Moody's Talks - Inside Economics - Stocks, SpaceX, and Subways

Episode Date: June 12, 2026

The Inside Economics team welcomes Jim Lebenthal, Chief Market Strategist at Cerity Partners, to discuss all things investing on the morning of the SpaceX IPO. Jim discusses the equity market’s extraordinary run, whether AI stocks are overvalued, and how investors should think about picking individual stocks versus investing in index funds. The team also welcomes Matt Colyar to talk about this week’s inflation data, and Marisa addresses a slew of comments from last week’s podcast.  Guest: Jim Lebenthal, Chief Market Strategist at Cerity Partners For more from Jim Lebenthal, visit his website: www.jimmylebenthal.com Jim's book, How to Ride the Subway: Getting Around on Wall Street and in Life (Regalo Press March 2026), is available here Jenna Score: 8.5 Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s Analytics Follow Mark Zandi on 'X' and BlueSky @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn   Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Marissa Dina Talley, Chris Trudis. Hi, guys. Hi, Mark. Hello. Good to see you. Good to see you as well. We've got Matt Collier. Hey, Matt. Hey, everybody. What does it mean when we have Matt on? Chris, what does it mean? It means you have to pronounce his last name. I got that. I got Collier. I got that right, right? If they're your trusty co-host, am I untrustworthy as a guess? What am I? Well, you know, they're a co-host, Matt.

Sure. You're a guest. You're a trusted guest. Okay. Colleague. We have you on every, don't we have you on every inflation guy. Inflation, every CPI report. Yeah, I'll take it.

That's right. Do you want to be a host, co-host? Is that what you're saying? I wouldn't turn it down, but no, I just want to be trusted. I want to feel, I want to pick up one of these other guys. Where are you going to throw a person in first? It was more about the trustworthiness. It was more about the trustworthiness.

I'll email you privately, Mark. All right. All right. Good. Okay, good. And Dr. Dorides is speaking to us from his wine cellar and a brutsi, Brutza. Pretty close. Good.

Good stuff. I know. I have a hard time with names, as you all know. So you've been sipping Kiante? Have you gotten, you've been able to. enjoy any of the Keante yet, Chris? Not really a Keante region here, but it's good. Good stuff, yeah.

Why did I think you were Keante? I don't know. Oh. What kind of wine drinking that cellar, then? What is going on down there? It's Montepucano. Montepulciano Dobruzzo. Ooh, that sounds good.

That's good, yeah. Chris, where's the... You should stop by. Yeah. Where's the Olive Garden background I made for you? I'm a little hurt. I was trying to insert it at I'm having some troubles here.

What was that? I'm working on it. Would you do? I made an AI-generated background for Chris's duration of his stay in Italy to use on. Yeah. Oh, yeah. We'll have to see it. You've got to work on that.

I'll work on it. I'll work on it. We're going to have to keep our conversation here short because we got a great guest, Jim Labenthal of Serity Partners. He's the chief market strategist. He just wrote a book, How to Ride the Subway. It's a investing book. We talk a lot about the stock.

got a lot to talk about with regard to the stock market, AI, bubbles, all that kind of good stuff, valuations. So we want to get to that. But before we do, a couple things. One, Marissa, last week we had a kind of, you know, we had, it was the jobs numbers. We had Dante on Dr. D'Antonio. And we were talking about why we saw, we were, I think it was called dazed and confused. I think that was the title of them. Because there's a lot of confusion as to what was behind the job, good, strong job numbers we got last week. We got a lot of listener feedback on that. You want to describe what we got on that? I've never had so many emails telling us that we missed the discussion of the World Cup in the gain in leisure leisure hospitality. So there was a big outsized gain in the leisure hospitality industry. And we were talking about why that might be. We were talking about seasonality.

We were looking at other sectors that were surprising. And I must have gotten 10 emails saying, why didn't you guys talk about the World Cup? This is obviously hiring ahead of the World Cup. So I thought we should address that because, like I said, I've never gotten so much feedback on a single podcast episode. Do we make a mistake not mentioning the World Cup as part of the job number? I don't think so. So the more I look into it, right, and we did mention this, is that, if you look at the not seasonally adjusted gain in leisure hospitality, right? So just the straight-up

increase in jobs before the BLS lays seasonal adjustment on top, the gain is exactly what it was a year ago in May. So the gain was not an outsized gain compared to prior years, which suggests that the big plus 70,000 in leisure hospitality is a seasonal adjustment issue going on. So the way you can think about this is, well, first of all, if it was the World Cup, you're saying that people were hired and were working the week of May 12th, right, for World Cup games that start today, which seems kind of strange. You would expect there would be some hiring, I think, It's reasonable to expect that there's a little bit of hiring leading up to the games,

but not to that magnitude that early on in this industry. I was just going to say, if you go back and look at the other World Cup we had in the U.S., is that what you were going to say? Is that what you were going to? Yeah, when you look historically at the last World Cup or when you look at other big sporting events, the Olympics, the Super Bowl, the hiring is very in leisure hospitality. It's always right around the event. So if we go back and we look at the pre-referral,

World Cup, the hiring was in June. So we would expect to see the biggest increase in June, a little less of an increase in July, and then we would see those payrolls reverse. So the fact that we didn't see an not-seasonally adjusted gain that's any different than we've seen in previous years suggests it's not a World Cup thing. Again, I'm not saying none of it is, right? But I don't think it explains the huge increase. The other place you might expect to see it would be in transportation in the private sector. You know, we also saw this big gain in local government. I don't think that has anything to do with the World Cup necessarily.

So to be determined, we'll find out more definitively when we get the data at the regional level for states and metropolitan areas in a couple weeks because then we'll be able to see, did we get a big pop in leisure hospitality in the host cities where these games are going to be. If that shows up, then that tells us some of this hiring could be attributed to the World Cup. But I don't think it's all the World Cup, which a lot of people are suggesting. Got it, got it. And of course, the implication is there's some significant job gains we're going to get in the month of June and maybe July. And July, right. Yeah. So we'll get somewhat of a pop there. That's where we'll be the World

Cup effects. Okay. Well, that's good to know. Yeah, I got the same kind of feedback from lots of folks. You guys, basically you morons, didn't you? Right. Yeah. Like the World Cup, duh. Duh. Duh. And, of course, Dante dismissed that.

