Economist-strategist David Woo says investors are mis-pricing everything: Trump’s soon-to-be revived tariff war, China’s rare-earth dominance, and an AI bubble that’s ripe to burst. Betting on U.S. equities while ignoring these risks, he argues, is the fastest way to get burned.
In this explosive interview, Woo explains why:
- Higher tariffs will crush corporate margins and crush stocks, not simply raise inflation.
- Trump’s aggressive new tariffs are his only weapon against America’s twin deficits.
- Retail traders are driving a bubble built on false assumptions.
- Bonds are undervalued and offer better risk-reward than equities.
- The AI boom is overhyped, with China catching up fast, and Tesla & Nvidia in the crosshairs.
- Crypto donations, not policy, are behind Washington’s sudden Bitcoin embrace, risking the dollar and Treasuries.
Tariff Volatility got you concerned? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/44zABoh
Hard Assets Alliance – The Best Way to Invest in Gold and Silver: https://www.hardassetsalliance.com/?aff=WTH
David Woo 0:02
We cannot escape the employees of tariffs unless you think consumers are going to reduce their savings dramatically, which I think is simply not on their part. And you know, therefore there is nothing out there that I can see, you know, fundamentally that would make me even remotely bullish about the US stock market.
Maggie Lake 0:22
I Hello everyone. Welcome to wealthion. I’m Maggie Lake, and joining me today is David Wu, the CEO of David Wu Unbound, Hey David, thanks so much for being with us. Thanks for having me. So before we jump in, just a reminder to everyone who is listening. If you have any comments or questions, please drop them below. We’d love to hear from you. And if you want to take a fresh look at your asset allocation, you can get a free portfolio review from one of the advisors in the wealthion network. Just go to wealthion.com/free and I think we’re all thinking about looking at our investments and our allocations a lot more closely. David, because there’s so much going on. There’s so much uncertainty. We talk about this all the time, and of course, front and center now is the conflict between Iran and Israel, just adding to everything else that’s on investors plates. What’s your view on the state of play in the Middle East and what it might mean for the markets?
David Woo 1:19
Yeah. So, I mean, anybody you know, like, again, I mean the, you know, I mean the prediction business. So, like, I mean, so, from my point of view, my outlook generally, is forward looking. And those of you want to basically, you know, check out my call on this war between Israel and Iran. You can check out my YouTube channel. In fact, two weeks ago, I should be predicted that this was going to happen before the end of the month. So from that point of view, it’s sort of like, you know, it feels good. In fact, I was very long oil heading to this thing, and I took profit. And so it’s been a very good couple of weeks for
Maggie Lake 1:53
me. So sure it was going to happen. How are you able to make that contrarian call?
David Woo 1:57
The prediction was pretty predicated on my view that Trump has to bury the taco before the taco buries him. Okay. Now, as we know that Trump is a maximalist negotiator, and it worked for him very well in his first term, the second term, it hasn’t worked for him as well, because the problem is that his reputation precedes him. So, like, you know, typically what happens when somebody realizes you’re dealing with a maximalist negotiator, who means, like, you know, who starts high, you know, basically with high demands or low offer and so on so forth. You just basically wait him out. I mean, this is why, sort of, like, the whole taco business was almost inevitable. Now the question, of course, there was no doubt that Trump had to restore his credibility, because he’s got another, almost four more years to go. Like, from that point of view, if he becomes known as the taco he’s done okay. So then you say, Well, you know, you know, how is Trump going to regain his credibility? Okay? Now, with the Chinese, it is very clear that the Chinese got him exactly what they want him, which is the fact that the Chinese decided to play the rare earth card, and that’s it. There was no way Trump can get around that. The fact is that China controls 90% of the processing of rare earth. The fact is that without Chinese rare earth, the US car industry will be shutting down. You know, the US defense contractors will be shutting down. So in the end, Trump went from 145% tariff down to 10% because the Chinese had his, had him exactly where they wanted him, and Trump was only too stupid to fall for it in the first place. So in any event, so there’s no doubt Trump can no longer play the madman card with the Chinese because it doesn’t work on them. And then if he wants to escalate this, you know, he’s going to basically, you know, crash and burn the US economy first. And I think you know now we know he’s not prepared to do that. So with China, you cannot. He’s taco and that’s that now. And then you say, Well, what about with Russia and Ukraine? Now I think this is actually very interesting and important, because Trump is determined that he does not want to get any more involved in the Ukraine war, because this is why he’s reminding us every week that you know what it is. Biden’s war is not his war. He knows that if he were to agree to hit Russia with sanctions, or he would to provide Ukraine with more arms, then it becomes his war. I mean, I think you know, the great historical example, of course, is Richard Nixon. Richard Nixon ran out of ticket okay to basically stop the the war in Vietnam. In the end, he wasn’t able to stop the war in Vietnam. Indeed, actually, more Americans got killed under Nixon that before Nixon came along, okay? Because, you know, problem with Nixon was that he did not want to be known as the American who lost basically Vietnam. So again, this is why Trump doesn’t want to get drawn into the Russian Ukraine war. This is why he doesn’t want to play the madman with Putin, because he. You know he he’s wary of being drawn into the war, and then next to next thing you know becomes his war. And this is why there was only, if you wanted to play the madman, there was only one conflict he could really play that you know well and with credibility, of course, is with Iran. If
Maggie Lake 5:18
you have any questions about how to navigate the current environment. Wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time. Again, that’s wealthion.com/free thanks so much for joining us. So if, do you think that, if this has Do you think that this has restored Trump’s credibility? We said it killed taco, which Trump always chickens out? Has it restored his credibility in a way that will enable him to re engage in the trade negotiations, for example, in a stronger position, or is this a distraction away from some really important economic initiatives such as trade and the budget. I think,
David Woo 6:05
