The Soft Landing is a Myth: Here's What's Really Going on in the Economy | Cullen Roche

[00:00:00] I've never loved the soft landing analogy just because the economy isn't something that takes off and lands. It kind of perpetually flies. The Fed is the biggest, baddest bank in the world. I mean, the bond vigilantes and banks can't tell the Fed what to do. The way a tariff works is really basic. It's basically just a corporate tax. So China's not paying this. It's a purely domestic corporate tax.

[00:00:24] The math doesn't even come close to working. I mean, the government generates $5 trillion in taxes now. And I think something like half of that comes from the income tax. We only import like two, two and a half trillion dollars of goods every year. The USA is the best house in a bad neighborhood of fiat currencies. And it's just, there's not even a close second.

[00:00:45] I don't think the yield curve really predicts recessions as much as it just is predicting the future status of, of Fed policies. And so in, in some ways, I almost would say the bond traders are the stupid ones. Hey Cullen, thank you very much for joining us. Hey guys, how's it going? Great. Uh, I think anyone who has followed us for a period of time on excess returns is probably familiar with you.

[00:01:14] You've been on the show many times and we always appreciate the time that you take for us and our audience. And, and one of the things that I think we value from your perspective is your ability to take, you know, some of these complex things happening in the markets, happening in the economy and kind of bringing them down to, you know, ways that people can sort of understand what is going on.

[00:01:35] And also the, the mechanics behind things. That's one of the, I think, things that you do a really good job of is people might hear about the Fed or hear about interest rates or hear about that in the market, but you know, your ability to kind of, uh, peel back the onion, you know, weave it and weave it together is something that, um, I think our audience, um, gains a lot from.

[00:01:56] And I think what we want to do with you today is take some of the big things that are on investors mind that are happening in the markets, um, that are developing and sort of have like almost like a fat and fiction type of discussion with you. And, you know, some of these, it'll probably be, there'll be truths to them. There'll be some truths to them. There may be no truths to them. We'll see what you're, you know, how you kind of approach some of this stuff.

[00:02:23] I think this will be a fun episode to do with you. Um, and certainly appreciate it. And before we get into it, I just did want to mention if you want to, um, learn about what Colin is up to, how he works with investors, an ETF strategy, a strategy that he runs through an ETF wrapper. You can learn more, um, about all his stuff at discipline funds.com. Um, so cool. Yeah. Great. Yeah. There's not a whole lot going on these days. So, uh, it's going to be a dry conversation.

[00:02:52] All right. That's it. We're done. Thanks for having me guys. Yeah. So, you know, I'm going to start with the fed. I kind of feel like everyone starts with the fed, but let's start with the fed because that's sort of, I think, uh, the thing that investors are asking about. And, um, it was in 2022, the fed raised interest rates significantly. Um, we had a bear market and a lot of stocks in 2023, but I think the discussion or the question is,

[00:03:20] is, you know, have we, or had they successfully sort of engineered is, is inflation under control and have they engineered a soft landing? And there's different people that have different takes, but I wanted to see where you can move on.

[00:03:33] Um, so the way that I would frame this is that I've never loved the, the soft landing analogy, just because the, the economy isn't something that takes off and lands. It kind of perpetually flies. And so the way that I would probably analogize fed policies that really what happened was we were flying at too high of an altitude and the fed had to slow the plane down to avoid some turbulence. So they, you know, whatever, they raise the flaps, they slow the plane, they,

[00:04:03] they fly beneath the storm or around the storm. And that was the equivalent of raising interest rates was trying to slow down things so that you could avoid some potential turbulence from the inflation that was occurring from COVID. And they've done that, but the,

[00:04:19] the, the way to measure whether or not they've successfully, you know, achieve this sort of so-called soft landing is actually, can they get back to cruising altitude? So can they bring the plane now back to a stable trajectory, a stable altitude where the plane is flying back at full speed, where, you know, the economy now looks healthy in the same way that it sort of would have in, say, like a 2019 or so before COVID all happened and before the, the big inflation.

[00:04:49] happened and we're not there yet. So the fed has done, I think by any standard, they've done much better than most people expected. So they, you know, they were, they were able to slow the economy. But what a lot of the times happens with fed policy is that the fed policies and raising interest rates is so it's such a blunt instrument. It impacts things so broadly that a lot of the times you end up, you know, with these inverted yield curves, and then you end up with a recession.

[00:05:19] And the fed has to sort of backpedal out of that at some point. And that hasn't happened yet. And so what we've seen so far is that interest rate policy, I think has actually worked a lot better than a lot of us expected it to. So, you know, in 2022, I think the market was sort of pricing in that potential for a hard landing this environment where the fed had to raise interest rates to bring inflation down.

[00:05:42] And then inflation falls because consumption basically slows down way more than expected. And that hasn't happened yet. I mean, I'm still in the right now, like my view, I've basically been in for really the last like three years, I've been in this view of like, okay, the fed is raising rates. And things are more or less everything is going to mean revert back to kind of where it was pre COVID in terms of like growth rates and consumption rates and everything is going to mean revert back more or less to where it was.

[00:06:10] And I don't mean that in terms of like the price level, but I mean, in terms of like rates of growth. So like, we're never going to see, you're never going to see $5 beers again or something like that after they went to 10, but they, you know, they announced the rate of growth is slowing in such a way that we're returning to a rate of inflation. That is, is more similar to the pre COVID environment. And, but we're still very much in that process.

[00:06:35] And obviously like everything going on with Trump now is in a lot of ways, it's almost like a, it's like a new secular trend in a lot of ways in the sense that what he's doing is seismic in a lot of the ways in terms of just reducing the government, reducing immigration.

[00:06:56] And then obviously the tariff position is something that we haven't really seen in a mass manner in a very, very long time. So a lot of those things are secular trends that they actually, they don't have the potential just to return us to the 2019 environment. They potentially have the, I mean, the, there's a chance that we, he, he's really changing the way that the U S economy fundamentally has worked for a very long time.

[00:07:28] Let's talk about tariffs because that's obviously something that, you know, we're sort of going through and experiencing and, and with a lot of these tariffs that Trump is putting on. So in your opinion, do you think that tariffs equate to higher degrees of inflation? Yeah, this one's really messy.

[00:07:51] The end of the, well, a lot of this is really interesting because we've never seen this like, you know, in the, the way that it's being unfurled. I mean, we have, we basically have had almost purely free trade for the last 80 years. Tariffs weren't even a meaningful policy, you know, until really like the pre great depression era.

[00:08:11] Um, so a lot of what we're seeing is just brand new, but, um, you know, I think from a, a really basic perspective, you know, so first of all, the way a tariff works is really basic. It's basically just a corporate tax. So, and it's paid by the, by the domestic corporation. So when China exports goods, a Chinese firm exports, you know, puts, you know, a thousand iPhones on a ship, they arrive at Los Angeles.

