The Fed’s September Dilemma: Is it Really Time to Cut Rates?

28:20It's the administration bureaucracy, communication as investor relations bureaucracy that is so expensive and so difficult. The CEO is now mandated to sign his earnings report. The IR committee and the lawyers have to review everything, parse the language. I bet in a big public company, 20 to 30 people are working, including the CFO and the CEO, for weeks and days if you're the CEO and the CFO before earnings call. And they're like, Jesus Christ, this is a pain in the ass. Because if you get a number wrong, I think like what at Lyft, they got one number wrong and it sent the stock up 30 percent and then down 10 percent.

28:56You know what? I'm getting everything I need in the private markets. I don't want I just, you know, I don't need this shit. Right. That's a good point. The straw man argument here is the following. I was approached by a guy who was starting a hedge fund in this like 10, 15 years ago. And he said, all we do is find fraudulent companies in China that because of a lack of regulation to go public there, I can find companies that are literally downright fraud. Here's a company that claims it has 3 ,000 gas stations. And I went to China and did an audit, and I think they have 30. I think they're literally lying.

29:30I think they are saying they have 100 times the number of gas stations that they actually have. Because the lower the regulation of the reporting requirements, the greater the likelihood for fraud, right? So there is one of the reasons our S &P trades at a greater multiple than any other market is because we're more risk aggressive, our companies are better, access to capital, but also rule of law and regulation. Because if you're a widow or an orphan and you invest in SPY, the S &P, you're unlikely to get made-offed. You're unlikely to find out, oh, there's very few Enrons in the S &P 500. That doesn't happen very often because of these reporting requirements.

30:08Now, what's the answer? How do you kind of thread the needle here, I would argue that you could bring down regulatory requirements and reporting requirements for companies to go public to try and incent them to go public such that retail investors have more access. I think the delta here or the solution or the plug, if you will, might be AI. And that is, I think at some point, if you say, all right, I'm going to release all my data, but maybe I'm not going to get on the phone every three months and ask analysts questions. and I don't need all sorts of regulatory submissions. You need to make it less expensive.

30:43I think AI is going to be able to look at every single fraud that's happened in about one second and then ask for a series of inputs from a company on a regular basis and then put out a fraud rating and say, this smells funny. This doesn't feel right. And then for other ones, say, everything seems legit here and they don't need to have this incredible regulatory burden. The average U.S. publicly listed company today spends 136 hours working on every quarterly report and 1 ,720 hours working on every annual report, which means that S &P 500 companies are together spending a million hours a year filling out forms, basically, to disclose their financials.

31:27And that to me, right to your point, you got to AI-ify that 100%. So it's extremely burdensome in terms of time. It's also expensive, costs roughly$2 million a year to comply with reporting requirements. In total, S &P companies are paying more than$5 billion per year to auditing firms for their financial disclosures. So really expensive too. And you would think that AI would step in here. But it does raise this point where, you know, as the public markets have dwindled in terms of the amount of capital and the amount of activity and the amount of companies that are listing on these exchanges, the financial disclosure requirements and the regulatory burden, it has increased a lot.

32:17And, you know, just as an example, back in 2020, the SEC decided to increase the reporting requirements, especially around risk. There are now more than 30 risk factors reported on every public company report on average now. And, you know, as an investor, you read these risk disclosures, and it's getting pretty ridiculous. I mean, we might have discussed this before, but the average length of just an annual report since 1997, it's increased 200%. So these filings and these disclosure forms are getting so, so long. and it's all in the name of, you know, investor protections and informing the investor and making sure investors know all of the risks, et cetera, et cetera.

33:09But it gets to the point where like, this is just way too long. I'm not paying attention to any of this. Like these risks are getting ridiculous. And just some of the dumbest and most meaningless risk factors that we have collected here, that our team collected. So Amazon on their recent report, one of these risks, quote, quote, we face intense competition. Like, okay, got it. We understand. Thank you. Thanks, Captain Obvious. Apple, quote, the company's operations of performance depends significantly on global and regional economic conditions. Great. Here's one from Berkshire Hathaway, quote, a cyber, biological, nuclear, or chemical terrorist attack could produce significant losses to our worldwide operations.

