While markets have started the year on a positive note, leadership is shifting. At the same time, GDP has slowed, policy uncertainty has increased, and investors are reassessing valuations across multiple sectors.
Although major indexes remain near recent highs, early 2026 performance has come from different areas than investors have grown accustomed to in recent years.
Mega-cap technology names have paused. In their place, small caps, mid caps, value stocks, international markets, and energy have stepped into leadership roles. Noah and Chris describe this shift as an “everything rotation,” where capital broadens beyond the handful of dominant growth names that previously carried the market.
Rather than signaling weakness, this type of rotation can reflect healthier participation across sectors. Markets often transition leadership during periods of valuation reassessment and evolving economic conditions.
If earnings growth expands beyond one concentrated theme, it can create a more durable foundation for long-term performance.
Recent economic data has added complexity to the picture. GDP came in below expectations, driven in part by reduced government spending tied to the recent shutdown. Federal expenditures have been a meaningful contributor to economic growth in recent years, so any pullback has measurable impact.
Weather also played a role. Severe snowstorms across parts of the Northeast temporarily slowed travel, consumer spending, and business activity. While weather-related disruptions are often temporary, fiscal policy shifts can have longer-term effects.
The episode explores how these combined forces contributed to a softer GDP reading and what that may signal for the quarters ahead.
Noah and Chris discuss the latest employment data, including headline job growth numbers alongside meaningful downward revisions to prior months.
While unemployment remains relatively low, slowing job growth and declining job openings may indicate a cooling labor market beneath the surface.
This leads to a broader discussion around artificial intelligence and automation. Rising productivity driven by AI has the potential to reshape industries, job roles, and long-term employment dynamics.
The episode raises an important question: if productivity improves faster than job creation, what does that mean for consumer spending, which accounts for roughly 70 percent of U.S. GDP?
Rather than framing AI solely as a threat, the discussion focuses on how technology may shift the types of jobs available and the skills employers prioritize in the years ahead.
The episode also examines Nvidia’s strong earnings report and the surprising negative stock reaction that followed. Despite significant year-over-year growth and optimistic forward guidance, the stock declined, illustrating how elevated expectations can influence short-term price behavior.
At the same time, the software sector has experienced broad pullbacks, sometimes described as a “SaaS correction.” Noah and Chris explore whether fears of AI displacing traditional software models are overstated, noting that many established platforms may ultimately integrate AI rather than be replaced by it.
Large capital spending plans from major technology firms continue to support the long-term AI investment cycle, but markets often overshoot in both directions as investors attempt to price in innovation before its full economic impact is clear.
Additional discussion includes volatility in Bitcoin, energy sector leadership, and ongoing global trade developments following the Supreme Court’s ruling on tariff authority.
These factors highlight how policy decisions, currency dynamics, and geopolitical tensions can influence both inflation expectations and investor sentiment.
The episode also reinforces that speculative assets and high-growth sectors often move together during risk-on and risk-off environments, making diversification and risk awareness especially important during periods of transition.
As markets navigate shifting leadership, rapid technological change, and evolving economic signals, Episode 55 reinforces several core principles:
Strong markets are rarely driven by a single sector or theme. Sustainable growth typically comes from broader participation, balanced expectations, and investors maintaining perspective despite changing headlines.
Hey, welcome back to another episode of the market enthusiast. I’m Noah Brooks. And obviously this is Chris needs.
Noah Brooks (00:08.622)
Hello. All right. Thanks for joining us today. Let’s get right down to it. I’m going to start with the elephant in the room. Do you know what that is? Nope. Nvidia earnings. So, well, they were strong. They were great earnings. Great guidance. talk about that for a minute. 73 % year over year revenue. That’s awesome.
data center was up 75 % year over year, 68 billion in revenue. And the stock went down. It It pops right on the report and then just overnight just. So, okay. Seriously. Nvidia is down 5 % today, five and a half, depending on when you’re looking at it. And here we are, we’re recording, the day before the last day of the month, February 27th, think.
sick maybe. Second business, second last business day of the month. NVIDIA came out last night, popped as you just mentioned after the close, after they reported and then they’re down 5 % today. You’re saying 70 plus percent year over year earnings growth and the stock goes down. They forecasted also up to $500 billion of revenue
for the next two iterations. Pardon me here. Blackwell and Rubin. So 500 billion from two iterations of chips and this stock goes down. And they guided higher, significantly higher for the first quarter, right? Coming up, were 78 billion for revenue. Yeah. So I mean, is everybody already expecting all this? It’s all built in. Is it the AI overhang?
Does it have anything to do with that memo from the future that we heard about this past weekend or week? Yeah, it looks like a sell the news. I mean, that clearly was the reaction, but I was surprised how strong the earnings were. Definitely thought that first move was going to be more indicative of the follow through and it clearly wasn’t. Clearly wasn’t. Hopefully you weren’t trading after hours. Oh, I wasn’t. I was off yesterday, so I was not doing that. I was trying to get a car and that didn’t work out.
Noah Brooks (02:26.222)
those snake oil sales. Why would have with the car? The price on the website is never the real price. Just what you know, go you mean you went to you went online to look for a car and you try to buy it at that price, the cars.com price as well as the website price, not the same. So what I was looking at was 27 got there and they say it was 30. I was like, well, these numbers don’t work anymore. Wow. And just I said, Good day, folks and left.
Good day, sir. Yeah, I bid you good day. Okay, well, let’s let’s hope your car search continues and you get something. Tell me tell me again why you’re looking for a car. I bumped some people with the Tesla. Well, you you bumped people normally when people bump other people in a car just like a scratch. Yeah. Yeah. Is that not what happened? Chris? No, they totaled it. They Geico just wanted the battery. That’s all.
You think the insurance company totaled your car to snake your battery? Yep. Yep. And then so they could charge me more. Yeah, all the stuff. I’m full conspiracy mode on this because that car could drive I drove it from the scene and whatever. Okay, I just work here. Okay. We’re come back to the whole AI thing. Let’s just say where we are right now. So S &P 500 up about a point and a quarter percent a quarter year to date mid caps.
Good performer, underperformed last year. This year up over 9 % year to date in the first two months. It’s pretty good. And small caps, &P 600 up nine and a quarter. Russell 2000 up not quite as much as the S &P 600. We prefer here at Good Life, we prefer S &P 600 because they all have earnings. Russell 2000 has a lot of smaller companies without earnings that can be included in that index.
But you know, last year Russell 2000 outperformed this year, at least in the first two months, S and P 600 up 9%. Not too bad. Developed international up 10 % for the year. Not too bad. Continuing on last year’s big, big rally and then EM emerging markets up almost 15. Certainly. Especially Latin America. Yeah. And you have Latin America right up again, another 19, 20%. You have Korea, South Korea, is two stocks.
Noah Brooks (04:50.126)
Basically, two stocks is over 50%. 50 % of their stock market is two companies. Is that what it is? Yeah. Well, they’re still up and they’re included in there. Yeah. You know, those memory chip manufacturers, big market caps, and they’re cyclical, right? mean, the DRAM prices obviously have gone up dramatically. Anybody that’s looking to buy a computer or has bought a computer in the last six months has felt the pain of those memory prices.
But it certainly impacted stock prices as well. I saw a report today on Bloomberg They’re projecting 13 % drag on phone sales because of the HDD memory So prices are going up Okay for phones. Yep Do we need to upgrade a phone every 18 months? I dodge it as long as I can
I got one terabyte and I’m like I can this phone will never go bad a full terabyte I won’t use a quarter of that and it’ll just stay healthy and stay strong and you know the battery still goes so yeah that’s what it is right yeah it’s always the battery yeah if your battery lasted and you plugged it in you get a full day’s charge in two or three or five years you wouldn’t need a new phone yeah I’d be on like the 6s plus still if the batteries didn’t go it used to be I mean I’m dating myself we’re at like 17 now I think
It used to be that you could replace the battery alone. Now I would imagine you can go can’t pop them out anymore. That’s part of that part of the play. Yeah, I can’t. mean, they do they do that? Like the I break you fix stores, those those techie stores? Probably I bet you someone somewhere does but you yeah, well, I don’t know how we got there. But memory prices, right? Memory prices have definitely been going up. Certainly memory manufacturers have been
going up in stride. I was actually looking at a new PC and I wasn’t even upgrading. My my old PC at home won’t allow me to upgrade to Windows 11 and it’s required. So I have to, you know, similar specs, newer processor. I have some great graphics cards that I’m going to use in the new the new PC. I’m not going upwards.
