Are IPOs Still Buying Opportunities? Ed Elson on the State of IPOs and that Big, Beautiful Bill

29:06And the S &P right now is trading at around 25 times earnings. And that's actually, it's come down a little bit. But when my parents were my age, it was trading at 11 times earnings. I mean, the whole thing was on a more than 50 % discount compared to today. And so I think you look at what's happening in the stock market. You look at what's happening in the housing market, where the cost of housing has gone insane home prices are at record highs. I think it is becoming very difficult to build meaningful long-term wealth as a young person. I think it's easy or easier to have these get-rich-quick schemes.

29:52You know, I think you can buy some very hyped stocks and some meme stocks, and you can see if you can make a bunch of money trading GameStop or trading some crypto and trading Pepecoin. whatever your crypto du jour is. But I don't think that's going to make you money in the long term. And that is what we've been seeing with a lot of these people, a lot of whom are actually losing money on these crypto trades. I totally agree with you that the new class of IPOs, the Klarnas and the Geminis that are coming up, are not going to be the Apples and the Microsofts. But to be fair, if we went back in time, if you were smart enough to get in early on those companies, there were huge risks at the time.

30:38And also a ton of other companies have to IPO. There's the Mag7 that's driving a lot of those multiples, but you have 493 other companies, many of which are doing well, not Amazon well, though, not Meta well. So I think you're talking about degrees of how much growth potential there is, but there still is growth potential if you get into the market. So I think we should clarify that, you know, getting rich slowly and in a boring way with non-sexy next Amazon, next gen companies is not the worst way to go. It's way better than whatever coins you just mentioned. Yeah, exactly. And it all comes back to fundamentals.

31:33I mean, you know, someone could make the argument to me that, you know, people wrote off Amazon back then and Gemini is the next Amazon. That is an argument that someone would make is that I'm writing them off as these silly, dumb companies and people were doing that back in the day too. And I'm sure that was happening to a little bit. But I think you do have to go back to the fundamentals of where the value is being provided. And then I think you have to also look at how are these companies providing value into people's everyday lives. That's the real test for me. And I think when the internet was happening, and Apple was coming out with these incredible technology products that many people were starting to use that was significantly enhancing their lives.

32:28That, to me, is a testament to the value that Apple was providing. And I don't think that many of these companies that are going public are providing that level of value. But there are companies that are providing that level of value, and they're not going public. True. So we're just talking about the degrees of growth potential here. There's still room to grow when you're getting into these IPOs. And if you start investing in the secondary market, you could, you know, be like early Scott Galloway and get some allocations into these companies on a secondary market. There are, you know, funds that do that.

33:09There are ways to get involved. My husband invested in SpaceX on a secondary platform. There are, you know, insiders that get allocations that then, you know, go out to some of their friends and family. So there are ways if you're getting into a private equity investing game. Yes, more expensive, more expensive because there are more degrees of separation. But yes, it is possible, but it's a lot harder to do and it is more expensive. But I think that is the next step is we need to figure out ways to open up the startup world to regular investors. One of my big issues is that the investment laws right now, I just don't think are very fair.

33:55Basically, the rules are that you need to be an accredited investor to invest in these private companies. That's the legal framework right now. Which is a joke, by the way. Which is crazy. Self-attest that you have enough money and can lose the money that you invest. Exactly. And I mean, if you want to be an accredited investor, there's a test that you can take to become an accredited investor. But all the other option is you can have a net worth of a million dollars or you can make$200 ,000 for two consecutive years in a row. So the idea that we're saying like we're protecting this very incredible batch of investments and saying, no, no, no, you can only invest in these if you're rich, because only if you're rich will you understand how money works.

34:43That to me is a level of patronization to retail investors that I don't think is fair. And I think as we're seeing, we're seeing huge growth in those companies. And those accredited investor laws are in the process of changing, actually, and they need to change. I agree. 100%. You're a young guy. I feel like I could be your mother. I remember reporting on the floor of the exchange when, you know, Apple launched its iPod and things like that. So I'll just say you are a young guy. You talk a lot about, you know, the fact that the game is rigged, data pointing to that. So why, Ed, did you get into this world of economics and investing?

35:26I kind of stumbled into it, I would say. I mean, I was a big fan of Scott Galloway, who is my now co-host when I was in college. And I just liked the way that he simplified topics down into a way that was easy for me to understand. And I was interested in the things that he was describing. I was interested in the issues that he was talking about specifically as it related to young people. And so I basically decided I need to go figure out how to work for this person. And I was able to get connected to him. How? How did you find him? My friend, one of my good friends from college, I learned that his mother knew him.

