3 Reasons This Bull Market Is Just Beginning

0:00What's going on guys? Obviously, I'm not at my desk, but I wasn't going to miss this. Today, we're going to talk about why stocks keep going higher and why I think all the pessimists are wrong. Then we're going to get into the U.S. government shutdown and why I think this will be a nothing burger. And then Dave Mazza is going to join us to explain why so much capital is flowing into ETFs in the public market. That and much more today, live from the desk of Anthony Pompliano.

0:31Now, before we get into today's show, please remember, my goal is to get to 1 million subscribers on YouTube, and I need your help to get there. Hit that subscribe button and help us get closer. Let's get into today's show. Now, everyone knows that stocks keep going higher, but there's plenty of pessimists out there that are telling us that the market crash is coming. I completely disagree. There are three main reasons that stocks are going higher, and this is what the pessimists are missing. The first is that earnings growth is still very, very attractive. If we go and we take a look, Carson Group's Ryan Dietrich, he writes, Since 2019, the S &P 500 is up 125%.

1:04That's pretty good. 76 % of that is coming from earnings growth and 19 % from dividends. He says, No, this isn't a bubble. This rally is justified for strong earnings growth. Well, if earnings are going up, then companies are becoming more profitable. If companies are becoming more profitable, they're becoming more valuable. And if companies are more valuable, their stock price should go up. This is not rocket science. It's pretty simple. And so the pessimists are missing the point that the companies are actually performing better. If companies perform better, their stock price should do the same thing.

1:34And that's what's been happening. Now, the second thing that we're watching play out here is that we have the interest rate cuts. If cheap capital is coming into the market, then naturally people will take that and they will push further out on the risk curve into things like stocks, and they will push stock prices higher. So we got an interest rate cut in September. We have interest rate cuts likely to happen at least once, if not twice more through the end of this year. And there are many estimations on Wall Street of people saying that we're going to get six straight interest rate cuts of about 25 basis points.

2:00Regardless of whether it's two or three or it's five or six, what we know is that cheap capital is coming into the market. But it's not just in the United States. We also know that around the world, central banks are cutting plenty of interest rates as well. If you go and take a look at that, global central banks are cutting interest rates as if there is a recession. 82 % of world central banks have cut rates over the last six months. That's the highest share since the 2020 crisis. That comes from Global Markets Investor. And so it's not just the Federal Reserve. It's all around the world we're getting cheap capital.

2:29If cheap capital floods in globally, that means that stocks will go higher as well. And then, of course, we can look at things like GDP explosion. Atlanta's GDP now, they're suggesting that there is going to be a 3.9 % boom in Q3. Now, that is a number that many people didn't expect. Remember, recession, depression, empty shelves, all those things we were promised, they don't seem to be coming to fruition. And so whether you take a look at earnings growth, at interest rate cuts, or at the explosion in GDP, all of those things are driving stocks higher. And I think that the pessimists are completely missing what's happening here.

3:03We are in a tech-enabled economic boom. And of course, stocks should go higher. The pessimists, they simply are lost in the sauce. They're looking backwards in history, and they don't realize that actually, the bull market's probably just beginning. I recently sat down with my brother, John Pompliano, and he asked me about the US government shutdown. And I told him exactly what I thought. Here's what I had to say. I think that the government shutdown threats are very performative. I think that we need less one side versus the other. And I wish that there was a lot more conversation, constructive conversation, collaboration, et cetera.

3:45I think that there are certain people in both parties that want to do that. And then there's certain people in both parties who think that they are being served up a media opportunity and they're gonna go and make ridiculous, wild demands. Now, what I think might be the single most important part of this whole thing is that some of the people who are advocating for certain things are the exact people that 20 years ago were advocating for the exact opposite thing. And not in a scenario where I used to believe X, I received new information, so I'm intelligent because I changed my mind with the new information.

4:24These people are saying, I used to believe X, but that is no longer politically valuable to me to believe that. And therefore I am now going to switch around and have a completely different viewpoint on this issue because now it is politically valuable for me to have that. So, I think that one of the things that we should do is we should put term limits in place. And I believe that that would significantly reduce some of the craziest, most extreme kind of fanatics is that the only way that you serve a very long time in politics, like some of these career politicians, is you become an expert navigator of bureaucracy.

