We Asked Andy Constan What Happens If AI Funding Breaks Before the Thesis — And if Warsh Blinks

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**Jack Forehand** (0:56)
We are excited to announce the launch of a new podcast, First Principles with Andy Constan. There are a lot of shows out there that give you opinions on what is going on in markets. But the goal of this show is to go deeper. We want to focus on the lessons and frameworks behind what is happening so we can all develop a better understanding of what actually drives markets and the economy. In this episode, we discuss why AI funding may matter more than ROI right now, what yield suppression means for markets and what might change at the Fed under Warsh. If you would like to continue receiving new episodes of First Principles, you can subscribe on all major podcast platforms using the links in this episode description. Thank you for listening. We hope you enjoy the new show. Andy, it's good to see you again.

**Andy Constan** (1:30)
It's great to see you guys. Hey, Justin.

**Jack Forehand** (1:33)
These episodes with you that we do on a monthly basis, I think have been resonating a lot with our listeners and our subscribers on YouTube. And I think what investors sort of appreciate when we're able to sit down and talk with you is you can kind of take these complexities that you're seeing in the market, that we're seeing in the economy, and all over the world, and a lot of different things, and really trying to think about those from a first principles perspective. And you have a good way of kind of getting underneath the surface at the key things that are driving markets in the economy and stocks, and everything that you're sort of always looking at for your subscribers on an ongoing daily basis. And I think today, we kind of want to focus the conversation on a few, I guess, key ideas. The first is, and this is where we'll start, we'll kind of start with where the market's at today, given where stocks are, where interest rates are, and just inflation and kind of think through like what investors should be thinking about as we're sort of in this market regime and period of the market. And then we'll kind of get into things like the risk premium suppression that you've been writing about, how Warsh and the Fed could kind of change things up here. So sort of a lot to talk about. Some of this comes from the thoughts you're putting out there on Twitter. Some of it comes from the damp spring research you're putting out there. So always just appreciate you kind of sitting down with us and working through some of these things. So I guess to start, the market, I think, has confused some investors in that here we are, stocks are record highs. You have the 30 year near multi-decade highs. Inflation is still high. You obviously have the war ongoing in Iran.
So how do you think investors should make sense of all of those things?

**Andy Constan** (3:22)
Right. I mean, I think it is internal. Markets are basically acting internally consistent at this stage. It's not like there's things that are saying, wow, that really makes no sense to me. Interest rates going up is often confused. I think even our president is confused about the idea that real growth, particularly productivity growth, also population growth, but that's not a factor today. Real growth is by its very nature, pushes interest rates up because people prefer to spend their cash to build a data center that has great potential for earnings, then buy bonds. And so the data centers are selling the equity and things like that. The investors are saying, well, I'd much rather own equity in that than own bonds. And so that presses up real yields. And it's only it's consistent within an economy that's running very hot.