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- [00:03]
Morgan Stanley Announcer
Support for the show comes from Morgan Stanley's Thoughts on the Market Today's financial markets move fast. Morgan Stanley moves faster with their daily podcast Thoughts on the Market. Thoughts on the Market covers daily trends across the global investment landscape with actionable insights from Morgan Stanley's leading economists and strategists. And with most episodes under five minutes long, staying informed has never been easier. Listen and subscribe to Thoughts on the Market wherever you get your podcasts.
- [00:33]
Virgin Atlantic Announcer
Support for this show comes from Virgin Atlantic. A lot of people dread flying. I've been on some bad flights and I've been on some truly miserable flights. But it's a whole different story when an airline shows up for you and the crew treats you like a vip. Virgin Atlantic offers warm one on one service from the moment you step on board. Its upper class cabin features four course meals, fully lay flat seats and drinks delivered on demand. Make the journey as exceptional as a destination. When you fly Virgin Atlantic. Go to virginatlantic.com to learn more.
- [01:05]
McDonald's Promo Host
K Pop Demon Hunters Saja Boy's breakfast meal and Hunt Tricks meal have just dropped at McDonald's. They're calling this a battle for the fans. What do you say to that, Rumi? It's not a battle. So glad the Saja Boys could take breakfast and give our meal the rest of the day.
- [01:19]
Alex Heath
It is an honor to share.
- [01:21]
McDonald's Promo Host
No, it's our honor.
- [01:22]
Alex Heath
It is our larger honor.
- [01:24]
McDonald's Promo Host
No, really, stop. You can really feel the respect in this battle. Pick a meal to pick a side
- [01:33]
John Mowry
and participate in McDonald's while supplies last.
- [01:35]
Ed Elson
Today's number, 40 million. That's how many dollars the top five spirituality sellers have made on Etsy. Today's other number is 100. That's how many dollars we will be charging for our latest product, Prof. G Crystals. Money market matters. If money is evil, then that building is hell.
- [01:57]
John Mowry
The show goes up.
- [02:03]
Ed Elson
Welcome to Prof. G Markets. I'm Ed elson. It is April 2nd. Let's check in on yesterday's market vitals. The major indices extended their rally for a second day in a row. Brent crude prices briefly slipped below $100 per barrel. Treasury yields were flat on the day and the dollar continued its slide. Okay, what's happening? Stocks are still rallying on hopes that war with Iran is winding down. President Trump said the President of has asked for a ceasefire, but the US Will only consider when the Strait of Hormuz is, quote, free, open and clear. That comes a day after Trump told aides he'd be open to ending the war even if the Strait of Hormuz remains closed. The S&P 500 surged nearly 3% and the Nasdaq was up nearly 4% on Tuesday. And all three major indices continued their rise yesterday. So here to discuss the market's movement, we're speaking with John Mowry, chief investment officer, portfolio manager and equity strategist at NFJ Investment Group. So John, we keep on getting all of these announcements and to be clear, we are recording this before Trump makes his 9pm announcement. He said he's going to deliver this address to the nation. When people listen to this, he'll have made that address. Unfortunately, we cannot analyze it. We're recording it before. However, markets appear to be quite optimistic right now. They were optimistic on Tuesday, optimistic on Wednesday as well. What do you make of the market's reaction to what might be an end to this war? Maybe not. What do you think?
- [03:41]
John Mowry
So I think that, you know, when you look at the multiple compression that has occurred off of what has gone on in the Middle east, you have to be somewhat optimistic. You know, technology stocks, which make up, you know, the largest sector in The S&P 500, they're now trading below 20 times earnings with accelerating earnings growth. That's actually the lowest multiple since back in 22. You've now gotten past the Liberation Day multiple. So I think you have to be optimistic as a long term equity investor here, what I would say about what's going on in the oil markets, obviously the oil sector was extremely strong in the first quarter. I think it was the second best quarter since 1989. And energy stocks had two distinct advantages going into the year. The first is that they were historically cheap and then you had the exogenous shock that occurred with the oil spike. So I think that when you look at what's going on, you definitely have to be optimistic. As you look at more cyclical areas, technology financials have really been beaten up. And even though the broader markets are only down 6, 7%, the multiple has compressed far below what I think investors might expect given kind of a more small pullback on a total return basis.
