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The Laffer Tengler Take delivers sharp market insights and investment wisdom from Nancy Tengler and Arthur B. Laffer Jr., leaders of Laffer Tengler Investments. Each week, Nancy and Arthur cut through the noise with real-time market commentary, concentrated portfolio strategies, and proprietary research that challenges conventional thinking. Whether you're a sophisticated investor or financial advisor, expect bold takes on investing, high-conviction ideas, and the kind of straight talk you'd get over a beer with the pros. This isn't your typical investment podcast—it's where relationships meet returns, and where decades of market experience translate into actionable insights you can trust.
Nancy Tengler: Welcome everybody.
It's Black Friday.
I hope you had a great Thanksgiving.
Uh, Arthur and I are sitting down today
to give you the laugh rectangular take,
and we're gonna focus on two things.
The first is the consumer,
so that's all of us.
And then the second is a review
of the five for 25 that I put out
on December 31st of this year.
We're gonna talk through why
and the performance, and then
next week when I'm in New York.
I will be revealing
the six for 26 on CNBC.
The exchange with Kelly Evans.
She's back from maternity leave,
so we're gonna have a little party
and talk about the six for 26.
So let's get started.
Arthur's got a chart to, to start with I
think, but I'm gonna hand it over to him.
Arthur B. Laffer, Jr.:
Hey everybody.
Um, yeah, I figured.
We figured in honor of Black Friday,
since we've all been satiated,
hopefully with giant Turkey dinners.
And uh, now you've got the other feeding
frenzy, which is the Friday afterwards
where you're getting inundated with
sales, hopefully really good discounts
as opposed to bait and switch.
We thought we'd talk about, um,
really quickly retail sales.
'cause one of the things that Nancy
brought up this week was in between
retail sales numbers we get, which are
monthly, and also the consumer spending
and the real differences between the two.
And there are some pretty market
differences in these series.
It's just one of these things about
our business where, um, especially
with government numbers, you really
have to know what's going into them.
Uh, we've seen issues with the collection.
Nancy, I remember you brought that up
where a huge amount of the CPI calculation
was being estimated way more than normal.
So there's always some kind of
normal sampling to it, right?
Yeah, that's right.
Another Nancy Wynn.
Um, she's not competitive.
Everybody swear to God.
Nancy Tengler: No, I
meant, I didn't mean that.
I meant this is what they're doing.
They're putting their finger up and
Arthur B. Laffer, Jr.:
Oh, you will?
Yes.
One more for Nancy in the one
more than Nancy column as
negative one in the Arthur column.
Nancy Tengler: anyway.
Arthur B. Laffer, Jr.:
So, um, I'm gonna put up a chart
really quick, which is going to
be, um, retail sales and, and
the US consumer spending number.
So here we go.
So if you look at the chart on my
left, which is US retail sales month
over month, and then the chart on
the right, which is US consumer
spending and US consumer spending.
Um, Nancy very kindly pointed
out, is really what goes into the
personal consumption expenditures,
but that's a monthly series.
So this is the quarterly, actually actual
series for actual consumer spending.
Um, and there's some pretty
market differences in these two
series, so they tell you actually
different information, right Nancy?
Nancy Tengler: Yeah, no, you're right.
And the Fed uses the one on the right,
the, the consumer spending number.
their inflation inputs with PCE.
So yeah, they're very different
Arthur B. Laffer, Jr.:
Yeah.
One really, truly is a retail number.
So retail sales really
is about 30% of GDP.
It's monthly and it's
really a goods number.
So it's, it's real,
almost all physical goods.
It's got some food services in it,
but it's really on the, but as a good,
um, excludes almost all services.
Um, this is really a physical,
like, you know, going out and
buying TVs, cars, stuff like that.
Um, and it's a direct
survey as the sample size.
So it's about 5,000 businesses and
they go out and actually do an actual
physical survey business, have to send
it back, um, whereas the US consumer
spending is actually the number that
goes into GDP and it's about 70% of GDP.
It's quarterly, the actual number.
It's all goods and services.
And by the way, this includes stuff
that you wouldn't think of normally,
like the employer portion of employee
healthcare benefits, stuff like that.
I'm sure.
