WEBVTT - Interview Only w/ Mark Zandi - Will Trump’s Tariffs Drive The Economy Into Recession? 0:00:05.040 --> 0:00:08.960 Well as we begin the fourth quarter of the year, 0:00:09.200 --> 0:00:11.160 if you want to look at it in quarters, and 0:00:11.280 --> 0:00:12.959 of course it's supposed to be the first quarter of 0:00:13.000 --> 0:00:16.120 America's fiscal year, but we have a government shutdown since 0:00:16.160 --> 0:00:19.200 we can't agree on those things. I always want to 0:00:19.200 --> 0:00:22.160 bring back somebody who makes I think makes the most 0:00:22.160 --> 0:00:25.520 amount of sense about what's happening in this economy and 0:00:26.520 --> 0:00:29.880 how much of this uncertainty can feel certain down the road. 0:00:29.920 --> 0:00:33.520 It's of course Mark Zandi from Moody's Analytics. Mark, good 0:00:33.520 --> 0:00:35.159 to see you, Chuck, good to be with you. 0:00:35.280 --> 0:00:36.360 Thanks for the opportunity. 0:00:37.080 --> 0:00:42.479 So I have been describing the economy this way. If 0:00:42.520 --> 0:00:46.839 you have money, have some savings, and have the ability 0:00:46.960 --> 0:00:50.120 to invest, it got to be is going okay for you. 0:00:51.720 --> 0:00:57.040 But if you don't, this is a scary economy. I 0:00:58.720 --> 0:01:02.160 confess that's a simple, simplified way of putting it. But 0:01:02.280 --> 0:01:04.880 that's what it looks like to me as a lay person. 0:01:05.120 --> 0:01:07.880 What kind of is that too simplified of a description 0:01:08.000 --> 0:01:08.560 or how would you do? 0:01:08.720 --> 0:01:11.479 No, I think that's pretty apt. I think if you're 0:01:11.520 --> 0:01:13.560 in the top part of the income and wealth distribution, 0:01:13.680 --> 0:01:17.800 let's say, the top third of the distribution, you're doing fine. 0:01:17.840 --> 0:01:20.920 You got a job, you're getting a pay increase, get 0:01:20.959 --> 0:01:26.319 a bonus, you own your own home, you own some stocks, 0:01:26.360 --> 0:01:29.800 and of course stocks are on a tear, and you 0:01:30.080 --> 0:01:32.800 you don't really owe anything. You might I might have 0:01:32.800 --> 0:01:36.720 a mortgage, but you probably locked in back during the pandemic, 0:01:36.840 --> 0:01:39.360 so you've got a three three and a half four 0:01:39.400 --> 0:01:42.000 percent mortgage rate. So you're making more on your money 0:01:42.040 --> 0:01:44.400 market account than on your you're paying on your mortgage. 0:01:44.440 --> 0:01:47.520 So yeah, you're sitting pretty If you're in the bottom 0:01:47.800 --> 0:01:51.240 two thirds of the distribution of income, certainly the bottom third, 0:01:51.720 --> 0:01:55.920 it's a struggle. You know, you probably have a job, 0:01:56.000 --> 0:01:58.560 but unemployment is starting to not hire her, and you 0:01:58.560 --> 0:02:01.600 don't want to lose your job because it's getting increasingly 0:02:01.800 --> 0:02:04.400 hard to find another one. Hiring rates are very low. 0:02:05.560 --> 0:02:08.600 You don't you know, you really don't own very much. 0:02:08.840 --> 0:02:10.680 If you're in the middle part of the distribution, probably 0:02:10.720 --> 0:02:12.160 own a home, but if you're in the bottom part, 0:02:12.200 --> 0:02:15.840 you don't, and you owe on credit cards auto. If 0:02:15.840 --> 0:02:19.040 you're in the bottom third, you're probably on student loan debt, 0:02:19.600 --> 0:02:21.800 so so it is more of a struggle. So I 0:02:21.800 --> 0:02:24.919 think that way thinking about the economy and whether it's 0:02:24.919 --> 0:02:28.359 working for people works is very apt. Yes, I agree. 0:02:28.639 --> 0:02:31.440 So you know it's interesting because this creates sort of 0:02:31.919 --> 0:02:35.040 I think political challenges more now for the Trump administration. 