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Ed and Josh Brown, co-founder and CEO of Ritholtz Wealth Management, open the show by discussing January’s housing starts data, X’s latest funding round, and the growing wave of companies emulating MicroStrategy’s approach to bitcoin. Then Josh unpacks the potential breakup of Intel. He breaks down how Intel’s leadership struggles led to its decline and explains why having a true visionary at the helm is crucial for a chip company. Josh and Ed also break down gold’s record-breaking surge and explain why banks are rushing to fly the commodity into the U. S. Ed questions whether gold is really a smart investment, while Josh explains why owning it outright might not be as valuable as people think.
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Transcript 9,963 words · 12 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:41 Ed Elson? Welcome to Prof G Markets. So Scott is still away. He's still on the slopes. We were beginning to think he's quiet quitting, but we're not too worried about that because today we have one of our favorite guests on the show. You've heard him before. We have in the studio, the one and only downtown Josh Brown.
2:02 Ed Elson? Josh, thank you so much for joining me.
2:04 Josh Brown? I will be doing my best Scott impression. You'll tell me after how it went.
2:08 Ed Elson? I can't wait to see it. Where are you? You're not in your usual studio.
2:11 Josh Brown? I am in Naples, Florida, which is Chicago's version of, I guess, southeastern Florida. So this is Gulf Coast, western Florida, and I love it here. I've never been before. We're seeing wealth management clients and colleagues and we're doing a live version of our podcast tonight in town. So it's exciting.
2:33 Ed Elson? Very exciting, and we should plug your podcast, The Compound. I know you don't like doing a promotion. Last time I asked you where our fans could go follow you, and you said, don't follow me. So I'm just going to tell the fans straight up, go check out The Compound. Let's just get into the show. We've got a lot to get through. So let's start off with the market vitals.
3:01 Ed Elson? The S and P 500 hit a record high. The dollar declined, Bitcoin was flat, and the yield on 10-year treasuries fell. Shifting to the headlines. U.S. housing starts slowed in January with new residential construction falling 9.8%. Builders scaled back construction due to harsh winter weather, while also grappling with challenges from high mortgage rates, tariffs, and inventory shortages. Elon Musk's X is in talks for a funding round at a $44 billion valuation. That's the same price Musk paid for it over two years ago. The funds would be used to support new initiatives, including video products and to help pay down some of the company's debt. And finally, Michael Saylor's move to transform MicroStrategy into a Bitcoin treasury company
3:45 Ed Elson? has inspired a string of copycats. At least 78 public companies have followed suit, including a meal delivery service and a coal mining firm. Also, GameStop shares jumped 20% after revealing it was considering a Bitcoin investment. So Josh, we'll just start with this housing starts data. I will say right off the bat, this is extremely disappointing to me. Just given all of the conversations. We've had around the cost of housing in America, the median home price today is $420,000 in America. The median age of a home buyer is 56. And you know, Scott and I have talked about this before. Our view is pretty simple. The way we solve this is we build more homes.
4:28 Ed Elson? And so I see this data, housing construction actually going down. And just as a young person who at some point would like to buy a home, I hope. It makes me a little depressed. So let's just get your reactions to this housing stock data. Perhaps any thoughts on why this is happening?
4:47 Josh Brown? I think the obvious answer in this case is the right answer. You had freezing temperatures affecting residential construction. And if you've got companies in that environment that want to pause or delay a groundbreaking by a week or two. I don't think it's going to have a substantial longer term impact. And if you actually seasonally adjust that number, January was really down 8.4%, which again is not great. But not as bad as the nominal headline. And I'd like to share with you that home building was actually up 24.9% in the Western region of America.
5:26 Josh Brown? Which obviously is not being affected by freezes and and so it's the headline sounds worse than the reality. And I think the bigger issue that we have is the cost of labor to build new homes is high and rising. And not necessarily in step with the disinflation that we've had in other parts of the economy. And it's sticky and it'll be stickier still as the ICE raids. And some of the things that are going to happen with immigration become more and more front of mind. So if you're worried about anything, that's really the thing that you should be most worried about.
6:06 Josh Brown? And the home building stocks, just if you're watching those for Signal Ed, the XHB is up 1% so far this year. Within the XHB, which is the ETF that owns all the home building stocks, 17% of those. Companies are above their 50 day moving average, 23% are above the 200 day moving average. And about 59% of all companies in the S and P 500 are above the 50, 61% are above the 200. So those stocks are all well behind where the overall market is. And I, I do think that there's room, if you're an investor in the space, for there to be a little bit of a catch up trade.
6:49 Josh Brown? Mortgage rates fall a little bit more in the second half of the year and we get a bounce back after the weather. You could all of a sudden be reading really good headlines, I guess is what I'm trying to tell you.
6:58 Ed Elson? To what extent do you think tariffs are going to play a role in this? And it's good to hear that there's a positive read on this. I think Scott and I have a tendency to just see the negative in everything. But, you know, we've got 30% of softwood lumber coming from abroad, 32% of appliances coming from abroad. There was also this new data from the National Association of Home Builders. And they found that home builder confidence had its biggest drop since COVID. It fell 13 points. And I think a lot of that, we could probably assume is, is a response to the possibility that the tariffs are about to be slapped on all of these materials. And suddenly the cost of constructing homes is going to go up.
