00:00:00
oh my God sax looks like I got hit by a Mack truck you okay little fella oh how long were you out last night oh boy did you see this the message I got the text
00:00:10
message and I was like what the is going on over there I gotta get back to the United States timestamp 1 39 a.m
00:00:17
Pacific I'm still out drinking tonight there's no way I'm making 9 A.M I'll do 10 a.m
00:00:23
to noon this is sax the negotiation has uh begun and I'm waking up it's my last day on the boat I'm trying to get off the boat in a reasonable Manner and that's the first text message I get that's the first text bad six minutes
00:00:34
later Drake just came in better make it 11. [Music] let your winner [Music] [Music] do you want to tell you the story so the
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thing I would compare it to is do you remember that episode of Seinfeld where Costanza stumbles onto the model bar you
00:01:06
know he finds the place that all the supermodels are hanging out and he calls it Shangri-La because it's like this
00:01:11
mythical place and he spends the rest of his life trying to find Shangri-La again but he can never find it yes that was
00:01:18
you last night in L.A well so we were just out having a few drinks at this private club that's uh new in town it's
00:01:24
just me and you know my Wack Pack and the room is it's just you know a few of us having drinks hey sorry who who is
00:01:31
your whack pack we can bleep out these games are on salary versus yeah yeah yeah he's
00:01:36
like an NBA player it's like he rolls it with six people what percentage of the payroll two or four what percentage are
00:01:42
your friends yes um he's doing the calculation about I guess about half received some sort of monetary payment for me not all of them are direct employees some are vendors
00:01:54
okay got it you know yeah of course real estate brokers oh my God so yeah they're on they're fee
00:02:06
based they're fee based yeah but you could call it an Entourage wait how many how many rolling your entourage how many are there five four I'm gonna say six I
00:02:13
think we had about five people out okay that's that's an Entourage that's perfect because that you can get into the club
00:02:19
with that it's more like a private club it's not like uh like you know a different kind of Club yeah now you're a
00:02:24
member of this club yeah I'm a member got it okay all right so we're just hanging out there having drinks and you
00:02:30
know the room's empty it's just us and all of a sudden there's like a subtle Vibe change that happens
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and we look around like five minutes later the whole place is full and it's like Shangri-La basically oh
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man and we're like what just happened what happened and then Drake walks in ah or like oh okay got it he performed at a
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concert in LA that night so the after party was basically at this place so it's not like we were hanging out what
00:02:57
were you drinking are you on the tequila still or what are you on right now you seem to love that tequila yo you won the Ranch Water still yeah I used to like
00:03:03
bourbon or Scotch it but now remember that sort of Highly refined tequilas are better so the Colossal is probably my favorite right pesado yeah these
00:03:14
reposados are on yejos are really great and I I've advocated to this group that we should actually have our own all in
00:03:21
Tequila label I'm in I'm in so we'll see if the fans like that idea let us know in the comments we'll work on it but now what do you how do you drink it are you a neat guy you put a couple of ice cubes
00:03:32
in or do you do like a bill Gurley Ranch water situation what what's the range what what do you mean by Ranch Waters
00:03:38
you take a topa chica some tequila and then what you put a couple of limes in it free bird because
00:03:43
you're on this Ranch Water kick too aren't you I had a little Ranch Water the other night I had some ranch water last night you hear my voice a little
00:03:49
too much Ranch Water but chocolate is just that's just it's a seltzer water right in a glass bottle from Mexico like
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but it's fair it's a fancy Seltzer and then you get lime juice in it and it's just you know it's a very like it's
00:04:01
basically a double tequila on soda with some water so it's it's like a margarita minus the sugar no sugar yeah no sugar
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it goes down very smooth very refreshing you got to have a good tequila for it to work yeah I don't bother with the mixers
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or the fruit or any of that stuff it's just uh I'll drink it on the Rocks I can't be bothered with anything that is
00:04:19
ranch and water just seems so down mark it seems nasty yeah no it's a Texas thing it's a Texas sound Market no if
00:04:26
you're drinking a high quality Spirit you don't need to mix it with anything you know if it's if it's a bad Spirit
00:04:32
then you gotta put all sorts of things in it but you don't add Seltzer to white wine to a good wine when Bobby Baldwin
00:04:38
was still running the Aria and I was super gambling at the Aria my host invites me and there was a huge Chinese junket at the same time and I'll never forget it
00:04:50
these guys had ordered every bottle of Screaming Eagle okay so whatever five six thousand dollars a bomb and Welch's grape juice said they were mixing
00:05:02
up screaming I'd never seen anything like this before or since it was unbelievable this is like a joke no that's how they drink it
00:05:12
come on no they asked for the most expensive bottle that they had the most expensive California bottle the bat these guys pull out a case of screaming
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eagle and they just start pouring we were playing together pouring half Screaming Eagle hop Welch's grape juice
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like those grape soda I gotta be honest that does sound pretty good I don't think you need a screaming eagle exactly
00:05:31
yeah yeah that's pretty nutty it's like a sangria the big thing now that they do is they put the big ice cube in the
00:05:38
drinks you know The Big Cube yeah but I you know I think I'm I'm old-fashioned I prefer the the multiple rocks you know
00:05:45
not The Big Cube because I actually I want the ice to melt a little bit you know I want the I drink you want to open
00:05:51
it up you want to open it up it's a relationship it's a relationship with the drink how does it start how does it
00:05:57
end exactly David I want an honest answer do you have in the mausoleum an ice cube mold of
00:06:04
your face not uh some super fans just put that in the merch store not in my face but we do
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have our own ice cubes we do have our own big cubes actually there's a there's a room off of
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the kitchen which is the ice room so they bring the ice down from Antarctica and they cut it uh most of it melts
00:06:25
because it's not there but yeah it's the best socks is the best he's the best but you it opens up right so tell me more
00:06:32
about the relationship you start you got a very powerful strong relationship with it and then you want ease into it it
00:06:38
gets you know I mean the reason why they do The Big Cube in theory I mean it looks cool but is because when the ice
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is kind of in one Cube like that it doesn't melt or it doesn't melt as fast and so it doesn't water down the drink
00:06:50
but I want the ice to melt a little bit uh you know make it a little easier to drink when we drink Scotch yeah sax when
00:06:56
you're drinking bourbon is the whole shtick around Pappy Van Winkle Is that real or is that just like marketing it's
00:07:02
a little bit like screaming eagle which is to say it's good but is it 10 times better than the you know 300 bourbon no
00:07:11
so there are other good Bourbons but Pappy is very good it is undoubt very good and what what makes a bourbon good versus modern average versus shitty it's
00:07:22
uh I'd say like can you taste it like wine like you can taste the difference in wine or not really it's about how
00:07:27
smooth it is personally I don't want bite in either my bourbon or my tequila so you know how smooth that is and then bourbon compared to Scotch tends to be sweeter but you don't want to be too
00:07:39
sweet so just getting that balance right you know the these new tequilas are kind of like that as well
00:07:45
you know you choose how much bite you want how sweet you want it three things you don't want to bite in Bourbon scotch
00:07:50
and whoa whoa you just ever have a drink with the Collins ice you ever have the Collins ice do you know what that is
00:08:05
check this out whoa this is becoming a trend they cut a very long uh rectangular ice what do they call that high ball is that a high ball or is a highball the shorter glass I don't know no I thought
00:08:17
eyeball is the short Quest no that's a short glass which makes no sense because they call it a highball but anyway there's a funny meme where
00:08:24
you take this drink and you they show this and it's like what happens when you're Venture capitalists
00:08:29
after Venture capitalists get their preferred and their liquidation preference and they pull the ice cube out and there's
00:08:35
one ounce of drink left that's great that's the Press stack right there there's the prep stack this explains depression your comments is the
00:08:46
liquid around that Ice Cube that's really good that's really good that's really good oh man can I admit something
00:08:53
which may be totally derided but I have to say have you guys ever had a cosmo in
00:08:59
a short glass so meaning not in a martini glass but just a cosmo in a sugar glass in a guy glass yeah yeah a
00:09:06
guy glasses I think when a cosmos made well it's an incredible drink um do you guys too many ingredients yeah nobody here is going with you on this one pal you're on your own
00:09:18
alcohol but when I do yeah it's it's a cosmos there are so many better what about a like a great Negroni it's not sweet enough for me I like a cosmo yeah and a margarita I like well I guess I
00:09:31
like sweet drinks I like margaritas just did it it's a good background what is oh
00:09:42
there's the Entourage background yeah I'm friends with a lot of the Entourage guys now uh I know Adrian
00:09:48
uh and I know Turtle who uh is a big Knicks fan so I'm friends with two of the four two of the four not really nice guys like when you say you know him you mean you've dm'd with them or you've
00:09:59
done something in human life I've hung out with uh Adrian Grenier many times he's he's a big attack he's got a he's a
00:10:05
he's a uh like a venture partner in a fund and he lives in Texas well-known public that he's in the Austin area um
00:10:12
so I've seen him many times I think sax has to he rides in our circles and then um yeah turtle is a huge Knicks fan and I'm in a group chat with him where we talk about the Knicks so shout out
00:10:24
and they're bringing it back by the way there's a big fight between I guess Mark Wahlberg no two of the creators but the
00:10:31
whole cast wants to come back and then they want to do like what would Ari Gold be like
00:10:38
in this era of cancellations and political correctness and I think that would be because it's happening also he's got to be a softer character too now that he's grown up he's matured he's
00:10:48
past the the Heyday of his career he's reflecting on life a bit it could be really good well that would be a plot
00:10:53
line yeah get you you put him in the middle of the cancellation crisis yeah Jerry Ferrara they probably has to
