The Prof G Pod with Scott Galloway
Prof G Markets: The TikTok Showdown, UnitedHealth’s First Earnings Post-Shooting, and a Banking Boom
Mon, 20 Jan 2025
Follow Prof G Markets: Apple Podcasts Spotify Scott and Ed open the show by discussing the latest inflation report, Meta’s next round of layoffs, and the uncertain future of TikTok. Then Scott breaks down United Health’s first earnings call since the killing of executive Brian Thompson, explaining why the company appeared to downplay its successful year. He delves into how profit incentives in sectors tied to social goods can create harmful externalities. Finally, Scott and Ed review fourth-quarter bank earnings, explaining why the results are clear evidence that mergers and acquisitions are back. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What are the latest trends in inflation and the market?
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Today's number 41,000. That's how many social media posts have the hashtag TikTokRefugee at the time of this recording. Ed, what is a negative thought? What? TikTok. TikTok. That's kind of an existential one. That's like that joke I heard that a Holocaust survivor ends up in heaven and he says to God, hey, I'm thinking about telling a Holocaust joke. And he's like, no, no, no Holocaust jokes.
It's just not funny. And then the Holocaust survivor says, well, I guess you had to be there. It really gets you thinking. Two bombs in a row. Well, I wanted to go after the Catholic Church, but I was worried our interns are going to be witnesses in the lawsuit.
Yeah, you've never done that before.
My role model, Sam Harris, I'm totally backfiling right now, says if you're wealthy and you have people who love you unconditionally, you should speak your mind. I'm speaking my mind. That's very good. Have you seen what Sam Harris has been saying about Elon Musk? Well, you tell me, what is he saying?
I know it, but the viewers don't know it. Trying to remember it exactly, but he basically described how he fell out with Elon Musk. And Elon Musk made this bet with Sam Harris where he said, I will bet you a million dollars that we will not see 35,000 cases of COVID in the United States.
And Sam Harris was like, well, that's kind of ridiculous because the estimates that we're going to have a million deaths, not cases, but deaths in the US. He says, why don't we make it a little fairer? How about I'll take you up on the bet, except let's make it three and a half million cases, not 35,000. And Elon said, no, no, no, no, make it 35,000 cases. So then a week later...
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Chapter 2: How is TikTok's future being impacted by regulations?
Ed, what else is going on? What are we doing here?
Let's start with the weekly review of MarketVitals. The S&P 500 rallied, the dollar fell, Bitcoin climbed, and the yield on 10-year treasuries dropped. Shifting to the headlines. The consumer price index increased 2.9% in December from a year earlier and rose just 0.4% month over month. Core CPI also came in lower than expected, providing further evidence of easing inflation.
That encouraging report drove all three major indices higher. Meta is laying off approximately 5% of its workforce as part of an effort to phase out lower performers. CEO Mark Zuckerberg stated that the cuts are essential to ensure the company maintains, quote, the strongest team possible. And finally, the Supreme Court has upheld the federal TikTok ban, but the app's future remains uncertain.
Trump has stated that he may issue an executive order to delay the enforcement of the ban for at least 60 days. Scott, starting from the top, pretty positive CPI report, especially the core CPI. Your thoughts on inflation tamping down a little bit?
Yeah, well, the market had a collective sigh. It had its best day since November 6th, and bond yields moved lower. The S&P erased its 2025 losses year-to-date and popped 2%. The 10-year fell 15 basis points, which, as we keep saying, is now the adult in the administration. Treasury yields are a benchmarking for borrowing costs, right, across the economy.
And when yields drop, borrowing costs become cheaper for businesses and consumers. It's essentially a tax cut, which can stimulate economic growth. So I think this is good. Core inflation, I think it strips out more volatile things, including, I think, food and energy, what it strips out.
And the reason that we have that is because, as you said, food and energy prices are very volatile. So generally speaking, economists prefer to use the core CPI when trying to understand these trends.
It's funny that we've become obsessed with inflation. I remember 15 years ago, all we could talk about was the Greek sovereign bonds defaulting, and that was going to infect Europe, and we just became obsessed with it. It seems like now we're obsessed, and maybe... It's more justified now.
Yeah, I was thinking about that when I was 10 years old.
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Chapter 3: What happened during UnitedHealth's earnings call?
And the answer is quite simple, is it was the election. And I think this is a reminder here of the power of stories and narratives in markets. Because what this election did is it sparked a flurry of new narratives from investors about what may happen in the future. Who's going to benefit from a Trump administration? Who's going to get burned? What's going to happen to interest rates?
And it's all those stories that create this energy in the markets that propel people to make trades, to take bets, to speculate on the future.
Acquire a company, right? Yeah. Exactly.
And of course, who benefits? It's the middlemen, which are the banks. So I think that's what really happened here is the banks were the beneficiaries of an environment where quite simply interesting stuff was happening in the markets. And the question now is, will that continue? I would argue probably not, not to the extent that we saw in Q4. But having said that, Trump is a very erratic person.
He'll probably make some pretty controversial decisions. And I'm sure that will lead to lots more interesting stories that lead to new investment theses and new trades. So that's sort of a breakdown on, I think, why we've seen this explosion in banks in the past quarter.
I thought that was cogent because what you're summarizing and I hadn't zeroed in on is wait and see is the worst words in the world for a services industry or financial institution. They don't want people to wait and see what happens with the election around going public, acquiring a company, reallocating the portfolio, moving, whatever it might be.
And the last kind of six months have been sort of wait and see. And then once we had clarity around the election, whether you like the outcome or not, people move to getting shit done and trading and buying and making bids for companies and doing their debt offering. OK, we're going to wait and see if interest rates come down. Well, they are. They are not. So let's just get on with life.
But I actually I think that was a thoughtful analysis of the situation.
something Jamie Dimon said on the JP Morgan earnings call, and this is a bit of a pivot here, but I found this fascinating. He said, this is a fantastic quarter, highest annual profit in the history of American banking, $59 billion, it's just enormous. But then he said, quote, "'Two significant risks remain.
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