All In Podcast Episode 89 Notes July 28 2022

 

July 28 2022

• Awesome intros by JCal
• Negative GDP growth
  • 2 straight quarters of -ve GDP growth
  • Home construction down 14%
  • Ecommerce adoption went up very high and then drop - now waiting for normalcy in markets
  • Country is headed in the right direction overall from crazy covid spike but White House is saying something else
  • Media coverage is absurd - definition of recession is 2 -ve quarters of growth and now Democratic recession is underway
    • They are not reporting the obvious headline - claiming all kinds of difficult technical issues
  • Inflation is also responsible for recession - 5.1 CPI print came out May 2021 - govt did QE for a long time - like 9 months or so - so they could have stopped easing and saved inflation 3 quarters earlier
  • Paul Volcker’s book was instructive - Administration reacted in a political way to the inflation print - they used the word transitory - went into denial mode - end of year it was clear it became persistent
  • Powell is responding to headline print - he waits until headlines tell him he has to react
  • Fed is slow to react and Administration wants to relabel problems instead of confronting them head on
  • Excess money distort what true supply and demand should be
  • Lot of purchasing activity was propped up seemingly endless supply of money
  • Now that money is out so we don’t know what economy will be like now
  • 14 years straight since GFC we have been printing money - now have to figure out what real supply and demand is in the economy
  • It will be longer to come out of this
    • Typically yields of long dated bonds goes down
    • Cost of borrowing becomes roughly cheaper
    • Price of equities (NASDAQ and Crypto) goes up much more aggressively
    • Powell has synthetically created a form of easing
    • He is pushing the problem out another 8 quarters - needs to be definitive and fundamentally break the back of inflation so we can find out what is the true economy
  • Volcker was told to not raise rates but he already was not raising rates
  • Never in the history of CPI > 4.5-5% without Fed funds
  • Now target Fed funds rate is ~2.5%
  • Administration made it worse by sending checks into an overstimulated economy
• Covid and layoffs
  • Shopify Layoffs
    • Massive spike in 2020 for ecommerce adoption rate - now reverting to mean
      • Shopify, Peloton, Affirm, ARK
    • Reversion to the mean will impact companies’ bottom line
  • Telehealth was used by 33%, up 420% vs pre-covid
    • Females are using 66% of telehealth
  • Amazon bought every warehouse during covid and now are putting them back on the market
  • Teladoc has fallen post covid
  • Consumers want to do what they want - not everyone wants to buy food or clothes online
  • As people WFH more, they want to do more shopping in person, meet people for lunch/dinner
  • People working in the office might do more e-commerce
  • 60% of US population lives in urban areas - for 40% of Americans this is not the same conversation
  • Ghost quitting
    • Its when you decide to quit mentally but don’t actually quit - so you do the bare minimum
  • Hard to assess productivity for knowledge workers
  • Large percentage of US workforce have moved to independent contractors style of working
  • Most companies want RTO, most employees want WFH, most bosses don’t know what to do
  • So now orgs will figure out how to understand productivity
  • Use Amazon 6 page philosophy to have a write-first culture
• Inflation Reduction Act
  • Chamber of Commerce says 3.25M fewer people working today than before Covid 2020
  • Manchin said few months ago that BBB would contribute to inflation
  • Now he has agreed to $750B of which $450B is new spending
  • We are clearly dependent on fossil fuels for a very long time - its a bridge fuel
  • Its not clear any of this spending is going to accelerate the trends that are already underway
  • People are already buying electric vehicles because they will save money - they don’t need govt subsidy - we are already past the critical point of 5% adoption for a product in a market - it indicates when this will become mass market
  • $3.5 vs $15 for 100 miles is cheaper for EVs
  • Humans are already on a carbon saving path - we can’t change consumer behavior - they want cheaper, faster, better - efficiency ultimately resolves to less carbon, less land, less energy - natural market forces always solve this
  • Animal agriculture to transportation systems to energy systems will get solved
  • We thought at start of 20th century that we will run out of food - Haber Bosch process saved humanity by figuring out how to make fertilizers from the air
  • Biggest threat to US is productivity - we are so well off that we don’t realize we had 50 years ago - read Steven Pinker’s book - even compared to 30 years ago - its a condition that unfortunately yields decline in productivity
  • Congo to auction land to oil companies - “our priority is not to save the planet”
    • their priority is economic growth
    • Hopefully they feed the rest of the world oil and if it doesn’t get pilfered the people get education and healthcare
  • Govt’s job is to tip the balance of power to affect investment decisions
  • Government subsidy entrences companies and industy in some tech - when new technology comes in, it gets blocked
  • Crazy state of excess abundance - Friedberg is the best
• Alzheimer’s Fraud
  • The initial paper has been shown to be fraudulent
  • BioGen drug was approved because NIH had lot of money in that research - even though scientists said there is no evidence this will work
  • Ameloid-plaque
  • Depression drug research
    • There is no proof that SSRI drugs fix depression - latest study shows that
    • But companies are making $20-$25B per year on serotonin style drugs
  • Ginkgo acquires Zymergen for $300M
    • G went public at $20B through SPAC, Z went public after raising $1.5B since 2013 at $4B
      • Both same companies
    • Biologics drug industry is $350B annual revenue industry - led by Genentech
• Democratic party is funding far-right candidates at the expense of moderate GOP candidates
  • Dangerous in a year of red wave
  • Can’t say we are at the end of democracy - but you’re giving money to the people who you claim will end democracy
  • Dems are donating money to every MAGA candidate going against every republican who voted for impeachment
    • Peter Meijer
    • David Valadao
  • Republicans haven’t done this
  • America doesn’t want Trump vs Biden, they want DeSantis vs Newsom