The Bitcoin Presidency & The Dawn of a New Robber Baron Era — ft. Josh Brown

26:16And then by Tuesday night, you have certainty. And we saw the same thing happen in 2016. We saw a rally when Biden won. We have seen this throughout history. So it's not surprising at all to people who are students of the market. So it sounds like the certainty is one thing. And I would imagine in your view and probably in Wall Street's view, that also translates to this election or the result of this election was not contested. It was a clear winner and we didn't have issues with ballot boxes and fraud and any of these questions that would have caused some instability. I just want to confirm that's kind of what you're getting at there with the certainty as well as the win.

26:55Yeah. And it's unclear that if she had won the popular vote and the electoral college, that we would have had the same amount of certainty as we had this time, because it's very unlikely that he would have placed a concession call to her within 24 hours. I think we can be pretty certain that he wouldn't have conceded. Yeah. So it's, I mean, look, you really have to put your feelings aside. Stocks care about earnings and interest rates. And we already were rallying going into this election and we didn't know who would win. What does that tell you? What does that tell you? We were hearing it's a coin toss and the market was rallying anyway.

27:38So what the stock market really wants is not necessarily Trump or Harris or this policy or that policy. The stock market part – I shouldn't anthropomorphize the stock market. People in the stock market want an answer. And whatever the answer is, we learn to live with it. We learn to make the best of it. And that's what we got. Guys, there was a five-week period in 2000 where we didn't know if the president was going to be George W. Bush or Al Gore. And I know it sounds weird, but the worst the Dow Jones did in that environment was negative 5%. We didn't get a concession speech in 2020 from Trump to Biden, and Trump wanted to litigate the election.

28:24And we had that chaotic, I don't know, 10-week period into year end, eight-week period into year end. And the S &P 500 actually rallied 12 % from election night into the inauguration. Did you know that stocks went up on January 6th? I bet you didn't. Okay? So what I'm trying to get across to the listeners who aren't familiar with the history, stocks rallied after JFK was shot. We're not emotional on Wall Street about our policy wants and needs. It's about earnings and interest rates. So here's the big picture. Earnings are rising and interest rates are falling. You don't need to know in advance who wins the White House in that environment.

29:10Josh, always good to see you. So I'm just, I think it's incredible how prescient the market has been. You said, you pointed out that it was rallying. I think it's because the markets correctly predicted and felt that Trump win and thought if corporate taxes are going to go anywhere, they're going to go down and earnings are going to go up. Meanwhile, the credit markets see him as more inflationary, and they started—the chief investment officer of Millennium was the first person to call me and say he's won. And I said, why do you say that? He goes, because the 10-year spike and the credit markets know he's about to be elected.

29:43Also, the markets are saying, as far as I can tell, that they don't believe the tariffs are going to be anywhere near as bad as he is threatening. Your thoughts on tariffs and if the market is getting it right? And if so, does that – or if these tariffs go through, I think it would be disastrous for a lot of companies. But the market is thinking it doesn't believe it. What are your thoughts? I don't know if I fully agree that the evidence supports this idea that the spike in yields is because of fear over inflation. It might be. I think we don't have enough – it might just be because of a higher expected economic growth scenario.

30:24But we're going to find out together. The great thing about markets is that debates are irrelevant because there's a scoreboard, and the scoreboard is what ends up happening to prices. Scott, I think you're right, though. I think the markets did correctly price in that it was going to be clear in Trump's favor. And I think as evidence of that, this parallel story away from stocks and bonds with polymarket is really, to me, one of the biggest stories of this election cycle. and it look it could have gotten it wrong and i wouldn't be saying any of the things i'm about to say um but there is power in markets and people putting their money on the line rather than taking polls and until now this has really been something they've had in europe and not in the united states and this is the first election where um people are really taking notice of predicted and really taking notice of polymarket and kalshi and all of these prediction marketplaces and i I think what you're going to see in the midterms is an almost slavish devotion to what these betting markets are saying.

