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So what you do you know if you're a nineteen year old kid, Yeah, I mean, you know, it was a difficult child. Jason Trenner with this right now, and he summed up up in a book recently. We're Strtigua's working with Edheimen years ago, and this is a book from like, you know, ages back my side.
Of the Street.
Why Wolves, flashboys, quants and Masters of the Universe don't represent the.
Real Wall Street? What is the real Wall Street?
Well, you know the point of that book is that you have about six million people in the financial services in this country, and I truly believe financial services serve a social purpose, an important social purpose to raise capital, breed life into dreams, and raise capital for research and development, all the rest of it. Unfortunately, the headlines tend to get hijacked by so the bad behavior of Wall Street. And I just wanted to give a very human, you know,
approach to the way I grew up. And I grew up in any sort of you know, Wall Street family. But I love the financial markets and I think they're important.
You have led the way on this of almost it's.
Almost like Robert Schuller, you know, leading on a social mandate of it.
Once again, Paul's lead on this.
Frankly, we have the joy of private credit, private equity, and some would say the greed to make another two hundred beeps on yield. Did you perceive it's strateiguous that private credit is a challenge to our future?
I do, I mean, I you know, and this is just based on experience. I think the problem with the private assets, of course, is the opacity, which also tends to be the attraction for a lot of pensions, endowments and foundations because it seems less voliible, although it's not.
But based on experience, I would say that there's probably going to be more problems, and that's only because Wall Street is great at finding ways, very creative ways to extend credit to marginal, marginal players, and it usually works that worse than people thought.
Jason, what's the conversation you're having with your clients these days? We've got geopolitical risk front and center seemingly for a long time now now with what's going on in Iran? How do you put that in context of kind of just the conversation you have you with clients.
Yeah, no, it's good quite The three big things we're talking about with clients obviously the war, private credit, and the sustainability of the infrastructure spend on artificial intelligence, and the way the way we're looking at it is, as we discussed, we think private credit is going to stick around for a while. I don't think it's we don't think it's systemic. We think the war is a big deal.
The long the longer it lasts long. You know, people forget we've had a fifty percent increase in the price of oil and three it's only two weeks. You know, this last another couple of weeks. It's going to be real problems. Ironically, the infrastructure spend, it's really hard to fade that. I just have to say, we look at the cash flow, as we look at the fact that these companies are issuing debt ye and we look at Jensen Wang's comments last night. I mean, it's pretty stunning.
And he's been you know, he hasn't been. I'll try to clean this up. He hasn't been. Uh, he's been lying to us, let's put it that way.
And promotional.
Some people will say, of course, maybe, but a boy, he's been right there.
Yeah, he's been you know, it's it's again hard to fade what he said because he's largely been correct.
So so I mean, I guess the you know, before Iran erupted, I guess the AI trade was really the driver for these markets really for the last two or three years on the way up. I mean, you probably spend enough on AI and now it's coming to the point where we want to see use cases, we want to see returns on investment, and that's where we've seen it spin to another direction. If you're a software company, you've got a lot of explaining to do.
Yeah. Absolutely, And we actually in our piece this morning, we have a chart from the Census Department that's also based on the Anthropic Study, where you look at the companies that and industries that are using AI. It's actually quite small. I mean, if you according to the Census here, it's only five percent of companies on a on a labor weighted basis, it's maybe twenty percent. So there's a
long way to go. Although I will say to someone runs a business, you know, it's it's expensive and it's not always easier or obvious what you need to do to incorporate into your business.
An extended discussion with Jason Trent. It's strtiguous research with us to help me here with the meat and potatoes of retail, which is growth. Stocks always work. I fear missing out step in by seven, ten, twelve, fifteen stocks. You know, years ago you'd put this up front and linked into Ed Hyman's economic call. Now you do it with your great stream statigue as you put up with Dan Clifton, which.
Itself is a challenge.
Recapitulate the value of growth right now?
Yeah, I mean the funny thing is tom uh you know, I started maybe thirty five years ago. Graham and Dodd was like a it was important, you know. Now it's a book. Now it's like a doorstop, you know, valuation basically since the TAF it's tragic.
I legally have Graham and Dodd folks on my desk here.
Alexis told me to clean my desk, but underneath it there's a Grammy.
Yeah, no discussed.
It's kind of sad because well, if it's kind of saying if you've been trained, and this is because you almost throw out a lot of your training and you have to you have to really focus on the liquidity in the markets, and you have to focus on obviously growth, top line growth as opposed to necessarily bottom line growth.
But I do think Tom that the going into this year, we were very much of the view that you wanted to be an equal weight S and P, you wanted to be more in value sectors, and you wanted to be more in international mainly because they were more value orient and growth oriented. What you see, though, when you have this locations is it's really hard to get away from the US because it's the only country in the world that really has this kind of innovation. Sadly, but it's the way it is.
