David Woo on the Macro Trade Everyone's Missing: What the US-China Trade War Is Really About
Summary
Market Outlook: David Woo expresses a pessimistic view on the stock market, particularly the NASDAQ, due to the ongoing US-China trade tensions and the potential for a stagflationary environment.
US-China Trade War: Woo highlights a shift in the relative bargaining power between the US and China, with China appearing stronger, and suggests that the trade war is more about technology dominance than traditional trade issues.
Stagflation Concerns: Woo predicts stagflation, driven by tariffs and a shrinking US labor force, which could negatively impact consumer spending and corporate profits.
AI Bubble: He warns of an AI bubble, questioning the sustainability of current valuations and the profitability of AI technologies, suggesting that the market is overestimating the potential for rapid growth.
Investment Strategy: Woo advises a defensive investment approach, shorting the NASDAQ and remaining cautious about tech stocks, particularly in light of the upcoming US-China negotiations and potential AI market corrections.
China's Resilience: Despite US tariffs, China has managed to maintain economic stability through increased exports to other regions and significant investments in automation and AI, positioning itself strongly in the tech race.
Geopolitical Risks: Woo emphasizes the geopolitical implications of the US-China tech war, noting that the outcome could significantly impact global economic dynamics and market stability.
Risk Management: He advises investors to be flexible and ready to adjust positions based on new developments, particularly with the critical November 1st deadline for Chinese rare earth restrictions.
Transcript
I think honestly it's it's a bit too late. This is why in a way that I I don't see a way out of this. I mean this is why I'm short NASDAQ. I'm short the stock market heading into November. There's been a big change in terms of the relative bargaining position between the US and China which makes it much scarier I would say compared to you know April because I think the Chinese are are are in a stronger position. Therefore, they're much less likely. They're even less likely to capitulate to Trump's win. >> David Woo, CEO of David Woo Unbound, a global forum devoted to the promotion of fact-based debates about markets, politics, and economics. It is so wonderful to welcome you back to the show, David. It's been way too long. I think we had you probably at the end of the second quarter. So, lots transpired in the third quarter now that we're in the fourth quarter. Great to see you as always. Really appreciate you. Thanks for having me back on. I love I love being on the show. >> I love having you on this show and this audience loves hearing from you. And so since it's been a while, let's start, David, where we always start with the big picture, the macro view, the framework in which you are looking at the world today. What is on your radar? Where do you see things headed? What is your outlook for the remainder of the year? And as you know, David, on this show, you could take all the time you need to set the table. >> No, that's great. Thank you so much for that. I I think you know like for me you know I mean I think you know I mean I I when I say for me I I I think I can almost speak for the macro community. I think this has not been an easy year. I mean I think you know like it was relatively straightforward I think the first quarter. I think for me to the extent that I sort of more I was well positioned ahead of Trump's liberation day. So I I did well I think in terms of my investment strategy. the second quarter, you know, the market came storming back, you know, like I got out of the way, so I at least I didn't get hurt, but it was it was tough. Okay. Like, you know, to actually make money, you know, the third quarter, I mean, was very difficult because I started to basically like, you know, I I I thought the market had gone like too far. I'm talking about the stock market, of course. Then I was trying to basically take the other side and and, you know, and lost a bit of money. So, but the good news is that I didn't give up. I came into the fourth quarter thinking that, you know what, I think the AI bubble, you know, is vulnerable. The US China situation, I thought that there could be a surprise and I was right about that. I was thinking that, you know, the US economy could be set to slow heading into, you know, you know, holiday shopping. And I think, you know, there is growing evidence this could be indeed the case. So all of a sudden I went long I started to basically go long treasuries from being short treasuries betting on more aggressive Fed easing not because inflation is not a problem but because I thought growth was going to surprise to the downside and and so from that point of view like I feel like you know things have been working out quite well lately. I think, you know, with stocks going down, consumer discretionaries underperforming staples, treasuries rallying, the dollar doing okay in this environment, I kind of feel like finally things are coming together and I'm going to the final six weeks of the year. Continue to be quite defensive. I mean, pessimistic. And I think this is what I want to talk about, which is like >> why are you so pessimistic, you know? So, if you allow me, I'd love to. >> I want to hear. Yeah. I think the first part of it is that you know in a way you know like I think you know like in in a way you know the market was wrong about the trade war right I mean if you think about this right I mean immediately you know I mean there's no doubt that tariff has kicked up to the highest level since the great depression like you know anybody who's taking economics 101 would have said wow higher tariff means high inflation right and u what's that inflation or that you know like reduce croper profit margin. So either way you know like tariff was going to be bad news for the stock market for the bond market I mean for the economy in general like and yet incredibly you know for the last 6 months ever since you know tariff started to roll in and we know tariff has been collected that you know that the sort of the negative impact of tariff hasn't been that obvious you know inflation was creeping up but not that much you know you know corporate profit margin in fact improved moved dramatically in the second quarter and um and an economy until now has been doing okay I mean stronger than expected in the second quarter and so on so forth in the third quarter I mean that you know the Atlanta Fed GDP now forecasting is cracking 4%. So like what you know so so all of a sudden I was like I I was feeling very depressed and I'm sure a lot of people like me especially you know I with a PhD in economics and I started my career at the IMF like worked on Wall Street for 20 years like I grew up in sort of traditional school of economics and then that believes that tariff was going to have consequences you cannot have the cake and eat it too and then nothing happened you know so so that was kind of disturbing and this is the also the reason why sort was so easy for the market to sort of climb the wall of worries, right? I mean, that's why the market just kept going higher higher higher. Now the question is I am very much of the view that if we haven't seen the negative impact associated with the tariff it's because you know the negative impact has been delayed and I'm I believe that you will I'm think we're literally on the cusp of basically the negative effects started to come through in the data and and that's very much my view which is I I'm of the view that we're heading to we're heading towards stagflation. Okay. >> Stagflation. Okay. stagflation. Now, one reason, you know, one thing that was indeed quite disturbing, okay, is why until now, you know, sort of like um consumer spending has been so strong, right? I mean, you think about this, right? I mean, consumer confidence has been quite low. The employment numbers haven't been all that great. You know, consumer says that they're depressed, but you know, like, you know, retail sales were super strong in July and August. even the September numbers look like, you know, it's actually uh quite decent. So like what the hell is going on here? Like I am of the view and I'm increasing of the view, of course, this is I'm trying to be forwardlooking here for the next couple of months. I'm I'm I'm increasingly of the view that the strong US consumer spending of the last two, three months is no more than just preemptive buying ahead of expected price increase. I think a lot of Americans think that prices are going to go up because you know because this tariff thing is very well terrored. I mean this is not like you know back in 2018 like Americans never heard of tariff like for the last basically nine months all they hear every day all they read about in the newspapers is tariff is going up. Okay. And I think that Americans realize that you know what they have in order to basically like you know if price is going to go up they should start buying before and I think you know and this is why I think spending has been stronger than than expected I mean and by the way but I think it's very clear to me that that is now over you know like you know I mean obviously you know a lot of this is based on anecdotal evidence like for example CarMax right the biggest um used car dealer in the US recently said that you know after the tariff went up like everybody was buying used cars like no like there's no tomorrow because they all expected prices could go up but in the last two months demand had just collapsed. Okay. And as a result they had they have had to essentially price down the inventory of their their their used cars by I think $1,000 per vehicle. And that's why the stock mark the stock dropped. you know, Costco CEO, I mean, basically said only a few weeks ago that he said he's, you know, Costco is not going to be ramping up, you know, holiday inventory like usual. Okay, all these are little signs that actually things are not going to be that great in the holiday shopping season that starts basically in a couple weeks time. Okay. And I think just this week both Walmart and actually Amazon came out and basically says that you know the typical upswing in retail hiring okay around the holiday season it's going to be also much less u you know strong than than than in past years. And then there are a lot of surveys that are suggesting that aren't the like Gen Z, okay, are going to be pulling back quite sharply in terms of their spending, you know, you know, over over the holiday shop shopping season compared with basically the past few years. And I I assume this is because Gen Z, they're younger. They've probably been more affected by the slowing job market, especially the recent college graduates. They're also much more likely to be bumping up against credit card limit and so on so forth. So like so there is I mean if you I mean I know right now we're in a sort of like a a black hole in terms of we don't we have we we have no idea what the data are because you know like because of the shutdown but I think what it feels to me right now is that holiday shopping is going to be very weak weaker than I think the Fed had been expecting at least based on the numbers of the last few months and I think you know and especially given that my view is that the shutdown is likely to drag on into November which will wait further on sentiment. I think you know you again no you know black Friday you know cyber Monday you know like you you're talking about the concentration of US consumer spending which is 70% of GDP into that one month I think you know I personally think that November you know I I think this is what what is going to be so in a way if we don't see prices going up a lot it's not going to be because somehow tariff is not filtering through but simply because nobody's buying the demand. The demand side of it. Yeah. I also just wonder too, David, like how much has been just loaded up on consumer credit cards, you know? Like are they really that healthy? Like the consumer? I don't know what their balance sheets look like, but >> yeah, I think the younger people certainly I think there is ample evidence to suggest the younger people. I mean listen again the older people obviously you know they tend to be I'm talking about the older like you know millennials or >> for that matter the boomers like those who are sitting on most of the stock holdings in the country for example I mean they've done well because of the wealth effect but you're talking about the younger the younger people you know like you know they they they haven't got a lot of stocks and then um and they definitely been spending much more on their credit card and I think these people clearly are struggling I mean, that's why I've seen one report lately that says that, you know, you know, Gen Z could actually pull back their holiday shopping by as much as 20%, believe it or not, >> you know, I think it was Price Waterhouse did a survey. But but the point here is that I think this is going to be >> I think this is going to be very interesting. So, from that point of view, again, I I think Trump got a bit lucky. I mean, I think in the sense that it it took a much longer, I think, for the sort of the u the tariff. I mean, of course, there's also the AI bubble that also helped him and so on so forth. But whatever reason is, I think that, you know, the the assumption in the market right now that tariff doesn't matter, that in fact Trump has reinvented economics, that everything's going to be fine. In fact, most people are expecting a massive basically reaceleration in GDP growth next year and the stock market is going to go up for I I think a lot of it is based on reading too much of this transitional data which I think we're