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hey everybody Welcome to episode 98 of
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the all in podcast with us again
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the Sultan of science the queen of
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quinoa looks like he brought a trucker
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hat what what are you getting jealous of
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the Montclair hat or are you just not
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bathing anymore I haven't had a haircut
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in like six weeks I'm getting my hair
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cut this afternoon it's not gonna make a
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difference I think what Friedberg is
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trying to tell us is that he is the
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Zodiac Killer
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it's long been known
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all right there he is the unibar uh all
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right uh and Montclair sax is here with
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his 400 Montclair hat
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and of course the dictator himself I
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asked Ron I asked Ron to cut my hair so
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that the white patch is more prominent I
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think he did a good job do you add the
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white patch with coloring or is it uh no
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it's natural it's just there it's just
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there make it look so odd if you were
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doing it on purpose it's super random I
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like the way it looks I like the way it
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looks Jay Leno had a look like that I'm
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about to go by the way you know this in
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the fall it truffle season I like to
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grow it so that it's more wavy white for
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white truffle season got it I needed to
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have a reset cut so then we could grow
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it wavy
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for the fall for truffle season listen
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sir moth the only thing less relevant to
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us than your cashmere sweaters is your
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haircut
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[Music]
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[Music]
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I believe
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all right second now it's the hiring
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freeze and a reorg at meta he also said
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meta will reduce head count for the
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first time in its history
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medicine count in 2023 will be smaller
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than it was this year he called it the
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end of an era of rapid growth this on
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top of uh Apple reporting and apple got
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walloped in the market for the first
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time in forever uh Apple pullback iPhone
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production for the 14 after slower that
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anticipated demand as I mentioned on
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previous episodes they've kind of done a
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gentleman's layoff
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similar to I think meta in that Apple
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said you have to be back in the office
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three days a week a bunch of people quit
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so uh you don't have to pay them I guess
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huge packages when they quit that way
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Google CEO Sundar pichai also called out
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employees in July as you guys all read
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and he wrote there are real concerns
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that our productivity as a whole is not
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where it needs to be for the head count
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we have Google of course 174
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000 employees so I guess the question I
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have for you is are these the last
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Towers to fall chamoth in this uh
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pullback that we've seen these are
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companies that don't need to do the
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layoffs they have tons of cash so
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they're obviously doing that to maintain
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earnings uh one would and to maybe send
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a signal to employees that they need to
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work harder what's your read on these
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this past week's shoes to drop well it
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definitely is the end of an era I think
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it is sort of like the the end of this
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phase of big Tech where you had this you
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know unfettered growth where these
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business models were largely
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unassailable and they you know we're
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really just fighting to grow into their
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valuation and just generate more Revenue
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to justify where they
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um where they traded at
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and now it's this next phase where they
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have to operate more like a cash cow
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business and so you know it's an
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acknowledgment that the growth is
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tapering
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it's an acknowledgment that they're
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going to trade on a pretty tight band in
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terms of multiple which means that they
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have to manage expenses much more
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tightly which means that they can't have
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a really broad-based
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surface area in which to operate an
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experiment you have to keep the
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experiments small
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you have to manage your expenses you
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can't have employees basically you know
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run over the place management has to
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have a firm hand in in dictating
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strategy and what people work on
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so I think all of that signals that I
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actually Jason I don't think this is the
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end I actually think it's the beginning
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because these companies Apple Facebook
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Google
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maybe a little bit Microsoft
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are the most sensitive to valuation
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because they are the most widely held
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right these are the these are the you
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know the equivalent of U.S treasuries in
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the equity markets the safest most
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predictable Safe Haven in times of
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stress if you want to own big chunky
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cash flow generating businesses that you
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know are relatively unassailable you
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couldn't pick four better businesses
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than those and so the fact that they see
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enough in the Horizon to say that we
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need to batten down the hatches should
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be a warning to everybody else
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uh Freeburg is it as simple as this that
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the they're moving from Top Line growth
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to bottom line and they're going to need
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to look at the expenses what's your read
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on this for Silicon Valley well I just
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want to zoom out for a second because
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I remember I started working in Silicon
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Valley in 2001
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you guys are a little older than me I
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think but like we were right at the kind
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of year one of the.com implosion and all
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the Fallout that happened from all the
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funding that happened from 97 to 99 and
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2000.
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and so from 01 to O3 it was super like
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deflationary everyone was cutting costs
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and all the money that had been raised
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was kind of being pissed away or
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companies were liquidating and you know
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so on and then starting in 2004 which is
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actually when I joined Google but there
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was also this big movement starting 0304
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of like what people called Web 2 then
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kind of new business models and new
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businesses started to emerge that seemed
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to have real traction and real legs and
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it was a different story and a much more
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rational story than what you saw leading
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up to kind of 2000 2001.
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and it was around that time when Google
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started offering these crazy benefits
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right it was like there's a gym and free
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food and all these amazing workplace and
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suddenly everyone had to do that to keep
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up right Facebook obviously mimicked it
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all the other big companies mimicked it
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and then it became Mainstay and they
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also raised compensation in the valley
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significantly because Google had really
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cracked a nut on how to extract value
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from the internet and it really changed
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everything in Silicon Valley and changed
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everything in Tech because suddenly
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every tech company whether you were
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Enterprise software or Hardware or an
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internet eCommerce site to be
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competitive and hire great talent you
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have to have the same sort of
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environment High wages
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great salaries really share the value
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with your employees you know gyms and
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free food and all this sort of stuff so
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it's the first time I think in a
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generation since like 2003 2004 that
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we're seeing things start to turn the
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other way where instead of adding more
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benefits you know making things more
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attractive giving more value to
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employees we're really seeing the
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recession hit these kind of leading
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indicators of how things are going to be
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in the valley and as a result I think we
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should expect to see a similar impact on
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compensation on benefits on value share
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and on kind of proclivity to hire an
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opportunity to kind of jump jobs and you
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know opportunities that we've all kind
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of taken for granted over the past 18
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years and this is going to be a real
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shock to a lot of people that work in
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Tech and a lot of people that have
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gotten used to the idea that every
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company offers great benefits there's
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always another job to jump to that'll
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pay you more and that that as that
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engine of growth that was really driven
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by these big companies by Google
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Facebook Apple starts to slow no one
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needs to compete with them anymore as
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much and the compensation bands get
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tighter and the option value gets
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Tighter and the free stuff gets tighter
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so it's the end of an era and I think
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it's a new world for tech and and
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Silicon Valley sex what are your
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thoughts here in terms of startups in
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relation to Big Tech maybe having these
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austerity measures kick in and a
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refocusing on profitability the big
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takeaway here is just that nobody is
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safe and it's not just starts to have to
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you know tighten their belts it's these
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big companies too and I think we're
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headed for a broad-based recession
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that's what it seems like you saw
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druckenmiller's comments this week
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predicting a hard Landing in 2023 no
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one's talking about soft Landing anymore
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in fact I think we're all wondering
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who's flying the plane so I think we're
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headed for a pretty big recession and I
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just take it in a slightly different
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direction I'm down here in La had dinner
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the other night with a friend who's a
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showrunner in Hollywood and so a
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showrunner basically is like the head
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writer and they basically put together
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the writing team and the you know the
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content for a show and then they sell
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them to networks he said that like no
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one is buying anything anymore here that
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last year you had there was tremendous
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you know activity and you saw like the
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The Game of Thrones guys you know uh DND
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they got like a 300 million dollar deal
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from Netflix and Shonda Rhimes yes they
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did yeah they got like these they were
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massive multi-hundred Million Dollar
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Deals being made last year and that was
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just for like future writing deals like
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Netflix wasn't even buying libraries
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when they did those deals they were
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locking down talent for the next day
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yeah exactly so all of that has stopped
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and the reason is that Netflix's stock
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has been hammered right and only so they
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not have the capital to do those kinds
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of crazy deals anymore but they know
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that Wall Street is watching them and so
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fundamentally they're questioning
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whether a business model even works if
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they have to spend that much money on
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content so then all of Netflix's
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competitors basically have stopped so
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this whole like frothy environment that
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you had for in Hollywood last year
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that's just over the faucet's been
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turned off and it's not even turned off
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to a trickle it's just stopped so you
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think that this like massive asset
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bubble that we had last year was just in
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crypto and growth stocks it's not I
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think it actually trickled down into the
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real economy because Netflix is one of
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those gross stocks the money then flowed
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into writers in Hollywood and then lots
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of other places this is one small
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example right that that this asset
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bubble wasn't purely just something
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that's going to be localized to crypto
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it affects real people in the real
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economy and we are just beginning to see
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the unwind of that
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yeah what's absolutely correct I think
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is people were more risk taking they had
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free Capital they wanted to place more
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bets and sure why wouldn't you bet on
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the Game of Thrones writers for the next
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decade but looking at this is going to
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be fantastic for startups I mean the
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startups I've worked with over the last
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five years have been they always come to
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me oh I got a developer but this
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person's got three offers from you know
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Facebook Google and they're like how do
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I land this person they got 300
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000 a year offering a million dollars in
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rsus and
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basically Founders had to say no I can't
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get that person and so they had to get
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creative and they would hire people
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Ukraine Uruguay everywhere in between to
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try to find developer talent and they
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had to get creative now all of those
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people are not going to have four job
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offers they're going to have no job
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offer so they may have gotten laid off
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uh and those crazy
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unrealistic out of school deals are
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going to be gone and this means massive
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consolidation of talent you look at the
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startups uh Community right now
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tons of companies are just going out of
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business they're packing it in those
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people are going to go work at the other
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startups that are stronger so whoever
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makes it out of this as a startup this
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is how the cycle restarts is Talent then
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consolidates on the winners it would be
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like taking the NBA and getting rid of
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the bottom you know 10 teams and just
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telling the best players there move up
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to the other teams and uh everybody else
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you're out of the league so I I think
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this is incredible setup for 2023 for
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startups to consolidate Talent so I'm
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I'm actually excited yes it's another
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data point that again I said it last
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week I'll go out on a limb and predict
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my equivalent November fall predictions
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last fall it was at the markets were
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going to Coop the bed
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my prediction now is that I think the
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markets are bottoming and consolidating
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yep 100 and this is the time I think to
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start nibbling and start getting ready
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to really rip the money in and I think
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there's enough signals every day that
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kind of like tell me at least that on
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the margin
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it's time because I think the markets do
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a reasonably good job of digesting news
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and then pricing the forward reality
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right like today's price is really
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everything we already know and so the
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real guess is what's about to happen in
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the future and from my perspective
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I'm actually pretty starting to get a
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little constructive here I think that um
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when when companies like Facebook really
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do this and you know like if you think
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about it one way the financial markets
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have always had this thing that we have
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called the fed put what does that mean a
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put is essentially the right to sell
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something
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and what Market participants have always
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known for the last decade is that if
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things got very hairy if there was
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uncertainty in the market the Federal
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Reserve would and they have consistently
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stepped in to create a buyer of Last
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Resort and so it always eliminated that
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last part of true
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you know Supply demand balance because
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they would just come and say don't worry
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in many ways in Tech
00:13:02
what the big tech companies were were
00:13:04
that you know you could never really
00:13:06
find what the true market clearing price
00:13:08
for an engineer was or what the true
00:13:10
amount of expenses you should spend on
00:13:12
office space or you know free services
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because you always always had these
00:13:17
companies which was an escalating arms
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race you know if one company had a
00:13:21
massage
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the next company had gyms in massage and
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physical therapists and the other
00:13:26
company would have buses to take you to
00:13:28
the gyms in massage and therapists in
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the next company would have protein
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shakes that were freshly made you know
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and it just kept escalating and
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escalating because the costs didn't
00:13:36
matter and they wanted if nothing else
00:13:40
to get that marginal engineer or product
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manager or business person to work at
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their company
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which eliminated the risk that they
00:13:49
would actually start something to
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disrupt them
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blocker strategy is very real you should
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on the blocker strategies is very real
00:13:55
so when you take this big Tech put
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out of the market
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you will get true price Discovery and
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you will find out what the real price
00:14:06
should be for this kind of an engineer
00:14:09
that kind of a product manager you'll
00:14:11
find out what are the real expenses you
00:14:13
need to bear in order to build a real
00:14:14
lasting business and you'll be able to
00:14:17
sort through all of that stuff out so I
00:14:18
think it's a really good moment and
00:14:21
again it's yet another indication to me
00:14:23
that I think broadly speaking
00:14:25
the markets are now starting to
00:14:28
stabilize all the irrational Behavior is
00:14:31
starting to exit the system the party is
00:14:33
in the last few hours volumes going down
00:14:36
the alcohol has been taken away people
00:14:38
are hanging around with a little bit
00:14:39
lights are coming on they're like I've
00:14:41
been here a little too long
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and I think that that's a very healthy
00:14:45
process for an economy and I think that
00:14:47
that's what's happening right now so I'm
00:14:49
constructive I'm a little bullish I'll
00:14:50
go I'll go out on a limb I think you
00:14:52
know we could be three to five percent
00:14:53
from the lows but we're more near the
00:14:55
lows than the highs it certainly feels
00:14:57
like the double bottoming out process
00:14:59
was the The Bouncing along the bottom
00:15:00
and yeah who knows how hard the landing
00:15:02
uh is but I think it's a great setup for
00:15:05
startups and people who want to start
00:15:07
companies I don't know if you saw a girl
00:15:08
who did a great interview
00:15:10
that trended on the Twitter and you're
00:15:13
just saying this is the best time to
00:15:14
start a company and I have to agree with
00:15:15
him like you're going to have talent
00:15:16
available and like who are you competing
00:15:19
against for buying ads like there's so
00:15:21
many marketing opportunities available
00:15:23
the first thing to go in a down market
00:15:25
like this is advertising and marketing
00:15:27
so and by the way we will we will also
00:15:30
relive what we have
00:15:33
empirically known to be true and it's
00:15:35
been it's been pretty well proven the
00:15:37
Investments that one makes in this
00:15:39
period will probably be the best for
00:15:42
many many years to come because they'll
00:15:43
have the most asymmetric upside and that
00:15:46
was true in 2008 and 9 and 10.
