WEBVTT - Hugh Hendry on the "Terrifying" Yen Move, and Risk of "Mad Max" Deflation 0:00:03.120 --> 0:00:16.360 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.720 --> 0:00:24.639 Hello and welcome to another episode of the Odd Lats podcast. 0:00:24.720 --> 0:00:27.040 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:27.400 --> 0:00:28.280 Racy, you know, it's. 0:00:28.120 --> 0:00:31.080 Sort of giving me a little bit of anxiety these days. 0:00:31.120 --> 0:00:34.640 Just I feel like that's a dangerous question to ask 0:00:34.680 --> 0:00:35.360 your coworker. 0:00:35.440 --> 0:00:38.159 But go on, I mean, it does seem right, It 0:00:38.200 --> 0:00:39.599 could be anything. It's not personal. 0:00:40.440 --> 0:00:46.559 It does seem like across many industries evs, etc. Like 0:00:47.360 --> 0:00:53.320 Chinese firms either because they're doing very well organizationally, technologically 0:00:53.600 --> 0:00:56.840 or whatever, or cost competitively or like really killing it 0:00:56.840 --> 0:00:59.560 in a lot of industries. And it is an American who, 0:00:59.680 --> 0:01:03.720 you know, on to the thriving US economy watching say, 0:01:03.840 --> 0:01:06.080 like on the same day, like the day after Boeing 0:01:06.160 --> 0:01:09.200 is experiencing some new investigation, and then the next day 0:01:09.240 --> 0:01:12.200 seeing some headline about the COMAC is like expanding its factories. 0:01:12.240 --> 0:01:13.920 It's like, like, what's been on here? 0:01:14.080 --> 0:01:15.920 Yeah, I know what you mean. I feel like evs 0:01:15.920 --> 0:01:18.440 are sort of a microcosm for I guess a lot 0:01:18.480 --> 0:01:21.600 of anxiety over the Chinese economy. So first of all, 0:01:21.640 --> 0:01:23.479 the idea that China is sort of going to leap 0:01:23.520 --> 0:01:27.360 frog America in one way or another in terms of technology, 0:01:27.560 --> 0:01:30.959 renewable technology as we've sort of seen in solar panels, 0:01:31.000 --> 0:01:33.840 but also the idea that to some extent, China has 0:01:33.880 --> 0:01:36.959 a lot of policy levers to pullah in a way 0:01:37.040 --> 0:01:42.600 that the US sometimes struggles with. So President Chichiping can 0:01:42.720 --> 0:01:45.720 go out and say we want China to make massive 0:01:46.240 --> 0:01:50.920 investments in things like evs or in things like semiconductors, 0:01:51.160 --> 0:01:54.280 and to some extent the entire economy sort of turns 0:01:54.280 --> 0:01:55.480 that way and starts doing it. 0:01:55.800 --> 0:01:58.440 And just to be clear, like, I think it's good 0:01:58.600 --> 0:02:01.200 that more countries around the world world are getting richer 0:02:01.200 --> 0:02:02.279 and more competitive and. 0:02:02.480 --> 0:02:03.400 Able to like. 0:02:03.560 --> 0:02:05.240 So I don't see the world as some sort of 0:02:05.560 --> 0:02:10.240 zero sum type thing. But if the US is embarking 0:02:10.400 --> 0:02:13.880 on this sort of renewed industrialization push, if we think 0:02:13.880 --> 0:02:16.400 it's valuable, if we think it's important that certain types 0:02:16.440 --> 0:02:19.440 of batteries and cars, etc. Are manufactured here, which we 0:02:19.480 --> 0:02:23.959 seem to have prioritized, also chips, then the question is like, well, 0:02:24.000 --> 0:02:27.960 will any of this be competitive globally cost competitive effective 0:02:28.200 --> 0:02:33.480 similar technology technology to what competitors overseas are doing. 0:02:33.520 --> 0:02:36.639 But also just to ease your anxiety a little bit, 0:02:36.680 --> 0:02:38.760 because that's what I'm here for. There are a lot 0:02:38.760 --> 0:02:41.919 of question marks around the direction of the Chinese economy 0:02:41.960 --> 0:02:45.840 at the moment. There's speculation over a un devaluation. Interest 0:02:45.919 --> 0:02:49.480 rates are already pretty low, You're struggling to boost economic growth. 