Dante definitely doesn't think it's the World Cup. Yeah, definitely doesn't think it's the World Cup. Yeah. We'll see. And, of course, Dante's the Bible on job numbers. Other than you, Marissa, other than you. All right. We'll talk about the inflation numbers, Matt.

Again, I do want to keep this short. I mean, what was, I think, CPI, top line consumer price index, what is that year over year now? It's the month in May? 4.3% in May. 4.3. And what's core excluding food and energy? Core is now 2.9%. 2.9.

And we also got PPI producer price index. And that was like a huge increase, wasn't it, in May? Yeah. So just month to month was 1.1%. And then year over year. looking at PPI, you're at 6.4%. That's Russia's invasion of Ukraine territory, 2022 highs. Right.

That's surprising, huh? That we got that big increase in PPI? Yeah, it's surprising in scale, but I think the broader story of the week when it comes to inflation data, I think is a pretty coherent one. And I would say it's concerning. But in general, that these price pressures are working their way, you know, the energy shock is working its way through to consumers. And I think the data we saw this week is consistent with that. Okay. Before you get to the overarching point, though, if you take the CPI and the PPI, which feed into the

PCE, the consumer expenditure deflator, which is the measure of inflation that the Fed generally most focuses on, that's where you get to 2% inflation target. What's that going to be year over year in May? You know, I guess that gets released a couple weeks from now. When it does, what will it show? for your rear growth in May? Headline PCE should be 4%. 4%. 4% on the nose, 4%. On the nose, yeah.

And core PCE, which will be running a little bit. It has been and will continue to run a little bit higher than Core CPI, I believe it's at 3.4% with all the input data we now have to predict May's PCE deflators. And of course, the Fed Target is on the top line consumer expenditure deflator, PCE deflator.

It's a four. So you're saying the current rate of inflation is exactly double the target, the 2% target. Yeah, that's right. Okay. All right. Okay. Pretty good reason not to cut interest rates. Maybe a reason to rate.

That's persuasive. Getting harder and harder to make the case to stay put, although I think that's the sound argument right now. Okay. So let's go back to your, oh, sorry, Chris. Go ahead. I was going to add, I think there's a 60% chance of a hike now by December. Oh, is that right.

December's meeting? The futures, they're saying that, 60%. By when? December. December. December. Right. Well, we took our rate cuts out.

Now we don't have a rate increase, but we don't have any change in rates for the foreseeable future. Yeah. Interesting. So what's the overarching message? You sound pretty lugubrious there. Legubrious, I am. Yeah. I would say the overarching story, the CPI's data comes out first, headline CPI, big

jump.5%. Everyone saw that coming one tenth of a percentage point away into the direction because of energy. So another month, strong energy increase. We see that at the gas stations. This is all predictable. But the story and the thing to focus on, of course, has been, what about non-energy components? So is this energy shock filtering through to the food that needs to get driven on trucks or agriculturally, rely on diesel, then gets on trucks, all those things rely on energy. Manufactured goods the same way. Airfare, hypersensitive, that reaction was even sooner. But the extent that that second order effect of the energy shock was going to start showing up in things, food's excluded from core, but core CPI in general,

I think is what we were focusing on. And a 0.2% increase in core CPI in May. Again, that's about exactly where we were, where consensus were, expectations. That's mild. And in isolation, I think is something to be encouraged by if it was just, hey, it's an energy shock, gas prices are up, but really nothing else is. You're still running over 3% over the past six months when it comes to this core CPI. I think that is an issue. But then jumping to the PPI when we think about, okay, these things are just still in tow, I think is the most compelling argument. Oh, you're saying the pass-through didn't happen in May, but it's coming. Is that what you're saying? I think you, airfare is there. Food.

You take the past two months, prices are hot. But if you look at PPI, if you look at intermediate series in PPI, not to get too in the weeds here, but if you look at the kind of supply chain flow that is tracked throughout the PPI, prices are rising fast there. And we've had two months in a row over a percentage increase from month to month. You can look at non-energy components. So metals, petrochemicals, really strong growth there. That will work its way to consumer prices.

It's a matter of months. that it happens. And we can think about what that leads to in actual terms of year-over-year growth rates. But I'm pretty, the PPI report should give us confidence that that's what is happening. Okay, so even though we've gotten some, what seems to be, and I say this was a lot of

angst. Maybe there's some good news coming out of the Middle East that the straight's going to get some kind of arrangement between the Trump administration and the Iranian regime, the straight opens up a bit. We get some more flow through there and get some production and prices come in. And oil prices are today, last I looked,

we're in the 80s now. So that's a good positive direction. You're saying even with that, we still have got this pass-through that's in-train that is going to continue to keep inflation elevated. It's going to take some considerable amount It feels like a considerable amount of time to get inflation back down to that anywhere close to that 2% target. That's what kind of sort of what you're intimating.

That's what I would argue for core CPI. The positive story would be, I don't think, at least, you know, we're halfway through June now. We're not going to get another big headline jump in June for the CPI, keeping the relative status quo that we're seeing. So gas prices about 450 on average in May, looking closer to 420-ish in June. That's a decline that could lead to a pretty weak, should lead to a pretty weak CPS. energy increase in the CPI for energy next month. That'll have a big effect on headline inflation. But it says nothing about the price pressures that are working their way through to supply chains that I think shows up in a hotter and hotter core CPI reading this summer. Okay, let's end the conversation because I want to go to Jim Labenthal. What in these numbers was most surprising to you on the upside that inflation was stronger than you anticipated?

in the month. If you look at, and this I'm really leading on PPI here, which I don't normally do, but I think the nature of this shock to think about it sequentially like this makes a lot of sense. You look at PPI, excluding food, excluding energy, and excluding trade services, which is just a measure of margins between wholesalers and retailers. You have a 0.8% increase. And that, again, is isolating the effects of energy. And that is, to me, price pressures elsewhere.

And that's the fastest increase since March 2022. and that's the month after Russia invades, Ukraine, commodity prices start to spike. So I don't think we're on the precipice of 9% inflation like we were then, but there are real price pressures that didn't show up in consumer price data in May, but everything else is telling us they are coming. So that's the thing that I would call out. And let's end on a more positive note. What in the reports was surprised in a positive way?

Inflation was less than you expected. Tariff-sensitive things. I mean, I'm more and more confident that that stuff is behind us. So we're looking at, you know, core goods in general can't be too positive. I'm arguing with this inflation is in tow. But we're seeing some pretty mild increases there. Computer software, again, it's an AI demand story. First month that we took a break after four to five percent increases in prior months.