Matching contribution for 401k
at the employer level, so they
include a lot more in this series.
And it's durable and non durables, and
it encompasses a huge number of surveys.
It's not one.
Nancy Tengler: But don't, but don't you
think including the employer portion
is weird because it's not, it's not
like it multiplies in the economy.
The employer takes money from
profits or from a, you know, not
paying employees as much and then
pays par part of the healthcare,
and that's now counted as spending.
I, I just, it's just like how 4 0
1 ks are not counted as savings.
So the distortion
Arthur B. Laffer, Jr.:
Actually, yeah, so, so it's a very
different series and, and Nancy, it's
like, I mean, if you were talking about
like price to book versus p, price to
earnings, I mean, they both have price in
them, but they're very different series.
Retail sales and consumer
spending are clearly not the same.
And you can be very careful
conflating one with the other or
looking at one and saying how much
of an effect it has in the other.
Retail sales is clearly just a subset.
Um, much more volatile too.
Nancy Tengler: I spilled my water.
Sorry.
Just wanna make sure I don't wreck
Arthur B. Laffer, Jr.:
don't fry the computer.
Nancy Tengler: Okay, go.
I'm good.
Arthur B. Laffer, Jr.:
Um, so it's interesting that there's
also on the real consumer, uh, US
consumer, sorry, consumer spending
number, that really is a quarterly series.
Even though we see the, the price
changes, which again, are a lot of
estimates going into the monthly and
the consumer spending number, right?
Nancy, I think is, is, um.
Revised quite a bit and it's revised
historically a lot, whereas the
retail sales owners aren't because
they're coming straight from a survey.
Nancy Tengler: Oh, nice.
So, so what do you, okay, so when
you look at this, what do you take
away as it relates to the consumer?
Because we're hearing all this noise
about, you know, the consumer's
not, not spending the low end
consumer is, is defaulting on debt.
But I looked at credit card
receivables and they looked, um, flat.
So I'm just wondering what
you think about the consumer.
'cause as you point out, it's
two thirds of the economy.
Arthur B. Laffer, Jr.:
Yeah.
And, and, and so some of these numbers
are giving us, I, I think what we would
expect based on just the headlines we see,
you know, they talk about the consumers
more strapped, but yet you're right.
And not only that, mortgage, mortgage
delinquencies really aren't rising either.
It's student loans,
credit cards, and autos.
Um, and I think what you're seeing is
the weaker the weekend of the consumer.
We used to call it the
subprime mortgage lender.
Yet clearly under more stress.
Um, we deferred student loans forever.
I think people thought they were
never gonna have to pay these things
back or make payments on them,
and these are new days, so they
have to start paying them back.
And those pe that that certain demographic
groups are gonna have to adjust their
spending and their consumption and their
debt loads and how they're financing
their debt, whether it's cash drawdowns
on credit cards, or are they using
like home equity lines of credit?
What are they doing?
Nancy Tengler: Okay.
Arthur B. Laffer, Jr.:
But it's not showing up in mortgage
delinquencies, I'll tell you that.
Nancy Tengler: Right.
Which is important because that,
that's when you have problems.
And then what, what do you
think about the, the work, the
unemployment rate, and whether or
not, you know, labor is weakening?
Because that, that's what
we've been hearing too.
That labor's weak.
It's, it's, it's a problem.
It's a canary in the coal mine.
What do you think about that, Arthur?
Arthur B. Laffer, Jr.:
I, I, I don't think, I mean, we look
at the metrics, you know, you're
seeing people, the quits numbers
falling, the hiring numbers falling.
Um, unemployment claims really
aren't going up that much.
I mean, a four and a half
percent unemployment.
And this unemployment's a weird number.
It's one of those ones.
Nancy, and I know you and I have
spoken about this, probably ad nauseum.
It's one of the few series
that doesn't get revised ever.
Um, so they don't go back and fix it
if they find an issue with it, uh,
which is unusual for the government.
'cause usually they're always
changing stuff all the time and
you can never figure out what the
actual number was or is or anything.
But the, the labor market
looks like it's changing.
I don't know that I really
see that it's inherently weak.
It is just very different I think.
I think this comes back to
Nancy, that that we're at an
inflection point for the economy.