- [05:03]
Ed Elson
Yeah, it's interesting you mentioned the tech sector there because, yes, those multiples have been compressed. A lot of the biggest names in tech have just gotten crushed this quarter, like big, big drawdowns. And I guess what's hard to understand is how much of that even has to do with what's happening in the Middle East. I mean, on Monday, as example, we saw there was a little bit of a rally and it coincided with some maybe peace talks or at Least some announcements that made it seem like maybe the war was coming to an end. You saw this rally, but it was mostly in the tech sector. At which point I'm kind of thinking, well, how are these even related? I mean, maybe it's the helium that goes through the Strait of Hormuz, it goes into the semiconductors. But is that really the problem here? What is the connection between those two? Is there any connection at all? And what does that leave you to do as an investor?
- [06:00]
John Mowry
Yeah, there's a lot of pieces swirling around. You have the concerns around private credit. You now have shock inflation that's very different than hot inflation. So you have concern that the Fed may not be able to cut as much as folks thought. So I think that those are two obvious concerns. And then you have, you know, the exogenous shocks of how long does this conflict in the Middle east drag out? This looks like a bit more of a complicated situation relative to Venezuela. So I couldn't agree more, Ed. You know, when you look at what's going on in technology that was selling off well before this news came out, and that really is around concerns around can these technology companies hold their margins? Is that going to be possible to do with the advances in AI? It's really ironic that Nvidia, the largest stock in the S&P 500, is disrupting its own siblings to some degree in the software space. No one really expected that. What's fascinating though, and I was looking at this today, there has not been any change to earnings and margins for the large software names yet. So either the market just wants to reprice in anticipation of earnings cuts, or it's just the market recalibrating and kind of a broadening out trade. We've talked about concentrated leadership in the market for some time. So this may be the market just reshuffling, digesting and compressing some of those multiples as we kind of march forward. Because the earnings in technology stocks have not changed, it's just been a multiple compression story. So you have a lot of information with private credit, as I mentioned, that's been another concern. I think that that parlays into, you know, is the Fed going to have a harder time reacting if you have hotter inflation numbers coming out to what could be a brewing problem in credit? And a lot of that private credit has funded a lot of the areas in software. So all these are connected, whether it's credit interest rates and how that impacts the CPI readings coming out of, you know, the result of the oil shock.
- [08:10]
Ed Elson
Yeah, credit interest rates and then of course, AI. And I guess maybe the AI story is kind of part of the private credit story as well, because the private credit concerns are based on the holdings in software, which is based on the holdings in AI or what AI could do to that economy. Yes, it seems as though, and I don't know if you agree with this, but it seems as though investors right now and the markets right now are especially unanchored or especially maybe the better way to put it is seem to have very low levels of conviction, at least relative to what they had in previous years. I mean, what we saw with Citrini Research as an example, where a blog post goes out that's related to AI and suddenly everyone starts selling. We saw it recently with the memory chip market which we were discussing on our show yesterday, where Google comes out with some algorithm that this is going to change the way the memory chip market works. And then everyone sells and then Bernstein comes out with research and says, no, it's not going to be a problem. Everyone buys. I don't know what your reading is, but I get the sense that investors are just so confused right now that they're not really down to go with any position. They're kind of going wherever the wind blows.
