Searching For Value Outside the U.S. — ft. Lyn Alden

Ed and Scott open the show by discussing Klarna’s IPO, Google’s acquisition of cybersecurity startup Wiz, and Lip-Bu Tan’s new plan for Intel. Then Lyn Alden, independent analyst and the author of Broken Money, returns to the show to break down the latest stock market correction, explaining why it’s a natural part of the market cycle. She explores whether we’re about to see a rotation from U. S. markets to international ones, unpacks why she doesn’t think federal spending will come down under Trump, and gives her take on the national crypto reserve. Finally, Lyn shares an update on her portfolio and reveals the key investment themes she’s focused on for 2025. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:28Speaker 01

  Here's your report.

• 0:29Speaker 02

  Oh, thanks, Jane. I wish I could hire someone just like you.

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• 0:49Speaker 02

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• 0:53Speaker 01

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• 0:58Speaker 03

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• 1:13Scott Galloway?

  Today's number 40. That's the percentage of college basketball fans who've admitted they've called in sick to watch a March Madness game. True story. When I worked at Morgan Stanley, I called in sick and my boss said, you don't sound sick. And I said, well, I've been fucking my pet rabbit all day. Does that sound sick enough for you?

• 1:40Scott Galloway?

  Welcome to Prop G Markets. Today, that's right, first job. Can you imagine what a great employer I was today? We're speaking with Lynn Alden, independent analyst and the author of Broken Money. But first, It's time for banter. Ed, did you have a pet rabbit?

• 1:55Ed Elson?

  No, I did not have a pet rabbit. And I just want to say-

• 1:57Scott Galloway?

  Did you have any pets?

• 1:58Ed Elson?

  I did. I had a dog. And I've told you about that.

• 2:01Scott Galloway?

  The dog you didn't like?

• 2:02Ed Elson?

  That's right. Okay, you remember?

• 2:04Scott Galloway?

  Yeah, you're the first person I've ever met. It's like, yeah, I wasn't a big fan of my dog.

• 2:07Ed Elson?

  I wasn't a big fan of my dog. He was lame. And he bit other dogs. I think I've said this before. I just want to point out, I tweeted about this-

• 2:16Scott Galloway?

  On Twitter? You're still on Twitter?

• 2:17Ed Elson?

  I also posted it on threads. Yeah. I cast a wide net.

• 2:20Scott Galloway?

  Okay, sorry, go ahead.

• 2:21Ed Elson?

  So I assume you watched White Lotus this weekend?

• 2:23Scott Galloway?

  I did, yeah.

• 2:24Ed Elson?

  So the scene that everyone's talking about, where Sam Rockwell is talking about-

• 2:29Scott Galloway?

  Getting railed by other men as he's, yeah, right?

• 2:32Ed Elson?

  Correct.

• 2:33Scott Galloway?

  I call that a Tuesday night.

• 2:34Ed Elson?

  Okay, so the face that the guy, the other guy makes, that's me at the opening of every single show on this podcast.

• 2:43Speaker 06

  Sex is a poetic act. It's a metaphor. Metaphor for what? Are we our forms? Am I a middle-aged white guy on the inside too? Or inside? Could I be an Asian girl?

• 2:59Speaker 06

  Right.

• 3:01Scott Galloway?

  I did see that thread and people loved it.

• 3:03Ed Elson?

  Your reaction?

• 3:03Scott Galloway?

  I've always thought a decent, a non-zero probability is my end is very similar to Kung Fu star Keith Carradine. There were several prostitutes involved in Thailand. And I thought, you know, if you're gonna go, go, go out with all guns blazing. I mean, did you, did you ever see Kung Fu?

• 3:24Scott Galloway?

  That a white guy playing like a monk who could kick the shit out of like, it was kind of politically incorrect, but very kind of politically correct at the same time. And the next half hour, I'd be like, okay, Tonto, like smell the ground for, for other savages.

• 3:41Ed Elson?

  Right now, I feel like the guy in White Lotus. I'm like, oh, oh, really? Hmm.

• 3:45Scott Galloway?

  Yeah. And then, and then you know what I'd watch? Let's go through. I mean, it would be impossible for me not to be like pretty fucked up based on the steady diet of media. I watched two hours a day, four episodes of I Dream of Genie. We were one of the first communities in Orange County to get cable TV and they had Genie on four times a day. I watched all four of them. So I grew up, my formative years were, yes, master, or go to your bottle, Genie. Anyways, I'm like fucking Alan Alden. I've come a long way. Ed, what did you grow up on?

• 4:17Ed Elson?

  Uh, I grew up on SpongeBob SquarePants and Dexter's Laboratory.

• 4:22Scott Galloway?

  That just means you should be abusing drugs. I don't, that's, that's not that. Claire, come in here. What did you grow up on?

• 4:28Speaker 07

  I actually grew up on the same shows you did, weirdly, because I didn't have cable. So.

• 4:34Scott Galloway?

  Oh, wow.

• 4:34Speaker 07

  Yeah, I basically watched PBS Kids and then this channel called MeTV, which just played reruns of all those old shows like I Dream of Genie, Bewitched.

• 4:45Scott Galloway?

  Bewitched.

• 4:45Speaker 07

  The Brady Bunch. Yeah, all your favorites.

• 4:48Scott Galloway?

  Did you watch Partridge Family?

• 4:49Speaker 07

  Of course.

• 4:50Scott Galloway?

  Yeah, that was pretty good. That was my favorite thing about Brady Bunch was that Greg was fucking the mom Florence Henderson. I, and the dad was closeted and died of AIDS, obviously very tragic. The Brady Bunch was not what it appeared to be. It was not what it appeared to be. God, get me out of this. Get me out of this. I gotta get out of this. GDP AI. All right, let's get, let's get to the headlines, Ed.