about to basically um that that are actually irrelevant because what really matters is that I think you know the economic reality is not going to be so great. Mhm. I heard you earlier in your answer mention stagflation, historically the worst environment for pretty much all asset classes. But can you um unpack your thesis for why you see us headed toward a stagflationary environment? I >> I think stagflation just basically means that you know like in a way like it it's it's almost inevitable, right? I mean in a way because what's going on is that you know you've got you know we are seeing you know I mean you know if you think about this you've got you know the aging of the American labor force so the labor force is shrinking at the same time obviously we all know that you know essential the uh immigration has come to you know essentially the standill on top of that Trump is now charging $100,000 you know per visa for the F1 on one B you know basically visa for these Indian workers on top of that it's become more and more difficult to get in so I think you know there is no doubt and then so there is no doubt at a certain level there is no question that basically the labor force is going to be growing more slowly going forward as a result of the policy of this president and and I don't think that's going to get reversed anytime soon right meanwhile this is the question we have to ask ourselves You know, one of the things that you know, you think, oh, you know, you know, obviously there should be beneficiaries from the tariff, right? I mean, the biggest beneficiaries of Trump's trade war ought to be, you know, the so-called import competing industries in the US, right? You know, those industries that compete against imports. They should be benefiting from, you know, the higher tariffs on imported goods and becoming more competitive. They should be seeing like they should literally like be like you know swimming in money right now. Now let's think about this. What what industry we should I mean what industries are in the so-called import competing sector right? I mean obviously manufacturing right I mean and yet you know it's incredible but the last nonp payroll number we had you know you know manufacturing laid off 12,000 workers in in August which was more than the average of the previous three months. Now within manufacturing you say well you know like you know America has forgotten how to manufacture stuff like you know stuff that went to China so many years ago they're going to come back in hurry but what about but there are two industries that should be the biggest beneficiaries because they because these are established industries that still also have a lot of spare capacity in the US that should be doing a lot better which are these two industries one is autos >> okay >> and the other is furniture >> okay and most most of it these days is North Carolina and towards >> where I am in Raleigh, North Carolina, but High Point, North Carolina. Yeah. For furniture. >> And yet incredibly incredibly in August. Okay. Between autos and furniture, these two industries shed 10,000 jobs. >> Okay. So 85% of the job basically lost to US manufacturing happen in the two industries that should be like the biggest beneficiaries of the tariff. Okay. So what does that tell you? I mean what it says to me is that actually if the import substituting the if the import competing sectors cannot even benefit from the tariff then who the hell is going to benefit from the tariff? You know, like the governor of North Carolina was talking about like how these jobs have gone. It's going to take a lot for them to come back. Like, you know, like skills that have been lost. Like who the hell you going to be able how you going to get companies that went out of business. You think they're just going to come back and then basically reopen business, you know, especially given the unpredictability of all this stuff right now. So as a result what will happen is so you know in in a good situation would be that oh wow tariff means that American companies are going to immediately like you know produce a lot more okay but instead right now it's like well tariff's gone up but American companies are not going to be producing more they're not going to be hiring more people and guess what just means Americans are now going to have to pay higher prices for what they basically purchase from abroad okay and locally too. So essentially what I'm saying to you is that this is the problem right now which is that you know like I think you know whatever Trump's intention is right now there is no evidence over the last 6 months this is doing that anybody within the US is benefiting because if the import competing sectors are not competing then you know god forbid I don't know who it is. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. 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It's it's it's it's very very hard to say you know I mean you know the US government has benefited to some extent they're collecting more tariff right I mean because in a way it's just a form of tax right so the US government's collecting you know an extra whatever $30 billion every month in terms of tariff collection >> and and that's about it but but but in the end but that just essentially attacks it just attacks on the economy that's not doing anything more than that it just basically attacks okay and um And it's a it's and it's a hit on the actual real purchasing power of American people. And and right now again I just don't see what companies are, you know, like again I you know like small business are struggling, larger corporations, you know, like right now it's like well it's it's hard to say, you know, I I it's it's certainly very very hard to see any companies benefiting right now. >> Yeah, I guess. Okay. So on the US China trade war front even going back to April would you is it fair to say that the US is in a weaker position than we were in April then? >> I think so. I I think it's unfortunate I think I think China is in a relatively stronger position whereas the US is in a weaker position. I mean, and I never I never would have thought I was going to say this already like in October because I thought, you know, honestly back in like April, like everybody else, I was sure that the Chinese economy was going to have a hard landing because it was very clear, you know, in April that the whole Trump's trade war was actually trying to target China, right? And we have to remember the tariff the new tariffs you know that hit China were both larger larger and came much earlier than against other countries right I mean the Chinese I mean the average on Chinese goods right now is almost 60%. Up from like 20% at the start of the um the Trump second presidency. So like you're talking about a very sub substantial hit and there's a there very relatively few exemptions like you know for Europe and Canada there are a lot of exemptions that kind of thing but against China there are very few exemptions and it's a huge hit. I would have thought like you know I mean back in you know basically April I was convinced like you know like you know the Chinese gonna have a big problem to recover from this but you know to my surprise I mean and I think it's to everybody's surprise that you know of all the countries that have seen upper revision in terms of GDP growth forecast by Wall Street this year nobody has seen more upper revision than China like now like you know Wall Street was expecting like China to grow like I don't know 4% even less okay, back in uh April now is expected to grow 4.8% this year, which is barely slower than the 5%, you know, recorded by China last year. And it actually is very very interesting because exactly the opposite of what happened in the US during during the same period actually how just we said you know that the the tariff has it hasn't helped the US at all. But what's interesting is that it hasn't hurt the Chinese that much either. >> And the reason is because China has been able to actually increase exports elsewhere to Europe, to Africa, to Southeast Asia, everywhere else to offset the drop in exports to the US. Now, you might say, well, is it because like the Chinese are like, you know, discounting heavily in order to like dump their stuff like around the world? If that were the case, Chinese corporate profit growth will be collapsing. And yet, believe it or not, in August, Chinese industrial profit actually expanded by expanded 20% actually, you know, basically following 3 months of decline. What it's basically saying to me is that so so so yeah, the Chinese economy has slowed a bit. Industrial production was growing at 6% at the start of this year, but guess what? It's still growing at 5% right now. So, it's not a it's not a very big slowdown. Now, of course, it's too early to say anything for sure, but I am of the view the reason why the Chinese been able to survive Trump's trade war so far with flying color, I would argue, is, you know, is is the is the decadel long investment that China has made into factory automation. Okay, that you know people people just think you know like people most people think oh wow they're trying to just bunch of basically like cheap labor and all that kind of stuff. The reality is that the Chinese labor force has been shrinking now, okay, in the last 10 years. That is like, you know, there are fewer people looking for jobs every year. I mean, actually, it's going down. In order to offset that, the Chinese have been investing aggressively in robots. >> As a result, >> I imagine too. >> Yeah. So, as a result, today there are 2 million robots in Chinese factories doing the jobs of people. China last year basically installed three, you know, 300,000 robots alone last year, which is more than the rest of the world combined. So from that point of view, I think is ironic because China is also of course also a leader in AI. So the fact that they are big in factory automation by combining robots and AI, I think they have been the biggest beneficiary of the whole AI revolution. Okay, more so than anybody else. And because this whole thing has allowed them to cut cost to do everything more cheaply. So ironically this is actually the greatest irony of this thing which is that you know we're sitting I mean everybody's thinking oh wow so who's going to basically like with because I I think this AI is a total bubble like you know I'm talking about a bubble in in terms of NASDAQ valuation and so on so forth. But the point here is that like there's a lot of debate about like who's making use of the AI to increase productivity growth and so on so forth like Stephen Marin was telling you that oh well everybody yeah America you know AI is already having a major positive impact productivity growth is not clear at all but where it's very clear where AI is making a very big difference is in China and I think that the fact that AI is probably the reason why China has survived Trump's trade war as as well as it has until now. And and I think you know this is actually you know and I think this is also the reason why in this latest showdown between the US and China. The Chinese there's been a big change in terms of the relative bargaining position between the US and China which makes them much scarier I would say compared to you know April because I think the Chinese are are are in a stronger position. Therefore they're much less likely they're even less likely to capitulate to Trump's win. Wow. It's it's so fascinating to just like to kind of understand like how the pieces fit together and that this is all part of like a bigger macro story, if you will. From an investor perspective, how is this um informing how you're wanting to be positioned in the markets? You were kind of alluding to it earlier, but can you walk us through like how you're thinking about positioning or what you can share from that perspective? >> Sure. I mean you think about this like broadly like what what is the biggest story of the world today? I don't care whether you're macroeconomist, political scientist, geo, you know or or or investor for that matter. The biggest story really is the tech war between us and China. That's it. Okay. Both US and China view okay AI as being a must-win. Okay. because they think both sides believe that whoever wins this round, okay, this AI war, okay, is you know, you know, let's put it this way, you know, will enjoy, you know, I mean, I don't want to say hedgeimony, but certainly, let's put it this way, you know, in the fight over in the rivalry between us and China, there's nothing more important than winning the AI war right now. Now it's interesting because if you look at the two sides, they have two very very different strategies about how to go about winning this war. Okay, on the US side, it is very clear that Trump's strategy, you know, I'm not I'm I'm saying Trump because, you know, he's the president of the United States. Obviously, he's not the only one, but I think but Trump understands this very well and he's been a major I think driver behind the US strategy in terms of how to win this war, which is to win this war, the US has to control every choke point of this technology in the supply chain. Okay, that is the US needs to control chip design, large language models, hyperscalers and the fact that Trump recently has been, you know, had twisted essentially the arm of Nvidia to invest in Intel to me is a very clear sign that Trump also wants to control chip manufacturing. Okay, I mean like you know they want to revive Intel in order so that chip manufacturing will come back to the US as well. And then the idea here is that Trump would and I think the reason why they want to do all this obviously is to keep China basically behind but more importantly if you control all these choke points and then given how expensive this technology is because every Nvidia chip is like $60,000 the only companies that can afford to buy these chips are basically American companies like Microsoft and Amazon that have very deep pockets. Nobody else can afford to buy these chips in scale. And therefore the idea is you know Washington's plan is that down the road in the future whoever wants to have wants to access AI will have to rent AI from American companies and that is American companies will basically essentially own the rent you know basically of the entire industry for as long as the I can see. So that is in my view the American strategy. So what is the US what is China strategy? China's strategy is to commoditize this entire technology. So it's going to cost zero. Okay. China strategy is the very very opposite of this whole of the American strategy. they want that's why the you know the Chinese you know large language models are open all all open source models to the extent you can just literally copy and paste their source codes okay that's why they are at least 10 that I know of AI you know designer companies in China that are that are designing their own AI chips and then they're going to eventually they want to sell these chips at onetenth of the price of Nvidia chips down the road now Why is this important? So, US wants to monopolize it in order to maximize the rent. China wants to completely commoditize it so to drive down okay the price to zero. What is the market pricing right now? I mean if you look if you think about what NASDAQ's basically massively high elev valuation of US tech companies the market is right now assuming that the US is going to win is basically pricing a US victory which to me is certainly not a given okay if you understand what's going on here and I think this is basically this to me it is the biggest in a way you know absolutely ironic, but I would argue the biggest the biggest potential problem for the assumption of the AI valuation associated with you know NASDAQ right now is you know it has to assume that the Chinese will never catch up. Okay. And then if the Chinese were to catch up and soon then guess what then the America the not only NASDAQ but the entire US economy the US dollar everything US will have a big problem and Trump and this is what this is about actually what is coming down in terms of the showdown between US and China between now and November 1st. Mhm. So that is like we right now that is the macro trait of our generation then >> there just no doubt there is no doubt and and and what people don't realize is this right I mean it's like and this is why it's you know like you know like you know the market goes up because like you know so Sam Alman says he wants to start selling porn you know with you know open AI you know that's almost irrelevant it's irrelevant what is much more crucial is this basically this AI race, this AI war and and and and and and the reality is this the real and this is what why like this November 1st thing has has taken on so much importance for the next basically uh 10 days is that you know what you know so you say someone like um you know because this whole this whole like trying to stop China from catching to the US started under the Biden administration right and the architects of the US export were sanctions against China was of course you know um the former CEO of Google Eric Schmidt okay and and he used to say that you know the so-called entity list and the tech sanctions and so on so forth should basically give the US a two to threeyear lead over China and he used to say that in his mind that's like eternity and the idea is like well you know listen in a tech race like you know technology everything's is changing every single week. Like if you have the two to three year lead over somebody that this is like a massive lead. Okay. Now I think it is certainly this this is no longer true. Okay. Far from it. just recently you know you know uh Jensen Hong I mean CEO of Nvidia said that whatever just two three weeks ago in a podcast that China is now only a nanocond behind the US in AI and semiconductors and I think this is extremely extremely important okay I I don't think you know Jensen Hong is like trying to scare anybody that kind of thing he has no reason to do so so on so forth and he probably has better information than anybody else because Chinese he probably goes to China so often that he probably knows what's really going on. Okay, not the kind of stuff that goes into the Wall Street Journal, the New York Times, but really what is going on behind the scene. So I think so from that point of view, I think the Trump administration is getting extremely nervous. They got very extremely nervous after the Chinese put a ban on the sale of Nvidia chips in China. Just think about that for a second. What does that mean? Like for for the last two years like the Chinese are trying to get their hands on Nvidia chips like around the world, whatever age that kind of thing. Now they said, you know what, don't even bother to sell them to us because we don't want them anymore. What could that possibly mean? That just simply means that they are now making better chips themselves. Okay, at least they are basically making better chips than whatever they can buy from Nvidia under the uh the sanction regime. What I'm saying to you, this is actually a very important development. And I what I'm saying to you also is that actually you know so the Chinese haven't got the lithography machines from ASML the most that mean the most advanced one but so that they cannot make miniature chips but guess what it you know you know AI chips is not like making a chip for iPhone 17 air that has to be very small AI chip doesn't have to be that small so therefore the Chinese it's not an impediment for the Chinese Okay. What I'm saying to you is when, and this is what the showdown is coming, this is going to get very ugly, and I think the stock market doesn't get it yet, which is that when on September 29th, the Trump administration decided to dramatically expand, okay, the export sanctions against China by essentially passing this relatively obscure rule about like, you know, companies on the entity list. Now you know that this now will the the restrictions will now be extended to also subsidiaries of these companies you know that have majority control. So without going into too much into the details which is boring but the fact is that before September 29th okay there were about a thousand Chinese companies that were banned from being able to purchase US sensitive technologies. after September 29th, the estimates is that that that number went up to probably around 3,000 if not 5,000. Okay? So what I'm telling you is that when the Trump administration decided to go down this path and they did this just before the start of the Chinese whatever golden whatever holiday season whatever it is because they were trying to sneaky in under the radar that this in my view when they went down this path that is about as open an acknowledgement as possible that they are starting to get very wary of the Chinese catching up. So they're getting so nervous that they have to basically take out a you know basically uh they have to resort to something as draconian as that to stop the Chinese. And of course at that point the Chinese have no choice but to respond in kind because the Chinese said well you know listen we will never allow anybody anybody's to set us back technologically speaking. So if you don't want to sell us what we need to become a better you know basically country we're going to stop selling you okay what you need to make F-35 autos green equipment whatever it is that is rare earth so in a way the whole rare earth thing is a direct response to the US decision to stop China's technology development and what I'm saying to you is that this is why this is nothing to do with trade that's why this latest round of tension between US and China has nothing to do with trade. >> It's technology. >> It's only about technology. >> Interesting. >> And then neither side can back down. >> Mhm. I just saw a headline just crossed just now um that Treasury Secretary Scott Bessant is going to speak with the Chinese trade counterpart today. That's just it's just a headline, not a full written out article. But if you were to advise the Trump administration, and you are known as a bit of a Trump whisperer on Wall Street, what would you say to them? What would you tell them that they're missing? I imagine we probably just covered it, but if you if you had that opportunity, what would you say that they're missing? >> Listen, I I think at this point, I mean, to be honest, I think it's a bit too late. I think honestly it's it's a bit too late. I mean, this is why in a way that I I don't see a way out of this. I mean, this is why I'm short NASDAQ. I'm short the stock market heading into November. I mean basically first because I mean if because the Chinese rare earth restrictions >> Yeah. Why why November 1st again? Is there specific >> November 1st is the Chinese rare earth restrictions is scheduled to go into effect on November 1st. And the reason November 1st is because Trump and Xiinping are both going to be present at the Apex summit in South Korea at the end of October. You know basically whatever in 10 days time. So the idea here is that well if there's going to be a deal they're going to work it out in South Korea so that this is the reason why the Chinese you know set the basically the date for November 1st and Trump of course said that well if they if this thing goes in effect on November 1 then he's going to hit China with additional 100% tariffs. Okay, whatever it is. Okay, what I'm saying to you is that Scott Besson is making a big mistake. And I think you know whatever is I mean from his standpoint it's not a mistake because he thinks it's something else because he says oh well you know listen he says Chinese cannot be trusted because he says that when he met with the Chinese whatever 2 three months ago in Geneva when the Chinese agree to basically uh to keep rare earth the supply of rare earth flowing he said it was in exchange for the US agreeing to lowering the tariffs. That's what he said. Okay. and he says well the US has now raised the tariff but the Chinese are now trying to basically restrict this but the Chinese but the Chinese did this rare earn thing has nothing to do with tariff it is a direct response to the US decision to restrict in you know basically access to technology by Chinese firms so that is the thing so if if if if if Scott Bon is still trying to approach this whole entire showdown by saying oh wow actually this is this is about trade. Okay. I think he's completely missing the point. This is nothing to do with trade. Okay. Nothing to do with trade, only about technology. >> Okay. So, short the NASDAQ um and the AI bubble bursting here in the US. Walk me through the implications there because I imagine that has spillover effects elsewhere. How are you thinking about maybe the knock-on effects? just walk me through the trade that the scenario that you see playing out. >> Yeah. So, I think you know there are there there are two reasons why I'm negative in NASDAQ. Number one is that I said this this this this problem with between the US and China which is now coming to a head. Okay. And that you know and uh and this is this is the this is the big problem. Okay. The other is that I think you know I think the market I think the market you know is I think there's also a AI bubble and that the AI bubble has to do with the fact that I think it's not obvious to me okay that you know that the um that the revenue growth okay the profitability of AI is going to improve as quickly as people are expecting. Let's think about this for a second, right? I mean, I I think everybody knows the story by now, which is that well, you know, it was incredible. This was only a month ago. You know, if you remember, Open AI, Open AI, you know, is a company that right now has is has an annualized revenue of 12 billion. Okay? So, it doesn't mean like, you know, sure that, you know, they're char GPD and so on so forth, but they're not making that much money. Okay? So, $12 billion. So when a $12 billion company, and we're not even talking about profit, we're just talking about revenue, right? A company basically says that they're going to pay Oracle $300 billion the next whatever four or five years. Okay? And then Oracle stocks goes up 40% making Larry Allison one of the richest, I mean, the second richest men in the world momentarily. That to me, that's a bubble. Okay? Because I I think, you know, this is what it is, you know, like let's be honest. I I can understand to at a certain level I can understand Sam Alman. I mean I you know because if you think about what what what do what do Steve Jobs and Elon Musk have in common? Okay they're both visionaries. Okay but both are excellent storytellers. Okay they were great storytellers because you know what you know and guess what you know like people like Jensen Kong and Sam Alman they're obviously very good storytellers as well right? Sen Alman I mean to me it's amazing because like you know how his stories has mesmerized everybody right now because the last six weeks the whole AI rally is about how Santa Alman has decided he wants to turn open AI into a major hyperscaler. This is a company that has, you know, you were talking about like how, oh, well, you know, listen, you know, Microsoft, even if they're buying all these chips, at least, you know, it's a very profitable company and then they're going to, you know, they they have they're paying with cash right now. You know, Sam Alman is promising to spend a trillion dollars over the next five years. Okay? And the market got very excited about it and they're making 1212 billion. The my problem with with this whole a open AI thing is not is not about anything else but about the technology. All I know is this. You