YouSaid · the spoken record

Aahan Menon

lines on the record: 65
first: 2025-12-03
most recent: 2025-12-03
sittings or episodes: 1
sources: podcast

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“So, if you want to hear me, yap all day about all kinds of nonsense, you can check me out on Twitter at Ahan Prometheus. If you want to read the more substantive work that we have, you can check out. Of course, if you're an institution and you're interested in multi strategy offering, which is like a totally different set, you can reach out to us via email. We have emails listed on all the websites.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“We now have an industry where it's completely, you know, we're sharing all this stuff. Like, oh, you can do this, you can do that, and in reality, like most things are going to underperform passive exposure. And there are some things that will outperform passive exposure if you do them intelligently. But there's no silver bullet to just outperforming constantly without paying the cost for it. Like you have to pay it either in terms of time and energy yourself or you pay it in terms of management fee to a really good hedge fund manager.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, I just think that we have access to all this information now today, right? And the question is, I think in some ways it creates adverse incentives for people to cringe when I see people telling you that, hey, you can invest the best institutions by doing X, Y, and Z. No, you absolutely cannot. Like, there's literally a reason that all these people are getting paid a tremendous amount of money and give up their health, life and family to chase these crazy returns and all this stuff, right? It's not something that you can just do at home with maybe a Bloomberg terminal subscription and like a couple of alternative data providers. So, you know, I think that.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“It's a full time thing, and as you will have some of those charts in there, but as you'll see, just the it's really hard for some of those to beat the buy and hold S&P. I think it's an important conversation to have.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Is we want to make something that just smashes the SP but takes like a less than 10% drawdown. That is hard. Okay, that is really hard. But just by having realistic expectations, doing some low hanging fruit in terms of diversification, having smart leverage, being able to do some trend following, all of those things are hugely value additive to any individual investor. And also they don't require a lot of time. You know, you can set all of that up in a few minutes. You'll find that that sort of approach also will end up basically getting you to a place where you're in sync with all the really, really big macro trades. And so I think there's a lot to be done. I just think that if you want anything beyond that, if you want that return stream that almost looks perfect and all that stuff, that's like a full-time thing.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“A couple of moving averages put together does a good job at cutting off tails in markets, right? Should anyone charge you for that? Absolutely not. Basic trend following takes less than five minutes to make in an Excel spreadsheet. Don't let anyone charge you for that. But just these simple principles of having more diversification, being able to lever that diversification to meet whatever target wall you want, having some understanding of what volatility is and what wall targeting or risk targeting is, some basic trend following, all of those things are readily available and can lead to dramatic outperformance relative to owning the S&P 500 passively. You can do all of those things, right? Now, the place where people get tripped up, right? And like, I obviously, like as somebody that's in the business of trying to make all these portfolios, I personally get tripped up all the time.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“All of the actual returns as well outperformed don't take worse drawdowns. That's an easy one, right? Second one is learning about basic things like wall targeting. Like wall targeting sounds super complicated, but all it means is that like, hey, I don't own an asset or I tailor my asset's exposure to have something like a 10% wall or a 15% wall or whatever it is. It has very nice properties when you're in equity markets. own an equity typically if equity wall goes above 15% it's a bad thing it usually means bad things are happening and just by reducing your exposure to make sure that you're not holding an asset above that 15 wall it does really nice things for you basic trend following right i have strong views on basic trend following”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, exactly how you're underperforming. But now, in today's day and age, you have access to all these leveled products. So you can do S&P 500 plus another five assets, better risk adjusted returns, and”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely, absolutely. And you know, he's so humble about it, right? Like, and that's the thing. That's a hallmark of really, really good investors. This shirt is hard. This shirt is really hard. And one in a million of us is going to be tremendously successful and you're going to see him on all the podcasts and raise all the AUM and all that stuff. But it's probably best not to bet on being that person, especially with the hard-earned money and you have other things to do. But I think there are lots of low hanging fruit for people to generally do, right? Let's start with something really boring, like having actual diversification in your portfolios. That's a low hanging fruit. I think everyone should engage in it. There are more and more tools now to be able to level your diversification. So the problem with diversification for a lot of people earlier was like you would diversify into barns and gold and all this stuff and you would get low of all than your equities. And then when equities were having a bull market, you would have to complain to all your friends about how you listened to Arn about devils.