00:10:59
issued an apology of some kind something from the past some text he sent to some producer in the past
00:11:04
yeah what would be great is if I think the best Entourage reboot would be making him the head of like Disney or something like he's in charge oh my God you're his Studio
00:11:15
and then by the way are you seeing this Snow White the backlash oh here we go go welcome bro go ahead here's your right
00:11:21
here I I don't care I'm not gonna see the movie and I don't care much it's another Disney it's another Disney faux pas where conservatives are backlashing
00:11:33
against this revisionist take on Snow White the dwarves apparently are no longer
00:11:38
Dwarfs they're just people with like funky hair no way yeah really yeah they made them
00:11:45
non they made the doors non doors I think they're still called dwarves but they're you know normal height people so
00:11:51
Lord but they've got like blue hair or pink hair or whatever though well this is the thing the term dwarf I I think is
00:11:57
not I think there's some in the community some debate if it's offensive or not so I I don't know if it is if it
00:12:04
is apologies in the small person community like what community the person uh there
00:12:11
is a term person of short stature little person and dwarf those are the commonly used terms uh according to the internet
00:12:17
I don't think you get canceled for those but I do think it's a sensitive subject um and there are some differences of opinions anyway
00:12:24
somebody who is a person of short stature um complained about this and then a bunch of folks who are persons of short stature were
00:12:35
very upset because how many iconic roles are there four people who are are in this right well this is kind of an ancillary issue Jason the the main thing that's race tackles is that the actress
00:12:47
who plays Snow White has been giving all these interviews in which she's trashing the original movie and of course he's
00:12:53
saying that Prince Charming was a stalker in the original and so they had to change that and yeah that that Snow
00:12:59
White was the original Ip of Disney that was the first big movie they did that put them on the map I think before that
00:13:05
it was more like short animated films and I think Snow White was the one that Walt Disney figured out we could make a
00:13:11
feature length animated movie and it made the Walt Disney Company so you have here this actress is taking a lot of heat because she's saying a lot of things sort of trashing their original
00:13:21
movie now I personally don't blame her because the things she's saying I think are the filmmakers intent and so really you have to question the wisdom of the
00:13:32
executives at Disney who you know could have left this material alone they didn't have to go here yeah but they did decide to go here they did decide to do a remake and they changed all these
00:13:43
things why even bother you know all you're going to do is ruin the Public's perception of the original yeah that'd be like the the new Star Wars people being like Oh my God Han
00:13:53
Solo was a misogynist and it's like well yeah it was a scoundrel they literally call them a scoundrel in it like yeah I
00:13:59
mean he's not the best guy but he has an arc and he turns around I mean it's a problem with trying to you have to look
00:14:04
at Art uh in context obviously and uh you know speaking of which I don't know if you guys saw it there wasn't a need
00:14:10
for them to rehabilitate that movie by remaking it in a completely different way yeah here's how you say it um
00:14:15
standards have changed over a hundred years so some of the things that you might see on film or in Media or in
00:14:21
books might be different over the last century and you might want to put them in context at the end let's move on
00:14:27
but speaking of media are you guys aware of this uh song that has rocketed to number one
00:14:33
rich man haven't listened to it Richmond all right so I just I thought I'd bring this up I think it's have you heard it
00:14:38
Freebird great song great voice incredible can you play it because I I haven't heard it I have no idea let me
00:14:45
play you a little bit I want you to just listen to some of the lyrics here and then for context nobody knew the song a
00:14:50
week ago it got 25 million views on X in a week or three days and it's the number
00:14:55
one song on iTunes right now number one track in the country here we go coming at you Oliver Anthony rich bad to Rich
00:15:01
become an attitude for pay so I can sit out here and waste my life away drive back home and drown my troubles
00:15:16
around people like people like me people like people I guess I could just wake up and
00:15:24
not be true yes [Music] [Music] Lord knows they all just wanna have total control wanna know what you think wanna know what you do and they don't
00:15:49
think you know but I know that you do is [Music] incredible when you hear the song
00:16:05
I saw sax was getting into it this is popular song He's crooning the American voice
00:16:11
it's the 80 million people who voted for Trump that you know if you read the top
00:16:16
YouTube comment it's the 80 million people that feel like they don't have a voice that you know Trump was speaking
00:16:22
to he sounds like Wesley Schultz of The Lumineers the beautiful voice but obviously the lyrics are what speak
00:16:28
to people let's do a little um all in for the first time a little um cultural uh you know what would you call this appreciation of the lyrics here uh or an analysis
00:16:40
I've been selling my soul working all day overtime hours for pay so I can sit out here and waste my life away drag back home and drown my troubles away
00:16:52
it's a damn shame what the world's gotten to for people like me people like you wish I could just wake up and not be
00:16:58
true but it is living in the new world with an old soul these rich men north of Richmond huh
00:17:04
Lord knows they just want to have total control this is this is a key line they just want to have total control they want to know what you think Zacks they want to know what you do
00:17:15
and they don't think you know but I know you do and so what's happening here is the uh author of the song The Lyricist is saying this is about big Tech this is
00:17:27
about the CIA this is about the FBI tracking us and then thinking that we're schlebs
00:17:33
that we don't know they're tracking us they don't know that track and worker man but the author speaks to The
00:17:39
Listener and says I know you do just let it sink in huh do you have any uh lyrics here that spoke to you Friedberg I know that you're you're living this blue-collar life yeah I just want to wax
00:17:51
philosophical for a second I do I do think that you know for all humans to find happiness in life they have to feel like they're progressing and if folks are not progressing because
00:18:02
of challenges they face in the world there's always an orientation that the system isn't delivering to me the things
00:18:07
that it was supposed to deliver or the system is rigged and corrupt against me that's been the case for all of human
00:18:13
history it's certainly the case today and with you know you read Thomas picketty's book Capital he speaks so
00:18:18
much about wealth disparity um in an era of globalization uh in an era of technification in an era when the
00:18:26
world is seeing some people have extraordinary gains but most people not on a relative basis and that voice
00:18:33
speaks to A system that is preventing those folks from finding that path in life that they believe they're due and
00:18:40
that they think is obviously something that everyone should be born to be able to pursue I think it's beautifully said
00:18:45
it's beautifully said it really speaks to the core and the Heart of what people turn this populism I hate that term but
00:18:52
it's a lack of progressivism it's the fact that folks don't feel like they can progress not just in the U.S around the
00:18:58
world today but really the US voice is so strong and so loud on this point it's why Trump was elected that the system
00:19:04
whether it's the companies the people the institutions the large large federal government agencies are preventing folks clogging up giving people not delivering
00:19:18
to the people the things that they said that they would and not enabling them to progress on their own and I think that's
00:19:23
really this this song encapsulates the emotion of that feeling so well I think it also I think that's what's going on
00:19:29
yeah it's beautifully sad and I think to build on that and then bring shamoth in here there's something unique about the
00:19:34
American Spirit that we're never happy that we're always striving and I think this also encapsulate this that and if
00:19:41
you look at the European Spirit specifically Italy where you are right now there are people who very much enjoy
00:19:46
life and accept life and have uh maybe a little more peace and happiness and aren't trying to you know upgrade
00:19:52
upgrade upgrade to get the latest version of whatever it is car Boat House you know iPod uh whatever and
00:19:59
it's super interesting this lyric because it shows this frustration and if you think about the frustration freeware to your point we have the lowest unemployment in the history of this country in our lifetime
00:20:11
I should say uh and uh Wars aside and and when we have 10 20 unemployment in certain groups people complain about that when people complain about their retirements We complain here about our
00:20:23
portfolios and our Equity positions and them being down everybody in America complains it's why we are so uh
00:20:29
successful is because we never accept it and we never actually take a moment to smell the roses uh any thoughts on that
00:20:35
and then I'll just read some more lyrics and then go to sex and I don't know how to reconcile
00:20:41
all of this with the other part of America which is you pull yourself up by your bootstraps and
00:20:47
the system still roughly Works how do you make those two things work together it just seems like one cohort of people says the system is
00:21:00
rigged another cohort of people say if you work really hard America will give you a better chance than anybody else
00:21:06
and it still does and it still does a better job than it ever did and there are umpteen examples that
00:21:11
they'll point to so who's right is it that they're both right I think it is that I was about to
00:21:16
say I think it's it's both right sacks you could have a group of people uh who are unhappy with their current condition
00:21:22
and there are people from around the world who look at America and say I want to be part of that system if only I
00:21:27
could be in that country in fact all three of your parents Freeburg Sachs and shmob said that I need to get there I need to get to America sex with us on shabbat's point about this disparity
00:21:39
this Paradox so the way I interpret this word populism is failure of the elites when you hear people expressing populist thoughts what they're really saying is that the people running this country the
00:21:50
ruling class the elite has failed and we've just seen with two years of covid that the ruling class got everything wrong pushed these insanely destructive
00:22:02
lockdowns lied about every aspect of the virus and pushed a vaccine that didn't work so I don't want to rehash covet but
00:22:09
the point is just the elite the ruling class completely failed and yet their failure was covered up by the media it's
00:22:15
the best example let's just say let's just call it what it is it is the best example right so I think people are
00:22:20
justifiably angry about this failure of the elite combined with the lack of accountability because there's not honesty about what they're getting wrong and you see this pattern repeated over
