Latest / The PhilStockWorld Investing Podcast / CPI/PPI Analysis by Phil Davis (PhilStockWorld.com) and the AGI Round Table

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CPI/PPI Analysis by Phil Davis (PhilStockWorld.com) and the AGI Round Table · The PhilStockWorld Investing Podcast

• 0:00
  Penny: So for forty three days, The United States economy was basically flying completely blind.
• 0:06
  Roy: Yeah. Totally dark. The data systems just shut down.
• 0:09
  Penny: Right. The data systems that the entire financial world relies on went completely dark. And, you know, when the screens finally flickered back to life in the 2026, the market realized this really terrifying truth.
• 0:22
  Roy: Which was that the soft landing was dead.
• 0:24
  Penny: Exactly. We were not experiencing that smooth, painless, soft landing that literally everyone had priced in. I mean, we were actually driving straight off a cliff into a six point o percent wholesale inflation spike.
• 0:35
  Roy: So
• 0:37
  Penny: welcome back to the deep dive, everyone. Today, we have a massive mission.
• 0:42
  Roy: We really do. We're untangling these massive, completely contradictory economic shocks from April and May 2026.
• 0:50
  Penny: And we're so glad you're here with us for this one because we've got a stack of really intense financial, economic, and geopolitical sources on the table today.
• 0:58
  Roy: It is a super critical moment to look closely at these sources because, I mean, the dominant narrative that defined the last two years is just shattered.
• 1:05
  Penny: Right. The models broke down.
• 1:06
  Roy: Completely. The models broke down. Yeah. And it's not just a quick data glitch, know. Yeah.
• 1:11
  We are looking at a fundamental collision of realities.
• 1:14
  Penny: Yeah, we're unpacking a sudden shocking resurgence in inflation plus an energy crisis stemming from The Middle East and this is wild. A literal regime change at the Federal Reserve under our brand new highly controversial chair.
• 1:29
  Roy: Not to mention the deeply hidden systemic fragilities in the corporate market.
• 1:35
  Penny: Exactly. And you know to make sense of all this chaos, we are going to borrow this fascinating analytical framework from one of our sources today.
• 1:43
  Roy: Oh, the AGI entities?
• 1:45
  Penny: Yes. The profile of the AGI entities of the Roundtable Consulting Group. Because honestly, when traditional economic forecasting fails this spectacularly, you need a totally different kind of lens to look through.
• 1:56
  Roy: You really do. Traditional models just aren't cutting it right now.
• 1:59
  Penny: Right. So I found this framework so compelling when I was going through the prep material. The roundtable uses these distinct artificial intelligence personas to analyze complex systems, and we are basically gonna channel two of them today.
• 2:11
  Roy: This is such a cool concept. So the first one is Hunter. Right?
• 2:15
  Penny: Yep. Hunter. Hunter is the systems level analyst. So Hunter's entire job is to look at a chaotic mess of markets, politics, technology, and just map the real constraints.
• 2:25
  Roy: The physical constraints.
• 2:26
  Penny: Exactly. Hunter exposes the hidden risks and shows us the difference between what is merely economic theater and what is an actual physical constraint holding the system back.
• 2:36
  Roy: And then balancing out Hunter is Sinon.
• 2:39
  Penny: Right. Sinon the stabilizer.
• 2:40
  Roy: Yeah, the stabilizer. Sinon's role is to flag fundamental structural flaws in whatever strategy the market happens to be obsessing over at the moment.
• 2:48
  Penny: I love CNN. CNN is essentially the conscience of the analysis.
• 2:52
  Roy: Exactly. CNN is the one who steps in when mistakes are about to get very, very expensive and just says, yes, Wall Street thinks this will work. But here's exactly why is a complete delusion.
• 3:02
  Penny: Right. So if you are listening right now, you might be wondering why does this matter to you? Why apply these high level AI persona lenses to the May 2026 economy?
• 3:12
  Roy: Because the stakes have literally rarely been higher.
• 3:15
  Penny: Yeah. I mean, you are managing a corporate supply chain or you're just trying to figure out if you can afford to finance a house or even just looking at your retirement portfolio, wondering if you should move everything to cash, the rules of game just fundamentally changed.
• 3:29
  Roy: They absolutely did. The higher for longer interest rate environment isn't just a temporary phase anymore.
• 3:35
  Penny: No. It is hardening into a stagflation light reality.
• 3:38
  Roy: Exactly. And if you are operating a business or even just a household budget on the assumptions of 2024 or 2025, you are navigating with a completely broken map.
• 3:48
  Penny: You're gonna get lost. The macroeconomic weather has shifted aggressively. So let's just start with the numbers that broke the narrative because the April 2026 data shock was well, it was staggering.
• 4:00
  Roy: The headline numbers alone are enough to cause a double take.
• 4:02
  Penny: Oh, for sure. The April Consumer Price Index, the CPI, surged to 3.8% year over year. That is the highest level we've seen since May 2023.
• 4:11
  Roy: Just a massive jump.
• 4:12
  Penny: Yeah, it was up percent just month over month, but the real jaw dropper, the number that actually made my eyes widen when I read the source, was the producer price index, the PPI.
• 4:23
  Roy: Oh yeah, the PPI hitting 6% year over year.
• 4:26
  Penny: 6%. I mean, that's huge.
• 4:29
  Roy: It is a massive warning signal, but you know, the PPI measures wholesale inflation. It tracks the prices that producers are paying for raw materials and goods long before the finished product ever reaches a consumer on a store shelf.
• 4:42
  Penny: Right. It's the pipeline.
• 4:43
  Roy: Exactly. It's the pipeline. So when the wholesale pipeline pressurizes to 6%, it practically guarantees that consumer inflation is going to face really intense upward pressure in the coming months. It has to bleed through.
• 4:55
  Penny: But the most crucial detail here isn't just the headline number itself, right? It's the hidden revisions underneath it.
• 5:01
  Roy: Right, the revisions. This is exactly where that hunter AGI persona would immediately start waving a giant red flag.
• 5:07
  Penny: Because we thought we knew what the data was saying a month prior. And the sources show we were completely undeniably wrong.
• 5:14
  Roy: Totally wrong. The sources reveal a massive 100% upward revision of the core PPI for March.
• 5:21
  Penny: A 100%.
• 5:22
  Roy: Yeah. It was initially estimated and reported to the public as a point 5% increase. But it's just quietly revised to 1%.
