The Economic Signals Investors Should Not Ignore Right Now

Yesterday I asked a question.

What happens if the world stops buying America’s debt?

Today’s full Wealth Transparency episode takes that question much further. I’m joined by Andrew Tang of Turner Financial Group and Michelle Connell of Portia Asset Management as we examine rising debt, shifts in the labor market, the explosion of artificial intelligence infrastructure, and how investors are thinking about valuations right now.

But the real question is this.

What do you think happens next?

From debt pressures that could weaken the dollar, to labor challenges hitting everyday Americans, to the AI boom transforming how investors think, the stakes are higher than ever. Every corner of the economy is being tested, and your portfolio could be next.

Don’t just watch, engage: drop your take in the comments, tag a friend who needs this insight, share with anyone serious about markets, and follow for the next Wealth Transparency episode. The clock is ticking, and understanding these shifts could change how you invest tomorrow.

Chapwood Investments, LLC, is a partner of Ethos Financial Group, LLC, a Securities and Exchange Commission registered investment advisor. No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed in this webcast or video. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results.

All investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results. 
No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. 
Securities are offered through Innovation Partners, LLC (member FINRA/SIPC). Ed Butowsky is a Registered Representative with Innovation Partners LLC. Ed Butowsky is licensed to business in: CA, FL, LA, TN, TX. 
Innovation Partners LLC and Chapwood Investments are not affiliated.

Transcript

SPEAKER_00 0:25

Hello, this is Ed Butowski. Welcome to another edition of Wealth Transparency. And we have two of our gurus, Andrew Tang with Turner Investments, and Michelle Connell with Porsche Asset Management. Thank you for being here today. The goal of Wealth Transparency is to take headlines that don't necessarily make it to the forefront of everyone's mind, but do impact the markets and explore what those headlines are and how they impact investing. So thank you again. And for anyone watching today, I want to encourage you to reach out to one of these two individuals if you have any needs on the uh wealth management side. So I want to start off with we talk often about how the US economy is really overwhelmed with borrowing of money, how many trillion of dollars we are in. And right now we are borrowing$50 billion a week, which comes out to be about a trillion dollars a year. And how sustainable is this, Andrew? And what implications does it have for the overall markets?

SPEAKER_01 1:37

It's uh it's not sustainable at all. I tracked this data set on a weekly basis, you know, as as uh I forward the slides to you, the slide deck to you, Ed. You probably saw that. And so it wasn't too long ago that we were increasing no less than only$20 billion per week, but now it ballooned up to$50. And especially with the proposed increased spending in defense, you know, this dollar amount it's very unlikely going to go down anytime soon. And it's going to take bipartisan support in order to cut the government spending. And without government spending, we cannot solely rely on growing our way out of this deficit problem. Because of course, if we have superior growth compared to other nations, then our tax receipts will grow also, right? And that's the assumption. And then we can supposedly we can grow our way out of it. But the way that we are paying interest and with rates as high as it is today, compared, you know, and in conjunction with the amount of debt, we are very likely gonna hit 40 trillion very soon. Who knows? And it's not sustainable. And the implications are basically a sell-off in bonds and treasury bonds. If people don't trust your fiscal system, you're gonna see the demand for securities of your sovereign debt, it's gonna go down. Then it's gonna lead to obviously the weaker spending power with the dollar dollar decreasing value, and then you're gonna have an inflation problem because your purchasing power is gonna be deteriorating. And so it's gonna be a slippery slope of a chain events that is all negative. It's all negative. Right now, we're just uh surviving on borrowed time. The true implication and how crazy this death spiral of debt in nations, you know, it still remains to be seen. And this is exactly why gold has risen so high. Because when people don't trust your fiscal system, when people don't trust your central bank, you know, when you're borrowing too much money, you're you're you're not making enough to cover, and then just servicing your debt equals to about 20% of your of your fiscal budget, that is not sustainable. It's actually pretty ridiculous.

SPEAKER_00 3:50

So so, Michelle, what how does this manifest itself? What actually will happen when we reach 40 trillion and then other countries don't buy our debt, and that makes our interest rates go higher?

SPEAKER_02 4:03

Right. And it makes our currency less attractive, right? It puts downward pressure on the dollar, so you could potentially have a currency issue. You're going to have to have some sort of austerity, meaning you're gonna have to cut spending and increase taxes. But those are the two things that Democrats and Republicans both are guilty of not wanting to do. So how do you get out of this? And we have a population that is not we don't have a lot of babies. We and so that's an issue. But we have a uh population dead that's aging. We are not having as many people come into the country who those are typically the immigrants that are having children versus, you know, U.S. citizens. So it's it's a quagmire. It's it's a big issue, but I don't know how you get out of it when everybody is more concerned about are they gonna get re-elected and how much money are they going to make while they're sitting in office?