00:15:50
it was true in you know 2002 three and
00:15:53
four you I mean you're talking
00:15:55
incredible companies just in those two
00:15:56
periods think about this atlassian Tesla
00:15:59
Uber Google Airbnb Uber Instagram
00:16:02
WhatsApp incredible businesses that have
00:16:05
created tremendous value and so there
00:16:08
are businesses that have been invested
00:16:09
in
00:16:10
for the first time in 2022 and will be
00:16:13
invested in for the first time in 2023
00:16:16
and 24 which will be the leading winners
00:16:19
of this next phase and this next leg up
00:16:22
and so the real opportunity is to find
00:16:24
out who those companies are and get
00:16:26
behind them I think 100 as I always tell
00:16:28
people fortunes are made in the down
00:16:30
Market they're collected in the up
00:16:31
Market Freeburg what are your thoughts
00:16:33
here in terms of the startup Community
00:16:35
or company Builder uh and talent because
00:16:39
that that seems to be the piece that uh
00:16:41
could be a silver lining on all of this
00:16:43
uh Maelstrom that we're going through I
00:16:46
mean technology always marches forward
00:16:47
so there's always
00:16:50
you know there's always progress to be
00:16:52
to be had and to be made
00:16:55
that's one universal truth about
00:16:58
it's weird that we call it an industry
00:17:00
because a lot of technology companies in
00:17:02
Silicon Valley today
00:17:04
don't sell technology to other companies
00:17:06
which is how Silicon Valley started
00:17:08
nowadays Silicon Valley
00:17:10
is Reinventing other industries by being
00:17:12
technology LED
00:17:15
and that is certainly still true because
00:17:16
there are so many
00:17:18
I hate using the term but undisrupted
00:17:20
Industries
00:17:22
to pursue efficiency gains across and
00:17:24
Technology built in Silicon Valley can
00:17:27
can drive that now when I say Silicon
00:17:29
Valley I don't mean the physical
00:17:30
location anymore and that's the
00:17:32
confounding Factor here which is that
00:17:34
there does seem to be this
00:17:36
distribution opportunity that's also
00:17:38
emerged at the same time
00:17:41
where people are doing remote work and
00:17:43
work from home and distributed Workforce
00:17:46
models that seem to be highly effective
00:17:48
you guys talked about atlassian I don't
00:17:50
think they ever had an office right I
00:17:51
mean don't most of the people work from
00:17:52
home there
00:17:54
and I think that the success that's been
00:17:56
seen in software
00:17:58
companies that have operated that model
00:18:00
also changes the calculus because not
00:18:02
only are
00:18:04
are wages lower and therefore the cost
00:18:06
of operating is lower not needing a
00:18:08
fancy expensive office in San Francisco
00:18:09
is needed
00:18:11
but you can also access far more Talent
00:18:13
than you ever could before you don't
00:18:15
just need people to live in the Bay Area
00:18:16
or New York or LA or wherever you're
00:18:17
operating from
00:18:19
so from a software perspective this is
00:18:21
an amazing time I'll tell you there's a
00:18:23
flip side to this like in life sciences
00:18:25
real estate is more expensive than it's
00:18:27
ever been right now in the Bay Area to
00:18:29
get lab space there's a total dearth of
00:18:31
space
00:18:32
so there's certain segments that I think
00:18:35
uh
00:18:36
lab space like a specific a specific
00:18:39
designation I mean there's a revolution
00:18:41
and genomics that's totally transforming
00:18:43
all of biology and human health and what
00:18:45
I'm saying is like do you need a certain
00:18:46
type of location that's sanctioned for
00:18:49
that yeah yeah lab space is a certain
00:18:52
kind of build out and it's not you know
00:18:54
and so there's a certain amount of
00:18:55
square footage and it's being built out
00:18:56
a lot around the bay area but
00:18:58
um the thing about life sciences
00:18:59
companies is you do have to operate
00:19:02
physically because you're doing some
00:19:03
you're building something physical
00:19:06
and so that is an industry
00:19:08
that continues to remain very well
00:19:11
funded
00:19:12
and very competitive and I think
00:19:15
you know there's still tremendous value
00:19:16
and by the way there's a lot of public
00:19:18
companies to invest in not on the
00:19:19
primary basis but that are tools
00:19:21
companies that are benefiting greatly
00:19:24
from the continued demand and and growth
00:19:26
in spending in that category sex let's
00:19:29
talk about competition you know a lot of
00:19:31
talk you know of these large companies
00:19:34
pursuing many different verticals we
00:19:36
talked about anti-competitive stuff Lena
00:19:38
Khan the bundling in the suite of
00:19:40
products at Microsoft other firms
00:19:42
now you have uh all these being cut
00:19:46
death to the Roomba
00:19:49
death of the room
00:19:51
by the way did you see
00:19:54
the letter to the FTC about I guess she
00:19:56
sent a letter about the Roomba I mean
00:19:59
Senator Karen is just too much man I
00:20:02
mean there's a lot of other stuff going
00:20:03
on but you can let the Roomba slide
00:20:06
that's not important oh you know all the
00:20:09
things that are going on right now in
00:20:10
2022 it's the Roomba that gets on the
00:20:13
that gets that's above the line at this
00:20:15
point believable oh my points actually
00:20:18
is sleepwalking oh my God what is going
00:20:21
on no there's a there's a famous history
00:20:23
of world war one called The Sleepwalkers
00:20:25
because that's basically what it felt
00:20:27
like is they just slept walked their way
00:20:29
to World War One basically what should
00:20:32
have been a minor Regional War the third
00:20:34
Balkans war that nobody should have
00:20:36
cared about nobody should have cared
00:20:38
about this Franz Ferdinand guy except
00:20:40
for you know the austrians and yeah
00:20:43
exactly but the whole world basically
00:20:45
got themselves invested in this thing
00:20:47
and it feel and this is what we're
00:20:49
worried about we're worried about the
00:20:50
Roomba when the administration is
00:20:53
sleepwalking its way into the next World
00:20:54
War well I do not want Amazon okay to
00:20:57
control my vacuum cleaner I'm just gonna
00:20:59
put that on the record okay because you
00:21:02
know where the dirt is they know which
00:21:03
rooms are dirty what happens if they get
00:21:05
a hold of the Roomba I'll tell you what
00:21:06
happened happens the next thing is
00:21:07
they're going to go after Dyson okay and
00:21:09
then once they do that they're going to
00:21:11
put chips in these things and all of a
00:21:13
sudden they're going to know exactly
00:21:14
what Jason said what are you eating
00:21:16
where your dust bunnies are yeah all of
00:21:18
this stuff it's This Must Be Stopped
00:21:20
Lena Khan now no but to the point of
00:21:23
competition you you you're seeing cuts
00:21:25
to you know all the uh non-core projects
00:21:29
at these big companies this is going to
00:21:31
be great for startups right like the
00:21:33
idea that Facebook could focus on you
00:21:36
know a fourth fifth sixth thing is going
00:21:38
to go away yeah well look you're right
00:21:41
that great companies are built during
00:21:42
downturns uh PayPal was built largely
00:21:45
during the downturn the starter pack
00:21:46
created Yammer was built largely during
00:21:48
a downturn so listen there's going to be
00:21:50
opportunities Innovation doesn't stop
00:21:52
just because we're in a recession or
00:21:54
depression but I gotta tell you I unlike
00:21:56
tremath I'm having a hard time finding a
00:21:58
silver lining right now uh part of it is
00:22:00
the comments that druckenmiller just
00:22:02
made which and he's been right about
00:22:04
this stuff we've been talking about his
00:22:05
predictions for over for a year on this
00:22:07
podcast and he famously shorted the
00:22:10
pound uh for George Soros that was one
00:22:13
of his first things started but yeah
00:22:14
since then um he's one of the most
00:22:16
successful macro traders in the world
00:22:19
and and you know universally respected
00:22:21
and I think deservedly so remember he
00:22:23
said that that this was in mid-2021 he
00:22:27
said that the Fed was engaged in a
00:22:28
radical
00:22:29
uh monetary policy because even though
00:22:32
we were starting to get inflation it was
00:22:34
around five percent then that they were
00:22:36
so engaged in this Bond buying program
00:22:38
they're still bought like 160 billion of
00:22:40
bonds and he is the first one waving the
00:22:42
alarm bell saying what are they doing
00:22:43
and now his predictions have come true I
00:22:46
mean we're in a inflationary spiral and
00:22:48
his prediction now is his Central
00:22:49
Outlook is that the Dow Jones will be in
00:22:51
the same place
00:22:53
where it is today in 10 years and he
00:22:56
made the point that yes Equity markets
00:22:57
do go up in the long term but how long
00:22:59
term are you talking about from night
00:23:01
from roughly 1966 to 1982 the stock
00:23:03
market was sideways Japan had a lost
00:23:05
decade as well like this is not
00:23:07
unprecedented after an asset bubble
00:23:09
right and then from the Great Depression
00:23:11
it took until 1955 for the stock market
00:23:14
to recover so in the long run the stock
00:23:16
market will go up but it could be you
00:23:18
know we could have
00:23:20
um a flat decade this is his prediction
00:23:22
right but he's very smart guy and and
00:23:25
then on top of that that's not to say
00:23:27
that you can't be one of the ones who
00:23:29
make money during that period because
00:23:30
lots of people do but we're in for I
00:23:33
think a very tough economic period
00:23:35
because of just this radical uh
00:23:39
expansionary fiscal monetary policy
00:23:41
we've had basically the fed and the
00:23:44
administration printed the last two
00:23:46
administrations but especially this one
00:23:48
printed 10 trillion dollars
00:23:51
over the last couple of years
00:23:53
most of that was under Trump but
00:23:55
continue no it's not 100 I'll pull it up
00:23:59
in a second but anyway keep going we had
00:24:01
Biden basically kept digging this hole
00:24:04
we had the two trillion dollars of
00:24:05
American Rescue plan which we didn't
00:24:07
need we just had uh another two trillion
00:24:10
of the infrastructure Bill the inflation
00:24:13
reduction act 500 billion for student
00:24:16
debt yeah exactly so Jason what are you
00:24:19
talking about and this was all after the
00:24:20
emergency was over but I think I think
00:24:22
that you guys are debating the wrong
00:24:24
thing I think that what drucken Miller I
00:24:26
think by the way just to be clear both
00:24:27
drucken Miller and I
00:24:29
can be right which is he's commenting on
00:24:33
the real world economy going into a
00:24:35
recession what I'm saying is that the
00:24:36
stock market tends to be 9 to 12 months
00:24:38
ahead of where we are Nick throw up that
00:24:40
chart please that I asked you guys to
00:24:42
