Why the TACO Trade Matters — ft. Robert Armstrong

Scott and Ed discuss Trump’s move to double tariffs on steel and aluminum, the administration’s decision to enlist Palantir to streamline federal data sharing, and Meta’s plan to launch AI-powered ad creation tools. Then, Robert Armstrong, U. S. financial commentator for the Financial Times, returns to the show to share how he coined the term “TACO trade,” what he makes of its viral moment, and the potential ripple effects it could have. He also highlights an overlooked element of the “big beautiful bill” and discusses whether we can grow our way out of the deficit. Take a survey to let us know what you think about the show Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth" out now Subscribe to No Mercy / No Malice Follow Scott on InstagramFollow 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

  Flowing ad budget on metrics that look great till the CFO sees them? That's bull spend. And marketers are calling it out in Dashboard Confessions.

• 0:09Speaker 01

  I remember telling my boss, "It'll be good for the brand," when leads were slow. Yeah, it wasn't.

• 0:17Speaker 00

  Cut the bull spend. LinkedIn lets you target by company, job title, and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 0:31Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit MichelobUltra.com/SuperiorAccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 1:01Speaker 03

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake? The mountains? The homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all-wheel drive, and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com/Outback to learn more.

• 1:26Scott Galloway?

  Today's number 30. That's a percentage decrease in Hamptons' home run contracts year over year. True story, Ed, I was on the jitney, headed out to Southampton, and this guy was masturbating. So I looked at him and said, "Where do you get off?"

• 1:51Scott Galloway?

  It's bad, but good.

• 1:52Ed Elson?

  That's good.

• 1:54Scott Galloway?

  Do kids your age go to the Hamptons? Or do you just play shuffleboard and goon us or something like that?

• 1:58Ed Elson?

  Oh, yeah. I'm well acquainted with the jitney.

• 2:00Scott Galloway?

  Oh, so you go out to the beach? Kids still do that.

• 2:03Ed Elson?

  Yeah, they still do it. Yeah. That was sort of your thing back in the day, right? You took the BMW with the goggles on the, on the mirror.

• 2:10Scott Galloway?

  Now, that's the eighties. This was, this was renting a car, piling the kids in the back. This is when I had kids. I had a couple of good years in the Hamptons when I was single. I bought basically a giant fucking fraternity. I put in a sand volleyball court. I was fully optimized. I'd go out there and be strangers and sleeping in different rooms.

• 2:28Ed Elson?

  Which, which Hampton?

• 2:29Scott Galloway?

  I was in Watermill. When I went out there, this marks the age, it was the early aughts. And every weekend, it was a, a task or a maze of trying to figure out who knew the right publisher or editor of a different Conde Nast magazine to go to the best party that weekend. And I haven't been to a magazine party in the Hamptons. I don't go out there anymore. But they, they were the bomb. And when you moved to New York, the most powerful, coolest, well-dressed, dialed-in people you knew were publishers and sales reps and editors of Vanity Fair, Vogue, you know, Details Magazine. And I just think to myself now, it's, you know,

• 3:14Scott Galloway?

  it's the crypto party or it's.

• 3:16Ed Elson?

  I was gonna say, what, what, who are the, the, the Conde Nast editors of 2025? I'm trying to think. I mean, maybe it's crypto, but I feel like crypto doesn't have that same level of like artisanal cultural respect that those guys had. What's the equivalent?

• 3:31Scott Galloway?

  You know, the honest answer is I don't go out. I decided, I, I haven't gone out to the Hamptons much over the last 10 years because I found it, I sold my house. I found it was so expensive. And also it kind, it didn't ruin the summer, but you spend so much money keeping this place up to enjoy it for what for me was a 12-week season that you feel as if you have to go there. So you didn't do anything else. And also I felt some social pressure to go out and it was crowded. I just didn't enjoy it that much. So sold the house out there and haven't been out there that much. But I can see why people your age would love it. I think it's, it's fun and I need you to go out there and have fun. And now the young people go all the way out to Montauk though, right?

• 4:11Ed Elson?

  Yeah, it sucks. It's way too far. That's where all the, I mean, all these, these, these ridiculous clubs are opening up out there. I, I actually kind of agree with you. I think it's getting a little bit much. Maybe I'm becoming old and boring too.

• 4:25Scott Galloway?

  Yeah, you are sort of an old soul. You seem like you present as 27.

• 4:32Ed Elson?

  All right, get to the headlines. Let's do it.

• 4:36Scott Galloway?

  Now is the time to cry. I hope you have plenty of the well of all.

• 4:43Ed Elson?

  Trump is doubling tariffs on imported steel and aluminum to 50%. That's their highest level since the 1930s. The move is expected to drive up prices on consumer goods, including cars and home appliances. The Trump administration has reportedly tapped Palantir to streamline data sharing across federal agencies. While the government had already sought access to extensive citizen data, integrating it across agencies could create more detailed profiles on all Americans. And finally, Meta is planning to roll out AI-powered ad creation and targeting tools for brands by late 2026. While its platform already uses AI to optimize existing ads, these new AI tools will be able to build entire campaigns from just a product image and a budget.

• 5:28Ed Elson?

  Meta's stock rose 4% on that news and ad agency stocks fell. So Scott, let's start with this new tariff order from Trump. He's doubling tariffs on imported steel and aluminum. He announced this at a rally in Pittsburgh where he was also promoting this new deal that we talked about last week between Nippon Steel and US Steel. But now we've got steel tariffs up to 50%. And the market's reaction, we saw US steel stocks rise. Steel Dynamics up 10%, Cleveland Cliffs up 21%. We saw foreign steel stocks falling, as you would expect as well. Scott, your reactions to the steel and aluminum tariffs?

• 6:09Scott Galloway?

  It's not gonna happen.

• 6:12Scott Galloway?

  For our guests that's coming on, the taco trade Trump always chickens out. This is...

• 6:16Ed Elson?

  What do you mean? Because it went into effect this week. Are you saying it's not gonna hold? It's not gonna last?

• 6:21Scott Galloway?

  No, it'll be revised downward or it'll affect it. I just don't think it'll hold. And, okay, so why do these stocks go up? Because the general assumption is if you make imported steel that much more expensive, they have unearned pricing power. Meaning, effectively, cars and homes are about to get substantially more expensive. I read that car prices could go up anywhere between $500 and $6,000 based on additional... I mean, essentially... The inputs of steel are just, everything that involves steel is about to get a lot more expensive. So, and these are small, I don't want to say shitty companies, but relatively unimportant companies that don't employ very many people. You know, okay, so you've pleased

• 7:05Scott Galloway?

  a bunch of people who own Cleveland Cliffs and US Steel.

• 7:08Ed Elson?

  Yeah, and the union workers.

• 7:09Scott Galloway?

  Yeah, and some union workers, which are now, what, nine or 11% of the US workforce? So you're pissing off a ton of people for the benefit of a small number of people. It's just, I would bet that it doesn't, that it doesn't hold. What do you think, Ed?