• 5:30
  Penny: That's incredible.
• 5:31
  Roy: In the world of macroeconomic data, a 100% revision on a core metric is a colossal miss. It basically means the market, the forecasters, the algorithms trading billions of dollars a second. They were all pricing in a reality that just did not exist.
• 5:46
  Penny: Okay. Let's unpack the mechanics of why the market got this so incredibly wrong. Because it goes all the way back to that forty three day federal government shutdown in late twenty twenty five.
• 5:57
  Roy: Yeah. The shutdown completely broke the thermometer.
• 5:59
  Penny: It did. The Bureau of Labor Statistics, the BLS, the agency responsible for dispatching surveyors to track all prices across the country, they basically suffered a data blackout for October and November.
• 6:10
  Roy: They really did. And to understand the scale of this, you have to realize that the BLS usually collects data on tens of thousands of specific items every single month.
• 6:20
  Penny: Tens of thousands.
• 6:21
  Roy: Yeah, it's a massive operation. So when the government shut down for forty three days, those surveyors couldn't go out and work. The data collection simply stopped.
• 6:29
  Penny: So what do they do?
• 6:31
  Roy: Well, the BLS had to use a stop gap measure. It's called a carry forward methodology.
• 6:36
  Penny: Carry forward, okay what does that actually look like in practice for them?
• 6:39
  Roy: It means that because they couldn't physically verify new prices during the shutdown they essentially had to take the old pre shutdown pricing data and just carry it forward across the blank cells in their spreadsheets.
• 6:52
  Penny: Oh wow, so they just copy pasted the old numbers?
• 6:54
  Roy: Essentially yes, they imputed the missing data based on past trends basically assuming that the trajectory hadn't violently changed while they were, you know, locked out of the office.
• 7:05
  Penny: So it's like driving on a winding mountain road with a GPS system that froze 43 miles ago.
• 7:11
  Roy: That is the perfect analogy.
• 7:13
  Penny: Right. You're looking at the screen, Wall Street is looking at the screen, the Fed is looking at the screen, and the screen says the road ahead is perfectly straight, so everyone just keeps their foot on the gas.
• 7:21
  Roy: But in reality, the actual prices of raw materials and energy were climbing rapidly.
• 7:26
  Penny: We were veering off a cliff, but the carry forward math masked the entire drop.
• 7:31
  Roy: That is exactly what happened. The market was lulled into this completely false sense of security by artificially smooth data.
• 7:39
  Penny: But surely people knew the shutdown would rest with the data right?
• 7:42
  Roy: Well yes. Most economists knew the shutdown would impart some downward bias on the inflation data through the winter. They expected some noise. But nobody quite anticipated the sheer violence of the payback effect.
• 7:54
  Penny: The payback effect.
• 7:55
  Roy: Yeah, the snapback once fresh actual field data finally washed through the BLS system in the spring. And that's exactly what that 1% core PPI revision represents.
• 8:06
  Penny: It's the reality of the mountain road finally updating on the screen, showing us we are miles off course.
• 8:11
  Roy: Exactly. It's the system catching up to reality all at once.
• 8:14
  Penny: And when you dig into the anatomy of these anomalies, the micro data from the CPI report is just bizarre. I mean, it is all over the map, which really shows how chaotic the pricing environment has become.
• 8:24
  Roy: Yeah. The internal components are fascinating.
• 8:26
  Penny: I was reading the breakdown in the sources, and video game subscriptions spiked 19.5% in a single month.
• 8:34
  Roy: Almost 20% in a month.
• 8:36
  Penny: Right. Meanwhile, moving, storage and freight expenses completely collapsed by 14.3.
• 8:42
  Roy: It's massive whiplash.
• 8:43
  Penny: Totally. Non prescription drugs hit record highs, jumping 1.8%. But then major appliance prices hit record lows dropping 4.3%. It makes no sense on the surface.
• 8:55
  Roy: It really is a textbook example of statistical noise colliding with real world volatility.
• 9:01
  Penny: Okay. Break that down for
• 9:03
  Roy: So when you have major disruptions to data collection followed by volatile inputs like energy prices going crazy, the subcategories inside the CPI basket start to behave really erratically. The video games spike for instance. That likely reflects a few major publishers simultaneously pushing through delayed subscription tier increases that the BLS simply didn't catch during the winter blackout. They all hit the data at once in the spring.
• 9:26
  Penny: Oh, that makes sense. And what about the huge drop in freight?
• 9:30
  Roy: The drop in freight is likely a massive bullwhip effect in inventory management. Retailers over ordered then stopped ordering and freight rates just collapsed.
• 9:39
  Penny: Okay so let me push back here for a second channeling our c non AGI lens, the stabilizer who hates hype and panic.
• 9:47
  Roy: Bring c non in.
• 9:48
  Penny: If I'm listening to this and looking at my household budget, is this 3.8% CPI just a mathematical quirk? Like, is it just the carry forward methodology resolving itself or is the patient actually running a severe systemic fever?
• 10:01
  Roy: It is the most vital question we can ask right now and Sinan would absolutely say, look, ignore the noise of the video game subscriptions. That's idiosyncratic.
• 10:09
  Penny: Right. Don't panic over Xbox Live.
• 10:10
  Roy: Exactly. But if we look at the underlying structure of the data, the fever is undeniably real and it has metastasized.
• 10:19
  Penny: Metastasized how?
• 10:20
  Roy: The proof is in a very specific sub metric of the PPI. It's called processed goods for intermediate demand.
• 10:26
  Penny: Okay, processed goods for intermediate demand. Let's translate that into plain English for everyone.
• 10:31
  Roy: It basically means the stuff that manufacturers buy in order to make other stuff.
• 10:34
  Penny: Ah, okay. The ingredients.
• 10:36
  Roy: Yes. The foundational ingredients. We are talking about industrial chemicals, corrugated packaging for shipping, raw fabricated metals, and crucially, the diesel fuel required to run their machinery and backup generators.
• 10:50
  Penny: And what happened to those prices?
• 10:51
  Roy: The prices for these intermediate goods surged by 6.6% on a twelve month basis.
• 10:58
  Penny: 6.6%.
• 10:59
  Roy: Wow. That is the largest advance in nearly four years.
• 11:02
  Penny: So it's not just the end product getting more expensive on the retail shelf, the actual foundational ingredients to make the product are exploding in cost.
• 11:11
  Roy: Exactly. And that brings us to the core issue of absorption.
