← The Compound and Friends
The Compound and Friends
Coinbase Is the Godfather, the Return of Cathie Wood, Neil Dutta on Jackson Hole
01:49:20
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- [00:00]
A
Ladies and gentlemen, welcome to the compound and friends. Tonight's show is brought to you by Betterment Advisor Solutions. We are also brought to you by Rocket Money. A lot of people aren't aware of how much they spend each month. Do you know how many subscriptions you're currently paying for? What about how much you spend on takeout or delivery? It's probably way more than you think, but there's an app designed to help you manage your money better. Rocket Money, a personal finance app that helps find and cancel unwanted subscriptions, monitors your spending and helps lower your bills so you can grow your savings. Rocket Money's 5 million members have saved a total of $500 million in canceled subscriptions. Members save up to $740 a year when they use all of the app's premium features. So cancel those unwanted subscriptions today. Reach your financial goals faster. Go to Rocketmoney.com compound. That's Rocketmoney.com compound. All right, we have an action packed show for you. Michael and I spoke with Paul Graywall and Alicia Haas, who are the chief legal officer and chief financial officer at Coinbase. Coinbase is one of the best performing stocks of the year. It is now the 24th largest financial services company in the stock market by market cap. And just racking up a series of wins and major partnerships. Most recently a deal with PNC bank, another deal with JP Morgan. They have 80% of all of the assets, custody for the dozen or so Bitcoin ETFs. They just, it seems to be on fire. So it was a really fun chat. We got to ask them some tough questions and they answer them and I think you guys will get a lot out of it. Whether you're a crypto person or a crypto skeptic. This, this conversation is for you. Following that, it's an all new edition of what are your thoughts? We had a special guest star. Neil Dutta popped on to preview this weekend. Central bank jamboree we refer to as Jackson Hole. That's coming up starting Friday with Jay Powell's big speech. And Neil shed some light on some of the things that he's watching for. We also did a ton of stuff on AI. We took a look at Cathie woods resurgence this year. Some of the buys that Berkshire Hathaway has been making. David Tepper, Michael Burry, I don't know, talk a little bit of shit about Chamath, but I like him. But you'll hear that for yourself. There's a lot and it was a big show and I Hope you guys enjoy it. I'm gonna send you right in now. Special thanks to the sponsors and guys. Please enjoy. Welcome to the Compound and friends. All opinions expressed by Josh Brown, Michael Batnik and their castmates are solely their own opinions and do not reflect the opinion of Reditholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, welcome to Live from the Compound. Coinbase has become one of the largest financial companies in the United States over the last few years with a market cap of almost $80 billion. You guys, I don't know if you know, you are a top 20, 25 market cap in the XLF right now. Pretty big. Okay? Coinbase is now larger than nasdaq, larger than msci, and larger than the cboe. Just to give you guys an idea of the scale of this company, you are the Coinbase, the sixth best performer in the sector year to date as well, you've reported 245 billion in assets, and over 80% of the assets of the Bitcoin and ETH ETFs are held at Coinbase. Our guests today are Paul Gruel, the Chief legal Officer of Coinbase Global, where he is responsible for Coinbase's legal compliance, global intelligence and government relations group. And Alicia Haas, who is the Chief Financial Officer of Coinbase, where she has served in that role since 2018. Guys, welcome to the Compound. Thank you for being here today.
- [04:24]
B
Thanks for having us.
- [04:24]
A
How's that for an intro? Pretty good, right?
- [04:26]
B
I'm pretty sure. Damn.
- [04:27]
A
Alicia, what would you give that out of 10?
- [04:28]
C
I want to just note that we have over 400 billion of assets on our platform.
- [04:32]
A
Forever. 400 billion. Let me correct the record. All right, guys, what is it like being on the management team at the largest crypto business in the world? How does it feel? What is the day to day like these days? It's pretty exciting, I would imagine.
- [04:45]
C
We're pioneers.
- [04:46]
A
Okay.
- [04:47]
C
It feels like you're sitting on the brink of history and watching the world transform in front of your eyes. It's incredibly motivating.
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B
Yeah, it really feels like the world is changing quickly around us and we get to play some significant part in seeing what that change looks like in the future.
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A
I think the world is changing, but then you guys are also responsible for shaping that change. And I know that's very deliberate. I know that's. She's. She's pointing at you. I know that comes.
- [05:09]
C
He's opening doors for us. Opening doors. And then we have to chase knocking.
- [05:12]
B
A few down as well.
- [05:12]
A
But yes, knocking down some doors. Okay, I think we want to. Where do we want to start?
- [05:18]
D
Bitcoin. Let's start with Bitcoin. Bitcoin started, I think, as self sovereign money. It is yours. The government can't seize it like it is yours and it is yours alone. And the story has evolved a lot over the years to the future of finance. But it seems like the story today is a new asset class. Last week Eric Balchunas reported that Spot bitcoin and ether ETFs did about $40 billion in volume this week. And if you just look at the ETFs alone, that's like it's up there with VOO and the Qs, in some cases bigger. Like to me right now, the story is about crypto as an asset class. Is that how you guys see it?
- [05:59]
C
That's the first chapter. We see crypto as an asset class being the foundation. But then we think of crypto moving to a financial asset in which you can transact, you can use it for lending, you can kind of broaden the financial transactions versus just a store of value in a savings vehicle. And then we think of crypto as an app platform and that's. It gets really exciting about, like thinking about base as a layer two where we're seeing new social, new messaging things built on top of crypto that's embedding data and dollars all on the same platform. So we think about it as we've moved from this offline world to online world, and now we're moving on chain. And that is then the evolution of crypto. An asset, a financial system, an app platform.
- [06:37]
A
Yeah.
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B
And I think that evolution from off chain, on chain into an app platform is what creates some of the most interesting but frankly challenging regulatory issues that we've confronted. But what's also, I think, unique about crypto is that all of this has taken place in the course of roughly a decade. I don't think we've ever seen that in global financial history.
- [06:56]
A
How much of what you guys are building is looking at the analog or the traditional world and saying let's do the digital equivalent versus truly pioneering things that no one is doing in any way, shape or form. Like if you could maybe talk a little bit about why you're able to move so rapidly because there is this groundwork laid by traditional finance, but then like going off into areas where people are like, wait, what are you doing? Because it seems like you're doing both at the same time.
- [07:26]
B
I would say that what we are doing certainly builds upon, I think, a lot of traditional financial infrastructure. And you know, I think in the first instance Bitcoin and later digital assets that followed were about offering alternatives to that system that frankly weren't serving a lot of people. The reality is that even in the United States, let alone all over the world today, access to the financial system is limited for way too many people. And so I think correctly, the industry as a whole, and certainly Coinbase in particular, has focused on that as an initial priority. But as Alicia alluded to, the goal here is much bigger than that. The goal is to build a true platform for all sorts of decentralized applications that can go far beyond just asset speculation, appreciation trading and the like to really fundamentally changing how people interact with their data online and ownership of their identity online in ways we think are powerful.
- [08:19]
A
One of the things that the crypto skeptics have been saying all this time is if I'm not Venezuelan, there really is no day to day use case for me other than speculation or accumulating wealth. I would argue it's been an incredible tool for accumulating wealth. Just looking at the prices, like it's been really hard to at least in the last couple of years, lose money in cryptos. Okay, so we know that works. How do you answer those skeptics? What do you tell those people about the daily use case of crypto who just don't see one or maybe it exists in the background, but they don't know that they're interacting with crypto or like what's, what's your answer these days to those people?
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C
Crypto is more than just bitcoin today. And I think that you have to look at what are the pain points of each individual customer and how can crypto solve their problems? Yes, Bitcoin and Ethereum, many of these assets have been tremendous investment returns. But you also now have stablecoins with product market fit that are enabling faster, cheaper transactions. You have the emergence of decentralized social and what we're seeing with decentralized social and we have a product that is in its beta, we are just onboarding to it. It's this magic moment of if you're a creator and you are posting content, that content now is a coin. You own that content, you can monetize that content that immediately flows into your wallet. From that same wallet you can send a payment, you can buy a crypto asset. It's combining Social trading, payments, identity messaging, all within super apps. And so just reducing friction, lowering costs, giving it more boundaryless transactions was what we see, the real value out of crypto in people's lives.
- [10:04]
A
Can we double click on that? In the creator economy, you still have gatekeepers. They're different than the prior gatekeepers, but his Patreon, his onlyfans, his Instagram, his TikTok. What you're describing sounds like a direct payment to a creator who can then put their content anywhere. But surely you're gonna want to get paid for that too. So do you just replace the existing gatekeepers, or are you suggesting an entirely different sort of experience?
- [10:31]
B
Well, I think payments are certainly an important part of the opportunity that crypto offers to content creators, but payments are just the beginning. Fundamentally, what we're talking about is ownership, right? In the traditional web2world, who owned the content that so many creators added to those platforms that drove a lot of the value? It wasn't the content creators, it was the platforms themselves. With decentralized assets and with cryptocurrency, you offer the opportunity for the content creators themselves to own their identity and own the content in ways, allow them to port that content to whatever platforms, allow them to reach their intended audiences and share value with those audiences, ways that they deem most appropriate and most valuable. That's the fundamental opportunity that we see there.
- [11:17]
A
So that's the transition to an app platform, you know, financial app for.
- [11:21]
C
That's right.
- [11:22]
A
Okay, so this is in distinction with, let's say, your former employer, Facebook, YouTube. So basically, you'll have a scenario where people can take full ownership of their work, not just contribute it to someone else's app or someone else's website, but they do have to put it somewhere. So it sounds like it's gonna be a situation where it's a little bit of both and not fully. I have my own video platform now, right? Am I describing that?
- [11:52]
B
I think that's right. But I think what's important to understand is that in this scenario, in contrast to the old world of Web2, the content creator makes that choice. The content creator decides where that content is hosted. That content creator decides how fans and audiences will interact with that content and on what terms. And that ownership, that independence, that autonomy, we think is what fundamentally different from the old gatekeeper world model that you were describing?
- [12:21]
D
I think part of the problem with crypto branding, for the average person who doesn't see the technology, doesn't understand the dollars that are extracted from the financial companies, from the system, all they know about are the scams. And they remember FTX, the collapse in 2022. How surprised are you that the price of bitcoin fell from 70,000 down to what, bottom of 15, something like that. And like two years later or thereabouts, wherever it was, it was at all time highs and it 8x'd from those levels. How damaging was the collapse to trust in crypto? And how surprised to you that it's only three years later and we're so back, all the way back.
- [13:06]
B
Were you surprised, Alicia?
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C
I wasn't surprised, no. I think.
- [13:10]
A
Which part weren't you surprised by? The fall or the recovery or, or both?
- [13:14]
C
Both. I wasn't surprised for either.
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A
Okay.
- [13:16]
C
Because when you saw the collapse, there was a lot of leverage in the system. So whenever you have a highly leveraged environment and you have an event like FTX failure, you're gonna watch a downward price trajectory. However, at the same time we were watching new corporates onboard into crypto. We were seeing new participants go like this is a buying opportunity. We wanted an entry into this asset class. There was a huge chilling effect on the industry though, because everyone re underwrote every platform. They said, could Coinbase be the next ftx? Coinbase? What are your controls? Banks were definitely fearful of then interacting with these crypto companies. What did they not know? So we definitely went through a reeducation process. We had to really rebuild trust in the underlying controls and infrastructure. But once we did that, with the tailwinds that we now see, with the regulatory clarity, with the increased institutional and government interest in this asset class, I'm not at all surprised to see the essential crash as well.
