Mike Green on What Happens When Passive Flows Meet the Largest IPO in History

Even the discussion around Tesla's inclusion in September of 2020, hailed in comparison to the discussion that's going on now. This is recognized as something different, and we've dropped any pretense that they are, quote, unquote, passive indices. My analysis is it is mostly the passive flows. I've shown elsewhere that number is now accumulating to impact the largest US stocks by about 18% a year. Over 50% of Google's profits in this last quarter alone were tied directly to the price appreciation of its investment and then drop it. People are putting a multiple, look, I've gotten those gains. I mean, these are one-time gains. You either have the cash to make the payment on your, or you don't. And that's the real question I think that's going to play through. We'll look back on it if it actually plays out, and we'll say, well, these signs were all there and nobody was paying attention. You're watching Excess Returns, a channel that makes complex investing ideas simple enough to actually use for better questions, lead better decisions. I can't decide. It's like you get one part, Michael Lewis. You get another part, Michael Milken, and probably a few other Michaels in between. Yes, we do give a fig about this. Chief strategist that simplify asset management. Mike Green, so good to see you. - It's great to see you, Matt. I love the intros every single time. We were all products of the 60s and 70s. Mike was the most common name for an extended period. - Well, you're serving the name proud. Let me just compliment you on that. Can we talk? - Yeah, it is something to be proud of when your name is Mike Green and you can actually find yourself on Google. So there you go. - There you go. Pride points on Gmail address, if nothing else. Can we talk about how boring markets are right now? - There's a little interesting. - Be to death topic. - Why? - I think honestly, every professional investor I know is suffering through a period of deep depression because there is just nothing you can actually say about what is happening other than, here we go again. And you think you learn my work, obviously suggests there's a mechanical component to much of this. The behavior of the indices actually would seem to validate that at this point. And so we're just kind of all waiting for what happens next 'cause this has not happened before. We actually don't know how this will play out. We can build models of it and we understand the bid that is coming for SpaceX from the passive indices, the demand that that creates. The Heisman from the S&P 500 was actually a remarkable event. I candidly was a little bit surprised as I described in my sub-sack. I was actually in the middle of an interview discussing SpaceX when the news came out. And it had no quicker being the observation that I couldn't understand why S&P was doing it. I did understand why NANES that was doing it. I couldn't understand what S&P was doing. But when the reporter I was speaking to said, well, guess what, S&P just announced they're not going to include it. And I think this is actually a really critical thing to understand it is the role that these index committees and the index construction committees actually play from a fiduciary standpoint. That's become the most interesting thing in markets right now is this basic discussion around what sort of role should we expect passive to play, how should we expect it to impact it? It's a radical change from the discussion I was having a decade ago, even five years ago, which is people refusing to admit that indices had any impact whatsoever. So we've come to an interesting conclusion that feels a little bit like a logical endpoint to some of it, but again, we just don't know. We haven't seen it before. - So, and I would say even five days ago when that S&P role link came out was another change. I feel like, correct me if I'm wrong. This is the first time we actually gave mainstream conversation to the role that passive was gonna play in an individual issue. I don't remember this being this size of a, everybody was talking about all of them. - I completely agree with you. This is recognized as something different and we've dropped any pretense that they are quote unquote passive indices. It's become very clear that they play a very active role in the behavior of capital markets. - So that being said, you saw the S&P news, you actually got to read it afterwards. What do you think the impact is? How do we think about day one versus five versus 15, versus 16 months out in lockups and blah, blah, blah, how do we think about this stuff? - Well, I see. Again, because this has not happened, it is difficult to figure out exactly what the pattern is going to be. The indications that we have is the low float that is being offered combined with the buying from the NASDAQ should result. There's Justin. Should result in something that looks he did magically appear. That looks something like two times the underlying float in terms of demand that's created expectations that the IPO will do relatively well. The impact that it will have on remaining securities in the NASDAQ 100 and the Russell 1000, et cetera, is certainly going to become the primary focus. One of the factors is actually