Trump Goes After Fed Chair, Markets Pull Back, and A Tribute To Scott Adams - This Week In Capitalism

Trump Goes After Fed Chair, Markets Pull Back, and A Tribute To Scott Adams - This Week In Capitalism Speaker 1: I don't watch the news to stay informed. I watch the news to look for trends that will affect my money and my business. And this week, the president went after the head of the Federal Reserve. The S&P 500 hit record highs fueling speculation about a possible AI bubble. And we lost one of our friends here at Capitalism.com. We'll talk about all of this and more this week in capitalism. This week, the US Justice Department opened a criminal investigation into Jerome Powell, and they actually threatened indictment over some testimony that he gave over the budget of some renovations to the Federal Reserve building. And the reason why you should care about this is because as capitalists, Who take ownership over the results that we create in our lives. We should be concerned about the government meddling with markets. I don't mean to get all political on you, but let's talk politics for a second. I happen to be one of those who voted for Donald Trump. I voted for him twice, actually. And Jerome Powell was Donald Trump's nominee. And Jerome Powell Say whatever you want about him, oversaw a lot of chaos and, in my opinion, has done a fairly good job at getting inflation under control. Now, I happen to be a crazy libertarian who remembers getting chills on my arms at Ron Paul rallies when people would chant, end the Fed. I am not a fan of the Federal Reserve. But the reason why this matters is because if you stand for limited government, if you are a pro-capitalist thinker, then there should be some concern over the executive branch seizing control of financial markets. Overall, you and I believe that we are in control of our financial futures. What we do with our money, what we do with our businesses, It says way more about how successful we will be than what any government does. And so this is why we should be concerned when there is an increase in government control, whether that is coming from the Federal Reserve or that is coming from the president. But when the executive branch starts to meddle with other branches of government, and I would consider the Federal Reserve the fourth branch of the United States government. When we see one branch trying to seize power from another branch of government, I would say this is not what I voted for. This is something that should cause alarm. Now, there's something going on behind the scenes that I think is worth talking about, and that is that we did not hear about this pressure on Jerome Powell from the White House. We heard it from Jerome Powell. What this means is that there was not a big announcement coming from the White House that there were federal charges being put on Jerome Powell. This was done in secret. Instead, the way that the public found out about this was Jerome Powell releasing a statement on video that got seen on X by over 70 million people. So Jerome Powell actually stood up and said, this is what is happening. I'm being pressured with federal charges, and here's why. The way that I interpret this is that this was supposed to be private pressure towards Jerome Powell. And why would that be the case? Because every president wants there to be lower interest rates. Every president wants there to be as close to 0% interest rates as possible because it allows them to justify more spending. It allows them to increase government spending without it driving up deficits. That's why presidents like low interest rates. Now, President Trump came into office promising a more balanced budget, promising less deficit spending. And unfortunately, the initiative that was known as DOGE looks like it was a colossal failure. The trillion dollars in cuts that we were promised have not come to pass, and instead we're facing still a monstrous federal deficit. That's why I think there's more going on behind the scenes that we are seeing right now. In fact, I don't mean to get all crazy on you, but I think that this may also be related to the capturing of Venezuelan President Maduro. It may seem like a stretch to try to relate the pressuring of the Federal Reserve Chair to capturing the President of Venezuela. But I think both of these are attempts to drive down prices and drive down the federal deficit. Here's why. When inflation reports come out, they are heavily influenced by two factors, food and energy prices. Those are the most volatile things in an inflation report. So if you have oil or gas prices coming down, that will show up as lower inflation in the short term. That's the data that the Federal Reserve uses in order to justify higher or lower interest rates. So if you capture the president of a country that controls millions of barrels of oil, and now you are flush with the oil supply, It would make sense that oil prices would come down, which is exactly what we see happening in the data. We see gas prices coming down by 25 to 50 cents a gallon in some parts of the country. Look for that to show up in the next inflation report. We'll see a temporary dip in the cost of gas prices and oil prices, which also drives down other energy prices and some consumer prices because oil is used in everything. So that will create a temporary drop in consumer prices. That would justify a lower interest rate. What does that do? Well, one, it gives Donald Trump and his administration a victory lap. He can say, I promise to bring down prices and look at the recent inflation report. Prices are coming down. But second, if that means that there are lower interest rates, it means that the government can save hundreds of billions of dollars in interest on the federal debt. One point of interest will result in over a hundred billion dollars In savings to the federal deficit. And so Donald Trump can say, I brought down the federal deficit by over $100 billion. And we might interpret that as he cut programs or he cut bureaucracy. But the reality is, interest rates just came down. So we're not paying as