• 5:27Ed Elson?

  Buy now, pay later firm Klarna has officially filed for an IPO on the New York Stock Exchange. Analysts estimate its valuation is around $15 billion and is a sharp decline from its $46 billion peak during the pandemic. Google is acquiring cybersecurity startup Wiz for $32 billion to strengthen its cloud security offering. Back in July, the companies were in talks for a $23 billion deal before Wiz walked away from the deal. Now, Google expects to close on its largest acquisition to date. Next year. And finally, Intel's new CEO Lipbo Tan is just days into his tenure and has already outlined his new plan for the company. His strategy includes revamping

• 6:07Ed Elson?

  chip manufacturing with a focus on chips that power AI servers. Scott, let's start with Klarna, which is looking to IPO now. This is a buy now, pay later company. I've been pretty critical of buy now, pay later in the past. I think you have too. My view is that this is basically just a misleading rebrand of a product that already has a very negative reputation in society and that product is debt or credit. People do not like debt. They don't like credit. They don't like these banks that make money off of the people they service defaulting on that debt and that credit. And so companies like Klarna and Affirm, which is another BNPL firm, and Afterpay, they came in, they said, hey, we don't like debt either. We hate those

• 6:51Ed Elson?

  big mean banks. So we have a new product. It's called buy now, pay later. It lets you purchase things now and then you delay your payment of those items in the future. And of course, this is literally the definition of debt. It's just repackaged in a different format with a different brand and a different name. To be fair to Klarna, they have sort of cleaned up their act. They're a lot more forthcoming now about what they're actually selling. But I'm still a little bit wary of this company because I especially, I'm especially wary looking at the language in the prospectus for this IPO, which begins with this tirade against traditional banks. The CEO says that Klarna is an amazingly diverse group of people with really one thing in

• 7:33Ed Elson?

  common, and that is their resentment of traditional banks. So I'm still a little bit iffy on buy now, pay later and Klarna. But the company is doing quite well. Revenue's up almost $3 billion, expected to go public at a $15 billion valuation. What do you think of Klarna's potential IPO, Scott?

• 7:52Scott Galloway?

  So I agree with you. I'm not a fan of the BNPL space. And basically, it's sort of the way it works is you can walk up to the till at a retailer and they say, would you like to buy $300 worth of stuff? And you get automatic credit right now. And the retailers love it because it inspires additional basket size on the spot. And it's sort of tapping into

• 8:17Scott Galloway?

  People's, young people's, and I'd be curious what the age, the numbers here are, offering them cheap and easy credit, which sometimes leads people to bad places. Having said that, you can infantilize people. They get to make their own decisions. But it's yet another kind of easy credit way of juicing retailer sales. I would argue these guys seem to be really solid operators. And that is they went from a loss of a quarter of a billion dollars in 2023 to a $21 million profit last year. And they claim, and some of this is marketing, but some of it's also probably real, that they've really embraced AI. And that they're, from 2022 to 2024, Klarna cuts sales and marketing costs by 38%. R and D costs by nine and a half percent.

• 9:01Scott Galloway?

  And customer service costs by 29%. So, you know, cutting your customer service cost by a third is real. Meanwhile, its revenue has surged 48%. So their story is a compelling story. We're using technology and management discipline and AI to decrease costs while not losing growth, which results in a massive increase to the bottom line. There's been some analysis that says the savings from AI have been overstated. But this is smart from an IR standpoint. 15 billion feels reasonable to me. I don't know if they're growing faster than the other guys, but I would bet this actually gets a pretty warm reception in the marketplace because they're very good at using the term AI.

• 9:46Scott Galloway?

  They used, they said AI or mentioned AI 142 times in their prospectus. Their strategy of, from a comms perspective, trying to create, Klarna is synonymous with AI, is both smart and effective. And I think they'll get a nice pop here. What's, what's also interesting is they decided to list in the US. And it's really interesting, the umbrella brand of US listing. Increases your market cap by the analysis that the team brought together that the average company listing in the US trades at a multiple of 24 versus 18 in the UK. Now, you might argue well, it's there's more growth companies and they deserve a higher valuation, but some of

• 10:26Scott Galloway?

  it is definitely the halo or the brand halo of going public on a US exchange, which tends to attract the best companies globally. And they've decided to opt for a listing on the NYSE. I thought that was kind of interesting. Your thoughts?

• 10:41Ed Elson?

  I think one thing to mention there, you're asking about, you know, proposing the idea that they're targeting young people. That is exactly what they're doing. 70% of their users are Gen Z or millennial. And when, as soon as you look at the logo, that makes sense. It's sort of this sort of Gen Z-ified, clean logo with a pink background. And some of their marketing campaigns, I find quite funny. They have partnered with high-profile celebrities, including Paris Hilton, ASAP Rocky, and Snoop Dogg. So this is definitely targeted to young people. Again, I have no issues investing in the IPO. I agree with you. I think this is a very reasonable valuation. But I do think if you are a user of Klarna, and if

• 11:25Ed Elson?

  you are someone who's young and you somehow think that you're getting a great deal by paying with Klarna, oh, maybe I'm circumnavigating credit card debt. I just want to remind you again, this is no different from that. This is credit. It's basically the same as using a credit card. It's just packaged differently. You're still borrowing money. Let's move on to this acquisition of Wiz by Google. This is very interesting because 10 months ago, you and I were discussing the same headline, except it was that they were acquiring Wiz for $23 billion. And we talked about how that was going to be a huge win. You warned Wiz employees, many of whom would have made millions off of this, not to get too excited

• 12:07Ed Elson?

  because we believed that given the situation and from a regulatory perspective, maybe this wouldn't go through. And then a couple of weeks later, the deal was actually called off. Wiz said they were walking away from the deal and they said that they were going to pursue an initial public offering instead. So here we are 10 months later. It's the same deal, except this time it's for $32 billion. It's 40% higher than when we last discussed it. Scott, what do you make of this? And what do you think changed? They they tried to do this 10 months ago. They said no, and then suddenly they're down to do it again.

