It’s Not the Money, It’s the Mood

Summary

Podcast Summary: The Compound and Friends - “It’s Not the Money, It’s the Mood”

Release Date: February 14, 2025
Host: Downtown Josh Brown
Guests: Michael Batnick, Robert Frank
Description: In this engaging episode, Josh Brown, Michael Batnick, and Robert Frank delve into the intricate world of wealth, family offices, generational perspectives on money, and the broader economic implications of concentrated wealth. Through insightful discussions and candid exchanges, they explore how mood, rather than mere financial standing, influences spending behaviors among the wealthy.

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1. Personal Backgrounds and Origins in Finance

[00:00 – 01:01]
The episode opens with Josh Brown and Michael Batnick reminiscing about their childhoods, highlighting their close yet brief proximity during Michael's early years. Michael shares his unconventional entry into the finance world, recounting how he met Josh at a train station during a tumultuous period in his life, leading him from being expelled from Indiana University to embracing a career in finance.

Michael Batnick: "I met Josh at a train station. He saved my life. [...] It turns out, like, that's not real life. So spoiler. It wasn't fine."

2. Navigating the World of AI Tools in Wealth Management

[04:02 – 06:16]
The conversation shifts to the utilization of AI tools in financial journalism and wealth management. Josh discusses his experience using various large language models (LLMs) like OpenAI's GPT, Claude, and DeepSEQ for research and content creation. Robert Frank humorously mentions the phenomenon of "Claude boys," exemplifying the reliance on AI for decision-making among younger generations.

Josh Brown: "I used OpenAI. Now I use Claude more. I haven't used Deep SEQ much. My daughters love Deep Seq."

3. Family Offices: Evolution and Current Trends

[06:16 – 33:40]
Robert Frank joins the discussion, bringing his expertise as CNBC’s Wealth Editor. He and Josh delve deep into the rise of family offices—private entities that manage the wealth and affairs of ultra-high-net-worth families. They explore the transition from traditional wealth management services to in-house operations tailored to individual family needs.

• Growth and Significance:
  The number of family offices has more than doubled over the past decade, currently managing approximately $3 trillion, with expectations to reach $5 trillion. This surge is attributed to the increasing complexity of managing wealth, desire for personalized services, and dissatisfaction with traditional private banks post-financial crisis.

• Challenges and Risks:
  Robert highlights potential pitfalls, such as over-reliance on single-point relationships within family offices, which can lead to conflicts of interest and lack of diversification in advice.

Robert Frank: "You become wholly dependent. Your whole family becomes dependent on this person. [...] And they're also involved in your investments."

4. Generational Perspectives on Wealth and Inequality

[33:40 – 62:00]
The hosts transition to discussing how different generations—Baby Boomers, Gen X, Millennials, and Gen Z—perceive and interact with wealth. Key points include:

• Generational Wealth Transfer:
  An anticipated $100-130 trillion will be passed down from Baby Boomers to subsequent generations over the next three decades. Gen X is set to inherit around $39 trillion, while Millennials could receive approximately $40 trillion. This massive transfer is expected to reshape wealth distribution and perceptions of money.

• Millennials and Inherited Wealth:
  Millennials exhibit a more critical view of wealth, partly due to witnessing more peers inheriting substantial assets compared to previous generations. This shift fosters resentment and alters their aspirations regarding money.

Josh Brown: "There is this inequality now within Millennials that the wealth gap within millennials between the top and the bottom is the widest of any generation."

• Gen Z's Relationship with Wealth:
  While Gen Z grows up in an era of unprecedented wealth concentration, they are also directly affected by economic pressures like high rent and student debt, influencing their attitudes toward wealth accumulation and distribution.

5. Taxation and Wealth Inequality

[62:00 – 76:15]
A critical segment addresses how tax policies contribute to wealth inequality, focusing on:

• Carried Interest Loophole:
  This allows private equity and hedge fund managers to pay taxes at capital gains rates rather than ordinary income rates, significantly reducing their tax burden.

Robert Frank: "They are being taxed as investors and it's a favorable tax rate on the gains when they sell a property or a comp or they have a liquidity event."

• Step-Up in Basis:
  Currently, when individuals inherit assets, the cost basis is "stepped up" to the current market value, eliminating capital gains taxes on unrealized appreciation at the time of inheritance.

Josh Brown: "Let’s say you start a business, you buy Apple stock, whatever it is, you bought it at a dollar, it's now worth a million dollars when you die. The basis of that for tax purposes goes to a million dollars, today's price. So there's zero tax."

The discussion emphasizes the need for tax reforms to address these issues but acknowledges the significant lobbying power of wealthy individuals and families in maintaining the status quo.

6. The Wealth Effect and Economic Implications

[41:00 – 48:10]
Josh Brown introduces his theory on the "Wealth Effect," where the spending behaviors of the wealthy significantly influence the broader economy. Key insights include:

• Correlation with Economic Confidence:
  The wealthy’s spending is closely tied to their confidence in the stock market and their assets' performance.

Josh Brown: "I always say for the wealthy, it's not about the money. It's the mood. They always have the money."

• Impact on Luxury Markets and Real Estate:
  A recession in luxury sectors like art and classic cars indicates shifts in the wealthy's spending moods, directly affecting these industries.

Robert Frank: "The art market was interesting partly because it wasn't so much that the stock market. Because the stock market did so well in 23. I was like, what the hell? That doesn't make any sense."

• New Spending Trends:
  The wealthy are increasingly investing in experiences and private clubs, reflecting a desire for exclusivity and unique lifestyle offerings.

7. Media Representations and Cultural Reflections of Wealth

[53:03 – 84:28]
The hosts analyze how media and popular culture portray the wealthy, drawing parallels with shows like "Succession" and "The White Lotus." They discuss the increasing glamorization of wealth and the creation of exclusive spaces that cater to ultra-rich individuals.

• Exclusive Access and Private Clubs:
  The rise of private clubs with exorbitant membership fees exemplifies how businesses are tailoring offerings to cater exclusively to the wealthy.

Josh Brown: "It's like Planet Fitness with an extra $10,000 instead of $10 a month."

• Impact on Public Perception:
  Such portrayals contribute to societal tensions around wealth inequality, as accessible luxury becomes synonymous with status and privilege.

8. Future Events and Content Highlights

[85:01 – End]
The episode concludes with promotions for upcoming events and content:

• Upcoming Interview:
  Josh Brown is set to moderate an interview with Russ Savage, the founder of Rockstar Energy, at Future Proof Citywide in Miami. The discussion will focus on Savage's transition from entrepreneur to investor.

Josh Brown: "How do you make that transition from entrepreneur to investor is very hard, and he's learning the hard way."

• Entertainment Recommendations:
  The hosts briefly touch upon new entertainment releases, including the movie "Friendship" starring Tim Robinson and Paul Ruddy, and discuss its depiction of wealthy lifestyles.

9. Closing Remarks and Takeaways

Throughout the episode, Josh, Michael, and Robert emphasize the evolving landscape of wealth management, the profound impact of generational wealth transfers, and the societal implications of concentrated wealth. They advocate for greater transparency and reform in tax policies to address inequality and underscore the importance of understanding the wealthy's behaviors and motivations to navigate the future economic terrain effectively.

Josh Brown: "It's the way that the wealthy aren't just getting wealthier. There are more of them and more and more. The economy is sort of roping off an even special version for the wealthy."

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Notable Quotes:

• Robert Frank [01:20]: "There are 8,000 family offices now managing ... $3 trillion."
• Josh Brown [08:46]: "Have to work even, like which I can't imagine growing up wanting to not work..."
• Michael Batnick [25:27]: "A multifamily office is like, we’re your family office, but we’re also the family office for 10 other families."
• Robert Frank [33:40]: "There are multifamily offices ... like, we're your family office for 10 other families. ... We'l deliver the product."

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Conclusion:

"It’s Not the Money, It’s the Mood" offers a comprehensive exploration of wealth dynamics, emphasizing that the psychological state and confidence of the wealthy significantly influence their spending and investment behaviors. By dissecting the mechanics of family offices, generational shifts, and the socio-economic impact of concentrated wealth, the hosts provide listeners with a nuanced understanding of the current financial landscape and its future trajectory.

For more insights and weekly updates on wealth trends, subscribe to Inside Wealth at CNBC.com/InsideWealth.

Transcript

[Josh Brown]

So where did you grow up?

[Michael Batnick]

So believe it or not, Josh and I are both American.

[Josh Brown]

Okay.

[Michael Batnick]

He's older than I am, but we. There was not a lot of overlap. He's like, seven years older than me. So we. We lived across the street from each other for, like, a week when I was, like, 8 years old before I moved out.

[Josh Brown]

So funny.

[Michael Batnick]

So, yeah, we grew up at the same time.

[Josh Brown]

And how did you get into this business?

[Michael Batnick]

I met Josh at a train station. He saved my life. I was really. This was like, 2000, 2008. And I was an in high in college, so I got kicked. I got kicked out of Indiana University.

[Josh Brown]

Who wasn't?

[Michael Batnick]

But I kicked out twice. I was, like, real bad. Did not take school seriously. And so when I graduated, during the crisis, I was like, oh, this is why people go to class. Like, why didn't anybody ever tell me that? I'm, like, sort of kidding, but not like, I was really.

[Josh Brown]

And was it just that it took you a while to understand why you needed it or. I was so.

[Michael Batnick]

I was arrogant.

[Josh Brown]

Okay.

[Michael Batnick]

Because I always did well in my tests.

[Josh Brown]

All right.

[Michael Batnick]

That I always thought I would be fine. And it turns out, like, that's not real life.

[Josh Brown]

Right.

[Michael Batnick]

You know? So spoiler. It wasn't fine.

[Josh Brown]

Right. Right.

[Michael Batnick]

Until I met.

[Josh Brown]

So you met him and. And. But were you interested in finance?

[Michael Batnick]

Oh, yeah.

[Josh Brown]

Yeah, yeah, yeah.

[Michael Batnick]

But it was 2008, and, like, who is hiring an idiot? You know?

[Josh Brown]

Like, I didn't have any skills back then. A lot, actually, doesn't it?

[Michael Batnick]

So this. So. But after the wheels fell off, there was, you know. You know, it was over.

[Josh Brown]

Yeah.

[Robert Frank]

So I only go to Spanish barbers. Yeah. Because they don't want to talk to me.

[Josh Brown]

Oh, they only talk.

[Robert Frank]

They talk to each other. Oh, they are carrying on, like, these raucous conversations. They're laughing, they're gesticulating.

[Michael Batnick]

What did I miss?

[Robert Frank]

And I could just. I close my eyes.

[Michael Batnick]

I feel like I entered the halfway.

[Robert Frank]

So you don't understand this because you don't get haircuts. I'm talking to Robert. Look at his head of hair.

[Michael Batnick]

It's impressive.

[Robert Frank]

This is a. This is a man that knows about.

[Josh Brown]

No, but I don't know the most important thing.

[Robert Frank]

All right. I used to go to hairdressers when I had a lot of hair. Ten years ago, I had hair down to my shoulders. And then I transitioned to barbers because it's almost a joke at this point. But then the problem with barbers is they're really friendly. More friendly than hairdressers and they, you know, they do small talk. That's like part of their. And there's nothing wrong with that. There are some people that love that they like really love to just talk, hear themselves talk, give and take. I hate it more than anything because not. Cause I'm like too good to talk to anyone. I'm not good at it. And I'm like have my topics that I'm interested in. And I don't wanna do weather. I don't wanna do politics. I don't wanna do Yankees. So I realized, oh, is that Michael with hair? It wasn't even good then. By the way, I had great hair.

[Michael Batnick]

I really did.

[Josh Brown]

You know, you look like. Who's the guy that's doing the new White Lotus is doing all the prom.

[Michael Batnick]

Mike Judge.

[Josh Brown]

Is that who it is?

[Robert Frank]

Mike or Mike White? Mike White.

[Michael Batnick]

Mike White. Now Mike Judge is Beavis and Button. I'll take Mike White.

