Adam Parker’s 2025 Market Outlook + Navigating Fed Speak with Axios’ Courtenay Brown
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On the Tape.

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Welcome to the On The Tape Podcast. I'm Dan Nathan. I'm joined by Danny Moses over here. We have a great show for you today. I'm going to get to our guest right now. In a minute, we have some housekeeping here. Stick around for a conversation that we had with Courtney Brown. She is the head economics reporter at Axios. We do a little Fed preview and kind of get into a little of her background. We know her from CNBC. She was a producer on the fine show Fast Money about 10 years ago. And we're just going to talk about the Fed and some of the stuff that's going to be going on into year end and the new year.

Also, Guy and I spoke with Michael Saylor. He is the chairman of MicroStrategy. He lays out his view for Bitcoin, what he's doing with the company. And as it relates to, you know, they become a treasury for Bitcoin. It's a great conversation. That is in the On The Tape podcast feed and on our YouTube page. Go there, Risk Commercial Media, Tuesday, December 10th.

10 a.m. Guy, Adami, and myself, we are hosting an AI panel with the CTO of FactSet, our fine partner. And they actually have the CBO, that's the Chief Business Officer of Perplexity, a company that we've gotten to know really well. The CEO has been on our pod. He's been on Fast Money. His name is Dimitri Shevelenko. So tune in for that. Register at riskreversal.com. All right. I need to take a break here because that was a lot of house. Yeah, you have a lot going on. I have a lot going on. We got a lot going on. But

This is really exciting for us. First time on the pod, Adam Parker, founder, CEO, Trivariate Research. We knew him back in the day. Danny, you go back with him. But he's been coming on CNBC for years. He goes on our good friend Scott Wapner's show, Closing Bell, all the time. Thanks for having me, both of you. Good to see you. Thanks for the-

The swag, man. I mean, like, does Trivariant have swag? We do. We do. And I'll give you a quick lesson. My middle daughter taught me this. Do you know what the difference between merch and swag is? No. Merch is when you pay for it. This is merch for you, swag for me. I appreciate that. Thanks very much. You know what's funny, though? And I'm sure your client, I mean, the people who come back every day and listen, I mean, your people are clients. They love the swag, man. They love it. Everybody does. We have Trivariant has a holiday party next week.

Plays only. I'd love to have you. Well, if it turns into a poker game, you know I'll be there with you. You guys play poker? We have played poker together. I'd like to, yeah. He's a very good poker player. So you guys go back. We were the member at the same club up in Westchester for a little while, and now our kids both attend University of Wisconsin. Madness. They saw each other pre-gaming for a Badger football game. Wait, you were at the Oregon game or no? I was at the

Penn State game. Yes. So a lot of fun. So I always see you at good times. Yeah, exactly. And look, it's a Raging Bull market and we get to be together too. This is it. Yeah, this is it. Well, it's nice to steal you from Wapner. I'm surprised he let you off the desk for a minute to come be with us. It's really good. Thanks for the invite. No, but you've had some really nice calls here. I think you have a very thoughtful approach to how you kind of look at the street and sectors and so forth. And I thought the comment right after the election, which was, he's like, listen, don't fight it. Buy the election, potentially sell the inauguration in January, which is

been the right call. I'm curious. It's been a few weeks now. Are we pulling forward way too much at this point? Give us your current thought on that. I think so. I mean, the way I think about it is we tag stocks into quartiles based on quality. So high, mid, low quality, junk. Obviously, junk stocks can go up a lot or whatever. Junk, you

Within the growth universe, junkie growth stocks have beaten high quality growth by a huge amount. In fact, the last 25 years, only two times ever has it been bigger. It was right after the financial crisis recovery and right after the COVID recovery. So I don't think the red sweep is exactly the magnitude of recovery that you got from those huge events. So it's getting kind of stretched in terms of the amount of performance that I'll just say like the

real risk on frothy stuff. So I'm expecting some kind of rotation. I think most clients I talk to are, whether it's early January, the inauguration, which is I think the 20th or 21st, or whether it's, yeah, I didn't know how to count that. Do I count the returns from the 20th at the close? It is a tough time of year to see anything really change. Once in a while we get something happens in December, some big event, we get type of salt, but you're right. Now it feels like we're just kind of geared in toward the end of the year. Do you see anything here happening? The negatives are, I mean, as we record this

On a Thursday, I mean, you get the jobs report tomorrow. I mean, I guess to the extent that...

There's some hawkish interpretation of that and people think the Fed pumps the brakes a little. That could be a negative. It's hard to create a story where the multiples for equities expand a ton at the same time you think the Fed's going to be less accommodative. So that could be a short-term negative. I mean, kind of direct tomorrow. Look, what are the negatives? It's hard. In the next few weeks, I don't know. I think if I look out in the first six months of next year, I could see a few. I think one would be the single most negative thing that I can think that happened to U.S. equities would be three months before

Taiwan Semi says they can meet NVIDIA chip demand. That will be the single most fundamental negative thing that can happen. Well, there are, you know, and we'll get to that a little bit. Maybe a little too specific. No, no, I mean, like, you know, again, or that there's so much demand and it's a supply constraint situation that it goes the opposite way, right? Like, so if you think about Taiwan Semi and we can get to that, 85% of the production of high-end GPUs, we know that NVIDIA has 85% of the market share right there. They've had a lot of pricing power.

Both of them, the fabs, right? And the folks at Nvidia. So that's something I think that is probably underappreciated. And then you think of the breakneck pace that a lot of the hyperscalers, right, have been paying for the GPOs, building the servers that go into the data centers. The data centers, there's some, I don't think there's a lot of bubble stuff going on personally, but I think it's some of the data center financing. There's some squishy stuff going on. Well, yeah. Yeah.

It reminds you a lot of Sun Microsystems 25 years ago, a lot of vendor financing. You know, NVIDIA has been investing in a lot of these startups, right, that are buying their chips. And then they think about it. You know, we also have a situation where when Microsoft pays $10 billion to OpenAI, right, for access to this technology, a lot of it is coming in credits on Azure.

and stuff like that. So there's a cyclical risk. What's that pick stuff called where, you know, I paid in kind of way, like I owe you a million bucks for my mortgage. I can't make my minimum payments. You just say, okay, you owe me a million and a hundred grand next month. There's some squishy financing going on, but kind of backing up just one more point on like what could go wrong. I think that the Fed pumping the brakes a little bit would be one. Two would be, obviously we get change in the outlook for

high-end silicon at some point next year. And I think the third thing is just around inflation, right? Because the number one reason I think stocks go up is their gross margins go up. And so it's really hard for small and mid-cap companies to have expanded gross margins when CPI goes up. So to the extent that we'll see there's tariff banter and there's tariff reality, but if you start believing CPI is bottoming for a six or 12-month view, I think that could also be fundamentally not correct. So bull case, margins go higher and you're going to have a

essentially multiple expansion based on that, right? Yeah. Yeah. There's a pretty non-linear and tried and tested relationship between multiples and gross margins. And so the more they go up, the more the multiples go up, right? So, all right. The way I think about gross margins, I guess, would be there's like the revenue side in my brain that's just like pricing and mix, right? So if I could sell you, you guys both have nice vests on. If I could sell you a vest at a higher price without losing any units, that's the best way for me to drive higher margin.

Across the market, we study pricing really carefully. There's certain businesses where pricing has not been that sticky, and then there's others where it has. And so we search every year, it's called transcript, looking for anything around dynamic pricing, competitive price. We're very specific about that, but I'd say there are still businesses that are taking pricing or mix. And then on the cost side, if you think the other side, the general three things that go into gross margins are depreciation, labor, and some sort of materials or logistics. You could

make an argument that most of those things for most companies are not getting worse. Obviously, you've got the top 10 companies doing massive capbacks, so I'm not going to argue for Microsoft or whatever, there isn't a depreciation burden. But for the average company, there isn't. The depreciation is not up year over year. For the average company, the inventory is not going up. So if inventory comes down, that's usually good. Materials,

Maybe you look at Bloomberg Commodity Index or however you want to like you proxy that. It's not really becoming a headwind. And so you're down to like labor. And the question is, what's the dream? The dream is that you want to get bullish, crazy bullish. How about a real company in Q1 or Q2 says, we would have hired 5,000 people in the past to do this. We're hiring zero. And all of a sudden, every analyst is like, geez, like three or five years from now, my revenue could be 20, 30, 40% higher for these companies I'm covering within

no net hiring. And so your labor productivity algorithm is like totally wrong. And I still kind of believe, I believe that. That's kind of dreamy for me. And we can, we've spent a lot of time trying to identify those companies. But so I'd say when I look at the pros and cons of that, yeah, I can believe the median company, the

median company can have gross margin expansion. So you're talking about the S&P 500 gross margins overall, because you just mentioned before how the market's really dependent on seven or eight, nine, 10 different companies. Yeah, I'm saying like the 250th out of the 500th, you know, like 250 companies will have margin expansion. I can believe that. Isn't it safe to say though, that that's being priced in, the margin expansion is being priced in when you look at it 22 to 23 times now, 2025 numbers that we're starting to trade at. If we start thinking about, you know, 265,

269 number kind of for 2025? So I guess I'll answer that question this way, knowing that I'm not going to say anything you guys don't already know. But I don't think valuation is a very helpful predictor for market level returns within a six or 12 month horizon. I think it has some value in years three and maybe more in years five through 10.

