The Compound and Friends - The Week We All Found Out

Episode Date: August 8, 2025

On episode 203 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Sam Ro and Luke Kawa to discuss: AI dominating the economy, crypto and PE in 401(k)s, consumer spending, the BLS, and much more! This episode is sponsored by Betterment Advisor Solutions and Vanguard. Grow your RIA, your way by visiting: https://Betterment.com/advisors  Learn more about Vanguard at: https://vgi.vg/3GbOsYM. Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Whoa, whoa, whoa, stop the clock. He's been here. Look, Duncan, welcome back. He's been here. Oh, Duncan's back? Oh, my God. Awesome. Sam, welcome back.

Thank you. All right, man. We'll get you right down here at the end across from Josh. You're right. Sam, you got to be close to number one. A new recording, Doug. Repeat guess. Ukraine.

Yeah, maybe. Five. Five? This is seven. What are you out? Seven? All right, so you're 100% number one. No way. Really?

Yeah, why do you guys... That is awesome. Why do we keep inviting you? A lot of people canceling or something? We love you. Do you guys get a lot of nose? No. We don't get a nose anymore.

It's not a scripted. Dude, we were just talking about Mr. Buffett. Look at this. So actually, you know what? This is awesome. Thank you. Yeah, you bet. There's got to be a better answer than Warren Buffett

because the number one person you want to have dinner with. That's kind of a lame answer. No one for what? Number one person you want to have dinner with? Nicole asked, you could have dinner with anyone living or dead. It's so cliche, right? I said Warren Buffett, but living. Oh, my God.

All right, here's a good question. Nicole posted a video of me walking around last week on YouTube. And I guess most of the videos, I'm seated. and people in the comments were like, holy shit, Josh is tall. People didn't know that? I thought that was one of the very known things about you. Apparently, I give short.

Really? I'm telling you, there was, did you see it? You're very beta. Did you see how many messages were like, wait a minute, Josh is gigantic? There's like so many, like, group pictures of you. I guess these are people that don't see the photos and they just watch the video.

I thought they were going to comment on the little boo-boo, which is predictably ridiculous. Nick, you said, I give short energy. What does that mean? When did I say that? Last week when I'm like, why is everyone in the company? Wait, so I talked to Dan on this, and he also thought you were going to be short when he was hired.

Where is he? Bring him. Bring him to me at once. Dan thought I would be short also. All right. There's something about maybe the way I sit that gives short, that gives like an impression. Is that him? Can you get me, Dan?

Get me, Dan. Where is he? Come here. Get on Duncan's mic. Nicole said that you thought I was short before you met me in person. Oh, I did. But we're trying to figure out

why everyone in the YouTube comments was surprised that I'm tall. I don't know. I know why. Because your energy is very, like, aggressive, like you're a short guy trying to be not short. Is that your impression?

No, no. Why did you think I was short? You just, it just looked like I was? Yeah, I just, I'd never seen you setting up. And I was just, you know, surprise. All right. There's no good answer. There's absolutely no good answer that it's here.

You're dismissed. You know what is? Here's the way to think of it. For the record, 6-2-180. 6-2? Yeah. Are you sure it's not like 6-1 and 3 quarters? Kilogram?

It's like, a 1. I'm 6-2, and my 16-year-old son is 6-1. I think he's to be taller than 6-day. Yeah. Oh, boy. I need you be tall in May. Oh, tell us your wife. Not tall.

Five, three, five, five, and Lubitons. Yeah. So, I don't know. You, like, you surprised by that that I'm giving short to the audience? You're not surprised. I think people are probably getting used to finding out that people in real life are shorter than you expect. Like Tom Cruise and. Alpachito's four foot six.

Yeah, me and Tom Cruise. Everyone always says. All right. So, Sam, this has been a week for you? What happened? Yeah, it's been an interesting one. Can we get into it a little bit? Yeah, sure.

Okay, so you have been displaced from your apartment. Yeah, I just moved back in two days ago. But not your first rodeo. Not my first rodeo. So my apartment got flooded. It's your second rodeo. Oh, just for the listener, share the street address? I'm in an apartment building in downtown Brooklyn in that development area.

And I was actually out of town, and I got a phone call from my landlord saying that the person upstairs left their kitchen sink running. But who was this? Blackstone? Right. Black Rock or Blackstone? So what? It came through the ceiling or through the wall? It came through the ceilings and the wall. So, you know, by the time people realize there is a water problem, it's usually already in the wall.

That seems to be like the rule. Yeah, but then they have to remediate. It's not enough to just dry it because now you can have more. So this was my, so since this was my second time, I was able to witness the entire process when it happened the first time. And, yeah, like, by the time the water is still, like, being mopped up, there's, like, a SWAT team comes in with, like, the dehumidifiers and the fans and a guy sawing out all of, like, the wet drywall. They have to pull the drywall out and redo it. Yeah, because of mold and all that stuff. All right.

And, yeah, they just leave industrial dehumidifiers on for, like, four days until. of the places like a desert. So that's two strikes on this landlord. All right. For any attorneys in our audience, we might have need of your services if this happens again. I don't think we're going to put up with it. But how does this work? Because you have to pay for a hotel?

All that gets reimbursed. So the rent, it's either frozen or you get credited for the time you're not able to access the apartment. And then they reimburse you for the hotel. And then anything that's damaged gets replaced. Okay. And now we have your landlord here. Duncan, would you like to apologize?

Is there anything that you want to say to Sam? It's close to home. I have the same thing happened in Brooklyn. Yeah, I remember you were telling you about this. Where my place got flooded. Two years ago. Neighbor went to Europe during the winter and left their heat off. And so their water pipes busted.

Holy shit. Well, I mean, that's kind of the funny thing about this. It's not an uncommon story to hear about water damage, flooding, kitchen sinks, and all this stuff. But, you know, in that kind of. context, I thought my experience two years ago was pretty good. Like, sometimes this stuff draws on for months. Like, if the landlord doesn't care

or if it's not... Well, that was you. That was you. So what... Well, how long were you out of your apartment for? It was months. We never went back. You never went back. Yeah, it was months. And there was no date in sight. Right. And then, like, you know,

everything from, like, covering mold inspection and... Do you have anything you care about, get damaged, or TV or anything? No. I mean, this is actually, in my lifetime, this is my fourth flood. You must be uninsurable. Yeah, I mean, I don't leave stuff on the ground.

You're like the wet bandits. Now, watch it being flooded teach you about B-to-B sales. Nothing. No, but seriously, you know, the funny thing is, I mean, so, Jack Raines was here this morning. It's funny, I should have asked him. Oh, yeah, he's in town, yeah.

He's in town, he's making the rounds. So, the B-to-B story is this. stuff like this is unavoidable. I mean, you guys are homeowners. You have disasters all the time. That shit happens. Yes, shit happens. Every week something.

Like, really, the unusual thing would be is if you never have, like, an issue in your house. Now, if it's happening, like, every two weeks, then that's a whole other story. But, you know, once every two years, I've had no other incidents in this building. And the landlord's, you know, overall great. Like, the way that they handle the situation is great. Like, you know, Duncan wasn't able to move back in. I'm back in eight days. You roll with the punches.

Yeah. I mean, I think that's what makes me a great stock market. You make content out of the punches. It's perfect. It's even better. Yeah, I mean, well, that's the other thing, too. I think, you know, I've been scaling down in terms of crap that I keep in my house. Okay.

And because I don't know what it is, but like it can, you know, stuff can be kind of like a psychological weight and a distraction or whatever. Oh, I agree with that. I don't know what it is, but like I'm most productive when it comes to work. when I'm not at home. So, like, if I'm at, like, a conference or something and go back into my hotel room for two hours, like, I could do, like, six hours worth of product. You're not surrounded by all your, your toys and games. Right, exactly.

