The Pomp Podcast - Chief Economist: Inflation Has Peaked — Here's What Happens To Bitcoin Next | Stephanie Roth

Episode Date: July 15, 2026

Stephanie Roth is the Chief Economist at Wolfe Research. In this conversation, we break down whether inflation has peaked, why tariffs, AI chip shortages, and the Iran war are driving short-term prices, and why consumers feel poor despite a resilient economy. We also cover trust in government data, incoming Fed chair Kevin Warsh, the 2026 IPO wave, and the bitcoin and gold debasement trade.==================Award-winning Fountain Life - Energy supercharged. Memory sharper. Life extended. Ready for the best investment you’ll ever make? Schedule a life-changing call at http://fountainlife.com/pomp Get $1,000 off the cost of a life-changing membership with Fountain Life when you schedule a call at https:www.http://fountainlife.com/pomp==================Arch Public is an agentic trading platform that automates investment strategies across Stocks, Commodities, ETFs and Crypto. Whether you’re rotating into AI & Gold, allocating to the S&P 500, or accumulating Bitcoin, Arch Public executes your plan 24/7 without ever taking custody of your assets or funds. Sign up today at https://www.archpublic.com, and start your FREE automated trading strategy!==================Simple Mining makes Bitcoin mining simple and accessible for everyone. We offer a premium white glove hosting service, helping you maximize the profitability of Bitcoin mining. For more information on Simple Mining or to get started mining Bitcoin, visit https://www.simplemining.io/pomp==================0:00 - Intro1:03 - Has inflation peaked? Tariffs, AI & energy price drivers5:14 - Why consumers feel poor despite a strong economy7:43 - Can you trust government economic data?13:54 - Housing affordability & why NYC rent hit an all-time high17:43 - Return to office, commutes & worker productivity21:37 - Kevin Warsh takes over the Fed — what's changed?30:57 - Could the Fed cut rates to influence the 2026 election?35:42 - The mega IPO wave & the AI bubble question41:32 - What happened to the bitcoin & gold debasement trade?43:00 - What keeps a chief economist up at night?

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There was real concern that AI was going to take over the labor force and we were going to get a big rise in the unemployment rate. And it didn't pan out that way. And I don't think it necessarily will. I think the way it will pan out is people will gradually become more productive. Perhaps some job openings won't get filled because, you know, they realize AI can maybe do some of that work. And then new jobs will be created as a result. And it will just result in an overall a better economy, better labor force, one where it's more productive, unit labor costs come down or sort of the costs associated with production. And that's where you get further disinflationary trends. What's going on, guys? Today, we got a great conversation with Stephanie Roth. She's

the chief economist at Wolf Research. And we dig into what is the impact on inflation coming from AI? What's happening with the IPO wave? And we get into a little bit of a debate. Are we going to see higher inflation, lower inflation? What's going on at the Fed? Is Kevin Warsh going to tell us what's going to happen in the future or not. There's a lot of nuance in this conversation that I think is really going to strike a lot of you, help you better understand what's happening in your life when it comes to spending, but also what's going on in your investment portfolio. Here's my conversation with Stephanie Roth. All right, Stephanie, let's start with talking about inflation. I think everyone thought inflation was going to go sky high. Everyone

was worried about energy prices, the Iran war, and a bunch of other things. But now we look, and at least the official numbers are turning over and starting to come down. It looks like inflation may have peaked. What's your take? Yeah, our thought is that inflation was going to peak around this time of year. Then you're going to have a bit of a slowdown in the summer, a couple of things happening. Tariff-related inflation is coming down. The AI-related inflation will probably start to cool. And then even if gasoline prices pick up a little bit from here, the Iran war-related inflation is also going to cool too. So today's CPI data came in much softer than anyone expected. It came in at flat. Forecasts were all looking for

0.2 or above. The Fed was getting ready to potentially hike in July as a result, And that's nearly off the table. So the picture looks a lot better than where it's been. It's not good, but it's looking a lot better than where it's been. So let's take each one of these. Do you think that there was tariff-related inflation? Because I'm of the belief that tariffs were not inflationary at all. They're actually deflationary.

It shows up in the data. If you look at core goods, they were running over 2% year over year. Typically, we have core goods deflation, disinflation. So we measure that it was adding 50, 60, 70 basis points on inflation. But that's starting to peak because we're now past Liberation Day. So there were goods components that did see price inflation. You know, you could argue it wasn't related to tariffs. I think it probably was. But it was certainly less bad than people thought it would be. The expectation it was going to create this, you know, inflation type spiral and feed through into, you know, across the entire goods sector and then to services like that didn't play out. It wasn't the worst case scenario, but it does appear to have shown up in the data to some extent. Okay. And then you mentioned AI inflation. My belief is that AI, at least over the long run, definitely is going to be deflationary. But where's the short-term AI inflation coming from? Yeah. And I agree with you in the long term. In the long term, it should be disinflationary. I'm a big believer in productivity in the long run being a disinflationary force because companies will save money and therefore they can pass it through.