So the problem with equity risk premium-based arguments or valuation arguments is they're just not helpful at the market level in a short-term view. And the reason that's the case is because I've had people push back at me, sort of panel recently, it's like, oh, you're a pontificating non-investor guy. It's like, well, you're double counting by saying valuation and margins are related. I'm like, no, I'm not. You think I'm double counting, but I'm not. Because high gross margins are a proxy for something. They're a proxy for a business that has a sustainable model.

that there's a moat, that there's something that's going to make their earnings in 27 to 28 and 29 higher. So you're right. I mean, obviously I get the tenor of your question, Danny. Like obviously it's not optically cheap on next year's numbers, but the question is, do you have a reasonable belief in a probability distribution that the numbers are going to be decent in 28, 29 or whatever? And if you really get some AI proof cases on the earning side, not necessarily the revenue side, maybe you're at 4, 400, 425 in earnings in 2030, maybe you pay...

22 times that you're a 10,000 S&P and we're at 6,000, 6,100, whatever as we chat. So it was 60, that's the normal 10, 11, 12% per annum return over the next five years of equities. I think that's a decent probability of happening. Do you guys put out targets in S&P estimates? Okay, because you saw like a lot of folks, you know, there were 6,000, you know, six months ago, then they kind of went up to 6,350. And now we have with an S&P where it is right now, just below 6,100, a lot of those targets at 6,600 or 6,000.

They don't look like- Yeah, I have a lot. They look pretty achievable. I have a lot of thoughts on this, right? As you guys know, I used to work at Morgan Stanley. And so to say, I understand how it's done is, you know, I've made the sausage. Forget, okay. So I'll shed a little light on that process, right? So the process is 50 people around the world are on three, three-hour Zooms, three weeks apart. First, like the economists go-

And there's like 44 of them. And then the next week it's like the rates and the currency and all the credit guys. And the third week it's like the equity guys. So if we embed into our forecast everything that everyone else said in the previous two weeks, I had to thought every single quarter of every year I worked there. And I would say this out loud almost every time. I think there's a chance we're all wrong, but there's no chance we're all right.

Right? Like you just, you have, by the time you're the last one in, you're like, you know there's no way that this can sequence that way. So I think you have to just kind of publish what you believe when you're at those firms. You also have to remember that if there's a private wealth network at that firm, it's

There's such a type one, type two error differential. Like if you're bearish and wrong, you're fired. Or it's heartlocker, right? If you're bullish and wrong, it's like, yeah, but a lot of other people are optimistic and maybe I'm just a little early. So it's harder when you're at a big firm and you have a giant private wealth network to crap on your advisors every Monday with a note saying, I think the market's going 20% lower. It's not helpful. Mm-hmm.

Because those people want their clients to be fully invested, and they're right. They should be fully invested over time. Yeah, let me ask one question. It's incongruous. You know what I mean? And I have institutional clients, so generally, so nobody pays me for my market view on a price target. Yeah, no doubt. But Danny and I spend a lot of time on the buy side. And I have one last comment, but I'll let you go. No, I'm just saying, we spend a lot of time on the buy side, right? Yeah, you guys know. You guys know the deal.

But what I was saying is we dealt with a lot of folks who there's a lot more nuance than their S&P target and that sort of thing. That's their only value. And we always found that really interesting. Is that fair? That's where the gold is. It's not the target. So we never – some of these folks, and we don't have to name any names, who have 5,600 targets or whatever, I don't really give a shit. You know what I mean? Two things, Ian.

One is all that matters is when they change their mind. Yeah. I love talk because- From a sentiment standpoint. I love Mike Wilson. I think he's a great dude. He's a current Morgan Stanley, a second-rate strategist. He has integrity. He's smart. And it's like two years ago, everyone was like, he's a genius. And last year, everyone was like, he's stupid. He's like, Mike's a smart guy. Like, you know, if you do that job, you're going to be bullish, bearish, right and wrong. There's four quadrants. If you have any intellectual honesty, integrity, you should live in each of those quadrants or part of your career, unless you're always the bull guy or the bear guy. He didn't magically get stupid, right? There's a set of things you're looking at and you're right or wrong. Like I

So my point is, I think when somebody like that who's really smart and experienced changes their mind, that's a good time to call them and say, what did you look at that made you think it's worth changing? One other last thought is, and it does worry me a little bit, and I think this will resonate because I know you guys have been great traders for 25 years, but it's like- Well, maybe Danny. Keep going. Maybe like four of them. Just keep going. But my point is just like, look, two years ago, all the guys, the

Price target setting guys are talking about where November of 22, they do their target. They're negative for 23. You know, you could romanticize your contrarian bull. Last year, November of 23, they're generally not that bullish for 24. You can romanticize your contrarian bull. Nothing better than being a contrarian bull and being right. Now, they're all out and they're kind of like...

10% return, 7,000 target. So you can't really romanticize you're this contrarian bull anymore. In fact, you're a little bit worried why these people are now bullish after a 50% move or 45% move in two years in the market when they were bearish. It's a little bit more worrisome. So if you kind of say, I romanticize I'm a contrarian, it's a little bit harder to be bulled up. And that part worries me a little bit. It does. Well, to be fair, it's not the target of the S&P that matters. It's the sentiment. No, but that should scare people that the sentiment's all one way at this point. But within those targets, there's

So many caveats. It's my target is based upon the Fed continues to cut, inflation continues to trade toward 2%. Those are the type of things that are in there. So then it's like, oh, well, if I had known that rates were going to be higher and I know that- I can blame it on something else when I'm wrong. No, no, but I'm saying, but I totally agree with you. I was on the sell side as long as I

I was on the buy side. I know the game. Long and wrong, you have a job. Short and wrong, you're literally fired. And you don't gain anything by coming out and saying 5,000 S&P in 2025. When I launched coverage of the strategies in Morgan Stanley, which was January 2nd or 3rd, 2011, I had a price target for year end 2011 that was below where the market was trading. And I could see the sales guys in the room just be like, what in God's name? I didn't change my target all year. On December 30th at 3 p.m., it traded at exactly my price target.

I'll never be more right. My comp was down 30%. I was bearish and correct. Right. And everyone hated me. And so my learning lesson was like, wow, this isn't worth it. Yeah. I think you want to run bullish 70, 80% of the time. And your ability to make one month market calls, I've studied this really carefully. It's impossible. Okay. So I think you do want to be constructive on equities. When I see, I think it was Goldman, a costume was out with like a 10 year equity. And I was seeing myself- Low single digits, right? I was like, no, I think it was like three. Yeah.

And I was thinking like, Koston must be wanting to retire. Like what's happening? Forced out, you mean? Well, no, he's a smart guy, but I'm just saying you've got like powerful and smart prime wealth network at Goldman. Like why are you turning on the advisors for 10 years? You can have a short-term cautious view. You could say, hey, the junk rally is too much. I think there's going to be rotation. That's my personal belief. You can hide it that way. Hey, I don't really know if I should be buying a ton of super micro at the come up, pick your proxy, ARK. ARK's probably up too much, right? But like-

That's different than saying equities won't work for a decade. Yeah. So we try to explain to people that professional money managers get paid on outperformance of whatever index they're targeted. Let's use the S&P 500. It is their job to overweight certain sectors, underweight certain sectors. And you have a very good sense for where things are overbought and oversold, et cetera. So as we go into 2020.

25 here, you know, and you had to start fresh and you were to reallocate entering because we know the chase is on right now. We know that fund managers are literally holding on right here. Like, okay. They would, most of them would close the books this year if they could right now. They would do it. So where do you see this setup going in? Cause this is a, it is really interesting setup going into 25. Yeah. Two thoughts that came to my head as you're saying that. And I forgot to mention this earlier when I was, when I was ranting is,

The reason we do our year at Howlick January 6th at Trivariate is because if you do it two weeks before Thanksgiving, you can already be wrong by January 1st. You could already have to change your price target. And then you look a bit...

