Investing with UBS CIO Mark Haefele
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welcome to inside economics i'm mark zandy the chief economist of moody's analytics and i'm joined by my two trusty co-hosts marissa d natale chris dorides hi guys hey mark mark welcome to spring yeah i made my way back up from florida did the 16-hour drive um you know the dogs

The two dogs, my wife. Some Wawa coffee. You know, Wawa, I have to tell you, Wawa is becoming more common along the way. I even saw, I think, a Wawa in North Carolina this time. So pretty soon, isn't that good? Yeah, that's great. I don't see South Carolina. I don't know about maybe Georgia. I'm not sure, but.

But I got a couple cups of Wawa coffee. Yeah, very good. But it's still cold up here in PA. What's that all about? It got cold today, all of a sudden. We had a couple nice days. I'm bummed. I'm bummed. Yeah, it came a little early, I think. I think I've told you before, I could be a truck driver, no problem.

Many times. I told you many times. I was just thinking about my second career, you know? There is a shortage of truck drivers. Is there still? There's a structural shortage. Yeah. Yeah, I knew there was. I thought it had alleviated, but no, still a problem. But the autonomous trucks are coming, so, you know. That's true. I'd be careful about your future career plans here.

That's okay. I could be coded out. No problem. No worries. No worries. I think I'm about ready. Well, anyway, we've got a guest. We've got Mark Heifeli from UBS, the Global Chief Investment Officer, CIO of UBS. Hey, Mark. Good to have you on board. Mark, Chris, Marissa, it is so great to be here. Thank you for having me, and I'm looking forward to a great discussion.

Yeah, and you're hailing from Zurich, right? Yes, I am. Although I wish I was somewhere on I-95 with you, you know, making that drive. I got so many questions. Does the Wawa still smell the same? Can you still get one of those Stucky's pecan rolls along the way? And do you know truck driving is no longer about weed, whites, and wine?

You know a lot about, you're American. You sound American. I am American, yep. And where were you born or raised or, you know, where in America? Sounds like Northeast.

Yeah, you know, I was born in New Jersey. I still say coffee. But I grew up in Massachusetts and then lived in Virginia for some time. And now we are very pleased to have a home in the great state of Texas. Oh, go ahead, Chris. So you're still pro-wawa after your stint in Boston? Yeah.

You know, getting into the whole Wawa, Dunkin Donuts, you know, south of the border along I-95, you know, all the Waffle House. I mean, I'm Swiss, too. So I'm going to I'm going to make that I'm going to say I'm neutral.

Oh, there you go. Nicely done. Love playing that card. I love that card. That's great. And how long have you been in Zurich in Europe? When did you go over?

Yeah, I went over here in 2011 to take this job at UBS, and it's been amazing ever since. Very cool. I'll have to say, going back to south of the border, I don't know that it's open anymore. I think it got nailed by the pandemic. And when you drive by, there isn't a whole lot going on, so I'm not sure. And they've got this new...

Have you heard of Buc-ee's? Have you heard of Buc-ee's before? Anyone heard of Buc-ee's? If you live in Texas, you've heard of Buc-ee's. Oh, is that right? Oh, okay. Yeah. I ran across the first one on the trip down, I think in South Carolina. And my gosh, it's like a, it's a, it's an event. It's a massive place. You know, they've got endless, you know,

barbecue anything you want you can get at bucky's i think pretty much anything you can watch the people but uh anyway it's it's good to have you uh and how did you okay you started off in new jersey you found your way to uh to boston uh how did you find your way to becoming the cio of ubs

Thank you for that question. I think most people will tell you a story. Well, I started picking stocks when I was in the womb and then I went to business school and then this is something I've always wanted to do my whole life. I don't have a teleological career in any way. My background, when younger people ask me for career advice, I'm like,

don't come to me because I wanted, I didn't know what I wanted to do when I was 18. I was jumping out of planes with the U S army airborne. And I quit that when I was 21, I was climbing mountains with, uh,

Scott Fisher, who later became famous for tragically dying on Everest, and I wanted to be a mountain guide, and I quit that. Before I was 30, I was teaching history at Harvard. I quit that. Then I was a partner at a hedge fund, and I quit that before I was 35, and then took some time off, and then I

I got a call from a college friend and said, hey, what do you think about joining me? Take this job in Switzerland. So no, it's a yeah, it's not a good career story. That's an amazing career story. Wow. Boy, just endless change. But now you've been at UBS. It sounds like you said since 2011 is what you said. I think almost 15. Yeah. Yeah.

Great. And well, how does one become like the global CIO? I mean, UBS is a massive investment. I was reading your book. What is it? What's the assets under management? Like, what is it? Three, four trillion? Yeah, I mean, it's something massive. Yes, we get to advise on four plus trillion of assets. Yes.

Right. So how does one become CIO? I mean, did you like these great investment calls? I mean, like, how does that happen? Yeah, so...

