AI is happening, GDP is growing, productivity is going up, corporate earnings are exploding, and we're seeing that reflected in the stock market itself, which is growing as well. But that's the point here. The economy is roaring only for corporations. And somehow while that is happening, literally zero of the gains have accrued to American workers.
Today's number three. Americans are three times more likely to purchase an audiobook read by a British narrator than an American one. Just a case in point here, when Ed says inflation is at 3.6%, he sounds like the governor of the Bank of England. When I say it, I look like a divorced dad yelling at a bank teller.
My favorite opening number. Really, that's my career in a number right there.
I don't know if you remember the first time as a child you actually discovered nuance. I remember my dad's 40th birthday party. I was five and they had all these people and they put notes on the back. They put note cards describing people and taped them to the back. And I remember one of my dad's friends got offended, I remember that, about what they said about him. But I remember going to my mom. I remember seeing men would laugh at anything my dad said if he stopped and laughed like it was a joke. In his deep glass, we got drunk. When he spoke, it sounded like a dead language that twins can only understand.
But he would tell a joke and then pause and look around and start laughing and everyone would laugh. And I noticed women were constantly touching my dad's arm when he'd talk. And I went back to my mom and I said, 'Mom, what dad says isn't that interesting and yet everyone finds him fascinating. What's going on?' And my mother said, 'He's charming.' And I've said that part of the reason I'm so traumatized, let's bring this back to me, is because my dad started banging a flight attendant on Continental Airlines while he was still married to my mom. But the reason he got to do that is that when you're in 70s California with a strong jawline and a glassian accent, you can not only think with your dick, you can listen to it. I'm convinced my dad ended up penniless and alone because of his Scottish accent. Any thoughts, Ed?
No, I think this is just incredible analysis. There is something about those people who they tell a joke and then they start the laughter and then it triggers everyone else's laughter and it feels like you're cheating. It's like, isn't it supposed to be up to us? But it works.
And you, and I mean, I honestly, I love those people. I have friends who are the same way. They say something then they start bursting out laughing and then suddenly you're like, [__] it. Like this guy is hilarious. I love this. So that's sort of the cheat code. If you can kind of figure out how to be the loudest laugher at your own jokes and time it right, I think it is very powerful and your dad is case in point. Also helps to have a Scottish accent because those accents are crazy.
I want to stay on this topic of anthropology and mating because after listening to Paul Kadraski and Mark Zandi, it's clear I know [__] nothing about the markets yesterday and I can add no value to this show. So I want to talk about mating and lessons for young people. The three things women find most attractive in men, and by the way about 82% of our listenership is males under the age of 40, is one, signaling resources. And the key word there is signal. You don't have to have the Range Rover now, you have to have your [__] together. Like I get you signal a lot of future resources.
Two, and the British accent, intelligence. It's anthropological. The person who makes a better decision for his family, the family is more likely to survive. And the fastest way to communicate intelligence is humor.
And it's hard to tell someone to be funny. Like I'm naturally funny. I won most comical in the ninth grade. I don't know if I brought that up before, but anyways,
I think that is your proudest achievement by the way is the
Hands down. Better than New York Times bestseller.
Yeah. But the thing is, you can't tell someone, you can't advise a young man, 'Well, be funny.' But what you can do is say have a great sense of humor. And that is laugh at yourself. And when someone else says something funny or you try to be funny, laugh.
100%. Laugh a lot. Have a good laugh. Maybe work on your laugh a little bit. And also don't take yourself seriously. I think I agree. You can't be like, 'Okay, you need to be funny now. Figure it out.' But the path to having that sort of, having those characteristics is if you can take yourself unseriously. Then I think people appreciate that and I think it works.
I think that's right. Laugh at yourself. Have a good laugh.
Okay. Well, now that we've figured out how to increase the prospects of men's dating lives, shall we get into the markets?
All right. And by the way, if you like this show, please be sure to hit follow wherever you're listening or subscribe to us on YouTube and hit the bell icon. That way, you get notifications to all of our latest episodes. We appreciate it a lot. Oh, by the way, Ed, I don't know if you know this, but I have another podcast called Pivot, and we're going on a tour.