All right. All right. So, in my 401K, I just put on a trade. Will Sam's apartment flood next year. Thank you, Kalshi, for that. Yeah. Nice. Yeah.

Are you on the prediction markets right now? Not yet, but I'll make sure that happens because, you know, why get insurance when you can just, you know, put money on. And sure. I love that we've rebranded this as prediction markets and not gambling. Right. It's prediction markets. Yeah, sure it is.

I love it. I love it. I bet that. I don't gamble. I predict. Isn't like the history of... I'm a degenerate predictor. I cannot stop predicting.

Like in the, in Game of Thrones or whatever, the shorthand for the insurance guy was the gambler. Oh, really? Yeah. Good to know. All right. We ready to rock? You guys ready? Yeah.

Yes. All right. Duncan, you ready? Okay. Coming in with three claps. All right, let's do it, Sean. Break my mic on. Episode 203.

Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor. Today's show is brought to you by our sponsors at Betterment Adviser Solutions. If you happen to be thinking there's got to be a better way to grow my RAA, you're not alone. With Betterment Advisor Solutions, we do the heavy lifting so you can focus on what matters most, your clients. From improved service that makes asset transition smoother to fast, paper-free onboarding that delights clients on day one.

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Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholds wealth management may maintain positions in the securities discussed in this podcast. 203. This is a big one. Sam Rowe is back for, you think it's the seventh time? It's either six or seven.

Oh, my goodness. Let's call it 6.9. 6.9. All right. We're going to read your introduction anyway, though, okay? Guys, Sam Rho is the founder and author of Ticker that's spelled T-K-E-R, an award-winning newsletter covering news, data, and insights informing long-term themes for investors and the economy.

We love when you come. on the show. Thank you so much for being here. Appreciate it. We'll get a decommeter fire on you right in that corner and dry you out. All right. First time guest today, you guys, if you've been on financial social media at any point over the last 15 years, you know this dude. This dude is razor sharp, covers the gamut, markets, economy, predictions.

You name it. Luke Cowah is the markets editor at Sherwood News, a media and research arm. of Robin Hood focused on markets, business, tech, and the culture of money. Luke, thank you so much for being here. Pleasure to be here, thanks. Awesome. The crowd's going nuts. I don't know if you could, I don't know if you could hear that.

They can't be, they can't be restrained. So you and I met once before in person. Yes. We met Jillian Tett's backyard, big financial times. You a Bloomberg writer at the time? I was a Bloomberg writer at the time, and you had just, like, wrote something nice about something I wrote. So I was very happy. That was a big, big deal for me at the time. It would actually still be a big deal for me now if you do that. Yeah. No, I love your stuff. I've been reading

your stuff forever. And when I was active on finance, finance Twitter, you were definitely one of, like, the key people that everybody follows. So really nice to get this chance to talk in person. Now, your accent's interesting. I'm picking up Mississippi. All right. Neil Dutta's already outed me on this show. So yeah, let's not, let's not be around the Bush. All right. What, what province are you from? I am from Ontario. Thank you for knowing provinces. Very good. Very good. I do. All right. Guys, I want to, I want to play something, okay? Ukraine, getting it settled, getting it ended, should have never started, would have never started. If I were president, it would have never started. I want to thank Tim Cook. He's a

great, great man, a visionary, a businessman, just about every quality he can have other than athleticism. I don't know. I'm looking at him. I'm not a hundred percent sure about you. You're a good athlete. I bet you're pretty good. I think he's good at everything. But I want to thank you very much, Tim.

Congratulations. Thank you all. Thank you, Mr. President. So Tim Cook went to the White House last night and brought Donald Trump. Let me read this. An iPhone. Here. First, they announced another $100 billion in U.S. investment.

They're going to make some of the glass for Apple devices in Kentucky. I think that's a corning plant. Okay, very cool. With trembling hands, this is USA Today. Cook opened an apple box, he said, was made in California, took out a circular plaque with an apple-shaped cutout in the middle, made of glass, apparently made in Kentucky, and attributed the design to a former U.S. Marine Corps corporal who now works at Apple. The plaque was set in a 24-carat gold base.

Cook said was made in U.S. Utah. Is Tim Cook like a, like a genius? Like, what else would you need to do? He got Marines involved. He got two red states involved. There's a gold 24-carat gold. That's it. That's the secret. Why is it so difficult for everybody else? Why do we even have tariffs? Why doesn't everyone just bring him gold? I don't know. Is that, is that like a, for me, as an Apple shareholder, I'm looking at that like, all right, good, problem solved. Yeah, I think, I think that's exactly it, right? You put on your shareholder hat and sort of separate the bizarreness of it all. Yeah. Get over it. People are going to fight all day long on Twitter about like, well, this is like,

you know, giving gifts to an autocrat and all these things. And like, well, okay, you know, there's a, you can have that discussion, but like just as a straight investor who needs to see that the companies that they perform, that they invest in, they need to operate and execute. And, you know, What better way to execute in the world when you get the person who's basically running the world on your side? The 24-carat gold base of this, whatever the thing is, is not the point. He's not a six-year-old. It's the $100 billion investment in making glass for the phones in Kentucky. It's a step in the right direction, right?

Well, I look at it from not the perspective of a shareholder, but the perspective that the Verizon customer who now knows when I go to get my new iPhone in October that it's like I'm not facing nearly as much of the hit as I would have. But I think like this is just the proportional evolution of what the crypto folks have already done with Trump for some time, right? Like there's there is a playbook for doing this, for pulling this off, and for minimizing damage. The one who seems to have done it most successfully without kind of just purely through a

public pressure campaign without really having to, you know, pay the tithe, as it were, is Jensen Long, like, just the, what he was able to do in terms of getting the H-100 back to China, also helping, you know, AMD in the process there. The exclusions. Yeah, yeah, yeah. Like, so that, that kind of pressure campaign to me almost strikes me as more revealing, but, like, ultimately what this tells us and, like, kind of what every deal has told us is that the inclination is not to blow everything up, right?

Like, you just have to do something, and the, you just have to do something, and they, the golden apple is like a hell of a lot of something. Also, I don't know, I don't know about how consistent, like, the track record of these big commitments are. Oh, they never actually do anything. They never, they never actually happen. No, it doesn't matter. Every couple of years you hear about some massive deal to invest for six or eight

years or, you know, some time period where you know that president's not going to be around to even bother you. Yeah. And then some article comes out and says, oh, it turns out Foxconn didn't actually build that plant in Indiana or Look at, he's screaming about Intel right now. Intel was supposed to make these huge investments, and I guess they're slow. Like, I don't know.

But even the, like, even the semi-232 tariffs that were announced, like, think of how loose that is. All you have to do is, like, say you're bringing manufacturing back at some point, have plans to do so. People can have plans for four years that never happened. And now we're already running down the clock on that. So when TSM is the biggest beneficiary in the market of. They measure that's supposed to return domestic manufacturing investment to America.

I think that's pretty telling as to how porous this is and how toothless a lot of this is. And toothless is great because that sector is on a fine trajectory as long as it's just not punished. So I was going to, I was just looking at this. Apple's total operating expenses from the report for the last nine months was $46 billion. So where does $100 billion come from? Nobody cares, right? It's not, I don't think that goes into OPEX. I'm just saying.