I, when I was in my dorm room at Harvard, I met this brilliant guy. And this is, this is part of the book and a little bit why I wrote the book, but met a brilliant friend. We started a hedge fund together and late that later became a part of a tiger cub hedge fund. And then, you know, as the financial crisis approached, I realized that I didn't want to be managing other people's money and luck.

luckily retired before, like right at the end of 2006. And then, you know, I was talking to friends and just talking to people managing my own money during the crisis with my old hedge fund partner. And then this friend of mine, you know, called me up and said, hey, UBS realizes that post the financial crisis, say this is 2010, they really need to bring in

some investment talent on the wealth management side to professionally manage an investment process. You have experience at a large hedge fund. Is that something you'd be interested in? And so I signed up with my friend. He was the CIO and I was the head of investments and tried to set up an investment process

in the wealth management division. And, you know, it was kind of like a little bit like the, you know, like the Jerry Maguire speech, like clean slate, you know, this is how I'm going to fix the industry, right? And we said, you know, in a hedge fund, it tends to be very top down from one portfolio manager. And we wanted to, and it can be an opaque process. We wanted to make it a process where all the advisors and the clients

Could have had more transparency into the investment process, wanted to open it up more and not make it about one person, really make it about a process. And also, you know, it's a Swiss concept.

And it's and process is really important, repeatable results and professionalization and started started doing that, had some early successes with the calls that we made and the process we created. And it's the role has grown from there.

That's so cool. That's so cool. Well, thank you for joining us. And I do want to get back to your book. And just to let everyone know, it's The New Rules of Investing, Essential Wealth Strategies for Turbulent Times. And I'll have to say, the thing that struck me was the people you got to write the endorsements. That was a pretty cool group of

Michael Spence, Gene Chatzky, Alec Weber. I thought that was really very cool from wide-ranging perspectives. This is quite an endorsement, so congratulations on the book. How's it going? I know you published in January. How's it going?

Look, I thank you for that. I was super excited that these people were willing to to give to do that. And I mean, I think it's going well. You know, I how do you define going well? I mean, for me, it was like.

you know, why write a book today, right? Does anybody even read books anymore? You know, but I think it's, for me, it was, hey, I have this view of the world and how things work. And I want to put it out there kind of in long form and see what people think about it. And, you know, am I right? Am I wrong? And let's get a debate going. And from that perspective, I guess if I

I'm on a podcast with, you know, Mark Zandi, somebody who I've been listening to for the past, I don't know, 20 years about markets. I guess it's going pretty well. So that's how I look at it. Oh, that's so kind of you to say. I really appreciate that. That's kind. But let's come back to the book. I want to spend a few minutes on, you know, what's going on right now.

And there's a lot going on. You know, there's a lot of concern, growing concern about the economy. You know, here I'm focused mostly on the U.S., but we can talk, we certainly should talk globally as well, just generally about how things are unfolding here in terms of economic policy and what that means for the global economy. And front and center is the

I think it's fair to call it a trade war, a global trade war. But maybe I'll just kind of kick it back to you. How are you feeling about things in terms of broader economic conditions and policy and trade wars and Doge and all those, the melange of things that are going on here? How is that shaping the way you feel about things? Well, I mean, look, it's something that

I think about all the time in all the different ways. And so I'm really looking for you to lead us through the miasma of questions. But let me start with kind of the way that we look at it from an investment perspective, which is we have scenarios, bull, bear, base case. We've had to increase

the risk of our bear scenario, which is a combination, which is either just flat out recession or stagflation, that's up to 30%, which is still, you know, not alarm bell levels, but definitely increasing. We've taken down or, I mean, we're, we're,

very close or thinking about our S and P target for the end of the year, which was 6,600. And, uh, you know,

based on, based on what's going on, we're starting to think that there's going to be some earnings revisions. Again, I think the, I think we're going to still end the year positively because I think there are some forces that can start to moderate some of, some of what we heard from the Trump administration around policy. Uh, but you know, clearly it's

it's not, you know, the Trump put isn't set where people, I was at Davos, right. And, and this, this idea that the Davos consent and what the Davos consensus, it was that, you know, the Trump put was struck at, you know, where it was on inauguration day and that Europe could, you know, could never move. I think we, we moved off that really rapidly, but, you

you know the the idea that uh the president and his advisors are not looking at markets at all

and are going to drive inflation straight up. I think it's too early to say that as well. So, you know, we would expect that there's a good chance that this is tariff first, negotiate second. And we really got to see what happens with this April 2nd announcement. And I'll just say one more thing, which is I think that

This talk about that it's just going to be tariffs, there's also this idea of looking at the VAT taxes and other things. So I think that announcement may still shock some people when it comes out. Okay. So there's a lot to unpack there. First, kind of where you ended, it sounds like you are uncomfortable with kind of the way the tariff works.

tariffs are going and you're saying that there's a clear possibility that we're going to get much higher tariffs here before before the president presumably will pull it back if things aren't going well in that in the case of Europe

that the tariffs increases could be even more significant because of President Trump's view on the VAT, the VAT tax in Europe as a way of the Europeans kind of protecting their industry. So that sounds a bit on the, I don't want to say dark side, but on the more negative side. Did I get that right?

