Joey 0:01

Welcome back to Wealth Unplugged. This is another episode of Market Chatter where we dig into what's going on in the markets, what storylines are taking place. My name is Joey Loss.

Adam Van Wie 0:12

My name is Adam Van Wie.

Joey 0:14

All right, so, Adam, we certainly don't have a shortage of market activity to talk about. SaaS Apocalypse took the headlines over in the three or four weeks since our last Market Chatter.

Joey 0:26

So let's. Let's start with. That's kind of a fun storyline to start with, and then we'll walk through some other stuff. But what's the deal with software stocks?

Adam Van Wie 0:33

Yeah, the deal with software stocks right now is you don't want to be anywhere near them. They're just getting destroyed. And that's all thanks to AI, which is a little confusing on the surface because you think about AI being this great new technology and how it's helping tech, and it's been driving the market higher, especially the tech sector, for three years now. And so why all of a sudden are our software companies just getting beaten down? And the answer is, well, maybe AI can take over what they're doing. And it looks like to some degree that is the case, that AI can write code better than people. It's faster, it's more efficient, and it's probably eventually going to be more powerful than anything we can develop. So I think you're just seeing the market react to, wow, what if AI actually does more than just disrupt some things, but actually puts some of these software companies out of business?

Joey 1:37

Yeah, I mean, it's been a. It's a fun time to watch these storylines play out. Obviously, I don't have a personal stake in the software business, so I can heartlessly find it interesting that this is happening.

Adam Van Wie 1:47

Definitely. It's probably not as fun if you're on that side of things.

Joey 1:50

Right. If you've been. If you're a lifetime Salesforce or ServiceNow person, you're having a bad couple of weeks here. But, yeah, I mean, these companies for years have been just such a dominant force in the tech sector, which. The tech sector as a component of US Markets as a whole just continues to grow and grow and grow. I think it's now, what, like, over 40% of US GDP is related to tech?

Adam Van Wie 2:15

Yeah, I think that's right.

Joey 2:17

And so software has been a huge component of that. A lot of these software companies have huge enterprise relationships with organizations all over the country. I mean, we interface with a couple of software companies and CRMs, client relationship management softwares ourself, and a lot of them have this model where they charge per seat to use their services. They charge per seat and they're able to increase their premiums, like what you're paying the subscription costs, like by 15% a year, 20% a year. That's been a huge profit driver for them. Last year, the storyline was that there'd be a huge tailwind as AI tools get introduced into these enterprise softwares. And to your point, like this year that kind of changed with the release of a. There's some cloudbot legal tool that came out about two weeks ago, or, sorry, Claude, AI legal tool. And in that moment the market decided, oh my gosh, people are going to build their own enterprise software by Vibe

Adam Van Wie 3:13

coding through AI, which I think is a bit of an overstatement of the. The current state of things. Sure, maybe all things are possible in the future, but it seems like a bit of an overreaction. The other thing is I could paint a scenario where a software company just gets more profitable selling their software for less money, but now you're paying two software developers instead of 40. And those two are just so ultra productive because they're working in tandem with AI to do software updates and increase the capabilities, capability of the software. I'm not saying that that's what's going to happen, but that is another scenario that perhaps the market is. Is not freaking out about right now because they're freaking out about what happens if this puts everyone out of business. So I. You just don't know what's going to happen. And that's what makes it so exciting to watch it play out in real time in the stock market. But nobody knows what the end game is here. And trying to predict it is, is you're more likely to get it wrong than you are to get it right.

Joey 4:21

Yeah, I mean, it's funny if you look at the market as a whole. We were talking about this on the radio this weekend. The market, the S and P, is like flat, basically for what, six months now? Since October or four months at least.

Adam Van Wie 4:32

Yeah. But I just read this morning that something like 80% of stocks are either up or down 20% this year. So that's. That's crazy.

Joey 4:41

Yeah. If you, if you try to get your market vibes from one part of the market, you're definitely not getting the whole story. You have to zoom out and realize it's a calm playing field if you just look at the S&P 500 return. But if you look at any part of it, you're going to see some excitement one way or the Other, you

Adam Van Wie 4:58

know, what it really is is a lesson in diversification and why it's important. Because if you were all in on tech and software stocks over the last few years, you've had a good run, but this year, not so much.

Joey 5:09

You couldn't help yourself.