• 12:41Scott Galloway?

  Trump. Basically, Jonathan Cantor and Lena Conner are no longer there to threaten. I mean, if they get a good, if they're going to go public and they think they're going to get a great valuation, and there's a chance that they'll go through six or nine months or 12 months of headache trying to battle the DOJ or the FTC, and maybe end up with a negative decision. Let's go public. But if it's Google showing up and saying, why would you even risk it? We're back, we're going to close in 30 days. The Trump administration is very friendly. They've, you know, fired the FTC and DOJ people. There's, we have pretty decent certainty of close. And we'll up our, we'll up our price. Why take the risk? And why put up with earnings calls? And every senior manager here is about to be worth a shit ton of money.

• 13:25Scott Galloway?

  And they don't have to, they don't have to digest their stomach and go on CNBC and put up with pesky analysts. So this was Trump. And it sounds like they increased the valuation and boom, we're off to the races. I, I think they're smart to do this. I wouldn't, I mean, if you, if you can get, basically a public filing is a few things. One, it's a disclosure of certain data, but it can also serve as basically a kind of a whistle or, or what I would call speak now forever, hold your peace to any company trying to acquire them. Because once a company is public, acquiring it is, you know, really difficult. And you got to get shareholder approval. And there's a media class action suit saying you're buying us for too little. And there's all sorts of SEC issues around acquiring a public company.

• 14:08Scott Galloway?

  It's pretty clean and pretty easy to acquire a private company as long as the FTC and the DOJ aren't going to get in the way. So what changed here? Trump changed.

• 14:17Ed Elson?

  I'm in agreement with you that that's why they did this. Where we might disagree, I think they are miss assessing.

• 14:25Ed Elson?

  The positions of the DOJ and the FTC under Trump, because as we discussed with Jonathan Cantor, who used to lead the antitrust division at the DOJ, these new heads at both the DOJ and the FTC, these people are not soft on antitrust. These are the people who decided to continue the frameworks that were established under Biden. They're very tough, they're very active, and they're very much focused on big tech and on cracking down any and all monopolies that are emerging in that industry. So if Wiz has done this under the assumption that they are now in a more lenient environment when it comes to antitrust, I would encourage them to go look at Andrew Ferguson's resume, who's leading the FTC.

• 15:09Ed Elson?

  Go look at Gail Slater, who's leading the antitrust division of the DOJ. These are not the big tech sympathizers you think they are. It might have seemed that way based on Trump's positioning and having all those guys over for lunch at Mar-a-Lago. But the leaders of these agencies themselves are not going to be cozying up. I don't think it's going to be the cakewalk that they think it is. But we'll see. If I were to predict, I don't think this necessarily falls through, but I do think we're going to see massive scrutiny and it's again going to be a one or two-year ordeal. Because the other side note to this is that it's Google's largest acquisition by far. So I think this is going

• 15:49Ed Elson?

  to be long and drawn out. But I do agree with you. I think they saw a regime change and they said, okay, now is our time to strike. Let's go over the proposed changes for Intel as outlined by their new CEO, this guy Liputan. So we've been talking about Intel a lot and the issues that have been ailing this company. And here's what he wants to do with Intel now. This was reported by Reuters. He wants to focus more on AI. As we know, Intel has been more focused on this standard computing. He wants to restructure the company, likely in the form of layoffs. So he's going to fire a bunch of people. He wants to, quote,

• 16:31Ed Elson?

  "revamp" the company's manufacturing operations. I don't really know what that means. And I think the big question that remains here, which we do not have an answer to, is whether he's going to break the company up or not. I think a lot of people are expecting that he's going to split it into the chip design business and then also the chip manufacturing business and go for an all out corporate breakup and operate those two as separate companies. So far, we don't know. We can only speculate. So Scott, your reactions to the new Intel CEO and your thoughts on what might happen under his leadership?

• 17:08Scott Galloway?

  So Tan was on the board and he resigned from the board after dispute with Dancy Gelsinger about layoffs. This stuff never gets out into the public arena that a board. I've had pretty serious fights with other board members and CEOs. The fact that it escaped the room, that Tan had left the board over a disagreement about how many people to lay off at a place like Intel where everyone's like playing golf at Woodside Country Club together. I mean, that means it was really heated and that Tan was pissed off. And then what's even more interesting is the board called him back and said, hmm, you were right. Do you want to come be the CEO? So this is really, this is like high dudgeon boardroom

• 17:53Scott Galloway?

  drama. When a board member leaves, he's so pissed off with the CEO and then the board fires that CEO and calls him and says, come back as the CEO. And this is a company that I think the markets say there's a lot of potential here, a lot of IP, a lot of brand, a lot of distribution, probably a lot of fantastic human capital, and that it is arguably been one of the worst management companies over the last two or three decades, given the space it's in. And evidence of that is the new CEO coming in and acting like he's aggressive, he's bold, he's going to shake shit up. The stock's up 25% in the last few weeks. He's already added, you know, $20 billion or $25 billion in market cap just

• 18:33Scott Galloway?

  by virtue of this aggressive CEO who believes he has a vision. You know, he's also pulling a Klarna and mentioning AI a bunch. He is clearly, the markets are happy about change, disruption, and for God's sakes, do something. There's real assets here. So it'll be interesting to see what he does, but he's very successful. He served as, he was the CEO of Keynes Design Systems and the company was up 33x while he was there. And he's already sort of paid for his salary several, you know, exponentially, just by virtue of the market is excited. Maybe not as much about him, but more specifically. Just the prospect of serious, serious change. Your thoughts?