- [09:26]
John Mowry
I think you hit the nail on the head. I mean, I just pulled up Micron because I wanted to get it exactly right. Micron is growing Forward earnings at 739% percent and trades at 5 times earnings. So that is the market telling you it doesn't know what to do with the earnings profile. The earnings growth is so egregious to the upside, the market does not know what to do. So the multiple is being pushed down even though the stock has gone up because the earnings have accelerated so dramatically. The same thing is occurring with Nvidia. Nvidia is growing at 80 and it's trading below 20 times earnings that's, you know, at a parity almost with the S&P 500. So I couldn't agree more. I don't think folks know quite what to do with this. I think that it's really going to come down to capex spend from the hyperscalers. We'll get a read on that as we roll into quarterly earnings. But I will say this is one risk that you know, is out there. To the extent that, you know, Microsoft had a really tough quarter. To the extent that, you know, the Mag 7 continues to struggle in the equity markets, that is going to put pressure on management's ability to continue funding CapEx. You know, historically They've done it from free cash flow. Now they're having to tap the debt markets. So the market will only tolerate that so far. So I think that you know what, what plays out here with the war in Iran and the CPI continuing to come in is going to be really critical because if the equities prices stay, stay weak for the MAG7, you know those are the, those are the customers for many of the, of the chip and memory stocks. So it's going to be tougher for them to continue the CapEx cycle. So we're going to have to see how those earnings shake out. But I will tell you as I sit here today and I look at where valuations are, I look at where earnings are and I look at the sectors that did well. Some of the more defensive sectors, energy, utilities, REITs. I'm optimistic that we could push through this and I think that the current administration really does not want to war in their hands. The midterms are coming up. I think that there's going to be a lot of pressure to resolve this relatively quickly and move out. And particularly with the administration saying they want lower rates, it's going to make it way harder if you continue to push oil prices because the strait stays closed and that's 20% of the world's oil supplies going through there. So one point that I will make those fascinating. I haven't heard anyone talk about this. It relates to oil. So in 2022 you had two real bad things going on, right? You had interest rate hiking cycle and then you had the Ukraine. You know, Ukraine was invaded by Russia and you saw oil, oil prices shoot up. And that was a really tough period for the market because you had the Fed raising rates to deal with inflation from COVID and supply chain disruptions. And on top of that, you know, you had a war going on. So it was really tough. And what occurred was you saw the Baker Hughes rig count really ramp up oil production to compensate for the higher oil prices. That has not happened yet. The Baker Hughes Rick count has not moved higher. We're going to get a reading tomorrow on that. But that's also interesting. That would need to move up I think to kind of release some constraint. If that doesn't, you actually could have a scenario where the Gulf refiners and the energy stocks maybe continue to participate in the market. But you see technology, financials and other cyclicals kind of play a catch up trade as well. So it could be a bullish setup, right?
- [13:14]
Ed Elson
Yeah. It seems as though you would buy the dip or Maybe you have already bought the dip. Are there any names or any sectors that you feel particularly bullish on right now? I get the sense that that is your position.
- [13:27]
John Mowry
Yeah. So I will tell you that we have taken some energy profits. We were overweight energy and that was not a call based on anything in the Middle East. It was a bottom up call and valuation. So we were fortunately positioned, you know, the right way this quarter. Yeah. So you know, we'll take it. But what I would say is that we've been adding to some of the more cyclical areas like financials, like industrials. You know, financials have went through a really tough time, particularly the regional banks back in 2023 with the failure of Silicon Valley and First Republic, you know, you're getting a lot of multiple dislocation. Price to books are attractive. There's and the yield curve is steepened now. We'll see what happens here with the Fed. You know, if they don't cut, that's going to put a little bit pressure on the yield curve. But my expectation that, that you should have a steep yield curve. That's a healthy sign for the economy. I don't think you want the 10 year parity with the fed funds rate which is basically where we are today. So if that steepens banks should fly. They've got great balance sheets, they're not exposed to private credit. I like financials here and then as I mentioned some of the industrials in the capital goods space, industrial machinery, these names look attractive and I think the market is trying to recalibrate. Doesn't want to pay for longer duration assets, meaning the software trade or is more interested in cash flow generative hard assets. And I think the market is recognizing that actually the AI trade needs hard assets and so maybe it's overly discounted these areas relative to, you know, the technology trade. So I think that you could see a compression there. You're already seeing it. So yeah, I'm optimistic. You know we could see a leg lower. I would not be surprised if that happens. But that being said, I think that you should be adding to equities here given that you're, you know, you're, you're getting the S and P. You know it was under 20 times yesterday.
- [15:23]
Ed Elson
Right. Just before we let you go here, we'll see what Trump says. But you mentioned that this administration probably doesn't want to have a war on its hands. Probably doesn't want to be dealing with even higher oil prices. Midterms are coming up. I agree conceptually with all of that, however, it's also, that's also what I thought at the beginning of the year and it's also what I thought last year. And then they did start a war and they did close down the Strait of Hormuz and they went ahead with all of this. So that leaves me in a slightly difficult position. I agree, theoretically, probably they want to end this thing, but then I look at what they do and I'm like, well, maybe not. Maybe there's no way to understand it. Maybe there's no way to get into his mind and predict what's going to happen. I guess my question to you is, let's say this continues. Let's say the speech is a nothing burger. Or he says, actually I'm doubling down. Would that change your position at all? And if so, how?