Adam Van Wie 5:12

It would be. Yeah, I mean if you're following returns, it's, it's not a good for that. Yeah,

Joey 5:20

yeah. And, and you know, with these software companies, one of my friends, I was having a text conversation with him this weekend and he's at Google, obviously not in this sort of CRM software as a service space directly. That was hit so hard two weeks ago. But he was saying, well, has revenue changed? Have profit changed yet? And it's a good question because the answer is no, that hasn't happened yet. The, the whole stock price reaction was a rerating of future expectations, which I think is as we see different parts of the market get hit, at least in the short term. That's probably what it's going to be about is it's not like revenue and profits are changing drastically overnight. It's really people trying to make sense of does this valuation make sense now? If we think that they're going to grow at half the speed or potentially decline in business compared to where they were last quarter when their profits beat the earning expectation, it's confusing.

Adam Van Wie 6:18

In fact, tech has the highest beat rate in earnings and revenue in the fourth quarter, the earnings season that we just saw reporting for over the last few weeks. So it's not like it's showing up at all in the bottom line at this point.

Joey 6:32

Mm.

Joey 6:36

So we talked about the spread, the high and low spread for the S P. But just to make a point, that's the lowest, the second narrowest high, low spread in the S&P 500 index's history

Joey 6:55

in the last hundred years by February 20th.

Adam Van Wie 7:00

Talk about a tight trading range.

Joey 7:02

If you want to get. You can always make an interesting stat if you get a specific about it, as I just did, but it's hard to get out of my mouth. Joey, you're not supposed to ask me that. Adam, it's by February 20. Normally we see more volatility by February 20 is the point of my super long statement. And it's funny at the index level to see that we're in one of the lowest S and P volatility periods. But if you, again, if you look under the hood, there's just like fire and cascades in different parts of the market.

Adam Van Wie 7:09

So what does that mean?

Adam Van Wie 7:34

Yeah, it is a really Interesting market right now. I mean, all markets are interesting for different reasons, but this one is just something that we haven't seen before in our lifetime in this industry.

Joey 7:46

Yeah. And we've talked on the surface, you could say, okay, well should we be super scared of AI now or what is happening? And I think it is interesting to kind of pontificate on. Last year it was all excitement. Every company, these big companies are announcing infrastructure build outs and it was just on the news of spending on the potential future benefits of AI. The market soared.

Joey 8:11

And going into this year it seems like the tone's a little bit changed. It's like, I guess maybe the market kind of expected profits to happen instantly, which is a little bit foolish when you're talking about a build out of this scale.

Joey 8:25

What do you make of that?

Adam Van Wie 8:28

I think it's fair for the market to worry about the amount of money being spent.

Adam Van Wie 8:34

Lots of comparisons to 1998, 1999, the tech bubble. If you look at spend on a relative basis, it's nowhere near what it was in the late 90s. It really is a fraction of that. And no, the returns haven't been realized. But this is a, this is not something plug and play. This is more of a capital improvement project that's going on. And those things like when you build a plant, you're not going to start realizing revenue. Once you lay the foundation, you have to finish the plant, install all the equipment, turn on the manufacturing line, do your quality control, make sure it's up and running correctly. That's a multi year process, as is this. And so I think it's very unrealistic to expect to see results in months after these, these capital improvement projects were announced. And so I know it's tech and it moves faster than a manufacturing plant, but still that's a little bit ridiculous to expect to see something right away. But also there's the uncertainty around will it pay off at all, what is the timeline on it paying off and what is the ROI on those dollars spent? So if you. I think the, I don't think that

Adam Van Wie 9:56

the questions are unwarranted, but I do think that the expectations may be a little out of line.

Joey 10:03

Yeah. And you can see week to week whether the negative suspicions or positive suspicions are dominating.

Adam Van Wie 10:10

Yeah. And it changes often and sometimes intraday.

Joey 10:15

Pretty exciting to watch. And you sent me something this morning that's interesting and creates a bit of confidence, I think. And it was a chart from Goldman Sachs and it walks through the amount of debt financing, the growth of debt financing for the build out in each situation. So people, you know, we've talked about how we see all these different providers doing an overlay of stock market activity. From the beginning of 94 or whenever Netscape came out and ChatGPT came out, they just do a stock activity overlay. And it's remarkably similar, which can create the sense that, wow, we're running, we're like three years out from a terrible day, terrible couple days, but there's a lot to run in the meantime. Well, if you look under the hood, we've talked about how they're not the same because those companies didn't have profits. You just put a.com on the end of it and their valuations would explode by 100x.