Silly, because it's supposed to be for the year after. You're supposed to be the year-end 25 target, and you have to change it. So I at least guarantee myself of not being wrong. We even don't have a target just on like bullish bear. But in that outlook, obviously, one of the things we'll address is your specific question. But kind of answering it now, I think last Sunday, 10 days ago, we did –

And I guess you could always do this, but we did what's up a lot we think makes sense, what's up a lot we don't think makes sense, what's down a lot we think is kind of silly, and what's down a lot that we kind of still think. So just sort of like long... Because there's been so much of all since the red sweep. So I have kind of ideas on all side of that, and I'll just give you one at a time and you can... Yeah, let them rip. ...crap on it or not. I like the drug distributors, but not the drug companies. So really think this like McKesson, Sankora, Cardinal Complex makes sense. What's my dream? My dream is they're...

Most of your listeners may not know this, but McKesson is a 350 billion revenue company with 1% net margin. If they could just get slightly more efficient and better at knowing how many people need statins and GLP-1s or whatever in every geography, and they go from 1% to 1.5% margin, that's called

50% earning could run. - Or just say we're using AI to transport some of our stuff. - That's how they're gonna do it. That's how they're gonna do it. They're gonna be more efficient at predicting the customer and employee behavior. - But that is the use case. I mean, we spend so much time-- - That's the use case. - About the hyperscalers and the chip providers and the server makers. And to me, that is actually the next leg. So you as a strategist, if you can identify the next five industries that are gonna benefit from that-- - Drug distribution is one of them. And I think on the drug side, it's hard. Pfizer's chart acts like they don't sell drugs.

Okay, like it acts bad, but I still don't like them because I think you need to see what happens with RFK Jr. You need to see what happens with some vaccine. I think there's going to be some litigation. There's going to be some volatile stuff. And so I like the distributors for this dream of margin expansion. And I just don't know about, at some point we'll stop being negative on big pharma. But at this point, it seems too early. We did a note a couple of weeks ago, actually last week saying 12 times earnings is cheap, but six times isn't.

Right? Because once it gets too cheap, the market's telling you something's wrong. And so I like that trade a lot. And per your point, I love businesses that have lots of employees, lots of revenue, but low net income per employee. Because if you and I were sitting on top of it, we'd be like, how can we be more efficient? What predictive analytics can we use? So I like that. Second trade I like is shorting restaurants. I don't know if you guys have plotted- QSR or- If you looked at Eat, look at that chart, it looks like they sell NVIDIA chips. The chart, it's crazy. Cheesecake-

I mean, these things are up way too much. Now, I get there's a small cap consumer optimism, growth's going to be better, red sweep moment. But I don't believe their fundamentals will come through and support that in the first quarter or two of next year, even seasonally. So those are good short ideas to me. They're pretty liquid. And I don't see a reasonable chance that they're above average margin expanding businesses. Just anyone who's listening, plot EAT.

You can't believe. You'd think they literally, it looks like they sell AI semis, the chart. So I like shorting those. We've been very negative for three years plus on physical US retailers. So those are things that are down that I think should be down. You saw Dollar General today. Stock acted better than I thought it would on the news, but we've been recommending targeting Kohl's as our favorite short ideas for three years. And

you know, there's times where it really hurts you, but generally I think they're impaired businesses, they're subscale. And I think I said on WAPT show six months ago, Kohl's was obviously zero and he goes, obviously zero. I'm like, I don't know. Just, I think these things are. Scott loves, he loves the definitive sort of. Yeah. But I, he,

Yeah, I love going on the show. And so I think the physical retailers are down. It should be shorts. I think the restaurants are up. It should be shorts. I'm pretty convicted that the number one rotation that will be happening will be out of this kind of low quality gross stuff. So like the archetype stuff. I think that's where people are going to sell. They've made lots of money. ARKK. Yeah. And that stuff's going to get sold.

back to somewhat of the higher quality trade. You saw that a little bit yesterday. Maybe it happens a little, but you started to see, well, maybe I should buy some of the Mag7 again, better businesses. But I also kind of think the software trade's up too much. I see Salesforce and they beat by a tiny bit and the stock's up 9%. I'm like, whoa. It wasn't great guidance either. Yeah, not great. Not sure the world needs what they do in five to 10 years. Not totally convinced.

that lots of businesses benefit, that their AI kind of dream is that dreamy to me. We used a product that didn't make any sense. I mean, unless you have millions of customers, I don't need to segment my 18th Street revenue versus my 19th Street revenue. So I'm less convinced that ... I know the world can't replace Taiwan Semi, per what you said before. I know they're going to be around in 2030, and are you sure Salesforce isn't worth 30%, 40% less in 2030? I'm not. So whenever I see software beat semis by this much,

I kind of want to zig a little way just because I know the world needs semis. Now, I used to be a semis analyst, so story checks out that I'm a little biased on that, but I still think this software move has been too big. I'd rather it was small mid-cap software because I think there's going to be deals. Yeah. That's the deregulation part of it, and these folks have not been making strategic M&A in a very long time. And the other point I'll just say, if you look at the SMH, we know that 30-some percent of it is Taiwan Semi and NVIDIA, and

It's really gone sideways. I mean, you talk about that software outperformance in the last few months. I mean, that has actually been a big story in tech. And I think you also make a great point is like Microsoft's playing a little catch up right now. I mean, so some of the Mag 7 that were underperforming, you know, some of their peers, what Tesla has done in the last month or so. But that, you know, that's a real contributor, right? As you think to performance and the like. It was big in Q3 also, even before the election. Let's talk about that whole by the election, sell the inauguration. So, you know, one of

One of the things, and I find it pretty interesting, is that this supposed red wave mandate, it actually isn't. When you think about it, the popular was pretty narrow. You could say, "Well, he's the first Republican to do this." If 10 million people in California and New York voted, he probably loses the popular.

You look at the House. It is about as slim it's ever been. And there's a good chance they lose that in two years. Right. The Senate. That's fine. I guess my point is here. It's not that wide of a mandate. There's going to be some some stuff push and pull on the social front. Right. That might not give the political capital, let's say, that that Trump thinks that he might have. So my question is, you know, we got tariffs, we got tax cuts. How much of that do you think he gets done? Because I think that has to go.

you know, a great deal of the excitement in the last month or so, right? About the economy and about the markets. Because to me, I'm not sure that they get everything that folks think that they're going to get to kind of keep powering risk assets higher. Yeah, totally. So I kind of had like one last pair trade here that morphs right into your question, which was

I like longing the stuff that's going to do the deals like alts and investment banks and then shorting the regional banks. My logic on the regional banks is they don't really participate in the deals and the rate environment is as benign as people thinking they can't grow their loans. And I think they're the stuff that I think gets rotated out of. And it falls right to your argument, everyone has a very benign interpretation of what Trump and his

policies are going to mean. And so I think the reality is there won't be as much impact on the earnings and the growth trajectory as is currently in the price. And that's why I'm focused on what's up that I think will at least show some fundamental directional support versus what's up that won't as my logic. Because I tend to agree with you, I think in two years, maybe less he's dead man walking anyway, because people don't need the money and his

affirmation for the next elections and the world will change. So it's going to be like, what can you get done in the first year? What has bipartisan support? What can be jammed through? All that kind of stuff. Everyone has a very benign, like institutional investors I talk to all have like a very benign interpretation. I'd argue without asking people individually that it tends to run...

a little bit right of center as a crowd. So I think people are happy to shake stuff up other than the treasury. And I think generally people are quite happy with Besson as a choice that I talked to you. But here's the view that everyone has, and this could be worrisome, is Trump looks at the stock market as one of his major kind of scorecards for whether he's being successful. And so he wants it to go up and it'll go up a lot. And he's going to break a lot of things. And if something makes the stock market go down 10%, he's going to fire that person and stop doing it. And so you have like a Trump putt

that everyone kind of thinks is there. And so that I think is a benign interpretation. I think it's possible. And if you said sign of probability of that, there's a chunky probability, but it's not 100%. And I worry about that. I mean, I ask people about China in specific because the story people have generally is pretty benign. It's like, Xi will go to Mar-a-Lago, they'll play golf and eat cake. Trump will say, "You buy a trillion treasuries, right?" And he'll say, "Okay." And Xi will say, "I'm

