Inflation Is About to Get Worse

Ed Elson breaks down why the January inflation data is not what it seems with Mark Zandi, Chief Economist at Moody’s Analytics. Then, Ed is joined by Liz Hoffman, business and finance editor at Semafor, to unpack why the DOJ’s top antitrust enforcer was fired. Finally, Ed makes the case that Amazon should disclose how much of Anthropic it really owns. 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

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• 1:29Ed Elson?

  Today's number, forty-nine thousand, five hundred. That is the current value of the Dow, down from fifty thousand on Thursday. As a result, Attorney General Pam Bondi has officially declared that child sex trafficking is once again illegal.

• 1:48Speaker 08

  Money markets mad, though. If money is evil, then that building is hell.

• 1:58Ed Elson?

  Welcome to property markets. I'm Ad Elson. It is February seventeenth. Let's check in on yesterday's market photos.

• 2:06Ed Elson?

  Markets were closed in the US for President's Day and stock futures were muted following last week's inflation report. More on that in a minute. Meanwhile, Bitcoin dropped below $68,000 as its bear market dragged on. It has now fallen for four weeks in a row. And finally, Bloomberg reported that Warner Brothers Discovery may reopen negotiations with Paramount.

• 2:31Ed Elson?

  Okay, what else is happening? January inflation data looks like good news at first glance. According to the Consumer Price Index, headline inflation rose 2.4% year-over-year, which is slightly lower than expected. Meanwhile, core inflation came in right on target at 2.5%. But beneath the surface, the picture is less reassuring. Prices for services, excluding energy, jumped 0.4% in January. That's the fastest monthly pace since July. And there is another wrinkle. We are still missing October data, which is distorting the year-over-year picture. So here is the real question. Is inflation actually cooling, or is the data just wrong? To help answer that question, we're speaking with Mark Zandi, chief economist

• 3:15Ed Elson?

  at Moody's Analytics. Mark, thanks for joining us on Profite Market.

• 3:20Mark Zandi?

  Hi Ed, good to be with you.

• 3:21Ed Elson?

  So I want to jump right into this. The CPI report comes out, inflation's up 2.4% year-over-year, really good report on its face. People were excited about it, especially this administration, which, you know, they're saying that basically inflation is coming down. The giant elephant in the room to me as soon as I saw this was something that we've discussed in previous conversations when the last report came out and the report before that came out, which is the numbers are probably wrong. And something that we've been talking a lot about is the fact that this shutdown that happened in October.

• 4:01Ed Elson?

  Caused the Bureau of Labor Statistics to just not count up prices in October. They just made the assumption that inflation was flat, which of course doesn't really make any sense. And that that has reverberated through to the numbers that we're seeing in every inflation report subsequently. And so my reaction was this is, this is just wrong again. And that's what people should be talking about. The numbers are wrong. So talk about that for us. To what extent are all these numbers wrong? Are they wrong? And what did you make of this new CPI report for January?

• 4:38Mark Zandi?

  Yeah, Ed, I don't know that I'd overstate the case. I mean, they're overstate, these numbers understate inflation because of the, the October government shutdown and the fact that they couldn't, the BLS couldn't collect the data for sure. But probably, you know, if you count for that, it probably adds a tenth or two, to year-over-year growth. So instead of 2425, which was a top line CPI, core CPI, it's probably what, 2526, maybe 27, something like that. So inflation, you know, if you take these numbers at face value, don't put it into any other context, make the correction I just made, you'd say, okay, it's, it's, you know, not great. It's still above where the Fed would consider to be target and what I think most Americans

• 5:23Mark Zandi?

  would consider to be comfortable. But it's okay. But, you know, that's not the end of the story. There's a lot more to the story than just the CPI numbers.

• 5:31Ed Elson?

  Let's hear what else is in the story here. What else should we be focusing on?

• 5:36Mark Zandi?

