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#FinanceDaily: Alibaba builds AI, Jobs Report, Twitter threatens META
Recorded: July 7, 2023 Duration: 1:18:52Space Recording
Short Summary
The discussion highlights the rapid launch and growth of META's Threads platform, which quickly gained traction by leveraging Instagram's user base. Allegations of former Twitter employees joining META to develop Threads suggest potential intellectual property disputes. META's recent financial performance shows significant growth, with a 150% return in six months, indicating strong recovery. However, the economic landscape is challenged by a 68% increase in commercial Chapter 11 cases, signaling financial stress and potential decline.
Full Transcription
All right, give us another minute or two.
We're waiting for a few more people.
Looking at this lawsuit right now.
Let me see.
Do we want to talk yelling does China?
Or we want Twitter threatens meta.
All right.
All right.
How's everybody doing?
That good.
All right, awesome.
So I think today I really wanted to start with
this Twitter suing or potentially suing meta and how in my opinion how silly of a lawsuit it is.
So I will start by sharing some details. Hold on. Let me just put, and nobody go after me for my commentary on this.
I'm just trying to be honest here.
We're known as Elon stands anyway, so it's nice that we can call them out when it's appropriate.
So I just shared a tweet and I put it up in the nest.
I'm going to walk through what is going on.
So for people that are not being attention or not joining us every day, which I think is a big mistake,
you know, Elon...
uh as you know bought twitter for 44 billion has had to do crazy cost cuts has had to withstand
advertisers leaving likely because he has claimed to make a free speech platform um and uh the advertisers
are worried about their advertising being shown next to potential potentially uh not so friendly speech um
He then backtrack on his free speech absolutism to now say,
well, it's not free speech alone.
It's not freedom.
Freedom of speech is still here,
but freedom of reach is not.
Whatever that means.
Well, I know what it means, but it's a silly argument.
And he hired Linda, Yacarino, to come in from NBC to start trying to restore the,
the revenue potential of Twitter,
and surprise, surprise, about a week and some change ago,
they started getting completely bombarded with web scrapers.
Think about how silly that is.
Just for a second.
Suddenly, people are going asked,
some people are trying to scrape the website
at rates that have been unprecedented.
Now, there are two sides of that story,
so I'll say both of them.
The other is that their Google Cloud contract, I guess, was up.
And so some people are saying,
well, actually, that was just a disguise in reality.
They just switched carriers
and they didn't want to pay,
and they haven't been paying Google and all that stuff.
But I like the other one better.
Who knows what the truth is?
And so this happens.
And now, literally a week after, they started putting limits on usage on Twitter and
threads launches and threads is essentially a copycat it's the one big value ad is it's connected
to instagram so for people that are big on instagram which is everybody right most people are on
instagram if you're not that's a personal choice but you're in the minority uh more people are on
instagram by a long shot that they are on twitter and it's easy to just create a threads account
And they went from zero to three percent of Twitter's size in a matter of hours.
They are now above 10 percent of Twitter size, at least according to reports.
But we'll talk about that.
I know Jeff put a threat out about how some of the corporate media relies a lot on
meta for advertising.
And then...
We now see that Twitter is not happy and Elon Musk is not happy.
And I think this is a very sad attempt.
So, as people know, as part of his cost-cutting measures, he let go of a significant portion of Twitter staff.
And now, Alex Shapiro, legal counsel, sent out a letter on behalf of Elon Musk.
He says, I write on behalf of X-Corp and whatever, which...
which is essentially the successor of Twitter, based on recent reports regarding your recently launched Threads app,
Twitter has serious concerns that meta has engaged in systematic, willful, and unlawful misappropriation of Twitter's trade secrets and other intellectual properties.
And the underlying implication here, by the way, is that the employees that must let go of went over to META and build the threads app using trade secrets.
And that's really what they're going after, possibly intellectual property, but I'm not sure what they're talking about there because they didn't cite any specific patents.
And trade secrets are, just so people know, it's actually sometimes easier to enforce trade secrets than it is to enforce patents because they tend to be a little bit broader.
That's a really important aspect of this, which is why I think they brought in trade secrets.
I don't know. Wanted to get people's thoughts on.
My opinion on this is, come on, man, it's a software platform.
Compete, they beat you, it happens.
You know, don't be a cry, baby.
Just go and go after it directly.
Look, Threads is like a 120th of what Twitter is.
If you can't compete with...
threads where you have a bunch of influencers who can't string a few words together,
putting threads out there.
If you can't compete with that, then you really don't deserve to be, you know,
running a social media platform.
I'm just not convinced that this is the right approach to try to sue them or threaten to sue them.
It seems like a very...
childish move. I'll let people jump in. I just wanted to give everybody a little bit of background
on what's going on. I think it's, this is a silly, you know, it's not a cease and desist,
or maybe it can be considered that, but it's definitely a silly move in my opinion.
Mike,
Hey guys, how are you doing this morning, evening, afternoon, wherever you are? I think there's some great points. And I have a few things to say that I've been sort of, you know, concentrating my thoughts over the last couple days. The first one I wanted to directly respond to your, you know, the idea of the, you know, that sort of the trade secrets lawsuit and, and sort of that avenue. Quite frankly, I mean, I,
litigation such a slow process i really would not expect that to actually um cause a disruption and sort
of the overall uh you know the overall uh strategy of of of zuck i mean i think he knows what this would
tell in fact i mean a lawsuit is probably the best case scenario for him right now like
like the other solution would be like, you know, them going after, you know, Facebook's core business.
And so the lawsuit he expected, I think that was sort of in the playbook. I mean, the way the
the meta platform works and the way Facebook works is they take the best solutions from other
enterprises and they build it as part of their integrative, cohesive platform that really
harmonizes the relationship between consumers and advertisers. I mean, you look at
marketplace from Facebook.
That was the Craigslist rip-off or Messenger.
That was like AOL instant messenger.
You have reels.
That was TikTok, stories, Snapchat.
So they really...
take the best of every platform and offer a better solution.
And the way Facebook's really able to do this and offer a more competitive solution is because
they gain the when they gain this additional information as part of their universal graph,
they're able to amplify the value.
So like the data alone to Twitter may be worth $100.
The data.
when integrated with meta's platform
is worth $500 because they already
have all this other information.
And so for me,
I think they're not concerned about the lawsuits.
They're not concerned about the trade secrets.
I mean,
you know,
proving this stuff and discovery.
I mean,
you're talking,
millions of documents and years of litigation.
Now, the one thing I would say, and people have asked me a few times, like, what do you think is going to happen to Twitter?
Like, is this a direct competitor to Twitter?
And my answer has been, no, it's not right now because Twitter, quite frankly, still is the free speech platform.
I remember being on Facebook, you know, even a year and a half or two years ago.
And, you know, I posted something like all men are assholes.
and I was actually like given a six month warning for that.
It was a facetious comedical remark and I was given a six month warning.
And I think what we've seen right now on space, or excuse me, on, on threads is people being removed for the smallest infraction.
