Tea and Crumpets

Will Brown and Adam Eagleston

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Tea and Crumpets is Formidable Asset Management's biweekly podcast that features Formidable's Managing Partner and CEO, Will Brown, and Chief Investment Officer, Adam Eagleston, CFA, talking directly about current events in relation to their expertise and business in a conversational manner.

JAN 14

Happy New Year

We look at the eventful start to 2026 and try to put some context around potential market impacts. Geopolitically, we saw the renewed vigor of the Monroe Doctrine in full force with U.S. action against Venezuela's Nicolas Maduro. Whether stemming the flow of drugs or increasing the supply of oil was the primary factor is undetermined, though decades of underinvestment in infrastructure make any meaningful near-term effect on oil supply unlikely; lower oil prices have been one of the few things keeping inflation in check. We also discuss saber rattling as it relates to Greenland, whose strategic location has perhaps been underappreciated, and Iran, where citizen protests are increasingly being met by violence. Affordability has been top of mind for the electorate, and the Administration, and we have seen presidential social media posts on housing and credit card interest rates. Though executive power has increased, barring institutions from buying single-family homes and capping credit card interest at 10% seems to have little likelihood of actually being implemented. However, housing affordability is a huge problem; according to Apollo: 54 million households can only afford a house priced less than $200k Another 40 million need prices between $200k and $400k With around 133 million households total in the U.S, and the median home price over $400k, the American dream of home ownership is simply out of reach for most One mechanism viewed as a way to improve affordability is lower interest rates, though compelling the Fed to reduce rates by having the DoJ go after the current Fed chair may not have the desired effect. We discuss Chair Powell's stern response to the charges and the importance of maintaining Fed independence. Finally, we recap a strong 2025 for equities (at least some of them), and look at the statistics showing just how few stocks outperformed the S&P 500 (fewer than one in five). This was the third year in a row where active managers had the deck stacked against them. For 2026, expectations are universally bullish. We look at the math behind higher equity prices in terms of multiples and earnings, and why a broader market, which started to take shape in December, might help investors but not necessarily matter for the index. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

34 min
12/23/2025

Christmas Present

We take a detour into the Dickensian in evaluating the state of the economy. First, the recent inflation print, which showed a significant decline in the level of price increases, was a fiction worthy of Dickens, with the majority of the data simply made up as a result of the government shutdown. Setting that aside, since 2021, wage growth has not kept pace with inflation for food, shelter, and services, though we can count our blessings that at least alcohol prices have not increased as much… Challenges face the Fed chair (both current and yet to come), and managing a deteriorating labor market and persistently higher prices presents a conundrum. The Fed is simply not getting what it wants at present in terms of rate cuts translating to a lower yield on the 10-year Treasury, and with deficits soaring in spite of a growing economy, some tough choices will have to be made. However, stocks have proven remarkably resilient, and predictions from most Wall Street firms argue for a continued move higher supported by AI, solid growth, fiscal stimulus from tax policy, and further rate cuts. However, the math is a little challenging; to cite one example: The S&P reaches over 7,700 by this time next year (around 13% above where we are now) Earnings grow around 9% (this seems achievable, and maybe even a little conservative) Multiples expand to 26x earnings (this would be at peak dot com levels) We think you might get this level of earnings growth (or better), but that multiple seems a little rambunctious. Even if we do get there, expect some market shenanigans on the way, as history shows mid-term election years tend to see large drawdowns; think back no further than 2022. The average midterm drawdown is around 18%, though the range is very wide. Will brings it home with a reading from a speech given by Scrooge's nephew Fred so we end on a positive note celebrating the season. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

41 min
12/09/2025

Ish

After Thanksgiving, we take a look at poultry, especially how dove-ish the Fed is now expected to be, a sharp reversal from a few weeks ago. We also discuss the odds-on favorite for the next Fed chair and how his political leanings may (or may not) influence which direction the Fed takes. Recent employment data has been lackluster, to put it mildly, which is forcing the Fed's hand as it relates to continued cuts. To wit: Total change in private employment – Negative 32k Manufacturing and construction – Negative 27k Small businesses – Negative 100k Wage growth, especially for lower income households, is rapidly slowing, and those households spend, on average, over 70% of income on food, shelter, and transportation, all of which are seeing price increases that exceed wage growth. It seems like more pressure could be imminent on both wages and employment as AI continues to make inroads. We take a detour away from economics into the carnage in the cryptocurrency space and what it may mean for certain types of companies that have built their business models on owning crypto. In the second half of the show, we juxtapose the threat of AI for employees with the opportunity for employers. AI has been the savior in terms of growth and price appreciation for the stock market. Since the launch of ChatGPT in late 2022, earnings for technology and communications stocks have grown 121% versus a mere 27% for all other sectors. That trend is expected to continue in 2026, with the Mag 7 forecasted to grow over 20% versus 11% for the other 493 stocks. We also discuss just how big the Mag 7 are, with some individual members of the group larger than entire sectors of the economy from a market cap perspective. We discuss whether that is healthy (or sustainable) and why a broadening market is potentially overdue (not to mention healthy). Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