0:02:49.520 --> 0:02:51.560 So you have these sort of twenty things happening at 0:02:51.560 --> 0:02:52.040 the same time. 0:02:52.160 --> 0:02:56.400 No, I, China unambiguously has its host of issues. That 0:02:56.560 --> 0:02:59.400 being said, you know, I do think that for as 0:02:59.440 --> 0:03:03.120 long as I been paying attention to markets, economic stuff 0:03:03.120 --> 0:03:05.640 like that, one of the overriding questions is like, well, 0:03:05.639 --> 0:03:07.560 when is the crash? When is the financial core? And 0:03:07.600 --> 0:03:10.440 it hasn't really happened. Like, There's been some issues now 0:03:10.480 --> 0:03:12.840 and obviously they sort of on purpose to some extent 0:03:12.840 --> 0:03:15.840 prick to the real estate bubble, but by and large 0:03:16.160 --> 0:03:18.280 some sort of like big Chinese disaster the likes of 0:03:18.320 --> 0:03:20.200 which many people have been expecting for a long time 0:03:20.200 --> 0:03:21.040 of not materialized. 0:03:21.120 --> 0:03:23.920 I think this goes back to the command economy policy 0:03:24.000 --> 0:03:27.160 lever idea, and if you have those types of levers, 0:03:27.600 --> 0:03:29.800 you can kind of pull them and buy yourself time. 0:03:29.919 --> 0:03:32.440 And that's what we've seen over and over again. You 0:03:32.480 --> 0:03:35.320 do have these disasters that happen in the Chinese economy, 0:03:35.840 --> 0:03:39.280 like the three red lines proposition for real estate that 0:03:39.400 --> 0:03:41.520 led to a housing crash. But on the other hand, 0:03:41.600 --> 0:03:44.520 you have sort of measures that can offset some of that, 0:03:44.720 --> 0:03:47.360 and I guess extend and pretend for a. 0:03:47.320 --> 0:03:48.520 While totally well. 0:03:48.560 --> 0:03:51.640 I am really excited about our guests. We've had him 0:03:51.680 --> 0:03:53.600 on the show once and before, although now he's in 0:03:53.800 --> 0:03:56.440 studio with us, which is always a lot more fun. 0:03:56.960 --> 0:04:00.160 Someone who has been covering this story for years. I 0:04:00.200 --> 0:04:02.280 first discovered him probably in two thousand and eight or 0:04:02.280 --> 0:04:04.680 two thousand and nine, watching his YouTube videos where he 0:04:04.760 --> 0:04:07.560 was in China looking at these gigantic I think the 0:04:07.680 --> 0:04:09.440 term at the time was called ghost cities, where there 0:04:09.480 --> 0:04:12.000 are tons of skyscrapers and apartments and at the time 0:04:12.400 --> 0:04:14.040 no one was ever living in them, and had sort 0:04:14.040 --> 0:04:17.160 of raised all these questions about misallocation, all these questures. Anyway, 0:04:17.680 --> 0:04:22.520 we are speaking to the acid capitalist himself, former hedge 0:04:22.520 --> 0:04:25.240 fund manager, now all around cool guy who lives in 0:04:25.279 --> 0:04:27.400 Saint Barts, but he graced us with his presence here 0:04:27.400 --> 0:04:29.760 in New York City. Hugh Hendry, thank you so much 0:04:29.800 --> 0:04:31.280 for coming back on odd Laws. 0:04:31.760 --> 0:04:33.919 It is an absolute pleasure and you know, for the 0:04:33.960 --> 0:04:35.760 folks at home, if you want to see the future, 0:04:35.800 --> 0:04:36.640 you got to get high. 0:04:37.080 --> 0:04:40.400 Yeah, why is that? Why? 0:04:40.560 --> 0:04:41.839 Let's just leave it there. 0:04:41.600 --> 0:04:43.640 Let's not leave it there. Why do you need to 0:04:43.640 --> 0:04:44.719 get high to see the future? 