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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Tracy Alloway and I'm Joe. Isn't all so, Joe.

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Speaker 1: This is a very special live recording.

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Speaker 2: I'm really excited about this one. Always enjoy live recordings.

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Speaker 2: We talked to our guest recently a few months ago,

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Speaker 2: and a lot has happened since then, So.

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Speaker 1: All right, let's just jump Yeah, you've given it away, Steve,

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Speaker 1: but we're going to be speaking with Steve Eisman. He is,

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Speaker 1: of course, a senior portfolio manager over at Newburger Berman.

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Speaker 1: So thank you so much for coming back on the show.

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Speaker 3: Steve. Oh, thank you very much.

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Speaker 1: So let's see, the last time we spoke to you,

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Speaker 1: you seemed okay about the banks, and.

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Speaker 3: I don't know if I would say, okay.

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Speaker 1: Okay, Well all right, let's talk about what happened since then.

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Speaker 1: What what did we just see in the financial system?

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Speaker 3: So if I could sum it up in like a sentence,

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Speaker 3: because it's always pretty good to try and sumon up

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Speaker 3: in a sentence, I'd say, we're not having a banking crisis.

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Speaker 3: We're having a crisis of certain banks. That's like a

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Speaker 3: really good frickin line. So pay attention. So I mean

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Speaker 3: the saying goes that generals always fight the last war.

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Speaker 3: The last war was credit quality and capital, which that

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Speaker 3: problem was solved. The problem with Silicon Valley was that

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Speaker 3: the correlation between all their depositors was essentially one. In

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Speaker 3: other words, they were all the same. It would be

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Speaker 3: as if, you know, you had one depositors with one

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Speaker 3: hundred and fifty billion dollars in the bank. And what

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Speaker 3: happened was Silicon Valley had a very simple business model.

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Speaker 3: They just took in deposits from VC and they bought months.

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Speaker 3: That was it. They made very few loans and gave

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Speaker 3: great service, and so when rates were at the bottom,

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Speaker 3: they brought long term bonds at subterranean rates. The Fed

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Speaker 3: starts raising rates. Who knew, and all of a sudden

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Speaker 3: they have massive mark to market losses in their portfolio,

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Speaker 3: which if they had, which essentially wiped out their equity.

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Speaker 3: But that's not enough because you could always hold the

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Speaker 3: bonds to maturity unless you got to sell the bonds.

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Speaker 3: So if you remember last year, the stocks that were

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Speaker 3: down the most were the companies that had high revenue

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Speaker 3: growth and negative earnings. They were down anywhere from seventy

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Speaker 3: five to ninety percent. That characteristic is the same thing

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Speaker 3: as venture capital companies. So venture capital couldn't raise any

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Speaker 3: more money. The venture capital companies had to pull their

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Speaker 3: deposits out of the bank. Eventually, Silicon Valley rate out

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Speaker 3: of liquidity, they sold their bonds, and the rest is history.

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Speaker 3: You know, thank you Peter Thiel for closing a panic

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Speaker 3: and the next morning they were done. That was essentially

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Speaker 3: the story. So after that, everybody, you know, basically started

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Speaker 3: running every single bank that had the same characteristics as

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Speaker 3: Silicon Valley signature which went that same weekend. First Republic

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Speaker 3: pack West Western Alliance. Obviously, First Republic is gone. You know,

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Speaker 3: probably this part of this crisis is largely over. There's

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Speaker 3: a problem with the earnings of the banks, but I

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Speaker 3: don't think it's unlikely. I think at this point that

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Speaker 3: anybody else is going to go under.

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Speaker 2: Well, you mentioned and you know, the generals always fight

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Speaker 2: the last war, and so people weren't paying very close

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Speaker 2: attention to depositor correlation, it would seem the supervisors apparently not.

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Speaker 2: And then of course, you know, people were not concerned.

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Speaker 2: They're like, oh, credit risk is solved, and then maybe

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Speaker 2: they weren't so aware of the rate risk.

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Speaker 3: The problem was they don't read the research. If they

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Speaker 3: read the research that's out there, they would have known

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Speaker 3: the losses to the to the dollar. But it's in

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Speaker 3: my experience that regulators don't read Wall Street research and

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Speaker 3: they try and find it out on their own. It's

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Speaker 3: a lot easier just to read the research, trust me.

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Speaker 2: So from your perspective, though it was out like there.

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Speaker 3: Are, there's no questions, There's absolutely no question, no reason.

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Speaker 3: There's absolutely no question that the investment community knew what

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Speaker 3: the losses were on Silicon Valley's portfolio to the dollar.

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Speaker 1: Huh, Well, can I ask you? I mean, let's say

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Speaker 1: we have a FED meeting coming up, obviously, and you

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Speaker 1: know there's a lot of debate over whether they're going

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Speaker 1: to pause or hike again. But if they hike again,

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Speaker 1: how problematic would that be for the banking system?

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Speaker 2: Now?

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Speaker 3: Well, I mean, what's what happened during the pandemic was

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Speaker 3: that was the banks were flooded with liquidity, and so

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Speaker 3: what's happening now is people are but you know, what

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Speaker 3: were you going to do earn twenty five basis points

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Speaker 3: and money market funds and sort of pointless? So now

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Speaker 3: I don't know if any of you notice, but you know,

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Speaker 3: if you want to buy a three month treasure, you

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Speaker 3: make five point four percent. That's not bad. So people

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Speaker 3: are taking their money out of the bank and putting

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Speaker 3: it to money market fund So what's happening is the

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Speaker 3: regional banks are really pulling in their horns in terms

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Speaker 3: of lending. You know, do I think that if the

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Speaker 3: FED keeps raising rates that will accelerate. Maybe, but a

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Speaker 3: lot of it's happened already.

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Speaker 2: Just to stick on the banking system for another minute,

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Speaker 2: you know, like obviously there's another cliche that's out there,

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Speaker 2: like the FED keeps raising until something breaks, and then

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Speaker 2: when SVB happened, like, well, there was the break that happened,

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Speaker 2: except it turned out that wasn't the end of the

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Speaker 2: hiking cycle like it would have been. That would have

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Speaker 2: been like, you know, if you're writing history, you could

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Speaker 2: have imagined a version where SVB is the end of.

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Speaker 3: The hiking cycle. It broke not big enough. It just

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Speaker 3: wasn't big not big enough, you know, as I always

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Speaker 3: I said long time ago, when JP Morgan goes down,

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Speaker 3: Planet Earth burns, when when Silicon Valley goes down, it's

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Speaker 3: a match, you know, like a match.

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Speaker 1: You know, well, okay, one one more ba.

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Speaker 3: More than a match, maybe a match book.

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Speaker 1: One of those like automatic rider things. One more banking question,

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Speaker 1: but you mentioned might have.

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Speaker 3: One more banking question, okay.

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Speaker 1: Full disclosure. Uh you mentioned profitability. There are financial is

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Speaker 1: a good bye in an environment where maybe they have

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Speaker 1: to compete for deposits a little more and rates are

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Speaker 1: going up and NIM is getting net interest margins are

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Speaker 1: getting compressed.

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Speaker 3: I mean, there's always a trade.

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Speaker 4: You know.

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Speaker 3: The banks are very very cheap on a price to book.

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Speaker 3: They're very very cheap on earnings. You know, the problem

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Speaker 3: is that because of the money leaving the banks into

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Speaker 3: money market funds, it's more likely than not an estimates

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Speaker 3: are too high, you know, longer term, you know, if big,

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Speaker 3: if we go into recession, we'll have a credit cycle.

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Speaker 3: And I mean the joke in amongst the people you

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Speaker 3: know that what I call the financial services mafia is

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Speaker 3: the banks have collapsed and we haven't even had a

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Speaker 3: credit cycle yet. So you know, if you want to

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Speaker 3: financial services mafia, can it tell you?

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Speaker 2: Okay, but there is there.

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Speaker 3: Is, but they they are known, Okay, I know almost

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Speaker 3: all of them. Okay, now these are the people who

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Speaker 3: traffic in largely you know, the financials for twenty years. Okay,

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Speaker 3: and you know it's not like we go on vacation together,

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Speaker 3: but we know each other. In fact, we don't go

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Speaker 3: on vacation together.

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Speaker 2: Okay. Well, just you know when after as IVB collapped.

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Speaker 2: One other element of this was like do we really

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Speaker 2: need so many banks in this country? And the people

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Speaker 2: look up North and Canada and they're like, they only

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Speaker 2: have like six or seven banks here and we have

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Speaker 2: I don't know, fifteen thousand or something like that.

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Speaker 3: More like five thousand.

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Speaker 2: More like five thousand are we gonna have? You know,

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Speaker 2: in ten years, will we be done with a thousands?

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Speaker 2: Like how much consult? No? Really, no way.

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Speaker 3: First of all, the regulators will not allow JP Morgan

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Speaker 3: buying First Republic is one off. The regulators do not

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Speaker 3: want the large banks to get any bigger through M

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Speaker 3: and A. You know, could there be mergers between regional banks, sure,

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Speaker 3: but to go down to from five thousand to a thousand,

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Speaker 3: I mean that's a lot of work. You know, it

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Speaker 3: is choose your poison. In Canada, the banks are safer

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Speaker 3: because they're oligopolies, but they can charge much higher fees

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Speaker 3: for their customers. Here there's a lot more competition, but

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Speaker 3: because there's a lot more and because there's a lot

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Speaker 3: more competition, prices are lower. But then you have problems

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Speaker 3: with credit and just stability.

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Speaker 1: Sorry, you just reminded me of one more banking question.

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Speaker 1: So apologies in advance. But you're an expert in moral

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Speaker 1: hazard basically based off of yours.

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Speaker 3: I don't know if it's an expert you.

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Speaker 1: Have experience with moral hazard. What do you think about

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Speaker 1: deposit insurance in the aftermath of SVB. I mean, the

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Speaker 1: depositor has got a full bailout. There's now discussion about, well,

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Speaker 1: why not just have universal deposit insurance? What would that mean?

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Speaker 3: Well, if it had been up to me, and believe me,

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Speaker 3: it was not to me, and nobody called me over

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Speaker 3: that weekend. But if it had been up to me,

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Speaker 3: I would have let Silicon Valley fail and then I

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Speaker 3: would have guaranteed all the deposits and that would have

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Speaker 3: solved your moral has its problem. I mean, it's not

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Speaker 3: like they guaranteed Silicon Valley and they guaranteed all the

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Speaker 3: deposits and people didn't pull their deposits out of these banks.

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Speaker 3: So you would have been in the same situation, but

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Speaker 3: you would have solved your moral hazard problem. I actually

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Speaker 3: don't know technically if the regulators even have the authority

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Speaker 3: to raise the deposit in churns level unless it's an emergency.

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Speaker 2: I think it would require some sort of act of Congress.