know it took them it took open AI 2 and a half years after releasing cha 4.0 to release cha cha 5.0 and 5.0 was is probably about 20% better than 4.0. Okay. In other words, that basically if it's going to take them another 2 and a half years to come up with 6.0 that's going to be 20% better than 5.0, we've got a problem here. You understand? I mean, I think what it says to me is that actually the based on the current architecture, okay, of generative AI, we're starting to basically like, you know, basically bumping up against the plateau of the technology. This is also the reason why Facebook Meta decided to delay their all their all-time great whatever their own large language models the um the llama thought for okay the method because supposedly the the the improvement is also just incremental so my problem right now is that is it's not because the markets right now thinking that oh well you know open AI is going to spend a trillion dollars in the next 10 years but it's not clear to me how open AI is going to be able to make enough money to basically pay for all these chips in order to become a major hyperscalers given that actually the technology you know seems to be already essentially running up against diminishing return even before it's taken off now sure I mean if if we somehow manage to discover generated you know whatever you know the artificial general intelligence in 3 years time that that things can change but we don't know that I mean because it's not a it's not a continuous thing from where we are right now that will be something completely different. Okay. And and this is my problem. And then on top of that on top of that the problem for open AI is the fact that you know what you know these days you know this is not like Google search. Google search is like 99% 99% of you know search goes through Google search. Google search is like the they're the best and they're monopoly and so on so forth because their technology is sort of better than everybody else and then for years nobody could even come even close. All right. Right now like open air has got so many competitors not even funny. I mean there all these basically like internet sites where people actually rank all these different large language models according to their performance metrics and so on so forth like you know three of them of the top six three are Americans and three are Chinese. Okay. be all because of this technique called distillation which allows all these large language models to copy and paste each of theirs capabilities. You know it it might takes a company 3 years to come up with a new model. It will take only another company months at a fraction of the cost to copy all that new stuff. Okay. And then to replicate it exactly. So what I'm saying to you is that the assumption okay right now this whole AI thing assumes that the technology is going to go through the roof and that's why and then therefore the assumption is if the technology is going to improve so much then demand is going to go through the roof. So all these companies are getting in there to buy the chips and build up the capacity so that to in order to basically be ready for the demand. But right now to me the bottleneck is actually these the software the the you know the uh the open AI of the world. Maybe this is the reason maybe San Alman gets it. This is why he wants to become a hyperscaler because maybe he figures that that's how that's the only way he's going to basically make money out of it. But I cannot imagine that Microsoft's too happy about that. By the way, like Microsoft has been basically investing aggressively in data centers, you know, you know, because of their special partnership with Open AI, they were going to use their data data centers to power the AI the Open AI models, but now OpenAI wants to basically uh wants to go into Microsoft's business. I I just think that there is a lot of going on and I cannot imagine I don't know this as a fact but it wouldn't surprise me that actually St. Alman is making lots of enemies actually across Silicon Valley. So what I'm saying to you is that there's an AI bubble and then there is this whole US China thing which is about AI in its own way and these two things together makes me very wary about the current valuation of the US stock market. >> Yeah. And then the tech the stock market I think we're going to go right into a recession. There's no doubt about that in my mind. >> Got it. Yeah. Um okay. From I know short selling can be quite challenging. Um and like markets can uh go the other way. From a riskmanagement perspective. How do you have to think about a trade like this? >> You have to think about some portfolio, right? Because I mean I am I'm trading lots of different things and I would not just like have one just naked short NASDAQ position. Also you have to sort of know which level to basically short it at and then you might want to hedge it from time to you know nobody's saying shorting is easy. Okay. >> Mhm. But I think you know from that point of view I just think that you know for retail investors who are doing this at home like you know you know like you know I think if you make some money I think you know in tech like you know take it off take it out of the table actually I mean especially again I think the point here is that November 1st is going to be a very big day because again there are two very important things I mean like because I I'm I'm not you know if I'm wrong I'll be the first one to say you I'm out of this. You know what I mean? I mean because you know every day like you know when facts change you got to be prepared to change your mind. So I I'm not I'm not married to any position you know as long as my if if my if my investment thesis no longer true. But the next two weeks there are two very important things to be on the lookout for. One of course is as I said before like will the US and China work it out between now and November 1st because if they don't this is very bearish. Okay. I mean it's bearish for lots of things, you know, not just basically for tech, but especially bearish for tech. Okay. The second thing is that between now and November 1st, we're going to have, you know, quarterly guidance from Microsoft and Amazon. Okay. I I think it's it's it's reasonable to assume that if there's I mean, I think that their numbers probably going to be okay. Okay. The question is what are they going to what's going to be in their guidance in terms of capex spending going forward. I think any hint that there could be a slowdown whatever it is I think the market is going to be in trouble. Okay. So I think that's what it is because right now everybody's thinking oh well you know as as long as Microsoft's buying more Nvidia chip everything's going to be fine because people think oh well Microsoft presumably know what they're doing. if they're buying more of these chips is because they think that the under underlying demand is strong, right? And then nobody wants to second guess Microsoft like they should know better than I do about like, you know, the, you know, the outlook for demand. So, as long as they're buying more, it's going to be fine. But I think and that's the market psychology right now, which I think is wrong, but it doesn't really matter. But this is why like any disappointment, even the smallest disappointment in terms of like potential pullback, I actually think Meta is going to be pulling back on their, you know, because Meta has also been one of the big buyers of these chips. I think they're going to be pulling back. They just recently um signed a couple deals with including with Google to rent their computing power, which probably tells me that they're going to be renting this as opposed to buying more of this themselves because maybe it's less risky. Whatever. We'll we'll see how it goes. I mean I mean again I mean I mean like my clients are among the biggest hedge funds in the world, macro guys and so on so forth. like, you know, I'm not basically I I'm not like saying, "Oh, well, you know, listen, I'm gonna basically uh I'm betting on a 20%, 30%, 40% drop." No, that's not what I'm doing. I'm going to basically going in and out in a sense that I'd love to basically make five or 6%. I love to see a 10% drop, by the way, you know, and then uh but I I may not actually stick around until the end. That kind of thing. So, to me, this is a bubble that is going to definitely go down. But you know like like bubbles like no the NASDAQ when they when the NASDAQ bubble burst after the d in in you know the docom bubble like it took two and a half years for the bubble to finish bursting you know it takes a long time it takes a long time so I think >> I think some people think it's like oh it should be instantaneous but that's a good point it takes a long time >> it takes it takes you it really takes a long time >> because you know like part of it is real part of it is not real right I mean so you don't know which part is real, which part is not real. And then you don't even know like you know again you know because because you know you're selling hope right I mean that's what that's what they're selling >> and the um and you know it's look I mean look at you know Tesla it's a great example right I mean like you know I mean the news cannot be any worse for Tesla and the stock is trading at a P like at 150 whatever it is so clearly like Elon Musk you know like you know people love his storytelling whatever ever it is. And the um and they're willing to give him benefit of doubt. I mean, and and and you know, and that's what it is. I mean, and you have to respect that, by the way. If you're trying to short the market, >> you got to basically that's why I have to I I respect you know, you know, and you know, Jensen Hang as a storyteller. I respect, you know, you know, Sam Alman as a storyteller, even though I I I tend to agree with Elon Musk that he's a liar, too. But but that's a that's a different story. David, before I let you go, um, what's that risk for you right now that's keeping you up at night? Because I mean, you look at the world from all different facets. >> I I think, you know, there's only one thing that really worries me is is like what Trump said last week that he was thinking about sending uh the tomahawk missiles to uh to Ukraine. >> I mean, if he does that, that is like really scary. That would be extremely scary. I mean, he's backed away from that a little bit today. like you know last night >> supposed to meet with Putin. Yeah. >> But I think it but but again I don't know I I don't think Putin's going to end this war. Okay. So I don't know what assurance he had from Putin that what you know whatever. All I can tell you is this, like you know that, you know, Russia invaded Ukraine three years ago in order to stop the Tom of Hawks from being deployed on the Russian border because in 2022, it was very obvious that Biden was doing everything he could to get, you know, Ukraine into NATO. And for the Russians, okay, had Ukraine got into NATO, it would have meant that tomahawk missile launchers would have been deployed directly on the Russian border. And then Putin was going to not going to have that. And this is the reason why, you know, he decided to to to to invade Ukraine in order to prevent Ukraine from becoming a NATO member, in order to prevent the Tomahawks from being deployed on Russian border. So do you think that what after all these you know almost four years of fighting that he all of a sudden is going to agree okay fine yeah Trump please send them to uh to Ukraine right now just it would be a completely unacceptable situation for the Russian he would you know as the Russian president said you know on Monday okay former president Medadev said he said that you know what the problem why these missiles will end very badly for everybody is because since these missiles can carry nuclear warhead. That means that when these missiles are in flight, there's no way for the Russians to know whether they are carrying conventional or nuclear warheads. Okay? And and and this is, you know, I I just hope that Trump has the good sense, okay, to to not go down this path because it's very very scary. It will be very scary if the US goes in this direction. >> Yeah. Yeah. Uh, it will. And David, I have to say I always enjoy your conversations. I love listening to you. I love learning from you. I know this audience does as well. Before we, um, go here, let let folks know where they can find and support your work. I am a subscriber to David Woo Unbound, so I hope other folks sign up. I'll leave a link. Um, and any parting thoughts? The floor is all yours. >> Yeah, I I just think that, you know, like, you know, I I think thank you so much for that. you know, I I just think that, you know, listen, I mean, I I I know I'm negative right now, but you know, but I but I think what we I I think the the point here is that, you know, everybody was very negative at the start of the year and then things got better. But I think and then in many ways the Trump got very lucky and then he was able to taco his way out of some very difficult situation. In a way, I would argue that just like the shutdown in Washington right now, the showdown between US and China is a very tough situation for Trump to taco out of because again this is not about tariff at 25% or 20% or 15%. This is about the technology leadership. It's about the hedgeimonyy. There's so much writing on this right now and I think, you know, this is something that, you know, this is why I think the market may be overestimating Trump's ability or willingness to tackle again in the situation. So, yes. So, we'll see how that goes. Anyway, >> David Woo, CEO of David Woo Unbound, thank you so much. Really appreciate you being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. Really appreciate you. Until next time, be well, David. >> Thank you. Thank you, Julia.