5:05you become excellent at building consensus. You become excellent at fundraising. You become excellent at manipulating the media for your efforts, et cetera. There are some positives to that. You want people who have long-term orientation that can work together to actually get solutions to problems and say, hey, look, we know we're going to work together for the next 20 years. I'm going to look out for you to help you get your bill done now because I'm going to try to get a bill done later this year and I'm going to need your support on that, right? There's some horse trading that goes on. Okay.

5:33Like there's a greasing of getting these things done. At the same time, I'm not going to name names, but just look at who's in the media on a day-to-day basis. These people are kings and queens of bureaucracy. Like they understand how to use the system. And so what they essentially are doing is they are holding the American people and government workers at, like they are holding them hostage to simply make wild demands to score political points in the media. Call it out for what it is, right? When I hear the government's going to shut down, I immediately know three things. One, it's going to get turned back on.

6:08I promise they're not going to leave the government shut down for very long, right? Sure. Could they do it for two to four weeks? Absolutely. But I think the longest government shutdown ever is like 35 days. Is it long? Yeah. But relative basis, it's not that long, right? My guess is that they're either going to strike a deal at midnight or they're going to do it, you know, 48, 72 hours later, Whatever. Fine. That's first. Second, I know that there's a lot of people who are going to yell and scream about this. They're yelling and screaming about it, and they have no understanding whatsoever of what is the pain that the average American who is reliant on government services going to feel.

6:42There's real people there. There's real stuff there. So shutting down the government is very irresponsible. People shouldn't do it. But I also understand the argument that, well, if the other side is making outlandish and ridiculous demands, at some point you've got to draw a line and say we're not going to agree to that. Right. And so how do it's a negotiation happens in business happens here. Right. Part of being a good negotiator is also being willing to walk away, is being willing to say no, is to get up from the table. So there's it's a complex situation. Right. Everyone wants it to be black and white.

7:13Should you shut down the government? Should you not? It's more complex than that. But the third thing is, I always know that the finance people, they're going to yell and scream and say, oh, my God, the economic data is not going to get reported. The government shut down. We're not going to get the jobs report. That's stuff they're going to yell. You see it online right now. They're already yelling and screaming. If the government shuts down, we're not going to get the jobs data. Good. Job data is wrong anyways. Do you know what the average revision of the job data is over the last 20 years? No.

7:40I saw a guy tweeted this. 60 % revision. What are we doing? Put your pencils down. Just everyone stop. What are we even talking about? Whoever's doing that should be fired. Just stop. Not getting the job data actually may be better for investors than getting the job data. It's like going to - They always rise it down though, the job data. Well, here's the thing. Imagine if you went to the stock market and they said, all right, we're going to flash up what the share price is on a given stock. And you'd done all your work. You knew what the revenues were, what all this stuff was, whatever. And you had an opinion and you said to yourself, all right, if the stock price is above a certain thing, I'm not buying.

8:21It's too expensive. But a stock price is below a certain price. I'm buying it. Right. Okay. They flash it up. You cheap buy. And then they come back to you a month later and say, oh, by the way, remember when we told you that it was$20 a share? Just kidding. It was really a hundred. You're like, yo, I want to return, right? Like here's my receipt. Give me my, give me my money back. It's crazy. Right. That's what happens with the job data is a bunch of people are going to make trillions of dollars are going to change hands in stocks, bonds, gold, Bitcoin and crypto, real estate, all this stuff based on these job numbers.

8:58And then they revise it on average by 60%. That's crazy. Now, whether you agree with me or not, it's kind of ridiculous that the US government is shut down again. But I don't think this is going to be a big deal. And I think stocks will keep going higher. A few weeks ago, I had a great opportunity to sit down with Dave Mazza. Dave is the CEO of Roundhill Investments, and they've got over$8 billion in AUM in their ETFs. Dave really understands the ETF industry, and he explained why so much capital has been flowing into these instruments. So here's my conversation with Dave Mazza. You have Roundhill Investments.

