So welcome everyone. Thank you, Eric Rosen, for joining us. This is our second quarterly economic update. Again, we plan on doing this, each quarter the month after the the quarter end. And our goal is to just provide a view of what we're seeing in the economy. Eric has some great insight.

I know he provided last time. And our goal is to take a, a landscape of of what we see in both private and public markets. And then at the end, I'll kind of wrap it up and show how that kind of has an impact on us from an early stage. VC perspective. So without further ado, let me hand it over to Eric and I hope everyone, if you do have questions, feel free to chime in or use the chat.

We have a lot of information to cover, so I think from Eric's perspective it it's a lot easier if the question pertains to some of the material he's, reviewing at the time.

Thanks. I'm really excited to be here. For those who are on the last time, I think we had a really good discussion. And that was in large part to the participation from the people in the group. I will cover a bunch of stuff. I have about 25 slides, and if you have any questions about what I'm talking about or you have a question about something else, feel free to ask it.

I will do my best to address all questions and please make it interactive. It's a lot more fun for me and I think it's a lot more fun for everybody here. So, with that, I'm going to get started and, you know, let's let's go to the presentation.

So, you know, if I look at the backdrop of what we're looking at and what's transpired over the last few months, if you told me that Israel was going to attack Iran, the US was going to bomb nuclear facilities, we'd be in a trade war.

That seems to be escalating again. But there was some good news last night on Japan. I should say, I don't know, 15% tariffs are good news, but it was better than the 30% potential outcome. Big tariffs on copper, which is a key input for industrials and construction. The U.S. manufacturing sector was in a recession. The consumer was bifurcated with a low under and consumers under pressure.

Housing was down slowing down with rents starting to roll over. The 30 year Treasury actually was over 5% earlier this week. It's back under. Just under. The US should be running $2 trillion. Deficits may as interest burden alone was 92 billion. There would be protests and riots in many cities over Ice detentions. Ukrainian situation remains hot, yet stocks actually hit all time highs yet again today on the S&P, and I believe on the Nasdaq and the S&P estimate for 2025 is 22.

You know, I would think you were crazy. And there was a Wall Street Journal article last night. Wire stocks stopped. Nobody knows. A torrent of bad news hasn't been enough to sink the market. But that was a cover story in the Wall Street Journal last night. So, I am not a hater of this market. I just think it's a little bit higher than I think it should be based on this backdrop.

So next slide please. So to remind people last time we were just on the heels of Liberation Day, markets were in a bit of a panic. This this chart outlines will we be in a recession in 2025 from Poly Market which is the betting site. And it was 55%. Now it's about 18%, and we will be in a recession within 2025.

As I said last time, it was on the heels of Liberation Day. Cooler heads up was a in some of these outlandish, tariffs have been have been brought back down a little bit. And now I think the betting markets are probably a little bit too low. And I'll outline some of my concerns a way I think could play out.

Okay. Next slide. So going over some of the things I talked about on the first slide, the richest Americans on the first chart, the colorful one are driving the top 10% are driving 50% of consumer spending. Well, you know, the bottom 60% are only driving 20% of consumer spending. And so when we talk about a bifurcated consumer, that's what I'm talking about.

The wealthy are spending money like drunken sailors and then everybody else. The the percentage of people that cannot make an emergency medical bill of $500 is, quite frankly, frightening. Ism, which is the manufacturing, sector is in recession. A number under 50 shows a recession, and we're just under 50. We're at like 48 or 49. And it's been that way for like a year or more.

So next slide. HomeBuilder confidence is starting to wane. You know affordability is a key issue. Clearly higher rates. You know I think everybody got used to two. And a half to 3% mortgages and they're hovering 675 or 7% for 30 years. And that's really hurting folks. Insurance costs are putting a big squeeze on invest, on buyers.

I live in Florida. Good luck getting the insurance. If you cannot get a mortgage without flood and hurricane insurance, and it's very, very expensive insurance in my community and I'm not on the water has gone up 3 or 400% in the last five years. So we're talking a material number. And these are all things playing a factor on homebuilder confidence, which is which is at pretty low levels.

Okay. Next slide. The housing market, this is showing that there are more sellers than buyers. You know, for the first time in a bit and, you know, more and more markets are starting to pull down. Yes. We're at all time highs in housing. Housing pricing tends to lag a little bit, but we're starting to see more markets.

I saw a good article I was going to put in here, but I thought we had too much showing the a number of cities where rents are down 10 to 25% over the last year. And so you're starting to see, for a host of reasons, affordability, in, not only affordability of housing, but affordability of communities and overbuilding starting to impact the apartment market, which is actually a good thing for inflation.

One biggest expense tends to be rent or mortgage. And if rents are going down, that will help us cool inflation despite tariffs, which should bring inflation higher. Okay. Next slide. So I'm a deficit hawk. And I think the last conversation we had I spent a lot of time talking about this. I remain very concerned about where we are with respect to federal spending.

You know, on the margin, Republicans have done a little bit better job, of of of being deficit hawks than Democrats. But make no mistake. Both parties are guilty of running big deficits with the last president to to balance the budget was Bill Clinton in 2001. Fiscal year ends a little different, in October. So that was the last time we've had a balanced budget.

And every president since has run deficits of 300 billion to over 2 trillion. You know, because of either a global financial crisis, Covid, or just crazy spending. And I'm also not convinced the big beautiful bill will be deficit reducing. I think it will be additive. The CBO, congressional Budget Office, which is not exactly the best predictor of the future.

They're either too low on deficits. They always end up higher than they think, assumes $22 trillion of deficits over the next ten years. And now they're saying this bill will add 3 to 4 trillion to that. So you're going to be at $60 trillion in 2035 of cumulative debt. And I just think that's too high. We in the month of May, the federal government spent $92 billion on interest.

You know, you don't really want to annualize that number, but you're basically a trillion to annually. Just a few years ago, we're at 300 billion, and I believe the Treasury secretary at the time, Yellen, had a critical opportune to refinance a lot of short term debt. At under 1%, the ten year traded at 31 basis points in the peak of Covid, and there were buyers for trillions of dollars of ten years at under 1%.

And she thought inflation was transitory. This year, we have $9 trillion of debt coming due over the next 12 months. Rather, so, it's not an ideal situation. Next slide. This shows that interest make up, 18% of government revenues. So just rough numbers. I'm going to just to keep it simple, the government get brings in about $5 trillion a year of taxes primarily, and they spend about $7 trillion a year.