  Well, there's other measures of inflation. I mean, obviously, the most important is the Consumer Expenditure Deflator, the PCE. That's the measure of inflation the Fed uses to set its 2% target. And we are now getting a lot of more data coming in, the CPI, the PPI, all that information feeds into this other measure of inflation. That's kind of the bible for inflation measures. Better measures inflation in a better way, accounts for a lot of the problems the CPI has. And that, that is going to come in hot for the month of January. You know, when we get that number a month from now, we're going to have a different kind of, you know, conversation around that. It's going to come in. At least three tenths of a percent up in the month, maybe four tenths, and year

• 6:17Mark Zandi?

  over year is going to be close to 3%. And that's the reality of inflation. If you take all the different measures and you add it all up and you make all the corrections and adjustments and everything else, feels like to me inflation is sitting around 3%, not 2%. That's where the Fed wants it. That's where I think most Americans, again, would feel comfortable with. It's closer to 3%.

• 6:37Ed Elson?

  I think the thing that's confusing for a lot of people is there are all these different measures of inflation. You've got CPI, you've got PCE. There are questions about how those are measured and which one is more accurate. Then you have the third-party data. You have, you know, you've been measuring your inflation over Moody's. You've got, you know, other sources. And a question is like, what are you supposed to trust? And what is actually the most accurate reading? And what, what number is the right number? Which is increasingly becoming a real question, especially when the data was kind of messed up in October.

• 7:19Ed Elson?

  You know, just as an observer, I'm sitting here, I'm like, which number am I even supposed to be focusing on? Like, what would you recommend to people who are trying to figure out what, what the actual deal is?

• 7:30Mark Zandi?

  Well, this is why I get paid a salary. I direct the data for you. You know, look, the reality is that data, any data, are an imprecise representation of reality. Some data gives you a more precise representation, others not as precise. None of them are perfect. They all have their flaws and issues, you know, for lots of different reasons. Some obvious, some not so obvious. But I think the way to think about this is you take the plethora of information that's available, you weight those pieces of information, data that you know are more reliable for methodological reasons, survey-based reasons, whatever the, you know, whatever your look, criteria you're, you're looking at. And you make a judgment

• 8:14Mark Zandi?

  as to, you know, where we are. This is what the Federal Reserve does when they meet. They, you know, to think about the job market and they have to think about inflation. And this is what they do. They have these kinds of discussions and debates about, well, is this measure better? Is that measure better? What's wrong with this? What about that thing over there? You know, what about these new third-party measures? That's what they do. That's what they do for a living to, to set policy. So there's no- Good, unfortunately, I can't give you something you're going to feel really satisfied with.

• 8:42Ed Elson?

  Yeah.

• 8:42Mark Zandi?

  There is no satisfaction here. You've got to, you know, take all these pieces of information together and make a judgment based on that imprecise representation of reality.

• 8:51Ed Elson?

  Yeah. When I look at the number that came out, 2.4%, I mean, still, that price is going up and it's not, it's not the 2% number that we wanted. But the information that I'm sort of synthesizing, one, the issues that we had in October that we've discussed.

• 9:08Mark Zandi?

  Right.

• 9:09Ed Elson?

  Two, I'm thinking about tariffs and the fact that tariffs have been passed through at 96% completion rate, according to this report. 96% of the pass-through is going, being passed on to consumers. So you've got tariffs, which is, you know, raising prices as well. I'm also going off of just general personal experience where I go around and I'm paying for things that are a lot more expensive than they used to be at the grocery store and otherwise. And, you know, I'm putting that all together and I'm thinking like, inflation's not improving. Inflation is getting worse based on, that's my read. But some

• 9:49Ed Elson?

  would say, no, that's not taking the data into proper account and maybe you're biased for various reasons. So when you look at all of the signals and data points that are out there, what would be your general characterization of inflation right now? Would you say that it is getting better, worse, or about the same?

• 10:11Mark Zandi?