- [16:29]
John Mowry
You know, I think the playbook is what happened with the tariffs. He drew a hard line and the market ultimately forced his hand. It's not unlike when Mark Zuckerberg said, we're going to rename the company Meta, we're going to do the Metaverse. And then the market took the stock down 67% and he said, whoops, it's the year of efficiency.
- [16:50]
Alex Heath
Yeah.
- [16:50]
John Mowry
So the market ultimately dictates how leadership has to respond so they can draw hard lines. But Trump is, he does seem to be very aware of what's going on in the equity markets. And to be honest, I don't know if that's not improper. I think that a leader of the country should be focused on what the largest companies in the world are doing.
- [17:10]
Ed Elson
Agreed.
- [17:10]
John Mowry
So I actually think that if he comes out with a more negative stance and the market reacts very negatively, my expectation is that that will be pressuring him because again, to the extent the markets stay negative, that starts to put pressure on the CapEx cycle, that puts pressure on the AI buildout, that puts pressure on tensions with China and their build out. So there's all this geopolitical chess that occurs with a weak equity market. I think for America to be in the best position, we need a strong equity market. And I think that that's going to ultimately the lever that he uses to or that he's going to be considering when he thinks about how he deals with the Iranian conflict. And I think that my personal opinion is it's already proved to be more complex than he anticipated.
- [18:01]
Ed Elson
Yeah, I think that's right. John Mowry, Chief Investment Officer, Portfolio Manager and equity strategist at NFJ Investment Group. John, appreciate your time.
- [18:10]
John Mowry
Thank you.
- [18:11]
Ed Elson
After the break, OpenAI makes history again. And if you're enjoying the show, please follow our new Prof. G Markets YouTube channel starting next week. That is where you'll find our content on YouTube. The link is in the description. Subscribe Now.
- [18:32]
Virgin Atlantic Host
Support for the show comes from LinkedIn. It's a shame when the best B2B marketing gets wasted on the wrong audience. Like imagine running an ad for cataract surgery on Saturday morning cartoons. Or running a promo for this show on a video about Roblox or something. No offense to our Gen Alpha listeners, but that would be a waste of anyone's ad budget. So when you want to reach the right professionals, you can use LinkedIn ads. LinkedIn has grown to a network of over 1 billion professionals and 130 million decision makers according to their data. That's where it stands apart from other ad buys. You can target your buyers by job title, industry, company role, seniority, skills, company revenue, all so you can stop wasting budget on the wrong audience. That's why LinkedIn Ads boasts one of the highest B2B return on ad spend of all online ad networks. Seriously, all of them. Spend $250 on your first campaign on LinkedIn ads and get a free $250 credit for the next one. Just go to LinkedIn.com Scott that's LinkedIn.com Scott Terms and conditions apply.
- [19:36]
Morgan Stanley Announcer
Support for the show comes from Morgan Stanley's Thoughts on the Market Today's financial markets move fast. Morgan Stanley moves faster with their daily podcast Thoughts on the Market. Thoughts on the Market covers daily trends across the global investment landscape with actionable insights from Morgan Stanley's leading economists and strategists. And with most episodes under five minutes long, staying informed has never been easier. Listen and subscribe to Thoughts on the Market wherever you get your podcasts.
- [20:05]
Virgin Atlantic Host
This is Advertiser Content brought to you by Virgin Atlantic. Ed, a couple weeks back I got you a birthday gift. Not to pat myself on the back, but it was a pretty good one.
- [20:15]
Ed Elson
It was indeed. You surprised me with Virgin Atlantic Upper class tickets to London.
- [20:20]
Virgin Atlantic Host
So tell us all about it.
- [20:22]
Ed Elson
It was pretty incredible. From the moment I entered that upper class cabin, I have to tell you, I felt like a vip. Anything I needed a drink, snack assistance with the seats.
