Danielle DiMartino Booth: Recession Signals, Inflation Trends, and Market Implications

Summary

Enterprising Investor Podcast Summary

Episode: Danielle DiMartino Booth: Recession Signals, Inflation Trends, and Market Implications
Host: Mike Wahlberg
Release Date: April 1, 2025
Guest: Danielle DiMartino Booth, Founder of QI Research

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Introduction

In this episode of Enterprising Investor, host Mike Wahlberg welcomes Danielle DiMartino Booth, a renowned expert in monetary policy, economics, and finance. Danielle brings a wealth of experience from her tenure at DLJ, Credit Suisse, and the Federal Reserve Bank of Dallas. As the founder of QI Research, she offers deep insights into the economic landscape, making her a valuable guest for investment professionals seeking to navigate the complexities of the current market.

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Are We in a Recession?

Timestamp: [01:44]
Mike opens the conversation by addressing the pressing question: “Are we bound for a recession this year or are we maybe already in one?”

Danielle's Insight:
Danielle confidently asserts, “So yes, I do think we actually are already in recession” ([01:57]). She references systematic downward revisions in payroll data, emphasizing that private sector full-time employment peaked in April 2022, signaling the onset of a recession. Danielle underscores the statistical anomalies that traditional metrics may not fully capture the economic downturn, reinforcing her stance that the recession has already commenced.

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Key Economic Benchmarks and Indicators

Timestamp: [02:36]
Mike probes further into the benchmarks Danielle monitors to foresee economic shifts.

Danielle's Analysis:
Danielle highlights the significance of the credit cycle, particularly within the fixed income ETF universe, which has expanded to over $1 trillion, a stark contrast to pre-2009 figures. She explains that high yield spreads are now influenced more by ETF inflows and redemptions rather than inherent credit risks. Additionally, she tracks the bankruptcy and distressed debt cycles, noting a rise in distressed debt exchanges as companies navigate defaults. This shift indicates deeper underlying financial strains within the market.

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Store Closures and Private Equity Impact

Timestamp: [03:51]
The discussion shifts to Danielle’s report, Inflation Illumina Alumin, Inflationista Illuminati, focusing on store closures and bankruptcies.

Danielle's Insights:
Danielle elaborates on the alarming trend of store closures, citing CoStar data: “in the year 2024, calendar year, there were 7,400 store closures in the United States” ([04:37]) and projecting up to 15,000 by the end of 2025. She attributes this surge to excessive leverage and overexpansion financed by private equity. These entities, with ample "dry powder," have enabled retail and restaurant chains to pursue aggressive growth, often resulting in non-viable locations that eventually succumb to financial pressures.

Key Point:
The reliance on variable rate debt is finally catching up, forcing companies to confront unsustainable financial obligations, leading to widespread closures and bankruptcies.

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Risks in Private Credit Markets

Timestamp: [06:54]
Mike inquires about the surge in private credit products and the associated risks.

Danielle's Warning:
Danielle warns of the fragility within private credit markets, referencing the abrupt collapse of Zip Car Wash. She explains, “...private credit has been marketed as a much more, as a much safer alternative to private equity... blindsided by those bonds going from 93 cents on the dollar on their books” ([06:54]). The episode highlights the potential for private credit funds to fail similarly to private equity when faced with defaults. Danielle advises investors to prioritize veteran players in the private credit space who have a long-standing track record over newer entrants motivated by the sector's perceived vulnerabilities.

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Job Cuts and the Gig Economy's Role

Timestamp: [08:56]
The conversation moves to employment trends and their economic implications.

Danielle's Observations:
Danielle discusses the paradox of low initial jobless claims despite significant layoffs, attributing this phenomenon to the rise of the gig economy. She states, “the number of Americans working as freelancers... is estimated to be up 23% from 2020 in 2025” ([10:28]). This surge in gig work acts as a buffer, absorbing those exiting full-time employment and preventing spikes in unemployment claims. Moreover, the increasing prevalence of underemployment, as indicated by the U6 rate rising to 8%, further underscores the shifting dynamics of the labor market.

