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>> People are feeling confident about the

here and now, but not so confident about

what's around the corner. And that is

actually the similar backdrop that we're

seeing actually play out in the markets.

You see that in the price action, a lot

of euphoria or at least a lot of

optimism about the short term, but a lot

more trepidation about the long term.

Abby Joseph Cohen has seen quite a few

economic and business cycles. A

legendary economist and financial

analyst, now a professor at the Columbia

Business School, also of course former

partner and chief US strategist over at

Goldman Sachs. And Abby, I do want to

start off talking about uh what the

market is kind of telling us because we

talk about equities of course right now

still camped out near record highs, but

then you look at some of the moves that

we've seen in Treasury yields which

seems to suggest at least among bond

investors that they're a little less

sanguin about the longer term picture.

What do we pay most attention to? What

should we?

>> Well, Roma, you've laid it out quite

well in your introductory comments. You

know, basically this is an equity market

that is being driven, at least for now,

by very favorable earnings outlook. Um,

we've had great reports and the

expectation is that many of the leading

companies will continue to be very

profitable, strong margins, strong

returns on equity. However, when we look

at the rest of the economy, things are

looking okay, but not great. And that's

what those consumer confidence numbers

are saying to you. You know, we

basically see, for example, that middle

inome consumers are not feeling all that

great about either their own financial

situation or perspective employment and

wage gains. And that's something that's

quite telling. Among the things to be

looking at, by the way, will be a real

time metric of consumer confidence. And

that, of course, is consumer spending.

Um, back to school sales will be

important, but let's keep in mind that

many of the retailers are trying to

juice up those sales by doing their

Halloween uh uh offerings very early.

Uh, so that's something that will make

the year-on-year comparisons a little

bit difficult to read. We're also

looking at a situation where the

consumer balance sheet is looking more

awkward than it has in the past. We see

an uptick, for example, in subprime

borrowing for autos, for example. And

let's not forget, we're now seeing the

pinch from some of those changes that

were made in that big omnibus bill that

was passed in January 2025. We know that

many middle inome and lower middle-

inome households have lost their medical

insurance coverage, and that of course

says something about whether they can

afford to be spending on other items. I

do want to go back to the consumer

spending thing and this also gets to the

a lot of questions about uh the economic

data we get and how reliable it is uh in

the moment. I was looking through a lot

of the corporate earnings that we've had

particularly among some of the uh folks

in the retail space. Uh and they have

not necessarily been good. I mean we're

going to talk a little bit later in the

show about Dick Sporting Goods uh which

I missed because of higher promotions

that it had to make to get people back

in the store. Last week, Walmart posted

its slowest comp sales growth in about

six years. On holding, Under Armour,

Nike, you name it. A lot of these

companies in their most recent earnings

report seem to have suggested a choosier

consumer and a consumer for some of them

that isn't choosing at all. Should we

pay more attention to what we're hearing

out of some of these companies rather

than maybe what the official economic

data says?

>> I think it's important to look at both.

you know those retailers that you site

are very important because these are the

large public companies but one of the

things that the aggregate uh data from

the commerce department uh picks up is

what's happening for mom and pop

retailers. You know what's happening for

those retail companies that are not

included in the market indices and those

numbers don't look particularly good

either. you know we see that personal

consumption spending um is know just

about 2% 1.8% 8% that's not as robust as

we might like. In fact, when we look at

aggregate GDP numbers where is the vigor

coming from a lot of it is just coming

from business fixed investment and even

there it's primarily equipment uh which

is growing something on the order of 11

or 12% on an annualized rate. Business

fixed expenditures for structures

buildings is actually down 4%. So this

is an economy that is very uneven in its

growth and the middle income, lower

middle- inome consumers are not where

the vigor is. Not at all.

>> Well, this is also an economy, Abby,

where we're seeing so much spending on

the buildout of artificial intelligence

infrastructure. How do you kind of see

that weighing on pricing pressures and

economic growth going forward?

Well, there are so many different ways

to to slice and dice that. I'm glad that

you asked that question. Um first of all

there is the accounting question that is

very comparable to that cross holdings

uh situation in Japan in the 1980s where

there's the circularity uh to a lot of

the accounting where different companies

in the industry or related industry are

basically borrowing and lending money to

one another and it shows up in some

cases as earnings uh and in other cases

as a prospected revenue. So that's one

thing to keep in mind. The second thing

to keep in mind is whether there is in

fact a a sustainability to some of what

we are seeing particularly when it comes

to growth in data centers uh and also

growth in expenditures on on some of the

chips and so on. Uh now look, I'm I'm

not uh at all um um saying that there's

not something very unique happening, a

structural change as it relates to AI

and so on. However, we also have to keep

in mind uh that some of the spending

that we're seeing and some of the

accounting that we're seeing may not be

sustainable.