For now, you're seeing it show up specifically related to the chip shortage. So in computer software and accessories, like some components within the inflation basket are up about 15% year over year. That is filtering into the data. Do I think this is going to be a problem in the medium term? No, but it's just on top of a couple of other sort of one-off factors that are feeding into the inflation data that are making it high. Now, it's not going to continue to rise at 15% year over year into perpetuity, in which case that inflation will start to fade off the data probably in the middle part of this year.

Now, when it comes to energy prices, I think that I'm full on board. Hey, if oil prices spike, obviously, there's going to be this like push through. You see gas at the pump going up. Now, all of a sudden, a barrel of oil, though, has come down significantly. And it feels like maybe it's finding some sort of equilibrium where maybe it's like the new gas price or the oil price that we're going to see, how do you guys look at that impact on inflation and whether it's just like a short term impact or there's going to be some sort of long term, you know, kind of effect to actual inflation because of those

energy prices? Yeah, I think it'll be I think it'll be short term as long as the war doesn't escalate in a material way, which, you know, the signs right now are not in a great direction. No, but nobody even knows if the war's on or off. Like if I walk out on the street right now and ask 20 people, is the Iran war on or off? Literally, I do not think that people know. And I find myself day to day because it's like it's on in the morning. It's off at night.

It's back on in the next morning. Then it's off by noon. Then it's on again by dinnertime. You're just like, unless you were just sitting paying attention to the news, like you don't even know. I think it's fair. And that's why oil prices have drifted notably higher than where they were. It was impressive how much oil prices have come came down initially. Now they've jumped back up, but they're not nearly where they were earlier in the year.

And I don't think that will happen. I don't think we're going to get to that type of escalation because neither side really wants that. So it's possible we'll settle with WTI in the 80s for a period of time, which is not great, but that's not a disaster for the consumer. The consumer, as we've seen, has been able to be resilient through a lot of this. It's caused some inflation, of course, in energy prices because it feeds directly into that. But the broader implications are a little bit more limited in terms of core inflation. The main effects show up through airfares. Mm hmm. Now, I recently went deep into the Bronx, the Yankee Stadium at the Jay-Z concert, and we talked to a ton of people. And you can imagine these people are everything from I talked to a guy who owns a store in Manhattan selling physical goods. I talked to people who one woman told me she doesn't pay rent. And, you know, she's kind of I didn't really know what her job was and kind of everyone in between.

But one of the things I took away from those conversations of talking, these are like real people in the real economy who they are not looking at what the CPI data is. I bet you most of them didn't even know what CPI is, right? They all seem to be very convinced everything is more expensive, which I think objectively is true, especially the last couple of years. But they did not understand why. And so one of the things that I've been thinking a lot about is like when we're looking at how the economy actually is in terms of health, it's like the consumer is super resilient. People on the ground are saying everything's too expensive, right? It's kind of this weird dynamic. So how do you think through, OK, if everything is so expensive, yet still the consumer is

so resilient, like how do you balance those two things? So I think it's a problem of price level versus what's actually happening in terms of inflation. So the price level went up in the years after COVID, partially because there was a lot of stimulus coming from the government, supply chain issues. Once companies tend to raise prices, they don't generally lower them in a big way. So we got a big shock to price level. people are still upset about how much things cost because they still remember what they were before the pandemic although eventually that will start to fade as people kind of forget what prices used

to be so they're unhappy if you ask consumers consumer sentiment measures are quite negative people say things are unaffordable today yet the reality is the economy is actually pretty good income growth is solid payrolls are pretty good so the combination of those things mean people can continue to spend even though the price levels are high so they can technically not everybody, of course, because there is this bottom of the consumer that got left out. But the bulk of the consumer base, middle to upper income people can largely afford most things. They just don't like the level of prices. So that's why spending has been solid, even though things are notably more expensive than they were before the pandemic. But at the same time, wage inflation has largely

kept up with most things outside of housing related purchases and autos, things that are really interest rate sensitive. Other than that, the bulk of the sort of CPI basket or the goods that people buy on a day to day basis have largely kept up with how much wages have picked up since then. It's just people don't like the prices that they see at stores. When you see the economic data, like how much do you believe that versus maybe like other metrics? And the reason I ask is, you know, the government metrics, I think that I find it's like 50 50. Some people are like it is the data. They do a great job. I believe it. The other 50 percent of people, I think, are like, eh, I don't really believe it, but it's kind of the best we got.