36:14And so I called her. I said, I'm obsessed with this guy. Please, can you connect me if you have his email? So she connected me on an email and he sort of reluctantly took my call. And we talked for like an hour about life and about business and about markets. I told him about what my situation is. And then he offered me an internship. I started interning with him. One thing led to another. I started doing more work with him on his TED Talks and his books. And then one day he said, let's do a podcast and you'll be the co-host. And so I think that's probably why I'm here on this podcast right now.

36:54It's about your idols. Yeah, exactly. that is that is a genuinely I think is is the right is the right move so now that you've worked your way up with Scott how do you feel about money in general is it emotional to you is it just a game is it just numbers are you hopeful I think I think it is emotional I think I think people who view money as just numbers, I don't think really understand what it is. I think money, I think it reflects everything in our lives. I think that's why, by the way, I love covering the markets because the markets really encapsulate everything. They are just a distillation of emotion, of psychology, of conflict, of business.

37:49They encapsulate everything. and so that's why I'm fascinated by it but you know in terms of how I feel about money it's extremely important to me because I think what our generation my generation doesn't really understand is that we're getting quite poor just in when you compare it to other generations I mean I talked about what's happening with the stock market in terms of how it's getting so much more expensive, how it was at a 50 % discount for my parents. But it's also true of home prices, which are now six times our annual income. And for my grandparents, home prices were three times their income.

38:32I mean, even like the cost of college, which is more than 42 % of our annual income. And for my grandparents, it was 13%. The average age of a home buyer right now is 50. In 1980, it was 30. And then I look around and I see these statistics that a third of us are still living with our parents. And I think if we, as young people, want to make sure that we live fulfilled and dignified lives, then we have to get smarter about it. And we have to start understanding what is happening because no one's just going to hand it to us. I mean, we really have to get smart on how to build wealth for ourselves and how to build meaningful lives.

39:17And right now we're not on a very good track. So that's sort of a long winded answer of what money means to me. But it's also a big question. So I don't blame myself. It's a big question. It was a great answer. So thank you for that texture. You also have talked about the big, beautiful bill as it relates to young people and some of the issues that you just brought up. You say that it's a wealth transfer from young people to old people. Can you explain what you mean by that? Yes, this is going to add three to five trillion dollars in deficits over the next decade. And the word deficit might sound kind of boring or uninteresting.

40:05I think the best way that we could sort of put into context what that means, basically right now, we spend$900 billion just servicing our debt in America. It is our second largest federal expenditure. that's going to increase to$1.8 trillion by 2034, which basically means we're going to be spending most of our money on just servicing the debt, on paying interest. So what is basically happening is we keep on swiping the credit card as a nation right now, basically because we're greedy. We want more and more and more, and we want to keep on adding to these deficits. We want to keep on adding to the debt.

40:49and what is eventually going to happen is that someone is going to have to pay for this someone's going to have to get the check and the reality is the person who's going to get the check is young people it's going to be people like me essentially who are now subsidizing the lifestyles of these old people and basically after they're dead suddenly we're going to have this giant debt that we have to deal with. We're going to have all of these interest payments, and it's going to be a lot more difficult for us to pay for all the other stuff in America. So this is my big issue with it. We are adding so much money to the deficit.

41:32And the reason it's happening is because we're basically making a bunch of tax cuts for rich people. And that goes directly against the interests of my cohort, which is young people, because we are the ones who are going to have to pay for it. And that's the real problem right now. So basically kicking the can down the road. Kicking the can down the road. Yeah. So with all these changes, you don't feel like it's bigger or more beautiful? Not at all. I'm shocked that this even went through. And I'm especially shocked considering what Trump was saying at the beginning, where he said, we're going to balance the budget.

42:08That was what he said in his address to Congress. and it got the loudest applause of the entire night. And literally everyone was standing up, clapping, cheering, ruckers applause. Okay, we're going to balance the budget. I thought we all agreed that this deficit thing was a big problem. I heard about it constantly. I hear about it in the news. I see Moody's is downgrading our credit rating. I see that Fitch and the S &P downgraded our credit rating. Everyone's saying, hey, this deficit thing is kind of a big deal. You might want to rein it in. And then suddenly this big, beautiful bill comes out and it just completely ignores everything we've been talking about for the past year, two, two years, three years.

