What Good News on the Economy Means for Investors

Kara Swisher 0:00 The stock market is hitting record highs. Job numbers are good, inflation is falling, and the Federal Reserve might be cutting interest rates also. Um, consumer happiness is rising, according to all those consumer happiness, um, s-surveys. They're moving, it's ticking upward. Looks like the US economy might be able to avoid a recession according to a recent survey. Um, economists not even a soft landing. Um, what do you, uh, what do you think we... What's going on? Treasury Secretary Janet Yellen was touting soft landing weeks ago and said, "My hope is it will continue." I guess we're continuing to soft land if at all. Um, what is your take on all the good news?

Scott Galloway 0:34 It, what strikes me is more so than all the good news, which is exceptional, is the consumer dissonance or the citizen dissonance. And that is Americans have a unique ability to credit their character and their grit for the raise they're getting-

Kara Swisher 0:48 Mm-hmm.

Scott Galloway 0:48 ... and then blame the government for inflation.

Kara Swisher 0:50 Mm-hmm.

Scott Galloway 0:50 And so even though the, even though the, uh, wages are rising faster than inflation now, there's real wage increases. They still blame the government.

Kara Swisher 0:58 Mm-hmm.

Scott Galloway 0:59 It's just this, this quandary. It must be driving-

Kara Swisher 1:00 Well, it's ticking up. It's ticking up. That, that Michigan survey just suddenly went the other direction.

Scott Galloway 1:04 I hope so.

Kara Swisher 1:05 Yeah. Yeah.

Scott Galloway 1:06 But it's just very strange. The White House doesn't get any credit for it.

Kara Swisher 1:09 Yeah, it's starting to.

Scott Galloway 1:10 And, uh, I hope you're right. But... And you know, this goes to my win. We literally have... Now granted, it's not distributed equally. We have a- a... No one could have predicted if someone had said America is gonna pull off this economy or they're gonna figure out a way to have the lowest inflation in the G7. By the way, they're gonna massively increase for all the shit posting and all the far right likes to say, "Drill, baby, drill."

Kara Swisher 1:35 Mm-hmm.

Scott Galloway 1:35 We're producing more energy than ever. We're the largest-

Kara Swisher 1:37 Yeah, yes.

Scott Galloway 1:37 ... energy producer in the world.

Kara Swisher 1:39 We are, indeed. Yeah.

Scott Galloway 1:40 And if you look at, if you look at our competitive a- advantage against China-

Kara Swisher 1:43 Mm-hmm.

Scott Galloway 1:43 ... if China decides to get into a hot war with anyone-

Kara Swisher 1:46 Yeah.

Scott Galloway 1:46 ... uh, and they start su- s- uh, uh, and at any number of choke points their energy supply gets, gets, um-

Kara Swisher 1:53 Yeah.

Scott Galloway 1:53 ... gets shut down-

Kara Swisher 1:54 They're gonna have to invade Russia. They're gonna have to invade Russia first. (laughs)

Scott Galloway 1:55 They would, they would be in such a world of hurt. And we are energy independent. We-

Kara Swisher 1:59 Yeah.

Scott Galloway 2:00 We're e- not only ener- energy independent, we produce more energy than we consume, which is remarkable given what gluttons we are.

Kara Swisher 2:06 Yeah.

Scott Galloway 2:06 So it's, you know, it's just striking that-

Kara Swisher 2:09 Yeah.

Scott Galloway 2:09 ... consumers don't feel better. It's getting-

Kara Swisher 2:11 I-

Scott Galloway 2:11 It's getting better, but-

Kara Swisher 2:12 I- it's ticking up. It's absolutely ticking up. I think people still feel they're paying too much for food or the kind of the daily... But although I went and got gas and I was like, "Oh, this is low." This is like... And I mean-

Scott Galloway 2:23 Yeah.

Kara Swisher 2:23 ... I guess I'm one of those people who doesn't think about it that much compared to people who have really tighter budget. But I was like, "Wow, this is not expensive for the first-

Scott Galloway 2:32 Mm-hmm.

Kara Swisher 2:32 ... time in a while." And I paid attention to like the $4 and $5 gas. Um, employers added 216,000 jobs in December, which is a larger than expected number. We- uh, weekly jobless claims reported were the lowest since September of 2022. Uh, there's a lot of layoffs in a number of sectors, but I think that's people cleaning up, like all this stuff in tech looks like it's around assistant, which AI, they're getting ready for AI and getting rid of stuff they don't need anymore.

Scott Galloway 2:57 Mm-hmm.

Kara Swisher 2:57 Um, so that seems to be, to be clean up, right? Of where things are going or, or getting ready for something else. Um, so if you were... I- if someone... Uh, two things. If, if you were looking to invest right now-

Scott Galloway 3:11 Mm-hmm.

Kara Swisher 3:11 ... what advice would you give them? And then I wanna ask you a quick question about the housing market.

Scott Galloway 3:15 Where would I invest?

Kara Swisher 3:16 Yeah.

Scott Galloway 3:18 Look, my, my feeling is it's dangerous to listen to people like me and talking heads on podcasts, uh, make stock recommendations. And I like it 'cause it's fun. And I tell young people, take a third of your money and put it in stocks 'cause A, you'll learn, you learn about the markets. And also it's kind of fun and you can feel good when it goes up and beat yourself up a little bit when it goes down. But for the most part, what you wanna do, if this market has taught us anything, don't try and pick the needle in the haystack. Pick the whole haystack-

Kara Swisher 3:45 Mm-hmm.