It was relatively flat in May, which is removing a source of inflation. Got it. Okay, good. Well, that was, I just want to keep this short and sweet because we do want to I want to bring in Jim. But thank you, Matt, for the update. And with that, let's bring Jim Labenthal into the conversation. Great to be with you, Mark. Thank you. You're joining us from New York City today. I'm here in the Big Apple. It's a summer day and the heat is showing. So, you know, hot town, summer in the city, however the song goes. That's what we're feeling.

Yeah, I was there yesterday. I had a bunch of meetings and it was pretty toasty. In fact, the traffic was horrendous. Talk about how to ride the subway. We're going to come back to your book, but I wish I was on the subway because I was trying to get from downtown to midtown, and it took an hour to get to where I was going, and ultimately I had to jump out of the car

to get to my final destination because the traffic was so bad. So good reason to be on the subway. Mark, I know it well. About three times a week I go from Midtown Manhattan down to the New York Stock Exchange. I appear on air down there. By the way, the stock exchange is now what movie says. in case you didn't know.

But the subway is the only way to go. It's 20 minutes. And as you just saw, it's an hour if you take a car. Yeah, so which subway do you take? Is it like the 1-2-3 or A-C-E or what is it? I love that we're having this conversation. The 1-2-3 is my home line as a kid. When I was six years old, my dad, who was a municipal bond financier,

took me to work on the subway, taking the 1-2-3 from 96th Street on the Upper West Side down to the South Ferry. So I've always held that line near and dear to my heart. But from Midtown Manhattan, we take the other IRT, which is the 456. And both of them, by the way, are part of the original first subway line built in the early 1900s. Oh, is that right? That's fascinating.

So you've written a book, How to Ride the Subway, and it's about investing. And we're going to come back to that. But before we get there, I should introduce you more formally. You're the chief equity strategy, sincerity, Serity Partners. And also, I took this for granted, but you're on CNBC all the time. So, you know, kind of a well-known person in the investment community in the folks that listen to this podcast. So it's really wonderful to have you on here. How does one become chief equity strategist at Serity Partners?

Like, how does that happen? Well, that's a good question. And I think it strikes to just having a passion in life. As I just mentioned to you, I grew up in a family of municipal bond financiers. But at the tender age of 12, I went to my dad and said, you know what, this fixed income stuff, I want something bigger than that. I want something that could be more, could vary. And so I was 12 years old. He bought me for Christmas 10 shares of U.S. shoe, which was a growth stock. and 10 shares of Texaco, not Chevron Texaco, Texaco. And I didn't, you know, I can't figure out why he bought those two for me, but I started following every day. I'd open the newspaper in the morning. This was back, you know, well before the internet. In fact, I'll give you the date. People can date me on this.

It was 1980, 1980. Mark, by the way, as an economist, you will remember that interest rates in 1980 were sky high. So I was too young and naive to know that I probably should have just taken fixed income and happy with it. Yeah, you can make, you're right, because the interest rates were straight down since then. That's right. But as you also know, those lowering interest rates produced one heck of a two-decade boom, 80s and 90s.

At any rate, this was when you had to open the newspaper the next day to get your closing share price from the prior day, unless you wanted to call the broker. The broker did not really take kindly to 12-year-old Jim Laban, calling them up in the middle of the day. But that's where the bug for equity investing began. And I've had it my whole life. It continued even when I wasn't in the business, when I was in the Navy as a submarine officer, I would pick stocks, we'd close the hatch, the submarine would go underwater, and we'd be gone for weeks, sometimes months at a time. So that probably honed my craft as more of a long-term value-oriented investor as opposed to a momentum or growthy type of investor

who might have to treat quickly in and out of stocks. That just wasn't an option for me. And here at Serity Partners, where I've been doing this for nine years, they've actually had me evolve to more than just the chief equity strategist. I'm the chief market strategist. So I touch on everything, fixed income, private markets. So if you want to talk about any of that stuff, we certainly can too. But equities, equities are my love, as is my passion for the subways. I don't think I made that up. I think I read it on, I was obviously preparing for this. Simon & Schuster has your bio wrong, I think. You are correct. And the innocent mistake, because I've only recently been promoted to the chief market strategist. So, yes, thank you. So I didn't, I'm not calling you out.

And yes, the book has me, I'll open the inside cover here. I think it does have me as the chief equity strategist because it was published prior to the promotion. Oh, great. Well, did you just say U.S. shoe was a growth stock? Yeah. Yes. This was the 20th century. Mark, I mean, you remember this. Chris, you remember this. Matt, you may remember this. You know, it definitely does not remember this. No. Some of it. Slurry. It wasn't technology back then. It was hard assets. It really was. Now, by the end of the 20th century, tech became gross stocks. But in the 1980s, being U.S. shoe, a company that actually manufactured the equipment for shoe manufacturers to make shoes was a growth industry. And the reason I define it that way is because the stock kept going up and up as the share price increased, it kept splitting shares. So I would get these letters in the mail. I mean, picture me as like a sixth grader coming home from school and I get a letter, an official letter from USU announcing that my 10 shares are 15 shares and then my 15 shares are 30 shares. It stock price kept going up and up. I forget what happened to the company. I think they may

have sold it to 9 West. I mean, this is a long, long time ago, but it gave me the buzz of investing and seeing nice returns on your investment. Yeah, I'll have to say, I do remember having to open up the paper and you look at all the stock prices, it was, it was really pretty mind-numbing, very difficult to invest it, you know, back in the day, but, but you did it. So, so here we are. So, is that mean, do you think 50 years from now we're going to view Nvidia the same way we view USU? You know, I really like that question. Maybe I'll answer by just reminding all of us, If you go back to the aughts two decades ago, technology was kind of left in the dust.

I mean, after the 90s and the Y2K boom, the telecom boom, we had the bust that came after that. And through most of the aughts, tech was really an afterthought. Anybody listening to this can go look at what the share price was for Amazon or Microsoft or any of these companies. So there are periods of time where what was hot can become very dull. I don't see that happening in the next year or two with the amount of capital expenditures going on in the space. But I think it's reasonable to say that creative destruction, which we're seeing right now with artificial intelligence and its impact on many industries, we'll continue. And today's leaders may be laggards 10, 15, 20 years from now. What I can't do is tell you what the supplanting technology will be.

