20% Market Crash By Year-End Is Just ‘Tip Of The Iceberg’ | David Woo

Here is a chronological list of distinct topics, claims, and statements from the transcript:

1. The US strategy aims to control every choke point of technology globally, requiring other countries to rent technology from American companies and pay substantial fees. This approach is intended to prevent China from accessing these technologies.
2. Consumer sentiment has fallen to its lowest level in months, prompting a question about whether this signals an uncontrolled economic spiral.
3. David Woo, CEO and founder of David Woo Unbound, is introduced as an expert with a long career in macro research on Wall Street, holding a PhD in economics from Columbia University, and experience at the IMF, Barclays, and Bank of America.
4. Trump is reportedly backing off previous threats and preparing substantial tariff cuts, aimed at addressing high food prices and facilitating new trade deals with countries like Argentina, Guatemala, El Salvador, and China.
5. Trump's motivation for these actions is the upcoming midterm election, less than a year away. He has an overwhelming incentive to ensure his party retains congressional majorities to avoid becoming a "lame duck" and facing a major legal onslaught, including a potential impeachment trial over $5 billion in crypto dealings.
6. Trump believes he can win the midterms, despite historical odds (president's party loses seats in 20 of 22 past midterms). His current approval rating is 42%, significantly lower than past exceptions like Clinton and Bush (mid-60s).
7. Trump's lowest approval rating is on his handling of inflation (35%). It is assumed he will do everything to drive down inflation over the next six months, including reversing tariffs and lowering gasoline prices, leading to lower inflation next year.
8. There is a perceived contradiction in Trump's actions: if he is concerned about fighting inflation, he should not pressure the Fed to lower interest rates, as this would exacerbate inflation.
9. Trump is described as a political opportunist with excellent political instincts, and his current focus is on the midterms and improving his approval ratings.
10. More fiscal stimulus is anticipated, specifically a $2,000 "tariff rebate" or "dividend." This is seen as a politically smart move to be passed through a reconciliation bill before the Supreme Court rules on tariff constitutionality.
11. Trump's second year in office is expected to be significantly different from his first, as he cannot afford to lose congressional majorities, which would make his administration "miserable."
12. There's a notable perception-reality gap regarding inflation: actual inflation is around 3%, but public perception suggests it's a much larger problem, as indicated by Trump's low approval on the issue.
13. Republicans need to communicate their accomplishments more effectively and focus on tangible actions that directly benefit ordinary citizens, such as rolling back tariffs on consumer goods and lowering gasoline prices.
14. The proposed $2,000 prepaid check is considered an excellent idea because it would be a highly visible and undeniable benefit for voters, despite concerns about its impact on the budget.
15. Consumer confidence has been collapsing, a decline typically associated with the onset of a recession, not a new presidency, making the current magnitude of decline highly unusual.
16. The collapse in consumer confidence is attributed to tariffs. While tariffs haven't significantly boosted inflation (CPI at 3%), this is because companies lack pricing power due to weak consumer sentiment and fear of losing sales if they raise prices.
17. Companies unable to pass tariff costs to consumers are experiencing pressure on operating margins, leading to cost-cutting measures and layoffs. AI is increasingly used as an excuse for these layoffs.
18. Layoffs this year have reached nearly a million people, the highest since the pandemic. Consumer confidence is low due to job insecurity, rising prices, and widespread worry about an "AI bubble."
19. While the labor market would still be somewhat weak without tariffs, the current severe weakness is largely attributed to them. Tariffs, intended to boost US manufacturing, are paradoxically causing job losses in sectors like autos and furniture.
20. General Motors' operating margin significantly dropped due to tariffs, illustrating why companies are laying off workers despite the stated goals of the trade policies.
21. US manufacturing jobs are being lost, with 12,000 shed in August and 42,000 since April, primarily in the auto and furniture industries, which is ironic given that tariffs are advertised to bring jobs back.
22. The tech sector has been strong, with AI being the primary driver. Without AI, the US economy would likely have entered a recession due to tariffs.
