Could the AI Rebound Go Much Higher? | Rob Spivey

A lot of times, headlines are focused on the stock market, but there is a bigger phenomena out there. It's the credit markets. A lot of times, the credit markets are ignored. Today, we sit down with Rob Spivey, who's gonna tell us where we are in the credit cycle and why the credit markets matter. Hard assets have gravity. Borrowing has gravity. Borrowing begets more borrowing until you get the daisy chain that actually gets you too far on the other side, which we are far, far away from. When you build a data center, that means somebody else has to build a factory. That means the people behind them have to build a factory, and so on and so forth. He's also here to tell us about the incomes of companies. A lot of times, the income statements we see may not reflect truly what's happening in a company. Rob is gonna tell us how they're looking at that. Last year, we saw return on assets for the US as a whole rise to 13%. Just for context, cost of capital is around 5%. So that's more than 2x what companies need to return. I'm Siamak. Welcome to Market Insider. Rob, it's great to have you on. Welcome. Thanks so much for the time. I appreciate it. You have your own unique way of analyzing the earnings and the credit cycle, the credit market. Can you tell us what you're seeing right now? Yeah, a lot of this comes back to the idea before we even get to how we analyze companies. We always have to look at the market as a whole because any good analyst will tell you, or any good portfolio manager will tell you, the vast majority of performance, somewhere between 60 and 80% of the performance of any individual stock, comes down to what's going on for the market. That is the big story. And so we always, whatever we're doing analysis on a company, we always start with what's going on in the market. We've built a framework for this that really gets the idea of understanding big, bold market cycles and where those market cycles are taking the economy and everything else. And this starts, the bedrock of what we do is really revolving around this idea of understanding credit cycles. Because if you can understand credit cycles, you can better understand what's going on in the economy. And all of a sudden, all the noise, a debate about whether the SaaSpocalypse is real, a debate about the tariff tantrums, a debate about anything else, all of a sudden drops away because you understand credit creation is what drives the economy. I'm in New England right now. And so in New England, we say America runs on Dunkin'. America doesn't run on Dunkin'. America runs on credit. And so we can understand where we're seeing credit creation and credit destruction all of a sudden, we can see where the economy is going to go. And where the economy goes, that leads to a market at the end of the day because credit creation leads to credit demand, credit borrowing. Credit borrowing leads to investment. Investment leads to revenue growth and revenue growth leads to earnings growth. And right now, we are in a situation where we have insanely healthy availability of credit. Just to put this in perspective, we monitor a whole bunch of different indicators here in terms of we monitor things like senior loan officer opinion survey, which is for the Fed, basically going out and asking banks, are you making it easier or harder for people to get access to credit? We also monitor credit spreads in terms of in bond markets, when corporate bonds are yielding very close to the risk-free rate to treasury bonds, that means bond markets are wide open, easy access to credit. And then we also monitor things like Chicago Fed has several great indicators that are broad indicators on credit availability. And every single one of those right now are pointing to improving credit availability. And that's why anybody who's worried about the end of the AI boom or anything else upsetting this apple cart really is totally missing the picture in our view. So how often do these indicators change? Because were they signaling a recession before or the credit market has been like this for a long time now? Yeah, great question. And if you look at each of them, so looking at things like bond market spreads in terms of bond spreads and the senior loan officer opinion survey, which is about whether or not banks are making it available. We look back in 2022, we 100% were seeing those flash warning signs, red, red, red. And we actually went out to our clients back in June of 2022, just when the market was re-approaching those all-time highs that we had in late 2021. We basically said, hey, look, just you understand this often happens that you're seeing a market rally while the credit underlying, if you think really the foundation of the market, which is what credit is, is getting worse. Everybody watch out. And that was before the market pulled back 15, 20%. And if it hadn't been for ChatGBT being released in November of 2022, we probably would have not seen an investment cycle that kind of pushed us through this. We would have seen that issue get even worse than the 15, 20% pullback we did. But since then, the way that really worked is 2022, absolutely, we had everything closed in terms of markets were flashing warning signals. 