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jacob you look a little grifty feel okay yeah me i'm great i'm great you look half a milli richer today
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what's it like to be half of millie richard jacob you look like a failed hostage taker
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laugh it up boy slap it up boys laugh it up boys when you see my other projects drop
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you're going to be crying again okay i can't wait why don't you take yes for an answer jacob i i've taken this for an
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answer welcome to the all in podcast where three miserable rich bastards who pull up the ladder behind him
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do you want to explain why it took us a month to produce a new episode jkl hold on a second attorney let me give
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you guys the tl dr jacal thought the all in pod was his and then he realized it wasn't
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no if you guys want to go there we go there i'm totally transparent i requested i
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requested to own six percent more of the all-in podcast no no back up to the summit back up to when you wanted to
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kick me off the show back up before that where we oh my god are we really doing this yeah we're gonna do it we're gonna
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okay if you wanna do it we do it we can't talk about this for 45 minutes because what happens it's so boring so
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plan the summer we planned the summit j cal doesn't like how i was concerned about the summit and i bitched at him
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and you know i was negative to him finish the summit and j cal wants to kick me off the show yes brad gerstner
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bill gurley would have higher rates it comes to the bottom i think it was me and jacob getting into it it wasn't it
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was actually it started with free burger and jacob getting into it wanted me off
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the show all right i'll do i get to explain the series of events right now you wanted me off the show
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true or false j cal i felt that admit it if friedberg if friedberg wasn't enjoying his time
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here and was going to constantly complain every week about every detail why the show's not good there was always the
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option for him to maybe do half the shows and have brad garcia or do half the shows or have bill gurley or rotate
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in and so if he was going to be miserable all the time and worried about the show
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i gave him the option to have somebody else take his spot did you or did you not say that this is your
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show you're the leader and you wanted me off the show i never said that i don't know nor would i say that i don't need
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to say that you could summarily replace any of us effectively you acted like we all work
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i don't think tremont's replaceable just for the record so that's true he does think that he does i do not think it's
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replaceable freeberg i do think i mean i could pull up the brad gerstner episodes
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i think they have slightly more views so but people love you so we keep cal told
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my mom and my wife that he thought i was replaceable on the show guys i would like to jump in by just summarizing this
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so that we can move on so basically what happened was we had an agreement that it
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was 25 percent each there was a moment where j cal believed that he deserved more we had to sort
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through a lot of the underlying issues that caused them to believe that we got to a good consensus we now have a signed
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agreement that governs how the show and other things around the show and offshoots of the show will work we are
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25 equal partners and now we can move on so enough for the bitching let's go all good and i love
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you all i love you all too i love you all too to be clear my position i i do feel like this nice spot here was if
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we're gonna make it into a media company my request was listen i think i own i should have 10 more equity and i'll go
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to work every day and do the work and you guys can just show up you guys agreed to that and then you guys have
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said you don't want to do it and i said okay fine so here we are we're back at square one so let's just get to work we
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just want to do a pod and we just want to talk there's not gonna be any more summits there's not gonna be any
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business here it's just a pod i have other events i do i have other pods i do if i want to get paid i'll do them over
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there and here it's just a pod that you see every week so let's get into it everybody wants to talk about markets oh
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by the way if you guys want your intros that's one percent each intros go do okay good those are one percent each so
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when you guys are willing to pay me my one percent additional equity you get the intros and when you want the all in
00:03:59
summit 2023 that's another one we're gonna get an invoice each week from jcal now you're gonna get it's gonna be
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prorated monthly it's gonna be a point eight percent equity per month vested i just think it's so fascinating that we
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went through all of this you know i don't know storm and drawing or whatever this this like you know a month
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of non-taping and you know and this like all this turmoil in our relationship so you could
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get an extra one percent from us two percent each thirty one two percent i believe i should just so you know i do
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this for a living and if i do extra work i believe i should uh and if you want me
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to be the the de facto ceo of this then i should get a little extra we don't want that and you don't want that so
00:04:39
that's fine that's fine this is just going to be a project we do it every week and then all
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your grips whatever you know you're spinning out from the production board or whatever
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copycat app you're making you can [ __ ] do as a side here we go do the intros let's
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get going come on let's go i'm not no there's no zero intros no interest intros are out wait what about hey
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everybody hey everybody i'll i'll do it hey everybody hey everybody on the house
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hey everybody hey everybody welcome to another [Music] [Music] hey everybody welcome to another episode
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of the all-in podcast we're back for episode 84 with me of cour course uh the sultan of science the prince of panic
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attacks the queen of quinoa himself david friedberg how you doing buddy great to be here great to be here all
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right can you feel the tension there's still a lot of tension there's still tension
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there's a little tension there jkl and i will be hanging out tomorrow night we'll
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we'll make it have you guys resolved it i'm cool with it i'm cool for a break on dinner
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i think we're good he did buy me a wonderful dinner oh my lord after the warriors game shout out to the words uh
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all right and of course with us is the rain man himself david sacks how you doing buddy
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good you ready to go don't try and deflect this thing on to me i was only tangentially involved
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says the guy who spent 72 hours a contract i wrote a very fair contract so that we can move forward
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yeah and then you proceeded to break it in the first 15 minutes by slandering me
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and disparaging me but okay oh come on that was good for ratings good for ratings yes i thought your meme was
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pretty great he did the meme the two buttons and the superhero triangles and i was like jason
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that was good making jokes uh breaking the breaking the non-disparaging clause and then of course the dictator himself
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uh from some undisclosed location in a european city i don't know if i'm allowed to say that
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jeremiah pattia welcome back boys episode what's up boys all right uh well since we last convened
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let's get it on yes the the all in summit is finished all the episodes have been released
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uh including palmer lucky yesterday and here we go the markets are in complete turmoil uh spy down 21 percent
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year-to-date dow's down 17 year-to-date as sax has pointed out that is not representative of what happened to
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growth socks at the same time and uh the may cpi uh went up and it was at 8.6 we
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also got the 75 basis point rate hike who wants to start here chamath i mean it's market so maybe i'll just dump it
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to you first and then we'll go around the horn to sacks and then free bird wow there's a lot to say so uh bear with me
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for a second but um the thing that you have to do before you talk about what is happening now i think
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it's probably useful to go back and you have to really start at the end of the great financial crisis
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and the reason is there was a bunch of people coming out of the gfc who confused
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what the us government and some european governments were doing at the time there
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was the risk of a huge financial contagion and so the u.s stepped in and the federal reserve started to use
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their balance sheet to buy toxic assets right and the ecb did that and i think japan
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did that as well anyways a bunch of banks did it i mean a bunch of governments did it
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and then there was this body of pseudoscientist certificate economists who coined this thing called modern
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monetary theory which basically said hey you can keep printing money and introducing it into the economy to
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smooth things out and to actually drive long-term growth and it turns out that a bunch of
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government officials fell for it and if you fast forward to 2022 so 14 years later
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you know governments around the world had printed something to the tune of about 30 35 odd trillion dollars of
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money into the economy that should have never been there so the thing to remember is like we have
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not necessarily just been obfuscating true supply demand in the last six or eight
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months when we've been talking about a recession or inflation we've been actually doing it since 2008
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it's just that it's been building up in the system so one of the things that we have to
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realize is that all of that money somehow needs to get destroyed in some way shape or form
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if the true economic equilibrium is meant to be found what is true supply what is true demand
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in the absence of government sloshing money around trying to prop up things that should not
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be propped up or buying votes or all the griffs that these folks have engaged in
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in the last you know decade and a half have to get undone so that's the backdrop so if you think
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about taking 30 trillion dollars out of the global economy you know you're talking about almost
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you know i think it's 85 trillion is the world gdp so like you know it's it's it's almost half of an entire year's
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worth of global gdp it's going to take three years probably of the slow meticulous you know running
