← Bulwark Takes
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- [00:00]
Jake Stauch
Warning the following ZipRecruiter radio spot you
- [00:03]
Jonathan V. Last
are about to hear is going to
- [00:04]
Jake Stauch
be filled with F words when you're hiring.
- [00:07]
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- [00:43]
Jonathan V. Last
Fantastic.
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- [01:57]
Jonathan V. Last
N Another good one. Hello everyone. This is JVL here with my bulwark colleague, the great Catherine Rampel, author of the Receipts newsletter. And we are going to open today with some breaking news. Breaking news, very big, very strong breaking news from your favorite president. He just put out moments ago a truth social tweet in which he discussed we're going to go to the Hormuz first. So the straightforward moves. The Islamic Republic of Iran shot at least four one way attack drones at ships transversing the Strait of Hormuz One of the drones solidly hit the upper deck of a large and very expensive cargo carrying ship. That's the technical word for those. That's the technical term they use in the shipping industry. Damage was done, but the ship was able to proceed on its way. We knocked down three other drones. Obviously, this is a foolish violation of our ceasefire agreement. Very concerned, Catherine, because I was assured that. That the Iranians had no military capacity anymore.
- [03:02]
Catherine Rampell
I was assured that their nuclear capacity was completely obliterated last year. And the same thing for a lot of their other military capacity. Yeah, I've been told many times, in fact, that we won. That the war, which was not a war, but is now a war, is over. That the strait, which is not closed, is open. Subject.
- [03:25]
Jonathan V. Last
It was never closed, but now it's open.
- [03:27]
Catherine Rampell
Yes, it was never closed, but now it's open. It was never told, but now we're tolling it. Maybe. Or not tolling. Maybe there'll be a service fee. Who knows? Yeah, there's a lot of verbal jiu jitsu happening here. I also wonder with this tweet, how excited our intel community is about Trump just tweeting it out. I have no idea, but this seems like something that maybe they don't want made public, but I have no idea.
- [03:54]
Jonathan V. Last
Maybe they're not clear when this is from. There was. There was a Wall Street Journal story yesterday about Iran. So, I mean, maybe he's talking about something that just happened five minutes ago. Maybe he's talking about yesterday. He doesn't say that this means the ceasefire agreement is off. He just says like, hey, this is a violation. Just want to let you know that.
- [04:15]
Catherine Rampell
Yeah.
- [04:17]
Jonathan V. Last
So it's not clear whether there's anything actionable here or not, but it's just interesting. And then we have another. So two of our favorite topics on this show, the Strait of Hormuz and tariffs. We got a thing numerous. I'm sorry, but I have to read this whole thing out to us. Numerous European countries have been discussing the imminent implementation of a digital services tax on American companies. Some of these countries are close to actually doing this. Please let this statement serve to represent. What does that even mean? That any country that imposes such a tax will immediately be met with a 100% tariff on any and all goods sent to the United States of America. This tariff will supersede trade deals. Blah, blah, blah, blah, blah, blah. Thank you for attention to this matter. I want to unpack this a little bit.
- [05:09]
Catherine Rampell
Sure.
- [05:09]
Jonathan V. Last
Catherine, can you explain to the people what the digital services tax is?
- [05:16]
Catherine Rampell
This is essentially an effort by the Europeans, in this case to shake down American tech companies. They call it a digital services tax. I don't exactly know how it's constructed, but I think it is sort of like facially neutral. Like, it's not that it is, it is on paper targeting American digital services, but de facto it is because we have the juggernauts here in the United States and Europe does not. Europe has very little in the way of tech superstars. So this is a way to get some revenue out of American companies, which, to be clear, I think is kind of crappy. I know that everybody hates big tech here in the United States now for various reasons. Pardon?
- [05:58]
Jonathan V. Last
Is it kind of crappy?
- [06:00]
Catherine Rampell
Yeah, I mean, it's a shakedown. It's a way to get revenue from somebody else. But. But, you know, this is exactly the kind of thing that they should have been negotiating over in trade deals. Like this is. This is why it is useful to have a competent trade negotiating team who understands what valuable products, whether those are goods or services we make versus other countries. And so it's like, don't negotiate a trade deal in goods and then have France tax a huge share of Facebook or Google's revenue. If you want more revenue from those companies, it'd be better if it got kept here in the United States rather than siphoned off to other countries. I'm not against having these companies, like, pay higher taxes, but I think it would be better if the United States got to keep them. And I'm a little put off by the idea of taxing different industries so differently just because people don't like them. There are better ways to deal with the things that you don't like. But in any event, Trump is not entirely wrong here about being mad about this digital services tax, in my view. But this is not going to help things by threatening 100 tariff on our trading partners whose goods we, we want and use and need. Again, it's like, figure out a way to make this part of the negotiations. And his team is just competent to do that.
- [07:29]
Jonathan V. Last
So I'm a little more both pink and puritanical than you are. And I, I do not mind the idea of a syntax. Like, there are, there are things we, we think are net ills for the world, but which we're going to allow anyway. And so, you know, we ought to disincentivize them with taxation. I think a lot of our digital services companies probably fall underneath that, especially at the very top of the pyramid. I'm not sure how much value Facebook is actually adding to the world versus how many, how much tragedy the commons it's creating. I would say, though, it is a little weird that Trump, whose entire approach to trade and business is to bully and extort everyone. It's a little weird to have him being like, oh, how dare they. Like, you know, all of a sudden he's a champion of the free markets.
