Author: Eric Johnson

Money, Happiness & Cancer

William Vanderbilt was the son of the great Cornelius Vanderbilt. When his father died, Cornelius was the richest person on the planet. Billy took his father’s wealth and almost immediately doubled it with some shrewd business maneuvers (in today’s terms, imagine Elon Musk’s son inheriting $500 billion when he dies and then investing it and quickly doubling it to $1 trillion). Being the richest rich person didn’t make William Vanderbilt any happier:

“The sheer magnitude of his fortune, he told Chauncey Depew, gave him no advantages over men of moderate wealth. “I have my house, my pictures and my horses, and so do they. I can have a steam yacht if I want to, but it would give me no pleasure, and I don’t care for it.” On another occasion he spoke of a neighbor saying, “He isn’t worth a hundredth part as much as I am, but he has more of the real pleasures of life than I have. His house is as comfortable as mine, even if it didn’t cost so much; his team is about as good as mine; his opera box is next to mine; his health is better than mine, and he will probably outlive me. And he can trust his friends.”

Being the richest person in the world brought him, he said, nothing but anxiety.

The founder of MVMT recently sold his company for $100 million at age 29. He recently posted on Reddit how two years after selling his company he’s lonelier than ever and deeply depressed. Money dramatically improves everyone’s lives up until the point they can relax and be content. After that, assuming they are in moderately good health, almost all happiness comes internally.

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The largest medical A.I. randomized controlled trial yet performed, enrolling >100,000 women undergoing mammography screening, was published today. The use of A.I. led to 29% higher detection of cancer, no increase of false positives, and reduced workload compared with radiologists without A.I.

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The Drug Industry Is Having Its Own DeepSeek Moment. It isn’t just artificial intelligence—Chinese biotechs are now developing drugs faster and cheaper than their U.S. counterparts. Many top scientists trained in the U.S. have returned to China over the past decade, fueling the emergence of biotech hubs around Shanghai. And just as DeepSeek built a formidable chatbot—allegedly on a lean budget with limited access to semiconductors—Chinese biotech companies are also scrappier, capitalizing on a highly skilled, lower-cost workforce that can move faster. Additionally, companies can conduct clinical trials at a fraction of what they would cost in the U.S., while recent changes in the Chinese regulatory system have streamlined and accelerated the approval process to get a study started.

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A new study by Stanford University researchers finds that the average online sportsbook customer expects a gain of 0.3 cent for every dollar wagered. In reality, sports bettors lose an average of 7.5 cents per dollar wagered, reflecting widespread overoptimism about financial returns. We found that people more or less understood the amount of money they had lost in the past, but they just thought the future would be better. Parlay bettors do so much worse than single-outcome bettors and are so much more overconfident in their chances that they likely account for most of the excessive optimism in the overall sample.

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Only 13% of U.S. imports come from China:

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European stocks have under-performed U.S. stocks in 12 of the last 15 years. However, the pedestrian pace of the European economy and markets could be a virtue for investors in the years ahead. Europe suffers from none of the over-building excesses that haunt the Chinese economy. European equity markets have none of the bubbly valuations that pose a threat to U.S. stocks. A starting point of a weak euro and monetary easing, combined with a high savings rate and fiscal capacity has the potential to boost both economic growth and dollar-denominated returns on European equities. Attractive dividend yields can allow European equities play a respectable role in generating income. Moreover, political pressure from within Europe, along with the threat of tariffs from the United States, could motivate bolder action from European policymakers in both deregulation and fiscal stimulus, triggering greater economic momentum. The strongest case for European equities is simply a value case. At the end of January, the MSCI Europe ex-UK had a forward P/E of 14.7 times compared to 21.8 times for the S&P500, a discount that is more than two standard deviations greater than its average over the past 20 years. It also sported a dividend yield of 3.3% compared to 1.3% for the S&P500.

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The silver market is heading into a perfect storm. Even in our most conservative case, holding everything but solar demand constant, we’re looking at potential deficits of 100-200 million ounces annually for the next decade. Solar panels now consume one in four ounces of silver mined globally. Even at current solar installation rates – before factoring in any AI-driven surge in energy demand – we’re looking at a supply-demand gap as large as the entire elastic (price-sensitive) portion of silver supply. Solar demand is structurally inelastic – panel manufacturers will buy silver at almost any price because it represents a tiny fraction of total costs but is essential to functionality. The sheer scale of the energy transition dwarfs anything in silver’s industrial history – we’re talking about rebuilding the entire global energy infrastructure.