The economy's trying to shift from really
being focused on services to the current
administration, changing the playbook and
trying to push the US back into, into much
more of a manufacturing non-service role.
And the economy is like,
it's like turning a Titanic.
It's really hard to turn it, but once you
turn it, you can't stop it from turning
Nancy Tengler: from turning.
Right,
right.
you Yeah, no, no.
I, I think I agree with you.
I mean, we're at four point
a half percent unemployment.
If you, if you look back over
other periods, I mean, 5% was
considered full employment.
We're below that and yet
people are ringing their hands.
Because, you know, their kids getting
outta college can't find a job.
Well, welcome to the world.
I mean, I had a heck of a time finding
a job when I got outta college.
Um, I, I think that that's
part of the rite of passage.
You gotta figure it out.
And, um, I mean.
The, the numbers I saw were, it's,
it's the young, very young and older.
So 55 and older are getting laid
off early, um, or retired early,
uh, because they're expensive.
And so in this new world of ai, you
know, I mean, one of the things that
just struck me in, in Walmart's earnings
is that 50% of their fulfillment, so.
Think logistics factory, 50% of the
orders are being fulfilled automatically.
So it's, it's all Rob robots.
I, I think Amazon's actually higher,
but, but Walmart came to the party
a little later and, and Target's
missed the party entirely, but,
and they're, and they're doing it,
they're delivering, 30% of packages
are being delivered in three hours.
That, that's kind of amazing.
Uh, and they're using AI robotics.
You know, the whole shebang.
So I think we're gonna
continue to see more of that.
And then the jobs will either get upgraded
or the, the people will be redeployed.
But Walmart has committed to not
shrinking their workforce any
further and sort of growing their
way out of the problem they're
delivering on the earnings, they're
delivering on, uh, same store comps.
And I think e-commerce was up
27% on a really big number.
To start with.
So I, I think employment's fine and
that, you know what, what you get in
the, in the stock market that I don't
think most people really understand
is you get a big, giant group of
people that are talking their book.
So it starts in the morning
with the headlines, the computer
programs or the algorithm.
Read the, the headlines, they
start buying or selling and
then the hedge funds jump in.
And so it exacerbates the volatility.
But that creates an opportunity for our
firm, as you know, 'cause we get to buy
the really high quality companies on sale.
Arthur B. Laffer, Jr.:
Well, you know, you also, we
didn't mention, but GDP, I
mean, the last quarterly report
was, uh, annualized at 3.8%
real.
Uh, you got GDP now that's bouncing
around 4 1 4 2 range from the Atlanta Fed.
So if, if those numbers are real, if
they're, if we're actually looking at
an economy that, that is that strong
for something the size of the us.
It would beg to actually be more
supportive of labor being strong,
because if you're growing the economy,
I, I think you can only get right
at this point, you can only get so
much from AI right now, or robotics.
You still have to hire because you
can bring people on and get them
productive right away, whereas
it takes quite a bit longer.
And in fact, we talked about that
one client of ours that Nancy, you,
you talked to them that had a machine
that they couldn't get running
because they didn't have the technical
skills get, wasn't that right?
They couldn't get the machine set
Nancy Tengler: there.
Yeah.
Um, yeah, it's nuts.
But I, I just wanna
clarify one thing you said.
'cause you said real twice
and it had different meanings.
So the GDP numbers are real,
um, which means after inflation.
So if they were nominal,
that would include inflation.
So when you've got two to 3% inflation,
that means nominal growth or the
growth that we all think about
before inflation is close to 7%.
That's, that's pretty amazing, as
you say, for an economy this size.
So, um.
I think things are much be, and the market
has come back nicely after, you know, the,
the short sellers, uh, did their damage
and then it just, you know, it stepped
to one side and started rallying again.
So I think we will continue to see
a rally into the end of the year.
Um, bond yields, you know,
we, we looked at that today.
You and I were talking about it.
I don't know.
I mean, if we get a cut and I think
we both think, we think we're gonna
get a cut in December, whether we
should or not, different debate,
but we think we're gonna get one.
Um, what that does to the yield curve,
I don't know, mortgage rates, neither
one of us knows, but eventually,
eventually the Fed's gonna get it right.