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off of money you know not reintroducing new money so it seems like we're at the beginning
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of the beginning of something that's going to be long and drawn out now that's separate from and that's
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separate from whether we're in a recession or not that's just the bear market that we're in
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right and so you have to look at asset prices today as a microcosm of a much larger trend
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that has to be about fake money pushing asset prices up and now taking all that fake money out
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and finding out what the real price of something is and i just don't think that takes six
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months so for all the people that were you know fingers crossed hoping that this would be the end of it fed raises
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75 we're done with this they're going to raise 75 more i just think that's not how it's
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probably going to be it's going to take you know 24 36 months that may mean the bottom
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doesn't happen for another 18 months so i think it's a we're we're in for a lot of choppy um
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market action saks three asset bubbles clearly all um you know being impacted we had stocks looks
00:11:11
like that story was pretty violent uh then we had crypto this last two or three weeks have been absolutely insane in
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terms of that asset bubble and now uh record high inventories for homes record um sales are now dipping below the
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average of the last 20 years and um we're seeing uh mortgage origination just absolutely get crushed six percent
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mortgages just a couple of months ago it was two point x uh for some folks so when you look at
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those three asset bubbles do you buy chamats hey we're going to see even more deprecation in these for another 18
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months possibly or do you think we've taken such crazy action this has come down so violently that we're now
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bouncing along the bottom bouncing along the bottom or 18 months of more pain well the the stock market especially
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growth stocks may have taken the majority of the carnage but you're right there are other asset classes and i
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think we're going to see the carnage start to rotate into those so you're right if you look at
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residential real estate now the prices are at the highest they've been relative to median income since something like
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2006 2007 before that sort of great real estate crash that precipitated the great
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recession of 2008. so i think there are going to be more more shoes to drop i just want to build
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on chamas point about root causes here milton friedman once said that there's nothing quite so permanent as a
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temporary government program the temporary government program was quantitative easing we had this
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great recession of 2008 that could have turned into a depression they broke the glass in case of emergency they started
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this qe which is basically the government intervening to buy bonds in the market they had never done that
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before and they loaded up their balance sheet the crazy thing is that program was
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still continuing until last year why i mean it was like on cruise control and so last year
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it was it was continuing until last month and countries like europe are still doing it nine percent inflation in
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europe and they're still buying bonds right so you go back to last year the fed bought 54 of the government's debt
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despite the fact that the economy was growing at like 5 gdp that it was bouncing back really strongly from covet
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that you had the stock market at all-time highs and yet they were still intervening with this massive qe and
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then when we got the surprise 5.1 inflation print last summer they didn't stop qe till the end of q1
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so you're right they kept basically printing money and it's still going on and that's
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created massive distortions in the economy now so the fed i would say is the number one culprit here and jpal is
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the number one culprit but the number two culprit is the binding administration and i think biden did
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three things very early on in the first few months of his presidency to effectively tank his presidency number
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one he canceled our energy independence on his first day in office canceling the
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keystone pipeline and making it much harder to drill and of course energy inflation's number one factor in this
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sort of overall inflation number two he pushed through that last two trillion of stimulus on straight
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party lines the arp the american rescue plan after larry summers said economists
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in his own party said this is going to create inflation don't do it and then the third thing is and no one really
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talks about this is that biden could have used diplomacy in 2021 to basically find an off-ramp to this
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ukraine crisis before it turned into a full-fledged war and if you listen to the economist the international
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development economist like jeffrey sachs he basically says that biden pulled his
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cabinet and said listen should we negotiate and compromise with the russians they all said no and biden
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handed down the order we will not compromise with the russians so now we have this massive war in ukraine
00:14:55
that's fueling food and energy inflation it's going to take his presidency and i
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don't even think there was any difficulty about this we may not be negotiating against russia
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but we're enabling them to print enormous uh surpluses meaning i don't know if you
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guys saw but there was an article today janet yellen is traveling around basically convincing folks to uh
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not include russian oil from a bunch of import bans so that these russian oil tankers can be insured why so that they
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can sell this oil to places like china and india et cetera is on a five-time five-year high the ruble's at a
00:15:35
five-year high we push for all these sanctions europe gets on board and says we're going to do it and we're going to
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take the lumps and then we go around europe and basically say well we kind of want to fight this proxy war but at the
00:15:46
same time we want to try to fix inflation and we didn't mean to cause this and it's completely disorganized what's
00:15:52
happening so if you had six minutes in the pool for when saks would blame biden for the economy uh you win
00:15:59
who do you blame we talked about quantitative easing starting in 2008 so that that goes over
00:16:05
a couple of presents and i guess the question i would have for you sax is how much of the spending the free willing
00:16:10
spending you know um you know was from the previous administration because it does spending is a bipartisan problem
00:16:15
there's no question about it but i just want to make sure that we point that out
00:16:18
yeah for sure and republicans only seem to find their principles on spending whether there's a democrat in the white
00:16:22
house i totally get it and i would like to see more fiscal responsibility regardless of which party is in power
00:16:29
and i'd like to see the republicans less be less hypocritical in their principles
00:16:32
on this but look perfect here's the thing the economy was bouncing back strongly last year and binds still
00:16:38
pushed for this last 2 trillion of spending and then 1.2 trillion more on infrastructure
00:16:44
and then remember the 4 trillion to build back better where mansion saved them for themselves exactly i mean what
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would if what would that have looked like uh freeberg you haven't spoken yet uh thoughts on
00:16:55
you know this these asset bubbles i guess and then the buying of the bonds seemed
00:17:01
completely unnecessary for some period of time if we are acting as the 50 plus buyer of bonds what kind of distortion
00:17:08
does that create in the market because if the government's competing against other people in the marketplace to buy
00:17:14
those bonds how could they possibly be priced correctly let's just be very careful about our framing there's
00:17:19
the us treasury which issues bonds and raises capital on behalf of the us government for
00:17:26
spending programs then there's the central bank the federal reserve and our central bank's
00:17:31
job is to number one maintain liquidity in the capital markets so that businesses can invest in growing their
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their products and growing their businesses and the economy grows while not providing too much liquidity that
00:17:50
you end up with inflationary effects and inflationary effects means that there's
00:17:53
too much money in the market and you see that money find its way into escalating
00:17:58
prices on different you know assets and the fed's long-term goal to remember is to provide
00:18:06
a stated goal of jerome powell in particular right now this changes over time but generally the intention of the
00:18:11
federal reserve is to make liquidity to make cash available to banks who ultimately make it
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available to businesses in such a way that there's enough cash in the system that the businesses grow
00:18:25
and that people have capital to invest in growth while keeping inflation at two percent so their long-term target is two
00:18:30
percent inflation and it's also correct me if i'm wrong making sure that there's enough cash to support economic
00:18:36
growth so remember last year you'll remember stan druckenmiller was very public about how insane it was
00:18:44
that the federal reserve was still buying bonds and so so there's one way to introduce cash into the system is to
00:18:50
make cash available as a loan to banks and then those you know banks use that money to loan to businesses and it makes
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its way through the economy another way is for the federal reserve to step in and actually buy bonds
00:19:00
freeing up the money that other people would be otherwise using to buy bonds to go and invest in other things so they're
00:19:05
effectively forcing liquidity into the market by taking bonds out of the market and last summer
00:19:11
or q2 of last year druckenmiller was pounding the table saying guys the economic indicators on how quickly the
00:19:18
markets are how quickly the economy is growing relative to how much inflation there is
00:19:24
indicates that we should stop buying bonds and we should stop injecting liquidity into the markets this makes no
00:19:29
sense it is nonsensical and there was no strong point of view from the fed at the
00:19:33
time other than there was uncertainty about the the bounce back of the from the recession from covid there was
00:19:38
uncertainty about what else was happening in the economy and yada yada but the the numbers the economic
00:19:43
indicators were showing very clearly the economy is growing in a robust pace low
00:19:48
unemployment and inflation is starting to pick up holy crap it's time to cool it off and the fed made a judgment call
00:19:54
and their judgment call really kind of was to keep going and then we end up in this massive runaway inflationary
00:20:00
problem where if you keep too much liquidity in the system for too long you have inflation even if you have economic
00:20:05
growth and now by pulling the money out of the system super super fast we reduce the inflationary effects
00:20:11
potentially but we tank the economy because now all this money coming out of the market means
00:20:16
people are spending less and buying less and businesses have less to borrow right
00:20:19
the borrowing costs are high and then that that's that's the big vacuum okay hold on let me go to chamath and then
00:20:23
sex the rate the rate at which we pull the money out which has had to be really really fast over the last few weeks can
00:20:30
cause a recession and that's the the biggest concern right now is will that actually trigger a massive recession or
00:20:35
not that everyone's watching so chamath i guess one of the things we need to clarify
00:20:39
here is the actual mandate of the fed i was under the understanding that the fed really was there to make sure of
00:20:46
maximum employment and that you know low interest loans were available and price stability these are the were
00:20:52
the stated goals for a long time not low interest rates capital capital is available
00:20:56
availability to grow moderate rates without exceeding inflation of two percent that's okay so maximum
00:21:02
employment price stability was also in there that's not really gp growth because remember we can't ever pay our