7:42 Ed Elson? Now, I don't want to just blast Trump immediately at the top of the show.
7:46 Josh Brown? Yes, you do. I listen to the show. You forget I listen to the show. And, and it's a really good point, like the home builders are people too, and they are susceptible to the media. And they're hearing about nonstop tariff stuff. A lot of the things that we think might be tariffed won't. We know that this is part of the negotiating tactic of the administration. We know it because number one, we had a full term of this. And then number two. We already, we have people in the administration winking at us, just talking about this stuff like, "Yeah, it's a tariff, but..." So, like, that'll run its course. And the reality is that if you're in the business of home building,
8:31 Josh Brown? your job is to make money on the homes that you build. It's not to race in and, and try to fill the void of, "Oh, my God, we're 1.5 million homes, uh, short what we need to be for the millennials and blah, blah." They don't care about that. They're in business, and business finds a way. So they have to replace foreign suppliers with US suppliers, and US suppliers are there to meet the, the demand at a reasonable price. That's what's gonna happen. In the end, they wanna build homes and make a profit on the homes. That's what they're really here for. So I think you have to have some faith that commerce and, um, American-style capitalism will find a way,
9:12 Josh Brown? regardless of what roadblocks get thrown up by, you know, international trade wars or, or whatever. And one of the things I wanna say to you and to your listeners and viewers, it's really easy to buy into worst-case scenarios. Train yourself to think about what could go right. And sometimes it doesn't work out. But if you look at these thi- these things and you say, "Okay, but what could go right?", you're immediately one step ahead from most first-level thinkers who read a negative article, process it as negative, and then embed that negative expectation in their minds. Like, "What, okay, but what could go right?" So here's an example. What could go right?
9:54 Josh Brown? Now you have confidence really low amongst home builders, because they think there are gonna be all these monkey wrenches. Let's say those monkey wrenches are not thrown into the works. All of a sudden, that confidence returns. And, and so, and we see a pattern of this happening all the time. No, Trump or, or no Trump. This is a mindset shift that I think investors need to make.
10:16 Ed Elson? Yes. Let's move on to the X valuation. This funding round that's going to value X at $44 billion, the same amount Elon paid for Twitter.
10:26 Josh Brown? How many shares can I put you down for?
10:30 Ed Elson? It's gonna be, it's gonna be none for me. How about you? What about, would you invest in this?
10:34 Josh Brown? No. Well, so here's, here's the thing. It's an advertising business. Are there any shortages of ways for public market investors to, to bet on advertising? Not really. If you really wanna be invested in, in ads, you can be invested in ads in a myriad amount of ways, none of which involve all of the volatility and potential risk and the mercuriousness of the CEO of this project. Like you can skip all of that and just invest in ad-based businesses and there are plenty to choose from. So from, for my dollar, the answer is no.
11:11 Ed Elson? The other big question here is like, how did they land on this number as evaluation? We basically have no signal into, into what this thing is actually worth. And this is the big question that we've been asking. And it's very hard to know because we don't see the, the, the financials anymore, um, ever since it went private. But the, the best signal that we got was from Fidelity, which owns a stake in X, and they valued the company at $10 billion. And that was just in December. So I guess the thing that I can't really wrap my head around is how, how could these new investors, whoever they may be, justify a new valuation of $44 billion, when just a few months ago, it was valued at less than a quarter of that?
11:54 Ed Elson? I wonder if this might be due to Elon's association with Trump, maybe having that connection makes people more excited and more bullish on the company. Maybe it also has to do with XAI, Elon's new AI startup, which is reportedly raising at a $75 billion valuation. Maybe they think that X, the social media platform, can capture some of the value of the AI company. Or maybe they've just quadrupled their revenues overnight, but I highly doubt that. So what do you think, Josh? What do you think these investors in this potential round for X are seeing that the guys over at Fidelity two months ago didn't see?
12:33 Josh Brown? I think it's the halo effect of Elon Musk. He has a ton of momentum in terms of the zeitgeist of, of. The country moving in the direction of what he's done with uh free speech on the platform. And you could absolutely hate the stuff that you come across on the platform and that's fine. But a lot of people just like the fact that it exists. And they see Meta kind of following Elon into this. Which is, when was the last time Meta or Facebook ever followed Twitter into anything? Um, so they kind of see that um, that you know, the vibe shift in the country, especially amongst young people, but really in in uh places that surprised people.
13:14 Josh Brown? Among African American voters, among voters living in border towns in Texas. Like, none of these people were supposed to have had uh heard that rhetoric from Trump and Elon Musk and had that resonate with them, and yet they did. And so I think advertisers feel a little bit more emboldened about, you know, being willing to place ads on um, the X platform where six months ago they would not have. I think some of that is being reflected in the valuation. I also think the valuation is made up to begin with. The forty-four billion is what he paid for it. So this is him saying, hey, I didn't destroy any value here. Things are better than ever.
13:53 Josh Brown? So there's some of that. I also think there are people willing to buy a stake in this just because it gets them, you know, uh, in the room. It's like, yeah, I invested in your X platform. Now allow me to talk to you about this other aspect of my business. And so, a really cheap way for uh a big investor to buy in, so to speak, is to buy some equity at X and uh rub elbows with the people that are perceived to have a lot of momentum.