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Speaker 2: But regardless of good luck with that, right Senka said,

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Speaker 2: whether it's even doable, right, there is this question that

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Speaker 2: a lot of people felt after SVB and they saw

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Speaker 2: all these depositors immediately made a whole at one hundred

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Speaker 2: cents on the dollar. Why is banking like a private

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Speaker 2: for profit enterprise as a thing if there's sort of

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Speaker 2: like key aspect of age.

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Speaker 3: I mean, the problem is when whatever these things happen,

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Speaker 3: it seems like the regulators adopt the attitude that if

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Speaker 3: we don't do this, we're going to have the system's

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Speaker 3: going to burn. You know what, system's not going to burn.

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Speaker 3: You know, in two thousand and eight that was true,

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Speaker 3: you know, with Silicon Valley really wasn't true, but for

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Speaker 3: some reason the regulators felt it was true, and that's

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Speaker 3: why they acted the way they did. I don't think,

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Speaker 3: you know, for what it's worth that I think that

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Speaker 3: deposit insurance is going to be guaranteeing everything within after

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Speaker 3: the first twelve months.

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Speaker 1: Was there anything in the recent banking drama that reminded

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Speaker 1: you of two thousand and eight or was it just

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Speaker 1: completely different?

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Speaker 3: Totally different? You know, the problem with what you're hearing about.

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Speaker 3: You're hearing about the regulators raising capital requirements by you know,

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Speaker 3: ten percent, twenty percent. That's useless because this wasn't a

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Speaker 3: capital problem. This was a liquidity problem. And by the way,

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Speaker 3: no matter how much liquidity you might have, you don't

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Speaker 3: have enough does a run on the bank. So this

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Speaker 3: is more of a I think, an examination issue rather

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Speaker 3: than a liquidity issue and a capital issue.

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Speaker 2: By examination, you mean the examiners of.

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Speaker 3: San Francisco examiners should have been all over Silicon Valley,

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Speaker 3: you know what. I think what the press said was

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Speaker 3: that they went in and they suggested nicely that Silicon

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Speaker 3: Valley start looking into its issues. You know, a regulator

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Speaker 3: should not be asking nicely, they should be telling meanly.

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Speaker 3: But for some reason that wasn't done.

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Speaker 1: Well, what responsibility do you think tech has in this

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Speaker 1: whole saga, because I mean, the last time we spoke

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Speaker 1: to you, we were talking about the stunning continued resilience

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Speaker 1: of a lot of tech growth stocks, and it feels

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Speaker 1: like that wave of money is alive and well, but

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Speaker 1: kind of more flighty than it used to be. And

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Speaker 1: in this instance, it basically infected the financial system.

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Speaker 3: I'm not following you. What do you mean infected the financials?

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Speaker 1: Well, it got into the banking system as tech and

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Speaker 1: vcs kind of pulled their money away from SVB.

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Speaker 3: I mean that's true. I mean part of the issue

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Speaker 3: is that it's so easy to move money today electronically.

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Speaker 3: I think it was a very big mistake by the

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Speaker 3: regulators to allow basically every Vingle VC fund and every

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Speaker 3: single VC company to bank with one bank. That was

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Speaker 3: you know, reminds me a little bit of the sub

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Speaker 3: You know, people used to say in terms of subprime

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Speaker 3: mortgages that you got diversification. And so the affair was

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Speaker 3: a low correlation. It turned out it was a correlation

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Speaker 3: of one. This was more obvious that it was a

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Speaker 3: correlation of.

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Speaker 2: One in the UH, in the finance industry mafia. Was

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Speaker 2: this something? Is this something that comes up and people

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Speaker 2: aware of this or was this like, oh what where

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Speaker 2: did this?

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Speaker 3: Now they were aware of it? They were aware of that,

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Speaker 3: they were aware of signature First Republic. I mean, it's

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Speaker 3: just math in.

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Speaker 1: Terms of risks in the financial system. Now do you

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Speaker 1: think think like there's a strong case that we should

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Speaker 1: be looking more at deposit concentration. And also maybe I

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Speaker 1: don't even know how you would measure this or enforce it,

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Speaker 1: but like social media risk, the idea that people all

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Speaker 1: start talking about, like, oh, Credit Swiss is in trouble,

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Speaker 1: SVB is in trouble. First republics in trouble.

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Speaker 3: Well you know what Credit Swiss was in trouble. SVB

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Speaker 3: was in trouble. First Republic was in trouble.

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Speaker 1: Well, this is why it would be hard to enforce,

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Speaker 1: you know.

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Speaker 3: No, but they were actually in trouble. It didn't matter

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Speaker 3: what was being said on social media. So I don't

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Speaker 3: put a lot of stock.

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Speaker 2: In that, Okay, I keep saying, like last banking question,

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Speaker 2: but how much did the experience of you know, two

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Speaker 2: thousand and eight, two thousand and nine, the regular the

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Speaker 2: reforms DoD Frank, et cetera. Put the regulators in a

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Speaker 2: position like had something like SVB happened in a different era,

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Speaker 2: would it have been worse? How much did the sort

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Speaker 2: of post crisis changes make it such that you can

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Speaker 2: have a pretty substantial regional bank fail without much spillover.

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Speaker 3: I think the regulators learned was that you have to

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Speaker 3: be fast. So the fact that they guaranteed deposits over

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Speaker 3: a weekend and seize two banks was very important. So

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Speaker 3: they did learn that lesson, But they weren't looking for liquidity,

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Speaker 3: you know, duration problems.

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Speaker 1: Should we talk markets wider markets? Yeah, you know what

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Speaker 1: I'm we should just throw out some single stocks and

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Speaker 1: just have you Yeah, but why don't we start started

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Speaker 1: in video because I think that's like the.

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Speaker 3: Figure not going to do buy sold. That's fine because

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Speaker 3: my firm would shoot.

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Speaker 2: Word association, word association.

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Speaker 3: Yes, and I mean literally shoot men. Okay, this tomorrow morning.

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Speaker 3: So what do I think of Nvidia? I mean, let

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Speaker 3: me let me tell you what I think. Well, the

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Speaker 3: whole chat gpt AI situation. So, I mean, as everybody knows,

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Speaker 3: the market's been very narrow this year. If you take

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Speaker 3: out the eight big tech stocks, the market is maybe

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Speaker 3: a one or two percent, you know, in terms of

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Speaker 3: what's happened so far. You know, Vidio is selling a

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Speaker 3: lot of chips because everybody wants to get into the act,

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Speaker 3: so they're sort of stocking chips. But what we don't

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Speaker 3: have yet is really too many apps. And so I

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Speaker 3: love the story that was in the papers about the

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Speaker 3: lawyer who had a case he had to write a

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Speaker 3: brief and so he asked chat GPT to write the

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Speaker 3: brief and all the citations didn't exist. That guy's going

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Speaker 3: to be disbarred. Okay, thank you, chat GPT. So the

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Speaker 3: apps aren't there yet. So right now, you know, this

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Speaker 3: story is just just in a few data centers. You know,

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Speaker 3: at some point in the next six months or so,

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Speaker 3: it'll probably get rolled out into all the data centers

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Speaker 3: in the country. But so the beneficiaries are the people

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Speaker 3: who sell the hardware, the chips, send everything connected to

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Speaker 3: the chips, the obvious companies that have the data, and

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Speaker 3: then after that we really don't know, you know, does

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Speaker 3: this benefit into it or not benefit into it. Does

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Speaker 3: this help eccenture or hurt Accenture. It's unknown, and we

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Speaker 3: don't know yet who's going to be creating good apps

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Speaker 3: that's going to do very well. So right now the

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Speaker 3: story is very narrow in terms of investing.

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Speaker 2: But the market seems to I believe the market seems

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Speaker 2: to be of the view that the incumbent those eight companies, however,

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Speaker 2: many of there are Meta Alphabet and Video Microsoft, that

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Speaker 2: they are going to accrue the big financial gains from

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Speaker 2: AI in general will somehow accrue to them. And do

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Speaker 2: you think, like how confident would you say? Like, is

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Speaker 2: the market right? Is the market overly confident in the.

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Speaker 3: I mean, who you know, I'm not a fortune teller,

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Speaker 3: although some people think I was a fortune teller, but

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Speaker 3: I mean that's the obvious case. I don't have any

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Speaker 3: reason not to believe that, you know. But we'll see

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Speaker 3: in a year or two years, what's going to happen.

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Speaker 3: This is, this is this is not going to happen overnight.

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Speaker 1: Well, how should investors think about you know, there have

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Speaker 1: been many instances at this point of people coming out

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Speaker 1: with revolutionary technology of one sort or another, often packaged

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Speaker 1: under a very exciting name like Generative AI. How should

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Speaker 1: investors think about that?

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Speaker 3: Like, We're got to give you an example of a

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Speaker 3: group that used to be hot and it is not

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Speaker 3: the payment space h Okay, PayPal, Square, et cetera, et cetera.

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Speaker 3: So so, by the way, I've done payments for a

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Speaker 3: very long time, and I will tell you that every

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Speaker 3: five years, somebody comes in and says, I got this

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Speaker 3: thing that's going to completely disintermediate Visa and MasterCard. I

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Speaker 3: swear to every five years like clockwork, and two years

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Speaker 3: later they come back and they say no. So other

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Speaker 3: than Visa MasterCard, who has long term staying power and payments,

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Speaker 3: is never obvious. But the space used to be really

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Speaker 3: really hot, especially the companies that you know, again big

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Speaker 3: revenue growth, negative earnings, and but what's happened over the

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Speaker 3: last several years is so much capital has gone into

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Speaker 3: this space that they're basically killing each other and it's

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Speaker 3: not hot anymore and people are exiting. Is that going

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Speaker 3: to happen to chat GPT? Less likely because you've got

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Speaker 3: real bohemoths that are going to be spending a lot

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Speaker 3: of money. But you know, around the app part, we'll

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Speaker 3: see what happens.

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Speaker 2: But it seemed there's a good chance that maybe outside

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Speaker 2: the behemoths, a lot of money will be spent from

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Speaker 2: companies that just kill each other and drive each other

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Speaker 2: into the ground. Reason So obviously, you know when you

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Speaker 2: see a company like in video uh trading at over

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Speaker 2: thirty x revenue.

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Speaker 3: It's actually not trading at thirty x revenue. It's trading

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Speaker 3: you know after the the most recent uh you know,

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Speaker 3: the stock one of twenty six percent, but the earnings doubled.

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Speaker 3: I think, you know, the pe got cut in half.

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Speaker 3: So I don't remember where the pe is right now,

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Speaker 3: but it's not insane anymore. It's actually lower than it

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Speaker 3: was before they reported.

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Speaker 2: So when you see that, like obviously and it seems

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Speaker 2: sort of lazy, and people like dot Com this is Cisco,

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Speaker 2: this is loose you know, Sun Microsystems, just these like

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Speaker 2: completely unreal when you when you look at these numbers,

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Speaker 2: like they don't look like unreal. They don't look like

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Speaker 2: some of those numbers from those.

