00:00:00
sorry everybody I wasn't here last week
00:00:02
so what's your bit J jump jump into your
00:00:04
bit no there's no bit I'm just I'm H you
00:00:07
know triple vax I took the pack low it
00:00:10
and I'm back everybody I know everybody
00:00:12
was very concerned about me thank you to
00:00:14
everybody but I can take my mask off
00:00:15
right freberg do I need a mask in 2024
00:00:18
you're good you're clear okay so let me
00:00:21
take one of these off get
00:00:23
that okay was getting uncomfortable
00:00:27
you're in the clear for one okay you
00:00:29
know what I'll take the Third mask
00:00:30
totally free no mask free I hope I don't
00:00:32
get you guys says we can treat Co like
00:00:34
the flu now I mean you see that they
00:00:36
finally admitted after two years of
00:00:38
shutting down schools the economy
00:00:40
everything like oh it's just a flu you
00:00:42
treat like a flu well it's interesting
00:00:44
you know I got the co just to explain to
00:00:46
everybody I went to Billy Joel's final
00:00:48
concert with my daughter she we had a
00:00:50
great time it was his final MSG Nick
00:00:53
time stamp the end of this so everybody
00:00:54
can just skip to the end of go sorry go
00:00:56
ahead Jason there's no bit here I'm just
00:00:58
saying I I'm letting people know that's
00:00:59
I think got Co at the last Billy Joel
00:01:01
show it was a great show um Shout Out
00:01:03
Billy Joel but it was 48 hours that were
00:01:05
very intense and then I took that pack
00:01:07
slov and I came right out of it but so
00:01:09
apologies to everybody but man it was no
00:01:12
joke great story great story great story
00:01:15
great story I mean listen there's a lot
00:01:17
has happened since I've G sneezed
00:01:18
earlier today did you guys sne oh my God
00:01:21
yeah the Olympics happened I you guys
00:01:23
taken the Olympics at all freeberg you
00:01:25
seem like a guy who would watch obscure
00:01:27
Olympic sports I think there's a lot of
00:01:29
sports that should be regular it's like
00:01:31
the pistol shooting guy anyway it's all
00:01:33
moot because um you know the paparazzi
00:01:35
were there and they took poke pictures
00:01:37
chamal do you know this big Paparazzi in
00:01:39
Paris this year because of all the
00:01:40
celebrities there yeah the pops are all
00:01:42
over the place in Europe they're
00:01:43
everywhere they're everywhere I'm sure
00:01:44
you saw them in Italy it's it's getting
00:01:46
crazy but um they got you when you were
00:01:49
getting your gold medal Nick pull it up
00:01:51
this is this was I think in US Weekly
00:01:53
here it is here's chamath getting his
00:01:55
gold medal okay
00:01:58
oops whoa now this this is in the uh
00:02:01
category of uh being the biggest prick
00:02:04
now just let people know chamat has
00:02:07
there he is the biggest
00:02:11
prick other people were there too by the
00:02:13
way it wasn't it wasn't just Cham
00:02:15
freeberg was also there here's here
00:02:17
freeberg yeah most likely to fight a
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girl yeah there it is he was in the am I
00:02:22
the Syrian uh yes that's you in the
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that's you in the women's category of
00:02:27
boxing the women's boxing right thank
00:02:29
you J thank you job saak was there too
00:02:32
though by the way here he is he uh he
00:02:34
won silver for
00:02:37
the at the very least the otic and wovi
00:02:40
you lost the weight but you didn't add
00:02:41
any muscle definition that's a known
00:02:43
that's known right freeberg it's known
00:02:45
you lose the muscle right that's right
00:02:47
fat and the muscle um I was there too by
00:02:50
the way and I'm very very proud to say
00:02:53
in a photo finish you can see me
00:02:55
there you guys know this one right this
00:02:57
is the 100 meter virtue signal
00:03:00
so you see
00:03:01
there just edged me out and I'm right
00:03:05
ahead of Paul Graham so we
00:03:07
signaling 100 meter dash it was pretty
00:03:10
great it's pretty great but congrats to
00:03:12
Reed Hoffman also coming on the Pod to
00:03:14
debate you sex hard to beat them in vir
00:03:16
signaling I know I felt like hard I felt
00:03:19
like silver in this case was a gold you
00:03:21
know given the competition right you
00:03:23
just if you medal in that group of virt
00:03:25
signs you're
00:03:27
good let your winners ride
00:03:30
Rainman
00:03:34
David and in said we open source it to
00:03:36
the fans and they've just gone
00:03:39
[Music]
00:03:42
crazy all right everybody welcome back
00:03:45
to the Allin podcast of course the
00:03:47
number one podcast in the
00:03:49
world and I'm back Daddy's home and
00:03:52
we've got a very full docket sax will
00:03:55
get his red meat at the end for all the
00:03:56
Maga lunatics in the comments don't
00:03:58
worry he's going to get his red meat but
00:04:00
we got bigger fish to fry in the markets
00:04:02
markets were down big on Monday due to
00:04:04
something called the Yen carry trade uh
00:04:08
the Dow was down 700 points NASDAQ was
00:04:10
down like 6% it was unsettling social
00:04:13
media went crazy on Sunday night that it
00:04:15
was going to be the end of the world the
00:04:16
beginning of a recession maybe a
00:04:19
depression and this all happened because
00:04:21
Japan Central Bank raised their interest
00:04:23
rates by a whopping 15 to 25 basis
00:04:26
points uh and we'll explain why that's
00:04:28
important in just moment we'll get
00:04:30
chamat to give us a little overview here
00:04:31
of the Yen carry trade but this is a big
00:04:34
deal because Japan has had its interest
00:04:36
rates at near zero even negative since
00:04:38
1999 so this little blip on the chart is
00:04:41
uh you know the interest rate going up
00:04:44
uh yeah there in Japan so quick
00:04:47
explainer and then shabath will have you
00:04:48
go deeper the Y carry trade is a pretty
00:04:52
basic concept investors borrow at 0%
00:04:55
interest or close to it due to this 0%
00:04:57
interest rate uh and then you convert
00:04:59
your into another currency or perhaps a
00:05:01
stock like Nvidia and you take the
00:05:04
spread so um you know the goal is
00:05:07
obviously to return a higher rate than
00:05:10
the cost of borrowing the Yen and so
00:05:12
here's an example of it um if you just
00:05:14
want to look at the flow you borrow some
00:05:16
Yen at 0% you invest it in stocks
00:05:18
whatever you get some appreciation and
00:05:21
then you liquidate the stocks and you
00:05:22
pay back your bill of course this can
00:05:24
all go yeah but a safer way to do this
00:05:27
is just to invest in a US t bill that's
00:05:30
paying 5% you don't have to take R yeah
00:05:33
people doing going down yeah so you have
00:05:35
you borrow you borrow Yen at zero%
00:05:38
invest in t- bills at 5% and you pocket
00:05:40
the difference yeah you just have to pay
00:05:42
back the loan of course chamat this can
00:05:44
all go very wrong if a number of things
00:05:47
happen so maybe you could give us an
00:05:49
overview of this kind of trade have you
00:05:52
ever done something like this what do
00:05:53
you think of these type of Trades these
00:05:56
quote unquote free money trades you know
00:05:58
picking up free money off the ground
00:06:01
trades I mean I think these kinds of so
00:06:05
I've never done them and part of the
00:06:07
reason wise I think these things look
00:06:10
genius and they work until One Moment In
00:06:14
Time where they stop working and it
00:06:16
stops working so severely that it
00:06:17
becomes almost impossible to unwind
00:06:20
yourself and so you unwinding yeah yeah
00:06:23
yeah so I I think typically in these
00:06:26
situations the thing you have to
00:06:27
remember is you don't really make a lot
00:06:29
of money
00:06:30
in this trade the way you make a lot of
00:06:32
money is by leveraging this trade up so
00:06:35
meaning it's not like borrowing a
00:06:37
million dollars in Yen and then swapping
00:06:40
it to US Dollars and then putting it in
00:06:42
t- bills is a real money maker you're
00:06:44
talking about 50k that's not really
00:06:47
going to move the needle so what people
00:06:49
try to do in these situations is do it
00:06:52
on a billion dollar and then lever it up
00:06:55
five or
00:06:56
10x the problem with that is that you're
00:06:58
posting all kinds of collateral as
00:07:02
margin to these Banks to give you that
00:07:04
leverage because then all of a sudden
00:07:07
capturing 150 basis points on 10 billion
00:07:11
or 15 billion now we're talking about
00:07:13
real
00:07:14
money and so when these things go wrong
00:07:17
and they happen very suddenly what it
00:07:20
does is it puts pressure on all other
00:07:22
asset classes because people are
00:07:25
scrambling to make sure that they don't
00:07:26
get margined out and what you saw over
00:07:30
the weekend was that mostly a lot of
00:07:33
that happening which was a lot of these
00:07:35
folks were putting this trade on to the
00:07:39
tune of tens or probably even a hundred
00:07:41
billion plus dollars wow of which they
00:07:44
had maybe five or 10 billion of equity
00:07:47
and 80 to 90 billion dollar of just
00:07:51
margin and that's what caused this very
00:07:54
quick
00:07:56
cycle then it looked like it unraveled
00:07:59
it and so people thought oh we're
00:08:01
probably mostly past this I actually
00:08:03
think we're not I've said this
00:08:05
before I think one of the most
00:08:07
interesting things I've learned in the
00:08:09
last few years about the stock market is
00:08:12
the stock market is owned by and large
00:08:15
by these alos right meaning there's
00:08:18
these large kind of murky grayish hedge
00:08:21
funds that have these computer trading
00:08:24
algorithms that are allowed to be
00:08:27
levered to the tune of you know 13 15 20
00:08:32
times about $50 billion so these folks
00:08:35
are swinging around a trillion dollars
00:08:37
each
00:08:39
okay and we all just live in their world
00:08:41
because when these algorithms make a
00:08:44
decision and they react to these kinds
00:08:47
of events that's when the real
00:08:49
volatility starts so I think the most
00:08:52
important thing was summarized by
00:08:54
friends of
00:08:56
ours from Goldman Sachs I just want to
00:08:58
Nick if you want to just throw up the
00:09:00
picture that they sent me so they they
00:09:01
sent they sent some really good Market
00:09:04
insights whenever these things kind of
00:09:05
happen to a bunch of their clients and
00:09:08
one of the interesting things that they
00:09:11
observed is a couple of facts the first
00:09:14
is the algorithms in the middle of all
00:09:16
of this chaos sold about $41 billion of
00:09:19
global equities okay no big deal except
00:09:22
that it actually causes everybody else
00:09:24
to have to react and then they sell
00:09:26
billions and billions more the other
00:09:29
thing that they noticed though is that
00:09:30
they're we're in a moment in time where
00:09:33
you can see how these algorithms will
00:09:36
behave over the next month and right now
00:09:39
if there's relatively minimal volatility
00:09:42
and not much
00:09:44
changes the algorithms will have to sell
00:09:47
another 160 odd billion dollars of
00:09:50
equity and that'll pull through many
00:09:53
hundred billions more from everybody
00:09:54
else so I think we're in a little bit of
00:09:57
a delicate moment where
00:10:00
the preponderance of the market action
00:10:02
will be to continue to sell and I think
00:10:05
it's just going to be when we look back
00:10:06
in hindsight another reason why getting
00:10:08
levered on these things is very
00:10:10
dangerous there's no free money
00:10:12
basically yeah there is no free money in
00:10:13
this free money trade and just to
00:10:15
translate a little bit of this on the
00:10:17
margins for the audience who's not
00:10:18
familiar with it margin is a loan fancy
00:10:21
way of saying a loone margin call you
00:10:24
have some asset that backs it up you
00:10:26
know in your case it might be uh you
00:10:27
know a civilian it might be your house
00:10:29
whatever your bank account in these
00:10:31
cases these big companies uh these hedge
00:10:33
funds might have cash or equities and if
00:10:37
they come down and they have to pay the
00:10:39
loan they are forced to liquidate it and
00:10:41
in some cases those assets are
00:10:44
controlled by the person giving the loan
00:10:46
and they will just start
00:10:48
programmatically selling your shares in
00:10:49
whatever Apple Google whatever Nvidia
00:10:52
you own whatever you own to pay down
00:10:54
that margin and this is called a margin
00:10:56
call thus the name of the uh movie and
00:10:59
so it's incredibly dangerous and The
00:11:00
Leverage is you and I can or like any
00:11:03
civilian could borrow you know $500,000
00:11:06
against their $2 million house in home
00:11:08
equity rich people and these big Banks
00:11:10
they can borrow 10 or 20 times the value
00:11:13
of the assets which then could lead to
00:11:16
Absolute chaos freeberg let's go to you
00:11:18
next and just talk a little bit about
00:11:20
what's going on in Japan because they
00:11:24
have had a rush people buying their
00:11:27
stocks uh the population declining it's
00:11:29
a very unique economy maybe you could
00:11:33
talk a little bit about it one of the
00:11:35
biggest challenges facing Japan is the
00:11:37
level of debt that they've recruit their
00:11:39
debt to GDP ratio is currently 263 per.
00:11:43
they have about 1.3 quadrillion Yen of
00:11:47
public debt on an annual GDP of about
00:11:50
591 trillion yen they're currently at
00:11:55
the federal level spending about 20% of
00:11:58
GDP per year
00:12:00
5% of GDP is being spent per year just
00:12:04
on servicing the existing debt and
00:12:07
that's at interest rates set by the
00:12:09
Central Bank of roughly
00:12:11
0% so you know or whatever the market is
00:12:14
trading it at so slightly above 0 per.