Right now, it's AI that's in the catbird seat. Yeah, let's turn to that in valuations generally. I mean, kind of at a 30,000 foot level, you know, one concern that economists have, and I share the concern, is that the run-up in stock prices, which has been amazing, just the amount of wealth that's been created is driving a lot of economic growth, right? because the well-to-do who own the stock, they're wealthier and they're outspending, and that's driving a lot of economic activity. And that means that the economy feels like the economy broadly is very dependent on those consumers, those high-end consumers, and therefore on the stock market. And that gets to valuation.

And, you know, how do you, you're a value investor, so you're very attuned to valuation. and you hear a lot of the conversation around bubbles, the values are so high that maybe we're in a bubble. How do you think about this? How do you feel about the stock market in terms of where it is from a value perspective? Yeah, it's certainly not cheap, Mark, but I don't think it's overly expensive. And if we look at valuation, the most commonly cited metric is going to be price to earnings ratio. I tend to like to look at it on a forward basis, even though there's uncertainty about what the future will bring.

If you just look at the next years, there's some rationality that the earnings estimates should be near what actually happens. But just taking that price to earnings multiple isn't enough. We have to compare it to the growth rate of earnings. Because just using stock-specific examples, if we look at, say, AT&T and Verizon over the last 20 years or so, for the most part, they have traded in high single-digit earning multiples. Stock price hasn't done much. There's been a nice dividend yield, but the stock price really hasn't done that much. And that's because those companies are more utility-like. They don't grow their earnings. It's very hard for them to grow their earnings. So maybe a high single-digit multiple is right for those companies. But if we look at the artificial intelligence stocks, maybe we'll take a look at Nvidia. That's kind of the bellwether right now. And we look at a company that's trading at around 24 times forward earnings, but its growth rate in earnings over the next year is going to be close to 40%. If I compare those two numbers, the 24 multisodes, the 24 multisodes,

as a numerator and the 40% growth rate as a denominator, that gives what's called the peg ratio, price to earnings to growth ratio. And for me as a value investor, that's the most important metric. Now that peg ratio, 24 divided by 40 is 0.6, that's very cheap on an absolute level. Anything below one is actually so cheap that one scratches their head and says, is something wrong with this? And the reason it's so cheap is, number one, the size of the company, I forget if it's five or six trillion, but it's kind of hard to grow at infinitum from that level. And then also the concerns, which are legitimate, that artificial intelligence will ultimately turn out to be cyclical. I do think it will turn out to be cyclical. The question is, how long does this up phase of the cycle last?

And I think based on the amount of data centers being built out, the amount of use cases still to come in. artificial intelligence, that we've probably got at least another two years of this, which tells me that that peg ratio is too low for Nvidia. The markets overall, just of, sorry, I'll answer your question directly now, Mark, at roughly a 22 times forward earnings on the S&P 500 versus a 23% projected growth rate this year over last gives that peg ratio still around one, which is really quite good. The issue, of course, is what if the earnings don't come in as expected. Hard to see that right now with how good earnings have been, but at some point we will be disappointed. Okay, so that makes a lot of sense. So you're saying if I look at

the P.E. multiple and you look at kind of forward earnings, what investors expect, it's the P.E. multiple is high, but it's not that high relative to that earnings growth, that the so-called peg ratio looks within reasonable levels, norms. But that gets to, and I don't think you mentioned it, what is the forward P.E. Multiple right now for the market? 22. 22. Yep.

So that means earnings are growing, if it's less, the peg ratio is less than one, the earnings growth, expected earnings growth is over 23. 23%. 23. That's where I get hung up, right? I mean, the economy, again, I'm an economist and I look at things from that prism. If I look at nominal GDP growth, you know, which ultimately is the root of all earnings growth and income growth and everything else, that's five, six percent, you know, maybe a little bit more juice given the high inflation environment that we're in now right now. But that's kind of typical five, six percent. Twenty-three percent earnings growth means,

you know, that the, that's for X, you know, GDP. That's extraordinary. And I, and it's certainly not something that I think we've seen historically. I mean, earnings growth has been strong relative to GDP and the earnings share of GDP has increased, but, you know, this is out of bounds. So maybe the concern is not so much the P multiple or the peg ratio itself, but that expectation for earnings growth seems, if I, feels just feels kind of out of bounds, overly optimistic, no? I think you're right. So the timeframe here is going to matter. That 23% earnings growth rate that I mentioned for 2006 S&P 500 companies versus last year, and I know this is your stock and trade, so you,

you know, you may want to update me on the figures, but I'm pretty sure I'm accurate on that. That 23% is not something that can continue forever. You know, a wise man when I came out of the Navy and started in this business impressed upon me the foolishness of trying to predict the future. Now, it's our business, right? All of us. This is our business is to predict the future. But I have to draw the line somewhere. And when we get past a year, I get uncomfortable making strong predictions. I preface that or I use that preface to say that 2007 earnings are predicted to grow 15% over this year, which is growing 23%. And there I sort of scratch my head because to the point you're making and the calculation you were going at, margins have been the X factor that gets you from GDP growth to profit growth. Margins have been going up and up and up and up. And they're out of record. I don't think we can reasonably expect for margins to continue to grow. But if you get that 23% growth this year, a 22 times forward multiple becomes 20 times. And if you get, let's just say,

it's not 15% growth in 2027. Let's dumb it down to 12% or something like that. Then that peg ratio that I spoke about becomes 1.67. And while that's higher than one, it's not an egregious number. It's right in the middle of the range that the S&P 500 over the last 10 years has traded, which is to say one to two times on the peg ratio. It's a long-winded way of saying that if you get the earnings growth this year, then the S&P 500 grows into its multiple. Now, I'm going to pause and throw it back to you, but this leads to a question of should we be investing in just the S&P 500? Should we be picking stocks? Should we be picking other areas, other indices of the markets? Let me, maybe I'll stop you for one second. And let me bring Chris back in. So Chris, on this issue

of valuation, you know, are we in a bubble kind of thing? How? How do you? How would you push back? Do you share a concern that your valuation is an issue, and how would you push back on Jim's perspective? Yeah, I certainly am concerned about the valuations. I do see the valuations as high, but I guess I'm willing to accept the average, right? We've been talking about the market as a whole. What is of greater concern to me is actually the concentration, right? It's still just a handful of stocks that are really driving the bus here. It's really a big bet on AI.

