This Is The BEST INVESTMENT Of The 2020s (NOT What You Think)

0:28Hello, everyone. We've got a lot to discuss today. just approved a$30 billion pay package for Elon Musk, and the haters are going absolutely nuts. They hate this. But they're all wrong, and I can prove it to you. Before we talk about why they're wrong, let's first talk about what happened. Elon Musk, the world's greatest entrepreneur, has previously been given a massive incentive package to Tesla. The idea was that Elon would receive tens of billions of dollars in value only if he could substantially increase the share price. That share price going up would create hundreds of billions of dollars in value for shareholders.

0:58That seems pretty fair, right? If you create a lot of value, then you should get some value back. Create hundreds of billions of dollars of value and you receive a percentage. No issue, I would think. But a shareholder who owned like three Tesla shares sued the company and said the pay package was excessive. It didn't matter that the board of directors approved the package or that shareholders themselves had voted for the package. A random judge in Delaware was able to strike down this pay package. How the hell does that happen? Well, your guess is as good as mine. That's not capitalism in my mind, and that's definitely not what the American economy is built on.

1:30But Tesla's board, they're not taking this laying down. They're back at it again, baby. They just approved a new pay package for Elon Musk. This new package will give him approximately$30 billion of stock. And I personally think there's a strong argument that Elon is worth way more than that. He's being underpaid. He's built the most successful car company in America. Tesla is worth nearly$1 trillion. And anyone with a brain knows that Elon Musk is the reason that tons of shareholders have made an absolute killing by investing in and holding Tesla shares over the years. Pay the man what he deserves.

2:01$30 billion is a good start. But think about this for a second. How much would you want if you created a$1 trillion business? At this point, I think everyone realizes that NVIDIA is a good company. Revenue's way up, profits are way up, and they're pretty much the backbone and infrastructure for the entire AI trend. But what you probably didn't know is that even though it's a multi-trillion dollar company, the employees are getting paid very well. It's estimated that between 76 and 78 % of all employees at NVIDIA are now millionaires, but that's not even the most mind-blowing stat. Approximately 50%, one out of every two employees at the company now has a net worth of over$25 million.

2:40Now, before all the critics start yelling and screaming and saying that they hate capitalism, think about this for a second. Of course, the CEO, the founders, the board of directors, and the executives, they're going to make a lot of money. They built a multi-trillion dollar company. But this is a perfect example where a company giving stock ownership to their employees actually are able to reward the employees. How many businesses do you know where one out of every two employees is making something that is in the millions of dollars? First of all, there's not that many companies that get that big, but on top of it, this is the power of owning equity.

3:12And if there's one thing that the tech industry got right, it's that they hand out equity to the employees. So the people who help the founders, the executive and the board actually build the company, they're also being rewarded. And so the fact that one out of every two NVIDIA employees has a net worth of over$25 million, that makes me happy. And it tells me that the people, they're actually capturing a lot of the value that they created. People are always looking for the next great investment opportunity. So am I. It's how investing works. Find a good opportunity, put your money there and let it go to work.

3:41They want something that's simple and something that's obvious, but they still want lots of asymmetry left in the trade as well. Bitcoin's been that answer for a long time. Decentralized finite asset was well misunderstood and underestimated. So it had a lot of room to run. That thesis has not really changed much. In my opinion, Bitcoin would likely get bigger and bigger over time and holders will do very well. But Bitcoin is not the only idea in the world. Maybe it is the best idea as for you to decide, but investors are still going to seek out other theses to pursue. An easy one is the electrification of the world.

4:11Someone on X named Lynn shared this great chart about the explosion of energy usage. We're seeing all of this happen due to various technology trends. They write that the clearest bet for this decade is energy, AI, chips, data centers, robotics, electric vehicles, self-driving cars. None of them work without power. They all need electricity and a lot of it. It's nearly impossible to disagree with that statement and that thesis. We're a power-hungry society. Remember, there's no developed nation in the world that has created prosperity for its citizens without consuming more power and more energy.