much interest. Now he can justify his stimulus checks, which are branded as tariff dividends. Or he can justify increasing the budget of the Department of Defense or Department of War, whatever the heck it's called today. So in a way, I view this as marketing. These are ways around the system so that politicians can stand up and say, look what I have done for you. But it's actually just done from a bully pulpit. I think this sets a very dangerous precedent. And those of us who believe in limited government, And free markets should hold those in power accountable, not through putting backdoor pressure on other people involved in government. Now, on a personal note, it is very popular to back a person and back a side. There's a few of us still left in the world who back ideas and back principles, and principles Stand regardless of who is in power. So this is one of those cases where even though the guy I voted for is in charge and he's winning, from a principle standpoint, I have to hold those in power to a different standard. And I think pressuring a different branch of government and consolidating power into the executive branch is a dangerous precedent. Because it just takes one more cycle, one more election year for somebody that you don't like to be in charge of that executive branch. And then they have that power that was set in motion by the previous administration. What does this mean for you and your money and your business? Well, markets like certainty. Markets also like lower interest rates. And the interesting thing about this situation is this definitely creates more uncertainty. But it also may also result in lower interest rates. When Trump gets his way and we have a new federal reserve chair come this May, he will probably install someone that will do his bidding. That will look really good for short-term markets. But overall, from a principal standpoint, I think the set's a very dangerous precedent. Here are my predictions for how this will shake out. I don't think that Jerome Powell is gonna face any actual federal charges. There's already been pushback by Republican senators saying this is kind of bad. And I think that this is going to backfire on Donald Trump. I think that Republicans and Democrats will agree that this is a dangerous precedent. And as a result, I don't know that Trump is going to get his way when he starts nominating a new federal chair come this May. Instead, there may even be a case for Jerome Powell staying on the board, if not staying as the Fed chair, because I think that the pushback against this move is going to be very strong. I see a trend happening in government where people are kind of tired of the us versus them mentality. There is more of a push for centricism. There is more of a push for, dare I say, unity. People are tired of hating one another. And I think Republicans and Democrats now have a large enough coalition together meeting in the middle Instead of hating each side. So I think this is going to backfire on Donald Trump. And I don't think it's going to end up with the result that the Trump administration wanted in the first place. What do you think? What do you think is the reason behind this move? Drop it in the comments and let me know. This week, the stock market hit record highs. The S&P 500 hit all time highs, which is good for everyone, but it has fueled the speculation of if we are in a bubble, specifically if we are in an AI bubble. And the concerns here are worth noting. NVIDIA is the largest company in the world. Google's stock has more than doubled in the last 18 months. We see deals happening between NVIDIA and OpenAI where they are basically investing in each other's companies and driving up the valuations of both companies. This is bubble-like behavior. And so there are obvious concerns about whether or not this bubble is going to pop and we will see a big drawdown in stock prices similar to the 2000 and 2001 NASDAQ bubble. I have a different perspective and a different opinion about the situation. Yes, I think that we may be in an AI bubble, but we are not in a stock market bubble. These two things are different. There's a couple reasons why. First, AI stocks like NVIDIA, like Google, are driving most of the returns in the Magnificent Seven and the S&P 500. And most of that growth is coming as a result of AI. But this is different than 1999 or 2001, because these companies are profitable. They're very profitable. That's different than when Pets.com goes bankrupt and they have almost no revenue. So, we may be in a bubble right now, but it's not the same type of speculative bubble that we saw back in 2001 or even during the crypto bubbles of the last few cycles. There may be a drawdown this year, specifically in AI stocks, and I think it's very likely that we see a 20% pullback in the S&P 500 and maybe even more in stocks like Nvidia. However, there is something that a lot of the financial analysts are missing, and that is because there is so much investment happening in Nvidia and the other AI stocks, it's my opinion that a lot of the other companies that are not AI-related are now undervalued. Because all of the attention is going into the Magnificent Seven and AI spending, there are all kinds of very healthy companies in other sectors that are super undervalued right now. They look really boring on the surface. For example, one of my biggest holdings is in PayPal, which is not an AI company at all, but they're trading at about 11 times earnings and are reporting record profits, record users, and they're beating earnings. Another example of a stock I like is Pinterest. The boring social network, trading at about 10 times earnings, reporting record profits, record users, and all kinds of innovation. There's a bunch of stocks on my radar right now that I think are very undervalued. Now, why are there companies that are reporting record profits and record growth, but super undervalued? Because all of the attention is being given to the AI stocks and the Magnificent Seven. So instead of this being an AI bubble, I think we're just primed for a rotation into other