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Speaker 3: Well, I'm gonna look at videos the pure play. Yeah,

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Speaker 3: then there's a MD We'll see how well that their

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Speaker 3: new chip is going to do. You know, how much

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Speaker 3: is this going to add to the earnings of Microsoft

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Speaker 3: and Google and Meta. Well, it's not gonna be as

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Speaker 3: much as in video obviously, you know, but how much

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Speaker 3: it accelerates the growth rate. I mean, we're really not

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Speaker 3: going to know this for a couple of years because,

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Speaker 3: like I said, it's gonna take time to really develop

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Speaker 3: something that's not going to have somebody write a brief

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Speaker 3: where all the citations are wrong. I go back to

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Speaker 3: this over and over again. It's stunning to me, Tracy,

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Speaker 3: I would not read the site. I used to be

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Speaker 3: a lawyer. That a lawyer would submit a brief where

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Speaker 3: he does not read the citations and the brief is astonishing.

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Speaker 1: I think there's someone actually suing chat gpt for defamation

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Speaker 1: now because of some of the stuff it spat out

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Speaker 1: from that incident.

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Speaker 2: Tracy has seen many of my attempts to use chat

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Speaker 2: gpt for work, and so is well aware of a

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Speaker 2: let's just say it's not it's not mission critic, it's

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Speaker 2: not mission ready, it's not.

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Speaker 1: Ready for prime time. I do think it's very sweet

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Speaker 1: that Joe is always very very polite to chat gpt

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Speaker 1: just in case the robots, you know, eventually take over

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Speaker 1: the earth hedging your butts.

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Speaker 2: That's true, I would say, please and thank you.

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Speaker 1: Well, that's good life advice. Okay, Well, just on the

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Speaker 1: broader market. I mean, the last time we had you

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Speaker 1: on the podcast, you were talking about a new paradigm

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Speaker 1: for markets, and you are very care careful to emphasize

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Speaker 1: that this doesn't happen in a straight line. You know,

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Speaker 1: there are fits and starts. People hold on to the

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Speaker 1: old way of thinking, you know, for as long as

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Speaker 1: they can. Sometimes, when you look at what's happening with

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Speaker 1: some of the tech and growth stocks right now, does

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Speaker 1: that support the thesis is this the last gasp of growth?

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Speaker 3: I mean, for example, let's go back to the high

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Speaker 3: revenue growth, negative earnings companies. So they're up a lot

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Speaker 3: this year on a percentage basis, But when you go

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Speaker 3: from two hundred to ten and you're at fourteen, yeah,

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Speaker 3: it's up forty percent. But so what you know, the

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Speaker 3: large cap mega companies I think are investible for a

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Speaker 3: very long time, but after that it's unclear. And I think,

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Speaker 3: I mean, if anybody gave me their money today, for example,

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Speaker 3: I wouldn't be so overweight tech. I'd be much more diversified.

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Speaker 3: I'd have some god forbid bonds. You know, there's plenty

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Speaker 3: of other stories other than tech, such as I mean,

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Speaker 3: for example, has anybody ever noticed that the electrical grid

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Speaker 3: in the United States is pathetic? You've noticed, you know.

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Speaker 3: I don't know if everybody said, there's this new rule

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Speaker 3: that came out from the governor that says every single

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Speaker 3: new building in New York State has to have an

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Speaker 3: electric oven. Well, if we could snap our fingers and

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Speaker 3: just do that, there'd be a blackout immediately. So you know,

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Speaker 3: there are companies that are involved with the electrical grid.

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Speaker 3: There's reshoring, there's greenification, although you know the solar companies

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Speaker 3: sell it insane multiples, but there are other ways to

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Speaker 3: play it. And the other concept that I think is

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Speaker 3: going to come back is what i'd call risk adjustice returns.

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Speaker 3: You know, risk adjustice returns have been out of favor

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Speaker 3: because everybody just wants to invest in tech. I think

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Speaker 3: the world's going to be, you know, with if rates

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Speaker 3: stay high. I think that's going to That is going

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Speaker 3: to happen because I think Vulgan, I think Vulkar it's

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Speaker 3: Fredian slip. I think that Powell is petrified of doing

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Speaker 3: what Vulgar did, would would stop raising rates, cut them

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Speaker 3: a little bit. Inflation soars and he has to go to

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Speaker 3: seventeen percent.

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Speaker 2: So many different directly, Actually, what do you mean when

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Speaker 2: you talk about risk adjusted returns coming into vote?

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Speaker 4: What do that mean?

435
00:23:09,359 --> 00:23:12,800
Speaker 3: Specific? Risk aggestion returns means how much return are you're

436
00:23:12,840 --> 00:23:16,439
Speaker 3: generating given every unit of risk. There's mathematical ways to

437
00:23:16,440 --> 00:23:19,800
Speaker 3: figure I thought all investors, I thought that you're kidding.

438
00:23:20,200 --> 00:23:22,600
Speaker 3: People haven't focused on that. In the last ten years,

439
00:23:22,680 --> 00:23:25,200
Speaker 3: you could have been paid to take as much risk

440
00:23:25,240 --> 00:23:28,520
Speaker 3: as possible. So that concept, which was in voked for

441
00:23:28,560 --> 00:23:31,879
Speaker 3: a very long time, has been people have just stopped

442
00:23:31,880 --> 00:23:32,840
Speaker 3: paying attention to it.

443
00:23:33,119 --> 00:23:35,760
Speaker 1: But it sounds a lot like value investing, right, No,

444
00:23:35,920 --> 00:23:37,960
Speaker 1: keep predicting value.

445
00:23:37,760 --> 00:23:41,359
Speaker 3: Not value investing. It's you know how much volatility is

446
00:23:41,359 --> 00:23:44,040
Speaker 3: in your portfolio? How diversified are you don't want to

447
00:23:44,040 --> 00:23:47,320
Speaker 3: be too diversified? You know what's the beta versus alf

448
00:23:47,400 --> 00:23:49,639
Speaker 3: in your portfolio? That those are the concepts that I

449
00:23:49,680 --> 00:23:52,080
Speaker 3: think you're going to start to come back. You know,

450
00:23:52,119 --> 00:23:55,960
Speaker 3: I had just as an example. You know, my partners

451
00:23:55,960 --> 00:23:59,400
Speaker 3: and I, you know, we run separately manage accounts. Everybody's

452
00:23:59,400 --> 00:24:01,880
Speaker 3: got a different profile. So I'll just give you one

453
00:24:02,040 --> 00:24:05,800
Speaker 3: extreme example. I got a cold call from a woman

454
00:24:05,880 --> 00:24:10,639
Speaker 3: who you know, saved about a million dollars by killing

455
00:24:10,680 --> 00:24:13,720
Speaker 3: herself basically, and she gave money I won't say the

456
00:24:13,800 --> 00:24:17,840
Speaker 3: name of the very large bank to manage her money,

457
00:24:18,040 --> 00:24:21,639
Speaker 3: and they obliterated her. I never saw a portfolio like this.

458
00:24:22,200 --> 00:24:26,960
Speaker 3: Every single security she had had a loss. So she

459
00:24:27,080 --> 00:24:32,560
Speaker 3: comes to me basically with PTSD, and I promised her

460
00:24:32,600 --> 00:24:35,720
Speaker 3: I would hold her hand. And so I've only invested

461
00:24:35,760 --> 00:24:38,240
Speaker 3: a few, you know, and a few stocks, and otherwise

462
00:24:38,240 --> 00:24:41,520
Speaker 3: I put her in bonds and treasuries, and I figure

463
00:24:41,600 --> 00:24:45,120
Speaker 3: after about a year, maybe she'll have the emotional ability

464
00:24:45,200 --> 00:24:48,960
Speaker 3: to invest in stocks. So look, I think you really had.

465
00:24:49,040 --> 00:24:51,840
Speaker 3: What's also going to come back is catering to everybody's

466
00:24:51,920 --> 00:24:54,440
Speaker 3: individual risk profile as opposed to just putting fifty percent

467
00:24:54,480 --> 00:24:55,280
Speaker 3: of your money in tech.

468
00:24:55,480 --> 00:24:58,199
Speaker 2: As we're since we're talking about paradigm shifts, and you know,

469
00:24:58,240 --> 00:25:02,080
Speaker 2: you mentioned powells fear of you know, having to go

470
00:25:02,119 --> 00:25:06,000
Speaker 2: into the teams to fight inflation. I'm curious, like we

471
00:25:06,080 --> 00:25:09,920
Speaker 2: have the market does seem to be like go through

472
00:25:09,920 --> 00:25:11,840
Speaker 2: these phases of like, oh no, this is as far

473
00:25:11,840 --> 00:25:13,119
Speaker 2: as gonna go. So we're gonna go to three and

474
00:25:13,119 --> 00:25:15,000
Speaker 2: a half percent, So we gonna go to four. Okay,

475
00:25:15,000 --> 00:25:17,600
Speaker 2: we stopped SVB. That must have been the top. Oh no,

476
00:25:17,680 --> 00:25:19,680
Speaker 2: we're going to like pause in gin. But it looks

477
00:25:19,680 --> 00:25:22,119
Speaker 2: like we're gonna hike in July. Does this process, in

478
00:25:22,160 --> 00:25:24,440
Speaker 2: your view, have further to go in terms of.

479
00:25:24,400 --> 00:25:29,000
Speaker 3: People have lived with low rates for so long that

480
00:25:29,080 --> 00:25:32,600
Speaker 3: it is unimaginable to them that the Fed's going to

481
00:25:32,720 --> 00:25:35,840
Speaker 3: keep rates high. They just can't imagine it, you know

482
00:25:35,920 --> 00:25:38,600
Speaker 3: that They were like, oh, the FED will cut rates

483
00:25:38,920 --> 00:25:40,800
Speaker 3: in the second half of this year. That was never

484
00:25:40,880 --> 00:25:43,600
Speaker 3: my position, but that obviously was the position of the market,

485
00:25:43,600 --> 00:25:47,359
Speaker 3: and that now seems to be going away. So but

486
00:25:47,480 --> 00:25:49,600
Speaker 3: like I said, you know, people I like to say,

487
00:25:49,840 --> 00:25:52,800
Speaker 3: you don't think about your paradigm. You inhabit it. And

488
00:25:52,880 --> 00:25:55,119
Speaker 3: one of the paradigms is that we're all entitled to

489
00:25:55,160 --> 00:25:58,959
Speaker 3: live in a zero rate world. That's gone. Just everybody

490
00:25:58,960 --> 00:25:59,760
Speaker 3: hasn't woken up to that.