Noah Brooks (07:08.974)
of RAM, it’s 32 to 32 gig. And that’s like a four to $500 increase over what it used to be. I remember it was probably about 18 months ago, we were talking with one of our advisors and we had a holding in one of our models, Seagate. And he was like, Ooh, this is a good one. our pushback was we’re going into a corporate refresh cycle. And I think we got it. And then this sort of Microsoft
forced conversion is just fuel on the fire of that corporate refresh cycle. And hey, like we just sort of said, if you’ve been watching Seagate, Western Digital, Samsung, what is the other micron micron? know, if you look at those guys are just killing it. Yeah. But they are pretty cyclical. mean, they come and go, they have these big moves. And then, you know, six, nine months later, you’re like, what the heck happened? I don’t think I can remember.
In the early 90s, maybe 94, 95, I owned an AIM fund. They’re not around anymore. I think they were gobbled up by Invesco at some point, not positive on that, but I owned like the AIM Aggressive Growth Fund. And some of the top holdings were like Rambus, RMBS, and Micron, and some of the other RAM manufacturers.
And honestly, if you’ve held those, those companies for like 30 years, they’ve had big booms, they’ve been dead in the water for a long time, but still those moves are explosive. yeah, explosive moves. But I don’t know that they compound like some of the other companies out there. not saying they don’t. But they’re not in that, you know, 10 20,000 % like, yeah, like, like a Domino’s pizza. Yeah, right. Monster beverage, just what you’d expect. Yeah, no, they’re, they’re not.
In terms of what’s going on this year, energy outperforming. said that last time, energy up about 23 % year to date. Financials on the opposite end down about five and a quarter percent. We have a little bit of a curve flattening, which, you know, not too great for financials, but it seems like there’s a little bit of an overhang. It may be this idea that some of the private equity stuff isn’t going to do too well.
Noah Brooks (09:32.758)
And there might be exposure there for some of the large financials. Yeah. And materials doing well, consumer staples that shouldn’t be doing well when we’re in a bull market right near all time highs of 13 % plus for the year at this point. But yeah, know, Jamie diamond, some of those big wigs have talked about private equity. And, yeah, it just looks like they were chasing, you know, a little more net interest margin and started making
some loans and they’re given loans to so the big guys can scoop them up. Think of like KKR, Apollo, know, Blue Owl is the one in the news right now who kind of pause distributions. Some big private equity players kind of struggling right now. If you look at, you know, their stock movements, it’s been a pretty rough environment the last three to six months for them. Yeah, no question about it.
we were talking banks and tanks at some point. That’s the European play got nice little ring to it. have not looked actually in the last few weeks on European financials. I know there’s a some ETFs on European financials, things like that. But I do know that the European defense contractors are, moving and grooving, you know, it seems like, why do you think that is? Seems like a war going on over there.
Yeah, I think so. I think we’re rearming. There’s there was a an article out. I think it was last Thursday in the journal talking about the CIA game playing. What would happen if Russia invaded, let’s say the EU, and it didn’t really seem that good. It seemed like that the EU was unprepared for a true invasion on Russia.
And then this week I hear that the Russian forces in Ukraine are basically they’re they’re killing more than they’re able. Russian forces are dying at a higher rate than they’re able to be replaced that. Lost of life is terrible, but isn’t that positive for Europe, right? Lower Russian troops.
Noah Brooks (11:50.734)
Drup levels. Well, that’s that’s the thing. Yeah, I remember hearing about the war games with Taiwan and those stats were not good for us. Hey, when is China invading Taiwan? I think they’re just doing that slow takeover where by the time it happens, they’re already in control of everything, so they don’t need to take the military in. I will. I’ll raise that a little bit and I will say that 2027 is the year that we see boots on the ground, Chinese boots on the ground in Taiwan. I don’t think it’s going to happen in 2026.
think it’s gonna happen in 2027. All right. And I don’t think we’re gonna do a gosh darn thing about it. Well, while we’re talking about geopolitical, got it got a touch on IEPA. I was gonna say the elephant room finally got tariff. Yeah, it’s from the Supreme Court. Yeah, did strike down IEPA. And Trump’s usage of tariffs. Yeah, so
The president’s argument was, you’re telling me I can place an entire embargo on an economy, but I can’t tariff them 10 measly percent. Well, but that’s, that’s a yeah. Okay. I, and the best way I heard it declared was our, our friends at Facts vs. Feelings. Sonu Varghese said, so a fire chief can shut down a road for an emergency, but he can’t erect a toll booth for you to pass. And that makes total sense. Now, Trump still has 232.
He still has 232 is is that national security 301 is unfair trade practices. 122 122 is what he’s using now saying 10 to 15 % broad that can only last for 150 days though and then Congress has to authorize and it is a massive how many days until the midterms more than 150 more than 150 but not that many more I think it’s about 225 if I’m not mistaken. Yeah, that would be interesting to see how that works.
And then to actually have a vote where everybody’s name and vote is going to be locked in on on tariffs. I think he might be setting himself up for a disappointment on the tariff situation. Cause I don’t think that the Republican majority as it stands right now would vote tariffs in pre Trump, would have been 100 % against
Noah Brooks (14:05.634)
tariffs, I’d say. Well, maybe there’s like a 10 % maybe like the far right, like super populist, right? Maybe would have been okay with it to shut down China and keep jobs here. But yeah, 80 to 90 % I would say the Republic traditional Republican Party would never stand for tariffs because you know, free trade tax just like the Supreme Court ruled basically. So where do you think this is gonna go? I mean, he came out shortly after that, and essentially said that he’s gonna do it, you know,
his way and he’s going to put this 10 % on and then the next day it was 15%. This was last Saturday. I think it was. Where do you think that this goes? Because since then I know that there was a state of the Union. We can talk about that a little bit. I don’t. I don’t know that we need to go too far into it and he was probably working on that, right? You know it takes some time to go over that stuff.
So we haven’t really heard anything about the 10 % other than I guess Monday when we came in talking about 10 % and then a 15 % and that’s through that section to 222 or 322 that they can put it on for 150 days. Do you think they do anything? think he’s going to use section 122 because that’s the easiest thing he can use right away. But they still have to give back 175 billion give or take in tariffs that they
collected through customs. So those companies, they can apply for their money back and he’ll start finding another way to charge them going forward. heard that I think this was with FedEx that they’re requesting a refund of something like a billion dollars. But the it’s not DOJ. I will just say the federal government was asking them, well, how are you going to account for that money and give it back to the customer?
And I don’t think they had an answer for that. The shippers. Yeah. I don’t know if the onus is on them to prove how they’re going to give money back. That’s a great point. I think that’s just them trying to play hardball and make it difficult for them. Yeah, I think regardless, they have to give them my back Supreme Court ruled and you know, they can lower their prices going forward with this $1 billion windfall. What if the government just decides they’re not going give it back? No, can’t do that. Why? That’s not cool.
Noah Brooks (16:24.814)
Well, I mean, they don’t seem to be worried about that in other cases. They don’t mind being in contempt of court. I don’t know. We’ll see. I don’t think that’s going to be a lever they they don’t want to come across as lawless and ignoring the law when they claim to be law and order side of things. Okay. Well, let’s let’s revisit that one in. I don’t know. They’ll find a way to do future tariffs. But yeah, as it stands right now, they’ve got to give that money back.
Okay, good thing they didn’t cut those $2,000 checks or whatever they’re talking about beforehand. That may be an even bigger deficit. We’d be at 40 trillion already. Do you think that maybe they were waiting for the ruling to cut the tariff? I think that was just a little carrot to dangle to say, don’t you say no, you’ll have the people mad you because they expect checks. yeah. So going back to the state- not a tax if we give it back. right. State of the Union. We can get into that a little bit.
But the Supreme Court justices I thought were maybe a little bit odd that they weren’t all there. And that the ones that were there were the ones that ruled against the president, not every one of them. But most of them ruled against the president with only I think one exception. who wasn’t there? didn’t I my apologies seeing like in ignoramus I did not watch the State of the Union Roberts was there Keegan was there.
Well, you said the ones against him are there so so they’re Amy Barrett Cohen, Amy Cohen Barrett. He’s he be? Yeah, he was there. And one other another gentleman was there. Justice, I would say not gentlemen justice was there. But yeah, there was a whole whole slew of them people missing. And it was interesting, though, I thought for sure he would have attacked the Supreme Court at the State of the Union and he didn’t. How about that?
went to it right to their faces, I guess. Surprisingly, he doesn’t shy away from doing like with J. Powell. He’s like, Hey, well, your numbers he pulls out a she’s like, 3 billion. He was like, No, sir. That’s the third building there. Yeah. That’s good. That’s kind of funny stuff. So you didn’t watch the State of the Union? No. Okay, I did not know what I did watch. So it’s little segue away here. Okay. The gold medal hockey game us swept
Noah Brooks (18:51.916)
the hockey medals we beat Canada in both matches men and women’s two to one both and overtime so it was really awesome especially for the men’s team at least my opinion you know I called it the second miracle on ice 46 years after we beat the USSR but like a week before this maybe 10 days before this we had like the face off of nations with Canada and there were three fights
nine seconds into things. So they booed the national anthem and we were like, heck no. And we threw down three fights in the first nine seconds of the match. So it’s cool to beat them for the gold medal. No fights. Apparently in the international game for Olympics, the penalties are much more severe for fighting. It’s not like regular hockey. Maybe not just five minutes, you know, went to the fight and the hockey game broke out. Yeah. Yeah. But yeah, it was really awesome game. Like I said, went to OT.
