The USA Is Now A 'Pre-War' Economy | Peter Tchir

**Peter Tchir** (0:00)
To me, there's two things that come out of a kind of pre-war mindset. An urgency, right? We haven't had this urgency. We've been talking about the lack of rare earth's critical minerals for years. We've been talking about, yes, moving to solar winds fine, but it's not going to create the backbone. We're not doing enough fast enough. And we watch China kind of outpace us. So I think that becomes an urgency. And the other part of this is almost a sense of sacrifice. Will we sacrifice something? And I think in our case, some of that sacrifice is going to be no more cheap goods or fewer cheap goods, right? We're going to be paying more. And I think we're going to have to sacrifice some of our regulations that we put in place, right? Things that we felt were very important, maybe like Bill Gates thought were very important, get de-prioritized when you realize, oh crap, if we focus on only that and China goes here and beats us, this won't matter because we lost to China.

**Adam Taggart** (0:59)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. The Wall Street fears of Trump's tariffs and trade wars are greatly diminished these days, at least by the stock market, which has been flirting with new highs of late. Now that we're nearing the end of the year and a resurgence of inflation hasn't materialized, and new trade deals have or are being finalized with many of America's largest trading partners, including China too now, it seems. An important question is starting to emerge. Will the economy start experiencing tailwinds soon from the administration's policies? To discuss, we're fortunate to welcome back to the program, Peter Tchir, head of macro strategy at Academy Securities. Before we get started, folks, just be forewarned that Peter's audio had a slight issue in the first part of this interview. We fixed it about a third of the way through and it was fine after that. With that caveat out of the way, Peter, thanks so much for joining us today. Thanks a lot for having me back. Really glad having you back, Peter. Look, lots to talk about here and a lot going on this week, so why don't we just start dialing through the list if you don't mind. We are speaking the day after the FOMC came out with its latest release and Jerome Powell had his most recent press conference. The Fed pretty much delivered as expected.
It did another 25 basis point rate cut. It announced that it will be ending quantitative tightening starting on December 1st. I guess the only really maybe major notable takeaway from it was that Powell took pains to say, hey, look, a rate cut in December isn't baked in the cake. He's not saying that they're not going to cut. He's just saying if you're putting all your chips on them cutting, you should think twice about that. I'm so curious just to hear in general your reaction to all this.

**Peter Tchir** (2:51)
Yeah, I think he tried his best to say, it's very difficult for them to do much without data. They're not sure where they say the economy is. I think at the end, the market is just reading through a lot of this, knowing that by February, March of next year will probably be a very different makeup on the Fed, and they are probably going to cut to get us down to 3%, maybe under almost no matter what the economic data is. I think that's why we had that brief dip in the markets and stocks as he was speaking, but we quickly retrenched that. I think anything he says, he's a little bit of a lame duck now, and if people really thought, okay, wow, this might delay it by six months to a year, that would be a big deal. If it's going to push off the cuts in three months, I just don't think anyone cares that much, and it's going to really come back to what our earnings look like, what's the cumulative effect of a lot of our policies, and where are we going with China and trade?

**Adam Taggart** (3:37)
Okay, so earnings, policies, and trade, why don't we tackle those in order? So we had the earnings over the past couple of days for a lot of the major MAG 7 companies. I think there's still two more big announcements later today, Apple and Amazon, I think. But we just got Google and Meta, and one other big one that I'm blanking on. Pardon me?

**Peter Tchir** (4:08)
Microsoft.

**Adam Taggart** (4:09)
Microsoft, you're right. And mixed so far, right? Google, I think was up a bit, Microsoft was down a bit, Facebook was actually down big. Because all these companies are having to spend much more so than they used to have to in the past in terms of CapEx, as part of this whole AI build out. Now, we just had NVIDIA cross $5 trillion in market cap this week. And no huge surprise because everybody's spending their CapEx money on NVIDIA's chips. But I guess my question is, at what point, given the just stratospheric valuations that these stocks are reaching, and by that, I don't just mean all-time high prices, but I mean very stretched multiples. Multiples to earnings, multiples to sales, etc.