23. AI's contribution to the economy comes from significant capital expenditure spending and a "wealth effect" from $14 trillion in wealth creation since April, largely benefiting wealthier individuals.
24. Trump was fortunate that the AI bubble's exponential growth averted a recession that tariffs would have otherwise caused. The critical question for 2026 is when the AI bubble will burst.
25. A NASDAQ decline of 20% or more, which is predicted to happen this year or within the next three months, would trigger a US recession and jeopardize Trump's midterm prospects.
26. The decision to short NASDAQ was prompted by Larry Ellison becoming the second richest man after Oracle's stock rose 60% following OpenAI's announcement to spend $300 billion on Oracle computing services.
27. Sam Altman's strategy for OpenAI involves pushing for a trillion-dollar IPO by announcing numerous partnerships and promising to spend money the company does not yet possess.
28. The recent NASDAQ rally is largely driven by OpenAI's ambition to become a hyperscaler, directly competing with Microsoft, its largest customer and partner, which is seen as a bearish indicator for the overall AI sector.
29. Despite arguments that ending quantitative tightening and potential Fed rate cuts should boost risk assets, the Fed is concerned about AI valuations. Jerome Powell's pushback on a December rate cut signals the Fed's reluctance to fuel the AI bubble.
30. The Fed is wary of repeating past mistakes like Greenspan's handling of the dot-com bubble or Bernanke's with the housing bubble. They are likely concerned about the AI bubble and will refrain from cutting rates if NASDAQ continues to rise.
31. The AI revolution faces a massive funding gap, estimated at $1.5 trillion, which will likely be covered by mainstream high-grade bond markets, effectively funded by retirees and pension funds.
32. The immediate concern is not the funding gap but the inability of the tech industry to monetize AI. An MIT report indicates only 5% of US companies are using AI for positive profit and loss contributions, with 95% stating the technology is not yet ready for prime time.
33. The slow pace of AI technological advancement (Chat-GPT 5.0 only 20% better than 4.0 after three years) combined with the rapid depreciation of AI chips (losing value in three years) suggests the AI revenue story will quickly challenge the bubble's sustainability unless Artificial General Intelligence (AGI) emerges soon.
34. Job data is identified as a key economic indicator, although the current data blackout (due to a government shutdown) means October data is unavailable. This will delay meaningful interpretation of November data until potentially 6-8 weeks later.
35. China poses a significant risk to the AI bubble, as both the US and China view the AI battle as crucial for economic hegemony, employing vastly different strategies.
36. The US strategy is to control all technology choke points, from chip design to hyperscalers, to dominate technology and rent it globally, thereby excluding China.
37. China's strategy is to commoditize AI, driving its price to zero by making large language models open source and having numerous companies develop low-cost AI chips. This aims to break the US technology stranglehold and potentially bankrupt US tech.
38. While NASDAQ's high valuation prices in a US victory, China is rapidly catching up, evidenced by Baidu's upcoming AI inference chips and Chinese companies developing their own complex semiconductor manufacturing equipment.
39. The US lead over China in sensitive technologies, once estimated at 2-3 years, has now shrunk to approximately 6 months, causing concern in Washington and among US tech giants like Microsoft and Amazon who oppose Nvidia selling chips to China.
40. China's determined push to catch up in AI is driven by Beijing's focus on winning economic hegemony rather than short-term profits, allocating all available funds to R&D and tech companies.
41. For investors, positioning in India is recommended. Despite being the worst-performing stock market in 2025, India is the fastest-growing economy and is expected to be a major beneficiary of the escalating US-China tech rivalry.
42. India's growing manufacturing capabilities (e.g., iPhone 17 being made there) and its large pool of skilled tech talent position it to leverage AI and geopolitical shifts for future growth.
43. David Woo retired from Wall Street in 2020 after leading the top-ranked macro strategy team, moved to Israel, and now runs an advisory business, teaches, and gardens.