Well, I think there's a few nuances there. I mean, the first thing is that rentals,

Right now, in my view, much of what's going on is still kind of the anecdotal evidence, right? So, you know, Dallas Fed survey, that's Trump country. But there, you know, you read in the Beige Book that, hey, all this tariff stuff is starting to cause people to have questions and pull back. You're much better at parsing the signal and the noise and the high frequency data.

hard data, I would say. So I'll defer to you on that. But I don't think there we're seeing anything unrecoverable. I don't think we're seeing that in credit spreads. Right. So, you know, I think that there's still room to pull out of this. And then the second nuance is on the

on the tariffs themselves, you know, the, it is curious perhaps to start with Canada and Mexico, your largest trading partners, but even there, I think some of what's been reported about what is, what, you know, what actually falls in,

under the higher tariffs umbrella when you take out the USMCA exclusions and what would qualify for those if people did the paperwork to do that. Again, it's kind of tariff first. Maybe it's not quite as bad as the headline makes it out to be. And then hopefully that will lead to

very soon to say negotiations around the USMCA. And likewise, I'm just saying that with Europe, I think it's going to, it might look worse than people think, but then the idea is to open up the ground for negotiation more quickly. Okay. Okay. Very good. The other thing you mentioned was the Trump put, I think that it's kind of the idea that

you know, if push comes to shove, if the tariffs trade war start doing real damage to the economy and to the stock market, that the president would respond to that, react to that and pull back, pivot and figure out how to move forward without the tariffs and ultimately save the day. So before things really fell apart, that the tariffs would go away and the economy would move forward.

The thing that confused me a little bit about that is it feels like we're in a bit of a hall of mirrors in that the president is looking to the – if that's the scenario, the president is looking to the stock market for signals, and the stock market is thinking that they're going to get bailed out in time by the president. So investors don't want to sell or they buy on the dip. So you will never really see –

the stock market goes south until perhaps it's too late that the president took this too far, only because he's been looking at the stock market. Does that make any sense to you, what I just said?

That it's all a hall of mirrors and competing narratives and that there's no such thing as any numbers anymore. Does that make any sense? Yeah, I mean, yeah, I can understand that point. I think I was trying to, I guess I see the Trump put a little more broadly, which is, you know, it's not just the S&P 500.

500. And Scott Besson has mentioned that they're also looking at, say, the 10-year, not that looking at the 10-year should... Given how much fear has come into... Fear of slowdown has come in, it's not like we're getting massive 10-year relief. But I actually think there are other elements to this, which is the political element. If you start to think about

When given the narrow majority in the the, you know, in the House and the Senate, and if you start thinking about how House members who have to who have to run for the, you know, for the next election, how much how much runway and how much Trump.

unpopularity will they tolerate before they face opposition in the primary in the House. And so this thing could start to turn politically even relatively soon. So I don't think we necessarily have to wait to 26 to start to see some other signals that say, hey, we got to turn this around a little bit.

Again, we don't know. Maybe if the president doesn't feel like he cares at all what happens at the end of his term. One of the things I talked to the team about all along is we can't have a failure of imagination about what the Trump administration is going to do. I

I read somewhere that now Elon Musk is talking about a widening of the Overton window. You know, that's, that, that is scary. And it's, it's scary because more scenarios do not a, a low VIX make. Right. Right. Right. And the final thing you mentioned was the kind of your S and P target at 6,600. I think we're sitting at what 5,700 right now. And I think,

Kind of started the year. I kind of had been using six thousand as the benchmark. That's kind of sort of we've we've been hovering around, give or take over the last few months, even before the election. You're I think you said that you were thinking about downgrading or lowering that that that target. Yeah, I mean, we I mean, it's really we've got to see how much pressure we get on earnings due due to all these forces. Right. So we're reviewing that. OK, great.

Mark, just an open-ended question. If you were in my shoes asking you questions, what should I have asked you about the current conditions that you think is important, or have we covered it? Well, I mean, my question to you would be, it's turtles all the way down, but what's the turtle on top? Is it economic data? Is it...

Social media driving politics driving economics like, you know, is it is it a snake biting its tail, you know, I think at Davos. One of the reasons people were so pessimistic about Europe was because

you could construct the circle that will like low energy prices mean that you, you have the data centers, which can help drive the tech and the, and the social media, which is driving the politics, which drives the economics, which helps set the price for, for energy. And you go around in a circle. So, you know, what, what's the, how do you think about where you start to, to,

construct your models in this world today? Well, I'm pretty straightforward. I mean, I think it's all about economic policy here and to a significant degree, foreign policy that the administration is pursuing. And they all feel problematic to me. You know, the trade war that just

I mean, you get 100 economists in a room asking what they think about broad-based tariffs. 99 of them will tell you it's a bad idea. You find one that thinks it's okay, and I'm not sure who that is, but that's consensus. I think the doge cuts to jobs and government funding, government jobs and funding, I don't know how big a deal that's from a macroeconomic perspective, at least in the near term.