You can't tariff the following 92 items. And Trump will say, okay, but I could tariff these seven and I can go on TV and say some crazy stuff and say I'm taking them off 50% and you just let me do that. Cool, right? Okay, great. Like that's what... And maybe, I don't know, but that's what people think is going to happen. And we're all like, yeah, story checks out. But like, I don't know. Like in the reality, he's poking Mexico, he's poking Canada, he's poking Europe. Like stuff's going to break a little bit. And so we'll see what that is. So I just feel like the whole small cap trade is the biggest canard because like they don't have...

the pricing power, and they don't have the ability to really benefit. And in the end, like the big companies that have to take pricing, you know, I was going to pick UnitedHealth that the disaster was absolutely horrible yesterday, but like that's a business that just has pricing power or whatever. Pick one that you like and it's like use UnitedHealth for healthcare. I mean, they just take pricing up 10% every year on us. So it's like, it doesn't matter. It doesn't matter who the president is. Like I'm going to pay them more next year. We are in such a weird spot

This was an assassination. This was a hit, okay, on this guy. And, you know, immediately, supposedly on social, people kept on hitting me. You know, this is a hated industry because of taking price, because of the... I just found that, and it's purely anecdotal. I just thought it was really interesting. I think that was like the 36% of the claims they'll get paid. So I think that's the part that people like. But they have a lot of pricing power, and it's kind of monopoly, and I don't think there's a lot of political will on either side to resolve that. Nobody can do the 30-year...

UnitedHealth plot, but if they could, they'd realize they've been a lot better stocked than Pfizer, so they should probably focus less on drugs and more on other stuff. But just as a small business owner, we notice it when, if you're married with kids and you live in New York and you have like the second or third best plan out of the five, it's four grand a month. Yeah.

It's like a real, I mean, it's a real number. And then they just call you and say it's up 10%. My point is there's lots of businesses that have pricing power next year. And I think the thing that I think is most attractive in the market relative sentiment is the healthcare sector. And that's why I push drug distributors on you. But there's tons of places where they're going to be more efficient. They're the proof case for AI. And why would Quest Diagnostics, there's all these businesses, why would they have any net hiring at all in the next five years? You bring up a great point that I've said all along for the last few years. If you don't have your house in order,

Right now as a company, you've got the benefit, tons of liquidity, got the benefit from a strong economy. Now you're getting the benefit of the Fed taking their foot off of the brakes or gas, however you want to look at them, not raising rates anymore. And the companies that have gotten through all of this, and I always listen, and I'm sure you do, on these calls and reading transcripts. When anyone ever blames the Fed or would never buy the stock, because I think this is just part of

cycles of what companies do. Names like Disney, names like AT&T, companies that are really transforming themselves and adapting to kind of the new new. To your point about the Russell, some of these smaller names which don't have the pricing power, which don't have the balance sheets, which don't have the ability to kind of change on the fly. It feels like if the market were to go up

The disparity between the haves and have-nots is even going to grow more next year. And I'm not sure exactly how to play that. And one other sector I got to ask you about, because airlines in general, right, just they're great trading vehicles, right? You never say, oh, take that and put it away forever. That's a rare thing to do. Give me your thoughts on airlines. And I'm curious—

how the airline's pricing power and what it's kind of telling you. Are we at maximum thrust, pun intended, on these things? Yeah, on your first half of that, I agree on the small caps that a lot of people, it's really fashionable now to get on the air and say you like small caps, they've ripped or whatever. But the devil's in the details. When you really look at the businesses and small cap values, a lot of banks and Utes and Reed, small cap growth is a lot of profitless biotech and kind of high beta, heavily shorted security. So it's like easy to plot and say they look cheap in aggregate versus a large cap, but that's

There's a reason. Yeah, there's a reason and they're worse. The reason is they're worse. And I get when you get psyched about growth. So they typically work when you're at the bottom of recession or close to the bottom of recession, you know there's going to be a lot of policy. And so they ripped in March 09 to June 09 or March 20 to June 20. But for

For them to sustainably work, now we didn't have a recession, but they're going to work for the recovery from the recession we didn't have. It's a lot. So I get taxes are good. I get regulations good, but it's been a huge move on a relative basis and they're not going to fundamentally show that, especially if we're kind of getting a little worried about CPI come up a little and all that kind of stuff. So I think you sell the Russell, you sell the ARK, hyper growth junk stuff, and you're going to rotate into better businesses probably in January.

That's the guess. In terms of the airlines, look, they put up pretty good numbers. I always think of this. Years ago, when I was an analyst at Bernstein, we hired Bill Bennett, the Book of Virtues conservative, and Al Franken. I can't remember if he was a senator yet or if he was just a comedian. He might have been aspiring.

And they had this dog and pony show where they debate, the right-wing guy, the left-wing guy. And it was great. They obviously were kind of in sync. And Frank had talked for like 20 minutes about how awesome the economy was during Bill Clinton. And Bill Bennett had this amazing answer. He's like, yeah, so I live on the beach and I wake up every day at sunrise and I walk my dog on the beach. And my dog and I, we watch the sun rise together. I just don't give my dog credit for it.

And I love that line of like, things cycle like independent of who's in charge. The Treasury is more important than the president. The presidents will blame or accept whatever happens. And I think the airline is a little bit of a cousin of that, of like post-COVID, you just had like capacity totally change, right? And so then as it came back,

you didn't have all the excess capacity. And so you know all the stats you can look at, the prasm, chasm, resm, all that stuff, the seat mile stuff. And it got really optimal, I would say, like six months ago, right? People like you and I probably over-indexed toward expensive flights because we're trying to buy JetBlue from LaGuardia to Palm Beach or Fort Lauderdale in December. That's still probably a tougher ask. But if you go across the country, pricing has peaked and rolled over actually in a lot of areas. So I would say the best of it's slightly behind us for that industry. Now, will the trough coming up be as bad as previous troughs? Probably not.

And so I think you can make an argument that some of these companies are now like real companies that maybe don't totally hemorrhage dough in the trough. But we're being very general now. You know, Elliott's in Southwest. You know, American's got a lot of knowledge. Yeah, there's a bankruptcy with Spirit. But like, you know, I think in aggregate, the industry dynamics have slightly improved.

Let me ask you this, because you just mentioned like quick serve and it looks like they're NVIDIA. I mean, the airlines look like that. So as we're speaking on Thursday afternoon into the close, I mean, American Airlines, they kind of raise their outlook a little bit. It's up 20 percent. Yeah. And in sympathy with that, you know, Delta, Airbus.

And United are up 4% or 5%. So when you talk about some of this behavior, does it seem sort of peak? And when you look at what's going on in the stock market, I could list over the last week some crazy moves. Marvel Tech, a company that you probably know, was up 24% on Wednesday after their results. I mean, Snowflake, a big laggard, right, was up 35% after they released their earnings. I could probably rattle off another five. That

That to me is not particularly bullish action. I get it if you're long and you feel great about that sort of stuff, but it feels a little bubbly to me. Well, one is I think it really depends on the stocks in the industry. The stocks like the airlines are super cheap companies and value doesn't work as we talked about. It's hard to buy stuff that's cheap. There's an arrogance to buying a value stock like you know stuff that nobody else does when everyone sees it's cheap, right? So when they show a fundamental inflection or some improvement like you've seen at Delta and United and American, it's

Kind of makes sense to me that it would go from five, six, seven times earnings to eight, nine, 10 times earnings in a market in the low 20s. So that one almost seems a little more merited to me because in a way you're saying the probability of bankruptcy is probably less than it was and I'll pay a little bit more. I think that's different than your comments about some of the tech companies that are up that much where I don't really think that they're totally going to be showing the fundamentals that argue for that much of a move. So why is that? I think our vintage of people, I think we're all roughly...

the same vintage, maybe you're younger than- He's a little younger. You may not look it, but he's a little younger. I think I might be the oldest one at the table here. But our era would definitely nod our head in a degree of sympathy. So why don't I take the other side and say, look, what's different now is there are, take one multi-strat, one of the biggest three or four, they're all the same. They have 35 or 40 quant teams at them. The quant teams run 50 to 150 million each book.

They run at 6 to 1,200 gross. They run with several hundred longs and shorts. And they run three-hour to two-day holding period in most of the strategies. So you have $30 billion being run at each multi-strat, four, five, or six of them this way.

They sometimes, a lot of them are not involved purposely before and after earnings. So sometimes you'll see what you're talking about where stock goes up a ton in the earnings and then it goes down every single day for the next 10 days after because the quants are back in or vice versa. And so there are guys that specifically only play the quarters and then you get a lot more vol like you're talking about, but then you'll find a lot of those names, it bleeds the vol afterward in both directions. So I think some of the answer to what we're talking about, the huge vol and the moves afterward is just...

