Transcription
Nouriel Roubini is the chairman of Roubini Macro Associates, and he writes the following: The US remains at the center of a technology-driven, positive supply shock, the racist growth and low inflation over time.
Noria joins us now from Monterrey. And good morning. Good to see you. Great seeing you. Fantastic to catch up with you, sir. You're bullish not just for the year ahead, but through to 2030. Can you flesh this out for us a little bit more?
Yes, I mean, everybody is talking about AI, GenAI, but this is only one of the 15 technologies of the future that are already talked about is a semiconductor, biomedical research, quantum fusion defense that can bring back new material signs, you name it. And it's a race between us and China. I don't think it's a zero-sum game. U.S. is going to do well. China is going to do well. But my estimate is that the U.S. potential growth is estimated today to be only 1.8%, could be as high as 4% by the end of the decade. And I've gotten a bit of a bottom-up analysis. And by the way, the data on productivity after the GFC averaged productivity between 2009 and 19 was only 1%. Since 2019, in spite of the dip during COVID, has doubled to almost 2%. 1.9 in 2024 was 2.4%, and the number from Q3 suggests was almost 5%. And by the way, that land to Fed no cost for Q4 GDP as today is 5.1%, probably is too high. But given that on a given the job, number 11, either high productivity growth, now, I don't think the growth is 4% or 5%, but there's definitely acceleration.
Jobs is key. Is it jobless growth, so-called jobless growth? Yeah. Well, is it jobless growth? There are three stories. One is that the GDP numbers are wrong and the GDP numbers can be revised towards the weaker labor numbers. The other one is that now the GDP growth is strong and you have going to have some adjustment upward of the revised data. I think the third explanation is the more correct one. You can have strong GDP growth and having weak labor growth because we're having a productivity revolution. If you're looking, for example, at the revenue, real revenue per worker of S&P 500 firms since the launch of Choudhry in November 12, 2022, the average averages increase for S&P 500 firms by 15% in the last three years. So it's almost 5% per year. And if you look at the by sector, of course, a lot of it is closer to 20% in tech and communications services, but it's very large also across the board. So both at the micro data level, S&P 500 firms and the macro numbers, we are seeing a productive revolution already in the numbers.
I'm kind of dealing with whiplash right now because we just had the Ryan Metals CEO on defense sector in Europe booming for all the wrong reasons. This idea that he's more worried about the state of the world than ever before. And here Dr. Doom is coming on to tell us about how productivity boom is going to bring everything to a better place. Why are you less concerned about this overlay of rearmament and militarization that is also coming in tandem with this productivity boom?
Well, there are geopolitical risks in the world, and I'm aware of them. The question is whether they're going to have a significant economic and market effect. Look at the biggest one, the 12-day war between Israel and Iran last June. Oil prices went up a little bit. Stock markets wobbled. And then given that Iran did not attack the oil facility or the guy would freeze or block the Strait of Hormuz, it went away. And that was a big, big deal. Venezuela, you know, we can discuss it at length about the macro and market implications are close to zero. It's just less than 2 million barrels a day. Russia, Ukraine is a mess, but it's not going to have an impact on global market economy the way it did in 2000. When it so the U.S., China there, of course, in a competitive strategic competition. But right now, the trade tensions, for all the reasons we know, are some are limited. So every time there is a geopolitical risk, people say stuff could happen. But so far, those that we have seen the last few decades said leaving aside the seventies with the shocks of Yom Kippur, an Islamic revolution over not a market effect.
Do you think, though, that the United States is going to lose some of its luster as an investment haven in terms of the ongoing conflict between the U.S. and traditional allies like Europe? I mean, have you seen anything like that or do you think that's overstated and productivity really is going to rule the roost?
You know, I've been saying since last year that tech trumps tariffs because I think that the upside coming from tech is 200 basis points. Well, if you add the all the impacts of the bad stagflation policies of Trump trade, the restrictions of migration, fiscal deficit, trying to affect the independence of the Fed, the rule of law, the maximum from an imperial point of view, it could be a -50 basis points of downside to potential growth. So you have an upside of 200 from technology. You have a downside of 50 as a ratio of 4 to 1. So tech trumps tariff. So the stuff that these technologies first order, everything else, including geopolitics, is second order.
Is this why the air trade, the market pretty much shrugged off at independence yesterday as a serious concern?
You know, I, I believe that, you know, there is some frothiness, of course, in the sector. But if you talk to all these companies, I think that they would all argue that we are maybe at worst five years away or at best three years away from AGI. However you want to define it. Now, if we are achieving artificial general intelligence, the valuation of data, say, of not every of the max seven is going to reach AGI, but maybe three or four will. So the value of a firm that is going to be having is high is going to be five X of its current value. So that's the race. So if you think of it this way, yeah, there is some frothiness, there can be a correction. But with us growth at 2% for the last few decades, the average return on S&P 500 was 12%, including dividends of that of Nasdaq was 16% and was worth 2%. Suppose growth is not two, three, let alone three. Now for American exceptionalism has to become even stronger because if it was American exceptionalism with 1.8% growth, with high growth, it has to be better than that on average. Now, there would be winners and losers, both within the publicly traded firms old economy versus new economy and among the startups. Many of them are going to go bust. But if you're looking at the medium-term horizon with higher growth, you've got to have high returns. And we are seeing, based on the data on real revenue growth by 6500 firms, that most of those productivity gains are gotten by the firms. Real wages are growing less than productivity. Labor costs are falling. That's why that is my bet. That's why people are worrying about affordability. But from a profitability point of view, the corporate sector is doing great.