SPEAKER_00 5:09

Yeah, I mean, and the Trump administration, you know, and every Republican likes to say that they're fiscally responsible, but this doesn't show that they're fiscally responsible at all.

SPEAKER_02 5:19

It does not.

SPEAKER_00 5:20

And and if we continue to see more and more debt being piled on, not deficit, but debt, long-term debt. Uh as Andrew said, about 20% of our tax revenue goes to pay interest on that debt. At some point, other countries are gonna say, hey, we don't need the United States anymore. I mean, they're only, you know, paying, you know, three and a half, four percent on their bonds when they start looking at it on a fiscal side, and they're gonna just walk away, and that's going to then catapult interest rates higher because we have to pick interest rates go higher to make our bonds look more attractive. And that's gonna have a ripple effect of negativity throughout the whole world. Yeah.

SPEAKER_02 6:01

And it's really going to hit the everyday consumer, the middle class, right? Because they can't afford a home because interest rates are higher are going higher. Same for credit cards, and I'm talking about the basic middle income person, not the person at the top of the K-shaped economy, and cars, etc. And inflation will also continue. So the cost of living will continue to go up as your deficits going up.

SPEAKER_00 6:30

Yeah. Yeah. So so let's let's switch gears a little bit, but still sticking with the Trump administration and how they're handling the economy. Let's talk about the jobs numbers that came out. And it looks like the only thing that's keeping the U.S. labor market afloat is health care. But they also noted that there were no government new jobs, which is also a good thing. You know, let's will you dive into a little bit on the uh job numbers, Andrew?

SPEAKER_01 6:57

Yeah, absolutely. It's uh similar to the uh to the rolling recession that I have uh always have talked about, you know, since June of 2022. That without AI build-out, without the the the growth, you know, with the convergence of mega growth and productivity with uh innovation and technology, we would have had a really nasty, nasty recession. And without the increase in healthcare workers and healthcare-related jobs, we would have lost anywhere from 50,000 to 150,000 jobs per year. That's how bad it would have been. Then we would have officially gone into recession. Because remember, keep in mind, we did have two consecutive quarters of negative GDP. But we didn't, meaning the government, US government did not declare a recession because our job status were strong back then. Now, what came after? A continuation of job cuts and layoffs that that never really stopped. I mean, even it it it happens all the way to Europe. Volkswagen just declared that by 2030 they're gonna lay off 50,000 manufacturing workers. Déjà vu, this reminds me of NAFTA back in the Clinton administration, where we outsourced manufacturing to Canada and Mexico. Right now, Volkswagen in Europe, they're outsourcing the manufacturing to China. So I see a complete repeat uh, you know, in the same scenario. So going back to the US with US healthcare workers, they are keeping us afloat, but in the short term, we are seeing some disruption with that data because of the strike with uh Kaiser Permanente, you know, with the nurses going on strike. But overall, the healthcare worker growth space is bringing this very much needed balance in our labor markets and our U.S. economy overall. So I say this is a blessing in disguise.

SPEAKER_00 8:53

So, Michelle, you and I both live in the state of Texas where everything seems to be really wonderful compared to the rest of the United States. The job market here seems to be pretty tight, but around the country, it looks like it's not that tight and it looks like there's a lot of unemployment going on. What is your thoughts on this?

SPEAKER_02 9:13

Well, I was concerned at the end of the year when you had larger businesses, but not smaller businesses. The larger businesses were saying that they were looking at having some form of layoffs during 2026. Six out of ten employers, large employers that were surveyed, and they blamed it on AI. Okay, I think that's convenient. I think a lot of them may have overhired uh during COVID, or maybe they want to be leaner because their costs are higher. That's probably uh more of the case. I I think it's a very difficult environment if you don't have a seat and you don't have a job currently, uh especially if you're a younger person, because when you look at those numbers for men under 30, I think it's over 10% unemployment. And so what do you say to a young person that they've gotten their college degree, they can't find a job? There was a guy on LinkedIn, and he had, he was a software engineer and he'd been unemployed for two and a half years, and he had a link to his GoFundMe on Link on LinkedIn because he was going to be shortly living in his car. This is somebody, you know, that ha has the skills, but those seats are being trimmed and they're going away. Not everybody wants to be a healthcare person, you know, and there aren't enough jobs for everybody to go to that side of the boat. And frankly, it's kind of scary when you only have one sector that's hiring. And you can't continue that pattern. It's that is very unhealthy, not only for the economy, but for people's morale.