[Robert Frank]

So I had this epiphany. I started going to Seven Stars Barbers in Belmore, New York. And they don't talk to me. They're not interested in doing small talk with me. It's not. English isn't their first language. And they have each other and whatever they're talking about amongst each other.

[Josh Brown]

I would think a guy like you would be like. Once you get the barber indicator of what they're buying or selling, then it's time. I think you would be like, that guy used to be like the shoeshine indicator. But nobody does that anymore.

[Robert Frank]

You know what? Not anecdotally, I guess I'm interested if somebody does a survey. But the one on one stock talk.

[Josh Brown]

Yeah.

[Robert Frank]

Oh, and by the way, and you probably get this. There's an expectation if they know who I am or if they know who you are, what stock should I buy? What's gonna happen with interest rates?

[Michael Batnick]

I was with him at a high.

[Robert Frank]

School and I don't know anything.

[Michael Batnick]

And the ref came up to talking about his stock.

[Josh Brown]

See, I don't get stock. I get two. I get. I have a cool Ferrari. You should come film it. I'm like, wow, you're the only guy that's got a Ferrari. Or. Or they have like some problem. Like, dude, you wouldn't believe what housekeepers in Palm beach are getting right now. It's awful. You got to do a story on it. I actually did a story on it.

[Michael Batnick]

Oh my God.

[Josh Brown]

Actually, you know what's funny about that story?

[Robert Frank]

It's so hard to find good help these days. That's the story.

[Josh Brown]

So I did that story it was the first time I used OpenAI for a headline. So it was a story about how. And this is true, actually. I was like, well, that's bullshit. I found out it was true that housekeepers in Palm beach, because of all the wealth migration, if you were experienced 150 somewhere getting 200 plus benefits, you.

[Robert Frank]

Travel per hour, what, for a year? Oh, a salary. There's salary of the household.

[Josh Brown]

That's right.

[Robert Frank]

Oh, that's next level shit. Yeah.

[Josh Brown]

So I actually, for that article, I just got an open AI. I was like, give me a good headline for an article about housekeepers in Palm beach making more. And the headline came up, Genius cleaning up.

[Michael Batnick]

Oh, that's.

[Josh Brown]

I could. I could never have thought of that.

[Robert Frank]

Which. Which LLM.

[Josh Brown]

I used OpenAI. Now I use Claude more. I haven't used Deep SEQ much. My. My daughters love Deep Seq.

[Robert Frank]

Why do you use Claude?

[Josh Brown]

Claude, I find is good with, like, deeper research stuff. Like, give me the correlation between the art market and the stock market over the past 30 years.

[Robert Frank]

Okay.

[Josh Brown]

It's faster and better with that. Better.

[Robert Frank]

I wonder why.

[Josh Brown]

I don't know. It's just my, My. So my older daughter is studying AI policy.

[Robert Frank]

Okay.

[Josh Brown]

And so whenever there's like, I have an AI question, she's like, oh, use Claude for this. Use OpenAI for this. Use Deep SEQ for this.

[Robert Frank]

Oh, that's interesting.

[Josh Brown]

Yeah.

[Robert Frank]

Do you know about the Claude boys?

[Josh Brown]

No.

[Robert Frank]

You don't know about this Jean Claude?

[Michael Batnick]

And who's the other one?

[Robert Frank]

No, this is like a real thing. There's like this group of boys who walk around with Claude open on their phones all the time.

[Josh Brown]

Yeah.

[Robert Frank]

And they ask it what to do, and they will only, like, make a decision if Claude says to do it.

[Josh Brown]

But you can't just ask it what to, like, you mean? I'm here at a store. I'm interested in getting brownies. Brownies or something.

[Robert Frank]

Yeah, yeah, yeah. Dude, they love. They. They love Claude. Like, they're.

[Josh Brown]

It's. It's very fast.

[Robert Frank]

It has the most personable user interface, which is kind of true. Why I think it's like that.

[Josh Brown]

It's also so damn quick. It's just like, terrifying how quick it is.

[Robert Frank]

Yeah. So are you gonna be a Claude boy?

[Josh Brown]

I don't know. I'm gonna check it out.

[Michael Batnick]

So, Robert, how did you get the B covering wealth? I know I just met you, but, like, did you grow up in this world?

[Josh Brown]

Like, not at all. So I grew up. My parents were hippie artists. I grew up in the Hudson Valley. So my dad was literally like a starving artist. We had no money. And so the family I grew up in, the main value was creativity. Can you see? Discover things that no one else is seeing or see things in a different way. And money was just. It wasn't that we dislike people with money. It just wasn't a value. In my family, I grew up with artists, with writers, with painters. So the arts were really important.

[Michael Batnick]

Music and people with money were assholes growing up.

[Josh Brown]

No, no, they were people that supported the arts. So we knew that they were like, they provided a positive for my dad and his friends. They were the guys at the galleries buying the artwork. So it wasn't like we hated them.

[Michael Batnick]

They were necessarily evil.

[Josh Brown]

They were. Yeah, exactly, Exactly. No, that's probably right. My point is like, I didn't grow up with a strong view one way or the other. It just wasn't in my value system. So. But I was very, you know, look, I grew up in the 80s, so we all, you know, the yuppies, you know, we all sort of grew up with a very positive view of success making money. It's different from this younger generation today which has a probably more skeptical, broader view of wealth and inequality.

[Robert Frank]

Do we really think though? So I think they appreciate wealth, but I think they place a higher amount of cultural cachet on people who have won it versus earned it.

[Michael Batnick]

Wait, what do you mean by that?

[Robert Frank]

People that have figured out a loophole.

[Josh Brown]

I agree with that.

[Robert Frank]

Or a bet. Or they risked everything. Like even the streamers, like the biggest entertainers for people, let's say between the ages of like 14 and 29. Right. So I guess that's Gen Z, sort of. Or 27. So they appreciate people who are gambling 24, 7, playing video games for money, finding loopholes that enable them to like pull a hat.

[Josh Brown]

Beating the system. Beating the system.

[Robert Frank]

Beating the system.

[Josh Brown]

That's right. And it's so funny you mentioned that because I've been thinking a lot. You know, @cnbc.com, we have this make it section which is hugely popular. And most of the make it articles are like, this 26 year old is getting passive income and living in Mexico because he bought this vending machine company or something when we were growing up.

[Robert Frank]

But it's a trick.

[Josh Brown]

It's a trick, it's a hack. It's beating the system. And they're all about people retiring or making passive income at the age of 25 or 30, something being done with.

[Robert Frank]

Having to listen to that being done.

[Josh Brown]

Have to work even, like which I can't imagine growing up wanting to not work, that my goal was not. I wanted to find work that I loved, that was stimulating, that had a connection to what I was good at, that that would help somehow communicate to others, maybe change the world. Probably not, but the idea that my goal was to sit in Mexico and collect money from vending machines, do they.

[Robert Frank]

Grow out of that mentality? Or it's totally.

[Josh Brown]

I don't know what. But it's also like, there's more fondness for even criminals that have beat the system. They respect people who. I won't name names, but that have been arrested and charged, and they love these people.

[Robert Frank]

Yeah, no, it's no shit. It's not a shame.

[Josh Brown]

It's like what you said about Wolf of Wall Street. Let's talk about the victims of these crimes. Leo DiCaprio, just like Wall street, the movie. Like, Gordon Gekko was not. Oliver Stone, as you said, was not supposed to be a hero.

[Michael Batnick]

He was an inspiration.

[Josh Brown]

He became liars. Poker was the same way. But I think this generation takes it to an extreme where they actually respect and admire people who break the law, who. Who find a way to get back at the institution's demand, whether it's the government or Wall street or banks, and find their own way of doing it.

[Robert Frank]

I wonder if that's immaturity or that's just Internet culture. And it was like always trending in that direction. And then I remember seeing an Instagram post where Drake met Jordan Belfort. And Drake was like, it was like a big deal to Drake. And it's like, wait a minute, didn't you just spend the last 20 years, like, performing and acting and touring the world and you're excited to meet this.

[Josh Brown]

Guy, but what about hard work and all that it brings? Not just that, it's actually a more realistic way to get sustainable wealth and become really wealthy, but what it gives you in preparation once you get that wealth.

[Michael Batnick]

But the Internet did that. The Internet did that.

[Robert Frank]

But they're not clicking on that. They're clicking on the shit. They're clicking on things about generational wealth.

[Josh Brown]

Yes.

[Robert Frank]

Like, they're more. It's so crazy. You have 19 year olds so this word, generational wealth.

[Josh Brown]

They're more.

[Robert Frank]

But they want generational wealth.

[Josh Brown]

All of a sudden I hear all these athletes talk about generational we. I'm like, dude, if you can even make it. If you can even make it to retirement without going bankrupt, good for you.

[Robert Frank]

So I think this is Internet culture. It's feeding them all of these stories and some of them are real about people who have tricked the system or found the workaround. And that exists. You think about people buying Bitcoin at $50 per coin. They'll never work again. It's all real. Yeah, but like, those are the heroes. Yeah, and I don't. I don't know that. And I don't know that that's permanent because the Gen zs will turn 30 one day and they will have lost a lot of money in scams along the way, and they'll realize, oh, that's not how you do it.

[Josh Brown]

Well, we can. You know, one of the things I always tell people that surprises them is, you know, they say, like, well, how do most people get rich? And they think it's celebrities, they think it's rock stars, they think it's somebody who traded crypto because that's kind of what they see on Instagram. And yeah, it's the guy you've never heard of who built a packaging business or built a real estate business in Nashville. Nashville. All his life. Maybe his dad started it. He inherited a small stump of a business and grew it out. And you own a private company. How do you get rich? You start a private company, you build it, sell it. Here's the key. Exactly.

[Robert Frank]

I'll give you.

[Josh Brown]

You sell it, and. And it's just like. But that formula is gone.

[Robert Frank]

No one know that. I'll give you a guy. This is a guy. Adam Weitzman. This should be the guy that Gen Z emulates. He's our age or he's older than us. This is a guy that had a. Like a. A garbage collecting business. Like scrap. Scrap metal. I love that in Syracuse. But he's the most lit. He is the most lit person I've ever seen.

[Josh Brown]

That's awesome.

[Robert Frank]

On Instagram, all his friends are rappers and basketball players and celebrities. He's like a big donor to Syracuse.

[Josh Brown]

Did he inherit it, though? Did he like. Did his. I guarantee his.

[Robert Frank]

I think he. I think he went to prison or something.

[Josh Brown]

Awesome.

[Robert Frank]

So this is like the perfect role model. No, but if you follow this guy and his family on Instagram.

[Josh Brown]

Yeah.

[Robert Frank]

This is real wealth. Yeah, this is like a. A business that's not glamorous at all, but he turned it into glamour to the point where he's like, at every restaurant opening, like, that's who Gen Z should emulate. It's like, totally. This guy has a business that he spent 30 years to build. It only looks like overnight you're gonna.

[Josh Brown]

Have him on ownership.

[Robert Frank]

Maybe. I don't know, I don't know how to get to these people.

[Michael Batnick]

Let's go.

[Robert Frank]

I'm not as. I'm not as good at you at getting. Getting to these people.

[Josh Brown]

All right, Coming in with three claps.

[Robert Frank]

All right. This is so exciting. Hey, throw these on.

[Josh Brown]

He's.

[Michael Batnick]

He's not going.

[Robert Frank]

He has one.

[Michael Batnick]

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[Robert Frank]

Welcome to the compound and friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz 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 the very best podcast in all the financial media. I say that I hesitate to say it. I feel bad having to repeat it, but I listen to other shows and it's just. It's so much mid and it's. Listen, it's nobody's fault. This is not easy to do. We have an incredible staff. Nicole is here today. Daniel is here. John is here. The founding father of this channel, Duncan. Duncan is. Don't shake your head. You know what you've done.

[Josh Brown]

Do you have to have a beard to be on that side?

[Michael Batnick]

Duncan's Hour. Ben Franklin, look what you've done.

[Robert Frank]

All right, you guys. I am so excited for today's show. We cleaned the studio up extra nice because our special guest is a fastidious Man, I think I have to.

[Josh Brown]

Pretentious probably.