David Woo on the Macro Trade Everyone's Missing: What the US-China Trade War Is Really About
Summary
Transcript
I think honestly it's it's a bit too late. This is why in a way that I I don't see a way out of this. I mean this is why I'm short NASDAQ. I'm short the stock market heading into November. There's been a big change in terms of the relative bargaining position between the US and China which makes it much scarier I would say compared to you know April because I think the Chinese are are are in a stronger position. Therefore, they're much less likely. They're even less likely to capitulate to Trump's win. >> David Woo, CEO of David Woo Unbound, a global forum devoted to the promotion of fact-based debates about markets, politics, and economics. It is so wonderful to welcome you back to the show, David. It's been way too long. I think we had you probably at the end of the second quarter. So, lots transpired in the third quarter now that we're in the fourth quarter. Great to see you as always. Really appreciate you. Thanks for having me back on. I love I love being on the show. >> I love having you on this show and this audience loves hearing from you. And so since it's been a while, let's start, David, where we always start with the big picture, the macro view, the framework in which you are looking at the world today. What is on your radar? Where do you see things headed? What is your outlook for the remainder of the year? And as you know, David, on this show, you could take all the time you need to set the table. >> No, that's great. Thank you so much for that. I I think you know like for me you know I mean I think you know I mean I I when I say for me I I I think I can almost speak for the macro community. I think this has not been an easy year. I mean I think you know like it was relatively straightforward I think the first quarter. I think for me to the extent that I sort of more I was well positioned ahead of Trump's liberation day. So I I did well I think in terms of my investment strategy. the second quarter, you know, the market came storming back, you know, like I got out of the way, so I at least I didn't get hurt, but it was it was tough. Okay. Like, you know, to actually make money, you know, the third quarter, I mean, was very difficult because I started to basically like, you know, I I I thought the market had gone like too far. I'm talking about the stock market, of course. Then I was trying to basically take the other side and and, you know, and lost a bit of money. So, but the good news is that I didn't give up. I came into the fourth quarter thinking that, you know what, I think the AI bubble, you know, is vulnerable. The US China situation, I thought that there could be a surprise and I was right about that. I was thinking that, you know, the US economy could be set to slow heading into, you know, you know, holiday shopping. And I think, you know, there is growing evidence this could be indeed the case. So all of a sudden I went long I started to basically go long treasuries from being short treasuries betting on more aggressive Fed easing not because inflation is not a problem but because I thought growth was going to surprise to the downside and and so from that point of view like I feel like you know things have been working out quite well lately. I think, you know, with stocks going down, consumer discretionaries underperforming staples, treasuries rallying, the dollar doing okay in this environment, I kind of feel like finally things are coming together and I'm going to the final six weeks of the year. Continue to be quite defensive. I mean, pessimistic. And I think this is what I want to talk about, which is like >> why are you so pessimistic, you know? So, if you allow me, I'd love to. >> I want to hear. Yeah. I think the first part of it is that you know in a way you know like I think you know like in in a way you know the market was wrong about the trade war right I mean if you think about this right I mean immediately you know I mean there's no doubt that tariff has kicked up to the highest level since the great depression like you know anybody who's taking economics 101 would have said wow higher tariff means high inflation right and u what's that inflation or that you know like reduce croper profit margin. So either way you know like tariff was going to be bad news for the stock market for the bond market I mean for the economy in general like and yet incredibly you know for the last 6 months ever since you know tariff started to roll in and we know tariff has been collected that you know that the sort of the negative impact of tariff hasn't been that obvious you know inflation was creeping up but not that much you know you know corporate profit margin in fact improved moved dramatically in the second quarter and um and an economy until now has been doing okay I mean stronger than expected in the second quarter and so on so forth in the third quarter I mean that you know the Atlanta Fed GDP now forecasting is cracking 4%. So like what you know so so all of a sudden I was like I I was feeling very depressed and I'm sure a lot of people like me especially you know I with a PhD in economics and I started my career at the IMF like worked on Wall Street for 20 years like I grew up in sort of traditional school of economics and then that believes that tariff was going to have consequences you cannot have the cake and eat it too and then nothing happened you know so so that was kind of disturbing and this is the also the reason why sort was so easy for the market to sort of climb the wall of worries, right? I mean, that's why the market just kept going higher higher higher. Now the question is I am very much of the view that if we haven't seen the negative impact associated with the tariff it's because you know the negative impact has been delayed and I'm I believe that you will I'm think we're literally on the cusp of basically the negative effects started to come through in the data and and that's very much my view which is I I'm of the view that we're heading to we're heading towards stagflation. Okay. >> Stagflation. Okay. stagflation. Now, one reason, you know, one thing that was indeed quite disturbing, okay, is why until now, you know, sort of like um consumer spending has been so strong, right? I mean, you think about this, right? I mean, consumer confidence has been quite low. The employment numbers haven't been all that great. You know, consumer says that they're depressed, but you know, like, you know, retail sales were super strong in July and August. even the September numbers look like, you know, it's actually uh quite decent. So like what the hell is going on here? Like I am of the view and I'm increasing of the view, of course, this is I'm trying to be forwardlooking here for the next couple of months. I'm I'm I'm increasingly of the view that the strong US consumer spending of the last two, three months is no more than just preemptive buying ahead of expected price increase. I think a lot of Americans think that prices are going to go up because you know because this tariff thing is very well terrored. I mean this is not like you know back in 2018 like Americans never heard of tariff like for the last basically nine months all they hear every day all they read about in the newspapers is tariff is going up. Okay. And I think that Americans realize that you know what they have in order to basically like you know if price is going to go up they should start buying before and I think you know and this is why I think spending has been stronger than than expected I mean and by the way but I think it's very clear to me that that is now over you know like you know I mean obviously you know a lot of this is based on anecdotal evidence like for example CarMax right the biggest um used car dealer in the US recently said that you know after the tariff went up like everybody was buying used cars like no like there's no tomorrow because they all expected prices could go up but in the last two months demand had just collapsed. Okay. And as a result they had they have had to essentially price down the inventory of their their their used cars by I think $1,000 per vehicle. And that's why the stock mark the stock dropped. you know, Costco CEO, I mean, basically said only a few weeks ago that he said he's, you know, Costco is not going to be ramping up, you know, holiday inventory like usual. Okay, all these are little signs that actually things are not going to be that great in the holiday shopping season that starts basically in a couple weeks time. Okay. And I think just this week both Walmart and actually Amazon came out and basically says that you know the typical upswing in retail hiring okay around the holiday season it's going to be also much less u you know strong than than than in past years. And then there are a lot of surveys that are suggesting that aren't the like Gen Z, okay, are going to be pulling back quite sharply in terms of their spending, you know, you know, over over the holiday shop shopping season compared with basically the past few years. And I I assume this is because Gen Z, they're younger. They've probably been more affected by the slowing job market, especially the recent college graduates. They're also much more likely to be bumping up against credit card limit and so on so forth. So like so there is I mean if you I mean I know right now we're in a sort of like a a black hole in terms of we don't we have we we have no idea what the data are because you know like because of the shutdown but I think what it feels to me right now is that holiday shopping is going to be very weak weaker than I think the Fed had been expecting at least based on the numbers of the last few months and I think you know and especially given that my view is that the shutdown is likely to drag on into November which will wait further on sentiment. I think you know you again no you know black Friday you know cyber Monday you know like you you're talking about the concentration of US consumer spending which is 70% of GDP into that one month I think you know I personally think that November you know I I think this is what what is going to be so in a way if we don't see prices going up a lot it's not going to be because somehow tariff is not filtering through but simply because nobody's buying the demand. The demand side of it. Yeah. I also just wonder too, David, like how much has been just loaded up on consumer credit cards, you know? Like are they really that healthy? Like the consumer? I don't know what their balance sheets look like, but >> yeah, I think the younger people certainly I think there is ample evidence to suggest the younger people. I mean listen again the older people obviously you know they tend to be I'm talking about the older like you know millennials or >> for that matter the boomers like those who are sitting on most of the stock holdings in the country for example I mean they've done well because of the wealth effect but you're talking about the younger the younger people you know like you know they they they haven't got a lot of stocks and then um and they definitely been spending much more on their credit card and I think these people clearly are struggling I mean, that's why I've seen one report lately that says that, you know, you know, Gen Z could actually pull back their holiday shopping by as much as 20%, believe it or not, >> you know, I think it was Price Waterhouse did a survey. But but the point here is that I think this is going to be >> I think this is going to be very interesting. So, from that point of view, again, I I think Trump got a bit lucky. I mean, I think in the sense that it it took a much longer, I think, for the sort of the u the tariff. I mean, of course, there's also the AI bubble that also helped him and so on so forth. But whatever reason is, I think that, you know, the the assumption in the market right now that tariff doesn't matter, that in fact Trump has reinvented economics, that everything's going to be fine. In fact, most people are expecting a massive basically reaceleration in GDP growth next year and the stock market is going to go up for I I think a lot of it is based on reading too much of this transitional data which I think we're about to basically um that that are actually irrelevant because what really matters is that I think you know the economic reality is not going to be so great. Mhm. I heard you earlier in your answer mention stagflation, historically the worst environment for pretty much all asset classes. But can you um unpack your thesis for why you see us headed toward a stagflationary environment? I >> I think stagflation just basically means that you know like in a way like it it's it's almost inevitable, right? I mean in a way because what's going on is that you know you've got you know we are seeing you know I mean you know if you think about this you've got you know the aging of the American labor force so the labor force is shrinking at the same time obviously we all know that you know essential the uh immigration has come to you know essentially the standill on top of that Trump is now charging $100,000 you know per visa for the F1 on one B you know basically visa for these Indian workers on top of that it's become more and more difficult to get in so I think you know there is no doubt and then so there is no doubt at a certain level there is no question that basically the labor force is going to be growing more slowly going