Original author: MD, Bright Company
Original link: https://www.techflowpost.com/article/detail_26873.html
Disclaimer: This article is a reprint. Readers can get more information through the original link. If the author has any objection to the reprint format, please contact us and we will modify it according to the author's request. The reprint is only for information sharing and does not constitute any investment advice, and does not represent Wu Blockchain views and positions.
Last week, Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, shared his thoughts on the differences between the “new generation” of retail and institutional investors on Amit Kukreja’s podcast.
Tom Lee previously worked as the chief strategist at JPMorgan Chase for many years. He is well known to American investors for his accurate predictions of market trends and frequent appearances on media such as CNBC, but he is also controversial for his consistent "bullish" views. He also talked about the changes in the times in which retail investors are currently living in the podcast - one reason is the prosperity of self-media, that is, "the emergence of Twitter", and new start-ups have gained wider attention and influence by relying on independent media channels. Another reason is the change in population structure. He found that "every 20 years, American retail investors will be optimistic about stocks again."
Tom Lee is also a staunch supporter of digital assets such as Bitcoin and Ethereum. Not long ago, Tom Lee was appointed Chairman of the Board of Bitmine and participated in the company's $250 million ETH treasury strategy , which attracted widespread attention in the market.
"I like Ethereum because it is a programmable smart contract blockchain, but to be frank, the real reason I chose Ethereum is that stablecoins are exploding . Circle is one of the best IPOs in five years, with a price-to-earnings ratio of 100 times EBITDA , which has brought very good performance to some funds. On traditional Wall Street, Circle is a god-level stock, and it is a stablecoin company. Stablecoins are ChatGPT in the crypto world. They have entered the mainstream and are evidence of Wall Street's attempt to "equityize" tokens. The crypto circle is "tokenizing" equity, such as the tokenization of the US dollar." In the interview, Tom Lee described the logic behind it.
The following is an edited version of the interview by Bright Company:
Betting on the "Robinhood Generation": Every 20 years, American retail investors will pay attention to stocks again
Amit: …In 2022 and 2023, you were one of the few people who dared to go against the mainstream media. You said, “I don’t think the market can go any lower, it should have bottomed out, and now is the beginning of a new bull market.” Because you were different from other voices in the world, people like me and millions of people around the world listened to your advice and carefully studied the research results you presented—these contents were not conspiracy theories, but supported by facts and data—and their lives were changed. …
Tom Lee: Thank you very much for the compliment, I really appreciate it. This is exactly our original intention when we founded FundStrat. We founded the company in 2014, and it has been 11 years now. Prior to that, I had been working in large banks, such as serving as chief strategist at JPMorgan Chase for nearly 16 years. I wanted to create a company that could provide institutional-level research while making it understandable to everyone. The judgment at the time was that the public was not actually interested in stocks in 2014, trading was mainly dominated by institutions, and retail trading volume was declining. But I remember that people were very concerned about stocks in the 1990s. I think that period will come back. So our bet is that people will be interested in what we say.
Amit: That’s amazing. You foresaw the arrival of the “Robinhood generation” in advance. What data did you have at the time to support it?
Tom Lee: Our evidence-based research focuses on demographics. We have written many white papers that study behavioral changes in different generations. We published a white paper that pointed out that the millennial generation is the largest generation in history, with a total of 98 million people, 40% larger than the previous generation. And if you divide the generation every 20 years, every other generation will pay attention to stocks again because the previous generation will be hit hard by the market.
For example, after the Internet bubble burst, many of my peers stayed away from stocks. But those who started making money after 2000 thought stocks were great. So we bet that this scene would happen again. In fact, when I was at JPMorgan Chase, I also suggested that executives enter the retail brokerage business. They all thought that this industry was "dead", but now it seems that it is actually a good tactical investment. So this is our choice. Our company is small and there is no support from a big platform, so we also have to learn to connect with people and amplify our voice. We used Twitter and various media very early on. This is the "guerrilla warfare" for the growth of our company.
Amit: It was actually quite risky to embrace new media at that time, because social media was far less developed than it is today. Do you think using social media was a natural choice at that time, or was it a struggle?
Tom Lee: It was a little hard to find your voice in the first few years. Twitter was only 255 characters back then, and it wasn't as powerful as it is now. People didn't use tweet threads much, and there were few pictures. Then we realized that the best way to do it was to tweet like we were chatting with people. So we started to send short tweets.
Amit: I think that natural expression is what our audience loves about you. Whether you're on CNBC or on an independent podcast like mine, your words carry weight. Do you ever find it weird that every time you say something, thousands of people chime in?
Tom Lee: Yeah, it's a big responsibility. I've been a stock research analyst for 34 years, and I used to give buy ratings on stocks, so I know that feeling - you put your name and target price on the table, and if the stock price goes down, everyone will be unhappy. And in the public domain, people only look at your most recent prediction. There are people on Twitter who will never forget your mistakes. So most of our interactions on Twitter are actually people scolding us and calling us bad, which I think is quite interesting. I don't mind because I know that this is the nature of the platform.
Amit: When you are not making many mistakes, you will retweet those tweets that question you, which is actually a good thing. It conveys your point of view to the world in a good way.
Discussion on the Fed’s interest rate cut: Where is the truth in the US employment data?
Amit: Let's talk about some market-related questions. Let's start with a simple one, which is not difficult. Do you think Powell should cut interest rates now?