[00:08:36] And when Apple receives those phones, they pay the import tax at customs. And so they're paying a fee that is independent of anything China actually did. So China's not paying this. It's a purely domestic corporate tax.

[00:08:53] And so from a very basic economic perspective, the, this tax, and I think of taxes, all corporate taxes is this basically that all corporate taxes are a, they result in producer price inflation. So they raise the cost of, of manufacturing anything. They, they reduce margins instantaneously for businesses. And when they're incurred. And the question is whether can that corporation then pass on the cost?

[00:09:22] So, you know, whether or not the, the producer price inflation from the tax results in consumer price inflation, which is the, the, the, you know, things like CPI or the personal consumption expenditures measure that the fed uses. Those are the consumption taxes that we, or the consumption inflation that we all measure and the ones that we, we live in experience at a consumer level. But the, whether the corporation can pass those on is yet to be seen so far.

[00:09:52] You know, I've talked to a lot of people who, um, you know, like I was running to, or talking to somebody over this weekend who runs a big pharmaceutical firm. And he was saying, oh, we have so much pricing power that we're going to have no problem passing this all on. That's very different story for someone in a much more, uh, a low margin, for instance, like, uh, supermarkets, for instance, they're going to have a much harder time passing on these extra costs that they're incurring to consumers.

[00:10:17] Especially like the thing that's a little bit worrisome in some of the recent economic data is that we're seeing personal consumption slow. And so like the GDP now data came out last week and everybody kind of had a panic attack about that stuff over the last few weeks. And the thing that was somewhat worrisome about that was that personal consumption is slowing inside of that. So we're actually seeing some pushback from consumers where they're saying, oh, you can try to pass on this cost and we're, we're not eating it.

[00:10:45] We're not eating all your, all your producer price inflation. So don't, don't even bother. You can try it, but it's not happening. And in that case, like, I think what you're seeing with the stock market is that ultimately somebody else, like corporations don't pay taxes. That's one of the, the important facets of this is that the, the people who actually pay the taxes, it's either going to be the consumers eat it as corporations maintain their margins, or if corporations can't maintain their margins, then labor's going to eat it or shareholders are going to eat it.

[00:11:15] So at the end level, a person pays these taxes, whether you actually see it and get a tax bill or not. And right now what we're seeing through the stock market is shareholders are eating a lot of this because I think what's happening is that, and this has been a great big trend over the last 30, 40 years is you've seen this huge margin expansion. And a big part of that is that firms have been able to outsource manufacturing. Then they, you know, they import that good and they're able to pass on these lower costs to consumers.

[00:11:45] And that's been a huge boon to corporate margins for the last 40 years. And it's part of why we've seen valuations explode and sort of stay high. You know, the, the big discussion over why valuations have exploded over the last 40 years and stayed high. Things like the Cape ratio is largely due to just value or margins expanding and staying high. And so is some of that now coming out of it? And, you know, so we're seeing valuations now compressed in part because margins are compressing.

[00:12:14] And there's a worry that these tariffs are going to bleed into ultimately shareholders and potentially labor also eating a big chunk of the tariff. So from a very basic perspective, though, you know, like don't get it twisted. This is, this is a corporate tax. It's eaten by the American firm. And whether that's good, you know, can it, can it shake up supply chains and will it onshore a lot of manufacturing?

[00:12:42] And will it, you know, does it force Apple to reconsider whether to do business at Foxconn, making their phones and stuff? Or, you know, do they move it? But, you know, I personally, I think they're more likely to just move it to like Malaysia or Vietnam or something like that before they're going to onshore here. Like they're not going to hire people like me to, you know, charge them 50 bucks an hour to make iPhones.

[00:13:04] They're going to, you know, first they're going to go and build factories in places like Vietnam where they're able to pay somebody $1 an hour or something, if anything. So it's, there's a lot of unknowns with this. But the one thing we do know is that it's a corporate tax that right now it looks like a lot of this is being eaten by either consumers or corporations at the shareholder level. You alluded to this idea of manufacturing and you actually have a chart. Well, you sent us that we'll put in the podcast here.

[00:13:30] But that's one of the things people who argue for tariffs will say is effectively by increasing the cost of those goods, we'll encourage companies in the United States to make stuff again. And it's going to make our economy better because we're going to manufacture more things. Is there anything to that? It's hard to say just yet, but I mean, I think there's a, from a, a really sort of fundamental macro perspective, like the big thing is, you know, I sent you guys this chart of manufacturing as a percentage of total U.S. employment. We're just not a manufacturing economy anymore.

[00:13:58] I mean, we still, it's crazy to say that because like we still do manufacture, like, I mean, it's $2.5 trillion per year of manufacturing. That's the size of the component of GDP that goes into manufacturing, which is, you know, that's like the size of the entire Canadian economy. So we still, we make a lot of stuff domestically. It's just that over the last 80 years, the U.S. economy has changed fundamentally.

[00:14:23] We've transitioned increasingly away from manufacturing things more so to, you know, specializing in things like intellectual property, building technologies, and more importantly, services. Like the U.S. economy has become a huge services economy based on this sort of intellectual property, people who are experts in, you know, medicine and the law and, you know, consulting services, things like that.

[00:14:49] So the U.S. economy has very fundamentally changed in the last 80 years. And so, whereas manufacturing as a percentage of employment was 35 to 40% of total employment back in, say, 1940, it's now something like 8%. And this is a trend that this occurred way before, like the late 90s when multinational corporations started outsourcing everything.

[00:15:13] This was a trend that was in motion and in a steady, steady, steady trend way before that. And so this is something that I think is just very fundamentally driven about the way that a developed, the largest developed economy in the world has just fundamentally shifted into being a much more diverse, primarily tech and services oriented economy and not so much a manufacturing economy.

[00:16:07] So, you know, I don't know. Manufacturing and output to where it's best utilized.

[00:16:12] And the way that the global economy has operated is that increasingly the rich developed economies have increasingly outsourced to the comparative advantage of building things in emerging markets where lower wages and people that are better at using their time to build things can actually benefit domestic consumers.

[00:16:38] In a way, in a way, in a way, in a way, in a way, in a way, in a way, where we're able to outsource that stuff and not have to rely on, you know, higher costs of labor and frankly, just less efficient workers to build it here. And so, you know, the other sort of worrisome thing about this narrative is that, you know, not only is the macro trend so gigantic and working, you know, against everything that this, I think, tariff policy is trying to reverse.

[00:17:07] But the more important one, I think, is that going forward, you know, what's going to happen to manufacturing going forward now that AI and robotics is becoming so important? I mean, I wouldn't be shocked if manufacturing as a percentage of total employment. Maybe it won't go to zero, but it's going it's going down more. It's eight percent now. I wouldn't be shocked if it's five percent in 20 years. And that's just because, you know, the efficiency of robotics and AI is going to continue.

[00:17:34] It's going to continue to be this sort of huge secular trend that it just drives the number of people who are actually building physical things in our world to be reduced. So I don't see how tariffs are going to reverse this trend. Just one more thing on tariffs. I think Trump, you know, one of the arguments here is that, you know, these other countries are have tariffs on our goods.

