WEBVTT 00:00:00.000 --> 00:00:02.060 Welcome back to the deep dive. You know, the 00:00:02.060 --> 00:00:04.299 sources you sent over this week, they present 00:00:04.679 --> 00:00:07.620 really profound challenge. They really do. It's 00:00:07.620 --> 00:00:09.720 like you're looking at two completely different 00:00:09.720 --> 00:00:12.240 global realities at the same time. Exactly. On 00:00:12.240 --> 00:00:14.900 one hand, you have these institutional firestorms. 00:00:14.900 --> 00:00:18.000 I mean, high stakes political drama, huge constitutional 00:00:18.000 --> 00:00:20.219 clashes over war powers. And this this really 00:00:20.219 --> 00:00:22.859 surprising and sustained conflict with the Vatican 00:00:22.859 --> 00:00:24.940 in all places. Right. And then on the other side, 00:00:24.940 --> 00:00:28.239 you have the cold, hard economic data page after 00:00:28.239 --> 00:00:32.380 page of Q4 2025 analysis from, well, basically 00:00:32.380 --> 00:00:34.500 every major investment house. And it's not pointing 00:00:34.500 --> 00:00:36.500 toward instability. It's pointing towards something 00:00:36.500 --> 00:00:40.780 remarkably powerful, robust, and durable for 00:00:40.780 --> 00:00:43.840 the economy heading into 2026. So that's our 00:00:43.840 --> 00:00:45.920 mission today. We have to filter the signal from 00:00:45.920 --> 00:00:49.079 all of this noise. How do we, as informed observers, 00:00:49.799 --> 00:00:53.469 reconcile this just deafening political volatility 00:00:53.469 --> 00:00:56.490 with financial analysis that points toward a 00:00:56.490 --> 00:00:59.350 multi -year productivity -driven economic shift. 00:00:59.649 --> 00:01:01.570 Yeah, it feels like a government in chaos and 00:01:01.570 --> 00:01:03.789 an economy just in cruise control. It really 00:01:03.789 --> 00:01:05.890 does. I think if we synthesize it, it's pretty 00:01:05.890 --> 00:01:08.420 simple. The political volume knob is turned up 00:01:08.420 --> 00:01:11.640 to 11, but the economic engine is just quietly 00:01:11.640 --> 00:01:14.640 purring along underneath it all. OK. The foundational 00:01:14.640 --> 00:01:17.180 story here is that the last couple of years were 00:01:17.180 --> 00:01:19.480 all about building the raw AI infrastructure, 00:01:19.939 --> 00:01:22.060 capital expenditure. The next couple of years, 00:01:22.260 --> 00:01:24.799 that's going to be about diffusing that AI throughout 00:01:24.799 --> 00:01:27.000 the whole economy. And that diffusion is what 00:01:27.000 --> 00:01:29.739 generates the tangible productivity gains. Exactly. 00:01:29.900 --> 00:01:32.739 Gains that politics. at least so far, hasn't 00:01:32.739 --> 00:01:34.900 been able to disrupt. OK, let's start with that 00:01:34.900 --> 00:01:37.140 political volatility first, because the headlines 00:01:37.140 --> 00:01:42.099 are genuinely stunning. We have to begin with 00:01:42.099 --> 00:01:44.680 the institutional limits being tested on presidential 00:01:44.680 --> 00:01:47.959 power. Specifically around Venezuela. Yes, military 00:01:47.959 --> 00:01:50.159 action in Venezuela. It's the ultimate test of 00:01:50.159 --> 00:01:52.500 checks and balances, right? Right. We saw the 00:01:52.500 --> 00:01:54.819 Senate advance this measure designed specifically 00:01:54.819 --> 00:01:57.500 to limit the president's ability to wage war 00:01:57.500 --> 00:02:00.989 within or against Venezuela without you know, 00:02:01.349 --> 00:02:03.310 explicit approval from Congress. And this came 00:02:03.310 --> 00:02:05.469 right after the president's public threats of 00:02:05.469 --> 00:02:08.189 a second wave of strikes. Not to mention his 00:02:08.189 --> 00:02:10.750 incredibly provocative comments about potentially 00:02:10.750 --> 00:02:13.389 running Venezuela after capturing President Nicolas 00:02:13.389 --> 00:02:15.870 Maduro. And what made this vote so significant 00:02:15.870 --> 00:02:19.009 wasn't just the action itself, but... The internal 00:02:19.009 --> 00:02:21.330 breach. Exactly. The breach in his own party. 