00:12:16
but if the central bank had to start to
00:12:18
raise rates because inflation started to
00:12:20
run away because there's so much yen in
00:12:23
circulation there's so much debt
00:12:24
outstanding the federal government would
00:12:26
not be able to actually service this
00:12:28
debt so as of March of 2024 the bank of
00:12:31
Japan the Central Bank actually holds
00:12:34
53% of Japan's outstanding government
00:12:37
bonds which is equal to about 100% of
00:12:41
Japan's GDP so their Central Bank has
00:12:43
bought the debt that's being issued by
00:12:46
the federal government to fund their
00:12:48
budget a large chunk of which right now
00:12:50
is being spent just on paying the
00:12:52
interest on the debt while interest
00:12:53
rates are close to 0% so imagine if
00:12:56
interest rates bumped up to 1 2 3 4 5%
00:12:59
as we're seeing with us treasuries we
00:13:01
were recently at a nearly 5% handle on
00:13:04
the on the 10e treasury it would become
00:13:06
an unsustainable debt burden for the
00:13:09
Japanese government to be able to handle
00:13:10
that and a large part of this is being
00:13:12
driven by a number of crises that Japan
00:13:16
has faced since the early 90s so there
00:13:18
was the financial crisis in 08 there was
00:13:20
the nuclear uh meltdown there was a
00:13:23
couple of earthquakes tsunamis and a lot
00:13:25
of debt has been taken on to support the
00:13:28
country after those crises but really
00:13:30
importantly and Nick if you could just
00:13:31
pull up this age chart is the Aging of
00:13:34
the Japanese population so this chart
00:13:37
shows that and you can kind of see back
00:13:38
to 1950 when the average age in Japan
00:13:41
was 21 years old and today the average
00:13:44
age in Japan is around 48 you know in
00:13:46
the next decade it'll be 50 then it'll
00:13:48
be 52 so that means more and more people
00:13:51
are relying on public pension today 33%
00:13:55
of their government spending goes
00:13:58
towards their social Security Programs
00:14:00
in the US for comparison Social Security
00:14:01
is about 20% of federal spending so that
00:14:04
number is only getting bigger and bigger
00:14:05
as the population ages the Japanese
00:14:07
government has to continue to service
00:14:09
their older population and they've had
00:14:11
to face several crises their debt has
00:14:14
ballooned to a level that is well beyond
00:14:16
any other industrialized nation and the
00:14:18
only way to continue to service that
00:14:19
debt economically is to keep interest
00:14:21
rates low and the problem with keeping
00:14:23
interest rate low inflation and that's
00:14:26
the big driver that caused them to say
00:14:27
let's uptake the interest by 15 bips or
00:14:30
25 bips is to try and tackle the
00:14:32
inflation problem they're facing just
00:14:34
like our Central Bank recently tried to
00:14:36
do the same but clearly the market can't
00:14:38
have it so Japan isn't a real pickle and
00:14:41
I think that it shows how much having a
00:14:43
large amount of federal debt can impact
00:14:46
the ability for a nation to maneuver
00:14:47
itself during difficult times and
00:14:50
ultimately debt payments come due they
00:14:53
come to either in the form of economic
00:14:56
contraction or massive taxes or
00:14:59
inflation and currently Japan is paying
00:15:02
for it in terms of inflation sorry
00:15:03
you're saying Japan has inflation Japan
00:15:05
has no inflation the government raised
00:15:07
rates to tackle
00:15:08
inflation I'll pull up the inflation
00:15:10
chart Japan's inflation hit a 40-year
00:15:13
high and this just shot up in the last
00:15:15
18 months inflation is running at uh
00:15:19
close to 4% a year and so they're
00:15:20
setting
00:15:22
freedberg the interest rate in the
00:15:24
country and they own the debt so they
00:15:27
are basically in control of or they're
00:15:31
manipulating the economy and trying to
00:15:32
control it correct freedberg well their
00:15:34
Central Bank has to buy most of the debt
00:15:37
and their Central Bank sets the rates so
00:15:39
they have a large amount you know 53% of
00:15:42
their feder of their public debt is held
00:15:43
by their Central Bank and if they don't
00:15:46
pay a high interest rate then people
00:15:47
don't buy future bonds if they do raise
00:15:49
it they have to pay that rate so this is
00:15:52
the conundrum freedberg if I were to
00:15:53
summarize it well yeah while rates are
00:15:55
low you see this you know particularly
00:15:57
in a market like we're facing today
00:16:00
where there's Global inflation they need
00:16:02
to raise rates in order to reduce
00:16:04
inflation the problem with raising rates
00:16:06
is this this you know this currency
00:16:08
problem but also buying the debt chamoff
00:16:10
is you know who's buying debt if you're
00:16:13
not getting anything on the coupon
00:16:14
correct that's another challenge they
00:16:16
face in Japan is that there's a famous
00:16:19
quote from an economist Simon KET who
00:16:21
said there's four kinds of countries in
00:16:22
the world there's developed countries
00:16:24
undeveloped countries Japan and
00:16:26
Argentina
00:16:27
[Laughter]
00:16:29
and I think the reason he said that is
00:16:31
that J Japan has been in the state since
00:16:34
the 90s so they had a massive property
00:16:36
and Equity bubble collapse and they've
00:16:39
not had to deal with anything that
00:16:41
looked like typical economic issues
00:16:44
since then and part of it is because the
00:16:46
government plays a very big hand in the
00:16:47
Japanese economy there's a lot of price
00:16:49
controls there so I don't know I'm not
00:16:51
sure what it is that we can learn there
00:16:54
that you can extrapolate to the rest of
00:16:55
the
00:16:56
world yeah it is a very unique Sachs
00:17:00
geography and economy so Sachs your
00:17:02
thoughts on this overall and what we can
00:17:04
expect maybe you could take the future
00:17:06
looking forward looking and prediction
00:17:08
crystal ball go ahead so I think
00:17:10
freeberg is right that the reason why
00:17:12
the Japanese Central Bank tried to raise
00:17:14
rates I mean just by a tiny amount was
00:17:16
because they are dealing with inflation
00:17:18
if you look at that inflation chart and
00:17:19
you go back to when their inflation was
00:17:21
Zero roughly in 20120 the exchange ratio
00:17:25
between the US dollar and the Yen was
00:17:28
about to one meaning one1 US dollar
00:17:30
could buy 100 yen now it's at roughly
00:17:32
150 Yen to the dollar so their currency
00:17:36
has massively depreciated over the last
00:17:38
several years and a big part of the
00:17:40
reason why is because again their
00:17:42
Central Bank is offering roughly zero
00:17:45
and you can earn 5% in US bills so
00:17:49
people are basically moving their money
00:17:52
to countries that pay a lot more on
00:17:54
their bonds and they're even borrowing
00:17:56
Yen like we talked about selling the yen
00:18:00
to then buy Australian dollars or US
00:18:02
dollars to invest the money there so
00:18:04
there's huge downward pressure on the
00:18:06
value of the Yen and the the way this
00:18:09
creates inflation is
00:18:11
that Japan is a is obviously an island
00:18:14
that has very few natural resources and
00:18:16
it has to import all of its oil so it
00:18:20
has an advanced economy but it needs to
00:18:21
import a lot of resources and so as its
00:18:24
currency depreciates the price of all
00:18:26
those Commodities goes up and this is
00:18:29
why you're seeing inflation in Japan now
00:18:31
when the Central Bank tried to solve
00:18:33
this it created huge Jitters in the
00:18:35
financial Market because it was starting
00:18:36
to unwind the whole Yen carry trade
00:18:39
which is something like 20
00:18:41
trillion so the the bank of Japan backed
00:18:44
off and you heard the the Japanese
00:18:46
Central Bankers said we can't raise
00:18:47
rates while it would create instability
00:18:50
in the global markets we have to wait
00:18:52
until it's stable but the problem is
00:18:55
that raising the rates and unwinding the
00:18:58
Yen carry trade creates the instability
00:19:00
so what they're saying is we're never
00:19:01
going to be able to raise rates and the
00:19:03
result of this is going to be more
00:19:05
inflation in Japan their currency is
00:19:08
going to continue to depreciate you know
00:19:10
they've been unable to defend it and so
00:19:12
what I would expect is that the US
00:19:15
dollar is going to keep buying more Yen
00:19:17
it's going to go from I don't know 147
00:19:20
150 some bigger some bigger number it's
00:19:23
one huge upside to this Sachs and who's
00:19:25
going to pay the price here is the
00:19:27
Japanese consumer because because
00:19:28
everything's going to cost a lot more
00:19:31
yeah and that was you know obviously
00:19:32
when the when you get
00:19:34
158 Yen to the dollar this is
00:19:37
extraordinary I was talking with Tucker
00:19:39
and we just took our NCO ski trip this
00:19:41
year from four days to seven because it
00:19:43
is just such a great deal so it'll be
00:19:46
good for tourism because yeah you'll be
00:19:48
able to travel to Japan much more
00:19:50
cheaply but if you're if you're actually
00:19:52
Japanese and you live in that country
00:19:53
you're going to see your purchasing
00:19:55
power continue to erode so I would
00:19:56
expect big domestic problems in Japan
00:20:00
and eventually they may conclude that
00:20:01
this system does not benefit them now
00:20:04
who does it benefit you could argue that
00:20:06
it benefits the United States because it
00:20:08
has
00:20:10
subsidized the purchase of our debt
00:20:14
right because again so so you have this
00:20:15
Yen carry trade of 20 trillion and a lot
00:20:18
of that has gone into US bonds or us T
00:20:21
bills right and so it basically is a
00:20:24
huge subsidy to the US treasuries need
00:20:29
to continuously issue more and more debt
00:20:31
we're issuing what a trillion dollars of
00:20:34
net new debt every 100 days so having
00:20:37
the Japanese consumer subsidize all of
00:20:39
this by taking it on the chin you know
00:20:42
in terms of inflation in order to
00:20:43
provide this Yen carry trade you could
00:20:45
argue has been very beneficial to the US
00:20:47
Treasury and chamath at some point the
00:20:50
you know the percentage of your debt to
00:20:55
GDP you know we've talked about it so
00:20:57
much on this show you've said pre iously
00:20:59
hey you know we can have a little bit of
00:21:00
this uh because we're a very strong
00:21:02
dollar so when you look at Japan is
00:21:05
there some lesson here for the US or you
00:21:07
know maybe some uh warning here that we
00:21:10
we shouldn't necessarily follow them too
00:21:11
far down this
00:21:12
road
00:21:15
nope okay keep printing money got it
00:21:17
okay well I don't know I mean I I I tend
00:21:19
to agree with freeberg here that when
00:21:20
you have massive amounts of debt it
00:21:22
definitely limits your flexibility it's
00:21:25
just arithmetic you're going to pay for
00:21:27
it with either economic contraction
00:21:29
higher taxes or inflation those are the
00:21:30
three places it goes yeah and they and
00:21:32
they did test it they've stress tested
00:21:34
now yeah one of the reasons why Japan
00:21:38
can't raise rates is because their debt
00:21:41
will become even more
00:21:42
expensive right I mean freeberg isn't
00:21:44
that part of the problem yeah that's
00:21:48
exactly right and then their federal
00:21:50
spending gets compressed because now
00:21:51
they have to service that debt again
00:21:53
they're already spending 25% of their
00:21:55
federal budget on servicing existing
00:21:57
debt with the low interest rate and
00:21:59
they've got to support an aging
00:22:00
population okay so so to analogize this
00:22:02
the us our our debt service costs are
00:22:05
what what are they at now like well over
00:22:06
a trillion we're about a trillion a year
00:22:08
with a proposed 7.3 trillion budget so
00:22:11
we're at
00:22:13
13.6% and
00:22:15
Japan over the next 10 years isn't our
00:22:17
debt service supposed to rise to yeah as
00:22:20
all of the as all of the low interest
00:22:22
Bonds mature and we issue new debt at a
00:22:25
higher interest rate our debt service
00:22:27
cost is going to continue a climb it's
00:22:29
already higher than discretionary
00:22:30
military spending at over a trillion a
00:22:32
year well just buy Bitcoin and when it
00:22:34
goes to a million dollars a coin we can
00:22:36
just pay it all down so problem solved
00:22:38
just one other point is I think it
00:22:40
shows the fragility of the Global
00:22:42
Financial system I mean the market snap
00:22:46
back as soon as the the bank of Japan
00:22:48
backed off basically capitulated said
00:22:50
okay fine we can't we can't defend our
00:22:52
currency we're just going to let it keep
00:22:54
depreciating we're going to let
00:22:55
inflation keep raging as soon as they
00:22:57
declared that then the market snap back
00:22:59
but it just showed in that 24 hours
00:23:02
putting aside like all the Panic porn
00:23:03
that was on social media because I think
00:23:04
that was overdone it still showed how
00:23:07
fragile the global economy is the the
00:23:09
Yen carry trade has injected roughly 20
00:23:12
trillion dollar of liquidity into the
00:23:15
global economy and that is propping up
00:23:18
all sorts of things right and that is
00:23:19
subsidizing US Government debt and you
00:23:22
just wonder if the Yen carry trade were
00:23:25
to end because let's say for example the
00:23:28
Japanese people don't want to experience
00:23:31
hyperinflation then what would that do
00:23:33
to the global economy it just showed how
00:23:34
rickety the whole system is I think it
00:23:37
shows how much leverage there is in the
00:23:39
system totally that's what it is it's
00:23:40
all about leverage okay let's talk about
00:23:42
leverage for a section shamal leverage
00:23:44
on Leverage on Leverage so for example
00:23:46
like if you take something like Citadel
00:23:49
runs about $50 billion and they have
00:23:53
extremely precise Risk Management
00:23:56
Systems they're the best in the business
00:23:59
but as a result of that they are so
00:24:01
systematically important to make the
00:24:03
financial Machinery run properly that as
00:24:06
they're inspected and as they prove that
00:24:08
they have very good risk management
00:24:10
they're allowed to lever up to
00:24:12
incredible levels you know 15 16 17
00:24:15
times so I think that Citadel with the
00:24:17
50 billion of capital that an investors
00:24:19
have given them is probably running a
00:24:22
trillion dollars on a daily basis in the
00:24:24
markets Renaissance Technologies same
00:24:27
situation
00:24:28
Millennium same situation a bunch of
00:24:31
these funds that sit inside of the large
00:24:34
Banks same situation so when you add it
00:24:36
all up you're probably talking about a
00:24:38
few hundred billion dollars of notional
00:24:42
Capital that's enormously lever that's
00:24:45
what causes the that sensation as sack
00:24:48
said that things are rig so should we
00:24:50
have more increased regulation or
00:24:52
increased scrutiny on this chat you've
00:24:53
talked about it before when we had some
00:24:54
of these hedge funds flip and we talked
00:24:56
