New Constructs' Trainer calls Anthropic is 'the most ridiculous IPO os 2026'

0:00If you like YouTube, you'll love YouTube Premium. Hi, I'm Sean Evans from Hot Ones and I want to tell you about YouTube Premium. It has offline downloads so you can watch without Wi-Fi, background play, so you can lock your phone and it still plays baby. Oh, and it is completely ad free. Yes, I said it, ad free. Try YouTube Premium for two months free at youtube.com slash premium. Dial eligibility varies, terms apply, cancel anytime. Here's your headline on today's show. Anthropic is the most ridiculous IPO of 2026. You know the last time I used that title, we work. That was for 2019. So this is worse Chuck because the valuation, you know, a two trillion is just absolutely absurd. That is David Trainor, founder and president at New Constructs. And he's putting Anthropic about to be the biggest IPO ever in the danger zone before the box is opened.

1:01But he's got a message that actually runs through today's show. It's a buyer beware world. I'm really hoping that people will beware. And he's not the only one saying it. They're also getting that message from VJ Marolia, chief investment officer at Regal Point Capital, caveat and tour. In the week that is, he's talking about buyers being wary of the fabulous numbers, like Ron's been putting up, how consumers should be wary of how jobs numbers are being interpreted and how he thinks investors should be excited, but also cautious about an SEC proposal that would let mutual funds charge sliding performance fees. Plus David Rosenstruck, director of investments in financial planning at Wharton Wealth planning is here talking ETFs in the market call. E-M-N-U-T! Oh heck yeah, we're excited to start a new week here on Money Life. This is Money Life for October the 5th. Thank you for joining me. My name is Chuck Jaffey.

2:02I am your host here. And how could you not be excited when that is the clip you can play? It's just like Anthropic. It's gonna be a dog. You know, you can debate it. You can dislike it. You can say, wait, I want to go be an Anthropic investor. The way John Colescott was talking about just the other day, right? Using closed-end funds. That was part of our Friday show. You can have the debate. Disagreement makes a market. It also makes for a good show. We've got a great show for you. We're gonna let it run, so I'm gonna keep this very brief. I hope you had a great weekend. I did. I was officiating, which meant that I also was not watching Michigan, my beloved Alma moderate lose another football game. I had planned to watch it when I got home and then someone said something on the field and I knew the score. So they probably saved me. I probably shouldn't be upset that they did that for me that I just watched the highlights

3:04or lowlights as it were when I got back. But other than that, really nice weekend, great weather, good food, lots of fun outrunning around. Yeah, I hope you were able to do nice things as well. We have a tremendous show plan for you, but there are things in this show that you might take exception to or you might disagree with her. You might have a strong opinion. Please don't be shy about sharing that with me. ChockitMoneyLifeShow.com. I would love to hear from you. And while you're doing that at the end of today's show, I'll remind you of our contest. Don't be shy about entering. There's great stuff that we are giving away and because we're giving away so much of it because we put six different books into one contest, your chances of winning something are definitely higher. So get involved. Right now, however, we're going to get involved in this show. Yeah, we're glad you're here. The week that is rolls us out when we come back from this short break. Why isn't micron the most love stock on the market?

4:05Does anyone love current jobs and economy numbers? And why the fund industry loves a new SEC proposal, but individual investors might hate it. This is The Week That Is. Welcome to The Week That Is with Vijay Morolia of Regal Point Capital, where we talk about this, that, and the other thing of what's happening now in the financial world. It's the upshot from last week, a jump on the week ahead, and some additional insight from Vijay's creative mind. Vijay's chief investment officer at Regal Point. He's the founder of Dharma Investing, and he's a long time observer of markets and the economy. He posts a lot more on them at VijayMorolia.com and on his YouTube channel, VijayMorolia Unmoney and Markets. VijayMorolia, what's the good word? The good words are caveat and tour, which is Latin for, of course, let the buyer be aware. And I think that has a lot to do with some of the topics that we'll talk about today.

5:06It certainly does, Vijay, especially when it comes to buyers and microstock, because buyers are very wary, even though the company last week posted its seventh consecutive quarter of at least triple digit percentage earnings growth on a year-over-year basis. I mean, earnings were up a nastounding. Well, there's no, they're not enough adjectives for it. 1,000 and 3% in the fiscal fourth quarter, sales were up nearly 40% the fifth straight quarter of accelerating growth. And yet, microstock wavered. Now, I know you like micron. You've mentioned it before, but the S&P 500 has a trailing price earnings ratio of more than 25, and micron is trading at less than 15 times earnings. Help me out here, Vijay. What is your five lens approach? I'm going to say about micron now because it's hard to believe the numbers wouldn't have everyone excited. Hard to believe are the best words to describe.

6:06Everything that micron has reported not only in this most recent quarter, and I don't blame you for getting choked up with those numbers. Chuck, how often do you get to report that? I have to do like this with my eyes when I'm looking at micron's numbers. The reason why the five lens approach is so valuable is because of a company like this, because first of all, what do you want in a company? You want it to be profitable? This is amazingly profitable. You want it to grow. It's growing faster than anything that you've seen. And so those are the fundamentals. And then, of course, if you look at the chart, the chart makes you want to go back in time, get a flux capacitor so that you could be a part of this amazing trajectory. It's a hockey stick, but it's the sentiment, it's the structure and the scope, right? So the three, four, and fifth lens that I think tell the story.