Arthur B. Laffer, Jr.:
Well, that
was your title.
Oh,
Nancy Tengler: Oh yeah, go ahead.
Sorry.
No, no.
For you.
I was just gonna ask last question.
Who do you think is going to be the,
the chairman of the Federal Reserve?
And, um, what, what do you
think about who you think
Arthur B. Laffer, Jr.:
Yeah, actually that's what I was just
gonna, I was gonna bring up our call
last week when we talked about the Fed.
I, I, I think Kevin Hassett, I know he's,
I've seen him more in the publications
as being kind of the, the front runner.
Um, I think Kevin has, it probably
makes the most sense as opposed to
like, um, a wash or someone else.
Mostly because he's, in this case,
we haven't had a, a real economist
in the, in the, at the head of
the Fed for a long time now.
But, but Kevin's a real economist.
He's a conservative economist, which
you want, by the way, the, the,
uh, the head of the Fed is not,
the guy at the head of the Fed is
not a guy who says, I don't know.
Let's try something new.
You know,
Nancy Tengler: you know,
you don't mean conservative politically.
You mean conservative in
the way he approaches.
economics
Arthur B. Laffer, Jr.:
Yes.
How, how he approaches policy.
Yeah.
And, and managing, uh, managing a
federal reserve banking system, which
is the backbone for the economy with
regard to money, inflation and output.
You know, not making sure the
economy doesn't overheat or stall
out, and really focusing on the real
two fundamental jobs of the Fed.
Um, that's what you want.
You want stable, conservative.
Uh, right now, Jerome Powell,
most people probably don't know,
is not an economist by training.
He's a lawyer by training.
Um, Kevin Hassett is a, is an economist
by training and he's a good economist.
And more importantly, I think
also is when you're chairman,
you're trying to build consensus.
So it's not just about being smart
and, and understanding the, the
metrics, but it's also about building
consensus and getting people to agree
upon, 'cause this is a voting process.
You agree upon what policy should be.
And Kevin Hassett is nothing, if
not a, personally, a very nice man.
I've met him on numerous occasions,
um, through family Connections and
our old Laffer Associates conferences.
Super nice person in general,
and he's already been vetted.
So he doesn't have to go through
this whole vetting process like he
brings someone from the outside.
They gotta go through the
Senate confirmation process,
which is not gonna be fun.
Nancy Tengler: No.
Well, and he's a fine man.
Uh, you probably don't remember this,
but you asked me to introduce him at
the last Laugher conference, I think.
And one of the things that strikes me
about him when he, and 'cause I'd seen
him only on tv, he's always smiling.
And so I asked him about that.
And this is a paraphrase, folks,
so don't quote me, but I feel
like he said he woke up on a, um.
He couldn't have woken up on the
operating table, but he woke up after
a heart attack basically and decided
he was pretty darn lucky to live.
And so he's just been
like that ever since.
And if you have what people are calling
it divided Fed, uh, he is the right man
to go in there and just smooth things out.
Listen, he's very soft spoken.
so
Arthur B. Laffer, Jr.:
Or Paul Voker.
You need one or the other.
You need someone who's, again, an
economist, but they just are driven and
they're like, it's my way of the highway.
And they're just gonna bludgeon
their way and make everybody agree
because they're scared of him.
'cause he is like 27 feet tall.
Although that's, that's more
likely he looks like with my dad.
but
get you on a great d.
Nancy Tengler: I was just picturing
that, I don't know if people know
how tall your dad is, but not
Arthur B. Laffer, Jr.:
He was five six.
I don't know what he is anymore.
Nancy Tengler: at one point.
Yeah.
Well
Arthur B. Laffer, Jr.:
There's a funny picture of, I was
gonna say, there is a funny picture.
You know, the one with Paul Volker,
my dad standing next to each other.
I think there was a ticket
in Colorado at one time.
And, uh, it's pretty funny seeing
Paul Wilker standing next to my, my
dad that and, and, and Klitschko.
There's a picture of my dad and
Klitschko and they both look about the
same.
Nancy Tengler: Well, what, while I'm
talking, if you can find it and put it up,
I think that would give us a good laugh.
Um, so I'll be quick Arthur.