00:02:21.830 --> 00:02:25.490 It passed 5247, which meant five key Republicans, 00:02:26.110 --> 00:02:29.169 Rand Paul, Susan Collins, Josh Hawley. They broke 00:02:29.169 --> 00:02:32.310 ranks. They voted with the Democrats. That is 00:02:32.310 --> 00:02:35.370 a powerful bipartisan statement. It really is. 00:02:35.550 --> 00:02:37.770 It just speaks to the gravity of the constitutional 00:02:37.770 --> 00:02:40.189 question. I mean, this wasn't some policy disagreement. 00:02:40.449 --> 00:02:43.189 This was about the separation of powers. Hawley 00:02:43.189 --> 00:02:46.050 explicitly cited the war clause. He did. And 00:02:46.050 --> 00:02:48.259 Paul was so emphatic. He called the threatened 00:02:48.259 --> 00:02:51.180 actions an act of war, plain and simple, arguing 00:02:51.180 --> 00:02:53.479 the Constitution just doesn't grant the presidency 00:02:53.479 --> 00:02:56.039 that kind of unilateral power. I remember Collins' 00:02:56.240 --> 00:02:58.639 statement, too. She said that while she supported 00:02:58.639 --> 00:03:01.039 capturing Maduro, committing more U .S. forces 00:03:01.039 --> 00:03:03.759 without Congress was a constitutional line, she 00:03:03.759 --> 00:03:06.099 just wouldn't cross. And how did the president 00:03:06.099 --> 00:03:09.539 respond to this constitutional defense from his 00:03:09.539 --> 00:03:11.860 own party members? Well, without restraint. He 00:03:11.860 --> 00:03:14.120 just went on the offensive. Right. Bashing them 00:03:14.120 --> 00:03:15.699 for their stupidity, saying they should never 00:03:15.699 --> 00:03:18.849 be elected again. The real revelation, the thing 00:03:18.849 --> 00:03:21.310 that made the sources we reviewed just pause, 00:03:22.169 --> 00:03:24.310 was what he said when he was pressed on the limits 00:03:24.310 --> 00:03:27.949 of his own power. Oh, this quote. Yeah. He said, 00:03:28.490 --> 00:03:32.129 there is one thing, my own morality, my own mind. 00:03:32.270 --> 00:03:34.550 It's the only thing that can stop me. And then 00:03:34.550 --> 00:03:36.729 he doubled down and said he doesn't need international 00:03:36.729 --> 00:03:40.090 law. My own morality, my own mind. I mean, that 00:03:40.090 --> 00:03:42.509 is a staggering summation of the institutional 00:03:42.509 --> 00:03:44.389 tension we're seeing right now. And it's not 00:03:44.389 --> 00:03:46.960 just in Washington. No. Our sources point to 00:03:46.960 --> 00:03:49.419 a parallel institutional conflict brewing with 00:03:49.419 --> 00:03:52.000 the Vatican. With the arrival of Pope Leo XIV, 00:03:52.259 --> 00:03:54.879 the first American pope, he's become a serious 00:03:54.879 --> 00:03:57.300 ideological counterweight. And the conflict is 00:03:57.300 --> 00:04:00.400 immediate. It's direct. Shortly after the president's 00:04:00.400 --> 00:04:03.060 run -Venezuela comment, what does Pope Leo do? 00:04:03.400 --> 00:04:06.400 He uses his Angeles address to call for safeguarding 00:04:06.400 --> 00:04:08.400 Venezuela's sovereignty. And this seems like 