31:31I think the betting markets were so incredibly accurate on a state by state basis that everyone who follows the stuff is now sitting up and and and giving these platforms a lot more respect. If you remember the narrative the day before the election, people said, myself included, well, maybe we shouldn't put too much credence in a marketplace. That's really just young men. Women are not betting on elections in any real numbers. This is dudes. So maybe they are over indexing to Trump because that's what they want to have happen. I thought that too. I don't think that today. we talk to investors about our investment philosophy.

32:11We have a deck and one of the slides in our deck is the concept of the jelly bean jar. The predictions are going to be much more accurate with thousands of people betting how many jelly beans are in the jar than one expert who happens to know a lot about jars and or confection. This is not materially different. Now, Polymarket's got the user base overseas. There are not U.S. hedge funds in there. There are not U.S. retail people that are making investments in a prediction. So the one thing that you could have said is maybe that's where it's overindexing, where it's not picking up enough of the actual electorate.

32:54That will change. So Polymarket, interestingly, is based in Soho in Manhattan. but all of its users are overseas it sounds like a crypto exchange but they but they will you'll go i think you're going to see a lot of evolution in these betting platforms and by the way when they all agree like it's a good sign for me it's time to shut the it's time to shut the fuck up and pay attention to what the market is saying it doesn't mean markets can't get things wrong i think what it means is it's probably a better system than somebody making phone calls to people's landlines. What trends do you see? I mean, so certain companies were obvious winners.

33:35It feels like Tesla was a big winner. You think? Yeah,$119 million to get a$15 billion pop in his wealth. He's added$30 billion to his net worth. Oh, it's now$30. There you go. 30X, that's the best trade of 2024, right? So after the sugar high are the obvious ones, like alternative energy is not doing well, oil and gas doing well, some smaller companies that supposedly are immune to tariffs doing really well, those exposed to tariffs are doing marginally, or I would say, you know, somewhat or modestly negative. If you look out over the next four years, are there any sectors that you think people aren't registering or haven't acknowledged how well or how poorly they're going to do under a Trump administration?

34:18Yeah. So I think the biggest question is the hyperscalers. So, but I want to, I want to get back to that in a second. The biggest reaction in the aftermath of the election was in Bitcoin, the US dollar, and small cap stocks. And if you look at the composition of the Russell 2000, the biggest winners within the Russell 2000 were regional and small banks. That sort of makes sense to me. When you saw the 10-year yield explode, even though it's been walked, it's walked itself back a little bit. What that speaks to is higher net interest margins and, uh, and just a bigger lending spread and a belief in a stronger economy.

35:03And those stocks had been beaten up for like three years now. So relative to every other type of stock. So I understand that part of it. We saw huge rallies in industrial companies. I understand that part of it too. Um, oil services stocks are the most interesting to me. I have a personal ownership in a company called Baker Hughes. That broke out in a massive way. We also saw the travel stocks explode, which was really interesting. Marriott, Delta, some of the bigger names in consumer discretionary or the travel companies. So the reaction was really widespread. Notably, gold fell, which I found interesting.

35:42I don't have a theory as to why, but it diverged from Bitcoin. Gold has been a huge performer all year. It's actually performed as well as the S &P 500, which doesn't happen every day. But gold fell in the aftermath of the election result. The other thing I would get back to is the hyperscalers. It's unclear whether or not J.D. Vance claiming that he's supportive of the work being done by Lena Kahn, who is a Biden appointee running the FTC. It's unclear if that J.D. Vance imprimatur is going to be enough to dissuade Trump from getting rid of everything related to Biden that he possibly can. She doesn't have a lot of friends on the right, obviously.

36:32And the only thing I can think of is J.D. Vance may be telling Trump, no, actually, this is good. We want to keep the pressure on these guys for the next four years. We want to give them another assailant out here that they can expend their time and energy fighting against. So that that was kind of like an interesting idea. I don't know where the relationship between Zuckerberg and Trump stands. It was not great in the first term. I think we all know Bezos is not the CEO of Amazon, but still going to always be the first thing that Trump associates with with Bezos. So we don't know where they stand 100 percent.

