In the world of finance and investing, certain key elements often fly under the radar, reshaping the economic landscape. During this episode, we dive into unconventional yet influential facets of the financial sphere to unpack the profound impact of data science in investment decisions.
Jordi Visser, President and CIO of Weiss Multi-Strategy Advisers, joins Eric Chemi to explore the transformative power of data science in investment decisions, Visser’s groundbreaking asset allocation strategy for the future (50% in the money market, 30% in fiat (60/40), and 20% in bitcoin) and how to embrace a new era of financial prosperity.
Jordi Visser 0:00
Baby Boomers are going to be much more interested in five and a half percent money market funds than they are in terms of taking a significant amount of risk outside outside of that.
Eric Chemi 0:15
Welcome to Wealthion. I’m Eric Chemi. We have a great episode for you today. But before we get started, don’t forget to tune in this Friday at 11am. Eastern Time for our new live call in series, “Speak Up” with Anthony Scaramucci, this is your chance to ask the mooch himself any pressing questions you have about the markets, pick his brain about trends in the global economy, and even dial in to speak with him alive, to chat with him and hear his insights. If you have any questions that you want Anthony Scaramucci to answer, go to wealthion.com/ask-anthony. That’s wealthion.com/ask-anthony. To submit your questions and learn more. Today we are talking about is inflation going to change the dynamic for what investments you can have? Should you still be in stocks? Should you still be in real estate? Should you actually think about going to cash going to gold because the inflationary era of the last 20 years is hyper bubble that we’ve seen is that over Today, my guest is Jordi Visser, he’s the president and CIO of Weiss multi strategy advisors, the firm manages over $3 billion in assets, a big focus in alternative assets. Today, we’re going to talk about economic policy, investment trends, artificial intelligence, asset allocation, and various macro economic issues. And Geordi. I know you’ve got a few contrarian views on the market. And but before we get into that, I’ll mention that Weiss, the firm, you’re at launch in 1978, pioneers in market neutral investing, and you guys employ a highly active investment approach across their many funds, got about a dozen, two dozen different portfolio management teams. And then one thing unique, which we’ll talk about, about the firm your commitment to utilizing data science to managing and monitoring your risk exposure. So Geordi, thanks for coming on the show with me today.
Jordi Visser 2:06
Eric, glad to be here. Look forward to the conversation.
Eric Chemi 2:09
I hope I introduced you correctly. Did I get all of that? Right? Sure.
Jordi Visser 2:13
It’s, that’s pretty much on the blend. I have anything to correct. So we can we can expand upon it at some point.
Eric Chemi 2:20
That’s good. We’re off. They’re off to a great start. So then let me just get right into it. Asset allocation. I know you would say in thinking Fiat assets around the globe, peeking the debt, deglobalization trends are going to continue. And investors you think especially younger ones, around they’re looking for a different system, right? We see these are this Argentina election, for example, we’re seeing a little bit of a push against the way that economics have been working. And you’re seeing a world that’s going to web three blockchain crypto, for investors to make money, you’re suggesting 50% Money Market 30% fiat money and 20% Bitcoin, that that’s a very different kind of exposure than what most people are talking about. So, so explain that to us, please?
Jordi Visser 3:02
Well, the first thing I want to say, Eric, since you’re, you’ve got an audience focused on this is, regardless of my views, everyone should talk to their advisor, you say my views are are contrarian. I’ll just kind of give a little bit of details as to why this why this conversation is important for people just to put in into context, the structural changes that are happening now and have really been happening since the great financial crisis. And that’s why this is so important. I’ve always been a macro person. My career started at Morgan Stanley, I was a derivative person, I traded emerging markets during the 90s. I manage the macro portfolio, or macro fun before I got to Weiss, and then at Weiss before I became the CIO, I managed a macro portfolio there for about 10 years. So my focus is always on where the economy is going to be. And then in the REIT, in the most recent 10 years since I stepped down from managing money became the CIO and President, I have focused more of my attention on asset allocators and kind of talking through where the next five years will be from a risk reward basis. So everyone’s got a different age. So when I, when I give any kind of advice in terms of asset allocation, it’s not customized to the individual person. But I do believe that we are at a very, very important inflection point really coming out of COVID. But it’s because of three themes, which are structural, and there’s no way to get away from them. The first one is what you mentioned, which is exponential innovation has been driving most returns since 2007. So before I get into the concept of the Fiat asset world peaking which I do believe is happening. I just don’t think Fiat assets are going to outperform money market funds for the amount of risks that you have to take to do that when I say Fiat assets that means stocks and bonds in 2007 this Smartphone or the iPhone came out and to make money, you really had to be invested in about seven stocks. That’s driven most of the performance around the globe. And I think everyone listening to this recognizes that. So that’s a structural force, which is only accelerating with the recent generative AI movement that started with Chad GPT. The second thing is 2011 was when the first baby boomer retired. So for a lot of people on there that are listening, they’re probably in that bracket of baby boomers, I’m just away from there. But they control most of the world’s money. And they are past retirement. So the spending habits and the way that you’ve always made money with the baby boomers is changing, and the baby boomers are going to be much more interested in five and a half percent money market funds than they are in terms of taking a significant amount of risk outside outside of that. So that’s the second structural force that’s going on. And the third one you mentioned, which is the world, specifically China, Europe, Japan, and the US, is loaded with debt. And we all know that. And that just means growth going forward is going to be slower, particularly with rates at higher level at higher levels. And so going forward from here, we have a very different world than the prior decade where QE was driving assets. And now you have one where rates are going to be a headwind. But also demographics are going to be a headwind. And artificial intelligence is going to be a much bigger disruptive force than what we saw from the mega cap tech names. And web two point of
Eric Chemi 6:30
this is good, there’s a lot, there’s a lot to break down here. So you mentioned boomers retiring there, or have been retired for a decade now their spending habits are different, they’re going to want that five and a half percent money market fund, but it’s unclear that they’re going to be able to keep getting that it seems like we’ve had it for this past year or so. But if the Fed stops raising rates, it goes back down towards zero, how are they going to get these five and a half percent? Are they going to be forced back into Fiat assets, the stocks and bonds in order to get some kind of return?