[00:18:03] And so these tariffs are to some extent in response to those tariffs and also to the trying to bring jobs back like we just talked about. But do you know, like, where can I is there a source out there that like you can go to see what tariffs are on specific industries or sectors of different countries or even here in the U.S.? Like, where could I go to, like, verify that information?

[00:18:33] That's a good question. Off the top of my head, I want to say chat GPT. Probably. Oh, that's the end of these days. I don't know it off the top of my head. I mean, my my guess is that you could probably find that, you know, around census and other other trade related data organizations.

[00:18:53] But the it's it's a great point, though, because this is something that I also wanted to touch on that when when another country, because this is a justification for us doing tariffs is that we need to be doing reciprocal tariffs because somebody else is doing it. And that argument makes no sense, because when you understand that the domestic entity is the one paying the tax, then it completely changes the narrative. Because, I mean, if who cares if Europe is imposing huge taxes on their corporations?

[00:19:23] Is that a justification for us to then impose huge taxes on our corporations? Like, that's just it doesn't make any sense. I think the reason people think that that's a justification is because there's this narrative going around that they're because they're doing it. And we're we're somehow paying the tariff, which is wrong, that then we have to do it to so that they incur the same cost. But that's not how it works. When you when you impose a tariff, you're literally imposing a tax on your own companies.

[00:19:52] So, you know, like we impose a tariff, we're imposing a corporate tax on our corporations. It's not a tax on China. China does not pay for it. They could potentially end up paying for this in a very indirect way, where if Apple were to fire, you know, Foxconn or, you know, eliminate it, then I guess you could say that, you know, they're paying for the tariff in that sense.

[00:20:17] But at a basic economic level, the tax is paid by the domestic corporation. And so if China wants to tax their corporations with a tariff, who cares? And since when did the United States is the other narrative that drives me crazy is like tariffs are very fundamentally anti freedom to me because free trade is the is one of the basic principles of, I think, macroeconomics, where we all agree that we shouldn't let the government.

[00:20:47] Tell us, hey, this is where you can make things and this is where you can buy things. And so it's it's very strange. I don't want to sound political, but it's very hard to not sound political with this because it is so frustrating to see the conservative party promoting this policy where the government is very explicitly telling us you cannot or should not buy goods from that come from China or you cannot buy this type of good.

[00:21:13] When the basic principles of free trade run in the face of all this. And there's so much evidence that the benefit of free trade and just letting people freely compete in general. We shouldn't be telling Apple where they can make their stuff or where they can source their materials from. And that to me is like such a that's such an American principle, like, you know, the American dream is all about freedom and freedom of opportunity, freedom of choice.

[00:21:41] And having the government come in and suddenly start telling us where we can buy things and where we should and shouldn't make things or buy things from to me is it's so frustrating to watch. I was going to ask you about the idea of replacing the income tax with tariffs, but I think I think I've got your answer. So I probably I don't have to ask that one now. Well, that one's even more frustrating because the math doesn't even come close to working. I mean, we the government generates five trillion dollars in in taxes now, and I think something like half of that comes from the income tax.

[00:22:09] We only import like two, two and a half trillion dollars of goods every year. So, you know. Theoretically, I guess if you were to tax all of that 100 percent, you know, corporations then are paying those taxes. But then, of course, like what are all the knock on effects there? If you tax one of the effects of imports is that or tariffing imports is obviously you want imports to go down. Right.

[00:22:35] So when you tariff all this stuff and we stop importing as much stuff, then by definition, you're reducing your own tariff tax. So the income is going to fall if you do this enough. So the knock on effect there means that right off the bat, even if you're tariffing, you know, 50 percent of that two point five trillion. Well, and let's say it falls by 25 percent. Well, you're only covering maybe a trillion dollars of with tariff taxes there.

[00:23:04] You know, then what are the knock on effects there? Because the corporations are paying the tax shareholders fee consumption falls. Capital gains taxes fall. I mean, there's all sorts of just terrible knock on effects there that are ultimately going to reduce government taxes in the long run, no matter what. So it's just mathematically like there's no way these things can even come close to covering the income tax to begin with. The other thing that's been the news a lot recently is the national debt. And there's different opinions on this and the level of worry we should have about it.

[00:23:33] I think Ray Dalio wrote a whole book about like a potential coming debt crisis or something like that. But I just want to you're my source on this. So I wanted to get your opinion on this. Like, how do you look at the national debt in the degree of a problem it is for the country? Yeah, I mean, I don't know. I'm I'm probably I'm kind of famous somewhat for downplaying the risk of the U.S. national debt just because the way that I view it in the scope of the global economy.

[00:24:00] The USA is the best house in a bad neighborhood of fiat currencies. And it's just there's not even a close second. So I kind of I don't see, you know, if you were going to pick a fiat currency or a debt market that was really, really risky. The U.S. is just kind of it's one of the last ones I would pick. I mean, there's probably hundreds of other countries that are more at risk with their national debt than the United States. And so as the reserve currency issuer, you know, I just don't see it as a huge problem right now.

[00:24:30] But there is there is some, I think, legitimacy to the worry in that we've had. I sent you guys a chart of government spending as a percentage of GDP, and it kind of shows how there is a level of creep in the percentage of government spending relative to GDP where this number has increased. And I think one of the lessons from covid is that.

[00:24:53] You you can get big inflation from government spending, and so that's the big risk from all of this is that if we run big, big deficits, big spending, you can ultimately get big inflation at some point. And so, you know, like during covid, we ran government spending as a percentage of GDP went up as high as 45 percent. And that that obviously contributed to inflation to a large degree.

[00:25:17] And so when you get levels that are, you know, I would say over 30, 35, 40 percent, that's going to cause inflation. So that's a real legitimate risk is that you get this level of creep in government spending where they're spending so much money and doing some of it inefficiently enough that you're just getting a bleed through into inflation and you start getting higher and higher levels of inflation.

[00:25:40] The question is now, you know, right now it's like we're at like 28 percent in terms of spending as a percentage of GDP. That's not that far off from really the level that it's been for a lot of the last 30 years. And we know that, you know, I think a lot of people, when they think about inflation, they say, well, inflation is all derived from the government or something. And I think we kind of know that's that's wrong.

[00:26:06] I think you can say that government spending causes some sort of baseline level of inflation, but there's a lot of other factors that also cause inflation because we've had this creep in government spending for the last 30 years. And inflation has fallen that whole time for the most part. So, I mean, before covid, you know, inflation was falling from basically 1980 until 2020.

[00:26:27] So, for 40 years, you had a falling rate of inflation that whole time, which to me very clearly says there are other big trends that have mattered more than government spending. And that probably, you know, I think you could chalk that up to probably slowing population growth and things like, you know, hyper technological growth. Those are deflationary trends that have they've more than suffocated any creep in government spending.