Tom Lee: You know, I almost never comment on this issue directly, and I rarely express my personal opinions even in reports to clients. We have about 10,000 registered investment advisor clients and 300 hedge fund clients. I usually just show them the evidence and ask them what they think. For example, what indicators should the Fed focus on and then see what policies are appropriate. For example, we know that if we use the ECB's calculation method, the core inflation in the United States has actually reached 2%, because the ECB excludes housing. Excluding housing alone, the core CPI inflation in the United States drops to 1.9%. The ECB interest rate is now 2.5%, and the Fed is 4.5%. So why is the Fed tightening 200 basis points more than the ECB? In fact, the difference is in housing. Is the Fed deliberately suppressing the real estate market? Actually not.
Amit: But it is indeed doubtful.
Tom Lee: Yes, that is indeed questionable. Another problem is that the Fed said that tariffs will bring inflation in the summer, so they will wait before cutting interest rates. We recently wrote to our clients to analyze this issue and shared it on Twitter. In fact, tariffs are essentially a tax because money goes into the government's pocket. In other words, if the US government says I want to add a $6 tax on gasoline, the gasoline price in the CPI will skyrocket. But the Fed will not raise interest rates because they will feel that people's wallets have been hit. So we may cut interest rates because everyone's money is taxed by the government, and this money flows back into the economy. This is not actually inflation, it's just a transfer of funds. This is the nature of tariffs. Someone pays, the money goes into the government, and then returns to the economy. This is not inflation, in fact...
Amit: It’s taxes. The view of Powell and the Fed is that companies will raise gas prices, and while some of the revenue will offset that, it’s still technically…
Tom Lee：Look, it's like saying if price increases occur at different points in the supply chain, that's inflation. But no matter where it happens, it's essentially a tax. Mathematically, a tax is a tax, no matter where it happens. So what exactly is inflation? Is it a pretend tax?
Amit: Or if it's something that pops up, or something that's real but not fictional, and then gets offset at some point later, then it's not inflation in the end. This is what Trump always says - if we cut taxes, people will have the money to pay for higher gas prices.
Tom Lee: Yes, if I were not partisan and just analyzed it like an undergraduate at Wharton, I would say it is not inflation because there is no inflation signal. If it is just a one-time thing, it is not inflation. If it is essentially a tax, it is not inflation. Anyone who says it is inflation is actually bound by the concept of CPI and ignores the larger context. CPI is actually not a good tool to measure inflation. For example, the Trueflation indicator is better.
Amit: Do you think that the way we currently measure inflation, such as the way the Bureau of Labor Statistics uses it, including the data released by JOLTS (Note: Job Openings and Labor Turnover Survey), such as the increase of 400,000 jobs, do you think these models and data collection methods are outdated?
Tom Lee: Yes, or the data doesn’t reflect reality very well. For example, the response rate is very important. There are many strange concepts in CPI. For example, technological innovation is actually a deflationary factor, but they never treat it that way when they calculate it. JOLTS data rarely matches other data, such as LinkedIn data. The response rate of JOLTS is only 40% , but it doesn’t match other data.
Amit: Tom, I'm confused. Our audience is retail investors. Yesterday, the government said that companies had 400,000 job vacancies, but today the ADP employment data was negative 33,000, while the expectation was 99,000. My audience was confused. What's going on?
Tom Lee: Actually, if you look closely, the JOLTS job openings increased significantly because restaurants were not hiring , so they increased job ads. This is actually because of the risk of deportation, many people did not come to work. The three industries with reduced employment today are financial services, professional services, and education. Education is just seasonal, and professional services and finance are mainly consulting companies laying off employees. This is not a tariff issue, it is a structural issue.
Amit : Do you think AI has impacted employment in the service sector today?
Tom Lee: It is possible. If recruitment is reduced, it will definitely have an impact. For example, Salesforce said today that half of their work is done by AI.
Amit: Meta says 30% of their code is written by AI, as is Microsoft. Imagine a society where the highest paid software engineers are no longer relevant, which is a bit scary and has an impact on inflation for sure. A lot of people were confused on April 2nd, "Liberation Day." That was the day when reciprocal tariffs were introduced and the stock market fell to 40,800 points in 2022, and you were quoted as saying that you didn't think Trump would violate the core contract of capitalism. You also said that there would be a V-shaped rebound no matter what. My question is, why didn't your institutional clients see that the guy on "The Apprentice" was not actually going to impose a 90% tariff on Zimbabwe?
Tom Lee: Haha, yes, some of the data at that time was simply ridiculous. Institutional investors have their own "guardrails", such as they must reduce their positions when the VIX index rises, and they must also reduce their positions when the market falls. Therefore, when the market fluctuates, institutions cannot hold on and can only passively sell. The reason why we say that there will be a V-shaped rebound after the "waterfall decline" is that in the past 100 years, as long as there is no economic recession, the market has always rebounded in a V shape. At that time, our judgment was that this was just a growth panic, because high-yield bonds did not react, only the stock market was moving. Another thing that made institutions very pessimistic was that they thought that only the Fed's interest rate cut would save the market. Our view is that this is actually an illusion. Even if the Fed does not cut interest rates, the market will rebound in a V shape. But many people say that since the Fed does not cut interest rates, the market will continue to fall, but the result is a V-shaped rebound.
Amit: Why can you see that relying on the Federal Reserve to save the market is actually an illusion?
Tom Lee: Because when the Fed injects liquidity, the money actually just goes into the banks. If the banks don't lend, the money just circulates in the banking system. The more important funds actually come from retail investors. There are four major types of participants in the market now: institutions, high net worth individuals, family offices, and they usually follow hedge funds. There are also corporate buybacks, and then there are retail investors. Only retail investors are buying into the market.
Retail investors and institutions: The best company shareholders are users
Amit: Why do you think retail investors can see through this? I know institutions have a fiduciary duty to sell, but why don’t they buy as actively as retail investors?