So we're running about $2 trillion deficits right now. Interest is almost 20% of our budget and growing. And remember, half of the budget is is social programs, Social Security, Medicare, Medicaid, and Snap, which is the new name for food stamps. And so that is a little over 50% of our budget. Interest is 20% of our budget. And so you don't have a lot left over.

And then defense is about $1 trillion, almost 20% of the budget, probably 1,718%. So you don't really have a lot for all the other things, whether it's infrastructure or education, and all the other important things that the federal government supposed to do. And this is a chart showing $9 trillion of, of debt coming due in, in the next 12 months.

And again, that should have been dealt with under Yellen when we had 18 months ago when we had, very, very low interest rates. And, that was a missed opportunity that's going to cost us, us, us, meaning taxpayers trillions of dollars. If you're financing debt at 5%, that you could have gone at 1%. And it's trillions of dollars, you know, 4% and trillions of dollars over ten years is trillions of dollars.

So it's really costing us a lot of money.

So this chart is the, S&P 500. I talked about being fully valued. It's above 35% of its 20 year average valuation. So, you know, I just I don't think stocks are cheap.

That doesn't mean they can't keep going up. In 1999 I started shorting stocks. And I couldn't understand the valuation of stocks. Now I don't think it's nearly as overvalued as it was in 1999, but I got crushed for like 4 or 5 months and was starting to cover my shorts when the bottom dropped out. I shorted the world in 2007, and I was early, and then made a ton of money in 2008.

And I'm not short, but I've definitely started taking chips off the table because I'm a trader and I just think things feel very fully diluted to me, but that doesn't mean they're going down. But I think this is a good picture of of where the S&P is trading relative to history. It's pretty high. So it's really only Covid, you know, was higher.

Okay. Let's go, next year. So I thought this was a good one by JP Morgan. This chart shows, you know, for peace. And it's a similar vein only higher in Covid and, the.com, boom. And it just shows, you know, valuations. And again, it's, it doesn't mean that we're having a crash tomorrow and it doesn't mean I'm the ultimate bearer.

It just means on the margin I believe were fully valued. And these charts just support my view that valuations are high. Next chart please. You know, this is about concentrations. And it basically says that ten companies account for 40% of the S&P 500. And you know that that's a that's a big number. And I like the chart on the right, just with, Nvidia hitting $4 trillion in value, last week, it shows how big they are and also shows how the biggest ones are show for it.

You know, you basically have a handful of stocks, whether it's meta, Nvidia, alphabet, Microsoft, you know, Apple combined Amazon are, you know, trillions and trillions and trillions of market cap. But it shows how big Nvidia is relative to some of these others. You know, Nvidia is bigger than Chipotle, Starbucks, McDonald's and Coca-Cola by like three times bigger than those four stocks combined.

So, some of the some of these, tech stocks have gotten so massive, they're just crowding out everything else. And, you know, the, you know, the equal weighted stocks look very different than the market weighted. So I just think that's that's interesting

So the first question is, speaking of Janet Yellen. Just just goes back to some of the slides. She warned the tariffs could drive up the prices in the fall. The parallel appliances, toys, all of it is preparing for something like stagflation. Or do you think the risk is overstated?

So, I've said it publicly at first, but the way I put out a piece on Wednesday, on Sunday, it's called the Rose report read in 50 states and five countries by a lot of influential people all over the world. And, I talked a lot about this. I was very critical of the rollout of Trump's tariffs. I'm a big believer in reciprocal tariffs.

I do not believe these tariffs are reciprocal. We're tariff in countries with $500 per person GDP in Africa, Madagascar. They do what we will always run trade deficits. And we talk about it a little bit later. But I believe that the second half of the year is going to show more inflation. In the first half, the tariffs happened and they didn't all go into effect.

He kept giving him time and a 10% tariff. Part of that can get eaten by the country like China, by the manufacturer, by the retailer when you have 15 to 20% tariffs. Goldman came out and said 40% of the tariff will be eaten by the consumer. And I'm not going to do perfect math here, but let's just walk through it roughly, you know, remember, you don't consume everything you consume.

If you have a dollar, if you spend a dollar, you're not spending it all on imported goods, right? You're spending some on housing. You're spending some on food that doesn't come in from overseas. So if, if, if there's a 15% tariff on average on goods, which is roughly what we're looking at, there's some ends, but there's a lot of 15, 20s and even 30s.

If you assume it's 15%, I assume that's going to push prices up your CPI by 1 to 2%. Now, offsetting that, I talked about as rents are really crashing. And so that is the biggest spend that consumers have is rent. And so will they perfectly offset each other. No I do think the second half is going to look worse in the first half.

To your question on inflation, and I believe in reciprocal tariffs. I don't believe the way he rolled them out was very good. And I just think that, Trump was sloppy in this regard with around math at around who who was implemented. But I don't think it's going to be draconian. I don't believe that these tariffs are going to cause stagflation.

I can see very low growth or slightly negative growth, but I don't I don't see -3% GDP. But could it be flat plus or -1%, which feels kind of like a recession whether it is or not I'm not sure. But I think things are going to slow down. My bigger fear that will cause stagflation is is due to what's happening to the dollar and what's happening to the cumulative debt and our debt service and the crowding out of what I'll call discretionary spending, because we're spending so much on entitlements and interest, about 80% of the budget is going to that.

And we're having fund massive deficits every year. And I don't believe we can continue to run 5 to 7% deficits to GDP in perpetuity. And with an aging population, we're talked about a little bit, but I've written a lot about it in the last few weeks. Just quickly, we have, baby boomers, 10 to 12,000 baby boomers a day hurting 65.

And in 1950, we had 16 workers for every retired person. Now we have 2.7 workers for every retired person. And it's going to to, we were at 3.6% fertility rate for women in 1960, 1.77% fertility rate has been cut in half since 1960. You need 2.1 fertility rate to maintain a population. China is screwed. Japan is screwed.

Therefore, their fertility rates are approaching 1%. Spain and Italy are like 1.2, 1.1. And so we have this global phenomenon when people are living longer. Advances in health. People are eating healthier, not necessarily in America, but everywhere else. 74% of Americans are obese or, overweight. And you have advances in technology with AI and better cancer treatments.

People are living longer and the younger people are not having kids. And those are the reasons that I'm more concerned about the medium term view, on, stagflation rather than, rather than tariffs. Long winded question answer. Sorry. Next question.

on the dollar.