Additional Insight:
Danielle notes a reversal in wage growth patterns, where job stayers are now experiencing higher wage inflation than job switchers, signaling evolving employment conditions ([12:20]).

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Student Debt Repayment and Credit Implications

Timestamp: [16:37]
Mike transitions to discuss the impacts of student debt repayment on the economy.

Danielle's Analysis:
Danielle highlights the ramifications of resuming student loan repayments after 43 months of forbearance, as detailed in recent New York Federal Reserve reports. She explains, “9.67 million student loan borrowers would have their FICO scores adversely impacted” ([16:37]). This decline in creditworthiness could hinder access to credit for a significant portion of the workforce, affecting consumer spending—a critical component of the U.S. economy, which accounts for 71% of GDP. The inability to expunge student loans through bankruptcy exacerbates financial strain, potentially leading to reduced consumption and increased dependence on debt financing.

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Inflation Trends and Market Implications

Timestamp: [19:45]
Mike seeks a more optimistic view on inflation, asking whether the worst is over.

Danielle's Response:
Danielle affirms, “We are” ([19:45]), noting that inflation has been falling significantly, particularly in the shelter sector, the largest contributor to inflation. She references her colleague Ivy Zellman's forecast predicting a decline in new home prices for 2025 due to an oversupply of apartments and spec homes. Additionally, the reduction in wage inflation and the shift towards gig work are contributing to decreased spending on services, further dampening inflationary pressures.

Impact on Businesses:
Danielle explains that businesses are facing a "margin squeeze" where they cannot pass increased input costs to consumers, leading to reduced profitability and subsequent job cuts ([24:30]). This scenario forces companies to absorb costs rather than increasing prices, impacting corporate earnings negatively.

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Tariffs, Reshoring, and Friend Shoring

Timestamp: [25:00]
Mike introduces the topic of reshoring and its future prospects.

Danielle's Perspective:
Danielle differentiates between reshoring and "Friend Shoring," emphasizing the need for consistency in trade policies. She critiques the current administration's approach, which appears inconsistent in handling investments made in Canada and Mexico. Danielle advocates for a balanced strategy that supports reshoring while honoring existing trade agreements and investments, ensuring that the transition does not undermine established economic ties.

Policy Implications:
She calls for a coherent and continent-wide campaign to facilitate reshoring, combining incentives (the "carrot") with regulations (the "stick") to encourage businesses to rebuild the U.S. industrial base without disregarding prior commitments to neighboring countries.

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Final Thoughts and Personal Insights

Timestamp: [27:26]
As the episode nears its conclusion, Mike asks Danielle about her first job in the industry and the advice she would give her younger self.

Danielle's Reflection:
Danielle shares, “read the fine print, but I would also say start in sales” ([27:26]). Her first role in sales taught her the importance of attention to detail and the foundational skills of persuasion and negotiation, which she asserts are essential in all subsequent career roles. Despite early challenges, Danielle emphasizes that starting in sales provides invaluable experience that benefits one's professional trajectory.

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Conclusion

Mike wraps up the episode by thanking Danielle for her insightful contributions, highlighting the valuable knowledge shared on recession indicators, inflation trends, the gig economy's impact, and the intricacies of private credit and student debt repayment. Danielle's expertise offers listeners a nuanced understanding of the current economic landscape, equipping investment professionals with the perspectives needed to make informed decisions.

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Key Takeaways:

• Recession Status: Danielle believes the U.S. is already in a recession, based on payroll data trends.
• Credit and Bankruptcy Cycles: Monitoring fixed income ETFs and distressed debt provides crucial recession signals.
• Store Closures: A significant rise in retail and restaurant store closures is linked to over-leverage and private equity financing.
• Private Credit Risks: Investors should be cautious with private credit funds, favoring established players over newcomers.
• Gig Economy's Role: The surge in gig work absorbs layoffs, maintaining low unemployment claims despite job cuts.
• Student Debt Impact: Resumption of student loan repayments may adversely affect credit scores and consumer spending.
• Inflation Trends: Inflation is declining, especially in shelter, but businesses face margin squeezes impacting profitability.
• Reshoring Strategies: Effective reshoring requires consistent policies that support both domestic manufacturing and existing international investments.