37:12We know that there was dissatisfaction on the part of the Trump campaign with the treatment of search results on Google. It's an open question how they'll be dealt with. The one thing I think people feel good about is that Tim Cook knows how to handle Donald Trump. Tim Cook went to the White House. He did the photo ops. He did all the things that he had to do. And Apple got itself an exclusion from the tariffs that would have really harmed the making of phones overseas. uh i'm guessing tim cook has a playbook for this uh and i'm guessing investors are willing to give him the benefit of the doubt that he will skate through another four years of trump unscathed one of the other winners you we were just mentioning there are small cap stocks so the russell 2000 jumped nearly six percent right after that was the biggest reaction biggest reaction um i'd love to get your take on one why exactly that's happening right now and two whether you think this will be a long-term trend because what we've seen over the past several years is that kind of the rich get richer among the stock market at least it's the big players the mag sevens that have been ripping and the small cap stocks have been kind of left behind I wonder if we're going to see a reversal of that trend.

38:31I won't bury the lead. It's not going to be a long-term trend. The history of small caps versus large caps is one of oscillation. They have these periods where small caps outperform, followed by these very predictable periods where they underperform, and then the cycle begins anew. And this will be no different. We saw small caps rally in 2017 as part of the quote-unquote Trump trade. There is an idea on the part of asset allocators that high tariffs represent an opportunity for smaller businesses that are more domestically focused. Famously, the S &P 500 derives, I think, double the revenue from overseas than the Russell 2000 does.

39:10So there's an idea that these are companies that will largely be unharmed by tariffs and might even be helped if they've got onshore production. I don't really believe in that. I think that's people taking a narrative and forcing it into an investment strategy. And I think if we really have 20 % tariffs around the world, 60 % tariffs on China, I think small companies will be equally susceptible just as the larger cap companies are. So I don't think the infatuation with small caps will. Why? Because I buy that narrative when I heard it too. I mean, if you're more domestically focused, if your supply chains aren't in America, you're not paying the tax.

39:57Why is that not compelling to you? Go look at 2018 when the tariffs first went on. We had two in one year. We had two 20 % little mini crashes in the S &P 500. And ask yourself, how did small caps do in those moments? They did not hold up. They were not a safe haven. And people were not making this calculation with their money. Oh, I'm going to sell S &P stocks and buy these little pieces of shit. It's just it's not the way money managers actually react with the dollars that are entrusted to them. So if we didn't see it then, we're not going to see it now. That's one. Two, who are the customers of small cap companies?

40:37Large cap companies. So if large cap companies are struggling because of tariffs, they're going to spend less money and they're going to buy less products from the smaller public. So it's not going to play out that way. But I understand the rally. It's important to point out. So the Russell 2000 just takes the 2000 largest market cap small companies. And it's a little bit random of what's in there. The S &P 600 is a better index to follow. So it's just a competing version of small caps. They're all profitable to get into the S &P 600. So you have less little tiny biotech companies with no earnings.

41:18You have a higher amount of industrials and financials in that index. that's kind of I think what you want to watch if you all of a sudden get into a tariff situation and you hear CEOs of those companies coming on conference calls and crowing about what a windfall they're getting because of tariffs I'll be wrong I'm telling you right now in November of 2024 that is not going to be what we're saying in November of 2025 stay with us