Jack Hughes hit the golden goal and it was awesome. It was the most pumped I was. It was like a rocky fight, you know, we scored like one second in one minute into the match, like real quick. And then we just got our faces beat to a pulp, barely made it limping into overtime and then snuck it through and got a goal. Yeah. He had a pretty big gap between those. He had that missing tooth. Yeah. He took a double penalty. So yeah, they high sticking and it was a major.
We got a four minute power play off then and he came back and slash someone and gave two minutes right back. Did you ever get a tooth knocked out? I have all my you did. I got one in a high school basketball game just pulverized by a big guy in the lane. I never I had a loose tooth, but it never had one knocked out. Yeah, this one just powderized my front right one. That’s a fake. Yeah. Yeah. Yeah. OK.
I don’t want to have anything knocked out, but he seemed to be fine with it. know, boom gets knocked out. He’s up. He’s skating, playing, kept playing. Probably a little adrenaline rush. Yeah. But then he went anyway. But they were, they were at the state of the union. Yeah. Right. The only unanimous clapping on both sides, I think was, was from that, you know, when they were announcing the gold medal hockey team. Yeah.
Noah Brooks (21:07.458)
good USA USA. was worth it. That was awesome. Yeah. We also had that big snowstorm. New York City got the ninth most snow total in their history. Rhode Island had like 32 inches. It was basically like a snow hurricane up in the Massachusetts Rhode Island area like 65 mile per hour winds. Yeah, like like the day after tomorrow type scene. My cousin Emily up on Long Island to two feet out there.
near near the North Fork. And it seems like they don’t get that much. Rhode Island, I think was was a three feet. I saw 32 inches. I forget what town it was in. That’s close enough. Providence maybe. Yeah, I’m really glad we didn’t have to deal with that. Yeah, we got the dodging for once. And then you have the people that get the lake effect and like Buffalo and like, that’s just a Tuesday. You know, when you have these big storms,
obviously people slow down on their spending. I speak from personal experience, like you’re locked up, you’re staying indoors, you’re shoveling, you might be working from home depending on what day of the week it is, but you’re not really doing a lot. And then even when you get shoveled out, depending on how much snow you have, you have this situation where, you know, some things may not be open, but you’re like, well, I don’t need to go out unless I really have to.
And there’s a drag on the economy a little bit. And sometimes it’s a regional drag. Sometimes, you know, in this case, there’s the hurricanes, right? And so I’m bringing this around to GDP because we got some GDP information last week and it was not good. And they’re, they’re chalking a lot of that up to the government shutdown.
that occurred in the fourth quarter. Excellent. Yeah. So I mean, the numbers, so the numbers came in at 1.4 % GDP. If you remember, if you look back a month, month and a half ago, we were talking about the GDP now was like up at like 5 % or 4.0 % and it was hot. And we were keeping an out and Noah.
Noah Brooks (23:19.086)
gently reminded yes but those numbers they they move a lot don’t they well GDP now numbers are super easy volatile I don’t know like there should be some type of rolling three month or at least one month number on there but the actual numbers can move a hundred basis points in the course of a week or two that doesn’t make any sense the final reading before the number came out said 3.1 yeah the official expected that I saw from analyst was 2.8 % again
came in at 1.4 % right much lower half. And like you said, attributed mostly to the shutdown. So there was a 16 % decrease in federal spending for the quarter. Obviously, the federal government is a huge spender. So the fiscal stimulus we’ve been putting on the last few years has been legendary. And then if you do non defense spending 26 % lower, I think was the number I had. So
It was a lot of money coming out there and we talked about jobs and how the jobs numbers are going down for the government. 324,000 over the last 13 months. And they are really pulling back from the previous fiscal stimulus that we had. And they attributed that 16 % and 26 % drop to about 1.2 % of GDP was due to reduced government spending from that shutdown and the other efforts to lessened spending.
But you don’t really get that back. It’s not like, well, GDP is going to be up five and a half percent next quarter based on the government reopening. And we also have a situation where the government may have another shutdown. It seems less likely now than before. But we’re, we’re in a precarious position where they don’t really want to, the Democrats do not want to fund department of Homeland security without guardrails.
And we can, you know, that’s, that’s a conversation for another show, but they don’t want to do it. And there’s a swath of the population that is kind of behind that. And then there’s some people that aren’t, and there’s going to have to be, this is one of those things that there’s going to have to be some compromise on. And I think we all know, compromise means, compromise, compromise means that both sides are going to have to give something up. Yeah. People on the right are going to have to concede.
Noah Brooks (25:43.746)
that DHS have some better guardrails and people on the left are going to have to concede that there’s still going to be ice out there. Yeah. Right. I mean, that’s, that’s realistically what all of this means. But if you remember going back to 2011, when the United States got the downgrade, right? S and P downgraded treasuries from, from AAA to AA, right? That’s, that’s the simple impact.
It was based on shutdown and not being able to pass a budget. we just decided to keep on doing it. Let’s do it twice a year now. Once not enough. that was S &P. had another. Fitch followed over the subsequent years. Yeah, it took a long time for them to do that, but they followed. Can you imagine if we got a situation where there was another downgrade on US debt?
What would that what would be next double A minus or would it be going all the way to A plus? It depends on what they did, which and also which one you’re looking at because you know they all have their slightly different. Greetings, but so that brings me I’m gonna I’m gonna bring it back. We had a report from the future. Come out on Sunday or Monday from a lesser known research company. Let’s let’s talk about that a little bit.
fictional research character released this little white paper as if they’re writing in June of 2028 and sort of looking backwards of what has sort of transpired centrini centrini research and basically it was like a hypothetical future looking back to 2026 and you know they said unemployment’s at 10.2 the S &P 500’s fallen what’s the number 30 some percent since it’s
2026 high of 8000. And it just laid out this spiral where as companies continue to optimize and try and boost their profit margins, they just keep firing more and more human workers. And it’s just a never ending spiral. I said to you, it’s like the opposite of the wage price spiral upwards, where they just keep firing more and more people. And eventually we have no consumers, which is 70 % of our economy. Yeah, and we don’t recover.
Noah Brooks (28:08.59)
I’m gonna take just a second here. Consumer spending was one of the big highlights of fourth quarter. It was over 1.5 % increase versus last year. If we have a slow down and quite frankly, consumer spending has been one of the main drivers of GDP out of the global financial crisis from let’s say 2011 to till today. And if we have a situation where consumer spending
really, really starts to slow down. Tax revenue slows down. Obviously, that’s caused by less jobs. And we’ve talked about my 2026 Word of the Year, right? Universal Basic Income. Yes, that’s three words. But as a phrase, we’re going to call it Word of the Year. So this is a hypothetical that somebody’s putting out there. But there are items that could be grounded in reality. Yeah, from this.
Yeah, definitely a sobering import. You understand it’s totally fictional, but you ever watch a movie where it’s like very dystopian, you’re like, holy crap, man, I don’t know how I feel after watching that. That’s sort of how you feel after reading this. And you know, it makes sense labor’s share of the profits will decrease because you’re going to have robots doing it. So what does that mean? Naturally, the owners of the companies employing the AI will have a higher share of income. Sure. In public companies, that’s you and me anyway, who invests in them.
but still owners of the companies, founders of the companies will have disproportionate wealth continuing. Obviously there’s already disproportionate wealth. And the velocity of money was one of the things hypothesized as decreasing significantly as a result of that. So you may have Elon Musk in the future with $20 trillion. No human could spend that much. you know, ultimately the velocity of money will decrease because maybe he only spends one trillion a year.
the other 19 trillion just sitting in his stock, you know, somewhere. He’s probably borrowing against it. And he’s gonna he’s gonna get taxed on it at some point. What was the movie? I know there’s a little bit of a gap with us sometimes in movies that we’ve seen and we haven’t seen. Do you remember Brewster’s millions? Nope. Richard Pryor? No, his really like wealthy uncle says you have
Noah Brooks (30:30.638)
30 days to spend $30 million. And if you spend it, then you get $300 million. I’m gonna be so easy. I’m a product of the 80s. Yeah, but it was really hard for him to spend one yacht baby. Well, you so the thing was at the whole premise was at the end of the 30 days, you couldn’t have anything to show for it. So like one of the example, wait, how much was Greenland? No, you you couldn’t have anything to show you couldn’t buy anything that you could rent something but you couldn’t buy anything that you were going to have at the end of 30 days. So
One of the things that he did to dispose of that that money was he bought a very, very expensive stamp, like a stamp from stamp collection. then he mailed it. I can’t believe you never saw Brewster’s millions. No, I haven’t even heard of it. I’m not the most movie going person. I should do better. You should do a little bit better. We just finished up.