- [14:10]
A
How much of the, of the recovery that Michael's referring to? Can you point to the fact that Trump won and Trump was highly supported by people who are crypto positive? Cuz there's another world in which Trump doesn't win. And your day is probably being spent very differently. And your day is probably being spent very so like would you say that's 50% of the story of Bitcoin running to 125,000 or 30%? Like what would you handicap that election being?
- [14:41]
B
Well, I don't think there's any question we now have the most pro crypto administration in history. And I don't have to imagine what that world could look like because frankly, the previous four years offered us a pretty tangible example of what a hostile attitude towards not just an American industry, but frankly an American innovation could and would look like. There's no question though that the political support for crypto has now gone far beyond just the Trump administration or a small set of early adopters on one side of the political aisle. We've seen now, because we've seen votes taken in Congress and legislation passed that Democrats and Republicans by and large understand that crypto is going to be part of the financial system and financial future of this country. And so we need sensible rules, sensible standards to govern that, to protect against collapses like ftx, and to make sure that people are kept safe even as they invest in this new opportunity.
- [15:33]
A
Are you surprised the Democrats weren't strategic and smarter about recognizing that there was this huge demographic and it's young and it's energized and it wants to affect change? Are you surprised that they didn't grab that opportunity to be the party of crypto prior to Trump coming along?
- [15:52]
B
Well, some Democrats absolutely grabbed that opportunity. We've seen it actually here in New York with leaders like Congressman Richie Torres, Senator Christian Gillibrand, who have staked out a very early claim to sensible ideas and sensible standards for crypto that are reflected in the legislation that was passed. What I think was disappointing and what you're alluding to was the fact that the previous administration, the Biden administration, as well as the Harris campaign, just couldn't get their minds around what opportunity crypto offered to the very constituencies and communities that they purported to want to champion. We met over and over again with the previous administration and with that campaign to try to lay out for them the case for crypto for the very people that they sought to champion. And yet over and over again, we just saw either a disservice at the very least, or an outright hostility that was extremely counterproductive and ultimately, I think, cost them in that election.
- [16:43]
A
I think that's a good segue. I want to ask you about something that you guys did that almost no financial institution would have the courage to do. Some would say the chutzpah do. But you guys sued the sec and it sounds like that was coming. I mean, obviously it's coming from Brian Armstrong, the top down. It took a lot of guts, but you actually won. And it took a really long time. Talk a little bit about why that was so important for you guys to once and for all say current securities regulation just does not apply or is not written so as to make it conducive for our industry. And we need something different and you need to listen to us. What was that decision making process like, how many sleepless nights and what did it feel like when things ultimately fell your way.
- [17:34]
B
Well, I give our CEO, Brian Armstrong and our board a lot of credit because the decision to take the fight to the SEC head on was not an easy one and certainly ran against all conventional wisdom at the time and maybe even since then. I will certainly say that when I attended law school nearly three decades ago, maybe the second or third lesson, if not the first lesson that we learned that their very first day of class was don't sue your primary regulator. And yet there we were in 2021, already seeing that that day would come for us. And then ultimately we were confronted with and forced to pull the trigger that in 2023. Look, I think if you just take a half a step back, it can seem like ancient history now. But not that long ago, we were in an environment where the previous administration made it clear they did not want to see crypto flourish in this country. In fact, in many quarters of the White House in particular, and certain leaders on Capitol H, Senator Elizabeth Warren, there was a mindset of let's try to drive this thing underground at the very least, or out of the country entirely through lawsuits. We won't pass rules, we won't tell people what the standards are. All that we're going to do is take them to court and either grind them into submission or ultimately make it so impossible for anyone in crypto to operate in the United States that people would leave voluntarily. And so in that environment and against that challenge, in some ways, the choice was actually relatively easy because what other choice did we have? Nevertheless, I do think Brian and the board deserve a ton of credit because the fight was not only for coinbase's survival, but frankly, the thriving of the industry as a whole, long term. And it may be the thing I'm most proud of that we've done as a company.
- [19:10]
A
Given the size of Coinbase, can you truly say that this is a decentralized asset class in the way that the original satoshi paper laid out? Like, can we all kind of admit that maybe there's a limit to how decentralized anything of this size can really be? And that ultimately, throughout history, crypto or otherwise, power tends to consolidate and institutions tend to get large when there's money in motion. Like, we can kind of all, I think, say, no, not if you're in our.
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C
Not if you're in our executive meetings.
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A
Okay, that's still an important part of the. It is what you're saying.
- [19:50]
C
Incredibly important part.
- [19:51]
A
Okay, talk about that.
- [19:53]
C
I think we might be the only company that is actively working to decentralize everything that we do to ensure that each one of our customers has the ability to withdraw their crypto to a self custodied wallet, to take their money anywhere around the world, pass through borders. That we fight through legal and policy efforts, that we build products to enable this, that we are bringing in decentralized applications into our main platform to give our customers direct access to moving into on chain apps. We are not putting up barriers. No, we are doing quite the opposite of trying to really encourage this movement into an on chain economy.
- [20:28]
B
I think we have a record to prove that. I mean it really goes back to for example the very first significant win in our fight with the SEC was establishing legal clarity for non custodial wallets. It's falling outside the scope of the federal securities laws. That was huge. That was huge. If you look at where we're really drawing hard lines in our advocacy efforts for new legislation, defi and protecting defi is critical. You could argue that each of those efforts and a dozen others I could list actually run counter to our narrow short term self interest as a company. But our vision is for something much bigger than just as you would suggest by your question, a replication or duplication of the way we've run the traditional financial system for decades in this country.
- [21:09]
D
Tailwinds for crypto Right now there's a lot, I think maybe number one is a lot of people still don't own it. In fact like nobody owns it practically speaking and the limited supply and the race to own it. Then there's the political landscape. There is the ETF which was enormous. That was the spark that lit the latest bull run. One of those tailwinds though can potentially turn into a headwind. I don't know when or how or why, but the number of Treasury Bitcoin, treasury companies that are using you guys, I would assume in many cases to secure their bitcoin and to store it. So Saylor tweeted this morning, Strategy has acquired 430 Bitcoin. They now hold or HODL, excuse me, 629,000 Bitcoin acquired for not worth. Acquired for $46 billion. And this is from the FT. In the year to August 5th, some 154 public companies have either raised or committed to raise a combined total of $98 billion to buy crypto. I don't know what stops this, but the more and more companies are getting in on the action simultaneously. Has to excite you. This company Ethzilla just recently converted this is today. It's not that noteworthy other than it was today converted from a biotech company into an eth treasury company. So on the one hand a rational person sees this and says like all right, time out, this is getting crazy, I want to get off the train. But the other person might say, but this is sort of one of the points is that there is a limited number of supply and there is an all out race to accumulate them which should be very supportive of the price. But I guess does this cut both ways? Like what happens if there's a geopolitical event? And at the end of the day these are risk assets and they can go down and interest can wane. So how should investors think about the simultaneous tailwind that might turn south in a hurry?
- [23:10]
C
I think you have to have a long term hold on these assets. These are not assets that should be viewed as linear risk free assets where you're looking for great annual or quarterly returns. We've seen crypto go through cycles, Even ignoring the 2022 events that led to a significant decline prior in 2017 and 2015 you saw definite waves. If you zoom out, Bitcoin, Ethereum have had long returns over time. And so you have to take that long term mindset. These are store of value assets. These are not daily speculative assets for the majority of investors. What I think about these treasury companies though is very few institutions had access to buy spot crypto commodities. Many funds have a prohibition. They couldn't buy ETFs, they couldn't buy spot bitcoin, they couldn't buy spot Ethereum. And so they're using these as equity wrappers because they can hold equities. And so it's introducing new capital into the crypto ecosystem. What I think is an untested theory is is this a moment in time and will the world changed where then more investors can go into spot commodities once you have market structure in place? Well, funds change what their investable asset classes are over time. But these wrappers are just giving more and more capital access to crypto since really what they're doing.
- [24:30]
A
I think everyone would like to be long term and zoom out and historically if they had done that, it would have served them well. But there's a lot of leverage in the system as a result of the Bitcoin and the eth treasuries and that doesn't allow you to zoom out. Always when you get a margin call, you can be as long term oriented mentally as you want. Financially, you have to come up with the money. I think that's the risk that Michael's alluding To do you think that there's as much or more leverage currently given the size of these crypto treasuries as there was back in 2022, or is it a different type of leverage?
- [25:04]
C
That maybe it's a different type of leverage, but it's hard to tell because you don't have transparency into the global holdings and you have a lot of crypto held, not outside the US in companies that don't have any financial reporting obligations, which makes it very difficult to look at total leverage in the system today.
- [25:19]
D
If you think about. So Bitcoin has been the best performing asset class of the last 10 years. Right. Since inception, it's crushed everything. There's nothing that's even remotely close. As you think about the future opportunity set. And as Bitcoin matures, you would expect all else equal, that volatility will come down a little bit and that returns cannot possibly continue to compound that 50, 60% because ultimately it will swallow the globe. Just in terms of asset size, we were talking recently about this. How do you think about the size of Bitcoin? Because it's not a market cap like equity is, which means that maybe the size of it can be way larger than we think because it's not a true market cap.
- [25:58]
C
Correct.
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D
So talk about how you think about supply price.
- [26:02]
A
If it's, if it's not a stock, and we know it's not, then maybe market cap is just a term we're borrowing from tradfi that's not applicable. So maybe we need to think about it like the supply of US Dollars.
- [26:13]
B
Well, I think it is a bit of an outdated or outmoded term.
- [26:18]
A
Market cap. Yeah.
- [26:19]
B
Because if you think about it right even now under US law, after a lot of struggle and a lot of heartache, we have established that Bitcoin is not a security, it is not an equity. It is properly considered as a commodity. And I think treating it and considering it as a commodity class is probably a better way to think about it. The other point I'll just make, in terms of its potential for growth, I think you're exactly right. We don't need to see compound annual growth in terms of historical norms for Bitcoin to continue to grow and continue to play a much larger role in our system, I think that's in large part because now we not only have the ability to buy and acquire and hold Bitcoin in custodial wallets and non custodial wallets by individuals, but we have a lot of other ways to get at the asset Class. There are the digital asset treasuries for sure. Strategy is certainly one way to go about it. But the ETFs you mentioned earlier I think were the catalyst for so much retail and institutional adoption. I actually think in terms of the law, the single most significant event in the history of crypto was the decision of the D.C. circuit forcing the SEC to grant those ETF applications had been pending for years. That was a watershed moment and that has brought in a whole new class of investor that has access to this market that never was there before.
- [27:39]
A
I think it smooths out the flows into, into the asset class because it's not fully reliant on people who decide every day I want to place a crypto trade. Now you've got money coming from the asset management world, pensions, insurance companies, wealth management, where it's scheduled. Each month I buy X dollars of one of these Bitcoin ETFs or every time I rebalance my portfolio or whatever the case may be. I think it kind of that decision to your point, for me that was a moment where it's like, okay, this is now permanent. You can't get rid of this now.
- [28:15]
B
It's the game is now on. The game is now on.