about maybe some regulation yeah we have
00:24:59
a lot of regulation on banks essentially
00:25:02
what happened is after all of the chaos
00:25:05
of the great financial crisis the thing
00:25:07
that we don't talk about is what we
00:25:09
really did was keep running the same if
00:25:11
not more risk we just took it off
00:25:13
balance sheet so the banks were able to
00:25:16
structure business lines to work with
00:25:19
these hedge funds and these hedge funds
00:25:20
in turn were able to show overtime that
00:25:24
they're so tightly managed that there
00:25:25
are no Black Swan events that could
00:25:27
happen
00:25:28
that they can run highly leverage so I
00:25:31
think we are in this moment
00:25:36
where there'll be these fissures from
00:25:38
time to time so here's this bill hang
00:25:41
that's an example the carry trade is
00:25:44
another example there there have been
00:25:45
examples a couple times a year but at
00:25:48
some
00:25:49
point these folks will have taken too
00:25:51
much risk and we'll look back on it and
00:25:54
we'll think that hedge funds should
00:25:56
probably have been more regulated than
00:25:58
they are with respect to their leverage
00:26:00
ratios not with respect to their
00:26:02
strategies with this particular trade JP
00:26:05
Morgan yesterday or a few hours ago said
00:26:07
that they think about 75% of the Yen
00:26:10
carry trades have now been Unwound and
00:26:12
it was at 50% a little over a day ago so
00:26:16
the market has moved to kind of unwind
00:26:17
these trades it seems and we're pretty
00:26:19
much at the end of The levered Fallout
00:26:25
of this particular activity so I put the
00:26:27
link and so people at home understand
00:26:30
why we move on to the to the to the next
00:26:32
phase of the financial markets all of
00:26:35
those people had to cover those trades
00:26:36
which means they all have to sell assets
00:26:38
at the same time as buying in or
00:26:40
covering the n and that's what causes
00:26:42
this acute chaos in the markets where
00:26:43
you saw the NASDAQ go down 6% or in some
00:26:46
cases maybe people wanted to take some
00:26:47
chips off the table since things were
00:26:49
high yeah they going to put that trade
00:26:51
back on in fact now is even better time
00:26:53
to put that trade on because the bank of
00:26:55
Japan's basically just capitulated and
00:26:57
said that they can't raise interest
00:26:59
rates while things are so unstable so we
00:27:02
know they're just going to keep rates
00:27:03
where they are so if I was one of these
00:27:05
Traders I put the trade back on
00:27:08
now right so let's talk about the
00:27:11
landing here in the US let's get us
00:27:12
Centric now and it looks like maybe it's
00:27:15
going to be a bumpy Landing rather than
00:27:17
a soft Landing as one might suspect and
00:27:20
as we talked about here that we think
00:27:21
this could be bumpy to soft July's job
00:27:25
reports was pretty bad which is good
00:27:28
some ways when you're thinking about
00:27:30
inflation so the new jobs added were way
00:27:32
down growing 114,000 here in July and a
00:27:37
bunch of these estimates have been
00:27:38
reported downward uh over the past year
00:27:41
just so we make a note of that and this
00:27:43
was below the Dow Jones estimate of
00:27:45
185,000 there's her chart it just keeps
00:27:48
ticking
00:27:49
down you know since the FED started
00:27:52
hiking rates and you hear anecdotally
00:27:54
about all of your friends 88% of
00:27:57
Millennials right now are actually
00:27:58
preparing to be laid off according to a
00:28:01
recent survey unemployment is way
00:28:05
up in the short term here we're at 4.3%
00:28:08
in July that's the highest since October
00:28:10
of 2021 up from
00:28:13
4.1% last month and 3.5% in July so you
00:28:16
take that July number to now it's pretty
00:28:18
significant here's your chart on the
00:28:21
jobs obviously historically it's low but
00:28:23
it's ticking up pretty quickly which is
00:28:25
what you would expect with the rate
00:28:27
hikes and
00:28:28
we had this great moment of hourly
00:28:30
earnings growth going up so how much
00:28:33
people make on average per hour was
00:28:35
going up and and I think that was
00:28:36
causing a decent amount of the consumer
00:28:38
enthusiasm in the economy here it is
00:28:41
it's coming way down from almost 6% down
00:28:45
to three and a half and so that means
00:28:48
Fed rate cuts are
00:28:50
coming here's your chart uh from
00:28:53
prediction Market of the chances of how
00:28:56
much the Fed Cuts rates this year looks
00:29:00
like 75 to 100 basis points is the
00:29:02
majority about 60% of people believe
00:29:05
will be one of those two numbers I'll
00:29:07
stop there there's a lot more to talk
00:29:09
about here and we'll get into specific
00:29:10
companies and the NASDAQ yeah let me
00:29:12
pull up this last chart before I go to
00:29:13
eachof it's been a strong year for the
00:29:15
market uh S&P and NASDAQ both up 11%
00:29:18
year to date as of Thursday morning but
00:29:21
obviously a massive I guess do we call
00:29:24
it a correction when it's yeah 20% is
00:29:26
correction territory chamal
00:29:28
so your thoughts on The Wider US market
00:29:32
and the selloff I think we're in a
00:29:34
low-key recession so I think that we're
00:29:37
going to probably go through a couple of
00:29:39
very difficult revisions of old data the
00:29:43
thing to remember about non-farm
00:29:44
payrolls isn't as much what the number
00:29:47
is but if you actually look to the
00:29:49
number of times it then gets revised the
00:29:52
reality is that these things get revised
00:29:54
constantly and right now we're in this
00:29:55
trend Where We Are overestimating and
00:29:58
revising down Saks mentioned this that
00:30:01
that was the same with GDP so we are I
00:30:04
think in a tough situation and then what
00:30:07
you're seeing is folks that run very
00:30:11
cyclical businesses are telling us in
00:30:14
very plain spoken English that demand
00:30:16
isn't there so the one that was
00:30:18
interesting this past week Jason you
00:30:20
mentioned Millennials but like Airbnb
00:30:23
where you think all these young people
00:30:24
are running around yoloing what whatever
00:30:27
cash
00:30:28
have Airbnb had a massive warning on
00:30:31
demand so when I think the excess
00:30:35
Capital whether it's the steamy check or
00:30:37
what have you has been exhausted you're
00:30:39
now starting to see a bear out in these
00:30:42
cyclical businesses I don't think the
00:30:44
demand is there I think we're in a
00:30:47
recession it probably becomes more
00:30:50
obvious in Q3 and Q4 and so Powell's
00:30:54
going to have to cut the question is
00:30:56
will he overreact the
00:30:58
pressure and cut 75 to 100 versus 25 and
00:31:03
take it slow okay freeberg technical
00:31:06
definition of a recession is two
00:31:08
quarters in a row of negative GDP we
00:31:10
haven't had that but we're sort of
00:31:12
bouncing along that possibility is the
00:31:15
recession baked in or if they cut rates
00:31:18
at the extent the prediction markets are
00:31:21
predicting and they're signaling do you
00:31:23
think we have a nice rebound how do you
00:31:25
feel about the overall US economy
00:31:28
obviously you have to account for
00:31:30
inflation and government spending how
00:31:33
much of government spending is driving
00:31:36
economic growth today the US is
00:31:39
proposing to spend $7.3 trillion next
00:31:44
year out of $25 trillion
00:31:47
GDP so the US federal government is
00:31:50
roughly 30% of
00:31:52
GDP and we obviously still are tackling
00:31:56
inflation the real question is how much
00:32:00
of the economy is growing because of
00:32:03
productivity gains in the sector of the
00:32:06
economy where people are making things
00:32:08
and doing things versus the government
00:32:11
using its ability to tax and borrow to
00:32:14
drive growth in the economy by inflating
00:32:16
numbers by pushing Revenue onto
00:32:18
businesses by pushing Capital into the
00:32:20
markets by creating levered trades in
00:32:23
the markets using their um borrowing
00:32:25
capacity and their taxing capacity so
00:32:28
that's the thing I remain concerned
00:32:29
about I I mentioned this last week I
00:32:31
remain highly concerned about many
00:32:33
sectors of the economy that are deeply
00:32:35
challenged right now particularly the
00:32:38
industrial sectors manufacturing sectors
00:32:40
the agricultural sectors but um services
00:32:43
and software sectors where you can raise
00:32:44
prices and you have a nice high margin
00:32:46
business you can continue to to grow and
00:32:49
and look good but there are many parts
00:32:51
of the the global economy and the US
00:32:53
economy that are pretty challenged right
00:32:55
now saak let's talk about uh uh this
00:32:58
soft to bumpy
00:32:59
Landing consumers are definitely weaking
00:33:02
on the low end Airbnb and Amazon are
00:33:04
example of bargain hunting people who
00:33:06
are looking for discounts who want to
00:33:08
save money with those Services
00:33:10
higher-end services that have a bigger
00:33:12
price tag like uber and some of the
00:33:15
high-end retailers are showing actual
00:33:17
growth and they're saying the consumer
00:33:19
strong so it was A Tale of Two Cities
00:33:21
during this earning season with a bunch
00:33:24
of the high-end folks saying strong
00:33:25
consumers on the high-end weak consumers
00:33:27
on the low end
00:33:28
what are the chances we go into a
00:33:30
recession and you know second question
00:33:32
for
00:33:33
you Elon was recently on Lex Freeman for
00:33:36
I think eight days or something it was
00:33:38
like a record podcast of how long he was
00:33:40
on but one of the things he talked about
00:33:41
was that he had discussed with Trump and
00:33:44
VC has been very strong about this on
00:33:46
our podcast and other places and he was
00:33:48
a leading VP candidate of making the
00:33:51
government more efficient and radically
00:33:52
cutting the amount of spending but there
00:33:55
would be a reaction so does the
00:33:58
potential GOP Administration have a
00:34:00
platform to cut costs massively or not
00:34:02
and do you think that you know that
00:34:04
would have been
00:34:05
maybe too unpopular to to sort of unveil
00:34:08
that plan now as a as a presidential
00:34:11
candidate in either party I don't think
00:34:12
they have that plan specifically because
00:34:15
I just think that you would need you
00:34:17
would need a super majority in Congress
00:34:18
to do something like that and I just
00:34:20
think that this election is going to be
00:34:21
too close regardless of who wins to
00:34:23
provide that kind of mandate I mean
00:34:25
sadly I think we do need to get
00:34:26
government spending under control but I
00:34:28
think it's a long-term political problem
00:34:30
and I just think our political system
00:34:31
doesn't have the will to fix it I I do
00:34:34
believe Republicans would be better than
00:34:35
Democrats on that but I think that's the
00:34:37
truth of it to go back to your first
00:34:39
question on the state of the economy I
00:34:42
had lunch with a very prominent investor
00:34:45
yesterday who's very plugged in with the
00:34:47
hedge fund community and he said that
00:34:49
the sentiment
00:34:51
shift you know I'd say again within
00:34:53
hedge funds professional investors
00:34:55
Public Market investors had been very
00:34:57
sudden that people were now very worried
00:35:00
about the risk of a
00:35:02
recession and and I do think that the
00:35:05
Airbnb Revenue that Shas cited is a big
00:35:08
factor airbnb's stock went down 15% in
00:35:11
in one day on soft demand and what's
00:35:14
driving all of this is is consumer
00:35:15
weakness or at least fear of consumer
00:35:18
weakness you mentioned the rise in
00:35:20
unemployment it went from 4.1 to
00:35:23
4.3% month over month so 4.3 is still a
00:35:26
pretty low number by historical terms
00:35:29
but to jump so much in one month that's
00:35:32
a pretty big increase and then of course
00:35:34
it's up from 3.5% a year ago so we're
00:35:38
seeing pretty big increases in 10% year
00:35:41
over year 5% month over month is very
00:35:43
significant you yeah so these are big
00:35:45
changes There's real evidence of of
00:35:47
consumer weakness and I think
00:35:49
professional investors are are getting
00:35:51
quite worried about uh the risk of a
00:35:53
recession and I guess just one last
00:35:55
point on this is that
00:35:58
if you were to remove the impact of
00:36:00
government spending it's pretty clear
00:36:02
the private sector is in a recession I
00:36:05
mean like we've been talking about
00:36:06
government's been going hog wild with
00:36:08
spending we have the government is
00:36:10
running 6% of GDP deficits uh the the
00:36:14
latest Q2 growth number was something
00:36:16
like 2% so if you force government to
00:36:18
live within its means and to cut its way
00:36:21
back to balance we would definitely be
00:36:23
in a recession we' have a negative
00:36:24
growth rate uh so I do think that the
00:36:27
econ is looking pretty shaky all of a
00:36:29
sudden uh whether we actually tip over
00:36:31
into recession in the next few months
00:36:33
I'm not sure all right well listen I
00:36:34
want to Corner everybody here with a
00:36:36
question you got to answer the question
00:36:37
you you can't uh avoid the hard
00:36:39
questions here on the Allin podcast
00:36:41
chamath sitting here a year from now
00:36:43
market up or we experience a recession
00:36:46
defined as two quarters of negative GDP
00:36:49
which one is the more likely scenario
00:36:51
market up or a recession give it a
00:36:55
percentage or just which is more likely
00:36:57
fre your next those those are those are
00:37:00
not opposing things so you're saying a
00:37:02
year from now I don't I don't honestly
00:37:04
know okay but I do think that we'll
00:37:08
probably be in a technical recession
00:37:10
okay so you lean towards I'll just go
00:37:12
recession no recession in the next year
00:37:15
but I also think that there's a pretty
00:37:16
decent chance the market will be up ah
00:37:19
got it okay so we could have a recession
00:37:21
but the market goes up so to unpack that
00:37:23
I am with you on that same prediction
00:37:25
because I do think people are addicted
00:37:27
to to efficiency they're going to lay
00:37:28
people off and earnings are going to
00:37:29
keep ripping as these companies become
00:37:32
managed so well that's a small
00:37:34
percentage of the economy Jal that's a
00:37:35
few tech companies but much of the
00:37:38
manufacturing sector the industrial
00:37:39
sector the a markets like there's a lot
00:37:41
of markets where you don't have this
00:37:42
option to just cut knowledge workers the
00:37:44
knowledge worker economy the software
00:37:47
economy has the ability to do that the
00:37:48
tech economy can do that but much of the
00:37:50
rest of the economy doesn't have a lot
00:37:52
of maneuverability like we do in this in
00:37:55
this fast growth high margin kind of
00:37:57
industry we work in I think it's a good
00:37:59
point but I do see McDonald Starbucks
00:38:01
and some of those consumer retailers are
00:38:04
taking steps right now to rightsize
00:38:06
their businesses and offer $5 meals or
00:38:08
$3 coffee so I do think there's a shi in
