Financial markets are more concentrated than ever, with a handful of companies dominating the stock market like never before. In this insightful Speak Up interview, Anthony Scaramucci sits down with Simply Asset Management’s Michael Green to examine how this unprecedented market concentration creates systemic risks—not just for the stock market, but for the broader economy. Together, they delve into the brewing crisis in passive investing and its potential to destabilize America’s financial system. Plus, Michael unpacks Bitcoin’s biggest challenge and his thought-provoking vision for humanity’s future. Don’t miss these essential insights to navigate today’s most pressing financial risks and prepare for what’s ahead.
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Michael Green 0:00
Effectively, the markets have become dominated to an extent we’ve never seen before, nothing even remotely close by a subset of companies that everybody is buying into, and that is really the core of the issue.
Anthony Scaramucci 0:22
I Hi and welcome to speak up. I am your host, Anthony Scaramucci on the wealthion network. Our guest today is Michael Green. Michael, thank you for joining us. He is the chief strategist at simplify asset management, and he writes a sub stack titled, yes, I give a fig. Is that what it is?
Michael Green 0:44
Yes, it’s a joke on my my Twitter profile, which is Professor Plum. So okay,
Anthony Scaramucci 0:49
all right. So yes, you give a fig, where you can find Michael Sloss on the markets, okay, I like the I like the title because I have actually no idea what it means, Michael, so that’s a good, good size. So you’re educating people here on the wealthion network, but you’re a brilliant guy, and I appreciate you joining. Want to talk to you about the world, the markets, and I want to start with the expectations that you and simplify asset management, have for the 2025 US and global economy. Well, the
Michael Green 1:19
easiest way to to summarize that is that the US economy has been very strong but very bifurcated, and so the experience of many of your listeners is going to be heavily influenced by their existing asset base. If they have cash, significant quantities of cash or assets, they’ve experienced roaring bull markets and stocks, and they’ve experienced much higher interest rates than they have historically been. They’ve historically received and their savings accounts has created a tremendous amount of income for wealthy individuals that has basically manifested itself in an economy that sees lots of interest in things like going out to eat and dining solo, etc, relatively high components of travel. And at the other end of the spectrum, you have the American worker who is increasingly stressed about their employment situation. They’re watching jobs being increasingly outsourced in technology sectors, so things like h1, B’s, and if they are in the traditional industrial sectors, whether that’s retail or elsewhere, they’re really effectively struggling with the high cost of living that has really not been recaptured by increases in wages up to this point. And unfortunately, this is showing up in the stress that they’re experiencing around quitting jobs, etc. We’re seeing quit rates at levels that historically have been very consistent with recessions, indicating that people are really stressed about their employment situation and their finances. And so it’s a very bifurcated economy that a lot of people typically use the equity markets, particularly the S, p5 100, to summarize and say, the economy must be doing great. And so it’s unfortunately creating a very split experience where some of your listeners are going to be like, yeah, things are absolutely fantastic. And another segment of it is going to say, No, the reason I voted for Donald Trump is because things are so terrible. And you know, those two unfortunately coincide in the experience that we’re likely to see continue in 2025
Anthony Scaramucci 3:09
so, I mean, you’re a good policy guy. I mean, I’ve read a lot of your stuff. So is there, is there a fix to any of this? I mean, because every time I walk into the portal, okay, how do you fix this? I think the incentives for everybody are just misaligned. What politician is going to cut spending when they need to get themselves re elected, and what politician is going to tell the American people the truth about where we are? So, you know, and by the way, and by the way, things end badly when this happens. Because, you know, good politicians say, Okay, here’s the 10 year plan to fix the budget deficit. Right size, the entitlements and bad politicians are right. Let’s, let’s, let’s, let the thing burn down to the ground as long as I can stay in power. Well,
Michael Green 3:52
I mean, actually, the the frustrating part is many of the fixes are very straightforward. As a society, we have prioritized spending on old people. That’s certainly one of the components that the high interest rates represent. Those high interest rates disadvantage young people that are attempting to get onto the economic ladder, and they don’t have savings, they don’t have money in the bank that is earning interest. What they need is to borrow in order to obtain a house, to obtain a car, to obtain the resource to obtain an education, the resources that are required to basically move to that next step in their life. We’ve retarded that component through our policies, and we have enriched, effectively, the older generation and those who already have wealth in our society. The fix is very straightforward. We actually reverse some of those policies and we start investing in children. We start investing in young families. We create the infrastructure and the resources that allow people to get a step up on that economic ladder. But that is going to require some unpopular policy changes, and part of that is what you’re highlighting, which is an increase in spending coming. From the government, going to a segment, you know, through things like a cost of living allowance adjustment for Social Security, which I understand is incredibly important and really, really valuable. But the simple reality is, is that those of us who are older, and I’m including myself in this, we’re the ones that stood by and allowed our policy to get so off track, we’re the ones that are responsible, and so we really should be bearing the cost, and I speak particularly for those who are wealthy. We screwed up with our response to COVID, we screwed up with our response to the global financial crisis. We tried to choose the easy ways out, easy way out, as compared to making the hard choices that would have actually allowed us to reformat our economy into a one that actually works for all Americans, not just for those who are already resourced. Thanks