And so, like, I use it as maybe a data point, but I look at these other things and put more weight on them. Like, where are you on that spectrum of, you know, full on believer of the economic data to like, eh, I look at it because everyone else looks at it, but maybe I don't put as much weight. I'm closer to the believer in the data. I think they do the best job that of most of the data out there in terms of capturing inflation, employment, recognizing it's not perfect.

I don't think that there is, sometimes people will make these sort of political arguments against the data. I think there's very little of that. I don't think it's politicized. I just think that it is difficult to fully capture the breadth of the U.S. economy, especially in an environment where patterns have changed over the past couple of years. And a lot of the data relies on seasonal adjustment. So they look at patterns over the past, depending on the measure, five to eight years.

And if patterns change, it's harder to adjust for the data. So you tend to get these swings month to month, and that leads people to misbelieve the data just because it's been a lot more volatile than it historically has been. But if you look on a smooth basis, if you look at year-over-year data, if you look over sort of longer periods of time, I think it's telling you the accurate story. It's just we're left with some bigger revisions than normal and some additional volatility. But I don't think it's fair to necessarily totally discount it because it is among the best data that's out there. Mm hmm. Yeah, I don't think that there's anybody sitting like politicizing the data in terms of like, oh, I want inflation to be higher or lower in the reading. I want to even know how they could do that. But second of all, I generally think that they're not being like nefarious, regardless of who's in office. I do think that maybe the Michigan Consumer Sentiment Survey is a great example where they just started a sample way more of one political party over another. And my guess is actually, again, not nefarious. It's just like they moved from kind of telephone type serving stuff to when they went online. They just go advertise on certain sites and they may not even know where they're advertising.

But then you get these like bias in the data. And so what I've been trying to think through and I don't have a good answer for is just when you see these shifts in data. But you see it in outliers like to me, it's like the stock market at all time highs, but consumer sentiment is at all time lows. Right. It's like I think that's like become this huge story. But then when you go and you look at the data and Tom Lee did a big report on this that I thought was fascinating. These are go and survey 50 percent Republicans, 50 percent Democrats. As we know, Republicans think the economy is amazing and Democrats think it's horrible. And it's kind of those views are definitely politicized.

They now are surveying two thirds Democrats, one third Republican. And so naturally you get some decay. Now, it wouldn't put it at the lowest level possible. And so it's almost like you get really deep in the nuance. And then I think I've just concluded, I'm like, actually, what people are saying may be the most important thing. Right. It's like kind of like their personal experience in a way. If they think inflation is coming, they start to act like inflation is coming. And so they sort of change their behaviors. Do you see that?

Or is that more so like it's not a good story, but maybe it's not the actual reality on the ground? Yeah. So going back to the like, is there politicization of the data? Like I often hear from people, is the administration having some impact on the data? I really don't think so. You know, there was some, you know, shuffling in terms of the head of BLS. It ended up being they ended up putting the sort of second second person in line has been a longtime economist at BLS. And, you know, it's it's not something that's concerning. It's something someone who's been very much, you know, in the weeds in the data.

So there doesn't appear to be any major changes from that perspective. of when you think about some of the data sources, specifically UMICH, it's a relatively small sample size. And as you mentioned, it's certainly not a perfect sample. And what we've seen is some pretty big volatility in the data. And then when you think about the headline measure, they ask five questions to get at the answer. Three out of the five are kind of related to affordability.

They ask, is now a good time to buy durable goods? And you might say, no, it's not a good time, but you might still buy them. They ask, you know, how do you feel about your personal finances, you know, currently? How do you feel about them in the future? You might still say those things are bad, but that doesn't mean you're not going to spend. So it's important to see how people feel about the backdrop and the affordability landscape. But that doesn't necessarily indicate how much they're actually going to spend. So I think it's important to look at it and to view it at least separate from what's actually happening on the ground because it tells you two different things.

If you look at the credit card data, that tells you that, you know, the spending is pretty good and the banks all reported today. and had pretty optimistic views on the overall consumer. And I think that's the right view, even though sentiment measures tell you that people are unhappy about the affordability. That doesn't necessarily mean they're not going to spend. They just don't like the price level today. Today's episode is brought to you by Fountain Life.

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What I find very fascinating is take something like New York City, right? When I was asking a bunch of people, why is New York so expensive? One of the things people were like, because everyone wants to be here. Right. And so you're just like, you have so many people that want to be here. And if you, you know, rent is just hit a brand new all time high in the month of June. And so you have a ton of people who all want to live in a certain set of housing. Of

course, the price is going to go through the roof. The other thing that I find interesting, I have a friend who he talks a lot about housing affordability, but his view is like, most people can afford a house. It just may not be the house that they want to afford. Right. So he's like, you know, if you can afford a two bedroom or three bedroom home somewhere in the suburbs of some, you know, kind of mid tier city, you just may not want to live there. And so you want to go live in a big city, or you want a bigger home, or you want a bigger yard or whatever the thing is. And so you start complaining that like, it's unaffordable. But there's actually a mismatch between what you can afford and what you want. Is that a problem? Or

actually, is that just like, the affordability thing is more psychological, and it's almost become political to a degree, but the consumer sentiment is really our, you know, waypoint or maybe North Star on what the U.S. economy strength is. Yeah. I mean, I think there's a little bit of both in the sense that, you know, mortgage rates have come up a lot and people don't want to trade in their current mortgage rate for one that's a lot higher. So that would just that just kept a lot of people on the sidelines.