- [08:22]
Catherine Rampell
Well, game recognized game, right? He's like, hey, I'm the only one who's allowed to shake down our tech companies and make them bow before me and have their CEOs watch documentary watch or fund documentaries about my w demand gilded trophies and things like that. He's the only one who's allowed to either squeeze or humiliate or, you know, financially drain American companies for his own interest, which I also don't think is a great idea. I'm not averse to what's called Pigovian taxes, which is like you tax the thing that has bad ramifications, economics. They call it externality. So it's like things like it. So with tobacco, like this is. You call it a syntax, but it's a little bit different from don't take it well. It's like a carbon tax would be. I don't know if that. If like carbon emissions are sinful per se, but they do have negative externalities. They have consequences on people and things beyond the company that is emitting the carbon. So you might want to tax that to discourage, you know, those kinds of emissions to capture to offset that and, you know, those externalities and like, make the rational decision for whether to emit or not to emit more in line with societal good. And you could say there's something similar that you could do with social media companies. I don't know exactly how that would work because I'm not exactly sure what you're taxing. And when you're like taxing a company because of the industry that it's in, I think you're going to get a lot of distortions and a lot of like, fake categorizations of stuff. Like tax law is one of these things where it's never as black and white as you want it to be. It's. It's particularly when you have a revenue collection agency like the IRS that is so outgunned by the armies of accountants and tax attorneys at a place like Facebook. Meta. But, you know, I think that there are ways to deal with that. It's probably regulatory, honestly, than through taxes.
- [10:43]
Jonathan V. Last
I'll take either.
- [10:44]
Catherine Rampell
I'm not sure I Would not oppose,
- [10:46]
Jonathan V. Last
not opposed to either. I'll take what I can get. I mean, because frankly all of it is, from my perspective, compromised. Because what I would really like to do is to become emperor of the world and wave a wand and make, make all of the social media companies go away because they are net harms to the world and they bring nothing but misery and destruction in their wake. Okay, the theme of, of today is going to be basically why does Donald Trump hate the free market? And so we're, so we have this. He doesn't like the idea that other countries might be taxing things and might be trying to extort companies. That's only. He gets a taste. He was very, very mad this week at oil companies. We had, we had a tweet about this, a truth truth social tweet about this. The big oil companies are not dropping their price the pump commensurate with the sharply lower prices they are paying for oil. Those prices are dropping like a rock. In other words, customers are being gouged. I've instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I'm seeing. Oh, and I think we have some video of this as well. Is that right, Matt?
- [11:57]
Matt (Producer/Assistant)
It's ExxonMobil, it's Chevron, it's Shell, it's BP. It's a lot of them. The gasoline or the oil prices have come down so much and we are not seeing anything at the pump by comparison to what it should be. We should be in my opinion at $2.25 right now at the pump and we're higher than that and we are doing a big investigation on it.
- [12:28]
Jonathan V. Last
Yeah, yeah. So weird that he was doing that. Sit down interview from MbS's Crown Prince palace in Saudi Arabia. It is hard to imagine that that's what the American White House looks like. It has been turned into a presidential palace so quickly we didn't even really notice. So the President, I guess he's got a very sophisticated financial model and he's taking in supply chain and price of Brent crude and then understanding the air gap in the supply line and refining costs and all that and he's come up with $2.25 as what the price should be.
- [13:12]
Catherine Rampell
It's a back of the envelope calculation, you know, I'm sure plus or minus a few pennies, I think the could
- [13:18]
Jonathan V. Last
go as high as 227.
- [13:20]
Catherine Rampell
I know you really want to make fun of Donald Trump for railing against the oil companies, but I just want to make clear this is a time honored presidential tradition, even from much more conventional presidents. Basically. Every time.
- [13:35]
Jonathan V. Last
Please.
- [13:36]
Catherine Rampell
Every time? Yes. Every time gas prices have shot up, you have the president of either party railing against the oil companies for being too greedy. And I think almost every, maybe every presidency going back to like early 2000s, they have also commanded some sort of antitrust investigation to make sure that the companies are not engaging in collusive behavior or whatever. Like whatever. However they want to paper over the price gouging thing. I think we actually have like a headline from Joe Biden doing more or less the same thing. What year is this? This is from 2021. And then you can see that there are. We have like some clippings from previous FTC investigations that find nothing. These are from what, 2001-2001-2009-2011.
- [14:29]
Jonathan V. Last
We've hit every administration. Bingo.
- [14:31]
Catherine Rampell
So yeah, so this is, this is a time honored tradition. It is performative and whether presidents realize that it is.
- [14:43]
Jonathan V. Last
Hold on. So this is where I would like to press you a little bit because it is true every administration has done something like this.
- [14:53]
Catherine Rampell
Another game day.
- [14:55]
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- [15:00]
Matt (Producer/Assistant)
Let's go.
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Matt (Producer/Assistant)
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Matt (Producer/Assistant)
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- [15:22]
Jake Stauch
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- [16:22]
Jonathan V. Last
Every administration, in fact no other administration, has had a setup in which the President of The United States DMs the Attorney General and Says, I want you to indict this person.
- [16:33]
Catherine Rampell
Oh, that's true.
- [16:34]
Jonathan V. Last
Department of justice does that. So we have moved out of a world in which businessmen could assume that this sort of action by a president was performative into a world where that is no longer a safe baseline assumption.
- [16:50]
Catherine Rampell
That's fair. The other distinction I was going to make as well is that typically when presidents have ordered these kinds of investigations, they come in the wake of some sort of disruption, usually like an oil shock, where there's a mismatch between supply and demand, like a Hurricane Katrina or oil refineries going offline in California. I don't remember, like, what the exact circumstances were for some of those. Pardon?
