E87: Emerging markets, Sri Lanka, 9.1% CPI, market sentiment, NASA's Webb telescope & more

wait that's not even a sweater that's a sweatshirt no no it's not even cashmere it looks like polyester or something okay quick freebrook come on the video where you're wearing the same thing as jkl so we can make a quick joke about it morons i mean you guys are so predictably dumb the two of you it's so itchy do you have a rash jason made me buy this outfit and i put it on and i'm like itching i'm about to take this thing off polyester wool polyurethane what's that made out of [Music] rain man david [Music] okay everybody welcome back to the all in pod episode 87. here we go tons of news going on thanks for all the

great feedback on episode 86. uh we're going to start with emerging markets oh again welcome to the program david freeburg sultan of science the dictator himself from his palace in sri lanka uh his new pal is in sri lanka he'll be taking over over there we'll get into that and sax is in a in witness protection right now apparently where are you sacks in this white nondescript room can you say where you are this is my soundproof padded room yeah oh is that what if that's what a biden's done your vitamin derangements in them they they put you in an asylum what do you do you rock back and forth and say inflation ukraine inflation ukraine no we just had the room

soundproof for you know better podcasting oh look at you taking the taking the job seriously i don't think it looks bad i think it looks good yeah you could put a little art behind you or something just put one of your monets behind you you know the ones you have in storage downstairs okay emerging markets are facing uh some huge challenges right now quick more quick primer on three types of markets developed emerging and the frontier market if you don't know developed markets are considered u.s japan europe their gdp growth is lower single digits typically in the emerging market it's roughly defined as developing but not

fully developed that includes countries like the brics which is brazil russia india china and recently added south africa many other markets are included in that they were previously called the third world in the 80s people didn't like that term investors will bet on them having uh higher gdp growth typically two times or three times what the developed world has china for example 2019 six percent growth u.s in 2019 2.1 growth and of course there's frontier markets these are viewed as small unstable illiquid generally risky if you look at something like kenya vietnam those would

fall into that category uh vietnam seven percent gdp growth in 2019 to the us is two percent sometimes people like to make bets on them here's a nice little chart for y'all to look at and you can just see china versus vietnam in the united states uh since the 80s and so why is this all important well the wall street journal reported last week that ems the emerging markets have been feeling massive pressure we'll get to sri lanka in a moment that's a frontier market to be clear but three things well we've got probably a half dozen things going on let me just highlight maybe the top five and then i'll hand it off to

the besties you have high bond in loan yields the debts debt rates are increasing in the emerging markets and frontier markets think what happens when you got a variable mortgage or you try to get a new market a new mortgage in the developing markets the developing market investors have stopped investing in emerging markets and frontier markets as you might suspect during a downturn and they're even pulling money out then you have surging inflation we all know about that and we're going to talk about inflation here in the u.s because we got the print this morning and slowing growth we've also talked

about this for the last six months on the program all these problems get exacerbated when economic growth slows and it's slowing globally and then finally we have the potential issue of contagion we don't know exactly what's going to happen when various countries are facing these challenges although we did tell you here what would happen with the ukraine shout out to uh sax and free bird fertilizer wheat oil all that good stuff and it's becoming very acute perhaps to carry canary canary in the coal mine is sri lanka breaking news president uh rajapaksa fled for the maldives and it's a state of emergency curfews were to

clear declared i think that's been canceled as of the taping of this we can get into the state of sri lanka your thoughts freedberg i know you've been chomping at the bit to discuss this yeah that was a good long intro i think um you know the the high level for me if you look kind of at debt markets around the world there's about 300 trillion dollars of global debt and i put this uh chart in the chat here nick you can put it on the on the video and about a hundred trillion of that debt globally is in um emerging markets and so these countries generally have you know much more kind of variable gdp growth

as well as challenges ultimately with their currencies most of this debt recently and and this has been a trend for a number of years lately has been issued in their local currency rather than in u.s dollars and so as the currency devalues it becomes more challenging for an investor to make a return if they're investing from a us dollar denominated base or some other dollar denominated base so um look the em the emerging markets are are heavily saddled i mean some of these countries have over you know 300 percent or 250 percent uh debt to gdp and what's really gone on recently

is that many of them as net importers of energy and food are going to struggle to make the stuff they need to make at home or to feed their people at home because of the rising inflation that's been happening around the world from the producers of those goods and services of those goods and so to import those goods is more expensive that makes it more challenging for people to be able to afford food to be able to afford energy this is part of what we're seeing happening in um in sri lanka what's compounding this is we have rising inflation in the u.s so as we've been talking about a lot the fed's been raising interest rates here

in the us which means that you can now buy treasuries that yield three percent if you're an investor around the world where else are you going to put your money except u.s treasuries in a market like this you want to buy three percent yield in u.s dollars versus you know getting 10 yield in you know some currency denominated account some currency denominated bond in a country you don't really know well or trust as much as the united states and so as a result a lot of dollars are moving out of emerging market debt into u.s debt and the price of that debt has collapsed and so we've seen in the last couple of months a decline of emerging market debt of about 20

this makes it harder for those countries to issue new debt to fund things and it's creating this really challenging spiral that may ultimately lead to defaults those defaults absolutely have a trickling effect because if one country starts to default and you're an investor in emerging market debt you're going to say hey wait a second this this this i just took a huge loss in this position you're going to start to sell off other emerging market debt and then it becomes harder for those countries to raise more debt and fund themselves and it can cause a cataclysmic spiral so you know it's a really scary scenario we're

wading into now and i think we really hope that the us starts to taper interest rates and we find some stability in these markets over the next couple of months because it's not just a food and energy crisis it's also a humanitarian crisis and ultimately could lead to a global financial crisis in fact it's highly complex but it's something that folks are tracking very closely here what's happening also is the companies that were already at risk are going to start feeling this impact we could jump into sri lanka if we want sri lanka has i think

a bunch of short-term issues and a couple of very long-term issues um let me set the backdrop because i think this is really interesting let's take um let's study sri lanka through the lens of two other countries jamaica and singapore if you go all the way back to 1960 so you know roughly when singapore became a nation the jamaican population in 1960 was 1.6 million people the singaporean population was 1.6 million people sri lanka's population was 9.8 million [Music] jamaica's gdp was 700 million singapore's gdp was 700 million sri lanka's was 1.4 billion now you fast forward to 2022 jamaica's gdp is about 13 billion

singapore's gdp has grown to about 360 billion um and sri lanka's gdp is 80 billion so like what did singapore do right what did jamaica kind of get right because one of the things that they kept in check was their population even though their gdp didn't expand that much so per capita income was still quite healthy and then what did sri lanka get right and what did sri lanka get wrong well some of the things when you look at singapore is that they found a way to embrace despite a very heterogeneous culture and sets of religions inside of that entity

inside that city-state they found a way to promote multiculturalism yet also promote english as the lingua franca why was that small thing so important because it allowed them to be a hub for the rest of the world in a way that many many other countries couldn't do the second thing that they had was a very low level of corruption because they had a leader in that case lee kuan yew and again some people in the west will paint it as slightly authoritarian you know he would paint it as asian values but the net result of it was very low levels of corruption a small but highly effective

public service and meaningful investments in education and health care to make that country grow over decades and within a generation that country completely you know exceeded all expectations sri lanka struggled through a civil war i was a byproduct of that civil war it was partly religious it was partly ethnic and it was 20 plus years in the making and in the happening and it took a very right-wing autocratic leader the brother of the current deposed president to basically root it out now in order to root it out there were enormous amounts of war crimes and all kinds of things that i don't think