I think the budget, the trade and foreign policy of three different things. I mean, I think, you know, the way I think about trade is very simple, you know, I think, you know, the most important takeaway for me from the g7 meeting that just ended was what didn’t happen. Okay? Now, if there’s, if there’s to be deals, okay, trade deals before July 9, in my humble opinion, you know two countries, okay, provide the real litmus test. Because I would argue there are two countries that represent the lower lying fruit for Trump. If he can close a deal with them, then we’ll make it a lot easier for him to, you know, essentially, close deals with other countries. And the two countries have in mind are India and Japan. Now it’s interesting, because the Indians, I mean, JD Vance is married to an Indian, as you know, they’re all looking up to the Indians. You know, the last basically, few months, the Indians have been sounding their great enthusiasm about doing a deal with Trump, and therefore, given that Modi was invited by the idiot Mark Carney to basically Canada to the g7 you know, there would have been a perfect photo opportunity for Trump and Modi to shake hands on a deal, but there was no such deal. And that, to me, is very interesting. Now you might say, Well, why wasn’t there a deal? I mean, because, especially given both sides have been saying how close they are to a deal, like you’re only three weeks away now from July 9. And what are you waiting for? If? If, especially, this would have been a perfect opportunity for Trump to brag that he got a deal. He backed the deal from India, major BRICS, countries on so forth. I think actually what’s been going on is that if I, if I go through the Indian press, what is very clear is that Modi’s under increase. I think, you know, he’s under a lot of criticism at home, for, you know, essentially voluntary India to be the first country other than the UK to do a deal, in other words, surrender to Trump’s impossible demand. Right? So essentially, they’re saying that, you know what you are selling India down the river, right? Because India is, like one of the most protectionist economies in the world. Like, you know they are. They’re heavily protectionist in the service industry, agriculture industry, manufacturing industry, and so on so forth. So for the Indians to accept all of Trump’s demands, I mean, that would be a big shock for the economy now, I think, until three, four weeks ago, when China, when the US was still had a 145% tariff on us, on Chinese imports, the Indians were thinking, this is going to be amazing, because if, if Trump basically maintains the 145% you know, tariff on Chinese imports, then all the basically direct foreign investments that are currently in China are going to get diverted to India. So they thought that there was a lot of upside for India to become Trump’s basically best friend by embracing his demand. Now, of course, meanwhile, the tariff on China has been lowered from 145% to now only 10% as you know. And so therefore the Indians probably are looking at this whole thing, they said, Well, you know, listen, what’s the upside for us? Like, you know, what, you know, I mean, is this going to be enough to get Apple to basically shift all their production to India? And are we basically going to get something for all the, you know, essentially, the concessions that we’re going to be making. So I think it’s actually very interesting, very, very interesting that India has not yet essentially closed the deal with Trump, another country which I think is fascinating, why they haven’t closed a deal with Trump, of course, is Japan. Now you understand that Prime Minister ishiba is, you know, essentially governing a minority government, and the guy, basically, he he’s facing an upper house election in three weeks time, and he’s currently running behind the opposition, which is very anti American. Now, ishiba and his people have been saying for the last month that they would like to get a deal with Trump ahead of the g7 so that yeshiva and Trump can shake on it at the g7 you know, not only just for the for the opportunity, but also for Sheba to be. Able to present to the Japanese public just before the election that he got a deal with Trump, and that, you know, we can move on from there. So, so ishiba was very motivated getting a deal with the US. And you can see to some extent, the fact that Trump actually, last Friday, signed off on the deal between us, deal and Nippon deal was an indication that perhaps Trump was eager to get a deal as well. But the fact is that the two, even though they met for half an hour again at the g7 they couldn’t close the deal. And then, you know, ishiba basically said that, you know, yesterday, that there are significant differences. Now let me just tell you this Japan has probably the least, you know, amount of leverage vis a vis the US of all these countries. So if they cannot, if Trump cannot, get a deal out of Japan, it just means that Trump is actually not that serious about wanting to get a deal. So I’m just telling you the fact that Japan hasn’t got a deal from Trump just means that it’s very unlikely the South Koreans are going to agree to do a deal. Okay? Because the South Koreans tend to essentially do everything. They tend to follow Japan’s lead. If Japan and South Korea haven’t done a deal with Trump, then guess what? It’s very unlikely that Taiwan is going to do a deal with Trump. If Taiwan, Korea and Japan haven’t done a deal, you know what? I would be very skeptical that Trump’s going to land a deal with Vietnam, and if there’s no deal with Asia, forget it. There’s no way the European Union is going to agree to do a deal with Trump. And of course, Carney the idiot definitely does not going to do a deal with Trump. So basically, you got a situation where, I think the situation is is such. I do think that Trump has to kill the taco there as well, because he because, you know, definitely with China, like, that’s it. Trump hasn’t got any card. The Chinese play the rare earth card, and that was a killer card. You know, maybe the Chinese will regret it one day, because this is a, this is a card you can really play once. But for the time being, there’s no way for the US to get around that. Because, you know, I mean, it will take at least two or three years before the US can even begin to basically break into the earnest, basically manufacturing. So from that point of view, this is a stalemate right now. The China has wound has won this round. There’s no doubt about that. So therefore Trump, you know, if he wants to be taken seriously, he has to basically play crazy with the others. And I think that, from that point of view, you know, I do think between now and July 9, Trump will probably also play the crazy. I mean, you know, I think at a certain point, I think it’s going to happen before July 4, okay. And clearly it’s also related to what’s happening with respect to the budget that’s going through Washington, but my expectation there is that on the fiscal front is going quite well. I think, you know, sure, there are disagreements between the House and the Senate, but in general, the fiscal hawks are in the driver’s seat. I think there’s not going to be a big problem. And in any event, they have a bit of a time, because the debt ceiling is probably not going to be combining until the middle of August, According to my calculation. So from that point of view, Trump, it’s got another two more months before he has to panic over the fiscal stock, which gives him a bit of a window between now and July 9 to throw some toys out of his brand and scare the market.