14:22 Ed Elson? Yeah, absolutely. I mean, we certainly saw all of these blue chip advertisers fleeing the platform. And it feels like what might be happening now is they're starting to come back. Especially after the election. Do you think we might see that that swing back?
14:38 Josh Brown? Yeah, because it's not just happening on X. Google is pulling out all these um, you know, Black History Month and Women's History Month. They're pulling all that stuff off the calendars. You are not going to see the the Pride Month displays at Target and and elsewhere that you've seen in previous years. All that stuff's going to be downplayed. Corporate America is recognizing that they were pushed to go way further in one direction than the the average person in this country really wanted to follow. And so now they're tacking all the way back in the other direction and maybe, of course,
15:17 Josh Brown? that'll go too far too. But like X is uniquely positioned, to get back to the original question, if you want to demonstrate that you're about profits and making money and satisfying the customer, a really easy way to do that is to be back in business with Elon and with X. And just to say like, look, here's where our customers are. This is where they are emotionally and spiritually and where they're too. It's a really easy signal flare to fire in the air. And you're going to see, I think, you're going to see advertisers back.
15:55 Ed Elson? Let's move on to uh MicroStrategy. Multiple companies now copying the playbook where you just basically buy up a bunch of Bitcoin. I look at these companies and the common thread I see among all of them is that they're all shitty companies, is what I would say. And I think back to what Michael Saylor said on this podcast, which is that before he got into Bitcoin, MicroStrategy was struggling too. So I'm seeing this Bitcoin strategy, it's kind of looks like the get out of jail free card for shitty, struggling businesses. Do I have that wrong? Or do you think that's sort of what's happening here?
16:36 Josh Brown? Nah, you nailed it. And we've seen versions of this before. In uh 2017, there was a wave of small and micro cap companies adding the word blockchain to their official corporate name, like, like literally changing the corporate name to something blockchain and um immediately getting a boost in their valuation because Bitcoin rallied up to eighteen Thousand that year from like nine thousand and it just became the zeitgeist and dead ends companies that didn't have much going on. It was like an overnight way to add market cap. Of course, it failed spectacularly in 2018 when the price of Bitcoin crashed. So none of this is surprising and I think the interesting thing that happens here in the
17:21 Josh Brown? short term, it actually bolsters strategy because you have a lot more entities that are buying up Bitcoin. And you know, as the scarcity of Bitcoin becomes more, more of a widespread idea, obviously companies that own a lot of Bitcoin will benefit. Over the longer term though, or the intermediate term, if this continues and grows, I think you'll lose the premium that strategy has to its value of Bitcoin. So right now it trades at a premium to the amount of Bitcoin it owns because people believe in not just the value of the Bitcoins, but the strategy of accumulating more. So it's selling at a premium to, if this were a closed end fund,
18:05 Josh Brown? we would say a premium to NAV or net asset value. The premium will shrink if there are five of these companies, if there were 10 of them that attain any kind of size. So that's one interesting thing that could happen where all of a sudden the company's strategy starts to trade at closer to just the value of its Bitcoin because it loses that scarcity premium because there are so many imitators out there in the market.
18:31 Ed Elson? I'd love to get your thoughts on Michael Saylor's strategy in general. I look at what he's doing. I'm very skeptical of it. You know, you, you, you described the, the premium to NAV there and a, a lot of why that's happening is because he's, he's basically securitizing the value of Bitcoin to issue bonds and then using the bond proceeds to buy even more Bitcoin and just levering and levering and levering. And to me, at a certain point, it starts to look more like a Ponzi scheme than anything else. The whole thing feels extremely unstable, especially when you bring up those historical comparisons of adding blockchain to these companies. It feels very similar to that.
19:10 Ed Elson? And then add on top of that, the fact that the NASDAQ has now decided to include this company in the NASDAQ one hundred. This adds a whole new dimension of concern for me because now you have millions of people in pension funds and people's retirement accounts holding this thing that arguably doesn't have much value, or at least that isn't generating real cash flows in a in a normal, regular way that another company would. Perhaps I'm being too negative. Does this make sense to you?
19:43 Josh Brown? It works and it makes sense so long as the price of Bitcoin goes higher.
19:49 Josh Brown? I'm sorry, but that's the reality.
19:51 Ed Elson? You're not comforting me.
19:52 Josh Brown? He owns two point two eight percent of all of the twenty one million Bitcoin that will be available. So the available now and available in the future. That's impressive if you think that Bitcoin is going substantially higher. He's got a thirty one thousand dollar cost basis on that Bitcoin. That cost basis will rise as he continues to buy. But the bet is the demands for all of the other Bitcoin available will grow quick more quickly than the new supply coming on net of whatever he's buying. And these other companies that are aping the strategy are way more ridiculous. So here are a couple.
20:34 Josh Brown? Similar Scientific, this is a quote unquote chronic disease detection company. You could see why they'd want to buy digital assets. It makes perfect sense. They bought eight hundred seventy one Bitcoin for eighty eight and a half million dollars. They used a convertible bond that they issued in January. Its stock price is up one hundred and twenty percent since buying this crypto and they're calling it their primary treasury asset. Here's another one. Meta Planet, based in Japan. They're calling themselves Asia's strategy. Last year, they switched from developing hotels into becoming a Bitcoin treasury company. The stock price has gained more than two thousand percent.
