The $6.6 Trillion Sell-off

Scott and Ed dig into the rubble of the record breaking $6.6 trillion sell-off following Trump’s tariffs announcements. They break down how Trump determined the tariff rates, what the tariffs will do to company earnings and the real economy, and offer advice on how to deal with turmoil in the markets as an investor. Vote for Prof G Markets at the Webby Awards Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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

• 0:00Speaker 00

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• 1:13Scott Galloway?

  Today's number, $6.6 trillion. That's how much value the US stock market shed following Trump's tariff announcement. A record breaking two day wipeout. Ed, I just came from a necrophiliac's anonymous meeting and suddenly it dawned on me, what happens if I die here?

• 1:42Scott Galloway?

  How are you, Ed? How are you?

• 1:45Ed Elson?

  I'm doing okay, Scott. How are you? Are you reacting badly to these tariffs? What's going on with you?

• 1:52Scott Galloway?

  So I'm an emotional tidepole right now, not for the reason you probably think. I lost, I don't know, mid single digit millions, maybe 10 million bucks on the 48 hours on Thursday and Friday, but. That's the bad news. The good news is that means you have a lot of money to begin with. I'm blessed. And I could kind of, I don't want to say I could kind of give a shit, but the reason I'm emotional, Di Bill, is I just finished up a college tour with my son and it just is sort of this very, it's a marker in time, you know, it's just, we went to eight schools in five days and I decided I was going to be totally focused on parenting and not do any business calls. And it's just sort of, you know, it's just

• 2:37Scott Galloway?

  very emotional. He doesn't understand it, but he will when he has sons. But what happened on Thursday and Friday, for me, it's like, I was much more upset about the Trump coin. I was much more upset about, you know, Marines being kicked out of the service because they're transgender. I, this to me is like so far fucking down the list of this ass clown's un-American, bigoted, weird behavior. I, I find it just sort of disappointing. All of a sudden, the most powerful people in the nation have decided enough is enough when they lose, when their portfolio goes down. So, yeah, I'm, I'm a bit of a mess today, but for the right reasons. I don't, I, you know, we, we know this is stupid.

• 3:20Scott Galloway?

  So let's bust right into it. You did a fantastic video, I thought was really powerful, talking about, you know, tariffs can play a role in restoring trade symmetry. Talk a little bit about the asymmetry as it relates to US tariffs and our trading partners.

• 3:37Ed Elson?

  Well, I, I will get into that. First off-

• 3:40Scott Galloway?

  Never mind. Get into other stuff, Ed. You're clearly the fucking producer here.

• 3:45Ed Elson?

  Yeah, okay. I gotta stick to our structure that, that producer declared.

• 3:49Scott Galloway?

  By the way, that's super sexy when you're not flexible and have to stick to a script. Yeah, that's going to get you laid, boss. Anyways, sorry, go ahead.

• 3:58Ed Elson?

  Sorry. No, I'm happy to talk about about the asymmetry and what I brought up in the previous podcast, which we will get to, is that the US is not getting screwed in the way that we think we are. And we will, we will cover that. Before that, I just want to go over what exactly happened. So Trump's 10% tariffs on all exports to the US and higher rates for roughly 60 countries are the most severe American tariffs in a century. The markets offered a swift and damning condemnation of those policies with one of the worst sell offs in recent memory. In the two trading days following the announcement, the S and P 500 dropped 11% to its lowest level in 11 months.

• 4:39Ed Elson?

  Meanwhile, the Nasdaq followed the Russell 2000 into bear market territory, down 20% from its peak in February. The speed of that drop is rivaled only by the pandemic and the dot com implosion. The Dow closed Friday, down more than 2,000 points for only the fourth time in history. All told, we should probably just reiterate the number you used at the start of the show, which is that the US stock market lost a record $6.6 trillion in two days. Okay, now that we've just gotten the basics out of the way, there are many places we could start. I guess the first place that I would start, and that a lot of people are talking about, is how these tariffs were actually calculated, right? So, I mean, I think most

• 5:24Ed Elson?

  people know by now, the tariff rates that this administration chose had actually nothing to do with the existing tariff rates in the world. Instead, what they did was they took the trade deficit of each country, they divided it by the imports, that's how they determined the existing tariff rate, quote unquote, and then to get the new tariff rate, they divided that number by two. This calculation, I'm sure you've read about it before, people are covering it, it actually has no relationship with the actual tariffs on the US. It's measuring a completely different thing. So, you know, I think that's a big part of why the markets reacted so badly. The markets realized, oh my God, not only are these people serious

• 6:08Ed Elson?

  about these tariffs, but they're also incredibly stupid and misinformed. And I think that was the big freak out for everyone. Now, on the point that you asked me to raise in terms of the trade symmetry. I think what was really interesting to me was this recent article that we saw from the Washington Post, which explains how this whole calculation went down. What happened was Trump asked his team to do the analysis and to go out and find out, okay, what actually is the effective tariff rate on each nation, which is a difficult thing to do because, you know, these tariffs, they're not universal, they're specific to

• 6:51Ed Elson?

  each item, and then that rate can change depending on your relationship with a certain country. In other words, determining a number, a tariff rate, is a difficult thing to do. But his team did it. They went out, they did the analysis, and they went to the president and they brought him a menu of options. They said, okay, we did what you asked, here is what we could do. And he looked at the menu and he said, I don't like it, I want to do something else. And that's when he decided on this new trade deficit formula, which again, has nothing to do with actual tariffs. And this gets back to what I discussed last week, which is that if you actually look

• 7:33Ed Elson?

  at the numbers and you look at our relationship with all of these countries, we're not the victim we like to think we are. Many countries charge less than we do, most of our largest trading partners charge around the same that we do. And in fact, if you look at the last 15 years, the US has implemented the most amount of hawkish trade interventions of any nation. And so what I think happened was the Trump team went out, they found the data, they did the analysis, they showed him the data, they showed him the truth, and then Trump looked at it and he said, I don't like the data, I don't like the truth, because it doesn't fit with my narrative. So what we're going to do now is we're going to make up the data and we're going to make up the truth.

