Something Has Broken In The U.S. — ft. Katie Martin

Ed Elson and Scott Galloway are joined by Katie Martin, markets columnist and editorial board member at the Financial Times, to break down how investors are navigating another Trump TACO. She also weighs in on turbulence in the Japanese bond market, the state of the AI bubble, and where investors should be focusing their attention right now. Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 0:30Speaker 01

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• 1:29Scott Galloway?

  Today's number: $33,000. That's how much the average wedding cost in 2025. True story, on my wedding night, my wife said to me, my ex-wife, I should add, said, "I've got very good and very bad news. It's gonna make you very happy and very angry." And I said, "Lay it on me." And she said, "Oh, my God, your dick is so much bigger than your brother's."

• 1:47Ed Elson?

  What happened to the PG jokes when all guests are on?

• 1:51Scott Galloway?

  I could keep going.

• 1:55Speaker 05

  Markets are bigger than us. What you have here is a structural change in the world distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

• 2:05Scott Galloway?

  How are you?

• 2:06Ed Elson?

  I'm doing very well. It's freezing here in New York. It is unbelievable.

• 2:10Scott Galloway?

  Yeah. Do you miss me? You haven't seen a lot of me in the last month.

• 2:13Ed Elson?

  I do miss you. Where are you?

• 2:14Scott Galloway?

  That was very sincere. I'm in Jackson Hall. I've been in LA, New York, Davos, now Jackson Hall. Which, by the way, those routes aren't easy. It's not like there's no airline that has direct routes to all those places.

• 2:26Ed Elson?

  Surely some private air flights. That's kind of the, those are all the hotspots, no?

• 2:30Scott Galloway?

  Yes, and don't call me Shirley.

• 2:33Ed Elson?

  What are you doing in Jackson Hall?

• 2:34Scott Galloway?

  I'm speaking, am I allowed to say this? I'm at the annual meeting of-

• 2:37Speaker 06

  You're not allowed to say it. Sorry.

• 2:39Ed Elson?

  He's at an Illuminati meeting, is what he means to say.

• 2:41Scott Galloway?

  I'm the keynote speaker at a, I noticed how I said keynote, not just I'm a speaker. Desperate for everyone's affirmation. I'm a speaker at a conference of an investment bank that is here in Jackson Hall. That's all I'm allowed to say.

• 2:54Ed Elson?

  Not doing a good job defending against the Illuminati rumors. What's going to happen? Are we going to sacrifice babies and dance in a circle at Bohemian Grove? How does it work?

• 3:05Scott Galloway?

  No, no, no. At 3 o'clock, there's mountain biking. And then at 4 o'clock, we have redrawing the maps of the world in the lounge downstairs. And income inequality, how to make it worse, that's at 4:30.

• 3:18Ed Elson?

  Yes, that sounds like good fun.

• 3:20Scott Galloway?

  And then, yeah, and then I go back home on Friday. And I'm spending a shit ton of time trying to organize and get some traction around this national economic strike. Everyone's calling my bluff and saying, okay, bitch, get on with it. What do we do?

• 3:33Ed Elson?

  Yeah, it was interesting that that got, I mean, it got a lot of attention. Basically, Scott, on the other show, as I always call it, the show that will not be named, Scott discussed the implications of what we should be doing about ICE and suggested that one way to fight back is to just go on a general economic strike, bring down the GDP of the nation, and that could create some incentive to change things. It got a ton of feedback. I know you're not on Twitter, but I mean, you were all over my Twitter feed. A lot of people were talking about it.

• 4:10Scott Galloway?

  Did they have me in a bikini?

• 4:15Ed Elson?

  Not yet, not yet, but I can speak to the people at X, make it happen. What did you make of the reaction from the world? I was, honestly, I wasn't expecting that people would have such a visceral reaction to that comment.

• 4:30Scott Galloway?

  I've heard from governors, actors, economic ministers saying, yeah, it's a great idea. What are you going to do about it? So literally people are saying, okay, people are calling my bluff. So this morning I was on the phone with Catherine Dillon, putting together a website, trying to figure out how I'm going to curtail my own spending. But the basic logic is I don't believe that, I think protests are powerful. Political parties don't start movements throughout history. It's people and political protests are very cinematic. They make people feel good, but I would argue over the course of the last couple of years, we've had some really dramatic protests, including one of the biggest for the No Kings movement. And then we feel good and then nothing happens. And I just think we need to be more strategic about this and say, what is the strongest weapon we have?

• 5:14Scott Galloway?

  And in America, consumers control 70% of the economy. And at every moment, we are hit with incredible offers to spend more money. And it's striking how little a slowdown in spending would dramatically rule the markets. I'm like, well, let's go for the soft tissue. Let's go to the epicenter. What, well, how do we start a chain reaction? What's the grid where we fire photon tubes into it and takes down the entire Death Star? And what I've circled in on is AI and specifically if ChatGPT, just as an example, if we could convince a bunch of people to unsubscribe in the month of February. I'm calling this movement unsubscribe February or resistant unsubscribe.

• 5:53Scott Galloway?

  If OpenAI were to see for the first time in its history, a down month in subscriptions, they would have to report that to investors. I think it would send a chill to Nvidia, Microsoft, Amazon. If people canceled Amazon Prime, their Amazon TV, their Apple TV plus, put off buying an iPhone for a month. I think that any significant move, anything, not even an insignificant move in the subscription rates and the revenues of these companies would have to be disclosed. And I think you would immediately see a reaction across these companies' valuations. And then, given that 40% of the S and P. Is represented by these companies, you would see potentially just a dramatic echo

• 6:35Scott Galloway?

  effect, and that is a chain reaction. And if you look at Trump, he doesn't respond to citizenry, doesn't respond to shame, doesn't respond to the media. He responds to the markets. And that is the only times he ever backs away from this weird behavior is when the equity markets goes down, he withdraws from this, these bullshit tariff, when he draw an invasion of Greenland. The, when the Japanese bond market got wobbly, he backed away from tariffs. And in recent history, the greatest political action in history in terms of action and speed was exactly six years ago. And that's when in Q1 of 2020, COVID hit, you saw literally the government move on a dime, tons of stimulus, tons of mandates, whether you agree with

• 7:19Scott Galloway?

  them or not. We've never seen that kind of political action globally in history at that speed. And it wasn't because people were dying. That's where they get it wrong. It's because GDP plunged 31%. The most radical act of protests in a capitalist society is nonparticipation. So it's less about ideology and cinema and just more about mechanics. So I'm trying to figure out a way to start a movement. And I believe so many people have moved from the indignance part of the program to, okay, what the fuck do we do now? And my thesis is that the easiest way to create a dramatic reaction that the administration has to listen to is a very targeted, surgical, national economic strike. And that's what

• 8:03Scott Galloway?