491
00:26:01,359 --> 00:26:03,520
Speaker 1: Well, just on this note, can you talk a little

492
00:26:03,560 --> 00:26:06,840
Speaker 1: bit about what's going on in consumer discretionary because those

493
00:26:06,840 --> 00:26:09,679
Speaker 1: stocks have been doing really well, and yet there is

494
00:26:09,840 --> 00:26:11,880
Speaker 1: this or there seems to be this big question mark

495
00:26:12,000 --> 00:26:15,359
Speaker 1: over the strength of the American consumer. So if you

496
00:26:15,400 --> 00:26:17,800
Speaker 1: look at the surveys, I mean, a lot of people

497
00:26:17,840 --> 00:26:20,040
Speaker 1: seem to think we're basically back in the depths of

498
00:26:20,200 --> 00:26:23,160
Speaker 1: two thousand and eight. Oh, definitely are if you look

499
00:26:23,160 --> 00:26:27,199
Speaker 1: at the hard data. The spending continues. So how are you.

500
00:26:27,440 --> 00:26:30,480
Speaker 3: I've heard from some companies, you know, very large banks

501
00:26:30,520 --> 00:26:33,520
Speaker 3: that really have the best data that consumer spending has

502
00:26:33,560 --> 00:26:37,000
Speaker 3: really slowed in the last couple of months. The consumer

503
00:26:37,080 --> 00:26:41,359
Speaker 3: is still relatively healthy because everybody's employed. So you know,

504
00:26:42,119 --> 00:26:44,600
Speaker 3: you're not going to see like a real deterioration and

505
00:26:44,640 --> 00:26:48,200
Speaker 3: consumer credit or anything like that until people start losing

506
00:26:48,200 --> 00:26:50,439
Speaker 3: their jobs. You know, is that going to happen. I

507
00:26:50,480 --> 00:26:52,439
Speaker 3: don't know. I think it's probably more likely than not.

508
00:26:52,920 --> 00:26:55,280
Speaker 3: But until we start to see unemployment go up, you're

509
00:26:55,280 --> 00:26:57,840
Speaker 3: not going to see a problem with the credit. That

510
00:26:57,880 --> 00:26:59,520
Speaker 3: doesn't mean the consumer is not going to pull in

511
00:26:59,560 --> 00:27:01,440
Speaker 3: their horn. I mean you're starting to see that in

512
00:27:01,480 --> 00:27:04,080
Speaker 3: a lot of different retail companies. I mean, I think

513
00:27:04,119 --> 00:27:06,600
Speaker 3: everybody's saw a dollar general how much that went down

514
00:27:06,680 --> 00:27:08,960
Speaker 3: because spending was you know, spending at the lower end

515
00:27:09,240 --> 00:27:12,040
Speaker 3: is slowing. You know, people are starting to trade down.

516
00:27:12,480 --> 00:27:14,760
Speaker 3: So it's happening behind the scenes, but it's a little

517
00:27:14,800 --> 00:27:16,879
Speaker 3: glacial because everybody is employed.

518
00:27:17,400 --> 00:27:21,639
Speaker 2: On this theme of sectors that stay buoyant because people

519
00:27:21,680 --> 00:27:26,400
Speaker 2: have jobs. Housing, big surprise over the last year, home

520
00:27:26,400 --> 00:27:27,560
Speaker 2: builders continuing to.

521
00:27:27,520 --> 00:27:28,280
Speaker 3: Do very well.

522
00:27:28,280 --> 00:27:30,640
Speaker 2: Maybe they're a little bit off their highs, home prices

523
00:27:30,880 --> 00:27:33,960
Speaker 2: not far off their highs, only modestly. I know, we

524
00:27:34,160 --> 00:27:38,000
Speaker 2: talked about this in March, but it seems like home

525
00:27:38,040 --> 00:27:40,200
Speaker 2: prices are back on the rise again, Like is there

526
00:27:40,359 --> 00:27:40,640
Speaker 2: they are?

527
00:27:41,240 --> 00:27:43,719
Speaker 3: It's actually very I mean, I mean the first to men,

528
00:27:43,800 --> 00:27:46,040
Speaker 3: I was wrong about this. You heard it here. First

529
00:27:46,880 --> 00:27:49,600
Speaker 3: surprised that the home builders have done so well with

530
00:27:49,720 --> 00:27:52,320
Speaker 3: rates so high, but you know, there is a shortage

531
00:27:52,320 --> 00:27:55,880
Speaker 3: of housing. I do think that existing home sales are

532
00:27:55,920 --> 00:28:02,080
Speaker 3: still fairly low because with everybody employed, and if you

533
00:28:02,119 --> 00:28:04,520
Speaker 3: have a three percent mortgage, it's hard to sell your

534
00:28:04,560 --> 00:28:06,600
Speaker 3: house and buy something else if you want to trade

535
00:28:06,640 --> 00:28:09,400
Speaker 3: up and get a seven percent mortgage. But the home

536
00:28:09,440 --> 00:28:12,040
Speaker 3: builders have been very good at, you know, cutting of

537
00:28:12,440 --> 00:28:16,439
Speaker 3: some of their prices, in their costs, incentivizing people through

538
00:28:16,480 --> 00:28:19,359
Speaker 3: their internal mortgage companies. I'm actually very impressed by what

539
00:28:19,400 --> 00:28:20,080
Speaker 3: they've done.

540
00:28:20,200 --> 00:28:22,920
Speaker 1: We talked a little bit about residential real estate the

541
00:28:23,000 --> 00:28:25,200
Speaker 1: last time we had you on. We didn't get to

542
00:28:25,320 --> 00:28:28,000
Speaker 1: commercial real estate. I don't think and I'm kind of

543
00:28:28,240 --> 00:28:31,000
Speaker 1: I'm jumping the gun remembered, I'm jumping the gun a

544
00:28:31,040 --> 00:28:34,200
Speaker 1: little bit because we have had some audience questions on

545
00:28:34,240 --> 00:28:36,919
Speaker 1: this topic. But how are you thinking about CI risks

546
00:28:36,960 --> 00:28:37,440
Speaker 1: at the moment?

547
00:28:37,600 --> 00:28:39,360
Speaker 3: Well, I mean, there's a lot of different categories of

548
00:28:39,440 --> 00:28:42,280
Speaker 3: cre Well, let's talk about cap rates first. First of all,

549
00:28:42,480 --> 00:28:47,200
Speaker 3: leave aside fundamentals. You bought something when rates were nothing,

550
00:28:47,280 --> 00:28:49,640
Speaker 3: and you paid a three percent debt and your cap

551
00:28:49,720 --> 00:28:52,880
Speaker 3: rate was let's say three or four percent, and now

552
00:28:53,080 --> 00:28:55,080
Speaker 3: if you wanted to borrow, you're going to pay seven

553
00:28:55,160 --> 00:28:59,080
Speaker 3: or eight. The value of your real estate went down. Period.

554
00:28:59,480 --> 00:29:02,880
Speaker 3: The area that is the most problematic is obviously office,

555
00:29:03,480 --> 00:29:06,720
Speaker 3: the areas that are probably the worst of San Francisco

556
00:29:06,800 --> 00:29:09,719
Speaker 3: in New York. I'll just give you a shocking statistic.

557
00:29:09,840 --> 00:29:11,600
Speaker 3: I've looked at it the other day. I was stunned.

558
00:29:11,640 --> 00:29:13,600
Speaker 3: Do you know what the market cap of Vernado is?

559
00:29:14,080 --> 00:29:14,680
Speaker 3: Two billion?

560
00:29:15,600 --> 00:29:16,920
Speaker 2: You should let me get us. I was going to

561
00:29:16,960 --> 00:29:17,920
Speaker 2: say three billion.

562
00:29:17,680 --> 00:29:20,960
Speaker 3: But two maybe it's kind of maybe it's two point two.

563
00:29:21,720 --> 00:29:24,040
Speaker 3: That's unbelievable when you think about it. So you know,

564
00:29:24,120 --> 00:29:28,440
Speaker 3: the market has really repriced the public entities, but the

565
00:29:28,480 --> 00:29:31,320
Speaker 3: private entities really having marked down their portfolio there because

566
00:29:31,360 --> 00:29:34,240
Speaker 3: nothing is trading. There's about one hundred and seventy five

567
00:29:34,400 --> 00:29:38,080
Speaker 3: billion of office debt coming do this year and about

568
00:29:38,080 --> 00:29:40,600
Speaker 3: one hundred and fifty billion of office debt coming to

569
00:29:40,640 --> 00:29:44,440
Speaker 3: do next year. If you took out a loan let's

570
00:29:44,480 --> 00:29:46,800
Speaker 3: say three four years ago to buy something, and the

571
00:29:46,960 --> 00:29:53,280
Speaker 3: LTV was sixty percent. Today it's probably one hundred. So

572
00:29:54,080 --> 00:29:57,120
Speaker 3: I mean the issue is the refinancing, and I think

573
00:29:57,160 --> 00:29:57,960
Speaker 3: it's going to be tough.

574
00:29:58,760 --> 00:30:01,440
Speaker 1: So you mentioned the isn't trading. Is this one of

575
00:30:01,440 --> 00:30:05,040
Speaker 1: those situations where maybe illiquidity can be your friend if

576
00:30:05,040 --> 00:30:05,640
Speaker 1: you don't they.

577
00:30:05,560 --> 00:30:09,080
Speaker 5: Don't have to market down because you know you don't

578
00:30:09,080 --> 00:30:12,600
Speaker 5: have to sell anything, right, Well, the problem for you

579
00:30:12,760 --> 00:30:15,280
Speaker 5: is that when your debt comes doe, then you got

580
00:30:15,280 --> 00:30:15,880
Speaker 5: a problem.

581
00:30:16,000 --> 00:30:18,320
Speaker 3: Until then you could, as we like to say, extend

582
00:30:18,320 --> 00:30:18,880
Speaker 3: and pretend.

583
00:30:19,520 --> 00:30:22,280
Speaker 2: At some point, could there be a do you think

584
00:30:22,280 --> 00:30:25,560
Speaker 2: about a point where you can bid on the public

585
00:30:25,720 --> 00:30:28,240
Speaker 2: equity or public aspect of Siria? I mean three billion?

586
00:30:28,320 --> 00:30:31,360
Speaker 2: It does seem like, oh, you were talking about like

587
00:30:31,400 --> 00:30:33,720
Speaker 2: the end of sort of like New.