Joey 11:12

And today it's very different. You have a different environment. You have massive tech companies with proven profits. They have multiple lines of business and they're choosing to engage in this AI thing and build things out. But underneath the hood, another positive piece is the debt usage to Finance in 2023 was 0%. It grew to 3% in 2024 and then it's at about 9% in 2025. So we're seeing that grow. But the chart also says in 97 it was 38%, then 86%, then 111%, then 152. And this matters because what it means is there's current profits from other lines of business for these major companies paying for the infrastructure build out instead of using debt to build up this bubble. I mean that really behind any serious bubble is a lot of debt. And if we don't see the debt, that kind of changes the feeling and the facts about what's going on.

Adam Van Wie 12:04

Yeah, and I think you brought up a great point, especially when there's cash flow to cover that debt.

Adam Van Wie 12:11

Even if this didn't pan out at 9%, you're not really in danger of going out of business. And also last year the great concern was like, would AI make Google searches irrelevant? Well, what's happened? Kind of the opposite of that. Google searches have probably become more relevant and now they give you an AI summary of your search. And so it's again, some of the. There's going to be a lot more fears and potential devastating changes that are going to be hypothesized by the media, by people, by investors, and only a small percentage of them are going to play out. And so getting fixated on any one thing that you see as a risk right now, without concrete knowledge that it will actually hurt any given industry, is probably not the right Way to go about this. I think again, diversification and having a good balanced portfolio are going to be a way better tool for mitigating risks than trying to guess what the next big thing is.

Joey 13:17

I couldn't agree more. The last, I think you could argue the last 10 years if you just pick the stocks everybody was talking about, you had a pretty decent time. I mean markets were generally moving up. We have obvious bad times. The initial Covid drop, which was pretty short lived and then 2022 was a terrible year that nobody talks about. But other than that, if you owned Nvidia, Microsoft, Google and Netflix and the common bunch, the Mag 7, really you had a great 10 years and diversification kind of became less of a sexy word. Not that it's ever been the sexiest of words, but right now it feels like diversification is pretty attractive because it's just like you said, week to week, sometimes hours of a day versus the other hours of a day. Who's winning, how the market's treating different parts of the market. And maybe it's a good time to run through like indexes and just talk about who's showing up this year because it's a surprising set of players.

Adam Van Wie 14:19

It is not the usual suspects, that's for sure. The NASDAQ is probably the worst perform, maybe not the worst, but one of the worst performing indexes that's been leading the way higher for years. You look at the Dow, it's doing better. And that hasn't been the case for a while either. The S P is kind of right in the middle, just chugging along. But then the real winners are the small caps and international stocks. Been doing amazing and I can't, I don't think there's been a time in the last 15 years where small caps and international were the two areas that you wanted to be invested in. And then tack on precious metals to that. And that trifecta has in my lifetime never been the three best areas of the market.

Joey 15:07

It's an odd time. And so if you're, if you're heavyweight in the Mag 7, you're probably down year to date. even the Mag 7 itself is down about 4% year to date. The S and P is about flat. Nasdaq's down 1.87. The Dow is up 1.8. So that's pretty much a flip side, like a flip of the normal story. Normally you see Dow then a little bit above that's S and P, a little bit above that's Nasdaq that's been true for like 10 years now. Then small caps are up 5.3%, developed international up 9, and emerging markets kicking butt at 13%.

Adam Van Wie 15:14

Oh, I would almost or at best

Joey 15:48

If you have a diversified portfolio, your quarter to date performance probably looks pretty similar to how Q4 went last year, but for different.

Adam Van Wie 15:58

We're seeing that in our portfolios for sure. And I got an alert this morning that the rate that we use hit a 52 week high. I haven't seen an alert like that on a REIT in several years. So that's good news as well.

Joey 16:12

Yeah. So overall, I mean, I, I don't know what you think, but I feel like this is a pretty healthy market rotation that in a way a lot of advisors, just based on the buzz we feel from other podcasts we listen to and what people are saying, like this kind of rotation feels healthy. It just wasn't great watching seven companies carry us higher and higher every single year.