00:21:07
debt if our gdp is not growing okay while minimizing uh while keeping inflation below two percent chabot
00:21:12
whatever point you want to make feel free to make but also i was just wanted to know from you where did the fed go
00:21:17
wrong with their mandate if at all here because we do have maximum employment now we have out of control price
00:21:23
stability look here's the thing you you i think we have to also be sensitive to the fact that the
00:21:29
fed operates on a certain class of data and that data in the 21st century is pretty pathetic
00:21:36
nick you can probably find this but there was an article i think it was in the new york times that really walk
00:21:42
through how cpi is calculated and it's a bunch of people that work for the government that walk around with ipads
00:21:48
building relationships with local businesses and all these random places all around the country and asking them
00:21:53
to you know chit chat for 15 minutes and do these surveys now you would have thought that in 2023
00:22:00
or 2022 what the government would have said to you know visa mastercard american
00:22:06
express all the payment rails the banks and stripe is send me a feed in the following structured way so that i can
00:22:12
actually have an absolute precise sense of inflation because inflation really only occurs when a good or a service
00:22:18
trades hands for money right and you calculate what did that thing trade at the day before and what is the trade for
00:22:25
today so you could get an absolute precise sense of it instead we do this random sampling thing and some extensive
00:22:32
humans etc so if you read this article your takeaway will be oh my god this is very rickety and it drives an enormous
00:22:40
hammer that we use to try to manage the economy that's the first thing i think you need to buckle your seat
00:22:46
belt because the next three four five months of cpi will probably be very very bad
00:22:53
seven eight nine percent why there are a handful of components that have gotten completely run away
00:22:59
number one the biggest one is rent and so rent works on a three-month lag we're going to reintroduce what the true
00:23:05
owner's equivalent rent renters into cpi so we can already forecast that cpi going up
00:23:12
oil is at 105 bucks a barrel russia is basically trying to break the bank of europe by now messing with their nat
00:23:19
gas supplies the german energy minister yesterday said that if that happens it could be a
00:23:25
contagion equivalent to lehman brothers with respect to energy when you play all of these things out
00:23:32
what you have is unfortunately rampant runaway costs that really have no mechanism to get
00:23:39
back in check in the absence of some real governmental changes our policy on this ukraine
00:23:45
russia war you know how we intend to sort of uh work or cooperate or fight with china
00:23:51
all of these things have to get solved so in the absence of that prices are going to continue to go up
00:23:57
and so what does the fed do how does it throw away what little credibility it has left
00:24:04
when there's eight and nine percent inflation prints and saying we think we're done for right
00:24:09
now you can't do that so they will over correct because there is just going to be so
00:24:15
much pressure for them to act all roads i think lead to lower equity prices and i think what david said astutely is
00:24:27
we've seen the first wave but now it has to touch all these other areas for example
00:24:33
we have gotten totally drunk on debt as a country one of the most obvious places where we've been serving
00:24:40
alcohol far too late into the night is in the financing of all these private equity
00:24:46
leverage buyouts right these are dangerous these are sketchy companies that are sort of like
00:24:52
you know teetering on insolvency at times where private equity comes in levers up the balance sheet with debt
00:24:59
they price it right to the edge of what's legally allowed or what's financiable and then they go do it
00:25:05
but that's all assuming the economy continues to grow and so if all of a sudden you have some
00:25:10
recessionary forces or prices go up and earnings don't you'll have you know a contagion in the
00:25:16
debt markets you could have a contagion in the commodity market so we're dealing
00:25:21
with some really um tough boundary conditions i mean real estate most of most americans have most of their net
00:25:27
worth tied up in real estate and if we see a 30 30 correction in real estate it could be a real problem particularly
00:25:32
with rising interest rates inability to refinance sacks the dual mandate is hey keep inflation two percent and then keep
00:25:39
the unemployment rate reasonable the unemployment rate's amazing with still so many jobs out there even with these
00:25:45
layoffs in fact one might argue we made too many jobs available to the point at which people maybe aren't working as
00:25:52
much or just you know under working um uh and not taking advantage of these amazing jobs out there where do you see
00:25:59
this going sax now um that we can't seem to get inflation under control and people are looking at their 401ks they
00:26:06
feel a lot poorer but is the demand side gone yet have have consumers decided i'm
00:26:12
not going to buy the next house i'm not going on this vacation six dollar gas makes no sense seven
00:26:18
dollar gas makes no sense i'm not going to go on this weekend excursion i'm staying home
00:26:22
yeah i mean look consumer confidence just had the biggest drop i think in 40 or 50 years um
00:26:28
we if you look at like right track wrong track polling for the country only something like 24
00:26:34
percent believes that the country's on the right track right now if you poll people are we in a recession and they
00:26:40
don't look at like you know the quarter of a quarter growth they just look at what they're feeling 56 percent of the
00:26:45
country says we're already in recession it's about 70 percent republicans about 50 percent democrats so the country is
00:26:52
already hurting people already feeling it and this is psychological sacks or are
00:26:57
they actually making decisions now to spend less well i think it's both i mean you start
00:27:02
with the real inflation and people feel it and they also hear about it in the media and then they start to adjust
00:27:07
their their decisions and this is the problem with fixing yeah this is a problem with fixing an inflation problem
00:27:13
is that it's based on expectations so once people start to expect inflation then businesses have to start operating
00:27:19
as if there's going to be an inflation rate next year so they have to start raising prices and it's actually very
00:27:24
hard to put the horse back in the barn and this is why i think the fed is probably more likely to overshoot on
00:27:32
raising rates is because if they really want to stop inflation now they really have to slam on the brakes and then
00:27:37
that's going to lead to a recession and if they don't then we end up with like a
00:27:41
chronic sort of stagflationary situation where you get lower growth and inflation
00:27:46
persists so it's a bunch of bad options right now and i think to the point freeburg was making earlier you know
00:27:52
this ray dalio piece that he's published as a blog on linkedin he said look what
00:27:57
you want is a fed that is alert at the wheel and gently applies the accelerator or the brakes based on what's happening
00:28:05
and instead what we had is the fed was asleep at the wheel they should have started reacting gently to inflation
00:28:11
last summer instead they waited nine months and now they're slamming on the brakes and this is a bunch of bad
00:28:18
options i think we you know we are going to have a recession the way this is can
00:28:23
i just make one suggestion i want to put this out there because i sent it on our
00:28:26
text and i anyone that's listening in dc please think about how we can change the way the federal reserve
00:28:33
operates but it doesn't make sense to have humans with subjectivity applying their subjectivity to a set of
00:28:43
as chamath pointed out infrequent data that comes in chunks and comes in spurts and only having a mechanism of changing
00:28:49
rates by 25 each month or sorry 25 basis points once a month we should have continuous
00:28:57
real-time monitoring of economic data and software or ai or some sort of informed set of models should then
00:29:05
predict what inflation and economic growth rates will be as that data comes in react in real time and on a daily basis
00:29:12
we should be adjusting the overnight rate in a one basis point increment so we can have the ability to more quickly
00:29:19
more efficiently and in a higher resolution yeah smooth it out a smoother way in a higher resolution way make
00:29:24
these adjustments it's silly that we're still operating the way we did in a pre-digital age as it is with a lot of
00:29:29
industries and a lot of bureaucracy but in this case it's particularly prudent and it's becoming particularly important
00:29:35
and relevant as we're seeing right now with the stagflation risk that we're facing where we could have massive
00:29:40
inflation and recession at the same time because if we had made smaller adjustments every day for a period of
00:29:46
time as these economic data indicated that we should be making them more quickly we would not be in this problem
00:29:51
and i don't think that having humans and their judgment should necessarily be the
00:29:55
way that we drive yeah but listen we don't need them making daily adjustments i don't think the fed can fine-tune an
00:30:00
outcome like that i just think that they can't be asleep at the wheel for nine months i mean we should have ai running
00:30:05
this freaking thing i mean listen i i don't i actually don't think when you said that you know congress needs to
00:30:10
somehow change the way the fed does business i actually think that the fed has the correct mandate which is the
00:30:16
dual mandate of considering inflation and unemployment we shouldn't be basically junking that up by adding a
00:30:23
bunch of mandates and actually the administration has been trying to add mandates they basically gave the fed a
00:30:28
mandate around climate change they gave them a mandate yeah no i agree don't you
00:30:32
don't change the mandate don't change them it can't be the tools the tools should change yeah
00:30:39
right we really want a focused fed and i think the administration has been politicizing the fed by giving them a
00:30:45
bunch of mandates look if you want to pursue those policies do it at hacks do it in the
00:30:49
interior department don't basically confuse the fed and make them pursue climate change or equity or what have
00:30:56
you i mean that is just bad that is not their remit right their remit is controlling inflation i really think
00:31:02
this just comes down to the fact that for nine months they sat on their hands and ignored the inflation evidence
00:31:07
remember this word transitory you know we heard so much last year about inflation being transitory how'd they
00:31:13
know that you know why didn't they start rethinking this quantitative easing the
00:31:18
headline from the wall street journal says it all how the inflation rate is measured
00:31:22
477 government workers at grocery stores yeah software should be taking data from
00:31:29
different feeds and software can learn i don't i don't agree with you and what are the predictors of inflation and what
00:31:34
are the predictors of growth and make a recommendation i don't agree with you that it needs to be real time in fact i
00:31:39
think it would do more harm than good but i do think that we can know these things without sampling in such a porous
00:31:46
way and you know you can work with private companies to give you the feed of data
00:31:51
to to allow you to do it and now you know we're going to look we've had a system of over correcting and under
00:31:58
correcting for years the problem is the stakes get higher and higher as the economy grows and becomes more
00:32:04
complicated and energy and we have more leverage and we have more leverage and we have more industries that are
00:32:09
leveraged and more asset classes that are leveraged like housing because this is such by even a few points you could
00:32:16
tank everything i also want to tell you guys a quick story one of the most interesting canaries in
00:32:21
the coal mine of all of this was two days ago and what uh happened to facebook and this sort of ties a lot of this
00:32:32
stuff together in terms of like economics inflation asset prices equities tech we should we then we can try to
00:32:38
talk about non sort of you know big tech but the everybody was saying oh gosh the
00:32:45
market's going to rip on the open you know we were closed for juneteenth and then on tuesday the market you know the
00:32:51
s p was up like 250 basis points 2.5 and the nasdaq was also up you know call it maybe 300 basis points roughly
00:33:00
but facebook was down like 400 points right so it's a big spread and why is that and i was like this
00:33:06
makes no sense to me what is going on with this price action everything was up apple was up google was up and so i
00:33:12
called around and you know i was like why is this happening and this is the best explanation i got
00:33:18
when you look at who the incremental buyer is in the stock market it tends to give you
00:33:23
a sense of whether prices can go up or will continue to go down and the poorest informed buyer
00:33:33
tends to be retail and the most informed buyer tends to be these very large institutional hedge
00:33:38
funds right so there's a spectrum and uh facebook is an example of one of the of big tech that is poorly owned by
00:33:47
retail so it's mostly owned by smart money and the case that smart money makes for
00:33:53
owning facebook is that it's got an extremely cheap price to earnings ratio so you must own it
00:34:00
and what they said was that they you know looking at the tea leaves of consumer demand what they actually
00:34:07
re-underwrote was that actually it's not that the price to earnings was cheap it's that the e in p e was just
00:34:13
wrong and if they pass through all of these increases in inflation and you know their earnings expectations into
00:34:19
facebook it's actually more like fair value at a lower price that's why they sold it so much on a day where the
00:34:25
market was up now why is that important well eventually you're going to touch all
00:34:30
these other stocks as well that are going to go through earnings revisions in this recession
00:34:35
this is where i think wall street has done a very poor job on behalf of retail if you look at the average estimates of
00:34:42
earnings you will be shocked to hear that wall street actually has this year being record earnings next
00:34:48