00:38:12
management and how they run these
00:38:13
companies that's about reduced forecast
00:38:15
right so when their revenue decline when
00:38:17
their revenue forecasts have to be cut
00:38:19
they have to cut headcount that's
00:38:20
different than creating more efficiency
00:38:22
well they're also cutting stores and
00:38:24
they're cutting things and projects that
00:38:26
are inefficient I just think there's
00:38:28
going to be massive efficiency in all
00:38:29
sectors that's going to be the theme for
00:38:30
the next year but I mean it's obviously
00:38:32
that's a loss of jobs and a loss of
00:38:34
growth right so just to be clear when
00:38:35
you cut stores you have less growth when
00:38:37
you cut jobs that's because you don't
00:38:38
have as much revenue growth so those are
00:38:40
about earning can go up right they can
00:38:43
be supported but you're still facing
00:38:45
contraction and you know one of the
00:38:47
challenges right now a lot of food
00:38:48
companies a lot of retail companies have
00:38:50
been raising prices to try and keep
00:38:52
earnings going up but there's hitting
00:38:54
this natural inflection point where
00:38:55
consumers no longer Buy where you find
00:38:58
this Tipping Point I don't know if you
00:38:59
guys have been to the supermarket lately
00:39:01
but man it is crazy expensive how like
00:39:05
prices have gone up like 50 to 100% un
00:39:07
like everything at the
00:39:08
supermarket and this is like it's
00:39:11
basically imposs we can deal with it but
00:39:13
like a large percentage of people this
00:39:15
is a big deal in terms of like now you
00:39:17
have to budget your life and you spend
00:39:19
less Nat and I when we're here in
00:39:21
Portofino we go in the morning to the
00:39:24
fish monger and we'll buy you know fish
00:39:27
with the family it is unbelievably
00:39:30
expensive and you know we always think
00:39:31
to ourselves how is it possible that
00:39:33
folks can actually choose to eat healthy
00:39:35
and local if they want to it's waso What
00:39:39
was a whole fish tell
00:39:41
us you know like you want to have like
00:39:44
locally caught Soul it's like 48 a
00:39:48
kilogram wow okay and like it's
00:39:51
expensive and W it's more than a
00:39:55
restaurant so to feed a family
00:39:57
seven which is what we are you'll have
00:40:00
to spend you know $150 $200 it's not
00:40:03
sustainable it's
00:40:05
not something that can that makes sense
00:40:08
for enough people anymore because that
00:40:10
probably used to be 40 bucks or 30
00:40:13
bucks but freeberg is right like we're
00:40:16
in a real serious problem because it's
00:40:18
it's like these systems have remained
00:40:21
the way that they have been for a very
00:40:23
long time and while other Industries
00:40:26
like the tech industry have captured all
00:40:29
these incredible efficiencies but the
00:40:31
problem is that then these other
00:40:33
Industries are what supports everyday
00:40:34
people's everyday lives and in the
00:40:37
absence of a way to actually reduce cost
00:40:39
and improve quality you end up where we
00:40:42
are today and I don't think that that's
00:40:43
sustainable freberg greater chance of a
00:40:46
recession in the next year or not a
00:40:48
recession you have to give an answer
00:40:49
yeah I think there's a great chance of a
00:40:51
recession okay majority chance of
00:40:53
recession got it but I do think that
00:40:55
there's going to be a government program
00:40:57
to mitigate the effects meaning you
00:40:59
could see the markets the equity markets
00:41:00
continue to Rally okay on some of the
00:41:03
government programs and government
00:41:05
activity which has become kind of like
00:41:08
the learned behavior it's like pavlovian
00:41:10
it's like we we have a we have an
00:41:12
economic problem the government step the
00:41:13
government steps in and spends money let
00:41:15
me get an answer from saaks the reason
00:41:16
why the markets could rally in the midst
00:41:18
of a recession is because interest rates
00:41:20
get cut we've already seen that the
00:41:22
expectations of rate Cuts have now grown
00:41:24
substantially the markets are starting
00:41:27
to price in 100 to 150 basis points of
00:41:30
rate Cuts this year where before it was
00:41:33
more like 25 to 50 basis points so
00:41:36
obviously lower interest rates make
00:41:38
stocks go up so I think that's the the
00:41:40
main driver of the rally you're seeing
00:41:42
right now jcal not the prospects for
00:41:44
increased efficiency because I think you
00:41:46
know those prospects were already there
00:41:48
so are you majority case recession or
00:41:50
majority case not recession in the next
00:41:52
year I've been predicting recession for
00:41:54
like three years now because I just
00:41:55
think when you jack up interest rates so
00:41:56
suddenly so violently you get recession
00:41:59
so I guess I if I had if you put me down
00:42:01
I'd say I recession and I'll tell you
00:42:05
one of the reasons one of the reasons
00:42:06
why interestingly I've just checked the
00:42:08
notes saaks you predicted five of the uh
00:42:11
nine of the last five recessions I know
00:42:13
I know look it's the same recession that
00:42:15
I've been predicting it's very simple
00:42:17
when you jack up interest rates from
00:42:18
near zero to five and a half percent
00:42:21
that makes everything much more
00:42:23
expensive unless unless the government
00:42:25
spends money which is the counterbalance
00:42:28
right and that's a lot of why
00:42:29
governments and and by the way I have a
00:42:31
theory on this I think this is also why
00:42:32
we have an open border policy or why um
00:42:35
the current Administration has pushed an
00:42:36
open border policy because that can also
00:42:38
be deflationary to counteract the
00:42:40
effects of the interest rate acrel
00:42:42
because of lowers wages overall and
00:42:45
fills jow wages it increases the
00:42:46
workforce Etc creates more competitive
00:42:48
Workforce but no one's allowed to
00:42:50
publicly say that and I do think that
00:42:51
that's one of the primary motivating
00:42:53
factors of having an open border policy
00:42:55
well people have been saying it I think
00:42:57
you just did it's well said if you look
00:42:59
at job creation over the last four years
00:43:02
there's been no net new job creation for
00:43:05
native born Americans all the job
00:43:07
creation has been foreign born or
00:43:09
because native born Americans have too
00:43:11
high of a wage expectation that's the
00:43:12
fundamental problem right too affluent I
00:43:14
agree I don't think it's too high right
00:43:16
and I'm not making an argument one way
00:43:17
or the other I'm just highlighting I
00:43:18
think that this is one of the motivators
00:43:20
for the policy I think it'd be a lot
00:43:21
better to let their wages rise but in
00:43:23
any event let's not get political on it
00:43:25
just to the point about recession Jason
00:43:28
yeah look I've been predicting the same
00:43:29
recession but I think one of the reasons
00:43:32
why it might finally come now first of
00:43:34
all you've got a lot of investors are
00:43:36
suddenly worried about it there's been a
00:43:37
big sentiment shift I think the other
00:43:40
thing is I don't think we know all the
00:43:41
bad news yet unknown unknowns yeah well
00:43:45
none of us were tracking the Y carry
00:43:46
trade like very I mean it was something
00:43:48
we may have heard of but it's not like
00:43:50
we were actively thinking about it until
00:43:52
this past week and the question is how
00:43:54
many more things are out there like that
00:43:56
and I also think that the pattern with
00:43:58
this Administration has been to hide the
00:44:00
ball they hid B cility for years not to
00:44:04
get political though SX you just said
00:44:07
not to get political not to get
00:44:08
political b b by say yeah not to get
00:44:11
political but B this is just a fact look
00:44:15
it's not political I was about to give
00:44:16
him an award for saying not to get
00:44:17
political moving
00:44:19
on I'm making an economic Point here
00:44:21
actually and you guys can decide if I'm
00:44:23
just being partisan or whether I have a
00:44:24
good point here which is look I think
00:44:27
Theo of this Administration has been to
00:44:29
hide the ball and any good news they
00:44:32
would have reported do you think that
00:44:34
they were reporting all the bad news I
00:44:35
don't I think there's more bad news
00:44:37
that's going to come out after the
00:44:38
election because there's too many
00:44:39
incentives for people to to hide it and
00:44:41
for people who don't know we're talking
00:44:42
about the concept of black swans in
00:44:44
order to have a Black Swan it has to be
00:44:47
something you're not aware of and it has
00:44:48
to be have a dramatic impact the Yen
00:44:51
trade would not fall into this because
00:44:53
people were well aware of it even if it
00:44:54
wasn't front page news and it didn't
00:44:56
have a dramatic impact but there could
00:44:58
be Black Swan sitting there obviously
00:45:00
the Black Swan that you can think of
00:45:02
recently would be in the great financial
00:45:05
crisis the subprime mortgage that truly
00:45:08
was massively impactful and it was not
00:45:10
known do was known and was massively
00:45:13
impacted you need both of those
00:45:15
categories to define a Black Swan and
00:45:17
there could be black swans right sax is
00:45:18
what you're saying when you said that
00:45:20
the Yen carry trade didn't have a big
00:45:22
impact that's because the bank of Japan
00:45:23
backed off so if they kept going with it
00:45:26
we don't know what the impact would have
00:45:27
been correct but it didn't so just so
00:45:30
people who are tracking the Black Swan
00:45:32
tracker just the more you know let's
00:45:34
talk about Apple chath I'll give you
00:45:36
your flowers right now uh they're coming
00:45:38
to you just look to your left here comes
00:45:40
a huge bouquet because you predicted I
00:45:43
didn't actually send you flowers he
00:45:44
looked to his left but uh here's your
00:45:46
virtual flowers you predicted I think
00:45:50
absolutely correctly that the less
00:45:54
Berkshire Hathaway and Buffett talk in
00:45:57
their documents and their letters and at
00:46:00
their uh events about a trade the more
00:46:04
they're falling out of love with it and
00:46:07
I understand birkshire Hathaway has sold
00:46:09
half of their largest position which is
00:46:11
Apple some people are saying because
00:46:13
they don't have faith in the company
00:46:14
some people are saying because they're
00:46:16
overweighted other people saying because
00:46:18
they freeberg want to get more cash on
00:46:21
the books to make other Acquisitions so
00:46:23
chamat your maybe just take your Victory
00:46:26
lap and then we'll I think freeberg
00:46:27
double clicked on this and did a deep
00:46:29
dive I don't have much to say I mean I
00:46:31
think it's been a trend in their letters
00:46:34
when he stops mentioning a company in
00:46:38
his letter it's because he's selling
00:46:40
it's a great uh great ra there it is
00:46:42
yeah and that's what happened here okay
00:46:45
so freeberg take us through this well so
00:46:47
it looks like since the start of the
00:46:48
year they've sold 55% of their Holdings
00:46:51
in apple and if you look at the end of
00:46:54
the year Nick if you could pull up this
00:46:55
image with the pie chart this is what
00:46:57
berkshire's stockh Holdings were in
00:47:00
their non-majority owned uh businesses
00:47:03
so businesses that they don't own the
00:47:04
business outright and 50% of their
00:47:07
portfolio was in Apple at $174 billion
00:47:11
we obviously saw Apple's uh stock price
00:47:14
Peak highest level ever just a few days
00:47:17
ago but it has since come down as it was
00:47:20
reported that since the start of the
00:47:22
year now Berkshire sold 55% of this
00:47:25
position so some people are arguing that
00:47:29
they've got a point of view on the
00:47:30
company strategy and compet competitive
00:47:32
kind of landscape some folks have argue
00:47:35
that the valuation multiple has gotten
00:47:36
too high trading at nearly 30 times
00:47:38
earnings the stock has risen 900% since
00:47:42
Berkshire bought the stock in 2016 nine
00:47:44
bagger nicely done yeah and some people
00:47:46
would argue that the percent of the
00:47:48
portfolio is too high at over 50% as you
00:47:50
can see here at the start of the year
00:47:54
but you know I'll kind of provide some
00:47:55
of the counterarguments you know Warren
00:47:57
Buffett does not do much analysis on
00:47:59
corporate strategy when he provides
00:48:00
reviews of the stocks that he's picked
00:48:03
he often finds and talks a lot about
00:48:05
great managers that generate great
00:48:07
returns and he sticks with them and he
00:48:09
sticks with them sometimes for many many
00:48:11
decades the management in this company
00:48:13
has not changed the return profile on
00:48:15
cash invested and cash returned has only
00:48:17
improved since he put money in they're
00:48:19
generating more cash flow they're
00:48:20
offering more dividends they're doing
00:48:21
more stock BuyBacks and he's happy to be
00:48:23
concentrated over the years he's made
00:48:25
large bets on single companies to the
00:48:28
point that sometimes he just outright
00:48:29
buys the entire company like he did with
00:48:31
Geico in 1996 he always talks a lot
00:48:34
about finding a company that is run by
00:48:36
great managers that has a premium
00:48:37
product with a nice high margin and a
00:48:39
durable moat strong brand value as I
00:48:42
look at kind of what's really gone on
00:48:44
here it feels to me like the difference
00:48:47
between Apple and some of the other big
00:48:48
Holdings in his portfolio is that many
00:48:51
of those other businesses are regulated
00:48:53
monopolies so BNSF Railway is regulated
00:48:56
by the Federal Railroad Administration
00:48:58
Berkshire energy which owns MidAmerican
00:49:00
is a regulated utility the prices that
00:49:02
they charge consumers are set by the
00:49:03
government so they have a market that's
00:49:05
locked in the prices are set they have
00:49:08
locked in distribution they have locked
00:49:09
in utility value and the same is true in
00:49:11
the insurance business Geico's rates are
00:49:13
approved and set effectively by state
00:49:16
Regulators Berkshire has a moat because
00:49:18
they've got the largest Capital base and
00:49:20
they've got this machine that just keeps
00:49:21
generating cash and the rates are
00:49:23
publicly set by government Apple however
00:49:26
is not regulated and it is very clear
00:49:29
that apple is facing very deep and
00:49:30
severe Financial impact from the
00:49:33
regulatory authorities that are
00:49:34
overseeing the business so if you look
00:49:35
at the Google antitrust we're get into
00:49:37
the Google deal in a second yeah there's
00:49:39
a real regulatory risk there because
00:49:41
Google's paying Apple 20 billion dollars
00:49:43
a year to be the default search engine
00:49:45
Apple also has a very deep relationship
00:49:47
with China they have a lot of
00:49:49
manufacturing being done in China and
00:49:50
they sell a lot of product into China so
00:49:53
as Regulators start to take a harder
00:49:55