We’re still still on our movies that won awards were nominated and we watched anonymous About William Shakespeare and the possibility that somebody else was writing those plays for For him. He’s just a front man and he was just a front man Wow, it is what a fraud Yeah, I can see why it was nominated And it was really really good. I would definitely recommend it to anybody
And you don’t have to be a Shakespeare fan or anything like that. was reasonably. I don’t know if it was easy to follow. You had to pay attention to it. I said I could watch it again to get the full effect. But in the end, you’re just like, is it possible that William Shakespeare did not write all of these classical plays that we think of? It also reminded me watching this movie that this was from the sixteen hundreds when these things were written and he’s still a very well known name.
and a long time ago. Yeah. Think right.
Noah Brooks (32:29.43)
Okay, so we’re out of the out of the movie area unless you have something that you think our listeners would love to watch. I don’t have anything real fresh. I started watching industry, which is four seasons in right now on HBO. It’s all right. And another show Lex and I like what like to watch the starting season two paradise. Pretty good show. Easy watch nothing that’s going to be rated like
in the pantheons of the greats but still entertaining watches. Every time I turn on the television, certainly news related, we’re still on day I don’t know 26 of the Nance Nancy Guthrie kidnapping. I have a feeling she’s not coming back. Yeah. That’s that’s a shame. But she’s either in Mexico somewhere, or that’s what my cop friend said he thinks that’s his bet. He’s down Scottsdale. He’s like, she’s over the border, man. She’s not coming back.
Yeah, that’s tough. Speaking of over the border, we had some really significant acts of terrorism this week in Mexico, in some of the expat communities, Puerto Vallarta, and yeah, I was gonna say Acapulco, not Acapulco. Almencho, no more. you’re Yeah. So tell us a little bit about what happened there.
So all I know is that, you know, one of the head of the CJNG cartel, I don’t even know what that stands for. But yeah, they located him apparently, apparently had some meetup with someone who they were tracking, found his location. And were we I guess we were involved in a little bit. We were providing data and yeah, and then basically we got them or they got them. And ever since his very well armed
cartel members have just been causing mayhem. His crew went a little loco. Yeah, Guadalajara local Puerto Vallarta. Yeah, love saying those shutting down the airport burning, you know, buses, cars, but I mean, can you be can you imagine being whether it’s just a simple tourist there if you’re there for a week or a few weeks or you’re a traditional expat and you’re living there where a lot of American expats do and British as well.
Noah Brooks (34:49.632)
and all of a sudden your town is under attack. You were just sipping margaritas on the beach. You have nothing to do with it and suddenly you can’t go anywhere. Yeah. Yeah. Scary thought. That is a little bit scary. I think that might slow down the move to Mexico from from potential expats. There’s a lot of other places like Portugal. Belize, they speak English. Yeah. Wait, did say it wrong? You may find me Belize. Belize. Belize. Yeah, I’ve never been there. I say Belize. They speak English. It’s by the bay. Get out of here.
They speak, they can’t speak, that’s not their first language. great stuff for income taxes. You’ll get a nice little break by going there. They have a whole expat program. Maybe that’s where Elon should move. okay. So let’s get back to the economy for a little bit. We have this situation setting up where we’ve had software names getting kind of kicked in the teeth. We talked a little bit about Bitcoin. Bitcoin is
down around 68,000 as we’re sitting here today, which is about a 50 % drawdown from its high last year. Maybe a little bit more. Bitcoin has had these bigger drawdowns over its existence, in some cases falling as much as 80 % more than once. And you’re looking at here at 68,000. And I know that there’s aggressive investors out there saying, listen, I maybe I missed this move.
or, you know, I missed Bitcoin altogether for the last few years. And now it’s down 50%. Should I buy some? What do you say to these people? I mean, yeah, you’re catching a falling knife. But hey, you have to be able to buy when there’s blood in the streets as as Warren Buffett sort of said, I don’t know if it’s truly him. But that’s who it’s always attributed to buy when there’s blood in the streets. Yeah, now seems like a good time. We’ve talked about how, you know,
certainly some compression of their valuations for the software companies as well as future discounting of their, you know, guided profit and revenue amounts is probably necessary. But I bet you there’s still going to be some winners that are really strong that come out of that. Here in February, every single one of the IGV software components was down at least 20 % from their all time high.
Noah Brooks (37:12.142)
for a whole sector to be obliterated like that. I think it’s just throwing the baby out with the bathwater a little bit. And I think you can sift through there and decide where you’re happy putting some risk on understanding you may lose 10 more percent or 15 more percent, but in the long term, you think this specific company may have enough guardrails around enough of a regulatory protection that they’re not going to go to zero.
I don’t, I don’t know that any of them are going to go to zero. mean, I guess there might be a few, not, I wouldn’t say the big ones of the, you know, the oracles of the world, the CRMs, the sales forces. don’t think any of that’s going to happen. but there probably are going to be some, some debt issues and they wind up getting acquired by other software companies. Right. but you, you question, you know, we talked about this, hypothetical research report.
And so you go, okay, well, you know, software is down 20 ish percent, you have some bigger names that are down more. And you go, well, this is the time to add to them. And it always goes back to your ability to absorb more downside. And you don’t know whether this is the net just one leg down. And then there’s two or three more, should never allocate like you’re calling the bottom and putting on a large position as it’s falling.
your point like allow there some room to buy more if it falls even further. I want to say one thing not to cut you off. we know there’s some private equity private comp, you know, debt issues out there. But there’s some really good companies like anthropic. We’re just talking about Claude and the Cetrine research. That’s all I think coming mostly from like a open AI or Claude anthropic. Google owns 7 % of SpaceX and 14 % of anthropic.
their own their own little private equity fund there. So yeah, well has that exposure be aware of if you want a little exposure to those two really big names. When is SpaceX gonna IPO? I mean, the expectation is the end of this year sometime 2026. Yeah. Are they gonna make any money? I know they make a fair amount of revenue, right, which is completely different than profitability. So they’re sending a lot of
Noah Brooks (39:31.31)
In 2027 will they make money? No, no, I’ll give you that short answer. 2027, I don’t think they’ll make money. Yeah, it’s going to be the old Tesla situation, right? Where they didn’t make money for a long time and all of a they turned it on. It’s the Amazon situation. Yeah, yeah. All of them. They just did that for a while. At some point they turned it on and then there this cashflow heavy situation and that’s obviously why people are interested in getting into it. just, it’s tough for me to wrap my head around it.
and to be that far in the future that they’re going to be making money from sending people anywhere. Like the lifting of satellites and launching satellites. Yeah, you can see that you see how it works. You can see the need for all that sending people to Mars. need to make the moon a launch pad and we’ll just go out and capture every asteroid and comet that comes around. Check it out. See if it has anything valuable. Mine it, bring it home. I’m not opposed to that.
I just I don’t know how they make money in the next let’s say you’re making me want to watch The Martian again what a great movie or Interstellar if I want to Interstellar great movie The Martian is really slow though it is but I like it I can’t do it it’s like mostly happy even though it’s like the most helpless situation you could be in he’s just growing potatoes in his own poop and he ruins it dude had it made all right on that note we’re gonna get out of here for this week everybody thank you so much for joining us we can’t wait to do
reach out again. Here we are end of February. We went through Valentine’s Day. have March, April coming up. Spring is here. We’re starting to warm up. Everybody’s gonna have big smiles on their faces. 72 degrees is the high a week out. yeah, Saturday next next Saturday. Yeah, I did not for it. Bring spring on. Tell that guy from Ponce of time to go away. Yeah. All right. And on that note, thank you everybody for joining us. We’ll see you soon.
Have questions about how this impacts your investment strategy? Reach out to your advisor or email us at marketenthusiast@goodlifefa.com.
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a decision. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
In Episode 56 of The Market Enthusiast, Noah Brooks and Chris Neis break down the forces shaping markets as February 2026 unfolds, focusing on changing market leadership, evolving labor dynamics, government spending shifts, and the growing impact of artificial intelligence and automation on the broader economy.
While markets have started the year on a positive note, leadership is shifting. At the same time, GDP has slowed, policy uncertainty has increased, and investors are reassessing valuations across multiple sectors.
Table of Contents
Markets Are Rising, but Leadership Is Changing
Although major indexes remain near recent highs, early 2026 performance has come from different areas than investors have grown accustomed to in recent years.
Mega-cap technology names have paused. In their place, small caps, mid caps, value stocks, international markets, and energy have stepped into leadership roles. Noah and Chris describe this shift as an “everything rotation,” where capital broadens beyond the handful of dominant growth names that previously carried the market.