year earnings continuing to go up how is that possible well how was that how was i if you were sitting here
00:34:56
happening do you see how do you see earnings continuing to go up into these prints like this when you cannot pass
00:35:03
through you know 80 90 increases in energy and cogs and whatnot how does that mean i
00:35:09
think the what people would say is maybe they're going to lower their costs and so with
00:35:13
layoffs and con and lowering salaries and lowering spend on advertising you know
00:35:19
the earning the e could go up if people because start belt tightening and then we start having companies that are being
00:35:25
run you know just more um you'll have to you have to sell fewer things because there'll be fewer people with jobs to
00:35:32
buy things but we have 10 million job openings so this is the weird thing about this recession is because we
00:35:38
haven't let a lot of people immigrate into the country but exactly so many jobs is that what you think the
00:35:43
consensus view on wall street is that basically a bunch of people get fired and so that's why earnings continue to
00:35:49
go up well they stopped hiring for two years in advance right facebook said they were hiring for like 2024 their
00:35:55
hiring plans were looking out two years so now if they go on a hiring freeze maybe there's you know i'm going to
00:36:00
number one i'm just putting out a theory i'll give you the counter factual i think wall street's wrong okay and i
00:36:05
think that earnings are going to go down this year and will definitely go down in
00:36:09
23 and so i think what probably happens is the entire world of equities needs to
00:36:16
get repriced at a lower price and in that it's going to put enormous pressure on these cash-burning
00:36:23
non-profitable tech companies well that's for sure but in the ones that are profitable chamath they're aware of this
00:36:28
facebook just canceled like two of their prototypes they were working on to save
00:36:32
money so that whole 10 billion dollars into you know vr i think they're trying to
00:36:36
make that number looks more smaller uh sax what do you think well i think you're bringing up a really
00:36:42
interesting point with this the 10 million you know job openings and what now that that number is coming down
00:36:47
really fast as companies close open wrecks and they basically freeze hiring so that number
00:36:53
is going to come down very very fast but one of the major contributors to inflation is that the labor force
00:36:59
participation has been very low uh millions of people left the labor force during covet as a result of the stimulus
00:37:05
checks and the freezing of rent and evictions i mean look rent's the number people's number one expense if they
00:37:12
don't have to pay rent for a couple of years a lot of them may not work or may not work as much so we've had this
00:37:17
problem where we really need about two million people to re-enter the labor force and if you describe inflation as
00:37:25
too much money chasing too few goods we need to increase production and productive capacity and when you have
00:37:32
millions of people dropping out of the labor force you've got less goods and services being produced that people want
00:37:38
so just reducing the money supply is not going to get us out of this mess we also
00:37:43
need to improve productive capacity just to put a number on that we peaked in the
00:37:48
1999 era at 67 percent of participation labor force uh and then it's been down in this low 60s 61 62 and it continues
00:37:57
to be low but that is the solution here we get that seven percent that gap um just fix the demand side because if
00:38:04
all you do is fix the demand side what you're doing is you're killing the economy to reduce demand in order to
00:38:10
bring it down prices that's very painful it's all pain but what you also have to
00:38:15
do is fix the supply side you have to increase the availability of all the critical inputs into the economy so
00:38:21
labor obviously is one of them but also critical resources like energy you know oil natural gas and so on and that goes
00:38:29
back to fixing the supply chain hopefully getting a resolution of the situation in ukraine the war
00:38:35
so if we could fix those things it's a way to improve the economy without creating more pain freeberg if the
00:38:41
prices of just daily living of which transportation and housing and health care are now the top three i believe um
00:38:49
groceries and health care i think have flip-flopped a couple times in the last decade in terms of cost if those things
00:38:54
go up would that make people want to go back to work to pay for those things or does
00:38:58
it create capitulation where people say i'm moving in with my cousin i'm going to lower my balance sheet what is your
00:39:03
prediction there are more people going to go to work or do we still have this you know call it 10 million people in
00:39:08
the country who just don't want to go to work i've mentioned this in the past but
00:39:11
i think there's more there's another kind of interesting outcome of this we we've had several
00:39:17
months in a row of pretty significant increase in consumer credit and i think the reason is
00:39:24
things are getting more expensive people generally do not like to reduce their spend on stuff or they're living their
00:39:32
lifestyle once you get used to a lifestyle like going out to dinner once a week or going
00:39:37
to the movies every week and you create a budget you create a life experience around that a model around that it's
00:39:43
very hard to say okay i gotta cut budget now and i gotta reduce my life i would rather say i'm gonna keep doing that or
00:39:48
at least there's some inertia or some momentum to keep spending on the things that you've been spending on
00:39:53
and the way you do that in a model where you don't have as much income or you have less income and things are getting
00:39:57
more expensive is you take on more debt and so there is a little bit of a nervousness
00:40:02
that i have had that people's response generally the consumer response to inflation
00:40:11
and uh to a uh kind of a a shifting um income environment like this is not necessarily to cut
00:40:21
as quickly but take on more debt and keep keep buying and so i am a little nervous about that but i do think
00:40:26
obviously at some point everyone has to figure out ways to generate income there
00:40:30
have been a lot of these kind of ancillary markets that are typically the first to go these
00:40:35
extra services markets where people you know have found other ways to make money side hustles and whatnot
00:40:42
um that may or may not be as robust as they have been historically and so people may need to go back for
00:40:48
more secure stable income and and these jobs get filled i look i mean as we all know there's an
00:40:55
opportunity and this is the whole concept i think behind build back better it's not super
00:41:01
thoughtful in terms of the approach um i think based on my understanding of where that
00:41:06
money's supposed to go because it doesn't create long-term jobs but there is an opportunity to build
00:41:10
um new manufacturing and new infrastructure jobs in the u.s right now that could
00:41:15
enable a healthy transition here but that legislation needs to be done smart it can't be done with this like hey
00:41:21
let's build a bunch of bridges and then a bunch of contractors make a bunch of money and no one has any long-term jobs
00:41:26
out of it we've got to find ways to spend money on creating long-term sustainable um you know new industry
00:41:32
here yeah and job openings 11.4 it's come down about six or seven percent so you
00:41:38
know it's gonna be trailing but it's for sure we're seeing it in our industry with the hiring freezes
00:41:43
that you know we're gonna work through those open jobs what are the chances that inflation gets under control
00:41:50
in the next year and should the fed go for like the one percent slam on the brakes there was some talk about that
00:41:56
obviously they went forward remember a lot of the elements that we were um kind of saying oh my gosh i can't
00:42:03
believe the climate prices so you know wheat is down i think 30 percent lumber is down 50
00:42:09
uh gas prices are coming down so you know there are some of these um you know commodity spikes that we've
00:42:16
experienced over the past couple of quarters uh particularly recently that are really that have had a significant
00:42:23
part of the fueling effect on the inflationary uh trickle down into ultimately end products and whatnot uh
00:42:29
and those are coming down um you know there's a real question of how quickly that flows through the economy and flows
00:42:36
through to the price of goods uh that consumers ultimately end up paying for the gas prices right now are the biggest
00:42:43
concern right like unless you can get gas prices under control that always always has a massive impact on spending
00:42:50
uh on consumer spending which drives a recessionary cycle um and so the if i'm the biden administration i'm first and
00:42:57
foremost i don't care about the general inflationary indicators as much as i care about getting the price of gas down
00:43:02
that is a super super critical number to fix is is this are these gas prices gonna
00:43:07
change how americans look at what car they buy because they're going to get worse last time we had that they're
00:43:13
going to have people started looking at not buying suvs we could have seven dollar gas
00:43:18
oh i said there was a picture actually uh i tweeted in california there was a seven dollar eleven cents broadly
00:43:24
broadly we could have seven dollar gas all throughout the country but jkl the um you know remember the average
00:43:30
automotive automobile in the us lasts for 12 years that's how often people change out their cars so that's eight
00:43:35
percent of the fleet being changed per year yep and the interest rates for auto loans have spiked like crazy now with
00:43:41
this change in the fed rates and as a result the uh delinquency on auto loan portfolios has spiked like crazy yeah
00:43:49
and so you know yes sure theoretically people will think about buying an electric car but most people aren't
00:43:54
thinking about that on average for five or six years from now because that's the
00:43:57
average of a 12 year cycle right five five years from now wait till all these peloton bikes need to get repossessed
00:44:02
well all these uh actually the the the weight for cars and the overpricing of cars has ended in the last two months
00:44:08
and there are multiple cars now on the market 25 30k for a 50 plus mile per gallon gallon car i think this actually
00:44:14
one of the silver linings coming out of this is people might actually stop buying as many suvs or you know i think
00:44:19
our average is in the low 20s right now and europe's is in the high 40s the problem is like you know every other for
00:44:25
miles per gallon part of the government acknowledges that you have to really ring fence and protect consumers right
00:44:33
like if you look at the securities laws uh they're meant to protect them at all costs um and jason you've you know
00:44:39
you've been frustrated by some of the rules that haven't changed and when they change they change so slowly
00:44:45
but the reason is because sometimes that you want people to make good decisions and
00:44:50
if you uh you know give them a bunch of firepower they're just gonna spend it and you know what we really did was we
00:44:57
gave folks just a ton of money and what did they do they acted rationally they spent it now we have to
00:45:05
take it all back um and that's that's i don't think that's going to be as easy or as
00:45:10
simple as people think what what percentage of the money supply do you think is in excess right now in
00:45:16
the united states well look i told you this because i wrote this in my annual letter but it's it's stunning that you
00:45:20
know the reason the stock market went up dollar for dollar was actually tied to the growth in the m2 money supply the
00:45:26
correlation was 0.92 so for every dollar that the fed printed the stock market went up by 92 cents
00:45:36
so you know it stands to reason that if the fed is going to take three to five trillion dollars of value out
00:45:43
then we have to re-rate the equity markets by three to five trillion dollars at a minimum and then you have
00:45:47
to re-rate and re-baseline for earnings and so that's probably another 20 or 30 percent it's good yeah let's talk about
00:45:54
the end game here um the rates go up people stop buying homes people go back to work
00:46:00
and uh energy prices come back down because people are not buying as much of it spending goes down and people rebalance
00:46:08
and that takes a year the job openings could also disappear by the way i mean like they're going down 400 thousand a
00:46:13
month is what are you doing yeah yeah you're the people you're assuming that all of a sudden like demand is stable
00:46:17
but it's not necessarily stable and it demand and in a demand contraction yes people get fired but then also new job
00:46:24
openings change right yeah there's fewer of them they're they're more specific in
00:46:28
the way that people salaries go down right that's the salaries go down that's the piece i'm waiting for that to me
00:46:33
that would be i don't know if you guys have early warning signs but the two early warning signs i have in my you
00:46:38
know uh uh job of investing in early stage companies is when people well what's the average salary for an
00:46:44
engineer if that hasn't gone down by now then that's a lagging indicator right that
00:46:49
would be to me capitulation salaries go down or people instead of laying people off sacks
00:46:54
they do uh salary cuts at a company that is really hard to do right that's yeah i
00:46:58
don't know i don't think they do solution preferences and deals right i think the way the salaries come down is
00:47:04
that startups freeze their hiring plans where they lay people off and all of a sudden the war for talent subsides it's
00:47:09
easier to hire people and so there's no need to keep raising up seeing that yeah i think we're seeing the beginning
00:47:15
of it but i gotta tell you i mean i think that startups have not fully embraced or realized what's happening i
00:47:23
just got back from the co2 summit over the past couple of days this was an event that was hosted by kotu
00:47:30
you know whose founders are felipe and thomas lafont very smart guys very smart investors who've been public market sort
00:47:37
of hedge fund investors for a long time but also have a large venture fund to do
00:47:41
growth stage investing some of the takeaways from that conference some of the more vivid lines that stuck
00:47:47
with me is that one of the speakers said that he said that when it comes to runway for
00:47:53