Tom Lee: I think it’s because retail investors treat this as a stock market. For example, I like Palantir and I have Meta. Should Meta plummet because of tariffs? Is it reasonable for Palantir to fall to 80? Retail investors look at specific stocks, but the higher the institutions go, the more macro they think Trump is going to take us off the cliff and the Fed will ruin us. These ideas form biases, and when the actual economy or market performance does not match their framework, they will think the market is crazy and only retail investors are buying this round of rebound. They are forced to hold cash and miss the V-shaped rebound. This is the "least favorite V-shaped rebound."
Amit: Money in money funds earns 4%, but Meta rises 40%... What are the conversations between you and institutions? I remember that in 2023 you kept saying that institutional clients didn't believe in the market, which became the reason for your "wall of worry", indicating that there is still room for the market. When you communicate with these people, do they want to scold you? But at the same time, they will thank you for letting them know that it is time to buy.
Tom Lee: Yes, institutions are more pessimistic now than in 2020 and 2023. They firmly believe that the economic cycle is about to turn ; one thing is that if you look at the political inclination of the stock market, 65% of fund managers voted for Biden , which I didn't know before. The bond market is the opposite, historically more Republican. So most people think Trump is crazy because they didn't vote for him.
Amit: Is this one of the reasons why people are not buying?
Tom Lee: We often write in our research that the stock market is partisan. These conversations have been awkward this year. They'll say, Tom, we have to sell, you suggest we don't sell, although I don't know where the bottom is, but I know it's going to be a V-shaped rebound. Every time the VIX is over 60 and then falls back below 30, it's 100% the bottom , but they say this time is different because the Fed won't rescue the market. Everyone can find a reason to prove that a recession is coming. Economists are all shouting recession, so how can you as a stock investor say there will be a V-shaped rebound? So they are trapped, and our conversations are not pleasant.
…
Amit: Do you think retail participation is a good thing overall?
Tom Lee: Actually, the stock market is going through a huge transformation right now, and I think it’s thanks to X (former Twitter) because the best companies have turned shareholders into customers. For example, Micro Strategy (MSTR.US). They “orange-pill” everyone, and everyone buys MicroStrategy not because it is a security business, but because Saylor (former MicroStrategy CEO) can help me get more Bitcoin per share. Another example is Palantir, (CEO) Alex Karp is the representative of the "personality cult". Tesla is also, in fact, buying Tesla is a bet on Elon . So the capital cost of these stocks has been actually discounted because they have turned shareholders into customers . I think this is very healthy, and this is exactly Peter Lynch's philosophy - buy companies you understand. For example, if you talk to a Tesla owner, he can tell you about Optimus Prime and FSD (autonomous driving), and they know the company inside out. They know what they are buying. Today’s retail investors are actually very knowledgeable, so the term “dumb money” is actually completely wrong, as retail investors know what they are doing.
Amit: Many institutions will say that Tesla's PE ratio of 200 times is too crazy. Those who can talk about FSD very well actually don't understand valuation. But your point is that these people may drive Tesla themselves and have actual experience with FSD. They can use their imagination to predict the company's future, and valuation may not be that important. Does it mean that the valuationists think that 200 times PE is too outrageous, while the "believers" will say, I drive this car every day, you don't understand what you are talking about?
Tom Lee: You asked a very good question. In fact, one question is, how many people really need "fundamentals" as a basis for investment? This group is shrinking. For example, do you have a luxury watch? (Amit: No) Do you collect art? (Amit: No). In fact, the scarcity of Tesla is like art. ... Can you name another company like Tesla? There is only one Tesla in the world. It's like a painting by Leonardo da Vinci, there is only one. If you value it only by the materials, saying that this painting is only worth 12 cents, but if a hundred people say that there is only this one in the world, I am willing to pay 100 million US dollars. This is Tesla. Some people say that Tesla is just a car company, but more people say that Tesla is Leonardo da Vinci. There is no other company like Tesla in the world, and this scarcity deserves a premium.
Amit: I never thought of it that way, but it makes sense. For example, Elon's brand has surpassed many corporate brands. I don't even know who the CEO of Procter & Gamble is.
Tom Lee: Yes, for example, can you name the CEO of the largest non-tech company? None of us can name one. This also proves that there is only one Tesla, and if you lose it, it will be gone. They have strong manufacturing capabilities. Making cars is one of the most difficult things in the world, and they can still make a profit. Elon said he wanted to do aerospace, and now SpaceX has a 90% market share. He said he wanted to do AI, and Grok is valued at 130 billion. He is good at creating companies. And there is only one Tesla in the world. Some people say it is a company that sells mass-market goods, but I don't think so.
Amit: It is indeed difficult to explain it only with valuation. Is this also the reason why you said Tesla will lead a V-shaped rebound?
Tom Lee: Yes. We made a list of "wash stocks". It's very simple. We took April 7 as the low point and screened 3,000 liquid stocks that institutions can trade. How many of them did not hit a new low on April 7 and had lower trading volume? There are about 37, including Tesla, Palantir, and Nvidia. These stocks have actually been sold out. Everyone had sold out in April, so there was no new low. This is our logic.
Amit: These are unique brands, like Nvidia, Palantir, Tesla.
Betting on Ethereum because of the bullishness of stablecoins
Amit: Let’s talk about your new move on Monday. Now you are the chairman of the board. You have raised $250 million to buy Ethereum, which is equivalent to building an Ethereum treasury. The first question is, why did you choose Ethereum?