share just to give you guys a sense of
00:24:43
what I mean by this by the way while
00:24:45
you're doing that jamas Jason look I
00:24:46
will agree with you that a lot of this
00:24:48
is
00:24:49
7.8 trillions more than Biden but fine a
00:24:53
lot of the stimulus happened under Trump
00:24:54
you're right because that's when
00:24:55
basically covet happened remember in the
00:24:57
in that Q2 of 2020 quarter the economy
00:24:59
shrank at a 30 percent annualized rate
00:25:02
everyone thought we're going to a great
00:25:03
depression and that's why they passed
00:25:05
all the stimulus by huge bipartisan
00:25:08
margins director Miller's best point is
00:25:09
that this is all post-vaccine right yeah
00:25:11
yeah so look and I think we can
00:25:13
definitely go back and second guess what
00:25:16
happened during the Trump Administration
00:25:18
there's an old saying that many of the
00:25:20
worst ideas are bipartisan but and so
00:25:23
you know the spending that happened in
00:25:24
2020 was clearly bipartisan and maybe it
00:25:27
went way too far but in the last two
00:25:30
years like drug said it was post-vaccine
00:25:32
post-emergency and they kept spending
00:25:34
and it's not just Administration it was
00:25:36
the bond buying program of the FED where
00:25:39
the economy was already fully back and
00:25:40
they bought another 160 billion of bonds
00:25:43
yeah I think I think the thing is that
00:25:45
you know I think Stan is a proven
00:25:48
Republican so maybe he is speaking a
00:25:51
little bit of his book as well I think
00:25:53
it's fair to say that both Trump and
00:25:54
Biden did not help but overwhelmingly I
00:25:58
think where the where the problem stands
00:26:00
is a central bank that was the same
00:26:02
through both of those administrations
00:26:03
and I think we should probably focus on
00:26:06
them because you're right what they did
00:26:08
was excessive and what they essentially
00:26:10
said is that if there is volatility
00:26:13
Beyond a certain amount and people cry
00:26:16
Uncle we will not allow the markets to
00:26:19
sort themselves out in an orderly way we
00:26:22
will step in and that's what you know
00:26:24
again what we just talked about the
00:26:25
Central Bank put in this case the FED
00:26:27
interventions yeah and these
00:26:29
interventions really uh pervert a market
00:26:31
because you don't know what's going on
00:26:33
and that has huge ramifications in the
00:26:34
real economy so Nick if you just throw
00:26:37
up this chart the the thing that is
00:26:39
really important here and what this
00:26:41
chart shows is essentially all of the
00:26:44
hiking cycles that we've gone through
00:26:45
since 1983 so 83 87 89 94
00:26:50
9904-15 in the current one and here's
00:26:53
what I just want to call out for you
00:26:54
guys what's incredible is that other
00:26:57
than the one in 83 so this is sort of
00:26:59
like you know
00:27:01
that last big one
00:27:04
what we've seen is that the stock market
00:27:07
has a tendency
00:27:09
to immediately go to the conclusion
00:27:12
very early on in a rate hiking cycle
00:27:15
and now why is that important for normal
00:27:17
folks listening to this thing well the
00:27:20
reason why that's important is right now
00:27:21
we're in month seven of a cycle we
00:27:23
obviously don't know how long it's going
00:27:25
to be
00:27:26
but the odds are improving every day
00:27:30
that we're near the end versus the
00:27:32
beginning
00:27:33
and why that's important is again if
00:27:36
you're thinking about when to you know
00:27:38
buy equities for example this is a
00:27:41
really instructive guide because what it
00:27:43
tells you is the closer we get to the
00:27:45
end
00:27:46
or more importantly the closer we
00:27:48
psychologically know that the end is
00:27:50
coming
00:27:51
we start buying and that and that's just
00:27:53
a broad-based statement that has been
00:27:55
true so you know what you see right now
00:27:58
I think is really interesting which is
00:27:59
that despite all the bad information
00:28:03
oh my gosh the nordstream pipeline blew
00:28:05
up could it have been sabotaged was it
00:28:07
the CIA was it the Russians oh my gosh
00:28:10
big Tech is slowing spending and firing
00:28:12
people China's in a coup I don't know if
00:28:15
you saw that rumor yeah how about
00:28:17
something more benign you know the the
00:28:18
US you know us yuan is really trading in
00:28:22
a crazy way the U.S euro is trading in a
00:28:24
crazy way the U.S pound is going crazy
00:28:26
despite all of that
00:28:28
every time we trade down
00:28:31
the market consolidates very quickly and
00:28:34
we sort of like so I think we're forming
00:28:36
a bottom I do think that Stan is right
00:28:38
we are going to see a hard Landing
00:28:41
recession something will break in 2023.
00:28:44
I hope it doesn't I hope it doesn't
00:28:46
affect a lot of normal people but it's
00:28:48
likely but at the same time to find hard
00:28:51
Landing us so I'll tell you in a second
00:28:52
but at the same time I think what's
00:28:53
happening is in the equity and financial
00:28:55
markets
00:28:57
we are consolidating a bottom because
00:28:59
we're seeing through to that end state
00:29:02
and this is where cheap Equity gets
00:29:04
bought so why is there a reason to sell
00:29:06
now I think a lot of the people that are
00:29:08
selling the smart money sellers that I
00:29:11
talk to are essentially right now
00:29:13
selling to book in capital losses to
00:29:17
offset other capital gains from this
00:29:19
year a term that's called tax loss
00:29:21
harvesting and so if you have gains
00:29:22
through this year which some of us do
00:29:24
this is the great moment to just sell
00:29:27
the losers to book the loss to net it
00:29:30
out so that you can minimize your taxes
00:29:31
for next year that's probably I think
00:29:33
where we are at
00:29:35
and I think that's why they're still
00:29:36
Consolidated by so what is the hard
00:29:38
Landing Jason if I had to predict I
00:29:40
think what David said is absolutely
00:29:42
right you're going to see unemployment
00:29:44
get to an awkward and uncomfortable
00:29:46
number
00:29:47
five six percent I think could be
00:29:50
something that we see
00:29:52
and I think you're going to see a lot
00:29:53
more companies
00:29:55
pull way back on their spend because
00:29:58
demand is going to really modulate uh
00:30:00
you know I'll give you a crazy example
00:30:03
you know what happens to all the people
00:30:04
in the United States that are on armed
00:30:06
mortgages right adjustable rate
00:30:08
mortgages when those things reset
00:30:11
they're going to reset two 300 basis
00:30:14
points higher their monthly payments are
00:30:16
going are going to go nuclear it's
00:30:17
already happened I've literally had a
00:30:19
family member call me about this and
00:30:20
they were like what do I do so in the UK
00:30:22
in the UK 40 percent
00:30:26
of all mortgage dollars are interest
00:30:29
only arms that will reset in January to
00:30:34
around four percent
00:30:36
forty percent can you imagine how upside
00:30:39
down the UK economy is going to be when
00:30:41
people have to spend three and four
00:30:43
times more together and then people have
00:30:44
to go to work so people who have not
00:30:47
been participating are going to have
00:30:48
those bills come in and they're going to
00:30:49
have to go to work they're going to have
00:30:50
to go to work yeah so free bird what do
00:30:53
you what do you think uh hard Landing
00:30:55
here and then what do you think 2023
00:30:57
looks like in that regard uh
00:31:00
looking pretty bleak do you buy that
00:31:03
we're bottoming out now as chamatha's
00:31:04
sort of hypothesizing I mean I'll tell
00:31:06
you
00:31:09
I was running some back of the envelope
00:31:10
math
00:31:12
you know how much debt there is in the
00:31:14
world
00:31:15
take a guess
00:31:20
200
00:31:22
couple hundred trillion
00:31:25
200 trillion about 300 trillion yeah
00:31:28
that's um debt
00:31:31
owed by governments businesses
00:31:34
and households and if
00:31:37
in response to the inflation which is
00:31:40
response to fiscal stimulus which is a
00:31:43
response to the entire economy of the
00:31:44
world shutting down for a couple of
00:31:46
months
00:31:47
we end up raising rates from zero
00:31:50
to five percent
00:31:52
that's uh 15 trillion dollars
00:31:56
of annual Debt Service
00:31:58
which is like 18 of global GDP
00:32:03
like that The Debt Service alone but
00:32:07
what does that mean that means that for
00:32:09
every dollar transacted
00:32:11
no it means nothing tax it no it means
00:32:13
what does it mean like so so what so I'm
00:32:16
saying that there's a massive
00:32:18
squeeze hap that's gonna happen right
00:32:20
and so what ends up happening ultimately
00:32:21
is because you could run this across
00:32:23
local governments
00:32:25
I think it means demand destruction I
00:32:27
mean if you're in debt households yeah
00:32:31
thick no no I'll tell you I'll tell you
00:32:33
about what it means
00:32:34
but it means nothing and I'll tell you
00:32:37
why these people keep because you can
00:32:38
print more money you print more money
00:32:40
I'm sorry to be the bearer of bad news
00:32:42
but like it is not as if we have a law a
00:32:45
constitutional law or it's not as if
00:32:47
governments have collectively decided
00:32:49
that you cannot have debt to GDP uh
00:32:52
above a certain number that doesn't
00:32:54
happen guys we passed 100 under Obama
00:32:56
and we've just kept printing money so
00:32:59
whether we like it or not and I'm not
00:33:00
saying I'm a fan of this or it's right
00:33:02
we are kicking the can down the road and
00:33:05
what we're doing is we're extending the
00:33:07
maturities you know you'll eventually
00:33:09
have 100 Year government bonds okay just
00:33:12
like you have like now you know
00:33:14
multi-decade long corporate bonds we
00:33:16
missed a chance for that we missed it
00:33:19
because brilliant Yellen actually said
00:33:21
no to that when when rates were like
00:33:24
near zero and we had the opportunity to
00:33:25
refinance the U.S government debt using
00:33:28
long-term rates basically long-term
00:33:30
bonds and actually was Trump who you
00:33:32
know crazy Trump who suggested let's
00:33:33
basically shift the debt to 100 Year
00:33:35
bonds and she said no you have a dollar
00:33:38
right so the the problem is that we have
00:33:41
all the short-term debt and look at what
00:33:43
just happened in the UK when Liz trust
00:33:45
tried to prop up the uh Bond rates by
00:33:49
basically intervening she was basically
00:33:51
an inflationary policy to fight an
00:33:53
inflation the markets puked all over
00:33:55
that and that's when their the pound hit
00:33:57
you know exactly there's only so you
00:34:01
have to have a buyer of the debt right I
00:34:03
think the list trusting is really
00:34:04
actually a microcosm of how
00:34:06
unfortunately Western governments are
00:34:08
working but I think there's a silver
00:34:09
lining like she basically came in a day
00:34:12