The way money is being run now is so much different than when you and I formed our investment heuristics. So one of the things, we'll move away from the airlines, obviously, but one of the inputs is oil, right? And most of the U.S. airlines don't hedge oil. Southwest, I believe, does. So they're getting the benefit of kind of oil. They've always got a refiner, right? Yeah, well, of course, they're not passing it on to the consumer. But let's move to kind of geopolitical landscape. And I kind of throw oil into that, obviously. That doesn't feel like we're pricing anything in for...

Quote something go there's a lot going wrong and hopefully everything just kind of stays at bay But how do you how do you figure that stuff into kind of so big part of what we do try buried is risk stuff, right? Like we have lots of people send us their portfolios to do custom risk work We do a lot of chief risk officer dinners like our Trojan horse to get paid of a lot of institutions is the risk department and

And this topic comes up a lot in a lot of our events. And I think the general consensus, which is probably messed up, is that it's really hard to pre-position a portfolio for geopolitical risk. Because like all those trades that we've all put on where you put a hedge on and then you lose all the money you hope to make if you're right by the time it happens. You got to put the hedge on the exact right time. And I think that's a challenge with geopolitical risk stuff. I mean, when you kind of look at the world and you see all these terrible things are happening in Sudan and

Russia, Ukraine, and the Middle East. And there's always this fear that China could do something with the three fabs in Taiwan, you mentioned earlier or whatever. But I think what people have sort of programmed themselves to is I can't pre-position for that. I'm just going to lose a lot of money and so is everybody that day. And pre-positioning for it is just going to cost me too much. And that could be wrong. I thought that was interesting. I did a risk dinner maybe two, three weeks ago.

I've been doing this for a fairly long time, since the late '90s, and I had never heard the words Japanese carry trade used in a row in my life until August of this year. I admit I do equities. I was very familiar with the carry trade. I've heard the word Japanese. I just never heard them in a row. We searched every earnings call transcript.

the top 3,000 US equities every quarter back to 2011. For the top 3,000 US equities, those words had never been used in a row in an earnings call transcript ever before. And then all of a sudden, the reason the stock market got annihilated and everything in the fix went up a gazillion percent was because of something called the Japanese carry trade. So I asked at my dinner a couple of weeks ago to these guys who are chief risk officers of huge firms, hey, have you noticed the yen's gotten kind of close to where it was in June again? I'm like, should I worry about that? I'm a

I'm equity guy. What does that mean? And everyone's like, nah, nah, it can't happen again. I'm like, okay. I don't know if they're right, but that one seems like it could be people put the same bank currency trade. That one feels almost briskier to me than pre-positioning. So the answer to your question is the dumb, stupid American answer. I'm like, I don't know, man. I'm not recommending people pre-position for it because I just don't- How do you trade the end of the world, right? Yeah. I just don't know how you trade the end of the world. And all I'm going to do is underperform until that happens and hope to massively outperform when it does happen. And I'm probably going to be wrong.

off. So you mentioned... I don't know if that's a stupid answer, but that's... It's logical. So let's finish up with this a little bit. It seems like you're optimistic. You talk to a lot of really smart money. You just mentioned, though, that quant capital is driving a lot of the... Massive, man. It's massive. So...

So when you think about this, I kind of believe that Microsoft and Google and Amazon in Q1, Q2 may be underperforming, let's say, the broader market. So you see this broadening out a little bit. Are investors that you talked to focused on the idea and that you started this conversation out is like an industry like healthcare or an industry like financial services getting the benefit, right, of, let's say, generative AI and research?

renting the compute and having that margin expansion, let's say, for some of the reasons you just mentioned, is that the next leg of this bull market? Or are there other things that lead you to believe that we're likely to see multiple expansion because of companies being able to take price? I think that's the biggest bull case for the first six months of this year coming up at 25 is that, I'll call it a real company. You know, Walmart flashed a little on this a couple quarters ago and said, hey, we've gotten some analytics a little bit better. But a big revenue company with low margin like Walmart,

If they can kind of tell you, "Hey, look, with all millions of employees or whatever, hey, you know what? We probably don't need to hire any more employees over the next five or 10 years." Or if the analysts start believing that, the growth rate of employees will be way less than the growth rate of... Their margins go up 50 bps, like 50 bps on 750 billion in revenue, the stock's going to be a monster. Now, it's already discounting some of that given it trades at 35 times earnings or whatever,

But I do think that's the bull case. I think it's, that's why Costco got to 50 times earnings. People are saying, hey, you know what, Dan, Danny, stop using the same card when you check in. Like they want to, you know, monetize the Netflix thing at the door, right? So I think that is the real bull case. I pick McKesson because I love the drug distributors. And I just think if they can get us believing that there's going to be margin expansion coming from efficiency, I won't even call it AI, I'll just say like better predictive analytics.

That's a serious bull case for next year. And that's how Danny's, you know, hey, it looks a little expensive on 265. Then you're like, yeah, but it doesn't look that expensive on 350 in 2028 or whatever people extrapolate. I mean, you guys know this. I'm just saying. So I think that's a legit bull case, to be honest. And if I'm assigning a probability to it, it's pretty big. I think it's a much higher probability than Microsoft comes in and says, our bad. CapEx was dumb. We're shaving 5B quarter out. Like, that's not going to happen next year.

Yeah, but I mean the likelihood like the percentage of the beat and capex is getting smaller and smaller from those folks You know, I mean like the hyperscalers we use a try very a year ago a little more year ago I bought a Mercedes C-Class tribe in video chip and we paid 10 G's for it It's out on EQ accent at data center in New Jersey. I pay about 500 bucks a month to babysit the chip You can't believe how fast it is. Like if you say to me, hey, I'm wondering if any company has mentioned like an example stuff We do all the time as part of our research

I read the news like you guys, and whenever I hear something interesting, I'm like, huh. Do you remember like a year ago, Wendy's said, we're going to do search pricing for burgers at lunch? I was like, really? That seems, that's a weird one. I'm used to search pricing going on Delta to Fort Lauderdale at Christmas. I'm used to search pricing when it rains in New York on Uber, but not for like the Baconator.

I don't want to, between noon and one. Are you a pretzel roll guy? I haven't tried it because I'm trying not to get any more, like incremental, I'm trying to have my incremental fatness not, but anyway. But my point is, I searched every earnings call transcript looking for everything around the word pricing, dynamic, competitive, every question of every earnings call, every consumer company back to 2011. I then tagged it, forecasted margins, multiple.

returns in two hours. We do that in two hours. I mean, there's hundreds of companies, hundreds of transcripts. I can do all that work and give you a chart. The companies that are mentioning endemic pricing, their stocks have been this. The ones that aren't are good in two hours. You know how long it would take me to do that three years ago, five years ago? How about like a month? The efficiency is massive. And I'm one little guy with the- But it's funny. You're very unique because you-

built that yourself. A lot of the multi-strat hedge funds are doing the same thing. Yeah, they've got monster resources. And when I think about this, I'm just going to kind of pimp out the thing that we're doing on Tuesday with FactSet. They're great partners. They've been investing in the same sort of tools. So it's going to be generative AI for the rest of the people out there, right? Because they're doing some of the same things within transcripts and that sort of thing. They're trying, yeah. Yeah, and so to me, I just find that really interesting. By the way, December 10th, this will be Tuesday, 10 a.m., we have the CTO...

Of fact, Seth, on a webinar with us, go to riskreversal.com, we also have the chief business officer of Perplexity. I use Perplexity all day long. When I'm sitting on the Fast Money desk and somebody says something that I think is stupid across the desk, I'll go in there and try to kind of get some real-time data on that sort of stuff. And that is fast. One of the things that I'm trying to get better at is not having a look on my face sometimes.

that indicates that i think the person said something as stupid as i actually do think they did when i'm on tv because people just say things that are like factually wrong yeah and i feel like i don't know how to like well i played poker with you you're pretty good i don't think you have a big tell so we got to play again soon and i'll be able to tell what that might be i would love to do that let's get that going like when i went all in you kind of looked at me like what's in the sky calling his bluff right i would love to i would love to play we i think we almost played we had a game in in uh

Wisconsin? No, but I'm going to invite you. All right. Yeah. Listen, we really appreciate you. Anytime. Thanks for including me. Yeah, let's do it, man. I see you on TV all the time with our good friend Scott. And I think that what you just said is really interesting. People go on TV and they say things with a sense of certainty. And a lot of viewers don't have the sophistication that some of us do.