look as they've said they're going to at
00:49:56
company's relationships with China
00:49:58
that's a real risk to Apple advertising
00:50:01
tracking users and then the subscription
00:50:02
fees that are charged to Consumers and
00:50:04
most importantly we've talked a lot
00:50:06
about the 30% Vig that Apple takes on
00:50:08
their App Store and how Regulators are
00:50:10
now stepping in and take a look at this
00:50:12
so because this business is not yet a
00:50:14
regulated Monopoly it may be a monopoly
00:50:16
in many senses of the word it's not
00:50:18
regulated yet and that transition could
00:50:20
be financially painful for Apple once
00:50:22
they get to the other side it starts to
00:50:24
look a lot more like a large scale
00:50:25
Burkshire type business so that that's
00:50:28
my kind of summary take on what's going
00:50:29
on with apple I don't know if you guys
00:50:31
agree I don't know I think it's pretty
00:50:32
deaf uh Sak your thoughts on this
00:50:34
massive increase in cash and what
00:50:36
Berkshire hathway is thinking what is
00:50:39
Warren Buffett thinking here is it this
00:50:41
became he became overweight apple or
00:50:43
that he's building up cash because the
00:50:44
recession's coming he wants to buy
00:50:46
things on the cheap well or regulation
00:50:48
to free BG's point when we had this
00:50:50
Global selloff on Sunday Monday a lot of
00:50:53
people were sharing this chart online
00:50:55
and pointing out that buff it was
00:50:57
sitting on this gigantic cash pile by
00:50:59
far the biggest cash pile that he's ever
00:51:00
sat on we then had a market recovery so
00:51:03
people aren't really talking about this
00:51:04
but it does stand to reason that Buffett
00:51:07
is building up a a war chest here and
00:51:10
he's somewhat defensively positioned you
00:51:13
can see that you know was it like 2021
00:51:15
22 the cash pile went down because he
00:51:18
started making a bunch of Investments
00:51:20
now the cash pile is really high so it
00:51:23
seems logical to infer that he thinks
00:51:26
thinks that the risk reward right now is
00:51:29
is not great on public equities and he
00:51:32
is um again he's just a little bit more
00:51:34
risk off what do you think of the
00:51:36
regulatory risk argument freeberg is
00:51:39
floating here chamama I think that David
00:51:41
is right that freeberg is right that the
00:51:44
China thing could have impacted it but
00:51:48
because he also sold a lot of
00:51:50
byd which they've owned since 2008 I
00:51:54
think so you know that's a Chinese
00:51:57
company and so it could be just that
00:51:59
that could have played a part to be
00:52:02
honest I don't know so wait you're
00:52:03
saying China dependency both of those
00:52:05
have a China dependency so he maybe felt
00:52:07
the overall portfolio had too much China
00:52:09
dependency maybe yeah I could buy that
00:52:11
that seems like reasonably logical I
00:52:13
think the thing to remember though is
00:52:15
that these
00:52:16
decisions I think have been
00:52:18
stewing for at least a couple quarters
00:52:22
remember like you know that letter that
00:52:24
he writes was not written yes yesterday
00:52:27
right that was being drafted months and
00:52:29
months ago so these decisions were made
00:52:32
or even longer so I think these
00:52:35
decisions were made a while back another
00:52:38
reason if we're going to play kind
00:52:40
of conspiracy theorist is like you know
00:52:43
after the death of Charlie Munger maybe
00:52:46
what he's starting to do is consolidate
00:52:50
the book so that it can transition
00:52:52
elegantly to Greg AEL when Buffett
00:52:55
passes away
00:52:58
and so that could be another let for a
00:53:00
second So when you say that you're
00:53:01
saying he wants to hand it off with less
00:53:03
risk in it so a dependency on one stock
00:53:06
would be risk a dependency on China
00:53:07
would be risk he wants to make it really
00:53:09
clean so the handoff is smoother he
00:53:11
wants to handoff a very organized book
00:53:14
or maybe he and Abel he and Greg Abel
00:53:16
have already talked about the kind of
00:53:18
risk book that they want over these next
00:53:21
5 to 10 years and it reflects a
00:53:24
discussion about what the incoming CEO
00:53:27
wants it could so there could be all
00:53:30
kinds of reasons why I don't I don't
00:53:32
really know I just think that Apple just
00:53:36
back to free Berg's core thesis I agree
00:53:39
with many of his General points I'm not
00:53:41
sure that they affected the Brookshire
00:53:43
strategy but apple is sort of a little
00:53:45
bit Wayward it is a company with an
00:53:49
effective and unregulated Monopoly or
00:53:52
duopoly that doesn't really know what to
00:53:55
do
00:53:57
and I think that that's the biggest
00:53:58
problem with that company and that's
00:54:00
independent of Buffett selling now or
00:54:02
selling a year from now or having not
00:54:04
sold the year before once you're
00:54:07
regulated you know what the prices are
00:54:09
you know what you can do you know where
00:54:10
you can go and all that risk is off the
00:54:13
table that's what is a feature of all of
00:54:15
those other monopolies he owns is that
00:54:18
the government has a role in it highly
00:54:20
predictable business by the way and you
00:54:22
mentioned the Google thing but this
00:54:25
clearly was not part of his calculus I
00:54:28
think he just got very lucky but if
00:54:31
you're holding Apple today I think you
00:54:34
have to take the20 billion that Google
00:54:37
pays you every year which comes in at
00:54:40
99% margin and you should probably
00:54:43
sensitize the value of Apple for not
00:54:46
having that 20 billion if this antitrust
00:54:48
ruling against Google stance yeah that
00:54:52
alone could be worth upwards of half a
00:54:54
trillion to a trillion dollars to
00:54:56
depending on what multiple you want to
00:54:57
put on that 20 well I mean what's crazy
00:55:00
is the Apple Apple still still up to
00:55:04
214 which is 11 12% higher than it was
00:55:07
at the start of this year at 185 the
00:55:10
stock is just coming off of its all-time
00:55:13
Highs at 230 a share so it's just barely
00:55:15
off the all-time highs I mean this is
00:55:17
just an extraordinary amount of cash to
00:55:19
be held by both Apple Apple's you know
00:55:21
also has over a 100 billion in cash now
00:55:23
Warren Buffett has close to three 100
00:55:27
billion allocators want to make trades
00:55:29
and they got a better obviously he's got
00:55:31
a better trade I think he can make on
00:55:32
this whether that's the 5% he's going to
00:55:34
get on the 300 billion or maybe there's
00:55:36
something he wants to buy that's another
00:55:38
possibility so uh great job wrapping
00:55:40
this all up and let's pivot to the
00:55:43
federal judge that ruled that Google has
00:55:46
legal Monopoly in Search and advertising
00:55:49
this is huge news perhaps this is the
00:55:52
biggest news in the tech industry for a
00:55:53
couple years on Monday a judge ruled
00:55:55
that Google had acted illegally to
00:55:57
maintain its Monopoly in online search
00:56:01
if you remember this was filed under the
00:56:03
Trump Administration in 2020 uh by the
00:56:06
do the 277 page ruling agrees that
00:56:10
Google abused its search business
00:56:12
Monopoly by paying billions of dollars
00:56:13
to third party platforms like Apple and
00:56:15
Samsung in order to be their default
00:56:18
search engine so it's not just that you
00:56:20
have the Monopoly it's how you maintain
00:56:23
the Monopoly uh this is called Tac
00:56:25
traffic acquisition cost we've talked
00:56:27
about it here many times according to
00:56:29
the suit Google conducts around 90% of
00:56:31
web searches I think we all know that
00:56:33
companies disputing that
00:56:35
claim the ruling doesn't contain
00:56:38
remedies yet for Google's Behavior
00:56:41
they're going to decide that in a
00:56:42
subsequent ruling obviously Google is
00:56:44
going to fight this it could result in a
00:56:47
change in business practices I.E they
00:56:49
cannot pay fire fox Samsung Apple to be
00:56:52
the default search engine anymore that
00:56:54
will lead to many interesting
00:56:56
possibilities uh jamat and I were
00:56:59
discussing them on X and so this is huge
00:57:03
news uh this is going to be great I
00:57:05
think for the search engine Market I
00:57:07
know Apple from my time doing Maha
00:57:10
Mahalo a human power search engine over
00:57:12
10 years ago when I sent it to Steve
00:57:15
Jobs he opened it up in the middle of
00:57:16
the night and started playing with it
00:57:17
and there were many reiews
00:57:20
of or many rumors of Apple wanting to be
00:57:23
in the search business because they had
00:57:24
a contentious relationship with Google
00:57:26
obviously when Google competed with
00:57:28
Android that upset Steve Jobs greatly
00:57:32
and also Google created Chrome which
00:57:36
also Safari and chrome competing with
00:57:39
each other it's not out of the question
00:57:40
I think chth that you could see apple
00:57:45
when they lose this 2030 billion doll
00:57:47
deal for TAC to start their own search
00:57:49
engine buy duck ducko Brave has an
00:57:50
amazing search engine and a search
00:57:53
API and they've obviously they've got a
00:57:56
crawler so people don't know this but
00:57:58
apple has a crawler my prediction is
00:58:00
Apple buys a search engine and they go
00:58:02
it alone and expand their advertising
00:58:04
Network like Amazon Uber and other
00:58:06
companies have what's your take on this
00:58:07
and what we're going to see in the
00:58:08
future will this ruling stand up and
00:58:10
then what are the downt market
00:58:12
impacts I think that this Google
00:58:16
thing is the most important thing that's
00:58:19
happened in Tech since the Microsoft doj
00:58:25
decision in 20 000 Internet Explorer
00:58:27
yeah yeah because if you if you go back
00:58:29
to that consent decree in 2000 it
00:58:32
essentially handcuffed this
00:58:34
incredibly for boing company for more
00:58:38
than a decade while all kinds of
00:58:40
Innovations happened so they missed out
00:58:42
on two huge waves right Microsoft
00:58:45
essentially missed out on social and
00:58:47
then they missed out on mobile largely
00:58:49
as a result of that consent degree and
00:58:52
then they were able to catch up and
00:58:53
embrace SAS and the clouding amazing
00:58:56
but there is this
00:58:59
small o outcome here which is
00:59:02
essentially a
00:59:04
consentire where Google gets handcuffed
00:59:06
for some number of years and it creates
00:59:10
a couple of big waves of innovation of
00:59:13
new companies that can succeed that may
00:59:17
not have otherwise been able to
00:59:19
succeed in the absence of such a consent
00:59:21
agreement and a good example of this
00:59:24
would be the AI power search experiences
00:59:27
that you're starting to see whether it's
00:59:28
from open AI or perplexity or a few of
00:59:32
these other folks the Big O outcome
00:59:36
though is more if you go back to the Mel
00:59:39
kind of thing where the company gets
00:59:42
broken
00:59:43
up I think that the odds of that are
00:59:45
extremely
00:59:46
unlikely so I think the Big O
00:59:49
outcome is probably something that you
00:59:51
can pretty safely take off the table I
00:59:53
think it's going to be a little low
00:59:54
outcome
00:59:56
but the point is that there's a
00:59:57
distribution here between these two
00:59:59
things that this judge will be in
01:00:01
control of and I think that again again
01:00:06
I'm just guessing I think both the
01:00:08
Democrats and the Republicans will
01:00:10
really support whatever happens
01:00:14
here and that's not necessarily because
01:00:16
I don't think that's necessarily because
01:00:18
they have a bone to pick with Google I
01:00:20
think that you know they have bones to
01:00:21
pick with other companies more than
01:00:24
Google but I think that it it starts to
01:00:27
set the tone
01:00:28
for being able to check big Tech in a
01:00:32
very meaningful and productive way and I
01:00:34
think that that has important
01:00:36
ramifications for
01:00:38
Washington okay saaks uh not to make it
01:00:40
political but this is the government
01:00:43
stopping Corporate America so it can't
01:00:45
not be political what's your take here
01:00:47
and what will we see in the future more
01:00:49
regulation more rulings like this slap
01:00:51
on the wrist break up is this more to
01:00:54
come or this is peak regulation in your
01:00:56
mind of big
01:00:58
Tech well I I think this is a good
01:01:00
decision I mean Google clearly is a
01:01:02
monopoly in fact it's at least two or
01:01:04
three monopolies they have Monopoly in
01:01:05
search they have Monopoly in advertising
01:01:07
and they at least have a dominant
01:01:08
position in video with
01:01:10
YouTube and I think that it would be
01:01:13
great if the government broke up this
01:01:15
company uh I mean it should be it should
01:01:17
be at least three or four companies I
01:01:18
mean there should be search should be
01:01:20
its own company advertising should be
01:01:21
its own company YouTube should be spun
01:01:23
out and then I don't know if G should be
01:01:25
a separate company or should get lumped
01:01:27
in with search I I I don't know but I
01:01:29
think this should be at least three or
01:01:31
four companies and I think Republicans
01:01:33
will be on board with that because
01:01:35
frankly Google's a threat to democracy
01:01:38
if you go to Google and search for
01:01:40
search results of anything relate to the
01:01:42
election it is clearly so biased explain
01:01:45
that yeah give an example if you want to
01:01:47
get the latest info on kamla Harris just
01:01:49
search for Donald Trump I mean compare
01:01:51
the search results and I've done this
01:01:52
and I've posted the results online
01:01:56
you search for Trump you'll get a bunch
01:01:57
of negative articles on Trump and you'll
01:01:58
get positive articles about Harris and
01:02:00
then conversely if you search for kamla
01:02:03
Harris you'll get positive articles
01:02:04
about her and it's like Trump doesn't
01:02:06
exist it's clearly they have put their
01:02:09
thumb on the scale here in favor of the
01:02:11
candidate they prefer as 90 something
01:02:13
per of their donations indicate here's a
01:02:15
real time search I just did Donald Trump
01:02:16
as you can see the first one that came
01:02:17
up was a Harris story about Trump and
01:02:19
Harris uh Google has actually addressed
01:02:22
this issue the issue is actually I think
01:02:25
I'll take a little bit the other side of
01:02:26
it not bias in the algorithm but bias in
01:02:28
media the overwhelming majority of media
01:02:31
is left leaning and uh there's a very
01:02:34
small amount of Republican right-leaning
01:02:37
media when compared to the left
01:02:40
obviously and so when you do a search
01:02:42
for Donald Trump you know you've got the
01:02:44
first three choices New York Times left
01:02:45
leaning Washington Post left leaning
01:02:47
Newsweek left leaning CNN left leaning
01:02:48
Delhi be super left leaning five of five
01:02:51
are left leaning that really is the
01:02:53
issue is that there isn't enough GOP
01:02:56
right leaning media to actually make uh
01:02:58
this work that's at least my take on it
01:02:59