7:06The sentiment is that it's either too good to be true or the growth will slow down and when it slows down, it'll slow down hard. I will have to call BS on some of that. Chuck, we know how hard it is to tell what's going to happen next year or even next month, sometimes next week, and yet the forecasts and the negative estimates for micron are forecasted for seven years out. And these are done by analysts that are basically copycatting each other. So long story short, I think that the fundamentals are fantastic. The chart is fantastic. The sentiment is confused. And shouldn't we all be because we just had somebody say that AI is going to kill everybody in 10 years? All that said, obviously, micron abog to you. But is there anything you are watching where you would say, I'm going to get nervous,

8:10we can revel, I mean, I don't think I've ever said 1000% Euro free. Like, I don't think ever. I don't think you saw it in your face. You probably have it, but you can't be in a situation where that continues forever. And Wall Street rides on trends. So at some point, I'm not even talking about reverting to the mean. They could go from 1000 to 250% to 100% anything that would blow every other company practically away. And it's going to look like it sucks when you don't year over year comparison. So how do you avoid that becoming the problem? What will you be looking for that will have you say, this is the part where those fears come to roost? So Chuck, first let me do you the compliment and steel man your argument because I'm looking right now at the estimates. So for example, the fiscal period ending August of 2027, their EPS was 176.

9:13And then next year it's supposed to grow to 205 and then a 204 at 2031 cuts in half. And then it kind of continues to decrease, but it continues to decrease at a steady figure of 22.5. This tells me that the young analysts, and I'm not trying to like talk shit about these young analysts, I used to be one and sometimes I still identify as one, but they don't know what to put in the spreadsheet. Who knows what's going to happen? Like you know what I mean? Like 31, 32, 33, 34. They're all the way out to 36. Who the hell knows, right? Especially when Dario is telling us that we're going to die before then. So no wonder that they have a bearish view on that. The bottom line is I think three years is a good way to look at the past as well as the future because certain trends are hard to change, right?

10:15So even though I don't know what mycron's EPS is going to be, I do know that we're going to need more memory. I know that we're going to need more copper. So anyways, let me take a step back so you can take one forward. Well, I assume VJ, when I see that regular, oh, you're looking out X number of years and you see that regular O is coming down 22 22. I assume that somebody's looking at a contract and a big deal that is not guaranteed to continue and they're just kind of putting that into their forecast. But I could be completely wrong about that and I totally agree with the idea that we don't want to look out too far. So let's instead move to our next topic because your caveat, mTOR quote, you're let the buyer be where quote, applies in different ways. And there's a lot of talk about whether the market is buying the jobs report from last week. So here's the details for anybody who missed it. The September jobs report showed 29,000 jobs added less than one third of the 90,000 that were expected to be added on top of that.

11:16The Bureau of Labor Statistics released the revisions for the two previous months and that meant that July actually saw a net loss in jobs. And they adjusted August down by 29,000 jobs. And oh, by the way, it may get revised down in the future too. So it's safe to say the job market is unusually weak. It's not saying we're in a recession, but there are some things we might be watching for like no job growth and rising unemployment at the same time. You have stayed very bullish on the economy, but are any of these numbers starting to add up to real worries for you? No, and Chuck, with all due respect, I must disagree with unusually weak labor. 4.1%. I know that you were taught 4% is fully employed. And I was taught 5% is fully employed. My man, 4 and 5% it's not a problem with the job market.

12:18Like, give me some pushback. When was it worse? That's why it's not a sign of recession. You mentioned recession and GDP is basically the way that you would measure or understand whether or not we're having a recession. And by the way, GDP is not only growing, it's accelerating and we're getting upward revisions. And so I think that the labor market is totally fine. I think people are blowing it out of proportion. I think that GDP is going to prove it. I think that inflation is still too high, but it's slowing down. Lord knows, VJ, I am hoping that you are right about that. But if you buy into the idea that certain economic conditions make a classic recession harder, that we are seeing rolling recessions where they're in a certain sector of the economy, but not the economy overall, then some of this stuff holds up. And again, I don't think a weak jobs report and rising unemployment is necessarily, oh,

13:19there's your sign. We're going to be in a recession soon, but it is assigned to me of weakness. And that job growth is weak and it's historically weak even at times when you're looking going, hey, we're near full employment. Chuck, there were upward revisions to the previous jobs reports, dude. The labor market is fine. You know what's not fine? It's people that have the skill sets that the labor market wants. You know what's not fine? It's people that actually want to work rather than complain. You know, like the disability claims are at all time highs and by the way, the biggest disabilities are not even physical. Some people want to work and they're hopefully going to be allowed to do so. AI is going to accelerate that. But there's always going to be people that don't want to work and that's sad. And I think that hopefully this podcast makes it so that people want to utilize technology, all the resources that are available so that they can be like, you know what, I don't care about what the current salary is. I'm going to do my own thing, right?

14:20Entrepreneurship, the American dream. Closing up on that one, I will just point out VJ, unemployment numbers only include people who are actively looking for jobs. So when somebody says I don't want to work, they fall off the roles. So that's that. Are you looking at absolute numbers? You're looking at rate of change. No, no. So you kind of hit the nail on the head and that speaks to the whole like the disability thing. But my friend thuk members of the public, extra performance fees if they do well. This has not really been allowed in mutual funds in the past. It's allowed in hedge funds and other things. Is this a good idea? Well, there are certain professions where you eat what you kill.

15:21Hedge funds, private equity, if you ask a lawyer how to define them, once they waste about 40 to 50 minutes of your time, get close to that full billable hour, they'll eventually admit, oh, it's only because of the similar performance fee. So you said something extra performance fee. Do you mean to say that they're going to charge more than one performance fee or do you just mean that the performance fee? Because there are tons of extra fees, whether they be 12B1, regular asset management, so on and so forth. But think about performance fees is if you don't have to pay them if nobody performs. But in the hedge fund world where the standard is 2% and then 20% of profits, there's your extra performance fee. That's just the performance fee. Performance fees are on top of the asset management. So a mutual fund, you pay 1% and you do average so that the guy doesn't get fired. By the way, it's an if, buyer beware, caveat, and tour.