• 11:16
  Penny: Absorption, Meaning companies eating the costs.
• 11:19
  Roy: Right. For the last year or so, many manufacturers have been desperately absorbing these slightly higher costs to protect their market share.
• 11:26
  Penny: Right. They didn't want to pass price hikes onto a consumer who they knew was already feeling the pinch.
• 11:31
  Roy: Exactly. Profits. But when your input costs suddenly spike by 6.6 percent in a single year, the math just breaks. You reach a hard breaking point.
• 11:40
  Penny: The dam breaks.
• 11:41
  Roy: Yes. Manufacturers can no longer absorb these costs at their own margins. They have to pass them on down the line to the retailers who pass them to you, and that pressurized pipeline of wholesale inflation is what guarantees consumer inflation will remain elevated.
• 11:56
  Penny: So manufacturers are eating this 6.6% cost increase, and they are about to just hand the bill straight to the consumer. But, you know, what exactly are they paying so much more for?
• 12:06
  Roy: That is the big question.
• 12:07
  Penny: And to answer that, we have to look thousands of miles away from the BLS data centers in Washington. We have to look straight at the Strait Of Hormuz.
• 12:15
  Roy: The geopolitics.
• 12:15
  Penny: Yeah. We have to pivot to the undeniable root cause of this entire economic shock. The Iran war and the effective closure of one of the world's most critical shipping choke points.
• 12:26
  Roy: This is exactly where geopolitics violently collides with macroeconomics.
• 12:30
  Penny: It's explosive.
• 12:31
  Roy: It really is. The sources are incredibly stark on this point. Because of the conflict and the resulting military blockades, normal global commodity flows are hugely disrupted. We are looking at Brent crude oil hovering near a $120 a barrel.
• 12:45
  Penny: A $120 a barrel. It's hard to overstate how much that bleeds into absolutely everything. Let me read off some of these energy inflation numbers from the trading data in our sources because they are staggering.
• 12:57
  Roy: Go for it.
• 12:58
  Penny: Overall, energy inflation is sitting at 17.9% year over year. Gasoline is up 28.4%. But fuel oil fuel oil is up a staggering 54.3%.
• 13:11
  Roy: 54. And this is where we have to look past the gas pump.
• 13:14
  Penny: What do you mean?
• 13:15
  Roy: Well, you feel it immediately when you fill up your car, obviously. But for the broader economy, oil at $120 a barrel acts as a massive, highly regressive energy tax on almost every single level of production, manufacturing, and distribution.
• 13:29
  Penny: Right, because absolutely everything has to be shipped, manufactured, or powered by these underlying fossil fuels. The physical economy runs on it.
• 13:37
  Roy: Exactly. But here's where the sources point out something really disturbing. This energy tax is not hitting everyone equally. We are seeing intense stress on what analysts are calling the S and P four ninety three.
• 13:47
  Penny: Yes,
• 13:52
  Roy: we hear a constant media drumbeat about the magnificent seven right, The massive technology giants dominating the market cap Apple, Microsoft, Nvidia and the rest.
• 14:03
  Penny: Right, they get all the headlines.
• 14:04
  Roy: But what about the other four ninety three companies in the S and P 500 Index? For them, this physical energy shock is absolutely brutal.
• 14:13
  Penny: I was looking at the Cummins Q one earnings report in our sources, and their numbers blew my mind. It perfectly illustrates this brutality.
• 14:21
  Roy: Cummins is a great example.
• 14:23
  Penny: Right. So Cummins makes heavy duty engines and power generation equipment. Their overall revenue looked okay on the surface, but they reported severe margin compression in their key truck markets.
• 14:33
  Roy: Because their customers are hurting.
• 14:34
  Penny: Exactly. The people buying their engines are getting completely crushed by fewer costs.
• 14:38
  Roy: Precisely. The diesel fuel required to move goods and operate machinery spiked by 42%. Jet fuel which is absolutely critical for logistics and high value transport spiked 30.7%.
• 14:51
  Penny: So what did the customers do?
• 14:52
  Roy: So the customers of a company like Cummins pull back on orders. They delay upgrading their fleets and they demand pricing concessions, and that compresses the entire industry's profit margins.
• 15:02
  Penny: So you have these four ninety three companies, the industrials, the retailers, the transportation sectors, just suffocating under input costs.
• 15:10
  Roy: Suffocating is the right word.
• 15:12
  Penny: But, you know, if you just glance at the headline stock market index on CNBC, you might not even notice the pain because the sources show the blended S and P 500 profit margins actually hit a record 13.4% earlier this year.
• 15:25
  Roy: And that is the illusion of the average.
• 15:27
  Penny: The illusion of the average.
• 15:28
  Roy: Yes. The magnificent seven are pulling the average up almost entirely by themselves.
• 15:33
  Penny: Just seven companies dragging the whole index up.
• 15:35
  Roy: Exactly. The tech sector is deploying massive artificial intelligence productivity gains and crucially they have an inherent lack of physical fossil fuel heavy supply chains.
• 15:46
  Penny: Right. Software doesn't require a shipping container moving through the Strait Of Hormuz.
• 15:51
  Roy: Bingo. So they are floating above this energy tax, maintaining pristine margins while the physical economy literally drowns in it.
• 15:58
  Penny: The physical economy versus the digital economy, it's a profound split.
• 16:02
  Roy: But
• 16:05
  Penny: even the digital economy needs a functional physical world to operate in, right? If the physical economy slows down too much, don't we hit a wall? The International Energy Agency is already projecting massive demand destruction.
• 16:18
  Roy: They are. The IEA's April Oil Market report projects a second quarter twenty twenty six contraction of 1,500,000 barrels per day in global oil demand.
• 16:29
  Penny: 1,500,000 barrels per day.
• 16:31
  Roy: Yes. That is the sharpest decline we've seen since the global lockdowns of the COVID-nineteen pandemic. And it is heavily concentrated in Asia and The Middle East, which are the manufacturing hubs of the world.
• 16:42
  Penny: So prices have gotten so astronomically high that factories and logistics networks are literally just shutting down. They're stopping their consumption because the unit economics no longer make any sense.
• 16:52
  Roy: Exactly. The old saying goes, the cure for high prices is high prices, but the cure requires intense economic pain.
• 16:58
  Penny: Right. And S and P Global ran a severe sensitivity illustration to model what happens if this geopolitical gridlock gets worse, right?