[00:26:52] So, you know, is there a risk, though, that you could get increasing levels of government spending that bleed into inflation? Yeah, I think it's worth thinking about that risk.

[00:27:04] And I'm not against like the what Doge is doing and like having an agency that goes in and is at least operating as like a secondary auditor and someone that, you know, an entity that is is sort of, you know, holding people accountable and, you know, saying, hey, we need to be more worrisome about this deficit and more mindful of managing it. Because if we allow this thing to just continue to get out of control, there is that risk that Dalio ends up being right.

[00:27:31] You know, he he made the classic economic mistake of of making a prediction and then putting a specific time horizon on it. So I think he said three years. And you never want to do that because then, you know, people can hold you accountable over a specific time horizon. The way to make economic forecasts is to be sufficiently vague about your time horizon or the prediction. And he was very clear about both. Is this going to happen in the next three years?

[00:27:56] I mean, I I I would be willing to bet my entire net worth that this does not occur in the next three years unless unless somehow Trump like blows out the budget in a way that is covid like, which is I think not going to happen. So. I don't see an immediate risk. There is a risk, though, that you get that level of creep where eventually, you know, say 2040, you know, you've got government spending of 35 percent of GDP and it's just bleeding into like four or five percent inflation every year.

[00:28:26] And that's the point where things kind of start to get a little bit scary because it's when you get those like high single digit levels of inflation that then things can very quickly turn into like a hyperinflation and or a very damaging 20, 30 percent level of inflation. How about Doge? You mentioned Doge. And it's something I think about from both sides, because on one hand, I think a lot of us think there's a lot of waste in the federal government that needs to be dealt with.

[00:28:55] But then I also look at what they can actually do when I look at Social Security, Medicare, interest in defense. And that's such a huge portion of the budget. I'm wondering if they can actually move the needle. So what do you think about that? Yeah, I don't it's hard to it's hard to tell what numbers are real and what numbers, you know, are just totally made up. Like a lot of it seems to be just Elon throwing numbers out there that then somebody the next day will come out and be like, wait, wait, you said 50 billion. But this number is actually like one billion.

[00:29:22] So, you know, they're they're making cuts. They're making noise, which I again, I'm not against. I'm not against, you know, holding the government accountable, of course. And I'm also not against running lower deficits. You know, I think as the reserve currency issuer, the likelihood that we're going to we're going to have to run some level of deficit spending every year is high. Probably probably necessary to some degree just because dollar demand is so high.

[00:29:50] But should we be running, you know, three, four trillion dollar deficits every year? No, that that contributes to that level of creep that I alluded to earlier, where you do get that that creeping risk of of something bad eventually happening. So, you know, I think it's good that they're they're holding the government more accountable. And the way they're implementing it doesn't seem to be the best approach.

[00:30:16] Like, you know, I laugh because like like my wife is a forensic accountant. Like she could look at an income statement and balance sheet and pick out inconsistencies in probably five minutes. And like somebody like that, I know the people, the type of people she works with and the experts that she works with. And these are these are CPAs for people that have done public accounting for 20, 30, 40 years. And Ph.D. economists who are their wizards when they look at this sort of stuff.

[00:30:45] They have real expertise in digging down into balance sheets and income statements and finding inconsistencies. Elon Musk is not he is brilliant in so many ways. He is not the guy that I personally probably would have picked to run a an auditing agency just because he has no experience in in public accounting. So, you know, the way they're doing it seems to maybe not be the most efficient way. But I don't know. I don't think Doge is a bad idea. It's you know, a lot of people think it's a joke.

[00:31:15] But I don't I don't think it's a bad idea at all necessarily to have this agency that operates, you know, in tandem with other government oversight agencies that reports to the president and tries to hold people very publicly accountable for the way all the money is being spent. You alluded to this, but how this idea about getting down the deficit in order to reduce long term rates and spur economic growth? Do you think there's validity to that argument?

[00:31:41] Yeah, I mean, gosh, I just I think of interest rates more so as like a they're a dial that the Fed, you know, can move. Like if I see this so much that, you know, Elon actually posted a chart yesterday on Twitter about the interest payments as a percentage of the national debt and how worrisome that is.

[00:31:58] And I always think to myself, well, you know, if the Fed, if inflation moves to two percent in the next three three months, there's nothing stopping the Fed from just taking that dial from, you know, what's it at four and a quarter right now and just dropping it to two. And that would drop interest payments from, you know, whatever they're at today, nine hundred billion dollars a year to, you know, seven hundred billion or something like that. They would drop a lot in that sort of an environment.

[00:32:24] And so this is something that I mean, in theory, there's nothing stopping them from controlling the whole yield curve where they could take the whole yield curve and just say, all right, you know what? We're actually going to sell all of our debt at zero percent. They would probably be counterproductive in terms of controlling inflation. But, you know, in terms of like controlling our interest costs, you know, the Fed just the Fed could just dial that up and down. I mean, that really is like mathematically how how that works.

[00:32:48] And so this isn't something I think a lot of people think of this as something that like, you know, the bond vigilante sort of narrative where the bond market sort of imposes its will on the Fed. And the the Fed is the biggest, baddest bank in the world. I mean, they're the bond vigilantes and banks can't tell the Fed what to do if the Fed wants to do something and they feel like it's necessary. The Fed does it and the bond market responds to that, because I think especially smart bond traders know that the Fed is the one with the bottomless pit of money.

[00:33:18] If they the Fed wants to do something, they're the monopoly supplier of reserves and they're going to they're going to be able to achieve that goal if they really want to, because they're the ones that can print the bottomless amount of money if they need to. The banks can't impose their will on them. So, you know, the Fed has to follow its inflation target to some degree. But, you know, they're not the Fed's not the whipping boy for the market. The Fed whips the market around in a lot of ways, especially when it comes to setting interest rates.

[00:33:48] So, you know, if they the interesting thing with Trump and a lot of this is that, you know, if they if they cut spending really quickly and they are, you know, there's kind of three arrows here. And, you know, those arrows are cutting, you know, the tariffs, cutting government spending and then the immigration policy.

[00:34:09] You know, if those three things have enough of a negative impact on growth, the irony in all of this is that the economy goes into a recession. And then if enough people lose their job in that sort of environment, what happens is we have automatic stabilizers that kick in, which basically means that unemployment benefits boom and the government tax receipts collapse. And then mathematically.

[00:34:36] The inverse happens of what you wanted to happen in that environment, where you fall into a recession and government spending explodes because unemployment claims explode and tax receipts collapse, which means the deficit explodes. And so you get an environment that looks, you know, a little bit not necessarily like like covid, but like any recession where the deficit expands just because tax receipts collapse and these automatic stabilizers kick in where people jump on unemployment benefits for, you know, nine to 12 months.

[00:35:04] And you get a big deficit by trying to cut spending. And that weirdly looks like an increasing risk as a result of a lot of this policy. Yeah, that is the weird thing. It's like I don't even think we've seen this come through in unemployment claims yet because a lot of I think the severance is still on. So you haven't seen that come through yet. You wonder how that can affect sort of just overall.

