WEBVTT - Chaos Kings and PCE Inflation Data 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.319 the Bloomberg Terminal, and the Bloomberg Business App. Joining us 0:00:47.479 --> 0:00:51.760 here is Na Seen teleb and Scott Patterson and celebration 0:00:51.960 --> 0:00:55.360 of a brutal book. I really can't say enough about 0:00:55.360 --> 0:00:58.160 this for Global Wall Street. I'm sorry. This is the 0:00:58.200 --> 0:01:03.640 adult of book Chaosis, Bill Cohen, William Cohen. He wrote 0:01:03.640 --> 0:01:07.240 a book about Duke Lacrosse. It was Bill Cohen, just 0:01:07.280 --> 0:01:10.720 says Scott Patterson. He's done it again, which he did 0:01:10.760 --> 0:01:13.959 in twenty twelve, and with Dark Pools and all that. 0:01:14.280 --> 0:01:16.120 And the problem we got here, David is we can 0:01:16.160 --> 0:01:19.120 spend the next three hours of tleeb but you know 0:01:19.160 --> 0:01:21.440 we got to give some love here to Scott Patterson, 0:01:21.720 --> 0:01:27.120 who's only here because James Madison University beat Chapel. That 0:01:27.200 --> 0:01:32.520 happened your book. In full disclosure, I'm totally in that 0:01:32.680 --> 0:01:36.440 seems camp and knows that like Wicked in his camp. 0:01:36.640 --> 0:01:40.600 So when you set up your book, which is the 0:01:41.000 --> 0:01:45.479 TALEB team like JMU against the other teams, some French 0:01:45.600 --> 0:01:49.360 dude like unc, how did you set up that polarity? 0:01:49.520 --> 0:01:52.320 Describe the tension of chaos kings? 0:01:52.920 --> 0:01:57.000 Yeah, well, it seems belief is that you can't predict markets, 0:01:57.080 --> 0:02:00.160 so you just need to prepare for extreme events all 0:02:00.200 --> 0:02:04.360 the time, the black Swans, and I can't trast that 0:02:04.480 --> 0:02:09.960 with another character, a French econophysicist named Didier Sornette who 0:02:10.480 --> 0:02:14.960 uses advanced physics and other mathematical models to try to 0:02:15.040 --> 0:02:20.040 predict these big advance He calls them dragon kings, which 0:02:20.040 --> 0:02:23.440 technical term. Yeah, yeah, I call it Newtonian envy. So 0:02:23.480 --> 0:02:25.680 he's a math guy, right, Yeah, he's a math guy. 0:02:25.840 --> 0:02:30.080 He uses some things that could be used to predict 0:02:30.080 --> 0:02:33.920 the explosion of rockets and transpose that onto financial markets. 0:02:33.919 --> 0:02:36.920 You gotta be kid, here's the reality, folks now seeing 0:02:36.960 --> 0:02:41.120 tallav changed the world with John and nero and fooled 0:02:41.120 --> 0:02:44.720 by randomness. Everybody else would have retired to turks and 0:02:44.800 --> 0:02:48.000 caicos or whatever. He went on to do Black Swan. 0:02:48.120 --> 0:02:50.120 And then you and I sat on the stairs of 0:02:50.200 --> 0:02:54.519 Saint Bart's on Park Avenue, and you described anti fragile 0:02:54.560 --> 0:02:58.360 to me. Now, seeing where is the humility among the 0:02:58.480 --> 0:03:00.320 quants in this great boomer. 0:03:00.880 --> 0:03:04.679 The point is you don't need humility. Humility actually is 0:03:05.080 --> 0:03:08.160 not necessary. I don't why people are arrogant. There's just 0:03:08.200 --> 0:03:12.840 got to be paranoid about the right things, namely, how 0:03:12.919 --> 0:03:16.880 much our error costs you when it happens that ruined problem, 0:03:17.200 --> 0:03:21.359 and and and and basically Scott's book is about ruined problems. 0:03:22.360 --> 0:03:24.600 Let's see. So you could be arrogant about everything, all right, 0:03:24.639 --> 0:03:27.799 You could be wrong all the time, doesn't matter. You 0:03:27.880 --> 0:03:31.320 gotta avoid You got to avoid ruin the big things. 0:03:31.320 --> 0:03:35.400 You've got to be right about the big sources of risk, 0:03:35.600 --> 0:03:39.240 and and and the rest take care of itself. 