  I'm thinking about and trying to organize.

• 8:05Ed Elson?

  Yeah, I like the emphasis on targeted and surgical because I think one of the criticisms, which I think is a fair criticism, is that you don't want to try to hurt the Trump administration by hurting the real economy, by hurting regular American businesses. You don't want to just, okay, I'm gonna stop going to my local grocery store because I want to stick it to Trump, which would end up backfiring on your neighbors in your local grocery. But I do like the idea of a targeted surgical strike towards a handful of companies that were okay with being very upset, i.e. the big tech companies, i.e. the AI companies. But

• 8:40Ed Elson?

  These are really hard things to organize. And I think one question will be, you know, I wonder how many times you get to play this card? How possible is it to get people en masse to strike in this way? Because we have become pretty dependent on a lot of these products and services. But I do think it's a really good point. And I think if it can be pulled off and it can be targeted also in its messaging on what the demands actually are, I agree. I think it could be very powerful.

• 9:13Scott Galloway?

  Well, you said a lot there, but one I agree with you. I don't think it's fair for, you know, someone with some money sitting in Jackson Hole to tell people to stop buying groceries.

• 9:21Ed Elson?

  Yeah.

• 9:22Scott Galloway?

  And I think that this also, the onus has to be on some of the most fortunate among us who have benefited from the incredible system of rule and law, which is why I like-

• 9:32Ed Elson?

  And who make up half the spending. I would also just-

• 9:35Scott Galloway?

  Yeah, exactly. And the reality is I could take my consumer spending down 30%. The average household can't do that. They just can't do that. And in terms of a target list, my target list is very strategic. All those sycophants and people who think if they wake up with the president's jizz on their face, it'll take their stock up. And that's the individuals who went to that ridiculous meeting and Tim Cook presenting the president with an inscribed hard drive. And I think you'd be shocked at how, I don't want to say easy it is, but I subscribe to three L L Ms, I'm going to go down to one. I am thinking about withdrawing my funds and my stocks from US banks and transferring them to a Canadian bank in the short term. I have seven streaming media platforms. I'm going to go down to one.

• 10:20Scott Galloway?

  I'm not suggesting that people just sit at home, but these companies are so fragile in the sense that if they, if anything, if anything looks like their growth, their subscriber growth is coming down, they're going to put off buying an iPhone for two months. I was about to go buy an iPhone, a new one. I'm going to wait. A couple of months.

• 10:39Ed Elson?

  That's a good one.

• 10:40Scott Galloway?

  It has to be surgical, it has to be around the most overvalued and quite frankly, it has to go after the people that he listens to. And if, if, if OpenAI all of a sudden had its first negative subscription month, it would leak into all AI companies, 40% of the S and P, and you can bet the administration would respond. So as I've constantly said on this show, one of my many faults as a professional has been the difference between being right and being effective. I get indignant, I know I'm right. And it's like, okay, great, now what? If you want to be effective, a national economic strike that puts a dent in the growth of AI-centered companies, that could start a chain reaction that would absolutely freak

• 11:25Scott Galloway?

  out the people who the president listens to and the president himself. Enough indignance, enough outrage, let's move to action.

• 11:33Ed Elson?

  All right, let's get into our conversation with Katie Martin, markets columnist and editorial board member at the Financial Times. Katie, thank you for joining us.

• 11:42Speaker 07

  Yeah, pleasure.

• 11:46Ed Elson?

  So a lot we want to get into here. I thought we would probably start with what happened last week at Davos, where we saw a lot of controversy and drama over Greenland, which eventually led to another taco, which your colleague, Robert Armstrong, has talked about a lot on our podcast as well. He, of course, invented the term taco. We saw another one. I guess I'd just start with what were your takeaways from yet another taco that seems to move markets again? What did we learn?

• 12:18Speaker 07

  I think the main thing that we learned was that this taco was much smaller than the last one, right? So if you look back to April last year, we had the, the announcement of the big liberation day tariffs and. Very quickly, markets just got it in the neck and started falling incredibly quickly. This time around, we saw a much more modest reaction in markets. You know, stocks, okay, they fell about 2% in the States. It's not nothing, but it's it's nothing like on the same scale as we saw last year. And I think that's because investors have become so accustomed to this idea that Trump always chickens out, right?

• 13:02Speaker 07

  He's he's chickened out on various things before. He's chickened out on the scale of the tariffs before. Therefore, he will chicken out on Greenland. And so I think there's a lot of people in markets who never took it that seriously to begin with. So I guess the dangerous thing there is that it just means that without that sort of stabilizing force of markets, without that pressure that comes from stock markets really taking a serious hit, we get ever closer to the day where you're closer to disaster. You're closer to some sort of accident. But I think there's still a lot of people who think that markets' primary function is there to be as some sort of check and balance on the president. And that's just not how it works.

• 13:47Ed Elson?

  Something you wrote recently about the taco trade. You said, quote, "One of the reasons this moment in history is such a head fake for investors is that it demands they do opposite things at the same time. They need to shut out the noise, but also listen to it carefully, ignore it, but also take some pretty radical action." I feel like that pretty much sums it up. And something that we've been thinking about, you know, something Tom Lee has said, which I think on the one hand is true, is that if you want to perform, outperform as an investor, you kind of need to pay a lot of attention to what's happening in the White House, because the White House is moving markets. You need to see what is Trump's, what are Trump's priorities? What is he, who, which companies is he trying to award? Which businesses is he going to award?

