Prof G Markets - The Economic Fallout of a Government Shutdown & Why Fermi Will Be the Worst IPO of 2025

Episode Date: October 1, 2025

Ed Elson is joined by Stephanie Roth, chief economist at Wolfe Research, to unpack how a government shutdown could impact the economy. Then, he dives into Fermi America, a new company going public, and explains why he thinks it may be the year’s worst IPO. Vote for Prof G Markets at the Signal Awards  Check out our latest Prof G Markets newsletter Order "The Algebra of Wealth" out now Subscribe to No Mercy / No Malice Follow Prof G Markets on Instagram Follow Ed on Instagram and X Follow Scott on Instagram Learn more about your ad choices. Visit podcastchoices.com/adchoices

Rinse takes your laundry and hand delivers it to your door, expertly cleaned and folded. So you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you. Like T-time U. Or this T-time U. Or even this T-time U. Said you hear about Dave? Or even T-time, T-time, T-time, T-time U. So update on Dave.

It's up to you. We'll take the laundry. Rinse. It's time to be great. When you're with Amex Platinum, you get access to exclusive dining experiences and an annual travel credit. So the best tapas in town might be in a new town altogether. That's the powerful backing of Amex. Terms and conditions apply. Learn more at Amex.ca. YNX

Did you lock the front door? Check. Close the garage door? Yep. Installed window sensors, smoke sensors, and HD cameras with night vision? No. And you set up credit card transaction alerts, a secure VPN for a private connection,

and continuous monitoring for our personal info on the dark web? Uh, I'm looking into it. Stress less about security. Choose security solutions from TELUS for peace of mind at home and online. Visit TELUS.com slash Total Security. to learn more. Conditions apply. Today's number 32. That's how many leather panels comprise the average soccer ball

as well as 642 stitches. The panels and stitching help to maintain the ball's shape, similar to Laura Luma's face. Money markets matter. If money is evil, then that building is held. The show goes up! The face and never watch the show, sell! Welcome to Profitory Markets. I'm Ed Elson. It is October 1st. Let's check in on yesterday's

market vitals. The major indices climbed to wrap up a second straight quarter of gains. The S&P 500 closed out its best September in 15 years. Meanwhile, gold climbs to another record nearing $3,900. Invidia shares also hit a record high, pushing the company's market cap up to $4.5 trillion. And finally, Pfizer stock rally. 7% after securing a three-year exemption from President Trump's pharmaceutical tariffs. In exchange, the company has agreed to lower its U.S. drug prices and reshore manufacturing. Pfizer will also sell some discounted drugs on the administration's new website, Trump RX. Okay, what else is happening?

A government shutdown is looming over the markets. We are recording this a little after 5 p.m. Tuesday evening, meaning Congress, about seven hours left to make a deal here. It could be that by the time this airs, we will have a deal, but at this point, the most likely scenario is indeed that we will have a shutdown. That would mean that nearly a million people won't be going to work, and they will not be getting paid until the shutdown ends. That is standard in government shutdowns. However, the unusual thing about this shutdown is that if a deal isn't made, the Trump administration has also threatened mass layoffs across the federal government.

In other words, instead of just furlowing government workers, and that is standard with these shutdowns, the plan with this shutdown is to flat out fire them permanently. Now, why is this happening? What is the disagreement? Well, it really all comes down to health care, specifically the Affordable Care Act subsidies, which are set to expire this year,

unless they are added back into the funding bill. So the Democrats want them in because without these subsidies, roughly four million Americans will lose access to their health insurance. Also, health insurance premiums across the country are going to rise in cost by an estimated 75%. So that's why the Democrats want them in. The Republicans want them out because the Republicans don't want to spend $30 billion a year on subsidies. And also, many of them simply don't like the Affordable Care Act altogether. They've felt this way for a long time. So, That is the standoff here. That is why we are getting this shutdown. The next question is, what will that mean for us? What will it mean for the economy? What will it mean for investors? What are the actual implications of having a government shutdown?

So to help us answer these questions, we are speaking with Stephanie Roth, chief economist at Wolf Research. Stephanie, thank you very much for joining me. Thank you for having me. So, sort of broad question here. We're looking at a government shutdown. This appears to be imminent for America. What kind of effects will this have on the U.S.?

And more specifically, what kind of effect will it have on our economy? Yeah, so there's two ways to think about this. One, you're going to have some spending that's delayed, largely in the form of salaries to government employees. We're not going to get paid until after the fact. They will certainly get paid and back pay, especially, given it is now written into law based on a law in 2019. And then secondly, there's some output that will ultimately be lost.

