WEBVTT - Michael Burry Speaks 0:00:15.316 --> 0:00:24.556 Pushkin. I'm Lidia Dean caught, I'm Michael Lewis. 0:00:24.596 --> 0:00:28.436 And surprise, we're here for an extra episode of The 0:00:28.436 --> 0:00:30.276 Big Short companion series one. 0:00:30.316 --> 0:00:31.596 We weren't expecting that's. 0:00:31.516 --> 0:00:34.196 Right, Yeah, because we got the hedge fund manager Michael 0:00:34.196 --> 0:00:36.556 Berry to be on the podcast. 0:00:36.876 --> 0:00:38.876 We didn't really get him to be on the podcast. 0:00:38.876 --> 0:00:39.876 It's funny. What happened. 0:00:40.036 --> 0:00:41.676 Well, first we should say how Michael Berry is. 0:00:41.836 --> 0:00:44.996 Michael Berry is one of the three main characters in 0:00:45.036 --> 0:00:46.716 both the book and the movie of The Big Short, 0:00:47.036 --> 0:00:48.916 and he was a really important character to me. 0:00:49.196 --> 0:00:50.996 And in the movie he's played by Christian. 0:00:50.676 --> 0:00:53.276 Bale and in the movie he's played by Christian Bale. 0:00:53.636 --> 0:00:55.436 He doesn't do interviews, and we've asked him to be 0:00:55.636 --> 0:00:57.796 on the podcast earlier and he said no. So yeah, 0:00:57.796 --> 0:00:58.436 So what happened. 0:00:58.676 --> 0:01:00.436 First he said, you know, I'd like to help, and 0:01:00.436 --> 0:01:02.156 then he said I don't, I wouldn't like to help. 0:01:02.556 --> 0:01:05.996 And then what happened was his trading activity got released 0:01:05.996 --> 0:01:07.796 to the public, which it does. He has to file 0:01:08.116 --> 0:01:10.436 a thirteen F four with the SEC saying what his 0:01:10.516 --> 0:01:13.276 positions are. And as though it's not a perfect picture 0:01:13.316 --> 0:01:14.956 of what he's doing, it did say that he had 0:01:14.996 --> 0:01:18.236 put on big short positions against U Palanteer and Nvidia, 0:01:18.476 --> 0:01:20.556 so he was betting against the AI bubble. 0:01:20.996 --> 0:01:22.756 All he did was file what his positions were. 0:01:22.756 --> 0:01:24.996 He didn't go on he doesn't do media, he doesn't 0:01:24.996 --> 0:01:29.156 do interviews, and it exploded like it was on Twitter 0:01:29.316 --> 0:01:32.716 on CNBC, people were both attacking him and praising him, 0:01:33.236 --> 0:01:36.036 and his reasoning for not coming on the podcast was 0:01:36.076 --> 0:01:38.796 he wanted to lay low and he was trending on 0:01:38.836 --> 0:01:42.396 Twitter for forty eight hours, so it was like, what's the point? Yeah, 0:01:42.436 --> 0:01:45.156 he can't lay low. Yeah, And as he tells us, 0:01:45.156 --> 0:01:47.196 he says like this only happens to me. But I 0:01:47.236 --> 0:01:48.516 was really glad to have him on because I felt 0:01:48.556 --> 0:01:49.636 like we were missing somebody. 0:01:50.196 --> 0:01:52.956 Yeah, no, same, and also because people were asking. I 0:01:52.956 --> 0:01:54.516 was getting messages and being like, are you guys gonna 0:01:54.516 --> 0:01:55.116 have Michael Berry? 0:01:55.276 --> 0:01:57.356 There's something also nice about subjects who does just who 0:01:57.396 --> 0:02:00.436 aren't promiscuous, who don't just talk to. 0:02:00.396 --> 0:02:03.276 Everybody, because that makes you feel special, or it makes you. 0:02:03.276 --> 0:02:05.876 Feel special, makes it makes your audience feel special, and 0:02:05.916 --> 0:02:09.076 the reader feels special like nobody else has this story. 0:02:09.556 --> 0:02:11.156 And one thing I wanted you to explain it is 0:02:11.596 --> 0:02:13.796 he was one of the first people, one of the 0:02:13.796 --> 0:02:17.756 early people right to bet on the subprime mortgage crisis. 0:02:18.116 --> 0:02:19.556 And when he was trying to do it, there weren't 0:02:19.556 --> 0:02:22.596 any financial instruments to do that right. 