0:02:35.160 --> 0:02:38.320 You know, you know the Biden administration, and it was Biden, 0:02:38.360 --> 0:02:40.440 and I've always thought it was a bit almost because 0:02:40.440 --> 0:02:43.760 he spent most of his professional life where the economy 0:02:44.080 --> 0:02:46.880 was judged. A good economy was based on whether there 0:02:46.919 --> 0:02:49.600 were jobs being created. A bad economy is when there weren't. 0:02:50.120 --> 0:02:52.520 And I do think Donald Trump looks at a good 0:02:52.520 --> 0:02:54.519 economy is when the stock market does well. A bad 0:02:54.560 --> 0:03:00.240 economy is when it doesn't. And like, ultimately both ideas 0:03:00.320 --> 0:03:03.760 the hey can I afford this economy? Right? Can I 0:03:03.840 --> 0:03:06.200 live in this economy? You know, it's one thing to 0:03:06.240 --> 0:03:09.320 have a job. Can you afford participating in the economy 0:03:09.360 --> 0:03:11.760 with your job? It's one thing if the stock market's 0:03:11.760 --> 0:03:13.320 doing well, but do you have the money to actually 0:03:13.400 --> 0:03:17.120 benefit from that? So I do see that as political. 0:03:17.200 --> 0:03:19.200 But let's start with what you have to do, which 0:03:19.240 --> 0:03:21.600 is trying to forecast, trying to understand what the economy is. 0:03:23.720 --> 0:03:25.560 There's all these little tea leaves. I was reading about 0:03:25.560 --> 0:03:32.080 the other day that people are pulling back on big 0:03:32.080 --> 0:03:35.200 home renovations and they're now doing smaller ones. People are 0:03:35.240 --> 0:03:39.440 pulling back on big trips, so they're doing maybe road 0:03:39.480 --> 0:03:43.760 trips that while you're starting to see these little signs 0:03:43.920 --> 0:03:49.240 of a pullback consumer pullback, and it's not yet reflective 0:03:49.280 --> 0:03:53.600 anywhere else, not quite reflected in GDP. Yet, how important 0:03:53.640 --> 0:03:56.720 are those little indicators to you? And what ones do 0:03:56.800 --> 0:03:59.720 you look at, especially now that government data has been paused. 0:04:00.880 --> 0:04:04.080 Well, yeah, I mean I pay attention to the anecdotal 0:04:04.120 --> 0:04:08.880 information in the kind of the little pieces of information 0:04:08.960 --> 0:04:12.720 here and there that you get from different sources, but 0:04:12.840 --> 0:04:17.960 I ultimately rely on the the data, the aggregate data. 0:04:18.080 --> 0:04:19.840 I mean, you can get fooled by you know, the 0:04:19.880 --> 0:04:22.760 economy is a big elephant, right, and depending on which 0:04:22.800 --> 0:04:24.400 part of the elephant you touch, you get a very 0:04:24.400 --> 0:04:26.960 different picture. So that you know, if I'm in one 0:04:27.000 --> 0:04:30.360 part of the country or another, that will influence people's thinking. 0:04:30.400 --> 0:04:32.599 If I'm in one talking to one industry or another 0:04:33.120 --> 0:04:35.520 that influences people thinking. If I'm at the top part 0:04:35.560 --> 0:04:38.200 of the distribution of income or the bottom, that influences 0:04:38.200 --> 0:04:41.320 people thinking. So I try to be careful not to 0:04:41.360 --> 0:04:44.960 get caught up too much in the anecdotes in those 0:04:45.000 --> 0:04:47.920 little straws as you as you put it, look at 0:04:47.920 --> 0:04:51.640 the aggregate data and you know, there and for me, 0:04:52.520 --> 0:04:55.080 at the end of the day, it's still about jobs. 0:04:55.120 --> 0:04:56.839 And you know, are we creating jobs or they good 0:04:56.839 --> 0:04:59.840 paying jobs as a pay enough that people can have 0:05:00.120 --> 0:05:02.800 forward to you know, purchase the things that they need 0:05:02.880 --> 0:05:06.440 and that they want. And there it feels like the 0:05:06.480 --> 0:05:08.800 economy is kind of a struggle, a bit of a 0:05:08.839 --> 0:05:12.480 struggle of you know, in aggregate we're not creating many 0:05:12.560 --> 0:05:15.440 jobs at all, but jobs we are being created are 0:05:15.839 --> 0:05:20.200 you know, in a very few industries like healthcare. It 0:05:20.279 --> 0:05:22.359 just doesn't feel like it's working for you know, a 0:05:22.360 --> 0:05:25.520 lot of Americans. So we're not in recession. We're growing. 