But I think you make a good point. There are plenty of people who could still buy a house. It's just not the place they want to live or not near where their job is. you know they're my friend's point not my point okay because because you know my point is i actually think again it's not everybody i think that there's a lot of people in america who want to own a home and for whatever reason they either can't afford a home they the one that they can't afford they don't want whatever but i do think there's a growing number of people who they like the idea of renting because they start running the math and they're like wait they're like owning a

home is not as good of a financial investment as they thought it was so there's like a crowd there a lot of like the fire uh you know community stuff like that um but the second thing is i also think there's a lot of people who now have jobs that give them mobility and they like the idea that they can kind of like pick up and go places. And so do you want to own a home if you're going to go on like a month long trip, you know, twice a year or something like you kind of get in this like weird dynamic where some of the consumer preferences have changed as well. And so it doesn't mean that there's not people who want to own a home. There's plenty of those. But also, I think just like the younger generation, renting doesn't sound that bad to them compared to owning.

And, you know, if you live in New York City or something like that, because it's affordability, but it's also preference. Yeah. And I mean, I think we're also a different generation than the baby boomers, for example, where owning a home meant that you kind of made it. And the younger generations, that's that's not necessary. They don't they don't view goods in the same way that, you know, some of their parents did or their grandparents did. So the idea that they need to live and have a white picket fence like that may that might have faded. And therefore, they're more into experiences. In the last couple of years, travel and service demand has been incredibly strong, more so than goods demand. And that might be the trend just going forward.

It might just be a bit of a shift in terms of the consumer mindset and where they want to spend their money. And paying as much as it would cost to afford the monthly mortgage payment is maybe just not their preference at the moment. That said, there is a cohort of people where it is unaffordable to live where they are working in a sort of reasonable distance in terms of commute, and that's sort of what the holdup is. I think what will happen eventually, mortgage rates will probably come down modestly, and then consumers will grow into a level of prices. And what that means is prices may stay steady for some time, and incomes continue to grow, and then eventually it becomes a lot more affordable than it is today when you look at various affordability metrics. It is interesting when you think about commute times, like one of the arguments that I see all the time is people say, like, why do I need to go to the office if I've got to commute 40 minutes or an hour or whatever? At the same time, if you go and you look at many large companies, you know, I worked at Facebook for a while and I lived in San Francisco and we should take the Facebook buses down to Menlo Park. And like, that's not a five minute commute.

You know, that could be 40, 50 minutes. What they did was they put Wi-Fi on the buses. and it always cracks me up that there are a lot of public transportation options in the kind of new york city metro area there's no wi-fi so like there is a ton of lost productivity because it's not like a lot of people are sitting there necessarily on their computers right they are doing other things they're reading you know whatever but like you as you measure some of these components there's affordability but then also you start to say to yourself the way that people work is changing. And because of that, we even see, um, the number of hours per employee

per day has started to evolve. And like AI is one piece of that, but also it does feel like the preference has changed. I almost get a sense sometimes like, well, especially talking to younger employees, they're like, I need to get paid a lot of money. And like, how do I, how am I efficient? That's the word that gets used, right? Like I want to be efficient, which really is code for like, I don't want to be here for 12 hours. And I understand that. But what's showing up in the data from that perspective of like,

it's not just preference around owning versus renting. It's also like preference of work and productivity and the impact on business too, right? Yeah, it seems to be this evolving sentiment where you're right. People want to get paid a lot, but like perhaps work less than otherwise would be. Four day work week.

Totally. And like, I mean, if you're going to actually be more productive with that, then so be it. So, you know, it does appear to be a bit of a shift in terms of workers want more of that work-life balance. The flexibility thing came about as, you know, related to COVID.

That wasn't really a big thing, broadly speaking, before. And that, you know, that has changed to some extent. And some companies are using that as a flex to help attract more workers without having to necessarily pay them more relative to the competitors. If it's, you know, two different companies, one could offer flexibility benefits at the same salary

that might become a more attractive seat. So, you know, you certainly do see that to some extent. And then you have the big banks who are, you know, requiring everybody to come in. And it's just been a bit of a sort of difference. We'll probably find some equilibrium eventually. So, I mean, I think what we'll see is an environment where, especially because the younger generations seem to want to be more productive with their time, the days of coming in before your boss and leaving, you know, leaving after your boss, like that seems to be over to some extent, which is fine. It's just, you know, an evolving sort of younger generation. And I think what we'll see is, you know, productivity will probably continue to rise with AI.