Jordi Visser 6:57
Well, you just made a prediction. That’s not reality. The reality is, you’re getting five and a half percent right now, the prediction that people have is that rates are gonna go lower, I don’t agree with that, at least for the near term. You mentioned at the beginning, you talked about inflation, here’s the reality of what the baby boomers are creating and have created not just in the US, but in other countries, too, which is, we have a labor shortage. That’s fact we, we have a situation where the unemployment rate is sitting below 4%. For us to actually cut rates, we’re gonna need to see job losses. And you know, we do our own podcast, and I’ve set on there for the better part of two years now, almost two years, to get a recession, you’re gonna have to lose a lot of workers. And I just don’t see that happening. The work from home movement is shrinking the amount of time that people want to be in the office. So it’s getting harder to convince him to come in labor has gotten some strength in this, there are shortages in pretty much everything from the house or from the hospital side in terms of nursing, we have shortages and truck drivers in terms of the old industrial economy, we have shortages in the technology side, I just don’t see the labor shortage thing is as giving in. And what that means is it’s really hard to have a recession when people are getting jobs and when there’s still more job openings, and there are people to employ. So I don’t think the Fed is going to be able to cut rates, primarily because wages are going to sit up here. So the employment cost index year over year is still 4.3%. I did a webinar recently where I just highlighted that, to get core inflation down to the Feds target of 2%. You’re not going to be able to do that without job losses. And even they’ve said that and we haven’t seen them yet. And I just don’t think we’re gonna see it. So it all begins and ends with the job situation, in my opinion as to what your prediction is. So play out
Eric Chemi 8:54
your sort of most likely scenario that when you look at jobs, recession, and then Feds response at what do you think your leads? What factors will lead what over the next, let’s call it five years?
Jordi Visser 9:06
Well, let’s get back first of all, to the baby boomers, because they’re an important part of this, how do you convince them to go back to work? So they have five and a half percent interest rates, they’re getting paid to sit home and as long as inflation is sitting at, you know, two and a half to 3%, you’re kind of in this really difficult position. So if you’re someone sitting at home, and you have inflation at two and a half percent, but you’ve got a money market fund to five and a half percent, well, your money is growing faster than the cost of spending, it is going higher. Yeah, and right now you’ve got, you know, mortgages in this country, the majority of people that have a mortgage have a fixed rate mortgage, which again, is below the five and a half percent. So you’re really paying older people to be at home. So if they’re not going to be driven back to work, and 10,000 people every day, turn 65 In this country, you’re less If with the younger people needing to fill in with it, and as, as we’ve seen, younger people have the ability of number one, living more with their parents, the net worth that’s been created in this country is beyond anything we’ve seen, the total net worth in this country is seven times the size of the economy, it’s $160 trillion. Which means it’s really hard to have a recession, when the you know, when people can just sell off some assets. Or for people that don’t have that many assets, they actually can go get part time work making $15 an hour. There shortages. I mean, I go to Maine a lot there shortage is up there. And so you see people that are older if they want to work, you know, 20 hours a week and make $15 an hour, and they get five and a half percent in their, their bank account. So this is a very unique situation. And I just don’t see this being anywhere near something where you’re going to have people out of works anytime soon. So
Eric Chemi 10:52
most people would hear that and say, Okay, there’s there’s no recession coming, it’s going to be hard to find the right labor that’s going to bring jobs are going to stay strong. So then I should be bullish, I should be buying stocks and not having my money in a money market fund, because stocks will continue to rise. I don’t know which seven stocks it’ll be. But if I buy an s&p 500 index, I will make money. Do you agree with that, or you’d still keep that Fiat assets pretty low in your portfolio and have more money market have more Bitcoin? Well, this
Jordi Visser 11:22
is where it gets, I mean, I’m going to try to kind of go through the way that companies make money in an economy. So GDP right now nominal GDP, which is before in inflation, is growing this year, somewhere around 6%, I believe the economy is slowing, and it’s going to remain on the slower side going forward. So I think that number will go down closer to 4%. Believe it or not, that’s where we were in the prior decade of 2010, coming out of the crisis to 2019. Now historically, with 4%, nominal GDP, top line revenue, which is really what drives earnings, and really drives the ability for companies to produce those earnings, which is what at the end of the day is going to make the s&p 500 go up. top line revenues to me are going to lose the multiplier, traditionally, it’s been about one and a half to 1.7, meaning if nominal GDP was 4%, you’d be getting top line revenue growth of about six to seven and a half percent in the s&p. Right now, we just had earnings reports come out and top line revenue was not at that same multiplier. And I think there’s a bunch of reasons for partly it’s the debt that’s accrued. So with companies having this much debt, they’ve got a problem. The problem is as their debt matures, and these 2% and 3% coupons roll off, these zombie companies are going to need to go out and borrow money, and it’s going to be borrowing it more like 6% 7% 8% 9%. And that’s going to be a problem for a big portion of the SP and that’s going to eat into some of their business. The second thing is, I am a huge believer that AI is going to be the most disruptive force that the world has ever seen. And we’re at the acceleration point, because of generative AI, we use it in the firm significantly, I’m on it three to five hours a day, I do a regular LinkedIn piece on AI, and I’ve done tons of podcasts on it, the efficiency gains are enormous, but they’re mainly going to be in my opinion for smaller businesses. So we’re going to see massive business formations disrupting