0:04:44.839 --> 0:04:48.320 What I mean, I like me. So what that means is, 0:04:48.720 --> 0:04:52.480 so I'm on a mission to try and give the 0:04:52.520 --> 0:04:57.520 indication that the science of finance should be left alone 0:04:57.600 --> 0:05:00.440 and we should actually embrace the arts of the future. Yeah, 0:05:00.839 --> 0:05:03.240 that is a creative flow, and you're not going to 0:05:03.279 --> 0:05:05.839 get there just by clocking up hours, wearing a suit 0:05:05.960 --> 0:05:08.600 and staring at a spreadsheet. Yeah, you've got to get 0:05:08.600 --> 0:05:10.440 a little bit kind of creative with it. And so 0:05:10.720 --> 0:05:12.920 I'm kind of trying to put out my career. I've 0:05:12.920 --> 0:05:15.920 got my book coming out later this summer, and it's 0:05:15.960 --> 0:05:19.000 it's a different path. There are many paths. Yeah, we 0:05:19.080 --> 0:05:21.479 only get presented the path with the guy. You know, 0:05:21.920 --> 0:05:24.200 they're always guys, Whereas there are all those guys, you know, 0:05:24.400 --> 0:05:27.240 and they got the ties and they don't see the future, 0:05:27.320 --> 0:05:28.880 but they get a lot of air time. 0:05:29.720 --> 0:05:32.080 For listeners who can't see you. Right now, I can 0:05:32.120 --> 0:05:34.960 confirm that he is not, in fact wearing a tie. 0:05:35.400 --> 0:05:37.920 But Hugh here's something I want to ask. I feel 0:05:37.960 --> 0:05:39.599 like you might have the answer to this. Have you 0:05:39.600 --> 0:05:44.839 ever stared and EXCEL spreadsheet while on acid? What happens? 0:05:46.040 --> 0:05:49.200 You certainly don't stare at spreadge. I've stared at walls. 0:05:50.400 --> 0:05:52.400 I mean at Saturday night, there was a wall that 0:05:52.440 --> 0:05:55.960 really came alive. So I'll give it back to you 0:05:56.000 --> 0:05:56.960 on that try that. 0:05:57.000 --> 0:06:00.160 You should try it like new patterns or like when 0:06:00.200 --> 0:06:01.200 you do you realize something. 0:06:01.279 --> 0:06:03.520 The next time you go back and look at that spreadsheet, 0:06:03.520 --> 0:06:05.479 you see something there that wasn't there before. 0:06:05.520 --> 0:06:07.760 I just don't look at the spreadshe some has to 0:06:07.800 --> 0:06:10.200 have someone else look. Someone has to look at the spreadsheets. 0:06:10.279 --> 0:06:13.440 So actually what I did was, I mean the wonderful 0:06:13.440 --> 0:06:16.839 Bloomberg and the graphics package. There was a function for 0:06:16.839 --> 0:06:18.680 game I can't remember the name now, but I would 0:06:18.680 --> 0:06:21.279 load like the S and P five hundred and I'd 0:06:21.279 --> 0:06:24.320 have my designated kind of the images in terms of 0:06:24.320 --> 0:06:27.480 the moving averages and what have you, and i'd sign 0:06:27.560 --> 0:06:30.080 maybe ten seconds stage tart because it's like five hundred, 0:06:30.400 --> 0:06:32.599 and I'd watch and I'd see patterns, and for me, 0:06:32.920 --> 0:06:35.760 I was becoming like a paranoid schizophrenic because the charts 0:06:36.000 --> 0:06:39.440 would create voices in my head, and with those voices 0:06:39.720 --> 0:06:43.040 and the pattern recognition, and they were spread and concentrated 0:06:43.080 --> 0:06:44.520 on particular industries. 0:06:44.800 --> 0:06:47.400 Did you ever see the movie Pi? Yeah, that's one 0:06:47.400 --> 0:06:48.400 of my Have you seen that trace? 0:06:48.400 --> 0:06:48.719 And I haven't. 0:06:48.760 --> 0:06:49.400 I've always wanted to. 0:06:49.400 --> 0:06:51.920 Do an episode on that, which is basically like they're 0:06:52.000 --> 0:06:54.560 an old like Darren Aronovski movie, or this guy like 0:06:54.839 --> 0:06:57.520 is convinced he kind of has like a psychic breakdown, 0:06:57.600 --> 0:06:59.960 but he's sort of convinced that he sees the entire 0:07:00.080 --> 0:07:03.719 hire pattern of the stock market and can predicted second 0:07:03.760 --> 0:07:07.880 to second through like numerology and kablo and Jewish mysticism 0:07:07.960 --> 0:07:08.440 and all this stuff. 0:07:08.480 --> 0:07:09.600 It's a great movie. 0:07:09.840 --> 0:07:12.720 When I have mental breakdowns, I just eat ice cream 0:07:12.720 --> 0:07:14.160 and can't get out of bed in the morning. But 0:07:14.240 --> 0:07:18.600 other people unlock the secrets of financial markets much more productive. 0:07:19.000 --> 0:07:23.120 Well, I got paranoid because I was risking other people's 0:07:23.160 --> 0:07:27.040 precious capital using these voices in my head. But the 0:07:27.120 --> 0:07:29.600 paranoid is a good thing, and that's when I had 0:07:29.600 --> 0:07:32.080 to call for the spreadsheets. So don't get me wrong. 