They're total operating expenses, total. I think a lot of this doesn't even come out of Apple's own pockets, too. Like, there's always, like, deals with suppliers. Yeah, Mexico's going for it. Yeah, like some, yes, there's usually something going on with, you know, whoever it is that they're dealing with, whether it's a supplier or a customer that they're selling. What does it say that the thing that they're able to make in America after like six months of fighting with or Trump fighting with them is like glass?

not that it's not impressive but like they're not making they're not making the M3 like advanced apple chips so I mean it's possibly the case that you know the U.S. was always making the best glass. No, they were it's corning. We've been

making the best class for 150 years. So basically it's business as usual but instead of you know filing an AK you're doing it from the White House yeah well listen that's how that's how the game is played there was another executive order today or they're signing it today or they already signed it. Everyone kind of knew this was coming. I think it's a big deal for Wall Street. It's a huge deal. Yeah. Trump will sign an executive

order Thursday that aims to allow private equity, real estate, cryptocurrency, and other alternative assets in 401ks, a major victory for industries looking at tap some of the roughly $12.5 trillion held in those retirement accounts. So basically taking the risk away from plan administration. administrators from saying we will now allow these types of funds. I wrote about this on Monday. Do you guys think this is like game changing or it's just another thing that might come and go and nothing really much will come of it? What do you think? I mean, you know, I feel like it's almost a continuation of the slippery slope of going from defined benefit plans to define contribution plans, right? Where, you know, just the fact that we can make our own, you know, equity allocations and

our 401K plans is a form of shifting that risk to the individual. Yeah, for better or for worse? Yeah, for better or for us. Yeah, so, you know, maybe it is the case that there's people who are, you know, very well educated and understand the risks or will get educated. And it's like this is, you know, now a great opportunity to do, you know, invest in some of these alternative asset classes at a low cost. That said, you know, it's not for people.

It won't be that low cost. It won't be that low cost. Yeah, someone will surely clean up on it. But like, you know, I think even the existence of people, like, like us, you know, talking about investing and having listeners who are sort of in control of their 401 plans already, you know, the reason why we exist, people are making terrible decisions already when it comes to their retirement savings. Correct.

Not everyone, but some people are. Not everyone, but, yeah, it probably just, it makes our work more complicated. And yeah, maybe people end up losing a ton of money on some of these. Maybe they make a lot, you know, who knows? How much private equity do you want for your retirement account? I will have zero. Just like, whenever,

whenever, whenever somebody wants to sell me something and the reason why is that the people they're normally selling it to have run out of room to hold it. Yeah. I generally find that. I think that's the whole thing. Why are they going down market otherwise?

I think that's a big, big part of this, that it's like that it is a form of exit liquidity and it's a pretty immense potential form of exit liquidity in a previous life when I was working on the other side of the street. We loved private markets for this exact reason, too. You can't ignore the fees. The fees are what matters. And over the long term, the fees are compounding drag on returns.

I think I get all of this, but I think there's too much like, oh, this is going to be terrible for the end investor. I don't know that anyone's saying it's going to be terrible. No, I mean, what do you mean? We just are. The context of this conversation is this is bad. This is bad. People are to lose money. Like, that is the tone from everybody on Wall Street.

that's not working for these giant companies. That is the tone. Every blogger. I think it's more like you're going to underperform a plain vanilla investment. Every columnist. This is a terrible idea. This is expensive. It's exit liquidity.

This is going to end badly. I'm not that like a doomsday on this. Do I think it's like a great idea? I don't know. Maybe. I probably wouldn't say it's a great idea. But let me just say this. Most people are auto enrolling in Target date funds.

These instruments, these private equity, private credit vehicles will I'm assuming, find their way into target date funds in a reasonably allocated way. I think there will be some guardrails. I think that it will be the giants. It will be the blackstones of the world. It's not going to be a complete free fall in wild west in your 401Ks. I think for the most part, it'll be a reasonable allocation, number one. And then number two, the other side of why is this even happening?

These companies are staying private for way longer. Open AI will come public at a trillion dollar valuation, perhaps. Is everybody going to invest early in open air? No, that's not the point. But the point is, the private markets are growing. Private credit is huge and is displacing a lot of the loans that banks used to make. And it is an evolving landscape and it's growing and it's changing. So I understand all of the expensive exit liquidity.

I don't think it's going to be that bad. Do you think that you're going to see, so I know Vanguard is got an alliance with Blackstone? But 2020, you're going to see. products, but I don't think they're going to be as expensive as people think they will be. So, Vanguard got into the game with Harbor Vest five years ago. And I think actually, the introduction of a lot more spotlight on these things, fees will come down. That's what I think.

I think a lot of bullshit will get cleaned up. And yes, people will have bad experiences, obviously, like with every other form of risk-taking. But on balance, I'm not like, oh, my God, this is the worst thing ever. I don't think it's the worst. No, but I'm saying that's a very invoked thing to say. And I get why, but I don't think it's that bad. Do you think, do you think, you know, this is the kind of thing that will lead to, you know, an actual sense of urgency where finally they require financial education in high school or middle school or? No. No, that will not. I would just, my point would be we went through this already a generation ago.

They wanted to democratize hedge funds. And nobody won. Like, the retail investor did not get access to great hedge funds. Like, we know that was not the outcome. And the way we know is, or. All of these quote unquote liquid alternatives that were launched 15 years ago. None of them have good track records. None of them have raised a ton of money. There is a market for hedge fund like strategies. The best and the brightest managers of those strategies are not courting people with $5,000. So it's almost like a tautology, this idea of democratizing a sophisticated asset class.

But by definition, somebody that's got a great product is not like, how fast can I get these in the hands of regular people. They only want a very successful hedge funds want to work with the top, top, top investors. They don't want to have to educate investors in the middle class. Yeah, but there is a difference between hedge funds and private credit and private equates. It's not the exact same thing.

There is capacity with these hedge funds. It's a little bit different. But point taking, I, but listen, whenever anything needs to be democratized, of course your antennas go up. How could it not? Yeah, I mean, you know, how different is this from, you know, the last back boom, right? Like, at the beginning, it sounds really interesting and it attracts a ton of money.

Democitizing the IPO process. Yeah, exactly. And then when everyone realizes this is a disaster, then, you know, it disappears. So maybe this is a conversation that doesn't last very long because... Cryptocurrency in a 401K? Yeah, that could be a dangerous. That could be a disaster. Like for a million, I don't know.

What do you think is the... How did the crypto guys sneak in on this thing that Steve Schwartz has been not negotiated? At least the private stuff, at least you can't sell it. They bring a gold-plated Bitcoin to the White House. The average person will lose money in crypto in a formal K. Listen, if we as a society are taking a very permissive stance towards what I would loosely call speculation, then like this is a pretty logical end point of it, right? Crypto as a, you know, asset to qualify. And in some respects, I agree.

Like, is crypto any more speculative than a very small biotech company? When it comes to serving as a source of funds, perhaps, or recourse when you're applying for a mortgage. No, it's not. In a lot of senses, the only place that I worry is like the classic joke about crypto is like, crypto is just, you know, learning all the lessons we learned about the Fiat system and they're doing it on speed drive. Like, I would like the banking system, the traditional banking system, to not have to relearn lessons that we already know because crypto is getting, you know, sufficiently adopted and in, you know, places where there's either more leverage or consumer exposure.

You can't buy a standalone biotech stock in a 401K because the guardrails that exist are like, you're buying funds, fund administrators, they're putting in these menus of like very diversified funds. They're not really doing sector bets per se as like the menu. But now you're going to introduce like, okay, here's a Bitcoin sleeve.

You can either opt for it or not. I would imagine like most young people that have a 401k at work, and all of a sudden they could put 10% into Bitcoin, they're going to do it. Yeah, I mean, I think the, I think one of the bigger risks is this idea, this implication that because it's available in your 401K, it's safe. It's safe. Yeah, I agree with that. I agree with that.