established businesses, in every industry you can imagine, but I don’t think it’s going to benefit public companies as much as it does small businesses that are going to be started by kids who don’t want to work for big companies. And so you’re gonna have a rise of startup businesses. So I think your best case scenario for earnings in the s&p 500, you’re gonna get earnings growth of say, five to 6% a year. That sounds good. But again, if the s&p goes up as much as earnings growth, five to 6%, you look around at where comparable assets are investment grade offers us 6%. Right now, high yield offers you 8% Right now, bank loans or senior you know, a lot of the bank loans that are up to our few double digits, and money market funds, the safest of them offer you five and a half. So you’re at a point where unlike the prior decade, where there was no comparison for stocks, they outperform significantly, they were able to buy back debt, they were able to turn out their debt, you have a completely different scenario. So this is all predicated on my belief that a we’re not going to have a recession. Secondly, inflation is not going to go back to 2%. anytime soon, we’re not an inflationary bubble. We’re stuck in a ideological bubble by the Fed where they’re not going to get off of this until it gets back to 2%. And that just makes the s&p to me a bad investment for the next few years relative to the safety of money market funds, and I’ll just finish it this way. If you were to get 8% annualized in stocks over the next three years, and Money market funds kept yielding five and a half percent, you would say, Oh, I’d rather be in the s&p because I’m getting an extra 300 basis points. But if during that time stocks fall 20%, they rally they fall, the risk adjusted return is much better and sharp. And I think with an aging demographic controlling most of the money, I think you’re going to continue to have money market funds as an alternative. Okay,
Eric Chemi 15:20
that’s good. So talk about on the AI side, you’re spending three to five hours a day, what are you doing that? Is this for content generation? Is this for portfolio allocation for research? How are you using AI in specific?
Jordi Visser 15:33
Well, I guess there’s there’s three separate parts to go through. One is when Chad TPT came out, I read I immediately realized this was the smartest person I’ve ever met. Meaning I can have a conversation with it and get information, it can write things for me. I use it a lot for helping me do my research or what I call my research for my thoughts. So as we’re sitting here, having a conversation, I can talk for a long period of time about a lot of different things. Most of that comes from a combination of Bloomberg and artificial intelligence, and YouTubes and podcasts and everything else. But AI speeds up that process tremendously. It reads transcripts from podcasts. So I can, you know, take a two hour podcast and turn it into five minutes of information by getting the cliffnotes of the podcast, if there’s a part that I want to go read on it, I can, same thing goes for YouTube’s you can connect it to a YouTube analyzer. So in the process of doing research, meaning gathering information, AI has sped up that to a degree which is beyond belief, it helps me right. So when I write something, and I write a lot, I ask it to go through edit it, I asked it to give any suggestions. It helps me a lot with the content creation. If you go to my LinkedIn and you look at the things I’ve written on a topic, you know, God plus Jarvis is what we started doing this, and I’ve been doing it since May, the images have evolved to right now. They’re the most unbelievable images I’ve ever seen. So we do the creative work on the images for the podcast. The next thing is for work, well, Bloomberg doesn’t have its own bot. But with chat GPT, I connect it to the Bloomberg data as I would any other data. And that’s what we’ve started to do. I download the data into it, I asked it for an analysis. So an easy way to say it is if I want to go see the last time that the s&p was up, it’s been up 16 In the last 19 days, and I wanted to go see the last time that it happened, I download all the s&p returns into an Excel file that takes me 30 seconds, I upload that into code interpreter. And then I have it in there and I asked chat GPT questions about it and have a conversation with it. So I use it for a variety of different things at this point. And it’s only growing, I didn’t know how to code because I didn’t have the time as someone to go learn Python, I took Python 101 in May. And since then I’ve been able to use the coding parts of GPT to allow me to write things to so if I want to do Visual Basic or things in Excel, I can have a code everything. So there’s an enormous amount of ways to use it. And it’s all based on things that I was doing in my daily work. And it’s made me tremendously more efficient. But also, it really makes my brain have the ability of processing more information and connecting more dots. How
Eric Chemi 18:26
has that changed? The types of investments you’re making them? Now your processes is, you know, Superman, right? It’s much faster and more efficient, you can do more? Is it? Is it changing how you invest? Not necessarily what you’re investing? We’ll talk about what you’re investing in a segment how you invest? Well,
Jordi Visser 18:46
let’s go back a little bit because at the beginning, you said, you talked about data science, and this really fits in with that. So let me kind of give everyone a brief history of Weiss’s involvement with with data science and kind of take it back to when I started my career at Weiss but even when I was a kid, so I’ve always been a data analytics freak. And I say freak and the fact that you know when I’ve done these speaking engagements before, my father, who was a construction worker had a really good mathematical mind. And he taught me risk reward basically, with the racetrack. He took me through odds. And I became very interested in what to me was the original data analytics or fantasy football, whatever you want to say for for sports, which was when you go to the racetrack, they give you a racing program. And inside that racing program is basically just like the stock market all this history of data, what place it came in what the time was for the first Furlong second, blah, blah, blah. And so as a kid, I coded that into a Commodore computer to try and see if I could come up with figuring out who would win the race. What the I eventually got to the point my father said it’s not who can win. It’s trying to figure out where the value is. So Try to use this but think what the odds should be based on the history and then