[Michael Batnick]

He didn't know you grew up as a hippo.

[Robert Frank]

Well, now I know the real story. Robert Frank is an award winning journalist and best selling author. He joined CNBC in May of 2012 as Wealth Editor. Prior to CNBC, Robert spent 18 years as a reporter at the Wall Street Journal. That's where I first started reading your stuff. What was your original beat when you were writing?

[Josh Brown]

So I started journal in 1994 and my original beat was air cargo. I was covering FedEx and UPS down in Atlanta. And then I moved, started covering Coke and Pepsi. Then I went to London and covered Eastern Europe and they sent me wherever there was trouble. I covered the Northern Ireland peace process.

[Robert Frank]

Oh wow.

[Josh Brown]

I covered the embassy bombings in Africa. And then in 1997 when there was the Southeast Asian currency crisis, the Thai baht was devalued. They're like, southeast Asia is a shit show. We need somebody there. I was about to come back to New York. So in 1998 I went to Southeast Asia. I was covering the Philippines. Indonesia was going through all these upheavals. So I was like, that was real foreign correspondent land where I'm in kind of at that point, dodgy situations covering 14 countries. I loved it. Came back to the US and I was on the M and A beat. Now remember at the time, this was in 2000, 2001, the M& A beat after Steve Lippin and Nick Diogan was the premier beat in financial journalism, let alone the Wall Street Journal. It was the hyper competitive you were competing against.

[Robert Frank]

Wait, Deoghan came from the M and A beat at the Journal?

[Josh Brown]

Yep. Diogen and I started the same month in Atlanta together. So we go way back.

[Robert Frank]

Nick Diogen was running CNBC when I first. That's right when I first started appearing there.

[Josh Brown]

Okay. And so I started covering mergers and acquisitions and I was competing against Andrew Ross Sorkin at the New York Times and David Faber at cnbc. It was. It's tough, it's tough. But I loved it because I got to understand how Wall street works because you're dealing with investment bankers, but you really want to understand the whole ecosystem of Wall Street. So that's, that's kind of really.

[Robert Frank]

That was the LBO era of M and A.

[Josh Brown]

There's a lot of lbo, a lot of, a lot of club deals and private equity. I mean there wasn't much because it was right after the dot com bust, but exactly. Right. So I, so then I said, look, I'll do this for Three years I finished. I was doing my last story for M and A was a comp story, compensation story. And I got this chart on how much, how many Americans were worth. 5 million, 10 million. And I just got the research because I was interested in like where Wall street guys stacked up, right? I was like, holy shit. The numbers of people worth 5 million, 10 million, 100 million, they had all doubled in seven years. And look, we all know that there was wealth created. We all know that there was like coming back to the US after being overseas for seven years, I just saw how much wealth there was all of a sudden.

[Robert Frank]

Yeah.

[Josh Brown]

And so I was like, I went to my editors and I said, give me one year, I want to start covering wealth. And I'm like, what?

[Robert Frank]

You know, what do you mean by wealth?

[Josh Brown]

What do you mean by wealth? Don't we already cover like making money? There's Forbes. I'm like, no, no, I'm going to go at this to try to figure out where the wealth and how the wealth is being created. Who are the new wealthy? What does that economy look like that's growing up around them?

[Robert Frank]

Because we're talking the services economy.

[Michael Batnick]

So you were covering the people behind the companies.

[Josh Brown]

Exactly, exactly. And so my first article was in 2004 and I went down to the Fort Lauderdale Yacht Show. And the goal was to show how yachts had gotten so much bigger so quickly. And I was down there sweating in my suit for three days. It was 90 degrees. No one would talk to me. That's the other thing about this beat. Like for years no one would talk to me like, hi, you're rich. Can I talk to you about your money? Yeah, sure.

[Michael Batnick]

It used to be taboo.

[Robert Frank]

Yeah, well, have you seen that kid that walks around with the little microphone? Yeah.

[Josh Brown]

I was like, now they're all talking. I don't know why I didn't think of that. I was genius, that guy. What do you do for a living? I mean, that's.

[Robert Frank]

Well, because he's not. He's in a T shirt.

[Josh Brown]

I know.

[Robert Frank]

And he's dishonoring. He doesn't have a camera crew.

[Josh Brown]

I know, I gotta change my clothes, get rid of the cameras and be younger, be four years younger.

[Robert Frank]

Some of those guys say no at first and he persists and he gets no.

[Josh Brown]

He's very good. He's a genius. So I finally got him, he had a hundred foot boat. And he's like, you know what? When I got this boat, this guy from Cincinnati started on his business. He's like, when I got this Boat. It was like I was special. And now he's like, look. And literally next door, and there was a 250 foot boat. Paul Allen was building his 400 foot boat. And he's like, it's like a dinghy. And so he said, it's almost like a whole other country. A separate country.

[Robert Frank]

Yeah.

[Josh Brown]

I was like, ding, ding, ding. Like the rich have created their own country. In terms of the economics, in terms of what's a priority to them.

[Robert Frank]

Well, it's called. It's called Southern Florida.

[Josh Brown]

Yeah, it's that. And it's New York and it's Aspen and it's the Hamptons and it's all these places, but they have become a virtual country. And so the way I started the beat was I loved being a foreign correspondent, but I didn't like traveling anymore. I was exhausted. So it's like I could look at wealth. I could cover it like a foreign country, but not have to travel out of the country. So my whole concept for covering wealth and naming Richistan, which is the name of my first book, was it's a foreign country and I should cover it just like I did Albania or Thailand.

[Robert Frank]

Yeah. Here are their customs.

[Josh Brown]

Exactly.

[Robert Frank]

Here's their language.

[Josh Brown]

Get the maps, get the language and tell it. Explain it to people who don't live there. That was the goal.

[Michael Batnick]

So, Robert, I was talking with Ben in the pod this week. Like, when you think rich, do you have like a dollar amount or is it 10 million? Okay, that's it.

[Robert Frank]

Okay, 10 million liquid or just 10 million investable assets?

[Michael Batnick]

Invest.

[Josh Brown]

Yeah. Because I mean, yeah, if you own a private company and if you sold, it's worth 10 million. You know, your lifestyle is probably not. You're probably $10 million probably pulling 10 million liquid. Yeah, I probably have to change that. I probably should update it to 30 million. Because just in terms of numbers, since when I started, there are now around 450,000 people in the world worth 30 million or more.

[Michael Batnick]

That sounds insane.

[Robert Frank]

Yeah, around the world. But that's 7 billion people. I know, but that's.

[Josh Brown]

No, but in the US. In the US it's about 240,000.

[Robert Frank]

That's insane to me.

[Josh Brown]

240,000 people of a population of 240,000 people worth 30 million or more. So I should probably. You know, the way I look at it is I cover the ecosystem, the economy, around the wealthy. That's wealth management. It's philanthropy. It's the art market, the car market, private jets, private jets. It's all that stuff. It's you know, insurance, it's luxury real estate. And really the people that are in that world buying a Ferrari, buying a penthouse, buying these, you know, really a private bank client of JP Morgan, it's, it's really 10 million, you know, to probably more like 25. So I should probably update that, I should inflation adjust that.

[Robert Frank]

Let's not bury the lead here because you've launched something new and I'm really excited about this. CNBC's wealth editor and bestselling author of A Journey through the American Wealth Boom will expand his efforts to report on the booming business of family offices and high net worth individuals. And so you've got this thing Inside wealth newsletter and you're gonna be going, it sounds like deeper and wider. And then CNBC notes the population of the ultra wealthy, 30 million or more, has surged 50% over the past five years and the number of family offices has tripled. So it's trillions of dollars. Everybody wants to do business with these people. Everybody wants to be in their orbit or marry somebody in their orbit. And you note as over 100 trillion gets passed down to heirs as part of the great wealth transfer. Inside wealth will chronicle how the next generation and women are changing the landscape of wealth and philanthropy. So there's a lot going on. How are people gonna receive your stuff? It's an email or it's okay, it's a regular letter.

[Josh Brown]

Yeah. And let me tell you what the idea behind it was. So I've been at CNBC for 12 years and a lot of what I do, I do two things. When I came to cnbc I was like, look, I'm not gonna become a TV person. I have no aspiration of being an anchor, of being a TV person. I'm a reporter and writer that appears on TV once in a while, probably less than you do, but so I've always been writing and I've always been covering wealth stuff because CNBC is mainly a stock investing channel now. I cover the luxury companies, so I cover LVMH and Hermes and Richemont Kering and all that stuff. I cover Ferrari, which is now a publicly traded company. I cover, you know, things that Sotheby's used to be public. I do cover high end real estate because real estate's interesting, but I have this whole other kind of life online. What we decided to do in the last year was to really become more essential to the audience that I have, which is a very special audience. I mean, having covered this for 20 years, Forbes is kind of falling apart. The Wall Street Journal covers Wealth occasionally, but it's not packaged or delivered or covered in a predictable way where you're like, okay, every week or every day I'm going to get something about what the wealthy are doing with their money.

[Robert Frank]

They'll do like a trend feature, but it's not occasional, it's occasional.

[Josh Brown]

Same thing with the ft, same thing with Bloomberg. They all kind of COVID it. And they would say they cover it.

[Robert Frank]

And, and Rob, Rob report.

[Josh Brown]

Rob report. Also the best five best beaches. You know, like, I'm not the five best beaches.

[Robert Frank]

That's right.

[Michael Batnick]

Do you know who your audience is? Like, is it aspirational wealth or is it the wealthy?

[Josh Brown]

So it's the wealthy.

[Robert Frank]

It's Barry Rithole.

[Josh Brown]

So I was actually surprised at how many of the wealthy love comparing themselves and finding out, number one, what I do is like, I cover the art market. I cover these markets that they're in and they're interested in and their friends are always talking about it. So like the $6 million banana, like, what the hell was that? I explained it and I explained what's happening in the art market. The recession in the art market. Watches cars. So the wealthy like to watch me. Because at cnbc, we cover the spectrum of money from the bottom to the top. I'm the top. What we decided to do was say, look, how can we become. We have a very special audience. It is the wealthy, but more importantly, it's people that serve the wealthy. It's wealth managers, it's family offices, it's multifamily offices, it's people in philanthropy. When I, when Richards Ham became a bestseller, you know, this is before we had like good Internet data and ebooks. I was like, who is, who is buying this book and why? Because it was like it blew up and we publisher was like, it's so well written. I was like, no, it's not. Because with all due respect, you know, it's not because I was telling.

[Robert Frank]

Right. Bonfire with the van.

[Josh Brown]

No, no, absolutely not. Although that is one of the great books of all time, maybe even the greatest, but maybe next to Gatsby, maybe those two, Those two are the greatest books about wealth, fiction wise.

[Robert Frank]

Yeah, I think so.

[Josh Brown]

But. So when I, when I went out and started talking to people, getting emails, it was mostly wealth management people. And they're like, you taught me about the clients. I don't have. You're showing me the clients. I know my own clients. But you were telling me where wealth is being created, that I'm not seeing the types of people that I'm not.

[Robert Frank]

How they make decisions, how they make.

[Josh Brown]

What their life is like. So I was like, holy shit. This is actually useful to somebody. So Fast forward almost 20 years and now because my content is actually useful to people, any company in the world that either wants a high net worth client or has high net worth clients wants to know what the wealthy are doing with their money.

[Michael Batnick]

So this is a good segue to what you're writing about, which is the explosion of family offices. Because back in the day these ultra rich individuals would work with like the private bank or maybe the advisor. And now they're just doing their own thing.

[Josh Brown]

Why do you think that guy, why do you think that's happening, both of you? Because, because I have my theories. But I'm curious from your perspective, why.

[Robert Frank]

Are people hiring their own in house cfo.

[Josh Brown]

Yeah. Instead of saying F you to the.

[Michael Batnick]

System, I think first of all, they could afford to.

[Robert Frank]

Wow. I think there's a vanity factor is number one. Number two, their kids are less and less useful. So they're less useful. Listen, they're doing bill pay for the grandkids. Like they're. They're paying car leases. Adult. There are adults in this country who have never been. They have never lifted a finger for themselves and can't do anything. So part of the family, the family office is not like, oh, we're gonna pick better ETFs than JP Morgan. Right. The family offices will wipe your ass. So there's an element to that also.

