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you're seeing now the the fresh summer collection of lower piano this jason oh really is the thin summer jale okay
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really beautiful cashmere container uh it's called like the king's cashmere or something and then this
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is called a lovely yellow boating sweater anyways i took saks to my tailor and i took him to
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uh laura piana and then at some point i just [ __ ] lost him and then i haven't seen him since so
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you took him to your tailor and to lawrence wow great that the show remains accessible
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to the every man and woman they're sucks good to see everybody's focused on what
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matters okay everybody welcome to all in episode 86 end of the world except for these two douchebags we thought it'd be
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really funny to vote to find the exact same outfit at laura piana i feel fully styled what a great look
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you guys look so good it's like dumb and dumber in italy we'll let your winners ride
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rain man david hey everybody welcome to episode 86 of the all-in podcasts we're not dead yet
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uh still publishing with us from italy uh the rain man and the dictator in matching outfits
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gentlemen how is italy it's fantastic and also with us the sultan of science himself david friedberg from an
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undisclosed conference uh somewhere which we can't talk about how you doing i'm off the record this
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week off the record this week and a little hungover it seems yeah you need a cup of coffee are you
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drinking a little scotch last night late night a little scotch i went scotch and beer and it was a
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it was a late night all right everybody we got a lot of news to get through let's just parse through some of the
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data because data's been coming in and the minutes from the june fed are out the key quote significant risk that
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elevated inflation could become entrenched if the public began to question the resolve of the fed so they
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went from transient to now fearing entrenched jobs have slipped a little bit this is
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something we've been talking about but just to give some context here we're still a historic uh
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number of job openings we peaked in march 11.9 million uh in may we uh we dropped down to 11.3
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and uh 11 million for six straight months it's just extraordinary if you look at this
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fred chart it's just astounding to think that this many jobs are available two for one in
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the united states there are two jobs available for every one person who needs a job
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and this they're just absolutely stunning if you look at the um what do you think this is a precursor
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to uh dropping down dramatically in the white collar sector is what the data is showing
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what's your wage or major wage inflation i mean yeah that work that work clearly has to be
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done and if you lay people off the number of unemployment not unemployed will go up but at the end of
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the day the thing that we know here is we have a structural unemployment problem as you said two
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openings for every person which means those openings aren't paying enough for people to leave the sidelines and get on
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the field yeah or they've been incentivized to to be on the sidelines exactly so
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obviously yeah these these job openings might actually be indicative of the opposite of what the
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fed is telling us right the fed wants us to believe that they can just keep jacking up rates and then we're not
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going to go into recession because we have all these open job wrecks but what if we should see the labor market as
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really two separate markets they're sort of white-collar professionals and you're seeing all of these tech
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companies that we're involved in slam on the brakes really quickly right now so we're going to see greater unemployment
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there and then on the blue collar side you have this issue of record low labor participation yeah and so you
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still have inflation there because they can't fill all the jobs because there's all these like warped incentives around
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that there are to just put a number on it saks we're ten percent off the peak in terms of participation and if those
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folks would participate it would really fill a lot of these jobs that would increase the production of
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goods and services that might take some of the pressure off inflation and it would also increase monetary velocity
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rights people would spend the money they make which then get us out of this mess
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possibly i think part of the problem with the fed's approach here is that it's assuming that if they just keep
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jacking up rates that will that will reduce demand and that will stop or slow down inflation and there's some truth to
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that however i don't think this inflation is purely a problem of excess demand i think there's also a supply
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problem meaning that not enough goods and services are being produced and the commodities the inputs that we need to
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the production of goods and services those prices are increased they've been inflated and that
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started well before the ukraine war but i think the ukraine war has now exacerbated this problem with respect to
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energy and food if you had seven minutes for your over under uh for saks to mention ukraine you took the under you
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won i'm just mentioning it as a exacerbator of the situation i think that's actually really good framing um
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that it's an exacerbator um yeah so if you look at the quits let me just give you the quits
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number because this is really interesting these are people who are quitting jobs it's still at a record
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high so this concept of the great resignation we're still having over 4 million people quit their jobs every
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month free pandemic quits averaged under 3 million a month and if you look at that
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chart it's just staggering to think that in an economy that's going down people are still quitting now what is that
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indicative of it's indicative of people believing that they can get another job you don't quit your job if you don't
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think you can get another one or you have some savings available you want a yolo uh maybe you know
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um you know spend a little free time going on vacation or there's a new economy emerging right i mean one of the the
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cases to be made is that the pandemic and the stimulus that followed created a staggering short
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shift in the types of jobs and the types of businesses that people you know used to make money and you know
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a lot of people were able to shift to work from home and when you shift to work from home you have more flexibility
00:06:49
and freedom to choose other jobs that you can now do from home and people don't want to work in restaurants they
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don't want to work in fast food and if they can find another job a gig like or services like or on demand type job
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where they can have more freedom and flexibility and more earnings in their life they'll make that choice and this
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happens so quickly because of the shutdown the lockdowns and then the stimulus the trillion dollars or two
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trillion dollars that poured in it created all these new opportunities and all these new incentives for new
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types of work and the fact is the old economy the old businesses all the fast food restaurants and the coffee shops
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they're sitting with half employment and they can't fill the jobs because that's
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you know that used to be a job that there was demand for and now it's not the case you know and i think that
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that's what by the way i don't i don't know if that necessarily reverts in the near term because i do think that
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there's been a substantial almost permanent change in some of these sectors of the economy not necessarily
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all some will revert but it leaves big gaps in parts of the economy and maybe fast food restaurants are not going to
00:07:49
be as cheap as they used to be because in order to get people to work there you got to charge more and there's other
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parts of the economy like services and you selling stuff on etsy and whatnot that are working for people let me just
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put a number on that and then hand it off to you sax so just put a number on that the jobs that fell the most white
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collar off 325 000 and manufacturing 200 8 000 the jobs that are increasing the most hospitality and retail so exactly
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to your point people feel more options this whole thing was accelerated during the pandemic sex
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well the question i want to ask freeberg is do you actually think that these new
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options of work from home and remote work have actually made the economy more productive
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it seems to me that obviously employees if you give them the no freedom over the decision of
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their trade-off between work and leisure and so let's see what's made the economy