• 8:16Ed Elson?

  And that's what that board was that he was holding in the rose garden. It was basically a fabricated list. It was like an imaginary world of what if the tariff rates were this amount? And then we will just divide that what if number by two in order to make you believe that America is getting screwed. So. That's it's a very interesting dynamic following what I talked about on the on the last episode, which is, you know, look, do the numbers, do the math, look at the actual tariff rates, do the hard work of understanding what is going on in the economy. And you will conclude, as is usually the case, America's not really getting screwed on much. In fact, we're the most powerful nation in the world for a reason. We're actually

• 9:01Ed Elson?

  quite stringent on other nations on many things, including tariffs. But Trump, it didn't fit with his narrative. Trump needs to believe that that America is getting screwed by foreigners. And so it was a miraculous thing to see him literally make up the numbers. And I think the most concerning and disturbing thing is seeing his team just playing the sycophantry once again, clapping at his announcement and basically pretending that he's got it all right, having just told him, these are what the real numbers are. And he said, no, I don't like those numbers. And they capitulated.

• 9:40Scott Galloway?

  Yeah. So the first myth we have to take off the table is somehow that that America is the victim here. Right? If if anyone has been flexing their muscle and imposing onerous tariffs that that we've been able to figure out a way to pay, I think you, I think some of your data, 25% tariff on Japanese trucks entering the US, they charge us 0% tariff. I think you said 82% for sugar imported in from Brazil, they charge us 13%. Typically, if there's asymmetry, we're on the right side of the asymmetry, so to speak. This will likely be the second largest or the largest own goal since our entry into Iraq.

• 10:22Scott Galloway?

  And the biggest wars or the largest was Nigel Farage convincing angry Brits, because the economy hadn't grown, that this would be our Independence Day. And the economy has just just basically gone sideways since then. Tariffs make no sense. They've never made any sense. There are rare exceptions when they can be used tactically. To restore symmetry in key areas where we're getting a raw deal, or to protect certain industries that you need for strategic reasons. You probably need a certain amount of domestic steel production in case we go to war. But just to use one company as an example, Apple. The tariffs that he has imposed are going to cost Apple $40 billion. By the way, it's the importer that pays the tariff.

• 11:06Scott Galloway?

  So they're going to have to pay $40 billion, right? That comes right off the bottom line. The PE of Apple is, it was 38, now I think it's 34. So you're talking about a trillion dollars in shareholder losses to Apple. And I want to come back to shareholder losses. In addition, the idea is that if you kind of raise the cost, then it inspires domestic production. To produce an iPhone in the US would cost $3,500 an iPhone. So we're not moving back manufacturing. All it's going to do is increase the price of an iPhone from $1,600 to $2,300 and reduce, and reduce the market capitalization of Apple by a trillion dollars.

• 11:50Scott Galloway?

  And that is fairly typical of what happens across the board. So these, it is difficult to think of a more elegant way to reduce prosperity than tariffs. And what people aren't talking about that's even more damaging is the uncertainty. People don't know how to plan their businesses. If he'd just come out and said, all right, 10% tariffs, businesses, both foreign and domestic, could plan their business, get on with it. They don't know who they're waking up next to. His sclerotic epileptic decision making, he could cancel all tariffs on Monday. So no one, no one knows what to do here. What they are doing is the largest companies, the largest economies in the world are reconfiguring their supply routes

• 12:36Scott Galloway?

  to excise American manufacturers and American services firms from their supply chain. This will take Likely years, if not decades, to repair and reassemble. The other thing we're not missing, and Josh Brown brought this up, and I just think it was a fascinating insight. It's that if you look at the products we export, a lot of finished products, a lot of high-value manufacturing. By the way, we need to rebuild our manufacturing base. No, we have purposely traded it off because the services jobs we've replaced the manufacturing base with are generally higher paying. And we are still the second-largest manufacturer in the world, behind China.

• 13:15Scott Galloway?

  But we, for example, we take an Nvidia chip, very, very high-value add, and we export those chips. Those products probably have a 50 or 60-point profit margin. We import Mercedes. Mercedes maybe, maybe has a 10% profit margin. The products we generally import in have a much lower margin than the products we export because we're bigger in services and high-value-add products. So let's just look at Nvidia versus Apple. Nvidia has a price-to-sales ratio of about 24. Mercedes has a price-to-sales ratio of 0.23, meaning if you were to go pro-rout and assume

• 13:59Scott Galloway?

  we're going to reduce $1 billion because of these reciprocal tariffs, which they didn't think were going to happen for some reason, but let's just assume for shits and giggles, a billion less dollars of Mercedes coming in because of the tariffs and a billion less of Nvidia chips going out. That's a reduction in market cap of $23 or $24 billion to Nvidia shareholders, and it's a reduction of $23 million to Mercedes shareholders. In other words, if we go pari passu and lose $1 for every dollar they lose, that's not the analogy. This is Apple's aircraft carriers. The hit to our stock market, the hit to our market capitalization, the hit to the compensation

• 14:41Scott Galloway?

  via options of domestic employees that work for these amazing firms will be much greater, much greater than the hit to foreign markets. We'll hurt both. All the markets were down, right? Our market was down. Europe's Stoxx 600 fell 8%. UK's FTSE fell 7%. The MSCI Asian Index fell 5%. This guy has figured out a way. To elegantly take down the prosperity of the global economy. And I only have one of two scenarios here. And one sounds paranoid, but it doesn't mean I'm wrong. The first scenario is this guy's just a fucking idiot. And nobody around him has the, has the stones to say, this is just a really bad idea.

• 15:25Scott Galloway?