anybody would support except it brought some amount of stability and so then you would have thought okay maybe this is the point at which you can now really start to grow but these guys yet again found a way to naval gaze and just to infuse so much corruption and graft inside of how the government was run by the way and it wasn't just the right it was also the left they spent two and a half times more on defense as of last year than they did when they were in wartime it doesn't make much sense the public service grew to the largest it ever did in a moment where you know you really should have prioritized private

enterprise so all of these things sort of created a situation where they fundamentally didn't know what they were doing so the other two issues there i think and that's a great summary of like really those frontier countries and what made them emerge singapore also has a great strategic location which sri lanka kind of shares they're both island countries strategically located for trade and then i guess the policies right singapore went on a very very aggressive uh tax and business policy effort did sri lanka do that as well and then maybe could speak to just how important those are as islands you know uh and their and their geography because jamaica doesn't

obviously have that i mean sri lanka has this massive growing importance as china has emerged the problem in these last few years is that they did everything possible to not just alienate china but to alienate everybody on every dimension possible you know they alienated china the the coup de grace was that there was an enormous shipment of fertilizer chemical fertilizer that was sent to the ports and it was summarily rejected and turned around because somewhere along the way the leadership in sri lanka decided that they uh were woke and so they enforced every farmer oh no to go organic the

problem with going organic and organic fertilizer was all the small farms shut down all of the large farms had 20 to 30 crop yield reductions the prices of food went crazy they reversed policies two or three times and really what they found as the you know they tried to go woke instead they went broke and all of a sudden all these other countries who were there trying to help said wait what is going on here so they offended china they offended the middle easterners uh they offended the japanese by cutting a light rail project that japan wanted to fund i mean in every step of the way they de-industrialized

this country found they didn't de-industrialize they tried to follow this woke agenda that is de-industrialization i mean reversing from like the modern techniques of industrial production like fertilizer and modern systems of farming is the industrialization it's it's um you know it's going to be a curse ultimately sacks to your point we we just discussed this last week with the farmers you know if you're in a frontier market trying to adopt the regulations and the strategic goals for the environment of the emerging market is like two giant hops it's it's it's probably insurmountable

well look there's a strong analogy between the populist uprising that's happening in the netherlands with the dutch farmers and the populist uprising that's happening in sri lanka basically they're implementing the same policies this is that sri lanka is a further down the road and it's a poor country to begin with so you know like jammoth mentioned in april of last year the sri lankan government banned the importation of chemical fertilizers and pesticides used in farming they again went with this idea they thought they could encourage organic farming so the result of that was that overall production agricultural production fell by a third and rice production fell by

43 and rice is you know the biggest staple in the country so now you got people there starving or going hungry you've got massive food insecurity as well as the whole economy basically has been crippled and the result of that is society has essentially collapsed so you know now the question is why did the sri lankan government feel compelled to adopt these policies a lot of it has to do with the fact they're getting these massive loans from the world bank and the imf and the world bank and so forth are imposing these esg requirements so sri lanka has something like a 98 esg rating even as their economy and society is collapsing how is that

possible well they're doing a great job following the prescriptions of the global elites of davos i mean this sort of global elite flies into davos from brussels and washington on their private planes they have panels on esg and then they prescribe these policies for countries like sri lanka and this is the result i mean it's crazy they've been telling us for years that somehow there's no trade-off between their environmentalist policies and creating a healthy growing economy and this is an example of that's not true there are real trade-offs here and the crazy thing is that the elites expect poor people in sri lanka to make up for their environmental emissions and it's

not really fair at all here's another example in march of 2020 sri lanka enforced one of the world's strictest china-esque 9 lockdowns covered 19 knockdowns despite one of the lowest death rates and infection rates in the world and so for nearly three months it literally crippled the economy and the livelihood of citizens there but here's where it gets crazy then they actually go against global best practice and they banned the burial of covet 19 victims claiming that it could lead to groundwater contamination i don't even know how they came up with this but you know what this did was it significantly

undermined the small minority of the country that is muslim because a religious practice there you know is you bury your dead and then that caused great pain to them and then it as in turn it hurt all these international relationships with all these gulf nations so then you you come all the way around and then you go back to those same gulf nations a few months later and you're like can i have subsidized oil and they're like no not so much and just to give paint a picture what's happening there right now as i mentioned before it's it's pretty much a state of

emergency you can see various videos trending on social media and you always take those with some caution because sometimes people will take clips out of context or label them incorrectly or use clips from other moments in time but what's really happening there right now and you shared a video in our group chat is everything is now uh being sold out in very small amounts so there there are lines for basic goods and inflation is is crippling there and as freeberg mentioned they started to pin um their exchange rate and their currency to i guess the world's exchange rate and now

everything is super expensive and essential imports uh like food and medicine and fuel they don't have the money to pay for it so this is going to be a complete societal collapse it seems and they're going to need to get bailed out there was a bill that was introduced in the government that said the central bank would be forced to have a discipline on money printing sound familiar in march of 2020 the central bank of sri lanka began printing money in order to finance a growing budget deficit again happens in many countries and they did that in part to fulfill an

election promise that they made that they would maintain single-digit interest rates again sounds really familiar so uh they've printed about a hundred billion rupees in march in the next two years the central bank printed 1.65 trillion rupees right so 16 and a half times that first number and then as a result what they saw was the highest inflation in post-independence history so time after time what you're actually seeing in sri lanka is not a microcosm of something that's endemic to whatever you want to call it jason a developing country a third world country a frontier country a southeast asian

country in fact it actually resembles many of the policies that exist in so many countries all around the world and what's really important here is that as goes sri lanka so goes ghana so goes pakistan so goes a whole bunch of countries where you're already starting to see food riots food insecurity energy and security rampant inflation uh sovereign defaults and you have to ask yourself like how are we going to really tourniquet this whole thing and prevent a much bigger contagion like freebird just talked about i think it's a we might be out of the work because uh you mentioned kovid it turns

out a lot of these frontier countries were already on debt relief and being given a moratorium on making their debt payments since they got so walloped during kovid and then now the other shoe drops and here we are there's no relief you can give them if they're already not paying their loans in some cases by the way here's another thing that happens in a lot of these developing countries so in the middle of all of this chaos what do you think happened the parliament got together they passed an amendment to the constitution and it enforced and it gave incremental power to one individual the president

and typically in most of these countries that run by a parliamentary system the president is a figurehead right the person shows up you know shakes hand kisses babies that's it right maybe convenes the senate but that is it now all of a sudden the person has control over defense control over budget control over the central bank and this person cannot be you know voted out in a no confidence build the same way that a prime minister can that happened here as well so yet another example of if you start to see a bunch of autocrats in some of these developing markets feel like the answer is more power

it's been tried here it didn't work so i think that there's a there's a lot of lessons i i am a little concerned and skeptical that many of these other developing countries that are teetering on insolvency will actually learn well i mean what they need to do we are the definition of the developed world reportedly and we have a president who tried to stay in power still an election so it uh it literally is happening here in the united states as well the parallels are truly terrifying all right the cpi uh i'm sorry it's actually said something this is rolling my eyes that's

no noise that's what you're a noise from an eye roll ah that's what it was it sounded like a boulder going down a hill wait sorry can i ask your mother a question yep tomorrow by the way if people don't know chamath is of sri lankan descent just to make that clear if you didn't hear his little mention didn't you go there a couple years ago i mean here's another great example of in this case this was the left who managed to [ __ ] things up so it's not just the right that screws things up in that country it's the left as well so in this example um i went there and i offered to bring google loon myself and google um we offered to bring internet access