- [28:18]
A
You guys mentioned stablecoins. Stablecoins had a big moment this summer. I have to be honest with you. I read the S1 and then I listened to the last earnings conference call. I still don't understand why coinbase allows Circle to exist. Why isn't it the Coinbase stablecoin? Why are you guys taking marketing or distribution fees from a company that you could very easily just replicate overnight? What's the rationale behind doing that? And I know that's a client of.
- [28:46]
C
Yours, but like it's an important partner of ours.
- [28:49]
A
It is. I understand all that and I know why it is, but why don't you guys just do your own?
- [28:54]
C
We really firmly believe that you need to have network effect in stablecoins and we want many distribution partners. We want to have an interoperable stablecoin. We want to build stablecoins as a utility layer of the overall crypto ecosystem. And we thought starting in 2018 when we partner with Circle to create USDC, that doing this as a multi party ecosystem was the best way to do that. We have an important role in this through distribution. We were a key catalyst in getting USDC adopted by Defi, really embedding it into like the trading community because we have such a large exchange and distribution capability. But we are both incentivized to Add even more partners, we want to add more people, we want to add more on ramps and off ramps, which is why we partnered, for example, with Shopify to embed USDC to Shopify's merchants. And why you see Circle going out and bringing their own partnerships to the table as well. This is going to be a utility that we bring to this open source.
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A
Most of the money in Circle, to be clear though, is custody to Coinbase or do I have that wrong?
- [29:56]
C
We hold more assets on platform than they do at this time. So at the end of the second quarter, we had over 14 billion on our own platform, but that's out of the 60 billion in the overall ecosystem. So a large percent are just held in self custody, wallets held in defi protocols distributed throughout the ecosystem.
- [30:10]
B
I think that distribution in 2025 and presumably, you know, beyond, validates the original vision back in 2018 that more participation, broader distribution and ecosystem would lead to greater adoption.
- [30:24]
A
How important are ETF custody and trading solutions? We referenced this statistic before that. About 80% of the money that's being custody for the ETFs is at Coinbase. I was dead wrong about this. Prior to Coinbase coming public, I said very publicly and incorrectly, I viewed the ETFs as being competitors to people having Coinbase accounts. Why would you even bother opening an account and trading crypto at Coinbase if you can just do it at Fidelity and Schwab? Horrible take. Turn it off.
- [30:59]
B
But it takes a big man to admit where he got him.
- [31:01]
A
Very big man and horrible take. But I'm on the record and everyone knows I said it. Okay, so that was wrong. What ended up happening was it was such a hugely beneficial thing to the overall crypto ecosystem that it was a net positive. But also you guys became a substantial player in the ETF product. So talk to me about why that's so important to you and what you see happening there these days.
- [31:26]
C
I think it just further cements that we are the partner of choice. We have built a platform that is institutional grade, that you've had these large, reputable asset managers kick the tires of our platform and compare us against many other tradfi players, other crypto players, and overwhelmingly chose us. But what we are trying to do, as I mentioned in the opening, like we are trying to become an infrastructure supplier to the overall crypto economy. And so that is our deep liquidity on our exchange. That is our custody platform where we can custody all types of these bearer instruments, different protocols with different security considerations. We are unique in this We've done this for over a decade to safely store these assets. And, and this is where it enables other banks, other fintechs to build on top of us. And so the custody is the root. We announced in the second quarter for example, that PNC bank is a new partner of ours where they have chose us to embed our products underneath their platform so they can offer crypto trading and storage to their customers. So it's just further support for us being the platform of choice of large institutions to turn to when they want.
- [32:29]
A
To, or the picks and shovels or the arms dealer. In that analogy, you don't care if BlackRock garners more Bitcoin assets for their fund this month versus another player or another player. It's just about you can work with everyone and they can all use your systems.
- [32:47]
B
We want to see the partners succeed and indeed thrive. And by the way, you were hardly the only one to raise those questions or concerns A short while ago, I will tell you. I mentioned the D.C. circuit's seminal decision ordering the SEC to grant those ETF applications. We actually filed in that particular case that Grayscale brought to achieve that result. An amicus briefing. I can't tell you the number of people who reached out to me afterwards and said why are you guys supporting.
- [33:14]
A
A firm looking bunch of people trading crypto on your platform if they can just do it in an etf? But you guys had the forethought to understand the bigger picture. Robinhood would say that they are as large a player in crypto as you guys are. But then they also transcend crypto with a brokerage platform and custody for traditional assets. How long before you guys have to acquire Interactive Brokers or public or Etoro or a trad fi brokerage firm so that you also can offer stocks? Because in the eyes of the consumer, the younger brokerage account holder, they don't see the difference. They would love to be able to do everything and all in one place. So you have meetings about that, you're thinking about starting your own. Where does that have to get to?
- [34:06]
C
Absolutely. And as we shared on our second quarter earnings call, it is our vision to be the everything exchange. Our vision is to bring every one of those assets on chain.
- [34:14]
B
This is a critical difference, which is the critical difference.
- [34:16]
A
So tell me about that.
- [34:18]
C
So just like we've been talking about decentralized finance, the ability to self custody, to own your own assets, we want to bring all of those assets. Securities, prediction markets, commodities, real estate, restaurant shares, you name it. Assets, broad categories of assets on chain as tradable, ownable individual assets. We started with being the easiest place to buy spot commodities. Bitcoin, Ethereum. Recently we've been diversifying into derivatives and so we launched futures. We now have 247 futures in the US we just closed our acquisition of Deribit which is going to bring options to the platform. So now we have spot derivatives. The next frontier is equities. And the next frontier is being able to offer tokenized equities. We haven't given the exact roadmap of how we will do that, but we believe that we also need to bring that to our.
- [35:09]
A
You're going to get a brand new set of competitors. You're going to get Vanguard, Schwab, Fidelity in addition to all of your crypto.
- [35:16]
C
We are, we are. It'll be a deep frenemy and coopetition space.
- [35:20]
D
Why are spreads still so wide with spot digital assets? Like why am I paying Robin 85 basis points? And whatever you guys are taking, it's not nothing. Why is that still the case?
- [35:30]
C
It's not commoditized yet, quite candidly so. I think that what you see is when things become commoditized, spreads will compress. When things are broadly available, when you can then buy every asset everywhere, you can stake your Ethereum and Solana on every platform, you'll start to see spread compressions. We offer a more differentiated experience today where products and the depth of our products have enabled us to have premium pricing. We run price experiments all the time, but we absolutely believe when commoditization will come spread compression.
- [35:57]
D
Why do you think more people don't use. More traders don't use Coinbase Pro. Are they not familiar that that's an option?
- [36:03]
C
Everyone's familiar is an option. It's side by side in the app. I think that people enjoy the most simplistic experience.
- [36:09]
D
You can miss it.
- [36:11]
A
Fair.
- [36:12]
B
I'll take the feedback.
- [36:13]
C
We also have Coinbase one. So we have tiered pricing where you can now even pay $5 a month and get fee free trading. So we offer a number of ways.
- [36:21]
D
I didn't know that I would have. I would have signed up for that.
- [36:22]
C
I will say brand new. Brand new Coinbase one day.
- [36:25]
A
The day is young.
- [36:26]
D
Now we're talking. Okay.
- [36:29]
A
You guys have been striking tons of deals with some really big players. I know. Michael wanted to make sure we asked you about the JP Morgan deal, which is fresh, I think last week or the week before.
- [36:40]
C
Two weeks. Two weeks.
- [36:42]
D
The biggest bank in the country and.
- [36:43]
A
The largest bank in the country. One of the largest financial institutions in the.
- [36:47]
D
And pretty vocal about, like, Jamie Dimon was not shy about his feelings about.
- [36:50]
B
They have not been shy in the past, that's for sure.
- [36:52]
D
So this has got to be a huge win for you guys.
- [36:53]
A
But their customers want to be part of those customers. So they're doing the right thing.
- [36:57]
C
Yes, exactly. They are. And they've been an important partner of ours. They've provided bank accounts to us for years, and we're really pleased to continue to broaden the partnership. But I just want to underscore partner of choice. Yes. JP Morgan chose to partner with us. We're now enabling more and more on ramps to crypto by enabling their credit card customers to redeem points into our platform.
- [37:16]
D
I mean, who else were they going to choose? I mean, maybe that's credit to you.
- [37:19]
C
Guys, but this is credit to ours. We've built this space. We are the infrastructure provider of this space.
- [37:23]
B
So we've done it in a completely compliant way from day one. I think that has also been a critical element of our appeal to our partners.
- [37:31]
D
Another coming unlock is banks. And they spoke about this. The head of the FHA said this is coming. The ability for banks to look at your digital assets as assets that count towards your net worth, as opposed to, we see you have $100,000 in Bitcoin, sell it, convert to cash. We'd be happy to lend a loan against it.
- [37:48]
C
That's right. I think we'll unlock collateral to pledge against various loans you're taking. This is all coming, and I think maybe we should go into market structure, because I think market structure rules are critically important to us. Looking at all of these assets as collateral for enabling trading and cross margin as well.
- [38:02]
A
So tell our audience what you mean by market structure and why is that relevant to this?
- [38:07]
B
Yeah, by market structure, we're referring to maybe the most important piece of the legislative puzzle that the industry as a whole and coinbase in particular, have been working on Capitol Hill now for well over 18 months. Just recently you saw Congress pass and the President sign a massive new bill on stablecoins Act, Genius Act. And we're thrilled to have it and we're grateful to the political leadership for that Will. But the market structure legislation that we believe is critical to completing the task at hand remains pending in the Congress and awaits a final vote in the Senate to match the vote in the House so that we can see this thing signed by the President in short order. What a market structure bill will do, among other things, is confirm for the first time, a framework for deciding what assets may fall to the federal securities laws and which assets are properly treated as commodities. What is the appropriate role for the SEC in that world versus the Commodity Futures Trading Commission? What requirements need to be in place for disclosures so that people acquiring digital asset commodities can understand what it is they're buying and what it is they're getting? So these basic standards need to be in place in order to provide full confidence and full clarity, hence the name of the legislation in the House on these issues. But the good news is, we think this is coming. The President made it very clear he expects to see a bill passed by the Congress this year that he can sign, and leadership in the Senate is working diligently.
- [39:33]
A
Is there division, though, in the community amongst the diehard crypto native people who would say, why do we want this? Leave us outside of the financial system. We're decentralized. We don't need rules, we don't need frameworks. What we need is to be left the hell alone. Yeah, that kind of crypto libertarian mentality still does exist. Or is it sort of dying down as even the hardcore crypto people realize? It's a fairy tale to exist in your own bubble and you have to learn how to play.
- [40:03]
B
Yeah, there. There are still purists out there, to be sure. But I to them, what I would say is, let's not forget recent history. We saw what can happen in the absence of legislation when an administration comes into power.
- [40:17]
A
Lawfare.
- [40:18]
B
Yeah, they're going to rely upon regulation by enforcement in the future, just as they have in the past, because the current law doesn't provide for guardrails around that. What this market structure bill, this Clarity act passed in the House would do is finally enshrine in US Law standards that limit the ability of a new administration or new regulators to take a very different view. And I would say, even in a world where we have very positive, even visionary leadership from the regulators like we do right now, just look, for example, at the recent speech that SEC Chair Paul Atkins gave laying out a vision for crypto that I think could not have been more expansive and welcoming, almost.
- [40:57]
A
As if the industry itself wrote the speech and passed.
- [40:59]
B
Well, I can't say any of us picked up the pen, but I certainly didn't have any red lines for him, if that's for me.