33:55Like, you talk about infantilizing the investor, all of those risk factors right there, that is like peak infantilization. Like, why is Berkshire Hathaway telling us that a nuclear or chemical terrorist attack is going to have an effect on the business? Like, we all already know this. So in my view, it is getting to the point where, as you say, there is a balance when it comes to regulation. You know, having an investor protections, having robust investor protections is a good thing, which is why you see this massive premium in the US markets. Yes, the US has a lot of things going for it. But one of the great things about listing on a US exchange is that you can pretty much guarantee, or at least you have a fair amount of assurance that whatever you're buying isn't totally fraudulent.

34:43And the same is not true of many other exchanges, especially emerging markets. But then there's the other side, which is it's getting a little bit much. And if this is a pain in the ass for the companies and also as an investor, I'll say it's a pain in the ass for me. I don't want to read 100 pages of risk. I don't care. I can do it on my own. I can figure it out. It seems like there is a happy medium and we are probably erring too far on the side of regulation here. My favorite in terms of what the team dug up was the disclosure and the warning. And this is in the S1 or in an earnings report from SeaWorld, which I think is owned by Blackstone.

35:22SeaWorld warned investors that its orca whales killed a trainer and might kill more. That's my favorite. And might kill more. Tilikum, was that the same? Tilikum is in a bad fucking mood. And he's upset. He's upset about the Padres losing. And we just get the sense he's in an eating trainer mood. I like that. I want Prof G Media to go public and just disclose risks around me. He's in the midst of a midlife crisis. Yeah, yeah. What would our publicly filed risk disclosures look like at Prof G Media? His judgment is really poor. Oh, my God. Likes drugs, experiments with all sorts of substances, has no fear of death.

36:09Even if we loosen up the regulation, I would still opt to put that in there. We're very, very dependent on this individual. The investors should know that. Oh, my God. We should absolutely put together a prospectus with our risk disclosures and see what we come up with. Claire is just about had it with Scott. She has just about had it. Oh, my God. I love that. Ed's head is getting fucking enormous. Ed is getting very annoying. Yeah. Yeah, Ed's had it. Oh my God, I love it. But I do think, I mean, I'd be interested to hear where you ultimately land on this. And just some quotes from some CEOs who are complaining about this.

36:57Jamie Dimon complained about, quote, intensified reporting requirements, higher litigation expenses, cookie cutter board governance, and the relentless pressure of quarterly earnings. Warren Buffett wrote an op-ed. He said, quote, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy growth and sustainability. James Gorman, he called the disclosure requirements for quarterly filings, he called them, quote, asinine. CEOs are annoyed about the amount of regulation. And I find it interesting that I am landing in a place, I'm usually very pro-regulation.

37:36I usually feel that we just don't have enough i do feel that we've gone overboard here agreed uh on the on this ipo question and so then the next question is like okay well what do we do about it so maybe we loosen the laws uh maybe we just expand access to private markets and just sort of enough with this delineation I mean, if you were to design a solution to this problem, specifically companies not going public, what would it be? When demand was so great for tech-related companies and companies didn't want to go through the hassle and the regulation of going public, we invented a plug and it was called a SPAC.

38:22And that did not end well for consumers. In the face of unprecedented market gains, this lower regulation, lower hurdle way of just add water in your public did not work out well for consumers who thought they were getting in quick and easy on some great little tech companies. No, these companies just – they shouldn't have gone public. and since then investors have really paid the price so i think there's a happy medium here um it's a little bit like me i i wonder if there's just an exchange and this is already sort of emerging i mean the problem is you have these secondary exchanges emerging um like setter and other places where you can buy shares in great private companies the problem is is that they're really inefficient a guy will call me and say scott are you interested in increasing your exposure to Epic.

