12-10-25 - 10am - What's Happening with Consumers and Epstein Transparency Act

Episode Transcript

Speaker 1 (00:00):
Michael, you missed the best part. I always raised my
kids when I said no and they asked why, I
just simply said, my statement does not require a question.

Speaker 2 (00:10):
Woo tough, mama bear, or just look at them and
go huh, don't ask. There is no one.

Speaker 1 (00:26):
I said so so.

Speaker 2 (00:30):
Late in this month, as we're kind of getting near
the end of the year, the year you know on
the economy, we got the Federal Reserve getting ready to
meet they think they're going to cut rates, probably for
the last time for a while.

Speaker 1 (00:46):
Here's where we are.

Speaker 2 (00:48):
Job growth has stalled, consumers I think are stretched, corporate
credit is actually beginning to crack a little bit, and
both production and housing are completely out of sync with
real demand. So the contrast that I would draw between
a quiet target and a packed Walmart on this last

(01:12):
Black Friday that we had is a way of showing
a two track economy that policymakers and markets refused to acknowledge.
I read a story. A guy had written a story
about how in Dallas he had gone to a target
and the target was, you know, had the music playing,

(01:36):
and you know, all the carts were there, and they
were all lined up, and all the red baskets and everything,
and the aisles were just pretty much empty. And he
goes to a Walmart not far away, just a few
blocks away, and it was packed. When I walk you
through that underwhelming Black Friday at Target versus the mob

(01:59):
Walmart just few miles away, What I'm really trying to
do is to illustrate that the economy is splitting into
in real time because households that used to shop a
mid tier retailer like Target are actually those same consumers
are now behaving more like the stressed, lower income cohort.
They're trading down, they're buying fewer items, and they're beginning

(02:23):
to prioritize the basics while the discount chains capture the
bulk of what is left of their spending. I told
you that on their earnings report, McDonald's reported. Now I
don't own stock and McDonald's. I just happened to hear
it on them Fox Business, but they were talking about
how they were losing some of their lower income customers

(02:45):
and they were gaining higher income customers. That tells you
exactly the same point that the person in this story
was trying to make about the difference between the Target
and the Walmart. So for me, those quote here two
economies image kind of shows how the official narratives can
miss what parking lots and checkout lines are actually showing us.

(03:09):
Walls look, I look at my broke, looked at my broke?
Which you count last night? Wall Street and corporate earnings
can truly look fantastic even as everyday purchasing behavior is
showing a growing financial strain.

Speaker 1 (03:30):
The labor market.

Speaker 2 (03:31):
I would describe the labor labor market as having shifted
from no hiring, no firing, to no hiring in some firing,
because if you dig deep, you can see evidence that
net hiring has stalled and layoffs are becoming more common.
And when regional manufacturing surveys report literally zero net employment growth,

(03:54):
I mean literally net zero net employment growth, and a
lot of firms talk about layoffs more than these, more
than they do new jobs. I interpret that as a
sign that we're closer to a two thousand and nine
style environment than we are some sort of soft landing.
But at the same time, I still pay attention to
consumer sentiment. You know, when surveys show that a large

(04:16):
majority of Americans are expecting unemployment to rise, with readings
rivaling the early vocal recession. I can only conclude that
people feel a weakening job market long before it really
shows up in the headline on unemployment rate. So what
do I think is happening to consumers? In my view

(04:38):
and in my experience, Now, I'm gonna retail sales have
become a mirage, and that's because inflation and shrink flation
hide the reality that people are paying more and they're
walking out of the stores less. Now I know that
the numbers from Black Friday look decent in terms of
the dollar amount. If you took that dollar amount and

(05:02):
you strip out the price increases, and you'll see that
volumes and units per transaction are actually down, Then that
becomes obviously to me that households are running out of runway,
and that's why you're starting to see the shift. Like
McDonald's is reporting. You can focus on private credit, or

(05:24):
say the shadow banking system, because they can be seen
as the leverage that made the apparent boom look bigger
than what it really was. When companies financed by large
asset managers go from being priced as safe loans to
near total write offs in weeks, those blow up to
the cockroaches that you notice when somebody finding flips on