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more expensive how so if you take a big step back to the day before the lockdowns started
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we had a normal functioning economy that was growing by call it two percent a year
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and the minute that we enforce these lockdowns i actually think what we did was we
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started a supply side recession it's what sac said earlier so what does that mean
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let's just say you're a factory and you make wheels okay just make something really
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simple you were growing at two percent a year everything seemed hunky-dory you had
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employees it was fine you used to sell your products make 10 15 percent profits everything was fine
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and then the day after the government said you need to shut your factory down because we can't have people
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spending too much time close together because we need to get a handle on this pandemic okay so you shut it down and
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then for the next 12 or 18 months what happens that stuff sits idle these people that used to work for you
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get two and a half trillion dollars put into their bank accounts they spend their time doing other things
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and then all of a sudden people say okay it's time to start the factory up again
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people want to buy wheels and now all of a sudden you find that because everything all around the world was shut
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down there's no rubber to make the wheels there's no steel to make the axle there's no people to put them all
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together and so what happens well prices go up because again you gave everybody else two and a half trillion
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dollars so they're like well i used to pay a dollar for your wheel i'm willing to pay you two dollars now just make the
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wheel give it to me before you give it to somebody else so that is like the classic definition
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of a supply-side recession there's another piece of that too and sorry just to finish the point
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and the fed basically confirmed this in the minutes that they just released today jason can you just read the quote
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that you had in the in the notes well the one up top significant risk that elevated inflation should become
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entrenched if the public begins to question the resolve their result i think the point is that you know we were
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kind of in a supply side recession and now by raising rates to some crazy amount the end of which
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we're still not sure about may actually then trigger the demand destruction to have a demand side
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recession and so i don't i don't know that we have lived in a modern point in time where both things have been true
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right there's been a principle of macroeconomics that you're everybody's always kind of debating is this a supply
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side issue is it a demand side issue we know that in kovit it was a supply side issue we took all the supply out of the
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market and now we're trying to figure out when we exhaust you know all of the money we've given
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people and we destroy demand and take the incentives for demand to go away right
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consumer confidence is now starting to turn what happens then well we're going to
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figure that out in the next six or nine months but the thing is you have both that are true it's not as if the supply
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side of the economy has been fixed it's not as if everybody is running at 100 capacity it's not as
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if all the supply chain issues have been worked out yep so i don't know i just think it's a very complicated situation
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yeah it's a perfect pivot and just to build on that um chamoth the downstream effects we always talk about the second
00:11:46
order uh impact because people are not going to work anymore downtown areas are dying so office space
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commercial real estate saks you're in that so you can comment on what's happening
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and then restaurants and commuting and all the stuff that was happening downtown san francisco's downtown mayor
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london breed had a press conference and she's been tweeting hey we have to revitalize
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you know soma in san francisco that's never going to happen that's off the table it's like bite and tweeting we got
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to drop gas prices yeah i mean we have complete markets we'll get to politics uh sacks don't worry we've got plenty of
00:12:21
politics real estate i i read an amazing statistic today from uh like one of the
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major brokers uh they they said that by the end of the year they're expecting 30 million square
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feet of office vacancy 30 million in san francisco by the end of the year san francisco is tiny by the way because of
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sub leases and uh and then tenants rolling off so the first thing i did is i tried to google what's the
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total square footage in san francisco and i think it's about 75 million of office space oh my gosh you're talking
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about 40 vacancy by the end of the year i've never heard of such a thing 40 let's be clear san francisco is fairly
00:13:03
unique and a bit of an outlier in the circumstance because so much of it was you know tech heavy and so much of it
00:13:08
went remote yeah and the city called everyone and it all got crime but like generally that's not the case i mean you
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know new york is apparently still pretty stable right and miami's obviously doing
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well la often but here's the piece of it that people aren't really thinking about
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which is the only reason it's stable is because tenants sign up for long-term leases and this is why it turns out that
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we work with a pretty bad business model is because if you're if all your leases
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are month to month and you hit a recession your revenue gets whammied this is why landlords like long-term
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leases with credit worthy tenants they sign seven years ten years and so letters of credit right right putting
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together what that means though is that as these um tenants start to roll their leases roll over the
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next few years they don't need as much space because they've either gone remote or they're like hybrid now and so
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they're thinking of their office less as a headquarters which everyone needs to go to and more as like a co-working
00:14:01
space their employees occasionally go to so they're all reducing their footprints
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this is why san francisco keeps increasing its vacancy is that as more and more of these leases roll
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there's just no need they don't need as much space so they're also downsizing now here's the problem here's the
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problem is that these buildings have debt on them right and that debt has what's called a debt service
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coverage ratio dscr and basically you become you as a building owner become in default on your
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debt covenants if your revenue from the building drops below a certain number and here's the problem all these new
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leases that get signed to the extent there are any they're going to be at a fraction of what the old leases were
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because this this vacancy is going to create a massively low market clearing price am i right to understand that
00:14:52
they're not allowed to sign those leases because they're under it so that's better than nothing or do they
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are not allowed to take it it's not that it's just that the market clearing price
00:15:01
is going to be so much lower than their old leases that when they then look at the revenue from the building
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and by the way that buildings can have a lot of vacancy on it now they're just not going to hit their their their debt
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service coverage ratio so they'll be in default what that means is i don't understand how in a place like downtown
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san francisco half the buildings don't end up getting owned by the banks well the banks don't want to own all these
00:15:22
buildings so they're going to be a fire sale going to happen then you need developers to come in and
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have the capital to to basically make all those changes again it takes a long time but but think about the systemic
00:15:47
risk from that right if you know that a huge chunk of the real estate in is the commercial real estate in
00:15:55
downtown san francisco which used to be blue chip i mean the most blue chip right yes who are those financial
00:16:00
institutions who own those assets because they are now toxic assets and they will be revealed to be toxic assets
00:16:06
as soon as the leases roll well and then there are debt funds and banks as well right and so
00:16:13
what are the cascading effects when those shoes start to drop yeah okay and so just to put a finer
00:16:19
point also on the the jobs and that was our flop um net international migration um has just
00:16:25
plummeted we're well under a million folks uh coming into the country so the obvious solution to our employment
00:16:32
issues is to recruit people from other countries but let's go to the turn card uh yeah and there it is um we have just
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stopped letting people trump just absolutely close the borders as you can see 2016. biden also is in favor of
00:16:44
closing the borders it's also sentiment it's like you know america is not the shining
00:16:50
yeah people still light on the hill it used to be not in the same way and there are we could easily have three
00:16:55
or four million people coming into the country if we wanted to yeah but we have three million people have come in just
00:17:00
under biden and illegal migration does that chart count illegal migration no this is legal this is legal okay well so
00:17:06
just make sure you count that because we've basically had uh open border policy yeah
00:17:11
if we didn't allow those workers then what would happen um okay let's go to the turn card consumer confidence
00:17:15
