Pope Against AI, GDP Revision & Market Updates From Ron Santella

18:37Robert Croak:This week, the timeline for AI regulation moved up. So keep that in the back of your mind. Next time someone's telling you the AI trade is just a straight up line forever. Probably still going to go up to the right. It's a, you know, I don't know how many trillions of dollars market cap we're all going to get here because of AI over the next decade. But regulation has decided to knock on the door and say, hey, it's me. The thing that tends to cause everyone a lot of headaches. I'm here to the party. Someone let me in.

19:06Austin Hankwitz:Yeah, they definitely want to get their pound of flesh before we get too far ahead of things here. But Austin, support for the show comes from VCX, the public ticker for private tech. For generations, American companies have moved the world forward through their ingenuity and determination. And for generations, everyday Americans could be part of that journey through perhaps the greatest innovation of all, the U.S. stock market.

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19:54Austin Hankwitz:Introducing VCX, the public ticker for private tech. VCX by Fundrise gives everyone the opportunity to invest in the next generation of innovation, including the companies leading the AI revolution, space exploration, defense tech, and so much more.

20:09Robert Croak:So visit GetVCX.com for more information. That is GetVCX.com. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Funds Perspectus at GetVCX.com. This is a paid sponsorship. With that being said, Robert, I can't wait to jump to our interview with Ron Santella, CEO and Portfolio Manager of Equable Shares. We've had him on the show twice now, and it is always a blast having Ron hanging out with us. He does a really good job of offering sort of not just his perspective, but this guy is talking with dozens, if not hundreds, of fund managers every single week and month with Equable Shares and the whole team that they're building over there and they're great products.

20:55Robert Croak:So he's got the boots on the ground intel as to what everyone thinks is going on in the stock market.

21:01Austin Hankwitz:Yeah, 100%. I think it's one of the coolest things we get to do within the Rich Habits podcast is have these insider guests that just really do have the boots on the ground. They are so ahead of the information before we see it in the news because they're doing it every day right there, just in the trenches. And we get to have them on here to spill the beans and tell our audience what's really going on in the market. So I'm excited about this interview as well.

21:26Robert Croak:And you guys are going to learn a ton. We're going to talk about the stock market, of course, but also the bond market, which is ticking higher, which normally is not a good thing. Yes, we'll talk about inflation, but we're also going to talk about the first, call it 90 to 180 days of what Kevin Warsh as the chairman of the Fed could begin to look like, and of course, how we can begin to shape our portfolios for best outcome by the end of the year. So Robert, let's jump to our interview with Ron Santella. Ron, thanks again for joining us on this episode of the Rich Habits Radar. We're seeing those March 30 lows in the stock market.

22:01Robert Croak:We've rebounded like crazy. I want to say the NASDAQ is up some 30 % from those March lows, But something else that's also increased from the March lows are the bond yields. They have climbed over the same period. Can you explain to us, one, why the bond market's important to keep an eye on? I know it's something that people speculate. Trump cares more about the bond market than the stock market. As well as what are the implications as an investor considers how to sort of position their portfolio for the rest of 2026? First of all, great to be back today. and love the question. I would start by saying that I think President Trump probably values both.

22:45I think he looks at the stock market as a measure of wealth. I think the administration has recognized that the bond market and financing is ultimately the engine of the economy, and that's why it's important. Investors have choices, Austin, and they can look at the equity markets and the bond market, and they say, where's the best place to put my money? There's a notion, and there's a principle called the equity risk premium, which is essentially, is an investor getting rewarded enough to be in the stock market. And with the 10-year currently in that sort of 4.45 % to 4.5 % range and the forward P ratio at about 22 consensus earnings, there's not much for premium to be in equities.

23:20So at some point, either earnings momentum has to continue and earnings need to grow or the bond market needs to pull back or a combination of both.

23:29Robert Croak:I like how you called out the earnings momentum continuing. Maybe take a moment to, because we've talked about this a ton inside the rich habits network as of late right we saw this kind of i mean it was it was interesting if you look at the earnings per share actual earnings per share here from q1 earnings heading into the call it april may you know time frame there it just skyrocketed because q1 earnings were so good and what we had to see was the stock market sort of reconciling that which is why in my opinion we've seen such a big rally but maybe talk a little bit more about how important it is for investors to understand earnings and the PE ratio.

