The Best Performing Stocks of 2025 (EP. 445)

Episode Summary

Executive Summary: Michael and Ben mix personal travel anecdotes with a wide-ranging market discussion: AI infrastructure and power demand, the extraordinary outperformance of silver, gold, small caps and international small-cap value, the growth of family offices, the weakness in consumer sentiment, and the continuing evolution of retirement behavior and crypto. The episode emphasizes that investing lessons rarely change, but market leadership and behavioral patterns do.

Main Topics: Family trips, Disney/Universal, and the cost of convenience (Priority: 2/5): The hosts open with family travel stories and compare Disney/Universal experiences, highlighting how expensive express passes have become and how families justify paying for convenience. AI boom, power demand, and market winners (Priority: 5/5): They discuss Fidelity’s AI outlook and the idea that AI is not all-or-nothing; instead, different companies may win in different parts of the stack. They focus on data-center electricity demand and utility/turbine names as beneficiaries. Market leadership, silver/gold, and the strange 2025 stock tape (Priority: 5/5): The conversation covers silver’s explosive move, gold’s gains, and the year’s best and worst performing S&P 500 stocks, using them as examples of the market’s odd leadership and the dangers of overtrading. Small caps vs. international stocks (Priority: 5/5): They examine record underperformance of U.S. small caps relative to developed international markets and note especially large gaps in international small-cap value versus U.S. small-cap value. Family offices, wealth concentration, and private wealth management (Priority: 4/5): They discuss the rapid growth of family offices, what they are, why ultra-wealthy families use them, and whether in-house management is really worth the cost versus outside firms. Consumer sentiment, retirement, and the changing financial life cycle (Priority: 4/5): The hosts debate weak consumer sentiment readings, argue survey quality may be degraded, and pivot to retirement spending, 401(k) participation, and the need to help retirees spend more early in retirement. Crypto, private credit, and long-run behavior (Priority: 4/5): They note crypto apathy despite prior catalysts, discuss Bitcoin’s price-driven narrative, and flag private credit’s expansion into consumer debt as an area worth monitoring.

Key Arguments: Market lessons are durable; the specifics change, but the core advice—don’t panic, don’t chase, don’t overtrade—stays the same. The AI opportunity should be viewed as a multi-winner ecosystem rather than an all-or-nothing bet; some firms may win while others fail without killing the entire trend. AI is already driving real-world demand for electricity and gas turbines, creating potential beneficiaries outside of semis and hyperscalers. Silver’s massive run and the dispersion among top/bottom stocks show how hard it is to manage greed and timing once a trend is underway. U.S. small caps and international small-cap value have dramatically lagged, suggesting a powerful mean-reversion/setup for 2026. Family offices are growing rapidly because the ultra-wealthy want privacy, control, and status, though that comes with higher overhead and career-risk-driven decision-making. Consumer sentiment surveys may be less reliable than headlines imply, because response quality has deteriorated and the pandemic changed attitudes permanently. Retirement planning should focus more on spending earlier in retirement when health is better, rather than defaulting to chronic underspending. 401(k)s have broadly succeeded in expanding retirement participation and wealth accumulation versus the old pension-only model. Crypto’s main catalysts may be exhausted for now, leaving price as the primary driver until a new use case or narrative emerges. Private credit’s move into consumer debt is notable because it combines higher yield with more cyclical risk, making recession exposure the key test.

Data Points: Universal Express Pass (4 people): $1,500 for one day - Cost quoted for skipping long lines at Universal during the family trip Universal Express Pass (5 people, prior example): ~$3,000 - Ben estimates what an on-demand purchase for five people would have cost Silver YTD performance: +170% - Used as an example of extreme market behavior and trend-chasing Gold YTD performance: +70% - Shown alongside silver as another major metals winner GE Vernova YTD performance: +102% - Highlighted as a potential AI power/infrastructure beneficiary S&P 600 vs. developed ex-U.S. 12-month relative return: Worst 12-month performance on record in the cited dataset - Small caps lagging foreign developed stocks by the widest margin in the chart history DFA International Small Cap Value YTD: +48% - Compared with the U.S. small cap value counterpart DFA U.S. Small Cap Value YTD: +10% - Illustrates the large international outperformance gap Small-cap value outperformance gap: ~40 percentage points - International small-cap value versus U.S. small-cap value S&P 100 profit margins: 15.7% - Compared against S&P 600 margins in the margin-spread discussion S&P 600 profit margins: 5.9% - Shows small-cap margin compression relative to large caps Consumer sentiment: Lowest since early 1980 - Used to frame pessimism versus the current economic backdrop Family office wealth overseen: $5.5 trillion - Deloitte estimate cited for family offices Family office wealth growth: +67% in five years - Shows the speed of growth in ultra-wealthy wealth management Projected family office wealth by 2030: $9 trillion - Forecast cited from the Wall Street Journal/Deloitte discussion Private credit consumer debt purchases: $136 billion in 2025 vs. $10 billion in 2024 - FT/KBW figures on buying or agreeing to buy consumer loans Increase in private credit consumer debt buying: ~14x - Described as snapping up nearly 14 times as much consumer debt Top 5% earnings threshold for Boomers (1990): $212,000 inflation-adjusted - Historical comparison from the WSJ millennial article Top 5% earnings threshold now: $300,000 inflation-adjusted - Shows how much higher the entry threshold is today Chance a lawyer reached top 5% (older cohort): 30% - Used in the WSJ discussion of career pathways to high earnings Chance a lawyer reached top 5% today: 20% - Indicates reduced odds for lawyers relative to earlier cohorts Private-sector defined benefit participants peak: 30 million - Historic pension participation level before the 401(k) era fully matured Active defined benefit participants today: 10 million - Shows pension decline Active defined contribution participants today: Nearly 90 million - Shows 401(k)/DC expansion Average health life expectancy at age 65: 12.4 years in poor health - Used to support front-loaded retirement spending

Pivotal Quotes: "It’s always the same novel." — Michael: On how investing lessons repeat across market cycles "I feel like people keep putting this stuff all in one big bucket. Like, it’s either going to succeed or it’s going to fail, and it’s all or nothing." — Michael: On AI expectations and winner/loser framing "My responsible life choices have made me permanently boring and miserable." — Michael reading a Reddit post: Used to frame the risks of over-optimization and social trade-offs

Implications: Listeners are urged to think in regimes, not headlines: AI may create multiple winners, small caps may be due for recovery, retirement spending deserves more attention, and behavioral extremes—from crypto apathy to over-optimization—can distort long-term outcomes.