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, I think there's a lot to be done, right? That doesn't mean that it's hopeless and there's not a lot to be done. But for most people, I think you had Victor Hagani on, right? Fantastic guy. I love his framework. I love everything. And like, you know, he worked at one of the most sophisticated head friends of the world. And he's doing basic asset allocation principles now.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“I love it. Yeah, I mean, when you look at just this entire industry, obviously, you know, no shame about it, but. What is the right way to frame all of this out? Because I do think you have a really good point that this idea of tracking either these things that have been impeded to the point that there's hardly any edge. And the remaining edge is very difficult for the average person to find. You know, people spend 100 hours a week at least trying to derive those edges. So what is your thoughts on what a person is to do in that situation?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Predict these things unless you're what I described where you like make a prediction, go and put on the trade and then come back next year and let your prediction play out, you're probably not going to do very well doing it. So I don't think that that type of stuff has tangible monetary value. What has tangible monetary value is being able to adjust your risk as you go through the cycle and as the odds change relative to your view. That's what has edge and that's what has monetary value. That's what people should be charged for. So that's my rant.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“For you to meaningfully outperform your PNL is not like unless you're somebody who can basically say, yeah, I just like I make my prediction, I shut my eyes and I come back next year. You're going to adjust your portfolio every day, every week, every month, right? And the thing is that there is typically a mismatch between macro commentary, so like your forecast horizon and your actual trading horizon. And that's where people don't realize. Your trading horizon is usually one day, one week, one month. And your forecast horizon is like a year. Those two things are completely uncorrelated, right? And so, you know, I believe in this so much, right? That all of our big picture macro stuff is like 100% free at Prometheus now. We started a campaign around this, right? It's called Pay for Portfolios. Don't pay for content. Like in air quotes, the contents and air quotes. Because, you know, to one, most people can't predict what's going to happen a year from now. Like, I sure as hell can't, right? And two, like even if you do.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“You were probably underperformed the SP 500. If you knew exactly what liquidity, take your measure, is a year from now, you would underperform. If you knew the exact price of the asset that you're trading one year from now, you will probably underperform. And the reason is because most edge lives in a very, very short term space because it's highly competitive, right? So first off, nobody actually has a crystal ball where they can predict everything one year forward. And two, like the real value of money management is in basically taking that view and reducing the risk around it dramatically, right? So let's say that you think, okay, great. You're the best predictor in the world. I'll give it to you. You know what the S&P 500 is going to be in next year. Amazing.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“While we have access to the tools to basically trade everything under the sun and try to understand everything on the sun, I think that there is like a gap in terms of recognizing what really matters. big picture like where the economy is going to be six months from now 12 months from now like all that type of stuff is actually like completely useless for trading markets right like you know in the chart back i think we've included a bunch of examples where it's like if you knew exactly what growth is going to be a year from now”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, there's so much to that, right? Like, and it's something I feel really strongly about because most things that you hear in like macro conversations and stuff like that, they are the highest level input to actually making an institutional portfolio, right? Like it's like the highest level everyone has this conversation like in their once a week meeting or whatever. And then for the rest of the week, nobody does anything related to that conversation. I think that there's a lot out there in the world today and it's a great thing that there's so much out there. Like, you know, when I was younger, I wish we had podcasts like yours. I wish the amount of information we have access to now is kind of crazy, right? But I think there's also”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“This next part of the conversation, I want to get into this idea of edge, and I want to frame it around some thoughts you've been voicing in recent weeks around basically everything we just talked about in terms of looking at growth or liquidity or didn't get into inflation, but obviously that whole thing as well. These are things your perspective is that this information should be free. You should be able to go and get a current understanding based on these baselines. And what actually matters and where that source of edge comes from is basically everything we're about to get into now. And so I want to just hear your perspective on that distinction between, because you mentioned a couple times now about how a lot of these information sets are either lagging or they're very well known. You know, there's hundreds of exceptionally smart people working at interest rate desks in Wall Street that are that know the stuff like the backside of their hand and can find their actual edge. So with that in mind, I would just love to hear