(05:46):
the light. Now, from my perspective, these are not random accidents.
There are signals that a lot of risk has been
mispriced across private credit funds and complex structures. And I
actually worry that an investorymptions and forced markdowns could spread
through the broader markets. So my argument would be that

(06:07):
the manufacturers kept producing. They just kept producing all those
widgets as if a robust second half recovery had been guaranteed,
and now that bill is coming due. When the surveys,
when you go to places like oh nerd Wallet in others,

(06:28):
you'll see surveys described as unprecedented, unplanned inventory build up
and collapsing order of backlogs bl interpret that is warehouses
that must be stuff with a bunch of stuff that
were made for a demand surge, and that demand surge
never arrived. So there's only one logical next step if

(06:49):
you are a producer or you're a business owner, production
cuts or layoffs, which linked the manufacturing story right back
to a weakening labor market, and that reinforces my belief
that the real economy is contracting, even while the GDP
and the stock Indussey still looks so strong every time
I hear, I mean, what's up today? CNBC's up today,

(07:13):
Uber Tech Uber's down five point five at eighty four
oh nine. Somebody, Joe Terra Novas sold has sold his
Uber stock. Okay, well, good for you, Joe, But overall,
can I don't see what the I guess some newslart
coming up.

Speaker 1 (07:29):
I don't see. They're not showing the indices yet.

Speaker 2 (07:31):
Oh the NASDAK, well, the nasdak's down sixty seven, down
zero point two nine percent. Russell is up seven point
thirty six. That's what the Federal Reserve is going to
be looking at.

Speaker 1 (07:46):
There.

Speaker 2 (07:47):
You think about housing, because housing is another arena where
surface level positives hide a really deeper dysfunction because most
homeowners were locked into very low mortgage rate unwilling to
sell into a higher rate world, and then the potential
buyers simply can't afford current prices at those higher mortgage rates,

(08:10):
so the volume of the transactions starts to collapse. Now
to me, that leads builder sitting on record levels of
finished inventory, and that sets the stage for price declines.
While commercial real estate faces high vacancy and regional banks
quietly hoping that they're not forced to recognize the losses

(08:31):
that are embedded in their loan books.

Speaker 1 (08:34):
When I look at the dollar, the dollars rent the
higher against.

Speaker 2 (08:38):
Multiple major and emerging market countries, I do not see
that is a simple vote of confidence in our economic strength.
What I see is a tightening global liquidity and a
shift toward risk off behavior because that pattern has echoed
past global growth scares. So I read the strong dollar

(08:59):
as a warning that financial conditions are tightening beneath the surface,
making the system more fragile, even as those equities that
we see up here on CNBC right now are hitting
record highs. So in my framework of looking at this,
a surging dollar, stressed consumers, weakening labor and manufacturing data,

(09:22):
that's all part of the same story. The supposed soft
landing is masking real and growing strain. When I go
back to that story that I read about the guy
leaving the target under a soft landing achieved manner, you know,
just imagine that over the target. What I'm trying to

(09:44):
do is deliberately contrast his actual lived experience with what
we keep hearing as the official narrative. In my mind,
the economy is not lighting gently to the runway. The
plane is already in tanker territory. Engines are sputtering, the
out atitude is bleeding away. The cockpit crew argues about
whether to put the landing gear down or not. Well,

(10:06):
the way I see it, we borrowed several years of
demand from the future using printed money shadow leverage, and
now this year twenty twenty five is when the invoice arrives.
Reasoning that much of the collateral backing the boom was
never worth what we pretended that it was worth. And
that's why Trump is out talking now. And as much

(10:26):
as he dislikes the word affordability, nonetheless the word affordability
is the right word. That's the pressure that people are facing.
And what I just described to you is the background
that creates the pressure those people are facing. So what's
the solution. Well, I do believe, I think Scott the