after she got elected and said okay
00:34:13
guess what guys at the same time I'm
00:34:15
going to massively cut taxes and I'm
00:34:18
going to give you fiscal stimulus I'm
00:34:19
going to cap your energy bills and I'm
00:34:21
going to have these huge transfer
00:34:22
payments from the government into the
00:34:24
hands of uh of uh British citizens I'm
00:34:27
not going to comment on whether that's
00:34:28
right or right right or wrong
00:34:31
but the financial markets to your point
00:34:33
David absolutely hated it and within a
00:34:36
few days you basically saw the pound get
00:34:38
crushed but then what did you see you
00:34:41
saw the bank of England decide that
00:34:43
Financial stability was more important
00:34:45
than financial viability meaning the
00:34:48
things that she wanted to do were not
00:34:49
viable so you could have let the
00:34:51
financial Market sort this out which
00:34:53
would have forced the prime minister to
00:34:56
basically abandon the policy but instead
00:34:58
the Boe said now we're on the unlimited
00:35:01
buyer of UK guilts which is the name of
00:35:03
the UK Bond and everything snap back
00:35:06
we're back to where we were before her
00:35:08
speech and before the chancellor of the
00:35:10
exchequer speech and so it's as if
00:35:11
nothing happened and that's what's so
00:35:14
insane to me which is that even though
00:35:16
the bank of England by the way in the
00:35:17
next week or two are going to raise
00:35:18
rates 140 basis points 140 basis points
00:35:22
almost double what the FED is
00:35:25
that is they're doing both at the same
00:35:27
time they're both raising rates and
00:35:29
they're acting as a backstop for bad
00:35:31
policy and this is what's wrong right
00:35:33
now in the world we do not have a real
00:35:35
check and balance so my point to
00:35:37
Friedberg is just that I'm like
00:35:40
emotionally on your side
00:35:42
but the problem is with these folks keep
00:35:45
getting bailed out David they're just
00:35:46
going to keep doing this stuff and
00:35:48
there's no end in sight well and the the
00:35:49
consumer doesn't get bailed out so that
00:35:51
if you look at it on a micro basis
00:35:52
instead of a macro basis you're correct
00:35:54
these governments will just bail people
00:35:55
out even if they make bad decisions as
00:35:57
we're seeing but then the person whose
00:35:59
uh variable interest mortgage just
00:36:01
kicked in has 500 less a month in
00:36:04
savings so they're now not going to buy
00:36:05
an iPhone 14. they're not gonna upgrade
00:36:08
their car every six years they're gonna
00:36:10
do it every eight years so the demand
00:36:12
destruction that's happening is going to
00:36:14
be quite severe and that's going to
00:36:16
reduce money then monetary velocity and
00:36:19
then we mark my words the Federal
00:36:21
Reserve will intervene this is why I
00:36:24
think we're in a bottoming process I
00:36:25
think the the bleeding edge of the Smart
00:36:28
Financial actors are actually on Sax's
00:36:31
side and friedberg's side
00:36:33
but then they're taking that next
00:36:35
intellectual leap and saying okay well
00:36:36
what happens when Apple basically says
00:36:39
hey guys I'm gonna have to fire 15 of my
00:36:40
employees
00:36:42
I think what happens is the fed
00:36:43
intervenes and I'm just using apple as
00:36:45
an example but there there is a
00:36:47
threshold of demand destruction Jason I
00:36:49
think you're right where we have the fed
00:36:51
put come back on the table and the
00:36:52
markets just go Bonkers so they instead
00:36:54
of doing 75 basis points two or three
00:36:56
times they're just gonna be like yeah
00:36:57
I'll do 50. we'll throw it down no no no
00:36:58
no no no no no they're gonna they're
00:37:00
gonna get to four and a half very
00:37:02
quickly
00:37:03
and then this Something's Gonna Break
00:37:04
like all these guys are saying I think
00:37:06
they're right and then the fed put comes
00:37:08
back on the table and we'll have this
00:37:10
we'll have the UK you know the UK thing
00:37:13
happened in what six days
00:37:15
bars will play out over six or nine
00:37:17
months
00:37:17
but it's going to play out the exact
00:37:19
same way and freeburg's right you know
00:37:21
we should have capped debt at you know
00:37:23
100 of GDP or less and sax is right we
00:37:26
should have issued 100 Year bonds at
00:37:28
zero rates when we had the chance
00:37:29
we didn't do either of those things
00:37:31
that's so incompetent sex I mean there
00:37:33
was no need to have rates this low for
00:37:34
that long
00:37:35
and it maybe they could just keep them
00:37:38
at some average number instead of going
00:37:39
down to zero or that's spiking back up
00:37:41
and just steering you know spitting the
00:37:44
steering wheel uh you know so violently
00:37:46
why don't we have some basic uh concept
00:37:49
of maybe not having zero rates and
00:37:51
keeping them at two percent or something
00:37:53
reasonable so you have some dry powder
00:37:55
well if you go back and and listen to
00:37:57
what the FED said and Drug makes this
00:37:59
point they were all worried that they
00:38:01
got there was an inflation print a few
00:38:02
years ago where I was at 1.7 percent and
00:38:04
they all started panicking about not
00:38:06
being at two percent so for a point
00:38:08
three percent move that they try to
00:38:10
engineer they opened the floodgates okay
00:38:13
and that's basically what happened and
00:38:14
that's why he's so critical of it the
00:38:16
other thing is the federal remember the
00:38:18
FED said we're going to be data driven
00:38:19
but then the data came in last summer we
00:38:22
got that surprise 5.1 print and they
00:38:25
dismissed it as transitory so they said
00:38:28
they're going to be data driven but they
00:38:29
weren't they they were dismissive now on
00:38:32
what basis did they conclude
00:38:35
transitory like what was the proof for
00:38:37
that there was no proof that was a
00:38:39
political consideration the
00:38:40
administration and Yellen is a big part
00:38:43
of that immediately reacted to basically
00:38:45
downplay the news I mean they PR did I
00:38:47
mean they didn't want to admit that
00:38:49
there was a problem they went from
00:38:51
transitory to this is permanent to next
00:38:54
six months but during and now we're at
00:38:56
hard Landing like right these people are
00:38:58
not competent are they just not
00:38:59
competent no I think they're really I
00:39:01
think they are competent but I think
00:39:03
that they're a little bit fighting with
00:39:04
one hand type behind their back I think
00:39:06
if you had to take the other side sacks
00:39:08
you know the problem is they have a very
00:39:10
specific strain of data that they focus
00:39:13
on and that data has all these weird
00:39:16
anomalies to it like you know they
00:39:18
should look at rent data but the way
00:39:20
that the rent data works is that you
00:39:22
know you bleed it in one-sixth a month
00:39:25
over six months just as an odd example
00:39:28
or like use card data only comes in a
00:39:30
certain way so I think they're driving
00:39:32
in the review mirror I think there is
00:39:33
something to that I think it's simpler
00:39:35
than this which is listen I think all
00:39:36
politicians do this which is when they
00:39:38
get bad news they want to spin it and
00:39:40
they're going to delay acknowledging the
00:39:42
bad news as long as possible so what
00:39:44
happened last summer when this inflation
00:39:46
started they all dismissed it it was all
00:39:48
a talking point I mean every single one
00:39:50
of them and here's the crazy thing is
00:39:51
Jay Powell he's the only Trump official
00:39:54
who got reappointed by Biden by a huge
00:39:57
majority how do you think that happened
00:39:59
and when did it happen it happened at
00:40:01
the end of May last summer so just when
00:40:03
this inflation print came out and yell
00:40:06
into the administration were saying it
00:40:07
was transitory that's when Powell was up
00:40:10
for renomination and he swept through
00:40:12
the only Trump appointment to basically
00:40:15
be renominated without even a question
00:40:17
by Biden why because he got on board the
00:40:19
talking points he wasn't gonna basically
00:40:21
Buck them at that time so he waited six
00:40:24
months he bought into the talking points
00:40:26
that was a hundred percent political 100
00:40:29
I told you I read Paul it's a very
00:40:31
compelling argument I read them there
00:40:33
it's really compelling it's really it's
00:40:35
sad but compelling sax you should read
00:40:37
the Paul volcker uh book keeping at it
00:40:39
he basically says Reagan came to him off
00:40:42
site where they knew they wouldn't be
00:40:43
recorded and told them do not raise
00:40:45
rights uh so this idea that the FED is
00:40:48
independent like history now has shown
00:40:50
us it is not like the the there is
00:40:52
massive uh political pressure on them I
00:40:55
I think especially at the time driving
00:40:57
in the review mirror clearly the data
00:40:59
they have is not great and then all this
00:41:00
data is nuanced you know jobs and this
00:41:03
massive amount of jobs we've had in this
00:41:05
country is because of you we have a new
00:41:07
immigration policy we don't let people
00:41:08
into this country we kick out phds that
00:41:10
we trained and then housing we have eye
00:41:12
buyers buying this so to your point
00:41:13
jamoff I think a lot of the data has
00:41:16
changed and they're they've got a bad
00:41:18
data set they have a bad dashboard and
00:41:20
they're driving with bad information
00:41:21
they don't know their Direction they
00:41:23
don't know their speed perfectly if you
00:41:24
want more Fidelity on the data you're
00:41:26
right if you went to a board of
00:41:27
directors meeting for your company and
00:41:29
said
00:41:30
how's the business doing and the CEO
00:41:32
says well you know well we're going to
00:41:34
have data from six months ago and it's
00:41:36
like okay I got that but what about like
00:41:38
last week uh you would fire that CEO to
00:41:41
your point Jason
00:41:43
um and these things are knowable today
00:41:45
like there are businesses for example
00:41:47
that are selling billions of dollars
00:41:49
worth of like iot sensors here and there
00:41:51
energy sensors here everything is
00:41:54
connected to the internet everything is
00:41:56
automated everything is running in code
00:41:59
um you would think that the government
00:42:00
would say there's a national level
00:42:02
directive here to get this into some
00:42:04
kind of a system that we can use because
00:42:06
these decisions are becoming more and
00:42:08
more important
00:42:09
I think that would be a wonderful idea
00:42:11
and a project and what had huge value
00:42:14
a Manhattan project for understanding
00:42:16
the economy on a very granular level we
00:42:19
you invested in a startup at one point I
00:42:20
remember I heard the pitch where they
00:42:22
had people around the world taking
00:42:24