If that doesn't pan out or comes in a little bit short, then we don't have a backup plan, right? There's no plan B here in terms of the breadth of the market. I wonder if that's a concern or how would you frame that? Am I being overly pessimistic when it comes to that concentration risk? I don't think you're being overly pessimistic. More to the point, I think you're putting your finger on a big issue, which is the concentration. spoiler alert, or let me just lead with the punchline. We at Serity Partners are recommending that clients have an allocation to the equal weight S&P 500 as opposed to the – now, you know, the market cap S&P 500 is core to any asset allocation.

But within U.S. equities, we do have a thematic allocation, which means one to two years in length to the equal weight S&P 500, which is our way of saying, Chris, that we think the concentration has got – too high and will resolve. Now, here comes the question, how does it resolve? Because the fear is, and this is where maybe you're feeling pessimistic, is that these AI stocks and technology in general are overpriced. Technology is almost 40% of the market capweight at S&P 500, and that that has to come down meaningfully in order to normalize the concentration in the S&P 500. The alternative, which is what we're ascribing to, is that the rest of the market can catch up. Historians will quickly note that that is not normally how concentration resolves. Normally concentration resolves that the big ones come down and take the market down with it.

We start with this premise that artificial intelligence to technology is not in a bubble, not yet. I'll come back to that in just one minute. And if it's not in a bubble, then those stocks, the invidias, the alphabets, the Microsofts of the world can stay fairly stable. But these earnings can start to spread out to the other sectors, things like financials, which will benefit from all the funding that needs to go on to finance the CAPEX, things like industrials, energy, and materials which go into building these data centers. In essence, that's why the rest of the market can catch up with technology and partially cure that concentration risk, which I see as well. Let me just quickly hit on the AI. Is it a bubble? Is it not a bubble?

I think we're old enough to remember the late 1990s and what a technology bubble looks like, which took two forms. One was the overspend in preparation for Y2K, and the other was the new technology of fiber optics in telecommunications. By the time we got to 2000, 90% of the fiber optics that were in the ground were dark, meaning that there were no customers. It had been laid in the ground speculatively. I remember this. I was working downtown at Goldman Sachs, and literally, literally every week, they dug up the street, laid fiber optics and repaved it. It was incredible. But it was unproductive. I compare that to artificial intelligence where every increment of compute that is being brought on is spoken for it. There is demand for all the supply that is currently coming online and it's profitable. That won't be the case forever, but it is the case now, which leads me. to think that artificial intelligence is not a bubble, at least not yet. But your concerns, Chris, are valid. So is there a greater opportunity than today in US shoe company or the like, the companies that are going to be leveraging this AI? Is that the thesis here? Going forward?

Because they'll be the ones that grow into the valuations is what I'm here. And again, that's why our thematic one to two year allocation to the equal weight S&P 500, which as the name suggests, takes every one of the 500 stocks in the S&P 500 and puts the same amount in each of them, which takes that overweight of almost 40% technology in the market cap down to about 15%. Okay, so now we're balanced out. And it's a way of saying that things like energy, which I'll just focus on that for a second. Energy should do well in a growing economy, which we see right now. There's always threats to economic growth, but right now the Atlanta Fed has GDP.

tracking at 3.3% for Q2. They're wrong, by the way, Jim. I know. I don't know why it consistently overestimates. I'll leave that to you to tell me, but it does consistently overestimate. Nonetheless, take a percent off of that, 2.3%. Okay, that's better. I'll take it. I'll take it. With stable and, and dare I say, growing employment, do I dare say that? I mean, you know, the last three months we've had, It's a good economy, good enough for energy usage to pick up. And then we have this little thing over in the Middle East, which is going to promote energy diversification sources outside of the Persian Gulf being looked at.

Countries are saying we can't live like this being held hostage by the Strait of Hormuz. This is a long-winded way. I'm just focusing on energy, but I could do the same thing with materials, with financials. that the other sectors of the market, I think will do well. I don't know if US shoe now Nine West, actually, is Nine West even in existence? Does anybody? I don't even know that. Nine West?

Okay. It must not be an existing. Who knows who bought it up? But, you know, that one is long ago gone. But traditional industrials, energy materials should do well. Hey, Jim, going back to AI, because obviously that's a lot of the focus. here from a stock perspective. My understanding is that one of the reasons why demand, you know, why those GPUs are being utilized is the cost is being subsidized, that, you know, the actual cost

is delivering that GPU is much higher than what's being charged by the AI companies, Anthropic, open AI, so forth and so on. And, you know, if the, you know, if the, they're starting to raise price, you know, to try to close that gap between the cost and, you know, and the price that they're receiving, that that will have presumably some impact on demand. And here, you know, I hate using anecdotes, but I'm going to use an anecdote, and the anecdote is me, you know. Before they started charging, I had access to all of the AIs, you know, all the LLMs. I have coalesced around Claude. We've coalesced around Claude.

I pay up for that and I'm enjoying that. And at the same time, now I'm canceling my other subscriptions because, well, they're now costing real money. You know, it adds up. It feels like, you know, my streaming services, you know, the same kind of principle at work here. So don't you think or is that there might be some over optimism with regard to,

Oh, one other point. It's not only about the price increases, it's the uncertainty about where those prices are headed in the future because that really affects your enterprise use particularly because you don't have certainty with regard to what the cost is going to be in the future. Don't you think that that might be a reason to be a little bit more cautious here about how these AI companies are going to perform going forward and whether they're going to actually achieve the earnings growth

that is implied by these valuations? So a lot of cross currents in what you just said. Let me start by agreeing with you on my own personal anecdote, which is that my firm gave me access to Claude. The chief technology officer came over to my desk, you know, inserted the app for Claude, showed me how to use it. Great guy, Stefan Ludlow. And he said, go use it, man. He said, go crazy. Use this thing. All right. So I've been using it. And it's been fabulous. I mean, it has reduced workload unquestionably. All right. We have. We We can have a productivity discussion in a minute. There are productivity enhancing uses for it. I have not yet had the tap on the shoulder from my CFO. I think it's coming, right? Because it may not be me. I mean, I'm using it, I think, reasonably.