0:02:22.956 --> 0:02:24.836 You had to It was how to do it in 0:02:24.876 --> 0:02:27.956 a way where if the madness just kept going and going, 0:02:28.156 --> 0:02:30.676 you weren't going to be bankrupt quickly. So you could 0:02:30.676 --> 0:02:34.316 have done things like bet against mortgage companies in the 0:02:34.356 --> 0:02:37.516 stock market. You could have shortened their stock, but you 0:02:37.556 --> 0:02:40.996 know that's a it's a beth. It's hard to hold for. 0:02:40.956 --> 0:02:43.476 A long time, and so you have to your timing 0:02:43.516 --> 0:02:44.636 has to be exquisite. 0:02:45.636 --> 0:02:50.196 What he did was basically invent, or have Wall Street 0:02:50.196 --> 0:02:53.676 firms invent for him, the credit default swap on subprime 0:02:53.716 --> 0:02:57.916 mortgage bonds, which is essentially an insurance policy on bonds 0:02:57.956 --> 0:03:00.276 backed by some prime loans. So if the loans go 0:03:00.396 --> 0:03:04.236 bad and the bonds go bad, you get paid off 0:03:04.236 --> 0:03:06.676 on this insurance policy. Think of it like I get 0:03:06.716 --> 0:03:10.436 to buy insurance on your house and fire insurance and 0:03:10.476 --> 0:03:13.076 if it burns down, I get paid. So there's something 0:03:13.156 --> 0:03:15.876 a little goofy about it. I mean, it used to 0:03:15.876 --> 0:03:19.276 be very oddly. It used to be that I could 0:03:19.316 --> 0:03:22.836 go buy life insurance on you, and if you died, 0:03:23.476 --> 0:03:24.756 I got paid a bunch of money. 0:03:24.956 --> 0:03:28.996 This obviously creates a very bad incentive murder. Yes, yes, exactly. 0:03:29.836 --> 0:03:32.156 But you can do this in the financial markets. You 0:03:32.196 --> 0:03:35.676 can buy insurance policies on other people's bonds and if 0:03:35.716 --> 0:03:39.436 they the bonds go bad, you get paid. You couldn't 0:03:39.436 --> 0:03:42.756 when Michael Barry started to think about this situation, you 0:03:42.796 --> 0:03:46.036 couldn't buy an insurance policy on a subprime mortgage bond. 0:03:46.556 --> 0:03:50.076 So he had to go help Wall Street create it 0:03:50.196 --> 0:03:53.276 for him, and then all the other characters in the 0:03:53.356 --> 0:03:56.636 story are then using that thing he creates to make 0:03:56.676 --> 0:03:57.236 the same bed. 0:03:58.796 --> 0:04:00.956 Is there anything else you wanted to say related to 0:04:00.996 --> 0:04:01.556 Michael Berry? 0:04:02.556 --> 0:04:04.556 I would say that the one other thing that's interesting 0:04:05.556 --> 0:04:08.276 about him is that he so let me into his life. 0:04:09.196 --> 0:04:11.996 He just doesn't really do that usually. 0:04:12.916 --> 0:04:16.036 It created an intimacy, Like I just really got to 0:04:16.076 --> 0:04:19.996 know him and really enjoyed like just hearing what he 0:04:20.036 --> 0:04:22.036 had to say, Like I just learned stuff from him. 0:04:22.636 --> 0:04:24.556 Even when he doesn't make money on what everybody he's making, 0:04:24.556 --> 0:04:27.076 it's really interesting to hear what he's thinking and just 0:04:27.156 --> 0:04:29.516 like have that as part of the furniture. 0:04:29.076 --> 0:04:30.116 In your mind. 0:04:31.236 --> 0:04:35.276 Michael Lewis's conversation with Michael Berry is coming up. It 0:04:35.316 --> 0:04:37.036 really is a very fun listen. 0:04:39.756 --> 0:04:43.156 I remember you handing me your emails, and like. 0:04:43.196 --> 0:04:46.516 You had, like thousands of you had communicated with the world, 0:04:46.756 --> 0:04:50.516 your whole trading life for years through email, and so 0:04:50.676 --> 0:04:53.476 it was a real time account of your thoughts of 0:04:53.516 --> 0:04:56.916 Wall Street's response to your thoughts of how the market moved. 