- [17:15]
Jonathan V. Last
Deepwater Horizon. Right. You get a giant spill and stuff like that.
- [17:20]
Catherine Rampell
Right. So there's been some. Usually like an act of God of some kind or some accident that leads to the mismatch between supply and demand. But that doesn't hold water for the public if you just like, well, supply and demand, blah, blah, blah. They want a villain, they want a scapegoat. And so they ask usually the FTC to find out if Big Oil is behaving badly this time around. We also have a major mismatch between supply and demand. But unlike those previous times, you know who caused it, Right? There is actually an identifiable villain here. It's not the oil companies per se. It's the guy who embarked on a war of choice that led to the Strait of Hormuz being closed down and, you know, whatever it is, like a fifth of the world's oil supply getting jammed up. So, you know, I kind of want to have Trump walk over to the DOJ and ask for this investigation, like wearing the hot dog man costume, asking, please, can you find out who's responsible here for these very, very high oil price or very, very high gas prices. Like, somebody must investigate it. We're all trying to figure out who caused the problem here or whatever the line is. That would be really ideal. I don't think that's going to happen. The thing that he's mad here about, obviously, is not just like, oil prices went up, but he thinks gas prices are not falling quickly enough now that oil prices have come back down quite a bit. I think they're. They're either at or close to where they were pre February 28th. And though they had been rising, of course, like in the climb up to that, because we were sending a bunch of ships and whatever, you know, military assets to the Gulf and people thought we might be doing something destructive. So you Know, he's mad about the phenomenon that economists refer to as rockets and feathers.
- [19:16]
Jonathan V. Last
Thank you. I was going to ask you to explain this to the class.
- [19:20]
Catherine Rampell
Yeah. So rockets and feathers is this idea that prices tend to go up very quickly and fall like, like a rocket, but fall much more slowly, more like a feather. And this is this known, very frustrating phenomenon. And there are different theories about why it happens, but it is documented over and over again with gasoline prices that when oil prices, you know, the wholesale numbers get very, very high, the real retail numbers match that trend almost immediately. And then when the oil prices fall, the gas prices are much more, much slower to again come back down to earth again. This happens over and over and over again. And like, one way to explain it is that the gas companies, the gasoline companies, the retailers get very anxious when they start to see are hedging.
- [20:13]
Jonathan V. Last
Yeah, they're both actions are hedges.
- [20:16]
Catherine Rampell
Right. Well, they're worried when they see oil prices going up about how expensive it's going to be to replace the oil or replace the gasoline or whatever diesel that they are now selling. So, like, they preemptively maybe raise prices even faster than they need to relative to when they're actually replenishing their supplies on the way down. Nobody wants to be the first mover to cut prices because you know you're going to leave money on the table. So I think there was a little bit of like, eyeing your competitors to see did they cut prices and steal some of my business. I guess I am forced to cut prices to do that. But until then, customers have gotten kind of accustomed to higher gasoline prices, and I might as well make as much money while I can, particularly if I'm worried that this is not a stable downward trend in.
- [21:11]
Jonathan V. Last
That's the thing, right? You don't know, right? As you're moving backwards, nobody is really sure, like, what is the rate we're moving backwards at? Are we inexorably moving backwards or is this an unstable equilibrium? Right. This is why I say, like, both sides are hedging from the aspect of the person selling gas.
- [21:30]
Catherine Rampell
But none of that is a satisfying explanation for consumers, right?
- [21:34]
Jonathan V. Last
Why not?
- [21:34]
Catherine Rampell
That's why not.
- [21:36]
Jonathan V. Last
Are they simply too stupid to understand something very obvious?
- [21:39]
Catherine Rampell
I don't think it's that obvious. It's like, hey, prices went up.
- [21:42]
Jonathan V. Last
So obvious. It's like all we did was think about this for 90 seconds.
- [21:47]
Catherine Rampell
I don't know.
- [21:48]
Jonathan V. Last
We thought about it for 90 seconds.
- [21:50]
Catherine Rampell
Catherine, there have been like, dissertation articles written about why do rockets. Why is there this weird asymmetry So I think it's not super intuitive. You see prices go up, you're like, hey, the straight is pretty intuitive. Especially if you hear that the straight is open again, then we have a cease.
- [22:05]
Jonathan V. Last
I'm not an economist. I don't have a PhD. Like, we figured this out real fast with a very satisfying explanation that may not have like, all the details exactly correct or something. Or maybe there are counter explanations, but it isn't like Fermont's Last Theorem. You know, it's not like we got a whiteboard with just like Greek symbols everywhere and 85 lines of. All it requires is thinking about the world rationally for 90 seconds.
- [22:30]
Catherine Rampell
Okay.
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Jonathan V. Last
To me that this.
- [22:31]
Catherine Rampell
I don't know that I agree with that. Either way, it's not intuitive to the president.
- [22:36]
Jonathan V. Last
You and Sarah Long. Well, with your. Oh, people are great.