Rather than signaling weakness, this type of rotation can reflect healthier participation across sectors. Markets often transition leadership during periods of valuation reassessment and evolving economic conditions.
If earnings growth expands beyond one concentrated theme, it can create a more durable foundation for long-term performance.
GDP Slows as Spending Pulls Back
Recent economic data has added complexity to the picture. GDP came in below expectations, driven in part by reduced government spending tied to the recent shutdown. Federal expenditures have been a meaningful contributor to economic growth in recent years, so any pullback has measurable impact.
Weather also played a role. Severe snowstorms across parts of the Northeast temporarily slowed travel, consumer spending, and business activity. While weather-related disruptions are often temporary, fiscal policy shifts can have longer-term effects.
The episode explores how these combined forces contributed to a softer GDP reading and what that may signal for the quarters ahead.
Jobs Data, Labor Trends, and the Automation Question
Noah and Chris discuss the latest employment data, including headline job growth numbers alongside meaningful downward revisions to prior months.
While unemployment remains relatively low, slowing job growth and declining job openings may indicate a cooling labor market beneath the surface.
This leads to a broader discussion around artificial intelligence and automation. Rising productivity driven by AI has the potential to reshape industries, job roles, and long-term employment dynamics.
The episode raises an important question: if productivity improves faster than job creation, what does that mean for consumer spending, which accounts for roughly 70 percent of U.S. GDP?
Rather than framing AI solely as a threat, the discussion focuses on how technology may shift the types of jobs available and the skills employers prioritize in the years ahead.
Nvidia, Software Volatility, and Market Expectations
The episode also examines Nvidia’s strong earnings report and the surprising negative stock reaction that followed. Despite significant year-over-year growth and optimistic forward guidance, the stock declined, illustrating how elevated expectations can influence short-term price behavior.
At the same time, the software sector has experienced broad pullbacks, sometimes described as a “SaaS correction.” Noah and Chris explore whether fears of AI displacing traditional software models are overstated, noting that many established platforms may ultimately integrate AI rather than be replaced by it.
Large capital spending plans from major technology firms continue to support the long-term AI investment cycle, but markets often overshoot in both directions as investors attempt to price in innovation before its full economic impact is clear.
Bitcoin, Commodities, and Global Trade Tensions
Additional discussion includes volatility in Bitcoin, energy sector leadership, and ongoing global trade developments following the Supreme Court’s ruling on tariff authority.
These factors highlight how policy decisions, currency dynamics, and geopolitical tensions can influence both inflation expectations and investor sentiment.
The episode also reinforces that speculative assets and high-growth sectors often move together during risk-on and risk-off environments, making diversification and risk awareness especially important during periods of transition.
Practical Lessons as 2026 Continues
As markets navigate shifting leadership, rapid technological change, and evolving economic signals, Episode 55 reinforces several core principles:
• Market leadership changes over time
• Government spending can meaningfully impact GDP
• Productivity gains may reshape employment trends
• Innovation creates opportunity but also volatility
• Economic data often tells a mixed story
• Long-term discipline matters more than short-term noise
Strong markets are rarely driven by a single sector or theme. Sustainable growth typically comes from broader participation, balanced expectations, and investors maintaining perspective despite changing headlines.
Key Topics Covered in This Episode
• Market rotation toward small caps, value, and international markets
• Energy sector leadership and shifting market dynamics
• GDP slowdown tied to reduced government spending
• Weather-related economic disruptions
• Jobs data revisions and labor market trends
• AI investment and software sector volatility
• Bitcoin and commodity price movements
• Trade tensions and policy uncertainty
• Automation, productivity, and future employment trends
Investor Takeaways
Market Leadership Evolves
Rotation can signal healthier participation across sectors.
Policy and Spending Matter
Government shutdowns and fiscal shifts can meaningfully impact economic growth.
AI Is Reshaping the Landscape
Productivity gains may change industries and employment dynamics.
Volatility Is Normal
Emerging technologies and policy uncertainty often create short-term adjustments.
Discipline Still Wins
Diversification and long-term focus remain essential during transitional periods.
Listen to the Full Episode
Full Episode Transcript
Hey, welcome back to another episode of the market enthusiast. I’m Noah Brooks. And obviously this is Chris needs.
Noah Brooks (00:08.622)
Hello. All right. Thanks for joining us today. Let’s get right down to it. I’m going to start with the elephant in the room. Do you know what that is? Nope. Nvidia earnings. So, well, they were strong. They were great earnings. Great guidance. talk about that for a minute. 73 % year over year revenue. That’s awesome.
data center was up 75 % year over year, 68 billion in revenue. And the stock went down. It It pops right on the report and then just overnight just. So, okay. Seriously. Nvidia is down 5 % today, five and a half, depending on when you’re looking at it. And here we are, we’re recording, the day before the last day of the month, February 27th, think.
sick maybe. Second business, second last business day of the month. NVIDIA came out last night, popped as you just mentioned after the close, after they reported and then they’re down 5 % today. You’re saying 70 plus percent year over year earnings growth and the stock goes down. They forecasted also up to $500 billion of revenue
for the next two iterations. Pardon me here. Blackwell and Rubin. So 500 billion from two iterations of chips and this stock goes down. And they guided higher, significantly higher for the first quarter, right? Coming up, were 78 billion for revenue. Yeah. So I mean, is everybody already expecting all this? It’s all built in. Is it the AI overhang?
Does it have anything to do with that memo from the future that we heard about this past weekend or week? Yeah, it looks like a sell the news. I mean, that clearly was the reaction, but I was surprised how strong the earnings were. Definitely thought that first move was going to be more indicative of the follow through and it clearly wasn’t. Clearly wasn’t. Hopefully you weren’t trading after hours. Oh, I wasn’t. I was off yesterday, so I was not doing that. I was trying to get a car and that didn’t work out.
Noah Brooks (02:26.222)
those snake oil sales. Why would have with the car? The price on the website is never the real price. Just what you know, go you mean you went to you went online to look for a car and you try to buy it at that price, the cars.com price as well as the website price, not the same. So what I was looking at was 27 got there and they say it was 30. I was like, well, these numbers don’t work anymore. Wow. And just I said, Good day, folks and left.
Good day, sir. Yeah, I bid you good day. Okay, well, let’s let’s hope your car search continues and you get something. Tell me tell me again why you’re looking for a car. I bumped some people with the Tesla. Well, you you bumped people normally when people bump other people in a car just like a scratch. Yeah. Yeah. Is that not what happened? Chris? No, they totaled it. They Geico just wanted the battery. That’s all.
You think the insurance company totaled your car to snake your battery? Yep. Yep. And then so they could charge me more. Yeah, all the stuff. I’m full conspiracy mode on this because that car could drive I drove it from the scene and whatever. Okay, I just work here. Okay. We’re come back to the whole AI thing. Let’s just say where we are right now. So S &P 500 up about a point and a quarter percent a quarter year to date mid caps.
Good performer, underperformed last year. This year up over 9 % year to date in the first two months. It’s pretty good. And small caps, &P 600 up nine and a quarter. Russell 2000 up not quite as much as the S &P 600. We prefer here at Good Life, we prefer S &P 600 because they all have earnings. Russell 2000 has a lot of smaller companies without earnings that can be included in that index.
But you know, last year Russell 2000 outperformed this year, at least in the first two months, S and P 600 up 9%. Not too bad. Developed international up 10 % for the year. Not too bad. Continuing on last year’s big, big rally and then EM emerging markets up almost 15. Certainly. Especially Latin America. Yeah. And you have Latin America right up again, another 19, 20%. You have Korea, South Korea, is two stocks.
Noah Brooks (04:50.126)
Basically, two stocks is over 50%. 50 % of their stock market is two companies. Is that what it is? Yeah. Well, they’re still up and they’re included in there. Yeah. You know, those memory chip manufacturers, big market caps, and they’re cyclical, right? mean, the DRAM prices obviously have gone up dramatically. Anybody that’s looking to buy a computer or has bought a computer in the last six months has felt the pain of those memory prices.
But it certainly impacted stock prices as well. I saw a report today on Bloomberg They’re projecting 13 % drag on phone sales because of the HDD memory So prices are going up Okay for phones. Yep Do we need to upgrade a phone every 18 months? I dodge it as long as I can
I got one terabyte and I’m like I can this phone will never go bad a full terabyte I won’t use a quarter of that and it’ll just stay healthy and stay strong and you know the battery still goes so yeah that’s what it is right yeah it’s always the battery yeah if your battery lasted and you plugged it in you get a full day’s charge in two or three or five years you wouldn’t need a new phone yeah I’d be on like the 6s plus still if the batteries didn’t go it used to be I mean I’m dating myself we’re at like 17 now I think
It used to be that you could replace the battery alone. Now I would imagine you can go can’t pop them out anymore. That’s part of that part of the play. Yeah, I can’t. mean, they do they do that? Like the I break you fix stores, those those techie stores? Probably I bet you someone somewhere does but you yeah, well, I don’t know how we got there. But memory prices, right? Memory prices have definitely been going up. Certainly memory manufacturers have been
going up in stride. I was actually looking at a new PC and I wasn’t even upgrading. My my old PC at home won’t allow me to upgrade to Windows 11 and it’s required. So I have to, you know, similar specs, newer processor. I have some great graphics cards that I’m going to use in the new the new PC. I’m not going upwards.