And so what I think Facebook is trying to do is get a platform where they can get contemporaneous.
or debating thought from their users.
And they really have lacked this
in any of their other platforms.
You look at Facebook.
It's really for your close friends and family.
You look at Instagram.
It's mainly designed for photos.
But,
You really learn the most about someone when they engage in debate or at least contemporaneous thought.
And I think that's what this platform is really designed around, you know, the short form blog platform to understand.
It's a missing dimension from Facebook's sort of ecosystem.
And I have some other points.
I want to make one more and then I'll save the rest of them for some response.
But the other big issue right now is that.
Facebook has, or meta has an incredible advertising platform.
Anyone who's used Twitter's advertising platform and I've directly used it, it's absolutely
horrible, right?
So they, Twitter relies on, they rely solely on fees from the APIs.
And yes, there's been scraping going on because,
you know, Twitter tried to monetize these APIs and developers said, oh, well, I'll just make
10 accounts and do the same thing and you're not going to pay you. And so until Twitter
reaches this equilibrium point where the cost of scraping data exceeds the cost of using the
APIs, they're going to have to keep rate limit or keep finding novel ways to do so. But back
to the point about the advertising revenue, there is, I had an average running for the United
States and I had almost all of the views from Mozambique. Like,
Like, how does that correlate?
You know, it's just overcomplicated.
It doesn't work.
It doesn't deliver.
And the other thing that I'll add is verified users on meta require an actual ID.
So if you're an advertiser and you want to know you're reaching real users, you want to pay a high cost per click or even a cost per an impression or a thousand impression, CPM.
You can actually say, I want to reach real users that have a verified identity.
And it's not a Twitter verified where you put in a credit card or a prepaid credit card or a master credit card and bill a thousand accounts.
It's we scanned your ID.
And yes, you can make a fake ID, but the cost of doing so is much higher.
So interested in thoughts, I have a few other points, but that's sort of where I'm starting off at.
Yeah, Mickle, what do you think?
Yeah, well, I think Michael made some outstanding points there.
And I think what it really comes down to is Threads is probably going to run in the short term, a more profitable business.
They're going to have better advertising.
It's going to be, have a lot of aspects from a corporate view that probably sit better with people.
But I think at the end of the day,
When it comes down to free speech and you were making these points earlier, I don't think anyone really expected Twitter to be a free speech absolute platform.
I think what we're really all looking for is to be able to post stuff and not have a constant worry of being, hey, am I allowed to say this, this or this.
I can honestly say since Twitter switched over, I really don't have those fears in general.
And I'm definitely not someone who's...
completely crossing any lines.
But I even think back to that space
we had that one morning where it was the
release of the debt ceiling deal.
And I don't think something like that
would ever fly on threads
if we were to report something early like that.
So overall, right now, I think the bigger
The biggest thing Twitter has is a network effect of really smart people who want to be able to voice their opinion on topics that aren't necessarily just perfectly in line with the view of the mainstream media.
So overall, I think as long as that stands on Twitter, I think there's going to be a group of intellectuals here.
And maybe you're right.
Maybe it's not the perfect advertising model for businesses,
but I still think it's going to be a very powerful platform going into the future.
And I honestly really do think both can succeed
and both can have a lot of users in the future.
And maybe they don't even cannibalize each other as much as many of us are expected.
Well, the question really is, and I mentioned this yesterday,
and I didn't go in trademark it, which I should have,
is this concept of intellectual socialism.
Because that's what you're talking about, right?
Like if they don't have a business model,
then they essentially are a free or a platform for intellectuals
without a capitalistic motive.
And ultimately, we know that there's a ticking time bomb with Twitter.
The clock is.
Well, let me just say real quick.
I mean, I think, I don't think there's any way Elon Musk won't figure it out.
I mean, I think it's pretty safe to say that he really did inherit kind of a shit show here.
So I think Elon Musk will figure out.
I just want to be clear.
He didn't inherit it. He bought it.
there's a pretty big different i mean inherited the issues but yeah yeah like he chose he chose
he bought the issues and now he just to fix exactly he chose it's like uh you know it wasn't an arranged
marriage he chose this girl right and so i'm just saying yeah but i would argue that network
effects there i would be more interested in buying those network effects than that come with the
issues than having to recreate the network effect and start off without the issues but yeah it's gonna be
interesting
So for people that are not aware, the Dow mouse or the daily active users divided by the monthly active users, the Dow mouse, that's what they call them.
And you can look at them in their S-1.
You can see that in every one of their quarterly reports.
Okay.
Facebook and Instagram
enjoy some of the highest down mouths
of any social media platform ever.
And those have actually,
for Instagram,
have stayed steady.
For Facebook,
obviously, that's gone down.
And what's interesting is Twitter...
has been hitting many different milestones around their daily active users divided by their monthly active users.
And I just want to take a second to make sure that people understand why they look at that.
What they're looking at is not just, hey, how many users do you have?
But what you're really looking at is how engaged are those users?
So of all the people that use Twitter every month, how many of them are coming in every day?
Like us chumps, right?
Right. And that is actually the best measure of engagement. And I've seen Elon try to talk about total hours on platform. I've seen Elon try to talk about other measures, but he knows just as well as anybody else that that's a pretty well-established measure that most people use. Nobody does Dow Mouse better than meta.
They, and you know what's really interesting is that intellectuals clearly are not buyers of products through advertising, right?
And so we've seen that what you need is both the intellectuals on this platform and you need regular folks who want to buy things through social media.
And they've not been able to figure this out.
And also their ad to what Mike was saying, their ad placements are awful.
Like, I get the same ad a million times.
And I've joked about it.
I'm getting, like, Bluetooth ads, like, every third tweet.
And it's useless.
Like, what the hell?
You know, my wife gets Bluetooth ads.
And she's like, I don't even, I can't even use this.
This is stupid.
Like, you guys are idiots.
Like, that level of ad issues on this platform.
And so...
You know, Elon has come in.
He's been focusing on identity verification.
As Mike said, Instagram then instituted identity verification.
And they did objectively a better job on that task.
Now, how does that apply to, you know, do you feel comfortable having your identity?
Like literally, meta have your ID card.
I don't know.
That's a broader question.
But, you know, from a financial perspective, so, you know, I wanted to pivot a little bit
to the financial side of things.
Look, good thing is, unless somebody here hasn't told me, you know, Elon is a private company and none of you are investors, right?
Elon's company, Twitter is a private company and none of you are investors.
Now, the VC firms that invested, the banks that have given loans, they're the ones that have to worry about this.
And I will say, there's no guarantee that Elon will figure it out.
I'm actually pretty concerned about growth prospects overall.
I'm...
I'm not sure where this goes, especially if meta makes some additional moves.
Like, what if they acquire, I was joking about this, there's no proof to this and it's not
financial advice.
But if they acquire something like Clubhouse for pennies on the dollar, now they have their
own spaces alternative.
Or they'll just build it because it's not from a technical perspective, the problem has been
figured out.