• 14:32Ed Elson?

  That's something you need to keep in mind. But at the same time, if you just follow that, he also tacos half the time, which means you're going to be whip sword in multiple different directions and probably lose money in the process. So it's hard to know what rubric to follow.

• 14:51Ed Elson?

  Either you go with what the president is telling us and assume that it's real and follow it, or you kind of completely tune it out. But if you go with either of those strategies, it doesn't really work. So I guess my question, like, what is the strategy? How are you supposed to tell what's real and what isn't?

• 15:11Speaker 07

  God, I wish I knew. But when I speak to asset managers, hedge fund managers, you know, people who run large pots of like quite conservative pension money, for example, around the world, they split into two camps, right? The there's asset managers who are in the States, who are US dollar based, they don't kind of really care if the dollar goes up or down. It's not that material to their bottom line and to how their portfolio performs. They see in front of them a US market that performs beautifully. And a lot of them really don't see that much of a problem here. Now, when I speak to asset managers who are in

• 15:53Speaker 07

  Europe, who are in the UK, who are in Asia, they all say a very similar thing to me, which is, no, something here has broken. The first of all, the dollar has broken. The dollar is a lot weaker. And if you didn't manage to hedge out that dollar risk last year in 2025, then you had an absolute stinker in US markets. If you're euro based or sterling based, for example. So the dollar has broken down. But more fundamentally than that, trust has broken down. And so now, particularly actually, since the heat really increased on Greenland, what investors are saying to me is that, look, we have to accept that

• 16:34Speaker 07

  we live in a world that where a president who is willing to demolish the East Wing of the White House and make threats against the Federal Reserve and like literally in real life, threaten to invade a NATO member, is willing to do all sorts of things with your investment portfolio. Maybe, you know, when people are war gaming very extreme scenarios, that goes right up to including, is he going to pay me back on my treasuries? Or is he going to get into some sort of argument with with me or with my government? That means that maybe he won't do that one day. What's the risk premium that I need to embed in my US assets to compensate me for these sorts of risks that didn't exist before? Also, as

• 17:19Speaker 07

  you mentioned, There are companies that he favors and companies that he doesn't favor. It makes it a very difficult decision for for an investor to think, well, do I get involved in those companies? Do I avoid them? What are the ramifications of me selling down a holding, for example, in a company that that is on on Trump's good list, if you like? So there's a whole bunch of reasons why investors outside of the United States are saying we need to hedge our dollar exposure and we need to diversify. There's a lot of investors who have just mechanically churned sixty, seventy percent of their equity exposure into the US just because that's how big it is in in the global indices. And maybe that number is too high.

• 18:04Speaker 07

  So maybe they need to put more money to work in Asia, in Europe. And by the way, those markets had an absolutely fantastic run in in twenty twenty five. So people are thinking very, very differently about what it means to invest in the US and how risky that is and what they want to be compensated for it.

• 18:24Ed Elson?

  Do you think that is the reason why all these global foreign markets outperformed the US by such a huge margin last year? Is this basically, I mean, there was talk of the sell America trade last year, which was getting a lot of momentum and heat early on after Liberation Day. Then it kind of dissipated, but quietly at the same time, maybe people weren't putting a lot of selling pressure on US stocks because the S and P rose pretty significantly, around seventeen percent. But as you say, all of these other markets way outperformed the US. Is that a result, as you point out there, of these European pension fund managers deciding,

• 19:04Ed Elson?

  okay, maybe I'm not going to sell my US stocks, but I'm certainly going to increase my international exposure?

• 19:11Speaker 07

  It's certainly part of it. And look. You can't avoid the US and you can't avoid US markets. They are just so much bigger than European markets. You can fit like the whole of the FTSE 100 index just inside Apple multiple times in terms of the market cap. You know, it's important to bear in mind just the sheer size of this of this thing. The entrances into European markets, for example, are much, much narrower. And that's why when you have not even a huge crowd moving into European markets, but just more people than usual moving into European markets, you get gigantic moves. So you look at the performance of Spain last year, for example, I think it added 50% in euros or 70% in dollars.

• 19:55Speaker 07

  You know, some of the moves here are incredibly substantial. But it's exactly as you say, I think it's very tempting to paint this whole phenomenon as sell America. It's not quite sell America. What it means is that over time you take that allocation down. And I know that's less dramatic and it might be somewhat less satisfying to some people, but that is the reality of it. And it takes ages. And I was just today speaking to a very large pension manager who was saying, we're very conscious that we don't want to over rotate. We don't want to move too far out of the US. We don't want to sacrifice the performance or find ourselves overly exposed to other small markets.

• 20:36Speaker 07

  So, you know, it's easy to forget, especially with some really, you know, large conservative investors, just how many investment committee meetings you have to go through to get to the point where you take a conscious decision to peel away from a big global benchmark. It's really not straightforward. It can take a really long time. But I do feel like this is a durable shift in how global asset allocation works and that we will be looking back on this moment in 10 years' time and thinking, that was it. That was the point at which the US started to lose its its global centrality.

• 21:15Scott Galloway?

  You brought up a key point that I think a lot of market analysts miss or the media misses. And that is, well, the headline number, the S and P is up 17%. If you're a foreign investor and you're one of the many markets with a dollar decline by 10%, basically all your returns are wiped out. I mean, the US has not been a great performing market for a lot of foreign investors over the last year. If you take in the currency devaluation. Lead into my question.

• 21:42Scott Galloway?

  A lot of activity and tumult in the Japanese bond market. Why should we care?

• 21:47Speaker 07

  The Japanese bond market has, as I'm sure you know, for the longest time been aggressively boring.

• 21:55Scott Galloway?

  Aggressively boring, I love that. That describes me at a bar in the eighties.

• 22:01Scott Galloway?

  Welcome to prof G markets, Katie. I'm sorry, Katie, the Japanese bond market.