conference boards consumer confidence index in june fell to 98.7 from 103.2 in may
00:17:22
uh expectation was 100 so it's under the expectation the expectation index so when you look
00:17:27
at consumer confidence there's two your confidence in the present situation that's the blue on the chart and then
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there's uh your expectations of the future and what you see is a huge divergence there uh starting to happen
00:17:40
people are starting to look towards the future as negative but they feel pretty good
00:17:44
about today um and so gentlemen what do you think of this chart it seems to me like this is sort
00:17:51
of akin to what saks was relaying about that founder at the co2 conference which
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is like you know he thinks everybody else is gonna you know uh roll up their sleeves and and buckle down but he has
00:18:01
no intention of doing it i think people um are roughly the same way and i think their behavior is well you know um if
00:18:09
things are going to get hard i'll deal with it in the future but right now i have money in my pocket and you know if
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you look at airlines and um how many people are trying to travel if you just look at
00:18:19
like the cost of a hotel room if you look at what's happening this summer it does not seem like people are slowing
00:18:24
down or tapping the brakes in any way yeah this is where i get concerned about credit because it's not coming from wage
00:18:30
gains you know the increased cost is there the increased income is not and you know we're seeing continue month
00:18:37
after month increases in consumer credit balances um and that i think you know this was
00:18:43
the point i made a few episodes ago was i don't think people are going to slow down how they're living and how they're
00:18:46
spending it's exactly um there's an inertia there's actually i don't know about that
00:18:53
i don't know i i just think after two years of a lockdown i do think that people are anxious to
00:18:58
re-establish some amount of normalcy and this is really the first summer where everybody
00:19:04
wrote large can be out and do the things that they were planning fake summer yeah last year was a little
00:19:09
bit of a head fake and look you have two years of pent-up plans of you know 50th anniversaries and weddings and all
00:19:16
of this stuff that's happening and so i think people are really spending money and if you look at it you know the the
00:19:21
consumer is holding up amazingly it's got to be some combination of jobs home prices um and this inflation but this is
00:19:28
why there has not been a downtick in demand i don't know why everybody thinks that there's been a downtick in demand
00:19:33
there was an article today numbers yet it's not showing up in the numbers yet very subtle okay sure it is there is a
00:19:41
subtle i actually disagree with you guys i actually think that the economy is pivoting on a dime here and it's it's
00:19:47
starting to show up subtly in the numbers here's some other data points consumer sentiment biggest drop in
00:19:52
consumer sentiment in 40 years that was in the last month right track ron track polling only 10 of
00:19:58
the country thinks we're on the right track if you poll people and ask are we in a recession something like plus 60 of
00:20:05
the country already thinks we're in a recession there's a slight political tent to that more republicans than
00:20:09
democrats think we're in a recession however even roughly half of democrats think we're in a recession so
00:20:16
those are all feelings not behavior though sacks we're looking at the data not the sentiment i think the behavior
00:20:22
will catch up with the sentiment i think the behavior is i think the behavior is
00:20:25
pivoting it's just that i think you have to dig beneath the surface and you have to look at things
00:20:30
like retail sales things like that i'm not sure david if you look back on all the number of times consumer
00:20:36
sentiment is dipped that the correlation to spending patterns is so uniformly predictive as we think i mean i think
00:20:42
that there are there's a slight positive correlation i remember but i don't think
00:20:45
it's like you know .75.8 it's not that so there's this weird preference falsification that happens
00:20:52
when you get asked what do you think is going to happen versus what do you do yeah and i think a lot of consumers
00:20:57
that's why they have you know we know the data in america like less than a month of savings or whatever those
00:21:02
numbers are despite all of the sentiment analysis and all of the stuff you would think
00:21:07
that there be behavior change but mostly people kind of just live in the moment and you know that that's partly because
00:21:13
they don't have the structural support to save or other things but the reality is that most
00:21:19
folks from what they say to what they behave there is a gap yeah and to your point
00:21:24
saks um this is starting to catch up we're seeing a slight uh down tick and we'll go to real estate next but if you
00:21:31
look i found i was doing some research on gasoline because that's obviously where people getting hit the most the
00:21:36
average household is now spending 5 000 a year on gasoline that's almost double last year so this is gonna have an
00:21:42
impact it's going to catch up but there's so many jobs available and there's so many people unemployed i
00:21:46
think it's manageable so to your point your mouth it feels like consumers can manage even this great headwind let me
00:21:52
just put a point to it i think the average uh per capita income in the us is about
00:21:59
38 thousand dollars a year that works out to about 17 bucks and 50 cents an hour roughly um
00:22:06
think about a person um with that level of earnings the average household in the
00:22:11
u.s has historically you know spent about a third on housing about 13 on food and about 16 on you
00:22:20
know their car and their gas and they only have about 12 left over for savings so you know if that 13 on food has
00:22:28
jumped by 30 percent the 16 that they're spending on gas has jumped by 40 or 50 percent and even if housing prices take
00:22:36
up a little bit all of a sudden your savings are gone and you're actually not getting it's
00:22:40
actually doubled freeburg it's doubled i guess so yeah by the way it's worse than
00:22:43
you say no it's worse than you say because you're you're using a per capita number yeah yeah and so what
00:22:49
but i think what i'm trying to highlight is that there is a distribution there is
00:22:52
a group of um the united states a small percentage of minority that have earned good income and are having their 50th
00:22:58
anniversary like jamaat is talking about taking their travel and that shows up in
00:23:01
the numbers there's outsized spending happening with a segment of the economy and what saks is saying i think is right
00:23:06
as well which is that the majority of americans are facing this really critical budget
00:23:11
crisis where their personal spending levels are now exceeding their income levels and there's a critical need for
00:23:17
credit and for personal debt and spending to go down and that's what's going to drive significant risk in the
00:23:22
next couple of months and quarters and years is the majority it looks some of the
00:23:27
numbers will look good because there's a segment of the economy that is overspending but the majority of the
00:23:31
economy is as sax is saying probably turning on a dime and i think both things can be true yeah let me let me
00:23:37
maybe tie a couple of these things together because i i tend to agree with you like i think that we
00:23:44
have been in a supply-side recession that is what has caused inflation we have to go through a process
00:23:51
of taking all the excess money that's been put in out and when you do that we will destroy
00:23:58
demand and then that will trigger a demand side recession because people will asset values and we will destroy
00:24:04
asset values so that process asset values went real quick yeah that will happen second
00:24:10
so the balance sheets of that segment of the population that is overspending right now once their balance sheets
00:24:15
really take the hit and they take a hard look at what their savings are they're going to cut spending
00:24:19
right yeah so but the point is i think we're still firmly in that first phase and and i hate to be the bearer of bad
00:24:25
news but the reason why i think that we're still in the first part of this process is because people broadly
00:24:31
speaking still have a lot of savings because of all the stimulus checks there is still a
00:24:37
lot of money so what how will we know maybe is the better point when all of that excess savings has been
00:24:45
you know torn away from these people because of high prices i suspect it's when jason's
00:24:51
first chart starts to close right so when people are you know go they're more motivated to re-enter the workforce i
00:24:57
think that's the signal free br your signal is another one which is when credit delinquencies
00:25:03
really start to spike it's because people then you know tapped out their savings then they tap their credit cards
00:25:08
and then all of a sudden they become delinquent when all of those things happen you're probably now at a point
00:25:13
where that first phase of the supply side issues are largely done and now you get to the
00:25:18
demand destruction but all of those roads unfortunately lead to the same conclusion which is like you know
00:25:25
equities get really under pressure there is no scenario where there's a bid to equities why would you buy something
00:25:31
that has lower earnings in the future or why would you buy something that has a lower discount rate for profits in the
00:25:38
future in this case both are true all right let's get to that because the piece we haven't got to so here's the
00:25:43
river card is housing because people's homes are the majority of their wealth here in the united states and that i
00:25:49
think will be the true indicator chamoth to your point labor participation certainly won but when this hits housing
00:25:55
that's when we're going to know we're in the end game the mortgage rate just hit
00:25:58
5.3 percent um why why do you say housing is the end game well i i think we haven't seen uh the collapse of
00:26:05
housing prices yet we're in a housing shortage and historically mortgages are still at um
00:26:11
you know the 30-year average so let me just give you the statistics here the mortgage rate is uh 5.3
00:26:17
uh if you look at this chart from our childhood on our parents in the 80s were paying 15 16 70
00:26:24
17 for their mortgages we're well below the 50-year average even with the uh rate hikes and so the 50-year average
00:26:32
for mortgages the 30-year mortgage is 7.77 so we're at 5.3 well below that but well uh this has been a very quick
00:26:39
turnaround from two and a half percent mortgages all the way up to five point three percent
00:26:43
home sales have started to show weakness so to sax's point this is starting to show up in the numbers but ever so much
00:26:50
um we're down six percent almost seven percent year over year and 3.5 month over month but we're holding
00:26:56
up historically so for the last 10 years we've been selling over 5 million homes a month with the
00:27:01
exception of the pandemic shutdown and that's this next chart you're going to see here and this is a really amazing
00:27:06
chart i found which is existing home sales versus a 30 year fixed rate mortgage in our childhoods in the 80s
00:27:12
we're selling 2-3 million homes a year as you see the rates that's the orange line come down massively from 17 and
00:27:19
then under 10 percent housing starts to flip people start flipping houses more and more often um
00:27:25
but we're still at that 5 million that number's got to drop down to probably four and then we would actually
00:27:31
have some capitulation uh feedback from the panel i mean look there's an old saying that a recession is when your
00:27:40
neighbor loses his job and a depression is when you lose your job and the reality is we haven't had the big job
00:27:47
losses yet it's starting we can start to see it and the number of open wrecks are
00:27:51
getting closed and then there were those job loss numbers that just came out which were a little higher than expected