(10:46):
sent Pasant is right. I think is all of the
tax credits, the reduction in taxes, reduction on taxes on
Social Security, no tax on tip ups, the new rules
and expensing. As all of those starts to take place,

(11:07):
I think you will see a little bit of a
mini boom, and I do think the economy will start
to I start to say lurch forward, but I don't
think it's going to lurch forward. But I do think
we'll start to see the trend lines start to reverse,
and I think we'll start to see consumer sentiment reverse also,
and people will become more comfortable. I used, you know,

(11:28):
I think it was must have been last week. I
used the example of camera going to the grocery store
and coming back and commenting to some friends at dinner
that chicken breast seem to be less expensive. And my
response was less expensive compared to what compared to two, three, four,
five years ago, or compared to say, the past year, well,

(11:51):
the past year, the prices have dropped down. Then that
got the whole group you know talking about. Yes, prices
are coming down, but they still haven't broken that level
of the new baseline that was established because of all
the inflation. It was created by all of the government spending.

(12:12):
We're still reading from that. And while I think the
Federal Reserve will.

Speaker 1 (12:17):
Do I don't.

Speaker 2 (12:17):
They do a couple of basis points cuts today. I
don't know if they'll do more than that, or even
I don't even if they'll do that. But whatever they do,
I don't think they need to worry about inflation kicking
back in because we're still sitting on goods and services
that we're buying that are still at a new baseline,

(12:42):
and while the prices are coming down, lots of things
you'll take cabs take. Last night I was I finally
narrowed it down to two or three places because the
guys that I used to buy my beef from have
just quit. They're not doing it anymore. So I found
a couple of other places where they're doing it. But
that me down to the down the rabbit hole of

(13:03):
thinking about just exactly how the cattle industry works. So
back when all the inflation is so high and you've
got a cattle herd and you can't afford to feed
that herd because the price of the feed and everything
else that takes to run that cattle herd, well, you
start to call the heart the herd. And when you

(13:23):
reduce it to say, let's just say by fifty percent,
because you can break even at fifty percent or maybe
even make a little money. If you you know you're
running a thousand head of cattle, you reduce it to
five hundred, because at five hundred head of cattle. You
can either break even or you can at least make
a little bit of money on that. Well, now you've
eliminated half your herd. It's not like picking up the

(13:45):
phone and calling the production manager at you know, some
widget factory and say, hey, I need five hundred head
of cattle. It's gold to take time, and that time
is measured in years to get that cattle herd back
up to a thousand head from the five hundred that
you called because you couldn't afford it because of the

(14:08):
four years of what Biden did to us. But people
don't understand that. They don't understand that people are shifting
from Target to Walmart and why they're doing it. Because everybody,
no matter what level you're at, you don't take Jeff
Bezos for example, he just recently, I shouldn't say recently
been the past year or so, you know, spent a

(14:30):
bazillion dollars on a new yacht Probabms. He were to
do that today, because that yacht started out in the
planning and design phase years ago before it finally launched,
you know, last year, Well he might have sized that
back just a little bit, particularly considering the divorce.

Speaker 1 (14:47):
So he might have sized it back just a little bit.

Speaker 2 (14:49):
Everybody at every strata of the economy looks at You
don't think rich people, the billionaires that they don't look
at their pennies. You don't think the Warren Buffett every day.
What's the story about his wife was so much changed
in a cup? And that's what he buys when he
goes to McDonald's every morning. Basically how much money she

(15:09):
puts in the cup. That's how he became a billionaire.
So they'll cut back. Also, then you get down to
our strata and you look at our strata, will you
do exactly the same thing. But most people don't understand.
While they'll bitch and moan and they'll vote, and I
understand why they vote the pocketbooks. But if you're going

(15:30):
to vote your pocket book, I at least want you
to understand that what we're still trying to do is
recover from four years that just completely eviscerated the economy.
And it wasn't just the government spending. It was the
tens of millions of people that came into this country
that yes, they got a bunch of government spending, but
they were also a drain on the economy. And now