Are you seeing any cracks on how foreign buyers are treating Treasury as the US dollar? Just great question. So I saw some things that were a little bit concerning. There's a couple auctions that were a little sloppy and the dollar has been decimated. This is the first worst six months run in the dollar that we've had in decades.

Now there's something called the Mar-A-Lago court, and that was drafted in at Mar-A-Lago, which is Trump's, house, in, in Palm Beach. Interesting. I think he paid $8 million for it in 1985. Now I live there. I live right around there. If you asked me to put a price on that, I think it's worth $1 billion. So you don't have that much land.

So he did a pretty good trade, when he bought it for, I think, eight. But the Mar-A-Lago reports are basically saying, and this is Trump's view, and I, I, I adamantly disagree with him on this, that I want to devalue the dollar to make our goods more attractive and bring manufacturing back to the United States. And I'm going to go over charts on why I disagree with that and why I'm adamantly in disagreement with that logic.

I do believe the US dollar will remain the reserve currency globally. It was, in 1974. It was about 86% of reserve currencies. Now it's down to 58. The euro's basically picked up the difference. I would argue gold's acting like a reserve currency based on worth trading in the performance. Year to date. Or of the last year.

I do not see a replacement to the dollar, but I do see with some of these trade wars, other countries doing a lot of trades outside of Russia doesn't trade oil in dollars. Saudi Arabia stop trading oil in dollars, Brazil stop trading oil in dollars. And so I think the dollar is probably on a downward decline as a reserve currency, but I don't see anything to replace it.

In, in, in the near term.

So this is the VIX chart. So I'm a trader. Right. And so I was probably most famous for buying a lot of volatility. In 2007 I famously wrote an email to my boss Jamie Diamond, and I said, listen, it was July 2007.

I said, world is priced to perfection. It doesn't make sense. Vol is too cheap. And the reason I was able to retire at an early age was because I bought a lot of all. I'm short of a lot of things that were cheap and July to September of 2007, and we know what happened in 2008. And so the red bars outline where I live as a lifelong trader.

I started trading stocks when I was 12 years old, and I have been a trader in some form or fashion for the last 43 years. And so when VIX gets above 35, I'm buying risk every time. Whether that means I'm selling volatility or buying stocks, it could be as simple as buying the S&P 500 or buying the Nasdaq when VIX is above 35.

I'm a buyer of risk. When VIX you know it gets 1213 I tend to be a better seller of risk if I'm trading now, if I have something in my children's trust and I'm taking a 30 year view, I'm not going to touch that. But for my my portfolio as a trader and I'm not that I'm not taking a long term view on.

That's kind of my range. And we're getting to the bottom. We're getting closer to the bottom of the range. You know, VIX is a bit volatile this term. I put together a couple days ago. It's like 16 ish. And with a rally today might be the 15th I didn't look today but that that just gives you my flavor of of where I see how I trade.

My my my plus one.

okay. This is about volatility. As a follow up. There was this good piece in Bloomberg showing volatility. And you know, I was a lifelong credit person on the credit trading desk at JP Morgan.

I had $1 billion plus hedge fund that was in the credit space. Everything from derivatives to bonds and loans and CLO, liabilities and equity. And I just thought this was interesting showing annualized return and standard deviation. And the S&P 500 is highlighted. And I just think that some of these, you know, I get a lot of inbound calls and emails from my readers about, oh, you know, things like, private credit are so attractive because they're not volatile.

Well, they're not being mark to market. So I just don't think it's a fair comparison to the S&P. But, you know, I think I would put definitely put an allocation to private credit. A lot of my net worth is in private credit. I, I do it myself. I, I do private credit deals, that I originate and I funded myself, but I just thought this was an interesting chart on, on volatility.

This gets back to the question on rates. And I just thought this is a good chart. It's about a week old. But you know for for for discussion purposes it would be great. These colors. And I tried to I and this was a Bloomberg chart that I, I tried to make a little easier to read by by putting a legend in there.

And it basically shows since 20 at that when Covid when rates basically went to zero or negative, globally. What has happened since these are 30 year bonds and all of them look pretty similar. They were around zero. And now all of them are, you know, 2 to 3%, depending upon what you're looking at, even as high as four and five.

And so globally, we've seen rates move higher. Part of that is inflation concerns. Part of that is, I think, fiscal irresponsibility and runaway spending. Germany ratcheted up its spending and is running big deficits. US is running 2 trillion deficits here. But I think it's interesting that all these major countries moved in unison, which is why I like the chart.

Give me to me. If the big takeaway here is deficits matter. And to the question earlier, you know, am I worried about tariffs? Yes. Ideally, I didn't think there were cleanly rolled out as they could have been. But I believe deficits matter more over the medium to long term. And I believe we're going to have to have entitlement reform.

So the following countries have raised retirement age Italy, Spain, Germany, UK, France, China, Australia, Japan have all raised retirement age. Guess who hasn't raised retirement age? United States we're still at 65. When Social Security started in 1935, the average life span was 60.7 years. Today, it's basically 80 and we still haven't raised retirement age. And so the single biggest thing we need to do as a country is raise your retirement age.

I don't want to raise retirement. I assume I'm not getting Social Security and I contribute a lot to security. I assume I'm not getting it, but we have. That's called means testing. If you have a net worth over a certain amount, you don't get Social Security. I was just with a guy who's worth $500 million. He gets $4,000 a month in Social Security.

I'm not going to say no, but they give me $4,000. He should not be getting Social Security. But I think the biggest impact will be raising retirement age. But nobody seems to want to do that.

Now that tech is going through some volatility, are you learning leaning more in cyclicals or just being patient.

So you know, for me I pick my my my spots I don't get too excited about, you know, a sector. I like to look at the fundamentals of a company, and I'll look at anything that I think is cheap. I think tech is pretty fully priced, but it seems to go up every day. And I've been wrong.

I just I think I'm paying a little bit too much for those. I do think we're going to slow down a little bit in the second half. And as I said, I if anything, over the last month or so, I've taken chips off the table rather than put more on. But I did buy a fair amount of stocks.

I got a little bit lucky, but I going back to that VIX chart that I went to on. Very disciplined on that. I bought a lot of stocks within a few hours of that low,

day that we, we spiked due to, the tariffs in April, I forgot the day, but maybe April 9th.