- [22:42]
Catherine Rampell
I'm just trying to be realistic about. Yeah, I mean, it's the same. There are a lot of things that, if you think about it a little bit longer, like our tariffs going to make things more expensive feel obvious. But then until you actually feel obvious, if you, if you spend a little bit of time. But it's not, maybe not your gut reaction when you first hear, oh, we're going to be tariffing other countries. Donald Trump says the other countries are going to pay the tariffs. Of course, that means that, like, it's not going to affect me. And then you live it out in real life and it turns out to be totally different. And then in retrospect, it probably seems obvious to voters, to consumers that this was a very bad idea. And you, in fact, you see that in the polling now. Like, if you look at how much support there is among Americans for tariffs today versus tariffs when Trump was running for reelection, my guess is it's gone down quite a bit. And that's because, like, again, things that you don't maybe spend a whole lot of time thinking through. You hear this demagogue give his explanation of how it's going to work out and how it's going to be beautiful and terrific. You accept that and then you live with the reality.
- [23:51]
Jonathan V. Last
But like, like saying, how could the people in Springfield have understood that they didn't need a monorail? It's not actually that hard. You don't need to take a graduate class on it. You just need, again, five minutes. Spend five minutes thinking about the world. Seriously, people, you will come to a lot of obvious answers. Okay, the president hates the free market. I think this is, this is, I have, I have a little riff. I want to do on capitalism. Because the President loves capitalism, but he hates the free market. And as further evidence of this, besides his big mail companies, is his utterly incoherent view of housing policy. Because Donald Trump wants. Well, do we have video on this, Matt?
- [24:34]
Matt (Producer/Assistant)
Let's talk about, oh, we're going to drive housing prices down. I don't want to drive housing prices down. I want to drive housing prices up for people that own their homes and they can be assured that's what's going to happen.
- [24:47]
Jonathan V. Last
So the President wants to drive housing prices up for home owners, but down for home buyers. Do I have that right?
- [24:59]
Catherine Rampell
You know, consistency is the hobgoblin of little minds. JVL why can't we just have one price for people who are buying the thing and a different price for the people who own or are selling the thing? Of course that makes total sense. No, of course it doesn't make any sense. And this guy who's a real estate mogul who ostensibly cut his teeth, you know, became a billionaire totally self made through real estate bootstraps. Yeah, all those bootstraps, lots of bootstrapping going on. Of course he understands this totally accurately. No, he's a moron. And we know he's a moron. And the fact that he's more concerned about protecting the wealth of the people who already have it should not be a huge surprise. That's his whole mo. It is making people who are already in, you know, pretty privileged positions, financially, politically or otherwise, even more so and helping them amass their fortunes. Now there are lots of middle class homeowners out there who are understandably also concerned about the fact that their, maybe their entire retirement nest egg is held in the asset of their house. And they are also concerned about housing prices going down. So we're not talking about like billionaires or whatever, you know, losing some value of their fortune. These are normal people. And that's part of the reason you have NIMBYism around the world, around, around the country anyway, because people don't want to increase the supply of housing to make it more affordable because they don't want to jeopardize the value of their retirement. And that's a real problem. And you know, there are different ways to get around that, including encouraging people to diversify and not sink everything into their home. But we as a country are not interested in those kinds of remedies. We really want to encourage people to, you know, be homeowners. It's the American dream. And we have a lot of distortionary financial Incentives to get people there above and beyond. Like, whatever the value itself may be of homeownership, you know, the psychic value or otherwise. And so this is like a real problem that we have. But you can't address the affordability crisis if you only cater to the people who already got theirs, rather than finding ways to help people, you know, move up in the world and, and acquire their own home or otherwise, you know, like, build, you know, use their own bootstraps or whatever. Like, if. I don't know. I guess my point is, like, Trump is not empathetic. Pardon?
- [27:46]
Jonathan V. Last
Can't you just get Deutsche bank to underwrite your purchase of the property you want, and then if you go bankrupt, it's their problem, not yours?
- [27:52]
Catherine Rampell
Right, I guess, yeah. That seems like a totally accessible strategy for most Americans, most millennials who are, you know, expanding their families and, and frustrated that they cannot buy a home themselves and that boomers are sitting on all of the good real estate and unwilling to sell and don't want any competition in the marketplace either. Yeah, it's.
- [28:14]
Jonathan V. Last
I am not an economist, Catherine. I'm just thinking out loud here.
- [28:18]
Catherine Rampell
Okay?
- [28:19]
Jonathan V. Last
But it's.
- [28:20]
Catherine Rampell
Appreciate it.
- [28:20]
Jonathan V. Last
One way to, to help both classes of people here would be to increase supply to lower costs for sellers, but then create some sort of ongoing benefit for homeowners. Like, for instance, and I'm just spitballing, what if homeowners could make tax deductible the interest they pay on their mortgages? Because then what you're doing is you're saying, look, the value of your home might go down a little bit as supply increases, but the fact of owning that home is going to be a real boon to you.
- [29:01]
Catherine Rampell
You mean like we already do?
- [29:04]
Jonathan V. Last
Which again, is before Donald Trump killed. Remember, this was part of, part of Donald Trump's signature initiative of his first term tax was, was actually killing the mortgage interest deduction.
- [29:16]
Catherine Rampell
Well, he didn't kill it per se. He made it less valuable by increasing the standard deduction. So it's only like 8% of people now claim the mortgage interest deduction. Because most people, yes, this is what
- [29:27]
Jonathan V. Last
I'm saying he created. Once again, it's creating the problem that you say you want to, to destroy.
- [29:36]
Catherine Rampell
And in fairness, the thing that Donald Trump says is his remedy today is he just wants lower interest rates. Because if interest rates are high, you know, that's, that's not a boon really, either to the buyers or the sellers. That's an additional cost, the cost of the financing. And that's painful. Right? It does increase Your monthly payment, if you are trying to buy a home, regardless of what happens to the value of the house itself, you know, if you keep that fixed and interest rates go up, your monthly payment is going to go up. And so Donald Trump is saying, well, that's the magic bullet. Why can't we just cut interest rates? And that requires an entirely different.
