29. Is the U.S. Economy Heading for a Slowdown? Iran War and Rising Oil Prices, AI Capex Bubble, Federal Reserve Trap, and Private Credit Run Risk | Edwin Burton

Investor Hunter Craig sits down with Professor Edwin T. Burton of the University of Virginia on Fed meeting day — March 17, 2026. The Federal Reserve is expected to hold rates steady, and Professor Burton explains why there is no path to lower rates without triggering inflation. From there, the conversation ranges across the Iran war’s muted effect on oil markets, a dangerously weakening U.S. economy, and the deep structural vulnerabilities in both public equities and private credit.

The episode’s sharpest analysis targets the Magnificent Seven: Professor Burton argues that most of the AI capital expenditure being capitalized on balance sheets should actually be expensed as a cost of doing business — which would reveal that earnings for the S&P’s biggest names are flat or falling. He closes with a warning about private credit run risk, the structural problem facing firms like Blue Owl and Blackstone, and why retail investors in private credit funds may not understand what they actually own.

DISCLAIMER

The content of this podcast is for informational and educational purposes only. Nothing discussed in this episode constitutes financial, investment, legal, or tax advice. The views and opinions expressed are those of the host and guest and do not represent the positions of the University of Virginia or any other institution. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Listeners should consult a qualified financial advisor before making any investment decisions. Statistical figures cited during the episode reflect the guest’s characterizations at the time of recording and may differ from independently verified data; see the market data table in these show notes for fact-checked figures.

Indicator

Value

2-Month U.S. Treasury Yield

3.69%

10-Year U.S. Treasury Yield

4.20%

Fed Funds Target Rate

3.50– 3.75%

Mortgage Rates (30-yr est.)

~6.30– 6.40%

Brent Crude Oil

~$102/bbl (briefly $120)

Q4 2025 GDP (annualized)

0.7% (revised down)

S&P 500 Change Since Iran War Began (approx.)

-1 to -2%

OpenAI Projected Loss (2026)

~$14 billion (note: Prof. Burton cited $80B in episode; verified figure is ~$14B for 2026)

Timestamp

Topic

00:00

Intro — Hunter and Professor Burton set the stage on Fed meeting day

00:45

Fed Prediction: rates hold; no cut possible; Walsh confirmation and what it means

02:00

Mortgage rates at 6.30–6.40%; debt market saturated at every level

02:45

Iran war and oil: why $120/bbl Brent matters less than it once did

04:00

Oil as an economic tax, not an inflation driver; U.S. now a service economy

04:45

Q4 GDP revised to 0.7%; employment weakening; recession risk rising

05:30

Stock market’s puzzling calm: barely -1 to -2% since Iran war began

06:00

Magnificent Seven and the AI capex accounting problem

07:30

Should AI data center spend be expensed, not capitalized? Burton says yes.

08:00

Meta: full-year 2025 capex ($72B) exceeded net income ($60B); cash flow under pressure

08:30

The AI moat problem: 47 free competitors; OpenAI’s mounting losses and cash burn

10:00

Why rates won’t fall: deficits, debt auctions, political gridlock

11:00

Deficits grow in recession; neither party has a credible spending plan

12:30

Can the U.S. afford the Iran war? Political coalition fracturing

13:30

Fed’s real power: printing money vs. market forces; inflation risk of cutting

15:00

Private credit: the retail investor misunderstanding and run risk

16:30

Blue Owl and Blackstone: why headlines matter more than contract terms

19:00

Private equity continuation funds; software company hangover

20:30

University endowments: Princeton at 4%/yr while markets return 20%

21:30

Bearish wrap-up: economy, stocks, politics all pointing down

22:00

Professor Burton’s self-aware caveat: “I do have a tendency to be bearish”