Noah Brooks (07:08.974)
of RAM, it’s 32 to 32 gig. And that’s like a four to $500 increase over what it used to be. I remember it was probably about 18 months ago, we were talking with one of our advisors and we had a holding in one of our models, Seagate. And he was like, Ooh, this is a good one. our pushback was we’re going into a corporate refresh cycle. And I think we got it. And then this sort of Microsoft
forced conversion is just fuel on the fire of that corporate refresh cycle. And hey, like we just sort of said, if you’ve been watching Seagate, Western Digital, Samsung, what is the other micron micron? know, if you look at those guys are just killing it. Yeah. But they are pretty cyclical. mean, they come and go, they have these big moves. And then, you know, six, nine months later, you’re like, what the heck happened? I don’t think I can remember.
In the early 90s, maybe 94, 95, I owned an AIM fund. They’re not around anymore. I think they were gobbled up by Invesco at some point, not positive on that, but I owned like the AIM Aggressive Growth Fund. And some of the top holdings were like Rambus, RMBS, and Micron, and some of the other RAM manufacturers.
And honestly, if you’ve held those, those companies for like 30 years, they’ve had big booms, they’ve been dead in the water for a long time, but still those moves are explosive. yeah, explosive moves. But I don’t know that they compound like some of the other companies out there. not saying they don’t. But they’re not in that, you know, 10 20,000 % like, yeah, like, like a Domino’s pizza. Yeah, right. Monster beverage, just what you’d expect. Yeah, no, they’re, they’re not.
In terms of what’s going on this year, energy outperforming. said that last time, energy up about 23 % year to date. Financials on the opposite end down about five and a quarter percent. We have a little bit of a curve flattening, which, you know, not too great for financials, but it seems like there’s a little bit of an overhang. It may be this idea that some of the private equity stuff isn’t going to do too well.
Noah Brooks (09:32.758)
And there might be exposure there for some of the large financials. Yeah. And materials doing well, consumer staples that shouldn’t be doing well when we’re in a bull market right near all time highs of 13 % plus for the year at this point. But yeah, know, Jamie diamond, some of those big wigs have talked about private equity. And, yeah, it just looks like they were chasing, you know, a little more net interest margin and started making
some loans and they’re given loans to so the big guys can scoop them up. Think of like KKR, Apollo, know, Blue Owl is the one in the news right now who kind of pause distributions. Some big private equity players kind of struggling right now. If you look at, you know, their stock movements, it’s been a pretty rough environment the last three to six months for them. Yeah, no question about it.
we were talking banks and tanks at some point. That’s the European play got nice little ring to it. have not looked actually in the last few weeks on European financials. I know there’s a some ETFs on European financials, things like that. But I do know that the European defense contractors are, moving and grooving, you know, it seems like, why do you think that is? Seems like a war going on over there.
Yeah, I think so. I think we’re rearming. There’s there was a an article out. I think it was last Thursday in the journal talking about the CIA game playing. What would happen if Russia invaded, let’s say the EU, and it didn’t really seem that good. It seemed like that the EU was unprepared for a true invasion on Russia.
And then this week I hear that the Russian forces in Ukraine are basically they’re they’re killing more than they’re able. Russian forces are dying at a higher rate than they’re able to be replaced that. Lost of life is terrible, but isn’t that positive for Europe, right? Lower Russian troops.
Noah Brooks (11:50.734)
Drup levels. Well, that’s that’s the thing. Yeah, I remember hearing about the war games with Taiwan and those stats were not good for us. Hey, when is China invading Taiwan? I think they’re just doing that slow takeover where by the time it happens, they’re already in control of everything, so they don’t need to take the military in. I will. I’ll raise that a little bit and I will say that 2027 is the year that we see boots on the ground, Chinese boots on the ground in Taiwan. I don’t think it’s going to happen in 2026.
think it’s gonna happen in 2027. All right. And I don’t think we’re gonna do a gosh darn thing about it. Well, while we’re talking about geopolitical, got it got a touch on IEPA. I was gonna say the elephant room finally got tariff. Yeah, it’s from the Supreme Court. Yeah, did strike down IEPA. And Trump’s usage of tariffs. Yeah, so
The president’s argument was, you’re telling me I can place an entire embargo on an economy, but I can’t tariff them 10 measly percent. Well, but that’s, that’s a yeah. Okay. I, and the best way I heard it declared was our, our friends at Facts vs. Feelings. Sonu Varghese said, so a fire chief can shut down a road for an emergency, but he can’t erect a toll booth for you to pass. And that makes total sense. Now, Trump still has 232.
He still has 232 is is that national security 301 is unfair trade practices. 122 122 is what he’s using now saying 10 to 15 % broad that can only last for 150 days though and then Congress has to authorize and it is a massive how many days until the midterms more than 150 more than 150 but not that many more I think it’s about 225 if I’m not mistaken. Yeah, that would be interesting to see how that works.
And then to actually have a vote where everybody’s name and vote is going to be locked in on on tariffs. I think he might be setting himself up for a disappointment on the tariff situation. Cause I don’t think that the Republican majority as it stands right now would vote tariffs in pre Trump, would have been 100 % against
Noah Brooks (14:05.634)
tariffs, I’d say. Well, maybe there’s like a 10 % maybe like the far right, like super populist, right? Maybe would have been okay with it to shut down China and keep jobs here. But yeah, 80 to 90 % I would say the Republic traditional Republican Party would never stand for tariffs because you know, free trade tax just like the Supreme Court ruled basically. So where do you think this is gonna go? I mean, he came out shortly after that, and essentially said that he’s gonna do it, you know,
his way and he’s going to put this 10 % on and then the next day it was 15%. This was last Saturday. I think it was. Where do you think that this goes? Because since then I know that there was a state of the Union. We can talk about that a little bit. I don’t. I don’t know that we need to go too far into it and he was probably working on that, right? You know it takes some time to go over that stuff.
So we haven’t really heard anything about the 10 % other than I guess Monday when we came in talking about 10 % and then a 15 % and that’s through that section to 222 or 322 that they can put it on for 150 days. Do you think they do anything? think he’s going to use section 122 because that’s the easiest thing he can use right away. But they still have to give back 175 billion give or take in tariffs that they
collected through customs. So those companies, they can apply for their money back and he’ll start finding another way to charge them going forward. heard that I think this was with FedEx that they’re requesting a refund of something like a billion dollars. But the it’s not DOJ. I will just say the federal government was asking them, well, how are you going to account for that money and give it back to the customer?
And I don’t think they had an answer for that. The shippers. Yeah. I don’t know if the onus is on them to prove how they’re going to give money back. That’s a great point. I think that’s just them trying to play hardball and make it difficult for them. Yeah, I think regardless, they have to give them my back Supreme Court ruled and you know, they can lower their prices going forward with this $1 billion windfall. What if the government just decides they’re not going give it back? No, can’t do that. Why? That’s not cool.
Noah Brooks (16:24.814)
Well, I mean, they don’t seem to be worried about that in other cases. They don’t mind being in contempt of court. I don’t know. We’ll see. I don’t think that’s going to be a lever they they don’t want to come across as lawless and ignoring the law when they claim to be law and order side of things. Okay. Well, let’s let’s revisit that one in. I don’t know. They’ll find a way to do future tariffs. But yeah, as it stands right now, they’ve got to give that money back.
Okay, good thing they didn’t cut those $2,000 checks or whatever they’re talking about beforehand. That may be an even bigger deficit. We’d be at 40 trillion already. Do you think that maybe they were waiting for the ruling to cut the tariff? I think that was just a little carrot to dangle to say, don’t you say no, you’ll have the people mad you because they expect checks. yeah. So going back to the state- not a tax if we give it back. right. State of the Union. We can get into that a little bit.
But the Supreme Court justices I thought were maybe a little bit odd that they weren’t all there. And that the ones that were there were the ones that ruled against the president, not every one of them. But most of them ruled against the president with only I think one exception. who wasn’t there? didn’t I my apologies seeing like in ignoramus I did not watch the State of the Union Roberts was there Keegan was there.