• 19:18Ed Elson?

  Yeah, I think it's important what you mentioned there about his time on the board of Intel. So yes, he was the CEO of Caters Design Systems, which is this software company that actually makes the software that Nvidia uses to design their chips. So he's deep in the AI game. He joined the board of Intel in 2022 and then he resigned in 2024. And as you point out, it's because he had these disputes with the CEO, Pat Gelsinger, who he thought was too nice, too bureaucratic, wouldn't lay people off. He thought he was too risk averse. All of these criticisms that made him very unpopular at the time. But in hindsight, he was totally on point. And so it does certainly feel to me at least

• 20:01Ed Elson?

  that he's almost the perfect guy for the job. He's been inside the machine, he's seen under the hood, and he was the only one who said, hey, guys, none of this makes sense to me. I don't like the way this is set up. And he got ousted, or maybe he resigned. We don't really know what happened. But I think it does make sense to bring him back because he's the only one who called bullshit when it really mattered.

• 20:25Ed Elson?

  We'll be right back after the break for our conversation with Lynn Alden. If you're enjoying the show so far, be sure to give Prof G Market a follow wherever you get your podcasts.

• 20:43Speaker 00

  This episode is brought to you by Welch's Fruit Snacks. Back to school season can be tough on parents. But choosing a snack you and your kids can both get behind doesn't have to be. Stock up on Welch's Fruit Snacks, made with whole fruit and now made with no artificial dyes. It's a snack kids already love and one you can feel good about giving them. Go back to school with Welch's Fruit Snacks, now made with no artificial dyes.

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• 22:03Ed Elson?

  Okay, welcome back. Here's our conversation with Lynn Alden, independent analyst, full time investor and the author of Broke and Money. Lynn, thank you for joining us again.

• 22:12Speaker 10

  Thanks for having me back. Always happy to be here.

• 22:16Ed Elson?

  So I'd like to start with your reaction to this sell off that we've seen in the stock market. So the S and P 500, it's down around 10% off of its high. It's officially entered correction territory. We're seeing all of this anxiety around tariffs and geopolitics and people talking about recessions again. I'd like to just start with your initial reaction to the drawdown. Any thoughts on this correction? And perhaps any thoughts on how this compares to previous corrections in stock market history?

• 22:49Speaker 10

  Sure. So there's been a pretty good couple of years in the market. So 2023, 2024 were both good for the market.

• 22:57Speaker 10

  One of the things I emphasized was the size of fiscal deficits during that time, which were generally stimulative. And all is being equal positive for markets in a nominal sense, as well as GDP running nominally on the hot side. And When we enter this year, some of that is slowly changing. So there's potentially fewer upside surprises in store, more downside uncertainty, things like tariffs, things like, you know, attempting to tackle the fiscal deficit in pretty kind of shock at all ways, kind of the start of the administration. And so I think it's natural, especially because equities were priced at a pretty high valuation.

• 23:40Speaker 10

  Now, in this whole kind of decade-long period, they've been on average, a little bit, you know, more highly priced than like very long-term averages. But even given this kind of cyclical ebb and flow evaluations, equity markets were a lot more highly valued than, for example, they were in the beginning of Trump's first term, if you use like a comparable baseline. So the combination of pretty high valuations, a lot of global capital all stuffed into US markets, overweight US and especially overweight US large-cap growth, has been very much the consensus play that keeps winning. And I think for the first time in a while, there are some challenges to that. And so I think the sell-off is natural.

• 24:24Speaker 10

  Partially, how deep it has to go will depend on policy decisions. There tends to be a somewhat feedback loop there. So, you know, don't really mind 5% corrections. We start getting to 10% and people aren't really sure where the end game is. You know, they start making noise and you see kind of rhetoric shift around that. And I think, you know, one of the ways to mitigate it was to have a fairly diversified portfolio. So for a long time, having international exposure was kind of an anchor on a portfolio. Whereas in this particular sell-off, international equities on average did better. It's kind of early rotation potential as well as owning other types of assets. I mean, gold's, you know, poking around its all-time highs.

• 25:08Speaker 10

  And so it's kind of funny because from a, when I look at a portfolio, it's like nothing to write home about, you know, like a kind of a week, you know, month-long period or more. But the sentiment on social media, from what I've seen, has been pretty kind of surprised. And I think it's mainly because the things that underperform the most tend to be the consensus. So some of the large-cap growth underperformed the S and P, and then the S and P underperformed global, and that just kind of messed up a lot of people's positioning.

• 25:37Ed Elson?

  Yeah, it does almost feel like all of the The truisms of finance and portfolio management are suddenly true again. It's like, you know, you shouldn't just be overweight US tech. You should also invest in dividend stocks and international stocks and treasuries, et cetera. A lot there is very interesting that we will definitely get into. I do quickly just want to get your take on tariffs and this tariff policy. I'm sure we're all getting bored of it, but I do want to get your position because I think everyone we've talked to has had the same view, which is this is a bad idea and it's bad execution. And I actually just read a tweet from our friend Morgan Housel, and I love this. I think it's very true.

• 26:17Ed Elson?

  He said, nutritionists fiercely disagree on what's the best diet, but all seem to agree that sugar is bad. The same seems true for economists and tariffs. I would like to get your view because I don't think you're, you know, you're an outside of the box thinker, I would say. I just want to check in. Do you have a different reaction to tariffs? Is there anything positive about this or is it mostly bad?

• 26:41Speaker 10

  I wouldn't necessarily have a different reaction, but I think I might come at it from a different timeframe or a different perspective. So one of the things I have been reading about for a while is the structural US trade deficits and why they do matter.