- [30:16]
Jonathan V. Last
Dollars are. Just don't, just don't worry about what the underlying value of those dollars are. Right. This is, that's great.
- [30:24]
Catherine Rampell
Well, the thing, I mean, when he, he made a comment about that this week, I don't think we have it, but where he said, you know, basically why do we need this housing bill to bring costs, to bring housing prices down. I don't want to bring housing prices down that way. I just want to cut interest rates. But of course he doesn't control interest rates. The Federal Reserve does. His new appointee as Fed chair, Kevin Warsh, very recently took over and got the job because he said that he was going to cut interest rates. Oh, do we have the clip of that? Maybe we do. In any event, we don't need it. It's okay. The Fed is not going to cut interest rates anytime soon. If anything, their next move would be higher rates, you know, probably later this year.
- [31:14]
Jonathan V. Last
Know why they're going to do that, Catherine?
- [31:16]
Catherine Rampell
Tell me.
- [31:16]
Jonathan V. Last
JBL woke deis.
- [31:19]
Catherine Rampell
Oh, okay.
- [31:20]
Jonathan V. Last
It's the woke dei that are making them raise rates.
- [31:23]
Catherine Rampell
Yeah, it's the woke DEI's that Donald Trump himself appointed to the Fed. Right.
- [31:27]
Jonathan V. Last
Well, this is, you know, he never makes mistakes except for giving people jobs who he shouldn't have. All right, I was going to do a little socialism, capitalism thing, but I think we're going to skip past that and have a little fun dunking on tech companies. We had a line go down moment with the NASDAQ this week. We have a chart here. I think pretty bad weekly loss over a year here. This is the, the biggest loss in a single week since 2024. Yeah, I guess there's one in 2020 in, in June. That was bad too. There's also a bad, bad first week of June. Do you have thoughts about what's going on here where we're like, we have the biggest IPO in history with a tech stock and then like a week later we have tech stocks doing very badly. What, what is happening here?
- [32:22]
Catherine Rampell
Well, not all. Yeah, I mean, not all tech stocks are created equal.
- [32:26]
Jonathan V. Last
Hashtag not all tech stocks.
- [32:27]
Catherine Rampell
Not all tech stocks in the sense that AI is actually very bad news for, for a lot of the existing so called software as a service companies because like their job is gonna get automated away by artificial intelligence. So that's part of what's happening here. Like basically all of the growth in the S and P to date this year has been, I believe in energy and the magnificent seven sort of the AI related tech stocks and everybody else has been falling. And some of the ones that have had the biggest pain are the ones who are facing this existential threat because AI is going to eat their lunch if it isn't already. So that's basically what's happening here.
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Catherine Rampell
shop@avocadomatress.com or leading retailers nationwide. And the real question is, given how much AI is propping up our economy now is that sustainable? Like you see all of these other companies that are either stagnating or losing ground. AI is kind of an arms race. Eventually someone's going to win that race. And what happens to all of the also rans? And what happens to the economy when a bunch of companies potentially pull all of their investment, all of the data centers that they've been building and other investments that they've been making. What happens when it's like that stuff doesn't pan out? They lost the contest. Is there a big implosion? Because, like, we don't really have a lot of other things going on. That's how I would interpret the context of that chart that you just showed.
- [35:35]
Jonathan V. Last
If you were looking around for signs that the AI bubble was starting to thin out, which, I mean, getting closer to popping, what would you look for? Not financial advice.
- [35:52]
Catherine Rampell
Yeah, not financial advice. I guess I would look at, you know, some of the fundamentals for these firms, like how high is their valuation relative to their revenues? I mean, they're basically not all losing money, but a lot of them are losing money. Actually, like the highest growth in the stock market lately has been from the companies that are losing money, which is, again, yeah, not totally intuitive, but that
- [36:17]
Jonathan V. Last
can go on forever. Catherine.
- [36:19]
Catherine Rampell
Probably not, but the expectation is maybe at some point they'll turn around and they will become uber profitable. And so whoever holds those stocks will be made rich and so they might as well invest now. I think that's the logic. So I don't know. I guess I would look at some of the fundamentals, but that's a good question. Again, my concern is partly about what's happening in the rest of the economy, whose weaknesses are being masked by this AI boom slash bubble. I think it's harder to tell, like, because we don't know where AI is headed, where, you know, will that burst, when will it burst, what will the fallout be? And because there will be a lot of gains from AI too. Like, I know we, we often harp on the destruction from it, whether it's software as a service or like white collar workers getting displaced. There'll be a lot of losers from AI and a lot of financial pain as a result. But we don't really know who the winners will be. And that's often the case with major disruptive technologies. It's easy to see who loses out. It's hard to conceive of, like what are the new jobs, the new industries that are created. So I don't know, this is a wishy washy way of saying, like, I don't really know how to predict that. I think it's just, it's easy to see who's going to get hurt. And that's who I'm most worried about right now.
- [37:40]
Jonathan V. Last
Okay, so some SpaceX talk SpaceX stock back underneath IPO price. Great. But the big thing is the bond traders. So can you talk people through what's going on with SpaceX's bond offering?