0:05:25.839 --> 0:05:30.719 GDP is positive, but it just feels kind of punk. 0:05:31.000 --> 0:05:32.120 That might be the word to use. 0:05:32.560 --> 0:05:37.800 So if we see the general consensus apparently is a 0:05:37.839 --> 0:05:41.760 thirty to forty chance of a recession next year, Yeah, 0:05:41.480 --> 0:05:44.800 how should folks interpret a prediction like that? 0:05:45.440 --> 0:05:49.400 Well, the most likely scenarios we kind of navigate through 0:05:49.560 --> 0:05:54.800 without an actual downturn, so the economy produces enough job 0:05:54.920 --> 0:05:58.560 so that unemployment really doesn't take off. Here, We're okay, 0:05:58.800 --> 0:06:00.760 it's not it may not be, but we're okay. 0:06:00.800 --> 0:06:03.160 But so kind of like the first I felt like 0:06:03.200 --> 0:06:05.839 the economy in twenty oh one to twenty oh two 0:06:06.040 --> 0:06:08.919 where it was a mild recession but we kind of 0:06:08.960 --> 0:06:09.480 got through it. 0:06:09.720 --> 0:06:13.000 Yeah, that that's that's right. But you know the risks 0:06:13.000 --> 0:06:16.600 are to the downside, right, I mean, you know, if 0:06:16.200 --> 0:06:20.599 if things turn out different than that kind of that 0:06:20.720 --> 0:06:23.719 economy we just described, it's going to turn out worse, 0:06:23.839 --> 0:06:26.640 not better. You know, just to give a little bit 0:06:26.640 --> 0:06:29.560 more context, kind of in a typical economy, the probability 0:06:29.600 --> 0:06:31.120 recession would be fifteen percent. 0:06:31.160 --> 0:06:33.840 We tend to have a recession once every six seven, eight. 0:06:33.839 --> 0:06:37.119 Years, so every year, if there was no you would 0:06:37.160 --> 0:06:38.520 you would say, well, you have to put it at 0:06:38.520 --> 0:06:41.240 fifteen percent. But that's just because that's the way it 0:06:41.279 --> 0:06:41.960 is all the time. 0:06:42.360 --> 0:06:46.520 That's just it's so called unconditional probability. I mean, on average, 0:06:46.520 --> 0:06:49.279 you get a recession every seven years there for fifteen percent. 0:06:49.320 --> 0:06:52.440 So if you're a thirty percent forty percent, well, you. 0:06:52.320 --> 0:06:55.520 Know that's on the high side. It's not over fifty that. 0:06:55.560 --> 0:06:59.799 I'll take it, but you know, thirty forty is uncomfortably high. 0:07:00.279 --> 0:07:00.479 You know. 0:07:00.520 --> 0:07:02.520 The other way to think about. It might be nothing 0:07:02.520 --> 0:07:06.120 else can go wrong, right, the economy is punk, It's 0:07:06.960 --> 0:07:12.120 it's vulnerable to anything that might go off the rails here. 0:07:12.160 --> 0:07:13.280 And it doesn't have to be a big thing. 0:07:13.320 --> 0:07:15.160 It could be a small thing because the economy as 0:07:15.160 --> 0:07:16.280 as vonible as it is. 0:07:17.520 --> 0:07:22.320 What has been the impact of what feels because you know, look, 0:07:22.640 --> 0:07:26.960 the DOGE cuts get a lot of attention, but there's 0:07:27.000 --> 0:07:29.840 a real pullback on government jobs on the state and 0:07:29.880 --> 0:07:32.320 local level because there's a lot of federal money is 0:07:32.360 --> 0:07:34.560 no longer going to state and local, right, A lot 0:07:34.600 --> 0:07:36.440 of we had a lot of COVID. You know, it's funny, 0:07:36.440 --> 0:07:40.160 we lived almost a decade, decade, decade and a half. 0:07:40.200 --> 0:07:43.960 First the Great Recession sort of triggered federal help for 0:07:44.040 --> 0:07:48.120 state and local, and then COVID created more help for 0:07:48.160 --> 0:07:50.640 state and local. And you know, I look at a 0:07:50.720 --> 0:07:53.280 California which is going to struggle for the first time 0:07:53.320 --> 0:07:55.120 with a budget deficit that they got to figure out, 0:07:55.160 --> 0:07:57.320 they got to do. They're going to do something really hard. 0:07:57.360 --> 0:07:59.720 I think a lot of states, I think there's going 0:07:59.760 --> 0:08:01.480 to be a a lot of sort of chickens coming 0:08:01.520 --> 0:08:03.760 home to roost in a lot of states who have 0:08:03.840 --> 0:08:08.280 these constitutional amendments that actually have to balance our budget. 0:08:09.120 --> 0:08:11.920 What is that risk factor of contraction of government workers 0:08:11.920 --> 0:08:14.640 and how much could that trigger a recession. 0:08:15.240 --> 0:08:17.040 Well, we're certainly seeing a lot of job loss at 0:08:17.040 --> 0:08:17.680 the federal level. 0:08:17.720 --> 0:08:21.400 I mean, the number of federal government employees down about 0:08:21.400 --> 0:08:23.560 one hundred thousand since the beginning of the year. So 0:08:23.600 --> 0:08:25.960 we are making the numbers up, but you know, rough 0:08:26.000 --> 0:08:29.800 word magnitude, we had three million federal government workers at 0:08:29.800 --> 0:08:31.640 the start of the year. We're now at two nine 0:08:32.200 --> 0:08:34.439 and we've probably got another one hundred k to go. 0:08:35.000 --> 0:08:36.920 Now, some people will hear that, say that doesn't seem 0:08:36.960 --> 0:08:38.559 like much two point eight to three. I mean, you 0:08:38.720 --> 0:08:40.600 round it up. It's still three million, right, Like, I mean, 0:08:41.360 --> 0:08:44.040 you know what I mean, Like, why is that a lot? 0:08:45.360 --> 0:08:48.559 Well, in the context of federal government never relays off. 0:08:48.600 --> 0:08:51.480 It's always in the reliable source of jobs. 0:08:51.520 --> 0:08:54.960 And historically, you know, it's been around three million for 0:08:55.360 --> 0:08:57.839 as long as I can remember. So losing one hundred 0:08:57.920 --> 0:09:00.680 k and losing another one hundred k in a short 0:09:00.720 --> 0:09:04.840 period of time six twelve months, you know, that's meaningful. Certainly. 0:09:05.000 --> 0:09:08.680 You know, obviously for the broad DC area. 0:09:08.520 --> 0:09:11.520 And regional economy, you can feel it right, Yeah. 0:09:12.080 --> 0:09:15.439 That broad metropolitan area is in a recession. 0:09:15.440 --> 0:09:16.800 There's no doubt about that. 0:09:17.480 --> 0:09:20.480 Now if if you're right, and I think you know, 0:09:20.520 --> 0:09:22.760 you make a good point that you know, federal government 0:09:22.840 --> 0:09:25.240 support the state in local first states and then local 0:09:25.280 --> 0:09:28.320 governments is now starting to wane. And you saw a 0:09:28.400 --> 0:09:31.920 tremendous amount of support in the in the pandemic. 0:09:33.320 --> 0:09:35.880 A lot of teachers got raises from that money, right, 0:09:35.960 --> 0:09:40.319 Like it was just a lot of public officials with cops, firefighters, teachers, 0:09:40.360 --> 0:09:43.840 you know, the stuff politicians feel good about. Hey, look 0:09:43.880 --> 0:09:45.720 we gave our teachers a raise, we gave our cops 0:09:45.720 --> 0:09:46.840 and firefighters are raised. 