39:07I own shares in Epic. Are you interested in selling your shares in Multiverse? Whatever. They make a market. They charge 4 % to 7%. Exactly. And whereas I think Schwab charges 10 % to 15 % basis points. So they're very inefficient. And also because there's not a mark or a liquid market, I'm always insecure around, am I getting a good price or not? So there's not enough liquidity in this marketplace. And a lot of market makers. People don't appreciate that a market maker will actually make the market in and even sometimes buy your stock ahead of time, not knowing there's a buyer because they're willing to take that risk.

39:42So, I mean, I think we've gone overboard in terms of protecting consumers. We let consumers bet on whether or not there'll be a Fed rate hike. We let consumers bet on everything. So the idea that we need to protect people from stocks has gotten a little bit overboard. I'm a little bit on your side. I'd like to see an Olympics where there's absolutely no restriction on performance-enhanced drugs. I'd like to see a woman show up who's 800 pounds in all muscle. Peter Thiel's built that, by the way. Really? Yeah, we have the performance-enhanced Olympics. It has arrived, thanks to Peter Thiel. I think that'll be a lot of fun to watch.

40:15I agree. I kind of feel the same way about the markets. I think there should probably be a market, and there is, for, look, if you want to have at it, but I do think that there will be a company that builds a layer on top of an LLM that says, all right, we issue ratings, similar to Fitch or S &P or Moody's or whatever, right? Who, by the way, I think rated some of the companies the week before they went bankrupt as like AAA or defaulting on their bonds. But I think there was going to be a ratings agency that is AI powered that basically says, all right, you want to go public or you want to trade on an exchange?

40:52We need the following data sets from you, the following APIs, and we're going to issue a rating on you in about two seconds. And it'll serve as an endorser brand, similar to a Moody's or a Fitch or whoever, or even some of the endorser brands right now is that if Goldman Sachs is taking you public, you're probably a pretty legitimate company unless you're a company renting out desks called WeWork. But most of the companies that Morgan Stanley, JP Morgan, and Goldman Sachs take public have kind of passed the smell test. So there's definitely a need for renovation here. I agree with you that we need to stop infantilizing consumers because they're spending money on stupider shit and taking bigger risks now that they have a casino in their pocket and can bet on almost anything.

41:33Why shouldn't they be able to bet on companies? So I'm with you. I was down with the argument for investor protections, but it doesn't make any sense that we have all of these investor protections when it comes to stocks. And then at the same time, the crypto industry exists. Like, why is it that we're protecting people from and making sure that people really understand what stocks they're buying. And then at the same time, we've got this thing called ThoughtCoin, which is perfectly permitted and allowed to issue those tokens on any crypto exchange. And then you have all these people buying ThoughtCoin and CumRocket and PepeCoin and TrumpCoin.

42:12Like, those two things should not be true at the same time. It doesn't make any sense. And then to your point as well, we've got these prediction markets, the fact that it's legal to bet on the Rotten Tomatoes score of the new Avengers movie. Like, we need to figure out where we land on this thing. And I think it's really interesting that you bring up this point of having some sort of more publicly available information on credit ratings as an example for private companies. And it's so interesting following what we've seen recently with Oracle and OpenAI and the conversation I had with Gil Luria recently, the head of technology research at DA Davidson, where basically what you've got right now is the Oracle's valuation is pretty much dependent on how much you believe OpenAI is going to pay them$300 billion over the next five years for their compute.

43:10And of course, OpenAI doesn't have$300 billion right now, which means they're going to have to borrow, which means that all of this is dependent on the creditworthiness of OpenAI. Now, how do we determine the creditworthiness of OpenAI? We don't have access to those filings. Maybe OpenAI's investors do, but the rest of us and reporters, we don't really know what's going on at OpenAI. And yet what is happening there, they've gotten so big that the moves that they are making is causing hundreds of billions of dollars of market cap to be created within basically a day for one of the largest tech companies in the world.