Starting November the 2nd, I believe. We're going to be in New York, Toronto. Toronto's already sold out. Minneapolis, LA, San Francisco, and I get to choose a city this time. They throw me bones every once in a while. I picked Denver. So, we're going to the great state of Colorado. So, we're almost sold out on three of the six or seven cities. So, if you're interested, go to pivottour.com. We'll have live Q&A. We always have special guests. Kara does have a rolodex deeper than, I don't know, deeper than someone with a very deep rolodex. So, we'll have great guests.
Any hints on the special guests? Anything?
We might have the infamous Ali G, but I'm just saying.
Yeah. Which would be fun.
Yeah. No, Kara is, I got to be honest. Kara always brings it on the gas. I think Kara's secretly the most powerful person in the world. I'll be like, oh, you know, what do we think of Secretary Rubio? She's like, I don't know. Let me text him. And she gets back, ah, he's making a dumb lesbian joke. Hold on. She's like, she literally knows everybody. When I went to the White House with her, god, this dang is working really well. When I went to the White House with her, literally everybody stopped and ran over and hugged her. People who I know hate her.
People are very scared of her. They think she brings the militia, the militia vote, and they're very
Immediately commands the room.
Oh yeah, immediately. All right, let's talk about AI or inflation.
All right, let's do it. The latest inflation data is raising some major red flags about the economy. Consumer prices rose 3.7% in September from a year earlier, which is the highest annual rate since May. Energy was a major driver with gas prices up more than 9% over the month and 34% over the past year. And producer prices also came out. They rose 6.3% which was their largest jump in four years. At the same time, Americans' inflation-adjusted earnings have now declined for six consecutive months. In September, average hourly earnings fell 0.7% from a year earlier, meaning that workers' paychecks are not keeping up with rising prices. So Scott, let's dig into this inflation report. I would say probably the worst inflation report of the year, just given the fact that it appears that prices are not coming down, they continue to rise. It's been going on for a very long time. And most importantly, wages continue to fall behind. So wages grew 3% which means that they grew slower than prices which grew 3.7% which means that when you adjust for inflation your real earnings fell by 0.7% year-over-year and that is the sixth straight month where that has happened. So Americans are continually getting poorer as a result of the rising prices which is mostly due to one, the war, and two, tariffs. But we're really seeing the effects on energy with gas prices up 34% year-over-year that is related to what's going on in Iran. I mean, nothing good here in my view. Your reactions to the inflation report?
I think you're right. This is really ugly and it's terrible timing for the Trump administration heading into the midterms. A few bits of nuance or observations and I'd like to get your response. Gas prices are just, no doubt about it, absolutely treacherous increase in gas prices for the incumbent administration. Grocery stores will price diapers below cost in the store because they've done a ton of consumer research and women who do the majority of the shopping, for some reason, diapers are an enormous signal around the value of the store. If they see diapers as being inexpensive, they think everything at Whole Foods, including that $22 bunch of grapes, is reasonably priced. It is a super strong signal. Think about just how incredibly powerful an indicator and signal and probably quite frankly a bit of a false flag, as important as they are, is gas prices. I counted, I came back, I was at my son's grandparents' yesterday for lunch and on the way back I counted how many times there was a giant, giant ad for Democrats called gas prices and that is every time you go by a gas station and they're literally every three blocks here in Florida. I'm down in Delray Beach. There's a giant really pretty neon screen that is updated daily with a number on it. And so every day, sometimes a dozen times a day, the average consumer, American consumer, is hearing subliminally or consciously and subconsciously, this administration is failing. Because what I see, I'm driving and I think, Jesus Christ, diesel at $7.69 a gallon.
So gas prices are just such a, they're important and b, they have outsized importance in terms of consumer perception. And then in addition the anger, the justified anger among people your age is the following. Since 2022, just literally four years, wealth for Americans 75 and up is up 37%. For people 35 and under, it's down 23%. So when people get angry at me for talking about why socialism doesn't work, they just look at me and they say, 'Bitch, whatever has worked for you is not working for me.' And you can understand inflation is a regressive tax with a birth certificate. If you own assets, it's a tailwind. But if you're young and renting, it's a mugging. And America is being mugged right now.