Marriage, Scammers & Losing It On Live TV

Losing It on Live TV. Lorne Michaels reportedly dislikes when “Saturday Night Live” cast members break character. But over 50 seasons, it’s become one of the show’s signature moves — one that usually delights the audience.

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A common narrative is that less people are getting married, and the number of births is declining because more college educated women are choosing their jobs over starting a family. In reality, the graph below shows it’s the opposite. The married rates for college educated women have held steady, while the number of non-college educated married women has plummeted.

The reason: Men without degrees have seen their economic prospects decline over the past few decades. These financial troubles have led to lower marriage rates for men — and for women without four-year degrees (even as these women have seen their incomes rise). In other words: a “good” man has become harder to find, at least for women with less than a four-year degree. So, they’re getting married less.

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Scammers are seen as faceless, evil people who make Aussie lives a living hell. We decided to track down a scammer, and this is how and why he does it. He worked alongside hundreds of others aiming to steal money in a ‘pig butchering’ romance scam in a sophisticated operation designed to part unsuspecting victims from their cash. This type of scam devastates thousands of Aussies a year.

Seen below, scammers will queue up “the model” to speak to the victims on video calls.

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The Endowment Effect is sneaky. It whispers, “Hold on. This is yours. It’s special.” But the truth is, nothing is special just because you own it. A bad stock doesn’t become good because it’s in your portfolio. A house isn’t worth more because you have memories in it. How do we fight the Endowment Effect?

  1. Ask: If I didn’t own this, would I buy it today? If the answer is no, it might be time to let go.
  2. Detach from the purchase price. The stock doesn’t know what price you bought it at.
  3. Think like an outsider. What advice would you give a friend in your position?
  4. Set clear exit rules. Have a plan for when to exit an investment before you even enter.
  5. Seek a devil’s advocate. Have someone play devil’s advocate to convince you out of your decision to hold.

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The graph below shows wealth concentration/inequality among top the 10% in the OECD member countries. The United States is unlike anywhere else in the world:

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How many decades since 1900 has the United States stock market outperformed the rest of the world? Only 3:

  • 1900’s
  • 1910’s
  • 2010’s

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America dominates the rest of the world in venture capital (VC) investments:

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Perhaps the single greatest divergence in equity markets has been the continued outperformance of US versus international equities—and thus the widening of the valuation gap between the US and the rest of the world. To try and determine why, we regressed value against the other common risk factors for the top 1,000 stocks globally. By far the most significant difference, explaining about half the valuation gap, is the domicile of listing. US-listed stocks are substantially more expensive than internationally listed stocks for no reason other than the place of listing.

Were a larger percentage of the valuation gap explained by fundamentals; we’d expect such a gap to persist. But given that the valuation gap is primarily explained simply by the location of listing, we think there’s a strong reason to expect a convergence—and therefore to favor international over US-listed stocks, despite their terrible relative performance over the past decade.

Figure 1: Premium of US vs. International Equity Valuations (5-Year Average, P/B)

Stories, Failing & Fartcoins

63 life lessons/principles from Nabeel Qureshi, including:

  • Think about what makes you ‘imbalanced’ as a personality, & do things where this gives you an edge.
  • Once you are ok with people telling you ‘no’, you can ask for whatever you want.
  • Doing as much as you can every day is a form of life extension.
  • Always be high integrity, even when it costs you. The shortcuts aren’t worth it.
  • Figure out what your primary focus is and make progress on that every day, first thing in the morning, no exceptions. Days with 0 output are the killers.
  • If you find yourself dreading Mondays, quit.
  • No matter how bad things seem, everything passes.
  • Form opinions on things and then find the strongest critique of those opinions. Repeat.

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The function of the mind is to process information and to interpret it according to its unique perceptions. It’s not a fact-gathering machine, but an opinion-generating one. It attempts to find the personal narrative that weaves through everything it knows, and will then communicate that opinion in the hopes that it will resonate with others. In other words, AI can give you all the information you want, but that’s not what creativity is. Creativity is about finding the unique connections within those facts and communicating the result to others, and that can only be done through the skill of storytelling.