  I think it's too high. I think it's about 3% and I don't think it's getting any better. And I suspect if we do a, if I give you my forecast, I'd say it's going to get a little bit worse before ultimately it will get better. I mean, we've got more tariff pass-through to go. We've got still seeing the fallout from the effects of the heavy-handed immigration policy on the labor market, on wages, on costs. You can see it in the service price inflation. So, you know, it's high, it's uncomfortably high, and it's not going to get any better, at least not anytime soon. There's, you know, all kinds of caveats to that statement, you know, what the Supreme Court decides, what the president does in response to what the Supreme Court decides on the tariffs, so forth and so on. But that's my characterization of it. I will say in response to You know, Ed's inflation rate, everybody has their own inflation rate, right?

• 10:55Mark Zandi?

  Because everyone buys different things and are focused on different things. My basket of goods and services I buy are different than yours. They're different than, you know, Claire's, the engineer here. So we each have our own, you know, basket of goods. The other thing I'd say is, in terms of perception, you know, often what we perceive about inflation is related to what we buy on a regular basis. You know, I buy a cup of coffee every morning. I buy, I have beef, you know, once or twice a week. You know, I, I buy a certain kind of clothing regularly. You know, I, I need electricity every single day, you know, so forth and so on. Those, the prices for those things, gasoline, obviously, because we all, you know, buy gas,

• 11:38Mark Zandi?

  most of us, not you guys in New York, but most of us buy gas once or twice a week. So, you know, those are the things that are, we see those on a regular basis. We are monitoring those on a regular basis. And so they have a heavier influence on our thinking about what inflation actually is. So there's a lot of things out there, like if you go buy a car, you know, you don't buy that once every three, five, seven years, and, but that's still in the, in the price index. By the way, that's another thing to consider, one other big caveat. In the CPI, the Consumer Price Index, and in the PCE, there are quality adjustments. So, you know, cars are obvious, you know, the, every year, if you go look at the new cars that come out, they're better than the year before.

• 12:22Mark Zandi?

  That's measured in the CPI as a quality improvement, and you can actually see price declines. In fact, you're seeing price declines for vehicles in part because of that quality adjustment.

• 12:31Ed Elson?

  Right.

• 12:31Mark Zandi?

  So, you know, there's all kinds of things like that, that make a, a gap between, you know, what's actually going on in your perception. But you're, it probably, I agree with your perception. Inflation is too high, it's uncomfortably high. For most Americans, it's way too high, and it's not, it's not coming in.

• 12:46Ed Elson?

  Yeah, I think that, that quality adjustment kind of portrays a good picture of what's happening in the CPI, where, you know, a lot of people, I think, are confused. That year-over-year number in January, it's like, it's not just we're going to measure what prices are in January across the board and then take the difference between what prices were last year. There are so many of these imputations and adjustments that they're making on a rolling month-to-month basis, which is why the numbers are so soft and it's so unsatisfying for someone like me who wants the real answer.

• 13:18Mark Zandi?

  Yeah. I mean, were you raised as an engineer? It sounds like you were. I mean, you want precision.

• 13:23Ed Elson?

  I was not.

• 13:24Mark Zandi?

  There's no such thing.

• 13:25Ed Elson?

  I was not.

• 13:26Mark Zandi?

  Okay. But here's the other thing. There's so-called, what economists call base effects. So every January, you get these, a lot of businesses, that's when they raise their prices for whatever it is that they're selling, right? It's the beginning of the year. They say, okay, now we're going to start with this new price increase. In the recent years, last couple, three, four years since the pandemic, you saw big price increases in January. We saw a big price increase in January this, but not quite as big. So this goes to seasonal adjustment.

• 13:55Ed Elson?

  Right.

• 13:56Mark Zandi?

  The seasonal adjustment makes things look weaker than they otherwise would have been. So even though it's year-over-year, you still have those adjustment effects and those base year effects. And so that's also probably pushing down the measured CPI rate year-over-year and making it inconsistent with, you know, how we think and feel about inflation broadly.

