Moody's Analytics Chief Economist Mark Zandi on the US Economy

Barry speaks with Mark Zandi, chief economist at Moody's Analytics about his career and the state of the US economy today. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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

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• 2:40Barry Ritholtz?

  This week on the podcast, wow, what a fascinating conversation with a really interesting, intelligent guy. Mark Zandi has been the chief economist of Moody's Analytics for 20 years. He co-founded a regional analytics shop in the 90s, coming out of both Wharton and University of Pennsylvania, where he got his undergraduate and graduate degrees in economics. He buys economy.com in the late 90s and builds out that. Really a fascinating career, unique insight. You know, we live in a highly polarized partisan world, whether

• 3:22Barry Ritholtz?

  it's the Fed, inflation, labor, BLS, the economy. I love speaking to somebody who was an advisor to both the McCain campaign and the Obama White House. He just looks at the world through a set of lenses that are data-driven, model-driven, and tries to provide the best analysis as to what's going on, where and why. I thought this conversation was great, and I think you will also. With no further ado, Moody Analytics Chief Economist, Mark Zandi.

• 4:00Barry Ritholtz?

  Let's just start with your background. You get a bachelor's from Wharton, a doctorate in economics from the University of Pennsylvania. What was the original career plan?

• 4:09Speaker 05

  I had no career plan.

• 4:11Barry Ritholtz?

  None?

• 4:12Speaker 05

  None.

• 4:12Barry Ritholtz?

  Never thought about going into markets, economics, like a PhD in economics, were you thinking academia or?

• 4:20Speaker 05

  Well, I definitely knew not academia. My father was a professor at Penn. That's why we all went to Penn because...

• 4:26Barry Ritholtz?

  Discounted tuition.

• 4:27Speaker 05

  At that time, which is a long time ago...

• 4:29Barry Ritholtz?

  You're gonna tell me it was free?

• 4:30Speaker 05

  It was free.

• 4:30Barry Ritholtz?

  Wow.

• 4:31Speaker 05

  Tax-free.

• 4:32Barry Ritholtz?

  Wow!

• 4:32Speaker 05

  Tax-free. And I have four siblings.

• 4:34Barry Ritholtz?

  Wow!

• 4:35Speaker 05

  In fact, he actually, he was a pretty smart guy. He bought a redstone at 42nd and Spruce, you know, just off campus. And we all lived in that, in that redstone.

• 4:46Barry Ritholtz?

  Amazing.

• 4:46Speaker 05

  Yeah.

• 4:47Barry Ritholtz?

  All right. You come out of college and grad school with a deep background in economics. What inspired you to explore a career in economics?

• 4:57Speaker 05

  Well, my work was very empirical. My thesis advisor was a guy named Larry Klein. He was a Nobel laureate.

• 5:05Barry Ritholtz?

  Yes.

• 5:05Speaker 05

  He got it as a result of all the work he did building macro models, US macro models. I needed to make money when I was in school, so I worked part-time. His firm's called Wharton Econometrics, you know, after the Wharton School.

• 5:16Barry Ritholtz?

  Hold on a sec. The school let him set up a program called Wharton Economometrics?

• 5:22Speaker 05

  A company.

• 5:23Barry Ritholtz?

  A separate company apart from the school? That's what I'm asking.

• 5:26Speaker 05

  Yeah, yeah. I don't know. I'm sure there was some kind of financial arrangement. He must have paid some kind of royalty or something to... but I'm not sure, you know, but they...

• 5:33Barry Ritholtz?

  I don't think you could get away with even paying royalties today. You couldn't set up MIT Economics or Stanford Economometrics.

• 5:40Speaker 05

  No, you don't think so?

• 5:41Barry Ritholtz?

  Yeah. I mean, if you do certain research...

• 5:44Speaker 05

  Right.

• 5:44Barry Ritholtz?

  And you get a patent...

• 5:45Speaker 05

  Right.

• 5:46Barry Ritholtz?

  They get a piece of it.

• 5:47Speaker 05

  Right.

• 5:47Barry Ritholtz?

  But setting up, like, there is such a branding...

• 5:51Speaker 05

  Right.

• 5:51Barry Ritholtz?

  ...focus these days. I can't imagine a big school would let you do that.

• 5:55Speaker 05

  Unless you paid a really big royalty, I assume. But, yeah. But anyway, so that was a firm, a business, an economic forecasting business. And so I learned the business as a graduate student, you know, working there to earn money. And I also used their main, at that time as a mainframe. And everyone was on, there was no PC.

• 6:13Barry Ritholtz?

  Right.

• 6:14Speaker 05

  This is the eighties.

• 6:15Barry Ritholtz?

  Is it still the punch cards?

• 6:16Speaker 05

  Punch cards.

• 6:17Barry Ritholtz?

  I recall those.

• 6:18Speaker 05

  Yeah, yeah, you wanted to change the federal funds rate by 25 bips. You'd punch a card, you have a stack of cards, you would take it down to some guy who would put it into the mainframe.

• 6:27Barry Ritholtz?

  Take 12 hours.

• 6:29Speaker 05

  Oh, take 12 hours. And if you messed up, if you hit the wrong, you know, button, then you had to wait another 12 hours to get the answer. Well, how much was a quarter point increase in the funds rate going to do damage to the economy? That kind of thing.

• 6:39Barry Ritholtz?

  What was, what was your doctoral thesis on?

• 6:42Speaker 05

  It was regional economics.

• 6:44Barry Ritholtz?

  Uh huh.

• 6:44Speaker 05

  It was examining fancy word factor flows. So labor, capital and the movement between regions in the country. And that was the basis for the firm I started in 1990 called Regional Financial Associates. Because at that time.

• 6:59Barry Ritholtz?

  So you started your own firm right, pretty much right out of school?

• 7:03Speaker 05

  Pretty much right out of school.

• 7:04Barry Ritholtz?

  Wow.

• 7:04Speaker 05

  Yeah, with my brother and my best friend. My best friend was also working, he was in the graduate program at Penn and we were working at Wharton together. We could see there was a lot of problems, you know, with the way it was being run. It was mainframe oriented and the PC was just coming out. So we were able to use the PC to do the things that we needed to do.

• 7:21Barry Ritholtz?

  I remember in grad school using this pokey Mac Classic in 1988.

• 7:26Speaker 05

  The Mac, really?

• 7:27Barry Ritholtz?

  And the technology was just, ooh, look how advanced this was. Fair skins and stone knives. That's what it reminds me of.

• 7:33Speaker 05

  Well, we bought IBMs at the time.

• 7:34Barry Ritholtz?

  Uh, so, so you, you launched this, when does economy.com come along to regional economics?

• 7:43Speaker 05

  Uh, almost a decade later.

• 7:44Barry Ritholtz?

  Late 90s?

• 7:46Speaker 05

  Yeah, the internet boom really took off, what, 98, 99, 2000, 2001?

• 7:51Barry Ritholtz?

  Yeah, like two years after the irrational exuberance speech.

• 7:53Speaker 05

  Yeah.

• 7:54Barry Ritholtz?

  Is when it really became irrational exuberance.

• 7:56Speaker 05

  That was what, 96?

• 7:57Barry Ritholtz?

  Six.

• 7:58Speaker 05

  96?

• 7:58Barry Ritholtz?

  Yeah, late 96.

• 7:59Speaker 05

  Yeah, Greenspan speech. In fact, we bought the URL, economy.com. This guy from Quest, he was an executive, remember Quest?

• 8:07Barry Ritholtz?

  Sure, of course.

• 8:08Speaker 05

  Yeah, one of the baby bells.

• 8:09Barry Ritholtz?

  Right.

• 8:10Speaker 05

  Going out of AT&T. A headquarters in Denver, I believe.

• 8:13Barry Ritholtz?

  Yeah, Colorado, right.

• 8:14Speaker 05

  It was Colorado, right? And he made, he squatted on all these names. In fact, when we were negotiating the price for that, buying economy.com, he was on a yacht somewhere in the South Pacific. He made so much money on squatting.

• 8:25Barry Ritholtz?

  So what did you end up paying for economy.com?

• 8:27Speaker 05

  At the time, it was a lot of money, 250K.

• 8:30Barry Ritholtz?

  That is a, and you hundred X'd it eventually?

• 8:34Speaker 05

  Yeah, it certainly was a good investment.

• 8:36Barry Ritholtz?

  To say the very least. I know your thesis advisor was, you mentioned Lawrence Klein, a Nobel laureate. Was he an advisor to the firm when you were, when you were first building that out?

• 8:48Speaker 05

  Uh, no, I thought that he was older at that point. And he was, and actually, we were competitor now, right, to Wharton.

• 8:55Barry Ritholtz?

  Oh, Wharton Economics.

• 8:56Speaker 05

  Yeah, I don't think, I mean, we weren't really, we were a bunch of guys, right?

• 9:00Barry Ritholtz?

  Right.

• 9:00Speaker 05

  Yeah. When we got the economy.com, I'm making this up, but we might've had 40, 50 employees, something like that.

• 9:06Barry Ritholtz?

  Oh, really? So, so what was it like building out what essentially became a dot com in the late 90s?

• 9:13Speaker 05

  Oh, it was a lot, it was so much fun. I mean, I've been a startup, I've been a small business guy, and I've been part, now, obviously, part of Moody's, a large multinational. So I've seen business from a lot of different angles. And I'll have to tell you, maybe because I was just young, I mean, I loved being a startup. It was just.

• 9:28Barry Ritholtz?

  It's a lot of fun.

• 9:29Speaker 05

  Especially if it's working, right? I can imagine, and we got lucky, you know, the interstate banking happened, so all these banks needed to think about their footprint outside of their state. So they needed our, the data and information that we were providing. So if I were a bank in Connecticut, and I was thinking about moving into Massachusetts, I now needed to understand the Massachusetts economy. We would help, you know, Shaw, Shawmae Bank was Connecticut, Connecticut bank that was one of our first clients back in the day.