0:03:39.600 --> 0:03:42.600 Could could I get your having come out of the pandemic, 0:03:42.680 --> 0:03:47.160 your perspective on what happened there largely but within markets 0:03:47.160 --> 0:03:48.680 as well, the reaction to what we. 0:03:48.680 --> 0:03:53.680 Saw, you mean, the pandemic, the reaction to it. Yeah, okay, 0:03:53.760 --> 0:03:56.880 we we were. I mean Scott discusses what happened in 0:03:56.920 --> 0:04:01.880 the pandemic and and and how we were sessing over it. 0:04:02.680 --> 0:04:05.120 I mean when we started the idea of universal. When 0:04:05.120 --> 0:04:09.120 Mark started Universal, I was a passenger, you know, I 0:04:09.160 --> 0:04:14.080 was a retired passenger. But the name universa means universal properties. 0:04:14.240 --> 0:04:21.400 And we're talking about some universality of these classes of 0:04:21.600 --> 0:04:26.719 tail uh processes that generate large tale events, and we 0:04:26.839 --> 0:04:29.480 call them, I call them grace WANs. Hence that that's 0:04:29.480 --> 0:04:35.480 where the name universe came from. So the the we were, 0:04:35.520 --> 0:04:37.520 I was obsessing even when I wrote the blacks one 0:04:37.520 --> 0:04:41.200 about pandemics, and kept obsessing and they said, okay, I 0:04:41.680 --> 0:04:44.080 didn't remember the interview. Someone asked me, what what you 0:04:44.120 --> 0:04:46.560 have to worry about this? And that no, you can't. 0:04:46.560 --> 0:04:51.599 To worry. First thing about some germ traveling on air France. 0:04:52.680 --> 0:04:55.800 Air France, you get good food and if they're bad germs, 0:04:55.839 --> 0:04:57.920 they travel along British air or they get bad food. 0:04:57.960 --> 0:05:02.400 So that was and sure enough nothing had happened since 0:05:02.800 --> 0:05:05.240 for one hundred years, or for close to one hundred years, right, 0:05:05.600 --> 0:05:11.200 So and people say, well, you know, just like financial risks, 0:05:11.800 --> 0:05:14.480 you know, people the perception for before the crisis say, oh, 0:05:14.480 --> 0:05:16.560 we don't have to worry about these they don't happen anymore. 0:05:17.000 --> 0:05:17.960 Sure enough, All. 0:05:17.880 --> 0:05:20.320 Right, Scott Patterson, you've got you know, one of the 0:05:20.400 --> 0:05:23.440 sections is the Boston section that we could problem and 0:05:23.520 --> 0:05:26.240 the answer is flying blind. I mean, you've been doing 0:05:26.279 --> 0:05:29.080 this for fifteen years at the Wall Street Journal, trying 0:05:29.080 --> 0:05:32.040 to figure out the mathiness and the certitude. And I'm 0:05:32.040 --> 0:05:34.279 gonna wake up and win. We're gonna we're number six, 0:05:34.320 --> 0:05:37.279 We're gonna be number two or number one. What are 0:05:37.320 --> 0:05:39.320 we flying blind on right now? 0:05:41.160 --> 0:05:45.520 I think that you know, right now, there's obviously a 0:05:45.600 --> 0:05:50.200 huge amount of complacency in markets. Yeah, you know, we're 0:05:50.240 --> 0:05:53.680 hitting records time after time, and yet you look outside 0:05:54.560 --> 0:05:59.400 Wall Street and it looks pretty crazy. So there's all 0:05:59.440 --> 0:06:02.320 sorts of things that can happen. And I know Naim 0:06:02.320 --> 0:06:05.599 wants to talk about China. I've been predicting China would 0:06:05.880 --> 0:06:08.680 collapse for two decades now, and they don't. 0:06:09.200 --> 0:06:12.320 Right careful cash flow lives there. My oldest son speak 0:06:12.320 --> 0:06:14.760 care of China's not going to collect. Let's do this, 0:06:14.800 --> 0:06:17.239 We do China. David Gurr in the next section, Okay, 0:06:17.279 --> 0:06:20.240 we're go an extended conversation when NA see teleb and 0:06:20.839 --> 0:06:24.320 Scott Patterson Chaos Kings is a book. Okay, you know 0:06:24.400 --> 0:06:27.120 I asked that question to Scott. I seem to set 0:06:27.160 --> 0:06:30.480 you up here. We're flying blind, Na seeing teleb and 0:06:30.640 --> 0:06:32.880 private equity in private credit. 