0:09:46.840 --> 0:09:49.280 Well. A bunch of other states they cut taxes, right, 0:09:49.400 --> 0:09:52.920 but you know they now that that's that's an issue 0:09:53.000 --> 0:09:55.240 because they're not getting that support from the federal government 0:09:55.320 --> 0:09:57.240 and likely not to going far and now they have 0:09:57.280 --> 0:10:00.959 a diminished tax base and so that's complicating things for them. 0:10:01.000 --> 0:10:03.600 So yeah, the state local then there are a lot 0:10:03.640 --> 0:10:06.000 more folks working in state and local government then and 0:10:06.040 --> 0:10:09.120 then in the federal government, and that if that sector 0:10:09.200 --> 0:10:12.280 is now not adding to payrolls and ultimately starting to 0:10:12.400 --> 0:10:15.480 reduce payrolls, and that becomes an even bigger deal. So yeah, 0:10:15.520 --> 0:10:18.280 it's a it's just uh, you know, the labor market 0:10:19.679 --> 0:10:23.280 has gone flat here. It's not creating any jobs. The 0:10:23.320 --> 0:10:26.520 only sectors that's creating jobs is healthcare, and everything else 0:10:26.640 --> 0:10:28.559 is a little bit adding a little bit, or hurt 0:10:29.120 --> 0:10:30.079 reducing a little bit. 0:10:30.440 --> 0:10:31.800 Government is reducing a little bit. 0:10:31.840 --> 0:10:34.920 At this point, all right, let's talk about AI. Yeah, 0:10:35.000 --> 0:10:38.280 how is A How are is AI having an impact 0:10:38.280 --> 0:10:39.480 on the job market yet? 0:10:40.520 --> 0:10:40.679 Uh? 0:10:41.360 --> 0:10:42.640 Yeah, there's some evidence. 0:10:42.840 --> 0:10:45.320 You know, I mentioned the hiring rate, the fact that 0:10:46.000 --> 0:10:47.760 if you look at the number of people getting hired 0:10:47.800 --> 0:10:51.000 relatives of the workforce, it's about as low as it 0:10:51.000 --> 0:10:53.079 gets when you're in the middle of a recession. We're 0:10:53.080 --> 0:10:55.160 not in recession because businesses aren't laying off, but they're 0:10:55.160 --> 0:10:58.400 not hiring. And one reason they may not be hiring 0:10:58.520 --> 0:11:01.760 is related to AI. You know, businesses are thinking, oh, 0:11:02.160 --> 0:11:03.640 you know, do I really need to go out and 0:11:03.720 --> 0:11:06.680 hire those folks because artificial intelligence will be able to 0:11:06.720 --> 0:11:09.520 empower my existing workforce to do those do that work, 0:11:09.520 --> 0:11:09.840 and I don't. 0:11:09.960 --> 0:11:13.600 Is this an experiment? Like my sense is businesses are 0:11:13.640 --> 0:11:16.600 trying to see if they can use AI to replace 0:11:16.679 --> 0:11:18.640 humans and then they're good and then if they don't, 0:11:18.679 --> 0:11:21.920 they'll go and hire. But if they can, then just 0:11:22.280 --> 0:11:23.600 then exponentially grow. 0:11:23.760 --> 0:11:29.120 Yeah. Absolutely, Yeah, I think you know, AI has captured 0:11:29.160 --> 0:11:33.440 the imagination, you know, particularly of the senior leaders management 0:11:33.480 --> 0:11:37.400 of many large multinational corporations around the country. In fact, 0:11:37.400 --> 0:11:41.920 they're selling themselves as AI companies increasingly because stock prices 0:11:41.960 --> 0:11:45.480 are as high as they are juiced by the promise 0:11:45.559 --> 0:11:51.439 of artificial intelligence creating all this wealth and genering a 0:11:51.480 --> 0:11:55.360 lot of economic growth that they are now saying, we 0:11:55.480 --> 0:11:58.640 are AI. Therefore we have to make AI work for 0:11:58.880 --> 0:12:02.600 our businesses, and so they're asking their existing workforce to 0:12:02.760 --> 0:12:05.440 figure that out. And you're right, I mean, so far, 0:12:06.320 --> 0:12:08.360 you know, there's some success stories, but there's a lot 0:12:08.400 --> 0:12:11.560 of failures as well, and must have to see how 0:12:11.600 --> 0:12:13.600 this plays out, and some companies will have to backtrack 0:12:13.640 --> 0:12:14.199 at some point. 