Latest / The Chuck ToddCast / Interview Only w/ Mark Zandi Boom, Bust, or Meh? What To Expect From Trump’s Economy In 2026

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Interview Only w/ Mark Zandi Boom, Bust, or Meh? What To Expect From Trump’s Economy In 2026 · The Chuck ToddCast

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  Speaker 1: Joining me now is it's the equivalent of the SNL
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  Speaker 1: five time hosting Club. It's the podcast guest club. Here.
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  Speaker 1: It's Mark Sandy, Cheap Economy Moodies, mister Sandy. It's good
• 2:01
  Speaker 1: to see you.
• 2:02
  Speaker 2: Todd is a huge That's okay.
• 2:06
  Speaker 1: It happens.
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  Speaker 3: This is the beauty of two first names. But you
• 2:09
  Speaker 3: must get called Sandy. Hey Sandy, Yeah, all the time,
• 2:12
  Speaker 3: all the time. Hey Todd, Hey Chuck. Yeah, it's good
• 2:16
  Speaker 3: to be with you. Sorry, it's been a long week.
• 2:18
  Speaker 2: It's and this is you know, five pm Eastern time
• 2:20
  Speaker 2: on a Friday, so I'm a little burned.
• 2:23
  Speaker 1: Here we are, And look, I've said this before about
• 2:26
  Speaker 1: every quarter, you know, i'd I like checking in with
• 2:29
  Speaker 1: you to see where we are. And in fact, the
• 2:31
  Speaker 1: last time was the beginning of the fourth quarter of
• 2:33
  Speaker 1: last year. We're now at the beginning of the fourth
• 2:36
  Speaker 1: quarter of the first year. And I'll be honest, sort
• 2:40
  Speaker 1: of first week of October of twenty twenty five, it
• 2:45
  Speaker 1: felt like this was an economy we're not sure where
• 2:47
  Speaker 1: it's headed. It feels like recession was at an elevated level.
• 2:53
  Speaker 1: Fast forward three months later, it feels like there's a
• 2:55
  Speaker 1: lot of optimism about the current state of the economy.
• 2:58
  Speaker 1: Am I just reading the wrong headlines? What say you?
• 3:02
  Speaker 1: What does the numbers say? How do you feel January
• 3:05
  Speaker 1: of twenty twenty six compared to what you might have
• 3:07
  Speaker 1: felt a quarter ago?
• 3:09
  Speaker 2: Yeah, I think it's fair to say there's I feel
• 3:11
  Speaker 2: a little bit better about the economy than I did
• 3:13
  Speaker 2: three months ago. You know, it's hard. You know, the
• 3:17
  Speaker 2: thing is the stock market kind of colors perceptions, right,
• 3:21
  Speaker 2: at least in my world right, And we've seen a
• 3:23
  Speaker 2: lot of green on the screen. Stock market's just skyrocket
• 3:27
  Speaker 2: at higher a lot of that artificial intelligence stocks, but
• 3:29
  Speaker 2: the broader markets up a lot too, and that is
• 3:33
  Speaker 2: powering a lot of growth and more than I The
• 3:35
  Speaker 2: market's up more than I would have anticipated in the
• 3:38
  Speaker 2: spending that's resulting from that, more than I thought. The
• 3:41
  Speaker 2: other thing is policy is going to kick into high
• 3:45
  Speaker 2: gear here. We're going to get a lot of fiscal juice.
• 3:47
  Speaker 2: You know, the One Big Beautiful Bill Act Cut Taxes,
• 3:51
  Speaker 2: is cutting taxes for both the business and for individuals,
• 3:56
  Speaker 2: and that's now going to come into the economy.
• 4:00
  Speaker 1: How do you expect how is that going to show up?
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  Speaker 1: Because I've heard this too that a lot of you've heard
• 4:04
  Speaker 1: Scott Pasent say it and others trying to reassure the president, Hey,
• 4:07
  Speaker 1: don't worry, your political fortunes are going to turn around
• 4:10
  Speaker 1: because we're about to you know what you just said,
• 4:13
  Speaker 1: The One Big Beautiful Bill is about to shoot a
• 4:15
  Speaker 1: whole bunch of fiscal stimulus. Last time we had too
• 4:19
  Speaker 1: much fiscal stim We had too much fiscal stimulus, and
• 4:22
  Speaker 1: it gave us inflation. So how how are you anticipating
• 4:26
  Speaker 1: that we'll start to see this in the economy.
• 4:29
  Speaker 2: Well in two big ways. One, consumers will have more cash,
• 4:35
  Speaker 2: so the refund checks are going to be a lot
• 4:37
  Speaker 2: larger this year than last year, about one hundred billion
• 4:39
  Speaker 2: dollars more in cash to low, middle, high income households.
• 4:44
  Speaker 2: And that'll flow in here pretty quickly, beginning in February,
• 4:48
  Speaker 2: but March April may obviously well timed to influence the
• 4:52
  Speaker 2: economy in the lead up to the election. That's that's
• 4:55
  Speaker 2: going to be a lot of jews. And then the
• 4:58
  Speaker 2: benefit to businesses expe So they invest and they can
• 5:03
  Speaker 2: expense all of that up front and that's a big
• 5:05
  Speaker 2: cost saving to them, and that means they'll do more investment.
• 5:07
  Speaker 2: And you can already kind of feel it in the
• 5:10
  Speaker 2: orders for investment goods. So those two things are going
• 5:14
  Speaker 2: to provide a lot of support. Obviously, it's all deficit finance.
• 5:16
  Speaker 2: That's how you get the jews, right. This is added
• 5:18
  Speaker 2: to the deficit. But and it's going to be temporary,
• 5:22
  Speaker 2: you know, it'll start to fade.
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  Speaker 1: Is this a one time thing? Are we going to
• 5:27
  Speaker 1: or this tax savings? I don't get the sense that
• 5:30
  Speaker 1: this is going to be long term.
• 5:31
  Speaker 2: No, No, it's not going to do much longer run.
• 5:35
  Speaker 2: I mean, you could argue that the investment should have legs,
• 5:38
  Speaker 2: you know, because you're building the capital stock and that
• 5:42
  Speaker 2: should help with productivity growth down right, But it's on
• 5:44
  Speaker 2: the margin. It's really providing a temporary boost to the companies.
• 5:48
  Speaker 2: It's straight up fiscal stimulus, just like the fiscal stimulus
• 5:51
  Speaker 2: we've provided during the pandemic. Same kind of deal here.
• 5:54
  Speaker 2: And then also you've got the FED, who is predisposed
• 5:58
  Speaker 2: to the lower inge rates. There's a lot of debate
• 6:00
  Speaker 2: around what they're going to do and to what degree,
• 6:03
  Speaker 2: but I think they will cut interest rates, you know,
• 6:06
  Speaker 2: before the year is over, and that should provide some
• 6:08
  Speaker 2: additional support.
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  Speaker 1: Do you expect those still they very cautious cuts more
• 6:13
  Speaker 1: quarter points, no, half points?
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  Speaker 2: Yeah, I think so. It's certainly up until the time
• 6:20
  Speaker 2: Chair Pale leaves the FED, and that's May of twenty
• 6:23
  Speaker 2: twenty six. At that point we're going to get a
• 6:26
  Speaker 2: new FED chair appointed by the President. The President has
• 6:28
  Speaker 2: made it very clear that he wants lower interest rates
• 6:30
  Speaker 2: and that he should have some influence, if not be able,
• 6:34
  Speaker 2: to dictate what interest rates should be. So it'd be
• 6:37
  Speaker 2: surprising if we don't see someone who's there that isn't
• 6:40
  Speaker 2: pushing hard for lower rates when they take that position.
• 6:44
  Speaker 2: You know, obviously it's a committee decision, so there are
• 6:47
  Speaker 2: other folks that aren't going to be on board with that.
• 6:50
  Speaker 2: But I think at the end of the day, they'll
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  Speaker 2: probably get some more rate cuts and that should help
• 6:55
  Speaker 2: support the economy also, And that's one reason why the
• 6:57
  Speaker 2: stock market is up, because the stock markets also painting,
• 7:01
  Speaker 2: you know, more rate cuts.
• 7:03
  Speaker 1: I remember the last time we talked about trying to
• 7:06
  Speaker 1: look at the stock market by disaggregating the AI companies
• 7:09
  Speaker 1: from sort of the non AI influenced companies and as
• 7:14
  Speaker 1: getting a sense of what is the health of the
• 7:17
  Speaker 1: current economy versus essentially what people are anticipating to be
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  Speaker 1: the future economy. What do those two pictures look like.
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  Speaker 2: They're very different. I mean, the AI stocks have gone
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  Speaker 2: skyward and they're moving up, you know, very significantly. They're
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  Speaker 2: still still in heading higher here. So that's a big
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  Speaker 2: part of what's gone on in the equity market, the
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  Speaker 2: stock market over the past little over a year. The
• 7:47
  Speaker 2: other stocks, it's it's more kind of pedestrian, you know,
• 7:52
  Speaker 2: it's kind of mid single digit kind of increases in
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  Speaker 2: stock prices, so kind of what you would typically see.
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  Speaker 2: But even there, you've gotten maybe a bit of support
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  Speaker 2: from the tax cuts, right, the tax cuts help business,
• 8:03
  Speaker 2: it lowers their tax bill in the lower interest rates.