• 9:57Barry Ritholtz?

  So, so how you, you built this out in the late 90s, you survived the dot com implosion, because although you were technically a dot com, you weren't a frivolous clicks and eyeballs sort of company. It was a real company with real clients and real revenue.

• 10:15Speaker 05

  Right.

• 10:15Barry Ritholtz?

  Kind of set you apart from the pets dot coms of the world.

• 10:18Speaker 05

  We were an economic forecasting firm masquerading as a dot com.

• 10:22Barry Ritholtz?

  Right.

• 10:22Speaker 05

  Because we, you know, it was, at that time, dot com, your valuations were a lot higher and.

• 10:27Barry Ritholtz?

  Sure.

• 10:28Speaker 05

  Of course, practically speaking, we set up economy.com, right? That was our, when you came to our site, you came to economy.com. So it was a way to advertise. Where you go to get our information, so.

• 10:40Barry Ritholtz?

  And today you go to economy.com and it forwards you to Moody's.

• 10:44Speaker 05

  It does, yeah.

• 10:44Barry Ritholtz?

  How did the relationship with Moody's come about five, six years later?

• 10:48Speaker 05

  The CEO of Moody's Analytics was this fellow, Mark Almeida, great guy. He is a Philly boy, Philly guy. He, he, and he and I worked together at Warren Econometrics, which is Philly based because of Klein. And I, he was a data guy. He was in a cube next to me. I was in this young economist, working on models and data and forecasting. He was a data person. And so we knew each other quite well. And he went on to Moody's at that time was the rating agency. And he did extraordinarily well, became the CEO of Moody's Analytics when they formed Moody's Analytics. And he just knocked on the door and said, hey, are you interested in selling? And the answer was no, because we had no idea what it was worth.

• 11:32Speaker 05

  Just serendipity, Fitch knocked on the door at roughly the same time, within a week or two. I don't, I can't connect the dots.

• 11:39Barry Ritholtz?

  No, it's nothing like a bidding war, right?

• 11:41Speaker 05

  Exactly. So we were able to get a price, right? And I do remember him saying to me, hey, Mark, what price would it take for us to end this, this negotiation? To this day, I gave him, I gave him a price and he took it right away. And I go, it was too low.

• 11:59Barry Ritholtz?

  Well, if you Google it, it says $27 million, but I have no idea how accurate that is.

• 12:05Barry Ritholtz?

  Everything that I find through AI and search, I always seems to have a little asterisk with it. You don't, you don't know what's, especially private stuff like that. So Moody's Analytics is a division of Moody's, the big rating company? It's, it's a group within, is that right?

• 12:22Speaker 05

  Yeah, it's, there's Moody's, the rating agency, and then Moody's Analytics. More recently, they've been, we've been moving together, but it's still, I'm still in the entity Moody's Analytics.

• 12:34Barry Ritholtz?

  So what was it like going from a startup to a large multinational conglomerate?

• 12:39Speaker 05

  I'll tell you, it was great because we were allowed to remain independent in every respect, except for some of the back office kind of things that legal, HR.

• 12:48Barry Ritholtz?

  Which no one wants to do anyway.

• 12:49Speaker 05

  Yeah, uh, sales. And that's the key reason why we sold was because we were mostly US and we were trying to go global. And that's hard. It's very expensive. We set up an office in London and Sydney and it was difficult.

• 13:01Barry Ritholtz?

  And they have a giant client base with

• 13:03Speaker 05

  Oh, they're everywhere.

• 13:04Barry Ritholtz?

  Clients all over the world. That has to be a huge benefit to

• 13:09Speaker 05

  Oh, yeah.

• 13:09Barry Ritholtz?

  A small startup. It allows you to really supersize.

• 13:11Speaker 05

  And a, and a sales force all over the world, right? And, you know, Moody's is a respected institution, but overseas, it's highly respected. If you go into many emerging markets, right? Rating debt, sovereign debt is really, really critical. And so when a Moody's or an S and P says something, it really does move markets. And, and so it helped us raise our credibility. We had no credibility overseas and this allowed us to gain some credibility.

• 13:36Barry Ritholtz?

  Well, right away.

• 13:37Speaker 05

  Yeah.

• 13:37Barry Ritholtz?

  Uh, speaking about gaining credibility, in 2005, you wrote a piece, "Where are the regulators? The runaway housing market needs tougher regulatory oversight." Very prescient analysis, warning about, hey, you can't just give mortgages to people regardless of their ability to actually service that debt. What drove that analysis? That was really the first time I became aware of you as an economist.

• 14:06Speaker 05

  Yeah, I remember that piece. Uh, I'm a macro guy, but my area of expertise is housing and housing finance. Uh, I was watching the housing and mortgage finance markets very carefully at the time.

• 14:16Barry Ritholtz?

  Which a lot of Wall Street didn't really seem to be paying much attention to.

• 14:20Speaker 05

  No, no, uh.

• 14:21Barry Ritholtz?

  My mom was a real estate agent. That's the only reason why I was paying attention to this space. And that's probably how I found you, cause we were having regular conversations.

• 14:31Speaker 05

  Yeah. And there's a regional financial associates, banks, regions, you know, obviously it's real estate and housing are kind of top of the

• 14:37Barry Ritholtz?

  Totally, right. They write a lot of mortgages. They make HELOC loans and other things against it. And they were losing market share to these unregulated, non-bank lenders.

• 14:48Speaker 05

  The private label securities market, the real estate market. And of cour- and the regulators were my clients. So the FDIC For many, many years was my largest client by far and away.

• 14:58Barry Ritholtz?

  Wow.

• 14:59Speaker 05

  Yeah, so I, you know, I was looking at this space from the prism of housing, housing finance, and also from a regulatory perspective, and I could see this was, you know, a problem.

• 15:07Barry Ritholtz?

  Something was totally, totally afoot.

• 15:10Speaker 05

  I did have one, I've had, I had a number of periods of doubt in that, in that lead up to the crisis. One was the Fed, under Greenspan, asked me to come in and brief them on housing, because I was a housing guy. And I give this talk, and it was pretty dark. And at the end of it, saying that we're gonna have a problem. I didn't think we were gonna have a problem to the degree we had the problem, but I knew there was a problem coming. That was the message of the talk. And when I finished, I didn't get a single question from one Fed member.

• 15:40Barry Ritholtz?

  Really?

• 15:41Speaker 05

  Not one.

• 15:41Barry Ritholtz?

  So was this just a pro se discussion, or did you stun them into silence?

• 15:48Speaker 05

  I was totally confused by the whole thing. I, even Greens, there was a guy, Ed Gramlich, who was, you remember him?

• 15:54Barry Ritholtz?

  Sure, 100%.

• 15:55Speaker 05

  He was kind of a naysayer.

• 15:57Barry Ritholtz?

  Very much so. He was in the camp of, hey, you know, you have to be able to, the history of finance is not based on the securitiers' ability to sell their product. It's based on the borrower's ability to service the loan. If you take that step out, you're asking for trouble.

• 16:15Speaker 05

  Yeah, so.

• 16:16Barry Ritholtz?

  Yeah, Gramlich very famously was the fly in the ointment, and also, very right, passed away before everything blew up.

• 16:23Speaker 05

  Yeah, that's right. That's right. But he, even he didn't say anything. So I walk out of that meeting, and I'm going, ah, maybe I have this all wrong. So, points in time I had my doubt, but it became clearer by 2006.

• 16:35Barry Ritholtz?

  So, after the crisis in 08, 09, or eventually post-financial crisis, you become an informal policy advisor to the Obama administration. Tell us how that came about. Outside, nonpartisan economic advisor.

• 16:52Speaker 05

  Well, that was the time when the administration was trying to figure out, how do I respond? Obama administration had just, the crisis had occurred, September 08. He was in office by January of 09. They used that period to try to figure out, how do I respond to this mess? What do I do? You know, both from a kind of fiscal policy perspective, from a regulatory perspective, from all angles. And I had done a lot of work on estimating so-called multipliers of different policies. So if you do this, you know, what is the impact on the economy? If you do that, what is the impact on the economy? Now that's widespread, that kind of work. Lots of people do that work, do it much better than I do. But at the time, there just really wasn't anyone looking at it that way and trying to estimate those multipliers.

• 17:37Speaker 05

  So they used those multipliers in trying to design the response, the stimulus, so-called stimulus package that they put in place in January 2000, in 2009.

• 17:47Barry Ritholtz?

  Arguably, no way near large enough to drive a recovery in the economy quickly.

• 17:54Speaker 05

  Well, yeah, and I think that's the lesson that the Biden administration took coming out of the pandemic, right?

• 17:59Barry Ritholtz?

  Even the Trump administration, the first CARES Act, the first two CARES Acts were under President Trump.

• 18:04Speaker 05

  Right. Biden gets into office, March of 2021. 2021. He passes the American Recovery Act, $2 trillion. And, you know, obviously it was very large, a lot of criticism. Me and Larry Summers was all over it, saying it's too large. But I think the Biden administration was looking back at the Obama administration and saying, hey, look, the Obama administration was, we will come up with this package, and if we need more, we'll get it. They never got it. So the economy struggled for 10 years after the financial crisis. And so the Biden administration saw that and they said, hey, we probably should go for a bigger bite of the apple because we may not get another bite, and therefore let's go for a bigger package.

• 18:40Barry Ritholtz?

  Right. And that was over the next 10 years. And that came into the environment where the first CARES Act under President Trump was the largest fiscal stimulus since World War II, at least as a percentage of GDP. Then there was the CARES Act II under Trump, and then a whole bunch of-

• 18:59Speaker 05

  I think I CARES Act III, and then you come in with Biden.