16:23No one is asking you to not buy an index fund. If you want performance, it's not for each other. Correct. So do you want to pay the goldman who can already charge it or do you want to pay it to someone like myself, a startup, someone who's smaller? Because do you know how hard it is to tell your cousins, your neighbors? By the way, oh, no, I can't help you because the SEC says that you're not rich enough to invest with me. That's a tough conversation to have with your friends, your neighbors, and your family, Chuck. And they don't allow us that many. Once you have more than 100 investors, your liabilities go up to a quarter million dollars a year, minimum. Correct. And we're talking about things that work with hedge funds, etc. But the question would become, so for your cousins and your relatives, if they wanted to be able to invest in a hedge fund that you run, but they could only do it because I start the mutual fund to let VJ's cousins invest. I charge my fee, my 1% to run my mutual fund.

17:27And then I have fees on fees because I'm taking your 2% plus your 20 if you have the performance. I thought you said 1%. Now you want to charge two. If I'm running a fund that's investing in your fund, I don't get to invest for free. I pay to your fund. You're talking about fund funds. You're talking about FOS, aren't you? That's the biggest scam in money management. But that is to some extent what would be allowed would be I could run a mutual fund. Bingo. So now you're hitting the nail on the head. Cavi, Emptor, did anyone say that earlier in the show? Guys, there is no free lunch. What the SEC and what people are trying to do is to do layers on layers on layers of fees. It's a bad idea. It's also a bad idea to not allow small investment firm to raise money from small investors if they have a good idea. Our funds have set amazing records.

18:29I'm not going to go into them. But if you want to, I would love to. I don't even know if we're allowed to because we have less than 100 million, which we keep that on purpose because we don't want to lose our quality of life and hire an army of lawyers. Now, will AI and legislation change that? I really hope so. I really hope so. But man, it's hard to keep people away when they know you're doing well and they want to do well with you. And I would agree with that, VJ, completely. I will also point out as you well know, the hedge fund world, particularly, but also the private equity markets and private credit markets. And a lot of this SEC proposal is about trying to increase the access that the average investor might have to those things, which I agree is a good thing. But you and I know the hedge fund world, just because they're charging performance fees, doesn't mean everybody's getting great performance. There are a small number of tremendous performers and a whole lot of funds that go on for a little while and then their investors go, give me my money back.

19:32I'm done with you. More than half are terrible. But what is the money going to go to if it doesn't go to investment? Is it going to go to hard rock bets? Cal sheet? Is it going to go to the bills to take the spread? Is it going to go to the casino? Is it going to go to options that are expiring in one day? Cavayot and tour. The whole discussion needs to be about financial literacy. That's the bottom line. VJ, when we get to the bottom line, that's when we call it. This has been a lot of fun. We'll talk to you next week. Thank you, Chuck, for allowing me this opportunity. VJ Morole is chief investment officer at regalpointcapital, online at regalpointcapital.com. His personal website, vjmerolea.com, includes links to his blog, to his YouTube channel, and the baby's first business book, which he wrote under the pen name, Dr. Funkle, because he's the fun uncle teaching kids about money and business.

20:34Up next on Money Life, we're heading for trouble joining David Trainor of new constructs in the danger zone. And then, David Rosenstruck of Wharton-Welth Planning will be talking ETFs in the market call. Let's go. You have just entered the baddest biker bar in the investment world. If you're lucky for trouble, here it comes. This is the danger zone. Looking to the danger zone on Money Life, it's where we get the latest take from the experts at new constructs, where they evaluate securities on a scale of most attractive to most dangerous. They do it by bringing together discounted cash flow analysis and forensic accounting. They dig in at the footnotes level and work their way up. And they're looking for cases where things will be misleading. If it's misleading and it works in your favor, that would make something attractive. That's not what we focus on here.

21:35We're looking for the stuff that is ugly and therefore dangerous. Learn more about how it works at newconstructs.com. David Trainor is founder and president at new constructs. David, great to have you back on Money Life. Chalk, it is great to be back. Thank you. Who's in the danger zone this week? And Thropic is in the danger zone, Chalk. Danger, danger. It's, and Thropic. Of course, it's the IPO that everybody is talking about. And I know you're not just picking on it. You guys at new constructs have developed methodology that lets you look at pre IPO perspectives. So is this about the data? Is this about the momentum? What is driving you to put this enormous important IPO in the danger zone before it's even outside the box? First of all, let's be real about this pre IPO perspective. It was selectively disclosed, which I believe would be in violation of regulation fair disclosure

22:36where this information is supposed to be disclosed to everyone at the same time. It was not. So we don't have the full S1, only a few people do, but we don't really need more than what was reported from the S1 to be honest with you, Chalk, to understand the gargantuan amount of risk in this IPO. Chalk, through title this report. The topic is the most ridiculous IPO of 2026. You know the last time I used that title, we work. That was for 2019. So this is worse, Chalk, because the valuation, you know, to trillion is just absolutely absurd. I mean, let's just start with what it means. It means it's going to be more profitable than like five of the most profitable companies in the market today combined. So absurd level profits. For business, we're right now, I'm not going to talk about much about like the fact that it's burning tons of cash. Everybody knows that. No big deal. But this is a company with competitors that sell virtually identical products at a 20th

23:42or 50th of the price. There's no conceivable profit margin right now for this company. When it's being valued as if, again, it will have profits bigger than the most profitable companies in the world today. That's what two trillion implies. So this to me looks like a very simple trade. Wall Street is using this IPO for exit liquidity for all of the billions of dollars that have been invested in anthropic already. In other words, this is the cash out. Maybe Wall Street's final cash out, Chalk, I don't know. It's that big a cash out, but it is a cash out for everyone else who's made tons of money on anthropic and an absolute ripoff for public investors. There's the anticipation that we're going to wind up seeing this company valued at $2 trillion. Is there any chance that somehow the market just doesn't buy the hype here and make this the most ridiculous IPO of 26?