Andrew Brill 5:49
so much for watching our discussion here on wealthion. If you would like help with your wealth efforts, please head over to wealthion.com/free. For free, portfolio review. Um,
Anthony Scaramucci 6:01
I’m not a modern monetary theorist, okay? And I don’t think you are, based on the stuff that I’ve read, but are, aren’t we both modern monetary theorists at this point? And what I mean by that is whether we like it or not, the US government, the Fed, the Treasury, our policy officials, our elected officials, are practicing modern monetary theory. Well,
Michael Green 6:27
it’s not so much that they’re practicing it. And so just to clarify on that, I am actually a believer that modern monetary theory is an accurate description of how the system works. The US government does not need to tax in order to spend. It can print dollars right? It can actually choose to do that. The existence of government debt is simply a way of mopping up the liquidity that is actually created by that. This actually speaks to the experience that we’re currently having when you do something like COVID and you print somewhere in the neighborhood of five to $7 trillion depending on the numbers that you ultimately want to use, you have to figure out ways of getting people not to spend that. The way we’ve chosen to do that is by paying them an absurd amount of interest relative to the growth potential of our economy. And perversely, because our debt levels are so high, that actually becomes a fiscal policy of fiscal transfers to those who already have money. The right answer to this, unfortunately, is, as I said, to accept that we screwed up, except as the electorate. It is our responsibility to acknowledge that and fix it by paying off that debt and paying off those expenses through higher taxation. I realize that sounds incredibly frustrating, but the simple reality is that is how the system is supposed to work. Modern monetary theory does not actually tell you how to spend the money. That’s the really critical thing to understand. MMT is a description of a system that works, no different than me describing how your circulatory or respiratory system works. What you do with that if you decide to take the description of your circulatory or respiratory system and say, You know what? Guess what? It uses involuntary muscles. Therefore, why should I go to the gym? Well, that becomes on you. That’s a bad policy choice in response to the reality that those systems are governed by involuntary muscles that are only peripherally involved by you getting under a bench press and trying to put up heavier weights, right? So the real problem is not, MMT. The real problem is the perception that there is no cost associated with bad policy, right?
Anthony Scaramucci 8:30
I mean, I guess, I guess the rich don’t care, though. I mean, let’s just be honest, right? Because they, they benefit from this. They own assets. The assets get inflated as a result of the monetization of debt, and they they find other ways to make money. The poor get destroyed because we’re stealing their time and labor, if they don’t own assets, and you’re taking the money from them in the form of inflation, which, you know, I I understand the point that we don’t need to tax, but we do create inflation, which is a form of regressive taxation, though, am I
Michael Green 9:04
right? Inflation is an incredibly regressive tax, and it is actually really important that people understand that we do need to tax. Taxing authority is actually what soaks up the liquidity that is created by government spending. It’s just, it’s an important thought exercise for people to think, where did the first dollar come from? The first dollar did not come from somebody who had $1 in their personal household. The first dollar came from spending from the United States, actually in the form of military expenditures putting coins into the pockets of soldiers who, in turn would spend that money elsewhere, or defense contractors, whatever. As we go through the Revolutionary War, and ultimately the war of 1812, etc. As we go through that process, the government is continually putting money into current into circulation. Taxes and debt issuance are ways of soaking up that liquidity. They’re basically saying, don’t buy cars, buy our bonds, right? Okay, and if you’re not going to buy the bonds the way we’re going to soak up the liquidity, is creating an obligation, a tax that you have to pay based on your income or your assets or your spending, in the form of a sales tax, etc, a value added tax. Those are all ways of basically soaking up that liquidity and getting that money back out of circulation so that it doesn’t create inflationary conditions. That’s where we’ve lost the threat, right? The real sign of a sovereign country, of a country that is capable of maintaining a fiat currency, meaning that is issued by mandate. And if you read the face value, the face of a US dollar, it says, this is, you know, this note is good for the settlement of all debts, public and private, right? That’s really what it’s there for. It is for the settlement of debt. And what you do when you raise taxes is you create a debt, an obligation for people to pay that to the government. It soaks up liquidity. How we choose to spend that money is really the question, and when we can’t like this