This comprehensive discussion with Danielle DiMartino Booth provides essential insights into the current economic challenges and trends, offering valuable guidance for investment professionals navigating these turbulent times.

Transcript

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[Mike Wahlberg]

Hello and welcome to the Enterprising Investor, the flagship investment podcast for CFA Institute. I'm Mike Wahlberg and I'm pleased to have Danielle DiMartino Booth on the show today. Danielle is a global thought leader in monetary policy, economics and finance, having worked in both fixed income and equity markets at DLJ and Credit Suisse as well as spending nine years at the Federal Reserve bank of Dallas before, during and after the Great financial crisis. In 2015, she founded QI Research, which publishes research at the intersection of her economic and market experience. You may have read or seen her comments on cnbc, Bloomberg, Fox Business News, bnn, Bloomberg, Yahoo Finance or elsewhere. Today we have her for 25 minutes and I look forward to surfacing some of those insights for you, our listeners. Welcome to the show, Danielle.

[Danielle DiMartino Booth]

It's great to be here. Thank you so much for having me.

[Mike Wahlberg]

Amazing. So Danielle, I'm going to start you off with an easy one and listeners can't see my air quotes that I'm putting into the air here. In your view, are we bound for a recession this year or are we maybe already in one? What do you think?

[Danielle DiMartino Booth]

So I do think through the rearview mirror of systematic revisions that would be in any other world. According to my business school statistics professor, impossible does not exist on a continuum. There aren't enough standard deviations to explain the consistency of the downward revisions to payroll. So yes, I do think we actually are already in recession. Private sector full time employment peaked in April of 2022.

[Mike Wahlberg]

Wow. And so what are the other sort of benchmarks that you're watching then closely? What do you think will the shoes that will drop before folks are aware of or acknowledge it?

[Danielle DiMartino Booth]

So first of all, with the caveat that in 2009 we didn't really have a $1 trillion plus fixed income exchange traded fund universe, if you will. And we do today. I'm watching the credit cycle, but the reason I bring up the exchange traded fund fixed income universe is that high yield spreads aren't the same gauge that they were in 2007, 2008, 2009. Because what we see through the prism of spreads really is the most liquid names in the high yield universe that trade based on inflows and redemptions to these ETFs, as opposed to the other majority of the high yield universe, if you will, that trades by appointment only and is very illiquid, which we would see I think manifest in much wider spreads than we're seeing today. So I'm following the bankruptcy cycle and the distressed debt cycle as well. Any bankruptcy attorney in the country right now will tell you that a lot of companies are pursuing distressed debt exchanges in lieu of filing for chapter 11, but that they're really one and the same when you're talking about a default by any other name.

[Mike Wahlberg]

Yeah, that's right, because you published a report and I love to get into that in a bit here, the Inflation Illumina Alumin, Inflationista Illuminati, which is an amazing name by the way, but in that you write a little bit about some of these, the store closures and the bankruptcies. Can you talk a little bit about that? And I'd love to hear your thoughts. I was just reading a little bit more on that. I saw that the FT published a similar story in late story about, about the, the trend for this in late January which isolated specifically private equity backed companies hitting the wall. So I'm wondering to what extent you think like and I'd love to hear your sort of some of the stats on the store closures and that, that these might be a reflection of too much leverage and that they're hemorrhaging to variable rate debt servicing that's finally kind of coming to pay the piper.

[Danielle DiMartino Booth]

So kind of at the simplest level, the intersection of private equity and the massive retail footprint in the United States compared to other developed economies is very relevant. If let's say you were an established restaurant or a promising upcoming retailer and you went in recent years to get financing to expand your footprint and you would potentially approach private equity with great big deep pockets and trillions of dollars in dry powder and say, hey, I'd love to get financing to open two more locations. I've already chosen them they're ideal and I think could be very promising. Private equity would come back and say happy to finance you, but it's gotta be 10 because we've just got too much money. And we saw that proliferate throughout the restaurant chain and retail chain space. And now we're seeing kind of the boomerang effect of that. And the Financial Times was referring to some CoStar data which showed that in the year 2024, calendar year, there were 7,400 store closures in the United States. And they're just talking about major chains. And through the first quarter of 2025 we've already seen 6,000. So CoStar's estimate for full year 2025 is 15,000. But boy, we sure are getting to that year end figure quickly. And again, that's just the United States. You know, we've got Hudson's Bay in Canada closing and that store has been around for centuries.