2023, we started to see kind of a demand pull in terms of credit demand pull, but we were still not seeing availability, which is why we were kind of seeing a slow burn early on, but we've seen progressively year after year, 24, 25, and now 26 credit availability getting more and more healthy, which is why we look at this and we go, much like in 1994 to 2000, we are seeing credit availability amp up just when investment cycles are starting to accelerate. And that's why we still see, right now we're seeing really bullish indicators, even though a few years ago we were not. So you're seeing a boom essentially in the credit market, and then you're very bullish on the stock market as a result of it. Can you tell us more about that? Now, this is where the proprietary thing that we do here at Valens becomes so important. So what we like to talk about here at Valens and ultimately our businesses in terms of our institutional business and our individual investor business is we really believe that we are a source of truth for investors, and especially for institutional investors, they have a whole plethora of way of looking at companies. And a lot of them look at companies the same way that we do. And what uniform accounting is, is this idea that when you look at as reported accounting metrics gap, what the US government says you have to report your accounting for in your 10-K or your 10-Q as a company, or IFRS, what you have to report around the world, those any good CFO will tell you are more of a compliance exercise than they are anything to do with actually understanding how good a business is. And so there's a reason why when you look at companies like BlackRock, some of the largest asset managers in the world, BlackRock has something like two dozen formerly tenured accounting professors who basically spend their day helping BlackRock figure out for the whole entire universe of stocks, how they actually clean up the accounting to get to what real economic profitability is. But there's a whole lot of people who do not have access to 24 tenured professors like BlackRock does, and that's what our uniform accounting does. What we're doing is, we go back to the bedrock of saying, let's go to first principles of understanding how to analyze a company's performance. We do things like looking at, hey, R&D, research and development, is not an expense like it's reported under GAAP. It's actually an investment a company is making in the future. Things like stock-based compensation are very, very noisy in terms of how they can artificially distort a company's real profitability. And so we make over 130 different adjustments to get to what real profitability is for a business, what real growth is, and what real valuation is. And the goal is, again, to be that source of truth so investors can see what the people who have the real money behind things, what they're actually seeing, right? The people who are moving money in. That's what makes us so bullish is because when we look at that uniform accounting data, it is telling us something insane, which is, last year, we saw return on assets for the US as a whole rise to 13%. Just for context, gory details, corporate cost of capital is around 5%. So that's more than 2x what companies need to return. The average company in China, the average company in China is like two, three, 4% in terms of return on assets. So way, way better than that. And also the average company in Japan is like four or 5% now. So really, really healthy profitability in the United States. But 13% is up from a few years ago, 10 or 11%. When we look at uniform earnings growth, we're seeing that we've got 19% earnings growth coming this year in terms of uniform earnings growth. And it's all being driven, not all, a big driver of it is the biggest companies in the world getting more profitable. When you look at the Alphabets of the world, the Microsofts of the world, even the NVIDIAS, they're having phenomenal earnings growth. And that is trickling down into the rest of the economy because the boom that they are powering is leading to HVAC companies, power companies, industrial machinery companies, all of these parts of the world that historically when big tech did well, nobody else benefited because they were just the center of profitability. But now that they are actually having to do real world investments, it is pulling so much of that forced investment cycle growth of when you build hard assets, we like to say this idea, hard assets have gravity, meaning hard assets lead to more hard assets accumulating. So when you build a data center, that means somebody else has to build a factory. That means the people behind them have to build a factory and so on and so forth. And all of that, when we look at uniform accounting is powering this massive earnings growth boom that credit cycles are enabling us to see investment coming into. And again, that's what we're so bullish on. And do you see this earnings trickling into other parts of the economy? You mentioned construction, HVAC, and the areas that are tied to the data centers, but is it going to get into other spaces, other sectors as well? Or will it take time? When we look at market cap in the United States, it's a staggering, but at this point, like 65 or 70% of total aggregate US market cap is effectively a bet on AI. It's a correlated concentrated bet on AI. And then the only stuff that's not in there is effectively the consumer, which the consumer is truly actually an issue right now. Because when we look at the consumer balance sheets, you can look at the data out there for things like consumer loan delinquency rates. You can look at things in terms of excess cash and excess savings. And you can look at things that is in terms of right where consumer spending is and look at the companies. There is a real reason why the consumer, absent us getting something happening on interest rates, is under pressure. And this is not trickling down to the consumer because effectively the AI world has created an environment