>> Yeah. Talk a little bit more about that.

Is it already clear to you what sectors,

what companies are starting to become

the winners versus the losers of this AI

race?

>> Uh there are other people who are very

close to this situation who have

identified uh winners and losers. uh I

think we look not just only at the

companies but we also have to look at

the geographies um which are the

communities and which are the countries

uh that are likely to do quite well in

in this environment. Um you know AI uh

has much promise to it. What we've not

yet seen is whether there has been a

boost in labor productivity. Uh that's

certainly has not come through at least

to this point. Uh maybe it's too soon.

So that's number one. Number two, we see

that many of the companies that have

invested heavily as customers in AI uh

say that they are continuing to spend uh

but they have not yet seen uh the

benefit to themselves. So to answer your

question at this stage which is pretty

early still when you talk about a

technological uh innovation um that is

hopefully uh going to have positive

impact throughout the economy uh the

beneficiaries thus far have been the

suppliers and the providers um and we

have not yet seen it in terms of an

economywide process.

>> When do you think though we'll start to

see that gap between the amount of AI

investment and these productivity gains?

I I feel like past cycles we've seen

this before where the spending far

outpaces the gain the returns but

eventually it catches up. I mean what is

the lag time uh historically? What does

that tell us?

>> Well the most recent period of course

was the 1990s uh with the so-called TMT

which was internet telecom media

communications and so on. Uh and there

the lag time was something on the order

of 2 to 3 years. Uh we also have to keep

in mind that the economic data uh didn't

keep up uh because many of the economic

statistics were tracking some of the

older companies that were not

participating. Uh but there's some

fascinating work going back in economic

history looking at the canals of the

1820s or or the railroads of the 1840s

and 1850s. Uh electricity generation in

the late 19th and early 20th century and

so on. And there very often uh the lag

was measured in terms of many many

years. I don't think it's going to take

that long this time. I think we're

looking in terms of one or two years.

And if the heavy spending uh doesn't

lead to uh propitious results for a

particular company, uh one can assume

that they will uh cut back or at least

they'll try to rationalize uh the

spending that they've been doing in this

category. Uh, Professor, I do want to

get your thoughts on the Jackson Hole

uh, meeting uh, which kicks off uh, uh,

this week. Uh, Kevin Walsh's speech uh,

on Friday ostensibly about financial

innovation and payments. I assume people

are going to be looking for something

maybe a little bit different uh, than

just what that headline uh, suggests.

But you started your career inside the

Federal Reserve and I am curious that

when a chair, new chair I should say,

steps up to that podium for the first

time, who who are they speaking to? Are

they speaking to the audience in the

room? Are they speaking to the market?

Who

Uh hopefully they're speaking to all of

us. Um Mr. Walsh um as you know did not

get rave reviews from the markets uh

when he did his first uh post FOMC

meeting uh press conference. Um and the

argument at that time on the part of

many was he didn't really provide very

much information or guidance. And the

sort of guidance that the markets are

looking for is not to be told, gee,

we're going to do this or that to

interest rates in a very specific time

frame, but at least to understand what

the variables are that he's most

interested in looking at. And I do think

that uh we will be hearing more of that

if not short-term at least what he's

looking at intermediate to long-term.

Number one. Number two, also structure.

uh he has spent a good deal of time thus

far at the Fed thinking in terms of

whether the Fed is handling itself

appropriately when it comes to things

like communications,

regulatory oversight, data collection

and so on. And I hope that we hear more

of that. And the third thing too is that

the attendees at this meeting come from

all over the world. And I'm hoping that

he will have an opportunity uh not just

in that public speech, but of course

behind the scenes and private meetings

with other central bankers for them to

come to some understanding of what

they're all looking at, what they're

concerned about uh and how they think

they can uh do uh better uh moving

forward. And when I say better, I'm

talking in terms of uh coordination,

communication, uh and also, dare I say

it, risk control. You know, one of the

things that the central bank in any

nation uh has as its responsibility is

to think about what to do if things go

wrong. Now that might be a very low

probability scenario, but it's something

that we expect central bankers to be

prepared for, not just in their own

countries, but also as they work with

one another as the Fed handles the

central banking for the world's largest

economy and largest banking system. What

Mr. Walsh tells everyone both behind the

scenes and in front of the camera in

this regard is really quite important.

>> All right, Abby, have to leave it there.

really appreciate you joining us. Abby

Joseph Cohen, of course, needs no

introduction. one of the greatest minds

uh in the world of business and finance.