Kenneth Rogoff on the Dollar, Stocks Laugh at Tariffs, Starbucks and Amazon Earnings

27:00and I think he's smart from the standpoint of, if that's your goal, he knows how to accomplish that goal. He's got the CEOs of the top companies in every industry from not just all over America, but all over the world, calling him, taking meetings with him, begging him to see reason or tailor what he's doing specifically so they could have their own loophole. he's got Tim Cook coming to him and saying, here's what I need, please, can I have it? Might not use the word please, but that's the implication. I couldn't say it better than you said it. So he likes that. No, he likes it. But I mean, after a while, at some point you have to deliver results and the results he's delivering are not good.

27:49He says it'll all be better. I think the thing, I just don't really get what's on the other side of this. It could be, I could draw out a map where he just everything we want. But, you know, I was just in the UK and sort of, it hadn't quite dawned on me until it was there. They were putting free speech as a, free speech. The UK didn't have good enough free speech. It's different than ours. This is the Magna Carta's from the UK, the birth of modern, you know, liberties there. So, yeah, I don't, you described it well, I can't. But if he would retreat from this, he would have a lot better four years and so would everyone else.

28:29One of the reasons for the uncertainty is that there is no clear aim. So if you have a trade war and you say, my ultimate goal is for these other countries to drop all tariffs completely. And once that happens, we will do the same. And free trade, and I'm a free trade ideologue and there should be absolutely no protectionism anywhere. And that's the goal. Okay, probably you don't get it, but at least people understand what the end game might be. When you come out and say there are tariffs until the fentanyl stops crossing the border to one country, and you say to another country, I need your media to give more voice to the right wing.

29:14And then you say to a third country, no, this is just about autos. And then a fourth country, we want to sell you steak. People look at this and say, okay, so in other words, The tariff is just the place setter so that when Trump meets with his counterpart in country A, it's just about getting something. It's not about getting to a specific economic deal. And so let's come to the dollar. That's our Achilles heel here. So when Trump came in, our debt trajectory was already looking pretty shaky. It had looked okay to many people when interest rates were super low. So, but once interest rates, in my opinion, had normalized more, then suddenly our interest bill was exploding.

30:01It's more than doubled in a very short period. And suddenly you can't just think everything's free. And that idea, which was very prevalent, not just on the left and parts of the right, but also in academics, that was a very popular idea. And, you know, a lot of people held it. A lot of smart people. It's looking pretty dubious right now already. That is our Achilles heel because if the dollar blows up and we run into debt problems and have to inflate, that's going to push people out of the dollar. And then if suddenly people stop liking us as much and add even more interest to that interest going up, that's happened recently.

30:43I want to make sure people understand what you're saying. So effectively, people are willing to take the US dollar as payment in trade and hold the majority of their FX reserves in dollar denominated assets like treasuries or dollars themselves. They're willing to do that because there's this implicit bargain that in exchange, the Federal Reserve will not allow inflation to inflate away the purchasing power of those dollars. So that's what's under threat. That's what's under threat now. One of the things that's under threat now, we were able to get off the gold standard because people were willing to just take our word for it.

31:27We have the most powerful military in the world. We have one of the most dynamic economies. And we promise we won't inflate away the purchasing power of the dollar. And people said, great, I'll hold my ass in some dollars. Well, let's pause on that. Okay. Not right away. I mean, so I'll go to the title of my book, Our Dollar, Your Problem. Dollar used to be as good as gold if you were a government. So, you know, individuals, it was in early 1930s, you couldn't get gold for your dollars. But if you were a government, you still could. And so the whole world was built on the premise that the dollar was good as gold.

32:03But we had the Vietnam War. We had the Great Society. We started having creeping inflation. We started getting challenged by the French and others, started turning in their gold. And Nixon finally said, no more. Dollar's not, you know, what it was. You can no longer bring a dollar to the window and get its equivalent value in gold. Now you just have to go along with us because we say it's good as gold. Well, or not. Was that 71? That was in 71. And so he sent John Connolly, who was the Treasury Secretary back then, a very larger-than-life Texan. And he went back to confront the big leaders from all over the world, Europe, Japan, Canada.

32:44And they go, what are we supposed to do? Like, we're holding a ton of dollars, just like the Asian central banks are today. And Connolly said, I'm paraphrasing it slightly, our dollar, your problem. And what, of course, it was our problem because we didn't really have a plan ourselves. And we had all this inflation in the 70s. It was terrible. For most Americans, it was a really low growth period. Why the title speaks to me is, first of all, the irony. It was our problem, too. We didn't recognize that. And you can talk about that with the trade war. It's worse for the United States than anybody.

33:26And second, it's something that captures the arrogance of the United States. And I don't want to say I'm very proud to be an American. But sometimes I hear this arrogance, which doesn't have a sense of humility, and we make mistakes. And I feel uncomfortable with it. Maybe you don't. I don't know. But it spoke to me. And so that's why I chose that title. It's a very evocative statement to make because that's not what America is really riding high in that era, to your point. We're about to capitulate in Vietnam, and we've got civil rights issues that are only a year or two in the rearview mirror, if at all, that were ugly in the eyes of a lot of the world.

34:13And to sit in front of foreign finance people who were worried that all these dollars they're holding are about to be inflated away and say it's our dollar, but it's your problem. I think it's a brilliant title for the book. And it sunk the dollar. That was a period dollar dominance had risen to a peak, and it went way down after that. It only started building up when the Fed figured out what to do under Paul Volcker in the early 80s. We had really high inflation. He raised interest rates, I mean, the short-term interest rate, to almost 20%. Can you imagine, you know, Powell had to do that? And I worked at the Federal Reserve back then.

34:52I was a junior economist. And there were people, you know, marching on the Fed every day, car dealers mailing in a million keys of cars they couldn't sell, builders sending in two-by-fours for things they couldn't build. It was chaos there. And Volcker really stood his ground. You may never have a Fed chair again who's got the guts to do something like that to break the back of inflation. It'd be very hard to convince a president, you're going to have to sacrifice your term so that I could do this and have the president say, yeah, sure, no problem. I mean, this is why Carter is a one-term president.

35:39And by the way, our debt back then was 30 % of GDP and not 120 % of GDP. So when he's raising interest rates and it turns over on all the debt, it's quite a headache. Here's something the Trump people will say publicly. Or they won't quite say it, but they'll hint at it. But it might be true. Okay, you don't like what we're doing. You don't like the trade war. You don't like to have to negotiate one-on-one with Donald Trump. What else are you going to do? Meaning the renminbi is not going to become the world's reserve currency. It may become Russia's reserve currency or Iran's reserve currency, but it's not going to become the reserve currency probably in Europe and probably not in Latin America either.

36:24You've got gold. You've got Bitcoin. You've got the euro. But like in the end, what things come back to is we have the technology. We have the market dominance. We have the biggest stock market. We have some of the highest per capita incomes. We've got the military. It's really hard to imagine a scenario where the dollar completely loses its dominance to one other currency. It won't. Okay. But we could lose a lot of the advantage. So think of market share. Our market share rose a lot after the financial crisis, believe it or not. I mean, I would say in some ways we caused it. Market share of global GDP.

37:05Market share of global GDP, but market share of, for example, how much trade is in dollars, market share of how much financial instruments are in dollars. The dollar exploded. No, it didn't have to happen. Europe, yes, Europe's not going to, nobody in New York's going to be using the euro. but you said Latin America and Africa? Oh, believe me, they use the euro some already. They'll use it more. They'll hold it more. And the Renimbi, we think of them, who wants China to know anything? There are a lot of African leaders and Latin American leaders, South Asian leaders who trust China more than the United States.

37:47Maybe they have human rights abuses or something or a civil war going on. And it's not just Russia. It's a lot of the world. And so as our market share shrinks, and it could shrink a lot, our interest rate will go up. We'll have less security. We didn't talk about that. But the dollar dominance lets us see everything going on in the global financial system because it passes through the U.S. because we make the rules. Yeah. And the Chinese want to change that. So I thought that was coming without Trump. When I wrote the book, I thought if Harris won, I mean, obviously, who could expect exactly what happened?

38:28But I thought we'd get another burst of inflation the next five to seven years. I thought China would continue breaking free. I thought Europe might expand its footprint. So I thought dollar dominance peaked 10 years ago, not just today. When Trump entered the scene, it had actually fallen quite a bit by some of the measures I use. He may have accelerated it a lot, but it was coming. I mean, these things don't happen overnight. They're not sudden, but we were headed in that direction. So in a world where the dollar loses market share and the United States loses some of its dominance in some of these international endeavors, What does that mean for the everyday U.S.

39:14consumer? Lower price earnings multiples for our equities, lower valuations for our small businesses, higher borrowing costs, more volatility in the prices of things. These are the negative externalities of a world where we're headed in that direction. Yeah, it's sort of death by a thousand cuts. It's not necessarily one big thing. It's not an event. It's a mentality that takes over. Well, for example, if you're a medium-sized business in the United States, you can borrow abroad if you want to. There's no other country where that's true because people want dollars. And if you have dollar income, they'll take you.

39:53It's going to affect mortgage rates. You'll see it when we have another crisis. I'm sure something will happen. I mean, I don't want to sound dark, but we had the pandemic. We had the global financial crisis. It's every seven years. Yeah. Well, I would say a recession every seven years, but right now it seems like even more things happen. And when it does, if you look at those events you mentioned already, the U.S. borrows twice what everybody else borrows, three times what everybody else borrows. Everybody else is looking in disbelief. But we haven't had the consequences yet. We haven't had the consequences.