24:09Robert Croak:We just did a whole episode talking about the PE ratio. So our audience is going to know exactly what you're talking about here. So Ron, walk us through some of that. Yeah, I think, look, the most basic level in equity is the net present value of its futures earnings. So when an investor buys a stock, they're buying earnings. Now, stocks are different. We have stocks that are stable. We have income stocks, utilities. I think in the current environment, you have to separate the market multiple, which might be 21 or 22, from different areas of growth. And I think what we're seeing right now is that investors are willing to pay a premium multiple for stocks that have a high growth potential.

24:44Robert Croak:Totally agree. Over to you, Robert.

24:46Austin Hankwitz:Yeah, I like that. And, you know, obviously the markets are ripping. We're at all-time highs all over the place. We've got all these crazy headlines. And in addition to the rise in bond yields, where do you see challenges? Do the equity markets face any near-term challenges or over the next year or two that you see? Or do you think it's business as usual and we're going to keep seeing things go up and to the right? I wish I had a crystal ball, Robert. And you've been doing this quite a while like me. I know, Austin, you're a student in the markets. Markets have a way of surprising all of us. Yes.

25:18I would say right now that the backdrop does remain favorable. If you look at some of the sectors that perform well, particularly, say, the semis, there are some good fundamentals supporting the ramp up in those stocks. But when I look at challenges for the market, I tend to break it down into the knowables and those things that we cannot know. And the knowables are that we do have midterm elections coming up this year. That'll be a focus, I believe, sometime in midsummer. You'll see the market starting to focus on what that looks like. Right now, the odds are that we could see a shift in certainly the house.

25:51maybe the Senate. Inflation seems to remain persistent. And I think whether it's the Fed or investors, they keep an eye on inflation and see what that does to bond yields. For me, one of the surprises could be the SpaceX IPO. I'm not predicting how it's going to trade. I think it's going to attract a ton of attention. That's been well telegraphed. For those of us who've been in the markets for a while, we have memories of Facebook in 2012, which at the time was, for me, probably the most euphoric IPO that came to the market. In fact, I was involved there as an investor. And I think most of us probably know that stock dropped 50 % from its IPO price.

26:31Took about 14 months to retrace and get back to its IPO level. Not predicting that for SpaceX, but we have three notable IPOs coming this year. We have SpaceX, OpenAI, and Anthropik. It'll be interesting to see what that means for the market.

26:45Robert Croak:I completely agree. And I want to linger on the SpaceX IPO for a second because it's something we're getting a lot of questions about from our community. And I want to get your perspective on this as well, Ron. You know, some of our community members and people that are listening to the show and chiming in are saying, hey, is this SpaceX IPO going to mean that people are selling their stocks to shore up cash to then go invest in SpaceX? How will that impact, you know, some of these high-flying semiconductor names, the names inside of the SOXX or the SMH, you know, sort of these semiconductor indices that are up 200%, 300%.

27:21Robert Croak:Micron's a great example of this. Are they going to sell index funds? So maybe talk a little bit more, especially I want to reflect upon that meta IPO, Facebook IPO. I saw a similar comparison on X as well and people talking about how, to your point, Ron, it took 14 months for it to get back to that sort of IPO price. Maybe if you want to linger on your thoughts on how retail investors might begin to look at this IPO, the SpaceX IPO, and maybe what you're seeing from your peers. First of all, I think SpaceX is a good microcosm of the market in some ways. I think we're in a market environment that is rewarding potential, rewarding growth, but is also putting a premium on that growth.

28:00And so I look at SpaceX and they're involved in many exciting areas. Obviously, SpaceX exploration, Starlink, you know, currently the emergency, Grok. They're even selling compute. One of their biggest revenue sources now is selling compute to Anthropic. So there's a lot of exciting things under the hood when you look at SpaceX. But ultimately, valuation does matter. And when you look at a company that could be valued as high as$2 trillion at the IPO price, I believe it's baking in a lot of the future potential. And that's where an investor has to draw that balance between buying into what is unbelievable potential, but what is the right value for that?

28:38The second part of your question, Austin, is, look, that'll be a$75 billion and possibly more if the underwriters exercise their green show. So that will direct dollars away from other investments into that and also into Anthropik and OpenAI down the road.