forward as a result of the policy of this president and and I don't think that's going to get reversed anytime soon right meanwhile this is the question we have to ask ourselves You know, one of the things that you know, you think, oh, you know, you know, obviously there should be beneficiaries from the tariff, right? I mean, the biggest beneficiaries of Trump's trade war ought to be, you know, the so-called import competing industries in the US, right? You know, those industries that compete against imports. They should be benefiting from, you know, the higher tariffs on imported goods and becoming more competitive. They should be seeing like they should literally like be like you know swimming in money right now. Now let's think about this. What what industry we should I mean what industries are in the so-called import competing sector right? I mean obviously manufacturing right I mean and yet you know it's incredible but the last nonp payroll number we had you know you know manufacturing laid off 12,000 workers in in August which was more than the average of the previous three months. Now within manufacturing you say well you know like you know America has forgotten how to manufacture stuff like you know stuff that went to China so many years ago they're going to come back in hurry but what about but there are two industries that should be the biggest beneficiaries because they because these are established industries that still also have a lot of spare capacity in the US that should be doing a lot better which are these two industries one is autos >> okay >> and the other is furniture >> okay and most most of it these days is North Carolina and towards >> where I am in Raleigh, North Carolina, but High Point, North Carolina. Yeah. For furniture. >> And yet incredibly incredibly in August. Okay. Between autos and furniture, these two industries shed 10,000 jobs. >> Okay. So 85% of the job basically lost to US manufacturing happen in the two industries that should be like the biggest beneficiaries of the tariff. Okay. So what does that tell you? I mean what it says to me is that actually if the import substituting the if the import competing sectors cannot even benefit from the tariff then who the hell is going to benefit from the tariff? You know, like the governor of North Carolina was talking about like how these jobs have gone. It's going to take a lot for them to come back. Like, you know, like skills that have been lost. Like who the hell you going to be able how you going to get companies that went out of business. You think they're just going to come back and then basically reopen business, you know, especially given the unpredictability of all this stuff right now. So as a result what will happen is so you know in in a good situation would be that oh wow tariff means that American companies are going to immediately like you know produce a lot more okay but instead right now it's like well tariff's gone up but American companies are not going to be producing more they're not going to be hiring more people and guess what just means Americans are now going to have to pay higher prices for what they basically purchase from abroad okay and locally too. So essentially what I'm saying to you is that this is the problem right now which is that you know like I think you know whatever Trump's intention is right now there is no evidence over the last 6 months this is doing that anybody within the US is benefiting because if the import competing sectors are not competing then you know god forbid I don't know who it is. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. 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It's it's it's it's very very hard to say you know I mean you know the US government has benefited to some extent they're collecting more tariff right I mean because in a way it's just a form of tax right so the US government's collecting you know an extra whatever $30 billion every month in terms of tariff collection >> and and that's about it but but but in the end but that just essentially attacks it just attacks on the economy that's not doing anything more than that it just basically attacks okay and um And it's a it's and it's a hit on the actual real purchasing power of American people. And and right now again I just don't see what companies are, you know, like again I you know like small business are struggling, larger corporations, you know, like right now it's like well it's it's hard to say, you know, I I it's it's certainly very very hard to see any companies benefiting right now. >> Yeah, I guess. Okay. So on the US China trade war front even going back to April would you is it fair to say that the US is in a weaker position than we were in April then? >> I think so. I I think it's unfortunate I think I think China is in a relatively stronger position whereas the US is in a weaker position. I mean, and I never I never would have thought I was going to say this already like in October because I thought, you know, honestly back in like April, like everybody else, I was sure that the Chinese economy was going to have a hard landing because it was very clear, you know, in April that the whole Trump's trade war was actually trying to target China, right? And we have to remember the tariff the new tariffs you know that hit China were both larger larger and came much earlier than against other countries right I mean the Chinese I mean the average on Chinese goods right now is almost 60%. Up from like 20% at the start of the um the Trump second presidency. So like you're talking about a very sub substantial hit and there's a there very relatively few exemptions like you know for Europe and Canada there are a lot of exemptions that kind of thing but against China there are very few exemptions and it's a huge hit. I would have thought like you know I mean back in you know basically April I was convinced like you know like you know the Chinese gonna have a big problem to recover from this but you know to my surprise I mean and I think it's to everybody's surprise that you know of all the countries that have seen upper revision in terms of GDP growth forecast by Wall Street this year nobody has seen more upper revision than China like now like you know Wall Street was expecting like China to grow like I don't know 4% even less okay, back in uh April now is expected to grow 4.8% this year, which is barely slower than the 5%, you know, recorded by China last year. And it actually is very very interesting because exactly the opposite of what happened in the US during during the same period actually how just we said you know that the the tariff has it hasn't helped the US at all. But what's interesting is that it hasn't hurt the Chinese that much either. >> And the reason is because China has been able to actually increase exports elsewhere to Europe, to Africa, to Southeast Asia, everywhere else to offset the drop in exports to the US. Now, you might say, well, is it because like the Chinese are like, you know, discounting heavily in order to like dump their stuff like around the world? If that were the case, Chinese corporate profit growth will be collapsing. And yet, believe it or not, in August, Chinese industrial profit actually expanded by expanded 20% actually, you know, basically following 3 months of decline. What it's basically saying to me is that so so so yeah, the Chinese economy has slowed a bit. Industrial production was growing at 6% at the start of this year, but guess what? It's still growing at 5% right now. So, it's not a it's not a very big slowdown. Now, of course, it's too early to say anything for sure, but I am of the view the reason why the Chinese been able to survive Trump's trade war so far with flying color, I would argue, is, you know, is is the is the decadel long investment that China has made into factory automation. Okay, that you know people people just think you know like people most people think oh wow they're trying to just bunch of basically like cheap labor and all that kind of stuff. The reality is that the Chinese labor force has been shrinking now, okay, in the last 10 years. That is like, you know, there are fewer people looking for jobs every year. I mean, actually, it's going down. In order to offset that, the Chinese have been investing aggressively in robots. >> As a result, >> I imagine too. >> Yeah. So, as a result, today there are 2 million robots in Chinese factories doing the jobs of people. China last year basically installed three, you know, 300,000 robots alone last year, which is more than the rest of the world combined. So from that point of view, I think is ironic because China is also of course also a leader in AI. So the fact that they are big in factory automation by combining robots and AI, I think they have been the biggest beneficiary of the whole AI revolution. Okay, more so than anybody else. And because this whole thing has allowed them to cut cost to do everything more cheaply. So ironically this is actually the greatest irony of this thing which is that you know we're sitting I mean everybody's thinking oh wow so who's going to basically like with because I I think this AI is a total bubble like you know I'm talking about a bubble in in terms of NASDAQ valuation and so on so forth. But the point here is that like there's a lot of debate about like who's making use of the AI to increase productivity growth and so on so forth like Stephen Marin was telling you that oh well everybody yeah America you know AI is already having a major positive impact productivity growth is not clear at all but where it's very clear where AI is making a very big difference is in China and I think that the fact that AI is probably the reason why China has survived Trump's trade war as as well as it has until now. And and I think you know this is actually you know and I think this is also the reason why in this latest showdown between the US and China. The Chinese there's been a big change in terms of the relative bargaining position between the US and China which makes them much scarier I would say compared to you know April because I think the Chinese are are are in a stronger position. Therefore they're much less likely they're even less likely to capitulate to Trump's win. Wow. It's it's so fascinating to just like to kind of understand like how the pieces fit together and that this is all part of like a bigger macro story, if you will. From an investor perspective, how is this um informing how you're wanting to be positioned in the markets? You were kind of alluding to it earlier, but can you walk us through like how you're thinking about positioning or what you can share from that perspective? >> Sure. I mean you think about this like broadly like what what is the biggest story of the world today? I don't care whether you're macroeconomist, political scientist, geo, you know or or or investor for that matter. The biggest story really is the tech war between us and China. That's it. Okay. Both US and China view okay AI as being a must-win. Okay. because they think both sides believe that whoever wins this round, okay, this AI war, okay, is you know, you know, let's put it this way, you know, will enjoy, you know, I mean, I don't want to say hedgeimony, but certainly, let's put it this way, you know, in the fight over in the rivalry between us and China, there's nothing more important than winning the AI war right now. Now it's interesting because if you look at the two sides, they have two very very different strategies about how to go about winning this war. Okay, on the US side, it is very clear that Trump's strategy, you know, I'm not I'm I'm saying Trump because, you know, he's the president of the United States. Obviously, he's not the only one, but I think but Trump understands this very well and he's been a major I think driver behind the US strategy in terms of how to win this war, which is to win this war, the US has to control every choke point of this technology in the supply chain. Okay, that is the US needs to control chip design, large language models, hyperscalers and the fact that Trump recently has been, you know, had twisted essentially the arm of Nvidia to invest in Intel to me is a very clear sign that Trump also wants to control chip manufacturing. Okay, I mean like you know they want to revive Intel in order so that chip manufacturing will come back to the US as well. And then the idea here is that Trump would and I think the reason why they want to do all this obviously is to keep China basically behind but more importantly if you control all these choke points and then given how expensive this technology is because every Nvidia chip is like $60,000 the only companies that can afford to buy these chips are basically American companies like Microsoft and Amazon that have very deep pockets. Nobody else can afford to buy these chips in scale. And therefore the idea is you know Washington's plan is that down the road in the future whoever wants to have wants to access AI will have to rent AI from American companies and that is American companies will basically essentially own the rent you know basically of the entire industry for as long as the I can see. So that is in my view the American strategy. So what is the US what is China strategy? China's strategy is to commoditize this entire technology. So it's going to cost zero. Okay. China strategy is the very very opposite of this whole of the American strategy. they want that's why the you know the