pictures of food prices Africa India the
00:42:27
United States anywhere and then putting
00:42:29
them into a database normalizing them so
00:42:31
you could know the price of tomatoes or
00:42:32
potatoes on a global basis you know and
00:42:35
normalizing all that data they don't
00:42:36
seem to have this data there
00:42:38
they're talking about August data and
00:42:40
it's you know we're now in October
00:42:42
it's a really odd situation I think you
00:42:45
know our friend
00:42:46
Brad grosser made this point which was
00:42:48
that look in this last fomc meeting the
00:42:51
FED raised their forecast for what the
00:42:54
neutral interest rate would be from
00:42:56
three and a half to four point six
00:42:57
percent so in two months they raised
00:43:00
their forecast by over 100 basis points
00:43:02
what is that based on like is there a
00:43:03
model I assume there is a model I assume
00:43:06
there's data so why don't they just open
00:43:07
source that why don't they let the
00:43:09
markets like see the model they're using
00:43:12
so we have a little more predictability
00:43:13
of course they always have the
00:43:15
discretion to bucket or not follow it or
00:43:17
whatever or change it but like you know
00:43:20
wouldn't that be a better approach is to
00:43:22
like let us see the data and the models
00:43:24
in real time as it's happening and then
00:43:26
the community like like an open source
00:43:28
project could actually like Fork the
00:43:31
model and actually create like better
00:43:32
ones well to your point to your point
00:43:35
like there's the the FED is actually
00:43:37
known as the gold standard of
00:43:38
transparency so the IMF has kind of like
00:43:40
a a view in how all these central banks
00:43:42
act last week they actually explore
00:43:45
created and this is good this hurts me
00:43:49
to say Canada
00:43:51
because of their lack of transparency
00:43:52
apparently Canada doesn't even put out
00:43:54
minutes
00:43:55
and so they're like hey Canada you uh
00:43:57
you guys like yeah and you know well
00:43:59
Canadians are I mean the Canadian
00:44:01
government at least like total moral
00:44:03
virtue signalers but they don't value
00:44:04
transparency apparently
00:44:07
but to your point David there is a lot
00:44:09
of opacity
00:44:11
in these things that really determine
00:44:13
how the real world works and the impacts
00:44:15
the individual people are going to go
00:44:17
and get ratcheted way up and nobody
00:44:19
really knows what to expect even though
00:44:22
the data is there sitting in plain sight
00:44:24
I think two things can be true
00:44:27
I think
00:44:30
the Fed
00:44:31
the process of setting Central Bank
00:44:34
rates by the Federal Reserve
00:44:38
should be reset
00:44:41
I also think that it could be true that
00:44:42
the FED is not responsible
00:44:44
fully for a lot of the conditions we're
00:44:47
now facing
00:44:48
we did have a bunch of policy decisions
00:44:51
that the whole world got swept up in and
00:44:54
seemed to accept as appropriate at the
00:44:56
time when we shut the global economy
00:44:58
down
00:44:59
and there was some weird assumption or
00:45:02
belief that fiscal policy would allow us
00:45:05
to soft land or recover out of that and
00:45:08
at the end of the day all that fiscal
00:45:10
policy did and I remember I was speaking
00:45:13
with
00:45:13
a smart person at the time and he said
00:45:17
all the fed's going to do is they're
00:45:19
just going to inflate everything and
00:45:20
it's going to take a while and
00:45:21
everything will inflate and that way
00:45:22
everyone will feel good for a while but
00:45:24
you can't just stop the spigot of
00:45:26
capital moving Goods moving and services
00:45:27
moving for months on end and assume that
00:45:31
the repercussions will not actually be
00:45:32
felt extremely harshly and at some point
00:45:35
things are going to come home to roost
00:45:36
and that is what's happening there was
00:45:38
no winning solution for the fed or for
00:45:41
any Central Banker
00:45:44
in light of the policy decisions that
00:45:46
were made to shut the global economy
00:45:47
down when covid began not to argue
00:45:50
whether or not that was appropriate but
00:45:52
that was simply a statement of fact I
00:45:54
said it before and I don't understand if
00:45:56
you were to take a first principle's
00:45:58
point of view on this today and say hey
00:45:59
let's create a central bank and how
00:46:00
should it operate you would take all the
00:46:02
data from into it from PayPal from visa
00:46:06
from MasterCard from the internet you
00:46:08
would take all of that data you would
00:46:10
let the algorithms or the AI or the
00:46:12
software figure out what is most
00:46:14
predictive of certain inflationary
00:46:16
recessionary totally and growth
00:46:20
indicators totally and you would
00:46:22
basically say look X percent growth X
00:46:25
percent inflation solve for what the the
00:46:27
central bank's interest rate should be
00:46:29
and it should vary at a hundredths of a
00:46:31
percent or a basis point every day
00:46:34
and every day the rate is reset and the
00:46:36
software resets it and to have you know
00:46:39
some degree of human logic or oversight
00:46:41
seems appropriate but to have a decision
00:46:43
made in quarter percent increments once
00:46:46
every couple of weeks uh seems seems
00:46:48
kind of Arcane so I think both things
00:46:50
are true the FED isn't necessarily fully
00:46:52
responsible we all want to point fingers
00:46:54
you know we can point fingers at at the
00:46:57
the Mania that swept over the entire
00:47:00
world when we started our podcast and
00:47:02
everyone was like what the hell is going
00:47:04
on why are we locking down the world and
00:47:06
this is nuts and it felt nuts and the
00:47:08
response may or may not have been
00:47:09
appropriate but at the end of the day
00:47:11
there was a cost and the cost is going
00:47:13
to be born for very likely a decade or
00:47:15
more if we are able to get through it
00:47:17
all a lost decade is a possibility
00:47:19
handset central banks can be Rewritten
00:47:21
so yeah well I think there's actually
00:47:22
two original sins of the economic crisis
00:47:24
we're in one is lockdowns you're right
00:47:26
like that was a fiasco it didn't do
00:47:29
anything to stop kovid it was an
00:47:31
economic disaster and then we
00:47:32
overreacted to lockdowns by them
00:47:35
printing all of this money both fiscally
00:47:37
and through expansionist monetary policy
00:47:39
so freberg's right about that I but I
00:47:42
think the other original sin here is the
00:47:44
the QE and the zerp right the zero
00:47:46
interest rate policy that began in 2008
00:47:49
2009 we broke the glasses emergency
00:47:52
totally yeah and then it just became
00:47:54
standard like it was on autopilot why
00:47:56
did we keep printing why did the
00:47:58
government keep buying it was a long
00:48:00
tail event that became the mean
00:48:02
problem is that every time government is
00:48:05
a bad idea I mean it's just yeah Milton
00:48:07
Friedman once said there's nothing quite
00:48:08
so permanent as a temporary government
00:48:10
program how many times have we seen this
00:48:12
every time the government's supposed to
00:48:13
do something on a one-off emergency
00:48:15
basis like zurp it ends up becoming
00:48:17
institutionalized we still have kids in
00:48:19
schools in California wearing masks I
00:48:21
mean that it's the same crazy thing that
00:48:23
people cannot get off these programs the
00:48:25
the thing about zurp which if you look
00:48:27
back
00:48:28
what really happened if you think about
00:48:30
like how people live their lives every
00:48:32
day what what if what has happened in
00:48:34
our view of government and politicians
00:48:36
it's really eroded since 2007-2008 right
00:48:39
there's huge amounts of rancor nobody
00:48:42
gets along everything tends to happen on
00:48:44
partisan lines and the reason I think
00:48:47
that that was allowed to happen or that
00:48:49
accelerated is actually because of zurp
00:48:51
because if you think about it if you had
00:48:53
failed policy
00:48:55
right and the economy was completely
00:48:57
broken
00:48:58
politicians would actually have to get
00:49:00
together and try to solve the problem
00:49:01
themselves and the last time they really
00:49:04
did that was actually in the great
00:49:06
financial crisis if you look at tarp and
00:49:08
if you look at how all of these smart
00:49:10
people actually had to get together in a
00:49:12
bipartisan way to figure out how do we
00:49:14
bail out America and prevent a banking
00:49:16
crisis that was the last real effort
00:49:19
that touched a lot of people but then
00:49:21
David as you said on the heels of that
00:49:23
we broke the glass and we've been
00:49:25
fighting ever since and the peak of that
00:49:28
fighting was basically Donald Trump
00:49:30
getting elected and so I think like what
00:49:32
it shows is that if you have these
00:49:34
irrational Central bankers
00:49:36
that will or that are willing to
00:49:38
constantly bail people out you will
00:49:40
never get a high functioning government
00:49:42
because policy is irrelevant good policy
00:49:45
doesn't matter I think our policy
00:49:47
doesn't matter if any of it goes wrong
00:49:50
the central Banker will come in and bail
00:49:52
us out well and the the second and third
00:49:54
order impact of these is can become
00:49:56
quite acute and just for people who
00:49:58
heard the word zurp like three times
00:50:00
zero interest rate policy basically
00:50:02
keeping interest rates very low very
00:50:04
dangerous to do because you get [ __ ]
00:50:06
like this like look at the number of
00:50:08
unemployed people
00:50:10
per job opening and if you just look at
00:50:12
this like ratio this is the number of
00:50:14
jobs per unemployed person it gets way
00:50:17
out of whack and then if you look at
00:50:18
this other chart just in terms of the
00:50:20
total number of job openings you know we
00:50:22
started we talked about this earlier in
00:50:24
the Pod hitting 11 million to burn that
00:50:26
office crazy then what happens if you
00:50:28
have too many jobs you don't let
00:50:30
immigration you you don't have a
00:50:32
functioning immigration policy well then
00:50:34
you get this great
00:50:36
um you know people quitting their jobs
00:50:38
quiet quitting and then
00:50:41
the Boomers saw their net worth go up so
00:50:45
high because of their retirement
00:50:46
accounts because of the stock market
00:50:47
boom and because of the housing boom you
00:50:50
had all these rich parents now who are
00:50:52
bailing out their kids who refused to go
00:50:54
to work and labor participation goes
00:50:55
from 70 down to 62 these are the
00:50:58
unintended consequences of zurp that you
00:51:01
know now how do you get a generation to
00:51:02
go back to work if their parents have
00:51:05
you know a two million dollar home and 3
00:51:07
million in stocks or a million dollar
00:51:08
homes
00:51:10
yeah and that's what they're doing now
00:51:12