see where it differs from what the betters are doing. And so this concept has always been with me in terms of data science, my first job at Morgan Stanley was in the same type of role I was in a controllers and risk management area built your risk system for them. I analyzed exotic options, the p&l for the traders, and I eventually moved to the trading floor at Weiss in 2013, I decided that quantitative competition was increasing dramatically, we started seeing the rise of quant funds going at an exponential pace, which means they started to impact the markets in a much bigger way. ETS were doing the same thing. And so to compete, we had to in some way, we weren’t going to become a quant strategy. So we took an approach of becoming a human plus machine approach to make all decisions. And that led to hiring our first data scientist, we built out what we call our baseball cards. So using the Moneyball theme, and the same thing as the movie, we started capturing as much data as we could on all of our portfolio managers and traders, analyzing not only their historical returns, but the turnover involved when it for behavioral alpha, as we call it. And then eventually getting into the point where portfolio construction became the most important thing outside of the behavioral alpha, meaning we’re market neutral, as you said, so how good is a manager at not only making money, but doing that in a way that is neutral, low correlation to stocks and bonds? And their turnover? How much are they turning their portfolio over? So where AI is starting to have an impact is because we built all that on our own. We didn’t use vendors. So all of our risk systems or baseball cards or talent assessment systems, were coded in our in Python, that allows us to do what we’re doing now, which is plugging in generative AI into it, to help our portfolio managers to be able to construct a much better or much more neutral portfolio than they could ever do by themselves. We’ve given them tools to help them in the past, but just like with chess, or go or every other place that AI is beating humans, the one thing that AI can do much better than humans is construct a much more balanced portfolio or a neutral portfolio, we have 1500 positions in our portfolio assume you know, 750, long 750 short. So the question is, how do you make a neutral portfolio that is as neutral as possible, a computer is much better with that many components than a human. So that’s how we’re doing it so far. The PMS are doing it on their own for research, and a variety of other places. But from the investment side, we’re mainly helping the managers and building tools that hopefully, in the very near term will allow them to save a lot of their time and portfolio construction.
Eric Chemi 22:47
Will this change the number of portfolio managers that you need the number of humans that you need? Because basically will you need fewer of them to the point that okay, the computer is doing more of the work,
Jordi Visser 22:58
there’s no doubt that any profession, any industry is going to in the future need less people because of AI. You know, there’s two ways the way the media portrays it is this will replace jobs. That’s the negative side, the positive side is we’ve seen every year we have a certain amount of people that are either let go or that choose to go a different path. And historically, we’d most likely go out replace those people. If our assets were still growing well, now, with our assets still staying the same or growing. We don’t have to hire those, hire the people back. And that’s what we’ve seen so far. It’s helped us on on that assigned side, it’s helped us on the marketing side. And I do envision on the investment side as our assets continue to grow, we will need less investment professionals. I’m not sure whether that means less portfolio managers, less analysts, less traders. But per the money we manage, it takes a certain amount of managers, I think every fund and every asset manager regardless whether it’s a hedge fund, or a mutual fund is going to need less investment professionals going forward than they do today. I wonder
Eric Chemi 24:05
about what you said, Do you think this will benefit small businesses more than benefit the big public companies but you guys have put so much work into all of this, that it suggests that a bigger company who has more resources, more people who can code and do this and build out a whole system, they’re going to benefit more than a small business that has two or three people who neither have the time nor the talent or the inclination to go ahead and do all these things. And they will just be users of a chat GPT kind of product. But you know, you’re not a giant business but these bigger businesses have more resources to take more advantage of the AI. What
Jordi Visser 24:41
generative AI and that’s the you know, as you get to know me in this I’m I do not think like other people in this stuff. I don’t run to assumptions. I don’t take the what I read in the paper as anything other than someone’s opinion. The fact of the matter is if you have a lot of reasons versus built in. So there are hedge funds in our industry that have hundreds of millions of dollars of a tech budget. So theoretically, they would have an advantage. But that means that number one, they have a lot of people already on the tech side. Number two, they have an infrastructure that does not allow them to be nimble. By definition, I worked at Morgan Stanley, it’s very hard to move a Titanic. And when you’re that big Geron of AI is something which actually lowers the barriers to entry. So think about three separate groups, big public companies, small public companies, and companies that don’t exist today that are going to exist tomorrow, the companies that will exist tomorrow will have a huge advantage huge, because the barriers to entry, the cost of doing artificial intelligence into your business, it’s costing us next to nothing that we want to do what we’re working on right now, what we’ve already been able to do, to do, the stuff that we do today, would have cost us at least 50 to $100 million. And the reason I know the numbers, because we talked about this when I hired the first data scientist, that was the vision, but the cost was so expensive, the servers we would have needed. Now a lot of those costs went down as Cloud Storage increase and things along those lines, but artificial intelligence to do machine learning was just not an easy thing for a small business to do. I’m doing things on there, including having a code for me that were unthinkable for people who are listening who haven’t used it. It’s the most powerful tool you’ve ever seen. It blows away anything that