0:07:32.240 --> 0:07:34.560 I listened to music and I was kind of separate 0:07:34.600 --> 0:07:37.680 from my team, but there was a fusion where I had, 0:07:37.720 --> 0:07:40.600 like the CIA, I had an intelligence operation, and I said, 0:07:40.640 --> 0:07:43.320 I'm crazy, challenge me. Let's see if we can find 0:07:43.320 --> 0:07:45.640 a synthesis. So I take a position. I take a 0:07:45.680 --> 0:07:48.280 small risk position. But when we got or if we 0:07:48.280 --> 0:07:50.840 could get confirmation, then we would build and we'd lean 0:07:50.880 --> 0:07:53.240 into it. So you know, I don't mean just to 0:07:53.240 --> 0:07:54.960 be a circus free. You know there's more too. 0:07:55.480 --> 0:07:58.000 So speaking of challenging yourself, one of the things you're 0:07:58.000 --> 0:08:00.880 doing right now on your sub stack is you are 0:08:00.920 --> 0:08:05.400 publishing all the old letters from your hedge fund Eclectica, 0:08:06.040 --> 0:08:10.560 And I'm curious, what was What's the goal of doing that? 0:08:10.680 --> 0:08:13.840 Is it sort of self reflection? Is it seeing how 0:08:13.880 --> 0:08:17.960 your investment vcs have stacked up, you know, two decades 0:08:18.080 --> 0:08:19.000 or whatever it is later? 0:08:19.800 --> 0:08:23.120 Yeah, I mean it is the diary of a long 0:08:23.200 --> 0:08:27.000 period of my life. And for I guess, you know, 0:08:27.480 --> 0:08:29.920 I take a different step perhaps from the rest of 0:08:29.960 --> 0:08:32.720 the community, and I gave everything. I mean, it became 0:08:32.800 --> 0:08:35.120 like a mouse trap. Like people liked it because it 0:08:35.160 --> 0:08:37.520 was a little bit zany. And then the challenges each 0:08:37.559 --> 0:08:40.040 month You've got to redesign the mouse trap. So I 0:08:40.080 --> 0:08:42.160 was always late. I had to be the very last 0:08:42.240 --> 0:08:44.640 day before I could actually get the thing written. But 0:08:44.800 --> 0:08:47.440 there's a lot happened over that period. We're talking about 0:08:47.440 --> 0:08:50.079 the period from October two thousand and two to October 0:08:50.400 --> 0:08:54.160 twenty seventeen. And you know, at leisure it comes at 0:08:54.280 --> 0:08:57.319 you know, my or my sub stock, and you get 0:08:57.360 --> 0:08:59.280 to see it and it resonates that I'm playing with 0:08:59.400 --> 0:09:02.880 language and you can then it's nice. It's like a 0:09:02.920 --> 0:09:05.240 game where you can actually I'm predicting. I'm trying to 0:09:05.240 --> 0:09:08.400 predict the future, and you can actually determine with your 0:09:08.440 --> 0:09:10.840 coffee if I got it right what my hit ratio 0:09:10.920 --> 0:09:12.880 is so and it becomes kind of fun. I hope. 0:09:13.280 --> 0:09:14.760 What have you learned about yourself? 0:09:14.840 --> 0:09:16.520 I mean when you go back and read those two 0:09:16.559 --> 0:09:19.240 thousand and two some of the over twenty years now, 0:09:19.760 --> 0:09:22.000 are there things that you look back at your own 0:09:22.120 --> 0:09:25.360 thinking you're like, oh, this was these ideas weren't fully formed, 0:09:25.600 --> 0:09:28.680 or things that you later changed your mind about or 0:09:28.679 --> 0:09:31.480 had new perspectives, Like what have you learned rereading your 0:09:31.520 --> 0:09:32.960 old hedge fund letters? 