  And it's going to cost you a lot of votes, a lot of support. Farmers are going to get hit the hardest. Canada and Europe are already deciding to be more strategic with their tariffs. And they're going after the heart and lungs. They're going after the red states. They're either all acolytes, or he just doesn't listen to them. My second scenario, and I know this sounds ridiculous, but what I would ask our listeners to contemplate is the following. If President Trump had received $10 billion, or a commitment of $10 billion from both Putin and Xi into his Trump coin in exchange for dividing the Western alliance, for driving the biggest trading partners into the arms of China, for withdrawing from Ukraine, wouldn't

• 16:10Scott Galloway?

  that just make perfect fucking sense right now? If Xi and Putin had called this guy and said, all right, I mean, he's either this fucking stupid or this fucking corrupt, because none of this shit makes absolutely any sense whatsoever. There is no evidence, there is no support, there is no empirical argument for why or how this does anything but reduce prosperity, throw our, throw our trading partners into the arms of our adversaries. Japan, South Korea, and China are talking for the first time about closer economic ties.

• 16:48Scott Galloway?

  So this is the inconsistency, the, the market capitalization loss, the general sort of reduction in the value proposition of our products abroad while increasing our prices domestically. This is Nigel Farage on steroids. But Trump is going to take down a bunch of Western economies in the short term. The big winner is China, because China is basically going to scoop up a lot of these trading relationships that we are throwing in the dustbin.

• 17:18Ed Elson?

  Yeah. I think the Brexit analogy is the correct one. And by the way, we've been making that analogy since the very beginning, ever since he said the word tariff, which is, it was an extremely emotionally compelling argument at the time to tell everyone that this sovereign nation is being screwed by its partners. And no one had, I would say, the attention span to go in and look at the data and actually understand what was happening. And it was more exciting to assume that we're getting screwed and that we need to sort of batten down the hatches and turn inward. And we saw the effects of that play out over multiple years. And we've covered it in many episodes before. The UK economy is

• 18:01Ed Elson?

  absolutely dog shit, is what I would say right now. You know, you said they flatlined, they haven't flatlined, they've contracted. I mean, it's been a total disaster. And the entire country recognizes that now. They recognize, oh, yeah, that was a mistake. So we've said from the beginning, you know, this is the same thing at play. We're getting very excited about the idea that we're getting patriotic. And, you know, we're going to sort of say fuck you to our quote unquote enemies, who are in reality, our friends, actually. And we're going to be pro America, quote unquote, America first. And we've said from the beginning, it's not going to work. It's going to tank the economy, it's going to tank the stock market. I said that to many of my MAGA friends. And they said I had Trump derangement syndrome. It's very, very simple stuff. Now,

• 18:46Ed Elson?

  you say, what is the reasoning here? I'll just tell you what the reasoning that I'm hearing from the MAGA base is. The argument from Trump supporters right now is basically twofold. The first is that this is a long term play. They would point to our debt load, they would point to our deficit, they would say this is not sustainable, and that failure on this path is inevitable in the next, call it 20 years. So if we don't shake things up dramatically right now, we are essentially admitting defeat. And if we do this, we can, you know, reconstitute a new economy that is less dependent on government debt, as it has been in the past,

• 19:30Ed Elson?

  and is more dependent on revenue, external revenue, as he puts it, from tariffing other countries. So that's sort of the first argument, that it's, you know, a long term play. The second is that it's a negotiating tactic. And they would say, you know, these tariffs, they're probably not here to stay. But what it does is it freaks everyone out. It shows all these other nations, we're serious, we'll actually do this stuff. Uh, and it will allow us to bring them to the table and make them do whatever they want, whatever we want. Um, so that would be their argument. My issue is those two arguments are completely contradictory because it's either a real policy

• 20:13Ed Elson?

  that has long-term benefits, or it's like a pump fake and a negotiating tactic. It can't be both. Um, so I would like to get your response to their response. You know, what would be your reaction to their arguments? Either one, that we have to do this because America is screwed on this long-term debt path, or two, this is 4D chess, it's a negotiating tactic.

• 20:38Scott Galloway?

  Yeah, the, the trope or the weirdness here, whenever no one in the administration can justify, explain or rationalize a decision he's making, they claim he's playing 4D chess, that this is so stupid or crazy, that it's crazy genius and you just aren't privy to his genius yet. Enough already, that's just fucking stupid. There's a lot of smart people out there, tell us what you're thinking. And, you know, this notion that, oh, all, all will be revealed, his genius will be revealed, that, that argument doesn't hold. I think the, I think the, the best argument from an optics standpoint is it is true that we've lost a lot of manufacturing jobs. And at least theoretically, if you raise the price of imports, our domestic manufacturers

• 21:20Scott Galloway?

  should be more competitive, theoretically, and you should increase manufacturing jobs. The problem is they impose reciprocal tariffs. I mean, just as an example, 88% of Toys under the Christmas tree are from China. Tariffs on toys, I think, are going from 3% to like 33 or something. So a 20% increase in the cost of toys. 90-plus percent of Americans are on a fixed budget for Christmas gifts. They just can't spend whatever it takes. So just to bring it home, this Christmas, 90% of households are going to have 20% fewer gifts under the tree for their kids. Instead of 10 gifts, they're going to have eight.

• 22:05Scott Galloway?

  So the notion it's going to bring back manufacturing doesn't really hold. I do believe you could say, all right, we're going to give massive subsidies to the chips industry because it's strategic, it'll create good jobs. We're going to spend a lot of money on an infrastructure bill, which will create shovel-ready jobs for people here who don't have college degrees. I'm sympathetic to the argument that we need more on-ramps. But the notion that tariffs are going to somehow restore American manufacturing, it just, it doesn't, it doesn't pan out that way. As a matter of fact, almost every example, this is essentially the policies of Latin America from the kind of the 50s to the 80s, and it didn't work. It was a disaster for them.

• 22:48Scott Galloway?

  And then a lot of people think that essentially China, you know, had all of this kind of cultural backlash. And basically, they said Mao Zedong, his strategies didn't work. So they, they've totally embraced kind of, I don't want to say open trade because they in fact are not open in terms of media. But let's just use that as an example. And to be fair, we should tariff the shit, i.e. ban TikTok because they don't allow Meta into their country. That's an example where I think you could have tariffs or basically a ban. But essentially, Meta trades at eight times sales. ByteDance trades at three, despite the fact it's growing faster.

• 23:30Scott Galloway?