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43:20We're back. with ProfG Markets. I just want to pivot to crypto, which we briefly mentioned there. So Bitcoin has hit an all-time high. It broke past$80 ,000 for the first time ever over the weekend. And the expectation is just laxer, looser, nicer regulation. But Trump has also spoken about building this national strategic Bitcoin stockpile. That's exactly the words he used when he gets into office and with my from my conversations with crypto bulls that's really what they seem to be most focused on um your view on bitcoin right now and is this huge rally warranted do you think i don't know if it's warranted because i don't know how to i don't know how to judge where the price should be there's no there are no cash flows so i can't say oh here it's cheap here it's expensive i just i i try i try to avoid doing that the only question that matters with bitcoin is are more people going to want to own it or less people six months from today that nothing else really matters um and when you think of it on that basis what schmuck would have sold it at 70 000 after on the on the heels of that electoral outcome selling it to do what like literally what are you doing with the money i hope you're eating with it because we basically have a bitcoin president coming into power who has largely been financed by bitcoin billionaires they have his full attention and just instinctively he doesn't have to understand anything about how blockchain works all he has to understand is there are rules and these people are against the rules Well, I'm with the people who are against the rules because they're rich and they flatter me and they're going to support me in the midterms.

45:14They got rid of Sherrod Brown in Ohio. This is the senior person on the Senate Banking Committee. They threw him out. It didn't even cost that much. I think it was like$20,$30 million. So he's not stupid. He understands that he should be listening to the crypto people and he's going to. And I think the tacit support on Wall Street and amongst institutions, Larry Fink at BlackRock, that's going to turn into full-fledged order for the age of digital assets. And if the government decides – they have 211 ,000 bitcoins right now, federal government. If they decide that this is a new reserve asset, well, what do you think central banks all over the world are going to have to do?

46:02What do you think foreign treasuries are going to have to do? They're going to have to pretty much fall in line. If we start stockpiling Bitcoin, that's of course what everyone else is going to start doing. But then they'll start getting rid of their dollars, right? Maybe. I think the bigger thing to think about at this point in time, who would sell it? Who would sell it right now? Understanding that this might be a thing that the federal government decides they want to buy more of. So the people within the Trump campaign are saying a million Bitcoin. I have no idea if that's realistic. If it is, the price is not going to be sub$100 ,000 for very much longer.

46:46And I think everyone understands that. I also want you guys to think about the chase because if and when Bitcoin breaks$100 ,000, every asset allocator in the United States that's ignored it or avoided it or talked down about it really is going to be forced to rethink whether or not they should do what the U.S. government is now doing. So this is one of the most incredible stories in the history of markets. three years ago they were arresting people for dealing in crypto and now the u.s government may end up becoming one of the biggest regular purchasers of of of crypto and uh i don't think anyone in the fall of 2022 when they were arresting uh sam bankman freed could have pictured a 180 to this extent taking place just a couple of years later distinctive trump's presidency are Are there any sectors you would stay away from where you think that these things are overvalued or they're going to face macro headwinds?

47:47If Elon Musk weren't in a position to pull his chair up to the desk in the Oval Office, which so I'm telling people that I think we're going into a new robber baron age. The parallels between what's happening now and the late 1800s should not be lost on anyone. We're probably going into a robber baron age where very, very smart, very wealthy people have the most influence. Their influence is going to trump the evangelicals, no pun intended or maybe pun intended. Their influence is going to trump the anti-China wing of Republican politics. They are, I think, going to be at the center of all of the decision making going forward.

48:33I would have ordinarily answered your question, Scott, by saying solar and EVs. But again, Elon Musk owns a solar business and an EV business. And I just don't think it's going to be as simple as we're for oil and we hate alternative energy sources. I just, I don't think it'll go that way. So I'm not sure about any industry in particular, other than media. Media companies are well and truly fucked For the foreseeable future These fantasies that all of a sudden We're going to have mergers And Warner Brothers is going to be able to find a deal And Netflix is going to start buying Lionsgate None of that's going to happen Because I don't think any traditional media companies Will have paid enough fealty To Donald Trump personally We know he's willing to weaponize these agencies against people who he views as being against him.