Maggie Lake 13:13
So that’s okay, so that’s short term, a lot of headline risk. If it sounds like he’s on his back foot. The administration’s on their back foot with the tariffs. What is the economic and market impact of that? I mean, are we going to see if we have no trade deals and we see higher tariffs, does he? Does he ratchet them back up, even if they’re at 10% do we start start to see that bite the economy?
David Woo 13:38
Yeah, I wouldn’t. I wouldn’t characterize this as from being on the back foot with respect to trade. Trump actually thinks that this has been the best thing has ever done, actually. I mean, you can think about this like over Ukraine and Russia, you know, it’s been a failure for this presidency so far. Vis a vis China, it’s been a failure so far. And so from that point of view, like this tariff thing, you know, is bringing in $1.3 billion of terror revenue every single day. I mean, that’s a billion dollars more than what the US was collecting before the trade war started. So that’s an annualized rate of $365 billion Maggie. I mean, I don’t think some things that that is actually means that he’s on a back
Maggie Lake 14:18
foot. Who’s paying that? Though, is that going to be paid by American consumers?
David Woo 14:22
No, we can talk about that in a second. I agree with you, but that’s what we’re going to come to. But the point here is that, for the time being, I mean the economy, I mean the first quarter, you know, the economy contracted the second quarter, naturally because of what’s going on, you’re going to get a bit of rebound and so on and so forth. So right now, we’re still sort of in this kind of, you know, sweet zone, if you like, okay, it looked like, oh, tariff hasn’t been such a bad thing for growth. And then we haven’t seen that in inflation numbers. So at this particular moment in time, Trump does not view tariff as being a bad thing. He’s probably like, thinking, this is like, the best thing that happened. No, you’re right in the. Then, you know, what really matters is what happens in three months time? Because so far, you know, like, you know, we haven’t seen much pass through. But it doesn’t mean it won’t. But I think what is very clear to me is this, you know, the stock market, you know, has massively outperformed the bond market over the last couple of months, right? And why is that? I mean, it’s very simple, because the market largely believes that tariff is going to have a bigger impact on inflation than it’s going to have on growth. And the market views, you know, stocks as providing a better inflation hedge than bonds, that that’s really been the big story in terms of, like, you know, things thematically, that’s what the market really believes, which is that you know what, you know, tariffs are going to have a bigger impact on inflation than on growth. Therefore, I want to be in stocks and not in bonds. Now to me, knowing we’re not, markets are making one big assumption here, which is the assumption because the only way for tariff to have a big impact on inflation and not such impact. Negative impact on growth is if businesses are able to pass on their high cost onto the consumers, right? Let’s think about that. That’s the only way you’re going to get inflation without too much negative impact on growth that you know, businesses can just simply pass on the higher costs onto the consumers. But for that to happen, the most important implicit assumption here is that American consumers are willing to save less in order to maintain their real purchasing power. Okay, so that they’ll buy the same amount of stuff by higher prices. So corporate profit will be good, but they’ll be saving less. Now I have a major issue with that. I have a major issue with the assumption that American consumers are going to significantly lower their saving rates to build out Trump, actually, to build out the stock market for that matter, okay? Because all I know is that the last couple of months, we’ve seen actually, you know, personal saving rate going up. And honestly, I don’t really care what the consumer confidence numbers are, because consumer confidence numbers have not matter a jot over the last five years in terms of, you know, driving consumption, or whatever consumer confidence number, honestly, between me, I mean, it’s just basically, these days, just a lagging indicator of the stock market. It’s not a leading indicator of the economy, with the consumers, for that matter. Now what I know is that consumers actually, ironically, even before tariffs even become an issue, they’ve already been actually raising their savings. Now what is interesting to me is this there is something else that leads me to be quite skeptical about the stock market assumption that consumers are going to actually save less, which is the fact that you know over the last three months, I think the most important data point, okay, is the fact that we’ve seen a massive spike in student delinquency. Okay? Now, over 8 million Americans are now, either in a rare will actually have defaulted on their student debt. Now, this did not happen overnight, obviously, because this happened, essentially the, you know, after 2000 the 2023 you know, ruling by the Supreme Court that essentially be, you know, as you know, that has reversed the you know, the you know, the student debt forgiveness that was, that was decided under, basically, Biden. But what is interesting is that, you know, so from September 2023 to September 2024 there was a grace period so students have some time to basically, like, you know, meet their payments and then their repayment history performance has now become publicly available until two months ago. Okay, in other words, until two months ago, credit card companies, lenders had no idea whether somebody’s actually paying or not paying the student debt. Now, I think what’s happened now that this data has become publicly available, I think that is actually driving down the credit scores. We’ve seen, actually the last we don’t have a very good history of time series history of like FICO score, but definitely the last reading we had was quite a bit lower than, you know, three months earlier or compared to a year ago. So I’m thinking that maybe, you know, those who have fallen behind on their student debt repayment, are now going to struggle to actually borrow more on their credit cards or take out auto loans and whatnot, and that’s going to constrain their credit access, and that’s going to actually limit their ability to reduce their savings. So all in all, what I’m saying to you is that, you know, obviously this is all moving very slowly, but my big focus in terms of US data reading has been sort of the weekly the, you know, consumer borrowing data that’s released as part of the Federal Reserve’s weekly data dump on commercial bank balance sheet. And that is clearly suggesting a deceleration of. A borrowing and that, I think, is a very, very important thing, because if that continues, that would suggest that business will not be able to pass on the higher cost onto the consumers, which means businesses will have to take it on their own margin. And that obviously would be a problem for the earning estimates. I mean, to me, it’s just hilarious and ridiculous. That Wall Street EPS estimates for s, p5, 100 this year is still up 6% I mean, where did they come up with these numbers? These idiot basically, analysts. But you know, how is it possible the economy is going to grow, like, one and a half percent, and then earnings growth is going to be a 6% I mean, just tells you it is, I mean, but again, you know, there are a lot of you know, right now the equity rally has been driven by, I’m sorry to say, dumb money. I mean, a lot of retail investors are piling in thinking that, wow, everything’s going to be great. I mean, the honest truth that we haven’t seen this kind of massive retail influences the meme mania back in 2022 I personally think it’s going to end very badly. Yeah, very badly
Maggie Lake 21:04
anyway. That’s always really rough to hear. So if people are sitting on a lot of exposure to equities, you think that’s very risky as we head into the fall, because the this idea that the negative fallout from tariffs will be inflationary and hit bonds, it’s much more likely that it’s going to be a price driven consumer reduced consumer activity, and businesses having to eat the tariffs. It’s going to hit earnings balance sheets, not not the bonds, and that stocks will pay the price for the tariffs.