40:31Right. But as our debt moves up, as the dollar dominance moves down, and we try to do that, we'll get blowback faster and you'll feel it. So I think, you know, that's when we'll really be put to the test. Yeah. Maybe sooner than that, by the way. But some crisis. And I don't—will Federal Reserve independents survive that situation? Okay, forget about Trump. anyone who's president. And they would like interest rates to be lower. There are other tools besides inflation. So yeah, I mean, it's definitely something where once we've lost it, we'll wish we had it. Do you view the decline of the dollar's dominance as inexorable?

41:16Because one of the things that you do in your book, which I found really effective, you point out these turning point moments where things might have gone differently. In your mind, is this just a question of degree or a question of how long it takes, but it's going to happen no matter what? Or are there off-ramps and what are they? Well, there's definitely an off-ramp if we just govern ourselves unbelievably well and suddenly - That's probably not going to happen. What else? What else can we - Any quick fixes in mind? No, I mean, I would definitely preserve of Federal Reserve independence as long as you can.

41:50But that's easy to say and not as easy to do in practice. And both sides have problems with that. So no, there's not an easy offering. Has the Federal Reserve earned the amount of independence that they demand? And I know it's in the Constitution. And I understand from 1913. It's not in the Constitution. Sorry, you're right. People think it is, but it's not. Congress could put the Fed out of business in a week. What's in the Constitution is that the president can't unilaterally remove the heads of certain agencies without Congress weighing in, but not the Fed specifically. Well, it's in the Congressional—I don't know that the Fed's embraced in there at all.

42:29I'm not a lawyer. But I think that if the president had Team Congress completely behind him, they could make it disappear. The Fed, actually, they have this incredible building in Washington. Have you ever been there to the Federal Reserve? I've seen from outside. I've not been inside. It's really impressive looking. My thesis advisor, Rudy Dornbusch, who's a great man, said central banks have to have really expensive, over-the-top buildings so they look like money. Pillars. There have to be pillars. So they didn't have that building when the Fed was formed. They didn't have it until the mid to late 30s.

43:04They had a little room in the Treasury. They can get stuffed back into that little room in the Treasury if Congress wanted. And by the way, the progressives have all these ideas that are not as out to lunch as you think of a future of stablecoins and central bank digital currencies. It's going to suck money out of the banking sector. It's all going to go into treasuries, even in treasury-backed stablecoins. And they say, well, great, then we will decide how to lend the money. It won't necessarily be in the private sector. So there's a lot of pressures coming on Federal Reserve. From both sides.

43:40Both sides. Both sides. People who think Trump causes everything, it's us. Both sides have these visions of what they want to do. They want to use the Federal Reserve for their own purposes. Yeah, I think there's a wing within the progressive side where they want to abolish the IRS, but not for the same reason the right wing does. They actually want to just tell you what taxes you and have it be automatic. They don't want there to be any negotiations or any professionals sitting in the way of that. Social credit systems where do you believe in the right things? Do you say the right things on your social media?

44:20Great, therefore you get more credit. There's a Black Mirror episode about this. Yeah, you get more credit for supporting the quote unquote right side and the other people that don't agree with us, they get less credit. So there's all kinds of paranoia. But I guess my original question, there's so much of an outcry. He better not dare fire Powell. And I'm in that camp. I like things the way they are. Probably because I'm 48 years old and I have a family. I'm not looking for disruption. But there are people who would say, look at how ridiculously we careen between disinflation, huge inflation during the pandemic, all these mistakes along the way about not watching over the banks.

45:03The Fed was the regulator of the banks leading into the financial crisis. Look how badly they screwed up COVID. They thought it was supply chain. They thought it was transitory. It was about the labor market all along. Has the Fed really earned the level of independence that they currently enjoy? Let me tackle two parts of this. Because they are not popular. The Fed is not popular. I actually wrote the first and most influential paper on central bank independence when nobody had independent central banks. So I'm talking my book here to think it's a great thing. But I think it's worked very well all over the world, having independent central banks, even in, you know, countries with dubious governance.

45:42Now, have they earned it? I always ask myself, could I have done better? And I think something I get from chess is when I was a kid and, you know, getting good fast, but, you know, I would look at a game and somebody who was really good would be playing against Bobby Fischer. on move 33, they did something dumb. And I'm like, I could beat them. And when I started playing them, when I started playing them, I was like, wait a second, I couldn't even get to move 15, you know, against Bobby Fischer. And you look at the Fed's mistakes, you have to look at all the things that they did right, you know, along the way.

46:20And I asked myself, could I have done a better job in real time? And I think, you know, Bernanke, Powell, for the most part, Greenspan, I can't say I would have done better. and Volcker, certainly not. So there's some people who say, well, you know, we should go back to gold. That's a popular thread and conservative thought. The Wall Street Journal will publish pieces by those who think that's a great idea. That's worse than Trump's trade policy. I mean, because it's more restrictive because it's because you can change your mind. You know, it's it's not like some computer programs forcing it on you.

46:59It never lasts. That's what the problem is with the gold standard. And it's like you set up all these landmines when you walk out of it, and then you have to step on every landmine when you do. So yeah, they're not perfect, but it's worked. The last 20, 25 years, even in the United States, maybe since the 90s, it's worked pretty darn well. Not perfectly. But some of this is also forecasting the mistakes. Like the progressives like to say, oh, we should have spent so much more money to come out of the financial crisis. Not if you had the IMF and the Federal Reserves and the White House's forecast.

47:36And then in the pandemic, I mean, I don't know about you. I thought it was going to be worse than it was. And I think a lot of the forecast did. So if you thought it's going to be worse, you'd keep the interest rates lower. You'd spend more. And then everybody says, what freaking idiots that we had inflation. What freaking idiots. Well, you didn't know, you know, what it was going to be. So I like to ask myself, like I did when I was a chess player, don't just look at move 33. Look at the whole game they played. Would you have done this? Would you have done that? And it's been a pretty good system.

48:09Okay. So I wanted to just, I wanted to kind of conclude by asking you if there were to be a new medium of exchange or currency on the scene that could do a lot of the things that the dollar does, but maybe not have all that baggage. There are a lot of people who genuinely believe that that would be Bitcoin. It's decentralized. It's native to the internet. It doesn't require there to be a military backing it because it's not sovereign. There are a lot of aspects to, I wouldn't say all cryptocurrencies, but to Bitcoin specifically, that make it unworkable. Like you can't do the amount of transactions that you do in dollars in Bitcoin, even if you had a thousand years to get a year's worth of transactions done.

49:01So a lot of things about it that are unworkable, but is that concept something that's not owned by any one country, but that's internationally accepted? Is that probably where the real challenge to the dollar comes from? Because it seems unlikely to me that it's going to come from another country's own sovereign currency, if there's any challenge at all? Well, I think the challenges are going to come at the edges from China and the renminbi. That is where the challenge is. But crypto, first of all, it already does challenge the dollar in the global underground economy. People are avoiding taxes.

49:35Well, that's probably 20 % of global GDP. That's my estimate in the book, and I think consistent with a lot of other people. That's a pretty—that's as big as Europe has. I mean, that's a pretty big slice of the pie. So Bitcoin and more derivatives— The black market, the non-recorded transactions are 20 % of the economy? Yeah, yeah, yeah. In Europe, it probably averages—and even in Germany, it's probably 15%. Wow. You know, in France, maybe a little lower. In Italy, it's like a third of the—well, 30 % and Greece, even more. And then you go to India and China, it's even more than that. So already, that's a big thing.

50:14By the way, in trade between China and Russia today, of course, cryptocurrencies are being used as part of it. But it's very hard to replace the dollar or a fiat currency in legal transactions. So there are a bunch of reasons. One is Bitcoin is very volatile. So there's some purposes it can't serve as well. But I would say a bigger reason is the government makes the rules. And there's a very nice passage in Harari's Sapiens. He's got a few chapters sort of saying, well, if everyone thinks Bitcoin's the currency or he doesn't need Bitcoin, then that's the currency. No, no, no, no, no. That's just wrong.

50:52The government can make the rules of what banks take. They can make the rules of what you pay your taxes in. They can make the rules of what they pay their suppliers in. This creates network effects. They can make it hard for you. And Bitcoin doesn't have a government that can do that. Bitcoin doesn't have a government. What they do have at the moment, and this is a critical area, is a big infrastructure around it. Things like Coinbase that are really banks. They're just banks. They have a lot of bells and whistles. They're holding currency in the end. And you can do transactions. And a lot of – when we're talking about Bitcoin being used, maybe 95, even 98 % of the transactions are like that.

51:33That can be regulated. I mean, Trump's saying he doesn't want to, but that can be. And so the government has a lot of control over this. So what I say is the private sector innovates, but the government eventually regulates and appropriates. And so if the government really likes Bitcoin, we could have something like it. But I suspect we will have a central bank digital currency. It might be around stablecoins, definitely, relatedly. But I don't think it's going to be Bitcoin, except in the underground economy where you can't control the on-chain transactions. So one of the things, back to Sapiens, one of the ideas in that book is the idea of a legal fiction.