00:04:08.400 --> 00:04:10.659 just the entry point to a much broader conflict 00:04:10.659 --> 00:04:13.139 with Maggi -aligned conservatives, doesn't it? 00:04:13.210 --> 00:04:16.889 Absolutely. Pope Leo IV is wading into every 00:04:16.889 --> 00:04:19.389 single culture war battleground. He's pushing 00:04:19.389 --> 00:04:22.089 for humane treatment of migrants, and he's taken 00:04:22.089 --> 00:04:25.009 action removing Cardinal Dolan from a key post, 00:04:25.350 --> 00:04:27.389 replacing him with a much more progressive bishop. 00:04:27.569 --> 00:04:29.610 He's also been openly critical on climate change, 00:04:29.670 --> 00:04:32.230 right? Oh, yeah. He even blessed a chunk of Greenland 00:04:32.230 --> 00:04:35.209 ice for dramatic effect. And he's taken a more 00:04:35.209 --> 00:04:38.129 tolerant line toward LGBTQ plus Catholics and 00:04:38.129 --> 00:04:40.050 a much harder line against the death penalty. 00:04:40.170 --> 00:04:42.470 It's fascinating. The one critic the president 00:04:42.540 --> 00:04:44.720 has to hold his fire on is the one who's elected 00:04:44.720 --> 00:04:48.199 for life. Precisely. For all the deep ideological 00:04:48.199 --> 00:04:50.959 clashes, the president has shown, well, unusual 00:04:50.959 --> 00:04:53.500 restraint toward Pope Leo. And the sources are 00:04:53.500 --> 00:04:56.319 clear why. The voting bloc. Catholics make up 00:04:56.319 --> 00:04:59.459 a massive 22 % of his electorate. He just cannot 00:04:59.459 --> 00:05:02.279 afford to alienate them, even if many Magier 00:05:02.279 --> 00:05:04.079 Catholics disagree with the perp on some of these 00:05:04.079 --> 00:05:06.139 issues. And it's the final point here on the 00:05:06.139 --> 00:05:09.000 political friction. Pope Leo is 70. He's healthy. 00:05:09.240 --> 00:05:11.540 and he's elected for life. He has a very long 00:05:11.540 --> 00:05:14.860 runway to shape Catholic politics. Time is definitively 00:05:14.860 --> 00:05:17.519 on his side. He can exert influence well past 00:05:17.519 --> 00:05:20.060 this presidential term. OK, so that's the intense 00:05:20.060 --> 00:05:22.279 political arena. You've got institutional friction, 00:05:22.740 --> 00:05:25.819 constitutional crises, global ideological clashes. 00:05:26.139 --> 00:05:29.199 Given all of that, the real question is, is the 00:05:29.199 --> 00:05:32.819 economy even paying attention? Let's pivot to 00:05:32.819 --> 00:05:36.889 the Q4 2025 economic landscape. Right. And the 00:05:36.889 --> 00:05:38.689 consensus among all these investment reports 00:05:38.689 --> 00:05:42.209 is just crystal clear. The economy is fundamentally 00:05:42.209 --> 00:05:45.649 strong and it's driven by a generational shift. 00:05:45.709 --> 00:05:48.730 From the capability phase of AI to the diffusion 00:05:48.730 --> 00:05:51.050 phase. Exactly. We're moving from building the 00:05:51.050 --> 00:05:53.209 tools to actually implementing those tools economy 00:05:53.209 --> 00:05:55.970 -wide in factories, in offices, in logistics, 00:05:56.490 --> 00:05:58.709 everywhere. And the investment needed for that 00:05:58.709 --> 00:06:01.579 diffusion is Well, it's staggering. How do the 00:06:01.579 --> 00:06:03.959 sources actually quantify this AI plus capex 00:06:03.959 --> 00:06:06.459 boom? It's the key metric. They call it the Trump 00:06:06.459 --> 00:06:08.779 investment boom and they measure it at five percent 00:06:08.779 --> 00:06:11.699 of GDP in its peak year. Five percent. Put that 00:06:11.699 --> 00:06:13.899 in historical context. That's huge. It's one 00:06:13.899 --> 00:06:15.759 of the largest economic injections in U .S. history. 