Supply Shocks Hit Your Wallet, Investor & Consumer Sentiments Diverge, Expensive Suburbs

Randall Williams · Bloomberg NewsUncertain

NFL is leaning into flag football, which could become a booming grassroots business, but whether it succeeds is open.

The NFL has invested $192 million in flag football, with a focus on grassroots play and pro men's and women's leagues. Flag football is cheaper to enter than tackle football because it needs only flags, gloves and cleats, so some young women are choosing it over soccer, softball or volleyball. Other leagues such as the NWSL and WNBA are booming and their valuations are growing, which suggests a model for the NFL. He says the open question is whether the NFL can build infrastructure at the high school and college level, given that it is not building its own league.

“But now I think the NFL is leaning into it because if you think about the other leagues that exist... those sports are booming. The valuations are growing.”at 46:41

Randall Williams · Bloomberg NewsBearish

Knicks owner James Dolan's refusal to pay players will likely self-destruct the team if he forces a Brunson pay cut.

He says the players are not distracted by their success. He thinks the Knicks' ownership is the problem. Season-ticket holders complained about high ticket prices, the team redid its ticket process, and the Knicks have just called off contract negotiations. Withholding pay from players while trying to make Jalen Brunson take a pay cut creates tension that he expects will hurt the team. The view is about the team's prospects, not a financial forecast, and he calls the tension a clear risk for this year.

“I actually don't think the players are, but I do think that James Dolan not paying some of these players is going to inevitably self destruct the team if he's trying to make everyone take the Jalen Brunson pay cut.”at 48:03

David Gura · Bloomberg

Both Michigan candidates oppose new data centers, making them a tangible election flashpoint.

In the Michigan debate, both the Republican and the Democratic candidates came out against building more data centers. Gura argues this makes data centers a tangible totem of what voters see, in statewide and local referendums on AI and data center construction, and it is part of the broader affordability message.

“Both of the candidates, Republican, Democrat, came out against building more data centers at this moment. So it's a very tangible totem of what I think the the electorate is seeing”at 9:12

Peter Orszag · Lazard

Debt-financed AI buildout carries higher financial distress risk than people appreciate.

The AI build-out is massive, around 3 to 3.5% of GDP in investment, larger than railroads, highways or electrification, and it is putting upward pressure on interest rates. Orszag says he is a huge believer in the technology, but because so much of the investment is debt-financed, the risk of financial distress in the ecosystem is higher than people appreciate. Debt-financed spending is fragile if token demand falls short, unlike equity-financed spending.

“because so much of the investment is debt financed, I do think the risk of financial distress in this ecosystem is higher than people appreciate.”at 18:10

Peter Orszag · Lazard

Rates are in a new regime as bond vigilantes return, unlike the low-rate era.

The interest rate environment is different today than three or four years ago. Orszag laments that the government did not lock in long maturities during the low-rate period, and says the economy has shifted into an era in which bond vigilantes are returning, so yields are structurally higher.

“the interest rate environment is different today than it was three or four years ago. ... we are in a new era in which, frankly, the bond vigilantes are coming back.”at 16:55

Anastasia Amoroso · Partners Group

Term premium reverts to norms, so the 10-year yield hovers near 5%, not 2%.

Part of the move higher in the 10-year yield reflects sticky inflation, robust growth and more uncertainty about the budget deficit trajectory and global growth. Amoroso argues the era of low yields is over and the term premium will revert to historical norms. The 10-year is therefore unlikely to return to 2% and should hover around 5%. She adds that at about 5.25% strong investor demand at Treasury auctions can cap yields.

“the term premium is going to revert to the historical norms, and that means that the ten year treasury is not going to be at 2%. It is likely to hover around 5%.”at 35:25

Peter Orszag · Lazard

Inflation is in a supply-side era 2.0, with recurring supply shocks rather than one-offs.

Orszag and Adam Posen argued that to understand inflation today one must look at supply shocks from a year or two ago. Some of the price effects will erode over the next few months, but new supply shocks will keep coming, so treating each as a one-off is a mistake. In their January essay they said inflation rising above 4% by the end of 2026 is plausible and a most likely scenario, and Orszag says that view holds up.

“we are living in a new supply side era where if you want to understand inflation today, you need to look at the supply shocks that happened a year or two ago.”at 15:56

Peter Orszag · Lazard

Open-weight and local compute could cut token spend, hurting debt-financed AI infrastructure economics.

Because AI infrastructure is debt-financed, a change in token spend is a serious problem for the ecosystem. Orszag argues that the shift in token spend could come from open-weight models and from local compute, running models on air-gapped local machines. He says people are not appreciating this risk.

“If the token spend instead of doing this just does that, you've got problem. ... that token spend ... could come from open weight, which we've already talked a lot about, but also from local compute.”at 18:22

Peter Orszag · Lazard

Social Security and Medicare financing problems must be fixed, but reform comes only in crisis.

Social Security and Medicare both have looming financing problems that will have to be addressed. They are part of an overall fiscal imbalance of 6 to 7% of GDP. History shows the country does not deal with these problems until they become crises, as with the 1983 Greenspan Commission reform, which came only when checks were about to go unpaid.

“Both social security and medicare have looming problems associated with their financing. They will have to be addressed. This is part of an overall fiscal imbalance of six to 7% of GDP”at 19:59

Anastasia Amoroso · Partners Group

Still a bull: earnings accelerating and valuations reset; bull ends only if Fed tightens or AI bubble bursts.

Amoroso stays bullish on equities. The S&P 500 forward multiple has reset from about 23 times at the start of the year to about 19 times, as geopolitical and rate uncertainty were absorbed, and earnings growth is accelerating. She says the bull market ends only if the Fed tightens enough to slow the economy or if the AI technology hope bursts, and she does not see either on the horizon.

“I'm still a bull. I'm still a bull, Tom. I do allow for the possibility that the market will go down at some point.”at 29:26

Anastasia Amoroso · Partners Group

Oil near $100 is less threatening as Middle East supply reroutes out of the region.

Oil is still hovering around $100 a barrel, but a large share of Middle East production is making its way out of the region through rerouted flows. Amoroso argues that the geopolitical fears the market had are being absorbed and digested, so the oil price shock is less of a threat than it looks.

“What I'm talking about is, let's say, the price of oil. And, yes, we're still hovering around a $100 a barrel, but the fact of the matter is a big chunk of the Middle East production is actually making its way out of the Middle East because of the rerouting”at 30:31

Anastasia Amoroso · Partners Group

Capacity-constrained firms have pricing power, driving record earnings while consumers feel squeezed.

Consumer demand is strong, but many sectors such as travel, leisure hospitality and industrials are capacity-constrained. Corporations therefore have pricing power and are using it, which explains the record earnings. Amoroso argues this makes it a solid time to be an investor in companies solving those bottlenecks, even though it is only an okay time to be a consumer.

“corporations have pricing power. They're using that pricing power, which is why we're seeing those record earnings.”at 33:02

Anastasia Amoroso · Partners Group

Private credit offers substantial yield, making it attractive versus public fixed income.

Amoroso says she is attracted to private credit because it offers a substantial yield that investors can earn there. She treats public equities and private assets as a continuum, and in fixed income she sees high-grade bonds and Treasuries as good, with private credit adding yield on top.

“I'm quite, you know, attracted to private credit, the fact is that you have that substantial yield that you can earn there.”at 34:16