The Economic Fallout of a Government Shutdown & Why Fermi Will Be the Worst IPO of 2025

0:00:03 As a BMO Eclipse Visa Infinite cardholder, you don’t just go to dinner.
0:00:06 You get rewarded for dining out.
0:00:08 And you don’t just buy gas.
0:00:11 You get rewarded for filling that tank.
0:00:16 Because you get five times the points on things like groceries, gas, takeout, dining, and rideshare.
0:00:19 So you get more out of life.
0:00:21 Apply now and get up to 60,000 points.
0:00:24 Which is a lot of points.
0:00:27 For more info, visit bmo.com slash eclipse.
0:00:28 That’s our website.
0:00:29 Drums and conditions apply.
0:00:33 Did you lock the front door?
0:00:34 Check.
0:00:35 Closed the garage door?
0:00:36 Yep.
0:00:39 Installed window sensors, smoke sensors, and HD cameras with night vision?
0:00:40 No.
0:00:43 And you set up credit card transaction alerts, a secure VPN for a private connection,
0:00:46 and continuous monitoring for our personal info on the dark web?
0:00:49 Uh, I’m looking into it?
0:00:51 Stress less about security.
0:00:55 Choose security solutions from Telus for peace of mind at home and online.
0:00:58 Visit telus.com slash total security to learn more.
0:00:59 Conditions apply.
0:01:05 Hey, I’m Teffy, and I’m hosting a new podcast from The Cut called Teffy Talks.
0:01:09 Think of me as your work bestie who’s here to give you all the juiciest pop culture deep dives,
0:01:12 read Celebrity Tea Leaves, and yap about modern life.
0:01:17 New episodes drop every Wednesday on YouTube or in your favorite podcast app.
0:01:20 It’s going to be so fun avoiding actual work together.
0:01:26 Today’s number, 32.
0:01:33 That’s how many leather panels comprise the average soccer ball, as well as 642 stitches.
0:01:38 The panels and stitching help to maintain the ball’s shape, similar to Laura Loomer’s face.
0:01:42 Money market’s mad.
0:01:45 If money is evil, then that building is hell.
0:01:46 The show goes on!
0:01:50 The folks in there have watched the show, show!
0:01:53 Welcome to Prof.G. Markets.
0:01:53 I’m Ed Elson.
0:01:55 It is October 1st.
0:01:57 Let’s check in on yesterday’s market vitals.
0:02:02 The major indices climbed to wrap up a second straight quarter of gains.
0:02:06 The S&P 500 closed out its best September in 15 years.
0:02:10 Meanwhile, gold climbs to another record, nearing $3,900.
0:02:17 Nvidia shares also hit a record high, pushing the company’s market cap up to $4.5 trillion.
0:02:24 And finally, Pfizer stock rallied 7% after securing a three-year exemption from President Trump’s
0:02:26 pharmaceutical tariffs.
0:02:31 In exchange, the company has agreed to lower its U.S. drug prices and reshore manufacturing.
0:02:38 Pfizer will also sell some discounted drugs on the administration’s new website, TrumpRx.
0:02:42 Okay, what else is happening?
0:02:46 A government shutdown is looming over the markets.
0:02:50 We are recording this a little after 5 p.m. Tuesday evening, meaning Congress has about
0:02:52 seven hours left to make a deal here.
0:02:56 It could be that by the time this airs, we will have a deal.
0:03:00 But at this point, the most likely scenario is indeed that we will have a shutdown.
0:03:05 That would mean that nearly a million people won’t be going to work and they will not be
0:03:07 getting paid until the shutdown ends.
0:03:09 That is standard in government shutdowns.
0:03:16 However, the unusual thing about this shutdown is that if a deal isn’t made, the Trump administration
0:03:21 has also threatened mass layoffs across the federal government.
0:03:26 In other words, instead of just furloughing government workers, and that is standard with
0:03:31 these shutdowns, the plan with this shutdown is to flat out fire them permanently.
0:03:33 Now, why is this happening?
0:03:34 What is the disagreement?
0:03:37 Well, it really all comes down to health care.
0:03:43 Specifically, the Affordable Care Act subsidies, which are set to expire this year unless they
0:03:45 are added back into the funding bill.