00:06:15.899 --> 00:06:17.860 It's only behind the covid recovery stimulus 00:06:17.860 --> 00:06:20.560 that was ten point seven percent and the railway 00:06:20.560 --> 00:06:22.959 boom back in the 1880s, which was six point zero 00:06:22.959 --> 00:06:25.259 percent. This is genuinely a top three capital 00:06:25.259 --> 00:06:27.740 build out in over a century. That sounds enormous, 00:06:27.899 --> 00:06:30.740 but. Is it sustainable? Are we just piling on 00:06:30.740 --> 00:06:33.319 debt to make this happen? That's the most critical 00:06:33.319 --> 00:06:35.519 insight in these reports. It is sustainable. 00:06:35.879 --> 00:06:39.379 And the reason is that the U .S. non -financial 00:06:39.379 --> 00:06:41.939 corporate sector is currently, and they put this 00:06:41.939 --> 00:06:45.459 in all caps, very under -leveraged. So companies 00:06:45.459 --> 00:06:47.839 can handle the spending. Easily. If you look 00:06:47.839 --> 00:06:50.160 at the corporate debt service ratio, which just 00:06:50.160 --> 00:06:52.740 measures how easily companies can pay their existing 00:06:52.740 --> 00:06:56.420 debts, it's near a historic low in 2025. OK, 00:06:56.500 --> 00:06:58.339 so debt loads are low. That's a great starting 00:06:58.339 --> 00:07:00.879 point. It's better than great because the AI 00:07:00.879 --> 00:07:03.680 CapEx is still being funded primarily by FCF, 00:07:03.680 --> 00:07:06.019 by free cash flow. That's money companies actually 00:07:06.019 --> 00:07:08.560 have on hand. They aren't relying heavily on 00:07:08.560 --> 00:07:10.839 new debt yet. It makes this whole thing very 00:07:10.839 --> 00:07:13.139 solid. And if we look at historical parallels, 00:07:13.399 --> 00:07:16.860 the railroad, the automobile, What inning are 00:07:16.860 --> 00:07:20.000 we in for this AI cycle? Well, the cycle really 00:07:20.000 --> 00:07:23.500 kicked off in late 2022. If you track its trajectory 00:07:23.500 --> 00:07:25.779 on a chart against those previous buildouts, 00:07:26.000 --> 00:07:28.519 we are following that historical curve perfectly. 00:07:28.720 --> 00:07:31.040 So there's still room to grow. Significant room 00:07:31.040 --> 00:07:33.420 to grow before this cycle peaks. The sources 00:07:33.420 --> 00:07:35.740 are suggesting several more years of aggressive, 00:07:36.000 --> 00:07:37.759 high -value investment are still ahead of us. 00:07:37.879 --> 00:07:40.579 It's a multi -year trend. OK, this is the data 00:07:40.579 --> 00:07:43.550 point I find most compelling. productivity data. 00:07:43.850 --> 00:07:46.949 We're seeing this sharp, really unexpected rise 00:07:46.949 --> 00:07:51.009 in labor productivity growth in 2024 and 2025. 00:07:51.339 --> 00:07:53.680 It is truly stunning. Productivity growth is 00:07:53.680 --> 00:07:55.860 now approaching levels we haven't seen sustained 00:07:55.860 --> 00:07:59.680 since the 1960s and the, you know, the dot com 00:07:59.680 --> 00:08:02.259 boom of the late 1990s. This isn't just theory. 00:08:02.439 --> 00:08:04.600 It's translating directly into corporate profit. 00:08:04.779 --> 00:08:06.759 So let's zero in on those profit implications. 00:08:07.360 --> 00:08:09.839 The sources compare output versus hours worked 00:08:09.839 --> 00:08:13.540 in this post chat GPT era against the 1990s Internet 00:08:13.540 --> 00:08:15.899 boom. What does that comparison tell us? It shows 00:08:15.899 --> 00:08:18.180 this massive decoupling between production and 00:08:18.180 --> 00:08:20.319 effort, which is the definition of a corporate 00:08:20.319 --> 00:08:23.810 win. Since ChatGPT was released, output what 00:08:23.810 --> 00:08:26.589 companies produce is up by 7 .9 percentage points. 