- [20:31]
Virgin Atlantic Announcer
Flat seats.
- [20:32]
Ed Elson
Flat seats.
- [20:33]
Virgin Atlantic Host
That's the key.
- [20:33]
Ed Elson
Flat seats. Exactly. Had the four course meal. Got my champagne. Very delicious. Enjoyed the food and the journey home. The journey home was great. I went to the Virgin Atlantic LHR clubhouse. That's the Heathrow clubhouse. Heathrow Clubhouse was awesome. Got myself a coffee. Headed over to the meditation pod that they call the Soma Dome kind of felt like a sort of spaceship where you relax and think nice thoughts. So I did that for a little bit. Then we went over to the wing, which are these acoustically sealed booths where you could do some work. You could even record a podcast. I didn't do that, but maybe I should have. It was a very enjoyable experience.
- [21:13]
Virgin Atlantic Host
So, Ed, the real question here is, what are you planning to get me for my birthday?
- [21:19]
Ed Elson
See the world differently. With Virgin Atlantic, flying should be more than just transport. It is part of the adventure. Go to virginatlantic.com to learn more.
- [21:28]
McDonald's Promo Host
Tickets and lounge access provided by Virgin Atlantic.
- [21:39]
Ed Elson
We're back with Profgy Markets. OpenAI just closed the largest funding round in startup history. The round brought in 122 billion of committed capital, up from the $110 billion the company announced in February. SoftBank Co led alongside Andreessen Horowitz and D.E. shaw Ventures. Amazon, Nvidia and Microsoft also participated. The company is now valued at $852 billion, but it's generating $2 billion in revenue per month. It is still not profitable and it is still burning cash. So here to help us break down the largest funding round in history, we're speaking with Alex Heath, author of the Sources newsletter and co host of the Access podcast. So Alex, $852 billion valuation, that makes it the most valuable private company ever. Neck and neck with SpaceX, which as we know is going public soon. I guess let's just start with your headline reactions.
- [22:44]
Alex Heath
I mean these are astounding numbers, right? We may have 3 trillion plus AI IPOs this year. So OpenAI, SpaceX obviously and Anthropic. It's a race between OpenAI and Anthropic now to get out next. I think there are sounding numbers. I mean the growth rates are the story, right? The growth rates of in OpenAI's case, the API business codex, which will be I think more central to the company's story this year than even ChatGPT. And then the continued ChatGPT growth has definitely slowed but still winning consumer and very early on the ads piece there, but starting to move into that quickly. So astounding number, I think proving that Sam Altman is won his already kind of de facto title as the greatest fundraiser in Silicon Valley history. This definitely cemented that someone should do the math. He's raised, gosh, what, over 200 billion for the company at this point in the last three years. So the last time we were all talking about this kind of Fundraising talent was Travis Kalanick and Uber way back in the day, and that was, I think, 60 or 70 billion. So not even the total sum of this one. One round?
- [24:12]
Ed Elson
Yeah, it is astounding. One thing that's a little interesting to me, $852 billion valuation, I mean, that tells you a story of just demand going absolutely through the roof. The fact that he's able to raise this amount of money and at this valuation, it would make it the 13th most valuable company of all companies in the world, which is just astounding. But then there was also this report from Bloomberg. They were saying that OpenAI shares on the secondary markets, the demand for those shares has been plummeting. They were saying that there are people who have been trying to sell their shares, $600 million worth of shares that were trying to get, that an investor was trying to sell and he couldn't find any buyers. And so that was quite interesting to me. It feels as though maybe there are two different worlds here. There's, I guess, the private markets going and getting these shares directly from the company, and then I guess secondary markets where maybe there's a different story. I'd just be curious to get your reaction to that story.
