Latest / Trend Watch / Episode 108: Elections Around the World

Transcript

Episode 108: Elections Around the World · Trend Watch

• 0:04
  SPEAKER_01: Ready to take a deeper look at where history, politics, and economics all intersect?
• 0:10
  SPEAKER_01: Well then, you've come to the right place.
• 0:13
  SPEAKER_01: Each week,
• 0:14
  SPEAKER_01: here's where we pull back the headlines and focus on the big trends,
• 0:18
  SPEAKER_01: the stuff that actually shapes our future.
• 0:21
  SPEAKER_01: Through the noise, we focus on the signal.
• 0:24
  SPEAKER_01: I'm your host, Neil Howe, and this is Trend Watch.
• 0:30
  SPEAKER_01: Today is October 29th, 2026, and this is Trend Watch.
• 0:34
  SPEAKER_01: Welcome back, everybody.
• 0:36
  SPEAKER_01: As usual, I have on my fellow analyst, Christian Ford.
• 0:41
  SPEAKER_01: Christian, how was your week, and what do you plan to do on Halloween?
• 0:46
  SPEAKER_00: Well, my week was good.
• 0:48
  SPEAKER_00: Over the weekend,
• 0:49
  SPEAKER_00: my wife actually ran the Marine Corps Marathon,
• 0:53
  SPEAKER_00: so that was a lot of fun to go watch.
• 0:55
  SPEAKER_01: Oh, wow, that's right.
• 0:56
  SPEAKER_01: I remember.
• 0:57
  SPEAKER_01: Yeah.
• 0:58
  SPEAKER_00: How'd it go?
• 1:00
  SPEAKER_00: It went great.
• 1:01
  SPEAKER_00: Yeah.
• 1:01
  SPEAKER_00: She was, it was her first marathon.
• 1:03
  SPEAKER_00: She's been training for months and she did great.
• 1:05
  SPEAKER_00: It was a lot of fun.
• 1:06
  SPEAKER_00: It's a very festive day in the city.
• 1:09
  SPEAKER_01: So yeah, it's been good.
• 1:11
  SPEAKER_01: How was it?
• 1:11
  SPEAKER_01: How was the temperature that day?
• 1:13
  SPEAKER_01: Oh, it was great.
• 1:15
  SPEAKER_01: It was like 60 degrees.
• 1:16
  SPEAKER_01: It was like about high forties in the morning, you know, didn't
• 1:19
  SPEAKER_00: really go over
• 1:20
  SPEAKER_01: 65.
• 1:20
  SPEAKER_00: So it was perfect.
• 1:21
  SPEAKER_01: It's kind of perfect.
• 1:23
  SPEAKER_01: Keep, keep the, keep the body temperature down.
• 1:26
  SPEAKER_01: Um, That's wonderful.
• 1:28
  SPEAKER_01: And what about your Halloween?
• 1:30
  SPEAKER_00: Well, our block shuts down and has a little block party and all the kids from
• 1:36
  SPEAKER_00: the city ascend on us for candy.
• 1:38
  SPEAKER_00: So just hang out with friends, hand out candy.
• 1:42
  SPEAKER_00: Classic Halloween.
• 1:43
  SPEAKER_00: Well, I'm glad it's safe enough to do that.
• 1:48
  SPEAKER_01: I'm not sure out here if no one would trick or treat us.
• 1:54
  SPEAKER_01: No one's going to send their four-year-old stumbling a half a mile up a gravel road.
• 2:03
  SPEAKER_01: As I sometimes like to say when the darkness is stealing in here in the mountains,
• 2:10
  SPEAKER_01: it's kind of every night is like Halloween, you know?
• 2:15
  SPEAKER_01: Sort of dark and quiet and you don't know what animals are out there.
• 2:22
  SPEAKER_00: Banjo music.
• 2:24
  SPEAKER_01: Oh, yes.
• 2:24
  SPEAKER_01: Yeah, yeah, exactly.
• 2:26
  SPEAKER_01: You know, pan to the banjo music.
• 2:31
  SPEAKER_01: So, great.
• 2:33
  SPEAKER_01: We're going to talk about the economy first.