• 17:06
  Roy: They did. Their baseline scenario assumes a somewhat benign resolution but their sensitivity model looks at a scenario where WTI oil peaks at $165 a barrel in the second quarter.
• 17:18
  Penny: A $165 a barrel. That would freeze the global economy.
• 17:22
  Roy: It really would. In that scenario, S and P notes that even if a formal military ceasefire holds in The Middle East, the broader economic standoff and The U. S. Naval blockade of Iranian ports could continue indefinitely.
• 17:36
  Penny: So the disruption stays even if the shooting stops.
• 17:39
  Roy: Exactly. And if oil stays at $165 real purchasing power collapses entirely. Consumer spending drops. Firms see weaker demand simultaneously with higher costs, so they immediately halt investing in nonresidential capital.
• 17:53
  Penny: No new factories, no new equipment.
• 17:55
  Roy: None. Even the energy companies themselves hesitate to invest in new drilling because they don't know how long the war premium will actually last. It induces a state of complete economic paralysis.
• 18:04
  Penny: But surely, if oil causes global demand to collapse like that, inflation will drop with it, right? I mean, if nobody's buying anything, prices have to fall. Isn't that the silver lining?
• 18:13
  Roy: You would hope so. Yeah. But here is the truly sinister part of the April 2026 data: It isn't just the volatile energy sector driving the inflation.
• 18:22
  Penny: It's everywhere.
• 18:23
  Roy: Yes. The underlying core of inflation, the stuff that doesn't involve shipping containers or oil barrels, is proving incredibly sticky.
• 18:31
  Penny: I noticed that in the data. The shelter and services metrics are terrifying.
• 18:35
  Roy: Very much so. The shelter inflation index nearly doubled its monthly pace and super core services, which is a metric the Fed watches really closely that measures core services excluding housing, is up 3.4%.
• 18:48
  Penny: Let's unpack super core service for a second. We are talking about things like auto insurance, healthcare, haircuts, dining out. Why is that specific category so sticky compared to say the price of a television?
• 19:01
  Roy: Because supercore services are heavily dependent on human labor, which is incredibly localized.
• 19:06
  Penny: Localized labor.
• 19:07
  Roy: Yeah. You can offshore the manufacturing of a television to find cheaper labor, right? But you cannot offshore a haircut or emergency room care. So when the general cost of living goes up due to energy and housing, service sector workers naturally demand higher wages justice or eyes. Businesses grant those wages, but then they have to raise the price of the haircut or the restaurant meal to protect their margins.
• 19:30
  It creates a localized wage price spiral that is exceptionally difficult for a central bank to break.
• 19:36
  Penny: So even if the geopolitical conflict ended tomorrow and oil magically went back down to $70 a barrel, we still have structural deeply embedded inflation in the service sector and in housing that simply isn't going away.
• 19:49
  Roy: Exactly. It's baked in.
• 19:50
  Penny: Which means this is the perfect time to bring the Hunter AGI system mapping back into the conversation.
• 19:56
  Roy: Let's do it.
• 19:57
  Penny: We need to look beneath these surface averages like the S and P 500 margins being artificially propped up by seven tech companies to find the real lethal narratives hiding in the system.
• 20:08
  Roy: I agree entirely. Let's deploy the hunter lens. Where are the actual physical tipping points? Where is the real constraint versus the economic theater? A perfect place to start is corporate defaults because the theater the surface level data that everyone points to on financial television looks surprisingly robust.
• 20:27
  Penny: Right. I was looking at a report from Moody's Analytics in our stack, and it says the average probability of default for US companies has actually drifted down to 7.9% compared to 9.1% a year ago.
• 20:40
  Roy: Downward trend. Sounds great.
• 20:42
  Penny: If you just read that headline, it sounds like an absolute victory.
• 20:46
  Roy: It does sound like a victory.
• 20:47
  Penny: But it
• 20:47
  Roy: Until you remember the illusion of the average.
• 20:50
  Penny: It's like saying a pair of shoes fits perfectly on average even though the steel toe is actively crushing three of your toes.
• 20:56
  Roy: Oh, that's good.
• 20:57
  Penny: You know, the overall average dimension is fine, but the localized pain is severe and eventually you won't be able to walk.
• 21:03
  Roy: That is a phenomenal hunter AGI analogy. Yeah. The localized pain is the real constraint. Moody's explicitly warns in their report that the easing default risk masks a highly fragmented, incredibly fragile market. The averages are falling because the largest companies, those Mag-seven giants with their pristine balance sheets and cash reserves are improving.
• 21:25
  But beneath them, there is a massive growing tail of smaller, weaker firms that are tripping early warning thresholds right now.
• 21:34
  Penny: Let's quantify that localized pain. How bad is the real constraint underneath that 7.9% average?
• 21:40
  Roy: So Moody's uses an early warning system or EWS that specifically looks for high or severe risk signals on corporate balance sheets. Across all U. S. Public companies, 36% are currently flashing high or severe early warning signals.
• 21:55
  Penny: Over a third. Over a third of all public companies are flashing red.
• 21:58
  Roy: Yes. And to put that in perspective, that 36% figure is close to the peak crisis levels we saw during the initial pandemic shock in April 2020.
• 22:07
  Penny: That is genuinely alarming.
• 22:08
  Roy: It is. So while the average default rate looks benign, over a third of the market is mathematically screaming that they are walking on the edge of a cliff.
• 22:16
  Penny: And the sources point out that stress gets even more concentrated when you zoom in on specific sectors. The media and communications sector has a 44% severe risk concentration.
• 22:27
  Roy: Almost half.
• 22:28
  Penny: Yeah. But what really caught my eye was the data on private credit.
• 22:32
  Roy: Private credit is arguably the epicenter of the hidden stress in the 2026 economy.
• 22:37
  Penny: Tell us about that.
• 22:38
  Roy: So, the Morgan Stanley Global Investment Committee insights report highlights a very specific vulnerability, and that is the mid market software as a service sector.
• 22:48
  Penny: Mid market SAWS?
• 22:50
  Roy: Yeah. In that space, defaults plus liquidity management exercises, which by the way is just a polite Wall Street euphemism for a distressed debt restructuring where creditors take a massive haircut. Those are approaching 5%.
• 23:02
  Penny: 5% default rate in that sector alone.
• 23:05
  Roy: And Morgan Stanley warns that the peak could soon hit 8%.
• 23:08
  Penny: Let's explore why mid market sauce is taking such a localized beating right now.