0:12:14.480 --> 0:12:17.680 But I think ultimately, you know, businesses will figure it out. 0:12:18.320 --> 0:12:21.600 In new companies when they form, they're going to optimize 0:12:21.600 --> 0:12:24.280 around the AI technology, just like they did the Internet, 0:12:24.400 --> 0:12:26.679 and so it will diffuse throughout the economy and it 0:12:26.760 --> 0:12:29.160 will have more of an impact on the labor market 0:12:29.160 --> 0:12:32.200 going forward, particularly certain occupations in certain industries that are 0:12:32.559 --> 0:12:36.240 more likely to be affected by the use of AI. 0:12:36.600 --> 0:12:39.440 Yeah, politically, I think AI job the fear of AI 0:12:39.559 --> 0:12:41.800 job displacement, I think is going to be a big 0:12:41.840 --> 0:12:44.600 issue in twenty eight, But not until twenty eight, right, 0:12:44.679 --> 0:12:47.200 Like I think we're I don't think we're there yet 0:12:47.559 --> 0:12:48.080 on that. 0:12:49.000 --> 0:12:49.840 But when. 0:12:51.720 --> 0:12:55.000 Is there? You know, all these data center investments, all 0:12:55.040 --> 0:12:59.719 this money that's going into this AI expansion is there. 0:12:59.760 --> 0:13:03.600 It's not creating new jobs. It's just computer power. 0:13:03.960 --> 0:13:08.679 No, no, so far, it's more about it's not about jobs. 0:13:08.800 --> 0:13:13.080 It's not creating jobs. It's more about GDP and. 0:13:12.960 --> 0:13:18.800 It's creating wealth, creating revenue. It's creating wealth. It's we're 0:13:18.840 --> 0:13:21.679 really good at manufacturing money right now. 0:13:22.000 --> 0:13:23.959 Well, here is an amazing thing. And this goes back 0:13:23.960 --> 0:13:25.560 to where we started when we're talking about the folks 0:13:25.600 --> 0:13:27.120 in the top part of the distribution of the wealth 0:13:27.120 --> 0:13:31.240 distribution and wealth. The value of all US publicly traded 0:13:31.280 --> 0:13:35.520 stocks is up ten trillion dollars in one year, so. 0:13:35.679 --> 0:13:39.480 It's sixty seven trillion dollars today. It was fifty seven 0:13:39.559 --> 0:13:43.480 trillion dollars a year ago. Trillion dollars. 0:13:43.520 --> 0:13:45.840 And of course, if you own stocks, and particularly the 0:13:45.880 --> 0:13:49.319 AI stocks, you're feeling pretty good, and that's what's kind 0:13:49.320 --> 0:13:51.360 of driving the economic training. So the real impact of 0:13:51.400 --> 0:13:55.000 AI so far, it's not about jobs. It's more about 0:13:55.400 --> 0:14:01.760 wealth and GDP and not the more. In fact, if anything, 0:14:01.760 --> 0:14:04.960 it's reduced to employment and the tech sector and some 0:14:05.000 --> 0:14:07.440 of the other sectors that are that we just talked about. 0:14:07.760 --> 0:14:10.079 So give me some historical parallels. We had this kind 0:14:10.160 --> 0:14:14.200 of investment in tech in the nineties, turn of the century. 0:14:14.520 --> 0:14:17.320 We had this kind of investment in the industrial Age. 0:14:17.360 --> 0:14:19.520 We had this kind of investment in the build out 0:14:19.520 --> 0:14:24.920 of the suburbs after the after World War Two? Is 0:14:24.960 --> 0:14:30.560 this a bubble? And it certainly looks bubblish, and yet 0:14:30.600 --> 0:14:33.040 it's amazing to me only Jamie Diamond seems to be 0:14:33.080 --> 0:14:36.360 the the only one in that world that seems to 0:14:36.400 --> 0:14:38.760 be concerned that this could could all be a bubble. 