to the entire country like guaranteed internet access um this was like five years ago um and we set up an entity and the government um tried to do the right thing and grant some spectrum and instead of sort of like um fast tracking this and allowing you know this project to become a reality there was an enormous amount of infighting that essentially said that you know we were trying to steal the license or we stole the license or we were trying to monetize a license and both me and google were just like forget this this is not worth it and we abandoned the project and walked away

instead google ends up servicing a whole bunch of other countries and the reason why sri lanka was part of it is because the balloons follow a certain uh orbit and it would have it cop it would go over sri lanka no matter what so it's kind of like we can light it up for free all we need is spectrum in this country google's already doing that work so you know i've i've gone there a few times i found it very difficult to try to do the right thing i think people there's a level of infighting that i hope this crisis changes i also think that it's an opportunity for people to reset writ large the gerontocracy that runs many of these

countries including the united states quite honestly um there is an opportunity there are some you know of my friends who i think may emerge in the next few weeks who are very well known people in that country who literally want to step one remove most of the executive power from the presidency make it a true you know parliamentary style system with an empowered prime minister and empowered elect elected officials and let the country run and fix itself you know de-prioritize some defense spending de-prioritize the growth of the public sector

re-prioritize the growth of the private sector i hope they're successful i've would love to invest if given the opportunity under those kinds of market conditions and i would love to go back at some point but my history with the country has been very fraught because as i've gone to try to do the work freedberg people are just haters and they basically they will cut their nose off despite the you know they they'll just do the worst things possible chamath there's i think you have a second swing at bat here uh only 50 or so of people in sri lanka have internet access and maybe we could uh talk to our friend

over at starlink and that could be an incredible mitzvah and changing thing there if you get 100 of the country on internet my god that could change everything and it seems completely doable by the way and this is the most literate country in the world you have to understand like the people in that country the human potential in that country is incredible okay there are not developing countries like this that have this type of literacy the and the kindness of the people these are incredible hard-working people but the elected class is some of the most inward naval gazing corrupt people and this is the opportunity for the

young people of that country to wipe the slate clean with all of them and start over with some i think um yeah the literacy rate is 92 or something crazy there it's very high it's a highly educated literate group of people the truth is the number of people living in extreme poverty has plummeted uh thanks to globalization we we went from almost yeah two billion people living in extreme poverty now it's gonna be that's gonna end in our lifetimes we have maybe 500 600 million people living in extreme poverty that's because of globalization that's the great thing that's happened now what's also happened

at the same time is people have gotten out of sync we have elites to sax's point who think they know better and they're trying to enforce on in a merging market or a frontier market god forbid the things that we have the luxury of doing in the development we don't even do wait hold on well yes we don't have a green we haven't banned chemical fertilizers in the western world well we do have in europe has standards for gas mileages but one example we have emission standards we have the accords that we've been working on all of these things are starting in the developed world and now exactly to what dave was just saying is we're taking them from the developed world we

are imposing them and sri lanka apparently embraced it i guess they get points when they're at davos sri lanka is not rich enough to resist that's the issue so the u.s has an esg rating of 51 sri lanka has 98 why is that because in our country we're not going to impose these crazy mandates there's enough resistance to it but if you're in sri lanka and you have these massive loans and debt service you have to do what the imf and the world bank and all these internationals what your creditors tell you to do yes exactly they're the ones who imposed all this stuff so great so sri lanka ends up with a 98

near perfect esg rating even as the country is completely collapsing read the schellenberger article here he says the underlying reason for the fall of sri lanka is as leaders fell under the spell of western green elites peddling organic old agriculture and esg and then he mentioned that sri lanka has a near perfect score of 98 higher than sweden which is 96 us is 51. what is having such a high esg score mean in short it means that sri lanka's two million farmers were forced to stop using fertilizers and pesticides laying waste to its critical agricultural sector and then it goes on from there so it was the imposition of it's not that sri lanka's politicians

implemented sri lankan ideas that caused the collapse of their country they implemented western ideas they implemented they were also corrupt so it was a combination sure enough corruption they implemented the ideas they learned at davos it's almost perverse you've got all these you know western elites again like john kerry and so forth they fly in their private jets to davos they come up with these esg rules they coerce countries like sri lanka to obey them and it's the people of sri lanka who end up paying the price i mean this doesn't make any sense

what's your reaction to that jkl you're somehow going to blame this on trump no uh i don't know how trump has anything to do with this well i mean i'm just thinking about it from first principles you know we we should as a you know species humanity should be trying to trend towards taking care of the planet and lowering emissions and being in renewables and then how we go about doing it perhaps there was good intent here but obviously if the country is corrupt and they're teetering already and they don't have the bankroll to do it forcing them to do it can lead to collapse nobody forced anybody but what

did the score give you it's not as if it all of a sudden they force them by nature of you get your loans if you do these esg requirements so that is forcing them de facto okay fair enough but i'm saying like you know now that you have this score it's not as if you issued green bonds and you could stave off this default no they do anything do what you said before it's like look at the sri lanka should be looking at what singapore did and just copy the playbook right i mean it's so obvious that you know country it requires a level of long-term leadership and and a lack of and a lack of corruption and i think those those two things are very hard to come by and i think a third

which is a very controversial statement to make is it required singapore to adopt english as a lingua franca now in fairness to singapore they also embraced multiculturalism right so you had forced you know enough force but you had bilingualism in the school so hindi malay or sorry tamil malay chinese right you could you would learn all of those and so you know you you kept an ethnocentricity to where you came from but they they allowed you to understand the lingua franca that allowed you to merchandise your skills to the rest of the world exactly are you saying they adopted the melting pot playbook and they allowed everybody

from around the world to have their culture but yet participate in a common uh goal oh my god literally if you say melting pot to young people today and everybody should try to adopt you know a new culture but keep some of their own people find great offense to that and that's what we were all taught the melting pot is what made this country great i think lee kuan yew just called it multiculturalism uh but my point is that you know i think the english decision by singapore was important i think steady predictable leadership by lee kuan yew was really critical um and the lack of corruption you know the way in which they they they promoted their public sector meaning you

know some of the best paying jobs in singapore was a public sector job right like you you would aspire to work for the government of singapore and so as a result you had policies and movements and and the movement of capital and progress and rules that were just um it's an example for for so many countries and you look where they are today for such a small population they have the same gdp by the way you showed vietnam they have a larger gdp in the vietnam which is an incredible statement you know a testament to singapore's ingenuity so could that have been sri lanka i think so knowing that the you know the the levels of literacy and

intelligence and frankly like look the the religious stability that can come from buddhism yet we're not there we're where we are today which is a shame yeah and and this is the canary in the coal mine i think we're going to see freeburg i i don't know what you think is going to happen over the next six months but there's going to be other dominoes certainly yes i mean i watch for arab spring type behavior right i mean you saw the protests and people storming the presidential palace in sri lanka um you know if i would imagine if we had a report uh from the intelligence advisors to the president of the united

states there's probably a long list and a growing list of these nations you want to keep an eye on right now where there is food insecurity energy and security declining currency uh you know rising debt burden and um you know there's a breaking point for all of these and as you start to hit that breaking point you start to see more of what happened in sri lanka now when destabilization like this happens it's scary because what happens um is there's a new power that emerges and those powers may or may not be aligned with the interests of the united states with the interests of allies with the