you’ve seen on the iPhone, and anything you can come up with that you’ve been shocked at. Artificial intelligence allows you to do so much more than you can ever imagine. And so I don’t believe in any way shape or form. After we get through right now the mega cap tech companies, Microsoft, and Vidya. Google, they’ve all had, quote unquote, the advantage you’re talking about meaning they already have resources in this they already have to go. But at the end of the day, the only way those companies are going to have a repeat performance as to what happened in the decade before is if their revenues grow 20 to 30%. I don’t know how people are going to grow revenues from Ai, I use it all the time, we’re not spending much money on it. So I don’t know where this thing is gonna come from. Remember, a lot of these companies made their money on advertisement. They made their money on the you know, the apps coming in, they’re all trying to be service providers. And a one big thing to just keep in mind for those people looking to invest solely in the US. The US is about 70% of MSCI World, the benchmark for most pension funds and asset allocators. That 70% is an enormous number, we are not 70% of global GDP. The reason we are 70% of MSCI World in terms of market cap is because of the mega cap cap, tech companies. And much of the revenue that they increased in the prior decade was not just in the US, it was also around the globe, artificial intelligence will not be allowed in Europe, our our our artificial intelligence will not be allowed in the future in there. So I’m not sure Google is sitting in a good position, or Microsoft is sitting in a good position. When the rest of the world says we need to have our own artificial intelligence, you’re already seeing this kind of battle play out between China and the US, you’re gonna see it around the globe. And so in the end, big companies that have already had established revenues, I don’t see them growing their revenues, it’s going to have to all come from efficiency and productivity. That means they have to fire a bunch of people. And I think this is going to be a slow process for them to get employees to use this. So I see big companies as underperforming and I see smaller new established businesses around the globe as being the biggest benefit.
Eric Chemi 28:41
Is there. Is there almost a reverse effect or if AI causes all these layoffs, then is the Fed need to cut rates now because all of a sudden there are more people who need to get back to work. They can’t keep rates so high.
Jordi Visser 28:54
It’s AI is not going to cause job losses. Not not in the short term in the long term. It will but it’ll happen through. And Ray Dalio and Jamie Dimon have said this, and I agree with both of them. And everyone can go Google this or use chat GPT and go spend some time on it. But they both said the work week was going to go down from five days to three days, three and a half days. Less work days is another way of firing people. It’s just less work days. Now a lot if you get paid the same amount of money or whatever money you’re looking for, meaning your wages are at some level and you’re working less time, then there’s going to be a lot of people that are going to be interested in that assuming they can afford that that lifestyle. And that’s what we’re headed towards. And that’s what AI is going to do. I just don’t believe that. Having used it for so long now and watching my own employees. Not everyone embraces it, not everyone attacks it. They have trouble with it as all technol Oh jeez. And so for bigger companies, the way that they will get their productivity gains and be able to replace people, is if the people use it. And I don’t think they’re going to be as fast to use it as as bigger companies think. So I think they’re going to be the ones that, again, are hurt on the productivity and efficiency gains at the employee level, what would
Eric Chemi 30:18
you say is the most valuable task you’re doing through the AI, if you had to just pick one thing that maybe I’ll put in the most valuable, that is the most accessible that you think other people could easily try to get up to speed on and make a difference in their own workday.
Jordi Visser 30:35
So I set a lot of things at the beginning, in terms of how I use it, the phrase I give to everyone, including my kids is, if you have an Alexa, and you’ve or Siri, everyone’s used either Alexa or Siri, I’m sure at some point, or most people, that is stupid, artificial intelligence, you get frustrated by it, it doesn’t know things, and it doesn’t do the work for you. Once you build the relationship with chat, GPT, with Claude with whatever generative AI that’s out there, and what I mean by build a relationship, it’s a person, it’s a personal assistant, you have to start building a relationship with it to get used to knowing what it can do. I cook, I’m a really good cook. Now, when I’m looking for recipes, I will ask Chad GPT to give me the recipe on a particular thing. So over the weekend, I have beans almost every single day some form and I was at the farmers market, I got some beans I’ve never had before. And I wanted to do a particular type of dish with beans, adding what I had inside my kitchen. So I just put all these things and I said write a recipe that includes these ingredients for being dish, I want the beans to be soft. And that was it and again, writes up a recipe. Now, you have to build that relationship to use it all the time. And what it does is it makes you smarter, it makes you more efficient, it makes you productive. So rather than view it as a tool, or software, that’s not what it is. It has to be thought of as a personal assistant that you’re asking questions. So go back to your Iron Man movie. And look at remember what Jarvis did for Iron Man, that is exactly what it’s able to do. And you have to start doing that with it to be able to get its full potential.
Eric Chemi 32:23
I know as it relates to what we talked about rates and inflation. So you’re looking at over the next decade, right stocks, bonds, venture capital, private equity, real estate, all of these things and have done well over the last, let’s call it generation decade, wherever you want to call it, you think all of them will not be able to outperform the risk free rates. Because if if that turns out to be true, that really changes how people should be investing, if so many people have been riding that wave, right? Buy a house, and then keep turning it into bigger, bigger bigger houses because the Fed has inflated all of these assets, sit in stocks do nothing and the stocks go up, right? You’re saying you can’t just sit there and do nothing on these these types of assets now?