That's like the unspoken thing. It's like, well, they wouldn't let me blow myself up with something in a 401k. Right, right. Not necessarily. It's the same with like all the big asset managers that are bringing crypto onto their platform. It's like that's when I'm going to invest in. It's a philosophical debate. Like, we view the 401k is sacred. Like, do not mess around. You can do whatever you want in brokerage account, uh, on chain, whatever, but not in your 401k. The other person would say,

well, why not? This is their money. Why can't they do what they want? Right. Uh, let's talk about, let's talk about the stock market. Um, we have a whole bunch of charts. Who wants to take over and steer us through what's going on? Luke, this is your stuff. Why this, this was the week that everybody posted the same thing. And I think it's not a mystery why. It's because we had the AI earnings reports and you had the shitty jobs report. And so this was the week that every content creator did the same thing. And Luke, you're one of those people.

But you did it very well. Absolutely. You did it very well. So the messaging is like the consensus now is that AI is powering the entirety of economic and stock market earnings growth. And everything else is kind of false. by the wayside. Do you agree with that conclusion or no? I think it requires a lot of caveats around it.

And, you know, caveats that I decline not to focus as much when I'm trying to tell the best possible story. But so a lot of the, a lot of story, I think you can summarize last week as the week where a lot of people said, AI is eating the U.S. economy and the stock market and it completely deserves to. Yeah. So that is where we have now set the bar. How did we get there? It's a combination not just of the jobs report, but I also I also think the GDP report, which, you know, then showed when you add up, you know, Q1, Q2, first half of the year, you have ancillary AI spending as broadly defined as overpowering consumption in terms of the contribution to growth.

Now, like, that's where one big caveat is needed, and that's where I would point to a company like Texas Instruments. Not AI. Not really AI. Really the more the industrial automotive. But it's going to show up in terms of a lot of the chip ordering equipment that was done in Q1 when a lot of people are fearing tariffs. So that's when actually the big spike in a lot of this was.

Oh, that's interesting. So people just equate anything semiconductor related with AI now. Yes. So that is part of the reason why it shows up so bigly in the GDP data. But the timing, Mike said, like it was just delicious and perfect. But I think the next part of the story is, okay, that's where we set the bar. We set the bar at it's, you have, you had Asia, you had alphabet, absolutely. killing. And then what happens when we've set the bar at? AI's the economy. It deserves to be

the economy. Amazon comes out. Nobody was expecting Amazon to go faster than Alphabet or Microsoft on the top line. And it's cloud business, no one was. And then all of a sudden, after servings apart, it's like, well, what are you done for me lately? You're number one, but you're losing market share, these other companies. So it's a bit of a double-edged sword in that I think the theme got a very, very big, very big narrative boost, and it's a little bit of a bird that's harder to clear from here. Okay. Show me these charts.

What are we looking at, guys? John, chart us. Chart us up. What is this? This has been one of my favorite charts lately. The blue on the right hand side is the annual change in consumer spending. The green line on the left-hand axis is the change in S&P 500 CAPX. year on year. One thing

you'll notice in this chart, and it kind of has a logical underpinning is you get capex booms for three reasons. One, it's the lagged effect of a big increase in consumer spending. Consumers want to spend a lot. We got that. Okay. So consumers want to spend a lot, so you have to produce more

second is a big boom in commodity prices. That tends to be more localized. That's, I would say, really no longer an issue at the S&P 500 level because of how small materials and energy are just as a share the overall index. So we can, like, you can basically throw that out. It's not happening, but even if it were not a great explanation for what's going on here. Is electricity a commodity,

though? Fair, fair, fair enough. I'll give you the, like, yeah, the, on the, on the data center side, that's, that's definitely filtering through on the S&P 500 CAPX. And the third reason is, our tax policy changes. So you do see, like, into 2017, 18 there, you do see a big jump in capx and, you know, that I would tend to associate with, with changes in tax policy. But what do you have here is a multi-year nearly streak of S&P 500 CAPEX accelerating as consumer spending decelerates. Like this is the- So this is it. This is the inherent tension in the market. It's how long, if at the end, all we care about is the end user, like the hyperscalers,

customers, by and large are everyone, right? But it's enterprises. Every large institution. Enterprises are people, my friend. No, they're not. People work at them. No, they're not. But then people are customers of that.

There's a K-shaped economy, which we spoke about in 2022, I guess, right? The K-shaped recovery, people with assets, people without. That theme has continued, and it's now inside the stock market in a big way. And I think, like, you can see this continuation of the S&P 493, no margin expansion, although maybe that's coming with AI. But I think that this is the biggest question. Like, can we, can the stock market survive a consumer slowdown on the shoulders of the hyperscalers?

And I think the answer is yes. It has been. So far, the evidence is completely in your favor. We're running at last six months, nominal consumer spending past six months up 1.4%. That's the slowest pace since August 2020 on a six-month change. And stock market seems to be doing pretty darn well through this time. Yeah, real consumer spending is actually down, I think, right?

But you know, it's weird. In terms, it's down. Like, there's such consumers are slowing down. They are picking and choosing, as they always do, but to a greater degree. Disney just had their record-breaking third quarter for the theme point. How many years ago would you have thought that would have vanished? Like, all right, like, they went to Disney. People got it out of their systems.

They still had a record at the theme parks. So people are maybe not spending on Chipotle Bowls. Now, I know it's like a different thing, a Disney World versus a Chipotle Bowl. But you hear from a million companies and they're all saying something a little bit different depending on where they are and where they fit in the value chain. Yeah, the anecdotes are not helpful. Yeah. Like they're spending at Disney but not spending at Nike.

Yeah. Or they're spending at Disney, but they're not spending at Disney. not spending out six flags. So Josh's MGM, Los Vegas strip, down 4% year on year. So, you know, that's a big one right there too. Somebody made an interesting point about Vegas. I forget who tweeted this. So forgive me for stealing this.

Like, Vegas is not the thing. People can gamble anywhere now. This is a, like, this is an artifact. We should not look to Vegas as a leading indicator. I mean, this is an issue with any kind of sort of historical context. Vegas is having its worst summer, though. Yeah. Yeah, yeah, yeah.

They literally have double-digit declines. And that's with the. But you're saying that's not the economy. That's new outlets for that gambling drive. That is a take that I lifted from somebody else. I thought it was astute. Yeah, I think that's about right. Well, they would probably, Vegas would probably say that.

Can I give you another astute observation? Where is this? Oh, wait, just one real quick thing, though, with, with, I think it's really important what you said. The key word here is growth, right? Like, responsible for economic growth, the economic growth story, responsible for the stock market growth story. It is still the case that the consumer is massive,

like, it's still 70% of the economy, whereas, like, the spending on AI CAPX is mixing old digits. It's 16 trillion of consumer spending versus 1.5 for CAPEX. Right. So if we're talking about, like, the economy, it's still the consumer. But if we're talking about what's defining the growth story right now, yeah, it's AI.

And the stock market, the earnings growth is coming from the AI Kappa X build. Even today, like the Dow is down triple digits. The best performing sector is utilities. And like the third or fourth best is tech. Like that's it. That's it. That's all one thing. There's nothing else working. So the stock market might be able to shoulder this, but can the economy? And then you probably not. My answer is consumer always wins, right? Consumer always wins. And the consumer either wins by being so bad that it dragged everything else down. Like I do not think you get the same rates of AI spending growth in an environment where the consumer is outright retrenching for a prolonged period of time.

You're right. There's no way. Or the consumer wins because, hey, like, we're getting some productivity increases down the road or now from this. The wealth effect is lifting consumer or supporting consumer spending sufficiently in the near term. You can make the case that, you know, as long as that coasts, that there's room for effectively there to be a decent floor under AI spending. But, like, the consumer will always win in my mind. And that's why, like, the consumer will always win in my mind. And that's why, like, so many people pay so much attention to myopically consumer labor market because that is going to be, in the end, a huge beta driver.