where we're kind of in a no hire, no fire issue, where what companies are doing is they're saying, we're getting so much extra benefit from our employees that are there that are using AI successfully. And we're seeing this 100% in companies that we're actually seeing them keep them, but they're not hiring anybody else because they're saying, you know what I mean? What Satya Nadella said this two years ago, and it was staggering. I think it was an interview with Jamie Dimon. He basically came out and he said, you know, Satya Nadella, CEO of Microsoft. He said, you know how good things are for Microsoft right now. We are literally at the epicenter of the AI boom. All of my direct reports who are powering this in Azure, in Copilot, working directly with OpenAI, none of them are asking me for headcount. And it's not because they don't have a lot of stuff they're working on, it's because they're getting so much more insanely efficient. And so that is an issue in terms of, that's been a stifling thing for the consumer, unless we get something like interest rates coming down or more liquidity coming to the consumer. And then healthcare is the other place. Healthcare, there are structural headwinds for healthcare because of what genuinely GLP-1s do in terms of just general need for a lot of different parts of healthcare, what reimbursements are doing in terms of shrinking healthcare margins, and also AI really actually disrupting the historic value chain for pharma because of how it's changing, how innovation happens. And so we're not seeing those parts of the economy, which generally we know the consumer is two thirds of the U.S. economy. It's about a little less than one third of U.S. market cap. That really is under pressure and healthcare is too. But outside of that, I mean, every single other part of the U.S. economy is genuinely benefiting from this investment cycle that is really pushing forward. You're seeing the credit easing, like the opportunities, the credit market is doing well. How long will it last? And what are you seeing that makes you so bullish? When we look at it, there's one thing that actually just happened recently that actually was funny. My business partner and I, the chief investment officer here at Valenzuela Telemetry, director of research, he and I were talking. We were always saying, all this credit availability is awesome, but we're not absent the private credit market world. Seeing it really show up in terms of growing borrowing. So until we do, a lot of this is just being fueled by companies that have tons of cash while they're throwing off. Well, what happened, which was really exciting about six to nine months ago, was we saw one of the most important indicators we look at as to whether or not we're in a bull market, inflect higher. And that's commercial and industrial loans, C&I loans. So C&I loans are, the way we like to talk about it is, it is like turning an ocean liner, a boat like the QE2. It takes a long time for it to turn. But once it gets going, it's like one of those massive boats or like a train. It's really, really hard to make it stop. And what we saw happen, which was so important, was for the first time since late 2020, we saw C&I loan growth start to really grow in an accelerated way. Meaning, we're starting to see companies actually borrow to invest. And if you look over the last 40 years, 1994, just before the dot-com boom, that turn happened. 2003, just when we were bottoming and we were finally starting to see the boom in investment from 2003 to 2008, that happened. 2010, that was the inflection. Because we would argue, having lived through it, the Great Recession, that bear market, didn't stop in March 2009. March 2009 to middle of 2010, that was a bear market rally because the fundamentals didn't justify it yet. But we saw that inflection in 2010. That was a signal things were picking up in late 2020. So whenever you see that road marker happen, that tells you you're about to get a big investment cycle and it takes so long for it to stop because it has such inertia. Right, again, that idea of hard assets have gravity. Borrowing has gravity. Borrowing begets more borrowing until you get the daisy chain that actually gets you too far on the other side, which we are far, far away from. And that's what has us so bullish, more bullish now than we were even six or nine months ago. How do you know we are far away from the other side? What indicators are you looking at that tells you that this is a beginning and it's not gonna end for a long time? When you look at corporate investment cycles, because corporate investment cycles have a pattern, right? How each of them are different, but it's like, right, what is it saying? Every family in America is unhappy, but they're all unhappy for different reasons, but it's all the same reason, whatever the saying is. The idea of all investment cycles, they're all different, but they all are the same. They have all the same pattern, which is you get to a level of euphoria and overinvestment and then, right, you have the hangover afterwards. Well, looking at this, what's really interesting, if we look at the 1990s investment cycle, which was the last really capex hard investment cycle driven bull market that we had in the United States, we got to a point where the average age of assets, which is a really, really great thing, it's what this thing we call net to gross PPP ratio, but it's a really powerful metric to monitor because it's another one of those slow twitch metrics that has inertia to it. It got to the point where the average age of assets in US was about 40% appreciated, which that might not mean