[00:35:31] Like, I don't know how many thousands of the jobs have been eliminated, but, you know, it's certainly on the margin going to have an impact. That's I think that's a good sort of you would assume so. I mean, it'd be really this this earning season is going to be really interesting because I keep thinking to myself. I mean, the the guidance from companies this quarter is going to be like earning seasons kind of just kicking off here.

[00:35:53] How many companies are going to come out and just be like we can't give guidance or our guidance is just such a wide range that it's like useless or going to be to the low end of ranges that investors were used to. It's going to be really interesting to see how especially because, you know, like I said, these are corporate taxes. You know, a lot of corporations now are going to have to put things on hold where, you know, they have so much uncertainty about how they're going to be able to pass on these extra costs.

[00:36:22] I mean, they're fighting tooth and nail to try to maintain their margins here. So, you know, how does that play out? Now, it can't be good, I don't think in the market, the stock market right now is trying to figure out, well, it's bad. But how bad is it really going to be? You alluded to the power of the Fed and that's our next one we're going to ask you about, because a lot of people have been talking about how we're now in a fiscal dominated world and the Fed's a lot less important than they used to be. Do you agree with that?

[00:36:50] I think you could say, you know, again, like going back to that, that analogy of like creep, I think you can say there is increasing levels of truth to this. But I think one of the things that and I think a lot of people who I think misinterpreted the way inflation was going to unfurl over the last couple of years, misinterpreted the just the sheer impact of private credit in the U.S. economy.

[00:37:15] I mean, we have one of the great things about the U.S. economy is that we have these huge private credit markets that they distribute capital to the best places it can go to. And these are, you know, gosh, the private debt markets are I mean, household debt market is 20 trillion dollars. The corporate debt market is, you know, 15 trillion. The corporate bond market is what, 50 trillion dollars these days. I mean, these are these are huge markets.

[00:37:42] And so when you even when you talk about the national debt, you know what? I think something like 20 trillion dollars of the national debt is actually held by the non-government. So comparatively. The the size of the the government debt market compared to the private debt market, they're just they're they're not really that comparable there. The government debt market is getting bigger over time.

[00:38:09] But it's still when you raise interest rates, you hurt the entire corporate bond market. You hurt the entire corporate debt market. You crush demand for mortgages for all new debt. And so, you know, there's been this argument that like, oh, hey, well, we're paying, you know, a trillion dollars of interest payments now, which is actually only an increase of, you know, went from like something like five hundred billion dollars. I think it roughly doubled.

[00:38:35] It went from five hundred billion to, you know, to a trillion when we we jacked up interest rates. That's that's money that, you know, people like like us or any investor that owns T-bills and things like that or government bonds, that's income that they're earning. So that's obviously like that's additive to demand and and our balance sheets in a way that could potentially boost consumption.

[00:38:59] But you've also got to think like the God, the example I always discuss is like you have a 50 trillion dollar bond mark in the United States. When the Fed went from zero to five, that market went overnight. It went from, you know, what in I think in back in 2020, it was like, you know, 45 trillion. It went down to it fell 10 percent. The value of that market fell 10 percent because of the interest rate increase.

[00:39:25] So those investors were earning more in terms of interest, but they incurred a an unrealized principal loss immediately of five trillion dollars or so. And so when you compare these numbers, they're just they don't they don't even come close to equalizing because the the private markets are just so much bigger than the government market and so much more impactful. So you had five trillion dollars of losses just in the corporate bond market.

[00:39:52] Yeah, we were households were getting households and corporations were getting an extra five hundred billion dollars in interest payments. But who cares? It's you know, those two numbers aren't the same thing. So that's, I think, why inflation fell to a large degree, because the Fed, the Fed basically crushed the housing market.

[00:40:09] Like they killed all new demand for debt in the mortgage market, but they also killed a big chunk of they didn't kill the corporate bond market, but they they hurt the bond, the corporate bond market in a big way where new issuance was dinged in a meaningful way. And, you know, we've seen this with the you know, that the brief bank panic and stuff like that and the unrealized losses at FDIC. These banks are sitting on huge amounts of losses. And so they've pulled back a lot. They've stopped being as risky.

[00:40:39] So I would say that, sure, there's a there's an element where fiscal creep is is becoming more dominant. But I would still say that interest rate affects impacting private markets are hugely more important than any fiscal impact that it might have in terms of like additive interest payments overall. I want to ask you about AI because I've been thinking about it a lot. I mean, obviously, I see the impact in my life. I see it's made Jack a lot more productive.

[00:41:06] But when I think out to the overall economy, I really don't know what to think. I mean, I would think it would probably boost productivity, but I don't think like the way you do. So I'm not able to analyze it that well. So I'm wondering, like, what do you think about when you think about how it'll affect productivity across the economy? How do you think about that? Yeah, I mean, I think this is the other thing that another huge trend that I think the stock market is trying to sort of, you know, grapple with right now is that this technology is obviously transformative in like big, important ways.

[00:41:34] I mean, anyone who has used, you know, chat GPT or any, especially any of the more advanced sort of products that they've issued and stuff. These things definitely improve productivity and just the ability to source good information very, very quickly. But a lot of this still is a more fundamental. Like I mentioned that I was talking to this over the weekend.

[00:42:00] I was at my daughter's birthday party talking to this big pharma tech or pharma CEO. And he was saying that, yeah, AI is really important for us. But at the same time, we only have so many PhD chemists working for our firm. Like there's only so much work these guys can do. And so it makes them say 25% more productive, but there's still only 700 of them at this guy's firm that those 700 people are now able to be 25% more productive, I guess.

[00:42:29] But there are, you know, there's a ceiling to this. It's not like, you know, this is not like the multiplier effect on this is not as transformative as maybe a lot of us have thought or a lot of us expected initially. And so the other interesting one there is like, okay, to the degree that AI makes us more productive and especially that it feeds into corporate margins increasingly by making corporations more effective.

[00:42:59] You're like, maybe this guy's firm doesn't need 700 PhD chemists. Maybe he only needs, you know, 600 now or something like that. You know, that's accretive to corporate margins. But then, you know, what about the other stuff that's going on now with the tariffs and whatnot and just the slower growth and everything overall? Does it, what's the offset effect there? Are we just, you know, did we just trade tariffs for any productivity increase from AI? It kind of seems like that.

[00:43:28] And it, the other thing is like, we haven't seen AI bleed into retail demand in like a huge way. Like a lot of people compare it to like the internet and the internet, obviously, like it had a huge transformative impact on the retail market in a, you know, in a probably the biggest multiplier we've ever seen in terms of just productivity and economic growth at the retail level.

[00:43:55] And we're not really seeing that one yet in AI. It looks like this is really beneficial for corporations more so. You know, does it, has it transformed my job personally and the way that I operate? You know, certainly not to the way that it can, you know, increase margins for a big multinational firm. So, you know, I don't know. That's another one that still is, I think the market's grappling with that.