0:04:57.436 --> 0:05:00.636 It was unbelievably valuable. It was so different from like 0:05:00.836 --> 0:05:03.076 everybody reminiscing. Do you remember that? 0:05:03.556 --> 0:05:07.356 I remember that, and those emails I think were the 0:05:07.396 --> 0:05:11.476 main reason I didn't get sued by my investors, Because 0:05:12.636 --> 0:05:17.476 if I had been a skilled orator or somebody who 0:05:17.556 --> 0:05:20.516 loved giving conference calls, I would have done conference calls 0:05:20.516 --> 0:05:24.116 with my investors and then maybe they wouldn't have been recorded. 0:05:24.196 --> 0:05:27.876 And but here I had emails with everybody on everything, 0:05:28.436 --> 0:05:32.876 and so it was very clear where we stood with everybody. 0:05:32.996 --> 0:05:36.516 You were like for me, you know, people came to 0:05:36.596 --> 0:05:39.036 the right answer in different ways, and you came to 0:05:39.076 --> 0:05:41.116 the right answer in such a satisfying way, because not 0:05:41.156 --> 0:05:45.436 only did you see that the irresponsibilities in the subprime 0:05:45.476 --> 0:05:49.356 mortgage market, but you actually had a theory about the 0:05:49.396 --> 0:05:51.796 timing of it when it was all going to come unraveled. 0:05:52.076 --> 0:05:54.516 And the problem with these positions like with oh, there's 0:05:54.556 --> 0:05:57.556 a lot of insanity and X or Y is that, yeah, 0:05:57.596 --> 0:05:59.836 you can be right, but you can be wrong for long. 0:05:59.756 --> 0:06:01.676 Enough that the market just takes you out of your positions. 0:06:01.756 --> 0:06:03.636 I think that's right. This is why this is the 0:06:03.636 --> 0:06:08.076 Big Short. It's the once in the century opportunity to 0:06:08.196 --> 0:06:11.516 actually say, I know when this is going to happen, right, 0:06:11.636 --> 0:06:15.116 you know, I've compared this to the nineteen nineties bubble, 0:06:15.756 --> 0:06:18.716 and the reality is there was no telling. 0:06:18.396 --> 0:06:19.076 When that would end. 0:06:19.156 --> 0:06:19.236 Right. 0:06:19.956 --> 0:06:24.796 In most situations like this, there's no good way to 0:06:24.836 --> 0:06:29.116 time it, and shorting it is just a high risk endeavor. 0:06:29.196 --> 0:06:30.916 Well, we're going to get to today, but I wanted 0:06:30.916 --> 0:06:33.276 to just revisit the Big Short just a little bit. 0:06:33.556 --> 0:06:36.116 And I'm curious what effect it had on your life. 0:06:36.156 --> 0:06:38.316 I mean, there was the trade, there was the book, 0:06:38.636 --> 0:06:41.596 and then there was the movie. You did let Christian 0:06:41.596 --> 0:06:43.636 Bale come and hang with you for a day, but 0:06:43.876 --> 0:06:47.196 you were remarkably chill about the whole thing. And I 0:06:47.196 --> 0:06:50.236 don't think I've ever felt like I've really recapped with you, like, 0:06:50.436 --> 0:06:52.116 what effect this thing had on you? 0:06:52.636 --> 0:07:00.036 If any I think I didn't know? I you're right. 0:07:00.236 --> 0:07:03.876 I mean, I'm on the autism spectrum. So I'm pretty 0:07:03.876 --> 0:07:06.276 good in my own head and I'm pretty good at 0:07:06.836 --> 0:07:11.996 blocking out stuff. And so even this movie, I saw 0:07:12.036 --> 0:07:15.156 it at the premiere. I haven't watched it since the book. 0:07:15.196 --> 0:07:17.196 I read it when it came out, and I haven't 0:07:17.196 --> 0:07:20.476 read it since. That's how I felt about it. We 0:07:20.636 --> 0:07:24.036 just I just move on and so kind of took 0:07:24.076 --> 0:07:25.836 it as it came. I went to the premiere because 0:07:25.836 --> 0:07:28.356 my whole my family wanted to go to the premiere. 