You know, this chart is a little bit cut off, but intraday we were like 50 or 60, 50 or 60. And I was buying stocks at that. And you know Goldman actually has a good for those of you who bank with Goldman Sachs. They have a good vol sell selling strategy that you can put money into.

And they will sell vol on your behalf, and through like a fund that I think they do quite well. Okay. Okay. And private credit it exploded up ten times in the government. Do you see a risk in building that out? Well, you know, I've been doing private credit. It's funny, since 1994, I've been doing some form of private credit.

Just started calling private. Now there's $200 private credit. Everybody, you know, across the globe seems to be managing a private credit fund. And I'm actually doing a private credit speech. I'm moderating a panel, actually, next week on the topic with some of the biggest private credit managers in the country. And I would say that where I'm concerned is when you have too much money chasing everything, anything, no matter what it is, whether it's private equity, VC, real estate or, or, or private credit deal structures deteriorate and bad things happen.

So let's go back to 2007. In 2007, when I was started shorting things, deals weren't making sense to me. I'm like, who would lend money to this piece of crap company? Like, who's doing this? And people were throwing money because the world's never going to end. And, you know, and then you get these aggressive term sheets that are good for the borrower and bad for the lender.

And so my concern around private credit is not that it's going to blow up tomorrow, it's that on the margin, as more money is raised and they're all chasing the same deals, how do you win? So if I'm betting on a deal and Mike's putting in a deal and Susie's betting on a deal and Kerry's betting on a deal, and we all have $1 billion to give a company.

We're only going to win by lowering price or loosening structure, lower covenants or less covenants or wider covenants, you know, no personal guarantees. Like whatever we're doing, we're going to lower the structure. And so over time, I'm concerned. The other concern I have, there's been a lot of new credit managers that have popped up that don't have all this experience.

If I'm going to allocate to private credit, they damn well better have restructuring experience and have better seen cycles and have because unlike a bond, if you change your mind on a high yield bond, you can sell it. If you buy a private credit instrument that only has you or 2 or 3 investors in it, selling it is very, very challenging and cumbersome, so you better be able to work it out.

And so am I worried that private credit's going to blow up? No. But on the margin, some of the deals that are brought to me, I'm like, who would do that? And my favorite credit story of all time was during the mortgage boom in 2007 and eight. There was a question on a call to, I believe it was to countrywide, which was the huge mortgage lender that blew up.

And somebody asked the question, how many ninja loans? What percentage of your portfolio is ninja? And the guy on the other end was like, Ninja, what the heck's a ninja loan? And they said, no income, no job, no assets. Lenders were lending money to people that didn't have an income, didn't have a job and didn't have assets. What could possibly go wrong?

And so my concern is over time, as too much money gets thrown at at an asset class, just your quality deteriorates. And I think we're starting to see a little bit of that. But I'm not I'm not hitting panic mode.

Okay. This is, a chart. It might be a couple days old.

So I think the ten year is like 438, but good enough for government work. So this is my view that I don't believe rates are going down materially. So if you look at the rates of fed funds on the top, they started cutting, in September, September 18th. They cut safety and they've cut 25 twice. So on the left side you see it says rate cuts started.

I believe the tenure was at 364. We're up about 75 basis points since that time. So you think well the fed is cutting rates. Why is ten year and 30 year going up in this 30 years up about 100 basis points. And it gets back to running deficits of 5 to 7% of GDP, $2 trillion deficits. You are not supposed to run deficits when you're at all time highs and stocks all time highs and real estate relatively low unemployment.

We're not in a major war. There isn't Covid, malaria, you know the global financial crisis. We should be running surpluses during this time. Love them or hate them, DeSantis, I live in Florida, has paid down 50% of the debt in the state of Florida since he took office almost eight years ago, so, I mean, fiscal responsibility, and I'd like to see more governors, more states and more and the federal government be a little bit more fiscally responsible.

And I think this I don't own ten year bonds. I do not own long term Treasury bonds. I don't know, 30 year bonds. And I believe and I can't believe I'm saying this out loud, but there's a non-zero chance that over the next ten years that there will have to be some sort of restructuring because the debt just gets too high.

That doesn't mean they're going to default. Well, there'll be a there'll be a default in the sense that they'll ask you to extend and probably lower your coupon. I just don't unless they're willing to do tackle a gentleman from. I just don't see, a way out of it. But this chart, I think, is showing telling because they cut rates on the left side of the chart September of 2024.

Yet ten and 30 year bond yields are up 75 to 100 basis points. And they really shouldn't be. So I then I'll say tie in an earlier question that the tariff announcements, I do think will be additive to inflation. I think, the, the big beautiful bill will be additive to the deficit, but hopefully slowing real estate prices over the next year will at least partially offset that.

In January 2025, I put out my first piece of the year, and I always make, you know, 10 to 15, let's call them the guesses or, projections for the year. And one of them was, one of my first one was that Trump and Musk would have a spectacular blowout fight, I think. I think that was proven true.

And so far, seven of my 12 proved true. And I said, there will be I believe there'll be one fed rate cut, but no more than two. As of this morning. Fed funds futures are predicting, one fed rate cut and a 72% chance of a second fed rate cut. So I think that will end up being proven true as well.

Okay. Next slide. So this goes back to the question on the dollar just showing the decline in the dollar. Which has been hit pretty hard. And you know, I think that Trump is a believer and I think falsely so that with a weaker dollar, manufacturing jobs are going to come back to United. Now I'm going to say something adamant manufacturing jobs, size will never come back.

The United States, the United States is massively uncompetitive from a cost perspective. So I make stuff in China I did before the tariffs, and now I'm using things in Vietnam and Southeast Asia. But I have a I don't have it on me. But I made a hat I made a hat in Ohio in the quality of the hat was awful and it cost me $15 a hat to make.

I made a much better quality hat in China, and I air shipped in here because I needed them in a hurry, and they cost a dollar a piece to airship them, and it cost me for 85 better quality, more embroidery. And I airlifted it and there was a third of the price. Now this is before tariffs. But my point is, in the United States, we will never be a major manufacturer because the cost of labor is too high.

The only way we will bring manufacturing back to the United States is through AI and robotics. We will not do it by hiring a union worker at $35 an hour, plus benefits. When China's paying $4 or $3 an hour, Mexico's playing $3 or Portugal paying $2. You just can't compete. I'm not suggesting we should pay people $2. I'm suggesting trade is a beautiful thing.