0:09:33.600 --> 0:09:36.839 Heavens? Yeah, what did I learn? I mean, the I 0:09:37.200 --> 0:09:40.720 tell you what I'm most proud about. It was a 0:09:40.720 --> 0:09:45.120 form of deduction which I had write at the beginning, 0:09:45.640 --> 0:09:48.760 because right at the beginning, this is before the Zukenbergs 0:09:48.960 --> 0:09:52.319 and you know, the Amazons, where you have a platform, 0:09:52.400 --> 0:09:54.839 it goes global and like you're the richest person on there, 0:09:55.000 --> 0:10:00.520 like Elon, etc. And back then, the highest return intellectual 0:10:00.559 --> 0:10:02.720 capital was to be a hedge fund manager, you know, 0:10:02.800 --> 0:10:06.000 like two and twenty if not more. And so by 0:10:06.040 --> 0:10:10.120 logical deduction, you got to think you're up against the 0:10:10.200 --> 0:10:12.560 smartest minds on the planet. And of course when you 0:10:12.600 --> 0:10:15.240 meet some of these guys and girls, maybe not, but 0:10:15.400 --> 0:10:17.800 you know, but it kind of stands up. Yeah, And 0:10:18.240 --> 0:10:20.880 I kind of concluded that it actually didn't make any 0:10:20.920 --> 0:10:25.440 sense to twine out smart the smartest people. Yeah, like 0:10:25.640 --> 0:10:28.880 you're going to fail, Okay, And so I reverse engineered 0:10:28.920 --> 0:10:31.480 and I said, why is it in this like musical 0:10:31.559 --> 0:10:34.120 chair game that we call the markets, why is it 0:10:34.160 --> 0:10:36.960 that it's not enough to be super super smart, Because 0:10:37.040 --> 0:10:39.200 let's face it, everyone out there and listening to this, 0:10:39.440 --> 0:10:43.199 everyone's got like a really high threshold level of intelligence. 0:10:43.440 --> 0:10:45.280 And so that's why, you know, we come back into 0:10:45.320 --> 0:10:48.960 my acid capitalist. Yeah brand, it sounds like cute and stuff, 0:10:49.040 --> 0:10:51.640 it actually had a function, you know, and you know 0:10:51.640 --> 0:10:54.040 when people would throw up their arms, So who were 0:10:54.040 --> 0:10:57.360 to fast forward into horror story of late two thousand 0:10:57.360 --> 0:11:00.959 and eight and Liman goes by and crabs and we've 0:11:01.000 --> 0:11:03.920 all seen the movie, you know, the Big Short. I 0:11:03.920 --> 0:11:05.800 mean I knew all those guys. I was the London 0:11:05.840 --> 0:11:08.800 operation of that. But yeah, when the suit guys throwing 0:11:08.840 --> 0:11:11.400 their hands up and they're saying, who would have guessed that? Well, 0:11:11.720 --> 0:11:14.360 littleal me. You know, I made fifty percent in the 0:11:14.400 --> 0:11:14.880 month of the two. 0:11:30.679 --> 0:11:32.480 So one thing we wanted to talk to you about 0:11:32.679 --> 0:11:35.720 is obviously China. And I feel like going back and 0:11:35.800 --> 0:11:40.480 reading over some of your own your old notes. Uh, directionally, 0:11:41.000 --> 0:11:44.320 you got the China call right, but timing has sort 0:11:44.360 --> 0:11:46.079 of been an issue here and maybe it goes back 0:11:46.120 --> 0:11:48.680 to those policy levers that we were talking about in 0:11:48.720 --> 0:11:52.040 the intro. But walk us through the China thesis in 0:11:52.080 --> 0:11:56.080 sort of the early mid two thousands and how it 0:11:56.160 --> 0:11:56.640 panned out. 0:11:56.840 --> 0:11:59.240 Yeah, I mean, I am the pig on the Chinese 0:11:59.320 --> 0:12:05.079 column and China. China has been has been the formative 0:12:05.480 --> 0:12:08.840 energy and force for my career and the career of 0:12:08.840 --> 0:12:12.000 all speculators, and really over the last forty years, the 0:12:12.080 --> 0:12:15.160 rise and rise of China has actually, I think been 0:12:15.200 --> 0:12:19.640 responsible for the what is now the preposterous rise and 0:12:19.720 --> 0:12:23.600 rise in asset prices. Not trying to explain that, but 0:12:23.760 --> 0:12:26.680 you know, back at the beginning, when I was listening 0:12:26.760 --> 0:12:28.960 to the she I was seeing the sheet music on 0:12:29.000 --> 0:12:32.079 my Bloomberg terminal, I was seeing the chart formations. What 0:12:32.200 --> 0:12:35.920 was I seeing? I was seeing the most ugly old 0:12:35.960 --> 0:12:39.480 industrial businesses that no one had wanted to own for 0:12:39.600 --> 0:12:43.120 twenty years. Everyone was in services and drugstocks, et cetera. 0:12:43.480 --> 0:12:48.040 I was seeing the worst businesses and they were coming alive. 