Tom Lee: Actually, Ethereum... I believe the audience has a general understanding of Ethereum. I like Ethereum because it is a programmable smart contract blockchain, but to put it bluntly, the real reason I chose Ethereum is that stablecoins are exploding . Circle is one of the best IPOs in five years, with a price-earnings ratio of 100 times EBITDA, which has brought very good performance to some funds . In traditional Wall Street, Circle is a god-level stock, and it is a stablecoin company. Stablecoins are ChatGPT in the crypto world. They have entered the mainstream and are evidence of Wall Street's attempt to "equityize" tokens. The crypto circle is "tokenizing" equity, such as the tokenization of the US dollar.
Now JPMorgan Chase, Amazon, Walmart, and Goldman Sachs all want to make their own stablecoins. This business model is good and friendly to consumers and merchants. But all of these have to run on the blockchain, and most stablecoin transactions are on Ethereum . ETH was close to $5,000, then fell to $1,400, $1,500, and now it's back to $2,400. The total amount of stablecoins is now $250 billion, accounting for only 30% of Ethereum's gas fees, but Ethereum has minted more than 50% of stablecoins. U.S. Treasury Secretary Scott is very optimistic. He believes that this is a $2 trillion market, which is a 10-fold growth. The U.S. government also wants more stablecoins because they are the 12th largest holder of U.S. debt and have promoted dollarization. 80% of stablecoins are used overseas (in the United States). If stablecoins grow 10 times again, Ethereum's gas fee income will explode. So Ethereum is the biggest beneficiary of Wall Street's "equityization" of crypto assets and crypto "tokenization" of equity, right in the middle. So I think Ethereum will be rediscovered this year, and now Robinhood has just announced that it will use Ethereum Layer 2 to tokenize stocks.
Amit: Robinhood is "tokenizing" Wall Street, and the government also supports stablecoins because it will increase the demand for US bonds, and ETH is the underlying asset of stablecoins. The price of ETH is obviously lagging behind Bitcoin. Why do you think people haven't realized it yet?
Tom Lee: Because the crypto space is a trust-driven, narrative-driven space. The story of Bitcoin is trust, and it is digital gold. The story now is programmable money. You will find that not only do we need programmable money, but we also need to use the largest network to do it. Ethereum has a market value of $300 billion and is the largest smart contract blockchain. So Ethereum has the opportunity to completely change the landscape.
Amit: In 2021, the only application of Ethereum is still NFT, and many entities doing smart contracts may have died. Now this direction has become more sustainable and supported by the government. The share price of BMNR (Bitmine Immersion Technologies Inc) has risen from 4 yuan to 40 (Note: as of press time, the share price of BMNR.US is 111.5 US dollars). Everyone believes in your Vision. Do you think buying this asset has a better risk-return ratio than buying ETH?
Tom Lee: I don't comment on BMNR itself, but I can talk about why a Treasury Company like BMNR makes sense. Some people may ask, if I want to bet on Ethereum, why not just buy an ETF? Why not just buy ETH on the chain and keep it yourself?
But the Treasury has five important options.
If you buy an ETF or buy ETH on the chain, the amount of Ethereum you hold is constant, and the ETF also charges management fees. But the goal of the treasury company is to increase the number of tokens per share, and MicroStrategy uses this indicator to measure itself.
First, if the company’s stock price is higher than its net worth, it can issue additional shares to increase its net value per share (NAV). This is called “reflexive growth,” and there are very few such reflexive things in the stock market.
Second, because the underlying tokens are highly volatile - Ethereum's volatility is twice that of Bitcoin. If you buy an Ethereum ETF and want to add leverage, the bank will charge a 10% interest rate, but as a business, the treasury company has a lower financing cost and can "sell volatility" through convertible bonds or derivatives. For example, MicroStrategy's financing cost is zero.
Third, you have the difference between market price and net worth, you have stock attributes, and there are other treasury companies doing market-to-book ratio arbitrage externally. If a company's market price is three times its net worth, you can merge and acquire other treasury companies, and there is arbitrage space. Fourth, you can be an operating company, such as providing services for the DeFi ecosystem.
Amit: For example, the lending business.
Tom Lee: Yes, this cannot be done on Bitcoin, but it is very useful on Ethereum.
Fifth, you can create a structural "put option". For example, MicroStrategy has 600,000 bitcoins. If the US government wants to buy 1 million bitcoins, the price will go up if it buys directly from the market. It is better to directly acquire MicroStrategy at a premium - this is the "sovereign put option". The same is true in the Ethereum world. If a vault company holds 5% of Ethereum and is extremely important to the Ethereum ecosystem, then their valuation should be higher. For example, if Goldman Sachs wants to issue a stablecoin on Ethereum, it needs to ensure the security of the Ethereum network. It may eventually buy a large amount of ETH, or directly acquire these vault companies. So the vault companies have Wall Street "put options".
Amit: This is a very clear idea. If you believe in the macro logic of Ethereum, then you do have a lot of leverage.
Amit: Finally, our audience has two Fundstrat Granny Shots ETF holdings that they are particularly concerned about (Palantir and Robinhood). Would you like to start with Palantir?
Tom Lee: Palantir is redefining the relationship between companies and enterprises, helping enterprises become better. Generally, such companies are either like consulting companies or technology companies. Palantir is both, but with fewer people. Palantir is like a "magician" equipped for Fortune 500 companies. Of course, the government also uses it.
Amit: One thousand employees, less than 800 customers, $4 billion in revenue. Robinhood is the second largest Granny Shots holding company.
Tom Lee: Robinhood is amazing. I think it is the Morgan Stanley of the younger generation. Don’t forget that in the 1980s, new brokers that served the baby boomers emerged on Wall Street. Charles Schwab was just a newsletter back then, but later became a brokerage. E*Trade and Schwab were brokers for the baby boomers, and Robinhood is what it is today . I think Robinhood is very smart, has a good product experience, understands the importance of UI, and is very flexible.