Jordi Visser 33:04
Yeah, so let’s go through a few things. He said. And again, I say this word. There are structural changes that happened during all of our lifetimes. They’re just happening faster now. So let’s take real estate first of all, so real estate has been disrupted by to two major trends at this point. And then I’ll I’ll mention something else at the end. But work from home has structurally changed commercial real estate, there is no way to not accept the fact that people want to work from home. You and I talked before this started just briefly about where I grew up, and how much I hated my commute. Now I’m 57 years old, or I will be 57 and March, on the healthiest I’ve been in my life on almost every metric that I keep. And I keep a lot of analytics on my health. And I believe a lot of that comes from not commuting two and a half hours each day the way I did from my 20s 30s and 40s. If I had the opportunity to work from home, I would if you look at surveys in the United States 80 plus percent of people surveyed would rather not be in the office one day a week, and they take less pay for that. So the work from home is a structural change that is never going back to the way it was. And so that is going to hurt commercial real estate for a long time because we just don’t we’re not going to have the ability of filling up these buildings from a residential real estate. The other thing that goes on is people are moving, they move to different cities they want the mobility so when you lock yourself into a mortgage at a you know, 30 year mortgage, it doesn’t make any sense in this day and age and I don’t think we’re gonna see the housing market come back in a big way anytime soon. A because we’ve got people trapped inside their house with they can’t get out because their mortgage is so low that if they were to sell their house and try to move somewhere they got a lot of cost a lot of things that go in. So you’re probably not going to have that much mobility for people with kids and people older. For the younger generation, they’re going to want the ability of moving into cities moving to another one moving around looking where labor is, you’re going to my, my daughter, or my oldest daughter works in Little Rock. She skipped, you know, didn’t have aI back when she made that decision. But she made the decision because to live in New Jersey, her expenses were going to be higher. And she could get a better job in Arkansas, because there were less qualified people. And she could get paid similar amounts of money, which meant her expenses were lower, her money was there, and she had a better job. It was a better decision for an entry level. If she had AI, she could just ask AI. So AI is going to increase that. So real estate to me, has got those headwinds, but also as the other one, which is interest rates, VC, AI disruption, interest rates, I think that is the place where people just don’t realize that you’re going to see a lot of small businesses, they are not going to get to moonshot potential, there’s too much competition. And so I see that that industry is going to go through a very difficult time with rates stuck at high levels. So both of those are rate driven right off the bat. And then obviously, for the bond market, and for places like that, you’ve got a tremendous amount of debt. Outstanding. Still, the issuance we need is enormous, that keeps putting pressure on things. But I also have said that I don’t think inflation is coming down. So a lot of this has to do with a combination of technology, and rates. And right now do I think the Fed could just abandon this ideological thing and move rates down? Yes. And then I’d be much more positive on stocks much more positive on real estate. But I also think it would definitely impact inflation, because we have a tight labor market where wages are still high. And so I think their ideology is going to remain that, until we get down to 2%, or wages start to slow down. We’re gonna keep this up there. And that makes their mandate very, very challenging. So that’s why I’m negative on all of those assets that were really good during the 2010 2020. Period.
Eric Chemi 37:01
I like the way you said the Feds ideological bubble, right, not an asset bubble, not a market bubble and ideological bubble. What do you think, gets them out of that? Is it like you said, they’re just going to look for the job movement and the inflation movement? And those are the two things that are going to keep them stuck there at these higher rates?
Jordi Visser 37:19
Well, this is a really important question. And this is something you know, again, as I mentioned, I just there are no there are no Givens. They’re using historical data. Meaning, as far as I’m concerned, their business cycle, I’ve publicly said repeatedly, there are no more business cycles, we’re not going to have recessions, we’re just going to kind of meander around, maybe we go to negative GDP for a little while. But without job losses, we don’t have a recession, the Fed is making their decisions based on data from the 1970s 1980s 1990s 2000. That’s an ideology that if it were the way your doctor treated you and you weren’t using any of the new stuff, you’re only using the old stuff, you’d be horrified. But the Fed is using historical stuff they learned in a textbook, which has nothing to do with the world with artificial intelligence. And really since the smartphone, everything’s changed. And so I talked about how the digital economy has taken over the physical economy. And we all know that’s the case. The question is, When will the Fed decide to change their views? And I don’t think it’s going to happen anytime soon. So
Eric Chemi 38:32
what would if you were in charge? What would the policy rate that you would put in right now?