9:30You guys do thematic ETFs. You also have pioneered these weekly pays, which we'll talk about in a second. But part of being a thematic ETF issuer is that you think a lot about themes. And I think one of the big themes that you all have kind of latched on to and have been very right about is this like winner-take-all strategy that's happening across financial markets. Explain how you guys view what's happening. Yeah. So our kind of general markets thesis that most certainly plays out from a thematic point of view is that we are in an environment of a winner-take-all approach, right? I think the easiest place to think about that is in semiconductors, So the market latched onto NVIDIA, being able to provide sort of their high-powered chips that are needed for all these new AI applications, whether it's large language models themselves or now what we're seeing with humanoid robotics, which is something that we're excited about as well.

10:18And we're seeing this in other industries. Right. And the impact in the stock market is being very clear where now, as opposed to rewarding sort of sectors or groups in unison, the winners who are able to generate revenue, generate earnings, transparency into their profitability growth are actually seeing the capital flows. and losers are in some ways left for dead because they're just not able to compete, especially with sort of the way markets themselves have changed with the growth of retail investors. Now, in this winner-take-all strategy, does it apply to every single industry, right? So, you know, you guys, and for people that don't know about Roundtail, you all started in, I think, 2018, and it took about six years to get to a billion in assets.

11:09I think you're at seven. We just hit seven yesterday. Okay, just hit seven billion. So you went from essentially a billion to seven billion in the last year-ish, right? Maybe 14, 15 months. So incredible growth. And one of the big funds that you guys have is the MAG7. So I think you're the only folks who have a MAG7 ETF that's out there. You buy one ticker, you get seven stocks in there. One of the questions is like, why do these seven stocks keep driving so much of the market, right? And I think this winner take all thing that you're talking about, But in those seven stocks, they're not all in the same industry.

11:42They're not competitive with each other in any way, right? Well, that's what I think is really unique. It's obviously seven stocks. And there's been essentially since we launched the fund in 2023. And we actually just published a piece on this where we looked at the articles written about the Magnificent Seven negatively from whether it's Bloomberg, Wall Street Journal, Barron's, you know, kind of high quality, credible news outlets. and then looked at the subsequent return when whether they said they're overvalued, the performance could no longer continue. And guess what? Obviously, it's not always a one-way path higher, but they continue to power ahead.

12:20And the reason being is that it is seven stocks, but there's hundreds of companies within that portfolio. If we think about Alphabet, right, it's not just search. It's what they're doing with Waymo, obviously YouTube and the growth there. So I think the market itself has changed from the winner-take-all environment, whether companies are almost conglomerates in different ways. And we don't always think about things that way. So that's one of the reasons why these companies can continue to power ahead. Plus, you have the fact that they have, particularly compared to the rest of the market, grown their revenues, grown their earnings, and have done so in an incredibly profitable way to an extent that other companies have not been able to do.

13:02And with that being the case, I think that's one of the reasons why they've seen outsized valuations. We could argue whether they should be rewarded for whatever particular price to sales or price to earnings multiple they're trading at. But at the end of the day, they've been generating not just sort of the power of the market, but really of the US economy of late. So really what you're saying here is like these, although they are one company, they encompass so much under that one corporate brand. You mentioned Google. If you look at some others like the Amazons of the world, et cetera, like they do so many different things that in a way by putting these seven individual stocks together, you're actually getting a broad index that might actually look similar to what like the S &P 500 looked like 20 years ago.

13:43It's just now you've had consolidation in these mammoth companies. Yeah, no, I think that's a great, kind of a great way of thinking about it is that we're in an environment and we know that there's been, until recently, a dearth of IPOs of kind of smaller companies, exciting companies that are going public. So investors have had a hard time accessing them, which is one of the reasons why, you know, as you were talking about before, the growth of privates and the ability to access those, I think, is becoming really of paramount importance for investors to think about. And then And these names have actually been able to develop, or these stocks, I should say, kind of develop their sub-brands under them, coupled with the fact that the vast majority of them are at the forefront of the AI revolution and all that is going to come from that.