43:50It has basically minted now the world's richest man in Larry Ellison. And so all of this is to say these private companies are so important now that we are beginning to see there is a reason why we need to know about what is going on with them. But if they stay private, we can't know anything. So someone needs to enter that void. Maybe it's AI, as you say, or maybe the other possibility is maybe we need more disclosures of private companies. Maybe that's how you level the playing field here. This feels like a technology solve for me. People want access to great private companies. And also, I have made, actually, my biggest gains have been buying, investing in B and C round companies and then selling them.

44:36I've invested in a great company. I'm not surprised. That's where all the returns are. Yeah. And by the way, but also it's risky. The way I would say it is, and this is what I think we're trying to do in the show, financial literacy is really important. because what I've also done, I always make sure if I have$10 million to invest in private companies, I invest in three to five because I know one of them is going to go to zero. And the problem is I don't know which one. And so I do think that you need people to go. I just remember Kleiner Perkins. I got into my first private deal was with Kleiner Perkins.

45:10We were doing some brand work for them, my first strategy firm profit. And what a thrill. They let us invest in this thing called, I think it was called, not Della and James, but it was a wedding registry. And we got to invest alongside Kleiner Perkins. Oh my God, what a thrill. Can't go wrong. This is the best VC firm in the world. John Doerr was on this deal. And so I called my partner and said, we got to back up the truck here, borrow whatever we have. And we managed to scrape together a quarter of a million dollars, which was everything we had. We were like, I think 27, 28, just started profit.

45:40Six months later, the thing is out of business, out of business. But if I had invested - And it's gone. And thank you very much. And your money's gone. That's a great South Park. Okay, hold on. Let me see. And your money's gone. I'm just going to put it into this. It's fun. And it's gone.

46:02So I didn't understand the power of diversification because what you find with these private companies is you just don't know. You try to make good investments. You look at the valuation and everything. But the bottom line is the private market is more volatile. And essentially what regulars have decided to do is they feel like they need to protect non-accredited investors from volatility. But you can invest in Fartcoin. Or you can bet on Kamala Harris to win the presidency. It's a zero-one game. I get it. You win. I'm in. Just what I can tell you, folks, is just spread it around because these things, you just don't know what's going to happen.

46:42We'll be right back after the break. with the rising Gen Z unemployment rate. If you're enjoying the show so far, hit follow and leave us a review on Prof G Markets.

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49:37We're back with Prof G Markets. Unemployment is rising and young people are feeling it the most. Overall, U.S. unemployment hit 4.3 % in August, the highest since 2021. But for 16 to 24-year-olds, the rate is 10.5%. By the way, this isn't just a problem in the U.S. Across the globe, youth unemployment is climbing, with similar trends emerging in many other countries To give just a couple of examples, in Canada, youth unemployment is at its highest level since 2010. In China, youth unemployment hit nearly 18%. And in India, more than 40 % of college graduates under the age of 25 are currently unemployed.

50:19So Scott, let's start with America here. As I said, more than 1 in 10 Americans under 25 are unemployed right now. That's one of the highest rates of youth unemployment in years. Entry-level job postings are also in decline, down 35 % since January of 2023. What do you think is happening here? I think the economy is slowing down. I think that AI is coming for entry-level information age workers who were sort of the bell of the ball the last 10 or 15 years. I mean, these companies could not hoover up recent grads fast enough. At Berkeley, people stopped recruiting at Haas because the kids were getting five and six offers.

51:04And they're like, it's not worth our time because no one's accepting our offers. So these kids were so in vogue. And now when I think about the 85 people that were in my analyst class at Morgan Stanley, and I think about the work I did over two years, I think that work could be done in four to 12 weeks. meaning that I'd just be curious to know what their analyst class is. I bet for the same amount of work, it's 20 or 30 people. Now, they say they're not checking back on hiring. I think that's bullshit. But it strikes me that AI is really going for young entry-level information age workers, the consultants, the bankers, the analysts.