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The reason we hate being bad at things and failing is because when goal-directed activity is inhibited or blocked (either by an outside force or our own lack of aptitude), that stimulates our dorsal anterior cingulate cortex, which is part of the brain’s pain circuitry. This is the same region affected when we experience social rejection. This kind of mental pain does, however, have an evolved benefit—creating the motivation to succeed, if not at the activity at hand then at some other one.

This motivation effect is detectable in business activities. When employees are frustrated by their relative incompetence at one task, they tend to be motivated to show more competence for something they’re already better at.

Ruminating on failure is widely recognized to be a destructive waste of time, because this type of reflection focuses on self-worth and what failure says about one as a person. Action rumination is different: It is task-focused and involves replaying the exact missteps that one made and how they could be rectified in the future, which can lead to learning and improvement as opposed to frustration and chagrin.

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Are we overprescribing antidepressants in the U.S. or are things worse here?

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The probability of divorce for married people has been declining steadily for a long time, and in 2023, a record-low 1.4% of married adults got divorced.

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A global perspective on what the DeepSeek A.I. technology out of China means for the economy and financial markets, from a the CEO of a research company that is from France, has a child going to school in the U.S., and works in Hong Kong.

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The lunatic fringe of the U.S. financial system seems to be experiencing a speculative mania involving cryptocurrencies and crypto-related stocks. It could be called the Fartcoin stage of the market. The current meme coin mania makes the bubble of 2021 seem like a relatively sober exercise in rational valuation. At least back then, Roaring Kitty talked about earnings, and crypto enthusiasts rhapsodized about use cases. They might have been delusional, but at least they were delusional about the right things. Karl Marx said that history repeats, first as tragedy, second as farce. He was too optimistic. The truth is that history repeats, first as tragedy, second as farts.

College, Cancer & Wages

The share of elite MBA grads still looking for work 3+ months after graduation is up sharply at practically every high-ranking school. The traditional elite-MBA absorption process—1) Get degree; 2) Glide path to Big Tech/Consulting—seems disrupted.

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Gen Z is the most money-centric generation we’ve seen yet.

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The face of cancer in the U.S. is getting younger—and more feminine. Cancer rates for women in the U.S. have risen over the past half-century, particularly among women under age 65 diagnosed with breast cancer. For decades, the cancer burden in the U.S. was higher for men, who started smoking en masse in the 20th century. Their rates of lung-cancer cases and deaths soared. Lung cancer remains the biggest cancer killer for men in the U.S., but case and death rates have dropped, after smoking rates declined. 

Women started smoking heavily later than men and have been slower to quit, so their lung-cancer decline started later and hasn’t been as steep. That has had a significant impact: Lung cancer incidence among women under 65 was greater than among men for the first time in 2021. Women are also more likely to get diagnosed with lung cancer as nonsmokers. 

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We rank nine major U.S. airlines on seven equally weighted operations metrics: on-time arrivals, flight cancellations, delays of 45 minutes or more, baggage handling, tarmac delays, involuntary bumping and what the Transportation Department calls passenger submissions (which are mostly complaints).

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Parlays, the tough-to-win multipart wagers with tantalizing payouts, are bringing in casual and newbie gamblers, and betting companies are making a killing. FanDuel said 90% of its same-game parlays, or bets on multiple developments within one event, have a wager of $30 or less, while 60% are $5 or less. About 20% of all money spent by DraftKings on national TV advertising last year hyped parlays, compared with 11% in 2022.

Parlays accounted for about 27% of the money wagered on all sports bets last year through October in Illinois, New Jersey and Colorado, states in which gambling regulators report data by bet type. That’s up from 22% of all sports bets in 2021. The multi-leg bets delivered about 56% of sports-betting revenue after payouts for companies in the three states during that period, up from 50% in the same stretch of 2021. 

Multi-leg bets are so lucrative that FanDuel parent company Flutter Entertainment recently increased its expectation for total online gambling revenues in the U.S. to $63 billion by 2030, up from its estimate of $40 billion two years ago, driven in part by parlays, the company said.

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People are usually surprised when they see how Japan has grown its dividends at a 6.9% annual clip over the last 20 years, outpacing the 6.7% growth pace of the S&P 500. Japan trades for 13.5x forward earnings, or a 37% discount to the S&P’s P/E of 21.3.

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A massive wage arbitrage has opened between the US and its competitors. The overwhelming majority of people in the US have no idea just how much more money they make than the Japanese, French, British, etc.