24:43I hope so, Chalk. I really do. I want to point out an article that I featured as well in the report from a guy named Jeff Park where he makes the point that American capitalism rests on a sacred social contract. If humanity must bear its risk, the public must also share in the prosperity not just pay for it. This is the opposite. The public would be getting shares of anthropic at such an expensive price that there is no reward left. It's all risk. It's all downside risk. It's all exit liquidity. It's all just shifting the bag to somebody else. It's a hand off. Let me give you some perspective here. Before its IPO, Amazon had raised $8 million. Google, $25 million, Metta, $2.3 billion, Uber, $24 billion. It's gone up over time. Anthropic has raised $120 billion already.

25:45People have made their money. This is an exit strategy. Nothing more. As big evaluation as possible. Part of the reason I think Wall Street is pushing it so hard is because so much of the AI trade for all these stocks is built on anthropic buying all this compute and all these chips from all these people, which again is a circular financing deal that there's been lots of talk about. I honestly believe they need this trade to go through in order to keep the marks, the price is high. While institutions, $120 billion, find a way to get this off the books, find a way to exit. It reminds me of that part of the big short where Michael Burry and Steve Iseman are calling in and saying, how are the prices on these mortgage-backed securities so high when the underlying securities have crashed 60-70 percent. The Wall Street people are answering like, oh, I don't know, the systems down.

26:46I don't know. When the answer was they were just keeping the marks high so that their clients could get out before the crash. That's what anthropic is right here. Same thing. It's too sad and it's so absurd that maybe, oh, maybe they should be a trillion. Maybe they should be $500 billion. I think it probably is a zero. Remember with WeWork, they came out in the beginning and was like, oh, maybe this will be $70 billion. Then, officially, they went and marketed to the street around $40 to $45 billion. Within a few weeks, SoftBank took it back. They said, oh, we can't go public. We'll take it back and we're going to market on our books at $4 billion, a tenth. Then eventually, they spack it and it goes out for $100 million and eventually still goes to zero. It was always a zero. Wall Street is not afraid to put something out there at a some ridiculous price. They're not afraid to try to sell you junk. It's a buyer beware world and I'm really hoping that people will beware and not be the excellent liquidity. The market itself has reached record high levels and all the experts who I talked to say

27:50it's all about earnings. The reason that this is not supposed to be a bubble is that unlike what we saw on the internet bubble days, you have real earnings. You have been warning about an AI bubble and in the case of anthropic, it is not profitable it has massive losses from everything that has been disclosed or leaked about the company's operations. If you believe the earnings story, why we've been able to overpower everything, this is the sign that that story is coming to an end or at least it doesn't exist here, right? No, we're missing a big part of the earnings story. There's another report I think maybe Kyle mentioned in the last week, the top 10 most wanted list we created for the biggest earnings manipulators. What people are missing is 4 trillion in all balance sheet debt that's also providing hidden earnings boost. When you really think about the earnings that should be generated from that 4 trillion, we're talking probably 1.4 trillion. In order for these companies to maintain the same profit margins they have before the AI

28:55as they have will have after all this investment. These earnings numbers are not that good when you consider the enormous amount of capital that's also been allocated. It's almost like football team playing with 13 to 14 people but they don't tell you about them. You wonder why they look so good. There's 4 trillion dollars out there that's also working that's not being accounted for. These earnings numbers are joke. That's one reason. The other reason is it's all circular. It's all these prepaid commitments, purchase commitments, and a lot of this 4 trillion is purchase commitments. I mean, I think there's overall even more off balance sheet data. I think we just went finished up to the whole S&P 500. I think we're seeing almost 4 trillion in purchase commitments alone. These purchase commitments are being booked as revenue and earnings for a lot of companies even though that capital hasn't really been spent. It's just been committed. There's a lot of fake stuff going on here. Reuters issued a report on anthropic that said that like a quarter or a third of the company's revenues last year came from two customers.

29:55They didn't tell us who the two customers are. If you've got two customers accounting for that much of your money in an industry like AI with the competitive stuff that's going on and everything else, that's a little risky, too, isn't it? Oh, 100%. 100%. Also, all this toward growth we've been seeing and token use and AI usage, that's been leveling off. And look, I built the model for anthropic by hand because we don't have the S1 to go through the system and do all this stuff that we normally go through. And I had to put like 100% revenue growth in there for almost 10 years with margins comparable to Facebook. I, again, I mentioned I don't think they're going to see very high margins if any at all because you've got these free models from China that do 80, 90% as much work. You also see reports about how 90% of the usage is 1% of the customers. There's only a few people that can have sophisticated that really enjoy sophisticated use of the AI. So this idea that the business model is going to grow and be profitable at the extreme

31:02level the valuation implies is I think on its face absurd, I don't think anybody can make a straight-faced argument that that would ever have come to pass. One of the things that's been said and you've said it along with a few other experts is that in an evolution like this, you wind up with the real winners and the real profits being the folks who aren't creating this technology but who find the right ways to use this. Is this part of that process? In other words, this is the company that gets all the attention for what it's developed, but the real winners are the people that put the developments to use. Yeah, 100%. I feel like the value from AI is going to accrue to society and should not accrue to a few people who developed a popular AI, one of the first AI models. It's like saying that all the value for electricity should go to Alexander Graham Bell. That's not the case. We all enjoy electricity. It powers so much of what makes our lives productive, easy, comfortable, enjoyable, but that