Adam Van Wie 16:35

I can't stand that kind of market. It's just not, it's not healthy, it's not real.

Adam Van Wie 16:40

It's not reasonable to expect that to go on forever. And I'm happy to see it shift.

Joey 16:46

Yeah. The thing that scares me personally about a market dominated by seven or 10 stocks is at some point you wonder how much air is underneath the performance. Momentum is a real thing. If everybody's buying these stocks and that's dragging us higher, how much truth is there? We can look at earnings reports and say, okay, at least earnings are moving in the right directions, which they have been for these companies. There's no doubt these companies are wildly profitable. It's not just a fad. They're doing amazing things and they continue to grow like a small company every year, 10, 15, 20%. It's pretty amazing. But when that's the whole story of the market, you wonder like, okay, is the playing field actually not that good for most people then? So to see it rotating and also to see small cap companies benefiting from AI in a material way,

Joey 17:36

it's all positive.

Adam Van Wie 17:38

Yeah, definitely. The other thing is that things change faster now than they did 50 years ago. And so go back and look 50 years ago at the DAO and you won't see a lot of names that are currently in the DAO. And so that happened in 50 years. Think about what the next 20 years might hold. I'm not saying that Apple won't be in like one of the biggest companies in the world in the next 20 years, but you could very easily make a case that that, that will happen, that that either other companies will outgrow and surpass them or that they will lose their competitive edge and take a turn for the worse. I mean, they've been on top for a long time now and they keep putting out the same thing with little tweaks in it. Can you make a case where that isn't what consumers want 10 years from now? 100% you can. And so I just think that there's going to be a lot of change. It's going to come very quick. And again I just go back to trying to predict what's going to happen next in this kind of environment is nearly impossible. And you'll probably get it wrong.

Joey 18:48

Yeah. And the market kind of, despite its love for the Mag 7, it kind of looks for when the ride is over. Like, if you remember Google, a year ago, we were all wondering like, is Google kind of out of the game? And I feel like we forget that. And then they came out with Gemini and just kicked butt. Now Gemini is probably like the best AI tool. And like you said about Google searches, half the time I Google something, it's because I'm too lazy to go to gemini.com exactly. I just Google it and I know I'm going to get a short answer. It's probably good enough for whatever I'm using it for. And so they just reclaim the lead. But I think the market understands that it's hard to be nimble when you're huge. And as things speed up in the tech environment, being nimble becomes more and more important if you want to stay a top player. And that's why you've seen like all these guys meta everybody jump on the AI train at once. Because I think to them it's a bit of an existential future decision about the future. If they either play the game and figure it out or they don't and they die. Is like kind of where the, I think some of the impetus for the build out came from because they're all spending money, like big money.

Adam Van Wie 19:55

Oh yeah. I, I think they all realize and some of them were late to the game but, or later than others. But I think they've all realized that if they don't do it then some upstart is going to eat their lunch in this, in this arena and they're, they can't have that. So it's either they invested in themselves or they buy another company which is probably by the time they realize who that is is going to cost them way more than doing it themselves.

Joey 20:24

Another interesting phenomenon that's going on Right now that we haven't seen in quite a while is the market is bouncing between overbought and oversold like daily.

Adam Van Wie 20:33

Yeah, it looks like it's going to get to oversold today based on early trading.

Joey 20:38

Yeah, but that's pretty interesting because it feels like we've been just. The 200 day moving average has just been dragged up and up and up by each sequential day's performance is a big generalization. But I mean we've had three 20% basically up years in a row. The 200 day moving average has just kind of been dragged up by each day's outperformance of the last. And to see the market kind of stabilizing and trying to decide is the bull market continuing or are we taking a breather or what's the deal is kind of refreshing. In addition to the rotation thing, I think it's nice if we have a quarter. I guess I'm saying I wouldn't mind if we have a quarter where things are kind of flat and earnings continue to grow. We see another quarter of just like excellent earnings reports. I don't think I'd mind that. It kind of lifts the boats or that lifts the water for all the boats and makes things feel a little bit normal.