Jordi Visser 38:37
Well, I, again, I don’t have a problem with where rates are, it really depends on what the mandate is, I think we’re not gonna have recession, I think the unemployment rates gonna stay low, which means people can get jobs, older people can save, the government’s going to fill in the gaps, as they’ve chosen to do in this economy with people that are not able to get food get work, the welfare state will remain. So I think it’s really hard when the government and their policies are going to keep the economy going at one level. And then on the other side, the demographics are going to help the economy because people aren’t working. So that’s why I brought in, we just haven’t had this situation before. And so people hear the number again, the total net worth of households in this country is $160 trillion. So the total size of the economy is about 25 trillion. So when I say nominal GDP is going to grow about 4%. That means we’re gonna go from 25 trillion this year, theoretically to 26 trillion, which means there’s 1 trillion additional spending that happens next year. Well, all that has to happen is the net worth goes from 160 trillion to 159 trillion, and you’ve been able to keep the economy growing that doesn’t keep in that while wages are growing at four and a half percent. What’s the Total income that’s growing, how much are people getting in their savings account above what their cost of expenses are. So that’s why it’s foolish to me for people to think there’s a recession when the baby boomers were in the 1990s. So I’ve been in in this industry since 1992. I’ve only seen two recessions. I don’t count the pandemic, because that was a chosen one to throw us into it, we came out of it six months later, I’ve only seen two recessions. One was in 2001, after 911. And then one was the great financial crisis, where the government made the stupid decision to allow Lehman Brothers to go under an open Pandora’s box. And then they quickly realized that the world couldn’t handle an SVB type situation. So they put these rules in place that SVB is not allowed to happen anymore, without them coming in and saving everything. So the world has changed. And there’s just no recessions that are going on. And so I just keep saying this stuff to people. Because a they don’t want really understand it. In my opinion, the Fed can’t take the risk of just going out there and saying it. So you’re just in a situation where because of technology because of baby boomers, and because of the Feds tools, we’re just in a very different world. And again, using historical data to make these decisions is just stupid. It’s really
Eric Chemi 41:15
the way you describe it, because a lot of people would say, I don’t see a recession, hence, I’m bullish on stocks, if your is is like, I don’t see a recession, hence, I’m bearish because they’re going to keep rates high, and these things aren’t going to move, I’d rather keep my money in money market, I’d rather just get this consistent return. So it’s interesting, the same belief can lead to these opposite decisions. Well, I’m
Jordi Visser 41:39
not bearish. So I’m not saying stocks are gonna go down. Okay, I’m just saying the returns you’re gonna get in stocks and bonds. If you get 5% over the next decade, a year in stocks and bonds, that’s not a bear market, but money market funds are getting you 5%, too. So this is really a comparable asset thing. It doesn’t make in you know, you mentioned 50%, money market funds 30%, a 6040 Fiat world, within that I would emphasize emerging markets. That’s my the place where I would have an overweight relative to the US. And then Bitcoin and I’m a big believer in crypto continuing to be a huge, huge asset class that will grow but it’s only Bitcoin, I don’t believe in the other tokens. Some of them will
Eric Chemi 42:28
yield even with no yield on Bitcoin, you’re okay with that just let it grow on the assets.
Jordi Visser 42:32
It’s up over 100% This year, it’s and it’s never going to be an asset of yield. I mean, the s&p 500 only yields one and change percent right at this point. So the NASDAQ basically gave you zero yield, right? Bitcoin is the new innovation, it is the new place that money is going to go to. I really do spend a lot of time on demographics and where the ages are. So when you’re in your 30s, you’re taking a lot of risk, and you’re willing to lose money because you have time to make it back. Right? Well, now we’re describing the gogo days of the 1990s. And that’s when the baby boomers were in their 30s. So now you fast forward and you go, Okay, well, what are the millennials going to do? Well, this generation, Gamble’s, They gamble a lot younger kids, whether it’s FanDuel gambling on football, I mean, this is the market Options Exchange option, volumes exploding in the US. Retail is involved. Tokens are another form of this, my son who’s 18 has been involved in crypto since the pandemic like most kids, This place offers a lot of excitement. It offers a place for community. I’ve I’ve done podcasts and written papers how the Taylor Swift situation is probably one of the best ways to gauge how the crypto world is going to work out these community based areas where she’s a token, and her token is going up in value rapidly. Communities go to see her well. That’s what’s gonna happen with the crypto world. It’s very community based. It’s something that older people can’t really grasp. And bitcoin is the end to of that world. So the Fiat world globally, all sums of stocks, bonds, and real estate, forget all the other alternatives because they’re a small portion. It’s $450 trillion. And again, its own primarily by the baby boomers with Europe, China, and the US dominating most of that, well, every day, the crypto world is going to go up in asset value as more money goes into it. I’ve talked about AI being the spark plug for it, we’re gonna have an ETF for Bitcoin coming out, hopefully in the next month to two months. That will be the first true bridge we have for people, for advisors to say, hey, now I have something that I’m familiar with. I don’t have to open some wallet and go find some way to buy this. I can actually do it in a form that I’m comfortable with, which is an ETF. So I’m writing a paper right now and I’ve talked about this year being the Bitcoin moment year because of the lack of Trust in the banking system, we’ve had deposits leave the banking system for the last two years m two is shrinking. That is the Fiat world basically losing believers every single day and it moving into other places. And crypto is going to be the main place where it goes part of that is money market funds right now. But part of it is crypto. And so people understand that when you take money out of a bank, and you move it into money market funds, that is leaving the fiat system, there’s no leverage the banks, there’s no lending on the money market funds, when you have your money in a bank gets gets lent out just like It’s a Wonderful Life. And there can be problems with that well as money and deposits are leaving the banking system as we saw with SVB. And they keep going into money market funds, which is going to keep happening because most of the big banks are still giving you zero on your on your money, more money is going to go looking for something that’s going up in value. So the main reason why I’m so interested in Bitcoin right now is because they’ve had competition, meaning you could buy NASDAQ and get 30 40%. If you ever year where NASDAQ is unchanged, the s&p is unchanged money markets yielding five and a half percent bonds are giving you three and Kryptos up 60. I’ve just been in this business long enough to know that all of a sudden people will be changing their mind on crypto and be looking at it. And I think that’s what next year is gonna
Eric Chemi 46:15
hold remind people though they don’t understand on the money market funds, like you said, hey, when the money’s in the bank, they’re lending it out. They’re doing that fractional reserve banking, but the money market funds, that money is going somewhere in order to get that five and a half percent yield. So where are they investing that money for people who are not sure what what’s happening with the money market funds, where’s my money going?