28:55Robert Croak:Completely agree. I want to jump back to what we were talking about earlier. We talked about inflation. We're talking about, specifically in this episode, GDP getting revised a little bit lower here. I want to talk about your perspective on Kevin Warsh's first, let's call it three, four, five, six months here. The Fed, and we've talked about this now on the show, I don't know how long, I'm blue in the face talking about it, but when we entered 2026, the Fed was supposed to cut interest rates by two or three times. Now, if you go to poly market or any of these sort of prediction markets, they say zero rate cuts in 2026 because inflation has reared its ugly head back out, specifically because of this sort of energy shock given the geopolitical conflict here.

29:37Robert Croak:So we're seeing the April PCE with that climbed. The super core section of it, though, when you strip out the energy and the food and the housing, that has been relatively flat, which is good. But do you have a perspective on, you know, Kevin Warsh's responsibility now as we head into the back of 2026? The Bank of America is saying maybe no rate cuts until 27. Others are saying, hey, maybe we get a rate hike. What is Ron Santella think? We all know at the end of the day, the Fed is heavily data dependent. And so what we say today could change with a number next month or two months. But for what's on the table today, I think Kevin Warsh has a couple of things ahead of him.

30:15I think, A, he wants to start off and show that he is independent. I think he wants to preserve the integrity of the Fed. I think that's really important. I think he understands he has to build a consensus and gain credibility with the other committee members. So I think he'll navigate that well. I think the pressure is often the administration to lower rates. The market clearly is indicating there's not a very high likelihood, in fact, probably no likelihood of a rate cut anytime soon. But if one just looks to his own swearing-in ceremony with President Trump recently, President Trump had no mention about rates.

30:52Scott Bissette has not mentioned it recently in terms of lowering rates. I do believe if Kevin Worsh has to lean one way, he will probably put off a rate hike as long as possible to make sure the data supports that as some kind of concession to the administration. In terms of what Ron Santel thinks, I'm in the camp of the Minnesota Fed chair who spoke last night in Japan, where he points to the fact that we're now in the fifth year of the Fed looking at inflation that's exceeded its own target. You know, they have that 2 percent. We have five straight years of inflation. The labor markets are fairly healthy.

31:30So I think the Fed is going to shift more towards controlling price levels. And now he's concerned with the labor markets right now.

31:37Robert Croak:I appreciate you echoing the Minnesota perspective there. Because I think, what was it? Was it last symposium? So it would have been what, August of last year, Jerome Powell talked about how like the risk to inflation versus the risk to higher unemployment. They cared more about the higher unemployment. But maybe that higher unemployment didn't come as fast as Jerome Powell thought it might have. To your point, it's certainly stable. Obviously, GDP was revised lower, but I mean, it's still 1.6%. We're certainly not in a recession. So I appreciate that. I appreciate the honesty, Ron. This is what it's all about.

32:13Yeah, sure. You know, these are complex, right, Austin and Robert? I mean, the Fed is looking at the consumer, and the consumer got a shot in the arm with the recent tax refunds. But that's a one-time shot. So you look at three consecutive months of real ways declining right now. You're listening to the CEO of Walmart, who has his fingers on a policy. He's kind of coming up, maybe raising prices. I think the next 6 to 12 months should be on all of our radar to see how is the consumer doing. Because at the end of the day, our economy is 70 % consumer-based.

32:46Austin Hankwitz:Yeah, for sure. And I've got a couple things. I want to click back on the Fed just for a second. Because right now, Polymarket has a Fed rate hike at some point in 2026 at a 32 % chance. What are your thoughts on that without the crystal ball? and what do you think the effect is if we see a Fed hike even of 25 basis points? What do you think that does to all of this momentum in the market? Robert, the 25 basis point shift in overnight rates, whether it occurs or not, to me is always secondary to what the rest of the yield curve does. I think when the Fed looks at rates, what they don't want to do is lose control of the rate environment.

33:30So when you watch the 10-year bottom out at 394 this year, trade up over 450 recently, if that starts ticking up closer to 5%, the Fed has to look at that. And I think they look at the tools in their arsenal. So obviously, they would look at the overnight rate. And I think the rate they look at the most is that two-year rate. I think the two-year rate is essentially the forward funds rate.

33:55Austin Hankwitz:Got it. My last question, Ron, is for our listeners. They're from all walks of life, all different income levels and portfolio levels. How does Hedge, talk through Hedge a little bit, but how does that fit in the everyday person's overall portfolio allocation? Walk us through that. I know you did a good job last time, but we have a lot of new listeners. And I want to make sure they understand your background, why Hedge is important, and what that means for them. Great question. I appreciate you asking. So let me just start with the environment. We have seen a few stocks go parabolic, Intel, Micron, and the list can go on, correct?