0:14:39.520 --> 0:14:41.960 How would you you know? Is this something you can 0:14:42.040 --> 0:14:44.120 forecast or you don't know if it's a bubble until 0:14:44.120 --> 0:14:44.800 after it pops? 0:14:45.000 --> 0:14:49.800 Well, uh, And I'm hearing more voices kind of variations 0:14:49.840 --> 0:14:52.480 on that theme. And I think it's appropriate that the 0:14:52.760 --> 0:14:57.360 you know, the stock market, stock investors uh in aar 0:14:57.560 --> 0:14:59.960 kind of getting over their skis. You know, they they're 0:15:00.240 --> 0:15:04.400 there's this is real. These companies are joggernauts. They're you know, 0:15:04.560 --> 0:15:08.359 they're they're they're making massive investments and they're generating. 0:15:07.960 --> 0:15:09.440 A lot of revenue. 0:15:09.640 --> 0:15:13.640 Uh. But uh that is also generating a lot of 0:15:13.680 --> 0:15:17.600 euphoria around the prospects uh that these companies, uh, you know, 0:15:17.960 --> 0:15:20.640 are are generating and it's driving up their stock price. 0:15:20.680 --> 0:15:22.160 So you can have a situation and I think we 0:15:22.200 --> 0:15:24.240 do very similar to what happened back in Y two 0:15:24.280 --> 0:15:28.560 K and the Internet bubble and in previous huge technology 0:15:28.760 --> 0:15:32.480 periods of technological advance, where investors kind of get ahead 0:15:32.480 --> 0:15:35.080 of the story. You know, they they discount all the 0:15:35.120 --> 0:15:38.160 good news and then some and then some, and then 0:15:38.240 --> 0:15:43.600 once that happens, uh, you get speculation. That's when investors 0:15:43.600 --> 0:15:46.960 in stocks and other assets buy that stock or that 0:15:47.040 --> 0:15:49.280 asset simply because they think they can sell it at 0:15:49.280 --> 0:15:51.040 a higher price down the road. That's it. They're not 0:15:51.120 --> 0:15:54.080 they're not doing they're not thinking about, you know, what's 0:15:54.680 --> 0:15:56.800 where the value comes from. You know, will this be 0:15:56.840 --> 0:16:01.160 more valuable in the future, simply the euphoria speculation And 0:16:01.560 --> 0:16:03.240 you know, I don't know that we're quite there yet, 0:16:03.320 --> 0:16:05.200 Chuck that I that's what I would call a bubble 0:16:05.240 --> 0:16:06.960 when you get that kind of speculative fervor. 0:16:07.480 --> 0:16:10.440 But it feels like that's the direction of travel here, right. 0:16:10.520 --> 0:16:13.400 And in fact that you know, when I look, I love, 0:16:13.680 --> 0:16:17.280 like most economists and people in the markets, I'm looking 0:16:17.280 --> 0:16:20.520 at the stock market four or five six times a day, 0:16:20.600 --> 0:16:23.240 you know, I go see what's going on. And usually 0:16:23.240 --> 0:16:25.360 when I see green on the screen, that's mean stock 0:16:25.400 --> 0:16:28.800 prices are up. 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I'm not quite 0:17:38.200 --> 0:17:41.080 at retirement thinking about retirement, but you know so I'm 0:17:41.119 --> 0:17:45.080 still kind of and at the same time, yeah, you're like, geez, 0:17:45.240 --> 0:17:48.320 I know, I know there's going to be a correction. 0:17:48.560 --> 0:17:49.639 How massive is it? 0:17:49.760 --> 0:17:49.920 Right? 0:17:50.000 --> 0:17:53.000 You just talked about ten trillion dollars. That means we 0:17:53.080 --> 0:17:57.040 could lose five trillion dollars of wealth and still be 0:17:57.240 --> 0:18:00.560 up five trillion dollars. But if we lose ive trillion 0:18:00.600 --> 0:18:02.639 dollars in wealth in the next six months, people are 0:18:02.640 --> 0:18:03.240 going to panic. 0:18:03.480 --> 0:18:05.840 Yeah exactly, you got it just right. So, I you know, 0:18:06.320 --> 0:18:08.640 this might be a little nerdy, but you know, to 0:18:08.680 --> 0:18:10.960 measure this to your question, are we in a bubble? 0:18:12.560 --> 0:18:14.360 The tried and true way of kind of looking at 0:18:14.359 --> 0:18:17.000 that is the so called price earnings multiple. Take take 0:18:17.359 --> 0:18:20.919 take the stock prices, look at it relative to the 0:18:20.960 --> 0:18:22.920 earnings of the companies that you know. 0:18:24.080 --> 0:18:26.439 I love doing that. Pallidteer is like one hundred and 0:18:26.520 --> 0:18:29.960 fifty times earning, but like Google is still only nineteen 0:18:30.000 --> 0:18:30.680 times earnings. 