what your
01:03:01
take that's their explanation yeah okay
01:03:03
fine but the problem I believe yeah yeah
01:03:05
they're waiting the Publications they
01:03:07
want to wait why is Daily Beast like
01:03:09
some Authority on the election they're
01:03:10
the most partisan ridiculous
01:03:12
untrustworthy publication when it comes
01:03:14
to the election so why should they be
01:03:15
top four I mean why isn't Fox News in
01:03:18
there why isn't New York Post in there
01:03:20
why isn't substack in there there's a
01:03:21
lot of great Publications on substack so
01:03:25
they are very selectively choosing the
01:03:26
Publications who you're right are in the
01:03:28
tank for the Democrats so that they are
01:03:30
reflecting the bias of the mainstream
01:03:32
media but they are being very selective
01:03:37
about what media they show and even so
01:03:40
Harris and let me just give statistics
01:03:43
here here hold on Cal Harris uh I just
01:03:45
did a search first five New York Times
01:03:48
NBC the hill CNN is the hill right or
01:03:51
left I don't know they're left would you
01:03:53
say sex it's left yeah and then Forbes
01:03:56
which I think would be considered right
01:03:58
and then Fox obviously right so I mean
01:04:01
it's just the
01:04:02
percentage Yeah the Guardians often
01:04:04
ranked right so there's another
01:04:07
two be like three of eight I want you to
01:04:10
I want you to put on the screen this
01:04:12
yeah go ahead you can do it I I tweeted
01:04:13
some receipts please click on the
01:04:15
screenshot so I can show you the side by
01:04:16
side and you'll see what I'm talking
01:04:18
about okay I search for Donald Trump
01:04:20
what do I get news about Harris the
01:04:23
first I this on my phone so this is
01:04:24
mobile the articles are all basically
01:04:27
about Harris criticizing Trump okay then
01:04:30
the second Carousel is about the project
01:04:33
2025 director stepping down which is
01:04:36
pretty tangential of trump but is a
01:04:38
major Democratic line of attack on Trump
01:04:41
so this whole thing seems rigged to
01:04:44
support the DNC point of view on Trump
01:04:46
same thing you search Donald Trump
01:04:48
latest news same thing there's some
01:04:49
weird story about Donald Trump's nephew
01:04:52
I didn't even know he about this person
01:04:54
but somehow they're elev it to be a
01:04:56
major story and again the first Carousel
01:04:58
is all about Harris now keep going
01:05:00
please yes ma'am okay now we look at KLA
01:05:04
Harris top stories just Harris no news
01:05:06
about Trump got it next
01:05:09
one same thing okay so the point is that
01:05:13
when you search for Trump you get news
01:05:15
about Harris and criticism of trump when
01:05:17
you search for Harris you get positive
01:05:20
news about Harris there's no way you can
01:05:22
tell me that this is fair or this is the
01:05:25
result of an algorithm that hasn't been
01:05:27
tampered with this is very clearly
01:05:29
programmed I mean you get cells
01:05:32
depending on which candidate you search
01:05:33
for I'm going to take the complete other
01:05:34
side of this but freeberg I want to give
01:05:36
you a chance because you worked at
01:05:37
Google I think you know a lot about the
01:05:39
algorithm what is there an explanation
01:05:42
for this that makes technical logical
01:05:45
sense given what you know about the
01:05:46
algorithm then I'll give my position
01:05:48
then chath you yeah there's very little
01:05:51
kind of editorialization going on with
01:05:53
respect to showing the rankings of the
01:05:55
the new sources the ranking of the new
01:05:57
sources is typically set by some ranking
01:05:59
algorithm the algorithm is usually
01:06:02
around click-throughs views popularity
01:06:05
of the sites how many visitors there are
01:06:07
so there are other metrics that drive
01:06:09
the order so for example if NBC CNN Fox
01:06:13
News all have kind of higher rankings
01:06:15
than some smaller publication they're
01:06:18
going to end up hiring the the ranking
01:06:20
out there in because they have a higher
01:06:21
call it quality score there's also
01:06:23
measures on how often people click
01:06:25
through and come back the bounceback
01:06:26
rate so if they click through an article
01:06:28
and then come back that can actually
01:06:31
reduce the ranking versus if they click
01:06:33
through and stay on the site so there's
01:06:35
a lot of factors that go into the
01:06:36
ranking algorithm the thing that
01:06:37
probably upsets people is that there
01:06:38
isn't any transparency into this so
01:06:40
there's no understanding on how these
01:06:42
things are ranked how they're set and
01:06:44
it's probably very good guidance and
01:06:45
feedback that there should be more
01:06:46
transparency and openness and I'm not
01:06:48
necessarily trying to defend anyone's
01:06:50
product or behavior I'm just saying that
01:06:52
there's a certainly a lack of
01:06:53
understanding on why one thing is being
01:06:54
shown versus
01:06:56
I'll also say Sach this probably the
01:06:57
case or there might be the case that
01:06:59
there's many more sites potentially
01:07:01
putting out Pro haris articles and there
01:07:04
are putting out prot Trump articles
01:07:06
which can start to overweight the the
01:07:08
algorithm as you know or overweight the
01:07:09
rankings that are showing up so that
01:07:11
might also be feeding into this that
01:07:13
that the general news media bias is what
01:07:17
you're actually seeing versus a Google
01:07:19
bias correct I I don't believe let me
01:07:21
get sham hold on let me get shth
01:07:23
involved here on this issue and and then
01:07:25
I'll give my come gener speak I do want
01:07:29
to come back to the anti trust reallying
01:07:31
in a minute okay absolutely saak thinks
01:07:34
the the fix is in freberg thinks this is
01:07:36
explained algorith me but that Google
01:07:39
could do a better job explaining and
01:07:41
being more transparent about the
01:07:43
algorithm I agree with that 100% always
01:07:46
considered a black
01:07:48
looke
01:07:50
as yeah the number of independent
01:07:53
journalists in left leaning Publications
01:07:55
is like 30 to one at places like Fox
01:07:59
News which is lar
01:08:01
about there need to be investment in
01:08:04
journalists by Republicans there are so
01:08:07
many more liberal journalists and
01:08:08
there's so many more liberal media
01:08:10
Outlets out there 20 that is a big it's
01:08:12
probably 20 to one yeah yeah of course I
01:08:14
understand that the mainstream media is
01:08:16
hopelessly biased please remember you
01:08:18
said that when we discuss it hly out he
01:08:22
say he didn't say sax I got to stop you
01:08:24
there he didn't say
01:08:26
what we said was it's 20 or 30 to1 it's
01:08:28
outnumbering so if the pool of things
01:08:30
the search can come up with is 30 to1
01:08:33
it's of course going to appear bias
01:08:34
which is what they need to do is they
01:08:36
need to show who's in the ranking what
01:08:38
percentage are left what percentage are
01:08:40
right what percentage are canit a middle
01:08:41
of the road show that at the top the
01:08:44
mainstream media is biased we all know
01:08:45
that you can defend it however you want
01:08:46
to defend it you can
01:08:48
nobody okay fine so we agree on that I
01:08:51
don't know why you're making picking you
01:08:53
a points okay my point about Google is
01:08:56
they're reinforcing the bias because
01:08:58
they UPR rank the mainstream media
01:09:00
sources and they downrank the sources
01:09:02
that provided distant opinion or an
01:09:04
alternative opinion again why is Vanity
01:09:06
Fair up ranked above the New York Post
01:09:08
is that because is that because of their
01:09:10
journalistic quality I don't think so
01:09:12
one way hold on why is it that that K
01:09:15
Harris search
01:09:16
result does not say anything about Trump
01:09:19
but the Trump search result has a
01:09:21
carousel on KLA Harris that looksam to
01:09:24
me yeah answer that looks I'll I'll tell
01:09:26
you the also
01:09:27
answer um this was the week Kamala or
01:09:31
this the last 10 days or so of Kamala
01:09:33
taking the position raising tons of
01:09:35
money hiring her VP and Trump
01:09:38
disappearing from public life for 10
01:09:41
days so there's also a on top of the 30
01:09:43
to1 ratio of let's say left leaning
01:09:45
journalist to right you also have this
01:09:47
was kamala's coronation week so
01:09:50
therefore it's going to be I don't think
01:09:52
Google is in the bag with our algorithm
01:09:53
anyway I think it's the source return
01:09:55
they're indexing trath what are your
01:09:58
thoughts one of the things that I like
01:10:00
to do when I'm in Pino is when you see
01:10:04
these huge yachts in the bay I I like to
01:10:07
figure out what they are okay and so I
01:10:10
use
01:10:11
Google for like a vessel
01:10:14
finder and two of the top three
01:10:18
links send me the
01:10:22
spyware and I think to myself every time
01:10:25
every year this happens how is it that
01:10:28
in
01:10:29
2024 Google hasn't figured out how to
01:10:32
click these
01:10:33
links in a sandbox isolate the ones that
01:10:37
send you to spyware and just take them
01:10:40
out of the
01:10:41
index and of course they can do it they
01:10:43
have you know 100,000 people and two
01:10:46
trillion in market
01:10:48
cap so I think that there's like just a
01:10:52
level of technical naal gazing at some
01:10:55
level that I think besets every big
01:10:58
company and so there are other examples
01:11:01
here that you can look at that are a lot
01:11:03
less charged than politics I think
01:11:05
freeberg is right that it's largely
01:11:07
algorithmic but I think David is right
01:11:10
in that there is a quality problem I
01:11:12
think the solution here is that for
01:11:14
certain extremely important moments
01:11:18
there needs to be a little bit more
01:11:20
intervention and there needs to be a
01:11:22
little bit more curation so that it
01:11:24
passes this test I mean the the version
01:11:27
of this that I that I also experimented
01:11:30
with and Nick you can find the tweet
01:11:32
that I had was when I was searching for
01:11:35
the assassination of Donald Trump on
01:11:36
Google it just it didn't show up it does
01:11:39
show up now so I think they got the
01:11:42
message and they fixed it so clearly
01:11:44
somebody's
01:11:46
listening and I think clearly then the
01:11:48
index
01:11:51
changes so I think that both things are
01:11:54
possible which is the algorithm can
01:11:57
improve and also that certain things
01:12:00
before people start
01:12:03
to complain loudly about this perceived
01:12:06
bias there should be enough intervention
01:12:09
to make sure that the algorithmic
01:12:11
results pass a smell test and if they're
01:12:14
not to add some amount of reinforcement
01:12:17
learning or something else some human
01:12:19
feedback that allows that that allows
01:12:22
you to get to a good answer that's
01:12:24
unbiased before we leave this topic can
01:12:26
I can I just show this chart okay look
01:12:29
this is
01:12:30
a tech all of Tech is deeply biased
01:12:33
towards the democat in the audience may
01:12:35
not know okay okay employee donations to
01:12:38
to party are again it's well over 90% of
01:12:41
Democrats this basically represents the
01:12:43
constituency of Silicon Valley okay
01:12:46
inside these companies we also know that
01:12:48
Google search results use more and more
01:12:50
manual interventions freeberg you agree
01:12:53
with that right that over time
01:12:55
definitely again there's there's meant
01:12:57
to not be an editorial process but there
01:12:58
certainly is tweaking of rankings okay
01:13:01
so all the people doing this stuff are
01:13:03
Democrats they're liberal and you're
01:13:06
telling me that this does not have an
01:13:07
influence it does not create bias come
01:13:09
on you can see the bias in a common
01:13:11
sense search for Trump versus Harris I'm
01:13:14
just saying like you've you've we've all
01:13:15
made a huge leap in this conversation
01:13:18
from talking about an antitrust ruling
01:13:19
which I will speak to very specifically
01:13:21
in a minute to oh my God Tech is biased
01:13:24
that's what's driving the you know the
01:13:26
the the sense of the nation I don't know
01:13:27
if you've noticed saaks but more than
01:13:29
half the nation is going to vote for
01:13:30
Donald Trump more than half like nearly
01:13:32
60% I think it would be like I think it
01:13:35
would be like 70 or 80% if it weren't
01:13:36
for the bias of the mainstream media
01:13:38
being boosted by big Tech well call it
01:13:40
balance in the force then I guess but
01:13:42
like hold on a second maybe maybe not
01:13:43
maybe not quite that percentage but if
01:13:45
you look if you look at if you look at
01:13:47
issues polling on issues the Republican
01:13:50
position on most issues is like a 60 to
01:13:53
70% winner and yet the are a nailbiter
01:13:56
and I think a lot of it has to do with
01:13:57
the influence of the mainstream media
01:13:58
and big Tech okay well let's come back
01:14:00
so I think that everyone has what sax is
01:14:02
speaking to is a deeply rooted feeling
01:14:06
held by politicians held by Regulators
01:14:09
on one side of the aisle or the other
01:14:12
when Democrats feel shunned by the
01:14:14
search engine or by Twitter or by
01:14:16
Facebook they raise their hand and they
01:14:18
say let's regulate these guys when
01:14:20
Republicans feel shunned because they're
01:14:22
not showing up in the news rankings or
01:14:23
the algorithms they feel let's Reg these
01:14:25
guys when it actually comes down to the
01:14:27
court case here is what is being
01:14:29
described when you go to Apple and you
01:14:32
type in a couple of words in the URL bar
01:14:36
that you want to search for because
01:14:38
we've all gotten used to this you guys
01:14:39
may not remember this but nearly 20
01:14:41
years ago when browsers first came out
01:14:44
on desktops and on mobile phones you
01:14:47
would not be able to just search by
01:14:49
typing into the URL bar you would have
01:14:51
to type in a web search engine in the
01:14:53
URL bar hit go and then you go to their
01:14:55
search box and you type in your result
01:14:58
what happened around the mid 2000s 2004
01:15:01
2005 is you suddenly were able to type
01:15:03
in a couple of words into the URL bar of
01:15:06
her browser and hit go and it would give
01:15:08
you search results the question is what
01:15:11
search engine did it give you those
01:15:13
results from and that's what this
01:15:14
lawsuit is about Google started to pay
01:15:17
companies like apple to make Google the
01:15:21
default search engine when you would
01:15:23
type in a couple of words and hit go
01:15:25
into the URL bar because search became
01:15:27
the primary way of surfing the internet
01:15:29
not typing in a URL and going to it and
01:15:31
then when they started doing that they
01:15:33
started to see more search traffic now
01:15:35
the real question from an antitrust
01:15:37
perspective is did
01:15:38
Google leverage its Monopoly to pay to
01:15:42
continue to be the default search engine
01:15:43
to lock in the search market and prevent
01:15:46
competition by doing this well the judge
01:15:47
the judge already said yes the judge