• 2:37
  SPEAKER_01: I think the news pretty much is going to be a whole bunch of elections.
• 2:41
  SPEAKER_01: Obviously, a little bit on the midterms.
• 2:44
  SPEAKER_01: We've been doing a few podcasts on that.
• 2:47
  SPEAKER_01: So we might as well just touch on the highlights there and then move on
• 2:51
  SPEAKER_01: to Varieta's preview of what elections might look like in France next year.
• 2:58
  SPEAKER_01: And then where are we going to go after that?
• 3:00
  SPEAKER_01: I think we're going to go to Israel, I think, right?
• 3:05
  SPEAKER_01: They just had their elections.
• 3:06
  SPEAKER_01: Where else are we going to go?
• 3:08
  SPEAKER_01: Or is that enough?
• 3:09
  SPEAKER_00: We're going to talk about Brazil.
• 3:11
  SPEAKER_00: There we go.
• 3:12
  SPEAKER_01: Another election.
• 3:15
  SPEAKER_01: And...
• 3:17
  SPEAKER_01: Okay, let's get into it.
• 3:18
  SPEAKER_01: Let's start with the markets.
• 3:22
  SPEAKER_00: All right, Neil.
• 3:22
  SPEAKER_00: Well, the S&P 500 closed down today 0.3%, and over the last five trading days is still up 0.74%.
• 3:31
  SPEAKER_00: Global Dow actually looked a little better today.
• 3:33
  SPEAKER_00: It closed up 0.62%, and over the last five days is up 0.6%.
• 3:38
  SPEAKER_00: VIX closed at 17.20,
• 3:42
  SPEAKER_00: you know,
• 3:42
  SPEAKER_00: a little lower than what we saw last week where we were around 20,
• 3:45
  SPEAKER_00: but elevated from a few weeks ago when we were in the 14 range.
• 3:49
  SPEAKER_00: As for the 10-year treasury,
• 3:50
  SPEAKER_00: that is at 4.943%, only down 1.6 basis points over the last five days.
• 3:57
  SPEAKER_01: Yeah, an interesting pattern there.
• 3:59
  SPEAKER_01: Yeah.
• 4:00
  SPEAKER_01: We've kind of been going back and forth between tech up,
• 4:07
  SPEAKER_01: interest rates up, gold up, energy down, and then everything reversed, right?
• 4:14
  SPEAKER_01: I think that's roughly true.
• 4:17
  SPEAKER_01: And obviously, the tech down days are usually the bigger overall down days for the market.
• 4:25
  SPEAKER_01: I knew we got the Q3 release.
• 4:29
  SPEAKER_01: Then you can kind of talk a little bit about sort of where we think markets are going.
• 4:36
  SPEAKER_00: So we got the GDP growth rate for Q3.
• 4:39
  SPEAKER_00: It came in at 3.4% quarter over quarter, and that's annualized.
• 4:43
  SPEAKER_00: And that was higher than expected.
• 4:45
  SPEAKER_00: The only other news I got for you, Neil, is we had the S&P flash PMIs for October.
• 4:51
  SPEAKER_00: Manufacturing was practically unchanged.
• 4:54
  SPEAKER_00: It was a slight increase to 56.0.
• 4:57
  SPEAKER_00: Services fell a little bit from 58.8 to 57.9.
• 5:02
  SPEAKER_00: But again, these are over 40, significantly over 40.
• 5:05
  SPEAKER_00: So both are still showing strong signs of growth.
• 5:09
  SPEAKER_01: They are red hot numbers.
• 5:11
  SPEAKER_01: You know, we don't see this very much.
• 5:13
  SPEAKER_01: And Q3 at 3.4% is way above what we expect long term.
• 5:21
  SPEAKER_01: Sustainable GDP growth to be in the United States.
• 5:24
  SPEAKER_01: And it was up from plus 2.2% in Q2.
• 5:29
  SPEAKER_01: And I think if you really want a sign of heat, real final sales to domestic purchasers.
• 5:36
  SPEAKER_01: You know what I mean?
• 5:36
  SPEAKER_01: That's kind of like what you can measure actually being transacted here in
• 5:40
  SPEAKER_01: the United States, up 4.9% after inflation.