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Of the stock market’s 10 largest companies, there are more that trade for a P/E > 30 than there were on Dec. 31, 1999. With the exception of maybe AT&T, every single one of 1999’s top dogs were considered unstoppable, dominant, kings, never to be unseated. Until they were.

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US stocks are expensive relative to the rest of the world, even if you excludes big tech:

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Stress, Attractiveness & Stocks

Minimum Levels Of Stress, a phenomenal new article by one of my favorite authors; Morgan Housel.

A day after the September 11th terrorist attacks, every member of Congress stood on the steps of the U.S. Capitol and sang God Bless America. Could you imagine that happening today? It’s easy to say no, given how nasty politics has become. But if America faced an existential crisis like 9/11 again, I think you’d see the same kind of unity return. There’s a long history of enemies putting their differences aside when facing a big, devastating threat. People get serious when shit gets real. If that sounds like wishful thinking to you, let me propose a reason why: Part of the reason today’s world is so petty and angry is because life is currently pretty good for a lot of people.

There are no domestic wars. Unemployment is low. Household wealth is at an all-time high. Innovation is astounding.

As the world improves, our threshold for complaining drops. In the absence of big problems, people shift their worries to smaller ones. In the absence of small problems, they focus on petty or even imaginary ones. Most people – and definitely society as a whole – seem to have a minimum level of stress. They will never be fully at ease because after solving every problem the gaze of their anxiety shifts to the next problem, no matter how trivial it is relative to previous ones. Free from stressing about where their next meal will come from, worry shifts to, say, a politician being rude. Relieved of the trauma of war, stress shifts to whether someone’s language is offensive, or whether the stock market is overvalued.

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The graphics below show that in general, men rate women more highly than women rate men.

A summary and thoughts on the data from the author:

  • The typical woman is disgusted by the typical man
  • The typical woman is moderately disgusted by the median man
  • The typical woman is strongly disgusted by the bottom quarter of men
  • Men should stop taking rejection so personally. When the typical women rejects you, the problem isn’t so much that she finds you unappealing. The problem is that the typical woman finds almost all men unappealing.
  • Men should try harder to be less disgusting. 
  • Women should try harder to be less disgusted. Most women eventually accept a guy who isn’t visibly attractive. Much of the reason is that superficially unappealing guys win them over with charm, humor, and devotion.
  • It’s not hard to use evolutionary psychology to explain why the typical man disgusts the typical woman: Since women’s maximum reproductive capacity is strictly limited, they’re evolved to be hypergamous, with a strong preference for mating with the best of the best.

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Numerous studies show a strong relationship between stock market valuation and long-term subsequent returns. Since 1979, global stock market indices have been valued on average at a Shiller-CAPE of 20 and a price-to-book ratio (PB) of 1.9. Investors who invested at attractive valuations in recent decades were able to achieve above-average returns over the following 10-15 years. Those who bought at high valuations, on the other hand, were generally disappointed in the long term.

Here’s a look at where countries stand today. The lower left are the least expensive countries/stock markets and the upper right are the most expensive. You can see that India is off the charts expensive while the United States is in another solar system based on how overvalued it is.

What long-term stock market returns can investors expect in the 20 most important stock markets based on valuation?

  • Based on CAPE and PB, Latin America and Asia currently show the lowest valuations, particularly in Brazil, Korea and China. These equity markets are currently trading at a CAPE of 9-12 and a PB of 0.9-1.4.
  • Historically, comparably attractive valuations have been followed by above-average returns of 9-11% (in real terms) over the next 10-15 years.
  • In general, the emerging markets (with the exception of India) are currently valued much more attractively than the developed markets. Historically, comparable valuations in the emerging markets have been followed by annual returns of 7.7%, while the developed markets are expected to achieve rather low returns of 2.5%.
  • The low return expectations of the developed equity markets are caused by the extremely high US valuation: with a CAPE of 35.4 and a P/B ratio of 5.1, the US market is trading at around twice the level of recent decades. In the last 140 years, such high valuations have been followed by long-term returns of only 0.1% p.a.
  • Among the developed markets, Germany, Italy, Japan, Singapore, Spain, Norway and the UK still appear attractive. Investors here can expect annual returns of 7-8% in the long term here.