Just on the idea of gas having outsized importance. I think what I would say is it has outsized exposure in public perception which is why it really matters politically and I think the same is true by the way of the stock markets. The stock market is one of those things that you're constantly getting an update in real time. You're constantly seeing the number. Generally speaking you know what that number is. The same is true of gas prices. So if you have something go wrong in the stock market, people go, 'Oh my gosh, something's going wrong.' If you have something go wrong with gas prices, same thing. I still think though that gas prices are actually very important in terms of actual inflation. And we've seen this as a result of what's happened after the war or during the war where you've had diesel prices rise close to 70% since the beginning of the war. And as we started to learn, it actually does trickle through to the rest of the economy because diesel is used for fertilizer, which is used to grow food. It's used for transportation, which is used to transport all of our products. And we have seen price increases in the rest of the economy. We're seeing that core CPI is rising close to 3% over 2.5%. It's lower than we're seeing in the price increases in energy, but it does all trickle down. And then of course gas is one of those things that most Americans are using directly every day. So in that way it really does matter.
I think that there have been some other false flags that the administration is trying to point to as an indication that things are going well. One of them that I keep on seeing is they say consumer spending is rising, which is true. It rose 6.1%. And the idea when they say that is, well, everyone's spending money so things must be good, right? Yeah. Okay. Inflation's up, but it's okay because you guys are spending. So, clearly you have money. But there are some very important things to factor in there. One, spending is up because prices are up. So, of course, we're spending more. Two, spending is also up because savings are down. When we look at the savings rate since Trump took office, it was 5.7%. It's fallen down to 4.1%, which is the lowest in nearly four years. So, in other words, yeah, people are spending more trying to keep up with inflation, and as a result they are eating into their own savings. So no, I don't look at the consumer spending and think, oh, that's a good thing. And then of course the other thing that we've talked extensively about with Mark Zandi is that increasingly consumer spending is driven by the richest. It's driven by the top 10% who make up half of consumer spending at this point. So that is a real false flag there. And which is why I think it's so important when we look at inflation, we look at the economy, I think the most important number is real wage growth. I think that's the thing that matters. If prices are up, but wages are rising higher, that's fine. People are technically getting richer. But that's not what we have right now. And as you pointed out, since Trump took office, the inflation-adjusted wage growth for the average American has been zero. They're standing still. And you might say, okay, so everything's sort of the same. What I would add on to that, look at what has happened to corporate earnings. Look at what's happened to profits. S&P 500 earnings in that same time frame have grown almost 40% since he took office. And I think that right there shows you what is happening in this economy, which is that AI is happening, GDP is growing, productivity is going up, corporate earnings are exploding, and we're seeing that reflected in the stock market itself, which is growing as well. But that's the point here. The economy is roaring only for corporations. And somehow while that is happening, literally zero of the gains have accrued to American workers. And I think it's the same thing that you and I have talked about for years now. It is the same K-shaped trend. It's the same trend that aligns also with the data that you presented on different age groups where young people who don't own as many stocks and who make their living through a wage or through a salary, they've seen their wealth decline over the past several years and the people at the top, the boomers 75 and older, they've seen their wealth explode. So I look at these numbers and to me it's like this is the K-shape on steroids. It's the same thing that we've been seeing for years. Trump came in and he has essentially made it worse and now we're seeing it. It's verified in the data. People are getting poorer if they're making money on a salary.
American families are more behind on their finances than at any time since 2010 after the great financial recession. And six months ago, Kyla Scanlon coined the term vibe session because she said, 'If you actually look at the data, the economy is doing okay and wage growth at the low end has outpaced wage growth everywhere else.' Right now, you'd have to argue that the vibes are correct. And just on Zandi's point, and we've been talking about how the top 10% are driving 50% of consumer spending. It's the ultimate upward spiral because the stock market has boomed mostly driven by hyperscalers and the AI trade and that's come off a bit, but it's still way up. The stock market is way up. That has an enormous positive benefit and psychological benefit on the top 10% now responsible for 50% of consumer spending. In addition, I think the YOLO effect is coming out of COVID. A lot of people are like, 'What the [__] am I waiting for? I'm going to take my husband to Africa. If I have the money, you know, I'm going to AA.' I do think there's an IRL. If you have the money, you know, people are going to spend and you see earnings growth way up. But the trade that marks the age or the event that marks the age is most recently Meta laid off 8,000 people to increase its capex, mostly to buy more chips. Laying off 8,000 people, buy more chips, stock goes up. So, it's great to be a shareholder of Nvidia, right? It's great to be one of the survivors of Meta. It sucks to be everybody else. And this kind of marks the AI age. If you're one of the few that's on the right side of the trade in the K, right, in the upward stick of the K, it's never been better. And I think that's across everything in our economy. I think travel, health care, services have never been better if you're on the right side. But we've outsourced all the pain to kind of the lower, you'd probably say the lower 60 or 70 because people would say the people in the 80th or 90th percentile are still doing pretty well. But this is, I mean, people think a revolution starts because someone doesn't have a job. If you look at history, it doesn't start when people don't have a job. It starts when people have to have a second and a third job to make their rent.