So I want to caveat what I said earlier. If there is sluggish spending, I think the stock market can survive. If it falls off a cliff, then of course, I mean, not of course. I don't think it could. All right. Brendan Duke tweeted, I've seen a lot of takes about how AI-related investment is preventing the economy from falling off a cliff. He said, I think this is wrong.

In a still strong economy, my guess is that less AI investment would mean lower interest rates and, for example, more housing investment. I thought that was a good, I thought that was pretty clever. Because the stock market would stop going up and the Fed would feel better about cutting rates? Absent the hyperscaler spending, you would have a slower stock market and perhaps slower growth rates and then, therefore, a stronger impetus to cut rates, which would maybe spur the housing market. I thought that was interesting. Except that the Fed is not supposed to be paying attention to the stock market.

Right, right. So. But they broadly pay attention to financial conditions, whatever that means. But, I mean, I'm sure that the wealth effect of a sluggish stock market is going to affect a person's desire to or ability to buy a house, right? I would agree. Let's do chart two. AI spending is eating the U.S. economy. So walk us through what we're looking at here.

Yeah. No, that's, it's, so it's spending in green on infrastructure. processing equipment and software. So again, broadly defined. There's going to be a lot of semi and computer equipment in there that is not necessarily purely AI, but you know, you have to aggregate or disaggregate somewhere. That's the decision made here. And this is, I was on the phone with Neil while he was making this tweet and this chart.

And it was just like, I'd really want to show how much AI is juicing the economy. Neil Cavuda? Neil and Neil Diamond. So this is personal consumption expenditures in blue. So it looks like a nosedive. I don't know. It could bounce from here. But like, yeah, yeah, I'm not, I'm not going to do any TA on, on the economic data.

No, it broke support. But, hey, like the, this is the story of something that, that green line in, once you aggregate, it's 6% of the economy. And it's adding more to growth than something that's 70% of the economy. This is very rare if you, like, go back and even just want to sum up, like, residential investment. and consumer spending, we're running a lot closer to the lows of what we average through 2022 in real terms than even what we got during the new normal, which was this perilously slow time of, like, we're never growing fast enough, we're never generating enough inflation, yada, yada, yada. So, like, it's a, it's a bit of an about phase just in the composition

of economic growth. And I think it leads to the question that is the Q3 question. so is a slow down in consumer spending is that uncertainty about tariffs or and we're now prepared to bounce now that we have certainty of what might not be the best situation but hey at least you know or is it the impact of slowing income growth and a bite from higher prices that will continue and perhaps accelerate in the card is the latter it's prices have not come down right they have they're not rising as fast as they were a few years ago I think prices are down 8,000 percent. Yeah.

Prices, right. Prices will not come down stubbornly, staying high. Some are still accelerating. And people aren't getting the wage growth that offsets it anymore. And their biggest investment for 55% of the country, all of their net worth is tied up in a house that is still difficult to sell. And you have job creation screeching to home. Right. And now we're averaging 35,000 new jobs a month for the last three months.

that's new because last year it was still gangbusters. So you have a less confident worker base. You've got homes that can't be sold. Prices are still high. And most of this tax reform that we just saw was just an extension of what already existed. It's not really a stimulus. It would have been a negative stimulus had they not extended it. So like, yeah, the consumer is the consumer is running on, I mean, not running on empty, but like running on fumes, for sure. Yeah. A lot of those drivers are just not there. Running on empty is a great song.

Josh, now is a good time. This just dropped. We announced the feature-proof musicians. Oh, it's out? It's official. All right, let's do it at the end of the show. Let's hold it. Let's hold it.

I'm curious. All right. What's this two cyclical pillars? Put this chart up. This is what I was just talking about. Stoll this from Conner's Head at Peach Creek Investments. And this is just the average quarterly contribution to GDP growth from residential investment and consumption during different periods.

So 20, 25 year-to-date, those two things that, you know, hey, Ed Limer wrote the famous paper, housing is the business cycle right before the housing market crashed. So very good timing on that one. Consumer spending, we all know a huge chunk of the economy. Adding a half percentage point to growth on average, we're very close to 2020 when it was about 22 basis points added to growth on average. And again, doing so, so much better and steadier during a completely. slow growth era. I really do think this underscores just how precarious the real spending

and the frozen housing market is for the U.S. economy because I think for these things have to change, you have to either think that job and income growth will pick up or long-term interest rates will go down a lot. But interest rates are going to come down. So what if we get this beautiful handoff of the consumers slowing down their spending and then all of a sudden we get a housing boom? It's not inconceivable. Not at all. Not at all. The thing working against that is we've already cut rates a few times and bond yields went up. Why did they go up? I would argue a combination.

I don't. Well, there was one rate cut, right? And a year ago? We got a few. Like, we're down, we're down 75 days. Of the peep. So where mortgage rates now at like 6.5-ish, 6.3? If it comes down under 6, I think you're going to see an explosion.

I just feel like, though, in the bond market, there is a, Trump premium in the front end because there is the idea that whoever the incoming Fed chair is is going to be more predisposed to Fed cuts. That's something that predates the, you know, the kind of recent bad jobs report that's caused a lot more pricing to get pulled forward in terms of rate cuts. It's going to be Waller. I mean, I certainly, saying it's time to cut. I hope so. So there's that. There's a Trump premium in the front end. There's a Trump discount in the long end, right? Like, it is more difficult to own U.S. bonds in a world where the administration has talked about taxing capital flows more, where there is more inflation risk because of some of the

measures that are being pursued on tariffs. So 70 to 75% of the time, the two-year yield follows the 10-year yield. We haven't been doing that for a bit. And we have some policy reasons why. Generally, I would expect that to be right. Mortgage rates to come down on Fed guts. But we've run this experiment pretty much over the past eight months. And it has really happened. You think we could have 50 basis points worth of interest rate cuts between now and the end of year and the mortgage rate doesn't fall? Is that possible? That's not great.

I think that's possible. Again, I'd go with the 70% heuristic, but like, I have to acknowledge what we've just lived through and the possibility of that repeating itself. And there's still, you know, inflation out there, too. So like, what if we are cutting rates, you know, with tariffs out there? Well, I don't think the interest rate causes the inflation that exists. So I have this, I have this huge disagreement on. on that with several people that they think, like, the Fed can wave a wand and create either

inflation or disinflation with a Fed funds rate. And it just, it's not the thing. So right now, if you ask, like, why is there still inflation in the system? I don't think it's because rates are too low. Like, I don't think anyone would say that. I think it's just a situation where we don't have layoffs. We have baby boomers retiring or being retired, but we don't really have, like, mass layoffs, that's the only way that you would actually get disinflation. And we just don't have it. Part of that is no immigrants in the labor force. Part of its policy decision. And part of that is just the demography of the country and the types of things that people want to do for a living. So it's like, if you really want disinflation, be careful what you wish for. You need much,

much lower employment. I don't think the Fed can really do that. So I don't know. If I have one regret, if I have one regret from the pre-pandemic cycle, it's the myopic focus on O'C.E is 1.8. That means the Fed needs to ease policy because we really need to get that up to 2%. They can't do that. The idea that there can be fine-tuning, the idea that there isn't an acceptable range, like for me, I think it's Greenspan who said it,

but like inflation is a problem when people think it's a problem when people are talking about it when people notice it. I think there's a pretty decent range in which people don't notice it, and that's oftentimes the best you can do. Right. And it's not a thermostat. It's not the Fed can't dial it in what they want their like inflation targeting. Like they actually don't have the power to do it because they have nothing to do with the housing market other than the rate of mortgages. They can't make more houses. So if you think like shelter is this like sustained cause of inflation, what do you really want the Fed to do about it? You want them to crash the housing market? they can't fine tune what the inflation rate is.