• 7:26Ed Elson?

  To your point on, on what it does to the auto industry, you look at GM, Ford, Chrysler, Stellantis, they all fell around 4% after that news. But I would like to point you to an interview that Scott Besant did over the weekend. He went on Face the Nation, and they asked him about this. Specifically, they asked him how steel and aluminum tariffs will affect the construction industry. Because as you point out, if you restrict almost a quarter of the supply that comes in from abroad, you're going to see price increases, which will ultimately affect all these industries downstream, including manufacturing and construction. So they asked him how this will affect the construction industry. I'd like to get your reaction to his response, because I just found it hilarious.

• 8:08Speaker 06

  Well, I think, I was with the president at the US Steel plant in Pittsburgh on Friday, and I will tell you that the president has reignited the steel industry here in America. And back to the earlier statements on national security, there are national security priorities here for having a strong steel industry.

• 8:32Speaker 07

  But do you have a prediction on how much it's going to impact the construction industry, for example?

• 8:38Speaker 06

  Well, I have a prediction on how much it's going to impact the steel industry. And, you know, again, we'll, we'll see. There are a lot of elasticities that, you know, this is, this is a very complicated ecosystem. So is it going to impact the construction industry? Maybe. But it's going to impact the steel industry in a great way.

• 9:02Ed Elson?

  Scott, I mean, one, what is your reaction to his response? Two, my question, why do they keep putting this guy on TV? This guy is so bad at public speaking. What are they doing?

• 9:14Scott Galloway?

  He does have a lot of credibility in the markets, but I got to imagine he wakes every morning and he either takes meth or beta blockers. And it's just like, I hate myself. I hate myself. He's not, everyone I know that knows this guy says he's smart. And he's talking about the steel industry is back. You did some good analysis here. How many people are in the steel industry in the US?

• 9:36Ed Elson?

  I don't have it in front of me, but I know that there are 14,000 workers working for US Steel in North America.

• 9:42Scott Galloway?

  This, you're not even cutting off your nose to spite your face. You're, you're cutting off your head to spite your ear lobe. I mean, this is just such a.

• 9:52Ed Elson?

  I've heard that one before.

• 9:53Scott Galloway?

  I just made that up. I'm pretty proud of that. And I think, I think it holds. I think it works.

• 9:57Ed Elson?

  Yeah, I think it works.

• 9:58Scott Galloway?

  I think it checks out. This is, the steel industry is back. Oh, great. And, you know, the cavalry is back. We're going to win wars. You should see these, these swordsmen on their horses. They're just so frightening. It's, the steel industry is back. In addition, you only have to go two orders down. We had Peter Zion on Prof G. My other podcast that is actually still bigger than this one, Ed, I don't, I want you to know that next time you ask for a raise, that it still is a bigger podcast than this.

• 10:29Ed Elson?

  Is it?

• 10:29Scott Galloway?

  Yeah, it is. It is. Yeah, at least according to math.

• 10:33Ed Elson?

  No, no, no. I think it's going to be Northwood bigger, no?

• 10:36Scott Galloway?

  No. Anyways, the steel industry is important, Ed. Anyways, I've lost my train of thought. I'm so angry at you right now. I'm literally, I'm Donald, I can't, I can't run for president. I'm so fucking old. I'm, I'm literally, I'm 50 years old and I don't remember what to say. And these guys are 105 with prostates the size of Uranus.

• 11:01Scott Galloway?

  If Uranus, I mean, the planet Uranus, not you. But, uh, oh God, where are we? You take this one, steel tariffs.

• 11:10Ed Elson?

  No, no, you've given us, you've given us the analysis. We've listened to the Besson clip. Uh, I think we're good. And now we're going to move on to Palantir. You've got two more things to talk about with us right now.

• 11:21Scott Galloway?

  All right, and then you'll reheat my soup. Okay, go ahead.

• 11:24Ed Elson?

  This is a report from the New York Times. They learned that President Trump has enlisted Palantir to build a master database for the government that will contain data on every American in the country. The data will include supposedly your bank account number, your student debt data, your medical claims, your disability status, et cetera, et cetera. And all of that data will be shared per Trump's executive order. It'll be shared across every agency in the US government. So Scott, a lot of people are very upset about this, as you would probably expect, um, your reactions.

• 12:00Scott Galloway?

  The reason why so many European countries have such strong privacy laws is that if you look at what happened in the Netherlands, um, the Netherlands had a census. France did not. And so in 19, um, I think it was 39, when Hitler rolled into the Netherlands, they went to the office of the census and they knew the addresses, names of every Jew. And they were really, they could round them up very efficiently and very easily. And the French had a much easier time helping Jews get out or hide them. You know, there's danger, there's inherent danger to lists, uh, especially when the government aggregates them. So I just immediately sort of have a gag reflex around the government gathering lists

• 12:44Scott Galloway?

  um, on people, on information for profit, if you will. Now, having said that, I think TikTok already knows a lot about me. And the CCP knows a lot about me. So what I think is incumbent upon this is I don't think you can stop this, whether it's Palantir or someone else gathering a lot of data on you. What I think we need is just really strong privacy laws and airtight. Airtight legislation that says if you abuse these laws and use them and they do damage to people that you're liable and you could get hit very, very hard.

• 13:14Ed Elson?

  Such as using the information to round people up and sending them to other countries.

• 13:19Scott Galloway?

  There you go.

• 13:20Ed Elson?

  I think most people agree this isn't, this isn't great politically, but in terms of markets, it's great news for Palantir because I think this basically shows that Palantir is now the go-to provider for AI in Washington. They have been sort of tested out for many years. Obama employed them, Biden employed them, now Trump. They've gotten trust on both sides of the aisle and Trump clearly trusts them to handle anything and everything. And I think as a private company, that is a huge deal because they have now landed essentially a 360-degree contract with the richest enterprise in the world, and that is the US government. And I think that's why you're seeing this unbelievable

• 14:01Ed Elson?

  valuation, $311 billion in market cap when I last checked, trading at 100 times sales. And a lot of people saying the valuation is insane. Maybe it's overvalued, but I think when you look at the amount that the government is investing into this company and the amount of trust that there is now in that relationship, I think it's not so much a question of is it an insane valuation? And it's more like it's maybe a little overvalued at this point.

• 14:30Scott Galloway?

  Yeah, like it's now worth more than Lockheed Martin, Northrop Grumman and General Dynamics combined. So take the biggest producers of submarines and, you know, fighter aircraft and aircraft, you know, detection systems and it's worth more, it's worth more than all those companies that actually make that stuff. I also think that Alex Karp is probably one of the more interesting iconic CEOs of this new age. He's kind of CEO 2.0. The way he does earnings calls, the way he's willing to go on Bill Maher, the way he's turned himself into sort of a brand. I also think he was brilliant leaning into like Team America and Team Israel. Even shit like he really understands branding, his hair, that's, that's not accidental.