But it's certainly creating a lot of angst and a lot of it feels haphazard. Even if it isn't, it feels haphazard. And I think that's weighing on the kind of the collective psyche. I think the deportations of immigration immigrants, probably also a smaller macroeconomic issue, but could become a bigger problem for certain industries where you have labor supply issues, where immigrants are key to the labor market.

force, construction, manufacturing, being good case in points. And then, of course, we haven't even gotten to really all the things that are going to go on with the tax code and spending with regard to fiscal policy, the reconciliation bill, and then the treasury debt limit. No one's talking about that, but that's coming here pretty quickly. The treasury is going to run out of cash by our calculation by late July, early August. I can go on and on. It just feels like those policies...

create a boatload of uncertainty that's already weighing on the collective psyche. I don't know that it's really affected real economic activity to a significant degree yet, but it will. But then the policies themselves, it just feels like, you know, they're that they're not going to work, you know, from a macroeconomic perspective. So it's just a question of

You know, to your point, you know, when does the president if if I'm right, I could be wrong for sure. You know, but if I'm right, when does the president in the administration, you know, take that in and pivot? And you have to give the president a lot of credit. He's very good at that. He can pivot and he can declare victory and move on. And so at what point does he do that and does he do it?

soon enough to forestall a more serious slowdown in economic growth and potentially a recession. That's kind of how I'm thinking about the near-term economic outlook. Any reaction to that? Yeah. I mean, I think that it makes a lot of sense. And I think

you know, there's, it's like, okay, I got, you know, like the old thing, like you can have two out of three, you know, fast, cheap, good, right. And, and pick two. And then with this one, it's like, all right, maybe you can get four out of five of the things you want in a perfect world. But I, I can't square the last one. Like if you get, it's, you know, if we get all this, but, and we managed to avoid the inflation and, but then you do the, or some of the inflation, but then you do the, the,

the tax cuts, what happens to the, the tenure? Right. And I think, uh, and then when, when, if the best answer is, well, we're going to do something called the Mar-a-Lago accord where we're going to convince everybody to swap their debt. You know, it's like, uh, is that plan a, because that's why that's pretty, that's pretty wild. Right. I mean, uh, so, so, uh,

I think that I absolutely agree that the narrative, people are trying to find the narrative and it's not, we're not at the, we can't make it to the end of this story. Yeah.

Okay, let's move on. Let's move on to the book, New Rules of Investing. Sorry, can I ask you one more question that I've been dying to ask? Yeah, go ahead. Because I'm just going to – like everything you said about – Of course, I'm the host, and I should be asking you questions, but go ahead. Yeah, but come on. All right, but – and maybe you've covered this, and I apologize if you have. But look, the –

I was raised up with the economic textbooks and fully get the argument tariffs and all these things. But how do you think about what has been uncovered as this externality, right? Which is that, yes, free trade. And again, coming out of Davos and globalism, there is this externality, which is...

perhaps rightly or wrongly summarized as the hollowing out of U.S. manufacturing or communities. Is there a way to, you know, it's a little bit the same question. It's like, okay, well, how do we put, you know, how do we put Humpty Dumpty back together again, but not have that part of it out of the picture again? Is there a way to put, you know, the

is there a way to put make all five of those things fit together yeah i i mean i i'm very sympathetic to the view that uh that globalization particularly on entrance of china into the global manufacturing system

did a lot of damage to the U.S. manufacturing base and hollowed out a lot of communities across the country. And I do think that goes a long way to explaining our frayed social fabric and our political fracturing and to some degree, what we're seeing now in terms of policy. So I think that's dead on. I don't think though the solution to that or the response to it should be

or can even potentially be bringing that manufacturing back with with certainly not with tariffs and trade wars that that i just don't get at all i mean i'm a global manufacturer i'm watching what's happening with these tariffs they can be changed with the stroke of a pen they're on again they're off again you know i there's carve outs and exemptions i mean i'm in an industry my competitor could get the tariff protection i may not i don't know

These are executive orders. They're not legislation. They could be done away with, you know, if not under President Trump's term, this next president's term. How in the world can I take that and make that into an investment decision in a factory facility that I, you know, hope to have around for 5, 10, 15, 20 years? I can't. So I don't see this as a viable strategy to addressing that problem. And other countries are going to retaliate, you know, especially if

The president is imposing retaliatory, you know, reciprocal tariffs, which are broad base, very high. We talk about Europe and potentially that is being included in the calculation and the tariffs that will be imposed.

You know, that's gonna cost jobs So I think that the result is it hurts manufacturing but it increases the hollowing out It certainly does not help and just go back to Trump one in the tariffs the tariffs during that period you can see it the US manufacturing base was in recession by the end of 2019 when He was pursuing that trade war. So I don't see that as the solution now I do see

You know, I go back to this kind of what Biden was doing with the CHIPS Act, you know, with the infrastructure legislation, with the Inflation Reduction Act, that

put tremendous tax subsidy out there for private sectors to grab it. And that's why we have chip manufacturing facilities going up everywhere that are now going to start to produce. You can see it with the increase in infrastructure spending. You can see it with, you know, clean, clean energy. You know, you can debate whether the merits of the industrial policy aspects of it. And I think that's fair. But, you know, that feels like a way to reindustrialize and help those communities out, not tariffs and trade wars. But

But but so that's that's I hopefully I answered the question that you posed. That's my sense of it. Yeah. Yeah. Thank you. Yeah. Let's go to your book. And, you know, there's one, I think, overarching theme, and that is.

And I hope I hopefully I get this right. Go where the money is going. Invest where the money is going. And a lot of that's related to governments and where governments are focused in terms of where they're putting their resources. Is that roughly right? Is that the kind of the broad overarching theme that you were trying to get through with the book?