588
00:30:33,640 --> 00:30:37,000
Speaker 3: York work as I haven't done enough work on this, okay,

589
00:30:37,200 --> 00:30:42,640
Speaker 3: but people that have say it's very problematic because I mean,

590
00:30:42,800 --> 00:30:45,720
Speaker 3: I'm sure some of you have seen, you know, Blackstone

591
00:30:45,720 --> 00:30:48,600
Speaker 3: and Brookville. I mean, these are not small companies have

592
00:30:48,720 --> 00:30:50,760
Speaker 3: given back the keys for some of their pretty good

593
00:30:50,760 --> 00:30:54,360
Speaker 3: buildings because you know they know that debt's going to

594
00:30:54,400 --> 00:30:56,239
Speaker 3: come do in a few years. They know what the

595
00:30:56,240 --> 00:30:58,719
Speaker 3: cash flow is going to be, and they can't support

596
00:30:58,760 --> 00:31:00,960
Speaker 3: the cash flow, so they're giving the keys back. So

597
00:31:01,120 --> 00:31:04,640
Speaker 3: if Blackstone and Brookfield are giving back buildings, you know,

598
00:31:04,800 --> 00:31:07,560
Speaker 3: how's everybody else going to be? Now there are what

599
00:31:07,640 --> 00:31:10,400
Speaker 3: i'd call triple A properties in New York City. I

600
00:31:10,440 --> 00:31:13,880
Speaker 3: don't know San Francisco as well, like you know one Vanderbilt,

601
00:31:14,320 --> 00:31:17,160
Speaker 3: but after that, you know, after a couple of abilities

602
00:31:17,200 --> 00:31:19,120
Speaker 3: that are like that, I think the rest are problematic.

603
00:31:36,600 --> 00:31:40,880
Speaker 1: Since you mentioned interest rate costs, it feels like people

604
00:31:40,920 --> 00:31:42,960
Speaker 1: have been predicting. I think we touched on this earlier

605
00:31:43,000 --> 00:31:45,040
Speaker 1: as well. But people have been predicting a turn in

606
00:31:45,080 --> 00:31:48,400
Speaker 1: the credit cycle for years now and it has yet

607
00:31:48,440 --> 00:31:52,280
Speaker 1: to happen. We've seen maybe some idiosyncratic bankruptcies, but nothing

608
00:31:52,440 --> 00:31:55,240
Speaker 1: sort of on mass or systemic. What would be the

609
00:31:55,320 --> 00:31:57,320
Speaker 1: catalyst for that actually happening?

610
00:31:57,320 --> 00:31:58,960
Speaker 3: And how like, I actually don't think there is going

611
00:31:59,040 --> 00:32:01,320
Speaker 3: to be. I think there will be. I mean, look,

612
00:32:01,360 --> 00:32:03,240
Speaker 3: if we go into some kind of recession, I think

613
00:32:03,240 --> 00:32:07,480
Speaker 3: there will be a normalization of consumer credit. I don't

614
00:32:07,520 --> 00:32:10,520
Speaker 3: think the consumer is over levered. There's really no subprime

615
00:32:10,560 --> 00:32:13,720
Speaker 3: mortgage lending in the United States at all. There's very

616
00:32:13,720 --> 00:32:17,200
Speaker 3: little subprime credit card lending. There's some subprime order lending.

617
00:32:17,600 --> 00:32:20,040
Speaker 3: But whatever problems happening is not going to be I

618
00:32:20,080 --> 00:32:23,400
Speaker 3: think in the consumer area, like I said, there'll be normalization.

619
00:32:24,200 --> 00:32:27,040
Speaker 3: You know, loan loss provisions in the banks will go up.

620
00:32:27,160 --> 00:32:29,440
Speaker 3: It's not a calamity. You know what's going to happen

621
00:32:29,600 --> 00:32:33,040
Speaker 3: in high yield office, et cetera. But those problems will

622
00:32:33,080 --> 00:32:36,120
Speaker 3: be you know, for example, the office will be concentrated

623
00:32:36,160 --> 00:32:40,959
Speaker 3: in cnbs and in certain regional banks, so it's going

624
00:32:41,000 --> 00:32:43,800
Speaker 3: to be more concentrated as opposed to systemic issues.

625
00:32:44,400 --> 00:32:47,400
Speaker 2: I have a career question or maybe a career advice question.

626
00:32:48,040 --> 00:32:52,680
Speaker 2: Very knowledgeable on banks, obviously real estate, knowing specific buildings,

627
00:32:53,120 --> 00:32:56,360
Speaker 2: thinking about understanding payments, et cetera. How should we How

628
00:32:56,360 --> 00:32:58,360
Speaker 2: do you like allocate your time? Because it's you know,

629
00:32:58,400 --> 00:32:59,760
Speaker 2: I don't know this stuff.

630
00:33:00,240 --> 00:33:01,240
Speaker 3: What do I do all day?

631
00:33:01,280 --> 00:33:03,120
Speaker 2: Is how do you allocate your time?

632
00:33:03,160 --> 00:33:07,520
Speaker 3: To have the morning? I have a cup of coffee,

633
00:33:07,600 --> 00:33:11,840
Speaker 3: you put black iceed. We're on the same I get

634
00:33:11,840 --> 00:33:14,520
Speaker 3: into the office, I start to read all my emails.

635
00:33:14,640 --> 00:33:18,920
Speaker 3: You know, I log into Blumberg thank you, and you

636
00:33:18,960 --> 00:33:21,200
Speaker 3: know there are companies are coming to Newburger, I go

637
00:33:21,280 --> 00:33:25,000
Speaker 3: to the meetings, I do some research on individual companies.

638
00:33:26,960 --> 00:33:30,000
Speaker 3: Trading day ends, you know, there might be some more

639
00:33:30,040 --> 00:33:32,600
Speaker 3: to do when I go home. That's that's my day.

640
00:33:32,880 --> 00:33:35,000
Speaker 1: What piques your interests though, Like, how do you make

641
00:33:35,040 --> 00:33:37,640
Speaker 1: decisions about whether or not to get really into a

642
00:33:37,680 --> 00:33:38,760
Speaker 1: sector or a company?

643
00:33:39,600 --> 00:33:41,880
Speaker 3: Look, it depends. I mean, I mean, I'll just give

644
00:33:41,920 --> 00:33:45,840
Speaker 3: you one stock, which hopefully Newburger won't shoot me tomorrow about.

645
00:33:46,040 --> 00:33:49,800
Speaker 3: So we've owned a company for a while called Quanta.

646
00:33:50,320 --> 00:33:53,120
Speaker 3: We have it in most of our portfolios. So Quanta

647
00:33:53,440 --> 00:33:56,920
Speaker 3: is a company. You know, utilities don't do anything. You know,

648
00:33:57,000 --> 00:34:00,000
Speaker 3: somebody has to build the utility, someone has to manage

649
00:34:00,280 --> 00:34:05,120
Speaker 3: the wires, somebody has to bury the wires. So you know, Quanta,

650
00:34:05,360 --> 00:34:07,320
Speaker 3: prior to all this grid stuff, used to sell it

651
00:34:08,120 --> 00:34:11,200
Speaker 3: ten to eleven twelve times earnings. But because all the

652
00:34:11,200 --> 00:34:15,080
Speaker 3: stuff of evolving infrastructure, the opportunities for the company have

653
00:34:15,160 --> 00:34:18,080
Speaker 3: been enormous, So the stock has been revalued. How often

654
00:34:18,120 --> 00:34:21,239
Speaker 3: does that happen? Not that often. But you know, when

655
00:34:21,239 --> 00:34:23,160
Speaker 3: you have the potential to do something like that, you

656
00:34:23,520 --> 00:34:25,319
Speaker 3: go all in. But it requires a lot of work.

657
00:34:26,440 --> 00:34:28,920
Speaker 2: But this was something that as you saw infrastructure coming,

658
00:34:28,920 --> 00:34:30,160
Speaker 2: and because you were familiar.

659
00:34:29,880 --> 00:34:31,480
Speaker 3: I'll give you an example of what we saw. So,

660
00:34:31,800 --> 00:34:36,600
Speaker 3: you know, the utility in California, I think it's PCG.

661
00:34:37,320 --> 00:34:40,000
Speaker 3: You know, there's a strict liability rule in California that

662
00:34:40,040 --> 00:34:43,439
Speaker 3: basically says if PCG causes a fire and is only

663
00:34:43,480 --> 00:34:49,719
Speaker 3: partially responsible, they're completely responsible. So the old CEOs of

664
00:34:50,000 --> 00:34:53,879
Speaker 3: PCG weren't too good. The new CEO is superb, and

665
00:34:53,920 --> 00:34:57,560
Speaker 3: so she's embarked on this plan to basically bury all

666
00:34:57,600 --> 00:35:00,640
Speaker 3: the wires of the company. Think about what that means.

667
00:35:01,400 --> 00:35:05,640
Speaker 3: This is not Rhode Island, this is California. That's a

668
00:35:05,680 --> 00:35:08,799
Speaker 3: lot of wires. You know who's doing that quant them?

669
00:35:09,280 --> 00:35:13,000
Speaker 3: So you know that's gonna take years to do. But

670
00:35:13,160 --> 00:35:15,520
Speaker 3: so stuff like that is, you know, the infrastructure stuff

671
00:35:15,560 --> 00:35:17,400
Speaker 3: in the United States is pretty pathetic.

672
00:35:17,920 --> 00:35:18,000
Speaker 5: Now.

673
00:35:18,040 --> 00:35:20,920
Speaker 3: I remember years ago, maybe like twelve years ago, I

674
00:35:20,920 --> 00:35:23,680
Speaker 3: had a conference in Hong Kong. It's like, fly in

675
00:35:24,040 --> 00:35:26,800
Speaker 3: the airport's completely new. You could literally eat off the floor.

676
00:35:27,200 --> 00:35:29,240
Speaker 3: You get into a car, you get onto a highway,

677
00:35:29,280 --> 00:35:31,640
Speaker 3: it looks like the highway was just built yesterday. You

678
00:35:31,719 --> 00:35:33,360
Speaker 3: go over a bridge, you go did they just finish

679
00:35:33,440 --> 00:35:35,640
Speaker 3: this yesterday? And then you know, you go to this

680
00:35:35,680 --> 00:35:37,799
Speaker 3: wonderful hotel, and then you come back to the United States.

681
00:35:37,880 --> 00:35:41,120
Speaker 3: You can go to JFK and you're embarrassed, like this

682
00:35:41,160 --> 00:35:43,759
Speaker 3: is the United States of America a lot, like it's unbelievable.

683
00:35:43,880 --> 00:35:45,799
Speaker 3: Then you get on, you get on the Van Wick

684
00:35:46,120 --> 00:35:48,439
Speaker 3: and the Grand Cential Parkway and it's I mean, it's

685
00:35:48,480 --> 00:35:51,600
Speaker 3: just unbelievable. By the way, have you noticed that when

686
00:35:51,680 --> 00:35:55,239
Speaker 3: you're driving to JFK where the Grand Central meets the

687
00:35:55,320 --> 00:35:59,399
Speaker 3: Van Wick, there's this construction there. You know how long

688
00:35:59,480 --> 00:36:05,040
Speaker 3: that construction has been going on? Twelve years? Like twelve years.

689
00:36:05,160 --> 00:36:08,600
Speaker 3: I could have done it myself faster, Like what's going

690
00:36:08,680 --> 00:36:09,120
Speaker 3: on with that?