• 15:12Ed Elson?

  The Malcolm Gladwell thing going on.

• 15:14Scott Galloway?

  Yeah, I'm an Einstein-like figure. That's very purposeful. And the result is, is he has access to cheaper capital, can get the best talent because he can issue. You know, you can realistically tell someone, there's a decent chance you're going to be a millionaire here in terms of options value.

• 15:30Ed Elson?

  Some of the smartest people I know work at Palantir.

• 15:32Scott Galloway?

  That's interesting. So they're not from Princeton.

• 15:34Ed Elson?

  Oh, they're from Princeton.

• 15:36Scott Galloway?

  That was good. That was good. Anyways, some of the smartest people you know work at Palantir, really.

• 15:44Ed Elson?

  Yeah, I think so.

• 15:44Scott Galloway?

  They've done amazing. Good for them.

• 15:46Ed Elson?

  Exactly. Let's move on to Meta, which is planning to fully automate ad creation with AI. Used to be that they would use AI mostly for targeting. Now they are testing out using AI to build the ads themselves. So for example, if you want to sell your new cold brew, as an example, you would go to Meta. You'd give them an image of the product. You'd say, this is the general message we want to convey. These are our budget constraints and then Meta builds the entire ad for you. And then in addition to that, the AI will personalize the content based on the user it's targeting. So for example, if the user lives in, say, a beach town, you might see the cold brew sitting

• 16:30Ed Elson?

  in a sunny location on the beach. If they live in the mountains, maybe it's on a snowy mountain, whatever it is. In other words, the whole thing is personalized, not just in terms of the placement of the ad, but in terms of the entire ad itself. Now, to be clear, this hasn't been released yet, but this is a report that came from the Wall Street Journal. Meta is building this. We did see a market reaction. Meta rose 4%. And the traditional ad agencies like WPP, Interpublic, Omnicom, they all fell around 4% as well. Scott, your reactions to what Meta is building?

• 17:05Scott Galloway?

  The first company I started was a company called Profit, which was a brand strategy firm. And the plan was pretty simple. Get to some level of success such that you can, you have good client relationships. You have something different and then hope Martin Sorrell, Sir Martin, comes and buys you. And after five years or seven years in the business, Sir Martin showed up with his team and offered to buy us, also offered to buy L2, because that was, they were the, Sir Martin Sorrell, Maurice Levy, John Ren, I forget the other guy's name, but IPG, they were the masters of the universe of the marketing world. And it's just incredible how far they have fallen. I was looking yesterday, the total market cap of those four companies is less than the market cap increase of Meta yesterday.

• 17:50Scott Galloway?

  And I am absolutely blown away by this because if you think about what an agency does, an agency says, okay, let's come up with a strategy. And we used to do a lot of this at profit. What is our core association? What markets does that appeal to? What's the addressable market? What's our point of differentiation? How do we communicate that point of differentiation, our messaging? Then we come up with great creative and then we have a group of people who plan how to most effectively deploy our finite scarce media dollars across TV or radio or activations, whatever it might be, or trade shows. And then hopefully people buy it. And essentially, Facebook or Meta was one of those companies competing for your media dollars based on your agency or your internal media team deciding

• 18:31Scott Galloway?

  who to buy media with. And basically Meta has said, okay, in addition to being arguably the best place for those people to deploy their media dollars, their scarce media dollars, they said, well, actually, we can be in the business of media planning. So PNG has a reputation for innovation around their products. Unilever has one of the best media teams in the world. They can figure out how to squeeze more juice out of a million dollar media budget than anyone in the world. And now those people are basically Meta saying, no, you don't need them. We can, using AI, determine what's working and not working a thousand times a second and reallocate your capital for you. In addition, they're going even further upstream and saying, you don't need to spend money on creatives. I mean, kind of the general rule was, you get the creative for free and then they take

• 19:16Scott Galloway?

  eight to 12% of your media spend. And then when the media spend went down, they tried to figure out different business models. But now they're saying you don't need the creatives. So who does this hurt? Who are the winners and who are the losers here? Obviously, the big guys are already just like, okay, they've become totally irrelevant. We're talking about companies now that have the market cap of a one or a two hour trading move in any of the big players now. It's kind of weird that we're even still even talking about them. The real losers here are going to be the niche regional ad agencies and the media planners at big companies. Those guys really aren't needed anymore. If you've got a small budget,

• 19:58Scott Galloway?

  you just turn it all over to Facebook. You give it the prompt. You're thoughtful about who you're trying to reach, what your objectives are. Is it foot traffic? Is it new customers? Is it reinforcing the brand imagery? Is it creating greater aspirational value such that you can increase margins? And this company will beta test a ton of different creative, a ton of different media buys. Now Nike and P and G will be the equivalent of rich people. Rich people will not pick Vanguard because they like to think that as rich people, they deserve special artisanal money management. So they will pay hedge funds and JP Morgan to underperform the market and pay more and feel like they're special, right? Nike is not going to use Meta's AI to do their advertising. Their attitude is we have the best people in

• 20:41Scott Galloway?

  the world at Weeden Kennedy. We like to think we're different and they will also get better work. They will. But small regional ad agencies are just done. And the big players are already, I mean, this isn't even their funeral or their execution. This is the stone setting a year later. That's a Jewish ceremony. I know you don't know much about my faith. But these agencies have been dead for a while. And all we're doing is showing up and saying, oh, you know, Papa, we miss them. They're gone. They're, in my view, these companies are totally irrelevant. There are some winners, though, and that is if you're a small company, you didn't have access to incredible creative or media planning, and it was expensive to

• 21:24Scott Galloway?

  do an ad campaign. And now if you're thinking, okay, I make fantastic hair trimmers. And it's a former factory that used to make Messerschmitts in East Germany. I can go direct to consumer and come up with a type of creative that typically only Braun or Gillette were able to deploy. And so it'll, it'll give a lot of small and medium sized businesses opportunities to go direct to consumer and acquire consumers. I'm just totally blown away by this. I think it's super interesting.

• 21:56Ed Elson?

  We'll be right back after the break for our conversation with Robert Armstrong. If you're enjoying the show so far, be sure to give the Profty Markets feed a follow wherever you get your podcasts.

• 22:14Speaker 00

  Flowing ad budget on metrics that look great till the CFO sees them. That's bull spend and marketers are calling it out in Dashboard Confessions.

• 22:23Speaker 01

  I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it wasn't.

• 22:31Speaker 00

  Cut the bull spend. LinkedIn lets you target by company, job title and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 22:45Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 23:15Speaker 03

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all wheel drive and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com/Outback to learn more.

• 23:46Ed Elson?

  Welcome back. Here's our conversation with Robert Armstrong, U.S. Financial commentator for the Financial Times. Robert, thanks for joining us again on Profite Market.

• 23:54Robert Armstrong?

  I always love chopping it up with you guys.

• 23:57Ed Elson?