- [37:58]
Catherine Rampell
It's confusing, to be honest. So bond traders are apparently stunned, shocked that the debt that they bought, the money that they lent to SpaceX was not as good of an investment as they thought it was going to be. In kind of the same way that like the stock market, the stock price for SpaceX has also come down. I think these things are related. I think that there was an expectation early on that like hey, strong demand for the stock must mean that these fools will buy our debt too and there'll be a huge market for it. And that hasn't happened. And Meanwhile, you know, SpaceX built this huge data center capacity but their AI basically fell apart. They're renting out the hardware to companies like I don't even know exactly what the, why SpaceX is borrowing so much money. Like what do they need the capital for if they raised all this capital to the stock market. But you know, like in a sense maybe Space X will be fine if they're renting out their, their data center extra capacity. You want to be like Levi Strauss and not the gold miners. You want to be the one who's supplying the, the whatever, the equipment to the gold miners. But I don't know, it's like they're just not doing so well. You're, they're expensive AI scientists, co founders all quit. And given that treasury rates are increasing and SpaceX still looks like a pretty risky investment, like maybe you are demanding a much bigger premium to take a 30 year bet on Elon Musk rather than US treasuries, is it possible that
- [39:58]
Jonathan V. Last
they're amassing capital here to make a play for Tesla? My assumption has been that Musk will eventually use SpaceX to buy Tesla because of corporate governance. So the way Tesla is structured, Musk controls Tesla but he doesn't have total absolute control of Tesla. He has total and absolute control of SpaceX because of the way the voting shares are set up. And so I forget there's a fancy name for this. I think it's called pyramiding maybe where you can get around those sorts of governance structures by simply having a company with a more favorable structure to you by the company with a less favorable structure. And anyway, I wonder if that's what some of this data is doing.
- [40:49]
Catherine Rampell
You know more about that aspect of than I do. I will say that Elon Musk's like number one play is these related party transactions is the official term for it. Or tunneling is a more pejorative term for it I guess. Or more problematic.
- [41:07]
Jonathan V. Last
Selling cybertrucks to SpaceX, right?
- [41:09]
Catherine Rampell
Pardon?
- [41:11]
Jonathan V. Last
Selling cybertrucks to SpaceX.
- [41:12]
Catherine Rampell
Yeah, that's what I mean, so he sold a lot of cybertrucks to SpaceX. I think like one out of every four or five cybertrucks sold at the end of last year went to Space X. He has used his boring company, which is the, you know, infrastructure building company, on contracts for Space X. And so, you know, there's SpaceX acquired Twitter X, SpaceX acquired the AI company that held it. XAI. And so this is how he kind of cleans up some of his failures at the very least is by shoveling money from one failing company to another company that is still highly valued, whether that means he'll eventually buy Tesla. I mean Tesla is still pretty highly valued. So it's come down a lot, but I don't know if that's going to happen. But, but certainly he likes to like move the money around amongst the companies that he controls.
- [42:10]
Jonathan V. Last
Catherine, you sweet summer child. Freelon Musk to buy Tesla, do you know who he would have to negotiate that sale price with?
- [42:20]
Catherine Rampell
Elon Musk.
- [42:21]
Jonathan V. Last
Yes, yes. Elon Musk would be sitting on both sides of that transaction.
- [42:29]
Catherine Rampell
That's what I promise you.
- [42:30]
Jonathan V. Last
He could come to a, he could come to terms with himself.
- [42:33]
Catherine Rampell
Well, I, I don't know exactly how the governance works. Like they probably, they have to get other shareholders on board, which is not the case as you point out with SpaceX.
- [42:41]
Jonathan V. Last
Who knows what the federal government would do. I mean, God knows the Trump administration would probably have a lot of regulatory things to say about that.
- [42:47]
Catherine Rampell
Yeah, but I mean this is right, exactly. Well, it depends on what Elon Musk has tweeted about the President recently. But I think this is to your question about what's happening with bonds, with these SpaceX bonds, part of it might be like again, bond rates for Treasuries, which is supposed to be the risk free asset, are already high because we're expecting those rates to go up. Now you have bonds for SpaceX, which is a much riskier asset. And it's like, well, if you want me to hold that instead of this risk free thing, I'm going to demand a higher interest rate to account for that risk. And then you add on top of it the fact that you might get expropriated if you are left holding the bag because Elon Musk shifts the profits to his next venture that he owns and you don't. So there are a lot of reasons why maybe holding an Elon Musk run company is riskier, even riskier than it appears on paper, which it does seem pretty risky considering SpaceX like doesn't make money and is losing quite a bit of money. But it's riskier because Elon Musk is in charge and can potentially expropriate shareholders or bondholders. And you won't have a lot of recourse if he does, both because of the way the company is set up and because we have nobody enforcing white collar crime, if anything does actually cross the threshold into criminal behavior.
- [44:21]
Jonathan V. Last
Strong rule of law kind of environment we're living in these days.
- [44:24]
Catherine Rampell
Yeah.
- [44:25]
Jonathan V. Last
I should say this for people, just so they understand what happened. I should have said this at the very top of this discussion. I'm sorry, I didn't. So what happened is, so SpaceX issued $25 billion of bonds. And those, those are, as Catherine says, notes on the debt, which mature at a certain rate. And I think the largest one was a 30 year bond which matures in 2056. And so they sold off these, but it was sort of weak demand. But then once we got into the secondary market where people trade the bonds they own, what people found was in order to get people to buy the bond, which you just bought, so like you, Catherine, bought one of these SpaceX bonds at issuance, you turn around to sell it to somebody else, and I look at it, in order to get me to buy it, you had to slash the rate on it. And so the losses on the bond trades are already like 305 million.