0:06:33.080 --> 0:06:37.640 It's all the rage, Okay. The first thing I have 0:06:37.720 --> 0:06:43.000 to say that we have a that problem in the West. Okay, 0:06:43.320 --> 0:06:46.919 whether in the visual government, you know, you can have that. 0:06:47.600 --> 0:06:51.560 China has that, but you must grow. And the problem 0:06:51.680 --> 0:06:55.200 of the West is that we have an escurve of 0:06:55.320 --> 0:07:00.440 growth or GDP or per capita and look like we're 0:07:00.480 --> 0:07:05.279 at on the top right of that curve. So it's concave. 0:07:05.720 --> 0:07:09.720 And people have two cars, they have two homes, and 0:07:09.840 --> 0:07:12.320 what do they want, I mean, have perier watership to them. 0:07:12.440 --> 0:07:16.080 I mean, so the incentive to grow isn't there. So 0:07:16.200 --> 0:07:19.760 here it's a serious problem when you have low growth 0:07:19.800 --> 0:07:22.640 and a lot of that. And the problem is that 0:07:23.120 --> 0:07:29.280 Western Uh. You know, economies have never had more debt 0:07:29.400 --> 0:07:34.000 in history as a time where gross became concave simply 0:07:34.200 --> 0:07:36.840 the nature of gross. You grow fast when you're China, 0:07:37.160 --> 0:07:39.360 because you've got to pull people out of the provinces 0:07:39.400 --> 0:07:42.480 and stuff and centers of living can still rise and 0:07:42.520 --> 0:07:43.440 make a difference now. 0:07:43.480 --> 0:07:46.600 So they're not quants of credits sweet years ago. There, 0:07:47.560 --> 0:07:51.640 our listeners, our viewers there, they put their pants on 0:07:51.640 --> 0:07:55.400 one leg at a time. How did they hedge against 0:07:55.480 --> 0:07:58.760 your concave tensions that we're in right now? How do 0:07:58.880 --> 0:07:59.960 near mortals head? 0:08:00.840 --> 0:08:03.960 Okay, the whole thing is, it's not you hedge. If 0:08:03.960 --> 0:08:08.360 you're investing without a tail headge, you're practically not investing 0:08:09.120 --> 0:08:12.000 because of the ruined problem. And that's what he discusses 0:08:12.320 --> 0:08:14.840 in the book. That's my first statement and the second 0:08:14.880 --> 0:08:19.520 one that people are way too static. They imagine either 0:08:20.240 --> 0:08:29.080 they have a memory that's that's either too short or 0:08:28.960 --> 0:08:32.160 or or has problems updating that they don't realize that, 0:08:32.280 --> 0:08:35.840 for example, what's happening in China that the Nature index 0:08:36.080 --> 0:08:40.040 of publications that's very hard to gain. What China used 0:08:40.080 --> 0:08:44.200 to have one percent today it's in the twenties and 0:08:44.360 --> 0:08:48.560 rising so tells you that that's a leading indicator of 0:08:48.600 --> 0:08:53.400 what technologies may come out of China. So you realize that, 0:08:54.679 --> 0:08:59.640 get a look back before seventeen fifty around when the 0:08:59.640 --> 0:09:03.160 industry revolution started. Starting the show, so we're starting to 0:09:03.200 --> 0:09:05.760 shift and in eighteen thirty TRYINGA had eight times the 0:09:05.880 --> 0:09:08.880 GDP of Brittain. We're back there as soon it's gone. 0:09:09.000 --> 0:09:13.920 So we're going back now in times like reversing the 0:09:13.920 --> 0:09:16.520 Dominus of the West, not because the West is doing poorly, 0:09:16.960 --> 0:09:18.720 but because it got one work. 0:09:18.920 --> 0:09:20.880 David, We're going to China right now now seems to 0:09:20.920 --> 0:09:23.199 running the show. We're doing China here right now we'll 0:09:23.240 --> 0:09:25.800 do with the stock market opening your Foremanu's David Gern 0:09:25.920 --> 0:09:28.240 China with Scott Patterson. Well now seeing. 0:09:28.080 --> 0:09:29.719 Steth, let me ask you more about you said you've 0:09:29.760 --> 0:09:32.600 been predicting the sort of dissolutionally been seeing for for 0:09:32.640 --> 0:09:35.680 twenty years. What stands out to you about this moment. 