anything to you. But normally, in the middle of a cycle, you're at like 44% depreciated. And we got in 2022 to the point, because of the fact that we had underinvested in hard assets in the US for so long, we got to the point where we were 46% depreciated. What does that mean? That means we had underinvested in US assets to get to normal levels by about seven, $8 trillion. To get to euphoria levels, we had underinvested by about 15 to $17 trillion in terms of hard asset investment by US corporates. In the last two years, we've gotten back 45%. So we have gotten to still, with all of the big investment cycle that we've had, powered by an AI boom that is actually showing value. When we look at return on assets rising, the reason why return on assets is rising for all these corporates is because we actually are seeing an AI value unlock here. That's only at 55%, I mean, sorry, sorry, so definitely 45% in terms of depreciated. We need to get to 40% to get to euphoric levels. We need to see another eight to $10 trillion spent to get to levels where we can say, okay, we've now overshot, which is where you always get in a boom. And importantly, so when we look at that, that all isn't gonna get deployed in a year. That takes multiple years to deploy. And on top of that, the credit availability that we have, you know, the reason why you see recessions and the reason why you see credit collapse is because of the fact that you get to a point where everybody shuts off the credit spigot and basically says, we're not gonna give you money anymore. We don't think that you can pay back. And then somebody has to refinance their debt and they can't. Well, we've got credit availability that's wide open and we've got this investment cycle fueling real earnings growth. Nobody's gonna shut off credit availability anytime soon. And you can add on top of that, there's really important things happening at the Fed that actually further confirm that. But if you wanna talk about that, we can. We don't have to talk about the Fed though if you don't want to. There's changes in the Fed and what are these changes? When Kevin Walsh came in, right, there's a clear mandate that, right, everybody said, you know, is he in Trump's pocket or not? Kevin Walsh is very independent and very intelligent. But when you look at where one, if you look at and you listen to what he has said, he very much believes, much like Greenspan believed in the mid 1990s. In the mid 1990s, in 1995, 1996, there was a lot of people at the Fed who were arguing, we've got this investment cycle that's happening that could be inflationary, we should raise interest rates. And he said, no, this is a tech unlock cycle. And a tech adoption investment cycle is fundamentally deflationary. And so we think it's gonna be deflationary, so I'm not gonna actually raise interest rates, I'm gonna let this run. Kevin Walsh has basically said he sees the same thing here with AI, that AI is deflationary, so he is not gonna have to raise interest rates. But the important thing is he also does not believe in QE, quantitative easing, the idea of using the Fed's balance sheet to effectively manage the US economy. And so everybody has this concern, is he gonna run that down? And if you run down QE, if you run down the Fed's balance sheet, there's arguments that that could stifle availability of credit. But people who are worrying about that are missing that he, Michelle Bowman, the head of regulation there, Scott Besant, you look at all of them, and they've been very clear, they're gonna be very cautious about running down the balance sheet, but they're going to do that in tandem with something else that's really important. They are pushing deregulation of the banks, basically lightening credit in terms of capital standards, easing reserve requirements, and all of that is effectively what they're trying to do is replace the Fed's balance sheet being the main driver of lending and basically allow banks to be the main driver of lending again. And that's really powerful because people who are worried about the credit cycle are missing that. And the other thing that, since Kevin Walsh understands and is likely to have a strong voice about the idea of, we are not likely to see inflation like everybody's worried about, we're not likely to see the interest rates that the market currently expects. The market currently expects in the next year we're gonna have at least one hike of interest rates. It's more likely that when we wash out what we're seeing here in terms of what's going on in the trade at Hermos and the energy crisis, that probably inflation is actually going to stay in these 2% levels if not actually come in a little. And that'll give him room to do some more interest rate cuts or at least holding things stable, which will allow the economy to continue to fuel. And if we get interest rate cuts, that becomes really important for that third of the economy that I talked about in terms of the consumer especially. Because if you can get interest rate cuts, that all of a sudden gives the consumer a little room to move. That'll really help things evolve. And in terms of the, so you're seeing this bull market, you're very bullish. And in terms of the sectors and people are looking at the AI space and the prices of stocks have skyrocketed in the last year and people are wondering, and the earnings have gone up a lot too. People are wondering, is this a good place to invest or where should they look at? Which sectors are you seeing good opportunities? And this again is where uniform accounting, having that ability to see through the accounting noise is so powerful. Because