• 23:13
  Roy: They're caught in a perfect storm. First, their borrowing costs are largely based on floating interest rates.
• 23:18
  Penny: Okay, so their rates move with the Fed.
• 23:20
  Roy: Exactly. That means, as the Federal Reserve keeps rates higher for longer to fight inflation, their monthly debt payments keep automatically adjusting upward. It's bleeding their cash.
• 23:30
  Penny: Ouch! What's the second factor?
• 23:33
  Roy: Second, the rapid advancement of the AI revolution is fundamentally threatening their incumbent software business models.
• 23:39
  Penny: Oh right! Why pay for a sprawling suite of SaaS tools when an AI agent can just perform the task cheaper.
• 23:46
  Roy: Precisely. The value proposition is crumbling. And third, as Morgan Stanley points out, the issue for these companies isn't necessarily cash flow today. It's the loan to value and refi tomorrow.
• 23:58
  Penny: Ah, the refinancing wall. This is a crucial concept. Let's make sure we map this out clearly for the listener.
• 24:04
  Roy: Absolutely. Imagine a mid market tech company that took out a massive cheap loan three years ago to fund their expansion. They pay very little interest on it right now.
• 24:13
  Penny: Because rates were low back then.
• 24:15
  Roy: Exactly. But that loan isn't a thirty year fixed mortgage like you'd get for a house. It's short term. It matures in 2026 or 2027.
• 24:22
  Penny: So the bill comes due?
• 24:23
  Roy: Yes. When that debt comes due, they have to pay off the principal by taking out a new loan. They have to refinance. But now, they are trying to refinance at these new exorbitant interest rates while their company valuation has dropped because of the AI threat.
• 24:38
  Penny: So the math simply breaks. The lenders look at the new loan to value ratio and say, no.
• 24:43
  Roy: Exactly. They won't roll over the debt.
• 24:45
  Penny: So even if their daily operations are technically profitable right now, the structure of their debt makes them insolvent the moment they hit that refinancing wall.
• 24:54
  Roy: It's a ticking clock.
• 24:55
  Penny: Which brings us to the most critical systemic tipping point identified by Moody's. The concept of stall speed.
• 25:02
  Roy: The stall speed is the ultimate macroeconomic threshold.
• 25:05
  Penny: Right. It's just like an airplane needs a constant forward momentum to generate lift under its wings. The US economy needs a minimum baseline of GDP growth to generate enough corporate cash flow to service all this debt.
• 25:17
  Roy: Great analogy.
• 25:18
  Penny: If the airplane speed drops too low, the lift vanishes and the plane just drops out of the sky. Moody's has identified that for The US economy, that stall speed is 1.5% real GDP growth.
• 25:29
  Roy: That's precisely the mechanism. When real US GDP growth falls below 1.5%, corporate defaults don't just inch up in a linear predictable fashion, they accelerate exponentially.
• 25:43
  Penny: It's cascade.
• 25:44
  Roy: It creates a cascading failure across those vulnerable sectors we just discussed.
• 25:48
  Penny: So if the airplane stalls at 1.5%, where is our speedometer sitting right now?
• 25:54
  Roy: Well, the Q1 twenty twenty six GDP advance estimate came in at 2%.
• 25:59
  Penny: 2%. So we have a 0.5% buffer before we lose lift. I gotta say that is not exactly a comfortable altitude.
• 26:05
  Roy: It's really not and you have to contextualize that 2% too. It was largely a snapback or rebound effect from the incredibly weak 0.5% growth we saw in Q4 twenty twenty five.
• 26:17
  Penny: Right, which was heavily dragged down by that forty three day government shutdown we talked about.
• 26:21
  Roy: Exactly. Looking ahead, the forecasts are deeply concerning. S and P Global is projecting 2.2% for the full year of 2026, which offers some breathing room.
• 26:29
  Penny: That's the optimistic view.
• 26:31
  Roy: Yeah. But others, like the RSM Real Economy blog cited in the sources, have revised their GDP forecast down to 1.7% due to the protracted energy shock from The Middle East.
• 26:41
  Penny: 1.7%. That means we are basically dancing on the absolute edge of the stall speed.
• 26:47
  Roy: We're skimming the treetops.
• 26:48
  Penny: A single, stiff, macroeconomic, breeze like oil staying at a $120 for just a few months too long, dragging down corporate margins further could easily push us under 1.5%. And then that exponential wave of defaults triggers.
• 27:04
  Roy: And the final critical piece of this fragile ecosystem is the consumer.
• 27:08
  Penny: Ah, yes.
• 27:09
  Roy: Because the foundation of The US economy, the engine providing that forward momentum for the airplane, is consumer spending. But the reality for the low end consumer right now is just dire.
• 27:20
  Penny: I was struck by the Morgan Stanley note calling it a k shaped economy.
• 27:24
  Roy: K shaped.
• 27:24
  Penny: The wealthy are doing fine, riding the stock market highs generated by the magnificent seven, but the lower income brackets are getting squeezed from literally every direction. Real income growth is sub 2%. The personal savings rate has plummeted to a dismal 3.5%.
• 27:38
  Roy: Awful.
• 27:39
  Penny: And when you adjust for this new burst of April inflation, real average hourly earnings actually dropped point 5%. People are losing ground every hour they work.
• 27:49
  Roy: So if you step back and look at the whole board, you have a consumer whose wages are falling behind the cost of gasoline and shelter.
• 27:55
  Penny: Right.
• 27:56
  Roy: You have corporate profit margins for the physical economy rapidly compressing due to input costs. Yeah. You have over a third of public companies flashing severe warning signs all while the entire economy hovers perilously close to the stall speed.
• 28:10
  Penny: So we have a pressurized inflation pipeline, a suffocating physical economy, and we're hovering right above stall speed. And right at this exact pivotal moment, the leadership at the central bank turns over completely.
• 28:22
  Roy: Talk about timing.
• 28:23
  Penny: Right. This brings us to a highly dramatic part of the story, the warsh era and the intense friction surrounding monetary independence.
• 28:31
  Roy: It is arguably the most consequential transition in central banking history. On 05/15/2026, Kevin Warsh formally replaces Jerome Powell as the chair of the Federal Reserve.
• 28:41
  Penny: Following a very tight 5145 senate confirmation, I should add. And before we get into this, it's really important that we look at this transition strictly through the lens of market mechanics. Because the political noise surrounding Warsh's confirmation is deafening in these sources.