SPEAKER_00 10:57

I remember when we were prospecting people, and one of the ways that people kind of told us to get lost was that they said that they were a client of Madoffs. And and that was a way for them to say, stay away from me. And you were like, Oh, I don't want to talk to you. Now you just say AI has taken over everything, and then you just walk away because you don't really understand how AI is impacting someone's business. But I just thought I'd throw that little tidbit out there. Let's talk about data centers because this seems to be the the biggest growth in real estate. Everywhere you turn, there's a data center going up. And how necessary are these data centers? And the data centers have to create their own energy now? Is that correct? Yeah, that's correct.

SPEAKER_02 11:46

Yeah, now I think that I think that's the goal.

SPEAKER_01 11:49

Yeah.

SPEAKER_02 11:49

I don't know that they all are.

SPEAKER_01 11:51

Yeah, that's why there's a new uh term coin, uh BYOP, bring your own power. And Trump also promoted BYOP plus, meaning you're gonna bring so much more power to the data center that's gonna spill over to the grid. That's his goal. But uh data center have gone through a transformational change. We need to keep that in mind and explain to the audience why. Because the yesterday's of data center was just to perform the function of maintaining traffic and provide bandwidth. The data centers of today, it's completely changing the ballgame because we are right now producing intelligence with data center. Not only traffic, uh, you know, maintaining traffic and providing bandwidth for the websites, but we're also computing uh through the large language models, we are generating intelligence. And guess what? As of the end of 2024, we ran out of human, pro-human data, right? So now we're generating synthetic data, and through synthetic data and training, we're generating synthetic intelligence. So the data center of yesterday's transformed into today of manufacturing of intelligence, plus maintaining all the traffic and providing cloud and et cetera, et cetera. So the demand is absolutely here to stay, but BYOP, it's also here to stay, I believe.

SPEAKER_00 13:16

That's that's interesting. What do you mean by synthetic synthetic data?

SPEAKER_01 13:21

Meaning data or intelligence that is not of human, natural human. Meaning you and I and Michelle, we together with our human brain power, will put together and generate some intelligence. We publish it to the web. Now, the large data, the large language model, the LLMs right there, you know, it you know, from since the ChatGPT moment, we have they have already gone through and scraped through the entire internet and grabbed the human, natural human data and use that to train their model. So we ran out of natural human produce intelligence and data as of the last, you know, last day of 2024. So what that means is that when the large language model and the AI starts to problem solve, when they generate something that is not of human origin, that's called synthetic data. And when synthetic data is the input to train the AI, the AI will generate synthetic intelligence. That's what I mean by that.

SPEAKER_00 14:22

Wow. It's I didn't realize how smart you were.

SPEAKER_01 14:25

This is really, we are living at pivotal moments. You know what this means, and I have said it many, many times, is that the Chat GPT moment, alongside with with synthetic data, has uplifted the entire platform level of human intelligence. Meaning we have gone up like a J curve in terms of how we are able to achieve the level of intelligence that we would not have achieved if we were just going through the course of time without use of AI. That's how significant it is. And that's why the hyperscalers are spending so much money on it, because that is the future. In other words, okay, Andrew, you you know, you're so smart. So why do we need all that? Okay, well, let me explain to you this way. If I could formulate the problem of uh small cell cancer into a formula, then superintelligence will be able to solve it, just like that. Yeah. That's how impactful it is. You know, not just to the intelligence world or the data world that only exposed or subject to the Max 7 companies. No, this is going to be positively impacting all mankind when we are able to find preventive measures to battle disease and come up with precision medicines. And basically, all mankind at every level of income is going to benefit.

SPEAKER_00 15:46

So, from a real estate standpoint, Michelle, do you see data centers being good investments? That's a load of questions.

SPEAKER_02 15:52

Talking to somebody that's been slowly paring back my core weave, you know, because just how much debt is required to build these things out. I read about how much is being built just in Texas, from what I have read recently, you know, we're like the number one builder of data centers. I think Virginia is, you know, established data centers because we have so much land everywhere. I mean, somebody was talking to me the other day and they said they were near the hill country and they saw this thing over to the side as they were driving. It just went on and on and on, which is so huge. There's going to be some point that no, it's not. They're not. I just be very careful because of what's required to build them, you know, just the amount of not the land, which here is very cheap, but the AI chips, the, you know, the uh the actual servers themselves. All those things are very expensive. And we don't even know if what's being used is going to be obsolete in five years, and it's going to be supplanted by bigger and better chips and servers. I think it'd be very I you know, I've got trepidation on it. I mean, I like the things that go into the data center, but I don't know if I like the data center.