when you look at, there's so many companies in tech, in industrials, in communication services, which is where the Googles and the Alphabets and the Metas are, that because of accounting noise around things like R&D investment, intangible assets, stock-based comp, distortions in asset aging, that you all of a sudden, it looks like profits are actually way lower than they are. And so we start to see this and we start to go, no, this is really interesting because even with where the markets run, we're at a point right now where you listen to Kay Schiller Cape, which is this metric that everybody loves to talk about. Oh, the market's expensive because on a cyclical basis, we're at a 40 times P.E. And that's the most expensive that we've been since the dot-com bubble and everything else. Well, two things. One, the Cape P.E. is actually irrelevant. And the reason why is because of that accounting noise that I talked about. We have massively changed accounting standards in the last 40 years, where 40 years ago, what you would in 45 years ago, there was not, you didn't even have stock-based comp. R&D was not a thing that we thought about because we were hard asset businesses. Goodwill and intangibles, you could basically amortize goodwill over time. So your balance sheet shrunk over time. There's all these different crazy things. We also didn't have to capitalize operating leases. And so when you compare the earnings 40 years ago to today, when you compare the earnings seven years ago to today, also relevant, because we had a massive accounting change in 2019 around how we account for operating leases. So there's this not like-for-like thing. And this is what, part of what got us bullish in the last nine months also was when we saw that earnings growth accelerate, but the really important thing is we were at a 24 times uniform P.E. in 2025. When you add the idea that we're gonna have 19% earnings growth this year and high teens earnings growth next year, current P.E.s with where the market are is 20 times. So 20 times uniform P.E. When we clean up the accounting noise, we don't take the gap numbers. We take the real data, the true earnings. We're looking and we're saying, we've got an economy, we've got a stock market where earnings are growing at double-digit rates and we're trading at a 20 times multiple. That's quite frankly cheap. And so just to highlight the overall market, we are seeing that the overall market actually is undervalued here because of where earnings growth is going. So now the question, which is fair, where do you go, right? Where is there opportunities in their pockets? The first thing is, when you look in the industrial world, you know, of course, the GE vernovas of the world have certainly, you know, everybody understands we need a lot of power and we need a lot of HVAC. But there are so many secondary and third and fourth industrial machinery effects on that that there is incredible value that's really interesting in industrial machinery. And we still, by the way, actually really think that companies like GE vernova are cheap when you look at the context of how many turbines they're gonna put out. The fact that they are doubling, tripling their turbine capacity over a five to six year period, which justifies a lot more valuation. The other area that we think is really interesting because everybody's sleeping on, we love areas of tech to be clear, tech hardware and, you know, some of the hyperscalers, but we think everybody's sleeping on the energy complex. Because if you think about what's going on, the current actual bottleneck in the US economy with the AI adoption cycle, it's not Nvidia chips, it's not even micron chips, and it's not HVAC equipment, which is a thing, but when you do it, it is power, right? It is that we need a whole lot more power to power these data centers. Just to give you a sound bite on this, over the last 20 years from 2005 to like 2024, we went in a situation where the US economy more than doubled GDP, and we did not increase our energy intensity, how much energy we needed for the US economy at all. Effectively, our demand was flat. But where we're gonna go in the next five years, we're gonna see a 20% growth just in on-grid demand for power. And then we've got all this conversation about off-grid power, right? In terms of behind the meter, as we like to call it, bring your own power. That is a staggering amount of investment that needs to happen. And people are starting to sniff this out in terms of utilities, but what nobody's paid attention to is, if you need all that power, there's one type of power that's gonna do all that, and that's natural gas. Natural gas is the only baseload solution that we have, and we are the Saudi Arabia of natural gas in the United States. We are going to see a lot more demand for natural gas, which means probably stronger natural gas prices, but more investment in natural gas. And that even goes before the idea of what's happened in the Iranian conflict, and how that is causing people to finally start to invest in oil again in the United States. That means we think that the energy patch is, everybody is kind of going first step and then first derivative of this whole entire boom. We need data centers and we need power. Nobody's going, well, how are we gonna get the power? Where's the actual source that gonna be? And we think that's so exciting right now for energy because of that. Do you recommend people to get into natural gas, look into the natural gas players and see if they can invest there? We think companies like EQT, for instance, which is the largest natural gas company producer in the United