  Now, why do our companies trade at a much higher multiple than their analog abroad? It's because, one, we have rule of law here. We have higher growth. We have more innovation, great universities, more risk capital, more risk aggressive people, more flexible companies. We also are seen as consistent and that is good trading partners. Now, all of a sudden, in a matter of a few short months since inauguration, we've gone from the rule of fair play or rule of law being a huge attribute. I mean, I can't, you can't overestimate. When I speak to people who've come here, who've immigrated here, they say the rule of fair law. I have a close friend who runs a lot of my money from El Salvador and he's like, the bottom line is you can be successful in El Salvador and someone might just show up and take your money with the government's backing.

• 24:15Scott Galloway?

  I have another good friend who came from Russia, said, you get the wrong, the wrong person makes a call about you, you're done. You get as much money as you can and you get out. The rule of fair law is no longer a given here in the US. Consistency, being a good trading partner. No, that's no longer rule, you know, a rule here. We're doing used car sales on the White House lawn. So what you're going to see here, and the reason why I'm transitioning out of US stocks, is even after this rout, we traded a P, the S and P trades at a P of around 24, 25. It was 28. Germany's around 21, Japan 16, China 14.

• 24:59Scott Galloway?

  A lot of that is directly correlated to what I'll call the separation of business and state. And that is business embraces rule of law and competition and the government stays out of the way. And that is not true in China. The CCP can weigh in and, and you can't rely on the Chinese government to not meddle with competition. And that's one of the reasons it trades at a much lower multiple. You are about to see dramatic contraction. In the multiple across the S and P, because a lot of the features that created a flow of capital into the US,

• 25:41Scott Galloway?

  consistency, rule of law are no longer attributes that people can rely on. This will take, I mean, think about it. If, if we go from a multiple of 25 to say where Japan is at 16, Meta, Ford Motor, PNG could increase their earnings 60% and the stock would be flat over the next four or five years. You can't outrun multiple contraction. If you've invested in Latin America over the last 10 years, you've been fucked and you might've picked great companies that outperformed, increased earnings, increased revenues, but the stock hasn't gone up because the multiple contraction has vastly outpaced the individual earnings or revenue growth of that company.

• 26:26Scott Galloway?

  And that is what, in my view, we are about to experience here in the US. Through this inconsistency, all of a sudden the US brand is about kleptocracy and sclerotic decision making.

• 26:40Ed Elson?

  We'll be right back after the break. If you're enjoying the show so far and you haven't subscribed, be sure to give Prof. Dymark a follow wherever you get your podcasts.

• 26:55Speaker 00

  This episode is brought to you by Welch's Fruit Snacks. Back to school season can be tough on parents, but choosing a snack you and your kids can both get behind doesn't have to be. Stock up on Welch's Fruit Snacks. Made with whole fruit and now made with no artificial dyes. It's a snack kids already love and one you can feel good about giving them. Go back to school with Welch's Fruit Snacks. Now made with no artificial dyes.

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• 28:14Ed Elson?

  We're back with Prof G Markets. You know, an argument I keep seeing and which Scott Besant made. You know, he has that quote that people are citing a lot. This is a Mag Seven problem, not a Maga problem. And I think that's worth addressing because his point is that, yeah, sure, we'll see multiple contraction, but the top 10% owns almost 90% of the stock market. Which means that the only demographic that this sell off is really going to affect is rich people. And I just want to clarify the truth of this point, which I think has been seriously perverted over the past couple of years because there is truth to that point.

• 28:58Ed Elson?

  You know, it is true that the stock market is primarily owned by rich people. And you made that point during COVID where we were artificially pumping stimulus into the economy such that we could maintain the multiples that we had gotten used to in the stock market. And your point was like, the stock market falling isn't a catastrophe because this isn't mainstream. You know, this will largely affect rich people. It won't affect poor people as much. But that argument has now been perverted and advanced into a total untruth where they make the claim that the stock market has no correlation with the real economy, that

• 29:41Ed Elson?

  the idea that the stock market falling has no effect on poor people at all. Which is not true at all because actually the stock market is a reflection of the real economy. Yes, it's not one to one. But if you see a contraction in earnings, if you see an increase in tariffs, which means that the burden is going to be shouldered by the companies who are importing those goods, then what we're going to start to see is one, an increase in prices. We're expected to see four above 4% inflation this year. And two, we're going to see layoffs. This is going to massively affect the job market. So whenever I see that argument that a lot of people seem to be making right now, well, this is only going to affect rich people. That's actually not true. Yes, it does affect

• 30:26Ed Elson?

  rich people. Yes, it affects multiples and people whose assets are largely held in the stock market, but it also is going to affect poor people. If you have a recession in the stock market, eventually it does trickle down into the real economy and you're going to see massive job losses, massive layoffs. It's going to be so hard to enter this job market if you're just graduating from college in the next year or two. So I just think we need to dispel that myth because what started as an important point about who really owns the stock market has been twisted and perverted into some weird justification into tanking the economy at large, which is going to affect everyone in the US. But I would also like to get your thoughts on that.

• 31:09Scott Galloway?

  The stock market, the Dow and the NASDAQ are not the real economy. They're a reflection on components of the real economy, but there is some truth to the notion that essentially the Dow Jones and the NASDAQ are essentially the PSA or the blood pressure reading of the top 10%, if not the top 1%. And what do you know? They've been on a record tear for 15 years and until, you know, until a month ago, 72 highs in the previous 24 months, what have you. And I'm actually a fan of programs that would probably take, not purposely, the stock market down. If you were to say. That the alternative minimum tax on corporations who have enjoy now enjoyed

• 31:54Scott Galloway?

  the lowest tax rates since 1939. If you were to say corporations aren't paying enough taxes, we're going to have an AMT of 30%, that seems reasonable, but it'd be it'd be an enormous hike in corporate taxes because many of them, including the biggest names in business, don't pay any because of the tax code. The stock market would go down because they would have lower earnings. I'd be in favor of that. I think people of your generation need disruption, maybe even if that means hopefully getting a chance to buy real estate and stocks at a lower price. Disruption and churn is a key component of transferring wealth back from the incumbents to the entrants on a regular basis. And as I've said, we've done everything we can specifically run up your credit card

• 32:36Scott Galloway?

  to smooth out disruptions such that I can stay rich. If we were to raise minimum wage to $25 an hour, McDonald's and Walmart's stock would go down substantially. I'd be in favor of that. I think it's worth it. This is a double whammy. This goes from bad to worse in that it's not only does the stock market go down, but 98% of companies that export products are small and medium sized businesses. 43% of US agricultural exports go to our free trade partners who've agreed to have lower tariffs. That's up from 29% in 1990.