investments. In fact, even sectors like real estate are super depressed right now. The real estate market is ice cold. There's not a lot of investment happening into new homes being built or new apartments being built. And that is partially because there is just so much investment happening in other sectors of the economy, specifically AI. I mean, heck, Bitcoin is down year over year. Ethereum is flat year over year. But a year ago, this was the future. News tends to follow the price of assets, not the other way around. So when you have a stock fall in price, You usually find news to justify that price. So we see a lot of positive news happening around fast growing companies and not a lot of news happening around the neglected but profitable companies that are just doing their normal thing and growing by 10 to 20% per year. I consider myself to be a value investor. So the way that I look at this is not to try to predict what's happening in the overall market because I don't know when a bubble is going to pop. I don't know when there's going to be another COVID moment. I don't know when that's going to be. So, instead, I'm looking for the companies that are not based on story, that are not based on what could happen with AI. I'm looking at the companies that have created predictable returns and predictable growth for many years and are being overlooked by the market. That's why I'm not so concerned about an AI bubble. I don't have holdings in NVIDIA or Palantir because I can't value those based on fundamentals. I can only value those based on story or price action. So when you see people who are jumping into those hot stocks, you know that there are people who are just betting on that number going up and they're not looking at the actual fundamentals of a company. If we are in a bubble, what will pop the bubble is not that AI turns out not to be profitable. But that the price of things comes down, that the price of manufacturing AI chips comes dramatically down because of innovation and because capitalism does its thing of bringing better products at cheaper prices. That's what may pop the AI bubble. But if you see that happen, it won't mean a dramatic slowdown in the economy. It means that we will rotate that capital into other areas of the economy that are already profitable. So the way that I'm playing this market is not by investing in Nvidia or Palantir, which I can't value on fundamentals. According to a value investors filter, these are way overvalued companies. Instead, what I look for are the companies that are overlooked. They're being neglected by this market. They're still producing record profits and record growth, but they don't have an AI story. That looks dumb in the short term because I miss out on all this upside happening with these hot stocks. But it's my opinion that over the long term, the weighing machine that is the market will bring that capital into those more overlooked markets. And that's why I'm not so concerned about there being a big bubble right now. Because even if open AI were to go completely under right now, That would send a signal to the markets that there's some short term pain. But what would ultimately happen is people would say, well, Google is still Google and Apple is still Apple. And these other companies are still really healthy, profitable companies. So am I really going to make major decisions about what's happening in the economy based on one very large influential company going completely under? I don't see reason for that to be the case. And that's why I don't think we are facing a 2008 style recession anytime soon. Instead, I do see a major pullback in markets when the AI bubble bursts temporarily. But I think what will happen is that we'll see a rotation into other profitable companies. And those are the companies that I'm investing in now. So let me give you some examples of how I'm playing this right now. Again, I think that there are companies that are being undervalued during this market boom because there's so much concentration in a few companies. And I look dumb in the short term, like I'm missing out on Palantir going up a hundred X or whatever. And I'm missing out in NVIDIA becoming the most valuable company in the world. But I think that those investors are missing out on the next opportunities of things that are being overlooked. So let me give you just a couple of things that I'm tracking. One of my biggest investments right now is PayPal. I liked them at $90. Now they're at 55. And I'm having a really hard time not buying a ton more of that. I also am buying Uber stock. I'm buying Uber because I think that the story about robo taxis is going to be very helpful to Uber's balance sheet. I mentioned that I like Pinterest. I put a lot of money into Alibaba this year. I'm also building more of a foundation in Bitcoin and micro strategy because AI has sopped up all of the news and attention away from crypto. So once that story changes, I think we will see more investment happening in these other places. One speculative play that I like, ...is Upwork. Upwork is, you might consider it like a small cap company, but they're growing and making interesting moves and we use it here at Capitalism.com. So I'm watching them. I haven't invested in them yet, but I've got them on my watch list. I've also made investments in UnitedHealth. I've made investments in Zoom. I'm eyeing Novo Nordisk, the maker of Ozempic. These are all hugely profitable companies that are growing quarter over quarter, but they don't have an AI story. So if there is an AI bubble pop, I think that money is just freed up to go into other things that are growing their profits long term, and that's going to look really good for value investors. Now, I'm an idiot on the internet. Don't listen to anything that I say because I'm not a financial advisor, but my invitation to you is to turn your attention away from whether or not this is an AI bubble. And instead, look at what's being overlooked in the market because all of this attention is put on AI. Where are the profitable companies that are growing and will