• 5:46
  SPEAKER_01: Whoa, that's hot to the touch.
• 5:52
  SPEAKER_01: And it's a huge investment component, over a trillion dollars.
• 5:57
  SPEAKER_01: And in fact,
• 5:58
  SPEAKER_01: if you want to look at the BEA,
• 5:59
  SPEAKER_01: looking at the components of this growth,
• 6:05
  SPEAKER_01: of this Of this 3.4%,
• 6:08
  SPEAKER_01: they have 3.27 of it is investment of which IP, intellectual property, was 0.47.
• 6:19
  SPEAKER_01: Non-residential equipment was 1.78.
• 6:23
  SPEAKER_01: And inventories was 1.61.
• 6:25
  SPEAKER_01: And by the way, those inventories, no, we're not just talking about stocking Campbell soup cans.
• 6:31
  SPEAKER_01: Yeah.
• 6:32
  SPEAKER_01: This inventory was chips.
• 6:35
  SPEAKER_01: You know what I mean?
• 6:36
  SPEAKER_01: Particularly memory chips coming in
• 6:41
  SPEAKER_01: from South Korea and just all kinds of tech stuff coming in.
• 6:46
  SPEAKER_01: Residential investment actually dropped.
• 6:48
  SPEAKER_01: It was actually a negative for anything, any investment outside that's not AI related.
• 6:55
  SPEAKER_01: You know,
• 6:57
  SPEAKER_01: what's happening to the American economy, right,
• 7:00
  SPEAKER_01: is when you think about If you're in a sector completely unrelated to AI,
• 7:08
  SPEAKER_01: you're probably suffering a little bit, right?
• 7:10
  SPEAKER_01: I mean,
• 7:10
  SPEAKER_01: wages are going up if you're a business person and your income isn't going up,
• 7:16
  SPEAKER_01: but wages are going up.
• 7:17
  SPEAKER_01: People are spending a little bit less on what you have to offer.
• 7:21
  SPEAKER_01: The dollar is going up.
• 7:23
  SPEAKER_01: And there's actually a term for that.
• 7:25
  SPEAKER_01: It's called the Dutch disease, right?
• 7:28
  SPEAKER_01: This was a term coined by The Economist back in 1977.
• 7:33
  SPEAKER_01: It referred to a time in the 1960s when the Netherlands had huge amounts of revenue
• 7:39
  SPEAKER_01: from gas, natural gas that they were harvesting.
• 7:44
  SPEAKER_01: And they found that they just let the natural gas companies plow all this money back
• 7:49
  SPEAKER_01: to all of their workers and invest a lot.
• 7:54
  SPEAKER_01: And what they found was that the...
• 7:56
  SPEAKER_01: The currency went up and everything became,
• 8:03
  SPEAKER_01: you know,
• 8:04
  SPEAKER_01: everyone sort of lived well,
• 8:06
  SPEAKER_01: but no one outside of the gas industry could compete in international prices, right?
• 8:11
  SPEAKER_01: Because the currency was pushed up so much.
• 8:15
  SPEAKER_01: And so export is suffer and any industry outside of energy suffered.
• 8:23
  SPEAKER_01: And this is the symptom of the Dutch disease, It's been applied very often to the Mideast.
• 8:29
  SPEAKER_01: What does the impact of huge amounts of oil have on a desert economy
• 8:36
  SPEAKER_01: where suddenly you have all this oil causing all this revenue to flow in from all
• 8:40
  SPEAKER_01: over the world?
• 8:41
  SPEAKER_01: Well, it quickly makes your currency...
• 8:45
  SPEAKER_01: So high that nothing else
• 8:47
  SPEAKER_01: that your poor economy could produce could ever be competitive, right?
• 8:51
  SPEAKER_01: So if you're outside of the oil industry,
• 8:53
  SPEAKER_01: you just basically nothing you can sell to the rest of the world.
• 8:56
  SPEAKER_01: And I guess maybe what I'm trying to say here,
• 9:00
  SPEAKER_01: Christian,
• 9:00
  SPEAKER_01: is a sign of just huge imbalance based on one sector sucking in all the investment
• 9:07
  SPEAKER_01: and pushing up the currency.