Adam Van Wie 21:35

Yeah, definitely. There's been, I mean we've been blessed with, with some of the best three year returns I've ever seen. And there's just no, again, you, you can't have unreasonable expectations in the market. But we all have this sort of recency bias that says like, oh, suddenly our, our expectations are reset to 20 years are normal and they're not. Just let me remind you that the long term return on the s and P500 is way closer to 10 than it is to 20. So still really great returns at 10%. So if we saw, if we see a 3% year on the S and P, that's okay. This, we're in it for the long game and for every 20% year you got to have a 0% year to average out the, the to get close to the long term average. So don't be surprised if we do see something like that. Even if you include 2022 where the S&P I think was down 16%, we're still trending way above the long term aver. Just don't be surprised if this isn't the best year. Ironically, it would come in the second year of the current presidency and the second year tends to be the worst year. Doesn't matter what party they're with. Republican and Democrats. The second year of all presidencies tends to be the worst year of the four. And so would it be surprising if this was not a great year or an average year or below average year? Not even a little bit. It would just follow that long term trend, which is really weird. There doesn't seem to be any specific reason for that trend, but if you go back and look at the data, it is definitely a trend.

Joey 23:16

It's stark,

Joey 23:19

I think, when you were with Justin on a college visit. But we dug into that specific question, why is the second year so bad? And the difference was amazing. It was like years one, three and four of any presidential term, first or second, doesn't matter which term, it is, just any term. The average was like 8% plus. I think it might have been over 9. And for the second year it was like 0.4%.

Adam Van Wie 23:41

Crazy. And Biden? Same thing. 2022 was the second year of his presidency. And so. And the other three years were great.

Joey 23:45

Yeah.

Joey 23:49

Yeah. Yeah. It's interesting. And obviously midterms, I guess, kind of play a role, like headlines just get. You see more conflict. But I feel like most of the institutional money doesn't care about that. It's looking at, it's trying to figure out the storylines we started the episode with and, you know, how do they rate future growth expectations.

Joey 24:11

Yeah, it's interesting. And then, and then we also have an upcoming Fed leadership change. I kind of feel like that doesn't matter that much.

Adam Van Wie 24:17

I don't think that this pick of Trump's is going to be considerably different than Powell. And I don't mean that's not a comment positive or negative. I just think that he seems like a reasonable guy who's going to try and do what the Fed's dual mandate dictates that he should do, which is keep employment high and inflation low.

Joey 24:41

Yeah. And I think he was an interesting choice because obviously Trump has been saying for a while, like, push rates down. And it kind of felt like he was just going to pick a lackey. He was going to do his bidding. And he had that option with Kevin Hassett. Hassett was like, I'll do whatever it takes to get the job, and then Yeah, I just want the job. I don't even care if you fire me two years in. I just, it was, it was, it was so willing. He was so willing that Trump actually said it turned him off, which I think is pretty funny to think about.

Adam Van Wie 24:59

just want the job.

Joey 25:14

And Kevin Warsh, the other Kevin, who now appears to be the presumed nominee is a much more balanced person who's actually pretty hawkish against inflation historically, which means he's not afraid to raise rates to fight inflation. So I think he was a balanced choice. He says that he would do what he's done historically to fight inflation if he thought inflation was a problem. But he doesn't seem to think inflation is the problem that some other pundits are saying that it is. And I think we're in the camp of thinking inflation's not a problem either at the moment.

Adam Van Wie 25:48

It's, it's really hard for me to listen sometimes to these media pundits that are just getting out there and talking about inflation when two years ago you didn't hear, three years ago you didn't hear a peep out of them when inflation hit 9%. Now we're, now we're below 3 and it's all that you can find on the news. First of all, the long term average for inflation is 3%. It's actually, I did the, I pulled the data, it's 3.26%

Adam Van Wie 26:19

going back to 1914. And so we're well below that right now. And depending on where you look, if you look@truflation.com you'll see that we're below 1%. If you look at the PCE data, we're somewhere between 2, 4, and 3. If you look at CPI numbers, we're closer to 2%. Inflation is not out of control right now. And the, the tariffs that everyone was so worried about just got shot down by the Supreme Court. And so yes, there are other tariffs that might be imposed, but honestly the tariffs hadn't made a noticeable difference in the inflation rate. And so it's just not the biggest problem that we're facing right now. We have way bigger problems in the job market, in the housing market than we do when it comes to the cost of, of consumer goods or things that people buy on a day to day basis.

Joey 27:16

Yeah, and those factors, like, I'm not a Fed chairman, but I love to play one on the radio with you guys.

Adam Van Wie 27:22

Exactly. Me too.