4:44And so America, we continue to collectively work as hard as possible to be the technology leader of the future. Everywhere you look, we're assaulting the market with innovation, software, hardware, and anything else that any entrepreneur can dream up. We're trying it all. We're building as fast as we can. Power is going to run it all. So those who figure out how to play the electrification trend are likely going to do very well moving forward. All right, guys, I've got a very special treat for you. I've got Heather Long. She's the chief economist at the Navy Federal Credit Union. I've been following Heather for years, and she's always on top of the latest economic data.

5:18She's got unique insights that I think are valuable, and I learn a lot from, and I'm happy to bring her here to you guys. Here's my conversation about the state of the U.S. economy with Heather Long. All right, Heather, I thought a great place to start this conversation is there's this massive job revision that just came out. Obviously, the president and the White House, the administration, they're very upset by it. I seem to remember that there have been a lot of job revisions, both under Biden and Trump, which calls into question kind of the BLS data collection and their methodology. How do you make sense of just the chaos that has now become what is pretty much a very hardcore finance organization and their data that maybe was less controversial but has now become center stage when it comes to finance?

5:55Yeah, the data nerds are center stage, right? I think most of America now knows what BLS stands for. And look, here are the three things that I've been telling people when they call. Be real brief about it and we can dive deeper into anything that you want to go deeper in. Number one is revisions are generally a good thing because the data that we're reporting on month to month, that is the first swipe. They send out this survey to 121 ,000 businesses and a lot of people miss deadlines. A lot of those businesses don't get back. And so they actually only hear from about 42 % of those companies.

6:33And that's what the initial jobs data is based off of. But by the time the more data comes in, more companies get their act together and respond over the next couple of weeks. And that those revisions incorporate that extra data. And so by the time we get two months down the road, we have 90 % of those establishments reporting. And so that's, you know, that's why the revisions are a healthy practice. They've been going on a long time. But, you know, as you're probably you're good at math, you're knowing, look, before the pandemic, that first read on the data used to have 60 % or more response rate.

7:11So the response rate has gone down. It's been a problem under, you know, as you pointed out, under Biden, under Trump, this isn't some new political thing. It's just the reality of the world we live in. The second thing I'll say, everything comes back to money. And the reality is funding for statistical agencies has been a problem. It's been basically flatline, which in inflation adjusted terms means it's gone down. You don't have as much money to collect data from across the United States. They've had to make some budget cuts in places. And that has impacted the reliability of the data as well.

7:45The last thing I'll point out, and this is the one that I think people should really pay attention to, the data tends to see larger negative revisions, like what we just saw on Friday that made everybody's head explode in times of recession or near recession. And so that's one of the things that if you've watched this data like I have for a long time, you're thinking, OK, OK, move the politics aside. You know, does this really mean a much bigger slowdown in the economy than than people are understanding? Now, what's fascinating to me is let's just take the BLS in general. Right. So I've been railing against the data collection and methodology for a long time.

8:24And frankly, I think a lot of people who follow me or who watch this show probably are like, why is this guy screaming about data? Right. But the two areas that I've usually focused on, one is the inflation measurement. And, you know, there's kind of the tinfoil hat conspiracy theorists who will say, oh, if we go back to the 1980s and, you know, you look at some of these kind of methodologies, inflation would be way higher. True. But is that the best method? Unclear. But what I do find very interesting is whether it's inflation, jobs, you know, whatever. There's now real time data that suggests that we should be able to do this much better.

8:56Rather than wait for the business owners, can we somehow hook into whether it's HR systems or some sort of data collection that does not rely on the responses? And the only company so far or organization that I've seen do something where I'm like, ah, this seems to make sense is this company called Truflation. And I'm not affiliated with them in any way, but it seems like they are simply looking at the internet and saying rather than sending people physically into the grocery store to manually input data or calling up people and saying, what do you think you could rent your home for? They're looking at things like, why don't we just go onto Zillow or StreetEasy or whatever platform and just see what are all the places that recently rented and what do they rent for?