is one of the real key issues that people need to understand about a bifurcated economy. If I’m talking to somebody who’s wealthy, they have absolutely no idea the travails that younger people and poorer people are going through in today’s society. They just actually can’t understand the conversation, and so it’s degraded into this basic element of vitriol on both sides, where one side is screaming, you guys are are terrible, you know, boomers and you’ve ruined the society. And the other side is saying, You know what, when I was your age, I worked for a living and I scrimped and I saved and I did this stuff. And the younger generation is correct to point out and say, You guys also restricted the building of houses. You created conditions under which our school system sucks. You created conditions under which we allowed extraordinary illegal immigration into the country that is and some that is actually legally supported, things like h 1v visas, which is a system that is being abused by employers to repress wages for those who gain the skills in our society by going through the process of college and education, etc, building human capital that is then devalued. We because we have such totally divergent perspectives, we’re no longer talking. We’re no longer able to sit down and have a conversation, and as a result, our policy is increasingly erratic. So I have
Anthony Scaramucci 12:24
another theory I want to test on you. Okay, I think this is all born from the 1992 presidential election, and so hear me out. Ross Perot runs for president in 1992 and he threatens the duopoly known as the Republicans and the Democrats, a result of which they tighten the screws on their duopoly. They make it much harder for a third party. They create all these legal, obligatory restrictions. 30 plus years later, you can’t get a third party started in the country, even though there’s lots of people that would like to have one, and they dial into things like gerrymandering. They dial into things like Citizens United, where incumbents get largess from big government constituents who are big pharma, big food, and so now you have this funnel of people. I’ll just give you the math. 95% of the incumbents get re elected in our system, yet the Congress has a 14% approval rating. So just imagine you and I in our business, or imagine a restaurant where they’ve got a 14% approval rating on Yelp, people don’t go back, but because the way the system is rigged, through the gerrymandering, through the collapsing and consolidation of power of the duopoly. We have this political class that stays in permanent power and is no longer really focused on coming up with the right policies for the people, but they’re focused on transactional policies. You know, put seed oil in our food, devalue the money, let vaccines go into the marketplace with very little testing, no problem with food colorings and food dyes and oh, by the way, Boeing, I’ll give you another example. Boeing moves from Seattle to Chicago, not close enough to Washington, so they stick their headquarters in Virginia. All they do is lobby the government. Now they can’t get the space capsule down from the space station with people in it, and they’ve got planes falling out of the sky. So what am I missing? What am I did I miss something? Or am I wrong about what I’m saying? Um, so
Michael Green 14:33
I think it actually goes back a lot further than that. I agree with you that the 92 election was a warning shot that was effectively fired at the two incumbent parties, that caused them to react in ways that reinforce their effective duopoly. But I think actually the far more important changes happened back in the 19th century and in the aftermath in in the. Aftermath of the 1970s and into the 1980s with the adoption of what’s called the Bork doctrine. And I’ll explain both of those just very quickly. So in the late 19th century, corporations were granted personhood. It’s actually an interpretation of the 14th Amendment of the Constitution of the United States. The problem is that we also then granted corporations unlimited charter life. So historically, corporations were created with a limited charter. They needed to be renewed, and effectively, a corporation would die at approximately 20 years of age. With the extension of corporate personhood and unlimited charters, what we actually did was create a class of people in our population that have unlimited lives. We call those people vampires in science fiction, and they become fantastically wealthy because they’re able to accumulate resources over a life period that the rest of us can’t even begin to imagine. And so I actually think that played the single most important role. And I think one of the things that is a solution set to that is actually rolling back the influence of corporations by removing the personhood status of corporations. The second thing that happened was the adoption of the Bork doctrine. So there was a, there was a reactionary component to the power of corporations that occurred in the 1930s under the FDR administration, which we and, more importantly, actually, Patman Wright, who was the congressman who really, really pushed a lot of the antitrust activity that effectively broke up the power of many of those vampires. We rolled that back in the 1970s and 1980s in particular, the 1980s Robert Bork introduced the had introduced the concept of the Bork doctrine that rolled back the protections of antitrust, effectively saying the only standard that you could use is were, is there evidence that consumers were actually harmed through price increases that led to a dramatic increase In consolidation and lack of enforcement and antitrust and created the world that we live in today, in which the world is our world in the United States is increasingly dominated by large corporations, with the influence that you’re highlighting that was then extended by Citizens United.
Anthony Scaramucci 17:16
Well, Said, you’ve added, you’ve added to my repertoire. I i intend on plagiarizing every single thing that you just said.