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Anti-Social, Bubbles & Walking

Derek Thompson wrote a great article this week called The Anti-Social Century: Americans are now spending more time alone than ever. It’s changing our personalities, our politics, and even our relationship to reality. He also released a podcast episode discussing the article.

  • Men who watch television now spend 7 hours in front of the TV for every 1 hour they spend hanging out with somebody outside their home.
  • The typical female pet owner spends more time actively engaged with her pet than she spends in face-to-face contact with friends of her own species.
  • From the late 1970s to the late 1990s, the frequency of hosting friends for parties, games, dinners, and so on declined by 45%, then it got worse. Between the early 2000s and the latest data, the average amount of time that Americans spent hosting or attending social events declined another 32%.
  • A 5-percentage-point increase in alone time is associated with about the same decline in life satisfaction as was a 10% lower household income.
  • From 1965 to 1995, the typical adult gained 6 weekly hours in leisure time. They funneled almost all of it into one activity: watching TV.
  • In 1970, just 6 percent of sixth graders had a TV set in their bedroom; in 1999, that proportion had grown to 77 percent.
  • The share of boys and girls who say they meet up with friends almost daily outside school hours has declined by nearly 50 percent since the early 1990s.
  • Today’s adults spend an additional 99 minutes inside their homes on any given day, compared with 2003.
  • The share of U.S. adults having dinner or drinks with friends outside the home on any given night has declined by more than 30% in the past 20 years.
  • Restaurants used to be the ultimate “social” business. But today, just one-quarter of restaurant traffic is “on-premises”—that is, sitting, ordering, talking with people at a table. With the rise and rise of delivery 74% of all restaurant traffic now comes from “off premises” customers—takeout and delivery. And solo dining has increased by 29% in just the past two years. The top reason given? The need for more “me time.”

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Gen Z spends an average of 109 days per year looking at a screen. Eighty percent of our waking hours are spent consuming information, up from 40% in 1980.

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Do You Even Maxx Bro? Chewing-gum workouts for sharper jawlines. Specialty products for feathered bangs. So. Much. Cologne. Exploring the extreme self-care trends shaping a generation of young men.

In the past, I might have tuned out a very online trend like looksmaxxing, but I regret to inform you that we can’t skip this one. Because looksmaxxing might be the key to understanding Gen Z and Gen Alpha behavior, knowing where they’re headed, and, frankly, answering a larger question you’ve definitely thought about: Are young men okay?

Someone unexpected has emerged as an unlikely Gen Alpha role model: American Psycho’s Patrick Bateman, the yoked killer from the 1991 Bret Easton Ellis novel, memorably played by Christian Bale (and his cheekbones) in the film. In forums on Reddit , looksmaxxers have coalesced around Bateman, whose well-moisturized face has become an extremely popular profile pic for self-described “sigmas,” a Gen Alpha term for independent men who prioritize power, class, and self-control, known to attract beautiful women aroused by their bank accounts.

As Bateman says in the film: “You can always be thinner…look better.” For many, that starts with “mewing,” a non-medical technique that involves pressing your tongue to the roof of your mouth to reshape your jawline. Men now receive ads for Jawliner gum, part of a new category of fitness chewing gums, which is 10 times harder to chew than a standard piece and is designed to tone the masseter muscles in their face. Terms like brotox have made their way into professional conversations, and more men have been seeking jawline-enhancing procedures.

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Great newsletter from Howard Markets this month discussing bubbles and valuations in the market using historical examples from his decades of experience in the financial industry (started in 1969). Some highlights:

  • In bubbles, investors treat the leading companies—and pay for their stocks—as though the firms are sure to remain leaders for decades. Some do and some don’t, but change seems to be more the rule than persistence.

My early brush with a genuine bubble caused me to formulate some guiding principles that carried me through the next 50-odd years:

  • It’s not what you buy, it’s what you pay that counts.
  • Good investing doesn’t come from buying good things, but from buying things well.
  • There’s no asset so good that it can’t become overpriced and thus dangerous, and there are few assets so bad that they can’t get cheap enough to be a bargain.

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Studies continue to show that any type of movement (even just taking a simple walk) can be extremely beneficial for mental health.