  We love chopping up with you and I'm going to get right to what we all want to talk about. So, and first I'll set up what's happened here. So, a few weeks ago, you wrote an article in your newsletter, Unhedged, about how Trump has this tendency to... Back off on tariffs as soon as we see some sort of reaction from the market. And you wrote about how investors are now pricing this in. Many investors, when there is a tariff announcement, they buy the dip in expectation that eventually it's going to be reversed. You gave this trade a new term in your article and you coined it the taco trade, i.e. Trump always chickens out. And everyone was talking about it. It was all over the news. It was all over social media. It was this very hot article.

• 24:41Ed Elson?

  And then this happened.

• 24:43Speaker 09

  Mr. President, Wall Street analysts have coined a new term called the taco trade. They're saying Trump always chickens out on your tariff threats and that's why markets are higher this week. What's your response to that?

• 24:53Speaker 10

  Oh, isn't that a chicken out? I've never heard that. You mean because I reduced China from 145% that I set down to 100 and then down to another number and you call that chickening out? This country was dying. You know, we have the hottest country anywhere in the world. I went to Saudi Arabia. The king told me six months ago, this country was stone cold dead. We had a dead country. We had a country people didn't think it was going to survive. And you ask a nasty question like that. It's called negotiation. You set a number and if you go down, you know, if I set a number at a ridiculous high number and I go down a little bit, you know, a little bit, 145% tariff, even I said, man, that really got up. You know how it got? I said, where are we now?

• 25:38Speaker 10

  We're at 145%. I said, whoa, that's high. That's high. We were basically going cold turkey with China. We were doing no business because of the tariff, because it was so high. But I knew that. But don't ever say what you said. That's a nasty question.

• 25:54Ed Elson?

  Don't ever say what you said. And you created that term, Robert. What is your reaction?

• 25:58Robert Armstrong?

  Look, I don't know why these things happen. You know, why? So I actually, when I first coined the taco trade, nobody really took much notice, but slowly, it was sort of a month, month or five weeks ago. And slowly it started to appear in brokers' notes and, you know, it sort of got up a kind of small following in finance world. And then the New York Times used it in a headline a few days before that news conference. And that news conference happened and something about that exchange at the news conference. Really captured the world's imagination and now there's like songs on the internet and memes and all of this weird stuff. And I spent like two days of last weeks talking

• 26:41Robert Armstrong?

  to people not unlike you who just want to talk about this phenomenon. And I honestly, I'm a bit taken aback by it. I mean, I have sort of a theory about it. Like, I have this friend who's a, my friend Dave is a comedy writer, and he says that that hard K sound, like K or the hard C, is the funniest sound in the English language. And he has no idea why. But just like taco is an intrinsically funny word that has a Mexican flavor to it, which makes it even funnier because the president is obsessed with Mexico and the Mexican border. It seems like the kind of gag the president himself would make. So

• 27:24Robert Armstrong?

  there's a little bit of turnabout is fair play here. And the final and possibly least important reason this has gone viral is because it's true, right? Is it Trump does in fact always chicken out. Now, you can call that negotiation as he does. I'm a little skeptical about that. But the empirical phenomenon is clearly there.

• 27:46Ed Elson?

  And I think the other side to it is that it elicited this very strong reaction from him.

• 27:51Robert Armstrong?

  Yes.

• 27:51Ed Elson?

  Where he called it a nasty question. He repeated that it was a nasty question. Don't ever say that ever again. And I guess something that I've been thinking about, I mean, now we know this is on Trump's mind, and he's upset by it. And people love that he's upset by it. And I just wonder from your view, do you think this could incentivize him to now be more aggressive, to not back down on tariffs, to prove to people that he doesn't chicken out?

• 28:20Robert Armstrong?

  Now, I have gotten this horrifying question a lot in the last couple of days. And let me say for the record. That I never expected this to get to the president's ears. And that taco for me was always a term of praise. The best thing about the president's tariff policy is the chickening out. Hooray for chickening out. I'm all for it and I hope that it may continue forever. So the idea that I've made this stupid gag and I might actually at the margin make the president less likely to chicken out is a very negative unintended consequence. I wish if possible to wash my hands off of.

• 29:05Robert Armstrong?

  Now, somebody would have called this out eventually, right? I mean, at some point, this, these were bluffs that were going to get called. And I just think like, I came up with this label and cometh the hour, cometh the acronym. You know, I'm not, I'm not that much of a player here.

• 29:21Ed Elson?

  It's all your fault. Scott, what do you, where do you want to start?

• 29:26Scott Galloway?

  I just love that Robert, after working your ass off for 25 years, you're an overnight success because of the term taco. But look, my, my understanding is you pointed out that there's a, he, he announces a tariff, the stock or stocks or indices take a hit. And then traders buy the dip or go long, trusting or believing that this is all bluster. And the premise, as far as I can tell, was just confirmed by his response where he says that the tariff he came up with, he decided before even a negotiation was too high. So he's negotiating against himself.

• 30:06Robert Armstrong?

  He's, he called the first, his first offer ridiculous in that clip.

• 30:11Scott Galloway?

  And he made the offer. He's a guy, he's a guy who shows up to a poker table, goes all in. And before anyone responds, he goes, I fold.

• 30:18Robert Armstrong?

  You make excellent points. I would just make two points about them. One, behavioral economics, concept of anchoring. This is a real thing. Scott, you and I are having a negotiation. I want to be the guy who talks first, so I get to say the first number. Because that number is going to plant itself in both of our consciousness where we're, I'm buying, selling you a car, you're buying a car from me. I want to come in and just, because the, the first number mentioned creates a kind of gravity, pulling the negotiation in a certain direction. That is true. And when Trump says that's a, that's a principle of negotiation, that is correct.

• 30:55Robert Armstrong?

  However, who is Trump negotiating with? It's not like he's putting these outrageous numbers out there and the Chinese or the Japanese or the Europeans are coming and saying, oh, no, no, you know, offering this, offering that, making a counter offer. No, as you say, he folds before anybody else has had a chance to look at their cards because he's playing against the bond market and the stock market. And they're the ones who are calling his bluff before the negotiations with the trade partners even begin, right? So at some point, you got to wonder like how these big numbers, what are they buying him or America or us?

• 31:37Scott Galloway?

  But the alpha or the opportunity or the dislocation is that the markets at least initially take him somewhat seriously. And they said, when he says, I'm imposing tariffs on Apple, the market takes him seriously and Apple goes down two to 4% on the announcement. And then as the market absorbs the information, they think, you know, he's going, he's no, this isn't going to happen and the stock recovers and the opportunity is to move in on that initial head fake because he is not, as Logan Roy said, serious people. My question is, is that delta? Is that shrinking?

• 32:14Robert Armstrong?