interests of the world with the interest of western democracy and so there are kind of scary moments that can emerge over the next couple of quarters and years as these camels back start to break as one straw after another is put on the back of these camels so yeah and who's the white knight who's going to come in and save yeah and then these frontier markets are going to be china india russia or the united states we're plowing 40 billion dollars into supporting the ukraine conflict um you know we're busy kind of protecting our energy interests and our interests with nato as as the united states and as you point out china will

likely end up becoming the savior and supporter particularly where they have infrastructure investments and interests i mean i don't know if you guys have followed this china has been building presidential palaces for african leaders throughout the continent and these people they're incredible you guys should put photos of them on the video um oh sorry wait that's the wrong one that's sax's house sorry guys sorry hold on next one believe it or not they might put sexist half to shame some of these things but they're they're really they brought the they brought the president oh yeah oh sorry that's uh

next one so anyway but yeah this is a um you know uh a moment to watch yeah because there's a very you know unfortunate confluence of circumstances that may lead to destabilization that may lead to influence and power being gained by folks that aren't direct allies of the united states so and this is why we want to build up a great cash reserve and have a really stable economy so that when these moments do happen uh you know the good actors of the world can take advantage of i suppose the bad ones and the united states is not in great position for this every society as they say is three meal three missed meals away from

chaos there are now a record 19 developing countries with sovereign debt trading at distress levels 19 and two that have already defaulted yeah just to start i mean pakistan has nukes right i mean that's problematic well and pakistan who's famous for enabling other countries iran north korea reportedly they look at their nukes as an export and they are more than willing to sell you right now i just sent you guys a link from forbes you know there are currently as of today inflation protests going on across sri lanka albania argentina panama kenya ghana um and if you look at the videos and you look at the images of some of these protests and

again there's like you know in the african continent there are um you know very radical militant groups that will try and seize power if there's destabilization at the top um and you know there are there are risks in in south america i mean all over the world uh you know these sorts of moments um can catalyze a real shift in power and influence um and uh and there's a lot of it going on so you better believe that folks in the u.s state department and the cia are very busy right now if you uh if you look at bond prices the three countries that are the next closest to defaulting so russia has

defaulted but that was more a vagary of you know foreign currency controls that that didn't allow them to pay but sri lanka has officially defaulted and the next three are el salvador ghana and pakistan yeah and by the way argentina just you guys know the argentinian print on inflation uh oh yeah these things are double 61 yeah yeah yeah it's if we think that 9.1 i know they had a structural default a few years ago renegotiation they've been back at the table over and over negotiating for years um and now they're facing this uh this inflationary crisis yet again uh it's a it's a scary moment um in argentina but yeah this is exactly like the european

crisis with the portugal italy greece and spain uh we're going to see a lot of negotiations occurring i really believe in this country and i think the people are incredible and i hope that um whoever is the president basically takes as much power away from that role and puts it in the prime minister and gets out of the way all right well we're hoping for the best uh okay cpi as uh everybody who listens to this show knows is a basket of goods and services and how it changes over time you can slice and dice the cpi uh based on food energy shelter your house et cetera last two months have been just

extraordinary to watch driven obviously by energy which has been driven by uh the russia ukrainian conflict cue the sax rant on biden's administration the core index doesn't include energy and so if you were to look at the core and index uh it and here's the chart 5.9 in june and uh it peaked actually with 6.5 percent in march so that's been trending down if you take energy out of it uh we haven't experienced energy and food i think are excluded from core yeah and if we haven't uh we haven't experienced core inflation like this since the 70s or 80s here's another chart just to zoom out and you'll see exactly how

jarring this has been uh for basically our generation we haven't experienced this since if you were born in the 70s or so that's when it was higher than it is today and we've had obviously goods and services plummet in our lifetime because of globalization and low interest rates uh energy hasn't seen inflation like this uh since this is what is this chart is this cpi what is that that is the core so that's inflation that's core so and then here's the energy one coming up next so when you look at energy obviously energy uh has been volatile in our

lifetime uh because a lot of the oil in the world is controlled by dictators middle east russia venezuela yada yada but the 40 year of a year uh increase in cost of gas and oil and energy has put us back to the mid 70s 80s in terms of pain that's this chart so you see it's spiking all over the place but generally it was uh under 20 percent and now we're back above 20 percent it's all about the oil chamber you were we were talking in the group chat before you were kind of satisfied with 9.1 do you think the 9.1 we're seeing in the inflation print today which was higher than expectations what is that going to lead to in terms of the interest rate hike 75 basis

points or you think they just go right to one you know we talked about this that this was going to be a big print right i think we all expected this to be a big print um yeah i actually also kind of put myself on a limb there and i said you know i wouldn't be surprised if at some point we print a mid to high nines maybe even a 10 handle at some point we're getting there and the reason is because uh you know rents are a little you know uh they lag in how they're reported inside of cpi so we have a couple more months to go of of rents and rents are moving or budging a bit

that's number one um we do see a little bit of fall off in in energy prices but i'm not so sure that it's it's enough frankly to to move the needle so i think that we could be in a sustained period for a while the more interesting thing i thought today was that canada surprised everybody and raised uh their benchmark interest rate by a hundred basis points okay so they just came one full point 100 pips and they just said we're going for it we need to tame this we need to break the back of inflation they ripped the band-aid off yep yeah and uh you know and i think if you read the fed minutes more carefully i think jerome powell is

basically ready to do the same thing yep after this inflation print the expectation for july went to 80 basis points from 75 which means a small percentage of people actually think it's going to be a hundred and september i think moved to 75. so the question is is that enough i just don't know i uh i don't know and to be clear this is for june the data we got on today july 13th is for june what we did see in july because we can track oil prices that's down 20 percent month over month and the cpi has been driven largely by oil so speak to that chemoth what do you think it's going to be in july when we get it in august no but yes

and no because the again the owner equivalent rents are up so much that they may actually you know break even right meaning rents go up by so much oil goes down by so much they cancel and we're still at nine okay that's your prediction for july which we'll get in august you think nine yeah i'm worried that we're in a sustained inflationary environment i'm worried about that i i hope that we're not um but then the question jason secondarily is then what do the markets do and what's so interesting today is like the markets shook it all off i mean like you could not have had a worse inflation print everything was up well 10

meaning meaning like it was beyond the number that was expected every component of it was up everything looked horrible and people were like meh tell them is that because the market is future looking uh sacks the market is basically pricing will get through this in six to 12 months is that what you're saying the markets are down right now to be clear the the print was definitely worse than expected they were expecting yeah they were expecting 8.8 it was 9.1 last month's number was 8.6 i remember us talking about inflation a couple of months ago saying that we thought it had peaked you know maybe in april or may at

the latest simply because inflation is measured on a year-over-year basis and we were starting to lap much bigger comps last year remember this conversation yes well the lapping effect turned out not to be enough and inflation is still rising so we have not yet peaked on cpi i understand that core we have peaked but deciding to exclude energy and food i mean that's a pretty arbitrary decision those are two really important variables that matter to the ordinary american for sure so we solve this problem and to chamas point we don't know when it's going to be when it's going to subside and i think the

big question now is when does inflation finally peak and start going down back to where it should be and then how much how severe recession do we have to have in order for the fed to solve this problem it feels like things are turning over in real estate we talked about that last week the number of homes being listed is skyrocketing the number of mortgages being originated is plummeting while the rate goes up so we're gonna see mortgage rates probably go six seven percent towards the end of the year that's going to put a huge kibosh the um high-end real estate is also starting to get hit massively uh the number of listings is