playing through right now. I would argue this is that the locking up of capital and margin associated with the IPO itself is probably part of the cause that we're actually seeing for some of the recent work at Weakness. The concerns around that, the actions by the S&P, I correctly articulated that this was actually a pretty big deal that this suggests that financing may be in question for some of these AI companies. But we can't know that fact yet. It's kind of the easiest way to put it. How much should we care or be thinking about what impact this has for Anthropic for the other super IPOs that we have in the pipe? Well, I think it has impact across both existing publicly traded companies where companies like Google have recognized that this may be one of the best opportunities to equitize some of the debt obligations that they've entered into. That intern places pressure on additional supply from existing publicly traded companies, Meta is now exploring an offer, for example. It's hard to imagine that these can't get done, but all of it plays through an increase in supply. And that really was the focus of the boost that I wrote this weekend, which is for the first time we're actually seeing a meaningful shift in supply that is quite different than what we've seen up to this point. By and large companies have been repurchasing shares and shrinking the quantity of equity that's available even as the demand from 401ks and pass eventities have shifted outward to the aggregate demand, driving prices and valuations much higher. It's natural to conclude that if we see anywhere close to the quantity of supply that is proposed with the Anthropic IPO, the Google issue, the Meta issue, how far behind can an Amazon issue or even Microsoft issue potentially be behind this? We simply don't know, again. And so this is one of those points where we've come to a fork in a road and so the answer is always take it. Always take it. The road less traveled is just the one. We're not sure which one that actually is. And that's the problem, right? We can look for signs of it. It does feel like large cap IPOs of this magnitude is a road less traveled. But again, this is just one of these situations that it is a predictable outcome. It is the anticipated source of supply, Marco Samin. I highlighted his work who clears the market when passive trades has highlighted that the vast majority of supply for passive demand is coming from companies themselves. And now we're just seeing it on a scale we haven't yet seen. - Michael Green, the Robert Frost of Finance. Join us around the podcast today in poetry. I want to talk about the white paper that basically supported your prior conclusions on passive. There's a chart here. I'm going to explain this chart to you and we'll hopefully get this up on the screen. It was the big cap weight concentration premium from 95 to 2025. Can you explain just what's going on in that chart what the cap weight concentration premium even is? - Yeah, so this is actually some of the more recent stuff that I've done. And ironically, it's been facilitated by the ability to use LLMs to rapidly build models and test some of this stuff. The really critical insight of passive is to think of it like a fire hose. It's concentrating a flow of capital into a crowded theater. The behavior of the participants in that crowded theater kind of what you need to be thinking about. And what we've done is articulate using market impact work that was created by J.P. Bushot all the way back in 2014 was the subject of a very interesting paper that he wrote in, I believe it was 2024, originally called Ponzi funds, it was highlighting the impact of flows of capital that becomes a self-indoginist momentum when the capital flows are large enough that the funds themselves become a significant source of the liquidity. He focused on the arc funds example and how that created its own endogenous liquidity by creating capital that then had to buy the securities that underpin to her holdings and driving those securities higher. The same phenomenon placed through in the S&P once you aggregate together all of the S&P funds, they've now become a very large fraction of the total holdings. Nasdaq 100 is obviously an extension of that slightly more concentrated and more tech-oriented. And as we've discovered, more prone to change itself to facilitate new IPO listings. But what we're really trying to do with that paper is identify how we should expect passive to impact markets. And so if you think of that fire hose, It's basically sending the largest flow of-- of liquidity towards the largest stocks. It has the largest impact on the largest stocks that have the highest volatility perverse shows framework. We see the evidence of that in this chart where historically the large cap high-vol stocks have been significant under performers. This is part of the work that Cliff Asnes and AQR correctly identified in the betting against beta framework basically individuals overpay for access to highly volatile securities because it's an embedded form of leverage that they typically can't obtain in their accounts. That means those securities have a tendency to become overvalued and therefore they're forward expected return on a discounted cash flow framework is expected to be lower