52:14I think he uses the example of Volvo as a legal fiction. Everyone agrees that Volvo exists, but it's not naturally occurring. It's all paperwork. It's an article of incorporation. There are people who work there. They get paid a salary. Now, we just, we all kind of agree that Volvo is a thing because it's a thing. And if enough people believe that it exists, then it exists. I think Bitcoin is headed to that plate. I'm not like a Bitcoin lunatic. I own it, but I'm not like an evangelist. But it's headed to that place where if enough people believe that it's real, that's all you need. And you point out Coinbase.

52:49I would point to the fact that belief in or advocacy against cryptocurrency became one of the most important factors in some local elections, specifically in Ohio. They threw the senator out because he was anti-crypto. The person came in, wasn't pro-crypto, just not against it. And that was good enough. They raised enough money in super PACs that they were able to replace somebody sitting in Congress. It's just starting. So if I don't know that there's an organized anti-crypto front. I know that there's a highly organized and well-financed pro-crypto front. And that might be enough so that it gets to the point where it's a legal fiction and it's got a widespread enough base of belief that it does become legitimized.

53:39Let me challenge you here. I mean, I think there I think it'll be around forever. So I don't hold with Jamie Dimon and Neuro Ruffini and Paul Krugman to say it's going to be worthless. No way. Not unless everybody, you know, there's no underground economy anymore. But in the legal economy, it's not going to stay at a big level. We're going to have a crisis in the crypto. We did already. I think we have one every year. We had one with FTX. But as it gets legitimized, it goes into pension funds. It goes into insurance companies. And we're going to find out we have to regulate that banking structure.

54:19And regulating it's going to mean know your customers, see everything. And a lot of the appealing things won't be there. So, I mean, I might be wrong. So, having BlackRock, the world's largest asset manager, having their fastest-growing product be a Bitcoin, a spot Bitcoin ETF, having Fidelity now banking crypto alongside stocks and bonds for regular Americans. A lot of boomers. Robinhood's got 30 million users. I think 85 % of them own crypto. That's the next generation of investors. They treat crypto just like they do any other asset class. They diversify with it. I feel like it's crossed over.

55:00I mean, you seem more skeptical than I do. We go through cycles in these things. I mean, stable coins, I think, will come out at the other end. and Bitcoin will always be there. But I don't think it's going to expand outside the underground economy. So Bitcoin is not the next dollar. Bitcoin is not the next dollar. It's a thing, but it's not the next dollar. Okay. I've taken up a lot of your time. You've answered so many of my questions. I absolutely loved your book. I just wanted to say thank you so much for joining me. And I want to tell people they can get this Amazon, Barnes & Noble, bookstores everywhere.

55:34Yes? Yeah, of course. And of course, they can follow your writing as I do. You're about once a month for Project Syndicate. I've been reading your stuff over the years, and I've learned a lot as a result. What else are you doing these days? Do you have a whole promotional blitz for the book? Or where else are you popping up next? Well, so I spend a lot of my time on research. I mean, and so, you know, there are parts of the book about what's going to happen to China, what's going to happen to real interest rates. When I talk about the dollar's footprint shrinking, that's a big research project to think about that.

56:05So actually, that's what I spend most of my time doing. And it was really fun to try to put it into this book and pull it together, put in the life to lean into my age that I've seen all these things. I've met with all these world leaders and these policymakers. But yeah, a lot of my time is sort of spent with a pencil and paper and trying to do stuff. I think you have a nice balance. You have all these great life experiences at very high levels. You've met a lot of important people. And then you've got all this time that you've spent researching. And I think both sides of your life come through in the book.

56:42And I just, I sped through it. I loved it so much. So I can't recommend this enough. It's called Our Dollar, Your Problem. Guys, thank you so much for watching, listening. Ken, thank you so much for your time. Really appreciate it. Thank you so much. I wish I could have you with me all the time explaining what I'm trying to say. Let's go sell more books. All right. Thanks again. Thanks for watching. We'll talk to you soon.

57:24Guess who's back? Ladies and gentlemen, welcome to the world famous compound channel on YouTube or Apple or Spotify, wherever you're getting me. It's so nice to be with you. I have my co-host of What Are Your Thoughts here with me today. His name is Michael Batnick. Michael, say hello to the folks. Hello to the folks. What's happening? How's everybody doing? Good? Same. so for uh for relatively newer uh viewers and or listeners i don't know if you guys realize how long we've been at it we've been doing this since 2019 six years does that sound right to you this particular show what are your thoughts wow i mean i know animal spirit is a little bit longer it's a little bit longer running right that's 2017 but six years is six years man Six years.

58:14All right. And better than ever. Better than ever. I don't know if you've seen the reviews and the video views. I feel like I'm at the peak of my powers, personally. I don't see the reviews, but I feel good. All right. Let's thank our sponsor real quick and then get right down to it because it's earnings season and there's a ton of stuff here. A lot to get to today. So today's show is brought to you by our sponsors at Betterment Advisor Solutions. Imagining a future is a first step. Investing in that future with Betterment Advisor Solutions is the next. Whether you're launching your own practice, looking to streamline client onboarding, or just searching for efficient ways to scale your firm, Betterment Advisor Solutions is here to help.

58:55They automate to make tax optimization simpler, and they provide support to make administrative tasks easier. At Betterment Advisor Solutions, they are building innovative technology for anyone who's ever said, I think I can do better. So grow your RIA your way with Betterment Advisor Solutions. Learn more at betterment.com slash advisors. Investing involves risk, performance, not guaranteed. Josh, let's get to the show. All right. So first things first, you got that Siegelman Stables hat at the Knicks game. I think they sold them out. I don't think there's any left for game two. Okay. They had like a thousand.

59:32It's game five, son. Oh, you mean there were no no i'm saying i got you i don't think they're gonna have them there tonight because i didn't get one i was gonna ask you to get me one but i think they're sold out um but it looks it looks good on you i like it thank you um let me show off a really quick brand new piece of merch whenever we do something um new we tend to show it off here first and give our live viewers the first crack at it these are limited edition we're not gonna have a ton of them this is the official markets and turmoil t-shirt how could you trade without this shirt like i don't even know what he what he oh it comes in three colors that first color was navy you know what this color is called mike this is uh royal blue cobalt okay royal blue is for pikers and this is purple guys these are not available anywhere else other than the compound nicole just tweeted the link We'll have the link in the description on all the platforms.

1:00:28Get them while you can. The official markets and turmoil shirt is the most legit way to represent the compound while you are navigating these markets. All right, let's start with Ray Dalio. It might surprise you, but he is somewhat pessimistic and concerned about the situation that we find ourselves in. And not to be overly blasé, but the stock market is coming off five straight rallies in a row. And he's still pushing this through it. Like he's still going through with this line of thinking, which is that it's too late. The changes that were probably going to happen anyway, and Trump has just accelerated, are you can't recover.

1:01:12So I just want to read you the opening two sentences and then get your reaction to the piece. And he posted this on X.com and I'm assuming elsewhere. This is Ray, one of the greatest hedge fund managers of all time. Okay, we got stipulated. Some people believe that the tariff disruptions will settle down as more negotiations happen and greater thought is given to how to structure them to work in a sensible way. However, I am now hearing from a large and growing number of people who are having to deal with these issues that it's already too late. And then he goes on to say, whatever happens with tariffs, these problems won't go away.

1:01:51And that radically reduced interdependencies with the US is a reality that has to be planned for. Ray's got deep ties and roots in China. He's been managing money for very powerful and wealthy Chinese people for decades. So I think that's probably where that's coming from. What do you think? Yeah. So I don't know Ray Dalio personally, but he's been on the beat that the US is at the 1937 yard line, that the debts that we've been creating are unsustainable. and he has ostensibly been looking for that unsustainability to not be sustained and to go a different direction. He's been in search of the trigger and now he thinks he's found it.

1:02:38Yeah, so maybe he's right. All right, so even though he's been saying this since at least 2017 that we've been on the precipice of something not great, I don't want to then discount what he has to say because I don't necessarily disagree with him. He obviously knows a lot more important people in China than we do. is is he being hyperbolic i don't know but i do agree bottom line i agree that a lot of the damage that has been created over the past 28 days or whatever it is since liberation day that can't just be undone with the with the with the tweet people can't forget that too that's i think i think so there are a lot of people like uh weisenthal and tracy are mocking this idea that like in Asian culture, it's so important to save face.

1:03:23And they like tweet it like mockingly, like, oh, are they saving face? I don't even think it's about saving face. I think it's just like a wake up call, the Europeans and the Asians just looking at the situation and saying like, oh, we can't rely on this shit. These people are crazy. Like, look who they look who they look, how they speak now. They're not doing this behind closed doors. They're like tweeting this stuff like we counterpoint. We are the consumer to the world. Yeah, no, stipulated. But also, there's an implicit deal there. We're the consumer of the world, and the reason why is because the world has agreed they'll keep buying our debt.