David Woo 21:37
That’s why I like bonds over stocks. I mean, bonds are very cheap right now, and stocks are very expensive, right? I mean, for a reason I just explained to you, which is that the assumption the market is that, you know what, we’re going to see a lot of inflation, but very little impact on growth in operating margin. And I think it’s actually the opposite. And I think you know so in that respect, I think while you better look at the bond market, the bond market is pricing like less than two fed cuts this year, two cuts next year, and then already 2027 2028 the market is pricing impacts, I mean, which is completely like wild and crazy, in my humble opinion. So from that point of view, I think bonds are very cheap. Where stocks? I mean, stocks are trading at valuation, they’re the most stretch in since the.com crisis, okay? I mean, the.com bubble. So I think from that point of view, like, I’m just saying, like, you know, listen, I mean, there’s short term. I mean, I’m, I mean, my, you know, I mean I, I advise, you know, the biggest macro investors in the world today. I mean, like, you know, total combined assets under management of my clients is over $4 trillion right? I mean, so I my guys, like, whether big hedge funds, big, whatever, they’re very short term, and I gotta basically, like, you know, and that’s what I bring, what that’s the value I bring to them is trying to be able to think long term and trade short term. But what I am telling them right now, and this is what I’ve been doing with my own money as well. I haven’t been trying to short the stock market, because, like, when you have this kind of momentum driven retail frenzy to stock market, I don’t want to stand in front of a truck and get run over, but I am long, you know, five year notes, which I think are the most attractive part of the curve. And in a way, it does allow me to basically benefit, you know, if the stock market does eventually have a correction, I’m going to make a lot going to make a lot of money either way. Except I feel like, because bonds are really cheap right now, it is better for me to be long bonds than to go short stocks, especially up against the momentum
Maggie Lake 23:33
I can get. You wouldn’t be it sounds like you would not be sitting at for people who may need their money in five years. You would not be sitting on a big equity, and bid on big equity exposure. You’re not shorting them, but you’re not long them.
David Woo 23:44
Yeah. I mean, exactly. I think everything in terms of, like, you know, my benchmark, whatever your benchmark may be, like, you know, like, I think, you know, for all, every investor in the world, including retail investors, you got to basically think about returns in terms of, like, what’s your benchmark you’re using? Are you outperform your benchmark, you’re underperforming. So like most hedge funds, for example, I mean, their benchmark is three month treasury bills, so their job is trying to beat, you know, three month treasury bills, and then on a risk adjusted basis, that’s reasonably attractive, right? If you are, like managing a US equity mutual funds, your benchmarks, s, p5 100, your job is simply just outperform s and p5 100. If you can do, if S p5 100 goes up, you want to be able to outperform, you know, more. And if it goes down, you might still go down. But if you could lose less money, then you know your benchmark that that’s something the same thing with, like, I think retail investors, like, you know, if you are a retail investor and you got, let’s say, a 4060, kind of, basically benchmark, which is, like, you think that you want to have 60% of your percent of your your money in stocks and 40% in bonds. I mean, that’s your benchmark. So what I would be arguing right now is that you want to think about like being overweight bonds and underweight stocks right now. I mean, but, but again, it really depends on your time frame. You know, right?
Maggie Lake 24:57
That’s why I’m saying, if you need the money, this is why time frame. Is always so important in these conversations, right?
David Woo 25:02
Exactly, if you’re talking, if you’re asking me, oh, well, this is what I should do, like, the next week or two. I don’t, I don’t know. I mean, I, I, you know. I think, you know. Again, I don’t think, I think, what I think is going to happen is that the next for for the market, for the stock market, to drop. Okay, we need Trump to play Crazy. And I think there’s a pretty good chance he’s going to play Crazy ahead of July 9, okay? Because if he doesn’t get his way on these tariffs, he’s going to look really, very bad. And then, therefore, you know, like, I’m not saying after all, we know what happened the last time around in April when, like, after liberation day went down to 4000 and Trump probably was, like panicking, and so on, so forth. And that’s how you acquire the taco thing. I think, you know, can he mentally, you know, essentially, the afford for this thing to go down to, you know, I don’t know, 4000 s, p, I don’t know. But I think 5000 I can imagine, you know, finally, for me, small price to pay for him to regain some credibility. So, yeah,
Maggie Lake 26:09
but Will, Will throwing his, you know, sort of getting crazy, however we want to describe it, will getting tough, taking a firm stance, sort of saying, will that, will that restore credibility and work in trade negotiations like the sort of cats out of the bag already, right? If China took a stand and everyone’s showing that they can chug along this way, you know, what would that look like? I guess it’s going back to those really high tariffs, reimposing those really high tariffs, and taking the pause off. That’s what you mean by go crazy,
David Woo 26:39
right? Yeah, it would be like, you know, like you wake up one morning. Let’s just say, I don’t know, on July 1, you know, you wake up in the morning, and Trump just basically says, You know what, nobody’s come to me with a good enough deal, and in interests of Maga, Make America Great Again, I’ve decided that these are the tariffs I’m going to apply, you know, essentially the, you know, on this country, on this country, on that country. This country is going to get 25%
Maggie Lake 27:03
this is going to be 30 back with the cardboard, you know? And then
David Woo 27:07