[Mike Wahlberg]

Yeah, 1670.

[Danielle DiMartino Booth]

Exactly. So what we're seeing, and again, you're absolutely right to point out the contribution or lack thereof of private equity to this. You put on too much leverage, you open non viable locations because the financing is there. That's not necessarily going to end up being a viable business plan. And that's what we're seeing.

[Mike Wahlberg]

Yeah, well, let's, I mean look at, point to one of the trends in recent years, which is of course a huge surge in demand for private credit products as well. Right. I mean this is where, this is where it's sitting. Right. Should we not be expecting to see some, some of these private credit funds shuttering?

[Danielle DiMartino Booth]

I would certainly think that was the case. You know, about a month ago the private creditor kind of limited partner investor universe was rattled because zip car wash went belly up overnight. And a lot of the investors had the, the, the debt of this company at 93, 95 cents on the dollar on their books. And that's again, that's what we call the illiquidity discount that you should have on your books. And yet, because private credit has been marketed as a much more, as a much safer alternative to private equity, a lot of people were blindsided by those bonds going from 93 cents on the dollar on their books to again, let's see what we're going to get in line with other creditors. So that was, I think, a prism into. You better be careful how you're investing in private credit because it might not turn out to be any less risky than private equity. Especially because most of the private equity players have gotten into the private credit business and they only know how to conduct business in one way. Now we're seeing new headlines break of private credit sponsors paying themselves one time dividends. That sounds a lot like what private equity used to do. And yet we're seeing that at the end. At the end. And yet we're seeing that in the middle or in the beginning of private credit transactions. So when it comes to investors, I say caveat mtor. Don't necessarily look for the biggest players in the space, look for the most veteran players that pre existed this rush into the private credit space that have been doing this for multiple generations. Not just rushing in because they, they, they see it's a vulnerable place to bring limited partners on.

[Mike Wahlberg]

So what about jobs? What are you seeing in terms of job cuts, impact on the economy and sort of markers that you, that you're tracking for that.

[Danielle DiMartino Booth]

So on the surface what we're seeing is a very muted effect of the layoffs that we've seen on the US economy. And it's a bit of a conundrum and it's also a statistical aberration. For a while initial jobless claims were around 200,000 a week. And when I say for a while, I mean for months at a time stuck in this range in a workforce of 170 million Americans. And you're like well that doesn't make sense. Now they're stuck around 225,000 a week. And you say to yourself well that's benign for all these layoffs we don't have that many people applying for unemployment benefits. Clearly they're getting employed quicker or there's enough demand in the private sector to absorb these layoffs. Or you look to again in a parallel to the fixed income exchange trader universe being non existent in 2009. Uber was born in Paris in 2009. And so we can't look and do apples to apples comparisons with prior cycles because the gig economy as it stands today was non existent last time. We had a lot of Americans losing their jobs. So if it's in the extreme cases of the three states of Tennessee, North Carolina and Florida where you only get 12 weeks of unemployment benefits, most states it's 26 weeks. But if it's in the extreme case of those three states, the math is very simple. You say I'm going to become a Lyft driver or a doordash driver or an Uber driver and I think the, the average Uber weekly income right now is 531 a week. That's gonna compare very favorably to the 295 $300 a week you would get collecting unemployment benefits. One of them is gonna help pay the rent, one of them's not. And so we see a very low level of initial unemployment claimants and we know why now. And in fact, you know, just before I came on with you, I did some simple back of the envelope math and the number of Americans working as freelancers, and that's how we define gig workers, is estimated to be up 23% from 2020 in 2025. And lo and behold, the U6 underemployment rate that's reported by the Bureau of Labor Statistics is also up 6.5% to 8% from its low, up 23% over that same period. I'm not a big believer in coincidences, but I do think that when you're studying the U.S. job market, you have to look to this release valve, if you will, that's absorbing a lot of the people who are coming out of full time employment, but looking for an alternative to unemployment benefits.