they're like we're going to break this
00:51:13
we're gonna we're gonna get Google and
00:51:15
apple who have unlimited cash to do a
00:51:18
riff
00:51:19
those companies don't need to do a riff
00:51:21
they're doing it because they have no
00:51:22
choice now
00:51:24
because they want to break the economy
00:51:26
so hard Boomers have 71 trillion in
00:51:28
assets over March I mean the wealth
00:51:30
transfer that's going to occur between
00:51:31
these two generations is crazy why would
00:51:33
any U.S except for Millennial with a
00:51:35
boomer parent even go to work if they've
00:51:37
got a million U.S Boomers have 71
00:51:39
trillion dollars in assets is that what
00:51:41
you said no yeah that's the number I
00:51:43
have here so an entire turn of global
00:51:45
GDP in savings that's about one-seventh
00:51:48
of the world's total assets it's just a
00:51:50
lot of Locked Up well
00:51:52
and this monetary policy was done by
00:51:54
Boomer 70 trillion
00:51:57
controlled by 76.4 million people yeah
00:52:00
so if you want to really talk about the
00:52:03
you know the rich in a global context
00:52:06
the Richer very specifically U.S Boomers
00:52:09
yeah that's one-seventh of the world one
00:52:12
seventh of the world's assets is
00:52:14
controlled by 76 million people how much
00:52:16
of it is their homes
00:52:18
I mean they were they were at Woodstock
00:52:20
they you know they lived the best life
00:52:22
in the best times they enjoyed the most
00:52:25
of the peace dividend in the 80s and the
00:52:27
90s and the 2000s they are the ones that
00:52:31
control everything
00:52:33
it's pretty crazy
00:52:37
it's I think it's less like Jeff Bezos
00:52:39
and Gates and musk it's Boomers that if
00:52:44
you want to go and really zoom out and
00:52:45
get it right it is Boomers
00:52:47
it's one percent of the global
00:52:49
population that controls one seventh of
00:52:51
the global wealth and they're all in the
00:52:54
united U.S Boomers hiding in plain sight
00:52:56
U.S Boomers there you are well once
00:52:59
these housing prices decline and the
00:53:00
stock market declines that number is
00:53:02
going to shift and that really is what's
00:53:03
fundamentally happening with the fiscal
00:53:05
policy and the effects that's happening
00:53:07
today it's happening today which is a
00:53:09
redistribution of that value because
00:53:11
we're basically deflating all those
00:53:13
assets now we're deflecting the average
00:53:16
Boomer is and we're going to deflate
00:53:18
real estate assets I mean if you just do
00:53:20
the math on that back of the envelope
00:53:21
these boomers are worth a billion a
00:53:23
million dollars each like think about
00:53:25
that like every Boomer is worth 900k a
00:53:28
million something in that range 1.2
00:53:30
million I mean it's bonkers
00:53:32
that's the average
00:53:35
that's how much wealth they have Bonkers
00:53:38
you you two are a boomer Jacob no we're
00:53:41
Gen X
00:53:43
we're Gen X can we get the worst we had
00:53:45
the we had like we got really shafted
00:53:46
it's like you know we grew up with
00:53:48
flannel
00:53:49
Alanis Morissette Alanis Morissette no
00:53:52
hold on hold on
00:53:54
Smashing Pumpkins
00:53:57
93 was probably the best year Smashing
00:54:00
Pumpkins ever did it for me Billy
00:54:01
corgan's voice was always like ah yeah
00:54:03
really annoying Rage Against the Machine
00:54:05
can we do a quick shout out for
00:54:08
um Julio sad to hear that he passed
00:54:11
we're here for you yeah I mean it was
00:54:13
really sad the guy was uh how old was he
00:54:15
50. were you a big fan of Coolio's I
00:54:18
love cool in the 90s his Coolio story
00:54:21
from the Pod when he said Gangster's
00:54:23
Paradise I feel you
00:54:25
yeah and then when I saw him at Sax's
00:54:27
birthday last year I was like dude I
00:54:30
love Coolio I mean I cannot tell you
00:54:32
what a big fan I am what was the line
00:54:34
you said to him you said I feel you I
00:54:36
said I appreciate you I appreciate you I
00:54:38
appreciate you
00:54:40
we fly down for the birthday
00:54:42
they you know they shuttle you on the
00:54:44
cars from the plane to the to the house
00:54:46
we get to the house and you know we're
00:54:49
all waiting of course sax is late two
00:54:50
and a half hours to his own party we're
00:54:52
all hanging out starving but then we go
00:54:54
into the party and then they have like
00:54:56
uh Coolio shows up so we're like sitting
00:54:59
down to dinner for course two all of a
00:55:01
sudden pop comes out of the the woodwork
00:55:03
Coolio I lose my [ __ ] I run up on the uh
00:55:08
so dance before I grew up Coolio like
00:55:10
it's like high school jams man I mean
00:55:12
that's like in the car cruising and at
00:55:14
this point I'm like seven tequila
00:55:16
watermelon Tequilas in so I'm playing oh
00:55:18
my God
00:55:21
on the Dance Floor you know jamming up
00:55:24
to Coolio I think Kaleo thought I was
00:55:27
sex you know because he's like yeah he's
00:55:29
like oh two South African Jews you guys
00:55:30
all look the same Coolio comes up starts
00:55:33
high-fiving me and hugging me and I'm
00:55:35
like What's Up Coolio my God this is
00:55:36
like a dream come true he's like hugging
00:55:39
me his face is right next to my face I
00:55:41
didn't know what to say and I like I'm
00:55:43
I'm I've had a little bit of tequila and
00:55:45
I and I whisper in Coolio's ear I'm like
00:55:47
oh no I appreciate I appreciate you
00:55:54
I appreciate you wow
00:55:59
oh my God I think I saw Freeburg throw
00:56:02
his panties on stage 201 yeah
00:56:08
know what to say I mean what do you say
00:56:10
clearly clearly you don't know what to
00:56:12
say yeah my team my my team and TPB they
00:56:16
had a they had a cameo made for me of
00:56:18
that Coolio sent in it was super
00:56:20
heartfelt and awesome sax posted it on
00:56:22
the internet I think yeah retweeted it
00:56:24
yeah retweeted it and it was uh
00:56:27
I don't know man it was uh he was he was
00:56:29
actually a super nice guy great guy and
00:56:31
uh it was super sad yo Dave
00:56:35
it's your friendly neighborhood Coolio
00:56:37
bro
00:56:38
I'm out here on the golf course thinking
00:56:40
about you
00:56:42
I appreciate you man
00:56:44
so I want to wish you a very very very
00:56:46
happy birthday man
00:56:48
you feel me
00:56:49
I want you to drink it I want you to
00:56:52
smoke good I want you to eat good I want
00:56:54
you to have some fun bro
00:56:56
go big do it right
00:57:00
yo Dave happy birthday man from Coolio
00:57:02
Shaka Zulu man well all the stories are
00:57:05
coming out now and not your experience
00:57:07
was not unique he touched everybody he
00:57:10
met literally these college kids were
00:57:12
like genuine very kind like yeah he was
00:57:16
a real super friendly and like you know
00:57:17
and and like wanted to ask about you I
00:57:19
mean it's like a very like
00:57:20
I could have been a politician if you
00:57:22
didn't become a music a music Superstar
00:57:26
he looked incredible he looked like he
00:57:29
was 25. I mean he literally went to
00:57:33
these college kids met him he went back
00:57:35
to their like you know uh frat house he
00:57:38
cooked them dinner and then he got a
00:57:40
guitar out with them and he sang
00:57:41
gangster paradise with them and he like
00:57:43
orchestrated it with the crowd singing
00:57:46
whatever he was then there was a video
00:57:48
of him in Dublin on the bar singing can
00:57:51
I just say something to I I've given the
00:57:53
message uh
00:57:56
before yeah before but like you know
00:57:59
take care of your health yeah take care
00:58:00
like there there are these incredible
00:58:03
drugs I just want to call out Health as
00:58:06
wealth
00:58:07
if Lipitor for example or Crestor or
00:58:09
these statins are not working for you
00:58:12
there's this next Generation kind of
00:58:13
drug called the pcsk9 inhibitor which
00:58:16
essentially is uh effectively a gene
00:58:19
therapy that's modeled after this very
00:58:21
specific group of folks in the nordics I
00:58:23
believe who actually have effectively
00:58:26
immunity against heart disease and so
00:58:28
it's taken 20 years to refine this drug
00:58:29
but this drug is a wonder drug and you
00:58:31
know there are versions of it now that
00:58:33
are injectable you know once every six
00:58:35
months or whatever so go and ask your
00:58:37
doctor if you're not if statins don't
00:58:39
work for you look at the pcsk9 inhibitor
00:58:42
and then separately after you're 45 or
00:58:44
so you should
00:58:45
again a CT angiogram because these
00:58:50
things are really important or you know
00:58:51
a heart flow
00:58:53
where they actually inject a die they
00:58:56
characterize all your veins they give
00:58:57
you a calcium score
00:59:00
may not prevent this but at least if
00:59:02
it's if it's something cardiac related
00:59:03
you can get to the bottom of it and it's
00:59:06
a knowable thing nowadays yeah rest in
00:59:08
power to
00:59:09
um our friend and uh
00:59:12
yeah take care of yourselves your health
00:59:14
and uh speaking of Health shout out to
00:59:16
Gwyneth Paltrow uh G pal uh who
00:59:20
in her group newsletter pointed out that
00:59:23
she loves the all in pod and has to be
00:59:26
honest she's obsessed with the
00:59:28
personalities a little bit
00:59:30
anybody want to handicap that listen
00:59:32
let's be honest uh what doctors say not
00:59:35
you if that's what you're trying to say
00:59:36
I've met her actually doctors say she's
00:59:39
a delightful if you want if you want to
00:59:40
live in health after a meal the best
00:59:42
thing to eat is a little dark chocolate
00:59:45
hmm do you get your dark chocolate from
00:59:47
goop do you have goop dark chocolate
00:59:49
Jason I was trying to make a story where
00:59:51
I am the dark chocolate where I'm saying
00:59:52
that I am her favorite personality you
00:59:54
[ __ ] [ __ ] so you're handicapping
00:59:57
that you're her favorite she said she's
00:59:58
obsessed with the personalities plural
01:00:00
I'm gonna I'm gonna where did she rank
01:00:02
her besties I need to know I'm gonna
01:00:04
rank as rebirth oh really you think
01:00:07
she's a free person that makes that's on
01:00:09
yeah okay
01:00:10
then me then you okay I'll take it the
01:00:14
fact that
01:00:15
Gwyneth Paltrow even understands like
01:00:17
who we are is a win in my book so I'll
01:00:19
I'll be number four on her list but uh G
01:00:21
pal if you could rank the besties in
01:00:23
your next newsletter that would be
01:00:24
appreciated
01:00:25
and we'll we'll take rank your besties
01:00:31
all right if sakshi wants some red meat
01:00:33
you'll I I saw you wrote a piece you
01:00:35
want your red meat should we throw it to
01:00:37
you yeah yeah all right I think we we
01:00:40
need a Ukraine update because I mean
01:00:42
we're talking about all the reasons that
01:00:44
there could be a silver lining or the
01:00:46
Market's bottomed out I don't think you
01:00:47
can know for sure that the markets are
01:00:50
going to bottom out unless you know that