in a passive world that's reversed because they've become more richly valued because they owe more volatile. The impact of those flows that are allocated simply on the basis of market capitalization has a larger impact on those securities and if that flow becomes the underlying dominant flow as it has we would expect those securities to suddenly start outperforming the remaining courses of the index and that's exactly what that chart is illustrating. I want to talk about the chart that was capwy premium for largest quintile US stocks, rolling 10-year monthly. First off, why the 10-year period and then clearly we have a pretty extreme reading going on right now. What's happening? The objective of using a rolling 10-year is honestly somewhat arbitrary. We're simply trying to capture a long enough period that it typically will capture a business cycle. That's the objective of using something like a rolling 10-year framework. If you were to use a rolling five or a rolling 12-year framework, it would result in very similar outcomes. We actually tested for that to see if the choice of period really mattered and it ultimately didn't. What about what's been going on with these biggest companies and how we talk about them? We say we can explain what's going on because of margins, because of network effects, AI exposure. Do we pay attention to any of these arguments? Or do we just say it's mostly the passive flows? I've shown elsewhere that numbers are now accumulating to impact the largest US stocks by about 18% of the year. That's more than many of them have actually been appreciating for the past several years and suggests actually that it is really passive driving this phenomenon. I'd also note that the vast majority of these companies that now claim AI provenance really didn't have any AI components to them a couple of years ago. So our memory stocks all about AI. No, they're really about memory and memory is used by the large scale LLMs. But interestingly enough, we are seeing the forces of capitalism at work. The forces of invasion is the price of memory has begun to rise. We're seeing more and more LLMs that are capable of operating with less memory. They're becoming more efficient than they're used to memory. This is totally predictable. It's exactly like the wave division multiplexing and the amplification that occurred alongside the fiber optic build out that allowed us to radically increase the quantity of capacity that we're able to obtain in terms of data transmission relative to the same amount of catbecs. I think this is going to be no different. Is it AI? I think that's a convenient narrative. I do think that the earnings growth that people are pointing to is becoming increasingly circular when NVIDIA uses its stock to create an investment in core weave. Core weave then has to use that investment to purchase NVIDIA GPUs. That creates a circular financing component to it that is unfortunately identical to what we saw with the vendor financing that existed in the.com and the fiber optic build out and candidly has been a feature of every capital spending bubble and basically recorded history. My analysis honest suggests that NVIDIA's profits are radically overstated on this. Over 50% of Google's profits in this last quarter alone were tied directly to the price appreciation of its investment and thrompe. People are putting a multiple of those gains. Maybe they will continue forever because it certainly does feel like this is never going to stop. But to put a multiple on one-time gains and call that quote unquote earnings is a very surprising outcome to me for most market participants. Yeah, at that point, I was listening to another podcast just earlier today. I think this statistic and I might be kind of off, but to your point, Mike, that in the last 12 months, like 12% of the S&P's earnings growth was a result of markups on those investments in those companies from the larger mega-cat tech stocks. Which was pretty crazy. Was it 12% of earnings growth or 12% of earnings? Well, actually, it's 12% of earnings. Yeah, exactly. Right. Which is just kind of nothing. We could basically all the earnings growth. Many other people have pointed this out. The X, Mag, 7, or X, AI earnings growth in the S&P is basically non-existent. Do you think there are any signs or are there any, I guess, indications that the passive flows, and I'm thinking like the, as, you know, more and more baby boomers sort of enter retirements, are drawing off their 401k and their retirement accounts. And that's where kind of most of the wealth is. Is there any evidence going forward that you can point to that would we'd see sort of a shrinking of the past and flows or sort of a reversal of what we've seen in the last 15 years or so? We actually have seen some shrinkage of the 401k flow. But we've actually seen the exact opposite in terms of the aggregate flows. So as performance for the S&P has gotten better and better, again, in my analysis, supported by the growth of passive, as well as the demographic characteristics of boomers now having to effectively forward financial assets rather than try to replace income as I've discussed in several recent pieces. That has increasingly morphed into what feels like a discretionary by every dip type phenomenon. And