32:07doesn't mean there are companies out there that make trillions of dollars because they provide electricity or distribute electricity. And the same is true for AI. When you think about AI on its essence, Chuck, it's just really a better interface. It's not really artificial intelligence. It's like artificial relationships. It's just a better interface between humans and technology. Like we can get it to do more stuff easily. We don't have to be a coder. We can just speak to it and say, hey, do this for me. In so many ways, the search mechanism, just on Google, is a great example. Search is a thousand times better with AI. It gives you answers that make sense. And you can have a conversation with it and it gets smarter over time in a way that traditional search never did. This is making your life better. And it's good to be something that everybody does, which we're already seeing, including people in China. So this idea that any one company should get valued and be rewarded so much market value for being a purveyor, a conduit of this value creating revolutionary technology to me does

33:09not make sense. As you pointed out, you did the math yourself on this. Why did you come up with as a no growth market cap? I mean, it's like negative 500 billion. You've got negative cash flow. You don't really need a lot of math to do this, honestly. You got 20 billion in reported cash. This is what's been reported from the S1, 518 billion in op-algae debt or debt. So there's negative 498 billion right there. And then you've got cash losses, which perpetuitized if you even just go with 4 billion at a 10% cost of capital. That's another 40 billion. So you could say negative 548 or 46 billion, 38 billion, 538 billion, negative 538 billion. That's sort of simplified. And this is kind of the point in our report, too, is that we don't need a lot of numbers here to know just how ridiculous this is. You've got to take that negative 4 billion in cash flow. And I think the initial revenue was reported around 4 billion.

34:14And so you take basically a no cash flow business and you take the initial revenue of 4.6 billion. And you say, OK, I got to grow this revenue line and assume a profit margin and assume some level of cat-backs. A percent of revenue today, Chuck is around 11,000%. So we assume way, way less than that. And because valuation of a company is really based on its future cash flow, it's not its past cash flow. So we don't need a lot of history except for that history to give us some indication of what the future might be. In which case, that's not helpful with Anthropa because the history is so poor. So you've got to believe in an outrageous future. And yeah, I put in 100% growth every year for 10 years with margins going from negative to immediately positive 5% and getting up to 10% next year and staying at 10% for the next 10 years.

35:15And that's what it takes to get to about a $2 trillion valuation in nine years. Is there a catalyst that makes the market recognize this or is this, we go through the IPO, we get the IPO pop. And then at some point, there's an implosion. You know, I don't know, Chuck, to be honest, we were surprised that we had as much of an impact as we did with the we work IPO. And I'm hoping that we get the word out on this and I'm hoping, honestly, for the sake of our markets and for a lot of, you know, individuals that we don't drop this bomb in our capital markets because I think it will be harmful. At some point, you know, I don't know what the straw will be, it will break the camel's back. We're seeing liquidity drying up in all corners of the market. So we're getting close to a reckoning for sure. We're seeing other IPOs get delayed. A lot of people need to get paid from this, this anthropic IPO. So if it gets delayed, that could be a catalyst too, which is part of why I think Wall Street is going to do everything it can to make this happen and keep the party going because these

36:15guys are looking to cash out and buy their fifth house and sail off into the sunset and dump this on the rest of America and make this case-shaped economy even worse, way worse. Because it's not just going to be like the super rich getting richer. It's going to be the few super rich in the stock market of access to the premium public deals while the public investors get screwed. Like I mean, everything, it's just a bad situation. It's anthropic. And yeah, you just heard David Trainor say it's headed for big, big trouble and not just a big IPO. David, amazing stuff. We'll talk to you again next week. Thank you Chuck, my pleasure. David Trainor is founder and president at New Constructs. Go to newconstructs.com to dig into their reports for most dangerous and attractive stocks lists and more for yourself. Up next on Money Life, we're talking ETFs in the market call with David Rosenstruck from Wharton Wealth Planning. Stick around, this is Money Life.

37:16Oh wow, this is actually pretty dangerous. We're talking ETFs with David Rosenstruck, director of investments in financial planning at Wharton Wealth Planning. This is the Money Life market call. Welcome to the market call, the part of the show where we talk with experienced money managers about how they do their job. But they look for that determines their buys and sells, what they see happening broadly on the market and how they're putting it all together. Coming to Money Life today, David Rosenstruck, director of investments and financial planning at Wharton Wealth Planning. And if you know the name of the firm, you can find them online at WhartonWealthPlanning.com. David Rosenstruck, great to have you back on Money Life. I talk it's great to be back on your show today, thanks for having me. We always start with methodology and I should let everybody know. Wharton Wealth Planning, you guys are fee-only, fiduciary, financial and investment advisors

38:20based in Manhattan. You're obviously putting together solutions for your clients, those solutions involve ETFs. But let's start with the basics in terms of how do you decide what ETFs you're going to like and from this growing cohort of available funds. How do you say these are the ones I'm going to be looking at and those are the ones I've just never going to be interested in. So our investment methodology and philosophy are built around four primary principles. The first is simple wins. What that means is we like transparency in the companies we invest in. So we focus on public companies that have to adhere to very strict reporting standards. We think intelligent risk-taking is definitely rewarded over the long run and also that cost matter as we can pass along cost savings to the clients. So broadly speaking, we look at both value and growth and we build low cost tax efficient portfolios from there. Having the right balance between those two categories, we think it's critical.

