Moneybeat: Return on intelligence

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MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat!

NICK EICHER, HOST: Time now to talk business, markets, and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm, the Bahnsen Group, and he is here now. David, good morning.

DAVID BAHNSEN: Good morning, Nick. Good to be with you.

EICHER: David, let’s begin with Friday’s jobs report. The first estimate says that August payrolls grew by 162,000, but the Monday Moneybeat rule is we prefer trends to single data points. And lately, David, you’ve been especially cautious about that first estimate because the revisions downward have been so substantial.

Even still, that 162,000 number did outpace expectations. David, how did you see it?

BAHNSEN:It’s better than where things had been. You really want 200,000 a month as a normal monthly jobs number, and I get a little bit disappointed when I hear people celebrating 162. But on a relative basis, celebrating 162 makes sense if there was a possibility of declining 20,000, the way we’ve had revisions and things the last couple months.

That’s the other piece you bring up: the trend. I like to get two or three months of data in a row, and that’s more important than it’s even historically been because of all the restatements and revisions we’ve had over the last several years.

EICHER: David, let’s turn to AI and your Dividend Cafe writing this week. AI, of course, has been a big political story. It’s an economic growth story. It’s obviously a huge market story. But your argument is that there’s a more basic financial question underneath all of it. What is the big question you think people are missing?

BAHNSEN:One of the points that I make is that there’s a very heavy amount of discussion right now in the political realm about AI, in the macroeconomic realm because our economic growth is so incredibly dependent on the AI story, and then naturally there are various questions when you see returns that were this high, this quick, certain things going up 100%, going down 50%. That sort of heavy volatility naturally provokes people wondering about a bubble and wondering about all the noise around it.

And I think all of those various categories are important, and they’re all legitimate, and I’ve addressed all of them, and will continue to. But the element that I believe, from a finance standpoint, from an underlying investment standpoint, needs to best be understood, is the totally unknowable answer to the question about future returns on invested capital and the timing of those things when they are so dependent on capital markets funding them.

What I mean by this is we are not in a situation where you take your favorite AI application, or what they call an LLM—and a lot of people use ChatGPT or Claude or Grok—and you say, “I’m really enjoying it, and maybe I’m paying 20 bucks a month for it.” And there’s other companies paying more, but their revenues are a teeny, teeny, tiny percentage of hundreds of billions of dollars of commitments.

And you say, “They wouldn’t have made those commitments unless anticipated future revenues out to extend it.” Maybe, and then you need profits from that, and we don’t know what those will be. And I’m not referring to the profits of the people that are making data centers or making GPUs or even making ChatGPT. I’m referring to the profits of the customers of these things, the enterprises that have to use it.

There’s all these questions there, and my point, Nick, and what I really hope WORLD listeners will understand is this thing is only possible right now because of hundreds of billions of dollars of debt and equity being issued to pay for it.

And so there’s a lot of risk takers out there that at some point may say, “Yeah, no, we need to get paid more to do it, or we’re not going to put more in until we get more return.” And that timing of capital markets cooperation with the most expensive expenditure in human history—more than it was to build the national railroad network, adjusted for inflation, more than it was to build telecom, fiber optics, cable, more than it was to build cloud, more than it was to build the internet.

This is the most expensive endeavor in human history. We do not know what the future profits will be, when they will come, and I think people need to question: Is there some risk about how the funding will align?

And then you add in all the other things people are bringing up about the political environment, controversy about data centers, competition from China. I was trying to simplify it to the one big thing, but if I’m being fair, there’s six or seven other things that pile on too.

EICHER: David, before we let you go, it is Labor Day today, so it seems appropriate to ask: In your book Full-Time, you make the case that work is bound up with why God made us. Why do you say that work itself is a matter of human dignity?

BAHNSEN: That book I wrote, Full-Time, on a sort of understanding of work from a biblical perspective that I think will always be an evergreen message. It isn’t meant to be a current-events hot topic. The argument I’m making is by definition perpetual because I’m arguing for this existential understanding of work that roots why we work to why God actually made us, and to the very fundamental Christian concept of imago Dei, that if we are made in the image of God, it behooves us as believers to understand what that means.

And as an economist, I’ve long believed that my appreciation for economics—why I long ago transcended this idea of, “Oh, it’s a dismal science. It’s boring. It’s a good thing I’m a nerd”—I’ve always found it a very exciting, invigorating, fulfilling topic because I view it in the context of imago Dei, and because I view it in the context of what God made man for.

And I think that God made us to work, and in that endeavor, whereby we are producing goods and services that meet the needs of others, dignity is found. And it is that way because God made it that way.

And we can appreciate this in small and big ways. Just when we do something that helps serve a customer or serve a coworker, we feel good about that, but also the notion that we have our needs met, but we had to do something. There’s an agency where you really don’t see a lot, Nick, of people that feel very satisfied, that have fulfilled lives, when their needs are met by them being passive.

Laying on the couch and having your needs met may sound good for some people, and every now and then maybe it’s a little alluring when someone gets tired. But it’s no way to live.

And so my message about work is rooted in this biblical anthropology: God made mankind in His image, and that means for us to really stoke our own productive, creative, and innovative impulses, and I find a lot of fulfillment in that.

EICHER: Excellent. David Bahnsen is founder, managing partner, and chief investment officer of the Bahnsen Group. He writes regularly at dividendcafe.com and at WORLD Opinions. David, I hope you have a terrific week and a productive Labor Day.

BAHNSEN: Thanks so much, Nick.

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