00:22:31
and over again so I think it's repeated in terms of how we got into this completely unnecessary Ukraine war it's
00:22:38
repeated in terms of the crisis we've had at the border it's repeated in terms of the export of all of these
00:22:44
industrial jobs to other countries and that has lots of cities collapse of cities the collapse of cities with you
00:22:51
know again we have hundreds of thousands of people living on the streets I think all of these things have made a
00:22:57
huge difference in the lives of many Ordinary People in the country and so yeah this is a land of opportunity for
00:23:03
people who have certain kinds of skills listen if you are technologically inclined it's still a great country
00:23:09
we're in this industry we know there's lots of opportunity it's always a great time to start a company but many people
00:23:15
in the country have been adversely impacted by these policies and there appears to be no willingness of the ruling class to admit the problem and make changes the line Jason you quoted
00:23:26
where it was kind of like they know we know and they keep doing it anyway it reminds me of a line from soldier
00:23:31
knitson who said that we know they are lying they know they are lying they know we know they are lying we know they know we know they are lying but they are still lying that's the vibe I'm getting
00:23:44
is this this uh Soldier knitson line Nick if you just pull up the link I just sent this is a a really important I
00:23:50
think data set for us to all look at and for everyone to understand you know what's gone on in the United States
00:23:57
this shows in 2020 per capita income in the U.S by quintiles so the top five percent of earners in the U.S you know since
00:24:09
called the mid 90s have seen a near doubling of their earnings the top quintile which is the top 20
00:24:16
percent of earners in the United States have seen their earnings Climb by 60 since that time period but the rest of
00:24:24
America the other 80 percent have been flat and I think what if you were born into the United States or told the story of the American dream the story of the American dream is you can come here work
00:24:36
hard be smart make put in the effort put in the time and you'll be able to progress in your life in terms of
00:24:42
Comforts and assets and all these things and for most of Americans that story has not played out they've worked hard
00:24:49
they've put in the effort they've tried to be smart they followed the rules they've done what the systems and the governments have said you should do in
00:24:56
order to get the rewards and they're left with flat earnings over several decades um and that's the story of America right
00:25:02
now and because of this the top 20 percent the top five percent have acquired you know an outsized amount of
00:25:08
the assets an outsized amount of the income as as we all know and have all benefited from and the vast majority of
00:25:15
Americans so that have been working I have a question for free Freeburg do you think that we should Implement policies to change the lines on this
00:25:26
graph that's exactly what I was going to ask yeah I want to reference you guys to the
00:25:31
Tim Ferriss interview with Charles Koch from a couple years ago in that interview he gives a really good
00:25:37
example and I'm going to mess this up a bit but he talks about how certain women that are hairdressers in the inner city
00:25:43
they want to go do this hair braiding thing but in order to do it they have to pay thousands of dollars to school to
00:25:51
get certified and then they have to go to the city to get a license in order to be able to do that job so the economic
00:25:57
cost of getting there is insurmountable for them and there's countless examples like this where in the U.S we've created
00:26:03
policies that have attempted to be forms of protection or perhaps be forms of income generation for cities and governments and so on that in the process unfortunately have limited the
00:26:16
mobility of people that want to be individual earners and entrepreneurs in the U.S I think that is the first thing
00:26:21
I would do to address this problem give every American the opportunity to be an entrepreneur to build their own path do
00:26:28
you think that hair braiding licensing fixing that problem will cause the dashed black line or the blue line to shrink or I guess what I'm trying to ask you is
00:26:40
should those lines shrink yeah I don't think it's the government's role right I mean
00:26:47
I just want to know I want to hear I want to hear friedberg's answer Jason I'll answer the question okay
00:26:54
um I've said this in the past if you shrink those lines you will limit overall progress
00:27:02
and what I mean by progress is improvements in productivity improvements and advances in technology
00:27:08
in business in economic growth because we've seen this many times in the past there's a certain limit on taxation so one Methodist attacks right pull more money out of the top earners and
00:27:20
redistribute it the problem is when you do that there's less capital in the hands of those who have proven themselves to be good at driving
00:27:26
productivity and improving access for goods and commodities and things that are cheaper for everyone so there is a cost to doing that and
00:27:33
that has been this is this has played out I mean this is the Roman Empire this is the British Empire this is played out
00:27:38
countless times in history in recent years it's played out probably half a dozen motivating you're evading the
00:27:44
question I just wanted to know what you think what do you think I think that there's an important balance to strike so I don't think it's about taking away from the top as much
00:27:55
as it's about enabling the bottom if that makes sense it doesn't because that's what everybody says they want to do and this is It's
00:28:01
been 50 years of people saying that it doesn't work what yeah so he's not going to answer so you answer your mouth what do you think I'm
00:28:07
just telling you there's a consequence to doing you know whatever we want to do to try and make everyone equal and end up here's my here's my issue the way
00:28:14
that you present it like you tell it in a language and even I felt it where I was like wow this guy's really
00:28:19
empathizing wow my God he's really but then the follow-up to like well what would you do is non-existent and I think
00:28:26
that that's the real problem a lot of people want to pretend that this is an issue and they want to get the sympathy
00:28:31
of the masses by giving the populist rhetoric of why this is an issue but when push comes to shove and the
00:28:37
question is do you believe that the dashed black line or the blue line should be legislatively brought down to
00:28:44
meet the other lines people just evade the question in my perspective the answer is no you cannot
00:28:51
do that and the reason why United States GDP is where it is is because of that dashed line it's an existence proof of
00:28:58
the fact that this is the largest economy in the world and so one has to make a really simplistic decision which is do you want
00:29:05
economic Supremacy and then try to figure out ways of rebalancing things or do you not I say you absolutely must start with that which means that that dashed line and that blue line will
00:29:18
always have a rate of acceleration that is greater than the other lines and that's just natural Opex leverage that exists in any company if you look at a company with 50 ebitda margins versus a
00:29:30
company with 15 ebitda margins because one uses technology and the other one doesn't
00:29:35
it's capitalism is right with these examples yeah Jamal that is the smartest thing
00:29:42
you've said in 142 episodes of the only product but I agree uh 100 with your I think
00:29:49
it's well said but then you should just say it I think we do a huge disservice by pretending to care and then not
00:29:56
seeing the Ugly Truth The Ugly Truth is none of us want the government to try to bring that dashed black line or that blue line down we want them to
00:30:07
stay out of our way that is the truth yep so if you talk to that guy that wrote that song and his 80 million followers he I don't think what do you say to them
00:30:20
what do you say to them I don't know it's my honest answer I want to get sex good okay look I think when you see a
00:30:26
chart like that the natural instinct is that you want to argue for redistribution you basically want to
00:30:33
take from one of the top lines and just give it to one of the bottom lines and I
00:30:38
think that only works to a degree I think it's important that we have a social safety net but what we've seen is that Marxist redistribution doesn't
00:30:45
ultimately work it actually makes a society poor I think this is where Jamal is right the simplistic Solutions don't work we're not going to move from
00:30:52
fundamentally a capitalist system to a sort of marxist redistributive system but that doesn't mean that we can't do things to improve the situation for the
00:31:03
average American and I think there the policies are more complicated but I think we could have much more prudent
00:31:09
handling of our fiscal situation so that inflation for example doesn't eat away the wages of American workers I think we could have a much more sensible immigration policy so that there's not I
00:31:21
think a lot of competition for let's call it low-end jobs I think we could have had a better trade
00:31:28
policy with China over the last 20 years I think there are things that we could do that were more nuanced that would
00:31:34
have improved the situation for working-class Americans and we didn't do it and you compound that with again all
00:31:42
these Elite failures around things like covet around things like Foreign Wars and let's add to this the Robert F Kennedy Junior critique of regulatory capture that the military industrial
00:31:54
complex is bleeding this country dry and I think you add all those things together and I can see why there are complaints there have been three major responses over the past 50 years to this
00:32:06
problem the one and and all of them involve creating budget dollars to fund access to every one of three major things which is Healthcare education and
00:32:17
housing and it sounds good in principle it is a good thing to say everyone deserves to have access to buying a home everyone deserves to have access to an education everyone deserves to have access to health care the problem is
00:32:30
when the federal government has stepped in to build the programs to provide these Solutions they've created
00:32:35
extraordinary incentive problems that have caused asset Bubbles and have ultimately caused failure in the
00:32:42
underlying system that you're trying to give everyone access to we have told every American that they should put all of their net worth and more into their
00:32:49
house and as a result we've had to continue to drive up the price of housing in the US drive up create a
00:32:54
housing bubble by pouring a ton of capital into keep that asset safe and protect it because it is where most
00:33:00
Americans have put their nest egg we've given everyone access to an education by giving free student loans out and those
00:33:07
student loans have caused an asset bubble in the price of education and we have tried to provide Health Care to
00:33:12
everyone through the federal government that has no accountability and as a result the cost of Health Care has ballooned so I think the the one
00:33:19
question for you guys is in the sense that most people are saying these are three critical things that I need access to but when the federal government gets
00:33:26
involved and provides them the cost source and we have all of these bubble problems and disincentives that arise in the system and money gets stolen and