• 33:20Scott Galloway?

  40 million American jobs depend on trade. And that you'd think, well, out of 355 million, that's not a lot. Only 150 million Americans work. So you're talking about a quarter of our jobs are dependent upon trade and we're going into a voluntary, unnecessary trade war? So there are certain components. They're they're playing, they're trying to play the everyman. Well, it just it just impacts the rich. Well, okay, that's a fair argument. But when you go after policies that reduce prosperity, reduce economic growth, reduce the demand for products across every company, including those that are not publicly traded, everyone's going to feel this. Everyone's going to feel this.

• 34:05Scott Galloway?

  So that that just doesn't hold water. What I will say, and I just find it, I go back to this notion, look at, look what money has done to us.

• 34:16Scott Galloway?

  A friend of mine went to a wedding and his niece is marrying a woman who's in the Marines. And one of the Marines that was there is this transgender male who's been in the Marines 14 years. I think he repairs, he works on aircraft carriers or something, repairing things. He's been a Marine for 14 years. He's transgender. He's just gotten noticed that he can no longer be in the Marines. I mean, it's just, why would we, when 70% of American males who show up to a recruiting office can't qualify for the armed services because they're either mentally unfit or obese, why would we risk our national security for a right wing hateful trend through the, through the current administration?

• 34:59Scott Galloway?

  When we hear about people being arrested because they didn't narc on people who were planning a pregnancy, when we hear about women in emergency rooms being turned away and risking sepsis in the parking lot. But the only thing that gets the most powerful Democrats, or quote unquote Democrats, down to fucking Mar-a-Lago is when the stock market goes down. So, look, whatever it takes for people of power to, to begin recognizing that Ben Shapiro isn't upset about anything until he frames this as a tax increase. Now he's like, okay, this is the largest tax increase in history. No, it's not, Ben.

• 35:44Scott Galloway?

  The largest tax increase in history is trading off tax cuts for increased taxes on young people in the form of deficits. Deficit funded tax cuts are essentially a tax increase on young people and they're inefficient. Trickle down just doesn't fucking work. It doesn't work, boss. But the, the Republicans are now outraged because they say this is an unconstitutional tax increase in the form of tariffs. But if this is what it takes to get people's attention, fine. For me, this is like... This is like number 15 on the list of shit that just outrages me. But if this is what it takes to get to the attention of powerful people, fine.

• 36:27Ed Elson?

  Well, but there are ways to do it without making poor people poorer. There are ways to, you know, extract the obscene wealth that we've been seeing accumulated among the rich. And it appears that that's the justification that they are using for this policy. But there's a way to do that, which doesn't also make poor people poorer in the form of layoffs, a tighter job market, and of course, inflation. That's the most important impact we're going to see. This is going to be massively inflationary. It's going to hit poor people the hardest. And the way you do that is, as you say, you you get your act together on taxes. That's how you do it. And so I think the double whammy, as you say, is the right way to put it.

• 37:09Ed Elson?

  Yes, this is going to affect rich people negatively, but it's also going to affect poor people negatively. And there is a way to implement policy that can address the massive wealth inequality that we've seen over the past few years. But to suddenly, after making this insane policy, then say, oh, this was all part of the plan because look how rich everyone is. Having enriched those same people for many, many years. To me, it's just they're completely fumbling the ball here. But I want to move on to what people can actually do about this. So, you know, we lost more than $6 trillion in value in the stock market. The dollar shed 6% of its value.

• 37:52Ed Elson?

  The odds of a recession, according to JP Morgan, have now risen to 60%. So in all likelihood, we can expect a recession in 2025. I'd just like to get some advice from you.

• 38:07Ed Elson?

  And let's start with young people. Let's start with me, for example. This could be the first real recession of my professional career. What would be your advice for a young person like me? What should I be doing with my money? And what exactly should I be worried about if a recession is coming this year?

• 38:25Scott Galloway?

  So, action absorbs anxiety, and there's two components to this. But at the same time, you don't want to make decisions from an emotional.

• 38:33Scott Galloway?

  Position from an emotional complexion. So a couple of things in terms of your own personal activity. I never think it's a bad idea to say, where could I save money? And dollar cost average in and start investing more because quite frankly, this might be, it might be an opportunity. I, you always want to be in the market. I'm not, I, I think it's always a great time to say, how could I cut my expenses as a young person and invest more? So ignore the markets for the moment. The first question in terms of real action, what could I do to reduce my costs? Get one of those apps to look at my subscriptions. One glass of coffee, downgrade my gym from Equinox to whatever boxing, whatever it might be.

• 39:17Scott Galloway?

  Partner with my boyfriend or my girlfriend to try and save a little bit money. But we're going to get, in case a shock comes, we're ready or more ready. And if it doesn't, any incremental savings we have, we're going to invest in the market. I think you always want to be invested at your age. It is impossible. In the last three years, we've had up 24, up 27 and down 10. You couldn't pick which of those years came sequentially. So don't try and believe you can, you can time the market. Your action is to think, how can I be more financially responsible and free up more money to invest? Terms of your investment strategy, and this is the email and the text I got. What should I do? What should I do? I'm freaking out. What should I do? This is what you do as it relates to investments. Nothing.

• 39:59Scott Galloway?