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  Speaker 2: So you know, even the non AI stocks are up
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  Speaker 2: pretty pretty strongly, but not you know, five five, six,
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  Speaker 2: seventy nine percent something like that, not twenty thirty forty
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  Speaker 2: fifty percent, of which is what we've seen with the
• 8:21
  Speaker 2: AI stocks.
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  Speaker 1: In the past. Fiscal stimulus, whether coming directly from the
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  Speaker 1: government or via the FED, the hope was that it
• 8:31
  Speaker 1: was going to trigger job creation, which then in turn
• 8:34
  Speaker 1: would obviously grow the economy. Where's the job creation coming from,
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  Speaker 1: because that doesn't seem as clear, Like I see all
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  Speaker 1: the savings that companies are seeing, the investments that they
• 8:47
  Speaker 1: want to make, but when you look at data centers,
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  Speaker 1: these are investments that create very few jobs, and a
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  Speaker 1: lot of the architecture that's being invested in the world
• 8:57
  Speaker 1: of AI, other than the industrial part of building said
• 9:02
  Speaker 1: data center, there isn't a lot of job creation with it.
• 9:05
  Speaker 1: And I know before we've discussed about the only place
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  Speaker 1: that had been growing in twenty twenty five. In the
• 9:09
  Speaker 1: job front, we're home healthcare worker? Were is there? You
• 9:14
  Speaker 1: know in this last three months is job I mean
• 9:16
  Speaker 1: that looked like pretty tepid job numbers to me that
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  Speaker 1: we saw in December. Are we going to have a
• 9:25
  Speaker 1: jobless recovery? And I guess I don't know if we
• 9:28
  Speaker 1: even call this or currently over here?
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  Speaker 2: Yeah, well, you know, I started the conversation by saying
• 9:32
  Speaker 2: I feel a little bit better about the economy than
• 9:34
  Speaker 2: I did three months ago. But if I completed the sentence,
• 9:38
  Speaker 2: I would say I still don't feel that good about
• 9:40
  Speaker 2: the economy. It still feels pretty fragile to me. And
• 9:44
  Speaker 2: that goes to the job market. We are not creating
• 9:46
  Speaker 2: any jobs, and that was the message in today's jobs
• 9:50
  Speaker 2: numbers for the month of December. You know, not only
• 9:52
  Speaker 2: did we not create many jobs during the month, but
• 9:55
  Speaker 2: we saw downward revisions to previous months. And in fact,
• 9:57
  Speaker 2: if you look the job mark market in terms of
• 10:01
  Speaker 2: job creation is going completely flatlined since Liberation Day. Just
• 10:05
  Speaker 2: you know, can look at the data month to month.
• 10:07
  Speaker 2: Right up until April of twenty twenty five, when we
• 10:11
  Speaker 2: had Liberation Day, we were creating one hundred and sixty
• 10:15
  Speaker 2: hundred and seventy hundred te thousand jobs per month in
• 10:18
  Speaker 2: the wake of that day, Beginning in May of the
• 10:21
  Speaker 2: of twenty twenty five, we've flatlined. You know, some months
• 10:25
  Speaker 2: a little up, someone's a little down. And you're right,
• 10:29
  Speaker 2: the job growth that we are getting is very concentrated
• 10:32
  Speaker 2: in the healthcare sector, maybe a little bit in leisure hospitality,
• 10:35
  Speaker 2: but that's it. You know, in the rest of the economy,
• 10:38
  Speaker 2: we're not creating any jobs, and businesses broadly just aren't hiring.
• 10:43
  Speaker 2: And so I don't think that's a very comfortable place
• 10:47
  Speaker 2: to be, you know, I said fragile. I think that's
• 10:50
  Speaker 2: the right word. It's very fragile. Everything has got to
• 10:53
  Speaker 2: stick to script here. If anything kind of goes off
• 10:56
  Speaker 2: script a little bit, I think we got a problem.
• 10:59
  Speaker 1: Is there even I mean in theory, where would job
• 11:04
  Speaker 1: creation come from in the world of AI.
• 11:07
  Speaker 2: Well, I mean one area would be the areas are
• 11:11
  Speaker 2: getting rocked by tariffs. I mean manufacturing. Manufacturing is losing
• 11:16
  Speaker 2: jobs plus eight thousand jobs in December, has been losing
• 11:18
  Speaker 2: jobs pretty steadily all year. You know, that's because of
• 11:21
  Speaker 2: the tariffs and the impact that said on supply chains
• 11:24
  Speaker 2: and manufacturing activity. Agriculture anything agg related because that's getting
• 11:29
  Speaker 2: rocked by the terriffs, Transportation distribution, wholesaling all in recession
• 11:35
  Speaker 2: losing jobs because of those would be sectors that presumably
• 11:39
  Speaker 2: would be adding to payrolls. And I think you have
• 11:44
  Speaker 2: general concern across the economy around the uncertainty created by policy,
• 11:49
  Speaker 2: by the terriffs, by immigration policy, by deglobalization more generally,
• 11:54
  Speaker 2: and so businesses have been sitting on their hands. So
• 11:57
  Speaker 2: almost all industries are being affected by that degree or another.
• 12:01
  Speaker 1: Is there any place where you have you know, think
• 12:03
  Speaker 1: about Let's let's take the immigration piece here a minute.
• 12:07
  Speaker 1: There's been an obviously an aggressive effort by this administration
• 12:10
  Speaker 1: to report folks that are undocumented. Has that and I've
• 12:15
  Speaker 1: seen the administration claim that US born new job you know,
• 12:20
  Speaker 1: US born workers are getting more jobs today than they
• 12:24
  Speaker 1: did a year ago. I don't know where they're getting
• 12:26
  Speaker 1: that stat What is the truthiness of that claim? One?
• 12:31
  Speaker 1: And two? Are we seeing any Are we seeing more
• 12:36
  Speaker 1: construction job openings or not?
• 12:39
  Speaker 2: Well, the number of foreign born workers is falling. The
• 12:45
  Speaker 2: number of native born workers is rising, but on the margin,
• 12:49
  Speaker 2: So you know, I don't know.
• 12:51
  Speaker 1: And is that really is it really rising? Or is
• 12:54
  Speaker 1: it more flatline and just native born as collapsing.
• 12:57
  Speaker 2: It's more the Latter's yeah, I mean, there might be
• 13:01
  Speaker 2: a slight tilt up in native more and native born,
• 13:04
  Speaker 2: but you know, I'm pressing, and it's certainly depressed relative
• 13:07
  Speaker 2: to where it was the last year in the year
• 13:09
  Speaker 2: before that. So it's not like we're seeing foreign native
• 13:13
  Speaker 2: foreign born workers loser jobs and native born workers take
• 13:16
  Speaker 2: those jobs. That's not what's happening. I think that's a
• 13:18
  Speaker 2: false narrative. They're just not feeling the filling the jobs
• 13:22
  Speaker 2: that you know, foreign born workers would typically take.
• 13:25
  Speaker 3: Uh and uh.
• 13:26
  Speaker 2: You know that that is restraining growth in jobs because
• 13:30
  Speaker 2: you know, if you don't have workers folks looking for work,
• 13:33
  Speaker 2: which we don't because of the immigration policy, they can't
• 13:36
  Speaker 2: be hired. They can't they can't turn into a job.
• 13:38
  Speaker 2: And that's part of the story. But the story goes
• 13:41
  Speaker 2: beyond the labor supply. It also goes to labor demand,
• 13:44
  Speaker 2: which we were talking about earlier. That's the terroriffs, that's
• 13:46
  Speaker 2: the uncertainty, that's the that's also AI starting to play
• 13:50
  Speaker 2: a role as well in terms of you know, labor demand.
• 13:52
  Speaker 2: So that's why unemployment is rising it's still low, but
• 13:55
  Speaker 2: it's rising.
• 13:56
  Speaker 1: Right, I Mean, it seems logical if I ran a
• 13:58
  Speaker 1: small business, I would our mid sized business, I delay
• 14:03
  Speaker 1: filling ahead for as long as I can until I
• 14:06
  Speaker 1: figure out how viable AI is, right. I mean, it's
• 14:09
  Speaker 1: a pretty logical mindset that that employers are are in
• 14:15
  Speaker 1: right now, are they not.
• 14:16
  Speaker 2: Yeah. I think that's more a large company thing, though,
• 14:18
  Speaker 2: than a small company thing. I think large definitely large companies.
• 14:22
  Speaker 2: I could attest to that personally. I mean, I know
• 14:25
  Speaker 2: that is what's going on. It's not that, And this
• 14:28
  Speaker 2: is why the economy is not in recession. Why you
• 14:31
  Speaker 2: know we're moving, we're growing. It's that they're laying off.
• 14:35
  Speaker 2: It's not that they're doing that at least not.
• 14:37
  Speaker 1: No, you don't see that. They're just not replacing. They're
• 14:40
  Speaker 1: just not older workers that leave. Maybe they're they're they're
• 14:43
  Speaker 1: getting rid of expensive people, right, I've I've heard I've
• 14:46
  Speaker 1: heard rumors of that at various large entities, publicly traded companies.
• 14:50
  Speaker 1: But they're not they used to replace them. They're not
• 14:52
  Speaker 1: actually replacing these folks, right.