21:19 Ed Elson? My god.
21:20 Josh Brown? So I guess I'm what I'm trying to tell you is don't get mad at strategy.
21:27 Josh Brown? If you really want to hate something, hate the Japanese hotel company, Metaplanet. Like, there are way worse versions of this. If Bitcoin craters to $50,000, strategy share price will implode. Of course it will. The way you made money in Bitcoin, and I made some, I should have made more. The way that you made money in Bitcoin was to ask yourself the following question. And I heard this put by Bill Miller, who's one of the greatest stock market mutual fund managers of all time. He had an unsurpassed record. He beat the market 15 consecutive years. Nobody, nobody else has ever done that. He got very heavily interested in Bitcoin way early.
22:11 Josh Brown? And the question that he posed and then answered is the supply of Bitcoin is only going to grow 2% a year. Supply. Ask yourself this, will the demand grow faster or slower? If you answered the question faster, then de facto you had to be bullish on Bitcoin. If you answered it slower, well, you were wrong. Because the demand outstripped the supply, which is why the price has gone from $50 a Bitcoin to $80,000, to $90,000, to $110. Like, that, that, so that was like the right way to answer that question. So if you believe that the demand will continue to rise faster than the supply,
22:52 Josh Brown? then you're probably bullish on strategy and you probably own it in addition to regular Bitcoin that you also hold. It's easy to be skeptical that the demand will stay. But so far, that's been the case. And people who have shorted this thing have train tracks across their backs to prove it.
23:11 Ed Elson? We'll be right back after the break with a look at Intel. If you're enjoying the show so far, be sure to give Prof G Markets a follow wherever you get your podcasts.
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26:50 Ed Elson? We're back with Prof G Markets. Intel could be headed for a breakup with the help of TSMC and Broadcom. TSMC is exploring taking control of Intel's US factories, while Broadcom is in talks to acquire Intel's chip design and marketing business. Intel's stock surged 16% on that news, marking its biggest rally since 2020. So Josh, this feels quite important symbolically. I mean, just going back through history, in the year 2000, Intel was the sixth largest company by market cap in the world. It hit a peak of half a trillion dollars in market value.
27:32 Ed Elson? And since then, it's shed almost 80%. We've seen this AI explosion. Its competitors have exploded in value, chipmakers like TSMC, AMD, Broadcom, Nvidia. And now Intel is not even among the top 10 most valuable chipmakers in the world. And it appears as though it's going to be split up into two and acquired by the two companies it was specifically trying to compete with, which are Broadcom and TSMC. What went wrong for Intel? DEI.
28:05 Josh Brown? Isn't that what we do now?
28:06 Ed Elson? That's the problem.
28:07 Josh Brown? It's actually, it's not that far off. Uh, me too is sort of what, uh, I wouldn't blame the me too movement for this, but um, that's where Intel's problems started in 2018. They had a CEO who had to step down. I don't have all the details, but he had a relationship with somebody who was working at Intel. It came to light and uh, the board asked for his resignation, which of course, that's how that ends. So um, please, i- if you're running a publicly traded company, try to control yourself around your employees.
28:39 Ed Elson? Keep it in your pants. Yeah.
28:41 Josh Brown? Anyway, that's 2018 and what comes out of that is a succession of bad leadership slash bad decision making. Intel decides in that moment of succession, they have been a, a new incoming CEO and they decide wha- what they're gonna do is they're gonna go full bore into the foundry business. They have this manufacturing advantage. They're one of the highest throughput manufacturers of chips in the world. And they're better at it than other American chip companies and they look at the success of Taiwan Semi, which has effectively become like the outsourced manufacturer to all of the chip design companies all over the world. And Intel says, we could do that too.
29:26 Josh Brown? And that's gonna be a big part of the future of our business. And that was a horrible, in hindsight, strategic decision. I think Wall Street hated it in real time and keep in mind, this is during a time, the rise of Nvidia, but it's pre-AI. It's 2018, 2019. At that time Nvidia, i- it's very well known that Nvidia is going to be a big player in next generation technologies like AR, augmented reality, VR, virtual reality, machine learning, AGI. What Nvidia is doing is parallel processing. They're taking this technology that they initially developed for video game development.
30:06 Josh Brown? And they're pivoting it to these other technologies where linear processing is not the right answer. So Intel is the The linear processing king, the CPU king. Linear processing, it's we do this operation, then we do that one, then we do that one. Parallel processing is multiple things at once. And if you're going to do autonomous driving, for example, you can't wait for a progression of um linear compute. It's gotta be parallel. So uh Nvidia is kind of in pole position for the GPU era and Intel's not even there at all. And as a result, they go into Foundry and uh Foundry is just a terrible smokestack industrial
30:49 Josh Brown? kind of business and you're never going to get the same stock multiple that you'll get as if you're a chip designer, asset light, where the, you know, we create the front end of this and we pay somebody else to do the dirty work. And so they've been stumbling. This is going on for a long time. It well predates the launch of ChatGPT and the AI era. But of course, that only made the disparity between Intel and Nvidia even worse. Companies like ASML uh overseas and other chip companies, ARM Holdings, they all got the memo and Intel didn't. And uh as a result, this is why this company is now a shell of its former self. It's a hundred billion dollar market cap in a land of trillion dollar companies like Broadcom and and uh Nvidia.