(15:53):
we're trying to recover from that too. So Trump's taking
the appropriate steps. But I think what he's got to
do you mentioned it was it was like a campaign rally.
What he's got to do is he's got to figure
out a way to explain to people that, yes, inflation
rates are down, prices have come down, but there's still

(16:15):
a baseline. And what he wants to do is either
increase wages so that we can start spending above that baseline,
or bring that baseline down a little bit so that
the actual cost, the cost of what we're paying for goods,
begins to drop a little bit. And until he can
explain that because we have, with the exception of this audience,

(16:37):
we have a really economically ignorant group of people that
are just looking at Oh, they don't understand how many
people you think understand the cattle business and why the
price of beef is still high. I mean, that's just
one example. There are numerous reasons why beef is still
so high, but the primary driver I think, at least,

(16:59):
you know, when i'd look to go back to the
story about looking at a couple of places where I'm
thinking about buy my next side of beef. Well, their
prices when I go online and check it, historically it's up,
but their herds are down. And until those herds get
back up, their prices are going to remain a little

(17:20):
bit higher than they've been over the past, say, five
or ten years, simply because oh, they don't have as
much product yet the demand is there.

Speaker 1 (17:28):
Now the demand will drop off a little bit.

Speaker 2 (17:30):
And they'll have to adjust their prices and or adjust
the herds they start adjusting both. That's real economics. Thank you,
mister Cudlow. Eighty five percent of the people who are
listening have no idea what you were talking about. Put
Michael back on.

Speaker 1 (17:49):
Thank you. I arrest my case.

Speaker 2 (17:54):
Then maybe you should go back and listen to it
again and think about exactly where we are in terms
of price structures and consumer behavior and the economy. And
I guess the reason I did that is because you
hear everything on the news about the market is just wonderful.

Speaker 1 (18:14):
And look. Am I happy about the gains that I'm
making on my.

Speaker 2 (18:19):
Portfolio, Absolutely, but I think it belies what's really going
on in the real world economy.

Speaker 1 (18:29):
I mean, I know.

Speaker 2 (18:30):
Most Americans, even indirectly have some involvement inequities. But for
the average American, it's about how much do I pay
for gas, groceries, what I have to buy at Walmart
or Target? What does it cost to, you know, clothe
and feed the kids. And those prices are still extraordinarily high.

(18:51):
Now they're some thing's dropping a little bit. Gas is
dropped a little bit, but that gets off set when
you go to the grocery store or you have to
go buy a Para Jeanes for your kids or a
Pari sneakers for your kids. It's interesting that Chad mentioned
during the news about the Epstein Transparency Act because to

(19:15):
my surprise, and I confess I've not read the details
of the legislation, but so the judge may have looked
at the law and said, yes, grand jury testimony is generally,
if not almost always, ninety nine point nine percent of
the time is kept confidential. But based on the Transparency

(19:37):
Act and our ability to redact certain things, I'm going to.

Speaker 1 (19:41):
Release this testimony. I'm going to release these files.

Speaker 2 (19:46):
The State of Florida began investigating Jeffrey Epstein in March
of five. This is a twenty year old story. Now,
they were investigating a complaint made to the Palm Beach
PD by the Paris of a fifteen year old girl
who had been paid three hundred bucks to give him
a massage. In November of four, the police department had

(20:09):
received a complaint about young women coming and going from
Epstein's house late at night. In March of four, a
telephone complaint was phoned in to the same police department
in Palm Beach claiming that a seventeen year old girl
at the time was giving Epstein massage just while topless,
and she was being paid two hundred dollars each time

(20:29):
she did it. So that state that Florida state investigation
and prosecution was led by the Crimes Against Children's Unit
of Women the name of Atlanta Blokovic of the State
Attorney's Office. The federal investigation of Epstein started May of six,
and the lead prosecutor was Anne Marie Villafana. She's the

(20:52):
one that handled the majority of the child exploitation cases
in West Palm and in two thousand and six was
named the coordinator for Projects Childhood, which was a new
Department of Justice initiative that was focused on child sexual
exploitation and abuse. At various points during all these investigations,
including after preparing a prose memo and a proposed indictment

(21:17):
BILLI find a consulted with the Department of Justice Child
exploitation and opposent a desection that's located in DC. The
FBI had been contacted by the police chief of Palm
Beach County, who was concerned that the state prosecutor might
charge Epstein only with simple counts involving solicitation of prostitution

(21:42):
without having any reference to miners, and that there would
likely be a misdemeanor plea outcome. The police chief said,
the investigation revealed dozens of high school age girls, so
I'm under the age of eighteen involved in all that
massage activity. Eastein was aware of the state investigation.