  Because when something traumatic happens to you, and for this, I was shocked how many people I know saw this as a traumatic event. They were watching, you know, glued to their phones, watching their net worth go down 10, 20, 30%. You never want to make a decision from an emotionally fragile standpoint. When you get divorced, girlfriend breaks up with you, lose your job, someone in your life dies, you do not want to make any big life decisions in that moment. You weren't thinking straight and you want to take action. You wanted to try and do something. Don't wait a while, talk to people before you do anything because if say you sold everything yesterday, the worst piece of advice in financial history was probably Jim Cramer at the depths of the great financial recession, saying, if you can't stand the

• 40:44Scott Galloway?

  volatility, then you should sell your position. Can you imagine if you sold your position in 2008 at the lows, within 14 months, they were back. You want to talk about a hit to your mental health. I panicked, I sold, and it came ripping back because this is what could happen. Say at the end of Friday, Americans, not Americans, humans will do almost anything to avoid pain. They just thought, shit, everything's so far down. If you're in tech stocks, you might have been down 20, 30% in 48 hours. I can't handle anymore. I'm just going to cash. You do that Friday at 3pm. Because this guy's so inconsistent, because the market is now volatile or volatility, the VIX has gone way up, there's a non-zero probability on Monday, Ed, he says, just kidding, I'll tariffs off, and the market goes up 2,000 points. And then what happens

• 41:27Scott Galloway?

  to your mental health? I perfectly timed this fucking wrong. And your emotions are your enemy in the market because your emotions are rational in the sense that other people are having the exact same emotion and are doing things in unison as a herd, which creates alpha on the other side. And that is, if at 3:30pm, a lot of people were thinking, I just need to sell like everyone else, those people generally don't do well because everyone's selling or everyone's buying, right? So you do nothing. Now, over the medium and long term, I think it's a decent idea to say, okay, I want to avoid some of this mental

• 42:08Scott Galloway?

  trauma. I want to avoid what I believe is probably maybe a signal that the American run or the historic run might be coming to an end. I think potentially saying, okay, after things have settled a bit, if I have some losses, maybe harvesting some losses for tax reasons, if that makes sense, or thinking about diversifying out into low-cost ETFs geographically. Should I be looking at some ETFs in Latin America and Asia and Europe, recognizing?

• 42:36Scott Galloway?

  That over the long term, demographics and innovation and productivity take the markets up and to the right over the long term. I want low fees, but to just be in the S and P, even if it's the SPY, you think you're diversified with an index fund? No, you're not. So I do think it might be time to think over the medium and the long term, should I be diversifying into other markets that might recognize more growth in the next five years, given that we look in America to be developing a reputation for a less ideal place to invest, meaning the flows of the rivers of capital that have been one way into the US for the last 15 years are about to reverse. And we might experience that

• 43:19Scott Galloway?

  insurmountable foe of multiple contraction. I think you think about this, you start talking to people about it, but you don't start selling everything and going into cash. When you're your age, and I think even when you're my age, you want to be diversified, you always want to be in the market. The markets could go up a thousand or 2,000 points on Monday, they could go down another thousand or 2,000 points. So you just want to think, you want to start thinking about how you make yourself more bulletproof, set yourself up for success, but you do not want to make big decisions from a position of emotion.

• 43:52Ed Elson?

  Yeah, I think the worst thing that you could do right now is panic sell. And I just want to make clear for everyone who's listening to your advice right now, you're not saying sell your S and P and go buy the Euro stocks. You're saying, hold your S and P, take what cash you have, and go diversify into other markets. And I think that makes a lot of sense. The other thing that a lot of people are talking about right now, though, which I'd like to get your thoughts on, is buying the dip. You know, hedge funds, they sold over forty billion dollars in stocks on Thursday, which is the highest net sell-off from hedge funds since 2010.

• 44:36Ed Elson?

  Meanwhile, retail investors bought almost five billion dollars' worth of stocks on Thursday, which is the highest net purchase from retail investors in the past 10 years. In other words, institutions are selling and retail investors are actually buying. They are leaning into it, they're buying the dip. So what are your thoughts on buying the dip right now? Do you think this is a good time to buy the dip? Or do you think we should be waiting a little longer?

• 45:05Scott Galloway?

  It's impossible to know. The only strategy I'm comfortable recommending, or actions I'm comfortable recommending, is if you find that you're 90% in US stocks, or 95, or 100, there's a lot of people that are 100% in US, real estate in US, and our entire net worth is tied up in the US. Because of innovation in the financial markets, you can now buy a low-cost ETF in Brazil, or in China, or Vietnam, or all of Europe. What I'm suggesting is you look at your portfolio, you don't do anything in the immediate term, because who knows what's going to happen with this volatility? And you think about diversifying. And also, I always think it's a great idea, if you have cash, or you can figure out a

• 45:46Scott Galloway?

  way to get some extra money together, I love investing. But I think this notion of buying the dip, shit, we don't know if this is, if we're going to look back, it's not as if the market is cheap right now. It's not, it's not like, oh, everything's on sale. And I remember I worked, I was an advisor to a kind of Phil Falcone at Harbinger Capital, and Phil made one of the great bets in history, he bet on the subprime crisis, he went from 300 million in AOM to 22 billion. And I remember coming in, in March of 09, or at Sandman, like, oh my God, we gotta buy Williams Sonoma. It's at five bucks a share. We gotta buy. And I remember him saying to

• 46:29Scott Galloway?

  me, what do I sell to buy this? Everything's on sale right now. Everything's on sale. We are so far from that. If you didn't know what had happened on Thursday and Friday, you wouldn't look at a lot of S and P stocks and go, oh my God, they're irresistible. Now, there's probably some value in like Nike I was watching. It's just gotten the shit beaten out of it. It's at a 12 or 15 year low. You know, Intel, there's probably some good companies. I wouldn't say they're on sale. I would say they're slightly marked down from what was historically high prices. So this notion that you should lever up or margin up? No. If you have some money and you want to be in the market, I think

• 47:09Scott Galloway?

  you really want to look at how diversified you are geographically. And I love the idea of freeing up money to invest. I think that's a great idea for a young person. Okay, I'm going to figure out a way. I have some cash. I want a dollar cost average in, but I think it's about diversification. But the notion somehow that the markets are on sale right now versus what? Versus Wednesday night? True. That's it. They're not on sale.

• 47:37Ed Elson?

  We'll be right back. If you're enjoying the show so far, hit follow and leave us a review on Profiting Markets.