31:35 Josh Brown? In the last eight quarters or two years, Intel has been profitable on an operating basis in only three of those quarters. On a net income basis, Intel has lost money four quarters in a row through the the last quarterly report. It's just an absolutely horrendous fall from grace. And maybe the right answer is to put this uh put a nail in the coffin, separate out the chip design from the Foundry business, have somebody else take those things over and uh say goodbye to Intel. And uh maybe that might that might be the better outcome for current shareholders than trying to continue to slog it out um i- given the market realities of today where Intel is in no man's land.
32:21 Ed Elson? Just going back to the the decision to get into Foundry, and just to clarify for listeners, Foundry is basically getting into the actual manufacturing of these chips. Most of the big companies, we're talking about Nvidia, Nvidia is probably the best example, Broadcom, they're designing chips, which is just a better business, and then they pay someone else to produce it for them. And Intel decided they wanted to try to get into the business of actually producing these chips for other companies like Qualcomm. This is the business that TSMC is in. And so they made that decision to go into Foundry, and I think everyone would agree with you, that was a bad decision. They got caught completely flat-footed.
33:02 Ed Elson? This AI boom took off, and then suddenly everyone has these GPUs and Intel's operating with a kind of shitty CPU business. And then also they're investing huge amounts of capital into building out this Foundry business. I guess, from sort of like a management perspective, what could they have done differently? Should they just not have invested in Foundry to begin with? Should they have invested more maybe in R and D, trying to predict AI? I mean, I feel it feels very easy to say, oh, what a what a terrible decision.
33:35 Josh Brown? It's the wrong people running the company. In this day and age, if you're going to be at the helm of a chip giant, you have to have a visionary streak that enables you to see around corners and predict. You cannot be a bean counter. You cannot be just like an operations guru, but not have a vision of where the tech is going. I mean, you can get away with that for a few years, but ultimately it catches up to you. It's not a surprise that Broadcom got to a trillion dollar valuation. It's run by Hock Tan, who is a visionary.
34:17 Josh Brown? He's a forty year veteran of the chip industry. And he's been there at the birth of so many milestones in, in, in the tech landscape. Jensen Wang, Lisa Su, who runs AMD. These people are running circles around Pat Gelsinger at Intel, who is, I think, has already stepped down. It's a, it's a management, it's not just one decision. This is this cumulative decision-making process. And you either get it or you don't. And if you don't, you, you miss where the market's heading. That's one. Two, a friend of mine, Jason Xu, who's a Ray Liant Global Advisors. He had been at Research Affiliates.
35:02 Josh Brown? He's a, he's a Chinese-born investment manager here in the United States. Brilliant guy. And Jason, I asked him last year, shortly after the CHIPS Act. I had a conversation with him and there was this whole push to like, start the onshoring. And the semiconductor shortages of COVID for the automobiles, and we can't let that happen again. And Intel is going to spearhead this effort to start building chips here in the United States, in Arizona and elsewhere. And that we're going to build our own fabs and the government is going to underwrite it. And it's going to be great. And Jason kind of said, not so fast.
35:44 Josh Brown? What you have to understand is, if you are a highly technically skilled person in Taiwan, you dream of being in an underground white room for Taiwan Semi, working in a laboratory all day in a hazmat suit. That's like, that's your dream. Your counterpart in America does not have that same dream. Does not want to work in a clean room, 11 hours a day for Intel in Arizona. It's just not what, so our most talented, most brilliant scientists and technically savvy engineers in America
36:25 Josh Brown? do not want what that same person would want growing up in Taiwan. And so Jason said, the idea of us having our best and our brightest, living in Glendale.
36:39 Ed Elson? What's wrong with Glendale?
36:40 Josh Brown? It's not gonna go that way. There's a reason for Taiwan's ascension to the top of the heap in terms of chip manufacturing around the world. There's a reason it's there and it's not in Connecticut.
36:53 Ed Elson? Yeah, exactly. Just looking ahead now. So we've got Broadcom, which is eyeing the chip design business, and then TSMC is looking at purchasing the foundry business. There are a lot of questions over how viable any of this really is. You know, I've seen some analyst notes pointing out that TSMC has very different equipment to Intel. So maybe you won't have those synergies that people were expecting. Maybe it doesn't actually make sense for them. I think the biggest question mark, though, is the regulatory approval for this, because if this deal were to go through, at least for TSMC, you will need sign off from the US government. So just from a regulatory
37:36 Ed Elson? perspective, how do you think this goes down, Josh? Do you think Trump and the government would ever let this go through?
37:42 Josh Brown? I would just comment, if Taiwan Semi really wants it, if Broadcom really wants it, I would just say, gentlemen, prepare to golf. You are going to be spending a lot of time at Mar-a-Lago.
