Stephen Ratner agrees with Chairman Brady that the economy overall is doing well, but the macro numbers hide a good deal of pain below the surface for many Americans.

The economy overall has been doing pretty well, but it's not doing well for everybody.

Obviously, people who have stocks in the market, where the market's been up double digits for, I think, three years in a row now, have done exceptionally well.

If you have SpaceX stock, you've done exceptionally, exceptionally well.

But for the average American, wages really have not gone up.

If you go back to the beginning of the Trump term, there's only less than two years, wages essentially, after you adjust for inflation, are flat.

In the last several months, they're actually down And so people don't feel like they can afford it.

Steve Ratner agrees that not all of the appeal of socialism lies in the substance of the policies espoused by the democratic socialists of America.

One question, though, that did come up, particularly this week, is what kind of AI will it be, given what we saw coming out of China, whether in fact we need the silver-plated special version that's very out there and advanced, or is there something that's a little less powerful but perhaps much cheaper?

cheaper?Well, this, the, yes, and the, so that is the absolute question of the moment, is, uh, who are the winner ...

I'll call it who are the winners and losers gonna be? We had, a few months ago, as you well recall, the DeepSeek moment where, where China first kind of raised its head in a way where people said, "Aha, they actually have something." And now you- we've had a number of different developments in China, um, that lead us to, to think that again, they have very robust models.

There was, uh, it has been tested that their model, their newest models are not quite as good as ours, but they're close.

But they come at a fraction of the price per token.

You know, a token is the unit of, of purchase of artificial in-, uh, intelligence.

That's a big question, and it, it is in some ways not that different of a question than the question of competing against anything else China does, whether it's cars or whatever.

Uh, as you look at the increasing borrowing costs we're seeing right now, as I say, creeping up, but nonetheless moving in that direction, how does it affect your investment decisions? Does it encha- uh, does it affect what you invest in, what you keep investing in, liquidity? How do, how do you take it into account?

Uh, does that make SpaceX more attractive or less attractive?

I think you could go either way.

I think there are plenty of companies with one line of business that have done fine, and there are other companies with multiple lines of business that have done fine.

If you look at SpaceX, the launch business is a excellent business.

Uh, Musk has done a fantastic job of essentially winning that race, so to speak.

If you look at the...

But it's a small business, and it's never gonna be a, a trillion dollar valuation kind of business.

Is that a risk?

Is that affecting the labor market?

I'm a bit of a contrarian on this.

The narrative is, yes, it's affecting the labor market, and particularly from people who are pro-immigration.

They say, see, see, we've got to have more immigration.

And I'm in favor of more immigration.

But it's very hard at the moment to see a lack of immigration as the reason here.

You have labor force participation going down.

Are the nature of safe havens changing?

What are the strategic disadvantages to the United States, either economically or even in terms of national security, of doing that?

It would be great for consumers in the short run and the long run.

And I don't think that the economic impact of all that would be a negative for the US, might even be a positive.

But I do think there's a really important question that I don't have a great answer to, which you alluded to, which is the strategic imports.

Obviously, everybody knows that in World War II, we took these auto plants and they started making planes and tanks and all this other stuff.

I don't think we're going to be fighting a war like that again, and hopefully at any time in the foreseeable future.

But the question is, do you want to have that kind of industrial capacity in case we have another COVID and we want to make N26 masks or whatever? And so that's the dilemma we face.

Should we be focused on manufacturing as manufacturing to begin with, particularly in an economy that increasingly has gone to services?

What are the risks here, even of the appearance of corruption, as these investments are made in companies that often have some connection to the Trump family?

I, I don't, I think we're past the point of appearance of corruption.

I think we're fully in corruption.

I think this administration, I, and I don't mean to sound like a partisan, but I've never seen anything like it in my entire life.

Um, you know, people have said, for example, that Lyndon Johnson sort of tilted the board in favor of getting a bunch of television licenses in Texas that made him wealthy.

Okay, maybe he did, maybe he didn't.

But that was then, this is now.

Uh, what are the threats, uh, potentially to the very foundations of our economy?

in those cutting edge technologies? I mean, we hear about biotech, we hear about EVs, certainly,

and AI, as you mentioned.

So we can take them in whatever order you want.

On biotech, they have gone from importing our drugs to their country to exporting their drugs to our country, not the actual drugs, but the drug development.

And if you talk to any biotech investor, and we have a number of them, they will tell you that they are now spending time in China.

What has become a thing is licensing Chinese drugs into the U.S. You have to do the trials again and so forth to comply with U.S. regulations, but they can develop drugs faster, better, cheaper than we can for all the reasons you can imagine that China does things well when they put their mind to it.

And so that's become a big thing.

Is China as fixated on Washington? Do they pay as much attention to

in those cutting-edge technologies? I mean, we hear about biotech, we hear about EVs, certainly,

and AI, as you mentioned.

So we can take them in whatever order you want.

On biotech, they have gone from importing our drugs to their country to exporting their drugs to our country, not the actual drugs, but the drug development.

And if you talk to any biotech investor, and we have a number of them, they will tell you that they are now spending time in China.

What has become a thing is licensing Chinese drugs into the U.S. You have to do the trials again and so forth to comply with U.S. regulations, but they can develop drugs themselves.

faster, better, cheaper than we can for all the reasons you can imagine that China does things well when they put their mind to it.

Is China as fixated on Washington? Do they pay as much attention to

are slowing at whatever rate, What does that tell the Fed? Because given the reasons they're slowing, do short-term interest rates have any effect on that?

Well, in theory, they do.

It takes a while.

It's not the most direct transmission mechanism.

But obviously, if you lower the cost of capital, business goes out and borrows more, spends more.

It's good for the stock market.

As we have seen, that creates a wealth effect.

So net-net, is that going to help the auto industry?

Um, but just, just first of all, tell me what's happening.

Uh, what's happening is a little bit of what you said in the intro, and actually, Michael Strain is a very serious and, and honest guy. And what he s- what is going on is you have a series of, uh, incoherent policies that are conflicting, that don't represent any kind of real vision of where he's trying to take it. He talks about balancing the budget and cutting the debt, but he's proposing literally $8 trillion of tax cuts if you add up everything he said on the campaign trail. He's talking about cutting spending, but he's not gonna... but then he keeps saying, "I'm not gonna touch Medicaid," so I don't know how you do that.

Mm-hmm.

And of course, what's going on in Washington with the federal workforce, as you said, is adding... But the, the overarching point at the moment, because none of these policies have actually even taken effect, is the other point you made, which is the uncertainty. Consumers are now nervous and scared. You see the stock market lurching around. People pay attention to that. They, they watch him saying one thing one day, tariffs are on, tariffs are off, who knows what to think about all that, and so they're cutting spending, and consumer spending is actually going down for the first time in years. And so, these are so far self-inflicted wounds. You can't either give him credit or blame him for any of these economic numbers yet, but you can see self-inflicting wounds, and you can see up there one of my favorite charts. Well, not favorite in the sense that I like it, but it shows very clearly what's going on with consumer spending, and it, it went down this month for the first time, as you can see, with one small exception, in a very long time.