1:04:03They will finance our consumption of the things they make. That was the deal. Yeah, but wait, but you said it last week. There's a reciprocity there. But you said it last week. It's not as if they're financing our debt for nothing. they're they're uh we're buying their goods and they're turning their dollars into reserves yes it's a system yeah it's a system it works so the question is it just doesn't work for every single person the question is was april 2025 a watershed moment in history of international trade monetary policy i don't know maybe like for real maybe all right if i if i had to guess if I had to guess like what's the better bet we look back on this in three years and say everything changed or we look back on this three years and say remember that that was weird lol anyway I'd say the latter the latter is more likely or less likely more likely in my opinion that we look back on this and it didn't matter yeah okay I hope you're right I'm not sure how I feel honestly I don't know what confidence I have on that it's not like I'm not dismissing the fears, I would say, I don't know, like, am I 65 % confident?

1:05:14Okay. I am confident that this is not a rug pull and that if Ray ends up being right, it's not an all at once thing. It's gradual and probably imperceptible to most of us because we're not dealing in international trade, but it's just like this kind of, and Rebecca Patterson told us something similar. Like it's, it's not like this, this earthquake that happens. She called it more like a drought where the capital just like gradually there's less and less and less of it again we don't have the answer like what's the alternative to the u.s dollar what's the alternative treasuries it there doesn't have to be one single replacement it can just be a market share issue where we go from 30 to 20 and it happens over 20 years and maybe we don't care or maybe it's really meaningful and we look back and say i can't believe we blew it we had the ultimate situation.

1:06:07But that's the way that smart people are talking about it. Ken Rogoff told me that yesterday. It's the right question to be asking. This is right. Number one, we are on the brink of the monetary order, the domestic political, and the international world orders breaking down due to unsustainable bad fundamentals that can be easily seen and measured. Two, the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history. So this one looks like a contemporary version of the old story. Three, there is a - Wait, hold on, just on the two.

1:06:44He's dying to see this movie again. Not that he wants a world to burn. I'm not accusing him of that. But he's been saying, I've seen this movie before. He's been prophesying it for long enough that at this point, he's now rooting for it. I would agree. Even if he doesn't want to, I think it becomes subconscious. How many times can you go to Switzerland and sit there outside on that CNBC set and say the same thing before you actually want to see it come to fruition. So if he's right, this like begoats him forever. Yeah. Because he could say, I've been warning about the situation for a decade and nobody listened to me.

1:07:19Nobody took me seriously. Okay. So if he's right, if he's right, this undoes like seven decades of precedent. So like we basically had this agreement in the Bretton Woods thing was just kind of this agreement that everybody said, all right, we'll go along with this because clearly the United States is the last superpower and the most reliable superpower that we're all allied with. And this is just going to be the way it is. The dollar is going to have this centricity, almost like the sun is to the solar system. And it was okay. It did its job. It didn't work for everyone necessarily, but free trade overall has been good for society.

1:08:00It's been miraculously good for the globe. Yes, and it's pulled a lot of people out of poverty. And it's led to tons of innovation that has made life longer, life better, more tolerable. Yes, of course, there are winners and losers. But we have to look at these things on balance. Then in 71, you're fighting inflation. You're fighting in Vietnam. You're losing both. Nixon pulls us off the gold standard. The rest of the world is like, wait, what the f*** do you mean? What is the dollar backed by? And basically we said, it's like, don't worry about it. Us. Yeah, you got to live with that. It's us.

1:08:38We got this. And everyone said, okay. And that's 50 years. Yeah. That's the last 50 years. That's the history. So now, you know, from Ray's perspective, that's what's being threatened and probably being undone. And maybe now it's bipolar. It's the Renminbi half of the globe and the dollar half of the globe. I don't know. Maybe you see some countries – maybe you see the Latin Americans using more euros. Maybe yuan. I doubt that. I don't know. You doubt that Brazil, which trades in huge abundance with China, would not want to have more yuan reserves? I mean I was talking about the euro specifically.

1:09:19No offense. Well, no offense taken, but I don't know that anyone can really know. because we know that gold is being stockpiled by every sovereign and central bank around the world. No denial, no denial of that. So we know that there are people that do want an alternative to a greater degree than they did even as recently as five years ago. So that part we know for sure. We don't know anything else. One of the big questions has been, will foreigners sell all of their US assets? Again, that fear is probably overblown that it's going to be some earthquake of people dumping their own holdings because they're going to knock down their valuations if that's really the way they want to behave.

1:10:03So it'll probably be more of a trickle. Let's put these charts up. This is a Deutsche Bank chart shared by Tracy Allaway. We're not zoomed in on, but what's going on in that top pane, top left pane that's inflows into foreign domiciled ETFs that invest in U.S. bonds. So that's a one-month rolling sum priced in billions, billions of dollars. So it's gone negative, but it's like negative$2 billion on a one-month rolling basis. It's not this avalanche of money out of treasuries, at least on the part of foreigners holding ETFs. Am I explaining that right, Michael? Yes. Okay. In the right side, this is inflows into foreign ETFs for US equities.

1:10:50Again, it's barely negative. So I think the thing to say is that, no, it's not like massive outflows out of US stocks and bonds on the part of foreign investors, at least not by looking at ETFs, but it's like a buyer strike. Do you agree with that? It's just like they're not dumping, but they're not buying at the same rate that they were up until now. Yeah, and I would also say if you zoom out and you look at total holdings, it is so far up until the right, and this is a dip. So that's important too. Right. This is not a complete trend change, what we're seeing so far. All right, we're going to get to earnings in a second.

1:11:27I want to do this political stuff really quickly in a nonpolitical way. Trump just celebrated 100 days in office. unless you've been living under a rock. The media has been gleefully reporting that it is the worst first quarter in the stock market for any US president back to Nixon during a really horrible error for the US economy. And I don't think things were as bad now as they were during Nixon's term. Rick Newman did a bunch of stuff at Yahoo Finance. He's got a great column. I'm just showing the charts here because I think that's really all we need to tell the story. The red line is Trump term two.

1:12:08That's stock market performance at the 100-day mark. As you can see, he's behind Biden, Obama two. Trump one was the third best on here. Obama term one was the fourth best. Both Clintons are back-to-back. Then George W. Bush, then George W. Bush. So Trump term two is the worst in modern history. But again, it's 100 days. It's not going to define his entire presidency. Next chart. I hope not. Look at this. What do you think about this? Consumer sentiment, the worst out of every president. And just the rate of dissent is pretty alarming, yeah? Yeah. This is 50%. Consumer sentiment, are these percentages or 50 points?

1:12:55How do they quote University of Michigan consumer sentiment? Like Dow points. It's like 1 to 100. No, it can't be 1 to – I don't know. It's horrible. Next chart. This gets a little bit more specific, what people are unhappy with. So the Trump economy at 100 days, jobs, manufacturing jobs, income, and inflation. And when you look at it this way, it's kind of middle of the road, right? Like relative to the other presidents? Yeah, nothing really monstrously stands out. out here. So it's interesting, like on the actual data itself, nothing bad has really happened. And again, it's only been 100 days.

1:13:40So like all of that stuff is really stock prices and sentiment. All right, last thing. This is the approval rating at the 100 day mark for Trump term two. The only worst approval rating we ever saw was Trump term one. I don't think this is like anything other than politics. Like Obama in term one had the highest 100-day rating. People need to remember that's coming out of the financial crisis. Right, right, right. It could not have – like things could not have been worse. And then Obama's inaugurated in January of 2009. March 2009, the stock market starts to rally furiously. and I don't think the whole thing is about stock market, but that definitely helped.

1:14:27Anyway. It's all part of the same thing. What are your thoughts on Trump's 100th day? Has it been everything that you hoped for? I love it. I like can't wait for the next 100. Can you remember an about face this stark from what people's expectations were to the reality of the first three months? It's pretty jarring, right? No, it's wild. Yeah. All right, let's do some quarter stuff. Okay. So we are in the heart of earnings season. And it's mixed, as it always is. But let's throw up this first chart from ChartGut. We're looking at 9.7 % year-over-year earnings growth for the S &P 500, which has been revised higher by 3%, not nothing.

1:15:14How? Since the start of earnings season. No, I'm not even joking. I'm not even joking. I'll tell you. Okay. I'll tell you. So number one, healthcare up 37%. Communication services, number two. Energy and materials and staples are in last. And let's get to some specifics, shall we, Josh? Wait, can you stay on here? Sure. We're saying that healthcare grew, the sector grew earnings by 37 % year over year. It's a mix. What the hell did we cure? Both actuals and estimates. I'm still a wreck. How did we do that?

1:15:54Not rhetorical. No, my silence, I can't answer. I don't know. I don't follow the healthcare sector that closely. All right. In fact, let me restate that. Communication services, I don't follow healthcare. All right, let's get into it. Let's get into it. All right. So this is from Google's earnings call, which was last Thursday. YouTube Music and Premium reached over 125 million subscribers. that puts YouTube at a$62 billion run rate, about one and a half times the size of Netflix. That's from App Economy. Yeah. That's monster. Look at this chart, US TV time market share, YouTube versus Netflix.

1:16:31Netflix has been stagnant and YouTube keeps eating it, just keeps going higher. Okay, so here's my hot take on this. I think the customer of YouTube TV, which I am one, is also almost a guaranteed Netflix subscriber. I don't think there's anyone that's paying Alphabet, paying YouTube$84 a month for YouTube TV, which I currently am, that also isn't giving Netflix their 20 bucks. I think that's almost universal. And it's a replacement of cable. I'm not saving any money. I ripped out all those Verizon Fios boxes two months ago, and I'm really glad that I did, but my bill is the same. I'm just paying – I'm paying YouTube for basic TV, and I get like a lot of sports, and I get all the news channels, the cable channels, and I get all the broadcast channels, right?