your”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Sheet items or whatever, and you get something that might actually be tradable in markets. So that's generally what we try to do over there. We have some measures that are decently good at trading markets where it's like no silver bullet. I think that when it comes to liquidity or something like that, you want to try to find the symptoms. It's going to be really hard to find the source”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“What you want to do is, right? Like, you want to look for the when it comes to liquidity and this concept, the sources of data are too slow for you to do anything with. They're just too slow for you to do anything. So what you have to do is you have to try to reconstruct using the symptoms. Hey, like, what is the shape of the curve tell me about liquidity conditions? Is there a kink in the curve? That's where that doesn't make sense. If there's a high liquidity environment, maybe there shouldn't be a kink in the curve, right? Because if no arbitrage, blah, blah, blah. Like that could make sense. Or like saying, hey, like if I look at all these short-term spreads, they're blowing out. Is that a good liquidity environment? No. And so what you try to do is you try to find the market-based indications that, oh, yeah, like things are flowing smoothly. And when you look at those market-based indications, one, like the advantages you can look at it daily. And two, you can add it to the slow balance.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“The volumes of these markets, a balance sheet items, and they're going to be super lagged to the actual activity. As a general rule, if you're trading and you're trying to do anything systematically, grabbing the levels of balance sheet numbers will lag everything else. So what you try to do is you try to search for the market-based indications of the health of these markets, right? And those are things people, you know, like knowledgeable people that you had on the show, like things like sofa spreads, commercial paper spreads, asset price vol, implied wall across assets, credit, credit spreads, all of those types of things basically give you some indications of like, hey, dealers are healthy. They are lending. People are levering up their books. You know, you can construct equity factors that are consistent with like a lot of leverage. High leverage, low leverage factors, high beta, low beta factors, like all of those types of things.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“We started to basically talk about this with clients. I think I did like a couple of podcasts sometime last year or something like that, where the handoff in the liquidity ecosystem Was from the public sector to the private sector because the public sector just isn't creating like a tremendous amount of liquidity anymore. So what really matters is measuring whether there's a lot of borrowing and lending happening on private sector balance sheets. And like just tracking the repo volumes is going to be okay fine. But I think it's super important to understand that the tracking the volumes of these aggregates is not good for trading markets.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Checking whether that's happening in the Mardon economy. There's obviously the reserves and the Fed's balance sheet, right? But that's not a singular input that you can use to trade. And then I think the most important thing today is actually the repo market. So keeping trackers of those two things is going to give you a rough indication of whether things are good or whether things are bad. In today's context, I think it's super important to recognize that when it comes to the Fed's balance sheet, nothing ever happens. Like I know that, you know, we're doing our end of QT or whatever. But the net change in all this stuff is like minuscule. Like it's not important. If you look at what's happening in repo markets relative to what's happening with the Fed's balance sheet, there is just tremendous amounts of growth. And so like, I think that.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Think that broadly, like, liquidity is a really good concept and very, very useful. But I think looking at unidimensional things like the Fed's balance sheet or the reserves in the Fed's balance sheet or mixing up a couple of things on the Fed's balance sheet is not super helpful. I think we have a slide in the chart pack actually showing how you would lose a lot of money if you tried to trade directly based on the Fed's balance sheet or net liquidity or whatever people want to call it, right? But I think that like as a concept, what is liquidity? I think the idea is we want a rough measure of how much cash in this is there in the financial system that can potentiate spending in financial markets or in the real economy. That's a really great concept. And I think that there are two big avenues for”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Frameworks are useful, measures need to be evaluated, right? Like that's my broad strokes on that. So like a framework around liquidity, amazing. Most measures that are used are useless. And so the skill that you need is like, I'm not saying necessarily I have it. I have some a little bit. But the skill is in like translating the framework into actual measures, right? And so taking on the broad liquidity and like, you know, in the modern age, what matters, I think that”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so on that point of monetary policy transmission, I want to talk a little bit about the modern version of that these days, which obviously there's been this traditional version of the Fed's fund rate changes, et cetera. But then there's this whole other thing of reserves in the system, this ample reserve regime that we're in. Quote unquote liquidity, however you want to define that. Just want to open up the floor to you and take it where you want to in terms of out of that whole complex of various acronyms and ways to think about this ample reserve or Jean Ran what parts of that are useful for what portions of macro analysis basically?