0:09:35.720 --> 0:09:37.560 We've spent the whole week talking about these kind of 0:09:37.679 --> 0:09:40.319 unprecedented actions, the way they were delivered by the PBOC 0:09:40.520 --> 0:09:42.880 in China. What that says about the actual state of 0:09:42.880 --> 0:09:45.640 the economy there. Talk a bit about that and sort 0:09:45.640 --> 0:09:47.360 of your your vantage of it, and also just sort 0:09:47.360 --> 0:09:50.160 of how much varacity we can ascribe to the statistics 0:09:50.160 --> 0:09:51.360 that we're getting out of China. 0:09:52.480 --> 0:09:55.000 Well as to the veracity of the statistics. Who knows, 0:09:55.760 --> 0:09:59.120 you know, they keep doing this, they keep they hit 0:09:59.160 --> 0:10:03.040 a slow down and then they you know, hit the accelerator. 0:10:03.480 --> 0:10:04.320 They've pulled. 0:10:04.440 --> 0:10:07.600 You know, after the GFC, a great financial crisis, China 0:10:07.640 --> 0:10:12.080 pulled the entire world out of that situation by stimulus. 0:10:13.920 --> 0:10:16.079 You know, who knows how long they can keep it up. 0:10:16.160 --> 0:10:19.400 It's a big mystery for me. You know, my focus 0:10:19.440 --> 0:10:24.280 these days is on climate and the dominance of China 0:10:24.400 --> 0:10:29.400 and climate technology is astonishing, and that's the future of energy, 0:10:29.440 --> 0:10:32.400 it's the future of vehicles, it's the future of batteries. 0:10:32.920 --> 0:10:35.920 And they're you know, light years ahead of everybody. We're 0:10:35.920 --> 0:10:38.559 trying to catch up. Europe's trying to catch up, and 0:10:38.920 --> 0:10:41.559 that for China is a big, big advantage. 0:10:41.640 --> 0:10:43.320 I got to do a shout out here with the 0:10:43.360 --> 0:10:46.960 Wall Street Journal this week with a stunning effort, China's 0:10:47.040 --> 0:10:52.040 newest nuclear submarine sank, setting back its military modernization. That 0:10:52.120 --> 0:10:56.120 was an incredible story. Out of your shop. Now on 0:10:56.320 --> 0:11:00.719 China again, continue, Aaron Friedberg for Foreign Fair says it's 0:11:00.720 --> 0:11:05.040 a Marxist Leninist regime. Nobody in Beijing read fooled. 0:11:04.720 --> 0:11:08.000 By randomness now. But the point is the point is 0:11:08.040 --> 0:11:10.400 that China is in reverse. Is the reverse of Europe. 0:11:10.600 --> 0:11:13.880 If you're small in China, you can do whatever you want. 0:11:14.720 --> 0:11:17.720 If you're big, the government calls you up for a meeting. 0:11:17.920 --> 0:11:18.120 Right. 0:11:18.320 --> 0:11:23.160 So in Europe, if you're small, you're overregulated. You got 0:11:23.160 --> 0:11:26.680 you got like five tax inspectors breathing down your neck. 0:11:26.720 --> 0:11:28.920 You've got to get all these permits. If you're big, 0:11:29.480 --> 0:11:32.360 then you own the government, okay, particularly the case in 0:11:32.360 --> 0:11:35.520 France and Germany everywhere and practically everywhere in Europe. So 0:11:36.080 --> 0:11:39.320 China is a reverse. So they say, okay, it's capitalism 0:11:39.640 --> 0:11:44.079 okay for the small and communism for the large, and 0:11:44.240 --> 0:11:46.880 its effectively it's not that much that there's you know, 0:11:48.600 --> 0:11:51.160 a centralized economy except for the top. 0:11:51.240 --> 0:11:56.440 So what about America into our fractured election. 0:11:55.280 --> 0:11:59.720 Okay, I don't know about whether the election makes it 0:11:59.720 --> 0:12:03.360 different and uh in many respects. But we have a problem. 0:12:03.480 --> 0:12:09.599 And that problem is that our death servicing is increasing, 0:12:10.600 --> 0:12:13.880 and I guess that you cross is more than military 0:12:13.880 --> 0:12:17.080 spending is more already okay, so and and it will 0:12:17.080 --> 0:12:19.199 continue to pay interest on that. Now you may say 0:12:19.320 --> 0:12:23.560 interest rates may be lower. I don't think we can 0:12:23.640 --> 0:12:26.480 go back to zero interest rate because zero interest rates 0:12:27.280 --> 0:12:29.160 gallas here, all right, so we're going to go back 0:12:29.200 --> 0:12:32.160 to normal interest rates. So the death problem is not 0:12:32.280 --> 0:12:35.160 going to go away. That service is going to keep increasing. 