Michael Green 17:23
I hope you do okay. Part of the reason I spend time educating is because I really do think that knowledge is power.
Anthony Scaramucci 17:30
Yeah, well, it’s well said because it’s factually accurate so, so I’ll add it to my repertoire. But I think we’re both in agreement that there’s now a misalignment between our public servants and our political leadership, and what the public actually really needs at this point in the nation’s history. Is that fair to say?
Michael Green 17:49
I think that’s totally fair to say, and I think I would also just highlight how crazy it is, right? So stop and think about this, Anthony, we are both hedge fund guys. We came from a world in which the worship of the dollar was viewed as very much paramount, and yet we both sound like socialists now,
Anthony Scaramucci 18:05
well, no, because I’m not see that’s the problem. If we’re not careful, you get a lunatic like AOC that comes in, and we’ll look you’re gonna have to redistribute it one way or the other. You’re either gonna have to redistribute it through Teddy Roosevelt, Republican style, progressivism, go to the robber barons and say, cut it out, guys, too much of a feeding frenzy, taking too much of the economic rent. You and I both know because we both studied this, 50% of the capital return can go to capital, 50% of the capital return, or the labor return, has to go to labor, 50% of the pie to each party. The society is very happy. It goes 6040, you get a revolution. So we don’t want that. But the flip side is, if you don’t do it through the free market system or through the organism of the American government, that’s been very favorable to the free free market, you could elect a lunatic from the left that will want to impose it in a socialist way, which would be an unmitigated disaster, means all parties would lose.
Michael Green 19:08
So I think that is absolutely correct, and it is one of the reasons why I emphasize that we sound like socialists, but we actually aren’t. So I am a ardent capitalist. I completely believe in everything that you were just saying with one two, by the way, right? With one very notable exception, which is there is no such thing as a free market like it doesn’t exist. All markets are actually created in a image in which a state wants them to be made. And the reason why I emphasize that is even like, even imagine going to a Moroccan soup, right? There will be security that is there that has been retained by the individual merchants to make sure that there isn’t violence, or make sure that there is an outright theft, etc. Those same merchants are going those same that same security will play a role in a self governing way, for creating, make, you know, making, making sure. Effectively that the goods that are being sold are not poisonous or really, really bad, etc. And we forget, if we go back into the 19th century, like there were very real issues we talk about seed oils today, right? Remember the Franklin Delano Roosevelt? The Delano family made their wealth by selling opium and opium derivatives in the form of patent medicines, creating addiction across the American public, and the wealth that ultimately allowed Franklin Delano Roosevelt to become President of the United States. So this is not unique. What we’re experiencing. There is always going to be bad behaviors, and there’s always going to be unethical individuals, and we rely on the state to enforce the rules so that we have a fair shake. The information that we’re receiving is accurate, that when we’re being sold a product that says X, that it actually does X, those are all things that rely on the state for enforcement mechanisms. The problem emerges when we decide that effectively, it needs to be a free for all. Right, a free market is not a free for all, if we basically just say there’s no rules that need to be imposed because the system itself magically reinforces its behavior. That’s not capitalism, that’s idiocy. Yeah,
Anthony Scaramucci 21:13
yeah, and I’m with you on that, and I always tell my friends that are very rich, we gotta be for equal opportunity. We got to get people an education, some protection with their health care services, and at least get them to the starting block so they can run alongside of everybody else and and, of course, I don’t think you or I are for equal outcomes. That would be a disaster, but having some ridiculous having some semblance of equal opportunity, you know, we’re a very rich country, smart group of people. Let’s allocate some resources to that. You know? Yeah,
Michael Green 21:46
no. And I mean, I’d be happy to share charts on this and slides that show that illustrate all these facts. But the simple reality is, we actually have a very clear template for what type of spending. Let’s go back to the MMT component again. What type of spending actually adds value and positive paybacks? And it should be no surprise that it’s not hip replacements for 95 year olds, right? That adds no economic value other than peace of mind of those who are currently working in our system that ultimately they’ll be taken care of. But it adds no real productivity benefit to our society, educating children, making sure that their nutrition, nutritional needs are adequately met, making sure that they are raised in safe households and exposed to education that furthers their capital development, their human capital development, as compared to degraded through things like pornography on smartphones, right? Those are the sort of things that we should be doing. We know these answers. We know the components of it. We complain about an educational system that fails to meet the needs and objectives of the individuals that live in our society, because we know it’s important, and then we walk away from it.