0:03:51 So the Democrats want them in because without these subsidies, roughly 4 million Americans will
0:03:53 lose access to their health insurance.
0:04:00 Also, health insurance premiums across the country are going to rise in cost by an estimated 75%.
0:04:02 So that’s why the Democrats want them in.
0:04:08 The Republicans want them out because the Republicans don’t want to spend $30 billion a year on subsidies.
0:04:12 And also, many of them simply don’t like the Affordable Care Act altogether.
0:04:15 They have felt this way for a long time.
0:04:17 So that is the standoff here.
0:04:20 That is why we are getting this shutdown.
0:04:24 The next question is, what will that mean for us?
0:04:26 What will it mean for the economy?
0:04:27 What will it mean for investors?
0:04:32 What are the actual implications of having a government shutdown?
0:04:38 So to help us answer these questions, we are speaking with Stephanie Roth, Chief Economist
0:04:40 at Wolf Research.
0:04:42 Stephanie, thank you very much for joining me.
0:04:43 Thank you for having me.
0:04:46 So, sort of broad question here.
0:04:49 We’re looking at a government shutdown.
0:04:52 This appears to be imminent for America.
0:04:56 What kind of effects will this have on the U.S.?
0:04:59 And more specifically, what kind of effect will it have on our economy?
0:05:02 Yeah, so there’s two ways to think about this.
0:05:08 One, you’re going to have some spending that’s delayed, largely in the form of salaries to government
0:05:10 employees who are not going to get paid until after the fact.
0:05:15 They will certainly get paid in back pay, especially given it is now written into law, based on
0:05:16 a law in 2019.
0:05:21 And then, secondly, there’s some output that will ultimately be lost.
0:05:26 In the 2018-2019 shutdown, that was estimated to be about $85 million a day.
0:05:31 So, it will be to that magnitude, but potentially larger just given inflation.
0:05:35 And then, this will be a full shutdown as opposed to last time it was a partial shutdown.
0:05:42 So, the reason why you have lost output, things like revenue that would have been collected
0:05:45 at national parks that won’t be collected because they’re closed.
0:05:50 So, there’s certain activity that just won’t happen as a result of the actual shutdown.
0:05:53 And that’s the output that will ultimately be lost and never recovered.
0:06:00 Yeah, so that shutdown in 2018, which was 35 days, longest shutdown ever.
0:06:04 How sizable was that economic impact?
0:06:07 I mean, you mentioned the $85 million a day.
0:06:10 Put that into perspective for us.
0:06:12 Like, is that a big deal or no?
0:06:18 So, when you think about it maybe in terms of quarterly GDP, the trend rate in real GDP
0:06:20 is, call it, 2% to 2.5%.
0:06:25 It was about a 0.4% hit to quarterly GDP.
0:06:31 So, if GDP was going to be 2%, it was going to be a 1.6% as a result.
0:06:31 Yeah.
0:06:33 So, we’re looking at a shutdown.
0:06:37 We, I guess, don’t know how long this will last.
0:06:38 Is there any way to know?
0:06:42 Is there any way to predict if this will look like 2018 or not?
0:06:45 Yeah, there’s good reason to believe it would look something more like 2013.
0:06:47 That’s probably a closer analog.
0:06:50 This is a full shutdown similar to what happened then.
0:06:55 There’s not that much that has to get done in order for the agreement to come to the table.
0:07:03 Really just for there to be a commitment that they will work on extending the ACA provisions.
0:07:09 So, if they agree to commit to that, it’s likely that there will be some sort of agreement.
0:07:14 So, our expectation is roughly two weeks is kind of a good way to think about it.
0:07:21 One thing that we found quite interesting, the BLS said it’s going to suspend all operations without a funding bill.
0:07:23 We’ll see this across all the other agencies, too.
0:07:27 The Census Bureau, the Bureau of Economic Analysis.
0:07:35 And I assume a lot of businesses and other areas of the government actually need this data to make a decision.
0:07:44 I’m wondering if you have any thoughts on how this will affect businesses, the idea that we will not be getting data for the next two weeks.
0:07:46 What are the economic impacts of that?
0:07:50 Yeah, at least there will be some data that is not coming straight from the government.
0:07:53 So, the PMIs will get a lot of attention.