01:00:52
there's going to be successful
01:00:53
resolution of this Ukraine war at least
01:00:56
a non-escalation of it and all the
01:00:58
things that have happened in the last
01:00:59
couple weeks have been
01:01:01
on the road towards escalation exactly
01:01:03
so in the last like just few days you've
01:01:06
had zelinski saying that they want to be
01:01:07
admitted to Nato you've got Putin
01:01:10
basically annexing or saying he's going
01:01:12
to Annex the Don bass and somebody we
01:01:14
don't know who but according to radic
01:01:16
Sikorsky who's the Polish foreign
01:01:18
minister he think the U.S somebody blew
01:01:21
up the Nord pipeline so what is the
01:01:23
common denominator did they say was
01:01:25
blown up was it one or two was this
01:01:28
so it was the one that was actually like
01:01:31
working what is the common denominator
01:01:33
of all these things they're all
01:01:34
eliminating key elements of what a peace
01:01:37
deal would look like so everyone
01:01:39
understands that a peace deal would
01:01:41
require uh zielinski to give up on NATO
01:01:44
it would require Putin to make some
01:01:46
compromises likely in the Don bass and
01:01:50
it would require the sanctions to be
01:01:52
lifted and the energy flows to be turned
01:01:54
back on well so now those things
01:01:57
basically have been removed from the
01:01:59
table or at least potentially that's
01:02:00
what's happening so I don't see how
01:02:03
you're going to get a peace deal now and
01:02:05
so if you remove all the off ramps
01:02:08
what's left escalation
01:02:10
wow so it seems to me this thing's just
01:02:11
going to keep escalating I thought you
01:02:13
wrote a good piece in the American
01:02:14
conservative should America go all in on
01:02:16
Ukraine if you haven't read it it is 80
01:02:18
of rehash of what we've talked about
01:02:20
here for the last year but there's 20
01:02:23
new in it I think and I thought what was
01:02:25
interesting uh in terms of new stuff you
01:02:28
put in the piece and it's a good summary
01:02:30
of you know poker strategy versus what's
01:02:31
going on here is that we've already
01:02:33
proven you know if you did want to prove
01:02:37
that Russia is not a threat with the
01:02:39
exception of their nuclear we now have
01:02:41
proven that they're really not going to
01:02:43
be able to do a domino and go into all
01:02:45
these different countries with the
01:02:46
exception of obviously the threat of
01:02:48
nuclear power so I thought that was well
01:02:50
that was really a point yeah yeah what I
01:02:52
was really responding to in that piece
01:02:53
is the assertion by the media that Putin
01:02:56
is bluffing how do they know that
01:02:59
you know how do they know that like you
01:03:01
know I think all of us understand poker
01:03:03
pretty well and none of us ever would
01:03:06
have the confidence to assert that we
01:03:09
know exactly what cards our opponent
01:03:12
holds in any given hand and how exactly
01:03:14
they'll play them what do we do what do
01:03:16
smart players do we put our opponent on
01:03:18
a range a range of possible hands of
01:03:22
possibilities and then we evaluate what
01:03:25
did their previous actions tell us what
01:03:27
story are they telling through their
01:03:28
previous actions well what story has
01:03:31
Putin been telling this is not a guy who
01:03:33
Bluffs in my opinion or at least that is
01:03:36
not the story there's a chance he he
01:03:38
would pop off a tactical nuke it's a
01:03:40
non-zero chance if that if his life is
01:03:43
on the line he is incentivized to use
01:03:46
every weapon at his disposal to try and
01:03:49
prevent his violence his life isn't on
01:03:51
the line here he can he can back out oh
01:03:53
yeah but where's this thing headed if
01:03:54
there's no compromise I I think they you
01:03:56
know I I I'm gonna stick with my
01:03:57
original prediction that we wanted to
01:03:59
you ankle Putin we wanted to prove he
01:04:02
didn't have you know as much strength as
01:04:03
he did and we wanted to exhaust his
01:04:05
resources so we could finally
01:04:08
basically get him out of office at some
01:04:10
point so I do think regime change via
01:04:12
exhausting him and I think it seems to
01:04:14
have worked we have exhausted
01:04:15
you're agreeing with me
01:04:18
I agree that we have exhausted his I
01:04:21
mean he's proven he can't fight a ground
01:04:22
war right I mean that that's a pretty oh
01:04:24
he's escalating now he's escalating you
01:04:27
think he's just gonna roll over he's not
01:04:28
going to roll over I think he but I
01:04:30
think what we've proven haven't we is
01:04:32
that he can't fight a ground war
01:04:34
effectively he doesn't have the Army he
01:04:37
doesn't have the weapons uh compared to
01:04:39
the west and he's been exhausted you
01:04:41
know and I think his he's spent now the
01:04:44
only thing he has left is what you're
01:04:45
talking about is the new corruption
01:04:46
literally no no well no there's there's
01:04:48
more intermediate options first of all
01:04:50
he's just called for the the
01:04:52
mobilization of 300 000 more troops so
01:04:54
that's going for step one people are
01:04:56
coming into the country yeah exactly
01:04:58
look there's gonna be very high
01:05:00
yeah they're gonna be very high costs on
01:05:02
the Russian side I would not assume that
01:05:05
means that there's something in it for
01:05:06
us
01:05:07
even with this um you know the the
01:05:10
conscription he's doing this draft he's
01:05:13
doing forced draft I mean he is kind of
01:05:15
redundant but
01:05:16
um this conscription or draft whatever
01:05:18
you want to call it has proven that he
01:05:19
doesn't even actually have the standing
01:05:21
inside his own country people are
01:05:23
leaving they're breaking they're looking
01:05:25
up how to break their arms like it's
01:05:26
it's pretty dark I think you're making a
01:05:27
lot of assumptions there just like the
01:05:29
media who are saying that he is
01:05:30
definitely bluffing what I'm saying is
01:05:31
we cannot know that he's definitely
01:05:33
bluffing no the United States of America
01:05:35
is blessed with being the most safe and
01:05:38
secure country in the world and really
01:05:41
in human history and the history is full
01:05:44
of humans constantly being at war with
01:05:46
each other so that is a really valuable
01:05:48
thing that we have why are we so secure
01:05:50
we're surrounded by gigantic oceans we
01:05:53
have these gigantic moats in addition
01:05:55
thanks to the wisdom of the Monroe
01:05:57
Doctrine for 200 years we have prevented
01:05:59
any great powers from getting a foothold
01:06:00
in the western hemis Fleet we are
01:06:02
completely dominant here and no one
01:06:04
could ever stage an invasion of the
01:06:06
United States we only have one one
01:06:07
vulnerability just one icbms that's
01:06:11
really it so what are we doing we are
01:06:13
basically engaging in a proxy war with
01:06:15
the person in the world who has the most
01:06:17
icbms and we are basically putting
01:06:20
ourselves on an escalatory path with him
01:06:23
this would be like if Achilles had gone
01:06:25
in front of the walls of Troy and
01:06:27
basically taken off his armor and stuck
01:06:30
his foot in the air and drawn a little
01:06:31
Bullseye around his his heel that's what
01:06:34
we're doing the other side in the world
01:06:35
why would we do that why would we do
01:06:37
that if they are the last real
01:06:40
um threat and they are the Achilles heel
01:06:42
if we can uh they're not the last threat
01:06:44
they're not the last threat we're never
01:06:46
going to be out of threats okay well we
01:06:48
got two major ones with icbms but anyway
01:06:51
it looks like we're in the end game now
01:06:52
what do you think happens here we're not
01:06:54
in the end game we're on a path towards
01:06:55
escalation because all the off-ramps
01:06:57
have been removed that's my point and
01:06:59
instead of saying instead of trying to
01:07:01
find a diplomatic solution first of all
01:07:03
we keep removing off-ramps and then we
01:07:05
we blithely disregard the threat to
01:07:08
ourselves by saying he must be bluffing
01:07:10
this is incredibly stupid questions hold
01:07:14
on a second the better question to ask
01:07:15
is what's in it for us what's in it for
01:07:18
the United States of America what is the
01:07:20
vital interest that compels us to risk
01:07:23
our security there isn't one this Don
01:07:26
bass region hold on this donbass region
01:07:28
is the Franz Ferdinand of this situation
01:07:30
it is not historically important to us
01:07:33
we have invested in it all of this
01:07:36
importance and we are potentially
01:07:38
turning a regional War into a World War
01:07:40
we are sleepwalking towards this unless
01:07:43
somebody finds an off-ramp we are
01:07:45
escalating our way into a much larger
01:07:46
conflict that is my point
01:07:49
and I don't see how anyone I don't see
01:07:50
anyone should re-enter the markets with
01:07:52
this geopolitical risk hanging over our
01:07:54
heads yeah this is kind of like what I
01:07:56
said a few weeks ago and JP Morgan put
01:07:59
out a analyst report today saying that
01:08:01
they were shifting from being
01:08:04
you know call it roughly positive sort
01:08:06
of like chamoth's Point earlier about
01:08:08
being a little bit constructive in the
01:08:09
markets right now and coming in and
01:08:10
finding opportunities to buy
01:08:12
to
01:08:14
realizing that the sum of the portfolio
01:08:17
of tail risks right now
01:08:20
you know outweighs the upside that may
01:08:22
arise from finding these low priced
01:08:24
opportunities in the market and that
01:08:25
seems to be the prevailing Market
01:08:27
sentiment right now is that there are
01:08:30
too many of these moments that while
01:08:33
each one of them is low probability the
01:08:36
impact is of such high severity that the
01:08:38
aggregate value expected value or
01:08:40
expected loss of all of them is actually
01:08:43
quite significant and that is heavily
01:08:44
Weighing on the market and so huge
01:08:46
amount of point I think and to the
01:08:48
question earlier about market conditions
01:08:50
one Catalyst for upside in the market
01:08:52
while there is fiscal strain and
01:08:54
economic strain and growth strain there
01:08:56
is also this geopolitical strain in the
01:08:58
market if one or more of these things
01:09:00
starts to resolve I think that weight
01:09:01
starts to come off the markets and you
01:09:03
can see look I can see the market taking
01:09:05
off like a rocket if Ukraine gets
01:09:07
resolved and I do think you're right
01:09:09
it's all fat tail risk that's about to
01:09:11
get resolved I think that can
01:09:12
potentially be
01:09:13
the political motivation here which is
01:09:16
that enough people like chamoth and you
01:09:18
start making the calls to your
01:09:21
representatives pointing out how
01:09:23
strained the market is because of this
01:09:24
tension in the region right now that
01:09:27