0:12:48.760 --> 0:12:49.400 I trapped you. 0:12:49.440 --> 0:12:51.480 Through what's example that when you say that one of 0:12:51.520 --> 0:12:52.880 the worst businesses and they're coming. 0:12:52.760 --> 0:12:56.640 Up, Oh, they would be like smelters, Yeah, you know, 0:12:56.679 --> 0:13:01.200 like I mean, just insanely ugly business is. Yeah, they 0:13:01.400 --> 0:13:04.000 had not earned an appropriate return on capital for the 0:13:04.080 --> 0:13:07.680 longest time, and they were coming alive. And so I 0:13:07.760 --> 0:13:10.480 used a lot of like you know, like people on 0:13:10.480 --> 0:13:13.440 Twitter and stuff in Bloomberg they throw around charts and 0:13:13.440 --> 0:13:15.199 they look at a three month charm me one is 0:13:15.200 --> 0:13:17.680 a three month chart. I want ingredient show me everything. 0:13:17.720 --> 0:13:20.200 So I'm looking at forty years and I'm seeing things 0:13:20.200 --> 0:13:23.160 which stop falling and then One of the other key 0:13:23.640 --> 0:13:27.400 determinerts that I was using was things go right, stocks 0:13:27.559 --> 0:13:31.319 and risk positions. They go right relative to their peer 0:13:31.400 --> 0:13:34.760 group before they actually go right in absolute terms, and 0:13:34.800 --> 0:13:36.440 so you've got to lean in there. So I was 0:13:36.480 --> 0:13:39.400 beginning to say this immense relative performance. I mean, let 0:13:39.400 --> 0:13:42.160 me give you an example with regard so like another 0:13:42.320 --> 0:13:44.520 like really dumb thing, which is gold. I know that 0:13:44.720 --> 0:13:49.040 inflames people, but you know gold had had what twenty 0:13:49.080 --> 0:13:51.520 five horrid years. It peaked at eight hundred and ten 0:13:51.559 --> 0:13:54.480 bucks in nineteen eighty and it was like two hundred 0:13:54.480 --> 0:13:57.000 and seventy bucks by the time the British Treasury got 0:13:57.040 --> 0:13:59.719 through selling it at the very very bottom in two 0:13:59.679 --> 0:14:02.480 thousand in two thousand and two, who are they selling 0:14:02.520 --> 0:14:04.880 it to? I was buying it my first I got 0:14:04.920 --> 0:14:08.120 fifteen years of this blessed thing we call speculation, because 0:14:08.240 --> 0:14:11.200 my first calendar year I made fifty percent. I'm not glory. 0:14:11.559 --> 0:14:15.360 What I'm meaning by that is the failure rate in 0:14:15.400 --> 0:14:18.560 hedge funds. It's like a restaurant. Most restaurants fail, yeah, 0:14:18.600 --> 0:14:21.680 and the return to the survivor is really high. And 0:14:21.760 --> 0:14:23.600 I got happen as there was times, so I didn't 0:14:23.600 --> 0:14:26.720 think I was gonna make it, but I was absurdly 0:14:26.920 --> 0:14:29.360 long gold. And again, if you're like a wanna be 0:14:29.800 --> 0:14:33.000 new hedge fund manager, like I got it, tariously, you 0:14:33.000 --> 0:14:35.960 ain't gonna make it in your first year if you're 0:14:35.960 --> 0:14:38.120 not making money, and you ain't gonna make it if 0:14:38.160 --> 0:14:40.400 you're like making six or seven percent and trying to 0:14:40.400 --> 0:14:42.840 tell people your sharp ratio is really good. You're gonna 0:14:42.880 --> 0:14:46.440 make it if you find like and you concentrate and 0:14:46.440 --> 0:14:50.400 you take leverage in a rising asset class and it's volatile, 0:14:50.440 --> 0:14:53.320 and you you chase the dragon. And that was gold 0:14:53.400 --> 0:14:56.840 back then. And I'd got gold because gold did nothing, okay, 0:14:57.040 --> 0:15:01.200 but we'd had the NASDA crash stop markets had collapsed. 