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• 49:10Ed Elson?

  We're back with Prof G Markets. I would like to pivot to advice for older people. Someone, say, closer to retirement age, someone who has been.

• 49:21Scott Galloway?

  Get a colonoscopy.

• 49:25Ed Elson?

  Someone who's been.

• 49:26Scott Galloway?

  You're gonna be dead soon. Forgive yourself, be nicer to people. Be kinder. Order the good wine. This is Bill Bixby from The Incredible Hulk and The Courtship of Eddie's Father, someone you probably don't know. When he was dying of cancer, he used to say to everybody, buy the good wine.

• 49:42Ed Elson?

  But on a serious note, I mean, there are people who have been building their retirement accounts for a long time. They've just seen the value of that account slash more than 10%. I'm sure a lot of people are legitimately panicking right now. I think for young people, it's actually a lot less stressful because as you've made the point before, we actually, for a lot of us, we don't really own assets. It's kind of a nice thing when the stock market's on sale. We'll just earn our income in cash and then convert that into assets when we buy the stock market and hopefully it goes down a little bit and then we can see it grow over a lifetime. But for someone who is, say, in their 60s, who has been building up the asset base and

• 50:24Ed Elson?

  this is the asset base they are ready to live off of, what would you say to that?

• 50:28Scott Galloway?

  Well, I'll talk about them and then I'll, I don't like to give financial advice. I'll say what I'm doing. And I'm in a much more blessed position than a lot of people for a lot of reasons. I got lucky and I'm talented, so, and I've been very open about my, my wealth on this program. So first off, same advice, don't panic sell. The markets could rip back up. Work with someone, talk to some people and say, am I too invested in the US market? And how can I thoughtfully and rationally and in a mature manner start to diversify away from a geographic concentration? I think that same advice goes.

• 51:08Scott Galloway?

  And also are there opportunities to perhaps maybe ramp up my investing through consuming less, right? And you don't like to tell people to consume less if they, you know, they're already living close to the bone, but are there opportunities to make a few, a few cuts here and there? It's basically the same advice, almost the same advice for young people. Diversification is even more important for old people because they don't have the time to make it back. So diversification is your kevlar. So this should be the impetus to try and figure out if you would benefit from diversifying. Now, what I am doing or what I've done, I'm, I'm doing nothing over the next few days because I think the market could go up two or three. This guy could announce all tariffs are off on Monday and we're off to the races.

• 51:51Scott Galloway?

  What I've been doing over the last three months is I have been doing, I have been slowly but surely selling out of US-based assets and buying European. I made my biggest private investment of the year was in a European defense company. My other one was I invested in a friend's company, Elena Partners, that manages special sits in Latin America and Europe. I love that. It's, it's mid-cap and small cap and value, basic value. I wanted to get away from tech, what I thought was just. Now, I also want to be clear, I've been planning to sell Apple and Amazon down and I waited too long. So I don't get it right. I'm not a genius. I still, I lost a shit ton of money Thursday and Friday from Apple and Amazon because

• 52:34Scott Galloway?

  I know I've been thinking about it, but I was thought, well, maybe when Apple hits 250 again, right? And it didn't, now it's back at whatever.

• 52:41Ed Elson?

  By the way, my prediction was right, not for all the right reasons, but I said Apple would hit, go below $200 in the next six months.

• 52:48Scott Galloway?

  You did.

• 52:49Ed Elson?

  It did.

• 52:50Scott Galloway?

  You did.

• 52:51Ed Elson?

  So chalk it up as a win.

• 52:52Scott Galloway?

  So what I have done though, or what I did was I went short. I thought this thing's just too expensive, specifically AI. I lost. I don't know. I haven't even really looked. I think I lost somewhere between five and seven million bucks on Thursday and Friday in just my US equities. But I got 30% of it back because I'm short Palantir and Tempest AI. I think AI is overvalued. I think Palantir is crazy overvalued. So I've been short those companies. I didn't know you were short. I love that. That's amazing. When did you go short Palantir and Tempest? Uh, just a couple of weeks ago. I thought AI has gone apeshit crazy and they went up dramatically, got hurt, but now they're well down. So I've got, I'm never perfectly

• 53:35Scott Galloway?

  matched in terms of net exposure, short, long, because I do think the market's general trajectory is up into the right over the medium and the long term. So I always, I always want to have and do have a long bias. So I didn't get my full, whatever it was, seven million in losses back, but I got two or three back, which quite frankly, kind of, it kind of softens the blow. And I don't think it's a bad idea when you're like me and fully almost, you know, kind of over invested in the US because of real estate and equities and the fact that I make small investments and the fact that our business, quite frankly, and you need to take this into account, is very dependent upon the US market. So I said, all right, I want to short the US market. I want to short AI. So I went short on Palantir and Tempest, which I just think are just trading at crazy

• 54:18Scott Galloway?

  multiples. So I got some of that back. But what I am doing over the medium slash long term is I'm saying, okay, I'm probably, I was probably six months ago, 95%, 90% US assets. I'm now 70 and I'm going to try and go somewhere between 40 and 50 over the next three or six months. Cause these cycles take a while to play out. It's not like, you think, it's not like you think, well, it's too late to diversify. Guess what, folks? If you want to diversify into Latin American or Asian or European stocks, they got whacked on Friday. So you might be actually, if you had some tax losses to harvest and you wanted to diversify, you're not really getting punished because while those markets didn't go down

• 55:03Scott Galloway?

  as much, they went down nearly as much. So it's still actually a decent time to diversify. So what am I doing? I'm trying to reduce my exposure to US assets because I do think we're going to experience multiple contraction, no way to outrun it. I'm at an age where I can't make it again, or I can't make as much back again. I have been wealthy three times, which means I have gone broke twice. Not broke, but I've lost most of it. There's a saying that any fool can make money, it takes someone smart to hold on to it. I am that fool, right? I was not smart. I did not diversify because I started believing I was good at investing and going all in on NASDAQ stocks all the time because I understand

• 55:45Scott Galloway?

  technology better than anyone. Yeah, what a fucking idiot. Anyways, now I'm trying to learn. I'm like, okay, okay, I can, I can maybe, you know, I can diversify a bit. I'm gonna, that's my kevlar. I'm not going to swing for the fences. I'm going to be more thoughtful this time and diversify. I believe in innovation. I believe in Europe. I believe in Latin American stocks. I hate to say it, but, but the Chinese I think are making a big comeback. So, look, that's what I'm doing. I'm diversifying. I'm, I'm going more global versus just the US. I'm trying to pull in my chin. I'm trying to pull in my horns a little bit. And I don't think that's a bad idea when you're a little bit

• 56:29Scott Galloway?

  older. I think you want to be diversified.