• 22:04Speaker 07

  Sufficiently boring that genuinely some Japanese government bond trading floors have like mini golf set up on them. Right. It's just that nothing happens. If you get a few slivers of a percentage point move in one direction or another, it's a huge drama. Okay, so that's, that era is over. What we're seeing now is actually quite lasting inflation in Japan, which they've had the opposite problem for the past few decades. They've finally got inflation that sticks.

• 22:35Speaker 07

  This is a difficult adjustment for the Japanese economy, for the Japanese population and Japanese financial markets to get used to. And there is a suspicion that the central bank is slower than it might have been in raising interest rates to tackle that. And of course, if you get inflation, that means that it's bad for bonds and that pulls up the bond yields. It pulls up borrowing costs. Now, this can, where this goes next is, uh, that's the sort of pertinent question, I guess. And there've always been people who've been looking for a crisis in the Japanese bond market because it's so big. You know, Japanese debt GDP is what 200%, something like that. It's always been enormous.

• 23:18Speaker 07

  So there've been people who've been calling for some sort of reckoning in that market for a really long time. And it simply hasn't happened. It is plausible that we get a serious problem now. And what that serious problem would look like is potentially that the yields blast higher, right? We get a really meaningful drop in, in Japanese government bond prices, yields blast higher. We get something that looks like the Liz Truss moment in, in the UK government bond market in 2022. And that's, first of all, leaves a lot of important Japanese investors with, with big losses, but also means that all of a sudden. Yields in Japan are so high that why would you, as a Japanese life insurance company,

• 24:00Speaker 07

  bother investing in the US with all the problems that you can see in the Treasury's market? Why would you bother with the French government bond market, or German, or UK, or whatever?

• 24:09Ed Elson?

  And that's referred to as the carry trade, is that right?

• 24:12Speaker 07

  Currently, exactly that. They go overseas because they want to get those higher yields. Why would they bother if you can get the higher yields at home?

• 24:20Speaker 07

  There is potential for that to be disruptive, but I think it's sort of slightly kind of, you know, disaster hunting to think that that is necessarily what is around the corner.

• 24:32Speaker 07

  Most likely, you know, Japan is blessed with very smart policymakers. They know what they're doing. They know what's at stake. The most likely path from here is that you actually end up with a government bond market that offers decent compensation to domestic investors, maybe even to overseas investors. That's a healthy adjustment, but it does mean that along the way, you get some moves that do feel a little bit uncomfortable for people who are used to the Japanese government bond market being a place where fun goes to die.

• 25:04Ed Elson?

  We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us if you haven't already.

• 25:20Speaker 00

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• 26:53Ed Elson?

  We're back with Prof G Markets.

• 26:55Scott Galloway?

  One of our big theses in 26, Ed has used this academic term to describe OpenAI as a fucking disaster.

• 27:06Ed Elson?

  Train wreck.

• 27:06Scott Galloway?

  Train wreck, as I always said, sorry. I got the F bar right. I got the F bomb right. But one of our, our big theses is that we just don't see how these companies can have growth and earnings that justify anything resembling their current valuations unless they're able, their clients are able to recognize such extraordinary efficiencies, which is Latin for layoffs. I mean, one or two things needs to happen. Either these companies need to be cut in half or more, which by the way, most big tech companies at some point in the recent, you know, recent past have been down 50% in 12 month period. Or you're going to have to see their clients saying, oh my gosh, our earnings are exploding because I was able to lay off 10, 20, 30% of my workforce. We literally see it as, I'll speak for Ed here because I pay him, so I get to speak

• 27:51Scott Galloway?

  for him. But we literally see either, one or two things here, either a very significant destruction in human capital, labor in key industries, or...

• 28:04Scott Galloway?

  These companies' valuations get cut 50, 60 percent. Let me add, that's not that big a deal. Nvidia is down 95 percent. Amazon down 97 in the dot bomb. More recently, Meta lost two thirds of its value in 2022. The difference, though, is that if these companies in unison lose 40, 60, 80 percent of their value, you know, the whole global economy is going to catch pneumonia. Your thoughts on the notion that, one, we either see a destruction in the market valuation of these companies, or pretty much chaos in the labor markets? Your thoughts on that thesis?

• 28:40Speaker 07

  Yeah, I think that thesis is correct. I think there is, you know, investors spend a lot of time noodling over this point of, you know, is there a bubble in AI? Do valuations make sense? Do, you know, does the stock market make sense? Is it really tracking, you know, realized earnings? Or is there a lot of kind of, you know, a wing and a prayer going on here? What strikes me is that, you know, I think it was the chair at OpenAI in Davos saying, no, no, sure, there's definitely a bubble going on here. You know, Sam Altman is saying, no, sure, there's a bubble going on here. There's some money that's getting misallocated. Jeff Bezos is saying, oh, yeah, there's a bubble going on here, but it's

• 29:23Speaker 07

  a good type of bubble. You know, the people inside the room are saying, there is a heap of stupid stuff going on here. There's, there's a lot of hopium. There's a lot of, you know, imagining that some sort of computer god is being created and it's all powerful and, and crucially, that it's monetizable. For me, you know, that, that argument is not one. But what I think probably happens here is, look, Nvidia is a proper company, right? It makes shed loads of money. This isn't like the dot com boom and bust in that regard. But there's a really thick layer of just like bubbly nonsense that sits on top of

• 30:03Speaker 07

  this space. And I think a lot of that froth does need to get blown off over, over the course of this year. The other sort of flip side extreme scenario that you allude to is exactly that. It is not that AI is a load of old rubbish. It's that it's much better than we currently envisage. And that all of a sudden, as you suggest, we don't need humans. Now, what are those humans going to do? And what are the socio economic ramifications of those humans having nothing to do? I don't know, and I don't know which scenario I would kind of rather see. But I think it's, you know, in terms of how markets respond to all this, I do think it's important to remember that it's,

• 30:44Speaker 07

  you know, the US dominates this whole debate, of course, you know, these big tech companies account for something like, you know, 25% or a third of like the entire S and P 500, you know, they're absolute monsters. But, you know, Korean stocks last year had a fantastic year. Why? Because they've got three gigantic AI contingent companies that account for almost the entire market. Japanese stocks had a great year last year, same kind of story. So there's no escaping it. And increasingly, there's no escaping it, not just in the stock market, but in the corporate bond market. And in private markets, there's an awful lot of private credit, private equity, venture capital,

• 31:27Speaker 07

  capital that again is all contingent on this one thing of AI hitting that sweet spot where it enhances efficiency. And it's monetizable, but it doesn't work so well that it puts us all out of a job. You know, if it wasn't for the fact that Trump was threatening to invade Greenland, we would probably still obsessively be talking about this all of the time. It does remain a very pressing danger for for global markets. And investors that I speak to are very conscious that they are kind of accidentally very overexposed to this.