  • Researchers analyzed 33 studies examining the movements of nearly 100,000 adults using smartphones, pedometers and other fitness trackers. Those who clocked more daily steps were less likely to report depressive symptoms or be diagnosed with the condition than those who walked less.
  • Participants ranged in age from 18 to 91 years old and lived in 13 different countries. Those who logged at least 5,000 or more daily steps were less likely to experience depressive symptoms, with the greatest effect coming for those who logged more than 7,500 steps a day — they were 42% less likely to suffer depressive symptoms.
  • A subset of studies included in the meta-analysis found that for every 1,000 daily step increase, adults reduced their risk of developing depression by 9%.
  • The message is very consistent: more is better, and some is better than none.

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An in-depth report from Reuters on the origins of OnlyFans and how it turned into one of the most profitable businesses in the world.

  • Created in 2016, OnlyFans has paid out over $20 billion to its creators, who now number 4.1 million. The company takes a 20% cut of creators’ revenue.
  • In 2023 alone, content creators generated $6.6 billion on the platform that has over 300 million users
  • Its dividend payout of $472 million to the owner was more than Ralph Lauren earned from the fashion company he founded, and Nike co-founder Phil Knight earned from the sportswear giant – combined.

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While no one is ever going to feel bad for someone that co-founded a company and sold it for $975 million, Vinay Hiremath wrote a blog post this week titled: “I Am Rich & Have No Idea What To Do With Myself.” After selling the company he found himself lost, depressed and breaking up with what sounds like an amazing girlfriend that loved him. He just booked a ticket to Hawaii to do some soul searching (again, no one is going to feel bad for him), and is asking himself:

  • Why couldn’t I just leave Loom and say “I don’t know what I want to do next”?
  • Why do I feel the need to only be on a journey if it’s grand?
  • What is wrong with being insignificant?

It’s an introspective look into someone’s open, honest mind providing another example that money solves a lot of problems, but it can’t solve all of them. Most of the time people seem to end up less happy at the destination than they were along the journey to get there.

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Fiscal Dominance, Premortems & Waking Up Early

Lyn Alden just released an absolute masterpiece of a newsletter on Fiscal Dominance and the impact it will continue to have on the economy and financial markets moving forward. She walks through:

  • What fiscal dominance is and how we got here
  • Why government spending is now more important than bank/private sector lending
  • Why central bank tools become ineffective at combating inflation in this new environment
  • Why DOGE will fail to reach its goals on cutting government spending
  • Why the stock market, not labor markets, have become the dominant driver of tax revenues
  • What to own/invest in to navigate the through the years ahead

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A phenomenal Q&A with Russell Napier, market strategist and historian, discussing how the global economy and financial markets will look in the months and years ahead.

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Forget about making a New Year’s resolution. Have you tried imagining your deathbed? It’s called a Premortem. It’s a habit that began for Ron as a response to the death of his parents in the 1990s. His mother was at peace with herself when she died, he says. But his father was “racked with regret and remorse” about decisions he made and the opportunities he missed. What he took away from their experiences was the last lesson that his parents would teach him—and the most profound of them all. Don’t wait until the end to decide if you are proud of your life. Do it before it’s too late. Do it while you can still do something about it. To him, there is nothing macabre or even remotely depressing about ruminating on death. In fact, he finds it to be oddly inspiring. 

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There’s one particular, very achievable commitment in mind that will help you become happier and improve your health and effectiveness: This year, start getting up early.

  • Our brain exhibits greater functional connectivity in the mornings. This, we might assume, facilitates better performance of complex tasks.
  • It tends to enable the achievement of other popular goals. The goal-directed brain regions—such as the hippocampus and orbitofrontal cortex—work better at this time than later in the day.
  • One habit that is easier to adopt first thing in the morning is exercise. Clear data exist to show that when people intend to exercise early in the day, they are significantly less likely to experience “intention failure” than if they plan to exercise later.
  • People who get up early enjoy a more positive mood throughout the day compared with those who rise late.

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All the major Wall Street brokerage and bank strategists failed to anticipate how well the market would do in 2024. Only part of the problem is that they are bad at predictions; the bigger issue is that they do it all. It’s kinda like Phrenology, the pseudoscience feeling bumps on people’s skull to predict their personality traits. It’s not that there are better or worse phrenologists, but rather, why was anyone doing phrenology? Think about how variable the future is. Random events can and will completely derail the best laid plans we may make. Even the most well-ordered, thoughtful forecasts turn to mush when randomness strikes. And randomness is served up daily.

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It’s a big world out there. The U.S. makes up a little less than half of the global market cap. By avoiding international stock markets, you cut out half of the investment opportunities. Why limit yourself?