[00:44:25] My inkling is that there was a little bit of a, you know, I hesitate to say bubble in AI, but like certainly some frothiness with a lot of these firms where especially like they were throwing so much money at this stuff that, you know, what's the ROI going to be on this? And maybe the ROI isn't looking quite as great as a lot of these firms expected. And so, but they're also, they're so bought in to it all. And they're, they're trying to maintain long-term perspectives. It'll be interesting.

[00:44:51] Like, can these things ride out, can these big spending programs ride out a legitimate recession? Because that's the thing that happened with like the NASDAQ bubble. The tech bubble wasn't wrong. You know, the internet was right. It was that transformative. It's just that they threw so much money at this stuff in 1999 and 2000 and the years leading up to it that everything kind of just got ahead of itself. And then when you had a recession hit, well, a lot of that money came out because the liquidity just gets sucked out.

[00:45:20] And you go through, you know, this digestive period where you have to then, you know, kind of, you know, weed out the good firms from the bad firms. And, you know, we, it kind of feels like we're maybe on the cusp of something sort of like that right now. I can tell you it's good at putting, figuring out what to put on YouTube thumbnails, but I have a feeling that does not impact overall economic productivity other than mine.

[00:45:45] Well, the other thing too, you can start becoming, I don't know what you guys feel, but like a little over dependent on it, which is kind of like a good thing, but you can kind of get caught up in this like circular thing where you're kind of doing work. It's making you more efficient, but then you're putting more stuff in it. And I don't know, it's just, it can kind of go backwards a little bit too, at least for me. Maybe I'm the only one that's happening to it. Yeah, no, I've been feeling that.

[00:46:12] And sometimes it's, you know, not that it's wrong, but it's, it is weird to like compare it to Google because Google, Google's very good at spitting out lots of answers and then letting you sort of decipher like which answer is the one that I, I like the best or the one that is most important to me. Whereas like something like chat GPT just gives you one answer and it's like, you know, is this right? Like I, I was doing something the other day.

[00:46:40] Oh, I was actually for, I mentioned I'm writing a new book and I was researching something. I looked up something in behavioral finance and I said, is there a paper that does X, Y, Z that shows this about behavioral finance? And it's cited, it rang off this great answer. And it, and I said, show your sources and it's cited three different papers. And then I Googled the top paper. It was, it was totally fictional.

[00:47:08] And I asked chat GPT, I said, did you make up that paper? And it said, oh yes, you're right. You caught me. Good catch. Like that paper is not a real paper. Um, I was like, what the, you know, like, so I don't know. There's, there's definitely that aspect of it where like, you know, is it, um, is it giving us the, the best information all the time?

[00:47:33] You mentioned the bond market earlier, but you know, there's narrative out there. A lot of times people say that the bond market is smarter than the stock market. Like the stock guys are just, you know, dumb and the bond guys are doing all the heavy lifting. What do you, what do you think of when you hear like that, that phrase? Yeah, I don't know.

[00:47:56] I, I mean, I think, I mean, free markets are free markets with lots of free information are all really smart. Um, you know, are there, I think there's sort of a, a certain degree of like sex appeal for people who are in the bond market. Cause people tend to think, you know, bond traders are somehow more sophisticated. Or I think the bigger, the bigger myth really is that like a lot of the times falling interest rates and rising bond prices will front run a recession.

[00:48:25] And that gives the appearance that the, the bond market oftentimes like inverted yield curves. Uh, people say that like inverted yield curves predict recessions, which, you know, from an interest rate pricing perspective makes bond traders look like the smart ones. And I just don't think that's really the way that it actually works. I think for the most part, the, the, the yield curve, for instance, is a, is an estimate of what future interest rates will look like.

[00:48:53] So I actually think that, I think being a bond trader for the most part is pretty simple. You're basically trying to predict what the fed, the fed funds rate will be at specific points on the curve out over a different time horizon. So if you're a 10 year bond trader, you know, you're really trying to predict, well, what is the average fed funds rate? Maybe plus a premium going to look like over the, the average of the next 10 years. And that's the number you're trying to, you know, you're, that's the number you find attractive.

[00:49:21] And so to a large degree, you're just sort of predicting what the fed is trying to predict, which is a weird sort of second order prediction, because you're trying to predict the prediction of a prediction. And it's like, you know, where's the fed going to be in 10 years? And so in, in some ways I almost would say the bond traders are the stupid ones, because they're the ones that are just kind of taking their lead from whatever the fed basically says all the time.

[00:49:47] And I think people tend to think the bond market is really smart because of things like the predictability of the yield curve relative to recessions. And that's another thing that I think is just, I think somewhat misunderstood because I don't think the yield curve really predicts recessions as much as it just is predicting the future status of, of fed policy. So right now, like the yield curve is inverted, but that's not, it's been inverted for three years.

[00:50:12] So like, you know, it's been wrong about recession technically for a pretty long time, but I don't think that's it. I think that the, you know, the long end of the curve right now is just predicting that interest rates are likely to be lower for longer in the longterm. So they're, they're likely to be, you know, lower than 4%.

[00:50:31] Basically, if the fed funds rate today is four and a quarter, you know, the reason the curve is inverted is because the longer end of the bond market is basically just saying the fed's going to cut at some point in the next 10 years. Where on average interest rates are lower on average than four and a quarter percent. And that's all the, it's not predicting recession. It's not predicting low growth necessarily. It's not really predicting anything except that inflation probably is going to be lower than it is right now.

[00:50:58] And as a result of that, or inflation will be more stable than it has been. And as a result of that, the fed will eventually cut interest rates to something more like 3% or so, which is to me, that's all the bond market is really predicting right now. It's not, it's not necessarily making a smarter prediction or a dumber prediction. It's just, it's making a prediction about where fed policy is going to be. And that's not necessarily indicative of, of recession today or tomorrow or anytime.

[00:51:26] It's really just a function of where is fed policy going to be. So, you know, I, I don't know personally. I mean, I think anyone who's followed the stock market long enough knows that the stock market is really goddamn smart. That's why it's so hard to outperform the market.

[00:51:40] You know, so it's, you know, whether you think it's, you know, smart or not is sort of irrelevant in the sense that it's, it's smart in, in the sense that it's very, very hard to predict where these prices are going to be better than the market is currently predicting them. So, you know, long story short, I guess I would say that, um, I would say all free markets are, are smart.

[00:52:06] They're certainly smarter than like command economies and things like, you know, the government trying to predict or any single individual trying to predict them. One of the things that I think about, you know, we, we, we, we, we, we, we owned our homes during a period when interest rates were very, very low.

[00:52:31] And, you know, I'm guessing, you know, we all have very low mortgage rates. Um, and I look at like mortgage rates today and I'm like, you know, my mortgage would be double. If I lived in the same house and had to buy the same house, my mortgage would be like double what it is. So, and that kind of just like brings up a whole bunch of questions about like homeownership in this country and affordability and all that kind of stuff.