00:33:32
yada yada what's the right solution then right how do you provide sex that that you know that 80 of Americans access to
00:33:39
these things that you know boost their condition in life without causing what is effectively inflation across I don't
00:33:46
I don't think those are these areas yeah I would like to start by just saying when we look at this chart I think it
00:33:51
maybe looks worse than it actually is in reality I think when you look at the chart you say oh my God this is terrible
00:33:58
but there are people around the world who are fighting to get in this country who want to be part of this chart now why do they want to be part of this
00:34:04
chart is because they perceive that you know even the the middle quartile even the fourth quartile here the bottom
00:34:10
quartile they feel like that's better than their lot in life in their country so this if you were to expand it and put
00:34:17
a couple of other countries on it you would say hey even the the people who are in the fourth quartile in America
00:34:22
are doing better than people in the middle quartile in another country and the opportunity is still here and that's
00:34:28
my second point which is you know how easy is it or how possible is it for you know the Next Generation you know if you came here as immigrants
00:34:39
uh like like many of you did and obviously you know my um grandparents did how easy is it to get from that green line to the orange one the orange to the red the red to the purple Etc that's the generation I think we need to focus on
00:34:52
forget about all the programs forget about tax moving up how do you move up that's a wonderful point because I think
00:34:58
the generalization that this chart is like chart porn because it's meant to be titillating but it tells a very poor
00:35:05
story of that exact dynamic which is if you started in the green line which I did you know my parents my parents made
00:35:12
thirty two thousand that's the most they ever made in their best year but most of the time with welfare we were on living
00:35:19
on between 15 and 21 000 a year yet somehow you know we went from the green line to the dashed black line
00:35:26
so the thing that this chart isn't really representing is is there enough people that go from
00:35:33
green to Orange Orange to red red TO purple purple to blue blue to dashed black that's what really matters that's
00:35:40
what that's why I think this chart is mostly pointless because if in fact what you saw was that in any given cohort of people they were not the cohort before that was
00:35:52
in the dash black line you would say wow we're actually creating wealth distribution in a very unique way which
00:35:58
is an entire new court order people are becoming wealthy in every generation if however it's the same 50 people that are in the dash black line obviously that's not good
00:36:09
but our lived experience is not that so I think like the real question is like can we just be can we find a different way of actually telling the truth using this information so that instead
00:36:21
of so that instead of bear hugging random populous sentiments and statements to try to win favor with people we actually just acknowledge the problem where it lies that individual that wrote that
00:36:35
song which line is he on which line was his father on and which line will his children be on that's the critical
00:36:42
question it's not that the lines shouldn't exist yeah and nowhere else on Earth would the
00:36:48
three of us I mean you know Coach Line did you start on I started in the green I know I'm asking foreign
00:37:05
yeah we had no money I don't know what to tell you I mean we you know my parents we moved to LA when I was six
00:37:10
years old from South Africa and they work gigs their entire lives yeah I think my family went from fourth to the
00:37:17
middle and then my brothers and I all went up to at least one or two lines Higher by the way another thing sorry I
00:37:24
think that's I think that's the important story if you guys read some of the comments on YouTube which we always argue we should or shouldn't have but
00:37:29
you know but honestly I just want to point this out there's to chamat's point there's immediate approximation of
00:37:36
people based on which quartile or quintile they're in rather than an approximation on their transversal of
00:37:43
the quartiles or quintiles or whatever well I think what what what's what's really true about all four of us is that
00:37:49
we all transverse the quintiles we all moved from there to there and none of us were wealthy just a few years ago we all
00:37:56
you know made our way in the world and in the United States in a way that we would not have been able to anywhere
00:38:01
else on Earth and I do think that that is the most powerful aspect of you know American liberalism
00:38:08
and democracy stuff I think this characterization of people based on their their wealth is what's so
00:38:14
disturbing to me because you hear it's like identity you hear it from AOC yeah but but it discredits the fact that
00:38:20
those people typically were not wealthy a few years ago that the people that should be celebrated are the ones that
00:38:26
went from not wealthy to wealthy through the means of creating things that ended up being useful and productive or
00:38:31
whatever the system uh asked for and they created value there and I think that the the lack of recognition of
00:38:38
Entrepreneurship the ability for immigrants to come to this country and transverse these quintiles yeah but that
00:38:43
was one of the challenges yeah that would require them to be a little bit curious about the individual and to not
00:38:48
use the individual as just an object to win their argument and you know I think that's that is the sin of politics is
00:38:56
that they're just using just different objects out there let me ask you the question then what do you say to the blue collar worker enrichment that this
00:39:03
guy is speaking to in terms of the their ability to transverse those quintiles to
00:39:08
to go from low income earner they they're a blue collar worker they work a union job or they work as a plumber or
00:39:13
they work in you know some manufacturing facilities you're not supposed to grin him so
00:39:20
by pretending like all of the this is what they hate they hate all of you people grin them stop
00:39:27
grin them stop purchasing that you care that you really care and oh what was them but the reality is it is
00:39:36
implicitly impossible for anybody on this podcast to talk about how this system has not
00:39:42
worked for them okay and so what we need to do is actually take a step back and just acknowledge
00:39:48
the fact that we were in the green line we somehow buy a bunch of fate and luck and hard work and opportunity that this
00:39:54
country provided and so the real question is what did that guy can he do differently has he done or shouldn't
00:40:01
have done that has kept them in there and one of the things that I would like to bring up that are that is really
00:40:06
worth exploring for multi-generational Americans which is not talked about enough is when we introduced or when we
00:40:13
I'm talking collectively we Lyndon Johnson really the war on poverty that had an
00:40:19
inexorable change in the Dynamics of America in Black wealth in white wealth in the trapped amount of wealth the destruction of nuclear families all of these Trends started a few years post
00:40:31
the introduction of the war on poverty and nobody talks about that so I disagree with you Friedberg when you point to health care and all those are
00:40:38
secondary and tertiary derivatives of the actual war on poverty and that was Lyndon Johnson's signature legislation post the assassination of JFK and nobody really looks at what that actually did
00:40:49
to change and potentially misalign incentives in the United States that have compounded to create this issue so
00:40:56
I I would say to the Richmond person I have enough respect for you sir to not great and you and tell you how well
00:41:02
was this graph I don't know what the solution is and I think we just need to talk and figure
00:41:08
out to see if there are some ideas that that can improve the situation but some of
00:41:13
them some of them do come to the fundamental incentives that the government has created that we need to
00:41:19
either undo or change sex yeah I mean I think there's a lot of good points in there just to Echo some
00:41:26
of the things you guys said I think my family came to America in 1977 I think my dad was making 27 000 a year so okay
00:41:34
it was the it was green or orange or something like that one of the bottom one or two quintiles and then we moved
00:41:41
up because he's a doctor and had that education so you know how you do in this country is going to depend a lot on what kind of education you have what kind of skills you have like you guys are saying
00:41:51
now that being said I still think there is a policy role here I do think that a lot of the policies we've had in this country over the last couple decades have not been great for Working Class People and I think there are things we
00:42:03
can adjust but to Jamal's Point declaring a simple war on poverty that's based around redistribution doesn't work
00:42:09
because what we've seen is that it also creates a lot of dependency and so a lot of these policies backfire
00:42:14
so simplistic redistribution is not going to solve the problem however I do think that
00:42:20
having a policy response that does try to create more opportunity in these working-class communities again we
00:42:26
didn't need to hollow out our Industrial communities by exporting jobs to China we didn't need to create all this low-end wage pressure by basically having an open border for
00:42:39
so many years so there were choices that we made that did make life rougher for these people and then when they start to
00:42:46
complain about it we censor them or call them deplorables and so I do think that
00:42:51
the response that the elite has and that really the mainstream media has towards these people does fuel the alienation
00:42:59
and polarization so we could be reacting we could be reacting a lot better to the complaint here I'll tell you what's
00:43:05
happened I think is America went from you know a country where people pulled themselves up by
00:43:12
their boot traps they believed in radical self-reliance and that they determined you know their fate and then
00:43:18
over time we've solely looked at the government as the determinant of Our Fate and you know what handout what tax
00:43:26
break for the rich you know what what can I get what Edge can I get on the system what angle shot how can I you
00:43:33
know look at the government as a solution to our problems and what I think all sides of the political
00:43:38
Spectrum need to look at and celebrate and this is why I think Chris Christie and vivec are like really good
00:43:44
candidates is because they're not looking at handouts or blaming the government or looking to the government
00:43:49
to solve problems but looking at your community looking inside yourself and saying hey what are the ways in which if
00:43:55
I want to if I want to move up those traffic and remember some people work to live they
00:44:01
don't live to work they just want to do their nine to five put their time in and spend time with their families or do their art whatever their job does not
00:44:07
define them and and we are a biased group of entrepreneurs who are Define ourselves in large part by what we do in
00:44:14
in our work doesn't mean we don't care about our families but we we put that front and center some people don't want to move up the lines they're happy and
00:44:20
content where they are but the entire dialogue in America is about how unfair you know we split that
00:44:28