maybe there is some path to resolution
01:09:29
that becomes more active rather than
01:09:31
passive because of that this may be a
01:09:33
little controversial so we can talk
01:09:34
about it but I um think that the markets
01:09:37
would have reacted
01:09:39
much much more negatively
01:09:41
to a nuclear incident three months ago
01:09:45
then now and may not even react as much
01:09:49
as we may think it would three months
01:09:50
from now
01:09:52
but what do you mean by nuclear incident
01:09:54
you may not goes off or just a threat
01:09:57
you're saying if Putin blows up a new
01:09:58
the markets may not react that much I
01:10:01
think that the markets are
01:10:03
basically
01:10:05
um ring fencing Russia Ukraine risk in
01:10:09
terms of currency and stability but
01:10:13
that's sort of now gone away
01:10:14
we've ring fenced the energy risk
01:10:17
because it looks like energy reserves in
01:10:21
Europe are actually going to be pretty
01:10:22
meaningful they're going to spend
01:10:23
whatever it takes so all of the second
01:10:26
and third order effects it would be a
01:10:28
humanitarian crisis which would be
01:10:29
horrendous okay but the markets don't
01:10:32
whether we like it or not react to
01:10:34
humanitarian crises they react to the
01:10:37
second and third order economic impacts
01:10:39
of those things and if you actually try
01:10:42
to think about what the second and third
01:10:43
order economic impacts are
01:10:46
you're seeing many of those things get
01:10:48
solved and so what it would be it would
01:10:50
be a highly isolating effect it would be
01:10:52
a humanitarian atrocity he would be
01:10:57
completely cornered from a from a
01:10:59
worldwide perspective
01:11:01
um the the the monetary and fiscal
01:11:04
implications of that
01:11:06
um may not be as meaningfully disruptive
01:11:09
today as they would have been three
01:11:10
months ago that's what I'm saying
01:11:13
well it's one thing I should clarify I
01:11:15
like friedberg's analysis of the fat
01:11:16
tail risk because I'm not saying it's
01:11:18
likely that this conflict goes nuclear
01:11:20
but I don't need there to be a high
01:11:22
likelihood in order for me to be very
01:11:25
concerned about it because of how
01:11:27
disastrous an outcome that would be so
01:11:29
if you're doing an expected value
01:11:31
analysis it's really hard to analyze the
01:11:34
expected value or negative value of a of
01:11:37
a low probability disastrous event right
01:11:40
that's the classic fat tail risk I do
01:11:42
think that if the markets think they
01:11:44
have priced in the effect of this war
01:11:47
then I think that's an argument for a
01:11:50
lot of downside to this Market because
01:11:51
it seems to me that we're on a one-way
01:11:54
ratchet here all the off ramps for us a
01:11:57
piece or a diplomatic solution have been
01:11:59
systematically taken away and all that's
01:12:01
left are potential escalations so no I
01:12:05
hear you but how do those translate
01:12:06
those escalations
01:12:08
to outside of those two countries and
01:12:10
into economic terms for the rest of the
01:12:12
world oh my gosh well I mean if the war
01:12:13
spreads here I'll give you a couple of
01:12:15
scenarios I mean
01:12:17
well here's one I think we're just
01:12:18
assuming that China is going to stay out
01:12:20
of it imagine if you're China and you're
01:12:22
watching what's happening and you're
01:12:24
worried that actually Russia could lose
01:12:26
this war so badly that it emboldens
01:12:30
Hawks in America who want to Target
01:12:33
China next you know who are basically on
01:12:35
This Global struggle against autocracy
01:12:37
you're going to look at that and go wait
01:12:39
a second is it really in our interests
01:12:41
for Putin and Russia to be completely
01:12:44
toppled by This Global struggle against
01:12:47
autocracy it seems to me they could
01:12:49
enter the Russian side not militarily
01:12:52
but in terms of support so they would
01:12:54
have an incentive again not to lose an
01:12:56
ally and then by the same token I think
01:12:59
the Russians could lash out I don't
01:13:01
think they're going to go nuclear right
01:13:02
away but I think they could pull a
01:13:04
grozny
01:13:05
I mean don't you think that is
01:13:08
well when you know in the Chechen War
01:13:11
when Russia was losing they just rubbled
01:13:13
Grazie I mean they basically level it to
01:13:14
the ground so I mean Putin hasn't done
01:13:16
anything like that yet but if he's
01:13:18
facing defeat isn't that something that
01:13:22
would be on the escalatory ladder is to
01:13:24
basically start leveling Ukrainian
01:13:25
cities destroyed infrastructure and then
01:13:28
what is the response to the West yeah I
01:13:31
know I know because the West may say you
01:13:32
know what that's unacceptable to us I
01:13:34
agree no no I I look I'm not debating
01:13:36
how bad all of these things are I'm just
01:13:38
asking the question
01:13:39
what are the second and third order
01:13:41
economic impacts because the market
01:13:43
doesn't reflect human atrocities we may
01:13:47
want it to but it just doesn't do a good
01:13:48
job of that it does do a reasonable job
01:13:51
of reflecting a discounted set of events
01:13:54
in the future related to economic events
01:13:55
and impacts and all I'm saying is that
01:13:57
you know the most obvious impacts of
01:13:59
this war have been to currencies to
01:14:01
Commodities and to energy
01:14:03
and the world has had
01:14:06
six or seven months to reroute what
01:14:09
they've needed to roughly solve a large
01:14:12
percentage of those problems it doesn't
01:14:14
take the fact that this is a bad war and
01:14:16
it should end
01:14:18
I'm not saying any of it right right no
01:14:19
I look you make you make a good point
01:14:21
which is that look the Market discounts
01:14:23
cash flow so how do the cash flows get
01:14:25
impacted you maybe write that valuation
01:14:27
multiples have gotten close to
01:14:30
correction but I think the thing that we
01:14:32
don't really know is what earnings and
01:14:34
profits and revenues are going to look
01:14:35
like next year and part of that is about
01:14:37
the hard Landing right like how inflated
01:14:39
are all these companies revenues and
01:14:42
earnings because of what are you I hear
01:14:45
you but this is why that chart is so
01:14:46
important every other time except in
01:14:49
1983 in modern history so the modern
01:14:51
history that we have all lived
01:14:53
says that the stock market Bottoms in
01:14:55
the first third
01:14:58
of a process
01:15:00
and so if you think that this process
01:15:02
ends in 24 that's a roughly 24 month
01:15:04
process 21-month process we're in month
01:15:07
seven we're in the power rally of what
01:15:10
would map to the last six or seven
01:15:12
patterns of behavior
01:15:15
yeah I mean I I guess you may end up
01:15:18
being right about this prediction I
01:15:19
guess what I'm saying is that I
01:15:20
personally would not want to enter the
01:15:22
market until some of these fat tail
01:15:23
risks are taken off the table oh yeah
01:15:25
well talking about nibbling in the
01:15:26
market for a second I'm not saying
01:15:27
they're likely I'm just saying that yeah
01:15:30
I understand obviously none of us want
01:15:31
this to happen I'm just asking a very
01:15:33
specific question which is and making an
01:15:35
observation which is I wonder how the
01:15:38
markets would react and I I I don't see
01:15:40
it being down a thousand points and that
01:15:42
may be wrong but by the way it could
01:15:45
certainly be shocking to to see that
01:15:46
yeah the diversity of views that you
01:15:48
guys all share I think really represents
01:15:51
the market
01:15:54
what view do you have you too you have a
01:15:56
view
01:15:58
dude I I'm like what the [ __ ]
01:16:01
wow what is your hand no but what is
01:16:04
your view here's your view that we're
01:16:06
okay we're about to just go through the
01:16:07
toilet like what is your view
01:16:09
from an equity Market's point of view oh
01:16:11
just in general yeah like Equity markets
01:16:13
your temperature how do you feel like
01:16:14
how do you feel yeah I'm worried about
01:16:16
money not moving
01:16:18
what does it mean money not moving I'm
01:16:20
really anxious about
01:16:22
invested dollars everyone seems
01:16:25
I think I mentioned a while ago that
01:16:27
dollars were kind of locked up in March
01:16:29
and then I went to this conference and
01:16:30
people were like yeah we're loosening up
01:16:31
and making a plan again in July because
01:16:34
the market was kind of turning back up
01:16:35
and now Equity markets are turning down
01:16:37
Bond markets have turned down interest
01:16:39
rates have spiked and there's a bunch of
01:16:42
these currency problems so I'm very
01:16:44
nervous
01:16:45
about the flow of capital which I
01:16:48
remember happening in 08 and I remember
01:16:50
happening when we were all joking over
01:16:52
text when covet happened and we're like
01:16:54
hey the market can only go down 10 a day
01:16:56
for so many days in a row and everyone
01:16:58
was kind of like you know Jamal was
01:17:01
talking about wearing jeans instead of
01:17:03
he's like I could just wear the same
01:17:04
pair of jeans for the rest of my life or
01:17:06
something that's true demand destruction
01:17:11
yeah yeah he's like I don't need fancy
01:17:13
clothes I can just wear the same clothes
01:17:14
I have let's go into a storage locker to
01:17:16
pull those clothes out right
01:17:19
on sale rent the rent tomorrow the CEO
01:17:23
of Laura Piana did send me a note after
01:17:25
that podcast he's like is everything
01:17:26
okay
01:17:29
[Applause]
01:17:32
indicator of economic health is the rate
01:17:35
of rotation of chamat's closet because
01:17:37
that is he's like you know what I can
01:17:40
take this season off I'll just wear last
01:17:42
Summer's season
01:17:44
I would guess that the rate of rotation
01:17:46
of chemov's closet is probably
01:17:48
predictive of IPO Market you know what I
01:17:51
was I was there last one rotating it I'm
01:17:53
rotating it so maybe that's a good sign
01:17:55
the economy is about to read it again
01:17:56
I'm ready to take some companies public
01:17:58
no no I'm buying I'm buying stocks
01:17:59
because I was at chamat last week and it
01:18:01
was supposed to be black truffles and
01:18:03
then he jumped the fence all of a sudden
01:18:04
white truffles over my shoulder I was
01:18:07
like chef chef chef
01:18:11
all right Lesson Four The Dictator
01:18:15
uh the prince of panic attacks the
01:18:17
Sultan of science the queen of quinoa
01:18:20
himself so see the Kevin Hart show if
01:18:21
you're in San Francisco or San Francisco
01:18:23
he's hilarious and uh for Montclair
01:18:27
Ambassador David sacks the dictator
01:18:30
himself
01:18:33
it's moderate and we'll see you on
01:18:34
episode 99. love you guys love you guys
01:18:38
we'll let your winners
01:18:43
[Music]
01:18:57
somehow
01:19:02
[Music]
01:19:22
we need to get Mercies
01:19:27
[Music]