• 14:54
  Speaker 2: Exactly, Hiring rates are you know, way down that those
• 14:58
  Speaker 2: are large companies, maybe some mid size coming. Smaller companies,
• 15:01
  Speaker 2: I think they're they're getting you know, hit by things
• 15:05
  Speaker 2: like the terriffs, they're hurt by the immigration policy. They
• 15:09
  Speaker 2: they rely very heavily on immigrant workers. You know, think
• 15:11
  Speaker 2: about all those small manufacturers that you know operate in
• 15:14
  Speaker 2: the country, or constructing, the construction trades, retailing, you know, leisure, hospitality,
• 15:20
  Speaker 2: these industries. A lot of small companies they rely on
• 15:24
  Speaker 2: those the immigrant workers, and they can't they can't get them,
• 15:27
  Speaker 2: they can't find them. So that's and they're and they're
• 15:29
  Speaker 2: nervous about all of that. What does it mean? Where's
• 15:31
  Speaker 2: it going? How's it going? Is it going to change?
• 15:33
  Speaker 2: Is it going to get worse? Is going to get better?
• 15:34
  Speaker 2: So I don't in that in the small business world.
• 15:37
  Speaker 2: I don't think it's AI. I think it's these other
• 15:39
  Speaker 2: things that are causing Yeah, I really think that that's
• 15:43
  Speaker 2: the case.
• 15:43
  Speaker 1: Yeah, So let's talk about the trade deficit. It went down.
• 15:49
  Speaker 1: Is that really good for the economy or not? Well?
• 15:52
  Speaker 1: I mean, right, a shrinking trade deficit is not always
• 15:55
  Speaker 1: translated into a positive economic uh output.
• 15:59
  Speaker 2: No, Yeah, you're referencing the last data point we got
• 16:05
  Speaker 2: this week and was trade trade numbers for the I
• 16:08
  Speaker 2: think it was the month of buck. Yes, the month
• 16:09
  Speaker 2: of October really wacko. You know, we saw the trade
• 16:15
  Speaker 2: deficit declined for two key reasons. One, the exports of
• 16:20
  Speaker 2: so called non monetary gold, so gold that's held by
• 16:25
  Speaker 2: private individuals and companies, not the central bank, not the reserve.
• 16:29
  Speaker 2: Exports of that surge, okay. And the other thing is
• 16:33
  Speaker 2: that imports of pharmaceuticals collapsed. And this goes all this
• 16:37
  Speaker 2: goes to the tariffs and the scrambling of a trade
• 16:41
  Speaker 2: as a result of that. So the month of October
• 16:44
  Speaker 2: is just I don't know, I throw it out the window.
• 16:46
  Speaker 2: The better thing to do is just take a look
• 16:49
  Speaker 2: at the trade deficit through the year to day through
• 16:53
  Speaker 2: October this year in twenty twenty five, and compare that
• 16:56
  Speaker 2: to twenty twenty four, and the trade deficit is actually
• 17:00
  Speaker 2: a little bit larger or not, it's not.
• 17:01
  Speaker 1: So so that's just a you just think that's bad data.
• 17:04
  Speaker 1: I mean, in the polling world, we'd get a weird
• 17:09
  Speaker 1: you know, sometimes you get a weird subgroup data. You know,
• 17:11
  Speaker 1: you might get and our pollsters would say, unless you
• 17:14
  Speaker 1: see it two months in a row, ignore it.
• 17:16
  Speaker 2: Yeah, so I would ignore this, okay, you know, I
• 17:19
  Speaker 2: take year to day, you know, year to day throughout
• 17:22
  Speaker 2: ten months. That probably gives that definitely gives us a
• 17:25
  Speaker 2: clearer sense of what's going on, and the deficit is
• 17:27
  Speaker 2: not changed so that the tariffs aren't if that was
• 17:30
  Speaker 2: the goal. Right, so far, there's a lot of script
• 17:33
  Speaker 2: to be written here. Obviously this is all early days,
• 17:35
  Speaker 2: but so far that's not that goal is not being achieved.
• 17:39
  Speaker 1: Well, and then let's get to the reality of the tariffs,
• 17:41
  Speaker 1: because if what he pledged to do unlimited ration day
• 17:46
  Speaker 1: is what he did, I'm guessing we would be in
• 17:50
  Speaker 1: recession by now.
• 17:51
  Speaker 2: Yeah.
• 17:51
  Speaker 1: But because he's essentially created so many exemptions and he's
• 17:56
  Speaker 1: pulled back some things, particularly on food, what has been
• 18:03
  Speaker 1: the impact of the tariffs other than making private industry
• 18:10
  Speaker 1: crazy trying to navigate it?
• 18:12
  Speaker 2: Yeah. The way I totally agree, and the way I
• 18:15
  Speaker 2: would articulate that is by looking at the stated tariff rate,
• 18:20
  Speaker 2: what President Trump is saying the tariff rates are going
• 18:23
  Speaker 2: to be, or what the administration says the tarif rates
• 18:24
  Speaker 2: are going to be, you know, one hundred percent on China,
• 18:27
  Speaker 2: one hundred fifty percent on China, seventy five percent on China,
• 18:30
  Speaker 2: thirty percent on Korea, twenty five percent on autos from Japan.
• 18:34
  Speaker 2: Those are stated tariffs. That's kind of in what's being articulated.
• 18:39
  Speaker 2: Then you go look at the actual tariff revenue that's
• 18:42
  Speaker 2: being generated, you know what actually is being raised, and
• 18:47
  Speaker 2: you get a very different picture. It's ten percent effective
• 18:51
  Speaker 2: tariff rate, which is not inconsequential Chuck. I mean it
• 18:54
  Speaker 2: was two percent at the start of twenty twenty five.
• 18:56
  Speaker 2: So you go from two percent to ten percent, that
• 18:59
  Speaker 2: means weaker growth. We talked about manufacturing anag and transportation,
• 19:03
  Speaker 2: it means higher inflation. That goes to the affordability problems.
• 19:06
  Speaker 2: We're paying more for imported product. That's happening, but it's
• 19:09
  Speaker 2: not twenty five percent, it's not thirty five percent, it's
• 19:12
  Speaker 2: not one hundred percent. And it could easily change in
• 19:16
  Speaker 2: the next few weeks because Sprember is going to rule
• 19:19
  Speaker 2: on the reciprocal tariffs and the legality of that, and
• 19:22
  Speaker 2: it looks like they might strike that down and then
• 19:24
  Speaker 2: the effect of tariffrey will go from ten percent to
• 19:26
  Speaker 2: five percent. So that's a very different story, but it's
• 19:28
  Speaker 2: having an effect. But you're right, if we had actually
• 19:30
  Speaker 2: got the stated tariffs I think have been very difficult
• 19:33
  Speaker 2: to avoid an outright economic downturn.
• 19:38
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  Speaker 1: dot com slash chuck. So big picture, I mean, or
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  Speaker 1: what what is this economy? And are we is it?
• 21:29
  Speaker 1: Is it still? I mean it still feels like an economy.
• 21:32
  Speaker 1: That is, if you have some savings, you're doing pretty well.
• 21:35
  Speaker 1: That the K that the K shaped economy where if
• 21:40
  Speaker 1: you're you know, if you're a living paycheck to paycheck,
• 21:42
  Speaker 1: it is harder. And if you've got a little bit
• 21:44
  Speaker 1: of savings you're managing, You're probably doing okay. Is that
• 21:49
  Speaker 1: still that your outlook for the next year, that this
• 21:52
  Speaker 1: is what this economy is going to continue to look like.
• 21:55
  Speaker 2: Yeah. I think if you look at the the economic
• 21:59
  Speaker 2: l and its totality a abstract from you know, what's
• 22:04
  Speaker 2: going on across industry, sectors, regions, different parts of the
• 22:08
  Speaker 2: income and wealth distribution, you know, the economy is is okay,
• 22:13
  Speaker 2: although as I said, it's you know, very fragile. Things
• 22:16
  Speaker 2: need to stick the script here otherwise we're going to
• 22:18
  Speaker 2: have a problem. But then when you touch different parts
• 22:21
  Speaker 2: of the elephant, you're going to get a different, you
• 22:23
  Speaker 2: know picture. So you picked one part of the elephant,
• 22:26
  Speaker 2: the income and wealth distribution that's very skewed. And if
• 22:30
  Speaker 2: you're at the top part of the income and wealth distribution,
• 22:32
  Speaker 2: life is good financially, right, I mean, you have a job,
• 22:35
  Speaker 2: your wages have been rising, you're getting a bonus, you
• 22:39
  Speaker 2: don't owe anything except maybe a mortgage Liane that you
• 22:42
  Speaker 2: locked in during the pandemic at two and a half
• 22:44
  Speaker 2: three three and a half percent. You're getting more on
• 22:46
  Speaker 2: your money market account than you're paying out on your mortgage,
• 22:49
  Speaker 2: and you own a lot of stuff you own your
• 22:51
  Speaker 2: own home, you own stocks, you you know you're you're
• 22:55
  Speaker 2: sitting in a good spot. But if you're a folks
• 22:57
  Speaker 2: in the bottom or middle part of the distribution, you know,
• 23:00
  Speaker 2: it's a very different world. You don't stocks, I don't
• 23:03
  Speaker 2: know any stocks, right, And if you're lucky to own
• 23:05
  Speaker 2: a home, if you're in the bottom part of the distribution,
• 23:07
  Speaker 2: very unlikely. So and you know, you know, people in
• 23:10
  Speaker 2: the bottom part of the distribution owe money on cards,
• 23:13
  Speaker 2: on auto loans, student loans, and so you know that
• 23:18
  Speaker 2: part of what part of the elephant you're touching really
• 23:22
  Speaker 2: does matter, you know, because you're getting these And that's
• 23:24
  Speaker 2: why I think there's such why disparate views on how
• 23:28
  Speaker 2: the economy is performing, and why there's such confusion around that,
• 23:32
  Speaker 2: because it really does vary quite a bit.
