YIKES - BAD REPORT

wow current estimates of Real gross

domestic product have absolutely

plummeted now you may have heard of this

before but you may not have heard the

data that actually goes into this and

what actually causes this to function

this way because if we look at the chart

we could see that gross domestic product

has fallen from 2.3% to

1.5% however there are some really

critical pieces that you have to

understand when it comes to how this

data is put together that's going to

give you a much better perspective on

what this data actually means and that's

my goal on this channel always to

provide you deeper understandings of how

these things actually function so that

way you don't get misled with improper

noise now I want to mention a few things

in this video we'll talk later in the

video about Trump and Solinski uh we'll

we'll talk about some Wall Street

reactions to this but I'd just like to

mention that people have been

circulating this GDP now picture and I

think most people don't understand

really what goes into it but including

Elon Musk mind you and this is not a

slam on Elon Musk but let's just make it

clear Elon Musk wrote a more accurate

measure of GDP would be to exclude

government spending all right I quote

tweeted that and honestly I probably

just I I I want to sort of minimize how

I tweet because I I just can't seem to

pull the vi ramaswami onliners on

Twitter uh I'm much more of a detail and

Nuance person you know so I quot tweeted

that and said let's change the

definition I've heard that before this

is basically alluding to and then I

later followed up and clarified um when

Joe Biden's Administration essentially

said huh two quarters of negative GDP q1

2022 and Q2 2022 nah that's not a

recession labor Market's too strong to

their credit the labor market was strong

then it's not that great now we're

teetering on the edge of glory that is

we're still on the edge of glory we

might fall off of it but anyway uh this

of course led to some people saying oh

my gosh Kevin you just hate Elon Musk no

I I just try to provide fact to when I

see that even Elon Musk is

misunderstanding what he's saying so

first of all the reason this line fell

is not because of government spending

even if it was only about 11.3% of the

Atlanta fed now real GDP data actually

comes from government spending now there

are knock on effects right when the

government spends money wastefully yes

other sectors of the private markets

pick up that money essentially through

you know contracts or whatever and then

they can hire people and spend right so

that is a way you could have knock-on

effects of um government spending as

part of GDP and that's how some people

say some economists argue that the

government's 11 in% spending could

really contribute to about half of GDP

or as much as half of GDP which which is

a lot but that's not actually why this

line fell and I think it's a fundamental

misunderstanding once again of Elon Musk

taking a screenshot and then without

actually looking at the detailed data

because you could literally on the

Atlanta fed GDP now page scroll down and

get to the detailed data and find out

hey like what's actually making up this

data and what you'll find if you

actually do that uh is the big things

that go into the latest data have to do

with retail spending and personal income

that's because we just had the pce

numbers now why does that matter

especially for Elon well it matters

because the estimates for personal

income were 4% for the month of January

well they actually came in at 0.9% which

is really good it means people had more

income than economists expected in

January doesn't necessarily mean you got

more income it just means and mass

people received more in January than

economists thought they would now

January spending though this hit a wall

we were expecting non-inflation adjusted

spending to rise 2% and actually fell

.2% and inflation adjusted we were

expecting it to fall in

.1 it actually fell

.5% now why is that a problem well

because the way the Atlanta fed real GDP

indicator works is it tries to

extrapolate the latest data to let you

know what's the speed we're going at at

this very moment so in my opinion it's

not actually the greatest at telling you

oh for sure this is going to be what GDP

is the entire quarter instead it's

taking that last data set heavily

waiting towards that last data set and

saying okay if this data keeps coming in

like this for the entire quarter GDP is

going to be negative so in other

words the pce data that came out

represents just January it was bad and

what they do is they quarterized it so

instead of annualize it's quarterized

it's weird but anyway they quarterized

it so they basically take all right

January's dat was data was CP multiply

it by three and then we get a current

leading indic Ator in their wi's a

leading indicator I don't really think

it's leading indicator of uh of what GDP

might be for the

quarter so simplified in English you had

a couple data sets that came out that

didn't have anything to do with

government spending pce does not count

government spending it counts household

spending and household income or sorry

the pce right I want to make sure I said

that right maybe I did anyway pce does

not count government spending it counts

household spending that's the data that

came in bad that's the data that led to

this giant drop off right here now Elon

Musk is tweeting that oh well you know

maybe we should just exclude the

government that wouldn't make any

difference to this but then again I and

it frustrates me because I I I've always

admired Elon I've always thought of him

as like man come on dude like you're

doing such great things for for the you

know for the world electric cars and uh

solar roofs solar panels the space

missions starlink these are such

wonderful things but I don't know what's

happening to him I think he's just

becoming an angry person on Twitter X so

I think what happens is like his when it

comes to engineering he actually tries

to get to First principles but when it

comes to politics it's not first

principles it's first reaction right so

it's like you have two different

elonso Elon and the first reaction Elon

and the first reaction Elon is GDP down

wow that's cuz we're cutting some much

government spending that's cuz that's

cuz we're doing such a great job over at

Doge maybe they should change how they

calculate that it's like

no first of all it's highly disputable

how much money you're actually saving at

Doge and I'm not here to shill anti-d

Doge I'm just here to argue that at the

moment it's highly disputable how much

money is actually being saved right

elon's wall of receipts 55 billion but

when you actually look at the receipts

and total them up you're at 16 billion

when you consider which of those

contracts are actually creating real

savings versus just sort of you know uh

open credit card limits that some of

these contracts have it's questionable

how much money is actually being saved

so I want Doge to succeed but I think

that if Elon is so focused on first

reaction it actually clouds his ability

to do his job in politics because let's

be clear he's doing a job in politics so

what what also contributed to this fed

GDP now estimate for q1 to fall well it

was wasn't just personal spending uh

personal consumption expenditures

following on the quarterized set from

2.3 to 1.3 based on some of that January

data but is also listen to

this delicious delicious cough and it

was also something that should come as

frankly no surprise to you this next

data set this next data set is really

critical and it's going to get into this

next part of this video where we really

got to get deep into the the the Trump

Selinsky and some of the other KnockOn

effects of what's going on with

potentially a new world order this is

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right so we know pce was one of the