They also can't print more people. So if labor is the cause of inflation, what do you want them to do about it? To go back in time 20 years and create more births. It's like almost a ridiculous concept. I understand they can hurt it or help it a little bit. But like in the end, they're not as powerful as we thought. They tried to create inflation for 12 years.

It couldn't do it. It rates at 0%. Still couldn't get inflation. So I just, I find that whole conversation where we're like ascribing magical powers to 12 people who decide the overnight rate. Could the Fed cause a crash? Yeah, totally. But they can't fine tune the rate of inflation that they want to say. Show me this AI didn't hear no bell chart.

This looks unsustainable. This is what I do think this shows is two things. So this is the year over year change in the forward. CapEx estimates for hyperscaler. So, you know, where CapEx will be in one year's time, change over time. So that's Amazon, Oracle, Meta, Alphabet, Microsoft. What I think that shows two things. One, that there is some implied economic sensitivity to CapEx estimates.

The only time this rolled over was when, effectively, the Post-Rose Gordon scenario. You're right. So the market assumes that AI spending is economically sensitive. that's like let's let's take that as a given that's something i would stipulate from this chart the second is it bounced right back up and probably has you know a little further to go perhaps in the near term but you're right back up to the same rate of growth of more and more spending now that in itself is not what happened here when it dipped what happened when it dipped well we got a policy reversal or a temporary policy reversal or a temporary investor so we're just

looking at the share prices of the five biggest spenders not the share prices the estimated capex, what they'll spend in capex over the changes. So the analysts lowered their estimates on capex spending that fast? Yes. And then raised it right back up. Yes. Hysterical. Yes. Like this is, got it. But I do think this is a dial that, you know, both tells you, hey, AI CAPX is going to be economically sensitive. And also we're law, law of large numbers, not to Andy Jassy it up, but law of large numbers is not applying yet in this instance, that you're still getting pretty immense increases. It will in the growth rates, though. It would, like you can't, like you can't, like you can't.

triple and then triple again and then triple again. Like at a certain point, you won't be able to see that level of cap X growth percentage wise. I don't know where that is. No, no, I exactly. I don't know where that is. And it seems to be longer than anyone had expected. I also think a pretty slept on story is just the OBBA, one thing it did do is some of the changes to effectively how free cash flow will be treated. Yeah. Incredibly beneficial for these companies. So if you think about how the expense the expensing of the buildout full expensing some changes around a plant that's put in place this year full expensing of that as well and some changes to the treatment of foreign taxes that effectively unlocks hey if you needed to tap debt markets for xyz well you don't really

have to do as much the need isn't as great i don't think there's any lack of desire uh to finance projects related to ai out there but it's just just another window that will allow this to go on for a lot. All right, we've been 40 minutes on this topic. Is there anything else important that we want to hit on any of these other charts before we move along? I mean, there's a lot. There's a lot in here. It's all the same.

Nah. They're spending a lot of money. TLDR. Yeah. Line go up. Yeah. Okay. Okay. Now, I do want to hit the debt. Let's pivot from AI to AI. Yeah, no. I do Wait, what else did I definitely what else that I definitely want to get to? let's see

Golden Apples Oh One more chart for me If you will On this topic Paul Kodroski Full On said This is a bubble

And he made A couple of really Interesting points That I hadn't read Or heard elsewhere But let's put this Infrastructure CapEx As a percentage

U.S. GDP by era All right This is the railroads Of the 1880s Telecom It says 2020 but I'm not sure if he meant 2000. This is data from Yens Nordvig, who's also been on the show.

And then AI data centers. So this is infrastructure CAPEX as a percent. So he has AI data centers as 1.2% of US GDP right now. And for the people listening about watching, the railroads at the peak of their bubble got to 6%. But Kodroski makes this point. Let me read this. Compare this to prior KAPX frenzies like railroads or telecom. Peak railroad spending came in the 19th century.

Peak telecom spending was around 5G fiber frenzy. It's not clear if we're at the peak yet or not, but we're up there. These are raw KAPX numbers, unadjusted for multiplier effects. In other words, just the purchasing and building of that stuff. And one of the things he points out is like, if you lay railroad tracks, it's pretty durable. you end up with something that's still usable 30 years later at the rate at which these chips are like useful and then oh no there's a new generation there's a new generation I don't know what the long-term effect is of a lot of this equipment that we're spending money on like what like

what what becomes of a situation where a lot of this stuff becomes obsolete so that's one element of this particular capex you can call it a bubble or not versus some of the prior ones when we laid all that dark fiber 25 years ago, it was still usable. It just took a while before there was an actual use for all that video. Any thoughts on that? You know, maybe this is really great

for the earnings of these companies because all this shit has to just continue to keep making more shit. You have to keep making more and it keeps getting upgraded. It's a nightmare for people who have to pay for it. Maybe that's what keeps the economy going. All right. All right. We're good on that.

But wait. What else do you have? What are these railroad charts? Are we doing these? Should we throw these end? Oh, yeah. I think we're, it's, again, it's all, like, kind of the same story. But so a different sort of angle on this.

Instead of, like, talking about how massive all this stuff is, what I take away from this is, is it's possible for there to be an industry that completely takes over the economy, the stock market, the growth narrative, or whatever. And maybe a couple years from now, we're not talking about AI infrastructure. And that goes away. But I don't think that necessarily means that it's the end of the stock market, and the economy or whatever. Like something else is going to eventually emerge.

So that's just sort of the short version of this. And the chart after this was, you know, sort of another, or I guess after this one, is another angle on this, you know, this whole idea of, you know, stock market dominance. No, next one. Look up. Oh, this one? Yeah, stock market.

That's another one too. But this one, I think, is interesting in that, you know, this was a study that was cited by a Goldman Sachs research note a couple weeks ago. And basically, the story here is, actually, I have the exact stat here. 60% of workers today are employed in jobs that did not exist in 1940. 60%. 60%. So over 85% of the employment growth over the last 80%?

years is from technology-driven creation, new positions. So the story being that, you know, in the process of emerging technology, destroying all these jobs and, you know, creating this nightmare for the workforce, it also figures out a way to create all these new opportunities for people. So, again, this is just for the people who, you know, feel like there's some sort of doom story coming with AI. And maybe there is a doom story. but the historical record is

whenever there's something that destroys jobs, something else comes through on the other side. I don't know. I think we're seeing it already. You look at the last couple of jobs reports. I just don't think it's... I just don't think it's coincidences. Yeah, no, I think short term,

it's absolutely going to be a nightmare. Yeah, we'll create new jobs. I don't know when, though. Yeah, yeah. I don't know when. I mean, and it has to happen because, you know, if there are no people who are employed to buy stuff, then none of this stuff matters. Do you worry about this? I've been now tested directly against AI by multiple bosses in very different careers.

So far, I've won both with flying colors. I don't know if I'll always keep winning it. But on the investing side and to Sam's- Do you have about this for like the country, for like society? Like, do you think that, because we, last week we did a show and we looked at the rate of college graduate hiring and it's way down. Like kids right out of school, you would think those are the people that. that are most likely to be replaced by AI would be like a recent college grad.

And it's exactly like what people feared. Like they're just not being hired at the same pace. Now, I don't know if that's cyclical or if that's the AI revolution or maybe a little bit of a mix of both. So I'm curious like what you think about that. It's incredibly difficult for me to disentangle that with like some of the trends that were in place.

I think well before AI was really getting up and running. We've had a low hiring, low firing, job market for years now. Tough for me to disentangle. I await with interest, though I don't look forward to. Whenever the next downturn is, companies are always making decisions on OPEX.

But that's a common sense, just say that like the new entrance, the, what's the first job called? Entry level. There we go. The entry level positions, maybe we don't need those anymore. I mean, that's like the deathly night there.