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“The interest cost, the burden, that's the tougher part to calculate. I'm sure we could come up with what effect it has in terms of stimulus pretty easily.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“It's tough to do it on a cut by cut basis. But I forget the exact metrics, right? Like I look at so many numbers a day. I don't always remember the exact metrics of everything. But it used to be near one for one, you know, especially like 70s, 90s and stuff like that. Heyday of macro. It was like, boom, you do over, you know, you do 500 basis points of easing. That translates into like 500 basis points of net interest burden rise. Now it's like that's totally non-responsive. And so like it just doesn't seem to be translating into much. I'm sure we could, you know, so it's harder to do. So there are two components to that net interest number, right? So there's the actual interest expense, right? The gross interest expense. And then there's the interest income. The interest income is actually easy to calculate.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I couldn't agree more. I've thought a lot about this situation. It's really interesting. I'm curious how far you've taken this in terms of its extrapolation. Like if we're in, you know, the Fed's probably going to cut in a couple weeks. When we cut by 25 bits, have you thought about the impact on that net interest income for the private sector? How does that look like?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, exactly. And so we actually saw the net interest burden go down, and it basically broke. All of macro, you know, yeah. And so I think that that is probably, when it comes to nothing stops this train or whatever, like fiscal dominance and all that stuff, I don't think the actual spending and stuff on the economy is that big a deal. But I think that this recomposition of balance sheets and breaking that monetary policy transmission mechanism Is a really big deal because so long as you have this weird situation of huge amount of private sector asset on private balance sheets, it basically reduces the Fed's ability to be able to tighten very meaningfully or have that impact. So yeah, I think that those two takes not that big a deal on the income. It's pretty big on the balance sheet monetary policy side.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Private balance sheets of very large amount of treasuries. And so now when you have interest rate hikes, right, your holder of short-term U.S. treasuries, you basically get that interest benefit immediately, right? And so the composition basically of like the private sector balance sheet has changed a lot, right? There's a lot more cash. Think about all the AI CapEx spenders we're talking about. They have a huge amount of cash. Relative to that cash balance, they don't have very high amounts of debt. And so what's basically happened is we've done a bunch of modeling to basically show how it is the size of the Treasury's balance sheet and the amount of that Treasury's balance sheet that's on, that's held by the private sector, that has resulted in the lack of monetary policy transmission. So what we've actually seen is, you know,”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“The net interest payments are basically just like the net effective interest cost of the private sector, right? And what basically used to happen over previous cycles until this one was that the Fed had absolute control over that effective number. So if they raise monetary policy rates, Which is super intuitive. But basically, what we had after COVID, where we had this huge, huge expansion in the government balance sheet, was basically this inflow into”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“And so at that high level of tracking macro and like trying to make sense of things, I don't think that the government is as big a deal there. They do have a very meaningful presence in terms of employment these days. So that's something to monitor. But in terms of them spending and government consumption, government investment is not that big a deal. The place I do feel is actually really meaningful is this whole dynamic of net interest payments, right? Like I think that that's a very, very meaningful channel. And we did it. We've done like quite a solid amount of work on the subject, basically modeling the net interest payments. So for those that are unfamiliar, basically”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“So, I mean, I'm definitely an outlier when it comes to this particular one. I don't like, so we have the chaos and stuff for government spending. In terms of its actual contribution to GDP growth, GDI growth, so let's say GDP is running, grow GDP is running at like 2ish%. Government spending accounts for 0.3% growth. that big a deal in terms of its impact to aggregate spending when it comes like so and it's because of the netting right it's because of the netting it's because they have they have a deficit like so they take in tax money so the gross government spending numbers will always look massive right but that's like saying if i look at the gross you know import numbers relative to gdp it's massive it trade is not that big a part of the u.s economy because for you know because you have to do the netting of the exports versus the imports it's the same deal right”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Macro podcasts like this one is you look at fiscal deficits as percentage of GDP, and okay, we're at six percent. Therefore, government spending a lot of money. Interest payments is a percentage of GDP is where it's at. That's all going to be an income for somebody on the other side of that balance sheet. So those are simple frameworks. And I want to understand what parts of those do you agree with or disagree with? And therefore, how do you think about the sequence of that government expenditure function of growth?