[Michael Batnick]

They don't wanna be captive. Right. To just be beholden to one bank's products.

[Josh Brown]

Yep.

[Michael Batnick]

What do you think? You sound like you have a great reason.

[Josh Brown]

No, I think all of that is absolutely true. I think the growth in wealth, I think the amount of responsibilities that they have, complexity for a growing family. I think what happened, what I'm told from family office now I wrote my first family office article was in 2005 and it was about how family offices, to your point had become a status symbol. It's like I got a family office and the investment part of it was sort of secondary to the fact that you had this private company that handled all your shit. Like whether it was the private jet fleet or the kids school or whatever. What I think happened was after the financial crisis a lot of wealthy people were like, I just got hosed by my private bank. My advisor really didn't have my back. Whether it's Morgan Stanley, Goldman Sachs, they really screwed me. I need my own person that actually understands this stuff. I was at a meeting that only works for me, literally, truly represents my interest.

[Robert Frank]

But don't you see how good or how bad that could be?

[Michael Batnick]

For who?

[Robert Frank]

For the buyer.

[Michael Batnick]

For the family office.

[Josh Brown]

For the family. Why do you have your own quarterback? Why is that?

[Robert Frank]

I know a lot about this world.

[Josh Brown]

So tell me. Okay, tell the audience.

[Robert Frank]

I know a lot about this world. There are incredible family offices, like where they recruit top notch talent, people coming out of Goldman and great banks that are doing such high end work that the client says, how much do I have to pay you for you to not deal with anyone else? Just come work for me. Yeah, that's the good. That's the dream scenario. And that exists.

[Josh Brown]

Yep.

[Robert Frank]

And. And there are really impressive people in the family office world. That's like for billionaire families. Then there's this sort of like next layer.

[Josh Brown]

Yeah.

[Robert Frank]

Where it's a family office and they're like almost duplicating an investment bank.

[Josh Brown]

Right.

[Robert Frank]

It's like, oh, we have somebody here that does M and A. Why? We have. So we have someone here that does stock picking. Cfa.

[Josh Brown]

Right.

[Robert Frank]

Who's meeting with companies and listening to conference calls. So is that like we have a venture person. We have this, we have that. So I met the family office people and they're very serious and I think, I'm sure they do a great job. They work.

[Michael Batnick]

They're family office people.

[Robert Frank]

They work for. No, I'm talking about a specific group. This is hilarious to me. They work for one of the biggest retailer families, but it's like the fourth generation and they no longer own this storied like department store.

[Josh Brown]

And it's not Walmart.

[Robert Frank]

No, no, no, no, not quite. That's billionaire.

[Josh Brown]

Yeah, yeah.

[Robert Frank]

So they have this whole office set up and they're like explaining how they're different from an ria. And I'm listening and I'm like, all right, I sort of understand it. So you guys aren't like a fee based, like an AUM fee? Like we are. He's like, no, what we do is we come up with the budget of what it's going to cost us to run this family office each December for the next year. And we calculate the salaries of the people and the equipment and the travel and all this stuff. And I'm like, so what does that work out to? That's like 1%. Right, but so my point is, I think the faster growing trend than family ownership.

[Josh Brown]

Yeah, but what's the incentive for him versus the products?

[Robert Frank]

Well, here's the problem. Here's where I've seen it go really wrong. You have someone in your life that knows everything about you.

[Josh Brown]

Yeah.

[Robert Frank]

You become wholly dependent. Your whole family becomes dependent on this person. And they're also involved in your investments. And let's say they're only really good at moving money between banks and answering your phone, but they're not good at the investment part.

[Josh Brown]

Yeah.

[Robert Frank]

So now you can hire another person.

[Josh Brown]

Right.

[Robert Frank]

Or you're going to have that person oversee these people.

[Michael Batnick]

Yeah.

[Robert Frank]

You almost can't get rid of this person from your life. And I've seen this too.

[Josh Brown]

Yeah.

[Robert Frank]

And a lot of very wealthy families are saying, hold on. We got wealthy because we wanted to maintain independence. Why do we want to have W2 employees again?

[Josh Brown]

Right.

[Robert Frank]

Like what? Why do we want to build the structure that now relies on us? That sounds like going in the wrong direction.

[Josh Brown]

Right.

[Robert Frank]

And so what I wanted to tell you, multifamily office, I think, is the real trend that will emerge from this and define that. Well, we're running a version of it. A lot of RIAs are. What is it a multifamily office is? We're your family office, but we're also the family office for 10 other families. We're going to take the knowledge that we learned from working with all of you and wield it on your behalf. And you don't have to go to sleep at night thinking that we're a wholly dependent employee of yours. Like, if you go away, we'll be upset, but we're not your subsidiary.

[Josh Brown]

Yeah.

[Robert Frank]

Like, we'll be fine one way or the other. And I think that's liberating for a wealthy family to not be in this.

[Josh Brown]

Situation if you can truly deliver the product. And secondly, if you can truly prove to them that you have their interests. And we should also tell people, just like if people think, oh, family office, this is some obscure, tiny corner. There are 8,000 family office. 8,000 family offices now managing or total single family offices. 8,000 that has more than doubled over the past 10 years. They're managing $3 trillion.

[Robert Frank]

So we have that chart. Let's. Let's put.

[Josh Brown]

Let's put that managing $3 trillion. Now that.

[Robert Frank]

That is expected is what you're referencing.

[Josh Brown]

Yeah. There we go. So that's going to grow to 10,007. Now, if you look at the dollars actually next to that, the dollars grow even further. So right now there's estimates that they manage somewhere. Aum for them is around 3 to 4 trillion dollars. Going to go to at least 5. So I know people often say, well, they manage as much or will manage more than Hedge funds. Now a lot of them invest in hedge funds. So that's like double counting.

[Robert Frank]

It's the same money.

[Josh Brown]

Some of it's the same money. But if you look at what they're investing in, startups, you know, we now have a deal tracker where we look at family offices and what startups people, the big ones like Bernard Arnault family office, Jeff Bezos. So we had some great stories looking at what AI startups have. Jeff Bezos Eric Schmidt, Bernard Arnault invested in over the past year. And so you can look at all those companies. Eric Schmidt's invested in 22 private AI companies. So they are becoming a force now. They're not doing leverage buyouts yet. The big trend is toward direct deals, direct private equity, as you know, alternatives. So private credit, they're less interested in private credit now than they were three years ago because the returns are crap and the product is not as good. But they are becoming a bigger force just because again, it's somewhere around 3 to 4 trillion in assets and will grow over time. So it's a pretty serious player.

[Robert Frank]

There are sports owners with their own family office and it's a necessity, I think, if you're a wealthy family and part of your wealth and part of your life is spent owning a sports franchise, there's so much peripheral business around that franchise that you need people in house that work directly for you and not for the team. But like, these are my people that keep track of my share of what's coming from the team. That has to be a family office. There is no organization that's set up to service you.

[Josh Brown]

That's right.

[Robert Frank]

But I know some of these guys and they are doing M and A with their own private money because they love. If you got rich making deals, why would you want to spend your time as a rich person not doing deals and being on the sidelines?

[Josh Brown]

Well, and if you spent your, if you made your money in the restaurant business or in, in the retail business, you know it, you know it. And so you go find a private company, you invest. Not only are you giving capital that's very patient, much more patient private equity, we want out in seven years. Family offices are like, we want 20 years. But I'll also help you because I started a successful retail company or food company or whatever. And so you get, you get the patient capital and you get the management expertise. And the challenge to your point is they don't have the due diligence capabilities that a lot of the ibs have when they're doing these Deals. So the big thing now is club deals. So, you know, it's a club deal is like you have three buddies that all have family offices at the golf club. You're like, hey, a guy has a building in Boca, and we. It's. Where is it going to become a new distribution center or whatever?

[Michael Batnick]

You went for a mill.

[Robert Frank]

You form. You form an LLC and you go in together.

[Josh Brown]

And because it's like, oh, it's my friend, they're all doing this. I just don't know how that's going to work out over time.

[Robert Frank]

They don't care, though, because this is the part you're leaving out. They probably can't do the same level of due diligence. But if you have a B. Yeah, they don't.

[Josh Brown]

They don't care.

[Robert Frank]

Who gives a shit?

[Josh Brown]

Yeah, they don't. They don't care.

[Robert Frank]

This worked. That worked.

[Josh Brown]

That's true.

[Robert Frank]

Who are you measuring yourself against?

[Josh Brown]

That's true.

[Michael Batnick]

So is there a level of wealth at which you think the single family office makes sense? Because if you are. If you're a billionaire and you're traveling and you've, like, you, you know, you need your bills paid, you need your travel coordinated, you need all your cash flows and this and that.

[Josh Brown]

The cutoff used to be 100 million when I started covering it. Now I think now it could go two ways. Some people say the cutoff is now lower because technology allows you to do so much automated now that you don't need a full staff. So there's some people that say you could actually do it for less than 100, but then it's machines, and then it's like, what are you really getting? I think it's more like 150 to 2, where, you know, that 1% that you'd be paying someone else starts to make sense. You know, it's like, okay, that's $2 million you're spending on a family. What kind of talent can you really get for a staff with $2 million? Yeah, so I think it's really like 150 to 2. But 100 million is what most people will say is the cutoff.

[Robert Frank]

More interesting to me is where is the line where Rias can't encroach? Like, so will Rias get involved in travel agency, like, activities? Probably not. Maybe that's the line. Will Rias get involved in selecting a physician or insurance?

[Josh Brown]

Insurance solutions.

[Robert Frank]

Well, so insurance, yes, but it's.

[Michael Batnick]

But the concierge services, I can't do that.

[Josh Brown]

No, but you can have somebody who knows how to do that. And you can have a network, you can have a network of solutions that are just for this group. And I'm curious to you guys, one thing I can't figure out is if you had a pie chart of who manages the money for people worth 10 million or more.

[Michael Batnick]

Advisors.

[Robert Frank]

Yeah.

[Josh Brown]

Percentages go through. What do you think it is for private banks, the wirehouses, the RIAs versus like what do you think that looks like and how is it changing? I can't figure out. Are the private banks losing share to IRAs? Are they IRA roll ups like really.

[Robert Frank]

Capturing shares to a certain level. So I think 25 million and up, the wirehouses are in really great shape.

[Josh Brown]

Okay.

[Robert Frank]

Because there's a lot of lending and a lot of money movement involved. 25 million and up, number one. And number two, the source of wealth for that cohort is probably related to investment banking activity. It's probably either M and a or an IPO. That's how you get to 25 million.

[Josh Brown]

Yeah, totally.

[Robert Frank]

Okay, so the wirehouses are in really great shape there. They have a lot of these businesses that cater to companies that have just gone public and oh, we'll refer you to our wealth guy and our tech. So they're really, really good at that. 25, 10 million to 25 million is an RIA business. I think unquestionably we're better at the wirehouses there because our pricing is more transparent. We're not selling them. Bullshit. We're not selling them. The fourth best private equity fund because we have access to it. I think we win there. 10 million and under is a real knife fight because then it's like Ameriprise and like insurance companies. It's the private bank at J.P. morgan and J.P. morgan has five different private banks.

[Josh Brown]

What you just described though is exactly why I get a calls from people who've just had a liquidity event. They sold something for it could be 300 million, could be 30 million. And they look at this landscape and they spent their whole life just living their business. You got to be obsessive just about your business. All of a sudden you've got this liquidity and they're like, I don't know what the hell to do. I've got five different kinds of companies all telling me they have holistic solutions to my entire wealth management and planning. My family, multi generation.

[Robert Frank]

They all say they have it the same buzzwords.

[Josh Brown]

It's the same buzzwords. But to really figure out who delivers, you have to become a client first and then it's Too late. So what we just talked about is, like, people think, you know, look, it's a great problem to have, but when you focused your life on building wealth in a business, and then all of a sudden you have to invest it, people screw up because it's so hard.