• 26:54Speaker 10

  And I've, you know, kind of pointed out that that's pretty tied at the hip with the dollar being the reserve currency. So basically, you know, compared to most other currencies, other than maybe one or two other sizable ones. There's a lot of countries that want to hold US assets or US currency directly. It's basically the biggest, most salable network effect for money in the world at the current time. And so a lot of international contracts and trade are priced in dollars. A lot of financing is priced in dollars. So a lot of countries and corporations have dollars on their debt. That's not even owed to American entities. It's often owed to European entities or owed to other foreign entities. It's basically cross border. You know, dollar financing. And so that's this really powerful network effect.

• 27:37Speaker 10

  And so for most currencies, they tend to trade on things like industry rate differentials, trade balance, differentials, things like that. There's kind of this like control loop that happens if a currency gets too expensive, too cheap. The dollar is kind of different because it has this more structural bid on top of the normal things like industry differentials and trade. Because basically, the whole world needs dollars. And the way that they get dollars is basically, we just pour them out like, you know, trillions of dollars over time, generally through structural trade deficits. And the mechanism is that because so many people hold it, they kind of inflate the value of the dollar. So our import strength gets, you know, stronger. And our ability to export lower margin things shrinks. And so we're, you know, we can be good at tech, healthcare and finance,

• 28:22Speaker 10

  but it's hard to be good at manufacturing in that environment. And when you run that policy for decades, you you kind of hit more critical parts. You get more deindustrialization. You get rising populist politics and changes on the electoral map. So it's, so I start from the viewpoint that the trade deficits do matter. And it's not surprising to see that increasingly become a political touch point. But I do think that the shock and all tariff policy is likely to have backlash. I think we're already seeing that. So it's not necessary to say that I endorse that approach. And the other thing that I tend to generally point to is if you kind of look at the administration, there's obviously different actors in it.

• 29:05Speaker 10

  One of the ways to help at least understand the somewhat intellectual framework that they're doing is Stephen Mirren wrote a paper. He's Trump's nominee for his chair, chairman of the Council of Economic Advisers. He wrote a paper in November 2024 that talked about realigning global trade. And it kind of laid out. It's kind of like the more intellectual, like if you were a steel man, what they're trying to do, that's the paper to read, because that's kind of the, you know, the more intellectual version, which is, okay, he kind of looks at tariffs, he looks at the trade balance, he looks at some of these things I just talked about, then says, okay, which approaches could address that, and then what are the risks of using those approaches, because

• 29:47Speaker 10

  he freely admits, these are risky tools to be using. So I think that in the context of understanding some of the voices in the administration, to see what they're at least trying to do, I get that. But yeah, I would generally agree with the consensus view that tariffs are more likely to slow down or impair an economy than help it.

• 30:07Ed Elson?

  And how will those tariffs affect the dynamic you described there, where we have this trade deficit that has, that kind of works because of the dollar's status as the global reserve currency, and we've sort of been, you know, floating off of this benefit that we didn't necessarily earn, perhaps. I mean, what do implementing these tariffs do to that dynamic?

• 30:31Speaker 10

  It adds uncertainty and adds costs. And so around the margins, it can change where there's things go. Now, the issue is that tariffs can impact in the very short term. You can just flip a switch and tariffs are on, whereas supply chains take a very long time, especially at scale, to move. And so, you know, my original background is engineering. So I always kind of look at things from a pretty tangible perspective. It's easy to kind of sit in New York or sit in Washington and kind of look at everything, numbers on a chart. But when you actually are moving facilities, moving logistics hubs and things like that, that's actually a really time consuming thing. So in the near term, it's likely to be inflationary and disruptive. Longer term, I think the best case scenario

• 31:11Speaker 10

  is it can kind of signal a priority shift. In that paper, The Economist covers not just the tariff side, but also ironically trying to discourage the rest of the world from stashing all their excess value in US financial assets and overvaluing the dollar because of that. So it's kind of like this one-two punch of trying to make imports more expensive and then also trying to discourage excess capital recycling.

• 31:35Scott Galloway?

  Leno, it was good to see you. One of our big themes for '25 was that the rivers would reverse, that the constant flow of capital into US, specifically US growth, would not only stop, but that it would reverse. And we're starting to see some signs of this. Do you think this is a temporary blip, or is this structural, where we might go into a... 10 or 15 year period of underperformance of US markets relative to non-US markets. Do you see this as a significant turning point or something that, you know, kind of wait and see?

• 32:06Speaker 10

  So I think it's a, it's a potential turning point and I started writing about that last year. Before the, all the tariff stuff came into effect, my initial catalyst was the US was entering a rate cutting cycle. And so it'd be the first window since 2019 that could be a catalyst for some of those capital outflows. Now, 2019 didn't really end up doing that because, you know, within a year COVID hit and the big, big, you know, US network effect tech stocks, you know, really benefited from that. And also the US did more fiscal and kind of came out a little bit more explosively than the rest of the world while China and other places were still kind of in contraction mode.

• 32:48Speaker 10

  And so that, that didn't work out last time. And so my kind of framework is this is the next window for it. Now, a window doesn't mean it's going to happen, but it basically means that it's, it's one of the first higher probability areas in a while. The, the area of my portfolio that has been more challenging has been expecting a little bit more of a rotation earlier. So I've been, I've been early on that trade. So I've kind of, I'm, you know, I'm always a little bit cautious to say, okay, this is the big rotation because I'm, I'm mindful of the difficulty of making that call. But I do continue to hold the view that, that it's more likely than not that this is early sign of a rotation because there, now there are a number of things there.

• 33:29Speaker 10

  There's the, there is the initial rate cutting period. Then there's all the tariff uncertainty. Then there's the fact that I've been emphasizing China because they've been in a balance sheet recession for a while that, you know, they're trying to deflate their property market.