51:40To me, the new lawyers, my God, I would really be curious to see an honest appraisal of what is happening to the first-year classes at places like Skadden or some of the tier two firms that still hire a ton of lawyers right out of law school. And also the employment rate is substantially higher for young men than it is for young women. But as we've seen in Nepal, when you young people get upset, it oftentimes leads to revolution. There's a variety of factors here. When you look at income inequality and the expectations it has raised for people, a lot of people say, correctly, your life right now, you'd rather be a middle-class person right now than the wealthiest person in America 50 years ago.

52:21You didn't have Novocaine. You didn't have Netflix. There is something to that, right? But that's not how the human brain works. Young people see the life of their parents along the lines of mom and dad got married, had a home, had kids, could afford to have kids, right? And all this wealth porn is being shoved in my face, convincing me that that is the life I'm supposed to have. And if I don't have a boyfriend with ripped abs and I can't take my girlfriend to Sardinia, then I'm a fucking failure because it feels like everyone but me is doing it. So the expectations have gone higher. The core things that people need to spend on to establish what I call a more meaningful life, that is finding a mate, having kids, a house, not having debt, that shit's getting more and more expensive.

53:06And unfortunately, I think that the new technology, AI, is coming straight for young professionals. It's really scary for young people because when you just think about it from the company's perspective when it comes to AI, there's the incentive to cut jobs and use AI and get rid of your employees to cut costs. So there's the business incentive. But because this AI thing is so powerful in Wall Street specifically right now, there's also a valuation incentive to show, yeah, we are using AI and yeah, we are getting rid of people. It's become almost a bragging point. And that's one interesting shift that we've seen.

53:45It used to be that layoffs were kind of a negative indicator, like, oh, what went wrong? Why'd you lay all these people off? It's flipped now. It's now a sign of strength. Yes, we are using AI so well that we don't need people anymore. It's become a bragging point. And in fact, we are already seeing that, especially in big tech right now. According to Satya Nadella, CEO of Microsoft, 30 % of the code written at Microsoft now is written by AI. That's striking in and of itself, but also it's striking that he's bragging about that. It's basically that there is a reason if you want to get a nice premium, there is a reason and an incentive to go out there and say, look how many people we don't need right now.

54:30Look how many young people we didn't hire. Meta's saying the same thing. Half of its code, according to Mark Zuckerberg, half of the code written at Meta will be written by AI by 2026. And so there's this very dark thing happening where the market is basically saying, you know, we love you young people. You guys are great. However, we really need to make sure that we can prove to Wall Street how much we do not need you. And we are already seeing that right now. And then we had that Stanford study, which was so alarming, which found that young people with AI exposed jobs have seen a 13 % reduction in employment.

55:11One of two things seems to happen here, and we don't want to talk, people don't want to talk honestly about this. If you look at the valuations of AI and AI related companies, the Magnificent Ten, baked into those valuations, is that they're either going to be able to help companies increase their revenues by a trillion That's the number I heard from the analyst. It was either Jeffries or Apollo or cost by a trillion dollars. I have not heard of a company saying, we're putting out a new moisturizer we developed with AI. Oh, it's a new car developed with AI. We're finding efficiencies. It's all about efficiencies.

55:48So that trillion dollars has got to come out from cost savings or efficiencies from the clients spending a shit ton of money on site licenses or LLMs or NVIDIA chips or have promised their shareholders that they're going to get all sorts of efficiencies. And in order to cut a trillion dollars in expenses, and given that maybe half of the industry is somewhat immune from AI, whether it's a chiropractor or a dentist or masseuses or whoever, or welders, that means the industries, the information intensive industries, are going to have to register a massive increase in efficiency, which is Latin for people being fired.