[00:52:56] But I'm just curious, do you think, I mean, at least in our, I mean, you mentioned like long-term rates that, you know, probably at some point they'll, they'll go down because the fed will cut. But I mean, do you ever, do you think we'll see 3% sort of mortgages in our lifetimes again? Yeah, I, I've said that I think it'll happen again. I, you know, will the fed go to zero again?

[00:53:23] Um, cause that's kind of what it takes to get to those sorts of rates. Um, God, maybe, maybe they won't go to zero again. I think, I think we're going to see really low mortgage rates again at some point in our lives though. You know, how fast that happens. And, you know, my, my basic thinking there is that the, you know, when you, I think that the, the technology trend is very much embedded.

[00:53:49] And I think the population trend is very much embedded in the, the sort of secular long-term trend of the economy. And it takes something really seismic to get inflation up in that sort of an economy. And it takes something like a huge, huge amount of government spending or, you know, a COVID supply shock, something like that to even get inflation.

[00:54:09] You know, we went to, I don't want to downplay the inflation of the last few years, but like, you know, we had, we had so much government spending during COVID and inflation went to, you know, went to 7% on PCE. It went to, you know, 9.5% on CPI very briefly. And it came, it more or less came down. I mean, it came down pretty quickly for the most part. It wasn't, it wasn't transitory like the Fed said, but it, you know, it's, we're now at, you know, 2.5%, 3% ish.

[00:54:38] So, you know, we're actually like, we're below the historical average. The historical average CPI rate is like 3.5%. So we're, we're actually below average historical inflation now. Um, and I think a big part of that is that these secular trends that we've experienced for the last 40, 50 years, they're so gigantic in terms of like population growth slowing. And then, you know, the big technology boom.

[00:55:02] And I think the technology one is going to do nothing but accelerate, you know, and that's a highly deflationary trend. And so all that put together, I think means that, you know, the potential for lower growth and lower inflation consistently means that the, the rate or the, the interest rate is likely to come down. You know, how much will it come down? I mean, I think right now, especially like the Fed knows how broken the housing market is.

[00:55:28] And they know that having rates at six, 7%, you know, first time home buyers are, you know, up the creek without a paddle. And I mean, they've made the housing market such a mess that they, they definitely want to get the Fed funds rate down to, I think something like. If they got to two and a half, 3%, that brings mortgages down at least to like five. You know, that starts to make things at least a lot more affordable than they are.

[00:55:58] I think they'd probably like to be even lower than that if they could on average. So, you know, I don't know. Will we see, you know, I think I refied at like two and a half. Are we ever going to see two and a half again? God, I don't know. But at the same time, I would have never predicted COVID. I would have said that, you know, after they started raising interest rates in 2019, you know, I would have said, ah, we all looked at that. Zero interest rates were probably a mistake. We probably should never do that again.

[00:56:25] And then 2020 happens and instantly, you know, we're right back at zero. So, yeah, weird stuff happens. I would not be, you know, in total, I would say the risk of lower average interest rates is the higher probability bet in my view in the long run, just because of these huge secular trends that I think are going on, rather than I think a lot of people think there's been a high risk of like, you know, the return of the 1970s or something like that. And, you know, really high inflation and stuff like that.

[00:56:54] And I think that's the much lower probability outcome relative to potentially going back to zero. So, yeah, I wouldn't be shocked if we get, you know, something in the maybe not 3% again, but 3%, 4% mortgage rates again would not surprise me at all during our lifetime. Yeah. I mean, it just goes to show it's just this stuff is tough. And just when you think like, you know, you're never going to see it again, something happens in the market that, you know, makes it so, you know, here we are.

[00:57:22] So it's just, it's tough to predict any of this really. I mean, hey, you know, let's say, you know, Putin rolls through Ukraine and then rolls into Poland and China says, you know, hey, you know what? We're going to roll up on Taiwan now. And, you know, then all of a sudden you got wartime interest rates. Wartime interest rates are 0% interest rates.

[00:57:47] So, you know, that's probably far fetched, but I don't know, you know, probably not. It's not a zero probability event. What do you think about the idea of the U.S. having this crypto reserve fund? I hate it. I mean, I think at a sort of like a basic level, the, you know, we, the U.S. is the reserve currency issuer.

[00:58:16] We're not the reserve currency issuer. I think a lot of people get the causality of this wrong. They think we're the reserve currency issuer because like of our big military or because of like the Bretton Woods agreement or like petrodollar. And to me, it's just much more fundamental that the United States is the biggest, wealthiest economy in human history. So we consume a huge amount of foreign goods, which means that by definition, we send a lot of money abroad. Like we consume a huge amount of stuff made in China.

[00:58:44] And so by definition, they're getting China's getting a lot of dollars. So the demand for dollars is large and in large part because we're just we're the wealthiest, richest consumers that have ever existed. And people like doing business with people who consume a lot. So the demand to get that revenue and income from the United States is large and they get paid in dollars. So as a result of this, foreign countries end up with a lot of dollars.

[00:59:11] And that's why the dollar is held in such high level of reserves by foreign central banks is because we just do a lot of business with foreign foreign countries. And so, you know, the weird thing, though, about that is that the fundamental driver of that is that we're we're a rich economy because we are incredibly productive.

[00:59:31] We make you know, we manufacture two and a half trillion dollars of goods, but we also are the innovative leader in, you know, huge, huge, important parts of the economy. Like arguably, I mean, we're by far probably the most important developer of technology in the world. We have all the most important technological firms. And we, you know, by virtue of that, our economy has become incredibly wealthy, incredibly productive as a result of that.

[00:59:59] And, you know, that going to change anytime soon. It doesn't seem like it to me. You know, China is obviously creeping on us, but like, you know, I don't see Google and Microsoft and Apple and all these firms, you know, stopping all their, you know, innovative progress in the next 25 years. And so, you know, but that's the main driver of reserve currency status. And why the dollar is in such high demand is because that's a creative to all of our wealth and our consumption.

[01:00:27] And we just we outsource a lot of the manufacturing and we buy just lots of stuff from abroad because of that. And so this just by virtue of that, you know, we. Our reserve is the stuff we make our output. We're the biggest economy in the world. We're the wealthiest economy. Our reserve really is like the thing that support the dollar. The dollar itself is is just the tool we use to transact in goods and services.

[01:00:53] But it's really the the goods and services are the reserve that really gives that thing value and demand for it ultimately. And so, you know, there's no. Like, we don't need Fort Knox to defend the value of the dollar that, in fact, I would argue that like Fort Knox and having a big block of gold sitting around is probably, you know, not service. It's not serving any relevant purpose in the modern economy. It served a purpose under the gold standard.

[01:01:20] But in a in today's world, the thing we really should lean into if we want to maintain dollar reserve status is we should be trying to optimize our output, trying to maintain our dominance as a, you know, a productive, huge economy, not buying rocks and putting them in vaults and then letting them sit around collecting dust. That doesn't add to the output and productivity of the United States.