0:12:36.080 --> 0:12:40.520 And and the problem is if the East becomes and 0:12:40.559 --> 0:12:43.680 that's just China, just the East in general becomes powerful 0:12:43.840 --> 0:12:48.400 and and becomes a target of you know, retirement money 0:12:48.400 --> 0:12:51.040 and stuff like that, then the dollar would be in trouble. 0:13:01.360 --> 0:13:04.240 Michael Mobison with us two days ago and nussing teleb 0:13:04.720 --> 0:13:08.440 today was Scott Patterson and celebration of chaos King Scott, 0:13:08.480 --> 0:13:11.240 what's the other side of the story here the mathewness 0:13:11.320 --> 0:13:13.679 and certitude of Zurich, Switzerland. 0:13:15.440 --> 0:13:19.440 Yeah, you're referring to Didder Sournett, the Dragon Kings guy. 0:13:20.960 --> 0:13:24.280 You know, I we were talking about China, predicting what 0:13:24.320 --> 0:13:27.800 happens in China. I just you know, after covering financial 0:13:27.840 --> 0:13:32.800 markets and talking to you know, hedge fund managers who 0:13:32.840 --> 0:13:35.480 twenty years ago were billionaires and now they're you know, 0:13:36.600 --> 0:13:41.400 buzzing tables at diners. I you know, this is where 0:13:41.400 --> 0:13:44.080 I come down on the Seams side is I don't 0:13:44.120 --> 0:13:48.600 think you can predict markets. I think it's impossible. I 0:13:48.640 --> 0:13:50.920 think that they're you know, when you look at quant 0:13:51.120 --> 0:13:55.160 trading strategies are very short term, like over the course 0:13:55.200 --> 0:13:57.839 of a few minutes and seconds. Those are the only 0:13:58.120 --> 0:14:01.400 strategies that really survive long term. And even they you know, 0:14:01.520 --> 0:14:04.360 my first book The Quants showed how they almost blew 0:14:04.440 --> 0:14:08.240 up in the two thousands in a period of big 0:14:08.280 --> 0:14:08.760 d leveraging. 0:14:09.000 --> 0:14:13.000 So basically they're basically getting a higher dimensional bit than mask. 0:14:14.040 --> 0:14:15.199 Okay, yeah, they're trading. 0:14:15.480 --> 0:14:19.040 Didn't asked very rapidly, and that's that's good strategy. But 0:14:19.560 --> 0:14:23.520 you know, trading making big bets on your prediction of 0:14:23.520 --> 0:14:26.000 what China is going to do next quarter, next year, 0:14:26.760 --> 0:14:28.680 or you know what the Fed is going to do, 0:14:29.560 --> 0:14:30.680 This is very very. 0:14:30.520 --> 0:14:32.920 Hard to do. My humility or David Gray is it's 0:14:32.920 --> 0:14:36.000 a once in a lifetime event. And you know, years 0:14:36.040 --> 0:14:39.040 ago in the old world, which is where tab is from, 0:14:39.360 --> 0:14:41.600 you know, eleven Aine and all that, and over to 0:14:41.600 --> 0:14:44.560 the continent of Europe. You know, they're laughing at us 0:14:44.600 --> 0:14:47.160 about once in a lifetime event. You and I have 0:14:47.520 --> 0:14:51.680 gotten Gray doesn't eve any great. But the answer is 0:14:51.680 --> 0:14:53.520 there's a lot of once in a lifetime events. 0:14:53.680 --> 0:14:58.200 David, I have a question about young people in this industry, 0:14:58.240 --> 0:14:59.800 and it's inspired by a conversation. I had to my 0:15:00.080 --> 0:15:02.200 and Robert Smith, who is at NPR. He's now running 0:15:02.200 --> 0:15:04.200 the Night Badge of program at Columbia. I said, I 0:15:04.200 --> 0:15:05.560 was gonna be talking to you today and he said, 0:15:05.840 --> 0:15:07.240 here's what you should ask him. He pulled up a 0:15:07.240 --> 0:15:10.040 tweet that you filed more than a year ago. Now, 0:15:10.520 --> 0:15:12.480 the story we haven't covered this week is Caroline Ellison 0:15:12.880 --> 0:15:15.480 of FTX getting sentenced, going to spend two years in prison, 0:15:15.480 --> 0:15:18.880 and you tweeted about Sam Begmanfreed when everything blew up. 0:15:19.120 --> 0:15:21.080 He said, the problem with people like SBF is knowing 0:15:21.080 --> 0:15:23.360 the tiny bit of statistics to pairrot about it, but 0:15:23.480 --> 0:15:27.480 not understanding processes. That is dynamics, cross time. Shakespeare has 0:15:27.520 --> 0:15:31.280 survived nearly half a millennium by filtering by time. Then 0:15:31.320 --> 0:15:33.960 you close, Sam Begnfreed worked at Jane Street. You're right 0:15:34.000 --> 0:15:36.760 to Jane Street. He would have flunked my job interview. 0:15:37.040 --> 0:15:39.720 What does the Naseem teleb job interview look like? What 0:15:39.720 --> 0:15:41.120 do you ask somebody's applying. 0:15:40.920 --> 0:15:47.000 For understand some basics things like ruined problems and understand dynamics. 0:15:47.520 --> 0:15:49.920 So which is the same. You know that people if 0:15:49.960 --> 0:15:56.520 you have probability of losing money, eventually would go out 0:15:56.560 --> 0:16:00.480 of business, okay, over time. So if you're aware of it, 0:16:00.560 --> 0:16:02.240 that's fine. If you're not aware of it, you've got 0:16:02.240 --> 0:16:05.920 a problem. The other one is sizing comes from sizing. Also, 0:16:07.400 --> 0:16:11.360 if you have the edge, you still have probably one 0:16:11.440 --> 0:16:14.320 hundred percent of blown up if you don't size properly. 0:16:14.400 --> 0:16:18.800 So sizing is very delicate. Two basic things, And the 0:16:18.880 --> 0:16:21.440 third one is about fat tales, the difference between tin 0:16:21.480 --> 0:16:24.920 tails and fat tails. That's pretty much the theme of 0:16:25.120 --> 0:16:30.080 the Black Swan, the remedy and anti fragile and discussion 0:16:30.080 --> 0:16:32.520 of white people don't understanding and skinning the game. Okay, 0:16:32.800 --> 0:16:36.640 so the difference between fat tail and thin tail finance 0:16:36.800 --> 0:16:41.560 is not Gaussian. Now everybody claims, yeah, we know that. Yeah, 0:16:41.560 --> 0:16:44.880 if you know that, then why are you using Gaussian tools? 0:16:44.880 --> 0:16:47.760 What tools do you use? What do you suggest people 0:16:47.800 --> 0:16:51.480 in the street understand the parreto eighty twenty? It is 0:16:51.600 --> 0:16:55.960 very intuitive. You need to learn to know some mass, 0:16:55.960 --> 0:16:59.400 but not enough, okay to get to stuck to you know, 0:16:59.440 --> 0:17:01.080 if you teach people a little bit of math but 0:17:01.120 --> 0:17:02.480 not enough, they go to the coe. 0:17:03.200 --> 0:17:05.880 This not Sing's laughing at me here right now because 0:17:05.880 --> 0:17:08.359 he knows it to Thudau, David, thank you, Kerr and 0:17:08.400 --> 0:17:10.399 I don't speak before the show. In fact we're not 0:17:10.480 --> 0:17:13.760 on speaking terms. But I'm so I brought that up. 0:17:14.440 --> 0:17:17.880 Not seem fine, you know me on position sizing. Position 0:17:18.000 --> 0:17:21.040 sizing is everything, and right now we're living in a 0:17:21.080 --> 0:17:25.359 MAG seven world where everybody, whether they admit it or not, 0:17:25.560 --> 0:17:28.560 is Scott Patterson's four oh one k at the Journal 0:17:28.920 --> 0:17:31.760 is loaded up with Nvidia and all the rest of 0:17:31.800 --> 0:17:35.200 it not seeing tell out on Mag seven the anti 0:17:35.480 --> 0:17:36.560 position sizing. 