factors that led GDP to decline in q1

but what else so far is leading to this

estimate decline well it is a plummet in

net exports net exports fell from

.4% uh you know in the previous

estimates to -

3.7% and mind you again we're taking

January data and we're extrapolating it

for the quarter so we're potentially

extrapolating more bad data

but what would possibly contribute to

this decline in net exports well

remember tariffs affect stuff that we're

importing it's basically a tax we put on

Imports right so if you want to import

uh you know a german-made screwdriver

cuz you're really into how the Germans

screw then you're going to according to

Trump pay an extra tax we don't yet

entirely know what that is but it'll

probably be an extra 10 to 15% to sort

of

reciprocity the whole vat thing you know

value added taxes that Europe has and bl

blah blah okay whatever so in that case

what

happens like why would net exports fall

well it's retaliatory in nature us

importing screwdrivers from Germany

doesn't affect net exports but the

Germans getting pissed that their

product is now less competitive the

Canadians getting pissed the Canadians

going as far as canceling Wayne grety

now because you know War specific Red

Hat uh and you know potentially some

businesses in Mexico wanting to to

express their frustration against

America less buying from Mexico Canada

Germany Europe our major trade

partners that reduces our net exports

Trudeau is gaining in popularity right

now he was like at the lows of

popularity resigning from his his

party's leadership until they can find

somebody else I wouldn't be surprised

now that his popularity is Rising which

it already is uh but that he ends up

staying because he's sort of become this

this figurehead of like no we're not

going to stand for the us trying to you

know pull us over the coals and then

this is of course where you have people

counter and they're like oh but Kevin

you know we've had trade deficits with

these other countries for so long you

know they're rugging us over the polls

but the problem is you've never actually

had Donald Trump or the Trump

Administration articulate why a trade

deficit is

bad I I'll leave this with one to you to

think of and and hey maybe you can put

together a list of comments down below

and that's fine we can argue about it

but my argument is have you ever

actually heard Donald Trump articulate

why a trade deficit is bad no a trade

deficit inherently is not actually bad

yeah there are some side effects but

wait a second you'd think the Trump

Administration would articulate the a

little bit better the reason they don't

is because all they have to do is say we

have a high trade deficit and people

just hear

high debt y that's bad

okay but there are also Pros that come

with high trade deficits and so you got

to weigh this out it's not just high

debt right it means we're trading more

of our Goods uh or sorry uh we're we're

we are importing more of others goods

and uh exporting less of ours but that

is what Donald Trump is trying to

equalize but sometimes when a larger

economy needs to import more goods and

services we're just going to naturally

have trade deficits but anyway we don't

have to get so much into a trade deficit

argument what matters more here is in my

opinion that you also have a whole

another set of Institutions that are

still basically sucking at the you know

what of the Trump admin with hope now

see here is a TS Lombard piece that says

the Trump recession and what's

interesting is they don't actually

believe that there will be a trump

recession they argue that Trump would be

willing to accept a maybe oneyear

recession uh and that could help them

maybe normalize some of the spending

that's going on on a fiscal side but

when you actually go through their

document what you find is they say no it

everything's still okay private spending

is going to explode sentiment fine the

labor market is still expansionary

everything is fine everybody's panicking

over nothing but again I've made this

argument multiple times that you know

these institutions like TS Lombard

apparently are forgetting that the labor

market is the last thing to roll over

over which is quite problematic so now

what you actually have is current

quarter lized data coming in worse Elon

Musk misunderstands that that actually

has nothing to do with government data

it has to do with household spending

less money but you know whatever it's Mr

first reaction versus Mr first principal

uh then we have a lot of resentment

regarding the potential for tariffs to

start as soon as 2 days from now against

Mexico and Canada retaliatory tariffs

are expected to be announced soon the

stock market certainly had a little bit

of a hiccup last last week that we did

have some recovery on Friday the

question now is Where Do We Go From Here

well at least what I've seen over the

last 48 hours after that meeting meeting

if you will some people think the whole

thing was rigged in like a show uh but

uh between you know the meeting between

JD Vance Donald Trump and zinski uh you

know people have asked Kevin you know

what's your opinion on this and I'll

just get to where my opinion is I I

don't think what we saw uh should be

unexpected at all that that is how

Donald Trump acts that that is Donald

Trump's version of negotiating talking

over uh and and arguing that he has all

the cards and his opponent doesn't this

is this is Donald Trump's version of

chaos this is this is the position of

power that he likes to negotiate from

and I think voters already sort of knew

that this was the kind of person that

they wanted in office and I think this

is why you have a lot of trump

supporters that are like that's right

yeah somebody finally stuck into zinsky

you know but then you have the other