• 23:34
  Speaker 1: Well. And this, of course, you know when you hear
• 23:36
  Speaker 1: about the phrase when I when you use a phrase
• 23:39
  Speaker 1: like politically tone deaf. A lot of times these days,
• 23:41
  Speaker 1: if you only are interacting in your bubble, you may
• 23:44
  Speaker 1: not really fully realize what the economy looks like. And
• 23:47
  Speaker 1: of course that's this president is in a bubble, and
• 23:51
  Speaker 1: you know, we know how he views a successful economy
• 23:55
  Speaker 1: is not necessarily maybe how economist would view how the
• 24:00
  Speaker 1: economy is going.
• 24:01
  Speaker 2: Yeah, totally. And of course we all have our own
• 24:04
  Speaker 2: political prison as well. Look at the world through and
• 24:06
  Speaker 2: that is influencing our perceptions here to a much greater
• 24:09
  Speaker 2: degree than it has historically. I mean you can see
• 24:11
  Speaker 2: it in this sentiment surveys that you know, you can
• 24:14
  Speaker 2: look at how Republicans feel versus how independence or Democrats feel,
• 24:18
  Speaker 2: and it's totally different.
• 24:21
  Speaker 1: Yeah. I was just going to say that this that
• 24:24
  Speaker 1: is made polling on the economy I think worthless. I
• 24:28
  Speaker 1: used to fight to get rid of the questions because
• 24:29
  Speaker 1: I already know the result. Whoever is president, that party
• 24:33
  Speaker 1: will think the economy is getting better, and then the
• 24:36
  Speaker 1: other party will think it's getting worse. But consumer sentiment
• 24:40
  Speaker 1: does strike me as different. I mean, I feel like
• 24:42
  Speaker 1: that Michigan survey is a pretty honest, you know, it
• 24:47
  Speaker 1: feels like it does sort of, at least directionally, let
• 24:50
  Speaker 1: you know what people really think of this economy, and
• 24:54
  Speaker 1: consumer sentiment continues to be kind of it's still underwater, right, Yeah.
• 25:00
  Speaker 2: I think again, if you take a step back and
• 25:02
  Speaker 2: look at the entirety of the elephant and don't get
• 25:05
  Speaker 2: caught up in the parts of the elephant.
• 25:06
  Speaker 1: You're right.
• 25:07
  Speaker 2: I think the perceptions are that the economy is met
• 25:11
  Speaker 2: you know, it's just not doing what I expect it
• 25:14
  Speaker 2: to do, at least not for me. And I think
• 25:16
  Speaker 2: there's also a lot of anks around big picture issues,
• 25:21
  Speaker 2: you know that you know, maybe because of the pandemic,
• 25:24
  Speaker 2: we now are focus on things that are broader than ourselves.
• 25:27
  Speaker 2: And when you do that, you get nervous pretty quickly.
• 25:30
  Speaker 2: I mean, what's going on geopolitically? I mean, you know, well.
• 25:35
  Speaker 1: How do you factor that into an economic outlook? I mean,
• 25:38
  Speaker 1: let's I mean, you know, we have a showdown with
• 25:41
  Speaker 1: Europe over Greenland and NATO is suddenly gone. That feels
• 25:47
  Speaker 1: like it isn't good for our economy. But I don't
• 25:50
  Speaker 1: know how you how you price.
• 25:52
  Speaker 2: That in now you can't except through these sentiment surveys.
• 25:57
  Speaker 2: I mean, if they as you say, they are captured
• 26:00
  Speaker 2: during that angst, then we are picking that up and
• 26:03
  Speaker 2: that's in our modeling. And you know, but at the
• 26:05
  Speaker 2: end of the day, that's what makes economic forecasting so difficult,
• 26:08
  Speaker 2: right because it's it is driven by cology sentiment. You know,
• 26:13
  Speaker 2: events that are inherently unpredictable, and that's why it's so
• 26:16
  Speaker 2: difficult to get it right, you know, at least on
• 26:18
  Speaker 2: a consistent basis.
• 26:20
  Speaker 1: So compare the American economy with the rest of the world.
• 26:25
  Speaker 1: Who's doing better than us and who's doing worse than us?
• 26:28
  Speaker 1: That should concern us?
• 26:31
  Speaker 3: Uh.
• 26:32
  Speaker 2: I think the entire world is kind of in the
• 26:34
  Speaker 2: same place we are. You know, it's kind of growing.
• 26:38
  Speaker 2: It's okay, it's growing, but it's just a very kind
• 26:41
  Speaker 2: of fragile, tenuous kind of growth. I mean, China is
• 26:46
  Speaker 2: obviously the second largest economic player on the planet. They've
• 26:50
  Speaker 2: got you know, they're growing just like us, but they
• 26:52
  Speaker 2: got their problems just like us. Different set of problems. Europe,
• 26:56
  Speaker 2: same deal. They're growing, depends on you know, which part
• 27:01
  Speaker 2: of Europe you look at where you get the growth
• 27:04
  Speaker 2: or not.
• 27:04
  Speaker 1: But the Eastern still growing faster than Western Europe.
• 27:08
  Speaker 2: Or Southern Europe is growing faster than Northern Europe, nor
• 27:12
  Speaker 2: South Spain is doing great. Germany is still struggling, So
• 27:20
  Speaker 2: very similar kind of dynamics there, and I think the
• 27:22
  Speaker 2: same kind of general angs exists. And of course, you know,
• 27:26
  Speaker 2: it's not surprising because the US is rapidly pulling away
• 27:30
  Speaker 2: from the rest of the world, right. I mean, it's
• 27:33
  Speaker 2: a big change or two. In President Trump's first term,
• 27:37
  Speaker 2: it was we were all about integrating with the rest
• 27:40
  Speaker 2: of the world, globalization, We developed all the institutions to
• 27:44
  Speaker 2: support that, and here we are now moving away from
• 27:47
  Speaker 2: that as fast as possible. And I think that's just
• 27:48
  Speaker 2: unnerving for the rest of the world to watch.
• 27:51
  Speaker 1: Well. I mean, it really is just right. We spent
• 27:54
  Speaker 1: arguably the fall of the Berlin Wall right, starting with
• 27:57
  Speaker 1: Bush to Clinton to Bush to Obama. Every one of
• 28:01
  Speaker 1: those presidents was for global integration. The the right saw
• 28:05
  Speaker 1: it as sort of inevitable, so let's be on the
• 28:08
  Speaker 1: forefront of it. Obviously, Trump is the response is the
• 28:11
  Speaker 1: whoa wo woe. And I always say I've been saying
• 28:15
  Speaker 1: nationalism is contagious and when the largest you know, when
• 28:19
  Speaker 1: the largest economy in the world goes goes inward, don't
• 28:24
  Speaker 1: be surprised if everybody else starts turning inward as well.
• 28:28
  Speaker 1: Is that happening? Are you seeing that? Are we seeing
• 28:31
  Speaker 1: other countries decide, well, if we're going to start up
• 28:34
  Speaker 1: in tariffs and we better protect this industry in our country.
• 28:37
  Speaker 2: Yeah, same kind of dynamic. I mean certainly China is
• 28:40
  Speaker 2: a you know, obvious poster child for that. Sure, yeah,
• 28:43
  Speaker 2: but I do think that's happening everywhere in the world.
• 28:46
  Speaker 2: And the other thing that's happening is the rest of
• 28:48
  Speaker 2: the world is now trying to work with them each
• 28:51
  Speaker 2: other independent of US. So you can see Europe striking
• 28:55
  Speaker 2: free trade deals, you know, with other parts of the world,
• 28:59
  Speaker 2: which they might have done anyway, but certainly takes on
• 29:02
  Speaker 2: a greater importance now that they can't rely on the
• 29:05
  Speaker 2: US as a trading partner. And but that, you creates
• 29:09
  Speaker 2: all kinds of dislocations and adjustments and angst. And I
• 29:12
  Speaker 2: think that's what we're in the middle of. And I
• 29:15
  Speaker 2: think that's that's something that plagues the entire global economy.
• 29:19
  Speaker 2: So when you ask who's doing well, hard to say
• 29:22
  Speaker 2: anyone's doing all that well, because we're all dealing with
• 29:25
  Speaker 2: this really dramatic change in the way the global economy
• 29:28
  Speaker 2: is organized.
• 29:30
  Speaker 1: And I assume, because look, I'm gonna I'm probably projecting
• 29:34
  Speaker 1: my own feelings on this, so let me let me
• 29:36
  Speaker 1: ask it that way, then, simply, which is is part
• 29:39
  Speaker 1: of this unsettled this sort of what you just describe,
• 29:45
  Speaker 1: in part because the rest of the world hasn't decided
• 29:48
  Speaker 1: if this is a permanent stance of America or just
• 29:51
  Speaker 1: a temporary blip. While Trump's in charge, I think.
• 29:55
  Speaker 2: They've come to the conclusion, or quickly come into collusion conclusion,
• 29:58
  Speaker 2: that they need to uh prepare for a world that
• 30:02
  Speaker 2: is global deglobalizing, and that the US is not going
• 30:06
  Speaker 2: to be in the center of that of that global
• 30:08
  Speaker 2: economy or that global financial system. And they got to
• 30:11
  Speaker 2: figure that out. You know, maybe we get lucky from
• 30:14
  Speaker 2: their perspective, they get lucky, and things kind of reverse,
• 30:17
  Speaker 2: you know, on the other side of the next presidential election.