00:27:56
so the job losses are starting but so far it's really been the step prior to that which is people are seeing their
00:28:02
401ks get destroyed stock markets down they're seeing their wages get destroyed by inflation food and gas prices being
00:28:09
much higher so there's a really good reason why people are sentiment is so negative out there people feel poorer
00:28:15
than they were before and this could get worse like you're saying jason with their nest egg in their homes getting
00:28:20
hit i agree that's the next shoe to drop just like the commercial real estate is
00:28:24
the next shoe to drop but i think the really big question over the next six months is what sort of job
00:28:30
losses do we see because that really is going to be the big determinant of of how hard this recession hits yeah i
00:28:37
agree with you and it's it doesn't look like if we if we're losing 300 000 jobs a month it's going to take a long time
00:28:43
for us to even get to one for one jobs and so this is just honestly i think i think
00:28:50
you're right but i think we're not even close to that i just don't see where all of a sudden there are these
00:28:57
writ large mass layoffs for example i would believe what you're saying if if the headline
00:29:04
in the wall street journal said walmart lays off 10 000 people right that's not what's happening in in fact it's the
00:29:10
exact opposite walmart's like well you know we seem to have record demand we're raising prices and and every supplier
00:29:16
will have to pay a gas tax and a supplier tax and deal with it so i just think that you're you're going to be
00:29:22
right in the end i just think we're way too early in this process to get to that place where we
00:29:28
did we're debating this i i don't see so chamath are you on board with the the ackman trade basically you know ackman
00:29:34
basically came out that tweet storm a couple of days ago basically saying that listen inflation is still the big
00:29:39
problem not recession the economy is humming along there's plenty of jobs and we're going to have a persistent problem
00:29:45
with inflation i think he's kind of right and kind of wrong i think that you can have inflation and a recession at
00:29:51
the same time this is what my point is i think we have been in a supply-side recession meaning
00:29:57
the day of the pandemic it's not as if demand stopped it's not as if you and i david didn't want to go out or use door
00:30:04
dash or take an uber or watch a movie in a movie theater we were not allowed right and so we found other ways in in
00:30:11
order to fulfill our demand that's why shopify you know did so well on behalf of the merchants that they served that's
00:30:17
why robin hood did so well that's why fortnite did so well right we found other places to spend money
00:30:23
but what went away was the supply and those incentives didn't come back and they're still not back that's why prices
00:30:29
keep going up this is the problem is the definition of a recession right chemotherapy it's not the problem that
00:30:35
most people don't understand that you can have a supply side recession and a demand side recession they just manifest
00:30:40
in different ways so well i think i think i think like i guess ackman is roughly right in some
00:30:46
ways he's roughly not so right in some others i think that we have an issue where we are going to transfer
00:30:54
the supply side issues that are driving inflation to average everyday consumers and their
00:31:00
ability to buy things i still think that the average everyday consumers desire to buy things is what
00:31:07
it was from before and on the margin is probably higher i do think at some point it will start
00:31:13
to change when prices get high enough but i don't think we've reached that point of equilibrium yet and the reason
00:31:20
is because companies like the walmarts of the world who see this demand on literally a real-time basis
00:31:29
knows better than anybody else when and how much they can raise prices downstream into their supply chain so
00:31:34
when you see something like this in the wall street journal i would just encourage us all to say they must see
00:31:39
that demand is the same or better and so they're going to now push those price increases down to everybody else
00:31:46
because now walmart says here is an opportunity for me to defend my earnings power
00:31:51
and this is why i think we're in this first inning of this so i don't know whether ackman is right or wrong
00:31:56
but i think we're in the early phases of a two-phase recession and i don't know what that looks like
00:32:02
because i've never lived through one of those and i think in many ways it's the combination of the two
00:32:08
and it was it was largely because of government failure government failure and how we reacted to the pandemic in
00:32:14
hindsight saks was right all along we overreacted by shutting everything down we probably could have kept some
00:32:19
supply online by understanding masking early on and then second we exacerbated with
00:32:25
failed government policy because we gave everybody trillions and trillions of dollars and we entered the capital
00:32:30
markets and perverted it with another seven or eight trillion more and by the way that has consequences well the
00:32:36
consequences are still talking about giving stimulus now in order to um help people deal with
00:32:43
so we are not we are not learning second you can't pour fire so if i lean on the
00:32:48
fire if i had to basically put what we are all saying into a neat little bow i would say
00:32:55
there needs to be a multi-phased economic correction one that corrects the supply that we
00:33:00
took out of the market during the pandemic one that corrects for all the excess money and then one that corrects for
00:33:07
demand that's a lot of stuff we have to do and so the more misguided government policy we have the
00:33:14
farther away from finding that equilibrium point we're going to be the longer it's going to take the more
00:33:18
damage it's going to be so sax the fed is obviously uh it's pretty much consensus they're going to do another
00:33:24
0.75 75 basis points later this month could be 50 basis points who knows there seems to be a couple of people saying
00:33:31
that that might happen if that does happen and it feels like inflation is starting to top out do you
00:33:37
think inflation you know starts to turn or do you think we're still going to see prices go up
00:33:43
because it does feel like it was starting to bounce along the ceiling what do you think's going to happen if
00:33:48
the 0.75 happens you're seeing the market rally today in the last few days especially growth stocks because of this
00:33:54
idea that the fed is tackling inflation they're raising rates and the market is looking out six months and seeing the
00:34:01
possibility of recession and they believe that is going to bring down demand and bring down prices and it
00:34:07
could i mean what i just described would be a soft landing i just am skeptical there's going to be a soft landing
00:34:13
because of what math is saying which is this is a multi-part problem and until we fix the supply side i don't think
00:34:20
that merely reducing demand is going to get us out of this i really agree with you it's a
00:34:25
production problem it's a demand problem and it's also as we just talked about a few
00:34:31
minutes ago an employment problem because the businesses that need to grow that need to generate revenue cannot get
00:34:37
the businesses that are dependent on people to do service jobs cannot get those jobs filled and so they cannot
00:34:42
grow their revenue cannot make their profits and there's a trickling effect in the economy of that you know what we
00:34:48
talked about that kind of job shift that job market shift that's happened so all
00:34:52
three and so all three are just this like dislocation that's happened totally right and it's unclear you know
00:34:59
someone very smart i was talking to yesterday who's a former um member of um an administration said um
00:35:09
we just there's literally no way to predict we just don't because think about the complexity of throwing three
00:35:14
rocks in a pond how do those three rocks interact and how the ripples interact is
00:35:19
really what we're trying to predict and it's very hard to do i mean if you translate this into the markets for one
00:35:23
second i think what we've done since november of 21 then nick you should play this
00:35:29
clip because you know not to say you know we didn't see this coming but we really did you know we pointed to
00:35:36
you know one of our friends and the person somebody else that we kind of know bezos and elon and we said
00:35:41
when the two smartest capital allocators in the world start divesting they clearly understand and see things
00:35:48
that the rest of us should pay attention to and to ignore it seems reckless or the clip and we'll be back in 30 seconds
00:35:54
after the clip the two most important founders of our generation the two smartest people who
00:36:00
have really consistently won elon musk and jeff bezos have collectively sold more than 11 billion of their holdings
00:36:06
this year alone and if you can't take all of that and decide for yourself what's right for you and your family
00:36:11
you're doing yourself a disservice i think it's important for me to never sort of like be forced to tell folks
00:36:17
whether i'm buying or selling although i'm willing to do it in moments where i think it's important but i think it's
00:36:22
really important to understand the context and so i think like these folks that like think
00:36:26
derisively about individuals who are managing risk i think it's really naive and i think it's um it creates a lot of
00:36:33
missed opportunity for them as well if the smartest people in the world are now selling their core holdings that they
00:36:40
told you they would never sell and you are not reconsidering your position on things
00:36:47
you're either much smarter than them or you're being really really reckless that was november you know and at that
00:36:55
moment i started a bunch of things in process which we can talk about at the end but i also sold a bunch
00:37:01
of the warriors positions i started a process at that point and i sold a piece in december and then i just sold the
00:37:06
last piece this week but then you know i sold a big piece of sofia in that moment
00:37:11
um but the the point was more the following which is since that clip to today what we've gone through is a massive
00:37:20
re-rating of the discount factor of these companies assuming nothing else changes
00:37:26
right that's all we've done we've we've not questioned whether earnings can change
00:37:31
you know all we said is okay well now we're going to take the discount rate up which means the value of this company is
00:37:36
less than it used to be that's all we've done through all of this wealth destruction that's happened since
00:37:42
november but now the second shoe has to drop which is if you believe that after the
00:37:47
supply-side issues are resolved you go through a demand destruction phase the earnings of these companies are in
00:37:53
real trouble and jason you posted something i think about the social media companies and
00:37:58
addresses gonna get hit right so one of the first things to go into recession is
00:38:01
advertising if you're going to belt titan at a company where can you do it well you lay off employees but you can't
00:38:06
get out of your leases as we talked about in real estate but you can cut your spending on marketing and so uh
00:38:12
right now the the it's looking pretty bleak for uh facebook because of the headwinds they have so the earnings
00:38:18
could drop which means and by the way the tax ratio could be totally we talked about that things are not
00:38:23
real right well we talked about that we talked about that over the last few weeks which is every time the market
00:38:28
rallied oddly facebook would be stagnant or trade off and we know when i called people on wall street what they said was
00:38:34
because you know we think this is the company that has the most pressure on earnings i
00:38:38
don't know if that's true or not but they took every opportunity and rallies to trim their position in facebook now
00:38:44
if that's true you have to remind yourself that is one of the 10 best companies in the entire
00:38:48