Well, you said the ones against him are there so so they’re Amy Barrett Cohen, Amy Cohen Barrett. He’s he be? Yeah, he was there. And one other another gentleman was there. Justice, I would say not gentlemen justice was there. But yeah, there was a whole whole slew of them people missing. And it was interesting, though, I thought for sure he would have attacked the Supreme Court at the State of the Union and he didn’t. How about that?
went to it right to their faces, I guess. Surprisingly, he doesn’t shy away from doing like with J. Powell. He’s like, Hey, well, your numbers he pulls out a she’s like, 3 billion. He was like, No, sir. That’s the third building there. Yeah. That’s good. That’s kind of funny stuff. So you didn’t watch the State of the Union? No. Okay, I did not know what I did watch. So it’s little segue away here. Okay. The gold medal hockey game us swept
Noah Brooks (18:51.916)
the hockey medals we beat Canada in both matches men and women’s two to one both and overtime so it was really awesome especially for the men’s team at least my opinion you know I called it the second miracle on ice 46 years after we beat the USSR but like a week before this maybe 10 days before this we had like the face off of nations with Canada and there were three fights
nine seconds into things. So they booed the national anthem and we were like, heck no. And we threw down three fights in the first nine seconds of the match. So it’s cool to beat them for the gold medal. No fights. Apparently in the international game for Olympics, the penalties are much more severe for fighting. It’s not like regular hockey. Maybe not just five minutes, you know, went to the fight and the hockey game broke out. Yeah. Yeah. But yeah, it was really awesome game. Like I said, went to OT.
Jack Hughes hit the golden goal and it was awesome. It was the most pumped I was. It was like a rocky fight, you know, we scored like one second in one minute into the match, like real quick. And then we just got our faces beat to a pulp, barely made it limping into overtime and then snuck it through and got a goal. Yeah. He had a pretty big gap between those. He had that missing tooth. Yeah. He took a double penalty. So yeah, they high sticking and it was a major.
We got a four minute power play off then and he came back and slash someone and gave two minutes right back. Did you ever get a tooth knocked out? I have all my you did. I got one in a high school basketball game just pulverized by a big guy in the lane. I never I had a loose tooth, but it never had one knocked out. Yeah, this one just powderized my front right one. That’s a fake. Yeah. Yeah. Yeah. OK.
I don’t want to have anything knocked out, but he seemed to be fine with it. know, boom gets knocked out. He’s up. He’s skating, playing, kept playing. Probably a little adrenaline rush. Yeah. But then he went anyway. But they were, they were at the state of the union. Yeah. Right. The only unanimous clapping on both sides, I think was, was from that, you know, when they were announcing the gold medal hockey team. Yeah.
Noah Brooks (21:07.458)
good USA USA. was worth it. That was awesome. Yeah. We also had that big snowstorm. New York City got the ninth most snow total in their history. Rhode Island had like 32 inches. It was basically like a snow hurricane up in the Massachusetts Rhode Island area like 65 mile per hour winds. Yeah, like like the day after tomorrow type scene. My cousin Emily up on Long Island to two feet out there.
near near the North Fork. And it seems like they don’t get that much. Rhode Island, I think was was a three feet. I saw 32 inches. I forget what town it was in. That’s close enough. Providence maybe. Yeah, I’m really glad we didn’t have to deal with that. Yeah, we got the dodging for once. And then you have the people that get the lake effect and like Buffalo and like, that’s just a Tuesday. You know, when you have these big storms,
obviously people slow down on their spending. I speak from personal experience, like you’re locked up, you’re staying indoors, you’re shoveling, you might be working from home depending on what day of the week it is, but you’re not really doing a lot. And then even when you get shoveled out, depending on how much snow you have, you have this situation where, you know, some things may not be open, but you’re like, well, I don’t need to go out unless I really have to.
And there’s a drag on the economy a little bit. And sometimes it’s a regional drag. Sometimes, you know, in this case, there’s the hurricanes, right? And so I’m bringing this around to GDP because we got some GDP information last week and it was not good. And they’re, they’re chalking a lot of that up to the government shutdown.
that occurred in the fourth quarter. Excellent. Yeah. So I mean, the numbers, so the numbers came in at 1.4 % GDP. If you remember, if you look back a month, month and a half ago, we were talking about the GDP now was like up at like 5 % or 4.0 % and it was hot. And we were keeping an out and Noah.
Noah Brooks (23:19.086)
gently reminded yes but those numbers they they move a lot don’t they well GDP now numbers are super easy volatile I don’t know like there should be some type of rolling three month or at least one month number on there but the actual numbers can move a hundred basis points in the course of a week or two that doesn’t make any sense the final reading before the number came out said 3.1 yeah the official expected that I saw from analyst was 2.8 % again
came in at 1.4 % right much lower half. And like you said, attributed mostly to the shutdown. So there was a 16 % decrease in federal spending for the quarter. Obviously, the federal government is a huge spender. So the fiscal stimulus we’ve been putting on the last few years has been legendary. And then if you do non defense spending 26 % lower, I think was the number I had. So
It was a lot of money coming out there and we talked about jobs and how the jobs numbers are going down for the government. 324,000 over the last 13 months. And they are really pulling back from the previous fiscal stimulus that we had. And they attributed that 16 % and 26 % drop to about 1.2 % of GDP was due to reduced government spending from that shutdown and the other efforts to lessened spending.
But you don’t really get that back. It’s not like, well, GDP is going to be up five and a half percent next quarter based on the government reopening. And we also have a situation where the government may have another shutdown. It seems less likely now than before. But we’re, we’re in a precarious position where they don’t really want to, the Democrats do not want to fund department of Homeland security without guardrails.
And we can, you know, that’s, that’s a conversation for another show, but they don’t want to do it. And there’s a swath of the population that is kind of behind that. And then there’s some people that aren’t, and there’s going to have to be, this is one of those things that there’s going to have to be some compromise on. And I think we all know, compromise means, compromise, compromise means that both sides are going to have to give something up. Yeah. People on the right are going to have to concede.
Noah Brooks (25:43.746)
that DHS have some better guardrails and people on the left are going to have to concede that there’s still going to be ice out there. Yeah. Right. I mean, that’s, that’s realistically what all of this means. But if you remember going back to 2011, when the United States got the downgrade, right? S and P downgraded treasuries from, from AAA to AA, right? That’s, that’s the simple impact.
It was based on shutdown and not being able to pass a budget. we just decided to keep on doing it. Let’s do it twice a year now. Once not enough. that was S &P. had another. Fitch followed over the subsequent years. Yeah, it took a long time for them to do that, but they followed. Can you imagine if we got a situation where there was another downgrade on US debt?
What would that what would be next double A minus or would it be going all the way to A plus? It depends on what they did, which and also which one you’re looking at because you know they all have their slightly different. Greetings, but so that brings me I’m gonna I’m gonna bring it back. We had a report from the future. Come out on Sunday or Monday from a lesser known research company. Let’s let’s talk about that a little bit.
fictional research character released this little white paper as if they’re writing in June of 2028 and sort of looking backwards of what has sort of transpired centrini centrini research and basically it was like a hypothetical future looking back to 2026 and you know they said unemployment’s at 10.2 the S &P 500’s fallen what’s the number 30 some percent since it’s
2026 high of 8000. And it just laid out this spiral where as companies continue to optimize and try and boost their profit margins, they just keep firing more and more human workers. And it’s just a never ending spiral. I said to you, it’s like the opposite of the wage price spiral upwards, where they just keep firing more and more people. And eventually we have no consumers, which is 70 % of our economy. Yeah, and we don’t recover.
Noah Brooks (28:08.59)
I’m gonna take just a second here. Consumer spending was one of the big highlights of fourth quarter. It was over 1.5 % increase versus last year. If we have a slow down and quite frankly, consumer spending has been one of the main drivers of GDP out of the global financial crisis from let’s say 2011 to till today. And if we have a situation where consumer spending
really, really starts to slow down. Tax revenue slows down. Obviously, that’s caused by less jobs. And we’ve talked about my 2026 Word of the Year, right? Universal Basic Income. Yes, that’s three words. But as a phrase, we’re going to call it Word of the Year. So this is a hypothetical that somebody’s putting out there. But there are items that could be grounded in reality. Yeah, from this.