You haven't really seen the benefits in the data, broadly speaking, yet. It's been very limited, and I think it's because adoption rates across various industries are still pretty low. But that will very much likely change. It's just a much slower adoption pace than people thought. earlier this year, there was real concern that AI was going to take over the labor force and we were going to get a big rise in the unemployment rate. And it didn't pan out that way. And I don't think it necessarily will. I think the way it will pan out is people will gradually become more productive. Perhaps some job openings won't get filled because they realize AI can maybe do

some of that work. And then new jobs will be created as a result. And it will just result in And overall, a better economy, better labor force, one where it's more productive, unit labor costs come down, or sort of the costs associated with production. And that's where you get further disinflationary trends. I have 100% changed my mind. I used to think it was going to take all the jobs. Now I think that it's going to create a ton of jobs. And I just see it. Like, we want to hire as many people as we can if they know how to use this technology because it makes it more productive.

Totally. What about Warsh? He steps in. Now he's going to run the Fed. He kind of completely changed the way he's going to communicate. You know, he really was like policy-wise actually didn't change much yet, but communication-wise it's changed a lot. How does that change your job or maybe other people who are paying attention to him? Yeah, that's been one of the most visible changes to start.

Of course, you know, we only had one meeting. So we'll certainly learn more about his style and his actual preference for policy as we move through the next couple of meetings. It has important market implications because now, one, we've become more data dependent. Every data print becomes a lot more important, including the June CPI print, because that set up the stage to potentially hike in July, which now no longer is likely to happen at all. But because we don't really know the path for the Fed, that makes every data point incrementally more important because we don't know exactly what they're going to do. So now we have to interpret the data, which isn't necessarily a bad thing. It's just going to create more volatility in markets. Every data print is going to move markets, I would imagine, more than would otherwise be the case.

You'll see rates moving pretty substantially, equities moving as a result, because that legitimately changes the market's view about where policy is going to be. If they provided forward guidance, which is the biggest thing that he seems to want to change is, you know, the Fed not really telling the market about where it's going to go into the future. But in doing so, that just makes everything that evolves in the economy that much more important for markets. So we'll probably just see volatility pick up, especially associated with anything that could dictate the path of policy into the future. Do you feel like he just wants to cut and he's just looking for any excuse to do that? And now we go from July potential hike to the market will start saying, hey, we know that his default is he wants to cut. He's talked about it. The president put him in there.

And now the data is starting to give him the green light to be able to do it. Or do you feel like maybe there's still a little bit of kick the can down the road and let's wait to see, you know, what's going to happen? I don't think cuts are on his mind right now. I think he's legitimately deliberating whether the Fed's going to have to hike or not. My sense is he would prefer not to have to go ahead and do the hikes. But I don't doubt that he would do it if he felt that the data really warranted it. Now, with the most recent two important prints, payrolls and then inflation, it seems, you know, there's the data moving in the right direction such that they could potentially hold off. But I wouldn't be surprised if he actually went ahead and did it in September if the data warranted it.

Did a hike. Did a hike. A cut is very far from now. I don't think they're going to hike cut any time this year. Interesting. I think he's definitely going to try to cut. I don't know if he'll get it done. But I think – I just generally think most people are significantly – it's an interesting way to think about it.

So in 2020 through 2022 time period, we went from, you know, very, very low inflation to nine plus percent on the official numbers. And we have a lot of recency bias. And I think that like when I see people talking online specifically, they just think that's like normal. Like, you know, inflation goes like nine percent. It comes down. It goes back to nine percent.

Like, I'm like, do you understand that this is like a once in literally for you and I once in a lifetime that that happened? Yeah. The last time it happened, we weren't even born. Yeah. Could it happen again? Sure. but is it likely definitely not and so the second that there's like any sort of like inflationary

type pressure take uh you know tariffs i think people thought were going to be inflationary they thought that the ron warren energy prices it's not like oh we're going to go from like two and a half to three and a half it's immediately like two and a half to ten right like that is the mentality that i see online and again the internet isn't a perfect proxy for all of wall street or economist whatever but like it does feel like we live in such a binary world that nobody thinks about like, oh, we're going to slightly increase. They just immediately go to like sky high inflation. The opposite is also true, right? Where I think that there's a lot of folks who are saying, okay, if inflation is starting to come down, they think inflation is