• 14:15Ed Elson?

  Yeah. Just looking ahead, your forecasting for inflation, you mentioned you think that it's going to get a little bit worse before it gets better.

• 14:25Mark Zandi?

  Yeah.

• 14:26Ed Elson?

  Speak more before we end here about what you expect will happen to prices across America over the next, say, 12 months.

• 14:34Mark Zandi?

  Yeah. If you told me over the next six months, the year-over-year rate of inflation, let's use the PCE because I think that's just what we should be using, is going to go from 3% to 3.25%, could be as high as 3.5% by mid-year, and then it'll start to fade because, you know, we'll get most of the, there's still more pass-through to go between businesses to consumers on the tariffs.

• 14:57Ed Elson?

  Yep.

• 14:58Mark Zandi?

  96%, I think that's that New York Fed study you're probably referring to, that the 96% pass. Through was to consumers and businesses. There's still a lot more to go from business to consumer. And that's going to happen. And so I expect some higher. But by the end of the year, we'll get through the other side of that. And we should start to see some moderation. And I'm hopeful, fingers crossed, that we get inflation headed definitively back to that 2% target by early next year, this time next year.

• 15:29Ed Elson?

  All right, Mark Zandi, chief economist at Moody's Analytics. Mark, always appreciate it. Thank you.

• 15:35Mark Zandi?

  Anytime, Ed.

• 15:38Ed Elson?

  After the break, the nation's top antitrust lawyer is fired. And for even more markets insights, you can subscribe to my weekly newsletter at edwardelsin.substack.com.

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• 17:29Ed Elson?

  We're back with Prof G Markets. The White House just fired its top antitrust enforcer. Last Thursday, Gail Slater was ousted as the DOJ's antitrust chief when she was confirmed last March. Slater told lawmakers she would resist any political interference in her division. Less than a year later, she was forced out for resisting settlements with companies represented by Trump-connected lobbyists. Her departure marked the end of a battle between populists who wanted tough enforcement and a pro-business wing that sides with corporate interests. Here to break down what all of this means, why she was fired, we're speaking with Liz Hoffman, business and finance editor at Semaphore. Liz, thank you for joining us on Prof G Markets.

• 18:12Liz Hoffman?

  Thanks for having me back.

• 18:14Ed Elson?

  So Gail Slater is out. It was a short run. How did we get to this point?

• 18:21Liz Hoffman?

  Yeah, you know, this kind of long-incoming kind of ideological collapse inside the DOJ's antitrust division, you know, finally came to a head last week. Gail Slater, as you said, is out, happened a couple of days after her top deputy left. And there had been these flashpoints, mostly over a handful of large mergers that had been brewing almost since the Trumps, like the early days of the Trump administration. And the simplest version of the story, which I actually have some doubts about, but that there were these big corporate mergers, you might remember HP Enterprise trying to buy Juniper Networks, there was a large merger of two real estate brokerages, where the consensus was that the DOJ had some questions and were skeptical that those mergers would

• 19:04Liz Hoffman?

  result in sort of a lessening of competition in those markets, and that the companies hired a bunch of lobbyists and went over their heads to the White House, to Trump officials at DOJ, and they kind of got waved through. And there's a little bit of truth to that. I think it's probably a little overblown, and there's some other reasons that this was kind of never going to work. But that the tensions just sort of boiled over and, you know, Gail Slater served at the pleasure of the president and that ran out.

• 19:31Ed Elson?

  So you've been reporting on this. A few weeks ago, you wrote, quote, "Companies whose mergers have been challenged or investigated by Slater's office have won favorable settlements by going around her to lobby Trump DOJ officials." You also pointed out that one of her deputies, Roger Alfred, that he said that decisions are made, quote, "depending on whether the request or information comes from a MAGA friend." That guy was later pushed out. So he gets pushed out. Now Gail Slater gets pushed out. This has been building for a while. This seems to me to be the big story that no one is talking about. This idea that Gail Slater and her team actually tried anti-trust enforcement.