Chinese you know large language models are open all all open source models to the extent you can just literally copy and paste their source codes okay that's why they are at least 10 that I know of AI you know designer companies in China that are that are designing their own AI chips and then they're going to eventually they want to sell these chips at onetenth of the price of Nvidia chips down the road now Why is this important? So, US wants to monopolize it in order to maximize the rent. China wants to completely commoditize it so to drive down okay the price to zero. What is the market pricing right now? I mean if you look if you think about what NASDAQ's basically massively high elev valuation of US tech companies the market is right now assuming that the US is going to win is basically pricing a US victory which to me is certainly not a given okay if you understand what's going on here and I think this is basically this to me it is the biggest in a way you know absolutely ironic, but I would argue the biggest the biggest potential problem for the assumption of the AI valuation associated with you know NASDAQ right now is you know it has to assume that the Chinese will never catch up. Okay. And then if the Chinese were to catch up and soon then guess what then the America the not only NASDAQ but the entire US economy the US dollar everything US will have a big problem and Trump and this is what this is about actually what is coming down in terms of the showdown between US and China between now and November 1st. Mhm. So that is like we right now that is the macro trait of our generation then >> there just no doubt there is no doubt and and and what people don't realize is this right I mean it's like and this is why it's you know like you know like you know the market goes up because like you know so Sam Alman says he wants to start selling porn you know with you know open AI you know that's almost irrelevant it's irrelevant what is much more crucial is this basically this AI race, this AI war and and and and and and the reality is this the real and this is what why like this November 1st thing has has taken on so much importance for the next basically uh 10 days is that you know what you know so you say someone like um you know because this whole this whole like trying to stop China from catching to the US started under the Biden administration right and the architects of the US export were sanctions against China was of course you know um the former CEO of Google Eric Schmidt okay and and he used to say that you know the so-called entity list and the tech sanctions and so on so forth should basically give the US a two to threeyear lead over China and he used to say that in his mind that's like eternity and the idea is like well you know listen in a tech race like you know technology everything's is changing every single week. Like if you have the two to three year lead over somebody that this is like a massive lead. Okay. Now I think it is certainly this this is no longer true. Okay. Far from it. just recently you know you know uh Jensen Hong I mean CEO of Nvidia said that whatever just two three weeks ago in a podcast that China is now only a nanocond behind the US in AI and semiconductors and I think this is extremely extremely important okay I I don't think you know Jensen Hong is like trying to scare anybody that kind of thing he has no reason to do so so on so forth and he probably has better information than anybody else because Chinese he probably goes to China so often that he probably knows what's really going on. Okay, not the kind of stuff that goes into the Wall Street Journal, the New York Times, but really what is going on behind the scene. So I think so from that point of view, I think the Trump administration is getting extremely nervous. They got very extremely nervous after the Chinese put a ban on the sale of Nvidia chips in China. Just think about that for a second. What does that mean? Like for for the last two years like the Chinese are trying to get their hands on Nvidia chips like around the world, whatever age that kind of thing. Now they said, you know what, don't even bother to sell them to us because we don't want them anymore. What could that possibly mean? That just simply means that they are now making better chips themselves. Okay, at least they are basically making better chips than whatever they can buy from Nvidia under the uh the sanction regime. What I'm saying to you, this is actually a very important development. And I what I'm saying to you also is that actually you know so the Chinese haven't got the lithography machines from ASML the most that mean the most advanced one but so that they cannot make miniature chips but guess what it you know you know AI chips is not like making a chip for iPhone 17 air that has to be very small AI chip doesn't have to be that small so therefore the Chinese it's not an impediment for the Chinese Okay. What I'm saying to you is when, and this is what the showdown is coming, this is going to get very ugly, and I think the stock market doesn't get it yet, which is that when on September 29th, the Trump administration decided to dramatically expand, okay, the export sanctions against China by essentially passing this relatively obscure rule about like, you know, companies on the entity list. Now you know that this now will the the restrictions will now be extended to also subsidiaries of these companies you know that have majority control. So without going into too much into the details which is boring but the fact is that before September 29th okay there were about a thousand Chinese companies that were banned from being able to purchase US sensitive technologies. after September 29th, the estimates is that that that number went up to probably around 3,000 if not 5,000. Okay? So what I'm telling you is that when the Trump administration decided to go down this path and they did this just before the start of the Chinese whatever golden whatever holiday season whatever it is because they were trying to sneaky in under the radar that this in my view when they went down this path that is about as open an acknowledgement as possible that they are starting to get very wary of the Chinese catching up. So they're getting so nervous that they have to basically take out a you know basically uh they have to resort to something as draconian as that to stop the Chinese. And of course at that point the Chinese have no choice but to respond in kind because the Chinese said well you know listen we will never allow anybody anybody's to set us back technologically speaking. So if you don't want to sell us what we need to become a better you know basically country we're going to stop selling you okay what you need to make F-35 autos green equipment whatever it is that is rare earth so in a way the whole rare earth thing is a direct response to the US decision to stop China's technology development and what I'm saying to you is that this is why this is nothing to do with trade that's why this latest round of tension between US and China has nothing to do with trade. >> It's technology. >> It's only about technology. >> Interesting. >> And then neither side can back down. >> Mhm. I just saw a headline just crossed just now um that Treasury Secretary Scott Bessant is going to speak with the Chinese trade counterpart today. That's just it's just a headline, not a full written out article. But if you were to advise the Trump administration, and you are known as a bit of a Trump whisperer on Wall Street, what would you say to them? What would you tell them that they're missing? I imagine we probably just covered it, but if you if you had that opportunity, what would you say that they're missing? >> Listen, I I think at this point, I mean, to be honest, I think it's a bit too late. I think honestly it's it's a bit too late. I mean, this is why in a way that I I don't see a way out of this. I mean, this is why I'm short NASDAQ. I'm short the stock market heading into November. I mean basically first because I mean if because the Chinese rare earth restrictions >> Yeah. Why why November 1st again? Is there specific >> November 1st is the Chinese rare earth restrictions is scheduled to go into effect on November 1st. And the reason November 1st is because Trump and Xiinping are both going to be present at the Apex summit in South Korea at the end of October. You know basically whatever in 10 days time. So the idea here is that well if there's going to be a deal they're going to work it out in South Korea so that this is the reason why the Chinese you know set the basically the date for November 1st and Trump of course said that well if they if this thing goes in effect on November 1 then he's going to hit China with additional 100% tariffs. Okay, whatever it is. Okay, what I'm saying to you is that Scott Besson is making a big mistake. And I think you know whatever is I mean from his standpoint it's not a mistake because he thinks it's something else because he says oh well you know listen he says Chinese cannot be trusted because he says that when he met with the Chinese whatever 2 three months ago in Geneva when the Chinese agree to basically uh to keep rare earth the supply of rare earth flowing he said it was in exchange for the US agreeing to lowering the tariffs. That's what he said. Okay. and he says well the US has now raised the tariff but the Chinese are now trying to basically restrict this but the Chinese but the Chinese did this rare earn thing has nothing to do with tariff it is a direct response to the US decision to restrict in you know basically access to technology by Chinese firms so that is the thing so if if if if if Scott Bon is still trying to approach this whole entire showdown by saying oh wow actually this is this is about trade. Okay. I think he's completely missing the point. This is nothing to do with trade. Okay. Nothing to do with trade, only about technology. >> Okay. So, short the NASDAQ um and the AI bubble bursting here in the US. Walk me through the implications there because I imagine that has spillover effects elsewhere. How are you thinking about maybe the knock-on effects? just walk me through the trade that the scenario that you see playing out. >> Yeah. So, I think you know there are there there are two reasons why I'm negative in NASDAQ. Number one is that I said this this this this problem with between the US and China which is now coming to a head. Okay. And that you know and uh and this is this is the this is the big problem. Okay. The other is that I think you know I think the market I think the market you know is I think there's also a AI bubble and that the AI bubble has to do with the fact that I think it's not obvious to me okay that you know that the um that the revenue growth okay the profitability of AI is going to improve as quickly as people are expecting. Let's think about this for a second, right? I mean, I I think everybody knows the story by now, which is that well, you know, it was incredible. This was only a month ago. You know, if you remember, Open AI, Open AI, you know, is a company that right now has is has an annualized revenue of 12 billion. Okay? So, it doesn't mean like, you know, sure that, you know, they're char GPD and so on so forth, but they're not making that much money. Okay? So, $12 billion. So when a $12 billion company, and we're not even talking about profit, we're just talking about revenue, right? A company basically says that they're going to pay Oracle $300 billion the next whatever four or five years. Okay? And then Oracle stocks goes up 40% making Larry Allison one of the richest, I mean, the second richest men in the world momentarily. That to me, that's a bubble. Okay? Because I I think, you know, this is what it is, you know, like let's be honest. I I can understand to at a certain level I can understand Sam Alman. I mean I you know because if you think about what what what do what do Steve Jobs and Elon Musk have in common? Okay they're both visionaries. Okay but both are excellent storytellers. Okay they were great storytellers because you know what you know and guess what you know like people like Jensen Kong and Sam Alman they're obviously very good storytellers as well right? Sen Alman I mean to me it's amazing because like you know how his stories has mesmerized everybody right now because the last six weeks the whole AI rally is about how Santa Alman has decided he wants to turn open AI into a major hyperscaler. This is a company that has, you know, you were talking about like how, oh, well, you know, listen, you know, Microsoft, even if they're buying all these chips, at least, you know, it's a very profitable company and then they're going to, you know, they they have they're paying with cash right now. You know, Sam Alman is promising to spend a trillion dollars over the next five years. Okay? And the market got very excited about it and they're making 1212 billion. The my problem with with this whole a open AI thing is not is not about anything else but about the technology. All I know is this. You know it took them it took open AI 2 and a half years after releasing cha 4.0 to release cha cha 5.0 and 5.0 was is probably about 20% better than 4.0. Okay. In other words, that basically if it's going to take them another 2 and a half years to come up with 6.0 that's going to be 20% better than 5.0, we've got a problem here. You understand? I mean, I think what it says to me is that actually the based