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