Well, I think that is absolutely one of the core themes. You know, I contain multitudes. The book is supposed to do a couple of different things. But I think that some of the ways I would describe the book is the first part, which definitely focuses on follow the money, which is what you're highlighting, is really kind of –

if I wanted to say the book is kind of three parts, how to make it, how to keep it, and then what to do with it. And really kind of my reaction to being a hedge fund manager, to being the CIO at UBS, and then from learning from all my clients, my billionaire and really smart clients around the world about what they do with their wealth. And yeah, but let's focus on this first part. And I think...

What I noticed being in the business about 30 years, one of the things is I do believe that investing today is very different than when I started, you know, long, short value investing. Yeah.

And a big part of that is government intervention in markets. And the financial crisis 2008 was a massive turning point in government intervention. But what really said, OK, now is the time to write this, was looking at government expenditure as a percentage of GDP after COVID.

And it was at the same levels as during World War II. And, you know, I said, well, would World War II be a time when you might want to rethink your portfolio? And, you know, well, then we're in that road today. And then so I wanted to set me thinking about like, what is what is different? And for a lot of people and, you know, meetings that I have with clients,

They're still, say, very focused on a Warren Buffett kind of value approach. And I just don't think that serves the average person very well to think about investing that way anymore. And so I wanted to get into that in the book.

uh in what would be a good example or examples of kind of the follow the money where where the government is leading the way what would defense stocks would be an example i suppose uh

What would be some good? Absolutely. Well, defense stocks would be one, you know, you look at central bank purchases of gold today, right. You look at, uh, you know, I talk about kind of what are, what are the big problems that, that governments, uh, face today. And I would, I would say the three, you know, I talk about five, but the three biggest really are digitization, uh,

debt demographics and decarbonization. And, you know, you mentioned the IRA and that was, you know, that's when that was announced and, you know, you could have waited till after the announcement and infrastructure shot up massively even after it was announced because the money started flowing in there. And even with the Trump administration, I don't know exactly where you stand on that, but I think

The idea that a lot of it will be rolled back in the United States is unlikely, especially given how much red states are benefiting from it. But even more importantly...

the issue of decarbonization has rolled into energy security. And that is very important in Europe. And it's very important in China. And it's going to continue. And it's an area that investment is going to continue. Demographics, that's about aging. And the developing world

is getting richer and older, but it spends half as much per capita on healthcare as the developed world. And that dynamic, you know, that is changing. And so this is an area that continues to grow faster than global GDP. And then of course, you know, this race for Gen AI has become, you know, absolutely a national security issue.

And we're seeing the continued investment in CapEx spend there. And so I think if you're looking for ways of organizing your investing today, rather than just kind of speaking out like low P stocks, I think starting with where's the money flowing? Where are governments buying? And

you know try to be an expert in those fields and so we've kind of reorganized our research not around say s p 500 sectors but around these these big themes and looking at the supply chains and and the companies as they uh unfold according to these themes no very cool i mean i suppose another really good example of this is what's going on in europe most recently right in re in response to

I think in part, President Trump's policy with regard to NATO and Russia and Ukraine and just Europe more broadly, it feels like it kind of lit a fire under the Europeans, particularly Germany. And the Germans have, I thought it was a really big deal when they gave up on the so-called debt break. I mean, they had this...

policy that if, you know, very, very judicious with regard to using fiscal policy in the context of their fiscal situation. They've got a really good, I think their debt to GDP ratio is very low. You correct me if I'm wrong, something like 40, 45%. We're at over 100%.

here in the U.S. and much of the rest of the world. But there seems to be a sea change in kind of thinking there almost overnight in response to the pressure put on by President Trump's policies. And now the Germans are off and running. It feels like Europe writ large is just moving quickly in another direction here, almost a very positive direction that you

It's just another good example of your investment philosophy to follow the money. The money seems to be flowing into Europe now. Did I get that roughly right, Marc?

Look, I think that's a great example to focus on for a couple of reasons. And first, one of the things that I try to say in the book and give some examples of is, you know, I'm very humble about what my role is. It's not to tell people how I think the world should be organized. It's try to look at the clues and unpack kind of how the world does work. And so, yeah,

With myself and the team, whether or not what Europe is doing is a good thing, you can look at that from many different perspectives. Should the United States give up its

hegemonic role does this enhance america's short-term hegemonic role not not not for me to weigh in judge right but but to sit but absolutely to say hey europe or in particular germany has surprised to the upside with their commitment to deficit spending and they're seemingly uh

higher level of commitment to spending a portion of their GDP on defense, something that, you know, something that the United States has been trying to get Europe to do for perhaps 50 years, and is now actually doing it.