going to be, you know, zero or 1% overnight. But if it starts to trickle down, I think that the, definitely the administration and probably Warsh himself, they just believe that the Fed cut is not nearly as inflationary as maybe other administrations have thought. And so it just feels like he is looking for an excuse to me to go ahead and make a cut. And if he can get one done before the end of the year, you know, the guy sitting in the White House probably be pretty happy with it. See, I actually would take the other view. I think if there's a scenario where the Fed is cutting this year, I don't think the White House is going to be very happy with where the economy is. OK, why? Because the environment this year where the Fed is cutting means you have

some real weakening in the labor market data. There's a scenario where in 2027, things go really well, inflation comes down, then the Fed can cut for good reasons. If they do it this year, I don't think it's going to be for reasons that anyone's going to be particularly happy with. Because inflation has been above target for years. The Fed isn't going to be comfortable cutting interest rates unless they start to see weakness in the labor market. And right now, we've seen a labor market that's pretty stable. So the only thing this year that could get them to cut is because they see weakening in the labor market. Yeah.

So I guess that's the, that's the big question is, could they cut without that being the reason? And I definitely agree. Most people, if I was to ask them, would say that would be the only way that they would make their, the, uh, uh, the argument. I just have in the back of my head, I don't know why, and I could be completely wrong by the end of this, right? But I just have in the back of my head that they are big believers that the AI stuff and

there's like this like big disinflationary force. I also think that they believe some of this is not economic policy. It's actually kind of governance. And then they're trying to make an economic argument that a lot of the deportations are highly disinflationary as well. And so what they're essentially saying is like, hey, we know we're going to keep doing the big immigration push. We know that a lot of this AI stuff is coming. We're going to cut in anticipation. Now, again, you kind of smirk, right?

I think there's a lot of people who are like, ah, we're starting to get into like, you know, theory land. But I just feel like that is much more on the table than it definitely was under Powell or anybody else. And so the hard part for me for evaluating this is like, what are they willing to do? How experimental are they willing to be versus the Fed usually is just like, show me the data. It's kind of formulaic. And we're just going to make decisions. We're going to telegraph what we're going to do. Like, that's a very different approach than I think Walsh coming in and just being like, I'm not going to tell you guys anything.

And, you know, you'll find out next meeting. Yeah, I mean, it's an interesting point of view. I think there's a scenario where you can get the cuts because of AI-related disinflation and positive trends. I just don't think it can be this year, given we're sitting here in July. Inflation is still running, depending on which measure, somewhere around 3% on core, which is pretty far from their target. It's 100 basis points, if not a little bit more on core PCE. It's not going to get down to their target this year. Agreed on that.

Will they change their target? No. And Warsh, they could eventually. But Warsh specifically said, and I agree with this, you know, basically we're not changing our target until we're back to our target. That would be. We're not going to surrender. Correct. Because you know what would happen in that scenario?

Going back to your comment earlier about inflation expectations or people's view about inflation into the future. If people think inflation is going to pick up in the future, they tend to buy a lot today. Of course. And that makes inflation even worse. So they need to be really careful about inflation expectations and keeping those anchored. and if they if they change the inflation target in the middle of the game like that's going to be a problem i wonder if they don't officially change it but like they've just come to terms with we're going to run this at two and a half to three percent and like that's the new unofficial

target and like we're cool staying there but they never actually officially announce it there's some people who definitely think they'll officially announce it i don't even know if that they need to do that as much as like if just internally they're like we're cool two and a half to three percent, then, like, do they think they're winning, you know, if they're sitting in that range? I don't know. I mean, I guess I would take, like, 50 basis points lower on your range. I think they could be in a scenario where they're okay with two to two and a half.

Okay. Which is still big. Like, that would be a big change from the way that they've historically operated. Yeah. And that would be, that, I think, is a more appropriate change. And realistically, you're right. They're not going to come out and say, we've changed our target, but they could potentially, if they're cutting at the end of 2027 and inflation is still probably not

back down to 2%, you know, that could be a signal of that. But if they did it this year, it's almost impossible for the year over year inflation to get back down to anything that's palatable. But I think even, even if they don't end up cutting this year,

if they don't end up hiking, that would be easing for the market. And that would be an environment where rates will end up coming down because hikes are priced into the market. So they have to get priced out, which would mean rates come down and that would ease financial conditions. and help markets, and that would be one of the most positive scenarios I think you could sort of argue for in a situation where inflation just naturally cools over the summer, the labor market

data stays solid, the Fed has no urgency to hike. If we get past the September meeting, they don't end up hiking, then they probably don't have to go at all, because that just means the data have been cooperating. Chances are it will still continue to cooperate. The back part of the year tends to have lower inflation than the beginning part of the year, and then you're probably out of the woods of that and then then you could start then the market could start thinking about when when can the fed actually be cutting you don't have a crystal ball neither do i but if we go back to the 2024 election the incoming presidential uh party were very accusatory of powell cutting rates going into the election because they felt like he was politicizing and

juicing and all stuff as fate may have it we now find ourselves with another election now there's a different guy running the Fed. Is there any world where they cut rates and it is done to juice the market and try to affect the election? I think if they cut rates and it's seen like, let's say, let's say incredibly unlike, let's just say the July meeting or September meeting, they come in, they cut rates unexpectedly. I think that would be very negative for markets. I don't even think that's the outcome that the administration would want, because what you would see is an environment where the market sees the Fed as not independent and a Fed that risks having a severe inflation problem.