1:17:32Then I'm paying Netflix. Then I'm paying Macs. And I just think like all we really did was take the same dollar amount that was going to Comcast and Fios and just hand it to Google. I mean it's great for Google because now they're getting – now they have broadband customers that are just getting Wi-Fi from them. And then a lot of those people are probably also buying TV through them. And they're not really competing with Netflix. It's like they're complementary services. Yeah, I would agree. So last week or two weeks ago, I was saying I'm really looking forward to Google's earnings reports specifically to see what happens with search.

1:18:13Like is the chat GBT-ification of the internet going to show up in Google's earnings? And the answer is no, not yet. In fact, not even a little. So YouTube ads – I'll get to the search in a sec. YouTube ads went from$8 billion a year ago up to$9 billion, give or take. Pretty remarkable. When you look at Google advertising,$61.6 billion up to just under$67 billion. Pretty amazing. They saw double-digit income, double-digit gains. 10 % – excuse me, 61.5 % to 66.8 % percentage-wise. What is that, 7 % or 8 % growth? 10 % or so. 10 % or so. 10 %? Pretty amazing. And look down. Look at the operating income.

1:19:07From$25.4 billion up to$30.6 billion. Pretty amazing. Now - They're executing. They're executing. The stock still trades like shit. I am a weak hands owner of it. I'm out. Yeah, I know. It's not acting great. It's cheap, maybe for a reason. um rallied five percent um and it's given back most of it so it always so it always does that it's one of the cheapest it's one of the cheapest stocks than azdaq 100 yeah if it rolls i'm probably gonna bail to be honest um so we'll see uh all right i think it's i i think it just it's like um they're executing they're doing everything they can do um it's a great company it's just the great company going to war.

1:19:53Yeah. The overhang is not going away. Now I will say the AI overview, it's working, dude. Like the numbers are working. The product is working. I'm using it more. Like it's, it's not, it's working. They're competing. What AI overview? Oh, the Gemini thing at the top. Yeah. When you Google something. So Gemini is like the chat GPT competitor, but when you Google something, there's an AI overview, which pops up right. And it's pretty good. So we'll see. When you put that same query or talk into your chat GPT app, it's no overview. They just give you the answer. Well, it's the same idea. Functionally, it's very similar.

1:20:35But Google search never had to worry about that. Google AI does. They have to worry about that. there's 10 other versions. For sure. So Starbucks, another stock that I own, it was a real piece of shit quarter. Expected though. Not unexpected. Maybe it was like fired up for this quarter. No, you're right. The tournament story, the stock is down. Oh, all right. Now it's falling. It makes sense. It was at first blush, it was like not really reacting negatively. And I'm like, why not? It was pretty crappy. So the stock is down 4.5 % in the after hours. Yeah. All right. So just to give people a little bit of context on Starbucks.

1:21:11So last summer, they pulled an absolute baller move. They went out and got literally the best CEO in the quick service restaurant space. They got Brian Nickel from Chipotle and the stock just absolutely launched. It went from 78 to a buck 20 almost. Yeah. 78. I have 115 is the high. Maybe that's closing high. As recently as March of this year. So for like nine months, that stock just went on an absolute tear. They've reported a couple of quarters. None of them have been good. Every time it's like, give Brian Nichol time. He's going to figure it out. He's going to figure it out. I haven't really noticed much change.

1:21:52I'm in Starbucks seven days a week. They're writing my name with a Sharpie on the cup. I could do without that. That feels like it slows shit down. I understand the mentality. It's like we're going to get our workers engaged again in the customer experience. Knock it off with the Sharpie. Nobody gives a shit. But it's China. China, they're doing way better. I think comp store sales were flat, maybe even up a little bit, which was a disaster. China is the big overhang on that stock. It's not how long it takes them to make a coffee. It's China. No, but I agree. And the numbers out of China were not horrific.

1:22:25Yeah. So throw this up from Consensus Media. It's just disgusting. It's a miss everywhere. Like, yes, expectations are not high, but they missed everything. So check this out, Josh. This isn't from the quarter. Speaking of like AI and LLMs and all that sort of stuff. So given that Starbucks reported an hour before we started, I said, tell me how the quarter went. And it did. It told me that total net revenues decreased. It told me that a decline in comp store sales driven by a decrease in both average ticket and transaction volume. They cited challenge in macroeconomic conditions. But then I said, tell me more about the most important parts.

1:23:00So it did. Comp store sales, global comp store sales decreased by 4%, 6 % decline in North America and 2 % decline internationally. And what's really amazing, and forgive me for plugging the company that we invested, but it's just so phenomenal, is that it gives you like bullets. So it extracts it from the data, from the earnings report, and then you hover over it and it takes you to that part in the report. It's miraculous. I think, yeah, so revenue down 2 % year over year. That's like hard to believe. Coffee is literally dealing drugs. How is your revenue negative year over year? Operating margin.

1:23:37No, revenue. Oh, yeah. Operating margin is down too. That's right. Yeah. That's right. A lot. 12.8 from 14.3. That's hundreds of basis points down. That's not good. It's not good. So stocks should be done more. When is his honeymoon? Well, it's not taking out the pre-Brian Nickel announcement price, which is what I wanted to get to. At least not yet. that the conference call is probably underway as of five o 'clock. How much longer is Brian Nichols honeymoon? Does he have another year? Does he have another quarter before people start like seriously saying he doesn't know what he's doing? I think it's his third quarter.

1:24:15No, but I think the China stuff is working better than it was. I think he has some time. So do I. I don't know how much time, but. So do I. I think if this gets into the 70s, I'll probably pull the trigger. Yeah, so I think I'm probably more likely to buy more than to bail, but I don't know. T-B-Day. All right, so let's talk about something we got. I mean, it's almost a 3 % dividend yield right now, assuming they keep the dividend. It's a$96 billion market cap. Here's the problem. It's not cheap. I know. 27 times, 29 times forward with earnings falling and revenue falling. That's the problem. This could get into the 60s, dude.

1:24:58I don't think that it will because I think there's a premium valuation here because if and when they figure it out, this thing can be unstoppable. They just were not there. And Dunkin' is not f***ing around. And in China they have Luckin and all these other coffee chains. And it's McDonald's is slinging coffee. And it's just, it's another one of these incredible brands doing the best they can in a tough situation. Like Nike and Disney. You think it's easy to sell American anything in China right now? Yeah. Or probably 20 other countries? So you have a lot of companies pulling guidance in here.

1:25:36UPS, General Motors, JetBlue, Coca-Cola. Oh, they affirmed the guidance actually. I am surprised. I was looking through these. They're not getting destroyed. Yeah. So here's something I got very wrong recently. We did a whole show about this, how I felt the next big risk to the market would be companies pulling guidance. they're pulling guidance every day. 10 more companies are coming out and saying, we do not reaffirm what we said in January. The stock, you're right. The stocks are in some cases paying the price, but the overall market is absolutely not phased. Well, you would have been right if this was a different market environment.

1:26:14If the fixer was at 50, they'd be getting slammed. Fix is at 23. But then I'd be like incidentally right. I just, I got this wrong. I thought the sell side would react to yank guidance with just blanket downgrades. And the sell side is like – Cali put it this way in our client update. This Wall Street sell side, at least as it pertains to tech, they're just frozen in their tracks. They won't do anything. Like they will not touch estimates for semiconductors. They know they have to. Everyone knows they have to. It's like a game of chicken. Away from tech – here, UPS pulled guidance this morning.

1:26:51They didn't crush the stock. I mean, it's already crushed. It's already crushed, and maybe everybody already expected that. General Motors pulled their guidance and delayed the conference call. You ever see some shit like that? Delayed the conference call. I think so. I think Paramount did that a year or two ago. So this morning - Yeah, that's not. JetBlue, we will not reaffirm our guidance. They didn't cut it. I'm saying they pulled it. Coca-Cola affirmed guidance. but yeah but also these like JetBlue's dead you know what I mean I thought this would I thought this would be negative and lead to market wide volatility okay we're in the thick of the most busy earning season of the of the quarter this week here Tesla cut this is via Morgan Stanley via Samro put that graphic back up Tesla cut guidance Masco which I think makes like sheetrock wallboard Cut Guidance.

1:27:48Baker Hughes, which is oil field services. Bank OZK, which used to be Bank of the Ozarks. Frontier. I don't know what this other one is. It's one after another. And these stocks, if you look at them, some are down a lot. Some are barely down. The S &P is up. I don't know. What do we do now? I mean, again, the companies that are pulling guidance are lousy stocks. were realistic. No, I'm just saying they've already been killed. They've already been killed. JetBlue was at$8 a couple of months ago. A couple of weeks ago. It's now at$4. You know what I mean? We know. Your stock's down 50%. I don't care if you pulled guidance.

1:28:29We already cut you in half. I got stopped out of this Baker Hughes. This was on the best stocks in the market list until April 2nd. And then they just demolished every oil stock. That is a head and shoulders top. Wow. Okay. I'm not buying that. So Spotify this morning, I listened to the conference call and I was listening. I'm thinking like the stock is on 8%. Remember a couple of weeks ago, I said to you, like, you don't know what's priced in until you see the numbers, right? Until you see the stock react. Because Spotify, I listened to the call and great. I mean, relatively speaking, like there's companies on fire.