0:15:01.280 --> 0:15:03.320 Gold had done nothing, And so when you look at 0:15:03.360 --> 0:15:06.280 the relative performance of the two, Gold was saying, baby, 0:15:06.320 --> 0:15:09.720 I'm coming by, and you know that, and that was good. 0:15:09.840 --> 0:15:13.280 Why why was all this happening was happening because back then, 0:15:13.720 --> 0:15:18.280 China was the size today of the Turkish economy. Yeah, 0:15:18.560 --> 0:15:22.480 today is the size of the European economy. And the 0:15:22.520 --> 0:15:26.160 markets and my prices were telling me that this long 0:15:26.280 --> 0:15:30.200 journey was beginning to pick up base and their desire, 0:15:30.480 --> 0:15:33.760 you know, like they laid down more concrete, They used 0:15:33.760 --> 0:15:36.640 more steal, et cetera in like ten years than the 0:15:36.760 --> 0:15:39.440 US economy did in the twentieth century. You know, it 0:15:39.520 --> 0:15:41.200 was big, and that's what I was seeing, and I 0:15:41.280 --> 0:15:41.760 was long in. 0:15:42.120 --> 0:15:45.800 I understand, Like, Okay, you can point to specific commodities 0:15:46.160 --> 0:15:48.880 like obviously copper and some of these old industry you 0:15:48.880 --> 0:15:52.400 mentioned the smelters coming alive with the industrialization and rise 0:15:52.440 --> 0:15:54.760 of the Chinese economy. Zoom at a little bit further, 0:15:54.800 --> 0:15:57.240 because what you said is that China has been the 0:15:57.240 --> 0:16:00.000 biggest story in asset markets period and that the incredible 0:16:00.160 --> 0:16:03.720 rise and valuations and boom and ascid prices, it all, 0:16:03.960 --> 0:16:06.000 in your views sort of come back to China. 0:16:06.160 --> 0:16:06.920 How does that work? 0:16:07.320 --> 0:16:10.080 Because it's a cheap charter. Sorry to say it, but 0:16:10.680 --> 0:16:13.160 so you know, there's this thing that triff and dilemma. Yeah, 0:16:13.200 --> 0:16:15.840 you know, they don't have an independent munchro policy. They've 0:16:15.920 --> 0:16:19.240 kind of cut onto the coattails of the mighty US dollar, right, 0:16:19.440 --> 0:16:23.120 they have a dirty float, they have a close capital account. Now, 0:16:23.280 --> 0:16:27.520 so economics, which is a dire dollars subject, but economics 0:16:27.560 --> 0:16:31.320 at its heart is really the investigation and the study 0:16:31.640 --> 0:16:35.120 of how something in chaos kind of tries to return 0:16:35.440 --> 0:16:39.240 and find equilibrium and clear. Yeah and so, and it 0:16:39.240 --> 0:16:40.760 can be the opposite. It is an equilibrium and it's 0:16:40.760 --> 0:16:42.800 going to pull apart, you know. And that's like what 0:16:42.880 --> 0:16:46.840 people like me were kind of watching that and the rise. 0:16:46.920 --> 0:16:51.920 They've done amazing things. Yeah, they've industrialized. Yeah, and the 0:16:52.040 --> 0:16:55.840 reward in economics is you get richer for doing so 0:16:56.400 --> 0:16:59.360 the benefits. And they've not done that. They've not now 0:16:59.720 --> 0:17:03.800 and it's kind of like the frog, like boiling the frog. 0:17:03.840 --> 0:17:07.600 And like we've warmed up the Chinese citizens, we brought 0:17:07.600 --> 0:17:11.760 them into these conurbations. We've given them amazing factories. The 0:17:11.840 --> 0:17:14.560 rise in productivity from taking someone off a field and 0:17:14.600 --> 0:17:18.240 putting them in a semiconductive fab is insane. Yeah. And 0:17:18.320 --> 0:17:21.399 so they're getting paid like ten x what their grandparents 0:17:21.440 --> 0:17:23.920 got paid. They're like, hey, you know, this feels good. 0:17:24.160 --> 0:17:26.680 The thing is they should be getting paid more. And 0:17:27.160 --> 0:17:30.480 really where it should be represented is in the exchange rate. 0:17:30.560 --> 0:17:33.280 The remember, forgive me, I call it the red cabbage. 0:17:33.280 --> 0:17:36.080 You almost need a red cabbage. So the back when 0:17:36.119 --> 0:17:39.720 we had the NAFTA agreement with Mexico and Canada, they 0:17:39.920 --> 0:17:43.920 devalued their currency to six point three, and where's the 0:17:43.960 --> 0:17:46.600 currency today versus the dollar? So you needed six point 0:17:46.640 --> 0:17:49.840 three red cabbage and today you need like seven point three, 0:17:50.000 --> 0:17:52.320 which is to say you need more red cabbage. So 0:17:52.359 --> 0:17:56.000 they've got poorer now that that doesn't make sense, right, 0:17:56.040 --> 0:17:59.200 And then you were talking about your anxiety. I'm here, 0:17:59.240 --> 0:18:01.440 I've got a bill, I've had a chill pill for you. Okay, 0:18:01.560 --> 0:18:05.120 because again, right, so we what we're seeing in ev right, 0:18:05.320 --> 0:18:08.000 we saw it initially at the turn of this century. 