NO RECESSION! The US Economy Is Running Too Hot To Slow Down

0:28Hello, everyone. We've got a lot to discuss today. we are at 21 ,348 subscribers and my goal is to get to 1 million. Hit that subscribe button and let's get into it today. All right, ladies and gentlemen, it seems that many people are freaked out over the week jobs report from last week, but I don't think people quite understand what's happening right now. We're living through one of the most historic moments in technology history, and you may think that that sounds like hyperbole, but I brought cold, hard facts to prove it. Take a look at this chart from Ahan Manan. The tech sector output is skyrocketing at the same time that tech sector employment is contracting.

1:03Quite literally, we have never seen this happen at any point over the last 60 plus years. Companies are becoming more productive, but they're doing it with less people. It is the textbook definition of efficiency. Now, you may ask, how's it happening? Don't worry, I got you covered. Let's use Coinbase as the first example. CEO Brian Armstrong recently wrote, approximately 40 % of daily code written at Coinbase is AI generated. He wants to get it to greater than 50 % by October. Obviously, he says it needs to be reviewed and understood, and not all areas of the business can use AI generated code, but that they should be using it responsibly as much as they possibly can.

1:41Yeah, he said 40 % of daily code written at the company is being done by AI. And he isn't the only one. 8 Sleep CEO Matteo Franceschi wrote in a response, 48 % of the code from our data team is now AI generated, and that share keeps climbing every week. Beyond engineering, teams across the company are rapidly adopting tools like Devin, making AI adoption our fastest growing company-wide metric. Now, these are public and private companies. They're software and hardware. One's worth hundreds of millions of dollars. The other's worth tens of billions. Each is publicly confirming that nearly half of the code written is coming from AI.

2:20No wonder we're seeing productivity spike upwards while employment's falling. So this begs the question, who's losing their job? Well, the answer is very clear. The number of junior roles are declining and the number of senior roles are increasing. Alex Chima shows that junior roles are down 23%. Senior roles are up 14%. This means the best engineers, which obviously are usually the most senior, they are the big winners from the AI revolution. That's an important data point because it proves that AI is making one group more productive at the expense of the less experienced group. So open your eyes and your ears.

2:55These companies are showing us exactly how they're doing it. So this brings me to the broader US economy outside of the tech sector. Our friends over at Boring Biz highlighted a recent report from Moody's. That report states that 33 % of states in the US, they are already in recession territory. It looks like Texas, California, Florida, New York, and North Carolina are responsible for majority of the economic growth happening right now. Those also happen to be the states with significant tech activity. Those include Silicon Valley, Austin, Miami, El Segundo, the Research Triangle Park, and Silicon Alley.

3:29It makes sense that the economic growth is happening in these areas because of the tech sector. But the fact that we're not seeing growth in other states, that's less than ideal. So add in the fact that the S &P 500's price to book value is now higher than it was in the 2000.com bubble. And you already know the bears are out in full force screeching about the impending catastrophe in financial markets. But before you throw up your hands and say that the bears are right, Sam Bawati reminds us that we have had three bear markets in the last five years. So all those bears, are they not happy with the last three crashes?

4:03And if that doesn't make you feel good, the Federal Reserve is about to juice the market with an interest rate cut too. They haven't been the only ones this year either. Adam Kobisi writes, the Fed is about to join the global rate cut cycle. There have now been 88 rate cuts worldwide year to date. It's the most since 2020. This puts 2025 on track for the third fastest global cutting cycle on record, according to Bank of America. So my best advice is to stop listening to all the bears. They keep predicting a recession, yet the odds on Polly Market have fallen from 65 % in May to only 8 % today.

4:38A big reason for these declining odds is the underlying business fundamentals are getting better. Companies are reporting record revenue, profits, and growth. These businesses are becoming more efficient and more productive. So they should be worth more money, right? Well, that's exactly what we're seeing in the stock market. And you can't have a recession if companies are getting stronger. So good luck to all the pessimists out there. I really sincerely hope that they don't actually believe all the nonsense they're spewing. I sat down with Jordy Visser over the weekend, and he says that a recession is not coming.

5:12He's got economic data to prove it. Take a listen to what Jordy had to say here. Jobless claims have not budged. They're up slightly. That means we're not seeing job losses. We are absolutely not seeing hiring. So this is a reflection, and we talked about it last week with the study, on the realities of AI. And I just want to remind people, when you read people saying a recession is coming, the last cyclical recession, and that means I'm throwing out COVID, but the last time we had jobs were weakening and then we got a recession. That was pre-iPhone. I don't know how to describe to people, like, you're talking about history that seems reasonably, you know, short time ago.

5:53The first baby boomer had not retired. These are dramatic shifts in the technology side. We were doing QE back then. We were coming out of a housing bubble. Now we have a problem in the housing market. Not that it's collapsing, as people want to say. People can't sell their home because they have a mortgage of 3%. And if they sell their home and have to go buy a new one, it costs too much. The housing affordability is a problem because we're not building enough supply. This is a very unique situation that you can't go back in history and compare it to. There's a distributional wealth problem that has been created by the smartphone, the AI, and all of the printing that's going on.