• 31:58Ed Elson?

  I just saw a survey recently, which I think was quite telling about what is happening in AI. And it basically asked a series of C suite executives, what AI is doing to their week, basically, how much time is it saving you? And they asked that same question to a series of employees and workers who work for those C suite executives. And basically what it found is that there is a gigantic divergence in the between workers and CEOs on.

• 32:29Ed Elson?

  The extent to which AI is actually helping the business and saving them time. So 40% of workers say that AI actually saves them no time during the week. For C suite executives, that number is only 2%. Those same C suite executives say that 45% of them say that it's saving them more than eight hours per week. The number among workers is tiny compared to that. So this brings up kind of an interesting point to me that I think is crucial in terms of our understanding of how to value AI is there seems to be a huge misunderstanding between different types of workers on how valuable it actually is.

• 33:13Ed Elson?

  And I think that it's quite good evidence of there potentially being a bubble because what it tells me is that workers, the people on the ground, the people who are supposed to be using the AI products themselves, they're telling us actually this stuff isn't that useful. But the guys who run the companies, who probably aren't using the AI that much themselves, but are telling their workers to use the AI. They think that they're getting a lot of value out of this. And that might be true between the workers and also the investment community. It could be that investors really think that AI is working, it's juicing the economy, saving people time. And yet on the ground, that isn't the case. I thought that was quite interesting. I just wanted to get your reactions to the results of that survey.

• 33:55Speaker 07

  So what you're saying is we can put all the chief execs out of work and all of the workers share the profits? Is that where we're going with this? It's the great socialist revolution in AI form.

• 34:07Ed Elson?

  That is another implication, yes.

• 34:10Speaker 07

  Survey data around who uses AI and what kind of utility they get out of it are kind of all over the place. You know, that rings true to me. But so one little anecdote here, we do this thing at the FT called Weekend Festival. And last September, one of the speakers there was Nikolai Tangen, who runs the Norwegian Oil Fund, a gigantic pot of money in Norway, like $2 trillion. And he loves his AI. And he was talking about, you know, he was asked on a session about, you know, how do you get people within the oil fund to use AI? And he said, oh, it's very simple.

• 34:50Speaker 07

  You have to be, and I quote, a maniac about it. You need someone at the top of the organisation who effectively forces it down people's throats, day and night. Mandatory training, drop in sessions, champions on every team, constantly getting everybody in the building and they employ hundreds of people to use AI to make themselves more efficient. And I thought, huh.

• 35:15Speaker 07

  If this stuff is so useful, why do you need a maniac to tell you to do it at the cost of otherwise losing your job, right? And at the end of this process, where people are kind of forced to use this technology, which, you know, Nikolai thinks is of great benefit to the organisation. But at the end of this process, they send a survey to everyone in the building and say, how much more efficient are you as a result of AI? And I think the result was something like 12%. Of course, you're going to say that if your boss is forcing you to use the technology, right? But I don't have anyone breathing down my neck telling me to use telephones or telling me to use WhatsApp or telling me to use email

• 35:57Speaker 07

  because it's just an obvious efficiency to my day. So it's this constant question around technology, isn't it? It creates productivity, but you just can't see it anywhere. So there is a valid question around how useful this stuff really is. And I think also, you know, what I gather is that, you know, companies are asking much tougher questions now. It's like, hang on, before we commit this money and this time and this resource to this technology,

• 36:26Speaker 07

  show me the proof points. And actually, that's something that investors are becoming somewhat more rigorous about as well. It's kind of, you know, like, show me. You can't just sort of wave your hands and say, oh, something, something generative AI. It's like, no, no, no, I need practical evidence that this stuff is any good.

• 36:44Speaker 07

  So that sort of rigor is probably helpful. But, you know, there have been famous surveys, there was the study last year, was it from MIT? That said something like 95% of companies that have adopted AI, I think it's a total waste of time.

• 36:58Ed Elson?

  Yep.

• 37:00Scott Galloway?

  That was a big one.

• 37:01Speaker 07

  I personally don't use it.

• 37:03Scott Galloway?

  You don't use it to prove, fact check your art, your drafts, your articles, nothing?

• 37:06Speaker 07

  No, nothing like that. Um, my seventeen year old son can, I mean, he can barely get out of bed in the morning at all, but he, he can barely tie his own shoelaces without asking ChatGPT how to do it. You know, there's a whole generation of kids that are absolutely, that, that use it for everything, for revision, for schoolwork, for all sorts of things. But I, you know, maybe it's just me, but it, it doesn't really touch my life.

• 37:30Scott Galloway?

  Wow.

• 37:31Ed Elson?

  I think your point that like it's, it's almost like in twenty twenty, or at least in twenty twenty five, the name of the game was just wave your hands as much as possible, say AGI, AGI, AGI. And then you get half a trillion dollar valuation. It seems that in twenty twenty six, the vibe has shifted and there is more of an emphasis on show me the money. Show me that you are actually generating a return from these investments, which is why I think a lot of these companies are doing quite well. I think Anthropic has got it right. I think the emphasis on enterprise business is working out well. And I do think it is actually a bright spot for OpenAI that they have now rolled out ads. Because to me, that, that tells me, okay, you guys are taking seriously that the job is to make money.

• 38:16Ed Elson?