49:37So if I were trying to think of an industry, this is smaller than a sector. You have sectors and then you have industries or sub-industries. If I were trying to think of a sub-industry that could possibly be the most flat on its back right now in terms of what's about to happen, I would say traditional and or mainstream media. This is not going to be a repeat of 2016 where everybody subscribes in The New York Times. I think there is just a fatigue about anti-Trump news. I in 2016 everybody wanted to subscribe to the washington post and the times because they wanted to fight back and they were and they wanted to hear every outrageous story and they wanted to be armed with information I have to tell you guys as somebody who walks outside of my door and talks to people nobody wants that this time don't you think with trump though being seen as sort of anti-regulation or not emboldening probably they have to see the doj even if they lead leave Lena Conn in position, don't you see a lot of mergers and consolidation coming down in media, given the stressors you're talking about?

50:48Where are they? They've been on hold. They've been on hold for a while, and it's unclear who is going to acquire these assets. Well, you don't see a Warner Brothers doing a stock deal for some of the other smaller players or something like that? I think they would have liked to have merged with Paramount, but they're not in a financial position where their own shareholders would think it makes sense. and who is big enough to absorb the$40 billion in debt sitting on the books at Warner Brothers almost no one so they have I think done a good job at repaying debt because I think that number was closer to 60 at one point but that's not necessarily going to change the calculus for who wants to own that stock you don't have the growth you've got hit or miss box office.

51:39Look, I love$8 stocks. Okay. I would love to say that's the buy. It's so hated. It's so, it's, it's like, uh, it's been so ostracized from people's portfolios that it almost might as well not exist. Normally that's a great setup. I just think, uh, this fantasy where the Republicans are going to allow$3 trillion in M &A, which is, uh, what we had in 2021 this year, we're about 1.6 trillion in M &A. So this fantasy that like next year, we're going back to 3 trillion and all these media companies are going to find dance partners. I just don't see, I don't think it's going to work out. I reserve the right to change my mind, but for right now, I just can't picture it.

52:22I do want to just go back to this robber baron era that you just brought up, which I totally agree with. I think it would be a very good bet to bet on Donald Trump's friends right now. Do you have any larger economic concerns about this, though? Well, I think we've had periods before where business interests had outside influence on the White House. I really don't think it's a new concept in American history. And I think of it as kind of a pendulum. And it could be a while before it swings away. I think the next four years, what you're going to see is the rich get richer. I think you're going to see an explosion in demand for people who do what we do, which is wealth management.

53:14I think more people are going to come into the wealth management industry looking for help than have ever come before. Keep in mind, this is coinciding with a just gigantic wealth transfer from the boomers to Gen X and millennials. And I really think that we're just in an era where smart people are going to stop worrying about all the headlines every day and all the outrage and every stupid joke that every stand-up comic tells in front of a mic that if that's how you plan to spend the next four years i i just would say just maybe rethink it spend the next four years put your head down make fucking money focus on how you can improve your own life and the pendulum will swing back and if you're horrified by some of the things like the overturning of Roe v.

54:05Wade or the way we're going to see very cruel deportations of immigrants. Like if you're horrified by those things and rightly you should be, the wealthier you are, the more opportunity you will have to do something about it. Screaming on Twitter, crying into a TikTok, all that does is make the people on the other side feel even more emboldened. They love the whining and crying. They're feeding on it. It's their energy source. So if you are virulently anti-Trump, and I know people who are, of course, I live in New York, if that's what you're about, my advice is arm yourself with money. It is the only way to make change.

54:53You don't have to like that what I'm saying is true. You just have to accept it because everyone else has. Josh Brown is a co-founder and CEO of Ritholtz Wealth Management, a New York City-based investment advisory firm managing more than$4 billion in assets. Five, five, five, five. Sorry, it's bios outdated. Five billion in assets. Did I get tariffed? Wait, hold on. Wait, I just got an update. It's 5.2. In assets for individuals, corporate retirement plans, and foundations. Josh, these are always hugely popular segments with us. We really appreciate your time. I love chatting with you guys. Thank you so much for having me.

55:25This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lange is our research associate. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

55:55You have me in kind reunion As the world turns And the dark flies In love, love, love, love

56:25Thank you.