And therefore, I don't think it would be very good for risk assets. So I don't even know if that's a scenario worth hoping for, because... I have no clue what they're hoping for, right? I don't think that's even one that they would want to pressure Walsh to do. And I would imagine Walsh would very much push back because he understands the market dynamics here. And I think even if he were to be pressured to do something like that, I think he would immediately push back and say,

the best way to bring down rates, which is ultimately what you want to do. And by the way, nobody pays the federal funds rate, right? People pay the 10-year rate, realistically, or, you know, rates that are further, further, further out on the duration. And I think what he probably told the president

before his first meeting was, if we come out and we establish our credibility and independence and come across even as a little bit hawkish, that will bring down long-end rates, which is effectively what you want to accomplish here, because that's what matters. That's what mortgage rates are anchored off of.

That's what businesses are borrowing off of. So if we come across as credible, that will actually bring down rates because that reduces the risk that we have some inflation spiral into the future. So coming across as credible and independent is probably more important than a cut or two that's unnecessary

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them before deploying capital. If it sounds interesting to you, you can get it for free at simplemining.io. That's simplemining.io. Go check it out today and see if you should you get into the mining game. Makes sense. IPO wave. We've been talking a lot about maybe how investors are getting punched in the face in affordability. They are making a lot of money as well. There's, you know, obviously SpaceX has now gone public. There's a bunch more that are kind of in the hopper to come public. You've written about a lot of liquidity and done a lot of analysis there. What are you seeing? Yeah. So our thoughts there, you know, we've gotten this question a lot from clients. This is IPOs is not something we typically write about as an economics

team. But there have been a lot of concerns that with all of these IPOs coming, that one, the market won't be able to absorb it. It'll be too much supply, not enough demand. And then secondly, there was a concern that is this a sign of a bubble? And is this an AI bubble? And what are the thoughts around that? So we dug into both of those issues. And when you think about the liquidity dynamics, the combination of buybacks is kind of your demand piece. And then your supply piece is your IPO issuance and then expiring lockups. And if you net out the two, that kind of gives you a sense of the key drivers of net demand. And this year, corporate buyback should be pretty good. In fact, it's estimated to be notably stronger than the sum of the IPO issuance

plus expiring lockups. So your net demand picture actually appears to be in the positive territory, which then would mean supply should get absorbed fairly well. Now, you know, of course, you know, these dynamics aren't perfect. It's an estimate based on corporate buybacks. But I think the dynamics would tell you that there's a decent amount of cushion for the issuance to get absorbed and not create liquidity problems. Now, the second question about whether this is some sort of sign of a bubble and is the market overvalued?

If you look historically, the IPO waves that you've seen in the past have generally been a lot of companies coming to market. It's been the breadth of companies. And this time it's different. It's a handful of companies that are mega IPOs. So it's the size in terms of, you know, dollars being issued is a lot larger than it has historically been. But I think that's just a sign of companies staying private for longer, waiting for the right opportunity. And this year happened to be it. Therefore, it has a different feel than the late 1990s.

It doesn't have that type of frenzy. And therefore, it's probably not really a sign of anything other than these companies stayed private until the right time. Now is a good time. The macro backdrop is good for going public. And at the same time, you know, the AI dynamics continue to look better. We're not worried about it being some sort of AI bubble, AI investment relative to GDP. is still only 2% historically, and nothing's perfect historically, but in the past, you've had big investment bubbles when said investment bubble was about 4% of GDP. So it's still

relatively sort of small compared to the size of the economy. Now, could we get there? Of course, there's certainly a possibility that there's malinvestment at some point in the next couple of years, and that creates some sort of bubble and, you know, certain companies face some severe challenges, but it doesn't appear like we're anywhere close to that right now. Yeah, it is interesting to me how so many companies have stayed private. Obviously, there's a lot of capital available there, but there's a different quantum of capital available in the public markets. And I think that when you look at OpenAI, Anthropic, even SpaceX to a degree, like SpaceX is probably the company that most realized, hey, we need way more money. And so

we probably should go and figure out how to get into the public market, but also how to we get the engagement of the investor base? And I think SpaceX, you know, you saw them, the share price went up, they immediately did an acquisition. Like there's these components of being public that just afford you different capital markets options. So I think there's some of that. The second piece is when these people have been working on this stuff for a long time, like sure, they've taken secondaries along the way, et cetera, but like there is a little bit of a competition, right? Of like, does the public market actually put as much value on your company as the private market does and spacex surprisingly has like held pretty strong