• 9:09
  SPEAKER_01: And I do think we have a little bit of that going on in the United States right now,
• 9:14
  SPEAKER_01: which may partly explain why Wall Street is happy and Main Street is unhappy
• 9:23
  SPEAKER_01: as
• 9:23
  SPEAKER_01: a result.
• 9:25
  SPEAKER_01: One thing I did want to talk about that really struck me today is Google,
• 9:29
  SPEAKER_01: which fell 12.6% in one day.
• 9:32
  SPEAKER_01: That's like a half a trillion dollars in market cap.
• 9:37
  SPEAKER_01: Disappearing, right, in one day.
• 9:40
  SPEAKER_01: And it's interesting, the reasons.
• 9:44
  SPEAKER_01: And I think this is a sign that maybe this third quarter GDP growth,
• 9:49
  SPEAKER_01: I'm not going to make a forecast here,
• 9:51
  SPEAKER_01: but I do think this could be the high watermark of this surge, right?
• 9:56
  SPEAKER_01: Because if you do look
• 10:01
  SPEAKER_01: at the picks and shovels of the AI economy,
• 10:04
  SPEAKER_01: particularly the The chips in the memory,
• 10:09
  SPEAKER_01: you see a lot of downward pressure right in the markets.
• 10:12
  SPEAKER_01: I mean, we certainly know that, you know, in our own business here.
• 10:16
  SPEAKER_01: But I do begin to see tremors beginning to come to the MAG7.
• 10:27
  SPEAKER_01: It's interesting to look at what caused this fall.
• 10:31
  SPEAKER_01: Their revenue growth was fine.
• 10:34
  SPEAKER_01: They reported a 25% increase in revenue growth driven mostly by cloud services, right?
• 10:40
  SPEAKER_01: But here's the thing.
• 10:42
  SPEAKER_01: The search decelerated, right?
• 10:44
  SPEAKER_01: This is all the revenue they get from their mainstay, right?
• 10:47
  SPEAKER_01: What's always been pushing them.
• 10:48
  SPEAKER_01: That's the revenue from their search engines.
• 10:52
  SPEAKER_01: The queries went up fine.
• 10:55
  SPEAKER_01: But the queries are increasingly AI mode queries, right?
• 10:58
  SPEAKER_01: You go on to Google, what do you see?
• 11:00
  SPEAKER_01: You see the little Gemini AI summary, right?
• 11:04
  SPEAKER_01: And you click on it.
• 11:06
  SPEAKER_01: And every time you click on it, you don't click through to the website.
• 11:09
  SPEAKER_01: So what Google is reporting is that they're getting less revenue per search.
• 11:14
  SPEAKER_01: I mean, if you click on the AI, it's much harder for Google to make money on it, right?
• 11:20
  SPEAKER_00: Right, no advertisement.
• 11:21
  SPEAKER_00: Right.
• 11:21
  SPEAKER_01: Yeah, no advertisements.
• 11:23
  SPEAKER_01: But it's more fundamental than that.
• 11:25
  SPEAKER_01: And it's not, here's the point that I want to make.
• 11:27
  SPEAKER_01: It's not just Google's facing a problem.
• 11:31
  SPEAKER_01: And you can see how Google's facing a problem, right?
• 11:34
  SPEAKER_01: Google no longer has free cash flow.
• 11:35
  SPEAKER_01: Google is a wonderful company with lots of free cash flow.
• 11:39
  SPEAKER_01: It no longer has it.
• 11:40
  SPEAKER_01: And the free cash flow went deeper into the negative.
• 11:43
  SPEAKER_01: It was, I think, minus $9.1 billion in this last quarter.
• 11:48
  SPEAKER_01: Google spent $54 billion in CapEx in Q3, up from $45 billion in Q2.
• 11:56
  SPEAKER_01: So no cash flow.
• 12:01
  SPEAKER_01: Unlike some of these other companies like Apple, they're still getting plenty of cash flow.