startups three to four years is the new two years because if you just have two years of
00:47:58
runway you're going to need to raise in a year and in a year from now we're going to be in the middle of a recession
00:48:04
they're predicting they're forecasting that capital availability is going to decline about 75 percent the amount of
00:48:09
money that's venture money that's available to the ecosystem downs by three quarters so if you try to raise in
00:48:16
that environment either you're not going to be able to or investors are going to
00:48:19
you know have all the leverage you're not going to get terms that you like so they were recommending three to four
00:48:24
years of runway so that is not what i think a lot of companies are just not even possible
00:48:31
the other thing that the other really vivid takeaway is that they did some polling of the startup founders who are
00:48:37
in attendance okay and what the numbers basically showed is a is a contradiction on the one hand the
00:48:44
founders sort of understood that intellectually that we're headed into a downturn we're headed to a
00:48:49
recession and so the polling reflected that on the other hand if you ask the founders how they're going to react to
00:48:55
it what are you going to do about are you going to cut a head count or are you going to accelerate your business to
00:48:59
beat competitors everybody said oh we're going to out accelerate our competitors
00:49:02
so everybody thought that they're the exception in other words everyone understood we're headed for this massive
00:49:07
recession it's going to be really bad but we're going to be the one company that doesn't need to cut we're actually
00:49:12
going to grow we're going to accelerate during the downturn so there was a real contradiction in
00:49:17
how founders are interpreting this advice and i have to tell you when i talk to founders in our own portfolio
00:49:24
what i see is you know we've now done multiple meetings where we lay out what's happening in the economy and they
00:49:29
get it they understand it and when we do a board meeting they're like okay we're going to go look at our
00:49:34
plan and we're going to reevaluate and we're going to make major cuts we're going to bring our burn multiple down to
00:49:39
you know the where it should be but then you know when you check in with them a couple of months later and you're like
00:49:43
where are you on the planet i haven't taken the medicine it's it or or the medicine is like a 10 cut and i'm like
00:49:48
guys like 10 a performance review yeah like temperatures you should be doing every year anyway
00:49:54
yeah you get rid of the the bottom like the c performers you promote the a's and
00:49:57
b's and get rid of the c so no one really wants to take the medicine yet and um you know it's a problem i
00:50:04
mean sequoia has this great chart called survival of the quickest that we should
00:50:08
put up on the screen and it shows two lines one company is the one that takes the medicine right away brings their
00:50:14
burn down to where it should be and then they're able to grow from there and they
00:50:17
really will out accelerate the competitors but then there's the company that basically delays and waits
00:50:23
and what happens is by the time they finally get religion to make the cuts it's too late because even after they
00:50:28
make the cuts they don't have enough runway on the other side they burn the capital yeah they burn the capital and
00:50:33
then they're in a death spiral so i think you know what what companies need to think about is this is a 75 reduction
00:50:38
imagine if you did a hundred million dollar round last year right if you go try to raise next year in the
00:50:45
middle of this recession that 100 million dollar round might look like a 25 million dollar round so imagine if
00:50:50
you're burning an extra 25 to 50 million more than you should be according to your burn multiple you're basically
00:50:56
burning the next round forget about the fact that the last round gave you all this cushion think about how much of the
00:51:02
next round you're burning and if you reward your thinking around that it could lead to a change in behavior
00:51:09
anecdotally i'm seeing people come back from rounds where they were expecting 40 or
00:51:16
50 million dollars in some cases like with 250k in revenue 500k in revenue they were living in a 200
00:51:23
300 times revenue kind of world it was just insane and um you know they're now coming back with 10
00:51:30
million dollar caps 15 million caps on their notes i was offered 100 million dollars
00:51:37
at a 50 discount and i said call me when you get to 65. and that's the best company that's literally the best
00:51:43
company that's the best and the best founders to bet on right of probably most private companies is that you don't
00:51:48
like that valuation what is that valuation 40 at 50 off i i it's less of a judgment on
00:51:55
but it's just more an observation that we're at the beginning of the beginning and again we're at the beginning of the
00:52:01
beginning okay for all of us that lived through 2000 this was four years of sheer hell
00:52:09
and a grind now we have 30 trillion dollars that we have to work through the economy a
00:52:15
recession we have to overcome a war we need to end and people all of a sudden assume that two or three rate hikes and
00:52:23
five or six months of headlines are enough and on the margin maybe they're right
00:52:28
but from my perspective you know it's less a judgment on but it's just an observation that we're at the beginning
00:52:34
of something that just fundamentally has to take some amount of time to work its way through
00:52:38
the system and so i don't understand why anybody would give up their liquidity in this
00:52:43
moment right now why would you why would i why would i give up 100 million dollars of cash in my bank account i
00:52:48
would not do that right now because the cash the caps the cash gives you so much optionality that's basically
00:52:54
so much optionality so you're going to be looking for distress and this is the thing so you have a huge amount of
00:52:59
capital leaving the ecosystem like we know tiger is basically out i mean they were the basically the default provider
00:53:06
of growth stage capital over the last couple of years so you have a lot of liquidity leaving the system and then
00:53:11
the liquidity that's in the system is waiting for distress so you're right and there's a quarter i mean like we talked
00:53:17
about there's a quarter trillion dollars of quote-unquote dry powder i mean i know chamoth thinks that people are
00:53:21
going to give that money back but there's never been this much there's not there's not that much
00:53:27
they're not going to give it back deployed yeah look at that tiger fund tiger raised a new 12 billion dollar
00:53:33
fund that was announced in march and tech crunch we covered it on the show a month ago yeah techcrunch an article
00:53:38
saying was already deployed in six months so i wasn't on that show oh that was the
00:53:43
one where you would jake i'll try to replace you with brad gerstner and we should we should do the show weekly
00:53:47
going forward instead of monthly it might be better to keep up with these trends okay so jacob jacob you made a
00:53:52
good point there chris go back this for a second you said that founders were they're still anchored on this world of
00:53:56
two to three hundred times ar valuations let me just tell you where the new valuation levels are and this is
00:54:02
obviously in flux but i'm pretty sure the valuation levels are at 20 to 30 times arr that's for a company that's
00:54:08
growing 3x year over year yeah three x year every year that's the best of the best the reason how you get that's 10x
00:54:13
next year's ars basically yes exactly and the way that you get there is that if you look at like
00:54:19
the um the multiples for like the best public sas companies that are like say a 40 grower like a snowflake they're at 8x
00:54:27
yeah so you know so basically giving more credit for the higher growth rate yeah right but
00:54:33
they really have to have that 3x growth so you know if you're a founder think about the fact that when you try to go
00:54:40
raise next year assuming you're the best the best you'll get 20 to 30 times arr now think about your spending not last
00:54:47
round's money you're spending the next round's money if you could just reorient your thinking that way you'd burn a lot
00:54:53
less money yeah the the i literally had a deal you know in the 30 and 40 range and angel investors who
00:55:01
never early stage angel investors seed funds that did not look at multiples are now
00:55:08
asking me because when i send a deal memo to 10 000 people for my syndicate people hit reply
00:55:13
people are hitting reply now and saying i did the math on this this is the multiple this is this this is the burn
00:55:18
multiple they're actually doing the math so we all of a sudden have discipline that i have not seen in this investor
00:55:24
class in the 10 years i've been doing it so that is to me one of the great silver linings here i
00:55:31
think people are going to do a better job with their personal balance sheets they're going to invest less in
00:55:35
speculative stuff and they're going to invest more in the actual builders who have discipline so we're going to
00:55:41
see this massive swing to discipline and we're going to flush out all the people who don't product marketing think
00:55:48
about all those folks like what's happened in the last six months it's like they've been long unprofitable tech
00:55:53
it's got smoked by 75 to 85 they've been long crypto that's gotten spoken by 65 more yeah i mean if they weren't using a
00:56:03
calculator then they sure as hell should be using a calculator now to figure it out i mean people
00:56:07
well you think about it there's a whole group of investors who have only known the up market there's a whole group of
00:56:12
founders who are only in the growth market if you're under 40 years old you don't understand what you're about to
00:56:18
experience and here we are let's that's a perfect time to segue into crypto bitcoin's
00:56:23
price is down 71 uh from the all-time high uh 69k in november of 2021 bottomed out at 17 000
00:56:32
or so on june 18th ethereum's price down 78 and if you look at the craziness since
00:56:38
the last all-in episode you know this three ac three arrow capital they're a crypto hedge fund that was letting
00:56:44
people uh basically loan out their crypto uh they are basically closing a ten billion
00:56:51
dollar um crypto hedge fund at its peak they're insolvent according to the reports tara luna
00:56:58
collapsed the founders and employees of that company are not being allowed to leave south korea it doesn't mean
00:57:03
they're guilty but it's certainly not looking uh good and um there is a whole situation with
00:57:10
solana and a company built on top of it so lend which is not solana it's an application built on top of it i talked
00:57:16
to vinnie lingam a friend earlier this week about it they had a whale who had um tried to loan out a hundred million
00:57:24
and they had to freeze their account because they thought the downward pressure since there's not many buyers
00:57:28
in crypto right now could collapse solana so thoughts on krypta writ large what is this going to look like saks
00:57:35
over there i mean crash all over again i mean basically you had an extremely promising
00:57:41
technology i mean it is a promising technology and it is a future you know technology platform but the
00:57:48
price action got totally decoupled from the level of progress in the space and people were not valuing these things
00:57:54
based on real customers real usage and real use cases but it was became you know very
00:58:00
speculative and again all this was fueled by the excess liquidity that was pumped into the system
00:58:05
so you've said it before that crypto is like a liquidity sponge it sucks up when there's a lot of excess
00:58:10
liquidity it sucks up that liquidity but now that sponge is getting wrung out and um you know and part of the problem
00:58:17
is with interest rates going up you know it's one thing when you have negative real interest rates and and and you
00:58:23
can't earn a return on your money then you start to get you basically people start to push the envelope and invest in
00:58:29
more and more speculative things but as you can get a real return in like let's say there's like a real
00:58:35
risk-free rate now there's alternatives for all that cash and then you got the problem of
00:58:39
leverage as well which i think over the last few weeks the crypto space was heavily over levered and a lot of people
00:58:45
got margin called and wiped out that's the contagion that's occurred and people were levered up five ten times their
00:58:51
bitcoin on these roads wait till these token sale things get litigated i mean the amount
00:58:57
the amount of grift by so many of these venture firms in running these sketchy deals where they
00:59:04
would put in some amount of money this is my understanding of the scam because it was
00:59:08
explained to me you put in a little bit of equity at some crazy price and then you get these tokens and
00:59:13
apparently there's no like you can just sell these tokens day one and so what happens is like
00:59:18
you you price the equity but it's meaningless because really what you're getting is the right to get some amount
00:59:23
of these tokens the price is crazy you sell it and then you just kind of walk away and
00:59:28
apparently you know you do these deals where you just rinse and repeat this thing
00:59:32
um well wait wait till that gets exposed i mean that seems like the term the firm
00:59:37
that did this the most is andreessen horowitz uh chris dixon i think was considered like the best investor last
00:59:43
year or the year before because of all these token returns i i gotta wonder when they go
00:59:50
now that this people are losing money that's when people start suing i mean what is it gonna look like
00:59:56
if they were what do you think their marks looked like last year versus right now
01:00:02
i mean and all these coins like looking back in the rearview mirror and saying hey you bought all these coins
01:00:08
you flipped some number of coins i mean to your point your mouth like what is the litigation path and the
01:00:14
the shadow economy that was created there was an article there's an article i think it was in bloomberg um about
01:00:21
folks trying to figure out how to get um [Music] a lawsuit filed against binance and the
01:00:28
problem was that they didn't even know what entity to sue um it's not clear who owns what and you
01:00:35
know what owns the other and who the ultimate look through ownership structure is and
01:00:40
and it doesn't mean that binance is guilty of anything but the article was just you know showing how there was a