right and you know done uh kind of flat to well which i think people um are excited about but like stripe they had a huge valuation it came down they're probably back somewhere in the range of where they were previously ramp was you know i think it was like a nine ten billion dollar company they did another round at six now it's gone up significantly from there and so i think that there's a lot of these companies trying to figure out like what are we actually worth coming out of like the 2022 slowdown and, you know, all of that. Well, the public markets will tell you pretty quick, right? And that feels like a whole nother component of this

is like these folks, they need capital, but also like being in the public market, you kind of get the real valuation. Yeah, I think that's fair. So, you know, now is a good time. When you think about what are the dynamics for it being a good market to IPO in, it's a market where investor and business sentiment is good.

CEO confidence is high. You have, you know, lower volatility, higher valuations, all those things are true this year, which, you know, last year, there was just a lot more volatility, tariffs were impacting markets, and there was just kind of a lot more going on. This year, the focus is much more on how much is AI growing, the strength in the consumer, the strength in markets has been, you know, pretty astounding. Therefore, it's a much better year for that. So it's been just a couple of years, you're right, after some sort of volatility post COVID, But now companies are in a better position to actually, you know, finally go public.

And, you know, it's a good time to do so. It doesn't necessarily mean we're at the peak of some sort of bubble. That may very well happen, but it doesn't appear like now is the time. Bitcoin gold debasement trade. That was all the rage 12 months ago, nine months ago. I don't hear anyone talking about that right now. Where do you guys come out on that? Yeah. So, I mean, it's been sort of a volatile trend for the debasement trade.

You know, at one point it was the Fed is going to not be independent and gold and Bitcoin are the safe haven assets for that trade. that probably went over, probably over the top, especially once we learned that Trump picked a very credible Fed candidate, worse is somebody where there's very little concern about him being politicized to some extent. He has a long history at the Fed. He's known to at least historically been more hawkish.

So, you know, there was this big wave up. Then it came back down kind of recently when it was assumed that, you know, the Fed was going to be much more hawkish than expected. That kind of was around Warsh's first press conference. And now I think we're kind of settling in the middle, where we're back to sort of trading on other things. And the hype about debasement is probably over the extreme concern

that it's entirely, you know, the opposite. That's probably at its low, too. And now we're going to be just trading more so on fundamentals and demand and sort of the, you know, inflation dynamics outside of this whole debasement, non-independent Fed idea. Well, that's a question for you. What are you worried about? Like, you know, consumer strong,

stock market's been doing relatively well. Inflation seems to be cooling. Is there anything that you're like, hey, this is the thing that really keeps me up at night? I mean, currently it's just the volatility with the Iran war. It's hard for, you know, business and consumers to make decisions when, you know, they don't know what's coming next.

If you have certainty, that just makes it a lot easier. The White House doesn't know what's coming next. Right. Totally. Iran doesn't know what's coming next. Right. And that's that's the dynamic that we're in. If you last year, that was the thing that drove the economy to be a lot slower was just the uncertainty because the tariff policy ended up not impacting the economy all that much. Yeah, it was a little bit inflationary, but the economy ended up being perfectly fine as a result. But it was the uncertainty that really held back business and consumer sentiment. We're nowhere near that. But if this continues and it's off and on again, and if it's off and on again and it continues to impact markets in a volatile way, I think that's a problem. If it ends up being $80-something oil, the economy can kind of settle into that. So that's one thing, just having some sort of certainty or at least less concern on a day-to-day basis about kind of what's happening over there.

um otherwise you're good otherwise i think things are pretty good which is concerning in and of itself right i mean you don't there's no there's no obvious risks out there which then means the risk there's always something that surprises everyone so there's going to be something that will probably surprise us in you know in either direction so it's kind of the the known unknowns but the dynamics of the u.s economy are really quite good the you know inflation picture should be getting better. That will happen likely slowly but surely. Consumers spending pretty well.

They've been quite resilient. You're still getting the benefits from one beautiful bill impacting consumer spending. Probably for much of this year, that should sort of flow through the data. So it's probably going to be something that's not domestic economic related. It could be something geopolitical.

It could be something else out of left field. But the economy itself doesn't worry me at night. Oh, that's good. That's a great answer, right? Tell everyone where they can come and get the research that you put out. You put out a great note every single day. Where can they go get that? Yes, great.

So you can feel free to email me at sroth at wolfresearch.com. Feel free to visit our website. You can learn more about signing up. We put out notes several times a week. We react to the data. We put out a weekly. So feel free to reach out to us. You can get more information.

Amazing. We're doing a great job. Thanks so much for coming and doing this. Thanks for having me.