691
00:36:09,239 --> 00:36:11,160
Speaker 2: Like Guardia isn't even connected to.

692
00:36:11,320 --> 00:36:14,720
Speaker 3: A subway way. Yeah, but that's better than the Van Wick.

693
00:36:15,400 --> 00:36:17,759
Speaker 1: It is true. I went to the Seychelles recently, and

694
00:36:17,800 --> 00:36:20,280
Speaker 1: I will say, like a tropical island in the middle

695
00:36:20,280 --> 00:36:23,480
Speaker 1: of the Indian Ocean has better roads than coming back

696
00:36:23,480 --> 00:36:26,239
Speaker 1: from the airport from JFK and fewer potholes, which is

697
00:36:26,320 --> 00:36:29,040
Speaker 1: rather amazing. We could listen to Steve Rant about US

698
00:36:29,080 --> 00:36:34,319
Speaker 1: infrastructure for a while provide insightful commentary on US infrastructure

699
00:36:34,440 --> 00:36:36,120
Speaker 1: for a few more minutes. But we do have a

700
00:36:36,120 --> 00:36:37,719
Speaker 1: lot of audience questions.

701
00:36:37,760 --> 00:36:39,040
Speaker 2: Shall we take some Yeah.

702
00:36:39,160 --> 00:36:42,720
Speaker 1: All right from Tim Lintern asking what is the trigger

703
00:36:43,040 --> 00:36:44,480
Speaker 1: for higher unemployment?

704
00:36:44,960 --> 00:36:48,160
Speaker 3: The problem with making a big case for higher unemployment

705
00:36:48,200 --> 00:36:50,799
Speaker 3: is if it is a shortage of labor. This is

706
00:36:50,800 --> 00:36:53,000
Speaker 3: a little bit of the revenge of the middle class.

707
00:36:53,360 --> 00:36:56,080
Speaker 3: So you know, the two thousand and eight crisis destroyed

708
00:36:56,120 --> 00:36:59,440
Speaker 3: the lower middle class. In the middle class here the

709
00:36:59,520 --> 00:37:03,360
Speaker 3: layoffs in tech at Wall Street, the middle class is

710
00:37:03,400 --> 00:37:07,160
Speaker 3: actually doing quite well. I mean, what would cause a

711
00:37:07,200 --> 00:37:09,920
Speaker 3: real uptick and unemployment. Look, if the Fed keeps raising

712
00:37:10,000 --> 00:37:12,120
Speaker 3: rates and the economy really starts to slow down, there'll

713
00:37:12,160 --> 00:37:14,000
Speaker 3: be some layoffs. Do I think they're going to be

714
00:37:14,080 --> 00:37:17,680
Speaker 3: very high? I don't because the labor sortags are still

715
00:37:17,719 --> 00:37:20,839
Speaker 3: so important. People may want to warehouse their employees.

716
00:37:22,000 --> 00:37:25,360
Speaker 2: Here's a question, since you mentioned your knowledge of the

717
00:37:25,360 --> 00:37:28,760
Speaker 2: payments industry Casey twelve twenty one, as what about Apple,

718
00:37:28,840 --> 00:37:30,960
Speaker 2: you know, in terms of a company with just incredible

719
00:37:31,080 --> 00:37:33,799
Speaker 2: like mote in some way, right, there's always talking there

720
00:37:33,840 --> 00:37:36,440
Speaker 2: coming a bank or Carridge or whatever. Could they make

721
00:37:36,520 --> 00:37:40,040
Speaker 2: further inroads in payments and become an entity that takes

722
00:37:40,080 --> 00:37:41,600
Speaker 2: share or profits from someone else.

723
00:37:42,440 --> 00:37:44,560
Speaker 3: I mean they certainly could. I mean, it's so easy

724
00:37:44,560 --> 00:37:46,719
Speaker 3: to pay stuff with Apple. Yeah, so I do think

725
00:37:46,760 --> 00:37:50,400
Speaker 3: Apple's already making inroads. You know how much farther they

726
00:37:50,400 --> 00:37:52,000
Speaker 3: want to go. I don't know. You know, there's the

727
00:37:52,040 --> 00:37:55,520
Speaker 3: Apple credit card that's run by Goldman Sachs. I don't

728
00:37:55,520 --> 00:37:57,879
Speaker 3: think Apple's ever going to really make a bigger road

729
00:37:57,920 --> 00:38:02,640
Speaker 3: in the credit card business, the payments business probably.

730
00:38:02,960 --> 00:38:07,680
Speaker 1: Another question from ABE one asks what are your thoughts

731
00:38:08,080 --> 00:38:12,720
Speaker 1: on private credit? Will direct lending replace commercial bank lending

732
00:38:12,920 --> 00:38:13,719
Speaker 1: long term?

733
00:38:14,239 --> 00:38:18,960
Speaker 3: Well that's an excellent question, you know, given let's assume

734
00:38:19,000 --> 00:38:22,280
Speaker 3: the regulators do raise the capital requirements for all the banks,

735
00:38:22,640 --> 00:38:25,279
Speaker 3: it's going to force the banks really to at least

736
00:38:25,280 --> 00:38:28,600
Speaker 3: that the regionals to really narrow some of their lending,

737
00:38:28,880 --> 00:38:31,480
Speaker 3: because they're only going to want to make loans where

738
00:38:31,520 --> 00:38:35,960
Speaker 3: the risk weight is low. And I know that the

739
00:38:36,000 --> 00:38:40,240
Speaker 3: private credit lenders are literally salivating over this happening, because

740
00:38:40,560 --> 00:38:44,879
Speaker 3: you know, Dodd Frank under Trullo, who was the vice

741
00:38:44,960 --> 00:38:49,040
Speaker 3: chair of Financial Supervision, not only did he lower their

742
00:38:49,120 --> 00:38:52,440
Speaker 3: leverage by like he cut it basically in half, but

743
00:38:52,520 --> 00:38:54,759
Speaker 3: he narrowed the scope of what lending they could do,

744
00:38:55,160 --> 00:38:58,399
Speaker 3: and that really opened up for the private credit lenders, right,

745
00:38:58,520 --> 00:39:01,760
Speaker 3: you know, assuming that happens again, the private credit lenders

746
00:39:01,760 --> 00:39:03,640
Speaker 3: will have even more room to play.

747
00:39:03,800 --> 00:39:07,680
Speaker 2: Another question, the reshoring boom. People talk about restoring friends shoring.

748
00:39:07,680 --> 00:39:10,520
Speaker 2: You know, as you talk about this new paradigm, partly

749
00:39:10,560 --> 00:39:12,960
Speaker 2: may be kicked off by a lot of the public

750
00:39:13,000 --> 00:39:16,920
Speaker 2: investment being made for IRA and Chips, et cetera. How

751
00:39:16,920 --> 00:39:18,880
Speaker 2: are you think about that? What is like what do

752
00:39:18,920 --> 00:39:22,000
Speaker 2: you see a sort of maybe the medium term of

753
00:39:22,200 --> 00:39:26,520
Speaker 2: some of these trends and different ways it could shake out.

754
00:39:26,760 --> 00:39:29,640
Speaker 3: Well, I think general reshowing is going to take time. Yeah,

755
00:39:30,000 --> 00:39:34,439
Speaker 3: you know, factories aren't built overnight. I still think that's

756
00:39:34,440 --> 00:39:38,680
Speaker 3: probably a reluctance by companies to bring all of their

757
00:39:39,160 --> 00:39:41,680
Speaker 3: shoring back to the United States because they're so used

758
00:39:41,719 --> 00:39:47,439
Speaker 3: to cheap labor. But I do think, you know, part

759
00:39:47,480 --> 00:39:50,279
Speaker 3: of the story, given all the legislation that's come back,

760
00:39:50,440 --> 00:39:53,799
Speaker 3: is something of a reindustrialization of America. How long that's

761
00:39:53,840 --> 00:39:55,920
Speaker 3: going to take, I don't know. I think that, like

762
00:39:55,960 --> 00:39:57,759
Speaker 3: I said before, the biggest story is going to be

763
00:39:57,800 --> 00:40:01,560
Speaker 3: the grid. The grid is is absolutely crucial. I mean,

764
00:40:02,080 --> 00:40:04,680
Speaker 3: the estimates of improving the grid in the United States

765
00:40:04,680 --> 00:40:06,719
Speaker 3: are and everybody's got a different estimate. But it's like

766
00:40:06,760 --> 00:40:09,880
Speaker 3: twollion three hundred billion fire. I mean, it's unbelievable numbers.

767
00:40:10,640 --> 00:40:12,320
Speaker 3: That's going to think it going to be the biggest theme.

768
00:40:13,000 --> 00:40:15,120
Speaker 1: Actually, I'm going to ask my own question based on

769
00:40:15,440 --> 00:40:18,680
Speaker 1: that answer. But why do you think the US seems to,

770
00:40:18,960 --> 00:40:22,560
Speaker 1: at least in recent years, be quite bad at infrastructure?

771
00:40:23,320 --> 00:40:25,680
Speaker 3: Oh, we haven't spent money on it in generations?

772
00:40:26,400 --> 00:40:26,520
Speaker 1: I have.

773
00:40:26,560 --> 00:40:30,040
Speaker 3: I noticed. You know, when was the last time. Let

774
00:40:30,080 --> 00:40:33,080
Speaker 3: me put you this way, in the New York metropolitan area,

775
00:40:33,920 --> 00:40:41,960
Speaker 3: every highway, every every parkway, every bridge, every park was

776
00:40:42,000 --> 00:40:44,919
Speaker 3: built by Robert Moses. You should all read the book

777
00:40:44,960 --> 00:40:50,480
Speaker 3: by Robert Carr or Robert Moses superb. That's the thirties, forties, fifties,

778
00:40:50,480 --> 00:40:53,080
Speaker 3: and early sixties. That was the last time the United

779
00:40:53,120 --> 00:40:56,359
Speaker 3: States really spent a ton of money on infrastructure. Our

780
00:40:56,400 --> 00:40:58,760
Speaker 3: infrastructure is just very, very old.

781
00:41:00,120 --> 00:41:02,560
Speaker 1: But what I mean, I guess my question, why why

782
00:41:02,680 --> 00:41:03,560
Speaker 1: can you issue all this?

783
00:41:03,680 --> 00:41:06,200
Speaker 3: I'm not president of the United States. Go ask the

784
00:41:06,280 --> 00:41:08,840
Speaker 3: last several presidents why ay didn't spend money on this?

785
00:41:08,960 --> 00:41:09,640
Speaker 3: But they didn't.

786
00:41:10,120 --> 00:41:12,960
Speaker 1: Well, current and former presidents of the United States have

787
00:41:12,960 --> 00:41:14,239
Speaker 1: an open invitation for all.