  So let's see how much money you can go out and make. And I, I would be very interested to see how much people are, are, are willing to pay, how much advertisers are willing to pay. Apparently they want sixty dollars CPMs, about three times higher than what Facebook charges. So we'll see if that actually works. But I do agree with you. It seems like we're entering the phase where, okay, we've waved our hands. We've sort of made these large projections about what the world's going to look like now. Let's see what it actually looks like, which to me is almost less concerning. And I'd be very interested to see what, what OpenAI's stock price were to be if it were actually publicly traded. I'm sure it would have gotten hammered in the past six months or so. I'd like to just return to the global rotation point.

• 39:01Ed Elson?

  I think it's very helpful to have you on this interview right now, because you are speaking with those fund managers in Europe. And I'm realizing as we talk, we haven't really gotten that perspective yet.

• 39:15Ed Elson?

  So you, you said that, you know, fu- fund managers, pension managers in Europe, last year, they were beginning to sort of diversify out of the US. What did Davos do to that rotation? And what are your expectations for 2026? Is that rotation going to continue? Will it slow down? Will it accelerate? What do you think?

• 39:37Speaker 07

  Yeah, my expectation is that rotation will absolutely continue. And look, there are push and pull factors here, right? You know, Trump is pushing people out of the US for a whole host of incredibly obvious reasons. But for a lot of investors, whether they're in Europe or elsewhere, the pace for investing in Europe has rarely been stronger than it is today. You know, you look at the situation in Germany. Yes, okay, it has taken a long time for it to start deploying this extra money that it's been talking about for the past year or so. But this money is really going to start hitting in terms of infrastructure projects and defence spending and all of that lovely stuff. So you look at the fiscal expansion that you see in the States

• 40:21Speaker 07

  and a lot of it is about sending cheques to people who don't necessarily need it. The fiscal expansion that you're getting in Europe is about real stuff. It's about roads and bridges and infrastructure and energy and defence. The multipliers on that are likely to be much higher, right? So this really should be supportive to European growth, which I know is disappointing for a long time, but it's better than nothing. You look at the European financial sector. Like, I don't know if you've looked at a chart of European bank stocks recently, but they had an absolute storming 2025. They've kept on going into 2026. Financial sector in sharp contrast to where it was a decade and a half ago is in seriously good health.

• 41:05Speaker 07

  Now, I know that European financial markets are more kind of creaky and sludgy and less fast-moving than they are in the States. But you can't argue with the performance that you had in Europe last year. UK, even France didn't do too badly, even despite multiple government failures. You know, Germany, all sorts of different markets across Europe had a fantastic run last year. People are definitely taking a fresh look at those markets. And even some US asset managers are saying, huh, I think we missed a trick on Europe last year. Especially when you add in the currency effect. We could have had some really big winnings there. This is happening across Asia too. There is just a sense that that it's important to be more self reliant.

• 41:50Speaker 07

  And, you know, the one thing as well that sort of hangs over people with regards to Europe is that they people say, look, okay, we don't have it today, we won't have it tomorrow, but at some point we will have a ceasefire in Ukraine. And at some point, we will have something that resembles peace in Ukraine. And at some point after that, there is a massive reconstruction trade of that country.

• 42:15Ed Elson?

  Wow.

• 42:15Speaker 07

  And, you know, if I were running a cement company in eastern Poland somewhere, Poland, by the way, standout 2025. I would be feeling pretty good about the next five to 10 years. You know, the the infrastructure spend and the rebuild spend that's going to happen at some point, hopefully sooner rather than later in Ukraine, is going to be really significant. So people can see a lot of positives about investing in in Europe, not just, it's not just about avoiding the States.

• 42:45Ed Elson?

  I think there's another question here, which is, you know, something Scott often says is market dynamics trump individual performance. And if the dynamic among the markets here is that Europeans are kind of collectively deciding to reinvest in themselves, then that is going to be a big deal, regardless of what happens in the world, regardless of which companies are performing well in America. I guess the question then is, what level of investment power does Europe really have? Can Europe, does Europe have the fiscal power? Do they have the the investment prowess to really move markets in a significant way? And that seems to be kind of a theme coming out of Davos, which is there's a threat that maybe Europe stands up to America.

• 43:30Ed Elson?

  They decide we're going to sell our US holdings, we're going to sell US treasuries. We're going to decide we're going to defend ourselves on our own. But then the the follow up is, do you really have enough to do that? Are you really powerful enough to take on America in the way that these conversations seem to suggest? It's a very broad topic and question. I'm sure there's no single answer, but what what would you make of of that question?

• 43:57Speaker 07

  I think the evidence for for the fact that Europe does have some clout and does have some leverage here is that Scott Besant was extremely pissed off at this notion that European pensions could start selling down. Their treasuries, you know, you'll recall, you know, there was a note from Deutsche Bank not saying that Europe is going to sell all of its treasuries, but saying, huh, Europe owns an awful lot of treasuries. Maybe it's not going to carry on accumulating treasuries at the pace that we've been used to for the past few decades in future. You know, Scott Besson had a word with the chief executive of Deutsche Bank. All of a sudden, they're distancing themselves from this analysis. And it's very clear that the US

• 44:40Speaker 07

  administration is very sensitive to the idea that it could lose a pocket of very reliable buyers for the US treasury market, you know. Stocks do what stocks do. They're typically very flighty, but Scott Besson is very focused on keeping that 10-year US Treasury yield at or about 4%. He does not want it to spiral higher. He doesn't want higher borrowing costs, either for the government or for anybody else. It's not in the US's rational self-interest to scare off buyers of US treasuries. Now, you know, again, so we've had a couple of like quite small Nordic pension funds that have said, we've got out of our treasuries, not necessarily because of Greenland, but

• 45:21Speaker 07

  because of a bunch of other issues, you know, debt sustainability, fiscal dynamics, the Fed, you know, all of that stuff. But it clearly leaves a mark. You know, I don't think Europe is going to just one day, you know, press a button and sell all of its treasuries. That would do us just as much harm as it would do the States. It's not plausible. But it is plausible that, so you're running a pension fund somewhere, your very old, you know, 10, 20-year treasury, you know, comes up for redemption. And you think, well, do I churn this into another 10, 20-year treasury? Or do I say, huh, maybe actually this time I'm going to stick half of it in Germany. I'm going to stick half of it in

• 46:02Speaker 07

  the UK. Maybe I'm going to put some of it in Japan. It's got nice, high yields now. I think that this whole moment at Davos has proven to be a little bit of a reminder that, you know, Europe is not without its tools at retaliation. You know, that's much more obvious with China, which says, look, we've got a whole heap of your treasuries and we can do what we like with them. By the way, we've got the rare earths. But it doesn't mean that Europe has no tools. And I do think that even that suggestion that maybe it won't be mechanically plowing money into the US has rankled some nerves.