- [45:22]
Catherine Rampell
Well, you had to slash the cost of the bond, which means offering a higher rate.
- [45:28]
Jonathan V. Last
Right, sorry. Yes, that's a much better way to explain it. Great. Okay, so we're going to wrap up today with the piece you wrote for the Bulwark yesterday. And I am going to try to just sit back and not get too hot, because this is one of the subjects that makes me viscerally, like, angry. Like angry angry. And I wrote a little bit about something that touches on this with The Robert Kennedy Jr. S views on people with autism, people on the autistic spectrum, a few months ago, and I don't know, I just want to let you present to the room what this is about. And I will try not to say too much because I don't want to turn into an insane person.
- [46:20]
Catherine Rampell
It's okay. I mean, this should make everyone insane. Basically, what has happened is that just as this administration is trying to purge the US Population of undesirables via deportation, it is also trying to purge the population of undesirables in the form of people with disabilities. Except they can't deport people with disabilities, so they're making it easier to hide them away. And of course, I use undesirables with air quotes. I'm referring to how perhaps Stephen Miller thinks about these kinds of populations in his ideal version of what the golden age of America should look like. What happened is last week the Department of Justice issued a memo that turns back the clock on decades worth of law, regulation, and even Supreme Court precedent and says that states can forcibly institutionalize people with disabilities instead of funding services that allow them to stay in their homes and in their communities. So that means somebody who might need a few hours a week of home health aid to help them shower or to help them maintain gainful employment in some way, take them to the doctor, whatever. Instead the state can say, we are not going to fund those services. We're going to lock you away. And again, this is basically what the United States used to do in an uglier period that people with mental disabilities and physical disabilities, we were much more apt to shut them away in nursing homes or psych wards or segregated schools or sheltered workshops. This was a line of first resort once upon a time. And these kinds of institutions had a really ugly, well deserved, ugly track record of crowded, unsanitary conditions where people were suffering huge amounts of neglect and not able to be productive members of society and thrive to the, to the extent that even people who have physical ailments or mental disabilities or whatever, you know, might be otherwise able to do given the supports and services that they need. And in fact, RFK Jr. S father, RFK Sr. Is one of the people who helped reverse this ugly history. He famously went to this horrible, horrible state run school for kids with intellectual disabilities called Willowbrook and described it as a snake pit. A place. I don't remember the exact language, but it was something along the lines of, we treat animals better than we treat these children. Jfk, his brother as president, also prioritized disability rights in part because the two of them had a sister who had mental and physical disabilities and who led a very difficult life as a result. So they had, you know, going back to the Kennedy administration, there was a lot of work to help people with disabilities achieve more autonomy, you know, social autonomy and, you know, financial autonomy through these kinds of services. And now the Trump administration is trying to unwind all of that again, including Supreme Court precedent. There's this decision called Olmstead that just had its, I think, 27th anniversary that mandated that states have to serve people with disabilities in the most integrated setting possible, meaning that rather than segregating them away in a Nursing home, you know, if it is possible, you know, appropriate for a person's needs, allow them, help them live in their home so that they can thrive and be autonomous and be productive members of society. So this is, this is where the Trump administration has been going. This memo, by the way, is reportedly the work of Stephen Miller, which is why I kind of referenced those other administration efforts that seem designed at, you know, vaguely eugenicist aims about purging undesirables from the population. Stephen Miller is obviously the architect of the immigration policy as well, the efforts to deport, according to DHS, a hundred million American or 100 million people in the United States, which is a third of the population and like 10 times as many undocumented people as there are. They want to purge people who are brown, who are black, who are from other countries. But there are, you know, other impurities that I guess cross ethnic and racial lines. There are white people too, who have disabilities, and we want to hide them away as well, or at least this administration does. And this is obviously not being done in isolation. There are a lot of other things that the administration has done. Yeah. Well, why don't you talk about the comments from RFK Jr that you wrote about a little while ago.
- [51:28]
Jonathan V. Last
So the key is understanding the context, because without context, you could maybe be sold if you are a hard hearted monster, a sort of fiscal, like, well, it costs the state too much to support people at home, blah, blah, blah, blah, blah.
- [51:45]
Catherine Rampell
It's not actually true. It's more cost effective to let them live in their homes. But sure, correct, Sorry, go on.
- [51:51]
Jonathan V. Last
But you need the context. And the context is Steve Miller, who reportedly wrote this standing up at a speech and talking about Democrats and the people in America, he does not like calling, saying to them, you are nothing. The President, United States, saying that immigrants are, quote, poisoning the blood, talking about how they have, quote, bad genes, saying that, quote, they're not people, saying that the enemy within are, quote, vermin. You have the President's long running and fairly well documented disgust with being seen with Americans who have like, been injured in battle. Like, you know, does not like being, being around people, says nobody wants to see that. And there was, there was. So this is a line from FDA Commissioner Marty Makari who said, quote, it is hard to watch kids with autism. Yeah. You know, just hard to watch for him personally. He doesn't enjoy it. And this is, you know, Kennedy talks about this RFK all the time about curing kids with autism, as if they have the measles or something. And you know, Bobby Kennedy doesn't want to cure people with the measles. He's happy to have everybody get the measles. What he wants to do is cure people who are just neurodivergent because he does not like them and finds them upsetting.