Anecdotally, it sounds like, yeah, that's absolutely the case because there's at least an economic justification for, you know, entry-level person because they can put together a draft of something that you don't, like, do work that you don't want to do. They're the least useful employer, and now you don't need them. And what happens when you don't need young people? It's catastrophic. And I don't want to go there, but how could you not start thinking about that?

You know, you're perpetuating your own demise when you do that. Yeah. I agree. But you think, like, it's too early to say if we're already seeing the effect of it? I think there's the, the companies who are adopted. opting it the most aggressively are still basically saying, hey, we've done this and we've slowed hiring, we've frozen hiring, the use cases of companies that are out and out saying,

we've cut jobs and it's because of AI. Those numbers are still. There are a couple who are still willing. Klarna said it, but then they reversed themselves. You know who's not going to ever say that? Amazon will never say it. Because politically, why the hell would you say it? It's a crazy thing to say.

Like, good news, we no longer need to hire for the following positions ever again. Like, no one's going to really, a few companies are saying it because they're pre-public, like, they're like pre-IPO, and they sort of have a window where they can be honest. Elon would say it, if it were true. Yeah. Well, all right. So we don't, but we don't think that's definitely, I don't, I'm starting to think it's like sort of very much. I think it's obvious. All right.

Let's do this thing from J.P. Morgan. What did you guys think about the commissioner of the BLS getting fired? I mean, I think it's been pretty well argued that it's not great. Somewhere between not great and terrible. Why? If the person's not doing their job, you get rid of them. Yeah. So I think since everyone kind of agrees on that side, I'll go on the third rail and sort of try to advance what some of the

counter-arguments are, like the decent counter-arguments. Dahlio said that the lady should have been fired. I don't know if the person had to be fired. I don't know what process had to happen to get to whatever the endpoint is, but there seems to be a lot of arguments to be made that there is a way to overhaul the process and the workflow and the way they analyze the data so that it becomes more tight and more efficient. Yes, only Republicans can count jobs from now on. That's the way that they want to...

In other words, if you are an appointee of a previous president and that president wasn't Donald Trump, you can't be in that position. That's like the irony of the announcement, like him accusing the former commissioner of being, you know, tainted politically. But he's going to replace them and, like, it's not going to be a tainted position anywhere. Hey, any projections on next month's jobs number?

It's going to be amazing. Revisions, upward revisions all over the place. Michael Faroley from JP Morgan. What is there? Potential politicization of the Fed has been much discussed over the past several months, but the risk of politicizing the data collection process should not be overlooked. To borrow from the soft landing analogy, having a flawed instrument panel can be just as dangerous as having an obediently partisan pilot.

Here's the part in bold. As users of these data sets know, even small changes in the market share of private data providers can distort the signal on the national economy. The $2.1 trillion market for tips, that's treasury inflation protected strips, is built on a foundation of trust in the construction of the CPI data, which is produced by the BLS. As such, the integrity of this data is at least as important as the employment data. So now you had a whole raft that people come out and say, well, we never believed in this data and the quality of the data has been deteriorating because it's a lot of it's survey-based

and people just don't respond to the survey. So the amount of people contributing to this data is down. And now you add on a layer of, well, Biden appointed this person who's responsible for the official tally. Therefore, it's bad data going in and it's a fucked up politicized conclusion being drawn as a result of it and I have to fire somebody. Okay, I feel like we could do that once.

Are we going to now go through every single data point that the government collects and fire the person who's in charge of it? Because I don't think the market's going to love that. What do you guys think? Well, if AI spending goes up, no, I won't make a return to that. AI data collection. If I'd pose like a couple of rhetorical-ish questions, do you think you could collect? Oh, the Socratic method.

I love it. Let's do it. Do you think you could collect, like, accurately collect data on how many jobs are changing in a month in an economy with, you know, a couple hundred million jobs? I don't think I can. I think most people who would say yes are delusion. says, my partner Barry says no. Exactly.

It can't be done. Exactly. Two, if you think you could, would you like more information to do so or more money to do so if given the opportunity? I think most people would answer yes to that. So do one of those two things. It's not just the response rate that's been going down. There's also been funny cuts in this regard. And the response rate is down.

You can mandate responses. So you have less need to revise. A big reason for revision is responses come in late. But you can't mandate the quality. What are people like, uh, click? Well, we already, the quality is already suspected to seasonal adjustments. There's like, um, like we have ADP. So we have like private providers of payroll data.

I, they don't diverge that much. The BLS stuff and the ADP stuff, do they? On a year on year, they don't diverge. But there's a, it's, it's almost a joke now in markets. If ADP beats, you know NFP is missing. Like, it's just, it's just happened too many times in a row. So it's now just a fun joke to tell. But over time, on the private.

Directionally, they do the same thing. On the private side, year over year, they track pretty darn closely. Like, it's there. I don't know if this. I thought COVID would be like the golden age of alt data. I hope this doesn't spur the need for another one. But like, that's still a TBD. I'm actually, I'm getting breaking news now.

It looks like the new chief of the Bureau of Labor Statistics has been announced. So Scott Bayo. So I don't know if that affects any of your. All right. Can we talk about Joe and Tracy before we get out? Yeah, let's let's do that now. How proud of Joe and Tracy were you guys when you saw them this Sunday on the cover of the New York Times Sunday business section? I was so, I was like so excited for us and for like our little world to, I mean, to see them get that recognition.

Did Joe hire you? Jill hired me at Business Insider in 2011. For those who are not sure what we're talking about, the Odd Lots podcast was featured. The New York Times and the co-hosts, Joe Wisenthal and Tracy Allaway, friends of ours, and people that I think represent what we all do out here in investing in economic podcast land. Yeah, I think what's great about this is I think we all listen to the podcast and it's really good. Yeah, it's great. Every once in a while you'll see like, you know, some random piece about someone you've never heard of

and then you download it and it's just garbage. But like this is, this seems very appropriate. And yeah, absolutely, I'm proud of these guys. And you worked with, was you at the FT with Tracy? No, I, uh, I worked at, uh, B.I with Joe, and then I worked at, uh, Bloomberg with Joe and Tracy for, for a while. And like, God, it is, it is amazing to see them get recognized for their amazing work. What this piece and no piece will ever capture is how many people they brought along the way. It, it never will because it would take, you know, how many

sections of the New York Times do that. I don't know. Joe is someone you can learn from example from incredibly well. Tracy is someone who will take the time on every piece, not just to give you a fish, but to teach you how. In every case, she's made me such a better reporter. I've been so lucky to have these two as mentors as a business. They're absolutely amazing people. I literally sat across from Joe for years. And I remember there would be times when like, you know, an intern or a junior person would sort of like creep up behind them and then ask him if he would take a look at a draft that he was working on. Yeah.

And every single time he would turn around and be like, hey, how's it going? Oh, yeah, sure. I'll take a look at it right now. Send it to me right now. He had time for everybody, no matter how busy he was. Leadership, that's how he became the, like, Henry put him in charge of the newsroom. Yeah. Because he had that quality about him.

Like, he was there to make sure the finished product that they put out as a newsroom was, like, up to speed. Can I tell you my favorite business inside a tweet of all time? I think. Do you know what I'm going to say? I'm not sure. There's a lot of them. I'm actually really worried. I'm nervous about this now.

I'm nervous about this. I think Joe tweeted it and it was a video of you watching the World Cup. You might have been eating food. And it was like an insane, it was an insane play. And you just very calmly said, that's a nice goal. Yeah. Do you remember that? Yeah, those were good times.

That's not the best business. We spent a lot of times. No, for me it is. Like, I just, that stands out. Those are simple a time. This is the best business insider tweet ever. And I think it's dates back to cluster stock. That's literally what the website was called.