• 33:47Speaker 10

  It kind of deflate bubbles there at kind of a gradual pace. But last year, they started to hit certain pain points on Chinese social media. They were, you know, it was, it was starting to come up and then they were starting to hit red lines in the equity market where their kind of priority shifted. And so my view was that they were going to come out with some sort of hyper stimulus, but that they're going to come out with a series of smaller ones whenever they keep bouncing into these red lines and that they're starting to put a floor under things rather than a ceiling over things. And so when we see You know, European fiscal opened up a little bit, not necessarily for great reasons, but European fiscal opening up a little bit, Chinese consumer stimulus opening up a little bit, while at the same time, the US is, you know, still being fairly tight with monetary

• 34:31Speaker 10

  policy, while also around the margins, trying to contract fiscal. And then you add tariffs. It's a pretty good recipe for the rest of the world, especially because there's also that big valuation differential, and everybody is on one side of the boat, stuffed overweight into US markets.

• 34:47Scott Galloway?

  So you've talked a lot about something that struck me the last couple of times we've talked is just how impactful it is to have $2 trillion in additional stimulus in the form of deficits. That that's just going to inflate the market, or that's going to be tremendously stimulative. Do you think that, and this is, this is a comment wrapped in a, or disguised in a question, do you think that the renewed emphasis on taking European defense spending from 1.9% of GDP to 3%, they're talking that we're about to see kind of a similar multi-trillion dollar stimulus come into the European market that might be very bullish for stocks there?

• 35:28Speaker 10

  I think yes, but smaller. It's not the same thing as, say, sending checks out to households, or, you know, PPP loans, a turn to grants, and it's not, it's not quite as explosive as what we come used to, but it's similar, I think, to the, kind of the US 2023, 2024 period, where, you know, social security was basically a pretty big cost of living adjustments, and the pretty top-heavy demographics that's pouring out into the economy, even interest expense is pouring out into the economy, which is spendable around the margins. And so, defense spending isn't some, like, rapid effects stimulatory thing, but it does trickle out to all the people that work in that, in those supply chains,

• 36:13Speaker 10

  and their spending power and their employment. And so, in the marginal sense, we can say that basically Europe's going from kind of low fiscal to maybe moderate fiscal, while the US isn't really increasing anymore. And so, on the margins, that fiscal difference has narrowed. And so, I think you do get a similar effect in Europe, just maybe smaller.

• 36:35Ed Elson?

  This is interesting, because, I mean, we're five months into fiscal year 2025 in the US, and the deficit is currently at around One, I think a little over 1.1 trillion dollars, which is a record high. And that includes the four months under Biden, but also the first month under Trump. And Trump has said he's going to change this. He said that he's going to balance the federal budget. That's word for word what he said. We're going to balance it. And the fiscal deficit is such a huge part of your analysis. It seems to inform many of your investment decisions. What is your outlook for fiscal spending under Trump? He's talked a big game about cutting spending.

• 37:16Ed Elson?

  We've obviously had Doge, which has been dominating the headlines. Do you think that spending in the short term or maybe the medium term in America will come down? Or is it going to remain the same?

• 37:28Speaker 10

  The short answer is I don't think it will come down. It could maybe flatline for a little bit, just because of the renewed focus on it. The issue is that the vast majority of the spending is these really big buckets that are hard to cut. So social security, Medicare, interest expense, defense spending, veterans benefits. And if you look at even, for example, back in the Paul Ryan Republican era, so the past decade, they were trying to reform social security, Medicare, raise the retirement age, trim things, potentially privatize some of it. Whereas in the Trump version of the Republican Party, like if you look at 2024 GOP platform, promise 24 is don't cut social security or Medicare and don't raise the retirement age,

• 38:12Speaker 10

  which is normally what you see in a, say, a democratic platform historically. That's where the biggest stuff is. So the optics are the idea that there's a lot of government waste, a lot of employees, and you can start trimming that. And while you can rack up a lot of these optical wins or dramas, depending on what side of any given issue you are, it doesn't really eat into the biggest things on the pie chart. Probably the only area that is big enough discretionary speaking is defense. But then the issue there is every single Congress person who has some program in their jurisdiction is going to fight tooth and nail to keep it. So you have to go through all that, let alone the fact that outside of defense and outside of all those big transfer, like those transfer programs.

• 38:57Speaker 10

  You know, we look at like FAA, Department of Education, XYZ, all those little tiny slices on the pie chart compared to those really big things. So my view is generally that. All the optics aside, when we look at this in a year or two, while they might have consolidated in some areas, I don't think they're going to really be effective at touching any of the big things. We'll be right back.

• 39:32Speaker 00

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• 40:50Ed Elson?

  We're back with Profty Markets. I want to pivot us to crypto. Trump has established this national crypto reserve that will include Bitcoin, but also many other cryptocurrencies. Ether, XRP or Ripple, Solana, Cardano. He intends to keep buying those cryptocurrencies in regular installments. I know you've written a lot and done a lot of research on crypto, especially Bitcoin. I know that you are a Bitcoin bull yourself. What do you make of this national crypto reserve? And do you think it's a good idea?

• 41:25Speaker 10

  Well, so there are a couple of different phases of this. There is that he posted on True Social that they would have Bitcoin, Ethereum, and then those three others. That got some backlash, not just among Bitcoin proponents, but also some CEOs of major exchanges that are involved in multiple cryptos. There's one of the projects in particular that is not well-liked by the rest of the space. That's probably what encouraged some of that backlash. Which one is that? XRP is particularly controversial in the space. The way that the executive order actually came out seemed to include, or taken into account, a lot of that criticism and probably behind-the-scenes lobbying, which is they separated Bitcoin from other cryptos.