56:30So one of two things has to happen in the next 24 to 36 months. Okay, one of three things. They find an immense new world of new products from AI, which I have not seen yet, that increases incremental revenue. Have not seen any evidence that's going to happen. They find massive efficiencies through layoffs of people they don't need or they need less of. I am seeing that everywhere. Or the Magnificent 10 gets cut in half. So in the next 24 to 36 months, we either see massive destruction in human capital across certain industries, especially at the junior levels, maybe also the senior levels, I don't know, or we're going to see a serious correction in the valuation of these companies because baked in to the valuation of these companies is that their clients and everyone announcing they're spending more and more money on AI and how are they going to register a return on that investment in AI?

57:18Through efficiencies, which again, is not reducing the cost of electricity in their factory, we're making it cheaper and easier to build a building. It's all about layoffs and people and redundancies. Catherine Anne Edwards, who is the labor economist who we had on the podcast, she made the other point here, which is, you know, there's the AI problem, but there's the other side of this, which is the unemployment rate among young people is usually a leading indicator of a larger economic recession. As she said, young people are the last to be hired, and the first to be fired. So the other side to this, and we've seen this in many recessions before.

58:01We saw it in the 80s. We saw it in 2007. The recession was preceded by a big surge in youth unemployment. The other side to this, and perhaps AI is part of that story, is that this could be a leading indicator to something larger. It could be, yeah, we're going to not hire these young people right now. We're going to hold on to our senior people because we have a nice relationship with them. We like them. They've worked with us for a while, but a year down the road, perhaps, we're going to have to let you go. And that could be the story too. So we have some breaking news here, Ed. Paramount Skydance prepares Ellison-backed bid for Warner Brothers Discovery.

58:45So you have been kind of the Oracle of Oracle. You said before it was cool that Oracle was really well positioned. Larry Ellison, 38%, what was it, gain in one day? Larry Ellison gained 100 and increased his net worth by$130 billion. We don't have a sense for these numbers because effectively, his son purchased Paramount for$8 billion. He could purchase 15 Paramounts with the increase in wealth of Larry Ellison yesterday. So, I mean, you now have basically the entire media ecosystem is being consolidated because of the Oracle earnings call. Like two of the most important media companies and, you know, Warner Brothers Discovery is basically going to be soaked up.

59:34I don't know the market cap for Warner Brothers Discovery, but I mean, tech is literally driving everything now. Anyways, I thought that was interesting. Breaking news. Breaking news, Ed. By the way, it reminds me of my favorite text exchange in the history of texts. What's his name and how much did it cost? Just wait till you're my age, Ed. It won't sound that alien or that weird. Few beers, a little more open-minded. Sorry, Ed, go ahead. Your favorite text exchange. My favorite text exchange, speaking of very rich people throwing money around. Elon to Larry Ellison during the Twitter deal. Any interest in participating in the Twitter deal?

1:00:16Larry Ellison. Yes, of course. Elon. Cool. Roughly what dollar size? Not holding you to anything. Larry Ellison. A billion. Or whatever you recommend. Must be nice, right? Must be nice. Also, Larry Ellison, 81, just married a 33-year-old, or his wife is 33. He looks good. We were talking about this. He looks very good. I don't know what he did. Oh, what didn't he do? The Peter Thiel blood transfusion, the vampire strategy. I don't know what he's doing, but he does look good. Oh, by the way, well, this is Profty Markets. Warner Brothers Discovery, just in the last hour, is up 27%. So get this. All right.

1:00:59God, we should have figured this out. Basically, Larry Ellison goes from a mature company. and this is the difference between Larry Ellison and quite frankly, Tim Cook right now. He goes, okay, I'm a mature company, returning cash to shareholders through buybacks. Oh no, there needs to be a number two in infrastructure to NVIDIA. It should be Oracle. I'm pivoting back to my younger days. I'm going aggressive. I'm gonna make massive investments in the cloud. It hugely pays off. He announces that they're gonna do, they have a$300 billion deal over five years with OpenAI, which is just staggering when you think about the fact that OpenAI, which is making about$10 billion a year, anticipates they can spend$60 billion a year on compute, which gives you a sense of how confident they are about their revenue growth.