0:07:56 The ISM PMI is one of the most widely watched of them.
0:08:00 That will be coming out tomorrow, regardless of whether the government is shut down or not.
0:08:05 Other things like ADP employment will get more attention than normal.
0:08:16 A lot of these data are not as important or certainly not quite as top-tier as things like employment or CPI, but they still give it an important indication on the trajectory of the economy.
0:08:28 So, if we have a two-week blackout of data, I don’t expect that will dramatically change the way forecasters are thinking or the way businesses are doing their day-to-day or thinking about hiring plans.
0:08:34 If it were to last much beyond that, then you start to get to be a little bit more concerned about the backdrop.
0:08:49 The thing also to flag, the labor market data, specifically non-farm payrolls, has gotten a lot of sort of negative criticism recently for being volatile and a little bit hard to sort of decipher anyway.
0:08:52 So, perhaps it’s been a little bit less useful these days than normal.
0:08:56 One other entity that will probably be affected by this would be the Fed.
0:09:03 I mean, presumably the Fed needs to have the data to understand what it is to do about interest rates.
0:09:15 And we’ve also been seeing some arguments that if the Fed has less data, then perhaps they will be more likely to stick with the dot-plot plan and go ahead and cut rates again in October.
0:09:27 I’m just wondering what you make of that concept, this idea that if they have less data or there is more uncertainty around this shutdown, then that could signal lower interest rates moving forward.
0:09:41 Yeah, it’s possible at the margin, just because even if, let’s just say they weren’t sure if they wanted to cut, have a total of two or three cuts this year, they could always do the October cut and then plan to just sit it out in December.
0:09:45 If it turns out that the data will look a lot better once it comes out after the shutdown.
0:09:48 So, I would say it’s a margin that does increase the odds.
0:09:55 We do expect that the shutdown will be over by the time of the FOMC at the end of October.
0:10:01 But to the extent that it’s not at the margin, I think that’s a fair point that perhaps they’d be more likely to cut than what would otherwise be the case.
0:10:08 However, you are hearing from Fed officials that they’re feeling a little bit uncomfortable about the way the market had been priced.
0:10:15 So, they’re a little bit more sort of on the fence and they would like to see some more data before making a move.
0:10:21 As we know, it’s going to be almost a million federal workers who are going to get furloughed during the shutdown.
0:10:29 But then there’s this other side to this, which is that the administration is also threatening mass layoffs throughout the federal government.
0:10:34 Not totally clear what those layoffs will actually look like.
0:10:42 But I’m just wondering from your research, what kind of impact will we see because of those layoffs?
0:10:45 If we do see those layoffs, how will that affect the economy, do you think?
0:10:51 So, if they actually go forward with these plans to do mass firings, that can have a significant impact.
0:10:51 Yeah.
0:10:54 Earlier in the year, they talked about doing these rifts or reduction in force.
0:11:04 The plans were about, or at least we counted about 100 or so thousand people from various agencies that would potentially be part of these rift plans.
0:11:10 If that were to play out, it would be important and a big deal, but not a big game changer.
0:11:16 However, the way the OMB phrased it last week, it suggested like the rifts could be even larger than that.
0:11:23 They cited that it could be all non-essential workers, which could be 400 plus thousand people.
0:11:26 If that were to happen, now you’re starting to talk about something that’s a much bigger deal.
0:11:32 Now we’re talking about a couple of tenths on the unemployment rate and some significant slack that all of a sudden appears in the economy.
0:11:38 In an economy that is having trouble absorbing a lot of the workers that are sitting on the sidelines today.
0:11:45 Right. And what’s interesting is we haven’t seen that much of a market reaction, or at least not much thus far.
0:11:55 I’m just interested to get your reaction to how the market has reacted to all of this, the shutdown, as well as, as you say, the prospect of mass firings.
0:12:02 Generally speaking, markets tend to look through the shutdowns largely because they come and go, activity tends to resume.
0:12:10 The difference this time could be if there is an announcement that they are doing mass firings as opposed to just furloughs, then I expect markets to react.
0:12:17 But as of now, the expectation is that this is just posturing and they’re trying to get the Dems to come to the table.