00:08:26.589 --> 00:08:29.029 Okay, and what about the labor input? Ours worked, 00:08:29.170 --> 00:08:31.250 only up 1 .4 percentage points. So you're getting 00:08:31.250 --> 00:08:33.230 almost six times the output for the extra labor 00:08:33.230 --> 00:08:36.000 you're putting in. Precisely. The profitability 00:08:36.000 --> 00:08:38.940 gains are just enormous because technology is 00:08:38.940 --> 00:08:41.820 allowing output to surge without a proportional 00:08:41.820 --> 00:08:45.080 increase in labor costs. It's the exact same 00:08:45.080 --> 00:08:48.259 mechanism that drove that massive profit expansion 00:08:48.259 --> 00:08:50.480 in the 90s. Which leads us right to the labor 00:08:50.480 --> 00:08:52.879 market where the narrative has been so pessimistic. 00:08:53.279 --> 00:08:55.820 I mean, people still worry AI is going to destroy 00:08:55.820 --> 00:08:58.679 jobs. But the data we're seeing suggests the 00:08:58.679 --> 00:09:01.679 opposite. AI seems to be enhancing value in high 00:09:01.679 --> 00:09:03.980 exposure fields. So the dire predictions are 00:09:03.980 --> 00:09:06.779 being undercut by the evidence? Strongly. Occupations 00:09:06.779 --> 00:09:09.279 with high AI exposure, the ones that are supposedly 00:09:09.279 --> 00:09:11.620 most vulnerable, they actually saw higher job 00:09:11.620 --> 00:09:14.899 growth post -COVID, about 1 .7 % annualized. 00:09:15.039 --> 00:09:17.259 What about wages? That's even more telling. They 00:09:17.259 --> 00:09:20.720 saw vastly higher real wage growth, 3 .8 % post 00:09:20.720 --> 00:09:23.500 -COVID versus a stagnant 0 .1 % pre -COVID. So 00:09:23.500 --> 00:09:25.340 AI isn't killing these jobs. It's making them 00:09:25.340 --> 00:09:27.220 more productive and therefore more valuable. 00:09:27.500 --> 00:09:29.950 That's a critical nuance. But if we zoom out 00:09:29.950 --> 00:09:32.110 to the overall unemployment picture, the rate 00:09:32.110 --> 00:09:34.330 is creeping up. That's causing some concern. 00:09:34.519 --> 00:09:36.879 It is. But if you look at the historical data, 00:09:37.320 --> 00:09:39.600 this current cycle has seen the slowest increase 00:09:39.600 --> 00:09:41.440 in the unemployment rate going all the way back 00:09:41.440 --> 00:09:44.059 to 1950. And those surging corporate earnings 00:09:44.059 --> 00:09:46.620 we just talked about, they're acting as an employment 00:09:46.620 --> 00:09:49.100 buffer. Giving companies the financial cushion 00:09:49.100 --> 00:09:51.820 to hold onto labor. Exactly. Even as productivity 00:09:51.820 --> 00:09:53.879 surges. Yeah. And then you have to talk about 00:09:53.879 --> 00:09:56.659 small businesses. They are the backbone of American 00:09:56.659 --> 00:09:58.679 employment. Absolutely critical. They represent 00:09:58.679 --> 00:10:02.019 something like 81 .7 percent of all non S &P 00:10:02.019 --> 00:10:05.029 500 employment. And we are seeing a crucial forward 00:10:05.029 --> 00:10:08.340 -looking indicator term positive. The NFIB Small 00:10:08.340 --> 00:10:11.019 Business Hiring Plans Index, which tracks hiring 00:10:11.019 --> 00:10:13.799 intentions, is starting to spike. It's near 20 00:10:13.799 --> 00:10:16.860 percent now. That points to a strong labor future 00:10:16.860 --> 00:10:19.340 as policy