0:17:37.480 --> 0:17:41.800 Okay, so I let me give you one one thing 0:17:41.840 --> 0:17:44.000 since I don't have a lot of things. Yeah, I read. 0:17:44.400 --> 0:17:46.920 I wrote a tweet saying that if someone gave you 0:17:47.119 --> 0:17:51.720 twenty four hours in advance the newspaper tomorrow's newspaper, that 0:17:51.840 --> 0:17:56.200 you would go bust. And actually someone just tested it. 0:17:56.400 --> 0:18:01.760 Victor Hagani Formative LTCN, who visibly no has long experience 0:18:01.840 --> 0:18:04.560 in the market, has tested it by giving people over 0:18:04.880 --> 0:18:09.200 fifteen years next day's the newspaper and tell and giving 0:18:09.240 --> 0:18:12.359 them you can trade that today's price, knowing towards newspaper, 0:18:13.840 --> 0:18:17.919 and people didn't do well. Why One of it is, 0:18:18.000 --> 0:18:21.639 of course sizing. They don't know how to size the 0:18:21.640 --> 0:18:24.160 position right, whether whether they're right. They don't know how 0:18:24.240 --> 0:18:26.760 right they are because they can't figure out how much 0:18:26.800 --> 0:18:30.160 of it is noise, all right, and of course the sizing. 0:18:30.440 --> 0:18:33.679 So so the just you know, I heard of the 0:18:33.720 --> 0:18:36.880 paper yesterday because it starts with my tweet. It's interesting 0:18:37.119 --> 0:18:39.520 to have a tweet turning into a paper by someone else, 0:18:40.000 --> 0:18:42.960 like for someone lazy like me, it's perfect, right because 0:18:42.960 --> 0:18:45.840 tweets I don't an airport's typically right, So. 0:18:46.080 --> 0:18:49.560 And that's not that's not how markets work. The markets 0:18:49.600 --> 0:18:52.959 work on anticipation of news events. Oftentimes, when you you know, 0:18:53.080 --> 0:18:55.960 you see the Fed cut interest rates, the marketer go down, Yeah, 0:18:56.000 --> 0:18:57.960 because it's already traded on that news. 0:18:57.960 --> 0:19:01.000 There's a fact Tony story and anti a right, how 0:19:01.240 --> 0:19:07.160 people who anticipated the invasion of Iraq or the starting 0:19:07.160 --> 0:19:12.320 of the war against Saddam in nineteen ninety one, those 0:19:12.400 --> 0:19:16.080 what dissipated It went bust because guess what happened to 0:19:16.119 --> 0:19:20.000 oil prices? They collapsed, all right. So it's not figuring 0:19:20.080 --> 0:19:22.760 out the news. There's something more subtle about markets. 0:19:23.400 --> 0:19:25.480 I want to get one more question in a kiss 0:19:25.560 --> 0:19:27.280 Kings and Nassin, then we've got to talk to you 0:19:27.320 --> 0:19:30.880 about it. Fractured your old World, your Europe with one, 0:19:30.960 --> 0:19:34.440 two three. They're calling them conflicts, but I think there 0:19:34.720 --> 0:19:37.840 was Skim Patterson, you have such a history of writing 0:19:37.880 --> 0:19:41.040 of the tension of Wall Street in your experience. Is 0:19:41.080 --> 0:19:45.240 anybody on Wall Street putting the tension and the outcome 0:19:45.359 --> 0:19:48.639 of it of your books into practice or we still 0:19:48.640 --> 0:19:52.120 what a to var which I know Nasim loves var. 0:19:52.640 --> 0:19:54.119 Is anything changed on Wall Street? 0:19:54.200 --> 0:19:57.720 I think that's it's funny. No, I don't think that 0:19:57.800 --> 0:20:00.399 we learn our lessons. I think people are still using 0:20:00.640 --> 0:20:04.520 value at risk even though it just got just I 0:20:04.520 --> 0:20:05.840 mean it was a laughing stock. 0:20:05.640 --> 0:20:06.480 In two thousand and eight. 0:20:07.560 --> 0:20:09.520 People looked at this and like this is insane. We're 0:20:09.520 --> 0:20:11.920 cutting out five percent of the worst days every year, 0:20:11.960 --> 0:20:15.200 and like that doesn't matter. So yeah, no, I don't 0:20:15.240 --> 0:20:17.399 think we learned less I wanted to come back to 0:20:17.440 --> 0:20:23.240 the question of an interview asking, you know at a 0:20:23.240 --> 0:20:28.879 hedge fund. Yeah. I spoke to a while back somebody 0:20:28.920 --> 0:20:33.399 who you know at Renaissance Technologies and the big quant 0:20:33.600 --> 0:20:36.480 Shop of Long Island. One of the questions they asked 0:20:36.640 --> 0:20:42.280 perspective employees is how does the toilet work? Which you 0:20:42.320 --> 0:20:44.760 know you're talking about dynamics. I thought that that's an 0:20:44.800 --> 0:20:48.840 inod question interesting and the answer is to vacuum. 