• 56:32Ed Elson?

  I would like to just make, as we wrap up here, one point about America, because I think a lot of people, they are panicked about what's happening in the US stock market. They're panicked about what Trump is doing. And there's no, there's no doubt about it. I mean, what he's doing is quite frankly insane. And both commentators on the left and the right agree on all of this. And this is why we're seeing this unbelievable reaction in the stock market. What I would say though, about America and investing in America, I mean Buffett has that great saying, never bet against America.

• 57:08Ed Elson?

  If this were happening in China or some autocratic nation, I think it would probably be a good idea to sell everything you have. Because what it means is that the government is taking us in the complete wrong direction. And I think you could expect that would happen and play out over 10, 20, 30 years. I mean, Xi Jinping, as an example, has installed himself as the indefinite leader of China. He's never coming out. The great thing about America is that we live in a democratic system. And what we're seeing happen, and what we've seen over the last week or so,

• 57:51Ed Elson?

  is the markets and the world is kind of coming to its senses that what this guy's doing doesn't really make any sense. And we're one of the few nations in the world where when we install someone who's crazy into the office, and this was written up in the constitution. The constitution was built with all of these checks and balances and all of these designs that was specifically meant to brace for the impact of installing someone stupid. And that is what we have right now. We've seen from these tariff policies, I mean, this is a stupid leader that is making stupid policy decisions. The wonderful thing about America is that we'll vote him out. I mean, if this continues and things get really, really bad, we'll just vote him out.

• 58:37Ed Elson?

  And we're one of the few nations in the world that can do that. And I think the reality is, yes, the stock market's down today. It'll probably be down tomorrow and the next week. But if you take a longer term view, we have the luxury of knowing that if things get really, really bad, we will just take action and decide to change them. And we can change the trajectory of both the economy and the stock market. And so for those reasons, you know,

• 59:08Ed Elson?

  I agree. I think it's good to diversify, but I definitely don't think that it's time to sell. I don't think this is a moment where the US is doomed and it's doomed forever. The great thing about the US is the fact that it is democratic and we can get ourselves out of holes every four years. And so if things continue in this trajectory, that's exactly what will happen. He'll be voted out and we'll make things right again.

• 59:32Scott Galloway?

  I love that. And I love hearing it from someone with a British accent. Yeah, you're right. You don't want to bet against America. I would argue some of the damage here is structural, not cyclical, that he's undertaking. I see above, what would Putin and Xi do differently if they wanted to just cede advantage from the US to China and Russia? What would they do differently than what he's doing right now? And so I, and unfortunately, I do believe, and you know, this is trying to manifest, we are going to elect somebody else after even red states realize, I mean, how many TikToks are we going to have over the next few weeks of, I voted for Donald, you know, I voted for President Trump and I regret it. We're going to see a lot of those videos.

• 1:00:16Ed Elson?

  It's going to be unbelievable. I mean, no doubt about it.

• 1:00:20Scott Galloway?

  The problem is, there has been a world order and inconsistency in a playbook and America has been seen, and we've taken it a bit for granted, that we were seen as the stalwart, we were seen as the base, we were the pillar, we were the mortar inside of all these bricks of wonderful democracies. And I think he's literally ripping at the fabric of the world order. And a lot of nations, even if we bring in someone who's seen as responsible and an adult, from the Republican or the Democratic side, I'm not sure the world order is going to say, you know, we've reconfigured our supply chain through Mexico, we're buying more products out of China, we're doing a lot more trade with Germany than we are with the US now. We're getting our agricultural products from different nations.

• 1:01:05Scott Galloway?

  If they're going to say, oh, okay, game on again, we're back in the US. I think some of this damage will last for a while. I think the hangover here is going to outlive the Trump presidency. And that's what's so awful about this. I don't think that this is, I think this is going to do long lasting damage, just as the way we had a 15 year bull market run. I think you could argue this might be the beginning of a multi-year, not, not three and a half, but five, 10, 12 year. Reversal of those flows. And even if companies, even if they get their act together, the American economy is like no other. People are so innovative here, so risk aggressive, the gears turn on. But the thing I don't think they're going to be able to turn around

• 1:01:48Scott Galloway?

  is I think the momentum now is dramatically around multiple contraction for the S and P and the Nasdaq. And I think that is gonna, I think that is just going to be a vicious hangover that'll be several years.

• 1:02:02Ed Elson?

  Well, we will definitely be continuing that conversation over the next several years. So I'm glad everyone will join us for the ride. Let's take a look at the week ahead. J P Morgan and Wells Fargo will kick off first quarter earnings season. We'll certainly be listening to what Jamie Dimon has to say about the tariffs and what's happened in the markets. We'll also see inflation data for March from the Consumer Price Index. Scott, do you have any predictions?

• 1:02:27Scott Galloway?

  Volatility. That's the only thing I I'm comfortable predicting. I, you know, it'd be fun to say the market's off another 5,000 points next week. Market could go up 3,000 points. This is the only thing I'm fairly certain on is volatility. And don't try this at home, but you're going to see a lot of traders make money buying and selling options because we're about to see the VIX go crazy. And traders love volatility because they can spot anomalies and panic selling and panic buying and weigh in with, you know, good bets on volatility. And anyways, long winded way of saying my only prediction next week is volatility.

• 1:03:03Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Isabella Kinsel is our research associate. Dan Shalan is our intern. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our interview with Gary Stevenson, only on Prof G Markets.

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