Joey 27:24

And I feel like, you know, the factors that are now at play are the ones that say, you know, Rate Cutter 2 is a good idea.

Adam Van Wie 27:32

Right.

Joey 27:33

These weren't, you know, six months ago. I wasn't really feeling that way and we were doing rate cuts, but it was like, okay, yeah, I guess it's in the gray, doesn't really matter if it goes down a little bit, whatever. But now it's like, okay, we've got some tightening in certain Markets and we need to loosen things up. And the way to do that is to make it cheaper to borrow money so companies are incentivized to spend and that gets people hired. That lowers the prices of housing theoretically over time. Obviously when the Fed cuts rates, it doesn't immediately kill mortgage rates or drop mortgage rates. But

Joey 28:05

historically most of the time, if you give that some time to ripple out, it does start to impact the 10 year which impacts mortgage rates. It feels like a little bit of market monetary loosening or easing is a good idea at the moment.

Adam Van Wie 28:18

Yeah, I'm with you. Six months ago I wasn't, I was in the same camp you were back then and now I'm much more pro rate cut doesn't have to be dramatic. We don't need to move a point or more. I just think a couple of cuts over the next six months. Months are probably in the best interest of the country right now.

Joey 28:41

Yeah.

Joey 28:43

And I think there's, I feel like the conversations about Fed rates have started to mature away from what we have to keep dry powder for

Joey 28:55

raising rates when inflation gets out of control. I feel like we've matured a little bit beyond that, but we're still not objective about what inflation really is at the moment. And that's annoying because it's just not.

Adam Van Wie 29:06

Yeah, and I don't know, honestly, the, the, the interest rates being low did not cause the inflation we saw in 2022 out of control. Government spending and printing money is what caused the inflation in 2022. It's, it's, it's a monetary phenomenon phenomenon. It is not caused by the interest rates. The interest rates can help address it. And that's exactly what the, the Fed did back then was raise rates to a point that slowed that inflation

Adam Van Wie 29:36

and then eventually brought it back down. That was a pretty painful process in the market personally for, for all consumers, but it worked. And so I just don't think that these cuts are going to be spur massive inflation. I don't see that as being the case. If we did a bunch of cuts and printed a bunch of money, then yes, I think that would be the case.

Joey 30:00

Yeah, I don't see any reason for additional money printing money printing at the moment. No, nothing, Nothing's in dire crisis.

Adam Van Wie 30:06

The current administration is not interested in ramping up printing money. In fact, they've been working to try and curb the deficit. But it's a tall task obviously. I wish we could get a handle on it, that'd be great. But it just doesn't seem very realistic in the short term.

Joey 30:26

So to close out today, you had a really good monologue this weekend about the K shaped economy and how that relates to some of the political economical movements that we're seeing take place in certain parts of the country. Obviously, we have a very left politically

Joey 30:45

mayor in New York City in Mandani, and you've got a lot of tension there about things like he ran on a campaign of rent freezing and then

Joey 30:58

that was predicated on the belief that he could raise income taxes on the very wealthy of New York City. Albany has that power, not the mayor of New York City. Albany said no. He turns around and says, okay, well then we're going to raise property taxes on everybody, which of course will have a direct impact on rents. Unless the landlords are just going to eat it, which I don't think landlords are in the business of doing. Not because they're evil, but because that's how economics works. And so without focusing too much on any particular city, I'm kind of curious for your thoughts on the K shaped economy and how this is influencing such a disparate experience in what's happening. Because I think for a lot of people it feels like the economy is great. Stock market's doing well. Everything that they're a part of seems to be rising in value. They're doing well. And then there's another group that's not having that same experience. Can you comment on that a little bit?

Adam Van Wie 31:52

Yeah. I think a lot of it goes back to where you were in 2020 pre Covid. If you went into Covid and you had assets and you had a white collar job that could be easily transitioned to zoom and you had potential for stock options and bonuses, you're probably as well off as you've ever been in your life. Five years later, six years later. If you went into Covid with a blue collar job that depended on you showing up at a physical location that may have been shut down during COVID you were a renter, you didn't have a large 401k,