• 30:20
  Speaker 2: But I think increasingly they're not counting on that. Uh,
• 30:23
  Speaker 2: They're they're making they're making decisions that I think are
• 30:28
  Speaker 2: going to be pretty difficult to reverse going forward. I mean,
• 30:31
  Speaker 2: I think it's understandable that they are worried about the
• 30:35
  Speaker 2: reliability of the US, you know, going forward. I mean
• 30:38
  Speaker 2: they're seeing the really, uh, the kind of the fragility
• 30:43
  Speaker 2: of the kind of the American uh governance, the way
• 30:46
  Speaker 2: we govern ourselves. Who would have thought that, you know,
• 30:50
  Speaker 2: a president could do some of the things that are
• 30:52
  Speaker 2: being done here. And I'm not even debating whether they're
• 30:55
  Speaker 2: good or bad, just the fact that they're being done right,
• 30:59
  Speaker 2: and they're saying, oh, oh my gosh, what I didn't.
• 31:02
  Speaker 1: Know the US was the poster child for rules based Yeah, no, no, no, no,
• 31:07
  Speaker 1: there are rules for you know, when we decide to
• 31:10
  Speaker 1: go into a country.
• 31:11
  Speaker 2: Yeah, to be Frank Chuck, I, I'm also surprised by
• 31:17
  Speaker 2: all this. And so the rest of the world is saying, oh,
• 31:21
  Speaker 2: I thought the US was on more solid ground than
• 31:25
  Speaker 2: it actually is. And if that's the case, I don't
• 31:28
  Speaker 2: care who the next president is, because the next one
• 31:31
  Speaker 2: after that could take a very different turn.
• 31:34
  Speaker 1: Have you Well, I feel like Europe, at least the
• 31:38
  Speaker 1: Western European leaders, right Germany, France, in the UK, to
• 31:43
  Speaker 1: a lesser extent, Italy, they seem to they seem to realize, hey,
• 31:48
  Speaker 1: they've got to strength in the EU, they've got to
• 31:50
  Speaker 1: strengthen what they're doing. But have you seen evidence that
• 31:56
  Speaker 1: China has been able to take advantage of the US
• 32:01
  Speaker 1: being in global retreat?
• 32:03
  Speaker 2: No, I mean they've got they have their own set
• 32:05
  Speaker 2: of problems and issues, right, I mean some cyclical more
• 32:09
  Speaker 2: and some more structural. I mean cyclical. Is they came
• 32:12
  Speaker 2: into this with a real estate sector that was just
• 32:15
  Speaker 2: a basket case that you know, we had our global
• 32:18
  Speaker 2: financial crisis back fifteen years ago, the housing market collapse.
• 32:21
  Speaker 2: They've been going through a similar kind of dynamic here
• 32:23
  Speaker 2: in recent years and in the wake of the pandemic,
• 32:26
  Speaker 2: and that has been a real problem for.
• 32:28
  Speaker 1: This And they still have a youth unemployment problem too.
• 32:31
  Speaker 2: Yeah, they do. I mean they've got all kinds of
• 32:32
  Speaker 2: structural longer term structural issues. Is the demographic issues or
• 32:36
  Speaker 2: the population is like they you know, those countries that
• 32:41
  Speaker 2: embrace immigration, they are the most successful countries long run,
• 32:47
  Speaker 2: and especially in a world where the demographics are such
• 32:51
  Speaker 2: that everyone's aging and the population is declining. And that's
• 32:54
  Speaker 2: now China's problem. So they've got that issue that you know.
• 32:57
  Speaker 2: And I also think they've got an issue with democratic
• 33:00
  Speaker 2: government and the ability to manage a complex economy with
• 33:04
  Speaker 2: an autocratic leader. I think that's an issue. So, you know,
• 33:08
  Speaker 2: I think China's got its own set of problems and
• 33:10
  Speaker 2: they've not been able to take advantage. But it's not
• 33:13
  Speaker 2: like they're standing still, right. They're also now thinking about
• 33:16
  Speaker 2: they're reornering their supply chains and where they're exporting to
• 33:19
  Speaker 2: and who they're relying on I mean, they're no longer
• 33:22
  Speaker 2: exporting as much to us, but they're exporting a lot
• 33:24
  Speaker 2: more to Europe. So you know, they're figuring it out
• 33:26
  Speaker 2: and they're adjusting like everybody else. But they've got their
• 33:29
  Speaker 2: issues as well, so it's made it more difficult for
• 33:31
  Speaker 2: them to kind of And at the end of the day,
• 33:33
  Speaker 2: no country benefited more from globalization than China, right, So
• 33:37
  Speaker 2: I mean, if you're going to deglobalize, you would think
• 33:40
  Speaker 2: all else being equal, they'd be you know, one of
• 33:42
  Speaker 2: the casualties of that into signal.
• 33:44
  Speaker 1: Well and theory, that's why we're doing that, right, the
• 33:46
  Speaker 1: whole motivation, that's what historical motivation, frankly left and right
• 33:50
  Speaker 1: has been. Hey, the rise of China has been bad
• 33:52
  Speaker 1: for America. We ought to slow their rise, right, And.
• 33:55
  Speaker 2: I you know, I think there's some validity to that argument,
• 33:58
  Speaker 2: although you know, I go back to Obama in the
• 34:02
  Speaker 2: Transpacific Partnership deal. I mean, there was a general sense
• 34:06
  Speaker 2: that China was not playing fair. They didn't do what
• 34:08
  Speaker 2: they promised to do if we allowed them to enter
• 34:11
  Speaker 2: into the global economic system. Uh, And the result of
• 34:16
  Speaker 2: the strategy was, Okay, we're gonna have this free trade
• 34:18
  Speaker 2: deal with all the Pacific rim nations, including the US,
• 34:20
  Speaker 2: excluding China, because they didn't play fair, and the idea
• 34:24
  Speaker 2: was that that would force them to start playing by
• 34:26
  Speaker 2: the rules. Of course, I got blown up right away
• 34:28
  Speaker 2: on the President Trump's first term.
• 34:30
  Speaker 1: What are you one of the potential big moments in
• 34:35
  Speaker 1: the world of trade in the economy is going to
• 34:37
  Speaker 1: be the renewal if there is one of the NAFTA,
• 34:41
  Speaker 1: also known as US.
• 34:45
  Speaker 2: By the way, you have to say kuzma in Canada
• 34:47
  Speaker 2: they call it KUZMA Canada, USMC Mexico.
• 34:51
  Speaker 1: Because it's Canada US Sure, is that MusmA? And is
• 34:54
  Speaker 1: it what MUSCA that I don't know?
• 34:57
  Speaker 2: I don't know, Yeah, I don't know.
• 35:00
  Speaker 1: Obviously, I feel like both Mexico and Canada have decided.
• 35:04
  Speaker 1: Krne and Scheinbaumer are like, hey, let's just preserve status
• 35:07
  Speaker 1: quo for as long as we can. So whatever we
• 35:09
  Speaker 1: can do to just you know, buy another year before
• 35:12
  Speaker 1: we negotiate, buy more time, which which I strategically get.
• 35:16
  Speaker 1: But what are you going to be looking for in
• 35:19
  Speaker 1: the US posture on the USMCA. That will tell you
• 35:22
  Speaker 1: a little bit more about what this economy starts to
• 35:25
  Speaker 1: look like in the next couple of years.
• 35:27
  Speaker 2: Well, you know this is going to come to a
• 35:29
  Speaker 2: head here pretty quickly, right, because the USMCA has to
• 35:32
  Speaker 2: be renegotiated in the next few months. So you know,
• 35:36
  Speaker 2: if the if the administration president doesn't focus on Mexico
• 35:40
  Speaker 2: Canada in the next month, two or three, then I
• 35:44
  Speaker 2: would think we're going to sail through pretty quickly here.
• 35:48
  Speaker 2: And you know, I'm increasing on the mind that that's
• 35:49
  Speaker 2: what's going to happen, because this goes to the affordability issue. Right,
• 35:54
  Speaker 2: I'm with you.
• 35:54
  Speaker 1: I assume sometimes they're not going to mess with something
• 35:57
  Speaker 1: and then you're like, all of a sudden, you made
• 35:59
  Speaker 1: a say do you know what I want to go
• 36:00
  Speaker 1: after the Mexican cartels, and it totally blows up the
• 36:03
  Speaker 1: entire trade pill.
• 36:04
  Speaker 2: Yeah, no, that's true. But I think he's I think
• 36:07
  Speaker 2: the kind of the the the key here is the election,
• 36:10
  Speaker 2: and everything is focused on the election, and there is
• 36:14
  Speaker 2: a clear understanding I think politically that affordability is top
• 36:18
  Speaker 2: of mind for the voter. You could see the last
• 36:21
  Speaker 2: you know, special elections and in the sentiment surveys. So
• 36:25
  Speaker 2: if that's the case, you know, maybe I'm you know,
• 36:28
  Speaker 2: tariffs are pretty obviously not good for affordability. I mean,
• 36:31
  Speaker 2: it's pretty obvious, and everybody knows it, including the American electorate.