tax base as you talk about Freeburg the spending and everybody wanting their peace and everybody wondering who got a bigger piece of the pie as opposed to
00:44:35
wondering hey how can I improve myself how can I provide more value to the world how can I build a business how can
00:44:40
I build a skill set and that's where the dialogue needs to move and I just when I hear vivec speak you know I disagree
00:44:46
with them about a lot of things I hear Chris Christie speak I obviously disagree with them about a couple of issues but I'm liking those candidates and I'm
00:44:54
liking the direction they're going Vivek has a great line which is victimization is a choice and you you see different
00:44:59
versions of it on both the right and the left on the left the victimization is based on identity politics where if
00:45:06
you're born into a certain group then you're automatically a victim regardless of really your circumstances
00:45:11
on the right it's more again it's it's more of this populist critique where if you're a working class person then
00:45:17
you've been victimized by those policies I think there's some degree of Truth in both critiques I mean I do think that
00:45:23
policy makers have to meet people halfway we need to have policies that work better for working class we need to
00:45:30
have policies that prevent discrimination at the same time people can't just buy into this victimhood
00:45:37
mentality where they're like okay I don't need to do anything on my own to improve my circumstances the whole
00:45:42
system is so rigged against me that I don't need to take any Agency for my own actions also and I think it needs to be
00:45:48
both we have to have policy makers and people meet halfway on this thing I also think that there's
00:45:53
a social Dynamic that's also worth exploring here which is that we live in a culture
00:45:58
where a lot of people spend a lot of time projecting a version of themselves and that version of themselves is mostly
00:46:10
meant to accrue Social Capital to them but by implication it's to make other people feel envious of them as well and that's the whole they'll call it the Instagram phenomenon
00:46:23
and I also think I just think it's important to acknowledge that we live in a point where there's this heightened
00:46:29
psychological Sensation that everybody else is doing better than you are and so you have to find these mechanisms of rationalizing and explaining and and I think that that's also very
00:46:41
dangerous so Jason to your point there is so much respect you know a lot of the reason why I spent so much time in Italy
00:46:47
is my friends here are just very very simple you guys met so many of them just normal everyday
00:46:53
people and and they're happy and I have so much respect for that because they have a balance in their life and one of the things that defines him is they don't spend time
00:47:06
in these media formats that actually exacerbate the sense of being less than everybody else competition and I find that consistent thread amongst all of
00:47:17
these people that are really well balanced that at every strata of whatever line you're on the healthiest
00:47:24
people in each of those lines are the ones that actually how the definition of themselves that
00:47:29
comes from within that is multi-faceted that generally includes a deep relationship with one romantic partner and it includes their kids yeah there's everything else is very
00:47:41
much and it's not defined by where you want to go and where you want to be it's defined by
00:47:47
the day you're living I had a great conversation after a lot of wine and tequila and beer and I don't know what
00:47:55
else wedding actually I forgot the guy's name so with Drake I said to the guys Italian
00:48:01
Guys tomato I'm sorry forgot his name really nice guy and we were talking about the difference between Americans and Italians and how
00:48:09
the Italians are all about let's just live for today enjoy our moment enjoy our experience enjoy our time the
00:48:16
Americans all just want to talk about where things are going where we're headed what we're looking for what we're trying to achieve and so much about it's
00:48:23
the irony is I've got my brother visiting from Europe this week and so much of the conversation
00:48:29
difference that we've talked about is in America we talk about winning it's like everything is a everything is a contest
00:48:35
everything is about getting ahead everything is about a challenge everything is about what's next how do I
00:48:40
get to the next level scorecard scorecard and that's what's made us the greatest entrepreneurial you know
00:48:45
Society the greatest 250 years of progress in human history yeah I disagree with that I disagree with that
00:48:51
but it also makes you profoundly sad if you only live for the score card and not I don't think entrepreneurs have the
00:48:57
best I don't think they're looking at somebody else saying I'm gonna beat that guy I don't think that that's where it comes from forget about the terms forget
00:49:04
about competition just make it about progress where am I going and that we Orient ourselves around where we headed
00:49:10
versus where are we today you know just enjoying this moment today the moment and I think that there's a big cultural
00:49:15
difference between the US and the guy I was sitting next to at your wedding chapat these folks are just very much
00:49:21
about enjoying this experience and not thinking about what's next and where we're going we come in everyone saunters
00:49:27
around no one's thinking about what time we have to start everyone's just enjoying their time with each other and
00:49:33
the Americans are all like what are we starting the wedding what are we doing this when are we doing that you know the litmus test for that I find is when you
00:49:39
first meet somebody and I encourage all of you guys to try to do this is to not go to what do you do as the question right American question how
00:49:51
long can you go without asking that question what do you do yeah and I find it's so amazing to actually have conversations with people where that question never comes up
00:50:06
you will really really really learn a lot about people I think a lot of this also is like you know I was watching the
00:50:13
center of Tim Scott I'd love to have him on the program I know he's maybe not got the highest percentage right now and we
00:50:19
got a bunch of other uh candidates coming on the program by the way for the audience but I was just taken back by I saw uh
00:50:26
Joy Bahar or whatever the host of the view is Joy Behar and she was just admonishing
00:50:33
him that he doesn't understand systematic racism he's a black man and he's like I am the
00:50:41
product of the American system I'm proud of where I got to and she was you know she's constantly trying to make him feel
00:50:48
worse that the the the you know the conditions are terrible it's funny because like I was a very basically
00:50:54
disjoint somebody basically saying that Tim Scott is not allowed to be proud of his journey basically that's what she
00:51:01
did whose right is that it just take the win like just let him you know yeah it's
00:51:08
really weird and uh I just want to take one other moment from the song because this song got pegged as like
00:51:14
maybe it's propaganda I don't know if it is maybe this guy people started doing their like how do we take this guy down
00:51:20
like the left and the right lunatics uh you know On The Fringe always try to do something happens that's nice or you
00:51:27
know whatever we got to take the person down and maybe the guy is on the ticket who knows he's just an artist to me
00:51:32
but he liked or had a playlist of 9 11 conspiracy theories but he says here in the song Lord we got folks in the street
00:51:38
he ain't got nothing to eat and the obese milk and Welfare well God if you're five foot three and
00:51:45
you're 300 pounds taxes ought not to pay for your bags of fun fudge rounds talk about the welfare state young men are putting themselves six feet in the ground because all this damn country
00:51:57
does is keep kicking them down referencing I think you know Jordan Peterson and the suicide
00:52:03
rate amongst young men and their hopelessness and you know Etc and it's very hard I think I would encourage people to be careful trying to pin this as a left or a right song this is about
00:52:15
you know Working Class People feeling frustrated with the system is was my read on it
00:52:21
and uh maybe even fighting back and taking a little bit bit of their power but a great song congratulations to him
00:52:28
and I hope he writes some more tunes reminded me of pick a song like The River by Bruce Springsteen or Telegraph Road by Dire Straits just so many great um songs about the Working
00:52:39
Man great congratulations on hitting number one and uh everybody else can tear it down and in the comments you can
00:52:44
tell us we're out of touch even though we moved up the lines I think that's way why some people like this show and and
00:52:50
you know have is because maybe we did move up a couple lines and maybe we might have a perspective at some point
00:52:56
in you know how to do that let's move on I guess I think everybody got their shot at this all right The Big Short too
00:53:03
Michael Murray he just made a bet against the markets this was trending I'm not sure how much of this is all true but there's been some reporting on it Barry's fund
00:53:14
has recently bought 866 million and put options against the s p and 739 million puts against the NASDAQ these are headline numbers on the SEC there's probably more to it contacts
00:53:27
obviously we all know the Market's ripped NASDAQ up 37 this year s p up 15 this year inflation getting cracked GDP
00:53:35
looking strong unemployment on the floor number of job openings still above nine point x
00:53:42
million pretty crazy to think about how resilient this economy is with pockets of disastrous stuff but what's your take
00:53:49
on this Friedberg yeah I think the reporting's a little wrong on this so okay this came out of a 13f filing and
00:53:55
on the 13f filing you when you report option contracts remember each option contract represents
00:54:01
a hundred underlying shares and you don't have to talk about the strike or the expiry on the option contract when you do the 13f filing so we don't actually know what the strike or the
00:54:13
expert is on the option that dollar amount that's being reported is when they take the number of option contracts
00:54:19
multiply it by a hundred which is how many shares per contract and then just use the price on the actual underlying
00:54:25
the index he may have paid a dollar an option he may have bought an option that was three years ago
00:54:32
it could be much smaller it could be a short-term contract that's just a near-term hedge on the portfolio and we have no idea how much the actual dollar
00:54:39
value of the contract is it could be really way out it could be just be a short-term hedge
00:54:44
so we really don't know directionally or or magnitudinally how significant this this is so it's a bit of a misreporting without knowing the strike and the expiry we don't know how much he actually spent
00:54:56
buying these puts and what the BET really means is that a near term better or long term is of his portfolio I mean
00:55:03
have to disclose in the 13f what your short positions are and so all you have to do is disclose
00:55:10
what your ownership is so my suspicion is that Michael probably has what's called the short straddle on and so a
00:55:16
short straddle is when you're basically selling a call and you're buying a put and so you know we've talked about these
00:55:22
a lot which is instead of taking a naked exposure for 1.6 billion dollars which seems very
00:55:29
aggressive and risk on and he's not the type of guy if you look at his trading activity that does that kind of stuff