• 46:41Ed Elson?

  We'll be right back and for even more markets content, sign up for our newsletter at profitemarkets.com/subscribe.

• 46:56Speaker 00

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• 48:28Ed Elson?

  We're back with Profiteam Markets.

• 48:30Scott Galloway?

  I can make a case for the markets at some point getting fed up with the sclerotic behavior, the Japanese yields skyrocket, people just lose faith in our treasuries. There's just a bunch of scenarios, AI being overvalued, where you can see a string gets pulled, any number of strings, and the market takes a real drawdown. At the same time, we're going into an election year, a lot of that big, beautiful bill stimulus is about to take real effect in 2026. Typically, in an election year, the current administration does whatever it can to kind of juice the market. So, and also our friend Josh Brown constantly, you know, I'm a catastrophist and a glass half empty kind of guy. And he says, look, Scott, the optimists have beaten the shit

• 49:12Scott Galloway?

  out of the pessimists. And he's right. And he, he taught me something that was really interesting. What, you know, always ask yourself what could go right. So coming into 26, recognizing nobody has a crystal ball. When you look at all the dynamics, all the risks, all the upside, stimulus spending, threats of a value of AI, geopolitical uncertainty, where do you and the editorial board, or, no, don't speak with editorial board, where do you, Katie Martin, if you're advising clients or institutional investors, do you think the US market will underperform or outperform its peers abroad?

• 49:47Speaker 07

  I would never presume to advise anyone. But, but what I can say is that, look, and it's silly to talk about markets as if they're people. But markets do kind of want to go up. US stock markets want to go up.

• 50:02Scott Galloway?

  They grind higher.

• 50:03Speaker 07

  They grind higher. It's a function of US growth. It's a function of the US tech miracle. But it's also a function of the fact that you do still have fiscal expansion and you do still have interest rates that are heading lower, not heading lower as quickly as Trump would like them to, but they are nonetheless heading lower. That's a recipe for US stock markets to pull higher. But what I think is, you know, again, we go back to that diversification point, that sort of sell America point, is that if you're not based in the States and you're not based in US dollars, then you still have an enormous vulnerability around institutional credibility and around the resilience of the Fed. And if they get chipped away out further and we get another big pull lower in, in the

• 50:48Speaker 07

  dollar, then we're going to end up with another washout year for overseas investors being, being parked in, in the US. And I think, you know, one year, you can kind of write off as a bit of an anomaly. But if this happens again, then we've got a really serious problem. I do think the sort of the most likely outcome is that US markets do pretty well, especially if it can, if, if we can have some credibility restored to the Federal Reserve. But but the risks are substantial and I do think there's a reasonable chance that the US gets its, you know, gets its ass kicked by the rest of the world again in 2026 and and beyond. So really, the the extent to which you care about that matters what currency you're in,

• 51:29Speaker 07

  what hedging policies you've put in place and just where your domicile. But the, you know, people do just want a little bit more compensation and certainty around putting, you know, their stakeholders money to work in the US with all of the policy uncertainty that's hanging over it.

• 51:46Ed Elson?

  Is there anything you're watching in the markets right now that you think people are not talking about enough, something that deserves more attention, that you find interesting, that isn't getting enough clicks?

• 51:59Speaker 07

  The thing that I think people are probably not worried enough about is is the Fed. We are all sitting around like diligent little soldiers and podcasters and journalists saying, oh, I wonder which Kevin will be the new chair of the Federal Reserve. Will it be this Kevin? Will it be that Kevin? Maybe it'll be a, maybe it'll be a Rick. Maybe it'll be somebody else. And we're not seeing the big picture here, which is that Trump and Besen and and Stephen Moran, who's now at the Fed and other people have made it very clear that they want the Fed to look very different to how it does now. And I just, you know, there's a part of me that thinks,

• 52:38Speaker 07

  are we sort of playing this game the old way and thinking, okay, which Kevin is it going to be? When actually what they're planning is a much bigger reconfiguration of the entire organization. It's a tail risk, but I think it's one that's worth taking seriously.

• 52:55Scott Galloway?

  If I were to upload the the transcript of this into, you know, my favorite AI model, which I keep a secret, hoping that one of them will show up with a big fat fucking check for me to say who my favorite.

• 53:07Speaker 07

  Is that how it works?

• 53:08Scott Galloway?

  Just welcome to capitalism. But good news, Katie, I'm a whore, but I'm an expensive whore.

• 53:17Scott Galloway?

  Where was I headed with that? If I were to upload everything that your dialogue and your articles that and said, summarize Katie's viewpoint and recommendation in one word, it would be diversification. You think that's accurate?

• 53:29Speaker 07

  I think that's accurate, and I think that's a that's a very reasonable representation of everything that money managers are saying to me at the moment. And again, it sort of doesn't matter what type of money manager you are. It can be wealth managers advising risky individual, you know, wealthy individuals. It can be managers of enormous pots of pensions. It can be hedge funds. It can be anybody. They're all saying the same thing, which is something has broken with the US. And, you know, the phrase that I always like to use here is that you can't put the ship back in the donkey, right? You can't unsay that you're thinking of invading Greenland. You can't.

• 54:03Scott Galloway?

  We've got to have you again. That just earned you a second, a third and a fourth appearance.

• 54:11Scott Galloway?