In the 2018-2019 shutdown, that was estimated to be about $85 million a day. So it will be to that magnitude, but potentially larger, just given inflation, and then this will be a full shutdown as opposed to last time it was a partial shutdown. So the reason why you have lost output, things like revenue that would have been collected at national parks that won't be collected because they're closed. So there's certain activity that just won't happen as a result of the actual shutdown. And that's the output that will ultimately be lost and never recovered. Yeah.

So that shut down in 2018, which was 35 days, longest shutdown ever. How sizable was that economic impact? I mean, you mentioned the 85 million a day. Put that under perspective for us. Like, is that a big deal or no? So when you think about it maybe in terms of quarterly GDP, the trend rate in real GDP is call it 2 to 2 and 1⁄2%. It was about a 0.4% hit to quarterly GDP. So if GDP was going to be 2, it was going to be a 1-6 as a result.

Yeah. So we're looking at a shutdown. We, I guess, don't know how long this will last. Is there any way to know? Is there any way to predict if this will look like 2018 or not? Yeah, there's a good reason to believe it would look something more like 2013. That's probably a closer analog. This is a full shutdown similar to what happened then. There's not that much that has to get done in order for the agreement to come to the table, really just for there to be a commitment that they will work on extending the ACA provisions. So if they agree to commit to that, it's likely that there will be some sort of agreement. So our expectation is roughly two. weeks is kind of a good way to think about it. One thing that we found quite interesting, the BLS said it's going to suspend all operations

without a funding bill. We'll see this across all the other agencies, too, the Census Bureau, the Bureau of Economic Analysis. And I assume a lot of businesses and other areas of the government actually need this data to make a decision. I'm wondering if you have any thoughts on how this will affect businesses, the idea that we will not be getting data for the next two weeks. What are the economic impacts of that?

Yeah, at least there will be some data that is not coming straight from the government. So the PMIs will get a lot of attention. The ISM PMI is one of the most widely watched of them. That will be coming out tomorrow, regardless of whether the government is shut down or not. Other things like ADP employment will get more attention than normal. A lot of these data are not as important or certainly not quite as top tier as things like employment or CPI, but they still give it an important indication on the trajectory of the economy. So if we have a two-week blackout of data, I don't expect that will dramatically change

the way forecasters are thinking or the way businesses are doing their day-to-day or thinking about hiring plans. If it would last much beyond that, then you start to get to be a little bit more concerned about the backdrop. The thing also to flag, the labor market data, specifically non-form payrolls, has gotten a lot of a sort of negative criticism recently for being volatile and a little bit hard to sort of decipher anyways, so perhaps it's been a little bit less useful these days than normal. One other entity that will probably be affected by this would be the Fed. I mean, presumably

the Fed needs to have the data to understand what it is to do about interest rates. And we've also been seeing some arguments that if the Fed has less data, then perhaps they will be more likely to stick with the dot-plot plan and go ahead and cut rates again in October. I'm just wondering what you make of that concept, this idea that if they have less data or there is more uncertainty around this shutdown, then that could signal lower interest rates moving forward. Yeah, it's possible at the margin, just because even if, let's just say, they want to, have a total of two or three cuts this year,

they could always do the October cut and then plan to just sit it out in December, if it turns out that the data look a lot better once it comes out after the shutdown. So I would say it's a margin that does increase the odds. We do expect that the shutdown will be over by the time of the FMC at the end of October, but to the extent that it's not at the margin. I think that's a fair point that perhaps they'd be more likely to cut them would otherwise be the case. However, you are hearing from Fed officials that they're feeling a little bit uncomfortable at the way the market would have been priced.

So they're a little bit more sort of on the fence and they would like to see some more data before making a move. Yes. As we know, it's going to be almost a million federal workers who are going to get furloughed during the shutdown. But then there's this other side to this, which is that the administration is also threatening mass layoffs

throughout the federal government. Not totally clear of what those layoffs will actually look like, but I'm just wondering, from your research, what kind of impact will we see because of those layoffs? If we do see those layouts, how will that affect the economy, do you think? So if they actually go forward with these plans to do mass firings, that can have a significant impact.

Yeah. Earlier in the year, they talked about doing these rifts or reduction in force. The plans were about, or at least we counted about 100 or so thousand people from various agencies that would potentially be part of these RIF plans. if that were to play out, it would be important in a big deal, but not a big game changer. However, the way the OMB phrased it last week, it suggested like the RIFs could be even larger than that. They cited that it could be all non-essential workers, which could be 400 plus 1,000 people. If that were to happen, now you're starting to talk about something that's a much bigger deal.