[Michael Batnick]

It's hard. And at that level, you can't ask your friend for a referral, hey, who's managing your 300 million?

[Robert Frank]

You have to. The first question is like, what are the incentives? If you're. If you're facing.

[Josh Brown]

Yes, exactly.

[Robert Frank]

If you're facing five different people who are all saying, we're going to do generational wealth transfer, we're going to do taxes, we're going to do insurance solutions, we're going to do holistic, whatever. Okay. How do you get paid? And if the answer is, well, it's complicated. And then somebody's like, you're the only person who pays me that. Like, for me.

[Josh Brown]

Yeah.

[Robert Frank]

And that's why we set up the business the way that we did.

[Josh Brown]

Right.

[Robert Frank]

For me, if you can look someone in the eye and say, that's you're my only payer.

[Josh Brown]

Yeah.

[Robert Frank]

I can't get paid by anyone. I can't send your money somewhere for.

[Josh Brown]

A rebate and then explain to them what your incentives for getting paid.

[Robert Frank]

And that helps too, of course. All right, let's talk about the wealth effect.

[Michael Batnick]

So, Robert, Josh is a big wealth effect guy.

[Josh Brown]

Okay.

[Robert Frank]

And I think it explains everything.

[Michael Batnick]

Okay. I think that the level of spending has less to do necessarily with the value of real estate or what your cash is paying or what your 401k is. I think it's the economy, which is maybe sort of saying the same thing, but it's like, if Americans have a job, they will spend all their money.

[Josh Brown]

Yeah.

[Michael Batnick]

And I think it's as simple as that.

[Josh Brown]

Going back to Richistan, there are two economies, or probably like five. But to Josh's point, and I was a believer, I continued to say there's.

[Robert Frank]

Only a lot to know about the first two.

[Josh Brown]

Yeah.

[Robert Frank]

That'S a third.

[Michael Batnick]

I wasn't listening.

[Robert Frank]

There are five economies. I'll tell you about two of them.

[Josh Brown]

I've written about the wealth effect. I believe in it, but I believe in it because it relates to the people I cover. Now, most Americans get their wealth and their consumer confidence from two things, their income and their house. Mostly their income until you get to the top, like 10%. That's where asset values and the stock market start. Now, the reason it's the wealth effect is probably more pronounced today. Than it has been in the past is because the wealth wealthy account for the top 10%. As you've reported and repeated own about 87% of the stocks.

[Robert Frank]

It's a K shaped economy. It's a K shaped economy.

[Michael Batnick]

Did you notice any pullback in 2022 of these mega wealthy spending?

[Josh Brown]

100%.

[Michael Batnick]

Really? Okay, okay, so tell me more about that.

[Josh Brown]

Give me some examples. The art market went into a recession.

[Robert Frank]

In 22 because the NASDAQ.

[Josh Brown]

It was a little bit delayed. It was a little bit delayed because the big art sales are planned six months in advance. But it started to happen in the back half of 22 and certainly happened in 23. Classic car market, the art market, Rolexes. Rolexes crashed in price. And now some people in the watch market was highly correlated to crypto. A lot of the guys in watches were crypto. So that was kind of related. But. But that's what happened there. The art market was interesting partly because it wasn't so much that the stock market. Because the stock market did so well in 23. I was like, what the hell? That doesn't make any sense. It was because interest rates were so high. The opportunity cost of then buying a painting versus putting it in 5% risk free. Competition was competition. But what happened in 2022 is all these collectibles markets went into the tank. Now real estate was very location specific. But real estate suffered. It started to suffer a little bit as well at the very high end. Look, I always say for the wealthy, it's not about the money. It's the mood. They always have the money.

[Robert Frank]

The desire to spend it is different.

[Josh Brown]

It's the confidence that is highly correlated. So when I worked at the Wall Street Journal, they were like, okay, you're going to cover. Where do you want to sit? I said, I want to sit where I was sat in the money investing section in the markets groups. Because the markets group is my people. It's how they feel every day. Because they're so tied to the stock market, even if they have a private company, they're going to look at the values of similar companies or their investments. So I think that the wealthy.

[Robert Frank]

You want to be right next to Jason Zweig.

[Josh Brown]

Exactly.

[Robert Frank]

And write about Lamborghinis.

[Josh Brown]

He's the best. He's the best. He thought I was hilarious. He's great. And I love Jason with him.

[Robert Frank]

Absolutely.

[Josh Brown]

So I think the wealth effect is important for the most important group of consumers and investors. Right now. The top 20% account for over half the spending. That's probably even More true today with inflation than it was before. But if you look at, you know, so there is no such thing as the economy, which is why. And one of the reasons I started inside wealth is because it's irrelevant what the economy is doing.

[Robert Frank]

Do you think there used to be an economy?

[Josh Brown]

More of it? Yeah. In the 50s and 60s there was certainly, you know, we all rose together.

[Robert Frank]

Less stratified.

[Josh Brown]

We always rose together.

[Robert Frank]

I agree with you, but.

[Michael Batnick]

So if the rich people pull back spending, does the economy even feel it? Or is it like segmented to their richest stand or wherever?

[Robert Frank]

Oh, what's the general economy more correlated to the bottom or the top?

[Michael Batnick]

Bottom.

[Josh Brown]

It's more correlated to the bottom right now. But there are certain parts of the economy that are correlated to the top.

[Robert Frank]

But these things can't exist independent of each other. In other words, you're not getting rising wages at the bottom.

[Josh Brown]

No.

[Robert Frank]

For instance, unless the wealthy are spending money.

[Josh Brown]

Right? That's right. Now look, we say the wealthy. The wealthy are spending at Costco. Right. We know that. Costco and Walmart too, they're getting a higher share. So it's not just that LVMH or Hermes are the measure of what's happening. The wealthy spend in lots of different ways. And it's going to take a horrific situation if the wealthy stop spending at Costco and Walmart. So I think they spend all along the chain, but just in terms of raw numbers, I don't think. And the marginal propensity to spend, which is the idea that when each dollar that comes into the wealthy, more of that is saved by the wealthy than the rest of Americans that spend it because they have to. So I think because of that, it's felt less.

[Michael Batnick]

It's weird. They're like sucking money out of the economy.

[Josh Brown]

They are sucking out of the money. And I have a grand theory. Josh, I'm curious. As more and more wealth is concentrated at the top and just has to go somewhere, is that one reason why markets are so stubborn to go down? And look, I think that.

[Robert Frank]

So I espoused a theory 11 years ago called the relentless Bid. And the general idea was that people, financial advisors, create financial plans and the more equity risk your clients take, the higher the likelihood that your clients are going to hit their targets. And you know that because of a Monte Carlo simulation. And as we started to disincentivize stock trading by getting rid of commissions for retail brokers, so we disincentivized transactional business and we emphasized more long term, more ETF allocation. So advisors would build these financial models for their clients. And when the market's down 5%, it's like, oh, my God, if I rebalance now, buy my clients more stocks, look how much better the plan looks. It's like pulling the lever.

[Josh Brown]

I see.

[Robert Frank]

We do it faster and faster now because we all know what our clients really need, given the longevity of rich people. When you hear the actuarial tables, you're going to live till 72. Yeah. Probably not if you're a client of Morgan Stanley. If you're client of Morgan Stanley, you live to 100.

[Josh Brown]

Yeah.

[Robert Frank]

So you need more stock.

[Josh Brown]

Yeah.

[Robert Frank]

The only answer to every question is more stock.

[Josh Brown]

Yeah.

[Robert Frank]

Okay. For people who are already wealthy and they already have.

[Josh Brown]

Well, I also think it's important, you know, go back to inequality. In your book, you talked about, like, the way to fight back on AI is to invest in AI companies.

[Robert Frank]

No choice.

[Josh Brown]

I've had the idea of like, the new pitchfork is the brokerage account. Put down your pitchfork and open a stock account and buy stocks. Robinhood blew up because the way you're not gonna hedge your life entirely, no matter what occupation, but unless you're wealthy, the best way to not ever get on that boat, or at least to try to balance some of it, is to buy stocks.

[Michael Batnick]

I think that message is hitting because.

[Robert Frank]

Robin is letting people, young people get.

[Michael Batnick]

That the account funded, like, blew up. They're getting a lot more people.

[Josh Brown]

Yeah. The earnings were just, you know the.

[Robert Frank]

Folk story about John Henry, so he takes on a steam shovel. And at the time, steam powered equipment was like the bete noir of the working class. And it was like, oh my God, look at this machine. It used to be 500 men with shovels tunneling through the side of a mountain for a train track. And now there's just this steam powered engine that's gonna shovel. And I don't think the Gen Zs would like, lionize John Henry in that scenario. They'd be like, what a dumb. What they should have done was invest in their own steam shovel and had a more powerful, better technology.

[Josh Brown]

Yeah.

[Robert Frank]

Like, so I think the kids understand that concept.

[Josh Brown]

Yeah. Let me give you some numbers to prove it. So, you know, we don't really realize how much wealth is created since the pandemic. It's like, okay, we all know that there was a ton of wealth, ton of liquidity flooding the system, both from fiscal and from the Fed. So from COVID to Now, the top 1% total wealth went from 30 trillion to 49 trillion. That's a gain of four years. 63% in four years.

[Robert Frank]

Right.

[Josh Brown]

That's more than a decade of wealth creation. That just happened, really. And it was really in three years because you take the market out in 2022, the top 10% went from 70 trillion to 107 trillion. So they added 37 trillion in wealth.

[Robert Frank]

Most of that is Elon, though, in.

[Josh Brown]

Fairness, most of it is Elon. Exactly. So stock. Well, let's just look at like. Okay, well, what was driving all that wealth creation?

[Michael Batnick]

Real estate.

[Josh Brown]

Aoi, it's almost all stocks.

[Michael Batnick]

All stocks?

[Robert Frank]

Yeah. Yeah. Real estate doesn't appreciate that fast.

[Josh Brown]

The stock wealth of the top 1% went from 12 trillion to 20 just in those four years. Found the bubble and the top 10% went from 19 to 43. So the wealthy got a lot wealthier. I mean, everyone did well, but the wealthy got wealthier faster because of stocks.

[Robert Frank]

You know what's crazy? Fifteen years ago, the most likely way to become a financial celebrity was to be one of these guys telling you not to invest.

[Josh Brown]

And do what? And do what?

[Robert Frank]

Go on Twitter and tell everyone the next 2008 crash is coming any minute. That was how you built renown is to call crashes and look at everything and say it's a bubble. And teach, teach retail know nothings how to quote, unquote hedge their portfolio.

[Michael Batnick]

Alt teacher had an article, don't invest in your 401k that like went mega viral. It was like a big deal right now.

[Robert Frank]

So 15 years ago, like, if you wanted to make a name for yourself in the financial media, the fastest route to doing that was to talk people out of long term investments. And of course, that proved to be disastrous to anyone that heard that siren call.

[Michael Batnick]

Just wait.

[Robert Frank]

Can we talk about this New York magazine article?

[Josh Brown]

Oh, I love this. I love this.

[Robert Frank]

This is awesome. This hit this week and a lot of people were talking about it and I thought it was a pretty well done article. Although I sent it to my wife and she goes, this is nothing new.

[Michael Batnick]

Here's the lead. New York has always been stuffed with rich kids chasing the dream on daddy's dime. However, it didn't always feel as if those were the only people who could live here. As if the whole city bent to the budgets of the secretly funded. It does feel that way now because we're living through a catalytic overlap. Rent prices are shooting up, salaries are not, and boomers are prepared to die. I agree with Josh. This is not. This is not new.

[Robert Frank]

But wait, finish this though. It wasn't always this way. They quote a realtor who says in 1989, a one bedroom on the Upper west side was $63,000. Like to purchase, not to rent. The equivalent of about 157,000 in today's dollars. A similar unit in that building sold recently for $730,000. Some of this, Robert, is a story of New York just being a way better place to live now than it was in the 80s, the crack smoking 80s. Like there's a gentrification angle to that in a good way, like less crime. And then some of that is just an explosion in wealth and the boomers wanting to watch their children spend it, not leave it to them when they're dead.