  Mic drop.

• 54:12Speaker 07

  You can't unsay that you that the chair of the Federal Reserve is a numskull. The the stuff that you it's out there. You you've said it now that the trust has gone. Even, you know, this is one thing that I think is lost on a lot of people, particularly in the States, is that this is going to hang over US assets much longer than Trump is around. You know, the next administration is going to have to spend a fearsomely long time rebuilding that trust with global investors and trying to explain away a kind of moment of madness and and trying to put extra guardrails around the institutions that the investors hold dear. This is going to hang over for a really, a really long time. I'm afraid there's there's kind of no way back.

• 54:57Ed Elson?

  Katie Martin is a markets columnist and member of the Financial Times Editorial Board. She writes the weekly Longview column on market trends and appears weekly on the Unhedged podcast. Previously, she spent four years as the FT's Markets Editor and also several years on the FT's Live News Service prior to joining the FT in 2015. She's spent 11 years at the Dow Jones Wall Street Journal Group. Katie, this was excellent. Really appreciate it. Thank you.

• 55:21Scott Galloway?

  Thank you, Katie.

• 55:22Speaker 07

  Pleasure.

• 55:32Scott Galloway?

  Ed, thank God we found someone other than Robert Armstrong from the FT. Jesus, they've been hiding Katie. I know. She was excellent. What did you make of it? Super smart, super measured. I like that people like that are in financial journalism. It just drives home the point of diversification. She validated a lot of the points you've made or that we've made around people, you know, this great rotation. That was our big prediction for 25. It's happened and it's accelerating. The point that she made that people miss is that, okay, the US markets, the S and Bs up 70%, but if I'm in the UK and I've been

• 56:13Scott Galloway?

  or in, you know, and I've invested in, had to transfer pounds to dollars, I'm up 7% versus if I'd stuck in a European market, it's up 30, 40 and 50%. The US trade has not been a winner. The 17% headline, when, when on a currency adjusted basis, this has not been a winner for people, this market. The other thing, the only thing I would push back on that she said was that there's going to be an incredible post-war trade in Ukraine. And I would say it's very dependent upon the following. If we do what Trump wants and what Putin wants and enter into a shitty deal for Ukraine and follow, I interviewed Neil Ferguson at the Davos and the whole interview, I love Neil, but it just pissed

• 56:55Scott Galloway?

  me off so much because I think he was basically parroting Sergey Lavrov's talking points, that the war in Ukraine is totally unsustainable for Ukraine. I would argue it's totally unsustainable for Russia. But if we end up with a peace there that is basically not, you know, that basically is not preventing the next war but scheduling it, and that is if we give Russia anything resembling what the peace plan that Rubio and Trump and probably Putin endorsed, we're just scheduling the next war. And no one is going to invest in Ukraine, especially in the civilian infrastructure. The bunch of their drone makers will all move to Silicon Valley and become really rich. But no one's going to invest in Ukraine

• 57:36Scott Galloway?

  just waiting for Russia to rearm and then take the rest of Ukraine and possibly Poland. Anyways, I think that

• 57:46Scott Galloway?

  Ukraine trade is totally dependent upon the kind of peace that is negotiated there. Little in the weeds, little in the weeds. Any thoughts, Ed?

• 57:58Ed Elson?

  I thought it was a really interesting point. I have to be honest, I haven't given the reconstruction, the Ukraine reconstruction trade much thought. So I'm not sure I have much insight there. Then your points are also totally reasonable as well. I think the thing that was most interesting to me was the fact that she has this direct line of communication to all of these fund managers in Europe. And it makes me think that we should be spending more of our time hearing their perspectives and maybe having one of those guys on the podcast because, you know, you were making the, the point last year that there would be a global rotation. Other people started to call it the sell America trade. And then when the S and P went up, a lot of people were quick to say, hey, you were wrong. It wasn't a sell America trade.

• 58:43Ed Elson?

  That was never our point. The point was a rotation trade. The idea being that, that fund managers are going to increase their exposure to foreign markets, and that is exactly what happened. And that's why we saw the outperformance of all of those foreign markets, not just on a, in dollar terms, but on a currency adjusted basis. The US outperformed practically every other market, especially the European markets. My assumption going into 2026 was that we would see something of a reversal, or at least a reversion to the mean. And that is, I thought that all of these European markets had ripped. And then maybe there would be some level of taco taking effect where people go, oh, you know what?

• 59:27Ed Elson?

  That was a little scary, but things in America are probably okay. Let's not worry too much about getting out of America. Given what we've seen over the past month, given what we saw in dollars, given everything she just told us about what European fund managers are thinking, I'm not sure that's true, actually, or that that will happen. It seems to me that actually this rotation will, as she said, continue and maybe even accelerate. And while I have said that I think the S and P will end up in the Green this year, though I think it's going to be kind of mere returns, it's going to be almost and pretty much flat, like, you know, low to mid single-digit returns. I do think that European markets, given what you said, have a real, real potential to significantly

• 1:00:11Ed Elson?

  outperform US markets again. And if that happens, I think that will only add more fuel to this momentum trade, more fuel to the fire, that the US, long-term, isn't going to have the kind of returns that we have historically expected. And that could be a big deal for markets.

• 1:00:30Scott Galloway?

  Let's turn to the tape. The S and P was up 17. Europe, Europe stocks 50 of the stock 600 was up 19. UK FTSE was up 22. Japan was up 26. I think the Kospi in South Korea was up 70 something. I think the Hang Seng was up, what was it, up 19? I mean, Canada was up 28%. In sum,

• 1:00:54Scott Galloway?

  wasn't the S and P the worst performing market amongst the developed economies?

• 1:00:58Ed Elson?

  Exactly.

• 1:00:59Scott Galloway?

  And then that's not even taking into account if you were investing, if you were transferring your currency into dollars, of which you likely lost another 5 or 10% on top of that because of the weakening of the dollar. So anyways, very much enjoyed her perspective.

• 1:01:18Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Shalon, Isabella Kinsel, Chris Nodden, Hugh and Mia Silverio. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

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