Original link: https://www.techflowpost.com/article/detail_26873.html
Disclaimer: This article is a reprint. Readers can get more information through the original link. If the author has any objection to the reprint format, please contact us and we will modify it according to the author's request. The reprint is only for information sharing and does not constitute any investment advice, and does not represent Wu Blockchain views and positions.
Last week, Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, shared his thoughts on the differences between the “new generation” of retail and institutional investors on Amit Kukreja’s podcast.
Tom Lee previously worked as the chief strategist at JPMorgan Chase for many years. He is well known to American investors for his accurate predictions of market trends and frequent appearances on media such as CNBC, but he is also controversial for his consistent "bullish" views. He also talked about the changes in the times in which retail investors are currently living in the podcast - one reason is the prosperity of self-media, that is, "the emergence of Twitter", and new start-ups have gained wider attention and influence by relying on independent media channels. Another reason is the change in population structure. He found that "every 20 years, American retail investors will be optimistic about stocks again."
Tom Lee is also a staunch supporter of digital assets such as Bitcoin and Ethereum. Not long ago, Tom Lee was appointed Chairman of the Board of Bitmine and participated in the company's $250 million ETH treasury strategy , which attracted widespread attention in the market.
"I like Ethereum because it is a programmable smart contract blockchain, but to be frank, the real reason I chose Ethereum is that stablecoins are exploding . Circle is one of the best IPOs in five years, with a price-to-earnings ratio of 100 times EBITDA , which has brought very good performance to some funds. On traditional Wall Street, Circle is a god-level stock, and it is a stablecoin company. Stablecoins are ChatGPT in the crypto world. They have entered the mainstream and are evidence of Wall Street's attempt to "equityize" tokens. The crypto circle is "tokenizing" equity, such as the tokenization of the US dollar." In the interview, Tom Lee described the logic behind it.
The following is an edited version of the interview by Bright Company:
Betting on the "Robinhood Generation": Every 20 years, American retail investors will pay attention to stocks again
Amit: …In 2022 and 2023, you were one of the few people who dared to go against the mainstream media. You said, “I don’t think the market can go any lower, it should have bottomed out, and now is the beginning of a new bull market.” Because you were different from other voices in the world, people like me and millions of people around the world listened to your advice and carefully studied the research results you presented—these contents were not conspiracy theories, but supported by facts and data—and their lives were changed. …
Tom Lee: Thank you very much for the compliment, I really appreciate it. This is exactly our original intention when we founded FundStrat. We founded the company in 2014, and it has been 11 years now. Prior to that, I had been working in large banks, such as serving as chief strategist at JPMorgan Chase for nearly 16 years. I wanted to create a company that could provide institutional-level research while making it understandable to everyone. The judgment at the time was that the public was not actually interested in stocks in 2014, trading was mainly dominated by institutions, and retail trading volume was declining. But I remember that people were very concerned about stocks in the 1990s. I think that period will come back. So our bet is that people will be interested in what we say.
Amit: That’s amazing. You foresaw the arrival of the “Robinhood generation” in advance. What data did you have at the time to support it?
Tom Lee: Our evidence-based research focuses on demographics. We have written many white papers that study behavioral changes in different generations. We published a white paper that pointed out that the millennial generation is the largest generation in history, with a total of 98 million people, 40% larger than the previous generation. And if you divide the generation every 20 years, every other generation will pay attention to stocks again because the previous generation will be hit hard by the market.
For example, after the Internet bubble burst, many of my peers stayed away from stocks. But those who started making money after 2000 thought stocks were great. So we bet that this scene would happen again. In fact, when I was at JPMorgan Chase, I also suggested that executives enter the retail brokerage business. They all thought that this industry was "dead", but now it seems that it is actually a good tactical investment. So this is our choice. Our company is small and there is no support from a big platform, so we also have to learn to connect with people and amplify our voice. We used Twitter and various media very early on. This is the "guerrilla warfare" for the growth of our company.
Amit: It was actually quite risky to embrace new media at that time, because social media was far less developed than it is today. Do you think using social media was a natural choice at that time, or was it a struggle?
Tom Lee: It was a little hard to find your voice in the first few years. Twitter was only 255 characters back then, and it wasn't as powerful as it is now. People didn't use tweet threads much, and there were few pictures. Then we realized that the best way to do it was to tweet like we were chatting with people. So we started to send short tweets.
Amit: I think that natural expression is what our audience loves about you. Whether you're on CNBC or on an independent podcast like mine, your words carry weight. Do you ever find it weird that every time you say something, thousands of people chime in?
Tom Lee: Yeah, it's a big responsibility. I've been a stock research analyst for 34 years, and I used to give buy ratings on stocks, so I know that feeling - you put your name and target price on the table, and if the stock price goes down, everyone will be unhappy. And in the public domain, people only look at your most recent prediction. There are people on Twitter who will never forget your mistakes. So most of our interactions on Twitter are actually people scolding us and calling us bad, which I think is quite interesting. I don't mind because I know that this is the nature of the platform.
Amit: When you are not making many mistakes, you will retweet those tweets that question you, which is actually a good thing. It conveys your point of view to the world in a good way.
Discussion on the Fed’s interest rate cut: Where is the truth in the US employment data?
Amit: Let's talk about some market-related questions. Let's start with a simple one, which is not difficult. Do you think Powell should cut interest rates now?