- [25:20]
Alex Heath
OpenAI pushed back on that story pretty quickly, which I thought was interesting. They. They are not a fan, as are most companies that are private, of these secondary transactions. Because you lose touch with the company, you're not a direct shareholder. There's us layers and layers of management fees and pass through things that make it very risky, honestly. And I wouldn't look at like a 600 million chunk of secondaries not moving as, like, any indication of, frankly, anything. When you look at a $122 billion round of primary capital that just closed again. I mean, I think a large chunk, though, of that, of that capital is the strategics, right? It's Amazon and SoftBank. And there's probably a bit of, a bit of circular motion there. Like, I'm sure a significant chunk of Amazon's investment is contingent on using Trainium and, you know, being integrated into AWS or doing deeper product partnerships. But I wouldn't read too much in the secondary piece. I mean, I think in general, you're going to see a crackdown and a realization that these secondaries are, for the most part, like, legally problematic. And I think a lot of people are going to get hosed in the SpaceX IPO. I've been seeing things about, you know, multiple layers of SPVs trying to, like, trade secondary chunks where the company's Just not. They're not obligated to recognize that. They're not obligated to say, like here are your shares, you know, because they're not really yours at that point. And so proceed with your own caution there.
- [27:00]
Ed Elson
You said don't read into it. I'm just going to read into it one once more. I wonder, as these companies you mentioned, trillions of dollars worth of startups, are looking to go public soon. You've got SpaceX going to be the most valuable, the largest IPO in history. You've got OpenAI eventually, you've got Anthropic eventually. I mean, when these companies go public, it's going to be like just a bonanza in the public markets. But I wonder how those companies will perform in the public markets and I wonder if the dynamics are different and I wonder if the secondary markets might be, I don't know, a signal of what may be to come. Because as you mentioned, the valuations for these companies have been primarily driven by the institutions here and perhaps by some of the circular motion that you talk about, where it's these giant corporations, companies like Amazon, Nvidia, et cetera, investing huge amounts of money into these companies. They're the ones who are driving those valuations up. And I wonder if when it gets to the public markets, maybe it would be something of a different story. I guess my question being, how do you think a company like OpenAI would perform in the public markets? Say it goes public next year at a more than trillion dollar valuation. What do you think would happen there?
- [28:22]
Alex Heath
I have no idea. I think if I knew that, I wouldn't be on a podcast. Frankly, Ed, no insult to you, I think that it's going to be incredibly hard for these companies to do quarterly earning. Anthropic added like 6 billion in ARR in February and that's unprecedented. And was based on new product traction with Claude code. Right. And the models, we could see multiple step function shifts like that this year because OpenAI is getting ready to release their next large model, Spud, as it's called internally, which they are very much hyping behind the scenes. Anthropic. There was a big leak about Anthropic preparing its own suite of large models that are apparently so capable that they're showing them first to cybersecurity companies to try to get them ready for when they're deployed. Wow. This is all happening before these companies go out and then you've got the super app that OpenAI is doing. And when I talk to, I talked to the head of Codex at OpenAI last week and he told me what is happening in coding. They expect to branch out into basically every domain of knowledge work in the next six to nine months given the model capability and where the products are headed in this more Claude cowork. You're coding but you don't really know it. Like AI coding for normies that really saturating and extending into all kinds of knowledge work domains in the same way that it's revolutionized engineering already so quickly that's incredibly profound at scale and like to try to navigate that again against quarterly earnings and the whims of the public markets. As a public company, I just. They need to do it because they need the capital and they need liquidity. But it's going to be very tough. And these companies are also like, we've talked about this before, like a bit of a governance disaster.
- [30:25]
Ed Elson
Right.
- [30:26]
Alex Heath
And so that's another messy part of it. So there's a lot of things that don't make these clear cut even with the elon ness of all of it and how many crazy reverse mergers have happened. SpaceX looks like a very normal company next to OpenAI and Anthropic. And that's a really wild statement, but it's true. And so I just don't think the markets have seen anything like this. And if you believe what these companies are saying, that AGI and Superintelligence are right around the corner or in the case of what I was saying, the head of Codex told me that, you know, the coding phenomenon is going to generalize all of knowledge work this year. How do you tell that in a quarterly story? You know, I'm not really sure. It could be spiky. As I say, I don't know if that's the official investor term, but stock go up and stock go down rapidly. It's my prediction.
- [31:19]
Ed Elson
I think that's a better way to put it. It's more simple, it's more descriptive and it's a great, great point.
- [31:24]
Alex Heath
This is why I'm not an investor.
- [31:26]
Ed Elson
It is a great point. Alex Heath, author of the Sources newsletter, co host of the Access podcast. Alex, thank you.
- [31:33]
Alex Heath
Thank you, Ed.