0:07:29.116 --> 0:07:30.916 And I, you know, as you know, I don't do 0:07:30.996 --> 0:07:34.676 interviews because I don't feel I'm good at this, and 0:07:34.716 --> 0:07:36.836 so I you know, I haven't done one, I think 0:07:36.876 --> 0:07:39.956 since like, I haven't talked to anybody since I think 0:07:39.996 --> 0:07:43.436 the sixty minutes interview about the Big Short about this 0:07:43.596 --> 0:07:47.276 in an interview format. And now it's the tenth anniversary 0:07:47.316 --> 0:07:50.836 of the film, fifteenth anniversary of the book, and yeah, 0:07:50.836 --> 0:07:52.716 I can't believe it's been that long. But you know, 0:07:52.756 --> 0:07:55.236 I just kind of go on and do my thing 0:07:55.276 --> 0:07:57.476 and it doesn't really affect me too much. 0:07:57.716 --> 0:08:00.796 You didn't feel it puts you in the position of 0:08:01.956 --> 0:08:06.236 oracle that all of a sudden, people are expecting you 0:08:07.396 --> 0:08:09.076 to predict the next thing. 0:08:09.996 --> 0:08:14.516 It was, as we mentioned, it is a very unique circumstance. 0:08:14.556 --> 0:08:17.076 It was a once in a century type trade. People 0:08:17.116 --> 0:08:20.236 say one, you know, once in a century, flood, once 0:08:20.236 --> 0:08:22.316 in a century, this one, and it's not really true, 0:08:22.316 --> 0:08:26.876 it happens every ten years. But this was that opportunity 0:08:27.156 --> 0:08:32.436 was very unique. And I've basically told everybody I can 0:08:33.716 --> 0:08:35.956 it ever since that that that's not going to happen 0:08:36.036 --> 0:08:40.156 again anytime soon. What made it unique, Well, I was 0:08:40.196 --> 0:08:45.116 basically permitted to buy insurance on these bonds that were 0:08:45.156 --> 0:08:49.996 incredibly I liquid, and I was permitted to basically buy 0:08:50.156 --> 0:08:56.796 insurance and then trade and profit off them without actually 0:08:56.996 --> 0:09:01.876 having the insured item. And it this was not expensive. 0:09:02.036 --> 0:09:05.196 Nobody thought this could happen. I'd put on a lot 0:09:05.236 --> 0:09:07.516 of my position by late two thousand and five, and 0:09:07.556 --> 0:09:10.636 I got a call from Go and Sack saying, what 0:09:10.676 --> 0:09:13.796 are you doing. You're the only person who noticed. You're 0:09:13.836 --> 0:09:17.076 not a mortgage fund, you're not hedging, You're doing something different. 0:09:17.756 --> 0:09:20.916 It's not something that people were generally aware of. And 0:09:21.076 --> 0:09:24.236 I was and so I could kind of walk in 0:09:24.316 --> 0:09:26.636 and basically. 0:09:28.156 --> 0:09:29.116 Pull the caper off. 0:09:29.476 --> 0:09:31.236 There are three things I want to talk about at 0:09:31.236 --> 0:09:33.396 the back end of the big of your story in 0:09:33.436 --> 0:09:34.916 the big short, and then I want to move on 0:09:34.996 --> 0:09:38.596 to the present. But the first is, you have this 0:09:38.836 --> 0:09:42.396 terrific win, your investors make a lot of money, and 0:09:42.436 --> 0:09:43.876 you end up closing your fund. 0:09:44.836 --> 0:09:46.716 You remind me why you closed your fund. 0:09:48.476 --> 0:09:51.756 My investors were generally mad at me, and they were 0:09:51.796 --> 0:09:56.196 generally mad at me even when things went well, and 0:09:56.836 --> 0:09:59.836 I didn't feel at the time I had goodwill with anybody. 0:09:59.876 --> 0:10:00.196 I didn't. 0:10:00.436 --> 0:10:03.836 There was only one investor I shouldn't say his name, 0:10:03.956 --> 0:10:07.916 but love him. He is the only guy that invested 0:10:07.996 --> 0:10:11.996 with me that last year and a half or so. 0:10:12.996 --> 0:10:16.236 Nobody came to me, nobody, nobody wanted to invest with huh. 0:10:16.516 --> 0:10:19.396 And even when we made the money, it was who 0:10:19.636 --> 0:10:20.876 We don't want to go through that again. 