14:30Now, what's interesting to me is, I was talking to Jordy Visser, I think, last week about this, is these companies are big, right? If you look at the metas of the world, if you look at all the oracles, not one of the seven, like you look at an oracle, these are hundreds of billions, sometimes trillion-dollar market cap companies. And they're still reporting numbers of growth, 20%, 30%, year-over-year growth in profit or in revenue. And so it just feels like these businesses are actually accelerating. You wouldn't expect a business that is a trillion-dollar company to still be growing 30 % year over year and delivering these kind of bonanzas in their earnings reports.

15:10Do you all see changes in capital flows into, let's say, the MAG-7 ETF or anything else as these companies start reporting and it looks like they're actually accelerating rather than slowing down? Yeah, so it's interesting. Maybe I'll take a quick step back. You know, one of the reasons why ETFs have seen 800 billion of inflows year to date in 2025, I'm talking about the whole industry, stocks, fixed income, crypto, asset allocation ETFs, covered call ETFs, what have you, is because it allows people to do one of two things to fit their objective, sort of like John was talking about. If you are a long-term investor, you can use an ETF to build a portfolio with an average cost of three basis points.

15:51Or if you are more of an active trader, that doesn't necessarily mean that you're trading even intraday. You can actually use ETFs to get that kind of instant diversification with one trade and position for earnings. So when it comes to what we've seen with our MAGZ ETF, we see exactly that. So actually, when we saw sort of the market crash related to the kerfuffle around tariffs in April, we actually saw investors allocate toward max. You think they would have sold it, but they use that actually as a buying the dip opportunity, which has paid off. And then, yes, around earnings season, we tend to see really a spike in activity in the fund and then particularly a spike in the options activity of the fund as people use that tool to kind of express a view.

16:38In some cases, it could be a hedging view. In other cases, it could be an outright bullish expression. When you look at these ETFs and this kind of very low cost exposure, one of the stats I saw that absolutely blew my mind was BlackRock created the Bitcoin ETF. The Bitcoin ETF is now their most profitable profit. Yeah. Right. Now, part of that is there's been this massive inflow into Bitcoin ETFs as an example. but also they charge, I think it's 20 or 25 basis points and the S &P is like eight basis points. And so how do you see the fee structures and maybe for the retail investor, how should they think about fee structures when evaluating various ETFs and strategies?

17:18Is there like, Hey, there's certain areas where you should expect and be okay with higher fees because they're more complex strategies versus maybe others where you should actually run away from high fees or, or just talk to you like the fee structure and how to evaluate that as an investor. Yeah, so there's kind of two things here, and there's actually a lot to unpack. So if I'm thinking about fees for kind of broad-based market indices, S &P 500, MSCI World, if we want a global portfolio, the Barclays aggregate and fixed income, I probably would, particularly if I'm using that for a long -term view, kind of 99 times of 100, probably pick the lowest cost solution, assuming it has liquidity and the size.

18:00And generally, these funds do now because that provides me the fee budget to use in other areas. So if I can save cost, use ultra low cost ETFs to build that kind of part of the long term portfolio, then I free up my fee budget to use for either actively managed ETFs or other areas that will be more costly. And this is what's interesting is that even when I started in ETFs 15 years ago, it was just a passive story. It was all about indexification. We know that active managers had had, you know, many had challenges for years consistently beating benchmarks. And there was a wave of money going into indexing, going into ETFs.

18:41In the last two years, that's really all changed. Some of it is a change in the regulatory environment, whether that's the allowing of things like crypto ETFs. But it's also that now investors can access active management in ETFs. And it's not just when we think about kind of traditional stock picking. Active management in ETFs could mean the use of leverage. It could mean options overriding. It just means so many different things that it didn't before. And active ETFs have really been the biggest growth area, which was why ETFs in aggregate had over a trillion dollars of influence this year. And as I mentioned, we're on pace to actually beat that in 2025.

19:23Now, you mentioned these kind of option-based active funds. In a way, it's active because there is this option component, but it's not necessarily taking directional bets, if you will, right? An explosion. You guys have been one of the big leaders in this space. There's many others. And I think one of the innovations that you all have had is you have used the rise of zero-day options to be able to create the ability to pay weekly dividends on these ETFs. And so for those that are unaware of these funds, I don't know how much money has gone into these across all the issuers, but there's an enormous amount of money where you basically buy an ETF and you can get these dividends.