States, we think EQT is really interesting here because there is a pricing power opportunity. We also think that a lot of the equipment and service companies, so these are the Baker Hughes of the world, the Halliburns, but you can even go smaller, the Liberties of the world, are really interesting here because we are going to need to start to ramp production. And really nobody is thinking about that and what that's going to happen. And a really interesting thing is for a lot of these companies, what's happened is because we had basically really four years since 2023, so three years, call it, but really since 2015, we've kind of had a bear market in energy. It's been tough. Ever since the natural gas and the oil bust happened from the shale explosion that happened from mid-2000s to 2015, there hasn't been a lot of investment in the oil patch. And so what happened was when all of these data centers started popping up, a lot of the companies that do oil field services, fundamentally, when you're a company that does completion services, like a Liberty, or you're a company that does compression services, like a Kodiak, what you're really doing is you're creating power and you're using that power to turn something, to basically make stuff work, which means their core competency is actually making power. Where they've got all these generators to be able to do it and said, wait a second, our generators break even at 55 to 85 megawatt, dollars a megawatt hour. In the data centers, they'll pay me $95 a megawatt hour. So a lot of them have taken capacity out of their core energy business and actually sold it to power generating for the data centers, which means when we get this boom in investment in the energy patch with natural gas, with oil, it's gonna be in a world with tight capacity to be able to do it, which means day rates are gonna go up and you're gonna have big, big winners for some of these equipment and services companies. We think a Baker Hughes is interesting this way. We think a Liberty, like I said, is interesting this way. We think a ProPump is interesting this way also, ProPetro, which is pump, P-U-M-P. Do you see the natural gas prices going up or do you think the activity will go up and the volume, it will be more of a volume play? Yeah, we think there's gonna be a bit of both, right? I mean, so the big thing is gonna be a volume play and most of our natural gas breaks even comfortably below $3, which is basically the floor of where, when you look at the natural gas curve, right? The natural gas curve, unlike oil, which tends to have a natural curve, either factorization or normal curve, natural gas tends to spike in the winter, of course, and drop in the summer because we use so much of it for heating. But if you look at basically the floor of that in the summer, it's basically $3 if you look at the next five years. And the ceiling is, I think, members are talking about $4.50 or $5. We expect that between the fact that with the LNG trains in Qatar being offline and Chenier and others investing in more LNG exporting in the United States, we're gonna be pulling more LNG out of the United States system. So we're gonna basically have more demand there. It's gonna be a lasting demand because it's gonna take so long to rebuild the trains in Qatar. Also, when we have greater demand of natural gas here, we're gonna see just a general shift in the plateau where the bottom and high end, we think it's gonna move higher. So it's gonna be a double whammy of increased volume and increased prices, which is gonna benefit the natural gas companies along with the equipment and services companies. And does it take long to build this infrastructure or is it fast? Yeah, I mean, so when you look at the, punching holes in the ground and basically being able to get natural gas and oil out, you know what I mean? Obviously fracking and shale oil drilling is incredibly fast in terms of how much you get down there, how you get down there and then how you turn around. You're talking a less than six month window in terms of getting stuff out of the ground. And then in terms of building the infrastructure, when you talk about the collection infrastructure, which is really what you're talking about from the wellhead to where you get basically the big areas where you kind of collect all of it, that actually is pretty straightforward infrastructure build. It means a lot more work to be done and potential beneficial things for companies like a US dealer, Nucor making the pipe for it, but it's not hard to be able to ramp it up. It's gonna be, in our view, and this is why we think we're seeing wildcatters starting to punch holes in the ground with oil prices higher. It's gonna be a thing that lasts for a while, but is an ability for them to ramp up relatively quickly and then it lasts for a while. And you're seeing this boom coming, you know, that's very bullish and it's impacting certain sectors of the economy with the AI. But at what point do you see the consumer get the relief? Do you think the consumer, because the consumer sentiment numbers are very low and it's true, people are not feeling good. A lot of people are not doing well. At what point would you have them see, you will see the consumer is doing better? Yeah, and I'm gonna answer this question in three different parts, actually, because I think it's relevant. I first want to talk about consumer sentiment and then talk about when the consumer gets better and what's the catalyst and what's really going on with the consumer right now. When you look at consumer sentiment, we always pay attention to it because we pay attention to every macro data point