continue to grow regardless of if we're in an AI bubble or not? Those are the investments that I like to make and that's where I'm putting my attention because I know that if there is a drawdown in AI stocks, That's actually going to be really good news for the long-term performance of my portfolio. This week, Scott Adams, the creator of the Dilbert comic strip, passed away at age 68 after a battle with prostate cancer. This celebrity death felt close to home for me because Scott has been on the Capitalism.com podcast ever since the launch of this book right here, Loser Think. And he's been supportive of our work here. Scott also had a big influence on my thinking of seeing the world through a filter of persuasion. He also encouraged me to view predictions as a way to judge people's filter on the world. He actually helped me resolve a lot of the pent up frustration that I had over people like Robert Kiyosaki and Peter Schiff and Harry Dent and these people who make these doomsday predictions all the time, and yet they're consistently wrong. And it just drives me crazy. And Scott framed that as evidence that someone's filter on the world was just wrong. And that helped me change my worldview to one that was much more optimistic and to one that was more flexible to be in alignment with reality rather than what my own biases were. Scott had a huge impact on the way I see the world, the way that I see marketing, the way that I see politics. And there's something really interesting about Scott's career that I think we can all learn from. Scott Adams went live every day on a show called Coffee with Scott Adams. And every day he did something called the Simultaneous Sip, where thousands of people drank their first sip of the day together. He did that every day until the day before he died. He did it on Christmas. He did it on birthdays. He did it on Sundays. He did it when he was traveling. He did it when he was being canceled because of things that he said in the media. He said it when he was dying of cancer. He did it the day before he passed away. And the day that he passed away, It was announced on his daily show that he had passed away just hours earlier. That amount of consistency of going live and building an audience is incredible. And on days when I don't feel like going to work, or I don't feel like doing the things that I am supposed to do, I remember that no matter what's going on, Scott was about to go live every day at the same time, regardless of how he felt about it. It also points out something that's really interesting about building an audience and what we might consider influencer marketing. Scott went live every day for 60 to 90 minutes. And as a result, I felt like I knew the guy. Now we had had several conversations. We had DM'd a few times, but he would barely know my name. Yet I felt like he was an old friend. I felt like this was a person who had mentored me and somebody that I felt like I knew personally. There's something about that amount of engagement with a group of people that can create ripple effects for generations. He will never see the impact that he makes on future generations, and neither will you and I. But what Scott helped me see was that consistency with a group of people can literally change lives. That if one person going live and drinking coffee and talking about the news can have such an impact on my life and the way that I see the world, that me helping a group of entrepreneurs or creating a supplement brand for dads, which is one of my companies, or you building a brand for pet owners or for travelers, you serving a specific group of people has ripple effects that can go on for generations. It's a testament to the fact that we have way more influence and impact than we will ever see. And I learned that from Scott Adams. So in honor of Scott, will you join me now for the unparalleled pleasure, the dopamine hit of the day, the thing that makes everything better, the simultaneous sip? Scott, this one's for you. Scott was most recently on the Capitalism.com podcast when he was promoting his book, Reframe Your Brain. And this is one of my favorite clips from that discussion. My favorite reframe that you have in your newest book was this idea of being able to take your ego out of something and allow yourself to be embarrassed. The reframe was the difference between boredom And embarrassing yourself. So this almost a desire to put yourself in a position where you could be embarrassed personally. It was an anecdote to boredom. Which really just fractured a filter in my brain. And I hope that you could share a little bit about that difference. It was so unique and helped me view what I call boredom from a completely different perspective. So would you share that in your own words? Unknown Speaker: No such thing as boredom. There's only you not embarrassing yourself enough. You're not taking enough chances. Speaker 1: I love that reframe. Yeah. Unknown Speaker: And I heard somebody else had another reframe that I forget who it might have been, Tim Ferriss, that everything that you value in your life in terms of the decisions you've made, like the job you've got, the person you asked down, et cetera, all the ones that worked out were all uncomfortable. And that 100% of everything you will ever value goes through that filter. You got to be uncomfortable and then you hope it works out. And then you look back and say, wow, glad I did that. Let me give you some examples. I can't tell you how many times people say to me, I'm thinking of quitting my job. You know, what do you think of it? And I always say the same thing. I've talked to a lot of people who have changed jobs, sometimes fired, sometimes quit. I've never met one who wanted to go back. But there's this real unpleasant feeling about quitting a job or getting fired is worse, but everybody ends up being happier. It's probably 95%, something like that. So yeah, if you just know that discomfort is more like finding a diamond on the ground than it is to something you want to run away from, It just really changes everything. For example, embarrassing