01:15:49
said yes Google is
01:15:51
monopolizing search because they're
01:15:53
paying to lock in the ability to type in
01:15:56
to get the default on the search bar by
01:15:58
the way you can go into the settings and
01:15:59
change it but what would the other
01:16:02
default be so now if Apple cre David I
01:16:05
think you're being you're being too
01:16:06
narrow hold on one second you're being
01:16:08
too narrow the initial complaint in the
01:16:10
Microsoft Internet Explorer thing that
01:16:12
kicked off the whole doj thing versus
01:16:15
the consent decree were two totally
01:16:17
different things I think that you're
01:16:20
underestimating the scope of the remedy
01:16:23
I get it let me finish so like if they
01:16:24
were to say like let's get let's make
01:16:27
sure Google can't do that again what's
01:16:29
the search engine is it bing is it Apple
01:16:32
search engine because then there would
01:16:34
be an antitrust claim to say that if
01:16:35
there is a default search engine without
01:16:37
the consumer having to actively choose
01:16:38
what their search engine is someone is
01:16:41
monopolizing the uh the install base
01:16:43
that Apple has or the install base that
01:16:45
whomever has where they are becoming the
01:16:47
default search engine now to your point
01:16:49
like the ability for the judge to then
01:16:51
say you know what this is one action of
01:16:53
many that you are taking to monopolize
01:16:55
search let's go ahead and figure out how
01:16:57
we can prevent you from monopolizing
01:16:59
search and this is really focused on
01:17:01
search it becomes a very hard leap to
01:17:03
say let's break up the company there's
01:17:05
bias in the news feed that you guys are
01:17:07
ranking this has nothing to do with
01:17:08
search engine rankings it has nothing to
01:17:11
with owning YouTube it has nothing to do
01:17:13
with like owning Cloud it has everything
01:17:15
to do with Google monopolizing the
01:17:17
search business which is the biggest
01:17:18
business on the internet I that's where
01:17:21
that conent gets narrowed Toth and where
01:17:24
there's a lot of path but I question
01:17:25
what path is there going to be it's not
01:17:27
going to be anti-rust triggering no no I
01:17:29
don't think that's a narrowing again the
01:17:31
Big O outcome of breaking up the company
01:17:33
like what happened in Mel I don't think
01:17:34
that's going to happen here a little o
01:17:37
outcome that is a consent decree similar
01:17:39
to the one that Microsoft had to sign is
01:17:41
very likely but what I want you to
01:17:43
understand is the way that that started
01:17:45
which was literally around Internet
01:17:47
Explorer and bundling versus the consent
01:17:50
decree was meaningful orders of
01:17:53
magnitude broader
01:17:55
so what I'm saying is this little o
01:17:57
outcome is going to be much bigger than
01:17:59
the scope of this
01:18:00
lawsuit and if they don't man they have
01:18:03
dodged an enormous
01:18:05
bullet and all I'm saying is the I
01:18:09
think if you had to be a betting person
01:18:12
they settled on that right like with
01:18:14
with Microsoft if I remember right it
01:18:15
was an agreed settlement like ultimately
01:18:17
they signed there was it was a consent
01:18:19
degree basically what happened is for 10
01:18:21
years the doj became the became the
01:18:23
product managers of critical projects
01:18:25
inside of Microsoft right the point is
01:18:28
this which is that when Microsoft went
01:18:30
through
01:18:31
this the government and they had broad
01:18:34
support Ed that consent degree as a way
01:18:37
to essentially hobble this company so
01:18:40
that other competition could come in
01:18:42
competition I don't it wasn't just it
01:18:46
wasn't just in the narrow scope of where
01:18:48
that initial Focus started I hear you
01:18:50
and what I'm saying is this judge will
01:18:52
read that for sure and I would and if
01:18:55
and if Google gets away with just having
01:18:58
to do something around Tack and search
01:19:02
yeah it they have dodged an enormous
01:19:04
bullet no I think you're look I think
01:19:06
you're right and I think the reason
01:19:07
you're right is because of how inflamed
01:19:09
sax is because the way that saak feels I
01:19:12
think is the way that every politi no I
01:19:15
think if I think if saaks gets his way
01:19:17
it'll be a big O outcome and they're
01:19:18
going to break I know I think that's
01:19:20
where everyone wants it to
01:19:22
go what what I'm what I'm saying is the
01:19:24
little o outcome is meaningfully worse
01:19:26
than where this lawsuit is I'm going to
01:19:28
make my final statement there's a strong
01:19:30
I agree with you and I'm not trying to
01:19:31
defend Google and I'm not trying to
01:19:32
defend some outcome here I think you
01:19:35
guys are correct I think that because of
01:19:37
how inflamed people are at the influence
01:19:40
that these companies have meta and
01:19:42
Twitter and Google there is going to be
01:19:45
a strong push to do a lot more than what
01:19:48
the narrow focus of the ruling in this
01:19:50
particular case to do something much
01:19:52
more significant to hurt these companies
01:19:54
and make them less influential and less
01:19:56
powerful
01:19:57
sax anything to add I'm not inflamed I
01:20:01
have a point of view that I think is
01:20:03
informed by facts and evidence the fact
01:20:06
the matter is the vast vast majority
01:20:08
well over 90% of the employees at Google
01:20:11
are liberal Democrats and Google search
01:20:14
does rely on manual actions and the
01:20:17
people performing those actions are
01:20:19
again overwhelmingly from one side of
01:20:22
the political aisle furthermore we can
01:20:24
see in the search results that they do
01:20:26
appear to be hopelessly biased in favor
01:20:28
of one candidate at the expense of
01:20:29
another I mean you're asking me to deny
01:20:32
the evidence my own eyes and ears I can
01:20:34
see what's happening I think most people
01:20:37
can see what's happening I do not think
01:20:39
that Google should be putting its thumb
01:20:40
on the scale on one side of the election
01:20:43
here and Jason you may have a point that
01:20:46
it's reflecting the bias of the
01:20:47
mainstream media I don't think that
01:20:49
makes it okay I think that Google should
01:20:51
have to work a little harder to be
01:20:52
neutral and they could do that use they
01:20:54
could do that easily by balancing their
01:20:56
new sources okay I feel like saxs and I
01:20:58
got to uh the perfect place I agree
01:21:02
Google's filled with obviously left
01:21:03
leaning don't deny that I agree that the
01:21:06
left the my the media is biased they all
01:21:09
picked a side and then I just want to
01:21:10
show you one chart because it's super
01:21:12
important for you to understand the
01:21:13
number of people in journalism this is
01:21:17
from 1971 to 2022 who say they are
01:21:20
identifying Republican has just
01:21:23
absolutely plummeted I know and this is
01:21:25
what I'm trying to explain to you Saks
01:21:27
is a incredible opportunity for your
01:21:29
party since you know you're passionate
01:21:31
about this is to invest in more
01:21:33
journalism invest in more journalists
01:21:35
because I don't buy this Independence
01:21:37
the fact that they're claiming they're
01:21:38
independent in journalism I believe
01:21:40
that's cap I believe they say that uh
01:21:42
but the Gap is 33% now between people
01:21:45
who say they're Democrats and people who
01:21:47
say they're Republican in journalism
01:21:49
that is a key piece to this problem and
01:21:51
layered on top of it I agree with you
01:21:53
that Google is filled with liberal
01:21:54
people and I agree with you shamat that
01:21:56
they need to intervene and put at the
01:21:58
top of the search results in news these
01:22:00
are the you know this is what we're
01:22:02
indexing this is the percentage that's
01:22:03
left leaning this is the percentage
01:22:05
that's right leaning and there are a lot
01:22:06
of organizations that examine and rate
01:22:09
Publications on their bias left and
01:22:11
right and that's something that Google
01:22:13
could do that's very unique and that
01:22:15
could move the whole show that you're
01:22:17
saying which is they could showcase that
01:22:18
up top so to my friends at Google who
01:22:20
are listening do a better job of just
01:22:22
being more transparent so we don't have
01:22:24
this ition in society okay it's time for
01:22:27
Sax's red meat sax we have a VP
01:22:30
candidate you have been absolutely
01:22:33
waiting for this moment the race is a
01:22:36
dead heat here's your second course of
01:22:38
red beat I brought you that giant this
01:22:41
you know what this is this is the St for
01:22:43
two no this is the steak for two for one
01:22:48
you order the steak for two for one
01:22:49
sacks get in there medium rare you got
01:22:52
your cowboy cut what did you think when
01:22:54
you saw Camala Harris enter VP pick uh
01:22:59
move ahead in almost
01:23:03
universally all uh polls and prediction
01:23:05
markets to the lead over your boys Trump
01:23:09
and Vance what did you think of the pick
01:23:11
go ahead enjoy your Sak well I was very
01:23:13
happy I was very happy with the pick I
01:23:16
mean so first of all I think I said last
01:23:17
week or two weeks ago that I thought the
01:23:19
pick was would be Shapiro Jos Shapiro
01:23:21
the governor of Pennsylvania it was such
01:23:23
an obvious choice for a Harris because
01:23:26
this whole election could easily come
01:23:28
down to 10,000 votes in Pennsylvania it
01:23:30
is the Tipping Point State and Harris
01:23:34
probably has to win that state in order
01:23:35
to win the election and you have a very
01:23:38
popular governor of that state he's got
01:23:40
something like 63% popularity in that
01:23:43
state he's also perceived as a moderate
01:23:46
so he would have helped Harris position
01:23:49
the ticket more towards the center which
01:23:51
apparently is her goal since she's
01:23:53
repudiated all of her far-left positions
01:23:56
so it just seemed teed up to be so
01:23:58
perfect and then what happened is there
01:23:59
was a smear campaign by the progressive
01:24:02
left against Shapiro he was the only one
01:24:05
of the VP shortless candidates that
01:24:06
seemed to get all this Oppo dumped on
01:24:08
him before the pick and that campaign
01:24:11
against Shapiro seems to have spooked
01:24:13
Harris who seems to be fairly risk
01:24:15
averse and she went with this guy Tim
01:24:18
Waltz from Minnesota who is a darling of
01:24:23
the radical left and I think that he's
01:24:26
already presented many opportunities for
01:24:28
attack by the right there's three big
01:24:30
issues that I think Waltz is going to
01:24:32
have to address because Republicans are
01:24:34
already Landing uh blows on him number
01:24:36
one Stolen Valor he has clearly and on
01:24:40
several occasions overstated the extent
01:24:43
of his military record look obviously
01:24:45
I've never served but I know that among
01:24:47
people who have this is a very big deal
01:24:51
campaigns have big issue campaigns have
01:24:53
imploded over this so that's number one
01:24:55
he's got the stolen valid problem number
01:24:57
two on trans he seems to have bought
01:25:00
into every aspect of the trans agenda
01:25:03
and uh he's made Minnesota Sanctuary
01:25:05
state for minors who want to come there
01:25:07
for puberty blockers and sex
01:25:10
reassignment surgeries even without
01:25:12
parental consent uh the law that Gavin
01:25:15
Nome just passed or or signed that drove
01:25:17
Elon out of the state uh Tim walz got
01:25:20
there first in Minnesota so he is he is
01:25:24
not not a Centrist he's very far on the
01:25:26
cultural left and then I'd say like a
01:25:29
third issue that I don't even know if
01:25:30
people have really gotten to yet but I
01:25:32
think it will eventually come up is that
01:25:36
Waltz was was insanely authoritarian on
01:25:39
covid I mean this is the guy who told us
01:25:41
that minnesotans live by a motto of mind
01:25:44
your own damn business but he set up a
01:25:46
covid snitch hotline so people could rat
01:25:49
out their neighbors for leaving the
01:25:51
house or having dinner parties or
01:25:52
walking their dog without a mask and it
01:25:55
was it was real I mean violators could
01:25:56
be punished by 90 days in jail so again
01:25:59
this guy has been to the left of Gavin
01:26:01
Nome on cultural issues and I think
01:26:04
that's going to be a big problem for the
01:26:06
Harris campaign and I don't really
01:26:09
understand why she went with him when
01:26:10
there was such an obvious alternative
01:26:13
who was available who could have given
01:26:14
her a swing state who could have
01:26:16
positioned her as
01:26:18
moderate what are your thoughts and SCH
01:26:22
you want to speculate
01:26:24
chance to bash uh the Democrats and
01:26:26
speculate Goa no I have no bashing to do
01:26:29
I will say two things one is that I
01:26:33
think
01:26:35
his stance on this trans stuff is a
01:26:39
little problematic in these swing States
01:26:42
I say a little only because I think it
01:26:45
matters more what comma stance on all
01:26:47
these topics are but I do think that
01:26:51
where there's going to be a a big
01:26:53
judgment issue around her selecting
01:26:57
him is if there is veracity to The
01:27:01
Stolen Valor claims and so when Shawn
01:27:05
Ryan as an example incredible podcast if
01:27:08
you guys don't listen to it there it's
01:27:10
great but like you know when he gets to
01:27:12
the bottom of this and he will Tim Waltz
01:27:15
better hope that he told the entire
01:27:18
truth okay freeberg your thoughts we're
01:27:21
dancing around the issue here you had
01:27:23
talk a couple of weeks ago about an
01:27:25
organization that didn't want to put a
01:27:28
Jewish person in the top position or in
01:27:30
a top position do you think that this is
01:27:34
or there are any concerns of Shapiro
01:27:38
being Jewish that caused him not to be
01:27:40
selected or do you think maybe he bowed
01:27:42
out because he wants to run for
01:27:43
president as some people are saying and
01:27:44
maybe he his star shines a little too
01:27:47
bright for the second position what are
01:27:49
your thoughts let's go right to the
01:27:51
anti-Semitism claims I'm not going to
01:27:53
make that Proclamation I don't know what
01:27:57
vice president Harris's decision making
01:28:00
process was I don't know who she talk to
01:28:02
what she cared about if she cared if she
01:28:03
was even in charge I have no
01:28:05
idea all I know is that there have been
01:28:08
other conversations I've been privy to
01:28:09
Behind Closed Doors where senior people
01:28:12
have been passed over because they are
01:28:14
Jewish and because of the concerns of
01:28:15
someone Jewish being viewed to be in a
01:28:17
leadership position in an organization
01:28:20
and the impact that that might have that
01:28:21
there is a brewing distrust as a result
01:28:24
of the conflict in Gaza let me say
01:28:26
something about this issue frankly in
01:28:27
defense of kamla Harris I I don't think
01:28:30
she's anti-semitic and I I don't think
01:28:32
that accusation should ever be made
01:28:34
without real evidence okay that being
01:28:37