And so then you can imagine that you can literally go across all of these different platforms
and guess who makes the everything app?
It's Facebook.
It's meta.
That's kind of crazy because that was the entire plan, right, all along.
And they waited for an opening and there could not have been a better opening.
So from financial perspective, I have to say that I personally, and I don't own any meta stock at all,
I've not been bullish on the Metaverse in the short term.
I think it's much more of a long-term play.
And I've not been super bullish on their approach to actually get advertisers themselves because of Apple.
But this move may be the monster move that makes me bullish on meta again.
And by the way, meta was down since Threads was released.
So just to be clear.
Mike, go ahead.
Yeah, I agree entirely, Dr. Tanesh. I mean, I think this really is a bullish move for META.
You know, I was worried about META's ability to continue their sort of streak of, I call it copycat innovation because it's not really direct innovation.
But to continue to bring value propositions to their platform.
And I think it's going to be very interesting to see, though, again, to me, where they draw the line with the content moderation.
I think.
if they do not change their content moderation policies, to me, it becomes a lot less bullish,
because I do believe that, well, I guess I don't know.
I may not be interested in some, you know, counter argument on this.
I mean, for me, I would love to see it being more open platform or town, you know, town hall kind of platform to look and communicate.
But do people want a contra to Twitter?
Like, do they want a place where they can go and just feel happy and not have any...
you know, contrarian views or views that go against the majority and consume micro blog or,
you know, small form factor media in a platform where there isn't, you know, some of the
animosity or the contrarian views that Twitter has. But I, it still does make me bullish from it.
And again, this is not financial advice. I don't own meta stock. I don't plan on buying any
meta stock. But if I were to buy metastock, this would make me feel better about meta, that they are
bringing in this platform. And really...
It's the data.
I don't really care about the platform.
To me,
the platform is sort of irrelevant for me personally,
but the additional insight and the additional,
they're bringing an additional dimension
to develop the individuals that are using this platform.
And so they're further...
enhancing i mean now they know what movies you like they know what they know what tv shows you
like they know you know who you talk to they have what's app they know your contact list
they know what area codes you communicate with i mean they just have this massive data set now
of of information that allows them not only to give you as a user a better experience
but obviously the big thing for them is to allow their advertisers and them the target individuals
in a much better fashion
And to me, that's really where this incentive comes from.
So from a financial perspective in terms of the performance of the stock, I would be much more bullish from that perspective.
Yeah, Michael?
Yeah, I just wanted to say a large position.
Michael, you're cutting in and out a little bit.
Go ahead.
Oh, can you hear me now?
Oh, much better.
Oh, I was just going to say I am a shareholder in META, so I had a lot of good things to say about Twitter.
I love the platform, but I still do think META is going to do a good job with how they monetize their product,
probably better than Twitter, like I was saying.
But if I could, I would hold shares in both.
I like them both going forward.
I like the value prospects of each, and I think they're both going to have their unique place in the world.
Yeah, David, you're looking at the charts right now.
Give us a sense of what the charts are telling us on META.
So, so META, again, like most of the other stocks at the end of these large-cap mega,
these mega-cap names at the end of 2022, they were at their lows.
Meta had dipped a little bit below $100 after peaking at $384 in 2021.
It had dipped below 100.
And, you know, I always talk about my measure of, of,
a bare market is when you have crossed below the 200 week moving average.
Meta had dropped way below its 200 week moving average.
So it had suffered more, maybe close to Amazon,
but more than any of the other mega-cap names,
it had really dropped to the point where, like,
it wasn't part of the magnificence of it,
and it dropped way down,
in terms of weighting in the S&P 500.
And then with everything else at the beginning of 2023,
it caught up, right?
It's still kind of right around the just barely getting above the 200-week moving average.
It's right up to that 62% retracement of its decline.
So it's still recovering.
But it's had a 150% return in the last 20%.
six months, 150% return. That is far more. It's about three times as more of its previous peak.
The last time, the only time it ever had 150% return in six months was early on in its history,
when it bottomed out at $17 after its IPO. It IPOed at $1.
you know, right around $30, $40 and then went straight down immediately after its IPO down,
more than 50% down to 17 and a half. And then from that point, it rallied all the way up to 58.
So in other words, it took about a hundred, 125%
return in six months.
So now we just had 150% return in six months coming off of a low point that was way below
its 200 week moving average.
At $300 now is still not close to its all-time high at 384 or its pre-COVID high
right around 350.
So it still has room to run.
But like right now, like buying meta because...
because of threads from a technical perspective would be like, you know, chasing,
chasing the shiny object.
Like it has such a big return and such a short amount of time.
Again, it does not mean, like I said before, it does not mean that it can't still go up.
But the bulk of its momentum,
has been, we've seen the bulk of its momentum.
Any return now to the upside will just be kind of a grinding move.
And it would be better served to see some kind of move to the downside.
you know, at least to say like it's 50 day moving average,
and then bounce off of that before you would say,
oh, I want to buy the stock because of this new product that just came out.
It's technical pictures is way, way old for bought.
Interesting.
Thank you for that analysis.
Yeah, I do agree with David here.
I think by the stock is quite extended.
Yeah.
When you do look at the last six months, it's been green, green, green.
Again, that's quite unusual here with where the markets are kind of headed.
I think that, David, I'd like to ask you a question, do you think we top out here, or do you think we have a, you know,
blow off top here around 300, 315, because I don't see the extension going beyond here.
I think we come down to the 250s area and kind of fix the averages a bit.
It's way too overextended, lots of seller volume that I see coming in here.
What are your thoughts?
Yes.
So there was a gap at the beginning of 2022.
There was a sharp gap to the downside on February the 3rd,
where we went from 3,23, it opened up the next day at below 245.
So big short gap.
Sorry to interrupt everybody.
Just got the numbers.
So U.S. private payrolls just came, jobs numbers just came in.
U.S. private payrolls actual.
149,000
Forecasted was
200,000
U.S. average work week hours, actual was 34.4 right on forecast. U.S. non-farm payrolls.
This is the important ones. Actual 209,000. Forecast was 230,000. Previous was 339,000.
U.S. average earnings year over year.
4.4% forecasted was 4.2%.
U.S. average earnings month over month, actual was 0.4%.
Forecasted was 0.3%.
Labor force participation still ranging at 62.6%.
Previous was 62.60%.
Forecast it was 62.6%.
And U.S. unemployment rate, actual
was 3.6% forecast 3.6%, previously 3.7%.
And then US manufacturing payrolls was 7K versus forecasted 5K.
So big headline number to keep in mind is that U.S. non-farm payrolls were actually 209,000
versus the forecast at 230,000.
Good news, bad news is good news again.
Is that where we are?
Any initial thoughts, David, or anybody else?
Yeah, I would say, I mean, yields are declining.
So the market's taking it as bad as good news, right?
The bond market, especially all the yields, two year, 10 year, they're all dropping on a knee-jerk reaction to the numbers.
So you would expect that means that Fed rate hike odds are pulling back a little bit.