I have a massive trade deficit with Amazon. I just buy from Amazon, Amazon, buy anything from me, and I'm much better off and I'm much better off. I have no problem with trade deficits. We should have trade deficits with countries that are better at manufacturing something and China because of the way they treat their people and pay their people.

They can manufacture things far more efficiently than the United States can. The UAW, the big three auto manufacturers, filed for bankruptcy. Two of the three filed for bankruptcy, partially because they made inferior product, but because they were paying union workers. When they laid off a union worker, they had to give them 80% of their salary for a year to not work in China.

They're more likely to shoot you before they give you 80% of anything. And so, I'm an adamant believer that that Trump has it wrong. Unless it's not hiring talent, it's bringing jobs back through technology. And I'm all for that. I am for critical components. I do not like the fact that 90% of some of our antibiotics are manufactured in China, and an overwhelming percent of our drugs are in Ireland.

Manufactured island. I would like to see things like that brought to the United States, even if it cost a little bit more money. I think it's two mission critical. If I'm China and a trade war. I'm just saying I'm not going to say these 20 antibiotics anymore. I don't know, that's pretty damaging. So, rare earths I'd rather see see us mine rare earths rather than rely on China for rare earths.

Everybody wants an EV. Well, not little less. So they've come out of favor a little bit. But we need to mined some of that, and we have a lot of that. But we've been unwilling to meet. But I think this was a good chart showing the weakness in, in the dollar in a short, in a short period of time.

So look at the average monthly wages. And I'm not even I found this chart. This is Apollo. So they got it for everybody on this call who's interested in economics should go on to something called the Daily Spark. It's Apollo. This guy talks. It's like, well, I've known for a long time our kids went to school together.

New York City. He used to be the chief economist at Deutsche Bank, and now he's a chief economist at Apollo. Every day, seven days a week, he puts out a chart.

And this shows that the average, wage in the United States is, is about $6,000 a month, and in India, it's $195 a month. How in the hell are we going to compete making anything in a factory? What? We're spending $6,000 a month and that's not fully loaded. That's wages. That's not including benefits.

And 41 K and all that. And China is at $1,000 a month in Japan to 3000. Like, you just can't compete. So this chart only proves my point that Trump is wrong on this. And, we will never be competitive manufacturing things. You know, Germany's pretty high now. They manufacture, a lot of cars there. But, they've come under a little pressure recently because of their stupid, energy policies.

And they relied too heavily on, on energy. You know, I crush Trump on this, on this tariff news and a press jump on, the dollar and his desire to bring it back. I will say one of the funniest moments in recent memory to me, there was an economic forum where Trump got up about three years ago, what he was and what he was off.

His last time maybe was five years ago

and said, Germany, you're too reliant on Russia for natural gas and you're going to freeze in the winter time. You should diversify your your natural gas sources and the representatives from Germany live. It literally laughed. And then President Trump's face and then we all know how that played out.

You know, over a couple of winters ago when, when people were freezing. So. Okay, but this is a good chart showing why we will not be a great producer in the United States. Using U.S labor. Too expensive.

Thanks for your quick answers. Quick question on it. If the Japan deal, it includes real capital, equity and credit flowing to the U.S. industries like semis and clean energy.

Are you seeing tangible

investment opportunities? You know, I'm on the road, and I've been, It's funny, my son is going off to college in, in three weeks. In just under a month, we'll drop him off at Wake Forest. He's going to be a freshman. And, I'm giving my son his last couple of weeks of whatever he wants to do, so I'm, like, basically living out of a car.

Not very glamorous and taking him golfing. And so this news hit last night, and I have not spent a lot of time digesting it. On the surface, it looks much better than it otherwise would have been, because you were talking about 25 to 30% tariffs, and the Nikkei was up 3.5% today. At one point, Toyota was up 12 or 13%.

And so I think it's better than it could have been. But make no mistake 15% tariffs were one of our four biggest trading partners is inflationary. And and so I just think the second half is going to prove far more challenging than the first half because most of the first half we didn't have tariffs for most of April and May.

They weren't really implemented. Now, on the positive side, last month I think we collected $100 billion or I think that. Best said he believes that we will collect $300 billion in tariffs in 2025, which are great news because that means that we are going to be, you know, that will reduce our deficit. Theoretically, if we're collecting 300 billion in tariffs and if we're running a trillion a deficit, it lowers it a little bit.

And you couple that with some a little bit of dovish cuts. And it makes a dent. But it's still not enough for me okay. Next one. So this was in my last, last piece. And I just keep going back to it. This chart shows that there was eight workers in 1985 to generate $1 million of revenue in an S&P company, and now in 2024, it was about, two people.

And I just believe that with AI, robotics and efficiencies in, in the world, we are going to 0.5 people to generate $1 million of revenues over the next five years. It was funny. My son and I went to dinner in New York City two weeks ago, a fancy omakase, restaurant called night 17 at Chelsea, and it was a four person bar.

And these two very young men that looked to be my son's age were sitting down next us. I was thinking, how are these kids, like, affording this kind of a restaurant? And I asked him what they do. I said, where do you go to college? He said, oh, I'm 30 years old. I, I'm an engineer at meta. I helped design those glasses.

I have, the meta, sunglasses with Ray-Ban that you can take pictures and record and talk on your phone. That's how I talk on my phone. And I said, okay, how much do you use AI? He goes, it's all AI. He said, they're laying off so many engineers. I'm very fearful of my job. He said, I can guarantee you I will be out of a job in two years.

I used to work 40 hours a week. Now I work 80 hours a week. I'm not getting raises and we are so fearful of getting laid off because we are all so much more efficient because of AI, that they're just a whole lot less need for workers like me in the future. And if you look, I wrote a piece last week about computer engineering, computer software design, computer engineering, computer science jobs are have, an unemployment numbers higher than the national average.

A year ago, they were the most sought after and highest paid people coming out of college. Now they're far worse than average coming out of college. And it's just an article data. 58% of college graduates from just this year do not have a job. And that's a whole nother topic I go on diatribes on about, should you send your children to college?

I'm not so sure. And I have a chart on that in a minute. Okay. Next slide. This is another example. I don't know if you guys listened to the All In podcast. I'm a little bit addicted and a stalker. And actually a couple of the folks on the on the podcast who read my newsletter, Travis from the founder of Uber was on, All In podcast last week.