what are you going to have the next day? Is all these countries are going to basically retaliate, right? But Trump is going to say that we’re in a stronger position, right? Because the US runs a trade deficit, so
Maggie Lake 27:18
just like and we’re going to see stocks fall again like that. You’re gonna it’s kind of a repeat of the of what we saw on Liberation Day,
David Woo 27:25
I think so I think that’s what I think, that’s what I think is gonna happen. Okay? That’s what I think is gonna happen now, especially given the fact that, again, you know, Trump has no cards to play against China right now. He doesn’t want to get tough with Russian, right? And, and I think he feels like also, I think, and I think, you know, I think the fiscal thing is a major consideration. Because I think one thing Trump has learned the last four or five months, because, I think, in a way, that this whole taco thing, he, obviously, you know, is disgusted by the fact that you know people you know think of him as a taco right now. So from that point of view, like, you know, I think you know me, one thing, one one thing. I think, you know, one nice thing I want to say about Trump is that he is capable of learning from his mistakes, right? He’s, listen, I’m a professor of economics here in Israel. I teach game theory. I mean, game theory is a very big part of the way I think about the world, in terms of how people react, people react, people like Trump, right, for example. And Trump is a smart guy. I think, you know, Trump, I think, has realized that he was firing, he was getting himself entangled in too many those kind of showdowns. You know, when you are playing too many sort of all for nothing, kind of thing, you know, you’re at risk of essentially losing of them all, because you just haven’t got the leverage to stay in this kind of confrontational mode across all the conflicts you are involved in. So I think Trump now knows he has to basically pick his bike. And I think the fact I’m Hope, I’m thinking that he’s thinking, wow, listen, I’ve got to, you know, the house has already passed the reconciliation bill. The Senate looks like, you know, maybe you’ve got a couple people you still have to talk to and trying to get them on board, but it looks like the Senate’s got a decent plan. So now just up to basically John Thune and Mike Johnson to work things out. And then he’s got another two more months for that to actually to bag it. Okay, so, and then he’s thinking like, well, you know, this means that so he might, and then he’s got the upper hand in his essentially, the whatever you know, essentially, I think, with, obviously, with, with Gavin Newsom, right? I mean, because, I mean, it’s very clear in the opinion, most Americans are behind Trump. So I would say Trump is winning on that front as well. And then, so far, the Supreme Court has been quite sympathetic about quite a few things that were that, were that, were that, were that were being, you know, say should be, I mean, disputed. But so therefore, I think Trump might feel that this is a moment he’s got pretty strong hand versus the rest of the world on this tariff. I think this is why all things put together, he might decide. Guy to basically throw his weight around for a bit. And so
Maggie Lake 30:03
interesting, David, because it’s, you know, that famous line in the, you know, in a past political campaign, it’s the economy stupid, that all works until the tariffs start to bite. And are you suggesting that as long as it’s businesses and earnings and shareholders people on stocks that take the pain, it’ll be okay. As long as the average consumer doesn’t carry the cost of the tariff, then it’s a win for Trump. Am I reading that right from you in what you’re saying
David Woo 30:37
as you and I know like Trump from has never been popular, you know, essentially among, you know, in corporate America. I mean, I mean, for God’s sake, Trump started, I mean, listen, let’s be honest here, yeah, from was, I mean, his father was in the business of building low house, causing low cost housing for low income households, right, believe me. You know, in the 70s, when he was getting going, like, you know, people who come from waspy backgrounds, they don’t go into real estate development. They didn’t go into, like, certainly build low cost housing, believe me. Donald Trump was never invited to the best parties in the Hamptons and the Park Avenue, believe me, okay. And that helped shape his attitude towards Wall Street, corporate America. He hosts them in contempt, and they all since they more or less held him in contempt for most of his so there’s no love lost there. I mean, it’s not like Trump is thinking, Oh, well, how am I going to basically make apple rich? How am I going to basically make Listen, Trump doesn’t give a shit about these people. He cares about the little Americans, right? I mean, his interest is that now, what in the last 30 years, or I know, is that if you look at GDP, right, the GDP as GDI, which is the gross domestic income, if you look at the share of gross domestic income going to labor, it’s been going down, going to us, companies, been going up. And Trump has a major grip with that. I mean, you know, and a
Maggie Lake 32:01
lot of people would agree with a lot of people are sympathetic and would agree with that. The I think, where the concern comes in is, if the tariffs push the US into a recession, there’ll be job losses, and there’s no escaping that. It’s hard. You can’t just carve out the pain or isolate laser target the pain on corporations and apple and everything else chugs along all right, at least in sequencing, there’s an issue with that, because you can’t reshore, rebuild manufacturing and do any of those things to kind of pick up the slack in time, because the tariff hit is immediate, and the rest of those plans are Like a 10 year plan that may or may not ever happen. You’re
David Woo 32:44