Anthony Scaramucci 22:59
It’s it’s incredible. It’s incredibly well said. Okay, so I want to want to switch to something that is near and dear to your heart, and that’s financial markets and passive investing. And I want you to educate our people, our viewers and listeners, on the unintended consequences of passive investing, which you often discuss, and what are some of the overlooked risks and and I want you to talk a little bit about the Nifty 50. Unfortunately, I’m old enough to know what the Nifty 50 is. So for young viewers, there were 50 stocks that everybody in the 70s says, well, these are the ones that will go up forever, and the market concentrated in those stocks, and they over concentrated in them. And of course, there was a bubble there. And I think in your writings, you’re suggesting we may have some signs of nifty 50, like activity today. So perils of passive investing. And what do you what do you think people should be worried about today? Well, can
Michael Green 24:00
I share a chart, actually? So if we’re gonna give me one second here to make sure that I’ve got this, hold on. This is where you realize that I am a true nerd. Let’s see here. There we go. All right, I just want people to actually see a couple of pictures that may help illustrate why I think this is way beyond Nifty 50 like so, just for your listeners to provide further edification, the Nifty 50 actually refers to stocks that were on a the Merrill Lynch approved broker list, basically the list that, without any impunity, you could call and say, Hey, you really should be buying this stock that, of course, created crowding into those names. And if I show you what has changed over that time, this is going to be a really messy chart. And. And hopefully it doesn’t turn off any viewer who sees this. But I just want you to get a sense of the scale of how different this is. This is looking at the correlation, right? So I’m looking at daily price changes for the stocks within the equivalent of the S, p5, 100 on a market cap weighted basis, which biases the largest stocks, and on an equal weight basis, which treats them all as the same. And as you can see, the correlation between the two has historically been somewhere in the 85 to 90 plus percent range, telling you that they all kind of behave the same. They all have the same macroeconomic factors. They all are based in the United States, etc, etc, etc. This was the Nifty 50. So basically, a divergence emerged between market cap weight correlations and equal weight correlations. And the market cap correlations fell to about 74% okay, here’s where we were at the end of 2021 here’s where we are today. We’re below 50% correlations. Effectively, the markets have become dominated to an extent we’ve never seen before, nothing even remotely close by a subset of companies that everybody is buying into. And that is really the core of the issue. Now, the reason why we do that is very different than the dynamics of the Nifty 50. There isn’t a broker approved list. This is far more nefarious. There is actually an improved investment style. And every single one of your listeners that has a job, I guarantee you, they’ve experienced this in the United States, starting in 2006 we changed our pension system, our 408 1k system, from when you opted into you chose to participate, and when you chose to participate, it was incumbent upon you to pick what stocks or funds that you wanted to invest in in 2006 with the Pension Protection Act, and this is under George Bush, right? So Republican, not Democrat. Let’s be very clear, we adopted what’s called an opt out policy. Effectively, if you get a job, you are automatically defaulted into a 401, K participation. And when you do that, they have to have something they can put you in that’s called a qualified default investment alternative, and it provides liability protection for the corporation that’s sponsoring the 401, k, that basically allows them to say, you can’t sue us for bad choices with what we did with your money, because we’re protected by the government under these liability rules. In two when that was adopted in 2006 most people were put into what was called balanced funds, and then in 2012 under lobbying from Vanguard, we switched to something called a target date fund. And a target date fund simply allocates capital across a passive investment in something like the S, p5, 100, or what’s called the total market index on the equity side, and then picks effectively the same total market index on a bond side, etc, effectively defaulting everybody into owning everything in a defined percentage. With that change, we’ve seen the collapse and the correlations that we’ve seen, and this is becoming a larger and larger issue, because when that money flows in, it’s simply chasing the stocks that went up last, right? It is a momentum reinforcing behavior, and this is why we see the behaviors that we’re seeing. And by the way, you’ll notice at no point in this conversation Did I mention valuations. Did I talk about, you know, our stocks a good investment, because it no longer matters if you have a job, you are defaulted into these programs, and you are blindly buying regardless of valuations.
Anthony Scaramucci 28:47
So me, let me just say this to you, because I have fought this for 25 years, yep, and so I have been wrong because, and I’m with you, by the way, those charts are great, and at some point it’ll probably happen, but when? And then the The other issue is, there’s just so much money that’s flowing, you know what? I mean? No, no.