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“There is that doesn't mean that there aren't like opportunities in other sectors because the gross investment numbers right now are propped up entirely by this AI CapEx. But if you look at the other things that classically drive the business cycle, stuff like residential investment, construction, broader non-residential construction spending, industrial equipment spending, like all of those types of things, all of those things are going down. They're not doing well. But at the same time, like having a macro discussion, it's about the macro aggregates. You don't want to fight the aggregate, but you can pick and choose your spots, right? So like a super interesting trade has just been short energy, which is like the super cyclical, like the most cyclical thing that you can find. And long tech. Despite the fact that AI CapEx might not, you know, work, that's been one of the best trades you could do this year. So there are different ways to apply this. But the aggregate is don't.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that's totally the right framework, right? Like, so the way you would track it is like, you don't even have to do any complex math to do the depreciation schedule or anything, right? Like you can go get capital consumption numbers from the NIPA GDP accounts. Those are available there. You can do some fancy schmancy stuff about now costing the actual investment numbers. What I will say is it is unlikely because those capital consumption numbers are calculated for the entire economy, they're never just going to pick up a lot of steam. They're basically going to look like inflation with a drag. And so the thing that you really need to focus on, you don't even need to worry about that that much. The only thing you need to really focus on is like, are they still doing the CapEx and is that showing up in the gross investment numbers? If that's showing up in the gross investment numbers, don't fight that, right? And that doesn't, and the new”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, that's super helpful. Okay, I want to send if I'm getting this correctly, and if we can give listeners a bit of a simple framer. And correct me if I'm wrong on this, but is the right way to think about it is that don't fight during the ongoing buildout, but keep track of the depreciation or amortization schedules because those will lag. And once that starts to start to see the balance way, like right now we have all the build out and hardly anything going on in the depreciation schedule. But as that gets closer, is that where the inflection point is? So just track those schedules and that will help you unlock how sustainable this is. Is that the right framework?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Getting really far away from that is really hard. And so I'm a non believer in AI just being this absolutely transformative thing, which takes us to 6% real GDP growth a year. But at the same time, I do want to emphasize that don't fight the profit juice part of this conversation.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“You have to finance that AI Cap X one and two, like the sources of that financing are going to run out at some point, right? And so we've started to do debt financing, and these companies make a lot of revenue, and they get to borrow for really low cost relative to that revenue. So they can probably do that for a while too. But the endgame is that no economy can function purely on investing entirely, right? So you have to have a recomposition from investment to consumption spending, right? And that's much more of a big picture, you know, like two-year question. There are many people better equipped to answer that question than I. My basic thought is just that I don't see how the tremendous amount of AI CapEx is going to lead to more washing machines being purchased. It's hard. Once you have a population and productivity trend, which is basically the most important thing for GDP growth and all of those types of things over time.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“So when we saw these CapEx numbers kind of coming through, what we understood was, oh man, like this is a big profit plus. This is a really, really big profit plus. And so that's the first part. While the CapEx is ongoing, that is business cycle stimulative. It is good for profits. Don't get in front of that train, right? Now, the question is, like, as we go forward, and I think that I really wanted to spend some time on the what's happening right now part because I feel like it's underrepresented in most macro podcasts. Like, don't fight the profit juice, right? But then you start getting into the question that most macro podcasts are covering a lot of, right? Is that going to be a sustainable dynamic? Like, I mean, I think it's obvious to anyone that it's not a sustainable dynamic, right? And why is”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“The associated cost is going to go up 2% and then 3%, and then 4% over the next five years. So what you have when you have this math, so if you look over time and you model this, the most explanatory variable, the single most explanatory variable of corporate profits at any point in time in terms of like total variation, is gross investment in the US economy, net of capital consumption.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“About not just AI Capex, which is a type of investment, but all gross investment in GDP, is that the associated cost with gross investment isn't recognized today. It's recognized in the future in the form of depreciation expense. So what happens is the second businesses start to invest bigly like they do today, you basically start to have a very, very dramatic revenue number go into your profit calculation, but your depreciation expense gets recorded on the GDI side of the equation in the form of capital consumption, and that roughly, very roughly tracks long-term inflation. And so if you have CapEx that goes up 20%,”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“True for any individual company, right? Like, so if NVIDIA, whichever AI company that AI affiliated company that you know does CapEx by itself, that's not profits for the company. But when you zoom out to the macro aggregate, what happens is the second they spend the money in terms of investment, that ends up being someone else's revenue, right? Now, in the macro aggregates through this Kalecki-Levy equation, every source of revenue has an associated cost. The most intuitive one is like, oh, if I receive consumption revenue, so consumers spend on my products, great, that's revenue, but what is the cost associated with that? Wages, okay? So you have to subtract out the wages. And so a rough number that kind of translates into corporate profits is the savings rate. The less consumers save, the more it goes to corporate profits. The thing that...”