00:24:35 · Joe Weisenthal, Skanda Amarnath
[00:24:35] S0: Like that's a given. What I'm, what remarks, what's remarkable about me is like, there's a whole group of people pride themselves on their rational, like I look at the data, all this stuff and they seem to be, get it the worst. Yeah. [00:24:49] S2: I think it's also funny because I spent 2024, if you were sort of in tech and you were like, we're leaning or you had just decided I'm going to go to the right year. And so you throw a lot of money at it and. success so that's like clearly the success is because i also contributed i did the smart thing it's like well you did the same thing again and didn't quite work i feel like cause and effect are different from each other in some ways and so you might get sort of these like you know elon was he the cause of why trump won i don't think he was but there were a lot of a lot of democrats and liberals who i know were like oh he's the key factor behind this and it's like okay elon's still giving a lot of money but it didn't quite work out the same way this time so i though who actually has.
00:24:49 · Skanda Amarnath, Joe Weisenthal
[00:24:49] S2: I think it's also funny because I spent 2024, if you were sort of in tech and you were like, we're leaning or you had just decided I'm going to go to the right year. And so you throw a lot of money at it and. success so that's like clearly the success is because i also contributed i did the smart thing it's like well you did the same thing again and didn't quite work i feel like cause and effect are different from each other in some ways and so you might get sort of these like you know elon was he the cause of why trump won i don't think he was but there were a lot of a lot of democrats and liberals who i know were like oh he's the key factor behind this and it's like okay elon's still giving a lot of money but it didn't quite work out the same way this time so i though who actually has. [00:25:26] S0: Just on the macro stuff, a couple of months ago, we might have, if we were just catching up with you talking about the macro, we might have said, well, the non-AI economy is soft. Maybe it's like getting stressed by higher rates. The AI economy is still absolutely booming. On net, we have a lot of inflationary pressure, et cetera. Where's your read on right now, the sort of the core impulses and, you know, do we have a path not like, especially maybe if some of this AI spending cools off or like how much work does the Fed have to do to get back to 2% inflation or whatever? What are the trends there?
00:25:26 · Joe Weisenthal, Skanda Amarnath, Tracy Alloway
[00:25:26] S0: Just on the macro stuff, a couple of months ago, we might have, if we were just catching up with you talking about the macro, we might have said, well, the non-AI economy is soft. Maybe it's like getting stressed by higher rates. The AI economy is still absolutely booming. On net, we have a lot of inflationary pressure, et cetera. Where's your read on right now, the sort of the core impulses and, you know, do we have a path not like, especially maybe if some of this AI spending cools off or like how much work does the Fed have to do to get back to 2% inflation or whatever? What are the trends there? [00:26:06] S2: Yeah. So I think even by the sort of call it early part of this year, we had already seen sort of a basing of that, that dynamic where it was, Oh, the non AI economy soft and like we're headed. The Fed was, flagging rate cuts as late as, what, the May meeting? And that was just too late relative to where the economy was. The economy was solidifying after the government shutdown had ended. And so the risks were already tilted in the direction of, hey, the economy is like, it's not, I wouldn't say the non-AI economy is gangbusters, but it's fine. [00:26:37] S0: Like, it's fine. [00:26:38] S2: It's been fine. [00:26:39] S0: It's nothing. [00:26:39] S2: I would say is amazing, but all booms tend to be imbalanced. [00:26:42] S0: Housing is terrible still, right? [00:26:44] S2: Housing is soggy and soggy. [00:26:45] S1: Home builders started going up yesterday by quite a bit.
00:26:48 · Skanda Amarnath
[00:26:48] S2: Yeah, part of that is a rates move. And so you have just a, there's clearly some effect of if you have less AI CapEx, you will have maybe a softer economy, lower interest rates. There's more room for other things to thrive. I'm quite skeptical that if you did see AI CapEx really cool off, these things tend to not be very linear. It tends to be more binary. It's on or off. And once it's off, is there something that's going to pick up that slack very quickly? That's obviously the Goldilocks outcome. Yeah, I'd say history suggests that's hard to pull off. So we are obviously in a world where I'd still characterize it as an AI boom. I'd still say there's obviously a lot of activity going on. There's a lot of activity still booked to happen. But if the tide comes out, I'm not as convinced that there is going to be some big housing boom that offsets it. So another set of... Those things take time to really get going as well. So you don't have this super nice sort of counter-cyclicality here in terms of how the economy works. And so you have the share of what I call the AI-sensitive segments of spending in the kind of GDP mix have grown at such an enormous pace. It's something getting close to 8% of GDP if I think about just your tech hardware, tech software, and industrial equipment. Those categories itself make up such a large share of the U.S. economy. From the demand side, obviously a lot of it is imported, but it still matters. This is still like spending. Spending is a risk. Someone who is spending is putting that on their income statement, their balance sheet in the U.S. And so these dynamics are probably going to dictate the cycle. I think that's not actually at this point very original to say, but we have coming into this year, there's a sense of, oh, the non-AI economy is soft. It's like, I'm not sure that's quite true. It's like not amazing. The other side is inflation, right, where we have three themes, maybe four at this point, that are going to matter. Look, the Strait of Hormuz closure and to some degree, obviously, some of the refining capacity issues that are maybe tied also to the Russia-Ukraine conflict have clearly blown out sort of set of prices for jet fuel. And that has pushed up airfares quite considerably.
00:28:49 · Skanda Amarnath
So when people are saying, ah, well, services inflation is running hot, it's like because airfares are sensitive to energy. It's not necessarily because of the labor market. diesel prices are very high. Caught a lot of political attention, but the effects actually on the consumer have yet to be seen really, which is to say like there's a lot of, I'm curious for a lot of the food retailers who have had to take on additional energy costs and transport costs. Are they going to have to pass through higher prices than the food, food services inflation, which actually does matter for core. That energy dynamic is clearly one big thing that I think, I suspect we're still kind of processing. It may not, be more aggressive in the next several months, but it may be called just as aggressive or pretty close to what we've seen in the last several months. Then you have the AI boom itself, where it's still places where this is showing up. Again, maybe we're past the peak impulse, but it may be more durable than people realize in terms of we had a lot of prices that spiked for your laptops, for various sort of things tied to memory, but there's still more things that could rise. So that might just mean that we had to deal with more durable inflation there. And the third piece of this is obviously tariffs itself. Look, there are a lot of categories that have already moved. There are some categories, notable categories that have not moved yet. Cars, right? Like you have not seen anything that's happened in the auto space. And some of that is because it's a different tariff regime there. But even so, there were a lot of the Canadian tariffs that were put on and on off that still cost that's not yet passed through to the consumer. And so I think those three themes are still with us. It may not mean that we're going to go to 4% inflation, but we might be stuck around three a lot longer than is currently suspected.
00:30:33 · Tracy Alloway, Skanda Amarnath, Joe Weisenthal
[00:30:33] S1: Last question. Are we going to see a democratic socialist on the ticket in 2028? [00:30:38] S2: My prognosticates, probably not. I think that this is. [00:30:41] S0: If you had to pick, you don't have to say it on air. If you had to pick, nominate. Just a guess, not a preference. [00:30:50] S2: I think the prediction markets here is a... Ossoff is, I think, moving into frontrunner now. And I believe in efficient markets like Joe. [00:30:57] S0: Don't lean on prediction markets.