0:18:31.200 --> 0:18:33.200 You know, you're a pee wow, that's impressive. 0:18:34.600 --> 0:18:37.600 You know, I'm not an economist, but too yeah. 0:18:37.680 --> 0:18:40.040 Yeah, Well anyway, so if I look at I have 0:18:40.040 --> 0:18:42.680 an what I call the economy wide price earnings multiple. 0:18:42.720 --> 0:18:44.000 That's the Wilsher five thousand. 0:18:44.040 --> 0:18:47.080 It's the value of all stocks, all stocks, divided by 0:18:48.119 --> 0:18:51.320 economy wide after tax corporate earnings. So that's the Ice 0:18:51.640 --> 0:18:54.720 Mobile on average since nineteen sixteen. That's as far back 0:18:54.760 --> 0:18:58.040 as I can calculate it. And I'm making this up roughly, 0:18:58.600 --> 0:19:01.920 so it's I'm rounding it's ten. That's the multiples. Ten 0:19:02.040 --> 0:19:06.200 ten times stock prices are ten times earnings. Right now 0:19:06.640 --> 0:19:12.480 today it's almost twenty twenty. There's one other time in 0:19:12.520 --> 0:19:15.440 that historical period when it's been higher y two k. 0:19:15.720 --> 0:19:18.480 It was twenty four so and of course we're still 0:19:18.480 --> 0:19:19.240 going higher here. 0:19:19.280 --> 0:19:23.840 So I don't know this so called mean reversion. You know, 0:19:24.000 --> 0:19:28.000 it feels like to me, we're getting we're overvalued, we're 0:19:28.040 --> 0:19:32.560 bordering on frothy and speculative. If stock prices continue to rise, 0:19:32.600 --> 0:19:33.520 then you know. 0:19:33.480 --> 0:19:35.520 I ring some alarm bells. I do think we're going 0:19:35.560 --> 0:19:36.880 to see a correction at some point here. 0:19:37.520 --> 0:19:41.120 I think what's odd about this is that a lot 0:19:41.359 --> 0:19:44.800 of folks assume tariffs would slow down the growth of 0:19:44.840 --> 0:19:48.960 our economy, right, would certainly hurt traditional companies because of 0:19:49.320 --> 0:19:52.679 rising costs, you know, and all of those things. And 0:19:52.720 --> 0:19:55.920 so here we are in this weird environment where tariffs 0:19:55.960 --> 0:20:01.119 are having some impact, certainly on the consumer and certainly 0:20:01.160 --> 0:20:05.480 on some businesses. But because this AI part is an 0:20:05.520 --> 0:20:09.960 investment type of thing, it is it tied to the tariff. 0:20:10.000 --> 0:20:13.720 And in some ways Trump is has sort of compartment, 0:20:13.760 --> 0:20:19.639 you know, has protected that space from his protectionist policies. 0:20:20.119 --> 0:20:22.760 So how would you view that the impact of the 0:20:22.760 --> 0:20:27.560 tariffs it? You know, every time I've noticed this with 0:20:27.640 --> 0:20:30.320 a lot, every time we look at it, it's like, yeah, 0:20:30.320 --> 0:20:32.959 it's coming, but it's not here yet. Yeah it's coming, 0:20:33.200 --> 0:20:35.359 but it's not here yet. Where are we now? 0:20:36.000 --> 0:20:37.959 The thing is, there's a lot of cross cards here, right. 0:20:37.960 --> 0:20:40.919 We just talked about the tailwind, and that's AI, and 0:20:40.920 --> 0:20:43.760 that's a powerful tailwind. You know, all the data centers, 0:20:43.800 --> 0:20:45.560 all the investment in. 0:20:46.320 --> 0:20:49.360 The electric electrical power, electric. 0:20:49.080 --> 0:20:53.080 Power, all the wealth that's being generated, that's driving consumer 0:20:53.119 --> 0:20:55.600 spending of those folks that own the stocks, the you know, 0:20:55.640 --> 0:21:00.000 the high end network, the individuals. About half the growth 0:21:00.080 --> 0:21:04.480