This was unforgettable. Henry Blodgett tweets an article that he wrote, article, L.O.L. A column, I suppose, or a blog post. Why do people hate Jews? And Twitter exploded. Like, just like these days, actually, you would be celebrated. This escalated quickly. Yeah.

Why do you hate Jews? So wait, he fixed it. So he went back in, you're laughing, because you know what he did. He changed the title. He changed the headline. It says, why do some people hate Jews? And then that made it even worse. And then it was what are the root causes of anti-Semitism?

Anyway, well, well done, Henry. I don't want to add too much for that, but this is the inside, sort of an anecdote from that period. Yeah. So the business inside our newsroom was in basically something the size of an auditorium. Yeah. Very tightly. I was there. I came to hang with you guys.

It's very noisy. There's a lot of typing. People are yelling. When that post went up, dead silence. And all you can hear, all you can hear were keystrokes. And people opening their seltzer. Everyone was G-chatting everybody. Yeah, because of the boss.

And he stands right in the middle of the newsroom. We'll say in Henry, just in general, Henry Blodgett defense, tall man standing in middle of newsroom at standing desk, clearly a running the company and B contributing to the editorial product best management style I have ever seen undefeated Undefeated

Did you guys know Did Henry start reinvesting his dividends yet? I think he's okay on that end Okay, probably But yeah no Financially he will recover

from not reinvesting his dividends But yeah no he was great That was the first time I was in a at a company where the CEO was right in the middle of the newsroom with everybody else doing this exact same thing. All right. Shout to all the B.

Oh, Tracy. B.I. They have the biggest coaching tree of any reporter. Can we put this photo off? Huge reach. This is Joe and Tracy at your wedding, Luke? Yeah. When did you get married?

Got married in, I should get this right, uh, 2023. Is Tracy pounding a corona? Uh, yes. And not a Corona light. I love her. She literally is the best. And Joe looks like he's mid-dance, maybe, perhaps. I went to Joe's house in the Hampton's last summer for his birthday party.

I was not there. I was not there last year. I've been there the past couple before that. All right. So here's what's cool about, here's what's cool about, Joe. So I'm walking around the party. I don't really know anyone there, right? And I can't spend that long.

So I'm there for like an hour. But I spoke to like a lot of people there. People come up to me. And it's always like, how did you meet? Like, how do you know Joe? He makes friends with everybody. Like, these are people that are like, oh, he used me as a source on a story seven years ago.

Or I sent him a DM and wished him a happy birthday. last year, and he remembered me and invited me this year. Like, Joe is the true every man covering economics, which is mostly covered by extremely elite kind of academic people who don't touch the crowd, don't

get really deep involved in the subject matter, kind of look at spreadsheets. Joe, like, puts people on the show. Who do you have on the other day? A guy that makes pizza in Midtown? Right. Like, I think that's why the show is so lovely. And he had a baker. Yeah, yeah. They go, they go very, very narrow. They're the best.

One of his, he actually, this is, I guess, last thing I'll say, he had a birthday party once at Business Insider, where he actually sent out, like, a tweet and a Facebook post and just had it open to everybody. He said, anyone who's going to show up, we're going to go to this Chinese restaurant, and we're all going to have

dinner here. And I think there must have been, like, 80 people show up to this. I think about how insane that is. Yeah, and splitting a check with strangers. Are you insane? Yeah, yeah, yeah. And somehow it worked out. All right, guys, this has been so much fun. Thank you guys so much for being here. We always end the show asking people what they are most looking forward to.

So this could be anything. I'll go first. Dinner with Warren Buffett. I can't wait. That's could be awesome. Living or dead or alive. Well, how'd she ask you? Either way.

I don't know. Living or dead. Who do you? I'm trying to be alive. All right. What do you look in forward to? I'm doing some late summer house cleaning. Yeah, good timing.

I'm throwing crap out like crazy. I'm turning into a full minimalist. Okay. What could you throw out? Clothes? There's definitely, there's way too many random t-shirts. There's too many random pairs of shoes. There's too many, there's all kinds of kitchenware that I only used once.

I mean, I'll give this stuff away. I'll donate to Goodwill, give it to friends and stuff. How many ladles do you need, right? You only need one. You only need one ladle, man. What are you looking forward for? Yeah, what are you throwing away? I'll do a two for.

Okay. First, Neil Duda getting appointed to the Fed Board. That'd be nice looking forward to that. But on a more serious note, I, Just note, a very, very delayed honeymoon planned for, for 2026 going out on safari, still very in embryo, but I am a lion lover, lion tattoo, have a parallel screenplay for the Lion King planned at some time. I could not look forward to that more.

I think it's going to be an incredible adventure. What country do you fly to? It is that embryonic that... Okay, you haven't figured that out. You have to get shots for that, too. Yeah. It's like a lot. It's a big thing.

All right. I've never done it. I've never done it. And you never will. I don't think I ever. I don't think I, if you met my wife, you understand. You'd show where you're going on a safari. No, it's never going to have.

Maybe six flags. Animal freedom. I'm looking to going back to my bubble on Monday. I'm going back to Boka. And I need to kind of get away from it all. The pre-future-proof warm-up. Oh, you didn't. You never close the music guest.

There you. So I've been, I've been requesting this for years. Yeah, this is a big one for you. I agree. Bush. All right. Bush is a headliner. Dram roll, please.

All right. No, you can do the opener because this is your, you, so, Bush is the headliner, and you might, you guys might not know this. The opening act, wait, slow down. Back up. Literally. They don't even know what you're talking about. All right.

Stop. They do. Future proof. They heard us. So there's a musical act. Bush is a headliner. And the opening act, Josh literally discovered them. They were like, Josh was walking in Merrick.

Invented. And he saw them in somebody's garage. He said, you guys should. should be a rock band. That did not happen. Oh, I know who this is. Wait. Josh invented them.

Go ahead. Tell the story. Let's back up. For people that are listening, have no idea what a bush is. The band Bush is going to be the headlining act at Future Proof festivals. Why are you infantilizing the audience?

They know what I was talking about. Not everyone listens every week. Some people listen to the first time. We got Bush. All right. Wait, wait. Who's the headliner again? Oh, my God.

The headliner is, A band called Bush, and the opening act is Blues Traveler. So what do you think about that? I remember hearing your story about Blues Travel. That's amazing. Yeah, dude, that's my story. I pretended that I invented Blues Traveler. It's not a real story.

All right, guys, if you are working in finance or wealth management and you weren't sure whether or not you're attending Future Proof this coming September, now you know that you actually are coming. and we're going to get Michael up on stage at one point, I think, to accompany Gavin Rostale on glycerin. Absolutely. Can we do that? Yeah.

All right. Duncan, you psyched for that lineup? I am. I'm more of a blues traveler person myself. Yeah. I think both are going to absolutely destroy. I think it's going to be an amazing night.

Yeah. So that's the Tuesday night of Future Prove. All right, guys, this has been so much fun. I want to tell the audience where they can follow you for more of your. writing and insights. Sam, we did you, the ticker. If you're not subscribed to the ticker, I don't know what you're doing. Sam, what's your handle on Twitter?

At Delta 1? That's right. D-E-1, T-A, yeah. Are you Walter Bloomberg? Wait, X.com slash Sam Rowe. Yep. Okay. Luke, where do we follow you? How do people get your insights? LJK-A-W-A everywhere, pretty much.

And Sherwood, surewood.com. We got a lot of great folks, not just me. A lot of folks a lot better than me. are killing it. A lot of breath and very impressive. Yeah. Shout to Sherwood and follow at LJ. Kawa everywhere on all social platforms and subscribe at Sherwood. News. All right, guys, thank you so much for being here. Thanks to the audience. Please like and subscribe and we'll see you next time. I don't know.