6:31When you increase your transfer payments dramatically to two groups, one is, okay, people are retired. That means they're finally getting social security. Well, they also have a pension, a lot of them. And if they have that, they have money to spend. And you move the rates up, which means they're getting money from the government in their bank account. For the people on the poorer end and the lower end of the economy, they're getting more transfer payments. These increased dramatically post-COVID. So we just have an economy that I hate to tell people. It's kind of boring. It's not as dramatic as people want to make.

7:04We've had nominal GDP above four and a half percent for five years straight. But the amount of recession fears and the amount of times that people get off worried about things, we're just in a situation where everyone who's involved in the crypto world. So if you separated your audience by people that knew me from the macro world and people that have grown up with you on the crypto world, The basement is the major story. They have to run the economy hot and in rates need to be lower than where inflation is going to be. And that's where we're headed. So instead of trying to fight it, I'll use Darius Dale's comment that he said to you, focus on the destination.

7:38The Fed's going to be more dovish going forward. They're going to be running the economy hot. Make your investments based on that. So there you have it. A recession is not coming. The economy has to run hot. And debasement, it's all but a guarantee. It's a pretty clear picture of what's happening all over the United States of America. If you're an investor, you just got to figure out what assets can you own that benefit from debasement. And my guess is that's the portfolios that are going to do best in the coming years. Now, most people know that the U.S. education system, it leaves a lot to be desired.

8:11Doesn't exactly perform the duty that it's supposed to do. And on top of that, seems like nobody really cares. We just keep putting kids through some sort of manufacturing line, giving them a diploma at the end, saying, good luck, kids. Well, Vivek Ramaswamy, he went on CNBC this morning and he explained why our economic challenges are actually deeply rooted in the failure of K-12 education. Take a listen to what Vivek had to say here. But let's get to the root cause. Why is TSMC slowing down a little bit in Arizona or not as fast as they would have wanted to be? it's in part because we don't exactly have yet the skilled workers to build those sub 10 nanometer leading edge semiconductors which goes back to deeper root causes that i'm looking to address in our educational system i mean the average student right now in the united states is four full academic years behind the average student in china a seventh grader here is performing at the same academic standard as a third grade student in china that's unacceptable and and do we need leaders, frankly, if not in the Democratic Party, at least in the Republican Party, focusing on those root causes.

9:14Absolutely. And I think we're going to be unified around that. But certainly in Ohio, looking at state leadership, that's where my focus remains. Now, it's kind of crazy to hear somebody say that a seventh grade student in the United States has the same performance ability as a third grade student in China. Let's teach our kids to be smarter. But it's not just about what is their academic knowledge? Alex Karp, another billionaire. He actually thinks that not only is it about the academic understanding, it's also about getting a benefit of refusing to conform to a system. Alex went on TBPN recently, and he had a great explanation of why young people should be so focused on figuring out what's their path in life, not just the path that other people tell them to be on.

9:58Take a listen to what Karp had to say here. People underestimate their artistry because like from a young age you get huge benefits for conforming and you can say well i don't i mean the central advantage of being dyslexic we can't conform yeah so that was that ends up being a huge because you just can't so you're gonna have to so your basic thing you have to emerge do not conform and by the way the people who are telling you simplistic bullshit that means you know like meritocracy isn't gonna matter you're not gonna judge all these conspiracies it's you can't do wealth accumulation if you're in this country yeah Like in America, I think actually a lot of these things are true in other countries.

10:32But in this country, they're teaching you how not to learn, how to be complacent, how to give up your agency, how to fail, and how to blame it on anyone else. And if you're, so you have to say it's like all that. Reject that. Yeah, reject that. That's kind of a, and then you have to really, really look at people and judge them by their fruits. The best way to learn is to look at somebody and say, okay, well, you know, it's like, you know, you work with somebody like the co-founding team at Palantir. so you have peter joe stephan nathan like part of what made us so good is it's like okay you can measure yourself it's like you know when i started at palantir i actually just because i just wanted to be left alone i was like yeah i'm gonna make some money i'm gonna move to berlin i'm gonna live a debaucherous life that was my goal like i'm moving to berlin i thought i needed 250k i was like at 250k is a minimum a million dollars a maximum yeah i'm moving to berlin i'm gonna do like debauchery forever.

11:23Burgheim. Yeah, well, I had to like, yeah. So it's a... Set up a remote office there. But like you then measure yourself and it's like, okay, well, I'm highly differentiated on managing complicated people who have to believe their opinion is their opinion, but still have to build a product that actually delivers value. That's my differentiation. It's pretty good to hear somebody who's been as successful as Alex Karp and somebody as successful as Vivek Ramashwamy talking about the problem in our schools, but also saying that you as an individual, you have agency. You can figure out what you're gonna do with your life and then you can just do things.

12:01And the more people who do that, the more people who leverage the internet, the better not only they're gonna be, but the better the US economy is gonna be. My guess is the future is still bright. We just gotta spread this information to as many people as possible. That's it for today's show. Hope you guys are enjoying it. Please remember, we have 21 ,348 subscribers on YouTube. I need your help. to get to 1 million, which is my goal. Please make sure you subscribe, and I'll see you guys live tomorrow from the desk of Anthony Pompliano.