0:18:08.000 --> 0:18:10.760 Again back to my like my letters and stuff. Biggest 0:18:10.760 --> 0:18:14.199 company in the world for a moment was Nokia. I 0:18:14.200 --> 0:18:17.160 mean those kids like listening saying Nokia was Nokia? Right? 0:18:17.280 --> 0:18:19.520 Nokia used to make televisions, and then they pivoted into 0:18:19.520 --> 0:18:21.840 mobile phones, right. And then Apple of course came ba 0:18:22.040 --> 0:18:24.399 at the turn of the century, biggest company on earth, 0:18:24.560 --> 0:18:28.119 and you had ericson and these guys control you, your G, 0:18:28.359 --> 0:18:31.240 your network, your five G, et cetera. Chinese came in 0:18:31.280 --> 0:18:33.840 and said, wow, that's kind of dope. We want that, okay, 0:18:33.920 --> 0:18:35.280 and now they own it and that's why you had 0:18:35.320 --> 0:18:35.560 all that. 0:18:35.800 --> 0:18:38.640 Yeah, how do you pronounce it's coming? 0:18:39.240 --> 0:18:41.960 It's coming, it's coming, right, Okay? And if you look 0:18:42.000 --> 0:18:45.880 at Ericson and Nochia today, those prices fell ninety five 0:18:45.920 --> 0:18:49.440 percent and just they've stayed in the graveyard. Okay. Then 0:18:49.480 --> 0:18:51.679 the Chinese came in, they said the same thing with solar, 0:18:52.119 --> 0:18:54.280 and now they've come in and they've said the same 0:18:54.320 --> 0:18:56.960 thing with ev What are they doing. They're saying, we 0:18:57.040 --> 0:19:01.200 don't need to make money like we allocate in America 0:19:01.280 --> 0:19:05.119 in the free world with the sharp jagged knife of 0:19:05.440 --> 0:19:07.520 you got to make it if you want to. We 0:19:07.560 --> 0:19:09.760 want to stay in the game. China doesn't. That's one 0:19:09.800 --> 0:19:14.919 of the implicit subsidies. Now, so where where do we 0:19:14.920 --> 0:19:16.280 see that? Where do we get that? I mean, maybe 0:19:16.280 --> 0:19:19.880 that's just cute, okay, But what China does, it's very 0:19:19.880 --> 0:19:23.280 good at creating GDP, but not wealth. So look at 0:19:23.280 --> 0:19:26.080 the stock market, right the stock market's flat flat for 0:19:26.119 --> 0:19:29.840 twenty five years, and the currencies is weakening. And that's 0:19:29.840 --> 0:19:32.359 the problem. And so what happens is with our savings model, 0:19:32.720 --> 0:19:35.200 all of it, all of it, and again, to maintain 0:19:35.280 --> 0:19:38.200 those advantages, they have to push all of their capital 0:19:38.480 --> 0:19:43.280 into risk free US treasuries. Okay, And unfortunately, only until 0:19:43.359 --> 0:19:47.960 the last two three years the US we were fiscally conservative, 0:19:48.400 --> 0:19:51.040 we should have been running huge deficits, but I was like, 0:19:51.080 --> 0:19:52.639 oh no, you can't do that. We should have been 0:19:52.680 --> 0:19:55.280 running huge deficits, and the Chinese would have funded the 0:19:55.359 --> 0:19:59.160 role out of the best like fast trains, the best education, 0:19:59.600 --> 0:20:02.879 the best healthcare, the best cities, you know, ships that 0:20:02.960 --> 0:20:06.120 don't crash into bridges and bring it all tumbling down. 0:20:06.440 --> 0:20:08.719 And instead, whenever we did something, we did a stupid 0:20:08.760 --> 0:20:11.919 tax cut. And right at the very end of this process, 0:20:12.160 --> 0:20:16.120 you're the Great Inflation Reduction Act, which is, hey, listen, 0:20:16.119 --> 0:20:19.320 we're going to pay you money to bring great technology 0:20:19.359 --> 0:20:22.639