But this idea from about a year ago of just let people, what do they call it, token maxing, right? I think that's the term. Where companies said to people like me, like my beloved CTO said to me, go crazy, use it. right? I think now they're getting the bills. We had a report from Uber not that long ago saying that it's already run through its AI budget, its token budget for the full year, 2006. So there is going to be some reduction in that usage. And another cross current, there are reports this week that Open AI and Anthropic are lowering the cost of tokens because they're going to feel that pressure. So everything that we're talking about so far, is what I would consider a normal part of a cycle. You know, there's a boom, and then some rationality creeps in. What we're not hearing so far, though, is a meaningful reduction in the demand

because the demand is so pent up and unable to be met by supply thus far that you can reduce that demand a little bit and still not have enough supply in terms of compute and data centers to meet it. then there is also, and this is where I would really stake my claim, if you will. One of you is going to have to help me. Is it the Jervens paradox? The Jensen's paradox? I said, Jevins.

Yeah. Okay. For as many times as I refer to it, I better get the name right for crying out loud. But this is the paradox that says if you lower the cost for something, people will use more of it. That is likely what you're going to see. So in terms of now let's dissect this a little further. This means that the demand for Nvidia chips, the demand for Microsoft

Azure, Amazon Web Services, Google Web Services, all of that stuff, is likely to continue. Open AI and Anthropic, on the other hand, may get themselves into a little bit of a price war. Is this going to be the equivalent of the roughly the 1870s when we had duplicative railroads all over the place and there needed to be a shakeout so big,

bad that it caused a recession and at bear market. I don't think we're at that level yet. We could be in a couple of years. And I think that's ultimately where this discussion between the optimists and pessimists comes down to is, is that day of reckoning right before us or is it a couple of years out? And I do think it's a couple of years out. With humility, I'll tell you, I don't think I'm a pie in the sky optimist. I think we've got a little more runway left on this. Okay. One more thing on this that I'm just curious, all these IPOs, you know, I think isn't today, isn't SpaceX IPOing today? It is. That news. It would be really cool to watch. And of course, Anthropic and Open AI aren't too far behind. And they're the headliners. I'm sure there's a lot,

you know, much better than I, you know, dead ahead on the IPO front. How do you, my kind of take on that is, well, that's great. And that makes sense. But you don't IPO unless you think you're getting a pretty good price. You know, these guys think they're getting a pretty damn good price here, right? Again, back to valuation. How do you interpret that? How does that fit into your narrative? Let me do the broad IPO question, and then I'll come back to SpaceX because I think

we have to. I mean, it's coming public today, and it's a big, it's a big event. The IPO. $7 billion. Did I read? So $75 billion is what they're raising. the valuation is at almost 1.8 trillion. And it's too expensive.

I'll just get that out there. Okay, okay. But before I do that, let me just remark that we are in a phase right now of capital raising. Last week, we had Alphabet issue about $85 billion in a secondary offering. We have SpaceX coming today. Open AI and Anthropic are down the line. meta, Oracle are also projected to do equity capital raises soon. And, you know, I think the first day in economics, they teach you that if supply goes up and the demand curve stays stable, the clearing

price between the supply curve and demand curve equates a lower price. And that would indicate that that's a reason why over the last two weeks we've had a bit of a consolidation, a bit of a negative tone to the markets. That may continue for a little while, as all of this new supply gets digested. Ultimately, I don't think it gets worse unless the war with Iran gets worse and inflation and the Fed and all that sort of stuff. But nonetheless, supply needs to be digested and there's a lot of it coming. To SpaceX and the valuations in general, I agree with you, Mark.

I mean, these folks are selling because they're getting a good price. And we know that this is highly unusual for a company like SpaceX to go public. this late in its life, after so much capital, so much appreciation has been created, put another way, there's a lot of sellers to come in this dock. We have not participated as a firm in the IPO. We don't generally make single stock recommendations, and I don't, I want to be careful about that, but I will say that at 90 times sales, granted, that's the last quarter annualized, and they're growing sales, but 90 times sales is a valuation. from which seldom, if ever, are good returns achieved in the future.

Okay. So a little bit of pessimism there on that one. Okay. So it was one other thing I wanted to ask about the AI stocks, but I can't quite remember. Can I add to something while you're thinking about that? Yeah, sure. Because I think any rational person would look at SpaceX and say it's too expensive to buy. But it is somewhat emblematic of sentiment.

sentiment around the man, Elon Musk, because we could have said the same thing about Tesla for the last 10 years, and it's returned nicely. And it is definitely an indication of some sentiment in the market. Now, I'm not going to say that we're overly frothy, but there are some areas of froth. And where do we see this? The number of leveraged ETFs that are being issued. The number of zero time to expiration options that are being traded every given day, which is basically both those things are rolls of the dice. That's not investing. That's rolling dice and hoping it comes up right. Those volumes in those two areas, short-dated options and levered ETFs are something to be aware of and to look out for. That might be an early indication of sentiment getting too frothy.

Yeah, that's exactly where I was going. I forgot. You know, what things do you look at to gauge whether things are getting a little ahead of themselves. I mean, other than that, are there anything on that subway that you ride and the metaphor you use there to help you with that question? Well, you know what? I will use the subway metaphor and thank you for bringing it up, which is sometimes you're on the local train and you see the express train zipping by you. And you think, you know what?

When I get 14th Street, I'm going to hop off and go across the platform and get on the express train. Maybe it's wait. Yeah, right. Maybe it's waiting right there and you go over and you feel. kind of fly like, hey, I'm getting on the fast train now. And then it sits in the station and you see the local take off, the one that you were on and it keeps going and you're just sitting there for unknown reasons. The conductor is keeping the dispatcher is keeping the train in the station,

which is a way of saying, be true to whoever you are as an investor. We were talking, Mark, I think before this starter, maybe it was on air. I apologize if my short term memory is already going. We were talking about, you know, Palantir. I was using that as an emblem of momentary. trading. I'm not a momentum investor. It's not my gig. If you see me buying a momentum stock, that's probably a good indication that it's a top. However, as a value investor, you know, I think I do a pretty good job of identifying a dollars worth of the value trading at a meaningful discount. The fact that I buy it doesn't mean that the horses are released from the gate and it's going to go right up. But over time, that local train will get me where I want to go time and time again.

But switching back and forth from the local to the express, one day you're going to be a value investor next to momentum, next to growth trader, not my cup of tea. My lesson here is just be true to who you are. Know who you are and be true to yourself. That's a great metaphor. It's kind of like my father would, you know, I grew up in the suburbs of Philly. I know you went to Wharton, I went to Wharton as well. And I grew up in the Philly suburb.