And it's really that second rate hike that matters, right?
That when the Fed's going to raise us, if they will raise a second time here, that's the one that people would be looking at.
Yeah. And just to clarify for everybody, I think most people believe that a 25 basis point rate hike is coming in July.
What David is referring to is August or September having a second rate hike, which, by the way, the Fed has choreographed.
And David, you know my belief. The Fed does as it says.
Yeah.
People want to not believe them, but they always end up doing exactly what they're saying.
So, and so I'm a little bit less skeptical than others, or more skeptical than others.
Jeff, your thoughts on the numbers?
Yeah, I mean, just this 80, you know, you compare it to ADP yesterday, which really thrashed the markets around, you know, probably for a much needed pullback.
But if you, it's another example of, you know, ADP just being way off, which ADP is just private payrolls too.
So it's good. I mean, this is, you know, it's a solid number. You know, it's, it's below forecast, which I think is.
important, but it's not like, you know, it's a zero, and it's not like it's 350K. I think it's,
it came in as a good number. I think markets will respond favorably.
Yeah, it seems like overall, again, as people know, my biggest problem is that I hate that good news is bad news and bad news is good news.
I think that's ridiculous, but that's the world we live in, at least for the last few years.
And that's where we are right now.
So I'm obviously not happy that job growth is slowing down, but this is like a, you know, we're in bizarro world.
So, Mike, go ahead.
I'll be very quick because I know we got some really good people on the space right now that will answer far more eloquently on this point, especially, that I will. But my only thing is job growth, I think, you know, I was reading an NPR article and I'm not promoting any mainstream media outlet whatsoever. But, you know,
I think we're running out of places to find new job entrance, right?
And you have different measures of job growth, you know,
or unemployment based on, you know, people that actually are looking for employment,
people that have sort of signed out of the workplace and people that are genuinely unemployed.
But I think we're running out.
out of new places to seek job growth.
I was reading an article that, you know, sort of the last frontier right now, at least in the United States, is really, you know, females reentering the workforce who had been out for years, be it raising families or for other reasons.
And so my question to you is, do you think we've reached this, you know, this, this constraining point where we're actually –
Job growth is not slowing because of, you know, the lack of new positions being created, but rather, you know, we're lacking people to fill those positions, which is sort of having a feedback cycle.
I'd be very curious to see some of the other speaker's thoughts on that.
Yeah, David, the other David, David Towell, what are your thoughts on that?
Well, in terms of, you know, finding jobs, I don't know exactly what.
if we need additional kind of spots or additional places to place people.
I will say, in contrast to a couple of people that spoke,
you know, as you know, Denise, I'm a more long-term investor,
you know, rarely, you know, trading on a daily basis in and out of things.
And I think for me, the longer-term story here is,
is that on the one hand,
The data is coming in close to where people expected to come.
I agree with you wholeheartedly that the Fed will do what it says it will do.
And I think at the same time, however, you cannot fight this tape, right?
The retail investor has gotten this market right for well over 12 months.
Institutional investors have gotten it totally wrong.
They sound really smart.
When they make their arguments, they tell a great story that all adds up.
But at the end of the day, you cannot fight this tape.
And I think if you're asking me, and this goes back to an earlier point regarding the talk about Twitter versus meta, those activities, the consumer, the individual seems to be charging forward.
I think industry is very apprehensive.
in terms of industrials, in terms of, you know, capital spending.
But in terms of the individual, in terms of personal spending, that is rip-roaring right now.
And it will continue to rip-roar until such time as the consumer goes ahead and runs out of, you know,
gunpowder and i think we have a little bit of time maybe six to nine months before that happens when
that does happen however right i would see i will see expect that discretionary spending will get
hit very hard we will see a major fall off in discretionary spending and i think that that's where
you need to be positioned in terms of your shorts you know six months out from now
Yeah, it's, I mean, Cody, I wanted to get your thoughts as well.
It's very confusing who to believe.
I mean, I have to say that even when it comes to the data itself,
I was just adding to my tweet above in The Nest that there was a big discrepancy between ADP and...
the data from ADP and the data from Bureau of Labor Statistics, which is the government data,
ADP way overshot, right?
So estimates came in 200,000 jobs more than what the consensus estimate was, and then for ADP,
and then for Bureau of Labor Statistics, we come in short.
Who do you believe?
Yeah, I would love to hear some opinions on those numbers.
You know, some of the government numbers seem to be manufactured at times.
I will say that the miss is the first miss in over a year here.
You know, Jay Powell has mentioned that they're keeping an eye.
on job numbers and that, you know, he thinks that we're getting to levels that are consistent
with where policy needs to be. He's stated that multiple times now. So expect that in the upcoming
meeting. You know, I'll go out on a limb here, though, and say, you know, I don't, I don't
I don't know that we're going to see much of a loosening in the labor market.
And I don't know that we'll see anything above 6% in the next decade.
You know, I know a lot of people are pressing that, you know,
we're going to have these massive job losses.
But I think there's a lot of tailwinds that are going to push the labor market
to be really strong for a long time.
Yeah, I mean, I'm curious, Jeff.
Do you agree with Cody that we're not going to see 6% for a while?
I don't know. I mean, when these things occur, you know, they tend to, they could be a little bit sudden.
But I mean, I do agree with Cody that, you know, there's been relative strength, you know, throughout the entire year.
But, I mean, when it does roll over, it can happen fairly quickly.
Yeah.
But right now, it doesn't look like it's going to do that.
I mean, if we had a, we had a print below 200K, well below 200K,
then you can say, wow, that looks like that could be a significant crack.
But, you know, I mean, the participant participation rate looks decent,
unemployment rate looks, you know, decent.
I mean, these are strong, these are relatively strong numbers, but again,
the fact that they're below expectations.
And then, you know, I would say significantly below last month.
And we'll see if there's any revisions.
I haven't seen any revisions yet.
in the subheadline.
That's always an important thing, too.
Sometimes they put these numbers out,
and then what we've seen this year
is that they've adjusted prior months much lower.
So I'll be looking for some revisions as well
to see if there's any changes.
Yeah, let's see if they revised lower.
To your point, just want to remind you.
They did.
They did revise lower.
Oh, for this month?
I mean, what do you mean?
No, they revised lower for prior months, which were able to...
Yeah, that's what I'm saying.
So, you know, but for this month, it already came in short of estimates.
In a month or two, they might revise it even lower.
That was my point, Caleb.
Sorry, to clarify it.
Yeah.
Can you go through the revisions if someone has them?
Caleb, do you have them pulled up?
Yeah, someone commented under one of my posts. So what they had said is that April and May job numbers were revised down. They just had 110K. So I'm not sure off the top of my head what they were. But the May one seems a little strange to me. So I'll need to look into a bit more. But.
based off some of the comments under my post,
it seems like they were revised lower.
And so every month,
you know, Bureau of Labor Statistics comes out with their numbers,
and every month, the numbers are adjusted lower,
at least for the past few months,
So the question is, this is the first miss.
Cody's not wrong.