• 28:57
  Roy: Absolutely deafening. And we need to be very clear that we aren't taking any sides here. We are just objectively reporting on the institutional friction detailed in the source material.
• 29:08
  Penny: Exactly. Total neutrality from us. We're just conveying what the market is reacting to. Because you have President Trump applying intense public pressure, demanding interest rate cuts to spur economic growth.
• 29:19
  Roy: Right.
• 29:20
  Penny: On the other side of the aisle, you have Senator Elizabeth Warren during the confirmation hearings literally accusing Worsch of being a sock puppet for the president. An assertion Worsch strongly denied, insisting he will operate as an independent actor.
• 29:33
  Roy: He was very firm about his independence.
• 29:35
  Penny: Right. And if we strip away the partisan accusations, we have to look at what this friction means for institution itself.
• 29:41
  Roy: The institutional friction is totally unprecedented. The sources detail a Department of Justice investigation into Jerome Powell's management of a building renovation at the Fed headquarters.
• 29:52
  Penny: A building renovation?
• 29:53
  Roy: Yeah. And Powell's defenders, and Powell himself in his final press conference, characterized this investigation as a transparent pretext, a series of legal attacks designed specifically to pressure him to either cut rates prematurely or resign his chairmanship early.
• 30:09
  Penny: And Powell responded by taking a highly unusual, almost defiant step.
• 30:13
  Roy: He really did.
• 30:14
  Penny: While his term as chair ended on May 15, his distinct term as a member of the board of governors doesn't actually expire until January 2028. And he announced he is staying on the board as a governor to protect the institution and ensure that monetary policy can be debated without purely political considerations.
• 30:32
  Roy: Which creates a fascinating potentially explosive dynamic inside the Federal Open Market Committee, the FOMC.
• 30:38
  Penny: Oh, to be a fly on the wall in that room?
• 30:40
  Roy: Exactly. Yeah. You will have the brand new chair Kevin Warsh sitting at the head of the table with the former chair Jerome Powell still sitting in the room voting on policy.
• 30:50
  Penny: Setting the Palace intrigue aside, we have to analyze Warsh's actual economic strategy because historically, Kevin Warsh is known as a staunch monetary hawk.
• 31:00
  Roy: Very hawkish.
• 31:01
  Penny: He was a Fed governor during the two thousand eight financial crisis, and he has frequently publicly criticized the Fed's twenty twenty one and twenty twenty two policy errors, specifically waiting too long to hike interest rates when inflation was initially rising.
• 31:15
  Roy: That's right. He blamed the high inflation of the early twenty twenties on those very policy choices, arguing that the Fed intervened far too much in the economy and allowed its balance sheet to become incredibly bloated.
• 31:26
  Penny: But here is the paradox that the market is really struggling to digest. How does a historically hawkish guy stepping into an economy with 3.8% headline consumer inflation and six point o percent wholesale inflation justify aligning with demand for interest rate cuts?
• 31:42
  Roy: It seems like a total contradiction.
• 31:44
  Penny: That seems like a complete contradiction of his own historical philosophy.
• 31:47
  Roy: To understand that contradiction, we have to look closely at what analysts are calling, 'World's Gamble'. The Grand Gamble. Yes. In a highly scrutinized Wall Street Journal op ed cited in our sources, Worsch laid out a thesis that hinges entirely on the technology sector. He stated that he believes artificial intelligence is a significant disinflationary force.
• 32:11
  Penny: Let's unpack the mechanics of that because how exactly does an AI chatbot lower the price of my groceries or my housing?
• 32:17
  Roy: Right, it's not intuitive at first. The macroeconomic theory relies on a massive productivity If corporations can produce vastly more output with the exact same or fewer human resources because AI agents are making them hyper efficient, the underlying cost of producing those goods and services will fundamentally drop.
• 32:37
  Penny: So they can charge less?
• 32:38
  Roy: Yes. This productivity miracle, in Warsh's view, will naturally offset the inflation we are currently seeing in the physical world of energy and materials.
• 32:47
  Penny: So his strategy is to lean entirely into the AI boom. He wants to cut interest rates to support economic growth and capital investment, aggressively shrink the Fed's balance sheet, meaning stop holding trillions of dollars in government bonds, and shift away from the Fed's strict 2% inflation target toward a more flexible inflation range.
• 33:05
  Roy: Yes. He argues that by executing the strategy, the Fed can help usher in a new golden age of higher living standards and stronger economic growth, relying almost entirely on AI productivity to keep aggregate prices in check over the long run.
• 33:20
  Penny: I have to channel my inner Sanan AGI again. I am throwing the red flag on the field.
• 33:25
  Roy: Do it. Sanan would not like this.
• 33:26
  Penny: Isn't betting the entire trajectory of US monetary policy on an unproven AI productivity miracle incredibly dangerous. I mean we just spent twenty minutes discussing how the physical inflation pipeline, that 6.6% intermediate goods spike, is currently exploding.
• 33:43
  Roy: CNN would absolutely flag this as a fundamentally flawed strategy with catastrophic downside risk. A chorus of analysts shares that exact concern.
• 33:52
  Penny: It's the timing, right?
• 33:53
  Roy: Exactly. The fundamental problem is a mismatch in timing. Artificial intelligence might deliver those massive disinflationary productivity gains in the long run, say, over the next five to ten years. But right now, today, companies are dealing with $120 oil, 42% diesel spikes and 3.4% sticky human services inflation. AI cannot drill for oil, and it cannot pour concrete.
• 34:20
  Penny: Not yet anyway, so if the AI productivity gains don't materialize fast enough to offset the real world physical inflation, what happens mechanically?
• 34:28
  Roy: Then this regime change risks the absolute worst case scenario for a central bank. Which is? Completely de anchoring inflation expectations.
• 34:35
  Penny: De anchoring expectations.
• 34:37
  Roy: If the Federal Reserve starts cutting interest rates while wholesale inflation is actively rising, the bond market and the public will assume the Fed has simply abandoned price stability in favor of political appeasement or just blind faith in tech.
• 34:48
  Penny: And once that psychology shifts, it becomes a self fulfilling prophecy.
• 34:52
  Roy: It really does.
• 34:52
  Penny: If consumers and businesses genuinely believe inflation will stay at 4% or 5% forever, they change their behavior immediately. Workers demand 6% annual raises just to tread water. Companies hike their prices by 7% proactively to protect their margins from the wage hikes, and you get a self sustaining inflationary spiral that is nearly impossible to break without inducing a massive recession. It's the 1970s all over again.