And, you know, we'll see what happens. But there are definitely market forces. I mean, yes, you can look at some of these European defense stocks and they finally really moved on that. And, of course, we would say that, you know, you should probably look more broadly at infrastructure. And for us, power and energy is going to be

is going to be key here in all these markets. And we think those are some enduring themes that will benefit. You know, the other kind of example of this, and I ran across something you wrote in Forbes on the crypto market. You know, this was back in January. And I got the sense that you were

kind of bearish on crypto that at the end of the day you thought the governments would put a knife in the back of the crypto market if it ever got big enough to become a competitor to fiat money to the dollar or the euro and you use some really good examples of what happened historically with gold and you know gold was the alternative around the depression and in that era

How do you feel now about crypto given President Trump's, again, going back to your point, follow the money. I think the day he was inaugurated, he issued a meme coin, a crypto coin. I don't know where it stands today, but at one point, I think it was worth like, I don't know, $7, $8 billion. And there's like no value. There's nothing there except, I don't even know what it is, a coin.

So, and now they're talking about a reserve for Bitcoin. I'm not even sure why you do that for Bitcoin, but just reserve for Bitcoin. How are you thinking about crypto now in the context of that strategy, follow the money?

Well, I think that one of the things that I've been most excited about is that everything I wrote has been completely vindicated, despite the fact that, you know, I wrote it during the Biden administration and now we're in the Trump administration. So is this this thing just keeps getting better? Now, why do I why would I say that in the face of what you said? So.

First of all, the book says, buy what the government is buying.

Yes, Trump has announced this idea of a sovereign wealth fund that will include crypto, but they're not buying crypto to put in. They're not buying Bitcoin to put in there. It's the Bitcoin that's been seized. And this plan is... I don't want to make light. I'm ignorant of the policy and its details, but it sounds...

sounded to me like we're going to take these assets like the crypto we're going to maybe revalue gold and we're going to put all these things in in this sovereign wealth fund and then we're going to lever it up and buy real estate with the with this sovereign wealth fund because of course we know that a sovereign wealth fund as i know it in europe or in the middle east or in asia is for you know

Governments with a surplus of funds, not not with a debt. And so this is a very novel concept. But getting back to the to the Bitcoin, you know, I think there is absolutely a chance that that the Trump administration administration changes the regulation of crypto in it.

in a lasting way, right? Like, I mean, you were talking before about tariffs done by executive order. Is that really enough to fundamentally change like factories moving into the

into the economy but let's say that there is uh if there could be a fundamental change in the regulation of crypto such that uh it's made made much more part of the financial mainstream but that that hasn't happened yet and it certainly didn't happen with uh this this announcement the announcements around crypto so far if anything some of the things you mentioned around uh

these collectible coins, you know, would point you in the other direction that this is exactly not the kind of thing that people who are investing, and this is an investment book, should be thinking about doing it all for their investments. And so that's kind of my initial response to how it fits with the buy what the government's buying theme.

Got it. Got it. You already alluded to this, but just to flesh out a little bit more, kind of the way I was thinking, the way you wrote the book is follow the money, follow where the government is going. And then you had these five kind of broad trends that are under kind of entrained.

the five D's, debt, deglobalization, decarbonization, digitalization, and demographics, that those are inexorable trends headed in more or less, and that you should get in the slipstream of those trends when you make your investment decisions. Of those, did I get, just to make sure, is that right? Yeah. Yeah.

Great. Yes. And, you know, one of the greatest, one of the greatest stresses of my life these days, because I put out these five D's and then people ask me to talk about them. And then I wake up in the middle of the night, like I forgot one of the D's in the middle of a conversation. Thank you for listing them out, you know? Yeah. Yes.

Yeah, but go ahead. Yeah. So so I meant, you know, I mentioned the three, the decarbonization, the demographics and the digitalization. And then and the other two, the you know, I do think that deglobalization and debt somewhat create opportunities. But they're they're you know, they're not clearly like the trillion dollar opportunity.

uh, earnings opportunities as the, the other three. But I think understanding that we probably have reached peak globalization and who, who is, who are going to be the winners and losers. That's also something that we think a lot about. And then, you know, we, we started this conversation and talking about debt and sovereign debt and, and, uh,

sovereign interest rates. And I think that's another one that we spend a lot of time thinking about. And that one is, I think, tricky. And that's part of this why you need new rules for investing because

Very much in Europe, there is still this real kind of Calvin, especially German speaking Europe, there's this real Calvinist bent to, well, you know, it's real simple. If you're a family and you take on too much debt, you're

you're going to run into problems and you're going to go bankrupt. And I think what I try to talk about in the book is, well, the history of debt for countries is not so cut and dry. They have militaries that they can use to reshuffle the cards, but they also have inflation that they can use to reshuffle the cards. And actually,

Inflation becomes a very important tool to kind of, you know, there's you can redistribute the wealth. You can write off the debt. You can inflate it away or, you know, you can try to grow out of it.