9:35What are the grocery store prices online? How do we get data that is not reliant on human intervention? Do you think we can kind of get to that world when it comes to jobs and other BLS metrics? Or is this kind of a technology problem that they just don't have the resources to actually go build this stuff. And so they're resorting back to kind of a human labor force that seems to really be the collection method of choice. Yeah, it's a really good point. And look, I would argue to you, I think you're right that a lot of this private sector data is getting better. I mean, I can remember being a journalist back in 2005 and 2006 and being visited from people like the Monster job site back in the day, and they were just trying to get their index going, trying to argue that they have some really unique data on job searching.

10:22Many of your listeners are probably familiar with the ADP jobs report. So that's looking at payroll of, you know, a couple of tens of millions of businesses. So they have a pretty good snapshot into the labor market. What's different? So I would say we want all of the above. Look, I love data. You love data. We're nerds about it. I don't think one replaces the other. I think we want all of the above. And so most people would still tell you that what the BLS ultimately is doing. So twice a year, this is where the real big revisions come in. A lot of people may remember last August when the data was suddenly 800 ,000 jobs lower for the prior couple of months.

11:03That is when they are reconciling the survey data you're speaking about with actual tax records and unemployment records. So that's the gold standard, right? That's every place in America up to the far ends of Hawaii and Alaska and down to the tip of Florida. And so that really is the best. But of course, you can't get that in real time. You know, and so you're right. That's why I've been arguing for both. I would also point out to your listeners, you like Truflation. Keep an eye on the Harvard Business School now has a pricing lab. And they are doing something similar, which has been really good.

11:42They have done some great analysis of what products are seeing the pass through of the tariffs in the last few months, not just ones you would expect to see the tariffs, but what other companies are also kind of lobbing on and taking this moment to raise their prices, even if they actually don't have a direct tariff impact. Let's talk about the overall health of the U.S. economy. One of the things that I've gathered in following you for a while now is there are certain areas where I think you're excited about the economy. You say, hey, look, this data looks good and it looks like things are kind of growing and doing what we want them to do as kind of citizens within the economy.

12:16There's other areas where maybe I'll call you cautious or, hey, look, there might be some early signs of cracking. Obviously, you've been talking about the frozen job market for a while. At the same time, I think that you've been surprised. It seems like some of the inflation numbers haven't come in nearly as high as people were predicting. And so when you, if you were just like having coffee with a friend and they say, hey, how's the economy going? How do you think about it right now? Is it good? Is it bad? Or is it somewhere in between? And we're From a top level, I'd probably say the economy is good, but not great.

12:49And what I think is really important to understand about what's going on right now is it's a very bifurcated economy. I like to call it K-shape economy, but you can choose your favorite word of divisions. And initially, when I was looking at the data a couple of weeks ago, I said, okay, almost all of the consumer spending is now coming from the top 10 to 20 % of Americans. And we can even see this in our Navy Federal Credit Union data. You know, basically all the spending growth and credit card spending growth is coming from people who earn$170 ,000 or above. And for middle and modern income Americans, it's been very cautious, very frozen.

13:26We're seeing things like people not using their credit cards, using their debit cards. They're holding more cash in their checking account. So not even moving it to a CD. They are just nervous. The other thing that I think is happening, and you've been covering a lot of this really well, is look, look at the stock market, right? It's being driven mainly by a handful of companies, seven or fewer, that are really AI driven. And most of the rest of things are not really growing that well. And I think we saw this finally in the labor data, as you pointed out, I've been screaming about for the last six months, this frozen job market that unless you work in healthcare and maybe social assistance or education, you're out to lunch.

14:08I don't care what kind of skills you have or what kind of degree you have or, you know, how nice your resume looks. You just can't find a job right now. And so that's what I think is really cautious for me going forward in this economy is we are so reliant on such a small number of sectors, you know, whether we're looking at the stock market or whether we're looking at consumption or whether we're looking at job growth. And look, that's not healthy, right? To be so all your eggs in one basket is never a good sign. Let's talk about the Federal Reserve. And really, I think there's been a lot of focus on the interest rate and whether they're going to cut or not.