- [53:15]
Catherine Rampell
Well, he also gave this big speech last year, this is what I thought you were going to talk about, where RFK Jr. Talked about how people with autism will never lead productive lives. They'll never go on a date or play baseball or write a poem, and they're all basically like leeches on society. I mean, he didn't use that exact epithet, but that was the message. And to be clear, like, people who have autistic family members or people who are, who have autism themselves want support from the government. Like, they want, you know, more services and support to help members of the community thrive. So it's not like they want to. If you talk to advocates from this community, it's not like they want the government to ignore them entirely, but this is the kind of attention that they're not so keen on. And in fact, last year, Jay Bhattacharya at NIH talked about create. Was it NIH or CDC? Sorry. Anyway, somebody at. Somebody under RFK Jr talked about creating a compulsive registry of people with autism requiring, you know, basically giving the government the unauthorized use of health records. Yeah. To keep track of them because that has such a great track record in other right wing countries when they come up with a list of people with various kinds of, of impairments or other perceived impurities. So understandably, when that was announced that they were coming up with this registry ostensibly to help people who would be in the registry, even though if they
- [55:00]
Jonathan V. Last
don't want to be in it, only to help.
- [55:02]
Catherine Rampell
Yeah, There was a huge outcry from the disability community and eventually they had to walk it back. But there are a lot of things like this. You know, they just moved special ed out of the Department of Education and over to HHS, where it will be overseen by RFK Jr. Who clearly has demeaning, if not eliminationist views towards people with disabilities, particularly people on the autism spectrum. So this is like part of a broader agenda again, of hiding people away, of taking away their services, of, you know, making it clear who does and does not fit in Trump's golden age.
- [55:46]
Jonathan V. Last
Real Americans. Right.
- [55:47]
Catherine Rampell
Heritage.
- [55:48]
Jonathan V. Last
Separating the real Americans from the, the fake Americans. I just, I, I don't see any reason to mince words about that. I just don't think there's any reasonable Way to discuss this as anything other than eugenics.
- [56:00]
Catherine Rampell
Yeah.
- [56:01]
Jonathan V. Last
And, you know, like, I. I don't know why anybody would pretend otherwise. That's what this is, and that's what the entire program is like. You just look at it within the context of everything that's going on, and it's. It's really something I'm not. Look at me. I was such a good boy. I did not scream or yell or throw anything. People should go read Catherine's piece. Go over to the bulwark.com and. And read this piece. It will. I mean, if you're open to getting angry, go read this piece. If you don't want to get angry today, then maybe give it a pass. But people should be angry about this stuff, so you should read it. Catherine, thank you for being with us. I don't know. We may not be together next week. We're still figuring out what next week's receipts live will look like, so.
- [56:50]
Catherine Rampell
Yeah, because of the holiday.
- [56:52]
Jonathan V. Last
Because of the holiday. So everybody, you know, think about that and pray on it. Tell us in the comments what you want us to do for next week. Do you want us to live? Live YouTube? Something like fireworks. Do you set off fireworks? Are you a fireworks family?
- [57:07]
Catherine Rampell
No, we are not a fireworks family. I enjoy watching fireworks from afar, but I am not going to set them off because I like having 10 fingers.
- [57:15]
Jonathan V. Last
So this was. This was one of my many, many culture shocks in moving from the Union part of America to the Confederacy. Was. You know, so I grew up in Jersey, where every Little town of five people has its own town sponsors fireworks display on July 4th. And it's amazing. It's great. Everybody, like, walks to the school, the high school, and they set off fireworks, and it's great. They get down to Virginia and there are zero municipal fireworks displays. And instead what happens is every person goes out and spends $600 on fireworks that they get from South Carolina or someplace. And they go out and they sit in their cul de sacs and they set off their own little neighborhood fireworks displays, but only after the dads are rip drunk. And I would. I mean, I just. The first time this happened, my wife and I, like, you know, nice little Jersey people were like, what is happening? And by, like, year 10, we were kind of like, we were okay with it, you know, like Jane Goodall among the apes. We didn't freak out, but we did not participate. We spectated and we provided monetary. We didn't want to be freeloaders.
- [58:33]
Catherine Rampell
You know, we would kick money into
- [58:35]
Jonathan V. Last
people who are Buying the fireworks because we wanted to be part of it.
- [58:39]
Catherine Rampell
Gave this whole spiel about syntaxes and I'm sorry, but non necessary explosions that could take off people's fingers and scare cats and dogs. I don't know, I feel like that might be, you know, deserving of some of these Pigovian taxes and you should not be funding it.
- [59:03]
Jonathan V. Last
This is very funny. So we on our cuddle sack, we for a time had both a Secret Service agent and an FBI agent. Not married. Two separate families. And one year we're all out there. Everybody's out on the cul de sac and we're. They're set up. I mean, Catherine, they are not doing sparklers and Roman candles. Like they are sending gigantic chrysanthemums 180ft into the air, right? And the cops show up. And I'm sitting there in my little, little lawn chair thinking we're cool because Secret Service lady and FBI bro are gonna like go talk to the cops and make sure everything's fine. I turn around and look and those two have run out of there so fast they left all of us civies totally alone to deal with the police and say, sorry, officer, we'll stop. And you know, didn't. We didn't realize. I didn't even know what that one would do. I just, you know, I thought it was. I thought it was a poppet, but then it shot way up in the air and exploded. Who could say?
- [60:02]
Catherine Rampell
I don't know. I feel like you are selectively puritanical about some things, but everything.
- [60:11]
Jonathan V. Last
All right. We'll be back. Maybe not celebrate July 4th, if that's a thing you do. No judgment. If not, good luck, America.