we absolutely saw that play through in the April to give or take end of may flows in which flows into ETFs actually exploded to the highest levels we've ever seen. Do I think that was tied to retirement flows? Not really. So the evidence that we have is there's some weakening on the 401k component. But as you would expect, as you get towards the end of any bubble you're seeing an increase in discretionary participation is more and more people basically just say, well, this only goes off. It's a licensed to print money. And I think that was a bigger impact combined with the systematic flows, the reversal of short positions, the CTA trend following strategies which continue to attract additional capital, as well as things like vol control funds stepping back in. For the very simple reason that we didn't actually realize that much that much volatility. It's one of the things we actually talked about a firm that I'm an advisor on tier one, as we looked at the market in April with the extraordinary skew and the bid for protection that was in place. It was behaving like market that had already crashed. And we're starting to see signs of that again that people are starting to bid up fixed strike volatility. The VIX is in the mid 20s. I'm implied correlation is in the absolute toilet is more concerned is on single stock components of it. These are all home hallmarks of a market that is uncertain about what happens next. It is somewhat desperately bidding for protection. If it plays out as it did in April, although I think this could be the increase in supply could be more material this time. If it plays out like it didn't April, the odds are that we get another draw down and then we get pushed to even new, even higher highs in the absence of anything material of developing. The flip side of that is as we look at the economy, the increase in gasoline prices in particular is hitting the lower end of that K consumer. And we're seeing sentiment to tier A rapidly. We're seeing savings being drawn down. And my personal favorite was a piece that came out from the New York Fed that was highlighting the link between inflation or loss of purchasing power and consumer sentiment. It came to the absolutely shocking conclusion that households that had found new jobs that paid more money and allowed them to maintain their purchasing power without additional effort weren't reporting the same degree of depressed consumer sentiment as households that had to obtain additional working hours or get a second job. Like this was to me just an astonishing statement that came out of the New York Fed that they were surprised that people who were forced to work harder and work more jobs in order to maintain their purchasing power are more depressed than people who have found new jobs that allow them to do the same with less effort. It's shocking the insights that we develop at the highest levels of economic from the research. I was in an Uber and the Uber driver with a laid off chewy factory like warehouse worker. Okay. And it's a number one. They're not going in the, you know, the employment data. They were already working two jobs to support a household in the area. And then at the same time right before we get on them, my phone's buzzing them getting the campaign ads for, you know, November. Can we count on your vote? Yep. Had its policies, this, this local rap running to reduce utility, grocery, and fully fund public schools can we count on your support? I don't think it's just a fed. I think there's a lot of confusion on if any policy can have any impact here. Well, I think this is one of these weird things where we've gotten to the point that the theoretical or academic work is so deeply separated from the experience that most people have that is just leading to, you know, that I think there's reasons. I've said many times the gas lighting has become the phrase of this decade. You know, people are looking at the headline reports and they're hearing everything's great. They're seeing markets move higher and they're looking at their own condition and life and saying, "And this is not happening for me." And that is leading to resentment and frustration and it is dire for change in leadership because the most recent change didn't seem to work. And so we're experiencing all sorts of uncertainty about who our leadership is going to be, what their priorities are going to be, how economically rational those priorities are going to be, how truth, you know, intrusive policies will become, we genuinely don't know. This is the sort of flailing that occurs when policymakers are increasingly disassociated from the reality of what people are individually experiencing. It's a modern version of "Let the Meat Cake." Yeah, so it's like, unless you've been in the stock market and unless you've been in the largest stocks in the stock market, do you feel good? Because everybody else just feels like left behind, I guess. Yeah, I think that's right. And I would also highlight that it creates all sorts of risks in terms of policy response. If you face a Federal Reserve that is actually forced to buy interest rates, which I don't expect to be clear, but there is clear pressure to respond to this wave of inflation and what, by inflation, we largely mean increasing gasoline prices at