going up in the high end and the number of sales is plummeting so that was one of the cards we wanted to see turn over and it looks like that's turning over just so one small clarification is you look we obsess over cpi right now because we're all kind of these fake macro want to be traders but i just want to remind you because the fed has been pretty clear about this they don't focus on cpi they focus on something else instead called pce which is the personal consumption expenditure price index and i don't know what the flow through from cpi to pc epi is exactly but that is the broadest measure of goods

and services which does include food and energy so it stands to reason that pce may stay elevated for a while which may give the fed enough of the motivation they need to go 100 to go another 100 or maybe go 170 and then a 75 i think that david's point is right like all this taming that we've been expecting to see we haven't seen it and so every month it's like oh it's coming next month every month it's been oh it's happening next month at some point you may just have to say maybe we're in like a sustained period for a while and i have to believe it's going up before i believe it's going to stay stable or go down well we did see energy go down

housing we are seeing now uh starting to contract the number of um price cuts has been surging according to redfin so i think we're starting and the layoffs obviously happened two months ago so don't we think that we're starting to see the headwinds and then we were talking to a buddy of ours who's big in the airline space he said god and i think you were pointing out this statistic that heathrow is now capping the number of people who can fly because it's been so crazy so overloaded with with traffic of passengers that they today came out and said we are capping the number of passengers to one hundred

thousand a day no more and this is after the cost of those flights was skyrocketing you know six seven thousand i really go back go back to what sack said before he this the nugget for me of this entire summer was what he said about his take away from the co2 conference right just to remind people you know that the person said something to the effect of oh well look all these other people will be saving money and cutting jobs i intend to hire and you know nothing has changed for me and the comment that i made in our group chat is well maybe that's the psychology of everybody it's not just the ceo of a

just yeah just just to be clear what what kochu did is they they polled all the founders in the audience the poll results showed that on the one hand everyone in the audience understood that we were headed for a big downturn and economic conditions and fundraising will be much tougher on the other hand all the founders or two-thirds of them said that they were going to use this downturn to accelerate their business as opposed to cut my one-on-one conversation with the various founders basically are in line with that which is it's all not me you know i know everybody else is going to be impacted it's going to have to cut but i'm going to be the one exception and there will

be exceptions absolutely but everybody can't be the exception so consumers are saying i'm going to still buy my car i'm still going on my summer vacation everybody else has to make cuts well it doesn't matter what they say consumers are behaving that way you know american airlines basically put out what they where they thought they were going to be their stock was up 10 percent you know heathrow says we have too much traffic we're going to cap it at 100k there was an article about you know u.s home prices and rents and there were these two uh housing companies in the wall street journal

that were profiled and both of them served middle-income neighborhoods in houston and these other places they're like we've never done better business and you know there are fewer and fewer people buying homes because of mortgage rates they all want to rent we you know our complete have we have complete ball control and so where where is the stopping and the slowing down of spending it just may be reflexively this thing where everybody feels like to be you know to have the polite dinner conversation they have to talk about how they're pulling back it doesn't seem like anybody's pulling back austerity measures have not hit yet yeah

well i think i think they are in the process of working but it just takes a while i mean what i would say is look we are 100 gonna solve this inflation problem why do i say that because price levels are fully within the power of the fed they just have to raise interest rates high enough paul volkl proved that in the early 1980s he had to raise interest rates as high as 20 percent but he crushed the inflation 1970s but that's what it took so i have no doubt that the fed can stop inflation i think the question is how much pain are they gonna have to inflict how high do rates have to go and how long do we live through this sort of stagflationary period

and that's the unsettling thing is we're just it doesn't seem like we're anywhere near the end of this yet i wrote this i wrote this last week in a little note but this is why if you look at the tailor rate again and you know people have abandoned the tailor rate it's not what it used to be i guess but you know it's still pretty directionally accurate which is what is the true equilibrium interest rate that allows us to basically manage and meet supply and demand together so that we have a calm stable economy and that uh that stable equilibrium rate is approaching five percent

you know our target the the collective wisdom of the of the market believes that three percent is enough to get the job done we're right now at 1.5 to 1.75 so if there's any number between three and five that is the true price we have a lot of work to do to get there yeah i think that's a really good point because the ten year t bill has been kind of floating around three percent so that is the long-term expectation of the interest rates that's required to have sort of normal inflation but what if it's four percent if it's five percent if that ends up being the case it'd be a huge downside surprise to the stock market

well how would you define that 10 pullback 20 pullback from here well you have a bunch of things like we we talked about this other issue before as well which is if you believe the stock market is fairly valued you have to believe that prices are right and that the earnings are right right so because it's effectually if it all boils down to the price earnings ratio of the s p 500 and i'm going to still maintain that the e is wrong the earnings are wrong for most of these companies so let why well one is that when these companies start to report their quarterly earnings

starting in the next few days the year-over-year comparison is going to be to the numbers that they posted in q2 of 2021 which by all accounts was a blowout number why because the number before that was 2020 where their business was zero right so you have these incredibly tough comps in terms of growth percentages that you have to reach which i don't think are achievable second is everybody's costs of making and selling things is going up which stands to reason that unless you raise prices quickly enough your profits will go down if you actually do business outside of the united states the u.s dollar has rallied so much

that you actually have less income that you're making in these other countries when you convert them and bring them back to the united states now most people look through that last issue but the point is if you add this all up there is a reasonable probability that the all the e's are wrong in which case we have to reassess what the right e should be in which case what is the right p e yes and earnings are a function of what you spend and what you make so that's why we see so many companies doing layoffs cutting people uh microsoft google everybody is now putting people on notifications they're they they're firing white-collar labor but they're hiring

you know blue-collar labor faster and so you know we're actually going to see a downtick in productivity right you're replacing a person that you know may sit down at a desk and use a computer eight to ten hours a day to do something but you are hiring a lot of people that you know may get paid by the hour or make it pay to you know fix salary if you do the right kind of work but uh that qualifies as as more contractual blue collar labor the difference in that is a productivity difference ultimately and just so everybody knows p for p e is price earning ratios over time here's a

quick chart for you currently uh and this is for the s p 500 we're currently at 20 or so and we have twice in our lifetime kind of hit that you know 13 14 15 level so we could have a 25 correction from here in the stock market um if you look at the highs our recent high in december of 2020 we're at 38 price earnings ratio so uh we've fallen from 38 down to 20 you know almost in half and we could still go down 25 from here and that would basically not even set a new record that would just hit the last two crises we had the thing that the the thing that i think will work against

this happening jason so yeah you're right the the maybe it goes to 3000 or 3200 but if you look again today you know and what what i mean by like the market has roughly shaken this off like the fact that the markets right now as we as we talk are you know are essentially down half a point uh you know the the s p is down you know 12 points uh it means that they are looking for any and all reasons to say this is a solved problem move on nothing to see here now that is a psychological reaction most of that if you actually i called a friend today and i said where are the flows and he said you know retail right now is

where all the flows are meaning it's retail that's buying they're in the 30th 35th percentile of where they normally buy which is a pretty healthy signal wait explain what you mean who's buying so the way the market works basically is your buyers and sellers and uh you know to to make it really really simple you have hedge funds as one class of buyer sure you have etfs but they're they're not really big yeah but they have fixed strategies and so you know they're hedging they're moving but whatever and then you have retail okay so it's retail and hedge funds those are the two main pockets of

of where the flows come into the stock market from and you can get a real sense of what's happening what the psychology of the market is if you see what those flows are and right now what we see is that hedge funds are largely on the sidelines but what it means is they are well they've been so battered and bruised in some ways i think they're licking their wounds but they're mostly waiting they're they do not find a compelling reason to buy right but they have to buy at some point right chamoth this is their business no well uh find other opportunities their business is to make money relative to their index