• 20:14Ed Elson?

  But then if a friend of the president or a friend of the administration comes along, they can just go around her and they don't have to deal with the enforcement, which seems kind of like corruption, at least to me, is it not?

• 20:27Liz Hoffman?

  Look, the Trump administration has a lot of channels that don't exist in other administrations and companies are using those to their advantage.

• 20:38Liz Hoffman?

  That said, the Department of Justice is run by the Attorney General, who is appointed by the president and like, it is not crazy to say that he wants people in those seats who share his politics and his ideology. And what's interesting about all of this is that coming into the Trump administration, there was a sense that we were going to have this sort of MAGA populist. There's a strain of MAGA that is almost very progressive in its dislike of big corporations and its skepticism of mergers and corporate power. And, you know, people talk about kind of the horseshoe theory of politics, where the kind of Bernie bros and the Steve Bannons of the world are, share a lot, have a lot in common on this particular issue. You know, they were sort of jokingly called conservatives.

• 21:21Liz Hoffman?

  You know, these are Republicans who liked what Lina Khan, the Biden anti-trust cop, was doing in sort of really aggressively swatting away these mergers and challenging monopoly business models.

• 21:33Liz Hoffman?

  And so there's a sense coming in that you were going to see sort of an interesting tension and like, it's just so obvious to me that the populists have lost that fight. You can argue about, you know, to what extent Gail Slater was ever really inclined to pursue it. But but that, you know, I think the simplest explanation it was is that it was never real, that really what we were seeing was a dislike, the visceral dislike inside the White House and the Trump campaign and then administration of big tech for mostly personal culture war reasons, right? That getting thrown off these platforms was like an incredibly searing formative experience for a lot of these guys and it's a grudge that they've really nursed and that the platform's bigness allowed antitrust to be kind of the

• 22:14Liz Hoffman?

  way that that got enforced and talked about, but that that problem has sort of solved itself, right? As Mark Zuckerberg has pivoted Meta away from, you know, content, policing content and Elon Musk's X is like sort of undeniably back and like relevant in a way. And so those fights have just sort of lost their edge, which means that the sort of usefulness of antitrust enforcement as a way to express those those views just kind of went away.

• 22:40Ed Elson?

  Right.

• 22:40Liz Hoffman?

  So I think this is just sort of the inevitable collapse of like an ideological coalition that we all kind of wanted to be there because it was interesting and strange bad fellows are are fun politics, but I'm not sure it was ever real.

• 22:51Ed Elson?

  Yeah, it's it's becoming clearer than ever that it was never actually about antitrust. It was never about monopolization. It was about wokeness and censorship. And that's what we saw with Netflix as well, right?

• 23:04Liz Hoffman?

  For sure. I mean, there's lots of mergers that would never sort of get to, you know, your radar or mine, but that like the DOJ's sort of day to day job is challenging those because they are anti-competitive in smaller markets. And we didn't see any of that either. It's not like, you know, Gail Slater was bringing cases left and right over like the consolidation of some dental practices in Arizona. I mean, that that wasn't, you know, I think if if you were looking for signs that there was like a real appetite to continue really what the Biden administration's policy had been, which is deterring consolidation, we never really saw that.

• 23:37Ed Elson?

  Yeah, it's really interesting because, you know, on this show, we're kind of pro antitrust regulation or antitrust enforcement. I think this is something we've been talking about for a long time, at least at Prof G, which is the just continued consolidation of big tech and this feeling that there's maybe we want some level of antitrust enforcement, but it's never actually going to happen. And I think the best example was what happened with Google last year where it was decided, it was agreed, yes, they were operating an illegal monopoly. But then when it came to figuring out what the remedies were going to be, they decided, actually, we're not going to issue a remedy because AI is now happening and it's a different time now and it doesn't really make sense anymore. We

• 24:19Ed Elson?

  thought that Gail Slater was going to be sort of the champion, or not maybe of the champion, but she was sort of the sleeper pick who was actually going to crack down on on on antitrust. And it was one of these people that I was like, okay, maybe maybe Trump's actually picked someone decent here. We then spoke with Jonathan Kanter, who was the former head of the antitrust division at the DOJ. I asked him what he thought about Gail Slater. Here's what he had to say about her.