Michael Green 29:15
So this is the core of the question. First of all, when you say when it will happen, the question is, what do you think is going to happen? Right? Because one of the really critical things for people to understand is the implications of my work are actually that stocks go higher and higher and higher, right, until those flows reverse, right? Those flows have an embedded, let’s call it the self destruct mechanism of, you know, the classic spy tape, right? If you read this, it’s going to self destruct sort of thing. The reason why is because withdrawals are always going to be a function of asset level. I take a percentage of my savings and spend them on a permanent wealth type framework, and by the way, if I have so. Much that I don’t need to spend it. And I’ve worked for people who have so much they have no need to even spend a fraction of what they have. You’re just going to pass it on to the next generation and differentially enable your children, which is a great thing to do, by the way, I want to be clear, I’ve invested in my kids, given them opportunities, made sure that they’re on a great path, etc, and that’s a benefit that I have from having been relatively successful in the world. But there is a difference between basically creating a system in which my children have an opportunity to succeed and guaranteeing that they succeed. There are, there are differences between those. Um, as long as people are contributing to the system on net, it goes higher. It’s just built into the system. It’s the way the system works. But because those withdrawals are a function of asset value and contributions are always a function of income levels, you actually end up with a situation in which the withdrawals have to exceed the contributions at some point. Now figuring out exactly when that is is really hard. I will be very candid with you. I actually had tagged 2018 for that to be the case, and then the Trump administration in 2017 changed the rules and increased the amount that companies were encouraged to contribute alongside employees change the rules on when withdrawals had to happen now that doesn’t help most people’s grandmother, just to be very, very clear, right? Most people’s grandmother goes into retirement with a 401 K and they need to start tapping it immediately. But really rich people who have large 401 K’s don’t need to tap them. And so you’re actually reinforcing the problems that we were talking about before. Those changes have extended the duration of the system. It looks like we’re actually pretty close to a precipice in which the retiring baby boomers are starting to impact this and then again, we increase interest rates so that those who have fixed income in their retirement portfolios no longer need to sell stocks. They can simply live off of the income on their interest expense. So we make lots of changes that have kept the system going, but it does have its own self destruct embedded in
Anthony Scaramucci 32:10
it. Okay? I mean, it’s what very well said. It’s very thoughtful before I go to the audience questions. Is Bitcoin like that? Then, what’s your opinion of Bitcoin?
Michael Green 32:20
So, I mean, this is a very hard one. I am a noted opponent to the Bitcoin Maxi theories. And the real problem with Bitcoin is, is that it misunderstands everything that we were talking about before, about money. What money actually is? It imagines that there’s kind of a finite quantity of money, if there was a finite quantity of money, then everything would be absolutely fantastic. There’s two real issues with that. One is that anything that has a fixed, truly finite quantity of something in a world of growing population means there will be less of that on a per capita basis, since new people are born into the system without ownership of that finite asset, it makes it increasingly hard for them to obtain it, and so it exacerbates the conditions that I’m actually describing now that’s camouflaged because most of the participants in Bitcoin world were relatively young and therefore taxed relatively tech savvy, etc, but as they age, we’re not seeing the next generation having the opportunity to obtain Bitcoin, and therefore it further exacerbates the inequalities across age demographics that we’re highlighting. The second thing is a little bit more nuanced, which is understanding that human beings inevitably make mistakes. Right? Sometimes people will listen to me like, man, you should really run for public office. And the one thing I can guarantee you is, if I ran for public office, that I would make mistakes and policies. And when we make mistakes on a social scale, ie, COVID, etc, one of the things we actually have to do is have the flexibility to address that, and so we can disagree with all the choices that are made, but I think we can all somewhat casually accept the fact that we wouldn’t want to have been locked in our homes by mandate, without access to money from our jobs, without access to subsidies that ultimately allowed people to survive that incredibly difficult and self imposed. You know, fiasco, Great Depression had similar components to it, etc. It’s really important to understand that the flexibility is great about and let’s just take it to the extreme. Imagine the United States was invaded and the US government said, Gosh, you know what? We just don’t have enough Bitcoin to defend ourselves. We should just roll over and surrender like it’s absurd. You know, that’s a mistake. And so that is one of the key issues. When you have a fixed quantity of anything, it destroys the flexibility to respond. The second component is, if you go back and you look at something that appears to have a fixed quantity, something like gold, it’s really key to understand that. Gold is not finite in the same way, it doesn’t have a fixed cap. There’s nearly unlimited quantity of gold in the universe. It’s created by supernovas on a very regular basis and launched out into space. And the explosion of the supernovas, that’s how we get our heavy elements. Human beings can discover that and create it through innovation. So if the price of gold gets really high, we can make more gold. This actually mechanically happened with the discovery of the Americas in the fort in the 1400s early 15th century, late 15th century. It happened again at the tail end of the 19th century, in the aftermath of the William Jennings Bryan cross of gold. Speech, Right? Farmers were nailed to a cross of gold. We discovered the cyanide process that radically increased the quantity of gold that was actually available and set the stage for economic growth to resume. You can’t do that with Bitcoin, and so it is a system that is fantastic for number go up, but completely impossible as a workable system for currency,