• 36:35
  Speaker 2: They know that that's not a good idea. They're paying
• 36:37
  Speaker 2: a lot more for everything that they're importing. Important we
• 36:40
  Speaker 2: import a lot of stuff. So in that context, you know,
• 36:44
  Speaker 2: it doesn't feel like you'd pick a fight. You know,
• 36:46
  Speaker 2: with China Mexico they're you know, big trading partners, you know,
• 36:50
  Speaker 2: just nail that down. The USMCA, you know, put some
• 36:53
  Speaker 2: pressure to make sure there's more US content in the
• 36:57
  Speaker 2: production that occurs, tweak the rules, but don't, you know,
• 37:01
  Speaker 2: don't pick a fight. That would be my sense of things.
• 37:03
  Speaker 2: So when you ask what am I looking for? I'm
• 37:06
  Speaker 2: looking for whether that gets on the radar screen on
• 37:09
  Speaker 2: true Social anytime in the next you know, four to six, eight.
• 37:13
  Speaker 1: Weeks, because saying you actually hope it's he's not focused
• 37:16
  Speaker 1: on it.
• 37:17
  Speaker 2: Yeah, he's focused. There's focus on other stuff when there's
• 37:20
  Speaker 2: plenty of stuff, you know obviously.
• 37:21
  Speaker 1: Right, all right, let me ask a few sort of
• 37:24
  Speaker 1: parochial questions. I have a soon to be college grad.
• 37:30
  Speaker 1: What's the job market look like for new college graduates?
• 37:33
  Speaker 2: These days. It's tough, Chuck, I mean really tough.
• 37:38
  Speaker 1: I mean, let's just say we're discovering this and we're
• 37:40
  Speaker 1: still five months away. Yeah, it's stuff out there. Yeah,
• 37:43
  Speaker 1: really tough.
• 37:44
  Speaker 2: And it goes back to the hiring freeze, right, I mean,
• 37:47
  Speaker 2: who needs to get hired. It's your your your, your kid,
• 37:51
  Speaker 2: you know that's graduating from school. I mean the last
• 37:54
  Speaker 2: graduating class has really struggled. Unemployment is you know, up
• 37:59
  Speaker 2: a lot, you know in that particular group twenty somethings. Oh,
• 38:03
  Speaker 2: here's an interesting stat if you go look at unemployment
• 38:07
  Speaker 2: by educational attainment, the increase in unemployment over the past
• 38:12
  Speaker 2: couple of years has been entirely for college educated. If
• 38:16
  Speaker 2: you look at folks with no high school degree or
• 38:21
  Speaker 2: a high school degree or some college, they're unemployment rate.
• 38:24
  Speaker 2: It hasn't gone down, but it has not really gone up.
• 38:26
  Speaker 2: It's really college educated.
• 38:28
  Speaker 1: There's still an income gap between having and not right, Yeah, okay, but.
• 38:33
  Speaker 2: It's just the historically that if you got a college degree,
• 38:37
  Speaker 2: you're golden, right, your unemployment rate was going to be low,
• 38:39
  Speaker 2: and it's going to be much lower than it and
• 38:41
  Speaker 2: it's not going to rise more quickly in an environment
• 38:44
  Speaker 2: like the current one, but that goes back I think
• 38:46
  Speaker 2: to AI. It's starting to have an impact. That goes
• 38:49
  Speaker 2: back to the hiring rates, and the college educated would
• 38:51
  Speaker 2: be the folks that we could get substituted out by AI,
• 38:53
  Speaker 2: and that's where the issues are.
• 38:54
  Speaker 1: So you got all the parents and said, hey, we
• 38:58
  Speaker 1: got to make sure our kids know how to OWD.
• 39:01
  Speaker 2: I know, I know, And now it's it's all about
• 39:05
  Speaker 2: embracing artificial intelligence. It really is. You've just got to
• 39:08
  Speaker 2: embrace it, and you know it's got to be yours.
• 39:11
  Speaker 2: So and I'm not sure you know, kids are getting
• 39:14
  Speaker 2: the right kind of education in school. I mean, the
• 39:16
  Speaker 2: faculty just aren't there yet. And that's a problem. So
• 39:19
  Speaker 2: you've got to do it almost on your own. You
• 39:20
  Speaker 2: got to go out and do it. But you got
• 39:22
  Speaker 2: you got to embrace it. You got to you got
• 39:24
  Speaker 2: to be able to use it effectively because that's that's
• 39:27
  Speaker 2: definitely where the jobs are.
• 39:29
  Speaker 1: You know. It's interesting and I again I'm projecting on
• 39:32
  Speaker 1: my own personal experiences, but they the new college president
• 39:36
  Speaker 1: of my younger my youngest UH is at s m
• 39:40
  Speaker 1: U and the new president there I HEARDAM and it
• 39:43
  Speaker 1: used to be at UT he has j Hertzel, Jay Hartzell,
• 39:47
  Speaker 1: He gut terrific. He's a good guy. He's got a
• 39:50
  Speaker 1: theory that classical education is actually going to make a comeback.
• 39:55
  Speaker 1: That that with. You know, we went basically a generation
• 39:59
  Speaker 1: of specialization, right You and I went to college and
• 40:01
  Speaker 1: there were still English majors. Then all of a sudden
• 40:04
  Speaker 1: we said we're not going to have any more English majors.
• 40:05
  Speaker 1: I mean, there's a university right down the street where
• 40:07
  Speaker 1: I live. They you know, it was a headline when
• 40:10
  Speaker 1: they just decided, hey, you can't major in English anymore
• 40:12
  Speaker 1: at Marymount here in Arlington. And suddenly, you know, that
• 40:15
  Speaker 1: became an contagious thing. And his theory is that actually
• 40:20
  Speaker 1: that's going to come back, and maybe that'll be it,
• 40:23
  Speaker 1: that'll be a good outcome. But we're but essentially you've
• 40:25
  Speaker 1: got to rewire universities to be able to do that,
• 40:28
  Speaker 1: right Yeah.
• 40:29
  Speaker 2: I think that there's a lot of validity to that.
• 40:32
  Speaker 2: You know, getting that degree in philosophy might not be
• 40:37
  Speaker 2: a bad idea. It's really about learning a framework for
• 40:41
  Speaker 2: thinking and being creative. And I don't know you get
• 40:46
  Speaker 2: that if you go to you know, undergrad business school.
• 40:49
  Speaker 2: You know, or you're you know, just I don't think
• 40:51
  Speaker 2: you get that, or you trained for pre law, you
• 40:54
  Speaker 2: know that kind of thing. So I think the way
• 40:56
  Speaker 2: we think about education is changing very rapid and I
• 41:00
  Speaker 2: think there's some real valility to that. But I think
• 41:03
  Speaker 2: to answer your question, what should your kid do, it's
• 41:06
  Speaker 2: really about, you know, go find something, some project that
• 41:12
  Speaker 2: embodies AI, embrace it and they show that, you know,
• 41:17
  Speaker 2: you've mastered the ability to harness the power of AI.
• 41:21
  Speaker 2: Because that's what I'm looking I'll tell you that's what
• 41:23
  Speaker 2: I'm looking for when I interview potential can and we're
• 41:26
  Speaker 2: not hiring a whole lot, but when we hire, that's
• 41:28
  Speaker 2: the kind of person I want, you know, someone who's
• 41:30
  Speaker 2: shown not so much that they got a degree from
• 41:33
  Speaker 2: you know, XYZ university. That's not what I care about anymore.
• 41:36
  Speaker 2: It's really do they show that initiative, that they've gone
• 41:39
  Speaker 2: out and done something and proven that they have that skill.
• 41:44
  Speaker 1: Having good life insurance is incredibly important. I know from
• 41:48
  Speaker 1: personal experience. I was sixteen when my father passed away.
• 41:51
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• 41:53
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• 41:58
  Speaker 1: sixteen trying to figure out how am I going to
• 41:59
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• 42:03
  Speaker 1: one life insurance policy that we found wasn't a lot,
• 42:06
  Speaker 1: but it was important at the time, and it's why
• 42:09
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• 42:12
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• 42:16
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• 42:18
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• 42:31
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• 42:47
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• 43:19
  Speaker 1: insurance is something you should really think about, especially if
• 43:22
  Speaker 1: you've got a growing family. Let me shift to housing.
• 43:30
  Speaker 1: I thought it was interesting to hear Donald Trump used
• 43:33
  Speaker 1: language that I might have heard Bernie Sanders use, which is,
• 43:36
  Speaker 1: corporations don't live in homes. People do when he talks
• 43:39
  Speaker 1: about Yeah, when he wanted to talk about banning sort
• 43:43
  Speaker 1: of corporate private equity from buying up single family homes, right,
• 43:48
  Speaker 1: I think you know, that's the populace in him. Right,
• 43:50
  Speaker 1: he knows like be careful where you walk down. I
• 43:53
  Speaker 1: think he frankly politically, that's he's certainly articulating it. I
• 43:58
  Speaker 1: think in the right way. Is this a good time
• 44:02
  Speaker 1: to buy a home.