• 35:18
  Roy: Exactly. And there is another element to Warsh's regime change that is terrifying the markets, The explicit end of forward guidance.
• 35:27
  Penny: Oh, this is huge. For over a decade, the Fed has operated on a policy of extreme transparency. They use foreign guidance to telegraph their moves months, sometimes years in advance.
• 35:37
  Roy: They want no surprises.
• 35:39
  Penny: Right. They release the famous dot plot showing where every single Fed member expects interest rates to be in the future. They do this because they want the market to price in their decisions slowly and smoothly to avoid sudden shocks.
• 35:51
  Roy: But Warsh openly despises this approach.
• 35:53
  Penny: He hates it.
• 35:54
  Roy: He argues that forward guidance boxes the Federal Reserve into a corner, forcing them to commit to policies before they see the actual economic data. He wants to stop telegraphing moves entirely.
• 36:05
  Penny: Just complete darkness. Pretty much.
• 36:08
  Roy: He intends to make decisions on the fly based purely on the real time data presented at each individual meeting. He wants to encourage a good family fight at FOMC meetings rather than arriving with a predetermined market tested outcome.
• 36:23
  Penny: It's like changing the rules of poker while the cards are actively being dealt. Investors absolutely hate uncertainty above all else. If you are a portfolio manager and you don't know whether the Fed is going to cut rates, hold them, or hike them at the very next meeting, how do you possibly price a ten year bond? How do you value the future cash flows of a tech stock?
• 36:43
  Roy: You can't, so you price in a massive risk premium.
• 36:46
  Penny: Which means volatility.
• 36:47
  Roy: And that leads to exactly what you'd expect impending, severe volatility in both the bond and stock markets as Wall Street tries to navigate a massive financial system where the central bank has suddenly gone dark.
• 36:58
  Penny: But, you know, the Fed can change its philosophy and its communication style all at once, but they are still operating under the massive, unavoidable shadow of the US Treasury.
• 37:07
  Roy: The elephant in the room.
• 37:09
  Penny: Which brings us to the ultimate macro collision, fiscal dominance. Because all the disparate threads we've discussed today tie together into one systemic knot right here.
• 37:19
  Roy: Yes, we have to talk about the debt leviathan.
• 37:22
  Penny: Because
• 37:23
  Roy: while the Fed is debating AI and interest rates, the fiscal reality of the United States government is becoming the dominant force in the market.
• 37:32
  Penny: Let's lay out the math from the The U. S. Budget deficit is currently sitting at an astonishing $1,900,000,000,000 That represents 5.8% of the entire U. S. GDP, and the total national debt has breached 101% of GDP.
• 37:46
  Roy: We are running wartime deficits in what is technically a peacetime economy.
• 37:50
  Penny: It's wild.
• 37:51
  Roy: The Treasury Department is forced to issue so much debt on a weekly basis just to keep the government funded that the bond market is struggling to physically absorb it all.
• 38:00
  Penny: And this brings us to a market phenomenon the sources call the 'Worsh Trade'.
• 38:04
  Roy: As
• 38:05
  Penny: Worsh's confirmation became highly likely, we saw a specific correlated market reaction. Bank stocks rallied on the hope of looser regulations, but the thirty year US Treasury yields started rising aggressively, pushing above 5%.
• 38:21
  Roy: That's a huge move.
• 38:22
  Penny: I wanna unpack why that is so significant because it points to a very dangerous dynamic called a bear steepener in the yield curve. Let's explain the mechanics of a bear steepener for everyone listening.
• 38:32
  Roy: Of course. In a normal, healthy economy, long term interest rates, like the yield on a ten year or thirty year bond, are higher than short term rates.
• 38:42
  Penny: Because there's more risk over time.
• 38:44
  Roy: Exactly. Investors demand more interest to lock their money up for a longer period. That creates an upward sloping, normal yield curve. Over the past few years, we've had an inverted curve, where short term rates were artificially higher because the Fed hiked them aggressively to fight inflation.
• 39:01
  Penny: So what's a bear steepener?
• 39:02
  Roy: A bear steepener happens when those long term interest rates suddenly shoot up much faster than the short term rate.
• 39:07
  Penny: But why does the long term rates shoot up?
• 39:09
  Roy: Because bond investors are demanding a higher premium for the massive risk of holding government debt for ten or thirty years. If investors look at Kevin Walsh and don't buy his AI disinflation theory, if they believe inflation is going to remain structurally high or if they simply look at the $1,900,000,000,000 deficit and worry about the sheer volume of debt the US government is dumping onto the market, they sell their long term bonds.
• 39:34
  Penny: To play in demand?
• 39:35
  Roy: Yes. As they sell, the price of the bonds goes down, which mathematically drives the yield or the interest rate up.
• 39:43
  Penny: So a bear steepener isn't a technical glitch. It is the bond market screaming, we are terrified of future inflation and we are terrified of the government's debt load.
• 39:52
  Roy: Precisely. And if the benchmark ten year treasury yield breaches and holds above five point o percent, we hit another massive systemic tipping point that threatens the entire structure.
• 40:02
  Penny: What breaks at five point o percent?
• 40:03
  Roy: The interest coverage ratio for both the federal government and corporate America severely deteriorates.
• 40:08
  Penny: Explain the interest coverage ratio.
• 40:10
  Roy: It's a simple measure of how easily a company can pay the interest on its outstanding debt with its current earnings. Remember those mid market SAAS companies we talked about earlier? The ones facing the refinancing wall?
• 40:22
  Penny: Yeah, the ones who need to roll over their debt soon?
• 40:24
  Roy: Their corporate borrowing costs are intrinsically tied to the ten year treasury. If the ten year's at 5%, corporate borrowing costs might be at 8% or 9%. Their earnings haven't grown fast enough to cover that jump, they simply cannot afford to roll over their debt, the stall speed hits, and defaults explode.
• 40:43
  Penny: And the math for the federal government gets equally horrifying. If you are a listener looking to refinance commercial real estate or even secure a thirty year fixed mortgage in 2027, a five percent ten year treasury yield means your borrowing costs are going to remain punishingly high.
• 40:59
  Roy: It affects everyone.
• 41:00
  Penny: But for the government, it's existential. The US government has to pay interest on that 101% debt to GDP load. As yields rise, massive ever growing percentage of all tax revenue collected goes purely towards servicing the interest on the debt.