It's the first miss in a long time.
I can't remember how many months, but it is the first miss in terms of being lower in a long time.
And so if they revised it even lower, which is what they've been doing, it would be more significant to what Jeff was saying, which is it might be below 200K.
Go ahead, David.
I was going to make a quick point here.
So, yeah, the jobs number in May killed the estimate.
Like it was up, even revised lower, they revised it down to 309,000.
The estimate was below 200.
The estimate was 190,000.
So it killed the estimate.
And remember, the job list, the unemployment rate rose a couple points to 3.7%.
Even though the labor force participation stayed flat.
So, you know, something was off in May and you wondered how much of that was kind of how much of that came back in, so to speak, this month.
Yeah, and, you know, just so people are aware, our labor participation rate is still not even close to our all-time highs.
I mean, we still have, yes, it's gone up in the last few years, but it's still not gone up enough.
I mean, we need to get more of our people back into the labor or into the workforce, and I think that's also throwing off a lot of our numbers.
Caleb?
Yeah, I'd just push back on that a little bit.
If you look at actual labor force participation, we're back at the pre-COVID levels.
So certainly we've been in a downtrend since the financial crisis and the great recession.
And that number started to inch up again higher under the Trump administration.
But we're back at those levels now from the pre-COVID era, if you will.
So we've recouped all of the labor market participation losses from COVID, which is a great sign.
And then if you look at prime age of labor force participation, so I think off the top of my head, that's individuals between the age of 25 and like 54 or 55, something like that.
that's well above the pre-COVID highs.
So, you know, we've seen a really sharp and strong rebound in labor force participation rate.
That's a great sign.
In terms of COVID itself, but considering how hot the job market is,
The truth is that we still, we have room to go.
There are more jobs out there than people that want those jobs.
And so you would think that people that are in their 50s and 60s,
which is the, as you're mentioning, outside of their,
I don't like using prime age,
especially after what happened to certain people for using those words.
But, yeah.
But, you know, in the older side of the working population, you know, a lot of them retired early during COVID.
A lot of them left the workforce.
And yeah, we've seen some increases.
But that's a pretty big challenge for us.
Because so, for example, in certain professions, like my profession, like in medicine, 117,000 out of a million doctors left the workforce last year and they're not coming back.
And so, you know, it's a, it is, I think, sector by sector,
and I think we're going to see some challenges that come from that.
It explains why healthcare inflation keeps going up.
But David, go ahead.
Yeah, I just wanted to go ahead and talk about a little bit, based on the rising rate environment,
you know, we should definitely start to be concerned about high yield debt and corporate refinancings and then the default rate.
I think we're going to start to see that in earnest.
Again, it's like the real estate market in the sense that, you know,
expirations or maturities don't all happen at once.
And so therefore, we're not going to see, you know, this gigantic waterfall that's going
to happen.
But it's something that's going to start to tick up in the corporate bankruptcy world.
We've seen a huge uptick in bankruptcy filings.
And the recoveries for creditors have been awful.
We've seen liquidations happen, no restructuring, no resuscitation of businesses.
Because by the time they go ahead and hit the bankruptcy wall because they raise money under such a low rate environment, they've essentially squandered all of the value of the company.
They've driven it into the ground.
For instance, today Bedbath and Beyond announced that they would go ahead and cancel the company.
the going concern sale of buy-by-baby.
Buy-by-baby used to be thought to be, you know,
the crown jewel in the bed-bath portfolio worth, you know,
400 million plus less than two years ago.
And now it's probably going to get sold for its IP rights,
the intellectual property, the brand and so on,
the customer list, you know, for somewhere around 20 million bucks.
And we're seeing value get eviscerated
because of the fact that companies that have struggled from a business perspective have been able to raise capital at such low rates, driving the business further into the ground under bad management.
And therefore, a lot of companies essentially hitting the wall with no value, lots of people getting terminated in terms of jobs and,
And frankly, those people are going to have to go ahead and enter the workforce.
So I do believe we're going to start to see, you know, in terms of unemployment,
we'll start to see, you know, some moderation.
in terms of, you know, how strong our labor market is.
But that being said, again, this is a slow-moving train wreck,
but it's important to go ahead and watch.
The same way it's important to go ahead and watch it
as it relates to the commercial real estate market
and what I think eventually will be the housing market.
So I wanted to thank one of our listeners who sent me this chart.
And by the way, we have the smartest, best-looking,
and most helpful listeners ever.
Thank you for sharing this,
because there's nothing that makes me happier
than being able to make my point,
thanks to using somebody else's data.
But the labor participation rate
hasn't actually returned to above pre-COVID levels
The chart up there is a historical chart for labor participation.
It includes both the actual survey and then the latest.
But it's very, very close.
To Caleb's point, it has made a, it's inching back towards pre-COVID levels, but we're not there yet.
And I'm kind of excited to see us make our way back.
And again, pre-COVID levels were pretty stable.
So it will be.
I'm hoping for even higher labor participation rate.
It's easier to work from home than it has ever been before.
And we've got a lot of smart people in the boomer generation that can continue to provide significant value.
I think, you know, and they can do it in a way that might actually be, you know, helpful.
So I...
I do want to push back a little bit on the labor participation rate.
Remember, you can't compare the ability to work in the 80s, the 90s, and early 2000s like you can in today's economy.
But go ahead, Jeff.
Jeff, you got on mute.
I just going to say that I pin the revisions, Caleb was correct, April, May, minus 110,000.
I'm with a lot, minus 110,000.
So, again, surprising that the revisions continue to be that high.
I mean, these revisions are literally 20, I don't know, 20, 30 percent of the number reported.
So it's not insignificant.
Yeah, but still, to David's point, it did beat estimates by, you know, a country mile.
I mean, it's not...
It's not, we shouldn't be looking at it as an insignificant difference.
Of course, the gap is different than what it was, but overall jobs did come in better than expected even with the revisions.
You know, today's jobs report, again, I just want to make sure it's clear.
Today's jobs report did miss significantly.
And again, as a reminder...
they've been adjusted down over and over and over again.
But this is the first time.
And again, Cody can correct me,
but I think in at least a year where non-farm payrolls came in way below estimates.
Usually they come in above, especially recently.
Robert, how are you feeling about the jobs market today?
ADP, and I actually, the bigger question is ADP
was way better than expected, and the numbers were in the 400s,
and then now Bureau of Labor Statistics comes in,
and we're in the low 200s, 209,000, and it's a big miss.
What are your thoughts?
Which one do you believe?
Well, you can read my tweet, Bidenomics is working, no recession.
Three-month average, 244,000.
For all the geniuses on the call, if you closed your eyes and you said for the last three months,
we'd average about 250,000 job gains.
Come on, you'd take that in a nanosecond.
So, you know, does it feel like the labor market's starting to slow somewhat versus, you know,
the 300 plus thousand print?
I mean, yes, but recall during the Trump administration, this is not being political,
I think they average 180-ish or something.
I think Obama, during his administration, average 210 or something.