And his new thing is this cloud restaurant idea that's called lap 37. And so that machine that you're seeing is 60ft by nine feet, and it can make 300 bowls an hour. So let's just use a Chipotle. So you want to go to totally and make a burrito or bowl. This could make 300 an hour. What you have to do is put the prepared food in the station and the sauces in the station.

And when somebody puts an online order into the system, it automatically makes it bags. It puts the utensils in it and closes the bag and seals it. And then a another machine takes it to a locker and puts it in a locker for the delivery person with their app to co open the locker and then they know where to take it.

So basically we talked about how to make things more efficient in the United States. It looks a hell of a lot like this and not like 20 people running around getting $20 an hour. There are some states, California trying to go to $30 an hour minimum wage for fast food. So I don't I don't eat fast food, but if I did, I'm not spending $24 on a Big Mac because I'm paying people 30 bucks an hour.

It's just inefficient. So what you're going to have is no workers. You're going to have this making your Big Mac and making your Chipotle a burrito. And so I just think that's very interesting. He said it's going live actually, this quarter. Restaurants who use this equipment can take their labor costs. I'm not saying you don't need any labor.

I'm saying you need far less labor, from 30 to 35% of revenues to 7 to 10% of revenues. And I that's pretty material. When you look at a restaurant, about 30% of your and Mike, correct me if I'm wrong. You're the big restaurant restaurateur in Chicago. Like, like Melbourne over there. Like, let us entertain you. You know, I would say 30% is food cost, 30% is labor cost.

If you could take your labor cost to under 10%, you're winning. And, that's what you're going to see here. And that's the way that there's going to be more, more jobs. But it's jobs for computers and robotics. And by the way, there's about 12 million people employed in restaurants across the United States. And I asked the question, how many in five years?

There's about 11 million drivers in the United States Uber, Lyft, taxi, Fedex, UPS, Amazon, USPS with self-driving. There's now a semi in Calif in Texas that travels two hours by itself, from one one stop to another without a driver in a semi, you're having more of those Waymo. Waymo cars drive around tens of thousands of jobs a month in five years time.

I can assure you there's not going to be 11.5 million driving jobs available. All those things are very deflationary. A lot of lost jobs. Okay, next slide. Number of white collar employees in public companies. The change since the end of 21. Look at that. You know, you're seeing a lot of them. Salesforce announced that 30 to 50% of its company's workforce is done by AI.

Now, Florida shrunk the workforce by 40% due to AI. When I ran trading, we didn't have algos do anything. I don't own trading 50 years ago. I'm not 90. I look like I'm 90, but I'm not. Now, my son, I had my son get a summer internship for a little bit at JP Morgan, and he was on the trading desk, and he came back talking about how algos and so much of it is done without human interaction.

So jobs that I was paying people some millions of dollars to do is now not being done by humans. And I just think that there's going to be a lot more of that. And this the top bullet talked about what I already said, that computer engineering, and, computer science, unemployment is higher than the national average for the first time because of AI.

Okay, next, I've been critical of terrible, terrible implementation. And this is kind of a chart that just shows the longer that there's uncertainty, the bigger impact to real GDP. But on the positive side, best and believes there's $300 billion a year of revenues to collect in 2025, which would be which would be a net net positive.

Okay. Next one, you know, I wish I could update to this for second quarter. I couldn't find it updated. But, you know, just to my comments about some practice. So let's talk about the big one student loan. So there was a moratorium on student loans for like three years under the Biden administration due to Covid. And then in October of last year, the moratorium ended.

And then you could see this huge spike in the kind of fourth quarter, you know, of of 2024, the, you know, late 2024 and early 2025 with like 15% of those having student loans delinquent, and they've just started to start having paid in the last 6 to 8 months. And the other thing is you're starting to see credit card debt.

We're at all time high credit card debt. Interest rates are 22, 23% on average for credit cards. We're seeing an uptick. There. I believe these trends will have continued largely in the second quarter, but I don't have the data yet to prove it. And then, you know, mortgages are up ticking a little bit, but not not not nothing.

No. Nothing major. And auto loan drop taking a little bit now. Just got interestingly like 18% of auto loans today are new autos are $1,000 or more monthly payment. And you're seeing a huge uptick in 84 month, loan terms for auto. And you know how what happens to appreciation so people can't afford it. They're getting squeezed because of housing prices are getting squeezed because of inflation.

And they're getting squeezed. And they're, they're, they're they're doing things that don't make economic sense. I don't buy cars unless I pay for them in cash. I don't I think it's very dangerous taking a four month loan on a car that's going to depreciate, far faster than that. And a lot of people turning in cars have to make a cut a check when they go to sell them, because they owe more on the loan than the car is worth.

So that's dangerous. But these are just things I continue to look out for as new data becomes available. Okay, next one. You know, these are coming to the near the end of my comments, but, you know, the last time we talked about a pretty big slowdown in IPO and M&A activity. And, on Sunday I had dinner with a very large bank chief, head of M&A.

He's the CEO of M&A for a big bank. And I and he and I said how busy? He said er the last six weeks are on fire. So things started the year off strong. Then the then the Liberation Day tariff scared everybody off. How do you, how do you do an inter a deal across country. How do you know how your impact is going to be impacted for, for tariffs.

And so deal flow totally stopped in April and May. And now June and July are very, very, very, very busy. And you know, and so IPO proceeds are up are down 6% year over year. But IPOs are up 52%. We've seen some good performing IPOs recently. And so I think you know, getting rid of of con at the FCC and I think reducing regulation, I think you are going to see a very robust second half in IPOs and M&A, which is very good for venture and private equity because as, as, as Mike can articulate, far better than I, distributions are down pretty dramatically for venture and private equity.

I know having invested in some of these funds that I never seem to get checks anymore, for the reason that we outlined. I mean, you look at what IPO proceeds crashed, you know, between 21 and 22. Look at that chart. And the same thing happened in M&A. It was down dramatically, down about 50% from 2021 levels.

So I think you're going to see an uptick there, which I think is good for those who are long private equity. And venture and even private credit, which will get taken out with with fees to be paid. And I do think that was interesting. Just this week, on Monday, we had J.P. Morgan announce earnings and their investment banking fees climbed 7%.

The market was expecting a 14% decline. Debt underwriting rose 12%. That just means there's more deals happening. And M&A fees climbed 8%. Just talking about what I just said. And then I've been very harsh on Citigroup. I think Citigroup is run very, very poorly. I am not a big fan of the CEO. I don't think they do a very good job.