and so if their index gets torched they doing nothing makes them look like geniuses um so they don't necessarily have to buy at any point they just need to make money at in the end so right now we're in a situation where the markets are looking for a direction retail seems to think that direction should be up hedge funds don't have an opinion are saying we're just going to wait this thing out okay meanwhile the data at best is a question mark and i think that's the that's the tension we have right now in the stock market is the psychological desires for this thing to be over

meaning i think people want to hear inflation is done we're starting the recession give us three or four quarters we'll be out here's a steady state interest rate let's go tech people want to accept the reality freeberg does that mean that we're bouncing along the bottom for the next year and then this is the time or the opportunity to buy it i want to give financial advice but what are your thoughts if hedge funds in retail are kind of waiting in the way asking me if the stock market is at the bottom are we bouncing along the bottom yes or what would you how would you describe the next year if you were to look at it what do you think i'll tell you guys

some stories i i went to a conference in march with a lot of uh fund managers probably managed several trillion dollars in total people were like in shock and awe at that conference because they had taken such significant write downs and they were still getting written down so all their investments were off they were off 40 from the peak they were freaking out things were collapsing no one was doing anything they were all sitting on the sidelines hanging out waiting i went to a conference last week and so the tone and the demeanor was just like morose last week i went to a conference with a lot of managers also probably managing trillions of

dollars across the pool and people were just kind of they had accepted this new reality and they were kind of willing to look at new things and you know they were no longer engaged in trying to shore up just their portfolio and a lot of the stuff we talk about which i think is tactical on the ground how do we deal with our businesses and our portfolio of investments that we actively work with in the private markets they were much more interested in kind of starting to explore and think about new things and i hadn't seen that three months ago so that's a positive sign from a market

participant point of view i think that folks have kind of call it accepted a new normal an inflationary normal a high volatility uh normal uh you know a normal of uncertainty a normal of kind of recession and as people have started to kind of um internalize that new normal i think they're now starting to say okay what should my action plan be and that action plan is i've got trillions of dollars of capital sitting on the sidelines what should i start to do with it so you know my my very very very anecdotal experience has been that significant market participants i think are going to start to perk their

head up this quarter and start to think about doing new things what that translates into in terms of you know stock price movements and indices i don't know i've always said that there's going to be a huge variation in outcome during this big this year and some industries some sectors some types of businesses will outperform others and so i don't want to create generalized statements about indices but i do think that capital activity is going to start to come back this quarter where people are going to start to think about what to do rather than pull everything out because of the massive shift that's happened in the past couple

of quarters sax what are you as a market participant thinking you're looking at series a's maybe doing some opportunistic flat rounds are you looking at the startup market mid-stage market and saying hey this is an opportunity maybe i should start looking to put some money to work in the next six to 12 months or are you we're still investing you're still investing yeah so as a market participant you're investing what are you investing but we see that the pace of deal making has slowed way down because founders know that valuations have gone down the fundraising environment is tougher so last year

they're raising every nine months now they know they should probably be raising it once every two years so the pace has slowed way down that's a good thing yeah i think it's happening it's more it's healthier yeah it's more normalized you know last year the companies that could race did raise they have big war chests so i think there's going to be a delay it's definitely a slower period we've done a couple of growth deals recently i think the fact that tiger and the other kind of crossover investors the fact they've pulled back way back from venture markets gives smaller firms like us an opportunity to do growth deals so how

did you make the decision to invest in those companies they're both companies we've known for a long time have wanted to honest for a while so you know the the opportunity arose to invest and it was way less competitive than it would have been so this is what you call opportunistic yeah we've basically done two deals in the last like four months and that's what was your pace let's say 18 months ago it was a little faster than that for sure there's just more deals happening so interesting if you want to think about tail risk where there's some event that can massively shift the market you know the indices south right make them go

negative and everyone pulls money out of equities or out of bonds further there are some of those events brewing right we've talked about the consumer credit i want risk we talked maybe taiwan maybe um this emerging market crisis that that may kind of be emerging these are like little turtles putting their heads out they may not come out but there's enough of these turtles now you know kind of circling you that you know there's still reason to be wary whereas let alone a black swan event which would be these are just like significant known risks yes no known but significant risks right yeah and if any of them do kind of take off um you know we're already in a very

shaky kind of period right now where we're trying to manage inflation and recession and you know businesses are trying to raise capital and again this is why a lot of biotech companies are trading below cash because the expectation is they're not going to be able to raise capital i mean anything will go out of business boom you know you start to see things go so i think that's the reason people investors portfolio managers are not going to kind of rush back into putting more money into equities is just you know sitting around waiting to see how a few of these things resolve um you know before kind of taking action

but there are companies that do not face the risk of ruin they just are sitting on so much cash they have so much revenue that there's no chance of that yeah i've always said it doesn't matter if you find a great business and you believe in that business over the very long run you don't need to worry about timing the markets you put money in that business as long as you get a fair valuation for it today relative to what it should be priced at based on what markets are telling you well 20 pe would be more than fair history who knows but like whatever that whatever that is but if you find a great business that you think is going to compound value for you

over the very long run market cycles don't matter and long run you mean a decade yeah call it a decade and you know saks is business that he's invested in these are tech companies that i don't think they're planning to go public next year he's making an investment in a business that he considers to be a great business that can compound value not compound valuation but compound business value meaning they can do something more valuable next year than they were doing this year and continue to accrue an advantage in their business that allows them to accumulate earnings over time or accumulate revenue that ultimately translates into earnings over

time and there are many businesses that are public that that operate like that that regardless of any of these turtles popping their head out those businesses will perform well over the next decade and i think you know that's always a great place to invest so so we basically went from d-day saving private ryan and seen you know in the first quarter to now people have accepted we're in wartime and we're not shell-shocked and some people are looking for opportunities chemoth you found an opportunity maybe you could talk about the deal you did this week um you know i tend to agree with

fredberg i mean you find these businesses that you like and if they appeal to you and you do your work that's the most important thing you shouldn't be afraid to write a check can you stop right there and just say define what you mean by do the work because everybody here should say that what does that mean for an investor for somebody like yourself what is doing the work mean it really depends on the sector so for example when you know when when we were uh when i was trying to underwrite open door what i really wanted to understand was you know what do take rates look like in all these various markets how do i think

take rates will evolve here how do value-added services work what kind of margins can you sustain what is the sensitivity of different parts of the real estate economy to interest rates you know that's an example of work when i was underwriting so far you know what you're trying to understand is you know how do banks generate net inc net increased income you know nim um how does that change over time how does bank charters change that um you know how do loss rates change in in you know times of um economic expansion versus recessions how do you price all of that into a fair fair value of a business

it's just a lot of really detailed diligence to understand all the facets or as many of the facets as possible of a business that allow you to have a clear eyed sense of what's possible then there are others which are pure technology bets where you try to understand either the biology or the technology so in the case of the deal that i did you know today or this past week myself um a bunch of family offices around the world um led by a great chairman pablo lagaretta who started a phenomenal business called royalty pharma which is public carlos slim a bunch of folks we put in

about half a billion dollars to to help advance into you know uh clinical trials this business that's trying to provide a solution to chronic kidney disease so in that example it was a lot of scientific diligence on what are the existing solutions how do they work what is the mechanism of action inside the body how is this the same or different um what is the early data say um how are the clinical trials structured and then you come to an answer um in this case i decided the bet was worth taking and you know like free tell us the name of the company uh and what they do the company is called pro kidney and basically the