0:10:21.196 --> 0:10:24.516 Did anybody ever call after the book, after the movie, 0:10:24.596 --> 0:10:27.076 after they got their money back and a lot more? 0:10:27.556 --> 0:10:31.956 Did anybody ever call you to apologize? No? No, no, no, Kit. 0:10:31.956 --> 0:10:34.236 It's kind of an amazing I did. I didn't expect it. 0:10:34.276 --> 0:10:36.396 I know you didn't expect it, But this sort of 0:10:36.476 --> 0:10:39.476 like at some point when there was cooling off and 0:10:39.516 --> 0:10:41.956 they looked at they looked at their winnings. I would 0:10:41.996 --> 0:10:44.796 have thought someone would have called and said, you know, sorry, 0:10:44.836 --> 0:10:46.876 I got so angry at you for doing this trade. 0:10:48.476 --> 0:10:51.276 No nobody did, okay, and I didn't expect it. It's 0:10:51.356 --> 0:10:57.036 Wall Street. When did you reopen twenty thirteen? And since then? 0:10:58.076 --> 0:10:58.916 How have you done? 0:10:59.476 --> 0:10:59.796 Done? All? 0:10:59.876 --> 0:11:00.156 Right? 0:11:00.556 --> 0:11:03.996 I think it's all been the same since. So I 0:11:03.996 --> 0:11:07.996 remember when I opened again. I didn't want investors I 0:11:07.996 --> 0:11:10.796 didn't know. I didn't want to be above the SEC 0:11:10.956 --> 0:11:14.436 threshold for registering as an investment advisor. I wanted to 0:11:14.476 --> 0:11:17.676 keep it small. So I just went to people I 0:11:17.716 --> 0:11:21.556 knew and some of my own money, and we created 0:11:21.556 --> 0:11:23.836 a fund. It was probably a situation where if I 0:11:23.876 --> 0:11:26.796 wanted to, I could have raised billions, but that wasn't 0:11:26.836 --> 0:11:27.356 my intention. 0:11:27.436 --> 0:11:29.796 You didn't want to relive the experience you'd already had. 0:11:30.196 --> 0:11:31.996 I didn't want to deal with Wall Street. I didn't 0:11:31.996 --> 0:11:34.236 want to deal with those kinds of investors. I knew 0:11:34.276 --> 0:11:36.356 who my good investors were from the prior time, and 0:11:36.396 --> 0:11:38.156 those were the only people I wanted to deal right, 0:11:38.636 --> 0:11:42.236 And so it just was a small operation. And I 0:11:42.316 --> 0:11:45.396 kept trying to keep it small, and I didn't really 0:11:45.436 --> 0:11:47.396 market it. I didn't market it at all other than 0:11:47.436 --> 0:11:50.836 just that first group. And what happens with that is 0:11:50.876 --> 0:11:53.076 that some of those people that were with me in 0:11:53.156 --> 0:11:56.956 two thousand, individual doctors or whatever, they get old, they 0:11:56.996 --> 0:12:01.876 actually pass away. Ultimately, it just became a something. There 0:12:01.876 --> 0:12:04.156 was a natural attrition in the pool, and so it 0:12:04.236 --> 0:12:04.956 kept us small. 0:12:05.556 --> 0:12:07.836 I have not paid that close attention. All I see 0:12:07.876 --> 0:12:09.956 is every now and then there's some explosion on Twitter 0:12:09.996 --> 0:12:10.436 about you. 0:12:10.796 --> 0:12:12.036 And it's wrong. 0:12:14.876 --> 0:12:15.836 They're all wrong. 0:12:19.596 --> 0:12:21.556 We're going to take a quick break, and when we return, 0:12:21.676 --> 0:12:24.476 I asked Michael Burry about why he placed bets recently 0:12:24.516 --> 0:12:36.356 against two large tech stocks, Talenteer and Nvidia. So let's 0:12:36.356 --> 0:12:39.196 talk about this. Explain to me you have this very 0:12:39.236 --> 0:12:42.356 small operation with just a handful of investors. What are 0:12:42.396 --> 0:12:44.876 the filing requirements? What do you have to hand in 0:12:45.076 --> 0:12:46.596 so that people can see what you're doing. 0:12:47.116 --> 0:12:51.356 They get to see US securities traded in the US 0:12:51.716 --> 0:12:55.196 that are stocks. They get to see stocks, and they 0:12:55.236 --> 0:12:59.036 get an incredibly bastardized version of options. 0:12:59.116 --> 0:13:01.636 Okay, how is it bastardized? 