  I think it is. I think that's the right question and you'd think the market would get wise, but it will never close altogether because the fact is he is the president of the United States, which is an almighty powerful office. And if he gets in a mood where he doesn't chicken out, whoo boy, right? John Auther is at Bloomberg wrote a nice column about this, that you can't choke on your tacos, right? If, you know, my contention is that he's always going to chicken out, but you can't be sure and he's the damn president. You know what I mean? And so let me put it to you this way, Scott.

• 32:57Robert Armstrong?

  There's two versions of the taco hypothesis. The first version is just the, the kind of regular, the market pattern that you're talking about, Scott. Market gets spooked, market goes down by the dip, it goes back up. It's a pattern we've seen. That is kind of uncontroversially true that this pattern exists. The stronger version of the taco hypothesis is this, and I believe this, but I think.

• 33:22Robert Armstrong?

  You know, not with perfect confidence. Trump is not willing to absorb very much pain on behalf of tariff policy. With every political leader, there comes a moment where you have to decide, what am I willing to spend my political capital on? And my contention is that he actually won't spend very much political capital defending these tariffs. If they cause economic pain, if they prove to be unpopular, his threshold is low. He just, it's the Logan Roy thing. He just, you know, it's fun to talk about tariffs on TV.

• 34:06Robert Armstrong?

  He's just not that serious about it. That's the strong version of the taco hypothesis.

• 34:10Scott Galloway?

  I mean, let me be clear. Everyone wants to revere the office. I think this guy's a fucking idiot. I have never seen, I have never seen such incompetence.

• 34:21Robert Armstrong?

  Yeah.

• 34:21Scott Galloway?

  A 10th grader who's played poker and understands it would handle our trade policy more deftly. They put out all these sweeping tariffs and then give everyone a July deadline. And I don't know if you saw it, but today sent them a letter saying, hurry up and respond, reminding them, again, showing them how feckless, neutered and limp dick they are. I mean, that's again, negotiating against themselves.

• 34:49Robert Armstrong?

  I would use slightly less salty language.

• 34:53Scott Galloway?

  That's why you're at the FT and I'm in a, I'm in my studio podcast.

• 34:57Robert Armstrong?

  When it's your show, you can use that kind of like.

• 34:59Scott Galloway?

  You gotta spice it up.

• 35:00Robert Armstrong?

  Yeah. Okay, but let me say this. In the poker analogy, what's tricky about this is that, yeah, I agree with you. He doesn't play his cards very well, but because he represents the United States, the game is stacked, so he always does get the strongest cards every time. And everybody knows it. So like, he'll have victories because he has face cards every time, because it's America. Right? But that doesn't mean he's a brilliant negotiator. It means like, you get something between a jack and an ace every time. You know, jacks and aces every time. And so like, oh, I'm brilliant. I know. I'm with you. I just don't think there's great negotiating skill there.

• 35:44Scott Galloway?

  Well, a toddler with an AR-15 is still a threat, right?

• 35:47Robert Armstrong?

  Indeed.

• 35:48Scott Galloway?

  The question or the, I want to propose a thesis and I want to understand if you've done any research along these lines. And we're actually trying to do some, do some analysis here. My thesis is they can't be this stupid and that there's a second, there's a much more mendacious strategy here and it's to create volatility purposely in the markets and wild swings such that they and the people close to them, an autocrat needs to create incentives both to the downside and to the upside. Support me no matter how ridiculous my statements are and I will make you rich. That is the playbook of an autocrat. And the way, the easiest way to make billions of dollars for you and your buddies is to create market volatility that you can anticipate and then trade against that market volatility.

• 36:33Scott Galloway?

  And I want to be clear, that is a serious accusation, but when the attorney general is selling stocks, the day that Trump announces these tariffs, which take the market down, she's selling, it means, it says to me, there are no more insider trading laws or repercussions. The thesis is the following, and I want you to respond to it. They are purposely creating market volatility such that they can trade against it and make billions of dollars for them and their acolytes.

• 37:01Robert Armstrong?

  I don't know. And I haven't looked at the trading patterns of the people involved. So I just don't know. But I would say you don't have to go so far as to say they are actually, it's an actual trading strategy. I think there is reason to believe across the whole policy package that the chaos is the point, right? That this is a group of

• 37:37Robert Armstrong?

  people who almost ideologically believe that the system is worthless, right? And that there is no downside to just shaking it as vigorously as you can and seeing what happens.

• 37:57Robert Armstrong?

  And that's what that's what you're seeing like that for them that there just don't seem to be any downside risks in the or I should say the downside risks don't seem to be considered in any of this stuff. I'll give you an example of that. That's really weird. My colleague, Martin Wolf, pointed this out to me. If what you were really worried about was China, right? And there is a really respectable, intellectually respectable case for the US's economic relationship with China being so distorted that it's a threat to our national security in terms of what they control economically, our security industry,

• 38:39Robert Armstrong?

  our telecoms industry, the chips industries, the imbalance are dangerous. I'm not endorsing this case. I'm just saying adults endorse this. If you were worried about China and you wanted to win a geopolitical and geo-economic competition with China, would you start it by pissing off everyone who's on your side who isn't China?

• 39:03Ed Elson?

  Yeah, exactly.

• 39:04Robert Armstrong?

  Would you go to war? Would you go to trade war with the EU if you thought the world's biggest problem was really China? Would you go to trade war with your Asian allies? This is insane, right? Like if China's the problem, you need Europe.

• 39:22Scott Galloway?

  See above, effing idiot.

• 39:23Robert Armstrong?

  I mean, I just don't understand that, right? Even if you assume that what you want to do is want to close the trade gap with China, you want to bring manufacturing from China home, you're not gonna do that if you don't have friends.

• 39:37Scott Galloway?

  There is no one who has won declaring war on the world, and that's what it feels like he's doing. Anyways.

• 39:43Robert Armstrong?

  There's very few powers in the world. There's Europe, which has problems. There's China, merging, there's India, there's the US. Can't take them all on at once in economic terms. It just strikes me as so strange. So, but again, everything to these, my working hypothesis about this administration is that from an economic point of view, they see the current status quo as worthless, and there is very little downside to damaging it on your way to achieving a better world.

• 40:15Ed Elson?

  I think there's another side of this. I mean, we're using the toddler as an AR-15 analogy. Toddlers get bored very easily.

• 40:24Ed Elson?

  To me, there's a lot, there's an element of boredom in this and it's exciting and it creates headlines and it's a fun press release to go out and say, you know, I'm raising the tariffs. And it's also not that hard for him to do because he can just tweet it out. Like it's basically, he just gets bored, opens the phone, raising the tariffs by this amount. And this is actually how these tariffs are reported on. It's from Truth Social. So to me, it almost feels as if what's really happening, I agree with you, he believes the system is worthless, which is why it sort of emboldens him to believe that it's okay. When you're bored, you decide, I don't really like China right now. I'm going to throw out a tariff threat. I feel like that's what it is.

• 41:08Robert Armstrong?