How about alternative investment alts as the kids out to call them, I mean the sixty to forty portfolio of equities and fixed income. It really increasingly, particularly with the biggest endowments and pension funds in increasingly increasing their allocations to alternatives. How do you think about that, because a lot of folks are starting to question that now.
Yeah, I think they should question it. And as we were talking about before, people are conflating the idea of risk and volatility. The thing is, the observe volatility of private assets is very low, and that's because they don't transact very often, but if you actually had to sell it, it would the volatility you're do very high. And so again the opacity is that is the feature in many ways.
But I think what a lot of endowments and foundations are finding pensions too, is that liquidity has a significant price. When the markets get in trouble and if you have trouble meeting the actual real assumptions, or you have trouble meeting the spending requirements that you have, the liquidity has a significant price. So liquidity's always there until you need it, and then it's then it's an issue.
What's a trendard exuberance meter look like? Right now? Are we in the silly season? I mean, Paul helped me here.
How many square feed I mean Hampton's is up like twenty five percent or something.
You know, there are we in the silly season?
I think for wealthy people we're very much in the silly season. I think it's gotten kind of out of control and there's a lot of signs of conspicuous consumption. I don't want to make normal the judgments, but it's not kind of my thing. But by the same token, I think for the average person it's nowhere near the
silly season. And I do think mercifully a lot of individual investors are investing in the market, which I think is there's more of a conception now that's an important thing for even middle class people, which wasn't the case. But let's say for my parents, young are absolutely I.
Think the younger people have learned from us and they're more serious about it.
Yeah, which is great, and you know there's there will be some bruises along the way, of course, but but it's much better than burying it in the savings account.
Most people when they get sick, they hyatt. You wrote it up with Charlie Gasberno on the New York Post. How do you check in the Sloan?
Well, it's a that's a long story, but the bottom line, I wasn't feeling well. I was about to, as you know, it's about to enter the Treasure Department as Assistant Secretary of the Treasury for Financial Markets, and I wanted to get checked out before I moved down to Washington. And they discovered multiple dilmam and so the you know, there's not great news in that. The good news and multiple dilumas it's not usually not fatal. It's cancer, right, It's
just it's just chronic and it's treatable. But last nine months was was was something else.
I'll just say.
I'll just say that unlike anything I've ever experienced.
But right, you know, he get through it. Speak to the people that don't.
They ignore, they ignore the pain in the elbow, you know, colon cancer, more serious cancer. Frankly, what's the trigger where you say, I've got to go to Sloan, I gotta go to Walcorn.
Now, you know, Tom, I don't know, because before this happened, I was going in about one thousand miles an hour, okay, I was traveling seventy eighty days a year.
I would go to the doctor maybe.
Once a year, and I would ignore a lot of things and familiar, you know, so you would just go kind of just in time, and that type of thing. I really would stress to people that it sounds corny, but you've got to focus on your health because you can't do all the other things, you know, being a father, being a husband. But you know, it sounds very corny, but when you're in a situation where you're dealing with the treatments, you really are incapable of doing all the
things that you love to do. So it's it's it's important that you catch this stuff early.
Are you back at strtigas there's Dan Clifton running the whole thing.
Kidding me now, Dan is of course one of the great great, oh of the great analysts. But I'm back every day, every morning, and so that's the best medicine FORMUTA fantastic.
So what's what are you telling your clients?
Uh?
These days?
Just about investing going forward here because it seems like there's more options than ever there's that's blown up in our lifetime to become such a huge asset class. What are you telling your clients here? Is it the diversification story? Is it the courage to be in the market? Is all of above?
Yeah? So, I mean our clients are institutional investors, so sometimes they must be fully invested. Other times they don't have a lot of leeway in terms of let's say cash. But I'm very much of the view that you have to and I've been saying this for a while, but I think people have to matter as their expectations about returns moving forward because you're starting at let's a used round numbers twenty two times earnings and about what a little less than twenty five times earnings for the ten
year treasure yield. So there's not a lot of room. You have to really find idiosyncratic bets, or you have to find things to really get big returns. Doesn't mean you shouldn't be invested, but it also means that, as we were talking about before, you can't rely on outsized returns from the public markets to sustain you.
One final question, a sea change on Fifth Avenue. Archbishop Ronald Hicks. Boy, does he have big shoes for you? Bet discuss that shift.
Yeah, well it's I'm a big fan. I'm a big fan of Cardinal Dolan and big you know, big fan of Cardinal Hicks. Cardinal Dolan is a character. I was seated next to him at the Museum of American Finances gala and he's eating a chocolate bar and he looked at me and he said, it's good for the kidneys. So this guy, you know, this guy's ready to give you a hard time. He's very funny and I'm so thrilled that he'll be sticking around in the city as
chaplain for the new police department. I think Hicks obviously will benefit from the fact, although some people question that he'll benefit from the fact that Cardinal Dolan is around. In any event, we're blessed to have those two gentlemen leading the flock.
Jason Trynick, thank you so much.