20:01and there's trade-offs in terms of how people use these in their portfolios, et cetera. But talk a little bit as to like, what goes into creating these funds? And if you're a retail investor trying to evaluate them, how to think through, okay, I can go buy the underlying stock. I can buy these dividend, you know, things on single name stocks or on buckets, um, or maybe I can just go and buy a fixed income, you know, ETF that somebody may offer. Like, how do you through the evaluation? Yeah. So when I think about sort of launching a new ETF or what could make the potential for a good ETF, it's a combination of three things.

20:36One is kind of the commercial viability, right? Is there an interest, whether it's with institutional investors or retail investors for this particular strategy, this particular approach? So that's step one. And then the two kind of critical components are how do you structure it, right? So what exactly is the investment strategy going to be? How are we going to run it? And then importantly, particularly when we're talking about new instruments like zero data, zero DTE options or other areas, it's what is the operational component? I think what's the great part about ETFs, and they've democratized investing in a wide range of asset classes, is that we take for granted that you still need to trade them every day, build the baskets, work with market makers and that community to allow people to buy it on exchange.

21:25And if you can accomplish those three things, then it likely puts you in the potential to have that commercially viable ETF. Now, if we go back to MAG7 for a second, you guys had some very unique point of view on what you expect the MAG7 to do over the next year or two. Revenue growth, free cash flow, their investment in AI. Just talk through what does the outlook look like for these seven companies in particular? Yeah, so we continue to be sort of very favorable on the Magnificent Seven. Now, the return path, I think, as we've seen in 2025, is not likely going to be as sort of up and to the right as we saw in 2023, 2024.

22:08But again, as I mentioned earlier, one of the reasons being is that these are the companies that are powering revenue and earnings growth. If we particularly think about sort of where the world is going, we remain in the early stages of the AI revolution. And these seven companies, all sort of to a different extent, and we know that obviously the marketplace has picked on Apple and their AI investment most recently, will continue to propel ahead. And I think what we're seeing with capital flows is that while there has been some broadening in the market, which is healthy, small caps have kind of come alive again.

22:48It's still at the end of the day when we take a step back, these are the companies that are likely going to continue to be able to grow because they're not just seven companies. There's hundreds of companies under the hood. Now, one of the things that I've heard you talk about is how to put the exposure on. So if you have a MAG-7 bias, you want to go put that in your portfolio, you can go buy the seven individual stocks. You can buy the MAG-7 ETF. But you also have this concept of the MAG-7s plus the next seven. So talk through kind of like what is the next seven and how do you look at the relationship between the next seven and the MAG-7?

23:22Yeah, so I think obviously we saw outsized returns from a company like Oracle. But the Magnificent Seven was, you know, it's debated whether Kramer actually coined it or did he, you know, rip it off from a B of A analyst. But we'll leave that conversation for. Depends who you ask. Yeah, exactly. It depends. We'll leave that conversation for another day. I'm sure there's someone who can really enjoy talking about that. But essentially, you know, it was a collection of stocks that all had similar attributes from their size and scale. and at the time their outsized revenue and earnings growth. They have continued to do so.

23:59If we go back, people were talking about the Fang stocks or the Fangum stocks with an M in there as sort of reflective of that. We're now at a point where we're seeing this sort of next seven, and that's companies like Broadcom, Oracle, and others that I think are beginning to sort of, again, when we think about that winner takes all, begin to be that next slave of winners. Broadcom is a$2 trillion company. It doesn't get nearly the attention as a company like NVIDIA, but I think that's changing. And Oracle, I mean, pretty crazy what happened there, right? I mean, maybe just like once in a lifetime type thing.

24:40I think Larry Elson made$100 billion in a day, right? If you're a Michigan fan, you should ask him to try to spend more of that at Michigan. You know that story? He got the number one recruit in the country to flip because he gave$100, right? So half the richest guy in the world as a fan is pretty profitable. A lot of retail investors now are also starting to think through, okay, I hear that it's frothy. I hear that people are getting worried. Buying is actually not the hard part. Selling is very difficult. And I think there's a lot of investors that I've talked with that are trying to think through, okay, I can sell, go to cash.