788
00:41:14,160 --> 00:41:18,640
Speaker 2: Thoughts absolutely well. Speaking of infrastructure, I don't know if

789
00:41:18,680 --> 00:41:21,160
Speaker 2: you have a view on this. It's not particular commodities.

790
00:41:21,200 --> 00:41:22,360
Speaker 2: People talk about copper.

791
00:41:22,880 --> 00:41:25,120
Speaker 3: I have no opinion, no opinion. There are enough ways

792
00:41:25,120 --> 00:41:27,880
Speaker 3: for me to lose money without going into commodities.

793
00:41:28,920 --> 00:41:33,160
Speaker 2: Okay, here's another question you as consumer restart of student loan,

794
00:41:34,000 --> 00:41:35,560
Speaker 2: is that something on your radar or is that not

795
00:41:35,560 --> 00:41:38,560
Speaker 2: big enough dealing with He's rolling it for people who

796
00:41:38,600 --> 00:41:39,080
Speaker 2: are listening.

797
00:41:39,120 --> 00:41:40,880
Speaker 3: I mean, I will just tell you know. It's putting

798
00:41:40,920 --> 00:41:43,719
Speaker 3: out my lawyer hat. Supreme Court is probably going to

799
00:41:43,800 --> 00:41:47,360
Speaker 3: rule that what the Biden administration did is not kosher.

800
00:41:47,640 --> 00:41:51,120
Speaker 3: But I actually think that the people are suing literally

801
00:41:51,160 --> 00:41:54,640
Speaker 3: have no standing to sue. But given the composition of

802
00:41:54,680 --> 00:41:57,440
Speaker 3: this court, they're basically not going to care. So I

803
00:41:57,480 --> 00:41:59,279
Speaker 3: think the case is going to go against the Biden

804
00:41:59,320 --> 00:42:02,200
Speaker 3: administration even though it shouldn't. The court just throw it out,

805
00:42:02,239 --> 00:42:02,840
Speaker 3: but they won't.

806
00:42:04,280 --> 00:42:08,200
Speaker 1: A question from Nathan Tankas he asks it's an interesting one.

807
00:42:08,680 --> 00:42:11,879
Speaker 1: Is there an index which you would prefer that more

808
00:42:12,000 --> 00:42:15,600
Speaker 1: properly weights tech relative to the S and P.

809
00:42:18,640 --> 00:42:19,280
Speaker 3: No comment?

810
00:42:21,680 --> 00:42:23,239
Speaker 2: All right. I have another question that was put in

811
00:42:23,320 --> 00:42:26,880
Speaker 2: there from Nathan. It was regarding SVB. You said, the

812
00:42:26,920 --> 00:42:28,799
Speaker 2: weight that they ought to have dealt with it is

813
00:42:28,880 --> 00:42:32,920
Speaker 2: let the UH, let the bank fail, and then guarantee

814
00:42:33,040 --> 00:42:35,120
Speaker 2: let the bank fail. But how does that solve moral

815
00:42:35,160 --> 00:42:36,240
Speaker 2: hazard because they never wants.

816
00:42:36,200 --> 00:42:40,040
Speaker 3: Because everybody would know that if the next bank, you know,

817
00:42:40,120 --> 00:42:43,200
Speaker 3: eventually we'll take away the deposit insurance and if your

818
00:42:43,200 --> 00:42:47,800
Speaker 3: bank fails, we won't guarantee you. Maybe we put guarantee.

819
00:42:48,640 --> 00:42:51,439
Speaker 2: So basically the guarantee you gotta be diversified.

820
00:42:51,520 --> 00:42:53,279
Speaker 3: I mean, I'll give you an example. Okay, So I

821
00:42:53,280 --> 00:42:56,920
Speaker 3: have a friend who runs a VC company and the

822
00:42:57,040 --> 00:43:00,840
Speaker 3: Thursday of Silicon Valley in the afternoon, he freaks out.

823
00:43:01,160 --> 00:43:04,640
Speaker 3: He goes online and he pulls all his money, and

824
00:43:04,640 --> 00:43:07,359
Speaker 3: then he wakes up Friday morning and his money's still

825
00:43:07,360 --> 00:43:10,960
Speaker 3: in the bank. So he runs to the branch. He's

826
00:43:11,040 --> 00:43:12,160
Speaker 3: fiftieth in line.

827
00:43:12,920 --> 00:43:15,000
Speaker 2: I didn't know that people got in line.

828
00:43:15,040 --> 00:43:17,680
Speaker 3: I know they got in line. There are fifty alpha

829
00:43:17,719 --> 00:43:20,799
Speaker 3: males with tens of millions of dollars in the bank.

830
00:43:20,840 --> 00:43:22,440
Speaker 3: I used to be an alpha male. I'm not. I'm

831
00:43:22,480 --> 00:43:28,400
Speaker 3: a beta, and don't ask how I got there. And

832
00:43:28,440 --> 00:43:31,200
Speaker 3: they're all waiting in line, and a woman comes out

833
00:43:31,280 --> 00:43:34,480
Speaker 3: who's probably like a teller, I mean literally, and she

834
00:43:34,640 --> 00:43:37,799
Speaker 3: comes out and she says, I know you're all here

835
00:43:37,840 --> 00:43:42,000
Speaker 3: to get your money, but unfortunately the bank has just

836
00:43:42,080 --> 00:43:44,359
Speaker 3: been seized by the federal government and we can't give

837
00:43:44,400 --> 00:43:47,400
Speaker 3: any money anybody. So the first guy in line starts

838
00:43:47,400 --> 00:43:51,040
Speaker 3: screaming and he says, I'll clean it up. He goes,

839
00:43:51,120 --> 00:43:54,719
Speaker 3: I want my f and fifty f and freaking million dollars,

840
00:43:55,400 --> 00:43:59,880
Speaker 3: and she says she says, sir, I just lost my job,

841
00:44:00,440 --> 00:44:03,320
Speaker 3: and he starts screaming, I want my fifty f and

842
00:44:03,400 --> 00:44:06,960
Speaker 3: freaking f million dollars. And that guy could have learned

843
00:44:07,000 --> 00:44:09,840
Speaker 3: a lesson about diversification, because if he had, he wouldn't

844
00:44:09,840 --> 00:44:10,239
Speaker 3: have been there.

845
00:44:11,440 --> 00:44:13,680
Speaker 1: The teller needs to give the It's a Wonderful life

846
00:44:13,680 --> 00:44:16,360
Speaker 1: speech and say, yes, it's porfolio.

847
00:44:17,239 --> 00:44:19,160
Speaker 3: You shouldn't say that because most of the people in

848
00:44:19,200 --> 00:44:20,880
Speaker 3: this audience don't ever saw the movie.

849
00:44:21,000 --> 00:44:26,840
Speaker 1: So it's okay, Resistance people have seen it's in the GPT.

850
00:44:29,320 --> 00:44:29,680
Speaker 3: I have.

851
00:44:30,080 --> 00:44:32,160
Speaker 1: Well, well, I mean we can keep going, but one

852
00:44:32,160 --> 00:44:32,640
Speaker 1: more question.

853
00:44:32,920 --> 00:44:36,200
Speaker 3: Keep going? I got nothing to do, all right.

854
00:44:36,080 --> 00:44:38,880
Speaker 1: So you know people are asking for free portfolio advice

855
00:44:38,920 --> 00:44:40,600
Speaker 1: at this point, but which if.

856
00:44:40,480 --> 00:44:43,040
Speaker 3: You want portfolio advice, I'll give you my card, you

857
00:44:43,080 --> 00:44:44,160
Speaker 3: can come invest with me.

858
00:44:44,520 --> 00:44:47,759
Speaker 1: Which sector slash stocks are at most risk for a

859
00:44:47,880 --> 00:44:50,759
Speaker 1: short squeeze in the next twelve months. That's from Georgina.

860
00:44:52,000 --> 00:44:54,600
Speaker 3: No comment, no comment, All right, my friend would just

861
00:44:54,680 --> 00:44:55,000
Speaker 3: kill me.

862
00:44:56,840 --> 00:44:59,440
Speaker 2: Here's a question. I think it actually ties back to

863
00:44:59,520 --> 00:45:03,160
Speaker 2: a bunch of someone asks your thoughts on American exceptionalism,

864
00:45:03,239 --> 00:45:05,120
Speaker 2: and I think it sort of ties to this. No,

865
00:45:05,280 --> 00:45:10,000
Speaker 2: it ties to like, can we actually setting aside the money, like,

866
00:45:10,040 --> 00:45:11,759
Speaker 2: because there is a lot of money, like build it.

867
00:45:11,800 --> 00:45:15,680
Speaker 2: We know that there's money going into factories or structures booming.

868
00:45:15,840 --> 00:45:17,480
Speaker 2: But then there's a question of like, okay, we're going

869
00:45:17,520 --> 00:45:19,440
Speaker 2: to do a good job of it, and with a

870
00:45:19,440 --> 00:45:21,840
Speaker 2: lot of this green spending, with a lot of this reshot, like,

871
00:45:21,880 --> 00:45:24,560
Speaker 2: are you confident that with the money there that like

872
00:45:24,920 --> 00:45:27,600
Speaker 2: it'll actually turn into something productive or is it, like

873
00:45:27,760 --> 00:45:28,480
Speaker 2: I mean, it.

874
00:45:28,400 --> 00:45:32,239
Speaker 3: Will be The issue Really the issue really is at

875
00:45:32,239 --> 00:45:36,000
Speaker 3: this point that to actually do something with the federal

876
00:45:36,040 --> 00:45:39,040
Speaker 3: government money takes a long time. Yeah. Now, whether they

877
00:45:39,080 --> 00:45:42,879
Speaker 3: can shorten the time, that's very important, But it's more

878
00:45:42,880 --> 00:45:44,520
Speaker 3: of a time issue, i think at this point than

879
00:45:44,520 --> 00:45:45,480
Speaker 3: a competence issue.

880
00:45:45,520 --> 00:45:48,640
Speaker 2: Well on the grid thing, which it sounds like is

881
00:45:48,960 --> 00:45:51,560
Speaker 2: sort of two questions, Like you said, it's like the

882
00:45:51,640 --> 00:45:54,000
Speaker 2: big thing, how many years? And then there's more need

883
00:45:54,040 --> 00:45:56,480
Speaker 2: to happen on the sort of regulatory side, because this

884
00:45:56,600 --> 00:45:59,800
Speaker 2: came up with in the recent dead saling negotiations permitting,

885
00:45:59,840 --> 00:46:02,239
Speaker 2: like can you actually like put up the wires, et cetera.

886
00:46:02,400 --> 00:46:05,600
Speaker 2: Like are you watching for more action on the regulatory

887
00:46:05,640 --> 00:46:07,759
Speaker 2: side for this thesis to really play out?