SPEAKER_00 17:13

Well, there was some talk. I remember Elon Musk was talking about having literally servers in space. And I I don't know how viable that is. You know, Andrew, I know that you know a lot about Elon Musk.

SPEAKER_01 17:27

How much time do we have? You know, so to to make it very short and sweet is that that is a direction that we must take. We must take. Meaning, can Nvidia generate a chip that's going to consume less energy in what time? You know, what's the time frame? So right now with the trajectory of where we're going in terms of AI, the natural course is to bring it closer to the sun, where we can harness a lot more energy from the sun. And also, we just need to figure out how to conduct heat in space because you have no atmosphere. So once those two are soft, space AI is it's there. And right now, Elon is already pushing full force into space AI. So I believe that's gonna be an amazing project between SpaceX and X AI.

SPEAKER_02 18:15

Is that how he's gonna earn this trillion dollars, Andrew? Get that big paycheck finally.

SPEAKER_01 18:20

It's part of the solution, yes.

SPEAKER_02 18:22

Yeah, okay.

SPEAKER_00 18:23

So as we conclude here, we've had kind of a very interesting last uh five business days in the market. A lot of that has to do with what's happening in Iran, not to get into the war, but let's look at valuations. I I put out a piece about the peg ratio. That's being a really good way to evaluate if stocks are expensive or if indexes are expensive. Right now, I believe the stock market's about 25% overvalued based on its PE ratio divided by its earnings per share growth rate. Um so even though we've come back quite a bit off of the 50,000 Dow, where do you see valuations right now, Michelle, and and what would you be buying today?

SPEAKER_02 19:08

It's interesting. As we started to have that rotation away from technology, you had the industrials and the consumer staples becoming more expensive than tech. And that's why I think as we've gone through this war in the short period of time that we've been experiencing it, you have more investors going back to technology. And it's probably because of that G of that peg ratio, right, Ed. It's because those names are going to continue to grow no no matter what. I mean, there are you may have some pullback in terms of spending, but they're obviously going to grow faster than other sectors of the economy. So those actually have become safe names again. Uh, you've seen more money going back into the software sector because it's just been decimated and probably people continue to look at the names in that particular sector. I think that there are still parts of the world that look cheaper than us. So I would wait for your moments to add to your portfolio if you don't have exposure there. Uh, average in because we don't know how long this is going to last. From what I've read, the odds are high that it's either going to be short or moderate term in terms of duration, not long term. That's very low probability. And by the way, if we do have that long duration war, that's when it's going to become very tenuous for the world, especially those countries that are dependent upon the oil that goes through the Middle East and need it desperately, like the Asian countries.

SPEAKER_00 20:49

Andrew, same question to you. What do you think about the valuation on the stock market and which individual stocks would you be buying today?

SPEAKER_01 20:57

Well, again, uh I would stay away from chasing performance. So chasing performance, for example, would be going after oil and defense sectors right now. So I wouldn't do that. Consumer stable also seems expensive because they don't grow as much. Utility is always stable because no matter your brook, poor, rich, you still pay your utility bills and you need it. So communications is always good. And then you have the tech sector, innovation, that it's still going through a lot of uh uh discovery and equilibrium and cleansing and revaluation. So the tech and innovation space is still my favorite space to be. Financials, I stay away from it for now. You know, deals are rising and there's uh, you know, tremendous pressure of what could be, you know, more cockroaches discover, you know, you know, chain effect of uh uh certain businesses and non-performing loans. So yeah, tech is still my favorite space, and I'll just name one again as Microsoft. Microsoft is the base layer operating system related core software that people need, and they will also invest with AI companies to make themselves relevant. Again, you know, like Larry Goldberg said in the past, that this could be a word perfect moment just because anthropic. Came up with a productivity suite, it's not gonna get rid of Microsoft. And I think it's gonna disrupt the software companies and the software sectors in some sense, but not to replace them.

SPEAKER_00 22:24

Great. Well, I appreciate both of you being here. Again, this is wealth transparency. And for those of you watching, please reach out to Andrew Tang at Turner Investment Management or Michelle Connell at Porsche Asset Management here in Fort Worth. Thanks to both of you. I really appreciate you doing this and uh look forward to next week.

SPEAKER_02 22:43

Thank you, Ed. Thanks, Ed.