  Yeah. And I think impulsiveness is an important theme and I'll throw out to you a totally unscientific theory. But I think it might, it might be relevant to what you just said. I do not think the president is senile. I think he's very mentally alert. Biden was clearly senile. That was a scandal. We can have another show about what the implications of all that were. I don't think the president is senile, but he is almost 80. And I don't know if you two have a lot of people around that age in your life. I do. And one characteristic of those people, whether they are senile or not, is that they are impulsive. They have arrived at the age of not giving a shit. Right? And that's one of the wonderful things

• 41:53Robert Armstrong?

  about old age. Right? You know, something we have to look forward to.

• 41:57Ed Elson?

  Your crazy grandpa. Yeah.

• 41:58Robert Armstrong?

  But the crazy grandpa thing is no joke when it's the president of the United States.

• 42:02Ed Elson?

  We'll be right back.

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• 43:43Ed Elson?

  We're back with Profty Markets. I'd love to get your take on this new big, beautiful bill currently under review in the Senate, but it passed in the House. It's estimated it's going to add nearly $4 trillion to the deficit over 10 years, potentially more. Elon Musk recently came out and called it, quote, "a disgusting abomination." He said, "Shame on those who voted for it. You know you did wrong. You know it." Give us your view on this, this new tax bill from, from the JP.

• 44:15Robert Armstrong?

  It is more fiscally stimulative and more deficit driven than what was expected. I think that's a consensus view, right? That there is less cuts and more spending and less tax increases than were expected. Now, I think about this always in terms of markets. And for markets, as a general rule, deficit spending is good, right? When a country borrows money and spends it on the economy, that money tends to filter down and land on a corporate balance sheet.

• 44:56Robert Armstrong?

  And so deficit spending tends to be good for earnings, tends to be good for economic growth, tends to be good for stocks. Up to a point, you are threading the needle. If you get so far that the bond market rebels and interest rates rise and the cost of capital becomes prohibitive, then what was medicine becomes poison. And I think what the market is telling us is not that we've reached the point where the medicine has become poison, but we are approaching it. And nobody, I think we've talked about this before, nobody knows what the magic number is, right? And, and it is, it's never, it never comes to a default, right? You don't have to get to that point where a bill doesn't get paid, but there comes

• 45:41Robert Armstrong?

  a point where you are overdosing on the deficit drug. And I think the skittishness we see in bond markets are telling, is telling us it's not that far away. The, the equity markets are holding up for now, but if you see the 10 year, you'll get much higher from here, it's going to be hard for stocks to go up. And if it gets much higher than that, it's going to be easy for stocks to fall.

• 46:06Ed Elson?

  I'm glad you're going right to what are the markets telling us. I take the same view, but I was almost a little surprised by how muted the reaction was to the bill, even to, I mean, the Moody's downgrade was, that's not going to necessarily make everyone start panic selling, but it is a symbol of what's happening. And I guess I look at the, the bond markets and my read is we're a little nervous, but not that nervous. And I'm wondering if you see that as well.

• 46:35Robert Armstrong?

  I think that's a, that's a correct observation. I mean, again, this boy has cried wolf a lot historically, you know, as long as Scott and I have been alive, people have been saying, this is it. This is the moment, right? Look, interest rates have come a long way here, right? We were close to zero at one point. We're up to four and a half on the 10. It feels slightly different this time, but the repeated experience of investors is to take a deep breath and march through these moments. And in the past, that's worked

• 47:14Robert Armstrong?

  out. But I share precisely your emotional response, which is this seems more dangerous than markets are pricing in.

• 47:25Ed Elson?

  What do you think it would look like if the bond markets were to tell us this is a serious problem? Like, we're not just skittish anymore, we're actually freaking out. What would that look like in a in a market scenario? What would happen to yields?

• 47:40Robert Armstrong?

  And What happens to countries that don't have the global reserve currency is that they are forced into austerity by their interest expense. Right? So there's literally not enough money. And you have to start making you have to close the deficit by spending less money. And you have a recession. And markets crash. And there is a great kind of purge. Right? In America, we have the reserve currency. We have the most important currency in the world. The you know, you might interest rates rise dramatically. Suddenly,

• 48:24Robert Armstrong?

  interest expense is dominating the budget. What happens next in our country? Well, can the Fed be convinced to start buying massive amounts of our debt again? If they do that, we're going to inflate our way out of the debt crisis rather than austerity our way out of it. But it ain't much more fun.

• 48:53Robert Armstrong?

  But like, look, the 10 year yield goes to six and a half percent. The bill's getting expensive and people are going to be sweating. And and marks are going to be falling already. It's gonna it's gonna be bad. But, you know, you have to make a bet about whether America will get budget religion, which will be very painful for markets. Right? Or if America will try to inflate its weight out, out, which will also be very painful for markets.

• 49:20Ed Elson?

  Well, the third option that the Republicans are floating is that we'll grow our way out of it economically. Do you think the markets believe that?

• 49:28Robert Armstrong?

  Well, it's happened before, right? Like the great Clinton budget balancing miracle was basically a miracle of economic growth. And it doesn't take loads and loads of economic growth to really help with this kind of thing. But that's not where the trend is right now. And if I was trying to grow my way out of a huge deficit, I might put the trade war on hold first.

• 49:58Ed Elson?

  That's a good idea.

• 49:59Scott Galloway?

  So if you look at the markets, people who are not fans of the president, like myself, I don't know if you knew that, but I'm not a huge fan of the president, Robert.

• 50:10Scott Galloway?

  So we were felt validated when the markets crashed or the market, they didn't crash, they corrected a little bit, they've rebounded. And I'm trying to figure out one of two things. One, the thesis is his economic plan actually people overreacted and it kind of his, his, his economic plan makes sense.

• 50:27Robert Armstrong?

  That's the taco trade right there.

• 50:29Scott Galloway?

  It's it makes sense or it's not real. This won't happen. The GOP tax bill won't go, things will look remarkably similar to the way they did before because the adult in the room is the tenure and the markets. Or the other kind of thesis is that the administration and the government are actually much smaller compared to the economy. And that the American economy grinds on regardless of what's happening in DC. Americans and companies wake up every morning, innovate, become more productive, use AI. And the market churns on. In other words, there's more, there's more noise than signal here.

• 51:07Scott Galloway?

  And I'm, I'm curious again, you know, we climb a wall of worry, what you take away from the market's recovery in the last month and a half.

• 51:16Robert Armstrong?

  The economy grinds on. There's a lot of truth to that. We are not that exposed to global trade as an economy. I forget the exact numbers here, but trade is like 15, 17% of GDP. So still.

• 51:35Robert Armstrong?

  You could do some damage messing that up, but we're not the UK. The UK is like an open economy on an island. It's mostly trade. You start screwing around with this stuff there as they do with Brexit. You have a real problem. You know, that's why they had the trust incident and all that. So that's the more noise and signal that point. We actually are a reasonably closed economy that sort of supplies itself and so forth. A lot of our economy is services too, right? Which is not right in the crosshairs. This stuff grinds on. I'll make an even further point for you. I was looking today for my column at the great month that the S and P 500 has had. Since like the first of May, it's up 5, 6%.