uncertainty starts to fade. And that 00:10:19.340 --> 00:10:22.200 policy context is important. The sources highlight 00:10:22.200 --> 00:10:24.840 that the daybreak push is expected to really 00:10:24.840 --> 00:10:27.799 start taking hold in 2026. That's kind of the 00:10:27.799 --> 00:10:29.919 final piece of the puzzle. When you combine reduced 00:10:29.919 --> 00:10:33.259 regulatory friction with this sustained capital 00:10:33.259 --> 00:10:36.240 investment boom, you get productivity, you get 00:10:36.269 --> 00:10:38.590 better profits, and you get stronger employment. 00:10:38.649 --> 00:10:40.049 And we're seeing it in the financial system, 00:10:40.210 --> 00:10:42.850 too. The Slake Survey indicates lending standards 00:10:42.850 --> 00:10:45.950 are loosening. OK, let's shift to the fixed income 00:10:45.950 --> 00:10:48.789 market, because this feels like the junction 00:10:48.789 --> 00:10:51.870 where the political volatility we started with 00:10:51.870 --> 00:10:54.649 could actually create serious economic instability. 00:10:54.750 --> 00:10:56.710 It's where the risk is, for sure. The market 00:10:56.710 --> 00:10:59.429 seems stable, but that risk of politicization 00:10:59.429 --> 00:11:02.250 is just enormous. Right. And first, just to set 00:11:02.250 --> 00:11:04.889 the stage, that high -growth private credit market 00:11:04.889 --> 00:11:07.279 that gets all the attention, it's still a sideshow. 00:11:07.379 --> 00:11:10.500 It is not systemic compared to the, what, $48 00:11:10.500 --> 00:11:13.620 trillion U .S. fixed income market? That's important 00:11:13.620 --> 00:11:15.980 context. But it does seem like the tech sector's 00:11:15.980 --> 00:11:18.120 reliance on capital might be moving beyond just 00:11:18.120 --> 00:11:20.620 free cash flow. The spreads suggest that's happening. 00:11:21.139 --> 00:11:23.059 U .S. investment grade tech credit spreads are 00:11:23.059 --> 00:11:25.279 now at or slightly above the spreads for all 00:11:25.279 --> 00:11:28.179 other sectors. That tells us the market anticipates 00:11:28.179 --> 00:11:30.799 the AI buildout will soon need to tap debt markets 00:11:30.799 --> 00:11:34.250 in addition to FCF. And how is this sudden productivity 00:11:34.250 --> 00:11:37.370 boom confusing the Fed's math? Oh, productivity 00:11:37.370 --> 00:11:39.690 booms confuse them every single time. It was 00:11:39.690 --> 00:11:42.710 the same in the late 1990s. The sources highlight 00:11:42.710 --> 00:11:45.809 the spiking disagreement among FOMC members about 00:11:45.809 --> 00:11:48.070 the neutral interest rate, the Goldilocks rate, 00:11:48.269 --> 00:11:50.409 the theoretical rate that neither stimulates 00:11:50.409 --> 00:11:53.409 nor restricts the economy. And if the Fed can't 00:11:53.409 --> 00:11:55.129 agree on what their steering wheel settings should 00:11:55.129 --> 00:11:58.149 be, it just adds massive uncertainty for everyone. 00:11:58.269 --> 00:12:00.350 So is the market telling the Fed what to do here? 00:12:00.490 --> 00:12:02.990 It certainly appears to be signaling you're done 00:12:02.990 --> 00:12:05.730 cutting rates. You can see that in the SOFR data, 00:12:05.750 --> 00:12:08.529 which tracks short -term funding costs. But here's 00:12:08.529 --> 00:12:10.610 the counterintuitive part. What's that? The 10 00:12:10.610 --> 00:12:13.149 -year Treasury rate has actually increased since 00:12:13.149 --> 00:12:15.250 the Fed began cutting rates back in September 00:12:15.250 --> 00:12:18.830 2024. The cuts haven't lowered long -term