00:55:34
his typical positions are 50 basis points 80 basis points 100 basis points so he's not a big risk taker so what he
00:55:40
probably has on is what's called a short straddle and what you don't have to disclose in these 13 apps is the other
00:55:46
side of the trade where you're short a call and so I suspect that's what that is so
00:55:52
this is a big much to do about nothing it's good headlines in a yeah in a moment where there's not much to talk
00:55:58
about it's August and the media you know this is the media business losing its business
00:56:03
model and Google and Facebook taking all their revenue and Craigslist and Facebook you know Marketplace taking all
00:56:09
there and Michael by the way Michael can go on Twitter and tell us that we're wrong but um dollars to Donuts he's got
00:56:14
a short straw didn't he go off the Twitter he's like done with Twitter he goes on and off and he Auto deletes his tweets so I said a zapier up anytime he
00:56:21
tweets he puts it in a slack room for me have you guys noticed the quantity without drinking this is myself
00:56:28
oh whoa whoa you got ice cubes in there no but let me just say this look I'm I'm back in the United States next week so
00:56:34
this is the end of the vacation it's end of a one month where I don't exercise except for swimming and walking I eat gelato every day and I drink wine every day so this is the end and then
00:56:46
I'm back what's the weight difference day one to day 30. what's day one to day 30. look at that perfectly chilled
00:56:51
Mantra Shea oh look at that the glass is completely see the condensation I see the condensation from here I've gained two and a half kilos so what does that
00:57:04
I have a moderate four pack that's two weeks of Manjaro now no big deal yeah I know you'll be good you'll be back in
00:57:09
the game with a little bit we'll get you back in the game kid I'm gonna see Jake Helen about uh in about an hour Freeburg
00:57:14
and I are going on a love walk but you know we have a lot of romantic moments so we're just gonna do a little can I shift the very short yeah before just my
00:57:23
last point on the bird thing the media needs to do a better job of making sure they understand these things just a bit
00:57:28
because the headline is just a little bit weird totally without knowing all the contacts like it's very hard to be a
00:57:33
finance Rider you know because if you're a great finance writer you could be in finance and be a capital allocator oh
00:57:49
let me fix where's the gelato you know you know these two kids this past week were literally like jumping against the camera they were jumping in
00:58:03
the sea these two kids were swimming without any help whatsoever it was the most incredible thing to see when little
00:58:10
kids learn how to swim isn't it it's joyous it's joyous it's joyous okay back to you guys sorry I love you let's talk about wealth disparity from
00:58:23
Italian Coast all right with your 500 Montclair hat let's talk about well let's party go no it's my Point's not about wealth disparity okay that's right sorry I think we should follow up on where the economy is right
00:58:35
now and and what the macro situation is and why Michael Berry might want to short the market yes so in terms of
00:58:42
where things stand today I think the consensus view of the street is that inflation is largely in the rearview mirror it was down to three percent last month and the bet now I think is that it
00:58:56
will continue to remain low it will be in this two and a half to three percent range at the end of the year and
00:59:02
therefore the FED will be able to cut rates next year and the market has rallied quite a bit in anticipation of
00:59:08
that I think that is the consensus view I think there are at least two really big risk factors to that one is that
00:59:14
inflation could still rebound we haven't really gotten that many months of good inflation data and if inflation ticks
00:59:21
back up if there's another wave of it in the next several months and there will not be Ray Cuts next year and that means
00:59:27
if its rates are higher than anticipated valuations come down so that would be a
00:59:32
big risk factor to the market the other big risk factor is I think in the real economy it's true that the economy does
00:59:38
not seem to be hurt so far by these huge interest rate hikes that we've had however there is typically a big lag in
00:59:47
the impact on the real economy of rate hikes and I think you could still see these rate hikes take effect over the next several months and you could see a real dip in the economy potentially a
00:59:59
recession and that would be a big risk factor to the markets because right now the markets are pricing in a soft
01:00:05
Landing or no Landing we're just going to do a flyby right right so what is the evidence that there might be a lag well a couple of things and it really has to do with real estate which I think is the
01:00:15
most impacted asset class by rate hikes you saw that the mortgage rate is the highest it's been in over 20 years yeah 7.09 and the rates I'm seeing in Florida
01:00:28
and other places mortgages are like eight percent well if it's going to cost you eight percent to buy a new house and
01:00:36
it used to be three percent a couple years ago you're not gonna be able to afford to buy that same level of house
01:00:41
and you can't afford to sell your current house and buy a new one because your current house is financed to three
01:00:46
percent you're not going to give up which mortgage to trade into an eight percent mortgage so we're already seeing
01:00:51
a huge reduction action in the number of transactions in residential real estate
01:00:57
and so that means that we're not seeing a lot of fresh marks in terms of where prices are but that doesn't mean the valuations haven't gone lower I think that as this washes through the system
01:01:09
you could see a big correction in the values of residential real estate which is most people's main asset so I think
01:01:15
there's a big risk factor there the other big risk factor is on the commercial real estate side there was a
01:01:20
interesting article in the Wall Street Journal about distress funds are forming in anticipation
01:01:26
of a lot of commercial real estate projects basically going under so the vultures on Wall Street are going to be looking to scoop up these projects I think the really interesting thing about
01:01:37
commercial real estate right now is multi-family until now the conversation has all been about office space and we know that office space is impaired because of the high vacancy rates that
01:01:48
this the sector just hasn't come back the same way from home since covid right exactly but now we're starting to see
01:01:55
real distress in the multi-family sector now why has this happened because multi-family is full There's No Vacancy problem yeah it's hard to get a home and more people would be renting if
01:02:06
mortgages on the demand side the problem is in the capital stack so let me describe the the
01:02:12
problem of what's happened here is let's say that you are a real estate developer
01:02:17
who bought multi-family you bought it at a certain price level let's say you finance it two-thirds with debt
01:02:24
you now need to go out and refinance that project because let's say you did a value ad let's say you you basically did
01:02:30
some improvements to it that means you didn't put long-term debt on it you can't put long-term debt on a project
01:02:35
that's not stabilized yet if you want to do value-add work to it you get what's called a construction loan for two or three years so there's a lot of real
01:02:42
estate developers who need to go out right now and finance these projects that they bought and they bought these
01:02:47
projects at the top of the market so let's say you're going out now to refinance first of all the rates are
01:02:54
much higher you're looking at paying eight or nine percent instead of the three to four percent that you had penciled in your model a couple years ago moreover there's another problem which is potentially even worse which is
01:03:06
loan to value you had basically gotten two-thirds loaned to value a couple years ago but
01:03:12
values were much higher now values are lower because again multiples have shrunk as interest rates have gone up and so the amount that you can Finance is much lower so you either have to top
01:03:24
that off by coming out of pocket with your own Equity or you have to go to one of these mezzanine funds so now this is
01:03:31
Insurance funds they are total sharks and they're going to charge you not eight or nine percent but like 15 so
01:03:37
your Capital stack has basically is completely upside down you thought that you could borrow all this money really cheaply but now it is super expensive and this project no longer pencils
01:03:47
meaning you're underwater from a you've got negative leverage on the project and so I think you're going to see again not
01:03:54
just impaired office space now impaired multi-family and there is not I think a sector of real estate developer who is
01:04:01
not in distress right now if they need financing in the next year or two that's what do you think what did you get a
01:04:07
better rate from Hesh right David David what do you what do you do if you're long these assets do you just default on
01:04:13
them and just give them back to the bank one major real estate guy told me that the the big guys like you know
01:04:19
Blackstone he the words he used was they are throwing their keys at the bank meaning they are so underwater they're
01:04:27
not even going to bother trying to figure out a workout they're just going to give the key they're just going to say to the bank you own this asset now
01:04:33
and they're going to move on to the next fund there's actually what's his take at least that was you said you sent a tweet to the group chat about uh the last line
01:04:40
of like hope which was called The Hope note which is like where one of these Mez financers just takes your property
01:04:46
and then if they happen to hit your high water mark again later on that you would
01:04:51
get that uh you would get some you know idiot insurance and get a little taste of the the sale you had a tweet about
01:04:58
the housing thing what's your take well no my only bought around housing was that very much just supporting what Saks
01:05:04
just said like we're in a incredibly untenable situation mostly because as rates go up mortgage applications go
01:05:11
down and so what you're seeing is just like the number of people trying to transact is very small and so the
01:05:17
inventory is very small and so Sac said well so I I don't really have much to add except that when you think about
01:05:24
where this lands squarely in terms of the wealth creation that it's supposed to represent for most Americans it's a very physical situation this is I
01:05:36
actually think the point like people talk about the political pressure from the White House to the Fed
01:05:42
and I think that this actually is probably a very powerful lens with which to look at it and the reason is because this touches all voters
01:05:53
in every state across all political lines and I think when people talk about is the economy doing well or is the
01:05:59
economy not doing well and as a result where are your political leanings I think something like this actually
01:06:06
represents a much larger percentage of how people represent whether they feel they're doing well than any other thing
01:06:12
even earnings quite honestly because I think that a home is just such a fundamentally visceral psychological
01:06:18
component of safety and so a percentage a large percentage or well and sixty percent of people own one and the people
01:06:25