• 52:19Robert Armstrong?

  It's done better than the global indexes. It's the best month we've had in 18 months or something like that. Now you decompose that 75% of the gains or maybe 72% of those gains. Magnificent seven.

• 52:35Robert Armstrong?

  Take out now, it's a slightly new magnificent seven. Apple's doing like shit. But you take out Apple and you put in Broadcom and you've just explained three quarters of the gains over the last month. So it's big tech again. Right? And so why is that? I ask you this because I'm trying to think of something clever to say at the end of my column. And I'm hoping the two of you will provide it.

• 52:57Scott Galloway?

  It's the burrito trade.

• 52:59Robert Armstrong?

  It's a striking pattern. It's a very striking pattern. So a lot of the bounce is, is, is investors coming back to this handful of massive, excellent companies, high growth, high barrier to entry, gigantic cash generating monstrosities. These, this for the last month, these have been the trade. So maybe that's like, I'll tell you why. Here's one story. One story is like, when the main institution in the world is falling apart slightly at the margin, the United States, it's getting a little ragged around the edges.

• 53:40Robert Armstrong?

  What is the second most important institution in the world that is easy to invest in and highly liquid? Maybe it's Microsoft.

• 53:51Robert Armstrong?

  You know what I mean? Like, maybe, do you want, what do you think's gonna do better? A five-year Treasury bond or Microsoft over the next five years?

• 54:03Ed Elson?

  Or Microsoft debt, as another example.

• 54:06Robert Armstrong?

  More Microsoft's debt, or whatever. So that's one theory. Another theory is, look,

• 54:12Robert Armstrong?

  these guys aren't serious. These, they make a lot of noise. The economy churns on, we're still the world leader. We still attract a lot of capital.

• 54:21Ed Elson?

  Yeah, Aswath Damodaran, who we had on last week.

• 54:24Robert Armstrong?

  He's terrific, isn't he?

• 54:25Ed Elson?

  Terrific. He had an interesting point where he was saying that he thinks that the markets are now actually more resistant to sensationalism and stories in the news and on CNBC, and that what the market, what he has found based on this, what we've seen with this rebound and just the way the markets behaved, he thinks that 30 years ago, we would have seen actually like a massive crash in the stock market. But he believes that investors are so dialed into earnings today in a way that they haven't been in a long time, which would explain kind of what we're describing here with this almost an apathy to these headlines

• 55:09Ed Elson?

  and to these executive orders that in any other world would be actually a huge deal. But instead, the market kind of digests it, and they go, well, all we really fucking care about is earnings. And so what do we think's gonna happen to earnings?

• 55:23Robert Armstrong?

  And earnings have been fine so far.

• 55:25Ed Elson?

  Exactly.

• 55:25Robert Armstrong?

  Q1 earnings season was fine. There were these little spooky bits where like, a company would, a company that's very dependent on Walmart would say, we can't really give targets right now. We don't know what it's gonna be. But a lot of the comments from the companies that do import a lot, the retailers and the merchandisers and the distributors and so forth, was kind of like, at the current levels, we can manage this, you know? And there was, of course, the funny, the funny question. Now, we're getting into a discussion about price increases and what the consumer can absorb. And there was, there was a kind of funny game going on. Well, because Walmart came out first and said, look, prices are gonna go up with the tariffs. And the president tweeted about them.

• 56:08Robert Armstrong?

  And after that, all the companies kind of equivocated on whether prices were going to go up. They they talked about portfolio prices, which means, well, this will go up, then it'll go down. But the news from earnings has been good, just to reinforce your point. And to Scott's earlier point about Trump's huffing and puffing, having diminishing returns, you know, this six months in, you know, Truth Social seems less scary now. This all this, all the noise seems less scary.

• 56:41Ed Elson?

  I'd like to hear your reaction on the new steel and aluminum tariffs. Trump has doubled steel and aluminum tariffs from 25% to 50%. Why do you think he's doing this? And more importantly, do you think this might have anything to do with the taco trade?

• 56:56Robert Armstrong?

  Somebody put it, and I should give credit to them, but I don't remember who it was, that steel tariffs are the wealth destroying tax policy that makes the other wealth destroying tax policies jealous. It's just the dumbest tariff, because very few people work in the steel industry in the United States. It is not a big industry for us, and lots of US industries buy steel. So the costs are overwhelmingly outweighed by overwhelmingly outweigh the benefits. It's an astonishingly stupid tariff for us. But what is Trump's

• 57:38Robert Armstrong?

  core product? Trump's core product is nostalgia. And there's something about a blast furnace that gets red blooded Americans' hearts pumping. And you can kind of understand that, you know, it's Bethlehem Steel, it's US Steel, right? It's the medal of industry.

• 58:00Robert Armstrong?

  So it's it's advertising for Trump's worldview and Trump's nostalgia. But it is paradigmatically destructive, the destructive tariff. So is he gonna is he gonna chicken out on this one? Who comes to the office? Is are the car manufacturers, CEOs as a group gonna march back into the Oval Office? Or is are the guys from the Whirlpool? I mean, maybe Whirlpool's factories are all in Mexico now. But is somebody gonna get to him and say, this is hurting us? Stop. And like I said, I believe if he finds himself in a position, if the president finds himself

• 58:43Robert Armstrong?

  in a position where he's under proper pressure, when rich men are unhappy with him, he's gonna fold. That's my bet.

• 58:51Ed Elson?

  I think I agree with you. My final question. Is there anything happening in the markets right now that's been on your mind that you think people are not paying enough attention to? Perhaps something that maybe we on this podcast should be paying more attention to.

• 59:07Robert Armstrong?

  Well, I hate to stick to policy because we've been talking about policy. But 899 in the budget bill is is a very, very section 899 is a very bad, another very bad piece of policy news. So 899 says, if your country, I'm summarizing and we'll get some of this, you know, slightly wrong, but I think I'll get the big picture right. If your country has discriminatory tax policies, if you try to import capital into our country, you try to invest or buy US financial assets, we are going to tax those inflows. And if you think about that, it's exactly like a tariff.

• 59:52Robert Armstrong?

  The fundamental issue is that America spends more than it earns. Right? And that expresses itself as a high trade deficit and a high capital account deficit. Capital account deficit simply says more money coming in than is going out. The the trade deficit just says more stuff coming in than is going out, but they have to be the same number. Right? And so just as a tax on imports, a tariff attacks the problem from one direction. In a dumb way, a tax on capital inflows is another way to attack the problem. And it's not, and I think when people want to give you money, you should take it. That's one of my main life rules.

• 1:00:34Robert Armstrong?