'cause it's Friday, it's Friday afternoon.
Um, but.
It at the end of, uh, 20 20 24.
Um, I was reading a number of stories
by, by hedge fund managers and, um,
I'm gonna read this so I'm not looking
at the camera, but, um, there was
one that the Wall Street Journal,
um, banking, uh, columnist, retweet
and, and it, and it said, uh, I'm
not very good at what I'm doing.
Hedge fund manager
Richard Tos raw Mea Kopa.
Details how he ignored Nvidia and
Bitcoin and misread tariffs and
lost over 35% through November.
Recall, the market was up.
Double digit 20 something
percent I think last year.
So, um, the fact that this guy would
say that, you know, I'm not very good
at what I'm doing, and this is one of
the big mysteries to me, that people
continue to give their money to hedge
fund managers who have underperformed
the s and p by, um, by seven or
8% annually for the last decade.
So they're, they're not, when you're.
Churning and, and trading.
It's very hard, uh, to make
the right decision every time.
And we've seen that from
strategists over the years.
They can, they can tell you when
to get out and then they forget
to tell you when to get back in.
They just can't call both sides of it.
Um, and then David Benoit, who is
also a hedge fund manager, said,
I pretty much missed all the major
themes in the last two years.
I was hopelessly out of sync with the
market buying, when I should be selling
and selling, when I should be buying.
I was just like, and he said he
put it, posted it on Twitter.
So I, I don't know.
But, um, the average return of,
uh, yeah, in 2023, hedge funds
achieved an average return of 6.4%
and the S&P returned 26%.
And part of the reason for this, um, is
that they continue to over diversify.
And so this kind of motivated me.
Um, and, and last thing I'll say, um.
No, I'll, I'll let that go.
So this motivated me to come up with
five for 25, and so I just thought
I'd go over 'em real quick because
I think that it's instructive.
Um, I wrote, when I wrote my, the first
edition of my book, I found an old
interview that I'd given that was, um.
Five stocks I'd given to the Wall
Street transcript, and it was 10
years, almost to the day earlier.
So I calculated the performance
and the portfolio dramatically
outperformed the S&P Remember, we had
2008 and 2009 Bear Market in there,
but it, it was only because two of
the stocks dramatically outperformed.
One performed in line and.
two Dramatically underperformed, but it
was the, the power of the concentration
and the high quality focus that even
though they underperformed, they generated
positive return for the most part.
And so the portfolio was up a hundred
full per percentage points above the
S&P during that timeframe that it.
It's, it, it's fictitious and it was EI
mean, I just assumed an equal weighting.
But with the five, for 25, I
basically did the same thing.
And these are all names that we own.
Uh, the first one was Amazon.
It was a name that we owned
and still own in growth and in
the 12th best ideas portfolio.
Uh, there were a whole bunch
of reasons we liked it.
You're gonna see in a moment.
Didn't work out very well.
But that's okay.
'cause the portfolio's still outperformed.
ServiceNow is one of my favorite
companies in the software space, but
it's been, um, sidelined because you
keep hearing these stories that AI
is gonna do away with, with software.
The problem is, um, this particular
software drives, uh, that all
the AI traffic on the cloud.
So I don't think it's going anywhere,
but it's down over 24% this year.
And that was in the five for 25.
But then we had Spotify.
And we had Broadcom and we had,
uh, Goldman Sachs in the portfolio.
And so if I can find it, the return
for the, the equally weighted
portfolio, uh, through today is 27.7%,
and the S&P's up 17.8%.
So Broadcom was up 75%.
75.1.
Goldman was up 46.5%.
Spotify 33.9,
Amazon only 6.3,
so that was one that was positive,
but still underperformed and
then ServiceNow's down 23.4%
year to date.
So I just think it's.
Super instructive because in the,
in the investing business, you
don't have to get everything right.
You just have to get it mostly right.
So the portfolio's outperformed.
If it were a real portfolio, um, it
might have slightly different nuance.
So I don't want to sell
this as, uh, something real.
It's just five names that we
thought would outperform and
they did, uh, so far this year.
And I expect we will see that carry
through, through the end of the year.
So, um.
the six for 26.
I'm struggling.