42:52It's a total reversal of what this administration said they were going to do. So it's, I mean, people are calling it the big, ugly bill, whatever you want to call it. this is bad and the people that will affect most in the short term it's going to affect poor people because we're getting rid of you know medicaid we're getting rid of snap benefits it's taking money from them and we're subsidizing that or sorry that is a a subsidy for the tax cuts that we're implementing for the richest so tax breaks for the rich take from the poor in the short and medium term and then in the long term keep on spending, spending, spending while not increasing your tax revenue, that's going to hit young people.

43:39Hold on to your wallets. Money Rehab will be right back. And now for some more Money Rehab. So the big, beautiful, ugly bill and the conflict in the Middle East have been dominating financial news cycles. Of course, there are other stories evolving as well. What's something that you think has been overshadowed that we should be taking a closer look at that's not getting as much airtime? Yeah. There's so much distraction right now. It's just, I mean, as Bannon said, flood the zone with shit. That's exactly what's happening. There are so many stories that are distracting from what really matters.

44:24The good news is the big, beautiful bill is getting the attention it deserves. That is important. And I think we all need to understand what the stakes are with that bill. So that's sort of been in the spotlight and I'm glad that it is in the spotlight. One other story that I think probably isn't getting enough attention, which probably deserves more attention, in my view, is what's happening with Trump's crypto projects. Trump coin, Melania coin, World Liberty Financial, American Bitcoin. I mean, these are all crypto companies that are in some way tied to the president. And look, regardless of your political views, and regardless of what you think of Trump.

45:18I personally don't love the guy, but we can set that aside. What he's doing with this crypto stuff is unexcusable. You know, you can make a steel man argument for everything else he's done. You could figure out a way to justify why you need to deport people. You could maybe figure out a way to justify why this big, beautiful bill is important. You could maybe make some trickle-down economics argument. I don't think that makes any sense, but you could start to fashion an argument. There is no argument you could make as to why it is even remotely acceptable for the president to leverage his power and leverage his image to sling totally valueless and meaningless assets to the public in a way, as a means of transferring wealth from his supporters to him and to his insiders.

46:18That is exactly what's happening right now. I mean, you just look at Trump coin. Now there's their cell phone. Now they have a cell phone. Now they have the cell phone. At least you can use the cell phone. That's the only thing that I would say is great. What are you going to do with your Trump coin? There's nothing you can do with the Trump coin. and there was a handful of insiders who knew what was happening with that Trump coin project, who knew when he was going to tweet about it, who knew when it was going to launch. They knew all of the details and those insiders made$1 billion on the Trump coin.

46:52So that already sounds pretty disgusting and it makes you uncomfortable that that's what happened. But then remember, crypto is a zero-sum game. So every time you win, there's a loser on the other side of it. Because remember, the Trump coin has no value. There's no cash flows. No one's getting anything from this. So someone has to lose. There were 600 ,000 retail investors who cumulatively lost$4 billion on Trump coin. And that is just so far. So what is happening right now is the president is getting his him and all of his buddies and his cronies. They're getting rich by basically just plucking money from their supporters.

47:42And that to me, there's nothing that can excuse that. It's it's the most shameless grift and the least defensible grift we've ever seen in this country. And I think that's the part that probably deserves more attention. There's a lot of stuff happening in the news cycle, a lot happening in politics. But in my view, that should be getting a lot more attention. By the way, it's very hard to crack down on this because he's also stacking the SEC with his acolytes and people who are pro-crypto. He's basically installed officials who won't regulate it such that he can go out there and steal from his supporters.

48:25I find it so awful on so many dimensions, and that's why I think it deserves a little bit more attention. yeah where is that other three billion so right right right well there's the the one billion dollars that happened that was at the very beginning there's more money that is being made on the trump coin and by the way there's also a lot of money that's being taken out of the system through uh fees and again trump and his buddies are taking the fees so So very shady stuff happening, and it's very tough to track where all of the money is going. But as a general rule, if you're on the inside, you're making the money because you know how to game the system.

49:13And if you're on the outside, you might think you're going to make some money, but ultimately, in the long run, you're going to lose. Can we play a game of bullish or bearish? Absolutely. Okay. So it's easy. You say bullish or bearish. tesla i'm bearish i probably disagree i think it's probably underpriced especially with the robots and things coming out but and it's proxy for the companies that aren't public but please tell me why you're bearish well i i just think i just think that it's overpriced at 191 times earnings compared to the rest of the auto industry 400 premium i mean my view is the whole the whole proposition of Tesla depends on the robotaxi.