• 19:02Barry Ritholtz?

  CARES Act III was Biden, which was short-term and dropped, but most of the other legislation under Biden was over 10. The infrastructure bill, the Inflation Reduction Act, those are all 10-year legislation. So it feels very much like the 2010s was the era of monetary stimulus, and the 2020s seems to be the era- Of fiscal stimulus.

• 19:26Speaker 05

  You know, I hadn't thought of it that way, Barry, but that's a really good way of putting it. Yeah, exactly. I mean, the Fed had to work really hard back in the 2010s because they weren't getting any support from fiscal policy. That was government shutdowns.

• 19:37Barry Ritholtz?

  That's right.

• 19:37Speaker 05

  Treasury debt limit battles. Fiscal policy was contractionary, and so the Fed had to step in and provide a lot of support.

• 19:43Barry Ritholtz?

  Right. Congress did not, you know, they seem to have forgotten everything we had learned from Keynes.

• 19:49Speaker 05

  Yeah.

• 19:50Barry Ritholtz?

  And they remembered it in 2020. It's kind of amazing because I recall being at a dinner with a number of people, including some Nobel laureates in economics. And when I said, oh, I think they're trying to cause a recession, Congress, they are, they know how this works. They're just, you know, they, they want to submarine this administration. It was very much poo-pooed by the people there. And then eventually it's like, oh, this has become much more partisan. And I was making a partisan argument. It was just an observation. Hey, we know how this works. We've done giant fiscal stimulus, whether it's tax cuts or spending. We know what the impact is. Refusing to do it, I can't come

• 20:33Barry Ritholtz?

  up with a better explanation other than we want to tank the economy and get this guy out.

• 20:38Speaker 05

  Well, the explanation of face value was, of course, deficits and debt, right? We want to rein that in.

• 20:43Barry Ritholtz?

  Right. Except for giant tax cuts and big spending. Other than that, you know, it's, everybody is a deficit hawk when they don't control the White House.

• 20:53Speaker 05

  That's a great point.

• 20:54Barry Ritholtz?

  And it's, it doesn't matter if you're Republican or a Democrat. When your guy loses, suddenly the debt matters. And it's been going on my entire adult life. It's so transparently political.

• 21:05Speaker 05

  And that's where we are on the deficit and debt, for sure.

• 21:07Barry Ritholtz?

  So I wanted to ask about your relationship with John McCain.

• 21:11Speaker 05

  Yeah.

• 21:12Barry Ritholtz?

  Because I, I find this both fascinating and hilarious.

• 21:15Speaker 05

  Yeah. Well, perhaps it equally is interesting. My friend Kevin Hassett.

• 21:21Barry Ritholtz?

  Uh huh.

• 21:21Speaker 05

  Asked me to come help out the McCain campaign. You know, now Kevin is the head of the National Economic Council under Donald Trump. He was at AEI, the American Enterprise Institute at the time.

• 21:30Barry Ritholtz?

  And name consistently floated for potential bigger roles.

• 21:35Speaker 05

  Yeah. And this is well before Obama came on the scene. I didn't know President Obama at all. And I knew McCain. And I admired him mostly around foreign policy. That's obviously where his expertise was. But I also felt like they needed real help. The campaign needed real help on economics. And I was the guy who took all the incoming information about the economy and translating that into what does it mean for economic activity and what, how should we, the campaign, respond to that? Well, I wasn't paid. I wasn't officially part of the campaign, but that's the kind of support I provided. But, you know, obviously, when the crisis hit, Senator McCain, that wasn't his strong suit, right? Again, he was foreign policy, he wasn't economics.

• 22:20Speaker 05

  He kind of struggled across the finish line and never really grabbed on. I can recall briefing the campaign, saying, "We got a real problem here. This is a, this is gonna be a mess." And there was, you know, complete kind of, "No, there's not. Everything will be okay." And so there was a little bit of tension at the end of that campaign.

• 22:37Barry Ritholtz?

  It feels like he just encountered some unfortunate timing because between the war in Iraq and the crisis, I think the Bush administration had made any mainstream Republican unelectable in 2008. And the Democrats put up a charismatic guy.

• 22:58Speaker 05

  Yeah.

• 22:59Barry Ritholtz?

  I don't think McCain would have been anything but a really good president.

• 23:03Speaker 05

  Right.

• 23:04Barry Ritholtz?

  And in any other year, a really strong candidate.

• 23:06Speaker 05

  Right.

• 23:07Barry Ritholtz?

  Kind of shocking the way this plays out.

• 23:09Speaker 05

  Yeah.

• 23:10Barry Ritholtz?

  But you're often painted as this, "Oh, that's Zandi is a lib." Like, he was an advisor to both McCain and Obama. That's more of someone trying to serve his country, not a partisan.

• 23:21Speaker 05

  I have always provided advice when asked from both sides of the aisle. So, you know, sometimes more from the D side, at times more from the R side, but I've done both. Clearly, the political center of gravity has shifted here, and McCain, even McCain, I'm not sure where that kind of lines up in the political spectrum. But yeah, I've always been nonpartisan. I tried my very best to be nonpartisan. And even now, it's tough to talk about the economy as an economist, given all of the things that are going on with economic policy. Policy tariffs and immigration and Doge. Generally, when I address a group, I start saying, I know I'm going to sound political. I don't mean to be political. I'm doing my very best not to be political. So please forgive me.

• 24:05Speaker 05

  And that generally people take that in and forgive me if I overstep in some way.

• 24:09Barry Ritholtz?

  It's tough to be an honest criticizer of policy without people. It's kind of a lazy accusation to say, jacques use, this is partisan. Well, no, we could talk about tariffs. We tried them in 1930, didn't work out great. Why do we think it's going to work out well this time?

• 24:30Speaker 05

  Right.

• 24:31Barry Ritholtz?

  That's not partisan. That's just, that's the factual situation.

• 24:34Speaker 05

  That's right.

• 24:35Barry Ritholtz?

  If you want to make an argument for why a consumption tax on consumers of imported goods is an efficient, effective way to either lower the deficit or raise capital or realign global trade, have at it. But understand there's a body of history that informs us what happened the last time.

• 24:57Speaker 05

  Totally. It's so interesting because on almost every issue economists debate and the debate is reasonable. Right? Economists.

• 25:04Barry Ritholtz?

  Reasonable people can disagree.

• 25:06Speaker 05

  Yeah. And economists think about the second, third, fourth, fifth order effects of these things and how they platter of time. So it's very, not at all unusual to have these knockout, drag down fights between economists over issues. But on tariffs, broad based tariffs, it's not much of a debate.

• 25:24Barry Ritholtz?

  Right. There's a pretty big consensus. Hey, the world isn't flat. We figured this out already.

• 25:29Speaker 05

  So, so I feel like I'm on pretty sound ground when I say I'm not a fan of these broad based tariffs.

• 25:36Barry Ritholtz?

  The phrase that always comes up with me on these sort of things, these accusations of partisanship is the Overton window. You could be middle of the road, or you know, maybe center left or center right. But when the entire framework shifts far to one way or another, it suddenly looks like you're an outlier, even though you were kind of centrist. Well, that's kind of how I feel. Right. The wings have have expanded and suddenly what what seems like it's pretty middle of the road isn't any any longer. Coming up, we continue our conversation with Mark Zandi, chief economist of Moody's Analytics, discussing what the firm is focusing on in

• 26:17Barry Ritholtz?

  the 2020s. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 26:28Speaker 00

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• 26:59Speaker 01

  This is the Bloomberg Tech Minute brought to you by Chat G P T. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters,

• 27:44Speaker 01

  advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 28:25Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Mark Zandi. He's chief economist of Moody's Analytics. Previously, he co-founded Economy.com and hosts the Inside Economics podcast.

• 28:41Speaker 05

  I bet you say that to all the economists.

• 28:43Barry Ritholtz?

  Everybody is my extra special guest. I get grief about it because once I painted myself into that corner, "Hey, my ordinary guest is this bum. Let's talk about your Moody's experience." We talked earlier about, you know, your warnings on housing and, and home financing and what ended up happening with subprime securitization. Moody's was one of the biggest rating agencies. I criticized them in Bailout Nation. Tell us what it was like when you joined the firm in '05 and you're wagging a finger about these sort of things. Did you get any sort of pushback?

• 29:22Barry Ritholtz?

  What, what was it like stepping into a firm that indirectly was a focus of, of some of your analytical critiques?

• 29:31Speaker 05

  Yeah, I got pushback.

• 29:32Barry Ritholtz?

  You did?

• 29:32Speaker 05

  I did, yeah. I mean, I, I wrote a paper on the subprime mortgage space and did everything but say, you know, "These securities should be downgraded. House price declines, credit risk, defaults, foreclosure, these are the losses." But I didn't take it the next step and say, "Okay, what does this mean for ratings?" But I wrote that paper and it went to the CEO, a great guy, and the CEO's-

• 29:56Barry Ritholtz?

  CEO of Analytics or the CEO of Moody's?

• 29:59Speaker 05

  Moody's.

• 29:59Barry Ritholtz?

  Full?

• 30:00Speaker 05

  Full Moody's.

• 30:01Barry Ritholtz?

  Right.

• 30:01Speaker 05

  And this, of course, I just had sold my company to them, so this was all brand new. He didn't, who, who is this guy? What's his, what's he doing?

• 30:09Barry Ritholtz?

  Zandi.

• 30:10Speaker 05

  Zandi.

• 30:10Barry Ritholtz?

  That's the back of the alphabet. We never get to his stuff.

• 30:13Speaker 05

  And he goes, why is he talking about subprime mortgages? What does that have to do about the economy? And at the time, that was a reasonable question. The best thing that ever happened?

• 30:21Barry Ritholtz?

  Yeah.