14:46I've been very loud proponent of them cutting interest rates. But I understand why some people say, hey, look, maybe they shouldn't do that. I think that there's kind of an argument on both sides here. What you just described of this kind of good, but not great, this there's pockets of like amazing economy, but then also pockets of not so good in the economy seems to make their job really difficult, right? Because it's kind of like whoever shows up, if you're part of the good pocket, you're like, Hey man, everything's amazing. I don't care what you do. Like we're rocking. If you're one of the seven companies, you know, you're kind of like, I don't care what the interest rate is.

15:16If you cut rates, I'm going to grow even faster. On the other hand, there's people who are showing up and like, I can't afford a home, right? You know, rates are too high or maybe my business, I actually can't borrow. and use it to invest in R &D and growth in these different things. How do you kind of evaluate the Fed and what they're doing right now? And I think maybe the part to me that I'm like most confused by is historically, it seems like they've looked at, you know, where are we and what does the data say? And then they're making decisions. I hear Jerome Powell talking a lot about the tariffs potentially leading to higher inflation and is causing him to be a little bit more cautious than maybe what the data today is exactly saying.

15:52Is that your read on kind of why they're not cutting rates? Oh, 100%. I mean, Fed Chair Powell has explicitly said that they would be cutting interest rates if it weren't for the tariffs right now. I did think at the end of the press conference last week, he made some comments that were sort of overlooked, and he was outlining the case for getting back to a more normal, normalizing the rates. And that's where I look even before Friday's jobs numbers that were I called them a game changer. I was arguing for a September rate cut for the same reasons that you've outlined that my focus is on the middle class and on the modern income folks and there's a desperate need for some relief.

16:31You know, it doesn't mean you go out and just cut for blindly, but I think to take a little bit of pressure off in September and hope that this could kickstart hiring in more sectors and kickstart some business investment in more sectors is something that I personally think that the economy really needs right now. But I think the, you know, look, the game Friday was a game changer. I think the Fed is going to cut in September now. And the other thing I think is interesting is even before Friday, the chairman was trying to make this argument or open the door to the argument that if the economy is doing pretty well, you know, maybe we need to get back to a more normal or normalized interest rate scenario.

17:13You know, what's interesting to me is I was having a conversation with a friend and one of the maybe ideas or thesis that I have, but I don't think we've yet proven it, is it seems like since 2008, the central bank now is able to persistently hold for longer periods of time. And then when they decide to make a decision, it is much more severe and the acceleration happens a lot faster. So if you think of, you know, hey, we are going to keep rates where they are. COVID happens. All of a sudden, let's cut two emergency rate cuts. We get to zero. The acceleration was kind of jarring. Then we kind of stay at that 0 % rate cut.

17:50All of a sudden, now we need to raise rates. Acceleration, fastest rate hikes in history. Right now, I think that people over the last maybe year or so were very surprised at how big the cut was in the second half of last year. But then we haven't gotten a cut. And so we're kind of holding constant. maybe that opens the argument that actually not only will there be a rate cut in September, but maybe it's going to be bigger than we think because of the jobs data and some of these components, right? It does feel like they are maybe more infrequent in their actions, but when they make a decision, you know, they're not changing this kind of like cruise ship, they're changing a speedboat and they just really take off.

18:25Do you think there's any credence to that kind of idea? Yeah, it's an interesting way of thinking about it. But, you know, look, Chair Powell has been very open about the fact that he's a fast learner and a fast course corrector. And that's really going, at least in the Powell era, I think what you're describing is true. I'm not sure if it's true in the Yellen and the Bernanke eras from back to 08. But I do think you're right that and he even sort of said this during the press conference recently in July that, look, he saw a lot less risk to waiting because they can course correct in September.

19:04Right. And so I think in their eyes, if something seems on the edge or seems unclear, they only have to wait like, what, eight weeks and then they've got another chance to get this right. So I think that's where you're right. They err on the side of if we need to, we'll correct it the next time we meet. Now, the stock market, Bitcoin, asset prices in general, all at or near all time highs. I think people were a little surprised at how quick the recovery was from kind of the April chaos. If you're sitting there at the Fed, they pretty explicitly say, look, we aren't here to juice the stock market.