Speaker 1 (22:02):
Almost from the start. He hired attorneys.

Speaker 2 (22:05):
He hired private eyes to go through the backgrounds of
all the victims while the cops were still conducting the investigation.
His legal team was led by the very famed Miami
defense attorney Roy Black Geraldicourt from New York, and of
course Alan Dershowitz, Professor Dershowitz from Harvard. After the fed's

(22:30):
investigation began and Epstein's team became aware of it, including
some who had been federal prosecutors in the Southern District
of Florida, which included a former US attorney who was
the deputy chief of the Major Crimes Unit and Lily
Sanchez she left the office back in five. Two attorneys
from the firm of Kirkland and Ellis ken Starr, who

(22:52):
was the former US Solicitor General then serving as the
dean of the law school at Pepperdine, and Jay Lefkowitt,
who's a litigation partner who's been involved in all sorts
of high profile criminal cases, including during Bush forty one
of my old boss and Martin Weinberg, and former US

(23:12):
Attorney Joe Whitley. Joe's actually an old friend of mine
from DHS days. There were more than thirty victims identified
in interviewed recorded interviews, first by the Palm Beach PD,
later by the FBI, and almost everybody agreed to cooperate
with the cops and we're willing to testify. A few
didn't now because the fans picked up the state case

(23:36):
already underway.

Speaker 1 (23:37):
It seems to me that the focus was on a.

Speaker 2 (23:39):
Group of young girls and women from the relatively recent
pass say, two thousand and three to two thousand and six,
and there is no indication that they looked further back
in time. Epstein paid the girls to bring new friends
along pass on the phone numbers to his assistants. The
Inspector General's report says that he got as many as
three massages a day and that Maxwell, in her interview

(24:02):
said Epstein was always asking to find new girls, and
that's how the cops and the FBI found the victims,
because they then all identified all the other girls they knew,
or the girls that they themselves they brought into the arrangement.
There's no indication whatsoever in the Inspector General's report that
the six and seven investigation ever involved hundreds of victims. Maxwell,

(24:27):
when she did her interview, told the Department of Justice
that his activities with Epstein's activities went all the way
back to the nineteen nineties and included locations other than
Palm Beach, and then he had all the civil litigation
before and after his death that resulted in the number
of compensated victims exceeding slightly more than three hundred. In

(24:51):
May of seven, an assistant US attorney that Villafana that
I told you prepared that eighty two page pros memo
and proposed a count indictment that she was prepared to
present to a federal grand jury in Palm Beach. That
was a year after she had opened the grand jury
investigation and starready collecting the evidence. A copy of her

(25:11):
memo was sent to the chief ex The Child exploitation
chief in DC gave it to his deputy and another attorney,
asking them to assess the legal issues in the case.
They all review the materials. The Child Exploitation Office offered
to assign an attorney to work with the attorney down
in Palm Beach on the case. There is no indication,

(25:36):
none whatsoever in either the IG report that the US
Attorney or the FBI ever focused on any other potential
defendants or co conspirators being actively involved in the sexual
abuse of minors. The only exception was for adult women.
They were referred to as Epstein's assistance, identified by name

(26:01):
in the provision that alleged that co conspirators would not
be prosecuted. So those four women helped in the same
way that Maxwell did.

Speaker 1 (26:10):
They brought in the.

Speaker 2 (26:11):
New girls, they explained what I was expected of them,
and they paid them when they were finished.

Speaker 1 (26:18):
How was it that the.