34:36And I'm sure many listeners today are invested in so many stocks and doing quite well. I just read a piece from Howard Marks, who's the founder of Oak Trade. Actually, I'm a big fan of Howard Mark. And he was talking about that one really has to hold on to those great compounders over time. But he raised the example of Amazon that declined 90 % from 1999 to 2001. Actually, it was 93%. So split adjusted, Amazon traded down to 28 cents in 2001. Most of the listeners could not hold that position and take that kind of loss if that was their portfolio. So the reason one looks to heads is to make that a sleeve or a part of an overall portfolio allocation.

35:18We're essentially that insurance in the portfolio that'll provide double-digit returns and up markets. So over the last three years, we've annualized it over 10%. But when the markets are volatile, when the markets go down, you'll find that this product is an anchor, its stability, it's less volatile. In fact, our volatility has been about the same as fixed income over the last three years. So it allows one, I think, to handle the more volatile parts of our portfolio and stay fully invested. And something we discussed a lot on this show is market timing is not optimal. We don't want to time the market.

35:54And I think that's where Hedge plays a major role.

35:56Robert Croak:One of my favorite call outs from our previous episode with you is Hedge, H-E-D-G, is the ticker of the ETF. I own it. Robert owns it. And what's so fun about it, as you had talked about in this prior episode, you said insurance is cheap when the markets are high and green, right? And so everyone wants insurance. Everyone's buying put option contracts when the markets are full of turmoil and red. And so people start running for the insurance. Oh, I want to have a hedge against my downside risk. But when things are great, when everybody's feeling euphoric, now is a wonderful time. Like Robert and I always say, if you're in a very speculative trade or some sort of thing goes parabolic, nothing goes straight up in a line forever.

36:37Robert Croak:Take your profits and reallocate it to other parts of your portfolio, including HEDG, this incredible piece of insurance that will buoy up a portfolio in case we have another Q1, right, where we had that Trump tariff tantrum in 2025 and this recent geopolitical conflict here in 2026. Love the analogy, Austin. We look at it as being insurance-like. I would draw one distinction. When one buys insurance, you pay for it. You purchase insurance. When one buys put spreads, you're paying a premium for that. There's a reason why with HEDS we make quarterly distributions in the range of the two-year rate that have been very tax efficient.

37:16We want people to get paid while they wait for that insurance. That's an important consideration at Equivalent for HEDG, our ETF.

37:24Robert Croak:Completely agree. Ron, thank you so much for joining us on this week's episode of the Rich Habits Radar. Your information, your perspective, your analysis is invaluable. and everybody again please go check out HEDG and go check out Equible Shares website everything's going to be linked in the show notes below gentlemen great to be here thanks for having me thanks Ron we always appreciate you stopping by another incredible conversation with Ron Centella CEO and Portfolio Manager at Equible Shares be sure to learn more about Equible Shares and his hedge ETF HEDG using the link in the show notes below Robert I always have too much fun with these episodes.

38:02Robert Croak:We're just Friday. It's good vibes. It's headline news. It's everything we need.

38:06Austin Hankwitz:I love these episodes because I feel like we're just giving it right off the dome. Markets are ripping. There's all it's and it's crazy to think when you look at the all of the different headlines, it seems like we would be in a downward trend in the market. Yet everything is ripping. We're all making money. Things are great. And this is why we want active management of our money, personal finances, personal and just keeping an eye on what's really happening in the markets. And I think that's what these Friday episodes bring is an up-to-date thesis of what we think is going on. So I love these episodes.

38:40Robert Croak:And these Friday episodes, you know, they're only about a year old or so, not even a year old. I mean, we're always trying to improve them. So please leave us a comment on Spotify. Leave us a comment on YouTube. Vote in the poll below. Subscribe to us wherever you're watching us. It'd be really great. We want to get your feedback. We want to make these episodes better and better over time. You said, hey, let's get this more interview style let's get some really smart people in the show so we've done that we've reached out to a ton of smart people we had ron santella this week we had wisdom tree another week i mean we're all over the place here doing the best we can to connect you with our network and the people we're talking with on a weekly and monthly basis so we get a better understanding and saying hey let's let's open up this information robert to our audience as well with that being said everyone thanks so much for tuning into this week's episode of the rich habits radar and we'll see you on monday

39:35We'll be right back.