I mean, we're talking about the last three months, 240, and we way surpass that prior to that.
And we have people still talking about this inflection point, which is a definite debate of recession, you know, versus, you know, strength.
And that's still a flip of a coin.
I'm obviously on the other side of that of the no recession.
But it's still, you know...
a debate worth having.
So, I mean, listen, I think these numbers are incredibly strong.
Labor participation continues to be, you know, strong.
Yes, it's not pre-COVID, but, you know, we're at near three-year highs.
Our wages went up, manufacturing up slightly after being quite buoyant.
You know, I thought it was, you know, I look at trends.
Trends is probably slightly slow down, but we're backed unemployment, 50-year low.
you know i think people should applaud this type of number when we're averaging a you know quarter
a million new jobs over a three month period the only pushback i will give is that the amount of
uh you know claiming victory not you specifically but people that that have been saying well you know
the bi dynamics model is working look at the adp numbers it was all over the news we broke it as it
happened it was uh such a big uh
it was so high above forecast and then we kind of get the BLS data and we're just kind of a little bit
confused about why there's such a big discrepancy between what the government's numbers are
which were actually lower than what ADP's numbers were which were way higher than anybody expected
even given seasonality and so
You know, it is hard to put this together.
And, you know, of note, you know, we saw this, the knee-jerk and yields for the two-year
and tenure that, you know, that dropped significantly.
And David Settle just sent us to me.
They're back up, you know, pre-jobs report numbers.
And so, you know, it's not like it's having a significant impact on the bond market, but it is interesting.
I don't know who to believe anymore.
It's a, because the revisions are so striking, you know, they just revised May's numbers by over 100,000.
That's what I heard a few minutes ago.
So, you know, these are, these are striking revisions.
And it's what that is the, is the BLS saying that, you know, it's actually potentially even worse since they always, since they've been adjusting it down?
I don't know.
It's a, it's a little bit confusing to understand.
I just want clarity, to be honest.
Yeah.
So, I don't know.
There wasn't really a question.
It was more of a comment.
I wanted to see what you.
Or was that just a dissertation?
Hey, you have to admit that the...
I don't have to admit anything, but go ahead.
No, you just have to admit that, you know, the numbers are confusing.
TXMC, I saw you be very vocal down there.
Guys, confusing, not confusing.
We're talking about, you know, when you talk about...
someone estimating 240 and we come in at 210.
This is the same group that has underestimated for years straight.
Okay, so this is the first time.
Okay, they overestimated.
Go look.
They've been wrong every time.
These are also the same people that said the Fed was going to hike.
Okay, last, you know, already.
My point is we're at this inflection point.
There's no easy call here.
I have a view.
Someone else has a different view.
This is a tough time.
We've never been in a post-COVID world than any of our lifetimes.
We've never seen a buoyant economy coincide with inflation and then something not, the shit not hit the fan, right?
Normally, inflation north of 4%.
Unemployment under 4% automatic recession.
Haven't seen that.
But listen, we have a longer tail inflation that we know.
We have a jobs market that stays buoyant, whether the revisions are up or down.
They've been all around.
Yes, a little down the last couple months, but prior to that up.
But if the average is a quarter of a million jobs, that is a strong F&E economy.
wages feel strong in here.
I was a little surprised
that hospitality and leisure
didn't do better,
but I think our debate continues.
Yeah, it'll be interesting.
A lot of people want to push back.
I'm not taking a victory lap.
I'm just saying that
no trophies for you today.
Bidenomics is working
because I think the economy
has winded its back.
If I told you guys where we continue to be at a 50 year low in unemployment with inflation coming down and wages going up, we would be applauding.
Very respective with the president.
No, no, I know.
And it's not about that.
I think it's more about just, well, let me hear from others.
I know Jeff has some comments, TXMC, Mike and AK.
Jeff, you want to go really quickly first before I would go to TXMC?
Yeah, if you look at the graph that's pinned in the nest from Timrose, I mean, that trend looks horrible.
Like, where we go, I mean, we go into zero in the next month or two. It doesn't look good.
I mean, we're at the lowest private sector payrolls since December of 2020.
And the revisions have been, a lot of the revisions have been to the downside.
you know, 110K
getting wiped off the last two months.
I mean, what is this 209?
Is this 209 really 150?
Is it, you know, so I don't know.
The trend does not look good.
And from a private sector payroll perspective,
it's the lowest of, you know,
the current administration.
And it's hard, I mean, besides the free money,
it's hard to point to the policy
that's actually creating these jobs today.
Because if you look at the Chips Act,
if you look at,
the Inflation Reduction Act, it's hard to say that those job ads are coming in right now versus maybe a year or two from now.
Yeah. And TXMC, your thoughts?
Sure. I had a couple of comments related to demographics and jobs and things like that.
So, you know, I was in this space a couple days ago giving some of my thoughts about where we are in the recession or no recession process.
And I put the same chart in the nest that I shared the other day.
Some of you will remember it.
Some of you are hearing this for the first time.
And the chart that I just put in the nest, I'm going to give the stump speech on it real quick because I have a different point to make.
It's showing non-farm payrolls from the perspective of yield curve inversions in every yield curve inversion since the 60s.
And what you can see in the arc, the light gray line is all of those previous eras, not today.
And what you can see is that non-farm payrolls show strength for 12 to 15 months after a yield curve inverts.
And then historically, the average sequence is that it begins to soften after that, a year, year and a half later.
And you can see the black line is us today following that trajectory just fine.
And so when people talk about job strength and how we're not going to have a recession, I just look at this chart.
And I say, you're just too early to make that call.
You just don't know.
And we could debate it for the rest of the year.
We could be debating it for another nine months or 12 months and still not know because we would
still have historical examples of downturns that played out in this window.
So I am still reserved in my call of recession or no recession.
I'm definitely leaning towards one occurring.
I think we have single digit percentage odds of not having a recession.
And...
The job strength, I think, is confusing.
It's confusing in part because people think jobs should be getting markedly weaker as we get into the recession, and that's just kind of not how it works.
But also, I think that we have to acknowledge the demographic shift in the United States that's been taking place over the last 25 years.
It didn't start with COVID. It really started in the 2000s.
That was the peak of population growth. That was the peak of labor participation, right?
Like that that was the peak of kind of American prominence was really the early 2000s.
And when you look at like percentage population growth, if you look at it on like a three year window, it's quite low. It's been declining for decades. So, okay, maybe it's just a law of large numbers where a big population, 1% isn't what it used to be, right? Well, what if we look at it in people terms? If you just look at it in raw numbers,
people terms, population growth on a three-year basis is as low as it was in the 1940s. So we are not
growing at the scale we were before. And population growth, which is what we had in the 60s and the 70s and the
80s when the boomer generation was really exploding the biggest generation in U.S. history,
that was organic demand, right? People creating new households, starting new families, spending into the
economy. And that
is in part what created a lot of the stubbornness in the economy through that inflationary period.