We've been doing it a long time and I think that this is the democratization of a lot of this information. - It depends on their mandate. If you're an RIA running money, you don't want your clients deciding to take money out of equities willy-nilly. You have to keep them allocated. So I get what they're trying to do, but the part that's harder is like,

somebody who is sitting on top of some organization and doesn't actually run any money and nobody who works there listens to them at all, but the company has to get their brand on the tube once in a while. And they say things as like a word salad of stuff that doesn't make any sense at all. That's the part that's hard for me. Because I'm like... And then you go to their LinkedIn and you're like, I know you bought...

users because like you have we have seven in common with mine and mine are only institutional investors that are real so like you you know what I mean like it's that kind of person that I'm like well listen this happens I'm getting better I'm getting better at whole I'm thanks Danny I'm gonna try to this is what happens in raging bull markets right and so you know we've been there before we'll listen Adam Parker we really appreciate it anytime yeah Trivariate if people want to go check out our site that'd be great 100 Trivariate research and listen a little housekeeping again

You had a great conversation with Meredith. Guy and I. Great conversation. That's going to drop Monday on the tape podcast. We also have a very interesting conversation that's on our YouTube page right now with Michael Saylor of MicroStrategy. And stick around for our conversation with Courtney Brown. We're going to do all things Fed. Adam, thanks again, man. Thanks again for this. Thanks, Adam.

Wear it with pride, maybe. There you go. That looks really good. That's good. All right. Can you tell that you read my face about how I really feel about how that looks? It looks like the NBA draft. First round. It looks good. Thanks so much. Take care. Thanks. Thanks.

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Welcome to the On The Tape Podcast. Now,

We've had a lot of guests over the years. Hundreds. But some people are more special than others because we've seen the arc of their careers. Is that fair, Dan? Fair enough. Well, Courtney Brown is one of those people. She's now an economics reporter at Axios.

I thought you were with us at CNBC in like 2018. You corrected me before and you said, no, no, no there, guy. It was 2014. So more than 10 years ago, you were our page on Fast Money. So the people understand Fast Money probably gets four or five pages a year from the NBC PageRogue program, which is one of the most difficult jobs to get. So that's a tribute to you in the first place. You are...

At the top, in terms of the people that, you know, I'm proud of, I remember made an impact on me personally. But now, 10 years later, here you are. So you just said kindly that the reason you're a business reporter is because of our show. I find that hard to believe. But please, Courtney, the mic is yours. By the way, I'm not a business reporter.

By the way, welcome to the podcast. Thank you for having me. I'm excited. Well, tell us about it. It's true. I mean, not just you two. No. Well, we probably had very little to do with it. As lovely as you were, when I walked into CNBC in 2014, first of all,

You guys should know, no one wants the CNBC assignment because it's in Englewood Cliffs, New Jersey. True. You have to get on a weird shuttle. Yes. What do they call this shuttle? There's a name for this shuttle. There's a name. You can't say it. Maybe after my time. You can't say it on a podcast? I don't know.

So I only took the assignment because I was desperate for any assignment. A lot of pages come into the program and they love working on SNL, you know, the late night shows. I hated it. So I wanted to get on assignment as soon as possible. So I interviewed for the CNBC assignment and I got it. And I had no idea what a stock was, had no idea how to explain to someone what the Fed does.

And I worked on Fast Money. And, you know, you guys taught me everything. Every time I would collect your final trades, I would look up the company and then I would listen to the way you talked about the company. And it really got me curious about corporate America and earnings calls. My mind was blown when I learned that once a quarter, nearly all companies like reveal their secrets to Wall Street, which is a very interesting.

It's a remedial way to think about it. Sometimes they lie to Wall Street, which is pretty fascinating. I would come to learn that. Well, that's one of the things that shows like ours, we're meant to demystify some of that, right? And we had a strategist on the other day, and she was talking about her expectations for AI spending, CapEx, and what that means for this sector and the like. And she's like, and I kind of pushed back. She's like, well, that's what the companies are telling us.

And I was like, really, do you believe companies all the time? Guy, haven't we learned to be a little skeptical? You have to be skeptical. And we're going to talk about that. And we're going to talk about all your writings and now your sort of alignment with Fed and Fed policy. But you said something that really resonates with me because when I speak to groups, I tell them that natural curiosity takes you a long way in life. Most people in a similar situation would take down those stock tickers, put them in a book, report them back.

and never look at them again. But you took it on yourself to be curious about, okay, why is Dan picking this stock? Why is Karen picking that stock? And doing your research, and then you see how quickly you get up the curve. So that's a tribute to you, and that's probably my sense is it's served you extraordinarily well in life. So speak to that.

I need to come on this podcast not often. So many compliments. Yeah, I think I figured while I was going to be at CNBC, I better learn what the hell you guys were talking about. And never did I imagine that I would spend the rest of my career be

Basically adjacent to some of the things that you all were talking about on the show, if not directly related. I thought I was going to be a politics reporter. And I'm so glad I'm not. I'm so glad I deal with politics when it's relevant to the economy and to monetary policy and fiscal policy, I suppose. But I think I chose the right route. I think there are not a lot of women politicians.

you know, talking about the things that I talk about. There are certainly a lot of black people talking about the things that I talk about. So I'm glad that I landed in CNBC, even though it was the worst assignment to have at the time.

Worst assignment, but be honest. Fast Money is a fun show to work on. This is true. Yeah. It's very fast-paced, and you guys have good personalities. Guy, Dan, you guys are funny. We're funny. Yeah, I mean, you know, I enjoy getting our coffees. Well, you did more than that, and we were, again...

It was a thrill having you on. So now fast forward to today. You've obviously gotten yourself up the curve in an extraordinary fashion. And now, you know, as Dan will tell you, I mean, you're one of the voices that we read, listen to when things about the Fed and about the economy come up in your role at Axios. So talk about that arc.

Because, again, it's a pretty big jump from, as you said, writing down final trades to being an economics reporter at Axios. Certainly didn't happen overnight. I think over the course of the past 10 years, I was a producer, producer.

at CNBC after my Fast Money assignment. I got hired almost immediately on the morning show on CNBC's Squawk Box, and I produced there for four years before becoming a reporter in my own right at Axios, which at the time was

baby company I would call up sources that I had from CNBC on Wall Street and they'd be like you're reporting for who what's that I almost never get that response anymore I think Axios has grown so fast and so quickly and I think our reporting has impressed people and I started at Axios as a financial markets reporter

And then I realized in covering financial markets, I was really interested in the Fed. I was really interested in this idea that a bunch of unelected officials get in a room two days every six to eight weeks. And they basically decide what to do about the U.S. economy. They basically hold the reins to the U.S. economy. And I was just very interested in like the secrecy and allure of that. And I started reading more about the Fed and covering the Fed.

Obviously, at the time, it was the Trump administration the first time around, and he always had something to say about the Fed. So I left Axios for a few months, decided to return immediately, and I started focusing squarely on the Fed about two years ago. It's funny. 20 years ago, or, God, when we started in the business, there were not Fed beat reporters. They just didn't exist. There wasn't just this focus on monetary policy because –

really up until, I want to say the late 90s, there wasn't a lot of activity. You know what I mean? That was, is that fair to say, Guy, a little bit? Like they kind of set it and forget it and that sort of thing. They wouldn't even announce when they made a change to interest rates. And it's funny, like, you know, so 20 years ago, like people weren't glued to what the Fed was saying, that sort of thing. I bet Steve Leeson might say differently. But one of the moments that I thought was really funny is like I was watching one of the Fed pressers, I want to say a couple of years ago, and, you know, we had just lost touch. I stood up and I was like,

Holy shit, that's Courtney asking Fed Chair Powell a question at the presser. Like, that was really cool, you know? So good on you for making it there. Let me ask you this, and we're going to get to, you know, what you're expecting for the meeting next week. And Fed Chair Powell just spoke with Andrew Russ Horkin at the deal book, and it didn't seem like there was a whole heck of a lot going on there. Maybe he's saving his best stuff for next week. What are some of the things that you've learned about

the Fed? As somebody, you know, you were producing before, right? You were kind of at the whims, if you will, of, let's say, the folks that were, you know, on screen and that sort of thing. What are some of the things that you've learned that you think most market participants don't understand about the Fed? These are normal people. Yeah. Right. Which just blew my mind because they're so powerful.

And I think that's the other thing I learned was just how powerful this institution is now and important and how much of a footprint they have in markets, which I'm sure financial participants know. But as you say, it's very different than a couple of decades ago. I think for a Fed reporter, I really feel like I'm in the golden age of covering monetary policy because...