• 44:04
  Speaker 2: It's still very unaffordable right for most Americans, you know,
• 44:10
  Speaker 2: even with the recent decline in mortgage rates. One of
• 44:14
  Speaker 2: the proposals he made yesterday was for Fanny Main and Fredimac,
• 44:18
  Speaker 2: the big mortgage companies, to go out and buy mortgage
• 44:21
  Speaker 2: bonds in an effort to bring down mortgage rates. So
• 44:23
  Speaker 2: mortgage rates actually have fallen today and we're now closer
• 44:26
  Speaker 2: to six percent on a thirty year fix. But even
• 44:28
  Speaker 2: if that's where they settle six percent, you know, the
• 44:31
  Speaker 2: monthly mortgage payment on a typical home, a median priced
• 44:35
  Speaker 2: home is probably going to be two thousand, two thousand
• 44:39
  Speaker 2: and two hundred and fifty in that ballpark. That's double
• 44:42
  Speaker 2: what it was before the pandemic, and so for most
• 44:45
  Speaker 2: Americans that's still very unaffordable. So the answer your question
• 44:48
  Speaker 2: is, is a good time to buy? You know not? You know,
• 44:52
  Speaker 2: I don't want I'm gonna paying with a broad I'm
• 44:54
  Speaker 2: paying with a broad brush. It really depends on where
• 44:56
  Speaker 2: you are and what kind of helm you're looking for,
• 44:58
  Speaker 2: But generally speaking, it's still better probably to rent than
• 45:01
  Speaker 2: to buy.
• 45:02
  Speaker 1: Uh. Well, let's look at it from the other perspective,
• 45:05
  Speaker 1: because you hear that this is actually kind of a problem.
• 45:07
  Speaker 1: You have a lot of older folks who are not selling. Yeah, right,
• 45:14
  Speaker 1: because it's not that they don't want to profit from
• 45:19
  Speaker 1: their house. They can't. You might sell something, but you
• 45:22
  Speaker 1: can't afford to go replace right where you live? Is
• 45:25
  Speaker 1: this a good time to sell a house.
• 45:28
  Speaker 2: Uh. Probably, Probably it's a difficult time to sell because
• 45:34
  Speaker 2: the aren't a lot of buyers. It's a pretty.
• 45:37
  Speaker 1: Start, even though inventory is narrow and small, because in theory,
• 45:40
  Speaker 1: you would think with a with you know, we still
• 45:43
  Speaker 1: we still have a housing shortage in this country. Correct. Yeah,
• 45:46
  Speaker 1: when theory right, by the laws of supply and demand,
• 45:49
  Speaker 1: should be a good time to sell.
• 45:51
  Speaker 2: Yeah, it's just that they're not a lot of you know,
• 45:54
  Speaker 2: at the price points that you want to sell at,
• 45:56
  Speaker 2: you're not going to find a lot of buyers that
• 45:57
  Speaker 2: can afford it, at least not yet. I mean, there
• 46:00
  Speaker 2: is a proposal, and I think it's a good one
• 46:02
  Speaker 2: because I made it with a few other colleagues where
• 46:08
  Speaker 2: you would raise the capital gains exclusion on homes and
• 46:13
  Speaker 2: I probably limited to seniors people over the age of
• 46:16
  Speaker 2: sixty five because one of the problems is you've got
• 46:20
  Speaker 2: these older homeowners that are living in these big homes
• 46:23
  Speaker 2: that they made sense when they had kids, but they're
• 46:25
  Speaker 2: empty nesters. They don't want to sell. They're sitting in
• 46:27
  Speaker 2: New York, they're sitting in California, they're sitting in Miami,
• 46:31
  Speaker 2: and uh, the capital gains Uh, just doesn't make sense.
• 46:36
  Speaker 2: You know, if you wait and you die and you
• 46:37
  Speaker 2: and you bequeath, you get stepped up basis, so you
• 46:40
  Speaker 2: don't play that capital gains tax. So people are doing that,
• 46:43
  Speaker 2: and so you got a lot of It's a lot
• 46:45
  Speaker 2: more than I think as well well understood that got
• 46:49
  Speaker 2: a lot of those folks that are sitting in homes
• 46:51
  Speaker 2: that they really would sell if they could, you know,
• 46:54
  Speaker 2: reduce that capital gains exclusion. So I in that exclusion that.
• 46:58
  Speaker 1: Two fifty used to be fifty per person, right.
• 47:01
  Speaker 2: For an individual, five hundred k for a couple couple, right,
• 47:04
  Speaker 2: So that was said in nineteen ninety seven. So if
• 47:07
  Speaker 2: you just index that to say inflation double to five
• 47:12
  Speaker 2: hundred k and a million, and you would get a
• 47:14
  Speaker 2: lot more of those homes being sold and you get
• 47:18
  Speaker 2: to start of the market movement.
• 47:19
  Speaker 1: That's what I would seems like. I mean, given this,
• 47:22
  Speaker 1: I mean that seems like a no brainer. Why is
• 47:24
  Speaker 1: that a difficult policy to get proposed to, Chuck? I mean,
• 47:28
  Speaker 1: you know everything well on this one, I don't, I mean,
• 47:31
  Speaker 1: because this is one no there's a lot of support,
• 47:33
  Speaker 1: right who I think this is a left right easy layout?
• 47:37
  Speaker 2: Well, yeah, I think there is a lot of support
• 47:40
  Speaker 2: on both the Republican and Democrats. And in fact that
• 47:42
  Speaker 2: there's a reconciliation bill. If we get another piece of.
• 47:45
  Speaker 1: And you would expect that in there.
• 47:46
  Speaker 2: I think that might make it through.
• 47:48
  Speaker 1: I think even the recon Yeah, well I'm torn on reconciliation,
• 47:53
  Speaker 1: meaning I think Trump, it's my understanding Trump is just
• 47:58
  Speaker 1: lost interest in Congress. Uh huh, and that there's a
• 48:01
  Speaker 1: lot of Republicans nervous that even though they want to
• 48:04
  Speaker 1: do a reconciliation, he doesn't want to do the heavy
• 48:06
  Speaker 1: lift this time. He already did it once. I don't
• 48:09
  Speaker 1: need to. I don't want to have to do it.
• 48:11
  Speaker 1: Let me just go around Congress. So I don't know
• 48:13
  Speaker 1: if we're going to Like I assume reconciliation was going
• 48:16
  Speaker 1: to happen, right, why wouldn't you? And I've been not
• 48:20
  Speaker 1: I want to say, waved off, but like, don't be shocked.
• 48:23
  Speaker 1: He isn't interested in the moment.
• 48:25
  Speaker 2: Oh interesting. Interesting, that may change pretty quickly if the
• 48:28
  Speaker 2: economy doesn't cooperate, if we start losing jobs as a
• 48:32
  Speaker 2: the you know holding you know where we are, and
• 48:34
  Speaker 2: he started and there's some worry about how the election
• 48:36
  Speaker 2: plays out as a result, maybe get a quick change here,
• 48:39
  Speaker 2: but reconciliation may not be that easy either, right, Chuck,
• 48:42
  Speaker 2: I mean, I mean not that feels like it's getting
• 48:46
  Speaker 2: more and more independent from you know, the executive branch now,
• 48:49
  Speaker 2: and it's not clear that you can marshal the votes,
• 48:52
  Speaker 2: you know, even to get a majority in the House.
• 48:54
  Speaker 2: So it's not clear that that would happen even if
• 48:56
  Speaker 2: they wanted to.
• 48:57
  Speaker 1: I'm actually entertaining the idea that the the current majority
• 49:01
  Speaker 1: party could lose its status before November looking at all
• 49:05
  Speaker 1: of the you know, just you know, you had a
• 49:09
  Speaker 1: lawmaker and a car accident, you had somebody dropped dead. Surprise.
• 49:12
  Speaker 1: You know, this is it. You know, it's called actuary tables.
• 49:16
  Speaker 1: Stuff happens, you.
• 49:17
  Speaker 2: Know, stuff happens interesting, right.
• 49:19
  Speaker 1: And our margins are so close, so so who knows there, Well,
• 49:23
  Speaker 1: let me get you out of here on this. Which
• 49:24
  Speaker 1: is you? You, I assume live in a world of
• 49:27
  Speaker 1: always trying to understand there's always risk, there's always risk
• 49:31
  Speaker 1: that can impact the economy. If you were to prioritize
• 49:35
  Speaker 1: the levels of risk that could just sort of up
• 49:37
  Speaker 1: into our economy. You know, what's concerning you the most
• 49:44
  Speaker 1: at the moment.
• 49:46
  Speaker 2: Yeah, and you know, I have this what I call
• 49:48
  Speaker 2: risk matrix. I have to show it to you one
• 49:50
  Speaker 2: of these days. The horizontal axis is the loss economic
• 49:54
  Speaker 2: loss if the risk were to occur. The y axis
• 49:56
  Speaker 2: the probability risk. Because there's so many it's hard to
• 49:59
  Speaker 2: keep my mind around them, right, But I would say,
• 50:03
  Speaker 2: you know, the thing that, aside from when I ask
• 50:08
  Speaker 2: people that question, uh, you know, what's bothering you, what's
• 50:11
  Speaker 2: worrying you? When I hear the word geopolitical risk, I think, okay, sure,
• 50:17
  Speaker 2: but that's a pretty amorphous kind of you know, risk,
• 50:21
  Speaker 2: and that's always there and I think that, But I
• 50:23
  Speaker 2: think it's fair to say at this point in time,
• 50:25
  Speaker 2: that feels elevated, you know, given what's going on the
• 50:28
  Speaker 2: what's going on in Venezuela, which you can see, what's
• 50:31
  Speaker 2: going on in Iran, you know, China and Taiwan, Russia
• 50:35
  Speaker 2: and Ukraine. Feels like that's pretty elevated risk. But I
• 50:39
  Speaker 2: think more concretely, I worry about going back to the
• 50:43
  Speaker 2: stock market, right, I mean, it is being driven by
• 50:47
  Speaker 2: euphoria over this technology AI and uh it's you know,
• 50:54
  Speaker 2: very unproven that this is actually going to cut these
• 50:58
  Speaker 2: expectations are going to be fulfilled. I mean, investors expect
• 51:01
  Speaker 2: a lot from AI. They expect big adoption and implementation
• 51:04
  Speaker 2: by business, big productivity gains and big profit gains and profitability.