- [41:05]
A
Ask you a personal question? Sure. Okay. You're a veteran of Facebook, where you worked with Mark and Cheryl in the endless battles with Congress, various agencies, foreign governments, foreign regulators. You're a wartime Consigliere, what do you do now? The industry is at peace. Some would say the industry is more influential over the government than any other industry in the country. I'm not suggesting that that's a negative thing. It seems like it's constructive. I don't see who the victims are, quite frankly. The more your industry institutionalizes, the better for the retail community. So I'm actually in favor of all of it. So I don't want to sound overly cynical. What does someone like you do now that you're not at war and you're not forced to sue your own regulator, and you're not necessarily battling with 50 different states individually? What's the.
- [41:55]
B
Well, I appreciate the reference. One of my favorite films of all time, the Godfather.
- [42:00]
A
Godfather. You were definitely a wartime consignee. I appreciate that you had Facebook in 2016. I think we could all establish that.
- [42:07]
B
Well, look, the reality is that even though we are in a much more favorable climate at the federal level today than we were just a short time ago, there are real challenges that remain. I would start with, for example, the states. Not all of the states have fallen in line. Several have chosen to continue this senseless.
- [42:24]
A
And which are the most anti crypto right now?
- [42:29]
B
Well, I would say that the handful of states that have chosen to pursue litigation even after the SEC withdrew its entire campaign would be at the top of my list right now. For example, Coinbase faces a completely meritless lawsuit by the state of Oregon for some reason that doesn't seem to understand that it's 2025, it's not 2023, but we'll deal with that in short order. And we also have, I think, important issues to resolve outside the United States. We tend to focus only on Washington, for obvious reasons here in the US but there are other jurisdictions, I think, that are further behind where the current administration is on crypto policy. And we need to make sure that they catch up.
- [43:06]
A
So your work is not quite done?
- [43:08]
B
Not quite.
- [43:09]
A
Okay.
- [43:09]
D
And one for Alicia. Alicia, last one for you, at least for me. I've listened to you over the years on the quarterly calls. How has that changed from your perspective over the years? What are investors giving you in terms of roadmap, benefit of the doubt, higher multiples, all that sort of stuff versus, say, a couple of years ago?
- [43:30]
C
Well, a couple years ago, they were worried that we wouldn't exist. After ftx, it was some pretty dark days. Now people are very focused on the future. Everyone's excited about the product roadmap. They are very excited about what we're building next and less focused on what are your expenses quarter to quarter. So I think that we now need to execute, we need to deliver on our roadmap that we have set forth a very exciting vision with everything exchange and continue to show the discipline of managing our expenses and continue to show top line growth.
- [43:59]
B
It's a great thing that I get fewer and fewer questions on the quarterly earnings calls than I did just a short while ago.
- [44:04]
A
Yes, yes, I would agree. The less you're talking, the more positive the environment.
- [44:09]
B
We should all look to hear much more from Alicia than me, that's for sure.
- [44:13]
A
Well, guys, I want to tell you, in the relatively short time this has been a publicly traded company, you guys have done an unbelievable job for investors. Stock has done very well. I know most people would say you've done a great job for the customers of the company as well. And we really appreciate you stopping in and talking with us and sharing your story with our listeners and viewers. Thank you so much.
- [44:34]
C
Thank you for having us.
- [44:35]
A
All right, guys, make sure to like and subscribe. Go ahead. And where should people check out more information about the latest doings at Coinbase? Where can we send them?
- [44:44]
B
Well, there's always coinbase.com but I am on X and posting frequently at IAM, Paul Greywall. I'd also encourage everybody to check out our presence on Discord and Telegram and elsewhere where we have a pretty active presence as a company.
- [45:00]
A
I like that they're talking. Coinbase talks. Okay. A lot of, a lot of financial institutions don't really talk and you guys talk. So.
- [45:08]
D
All right.
- [45:08]
A
Congrats on all your success. We appreciate it and we hope to talk to you in the future.
- [45:12]
C
Thank you.
- [45:12]
A
Thank you. Oh, my God, you guys, look alive. I am. No, I'm furiously closing out tabs. I had way too much open which would affect my resolution and I want people to get the full effect. Hey, it's five o' clock on a Tuesday. We are here with an all new edition of what are your thoughts for those of you checking out the show for the first time, his name is Michael Batnik. My name is Josh Brown. And each week we gather together here with a few thousand of our loyal live pounders and talk about all the biggest developments in the markets, in the economy. And we have an absolute blast doing it. So thank you.
- [46:09]
D
Can I say something? Your. His name is. My name is. That's a very 80s movie theme. It's like Weird Science. You know what I mean? No, I'm just. No, I love it. It's retro.
- [46:20]
A
I thought it came off well.
- [46:21]
D
Yeah, I love it.
- [46:22]
A
Let's say hi to some of the viewers and then we'll get to our sponsor. Teowa is here. Just Dave. Ronald Aramenta. Matt Stavic says Batnik button down. That's right. Very rare. Oh, almost.
- [46:35]
D
I'm wearing a button down. You're right. You're right.
- [46:37]
A
Akbar Muhammad likes the the big the big pony polo shirt. Thank you. Vincent Aguilar is here. Rose is here. Hello. Lawrence Raponi. Two brothers. Say what's up. What's up? All right. All the, all the pounders are here tonight and we love you guys for coming out for the live on YouTube. And as I like to say, the chat is already lit. Tonight's show is brought to you by Betterment Advisor Services Solutions. Betterment Advisor Solutions. If you happen to be thinking, there's got to be a better way to grow my Ria, you're not alone.
- [47:15]
D
With Betterment Advisor Solutions, we do the heavy lifting so you could focus on what matters most, your clients. From improved service that makes asset transitions.
- [47:23]
A
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- [47:33]
D
Now, if you're thinking, wow, they take the paper out of paperwork, then you'd be right. Grow your RIA your way at Betterment Advisor Solutions.
- [47:40]
A
Learn more@betterment.com advisors. Investing involves risk. Performance not guaranteed. Okay. We have an action packed show. There's all kinds of, oh, who could it be? Look who's here, you guys. We are in the presence of, of absolute greatness. Neil Dutta has run the doorbell. Yeah, literally.
- [48:04]
E
Hi, guys.
- [48:05]
A
Neil, thank you so much for stopping by and perfect timing because starting on Friday is another Jackson Hole August weekend. And this is the last one, we think, for Jay Powell. What do you think?
- [48:21]
E
I think that's about the safest bet you can make. It's going to be his last.
- [48:25]
D
Neil, are you a Jackson, Are you a Jackson Hole truther? And I don't even know what that means, but are you.
- [48:32]
E
Well, I think that. What, what is. So what does that mean?
- [48:36]
A
Like, does he believe that it exists?
- [48:38]
E
I mean, I certainly believe that it exists. I think if, if I had to say what it would mean. It's like that you're going to get some big signal out of it. Right? I mean, because this dates back to like the, the Bernanke era, right, when he Basically green lit QE2, if you remember, at Jackson Hole and really ever since then, everyone's always kind of looked at Jackson Hole for some kind of signal. I mean, if you remember last year, you know, Powell basically green lit a September rate cut. We didn't really know whether it was going to be 25 or 50, but he greenlit a cut. He said the time to adjust policy was now. So, you know, it kind of comes and it goes. I mean, there's, there are times when there's not really much news that comes out of Jackson Hole, and there's times when there's lots of news that comes out of Jackson Hole. So, you know, we'll see which, which one this will be.
- [49:25]
A
Last year the speech was 15 minutes long. Barron's has a piece he's calling, they're calling this year Powell's last stand. Like this is his last chance to cement his legacy is the way that they're taking it. Like, basically he might end up using this as, as like a defense of the independence of the Fed. Might be like a whole thing about that. Who really knows? But last year when, when he greenlit the, the rate cut, I don't think people thought, okay, we'll do one and done. But that's how it ended up being because the economic data just, I guess, in his eyes didn't justify more. So even if he does signal that they're ready to cut rates in September, nobody should take that to mean anything beyond September.
- [50:16]
E
Well, I mean, last year they went, they greenlit the September cut, then they ended up doing 100 basis points worth of cuts for the year. Right. They went 50 in September and then they went 25 in each of the remaining two meetings. Yeah, you know, it's interesting, like, listen, looking at that Barron's article and like, what his, what is his legacy? Because obviously they're framing it in a way of like, okay, he's like this like, last line of defense against Trump and the Fed's independence, but, and like inflation fighting and so forth and leaning against tariffs. But let's not forget like before COVID his legacy was supposed to be the guy that had this inclusive labor market. Remember that? I mean, basically bringing people in at the margins of the workforce and sort of, you know, I guess I can say this as one like leave no minority unemployed kind of thing. Right? I mean, so that, I mean, it was basically about running the labor markets hotter and sort of, you know, inflation expectations were anchored and so they, Fed had more room to kind of let the labor markets run hot. That's what his legacy was going to be before.
- [51:22]
D
What do you think it is. What do you think his legacy is as the, as the chapter is closed on. See, Josh, as the chapter closes on, on Jerome Powell, what do you think the legacy is going to be?
- [51:36]
E
I mean, I think if you give it enough time, I think his legacy will be one of the Fed basically delivered reasonably good economic outcomes in pretty trying times. That'll be his legacy. And part of this was stuff that Governor Waller talked about before, which is how do you get a soft landing? And the Fed leaned into this idea that you could essentially trim job openings without seeing much of an increase in unemployment. And by and large, that bet was a successful one. And if you look at, I mean, you have to grade on a curve, right? Like, could the Fed.
- [52:17]
D
He was coaching, he was coaching the 2017 Warriors.
- [52:24]
E
You have to grade on a curve. That's kind of what I believe. And so, you know, if you grade on a curve, I think, you know, the Fed did reasonably well over this period.
- [52:32]
D
All right, so zooming in on where we are today, what do you think, where do you think rates should be and what do you think he's going to tell the world in a few days?
- [52:48]
E
Well, I think that he's going to try to give us some meat around the bones of how they kind of think about both sides of their, of their mandate, right? Like, they have one of employment and they have inflation. And the tension right now is that, you know, the labor markets are getting worse, but they think inflation might be getting worse too. And so how they resolve that tension is going to be very important. Now, Powell has a really tough job because this isn't like last year. Like back then everyone was on board for rate cuts. It was really just around the timing of when they would do it.
- [53:26]
A
That year.
- [53:26]
E
It wasn't whether they would do it or not. That's not the case this year. Right now it's like a bimodal distribution. You have a bunch of people that think they should cut twice and you have a bunch of people that don't think they should cut at all. And so it's really his job to find a middle ground. And that's why Bloomberg has this article. Wager for half point rate reduction faces test of Powell remarks like, I don't think he can make a strong signal like that at this at Jackson Hole, like, there's no way you can do that before the meeting because you have so many people that are out there telling you and they're still out there squawking. I mean, you had a bunch of, you know, regional Fed presidents and so forth coming out and, and talking about this. There's no way to front run that meeting and kind of lay down the, you know, the pipe for a big upfront move.
- [54:17]
D
I mean, tell me if this is a reasonable take. The Fed cannot control tariffs and input prices. The Fed cannot control the labor market, particularly entry level jobs that are getting smoked. But what they can control and what they have absolutely wrecked a huge piece of the economy is the housing market. The housing market is all sorts of effed up and for that alone, rates should be at least 50 basis points lower. Is that reasonable or is that ridiculous or somewhere in between?