borrowing 00:12:18.830 --> 00:12:21.750 costs. Which brings us to the crucial political 00:12:21.750 --> 00:12:24.470 risk. This is what connects the chaos in Washington 00:12:24.470 --> 00:12:27.330 back to the economic stability. This is the foundational 00:12:27.330 --> 00:12:30.639 vulnerability for 2026. What happens if the president 00:12:30.639 --> 00:12:33.519 politicizes or interferes with the Fed's independence 00:12:33.519 --> 00:12:37.379 to try and push for lower rates? History is exceedingly 00:12:37.379 --> 00:12:39.840 clear on this point. Exceedingly clear. When 00:12:39.840 --> 00:12:42.039 a national leader starts meddling with the central 00:12:42.039 --> 00:12:44.679 bank, you can look at Turkey, Argentina, Sri 00:12:44.679 --> 00:12:48.200 Lanka, Brazil. The result is universally catastrophic. 00:12:48.320 --> 00:12:50.980 Every single time. Every single time. It leads 00:12:50.980 --> 00:12:53.480 to a loss of market trust, which immediately 00:12:53.480 --> 00:12:55.679 means higher interest rates and a much lower 00:12:55.679 --> 00:12:58.340 currency value. We're not talking about a market 00:12:58.340 --> 00:13:01.519 blip. talking about undermining the entire mechanism 00:13:01.519 --> 00:13:04.419 of national stability. That's the risk to watch. 00:13:04.679 --> 00:13:07.179 Thankfully, there is one anchoring factor that 00:13:07.179 --> 00:13:09.960 suggests the market hasn't lost faith yet. Yes. 00:13:10.419 --> 00:13:12.700 Inflation expectations are still firmly anchored, 00:13:12.740 --> 00:13:14.879 and that is a great sign that the market trusts 00:13:14.879 --> 00:13:17.759 the Fed will do its job, provided its independence 00:13:17.759 --> 00:13:20.500 is maintained. OK, so let's wrap up with equities. 00:13:21.000 --> 00:13:23.419 What does this strong fundamental foundation 00:13:23.419 --> 00:13:25.360 mean for stocks, especially when you consider 00:13:25.360 --> 00:13:28.590 the political cycle? There is a historical headwind 00:13:28.590 --> 00:13:30.789 we have to acknowledge. The presidential cycle 00:13:30.789 --> 00:13:34.009 suggests that 2026 year two, the midterm year, 00:13:34.389 --> 00:13:37.490 is often tough for the S &P 500. Historically, 00:13:37.509 --> 00:13:40.110 you see lower average and median returns. But 00:13:40.110 --> 00:13:42.950 fundamentals usually beat cycles. They do. And 00:13:42.950 --> 00:13:45.669 the market is fundamentally driven by profits 00:13:45.669 --> 00:13:49.370 and nominal GDP growth. And both of those are 00:13:49.370 --> 00:13:52.049 strong to quite strong right now. Corporate earnings 00:13:52.049 --> 00:13:54.629 growth is outpacing revenue growth, which means 00:13:54.629 --> 00:13:57.710 margins are expanding. And this rally is profit 00:13:57.710 --> 00:13:59.929 driven, which makes it more robust than the dot 00:13:59.929 --> 00:14:02.529 com bubble. Much more robust. And the big theme 00:14:02.529 --> 00:14:04.370 investors have been waiting for, the broadening 00:14:04.370 --> 00:14:06.590 out, we are finally seeing real evidence that 00:14:06.590 --> 00:14:09.110 it's taking hold. So it's not just the big info 00:14:09.110 --> 00:14:12.210 tech leaders anymore. No. While they've led for 00:14:12.210 --> 00:14:14.490 years, traditional cyclicals are now starting 00:14:14.490 --> 00:14:17.269 to lead the market higher. And crucially, the 00:14:17.269 --> 00:14:19.549 Fed's right cuts are finally starting to benefit 00:14:19.549 --> 00:14:22.850 smaller companies. S &P 600 small cap earnings 00:14:22.850 --> 00:14:26.129 are rising. That strongly supports this broadening 00:14:26.129 --> 00:14:28.809 outtrade that's expected to accelerate in 2026. 