• 30:22Speaker 05

  Bernanke gave a speech called

• 30:23Barry Ritholtz?

  Contained.

• 30:24Speaker 05

  Subprime mortgage.

• 30:25Barry Ritholtz?

  Right.

• 30:26Speaker 05

  And he, remember in that speech, he said, don't worry, this is not a problem. But because he wrote that speech, I could send it to the CEO. I said, look, this is why I'm talking about it.

• 30:35Barry Ritholtz?

  Right. The head of the Fed is talking about it. I should be sure he could talk.

• 30:39Speaker 05

  Right.

• 30:39Barry Ritholtz?

  What was he, vice chair or just a governor back then? Or was that his chairman?

• 30:42Speaker 05

  He was chair, I think, at the time. He was, yeah, he was definitely chair. To the CEO's credit, he said, okay, you know, you publish it. And it's the best thing that ever happened to, well, one of the things, best things that happened to Moody's because when the Financial Inquiry Commission, you remember the Financial Inquiry Commission?

• 30:57Barry Ritholtz?

  Sure, FCIC, absolutely.

• 30:59Speaker 05

  Yeah, they, they

• 31:00Barry Ritholtz?

  And that, I have that book. It's like this thick, sitting on a shelf.

• 31:02Speaker 05

  Oh, yeah, yeah, yeah. Yeah. I was, I was, I testified. I was the first panel.

• 31:07Barry Ritholtz?

  Oh, really?

• 31:07Speaker 05

  Panelist, yeah.

• 31:08Barry Ritholtz?

  Amazing.

• 31:09Speaker 05

  And of course, the CEO was a later panel with Warren Buffett. Warren Buffett was the, is a shareholder in Moody's. I think he still is a big shareholder. The lawmakers were questioning them and the CEO could say, hey, look, here's, here's the study.

• 31:24Barry Ritholtz?

  Hey, can I tell you something? A little, a little self-awareness and

• 31:28Speaker 05

  So that, yeah, I've been there for 20 years. I love Moody's. And, but that really helped a lot, right? In every respect, it helped my credibility.

• 31:37Barry Ritholtz?

  Helped the company's credibility.

• 31:39Speaker 05

  Yeah, helped the company's, established a set of ground rules that I'm able to write about, think about, talk about anything that I think is important about the economy. All that was established in that point. Now, that, that's getting tested at different points in time as we move along here. But, and we're in a trying time now, but that was very, very important to my successful stay at Moody's for 20 years.

• 32:01Barry Ritholtz?

  I wish I could remember who wrote a criticism in response to the Bernanke speech about subprime, because the line was, subprime is contained.

• 32:13Speaker 05

  Yeah.

• 32:13Barry Ritholtz?

  And the response, it could have been Alan Apelson and Barron's. It could have been James Grant, could have been Josh Rosner and Chris Whelan.

• 32:20Speaker 05

  Oh, great, yeah.

• 32:21Barry Ritholtz?

  But it was, yes, subprime is contained to planet Earth. The rest of the solar system is safe. And I, it was one of those lines where, damn. Damn, I wish I wrote that.

• 32:30Speaker 05

  Yeah, right.

• 32:31Barry Ritholtz?

  I might have been Abelson or Grant, but um.

• 32:34Speaker 05

  That sounds like a Jim Grant.

• 32:35Barry Ritholtz?

  Right, it very much does. It's sort of dry.

• 32:38Speaker 05

  Is he still writing, Jim Grant?

• 32:39Barry Ritholtz?

  I think so.

• 32:40Speaker 05

  Yeah, you know, we kind of lost track.

• 32:42Barry Ritholtz?

  Yeah, it happens especially in this era of Substack where

• 32:45Speaker 05

  Yeah, right.

• 32:46Barry Ritholtz?

  your inbox is just overflowed with uh, with stuff. So, you got some pushback, but they cleared it. I gotta ask, what was your experience like at Moody's during the great financial crisis? It had to be 24/7 work, plus terrifying everything.

• 33:04Speaker 05

  Oh, it was an amazing, scary.

• 33:07Barry Ritholtz?

  Mm-hmm.

• 33:08Speaker 05

  Uh, I can remember a few scary, real scary moments in my mind. You know, when I got a call from a CEO of a major retailer saying that, you know, if we don't do something, he's gonna not be able to make payroll, you know, on. And I'm saying, I'm thinking to myself, he's telling me this? We got a real problem.

• 33:27Barry Ritholtz?

  Well, he wants you to tell people in DC.

• 33:30Speaker 05

  That's exactly what it was. That was exactly what it was.

• 33:32Barry Ritholtz?

  Didn't um, the Bush administration, I don't remember if it was Hank Paulson or Bernanke, have conversations? Maybe it was the CEO of Ford or GM? Hey, we have money, but our credit facility is frozen. We can't get that money to make payroll.

• 33:49Speaker 05

  Right. Well, there was so many things going on. Remember this commercial paper market was, had frozen and completely frozen? And of course, that's key to making payroll for a lot of these companies.

• 33:59Barry Ritholtz?

  I have a buddy who was on a derivatives trading desk, and he always pushes back when I use the word frozen. He's like, hey, I don't know what you're talking about. We were trading billions of dollars a day in paper. It was just discounted 30, 40, 50%. So, there was liquidity, but there was a haircut involved.

• 34:17Speaker 05

  Well, and also just trying to find out, was it 30? Or was it 50? Or was it 75?

• 34:21Barry Ritholtz?

  You don't know. You really don't know. That led to the line, um, there's no such thing as toxic paper, only toxic prices.

• 34:29Speaker 05

  There you go.

• 34:30Barry Ritholtz?

  So, yeah, absolutely. So, that experience had to be just mind blowing.

• 34:34Speaker 05

  Well, also from coming just a purely academic perspective for an economist. I mean, this was just an incredible time. One, once every century, you see something like this. And there's so much that you're learning while you're doing. And it was not only just economics, it was also political economy, you know, how do, what should lawmakers do and how should they do it and all the moving parts there. So it was a very amazing time. And that's when I wrote that first book was, it's not a great book, Barry. And there is a, I did write a chapter, chapter seven on the rating agencies, but I did not put it in because I was part of the rating agency and no one would believe me anyway.

• 35:17Barry Ritholtz?

  Now you've been there 20 years. The financial crisis is more than 15 years in the rear window. Tell us a little bit about what Moody's Analytics is doing here and now.

• 35:31Speaker 05

  We're very simple business. My part of Moody's is a very simple business. We produce economic forecasts and scenarios.

• 35:38Barry Ritholtz?

  Yeah, but that's not really a simple thing to do. There's a lot of inputs and a lot of moving parts.

• 35:44Speaker 05

  There is, but the actual business itself is very simple. And one of the things that has been kind of a tailwind to our work has been the regulatory environment, right? The financial institutions all over the globe need to do stress tests for capital planning. It's even now embedded in the loan loss provisioning. CECL here in the US is an accounting framework that requires forward looking projections. IFRS 9 overseas, climate stress testing, all those things require a very disciplined, comprehensive approach to economic forecasting. And so that's really been key to, key to the business here over

• 36:29Speaker 05

  the last 10, 15 years.

• 36:31Barry Ritholtz?

  So that's kind of interesting. Your clients, are they necessarily Wall Street investing firms? Are they government institutions or non-governmental agencies?

• 36:42Speaker 05

  All of the above, all of the above.

• 36:43Barry Ritholtz?

  When I think of climate stress testing, I Just was involved in this silly debate about climate change. And my answer is, hey, my opinion is irrelevant. Go talk to an insurer if climate change is a hoax.

• 36:58Speaker 05

  Great point.

• 36:59Barry Ritholtz?

  And, and what, what are your experiences doing climate stress tests? For you look how hard it is to get insurance in places like Florida? Like, how significant is something like that to the sort of research? You would sell to a private entity like insurance?

• 37:15Speaker 05

  It's critical. So, uh, house prices. Uh, go look at house prices in Florida. Uh, we were talking about the west coast of Florida. They're falling and they're falling because homeowners insurance costs are rising because of the cost of, of hurricanes and other storm damage. Uh, so the insurers take that all in. They raise homeowners insurance and that depresses demand and, and price. And of course, that has all kinds of implications for mortgage credit risk. For if you're a mortgage insurer, if you're in the mortgage business in any, in any kind of respect. So that's a great example of where, you know, uh, the kind of economic forecasting is really critical to, uh, what's going on in real life. And in particular, the climate, it's real. It's, it's happening.

• 37:57Speaker 05

  There's damage and insurers are trying to figure that out and they're now building that into their premiums. And it's having a real impact. Uh, and right now it's more concentrated in places like Florida and Texas and California. But it's going to become more of a, a, a problem in other parts of the country, you know, pretty quickly.

• 38:15Barry Ritholtz?

  Huh. To, to, to say the very least, we've seen fires in California. We've seen flooding in the mid Atlantic states.

• 38:23Speaker 05

  Well, let me get, here's a good, uh, factoid for you. Or I'll ask you, I'll ask you, guess which state has the highest homeowners insurance costs in the country?

• 38:32Barry Ritholtz?

  So the two that come to mind immediately are Florida and California. But the question makes me

• 38:38Speaker 05

  Think it.

• 38:38Barry Ritholtz?

  Wonder, are, are we talking about places like Texas or the Carolinas?

• 38:45Speaker 05

  Nebraska.

• 38:46Barry Ritholtz?

  Nebraska? Because of tornadoes?

• 38:47Speaker 05

  Well, yeah, and, and convect, convective storms with the, the, um, the big thunderstorms that come along. And they drop a lot of

• 38:55Barry Ritholtz?

  That hail.

• 38:57Speaker 05

  The hail does tremendous damage. Yeah.

• 38:59Barry Ritholtz?