Jordi Visser 46:34
Short term treasuries. So it’s basically going to fund the US government debt, which is enormous right now. And so that money does not get loaned back out. And that’s where it goes. So I’ve said, and the fiat system is a Ponzi scheme, meaning as long as everyone is staying invested in it, it’s fine when you have $160 trillion of assets in the United States. And you have about 20 trillion deposits supporting it. As the deposits leave, then like in a hedge fund, the leverage goes up, by definition, if the assets don’t fall, that’s the main reason why I see the assets is just not being able to produce the returns. If people make money and they don’t put it back into the banks, you can’t get the same leverage. And that’s what in my opinion is happening. I mean, I will just say that I, there’s, I have a lot of money in money market funds for that reason. I like the yield on it. I’m an older person, I’ve made money. I’ve gone through this. I don’t have a mortgage right now. I moved to Brooklyn, I’m sitting in a place I’ve changed my entire lifestyle. It’s kind of like a millennial who’s made money at this point, and I’m living a different life. I think as people realize this next year, this won’t become apparent in my opinion. Until next year, it has been a crazy, four years. So 2021 2223. The stock the s&p 500 right now is only about four or 5% from the all time highs that were made in 2021. So that’s the good news. The bad news is the stock markets unchanged since late 2020. If I took everyone through and said, Let’s assume you didn’t live in the United States of America, and you live to anywhere else so MSCI World X, the US, which I said is 30%. But that markets unchanged since 2007. The Bloomberg commodity index is unchanged since 2004. Assets have not done well, the Barclays AG, which is the benchmark for bonds around the globe is unchanged since 2013. So I’m sorry, 2011. That means over a decade for all of those assets, you’ve made no money. And so people really should realize that just because assets don’t go higher, doesn’t mean it’s not a good no care economy. And it’s not an OK living. That’s what happens as things get older. And while people look for things, I think they’re going to look for exciting things, and all of the excitement to make money, in my opinion is going to be on Bitcoin. And
Eric Chemi 48:57
then lastly, because you mentioned US Treasury debt, how much of a problem do you see with with that in terms of how far can they go on the debt? At some point? Does it collapse? You know, can they keep funding this government? Are there going to be auctions that fail is that people just say about and then the government, you start to see a third world country kind of situation, do you? Do you see it that dire? Do you just feel like, Hey, this is been growing for a long time, it’ll continue to grow, they’ll find a way to muddle through on the government side. So
Jordi Visser 49:25
two things one, I traded emerging markets during the 90s. So I’m very familiar with failures of bonds and collapses and everything. A Ponzi scheme. Obviously everyone knows what it is. So a house of cards depends on the money staying in the system. Luckily, the government prints its own money in this Ponzi scheme. So the reason it can’t collapse and Japan has proven that because people forget that everyone wanted to bet that Japan was going to fall in the 90s because they had so much debt, and people don’t don’t realize this back in 1988, MSCI World, about 60% of it was Japan, believe it or not, they were bigger than the United States back in 1988. Now their stock market is unchanged since 1988. So again, I keep bringing up the people that if you think that it’s an inherent right that every year the s&p 500 goes up. It’s not the way the rest of the world has seen it. And I believe without any question in my mind, unless the Fed decides to ramp things up and lower rates significantly, I think we’re gonna have trouble going forward with dominating the world in terms of the company side in the stock market side the way that we we have in the past, and I think people really should be looking, but there’s no collapse coming. And that’s why a collapse would actually be something that might be good, because then we’re forced the Fed raised rates, and like you said, then when you start doing QE, again, we can get it going. I think a more painful solution for people is the boring nature of 5% money markets, 5% stocks, 5% bonds, and everyone refuses to buy Bitcoin because it doesn’t make sense to them while it goes up. 100% a year. I think that’s the outcome. I liked the best
Eric Chemi 51:11
Jordy this has been fantastic. I love the conversation, which I wish we could go here all day. You know, I know we’ve got other things to do. We’ll have to get you back on. Jordi, thank you so much. Where can people find you meant you mentioned LinkedIn podcast tell us everywhere if people want to really go deep with Jordi, where were all the places they can find you?
Jordi Visser 51:29
Yeah, the best place. I mean, I do post everything in LinkedIn. Meaning my webinars, which I do about every two weeks on the markets, it’s about 20 minutes, I go through 25 to 35. Bloomberg charts fairly quickly, just I’m a data driven person. So these are the things shaping the story. It’s the charts I care the most about on the economy, I don’t cherry pick things, I just go through what has happened. The second thing is our podcast is in search of green marbles. It comes out once a week on Friday, I’m on there at least once a month, if not twice, and I do things on the markets, I do things on crypto, I do things on longevity and health. And then we’ve got people do the Fed and things. So in search of green marbles is the name of it. You can find it there and then gyc.com GWEI ss.com has everything on it. So that’s the one place you can go to where all content is. Great.
Eric Chemi 52:25
Thank you so much for joining me. If you’re hearing all this and wondering, maybe I need to talk to a pro, get some helping go to wealthion.com there’s a short form there. And we can connect you with investment professionals that that we endorse at Wealthion It’s it’s free, there’s no obligation, no nothing to do, you can just talk with them and then kind of hear them out and see if you need help us. As Johnny and I were talking about it’s gonna get a little interesting over the next few years. So that’s the short firstname.lastname@example.org And then if you liked this podcast, please like it, share it subscribe, let people know so that more people can hear these voices and we can keep delivering this great content to you. So thanks to all of you for listening and watching and we’ll see you next time.