Scott Galloway 3:45 ... and buy the whole market because-

Kara Swisher 3:47 Haystack approach. Go ahead.

Scott Galloway 3:49 It's true. I- i- unless, unless you were a genius and maybe you weren't, you didn't have to be a genius. But people talk about their wins and they don't talk about their losses. Seven stocks were responsible for 70% of the gain last year. And you think you're smart enough to pick the seven of the 500?

Kara Swisher 4:02 Mm-hmm.

Scott Galloway 4:03 So instead, just by the entire 500. And what do you know? What... Were you up in the teens last year? If you do that, if you compound going into your prime earn- income earning years what the market has done since 2008 at 11%, that means every seven pers- every seven years, you're doubling your money. And just from an emotional and mental wellbeing, this is what you wanna do. You wanna focus all of your mental, physical, and emotional energy on your day job. And you wanna turn your investing over to an outstanding professional that is really good at what they do, but at the same time is really inexpensive. And that's called an index and an ETF fund. So if you could get someone... You're not good at building your own home. What if you could find someone to build your home that was outstanding at building homes and was really cheap, that's called an index or an ETF fund. Don't buy a stock, buy the market. And the temptation to believe that you're smarter than everybody and all of these, the financial industrial complex, which will teach you that this old looking guy or these, all these quant people and PhDs have some sort of special insight, or they're, uh, investing in ESG, whatever it might be. Whatever, whatever the branding is, they are ripping you off.

Kara Swisher 5:12 Yeah.

Scott Galloway 5:13 They are ripping you off. So anyways, my re- recommendation on where to invest is just start investing and invest in index or ETF funds.

Kara Swisher 5:20 Yeah.

Scott Galloway 5:21 SPY, S&P.

Kara Swisher 5:21 That's the stock market. Um, the economy, uh, the housing market is still kind of all over the place 'cause of the, the interest rate and, uh, the 30-year interest rate is at 6.6%, uh, higher than before the pandemic obviously. Hou- home prices are higher, but that's because... I'm just talking to a friend of mine who's a very big realtor in DC and she was saying there just isn't stock. People... It's in the middle area. She goes in the top area and the lesser, the, the cheaper area, it's doing okay. Um, but it's... There's no stock to sell. He- she said she didn't think people were as fixated on rates as they were. They don't wanna move because of that, you know, and that, and that's one of the issues is, is not having enough in the market to, to, to move it around. And she was thinking it was going to jump in the spring. She felt like people were just like, "Ugh, I feel... I'm, I'm tired of waiting," kind of thing or to move or to buy. Um, but that's one area that's been sort of a laggard.

Scott Galloway 6:14 Yeah. One of my predictions for my 2024 deck is, uh, that housing is gonna boom, not price.I mean, what happened last year was sort of suspended, that you had to spend the, suspend the natural order, and yet housing prices went up. You never see that because what we unintentionally did was created these unexplosive, you know, unexploded devices inside a home called a mortgage at 2.5% where no one wanted to leave. That w- life is aggregating at the dam. What I mean by that, death, divorce, disability, people having kids, people needing to move for a job, whatever it might be. All of that demand is building, and the moment I think interest rates get kind of below six-ish, uh, the moment that people start dying and more housing stock comes available, the moment that some of the supply that's being constructed comes on the line, I think, I think in Q4 you had the lowest transaction in, like, decades.

Kara Swisher 7:05 Mm-hmm. That's what she was saying, yeah.

Scott Galloway 7:06 And-

Kara Swisher 7:06 She said it's right in the middle. She said it's not at the high, it's not at the low, you know what I mean? Like, the apartments and things like that, but go ahead.

Scott Galloway 7:15 I, I, I think you're gonna see back half of this year just a ton of people, I don't wanna say throw in the towel, but go, "Okay, interest rates are below, uh, you know, maybe I can pick up an a- a mortgage with a five handle on it. We've been talking about moving home. We just had our third kid. Oh, did you hear the house down the street? Mrs. Robinson just died. There's a house-"

Kara Swisher 7:34 Mm-hmm.

Scott Galloway 7:37 I just think that all of that... Life doesn't stop marching on.

Kara Swisher 7:39 Yeah.

Scott Galloway 7:39 And when you think about housing, the biggest component in housing are life events, and those have not stopped the last year. They're just-

Kara Swisher 7:46 Yeah.

Scott Galloway 7:47 ... building up. So I think-

Kara Swisher 7:48 Yeah.

Scott Galloway 7:48 ... I think the finger out of the dike-

Kara Swisher 7:49 Which is why prices are, are h- higher.

Scott Galloway 7:51 Are higher, yeah, but you're seeing wages go up.

Kara Swisher 7:53 Mm-hmm.

Scott Galloway 7:54 Um, you're seeing interest rates come down, and life continues to march on. I think we're gonna see an absolute boom-

Kara Swisher 8:00 Yeah.

Scott Galloway 8:00 ... in sales volume-

Kara Swisher 8:00 Yeah, it'll be interesting-

Scott Galloway 8:01 ... uh, at the end of the year.

Kara Swisher 8:01 ... to see if the economy helps Biden. I think people, uh, it may be-

Scott Galloway 8:04 I hope so.

Kara Swisher 8:04 ... perfect timing for him. I'll tell you that. We'll see. We'll see.