50:01That's sort of what drives the valuation, because you've got declining vehicle sales, you've got a brand that is under a lot of pressure because of what Elon's been doing. And so the robotaxi has to work. And we saw a launch over the weekend, which is promising, which is why I'm not a mega bear on Tesla, I'm only slightly. You're a baby bear. Baby bear. But the launch was not that great. I mean, they still had Tesla employees in the vehicles who had to sort of monitor the safety situation. It was only open to a handful of Tesla influencers. The launch didn't blow me away. And I think what you need for that valuation to really make sense is that the robo-taxi needs to be signed and sealed as legitimate and that it's going to make a real amount of money.

50:54And it needs to get all of the regulation. It needs to get all of the safety clearances. And to me, I'm just not quite there yet. I think that the robo-taxi launch was promising, but it could be better. And you look at Waymo, which is doing incredibly well. So that's why I'm bearish in Tesla. Okay, so Waymo, let's transition into Alphabet. Alphabet, I'm bullish. Bullish in Alphabet. I think it's the most undervalued big tech company. Search has been extremely resilient despite what's happened with ChatGPT. They own YouTube. And I think YouTube is the most underrated media asset in the world. A lot of people don't realize this, but it is the biggest streaming platform in America.

51:37It makes up 12.5 % of total TV viewing time, which is more than Netflix. So I'm a bull on Google. I think Waymo is incredible as well. They've got a great AI team, a lot of AI exposure. I think they're doing everything right, and they're pretty cheap right now. Waymo, a subsidiary of Google. Uber. Uber, I am bullish. I think the question for Uber was the profitability. That was what people were really worried about, is that, yeah, they had this massive taxi network, but they weren't making money. They were profit negative. But they're firmly profitable now. They've figured that out. They've figured out a way to get costs way down.

52:21They have massive scale. And also, they're now using all of that to get into the robotaxi business. They're partnering with Waymo. They partnered with a few other robotaxi companies. I think they're going to be a big robotaxi player trading at 15 times earnings. I think that's pretty good. So I'm pretty bullish on Uber. Meta. Bullish on Meta too. They had a pretty disastrous year a couple of years ago, but they have bounced back so hard. They're at three and a half billion daily active users. Just to put that in perspective, that's 40 % of the global population that use a Meta product every single day.

53:03It's just insane to me. They're using AI. They're leveraging AI, which is turbocharging the ad business. Ad sales keep climbing. They keep bringing costs down. They've got the Ray-Ban Meta glasses, which have actually been a pretty big success. I'm pretty skeptical of all of the Metaverse stuff, but those glasses have actually been pretty good. They're monetizing WhatsApp now with ads. I just think there are a lot of opportunities for Meta, a lot of backup plans. And again, it's not too expensive. So I like Meta. Did you see this business where Sam Altman came out and said that Zuck is trying to steal their engineers with like$100 million signing bonus just to sign, not overtime?

53:47Unbelievable. It's so crazy. I was wondering about that. He's trying to win this game. Yeah, exactly. I was wondering if maybe this was some sort of PR scheme by Sam Altman to attack Facebook, because it makes Meta not look very great if they're that desperate. Either way, I'm still bullish on Meta, and I think I can be bullish on OpenAI at the same time. But that news was crazy. I did see it. I agree. Not mutually exclusive. I know the answer to this, but Circle. Yeah, bearish on Circle. Big Bear. Yeah, Big Bear. I don't think there's long-term value there. I think there's a lot of hype. I think it could keep popping over the next few months or so, but I'm interested in long-term value.

54:29I don't think it's a 10-year play. McDonald's. McDonald's, I'm bearish. They just saw their biggest sales decline last quarter since COVID. And I think you have to assume it's GLP-1s. I mean, Zempik, Wagovi, the usage on those drugs is seriously catching on. It's not just a trend. I saw this report recently that Wagovi usage among Gen Z rose 50 percent last year. So these are these are legit. They're here to stay. I think I think it's around two percent of the American population is currently using these drugs. And I think we can expect that number to keep climbing. But ultimately, that's not going to be a good thing for any fast food companies.