And we tried this Scuylkill Expressway in, you know, every day to the, you know, every day to the to school. He was a professor of Penn, a professor of Penn. So I'd come in every, I'd go home on the weekends. It come every Monday morning I get in the car. And he would tell me that the Schuylkill Express was a metaphor for life in that, you know, if you start switching lanes, you ultimately get in a more chance you get in an accident and you actually don't end up getting to the place, getting to Philly faster. So just stay in this, stay in one lane. But I, you know, it wasn't true to my personality. I kept switching lanes. I got switching lanes. But anyway, that's a good metaphor.

I like that analogy. I totally agree with your father. And it's a sign of maturing when you don't do that as you're driving. You just stay in your lane. Stay in your lane. So, Jim, investing itself, you know, the one kind of lesson or principle that's kind of taken over is the idea that, you know, you should not be picking. If I'm an individual investor and I have a stock portfolio. that that really should be kind of indexed, that you should be, you know, on autopilot,

some portion of your pay gets plunked down into a Vanguard or a Fidelity Index fund, and that's the way you should invest. You shouldn't be trying to pick stock. How do you feel about that, you know, a particular issue? Well, I think this is a great segue from what we were just talking about, Mark, which is to say you have to know who you are as an investor. the most important thing, bar none, is to stay invested. And I want to start on this because I really want to make this point clear. We've done analyses, it's not very hard to do, of what if you

invested in the stock market just before each of the last five disasters, whatever they may be, you know, COVID 9-11, the Great Financial Crisis, the crash of 1987, what if you invested right before those bad events? Now, in the case of the Great Financial Crisis, you went down more than 50% if you were invested in the S&P 500. But here's the important point. In each of these events, if you held through the downturn, did nothing, just held on to the current date, in most of those instances, there's obviously variability, but in most of those instances, your annualized returns are around 10%, which is darn good. Okay, so the important message here is be invested in the stock market for the long run. I personally don't care if you believe in me and you want to pick

stocks and sectors. Hey, I love doing it, as I've said. That's what I grew up doing at the age of 12. I'm going to have to go look at what happened to Nine West. But if you, listen, some people really don't like picking stocks because all they can focus in on in a portfolio of stocks is those one or two stocks that are doing poorly. And it drives them crazy. And I know those investors, and I respect them, and I say this is not for you. And what you're eventually going to end up doing is kind of picking apart the portfolio by selling the stocks that are down, which ultimately means you're buying high and selling low consistently, like paradigm in a paradigm. So if that's you, buy the indices. Okay, now you're going to have that problem with concentration that Chris just mentioned,

but that will solve itself over time. You might augment it with the equal weight S&P 500 that an advisor like me or anyone else might tell you. But the most important thing is stay invested. And to do that. You have to know who you are. You have to know if you're better on the local train, the express train, the fast lane on the highway, the middle lane on the highway, but just stay on the track. Stay on the highway. Keep going. The worst mistake any advisor can do. And this, like, this is from the heart, I feel this the strongest, is getting a client's risk tolerance wrong, meaning giving them too much equity exposure, too much risk, whether it's passive, whether it's active. Because when you do that as an advisor when you make that mistake, the moment the market really turns down, your client

is going to call you up in the morning and say, you know what, I was up all night. It's keeping me up at night, sell all my stocks. And that's the critical mistake. That's where those numbers from investing just before the great financial crisis, right before 9-11, that's where those numbers don't work is where you take a temporary loss along your path of travel and you turn it into a permanent loss. So getting clients risk tolerance right and getting them through the downturns is I think where an advisor earns his fee. I love active management. I love picking stocks and trying to beat the market. But Mark, if that's not good for a client, if that's not going to keep them on the train, then we'll do passive.

Do you think younger people have a different perspective on this? I mean, just anecdotal, you know, kind of in my universe with my kids and my nieces and nephews, it feels. it feels there's two groups. One group is very conservative. I'm going to be in an S&P 500 index fund. The other group, they're betting on everything. I don't know if you've noticed, but prediction markets, gaming, you know, Chris is the crypto king.

You know, he leaves the way on the crypto. But these kids are into crypto. I mean, do you think, and actually they've all grown up in a world where stock market's gone straight up, so they've known nothing but a straight up stock market. When you talk to them, I was talking to one, in New York yesterday, I was talking to one of the young person people at one of the meetings I was at. And he was basically saying, you know, I buy on every dip. Every time the stock market goes down, I buy. And it's not because of anything fundamental.

It's just simply the thought that I've never seen a down market. I mean, does that, does that, have you noticed any kind of shift in young people's attitudes towards investing? Or is it the same as when we were kids? No, it's absolutely different. There is much more of a speculative, dare I say, gambling mentality in younger investors today. You see that in the acronyms that are thrown around, Yolo, you only live once or Hodel, hold on for dear life, diamond hands, all these sorts of things. Oh, yeah. Well, this is, you know, this really got created in the meme stock phase of 2021.

when these left for dead stocks like GameStop or AMC all of a sudden shot up overnight, and they shot up overnight because of young people banding together and saying, let's get on this train. Now, what they weren't doing was they weren't doing any sort of valuation. They were just showing the power of masses, and it worked. It worked. But, you know, it's kind of like we were talking a minute ago about, hey, we take the subway to go from Midtown to downtown.

You know, what we don't do is we don't take the helicopter. And I think sometimes these younger people, think, you know what, I'm going to get rich quick. I'm going to get rich quick and I'm going to take the helicopter and I'm going to trade in and out and I'm going to do zero dated options. And there's a sign of maturity. Mark, you were talking about this with your father and saying, stay in the lane that you're traveling in on the highway. When I was younger, I switched lanes too much. Guess what? I learned it doesn't work. And, you know, you get older now. I'm in my late 50s and I'm driving down the highway. Look, if the traffic stops and I see the lane going next to me going by,

I'm not going to worry about it. I'm getting to where I'm going to go. I think what I'm trying to say here is these younger investors will mature. They will. That's inevitably what happens. Generally speaking, you learn your best lessons from negative lessons, from the hard lessons. Zero time to expiration options aren't going to end well for people. Fast trading, you know, the data has shown that it doesn't work for most people that you lose money. These folks will realize that. And they will, realize also that it's not about, you know, some funny sounding crypto. It's, I'm not putting down, putting down the asset class, Chris, but, you know, some of these, I'll call them altcoins. I think there's another name for altcoins, which this is a family friendly show, so we won't

use it. But, you know, I think investors will, and I'm not negative on crypto overall, by the way, But I think investors, the younger investors will learn, you know what, owning a stock is owning a fractional piece of a business. And I want to know, is that business any good? Is the management up to task? Is the balance sheet strong? Is it profitable? Will it have cash flows that I, as a partial owner, will participate in? That day will come for this younger generation.