  Yeah, you know, we just had a mild storm and this little branch smashes the windshield of the truck and I'm waiting three weeks to to replace it. And when I asked the, we have glass coverage and I asked the insurer about this, they're like, you have no idea how backed up everything is and there are delays in getting dumb things like windshield.

• 39:21Speaker 05

  Right.

• 39:22Barry Ritholtz?

  So all that stuff, plus all the pandemic shortage of automobiles and things like that, that's driven automobile insurance up. I never would have guessed Nebraska. That's an amazing.

• 39:34Speaker 05

  Yeah, isn't that interesting? And also.

• 39:36Barry Ritholtz?

  Who's number two or three? I'm curious who's right behind them. Like where are Florida and California?

• 39:40Speaker 05

  They're up there. They're up. They're definitely up there.

• 39:42Barry Ritholtz?

  Top 10.

• 39:42Speaker 05

  Yeah, top 10. The state that had the lowest, and this is I'm sure going to change when we get more up to date data is Hawaii.

• 39:48Barry Ritholtz?

  But well, you just had the.

• 39:50Speaker 05

  Fires, the fire. So that's going to change. But that had been the case. But the other thing is overseas, climate is a real issue. Just go to Indonesia where the central bank is, you know, client and they they're doing a lot of climate assessment because Jakarta is increasingly underwater, right? So.

• 40:09Barry Ritholtz?

  Literally not. You don't mean negative cash flow. You mean.

• 40:13Speaker 05

  I mean literally under seawater is sea level is rising and there's there's there's doing real damage. And so you have to consider that. So here in the US, it's an issue overseas is becoming in some parts of the world existential.

• 40:26Barry Ritholtz?

  You know, the I'm trying to remember if this was Wired or The Atlantic, but there was a big piece a year or two ago about Miami and the flooding risk from Miami, and this is very surprising, it's not the seas coming over the land. It's that so much of South Florida is built on the sort of limestone base, which is very porous to water. And so the flooding is not storms surging over the coastline. It's water bubbling up from, right? It's like a crazy. I never, you know, it there's so many random factors that if it's not your space, wow, like I never would have guessed Nebraska. And I never would have guessed Southern Florida's risk.

• 41:11Speaker 05

  Well, that's why they have those sinkholes, right? That's why the sinkholes are a real problem.

• 41:14Barry Ritholtz?

  In where?

• 41:14Speaker 05

  In Florida.

• 41:15Barry Ritholtz?

  No kidding?

• 41:16Speaker 05

  Yeah, because the bubbling up undermines the ground.

• 41:20Barry Ritholtz?

  That's unbelievable. Coming up, we continue our conversation with Mark Zandi, chief economist at Moody's, discussing the state of the economy today. I'm Barry Ritholtz. You're listening to Masters of Business on Bloomberg Radio.

• 41:44Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 42:25Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

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• 44:02Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My better-than-average guest this week is Mark Zandi. He's the chief economist of Moody's and hosts my extra-special guest. You called me out on it. You know, Conan O'Brien's podcast, he makes everybody say their name, and I feel blanked to be Conan O'Brien's friend. And it's kind of a funny throw-it-to-the-guest to fill that in. And I forgot her name. She was on Shrinking, Jessica, and former Daily Show. She said, "I feel pressured to say anything about being Conan O'Brien's friend."

• 44:45Barry Ritholtz?

  So I kind of painted myself into the corner. Maybe I'm gonna have the guest-

• 44:50Speaker 05

  You did a great job getting out of it, so no worries.

• 44:52Barry Ritholtz?

  Maybe I'm gonna have the guest say, "What sort of a guest are you this week?" So let's talk about the state of the U.S. economy today. How do you assess where we are? What indicators are most concerning to you? And then we'll drill down more specifically.

• 45:08Speaker 05

  The economy's struggling. I think it's on the precipice of recession.

• 45:13Barry Ritholtz?

  Precipice of recession. What does that mean? Does that mean- 50 50 chance this year because we've had economists forecasting recession pretty much since 2022.

• 45:24Speaker 05

  Not me, not me. I haven't been.

• 45:27Barry Ritholtz?

  So this is a change. You're now starting to get more cautious.

• 45:30Speaker 05

  This is nervous I've been.

• 45:31Barry Ritholtz?

  And you've been robust. You've seen this as a robust economy the past few years.

• 45:35Speaker 05

  I have, yeah.

• 45:37Barry Ritholtz?

  So the switch is, is significant.

• 45:40Speaker 05

  It is.

• 45:40Barry Ritholtz?

  So what, what is driving that?

• 45:42Speaker 05

  And I have to be humble because what ails the economy is pretty obvious. It's economic policy and it can change quickly. Therefore, you have to be humble here because policy can change and we may not, the economy may find its footing as a result and we avoid recession. So there's a lot of, I hate using the word, but it's the only word I can think of, is uncertainty. I mean, there is a lot of, of that in economic forecast.

• 46:07Barry Ritholtz?

  I steer clear of the U word and.

• 46:09Speaker 05

  Yeah. What do you say?

• 46:11Barry Ritholtz?

  Lack of clarity.

• 46:12Speaker 05

  I kinda like that.

• 46:13Barry Ritholtz?

  Because I think it's, I think it's not as pregnant as uncertainty.

• 46:17Speaker 05

  Yeah, I like that. Yeah, lack of clarity.

• 46:18Barry Ritholtz?

  But, but no doubt about that. We've seen CFOs talk about withholding capex spending and even families postponing trips to Disneyland.

• 46:29Speaker 05

  And to say it, so GDP growth, the value of all the things we produce, that was barely 1% in the first half of the year.

• 46:36Barry Ritholtz?

  Right.

• 46:36Speaker 05

  Consumer spending has gone nowhere all year long. Manufacturing's in recession. Construction's in recession. Transportation distribution is in recession.

• 46:45Barry Ritholtz?

  Not, not, you're not saying this is, growth rate is slowing. You're saying this is in the red.

• 46:50Speaker 05

  In the red, red.

• 46:51Barry Ritholtz?

  Manufacturing, construction. Why is construction in the red? There's such a demand for housing.

• 46:58Speaker 05

  Uh, home building is weakening very rapidly.

• 47:00Barry Ritholtz?

  Really? Is that a function of high rates and mortgages? Or is that a function of, hey, we can't find people to build these houses to say nothing of, we're going to Home Depot and deporting the guys looking for work.

• 47:12Speaker 05

  It's affordability. People can't afford the new homes.

• 47:14Barry Ritholtz?

  That's all it is. It's just affordability.

• 47:16Speaker 05

  And the builders have done an admirable job trying, with incentives, interest rate buy downs to keep the market going and maintaining construction levels, but that's over. They're not able to do it.

• 47:28Barry Ritholtz?

  No more buying down rents.

• 47:29Speaker 05

  So now we're seeing single family home building come down for the first time. Multi family's been coming down for, for, for at least a year.

• 47:36Barry Ritholtz?

  Right.

• 47:36Speaker 05

  Because it got overbuilt. All these luxury towers going up in New York and Philly and Chicago.

• 47:40Barry Ritholtz?

  Palm Beach.

• 47:41Speaker 05

  Vacancy rates are too high. Rents are too weak. The commercial, non-residential side is also very weak. The only strength is data centers.

• 47:50Barry Ritholtz?

  Clearly.

• 47:51Speaker 05

  Yeah, and that, that even with that, if you look at overall construction spending, it's like over, was it $2 trillion? It's declining.

• 47:58Barry Ritholtz?

  So I was on the impression that medical facilities, warehouses, things like that were still fairly robust. You're telling me that's no longer the case?

• 48:08Speaker 05

  There's different flavors. Yeah, yeah, the healthcare is fine, data centers booming, offices are way down, multifamilies down, residential, single families way down. So you add it all up. And now public construction is starting to roll over, right?

• 48:24Barry Ritholtz?

  Right.

• 48:24Speaker 05

  Because you had that big lift because of the infrastructure legislation that was passed a few years ago.

• 48:28Barry Ritholtz?

  Still, but it's still on, some of it is still ongoing.

• 48:31Speaker 05

  It's high, but you know, that the, it's now rolling over. It's a high level of spending, but you've now passed the peak.

• 48:36Barry Ritholtz?

  Right.

• 48:36Speaker 05

  In spending and it's now starting to come in. And we're not going to see any more infrastructure spending on the public side for, you know, quite some time.

• 48:42Barry Ritholtz?

  Really?

• 48:42Speaker 05

  I don't think so.

• 48:43Barry Ritholtz?

  I thought that would continue on for a couple of years. Wasn't that like a five or 10 year legislation?

• 48:47Speaker 05

  It's an elevated level.

• 48:48Barry Ritholtz?

  Oh, and then it sucks the tail down.

• 48:50Speaker 05

  What really matters for growth is the change in.

• 48:52Barry Ritholtz?

  Gotcha.

• 48:52Speaker 05

  And you've passed the peak. Yeah, it's coming now, starting to come in.

• 48:55Barry Ritholtz?

  So you've talked about everything. We haven't gotten to labor.

• 48:58Speaker 05

  Jobs, by the way, that's.

• 48:59Barry Ritholtz?

  That's my next question. Tell us about the labor market.

• 49:01Speaker 05

  It's, it's consistent with the economy is struggling. The job numbers are showing very little job growth in recent months. And I would not be surprised in the next few months, assuming we get the data from the Bureau of Labor Statistics, we can count on, talk about that. But assuming we actually get the data, we could actually see some, would not be surprised if we saw some negative numbers, you know, actual declines in employment.

• 49:24Barry Ritholtz?

  So, so Jim Bianco said something the other day that really kind of surprised me. First time in US history, we are actually seeing negative population growth, not, not caused by a war or anything, but immigrants aren't coming to the country and people are being deported. And by the end of 2025, we may have a lower total population number than we had at the end of 2024. What does that mean for the labor market?