1:01:44He announces this unbelievable staggering quarter, and that results in Warner Brothers Discovery the next day going up 26 % because his son, who wants to go to the Academy Awards, and I'm sure his dad likes the idea of hanging out at the Vanity Fair Oscars party, goes, fine. Go play in traffic with 20 % of my wealth gains from today. And to tie it back to this Gen Z unemployment thing, this is the problem where all of the value of AI that is being created is creating a lot of momentum and a lot of action only among equities, basically. All of the action is happening in the stock market, and it's all shareholder gains that we're seeing.

1:02:31So AI is great if you're an investor. I mean, you're crushing it right now. But as we know, young people are not invested in the stock market because they don't have the money, and the value of that AI is not being accrued in the real economy in terms of salaries and employment. I mean, people said this was going to happen. It is what is happening. It's taking young people's jobs. It's creating all of this value. The value is being accrued to the richest few people in the world who are then passing that money on to their children, David Ellison. We are seeing the inheritocracy arise as we speak.

1:03:10And then David Ellison is spending that money on ridiculous valuations for pet projects such as the free press, because he's probably into sort of edgy right-wing content. I'm not saying that's exactly what the free press is, but rest assured, he likes the ideological views of Barry Weiss, whatever it is. He's paying$200 million for that media company. Now he's going to go pay a ridiculous premium for Warner Brothers Discovery up 30%. All of that value is AI value that is being spent in an extremely inefficient way, where you have young billionaires who are the children of billionaires spending it on ridiculous things.

1:03:51And Ferraris aren't good enough anymore. You have to buy multi-billion dollar media companies. AI made Larry Ellison rich. He gave a bunch of that money to his son to go buy these online movie studios, these iconic trophy properties. And you're going to see AI. I can't imagine that the younger Ellison isn't going to spend a lot of time with the senior Ellison and immediately start applying AI to all of those properties. Just to wrap up here, you know, one of the things you pointed out is that youth unemployment and general youth dissatisfaction is a pretty accurate indicator of anarchy and revolution.

1:04:32I mean, that is, if there's a reason why revolutions happen, generally speaking, it's because young young people are very upset. And generally speaking, why are young people very upset? Because they don't have money, because they don't have opportunities, because they don't have jobs. And right now we have all of this alarming data about the depression of young people, the fact that 41 % of Gen Z says they're proud to be American, compared to 75 % and 84 % for the boomers and the silent generation. The fact that a third of us are living with our parents. I mean, we've discussed the Gen Z data many, many times before.

1:05:12But as you say, it is a real problem, maybe not right now for the overall economy, but possibly tomorrow. And then I sort of look at what happened, I'm sorry to say it, with Charlie Cook last week.

1:05:33It feels like we're entering kind of scary territory here. So I guess I would ask you, you know, if you agree that this is a real problem. And then two, what do we do about it? And what does a young person do about it? Well, I'm not here with a message of hope. Um, like I, I just did this times of London radio hit and I was at, I was at, uh, the Cologne cathedral yesterday, as you know, and I'm just so struck by this structure. I remember going there on my proverbial backpacking trip out of college with my friends, Lee Lotus and David Kingsdale. And I remember seeing the Cologne cathedral and thinking it was the most impressive man-made thing I'd ever seen.

1:06:20Have you seen it? No. It doesn't sound that exciting. It's a big cathedral, but it's so magnificent and artisanal or Baroque and just so huge. You think, how did humans build this thing? It took 650 years to build the thing. And then in World War II, it was subject to the largest single bombing raid in history, a thousand bombers. It was the first time a thousand bombers had been allocated towards a raid. It was severely damaged. 80 % of Cologne was flat. 90 % of the population was either evacuated or killed. 20 ,000 people were killed. And it was repaired. And I started thinking about Germany.