• 12:07
  SPEAKER_01: Anyone who's searching for the golden ring, who's competing to
• 12:18
  SPEAKER_01: To complete the Transcontinental Railway and AI,
• 12:21
  SPEAKER_01: which Google's one of them, I just can't help but keep up with everyone else, right?
• 12:27
  SPEAKER_01: You don't want to be a loser in that race.
• 12:30
  SPEAKER_01: But that's part of it.
• 12:32
  SPEAKER_01: But there's something deeper that's going on, I think, that's making people think a little bit.
• 12:38
  SPEAKER_01: And that is, it's not just Google that's going to suffer.
• 12:42
  SPEAKER_01: Because after all, when Google...
• 12:49
  SPEAKER_01: When Google's browser connects billions of people around the world to all
• 12:55
  SPEAKER_01: of these websites, what did they do to all these websites?
• 13:00
  SPEAKER_01: They keep them fed, right?
• 13:03
  SPEAKER_01: They provide revenue.
• 13:05
  SPEAKER_01: They're an essential part of the ecosystem that brings readers to these websites
• 13:11
  SPEAKER_01: and keeps them running, keeps them financially viable.
• 13:15
  SPEAKER_01: I mean, all of these authors,
• 13:17
  SPEAKER_01: all of these companies, all of these newspapers, all of these, you know what I mean?
• 13:24
  SPEAKER_01: All of these businesses, anyone who has anything on the web, Google's an essential part of that.
• 13:31
  SPEAKER_01: And you look at some of these figures about how much on newspapers now,
• 13:35
  SPEAKER_01: their click-throughs are down.
• 13:37
  SPEAKER_01: A lot of people are saying 50% down.
• 13:40
  SPEAKER_01: But here's the point I'm trying to make.
• 13:43
  SPEAKER_01: What happens when people are no longer clicking through?
• 13:46
  SPEAKER_01: These things fold, right?
• 13:49
  SPEAKER_01: These things, no longer are you going to get quality.
• 13:51
  SPEAKER_01: And in other words, the papers themselves are going to fire their reporters.
• 13:55
  SPEAKER_01: They're going to fire their analysts.
• 13:57
  SPEAKER_01: They're going to fire their experts.
• 13:59
  SPEAKER_01: They're just going to put up, if they survive at all, they'll just put up AI slop.
• 14:05
  SPEAKER_01: But think of this.
• 14:07
  SPEAKER_01: The entire large language models are dependent on this universe of people
• 14:15
  SPEAKER_01: who are providing content.
• 14:17
  SPEAKER_01: And now it operates with a lag, right?
• 14:19
  SPEAKER_01: So it's not going to happen right away.
• 14:21
  SPEAKER_01: But as soon as you start killing people,
• 14:25
  SPEAKER_01: What I call killing the host, the parasite, which is AI, right?
• 14:30
  SPEAKER_01: Because the AI,
• 14:32
  SPEAKER_01: the large language models depend
• 14:33
  SPEAKER_01: upon all these creative humans putting all this content up there.
• 14:38
  SPEAKER_01: Once that starts to fold, the entire ecosystem begins to fold.
• 14:43
  SPEAKER_01: This is larger than just Google.
• 14:45
  SPEAKER_01: You see where I'm going with this?
• 14:47
  SPEAKER_00: Right.
• 14:48
  SPEAKER_00: Well, even I guess what you're saying,
• 14:50
  SPEAKER_00: Neil, here is Gemini in a way is killing itself because of its...
• 14:55
  SPEAKER_00: It is.
• 14:55
  SPEAKER_00: Learning from these websites,
• 14:57
  SPEAKER_00: and then no one's going to the website, so we'll have nothing to learn from.
• 15:01
  SPEAKER_01: Very succinctly put.
• 15:07
  SPEAKER_01: But it's kind of tragic in a way.
• 15:09
  SPEAKER_01: There's something kind of Shakespearean about it because Google had no choice but
• 15:14
  SPEAKER_01: to put Gemini up on the page.
• 15:16
  SPEAKER_01: You know why?
• 15:17
  SPEAKER_01: Because if Google didn't put Gemini up on their search engines,
• 15:21
  SPEAKER_01: people would no longer come to Google anymore.
• 15:24
  SPEAKER_01: They would go straight to the search.