this point. We don't know what is going to happen. Again, I just have to emphasize, we're at a bit of a turning point, you know, fork in the road and we don't know which direction we're going to go, but we're definitely going to go one of the two. When the information that's coming through in the system is telling us the wrong information because that individual, as you pointed out, is quote unquote, "not unemployed." They are working and therefore they should be quote unquote, "happy" because, you know, when you're employed, you're supposed to be happy. My hunch is that that's not how people are feeling. What would you be paying attention to? I'm just thinking about, so to your point earlier, you have SpaceX coming public, open AI's file for an IPO and theropic has, you know, Google just, I think, completed a major equity raise here, Berkshire Hathaway, putting $10 billion, I think of that. What of the things that you're paying attention to? What would you be looking at that would give you some pause that the market has, it's kind of exhausted here and there's really too much supply and the market has started to question or investors have started to question the business prospects of some of these, you know, AI-related companies, I guess. Is there something like, I'm thinking back to, and I don't know, maybe I'm wrong about this, but I think back to like 2000 and it was like, it was a barren's piece that kind of looked at how much runway these non-profitable companies had. I think it was like 18 months of cash or whatever it was and they listed a whole bunch and that to me was like the crack that really put us into that sort of market decline in bear market, is there something specific, Mike, or a few things that you would really be looking at and paying attention to that would really give you pause and say, okay, I think the market's reacting negatively to all this stuff. Well, I mean, the definition of reacting negatively by definition is of course prices go down. So that is something that we would be watching. We are watching the flows very carefully. I do emphasize where we are positioned right now is very different than where we were in April. And large investors are fully allocated in their portfolio, systematic strategies like CTAs or basically fully allocated to equities, wall control funds because realized volatility has run well below implied volatility are nearly fully invested as well. And so the risk of a retrenchment, either a movement of foreign capital away or as we saw in early 2025 or simply a change in narrative that causes some of that discretionary and systematic capital to flow out because price movement deteriorates is really going to be the key test. On the flip side of that equation, the change in narrative or the awareness of this, I actually would argue almost everybody is aware of it at this point. Like certainly if you go on on Twitter, there's no shortage of people running commentary that says here's how ridiculous the assumptions around AI are. And the most part, the reaction to that is scoreboard, bro. And that I think will of course will look back on it if it actually plays out and we'll say, well, these signs were all there and nobody was paying attention. That's the definition of a bubble. On the flip side of the equation, people have been saying this for an extended period of time. People have been highlighting the over valuation of the markets. There's actually a fascinating new piece that came out that reexamines the Cape ratio in the context of individual securities. So instead of looking at the aggregate, adding up all the earnings for the S&P 500, which is subject to its own reporting characteristics and applying a Cape ratio to that, which has the problem of the ship athucius. Is it the same combination of stocks that existed 10 years ago? Brand new paper that came out just looks at this and says, absolutely, it's an improvement. We look at every stock versus its own history. We see improved ability to forecast future returns. The downside to that analysis is it suggests we're even more overvalued than the Cape ratio of suggested. And it's, you know, congratulations. You've got a mechanism that tells you what the Cape ratio was already telling you, which is that we're heavily, heavily overvalued. In terms of where this ultimately plays out and how it shakes out, you know, the reason credit markets are the markets that most people follow is because ultimately they have their own catalyst internally. And that's the real question I think that's going to play through firms and watching very closely or entities like CoreWeave. Hmm, excuse me. Where if you look at what's actually played out there with Magnetar, I would argue this is one of the most interesting and possibly fascinating uses of capital structure control I've ever seen. For those who don't know who Magnetar is, they're a Chicago based hedge fund. They were actually the single biggest winner from the big short trade. They were the ones that figured out they could match cash flows by going along the equity tranche of the CLO, the CDOs, which means the riskiest tranche of it that pays a relatively high coupon and going longer a significant higher quantity of noctional protection at lower cost. And so they basically built a lever