idea is that it uses your own body to help heal your kidneys if you are on the verge of chronic kidney disease or you are getting dialysis etc and essentially how it works is it removes cells from your body from your kidney actually and then it does basically puts it into a centrifuge does some specific things to it grows and amplifies certain cell lines from your kidney and then re-injects those back into your kidney and tries to improve what's called your egfr which is your estimated glomular filtration rate which is essentially a number that we can use to estimate how

efficient your kidneys are and essentially when you are you know a type 2 diabetic or you have chronic kidney disease or kidney failure or you're on dialysis it's because that filtration capability has failed and so all these toxins are getting pushed back into your body and so yeah we took a you know half a billion dollar shot i wrote 125 million dollar check i hope it works that's amazing freeberg we saw some satellite images this week uh biden i guess announced them they looked pretty trippy explain to us what the downstream effect of what is i think the the most clear picture we're seeing

of the cosmos ever created and what that could actually do for humanity well this is short and this has nothing they specifically had him share it which i think maybe they were looking for a mini win or something good for him um it hasn't he has nothing to do with this program um i i don't mean i just mean that like the scientists and the engineers that worked on this for many years deserve all the freaking credit the james webb telescope is a space telescope just like the hubble right remember the hubble space telescope and this is a massive improvement over the hubble so imagine you're you're in a boat and you're trying to look at the bottom of the

ocean you take a bunch of inocu pair of binoculars you look into the ocean and you try and see what's at the bottom of the ocean how hard that would be right there's all this murky stuff in the water it's going to be really hard to see it the the reason that we create a space telescope is so that the same problem that we would have looking at a telescope through the earth's atmosphere doesn't impact the light coming into the telescope and so there's so much stuff in the atmosphere right there's miles of molecules and dirt and dust moving around so by putting a telescope in space we get rid of all that murkiness and now we can really capture the light

that is coming from far far away concentrate that light onto really sensitive photo detectors these are photo detectors that operate at nearly the coldest point in the universe negative 263 kelvin and that photo detector makes it extremely sensitive and using a 20 foot wide mirror we can capture all the light that's coming in concentrate onto the photo detector and and read that light um and so why is this important why is this interesting well people get really excited by and flip out over the cool imagery that they see these images these colorful images of galaxies and stars far far away what we're really doing is we're not just looking far away we're

looking back in time so these um these images come to us from galaxies that are 4.6 billion light years away so it took 4.6 billion years for that light to reach our planet and we're actually seeing what happened in the earlier part of the universe and we're seeing how these uh galaxies uh formed how they're moving how they interact with one another how the plants planets interact with one another but what a lot of people miss that i think is the most important thing to highlight as an astrophysicist when you're looking through telescopes and gathering telescope data you're not looking for imagery like we looked at today that's really good to sell the story and get

biden to do a press conference what they're really looking at is spectrographs and a spectrograph is uh you know uh it shows for every wavelength of light across some spectrum what the intensity is of that that amount of light that wavelength of light and particularly the james webb telescope has incredible micro shutter arrays an incredible sensitivity that allows us to go from near infrared to infrared and some visible light and look at that spectrograph why is that important because if you can capture the spectrograph in a very high resolution way for a sun or for a planet far away it can tell you very specifically what the movement is and what the chemical

composition is of that object and from that we can start to do incredible research and infer very important things about how planets form how stars form how many places like earth might be out there how things are moving how much mass or matter there is in the universe and there are two very very big question questionable phenomenons in astrophysics right now one is called dark energy one's called dark matter turns out the majority of matter in the universe is undetectable and there also is this really weird energy force pushing on everything in the universe causing the universe to accelerate its expansion so the universe

is expanding everything's moving away from itself but it's not just expanding and slowing down it's expanding and speeding up and so having this sort of instrument in space that allows us to capture in a very high resolution way using spectroscopy and other tools that astrophysicists use and better map out how this is happening in different parts of the universe starts to give us a better sense and allows us to kind of inquire and start to develop theories around what's really going on and i want to say one more thing because because a lot of people think that this stuff is just so esoteric and it's like super interesting

why are we spending 10 billion dollars in this most applied engineering and the technologies that we've developed as a species started out initially as pure research with no freaking clue where it was going to go to imaging dna penicillin electronics mri machines so many of these capabilities evolved from scientists just querying the universe and asking questions and gathering data and all of a sudden they came across something developed a theory built an application of that theory and a technology emerged that changed the course of our history as a species and that's the reason to do pure research and that's the reason it's

so important for us to put 10 billion dollars into a program like this we're going to discover amazing things with this tool and it will ultimately hopefully yield advances for humankind that we cannot even contemplate today so it could be energy right i mean understanding dark matter energy totally and then maybe has changed everything in energy right jkl think about it one day there might be a capability where we say there's a new class of matter and a new understanding of energy that we can then apply in some form of physics on earth that we can do something interesting with and we have to be able to query and understand the

universe to do that could we measure there we go could we measure the matter from uranus yes okay no it's coming i mean the hubble telescope actually if correct me if i'm wrong here it actually told us the age of the universe how much dark matter is in uranus a lot a lot you're full of it um but we now know i mean hubble told us the rate of expansion of the universe and it also told us the age of the universe and we found all these other planets totally to freeberg's point about you know looking you know through the through the muddy water here's a great visualization on the left you have hubble on the right you totally

web and if you slide this you can just see like just how crystal clear and these images are and from my understanding we found some number of universes already that we didn't know just from the first images by the way i want to just give everyone a heads up this imagery looks beautiful and i'm going to print out a big one i'll put it behind my friggin desk here because i think it's so fantastic astrophotography is one of my kind of all-time you know favorite forms of art but um remember this is imagery that was actually captured in near infrared and infrared spectra and then they converted it to visible light

to make it look cool so remember that these images you know that these clouds if you were actually there don't actually look at like that color but it's a very cool way to visualize the density and the the spectral changes where does this sit for you in terms of your excitement between the new season of doctor who yeah and the foundation series let me give you let me let me just give you guys one more kind of yeah really interesting if if you start at our sun and you look at the sun it's super bright if you go at the speed of light for four minutes you reach the earth or a couple of minutes you reach the earth look backwards six minutes or seven minutes

whatever it is look back and now the sun looks like it does in our sky if you go for another couple minutes you end up looking back from saturn and the sun starts to look like a star i mean that's how how dim it gets now imagine continuing to go at the speed of light for another hour you look back you'll hardly be able to differentiate the sun from the rest of the universe now do that for 4.6 billion years and you're shooting away for 4.6 billion years now look back how freaking hard would it be to see anything that's the technical capability we just put into space we've built a 20 foot wide mirror

to concentrate the light the photons that traveled for 4.6 billion years lost all of their density lost all of the you know completely dimmed out completely diffused and we're capturing a few of them run that concentrated way onto a detector for minutes at a time and generate this image it's really profound how technically complex this is and again that technical complexity can ultimately yield other technological tools that we could use in all sorts of industry so i just i just want to highlight that i posted it for you guys uh it's an incredible story but basically this program was riddled with delays and things that weren't working

and then they put this quiet very assuming engineer in charge of it and he completely turned the whole thing around and it's one of the most incredible quotes what's his name let's give him a shout out his name is greg robinson and he turned a 10 billion dollar debacle into a groundbreaking scientific mission this is the quote from the wall street journal the the quote from the nasa uh the head of nasa's science mission directorate thomas zurburkin says it all there's a huge distance between success and failure and only a few actions that move you from one to the other he said greg robinson worked such wonders that