00:14:29.149 --> 00:14:31.509 Which is great news for diversification. It is. 00:14:31.669 --> 00:14:34.149 Okay, and let's end this section with that fun, 00:14:34.529 --> 00:14:36.610 intriguing piece of skepticism from the sources. 00:14:37.129 --> 00:14:39.789 The Time magazine superjinks. It's a great piece 00:14:39.789 --> 00:14:42.110 of market trivia. Time featured the architects 00:14:42.110 --> 00:14:45.690 of AI on its 2025 Person of the Year cover. And 00:14:45.690 --> 00:14:47.970 the historical data shows what happens when Time 00:14:47.970 --> 00:14:50.250 features a corporate leader or an industry like 00:14:50.250 --> 00:14:52.549 that. The performance in the year after is not 00:14:52.549 --> 00:14:55.080 good. Not at all. The stock performance of those 00:14:55.080 --> 00:14:57.559 companies sees a significant average drop negative 00:14:57.559 --> 00:15:02.059 25 .7 % on average, negative 7 .6 % median. It's 00:15:02.059 --> 00:15:04.820 a classic sign of market top concentration and 00:15:04.820 --> 00:15:06.980 a good reason to stay a little skeptical of the 00:15:06.980 --> 00:15:09.720 biggest AI leaders, even with their amazing fundamentals. 00:15:10.139 --> 00:15:12.799 That is a fascinating note to end on. OK, let's 00:15:12.799 --> 00:15:15.009 synthesize this whole deep dive. The CAPEX and 00:15:15.009 --> 00:15:17.549 AI build out is real, it's sustainable, and it 00:15:17.549 --> 00:15:20.070 still has room to run. This investment is translating 00:15:20.070 --> 00:15:22.009 directly to productivity gains we haven't seen 00:15:22.009 --> 00:15:24.750 since the 90s, which means better profits and 00:15:24.750 --> 00:15:27.649 stable employment. The Fed's probably done cutting, 00:15:27.830 --> 00:15:30.169 which creates stability, and the market is poised 00:15:30.169 --> 00:15:32.289 to broaden out. So what does this all mean for 00:15:32.289 --> 00:15:34.789 you? It means you're navigating a world where 00:15:34.789 --> 00:15:37.509 the noise from Washington and Rome seems deafening. 00:15:37.590 --> 00:15:40.009 It's full of institutional challenges and threats 00:15:40.009 --> 00:15:42.870 to executive power. And yet underneath all of 00:15:42.870 --> 00:15:45.159 it, The engine of the economy is just quietly 00:15:45.159 --> 00:15:48.779 humming along with 1990s level productivity growth. 00:15:49.019 --> 00:15:51.220 The challenge is separating that high frequency 00:15:51.220 --> 00:15:54.120 emotional political volatility from these durable 00:15:54.120 --> 00:15:57.000 multi -year economic trends. And deciding which 00:15:57.000 --> 00:15:59.299 door you prioritize. While the market signals 00:15:59.299 --> 00:16:02.000 this beneficial broadening out to smaller companies 00:16:02.000 --> 00:16:04.679 in 2026, the potential for a political clash 00:16:04.679 --> 00:16:08.019 to destabilize global monetary policy is undeniably 00:16:08.019 --> 00:16:10.860 real. So considering that stark historical data 00:16:10.860 --> 00:16:13.409 on politicizing the Fed, which always leads to 00:16:13.409 --> 00:16:16.049 economic catastrophe, is the core risk for 2026 00:16:16.049 --> 00:16:19.269 really the natural cooling of the economy? Or 00:16:19.269 --> 00:16:21.309 is it the potential erosion of institutional 00:16:21.309 --> 00:16:22.850 independence? That's something to think about 00:16:22.850 --> 00:16:24.230 as you follow these stories unfold.