• 24:46Speaker 14

  I know Gail. She's extremely talented. She's very well qualified. She's level headed. This is not somebody who's on the fringe. It's not somebody who comes in without any experience. It's not a made for TV job posting like perhaps in some other areas. This is somebody who's a serious, dedicated antitrust lawyer, and I think is well respected, is well respected in the antitrust community.

• 25:06Ed Elson?

  I guess my question would be, would you agree with that characterization? And is it not kind of a shame that someone who both sides of the aisle seem to agree was pretty good, is now out, I guess, because she didn't do whatever Pam Bondi told her to do?

• 25:24Liz Hoffman?

  I mean, that is the reality of this administration, right?

• 25:27Ed Elson?

  Yeah.

• 25:28Liz Hoffman?

  A plurality or a majority of people who come through it kind of come out worse on the other side. But yeah, I'm curious, why did you talk to Jonathan? Was that on the way in when Slater was?

• 25:38Ed Elson?

  That was right after the nomination, yeah.

• 25:39Liz Hoffman?

  Yeah, I mean, I think, and I think that really did capture the hope that that sort of both progressives like Jonathan and sort of MAGA populists like Steve Bannon, and by the way, like J D Vance, right, who has been, who was like very, had very nice things to say over the years about Lena Kahn and, and thought that companies were too big. You know, there was a sense that they, that there was some sort of political realignment happening around this issue, and it just like obviously did not happen.

• 26:08Ed Elson?

  Yeah.

• 26:08Liz Hoffman?

  And people who, you know, would like to see more robust antitrust enforcement are like very disappointed. And I spent a little time in some of the, the MAGA group chats last week. I'm like, people were really, really upset about this.

• 26:20Ed Elson?

  Right.

• 26:21Liz Hoffman?

  But I think as always, kind of the simplest explanation is, is the right one, which is that like, it was never real.

• 26:26Ed Elson?

  Yeah. All right. Liz Hoffman, thank you for your time.

• 26:30Liz Hoffman?

  Thanks, Ed.

• 26:36Ed Elson?

  As you've probably seen, tech stocks are being taken to the woodshed. In the past month, software stocks have fallen 16% on average. Big tech stocks have fallen as well. Google's lost 7%. Microsoft has lost 14%. But one of the biggest big tech losers so far is indeed Amazon. Amazon is down 17%. In fact, it fell for nine straight days last week, which was its longest losing streak since 2006. So why has this destruction happened? Well, as we've discussed before, it's all because of AI. A few weeks ago, OpenAI and Anthropic released new AI tools. Those tools went viral. They showed they can pretty much

• 27:19Ed Elson?

  do everything that a white collar worker is supposed to do. And since that happened, roughly $2 trillion in market value has been erased. And the idea behind this sell off is that AI is going to make legacy tech companies irrelevant. Why would you pay for traditional software if you can just vibe code your own software with Claude? This applies to Amazon, too. Why invest in a legacy e-commerce company when AI might upend online shopping altogether? Now, I have laid out before why I don't think this sell-off makes much sense. I don't think these legacy software companies are going to get nearly as hard as the market seemed to think. I think that for various reasons, such as enterprise security and switching costs,

• 28:02Ed Elson?

  lots more reasons which you can read about on my Substack. I run through the whole thing. But when it comes to Amazon, there is another very big and not very talked about reason why this sell-off really doesn't make any sense at all. And I'm going to tell you what it is, but before I do that, let me first just remind you how badly Amazon is getting punished right now. So, Amazon has historically traded at 57 times earnings. It is currently trading at 28 times earnings. Just to put that in perspective, Walmart, whose revenue grew less than 6% last quarter year over year, Walmart is trading at 47 times earnings.