But the problem we're having today who creates slightly different dynamics,
which is why today is not exactly the 1970s in many ways, but one of the ways,
is that we don't have that strong population growth buoying the economy, right?
Where there's just a, there's so much workers that we can't fill all the jobs.
But today we actually have kind of the opposite problem, right?
We have a lot of jobs and we have jobs.
an inadequate amount of worker supply for a full demand economy. And the problem, one of the main
problems is we're not having enough babies and we're living a lot longer. And so if you look at things
like the 65 and up population for the United States, it's exploded. It went from like 10%. Now I think
it's about 18% over the last 10, 15 years. If you look at,
the net drags on labor participation.
This is a data point that you can look at.
I think the St. Louis Fed has it.
And labor participation,
the net drag on labor participation,
number one since 2015.
You know what it was?
Retirement.
That's the reason people aren't participating in the labor force. And so we have certain pockets.
You can look at different age cohorts. And there are some people in the like 25 to 40 bucket who
haven't come back to work in the last three years. There is a number of people there. But it's not a
massive number. It's not going to eliminate nine million job openings. It's not that many people. A large percentage of it is
is that we have a growing senior population.
We had a bunch of early retirees in COVID that chose not to come back.
Some of them did.
That dynamic is different from the GFC when we had a lot of people, boomers, people near
retirement age who hung around in the labor market a little bit longer.
We had the exact opposite thing happened in 2020.
And we've been trying to coax some of them back.
But the problem is, and I'm going to throw one more chart up while I'm rambling here,
and then I'll stop.
is that since we have all of these older folks
and we have these labor dynamics
that are making us have outsized demand
for the amount of supply we have,
well the problem is,
and if you pull up this chart,
it's really colorful chart,
it's really showing you
labor participation and population by ages going left to right.
And there's a little squiggly black line in each one of the columns, and that's the labor
participation rate for that group of people.
And what you can see is you go from left to right.
There's a really stable part in the middle of the group, and that's people from like age
20 to age 60 or so.
They have really stable labor participation and population growth.
It's kind of flatlined.
But if you go to the very end on the right side,
and you see that the 70 plus population is exploding,
and their labor participation is at the bottom of the chart, right?
It's at like 15, 20%, because they don't want to work anymore.
And so I think that some of these dynamics,
are simply unavoidable.
And what we don't have an answer for
is will productivity growth,
will we have some like innovation with AI or whatever
that creates a new productivity boom
that supplants all of this just simple lack of bodies
that the United States has?
And this is a problem we'll be dealing with for decades.
We're not in as bad of a position as like Japan,
as certain places in Europe,
as China.
Like they're there are,
some of them are ahead of us
on the demographic downturn,
Japan very much so.
But we're going that way.
And it's unavoidable.
Demographics are destiny.
And so I think we need to start thinking about that
when we talk about job demand,
job growth,
labor participation,
which is literally all population.
And so if we have more and more old people,
more and more people living longer who have low job participation because they don't want to work,
then naturally labor participation rate will struggle to rise. It's just math. So there's demographic problems.
That's my main point. And then my first point to kind of counter what Robert said was that I think we've got
at least six or nine months ahead of us
before we can see enough data
to get any idea whatsoever
about whether or not this will be a soft landing
like 1960s.
Let me get to go to Robert.
I know Robert, you have to jump off.
Oh, whoa, whoa, whoa.
First of all, I wanted to be clear.
No one's countering my point.
People were calling recession months ago.
I'm not predicting where we'll be in...
And those people were wrong.
Let me just finish.
All right.
Damn.
Yeah.
No one was, I was not predicting where we would be in 24 and 25, okay?
I'm talking about where we are over the next coming quarters,
where most people have been calling for at least over 50% of economists a recession.
No one was making a prediction where we were going to be 18 to 24 months out.
That would be an impossible prediction based on where inflation will be,
geopolitical risk and all these things.
So, and I don't think you guys are making bets two years out.
Yeah, yeah, that's fair.
And I agree.
So you haven't been saying that.
The idea that someone's countering my point two years out,
let's wait two years from today.
But Robert, you know, if you truly, you were mentioning,
no but, no, but.
Can you hear me, Robert?
Just want to make sure.
I hear you fine.
Yeah.
I can mention Bidenomics because it's been in the news for a week.
So no, no, but my point is, is Bidenomics then a short-term phenomena?
Or do you think that the Bidenomics approach will actually lead to...
long term because again the chips act really has not it's a very good point what the prior speaker
was saying he's incredibly smart and i think his charts are very thoughtful demographics the labor
market but you know my view is much more bullish because i think over the next two years
I would probably take the other side of that bad.
I actually think GDP growth does better.
Because when the Chips Act and infrastructure projects,
the 35,000 infrastructure projects that are already funded,
the manufacturing plants that are funded,
those are much higher paying jobs.
And there's going to be a whole group of a transitional shift of better wages.
Right.
And so I think we're going to...
Robert, you're a little muckled.
Just want to make sure.
Sorry.
Well, I'm driving.
We're going to have, in my opinion, the wind in our back more over the coming years.
You know, infrastructure is the greatest multiplier of GDP growth that we have of any jobs.
It's a 1.6 times multiplier.
So, you know, my view is...
very, that we have a buoyant economy coming in the next two years. But we also have an election.
We could have a new president. Okay, we have annual budgets to take care of. We have, you know,
geopolitical risk. So my view would be if we continue this way with these type of legislative programs,
then I think the economy will be stronger. But that's hard to predict today.
Yeah, no, I think that's fair. And so wanted to kind of go to the other speakers as well. Mike, what are your thoughts?
I'm going to be very, very quick here. I just wanted to echo. I love what TXMC says every time he's on here. I always learn something new myself. And I think there's a great group of people here, a great group of speakers, and there's always diverse opinions. But I just wanted to echo what he said. I really do wonder, you know, where we are going to find. And this is something I echoed.
I think prior to TXMC joining, where are we going to find the additional labor participants to fill the vacancies?
And I still think that is actually a serious concern in this economy, given the, you know, the growth rate.
I mean, I would hate to see us become another Japan where we're having, you know, negative, you know, negative inflation or deflation, sorry, you know, in lack of birth and lack of people to fill the jobs.
I just think it's an actual...
legitimate concern that could occur if the United States does not really think about where we're going.
So I'd really love to see where people think we're going to source these jobs, these people to fill these jobs from.
Yeah, maybe we could just have much more effective immigration reform.
Maybe that is the answer.
I love it.
Because, you know, the problem is there's not the political will to be able to do this effectively.
Where else, you know, people often forget, but it was actually the Democratic administration of Clinton
that did the cream of the crop strategy, which probably led to many of us and our families, you know, being here, especially for immigrants.
And I think that it's time for us to revisit that.
If we're actually serious about our strategies...
perhaps, you know, we should focus.
And I know AI is going to help.
And I think that we could get better labor participation from people in their 50s and 60s
and maybe even their 70s with a lot of the technology jobs and, you know, with the use of
But maybe that's not what people want.