The chart below breaks down the annual performance of developed international stock markets. Each country’s performance seems to bounce around at random year after year, but over the long term those returns smooth out. While it’s difficult to pick the best performing country every year, a diversified global portfolio offers the benefits of international stock market performance which in turn lowers risk.

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Zooming out to all asset classes, U.S. stocks crushed everything in 2024, as they have for the last 15 years:

Time, Mastery & Threes

Some thoughts on time. Times we grew up envisioning as the far future aren’t so far away anymore. Even if lifespans stayed as they are now, many of today’s college students will live to see the 22nd century. Many of today’s babies will still be in the peak of their careers in the year 2100. And 2040, 2060, and 2100 are now closer to us than 2010, 1990, and 1950.

Likewise, much of what still feels like recent history is beginning to look a lot like ancient history. NSYNC’s “Tearing Up My Heart” came out closer to the moon landing than to today. E.T. hit theaters closer to the 1930s than to today. And Billy Joel’s “She’s Got a Way” was released nearer to World War I than the present moment.

If Back to the Future were released today, Marty would be heading back to the ridiculously retro year 1995. His teenage parents would be doing hilariously old things like talking on big cell phones and hanging out in AOL chat rooms. And of course, no existential time crisis would be complete without The Wonder Years. The show aired from 1988-1993 and took place in the years 1968-1973. If the show debuted today, it would be set in 2005-2010 and cover nostalgic old things like Obama’s election, Instagram like counts, and Taylor Swift concerts.

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How to change our perception of time. Say the average lifespan is 80 years old. Then consider that time feels like it moves faster as we age. At age 40, the average person may be 50% through their biological life but they may have experienced 75% of what the brain will ever experience.

When you are looking back at the end of a childhood summer, it seems to have lasted for such a long time because everything was new. But when you’re looking back at the end of an adult summer, it seems to have disappeared rapidly because you haven’t written much down in your memory. So here is the take-home lesson. We have to seek novelty because this is what lays down new memories in the brain.

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Jerry Seinfeld gave a great interview talking about what still drives him now that he has so much money. He talked about the importance of having a good skill, and he referenced an Esquire article from the late 1980’s that became the foundation for how he thinks about achieving mastery. It focused on things like plateaus combined with brief spurts of progress, the importance of having a child’s mindset and muscle memory.

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The argument for more NBA threes has always been the same: it’s math. The simple fact is that teams need only shoot 33 percent on 3-pointers to break even (in terms of points per shot attempt) against 50 percent on 2-pointers. But nothing stays static for long in professional sports. As the league’s brain trusts encouraged more and more threes, the efficiency of each shot type changed — and while 3-pointers have averaged a relatively steady level of points per field goal attempt for nearly two decades now, the 2-pointer has rapidly become more efficient, to the point that it has caught up to (if not surpassed) the efficiency of a 3-pointer:

This is even more the case when we consider that it’s much easier to get fouled attempting a 2-pointer than a 3-pointer.

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52 Things Learned In 2024, including:

  • Indian Americans own about half of all motels in the United States. Of them, 70% have the last name Patel.
  • People know whether or not they want to buy a house in just 27 minutes, but it takes 88 minutes to decide on a couch.
  • About 25% of the decline of casual sex among young men since 2007 can be explained by video games.
  • It takes twice as long to cook a chicken today compared to 100 years ago because twenty-first century chickens get less exercise.
  • American baby names trends shifted from family names a century ago to popular names a generation ago to popular endings today. A generation of people named Jason has given way to babies with -son endings: Mason, Jackson, Grayson, and Carson. Today, 48% of the top 500 baby names share only ten endings.

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  • The U.S. stock market is now worth $64 trillion and rising by the hour.
  • The market cap has doubled in less than 5 years, and it added $10 trillion alone in 2024.
  • China, Hong and all of Europe’s stocks combined are now worth less than 50% of U.S stocks.
  • The U.S. Magnificent 7 alone are worth more than every single company in all of Europe.