world and so if you're going to go and question the earnings power of one of the 10 best companies in the world
00:38:54
you may want to consider the earnings power of every other company that's not facebook there are so many things to the
00:39:00
facebook story they are facing a unique disruptive moment with apple uh ankling their ability to target users
00:39:07
supposedly google might follow suit with that which would be super anti-competitive and also the surging
00:39:13
tick tock uh taking market share from them there's some good news in energy which will then dovetail into politics
00:39:19
and into this farming situation freedberg turkish government claims it discovered almost 700 million metric
00:39:24
tons of rare earth minerals it's 15 times china's reserve if this is true you guys probably know we use about 150
00:39:32
000 metric tons a year right now that's going to double by 20 30. this is something like 4 000
00:39:38
years at the current demand and this would put them far beyond anybody else's chamati you've got investments in this
00:39:44
space i don't know if you've been tracking this news thoughts on another massive discovery of rare earths what
00:39:51
did you guys just have dinner dinner reserve what do you guys no that's the best she brought she brought us she got
00:39:55
a little pasta show me there's an incredible restaurant here in milan called desantis which
00:40:01
makes the best paninis you've ever tasted is this a harbinger of the future desantis what could be more perfect than
00:40:06
that oh the desantis panini here you go this is the oracle sex with the subliminal influence absolutely so good
00:40:13
this is what's going to get us out of this situation desantis all right chem off just quickly on the
00:40:18
rare earths uh if this is actually true what would this do uh and have you been tracking this
00:40:24
situation because it does seem to happen there's some truth to it yeah i think it's important to just take a step back
00:40:28
and kind of look at this thing with not like complete skepticism but just a little
00:40:34
skepticism it's okay not surprising that there's additional deposits all around the world meaning
00:40:40
we've always said rare earths are not particularly that rare it's just the question is you know which of the 17
00:40:46
rare earth elements at what grade meaning at what percent concentration does it exist and then
00:40:53
really importantly at what cost to extract it economically yeah right so meaning there's a ton of underdeveloped
00:40:59
rare earth athletes in canada the us africa australia brazil brazil they're just under under developed because when
00:41:06
you put all of these factors together it's really tough so the government release says they're going to process
00:41:11
like 570 000 tons of war that'll produce around 10 000 kilotons per year of rare
00:41:16
earths that implies sort of a 1.75 to 2 grade it's fine so there's just a lot more work i would
00:41:23
just sort of say it's really directionally great a lot more work needs to be done and more importantly
00:41:30
they need to release enough of this detail so folks like us and others can actually diligence it to to tell you
00:41:36
more accurately but the press release was exciting freeberg this reminds me a little bit of the peak oil head fake we
00:41:43
had you know 15 years ago everybody basically said we're not going to find more oil here's what's left of oil and
00:41:49
then norway is like yeah we just found more oil than existed previously it's been pulled out and the whole concept
00:41:54
that the world's going to run out of oil is now gone so freeberg what is happening in science that
00:42:00
we just can't predict what resources are available we know very little about what's inside the below the a certain
00:42:07
depth of the crust of the earth so um you know there's some estimates but we're always surprised and we know very
00:42:15
little about the distribution of those elements in the crust of the earth and below the crust of the earth
00:42:20
you know mining is an incredible industry i don't know the state of the art in engineering and
00:42:25
mining very well but you know from a pure geophysics point of view by some estimates we have
00:42:31
10 billion years of energy reserves below the crust of the earth that we can access in the form of
00:42:39
nuclear reserves geothermal power and that's excluding you know some of the the you know the potential of some
00:42:46
of these elements and what they could do um in building a more sustainable energy
00:42:50
economy why is people so pessimistic when we keep surprising ourselves and more resources
00:42:55
anyone wants a great book uh none of you guys were at the dinner that i did a few
00:42:59
weeks ago where we had stephen pinker come for dinner yeah read his book enlightenment now or you could watch one
00:43:05
of his uh videos on youtube where he's got like all 60 slides and he highlights like you know humans
00:43:11
have a tendency to focus on the risks and the concerns and the downsides and we miss the incredible optimism
00:43:17
um that is apparent as we actually look at the data of what's happening with our
00:43:21
species and what we're doing on our planet we have every reason to be optimistic you know we have fewer wars
00:43:26
than we've ever had murder rate per capita is lowest than it ever been longevity is increasing health
00:43:31
is increasing per capita i think everything's increasing and i think that the same is true in terms of you know
00:43:37
scientific breakthroughs discovery and engineering our way to a more sustainable energy and food future this
00:43:42
is one of the great things about having you as a friend freeberg is your relentless optimism and your actual cool
00:43:48
comp collective lack of anxiety uh another amazing news for me the eu parliament has flipped again credit
00:43:55
thurmberg is completely tilted we talked about the virtual signaling eu parliament you know and uh germany
00:44:02
turning off their nuclear power plants and and just securing the bag for putin the eu parliament flipped and they are
00:44:09
now saying these virtual signaling knuckleheads they came to the sensors and now they believe nuclear is green
00:44:15
also green according to the eu parliament is natural gas so uh this to me feels like the
00:44:21
beginning of the end for putin in saudi arabia uh if you look at the us becoming
00:44:26
a net exporter uh of energy uh it's quite possible the eu could become that as well if they actually
00:44:32
and this is a big f if they actually you know start building nuclear it could be the
00:44:38
beginning of the end of what some people are calling the woke green movement and this is certainly over this
00:44:43
realization that to transition to the next car to the uh beyond the carbon economy is
00:44:49
going to require continuing to invest in and support the carbon economy until those alternative solutions emerge and
00:44:55
to have dual track investing and i think that's what we're seeing around the world in the united states in europe now
00:45:01
and europe has always been farther way farther left in the united states in taking this point of view and i think
00:45:06
now this this has been a wake-up call for everyone and all it took was just a little bit of six dollar gasoline and
00:45:13
for people to personally suffer for them to change their virtual signaling nonsense yeah this is this is markets at
00:45:19
work yeah this is literally educating the public would you rather be beholden to
00:45:23
putin they pivoted because would you rather have nukes they pivoted from banning energy production to banning
00:45:29
food production should we talk about so on the energy side uh i did a in the group chat just a little breakdown on
00:45:37
the math i think it may be interesting for people to understand but today globally around the world
00:45:43
every single country in the world that is involved in the oil business is able to produce exactly one million
00:45:51
more barrels per day than we need so let's assume that we you know need a hundred million barrels of
00:45:58
oil a day as a as a as a world to continue to do everything we want to do we produce 101 million so we're right
00:46:06
on the knife's edge by august we're going to go through um a capacity increase in opec plus which is you know
00:46:15
opec plus russia etc uh saudi arabia is going to go from 10 million barrels a day to 11 million
00:46:22
barrels so not a huge increase um russia has is is thought to be able to cut production if they feel pressure
00:46:31
up to 5 million barrels a day without having any impact to their economy so jp morgan i think and um
00:46:39
uh credit suisse they they did this sensitivity analysis and here's what they found
00:46:44
they found that if russia were to cut three million barrels of oil so we would go from being over supplied
00:46:51
by one million to under supplied by two the price of oil would go to about 180 a
00:46:56
barrel if they cut 5 million so the threshold at which their economy doesn't really
00:47:01
get that impacted the price of oil could go as high as 380 a barrel while you would say okay well we just
00:47:08
need to pump more oil from other places and this is the problem in all of these rules that have existed for so long the
00:47:14
capacity doesn't exist right we were destroying supply governments all around the world were
00:47:20
making it very difficult to generate the supply of nuclear to generate the supply
00:47:24
of oil and to generate the supply of nat gas so saudi arabia says we can get to 12 million
00:47:31
well guess what they can only start the work in 2024 they'll be done in 2027. yeah so to your
00:47:38
point all of a sudden we realize wait we needed these bridge fuels all along how did we allow all of the supply
00:47:46
destruction to happen and now we need to unwind it it's going to be a very complicated process and if any of these
00:47:52
things happen if russia decides to play hardball against europe or america we better hope that
00:47:59
it's a mild winter because very quickly you can go from plus one million barrels
00:48:03
to minus two in a heartbeat yeah at american start and the last point on this about saudi arabia you'd say okay
00:48:09
well saudi arabia is going to go from 10 to 11 so that's good they have been at 11 million for a sum total of eight
00:48:14
weeks in their entire lifetime if we look at this i mean americans also buying 20 to 25 mile per gallon cars
00:48:21
that's got to end too and so personal responsibility uh is part of this the really interesting thing is china
00:48:27
already has this plan uh their nuclear strategy with the belton road initiative is to put 30 nuclear actors
00:48:34
in countries outside of china that they're trying to have influence in and they're they're building 30 nukes right
00:48:39
now they got 150 planned so china's just ultimately savvy and thinking big here about energy
00:48:47
independence and we need to follow them uh other big anybody have anything else on the energy situation before we go to
00:48:53
uh the farming situation let's get to the farming situation okay so dutch farmers are in revolt
00:49:00
after a new proposed law to cut emissions uh on tuesday dutch lawmakers voted on proposals to slash emissions of
00:49:06
pollutants uh like nitrogen oxide and ammonia they're targeting a 50 cut nationwide by
00:49:15
livestock produces these emissions so the plan will likely force dutch farmers to cut their livestock herds or stop
00:49:21
working all together farmers protested they put their tractors outside buildings they dump fertilizer
00:49:28
40 000 farmers gathered last week in the central netherlands agricultural heartland to protest these plans um and
00:49:34
started shooting at them uh these uh tractors were doing some uh pretty gnarly things uh and stopping
00:49:42
traffic and guess um and there were some shots were fired were they no wait the government fired
00:49:49
shots the protesters were unarmed as far as but supposedly they were doing something
00:49:54
dangerous were they honking threatening the safety of this is the other side of the story saks
00:50:10
um listen neither of us were there but according to the sources they were using the tractors to threaten the police like
00:50:16
physical bodily harm and that's why they unload it we don't know all the details
00:50:19
it'll come out but that sounds proportionate i i mean if you had a tractor coming at
00:50:24
you to kill you and you're a police officer okay so let's talk about the science of