• 15:26
  SPEAKER_01: They would go straight to Anthropic or they'd go to Cloud or Chat 5 or,
• 15:29
  SPEAKER_01: you know, they'd go somewhere else.
• 15:31
  SPEAKER_01: They'd go to DeepSeek and DeepSeek would connect them, you know, would tell them.
• 15:36
  SPEAKER_01: So you see the problem?
• 15:38
  SPEAKER_01: It wasn't Google.
• 15:39
  SPEAKER_01: Google's hand was forced.
• 15:41
  SPEAKER_01: And I think that Google knew from the very beginning that it hated to do this.
• 15:46
  SPEAKER_01: Now, Gemini is supposed to be, you know, quality-wise, it's supposed to be right up there.
• 15:50
  SPEAKER_01: I mean, I don't know.
• 15:51
  SPEAKER_01: It's what I hear.
• 15:53
  SPEAKER_01: I'm like Will Rogers.
• 15:55
  SPEAKER_01: I know what's in the news, right?
• 15:57
  SPEAKER_01: But every time I see it rated, it's not a bad language model.
• 16:05
  SPEAKER_01: It's pretty good.
• 16:06
  SPEAKER_01: But that's not the point.
• 16:08
  SPEAKER_01: The point is that if Google had a choice, it wouldn't have done that.
• 16:12
  SPEAKER_01: It's kind of like a prisoner's dilemma problem, right?
• 16:15
  SPEAKER_01: It's the kind of thing.
• 16:17
  SPEAKER_01: I'll come back to my Transcontinental Railroad example.
• 16:20
  SPEAKER_01: If you had some trunk line that just went from Buffalo to Philadelphia
• 16:28
  SPEAKER_01: and you just had a bunch of lines like that competing with each other,
• 16:30
  SPEAKER_01: they could have been fine just competing with each other
• 16:33
  SPEAKER_01: in these different little trunk lines.
• 16:35
  SPEAKER_01: But once one line decides to build a transcontinental railroad out to San Francisco,
• 16:45
  SPEAKER_01: Well,
• 16:45
  SPEAKER_01: then everyone has to do it because no one wants to be the subsidiary to
• 16:50
  SPEAKER_01: the one transcontinental.
• 16:52
  SPEAKER_01: You see what I mean?
• 16:53
  SPEAKER_01: It's like everyone would have made more money if no one built the transcontinental.
• 16:59
  SPEAKER_01: But once one does,
• 17:00
  SPEAKER_01: they all have to,
• 17:02
  SPEAKER_01: which is why the MAG7 companies that are in this race are the ones
• 17:08
  SPEAKER_01: that are losing their moats,
• 17:11
  SPEAKER_01: losing their uniqueness,
• 17:13
  SPEAKER_01: Once AI is in place,
• 17:16
  SPEAKER_01: an AI can become the agent between you and whatever you're trying to do.
• 17:22
  SPEAKER_01: And I think it's telling.
• 17:23
  SPEAKER_01: I mentioned earlier, Apple.
• 17:25
  SPEAKER_01: Why isn't Apple in the race?
• 17:27
  SPEAKER_01: Because it still has a moat, right?
• 17:30
  SPEAKER_01: It still has a device.
• 17:32
  SPEAKER_01: And that makes it a unique position.
• 17:34
  SPEAKER_01: I think Apple can wait until this thing crashes.
• 17:37
  SPEAKER_01: AI gets really cheap and then can just contract with anybody, right?
• 17:42
  SPEAKER_01: In other words,
• 17:43
  SPEAKER_01: it's the moat,
• 17:45
  SPEAKER_01: the existence of a moat, and it's possible destruction that is forcing people.
• 17:50
  SPEAKER_01: And the way I sometimes put it is, this is not just a case of greed by the MAG-7.
• 17:57
  SPEAKER_01: It's also a case of fear, right?
• 18:00
  SPEAKER_01: Right.
• 18:02
  SPEAKER_01: Both things are at work.
• 18:03
  SPEAKER_01: All right.
• 18:04
  SPEAKER_01: With that, let's move on to the midterms.
• 18:08
  SPEAKER_01: Yeah.