01:00:45
u.s investor who lost 1.2 million dollars who wanted to file a lawsuit and they have every right to do that um
01:00:51
couldn't even find the corporate entity to to actually file this lawsuit against
01:00:56
so if that's what's happening in a trillion dollar market there's um i mean it's gonna be a lot of people
01:01:02
it's free it's it's a lot of oversight that's that's that's free what is this gonna do to regulation and crypto at
01:01:07
this point because crypto regulators now or regulators are going to just be looking at this going wow look at all
01:01:12
the pain and suffering and when a local d.a gets you know five or six of their people complaining they lost money in
01:01:21
terre luna whatever it is this is like the perfect opportunity for them to collect a pelt and get some
01:01:26
crypto kid and you know hold them responsible and get some great headlines i mean
01:01:31
what do you what do you think happens from this point forward in the crypto land
01:01:35
what you just said okay there you have it folks yeah but what about regulation i guess that's the
01:01:40
next piece because all of these entities have taken a very the sec last july or august published this kind of initial
01:01:47
opinion letter but remember there's also the cftc there's a bunch of regulatory authorities in the united states
01:01:53
that have a longer process than governments xus that have had a much more kind of
01:01:58
stringent point of view that there's a lot of casino-like gambling going on with these things and that's it there's
01:02:02
no functional utility there's not a it's not is it a security if there's no underlying business if it's not a
01:02:08
security then it's just a bet on something if it's a bet on something it's gambling
01:02:12
it's you know obvious that if it's a security it has to be governed by the sec if it's a future or commodity it's the
01:02:19
cftc and the problem is we need congress to pass some legislative framework that
01:02:25
puts the puck in one side of the of the arena a rink or the other yeah and otherwise all this gray
01:02:32
is going to exist for a long time and people you know if if governments really hate it when retail investors
01:02:39
lose money well watch out because they just had two trillion dollars in the us we have a lot of other
01:02:44
regulators that can prosecute cases like the dfs in new york uh this is the department of financial
01:02:50
services they are a pretty litigious prosecutorial group i mean they go after scams and
01:02:57
uh people preying on consumers and retail investors in a very aggressive way often outside of the purview of the
01:03:04
sec they often coordinate with the doj or the scc in evaluating enforcement um decisions but they will prosecute
01:03:12
and and i think that there's a you know as you said a lot of opportunity when people have been grifted out of
01:03:20
their money uh for politically motivated and you know people that generally have kind of the
01:03:26
right point of view that are in a position to prosecute to go after uh the offenders so you're right there will be
01:03:32
there will be a lot of action on this over the next couple of years and then chemoth is right the way it gets
01:03:36
resolved is a congressional act but by the way i'll just point out in the year 2000 congress passed what was called the
01:03:43
commodity futures modernization act and that cfma was really meant to kind of quote bring commodities and futures into
01:03:50
the digital age and they started working on it in 1996 it took four years to get
01:03:53
it done within four years it was already out of date and a lot of what was going on with
01:03:58
respect to how exchanges operate and the types of contracts are being created it was already missed so you know the
01:04:04
problem we have here is that by legislating the state of the market today without creating enough flexibility in
01:04:11
how enforcement action can be pursued and how things can be interpreted in the future you could end up in a similar
01:04:16
situation where people just find and run around and the whole thing repeats itself in the next few years because
01:04:20
guess what people will always want to gamble and gristers will always want to grift and so there will always be a way
01:04:26
to try and scan people out of their money yeah and that's just sky dayton's poker
01:04:30
game hello hello by the way are you jacob's always going to want to jake so what you're saying oh
01:04:36
you get out of here hey everybody download call before we pivot um if you want a perfect
01:04:44
example of this and this is just a lesson to founders out there if you feel like you're in a gray area you probably
01:04:50
are um people are like oh nfts you know they're just trading cards yadda yadda and it's not a big deal that somebody at
01:04:57
openc decided to front run the market oh they just bought a trading card ahead of
01:05:01
everybody else who cares we know who cares it turns out the southern district of
01:05:06
new york cares and they are a pretty serious group of people former employee of nft marketplace uh openc was charged
01:05:14
in the first ever digital asset insider trading scheme so just because insider trading
01:05:20
didn't exist as a concept for nfts before congratulations doesn't exist in crypto i mean if they want to really
01:05:27
find uh the honeypots here i mean it's the worst kept secret in crypto how much insider trading is going on amongst the
01:05:37
organizations that run the exchanges and their side pockets that they use to to manage liquidity i
01:05:43
mean this is the it's the biggest thing that's been happening in crypto if you're wondering why people were
01:05:49
spending hundreds of thousands of dollars on a board ape or whatever like there might have been some shenanigans
01:05:55
going on here yeah well i mean no but jason it's not it's not a legal this is my
01:05:59
understanding though it's not illegal to front run crypto trade so most of these
01:06:02
organizations that that run an exchange right compete for order flow and they're
01:06:08
able to just look at that order flow and then they front run the trade and they're on the other side of that so
01:06:12
they're always making money and so they were making tens of billions of dollars all these exchanges were yeah and then i
01:06:19
guess the question becomes sacks you know in terms of since you're an attorney like how you interpret this
01:06:24
stuff there may not be a law in the books about front-running nfts but there are
01:06:29
laws on the books about fraud and nft and conspiracy to you know um grift people out of their money so this
01:06:36
is all going to come crashing down and the discovery is going next if the southern district of new york actually
01:06:42
subpoenaed any of these exchanges all hell would break loose oh no they are you can be sure that's in process if
01:06:47
they go after one nft flipper no forget nfts i'm saying coins crypto like that's the huge market and they
01:06:55
will they're turning over these cards because you know how they like to work they like to flip their way up to the
01:06:59
top person um but we're not talking about january sixth year we're talking about gas in
01:07:04
the ukraine next hey yo hey ho uh that's a little reference for y'all um listen now that we're now that we're an
01:07:11
hour in tenon and we've we've kind of like broken the ice and we're friends i feel good i feel like you want to reach
01:07:16
as a team again you you want to redo our intros so you're not being such a [ __ ]
01:07:22
i don't care i don't care can we just move forward i think we all understand i think i'd
01:07:28
like to be recognized you said you said that you were workshopping in intros so do you want to do your intros at the end
01:07:32
of this or not i'm not doing the interest no i'm not strike on interest no i didn't they were
01:07:37
here's the thing i wanted to the interview he's an extra point he needs extra no no it's not
01:07:41
about the point that was a joke i i wanted to do intros i didn't know coming into this
01:07:47
how sensitive people would be and then sax is like i need to have in the contract of non-disparaging nda and i'm
01:07:55
scared about the things i said so spike content needs to be she took that out you were the spike content guy you're
01:08:01
the most concerned no we have an agreement around a good rule non-disparagement he didn't
01:08:06
want to have in there i understand i took it out because i thought you would be more sensitive about accusing
01:08:16
others of disparaging you i might this whole show is you disparaging me have an intro or not for
01:08:22
that i don't have interest prepared no i'll do interest next episode i promise everybody i wanted to take the
01:08:27
temperature of my besties i don't know if people are sensitive right now you want me to make a joke about brad
01:08:31
gerstner we got real [ __ ] to talk about can we talk about ukraine and world war
01:08:35
iii it's not all about our narcissistic nonsense as foreign teenage boys running
01:08:40
amok go ahead so something happened in the last week that i think is pretty disconcerting i mean just intellectually
01:08:46
speaking we all know that wars that go on and on have a tendency to escalate and there was an example of how this
01:08:52
could happen over the past week lithuania is now essentially stopping the flow of goods
01:09:00
from the russian mainland to another part of russia called kaliningrad which is called an oblast it's a little area
01:09:07
but it's outside the russian mainland it's basically between poland and lithuania
01:09:12
and so goods go by rail from the russian mainland to clinton grad and they've been stopping these
01:09:18
goods because they say they're under eu sanction the problem is listen when you think about a sanction a
01:09:25
sanction is me not buying goods from you because i don't like what you're doing that's fair game everyone has a choice
01:09:32
over who they want to buy from but this is not that this is uh lithuania deciding to stop goods
01:09:39
going from russia to russia and so the russians say this is a blockade i think with some justification and blockades
01:09:46
are understood to be an act of war so you've got lithuania basically engaging in this act of
01:09:52
escalation against russia we always thought it would be poland but it's right exactly and remember lithuania is
01:09:59
a member of nato's they have an article 5 guarantee now think about the upside versus downside of this action
01:10:06
in terms of from the western point of view the upside is this has absolutely no impact on the outcome of the war this
01:10:13
is not going to help anyone in ukraine to blockade kaliningrad and prevent coal and building materials and steel from
01:10:21
reaching clinton ground that's not gonna have any impact on the war so there's zero upside to this from a military
01:10:27
standpoint but the downside is that you now have lithuania and russia getting into it
01:10:33
and if they get into a war then we are instantly pulled in under article 5 and world war
01:10:39
3. so this is the kind of dangerous escalatory act that has no upside only downside for us
01:10:45
and my view on it is that we have to tell we have to instruct frankly our treaty allies not to engage
01:10:53
in these types of dangerous acts because there's a huge externality we could be pulled in this is very dangerous and i
01:10:59
just wonder if the administration is on top of this did they give the green light to the lithuanians to do this or
01:11:06
were they caught by surprise and what is the reaction to acts like this you know what i worry is that we're
01:11:12
conducting foreign policy by virtue signaling where we just say who are the good guys and who are the bad guys and
01:11:18
you know if the russians are the bad guys the lithuanians are the good guys so therefore this is okay it's like
01:11:23
playing cops and robbers on a global stage i think we need to be asking the question is this smart or is it dumb is
01:11:29
this prudential or is it reckless is this in our interest or is it not in our interests
01:11:35
and um you know i really gotta wonder about who's mining the store on this day 120 um
01:11:43
and it feels like this is just doesn't have an ended site is there an ended site here what's the end i mean the the
01:11:50
indians what are the two parties yeah what do the two parties want at this point i mean the people in russia are
01:11:55
suffering during this the people in the ukraine are being murdered uh in ukraine
01:12:00
are being murdered i mean how does it end the problem is that biden um engaged the united states in a proxy war
01:12:07
without our real explicit discussion number one and then number two is then we pulled and we pressured europe to
01:12:14
really draw a hard line but then now are kind of working around it so that the countries that suffer the most are
01:12:22
europe now i think you're starting to see the tea leaves though last week there was a group of european leaders i
01:12:30
think it was macron draghi and i can't remember if it was the german chancellor or not and one other
01:12:37
person who went um to ukraine and if i had to bet i think the message was kind of like all
01:12:44
right listen like we need to find an organized de taunt here because there is you know according to europe a
01:12:53
lehman-like situation in terms of economic contagion that could manifest over the next months
01:13:00
so i think that the end game is probably some organized negotiated detent and ceasefire
01:13:09
um i don't think anybody will be happy with it but i think by and large russia is
01:13:14
and has won you know meaning they've won economically they're selling oil like it's not you know like it's going out of
01:13:21
style it's just not selling it to europe and to america um you know they're selling it to china
01:13:26
they're selling it to africa they're selling it india is fine with it they'll they'll take some well also
01:13:31
they're winning on the battlefield there was an article in the washington post there was an article in the washington
01:13:36
post in the last week or so and the washington post is basically the house organ of the washington
01:13:40
establishment and the blob basically saying that hopes are dimming for ukraine on the battlefield the
01:13:47
russians have now won 20 to 25 of the country they've won that eastern that don bass region they've done it with the
01:13:54
help of russian separatists in ukraine and the the amazing thing in this article was that they were saying that
01:14:00
the ukrainians were days away from running out of ammunition despite the 40 billion that we just appropriated to
01:14:06
them where did that money go and conversely they're saying russia is having just unbelievable casualties and
01:14:12
they're running out of weapons and they are obviously out of kiev now uh and they're in the don bass mostly so i
01:14:18