19:41We're not here to definitely not juice the Bitcoin price. The president seems to use that. And I think most presidents will claim victory if the stock market is at all time highs as to look how good the economy is doing. If they cut rates, is it as simple as we're already doing pretty well in the stock market and Bitcoin, if they cut rates, then we should expect those things to kind of continue to accelerate? Or are there things that maybe are changing in the economy because of some of the labor, you know, kind of frozen market and some of these other components that the rate cut may not just have the impact on asset prices that people think it'll have?

20:14Yeah, it's interesting. I think you're right. Look, the Fed does not pay super much attention to asset prices, except periods of like March 2020, you know, when it's really having a flow through to a potentially frozen financial sector and frozen banking sector. And so I think that, look, from an economic perspective, the economy really needs business investment to pick up again outside of building AI data centers. You know, it's wonderful that we're doing all of that, but you got to have an economy that does more than build AI data centers. And so that's where things have been frozen in the business investment side.

20:52And it was actually a detractor to GDP in the second quarter, if you step back and look at it. And so from my perspective, if you're cutting rates, and hopefully getting more tariff certainty from the White House in the coming weeks, that could really kickstart a much broader economy that is a much more rich, diversified, and really what we want. And that's frankly what the White House wants, right? They're arguing that We want to get to the private sector driving more and more of the economy. But right now, that private sector is very, very limited. So that's what I think would really weigh on a lot of the Federal Reserve mind.

21:29And look, I can tell you coming from a credit union, the largest credit union in the United States, that people want to see housing, the real estate market, kickstarted again. We are potentially on track to have the lowest existing home sales in 30 years this year. This is not healthy. You know, business permits, building permits are on hold, more or less very, very low levels right now, because no one at this mortgage rate and these borrowing costs wants to build more housing right now. It doesn't pencil out. And so these are the factors that I think I'm hopeful that several Fed rate cuts later this year could jumpstart.

22:10How low do you think we could go? You think we can get down to three, two and a half? Oh, well, not right away. Okay. All right. Like by end of year. Yeah. By end of year. Well, look, I think if you're really optimistic, you're thinking it's a 75 basis points lower, right? Maybe a hundred. If you really think things are going to fall off the rails and we're going to get a lot more jobs reports like the one that we have. But look, the unemployment rate does not get revised and the unemployment rate is still 4.2%. And that was what Fed Chair Powell said is his most important data point right now.

22:44So I think you got to be pretty aggressive if you think it's going to be more than 75. Now, here's what's interesting to me is we are still growing jobs, although not at the pace that we thought we were. We're doing that in the face of this whole like AI revolution. And depending on which friends I talk with, if I talk with friends who run tech companies that are really kind of AI forward, they'll say, eh, maybe we've let a couple people go, but more so we've just like slowed our hiring is probably the bigger message. Then there are some people who are just like, hey, look, you see public companies talking about we were able to let go of X number or percent of our company and we're replacing with AI, but whatever.

23:23The fact that we're growing jobs at all, given this kind of like AI trend, feels like that is somewhat of a positive. It's just that when you look at historical comparisons to the jobs data, you kind of don't get these more qualitative type things that play into the numbers, right? There's no like asterisk on the number that says, oh, by the way, this is with this time period or in this environment. And so how do you evaluate what the jobs number should start to look like moving forward if we have this kind of deflationary force of AI? And what I think a lot of people see as a promise of AI is just like you need less people to build bigger companies.

23:59Yeah, no, you're right. There's a lot of questions around what AI is going to do. Let me just say a couple of things about the current labor market. As you pointed out, I've been calling it a frozen one. And one of the other, in addition to healthcare, making up 75 % of the job gains in July. And if you look at the past three months, it's healthcare and social assistance, which is basically a form of healthcare, make up almost all of the job gains in the past three months. And the other thing that stood out to me in July is there's actually a lot more sectors of the economy that are laying people off.