yourself in front of other people is really the main thing that people care about. First time I gave a speech, a paid speech, when Dilbert became famous, somebody said, hey, do you want to talk to a bunch of engineers here? And I said, well, I don't really do that. They said, but we'll pay you an insane amount of money. Well, I'll do that. So I went up and I did it. And the feedback was it was bad. Yeah, which you can imagine is really embarrassing, but you know, I don't really suffer embarrassment like a normal person. So what I did was I looked at how much money I made and I said, I wonder if I could do that better. And then I just tried to do it better. And eventually I was one of the highest paid speakers and my reviews were incredible because I figured out how to do it. But that was literally, A fortune, a fortune just from the speaking circuit that I wouldn't have had if embarrassment had held me back. But simply walking through it and toward it instead of away from it was huge. Likewise, when I became a cartoonist, you submit your materials for rejection. But I wasn't afraid of rejection, so I went through the awkward period and got to where I was when I wanted to write a book, the first time I wrote a proper book. You don't know if anybody's going to like it. You put a year of your life into writing this book. I mean, it's really, really hard to write a book. If anybody's watching this and you think, well, you're just sitting there typing, how hard can it be? It's really, really hard. Speaker 1: Yes, it is. Unknown Speaker: It's super hard. And you do that without knowing if people are going to laugh at it. And just say, oh, this is one star. It's terrible. You don't know. So I no longer stop doing things because I would be embarrassed. So when I started doing the live streaming, my voice was sketchy. I mean, it was just terrible. And I was aware of it. But I was also aware that I could probably push through it and did. So pushing through the awkwardness is almost everything you'll ever value in life. So when you feel that thing that you're saying no to because of the awkwardness, you should say, no, the worst case scenario is just going to be a funny story. Because I have funny stories about the time I tried something and it failed miserably. And they're all just funny now. That's the entire impact they have on my future life. They're funny stories, nothing else. Speaker 1: The WWE undisputed championship by defeating Cody Rhodes in a three stages of hell match recently on Friday night SmackDown. Now, obviously I don't watch wrestling because I'm not a 10 year old boy, but all of us had been rooting for Drew McIntyre to reclaim his rightful place as champion ever since he was unfairly Tricked by CM Punk during Money in the Bank, and all of us have been rooting for Drew to get back on top. Now, here's why this matters for you and your money. I think that there are many lessons that can be learned from watching what is popularly known as sports entertainment, choreographed wrestling. Such a ridiculous idea is worth over $10 billion. Why is that the case? That is true because we as human beings love stories. We buy on stories. We create our beliefs because of stories. And part of the stories that we attach to are the stories of other people that we root for. Stories are kind of a way that we project ourselves into the lives of other people and we root for them to be victorious because that makes us feel victorious. That's why all of us woke up a little bit happier knowing that Drew had completed his story arc and now was once again at the top of the WWE roster. When you are selling your products, when you are creating marketing campaigns, It is very rare that anything outperforms a good story. If you can demonstrate how your product fits into the story of other people, that almost always defeats all other marketing. People love to talk about why their product is different or better. People love to try to come up with viral hooks for their videos, but It almost always fails to outperform the power of stories. Even bad stories tend to outperform really good marketing hooks. I did an exercise once when I was taking an improv class where the teacher walked us through an exercise of telling a really boring story. And the boring story that she gave as an example was something like, I woke up this morning and I heard this sound, I heard this dripping noise. And I was like, what is that dripping noise? And I walked over to the corner of my room and I put on my socks and I heard this dripping noise. I'm like, man, what is that noise? And then I woke up and I put on my underwear and I kind of got it stuck on my foot, but I got my underwear on and then I put on my normal clothes, but I kept hearing this dripping sound. And then I realized it was the faucet and I just turned it off. And it was a silly, stupid example of a really bad story. But all of us were paying attention the entire time because we wanted the story to resolve. Our brains work in story. Stories predate language. And so when you tell good stories, it just finds a way to get into your brain and get into your customer's brain and take them on a trip wherever you want them to go. That is why Something as ridiculous as professional choreographed wrestling is so popular among nerds like you. Not me, but other people. This is why characters like Drew McIntyre capture the attention of people like you, not me. I don't watch. And this is what we can learn from a $10 billion company like WWE. That story usually trumps all other forms of marketing. My name is Ryan Daniel Moran and I run Capitalism.com. I believe that the story of capitalism is that the world is getting better every day, every year. In the news, we are often bombarded with what has gone wrong, but we so little hear about all the things that are going right. It's my opinion that the world is better than it has ever been. And 10 years from now, it will be even better. That's the story of capitalism. And that's the news that we should really pay attention to. Thanks for watching. I'll see you guys next time. Take care.