[01:01:43] And so a crypto reserve is very much the same thing where you're you're taking things that, you know, whether it be Bitcoin or, you know, Solana or any of these coins, arguably a lot of these coins are, you know, maybe they're not worth anything. At least gold has like a fundamental economic driver in terms of its like economic utility where you can make a like there's a viable investment case for gold. Whereas when you look at something like, you know, a lot of these, you know, these they call them shit coins, I guess.

[01:02:14] You know, a lot of these things are, you know, are they worth anything? Is there any fundamental driver under the valuation of these things? You know, I think there's a there is an element of like if you want to think of these things as like portfolio insurance to some degree, like let's say Bitcoin for whatever reason does actually become like a global reserve currency. Well, it would then be beneficial to own for the government to have a lot of Bitcoin, I guess, as sort of an insurance policy against the dollar.

[01:02:43] And the same thing is true, I guess, of, you know, Fort Knox in the gold there that, you know, if we were to revert back to the gold standard, well, you'd want to have a big fork filled with gold to be able to support that that change in monetary systems. But, you know, that's an assumption that we're going to like transform into a different type of monetary system, which I guess if if you think that's where we're going, then sure. As an insurance policy to the dollar, it does make some sense.

[01:03:10] But, you know, like a fundamental level, if you think that the fiat system is going to continue to exist for the next hundred years and the dollar is going to be the dominant player in that system over the majority of that time, then, you know, having a reserve doesn't really serve any purpose.

[01:03:27] And it potentially detracts from that by diverting money that could have been utilized on, you know, investing in the real economy versus just buying something that sits in a vault and is held on a government balance sheet serving no real economic utility. I think that's a very good point because, you know, they're they're seeding this with whatever Bitcoin that the U.S. government has confiscated. I don't know what the number is, but, you know, that capital could have a productive use.

[01:03:56] There's like an opportunity cost like, you know, if that was sold and put to work somewhere else. I mean, you don't know. Maybe Bitcoin does become a million dollar per coin and then it'll have value. But, you know, could certainly go the other way, too. And you certainly don't want the U.S. government like doing what like micro strategy is doing, like issuing debt to buy Bitcoin. Right. Right. Good. I don't think. Yeah.

[01:04:20] Like and I'm not even against, you know, if you think that crypto is like an essential technology that's going to be transformative in the future, you know, I wouldn't be against the government spending money to invest in, you know, say the underlying infrastructure of that industry. But invest in, you know, the way that technology is going to be utilized rather than, you know, buying that. It's kind of the old Warren Buffett thing where like Buffett, Buffett doesn't like he wrote an old article back in.

[01:04:47] And I think it was for Fortune, like, you know, back in like the year 2000 about the the way that a lot of commodities are just useless in terms of like owning them as investments, because the way to utilize a commodity is to actually own the commodity and then use it to invest in something. So, like, you know, would you rather own Exxon Mobil stock? You know, Exxon buys oil and then utilizes in a productive manner. Or would you rather take custody of barrels of oil back in the year 2000 and just hold them?

[01:05:16] Like those are two very, very different things. One has a fundamental economic investment purpose, whereas one is just taking custody, you know, physical, you know, custody of the asset and buying and holding it and not letting it be utilized in any productive manner. Those are two totally different things. And I wouldn't be against the government necessarily investing in things in that way.

[01:05:38] Again, it's a little weird to be in favor of like if you're a free market kind of guy or gal, you know, should you be in favor of the government picking and choosing how to make investments? Again, I think you kind of get into murky territory there. Like I was dying. David Sachs tweeted this thing about how the government had sold like 17 million dollars of Bitcoin back in, you know, 2015. And he was like, this would be worth, you know, X, Y, Z dollars today.

[01:06:08] And I'm like, great. That's the exact right thing they should have done because that means that they sold it. They gave it to household. And now households are the ones that benefited from all the gain in value. Like, why would the what does the government need that money for? What you know, why should they be the ones speculating on these assets?

[01:06:26] It makes you know, if you're a if you're a real free market guy, which I would assume most venture capitalists are, you should have been totally in favor of the government divesting of all these things, giving them back to the market and letting the market then distribute the assets in such a way that, you know, they accrue their value. However, they will rather than the government hoarding these things and in a way sort of indirectly distorting the price of all these things. All right.

[01:06:52] As a fitness guy here, we're going to end on a fitness related factor fiction sort of as we wrap it up. But what do you what do you say to the leg day is the most important day? Thank you. Yeah, this is like a running a running troll meme of mine on Twitter, I guess. But I'm not people think I'm joking, but I'm really not. I just you know, I don't know.

[01:07:16] I'm I've kind of as I get older, I've you know, now that I can barely run anymore and all that, I've turned into like a big cyclist and like big leg day guy. I just lift, you know, they do tons of squats and leg presses now and calf raises. But like it's it's actually very fundamental in the sense that like I posted this video the other day showing that, you know, 50 percent of your muscle mass is in your legs. Basically, these are huge, important muscles.

[01:07:42] And, you know, having a lot of muscle mass is consistent with greater efficiency in terms of like your insulin output and your your glucose control and things like that.

[01:07:55] And also like something Peter Adia talks about a lot is that the way that having strong legs and a strong core is so essential to longevity because it it maintains your ability to to walk basically and to stabilize yourself. He often talks about how what happens with a lot of his patients is, you know, they get into their 60s, 70s and 80s and one fall is a death knell.

[01:08:23] You fall one time, you break a hip, you get an infection in the hip and all of a sudden the the infection in your hip turns into, you know, a kidney infection. And that's the way a lot of people go. And that's a result of, you know, just people not being able to literally stabilize themselves.

[01:08:40] They fall in the shower, they fall walking on the stairs and, you know, maintaining legs and just a strong core in general is something that I think a lot of people, especially a lot of men, I think, overlook because we think of ourselves and we, you know, we we say, ah, we need a big, you know, big, strong arms and big, strong chest because that's what people see and visualize. And really, like, not that those things aren't important, but the legs are the things that, yeah, maybe they're not the, you know, the the muscle that everybody sees.

[01:09:10] But function wise, they're the muscles that are most essential to the way that our body actually operates because of the things that not only carry the most muscle mass, but the things that literally carry us around all the time. Well, you should see Jack's calves. They're Jack's. Of course, the viewers can't see him because I'm sitting down, but. Justin, I know your legs are crazy. You're the endurance. I should do more squats. That's a very good point. And that is excellent. So, all right, Colin, listen, thank you very much. We really appreciate it, man.

[01:09:40] Always, always so great. Good seeing you. Thank you, guys. Thank you. Thanks so much for tuning into this episode. If you found this discussion interesting and valuable, please subscribe on YouTube or your favorite podcast platform, or leave a review or a comment. We appreciate it. No information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the participants or their clients.