half of of you know Americans who are

like I don't know man that's that seem

pretty disrespectful it seemed like you

know we potentially uh lost an alliance

there or how are we going to fix this uh

and uh this is I think why you have

these KnockOn effects now of zalinsky

going to uh London right away for an

emergency meeting in the EU it wouldn't

surprise me for the EU it's also pretty

frustrated with with you know Trump

tariff potentials

now excuse me uh it's it's entirely

possible that you end up having some

form of newer European Coalition uh that

essentially com

finds and potentially helps Ukraine on

their own which I know a lot of

Americans are like that'd be fantastic

that we'd save all the money uh but then

we also Garner more resentment amongst

Europeans and then it makes us Wonder

are we going to get more potentially

retaliatory tariffs to our retaliatory

tariffs tariffs because you know

everything has a side effect right we

help in Ukraine less Europe has to help

them more they're more bitter and all of

a sudden that ends up having side

effects for us what those are going to

mean it's anybody's guess so everything

as usual is a lot more complicated uh

and and nuanced in reality than uh than

than people like to let on especially if

you're scrolling on X which again is

where I'm getting to the point where I

just don't really want to post that

anymore because I mean look at this this

here's a 20-minute video to try to

actually have a discussion on this but

people often are looking for a VI

ramaswami sort of oneliner it's like

well where's the Nuance in that there's

so much more to this so uh okay so we

and you know Elon Musk was Joe Rogan

show for three hours again and started

watching that and you get a lot of um

we'll save my review of that one for the

next uh for the next video but let's

think practically for a moment here do

we think

that the real GDP is going to fall into

recession in

q1 uh it's un it's impossible to know

but I wouldn't be surprised if some of

the next data sets that we get end up

bringing this number back to positive

and probably back to positive GDP VAR

rapidly I think these data sets are very

volatile when they come out especially

at moments of change we just had an

Administration change so in my opinion

it's very likely that we're going to

have um a lot of sort of ups and downs

in that data set and as we get ups and

downs in that data sets uh in those data

sets like the GDP now indicator we'll

have constant sort of news about oh look

where the Line is now look where the

Line is now look where the Line is now

this volatility just comes as a nature

response to a new presidential

Administration and uh and frankly a lot

of change especially in regards to

tariffs uh so we'll see I don't actually

think the government Cuts or federal uh

job layoffs have actually hit our

economy yet because keep in mind most of

these voluntary layoffs that have been

conducted the exception of the

probationary workers who just get fired

um the voluntary layoffs these are folks

who were still getting paid through

September so you might not actually see

their economic impact or reduction in

spending my guess would be until the

summer because my take is those people

taking voluntary layoffs are immediately

trying to start you know looking for

other work and they won't really start

getting nervous until May June July when

they're like oh my gosh my payments stop

arriving in September and I still don't

have a job that's I think when the Panic

starts setting in and that's probably

when you're going to get the biggest

negative hit to personal spending but I

mean remember personal spending it's

it's not just government workers is

everybody and one of the first things in

personal spending that starts getting

cut before a recession are uh groups of

durable uh expenditures so these are

going to be cars uh these are washing

machines dishwashers you know larger

things that you're buying you know

Renovations for your home your kitchen

or whatever I wouldn't buy any of those

things right now i' would highly

encourage people to save their money

right now uh and just sort of wait out

what happens over the next 6 months you

could always get yourself a new kitchen

do you really need a new kitchen right

now know do you really need a new car

right now probably not

so the people who are being squeezed

back into the labor market that's not

the strongest already they're going to

be whacking spending the most and uh

eventually that'll have knock on effects

because when a lot of folks start

getting nervous and stop spending money

then businesses see their numbers go

down they take it not only in lower

revenues but also in the margin because

they can't raise prices anymore and then

layoffs come and when you already have a

Rel ly weak economy uh in a moment when

the Federal Reserve is is refusing to

provide any kind of forward guidance you

probably have enough of a signal already

that things are definitely tenuous right

now so I like to use the data I don't

want to be making a video arguing oh

there's definitely a recession coming is

there a good chance a recession could

come of course but I just like to look

at the data and uh you know if I just

wanted to sort of like you know

clickbait and not provide you in my

opinion accurate value I could just go

oh my gosh see look we're going into

recession well no that Atlanta had now

real GDP estimate isn't exactly going to

provide that to you yet we need a lot

more data to actually reiterate or

confirm this information so way too way

too soon to say anyway I hope you found

this perspective helpful if you like

this sort of perspective just subscribe

to the channel and I'll keep providing

you value thanks so much for watching

we'll see you in the next one goodbye

good luck