exposure to the trade that was self financing allowed them to stay in that position. I don't argue they've done the exact same thing here with CoreWeave, right? They invested in CoreWeave initially through a convertible security, a senior convertible secured security that paid them a very high interest rate, gave them protection in the form of initial claims. They then were able to convert that into equity and ride the slope of whole up in terms of the new innovation wave. And now they're extraordinarily well positioned with what appears to me at least to be the full-crowned securities so that they've sold off, give or take 85% of their equity at this stage. And they now hold a debt position that if CoreWeave actually does enter into distress, they could end up owning the entire equity tranche. It's a brilliant form of engineering that basically falls into the loan to own category with a very happy outcome in between the turd magnetor into by far the biggest hedge funds success in this cycle with possible exception of this kid Leo Ashburner or whatever his name is. I'm watching what they're doing very, very closely. I think those guys are probably the smartest players at the table. What do you think of just the law? Let's talk about the short term and the long term impact of AI. I know you think about this a lot. I mean, are you in the camp that this is going to be a major productivity booster and sort of this, I don't know, revolutionary, gain-changing technology for the economy or just how are you thinking about the technology in general, both short and long term? Well, I think this is the interesting thing about it. So first thing is an extraordinary general purpose technology. For the consumer basically offers them augmented IQ points in handling the uncertainties of life and answering the questions that they're exposed to. It's the type of technology that is near biological in its framework, not dissimilar to the corrective lenses that Nat is wearing, for example, right? They allow Matt to participate at relatively low cost in tons of activities that he'd be unable to if glasses didn't exist. Like part of them, you would pay a significant premium for them, but because it is available to relatively cheaply, even the stylish frames that you wear, the reality is this issue would never choose to go without it. And I think that's what consumers are looking for. Sumers are by and large-synon. Like, "Bully cow, I've got a tool that can help me plan my vacation. I've got a tool that can help me plan the financing of my child's education. I've got a tool that can help me evaluate the trade-offs between owning a home and renting a home. What my investment strategy should be, how I should interact with my spouse, my boss, et cetera." As I pointed out in my latest piece, this is much more akin to the endlessly popular advice section of the newspaper where people would send letters to Dear Abby, basically trying to establish in modern correlates, am I the asshole in the interaction? And people have correctly figured out that this is an extraordinary resource, but the data is pretty straightforward. The people are using it to the one for those personal choices, those personal activities relative to the actual business activities. So it's revealing a latent demand for vice columns that are personalized and don't require you to put your thoughts in front of your local community and advice letter to the local Dear Abby and run the risk that you're in trouble for it or whatever. You know, I'm not surprised that the market for that is incredibly huge. On the actual productivity side of the equation, though, I think we've actually completely misunderstood what the demand is telling us that it's largely about advice that people by and large would like to have, but not necessarily willing to be a huge premium for. And the ability of businesses to reorganize themselves in a meaningful way to take advantage of the automation of tasks, not the replacement of human beings. I emphasize in my last piece that there's a huge difference between replacing humans who ultimately can't be replaced in the process because they are the end source of demand. They don't build tools and food and all sorts of stuff simply for, you know, the capital owners. We also are doing it for the workers who are expressing their point of view through their sacrifice of leisure and the form of time that they spend working and also in how they choose to spend that money. There will be incredible productivity once we get through the process of redesigning our systems around AI much like there was incredible productivity that emerged once we stopped treating factories as basically places to gather together a bunch of fairly skilled individuals to, you know, so suits together or to do the exact same thing that they were doing before. And instead we created the assembly line and we actually suddenly said, all right, we want people to behave very differently given this new technology. My hunch is that we will see the productivity gains once that process starts. And again, it's one of the reasons why I draw attention to things like the magnet art trade where they were able to participate in the initial euphoria. Now they're in senior debt securities so that they're well positioned as