00:50:29
its science let's go wait is it like the scene in austin powers where there's a steamroller coming towards austin
00:50:36
exactly jason's like oh they're using the tractor as a weapon that's like really
00:50:41
just i'm i watched people doesn't have a you were not there i was not there i'm just telling you what was reported
00:50:46
reporting and reporting what's reported and nobody knows if those reports are true so i think look i think it's worth
00:50:51
just highlighting because this is a really important this is the first time we've seen
00:50:55
government action of this scale and and the resulting kind of rebound effect on something that's really important humans
00:51:02
use roughly between two and six percent of our energy on earth every year to make ammonia
00:51:08
ammonia is the primary fertilizer we use to fertilize our crops around the world
00:51:13
and if not for the invention of the haber bosch process which you can read about in the book the alchemy of air and
00:51:18
the creation of ammonia as a synthetic fertilizer humans would all have starved in the mid
00:51:23
20th century it's an incredible technology breakthrough what we've learned over the years however is that
00:51:28
when ammonia sits on the ground for too long it volatilizes and it basically binds
00:51:34
with oxygen and turns into nitrous oxide and goes into the atmosphere nitrous oxide is 300 times
00:51:41
more potent as a greenhouse gas than co2 it lasts longer and it absorbs more heat
00:51:48
so there has long been concern about the overuse of fertilizer and the overproduction of ammonia that just sits
00:51:54
on the ground for too long that ultimately creates this incredible greenhouse gas effect and so there has
00:52:00
been talk in the united states under the obama administration under multiple epas
00:52:03
there was a supreme court ruling a few weeks ago that started to touch on whether or not the epa has regulatory
00:52:09
authority here to actually regulate the use of ammonia farmers generally put a lot of ammonia on the ground because
00:52:15
they get higher yields out of their crop the problem is if that ammonia sits there for too long it turns into a
00:52:20
greenhouse gas and so regulating ammonia and regulating this nitrous oxide emission has been you know at the
00:52:26
forefront of green the green movement at the forefront of climate change as one of the ways to
00:52:31
manage um and and and reduce the effects of global warming from human industry um
00:52:36
and now you know the dutch government has come out and started to do some of this regulation it's a little bit um off
00:52:41
because it comes from cows and and we're seeing what happens off free brook can we finally admit that it's the vegan's
00:52:47
fault now well at this point actually um you know is it is that a yes no no the ammonia
00:52:54
production in the netherlands is from i mean the netherlands just you guys know the
00:52:58
netherlands is the world's third largest dairy exporter uh they export three billion dollars a
00:53:03
year of milk to the rest of the world to other countries um and so they have all these cows that
00:53:07
are like densely packed and they're peeing everywhere and that pee is ammonia and it's causing all of these
00:53:12
problems the other problem with ammonia is if you guys look at the united states
00:53:15
corn farmers farm in the midwest when it rains the ammonia on their fields goes into the streams goes into
00:53:21
the mississippi river and goes into the gulf of mexico in the gulf of mexico there is a massive hypoxic zone there
00:53:28
are no fish they're all dead because when ammonia ends up in the water it kills life and so there's this green
00:53:33
algae and no fish and everything dies and so that's what the dutch are trying to regulate and the eu generally has
00:53:37
been trying to regulate is the removal of excess ammonia in ag production and in in right but again i still hear
00:53:45
though that if if if we ate less vegetables this wouldn't be a problem not correct not correct most
00:53:51
of the production of ammonia is used to make animal feed which is used to feed animals to make beef which is a terrible
00:53:55
decision you could feed it olives as we know olives tastes delicious with there because the issue here that is the issue
00:54:02
here that the regulators hit the brakes too hard on these farmers and they should have maybe had a more
00:54:08
gradual landing for that is it's been talked about for a long time and in the us there's just no way a law is going to
00:54:13
pass because the u.s senate is controlled primarily by rural states which are ag heavy so you see a lot of
00:54:20
bit you don't see a lot of bills that hurt farmers get passed in the united states because the senate is controlled
00:54:25
by farmers that are elect sorry senators that are elected by farmer by big farming communities and farming states
00:54:30
and so um you know it's been hard to get a regulation like this past where folks
00:54:35
have tried to and talked about doing it um around the world however in a place like the netherlands and the eu or as i
00:54:41
mentioned before they're far more progressive and have this very kind of green hat on
00:54:46
they're starting to take this sort of climate change action as they're calling it and that climate change action
00:54:52
you know does have the ramifications of destroying by the way one of the things they said is we expect and this will
00:54:58
destroy the livelihoods of many dairy farmers in in the netherlands that was horrible by the way look all kidding
00:55:03
aside i said that they said that directly by the way and the dairy farmers are like fu you're not
00:55:07
destroying our business for climate change i have a specific question though which is has there not been some efforts
00:55:12
to engineer how these plants themselves absorb nitrogen yes i have three businesses on this totally
00:55:20
right technology is going to solve this problem i'm super optimistic on that there are microbes
00:55:26
that are being used to coat seed those microbes can pull nitrogen out of the atmosphere directly so you don't need
00:55:32
ammonia you use far less ammonia there's a couple companies that are doing this really effectively they're growing like
00:55:37
crazy they're doing really well there are other projects uh and there's very simple solutions my last company we
00:55:42
had a product called nitrogen advisor where we basically told farmers instead of dumping all the fertilizer at the
00:55:47
start of the season you paste it out so the fertilizer doesn't sit there and volatilize there's all these solutions
00:55:52
that technology allows from software to bioengineering to these microbial solutions
00:55:57
and so we're definitely um i think going to resolve this but meanwhile these governments are in a frenzy to solve the
00:56:03
climate change problem and you know they're going to start to pass these laws that really hurt the livelihoods of
00:56:08
uh you know ag producers how do you guys think something like this happens because
00:56:13
typically you would expect when a government is about to pass something like this
00:56:16
there's sort of like a pretty fulsome review and all sides are brought together and there's working groups and
00:56:22
all of this stuff and at some point you would talk to some scientists at other points you would
00:56:26
talk to economists at other points you talk to the people who'd be directly affected like the farmers
00:56:32
is it that the virtue signaling around sustainability and climate change is just so high
00:56:38
that people just turn off their brains or well like what is actually happening here i think what's going on is you got
00:56:44
a bunch of technocratic bureaucrats in brussels who don't know anything about farming or these people who live in the
00:56:50
netherlands who've been doing this for generations and they sit there in brussels and they make up these
00:56:55
completely arbitrary guidelines and requirements 50 by 2030 those are suspiciously round numbers
00:57:03
okay and then some other you know authoritarian technocrat in the netherlands then says well we got
00:57:09
to implement this and they pass some crazy law and they don't even think about the impact on these farmers why
00:57:15
because they're deplorables i mean it's complete class bias it's just like the canadian truckers they don't think about
00:57:21
these people they don't factor into their equation they don't know how they live
00:57:25
and so that's what's going on here and so you've got this global elite of of technocrats who are willing to use
00:57:30
authoritarian tactics they're appropriating their farms they're taking them away that's why they're up in arms
00:57:35
see the rest of it which you're not saying it's not just technocrats it's the actual globally writ large have
00:57:42
wrapped themselves around the sustainability blanket and they believe that that word justifies all kinds of
00:57:48
bad unscientific enumerate policies right and by the way they're they've just woken up on energy right they they
00:57:55
had just banned energy production in europe they realized oh wait a second this is making us dependent on russia
00:58:00
and authoritarians well what is the other big export of ukraine it's food so they got smart on energy and now they're
00:58:08
about to repeat their same dumb mistake of basically prohibiting this area where they have an enormous
00:58:14
natural advantage which is food production so you know it's like they just keep making the same mistake over
00:58:19
and over again and by the way let me ask you a question by the way yeah look i'm
00:58:22
not going to question you on the science freeberg but here's what i would say is
00:58:26
i think there's a tendency on the part of these technocrats to think that the science is a lot more
00:58:32
bulletproof than it actually is that is certainly what we saw with covid is we had these same sort of global elitists
00:58:39
these technocrats who claimed to be health experts they made up all these lockdown rules that we talked about the
00:58:44
beginning of the show and what did they do no this isn't speculative but but what
00:58:50
but i will i will they're willing to use they're willing to use heavy-handed authoritarian tactics and i just don't
00:58:55
believe that the science of this especially this 50 by 2030 why is that the guideline who
00:59:02
can prove that those are the exact right numbers and they're willing to use any tactics necessary to to implement their
00:59:08
crazy rules let me ask you a question sex let's assume that there's a technology transition possible that
00:59:13
there are solutions that could be used i highlighted a few of them they just cost
00:59:17
money they require some investment and you know creating this distortion in the market by saying you can't release 50 of
00:59:24
the ammonia that you've been releasing forces a technological shift that otherwise would have taken longer in the
00:59:30
market do you agree that there may be a scenario here whereby you know governments can and should intervene and
00:59:35
i'm not making the case personally i'm just trying to you know highlight for you that i think this is where folks are
00:59:39
coming from right but there are alternative ways to make the dairy there are alternative ways to feed the cows
00:59:44
they're all or um here's where i think you're going with that which could make sense which is
00:59:49
okay you're saying there is a pollution externality here uh being created by the
00:59:53
farmers well we need to basically internalize the externality we need to capture the cost of that so what you
00:59:59
could do is gradually introduce some sort of permit system you know or a tradable permit system
01:00:04
right where that would incentivize the creation of these technologies that you're talking
01:00:08
about you want to do it gradually so you don't destroy the livelihoods of these farmers who've
01:00:12
been doing it for generations so that would probably be the approach you'd want to take i agree with you by the way
01:00:18
i think i think that is what is going to happen around the world is that that sort of cap and trade or taxation system
01:00:23
is going to get slowly rolled out for a lot of these externality costs in production and industry and agriculture
01:00:29
particularly because there are technological alternatives and it will incentivize the switch to those
01:00:34
