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the thing that we haven't talked about
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is with all of the
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tariffs with all of the
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financing questions with all of the
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recession questions short-term rates
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long-term rates the one thing that we
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haven't sufficiently talked about it's
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not really in the press but it needs to
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be talked about is there is a tremendous
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amount of corporate debt that supports
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these businesses today and you would say
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well if long-term rates go
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down there's no real risk but the tariff
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picture actually impacts revenues right
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and the problem with that is that
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there's a lot of companies that have
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debt covenants tied to revenue and ibida
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and so this is what I spoke about at the
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beginning of January which is the one
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risk that is
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uncontrollable is what happens to
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corporate debt and could we see a wave
00:00:56
of defaults and a wave of action nick
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you may want to just play the clip and
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we can talk about what we can do about
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this this was my pick for the best
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investment idea
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go ahead all right here we go from What
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do you got so let me preface this by
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saying that this is a pick that 92 times
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out of 100 goes to absolute zero and six
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out of the remaining eight times you
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make 10x extra money and then the final
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two times you make anywhere between 100
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to a,000 extra money this is a loser
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trade but I would be long
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CDS so what am I buying i am buying
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insurance i'm buying insurance using
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credit default swaps i'm buying what's
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called protection that there is no
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default event in 2025 i would like a
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little bit of an insurance policy in
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2025 so that the men and the women that
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we have voted in have the chance to do
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their work in peace i think that there
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is a small chance of some volatility
00:02:00
next year i hope it doesn't happen i
00:02:02
hope that this trade loses money but if
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it hits it will be the best performing
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asset of 2025 and I just want to be
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clear this is not something I think will
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happen it's not something I want to
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happen but I do think that if you look
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back in terms of just the tonnage of
00:02:16
dollars you can make and the massive
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risk asymmetry that it presents to you
00:02:20
when you look at the concentration of
00:02:21
the S&P when you look at just the total
00:02:23
gross amount of debt that we have when
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you look at rate spiking all of these
00:02:27
things say having a little insurance may
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not be a bad thing it has
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hit nick you can show the CDS
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graph so this thing for every billion
00:02:38
dollars of risk you would have put on
00:02:40
every billion dollars that you put on
00:02:42
would have cost you about a million
00:02:43
dollars and that million dollars would
00:02:46
have made you about $7 million in about
00:02:48
3 months did you put it on i'm not going
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to comment on my my trades Jason oh okay
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but we tal we talked about it off air
00:02:56
already but if you did put it on does
00:02:58
that mean you're taking us all to Italy
00:02:59
this summer no what's happening here are
00:03:01
you getting a boat for us to record from
00:03:03
the all-in yacht no but there may be
00:03:05
some boats for sale if this trade keeps
00:03:06
going this way oh why is this important
00:03:09
the CDS actually represents the
00:03:12
structural risk in the United States
00:03:14
private economy in the corporate economy
00:03:16
and so Nick if you just put it back on
00:03:18
so when you see these spreads blowing
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out this is actually a very important
00:03:22
warning sign and this is actually a
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thing that I think Scott understands
00:03:26
well Howard understands well i think
00:03:28
they'll translate this to the president
00:03:31
if I have an opportunity to explain it I
00:03:33
will but this is a really important
00:03:35
market to pay attention to this is what
00:03:37
was the canary in the coal mine for the
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great financial crisis this was the
00:03:44
stuff that showed us that there was a
00:03:46
big default event happening in the
00:03:48
mortgage side of the market but then
00:03:50
that spilled over to the broader economy
00:03:53
and so the tariff picture and the
00:03:55
recession picture will get played out in
00:03:57
this chart and I think it's something
00:03:59
that folks can and should probably pay
00:04:02
tremendous attention to because I think
00:04:04
now that this trade is in the money the
00:04:07
question is I don't think we want this
00:04:08
to happen that one sigma two sigma event
00:04:11
where all of a sudden this trade returns
00:04:14
a,000x is really