on the current architecture, okay, of generative AI, we're starting to basically like, you know, basically bumping up against the plateau of the technology. This is also the reason why Facebook Meta decided to delay their all their all-time great whatever their own large language models the um the llama thought for okay the method because supposedly the the the improvement is also just incremental so my problem right now is that is it's not because the markets right now thinking that oh well you know open AI is going to spend a trillion dollars in the next 10 years but it's not clear to me how open AI is going to be able to make enough money to basically pay for all these chips in order to become a major hyperscalers given that actually the technology you know seems to be already essentially running up against diminishing return even before it's taken off now sure I mean if if we somehow manage to discover generated you know whatever you know the artificial general intelligence in 3 years time that that things can change but we don't know that I mean because it's not a it's not a continuous thing from where we are right now that will be something completely different. Okay. And and this is my problem. And then on top of that on top of that the problem for open AI is the fact that you know what you know these days you know this is not like Google search. Google search is like 99% 99% of you know search goes through Google search. Google search is like the they're the best and they're monopoly and so on so forth because their technology is sort of better than everybody else and then for years nobody could even come even close. All right. Right now like open air has got so many competitors not even funny. I mean there all these basically like internet sites where people actually rank all these different large language models according to their performance metrics and so on so forth like you know three of them of the top six three are Americans and three are Chinese. Okay. be all because of this technique called distillation which allows all these large language models to copy and paste each of theirs capabilities. You know it it might takes a company 3 years to come up with a new model. It will take only another company months at a fraction of the cost to copy all that new stuff. Okay. And then to replicate it exactly. So what I'm saying to you is that the assumption okay right now this whole AI thing assumes that the technology is going to go through the roof and that's why and then therefore the assumption is if the technology is going to improve so much then demand is going to go through the roof. So all these companies are getting in there to buy the chips and build up the capacity so that to in order to basically be ready for the demand. But right now to me the bottleneck is actually these the software the the you know the uh the open AI of the world. Maybe this is the reason maybe San Alman gets it. This is why he wants to become a hyperscaler because maybe he figures that that's how that's the only way he's going to basically make money out of it. But I cannot imagine that Microsoft's too happy about that. By the way, like Microsoft has been basically investing aggressively in data centers, you know, you know, because of their special partnership with Open AI, they were going to use their data data centers to power the AI the Open AI models, but now OpenAI wants to basically uh wants to go into Microsoft's business. I I just think that there is a lot of going on and I cannot imagine I don't know this as a fact but it wouldn't surprise me that actually St. Alman is making lots of enemies actually across Silicon Valley. So what I'm saying to you is that there's an AI bubble and then there is this whole US China thing which is about AI in its own way and these two things together makes me very wary about the current valuation of the US stock market. >> Yeah. And then the tech the stock market I think we're going to go right into a recession. There's no doubt about that in my mind. >> Got it. Yeah. Um okay. From I know short selling can be quite challenging. Um and like markets can uh go the other way. From a riskmanagement perspective. How do you have to think about a trade like this? >> You have to think about some portfolio, right? Because I mean I am I'm trading lots of different things and I would not just like have one just naked short NASDAQ position. Also you have to sort of know which level to basically short it at and then you might want to hedge it from time to you know nobody's saying shorting is easy. Okay. >> Mhm. But I think you know from that point of view I just think that you know for retail investors who are doing this at home like you know you know like you know I think if you make some money I think you know in tech like you know take it off take it out of the table actually I mean especially again I think the point here is that November 1st is going to be a very big day because again there are two very important things I mean like because I I'm I'm not you know if I'm wrong I'll be the first one to say you I'm out of this. You know what I mean? I mean because you know every day like you know when facts change you got to be prepared to change your mind. So I I'm not I'm not married to any position you know as long as my if if my if my investment thesis no longer true. But the next two weeks there are two very important things to be on the lookout for. One of course is as I said before like will the US and China work it out between now and November 1st because if they don't this is very bearish. Okay. I mean it's bearish for lots of things, you know, not just basically for tech, but especially bearish for tech. Okay. The second thing is that between now and November 1st, we're going to have, you know, quarterly guidance from Microsoft and Amazon. Okay. I I think it's it's it's reasonable to assume that if there's I mean, I think that their numbers probably going to be okay. Okay. The question is what are they going to what's going to be in their guidance in terms of capex spending going forward. I think any hint that there could be a slowdown whatever it is I think the market is going to be in trouble. Okay. So I think that's what it is because right now everybody's thinking oh well you know as as long as Microsoft's buying more Nvidia chip everything's going to be fine because people think oh well Microsoft presumably know what they're doing. if they're buying more of these chips is because they think that the under underlying demand is strong, right? And then nobody wants to second guess Microsoft like they should know better than I do about like, you know, the, you know, the outlook for demand. So, as long as they're buying more, it's going to be fine. But I think and that's the market psychology right now, which I think is wrong, but it doesn't really matter. But this is why like any disappointment, even the smallest disappointment in terms of like potential pullback, I actually think Meta is going to be pulling back on their, you know, because Meta has also been one of the big buyers of these chips. I think they're going to be pulling back. They just recently um signed a couple deals with including with Google to rent their computing power, which probably tells me that they're going to be renting this as opposed to buying more of this themselves because maybe it's less risky. Whatever. We'll we'll see how it goes. I mean I mean again I mean I mean like my clients are among the biggest hedge funds in the world, macro guys and so on so forth. like, you know, I'm not basically I I'm not like saying, "Oh, well, you know, listen, I'm gonna basically uh I'm betting on a 20%, 30%, 40% drop." No, that's not what I'm doing. I'm going to basically going in and out in a sense that I'd love to basically make five or 6%. I love to see a 10% drop, by the way, you know, and then uh but I I may not actually stick around until the end. That kind of thing. So, to me, this is a bubble that is going to definitely go down. But you know like like bubbles like no the NASDAQ when they when the NASDAQ bubble burst after the d in in you know the docom bubble like it took two and a half years for the bubble to finish bursting you know it takes a long time it takes a long time so I think >> I think some people think it's like oh it should be instantaneous but that's a good point it takes a long time >> it takes it takes you it really takes a long time >> because you know like part of it is real part of it is not real right I mean so you don't know which part is real, which part is not real. And then you don't even know like you know again you know because because you know you're selling hope right I mean that's what that's what they're selling >> and the um and you know it's look I mean look at you know Tesla it's a great example right I mean like you know I mean the news cannot be any worse for Tesla and the stock is trading at a P like at 150 whatever it is so clearly like Elon Musk you know like you know people love his storytelling whatever ever it is. And the um and they're willing to give him benefit of doubt. I mean, and and and you know, and that's what it is. I mean, and you have to respect that, by the way. If you're trying to short the market, >> you got to basically that's why I have to I I respect you know, you know, and you know, Jensen Hang as a storyteller. I respect, you know, you know, Sam Alman as a storyteller, even though I I I tend to agree with Elon Musk that he's a liar, too. But but that's a that's a different story. David, before I let you go, um, what's that risk for you right now that's keeping you up at night? Because I mean, you look at the world from all different facets. >> I I think, you know, there's only one thing that really worries me is is like what Trump said last week that he was thinking about sending uh the tomahawk missiles to uh to Ukraine. >> I mean, if he does that, that is like really scary. That would be extremely scary. I mean, he's backed away from that a little bit today. like you know last night >> supposed to meet with Putin. Yeah. >> But I think it but but again I don't know I I don't think Putin's going to end this war. Okay. So I don't know what assurance he had from Putin that what you know whatever. All I can tell you is this, like you know that, you know, Russia invaded Ukraine three years ago in order to stop the Tom of Hawks from being deployed on the Russian border because in 2022, it was very obvious that Biden was doing everything he could to get, you know, Ukraine into NATO. And for the Russians, okay, had Ukraine got into NATO, it would have meant that tomahawk missile launchers would have been deployed directly on the Russian border. And then Putin was going to not going to have that. And this is the reason why, you know, he decided to to to to invade Ukraine in order to prevent Ukraine from becoming a NATO member, in order to prevent the Tomahawks from being deployed on Russian border. So do you think that what after all these you know almost four years of fighting that he all of a sudden is going to agree okay fine yeah Trump please send them to uh to Ukraine right now just it would be a completely unacceptable situation for the Russian he would you know as the Russian president said you know on Monday okay former president Medadev said he said that you know what the problem why these missiles will end very badly for everybody is because since these missiles can carry nuclear warhead. That means that when these missiles are in flight, there's no way for the Russians to know whether they are carrying conventional or nuclear warheads. Okay? And and and this is, you know, I I just hope that Trump has the good sense, okay, to to not go down this path because it's very very scary. It will be very scary if the US goes in this direction. >> Yeah. Yeah. Uh, it will. And David, I have to say I always enjoy your conversations. I love listening to you. I love learning from you. I know this audience does as well. Before we, um, go here, let let folks know where they can find and support your work. I am a subscriber to David Woo Unbound, so I hope other folks sign up. I'll leave a link. Um, and any parting thoughts? The floor is all yours. >> Yeah, I I just think that, you know, like, you know, I I think thank you so much for that. you know, I I just think that, you know, listen, I mean, I I I know I'm negative right now, but you know, but I but I think what we I I think the the point here is that, you know, everybody was very negative at the start of the year and then things got better. But I think and then in many ways the Trump got very lucky and then he was able to taco his way out of some very difficult situation. In a way, I would argue that just like the shutdown in Washington right now, the showdown between US and China is a very tough situation for Trump to taco out of because again this is not about tariff at 25% or 20% or 15%. This is about the technology leadership. It's about the hedgeimonyy. There's so much writing on this right now and I think, you know, this is something that, you know, this is why I think the market may be overestimating Trump's ability or willingness to tackle again in the situation. So, yes. So, we'll see how that goes. Anyway, >> David Woo, CEO of David Woo Unbound, thank you so much. Really appreciate you being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. Really appreciate you. Until next time, be well, David. >> Thank you. Thank you, Julia.