55:14So I'm not I'm not super, super bullish on on McDonald's, dare I say, bearish. So bullish on Eli Lilly, Novo Nordisk, the makers of these trucks? Yes. I think a lot of it's been priced in. But ultimately, yes, I'm pretty bullish on Novo Nordisk and Eli Lilly. I'd want to take another look at the pricing and the valuation. But directionally, yes, bullish on those companies. Bitcoin. Bitcoin is just a tough one. As you know, I'm not a fan of the crypto industry. and I'm not a fan of crypto assets. But Bitcoin is the only crypto asset that I accept in its logical argument in the sense that it is the digital gold.

56:04That's what a lot of people say. And my trouble with gold is I'm more interested in investing in companies that generate cash flows. Again, this is Warren Buffett type thinking. I'm more interested in NVIDIA, which is going to generate chips. and, you know, provide value to society and generate cash off of that than I am investing in something like gold, which is basically just going to sit in a vault. And Bitcoin is the equivalent of that. It's digital gold. And I think that's fair. Having said that, gold has been on this fantastic run recently. And what we are continuing to find is that gold is the safe haven asset.

56:42When things are scary, when times are tough, people start investing in gold. And so if If everyone decides, OK, Bitcoin is the digital version of that and it is increasingly beginning to look like that, then I'm down with Bitcoin and I could see how it could have a serious run up over the long term. But the Warren Buffett in me says, but what's the point? I mean, if it's World War III, what are we going to do with our Bitcoin and our gold? I mean, we're going to want food. We're going to want water. We're going to want bullets and guns. What's the point in any of this? So I'm going to go with bullish in the short and medium term, bearish over the long term.

57:28Because I think if we really need this safe haven asset, I don't think it's going to be Bitcoin. I think it's going to be food, water and bullets. All right. What's a stock that you're feeling bullish on that we haven't mentioned? Maybe it's a defense stock or a concept like an SPV. I think something we haven't mentioned would probably be the European market, specifically the German market. What we're seeing with the dollar is that the dollar is down around 10 percent since Trump took office. And basically what is happening is there's a huge amount of institutional capital that is moving out of the U.S.

58:08because, quite frankly, they are frightened by what's happening in terms of tariffs and what that will do to the economy. and they're starting to repatriate those investments and move into European markets. And that's why we've seen a big run-up in the German stock market, for example, and also the European stock market at large. So if I had to be bullish on something that we haven't discussed really, I would probably say European index funds and yeah, the DAX, Germany. All right. We end our episodes, Ed, by asking all of our guests for a tip that listeners can take straight to the bank. You've given us so many tips.

58:48So I just want to know if there was a time that you needed money rehab and what you learned figuring that time out. Yes. You know, it's tough because I'm young. And so I actually haven't made any huge mistakes yet. And I'm sure I will. I mean, I've made some dumb purchases here and there. but overall I haven't had to deal with any really big life decisions like buying a house I would like to but I need to keep working or having a kid etc so I don't know if there's been a big mistake that I've made so far that I that I need some money rehab on there is one big decision though that I got right and that was probably my career decision I was pretty lost for a long time as to what I wanted to do and what my talents were and what my passion was.

59:44And I think that's something that a lot of people could probably relate to. And I think the best thing that I did that turned out to be really great for me financially and in terms of just my overall life experience was I focused on not working for something, but working for someone. And that is I identified someone who I really resonated with, someone who I really admired, someone whose life I generally liked and I thought that I wanted to emulate. And I basically did everything I could to get as close as possible to that person. And that was Scott, my co-host. And I think that was a really good decision because what I have learned is that the success of a company, the success of a business, most of it is just a function of the people who you work with and the people who work at that company.

1:00:43And so I think that the best thing that you can do for your career is to identify someone who you think is really, really great and try to get as close as possible to them, try to work for them. So I hope that's OK to to choose something that I think I've gotten right. And also to be and don't make it weird, because honestly, it could have worked out really badly tracking down Scott. It worked out great, which is awesome. By the way, that's a that's a really good that is a very good point. You want to do it. But within reason, you want to find someone who, you know, you don't want to go off to LeBron James or Lionel Messi.

1:01:24do something that actually is reasonable. Find someone, maybe it's someone in your network, maybe a friend of a friend. Yeah, all of this within reason. Don't make it weird. Well, you are going to mess up in your life, Ed. And when you do, please come back and tell us about it. I cannot wait. I'll see if I can mess up as soon as possible so I can be back on the show.

1:01:50I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for so many rehab.