- [54:57]
E
Well, I think, I mean, I would argue that the Fed does have a little bit more. I mean, over the long run, the Fed doesn't have control over the unemployment rate, obviously, but I think there are times where if you provide some lift to the economy by lowering interest rates, you probably will generate some demand for labor.
- [55:12]
D
Do you think they will today? Do you think that environment exists today?
- [55:15]
E
Sure. I mean, if you like, for example, you just mentioned housing. Right? I mean, I think I agree with you, by the way, on housing. I think housing is an absolute mess. And we saw more evidence of that today. Right. I mean, you have, you know, basically the main asset that's used as collateral in the banking system deflating in price for the last five months. That was out from Zillow this morning. And then, you know, look at building permits today. Building permits hit another cycle low and you know, I mean, builder sentiment was weak. So we had a raft of housing data this week that were all sort of not great. And so I would tend to agree that if you have a housing focus view that it kind of makes it pretty obvious that you should be cutting. But at the same token, I mean, this is also probably one reason why builders are probably on the verge of cutting construction workers. Right? I mean, they, they just, they need to rationalize their building model relative to what they're saying, what they're selling. So that means cutting costs, which means cutting people.
- [56:14]
D
Oh, who could it be?
- [56:16]
A
You have no idea. You have no idea what just happened. There's like a power coming. No, there's like a wi fi setup that just crashed off the wall onto the floor.
- [56:28]
E
We're gonna blame that, we're gonna blame Hurricane Aaron.
- [56:31]
D
Fed's got a cut. But, but. Well, Josh, Josh, welcome back. But Neil. So for people that are like, no, it's all good. For people that are, that are looking around and saying the S and P is at an all time high Chamath is launching a spac. There is speculation in the streets and in the sheets. How could they cut rates? Isn't that such a red herring? Like, does that matter at all to the conversation? The inputs that.
- [56:53]
E
You don't need to take my word for it. You don't need to take my word. You have a very good analyst in your own shop that made that very precise art, that argument. So shout out. Yeah, Callie made that argument and I, obviously, I agree with her. I mean, you know, look, I mean, you usually at the time of the, look, at the time of the rate cuts, the markets are not that far from their highs. That's also true, by the way of like, at the time, if you look historically of like the first negative jobs number, the stock market's not too far from its highs. So I think what's important here is like, if you're the Fed, do you care about financial market conditions or do you care about financial conditions in the real economy? Like, if financial conditions are this loose, why is it's so difficult to buy a home? Why is. I mean, you look at the Fed's own loan officer survey, lending standards for CNI loans, CRE loans, multifamily residential loans, they're all still tightening. Different parts of the consumer credit space are also tightening. So just because financial market conditions are loose doesn't necessarily mean that financial conditions in the real economy are as well.
- [57:56]
D
All right, last thing for me as we go into the week, there is a, I think a mis understanding or mis expectation. I don't know what I'm looking for. People tend to think that Jacksonville is a market moving event. And unfortunately it was in 2022 when we were at Future Proof. That was a lot of fun. Not, but Bespoke has this chart showing how the market has reacted during these weeks. And it's sort of nothing with nothing. I mean, maybe a little bit elevated, a few outliers, but overall.
- [58:26]
E
Well, this goes back to the point that I, that I made earlier, is that there are times when it's a huge signal for what's about to happen. And there, there are times when it's just sort of an academic discussion among friends about, you know, things they're looking at in the future. And, you know, this time it might be a little bit of both, right? I mean, the Fed's going to talk up their framework review, right? I remember back a few years ago they had this flexible average inflation targeting thing that they put in place and that lasted all of, you know, about a few weeks because of COVID But. So this is sort of. You're going to have a little bit on the near term and I think a lot on how the Fed is thinking about how they're going to deal with supply shocks in the future.
- [59:07]
A
My only question is, why don't you get invited to Jackson Hole? Or have you been and you've opted not to go? Because it would be much harder for you to analyze this if you became part of the. The show itself.
- [59:20]
E
I think, I think the primary reason why I'm not invited is because I don't have three letters after my name.
- [59:27]
B
P. Is it.
- [59:28]
A
Is it as simple as that?
- [59:29]
E
No, I mean, I don't. I mean, it's not. I, you know, look, I think some of the bank economists have in the past gotten invited, but really, this is, you know, it's, it's central bankers talking amongst themselves. That, that's. And presenting their research and, you know, I mean, that's, that's, that's largely what it's been about. The. I think, I think the Chicago Fed or the Booth School at the University of Chicag, Chicago does a nice monetary policy forum. I'd like to be invited to that one day. That'd be cool. But not expecting an invitation to Jackson Hole anytime soon.
- [60:01]
A
Well, if you, if you, if you do get invited, your. Yours will be the commentary I most look forward to. Thanks for coming out of that. Coming out of that event. All right, Neil, thank you for bearing with us. I'm sorry I dipped out for most of that. I will be re. Watching it later. Technical difficulties, but awesome to see you and enjoy your end of summer vacation.
- [60:21]
E
Thanks, Josh. Bye, Michael.
- [60:23]
D
Better. All right, we're back. You good?
- [60:26]
A
Yeah, no, I'm great. You got to take us to the next topic. I'm attempting to get my WI FI back up, but I got the sound that this made.
- [60:34]
D
I got you.
- [60:35]
A
When it all came crashing down, we're talking.
- [60:37]
D
This is good timing because a couple of weeks ago. Was it last week, actually, you and I played the game maybe two weeks ago. It was two weeks ago. Which falling stock would you most want to buy?
- [60:47]
A
And I believe the falling knife game.
- [60:50]
D
I believe we landed on UnitedHealth. Maybe my memory is faulty, but either way, either way. There was news last week because the 13Fs came out and a lot of people bought this knife, Berkshire included. So they bought more than 5 million shares throughout the quarter. We don't have an average price. They spent one. Oh, no. Yeah, my bad. We do have an average price. I could back into It. But I didn't do that. So apologies. They bought 5 million shares for $1.6 billion chat. What did they buy it at? Help us out. It is. Chart on, please. It is their 18th largest holding, so they've got a $1.6 billion position out of. Call it 200 and I don't know, the market's up since then. $280 billion portfolio.
- [61:35]
E
Tiny.
- [61:36]
A
Yeah, tiny. Five. We. All right, so I think it's important to point out that a lot of times they will start out buying something and they're nowhere near finished. They might never buy it again. They might sell the next quarter. They might spend two years adding to it. Every time they report, every time they file a 13F, they might add to it. So this is one of those things where it's like too early to really like assign a, like a hard and fast decision on what they're doing here. But it is classic. It is classic Buffett. I don't know if this is one of his picks or one of the lieutenants. I would imagine they're involved in the conversation of young guys because he's retired as of the end of this year. But 25 billion dollars in earnings at a 250 billion dollar market cap like this is like what they do.
- [62:32]
D
So, so I wanna, I wanna, I forgot to include. I didn't include this in the image because it was tough to see, but I, I clipped that from Slick Charts. So shout out to them. All right. It's the math. I used this thing, remember this? $320. That is the price. The average price that they were in at UnitedHealth traded as low as 235. So. Oh, my God, they thought they were getting a bargain, and maybe they did, but they still had to sit through a nasty drawdown. And mind you, the price today. So it popped on the news. Obviously, it wouldn't take much for this rubber band, which is stretched all the way down to pop a little bit. The stock is still at $304, so still a little bit underwater. But yeah, no, listen, UnitedHealth is not a company that Berkshire could buy. It's a gigantic company. And who knows what their intentions are, but they're not day trading this thing. They're not looking for a quick, you know, 5, 10% pop. That's not what Berkshire.
- [63:24]
A
I agree with that take. And I would also point out it's even more notable that David Tepper, Appaloosa was also buying it at the same time. And I'm sorry, I don't know if there are historical examples of stocks where they got a Dow stock cut in half with both David Pepper and Warren Buffett buying it at the same time. But I have to believe that's going to have a good outcome for the people that. Now a lot of the people that I do TV with, they were long the stock already and you know, they were excited because in many cases they owned the thing from 600. They rode this thing down from 600 to 270. They averaged down the whole way down they defended it. And now like Buffett coming in in the low 300s, I feel like it's a get out of jail free card. It's validation, you know, it's validation that like see there is value here. Unfortunately if you loved it at 600, it might be a, it might be a minute before your investors care. But at least you save a little bit of face on tv. Defended the stock.
- [64:31]
D
Here were some other moves. They took a small stake in steel manufacturer Nucor Lamar advertising security from Allegiant. They got back into home builders. I think that's notable. You and I are on that corner. They bought Lennar and Dr. Horton and they did some trimming. And bank of America and Apple, he's.
- [64:50]
A
Got a long history of being in and out of the home building and the housing related stocks. Thought it was really interesting that Home Depot missed on the top line and the bottom line and the stock traded higher. That actually helped the Dow buck the bigger trend of down stocks. Home depot is a $400 name and I know you don't care about dollars but the Dow does. And United Health last week and Home Depot this week. Those are two kick save stocks with high dollar share prices that help the help the Dow 30.
- [65:25]
D
Oh so. Oh, that was a misprint. My bad. I just got excited about a stock that was the fat finger trade I suppose. All right. Anyway, Home Depot is a stock that I own and I didn't read the report yet today but obviously investors don't care about what happened last quarter. Nope, because it's not relevant. All that they care about is what is the next Fed chairman and rates coming down and that really is it. So John, can we throw this chart up? I thought this is interesting. I saw, I couldn't find it. I saw Robert Armstrong, the FT did a post on Berkshire versus Property and casualty companies and I couldn't find it so I recreated it. Here's a chart people have talked about prior to I guess the last couple of years. Over the last like remember there was a time not Too long ago, over the last one year, five, year 10, year 15, 20 years, Berkshire had underperformed the market.
- [66:15]
A
Yeah.
- [66:16]
D
Anymore. Not anymore. So the, the purple line is Berkshire, the blue line is the S P, and the orange line is, I guess, what you would bucket them into. Although I know they're not really a property casualty company, but certainly they are a giant insurance company. And however you slice it, I mean, they've kicked ass. The stock has worked every which way.
- [66:40]
A
Yeah. And what's so great and what's so crazy about it is that this, the outperformance is persisting through this AI moment. And the cloud computing era and Apple obviously helped them a lot. But then like insurance business was great last year. Like premiums were high, not a lot of underwriters were out in the market and there weren't any massive catastrophes. There was the wildfire episode. But like, that was a great year, for example, for all the PNC insurers. And that's a huge part of Berkshire's business. I know Geico is doing really well and then the railroad was doing really well. So there's just so many different ways to make money as a Berkshire shareholder. The exposure to financials that they've largely taken off by now, but they had on. So it's like, I don't know, I shudder to refer to any individual company stock as an all season kind of stock, but if ever there were one, I really feel like it's Berkshire. Even when people are disappointed with it, all that usually means is that it went up slower than some other index, you know, so it's, it's definitely, it's definitely having another moment again this year, though. I agree.
- [68:02]
D
Last thing before we move on to Josh's topic. If he comes back, Josh come back is, is Michael Burry. Credit to him. This guy has a sense of humor. So his 13F came out and who knows what positions he still has on, but he famously got mocked and ridiculed on this show as well as, as well as others for just tweeting Cell, which is a fairly irresponsible thing to do, especially when it doesn't work. If it worked. Yeah. Hindsight is 20 20. We probably would have spoken differently, but we did flag him.