[Josh Brown]

Yeah, so that article reminded me, you know, the Franny Leibowitz line was like, nobody can afford to live in New York Yet 8 million people do. How do we do it? We do not know. But it's also.

[Robert Frank]

What you live in Manhattan. This must have like hit home for you.

[Josh Brown]

It did. Because I go to. When you go downtown and you see, see all these 20, 30 somethings in cafes in the middle of a workday.

[Robert Frank]

Living in the West Village, living in.

[Josh Brown]

The West Village, you're like, how are they doing this? Well, that's no mistake. And you're right, that hasn't happened. But because real estate everywhere has gotten so expensive, but particularly in New York, where a studio apartment's one and a half million dollars.

[Robert Frank]

Brooklyn's a million dollars.

[Josh Brown]

Yeah, you can't buy anything in Brooklyn for a little million dollars. So I think it grates people who are struggling to rent here. Now, 2/3 of apartments in Manhattan are rents, not buying. And very few first time buyers are buyers in Manhattan. Most of them are second, third time buyers moving up.

[Robert Frank]

But if you walk into via carota and look around on a Tuesday, everyone in there looks like an Abercrombie model. But those are the rich, those are the children, the wealthiest people around the country.

[Josh Brown]

So let's, so let's widen the lens and talk about the great wealth transfer. Because this is the most important thing that I've been covering once we started inside wealth, and it will be, I think, the main issue. So over the Next, let's say 30 years, around 100 to 130 trillion dollars will be passed down from baby boomers to the kids. So where will that go? The first transfer is what we're seeing now. And by the way, I was extremely skeptical of all these numbers for years because I'm like, baby boomers are the ultimate hedonists. They're gonna burn the shit out of their Fortune and like party up in Ibiza and everywhere else. It's too much money to spend and they're not going to leave anything because they want to enjoy it. But what private bankers are seeing is that it is happening. They're already seeing it happening. So over 100 trillion. So the first will be the spouses. So the wives will get it. Because rich guys marry younger women. Women live longer than men anyway. And so the spouses are going to get it first. The second group that's going to get it is Gen X. So if you're a wealth management firm, the people you want to target right now, that's Gen X. Gen X, absolutely. Sorry. Gen X is going to.

[Robert Frank]

We're the last generation that knows what to do with money. These people have no taste. Otherwise it's incredible.

[Josh Brown]

They're going to get $39 trillion. Gen X is going to get 39.

[Michael Batnick]

You feel better now? You're going to get 39 trillion.

[Robert Frank]

Fine.

[Josh Brown]

Millennials are going to.

[Robert Frank]

Howdy. Still bites.

[Josh Brown]

Then, then slacker. Then millennials are going to get 40. Millennials will be the richest generation when it comes to these great wealth transfers. Now here's the other thing about millennials. This goes back to this whole issue of rich kids.

[Michael Batnick]

Yeah, but when we're 60, you can wait 30 years.

[Josh Brown]

Yeah, it'll take a while.

[Robert Frank]

I mean, the millennials, so the average.

[Josh Brown]

Billionaire is 69 years old. Like, you know, this money is going to start flowing pretty quickly. But here's the thing. If you look at millennials as a whole, they are not as well off as baby boomers were at the same age of 35. Right. I think it's like 30% less than.

[Robert Frank]

Cause of cost of living.

[Josh Brown]

Well, even if you adjust everything, they just, you know, salaries, et cetera, cost of living is. Exactly. But if you take the top 10% of millennials compared to the top 10% of baby boomers.

[Robert Frank]

The super millennials.

[Josh Brown]

The super millennials. Now, not everyone you see who looks like Abercrombie and Fitch models is a rich kid. They've got good jobs on Wall Street. They're analysts. They've got good jobs in media. They've good jobs at a tech startup or a tech company. So there is this section of millennials and Gen Z that has very high paying jobs. So not everyone that we see that's under 30 or under 40, not idle.

[Robert Frank]

It's not all idle.

[Josh Brown]

They've got very highly skilled jobs that pay a lot of money. So that's number one. But there is this inequality now within Millennials that the wealth gap within millennials between the top and the bottom is the widest of any generation.

[Robert Frank]

Oh, that's interesting.

[Josh Brown]

So one of the reasons I think millennials have a jaundiced view of wealth and resent it is because they see more inherited wealth in their generation than we saw when we were growing up. So when we were growing up, you had like the rarefied Astors and Hearsts and Vanderbilts, but there weren't that many as a proportion of the overall millionaire billionaire population. Inherited wealth was not a factor after the late 1980s, early 90s. It was all, almost all 85% of millionaires were self made after the 1990s. Now what I think is gonna start happening and what's already happening is millennials see more of their own peers inheriting wealth and getting wealth. So that's gonna change your entire view of the wealthy. Because if it's the lucky sperm club versus somebody who worked their ass off for 50 years, of course you're gonna hate rich people.

[Robert Frank]

Does this partly explain Gen Z's unexpected move toward Trump in this last election? Are enough of them, Are there enough Gen Z people who are either currently wealthy or aspirationally wealthy that they said this Kamala message doesn't resonate with me at all.

[Josh Brown]

And I think what we feel like as a culture, I think there's less of an idea that the way to reduce inequality is to make the rich poor. I think everyone agrees that what we really need to do is help those at the bottom. So I think the idea of like, that sounds inflationary. Get the rich guy.

[Robert Frank]

Well, cause nobody to do the jobs that no one wants. If everyone's rich, it doesn't work.

[Josh Brown]

The idea of like, get the rich guy. Oh, and also there's some. I think there was a perceived risk that everyone's taxes would go up under her. So I think on the, on the economic, aside from inflation, I think was the main thing that drove people. But I think that's.

[Robert Frank]

Let's do these, let's do these charts.

[Josh Brown]

Yeah.

[Michael Batnick]

Just getting back to the original part of the article, which is like, how are these people affording these $5,500 rents? So we made some charts on New York City housing, both for the sales price as well as rentals. And this, this, this actually shocked me. We're looking at the median sales price.

[Robert Frank]

Shout out to chart kid. Matt, by the way.

[Michael Batnick]

And it's gone, it's gone sideways in Manhattan for the last 10 years.

[Josh Brown]

Really.

[Michael Batnick]

Price. Haven't gotten anywhere where prices really exploded. For sale were Brooklyn. Right. Like that's. That story is well known. The orange line Brooklyn prices are up 128% since, since 2010. But here's, here's the thing that's really pissing people off. It's the rentals. Okay, next chart, please. Look at this. So the price to rent in Manhattan is $4,365. That's the median.

[Josh Brown]

Yeah, the average is the median. The average is over 5,000.

[Michael Batnick]

So this is the chart that's destroying people.

[Josh Brown]

Yeah. And two thirds of all apartments are rentals. And. Yeah, that, that's what's killing people.

[Michael Batnick]

So when, when these people know that their friends are being backstopped, how could it not lead to resentment?

[Josh Brown]

It does. It does. How does that does? It does. And I, you know, I, I've been talking to brokers recently, and a lot of brokers I talked to recently said almost every deal they're doing now involves.

[Robert Frank]

A trust, the parents trust.

[Michael Batnick]

And the article made it sound like these people, they feel shame and it's not that they did anything wrong.

[Josh Brown]

Yeah.

[Michael Batnick]

But it does suck to know that, like, I'm only buying this because my parents, like, and my friends are. It's. It's a tricky situation.

[Josh Brown]

Yeah. Again, I knew people. Josh, you probably both knew people when we started coming to New York City. And we all knew people that, you know, had parents help, whether it's their rent or whatever. But I do think.

[Robert Frank]

You didn't have to, though.

[Josh Brown]

Yeah, that's right. That's right. Cause there were.

[Robert Frank]

That's right. My first apartment was on East 77th Street. I lived down the street from the Coconut Grill, if you remember.

[Josh Brown]

Yeah.

[Robert Frank]

Brother Jimmy's around the corner. Nobody had any money on my block. These were like five story, I don't want to call it townhouse would be to romanticize. These were walk ups, but like you could. Look, I think my rent was 1100amonth. And I was, I was like a loser stockbroker.

[Michael Batnick]

That same place is probably 10 grand.

[Robert Frank]

Now, but I could afford it. Yeah. If it hasn't been bought by somebody who just turned it into something magnificent.

[Michael Batnick]

My first lease was in Astoria and it was a big apartment. It was $2,000 and it was. That's probably five right now.

[Josh Brown]

Right, right.

[Robert Frank]

And that's what's different now. It's very difficult to picture somebody moving to Manhattan without two roommates unless the parents are helping them. And that's an interesting point that you bring up, which is that the inequality within millennials now trumps the Millennial versus boomer shit that we've lived through.

[Josh Brown]

New generational warfare is within millennials. And it'd probably be true for Gen Z as well. I don't know. Millennials had it rough because they came in during the financial crisis. They came to financial age, they've got student debt.

[Robert Frank]

They started investing lately.

[Josh Brown]

They got student debt. They don't own houses. They're not forming families, which sort of helps generate wealth when you're dual income. So they have all that against them. Gen Z probably came up with all this liquidity, so they'll have it better. But I do think the millennial stuff is gonna be a big source of tension, and I think it's gonna. I wouldn't say radicalize, but it certainly helps explain why there's a more negative view of wealth among millennials than there were, like, baby boomers or even Gen Xers.

[Robert Frank]

Let's do this Disney thing. Annual vacation budgets.

[Josh Brown]

Oh, yeah.

[Michael Batnick]

Robert, you saw this article in the Journal.

[Josh Brown]

I did, yeah.

[Robert Frank]

All right, so this is. Let me set it up. Tell us what's going on. Even Disney is worried about the high cost of a Disney vacation. And we have a chart for this.

[Michael Batnick]

So there's. They made a great chart in the Journal showing the income quintile from the bottom 20 to the top 20 and the annual vacation budget. And for the people in the middle and the. The fourth, fourth, fifth. It's impossible. The entire annual vacation budget is blown out by Disney. Even for the 2020 percent, it becomes unaffordable.

[Josh Brown]

Yeah.

[Michael Batnick]

So there was. There was apparently a hack. I don't remember this, but the genie pass. The genie plus passes over the last three years, from October 21st to June 24th, generated $724 million in revenue for Disney.

[Robert Frank]

Yeah, so like, Disney plus cut all the lines.

[Josh Brown]

Yeah. But like, if you look at. So when I talk about the economy around the wealthy, you know, we aren't talking about this tiny slice of people that's only like, X number of millionaires. If you look at, like, the boom in private clubs right now, almost every part of our economy now has a VIP version. Right. In some ways, inside wealth at cnbc. If you look at cnbc, we're kind of the Mercedes of you are that. You are that, but I'm like the amg, which is like the next level up. And so I think what the Disney thing reflects is that the wealthy aren't just getting wealthier. There are more of them and more and more. The economy is sort of roping off an even special version for the wealthy, the other thing that's happening is, and everyone thought this was gonna start happening 10 years ago, it's really happening now for the first time, the experience, economy, travel, dining, food. That's where the wealthy are spending their money. Oh yeah, yeah. They're buying stuff. They're still buying stuff. They still like their cars, their sports. But what is. And this is why LVMH went into the luxury lifestyle business with buying a hotel chain. They're sort of putting restaurants in their stores now. The Tiffany, the biggest success in that new Tiffany store is the Blue Box Cafe. So they're creating these experiences, part museum, part food and dining, where they know, they've seen that the wealthy, what they really love is not more stuff. And I think that that's true up and down generations. They want great food, they want great wine, they want great visuals.

[Robert Frank]

Robert Technology is enabling this though. Disney's got so many different ways to give them money now. Yeah, you think about the concert experience. Bruce Springsteen, the working class troubadour that he is, decided that he wanted to do, he wanted to do demand based pricing. And he gets to hide behind Live Nation, of course, so nobody thinks it's him. But like the price of a Bruce Springsteen ticket is whatever price the buyers stop buying at. And that's where it is. And like there's no limit. But, but back in the day, Bruce Springsteen in the 70s and the 80s and the 90s, they would print the tickets on paper. The price was the price.