a control participant during the period of, you know, distress and disillusionment that is likely to follow. And ultimately, then we'll start to see, you know, once it's being offered at much lower cost because the capital structures have changed, debt has been defaulted upon. Data centers are trading at pennies on the dollar, much like commercial real estate is trading today at pennies on the dollar from 2016. At that point, we can create all new business models around it, but we're just not there yet. Do you think we get there all at once? Or do you think there's a way to get there really slowly? I think there's a combination of factors that play through that. And as the models advance themselves, my hunch is that ultimately they will play a role in that process. And we're starting to see signs of that, right? I wouldn't use AI for rethinking some of my business models or at minimum building simulations of how my business would be changed. Again, that's where I think my use of AI is probably very different than most people's use of AI. Like almost all of my work is focused on building agentic models that allow me to test things and to play around with how would I build an index or how could I maximize the impact of various effects. My hunch is that we're going to see businesses redesign themselves and say, what would happen if we did this? Let's run a simulation. Let's play in this out. And the other hunch that I have a very strong leading towards is that there's a very small window of opportunity before the general public data effectively becomes truly commoditized. I think we're already seeing an element of that. We all have the underlying data sets and this is particularly true for financial markets. Where it's really interesting where I'm seeing the most progress made is people who have domain specific knowledge. They know their industry really well and they're able to look at the business processes and say, why are we doing it that way? Why don't we just do it in a completely different way? What is the binding constraint that exists in a world in which it's not how many financial analysts I can fire? Instead, it's how many customers get quotes out too quickly. How does that change my business model? I think we're just starting that. But I do think it will ultimately be quite profound. The last point that I would make is many technologies. I think we have now crossed the threshold at which people are beginning to see the possibilities emerge. That's part of the euphoria. But the simple reality is the execution is always quite a bit more difficult. It seems like there's no company from the Fortune 500 or draw whatever you line of big company. No company that's not a big slow moving ship when it comes to the adoption of this. No company that's more than a few years old can have an easy time or easy go at just rewriting their entire playbook. That has to take time, right? That's my expectation. Then the question becomes, how large is the mode that exists around that business that gives them the luxury of taking time? Ironically, if you run this through an economic modeling, in some ways, we should be seeing some of the behavior that we're seeing. Again, this is one of the challenges with narratives. If the only seven companies, they really control the tools and control the ability to move quickly or anthropic and open AI and Google, etc. Then I can understand the business case of the articulation as SpaceX pointed out that their team is the universe of life and space, basically. Not a bad target market, shall we say, almost as big as Bitcoins. The simple reality is it takes a long time for that to be realized. It's highly unlikely that all of the exceptionally wealthy individuals working for SpaceX are going to do all of that at SpaceX instead of do what has happened in every round of IPOs, liquefy some of their wealth, and then go do it with the own more of the unproduct. Competition will emerge, and ultimately, if you play this through, it should be resulting in lower valuations and lower expectations of terminal values in most situations. That may not be the case. Again, it boils down to what's the policy reaction. You're already seeing many of the AI companies soft-sell the idea that we're going to need instead of universal basic income, universal basic access to AI, and that the government should, quote, unquote, "soft bail them out" in this process. Two knows, right? I don't get to make those policy choice decisions, and I'm not entirely sure I trust those who are in those roles right now. That's not a mic green for President Pitch. No, absolutely not. I'm thinking about it from the context of this round of the Elon's and the PayPal Mafias, we forget that the success of the big company offering and whatever else begets the next generation of these people. Somewhere in SpaceX is the person who might very well be the person who gets the payout and founds the company that knocks his valuation down a peg or 99 turns on revenue. 