Tom Lee: You know, I almost never comment on this issue directly, and I rarely express my personal opinions even in reports to clients. We have about 10,000 registered investment advisor clients and 300 hedge fund clients. I usually just show them the evidence and ask them what they think. For example, what indicators should the Fed focus on and then see what policies are appropriate. For example, we know that if we use the ECB's calculation method, the core inflation in the United States has actually reached 2%, because the ECB excludes housing. Excluding housing alone, the core CPI inflation in the United States drops to 1.9%. The ECB interest rate is now 2.5%, and the Fed is 4.5%. So why is the Fed tightening 200 basis points more than the ECB? In fact, the difference is in housing. Is the Fed deliberately suppressing the real estate market? Actually not.
Amit: But it is indeed doubtful.
Tom Lee: Yes, that is indeed questionable. Another problem is that the Fed said that tariffs will bring inflation in the summer, so they will wait before cutting interest rates. We recently wrote to our clients to analyze this issue and shared it on Twitter. In fact, tariffs are essentially a tax because money goes into the government's pocket. In other words, if the US government says I want to add a $6 tax on gasoline, the gasoline price in the CPI will skyrocket. But the Fed will not raise interest rates because they will feel that people's wallets have been hit. So we may cut interest rates because everyone's money is taxed by the government, and this money flows back into the economy. This is not actually inflation, it's just a transfer of funds. This is the nature of tariffs. Someone pays, the money goes into the government, and then returns to the economy. This is not inflation, in fact...
Amit: It’s taxes. The view of Powell and the Fed is that companies will raise gas prices, and while some of the revenue will offset that, it’s still technically…
Tom Lee：Look, it's like saying if price increases occur at different points in the supply chain, that's inflation. But no matter where it happens, it's essentially a tax. Mathematically, a tax is a tax, no matter where it happens. So what exactly is inflation? Is it a pretend tax?
Amit: Or if it's something that pops up, or something that's real but not fictional, and then gets offset at some point later, then it's not inflation in the end. This is what Trump always says - if we cut taxes, people will have the money to pay for higher gas prices.
Tom Lee: Yes, if I were not partisan and just analyzed it like an undergraduate at Wharton, I would say it is not inflation because there is no inflation signal. If it is just a one-time thing, it is not inflation. If it is essentially a tax, it is not inflation. Anyone who says it is inflation is actually bound by the concept of CPI and ignores the larger context. CPI is actually not a good tool to measure inflation. For example, the Trueflation indicator is better.
Amit: Do you think that the way we currently measure inflation, such as the way the Bureau of Labor Statistics uses it, including the data released by JOLTS (Note: Job Openings and Labor Turnover Survey), such as the increase of 400,000 jobs, do you think these models and data collection methods are outdated?
Tom Lee: Yes, or the data doesn’t reflect reality very well. For example, the response rate is very important. There are many strange concepts in CPI. For example, technological innovation is actually a deflationary factor, but they never treat it that way when they calculate it. JOLTS data rarely matches other data, such as LinkedIn data. The response rate of JOLTS is only 40% , but it doesn’t match other data.
Amit: Tom, I'm confused. Our audience is retail investors. Yesterday, the government said that companies had 400,000 job vacancies, but today the ADP employment data was negative 33,000, while the expectation was 99,000. My audience was confused. What's going on?
Tom Lee: Actually, if you look closely, the JOLTS job openings increased significantly because restaurants were not hiring , so they increased job ads. This is actually because of the risk of deportation, many people did not come to work. The three industries with reduced employment today are financial services, professional services, and education. Education is just seasonal, and professional services and finance are mainly consulting companies laying off employees. This is not a tariff issue, it is a structural issue.
Amit : Do you think AI has impacted employment in the service sector today?
Tom Lee: It is possible. If recruitment is reduced, it will definitely have an impact. For example, Salesforce said today that half of their work is done by AI.
Amit: Meta says 30% of their code is written by AI, as is Microsoft. Imagine a society where the highest paid software engineers are no longer relevant, which is a bit scary and has an impact on inflation for sure. A lot of people were confused on April 2nd, "Liberation Day." That was the day when reciprocal tariffs were introduced and the stock market fell to 40,800 points in 2022, and you were quoted as saying that you didn't think Trump would violate the core contract of capitalism. You also said that there would be a V-shaped rebound no matter what. My question is, why didn't your institutional clients see that the guy on "The Apprentice" was not actually going to impose a 90% tariff on Zimbabwe?
Tom Lee: Haha, yes, some of the data at that time was simply ridiculous. Institutional investors have their own "guardrails", such as they must reduce their positions when the VIX index rises, and they must also reduce their positions when the market falls. Therefore, when the market fluctuates, institutions cannot hold on and can only passively sell. The reason why we say that there will be a V-shaped rebound after the "waterfall decline" is that in the past 100 years, as long as there is no economic recession, the market has always rebounded in a V shape. At that time, our judgment was that this was just a growth panic, because high-yield bonds did not react, only the stock market was moving. Another thing that made institutions very pessimistic was that they thought that only the Fed's interest rate cut would save the market. Our view is that this is actually an illusion. Even if the Fed does not cut interest rates, the market will rebound in a V shape. But many people say that since the Fed does not cut interest rates, the market will continue to fall, but the result is a V-shaped rebound.
Amit: Why can you see that relying on the Federal Reserve to save the market is actually an illusion?
Tom Lee: Because when the Fed injects liquidity, the money actually just goes into the banks. If the banks don't lend, the money just circulates in the banking system. The more important funds actually come from retail investors. There are four major types of participants in the market now: institutions, high net worth individuals, family offices, and they usually follow hedge funds. There are also corporate buybacks, and then there are retail investors. Only retail investors are buying into the market.
Retail investors and institutions: The best company shareholders are users
Amit: Why do you think retail investors can see through this? I know institutions have a fiduciary duty to sell, but why don’t they buy as actively as retail investors?