[Mike Wahlberg]

That's so fascinating to me that, you know, on this show people are always talking about alternative data or alternative points of view of ways to detect trends and predict the future. And this, this idea of looking at the, I guess it's the number of drivers, it's, it would impact the, the weekly income as well, I think that you've said before as well. So this idea that you can kind of forecast where we are in the economic cycle by how that uber universe is moving up and down, that's, that's, that's very cool.

[Danielle DiMartino Booth]

Well, and also, I mean, you know, I hate to interrupt, but we've also seen the, the flip of a phenomena. The Atlanta Fed produces a wage growth tracker. And in the post pandemic era, people who were job switchers, the grass is always greener, were making appreciably higher rates. We're seeing appreciably higher rates of wage inflation than job stayers. So those are the two different classifications that the Atlanta Fed has. And what we saw in February was finally a flip of this dynamic where job stayers are now making it out 4.44% year over year in terms of wage inflation. And job switchers are making 4.2%. That was 8.5% for job switchers at the peak of the great resignation, at the peak of quiet quitting. These phenomena that we felt that we saw as very real at a time when US employers were really struggling to secure employment, when the, I mean, what, we're $36.7 trillion in debt now, so we're almost at $15 trillion in debt that's been spent since 2020, which goes a heck of a long ways towards paying people to not work. And that gave workers bravado and a lot of job security and, you know, kind of the ability to switch jobs when they wanted. And now we've seen a full reversal of that to where job stayers are making more than job switchers.

[Mike Wahlberg]

Interesting. And I guess a part of that as well is just the natural demographic shift that's been happening.

[Danielle DiMartino Booth]

Absolutely. And we're also starting to see, by the way, uber weekly pay fall. And I travel way too much, so I'm always inquisitive with the drivers on the way to the airport. And I've started hearing from them. There are too many of us. We can't make what we used to make. And that is being reflected in falling weekly pay and rising hours for ride share drivers.

[Mike Wahlberg]

Yeah, there's that, that's that relief valve coming to bear on the, on the individual drivers. So what about still under the labor heading here? What, what about doge? Have we started to see anything there? And what's, what's the impact, you know, on public and, and private?

[Danielle DiMartino Booth]

Well, I think one of the things that I've learned since the advent of the Department of Government Efficiency is the multiple of not for profit and contract workers who fully rely on the federal government for work, but are not federal workers. So there's that middle ripple effect, if you will. But even so, what we saw in February Challenger Grand Christmas layoffs was the number 172,000. So that was a big, big increase in layoffs announced. A lot of people immediately said, well, that's doge. Well, guess what? Out of that 172,000, only 62,000 were attributable to public sector job announcements. The other balance, which is much larger, was attributable to the private sector. And that I think is something that needs to be tracked very closely. We've seen CEOs and CFOs just in the last week in confidence surveys say that they intend to continue cutting headcount going forward because of the threat to their top line and in order to compensate for the expected decline in aggregate income that's going to filter through from public sector job cuts. And that's when you start to see an adverse feedback where what's happening in the public sector feeds through to the private sector and feeds off of itself in this type of cycle. So we're paying very close attention to public job sector cuts. But again, I Think the more important of the two because of the size of the federal workforce is what that blowback effect is going to be on consultants and on not for profits that are tied to federal government contracts.

[Mike Wahlberg]

Yeah, you forget that a lot of these private companies, their biggest customers are government agencies, right?

[Danielle DiMartino Booth]

Absolutely.

[Mike Wahlberg]

Interesting. I want to switch gears for a sec here and just talk about student debt repayment. What do you see as the impact of that on kind of where we are in the economic cycle here and what the prospects are.