Now we're talking about a couple tens on the unemployment rate and some significant slack that all of a sudden appears in the economy. in an economy that is having trouble absorbing a lot of the workers that are sitting on the sidelines today. Right. And what's interesting is we haven't seen that much of a market reaction, or at least not much thus far. I'm just interested to get your reaction to how the market has reacted to all of this, the shutdown, as well as, as you say, the prospect of mass firings. Generally speaking, markets tend to look through the shutdowns, largely because they come and go. activity tends to resume. The difference this time could be if there is an announcement that they are doing mass firings as opposed to just furloughs, then I expect markets to react.

But as of now, the expectation is that this is just posturing and they're trying to get the demos to come to the table. But if there were to be an announcement and there were to be actual clams to follow through with firing all those 400,000 plus people, that would become a real problem. All right. Stephanie Roth, chief economist at Wolf Research. Thank you very much for joining us. We appreciate your time. Thanks for having me. After the break, a look at a strange AI IPO. If you're enjoying the show, give property markets a follow. Hit pause on whatever you're listening to and hit play on your next adventure. This fall

get double points on every qualified stay. Life's the trip. Make the most of it at Best Western. Visit BestWestern.com for complete terms and conditions. What a run! This champ is picking up speed. But they found a lane. Phenomenal launch into the air! Absolutely incredible! Air Transit! Fly the seven-time world's best leisure airline champions, Air Transat.

Hey, Alex Heath here, founder of Sources.net News and a contributor at The Verge. And I'm Ellis Hamburger. Tech reporter turned industry insider, working closely with today's hottest AI startups. We're excited to announce the launch of our new show, Axis. with the Vox Media Podcast Network. Access is the tech industry's inside conversation with Silicon Valley's most influential leaders. From the tech titans of today to tomorrow's most visionary builders.

It's a show made by insiders for everyone who wants a glimpse into the future. In our first episode, Alex interviewed Mark Zuckerberg about Meta's latest smart classes, the AI race, and what's next for the social media giant? I mean, didn't you just tell Trump you were going to spend like $600 billion? I did. Yeah, through 2028, which is... That's a lot of money. It is.

And if we end up misspending a couple of hundred billion dollars, I think that that is going to be very unfortunate, obviously. But what I'd say is I actually think the risk is higher on the other side. You can find the AccessPod now on YouTube, Spotify, or wherever you listen to podcasts. We're back with Profi Markets. Fermi America is set to go public today after just eight months in business. The firm co-founded by former U.S. Energy Secretary, Rick Perry, aims to build the world's largest private

energy grid to power AI companies by 2038. It is seeking to raise $750 million in its IPO, targeting a valuation of $13 billion. However, the IPO could face some delays if a government shutdown impacts approvals from the SEC. Okay. So Fermi, America. this AI company is going public. What is Fermi America? Why do we care about it? Why are we talking about this company on the show? Well, if you're a regular listener, you know that we have discussed this decline of the IPO at length, the fact that there are fewer and fewer public companies in America, the fact that the IPO has really lost its appeal because there's so much money in the private markets such that you don't really need to go public anymore. And the fact that

the few companies that are going public are, in simple terms, unimpressive companies, or at least unimpressive to us. Some people disagree with us on this, but we look at the companies that have gone public in 2025, the big IPOs, Clana, Circle, Gemini, BitGo, etc. None of these businesses are particularly impressive to us. And it is our growing belief that the IPO is almost becoming like the SPAC, in the sense that it is almost becoming a dumping, ground for all of the companies that aren't getting enough attention in Silicon Valley, that aren't raising these series E, F, and G rounds. And so what do they do? They toss these unimpressive companies over to the public markets, and they cross their fingers, and they hope

that retail investors will buy it instead of Sequoia and Andreessen Horowitz. So, again, why are we talking about this company, Fermi, America? Well, this company is the perfect example of the dynamic we are describing and that we have described for many months now. This is pretty much the most 2025 IPO you're going to see.

I mean, no real business here, all narrative, no substance, very half-baked ideas, just an overall shit show of a company. And we're going to get into the details here. So, Fermi America, this was founded eight months ago by