And, you know, in this mix, inflation becomes a very attractive political option. And one of the things I try to say for us is, you know, we're not predicting that inflation

in a year from now, that there's going to be this real spike in the 10-year or the 30-year in the United States due to the bond vigilantes coming out. But of course, every year, the risks of that go up. And so what is the average investor supposed to do with that? Because there's a reason they called

the Japanese 10-year, you know, the widowmaker, right? So you can bet forever on that and it doesn't pay off. And I think for the average person,

what it probably means is absolutely diversify more globally, diversify your asset classes, but also think more about having more of your assets in high quality stocks that can weather that higher rate of inflation with more certainty. And if a debt crisis does come, you're probably in better shape. And if it doesn't come,

you still benefited even if this gets worked out through inflation. One question around these five Ds, do you have a prioritization around them? It wasn't clear which one you would put at the top of the list if an investor was looking around and trying to decide how to allocate. Well,

Yeah, great. I mean, great question. I'm always going to give these, I guess I always give these elliptical answers because another part of the book is, well, knowing yourself and what it is you're most concerned about. So, you know, some people enter it, you know, I always think about like when I go into a conversation with a client for the first time, listening, you know,

to understand where they're coming from. So if their greatest fear is debt, and that's the thing that's holding their portfolio back from the asset allocation that we think makes the most sense, then the focus would be debt. If they're focused on

kind of physical security in the world order is falling apart, then, you know, then maybe you start the conversation with, okay, well, let's go through

de-globalization because there's some negatives, but there's also some positives. Maybe despite what President Trump has said about the need for higher tariffs on India, there's room for a trade deal there because the US wants to triangulate and other countries want to triangulate and reshuffle their supply chains even more away from China, for example.

I think right now for us, the AI alternative is something we're paying a lot of attention to. Obviously, the stocks have sold off, but it seems like the CapEx spend is going to be there. So we're still very excited about that. But on the other hand, really having a deeper knowledge of the healthcare sector,

is very important right now, because if we do start to head toward a recession, finding those, that's a very ripe area for understanding what's most, what out there is most inflation resistant. And then, you know, likewise in the decarbonization, I think,

Perhaps more of those opportunities are outside of the United States. So again, I think it's a framework. If you had to say one thing right now that's the most exciting for us, it would be AI and the power generation to feed AI. But these other topics are probably equally as important.

Excuse me, Marissa, anything you want to bring into the conversation? I was going to ask you about AI and your views on that, Mark, and how you think that that's going to reshape

sort of where people should invest. And also just, we always talk as economists, we always talk about it in the context of productivity growth and how that could potentially change the game on productivity growth. We don't really think it's, we think it's probably too early for it to be happening yet. But when you look across the globe, where are you, I mean, besides the U.S., where are you most excited about, or where do you see the most opportunity for

either growth in AI or you would also mention demographics. Where do you think the most opportunity is outside the US? Yeah, well, on the AI, I think...

We talk to clients around the world, and I think one of the things that continues to impress me is the way that CEOs or C-suite executives who are clients talk about the way that they're deploying AI to achieve efficiencies in their business, and

already, and, you know, not just in the tech sector. And I think that insight led us to be overweight AI, you know, for several years. And I think that absolutely continues. So that's, you know, this feedback from our clients is absolutely one of the areas that makes us

continue to be excited about AI. I think, obviously, in a recession in the United States, where a lot of the money for the CapEx spend and the Mag7 comes from ad spending and things, then I think we could see a material change, but I don't think we're anywhere near that just yet. And then

You know, again, on the demographics, I think the way we are currently thinking about that, I mean, demographics is a much larger issue that plays into a lot of the politics, particularly in in Europe. And I think, you know, Mark, you alluded to it a bit in terms of what the immigration policy in the United States, how that could start to show up in Europe.

growth slowdown. But for us right now, when we think about it, you know, we're thinking about the element of it that has to do with healthcare spend globally. And, you know, one of the, and one of the most recent that, you know, I just saw how are these weight loss drugs, how might they play into a trade war, right? So that, so that's, those are the kinds of things where we're trying to spend more time, both at a company level, but then just, you know,

you know, government spends so much money on healthcare. So where's that incremental spend going to be? That's intriguing. You mentioned the weight loss drugs and the trade war. What's the nexus?

Well, I just read it. I just read that in the FT this morning. The idea that, you know, what if we what if what if, you know, what if some of the European countries hold back or have massive tariffs, right, or have massive tariffs on these drugs? Right. You know. Oh, yeah. Oh, yeah. What you know, what are the pressure points that.

that Europe has. Oh, right. So don't buy Kentucky bourbon and put a tariff on, export tariff on those epic, I guess. Yeah, exactly. Yeah, interesting. Hey, we're running out of time, but I wanted, one thing that has not come up in the conversation, I'm just really curious how you think about it, is valuation. It feels like

valuations are high, maybe a little less high than they were six weeks ago. The stock market's down, US stock market is down, but they're up in other places in the world. But credit spreads in the bond market have been, corporate credit spreads have been very thin. They've gapped out a little bit recently, but they're still very thin. Real estate values, housing values, I should say, commercial real estate is corrected, I guess, but housing values, we talked about crypto,

Of course, in the equity market, even with the recent correction, AI stocks feel pretty highly valued. Is valuation an issue here or not so much, Mark?

You know, as a recovering value investor, you know, the first thing I always say to people that I learned the hard way is, you know, trees don't grow to the sky. So valuation is always an issue. But over any shorter time frame, I think it's a little less of an issue. You know, I don't think that...

the valuation of the, the, the, say the mag seven is, uh, is so out of line with what they've experienced, say, you know, in terms of growth that, um,

you're going to say that it is the key driver. If they continue to grow the way that they've been growing the past five, 10 years, then the valuation is probably justified. Now, that doesn't mean that other factors can't come into play. You mentioned, you know, what is the stimulus that...

the U.S. government is applying through tax cuts and other things that may drive the economic growth that sets this valuation. But I do think we're in a world where you have to think about valuation much more in the context of all these other factors than just simply say, I'm going to buy low P stocks. Right, right.