who own one are the people who vote so it may only be sixty percent of people but it might be 80 of Voters I'm not
01:06:30
sure I think I think that that could probably be very well be true so my only point in that was just more that
01:06:37
this could actually if if the FED is susceptible to political pressure I think this is the kind of thing that pressures them to move forward the point at which they start cutting
01:06:48
and to start to let go the release valve just because there's just too much pressure in the system
01:06:53
yeah there's talk of them doing a safety rate hike doing another 25 bips the end of
01:07:00
the year just to be safe and you know I think one of the things we've learned here is I don't think the data really supports that no honestly but but
01:07:07
they've made poor decisions this whole time and this is not like the feds you know
01:07:13
impact with this tool is not like driving a car where you hit the accelerator you hit the brake and you get an immediate reaction this is more
01:07:19
like driving a train where like it takes a little while to get up to speed and if you slam on the brakes this thing can come off the rails yeah and that's the
01:07:27
scary part for me just to build on what Sac said the the most interesting thing about this for me is that typically we
01:07:34
think about the FED as being very silent in election years they really don't try to get that involved mostly because they
01:07:40
don't want to seem like they're tipping an election one way or the other the problem that we have is that rates
01:07:45
are at a near-term high the tenure is ratcheting up faster than we ever expected it's rallied in terms of rates meaningfully more than anybody thought since the beginning of the year
01:07:58
and so now we're in this odd position where will the FED cut and why will they cut and if they cut will they cut sooner than they would have if they hold on is it that they
01:08:09
just want the country to enter a recession in which case they want to see quote unquote regime change it's a very
01:08:16
interesting set of Financial and political politics that I don't think we've seen in recent years
01:08:21
yeah well there's a lot of um real estate developers who are literally Hanging On by their
01:08:26
fingernails and they're hoping and praying for a rate cut the problem they're going to have is
01:08:31
that even if inflation doesn't rebound Even If the Fed does cut rates next year the rate that the FED Cuts is the short rate is basically the FED funds rate that's at five and a half percent right
01:08:42
now even if they cut that to call it three to four percent next year there's no guarantee that the 10-year rate which
01:08:49
is what real estate developers get financed on will move down right the 10-year rate is what is it now at like
01:08:55
uh four point four and a half percent something like that and that rate may not come down a lot of economists are
01:09:00
warning about this Larry Summers warned about this because the federal government has such huge financing needs and so just because short rates come
01:09:08
down it's no guarantee that the long wait is going to come down and so there may not be this relief that real estate developers are looking for next year and
01:09:14
again there's this Wall of Death that has to be refinanced I'll give you an example from my own portfolio I have a building just to simplify the evaluation
01:09:22
of a couple of buildings but okay that's worth about 15 million dollars it's an office building okay there's a 9 million
01:09:28
dollar loan on it that is coming up to be refinance at the end of the year so I'm talking to the lender about rolling
01:09:33
it over and what they agreed to do here here are the terms they agreed to give me 2.4 million out of the nine secured by the building
01:09:43
that's it they wouldn't roll over the nine that'd only give me 2.4 for the other 6.6 they wanted me to post
01:09:50
additional collateral in the form of public Securities so they basically wanted me to fully collateralize the
01:09:56
loan so in other words they're adding like a margin account on top of exactly real estate that's exactly right over collateralize the building with a bunch of security so why do you need a
01:10:07
lot of Real Estate yeah yeah and they want me to personally guarantee it so but why don't you just
01:10:14
sell the shares no you're still participating preferred in your building what the right no when I took out a margin loan on his own security portfolio right so what I said
01:10:26
is listening I don't need this so I'm just going to pay it off so I'm going to pay off the building 100 and when this credit
01:10:32
crunch is over whether it's next year or two years now I'll just refi it then but here's the thing the average developer
01:10:39
can't do that like how do they go out and just get that extra 9 million let's just point out the opportunity cost to you you could buy treasuries that pay
01:10:45
you five and a half percent so your actual cost on that Capital that you're using to finance the building yourself
01:10:51
to buy you know to buy the debt uh it's costing you five and a half percent a year of quarter million free risk
01:10:57
risk-free income for the uh for the nine million that's not a pleasant situation it's something that I can manage through
01:11:02
but my point is that this is something that's gonna be afflicting pretty much every real estate developer needs to
01:11:08
refinance in the next year or so and they don't have and they don't have what you have which is yeah exactly they
01:11:14
don't have the chip stack and by the way my real estate guys tell me that this deal that I got offered is a good deal right now oh
01:11:21
it's a good deal because that's a good deal at least they were trying to be flexible and work with me most these
01:11:26
lenders they're just like not even open for business I heard there's just no bid I mean this guy these guys I know that work in commercial real estate debt said
01:11:32
though they're putting out the syndicated loan um proposals to the typical funders and there's no bid
01:11:38
they're like well just tell me the rate they're like there is no rate there's just no bit well interesting news so
01:11:44
we've been talking a little bit about you know these uh Bond offerings Etc and uh you know the US is uh with the higher yield still continuing to draw buyers
01:11:55
Japan very very soft in terms of getting people to buy their Securities and 127 billion the share into funds that invest in treasuries on Pace for a record year Bank America Corp said last week all
01:12:09
right let's move on to we got Nvidia left on the docket we got hoppin as a peak zurp the founder
01:12:17
sold out a lot of shares let's pick one of these stories or we got the SPF which is going to be big drama uh next year
01:12:23
when this goes to court or sax we could go those other stories there's not a lot of meat on them I think let's spend five minutes should we do the indictment giving you your red meat oh me giving me
01:12:35
my red meat I think five minutes of you ranting and doing your TDS and then we can rap all right well listen I don't
01:12:41
want to speak to your TSS your Trump Stockholm Syndrome but I will say that Trump yes has his fourth indictment you thought the hat trick was a lot well now he's got four
01:12:54
Fulton County Georgia 13 felony accounts but this one's incredible it's got a you know a lot of co-conspirators and uh all
01:13:01
I'll say is uh there is a small town in Georgia coffee is I think the name of it and there are a bunch of election machines and a group of this whack pack went in
01:13:14
there and committed a bunch of cyber crimes accordingly and it's not clear yet but when this thing goes to trial
01:13:20
just keep an eye on that there's an incredible law fair uh article and we'll put in the show notes and um a podcast
01:13:27
but I think that opening up the aperture of it is uh what's really interesting to me
01:13:32
what I'm seeing is I think there's a lot of viable moderate Republican candidates that would appeal to somebody like me I
01:13:39
have voted 25 Republican 75 percent a Democrat I'm a moderate but left-leaning moderate I would say um on social issues um fiscal issues I'm definitely in the Republican camp but I'm looking at
01:13:50
Christie I'm looking at the VAC I'm looking at a lot of those kind of Republicans even Tim Scott and saying
01:13:56
you know what maybe that's a better choice than Biden who is very senile and I think the Republican Party
01:14:03
has its moment right now to disassociate itself and say enough with the mashugana enough of trump and
01:14:11
you're starting to see Pence come out very strongly Zacks vivec is still boot licking I think
01:14:17
and is still like trying to get the VP spot with Trump I think it's a huge mistake and I think um Christy
01:14:24
and maybe it's time for your guy DeSantis who is in the pardon Camp as well but maybe it's time for him to you
01:14:30
know maybe start criticizing him and then I think it's time to negotiate a pardon for both Trump and Hunter Biden pardon
01:14:38
both of them get him out of political life and let's move on as a country I believe that you're going to see uh
01:14:44
Chris Christie and vivec surge it's going to be a three-horse race with DeSantis and I think Trump's going to be
01:14:51
out of the race in the next six to 12 months that's just my prediction your thoughts sacks
01:14:56
well I want to give you a chance here to expound on your blue meat not red meat for you it's blue meat your
01:15:03
TDs is flaring up again Jason I think it's no no TDS so let me let me ask you to expound on this pardon Theory because
01:15:09
you you claim that you think that Trump is now playing for a pardon that that's I think he's playing for a party yes
01:15:15
can you explain that how do you how do you get from here he is going to go buck wild he's you know lashing out Etc in the hopes that he can cause so much
01:15:27
chaos because you're seeing him you know uh with these tweets that are kind of Border Lighting on violence and inciting
01:15:34
people gag orders that kind of stuff I think he's going to keep pushing the envelope to the point at which he breaks
01:15:41
the Republican Party makes Americans really burnt out because the Republicans can't win with him he's got like 30
01:15:46
support or whatever he's not going to beat Biden you've said that before I think everybody knows it he's the weakest candidate of the field uh and I
01:15:53
think you guys really want to get a win and you want to move past him so I think this combination of the Republican Party
01:15:59
flipping on him and you're starting to see the crack you know and people starting to criticize him once the
01:16:05
evidence comes out can people see him in court and people hear the details of his criminal Behavior his abhorrent Behavior
01:16:12
his behavior that Vivek Governor Christie you know either side of the aisle would never participate in
01:16:19
I think there's going to be kind of the United States is going to say you know what pardon him blanket pardon if he
01:16:26
just steps out of um public life and I think Biden's going to need a pardon too for Hunter and so I think this could be
01:16:33
the solution for everybody to move forward it sounds crazy but I think that the stuff that's going to come out is going to be much worse than Watergate
01:16:39
specifically you know again I'll reference the the article of some of the behavior of his whack pack
01:16:45
and what they were doing you know in uh Coffee County like the beverage Coffee County Georgia when you start hearing
01:16:51
what they did you know lying forging documents and basically committing computer crimes this woman who Trump uh Sydney Powell Trump put his
01:17:03
fate in Sydney Powell and um Giuliani is a critical era and I think it's all going to blow up in his lap these people were lunatics they were committing crimes and I think they're going to get them and I think he's going