1:29:04Let's go through some of these charts. Look at. Well, this is, I just, I clipped this. Okay. The thing that people said they didn't like, the stock was down 8 % in the pre-market. I want to point out it doubled over the last year. And I think it's quadrupled off. It's 2022 low. This company, when they stopped spending money on podcasts, just exploded to the upside. But the guide for monthly active users was below the expectation for Q2. It was fine. It was fine. $689 million versus$694 million. Okay. And then the stock basically closed flat on the day. How many companies have 700 million users?

1:29:45Dude, they're on fire. So look at this chart on, please. So this is the top we're looking at, premium growth. It's just up and to the right, you look at a premium revenue. Underneath, you're looking at ad reported growth, ad reported revenue. Next chart, please. This is the coup de grace. Look at their margins exploding. If you look at their free cash flow, same thing. The company is firing on every cylinder. And this is the reaction intraday. So the stock, it sold off, probably, Josh, to your point, it had just been a rocket ship and whatever. People took profits, and then they got right back in.

1:30:18Unfortunately, I think it gets back to the top of that gap and rolls back over. And it's not anything that they're doing wrong. Put that chart before this up. So this explosion in margins is really key. In 21, which is where this data series starts, they're basically doing this$2 billion influencer spend. They give Joe Rogan money, big money, which probably is paid off for them. They give Bill Simmons money, which I'm sure that has paid off in spades since then. They try to buy Joe Budden. they try to buy a whole bunch of properties then they start throwing money at celebrities who've never podcasted chart off they give they they give money to like the royals what's his name prince uh harry the the one that nobody likes the redheaded one harry and then the kardashians they give money to the kardashians they give money to harry and uh what's the what's the girl megan the princess Megan um here you're you're you're famous here's a podcast Kardashians yeah you'll probably be great at broadcasting I bet Kim can't wait to sit in a studio the Obama's got a podcast so they I get it they were they looked at it like it's a land grab let's just wrap everybody up that was that was hanging over the stock the stock was in shit because of that that's my point so they they retrenched they said all right this is stupid we got the ringer we got Rogan we got a couple of the biggest property uh they did they get call her daddy and i don't i think for three years and then that contract whatever they got the ones they wanted to get they invested in the podcast space they pulled back that investment substantially between that and music revenues they're killing they're killing it uh i i agree i agree and i don't i don't know that i don't know that this thing needs to go much lower i just don't think it'll get back into an uptrend it's not Netflix.

1:32:19A lot of people got long Spotify after Netflix reported. Wait, dude, what do you mean back up in an uptrend? Look at the stock. It's absolutely in an uptrend. I'm talking about shorter term. I think it's going to struggle with the pre-earnings until they come out next quarter and beat expectations. Yeah, would be fair. Listen, would be fair. The stock's doubled and tripled, so that'd be totally normal. All right, let's talk about the biggest question on Wall Street today. What, what, what the stock market, what is happening? So you're telling me that the market is unchanged. In fact, better since the Wednesday afternoon announcement, the NASDAQ is now higher than it was pre-liberation day.

1:33:03And the S &P is right where, right where it closed. Why? We'll get into that in a sec. Try it on, please. Look at this monthly candle. I mean, this is like super duper abnormal. This is funky shit, Josh. The Nasdaq was down 11 % of the lows of the month just for the month. It was down 11 % for the month in April and it's now up 1.5%. Do you see where it found support? Ooh, I do. You're going to tell me you don't believe in God? Look at that. Look at where that found support. There are no atheists with the stock market chart. Right at the 2021 peak, at the end of 2021, the Qs hit 400. and then sold off to like 280 and had just a brutal bear market.

1:33:47We literally, that candle bottoms this month right at those old late 2021 highs and refuses to get below. So Josh - Is that a 9 % rally off that low? More. It's more. It's 11, 12. We were down 11. So we're up even more than that. So I am one of these people. I don't think the stock market is stupid. In fact, I think it's the opposite. But I am having trouble making sense of why the market is higher today than where it was before the announcement. Because Trump capitulated. Because it's already over. That's the answer. Okay, fine. But counterpointing, has it even begun? No, no, no. The recession hasn't even begun.

1:34:30And we might have one. The trade war has already been lost. Okay. Why are stocks higher? Dude, you don't have to have an answer. Because they're laughing. Because now it's a joke. Because now it's – remember, you said this, not me. I said this first during COVID. You said this here on YouTube two weeks ago, and it was perfect. What did I say? You said the headlines are shocking, but their ability to shock us will dissipate the longer this goes on for. You said that. That's your line. Well, you probably didn't say dissipate. But it's like, yeah, the news will keep being crazy. But our response to it will go from, oh, my God, run, to, oh, that's so annoying, to, lol.

1:35:17Here's Lutnik today. We have a deal in place with the country, but I can't reveal who it is yet. It's a f***ing joke already. Is it Micronesia? Look how fast it became a joke. Allegedly, it's India. But no, this is my point. This is my point. We haven't had the recessionary thing that may or may not be coming yet. We don't have empty shelves. We don't have skyrocketing CPI reports. All of that could be in the future or may not be. It's Schrodinger's cat. What we have is a joke. Investing is a confidence game. And you're telling me that the multiple that investors are willing to pay for stocks today being the same that they were willing to pay 30 days ago before the announcement is the same, doesn't make sense, objectively.

1:36:04It does not make sense. You're not listening to me. It's over. They capitulated. They're talking today. They're talking today about a carve-out for the auto manufacturers. We're talking past each other. And what's left? I'm asking why investors are as confident in the multiple - I just explained it. No, you didn't. You said LOL. LOL is not an explanation. No, LOL. The trade war is over. We lost. There's a carve-out for Apple. There's a carve out for computers. There's a carve out for semiconductors. Today, they said they're working on a carve out for automobiles. It's over. What are the tariffs on?

1:36:38Denim? Like jean jackets? What literally are the tariffs on? If we're carving out cars, it's game over. Okay, fine. That's why the market's higher. Let me say the tariffs are over and there are no tariffs, which is not true. No, there are tariffs. but tariffs, exempting tariffs is what we have. Fine. You see? Getting back to topic number one with Mr. Dalio. It doesn't answer your question? With Ray Dalio talking about the floor moving beneath our feet. Why are investors willing to pay the same price for stocks as they were 30 days ago? I don't know. It feels curious to me. 30 days ago. Apparently nothing surprises you.

1:37:20No, no, no, no, no. Now, I didn't foresee this outcome. I understand it. 30 days ago, the worst case scenario was somewhere out in front of us on the horizon. We had no idea. Now we know exactly what the worst case scenario is and they're already pulling back from it. So now there's the uncertainty of how bad will it be is in the rear view. Now what's in front of us is just peeling it back, making it a little bit less bad, a little bit less bad, and then it's gone. It's over. We lost. Newsflash. Newsflash. Nobody won, but we definitely didn't win. Okay. The S &P 500. You don't like that explanation, or you don't like that I came up with it?

1:38:05I mean, you're allowed to just be like, yeah, this feels weird. You don't need to make up an answer. Go ahead. The market hates uncertainty. There is less uncertainty today than there was in March. Is there? Gabish? No. Yeah. No f***ing gabish. There is less uncertainty today than there was before Liberation Day? Yeah, Liberation Day was still in front of us in March. Now, it's like, oh my God, remember he said 180 % tariffs on China? Remember that? Let's move on. It's become, listen to me, it's become something that now we can get our arms around that's as bad as it could be now what's the reality probably not going to be that bad it's re-certainty the market loves re-certainty okay the sb 500 is with me bro except for a few people who are with you hold on can i just tell you what's going on in the chat josh is wrong okay let's get that out of the way josh is about to punch his monitor no i no michael is my brother we disagree professionally this is what we do guys um let me there's a couple others you're getting some props here okay so just just bear with me uh this is all part of the show let's let's go supply shocks coming no they're here okay please attention um all right so ryan dietrich tweeted the s &p 500 and he's done great work all week on this the s &p 500 is up six days in a row and up more than seven over that time.

1:39:38It's only happened eight other times. It's crazy. Higher six months later, seven out of eight times. Never lower a year later. So this type of stuff, this type of stuff does not ordinarily happen in a bear market rally. This is the type of stuff that sets up a new bull market, which sounds hard to believe, but that's what it says historically. So we spoke last week all about the bread thrust. That was like the topic du jour. sentiment trader says, this is a super Zweig, a super breath for us. So what does he mean? A super Zweig. A super, super Zweig. Has that been used before? What this is measuring is, and why I love this sort of metric, it's because it's capturing the psychology of the market, which is permanent.

1:40:24The psychology of the market, it's a psychology mob. It's same as in 1700 as it is today. People behave like people. Okay, so what is a super breath thrust? What it is measuring is what happens when you go from extremely oversold to extremely overbought in a matter of days. That's what it's capturing. Trot on, please. So as you can see from Sentiment Trader, the green diamonds, this happens at market bottom. So specifically, we're looking at the New York Stock Exchange up issues. It's the 10-day exponential moving average of them going from under 35 % to over 64 % within 30 days. So again, extremely oversold, everybody out to everybody back in.

