Henry Ellenbogen on productivity gains from AI

You can’t understate what is going to happen to productivity in this country.  Based on where AI is now, the marginal cost of intelligence in white-collar work is going to zero over the next several years.  I’ll give you some examples.  MercadoLibre is doing seven times the number of transactions it did several years ago, even as the number of customer service specialists has fallen to 7,000 from 10,000.  Rocket Mortgage has said that it can serve 50% more clients per loan officer.  In the physical world, trucking companies are using AI to leverage better data systems... 

Knowledge workers are using AI – in our case to do investment research – or look for novel drug targets, or improve productivity in coding.  Enterprises will continue to pay a premium for better intelligence powered by frontier models, which continue to advance at a rapid rate.

Those who say capex is going to implode may be looking at consumer-oriented AI technology, which has become commoditized.  They aren’t taking into account advances in intelligence that will drive advanced applications and scientific breakthroughs.  Over the next 10 years, we may have 50 years of advances in medical science.  Companies that climb the productivity curve first will be able to cut costs, reinvest in their customers, drive revenue growth, and reinvest capital to create enduring competitive moats.

Companies don’t all climb the curve at the same pace.  I foresee an unequal playing field.  The Mag Seven will do well, and a lot of smaller companies born in this era will climb the curve and unlock productivity gains.

~ Henry Ellenbogen, "The Roundtable: Part 1," Barron's, January 10, 2026

 

Lauren Rublin: "few see a deep or lengthy recession in 2023"

[F]ew see a deep or lengthy recession in 2023. 

~ Lauren R. Rublin, moderator of the 2023 Barron's Roundtable, January 9, 2023

Roundtable participants:

If we have a recession, it will be mild.

~ David Giroux, CIO, T. Rowe Price Investment Management

The magic money tree is over.  That and a global energy shock will likely lead to a modest global recession.

~ William Priest, co-CIO, Epoch Investment Partners

If the Fed stays on course on rate hikes, we are going to have a recession.

~ Scott Black, founder, Delphi Management

My assumption is that there won't be a recession, even though we could have two quarters of disappointing GDP.  But any downturn will be brief, so I am assuming no recession.

~ Abby Joseph Cohen, Professor of Business, Graduate School of Business, Columbia University

January 16, 2023

Laura Rublin on economic stimulus

Ultralow interest rates and ultrahigh spending by the Federal Reserve and federal government helped the U.S. economy not only survive the devastating impact of the Covid-19 pandemic, but also thrive in its near aftermath.

~ Laura Rublin, "2021 Midyear Roundtable: Yes, There's Plenty of Value Left in This Market," Barron's, July 17, 2021

Kevin Duffy on the financial establishment's addiction to stimulus

Never forget, the seeds of this mess (still in the first inning) were planted August 3, 2007, over a year before the 2008 meltdown.

They know nothing!!
~ Jim Cramer

Don't let revisionists like Reshma Kapadia at Barron's convince you otherwise:

It took a while before Congress, the Fed, & global policy makers were able to band together during the financial crisis to heal the global economy & set the foundation for an 11-year bull market.

Meanwhile, the Pavlovian response from Barron's is to call for aggressive stimulus to deal with Covid-19 and the stock market selloff:

Unlike the reaction to the financial crisis of 2008-09, the response to the spread of coronavirus has thus far been limited... As a result, the U.S. may face the steepest drop in economic activity in a generation.
~ Randall Forsyth

From the Barron's Roundtable members:

If I were president, I would announce a major infrastructure plan.
~ William Priest

I assume governments of the world will put a substantial amount of money into the system.
~ Mario Gabelli

The concern I have here is consumer and business confidence. That's why a response from government officials is essential.
~ Abby Joseph Cohen

All of this brings to mind the definition of insanity (often attributed to Albert Einstein):

Insanity: doing the same thing over and over and expecting different results.

~ Kevin Duffy, tweet, March 15, 2020

Sonal Desai debates Stephanie Kelton on MMT

People always point to Japan over the past several decades to justify the case for low and even negative yields forever...  To take the leap from Japan's experience to assume that the Fed can keep printing money forever is a problem.  It is very seductive to populist politicians, and that's one of the reasons it gets me really nervous.  I debated Stephanie Kelton, who has become the face of modern monetary theory.  She feels the choice between universal health care, forgiveness of student loans, and increased spending on infrastructure is a false one, because, in fact, you can have them all.  It's a problem to assume that the U.S. has no budget constraints; it does.

~ Sonal Desai, 2020 Barron's Roundtable, January 6, 2020

Abby Cohen and James Anderson on U.S. immigration controls

Abby Cohen: The fastest growth in job creation is at either end of the skills spectrum—high-level health care, information technology, and so on, and low-end health care and hospitality. Those broad areas are largely filled by immigrants. Over the last handful of years, the immigration rate is down. Visas for people who have special skills or visas for students are down 20% to 40% since 2015.



James Anderson: It is amazing to have seen America throw away its biggest comparative advantage in the way it has, particularly with regard to highly skilled, inventive people. The percentage of your great companies founded by immigrant families is staggering. It is not talked about enough.

~ Abby Cohen and James Anderson, 2020 Barron's Roundtable, January 6, 2020

Rupal Bhansall on Chinese credit growth slowing down

People underestimate how much China was responsible for world gross domestic product growth over the past decade, and China is running out of options to boost growth. The popular perception is that the slowdown in China is due to the tariff war with the U.S.. The actual cause is the huge pullback in credit growth, which the Chinese economy is addicted to. Starting in the middle of 2018, there’s been a 40% pullback, year over year. This comes in the wake of a more-than-fourfold increase in credit growth over the past 10 years, from roughly $9 trillion in the banking system to $41 trillion as of the first quarter. For perspective, the banking sector’s total assets in the U.S. are about $18 trillion, and in Japan, about $10 trillion.

~ Rupal Bhansali, CIO, Ariel Investments, "2019 Midyear Roundtable: Where to Find Value Now," Barron's, July 13, 2019

Oscar Schafer on why investing is a great business

Investing professionally is one of the world's great businesses, because you learn a lot and are paid well.

~ Oscar Schafer, founder, Rivulet Capital, "2019 Midyear Roundtable: Where to Find Value Now," Barron's, July 13, 2019

(Schafer plans to retire from active management and step down from the Barron's Roundtable after 34 years.)