Yeah, definitely a sobering import. You understand it’s totally fictional, but you ever watch a movie where it’s like very dystopian, you’re like, holy crap, man, I don’t know how I feel after watching that. That’s sort of how you feel after reading this. And you know, it makes sense labor’s share of the profits will decrease because you’re going to have robots doing it. So what does that mean? Naturally, the owners of the companies employing the AI will have a higher share of income. Sure. In public companies, that’s you and me anyway, who invests in them.
but still owners of the companies, founders of the companies will have disproportionate wealth continuing. Obviously there’s already disproportionate wealth. And the velocity of money was one of the things hypothesized as decreasing significantly as a result of that. So you may have Elon Musk in the future with $20 trillion. No human could spend that much. you know, ultimately the velocity of money will decrease because maybe he only spends one trillion a year.
the other 19 trillion just sitting in his stock, you know, somewhere. He’s probably borrowing against it. And he’s gonna he’s gonna get taxed on it at some point. What was the movie? I know there’s a little bit of a gap with us sometimes in movies that we’ve seen and we haven’t seen. Do you remember Brewster’s millions? Nope. Richard Pryor? No, his really like wealthy uncle says you have
Noah Brooks (30:30.638)
30 days to spend $30 million. And if you spend it, then you get $300 million. I’m gonna be so easy. I’m a product of the 80s. Yeah, but it was really hard for him to spend one yacht baby. Well, you so the thing was at the whole premise was at the end of the 30 days, you couldn’t have anything to show for it. So like one of the example, wait, how much was Greenland? No, you you couldn’t have anything to show you couldn’t buy anything that you could rent something but you couldn’t buy anything that you were going to have at the end of 30 days. So
One of the things that he did to dispose of that that money was he bought a very, very expensive stamp, like a stamp from stamp collection. then he mailed it. I can’t believe you never saw Brewster’s millions. No, I haven’t even heard of it. I’m not the most movie going person. I should do better. You should do a little bit better. We just finished up.
We’re still still on our movies that won awards were nominated and we watched anonymous About William Shakespeare and the possibility that somebody else was writing those plays for For him. He’s just a front man and he was just a front man Wow, it is what a fraud Yeah, I can see why it was nominated And it was really really good. I would definitely recommend it to anybody
And you don’t have to be a Shakespeare fan or anything like that. was reasonably. I don’t know if it was easy to follow. You had to pay attention to it. I said I could watch it again to get the full effect. But in the end, you’re just like, is it possible that William Shakespeare did not write all of these classical plays that we think of? It also reminded me watching this movie that this was from the sixteen hundreds when these things were written and he’s still a very well known name.
and a long time ago. Yeah. Think right.
Noah Brooks (32:29.43)
Okay, so we’re out of the out of the movie area unless you have something that you think our listeners would love to watch. I don’t have anything real fresh. I started watching industry, which is four seasons in right now on HBO. It’s all right. And another show Lex and I like what like to watch the starting season two paradise. Pretty good show. Easy watch nothing that’s going to be rated like
in the pantheons of the greats but still entertaining watches. Every time I turn on the television, certainly news related, we’re still on day I don’t know 26 of the Nance Nancy Guthrie kidnapping. I have a feeling she’s not coming back. Yeah. That’s that’s a shame. But she’s either in Mexico somewhere, or that’s what my cop friend said he thinks that’s his bet. He’s down Scottsdale. He’s like, she’s over the border, man. She’s not coming back.
Yeah, that’s tough. Speaking of over the border, we had some really significant acts of terrorism this week in Mexico, in some of the expat communities, Puerto Vallarta, and yeah, I was gonna say Acapulco, not Acapulco. Almencho, no more. you’re Yeah. So tell us a little bit about what happened there.
So all I know is that, you know, one of the head of the CJNG cartel, I don’t even know what that stands for. But yeah, they located him apparently, apparently had some meetup with someone who they were tracking, found his location. And were we I guess we were involved in a little bit. We were providing data and yeah, and then basically we got them or they got them. And ever since his very well armed
cartel members have just been causing mayhem. His crew went a little loco. Yeah, Guadalajara local Puerto Vallarta. Yeah, love saying those shutting down the airport burning, you know, buses, cars, but I mean, can you be can you imagine being whether it’s just a simple tourist there if you’re there for a week or a few weeks or you’re a traditional expat and you’re living there where a lot of American expats do and British as well.
Noah Brooks (34:49.632)
and all of a sudden your town is under attack. You were just sipping margaritas on the beach. You have nothing to do with it and suddenly you can’t go anywhere. Yeah. Yeah. Scary thought. That is a little bit scary. I think that might slow down the move to Mexico from from potential expats. There’s a lot of other places like Portugal. Belize, they speak English. Yeah. Wait, did say it wrong? You may find me Belize. Belize. Belize. Yeah, I’ve never been there. I say Belize. They speak English. It’s by the bay. Get out of here.
They speak, they can’t speak, that’s not their first language. great stuff for income taxes. You’ll get a nice little break by going there. They have a whole expat program. Maybe that’s where Elon should move. okay. So let’s get back to the economy for a little bit. We have this situation setting up where we’ve had software names getting kind of kicked in the teeth. We talked a little bit about Bitcoin. Bitcoin is
down around 68,000 as we’re sitting here today, which is about a 50 % drawdown from its high last year. Maybe a little bit more. Bitcoin has had these bigger drawdowns over its existence, in some cases falling as much as 80 % more than once. And you’re looking at here at 68,000. And I know that there’s aggressive investors out there saying, listen, I maybe I missed this move.
or, you know, I missed Bitcoin altogether for the last few years. And now it’s down 50%. Should I buy some? What do you say to these people? I mean, yeah, you’re catching a falling knife. But hey, you have to be able to buy when there’s blood in the streets as as Warren Buffett sort of said, I don’t know if it’s truly him. But that’s who it’s always attributed to buy when there’s blood in the streets. Yeah, now seems like a good time. We’ve talked about how, you know,
certainly some compression of their valuations for the software companies as well as future discounting of their, you know, guided profit and revenue amounts is probably necessary. But I bet you there’s still going to be some winners that are really strong that come out of that. Here in February, every single one of the IGV software components was down at least 20 % from their all time high.
Noah Brooks (37:12.142)
for a whole sector to be obliterated like that. I think it’s just throwing the baby out with the bathwater a little bit. And I think you can sift through there and decide where you’re happy putting some risk on understanding you may lose 10 more percent or 15 more percent, but in the long term, you think this specific company may have enough guardrails around enough of a regulatory protection that they’re not going to go to zero.
I don’t, I don’t know that any of them are going to go to zero. mean, I guess there might be a few, not, I wouldn’t say the big ones of the, you know, the oracles of the world, the CRMs, the sales forces. don’t think any of that’s going to happen. but there probably are going to be some, some debt issues and they wind up getting acquired by other software companies. Right. but you, you question, you know, we talked about this, hypothetical research report.
And so you go, okay, well, you know, software is down 20 ish percent, you have some bigger names that are down more. And you go, well, this is the time to add to them. And it always goes back to your ability to absorb more downside. And you don’t know whether this is the net just one leg down. And then there’s two or three more, should never allocate like you’re calling the bottom and putting on a large position as it’s falling.
your point like allow there some room to buy more if it falls even further. I want to say one thing not to cut you off. we know there’s some private equity private comp, you know, debt issues out there. But there’s some really good companies like anthropic. We’re just talking about Claude and the Cetrine research. That’s all I think coming mostly from like a open AI or Claude anthropic. Google owns 7 % of SpaceX and 14 % of anthropic.
their own their own little private equity fund there. So yeah, well has that exposure be aware of if you want a little exposure to those two really big names. When is SpaceX gonna IPO? I mean, the expectation is the end of this year sometime 2026. Yeah. Are they gonna make any money? I know they make a fair amount of revenue, right, which is completely different than profitability. So they’re sending a lot of
Noah Brooks (39:31.31)
In 2027 will they make money? No, no, I’ll give you that short answer. 2027, I don’t think they’ll make money. Yeah, it’s going to be the old Tesla situation, right? Where they didn’t make money for a long time and all of a they turned it on. It’s the Amazon situation. Yeah, yeah. All of them. They just did that for a while. At some point they turned it on and then there this cashflow heavy situation and that’s obviously why people are interested in getting into it. just, it’s tough for me to wrap my head around it.
and to be that far in the future that they’re going to be making money from sending people anywhere. Like the lifting of satellites and launching satellites. Yeah, you can see that you see how it works. You can see the need for all that sending people to Mars. need to make the moon a launch pad and we’ll just go out and capture every asteroid and comet that comes around. Check it out. See if it has anything valuable. Mine it, bring it home. I’m not opposed to that.
I just I don’t know how they make money in the next let’s say you’re making me want to watch The Martian again what a great movie or Interstellar if I want to Interstellar great movie The Martian is really slow though it is but I like it I can’t do it it’s like mostly happy even though it’s like the most helpless situation you could be in he’s just growing potatoes in his own poop and he ruins it dude had it made all right on that note we’re gonna get out of here for this week everybody thank you so much for joining us we can’t wait to do
reach out again. Here we are end of February. We went through Valentine’s Day. have March, April coming up. Spring is here. We’re starting to warm up. Everybody’s gonna have big smiles on their faces. 72 degrees is the high a week out. yeah, Saturday next next Saturday. Yeah, I did not for it. Bring spring on. Tell that guy from Ponce of time to go away. Yeah. All right. And on that note, thank you everybody for joining us. We’ll see you soon.
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The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a decision. Economic forecast set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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