Prof G Markets
Are We Headed For a Recession? + How Tariffs Hurt Housing (Live at SXSW)
Thu, 13 Mar 2025
From the Vox Media Podcast stage at SXSW, Ed and Scott discuss Apple’s decision to delay AI updates for Siri, Sony’s fight against deepfakes, and why the United States is considering banning DeepSeek. They then break down why the big banks are predicting an increased recession risk, exploring the recent pain in the stock market and the potential fallout if a recession hits. They also discuss how tariffs are driving up the cost of building a home, and Scott challenges the notion that home ownership is the best path to wealth. Finally, Scott fields some audience questions to close out the show. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: Is Home Ownership the Best Path to Wealth?
Buying a house has long been considered the best way to build wealth and move into true adulting.
Isn't it? I mean, at least that's what society wants us to think. Gotta get a Birkin, gotta get a home, you know.
Okay, the handbag you can probably manage without. But what about a house? Surely that's actually good, right? We're going to find out this week on Explain It To Me. New episodes every Sunday morning, wherever you get your podcasts.
Today's number eight. If Texas was its own economy, it'd be the eighth largest nation in the world. True story. Last night, I got a little fucked up, went upstairs, took an edible Sunday night. It was bored, so I went down to the bar and I met this really hot guy. And I just kind of slipped out. I said, I have an enormous dick. And he said, but I don't like big dicks.
To which I responded, how do you feel about liars? By the way, the reason I make so many dick jokes is not because I'm profane, but we really need to show more empathy for dicks themselves. I mean, think about it, right? Their hair is always messed up. Their family is nuts. Their neighbor is an asshole, and their owner is always beating them. This is not CNBC. Welcome to Prof G. Marcus.
Don't clap. By the way, Ed, can we talk a little bit about your dress? Please. It sort of says, I surrender. You know, I got, dude, Brunello, a little rag and bone that are like, your kids are likely to survive with me. This says, you know, aging skateboarder, but rich, right?
But rich, that's the most important part.
I just can't, this morning you stood in front of the mirror and said, that works.
I just point out, this is my mentor. This is all I've got. And this is how we start the show. Unpaid internship. Unpaid internship. Career experience. Let's get to the headlines. Let's do it.
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Chapter 2: Why is Apple Delaying AI Updates for Siri?
Now is the time to fly. I hope you have plenty of the wherewithal.
is postponing new AI updates for Siri after engineers failed to resolve bugs in the project. Originally set for release next month, the updates are now delayed indefinitely. Sony has removed more than 75,000 deepfake AI recordings of its artists, including Harry Styles, Queen, and Beyonce. Executives argue these AI songs cause, quote, direct commercial harm to legitimate recording artists.
And finally, the White House is considering restricting access to DeepSeek over national security concerns. Potential measures include banning the chatbot from government services, removing it from app stores, and limiting how U.S. cloud providers can offer the AI models. Scott, let's start with your thoughts on Apple with this product delay. They are postponing their new AI updates for Siri.
So people love to hate Apple. I don't think, I mean, just a couple of weeks ago, think about it. We were complimenting Apple for how smart they were to not go down this rabbit hole of massive capital spending in AI. That they decided that rather than develop our own search engine,
we're just going to charge $20 billion a year in rent to a bigger, better search engine, and $19.8 billion of that will hit the bottom line. I think it's about 20% of their market cap is derived from this relationship of renting search instead of investing themselves. And we were saying just a few weeks ago that them not making these extraordinary investments in AI
was probably the way to go, to rent the infrastructure or leverage it, and then at some point put themselves in a position where they could extract unfair rents from an open AI or an anthropic to be the default AI on Apple devices.
People will pile in because I think what you're gonna see is, and you talked about this last week, we're about to see, in my view, a serious destruction in the value of Apple's equity. And a stock can stay elevated based on story for a while, but it's a little bit like gravity. At some point, gravity and fundamentals and valuation, I do think, tank over.
And I think that's starting to happen to Apple. Just some numbers. If you look at growth relative to price earnings, right? If the growth is bigger, you would think the PE multiple would be bigger. So you have NVIDIA, which grew 114% this year. And it trades at a PE of 40, which actually looks quite cheap given that it doubled its earnings. And then you have...
Meta, Alphabet, and Microsoft that are growing somewhere between 14 and 22% at the high end for Meta, and their PE multiples are somewhere between 20 and 30. And Amazon, PE of 38, grew 11% last year. Apple has a PE of 38, despite the fact it only grew 2%. So relative to its growth, it just looks really overvalued. Now, the most overvalued company in the world,
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Chapter 3: How Are Deepfakes Affecting the Music Industry?