42 min
11/19/2025

I Have Two Gavels. One for Each of You.

After a long hiatus (no, not related to the government shutdown) we return with a look at the economy and markets. On the economic front, despite a lack of formal data, signs point to a weakening labor market. Consumers in the bottom 80% have spending post-Covid that has barely kept pace with inflation, with prices higher by around 25% since 2020. Unemployment has climbed to over 9% for those between 20 and 24 years of age. All these are signs of a K-shaped economic recovery, with a strong stock market supporting higher spending for those in the top 20% of incomes. The Fed faces a challenge with a weakening labor market but inflation near 3%; the odds of a December rate cut have fallen to 50%. In terms of the equity market, we have also seen a K-shape. While overall market performance has been narrow (only 158 out of 500 stocks in the S&P are outperforming YTD), it has been the Mag 7, which have seen strong earnings growth, and very speculative stocks, fueled by retail traders both in and outside the U.S. For the former, this growth comes with a caveat that their once strong free cash flows are being siphoned off (and bolstered by debt) to fuel the massive capital expenditure required to build out AI infrastructure. For the latter, a form of tribalism has united retail speculators, who are treating stocks much like sports wagering, which has also seen massive volume growth. It is important to note that despite stocks favored by retail investors performing well this year that, since 2021, the average Robinhood account is estimated to have declined in value while the S&P 500 is up substantially. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

45 min
10/02/2025

Red October?

In this episode, we talk a pay homage to Will's mentor by focusing on value and discipline, two things very much out of favor in the market at present. It is easy to see why as in the wake of five consecutive months of market gains, statistically the odds favor further appreciation. Moreover, even though valuations are high, historically valuation has proven a sub-optimal timing tool as it relates to near-term returns. With the Fed now more inclined to look more at weakening employment versus inflation, accommodative monetary policy seems supportive of valuation even at these elevated levels. In terms of what has been working recently, it is a strange combination of the largest technology stocks, which are now involved in myriad deals reminiscent of the late 1990s in terms of vendor financing and capital spending, and speculative retail favorites, many of which have no revenue, much less positive earnings. We still find opportunities and lower valuations among smaller and mid-cap stocks, especially those that are higher quality. However, since 2010, we have seen two very different markets. In the wake of the financials crisis, from August 2010 through August 2010, high quality stocks outperformed low-quality stocks by a factor of almost 3x. However, since that time, low quality stocks are up 140% versus high quality gaining only half that much. Retail investor speculation and the gamification of "investing" are contributing factors. We also discuss the challenge facing consumers in terms of housing affordability, especially as the lower and middle income cohorts experiencing declining wage growth . To simply return to pre-Covid levels, it would take one of three things, or a combination thereof: Home prices fall 38%. Incomes to rise 60%. Mortgage rates to decline to 2.35%. With the first two seemingly unlikely, can the Fed get there with rate cuts, or is some form of yield curve control required. We are hoping for a Red October on the baseball diamond but not in the market, but only time will tell. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