• 51:10
  Speaker 2: And I'm not so sure if the stock market were
• 51:13
  Speaker 2: to correct, and I think that's a real significant possibility
• 51:16
  Speaker 2: that knocks a big leg out of growth and potential
• 51:19
  Speaker 2: for much weaker economy or research.
• 51:22
  Speaker 1: I was reading it somebody's sort of right up with
• 51:26
  Speaker 1: the history of the railroads, yeah, and comparing the first
• 51:30
  Speaker 1: run up of a railroad investment that actually all went
• 51:33
  Speaker 1: belly up. Yeah, and yeah, so yes, everybody was right
• 51:38
  Speaker 1: the railroads were going to transform the economy, right, and
• 51:41
  Speaker 1: they did transform the economy about ten years after a
• 51:44
  Speaker 1: bunch of people lost early bets on that transformation.
• 51:47
  Speaker 2: Yeah, exactly. That's the I think that's the typical history
• 51:51
  Speaker 2: of big technological changes, and so that you know that
• 51:55
  Speaker 2: may not happen to the same degree this go around,
• 51:57
  Speaker 2: but you know, investors are expecting a lot, I mean
• 52:00
  Speaker 2: an awful lot, and they may not get it.
• 52:02
  Speaker 1: Is there anything out there that's like the housing crisis
• 52:04
  Speaker 1: of nine that would create comptasion? Right? Is crypto that
• 52:09
  Speaker 1: way or is AI that way or are both of
• 52:12
  Speaker 1: them small enough that it would be more like frankly,
• 52:15
  Speaker 1: the Internet receptor, the Internet bubble recession of two thousand.
• 52:18
  Speaker 2: No, you know what, Chuck. You know, if there's a problem,
• 52:22
  Speaker 2: it probably will be in the plumbting of the financial system,
• 52:25
  Speaker 2: the funding markets. I mean, if you look at how
• 52:28
  Speaker 2: the government and businesses are funding themselves, you know, they
• 52:31
  Speaker 2: borrow lots of money, and you look at that system there,
• 52:35
  Speaker 2: it just feels very fragile to me, and there's a
• 52:38
  Speaker 2: lot of volatility in that market.
• 52:41
  Speaker 1: What would be the call that's that's sort of like
• 52:43
  Speaker 1: who's who's making the margin call that all of a
• 52:45
  Speaker 1: sudden crumbles.
• 52:46
  Speaker 2: That well, I mean, could it could simply be one
• 52:51
  Speaker 2: of these AI companies does default on some obligation, some dud,
• 52:58
  Speaker 2: and that just changes the of psychology that you know
• 53:02
  Speaker 2: that we're often running here that you know, there's more
• 53:04
  Speaker 2: risk here than we think, and that's that's that's that
• 53:07
  Speaker 2: kind of contagion that could cause creditors to stop lending
• 53:12
  Speaker 2: and the markets to start freezing. Or it could be
• 53:16
  Speaker 2: you know, uh, the Treasury decides to because the deficit
• 53:22
  Speaker 2: is now very large and it's going to balloon here,
• 53:24
  Speaker 2: you know, pretty significantly. They got to issue a lot
• 53:26
  Speaker 2: of debt. Maybe they move from issuing a lot of
• 53:29
  Speaker 2: longer term debt to shorter term debt because they want
• 53:31
  Speaker 2: to keep long term rates down and there's so much
• 53:34
  Speaker 2: debt that, you know, people say, oh my gosh, we
• 53:37
  Speaker 2: can't digest this. And the hedge fund community, which is
• 53:43
  Speaker 2: a big player in these markets, to side this isn't
• 53:45
  Speaker 2: an investment we want to make. They all run for
• 53:47
  Speaker 2: the door at the same time, and we got a
• 53:49
  Speaker 2: funding crisis. So I think it's hard to answer that
• 53:54
  Speaker 2: question because these things are off the radar screen, right.
• 53:57
  Speaker 2: But the thing that makes me nervous is that part
• 54:00
  Speaker 2: of the financial sism, it's the literal plumbing, uh, where
• 54:04
  Speaker 2: businesses and government get their short term cash, get their
• 54:07
  Speaker 2: funding to you know, keep keep the doors open and
• 54:10
  Speaker 2: keep things moving forward. It just feels tenuous to me,
• 54:14
  Speaker 2: you know at this point.
• 54:15
  Speaker 1: Well, it's my understanding. Hemingway is the one who wrote
• 54:18
  Speaker 1: the line that bankruptcy first it happened slowly, then quickly,
• 54:22
  Speaker 1: and like it feels like everything in the financial sector
• 54:24
  Speaker 1: is that way. You're like, something's happening slowly and then
• 54:28
  Speaker 1: all of a sudden, the hockey stick moment comes. Yeah,
• 54:32
  Speaker 1: Katy bar the.
• 54:32
  Speaker 2: Door right exactly, exactly, very much. So that's a great remark.
• 54:38
  Speaker 1: Great to get an update. I don't feel as pessimistic
• 54:42
  Speaker 1: as I did after the last time we talked, but
• 54:44
  Speaker 1: I I definitely feel fairly uneasy.
• 54:48
  Speaker 2: Yeah.
• 54:48
  Speaker 1: Well that's an I wanted you, Todd, go from being
• 54:52
  Speaker 1: from being totally pessimistic to just fairly uneasy. Yeah.
• 54:55
  Speaker 2: Yeah, yeah, that's what that's what I was going for. Yeah, exactly,
• 54:59
  Speaker 2: I got you where I want. Yeah, yeah, all right,
• 55:01
  Speaker 2: did you see I have a glass of wine, so
• 55:02
  Speaker 2: I'm a little bit more mellow than you are.
• 55:04
  Speaker 1: So well, there you go. Uh GDP growth over under
• 55:08
  Speaker 1: three percent for calendar year twenty twenty six.
• 55:12
  Speaker 2: Oh, definitely under two and a half percent. Yeah, definitely
• 55:15
  Speaker 2: under I think that'd be my guess, why do you
• 55:18
  Speaker 2: think three?
• 55:19
  Speaker 1: Just because that's a Donald Trump I feel like three
• 55:21
  Speaker 1: percent is the road. Anything below is sort of static, No,
• 55:26
  Speaker 1: got it?
• 55:26
  Speaker 2: Yeah, no, that's fair. Two and a half percent would
• 55:28
  Speaker 2: be consistent with the economy's potential stable unemployment.
• 55:30
  Speaker 1: Yeah right, there's sort of it's sort of like right,
• 55:34
  Speaker 1: the uh A cost of living adjustment versus a race. Yeah,
• 55:38
  Speaker 1: but right, I feel like two and a half percent
• 55:40
  Speaker 1: is cola. Three percent is growth as a race.
• 55:43
  Speaker 2: That's good, But I caution using GDP, I'm not sure. Yeah,
• 55:47
  Speaker 2: I mean GBGP is this weird thing. We talked a
• 55:50
  Speaker 2: little bit about that. I'd focus on those jobs. I
• 55:52
  Speaker 2: mean in unemployment. So the question is hired a five
• 55:56
  Speaker 2: percent or closer to four percent? You know my baseline.
• 55:59
  Speaker 1: Let me ask this raw jobs. Are we going to
• 56:01
  Speaker 1: be net positive or net negative?
• 56:04
  Speaker 2: You know, I want to say it's we're going to
• 56:07
  Speaker 2: be tough to be in the positive after all the
• 56:10
  Speaker 2: revisions are in. It's going to be tough to be,
• 56:12
  Speaker 2: you know, in positive territory.
• 56:14
  Speaker 1: Hey, very before I let you go, do you care
• 56:16
  Speaker 1: about the prediction markets? Do you monitor them?
• 56:19
  Speaker 2: I watched them, Yeah, I do. I mean for things
• 56:22
  Speaker 2: like who they think the next pet chair is going
• 56:25
  Speaker 2: to be. I think there's some value there. Yeah.
• 56:28
  Speaker 1: It's interesting that Warsh's numbers get stronger, doesn't it.
• 56:32
  Speaker 2: Yeah, it is right. I think he's I think the
• 56:34
  Speaker 2: last I looked, Asset was forty four and he was forty.
• 56:37
  Speaker 1: Yeah, I mean all of the if you were just
• 56:39
  Speaker 1: to judge by Washington commentary.
• 56:41
  Speaker 2: It's hass it, it's acid.
• 56:42
  Speaker 1: Yeah, but I noticed that this is one of the
• 56:45
  Speaker 1: few places where there's been a counter and you're right,
• 56:48
  Speaker 1: that's I'm curious to see if that does.
• 56:51
  Speaker 2: Someone made a fortune betting on Venezuela getting in, you know, Yeah,
• 56:55
  Speaker 2: i'd like to.
• 56:55
  Speaker 1: Yeah, this is why I'm I find them interesting based
• 56:59
  Speaker 1: on who's leaking information. I'm not sure whether they're trustworthy.
• 57:03
  Speaker 2: Good point. That's good point. Good point.
• 57:05
  Speaker 1: Anyway, Hey, well, thank you, I'll see you so
• 57:09
  Speaker 2: H