37:58 Josh Brown? Prepare to tweet positive things about Trump and prepare to golf, because this ain't gonna go through the courts. This is 2025. If you want this deal done, it's gotta look like a win for Trump. If the headline is, Trump successfully sells Intel to two of the most successful companies in the world to create new jobs for American workers in red states, you got a shot. If the headlines are gonna look more like American failure while Trump was in office, this ain't gonna fly. This is gonna be looked at from an optics standpoint, more so than a strategic standpoint. I will say,
38:43 Josh Brown? Taiwan Semi is a foreign company, but if they're going to commit to making a go of this kind of semi manufacturing on American soil, and we say that that's not a bad outcome, that's a good thing, then maybe it'll, maybe it could happen. But I don't have any edge on whether or not they'll approve it.
39:04 Ed Elson? You've been working on your swing, Josh?
39:05 Josh Brown? Not nearly enough. Thank God I'm not trying to buy Intel.
39:10 Ed Elson? All right, we'll be right back after the break with a look at the new Gold Rush. If you're enjoying the show so far, hit follow and leave us a review on Profitec Markets.
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41:37 Ed Elson? We're back with Prof G Markets. Gold is hitting record highs, up more than 10% year-to-date, as investors seek out safe havens amid geopolitical uncertainty. President Trump's tariff threats, paired with fears of resurgent inflation and higher-for-longer interest rates, have pushed the price of the commodity to nearly $3,000 per troy ounce. Josh, this asset has had its best month in 13 years. I never really understand gold, or I really struggle with gold as an asset. What is going on with gold right now, from your view, and why are investors so obsessed with it in this moment?
42:15 Josh Brown? The best way to understand gold is just take whatever the price is doing, and then take whatever the headlines are, and concoct a story that enables you to say, "A plus B equals C", like, truthfully. If gold goes up... Concurrent to there being inflation, oh, it's very simple. People are buying gold because they're worried about inflation. If inflation is rising, but gold is not rising, oh, it's very simple. Gold already rallied and now the inflation is happening. Therefore, the people that bought gold before the rally anticipated the inflation. It's honestly, it's a fucking joke and nobody knows why.
42:57 Josh Brown? Nobody knows why anything does anything, but they definitely can't explain a gold rally other than ex post facto. So here, I will tell you why gold is rallying. Gold started to rally in the the winter of 2022 when Russia invaded Ukraine. And that is to this day, the predominant reason for why gold is rising. Central banks looked at the way Russia was kicked out of the SWIFT banking system. They looked at the way Russia was sort of deplatformed from the global economy. And they said to themselves, maybe we need to diversify away from the dollar. Because if we get kicked out of the global banking system, we're gonna have to have a way to transact.
43:42 Josh Brown? And we're gonna have to diversify our currency reserves. So once you reach that conclusion, you realize there aren't really that many other assets that make a lot of sense. Gold is as a result, being bought by central banks around the world. Especially in countries where they might be concerned about this sort of thing like China, like Iran, like Russia. And so the demand for gold is tru- truly a geopolitical phenomenon. So fine, we'll we'll we'll say the reason for gold's rise is geopolitics. Okay, I can point to historical examples where gold sold off during geopolitical tensions flaring, but fine. That seems to be the story that most people have accepted.
44:27 Josh Brown? But then the other thing that happens at is. The trading mentality shifts and all of a sudden that story becomes so popular that people in their investment accounts start to accumulate gold on the theory that that sort of thing will continue. And so people start to extrapolate the recent past. And that's where you get the momentum. So now gold is up 9% annualized over the past 15 years, nominal terms, 8.8% annualized over the past 10 years. But over the last three years, it's been rising faster. 15% annualized return over the last three years.
45:06 Josh Brown? Over the last one year, it's up 45% and it's up 12% since the year started. So if you think about gold over the long term, does not do better than stocks. But I can show you these five and 10 year periods of time where it far outperforms the stock market. And so people are looking at the momentum there and they're saying, okay, this is a gold bull market. I don't know when it ends, but I need to be there for it. So that kind of feeds on itself. And I think that's where we find ourselves today.
45:37 Ed Elson? I'd love to get your view on gold as an investment in general. I mean, you as a wealth manager, do you think that this is a worthwhile investment? And I'll just put it out there. I don't really see the value of gold when, you know, you can invest in companies that pay dividends and generate cash flows and, you know, provide actual value into the world. And then meanwhile, just gold, gold just sort of sits there and does nothing.
46:04 Josh Brown? Here's a long-term reality. Go back to 1928. So we have 86 years worth of data. Stocks have done 11.8%. This is nominal, not adjusted for inflation. Stocks have done 11.8% over the last 100 years. Gold has done 6.6%.
46:22 Josh Brown? High-quality bonds, US Treasuries have done 4.8, real estate 4.4, cash 3.4. So, gold has done well, has not done well as well as stocks. And I have to tell you, the chasm between 11.8 and 6.6 is absolutely massive when you remind yourself that we're talking about compound annual returns. We're not just talking about one year. We're saying like a 30-year investment time horizon. It's not just 50% better, it's substantially better, the returns of stocks. And I think that will probably be, always be the case over really long periods of time.