don't think that's anything like that yeah anything the russians the the right so listen i i said on this podcast they
01:14:24
said they're out of tanks right and then the troops they've adjusted their strategy and they've they're
01:14:29
they're they're learning they're adapting to this new kind of warfare this asymmetric warfare where you can
01:14:34
take out a tank with a drone you know but but look you know remember on this pod three weeks into the war everybody
01:14:41
who was in favor of this proxy war was saying how great it was and they were saying it was going to lead to a new
01:14:46
birth of freedom in the west that it was strengthening our alliances you had francis fukuyama predicting that we were
01:14:52
going to win the war and it would lead to this rebirth of freedom in the west we should have known at that moment
01:14:58
everything that fukuyama basically predicts the opposite is always true it's like negative one correlation yeah
01:15:05
and remember i said three weeks in that we were potentially i think putin made the mistake in the first three weeks of
01:15:09
thinking this would be a cake walk but that we were making the mistake of thinking the next phase would be a
01:15:14
cakewalk and sure enough here we are russia has now won the eastern part just to build on what you said you know
01:15:21
we engaged in economic sanctions and i was the first one to say hey this could really work and this
01:15:26
could be a road map for how to do it and it turned out this is the roadmap for how not to do it you can't on the front
01:15:31
door say here are these sanctions and then walk around the back door and basically open the door for them these
01:15:37
these sanctions were so porous as to be like swiss cheese we focused on virtue signaling acts like confiscating a plane
01:15:45
or a boat or a house but we didn't focus on the structural things we needed to actually um you know make the mandate
01:15:52
that we believe to be just to come to life and so russia's completely worked around it their economy effectively
01:15:59
you know is thriving so what have we gained how is it thriving i mean i don't know that
01:16:05
thriving is how they would describe their economy right now yeah i mentioned it isn't their printing
01:16:10
record they're selling gas they're selling phosphate they're actually making a market and the prices have doubled and
01:16:18
tripled in those commodities because the flow has been restricted so because there's a responsibility the opposite of
01:16:23
what we tried to do and by the way i'll point i'll point out something that i pointed out in february which was the
01:16:27
biggest concern for me at the time when we stopped allowing trading in the securities of russian companies we
01:16:34
yanked away 400 billion dollars of market cap that was held primarily by pension funds and retirement funds in
01:16:41
the u.s and europe and gave that value to russia for free we basically said here you go here are
01:16:48
all these securities we're no longer allowed to trade in them so guess what you guys can trade in them you can have
01:16:53
they got all of their gas and energy and mcnickel and mining for free i think it's such a good point
01:17:03
we ripped the stock out of retirement funds and we gave it to the russians and said here you go putin take all of these
01:17:09
securities for free enjoy oh and by the way because of our idiotic sanctions and
01:17:13
the way we're employing them the commodity prices are going to double and triple and all these companies are going
01:17:17
to have record profits this year happy [ __ ] birthday the ruble's up 5x it's not a 5x but yeah okay it's a great
01:17:23
point because if putin had retaliated against the west by nationalizing 400 billion of western assets in russia
01:17:30
everyone would have been up in arms but he didn't even have to do that because we just gave him we gave him 400 billion
01:17:35
totally i mean how did this policy make sense it's this policy of conducting russian securities i'm freaking
01:17:42
blackrock i own a billion dollars of russian securities the u.s government just took it out of my portfolio that my
01:17:48
clients own stakes in and gave it to the russians for free they're gone poof crazy i think listen i think we've got
01:17:56
like a two-level problem on this ukraine war one is that our policy hasn't made sense we should have been using
01:18:01
diplomacy last year to avoid it this we had all these false hopes around strengthening the west and the western
01:18:08
alliance by allowing this war to happen we then instead of trying to shut it down through a negotiated settlement we
01:18:13
try to use it as a proxy war to weaken putin instead it's done the opposite so there's a whole series of policy
01:18:20
failures here but there's another deeper level to the failure which is the personnel who are implementing these
01:18:26
policies the washington establishment the blob who've been of both parties the this sort of uni party who've been
01:18:33
implementing these policies there has been no dissent within the washington establishment the only guy
01:18:39
who really spoke up in a decisive way was john mearsheimer the professor of international relations from the
01:18:44
university of chicago and he was treated as a pariah by the blob in the washington establishment everything he
01:18:50
predicted has come true he proceeded years ago years ago predicted the us was leading ukraine down the primrose path
01:18:56
and the result was that ukraine was going to get wrecked and so it has can i just read the first paragraph of this
01:19:03
bloomberg article that i just posted russia's current account surplus more than tripled
01:19:08
in the first four months of the year the central bank said as prices research oil and gas imports and imports plunged
01:19:17
under the weight of sanctions well you know if you're putin and you're looking at this you're like wow maybe i should
01:19:22
be under sanctions more often totally you know what country should i invade next because this is sanctions all that
01:19:27
sanctions were was a restriction on the free market and when you restricted the free market you basically created a
01:19:33
spike in price but the market his market could still operate with a narrower set
01:19:37
of trading partners he is selling energy to certain trading partners he's selling
01:19:40
phosphates he's making money they are exporting product and they're making more because certain people can't buy
01:19:46
and they've got to go drive the price up elsewhere so not not only did our sanctions package not work and not only
01:19:51
is the treasury treasurer trust treasury sorry flailing around now trying to find
01:19:56
even more back doors we actually opened a very dangerous precedent which is now we allowed oil to settle in currencies
01:20:04
that are not just the united states dollar and now russia and china are trading and settling in cny that's not
01:20:11
good for us this is not how you preserve the identity of the reserve currency of
01:20:15
america i don't understand the eu of cutting all of their energy and then becoming dependent on russia then
01:20:21
creating a ban and sanctions but then they made a carve out that oil delivered by pipeline janet
01:20:28
yellen has been negotiating this carve out we have been enabling russia to sell we know the eu passed this legislation
01:20:35
jason look look at the wall street journal today the articles they're reading the cnbc right now about it like
01:20:39
the eu passed this landmark sanctions package in may but they also allowed the stuff that's coming by pipeline for some
01:20:46
reason to be a carve out if the eu wants to contain putin from invading countries
01:20:51
on their doorstep they gotta actually become energy independent that's the the beginning and
01:20:56
end of not popular and this is the problem with populism that's not popular it's not popular to continue to have to
01:21:03
to to have energy independent nuclear was not popular and so the politicians the legislators responded in a
01:21:10
short-sighted way to the popular opinion of the day and this is the challenge absolutely yes huge mistake on german's
01:21:16
part they closed three nuclear reactors popular sentiment in europe got highly affected by these environmental groups
01:21:21
exactly that's my point but in the u.s i think the people of the country want us to be energy independent and and it's
01:21:28
elite opinion that bought into these foolish ideas that basically we should cancel energy
01:21:34
independence we should cancel the keystone pipeline should cancel new drilling america should be a net energy
01:21:40
exporter 100 job number one is to be energy independent and job number two is to
01:21:46
move towards but now there's another piece to this you got to do this in sequence so when he came in
01:21:52
he said that he was going to make the saudis a pariah on the world stage remember this now he's going hat in hand
01:21:59
to them to try and get them to produce more or lower the price so what was the point of this foreign
01:22:04
policy it it was contradictory he cancels energy independence he basically insults the salt the saudis on which
01:22:12
we're even more dependent for oil and then he basically refuses to engage in diplomacy on ukraine these policies are
01:22:18
contradictory even if your goal was to basically isolate the russians you would then want
01:22:23
to improve our relationship 100 saudi and you'd want to produce more of our own oil 100 yeah you he overplayed his
01:22:31
hand for sure i mean you ha you can't not have uh heat in the winter in germany and the
01:22:38
germans that's coming by the way that's coming you think things are bad right now wait
01:22:42
until winter and then that's only going to increase putin's leverage and that's when you're
01:22:46
going to see a real fracture in the western alliance this idea that ukraine strengthened the western alliance i
01:22:52
think you will start to see the fractures nationally i mean germany's got to put
01:22:56
those the slow march of nationalism will continue and this will be another catalyzing event turn your nukes back on
01:23:02
and and i also think that you know thinking about the western alliance i think that you know countries
01:23:07
like germany and france are really going to question u.s leadership when they have basically a huge
01:23:13
economic recession and they're wondering how they're going to heat their homes in
01:23:16
the winter but i think in the u.s it's time to reevaluate some of the alliances that we've gotten ourselves in again
01:23:22
with this lithuanian situation do you really think that lithuania would be basically poking that big russian bear
01:23:30
if they didn't have the u.s standing behind them as a bodyguard no way they would be much more circumspect and
01:23:35
prudential and the r and the fact of the matter is that these eastern european countries the baltic countries and
01:23:41
poland they have enmities they have friction with russia going back hundreds of years and these guys basically
01:23:49
they have very provocative attitudes towards russia and our alliance with them can draw us in so
01:23:56
we have to really keep a close lid on that we do not want them making moves on their own
01:24:03
because we could get drawn into a world war here yeah and by the way to your point sacks
01:24:09
also you know there continues to be escalating issues with debt and concerns about debt repayment across the eu
01:24:18
and while germany is you know looking to the u.s for support and worried about energy prices they're going to end up
01:24:23
having to foot the bill to support a bunch of these eu member nations that are facing debt
01:24:30
crises and will continue to face significant debt crises over the years ahead i mean greece made a payment
01:24:35
recently but greece's debt to gdp still over 200 italy's at 155 percent portugal is at
01:24:42
134 the numbers are uh pretty much you know today uh you know it was yeah the the
01:24:50
the spread on it italian debt has spiked over the last couple of weeks right bridgewater basically is biggest
01:24:55
germany's got another freaking crisis to fight now and i think you're right the the western
01:25:00
alliance is more than just a military at this point there's this you know do i really want to be the economic savior
01:25:06
over and over again of my smaller member states and guess who's going to benefit in all of this
01:25:12
china like they're going to look at this fracturing and they're going to be like
01:25:16
great by the way just speaking of speaking of china for a second you know we talk and we
01:25:21
bloviate about our desire for energy independence and you know we exclude tesla from you know any sort of
01:25:29
major meaningful legislation we trumpet you know these companies that are just completely woefully behind uh in
01:25:36
building energy independence um we think about like a gas tax holiday but as like kind of like
01:25:42
a you know something that still needs an act of congress to pass even though congress has said they have
01:25:47
absolutely no intention of passing it meanwhile we keep losing our footing to china just
01:25:54
today catl which is one of the largest battery manufacturers announced a pretty meaningful improvement in their you know
01:26:02
3.0 battery design these guys are now building batteries that can go a thousand kilometers
01:26:08
in both of the major you know um compositions that really matter nmc and lfp and i just look at these things and
01:26:16
i'm like wow we cannot actually get capacity funded to build domestic battery capability
01:26:23
because we're too busy kind of basically virtue signaling on things that don't matter
01:26:28
and in return nothing happens china continues to lap us we uh it's really it's really bad state of
01:26:36
affairs we are uh we are in a very odd period in terms of government effectiveness
01:26:41
if you think about china's foreign policy how have they lost out by not being part of all these conflicts have
01:26:48
they lost they're buying prices of oil that were nine months ago to 18 months ago and so there not only has russia's
01:26:58
output price been capped but that's okay china's input cost has been capped and so they don't suffer the same rate of
01:27:06
inflation that the rest of us do so to your point david you know our quote-unquote you know exclusionary
01:27:13
sanctions were ineffective they were porous and we allowed our largest competitive frenemy if you will to
01:27:20
basically be able to you know drive their entire economy at 30 to 40 percent of the uh a discount to what we have to
01:27:27
pay to do the same right when when china goes abroad they go abroad in search of economic
01:27:33
resources and economic development that's the point of belton road they don't insert themselves in these middle
01:27:39
of these conflicts that they don't understand they were never involved in the middle east they were never involved