42 min
09/11/2025

Hot Pot Paranoia

In this episode, we talk a lot about the job market, which is anything but hot, and its implications for the Fed, which is under pressure. All of the below tend to support President Trump's criticism of Powell being "too late": weakening job growth this summer (only +22k jobs in August, mostly in health care). likelihood of significant negative revisions this week. unemployment that would be over 5% if not for lower labor force participation. Although unemployment is not an issue (yet), the risk in the labor market is a dearth of new jobs, with the odds of finding a job if you lose on today only 45%, the lowest level in over 12 years. We believe that AI is having an outsized effect on job openings, especially at the entry level. All of these factors, along with a shift away from a focus on inflation by the Fed, support the market's consensus view of a rate cut being on tap for next week, with two or three more likely to follow in quick succession. Historically, this has been a positive for equity markets if (and that is a big if) a recession can be avoided. the Fed has cut rates after an extended pause (like the one we are in now) eight times in the last forty years; four times we avoided a recession, and markets gained, on average, around 15%. the other four times, we entered a recession, with markets typically experiencing a 10-15% drawdown. Although there are some parallels between now and the late 1990s, valuations are not quite as stretched at the top, with the median P/E of the top 10 stocks around 31x versus a 41x multiple in 1999. However, investor allocation to equites is now at 55%, above its prior peak in 1999. We also discuss the reasons why, despite Fed rate cuts, the all important 10-year yield may not cooperate. Chief among these are the lagged impact of tariffs on prices and the relatively high (and growing) level of U.S. government debt. Will the U.S. be forced to suppress yields a la the bank of Japan in order to unlock the housing market, and is that what is causing tempers to flare between members of the administration? Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

50 min
08/26/2025

The Gilded Age

In this episode, Will and Adam examine former Secretary of Labor Robert Reich's comments comparing today to the Gilded Age. We acknowledge there are several similarities, including increasing wealth disparity, the emergence of disruptive technology, and widespread commingling of government with business. We specifically discuss the recent discussion around the government taking stake in public companies, which, though has a precedent, was used in the past during times of financial crisis, i.e., to keep automakers afloat during the financial crisis. We discuss the (until just recently) ebullient vibes in the stock market, and why some of the forefront of the AI revolution are starting to sound a little more cautious about what AI can deliver in the near-term. However, that has not stopped investors from returning to familiar favorites from the 2021 run-up, with this rally's best performers including: Non-profitable tech Most shorted stocks Meme stocks With Fed chair Powell on tap for Jackson Hole, we look at the recent Fed minutes, which indicating a focus more on inflation than jobs, and why that could change if job revisions continue to be revised lower. However, with the inflation effect of tariffs expected to shift from businesses to consumers soon, will the Fed have the flexibility to cut rates as much as investors currently believe? With both anecdotes and hard data indicating a struggling consumer, the Fed is in a tough spot and under continuing political pressure. We conclude with why it is important to remain systematic and focused on long-term investing success and resist the temptation of the continued gamification of stock trading, with platforms like Robin Hood now exploring the addition of traditional sports wagering alongside retail investment accounts. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

46 min
08/06/2025

Demise of the Switchboard Operator

In this episode, we provide a recap on earnings so far in Q2, which, so far, have been good enough for the market to remain near all-time highs. We also delve a little deeper into some of the megacap earnings, especially as it relates to whether accounting rules are optically improving earnings while cash flow is shrinking as spending on capital expenditures, specifically AI chips, is draining corporate coffers. To wit, free cash flow versus capex for the four biggest spenders (GOOG, META, AMZN, and MSFT) is as follows (in billions): 2024 FCF - $233 Capex - $226 2025 FCF - $207 Capex - $351 2026 FCF - $240 Capex - $445 2027 FCF - $289 Capex - $512 In other words, these businesses, which once generated massive amounts of free cash flow for things like buybacks, are becoming much more capital intensive. However, since 2021, it has been only the 10 biggest stocks that have had earnings that have exceeded inflation; the other 490 have barely kept pace with overall price increases. We also talk about inflation, specifically the shift toward the greater use of estimates versus actual inflation data, as well as the smoke signals from the economic intelligentsia hinting at a shift away from the fed's long-standing 2% inflation target. In the spirit of government estimates, we also review the recent (abysmal) jobs data, and revisions, and connect that with the demise of certain professions, which ties into the massive AI spending driving corporate earnings and capital expenditures. We close with a look at the strong recent performance of speculative stocks, the historically large nature of the volume in that trading, and why that has historically boded poorly going forward. Of particular note is the recent record flow into the Ark Innovation ETF. Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

40 min

4.5

out of 5

8 Ratings

The Greatest Podcast

08/06/2021

🦙🦙🦙llama🦙🦙🦙

Yes.
🙌

05/04/2020

nate brownnnn

Great podcast👍

Tea and Crumpets is Formidable Asset Management's biweekly podcast that features Formidable's Managing Partner and CEO, Will Brown, and Chief Investment Officer, Adam Eagleston, CFA, talking directly about current events in relation to their expertise and business in a conversational manner.

Creator

Will Brown and Adam Eagleston
Years Active

2020 - 2026
Episodes

95
Rating

Clean
Copyright

© 2024
Show Website

Tea and Crumpets