Tom Lee: I think it’s because retail investors treat this as a stock market. For example, I like Palantir and I have Meta. Should Meta plummet because of tariffs? Is it reasonable for Palantir to fall to 80? Retail investors look at specific stocks, but the higher the institutions go, the more macro they think Trump is going to take us off the cliff and the Fed will ruin us. These ideas form biases, and when the actual economy or market performance does not match their framework, they will think the market is crazy and only retail investors are buying this round of rebound. They are forced to hold cash and miss the V-shaped rebound. This is the "least favorite V-shaped rebound."
Amit: Money in money funds earns 4%, but Meta rises 40%... What are the conversations between you and institutions? I remember that in 2023 you kept saying that institutional clients didn't believe in the market, which became the reason for your "wall of worry", indicating that there is still room for the market. When you communicate with these people, do they want to scold you? But at the same time, they will thank you for letting them know that it is time to buy.
Tom Lee: Yes, institutions are more pessimistic now than in 2020 and 2023. They firmly believe that the economic cycle is about to turn ; one thing is that if you look at the political inclination of the stock market, 65% of fund managers voted for Biden , which I didn't know before. The bond market is the opposite, historically more Republican. So most people think Trump is crazy because they didn't vote for him.
Amit: Is this one of the reasons why people are not buying?
Tom Lee: We often write in our research that the stock market is partisan. These conversations have been awkward this year. They'll say, Tom, we have to sell, you suggest we don't sell, although I don't know where the bottom is, but I know it's going to be a V-shaped rebound. Every time the VIX is over 60 and then falls back below 30, it's 100% the bottom , but they say this time is different because the Fed won't rescue the market. Everyone can find a reason to prove that a recession is coming. Economists are all shouting recession, so how can you as a stock investor say there will be a V-shaped rebound? So they are trapped, and our conversations are not pleasant.
…
Amit: Do you think retail participation is a good thing overall?
Tom Lee: Actually, the stock market is going through a huge transformation right now, and I think it’s thanks to X (former Twitter) because the best companies have turned shareholders into customers. For example, Micro Strategy (MSTR.US). They “orange-pill” everyone, and everyone buys MicroStrategy not because it is a security business, but because Saylor (former MicroStrategy CEO) can help me get more Bitcoin per share. Another example is Palantir, (CEO) Alex Karp is the representative of the "personality cult". Tesla is also, in fact, buying Tesla is a bet on Elon . So the capital cost of these stocks has been actually discounted because they have turned shareholders into customers . I think this is very healthy, and this is exactly Peter Lynch's philosophy - buy companies you understand. For example, if you talk to a Tesla owner, he can tell you about Optimus Prime and FSD (autonomous driving), and they know the company inside out. They know what they are buying. Today’s retail investors are actually very knowledgeable, so the term “dumb money” is actually completely wrong, as retail investors know what they are doing.
Amit: Many institutions will say that Tesla's PE ratio of 200 times is too crazy. Those who can talk about FSD very well actually don't understand valuation. But your point is that these people may drive Tesla themselves and have actual experience with FSD. They can use their imagination to predict the company's future, and valuation may not be that important. Does it mean that the valuationists think that 200 times PE is too outrageous, while the "believers" will say, I drive this car every day, you don't understand what you are talking about?
Tom Lee: You asked a very good question. In fact, one question is, how many people really need "fundamentals" as a basis for investment? This group is shrinking. For example, do you have a luxury watch? (Amit: No) Do you collect art? (Amit: No). In fact, the scarcity of Tesla is like art. ... Can you name another company like Tesla? There is only one Tesla in the world. It's like a painting by Leonardo da Vinci, there is only one. If you value it only by the materials, saying that this painting is only worth 12 cents, but if a hundred people say that there is only this one in the world, I am willing to pay 100 million US dollars. This is Tesla. Some people say that Tesla is just a car company, but more people say that Tesla is Leonardo da Vinci. There is no other company like Tesla in the world, and this scarcity deserves a premium.
Amit: I never thought of it that way, but it makes sense. For example, Elon's brand has surpassed many corporate brands. I don't even know who the CEO of Procter & Gamble is.
Tom Lee: Yes, for example, can you name the CEO of the largest non-tech company? None of us can name one. This also proves that there is only one Tesla, and if you lose it, it will be gone. They have strong manufacturing capabilities. Making cars is one of the most difficult things in the world, and they can still make a profit. Elon said he wanted to do aerospace, and now SpaceX has a 90% market share. He said he wanted to do AI, and Grok is valued at 130 billion. He is good at creating companies. And there is only one Tesla in the world. Some people say it is a company that sells mass-market goods, but I don't think so.
Amit: It is indeed difficult to explain it only with valuation. Is this also the reason why you said Tesla will lead a V-shaped rebound?
Tom Lee: Yes. We made a list of "wash stocks". It's very simple. We took April 7 as the low point and screened 3,000 liquid stocks that institutions can trade. How many of them did not hit a new low on April 7 and had lower trading volume? There are about 37, including Tesla, Palantir, and Nvidia. These stocks have actually been sold out. Everyone had sold out in April, so there was no new low. This is our logic.
Amit: These are unique brands, like Nvidia, Palantir, Tesla.
Betting on Ethereum because of the bullishness of stablecoins
Amit: Let’s talk about your new move on Monday. Now you are the chairman of the board. You have raised $250 million to buy Ethereum, which is equivalent to building an Ethereum treasury. The first question is, why did you choose Ethereum?