0:12:24 But if there were to be an announcement and there were to be actual plans to follow through with firing all those 400,000 plus people, that would become a real problem.
0:12:28 All right. Stephanie Roth, Chief Economist at Wolf Research.
0:12:30 Thank you very much for joining us. We appreciate your time.
0:12:31 Thanks for having me.
0:12:36 After the break, a look at a strange AI IPO.
0:12:39 If you’re enjoying the show, give Property Markets a follow.
0:12:48 Okay, flights on air Canada. Oh, wow. Mallorca, that’s new.
0:12:53 Oh, nice. But Vienna is a classic. Mozart, palaces and schnitzel.
0:12:55 Mm-mm, now you’re cooking.
0:12:57 If you’re hungry, deli brings the heat.
0:13:01 Heat? Cartagena’s got sun and the sea to cool off.
0:13:02 So does Martinique.
0:13:04 Mm, and that French cuisine?
0:13:05 Book it.
0:13:06 Yes, chef.
0:13:08 Wait, what about Lyon?
0:13:11 Choose from our world of destinations if you can.
0:13:12 Air Canada.
0:13:14 Nice travels.
0:13:16 I’m Chris Hadfield.
0:13:20 I’m an astronaut, an author, a citizen of planet Earth.
0:13:25 Join me for a six-part journey into the systems that power the world.
0:13:30 Real conversations with real people who are shaping the future of energy.
0:13:32 No politics, no empty talk.
0:13:39 Just solutions-focused conversations on the challenges we must overcome and the possibilities
0:13:40 that lie ahead.
0:13:42 This is On Energy.
0:13:44 Listen wherever you get your podcasts.
0:13:51 Today explained to Sean Romsfirm, a thing about me is I don’t drink coffee, but I can handle
0:13:52 a matcha every now and then.
0:14:01 Recently, I found myself in New York City at a very cute, straight-out-of-Tokyo, tiny little
0:14:03 matcha shop in Soho.
0:14:05 And there was a line, of course.
0:14:12 And one by one, I watched as almost every person ahead of me broke out their telephones and filmed
0:14:16 like a mini documentary while getting their iced matcha lattes.
0:14:22 They were getting all the angles, selfies, regular camera, front-facing camera, peace
0:14:24 signs, one with Boo, one with the squad.
0:14:27 And I was like, what is going on, you guys?
0:14:27 It’s a drink.
0:14:31 And then I read that there was a worldwide matcha shortage.
0:14:34 And then I was really like, what is going on?
0:14:38 And it turns out, La Boo Boo Matcha Dubai Chocolate was going on.
0:14:40 Matcha 24 karat La Boo Boo Dubai Chocolate Benson Boon Beam.
0:14:42 It’s not clocking to you that I’m standing on Moon Beam.
0:14:49 And for anyone who missed it, we’re going to explain on the show.
0:14:51 Join us over at Today Explained.
0:15:00 We’re back with Prof G Markets.
0:15:06 AI company Fermi America is set to go public today after just eight months in business.
0:15:11 The firm, co-founded by former U.S. Energy Secretary Rick Perry, aims to build the world’s
0:15:16 largest private energy grid to power AI companies by 2038.
0:15:22 It is seeking to raise $750 million in its IPO, targeting a valuation of $13 billion.
0:15:27 However, the IPO could face some delays if a government shutdown impacts approvals from
0:15:28 the SEC.
0:15:34 OK, so Fermi America, this AI company, is going public.
0:15:35 What is Fermi America?
0:15:37 Why do we care about it?
0:15:39 Why are we talking about this company on the show?
0:15:46 Well, if you’re a regular listener, you know that we have discussed this decline of the
0:15:47 IPO at length.
0:15:51 The fact that there are fewer and fewer public companies in America.
0:15:56 The fact that the IPO has really lost its appeal because there’s so much money in the private
0:15:59 markets such that you don’t really need to go public anymore.
0:16:05 And the fact that the few companies that are going public are, in simple terms, unimpressive
0:16:08 companies, or at least unimpressive to us.
0:16:12 Some people disagree with us on this, but we look at the companies that have gone public in
0:16:18 2025, the big IPOs, Klarna, Circle, Gemini, BitGo, etc.
0:16:22 None of these businesses are particularly impressive to us.