[Josh Brown]

Yeah.

[Robert Frank]

You might have had three zones 100 section 200 section 3. Now it's this technological advancement where the price will go wherever the next person is willing to take it. And I and Taylor of course was able to do that. Yeah, I think that pisses people off too.

[Josh Brown]

Yeah.

[Robert Frank]

When they're just like, wait, I don't understand, why am I priced out of everything? Yeah, because the technology is enabling it.

[Josh Brown]

Well, and there are just so many rich people now.

[Michael Batnick]

Well, you can't get to restaurants anymore.

[Josh Brown]

You can't. And that's why. So, so one thing I couldn't figure out, private clubs. And there's at least a dozen new private clubs in New York that open. It's zero bond. It's Casa Cipriani.

[Robert Frank]

Pure status though.

[Josh Brown]

No, it's, it's. So why are they paying, you know, X whether it's 10,000 a year or 1,500 a year?

[Michael Batnick]

I mean, we went to Casa Cipriani last year. It's pretty awesome.

[Josh Brown]

It's, it's beautiful.

[Robert Frank]

Yeah.

[Josh Brown]

But I so many on the Upper.

[Robert Frank]

East side strip club. I don't know.

[Josh Brown]

They changed it. The escorts. They got rid. No, they got rid. There were too many. So they got.

[Robert Frank]

Took a picture at Casa Cipriani and posted.

[Josh Brown]

Yeah, well, that's the person who's supposed to do that.

[Robert Frank]

Person who took me got arrested. Yeah, I don't. I'm not on any of that shit.

[Josh Brown]

No, but. But. So the reason these clubs are popular and Casatua just opened the Upper east side, there's already a wait list is because you can't get a reservation anywhere else. So all it is is. So when ZZ started Miami and somebody called me.

[Robert Frank]

A major food group.

[Josh Brown]

Yeah, major food group. Exactly. Zelasnack and Carbone. And they do a great job. And they said to me. Somebody said to me, oh, they're charging $20,000 just to make a reservation there. I'm like, why would anyone. That's stupid. Well, then they raised it to 30. Then they raised it to 40. There's still a waiting list of hundreds of people. The sushi's fine.

[Michael Batnick]

Dude, this economy needs to crash. There's too much money sloshing around.

[Robert Frank]

You know what you do when you have a private. When you belong to a private restaurant? You spend the whole week calling and trying to get people to go with you. Yeah, like everyone goes with you. The first time, I ran out of people. I gotta get.

[Josh Brown]

They're always crowded and they're waiting lists. And, you know, whether they go or not, these people are making money. And it's just because there are so many people able and willing to pay a fee for not even going. So this new paradigm, it's like Planet Fitness with an extra $10,000 instead of $10 a month.

[Michael Batnick]

Does this go into reverse in the event of a recession, or is this just the way it is?

[Josh Brown]

So the thing about luxury and the spending of the wealthy going back to. It's not the money, it's the mood, I think, right now. So there was a burst of spending by the wealthy. You saw it in luxury companies. You saw it everywhere else in the art market. Right after the election, there was a burst of spending. Private jet companies. Tell me, everyone said the wealthy just, like, went out and spent. They were selling cars on bring a trailer. They were selling $250,000 Porsches on Christmas Eve. And. And they had never seen that before.

[Michael Batnick]

Remember the excess savings? That story was supposed to be over three years ago.

[Josh Brown]

Yeah, I know. Well, but the.

[Michael Batnick]

I know it's different than your people.

[Josh Brown]

But there's more excess and excess savings at the very top. So I think it. What? What's what? Everyone. You know, it's hard to say the wealthy do anything because it's such a diverse group now. But I do think they're kind of in wait and see mode right now because you've got the tariffs, you've got the inflation, interest rate situation. Sort of unclear where that's going. And even though there's a lot of euphoria in the animal spirits and all the stuff people talked about after the election, I think the picture is a little more cloudy now. And so I think my sense is there was this burst. Now there's a bit of a pause in the real estate world. The art market might have a good spring. We'll see. So things are better than they were at this time last year. But it would take a major correction in the stock market for any of this.

[Robert Frank]

I would argue it's not about the severity of the correction, it's about the duration. We have not had a 12 month downdraft in the market. We had a pretty substantial eight month.

[Michael Batnick]

Wait. What?

[Robert Frank]

In 2022.

[Michael Batnick]

In 2022 it was two years before we had new highs.

[Robert Frank]

No, but I'm talking about being down and no recovery. This is different. And I lived through, and I lived through this in the 2000-2002 period. It just wore people out.

[Josh Brown]

Yeah.

[Robert Frank]

It wasn't about, when do we get back to new highs. It was like, oh my God, I can't take it anymore. We haven't had that in 20. You know, we really haven't had it since the great financial crisis. I want to do two more things with you. The carried interest loophole. Yeah, it's a big part of the wealth discussion is like, why do some types of wealthy people have these special deals in the tax code?

[Josh Brown]

Yeah.

[Robert Frank]

Trump, like out of nowhere just like randomly blurted out, we're going to look at the carried interest loophole. And I think like everyone did like the meme, they did that side eye.

[Josh Brown]

The rich guy with a billionaire cabinet wants to get rid of carried interest. What is going. What's wrong with this picture?

[Robert Frank]

Yeah. All right. So for people that don't know, this is hedge fund, private equity, private credit, venture capital, venture capital. Because they are quote, unquote, taking risk. Lol. Because they're taking risk, they don't pay taxes as though it's W2 income. They're being taxed as investors and it's a favorable tax rate on the gains when they sell a property or a comp or they have a liquidity event or whatever. And that is obviously how the rich get richer. It's one of the principal vehicles by which we have people. Steve Schwarzman's worth $50 billion.

[Josh Brown]

Yeah.

[Robert Frank]

Okay. That happens in part because of his investing acumen, but in part because he doesn't pay taxes as though he earned the money working at a law firm. Okay, fine, you love it, you hate it. We're not gonna do that today. He said it once.

[Josh Brown]

Yep.

[Robert Frank]

That was it.

[Josh Brown]

Yep.

[Robert Frank]

Nobody argued with him.

[Josh Brown]

Right.

[Robert Frank]

The private equity executives would not, could not be reached for comment.

[Josh Brown]

Yeah.

[Robert Frank]

Cuz they know the thing with Trump is never disagree publicly.

[Josh Brown]

Yeah.

[Robert Frank]

Do you think he's gonna bring that up again?

[Josh Brown]

So he brought.

[Robert Frank]

It's not on the table.

[Josh Brown]

He said it in 2016.

[Robert Frank]

He didn't mean it. He just said it once.

[Josh Brown]

He said it in 2016 and they did actually in the 2017 tax cuts, they extended the years by which you have to hold the investment to get the special capital gains treatment from one year to three years. So they sort of made it less attractive. Now you're probably gonna hold those investments for three years anyway. As a private equity fund, it's usually like 7 to 10. So. So fine, didn't matter. But there was something symbolic that they did so he could say, see, I promised it, I did something.

[Robert Frank]

Okay.

[Josh Brown]

Biden promised the same thing in 2020. Democrats said, no, we're not gonna change it. Steve Schwarzman, David Rubenstein, they're very powerful lobbyists and they've got a lot of money. So this thing gets killed. I think this time they might be able to get it through because I think it's only going to raise about a billion dollars a year by closing it.

[Robert Frank]

It's not actually going to solve any problems.

[Josh Brown]

It's not going to solve any problems.

[Robert Frank]

So what does that tell me? What?

[Josh Brown]

That tells me that the rich guys have figured out a way around it already. Already.

[Robert Frank]

What do you think it is? Caymans?

[Josh Brown]

I think it's offshore. It's a management company that's offshore. That's part of it.

[Robert Frank]

Dubai something.

[Josh Brown]

No, it's like Caymans or Puerto Rico, whatever. Management. And it's also somehow using the, you know, it's a pass through structure and using pass through the beneficial tax, interest and tax treatment of a pass through versus ordinary income, somehow using that 20% less that you get through pass through that way. So I don't know exactly what vehicles are using, but my guess is they've seen this coming. They've got, you know, these tax strategists. Now and trust and state law. They are geniuses. And they work faster than the IRS.

[Robert Frank]

They're Navy SEALs.

[Josh Brown]

Exactly. So they have already figured out a way around it. So my guess is because of that, the private. Now we had Joe Lonsdale on recently, who I think, I think voiced support for keeping it and says, look, this is small businesses. This is mom and pops. This is sweat equity. All the reasons they usually give for.

[Robert Frank]

There's an argument for, like, you don't want to divert people from going into the investment business because they create jobs. But it's like, come on, is that really going to stop people from going into private equity?

[Josh Brown]

He's like, you know, I don't want to make this huge investment and get a billion dollar payout because I'm going to have to pay 17% more on my taxes from that. No, it's not going to change any. But it's a loophole now, the tax code. So when you think about inequality, it's like, okay, Robert, you've been covering wealth 20 years. How do we solve it? I think when you look at the tax code, and I'm obsessed with taxes, I love the tax code. I think the two things that stand out to me is step up in basis is ridiculous.

[Michael Batnick]

Kill that.

[Robert Frank]

So you die. Your kids start from scratch with where the price is now.

[Josh Brown]

Yeah. What's the origin of that? So I don't. It's a good question. I don't know what the exact origin. I mean, I know what the origin is, but it can't be explained. What it is is. Let's say you start a business, you buy Apple stock, whatever it is, you bought it at a dollar, it's now worth a million dollars when you die. The basis of that for tax purposes goes to a million dollars, today's price. So there's zero tax. Suddenly that tax just disappears when you die. I think that's wrong. I don't know how it ended up exactly in the tax code. I mean, there are some reasons, but today, in today's capital world, it doesn't make any sense. The other thing I think we should think about is the capital gains tax itself, which is preferred treatment 23.7 instead of 39.6 when you. Or 37 plus the 2.3 was based on a time when capital was scarce, when you had to incentivize people. People to invest. We have to get. Otherwise people won't invest. We have a surplus of capital around the world now. Do we really need people now? Investors are going to Kill me for saying this, but I think something we should look at is, like, should it be closer? Because I don't think, you know, taxes are designed in some way to incentivize behavior you want and disincentivize behavior you don't want. There's plenty of money in the world.

[Robert Frank]

But they would argue putting money at risk is different than income that you earn in. In a vocation. Yeah, I would argue you have risk either way. But I understand. At least I understand the philosophical idea behind.

[Michael Batnick]

Well, also those people who are like, why am I giving up more money to the government? I already pay them.

[Josh Brown]

What are they doing? Josh, Should. Should work be taxed higher than wealth?

[Robert Frank]

All right, Che Guevara over here. No, I don't know the answer.

[Josh Brown]

That's the flip side. Like, should you know? That's the flip side.

[Robert Frank]

All right, Jamie Dimon, good or bad?

[Josh Brown]

Awesome.

[Robert Frank]

Yeah, I agree.

[Josh Brown]

And the building is awesome.

[Robert Frank]

Jamie Dimon is my president.

[Josh Brown]

He's so awesome.

[Robert Frank]

Okay. He.

[Josh Brown]

And by the way, their private bank is like. I mean, it's the bomb.

[Robert Frank]

Yeah, it's in and of itself. It's a massive, sprawling operation.

[Josh Brown]

They have this conference every year that I've been dying to go to. They'll never let me in, but it literally is like, just billionaires that go. And Jamie.

[Robert Frank]

Oh, the one in Miami? Yeah, I know somebody that goes to that. I heard it's litty.

[Josh Brown]

When I asked billionaires, like, what's your favorite event of the year? It's like, not Davos. It's not Sun Valley. It's like, it's that. Because it's all billionaires, and they're all just hanging out and they've got amazing speakers, athletes, celebrities. And it's like that.

[Robert Frank]

Well, the conceit of the event is that there's nobody here that's gonna go type this into an Internet field.