I mean, you think back to 2020 and the pandemic. I mean, the Fed, along with the Treasury, really, I think objectively, you can say they saved the economy. And we've rebounded faster and stronger than any other rich nation on the planet. And the Fed had a big hand in that. I think there's questions and fair questions to ask about that.

how much power the Fed does have, given what I said earlier, that these are unelected officials. Well, Guy would argue how much they should have. Is that fair to say? No, 100% fair to say. And I'm curious as to your thoughts on this. I've been very outspoken about it. Not that my voice matters at all.

But I think the wealth gap in this country has probably never been wider. And it's been growing pretty consistently over the last decade or so, which goes hand in hand to a certain extent with Fed policy. Zero interest rates helps people with assets and helps people that can buy things.

The people that get hurt are the middle and lower class. When inflation inevitably comes, and it will come as we found out, it doesn't hurt the rich. It hurts the same people that zero interest rates hurt in the first place. So-

For the ultra rich and the wealthy, how much they paid for gasoline is sort of a joke at a cocktail party on a Saturday night. It's not a joke for most people, though. So speak to that, because my sense is you've done some work on the wealth gap and the causes of said wealth gap. Yeah, you're right. So if you are kind of lower income, gas prices and food prices make up a bigger percentage of your overall budget. So if those prices go up,

You notice it and you feel it. And, you know, I think we're going to live with the consequences of that for years to come.

I know it was a big factor in reelecting President-elect Trump, even though inflation has come down quite a bit. The rate of prices going up has slowed, right? But the price level is still quite high. And I think people want prices to go back to the way they were before the pandemic. And they're not going to. So I think there's going to be this discomfort with high prices for a long time. One thing that's interesting to me is that

The Fed has gotten some new voices on its board of governors in recent years. It's gotten more diverse. And I think as a result, I can't say for sure, but my hunch is that the Fed has started to think about lower income Americans in assessing the economy. I don't think they're thinking about it in setting monetary policy.

But even today, we heard Powell say that while the overall economy is strong, he pointed out that corporate America and their earnings calls are mentioning kind of waning demand on the part of lower income consumers. And I think for the first time,

At least in the past decade, something like that got a mention in the Fed minutes. I only say the past decade because that's as far as I went back before I went out of time. I thought it was fascinating that they in their meeting, they called out specifically this divergence between, you know, the economic confidence of rich people versus lower income people. So I think...

It's on their radar, at least. Well, it should be. Again, I mean, you can't do the counterfactual. I've said that a number of times. But if you go back and look, the wealth creation on the back of Fed policy has helped a very small percentage of people. It's probably hurt more than it's helped. And the fact that they come into some acknowledgement around that, maybe zero interest rates aren't the salve for the entire economy. In some ways-

All it is is just an accelerant for the ultra rich. And I'm getting on a bit of a pedestal here, but I'm glad you brought that up because, you know, one of the things you said about inflation going down, and I think this current administration, the mistake that they made was,

trying to convince people that the inflation that they were feeling, they weren't really feeling it. Yes, the rate of growth has slowed, but it's still growing at a slower pace to your point. And I think people intuitively know that because they're buying things. And I think when you do your work on the Fed, I think they've come to the realization that, hey, wait a second,

And, you know, although we're getting this genie back in the bottle, Waller said something like he feels like an MMA fighter who has inflation and a chokehold, but they keep escaping. So speak to that. I wonder...

What's going to play out in the months ahead? Governor Chris Waller, as you say, gave the comparison to being in the ring as an MMA fighter. But he did mention the possibility that the kind of hotter inflation prints that we've gotten in recent months could be sort of a head fake the way that it was in the beginning of the year when it looked like inflation was reaccelerating.

So I think the question is, is this a bump in the road or is this kind of a true problem where inflation is going to be sticky and kind of remain elevated above that 2 percent target that they that they look for? I think you can't answer that question right now because we have an incoming administration that seems to have a lot of economic policies closed.

that could be inflationary. And we don't know exactly what those policies will be. And the Fed will have to grapple with that, what those policies are and deal with the fallout. So if President-elect Trump is as serious as he has said on the campaign trail that he wants to implement,

tariffs across the board. I mean, I think that's going to have an economic impact, as will his fiscal tax bill stuff. Yeah, it's funny because the Fed is probably in not too different a spot as most market participants right now. When you think about the uncertainty about these policies, he's said tariffs, but it's

It's not as easy as some would think. And, you know, like they think they have a big mandate when they came in here. Like they have the narrowest lead in the House than they've had in 100 years. Right. He only won the popular vote by two million. When you think about all the folks that didn't vote in New York and California, if they come out and vote, that's probably 10 million voters. He probably doesn't win that. So my only point is like you only have so much political capital to get so many things done, even when you have the House voting.

in the Senate. So I find that pretty interesting. The one thing I would say is, and Guy and I, we differ or we disagree on this quite often. You know, a lot of his, I think his views about Fed policy, I think he's being very empathetic to lower earners, that sort of thing. And I agree with the wealth gap. But when I think about what has happened, not just, you know, in the

in a financial crisis or the depths of the pandemic, but go back to March of 2023, when we had banks fail. I mean, I look and see how quickly they can move on monetary policy, how quickly if you had a coordinated sort of fiscal response too. I mean, there's no doubt about it. And Fed Chair Powell said this today, the world shut down. No one knew what was going to happen. They kept

We didn't lose a single bank in 2020. We didn't have a major bankruptcy. The citizens who were locked in their homes, they had PPP. Again, I think we're dealing with the aftermath of that with inflation, with lower savings rates and the like here. But for all intents and purposes, and again, Guy is right, you cannot prove a counterfactual, but this has been a relatively strong economy despite what's happened on the lower end. Is that fair? I think that's fair. And Powell has a reputation for...

wanting to keep the economic expansion going as long as possible. You might remember in 2019, that was his reason behind cutting rates. And they have a similar reason now. They know the economy is strong. It doesn't need, there doesn't need to be these rate cuts. I mean, I think, you know, when I first learned about the Fed, I thought rate cuts were kind of an emergency mechanism. If

If there's a recession, you saw the rates. It was the key quiver in their policy, if you want to put it that way. I mean, that was what they did. They went to zero. And many times, it just really didn't help a whole lot if you didn't have the fiscal. Right, right. It seems like they're not going to go to zero. It seems like Zerp is...

least in the near term. But I do think there is this instinct among Fed policymakers to not get in the way of the economic expansion. And one of the things that Powell said over and over in 2019 is, you know, the expansion that had then been ongoing hadn't reached

All of all of the workers, you know, there is this idea of last hired, first fired. And he wanted to keep the economic expansion going to pull in, you know, workers, marginalized workers who hadn't felt the the good times as, you know, richer people may have been feeling. Around Thanksgiving, you put out an article, five economic trends to be thankful for and a mostly painless disinflation.

fair, real wages are rising, which is true. Companies aren't firing people, many people. The pace of technology innovation without question, entrepreneurship is thriving, all true. The one

sort of monkey wrench potentially is that employment picture. And we talked about the SOM rule, and I'm sure you've looked that up of your time at the Fed, and that was triggered earlier this year. Claudia SOM has walked it back a little bit, but there's no doubt that the move from, I think, 3.4 at our lowest to 4.3 was significant. I think there's a hope that they can somehow, they being the Federal Reserve, can contain it at a level that they're hopeful with.

The flip side of that coin is historically the unemployment rate, once it hits escape velocity, things start to move a lot faster. Yeah. What are your thoughts on the employment picture into 2025, given what you know and given the work that you've done? Something really annoying as a student of history is it seems like all the things that have happened historically have

all those rules broke. I spoke to Claudia Somm and she admitted, as you say, that it is possible that that rule does not work in this business cycle. Some other recession indicators also look to be broken. For instance, usually when you see sharp movement in temporary workers, temp workers, when companies start shedding those workers, it's kind of like

a precursor to them shrinking all of their workforce. But that hasn't happened. So I wonder how or which indicators will tell us when we do get to that point of the unemployment rising so high that it just keeps going and going and going. And will that happen this time? I mean, the peak unemployment of this cycle, it has already fallen back some. I want to say that...