Speaker 2 (26:21):
Federal prosecutors in Florida came to an agreement that the
NPA was an appropriate outcome the non prosecution agreement. Well,
you go back to the three goals I listed above
In reviewing the pro's memo and the proposed indictment. Alex Acosta,

(26:42):
the US attorney, both had concerns about whether the victims
would hold up under cross examination at trial based on
all the information they knew the defense was likely to
use to attack them. So and prosecutors do. They tend
to become over committed to the credibility of their witnesses.
And that problem is never more prevalent than in a

(27:02):
sex crime case, particularly when it involves miners.

Speaker 1 (27:06):
But everybody involved.

Speaker 2 (27:08):
Knew there were going to be serious credibility issues if
that case went to trial. The girls had taken money,
some had come back, you know, multiple times. Some had
said there was no sexual activity, and some said that
there was, including the fifteen year old whose pairs made
the very first complaint. So A cost had told the
investigators in Florida that he was also concerned about the

(27:28):
trauma that would be inflicted on the victims by the
defense in that case if it went to trial. So
a costa came to the agreement, that federal agreement that
gave him the misdemeanor. But there's one episode that's worth mentioning,
and that is this. The non prosecution agreement was contingent

(27:52):
upon Epstein fulfilling his obligations by pleading guilty, but as
of January eight, he had not yet done that. So
as attorneys led by that all star team of ken Starr,
they were asserting misconduct by the attorney in Florida in
the way that she would put together the evidence in
the case, details not important as non lawyers. But in

(28:18):
a concession to the defense claims, the US attorney agreed
to request the review of her work by the Child
Exploitation Section of the Department of Justice. The idea that
the non prosecution agreement and the state court plead by
Epstein was some sort of sweetheart deal menticut secret all

(28:41):
the evidence about a cabal of rich and famous pedophiles
is simply a fantasy of people who do not understand
criminal trial work and the decisions that prosecutors have to
make before the first step they take into a courtroom.
When I get back The point that I want to

(29:02):
bring you to a conclusion to is simply this. There
will be no bombshells about a client list found in
the Epstein files in the weeks ahead.

Speaker 1 (29:14):
It's just not going to happen.

Speaker 3 (29:17):
Good morning, Michael and Dragon. Michael, you spot on. Affordability
is the word.

Speaker 1 (29:22):
It is the issue.

Speaker 3 (29:23):
I do not believe we have landed yet. I don't
think we're even on approach, which is saying something. There
is a lot to undo here. I know me personally,
in my family, I mean, we consider ourselves blessed, but
we buy in bulk. We make everything we possibly can
at home. You won't catch us at a store these days,

(29:45):
not anymore.

Speaker 2 (29:47):
I rest my case. So why is it I don't
have much time here. This is going to bleed over
into the next hour. But why is it that I
really don't believe they're going to be any bombshells coming
from these DOJ Epstein files or from the grand jury testimony.
It's very simple because literally dozens, if not more than

(30:07):
one hundred people have seen the evidence that was gathered
in the original Florida investigation and based on the evidence
used in the New York trial of Gislain Maxwell. The
New York investigation reached even further back to find victims
all the way into the nineteen nineties, and then after
Epstein died, hundreds of victims sued his estate. They also

(30:28):
they sued deutsch Bank, they sued JP Morgan Chase, and
then two months ago, back in October, two more class
action lawsuits were filed against Bank of America and Bank
of New York Mellon. There are dozens of lawyers and
investigators who have poured over every detail of Epstein's life

(30:48):
and criminal activities, and yet today there's not one definitive
statement by anyone who has seen the information concerning the
identities of others so called rich and famous people supposedly
joining in with Epstein and abusing those young girls as
arranged by him for their pleasure. Not a single one,

(31:10):
And just as a tease, think about this. If you
were rich and famous and your buddy Jeffrey Epstein had
just pleaded guilty to sexual molestation, albeit a misdemeanor, wouldn't
you have cut things off? But let me explain another
reason why.

Speaker 1 (31:28):
Next