0:16:28 And it is our growing belief that the IPO is almost becoming like the SPAC in the sense that
0:16:33 it is almost becoming a dumping ground for all of the companies that aren’t getting enough
0:16:38 attention in Silicon Valley, that aren’t raising these Series E, F, and G rounds.
0:16:40 And so, what do they do?
0:16:44 They toss these unimpressive companies over to the public markets, and they cross their
0:16:50 fingers, and they hope that retail investors will buy it instead of Sequoia and Andreessen
0:16:50 Horowitz.
0:16:54 So, again, why are we talking about this company, Fermi America?
0:17:01 Well, this company is the perfect example of the dynamic we are describing, and that we have
0:17:02 described for many months now.
0:17:07 This is pretty much the most 2025 IPO you’re going to see.
0:17:15 I mean, no real business here, all narrative, no substance, very half-baked ideas, just an
0:17:17 overall shit show of a company.
0:17:19 And we’re going to get into the details here.
0:17:21 So, Fermi America.
0:17:26 This was founded eight months ago by Trump’s former energy secretary, Rick Perry.
0:17:33 And it’s an AI company, specifically a power and data center company that is going to supply
0:17:40 AI companies with 11 gigawatts of compute over 18 million square feet of data center capacity.
0:17:43 So, big numbers, very sexy.
0:17:44 It all sounds very impressive.
0:17:46 Until you realize a few things.
0:17:49 One, they haven’t made a single dollar in profit.
0:17:53 Two, they haven’t made a single dollar in revenue.
0:17:56 And three, they also haven’t even built anything.
0:17:59 So, they haven’t sold anything.
0:18:01 They haven’t built anything.
0:18:06 And yet, they are here going public at a valuation of $13 billion.
0:18:09 So, that’s a little bit sketchy.
0:18:12 At this point, maybe you’re thinking, okay, well, they must have something.
0:18:17 You know, there must be some kind of progress if they’re going off and pitching this to investors.
0:18:22 And the answer is kind of, but honestly, not really.
0:18:28 As far as we can tell, there are only three things that are really nailed down at Fermi America right now.
0:18:33 Number one is they have secured a lease for some land in Texas.
0:18:39 So, they know where the data center is going to go and they’re going to lease this land from Texas Tech University.
0:18:41 So, they’ve got a contract for some land.
0:18:43 Two, they’ve secured some loans.
0:18:45 They have some debt financing in the pipeline.
0:18:49 Okay. And three, they’ve agreed to buy some gas turbines.
0:18:51 Nine of them, to be exact.
0:18:57 That’s 600 megawatts of power, which is about 5% of the capacity that they are promising.
0:19:01 But more importantly, these turbines haven’t actually been built.
0:19:07 And they’re currently sitting disassembled in warehouses in Germany, Sweden, Vietnam, and China.
0:19:12 In fact, Fermi still owes the manufacturer of these turbines $134 million,
0:19:17 plus the $10 to $20 million they’re going to have to pay in shipping costs.
0:19:22 So, what you suddenly start to realize here is, in addition to what they don’t have,
0:19:27 namely revenue, a business model, assets, infrastructure,
0:19:29 in addition to what they don’t have,
0:19:34 all they do have is a bunch of expenses and liabilities.
0:19:36 They owe the money on these turbines.
0:19:43 They owe the money on these loans, and now they’re going to rent some land as well in Texas.
0:19:47 So, none of this is particularly assuring if you’re an investor.
0:19:53 But the part where it gets most ugly is the story that they’re trying to sell to us,
0:19:58 which is, in no uncertain terms, a load of BS.
0:20:05 For example, this promise to provide 11 gigawatts worth of power over the next several years.
0:20:09 How they will actually achieve that is quite unclear.
0:20:16 But what is more unclear and what is more ridiculous is the size of that number, 11 gigawatts, itself.
0:20:21 11 gigawatts is five times greater than the output of the Hoover Dam.
0:20:28 It is two and a half times greater than the amount of energy consumed by all of Manhattan.
0:20:31 And as we have discussed a couple of weeks ago,
0:20:35 you look at NVIDIA and their $100 billion investment in OpenAI,
0:20:38 the largest private investment in the history of business,
0:20:41 that was for a build-out of 10 gigawatts of power.