• 28:44Ed Elson?

  Costco, which has practically no digital footprint at all, is trading at 55 times earnings. Meanwhile, Amazon, whose growth rate is nearly twice as high, is trading at a multiple that is nearly twice as low as those companies. So, Wall Street hates Amazon right now. And the reason they hate it is, again, because of AI, because of the disruption that AI companies like Anthropic, like OpenAI, could levy on their business. Okay, now I'm going to tell you why this sell-off is stupid. And it's quite simple. The reason it is stupid is because Amazon owns nearly a fifth of Anthropic.

• 29:25Ed Elson?

  In fact, Amazon is one of Anthropic's largest and earliest investors. They have invested roughly $8 billion in Anthropic, going back as far as 2023, before most investors even knew what this company was. So, what that means is that any success that is achieved by Anthropic will also be achieved by Amazon and by Amazon shareholders. Why? Because they literally own the business. Now, some investors know all about this. But as someone who spends most of their time talking about these companies, what I can tell you is that it is shocking how many people don't know about it. It is rarely acknowledged in research notes. It's almost never discussed in analyst calls. It's not even treated as a footnote.

• 30:09Ed Elson?

  It's treated as something even smaller. It's almost as if this investment doesn't even exist. So why is no one talking about it? Why is no one talking about the fact that Amazon owns nearly a fifth of Anthropic? Well, I've thought about it. And the answer is now clear to me. The reason no one is talking about it is because Amazon isn't talking about it. In fact, Amazon doesn't really talk about it at all. Supposedly, their Anthropic stake is now worth more than $60 billion, which would imply that they own more than 16% of the company. But that is based on an internal review of their balance sheet, which is based on an internal valuation of Anthropic. And it actually has nothing to do with the current market price of Anthropic based on its most recent funding round.

• 30:54Ed Elson?

  So what that basically means is we actually don't know how much of Anthropic Amazon actually owns. We can make assumptions. And based on our assumptions, it is more than 16%. But it could be even higher than that. We actually don't know. Why? Because they haven't told us. Amazon has given us almost nothing. So this is an open letter to Andy Jassy and to the Amazon executive team. Your stock has fallen 17% in the past month. You don't have a business problem. Your business is tearing right now. You have a multiple problem. You have a valuation problem. Investors don't like the story you're telling about your company. They specifically don't like the story you're telling about AI.

• 31:39Ed Elson?

  And that is because you're omitting one of the most important elements of the story, which is that you are one of the largest and earliest investors in the hottest AI company in the world. That is a very big deal. And it needs to be communicated. So my message to Andy Jassy is the following. Tell us about it. Tell us exactly what the terms are with Anthropic. Tell us exactly what your stake is. Tell your shareholders how much they have to gain here. Make this part of the story. By the way, I would also add that Microsoft should be doing the exact same thing. Microsoft owns nearly a third of OpenAI. And again, not enough people are talking about it. Now, I can understand the hesitation from Amazon. Anthropic is

• 32:22Ed Elson?

  a private company. They're issuing convertible notes. There are possibly some antitrust concerns, et cetera, et cetera. But let's also acknowledge that the AI narrative is now reaching an inflection point. We are witnessing a fundamental rerating of the tech industry. Wall Street is picking its winners and it's picking its losers. And they have decided that you, Amazon, are a loser. I and many others know that you're not. So if you want to improve the multiple, you have to improve the story. And right now, your story is missing a giant chapter that investors want to hear about. And that chapter is indeed Anthropic.

• 33:09Ed Elson?

  Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our research team is Dan Shilon, Isabella Kinsel, Chris Nodinehue and Mia Silverio. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.

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