I, I, I'm down to seven
and I gotta get rid of one
Arthur B. Laffer, Jr.:
You added one.
Nancy Tengler: about You added one.
What's that?
Arthur B. Laffer, Jr.:
You added one from this morning.
Nancy Tengler: morning.
I did,
I did because we talked through it.
Um, and thank you for that.
But, uh, yeah, so I'm, I'm just kind
of, I'm gonna finish it up tonight, but
I'll talk about it on Monday on CNBC.
So.
Arthur B. Laffer, Jr.:
Yeah.
The only thing I wanted to add
is, you know, we talk about
professional investing versus say.
More, less professional investing, like
what we do for a living versus what
some people can have better returns
than a lot of money managers out there.
It depends on what they're doing,
but it it discipline and process.
And one of the things I was
always taught is if the more,
the more information you have.
About what's gonna happen or what you
believe is gonna happen the more you
concentrate your investment portfolio.
And the extreme example, and this is an
example of hypothetically, if you had
the Wall Street Journal stock section,
the stock price section A, you know,
basically in a year in the future,
but you had it right now, the question
is how many stocks would you own?
What you do is you'd go through
and find the highest performer
over the next 12 months, and you'd
put 100 of your money in there.
And the, the point is that with
perfect information, right, which no
one has, but the perfect information,
you concentrate like mad, right?
You pick the best, and if you
were shorting, you'd pick the
one that fell the most, right?
But no one has perfect information.
No one has a crystal ball.
But there's a, there's a, there's
a really a professional way
that you build portfolios such
that you make concentrated bets.
Such that they're not bets, they're
basically your skillset looking at
companies and you look ahead and
say, what do I think is gonna happen?
How do you build a portfolio?
And to your point, they
don't all have to be winners.
They don't have to be.
In fact, very rarely
is that ever the case.
Probably almost never the case.
But you have more winners because
you're smarter and you do have a
skillset that lets you see where
you think things are going and
who's gonna take advantage of that.
It also comes down to Nancy.
Some of the things that quant versus
non quant is management matters.
And if you don't believe me, listen
to what Nancy said about Walmart
versus Target, and go look at what
management's done to one company
versus the other, and why Nancy likes
Walmart much more than target these
Nancy Tengler: and we don't own Target.
Yeah,
Arthur B. Laffer, Jr.:
and that's
Nancy Tengler: no, you're right.
And that's what we try
to do at Lap Rectangular.
I mean, I think we do it pretty well.
I mean, you, if you make concentrated
decisions, I don't like to call them
bets, but if you do the research and we
do, we sit on all the earnings calls,
uh, the team talks about the names.
You and I talk about the macro.
Uh, I'm cons.
This is all I think about unfortunately.
But, uh, you, if you are thinking
ahead and you are, if you have.
Experience.
You know, I think you remember we had
an analyst at one point that said,
I don't have to have experience.
I can just read about it.
And that's, that's, that's,
those are the people that are,
um, populating the hedge funds.
You have to have the experience.
I've managed money through the 1990s.
This is not.
That.
And so with all this bubble talk,
you know, gave us an opportunity to
add some names last week and, um,
you know, we'll continue to do that
and at some point the party will
end, uh, but we're not there yet.
And so it's a bigger risk to get out two
years too early than it is to stay in and,
and maybe get out just a little bit early.
And so that's, that's one of the
things that, um, that I think is
really important for people to.
To think about and then
just don't pay attention.
Let us worry.
That's all we do.
So anyway, I know you know that 'cause
you run a top fixed income strategy,
it's, it's about getting it mostly right.
So
anyway, so that's the five for
25 stop solid performance this
year so far we're almost done.
We got one month to go.
Uh, and uh, we would expect that the six
for 26 that figure out what they are,
will be, uh, equally as interesting.
Arthur B. Laffer, Jr.:
So you gotta stay tuned everybody to hear
Nancy Tengler: Yeah.
Arthur B. Laffer, Jr.:
for 26.
Nancy Tengler: Thank you.
All right.
Well you have a great weekend, Arthur.
Thanks so much.
Arthur B. Laffer, Jr.:
Thank you.
Thanks everybody.
Nancy Tengler: Thanks, bye.