[Week 29, 2025] Guessing Games

Welcome back to Price and Prejudice with a few musings from Week 29 of 2025.

Stable Demand for Stablecoins

Apollo’s Torsten Sløk points to stablecoins as a new marginal buyer of short-term U.S. government debt, citing research that large inflows into stablecoins push down three-month T-bill yields by about 2 basis points within ten days. That’s not nothing—especially in a world where every basis point counts—and the implication is that as the stablecoin market grows, so too could this quiet but persistent bid for Treasuries. Crypto wants to be money, and money needs safe assets, and the safest asset is still a T-bill (give or take the occasional debt ceiling crisis).

Meanwhile, Treasury Secretary Scott Bessent praises stablecoins as they will lead to a surge in demand for U.S. debt. This sounds bullish until you remember that it's not just what they say, but why they're saying it: when policymakers make optimistic claims about new sources of demand, the subtext is often that the old ones are drying up.

Valuing BlackRock

BlackRock lost $52 billion of client money last quarter—well, technically, an Asian institutional client decided to take back its $52 billion, perhaps to buy something fun, like treasuries or Nvidia. As a result, BlackRock shares fell nearly 6% despite beating on earnings and hitting a record in total assets under management. You’d think having $12.5 trillion would be enough to paper over the occasional rounding-error-sized redemption, but no. When a client takes back $52 billion all at once, people worry about what they don’t know.

How does this add up to valuation math? If you're an asset manager charging 10 basis points as fees and trading at 10x earnings, your business is worth about 1% of assets under management. So a $52 billion outflow should hit the stock by about $500 million. Instead, BlackRock lost $10 billion in market cap. Either markets are irrational, or they're pricing in the possibility that this wasn’t a one-off. When your entire business model is “we manage your money indefinitely,” any hint that clients are not that into you anymore becomes a threat to the multiple, not just the revenue.

Individual Investors

Here's a fun survey of individual investors from Natixis. Two things stand out. First, there is a large expectations gap: individual investors think they can earn 10.7% above inflation over the long term, while financial professionals suggest 8.3%. Second, when asked who they rely on for financial decisions, investors overwhelmingly pick their advisor (91%), even more than themselves (88%). AI ranks near the bottom (40%) and social media is at the bottom (17%). Despite all the hype around robo-advisors and TikTok trades, people still prefer humans.

The preference for human advisors over AI might reflect something deeper than mere technological resistance: financial decisions involve not just optimization but also psychological comfort, and people may need someone to blame (or thank) when things go wrong. In a world where algorithms can beat humans at chess and Go, portfolio management remains stubbornly relational.