that's reported, that's relevant out there in the world. But we have really downgraded consumer sentiment in almost any of the survey scores in terms of the relevance to tell you a lot, because of the fact that the issue is, because of the media environment that we're in now and how people get information, there is this structural thing where everybody does feel like it's worse than it was before. And also, just the sample size that you're getting there, it is a smaller world that you're getting the sample size. But in general, there is an inherent bias in the world now that everything is worse. What's always better to do is to follow the actual revenue and follow the earnings and follow what's really going on. What that tells you is the low-end consumer is absolutely under stress. And absolutely, the thing that I'll talk about next, it's hard to see how you don't get a resolution that involves some credit pain for them. For the higher-end consumer, and I'd argue not even higher-end, the middle of the higher-end consumer, we're still seeing healthy spending, right? I mean, because of the fact that outside of the lower-end, there is still a healthy consumer economy going on here. But the issue is the lower-end is so tough in terms of where it is right now. Now, if you talk about how you get out of that, right, in terms of how you get out of that situation, this is structurally, we think, part of the reason why we do need to see lower interest rates for the consumer. And also, we need to see this credit availability improving from the banks in terms of deregulation. This is where the Fed comes into the equation, because easy credit standards from banks and lower interest rates, meaning consumers can refinance at lower rates, consumers can buy houses at a better interest rate and all those other things, those are gonna be really core for the consumer to actually really have a pulse. And in fact, earlier this year, we were really bullish on the consumer in January, in December and January, because we saw that narrative playing exactly out. Look, whatever the administration wants to say in terms of President Trump wants to say about, I want 1% interest rates, of course, that's never gonna happen, because we should have never been at zero 1% interest rates in the first place back in the 2010s or whatnot, because we had negative real interest rates. So, but could we get to 3% interest rates? Absolutely, that is a viable thing, especially if you think that before the Shader Hamos and the Iranian conflict happened. If you look at metrics like trueflation, which is a different way of looking at inflation, they were arguing that we were at a 1.5% inflation rate, right? And that we're only at 2.1% now. At a 1.5% interest rate, you still have a healthy real interest rate, right? The nominal interest rate where the Fed says, minus, minus inflation, you still have a 1.5% spread, right? 150 points spread. That is a normal spread in a normal economic environment. So we think we could get there. And if you get interest rates down to 3%, all of a sudden that changes a lot of math for the marginal consumer and gives you room for them to have a pulse. That really needs to be the narrative to be able to solve it for them without there being a breakdown in employment because of AI. Which by the way, we don't see a breakdown of employment because of AI. Because when you got real industrial jobs popping up, you have the kind of thing that you can have a blue collar worker, a non-college educated worker, fit in there and be able to do, right? And also, even in the whole entire AI narrative about software, and I know that I'm getting off of our question, but I think it's relevant to talk about, AI and software and SaaS and software engineers, right? Everybody wants to talk about the idea that Block fired 40% of their workforce or that Intuit, right, basically laid off, is gonna lay off 20% of their workforce or whatever that is. Those are the really great headline numbers. If you actually look at job placements, meaning recruiting and demand for jobs, one of the jobs that has the highest level of growth in terms of demand, number of job listings and postings that people are trying to hire for, is software engineers. Because while the software companies don't need more software engineers because they're trying to use AI to be more efficient, there's a whole bunch of the rest of the United States that all of these companies that would love to be able to build internal software for themselves or external software for their industrial product, for their consumer product, that they haven't been able to afford the people to be able to do, or they didn't know how to do it, and generative AI is giving them the ability to be able to fit a software engineer inside their normal business process. And so the narrative that, you know, software engineers are being wiped out, software engineers that were making way more than they should have been making, yes, those actual incomes are coming down, but demand for those jobs is not going anywhere, it's just going in a different place. You're whacking the mole down here and the mole is popping up over here. Rob Spivey, it was great to have you on Market Insider. Thank you so much. It was a pleasure as always, and look forward to coming back. Thanks again. Yeah, we would love to have you back on. We also have an exclusive segment with Rob on our sub stack, which we will leave you the link below. He's gonna tell us what companies he's recommending to look at for buying and why, and what companies you might wanna avoid. I'm Siamak, this is Market Insider, we'll see you next time.