• 42:04Speaker 10

  So Bitcoin's part of a reserve, whereas crypto, other crypto is part of a stockpile. And those two pools, at least as far as its executive order remains in effect, it could be undone by a later executive order, either by this president or a later one, but under this current framework, the Bitcoin is instructed not to be sold, and that Besant and Lutnick are authorized to find budget-neutral ways to accumulate more of it. That's how it's worded. Whereas the crypto stockpile, the Treasury Secretary, so Besant, has discretion on how to handle those, which could include sales, and that they're not really meant to accumulate more, other than through the normal course of seizures and forfeitures,

• 42:49Speaker 10

  which is how they have all these holdings in the first place. So I actually think that the executive order came out better than it could, because instead of going out and buying crypto XYZ that probably passes the Howey test and makes certain insiders and VCs rich and was pre-mined, and has an issuer, and it's kind of like if the US picks certain stocks to own and not other stocks to own, that's rife with all sorts of conflict. I actually think that they separated it out pretty well. And the thing I read about before this all happened is my base case is they ring-fenced the Bitcoin they already have, which is basically what they did. They're capitalizing it with the Bitcoin they already have from seizures and forfeitures. They'll see if any of those should legally be returned

• 43:32Speaker 10

  to certain entities. There's a particularly big bucket of those that is probably owed to an exchange. They got hacked. They weren't involved in criminal stuff. So we'll see what happens there. But other than maybe that big chunk, I think they hold that. They might accumulate a little bit more. I generally take the under on the idea that they're going to go out and buy like a million Bitcoin. As some of the proposals have said, so I tend to assume that it'll be roughly the size it is now, maybe a little bit larger, because they probably want to get some optical wins of, hey, look, we sold this crypto and we put the proceeds toward a budget neutral acquisition of a little bit more Bitcoin, or we did this and we bought a little bit of Bitcoin, but, you know, we'll see.

• 44:13Ed Elson?

  I was just gonna say, is this not exactly that, an optical win? Because what you're essentially describing is all of the cryptocurrencies that the government already had from seizing them from illegal transactions. I think people don't really realize that. Yes, we have billions of dollars worth of Bitcoin held by the government, but we only have that because there was criminal transactions happening and the government went in there and they seized the Bitcoin. And what you're basically saying is, Trump made this whole statement, we're gonna become the Bitcoin nation, we're gonna go out and buy a bunch of Bitcoin, people pushed back, and now he's saying, oh, actually, we're just gonna hold on to the Bitcoin we do have, except there's a new name for it. I mean, it sounds like essentially, nothing has happened on the crypto front.

• 44:58Speaker 10

  It's not quite that, because I think, you know, their policy before was to gradually sell the coins they have. And so merely not selling them is a...

• 45:07Ed Elson?

  It's we're holding.

• 45:08Speaker 10

  Yeah, it is a tangible change. Two, it would take a reversal to undo that, which is not impossible, especially if you get a different administration. It's a ton of free marketing, so a lot of that is just optics. But then it's also like, the fact that they did differentiate Bitcoin from other crypto, I think was, you know, good. It could have turned out more problematic, more prone of conflicts and things like that.

• 45:36Scott Galloway?

  So Len, you're, I think, presenting what I would call a kind of a neutral and sober view of it. I bring a bias here, and that is, this makes absolutely no fucking sense to me. There's nothing strategic about a strategic Bitcoin. Like, if there's a strategic petroleum reserve, if we run out of petroleum, that's bad. We can't make tanks, our cars stop. If we run out of Bitcoin, I don't see any existential crisis to the US. So effectively, and I'm very open to pushback here, we've decided that we're in the business of being asset managers. And seizing stuff and not selling it is not much different than buying it because traditional US policy is when we seize a yacht or assets, we turn it into money and

• 46:19Scott Galloway?

  give it back to the victims, or we put it into the treasury. So not selling it is not really any effectively any different than buying it. And when you're running deficits, the net effect of this is we have decided to buy a certain asset class and increase the deficits. So how is this any different than us deciding to increase the deficit and go buy four or five stocks that the president likes, who gave him a quarter of a billion dollars, as the crypto community did? This just feels totally asymmetric or nonsensical.

• 46:47Speaker 10

  I agree with probably two thirds of it. I think the fact that not selling it is effectively the same as buying it is true, which is why I mentioned that this is not just an optical change. There actually is substance to it because it involves either not selling or selling potentially hundreds of thousands of coins. And so that's fully true. It just means that the purchases were essentially already made. It doesn't mean that more purchases are coming. But they're still effectively purchases in that sense. And it's also true, it's not like oil where the US like could find itself suddenly deficient in Bitcoin and needs Bitcoin. I think there are other countries where it can serve a more strategic purpose, which is that if they're worried about getting cut off by like sanctions or things like that.

• 47:30Scott Galloway?

  Or hyperinflation.

• 47:32Speaker 10

  Hyperinflation, yeah. But like they even just for the fact that they could make a payment to another nation that settles in a half hour with multiple, you know, under multiple blocks, that actually gives them something. Whereas if you are the US global reserve currency issuer, then effectively what the value you're getting is as an investment. So in that sense, it's not like oil, it's more like the gold holdings. And then the question is, is it worth adding to our gold holdings? Is it worth adding another kind of monetary like asset to that? Now, the part that I would see a little bit differently is it's not quite the same as holding five stocks the president's like because Bitcoin doesn't pass the Howey test, so it's effectively a digital commodity. It's an asset without

• 48:14Speaker 10

  an issuer. And so I do put it more on gold in that case with the caveat that It's still a fairly small asset and this does obviously benefit those who hold Bitcoin or that are bullish on Bitcoin. So it does, you know, potentially help certain constituents, not others. And as you point out, many of them did lobby for it. And so I don't, you know, I don't really disagree with that part other than to clarify that I would see a big difference between them doing with Bitcoin versus them doing with like crypto XYZ that literally had VCs, founders, a pre-mine insiders, things like that. It is somewhat different. But at the end of the day, it is basically just an investment decision.