absolutely right. But I think Trump also sees this somewhat differently, which is he thinks about the counterfactual, right? So what does that mean, right? Just think about this. Trump has inherited. I mean, you know, if you I mean, I’ve been seeing this for a while, you know Trump inherited from Obama, sort of a lot of low lying fruit, because under Obama, Obama was forced by the if you recall, Obama was two years into his presidency. He lost the midterm election the Freedom Caucus, essentially the play brinksmanship with him and then us all six years of fiscal tightening, okay, okay, under Obama’s, you know, basically two terms. So by the time Trump came along, the US actually, was sitting on a pretty healthy budget deficit. No thanks to basically Obama. It was He was forced into that position. Okay? Now, so therefore Trump was able to, you know, like, engage in fiscal easing, cutting taxes on so forth from a relatively strong fiscal position. Now, however, four years later, you look at the economy that Trump has inherited from Biden. Biden has left him with an empty fridge with some rotten fruit in it, right? I mean, you’re talking about a US budget deficit, 7% of GDP, record high outside of us, recession. US, current account deficit, 4% of GDP, which is like the highest since the the the pandemic. So from Trump’s standpoint, is like, in fact, actually, if you look at the twin deficit together, is the greatest twin deficits the US seen since the mid 1980s Mm, hmm, okay, and the since the middle of, you know, basically Ronald Reagan’s presidency. And what Ron Of course, the result of the massively unsustainable twin deficits in the mid 1980s was, of course, the Plaza Accord, right? Essentially the plaza court for you know, those reviewers don’t know what it is, essentially the you US, France, Germany, UK and Japan, basically all agree to coordinate a competitive devaluation. I mean, basically devaluation of the US dollar. Now you could argue, and because at the time, all these countries thought that, you know, the US budget deficit was out of control. Current account deficit was out of control. They were really very nervous that this thing was going to become a major destabilizing, you know, essentially, crisis. For the whole entire economy. That’s why they agree to that. I would argue this time around, okay, I would argue Trump’s trade war is the response to this massively, unsustained, unsustainable twin deficits Trump because, in a way, they couldn’t do applause of the court, by the way, even if they wanted to, because there’s no way Trump is going to be able to get all these countries, including China, to agree to allow the dollar to go down. That’s just never going to happen. Too many countries, like back then, four countries already, like, you know, was practically 80% of the world. This time, it’s like, well, the world was generally much more decentralized, so there was not going to happen. So in a way, I would argue that Trump had no other choice but to go down this path, you know, in terms of the tariff war. Because, in a way, whether it’s tariff or devaluation $1 they have they what they achieve is basically a change in the relative price between goods produced in the US versus goods produced outside, right? So there’s no doubt that dollar depreciation help essentially reduce US imports, boost the US export so the US current account deficit started to turn around and improve. And I have no doubt tariff is going to have the same effect, except tariff has one additional benefit, which is that tariff also provides you with some revenue. And right now, when the deficit is running at $2 trillion you need every paint you can get. Okay? And I think that’s what it is, because, like, so I think Trump, I and I’ve been saying this for a long time, like, you know, and then I’m sorry about that. Okay, so
Maggie Lake 36:39
was that Trump calling on the phone to add some insight to this.
David Woo 36:43
Well, you know, we’re not going to go there right now, but the point here is that it doesn’t matter. But what I’m saying to you is that I think Trump, you know, whatever you might say about Trump, I think Trump understands just how precarious the twin deficits have placed the US economy. And from that point of view, you could argue that the tariff war is resorting to, you know, basically the last resort. And that, you know, and then, if he didn’t do this, maybe we’ve had, we would have a worse outcome. Who knows. But again, at this point, is not like whether he should do trade war, no trade war, but rather, if he didn’t do this, what would happen? Would it be better off? And so on so forth. It’s not that clear to me, and
Maggie Lake 37:30
that’s so interesting. I think it sounds like if that, if that’s the option, if that’s what he has to do, in lieu of a Plaza Accord this time around, there are going to be tire, higher, higher tariffs. Rather, it’s just a matter of how high. And the casualty of that, if it goes the way Trump, like the best case scenario, is the casualty is the stock market, is earnings, earnings, profits for for companies. So we should expect that to be the case,
David Woo 38:01
I think so. I think you know, because, in a way, you cannot square the circle otherwise. So you know, like, if the tariff is inevitable because of the twin deficits and a tariff, can we cannot escape the implication of tariff unless you think consumers are going to reduce their savings dramatically, which I think is simply not on their cards. And you know, therefore there is nothing out there that I can see. You know, fundamentally that would make me even remotely bullish about the US stock market. That’s why the stock market right now is not at the rally. There’s nothing fundamental about this rally right now. Is all about, oh, everybody thinks, oh, well, you know, tariff means high inflation, and then stocks going to provide better hedge, because Microsoft has more pricing power than whatever it is. Let’s go buy some more Microsoft or Nvidia and so on so forth. So I think, you know, the you know, again, that’s why, also, because the equity rally has become more and more narrow,
Maggie Lake 38:57
you know. Let me ask you this so people will say, Okay, I agree with that, but I also think that they’re not they’re not disciplined enough on the fiscal side. They’re still talking about increasing the deficit. They still can’t resist the political urge to give voters what they want, especially if we get closer to midterms. So not only are stocks not a good investment, neither are US bonds anymore. And it what you what you really need to do is put your money somewhere else in the world, world. It’s the rest of the world. So you could have a scenario where you have US stocks down, US Treasuries down, and US dollar down, all at the same time.