Uh, you know, I, I, I guess I, I, I'm still stuck in the valuations. Uh, I, I can't get beyond, you know, a P multiple of, well, I don't know what it is now, but it was 24 times, you know, just in history says, and this is on the S and P 500, the P multiple price earnings multiple was closer to 15. Just, it's hard for me. Maybe I'm just getting old. I don't know. It just feels hard to get beyond that. But, uh,

That thinking has left a lot of money on the table, that's for sure. So I'm trying to think of how to end the conversation kind of in a way that is fair. But, you know, I want to ask something like, if I gave you 100 bucks, what would you do with it? Yeah.

And I know you're going to come back and you're going to say, oh, Mark, well, it depends on how old you are, what your risk tolerance is, blah, blah, blah, blah. Take all that in. And I'm going to ask that of everybody. We're going to go around the horn here. And I got $100. Let's make it $100 million. You got $100 million. Let's make this interesting.

What would you do with that money? How would you invest that? Is that a fair question, Mark, or is that just not fair? Probably not fair. No, I mean, look, I get asked that every day by clients, right? And so obviously, I have our answer, which is okay. 100 million bucks,

Here's our asset allocation. You're based in, you know, you plan on spending the money in this currency when you retire. But I'll give you the, I'll give, so. You're back in the New Jersey neighborhood, Mark. You're listening to Bruce Springsteen. Your buddy's saying, hey, Mark. Number one, let me give you, let me give you the number. Yeah, yeah. Let me give you the number one piece of advice. Yeah.

as a practitioner, what actually makes the biggest difference. And I can tell you, I've had this conversation around a family dinner table. I've had this conversation with the principals of a multi, multi billion dollar family office. I've had it with the, the, like the, the hired CEO of family offices. This is the most important conversation call.

call it the wealth wave three L's, which is think about your money in three buckets, liquidity, longevity, and legacy. Liquidity is what do I need over the next three to five years?

And then longevity is what do I need in my lifetime? And legacy is what do I think? What's the money that I can set aside to help others that I don't think I'm going to need in my lifetime? Now, as an economist, you hate this answer. I hated this answer when I started at UBS. They said, this is stupid. Money is fungible. It's all still one asset allocation.

But once you get people to think about their money, like, okay, I've got that. I've got cash and I've got short-term bonds. I got my three to five years squared away.

Then when you get a dip in the market like this, they're saying, all right, you know, I know what I have to invest because I'm covered. And they approach that question of what to do with $100 completely differently than they would if they're approaching that question after...

being worried about whether they're going to be able to meet their payments in a month or what the S&P 500 just did. So not the answer you're looking for, but that's why I wrote a book because everybody asks me the question you did. I try to reframe it. No, it's perfect. That's perfect. Okay, Chris, I know, Mark, I know what Chris would invest his money in. It's a vineyard in the middle of Italy. Am I wrong, Chris? Yeah.

You are wrong. Maybe a kombucha farm. A kombucha farm? Is there such a thing, a kombucha farm? Well, I guess it's more of a factory. Of a kombucha factory. What about you, Marissa? Marissa is like, she'll buy one of those weird boats that can go in and play with the- I know what Marissa is going to say. I was at dinner this week and someone mentioned that their investment strategy was-

Guns, gold, and ground. So very apocalyptic. Guns, ground, and gold. So land. Oh, yeah, right. Yeah, I think I would buy some real estate for sure. There you go. I mean, I would diversify. I would have some...

some mix of stocks, diversified bonds, some real estate, some money for fun and cash. It's almost like investing feels like it's hardwired in some way. Am I wrong, Mark? It just feels like people are hardwired in terms of the way they think about risk and investing.

Well, you know what Mike Tyson said about that, right? Everybody has a plan until they get punched in the face. And so I try to have some stories about that in the, in the book, right? It's like you, you, people, people, yeah, that's all great. But you know, when, when push comes, you need to be able to stick to that through push comes to shove. And, uh,

And that's why having that liquidity buffer then allows you to operate in that mindset of abundance that you have put them in. So that's a great place to end this because it shows that you've really invested in family and learning and creating a mindset of abundance, which are all amazing things to invest in. Well, that's a kind statement to make. And here's the key question, Mark. Are you an Eagles fan? You got to be. No? No.

you said uh you know 15 years in in switzerland you ever heard of the sport of i was gonna talk

Talked about the Swiss sports swinging, but then we'd need another hour. I'm pretty neutral on the U.S. sports teams. Oh, that's too bad. We had a good year, as you may know. But anyway, we had Wawa and we have the Eagles. So something going for us. Well, it was great to have you on.

Inside economics. Thanks so much. I really appreciate it. We learned a lot and I highly recommend the book to everyone out there, New Rules of Investing, Essential Wealth Strategies for Turbulent Times. A really engaging book and learned a lot. So thanks very much, Mark. Really appreciate it. Thank you all so much. Thanks, Mark. And with that, dear listener, we're going to call this a podcast. Take care now.