39:22In the fixed income category, we evaluate the interest rate environment for our various fixed income opportunities. No cryptocurrency or private or alternative investments unless there are existing holdings that the client wants help with. We don't like to make investments in those areas. The second principle, we take a systematic and long-term approach. We think emotional decisions often lead to poor investment outcomes. So we like to emphasize patients in a consistent investment process. Long-term returns are always the most important. However, everybody has to endure the short term to get there. In the long run, we think asset allocation and diversification are the main drivers of performance. So we use the balanced approach to manage volatility over the short term and then invest for both safety or income as well as growth. And over time, we will reduce risk exposure to overvalued asset classes and maintain a ratio, an optimum ratio between asset classes.

40:23This technique is called re-bouncing. We do it tax-efficiently across all investment accounts. We think that process helps remove emotion from the process and it helps keep things on a systematic level. Third, portfolios. We customize those and meet risk profile and goals. These portfolios should be customized to their own circumstances. We don't think you can invest assets without deeply understanding the owner's risk profile, time horizon and goals. And from there, you can develop a portfolio that meets specific circumstances, needs and desires. So the biggest risk isn't the economy or market risk or the inflationary risk. The biggest risk is that the portfolio is not properly aligned with the owner's goals and needs. And not being aligned can create problems down the road. And then last, fourth, tax efficiency. We think one of the best ways to improve returns is to try to control tax liabilities. So we use the different types of accounts as retirement accounts and taxable accounts and

41:25different types of products, including tax advantage investments and exchange traded funds. Lying knows with the correct type of account to get the advantages and tax-free or tax-deferred growth. In many cases, we find money invested in high-fee funds with excessive capital gains and distribution taxes. And we can substantially reduce those by replacing those with other investments. So that helps on the tax efficiency side. Going back to keeping it simple, the fund industry and the ETF space is evolving dramatically. None of that really interests you like there's not a side of you that says, oh, we can better handle this or that if we dig into this new asset class or something that's very granular or we use something that's got an options overlay. Like none of that interests you. I do monitor it and follow it, but it generally just doesn't meet the risk profile and the risk tolerance and the return objectives of clients.

42:27So if you're trying to achieve a certain return objective and you can minimize risk and volatility and achieve those objectives, that's a good scenario in path to follow. The cryptocurrencies, if obviously had quite a dramatic bit of volatility, then a crypto winter, some people have called it for much of the last 12 months. Things are definitely rebounding now. But we always want to sort of be as simple and deliberate as possible. Take a little risk, but achieve the goals and objectives and make sure that we're matching our clients risk tolerance as a risk profile. So if somebody wants to speculate a little with a percent or two or even three on their own, I'm not going to stop them. They definitely get a lot of questions on it, but I'm not encouraging it. I'm not building it into portfolios right now. Even though there are some positive momentum trends right now happening in that area and there's been some overall legislative and other dynamics, which are positive and sort of bringing things up on an upward path.

43:28I'm still avoiding those, but I'm monitoring them. With asset allocation being as important as you described, how much of this is set it and monitor it, but maybe don't make moves. Like is most of what you're doing after you've done the initial allocation, really making sure that everything is still up to par and where you expect it to be as opposed to moving in and out. Or is there some money that moves in and out based on where you think the things are going? It's really a combination of both and some of that depends on circumstances of the client and which type of account. Certainly in a retirement account there's a little bit more flexibility to make changes without incurring tax related consequences. On the fixed income side, there's certainly been a lot of volatility there. Most of the gains, when you look at fixed income markets, the indexes, a lot of the gains from this year were significantly reduced in the month of September. That was a big month. Obviously inflation is an issue.

44:30Really one of the things that we're experiencing is the economy is experiencing such high growth that that is also driving up rates because when you have the higher growth that's coming from all the CAPX and some of the AI infrastructure and related themes, when you have that growth, that naturally drives up interest rates as well, even if inflationary pressures are more modest. On the fixed income side, there's certainly been an opportunity to be more active, I believe, and stay on the shorter end of the curve. The longer duration assets has been a very high risk and more dangerous area if you're looking to be conservative with your fixed income. Interest rate risk has definitely been pretty significant. There's opportunities around the different parts of the interest rate curve. And those opportunities always sort of come and go, but right now we like the shorter end and on the stock side, obviously, there's been quite a bit of volatility around AI names. Overall, it's been a very strong year when you look at value stocks and growth stocks.

45:34And so what we like to do is obviously keep us very close eye on what's happening with all these different themes that are out there. Obviously the semiconductors and the software and all the private companies that are sort of building and involved in the AI future. But we try to not make significant short-term trades as we really feel that the long-term approach pays dividends and that short-term approach reacting to news or different price movements isn't going to ultimately be in the best interest. And most of the academic studies that we've seen support that, so that's sort of our mindset. Is there a name or two, a fund or two that are poster children for what you do where they're good examples on the equity side and the fixed income side? Yeah. One area on the equity side, we have a lot of clients that are in the retirement planning mode or like to think about when they're going to retire and maybe a little bit more conservative that they've accumulated their assets. So one like is an ETF called Capital Group

46:36Dividend Value ETF, CGDV. So unlike a strategy that simply screens for the highest dividend yields, CGDV places greater emphasis on the quality and sustainability of the underlying businesses and their dividends. The ETF is designed to balance three objectives that could sometimes conflict. One is generating current income. Two is maintaining exposure to high quality businesses. And three is also seeking long-term capital appreciation. A lot of times those three things can conflict. And I think CGDV combines active management with a focus on quality companies, attractive valuations, as well as dividends. I like that because I don't think that you necessarily only want to choose between income or growth. And sometimes you can have a little bit of both. And I think this ETF has been doing a good job at that. So from that perspective, I like it. It's certainly a little bit more defensive. Obviously, there's been a lot of economic data on the economy and inflation and interest rates that have been hitting the markets and