I think this is like the most important advertisement for why everyone needs to be
Laser focused on being well, vote. So that we'll get to that voting but also investing.
Like you have to be on the right side of this trade and you, like I don't really care where you are in terms of your career. You need to be thinking about how am I taking money out of my paycheck and how am I investing it in the stock market because we're seeing the divergence. People who forget to do that or they're not disciplined enough to do it or they don't make enough money to do it. I mean whatever the reason is those people are being screwed perpetually every single year and the effects are compounding and that's essentially what this inflation report is telling us. Like if you are not investing into assets, if you're not investing into equities, you are not only falling behind, but you're falling miles and miles behind. Like it is so essential to be thinking about that and be thinking about ways to make it easier for you as you talk about a lot. Can you think about ways to automate your investments? Can you build forced savings mechanisms such that you are, you know, without even thinking about it investing in the stock market? But that's the learning here because if you're not, you're just falling so far behind and yes the stock market has ripped and meanwhile if you haven't invested or if you're just making your paycheck you're flat because prices are rising so fast and inflation appears to be something that's going to be here for a very long time. We've been way off 2% for several years now. I mean it's almost a joke that the Fed's target is 2%. Like I don't even remotely take it seriously anymore. They keep saying it but I just don't really believe it at this point. But that to me is the learning. As you say though, the other learning is vote. What Trump has done here and the impact on the economy is absolutely striking.
It's actually unprecedented.
We actually haven't probably seen it since after the Great Depression. We decided to constrain fiscal spending. That was probably the biggest mistake we could have made in the 20th century economically.
But going back to just a learning for young people, whatever you can do, and I'm trying to instill this with my son, I tell him he got into stocks and he got into crypto. I don't like crypto, but I'm like, if you want to buy it, for every dollar you earn through chores, I'll match it if you invest it. And then he got into Pokemon. And I'm like, Pokemon is an asset. Buy cards. And he saved up. And he bought a $30 card. He goes and he waits in line with his friends and they WhatsApp each other for drops at different retailers around London to try and get the cards during the drops. Your job as a young person is to figure out what you're good at, to focus on it, to have some discipline, do everything you can and like you said, try and make sure the money never gets into your hands. And by the way, do as I say, not as I did. When I was your age, Ed, I thought I was going to be such a baller. I had some early success. I'm like, I'm going to sell this company, profit for 10 million. I'm going to take Red Envelope public and I didn't save. I had all my equity in my companies. I was always doubling down. And I ended up 42, divorced, and broke. And it was very, very anxious for me. And if I had just been a little less [__] stupid and taken 20, 30 grand a year, which I could have done fairly easily, and just put it into a boring low-cost index fund. Yeah, by the time I was 42, I'm like, 'Oh [__], I'm [__]. Everything I've touched has turned to [__] and my wife has kicked me to the curb. I could have turned to Vanguard and I would have had two or three million bucks such that I could have exhaled. Instead, I'm like, 'Oh, [__], I got to start a Bag of Donuts podcast with this Merchant Ivory-voiced young douchebag to try and get back in the game.' Did I just say that out loud? Did I just say that out loud? I should be on the beach right now. I should be playing shuffleboard with some hot little 55-year-old number from Boca. Anyways, you get where I'm
Stuck with me. You stuck with me. I think you went there. I think you got there.
Yeah. Slowly. It's never too late. No. But back to the Democrats. I think the anger coming from your generation, I think some of it is misplaced, but I get it. And this is your world. And to a certain extent, I think women with children should get three or four votes, and I think young people should get more votes. By the way, Senator Chuck Grassley has decided to run again for Senate at the age of 93. Jesus Christ, Chuck, don't you have any [__] friends?