888
00:46:08,800 --> 00:46:11,400
Speaker 3: I mean, I am, I mean the problem is that

889
00:46:13,760 --> 00:46:16,680
Speaker 3: and I don't say this pejoratively at all, but you know,

890
00:46:16,719 --> 00:46:23,040
Speaker 3: people have who have a very environmental bet bent, bet bent.

891
00:46:25,200 --> 00:46:29,239
Speaker 3: I don't want any non solo to be built, you know, so,

892
00:46:29,640 --> 00:46:31,839
Speaker 3: but the problem is that, you know, to get from

893
00:46:31,880 --> 00:46:35,480
Speaker 3: here to there, you're going to need a bridge, so

894
00:46:35,760 --> 00:46:38,800
Speaker 3: they fight any permitting, you know. But the problem is

895
00:46:38,840 --> 00:46:41,240
Speaker 3: you can't wave a magic wand and electrify every single

896
00:46:41,280 --> 00:46:43,960
Speaker 3: car in the United States. So that's a real problem.

897
00:46:44,040 --> 00:46:46,160
Speaker 3: I don't know how to solve that other than you know,

898
00:46:46,280 --> 00:46:49,680
Speaker 3: this administration has to really push through you know, shorter permitting.

899
00:46:51,440 --> 00:46:54,879
Speaker 1: I know, we can keep going, but maybe we should

900
00:46:54,960 --> 00:46:56,400
Speaker 1: leave it there and encourage the.

901
00:46:56,480 --> 00:46:59,200
Speaker 3: Audience members do not ask a question about crypto.

902
00:46:59,280 --> 00:47:03,279
Speaker 2: Come on, you know, it's funny. So there there No,

903
00:47:03,360 --> 00:47:05,279
Speaker 2: that's great, that's great. Someone put a question in there

904
00:47:05,280 --> 00:47:08,440
Speaker 2: about cryptos, like really, okay, but please what is the

905
00:47:08,680 --> 00:47:09,879
Speaker 2: give us a take?

906
00:47:10,160 --> 00:47:13,200
Speaker 3: Okay? So so as I like to say, not that

907
00:47:13,280 --> 00:47:15,719
Speaker 3: I feel that strongly about it. So there are two

908
00:47:15,840 --> 00:47:20,040
Speaker 3: issues about crypto. Is it actually a currency? And number two,

909
00:47:20,120 --> 00:47:24,320
Speaker 3: what's it good for? So personally I have my doubts

910
00:47:24,320 --> 00:47:27,200
Speaker 3: that it's even a currency, But let's push that aside.

911
00:47:27,920 --> 00:47:30,560
Speaker 3: What's it good for? So one thing we know for

912
00:47:30,680 --> 00:47:33,719
Speaker 3: certain what it's good for is money laundering. That we

913
00:47:33,800 --> 00:47:37,439
Speaker 3: know for certain. Is it good for anything else other

914
00:47:37,480 --> 00:47:40,600
Speaker 3: than money laundering? So at this point it is certainly

915
00:47:40,680 --> 00:47:44,960
Speaker 3: not good for transactions in the real world because the

916
00:47:45,000 --> 00:47:48,040
Speaker 3: cost of it is just way too high. Now, the

917
00:47:48,080 --> 00:47:52,240
Speaker 3: people who argue that one day, you know, one day

918
00:47:53,040 --> 00:47:56,440
Speaker 3: it'll be cheap enough to do, I have my doubts

919
00:47:56,600 --> 00:48:00,600
Speaker 3: because do you know how much money goes over the

920
00:48:00,680 --> 00:48:04,040
Speaker 3: rails of Visa MasterCard per year? It's like two trillion.

921
00:48:04,640 --> 00:48:09,000
Speaker 3: You know how much Visa MasterCard charge per transaction ten

922
00:48:09,120 --> 00:48:14,040
Speaker 3: basis points. So I think, assuming that you know these

923
00:48:14,080 --> 00:48:18,800
Speaker 3: coins have are really exist in terms of the real world,

924
00:48:19,040 --> 00:48:21,040
Speaker 3: it's going to take a very very long time for

925
00:48:21,080 --> 00:48:24,120
Speaker 3: them to be enough volume for them to be cost efficient.

926
00:48:24,480 --> 00:48:26,720
Speaker 3: Until then, it's mostly going to be about money laundering,

927
00:48:27,440 --> 00:48:29,480
Speaker 3: So what else is it good for? So people keep

928
00:48:29,480 --> 00:48:32,439
Speaker 3: coming up with new theories, so obviously it's not good

929
00:48:32,440 --> 00:48:36,719
Speaker 3: for transactions. So then the thesis was that it's a

930
00:48:36,760 --> 00:48:41,200
Speaker 3: way to hedge against the debasement of fear currency. So

931
00:48:41,719 --> 00:48:46,600
Speaker 3: the problem with that thesis was and still is that

932
00:48:47,640 --> 00:48:51,399
Speaker 3: if that's the case, then bitcoin should go up while

933
00:48:51,440 --> 00:48:54,239
Speaker 3: everybody's freaking out about the stock market and freaking out

934
00:48:54,239 --> 00:48:57,880
Speaker 3: about inflation, and Nasdaq is down and people are freaking

935
00:48:57,920 --> 00:49:01,200
Speaker 3: out about the stock market, and that's how bitcoin acts.

936
00:49:01,480 --> 00:49:03,799
Speaker 3: It goes up. The car I actually calculated is the

937
00:49:03,800 --> 00:49:07,880
Speaker 3: correlation over the last several years of boitcoin and naasaka

938
00:49:07,920 --> 00:49:10,959
Speaker 3: is anywhere from forty to sixty five percent, depending upon

939
00:49:10,960 --> 00:49:14,880
Speaker 3: what time period you're talking about, So that thesis can't

940
00:49:14,920 --> 00:49:17,720
Speaker 3: be true. So bitcoin in that sense is just another

941
00:49:17,719 --> 00:49:21,000
Speaker 3: warm form of speculation. The latest thesis that I heard,

942
00:49:21,040 --> 00:49:24,279
Speaker 3: because you know, people don't give up, is it's a

943
00:49:24,320 --> 00:49:31,319
Speaker 3: form of what's the word store of value. I knew

944
00:49:31,320 --> 00:49:32,759
Speaker 3: it would come to me event I was having a

945
00:49:32,840 --> 00:49:36,200
Speaker 3: data retrieval problem a store of value. I heard that

946
00:49:36,400 --> 00:49:38,640
Speaker 3: this from a bunch of people. It's a great store

947
00:49:38,760 --> 00:49:40,400
Speaker 3: of value. And my response to that is.

948
00:49:40,480 --> 00:49:42,759
Speaker 1: Right, this was the anti bank thing, right, And I

949
00:49:42,800 --> 00:49:43,279
Speaker 1: go about that.

950
00:49:43,520 --> 00:49:45,919
Speaker 3: Really, is it really a store of value? How could

951
00:49:45,960 --> 00:49:47,640
Speaker 3: it be a store of value when it goes up

952
00:49:47,640 --> 00:49:50,440
Speaker 3: and down like a yo yo every single year. You know,

953
00:49:51,480 --> 00:49:55,400
Speaker 3: currencies don't do that. You know, people who trade currents,

954
00:49:55,480 --> 00:49:59,120
Speaker 3: you know, a ten percent move in a currency like

955
00:49:59,200 --> 00:50:03,640
Speaker 3: the dollar any year is extraordinary. So people who trade currency,

956
00:50:03,680 --> 00:50:05,920
Speaker 3: the only way you can make money, generally is to

957
00:50:06,000 --> 00:50:10,160
Speaker 3: lever yourself enormously. You can't have a currency that's a

958
00:50:10,200 --> 00:50:12,960
Speaker 3: store of value that goes from twenty thousand to fifty

959
00:50:13,000 --> 00:50:16,160
Speaker 3: thousand to twenty thousand to twenty five thousand. You know,

960
00:50:16,880 --> 00:50:18,919
Speaker 3: in between, you're going to the bathroom and coming back.

961
00:50:19,560 --> 00:50:23,800
Speaker 3: So I don't understand, honestly, somebody should tell me, because

962
00:50:23,800 --> 00:50:26,840
Speaker 3: I just don't understand the social utility of bitcoin again,

963
00:50:27,680 --> 00:50:30,840
Speaker 3: other than money wandering. For that, it's excellent.

964
00:50:32,000 --> 00:50:34,839
Speaker 1: I'm guessing more about to get swarmed by at least

965
00:50:34,840 --> 00:50:36,480
Speaker 1: a few cryptobias.

966
00:50:37,719 --> 00:50:42,439
Speaker 3: Yeah, now, come on, we'll have a nice fistfight. It's okay, great, all.

967
00:50:42,400 --> 00:50:44,360
Speaker 1: Right, Well on that happy note.

968
00:50:45,280 --> 00:50:48,880
Speaker 2: Just leave it there, all right, very much thought.

969
00:51:01,000 --> 00:51:01,160
Speaker 3: Well.

970
00:51:01,200 --> 00:51:04,640
Speaker 1: That was our live episode with Steve Eisman, recorded as

971
00:51:04,719 --> 00:51:08,600
Speaker 1: part of the Bloomberg invest Conference. I'm Tracy Alloway. You

972
00:51:08,640 --> 00:51:11,040
Speaker 1: can follow me on Twitter at Tracy Alloway.

973
00:51:11,200 --> 00:51:13,840
Speaker 2: And I'm Joe Wisenthal. You can follow me on Twitter

974
00:51:14,000 --> 00:51:17,480
Speaker 2: at the Stalwart. Follow our guest Steve Eisman on Twitter.

975
00:51:17,520 --> 00:51:19,239
Speaker 2: I didn't even realize he had been on there. He's

976
00:51:19,320 --> 00:51:23,520
Speaker 2: at Eisman Stephen. Follow our producers Carmen Rodriguez at Carmen

977
00:51:23,680 --> 00:51:26,439
Speaker 2: Arman and dash Ol Bennett at dashbot. And check out

978
00:51:26,440 --> 00:51:30,080
Speaker 2: all of our podcasts at Bloomberg under the handle at podcasts.

979
00:51:30,400 --> 00:51:33,080
Speaker 2: And for more Oddlots content, go to Bloomberg dot com

980
00:51:33,120 --> 00:51:36,200
Speaker 2: slash odlot, where we post transcripts. We have a blog

981
00:51:36,400 --> 00:51:39,520
Speaker 2: and weekly newsletter, and you can chat with fellow listeners

982
00:51:39,560 --> 00:51:44,600
Speaker 2: twenty four seven in our discord discord dot gg slash odlot.

983
00:51:44,719 --> 00:51:45,479
Speaker 2: It's a lot of fun.

984
00:51:45,760 --> 00:51:46,719
Speaker 3: Go there, check it out.

985
00:51:46,880 --> 00:52:09,640
Speaker 4: Thanks for listening in behead