• 48:55Speaker 10

  If Bitcoin should, over the coming five, 10 years, go up five or 10x in price, then they have effectively made a good investment decision. Whereas if it stagnates, if it goes down, then it will have been a waste. Now, I think at the scale that they're doing it on, it probably gets disproportionate attention in the sense that, you know, they're not saying, hey, we want to go out and accumulate trillions of dollars with this. They're basically saying the, you know, the couple hundred billion we have, which is, you know, a month or two of fiscal deficits and a pretty small fraction of the gold reserve. So it's kind of, you know, I think there is controversy to it, but I kind of put it on small enough

• 49:36Speaker 10

  potatoes that, you know, it is what it is. And it's a little bit different than a security.

• 49:41Ed Elson?

  Just want to begin to wrap up here. I'd love to just check in on your portfolio. One thing I admire about you, Len, is that you make your portfolio public. So everyone can see what you're doing and what kinds of investments you're making. Are there any changes that you've made to your portfolio recently? Are there any investment themes or theses that you are focused on in 2025?

• 50:06Speaker 10

  So I haven't made any major decisions, but the parts of the portfolio that are working or not working are certainly changing. So it used to be that the US growth stocks were great. Obviously Bitcoin and MicroStrategy were great.

• 50:19Speaker 10

  The gold slice has been, you know, I purposely was kind of a bond bear and wanted some of that slicing gold, which has been a good decision. The part that I mentioned before, the anchor has been the international equities. And to a lesser extent, the US kind of dividend stocks, you know, the US stocks are doing pretty good, but they're not the mag seven, for example. And the recent rotation is basically saying that, you know, there might be some current wake up on overvaluation among US growth and a little bit of wake up on opportunities elsewhere. And one thing I like to point out is that it's not just tech. I already focused on, obviously, the tech is popular and expensive, but I've been highly in the fact that Costco has been trading at 60 times earnings. And it's a, what, like a 45 year old retailer? I'm not even sure exactly what

• 51:04Speaker 10

  date, but it's a, it's a four or five decade old retailer. It's a great company. I mean, their growth numbers are good. You know, I'm very bullish on the underlying company, just not at 60 times earnings. And so there's actually a lot of things like that that are just priced, you know, maybe not that extreme, but there's a lot of things that are just priced pretty expensively. And so I think we're entering the period where that starts to matter. And but because I have been concerned for that for a while, I'm already positioned for some of that. And the caveat that is that during, you know, where only US growth mattered, the equity side had a little bit of anchor on it, which lately has turned into a little bit of a booster. And so it's not

• 51:46Speaker 10

  that I'm making changes, it's that I'm noting things that are happening. And I think my biggest question now is to see if this has follow through. Because I mentioned that the rotation has been a very hard call to make. I think this has likes to it, but I do want to see continued evidence that it has likes to it.

• 52:02Ed Elson?

  Scott is rotating out, he's talked about it on the podcast, he's rotating out of US stocks into international stocks. I would say quite aggressively. Scott, you can interject wherever, but from my understanding, Scott, you are dumping all of your Apple, I think all of your Amazon too, and you're going to put it into international stocks.

• 52:24Ed Elson?

  It sounds like, Lynn, you agree it's time to start rotating. For anyone who's listening right now who feels overweight US stocks, how would you do it? How would you rotate out? Would you trim? You know, is there a certain percentage of your US stocks that you would you would trim in favor of international? What would the rotation actually look like?

• 52:44Speaker 10

  I think I would look for areas of overvaluation, things that you're not comfortable with, and reduce those overweight positions. I mean, the S and P 500 is very concentrated, the NASDAQ 100 is very concentrated. I do still think there's pockets of value in the US, just generally not in the big US growth. And I also differentiate on a company by company basis. I mean, you know, like, Apple is a case that I've not been bullish on that for a while, just because it's it's kind of a value stock that's priced like a growth stock. And that's been the challenge. When you look internationally, there are pockets, you know, like, and it's funny because some of them have the same issues. Like, Brazil has had some friction lately because of its of its budget deficits.

• 53:28Speaker 10

  But the budget deficits have not really been that different than the US. And it's just a matter of whether or not there's external demand for the currency and the assets or not. But I generally, I find, I've been less bearish on Brazil than it seems like the average consensus investor was, especially given some of the valuations and opportunities there. Like I said, I have been bullish on China with the caveat that there's a small percentage that something geopolitically happens and it entirely messes up that side of the portfolio, kind of like what we saw with Russia, for example, if, you know. And so it's like, you know, 90% chance, I was like, these are undervalued, super cheap. You know, they actually became more shareholder friendly. So for some of the big Chinese tech stocks were like initiating dividends

• 54:13Speaker 10

  or buying back shares when they were super cheaply priced. And I mean, that's that's kind of a change in that space. So more shareholder friendly policies. I do think that there are a lot of pockets out there that are that are quite interesting. And Europe, I have historically found a little bit less compelling. But, you know, when you when it's been dead money for a while and you do have marginal fiscal waking up. You know, it's nice to own some of that, at least at least compared to American dividend stocks, you can look around and say, you know, are there ways I can diversify my kind of value or dividend exposure?

• 54:47Ed Elson?

  Lyn Alden is a full time investor, independent analyst and the author of Broken Money, Why Our Financial System Is Failing Us and How We Can Make It Better. Her work has been featured in The Wall Street Journal, Business Insider, Market Watch and CNBC. She has also served as a consultant to startup companies, hedge funds and executive committees. You can find her research at LynAlden.com. Lyn, always a pleasure to have you on the show. Thank you again for joining us.

• 55:14Speaker 10

  Thanks, Lyn. Thank you.

• 55:16Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Isabella Kinsel 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.

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