- [31:37]
Ed Elson
In other news, Trump's ballroom plans might be coming to an end. A US federal judge just ordered Trump to stop building his $400 million White House ballroom until he gets approval from Congress. District Court Judge Richard Leon wrote that Trump is, quote, not the owner of the White House and sided with the plaintiff's motion that argued that, quote, no statute comes close to giving the President, the authority he claims to have. So the ballroom is on hold. Will it ever get built? I guess we'll see. In the meantime, though, the East Wing remains in ruins. As you may remember, Trump had the 123-year-old structure demolished back in October. He did so without any review, without any approval. He just went ahead and did it. And as of today, the East Wing remains destroyed, except now there is no plan or approved plan to rebuild it. Now, you could say that that's the judge's fault. You could say it's not the judge's fault. I don't really care where you stand either way. That is the situation we're in. The building is destroyed and it will continue to be. Now, why am I talking about a ballroom on a show where we talk about markets? Well, I've mentioned this on the show before, but the ballroom is quite significant because the ballroom is a great metaphor for our entire economic policy under this president. In fact, most of the big decisions Trump has made for our economy have looked a lot like the ballroom, where his first action is to demolish what already existed, then promise to replace it with something better, a new plan, until he realizes he doesn't actually have the wherewithal or even the constitutional ability to come up with an alternative, at which point he says, screw it. He moves on to the next thing. And then as we look back on what happened, we realize all this guy did was break the thing he said he was going to replace, and then he didn't even replace it. I'm calling this strategy bnfl. Break now, fix later. And we have seen this many, many times, and I'm now going to go through a few examples. The first example would be Iran. Now, it's not totally clear why we invaded Iran, but I think we can agree the general idea was to remove this threat of a regime that was either building nuclear weapons maybe, or had some interest in harming America. That is the generous reading. So what did we do? We spent $25 billion on bombing Iran. We caused four and a half thousand deaths. We roiled the markets around the globe only for the previous regime to remain intact. Only now it's run not by the guy we killed, obviously, but by his son. Now, do we think the son of the murdered ayatollah has positive feelings about America? Personally, I doubt it. And yet Trump is now talking about ceasefire talks. He's now talking a little bit of signaling about getting out of the region. So, again, we have the same dynamic. We broke the thing, but then when it came to fixing the thing we said, eh, we'll deal with it later. Another example would be tariffs. We impose sweeping tariffs on every nation around the world. We cause one of the greatest drawdowns in stock market history. We increase inflation by a full percentage point, essentially taxing every U.S. household more than $1,000. And then we realize, oh, wait, this isn't even constitutionally legal. The Supreme Court strikes it down, and now we're going to have to figure out a way to give everyone refunds. Except the refunds will only apply to businesses, not consumers. So the consumer gets screwed again. Yes, we broke it, but whatever, we'll fix it later. Doge is another good example. We create an agency that fires 300,000 federal workers. The agency shuts down USAID, which leads to nearly 10 additional deaths that would have been prevented. People kind of cheer only for Doge to then be quietly dissolved. Meanwhile, that same administration decides to increase our deficit by roughly $4 trillion, thus reversing any efficiencies that were supposed to be implemented in this government. So did we break things? Yes, we did. We broke a lot of things. Did we fix anything? No, we didn't. Most of Trump's big policies fit this rubric, and I do encourage you to go back and look through them and realize that for yourself. They break the thing. They dismantle whatever work was done over generations, like the ballroom. They promise to change it or replace it or build something bigger and better and more beautiful in its place, but then they just don't. Usually because they're in over their heads, but also because it's simply easier to break things than it is to build things. This is the pattern. We see it over and over and over again. Now, who knows how this Iran war will actually turn out? But if we are going off of the pattern, if we're going off of Trump's track record, if we're going off of the ballroom, well, then the conclusion is quite obvious. Lots will be destroyed. Buildings, systems, markets, even lives. And at the end of the day, when it's time to build something in its place, Trump will probably just move on to the next thing, and we will be left with nothing. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Profigy Markets from Profgy Media. If you liked what you heard. Give us a follow. I'm Ed Elson. Tune in tomorrow for our conversation with the acclaimed divorce lawyer James Sexton.