0:20:49.080 --> 0:20:50.960 I want to devote the rest of the time with 0:20:51.080 --> 0:20:54.320 great honor to all the people from Lebanon that have 0:20:54.359 --> 0:20:57.400 assisted David ger and I and what we've seen over 0:20:57.440 --> 0:21:01.200 the last weeks, days and Indian quarters and years led 0:21:01.240 --> 0:21:05.720 by Jumana Bricchecci over in Dubai, who has been really 0:21:05.760 --> 0:21:09.200 helpful to us here. Her show is Horizon out of Dubai. 0:21:09.320 --> 0:21:12.639 Look for that now, seeing you have lived this, you 0:21:12.680 --> 0:21:16.080 were in your family or deputy prime ministers, you were 0:21:16.160 --> 0:21:19.800 involved with it. Out of the Greek Orthodox Christian sphere 0:21:19.960 --> 0:21:25.560 of a Lebanon I remember with great prosperity, it is shattered. 0:21:26.200 --> 0:21:26.960 What did you not know? 0:21:27.119 --> 0:21:29.280 I mean, I was in Lebanon two weeks ago, and 0:21:29.359 --> 0:21:31.879 I go to Lebanon, I reside there part of the time. 0:21:32.680 --> 0:21:36.399 So what you see in pictures isn't doesn't map to 0:21:36.520 --> 0:21:38.760 any when you hear about the economy, doesn't map to 0:21:38.800 --> 0:21:42.960 what's going on there. There've been a little slowed down 0:21:43.000 --> 0:21:46.160 by the slowed down by the Gaza War, some kind 0:21:46.200 --> 0:21:51.879 of rise and across all economic sectors in Lebanon On 0:21:51.960 --> 0:21:55.960 a more anti fragile basis. In other words, the collapse 0:21:55.960 --> 0:22:00.399 of the government of Lebanon economically gave rise to central 0:22:01.040 --> 0:22:06.000 large municipal power and to a lot more entrepreneurship. Okay, 0:22:06.240 --> 0:22:10.280 because the central bank was conducting a ponzi and the 0:22:10.320 --> 0:22:14.240 ponzi went away, and then suddenly people recovered and four 0:22:14.320 --> 0:22:18.240 years later, you know, it's on amend and and you 0:22:18.280 --> 0:22:21.040 can see economic activity across all sectors. I mean, restaurants 0:22:21.080 --> 0:22:24.080 are all full, new restaurants opening up like every day, 0:22:27.240 --> 0:22:29.639 at least in my in my my neighbor is like 0:22:29.680 --> 0:22:32.400 forty to fifty past year, I mean every day every week. 0:22:33.400 --> 0:22:35.960 So so you have you have. So what the perception 0:22:36.040 --> 0:22:40.680 of Lebanon from from the outside is quite distorted, given 0:22:40.720 --> 0:22:45.359 that I spent time there the this war, I think 0:22:45.640 --> 0:22:49.440 is I mean, there there is a problem. Okay, let's 0:22:49.520 --> 0:22:54.080 let's say there is a problem. The fighting is confined 0:22:54.640 --> 0:23:00.600 to Hizballah and the State of Israel. But but but 0:23:00.720 --> 0:23:07.199 of course their side effects outside. But something tells me 0:23:07.320 --> 0:23:09.320 that that if you go to a bigger war, if 0:23:09.359 --> 0:23:12.240 Israel wants to drive the US and too a that war, 0:23:12.920 --> 0:23:15.280 and then then then think would would would blow up? 0:23:15.440 --> 0:23:19.600 David? Yeah, David. One final question, how. 0:23:19.520 --> 0:23:21.399 Do you engage the prospects of that happening. 0:23:21.920 --> 0:23:25.280 I think that the Yes is resisting and the Iranians 0:23:25.320 --> 0:23:29.360 are trying to be nice, and there is a more 0:23:29.520 --> 0:23:33.040 considerate tone here, so we'll see, we'll see. I mean, 0:23:34.240 --> 0:23:36.280 from there, you can see how irrational would be for 0:23:36.320 --> 0:23:40.560 everyone to get involved in broader war, particularly that long 0:23:40.680 --> 0:23:42.800 term it's not going to help me, think about it. 0:23:42.880 --> 0:23:45.240 Israel had with his Balla in two thousand and six, 0:23:45.480 --> 0:23:49.280 they got stronger, they they had they occupied the southern 0:23:49.359 --> 0:23:52.840 Lebanon and and has been stronger and stronger. So every 0:23:52.840 --> 0:23:57.600 every war is just like delayed training program for for 0:23:57.680 --> 0:24:02.360