The majority of those people on that board have probably been there for a while and have made somewhere between 10 and $300 million. under the leadership of Tim Cook. So they feel a lot of goodwill towards Tim. And the idea that one bad quarter or a strategic misstep is gonna all of a sudden get them to decide, these are people, this is the conversation right now.
Don't worry, Tim, we're at 110% behind you. Tim Cook probably leaves when Tim Cook wants to leave because he's done such an extraordinary job. And I brought a prop here. People talk about, I mean, the headset, which is fucking stupid.
The headset was a call option to make sure that little cocksucker Mark Zuckerberg, probably the wrong term, was not going to get too far ahead with his attempt to make vertical distribution with a headset. So he said, spend a billion or $2 billion, maybe 10, which is chump change for us, to make sure that if headsets and spatial computing really are the future of tech,
They were at letter D, not letter A. They're already killing it. It already doesn't work. People assume that Mark Zuckerberg is a genius, so everything he does, people rush to that end of the aisle. No, he hasn't been able to develop a product. The smart glasses will probably work. The headsets make no sense. The most underrated product are these.
This on its own... If you're listening to the podcast and you're not in person, he's holding up an AirPods case. AirPods. Has less gravitas in audio.
AirPods. This item would be a Fortune 50 company on its own. It is an extraordinary item. But the stock, it can be an amazing company. Tim Cook can be lauded as a fantastic fiduciary for shareholder value. And the stock could come down 40% because it's just become way too expensive. But the notion that Tim Cook or management is under any threat here, no way. This guy, arguably...
has been one of the most thoughtful fiduciaries and managers in corporate history. He's a first ballot hall of famer. He could literally screw up for 10 years. And just the last piece of data, Apple's percentage of its top line that goes into R&D is less than IBM's and less the rest of big tech.
So the question that I think they should be having at a board level is, are we making the requisite investments in R&D to inspire new product development? Because if you look at it as a percentage of their top line, it's actually lower than it was at IBM in their heyday and much lower than some of the other big tech.
Let's talk about this news from Sony. So Sony has taken down 75,000 AI deepfake recordings of their artists. Scott, I'm interested to get your view because last week you yourself were deepfaked. on a mass scale. I don't know if anyone saw this, but on Instagram and TikTok, there were several deepfake videos surfacing of Scott recommending stocks, recommending cryptocurrencies.
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Chapter 4: Should the US Ban DeepSeek Over Security Concerns?
Yeah, there were an estimated 8 million deepfakes, or estimated to be 8 million deepfakes shared online this year. That's up 16x from 2023. Very interesting though, 9 out of 10 deepfakes are used to promote cryptocurrencies. That's the main use case.
So I agree on the Section 230, but it also seems that we could maybe reduce the deepfake industry or take it down by 90% if we simply regulated crypto as well, because that's the main thing it's being used for. Let's talk about DeepSeek. The US is considering banning DeepSeek. This is coming a few weeks after South Korea made a similar decision. They said no downloading DeepSeek on our app stores.
They said it was a security concern. I talked about it on the podcast. I said, I think most countries will follow suit. And my prediction is that the US would be the first to do it. It seems that is probably going to happen, though we don't have confirmation. This is only rumors swirling around. What do you think, Scott? Should we be banning DeepSeek? Is this the right move from government?
Oh, of course we should ban it. Just the same way it was obvious, and still is, that TikTok should be banned. So let me list all the media companies and AI, US AI companies, just in terms of trade symmetry, who are operating in China. So just in terms of trade symmetry, it makes no sense. But it's also a security threat. The fact that we are
letting the CCP implant a neural jack into 70% of our future business, nonprofit, civic, and military leaders, such that they can make you feel shittier and shittier about America, one dance video at a time, that's just insane. TikTok has more impact and control over young people or exposure than ABC, NBC, or CBS did during the Cold War. Would we have allowed the Kremlin to own NBC, ABC, and CBS?
But this is the problem. No one fucking takes us seriously anymore. When South Korea says they're banning DeepSeek, I think DeepSeek and the markets go, yeah, they're gonna ban it. Anyone know if the tariffs are back off or on right now? We have lost so much credibility. We passed a law, we banned TikTok, Trump didn't like it.
Then the US Congress and senators and the president signed a bill saying they were banning it. And then Trump said, whoa, hold off. So we have no credibility globally in terms of doing what we actually say we're going to be doing. So the way to summarize right now threats of banning technology, Chinese technology in the U.S., is simple. Ignore them, they'll blink.
At the end of the day, ignore them. And on the eve of the banning, maybe the president will extend it. Maybe we get a donor to give him a bunch of money to extend it. It's no, is it an accident that one of his biggest donors, Jeff Yas, who's also one of the biggest investors in TikTok, and all of a sudden he's decided he likes TikTok and is trying to figure out a way not to ban it.