47:03 Josh Brown? But there are periods of time where gold beats stocks, and there are specific years in three-year and five-year and 10-year periods. So, some people use it as a diversifier in portfolios, some people don't. We do not. There's no reason to own commodities at all individually. And if there is a commodity boom, it'll show up in the stock market, and if you own stocks, you'll get the benefit of that. So, we own oil equities. We don't buy barrels of oil. If you have an S and P 500 exposure, you have gold equities. And if there's a huge boom in gold, those gold equities in market cap terms will become larger proportionally to the rest of the stock market. So, you will see some of the benefit of that. But we don't own commodities outright individually.
47:47 Josh Brown? We own stocks, and we will get the reflection of those booms and busts via our exposure to the stock market.
47:56 Ed Elson? In the reporting on this, you know, we hear a lot about the spot price of gold, and then we hear a lot about the futures price, gold futures price. Could you just break down for us briefly what that difference actually is, and why that difference matters, if it does at all?
48:16 Josh Brown? It doesn't really matter unless you're in the jewelry business. The spot price of gold is literally what you're taking, when you're taking physical delivery of gold bullion, that's what that price is about. And of course, most people who are trading, they're taking delivery of nothing. They're in ETFs. They own GLD. The futures market is what producers and what they call commercials use to hedge the volatility of future prices. So, as a for instance, if you're in the business of buying a certain amount of gold over the course of the year as a commercial player in the market, let's say
49:01 Josh Brown? you're a jewelry manufacturer, okay?
49:06 Josh Brown? The big risk for you is that the gold that you have to buy six months from now will rise significantly in price. So you would use the gold futures market as a way to hedge that risk. You would put on certain trades or collars or whatever your strategy is to try to mitigate the disastrous impact of the price of gold rising 30%, which could wreck the economics of the business that you're engaged in. And vice versa, if you're a gold miner and you know that you need to sell a certain amount of tons of gold a year from now and you're worried the price might be lower, you could lock in, using the futures market, you could lock in the price that you'll be selling gold at.
49:49 Josh Brown? So, think of the spot market as being more relevant to companies that are physically engaged in the gold market, buying and selling, or banks that are stockpiling gold, central banks, and think of the futures market as more of a tool to either hedge or speculate on the price three months from now, nine months from now.
50:10 Ed Elson? I bring it up because we're just seeing this very interesting dynamic in that difference, where right now you have gold futures trading at record highs in New York. But over in London, the spot price is significantly lower. And that's where the Bank of England holds all of that physical gold that you're talking about. And because of that spread, it's just a very interesting story that we're seeing. You have JP Morgan and HSBC and all these other banks, who, as we speak, are literally flying gold across the ocean from London to New York. And what we've seen is that they have these concerns over these tariffs.
50:51 Ed Elson? And so they need to get gold out of London and into America as quickly as possible. I'm not sure how important it is in global markets, but it's certainly an interesting visual. Could you just explain how this strategy is playing out and why it is important that the banks do this?
51:10 Josh Brown? Yeah, it's chaotic and it won't, it won't last, it won't last a long time, that type of frenzy, that type of activity. There are historical examples of that. One of the causes of huge market dislocations throughout history has historically been the movement of gold from one country to another, or from, from the rest of the country back to New York. Like, we've had instances where they closed the New York Stock Exchange heading into World War I. And one of the main concerns is all of the gold was about to be sucked out of the banks
51:48 Josh Brown? in New York and sent to England to finance the prosecution of that war against Germany. And they wanted to preempt the chaos that that kind of thing had historically caused. And you have these situations that have arisen in the past where just this seasonal pattern, in the springtime, America 100 years ago was very agrarian economy. Everything was about agriculture and farming. So you'd have all the gold leave the banks in Boston, New York, Philadelphia. And it would head to the Midwest and it would be dispersed amongst the farmers who had to, it would show up in the banks in rural America.
52:29 Josh Brown? The farmers would then be able to fund the costs of seed and equipment and hiring farmhands and people who would help them plant. And then the summer would go by, there would be specula- the gold would return back to New York. All that gold would lead to there being excess capital, that excess capital would lead to these huge booms in the stock market. And people speculating with the money while it was there. And then all of a sudden, the banks in rural America would call that gold back because it was time to bring in the harvest. And you would have this seasonal pattern that resulted in us saying things like sell in May, go away. Or you would see like October being this month where all of a sudden, all hell would break loose on Wall Street.
53:14 Josh Brown? Because the gold would leave these financial centers where all this trading. And you would have this literal dearth of liquidity. And you would like, you would have this drop off in money and in capital. And it kind of became ingrained in the patterns of stock markets and business and commerce. We've been able to neutralize that over time as society has become less agrarian. And we don't really have that every October, the market crashes because the farmers need their gold back. Like, that's not the way the economy runs now. So it is interesting when you see something like this. All of a sudden, people are flying their gold across the Atlantic to get it from one country to another.
53:55 Josh Brown? It's chaotic activity, it's kind of a throwback to the way the economy used to function when everything was on a gold standard. And it's weird. And I guess I would tell you not as an investor to react to that type of thing. Because it's not likely to be a long-lived phenomenon.
54:14 Ed Elson? Yeah, it certainly feels very apocalyptic and it's very interesting that gold has this association with geopolitics and inflation, but really just panic. It's like when the world starts to look like it's crumbling, suddenly people start to be interested in gold.