his boss calls him quote the most effective leader of a mission i have ever seen in the history of nasa unquote really incredible uh this project yeah the 11 billion big challenges robinson yeah and this has been going on for i guess 20 years now uh this process of getting this built in 10 years of really intense building what would the next and then we'll we'll switch over to politics for a quick second as we as we wrap up here freeberg what's the next telescope because obviously if we've gone hubble to web what would the next one conceivably look like and with the timeline for that is there another one that's going to come and then what would

that enable because it does feel like if we accelerate this we're going to really get a deep understanding of the universe that this seems to be accelerating our understanding correct and our technology is obviously accelerating so it feels like we could you know send another one of these out in the next 10 years that would dwarf this one's capabilities yeah so a lot of um uh telescopes operate at different wavelengths and they're meant to kind of pursue different missions so you know there are there are some telescopes that are already operational and kind of the gamma ray spectra but really there's a we i don't know if we ever talked about

this on the show but one of the really interesting areas of inquiry uh is these gravitational wave detectors and there are new more advanced versions of those systems starting to come online those are not space-based telescopes uh they're and we can talk about that another time um but uh they're creating new methods of inquiry where we're not capturing photons light coming from far away we're actually capturing the waves of gravity coming from um interactions of matter around the universe and it's a new way to kind of observe the universe those telescopes represent a new class of inquiry that

was just kind of you know discovered a few years ago and proven out and now there's there's a lot of work going on into that area and freeberg you had something you wanted to give a shout out to yeah i just sent you guys a photo of a new dog i adopted last week her name is we flew daisy out from virginia daisy is one of 4 000 beagles that were rescued from a facility in virginia that was shut down by the doj this facility was investigated by peta and the humane society and they basically shut this facility down this is in the united states we only do animal testing on beagles they're the only dogs that we do animal testing on because they can put up with

pain and they have a high tolerance and a high threshold for pain it's a really awful fact we need to change that in the united states the fda does not provide good guidance on this so pharma companies pesticide companies makeup companies very often test on beagles so this company um you know that was operating this beagle facility in virginia was shut down for um you know ethical issues at their facility and the humane society took control the company's called in vigo their parent company is publicly traded i think that the fact that we test on these beagles in this country is awful we adopted daisy uh there are 4 000 beagles like

daisy available for adoption i'll put some links in the show notes here people feel free to go and grab them i'm sure there's a long list the dog is absolutely incredible i think that it's awful we test on dogs in this country and i think i urge anyone that has influence with the fda to get them to provide better guidance this is not the law it's not required and they don't provide good guidance um and so a lot of companies de facto and default testing on beagles when they really don't need to and shouldn't so brooke let me ask you let me ask you a question i think it's incredible that you adopted the dog i hope all four thousand get adopted um

how should we do testing totally i look i think that there's a there's really important ethical lines here and we can debate those this is a good nuanced conversation we use mass models in biology to explore solutions for human disease we we use primate models right which means we use primates we use dogs we use cats we use mammals there are there are certain things that are obviously not necessary we don't need to take beagles and pour tons of kim kardashian's newest makeup line in their eyes to see what happens it's not required by law and it's not about getting some pharmaceutical drug approved this is in an area that i'm you know i'm not going to get into the

debate on on exploring and resolving kind of pharmaceutical solutions and things that can actually treat human disease where i'm particularly sensitive to is when it's not needed and when we're taking these animals and just doing awful things to them uh when there's no law that requires it we're not putting stuff in our bodies and this isn't about you know protecting humans it's really about cover your ass behavior for makeup companies and pesticide companies that they don't need to be doing and that's really what i'm addressing 3999 beagles to go uh if you adopt one of these beagles send us a photo and we'll share it at the end of next week's

program thanks for letting me say that guys it's really you know i think it's super important and how we treat uh dogs who are connected to humans in a very special way i think speaks volumes to us as individuals saks would you like to well on the biden administration talk about 2022 or give us an update on ukraine i give you the choices i mean it's like elder abuse at this point i mean i know you're trying to can i ask you a question i know you're trying to team me up here but like all i can say is 9.1 percent i don't want to beat a dead horse at this point can i read you guys something and you can tell

me there were these uh there's a there's a group called committee to unleash prosperity but two researchers stephen moore and john decker this is in the wall street journal article i post in the group chat the pair studied the resumes of 68 top executive branch officials whose work shapes the economy from president biden and treasury secretary janet ellen to white house special assistants on economic policy quote average business experience of biden appointees is only 2.4 years what any fresh-faced 25-year-old on wall street has clocked more private business hours again i'm reading from the journal

article than most of washington's top officials 62 percent have quote virtually no business experience unquote the average donald trump cabinet official had 13 years of experience in the private economy the author said what a disaster well somebody like sixty seventy percent of democrats wanna get rid of biden they don't want him to run again i've never seen a president been defected on been turned on by his own party so quickly into an administration he needs to take back ownership of the democratic party which means he has to pivot back to the center and he needs to have a wholesale replacement of the team that he works with on domestic policy it's not working and chamath that

was his pitch we're gonna go back to normalcy he was going to be you know more of a centrist and that's not what we've gotten but of course he was handed the disastrous economy that trump created why do you say he was handed a disastrous economy well because of uh covet and because of the massive stimulus that we spent those two things that was like a setup i mean if trump won a second do you think it would be much different if trump was running the economy with the setup was there trump probably would have spent more money right trump wanted to spend more money that's a really good question actually i have to think through that that's a really good question let's move on

what's the update on ukraine there's a really interesting chess game going on right now where the russians are slowing the flow of gas no no it's better than that it's better than that they shut down nordstream one for their annual uh maintenance [ __ ] it's supposed to be back up by july 21st and so the real question is what happens if uh putin hand checks europe and just takes an extra day or two to get that thing back up and going let me make a prediction right i think the western alliance is gonna fracture come this winter yeah germany's gonna be freezing the germans are not gonna take this well when they can't put their heat

on listen a a foreign policy based on virtue signaling is one thing when your economy is good and you're not worried about your energy security and you can heat your homes it's another thing to have a foreign policy based on virtue signaling when your economy is in recession you got runaway inflation and you're in winner and you can't heat your homes your morals change real quick don't they yeah three or four months ago the liberal interventionists were triumphant about this ukraine war there are three big predictions one that ukraine was gonna win it looked like ukraine was winning the first couple weeks but now it looks like

russia has won this donbass region number two they predicted that we would collapse the russian economy with all these sanctions the opposites happen we've collapsed our own economy and number three they predicted this would strengthen the western alliance that's the only card that hasn't you know basically turned yet and i think it will this this winter i think you're going to see serious opposition to the way the bible administration has led the western response i think it's well said that if germany has the gas lines that sri lanka had uh you would see a definite fracturing of how

people look at it just like they flipped last week and they made natural gas and nukes nuclear power a green energy so yeah their morals and ethics and their virtue signaling go as far as their wallets and their heat and meals go as we all know this has been another amazing episode of the all-in podcast for the baron of beagles the dictator himself and the rain man yeah it's definitely biden's fault now there is no chance for any of us to pass free brook on the popularity he's just he just sealed the deal with his [ __ ] thing what do we do i'm going to save a whale next week i am going to bring a dog

kill myself how about that oh you're going to prepare dolphin sashimi okay great that'll secure your part as the most hated bestie we'll see you all next time on episode 88 good luck 88 of the all-in podcast bye bye love you besties rain man david said we open source it to the fans and they've just gone crazy with it [Music] besties [Music] we need to get back [Music]