Adam Van Wie 32:34

you're probably as worse off as you've ever been in your life because your rent doubled your in your. That your income might have gone up by 10% and your expenses went up by 25%, let's say. And you're at. You had minimal assets, so you're not wealthier than you've ever been. And there is no easy fix for you in the short term. And I feel like you're seeing this dichotomy play out in all aspects of American life. Right now, if you get on a plane, the first class passenger, the first class cabin is full. They're expanding those cabins right now because they're, that's what they're selling is first class tickets. If you're, you know that that's just one example of the upper part of the K and how well off those people are. Concert tickets is another one. Concert tickets have gone from $100 to $400 in the last six years and they're selling out. And no one seems to care that what they cost. It's just, I want them and I have money, so I'm going to get them. Well, you're pricing out a lot of the country by having those types of prices. And so all these different examples are just showing that there is a, a class of people that is really, really doing well. But then if you go and ask the average person on the street, how's the economy, you're probably going to get the answer that we're in a recession because to at least half the country it really feels like that. And they don't have a path to get out of the situation that they're in. And I think that's driving politics right now. I think it got Mondami elected. I think that it is going to be the major theme of the midterm elections. And I'm not really sure what the solution is to that disparity right now.

Joey 34:36

Yeah, that's a very good summary. Thank you for that. And yeah, I think it plays a lot into the political movements that we're seeing as a response to what they perceive as the Trump economy. But it's really a phenomenon that started to your point, much sooner than that, really unrelated to any president. It was just what Covid did to the economy, particularly slowing down housing supply. I mean, we, we've talked at ag nauseum about how

Joey 35:04

the, the slowdown of supply buildup for housing that took place during COVID We've just not caught up to it. And that's a huge part of the housing element, housing price element that has taken place over the last few years. And that was really giant domino one that impacted people and continues to impact people about how, how they feel they're doing because they can't buy homes. And then you look at the other parts of the economy you alluded to, obviously this problem is bigger than that. And one of the things that's kind of hard to reconcile for those that are in the haves category is the stock market is pretty disconnected from that lower K reality. And the reason for that is 70% of GDP, which has a relationship with stock market performance, is based on consumer spending. And the top 10%, the first class cabin you're talking about does over 50% of consumer spending. So you know if you pull in the next 20 or 30%, you're talking about most consumer spending is done by the top 40, 50%. And that bottom 50% can be a huge group that, just for lack of a better way to say it isn't that impactful on stock market activity or gdp. And so that makes it hard to see. And that's why the job reports inflation. These other things matter. When we see huge amounts of unemployment and we see job growth slowing dramatically, at the same time we know that there's a problem coming and a recession is on the table.

Adam Van Wie 36:40

Yeah, that's a great point. I think the things that you want to watch that just give you an idea of is it getting better or worse for people? People in the bottom part of the K are things like average hourly wages, are they rising faster than inflation? The answer is yes, but it's not fast enough because they fell behind over the last six years. They're behind that curve. And so you need to continue to see those average hourly wages rise. That would be a really good sign. You also need to watch the unemployment rate, which is very low right now. But if you start to see that trend up at all, especially in the, the lower paying professions, the blue collar type jobs, that would be a very disturbing sign. It hasn't happened yet, but it, if it were to happen, I, I would be very worried.

Joey 37:31

Yeah,

Joey 37:33

you know, you know the AI story in a way, just to make this, to further articulate how hard it is to imagine what comes next. The AI story in a way has a bias against white collar workers more so than blue collar workers. I mean, it's the blue collar jobs that are more resilient to AI just in their nature in the short term than white collar jobs. I mean, you look at the way software industry was treated or the way coders are being treated right now, obviously it's not personal. But if vibe coding becomes a bigger part of the way that big enterprise systems are built, then the need for coders is just less. It's just immediately less. And those kinds of things can be taken away from the white collar industry at the moment more quickly than your H Vac tech who has to go to a house and talk to people and diagnose the problems and fix them manually. So you've got multiple kind of cross storylines playing out. It makes it an interesting time.

Adam Van Wie 38:33

Yeah, definitely. And that is, that is a weird aspect of this, is that many of those jobs are much more resilient to AI than some of the high paying jobs. But that isn't helping the situation today. It might help it 6 months, 12 months out, when maybe white collar jobs are getting laid off and blue collar ones are in more demand. But it doesn't help fix the problem today, unfortunately.

Joey 39:02

Right, right. Well, thank you for your time, Adam. We'll touch base in a couple weeks, see what's going on. Never a shortage of things to talk about, no doubt. Thank you.

Adam Van Wie 39:11

Thanks, Joey.