0:20:47 And this company, Fermi America, which has no real assets, no real infrastructure,
0:20:49 they’re saying, no, we’re going to provide 11.
0:20:53 So the numbers just don’t make any sense here.
0:20:59 Now, in addition to the AI lipstick that they are smothering all over this pig,
0:21:03 they are also touting their prolific nuclear business.
0:21:05 Another buzzword.
0:21:08 They want to build a nuclear power plant that will be, quote,
0:21:12 the largest of its kind built in the US in decades.
0:21:15 Now, how will they actually build this plant?
0:21:16 Again, unclear.
0:21:21 However, there is one thing that has been established about this plant,
0:21:25 and that is the name of the plant, which will be, no joke,
0:21:29 the Donald J. Trump generating plant.
0:21:35 So yes, this is the other bold strategy that Fermi is employing to get this thing off the ground.
0:21:38 They are also sucking up to the president.
0:21:44 By the way, Trump’s name was mentioned 11 times in this S1 filing.
0:21:47 He got more mentions in the filing than the word profit.
0:21:57 So zero revenue, zero infrastructure, 11 gigawatts of future AI capacity that they intend to build,
0:22:03 and a nuclear power plant that’s going to have the president’s name emblazoned on the front of it.
0:22:09 It is starting to sound like this whole company was made up on ChatGPT.
0:22:13 It’s starting to sound like former Secretary Rick Perry went on ChatGPT.
0:22:18 He typed in, give me a list of bullshit business ideas that I can sell to retail investors.
0:22:21 And this is what it came up with.
0:22:27 So we’ve seen a lot of bad IPOs in 2025, and we’ve discussed that before.
0:22:29 But this one takes the cake.
0:22:30 This is not a debate.
0:22:32 I’m not going to beat around the bush here.
0:22:34 This thing absolutely stinks.
0:22:38 And the investment bankers that are actually willing to sell this IPO,
0:22:43 Mizuho, UBS, Cantor Fitzgerald, that is Howard Lutnick’s bank,
0:22:48 they should be embarrassed to be selling this thing because this is not a real company.
0:22:54 Now, the plan is to sell 33 million shares at a price point of $18 to $22.
0:22:58 That’ll amount to roughly $715 million in funding.
0:23:00 It will value the company at $13 billion.
0:23:03 But I just want to be very clear here.
0:23:05 This is not going to end well.
0:23:07 And I will lock that prediction in right now.
0:23:10 This is WeWork all over again.
0:23:13 This is Aspiration all over again.
0:23:23 And this is another BS company that is using the hype du jour, in this case, AI, nuclear, data center, private power grid, even Trump’s name,
0:23:29 using all of that to dupe its investors into believing they have found the next big thing.
0:23:34 Now, does this mean that the stock isn’t going to pop when it goes live?
0:23:38 No, in fact, I would argue we might see a pop.
0:23:40 I could see this actually becoming a meme stock.
0:23:45 It has all of those meme-like qualities that meme stock investors love.
0:23:49 Trump-adjacent, AI-adjacent, nuclear-adjacent, etc., etc.
0:23:54 But ultimately, as we have seen time after time, gravity will hit.
0:23:55 Gravity must hit.
0:23:58 And this thing will have to come down.
0:24:01 So that’s my prediction there.
0:24:08 Keep an eye on Fermi America, another bad IPO, arguably the worst IPO of the year.
0:24:13 And this is really the truest indication of where the IPO market is headed right now.
0:24:20 We have all of these great companies that are staying private, and again, all of these bad companies that are going public.
0:24:23 Just another day investing in 2025.
0:24:28 Okay, that’s it for today.
0:24:34 This episode was produced by Claire Miller, edited by Joel Patson, and engineered by Benjamin Spencer.
0:24:35 Our associate producer is Alison Weiss.
0:24:40 Our research team is Dan Shalon, Isabella Kinsel, Kristen O’Donohue, and Mia Silverio.
0:24:42 And our technical director is Drew Burrows.
0:24:45 Thank you for listening to Prof G Markets from Prof G Media.
0:24:46 If you liked what you heard, give us a follow.
0:24:48 I’m Ed Elson.
0:24:49 I’ll see you tomorrow.