Anthony Scaramucci 36:04
all right? And that’s why, listen, I, what I, what I love about this program, which I enjoy, is I let everybody share their views, because they think that’s what makes program great. I don’t need to rebut you or anything like that. That’s your view. And I know this
Michael Green 36:19
is a point on which we disagree, and I think the reason why we disagree is for something that I think should be clear we both share. I want limits on how government spends money. And your focus on Bitcoin is basically saying, look, we’ve given these guys the ability to print money under an MMT framework, and they’re abusing it. Yeah, they’re
Anthony Scaramucci 36:37
drunk drivers. I mean, the Bitcoin network takes the keys away from the drunk drivers, which include the central banking community and the elected officials who are incentivized to drunk drive. And so, you know, unfortunately, I’m a pride. I think it’s the other problem with our decision making and our our even our investment philosophies. We’re products of our upbringings, I think, a lot of the time, and so I watched my dad’s wages get erased in the 1970s you know, he was a hourly worker. The inflation was going haywire, and his wages weren’t catching up, and we were contracting our consumption, and we were nailed down inside the house. It was, it was a financially anxious time, and we’re doing that to millions and millions of Americans right now because of the drunk driving. You know, I
Michael Green 37:26
completely agree, although, again, I think that I would offer a very different interpretation of what happened in the 1970s but let’s make that a subject for a future program. Yeah,
Anthony Scaramucci 37:35
yeah. Okay, well, yeah, but I mean saying
Michael Green 37:39
there was no 100% and I echo many of your concerns, and I agree with them, we do need to have better policy. But stop and think about the analogy you gave, right? We don’t want to incentivize drunk driving, but if somebody is drunk, imagine I am the designated driver, the passenger is drunk, and I have a heart attack. Do I want to not allow that drunk to take the keys and try to get me to the hospital if it’s an abandoned road in the middle of Long Island somewhere in the dead of winter? I kind of want them to actually have access to those keys, right? So we acknowledge that there is flexibility around even these hard rules, and that is a function of circumstances.
Anthony Scaramucci 38:21
It’s good. It’s good analogy, you know, and I, and I agree with you. All right, let’s go to questions. Take outside questions. Is there a risk of being too concentrated in US equities, when so many of the rest of the world’s markets seem undervalued? That’s mark from Texas. What do you think? Um, so
Michael Green 38:37
the the quick answer is, my work on passive actually suggests that the best thing to do is simply participate as this nonsense occurs. But basically it’s a little bit like the party that you want to be kind of close to the door because you see the rowdy fraternity guys getting a little too drunk, right? The rest of the world, the rest of the world’s markets, I would argue, are actually not particularly cheap. There are exceptions to that. Places like China appear very, very cheap on a fundamental basis, but I would also suggest that they run a very high risk of exactly what we saw in Russia, which is they become a persona non grata. In the United States, we forget the same things happened at the start of the 1930s really, what kicked off the crash of 1929 in the Great Depression was not actually the crash of the stock market. Only 10% of the US population was invested in the US stock market. It was the loss of collateral for businesses and debt holders in places like Germany, when Germany chose to default on their debt, same thing happened in Russia, etc. The there’s a very real risk that the regions around the world that look cheap, quote, unquote, are not particularly cheap. And if you actually look at them relative to their own history, they’re really not very cheap at all. The second thing is, remember that the. Passive strategies are defining where the marginal investment dollar is coming from. And so look at your target date fund, I encourage you, Mark to actually pull up the 401 k plan that’s offered by your employer. Look at your target date fund, and what you will find is there’s basically four allocations, US equities, international equities, US bonds and international bonds, the proportions in which those are allocated is the direction the market is headed. And international equities, particularly emerging markets, are tiny and have no rebalancing component to them.
Anthony Scaramucci 40:32
All right, make sense? Let’s go to the next question. What do you think of the biggest disruptor? What do you think will be the biggest disruptor in financial markets over the next decade. This is Sarah from California.
Michael Green 40:43
Well, I’m biased, because ultimately I think that the implosion of the passive mania, as I would describe it, is going to probably be the biggest disrupter. And unfortunately, what that means is that the retirement system on which Americans rely is increasingly at risk. So that’s, unfortunately, what I’m most focused on. If I were to try to say there’s a second one, it would be effectively that the US relationship with China devolves into the US and European relationship with Germany in the 1920s 1930s and China basically, excuse me, China basically decides to take everything that is inside their borders and say you don’t have any claim on it. That would be a perfectly reasonable response to what’s currently happening on the political front, but it would be very unfortunate everyone. And
Anthony Scaramucci 41:35
you know, you get, you go through that, and then you get the doctrine of unintended consequences. It’ll be costly for both parties. Okay, let’s go to the next question. If you can make one policy change to improve the US financial and or economic system, what would it be, and why? Adam from New York, oh, boy,
Michael Green 42:00
I would, I would do a couple of the first thing I would do, unfortunately, like what I would do, and I know this is going to infuriate your audience, is I would adopt a much more progressive tax rate, and I would encourage us to effectively acknowledge that we screwed up, and we have to go through the process. It’s not dissimilar to repaying debt that was accumulated during a war.