• 49:51Speaker 05

  Yeah, I mean, at the end of the day, if you're at full employment and we're close, 4.2% unemployment rate, the only way you can generate a job is if you've got someone to fill the job.

• 50:02Barry Ritholtz?

  Right.

• 50:02Speaker 05

  You need a labor, you need someone who's working. So if the labor force isn't growing, and right now it's just flat, it really has, well, actually, if you look at

• 50:10Barry Ritholtz?

  Well, you could have job openings, but just they're unfilled.

• 50:13Speaker 05

  Well, that's right.

• 50:14Barry Ritholtz?

  The data and

• 50:15Speaker 05

  That's right, but it's not a job until you fill it.

• 50:17Barry Ritholtz?

  Right.

• 50:18Speaker 05

  So you could actually, and right now, labor force is declining, if you believe the data, believe the precision of the data, but the level of the labor force in July, the last data point is higher, is lower than it was back in January. And so that would suggest that it's going to be very difficult for the economy to generate jobs. And it's very possible we start getting job loss and just negative numbers.

• 50:42Barry Ritholtz?

  So, so what are, what odds are you putting on a recession? And we'll talk about inflation and tariffs in a moment. But what odds are you putting on a recession in Q4 2025 or Q1 2026?

• 50:54Speaker 05

  I think our baseline outlook, my baseline outlook has no recession, just a weak economy. We kind of struggled the way through.

• 51:03Barry Ritholtz?

  Like a sub 1% GDP and a slightly

• 51:06Speaker 05

  It's a 1%, it's actually 1% on the nose year over year through Q4 of this year, Q1 of next, which is historically below the economy's potential.

• 51:13Barry Ritholtz?

  Right.

• 51:14Speaker 05

  No job growth.

• 51:15Barry Ritholtz?

  Zero, like a zero BLS print every month?

• 51:18Speaker 05

  I think I have average monthly job growth in

• 51:20Barry Ritholtz?

  Sub 100.

• 51:21Speaker 05

  Oh, way, way like 25K.

• 51:24Barry Ritholtz?

  Really?

• 51:24Speaker 05

  25, 50K, something like that. Yeah.

• 51:26Barry Ritholtz?

  That, that's a, you know, what's shocking about this sort of discussion is regardless of who you voted for or what your political affiliation is, there's no debate.

• 51:40Barry Ritholtz?

  The first quarter 2025 was a very robust economy with markets hitting all time highs. And here we are, eight months later, revenue is high, profits are high, expectations of forward growth in the stock market is high. I know the old joke is stock markets have predicted nine of the last four recessions.

• 52:04Speaker 05

  Right.

• 52:04Barry Ritholtz?

  But what are all time highs and this ongoing enthusiasm for growing corporate profits? What is that saying about the economy?

• 52:14Speaker 05

  Yeah, and that's the reason why, one reason why I don't have a recession in the baseline. The equity market is held up, although obviously a big part of what's going on in the equity market is related to AI and that has nothing to do with the business cycle.

• 52:25Barry Ritholtz?

  It's AI and half of the S and P 500 revenues are overseas, so it may not be reflecting US growth.

• 52:32Speaker 05

  And also you got tax cuts, right? So if you just assume a

• 52:35Barry Ritholtz?

  Stimulus, fiscal stimulus.

• 52:36Speaker 05

  If you have constant PE multiple, if you raise after tax earnings, you should get a higher price. So if you abstract from those things that are independent of the economic cycle, the stock market at best is flat from where it is at the beginning of the year. And that's the economy. It's flat. It's gone nowhere. Now

• 52:53Barry Ritholtz?

  The economy is flat, but the stock market can still elevate off a flat economy with tax cuts, AI spending and international.

• 53:01Speaker 05

  And that's my sense of what's happening. So what's going on in the equity market is actually, I think, consistent with what we're observing in the economy. Now, if the stock market starts to head south writ large and we see non-AI part of the market starting to go south here, I think that's a strong signal that we're going in, that we're going into. And the equity market is not only important as a signal, but increasingly it drives economic activity because The bulk of spending in the economy today is done by folks in the top part of the income and wealth distribution.

• 53:36Barry Ritholtz?

  Top 20% is half of all spending.

• 53:38Speaker 05

  By our calculation, the top 10% account for, oh, you're right, it's top 20% account for 50% of this spending, right?

• 53:45Barry Ritholtz?

  Right, and the top 10% is most of that.

• 53:47Speaker 05

  And most of that, and the top 5% is most of that, so.

• 53:51Barry Ritholtz?

  So, very, not a well-distributed consumer spend, it's high-end, high-end and luxury goods, which, you know, that's top 2%, like, that skew is very, the good news is, if you go buy a private jet, you can depreciate all of it in year one of the, uh, thanks to the new tax bill. But, that sort of stuff, so I remember when Bush did his accelerated depreciation, which, I want to say it was, depending on the item, it was three to seven years instead of 10 to 20 years.

• 54:33Speaker 05

  Right.

• 54:34Barry Ritholtz?

  Being able to depreciate these luxury goods, maybe that's a factor in driving some higher spending?

• 54:40Speaker 05

  I'm sure it is, yeah, and that should also help the construction markets, too, right?

• 54:44Barry Ritholtz?

  You would think, right? Real estate's a little different, so, I don't know if you could depreciate all of your build-out in year one, but I'm gonna guess it's not a 20-year depreciation schedule, you probably can do it. I should really ask one of my tax guys what the depreciation schedule is for new construction, 'cause you would think that would encourage more building, and we desperately need more single-family homes.

• 55:11Speaker 05

  And that may be the way out of recession, not only, it's really get more fiscal support, right? And we will likely get another reconciliation, a piece of, BBB, the big, beautiful bill, was reconciliation, they'll take another, they have another shot at that on the other side of the fiscal year.

• 55:27Barry Ritholtz?

  October?

• 55:28Speaker 05

  Uh, yeah, that's when the new fiscal year begins, and so they could come up with more stimulus.

• 55:32Barry Ritholtz?

  Right.

• 55:33Speaker 05

  You've heard talk of a stimulus check, you know, I'll pay for the, we'll take the tariff revenue and I'll rebate some of that back. To Americans in the form of a check and that would that would that would be stimulus.

• 55:43Barry Ritholtz?

  For sure.

• 55:44Speaker 05

  Uh, and that would support the economy.

• 55:46Barry Ritholtz?

  It worked the last Trump administration. He wrote a check and when people were stuck at home.

• 55:50Speaker 05

  Right.

• 55:51Barry Ritholtz?

  And, um, you know, I, I try and be nonpartisan when I look at those sort of things. It turns out Keynes was on to something a century ago, wasn't he?

• 56:01Speaker 05

  Well, particularly if the economy's not at full employment. If you're, if you're flat on your back like you were in the pandemic or the financial crisis, you provide stimulus. Then you don't get the crowding out. You don't get the higher interest rates. You don't get the inflation, but you get the growth.

• 56:13Barry Ritholtz?

  So, so.

• 56:14Speaker 05

  But you're now, we're now closer to full employment. So that's a bit of a more dangerous game. Because if you over stimulate and you're at full employment, you're going to get the inflation. Already inflation is an issue, given the tariffs and the immigration policy.

• 56:25Barry Ritholtz?

  So let's talk about tariffs before we get to inflation. What's your perspective of the impact of both the policy and the way it's been implemented?

• 56:36Speaker 05

  Well, I'm not a fan of broad-based tariffs. I mean, strategic tariffs, no problem. I can, I can kind of get that. Uh, but the broad-based tariffs, so you know, we've been there, we've done that. You mentioned the 1930s. In fact, you can go back a hundred years before that, under Andrew Jackson, and we tried broad-based tariffs and it didn't work out so well. It takes about a hundred years for us to forget the mistake and do it again. So I, I, I, I don't think this is going to end well. Uh, it, it, it's, uh, raises inflation by definition. And then we'll see more of those pass, those prices pass through to consumers over the next six, 12 months as the time passes here. And it lowers growth. It's, it's pushes the economy towards stagflation and, and the immigration policy, highly restrictive immigration policy. And I, and I get the, the need for addressing the southern border.

• 57:21Barry Ritholtz?

  We're, we're talking about legal immigration, not illegal immigration.

• 57:25Speaker 05

  Yeah. It's very restrictive and that does, that reinforces the higher inflation and the weaker growth. So you've got two policies that are very substantive, working together to raise inflation, weaken economic activity.

• 57:38Barry Ritholtz?

  Reducing legal immigration contributes to higher inflation? Explain that.

• 57:43Speaker 05

  You're in a very tight, go back to the labor force, tight labor market.

• 57:46Barry Ritholtz?

  Gotcha.

• 57:47Speaker 05

  Uh, just.

• 57:47Barry Ritholtz?

  Less bodies, higher wages.

• 57:49Speaker 05

  You're disrupting a lot of businesses, ag, we know that, uh.

• 57:52Barry Ritholtz?

  Restaurants, construction.

• 57:54Speaker 05

  Construction, leisure, hospitality, elder care, childcare, all those things. And it will, presumably will raise costs, labor costs, you'll see wages rise and add to inflationary pressures.

• 58:05Barry Ritholtz?

  So, so we keep hearing from the Fed that they're data dependent, things are ambiguous, there's no clear, necessarily clear path to, uh, future policy. Is that a reasonable response, given everything that's been going on? Cause it seems odd to, to say, on the one hand, we're at risk of recession. On the other hand, there's a chance of increased inflation. Sounds a lot like seventies era stagflation.

• 58:34Speaker 05

  It is stagflation.

• 58:35Barry Ritholtz?

  What does that mean for where rates could go over the next couple of meetings? It seems like a 25 bip cut is sort of locked into September.

• 58:45Speaker 05

  Right.

• 58:46Barry Ritholtz?