David Woo 39:35
Yeah, to be honest. I mean, I think you know, like you know, again, I you know, I’ve been quite disappointed by Trump’s foreign policy. I think he’s made a lot of mistakes, but I think on fiscal he’s done no wrong so far. And I know I’m completely outside consensus on this, but doesn’t really matter, because then again, not many people really understand us fiscal policy. Because you know what, it’s easy to understand monetary policy. You. You know, honestly, because, I mean, listen, I’ve got a PhD in Economics from Columbia University. I worked at the International Monetary Fund. I was the top rank rate strategist for many years on Wall Street. Let me tell you this, like monetary policy, relatively speaking, is very easy, because central banks only have one goddamn instrument. It’s called interest rates. And then, you know, they’ve got two variables they look at, which is unemployment, rate, inflation. So, like you know, you take three courses in economics, you can become a race trader. In fact, most race trader on Wall Street probably don’t, haven’t taken more than three courses in economics, but fiscal policy is far more complicated, because to understand fiscal policy, you have to understand politics. And most economists don’t understand politics. They have no understanding about politics. And people think of politics. They think of politics, they think about Donald Trump, but that’s bullshit, because the Constitution did not invest the power of the nurse in the presidency. It’s actually with Congress. So you have to then get into the weeds about the different factions within Congress. I might one of my big predictions. You know, after the election last year, and I predicted I was on Bloomberg back in October, saying there’s 85% chance Trump was going to get reelected with a win with a landslide. And I was right about that. But in December, I said that the biggest winner of the 2024 US election was not Donald J Trump, but rather it was the Freedom Caucus. The Freedom Caucus. What I mean by the Freedom Caucus are the 35 congressmen and women Republicans who run for office for only one reason, because they think that, you know, they’re go to Washington to stop the debt clock. They think of the, you know, debt and deficits being the most evil thing, okay, and the fact that there are 35 of them at a time that Republican Party only has a five seat majority in the House, means that the fiscal conservatives are finally in the driver’s seat for us. And if you look at the reconciliation bill that was passed by the House, I actually think it was actually not a bad bill at all, you know. I mean, people tell me, Oh, well, you’re listening, you know. Like, you know, you know, you know. It’s actually very interesting, because, I mean, this is why the market’s stupid, you know, this is why there’s money to be made. Because if everybody’s stupid, you can trying to, you know, trying to do this. But the point here is this, did anybody really, did anybody really think that Trump was not going to extend the 2017 tax cut? No way, because 99% of Americans do not realize that those tax cuts they got in 2017 are temporary tax cuts. So if you don’t extend them when they expired in the end of this year, you’re talking about a massive month of all recession, okay, in 2026 so that was never an option. Now, everybody also knew for years now that to extend those tax cuts will cost about $4 trillion okay, so that’s no surprise either. What was a surprise, however, was the fact that the reconciliation bill passed by the House only cost two and a half trillion dollars. Now not $4 trillion so clearly, they decided to cut one and a half trillion dollars from somewhere else to basically get this thing done. Get this thing going. Now, of course, as you probably know, of this, $1.5 trillion big cut over something else, over the next 10 years to get this to extend the tax cuts. $800 billion are related to custom Medicaid. Now, why is this important? Because you said, well, custom Medicaid, what does that mean? You may not like it, but it doesn’t mean that they’re not cutting. I mean, if you’re a bond guy, you don’t really care if they’re screwing over the poor people to make rich people whole. Whatever it is, I don’t really care. I just want to know, are they cutting or they’re not cutting, right? What is interesting? I’ll tell you what’s interesting important about the whole Medicaid story, which is the whole entire Wall Street is missed out on. First of all, at the start of the negotiation, Mike Johnson was proposing, you know, to basically cut the Medicaid starting in 2030 now, that obviously was not a serious offer. That was ridiculous. I felt like, wow, that’s obviously, like a just a gimmick, because, like, 2030 will be after the next general election, like there’s no way you could hold anybody you know, you can now basically make sure that that is actually going to happen. So after intense negotiation, and this is where the freaking caucus came in, they managed to get the president, the Speaker of the House to agree to essentially bring forward the implement, implementation of the, you know, of the Medicaid cuts to December 2026 just after the midterm elections. Now, why is that such an important thing? Because what it says to me is that regardless whether the Democrats are going to, you know, win one house worth two houses in the midterm Guess what? These cuts to Medicaid will become irreversible. In other words, unless they have a two thirds majority in the Senate, the Democrats, they won’t be able to actually overrule the Presidential veto Trump is going. President within four more years. So this is the reason why this was such an important, basically, concession made by Trump, and Trump was calling himself, you know, the biggest fiscal Hawk in Washington. I think there’s probably some truth to that. And this is also the reason why, except for one person, almost all the Freedom Caucus guys voted for because they couldn’t even believe that Trump agreed to it, because only three weeks earlier, Trump said he wouldn’t even touch mandatory spending. If you remember, not only he, he he agreed to cut Medicaid. He agreed to further basic kicking already in December, 2026 I mean, that is something, because the no US president, in fact, no US government has gone after mandatory spending in 40 years. If that doesn’t impress the bond market, I don’t know what should, because that is extremely impressive for me. Okay, and then we can talk about a lot of other stuff, but what I’m saying to you is that people just assume, Oh, well, Trump is, I mean, he just wants to spend money and that kind of thing, and the deficit is going to blow up. Just simply, I mean, listen again, it just, it’s not reflect you. I mean, a lot of people like, whether it’s Wall Street Journal, like all these journalists, they don’t know shit and that kind of thing. They the fact that they don’t like the fact that these cuts are going to be hurting poor people has no bearing on whether the US deficit sustainable or not, whether Trump is trying to count or not, is on so forth. The fact is, now what’s even more shocking to me, tells you, tells it says a lot about where Trump stands, physically speaking, is the fact that the 2026 budget he just presented to Congress, okay, that was already submitted, like whatever, six weeks ago, he’s actually keeping defense spending Flint, which is remarkable because he immediately came under fire from the defense hogs, you know, the chairman of the, you know, the Defense Committee, and kind of saying that he’s, he’s going soft on Russia. He’s going south on China, that he doesn’t want to spend more on defense. I mean, that just gets to the heart of the matter, Trump wants to, in fact, cut discretionary spending by 160 $5 billion next year. In fact, if this budget gets through and again, this is coming from his administration, and Congress will pass it, this will lower the US non defense discretionary spending to just two and a half percent of GDP, which is the lowest in 40 years. Yeah. I mean, that is not enough for the bond market. I don’t know what is, honestly.