You can't have serious negotiations, economic, geopolitical, even arms treaties with a nation that has no credibility. What is happening now and will happen with what's indicated by our lack of credibility around DeepSeek and TikTok is the same thing that's happening with the tariffs.
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Chapter 5: What Impact Do Tariffs Have on the US Economy?
The regular season's in the rear view, and now it's time for the games that matter the most. This is Kenny Beecham, and playoff basketball is finally here. On Small Ball, we're diving deeper to every series, every crunch time finish, every coaching adjustment that can make or break a championship run. Who's building for a 16-win marathon? Which superstar will submit their legacy?
And which role player is about to become a household name? with so many fascinating first-round matchups. Will the West be the bloodbath we anticipate? Will the East be as predictable as we think? Can the Celtics defend their title? Can Steph Curry, LeBron James, Kawhi Leonard push the young teams at the top?
I'll be bringing the expertise, the passion, the genuine opinion you need for the most exciting time of the NBA calendar. Small Ball is your essential companion for the NBA postseason. Join me, Kenny Beecham, for new episodes of Small Ball throughout the playoffs. Don't miss Small Ball with Kenny Beecham. New episodes drop in through the playoffs.
Available on YouTube and wherever you get your podcasts.
We're back with Profiteer Markets.
The big banks are forecasting an increased risk of a recession in the next year. A model from JP Morgan estimates a 31% probability. That's up from 17% at the end of November. And Goldman's model also ticked up to 23%. On top of trade war fears, warning signs are flashing across the economy. Unemployment came in unexpectedly high. Consumer sentiment hit a 15-month low.
And Atlanta's Federal Reserve expects U.S. GDP to contract this quarter. Meanwhile, an increasingly volatile S&P 500 just posted its worst week since September, and the Nasdaq is down more than 7% year-to-date. A lot in there. Scott, I think probably the most alarming piece of that is just this recession forecast from these big banks who are increasing the probability of a recession.
Given what you're seeing in the markets, given what we've seen in, I think we're now on day 48 under Trump, how concerned are you that we're going to see a recession in America this year?
So recessions, the joke that economists have predicted nine of the last three recessions, It is very difficult to know what's going to happen. What is obvious, though, consumer confidence has fallen further faster in the last month than it has since COVID. The economy is contracting faster than it has since COVID.
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Chapter 6: Are We Heading Towards a Recession?
If you look at how things have spun out of control in societies and gone really dark, and that is a severe economic shock. And so the Democrat in me likes to think, okay, if the economy gets really bad and people see just how ridiculously stupid these decisions are, I kind of deep down think, okay, Maybe that'd be a good thing.
I am worried that America has this cold comfort that we couldn't go there. Oh, bullshit, we could absolutely go there. Keep in mind, just a short 80 years ago, we were rounding up Japanese Americans, some of whom had kids serving in our military in the European theater, and we put them in camps. To believe it can't happen here is in my view, totally ignoring history.
And I think we have all the steps in place. If you look at what's happened in the past and other nations that have gone really dark, what we're missing quite frankly, and the reason I'm so freaked out about this data is a severe economic shock. Because the people in power aren't gonna take responsibility for it. They're gonna find a scapegoat.
So I think that America is very vulnerable to a series of dark steps right now. It is on a path to something very dark. And I think the missing piece to go even darker would be a severe economic shock. And this looks like we are not only setting ourselves up for recession, but potentially something worse. That was awful, wasn't it? Sorry. Take everything I say with a grain of salt.
Yeah. The crowd's going wild. When we look at how the stock market is reacting to these policies so far, it hasn't been good. And what's so interesting is that if you look at the global stock market right now, minus the U.S., So take all of the stocks, exclude all of the American companies, the global stock market is up 7.5% year to date so far.
So basically, we're having a uniquely American problem in the stock market right now. Now, What's interesting has been Trump's and his administration's response to this. And I just want to read you a quote that he said to Congress in his address to Congress. He said, quote, there will be a little disturbance, but we are OK with that.
And Scott Besant, the Treasury Secretary, he went on CNBC, he gave one of his first big public speeches on TV, and he said, quote, "...the market and the economy have just become hooked, and we've become addicted to this government spending. There is going to be a detox period." So in other words, the markets are not liking what's happening.
But, you know, I'm a little surprised that Trump isn't actually pointing fingers and blaming Biden, as I would have expected. Instead, he's actually owning up to what's going to happen. And they're saying, yes, this might hurt. We might feel some pain in the economy, but ultimately it's worth it. This is necessary. This is our medicine and we're going to do it.
I'd like to get your reaction to that, Scott. Is there validity in that argument? Is it fair to say that America maybe needs this shakeup? They need this pain and will suffer in the short term, but that's worth it.
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