  And I don't know how much of that is, hey, let's just throw a virgin in the volcano and make the, make the president happy. But there are credible reasons in both directions. This isn't like a one-sided debate.

• 59:00Speaker 05

  I, I think the, their decision to stay on hold was the right decision because they don't know, what do I respond to the inflation that I know is coming or the weaker growth that is in train? I, I just, and I don't know what, where the policies are. I don't, I have no sense of where the tariffs are going to land, when they're going to land there. I don't know what's going on with immigration policy. So let's just sit on our hands and just let this thing unfold a little bit before we can move on policy. Businesses have done roughly the same thing. They're saying, I don't really know. Therefore, it's not, I'm going to cut, but it means I'm not going to expand. I'm going to sit on my hands. And that's why the economy has gone sideways here since the beginning of the year. But here we are now, if I'm, you're at the Fed and I think they're, they're kind of, their weights on their, their, their goals are shifting.

• 59:44Speaker 05

  They're putting more weight on the economy than on inflation. Their thinking is inflation, because of the tariffs will be more one-off, they won't be persistent, which I think is a reasonable thing to think, but we'll have to see. But we know the economy is weakening, particularly the job numbers. And I, and I, again, going back to, we're going to get some negative numbers here. And I think that's what they want to avoid, particularly in the context of the political environment, because there's a lot of.

• 1:00:09Speaker 05

  Stuff coming out of Washington about reevaluating the Fed's, the Federal Reserve Act of 1913, their independence. And if you're at the Fed and you're seeing that, the last thing you want to do is go into recession and get blamed for the recession in the context of all those, kind of that political overlay.

• 1:00:25Barry Ritholtz?

  To say the very least. So, we haven't really talked about integrity of data, but since you alluded to it earlier, let's bring it up. You know, I'm a big fan of George Box. All models are wrong, but some are useful.

• 1:00:39Speaker 05

  Yeah.

• 1:00:39Barry Ritholtz?

  And so, my experience over the past, I don't know, 15 years, whenever I have a question about how something is put together in either a BEA or BLS data point, I just pick up the phone and call them and they eventually route you to the person, oh, here's the person who developed the birth death model, or here's the person in charge of survey data. They couldn't be more forthcoming, transparent, and helpful.

• 1:01:09Speaker 05

  Totally.

• 1:01:09Barry Ritholtz?

  And I'm kind of surprised at some of the crazy stuff I hear from people. I just heard a bunch of stuff about the MIT Billion Price Project, which ended up getting picked up by somebody. And they were talking about how great that is. And I'm like, hey, when you track this against CPI, they're almost identical. So, they're both different models. One is a little more skewed to the weighting of how consumers spend money. The other is just scraping all these data points, but they end up in the same place. How do you think about the integrity of data from the BLS?

• 1:01:46Speaker 05

  Right now, I think it's, I think it's fine. There's problems particularly with survey responses, but everyone's

• 1:01:55Barry Ritholtz?

  But that's true everywhere. Look at University of Michigan sentiment data has been plummeting for 10 years.

• 1:01:59Speaker 05

  And the answer to that isn't cut budgets. It isn't to cut staff. It is to put more resource in to help try to figure out how to improve those response rates. But even in the employment data, the payroll employment data that we're focused on, the response rates by the third month is, the first month, the response rate is 65. I'm making this up, but roughly speaking, 65%, 70%.

• 1:02:19Barry Ritholtz?

  Which is below what it used to be.

• 1:02:21Speaker 05

  It's down from where it was. By the third, it's 90, 95%. So, it's still a very, very good survey. But we all, as a result of the low response rates, we always get revisions to the data. In more typical times, when the economy is moving in a straight line, those revisions are small. When you're at an inflection point or a turning point, like I've been arguing we are, you get these big revisions. In fact, there's information in the revisions. It's not, it's not a bug. It's a, it's a feature. It's saying, hey, the economy is weakening and so the response rates, the responses we're getting after, after the first month are weaker than the ones we got in the first month, and therefore revising down the data. That's signaling, that's a, that's a strong tell that the economy is struggling and potentially at a turning point.

• 1:03:04Barry Ritholtz?

  So you're saying the July non-farm payroll, and I don't want to put words into your mouth. We had a July non-farm payroll that was pretty punk. That came out the first week in August, but the revisions were substantial for the prior two months. This isn't just a noisy data series or somehow partisan wrangling. This is a warning shot across the bow. Hey, the economy is starting to transition into a weaker state.

• 1:03:32Speaker 05

  Exactly.

• 1:03:33Barry Ritholtz?

  Pay attention. Is that a fair statement?

• 1:03:34Speaker 05

  That's the point. It's not that the data is any worse than it has been historically. There's anything nefarious going on. It's, that is the nature of the, of the data and it's telling us something. There's real information there. And so I, you know, I do, the thing I worry about the most is if there's a decision to not release the data as timely as it's being released today. The employment numbers that we've been talking about are the most timely data to get released the Friday of the first month.

• 1:04:01Barry Ritholtz?

  Oh, the quarterly nonsense that came out? That just seems...

• 1:04:03Speaker 05

  Yeah, that really makes me nervous.

• 1:04:05Barry Ritholtz?

  That's, I, I think Wall Street would have a hissy fit.

• 1:04:08Speaker 05

  You do?

• 1:04:08Barry Ritholtz?

  If that happened, yeah. The, you know, what people talk about, the, the Powell put.

• 1:04:16Speaker 05

  Yeah.

• 1:04:16Barry Ritholtz?

  I prefer the expression, the, the Trump collar.

• 1:04:20Speaker 05

  Yeah.

• 1:04:21Barry Ritholtz?

  When the, when the market's near all-time highs, he's emboldened and rolls out stuff. When the market's down 15, 20%, that's a floor. All right, we'll pause this for 90 days.

• 1:04:30Speaker 05

  Yeah.

• 1:04:31Barry Ritholtz?

  Because rightly or wrongly, and I think there's more to this than we give President Trump credit for, but when the stock market is doing well, he takes that as his report card. And when the stock market is doing poorly, it makes him unhappy and his bias is towards doing something, anything. What do we have to do to get the stock market back on track?

• 1:04:52Speaker 05

  Right.

• 1:04:53Barry Ritholtz?

  He doesn't care about polls. He cares about one poll, and that's the Dow Jones Industrial Average, or the Nasdaq, or the S&P. Kind of focuses his attention.

• 1:05:03Speaker 05

  Yeah, that's a nice way of putting it, the Trump collar.

• 1:05:05Barry Ritholtz?

  So, I don't want to make you late for lunch. I have one more question before we get to our speed round, our favorite questions. And it's a curveball question, which is, what are investors and economists not talking about, but perhaps they should be? What do you think is an important topic, and I don't care, policy, assets, geographies? What's getting overlooked but shouldn't?

• 1:05:32Speaker 05

  I'd say Fed independence. Not that people aren't talking about it, but they're not focused on it like they should be focused on it. I think this is a real, potentially a real significant problem. And the independence of the Fed is critical to a well-functioning market economy like our own. We know that from our own history. You can see what happened back in the 70s and 80s, or looking overseas.

• 1:05:57Barry Ritholtz?

  Sure.

• 1:05:58Speaker 05

  And we need to preserve that independence. And it's not only about the actual independence, it's the perception of independence that's really critical. And it just doesn't feel like to me, you follow markets more closely than I do, maybe you have a different view, but I just don't get the sense that markets are focused on this like they should be at this point in time.

• 1:06:15Barry Ritholtz?

  Huh, pretty interesting take. All right, let's jump to our speed round.

• 1:06:19Speaker 05

  Okay.

• 1:06:19Barry Ritholtz?

  Feel free to bang through these as quickly as you want. We'll get you to lunch on time. Starting with, who are your mentors who helped shape your career?

• 1:06:28Speaker 05

  Well, I mentioned Dr. Klein, the Nobel Laureate. He clearly was a key person in my professional life. My father, professor of engineering at Penn. By the way, he'll claim he was the first to use neural nets back in the day for the studies he was doing. But I'd say those two folks are, those two men were the key to my, to my professional development.

• 1:06:55Barry Ritholtz?

  Let's talk about books. What are some of your favorites? What are you reading right now?

• 1:06:59Speaker 05

  It sounds hackneyed now, but you know, Barry, I like, I just love Alexander Hamilton by Chernow. I mean, I, that was

• 1:07:06Barry Ritholtz?

  Why is that hackneyed?

• 1:07:07Speaker 05

  Well, because now everyone

• 1:07:08Barry Ritholtz?

  The book doesn't have any wrapping in it. People should be aware, if they go get this book, it's a deep historical dive. It's not an entertaining bunch of show tunes.

• 1:07:17Speaker 05

  Oh, yes, that's for sure. But it's very entertaining. At least from a nerdy kind of perspective.

• 1:07:23Barry Ritholtz?

  Chernow has a new book coming out this fall, doesn't he? Or did it come out already?

• 1:07:27Speaker 05

  Well, I've got, I'm reading the one on Washington.

• 1:07:29Barry Ritholtz?

  Is that, is that his latest?

• 1:07:31Speaker 05

  I think that's his latest. Yeah, I think so.

• 1:07:33Barry Ritholtz?

  He is an amazing writer and

• 1:07:36Speaker 05

  And I like that period in economic history.

• 1:07:39Barry Ritholtz?

  To say the very least, it's absolutely fascinating.

• 1:07:45Speaker 05

  And then I don't normally read self-help books, but I like this book, Outlive. I know everyone else has read it by

• 1:07:50Barry Ritholtz?

  Oh, sure.

• 1:07:51Speaker 05

  Four years ago. So now I'm hanging.

• 1:07:53Barry Ritholtz?

  Is it worth reading?

• 1:07:54Speaker 05

  Uh, it's

• 1:07:55Barry Ritholtz?