- [68:32]
A
He'd be on the COVID of Everything.
- [68:35]
D
But anyway, the guy's got a sense of humor. He tweeted by exclamation point with all the activity that he did and, you know, whatever credit to him he was getting in there and he's got some positions that he probably made a Lot of money on. Although those Lulu calls, that doesn't look, that doesn't look like that aged well. But, but whatever. He's, you know, he's laughing at himself. So appreciate that.
- [68:56]
A
All right. What. So I can't, I can't see what I wanted to discuss next. So just tell me what it is.
- [69:02]
D
All right, Chart, prompt. Chart on. So we're talking that There are now 30 ETFs. Our friend Todd Sohn did some work here. So, Josh, can you see what we're looking at? If not, I'll talk through it and then you could comment.
- [69:15]
A
Yeah, no, no, I can. And I love this because it's such a reminder, it's such a powerful reminder that sometimes you can have a theme that's so popular that everyone knows it's going to work. And like the knee jerk contrarian in people is to be like, sell it. But like, then it just keeps on working. And for me, that's the story of 23, 24, and now the first eight months of 25. AI has been the obvious growth theme for the entirety of the last two and a half years, to the point where there are 20 different pure play ETFs. They're all raising money and they're all buying the same stocks. And then also in Todd's work, there's another 10 ETFs that are like AI infrastructure, where they're buying the utilities.
- [70:10]
C
And.
- [70:10]
A
The natural gas transmission companies. And it's obvious to everyone. And also still a great investment. Not everything has to be mysterious, I think is my point. Not everything has to be like, oh, this is so popular. I'm going to go the other way. It's really important to fight that instinct because the herd's not always wrong. They're wrong at the end, they're wrong at the beginning. In the middle, the herd is the herd, because whatever they're doing is working. What are your thoughts?
- [70:41]
D
So it's funny, Ben and I spoke about that exactly today, about people wanted to make money the hard way by being contrarian. But yeah, you're right. And I would argue that the obvious trade, and again, hindsight, but, but even still was the fang stocks. That acronym, I think, was born in 2017. And there's been people that have been fighting this for going on eight years. By the way, I didn't even know that IFRA was a thing. John, throw that chart up, please. So IFRA is the iShares Infrastructure, US Infrastructure ETF. And flows are coming in, not surprisingly at all. And let me tell you, I'M looking at the top 10 holdings and it's 1, 2, 3, 4. Sorry for counting on air. There's four industrials and six utilities. The largest, the largest stocks are CSX, Norfork, Southern. Huh. Primoris. Which is not a stock that I known Evergy. In fact, you know what? I don't know any of these names if I'm being honest. Hawaiian Electric, Bowman Consulting.
- [71:49]
E
So.
- [71:50]
A
So Sean and Chart off for a sec. So Sean and I did a write up last. I think it was last week or the week before. First of all, our best stocks in the market list is loaded with utilities. And we're trying to write about them individually because nobody knows anything about any of these companies. And one of the most interesting ones we wrote about was Dominion, which is in Virginia. And it's like, I think we did this as make the case maybe last week. But you're talking about a company where all the data centers are within their domain. And you talk about an AI play. All the software, all the chips, all the GPUs, all the data centers are worthless if you don't have electricity coursing through that. And the fact that all those data centers are located in Loudoun County, Virginia of all places, and this just happens to be the regulated utility that's sitting there electrifying everything. It's just. And that's obviously utility stock. But like it looks incredible. Technically it does nothing but go up because the estimates keep going up. There are so many stories like that that we don't associate with technology. But the charts are just lower left to upper right and continue to work. So why is that happening? Well, you've got 20 different ETFs that are allocated to these stocks and people are buying these ETFs every single day and they won't stop until they get some sort of a signal to tell them to stop.
- [73:27]
D
So this iShares US Infrastructure ETF that I've never heard of ticker is IFRA. The thing has $3 billion in assets. And needless to say, it didn't exist three years ago. Okay. Like it was just zero to 3 billion and a couple years. Impressive. Josh. You had Sean make a chart on vgt, which is the Vanguard Information Technology Index Fund. I'm curious, why do you care about this one? Charlie, please.
- [73:53]
A
According to Todd, this is the first sector ETF ever to break a hundred billion dollars in aum.
- [74:03]
D
Oh, wow. The Vanguard one, huh?
- [74:05]
A
Huh? How do you like that?
- [74:07]
D
More than X?
- [74:09]
E
No.
- [74:10]
D
Wow.
- [74:11]
A
No, and I think it's a model portfolio story oh, yeah.
- [74:16]
D
There's no other explanation.
- [74:17]
A
But still, this is what I think. I think financial advisors are trying to please their clients, and they're using this as an overweight mechanism to just give them more exposure to the most obvious trade on earth. That's been the most obvious trade on earth for the last two years, as we talked about. This is such an easy way to do it. It's like, oh, just slap in 10 VGT. It's low cost. It's an index. It's Vanguard. So no one's going to yell at you. They're not going to it up. And you'll end up with exposure to these tech stocks that just. They will not relent. Like, they go down for two weeks, and then they go up even more when they recover. Like, look at semiconductor stocks. They crushed these stocks this spring, and then now they're up like 30% from where they started. So I think people are using VGT as that kind of like, let me shut my client. The up overlay. And it works. It's doing the job. Now you're an advisor. Look, I talked to Terranova about this. Joe Terranova's got a momentum and quality fund. So he's screening for quality and he's screening for momentum, and he's got whatever it is, 40 names, 50 names. He had advisors tell him, like, guys at UBS, guys at Merrill Lynch. He knows these guys forever. He's been traveling around the country talking to advisors, and they tell him, like, joe, I don't know these stocks. So I use your ETF so that when my clients call up and they're like, why don't I own Palantir? Oh, you do here. You own in the Jyoti. So it's interesting. Like, this is like a thing that advisors and portfolio managers are struggling with. And I think the VGT breaking 100 billion tells you all you need to know. That's advisors shutting their clients up. Here, you happy? Here's your. Here's your tackle. Overweight. I gave it to you.
- [76:21]
E
Okay.
- [76:24]
A
Can we talk about funding your grat now? Or, you know, whatever. Whatever you're working on with the client? So we have more from Todd here or that's it.
- [76:33]
D
There was one else. There was one chart that we skipped over. I mean, we discussed it. The AI Focus ETF inflow is going vertical. The. Listen, the bottom pane is.
- [76:44]
A
The bottom pane is the inflows.
- [76:47]
D
I. I hate to. Short term, who gives a. But it certainly feels like this might be. We might be at a pause. It just it, it went. Everything went parabolic. Everything went vertical. The headlines. It got it. It's stupid. We're in silly territory.
- [77:03]
A
Did you see that? Palantir just erased its entire post earnings gain. I did share that with us.
- [77:12]
D
I. I shared that.
- [77:13]
A
That's a wild. That's. Oh, you. That's a wild chart. So. Empire State Building chart.
- [77:19]
D
Yeah. And, and Carp and, and our boy Dan, they were talking a lot of. On the call. The stock gapped the hell up higher. Shut every bear up, went up for a few more days and then whoosh. I mean, listen, the, the bulls are. Have had the last laugh or they're, they're enjoying themselves. Who cares? It's on 60%. It's up a gazillion percent, but yeah, we'll see. All right, 16.
- [77:41]
A
It's down 16% from the high.
- [77:43]
D
Yeah, whatever. So whatever.
- [77:45]
E
Yeah, whatever.
- [77:45]
A
You can announce one contract with like Russia tomorrow or like, who the hell knows what they could announce? Yeah, before that all back before bears.
- [77:54]
D
Start getting salty and start flexing. It was at 66 at the April low and it went to 190. It's now 155. So we'll see. All right. Last week and, and every week we talk about these gigantic tech stocks that are not even tech stocks. They're everything stocks. Amazon being a classic example of. What even is it? How do you describe it? It does so many different things and like a gigantic ocean liner, it's just demolishing anybody in its wake. And this week was Instacart. Now, the shares have since recovered a little bit, but what am I talking about here? Here's what I'm talking about. This is from Bloomberg. Amazon.com plans to offer same day gross same day grocery delivery in 2300 cities by the end of the year, more than doubling the current number and making it its latest attempt to muscle into the $1 trillion grocery industry, led by, of course, Walmart. This is the face blower to me. So US shoppers spend $1 trillion annually on groceries, and yet online grocery sales represent less than 20% of that. Now, it's still, it's a gigantic number. And there was a natural cap at some point. Like people want to go to the grocery store, not everybody is Prime. Not, etc. But, but still, there's, there's room there.
- [79:13]
A
Yeah, and it's not even just that there's room there. It like forces Target and Walmart to play defense because, you know, those stores have very, very successfully used grocery to drive foot traffic for people to buy Other things while they're getting their groceries. And it's been an amazing strategy. But if Amazon starts picking off grocery customers, well, those are less trips to the store, to the physical store. I don't know that Amazon's E commerce lead is terribly powerful versus Walmart anymore. I think a lot of people just interchangeably will order things from Walmart's E commerce operation at this point. But Amazon going same day with things like produce and meat and eggs and the kinds of things people don't want to order and wait a day for the kinds of things. Like people like, no, I want to make this for dinner tonight or no, either I get the eggs now or I have to go to the 7:11. I have to go to like a convenience store or a supermarket. Oh, don't worry about it, Amazon, we'll have them here by five o'. Clock. To me that's behavior changing and it's a really big deal. And you know the maple bear thing with Instacart, at first of all, it's the worst service ever. Have you ever used it?
- [80:38]
D
No.
- [80:38]
A
You use Instacart. So I had to, on a couple of occasions I had to like order some stuff because I was coming back from Florida and we just had nothing in our fridge and we were going to land and it was going to be. All the stores would be closed or be too tired and so order groceries so that I get off the plane, I get home and there are plastic bags sitting in front of my door waiting for me. I do like that. But like half the items that are listed in the app that they say the store has, they don't have it or they have a different flavor or the wrong size. So then you have to have this back and forth with the driver. Either you have a setting where you say to the driver, pick the closest thing available or the driver has to notify you. So like, oh, you wanted lemon Italian ices. They only have chocolate. So now you're having like this back and forth on the app, which sucks. And then they, and then they screw it up anyway. And then by the time the fees are taken out and you're adding a reasonable tip because like you almost feel guilty not tipping someone who just walked through a store for you. It was, it's just so egregiously expensive. Half the items are wrong, the website had it wrong and it just, it's a horrendous experience. So I'm not surprised to see an over the top reaction, negative reaction for Instacart. If Amazon's going to come into this business. Not that they'll do it perfectly, but they definitely can't do it worse.
- [82:05]
D
Here's another area that Amazon disrupted. I mean, not, not Amazon per se, but just everyone. Is there a worse. Is there a larger melting ice cube than the linear cable cable services? So, for example, we got news this week that YouTube is now throwing their hat in the ring to get the rights to show the Academy Awards. Last night or two nights ago, I rented. It's not Blockbuster or Netflix. I rented Jurassic Park, World Rebound, the new one. Yeah. So anyway, I got it on Prime. I got. Now I'm like, we're buying stuff on Prime. I mean, it's everything. It is everything. Sure, you could think things that they don't do, but it's, it does everything.