[Danielle DiMartino Booth]

So you know, it's interesting you raise this point because the New York Federal Reserve, their blog just put out two thought pieces, two primers on student loans just this week that kind of delved into what were the ramifications for FICO scores when you had technically 43 months of forbearance where starting in March of 2020 through the CARES act, that you were able to stop making payments on your student debt. And what will the ramifications be on FICO scores going forward? And this is one of the situations where you crawl up the income ladder in terms of the effect because so many people who have qualified for student loan forgiveness in recent years have been among the lowest income workers. If you made too much money, your student loans didn't qualify for forgiveness. Now we're seeing what that looks like on the flip side because we know that up the income ladder many individuals with very large student loan balances, working in higher profession paying jobs also moved out to the suburbs and the exurbs in the aftermath of the pandemic. They took on a mortgage for the first time, they have a car loan for the first time, they have more credit card debt than they did for the first time. We know that people who make more than $100,000 have seen tremendous uptake of buy now, pay later. So it's a phenomena where it's a different income cohort than you would expect. That's going to be the most adversely impacted by the resumption of repayments and the reporting of delinquencies to the experience the transunions of the world and what the New York Fed blog report their bottom line was 9.67 million student loan borrowers would have their FICO scores adversely impacted with the greatest impact being on those with the highest FICO scores. And so that was data that just hit the wires. Just to put that in context, that's about 6% of the U.S. workforce. So quite a high number of individuals who are going to have impaired access to credit going forward. So whether you're talking about new home buyers or people to buy cars going forward. Remember, student loans cannot be expunged according to the bankruptcy court laws, whereas others can. In fact, student loans can be garnished out of wages directly. And we're going to see this in a 1/4 lag begin to show up with the credit reporting agencies in their FICO scores. This is a very timely and relevant topic in a nation that is 71% of GDP is consumption. And a lot of that consumption relies on debt financing.

[Mike Wahlberg]

So I'm hoping that I can pitch a question here that is not depressing in the answer. Let's return to the inflation East Illuminati. Are we through the woods with inflation and what are your thoughts on that? Where are we?

[Danielle DiMartino Booth]

We are. From 2018 to 2019 we saw the headline Consumer Price Index decline. That was the experience that we had with inflation because the specter of global trade declining was a larger drag on gep. So it was a bigger drag on growth than it was an upward pressure on inflation. And that's good news for people who are still suffering the vestiges of the 2024 percent increase cumulatively since 2020. And we definitely need relief on the inflation front. We're seeing it to the greatest degree in shelter, which is of course the biggest input to inflation. In fact, my good friend Ivy Zellman, who's I've known since, gosh, 2001, we were both at Credit Suisse at the same time. She's kind of a housing guru and she came out with a new forecast today that suggests new home prices are going to actually decline in 2025. And part of the pressure on new home prices is not just completed spec homes, which are at the highest level since 2009, but also the fact that the census tells us that the the highest quarter in U.S. history for apartment completions, which was the fourth quarter of 2024. In that quarter we only saw 47% of the apartments that came out of the construction pipeline be rented within three months, meaning 53% of the new supply was not. So we're seeing downward pressure on rents and that's flowing into the housing market as well. And again, that is the absolute largest input to inflation. And with wage inflation also falling, with people working gig jobs instead of full time jobs, we're seeing services spending decline. This doesn't sound like good news, but again, you asked me about inflation and the feed through to inflation is a positive development in the sense that we are seeing the pace of inflation decrease significantly. And that's Going to be good news, especially for people who are not necessarily debtors and looking for relief on the price front, looking to get into homeownership for the first time.

[Mike Wahlberg]

And by extension, not having a resurgence in inflation is a great outlook for financing costs as well.

[Danielle DiMartino Booth]

It is. And again, in the 2018-2019 episode, even with tariffs, we did not see that immediate flow through to inflation. And you know, we've seen 34 to the last 36 months globally we've seen export orders decline, which is indicative of falling global trade. So we are seeing a parallel phenomena to the tariff war, actually, even in more real time than we saw it in 2018, 2019, as other countries preemptively prepare for tariffs. So the decline in global trade is also going to feed through into disinflationary impulses.

[Mike Wahlberg]

Right. So the demand goes down. But does like I did want to talk about tariffs again, sitting here in Canada, shouldn't Americans expect to see price inflation come through in terms of the whatever the imports are from Canada or Mexico or elsewhere? You'd think that there would be an impact on the end consumer.