Zooming out to look at how we got here:

Dividends and share buybacks (total shareholder yield) in Europe and Japan are far more attractive than the U.S. A major reason for this is because you are paying an extraordinarily high price in U.S. stocks (vs. the rest of the world) for the yield you receive in return:

The largest contributors to the S&P 500’s (profit) margin expansion have come from taxes and interest rates declining. Let’s hope the U.S. government continues to have unlimited borrowing power at low interest rates to continue that trend forward:

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Cliff Asness, the billionaire founder of AQR Capital, wrote this week what he thinks a “normal” money manager’s letter to clients will look like 10 years from now. He reviews, bonds, private credit, private debt, liquid alts, crypto and other sectors, but I thought his sections on U.S. and international stocks was interesting:

U.S. Equities (letter to clients on January 2, 2035):

First, it turns out that investing in U.S. equities at a CAPE in the high 30s yet again turned out to be a disappointing exercise, Today the CAPE is down to around 20 (still above long-term average). The valuation adjustment from the high 30s to 20 means that despite continued strong earnings growth, U.S. equities only beat cash by a couple of percent per annum over the whole decade, well less than we expected.

International Equities (letter to clients on January 2, 2035):

Of course, after being left for dead by so many U.S. investors, the global stock market did better with non-U.S. stocks actually turning in historically healthy real returns (like 5-6% per annum over cash). It turned out that, just as we thought, the U.S. really did have the best companies (most profitable, most innovative, fastest growing) and this indeed continued in this last decade. But it also turned out that paying an epic multiple for the U.S. compared to the rest of the world mattered somewhat more than we thought, and international diversification, as we knew it would one day, did eventually work.   It turns out there was indeed a price at which European stocks made sense. That was news to us.  Luckily, we removed non-U.S. stocks from our benchmark back at the beginning of ’25 so this differential did not affect our benchmark-relative performance this last already painful decade, only our, well, you know, actual performance.

Lessons, Contentment & Individual Sports

10 great lessons learned in 2024 including: walk more, meet in person, things take longer than you realize, and we overweight risk but underweight exponential outcomes (the value of asymmetric bets).

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When travel is used as a vehicle to break the monotony of life, then don’t be surprised when that sense of monotony finds itself to whatever newfound place you’re visiting. A curious mindset doesn’t ignite just because your surroundings have changed. Travel is no cure for the mind because there is no cure for it to begin with. There is no external vehicle that will take you to prolonged contentment. What truly brings contentment is internal: gratitude for what’s in front of you, openness to all the stories around you, and unwavering curiosity toward the people you see every day.

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The Federal Reserve put together a comprehensive 51-page report on marriage trends in the United States. One of the charts that stood out to me was how much the things men and women look for in a partner changed over the last 60 years. Race has collapsed in importance, while income has risen dramatically for both.

In individual sports the best players might have coaches, trainers, agents, and others supporting them, but in matches or tournaments it’s one player versus another, or one player versus the world. The player gets the credit for the win, and the player gets the blame for the loss. It’s why individual sports are agonizing even for the best in the world. Stock picking is an individual sport. You have no place to hide. The outcome is focused on you. It makes the wins intoxicating. Losing is excruciating. When stocks go down, we stop looking in the mirror and start blaming everything and everyone else.

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Odometer fraud is shooting up: According to the latest data from CARFAX — 2.14 million cars may have had odometer rollbacks in 2024 — up 82,000 from last year and 18% since 2021. The reasons? Technology has made rolling back an odometer easier than ever — and is often done to dodge lease mileage fees or artificially inflate a car’s value. It takes seconds to do and costs the next buyer an average of $4,000 in lost value. Bottom line — if a “low-mileage” car deal seems too good to be true — it just might be.

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Until the 1950s, investors expected to earn more income from their stocks than bonds. The general idea was that stocks are riskier and thus need higher yields to attract investors. When dividend yields and bond yields converged it was a signal to sell stocks. Stock prices would then fall until dividend yields earned a premium over bonds again. It was a pretty good market signal too. The yields on stocks and bonds flipped for a month or two right before the Great Depression and many of the biggest bear markets of the late 19th century and early 20th century. But then a weird thing happened in the late-1950s…it stopped working. Bonds yields surpassed divided yields and didn’t look back for a very long time. In fact, they remained above stock market yields for 50 years until bond yields finally got low enough during the Great Financial Crisis.

The ratio of emerging market stock performance relative to the United States is now at an all-time low:

Foreign investors have piled into U.S. stocks like never before. Foreign investors now allocate a record 59% of their assets to US equities. The share of US stocks in foreign financial holdings is now ~7 percentage points higher than it was at the 2000 Dot-Com Bubble peak.