Eye On The Market Podcast Summary Episode: "OK Boomer" on Stablecoins, Profits, Tax Cuts vs Tariffs, and Presidential Break-ups
Host: Michael Cembalest
Release Date: July 3, 2025

Introduction

In the July 3, 2025 episode of Eye On The Market, host Michael Cembalest delves into a diverse range of investment topics, providing insightful analysis on stablecoins, corporate profits, the ongoing debate between tax cuts versus tariffs, and the intriguing history of presidential break-ups. Titled "OK Boomer," the episode underscores generational perspectives on emerging financial technologies and policies.

Q1 Earnings Season Overview

The episode begins with Dubrovko presenting a positive outlook on the first quarter earnings season, highlighting significant surprises and robust performance metrics.

• Earnings Surprises: Dubrovko notes, “Earnings surprise of around 7.5% compared to 4% over the prior four quarters” (00:50).

• EPS and Net Income Growth: He emphasizes the upward revision of EPS growth to 12% year-on-year and net income margins rising to 13%, surpassing expectations.

• Corporate Guidance: With only 25% of companies raising guidance and a mere 15% cutting it—the lowest in five years—Dubrovko interprets this as a sign of resilience amid uncertainties surrounding tariffs.

• Mag 7 Dominance: The MAG7 stocks (including Apple, Google, Goldman Sachs, Wells Fargo, and Verizon) continue to lead, contributing to a 28% year-on-year earnings growth with stable buyback programs increasing by 25%.

Notable Quote:

“The MAG7 are driving capital spending and earnings growth, making them a formidable trade tree” (05:30).

Market Bifurcation: Dubrovko illustrates a stark contrast between the high-performing MAG7 and the broader S&P 500, which is maintaining a steady 9% growth in a low inflation environment. However, he cautions against over-optimism due to a significant ramp-up in imports during Q1, which may lead to a slowdown in the coming quarters.

Tariffs vs. Tax Cuts: Impact on S&P 500 Profits

The discussion shifts to the complex interplay between tariffs and tax cuts and their impact on corporate profits within the S&P 500.

• Tariff Fluctuations: Tariffs have soared from 2% at the start of the year to 25%, with ongoing judicial cases potentially influencing future policies.

• Empirical Analysis: Dubrovko references a study by Empirical Research, stating that “for most of the manufacturing sectors, the tariff costs would be offset by the impact of some of these reconciliation bill depreciation benefits” (12:10).

• Tax Cuts: He explains that the new reconciliation bill offers limited corporate tax benefits, mainly extending existing cuts and introducing minor depreciation benefits under sections 199A and 179.

Notable Quote:

“If it turns out that we don't get the left tail high-end tariffs, some of the depreciation bill benefits could offset some of those moderate tariff costs” (13:45).

Future Projections: Dubrovko anticipates a shift in import sources from China to other Asian countries like India, Taiwan, Vietnam, and Malaysia, suggesting a continuing mix shift in trade patterns.

US Import Shifts and Trade Dynamics

The episode explores the nuances of US import behavior and the broader implications for global trade.

• Import Diversification: With imports from China declining and those from other Asian nations increasing, the US is witnessing a significant diversification in its supply chain.

• Russian Export Realities: Despite EU proclamations to halt exports to Russia post-invasion of Ukraine, Germany continues transshipments to former Soviet states, highlighting the resilience and adaptability of global trade networks.

Notable Quote:

“The transshipment process is alive and well, not just with respect to the US and China, but also with Germany and Russia” (18:00).

Stablecoins: Current Landscape and Challenges

A substantial portion of the episode is dedicated to analyzing the state of stablecoins, their market dynamics, and regulatory challenges.

• Stablecoin Instability: Dubrovko recounts the tumultuous history of stablecoins, mentioning that “more than 20 stablecoins collapsed between 2016 and 2022” and recent instances of peg losses, such as the third-largest stablecoin dropping to $0.87 in April (20:15).

• Market Dominance: Tether's USDT and Circle's USDC dominate the market, accounting for nearly 90% of both global stablecoin market cap and transaction volume.

• Transaction Volume Misconceptions: He critiques a popular chart in the VC community showing stablecoin transaction volumes nearing Visa’s, clarifying that true business and consumer transactions are only about $70 billion, a mere 1% of the inflated figures (26:00).

Notable Quote:

“It's essentially controlled by a market that's dominated by Tether and USDC” (22:45).

The Stablecoin Protection Act: Questions and Concerns

Dubrovko scrutinizes the proposed Stablecoin Protection Act, highlighting several contentious provisions and their potential implications.

• Lack of Differentiation: He questions the necessity of the act, asking, “What does stablecoin offer that existing regulated channels don't?” (28:30).

• Regulatory Loopholes: Concerns are raised about the act’s loopholes, such as allowing uninsured stablecoin issuers to access the Federal Reserve’s discount window, potentially undermining traditional banking regulations.

• Illicit Activities: Highlighting the association between stablecoins and illicit activities, Dubrovko states, “Stable funds account for like 60 to 70% of all crypto-related crime” (33:10).

• Yield Payments: He points out inconsistencies in the act regarding yield payments on stablecoins, which could inadvertently support capital flows away from traditional banking systems.

Notable Quote:

“There are a lot of weird loopholes in here that will allow the Treasury Secretary to issue safe harbors and waive reserve requirements” (30:55).

Presidential Break-ups: Current and Historical Perspectives

The episode concludes with an exploration of recent presidential break-ups and their historical parallels, providing a rich context for understanding political dynamics.

• Current Break-up: Dubrovko discusses the fallout between the President and Doge Pierre, a high-profile rift fueled by disagreements over the reconciliation bill, leading to significant regulatory and administrative disruptions (35:20).

• Historical Examples: He draws parallels with notable historical break-ups:

  • George Washington and Thomas Jefferson: Highlighting Jefferson’s underhanded tactics to undermine Hamilton’s Federalist policies, leading to Jefferson’s resignation in 1793.

  • John Dean and Richard Nixon: Recounting Dean’s pivotal testimony against Nixon during the Watergate scandal, which marked the beginning of Nixon’s downfall.

Notable Quote:

“Presidential breakups have often been fraught with drama and significant political consequences, much like the recent split with Doge Pierre” (40:15).

Conclusion

Michael Cembalest wraps up the episode by encouraging listeners to explore the stablecoin section in more detail and anticipates further discussions in the upcoming 20-year anniversary retrospective. The episode underscores the complexity of modern financial instruments and policies, and their profound impact on markets and governance.

Notable Quote:

“I think I’ve seen this movie before” (24:50).

Timestamps

For reference, here are the key timestamps associated with notable discussions:

• Q1 Earnings Overview: 00:24 - 06:30
• Tariffs vs. Tax Cuts: 11:00 - 19:00
• Stablecoin Analysis: 20:15 - 34:00
• Presidential Break-ups: 35:20 - 40:15

Final Thoughts

This episode of Eye On The Market provides a comprehensive analysis of current economic indicators, regulatory challenges in the crypto space, and the intricate dynamics of political relationships. Whether you're an institutional investor or a market enthusiast, Dubrovko’s insights offer valuable perspectives on navigating the evolving financial landscape.