0:13:01.996 --> 0:13:08.676 Because say I buy fifty thousand put options on Pallenteer, 0:13:09.516 --> 0:13:13.996 and that's fifty thousand times one hundred, and so I'm 0:13:14.116 --> 0:13:17.076 short strike fifty way out of the money. It's like 0:13:17.076 --> 0:13:18.956 a it's two hundred dollar stock. Now I struck, but 0:13:18.996 --> 0:13:22.556 I think it's worth thirty or less, so I buy 0:13:22.596 --> 0:13:25.356 them way out of the money. Two years out, you're 0:13:25.396 --> 0:13:27.836 betting the pontaive is going to drop by a lot 0:13:28.036 --> 0:13:30.676 a lot in two years, but over a long period 0:13:30.716 --> 0:13:30.996 of time. 0:13:31.076 --> 0:13:32.956 Right and the press. 0:13:34.156 --> 0:13:36.836 I'm working out and I see on CNBC I have 0:13:36.916 --> 0:13:39.676 a billion dollars short position against Palenteer. 0:13:39.836 --> 0:13:42.636 It's ten million dollars. I saw this too. I couldn't 0:13:42.636 --> 0:13:43.116 believe it. 0:13:43.196 --> 0:13:47.876 So what they do is they take the underlying shares 0:13:47.956 --> 0:13:51.996 under those options contracts and they they multiply it out 0:13:51.996 --> 0:13:56.316 by the current stock price. We're so I have a 0:13:56.316 --> 0:14:00.436 actually it was less than two dollars option, and it 0:14:00.476 --> 0:14:02.956 was being prices if I owned the two hundreds, so 0:14:02.996 --> 0:14:06.396 it was two orders of magnitude off. And that happens 0:14:06.396 --> 0:14:09.716 also with index So so I would take hedges on 0:14:09.756 --> 0:14:12.596 my portfolio and people would say, oh my gosh, he's 0:14:12.636 --> 0:14:14.276 shorting a billion and a half of the s and 0:14:14.356 --> 0:14:16.916 P five hundred or he's shorting, and there'd be these 0:14:16.996 --> 0:14:21.316 explosions and it's just wrong. It's notional. But's interesting is 0:14:21.356 --> 0:14:23.596 that they don't do this for anybody else. 0:14:24.876 --> 0:14:28.796 So maybe you should give more interviews. I asked you, 0:14:29.316 --> 0:14:31.796 what effect the big short hat on your life? This 0:14:31.876 --> 0:14:34.076 is an effect the big short hat on your life. 0:14:34.476 --> 0:14:38.316 And compliance and my compliance. Since the financial crisis, everything 0:14:38.436 --> 0:14:41.596 changed and compliance. We have a compliance officer inside the firm, 0:14:41.996 --> 0:14:44.436 and he just keeps saying, don't talk to anybody, don't 0:14:44.436 --> 0:14:47.356 talk to anybody, don't respond to him, don't respond to anybody. 0:14:47.396 --> 0:14:50.076 And so I think since the movie came out and 0:14:50.156 --> 0:14:54.156 this really started happening, there was a frustration building in 0:14:54.196 --> 0:15:00.956 me to want to say something yeah, and I couldn't. 0:15:01.636 --> 0:15:04.556 And so when COVID came about, I had some strong 0:15:04.596 --> 0:15:05.276 feelings on that. 0:15:05.316 --> 0:15:06.236 So I went on Twitter. 0:15:06.716 --> 0:15:09.356 But I was only allowed to talk about the that 0:15:09.396 --> 0:15:13.156 weren't stocks, and so that's fine, I mean, but I 0:15:13.196 --> 0:15:16.036 had to talk about social things and I got in 0:15:16.076 --> 0:15:18.796 trouble with that, because everybody gets in trouble with that. 0:15:20.716 --> 0:15:23.956 So I got off Twitter, but you got back on. 0:15:24.796 --> 0:15:28.876 I got back on recently because we deregistered. I don't 0:15:28.916 --> 0:15:30.876 run that pool of money anymore, I'm just going to 0:15:30.956 --> 0:15:31.556 run my own. 0:15:31.436 --> 0:15:34.556 Money in so it's you're just your money now. So mostly, yeah, 0:15:34.596 --> 0:15:37.916 why did you decide to do that? I think that 0:15:37.996 --> 0:15:41.036 we're in a bad situation in the stock market. I 0:15:41.076 --> 0:15:43.396 think the stock market could be in for a number 0:15:43.396 --> 0:15:46.876 of bad years, and I think it could