said van Jones who is in a position to
01:28:39
know because he's an important political
01:28:42
pundit in the Democrat Party said that
01:28:45
one of the reasons why Shapiro was
01:28:47
passed over is because of this issue and
01:28:50
he said that anti-Semitism had become
01:28:53
marbled into the Democrat Party I don't
01:28:56
know exactly what he meant by that I saw
01:28:57
I saw that quote that was really jarring
01:28:59
actually marble is an interesting term
01:29:02
yeah that means it's like absolutely in
01:29:04
the fabric of the yeah yeah so I don't
01:29:08
now I I don't think Harris is I think
01:29:10
she's just risk averse and didn't want
01:29:11
to alienate certain factions within the
01:29:14
Democrat Party I agree with that
01:29:15
statement you're right but too in the
01:29:17
process of being risk averse she chose
01:29:20
this guy Waltz who I think has got much
01:29:23
bigger vulnerability
01:29:24
than Shapiro does and I think the
01:29:26
question now is whether Waltz is even
01:29:28
going to make it to the convention I
01:29:30
think he might have to drop out I don't
01:29:32
understand by the way I saw the dating
01:29:35
process that Donald Trump had with his
01:29:37
VP candidates right sax and I saw some
01:29:40
of it really up close yeah explain
01:29:43
it well well I can only speak to what I
01:29:46
saw but it just seemed to me that there
01:29:48
was this
01:29:49
monthlong audition where I think they
01:29:52
were just trying to figure out I'm
01:29:54
guessing here completely guessing where
01:29:57
these folks stood on things but also he
01:29:59
was trying to get a sense of the person
01:30:02
and whether they got along and whatnot
01:30:03
but what I also suspected is that this
01:30:06
person was being highly highly
01:30:08
scrutinized behind the scenes on
01:30:11
everything that they've said or done
01:30:14
where the person who's going to make the
01:30:16
pick in that case Donald Trump was
01:30:18
deciding can I live with these issues or
01:30:20
not what the articles about the VP
01:30:24
process on the Democrat side was more
01:30:28
painted along the lines of there was a
01:30:31
meeting and she kind of liked him and so
01:30:35
she went with
01:30:36
him and I agree I don't think there's an
01:30:39
anti-semitic bone in her body to be
01:30:41
totally honest with you I don't get that
01:30:43
sense at all yeah no no I yeah that's
01:30:45
not the issue but the calculus right but
01:30:47
what I would say is this is the number
01:30:49
two person I mean maybe you should spend
01:30:52
more than a day and then maybe people
01:30:54
should be really vetting this
01:30:57
person behind closed doors on all of the
01:31:01
things that could go wrong and I mean
01:31:04
you have to assume that that happened
01:31:06
yeah let me make a couple of points
01:31:07
there so so number one is Trump had a
01:31:09
lot more time to vet and get comfortable
01:31:12
with his VP candidate because he's been
01:31:15
the presumptive nominee for many months
01:31:17
whereas Harris inherited the the nominee
01:31:20
Ship Without a primary battle right
01:31:23
Biden just AB ated less than three weeks
01:31:25
ago so that's the reason why she didn't
01:31:27
really have time to go through a
01:31:29
courtship process for her VP now as to
01:31:31
the vetting process I agree with you I
01:31:33
think it's somewhat inexplicable because
01:31:35
these stolen Val claims have been out
01:31:37
there for a long time when Waltz ran for
01:31:39
governor there were former soldiers who
01:31:42
came forward and said yeah he was
01:31:45
supposed to be the commander of Our
01:31:47
National Guard unit he was supposed to
01:31:48
go with us and he quit right before we
01:31:50
got deployed to Iraq and so these
01:31:54
complaints have been out there for a
01:31:55
while moreover he has many public
01:31:57
statements saying that he was um
01:32:01
deployed to operation enduring Freedom
01:32:03
which I think was Afghanistan and he
01:32:05
simply wasn't I mean at least that's
01:32:08
what I understand to be the case so or
01:32:09
he was deployed during that time I I
01:32:11
think this sounds like a lot of cap he
01:32:13
was deployed during that time but he
01:32:16
wasn't in combat right is that he never
01:32:19
saw combat and he said that he carried a
01:32:21
weapon in combat in war so so this isn't
01:32:24
like a use of sloppy language once or
01:32:27
twice this has been around circling him
01:32:29
for many years now and there's been many
01:32:31
examples of him saying these things on
01:32:33
video so my point is can I think the
01:32:36
vetting was very poor I think the
01:32:37
vetting was very this is what I was
01:32:38
gonna say so there's there was a there
01:32:40
was a great quote and I don't know if
01:32:42
this ever made the light of day but
01:32:44
there was a moment
01:32:48
where was thought of as a potential VP
01:32:51
nomination he was like a real big
01:32:54
Democrat stal and I don't exactly know
01:32:57
the claims so and but I'm not going to
01:33:01
go there but the phrase that I was told
01:33:04
is doesn't
01:33:07
vet and what it was was a way of saying
01:33:11
look we take our time we understand
01:33:13
everybody's background we know what
01:33:15
skeletons are in folks's closets and in
01:33:18
that example whatever was going
01:33:21
on was sufficient enough where he would
01:33:24
never really get nominated for something
01:33:26
very very big and I think that's sort of
01:33:30
what comes up here which is
01:33:32
that in this impassion desire to make a
01:33:36
decision quickly I still think the
01:33:38
Democratic party had an extra two or
01:33:40
three weeks to make sure Tim Waltz
01:33:44
really vets now I don't know if whether
01:33:47
these claims are true or not again
01:33:49
somebody will get to the bottom of it
01:33:52
but it creates a over this campaign too
01:33:56
early and where I think kamla probably
01:33:59
wants all of that noise away so that she
01:34:01
can Define what she stands for sort of
01:34:02
what we said last time go after these
01:34:05
five big issues that people care about
01:34:07
go into the five states on these five
01:34:09
issues and try to win this election she
01:34:11
can't do that if this is like oh what is
01:34:15
your decision making like why did you
01:34:17
pick this person why did this person lie
01:34:20
so they have to nip this in the bud very
01:34:21
quickly look in my view this was Easy
01:34:24
Choice even if she didn't like Shapiro
01:34:26
she could have gone with Basher or she
01:34:27
could have gone with Mark Kelly remember
01:34:29
the astronaut Mark Kelly was one of the
01:34:31
top two contenders pres you know at
01:34:32
least that was what was reported in
01:34:34
other words she could have gone with a
01:34:36
moderate CNN CNN reported that comma
01:34:39
thought that Shapiro was too ambitious
01:34:41
so okay so why not Mark Kelly he would
01:34:43
have outshined her for sure Shapiro is
01:34:45
really good at speaking and eloquent and
01:34:47
she's not Shapiro Shapiro is really
01:34:49
sharp I mean that guy unbelievable okay
01:34:53
on the B I'm not saying it has to be
01:34:54
Shapiro but the the remit here was
01:34:57
really clear to strategically you want
01:34:59
to choose a moderate from a swing state
01:35:01
that's it because this whole election
01:35:02
could come down to one state and you
01:35:04
want to basically portray yourself as a
01:35:06
moderate so this is a very easy
01:35:08
assignment find me a moderate from a
01:35:10
swing state and what do they do they
01:35:12
choose a radical from a safe State saf
01:35:15
for Democrats they got Minnesota locked
01:35:17
up why do they need to take on this
01:35:19
baggage there's no reason for it and
01:35:21
chamath I do think they rushed the
01:35:23
vetting but I think it wasn't because of
01:35:25
passion or something like that I think
01:35:27
they're running out of time because
01:35:28
remember Biden was supposed to be the
01:35:30
nominee Harris was supposed to be on the
01:35:32
ticket as VP they weren't supposed to do
01:35:34
this process and then all of a sudden it
01:35:36
happened three weeks ago because Biden
01:35:38
abdicated look I think I think that a
01:35:40
vice presidential
01:35:42
pick matters but only so much and I
01:35:47
think more than helping I think what VPS
01:35:51
do unbalanced is if you pick the wrong
01:35:53
person person it can meaningfully hurt a
01:35:56
campaign I think the you know Dan Quail
01:35:59
potato thing comes to mind you can
01:36:01
become a little bit of a laughing stock
01:36:03
which just becomes baggage that you have
01:36:05
to
01:36:07
overcome and so this is again where it's
01:36:09
a little bit of a head scratcher I would
01:36:12
just have thought that this would have
01:36:13
been a little bit more buttoned up
01:36:15
totally and let me tell you if if if
01:36:17
Waltz doesn't drop the from the ticket I
01:36:20
predict there'll be gold star families
01:36:21
protesting all of their events and
01:36:24
that's going to be a real headache from
01:36:25
now till the election here is the quote
01:36:28
in question uh Harris campaign and this
01:36:30
is from The New York Times uh had
01:36:32
promoted this on social media just so
01:36:34
we're clear when we're making all these
01:36:35
claims that he did uh steal Valor that
01:36:38
he has not been convicted of stealing
01:36:39
Valor which is an actual crime uh just
01:36:42
so we get things right here on the Pod
01:36:43
here's the
01:36:45
quote that he said we can make sure that
01:36:47
those weapons of war that I carried in
01:36:49
war is the only place where those
01:36:52
weapons are at
01:36:54
and so Mr wals never served in combat
01:36:56
and that quote uh that he
01:36:59
made I guess people are now weaponizing
01:37:02
to say that he's saying those here's a
01:37:05
quote those weapons of war that I
01:37:07
carried in war is the only place where
01:37:08
those weapons are so he was not in war
01:37:11
technically he was a reserve uh and his
01:37:14
is Battalion was going to be uh called
01:37:18
he claims so that's I guess what we are
01:37:22
questioning and Vance said
01:37:24
I'd be ashamed if I was him and I lied
01:37:26
about my military service like he did
01:37:28
this I could see where people might be a
01:37:30
little bit I can see both sides of this
01:37:31
issue s you want to dunk on him or yeah
01:37:34
I'm not going to dunk because this is
01:37:35
still an unfolding story and it's going
01:37:37
to play out over the next couple weeks
01:37:39
and we'll see where it lands but it's
01:37:41
pretty clear that he at a minimum
01:37:44
exaggerated his service and he
01:37:46
exaggerated his rank I would like to
01:37:48
thank both JD Vance and Waltz for their
01:37:51
service I appreciate both of their
01:37:53
service I'll leave it at that from my
01:37:55
perspective listen whenever I meet a vet
01:37:57
I always thank them for their service
01:37:58
but those vets will tell you you can
01:38:00
never exaggerate what you did course not
01:38:03
you can't say you were in war when you
01:38:04
were not in War of course yeah so I
01:38:06
guess we'll we'll see how this plays out
01:38:08
all right everybody this has been
01:38:10
another amazing episode of the Allin
01:38:13
podcast to recap Google's big news the
01:38:17
markets are in flux the ENT trade is off
01:38:20
and KLA Harris leads the race we've got
01:38:24
eight weeks left we'll be here for you
01:38:27
every single week and we will be seeing
01:38:29
some of you at the I believe sold out
01:38:31
all in Summit are we sold out right now
01:38:33
freedberg Master of Ceremonies freedberg
01:38:36
executive producer we are sold out we
01:38:38
might do a little
01:38:39
overflow just because we know people
01:38:41
don't show up so we might do a little
01:38:43
bit of a last minute kind of overflow
01:38:45
ticket sale but um we are sold out what
01:38:48
do people need to know about their party
01:38:49
outfits everybody's asking me what party
01:38:51
outfits do I need the first night's
01:38:53
party we're going to have Top Gun beach
01:38:55
volleyball and we're going to have Back
01:38:57
to the Future all the scenes from Back
01:38:59
to the Future for the second party I
01:39:01
can't wait to see what I'm gonna work on
01:39:04
my Biff get your damn hands offer
01:39:09
Biff you should
01:39:12
go McFly mfly all I know is chat's
01:39:16
wearing home fly anybody home any home
01:39:21
FFF get your damn hands off
01:39:24
I love you guys I gotta go love you okay
01:39:25
enjoy Italy uh we'll see you on the lake
01:39:28
everybody for the Sultan of science the
01:39:31
architect the dictator I am the
01:39:34
executive producer and world's greatest
01:39:35
moderator executive producer for Life
01:39:37
we'll see you next week byebye love you
01:39:39
boys
01:39:41
byebye let your winners
01:39:48
ride and instead we open source it to
01:39:50
the fans and they've just gone crazy
01:39:52
with it
01:39:54
queen
01:39:55
[Music]
01:40:01
of Besties
01:40:03
are this my dog taking your
01:40:08
driveways oh man myit will meet me we
01:40:12
should all just get a room and just have
01:40:14
one big huge orgy cuz they're all this
01:40:15
useless it's like this like sexual
01:40:17
tension that they just need to release
01:40:18
Som
01:40:24
[Music]
01:40:25
we need to get merch
01:40:30
[Music]
01:40:37
our and now the plugs the all in Summit
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01:42:12
byebye pull up this clip of hel youth
01:42:15
because he loves when we talk about him
01:42:16
on the show even though he's banned from
01:42:18
the show by jth for live he took Sachs
01:42:21
the the battery pack of the
01:42:24
he got this guy had pcket Jacks to his
01:42:27
Ace Queen I think he hits his queen or
01:42:29
his Ace and he loses his mind but he's
01:42:32
in good spirits for the first half of
01:42:33
this play this clip Jack has 38 outs six
01:42:38
what's the odds on that well huh River
01:42:40
card oh he's a Jack look out 100% start
01:42:45
the car start the car baby
01:42:47
look here we go start the
01:42:50
car one time oh my God come on yes does
01:42:54
he have
01:42:55
covered buddy I told you all right you
01:42:58
want me to quit I'm going to qu I
01:43:02
can't right now I don't mind losing the
01:43:04
flip I really don't but come on I asked
01:43:06
you not to do
01:43:08
that you have been more out of line to
01:43:10
me than any other person no you've been
01:43:13
more out of line to me than person has
01:43:15
been out of line to me in a year and a
01:43:18
talk I don't know who you are I'm never
01:43:22
you just lost a big thought so let's
01:43:23
just like you know no I don't give a jrb
01:43:26
just he just AP I'm Ser I don't give no
01:43:29
I asked you not to do it you've
01:43:31
been I had a guy who was all day
01:43:34
yesterday let's play
01:43:37
oh the wrong with this
01:43:39
guy
01:43:41
not I wasn't talking about what you
01:43:43
think at the game jrb's at the game I
01:43:46
get to play I'm saying I have chips with
01:43:49
a group of people and Palo elto who I
01:43:51
love and I have fun with that's who I
01:43:54
play he called that's that's play with
01:43:57
people in
01:44:00
Al one of them is his net worth is 1.2
01:44:04
billion one of them is David Sachs the
01:44:07
gay code to his house is 1234 pound I
01:44:10
mean it is Phil I want to thank Phil for
01:44:12
the shout out