1:41:09And a year later, it's higher 100 % of the time. Now - I never would have predicted this. That this is going to happen? This is like to this degree, like a super Zweig bread thrust inside of the same month - It's wild. As the trade war starts is - It's wild. Now - It is absolutely wild. So Josh, I was talking with Ben about this today on the show. We use a lot of Ryan's other data. This is the hill that I will die on. You can't panic sell because what happens if you sold two weeks ago? Now, this didn't have to be the outcome, but here we are. If you sold three weeks ago, literally, what do you do now?

1:41:52what happens is you do a lot of podcast appearances and you tell everyone i'm right the market's wrong i'm not talking about pundits i'm talking about real people like seriously all right yeah no real real people real people have to real people if you sold if like if you got if you went to cash your whole portfolio i don't you probably never invest again after this like think about what that does to you it's awful it just makes you think the whole thing is rigged against It's rigged. It's a joke. It's a game. All right. So now here's real talk about the market being at the same level today as it was prior to the announcement.

1:42:29It's not, I'm talking about the index. There's components that make up the index. So if you look under the hood, not everything is at the same level. There's winners and there's losers. So let's look at the best and worst industries since Liberation Day. Energy equipment demolished, air freight and logistics. Oh, this is good. This is good. Wait, hold on one sec. So on the left, these are the, these are like the industry groups that have had the biggest comeback since that announcement or went down the least. Just, just for two, like the close of four, two open a four, three. Give me like the top five sectors for, for each.

1:43:07Top five sectors are construction and engineering. Okay. Entertainment, tobacco, software, and food and drugs. And then gas and utilities is in there. It's a little bit defensive. It's got a defensive end to it. All right, but more importantly, more importantly, let's look at market cap, okay? Let's go to the next chart. So just because the index is where it was doesn't mean every stock is. Apple, down$190 billion. Amazon,$87 billion. UnitedHealth, down$104 billion. Facebook, down$78 billion. A lot of stocks are getting destroyed. On the flip side, Broadcom, up$93 billion. Microsoft, up$90 billion.

1:43:44Netflix, up$77 billion. So there is a lot of things happening inside the market that might make the – Wait. Let's do more of these because hold on. If I asked you, if I blindfolded you and said like which – what 10 blue chip stocks have had the biggest market cap swings positively since Liberation Day, there's no way you're guessing Walmart, but it's on there. Plus$47 billion. Yeah. Like it's, there's no way you're saying Microsoft. No. Well, if I said most market cap in dollars, you might've, but like Walmart. But it's so interesting because you've got Microsoft and Netflix in the left column, biggest winners, and Amazon and Apple and Meta, biggest losers.

1:44:33So the market is making sense of all this. The market is saying, okay, loser. Okay, winner. That's such a great point. And you know who could shut the f*** up forever? The indexes, the ETFs are distorting the market. Oh, really? Can I show you record-breaking dispersion between the top 10 market caps? Apple, put that back up. Show me how ETFs are manipulating the market, you dumbass. Look at Apple. It's down$200 billion in market cap. Microsoft added 90. That's the number one and two market cap companies in the world. Explain to me how ETFs are manipulating the market. those people those people should feel free to never speak again what do you think about that is that a fair conclusion no it's a little bit i mean i think that what do they have to say i think that it's a more nuanced argument than that but yes for the purposes of this i think that markets are there's no nuance in that chart you have gigantic market cap companies completely diverging in direction is the where's the where's the new where's the nuance in amazon and Walmart diverging to that degree.

1:45:41It's the same. They sell the same product. Okay. Seriously, like it's wild. And I think that's like a feather in the hat, in the cap of like real stock pickers. Like if you understood that Apple was way more susceptible to trade with China than Microsoft, that was a really easy, that was a really good trade to have made. And you got paid for making it. You got alpha. if you got that right. I want to talk about a chart from Torsen Slok, which shows the sharpest decline in earnings outlook since 2020. So if you want to tell me that, LOL, the tariffs are behind us and it's a joke and the market should be where it is today.

1:46:26I mean, what would you say for this? I would say, I would, I would say it's completely unexpected, but remember as quickly as they take earnings, expectations down, they can add them right back. And Michael, if they sign this exemption on autos, it just shows you, and I think they're going to, if they sign a trade deal with Japan or India, or there's some breakthrough with China or something, if they do that, no one's going to price in these revisions anymore. They're going to blow right through them. And I think that's what we're experiencing over the last week. There's no better explanation than re-certainty.

1:47:15Well, the market is looking right past all this. So it better be right. That's what I'm trying to say. It better be right. All right. Let's move on to some audio clips. We're going to talk about Amazon. So this happened this morning. Amazon will soon display a little number next to the price of each product that shows how much the Trump tariffs are adding to the cost of each product. So isn't that a perfect crystal clear demonstration that it's the American consumer and not China who is going to have to pay for these policies? I will take this since I just got off the phone with the president about Amazon's announcement.

1:47:53This is a hostile and political act by Amazon. Why didn't Amazon do this when the Biden administration hiked inflation to the highest level in 40 years? And I would also add. Well, I mean, she's a paid, she's a paid liar. She's also 27 years old and tell her what to say. And she just says it for a living. This really bothered me and it's pretty frightening. It really bothered Trump too. All right. You know, before we get to that, let's just play the next clip from Alex Cantruitz. Just to be super clear, the team that runs our ultra low cost Amazon haul store considered the idea of listing import charges on certain products.

1:48:33This was never approved and it's not going to happen. So this isn't happening at all. No, it's the information's incorrect. All right. Enough of that. so i'm just gonna is that is that is that boy one of uh jeff bezos's clone army all right um so they sent all right they sent him out to reassure alex kantrowitz what's going on here no it was it was a miscommunication they're not doing this i understand and i think they were thinking about doing it very seriously and the only reason why is because amazon hall specifically competes with Shane and Timu and they're both doing it. Like Amazon Hall is not competing with Walmart.

1:49:19It's competing for this like really like cheap shit China import business, I guess for like teens and people in their twenties. My point is the White House. I think they were going to do it is my point. I think the White House attacking and making an enemy of one of our companies calling that a hostile political act. I just don't want to live in that world. I don't like it at all. I hate it. Well, I guarantee it's so much worse than whatever you just saw in front of the curtain. And I'm going to tell you right now, I think it was being considered. I think Jeff – Jeff's not the CEO of Amazon. And he's definitely not sitting in a room making decisions at that level about what you're going to display on the price page.

1:49:59So if that even got to Jassy, I'd be surprised. And then, well, Lutnick was talking with Sullivan today about the hike, and he said it's such a joke. Yeah, Lutnick is also paid to say whatever he has to say. I don't know if that got to Andy Jassy. I highly doubt Jeff Bezos was consulted on it. I think if that idea were brought to Jeff Bezos, he's smart enough to know immediately. No way are we doing that. In no way does that help us. It's not like it's going to lead to more sales. It's not like there's any kind of win that we get from the customer for showing them why they're getting screwed, even if it's not our fault.

1:50:46We're not doing it. All we're going to do is create a really powerful enemy. And sure enough, they spoke by phone. Bezos, not even the CEO, he gets a call from Trump. He's like, I never heard of that. We're not doing it. It's fake. and then Trump actually said, great conversation with Jeff Bezos. It's not happening. Now we know where the red line is for the Trump administration. US corporations cannot tell the consumer, this is why this costs as much as it does. That's really interesting to me. Now we know where the most sense, that's the Achilles heel, is if companies start telling their customers the truth, which of course they won't do.

1:51:24Ludnick said to Sully, he's like, it's 10%. What, we can't? They can't handle a 10 % increase. It's 10%. It could be anything. How do you know it's tariffs? What a joke. Companies can't raise prices because their goods are costing 10 % more. It's 10%. You know how stupid they think we all are? Do you know how – that was my takeaway. Not me and you. Like all of us. They must think we're so stupid that you could say these tariffs are great. And they're going to help the economy. And tariff is the most beautiful word in the dictionary. Just don't show them on the price page. Oh, okay. That makes sense.

1:52:07That's how stupid they think we are. So again - Don't raise your prices. But again - Buy America. No, no, no. Raise your prices. Don't blame us. That's the message to corporate America. I actually think they're happy that that happened today because it gave them a chance to really explain to the Fortune 500, I'll tell you what you can't do. No one's going to do it. You'd have to be suicidal to do it now. Like there was a thing that Ford was doing. Ford went hard the other way. They were not going to add tariff to the sticker price. Instead, they said, we're going to give everyone employee pricing.

1:52:47Like we're going to actually, we're going to eat this for as long as we have to, to try to pick up some market share. So no one's going to do that now. And now we know where the red line is. You can say there's uncertainty. You go on a conference call and remove your guidance. You could tell sell-side analysts that you're not reaffirming. What you can't do is tell your customers how much of an increase in cost is directly related to what the White House is doing. Don't you dare. And to me, that was like the big takeaway. I thought that was great. I loved it. All right. What do we have left? We're getting – Just real quick, two charts on Amazon.

1:53:26since we're talking about them. Did you know that Amazon and the S &P are neck and neck since 2018? It's kind of wild. Seven years of no outperformance. I didn't know that. A couple of things on Amazon.

1:53:41We have Amazon versus Walmart chart too. We spoke about this last week briefly, just the PEs crisscrossing. It's just notable. All right. I was going to do this whole thing today, which we don't have time for, about Amazon today launched 27 satellites. they're going to have 1800 satellites ringing the globe they're launching their own competitive competing internet service to starlink and i think it's going to work and i think it's going to be a pretty good growth engine not anytime soon the capex will far outweigh any profitability probably for five years ten years but um amazon being able to offer its own web service all over the globe and Starlink not being the only game in town, I think is kind of important.