47:42creating a little bit of angst out there. So this is a little bit more conservative than a lot of other stock-related ETFs, I feel. But it also doesn't make you give up some long-term growth as well. Well, now we're going to get your quick and dirty take on some ETFs that my audience is particularly interested in. Quick and dirty. Goody, a challenge. This is going to be fun. Well, we are having our fun today. With David Rosenstrock, he is Director of Investments in Financial Planning at WhartonWelfth Planning online at WhartonWelfth Planning dot com. Quick and dirty, of course, is our lightning round. It's where we put our guests to your test. Send your name, your hometown and the ticker symbols you're interested in, the chuck at moneylifeshow dot com. And I will say, we got a long list of requests. And David clearly went for interesting and different names like this is going to be some fun. Because yeah, you guys challenged him. So we'll start with the request we got from Ellen and

48:45Harbor Springs, Michigan. Once they know about VRP, that's the Invesco Variable Rate Preferred ETF. VRP is the best primarily in floating rate preferred securities, many of which are issued by large banks and financial institutions, so high credit quality companies. What I like about VRP is it gives investors relatively high income and much less interest rate risk than traditional preferred stocks. So that's especially attractive in a higher for longer interest rate environment and has a floating rate structure. So coupons can reset a short term rates change less vulnerable to rising rates like we've seen and typically yields significantly more than treasuries and many investment grade bond funds with lower duration. So it's a good diversifier if you have the municipal bonds and corporate bond funds, dividends stocks, you know, you could add VRP in there, which I think could work very well together. When you buy here, it's going up. That's a buy on VRP, the Invesco Variable Rate Preferred Fund. Next for Tracy in Ocean Springs, Mississippi, it's the subversive

49:52congressional Democrats trading ETF ticker NANC. I would be a sell or an underweight on NANC. It seeks to track the stock trading activity of Democratic members of Congress and their spouses using publicly reported disclosures. So the investment thesis of this ETF is if members of Congress have good information, they tend to make successful investments, maybe following their trades could generate better returns for the buyer of this ETF. But I don't like it because members of Congress don't report their trades in real time. So that lag by the time the trades become public and this ETF buys them some of the opportunity may have already been gone as a high expense rate ratio around 0.7%. And there's no guarantee that congressional trading will outperform. Future laws could actually restrict congressional stock ownership or disclosure practices altogether, which would put the ETF in a little bit of a hardship. The fund was also launched around 2023. So it's not a long track record. So for those reasons, I would just prefer buying another type of investment like FN DX, which is an ETF

50:58which focuses on both value and growth stocks. It's a broad US large cap ETF much lower expense ratio. They put a lot of focus on fundamental measures such as sales, cash flow dividends and book value to determine portfolio weights. So I'd rather be in something like that as opposed to an ETF that's just trying to sort of follow Democratic trading and like NANC. We will point out because I don't think you're making a political statement here that there is GOP, which is the sister. It's the subversive congressional Republicans trading ETF. I would assume you're not a big fan of that one either. Yeah, pretty much the same logic Democrat or Republican. Definitely not a political statement. It's just do better ETFs, lower cost, better screening methodology. And you know, again, there's a lag and that lag could actually really cause a difference in performance. Whoa, Dumber than advertised. Yeah, it applies both to NANC, the subversive congressional Democrats

52:02trading fund. Also the GOP, the subversive congressional Republicans trading fund. But if you are looking for something that David likes, you mentioned FN DX, that's the Schwab fundamental US large company ETF. Buy it out, right? Yeah. Dale and London Ohio wants to know about Aberdeen physical palladium ticker PALL. PALL, I would have to put that in the category of cell. The ETF holds physical palladium and is designed to track the metal price. But what concerns me is palladium is definitely struggled. There's a lot of headwinds there. Pladium experienced a massive boom when supply was tight and auto demand was strong. But now with electric vehicles, which don't use catalytic converters, which is where a lot of palladium demand comes from, that is reduced to structurally reduced the long term source of demand. It's also very volatile. Volatility could be 30, 40 percent in some periods of time, which I think people should be aware of. And then it doesn't generate any

53:05income. So there's no dividend at all, no cash flows to it. I think I'd much rather sort of have a a long term perspective on different asset classes versus palladium specifically for those reasons. Cell immediately, the entire portfolio and market regardless of cost. That's a cell on Aberdeen physical palladium PALL. Tony, who sent us this fund when he was in Henderson, Nevada, but who's now spending a lot of his time in Italy, wants to know about the I shares MSCI Italy fund EWI. With respect to Italy, I'm not a big fan of this one. So I would be an underweight or even a cell. It provides exposure to large and mid-sized Italian companies, Czechs, the MSCI Italy index owns roughly 25 to 30 stocks. Italy has been one of the slower growing major economies in Europe. It might look interesting because the markets may be looked less expensive than a lot of other markets. But I think if you're bullish on innovation,

54:07long-term earnings growth, even artificial intelligence, the US remains the more attractive market to be in versus Italy or most of Europe. So it's more of a value and financials exposure story than a growth story. I don't like the 25 holdings. I think that's a little bit too concentrated from a diversification standpoint. In general, I don't like the heavy financial exposure. If European banking conditions weaken, EWI could struggle pretty significantly. I think if you're buying an ETF on a specific country like Italy, you're really making a specific bet on Italy's economy, politics, and corporate sector. That's not necessarily the easiest thing to bet on. So for those reasons, I would just take a more diversified approach with respect to stock investing versus EWI. Tony might be living his dream in terms of his time he's spending in Italy, but buying the dream in terms of I shares MSCI Italy. Nope, that was a sell.