01:17:14
to need a pardon so he's not built for jail I can tell you Trump is not built for jail well this is
01:17:20
one problem with your theory Jason go ahead president can't pardon State crimes that is true I think they could be a grand negotiation this Georgia Rico indictment can't be pardoned well
01:17:33
however I do think that there could be a plea and so this could play out I think
01:17:39
they probably want to plea it out every all people want to play this stuff out right both sides that's it see what
01:17:45
you're about to talk about I know and you know what if you want to talk about deep State conspiracies and sax believes in this deep State comparison here's a
01:17:51
conspiracy I just think that you free birthdays I just think that you cannot think rationally when it comes to the
01:17:57
stuff okay fine you didn't know that Biden appointed Merrick Garland you didn't know that these Georgia Georgia
01:18:03
Federal and estate crime of course I do of course I've talked about it being not pardonable before I think there is going
01:18:10
to be a grand reconciliation I think everybody's going to get together and say how do we move on and that might
01:18:16
even be underway right now the one thing that's definitely not going to happen is Trump takes a plea deal he's gonna fight
01:18:23
last second you know what's gonna happen I said it yeah I said it last August when they
01:18:30
raided Mar-A-Lago is that the way they're carrying on with this these lawfare attacks on Trump we now have the
01:18:37
fourth indictment apparently he's a mobster they're going after him with a RICO statue that was invented to get
01:18:42
organized crime and mobsters and apparently these lawyers you relied on as Dopey as they were apparently they're
01:18:48
like button men for the mob who have to be indicted as well into this RICO statute I think people can see this for
01:18:53
what it is which is it's a I'm trying to think of the right word I mean it's it's basically law fair right
01:19:00
they're bending the law in any way they can to go after Donald Trump and I know that his behavior wasn't wasn't good in
01:19:05
this but I don't think anything might have been Criminal no I'm part of that 100 you don't think
01:19:11
it's from okay interesting let's look at that Fox News poll where they asked do you think the Republican party let me
01:19:17
say this you think the Republican party is going to cut ties I think the Fox News poll asked the right question which is in connection with efforts to
01:19:24
overturn 2020 election did Donald Trump do something illegal something wrong not illegal
01:19:30
nothing seriously wrong I'm in that middle I'm in the middle bucket God I think it was wrong but not illegal God
01:19:35
look I think that what Democrats are doing with this partisan lawfare is that they are polarizing the outcomes they're
01:19:42
either going to send Donald Trump to the big house or to the White House that's what I said back in August last year when they rated they're going to send
01:19:49
him to the big house or the white house I'm here for the pardon I'm here for the pardon do you think the Republican party
01:19:55
is going to support him or do you think they're going to break ties and try to move on
01:20:01
they see the way in which the law is being misused as being weaponized in a partisan way to get one of the major candidates for president they're trying to drive him out of I know do you think
01:20:13
the Republicans are going to stand by him as these as he goes to court in these things these trials start I think that the rally or cut ties of course
01:20:20
they're rallying around him it's ensuring that he will be the nominee okay I think they're going to cut ties
01:20:25
and Republican party is going to expel him okay do Jeff Bezos was going to run for
01:20:31
president I think Jeff Bezos will run in his lifetime and not necessarily this one I said you know I think Jeff Bezos
01:20:36
will run his lifetime I think Jeff Bezos is living his best life on a yacht with totally I know 100 million dollars
01:20:44
and then I was like 500 million you're your yacht delivers his toast every morning Jesus watched Bob Iger try and get back in the ring he'll do he'll do five ten
01:20:56
years he'll do five years Max five years Max on yacht he get bored out of your mind it's so crazy My Yacht has a
01:21:01
support vehicle his yacht has a support country it's called Malta your support yacht is his thing he's uh it's five years that's the max you can
01:21:14
do on again one year on a yacht sax did one year on a yacht never again he's done it's too boring
01:21:21
yeah Jake out thinks there's a Groundswell to put guys with huge yachts in office I I think I don't think so
01:21:28
listen to that song you played no I think Bezos trip he spent 100 million got to the
01:21:35
first question the first debate boom he's out yeah no he he missed his window I will man Bluebird would have been
01:21:41
great I've got Bloomberg's betting on the yacht Groundswell I mean a Boy Can Dream are you telling me you wouldn't vote for Bezos if he was against yes of course you would would
01:21:56
you vote for Bloomberg of course you would you want an executive in here that's what the country needs a
01:22:01
professional exactly who's your non-traditional candidate Freebird who would you love most who's you know like
01:22:07
a you know not going to obviously run or like it would be a small chance yeah it's an economist who's an economist they're just terrible political speakers they're just not good
01:22:19
at that would be your wild card hold on I'm texting I'm texting Nat to bring me another glass of wine oh God he's so
01:22:27
drunk he's on the last four oh yeah that's class four on air we don't [Music] wild card if you had to pick a wild card non-traditional not for this election
01:22:43
but for an election somebody who's not part of this Peter Thiel no no listen I've I'm I've supported
01:22:52
other financially or at least verbally RFK Jr DeSantis and Vivek I mean how many more candidates do I have to support um can you guys do me a favor
01:23:12
[Music] I just don't think it was organized crime it wasn't a RICO indictment I want to hear you say he should drop out of the race as an influencer in the party I
01:23:26
want you to say you should drop out that's all I want you to say all right let's move on
01:23:33
Republic as a competitor to stripe since 2018 this was incredible since 2018 audien
01:23:45
has reported every six month period of growth at least 26 or greater and they reaffirmed
01:23:53
a 65 ebitda margin and there they were down at one point today 40 percent cool holy cow and so if you remember if you look at if you look at adien what does
01:24:11
it mean about stripe and I think the answer is that stripe at that 50 billion dollar round 55 billion round is worth 25 billion so there's a 50 markdown
01:24:22
right there same thing that's happening in real estate yeah the reason why that it might be a buy might be a buy the reason those
01:24:39
multi-family developers are getting whammyed right now is again it's not because of vacancy everyone wants their
01:24:44
Apartments the problem is multiple compressions the value is much lower which means they can't get as much debt hmm so all of a sudden they got to Pony up a
01:24:55
bunch of equity or get expensive Mez to fill out the Capital stock this is the problem is there's multiple compression
01:25:00
everywhere more and it's just taking time yes it's more time to work through the system this is a train what is
01:25:06
tripod where do you where do you buy stocks where do you buy strikes I think you're right I think that the almost perfect
01:25:14
comp there so yeah you're right down 46 year-to-date that doesn't even include what happened last year yeah right
01:25:24
the thing to remember about all these businesses stripe rdn PayPal is that they're middlemen businesses which by
01:25:31
definition means that they don't have pricing power they actually have to reflect the prevalent pricing power of
01:25:36
the incumbent sponsors of their technology so for example if you have a deal with
01:25:41
McDonald's McDonald's bids you out to five different people and they pick the cheapest one right so your margins over
01:25:50
time tend to be compressed and over time your share of profits tend to be compressed and you have to give up a lot so how do you maintain profitability so an IBN maintains 65 ebitda margins in
01:26:02
the face of this Revenue decline the only way they can do that is by cutting staff using more technology and
01:26:08
creating Opex leverage that replaces what they're losing so the real takeaway is that they this is a very tough tough
01:26:16
business that is a race to the bottom and it is a surplus business that benefits the buyer I.E the Ubers the
01:26:24
McDonald's the doordashes of the world not the seller I.E the audience the paypals the stripes it did what's the
01:26:31
changing cost you know if you're if you're uber and you negotiated a deal for three years which stripe and then you go to adyan and you negotiate your
01:26:39
next deal and they want to win it because they need the top line revenue and now you got a dog fight you know let
01:26:44
alone all the other players these are all race to the bottom businesses and so tough business tough business if you
01:26:50
have a very diffuse business model where you're trying to do too many things and so as a result you have a somewhat
01:26:55
bloated Opex relative to a company that's going to do a lot less but do it just much better I think you're going to
01:27:01
be very challenged yeah well uh you know this this could be the buying opportunity for a lot of these equities
01:27:07
if you believe in them long term so Dan Loeb is placing a bunch of bats he bought some Uber he bought Nvidia you
01:27:13
know he's he's out there buying up stuff so we'll see let's talk about day important I think this is like a very interesting
01:27:18
one we didn't get to it last week pen gaming a gambling company and gambling's become legal in the United States Sports
01:27:24
wagering has been accepted by the NBA ESPN TV shows everything it's been incorporated into I've been gambling for
01:27:30
30 years of course but now it's been integrated into um when I bought a piece of the Warriors the funniest thing was I got a call from the NBA because you have to submit like
01:27:48
this huge application like you know everything open the kimono okay and they knew that I was a big Sports bettor and they were like hey will allow you to sports bet in Vegas if
01:28:02
you show the tickets but otherwise you know they knew who my bookie was they were like you cannot
01:28:07
call this guy anymore you can't Sports it was crazy okay don't worry don't say his name
01:28:19
so Nick delete the thing about the first part that's small you're such an okay wrap it come on we gotta go let's go
01:28:33
four I really needed you I love you guys so much no I really love you guys and I miss you I can't wait to come back I can't wait
01:28:46
to be back with this book all right so am I gonna see you when I get to L.A I'd like to see you sure when you get
01:28:54
here Thursday no Wednesday Wednesday like one oh yeah I'm here put me out the group chat with Drake
01:29:00
Jay Kelly and I have a lunch date we gotta go okay so four the queen of quinoa the Sultan of science the
01:29:08
architect the SAS hole himself and the dictator I love you guys drunky monkey I am undoubtedly the world's greatest moderator we'll see you next time
01:29:21
we'll let your winners ride Rain Man I'm going home and I said we open source it to the fans and they've just gone
01:29:32
crazy [Music] besties [Music] it's like this like sexual tension that they just need to release
01:30:04
[Music] where did you get Mercies [Music]