  But if you wanted to raise revenue by taxing capital inflows, the last way in the world you want to do it is in an arbitrary way, where you say, I'm just going to tax the inflows from the people I don't like. Right? That I pick, I want to pick a bone with those people. Because then it's like spooky, investors don't know what the rules are. And the first rule of markets, as both of you guys know, is clear rules make the whole game possible. So this is a tax on capital inflows where the rules are yet to be determined. This is a real nightmare as far as I'm concerned. Because who's flying the plane? Who are they going to pick on? And, you know, people who are going to invest in the United States, they got to make plans.

• 1:01:19Robert Armstrong?

  Right? It's not like one day you decide, you know, you got to have a capital expenditure program. Right? And now there is a question mark tax on investing in the United States.

• 1:01:31Scott Galloway?

  One of our big themes coming into 25 was that this was going to be the year that the rivers of capital reverse flow. And then the P of 25 or 26, which I think went down to 23. Now I think it's back up to 25 or maybe 26. Higher than other big markets.

• 1:01:48Robert Armstrong?

  Much higher, a third higher.

• 1:01:50Scott Galloway?

  So you work for a British company owned by a Japanese company. What do you? And what's the correlation? Is it inverse? Is it not correlated between what's happening in the US and international markets? And is our trade idea for our investment thesis for 25, losing its steam or still holding up?

• 1:02:09Robert Armstrong?

  It's been a good trade. At least January, February, March, April, owning the world was a great trade. Right? And so congratulations. And part of that was just like, you know, the old phrase, like, good things happen to cheap stocks. Right? Meaning like, you don't know when it's going to happen, but it sets you up when there's some catalyst and there's a big valuation, when gap, when you do get the catalyst, something good will probably happen. But if you look at the numbers. Flows into US stock funds are still quite strong. So those are still going up. US fixed income, less so.

• 1:02:49Robert Armstrong?

  But there is something scary going on that is hard to interpret and that we're struggling with on the newsletter to interpret. Because US Treasury yields have been rising a little faster than the rest of the world. In other words, the gap in yields between the US and the rest of the world, it was more earlier in the year, less now, but it's been widening. And usually when that happens, the dollar has to get stronger, right? Because there's an arbitrage. If my country is paying much higher rates, you want to buy my currency and get some of them rates for yourself, right? So usually that gap and the dollar correlate. This year, they've been going the other directions.

• 1:03:29Robert Armstrong?

  In other words, the yield gap and the dollar are coming apart, right? And the standard interpretation of that is people have had enough with these dollar assets and there's global portfolios being rearranged to overweight the dollar assets less and put more money into the rest of the world. I would be very cautious with how quickly that process can happen. I think that is a drip, drip process. I don't know if you have ever spoken with like a European insurance company or a Japanese

• 1:04:06Robert Armstrong?

  insurance company, but like what you know of bureaucratic process is a shadow compared to what goes on at the big real money investors worldwide. Turning those battleships is slow. So it's like at the margin, they're like, just. So it's gonna, if, I think the change that you're looking for, there has been a change in sentiment.

• 1:04:35Robert Armstrong?

  But the change in capital flows is going to be a slow process, which as Americans, by the way, we should be glad about. That means maybe we have a different president in office when still people, you know, when this stuff starts to really matter, but it's gonna be glacial, the process that you're talking about.

• 1:04:58Ed Elson?

  But to be clear, the drip has begun, right? I mean, I just look at the, what I've seen where you had in March, the largest outflow of institutional capital in America into Europe. Also, the fact that you had the largest inflow into global non-US ETF funds ever. I mean, these are these little signs to me that the drip has begun. It has, hasn't it?

• 1:05:28Robert Armstrong?

  Correct. The drip has begun. And I think also what you're probably seeing is people are hedging the dollar. And that's what's creating the down, when people hedge the dollar, it creates some downward pressure on it. And I think you're saying that. I think people are realizing they can't have unhedged US assets. That's the name of my column. So I would say that, but you can't have, it's no longer a world in which you can look your board of directors in the eye and have a lot of unhedged dollar exposure in your portfolio. It's just too dangerous. And I think it's that, that hedging activity we're seeing now, and over a period of years, the drip, drip. If US policy doesn't change,

• 1:06:12Robert Armstrong?

  the drip, drip will continue.

• 1:06:14Scott Galloway?

  I was so excited. And by the way, Robert, I must occasionally will hear people ranging from senators to other thought leaders, literally parroting our analogies, our jokes, and our terms. And I'm flattered. I'm flattered. But the narcissist in me says, well, at least they could occasionally say, oh, I heard this on Prop G Markets, or Ed said this, or Scott said this. I am, I am making it my personal mission to every time someone says the taco trade, I say, you mean Robert Armstrong's thesis?

• 1:06:46Ed Elson?

  Yes.

• 1:06:47Scott Galloway?

  His theory.

• 1:06:48Ed Elson?

  Because not enough, not enough people are crediting you for coming up with this.

• 1:06:53Robert Armstrong?

  Can I make an embarrassing admission to you, Scott?

• 1:06:56Ed Elson?

  Of course.

• 1:06:57Robert Armstrong?

  I called, this is terrible. It just shows you how greedy I am. I called an intellectual property lawyer.

• 1:07:03Ed Elson?

  To see if you could trademark it?

• 1:07:05Robert Armstrong?

  I did. And I was like, can I trademark this? Can I copyright this? And it's because my daughter, my daughter like keyed into this. And he's like, are people paying you? And I said, okay, okay. I call this lawyer, but you cannot copyright a phrase or small series of words. And if you are going to get a trademark, this was terrible news. And if you're going to get a trademark, you have to have a trade. In other words, you've got to build it into a brand. I can only trademark it if I start selling my taco hats or whatever.

• 1:07:36Ed Elson?

  Well, there you go.

• 1:07:37Robert Armstrong?

  Well, if you think I'm actually gonna get up off my couch and step away from my keyboard and actually make something, you have me confused with someone else. So.

• 1:07:49Ed Elson?

  Okay, how about this? We'll, we'll take the taco trade, we'll make the hats and we'll pay you a little commission.

• 1:07:55Robert Armstrong?

  Perfect. Sold.

• 1:07:56Ed Elson?

  Okay.

• 1:07:56Robert Armstrong?

  We're gonna be, we're gonna be rich. Rich is the king of Persia. Look forward to it.

• 1:08:01Ed Elson?

  Robert Armstrong is the US commentator for Financial Times and writes the Unhedged newsletter. I highly recommend it. Previously, he was the FT's US Financial Editor and Chief Editorial Writer. Before becoming a journalist, he worked in finance and studied philosophy. Robert, as always, a pleasure. Thank you for joining us.

• 1:08:17Robert Armstrong?

  Congrats, Robert. Well done. A lot of fun, guys. See you next time.

• 1:08:22Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mira Salvario is our research lead. Isabella Kinsel is our research associate. Dan Shalane is our intern. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

• 1:08:59Ed Elson?

  In kind Reunion As the waters

• 1:09:12Ed Elson?

  And the dark skies In love