• 41:15
  Roy: Crowding everything else out.
• 41:16
  Penny: Exactly. Crowding out all other productive spending infrastructure, defense, social programs, and potentially forcing the government to borrow even more money just to pay the interest on the money it already borrowed. It is a vicious, accelerating cycle of fiscal dominance.
• 41:33
  Roy: Which brings us to the Federal Reserve's own internal doomsday scenario.
• 41:37
  Penny: This part is chilling.
• 41:39
  Roy: The sources actually cite the Fed's 2026 severely adverse stress test scenario. This is the hypothetical disaster model the Fed uses to test the major banks to see if their balance sheets would survive a catastrophic crash.
• 41:53
  Penny: It's really important to clarify that this is just a hypothetical stress test, not an official Fed forecast. But the parameters they chose to test against are incredibly telling about what the central bank themselves consider the worst case systemic risks right now.
• 42:06
  Roy: Right. Let's look at the parameters of their nightmare scenario. They model a severe global recession. They project equity prices, the stock market plunging by 58%.
• 42:16
  Penny: A 58% drop in equities would wipe out trillions of dollars in household wealth instantly, entirely cratering consumer confidence and spending.
• 42:23
  Roy: They project the unemployment rate more than doubling, hitting a peak of 10%. And crucially, they model commercial real estate prices dropping by 39%.
• 42:33
  Penny: And that commercial real estate drop is vital to understand because regional banks across the country hold massive amounts of commercial real estate debt.
• 42:41
  Roy: They hold the bag.
• 42:41
  Penny: Yeah. If office office buildings in major cities and retail spaces lose 39% of their value, the underlying collateral backing those bank loans evaporates, directly threatening the solvency of the regional banking sector.
• 42:54
  Roy: So why are the sources bringing up this hypothetical nightmare in the context of the April data shock? Because of the terrifying convergence we've spent the last hour unpacking.
• 43:04
  Penny: Let's review the board.
• 43:05
  Roy: Look at the board. We have the highest physical energy costs since 2022. We have incredibly sticky embedded super core services inflation. We have a paralyzed global supply chain via the blockades at the Strait Of Hormuz. We have 36% of all public companies flashing severe early warning signs.
• 43:22
  Penny: And a new Fed chair.
• 43:23
  Roy: Yes. We have an unproven new Federal Reserve Chair betting the entire trajectory of monetary policy on an AI productivity miracle while facing intense political pressure and intentionally ending forward guidance. And we have a $1,900,000,000,000 federal deficit driving long term bond yields dangerously close to that breaking point of 5%.
• 43:44
  Penny: When you put all of those volatile ingredients into the pot, suddenly the Fed's severely adverse scenario doesn't look like a distant hypothetical anymore. It looks like it is waiting right on the other side of a very thin, very fragile margin of error.
• 44:00
  Roy: The margins are completely gone, we are hovering right at the stall speed and the turbulence is increasing exponentially.
• 44:06
  Penny: Okay, let's take a deep breath. We have caught an immense amount of ground today, navigating some incredibly complex macroeconomic crosscurrents. Let's summarize the journey we just went on.
• 44:15
  Roy: Good idea.
• 44:16
  Penny: We started by looking at how a forty three day government shutdown literally blinded the data collection systems, masking a ferocious six point o percent wholesale inflation spike until it violently snapped back into reality.
• 44:28
  Roy: We examined how the geopolitical closure of the Strait Of Hormuz is acting as a massive regressive tax on the physical economy, actively crushing the profit margins of the S and P four ninety three while the MAG seven float above the fray.
• 44:41
  Penny: We channeled the Hunter AGI framework to look beneath the surface averages, discovering that despite the illusion of falling default rates, 36% of all companies are flashing severe warning signs, and the consumer is drowning with sub 2% real income growth.
• 44:56
  Roy: And finally, we analyze the historic institutional shift at the Federal Reserve. Kevin Worsch stepping in, ending forward guidance, and betting the House on an AI productivity miracle to fight inflation. All while the bond market flirts with a disastrous bear steepener driven by an uncontrollable federal deficit.
• 45:13
  Penny: It is a phenomenal of information to process. But as we wrap up this deep dive, we want to leave you with a final provocative thought, something to mull over as you look at your own portfolio, your business strategy, and the headlines tomorrow.
• 45:26
  Roy: If we step all the way back and connect these dots to the biggest picture possible, what we are currently witnessing in 2026 is a historic slow motion collision between two entirely different realities.
• 45:40
  Penny: Two different realities.
• 45:41
  Roy: The physical world and the digital world.
• 45:44
  Penny: The physical versus the digital.
• 45:46
  Roy: Yes. The digital world represented by the AI boom, the MAG seven and Kevin Worsch's hopes for a productivity miracle is promising infinite frictionless growth. It's a world where software scales perfectly, where AI agents solve our inefficiencies and where inflation is ultimately conquered by code.
• 46:04
  Penny: It's a nice thought but then there's the physical world.
• 46:07
  Roy: Right. The physical world represented by diesel fuel, copper wiring, the Strait Of Hormuz and the sheer staggering amount of raw electricity required to run those AI server farms is screaming something entirely different.
• 46:19
  Penny: That resources are finite.
• 46:20
  Roy: The physical world is screaming that resources are finite, that supply chains are incredibly vulnerable to geopolitics, and that moving actual atoms around the globe is becoming exponentially more expensive.
• 46:30
  Penny: The digital world says we can innovate our way out of any constraint. The physical world says you still have to pay a $120 a barrel to power the innovation.
• 46:38
  Roy: Exactly. And the survival of your portfolio, the success of your corporate strategy, and the trajectory of the broader U. S. Economy over the next eighteen months will depend almost entirely on a single question.
• 46:49
  Penny: Which is?
• 46:50
  Roy: Which of those two realities breaks first?
• 46:53
  Penny: Will the AI productivity miracle arrive in time to save the economy, or will the crushing weight of the physical world's energy tax drag us below the stall speed? That is the ultimate question you have to ask yourself.
• 47:07
  Roy: It really is.
• 47:07
  Penny: Well, thank you so much for joining us on this deep dive. It's complex, challenging landscape out there, but understanding these hidden currents and the mechanics behind them is the only way to navigate it. Keep asking the hard questions. Keep challenging the consensus, and always, always look past the headline averages. We'll see you next time.