color, but then it'll have its location on the grid, like a 18. And you look a 18. Okay. It's that special.
- [47:15]
E
Then you get little pegs that you can put where your guesses are.
- [47:19]
A
Yeah.
- [47:19]
E
And you start sort of triangulating on where the specific hue is.
- [47:23]
B
It's fun because sometimes, like you'll give your clue and you think it's like.
- [47:27]
E
A really good clue.
- [47:28]
B
And then everyone puts their peg like so far away from the color. You're like, I really fucked that up. It's kind of like writing where you like, I made my point. And then everyone takes away a completely different point from what you wrote and you're like, damn it, I fucked that up. It's kind of like a real time version of that. In a way. It's really fun.
- [47:44]
A
I'm just going to do the obvious one. I apologize to all of the listeners for this one. But My number is 1 trillion, which is a dollar number. It's a trillion dollars, which is basically the minimum amount that the United States is going to pay in interest on its debt. In 2026, for the first time ever, we're going to have over $1 trillion in interest payments on treasury bonds, which is, you know, a lot of money. And I do think this also, you know, going back to the K shaped economy thing, like the people who own treasury bonds who are receiving this trillion dollars of income every year, this is a flow, this isn't a stock. Normally when you talk about trillion dollars, like Berkshire Hathaway is worth a trillion dollars, that's a stock, that's not a flow. This is a trillion year and rising. Where's that money going? Well, a lot of it is going to, you know, China and other big foreign holders of Treasuries. But insofar as it's staying in America, it's going to, well, it's probably just going to go to like stablecoin owners. Yay.
- [48:45]
B
What even is money?
- [48:46]
A
Elizabeth, what's your number?
- [48:47]
E
My number is eight and that's hours. And that's the amount of time an entrepreneur named Wing Tan Wang, who runs a smartphone mindfulness app, spent sitting in a plastic stool, leaning against the door, doing nothing.
- [49:01]
A
Was he raw dogging the sitting on the stool?
- [49:03]
E
He was raw dogging boredom.
- [49:07]
A
Can't you just do that by sitting in a plane seat looking at the map? Isn't that what people have been doing all day long?
- [49:12]
E
Because then you're raw dogging your flight. Raw dogging is a usually vulgar term that means doing something with no aids or protections. And so really other people do this and they just call it meditation. But for the super online set, this is raw dogging boredom.
- [49:28]
B
So he just sat there?
- [49:29]
E
Yes. You have no screens, no entertainment. You just have to think and daydream and maybe meditate.
- [49:35]
B
That's tough. Can't read a book.
- [49:37]
A
The bros are very into stoics.
- [49:39]
B
There's just not a lot going on up there. So you can just sit with it.
- [49:42]
E
I think people are not used to, in the absence of screens, having to sit still for a minute and not do things.
- [49:49]
B
Could you do that for eight hours?
- [49:50]
E
Not for eight hours, but I did a meditation workshop at Esalen years ago because I was going to write about meditation and neuroplasticity. And after doing it for four days, I went from being able to like sit still for five minutes to an hour and the hour went by pretty fast. So I think it's like a acquired skill in a way.
- [50:09]
B
We'll just sit here now for an hour.
- [50:10]
A
But is it a valuable skill?
- [50:12]
B
It could be if the world ends.
- [50:14]
E
Neurologically, it apparently is because it helps you focus and stay calm.
- [50:18]
A
So, guys, yeah, that's it for Slate Money this week. You guys were doing the wrong thing. Instead of listening to three different people talking about their business and finance news of the week, what you should have done is just put on some noise canceling headphones and listen to nothing for 55 minutes because that would have been just much better for your neuroplasticity. It would have had fewer ads though, and it would have made less money for us. So we can't really encourage this. Too much capitalist, clearly. But I'm sure this what's his name, Wing guy has some kind of a startup where you can pay him money to do this somehow.
- [50:54]
E
Oh, he does? Well, he has a smartphone mindfulness app.
- [50:57]
A
There you go.
- [50:58]
B
So he's making money from people doing literally nothing.
- [51:00]
A
Yes, I approve. I approve. But yeah, thanks for tuning in. Now it's 2026. We appreciate you. Thanks to Shannon Roth and Jessamyn Molly and Micah Phillips for producing. And stay tuned if you're a Slate plus member, you're amazing. And we're going to talk about, about Emily.
- [51:21]
B
We are going to talk about Saks Fifth Avenue mulling bankruptcy and the future of luxury department stores. But also we are going to talk about food 52 because we like that website and it's also going bankrupt.
- [51:34]
A
Thanks for tuning in and we'll be back next week with more Slate money.
- [51:45]
G
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