54:31 Josh Brown? Emotional volatility.
54:33 Ed Elson? Exactly. And I would just like to get your final reaction to this because we had Ray Dalio on the podcast and it was very interesting because he was very concerned about the world from a geopolitical perspective. And I think a lot of people are very concerned about the world geopolitically. I mean, I think back to what Jamie Dimon said in the most recent earnings call, where he said that we are in the most unstable geopolitical time since World War II. And Ray Dalio basically told us, if I were to put my money into anything, it would be gold. And my reaction, I think, is similar to yours, which is, is this really
55:14 Ed Elson? worth the panic? And if we are to panic, to the extent that these people say we should, what is buying gold going to do for us? Is that really going to solve our problems? So I guess I'd be interested to get your view on gold from a geopolitical perspective. Does Ray Dalio's view make sense to you?
55:34 Josh Brown? I think gold probably can get to 5,000, just purely on momentum alone, because a lot of people are worried and there are a lot of reasons to be worried. It's not completely invalid. I think during the course of the Trump administration, if you told me this all ends with some major geopolitical conflagration and gold runs up to 5,000, I would say that's completely within the realm of things that could be expected. So I don't disagree with Ray Dalio, except in the utility of it. So we have World War III, we're going to fight China over Taiwan and Russia over Western Europe simultaneously. The fuck are you going to do with your gold ETF?
56:17 Ed Elson? I'd rather own a farm and food.
56:19 Josh Brown? Bullets, motherfucker. What are you going to... Oh.
56:24 Josh Brown? But look, I'm long gold miners. Don't shoot. The only currency in these worst-case scenarios will be like the backbreaking labor that you have the muscle tone to accomplish on behalf of whomever is enslaving you.
56:40 Ed Elson? And it won't be Bitcoin?
56:41 Josh Brown? You want me to spare you? Don't tell me about what's in your Roth IRA. Remember what I told you at the start of this. Think about what could go right. And worst-case scenarios very rarely play out. And if they do, in this case, think about the things that we're talking about. Talking about like multiple nuclear powers potentially like being goaded into a conflict here. Like it's nothing you do in your portfolio is gonna help you. Okay? So don't bet on the, don't bet, even if you bet on the worst-case scenario, if it comes to pass, who are you gonna collect from? Who's paying out on that bet? If we're all squatting around a fire eating a squirrel? So I, I, um,
57:25 Josh Brown? I view my role in this is to understand the risks and try to help people process them and try to give people the context that risk is omnipresent, ever-present. It's always a thing that exists. We feel it more acutely in some moments than in others. But honestly, it's usually in those moments where everything feels great that the big risks are really about to arrive. And it's rarely the thing that we're all worried about that actually ends up going wrong.
57:57 Ed Elson? Let's take a look at the week ahead. We'll see data on the personal consumption expenditures index for January. We'll also see earnings from Salesforce, Dell, Berkshire Hathaway, and Nvidia, which will be a huge one. Josh, this is the part of the show where I ask Scott for a prediction. No pressure, but do you have any predictions or is there anything that you're thinking about in the next couple of months or so that you think that? Our listeners might want to keep an eye on in the markets.
58:28 Josh Brown? I think Nvidia reports and hits a new all time high. Yeah, there's a lot of skepticism going into this earnings report. There has been for a while on Nvidia. They don't, their stock doesn't always rally after they report earnings. Sometimes it rallies into the earnings. In this case, it's kind of been stagnant for a while. I think the conversation is starting to pivot from large language models. And it's starting to go more toward physical AI. Uh, automation and robots. And I think Nvidia has got the most compelling case for why uh they will be at the forefront of all of these things. Than any other company in existence. And I think um that'll come through in the remarks Jensen Wang makes. I'm a long term shareholder here in Nvidia.
59:12 Josh Brown? I've owned the stock since 2015. Uh, so of course I'm biased. I would also point that everyone owns Nvidia at this point. It's the number one or two largest weighting in the S and P 500. If you have a, if you have a pension, if you have a 401k, if you.
59:26 Ed Elson? 2015 is early.
59:27 Josh Brown? I was extremely early to the story and uh very publicly so talking about the stock on, on television. Every week for 10 years. It has been a once in a lifetime stock. It's up 10,000% in that period of time. I prob, if I lived another 100 years, I'd probably never see anything like it again. And I don't think it can continue to rise at the rate that it has. But the reality is it's just not that expensive of a stock. Because as much as the share price has gone up, the earnings have gone up as much if not more. So uh I think, I think it'll be a good, I think it'll be a good conference call. I'm hoping to get a positive reaction after. My prediction is that we will, but who knows, anything can happen.
1:00:10 Ed Elson? Josh Brown is the co-founder and CEO of Ritholtz Wealth Management, a New York City based investment advisory firm managing more than $5 billion in assets. For individuals, corporate retirement plans and foundations. Josh, just an absolute pleasure as always. Thank you so much for coming on.
1:00:27 Josh Brown? Thank you so much for having me, Ed. Appreciate it.
1:00:30 Ed 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 you Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Mike Moffett, only on Prof you Markets.
1:01:28 Ed Elson? Life.
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