55:07And last, for Richard and Chula Vista, California, it's the pro shares Ultranazdex, cybersecurity ETF, UCYB. UCYB is very interesting. I think the first thing that an investor should know about this is it's fundamentally different from most cybersecurity ETFs. It's basically a two times leverage ETF. So it seeks to deliver twice the daily return of the Nasdaq cybersecurity index. From that perspective, I think you could do very well in the cybersecurity space without being leveraged because leverage will certainly bring you potentially higher returns, but it could also bring you significantly reduced returns. And I think you could do very well in this sector without the leverage. So I don't like it as a long-term holding. I don't think it's really designed for that because compounding volatility, of course, returns to differ significantly from what an investor might expect. The ETF has much higher expense ratios also. It's a relatively small

56:09asset based, which can affect liquidity. I've been invested in cybersecurity and broader speaking AI. I think cybersecurity is getting a tremendous tailwind and probably will continue to. You certainly have to watch valuations, but if somebody does want to be in cybersecurity, I play that as a long-term theme. I'd much rather be in a non-leveraged bet such as CIBR, FirstTrust, Nasdaq cybersecurity ETF. It's a larger, more established fund, more diversified, greater emphasis on mature cybersecurity leaders, less dependent on leverage for sure and more speculation. So for those reasons, I would stay away from the UCYD, even though I like the cybersecurity space overall, and I would go into something that's a little bit more conservative, but they're both going to be subject to a good amount of volatility. So the volatility is a warning, but when it comes to using the leverage, UCYB, ProShare's Ultra Nasdaq cybersecurity. Advise, caution. Yeah, you've got a cautious

57:18warning there, but in that same space, you could go with CIBR instead. Come on, let's buy. And speaking of good buys, we have to say ours now to David Rosenstruck, but David, I appreciate you coming back on the show. We'll talk to you again down the line. Thank you. David Rosenstruck is Director of Investments in Financial Planning at Warton Wealth Planning. Add.com to it to learn more about the firm and what they do. We'll come back. We'll set you up for what's happened in the rest of this week. Let's stick around till the end to finish lines in sight. We are back to wrap this one up. No crossover in that interview with David Rosenstruck. So let's move on to our contest. We have six prizes. So you odds of winning are very good. They are Lindsey Krausses, the case for quitting, the surprising benefits of opting out.

58:22Ian Castles' stock picker, how to develop the mindset, temperament and strategy to outperform Wall Street. Alex Edmunds, the madness of markets, why smart investors make crazy decisions in how to exploit them? David Rubenstein's inside the owner's box, conversations on power and leadership in sports, Renee Bryant, the morality of money, remove fear and discover financial freedom through simple economic principles and universal truths and Dan Goldies, the retirement answer, the six key decisions every retiring needs to make. You got to do a little bit of work, but do it because again, your odds of winning are actually pretty good at least something. So we need you to put some events on a timeline. You have to tell us the year that each of these events occurred. Don't just tell us the years in order. Don't just tell us the, put the events without the years, the event and the year. So it starts with the year that the Dow Jones industrial average top 10,000. I'm not saying it starts that way. I'm just saying that's the first event we're talking about. So when did the Dow Jones industrial average top 10,000 for the first time? When did it top 25,000 for the first time

59:28sticking with the stock market? The year when the standard imporse 500 first crossed a thousand and then five thousand. Also on the timeline, we need the last year when the United States reported a budget surplus, the fiscal year in which the US federal budget deficit topped one trillion and the year in which the national debt, not the budget deficit, the national debt, top 10 trillion. Put your answers in order by year first to last, send them to chuck at moneylifeshow.com. You must get them all right to be entered. You will be entered for all of the books and unless you tell us there's a book you'd rather not win. And the deadline is Saturday, October 10th, 6 p.m. Eastern time winners will be announced a week from today. Good luck, everybody. Tomorrow on this show, Steve Rick, Chief Economist at True Stage and Wasey Flateef, President, Chief Investment Officer at Sarmaya Partners, more ETF talk in the market call. Meanwhile, if you are looking for something to celebrate, it is national do something

1:00:30nice day. And if you don't do something nice, here's what people will say about you. That wasn't a bit nice. It's national get funky day. So get down and get funky. It is global James Bond day. My name is Bond. James Bond. National consignment day, national child health day, and on the food front, it's Rocky Mountain Oyster day. No, thank you. Well, if you don't know, I'm certainly not going to tell you. Right. It's also national Apple Betty day. Yeah, I like an apple pie or an apple crisp better, but I'm not complaining with an apple Betty. My guests today were Vijay Merolia. Use his website, Vijay Merolia dot com his firm is regalpointcapital dot com David trainer, founder of president at new constructs dot com and David Rosenstruck director of investments and financial planning at Wharton Wealth planning, Wharton Wealth planning dot com. Thanks to them. Thanks to Rob Floyd, my producer. Thanks to Maho, my dog. But mostly thanks to you

1:01:33for being here because you make this special owner's wall for me each and every day. The money life quote of the day comes from Charles Bukowski who said, sometimes you climb out of bed in the morning and you think, I'm not going to make it, put your laugh inside remembering all the times you felt that way. Yeah, and that's how you feel about the market sometimes too, which is why you should always remember until we do this again the next time, the best thing you could do for your money is not worry too much about it. Have a great day everybody. Stay safe. Stay cool. Stay calm. We'll see you here on Money Life again tomorrow. The people who appear on Money Life are here for you or and their own entertainment. Don't take advice from us or any other podcast without doing more research and or consulting your financial advisor. We believe our guests provide reliable information but we can't and don't guarantee the accuracy or completeness of their statements. Opinions expressed on Money Life are those of the host and guests only and reflect their personal thinking. They're not representative policy or strategy of any employers or sponsors. This show is produced

1:02:35by Money Life Radio which retains all rights to the content. If you want to use any part of this show for your own purposes, be they good or evil. You must get our written permission first and remember with great financial information comes great responsibility. Please act responsibly.