1:54:26I think it's good for the planet. And I think it's really interesting, but we're not going to do that today. I would also say Prime Day. There's a whole bunch of sellers saying, forget it, we don't want to participate. And I didn't realize this. Did you know, Michael, 62 % of everything sold on Amazon in the fourth quarter of 2024 was from a third-party seller? I thought it was 63%. No, I didn't know that. Would you have guessed it's like two-thirds of their business is third-party sellers? I don't know what I would have guessed. That's high. It's high. Not Amazon selling other people's stuff, but like other people selling their own stuff.

1:55:04That's a bigger part of business, I thought. Prime Day hits merchants, but they do it because it's good for revenue. It's not as good for profits. The average Amazon seller keeps 15 % to 20 % of a sale as profit after paying all the Amazon fees, et cetera. Amazon takes a 15 % commission on every unit sold on Prime Day. And sellers pay Amazon$1 ,000 to highlight a discount. You know where it says best deal on a product? That costs seller$1 ,000. So anyway, US shoppers spent$14.2 billion during Prime Day last year. I think it's the biggest shopping day outside of Black Friday or Black Monday or whatever it is.

1:55:52That's a really important day for Amazon. And they have a lot of third-party sellers who are just like, not this year. We can't get our stuff at the cost that we normally get it. We're just not doing it. So that'll be interesting. I'm sure people will ask them about that when they report on – is it Thursday afternoon? Mm-hmm. Okay. All right. All right. Well, I'm with this. Let's go to make the case. or do you have something else? I just want, yeah, we'll end with this real quick. So I typed into the quarter chat bot today, what were the most important things said on call today about the state of the consumer?

1:56:26And it pulled quotes from Coca-Cola and Starbucks and Visa and everything that happened today. And again, they're tagged so that if I scroll over one of them, the quote pops up and I can be taken to that part of the conference call. Okay, I bring this up because Adam Parker, did a similar exercise at Trivariate Research where he typed into ChatGBT, assuming NVIDIA grows revenue 50 % in 2025, 25 % in 26, et cetera, going above and beyond, what will NVIDIA earn in 2030? And he shows below is the unedited response. So Adam goes through this whole thing about the type of work that these models can do.

1:57:10And here's how he concluded. He said, ChatGPTO3 costs$20 per month. In minutes, it can do what it currently takes highly paid analysts, days and weeks to accomplish. If you are already regularly doing this kind of work, sorry for showing you the obvious. And if you aren't, it is definitely worth tinkering with because firms and research departments with dozens of fundamental analysts may keep some, may shift some to other areas, or may only hire going forward those with differentiated skills that can't be easily replicated by models. Obviously, we could have asked different and varying questions, better questions, and iterative questions.

1:57:44We could have asked what the forecast for revenue growth over the next five years would be, given its analysis of demand and competition. But if part of the analyst's job is to understand what introduces volatility into the P &L of companies, these models are already quite good for many applications. Well, good luck finding a DJ who can move and shake like this. John Lovitz I'm meeting tons of kids who are like I want to be a I want to be an analyst dude you need to have your head examined no the hiring class is probably going to shrink by 90 % the next 5 years because what do you do when you get out of college what's your first job as an analyst it's bitch work nobody needs to pay you health insurance to do bitch work because chat GPT is the greatest bitch of all time Yeah.

1:58:39So that is not smart. Do not pay$400 ,000 in tuition to become an analyst for Wall Street. Please don't do that. So I am making the case. There's a play on words here, Josh. It's IMAX and chill. So what am I talking about here? I want to talk about this idea, and I'm certainly not predicting by any stretch of the imagination, a bear market rally that looks like the dot-com bubble. My point is, chart on please. My point is that you can't get too hot or too cold in market downturns. There was 10 market rallies of 5 % during the dot-com bubble. They all fizzled. They are all psychologically very damaging.

1:59:26And this is also a plug for exhibit a for advice.com. If you are an advisor, you can have this chart. This is our chart of the week for this week. All right. Any comments on here, Josh, before I go to IMAX? Biff Griebel is saying your firm's colors. Oops. No, you don't understand. That's our company, dude. He thinks you screwed up and stole a charge from someone else. That's the opposite. Okay. I lived through these and I will tell you, after every one of those, it just felt worse and worse and worse. And here's what ends up happening then you get a five percent rally and everybody goes no way yeah it's a boy pride off sell them and then that's the one yeah and that's the one but that's not a v-shape that's a real bear market we haven't experienced one of those in a in a very long time like honestly we haven't had one yeah and i hope it's not maybe it's this year maybe it's not i hope it's not but uh also have no control let me do a mystery chart no no no no no no no no no no sir i'm making the case Let's try IMAX.

2:00:26Give me a second. Oh, okay. Give me a second. That was quite a windup, Michael. Thank you. I made the case for IMAX back in September, and I'm reiterating my buy. I bought more shares. I still hold it. All right. Try it on, please. Let's go through this quickly. This is a five-year look. It's defensive. It's working. Is it like defensive? Yeah, I don't know about that. Here's all you need to know. Here's all you need to know, Josh. This is taking market share. Going to the movie is an event now. People don't just get out of bed and go to see whatever movie's out there. They count it too. And if they do, they're going to see it on the big screen.

2:00:59Next chart, please. So the top 10 grossing IMAX titles for the market share of domestic opening weekend, it's double digits. Now, IMAX has less than 1 % of all screens. You saw this with Dune, part two, and you're seeing it with Sinners. IMAX has less than 1 % of all screens. I think 20 % of all views for Sinners was done at the IMAX. They are winning and it has flown through to the bottom line. Next chart, please. Operating cashflow. So I like the story. I like the stock. I'm in. I believe in it. I think it's going to work. It's also small enough that somebody should acquire it like yesterday.

2:01:38It's a billion bucks. It's tiny. It's been an acquisition target allegedly for 20 years when I started buying this stock, roughly at the same price it is today. It's two different types of IMAX. There's the real IMAX theater, which is seven stories tall and gigantic, but then the better business is converting. Existing theaters like AMC or Regal, if they have a, let's say they have an Octoplex, they have eight screens, they'll take one of them and make it an IMAX conversion. It's not quite as jaw-dropping of a viewer experience, but it's good enough that to Michael's point, when you're going to see Sinners, that's the experience that you want.

2:02:19it's nearby it's an elevated ticket price IMAX takes a piece of it everybody's happy the other thing you're going to hear this year is huge battles over who gets IMAX screens for their big movies um you've got new you have Fantastic Four coming in a month you have new Avengers coming a year later the movie the studios are promoing IMAX yeah it's a big part of the story you have you have Superman coming which is Jurassic which is a complete revamp of the DC Cinematic Universe, and you have Tom Cruise coming back, all of them are vying for whatever IMAX screens they can get their hands on. And that gives IMAX a lot of clout and power in the industry, which should translate to greater market share.

2:03:05So I like the story. I should probably join you in that stock. Maybe I'll wait until it doubles, and then I'll buy it. All right. Make the case. I'm sorry. Mystery chart. Go ahead. Mystery chart. This one's not going to be that tough. These are two companies that basically do the same thing. Oh, I know. Coke and Pepsi. But their stock prices look very different. What'd you say? Coke and Pepsi. Buy this man a Coke. I have not gotten to the bottom of why. Show me the next chart. I just want to point out Coca-Cola beat earnings today. Reaffirmed guidance for the year. This has been one of like the easiest, lowest stress stocks to be in year to date.

2:03:45It just looks great. It acts great. You can see it drop below its 200 day for a cup of coffee. The buyers came in immediately and bought it. And today is not just a 52-week high. It's an all-time record high. Give me that last chart. Michael, this is like you talk about American exceptionalism. What's more exceptional than a chart like this? Nothing. For effectively sugar, water, and a can. Nothing. It's beautiful. I know they sell water and they, I don't know, they probably sell like 50 versions of soda. But like in the end, that's American exceptionalism, turning something that basic into a brand that enduring and new all-time record high today.

2:04:30And of course, larger shareholder, the GOAT, Mr. Warren Buffett. All right. That's it from us today. Guys, I want to thank you so much for listening, for watching this extended edition of What Are Your Thoughts? Michael, you crushed it today with the charts. Sean, ChartKid, Matt, Callie, everybody, thank you so much. John Duncan, we appreciate you. I want to remind people tomorrow's Wednesday, which means an all-new edition of Animal Spirits with Michael and Ben. There's a new Ask the Compound with Ben live on Thursday. And then on Friday, we'll be recording something really special for you guys, which you will get over the weekend, an all-new Compound and Friends.

2:05:10Keep it locked. We'll talk to you soon.

2:05:17Whether you're just getting started as an investor or you're managing a multi-million dollar portfolio, Ritholtz Wealth Management has the solution for you. It all starts with building the right financial plan. To speak with a certified financial planner today, visit RitholtzWealth.com. Don't forget to check us out at YouTube.com slash the compound RWM. Make sure to leave a rating and review on your favorite podcasting app. If you love investing podcasts, check out Michael and Ben every Wednesday morning on Animal Spirits. Thanks for listening.