Anthony Scaramucci 42:21
Okay, so higher taxes would be one of the things, but you know, one of the things I would suggest is we’ll never do it, of course, but we’re at our best, if you look at our economy 250 years, when we roughly expend 20% of our GDP on the government. And so if you just said, Okay, our spending has to be capped at that. It’s at 27 right now, but it has to be capped at that. You have to make your way with 20% of the GDP going into governmental spending. That would go a long way to correcting the problem. But just, I’m just wondering about if we could ever get back to that. I mean, that’s just, you know, where we are right now and, and I certainly don’t want to go through austerity, so maybe there’s a 10 year plan to get you there, but, but anyway, yeah,
Michael Green 43:08
no. And I would echo the same thing on taxes, for example, like, the right response is not to immediately go to, you know, a much higher tax rate. The right responses to ultimately ease us into that process, out of that process,
Anthony Scaramucci 43:26
we’re in agreement. I think that’s the best way to handle it.
Michael Green 43:29
So my only pushback is, again, like I’m just not a huge fan of rules based systems for the very simple reason that rules remove the flexibility that is required to manage through those processes. So, you know, would I limit spending to 20% if we were invaded? No Right. Therefore, why would I limit spending to 20% if we had a surge in children that needed to be educated? Um? So I like, unfortunately, the reality is we inhabit a a Republican system, not meaning the Republican Party, but a republic in terms of we elect representatives who are supposed to express our interests, and we do that intentionally because we do not want to be governed by the madness of crowds or mobs. We’re just doing a terrible job of electing those individuals right now, and we need to do a better job of it. Need to actually stop and think, like, how does this person represent me? And I don’t mean to pick on individuals, but like, we’ve got literal Looney Tunes in office in many situations right now. Oh,
Anthony Scaramucci 44:34
you don’t have to convince me that, brother, I’m well aware. All right, let’s, let’s keep going. We don’t have any questions here, so I want to end with a final question, and that is a 10 year question. It’s 2025 10 years from now, my hairline will have receded. My boobs will have gotten bigger due to middle age fatness, but where. All, what will the economy be like? What will the world be like that I’m living in? Well,
Michael Green 45:08
10 years is in many ways a lot harder than 100 years. So you and I won’t be around in 100 years. I will tell you that I am an inveterate optimist when it comes to human ingenuity. It’s one of the reasons I’m so opposed to Bitcoin. If given the opportunity, human beings create incredible and amazing things. And so I fully expect that 100 years from now, you would live longer. Your boobs would not be as big. You would be in far better health and far better shape than you could have possibly imagined. And in all likelihood, you have far fewer wants than you have in the same way that we have far fewer wants than our grandparents had, and that’s very easily expressed in things like our need for products like ozempic and gym memberships when they were basically trying to find enough calories to consume to allow them to work their 16 hour shift in a coal mine. It’s a radically, radically better world that we inhabit, and I’m incredibly encouraged that it will be a much better world that we inhabit going forward with that said, if we don’t, you know proverbial pull our heads out of our asses and recognize that each human being has value in contributing to that outlook. And recognize that, as we spoke about at the very beginning, we need to give people the opportunity to contribute, not a guaranteed outcome, but the opportunity to contribute and participate in that vision. Then we’re going to ultimately end up heading back towards serfdom. And it’s really important for people to understand that the base state of the human being is not one of independence and your ability to express your point of view in a crowd without fear of being murdered. The base state has always been one of imposed control from above, whether that’s a chief in a tribe, or whether that is a pharaoh who can execute you, or whether that is a Sheriff of Nottingham who can willy nilly take your property and impose taxes because the king is away. We have to cherish the freedom that we were given by our forebears and the the authors of the US Constitution. Educate your children, educate yourself. Appreciate that, and if we do a good job, we may make it to that 100 year future much more quickly, incredibly
Anthony Scaramucci 47:25
well said, it’s been an unbelievable conversation. I’m very grateful to you for coming on. Thank you Michael Green, and wish you best of luck at simplify Asset Management.
Michael Green 47:37
Thank you very much, Anthony. Had
Andrew Brill 47:39
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