  Oh, Mark Twain is his name.

• 1:07:56Speaker 05

  Oh, Mark Twain, that's right.

• 1:07:58Barry Ritholtz?

  I had, it's a, it's a big tome.

• 1:08:00Speaker 05

  Yeah.

• 1:08:00Barry Ritholtz?

  It's sitting on my nightstand, gathering dusk, because it's so

• 1:08:04Speaker 05

  I don't know how he does it.

• 1:08:05Barry Ritholtz?

  So intimidating. Deep, deep research. Outlive.

• 1:08:09Speaker 05

  Oh, yeah. So it's an easy book, a summer book, right when you're on the beach. It's a, how do you live your life well, long run?

• 1:08:20Speaker 05

  And it's a lot of it's just intuitive. It's not non-intuitive, but there's some things in there that I found useful in terms of the tests you should take. And I love the hanging. You big part of the work is around the strip grip strength.

• 1:08:37Barry Ritholtz?

  Uh huh.

• 1:08:37Speaker 05

  And so one of the ways you improve your grip strength is by just literally hanging from it. Go try it.

• 1:08:42Barry Ritholtz?

  Okay.

• 1:08:43Speaker 05

  It's I've been.

• 1:08:45Barry Ritholtz?

  Wait, you don't have to chin ups or pull ups. You just have to hang.

• 1:08:48Speaker 05

  Just hang. You think this is easy. And he says, men, if men can do it for two minutes, that's great. Women, one minute. I'll tell you, I can't get, I literally cannot get.

• 1:08:56Barry Ritholtz?

  I can't imagine. I'm not going to do 10 pull ups.

• 1:09:01Speaker 05

  Yeah.

• 1:09:01Barry Ritholtz?

  But I would be surprised if I couldn't hang for.

• 1:09:05Speaker 05

  Right.

• 1:09:05Barry Ritholtz?

  For two minutes, but.

• 1:09:06Speaker 05

  Yeah, try it. Try it. Try it.

• 1:09:08Barry Ritholtz?

  Especially that's, that's, that's interesting. All right. So we're talking about books. What about streaming? What are you watching or listening to?

• 1:09:14Speaker 05

  My wife and I watch something every night, usually half hour to an hour and.

• 1:09:18Barry Ritholtz?

  We're the same. It's a post pandemic.

• 1:09:20Speaker 05

  Is that what it is?

• 1:09:21Barry Ritholtz?

  Yeah.

• 1:09:21Speaker 05

  Yeah.

• 1:09:22Barry Ritholtz?

  Cause when you were stuck at home, you couldn't go out.

• 1:09:24Speaker 05

  Right.

• 1:09:24Barry Ritholtz?

  Didn't we all?

• 1:09:25Speaker 05

  I'm highly annoyed with all these streaming services. Like, like, like, come on, hand me a break. I mean, so.

• 1:09:31Barry Ritholtz?

  So what, what are you streaming these days?

• 1:09:33Speaker 05

  Well, I got, you got any suggestions?

• 1:09:34Barry Ritholtz?

  Yes, yes, I do. I have plenty.

• 1:09:37Speaker 05

  I just finished disclaimer. Did you watch disclaimer?

• 1:09:39Barry Ritholtz?

  No. I love a good suggestion disclaimer.

• 1:09:42Speaker 05

  Yeah, it's Kevin Kline and what's her name? Cate Blanchett.

• 1:09:46Barry Ritholtz?

  Oh, no kidding.

• 1:09:47Speaker 05

  It's short, six, seven.

• 1:09:49Barry Ritholtz?

  I love those. We watched Department Q, which was a limited series.

• 1:09:53Speaker 05

  Department Q is good.

• 1:09:54Barry Ritholtz?

  Really interesting.

• 1:09:55Speaker 05

  Yeah. Actually, I watched that. That was very good. This is one I liked a lot. It's the ending is, the acting is great.

• 1:10:00Barry Ritholtz?

  Yeah.

• 1:10:01Speaker 05

  The ending is a little contrived. They needed to do two more episodes.

• 1:10:04Barry Ritholtz?

  I'll give you three interesting things we've been watching. My wife, my wife got me sucked into Killing Eve, which is an espionage thriller.

• 1:10:14Speaker 05

  Oh, I heard this.

• 1:10:15Barry Ritholtz?

  It's four seasons. We just started the second season.

• 1:10:17Speaker 05

  Killing Eve.

• 1:10:18Barry Ritholtz?

  Everybody in it is great. It's a little, it's a little, you know, some of it is, it's not terribly gory.

• 1:10:23Speaker 05

  Right.

• 1:10:24Barry Ritholtz?

  People, people get killed.

• 1:10:25Speaker 05

  Yeah.

• 1:10:25Barry Ritholtz?

  Um, it's assassins and, and yeah, you know, I, I don't like the police procedurals where they show you all the, when it's too realistic.

• 1:10:35Speaker 05

  Yeah.

• 1:10:35Barry Ritholtz?

  Like we tried to watch The Pit. My wife is like, I'm out.

• 1:10:38Speaker 05

  Yeah.

• 1:10:38Barry Ritholtz?

  All right. I get that. So, so Killing Eve has been really interesting.

• 1:10:42Speaker 05

  That's a good one.

• 1:10:44Barry Ritholtz?

  And you know, what's fascinating about the Gilded Age is it's four stories. Old money, new money.

• 1:10:54Speaker 05

  Ah.

• 1:10:54Barry Ritholtz?

  The staff in both of these houses across the street.

• 1:10:58Speaker 05

  Right.

• 1:10:58Barry Ritholtz?

  And then the old money secretary, who is a black woman, and then her whole family. Uh, and that storyline, but what's amazing is all the issues. It's 150 years ago.

• 1:11:11Speaker 05

  Same today.

• 1:11:12Barry Ritholtz?

  It's wealth inequality, it's status, it's economic mobility. And it's tribal and it's so fascinating.

• 1:11:21Speaker 05

  Gilded Age.

• 1:11:22Barry Ritholtz?

  The Gilded Age really.

• 1:11:24Speaker 05

  That's a good one, too.

• 1:11:24Barry Ritholtz?

  Interesting.

• 1:11:25Speaker 05

  Yeah.

• 1:11:25Barry Ritholtz?

  I didn't want to watch it.

• 1:11:26Speaker 05

  It's a Downton Abbey kind of thing?

• 1:11:28Barry Ritholtz?

  Kinda, it looked like another soap opera, but amazing cast. You get sucked into it. That's on HBO and um, so, so.

• 1:11:37Speaker 05

  You said three.

• 1:11:38Barry Ritholtz?

  So. If, well, Department Q was the limited.

• 1:11:43Speaker 05

  That was a good one.

• 1:11:43Barry Ritholtz?

  If, if you like the, uh, if you like the espionage.

• 1:11:47Speaker 05

  Yeah.

• 1:11:48Barry Ritholtz?

  Sort of thing.

• 1:11:49Speaker 05

  Right.

• 1:11:49Barry Ritholtz?

  Um, that one kind of unfolds really slowly.

• 1:11:54Speaker 05

  Yeah.

• 1:11:54Barry Ritholtz?

  And deliberately, but Killing Eve is much, it's much faster and crazier and more interesting. And it, it's mostly takes place in Europe, which makes it.

• 1:12:06Speaker 05

  Funnier.

• 1:12:06Barry Ritholtz?

  You know, it's MI6. Um, I, I won all sorts of awards. This, like, I got, she sort of ready. And when she was, she, I walk in and, and like, what's this? She's like, just watch 10 minutes of the first episode. All right. And we started watching it and sucked right in.

• 1:12:26Speaker 05

  Oh, that sounds good. Yeah, definitely watch that. It's four seasons, we need.

• 1:12:29Barry Ritholtz?

  That's right. So it gives you plenty and you could bang out two a night very, uh, very comfortably. Um, our final two questions. What sort of advice would you give a recent college grad interested in a career in economics and finance?

• 1:12:44Speaker 05

  Just show up.

• 1:12:45Barry Ritholtz?

  Show up.

• 1:12:45Speaker 05

  Just show up.

• 1:12:46Barry Ritholtz?

  Do the work, show up.

• 1:12:47Speaker 05

  Show up. Uh, I guess the other thing I'd say is, uh, I tell my kids this. Every point of contact matters. Uh, every relationship, every phone call, every email, every Teams meeting, because.

• 1:13:05Speaker 05

  Things come around. You know, you meet somebody in one way, they'll come back 10 years from now. And if you did the right thing, if you were attentive to their needs and interests, it'll benefit you in the long run. It's not easy to do. It takes energy, but every point of contact matters.

• 1:13:27Barry Ritholtz?

  Huh, really interesting. And our final question, what do you know about the world of economics today you wish you knew way back in the 1990s when you were first starting out?

• 1:13:37Speaker 05

  Well, I didn't, I thought, everything could, back to your point about box and models. I think, I thought everything could be solved with a model. It's like, you guys, come on, this is just arithmetic, you know, mathematics. We could, we should be able to do this. No, you know, the world is a very messy place.

• 1:13:57Barry Ritholtz?

  Really, really good stuff. Mark, thank you for being so generous with your time. We have been speaking with Mark Zandi. He is the chief economist of Moody's Analytics. If you enjoyed this conversation, check out any of the 550 previous discussions we've had over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. And be sure and check out my new book, How Not to Invest: The Ideas, Numbers, and Behaviors That Destroys Wealth and How to Avoid Them. How Not to Invest at your favorite bookstore now.

• 1:14:39Barry Ritholtz?

  I would be remiss if I did not thank the crack team that helps put these conversations together each week. Meredith Frank is my audio engineer. Alexis Noriega and Anna Luke are my producers. Sean Russo is my researcher. Sage Baumann is the head of podcasts at Bloomberg. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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