be a 0:15:46.916 --> 0:15:52.476 longer bear market, more akin to two thousand. But the 0:15:52.516 --> 0:15:55.276 structure of industry, the industry has changed. Back then, it 0:15:55.356 --> 0:16:00.156 was hedge funds, mutual funds, separate accounts, businesses. But there 0:16:00.156 --> 0:16:04.036 were people running pools of money and thinking about stocks 0:16:04.036 --> 0:16:08.116 and investing in stocks, and so I felt I didn't 0:16:08.116 --> 0:16:10.036 know I was on the autom the spectrum. I felt 0:16:10.076 --> 0:16:12.916 though I had an edge there I could. I'm kind 0:16:12.916 --> 0:16:15.476 of sit outside of all these human psyches and like 0:16:15.516 --> 0:16:19.476 and figure things out, and it worked well. Today it's 0:16:19.676 --> 0:16:22.236 all passive money, and. 0:16:22.116 --> 0:16:22.636 It's a lot. 0:16:22.676 --> 0:16:24.356 It's over fifty percent passive money. 0:16:24.396 --> 0:16:26.916 There's index funds, less. 0:16:26.676 --> 0:16:29.916 Than ten percent of money some say is actively managed 0:16:29.916 --> 0:16:33.116 by managers who actually thinking about the stocks and in 0:16:33.196 --> 0:16:37.676 any kind of way that's long term. And so the 0:16:37.756 --> 0:16:41.316 problem is in the United States. I think when the 0:16:41.316 --> 0:16:44.356 market goes down, it's not like in two thousand where 0:16:45.236 --> 0:16:47.036 there was this other bunch of stocks that were being 0:16:47.036 --> 0:16:50.036 ignored and they'll come up even if the Nasdaq crashes. 0:16:50.116 --> 0:16:51.956 Now I think the whole thing's just going to come down, 0:16:52.676 --> 0:16:54.756 and it would be very hard to be in a 0:16:55.036 --> 0:16:58.756 long stocks in the United States and protect yourself. And 0:16:58.796 --> 0:17:01.716 so that's why I decided to get out of it. 0:17:01.596 --> 0:17:03.796 Because the fund had to be long in some way. 0:17:04.316 --> 0:17:07.076 Well, I didn't want to go through that with investors again, 0:17:07.116 --> 0:17:11.076 I see, and that makes sense. Of course, I closed 0:17:11.076 --> 0:17:12.956 the fund and I got I put on all the 0:17:12.956 --> 0:17:14.596 positions for myself right away the same. 0:17:14.956 --> 0:17:16.716 So you're still in the position. So I want to 0:17:16.716 --> 0:17:19.236 talk about this position. I found it again. I was 0:17:19.276 --> 0:17:21.676 watching it from a distance. But tell me what I missed. 0:17:22.596 --> 0:17:25.476 Someone c NBC, whoever gets a hold of your thirteen 0:17:25.596 --> 0:17:28.796 F on this thirteen F it says Palatiner positions. 0:17:28.396 --> 0:17:29.756 Is especially big. 0:17:29.876 --> 0:17:31.636 It looks big because it looks big because they're the 0:17:31.836 --> 0:17:34.276 put ups. Just they're way way out of the money. 0:17:34.156 --> 0:17:38.116 They were struck at fifty. So, okay, you had to 0:17:38.156 --> 0:17:40.556 release this information about your fund. 0:17:40.916 --> 0:17:44.556 You weren't advertising it to the world in any unusual way. 0:17:44.596 --> 0:17:47.636 You weren't going out and talking trash about Palenteer. You 0:17:47.676 --> 0:17:50.396 just this position gets released, right, and then the next 0:17:50.396 --> 0:17:52.956 thing I do, I see Alex Karp, who runs Palenteer, 0:17:54.276 --> 0:17:57.676 like going after you for owning puts on his stock. 0:17:58.116 --> 0:18:00.196 And I don't think. I mean during the. 0:18:00.116 --> 0:18:04.796 Financial crisis, you will remember that the head of Morgan 0:18:04.836 --> 0:18:08.316 Stanley at the time, John Max, he blamed short sellars 0:18:08.316 --> 0:18:10.356 for what was happening to him and they banned short 0:18:10.356 --> 0:18:12.996 selling of the stocks very I think, briefly. 0:18:13.076 --> 0:18:15.076 Right, but it's always a really. 