- [82:51]
A
Well, just look at, look at how the cable companies and the media conglomerates are treating their linear TV assets. They can't shed them fast enough. So NBC, Comcast, Comcast, which is NBC, is getting rid of all the news channels. They're going to bundle it into Versant, which will include cnbc, msnbc. Just announced a name change.
- [83:15]
D
Yeah, what's the name?
- [83:17]
A
Beyond Bizarre, but no comment from me. Yeah, Miss Now. Yeah, but then the NLW stands for News Opinion World, which.
- [83:27]
D
Right.
- [83:29]
A
Okay, I bet you $1,000 that'll change between now and the end of the year.
- [83:34]
D
Okay, I will not take that statistic. I will not think about it. All right. Speaking of sign of the times and the feelings of. Or the not feelings to risk. Who cares about risk? The bullish ipo. Let's talk about that.
- [83:47]
A
Well, my take was this is I don't have all the data in front of me, but I would just say it's billions of dollars in market cap for a company that is based in the Cayman islands, which already. Three red flags. Not a fan. They filed an F1, not an S1 in order to go public. So an F1 is what you file when you intend to be a foreign domiciled company, but you want a listing on a US Exchange. So in this case, it's the New York Stock Exchange.
- [84:16]
D
Josh, I'm going to read some of these things that you put in here.
- [84:19]
A
Yeah, give us some of the numbers.
- [84:21]
D
All right, so According to the F1 for the period ending in March 31, 2025, it generated 46.8 million in total revenue, a 22 increase over the prior year. However, it incurred a pre tax loss of $348 million. Earlier in March 2022, they reported annualized monthly revenue of $97 million. Analysts have noted that Bullish's business relies heavily on trading fees. Okay, obviously. All right, whatever. Here are the details on the IPO. They raised $1.1 billion via the sale of 30 million shares at an IPO price of $37 per share. Initial valuation, $5.4 billion. Wow. Shares open trading around 90, peaked near 118 before closing around 68.
- [85:06]
A
Where to close today? What's the follow through to the downside?
- [85:09]
D
What's the ticker? It's Bullet bls. Okay, yeah, that's not good. That's not good. It closed at $58 or $59.
- [85:18]
A
Yeah. So this is not, this game is not for me. I think they're losing, losing like 40 million a quarter or something. Or something like, basically one of the problems here is that the value of their crypto assets rises and falls. And there's like an accounting treatment of that that can make it seem like it's got like this erratic business, which I don't really think is the case, but it's kind of like a mediocre brokerage. They're pitching this story where they're better for institutional clients than Gemini or Coinbase are. I doubt it. I don't believe it. The one thing that I think generated that hundred dollar open though is Peter Thiel's involvement. So I think he, I don't think he's like got a day to day here. He's an investor. He's an investor in a lot of things, but there's a Peter Thiel connection. And you know, there was with Palantir and people just like they were, they, they name associate. And so it's like, oh, this is Peter Thiel's brokerage.
- [86:21]
D
Yeah. Let me give you an alley of Josh. All right, Today, quote. This is a quote from somebody and you know who it is, Josh. Today, a company called Bullish came public. The deal is more than 20 times oversubscribed. And the stock opened up for trading 143% from its offering price. Wow. The underwriters actually did their best to tamp enthusiasm. The deal was supposed to be 20.3 million shares priced between 20 to 31. But it was indeed upsized to 30 million. Then price 32, 33. I would have taken that a little bit, a little bit higher, but you know what I mean, arguably they could have upsized it much more and made the price much higher. Josh, who was that quote from?
- [86:57]
A
So that's Jim Cramer. And the irony is the stock that Bullish reminds Me most. All right, so I want to say this. Bullish owns CoinDesk. So CoinDesk is one of the biggest media publishers in the crypto space and Bullish owns it. I guess they bought it during the tumult of 2022. Okay. CoinDesk is great. They do a great job. I like those guys. But it's basically it's a media company attached to a brokerage service. So the irony of Kramer commenting on it. This reminds me a lot of thestreet.com and I was there for thestreet.com IPO. I was in the business. And it came public in May of 1999. Not right at the top, but eight months before the top. And this is no fault of Kramer's or anyone else's. This was just the level of enthusiasm for anything related to trading this. The street.com along with Market Watch were like the two first websites that were dedicated to covering the dot com boom in the stock market. And the street.com was great. I was a subscriber. I almost bought the ipo. I'm glad I didn't. They upsized that deal several times due to demand. I think it opened at like, it ended up at 73 on the first day and then spent the next 25 years going to zero. Literally never had another bull market in that stock ever again. It was just this 25 year odyssey falling from $73 a share where it never belonged in the first place, to effectively zero. And then I think the assets ended up just getting handed to somebody else. But that's what this reminds me of. And I'm not saying the businesses are identical. I'm just saying thematically, we're now bringing CoinDesk public effectively and we're saying it's a better brokerage than, I don't know, Kraken, Binance, Coinbase, Gemini, how many other Robinhood, Come on. What is this, like the 10th largest brokerage firm in crypto attached to the street.com of the crypto era? And this thing is worth billions of dollars.
- [89:14]
D
Yeah.
- [89:15]
A
Is that what we're doing here? So is that what we're going with this? So that was my impression. I, I, I'm not surprised that it was a big IPO day. I'm also not surprised that the stock is getting crowbarred.
- [89:27]
D
Okay, here's what else is happening in the market in case you needed lest you, lest you forget where we are in the temperature check. Social Capital's chamath Polyapatea is launching a new SPAC 200 raising $250 million for the American Exceptionalism acquisition. Corp. And Q Capital 2020 shared the filing and highlighted this part for us to take a look at. Here's a quote. We believe that retail investors should only participate if, A, this investment is a small part of an otherwise diversified portfolio. B, this investment is a quantum of capital. Who says quantum? They can afford to completely lose. And see, if they do lose their entire capital, they will embody the adage from President Trump that there can be, quote, no crying in the casino. End quote. And you know what? Okay, fine. I like this disclosure. I like it a lot.
- [90:21]
A
Yeah, I think. I think the filing should have a spelling crossbones right on the COVID And you know what? Swim at your own risk. I've really made a 180. First of all, I'm in the minority of people on Wall Street. I like Chamath. I don't care. I'm not embarrassed. The guy Snake charmed me the first time I met him, and I'm still. I'm still hypnotized by him. I. Look, I. I don't invest with him. I'm not putting my money into his deals. His deals were mostly the. In the. What is it, Hadassah Philia or something.
- [90:58]
D
He was in the arena. Don't be a baby.
- [91:00]
A
Right? No, I. I don't give a. Like, he tried it. It didn't work. Now there are people that think he's, like, deliberately scamming people. Give me a break, dude. Don't you think he would have loved it more than anything if those stocks worked out and if those companies turned into great companies? He's just not that good at it, it turns out. That's okay. Most people aren't. So I. I'm not one of these, like, people that, like, knee jerk. Everything Chamath does. I have to talk shit about him. I like the guy. I think he's interesting. I don't want to invest with him. I don't like spacs. I wrote a book where I did a whole chapter that spacs are poisoned. I explained all the reasons why, all the up incentives and the carry and all the reasons why it's like the deck is stacked against you. I went on Everyone's Clubhouse and I ranted and raved and nobody listened and everyone lost all their money. I. I did the best I could, but I don't. I don't hate them. I don't hate the player. In that. In that case, I hated the game anyway. I'm not buying Chamath's New spac either. I do think that this is a sign that we're getting closer to the end of something than the beginning. I do agree with that. He probably would agree too, which is why you could better sell this thing as fast as you can.
- [92:20]
D
So.
- [92:20]
A
All right, I have another chance to launch this in. In six months.
- [92:24]
D
Another Canadian, Eric Jackson. Is he gonna do this? Is this gonna work?
- [92:30]
A
This is like such a great heel turn. Tweet on Jackson.
- [92:34]
D
Tweet on. Is it? But is it? All right, so what did he.
- [92:38]
A
What did he tweet? I can't see it.
- [92:39]
D
What did he says when the pirates take over the ship and suddenly it starts sailing faster. So for those of you who don't know, and if you're watching the show, you do know, but Eric Jackson took Carvana. Not Eric Jackson was very early on Carvana and he thousand extent. I assume that he held for the majority of time, maybe the whole time. Good for him. And so when he spoke and when he spoke about the next thousand X, people listened and I listened. I almost bought it. I didn't and I regret not buying it, but whatever. So. So now they got the CEO out of her seat at Opendoor. By all accounts, she was doing a terrible job. And Eric thinks this is the next hundred bagger and he thinks it's going to $82 a share. And the question is, can Eric and the army of retail investors get this thing remotely close. It's at $3. Where I don't know if it's 3, 4 bucks, whatever it is, can they do it?
- [93:33]
A
The thing is that he started this at like $0.50. So if you listen to him, you're already up a lot. And he's talking about this thing being worth thousands of percentage points more. He's talking 82 and. But that. But then he's like, like pulling a lot of the tricks out of like the classic playbook for this meme stock shit where he's like picking fights with people who disagreed with him and he's doing like the memes.
- [94:02]
D
He's all in on this.
- [94:03]
A
He's all in on this. And then he's also doing this thing where it's like this, this is like what's good for society. Like thanks to Open Door, we're going to solve the housing crisis. Like I'm mad. He's so. People accused him of manipulating. We didn't accuse him. We asked the question is this manipulation? I think if you play back what we said, we said, no, it's not. This is no different than anyone else saying they like a stock. The difference is it was a 50 cent stock. And he's not talking about it going from 50 cents to $5. He's talking about like going to almost 100. So it just like it gets under people's skin when you do that. But he's unapologetically doing it. And he doesn't believe that. I don't believe that the stock needs to go to 82 for him to be that, for him to be right. If this goes to 10, this is one of the biggest winners anyone will have in their portfolio. And it definitely could go. There's a universe where this goes.
- [95:03]
D
Show the chart. Show the Eric Jackson effect. John, please. So this is the stock just getting destroyed. It's still down 90%, but show the next.
- [95:11]
A
Well, let's, let's tell people what this. Wait, go back to the other one real quick.
- [95:15]
D
So actually this is a Chamath stock, is it not? Wasn't this.
- [95:18]
A
It's a Chamat Spac. So Open Door had this idea that they were going to digitally buy houses, like just on the Internet, just bid for houses and then resell them.
- [95:30]
D
By the way, by the way, there's an alternate universe chart off. There's an alternate universe where maybe it could have worked, I don't know. But they launched at the absolute worst time possible.
- [95:40]
A
21.
- [95:41]
D
Yeah.
- [95:41]
A
Well, went public at the worst.
- [95:43]
D
They launched to a housing mania.
- [95:46]
A
Yeah. But I would also point out Zillow tried the same thing and it failed miserably also.
- [95:52]
D
Yeah, that was horrible.
- [95:53]
A
It's not an easy thing to do.
- [95:54]
D
It was the worst timing ever.
- [95:59]
E
Yes.
- [95:59]
A
Now the difference is Zillow got out of that business and Open Door is.
- [96:02]
D
Still at it, and now they have.
- [96:04]
A
A partnership, I think.
- [96:05]
D
But anyway, okay.