100%. Then that would be more synonymous with history than anything else. The dynamics of passive where that fire hose is directed at the largest companies makes the cost of capital very cheap for an Apple Microsoft, Meta, Google, etc. It's very hard for that private individual to compete unless, of course, the business opportunity is enormous. Then nobody's really thinking about it. It's my cost of financing, 5% or 10% or 15% or 35%. They're really thinking about that, Tim, that is again, the universe of addressable space and time. Mike, before we let you go, I think we wanted just to talk a little bit about the overall economy. I mean, kind of sprinkled in some of your thoughts here, but just generally speaking, I mean, your thoughts on growth, inflation, I think you mentioned, you don't expect the fed to raise rates if I heard you correctly. But where do you think we are here economically in the cycle on what's your kind of view as you look out? Well, I think today's inflation report, I mean, just to put a time stamp on it, it's June 10th, we just got inflation, core-inflation actually came in below expectations at a level that is somewhat synonymous with the feds target. Headline CPI is obviously inflated by gasoline prices, although again, in one of these weird twists of gas-illiness down 40 cents, basically since the inflation print would have registered. So I think that the underlying characteristic of we're conducting a war, we've had unbelievable shutdown in energy flows around the world, and it's driven gasoline prices to very high levels, and we've gotten 4% inflation. forget that we had six percent inflation in 2008 when something similar happened. You know, suggests that the underlying characteristics of the economy are one that is under war stress than people would suggest. We actually are seeing this in the case-shaped economy where aggregate savings have fallen to the lowest levels in history, less than half of traditional levels we forget that that is an aggregated number of means that half the economy is doing really well. And the other half is, as the New York Fed found out, having to work a lot more hours and a lot harder to basically tread water. Those individuals that are in the bottom half, they're being forced to tread water, cutting back on their purchases of services, they're reducing their streaming services, they're reducing their utilization of Uber, they're reducing their utilization of all sorts of things that have become standard features of their lives. And that makes them understandably unhappy. Nobody wants to get rid of all the wonderful stuff that's available on Netflix, or Amazon Prime, or whatever. But if it's a choice between feeding your kid and feeding your entertainment, most of us would choose to feed our kid. And that's the unfortunate reality. I think that more and more households are facing is they simply kid to for it, the basket of goods and services that allows them to live independently as successful functioning adults in today's society. And if they can't afford to do that, they ultimately will make changes. They will move back in with their parents. They will reduce demand for housing, it will reduce the quantity of food that is consumed because waste falls. It will reduce the quantity of meals that are consumed in restaurants because when there are four or five people in a household, it becomes far more economic to cook at home than it does if you have one person in the household. These are all factors that will ultimately play through the longer this goes on. And I think unfortunately we're getting to the point where many of those choices are going to have to be made sometime in the next three to six months. Mike you've got a book coming out. Tell us what the status is and where can we buy it? Oh boy. Well, the status is unfortunately that I submitted a final draft, a final draft, always turns into let's edit these components. We're still targeting release in October. I'm going to be honest with the audiences, probably going to slip. And it is a direct buy product of the fact that I can't seem to find the ability to sit in my own seat in front of my computer and my multiple screens to get the work done that needs to get done. So we're getting very close. It is now listed on Amazon. It does have the October date for its release. It's called the greatest story ever sold. It is about the role of retirement and passive investing in changing market structure. And I'm hopeful that I'll have it out as soon as I possibly can. But the target date is October and I'm just being candid that that's probably going to slip because among other things, I'm sitting in Hawaii doing advisory work for the US military right now. So it's, you know, there's no shortage of things that I'm working on. Glad there's no shortage of things you're working on. I'm glad that hopefully the book can come out. We can turn it over to those new politicians or texting us now for their support. That would be nice. We just want to hear about Mike's know the way to work here. But maybe that's top secret. But maybe for next time. Yeah, unfortunately, you guess right. No, so we have to stick. We'll have to stick to passive flows in the economy and the markets. Thank you very much, Mike. We really appreciate it. Thank you very much. Take care. Thank you for tuning into this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the excess returns network at excessforturnspod.com. If you have any feedback or questions, you can contact us at [email protected] No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.