0:18:14.756 --> 0:18:18.116 Bad sign when people start going after the short sellers. 0:18:18.476 --> 0:18:21.436 It's in the United States, in the United States, and. 0:18:21.876 --> 0:18:23.796 I was thinking, oh my god, I guess wouldn't want 0:18:23.796 --> 0:18:25.756 to be in your shoes like you didn't you just 0:18:26.316 --> 0:18:27.036 made a trade. 0:18:27.556 --> 0:18:28.556 But he's provoked me. 0:18:29.036 --> 0:18:32.956 I want to understand your trade. It's about that pollunteer 0:18:33.116 --> 0:18:34.116 goes way way. 0:18:33.956 --> 0:18:35.836 Down, way way down in two years. 0:18:35.956 --> 0:18:38.116 What do you understand about their business as the market 0:18:38.156 --> 0:18:40.396 doesn't huh. 0:18:40.836 --> 0:18:44.396 So my belief is that this is a company that 0:18:44.716 --> 0:18:49.036 had a set of applications that were very expensive to 0:18:49.116 --> 0:18:52.916 install because you had to hire their consultants, like after 0:18:52.916 --> 0:18:55.236 you bought the software just to install it, and learning 0:18:55.716 --> 0:19:01.036 right and Pounteer had this reputation in government government contracts 0:19:01.076 --> 0:19:03.436 is a nasty business, and I think they figured out 0:19:03.476 --> 0:19:05.636 how to do it and get some contracts. 0:19:05.996 --> 0:19:08.956 How much of their revenues government contracts. 0:19:08.556 --> 0:19:11.196 It's fallen off a lot. It was it was almost 0:19:11.236 --> 0:19:14.636 it was a majority, and now it's like more even 0:19:15.196 --> 0:19:19.036 because it during this the AI build out, they've basically 0:19:19.076 --> 0:19:23.476 marketed themselves to corporations. Well, corporations have come to them. 0:19:23.956 --> 0:19:28.956 C suites of every public corporation have board members CEOs 0:19:29.596 --> 0:19:34.036 who feel under the gun to AI something. And so 0:19:34.876 --> 0:19:37.916 there's this scramble and now they're not the only one. 0:19:37.916 --> 0:19:40.796 They keep saying they're the only ones. But IBM has 0:19:40.956 --> 0:19:44.596 does basically the same thing. Their business is actually bigger 0:19:44.636 --> 0:19:49.716 than Pallenteers, and they are not really All government government 0:19:49.756 --> 0:19:53.716 contracts are not generally that profitable, and so you know, 0:19:54.076 --> 0:19:57.036 IBM's got a really good business inside it, but it 0:19:57.036 --> 0:20:00.916 doesn't get the credit for a Pallenteer valuation on that business, 0:20:00.956 --> 0:20:04.116 even though it is growing fast too. It's growing bout 0:20:04.116 --> 0:20:08.836 as fast as Pollenteer or was. And so let me 0:20:08.876 --> 0:20:13.196 put it this way, there are I think five billionaires 0:20:13.316 --> 0:20:16.276 that came out to Pollunteer because they own volunteer stock 0:20:17.276 --> 0:20:22.236 and the revenue was four billion or let basically four billion, 0:20:22.636 --> 0:20:25.956 so the billionaires to revenue ratio is greater than one. 0:20:25.996 --> 0:20:28.996 And I've never seen that book. Is that what attracted 0:20:28.996 --> 0:20:30.156 your attention in the first place? 0:20:30.916 --> 0:20:34.156 Well, it that was a that's a cute little thing. 0:20:35.276 --> 0:20:38.916 Was Wow, there's how do they get five billionaires out 0:20:38.916 --> 0:20:41.996 of that group? And so out of a company that 0:20:42.036 --> 0:20:45.796 has four billion of revenue and actually, uh stock based 0:20:45.836 --> 0:20:48.996 compensation basically to weighs almost all their income. They have 0:20:49.076 --> 0:20:51.396 to pay their people who are doing all this consulting 0:20:51.556 --> 0:20:55.476 so much in stock that they just use stock based compensation. 0:20:55.556 --> 0:20:57.356 And then what they do is they buy that back. 0:20:58.436 --> 0:21:01.116