[Danielle DiMartino Booth]

Well, there should be an impact on the end consumer. We forget that between 1975 and 1979, we did see a very stagflationary backdrop in the US economy. But the reason we had stagflation was because the unemployment rate was falling. So there was job creation throughout that period of extraordinarily high inflation. But with unemployment falling, that meant that of goods and services were able to pass through those in higher input costs. So what we've seen in a full array of regional Federal Reserve surveys, from manufacturing to services, is that anticipated prices received is declining and anticipated prices paid is increasing. And what we call that is not stagflation, but rather a margin squeeze. So you have to be able to pass through those higher input costs to the end consumer if they cannot afford to pay them. And you're not going to sell your goods or your services. The only solution to that is discounting. And again, that's why we're seeing CEOs and CFOs plan on increased job cuts to account for margin pressure going forward. Because something has to protect the bottom line, right?

[Mike Wahlberg]

You see a hit in corporate profitability as opposed to price hikes for or. Or probably some balance of the two.

[Danielle DiMartino Booth]

Yes. And indeed we have seen through fact set, you know, from the end of 2024 until present time, we've seen an appreciable decline in expected earnings for the first quarter.

[Mike Wahlberg]

I wanted to talk about reshoring as as one other topic for us to cover today and we've there's been a lot spent in the last eight years on it. What could the next eight years look like if the US is successful in rebuilding their industrial base as they're planning?

[Danielle DiMartino Booth]

Well, if you're talking about reshoring, that's one thing. If you're talking about Friend Shoring, that sounds like many years of sunk cost to me, which is certainly not an ideal backdrop. So I think the administration has to provide more carrot and use less stick and truly demonstrate that we're going to give you a several year on ramp to reshore as well as communicate the investment you've made in Friend Shoring was not for naught. So I think it actually has to be a combination of the two in order to be successful and have it be a continent wide campaign by the administration in order for it to be successful. And it's one thing to say bring your supply chains back from Asia, but it's a whole nother to say by the way, what you've invested in Canada and Mexico, you could just write that off. I don't think that that's going to work. I don't think that that's realistic and I don't think it should be realistic by the way, because these are trade agreements that have been signed in good faith and investments that have been made, direct investments that have been made. I find it very ironic to say we're going to tariff the heck out of Canada and yet we want to make a hurried completion of Keystone pipeline. Make up your mind. Which do you want to do? Do you want to forge greater ties or do you want to sever them? So I think that there's an inconsistency in the communication and that we need to have a serious rethink on Canada and Mexico.

[Mike Wahlberg]

Yeah, well it's certainly been a profitable relationship for both sides I think for a long time. So hopefully they can patch that up and find a way forward for it for sure.

[Danielle DiMartino Booth]

And I do think Treasury Secretary Scott Besant is very much aware of all of these circumstances and a little bit of a cooler mind when it comes to how tariffs should be implemented. In fact, he was the one who prior to being confirmed did indeed advocate for providing a several year on ramp to accomplish the reshoring and hopefully friendshoring.

[Mike Wahlberg]

Gotcha. Well Danielle, I'm sorry to say we're coming towards the end of our chat today. I have a two part question for you to finish things up today. What was your first job in the industry. And if you could go back and take yourself for coffee on your first day, what key piece of advice would you offer yourself?

[Danielle DiMartino Booth]

So my first job in the industry was in sales, and boy, that was not an easy one, especially when you had a huge error the first day with a London hedge fund that you were really excited about landing and had to pay for that error. On my own. So if I was sitting down for coffee with myself, I would definitely say read the fine print, but I would also say start in sales. It's the hardest job that I've ever done. And every other job that you're going to do from that day forward will involve some aspect of sales. You're always selling yourself. So I would say stick with how you started, but read the fine print.

[Mike Wahlberg]

Great advice, Danielle. Thank you for that. I've been speaking today with Danielle DiMartino Booth, founder of QI Research. Thanks so much for coming on the show today, Danielle. I really learned a lot today, and.

[Danielle DiMartino Booth]

Thank you for having me.

[Mike Wahlberg]

I'm Mike Wahlberg, and this is me, the enterprising investor.