alternatives because the alternatives will cost less than the taxes saks based on what you're saying is one of the
01:00:39
problems here that these technocrats these professional politicians they don't actually have great strategic
01:00:45
thoughtful um you know real world experience to do planning you know looking at germany their
01:00:51
inability to see the writing on the wall of what building a gas pipeline from russia to germany and shutting down
01:00:57
nukes would do it just seems like over and over they're just really bad strategic thinkers combined with this
01:01:03
fight you're wrong no jason they are influenced by these cultural elites who they want to create
01:01:09
favorites group think it's a lot of group thing going on yeah behind the group think is a class
01:01:15
bias right they only associate with other members of the professional class who have you know basically graduate
01:01:21
degrees they don't even interact with these farmers just like the just like the legislators making covid
01:01:28
rules the health experts never interact with canadian truckers so there's a huge
01:01:33
amount of class prejudice saying that these people just don't matter we can force them to obey our rules and if they
01:01:40
don't like it we'll confiscate their farms and by the way the rest of you you're gonna have to learn to eat bugs
01:01:46
or tofu or tempeh or recycled excrement or whatever i was the desantis what was your
01:01:51
desantis was the desantis uh prosciutto what did you have on there was it some mozzarella
01:01:56
and a roast beef that's a beautiful roast beef beautiful roast beef by disaster brought to you by dessert it's gonna
01:02:03
become a meme after this episode i have prosciutto is the best market campaign ever he's a
01:02:09
lock for president jacob i had prosciutto cotto with brie white truffle cream and lemon i mean did you have the
01:02:14
white truffle on it uh that's like a plus what's that bro this is 80 euros no it's like eight euros eight euros yes
01:02:20
bring something back bring some back uh wait i wanna i wanna say something about
01:02:24
this i hope the democrats uh embrace this agenda wholeheartedly because if we get all the voters who wanna eat roast
01:02:30
beef i'm pretty sure that's the super majority in this country the way to solve this freeberg is with the right
01:02:36
economic incentives there's no reason why the dutch government had to go and basically put thousands of farmers out
01:02:42
of business instead what they could have done is actually created the tax incentive that allowed farmers to adopt
01:02:48
some of these bleeding edge technologies when they were probably too expensive to
01:02:52
make it economically equivalent that i mean by the way that is not a newfangled idea this is not genius talk here so the
01:03:00
reason why they don't do the obvious simple thing is class bias it is exactly what david said it is the influence of
01:03:06
people who look hold on who look down on these people okay and who believe that they are
01:03:13
more virtuous because of their desire to defend climate change there's also a pragmatic piece of this this reminds me
01:03:20
of the cold debates we had there are 62 000 coal miners in this country like this is
01:03:25
a small number of people who are impacted we could just you know basically give them severance
01:03:30
or in a soft landing instead of the you know this crazy or or let them continue to do their job and
01:03:37
egress off naturally the economic free market will manage it will manage it on its own and instead what you could do is
01:03:44
actually green light nuclear subsidize some of these more adventurous ways in which you can extract and refine lng but
01:03:50
my point is this is where it's it's a real head scratcher why politicians don't do this and i think the only thing
01:03:56
that i can come up with is that they are overly influenced by these cultural elites with their perspectives i agree
01:04:03
that do judge very harshly what they believe to be right and what they believe to be
01:04:09
wrong can we take a victory lap here in the united states that we're energy independent
01:04:13
and that we're food independent can we take that victory how much longer jason no well i think we now need to think
01:04:19
instead of just being independent i think our mission should be surplus jason our president you know canceled
01:04:24
the keystone pipeline he cancelled a bunch of exploration permits in the gulf you know again it's we are one bad
01:04:30
winter away from all of a sudden being in the same situation as everybody else so it's not
01:04:36
as solid one bad we're not one freeberg where are we in terms of our independence jkl we are the number one
01:04:42
ag exporter in the world and by the way under under a different president just a
01:04:46
couple of years ago we were the number one energy exporter in the world the fact of the matter
01:04:50
when it comes to food and energy we have the greatest natural resources and we should be developing that we should be
01:04:57
moving but no sex my point is what if the united states took a philosophy of not just being an independent but
01:05:04
being even like a stronger surplus to the point of like building that up we are we're we're
01:05:11
working it out the market's working it out and we're taking you know we're we just need to feels like we could do
01:05:15
better it feels like we do i mean the issue with nuclear power as you know is the regulatory cost so you know it's 10
01:05:22
billion dollars and 30 years to get it let's move to the lightning round no i just want to show you guys the
01:05:27
monmouth pole which i think is worth highlighting okay we didn't talk about it but the monmouth pole that was
01:05:33
published a few days ago which is the june 2022 poll the number one concern that america the number one
01:05:39
thing americans are concerned about nick you could put the chart the table in the
01:05:42
in the uh the show nuts 33 percent care about inflation 20 15 care about gas prices 9 care about the economy six
01:05:50
percent care about everyday bills and groceries you know you add that up um that's the vast majority of what people
01:05:56
are concerned about and all the way down at the bottom of the table is climate change at one percent yeah absolutely so
01:06:02
i think it just speaks to the point about you know there there is and by the way i'm not advocating that this is the
01:06:08
right position but i will say that there is a huge distinction or discrepancy between what the average american is
01:06:16
worried about and you know where political leaders are trying to carry us forward i'm not sure
01:06:22
what the right answer is but there's definitely a disconnect and i think it's being played out in this netherlands
01:06:27
situation right now one point for you on that as well nick i put this article in
01:06:30
the in the chat but the the top esg fund manager in europe um of the of 2022 uh they released their um
01:06:41
results and the guy was up like uh almost 16 percent um and he disclosed what he owns and he turns out that he
01:06:48
owns conoco valero and exxon and according to the esg rules that these folks have passed this qualifies as an
01:06:58
esg fund because he doesn't own weapons porn and um oil sense but it allows all these people to walk
01:07:07
around thinking that their investments are tied up and things that are actually clean so it's not true so the point is
01:07:13
that there are there are these structural lies that have been baked into the system
01:07:17
um that they are supported by very shoddy accounting or rules or science and if we're really going to fix this
01:07:25
problem i think you have to go and inspect these things and call them out but like all of
01:07:29
this esg investing which perpetuates by the way perhaps you know why these governments just have no clue what's
01:07:36
going on sit on top of all of these lies there's nothing esg about conoco and exxon per
01:07:42
se that's ridiculous let's just call it for what it is this guy's a good fund manager it's a he's a good fund manager
01:07:47
he did well in a period where everybody else was down let's just celebrate that and not tell all these it had a good
01:07:52
marketing spin for a while so you know no but it's not just marketing it allows people to believe that there's a
01:07:57
solution that is being affected that is not true that's the part about it that's
01:08:02
super nefarious yeah okay listen we moved science up because science got a short shrift last week what is a
01:08:07
lightning round what is that i just wanted to things that were small that weren't like full segments i my
01:08:13
concept here was to just put things at the end of the show that we missed but what i did was give you a shout out
01:08:18
you're doing a great job moderating today by the way thank you put a couple extra hours in by the way i think
01:08:22
freeberg made a really interesting point a minute ago about me being a great moderator no not that okay um
01:08:28
about the um about the polling the monmouth polling where if you look at what voters care
01:08:34
about and what the elites and the elected politicians care about there's a huge divergence huge that's clearly what
01:08:40
happened in holland right you got these dutch farmers their livelihoods are being
01:08:44
taken away by people in brussels who don't even understand what they do i mean people want to make a living
01:08:50
yeah pretty but but this is why you're seeing populist nationalist uprisings in all
01:08:55
these countries is you've got a crowd of people who go to davos and make policy and they're completely disconnected
01:09:01
they're completely disconnected from the real concern look at pojo electorate bojo just got booted today why
01:09:07
ultimately at the root causes he was throwing covet parties when he was telling the same thing that everybody
01:09:12
nailed gavin newsom for this guy just got booted out as prime minister they're better than the united
01:09:17
states they're hypocrites and they're incompetent at their jobs let's call it what it is the association is you try
01:09:21
and do what you believe to be best for everyone but it's not it's not what's best for you
01:09:26
you know and i think that that's the point like climate fixing climate change stopping kovid i gotta do x y and z for
01:09:33
everyone but i still want to fly in a private jet and i still want to go to a covet party you know to a dinner party
01:09:37
exactly like super spread um this is why i think biden is very unpopular i mean look he's at hold on hold on let me
01:09:42
cheat out for you hold on let me see here okay so we are going to tear up okay i have a good joke just let me do it all
01:10:02
right so all of the free berks stands were breaking my chops that chamoth was cackling and laughing during a science
01:10:08
segment and we rushed him so i moved sides up so to the freedberg stands please stand down now we go to biden
01:10:15
arrangement syndrome segment at the end of the show joe biden's cognitive decline is becoming the topic sacks have
01:10:21
at it well listen if if you call this uh bind arrangement syndrome 62 percent of
01:10:27
the country has biden arrangements because it's like we all did for uh trump violence poll numbers are down to
01:10:31
something like 38 it's historic low for this point in time of a presidency but look the point i was trying to make was
01:10:38
i think that biden's problems flow from this dynamic we're talking about which is he campaigned as scranton joe he was
01:10:46
a working class hero who is going to give us a return to normalcy and what has he done he's basically implemented
01:10:53
every wacky idea of the progressive left he basically is representing that part of the party
01:10:59
that is completely disconnected from the ordinary desires of the working class and what are people concerned about
01:11:05
right now food and energy prices what is biden concerned well first of all he's blaming it on mom and pop gas stations
01:11:11
even even jeff bezos had to that's what was insane yeah so just to queue up the tweet my message is biden suite my
01:11:18
message to the companies running gas stations and selling and setting prices at the pump is simple
01:11:24
this is a time of war and global apparel bring down the price price you are charging at the pump to reflect the cost
01:11:30
you're paying for the product and do it now and then almost all small business franchises which is absurd and that's
01:11:37