I like the optimism. So we've taken a lot of your time, Jim, and I want to end the conversation. with a question that I care most about. And the stock market is an indicator of the economy. Do you think the – and this may be an unfair question, and tell me if it is, but, you know, do you think there's information in the stock market and its ups and downs in terms of what it means for the economy going forward? Is it a good leading indicator? Do you look at it that way?

or is that not even on your radar screen? There is a connection. And you know, you and I just a little while ago we're doing the connection of, hey, if GDP is growing at this rate and you get margin growth, that'll equal profit growth. Okay, we can do that mathematics.

And generally speaking over time, they're going to move together. But over any given short period of time, they can diverge wildly. And the analogy that I used, this 25 years ago, somebody gave this to me, and I think it's accurate, is that picture a dog being walked by a dog walker in the park.

And, you know, it's going down the path. Picture a little yappy dog and it's running from one side of the path to the other. That's the stock market. Okay? The stock market is running this way and that. The dog walker is walking straight down the path. They're both going to end up where they're going. The dog walker, which is the economy.

The economy is going to get there in a much smoother trajectory than the stock market, which is going to have these bouts of mania and despair, and ultimately they get to the same place. There are other connections. You've touched on it, by the way, the wealth effect, right? And that promotes consumption. So there are connections. But I don't use the stock market as a short-term indicator for the economy. Over longer periods of time, they both get to the same place. Well, Jim, this has been really great. And your book sounds fascinating. How do you? How do you, how do you? to ride the subway. Who came up with that title? Was it you? I did it myself for better or worse. I might have, somebody might have tried to talk me out of it. Somebody who knows something about publishing. But I just wanted to do this mash up of something I really love and I'm passionate

about, which is the subways, with something else that I love and I'm passionate about, which is investing in the financial markets. So I'm glad I did it. It gives me a longer form in which to expound upon my views of investing than on TV where I get about 15 seconds. And I'm happy I wrote it. Well, I'll have to say on TV, you're a true voice of reason. You really are. You know, I listen to, I don't watch all the time, but I watch a fair amount and I see you up there. And I do stop to listen to what you have to say because it makes a lot of sense. So I really appreciate you coming on the podcast. Very kind of you do that. Yeah, just an open-ended question. Anything we missed that you wanted to bring up before we call it a podcast?

Well, you know, we could talk about private credit. We could talk about the SaaSpocalypse. It's really up to you. Do you want to go into it? Yeah, it's been a few minutes, particularly on the private credit. Just to frame that, there's been a bit of a comeuppance there for particularly the BDCs, the business development companies that are the publicly traded private credit fund. And so there's been a lot of hand-wringing about, you know, what's going on there. And so should we be

worried about private credit? Is this something that you think is a threat to the financial system and broader economy or not so much? Yeah, we don't think it's a threat to the broader economy or the financial markets. You are right, Mark, to talk about the publicly traded BDCs, which have been disastrous. And ultimately, what this comes down to is who are the good underwriters and what funds are they managing? Clearly it's not the publicly treated BDCs, but the private BDCs, which have been lumped in, the private credit funds, which have been lumped in with these publicly traded funds, we think have been unfairly tarnished with this idea that they're bad investments and that they're going to be a systemic risk to the financial markets and economy. To start with the last point,

the private credit industry, which if we include all of the forms, the private credit, the publicly traded BDCs is around two, two and a half trillion dollars in assets under management, is ahead of that in any capital structure is around 10 trillion of private equity assets, which it's not purely apples to apples, but in a macro sense, that 10 trillion of private equity would have to go bad before you start impairing the private credit. Now, it's not apples to apples. There will be some individual companies that don't do well and for which the private equity is worthless and the private credit will be impaired. But as a macro asset class, we just don't see the threat to private credit. This is a case, however, where, look, I participate in the media. This story of the gating by which investors can only get out 5% each quarter, it's catnip to the media, right? I mean, the headlines almost right themselves about the amount that clients are trying to take out and the gates and, oh, the nefariousness of the gates. Well, the gates are there for a purpose, which is to match the assets and the liabilities. If you've got loans in these private credit funds that are maturing every four to five years, it kind of matches up with a five percent per quarter gate. and it prevents the fire sale, the run on the market that not gating would actually create. And just to get to the bottom line, we follow these private credit funds quite closely,

and we see the credit quality acting remarkably stable. So we don't see the uptick in PIC, which is payment in kind or non-accrual loans, in the private credit funds that we're seeing in some of the publicly traded BDCs. Well, this is great. Since you got promoted to be chief market strategy, I can ask you a little. I forgot about that. Since I have you then, you know, one final question, interest rates, long-term interest rates, you know, the 10-year treasury. I don't know if you have a view or a strong opinion, but we're sitting at 4.5% on a 10-year bond. What do you think? Is that kind of roughly where it should be? Or are we going to see higher rates, lower rates? What do you think? So we would see higher interest rates if the U.S. dollar were not the world's reserve currency, if the U.S. Treasury market were not the risk-free asset. In the immediate future, we don't see a competing sovereign debt market or currency to supplant that. Nonetheless, our debt and deficit levels otherwise would cause higher interest rates. No sign that the debt or deficit level is going to

come under control. But what can save the day, if you will, is productivity. And productivity is something that, you know, I kind of remember my dad sitting by the fire talking to me about productivity, son. It's the most important thing, like Hal Holbrook or whoever it was in the graduate, right? Plastics, one word for you. Wow, that's pretty impressive. I'll have to say. But, and look, you're an economist. Chris, you're an economist, right? Productivity is what gives growth without inflation. And that's what we're really counting on. Remember that anecdote of me sitting down with Claude and doing things in 10 minutes that would have taken me an entire day. That's what we need to see throughout the economy. And that will enhance productivity,

which will increase quality of life without meaningful inflation. Well, I really like the optimism, Jim. And I want to allow you to get to your investment management committee on time. But thanks so much. Really, really appreciate the conversation. It was a very informative and enjoyable. And the book sounds great. Best of luck with the book. What's the title again? How to Ride the Subway, Getting Around on Wall Street and Life. There you go. That's the book. So with that, I think we're going to call this a podcast. Dear listener, I hope you enjoyed it. We'll talk to you next week. Take care now.