- [96:07]
A
But yes, this was one of the Chamath Spacs and it fell 99. Like, it's one of the. It is one of the most horrific pieces of paper to have occurred in that 21 to 25 period. And there were a lot of them, but this one was really bad. It's amazing. It didn't go to zero, but it didn't. And now they seem to have gotten a handle on the losses at the company. Chamath is gone and they fired the CEO, which, of course, you have to fire the CEO. The stock is $0.50, but the average loss over the last four quarters is like $40 million. And they actually have been surprising to the upside, meaning the losses are smaller than expected. The company is claiming on an operating basis they're actually earning money. The problem is if 2.2.2 billion in debt. So they're making a lot of interest payments on that debt and they're barely profitable.
- [97:06]
D
But, but they needed to get the CEO out. Hello. Wake up. Do an equity offering, raise some money, pay down the debt.
- [97:11]
A
Well, so, so that's what I think is, is going to happen. And it should happen. And if you're long the stock and you truly are an investor and you're not just trading it because it's a meme stock, you should want them to raise money, they should raise equity capital. And they should probably be talking about a reverse split. There is no institution that will own this stock. At $3 a share, it should be $30 a share.
- [97:35]
D
They don't want the institutional investors. $3 is the point.
- [97:37]
A
You know that you want the retail now, but you probably as the story matures and the retail loses interest then you're going to want institutions. So start thinking that way today.
- [97:50]
D
Yeah.
- [97:52]
A
Retail was so excited about GameStop when it went to 40, they didn't stop buying it.
- [97:55]
D
Yeah. Yeah. So show the chart about the year to day chart that we have. I mean look what this guy did.
- [98:00]
A
Eric. Eric did. Eric did this. And he deserves, he deserves credit because he probably brought this thing back from the dead. I don't know what would have happened absent him saying hey guys, there's actually a valuable business here. So he did that.
- [98:17]
D
Well, absent that, they would have ran out.
- [98:19]
A
You love them.
- [98:20]
D
They would have ran out of money.
- [98:21]
A
Short the stock. If you short the stock, you hate them. If you long the stock, you love them.
- [98:25]
D
Yeah. Okay, last topic. Cathie Wood. She's back.
- [98:33]
A
I think she's back. What do you think? I want to hear what you think.
- [98:36]
D
I don't think so.
- [98:39]
A
What do you mean her ETFs are doing well? They are like not just okay. They're doing really well.
- [98:47]
D
Yeah.
- [98:47]
A
And her stocks are working. We have a, we have a table of what she's buying or what her biggest positions are.
- [98:55]
D
So it's, it's Tesla, Roku, Coinbase, Tempest, AI. Is that a private stock? I don't know that one. Roblox, Shopify or Chris Robin and amd. Listen, she's definitely back in the sense that the performance has turned around for sure. Baltun has tweeted. Holy Noah. Get it. ARC is at the top of the one week flow leaderboard with $5.5 billion. It's a lot of money. It's more than VO in the queues. So she's not, not back.
- [99:23]
A
Dude, she's back. This is her environment. This is her market. When the $3 stocks are going to 6 and when the money losing companies are up 40, 50, 60% off the April lows and when everyone's talking about robots and AI and flying cars and gene editing and all that shit, this is her market.
- [99:43]
D
Okay?
- [99:43]
A
And that's what's going on. I'm not saying lasts forever.
- [99:46]
D
No, I know. Listen. Okay, fine. Looking backwards. Absolutely. She was back. Let's throw this, this chart of Ark versus S and P versus the Qs. So I'm guessing. So this is the last three years. And yeah, listen, I love that she made a comeback. I love, I love, I love. More importantly, forget about her. The investors that stuck with her. I don't like to see people losing money ever. So I very much, I very much am in favor and I hope this continues and I hope that investors get hold because it was a really, really difficult couple of years for them. So I'm rooting for them.
- [100:16]
A
How about this? Here's another person. I don't invest with her, but I root for her and I like her personally. And it's another, like, there are a lot of people like that where it's like, I don't really agree with the way you view markets, but like, I like you and I root for you. I don't, I don't understand all the hatred. I guess like people were short stocks that she was long.
- [100:36]
D
I understand some of it more so for Chamath than for her because Chamath was kind of a dick when people were chirping at him like he was not, he was not very nice to the people that, that lost a lot of money with him. Have a little bit of self interest, you know what?
- [100:49]
A
So I'm not on, I don't see it. I'm not, I don't have the Twitter thing in front of me, but from what I, from what I hear that that's what he did. He like kicked the hornet's nest after these stocks blew up and that never goes well. Remember all that stuff I was saying about how people use Joe Taranova's active ETF to like hit that segment of the market, the momentum trades. Like, what, why not use, why not use arc that way? Say to a client like, look, I don't buy shit like this. Yeah, I'm never, I'm never going to buy like gene editing stocks for you. And I'm like, I'm not going to be buying you flutter and draftkings and all that stuff, it's not, it's not what I do. But, but I recognize that in certain market environments, those stocks are going to outperform. So rather than me trying to do a Cathie Wood impression, I'm going to give you 3% arc. Yeah, I'm going to give you 5% arc. There's not like. What's wrong with that?
- [101:47]
D
No, I don't know. Okay, so. So to their credit, ARK is outperforming the DJ Dow Year to date chart on, please. So Ark is up 83% from the Liberation lows. And this is a year to date chart. And. Yeah, so credit.
- [102:01]
A
So we, we tried to come up with our own index of Cathie Wood esque stocks, and she's beating them. Okay. All right, so we need to do an active. We need to do an active rebalance.
- [102:13]
D
Josh, I'm gonna do a mystery chart real quick. I don't know if you could see it, but it's instructive. Just for the purposes of today's show, the. And then you'll make the case for Rocket. John, mystery chart on, please. Josh, can you see this chart?
- [102:24]
A
Yes. Okay, so this is the volume on the bottom pane. Yeah.
- [102:30]
D
Yeah. So I'm gonna give it away because I don't know how else to give you a clue without giving it away. But I just think this is. This is the sort of thing. Chart off for a second. This is the sort of thing where you talk a lot of shit. The Internet gets up in arms and then like, it goes the other way and it never, never gets brought up again. So chart back on what we're looking at here is a conversation that we had on the show, I guess, two weeks ago, three weeks ago, where I was defending the bankers. This is a new issue. Nobody is trying to misprice the shares. Okay. They want to get it right for their clients. Their clients are the people that are paying them. And anyway, the stock popped and now it's just gone nowhere but down ever since that first day. What is it?
- [103:08]
A
It Sigma?
- [103:09]
D
Yes.
- [103:11]
A
Yeah. You gave it away. Because I remember us talking about it. I don't think people are saying that the bankers deliberately.
- [103:19]
D
Oh, yes, they did. Oh, yeah.
- [103:20]
A
The company in favor of the shareholders.
- [103:23]
D
Yes, they did. No, that is what people were saying.
- [103:26]
A
That is what I don't say. That makes no sense. My comment. Well, no, it definitely makes no sense because I guarantee you the corporate issuer of securities who's going to sell stocks and bonds through you for the next 10 years is a way More profitable client.
- [103:43]
D
Thank you.
- [103:43]
A
Than the schmucks that are allocating 100 for that are asking for 100 shares of an IPO. 100%. I agree. My comment is, how is it possible we're doing this shit since Amsterdam in the 1600s? How can we be so bad at gauging the demand for a stock after 525 years of initial public offerings on exchanges around the world from Europe to New York to Asia?
- [104:19]
D
I'll tell you why.
- [104:19]
A
Why is this like.
- [104:20]
D
I'll tell you, dude.
- [104:21]
A
Mike, they're getting it wrong by a. By a factor of 100%. What the kind of business is this?
- [104:27]
D
Let me quote our friends. Then we quote our friend Phil Perlman. I believe this is the tweet. Here's the thing about behavioral finance. People are crazy. Was that the tweet? Remember that tweet? You can't. You can't price. You can't price mob behavior.
- [104:43]
A
I would.
- [104:43]
E
I would. Jeff.
- [104:44]
A
That dude. It can't.
- [104:45]
D
It can't do it. They can't do it.
- [104:47]
A
It's got to be a better. It's got to be a better way, I think.
- [104:49]
D
Oh, yeah. Genius.
- [104:50]
A
Who from the way it is, I don't know.
- [104:54]
D
But there's got to be a better way.
- [104:55]
A
Questions. There has to. I'm not suggesting that. I'll come up with it. You're telling me.
- [105:00]
D
Yes.
- [105:01]
A
Somebody is not benefiting from this circus. It's just. It's just this random thing that we can't get better at sometimes.
- [105:08]
D
Sometimes they price it low. Sometimes they price it low.
- [105:12]
A
The average IPO should not open up 100% higher than the price.
- [105:17]
D
The average does not. The average does not.
- [105:19]
E
Literally.
- [105:19]
A
What's going on? All summer, we just talked about bullish. We did circle. We did figma.
- [105:24]
D
Okay. By the way, it's 69. 69 in the after hours. Very, very nice. It's not the banker's fault that people go nuts when these shares start trading and then they lose interest. How is that a banker problem? People get excited and then they get bored.
- [105:42]
A
So there's the way the auctioning is working. If you really wanted to get it.
- [105:47]
D
Closer to reality, make the case for Rocket.
- [105:50]
A
Not really making the case because we've already done that on the show. We are giving people an update because today there was a very big initiation of coverage on Rocket. And we have people, you know, that have. That have listened to us make the case on the stock before double disclosure here, not only do we own the stock personally, but Rocket has a subsidiary called Rocket Money, which is a frequent advertiser on the compound.
- [106:15]
D
Classic double disclosure.
- [106:17]
A
Double disclosure, but we're very transparent here. Anyway, the stock is working. The stock is up huge from its lows on the year. It is, I think, up in anticipation of rate cuts when they close this acquisition of Mr. Cooper. According to the analyst at BTIG who initiated coverage with a $25 price target today, Rocket will become the largest originator and servicer of mortgages in the United States. Most of the shares outstanding are not in the float, meaning there's a lot of shares that are non traded. And so it looks like it's got a tiny market cap. But the reality, the real value of this company Is in the 30 ish billions range. But if rates come down over the next year or two years and we have another cycle in housing and we see a lot of transactions in an existing market and we see refi activity and we see the young millennials and older Gen Zs start to really participate in the housing market, these guys will have the best mousetrap technologically to grab all that business. Not only did they make this Mr. Cooper acquisition, which is the largest independent portfolio of mortgage servicing, they also bought Redfin, which is a leading lead gen app for realtors and mortgage brokers. So they have built this, like during this time of depressed activity in housing, they have built this vertical empire. And that's what the analyst wrote about today. You heard it here first from us at 1112 bucks a share. Now it's 18. The analyst says in the bull case, with both rate cuts and $500 million worth of merger synergy, this could really be a $30 stock. So reason to, reason to hang on. And if you can get yourself a copy of that BTIG note and you're along the stock, I highly recommend reading it. It was really well done. All right, that's it for me. Michael, you did an amazing job. I apologize for my technological issues. We didn't miss a beat. And you, you were there to. You were there to save us. Guys, thank you so much for listening. Thanks for watching. Special thanks to our friend Neil Dutta for stopping by and filling us in on the Jackson Hole outlook. Tomorrow is an all new edition of Animal Spirits. First thing in the morning, we'll do another ask the compound this week. And then at the end of the week, it's a very special compound and friends with a returning champion, someone whom I know you're all dying to hear from and see. So you're not going to want to miss that either. Thanks again. Have a great night. We'll talk to you soon.