And the stock has been a massive, massive, massive underperformer over the last five years. They're actually their stock over the last couple of months and year to date is now starting to outperform after a long period of underperformance. If Citibank, who's got a horrible investment banks on 18% increase in banking revenue, you know things are good because I don't think Citibank does a very good job in that respect.

Okay. Next slide. And this is just showing IPO performance. IPO performance has lagged broader stock performance. And you know that's because the big tech companies are so heavily weighted. But it would be better you'd have a lot more IPOs if if the green line was higher than the then the dark line, of the S&P. But it doesn't.

That's one of the things that have kept back IPOs from from being more robust.

But this shows average housing prices. And, you know, when you look at this since 1963, there were two sharp upticks right before the global financial crisis.

And then with Covid, with all the free money and zero rates, you saw two upticks. And we're definitely seeing things slow down. With rents, we're starting to see housing prices, houses sit on the market more. Even in Florida. There's markets in Florida that are really under pressure. You know, in Florida, I think there's 183,000 houses on the market in Florida for sale houses or condos in 2019.

There's 129,000 and peak Covid. In 2022, there was only 35,000. So we've gone from 35,000 houses for sale in Florida to 183,000 houses for sale in Florida. Things are slowing down and so prices are lagging indicators, not leading indicators. The bottom of the housing market post the global financial crisis was about 20 1112. So a couple of years after the bottom of the stock market, March 19th, 2009 was the bottom of the S&P 666.

But real estate prices are lagging indicators. But I do think real estate prices are starting to roll over for all of the reasons we discussed.

This is I talked about should, you know, this kind of relates back to employment and factory work and should you send your kid to college. So college tuition and fees, inflation since like 1985 is up 700% and overall CPI is up 200%.

Jack is starting and my son is starting college August 20th. I took that from Wake Forest University website. This is not making it up $94,600 to send your child to a very good school, private school, 5500 students. That is before they've eaten dinner out. This is only dorm housing, no fraternity, and no meals outside of your food prep plan.

And it's not flying home for holidays or anything else or studying abroad. So I assume my son's college is going to be about $110,000 a year, or $450,000, I don't know. My son was valedictorian, and he's a smart kid, so that's why he's going to college. But I'm pretty sure if he wasn't, I would not be spending $450,000, because I don't think that you're going to get 450,000 of benefit out of it.

I'd rather go to vocational school for nine months and become a an electrician or whatever, or air conditioner repairman, and give him $400,000 to start a company and buy ten vans and have people work for him. And I think he'd be far better off. But the cost of an education is, quite frankly, mind numbing. And I think half the kids that go probably should be doing vocational school of some sign rather than paying these exorbitant cost to go to school.

So now this starts, Mike's comments, but if there's any questions, I'm going to stick around. If you want to ask me any questions, put in the chat or feel free to ask, and I'll try and talk about whatever you guys want.

of my material, and then we'll open it up for questions that can tie back to your stuff in mind as well. But, some great insight there. Stuff that we use. As you can see, what was mind boggling is the, you know, the cost per employee when you see some of those statistics and a lot of the stuff that Eric talked about, in terms of what's happening with the economy, where productivity is going to come from, how you're going to shift, you know, the landscape of manufacturing jobs in the United States will be done by robotics and AI.

This is something that we saw about, you know, a year and a half ago when we started our fund one and we were quick to recognize that how powerful this tool is going to be and how productive it's going to help not only new companies that are being started, but existing companies that can flip their business model where they're really using technology as a tool for automation, and obviously that reduce a ton of cost.

As you can see, how much it cost from the statistics Eric showed you for labor in the United States, but also helps with growth. So you get this technology that can help on both ends. And so when you look at where venture is, I think we see, you know, we start to see some green shoots here. When you start to see the IPO markets coming back, you've had this almost two and a half year period of trapped capital, where there's just been so much capital tied up.

And some of these private companies that have been unable to go public or their clearing price might have been too high. So we think that's a huge positive for the venture ecosystem. If you start to see an uptick of M&A and IPO activity, there's going to be a lot of capital that will then be able to flow back to, to early stage venture because I think there's attractive investments to make right now.

And I think people are want to make more investments, but they obviously want to realize, some of the returns that have been trapped for a period of time. But when you look at some of the statistics, you can still see, like what's alarming to us or what we take out, we really look at closely and is you still see the number of down rounds that are out there.

So they're increasingly high. You know, you're looking at around, you know, close to 20%, which can be almost double the historical average. And what this what these charts will show you. And I'll show you the next one in a moment is, is how high the valuations were in 2021. I mean, the valuations are way over their skis and that some of these companies are having a come to reality moment and some of these companies are just not going to make it.

And so as they're on their last lifeline, they're forced to, take significant hits in terms of their valuation. And so I think we'll see a couple more quarters of this, but a lot of these tie back to companies that were were started in 2021. We're seeing a lot less of that, especially with the companies in our portfolio.

So next slide please. This just shows obviously, you know, one of these years and I showed some of this chart in our our last quarterly update. But this just to shows you like how much capital was raised and that, you know, 2021 period. Close to double if not triple the historical average. And so this just speaks to the previous slide, where I think that a lot of that access is going to need to be burned off with, with a lot of down rounds or just a lot of these companies not surviving and, and their investor base just unwilling to support them moving forward.

But I still think that there's it just shows you how high these valuations are and extreme when you start to, you know, see this this lag over, you know, 2 or 3 year period after that access. Next slide please. Hiring continues to trend down from the highs of 2022. I mean this slide is very interesting because it ties back with a lot of the data Eric has shown you is that, you know, we had this period especially in, you know, even Covid or pre-COVID where everyone wanted to go to school and be an engineer.

And it was the most coveted job that was out there. These companies were in a race to build the best technologies, and I the only way that they could build these technologies. Would you hire a whole team of engineers out of school? Became so competitive. These guys were making, you know, 200 to $300,000 a year. And on a whim, that's all changed.

And we're starting to see that in a lot of the companies that we speak to and work with is that they're obviously now able to use AI and new ways to develop this technology, and that the number of engineers that they need is drastically less. I mean, you're talking about reductions in almost sometimes 80 to 90% of the number of people that you need.