It looks like the Fed can do this, but I don't know. That would be great. Fed Powell would go down in history as a great Fed chair, but it's no guarantee. They're threading the needle right now. It's one of those things, as long as nobody moves, everybody will get out unscathed until a rock falls and jars everybody, and all of a sudden that triggers a series of events. It's like, as long as we all stay calm...

we'll get through this together, but something inevitably happens and you know what you're speaking to is it's different this time. I'm not saying you're saying that, but that's been this, you know, that's been the theory out there that, you know, there are many things that make it different this time, but

All the things you look at, I mean, we didn't even mention the fact that the inversion in the yield curve, which when we got to March of this year, was historic in terms of the duration. Obviously, we surpassed that. We recently re-steepened only to see it flatten again. I don't even know what that means at this point. I'm sure you've done work on that as well, but one has to wonder what the bond market is trying to tell us. I mean, if you think about it, when the Fed cut rates 50 basis points in September, the

Since that point, all we saw were interest rates go higher. So there are a lot of odd things going on that the stock market says, you know what? Don't worry about it. We're fine. Thoughts on that?

Yeah, I think this conflicting message between the bond market and the stock market is confounding, if you will. The effect of the Fed lowering interest rates in part was to push, obviously, easier monetary policy through the economy. And one of the ways you do that is, you know, you lower mortgage rates. But mortgage rates have, at least the last time I checked, only gone up.

And, you know, is that a statement on where the bond market thinks the Fed will ultimately end up? Is that a response to what President-elect Trump might do on the fiscal front and what happens to the deficit? I would believe either story. I guess it could it doesn't have to be either. It could be both. But I think, you know, someone like you, I mean, which do you believe? Do you believe the bond market or do you believe the stock market? Well, it's it's.

I'm glad you asked me that question because I tend to look to the bond market for a guide. But quite frankly, over the last couple of years, if you've done that, you've missed a lot in the stock market. When I say a lot, a considerable move in the broader indices. And obviously, some of these individual names have been historic in terms of the move. So it's frustrating when you try to use historic norms in today's world because they haven't worked.

But it also doesn't think – it doesn't mean they won't work. It's just taking a lot longer for some reason that I haven't really been able to put my finger on other than the fact that there's still a lot of liquidity sort of making its way through the system. And maybe it's just sort of this delayed thing and still we're feeling the remnants of

of COVID and all the overstimulation on the back. That's really the only explanation that I have. I also think that the shock that the pandemic brought on and fallout from, you know, Russia's invasion of Ukraine. I mean, these were

all the types of shocks that we as Americans were not used to having. These are supply side shocks. It's not a demand side shock. And I think when the Fed was initially thinking about how to respond to the pandemic, to inflation, it had to realize that this is not a question of demand. It's plenty of demand. It was a question of too little supply. And as I

I mean, what do you do with that? You don't really have the tools to deal with that. But I also think that we don't really understand how this will all play out because it's been a long time since we've had a supply shock like the one we had, you know, when the pandemic hit. So maybe that's part of the explanation. Yeah.

of the economy kind of bucking historical trends, which makes it difficult for people like you, people like Powell, to figure out how to adjust resources

policy and what to do next. A lot of analogs out there. I mean, people will go back to the early 1970s when theoretically they thought they had tamed inflation only to have it come raging back. You know, the people will point to, again, the dot-com bubble, then the financial. There's something for everybody over the last 50 or so years, and we're trying to struggle to figure it out. But let me ask you this question. Understanding the genie is completely out of the bottle. Do you think we hear too much from Fed officials? Do you think

in trying to message to the market by over messaging, they're painting themselves into a bit of a corner. I'm curious as to your thoughts. I'm biased on this one. You can't ask a reporter that. I'm the nosiest person. Well, you obviously love, no, you love the fact that you have access. I totally get it. I said, I'll say again, we're well beyond that point. But there was a historical point in time where if you could name the Fed chair, you were one of maybe the top 1%. Now that's obviously much different being

that they're seemingly in the news every day. Yeah. And I think if I'm trying to make sense of the Fed's reaction function, the Fed's message, I mean, yeah, it's a lot of voices to consider. I am personally...

I am particularly grateful for all of these voices, again, because I'm a nosy person. Well, you're a report by nature. Right. I think it's good. You know, it's interesting. There's part of me that thinks it's a great transparency is always a good thing. There's another part of me that thinks...

You know what? They've overdone it on the messaging side of things. And, you know, maybe if there's some, if we could put that pendulum back closer to the middle, we'd all be better. I don't know the answer, but I also know that, you know, once it's out, it's out and there's really no turning back. But yeah,

But, you know, on any given week, you'll hear from five or six different Fed officials. I mean, I think that's fair at all different things. And it becomes difficult to sort of figure out what it all means, I guess, from my vantage point. I think you're right. I think it's it must be difficult to understand.

On the one hand here, Fed Governor Chris Waller, who we know is a pretty influential policymaker, you know, say that, yeah, we're probably going to cut rates in December in quite a straightforward way, but also raise concerns about inflation and raise the possibility that inflation progress might be stalling out. And then a few hours later, you hear from the New York Fed President John Williams, also procrastinating.

pretty influential. He doesn't seem to be worried about inflation progress at all. And it's like, well,

What are you looking at? Like you're looking at the same set of data and coming to completely different conclusions. Yeah. And the part that is difficult for me, and I'm sure I'm not alone here, is Waller said something to the effect of, you know, I'm going to be looking at the next few reports, the CPI report that comes out between now and the Fed policy meeting in a few weeks. And, you know, if I'm disappointed by that, I mean, we'll see. It's like, well, what would it take to disappoint you? Yeah.

How many, you know, how fast does CPI need to rise to change your mind? You know, is it, you know, 0.2, 0.2? I don't know. No, it's fair. I don't think, quite frankly, I'm not sure they know when they say things like that. I mean, you know, they understand the reasoning why, but I don't necessarily know if they know the exact data point that's going to change CPI.

their point of view. It's, it's, it is fascinating to hear and to understand they realize how important literally each word they say, the impact that potentially could have and how,

close to the vest, they sort of play things. And every once in a while, you get a candid moment. And in those candid moments is when our world seemingly goes haywire. Now, let me ask you this question before we sort of get out of here. You obviously are focused on U.S. Central Bank, the Federal Reserve. But if you think about the world now, there are a lot of other things going on in terms of

politics that are in a large ways been influences by their central banks. I mean, I can look at the Bank of Japan to a certain extent, what be going on in France right now. There are a lot of things in the world that are taking place on the back of central bank policy. Can you speak to that? Yeah, I think maybe I'm biased here. I think what's happening in Europe is way more interesting than what's happening in the US right now, just because first of all,

They say they've achieved a soft landing, or they're close to anyway, but it's not like their economy is booming the way the US economy is. And is that like cyclical stuff? Maybe, but it more so looks like structural issues.

They just have horrible productivity. The U.S. doesn't have that problem. Innovation, not great over there. And so watching how they're going to fix these problems and having someone like ECB President Christine Lagarde agreeing that Europe has some work to do, I mean, that's going to be pretty interesting to watch. I also think that when you think about what's going on across the Atlantic, they've had this

pretty sharp blowback on the part of investors to unfunded tax cuts and high deficits. I mean, what's happening in France right now is absolute chaos. I mean, Europe's second largest economy, it's political chaos. And it all stems from the fact that this prime minister that's now been ousted

was trying to get the deficit under control. Well, and think about what was happening in England a year or so prior. I get my dates off of it, but the same thing, it's playing out the same way. Exactly. And it's fascinating. You're obviously focused on it, and you're right to be focused on it. But we're here in the United States, and you understand that people are very US-centric, for better or for worse. But they're like,

Doesn't really matter what's happening in Europe. Bank of Japan seemingly blowing up. That's fine. That's their problem. Russia, Ukraine. These are not our problems here. And maybe not today, but they all at some point impact what goes on in the United States. And I think people should be

I don't want to be, say, more sympathetic to that, but they should be more aware, I think, what's going on around the world. Oh, absolutely. I traveled with Treasury Secretary Janet Yellen to China earlier this year, and the Biden administration has been very concerned about this overcapacity issue. All of the goods that China is pushing out into global markets at lower prices, in a way that

countries like Germany are having a hard time competing with on the automobile front. So I think what happens across the world, globalization is still a thing. It's not like we are operating in a vacuum. I mean, there are going to be spillovers to the extent that we feel the spillovers. I mean, I don't know. It's anybody's guess. But I do think this

towards protectionism that happened under Trump 1.0, continued under Biden to a certain extent and looks set to continue under Trump 2.0.

How does that look? What does that do to our economy, other economies? It's a big question. Yet to be determined. And, Courtney, you have to come back. It's great. I'm so proud. I mean this sincerely. I'm really proud of everything you've done. More importantly, everything you're going to do. So thanks for joining us, Courtney. Thank you, Guy. Thank you.