Tom Lee: Actually, Ethereum... I believe the audience has a general understanding of Ethereum. I like Ethereum because it is a programmable smart contract blockchain, but to put it bluntly, the real reason I chose Ethereum is that stablecoins are exploding . Circle is one of the best IPOs in five years, with a price-earnings ratio of 100 times EBITDA, which has brought very good performance to some funds . In traditional Wall Street, Circle is a god-level stock, and it is a stablecoin company. Stablecoins are ChatGPT in the crypto world. They have entered the mainstream and are evidence of Wall Street's attempt to "equityize" tokens. The crypto circle is "tokenizing" equity, such as the tokenization of the US dollar.
Now JPMorgan Chase, Amazon, Walmart, and Goldman Sachs all want to make their own stablecoins. This business model is good and friendly to consumers and merchants. But all of these have to run on the blockchain, and most stablecoin transactions are on Ethereum . ETH was close to $5,000, then fell to $1,400, $1,500, and now it's back to $2,400. The total amount of stablecoins is now $250 billion, accounting for only 30% of Ethereum's gas fees, but Ethereum has minted more than 50% of stablecoins. U.S. Treasury Secretary Scott is very optimistic. He believes that this is a $2 trillion market, which is a 10-fold growth. The U.S. government also wants more stablecoins because they are the 12th largest holder of U.S. debt and have promoted dollarization. 80% of stablecoins are used overseas (in the United States). If stablecoins grow 10 times again, Ethereum's gas fee income will explode. So Ethereum is the biggest beneficiary of Wall Street's "equityization" of crypto assets and crypto "tokenization" of equity, right in the middle. So I think Ethereum will be rediscovered this year, and now Robinhood has just announced that it will use Ethereum Layer 2 to tokenize stocks.
Amit: Robinhood is "tokenizing" Wall Street, and the government also supports stablecoins because it will increase the demand for US bonds, and ETH is the underlying asset of stablecoins. The price of ETH is obviously lagging behind Bitcoin. Why do you think people haven't realized it yet?
Tom Lee: Because the crypto space is a trust-driven, narrative-driven space. The story of Bitcoin is trust, and it is digital gold. The story now is programmable money. You will find that not only do we need programmable money, but we also need to use the largest network to do it. Ethereum has a market value of $300 billion and is the largest smart contract blockchain. So Ethereum has the opportunity to completely change the landscape.
Amit: In 2021, the only application of Ethereum is still NFT, and many entities doing smart contracts may have died. Now this direction has become more sustainable and supported by the government. The share price of BMNR (Bitmine Immersion Technologies Inc) has risen from 4 yuan to 40 (Note: as of press time, the share price of BMNR.US is 111.5 US dollars). Everyone believes in your Vision. Do you think buying this asset has a better risk-return ratio than buying ETH?
Tom Lee: I don't comment on BMNR itself, but I can talk about why a Treasury Company like BMNR makes sense. Some people may ask, if I want to bet on Ethereum, why not just buy an ETF? Why not just buy ETH on the chain and keep it yourself?
But the Treasury has five important options.
If you buy an ETF or buy ETH on the chain, the amount of Ethereum you hold is constant, and the ETF also charges management fees. But the goal of the treasury company is to increase the number of tokens per share, and MicroStrategy uses this indicator to measure itself.
First, if the company’s stock price is higher than its net worth, it can issue additional shares to increase its net value per share (NAV). This is called “reflexive growth,” and there are very few such reflexive things in the stock market.
Second, because the underlying tokens are highly volatile - Ethereum's volatility is twice that of Bitcoin. If you buy an Ethereum ETF and want to add leverage, the bank will charge a 10% interest rate, but as a business, the treasury company has a lower financing cost and can "sell volatility" through convertible bonds or derivatives. For example, MicroStrategy's financing cost is zero.
Third, you have the difference between market price and net worth, you have stock attributes, and there are other treasury companies doing market-to-book ratio arbitrage externally. If a company's market price is three times its net worth, you can merge and acquire other treasury companies, and there is arbitrage space. Fourth, you can be an operating company, such as providing services for the DeFi ecosystem.
Amit: For example, the lending business.
Tom Lee: Yes, this cannot be done on Bitcoin, but it is very useful on Ethereum.
Fifth, you can create a structural "put option". For example, MicroStrategy has 600,000 bitcoins. If the US government wants to buy 1 million bitcoins, the price will go up if it buys directly from the market. It is better to directly acquire MicroStrategy at a premium - this is the "sovereign put option". The same is true in the Ethereum world. If a vault company holds 5% of Ethereum and is extremely important to the Ethereum ecosystem, then their valuation should be higher. For example, if Goldman Sachs wants to issue a stablecoin on Ethereum, it needs to ensure the security of the Ethereum network. It may eventually buy a large amount of ETH, or directly acquire these vault companies. So the vault companies have Wall Street "put options".
Amit: This is a very clear idea. If you believe in the macro logic of Ethereum, then you do have a lot of leverage.
Amit: Finally, our audience has two Fundstrat Granny Shots ETF holdings that they are particularly concerned about (Palantir and Robinhood). Would you like to start with Palantir?
Tom Lee: Palantir is redefining the relationship between companies and enterprises, helping enterprises become better. Generally, such companies are either like consulting companies or technology companies. Palantir is both, but with fewer people. Palantir is like a "magician" equipped for Fortune 500 companies. Of course, the government also uses it.
Amit: One thousand employees, less than 800 customers, $4 billion in revenue. Robinhood is the second largest Granny Shots holding company.
Tom Lee: Robinhood is amazing. I think it is the Morgan Stanley of the younger generation. Don’t forget that in the 1980s, new brokers that served the baby boomers emerged on Wall Street. Charles Schwab was just a newsletter back then, but later became a brokerage. E*Trade and Schwab were brokers for the baby boomers, and Robinhood is what it is today . I think Robinhood is very smart, has a good product experience, understands the importance of UI, and is very flexible.