And some of these companies need, you know, 1 or 2 senior level engineers and one junior level engineer, and their guy is to another job is to manage the AI, fix the bugs and fix the problems. And I think that trend is going to continue, and you're going to start to see the paradigm shift into other areas. And so as this technology becomes a little bit more commodity ized, you're going to see more the importance of distribution, sales and marketing efforts.

It's going to be vastly important for these early stage businesses to have some type of distribution mechanism built in, because AI is is, you know, capable of of developing this technology. And that sort of leads us to our whole central thesis when we talk about, you know, specifics and vertical AI is that we have to be very careful in terms of there's so many different and so many competitive companies.

I mean, I alluded to this on our last call three months ago, but how many note taker apps are there out in the marketplace? I mean, there's hundreds of them. And so next slide please. The way that we look to invest in this space is obviously very, very specific, custom technologies that are built with defensible IP around it.

And so we just took a snapshot of how our portfolio is performing. We're, we're ecstatic to the fact that it's outperforming some of our metrics to date so far. Right now we're about 25% IRR, which puts us in the 90th percentile of all venture funds. A lot of that had to do with great timing. But I also think great strategy.

How we pivoted to focusing on versus vertical. I was a really, key move that I think is going to set us apart. And propel us as we work to launch our fund to as well. But also timing was key. Look, a lot of investment has to do with timing as well. And our ability to come into the market after that access in 2021 where we were getting into these, you know, some of these AI companies that at real attractive valuations, just because it was so hard to raise capital, I think is starting to pay off and will continue to pay off, because we're seeing great graduation rates for some of our companies.

All the ones that are performing are raising, capital in higher valuations. It's taking them less time to raise capital at these higher valuations, which are be positive. So we're pretty ecstatic with how our performance of fund one is, is going so far. And then just back to this kind of ties it back to what I was speaking to before about when you look at where the economy is going and of course, there's great places to invest private credit.

Obviously, everyone should have a well-balanced portfolio. But when you look at venture as an asset class and you look at the different areas that you can invest in, venture. Vertical, energetic, I obviously everyone's familiar with gender. Agents, which is a huge component of vertical AI, which is obviously means focusing on specific sectors and workflows. We think that this is so attractive for these key reasons.

Obviously it's capital efficient. Less dollars need to be raised to power these companies, which is a huge plus. These companies can become profitable faster, which I think is going to lead to quicker exits. And that's this whole form of trap, liquidity. And, you know, people's view of venture is, oh, I invest in the early stage venture, but it may take me 10 to 15 years to realize any profits back.

I think this particular focus of how we invest can, can change that paradigm dramatically. And is deeply embedded. Look, this is purpose built for industry workflows, as you saw in Eric's slide, you see all this new technology that's going to come in to restaurants. I mean, people are going to focus on these areas where costs have become so increasingly high.

It's taken out every margin. And I think there's a lot of opportunities, especially here with companies in the United States. And again, just ideas alluded to high value, high margins. So you're seeing this technology really make a lot of these companies attractive. And and and it ties back to how people are investing right now. People are so cautious in the early stage markets.

I mean, you're seeing series A companies in 2021 at maybe like a 500 K run rate. Now you're lucky if you can get a, you know, 2 million run rate is kind of the floor for a series A company. So the bar, the the bar of which people are now raising is kind of four times the revenue that they needed back in 2021, which I think is a positive for the early stage market.

Again, things bounce to extremes. Things become so loose and then they become so tight. But I think in this particular area, it gets us really excited about this moment in time. We think it's just a great place to continue to be. Deploying capital. So with that, I know we went or a little bit over, but if there's any questions, please feel free to let us know and we will provide a link to everyone with this recording.

And we hope that, we continue to deliver value to on a quarterly basis here.

Yeah. There's my email. Eric, you mentioned the 72 year old British of the year. Came out here to hear what? Your main five. You think you're most welcome to? I'd have to pull it up. That's in my Substack from, I think, the first one I did in January. And you could see all 12 of them.

I've talked about oil. I said, don't be surprised if oil hits 50. And it it got down to 55. Which, you know, is a pretty good move. I now think oil's going the other direction. I think it's been a lot of, of, of negative news on oil and it's and it's gone out there and OPEC is increasing production and it's gone up, my rates prediction markets, I said that markets won't do nearly as well as they did the prior year, which is there's no chance that they will, be up nearly as much as the last year.

I had the call, the big blow up between Trump and, and, Musk was there the rates call, which I said, I think going to be one cut was my base case and two was the most. And I have to go back and, and look, on my Substack, to, to see what it was.

But I just think that the second half is going to have a little bit more challenges in the first half. That doesn't mean that there's a crash. It doesn't mean there's a crisis. But I think there's going to be some some slowing. And I at the I do think and I talk with a lot of CEOs and CFOs and the uncertainty around tariffs.

You cannot make multi-year decisions because Trump gets in a fight with, you know, the president or the CEO or the president of a country and I feel like he's his on again, off again tariffs are very, they're disturbing and they're also disruptive to someone's trying to make a multi-year decision about where to source the products. And I think once there's a little bit more clarity and, you know, deals with Philippines and Vietnam and Japan all coming, to a conclusion.

And China looks like, you know, they then made some announcement. They didn't have all the details. You know, all those things are good. We still have a lot of questions about Canada and Mexico. Our big trading partners are Canada, Mexico, China and the EU with Japan being next. But you know, you know, the EU is a lot of questions.

August 1st is a deadline. I put in my last piece about how EU has some pretty good globe, nuclear options to make America. You know, pay. One of them is to charge on services. And so one of the things they're talking about, you know, Uber is an American company. So if you take an Uber in the UK or Europe, there'll be a big fee.

If you buy Microsoft Service, you know, they don't charge you tariffs on service. It's only hard products. So software products you know all those things Amazon you know it's American company. So I hope that cooler heads will prevail. And Trump gets off of his schtick of wanting to have all this manufacturing bring back jobs. But I just think the second half is going to be a little bit more challenging than the first.

But if you go on my Substack, it's Rosen Report on Substack one, it's free to sign up. I put out pieces on Wednesday and Sunday, and there's 500 pieces historically there. And if you go to the first one in January, you could see what my predictions were and which ones have come true. And which ones, if I go 12 or 12, I'm going to change my name to Nostradamus.

If I go ten for 12, I might do it. But, I was pretty excited that I went seven for 12 and six months.

so, listen, thanks for thanks for joining, giving me an hour of your time. I appreciate the questions and the interaction. And, have a great summer.