[Josh Brown]

And more importantly, the wealthy only want to be with people who are as wealthy or wealthier. If you're ever doing a seating chart for dinner and you want, like, somebody, make sure you seat them next to somebody who's wealthier, because they don't want to go to anything unless there's somebody wealthier than. And the beauty of that conference is the reason everyone likes it is because billionaires can go and know that there's somebody even wealthier than that.

[Robert Frank]

There's a multi billionaire. Dimon went on quite a screed this week. He's got employees signing a petition against five day a week return to office policy. And here, let me read this during an animated town hall meeting on Wednesdays. Yesterday, the 68 year old was questioned on the petition which has garnered roughly 950 signatures. In a recording reviewed by Reuters, Dimon said, quote, don't waste time on it. I don't care how many people sign that petition, end quote. He also said that in office requirements would not be left up to managers, adding, quote, there is zero chance I will leave it up to managers. Zero chance. The abuse that took place is extraordinary.

[Michael Batnick]

Abuse?

[Robert Frank]

The abuse of work from home. Yeah, he's got, he's got people walking around a shopping mall talking to his, talking to the customers of the bank. The whole thing is a joke.

[Josh Brown]

No. And I think when in the branch people had to show up every day and then to tell the managers, everyone else, you don't have to do what the branch people had to do.

[Robert Frank]

So I have flexible work policies here. Yeah, but if I'm him, I probably wouldn't. Cause I think it's a different, I think it's a different kind of organization. That's a bank. I'm not a bank. And I think he's absolutely right. You don't have to work here.

[Josh Brown]

Yeah, no, look, I think the whole power shift is happening when we're all waiting for when labor starts to lose some of their power and management starts to get more. Some of it. And they're like, look, when can we finally have enough leverage as management to tell our people we want to get back? And I think Jamie's leading the way on that and he's being unequivocal, like, we are a better company. You are better people and employees. If you are together during the day and learning from each other.

[Robert Frank]

Do you agree with me in terms of, like, can you imagine the nerve it takes? We're at the threshold of the age of AI and you're putting your name on a petition for why you shouldn't have to show up at the office.

[Michael Batnick]

It's very short sighted, very dumb. I would not advise that.

[Robert Frank]

Very dumb. I would not advise signing.

[Josh Brown]

On the other hand, you could say like, like it's a reflection of the culture at JP Morgan that people feel like they can voice what they think and feel safe. He's telling me, I don't know that you would feel that, like meta, you know, meta, you'd be out.

[Robert Frank]

Tesla, you'd be out. Yeah, yeah. I think if you're the CEO of the firm, you have to set the tone. You have to say, this is what we do. And then if there are people that work there that don't agree with it. They could say something and they could also just quit and go somewhere else.

[Josh Brown]

Right.

[Robert Frank]

And there are plenty of financial services firms you could work out where they don't care where you are. Yeah, but that's not one of them. And that's just like it's not a democracy. Work at a company like. And they're JP Morgan, I would guess, are probably paying above market salaries for most roles within the bank and you don't have to have one if you don't want it. Right. I know a lot of kids that just graduated school that would kill to go work in an office building filled with co workers and would love that role. So I, I agree with that. All right. Did you have fun on the show today?

[Josh Brown]

It was great. I mean I'm. One last thing. I'm just curious, you guys, you guys have a lot of 20, 30 somethings. How do you think they, the people that you deal with and your audience thinks about wealth, do they still aspire to have it and what is their definition of wealth? Do you think you're both your clients and the people that watch?

[Michael Batnick]

That's a great question. So I think a lot of the conversation that we had earlier in the show about how different generations, how Gen Z thinks about wealth, I think a lot of that is online. It's a lot of what you see on the Internet. And I don't really believe that the entire generations think so much differently about money than we do because if that.

[Josh Brown]

Were true, Instagram wouldn't exist. Like Instagram is a lot of it showing watches and cars.

[Michael Batnick]

And you look at the funded accounts on Robinhood, People are wise to the fact that equities are how you build wealth. Now a lot of it is crypto too, but ownership.

[Josh Brown]

But what does wealth mean to them? Like what is their like? I don't know. When I was growing up it was like the nice house, the car, like same thing.

[Michael Batnick]

I mean right now it feels really, it feels out of reach for a lot of young people because it is with 7% mortgages, with prices like this. Unfortunately real estate is not a reality for a lot of people. But this idea that people are just like full on nihilists and don't give a shit about anything. I just don't really believe that. I think it's a section of the Internet for sure.

[Josh Brown]

Josh, what do you think your view of wealth growing up versus the aspirations when they define wealth with today's.

[Robert Frank]

So I grew up upper middle class but didn't know it. And the Disparity between my own situation and my friends was pretty minor. There's thinking back, there's nothing that I was able to do that anyone else I was friends with couldn't do. So we weren't, I wasn't rich, we didn't do crazy shit. And we lived in a suburb that was fairly, that was fairly homogenous economically. Like roughly everyone's parents could sort of do the same thing. I still live in that town today and it is not that way. So for my kids, they're experiencing the world differently than I did.

[Michael Batnick]

Way more.

[Robert Frank]

And my brother's kids, forget about it. He lives in Calabasas. And in Calabasas they're probably all very similar. But like in the city of Los Angeles, that wealth disparity would be off the charts relative to Long Island. So I do agree with you that the interesting thing now, and probably the biggest area of tension is intra generational wealth disparity. I don't know what you really do about it. And now that I have a college age kid, like the things that I've seen and heard, you cannot even imagine what goes on in the mentality of the parents. And I think people get serious about wealth when they have kids because from my perspective, I didn't really, I wanted to be successful. I didn't really care that much about money. And then as my kids. No, not really. Not when I was in my 20s, I wanted to have fun.

[Josh Brown]

Yeah.

[Robert Frank]

And then having kids in my 30s, but then in my 40s when the kids were teenagers and everything started to cost a lot.

[Josh Brown]

Yeah.

[Robert Frank]

That's when I became way more driven about like, how much am I going to pay myself? So I, I think that that's not uncommon. I think that's most people, frankly. But I, I do think the disparity, even within suburban communities, within cities is probably way bigger than it was when you and I were kids.

[Josh Brown]

Yeah.

[Robert Frank]

And I say that as though. Are we the same age? I'm not sure.

[Josh Brown]

No, you're younger. You're a lot younger than me. But you.

[Robert Frank]

I'm a lot younger.

[Josh Brown]

I think so.

[Robert Frank]

Yeah. But I feel it. Anyway, I want to tell you, you're one of my favorite reporters and writers, truly. And I love that you cover your beat without a disdain for people who have succeeded, but also not in a celebratory, masturbatory way. You just tell the stories of the.

[Josh Brown]

People I was talking to years ago. I was talking to Sheldon Adelson. Adelson, the Las Vegas billionaire. And I was telling him what I Do you know I cover wealth from a financial position? He goes, I get it. You get it. You're the thinking man's Robin Leach. So that's what I use.

[Robert Frank]

We always end the show with champagne wishes and caviar dreams. We always end the show, Robert, with one thing that you're looking forward to in the future. It could be anything.

[Josh Brown]

Seeing you down at Future Proof.

[Robert Frank]

Ah, look at this right answer. Can we talk about that for one second?

[Josh Brown]

Yeah. I have a great guest down there.

[Robert Frank]

All right, so that's what. That's what I want to get to, but I actually have some details on this.

[Josh Brown]

Okay.

[Robert Frank]

You have a session called Rockstar Energy, Rockstar wealth, an interview with Russ Savage, which is going to happen at Future Proof citywide in Miami.

[Michael Batnick]

Is that the tres commas guy?

[Robert Frank]

Tres comas. March 18 at 11:25am to 12:00pm on the Loomis stage. And you are moderating, and Russ is your guest, and people are really excited about that. I just learned of it today, and there's, like a buzz within Future Proof.

[Josh Brown]

So he's awesome. So he's a guy that started Rockstar. His dad is Michael Savage, the famous conservative radio host. And he started Rockstar, sold it to Pepsi for $4.7 billion in 2020.

[Robert Frank]

Amazing.

[Josh Brown]

And I first knew about him because I was at a yacht show, and I saw this entire insane yacht. It had, like, you know, the most insane party amenities of any. And he had Rockstar energy drinks everywhere. And it was painted like. I was like, this guy is awesome. So now he trades. He trades his own stocks.

[Robert Frank]

Oh, I love it.

[Josh Brown]

So what I want to look at is how do you go. That transition, as we talked about, from entrepreneur to investor is very hard, and he's learning the hard way. But I want to talk to him about how he built that business, why he decided to sell it, and how do you make that transition to an investor? And so that's what we're going to talk about. He's awesome. He's like everything you could imagine.

[Robert Frank]

We're so excited to have you at Future Proof citywide, and that's definitely going to be a highlight, so I will be definitely on hand for that. Michael, what are you looking forward to, my friend?

[Michael Batnick]

There's a new movie coming out with Tim Robinson and Paul ruddy. It's called by a 24. It's called friendship. Is that the right. Is it called Friendship? I saw the trailer yesterday, and in my mind, I'm like, oh, this looks like twisted. I love you, man. And at the end the tagline was, it's I love you, man, but for sickos. And I said, I'm in.

[Josh Brown]

That's me.

[Robert Frank]

I got Cable Guy vibes from it. Yeah, yeah, yeah, right. Remember Cable Guy?

[Michael Batnick]

Of course.

[Robert Frank]

Duncan, is that in your oeuvre? Cable Guy.

[Michael Batnick]

Jim Carrey, Matthew Broderick.

[Josh Brown]

Yeah, that was.

[Robert Frank]

That was one of the better. To me. That was one of the better Jim Carrey movies before he went crazy. Yeah, well, because it's like, male friendships are weird to begin with a little. Unless you made them when you were a kid.

[Josh Brown]

Right.

[Robert Frank]

It's kind of like, what is it? What is this really about? Or wives, friends.

[Michael Batnick]

Or, like, are we official?

[Robert Frank]

Like, are we official? That looks. That looks like a perfect, like, awkward version of that. I can't wait.

[Michael Batnick]

Josh, what are you looking forward to?

[Robert Frank]

White Lotus. The. The press machine has ramped up. There's a New Yorker profile about Mike White, who we talked about a minute ago. For some reason, I just talk about the wealthy.

[Josh Brown]

Yeah.

[Robert Frank]

That's such a great show from a class warfare standpoint. 100%, because you've got the people that work in these resorts and cater to them, even, like bartenders, prostitutes, you name it. And then you've got the patrons who are completely out of their minds.

[Josh Brown]

And they've captured the texture of the wealthy very well on that show. What, they read better than most. Right. I mean, to me, Succession is the goat when it comes to recent series about the wealthy. I mean, they got it right with that one. But Lotus is very entertaining.

[Robert Frank]

I think Lotus is one of the few shows, one of the few shows where they threw out the entire cast, and the show was even better. And no one was mad about it.

[Josh Brown]

Right.

[Robert Frank]

They had one holdover cast member from season one, Season two. Nobody does that. That's American Horror Story does that. It's an anthology series. No one in television has the balls to say, this was a huge hit. Get rid of all the actors.

[Josh Brown]

Get rid of the setting, too.

[Robert Frank]

We're gonna start from scratch. This is one of my favorite things about it. And they have one holdover in. In this coming season. They brought. They brought somebody from the Hawaii cast to Thailand. The Worker, season three. So. All right, that's it from us, guys. Thank you so much for listening. I want to let people know where they could subscribe to Inside Wealth. What's the. How do they find you?

[Josh Brown]

CNBC.com Inside Wealth.

[Robert Frank]

CNBC.com Inside Wealth. And, Robert, you are active on X. Yep. LinkedIn, Instagram, some on Instagram, mainly.

[Josh Brown]

Maybe LinkedIn, but if they sign up, they get my weekly newsletter.

[Michael Batnick]

Only fans.

[Josh Brown]

Not yet.

[Robert Frank]

Robert, you didn't.

[Josh Brown]

Thank you guys. You guys are awesome.

[Robert Frank]

We appreciate you so much. Much Shared so much insight with us. Thank you. Great job to the whole cast and crew, guys. Thanks for all the likes and subscribes. We'll see you soon.

[Josh Brown]

Great. I know. Really great.