just not how the economy works do you think that they look at a chevron and think it's owned by chevron or they
01:11:42
cannot be who's tweeting for what some some millennial some millennial with a couple of master's degrees
01:11:48
and 400 000 if that is rage tweeting from the strategy to make him look incompetent i mean i am forever thankful
01:11:54
for joe biden to getting trump out before he took a third or fourth it would take an eight-second google search
01:12:00
to know that less than ten percent of the gas stations in america are owned by these corporates well here's basis these
01:12:06
are mom-and-pop businesses this is insanity a lot of immigrants it's a lot of south asians this is why it's very
01:12:12
sensitive to me these gas stations they are mom and pop owned a lot of them are owned by immigrants and this is their
01:12:16
small very strengths of the american dream and biden comes along and he's saying you're doing too well i mean
01:12:22
these people their profit margins like two percent two percent two percent nothing my buddy's family by the way
01:12:27
owns a bunch of gas stations in the bay area and he told me they make no money on gas they make all their money selling
01:12:32
cigarettes and soda that's it that's the whole business yeah it's a way to get people into a
01:12:36
convenience store here's my thought i think i'm going to state it right here bezos is going to run for president in
01:12:42
2024. this is why he retired what this is why he's giving money away i will bet anything against them okay
01:12:55
he's playing legacy games no why else would he become a [ __ ] poster on twitter
01:13:00
ouch inflation is far too that wasn't even a [ __ ] post well anyway he's he's basically he doesn't have to run a
01:13:05
company anymore he's bezos after dark that wasn't even a [ __ ] post that was kind of like he was
01:13:10
outraged by the financial illiteracy this year stupidity and the economics take on the president there's no upside
01:13:21
there he's not starting a fight jacob it's just calling out something that on its face that tweet it was not
01:13:28
written by joe biden so let's not pin the blame on him but that office and that strategy is clearly broken because
01:13:34
it is run by someone at a minimum who's enumerate and who's clearly financially illiterate
01:13:39
who doesn't know how to google anything because that's the only way you could write something that insipid biden
01:13:45
should fire whoever it is that wrote that 100 biden is looking for scapegoats okay his popularity is at historic lows
01:13:52
the right track wrong track numbers are at historic lows he's looking for anyone
01:13:56
to blame and he's been going through a whole sequence and the the putin price hike wasn't working he couldn't even say
01:14:01
it right so now they're looking for anyone else remember elizabeth warren did something similar when they had um
01:14:07
food inflation they started blaming the meat the meat packing industry or whatever look this is not how these
01:14:12
industries work but they are looking for someone to blame for their own mismanagement of the economy and biden
01:14:18
baked this cake last year we've discussed this before he canceled energy independence his first day in office and
01:14:25
then moreover look on this ukraine situation if you knew you were going to take this tough putin approach jason
01:14:31
that i know you support okay but if you knew a proxy war was coming or you're willing to let one happen you would want
01:14:36
to basically create an energy glut not an energy shortage you'd want to basically maximize the amount of
01:14:42
american production and you would not want to alienate the saudis so what is biden doing now he's going over saudi
01:14:47
arabia had in hand totally humiliating to beg for forgiveness for last year ostracizing them and calling them
01:14:54
pariahs so no hold on a second they had no grand strategy if they wanted to pursue
01:15:02
a tough on russia strategy they should have maximized energy production instead they didn't even think about it they
01:15:07
didn't even think about it energy inflation i agree with you there it also i will
01:15:13
say is notable i think the democrats are actually now um i think they're quietly pushing the joe
01:15:22
biden cognitive decline so that they can put it they can feel it what do you mean
01:15:26
quietly how do you allow a governor a sitting governor to run ads in a different state against the the presumed
01:15:34
uh republican nominee unless it's ordained well i'm saying the cognitive decline
01:15:40
being i think they're obviously not going to come out jason i don't think this is happening surreptitiously
01:15:45
okay here's the tweet from bezos just so people hear it ouch inflation is far too
01:15:50
important a problem for the white house to keep making statements like this it's
01:15:54
either straight ahead misdirection or a deep misunderstanding of basic market dynamics this is a very strong statement
01:16:02
and the point i was trying to make before is why would bezos why would bezos at this
01:16:09
time why would he take on the administration i think it's important for biden to take control of
01:16:16
his communication strategy and to reclaim more of the center going into the midterms i think a lot of this
01:16:22
content the naming the shaming the blaming tends to be more of the playbook from
01:16:28
the far progressive left and i think that there's probably too many people that have infiltrated the white house
01:16:34
from those ranks and i think he needs to close ranks a little bit more and so uh i don't think he wrote this okay and
01:16:40
i don't think he would have wrote it if he was given a chance so it's clearly something is breaking between what is
01:16:48
being discussed as a team and then what is being executed on the ground sex look
01:16:53
biden's staff the ron claims been with him for years they reflect his desires i think this is classic biden if you look
01:17:00
at his career in the senate he's a grandstander he always like to basically scapegoat and demonize this is this is a
01:17:06
playbook he may not have written the tweet but he certainly endorsed it and he's given speeches now where he's
01:17:11
calling out this scapegoat and that scapegoat for basically the energy prices which are totally his fault he
01:17:15
could have had a better strategy around that santa's versus bezos you heard of your horse on the bezos thing hold on a
01:17:21
second jason you're not taking into account this is actually the second time that bezos has tweeted about inflation
01:17:26
so i'm taking this into account yeah okay that was back in may he called out the administration so yes it's on this
01:17:31
particular issue i think he feels strongly about this issue and i think he's looking at what
01:17:37
the administration is doing into saying this is a level of political stupidity and financial illiteracy that i just
01:17:44
cannot stand and by the way who is jeff bezos bezos is a very liberal guy he's an outspoken
01:17:49
critic of trump and he owns a very liberal media house at the washington post so i think this is a reflection
01:17:55
that biden has even lost the jeff bezos of the world and he's trying to spend it as a good thing as if
01:18:00
we don't need these billionaires but if you're losing jeff bezos you're losing a
01:18:04
lot of people in the center probably the entire follow the breadcrumbs he bought
01:18:08
the washington post he bought the largest house in dc and now he's taking on the administration i think it's a
01:18:14
clear path that he wants to run you can you can you can mention me on twitter if you disagree i'll tell you a
01:18:20
funny story to end uh after after the sale of the warriors completed and i tweeted this thing out
01:18:27
uh it was really beautiful uh dre sent a beautiful text to me um so did david lee
01:18:34
and then i got one text message from phil hellmuth saying i dispute how much credit you've given me i expected more
01:18:42
wow he so seven seconds to fill again it only took seven seconds and then he called and then he called i showed i
01:18:50
showed sax the text right it's it's an unbelievable text sax can sacks can testify to it and then he's like lost
01:18:56
his mind again he lost his mind he said basically like you know he he he took the credit that i gave him want to throw
01:19:01
out the window he thought i really tried to [ __ ] him over and then he said i i'm
01:19:05
gonna block you for a week but then change his mind just tell him you'll buy him into the to
01:19:11
the big game or something and he'll be fine no he didn't tax money he just wanted more credit more credit but you
01:19:16
want more tell him you'll stake him because he did he did introduce you to the deal correctly
01:19:25
is it true is it true that he is that phil hellmuth introduced you to the deal yes or no
01:19:33
he introduced me to joe lacombe got it so if if not for phil you probably would not have made that trade
01:19:39
um i don't know it's not clear because they had maybe they had no they had bankers and i was you know i was using
01:19:44
allen and company so i mean there's not a lot of people running around in that moment trying to write to
01:19:49
ten percent does he deserve any credit for you buying your stake in the warriors in
01:19:54
fact and i thought i gave him an appropriate amount of credit yeah jeremiah tweet stormed it was like it
01:19:59
was phil peter teal and like one other oh and then jacob jacob yeah and it's like better company he couldn't find
01:20:06
himself in like it's the best he's ever been except when he was with michael jordan and jay-z but other than that
01:20:12
this was the best phil's ever done i mean you know when i get did you see he made it to the second when i get my
01:20:17
fourth ring i'm going to take a picture like michael with the four rings but but jamal in the interest of piece maybe
01:20:22
you should just thank uh phil right now oh i have a great idea to tell chill free look at free bricks laughing he's
01:20:28
the only one that got that joke did you get that joke i was wondering if i should tell you to cut it or not i don't
01:20:32
know i think it's good here's a great one you know how don't cut that part i think it's a funny joke
01:20:37
you know how phil gives his bracelets away uh as like a recognition you don't have to do this but pretend
01:20:44
that you're giving since you have four rings that you wanted to thank the other three bessies on the show and that
01:20:49
you're keeping one ring for yourself oh my god giving us the other three rings oh my god thank you for all the support
01:20:54
we've given you all the support for the warriors yeah for the warriors that we gave you and all the council we gave you
01:20:59
over the years this will put him on me super chilly one of the four rings super tough it's the greatest april
01:21:07
actually that reminds me phil's next ring is going to me so i can't say anything critical
01:21:11
bracelet yeah the next bracelet's going to me so i gotta i can't say anything critical you know what you're going to
01:21:15
do whatever i said that was critical i guarantee you takes the bracelet and loses it in the first three days and
01:21:24
never wears it it doesn't care right in the garbage care never talks about it again all right everybody we're
01:21:29
back the team is playing professional crisp ball again point guard is back we'll see you on episode 87 we're gonna
01:21:37
make it to a hundred i feel like we can make it to a hundred bucks yes we're going to make it that the vibe is back
01:21:42
the vibe i love you guys this show in the text but it's great here i got to say i love i love hanging i love hanging
01:21:48
out with saxypoot like live and physical he's a [ __ ] little he's very you just
01:21:53
want to take him yeah he's he's an [ __ ] last time i hung out live with him he had an iv hooked up and
01:22:04
he was recovering from the night before snacks on an iv basically on an iv now that's how bad it's gotten for him
01:22:10
zach you look terrible can you please get some sun and just maybe eat one less sandwich
01:22:17
he's losing weight he looks good i had two no but you could afford to you're in great shape i mean sacks maybe a half of
01:22:24
desantis maybe you should have a half of desantis i think i'm gonna put you on half the centers we'll see you all next
01:22:29
time on the all in love you guys bye bye bye bye and they've just gone crazy with it
01:23:18
get mercies