01:27:44
in like policing you know all these different countries that has cost us a fortune and now the
01:27:50
bill is finally coming due in the form of this inflation we are going to have some form or another of austerity in
01:27:55
this country and it's partly because of this highly militarized foreign policy in which we have set ourselves abroad to
01:28:02
be the world's policeman we can no longer afford to do that can i make a generalization in saks you react and
01:28:07
tell me if this is true or not if you have a country that has existed in some way shape or form you know the
01:28:14
the borders could be blurry but roughly for hundreds and hundreds of years and in some cases thousands of years
01:28:21
where internally the population of that country views themselves you know in a great way they
01:28:29
don't feel like their country is a meaningless nothing country any attempt to economically
01:28:38
humiliate such a country tends to have failed in the past and will continue to fail
01:28:43
and there tends to be other countries who view it as one of these things where well if them then why
01:28:51
not us and then they sort of you know in a backhanded way support everybody so we
01:28:56
end up in this odd situation where we are picking fights we cannot win totally and and the consequences for us
01:29:02
are economically really damaging right and the consequences for everybody else to stay on the sidelines is like
01:29:09
economic prosperity that doesn't make any sense right you're afraid that russia is going to
01:29:17
roll over more countries and that you have this existential risk that this dictator is going to attack more
01:29:23
countries so okay if you're living in eastern europe you might have a different view of it yeah so you might
01:29:28
very much accept and want some help from you know nato and other folks who but you're not getting that help that's the
01:29:33
problem with that that's the sad part about it i mean if it's poorly executed it's not working at this point in time
01:29:38
yeah i mean there's a lot of takeout if you look at the eu okay as an entity they have
01:29:44
almost the same gdp and output as the us and if you compare them to russia their
01:29:48
economy their their gdp is 10 times greater than russia they are rich they can afford to allocate a few percent of
01:29:56
their gdp of their government budget to defense they should be able to defend themselves they really should and so
01:30:02
this idea that we have to go over to europe and bankrupt ourselves to defend rich europeans they should be picking up
01:30:09
a hundred percent of the cost of that a hundred percent i don't know why we're paying
01:30:14
for rich europeans when our country is massively in debt why aren't we passing the bill to them
01:30:20
for that yeah we're absolutely um yeah do we have to spend that much money to to do that no and then obviously the
01:30:32
wars in the middle east were let me pick up on this policeman what kind of policing works the best
01:30:37
community policing when the policemen are from the neighborhood and they know all the players they understand the
01:30:42
subtlety of the area exactly the us has made itself the world's policeman we parachute into areas that
01:30:48
we don't understand we did in the middle east it was very ineffective what we should do is let the regions
01:30:56
deal with the problems themselves first and we should be the policemen of last resort not first resort let the
01:31:02
europeans take the lead they should be paying for their own defense you know we could still have nato but
01:31:07
they should be paying for it they should be the first responders and if they can't handle it then we can back them up
01:31:13
but this idea that we need to be on the bleeding edge of all these conflicts bankrupt bankrupting ourselves it's a
01:31:19
foolish idea energy independence is a solution to all of this we wouldn't have to deal with
01:31:24
these death spots if we didn't if we had energy independence so we're getting we're getting circles running around us
01:31:30
by china jason on the innovations front circles running around us by china on the innovation front
01:31:38
example i just told you the catl battery that they just announced today yeah it's
01:31:42
incredible yeah i mean battery technologies we have a lot going on there as well i mean it seems like the
01:31:49
battery technology issue has been solved for evs for some time now i mean if an ev can go 200
01:31:55
miles and we can build them at scale which seems like we're on the precipice of um we're going to be good you don't
01:32:01
need more than 200 miles on average it's just a luxury every mile after that given how fast superchargers are working
01:32:07
so just practically speaking 95 of americans will do just fine with a electric car that does 200 mile range
01:32:15
and the other five percent can do a hybrid or can still burn oil we just need to get more we have to be more
01:32:20
serious about the miles per gallon right now we are just absolutely abhorrent in our use of fuel in this
01:32:27
country it's just crazy that we have low 20 miles per gallon uh as our average when other countries are 30 40 50 you
01:32:35
know or 30 and 40. because we like our you know seven-seat suburbans which is ridiculous because 99 out of 100
01:32:42
missions in that suburban are done with one or two people in it the fact that our ubers you know in our lifts or
01:32:48
whatever are coming with giant suburbans with one person in it is just i have a i
01:32:52
have a fiat e500 here like a little mini oh it's incredible yeah it's incredible
01:32:56
i mean yeah i mean this is why i mean this is the path if we can just if you just think about it if we were to
01:33:02
double our miles per gallon there are cars right now that are doing 50 55 miles per gallon
01:33:08
we really have to be more punitive uh in terms of taxes give me the forecast jkl what's going to
01:33:14
happen with biden oh okay so give me your give me your scorecard give me your grade how's he doing
01:33:20
for biden oh it's disastrous i mean it i think the only thing more disastrous than biden would be having trump do a
01:33:27
second third and fourth term 100 so but so play it out play it up well i don't think he's going to run again i think
01:33:33
they're going to happen you don't think it's going to run again i think they're i think between then and now if the
01:33:38
economy keeps going the way it's going he would be a lame duck and impossible and i think he might say you know what
01:33:44
i'm going to retire to spend time with my kids and my golden years and they might convince him that him running
01:33:48
again is a really bad idea and kamala harris is a disaster as well she hasn't proven anything in the second two years
01:33:54
yeah who would the dems put up jkl jkl as a democrat who would you want to have put up i think it's going to be desantis
01:34:00
versus newsome in 24. i yeah i um but sorry explain that okay so well which part of it new summer
01:34:07
desantis how does museum get the nod okay here so newsome has a very weak challenger in in california it's a plus
01:34:14
30 devastation hold on so he's gonna handily win re-election in california he's already
01:34:20
not he's not even campaigning for re-election in california he's already campaigning to be president the thing
01:34:25
that he did that was politically smart and i say this not as a fan of newsome but this is someone who's analyzing the
01:34:29
politics of it is that he went on true social and to basically counter your republican lies and so he's positioning
01:34:37
himself as a fighter for progressive values and the reason why that's going to be flattering to the democratic base
01:34:45
is that when the democrats lose big in november they're gonna have there's gonna be a reckoning and they're gonna
01:34:51
have to understand why they lost and the fact of the matter is that ideologues never blame themselves or their agenda
01:34:57
they're gonna say that it was not communicated well and that we needed a basically a better communicator who was
01:35:03
a fighter and so they will basically pin the blame even more on biden and so newsom is positioning himself as that
01:35:09
sort of democratic progressive fighter if you go back remember when michael avenatti like they were you know
01:35:15
progressive were talking about him as a presidential candidate for a brief minute they swooned over him why did you
01:35:20
go to jail yes he's in jail right now he's a total grifter scumbag total grifter scumbag but you gotta remember
01:35:27
cnn had him on there every day because he counts he was a fighter jacob says his name in the funniest way possible
01:35:33
i've remembered a poker game when like hellmuth said he had no numbers on the jacob what's this guy's name say his
01:35:37
name michael avenatti i don't know how he says uh is a disaster uh it's an interesting
01:35:48
concept yeah sex can you do you think the dems will give newsome the nod can he actually win
01:35:53
in some of these um these uh middle states well you gotta remember this is true for both
01:35:59
parties that the general electorate does not pick the candidates the parties pick
01:36:03
the candidates and the base of the party picks the candidates they want someone that can win pennsylvania they want
01:36:07
someone that can win florida but yes and no so if you remember when when bill clinton pulled the
01:36:13
democratic party back to the center in 1992 and you had the whole democratic leadership council and they really
01:36:18
remade the democratic party at that time as a more centrist party they had just come off three disastrous presidential
01:36:25
elections so reagan and 80 and 84 and then herbert walker bush in uh in 88 so you know it took three big losses for
01:36:35
them to rethink i don't think progressives are going to rethink their agenda you know based on one midterm loss even
01:36:42
though i think it's going to be gargantuan later this year so i think they need more losses to really reevaluate their
01:36:49
agenda i mean look the activists in the party are deeply invested in their agenda they're just not going to give it
01:36:55
up they're going to blame it on a communication problem they're going to say let's find a new messenger and
01:37:00
newsome will seem like a younger fresh face so i think that's how it could happen
01:37:06
and if you look at the democratic bench he can also say can he also who else they got is the issue
01:37:13
that's going to be a bootage and aoc if they want to go full like crazy left would be and then if they want to go
01:37:19
more moderate that's not that doesn't win an election you've got to find someone that can win the election
01:37:24
they're going to say that was the governor of a big state which is as of now 100 million 100 billion surplus
01:37:30
looks good for him so yeah i mean gavin it's a scenario it's a scenario but look i think the big question is
01:37:38
will the republicans field trump after january 6th and i i think the answer is no and um it's too
01:37:45
shameful right to do that i i think that look i think trump's problem is he won't
01:37:50
stop talking about the last election and i think elections are always about the future and the republicans ultimately
01:37:56
going to nominate a candidate who represents the future no republicans want him as going out there trying to
01:38:02
steal an election again if you look at straw polls okay if you look at straw polling um desantis now is
01:38:09
beating trump in straw polls in the republican party jonathan chait who is a pretty smart liberal definitely not a
01:38:16
republican but he sometimes has very smart observations remember the whole zero covet thing anyway he has an
01:38:21
article just today talking about how desantis has now eclipsed trump within the republican
01:38:26
base and if you look at the numbers at within if you if you pull fox news viewers and likely republican primary
01:38:33
voters desantis is up a couple of points in the straw polls but among fox news viewers he's up like 10 to 14 points so
01:38:41
in other words the republican base the activists who are the influencers they already have moved from trump to
01:38:48
desantis you know they love him yeah yeah so i think i feel the fifth the scientist runs he's gonna run he's gonna
01:38:54
win uh a landslide this is why i say it's desantis versus uh newsome i think but look it could be
01:39:01
desantis versus biden it could even be trump versus newsome i think the configurations that win for the
01:39:06
republicans i think if biden's on the ticket i think any republican wins i think if it's desantis versus newsome i
01:39:13
think desantis wins i think however and this is sort of the nightmare scenario i
01:39:18
think if it's something like a newsome versus trump i think republicans could lose that just
01:39:22
because you know the people people people think about the future they they they want
01:39:28
they don't be reminded of the past and um so i think there's risks there no more
01:39:33
also insane and deranged you can't you can't have trying to steal your olds running
01:39:38
for president no that would be great yes yeah yeah i think all right nothing against oxygen
01:39:43
75 years old would be good for me all right this has been a this has been a very long episode well yeah well
01:39:48
considering how much uh sax is gonna spike uh we'll get it back down to 45 minutes all right everybody it's amazing
01:39:54
i love you guys it's really nice to be on anywhere everybody relax we're back i'm not going anywhere you're going to
01:40:01
need a wrecking ball to take me out of here jacob we don't want to get rid of you
01:40:07
but now all we need is three out of four votes so all right good luck vote me off
01:40:10
we never wanted to get rid of you j-cal but we knew we had to do certain things to get you to act right oh my gosh
01:40:18
jake alberta brought a knife to a gun fight he came to negotiate you guys in trailers you're too cheap to give me
01:40:26
two points that's [ __ ] jacob came to negotiate the treaty of westphalia and he left with half a snickers bar
01:40:32
that's fine it's fine you guys don't get no more interest for you all in summit no more interest hold back
01:40:38
our payment by the way i'm about to get on a call with our lawyers we're gonna get the accounts set up get all the
01:40:43
money transferred from your summit good luck with that money that's long gone i put that on the warriors i tripled it
01:40:51
we're good all right everybody we'll see you next time on the all lovely boys bye
01:40:55
bye besties bye-bye let your winners ride rain [Music] and they've just gone crazy with it
01:41:13
[Music] we should all just get a room and just have one big huge orgy because they're
01:41:33
all just useless it's like this like sexual tension that they just need to release
01:41:37
[Music] your feet [Music]