1:06:53And basically, you know, Germany didn't start or the descent into darkness didn't start with camps. It started with paper, the Reichstag Fire Act, which basically diminished the rights of free press, overwrote privacy laws, started weaponizing private industry or intimidating private industry in the media. and then kind of the, I would argue the thing that always ignites this dissent or revolution or anger is when young people have a lack of opportunity. And I feel like we're one real economic shock. And by the way, we have not felt an economic shock yet, not even a tremor as far as I know, based on what I saw in 08 and in 2000.

1:07:30But if we do experience the kind of shock, I think that we're due for, I think that that would be the spark on this kindling. America is so culturally strained right now that it overshadows some of our incredible accomplishments. So I'm not hopeful. I think we're in very dangerous—it feels like things are really hot and the temperature is really high and that our blood pressure is really high, meaning that we're just more prone for a cardiac arrest or some sort of stroke or some sort of really negative event. And what do we have here? We have a cocktail of the following things. We have the deepest pocketed, most talented people in the world with godlike technology and paleolithic institutions to regulate them, all trying to pit each of us against each other because there's profit in it.

1:08:18Nothing creates engagement like enragement and Nissan ads. So what's my prediction? I hate to say this, violence. And we aren't doing anything. We aren't acknowledging the problem. Instead, we want to blame each other. No, if anyone was serious, including the left, including the right, if anyone was really serious about taking violence down, they would try and take the temperature down and the rhetoric. I don't think that's going to happen. There's too much money in keeping the rhetoric ugly. Beyond economic shocks, I can't predict those. Revolution, Who the fuck knows? Unemployment. Okay, fine.

1:08:54Let's focus on tangible solutions. We have minority rule in the United States. We have fallen to this cold comfort of believing we're a democracy and that a passive populace makes our decisions. No. who makes our decisions, our well-funded, very well-organized special interest groups, chief among them, the NRA, and people who conflate rights with gun rights in Congress when 70 % of America wants some sort of sensible gun control. And sitting here in London, I can tell you a free gift with purchase having moved to London is that I do not have the same level of fear that I'm going to wake up and see my kid's school on CNN.

1:09:28That does not happen here. So a long-winded way of saying, I don't know, but a good place to start would be our elected leaders do what the governor of Utah did and try and take the temperature down and express sympathy for both sides on the aisle who are subject to violence and start to have reasonable practical discussions around gun control in the United States. All right, let's take a look at the week ahead. We will see retail sales, housing starts, and the import price index for August. And of course, all eyes will be on the Federal Reserve, which will meet and announce its interest rate decision on Wednesday.

1:10:02Usually I ask you for a prediction. I think you just gave it to me. More violence. Well, no, I'll give you a better one. I went off script there because I can't help but cosplay an angry Democrat. Those drones from Russia flying into Poland is Putin poking what he believes is a weakened Trump and EU. An EU plane or a plane with the The EU minister on it was forced to do an emergency landing because of a cyber attack on the controls of that plane. And now they are purposely flying attack drones into Poland, who I would remind you is a member of NATO and subject to Article 5, meaning if they are attacked and this could qualify as an attack, all 32 EU member nations are obligated to respond.

1:10:45What does that mean, bringing it back to the markets? The best performing stocks over the fourth quarter are going to be EU defense stocks because you are about to see the EU really increase spending even more than our previous predictions around spending. This shit is getting real over there. The EU is panicked about the fact that Putin saw fit to start sending attack drones into Poland. And there just aren't that many places to put that increase in spending because they're not going to buy Anderell or Boeing or Northrop Grumman planes, missiles and launch vehicles. They're going to try and buy as many as they can of that equipment from EU defense contractors, and there just aren't that many.

1:11:27The EU defense stocks are going to see an AI-like surge in the remainder of the year.

1:11:49executive producer. Thank you for listening to Prof G Markets from Prof G Media. Tune in tomorrow for a fresh take on the markets.

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