Maybe it's better to just get the best people in the world and bring them to the U.S.
again.
Maybe we should be innovative again.
It's a, it's incredibly sad that we can't.
get out of our own way here.
And we're de-globalizing
instead of becoming the place
where everybody comes to build
a better life for them
and their families.
DeXMC, did you have a response?
Yeah.
Yeah, you know, Doc, I was just going to have one comment you said there about immigration.
I think that's a great idea.
It's a nation built on immigration.
And if you look at like the CBO population projections for the U.S., which are pretty close to what the UN thinks,
they think that by the year 2043 or so, that because deaths by that point will outnumber births in U.S.
in organic population, that net immigration will be the sole driver of population growth by 20 years from now.
And so that, when you look at our immigration policy, makes you wonder how that might shift over the next two decades.
It hasn't been going in a great direction the last few years.
But I think that it's also worth considering that it's not just the U.S. that will have this problem.
Right. We will also need immigration like all of our developed market friends will also need immigration to supplant their populations, which are not growing at the pace they used to be.
And so when I think about that, we will need, most likely, an order of magnitude greater immigration than we're already expecting if we want population growth and not just stasis because we will have deaths outnumbering births.
So there is some simple math that we need to get over through immigration policy and we'll be competing with our friends for it.
Yeah, I mean, and we're seeing that immigration is not so simple.
You have to get the right immigrants.
You have to have them be contributors to the economy.
It's not so simple.
And this is me coming in as an immigrant myself.
I've got to say that, you know, what we're seeing currently around the world is not so simple.
And I'm just speaking the truth.
A.K., go ahead.
Hey, just a quick couple of remarks here.
I know that David Tawiel was speaking earlier on the point of small business and the corporate mismanagement due to what we had as artificially low interest rates in the past few years.
We're now actually witnessing the effects of the rise of costs.
I saw an interesting take here that there was a 68% increase in commercial chapter 11 cases compared to the same point last year.
Now, another interesting fact that I've seen here is that, you know, alternatively, the monthly net inflows into the U.S. equities are now averaging about $1.4 billion per day, which is close to the all-time record.
Right. So this comes in here to give us kind of.
you know the depiction of okay i see here you know you've posted long USA i agree with you
nobody nobody i think has ever lost money being long USA over the last 25 years
But, you know, with the rise of costs, with the rise of interest rates, we are going to see a lot of stress on the, you know, SME market, in my opinion.
And, you know, to TXMC's earlier remarks as well, I do think the chances of a recession are quite high.
And, you know, for us to get out of this, it's a, it is a single digit kind of, you know, number that I would say that, you know, the U.S. should be, you know,
an expansion point right now.
I think there's going to be a lot of defensive.
And I take this, you know, I always speak about the U.S. dollar.
That's kind of something that I always mention.
Once we start seeing the U.S. dollar bottoming and moving up,
that's typically when it's time to be on the defensive, in my opinion.
Yeah. Jay?
Yep, on the bankruptcy point, we've been making it for a couple months.
On a monthly basis, it's not just the Chapter 11s that are up 68%.
We have small business bankruptcy filings at 55%, and then Chapter 13 filings, which allow individuals to restructure jumped 23%.
You know, this is a pretty big thing.
I mean, if you look at Epic, Epic is, you know, the organization that provides, you know, bankruptcy data.
Things have been escalating pretty sharply.
And it's just a function of rates and the slowdown of the economy.
And the fact that, you know, a lot of the pent-up savings in corporate America and at, at the individual level are going to be declining because of one thing, which is margin decline.
You know, margins peaked in 2021, the S&P 500 in the Russell.
The interesting thing to note for individuals is that real earnings,
have been negative for the last two years. I mean, people talk about wage growth, but wage growth
adjusted for cost of living has actually made the U.S. family margin come down and compress,
and that's why savings rates have been coming down. So I think we're an interesting inflection point
where, you know, I think Lizanne Saunders says that by September,
The consumer is going to be very stretched.
You already see consumer debt levels over a trillion.
And you are going to see the start of after the debt ceiling negotiations,
it is going to be very difficult for consumers to cope because the average,
there are 27 million people in forbearance on their student loans.
They're going to be paying $393 per month on average to cover that debt.
And with consumer credit card debt already at high levels and the average car payment, you know, 40% higher.
And going forward, you know, cost of living when it comes to rent, health care, education, those things haven't changed as well.
So we are bearish on the consumer in the second half.
And even if you look at earnings like Dollar General, Walmart, Target, you know, Dollar General missed earnings.
you know it takes a lot for a dollar store uh to basically say they they're giving up for the second
half of the year so you know while the large cap tech obviously you know has done well um we think
that the earnings outlook for the third and fourth quarter is is overly aggressive in that you know
sell side assuming that earnings are going to bottom in the
in the second quarter.
We do think earnings are going to be lower
in the second quarter than the first quarter,
but we think that the idea
that earnings are going to bottom this quarter
is just completely arbitrary.
And it's management teams
talking to 25-year-old self-side analysts
and convincing them of a hockey stick recovery
when there really isn't a lot of data
supporting that.
Now, the service side of the economy
has been a little bit stronger
than the manufacturing side of the economy.
And that, you know, that's very clear.
And that's...
You know, we are a service economy, but, you know, the data doesn't support a hockey stick recovery.
I mean, it'll be interesting.
You know, I will say they've been pretty conservative recently in terms of under-promising and over-delivering.
So I'd be surprised that they're – I know that, you know, I've heard you say that before,
and I think I largely agree that maybe it's something that's unseen for them, and maybe they believe their own BS.
But –
There is a world in which they might be right, largely because they are seeing, again,
if you look at the XMC's curve, they might still have some positives happening in the short term,
and really this won't hit until 2024.
I mean, maybe it's just about timing more than anything else.
I mean, the only thing they could do is cost dramatically.
And, you know, that is going to affect you, but we aren't really seeing, you know,
sharp increases in unemployment and mass layoffs yet.
So, yeah.
Exactly. And so maybe that happens in in 2024, Q1, 2020, Q2 as we, you know, maybe we're a little early.
No, no, what I'm saying is I think earnings are going to fall before you see those mass layoffs.
I think you're going to need to see earnings compress in other sectors of the economy.
Right now you're seeing financial and tech layoffs. But in the broad economy, you're not really seeing layoffs.
You know, the labor market is very tight. You know,
You know, we have immigration issues, and the economy is still relatively stable on the service side.
I think you're going to see earnings come down in other sectors, and that's actually going to force management teams to cut costs in the latter half of the year and next year.
Yeah, it's possible.
I mean, I think this is where it's a little bit more of a bet, but, I mean, on that note, I think it makes sense for us to close up today.
It's a Friday, which means that we won't see you all until Monday.
But for everybody that joins us every day, I still can't believe you do it.
I know it's early, but thank you everybody for joining us.
We'll see you first thing Monday, 8 a.m. Eastern.
Thanks, everyone.
Thank you, everyone.
Thanks, guys.
Thank you, Dr. Nash.
Thank you.