Maggie Lake 47:22
So let me ask you two let me ask you two more questions. And this is outside anything we’ve been talking about, Bitcoin, crypto, much friendlier environment in the White House. Do you view that as a as a positive? Do you think it keeps wind under these markets and opens up financial innovation. Or do you think it’s a bit of a storm in a teacup? And
David Woo 47:46
I think, you know, honestly, I mean, one of the, one of the things I’m most disappointed with Trump and the presidency so far is, I think this whole Bitcoin thing, among other things. I think this administration is very corrupt. I think it’s about promoting the interests of the Trump family. Okay, I think that, and I find it disgusting, honestly, now I can understand maybe Trump, you know, Trump’s fan. I mean, I think Trump’s first presidency cost him money. You know, I think you know, money the Democrats almost bankrupted him. Okay? So maybe he decided to basically, like, you know, grab some money now, I mean, just so that, you know, like, you know, all the he’s gonna make America great, and then, you know, he wants to basically get paid, okay, back, at least the basic, you know. But I think this whole Bitcoin thing just smells really bad. It just smells really bad. This is about the fact that he got all this donations from the crypto companies. You know, I think Biden hated basic I mean, not Biden. Biden was an idiot, so he doesn’t understand a thing. But Janet Yellen hated, okay, so it should be Bitcoin and crypto, and for good reasons. That’s why the SEC chair basically hated Bitcoin and so on, so forth, and then so this is why all the Bitcoin companies essentially pour money into the Trump campaign, and now he’s beholden to them. He wants to issue his own coin, his own families. I just think that the whole thing just smells terrible. It says so much about American corruption. Because America is one of the most corrupt countries in the world, in my opinion, because Americans get away with it, because it’s legal. This is the kind of stuff that’s legal in the country that is not in other countries. Okay, yeah. And I just, you know, so I don’t want to talk about Bitcoin, because I just think that it’s that that’s what it is people are trading on the assumption that Trump wants to get rich on this, and he’s going to, basically, you know, whatever. But it comes up a lot. You need. This is the last thing America needs right now, because we’ve got a twin deficit. We need people to buy treasuries and not Bitcoin. We need people to buy dollar and not some alternative currencies. Okay, so if you really believe that the country’s got a fiscal crisis, $1 crisis. You know, the last thing you want to do is to basically blow, basically blow smoke up this bubble, you know, and it just terrible.
Maggie Lake 50:08
So let’s end with that’s a really interesting take on that you know about, especially related to bonds as an investment choice. So let’s end this really fascinating discussion with, if you kind of peer into the future, what do you think is something that is underappreciated from the market, either a risk or an opportunity that you think should be more front and center, and is not,
David Woo 50:37
I think the whole AI thing, I think the whole AI thing is completely, like, I think people have completely lost it. Listen, you know, like, you know, I think it’s, it’s incredible to me that, you know, that the tech stocks I’ve traded all the way back above the sort of the pre, you know, essentially deep sea level. And that, to me, is troubling, because, to me, you know, deep seek, deep seat, to me, was no proof of China’s technological prowess, but it was proof that AI can be easily copied. Anything that could be easily copied is worth nothing, okay, the US, you know, equity market is trading on the back of these seven companies, okay, that are essentially monopolies in their you know, not Tesla anymore, and maybe certainly not Tesla anymore, but these companies. So the assumption that these companies just think about this, right? I mean, like, you know, Warren Buffett’s famous moat, right? I mean, these companies managed to, you know, essentially become the biggest and the fat is in with the biggest profit margin because, you know, they have this monopoly, which means that they have money deep pockets. They can go out and buy out in competition and what and what. And deep seek just broke that business model, like overnight, right? I mean, deep sea can now compete. I mean, just, not just deep seas Alibaba. There’s a whole bunch of Chinese, you know, large language models that are just as good as deep sea. There are now among the top 10 best models. There’s not like one model that’s going to make it. There’s not going to be like a, you know, winner takes all the kind of thing, which means that there’s going to be a lot of intense competition, which means profit margin is going to be low. And the fact that the Chinese can achieve this even without access to the best Nvidia chips that cost $50,000 a piece, that also calls into question whether Nvidia is basically earning valuation makes any sense at all. So my view is that right now is that while people buying, you know, Tesla on the assumption that they’re going to be big in, you know, in trouble in Robo taxis or in robots. I mean, let’s be, let’s face it, I mean, Waymo. Waymo, you know, you know, actually, you know, Waymo has been doing essentially, robotaxis for the last 10 years. They’re not going to be basically introducing in New York now and then very few, there have been very few accidents, and Waymo doesn’t even make money. So in Tesla says. Elon Musk says, well, he’s going to do Robo taxi. He’s like, 10 years later, he wants to do Robo tax. He thinks that he can do it much better, and he doesn’t have to. He said, Well, Waymo is covered by all these sensors and cameras. His cars only need cameras because he’s got the best AI models. I mean, come on, let’s be realistic here. I don’t think anybody can post that they have the best AI model, because that changes every single week, practically. So I think and then and then Google is very good in AI too. So I’m just saying to you, if I look at the whole if you’re telling me that the mark is valuing Tesla as a robot taxi company, I don’t see the future of this company. I see there’s a lot of competition, including Chinese company, which is, I mean, there are five Chinese companies right now. They’re doing, basically, they’ve already launched their own robotaxis that are like driving around China and so on so forth. Are ahead of basically, Tesla and talking about robots. I mean, come on, robots like, you know, look at the Japanese look at the Chinese robots. They’re like first class robots. So I don’t quite see I’m, I’m genuinely, I’ve been, I’ve been genuinely. I voted for Trump partly because, you know, I thought like, well, be great if i i get Trump, and I get Elon Musk too. And Elon Musk has been a big disappointment from the point of view that he’s delivered nothing on Doge. I mean, he over, promise, under deliver. I mean, it’s crazy. I mean, how can you talk that big and deliver nothing? So now I’m starting to become very skeptical about what he’s going to deliver on, you know, Robo taxis on robots. Because if I look at the competition, the competitive landscape, I mean, Tesla really doesn’t have that much of a edge at this point. Yeah, you know, SpaceX is a great company, and so on so forth, you know. But you know, I mean, Tesla right now, it’s a good example. A lot of retail investors think, Oh, well, you know, I mean, Elon Musk is amazing, and so on so forth, you know, lately he hasn’t been done amazing, and I personally don’t want to give him the benefit,
Maggie Lake 54:57
though, that’s so interesting. And as we know, as goes, that AI. High momentum. It has implications for the broader stock market. David, it has been absolutely fascinating having this conversation. I’m so happy that we were able to cover so many different areas of the market. We really appreciate your time. You’re welcome. Okay. Thank you so much. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time. Again. That’s wealthion.com/free thanks so much for joining us. We’ll see you again next time.