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“So, for every unit of profits, you basically have items that are spending, so things like revenue that contribute and things like wages, which are costs that detract, right? So what we try to do is we try to model each one of the independent components and then come up with a profit now cost of profit estimate, right? And that generally lets us know, hey, like what's driving profits today? Is it investment? Is it consumption? Are the wages too high? You know, it gives us a nice sense of what's happening in the macro aggregate. And using that framework has been helpful because what we recognized for a while and were able to recognize particularly today is that AI CapEx, when done, is basically like pure profit juice, okay? And that's not.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“What's that ultimate cop out? Short term bullish, long-term bearish? No, short-term bearish, long-term bullish, right? I'm going to answer something like that, I guess. But basically, I think there are two perspectives when it comes to AI CapEx. There's first what's right in front of you. And then there's kind of assessing its continuity and stuff like that. So I think one framework that's been really, really helpful to us in terms of evaluating AI CapEx and broader investment has been to kind of think about and model the world through the eyes of the Kalecki-Levy equation. I don't know if you're familiar or your listeners are familiar, but they can Google the Kaleki-Levy equation. It's just, it sounds maybe intense, but it's just like a simple macroeconomic identity that uses GDP and GDI as two sides of the equation and tries to backsolve for what drives profit.”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Intuitively, that we're talking about AI CapEx, and basically, like, that has been the big piece of the last couple years. I want to understand how you think about the sequential impact of that. How does it lead through? And maybe the simple way to ask this is, can we stave off a consumer downturn in spending and therefore potentially an LRA recession just by spending a shit ton of money on AI CapEx? Is that even conceivable?”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“And if they go down tomorrow, I bet on them going up the day after tomorrow. If you put on a trade, a little more sophisticated logic than that, a little bit more sophisticated logic than that, that has been probably the best trade you could do this year. You had a risk adjuster return, a shop ratio of about 1.9 this year doing that. And what that does, like what that goes to show is that it's not to tell you to go and do that trade, it's just to paint the circumstance that market participants and the committee are not sure of what to make of this dynamic because of what you're outlining that, oh, we have nominal growth fine, but we have employment data that's weakening, which one do we go for until one of them breaks out in either direction and you get a defined macro trend, the bond market is not going to work, know what to do. And like if your position in the bond market, you won't be able to ride any type of”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“It's like a stress event, right? Like usually when unemployment starts to rise, it's like really dramatic, very painful, cause a whole bunch of issues for those in the administration and everyone sees it. So they typically tend to tend towards the unemployment side. But at the same time, unless you have that breakout in unemployment, you have the fed in a tight spot where it's like, oh, we're not at target employment's weakening. What do we do? And they keep changing their minds. And that's what ends up getting reflected in markets too, because market participants are trying to figure out, hey, where's the committee going to be? And as the data comes in in two opposing directions, where inflation, not a target, not a target, not a target, employment getting worse and worse and worse, you have this”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“Employment, which is slowly over the course of the CEO, started to get worse and worse and worse. But at the same time, inflation is at 2.5 and up, which is totally inconsistent with their target. The Fed is usually going to be likely to favor their unemployment objectives. Because unemployment is kind of...”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT
“I don't think so, one, like just if that happens, just avoid the barns. Avoid the barns because, I mean, and I think that this year is kind of like a small microcosm of all of that, right? Because what you've had is Look, like what matters for Barnes is so we talked about how the nominal growth turns into revenue and that revenue goes into profit. That's an equity market view, right? That matters in a small way, but not in the biggest way for Barnes. What matters for Barnes is what is the trade-off between growth and inflation, which is basically unemployment and measured inflation. And what does the Fed think about that? Like that's the world of Barnes. Like that is 90% of all bond returns. When you're looking at that type of dynamic where you can prospectively have”
2025-12-03 · Forward Guidance · The Hidden Fractures Behind America’s “Resilient” Economy | Aahan Menon · IDENTIFIED FROM THE TRANSCRIPT