Trump's former energy secretary, Rick Perry. And it's an AI company, specifically a power and data center company that is going to supply AI companies with 11 gigawatts of compute over 18 million square feet of data center capacity. So big numbers, very sexy, it all sounds very impressive. Until you realize a few things. One, they haven't made a single dollar in profit. Two, they haven't made a single dollar in revenue. And three, they also haven't even built anything. So they haven't sold anything, they haven't built anything, and yet they are here going public at a valuation of $13 billion. So that's a little bit

sketchy. At this point, maybe you're thinking, okay, well, they must have something. You know, there must be some kind of progress if they're going off and pitching this to investors. And the answer is kind of, but honestly, not really. As far as we can tell, there are only three things that are really nailed down at Fermi America right now. Number one is they have secured a lease for some land in Texas. So they know where the data center is going to go and they're going to lease this land from Texas Tech University. So they've got a contract for some land. Two, they've secured some loans. They have some debt financing in the pipeline. Okay. And three, they've agreed to buy some gas turbines. Nine of them, to be exact, that's 600 megawatts of power,

which is about 5% of the capacity that they are promising. But more importantly, these turbines haven't actually been built and they're currently sitting disassembled in warehouses in Germany, Sweden, Vietnam, and China. In fact, Fermi still owes the manufacturer of these turbines $134 million plus the $10 to $20 million they're going to have to pay in shipping costs. So what you suddenly start to realize here is, in addition to what they don't have, namely revenue, a business model, assets, infrastructure. In addition to what they don't have, all they do have is a bunch of expenses and liabilities.

They owe the money on these turbines, they owe the money on these loans, and now they're going to rent some land as well in Texas. So none of this is particularly assuring if you're an investor. But the part where it gets most ugly is the source. story that they're trying to sell to us, which is, in no uncertain terms, a load of BS. For example, this promise to provide 11 gigawatts worth of power over the next several years. How they will actually achieve that is quite unclear, but what is more unclear and what is more ridiculous is the size of that number 11 gigawatts itself. 11 gigawatts is five times greater than the

output of the Hoover Dam. It is two and a half times greater than the amount of energy consumed by all of Manhattan. And as we have discussed a couple of weeks ago, you look at Nvidia and their $100 billion investment in Open AI, the largest private investment in the history of business, that was for a buildout of 10 gigawatts of power. And this company, Fermi America, which has no real assets, no real infrastructure, they're saying, no, we're going to provide 11. So the numbers just don't make any sense here. Now, in addition to the AI lipstick that they are smothering all over this pig,

they are also touting their prolific nuclear business. Another buzzword. They want to build a nuclear power plant that will be, quote, the largest of its kind built in the U.S. in decades. Now, how will they actually build this plant? Again, unclear. However, there is one thing that has been established about this plant, and that is the name of the plant, which will be, no joke, the Donald J. Trump

generating plant. So yes, this is the other bold strategy that Fermi is employing to get this thing off the ground. They are also sucking up to the president. By the way, Trump's name was mentioned 11 times in this S-1 filing. He got more mentions in the filing than the word profit. So, Zero revenue, zero infrastructure, 11 gigawatts of future AI capacity that they intend to build, and a nuclear power plant that's going to have the president's name emblazoned on the front of it. It is starting to sound like this whole company was made up on chat GPT. It's starting to sound like former secretary Rick Perry went on chat GPT. He typed in, give me a list of bullshit business ideas that I can sell to retail investors.

and this is what it came up with. So we've seen a lot of bad IPOs in 2025, and we've discussed that before, but this one takes the cake. This is not a debate. I'm not going to beat around the bush here. This thing absolutely stinks. And the investment bankers that are actually willing to sell this IPO,

Mizuho, UBS, Cantor Fitzgerald, that is Howard Lutnik's bank, they should be embarrassed to be selling this thing, because this is not a real company. Now, the plan is to sell 33 million shares at a price point of $18 to $22. That will amount to roughly $750 million in funding. It will value the company at $13 billion.

But I just want to be very clear here, this is not going to end well, and I will lock that prediction in right now. This is We Work all over again. This is aspiration all over again. This is another BS company that is using the hype du jour, or in this case, AI, nuclear, data center, private power grid, even Trump's name,

using all of that to dupe its investors into believing they have found the next big fit. Now, does this mean that the stock isn't going to pop when it goes live? No, in fact, I would argue we might see a pop. I could see this actually becoming a meme stock. It has all of those meme-like qualities that meme stock investors love, Trump adjacent, AI adjacent, nuclear adjacent, etc., etc. But ultimately, as we have seen time after time, gravity will hit. Gravity must hit. And this thing will have to come down. So that's my prediction there. Keep an eye on Fermi America, another bad IPO, arguably the worst IPO of the

year. And this is really the truest indication of where the IPO market is headed right now. We have all of these great companies that are staying private, and again, all of these bad companies that are going public. Just another day investing in 2025. Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson, and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our research team is Dan Shalan, Isabella Kinsel, Kristen O'Donoghue, and Mia Silverio, and our technical director is Drew Burroughs. Thank you for listening to Prof. G. from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I'll see you

tomorrow.