1 00:00:11,160 --> 00:00:14,560 Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast. 2 00:00:14,640 --> 00:00:18,640 Speaker 1: I'm Tracy Allaway and I'm Joe. Wise, isn't all Joe. 3 00:00:18,720 --> 00:00:23,119 Speaker 1: I feel like it's been a pretty bumper year for 4 00:00:23,360 --> 00:00:27,440 Speaker 1: financial frauds and scandal, And maybe bumper year isn't the 5 00:00:27,520 --> 00:00:28,760 Speaker 1: right way to put it, but I feel like a 6 00:00:28,880 --> 00:00:31,440 Speaker 1: bunch of them have sort of been coming to light 7 00:00:31,520 --> 00:00:34,640 Speaker 1: over the past twelve months or so. Yeah, it's kind 8 00:00:34,640 --> 00:00:39,239 Speaker 1: of a weird time because the stock stock indusseries as 9 00:00:39,440 --> 00:00:43,560 Speaker 1: right now, they're all basically right at all time highs. 10 00:00:44,000 --> 00:00:45,959 Speaker 1: But we've handled a lot of I don't know if 11 00:00:46,000 --> 00:00:49,800 Speaker 1: like they're like per se frauds, but things going badly 12 00:00:50,159 --> 00:00:55,440 Speaker 1: blow ups, companies collapsing, hedge funds losing a ton of money. 13 00:00:56,520 --> 00:00:59,120 Speaker 1: It's kind of been a slightly weird time because things 14 00:00:59,120 --> 00:01:01,840 Speaker 1: that you don't necessary certily expect at the top, or 15 00:01:01,880 --> 00:01:05,080 Speaker 1: maybe you do. Basically a lot of things going south 16 00:01:05,480 --> 00:01:08,880 Speaker 1: generally speaking. Yeah, I mean normally it's like that Warren 17 00:01:08,880 --> 00:01:11,280 Speaker 1: Buffett quote where when the tide goes out, that's when 18 00:01:11,280 --> 00:01:14,600 Speaker 1: you see people swimming naked. But the tide, by no means, 19 00:01:14,640 --> 00:01:16,840 Speaker 1: has been going out lately. As you mentioned, we have 20 00:01:16,920 --> 00:01:20,839 Speaker 1: stocks pretty close to all time highs, we have ample liquidity. 21 00:01:20,880 --> 00:01:25,040 Speaker 1: It's a weird time for stresses in the financial system 22 00:01:25,080 --> 00:01:27,760 Speaker 1: like this to be coming to light. And yet we've 23 00:01:27,800 --> 00:01:30,600 Speaker 1: had quite a few. So most recently we had our 24 00:01:30,680 --> 00:01:36,520 Speaker 1: Chagos losing billions of dollars. Before that, we had Green 25 00:01:36,680 --> 00:01:40,200 Speaker 1: Sill blowing up, and then earlier we of course had 26 00:01:40,280 --> 00:01:43,600 Speaker 1: wire card as well. So, um, you know the rule 27 00:01:43,600 --> 00:01:46,640 Speaker 1: of three, we have three things happening. So we're going 28 00:01:46,680 --> 00:01:51,400 Speaker 1: to talk about that today with really a fraud or 29 00:01:51,880 --> 00:01:57,680 Speaker 1: scandal spotting extraordinaire. Yeah, I'm super excited about this. You know, 30 00:01:57,760 --> 00:02:00,440 Speaker 1: it's kind of like, you know, the food thing is, 31 00:02:00,480 --> 00:02:02,920 Speaker 1: we do seem to be like at the verge of 32 00:02:02,960 --> 00:02:05,800 Speaker 1: what like people think are like people are feeling optimistic, 33 00:02:05,880 --> 00:02:10,040 Speaker 1: Like growth expectations in the United States are like running 34 00:02:10,040 --> 00:02:13,480 Speaker 1: sky high. Like people aren't negative. But what does seem 35 00:02:13,520 --> 00:02:17,079 Speaker 1: to be clear is that, like after this incredible bill 36 00:02:17,200 --> 00:02:18,840 Speaker 1: run and whether you want to define it by the 37 00:02:18,919 --> 00:02:22,640 Speaker 1: last year or the last several years, there's just a 38 00:02:22,680 --> 00:02:26,320 Speaker 1: lot of like sloppy behavior that's sort of coming up 39 00:02:26,360 --> 00:02:28,480 Speaker 1: to the surface right now. Yeah, and so yes, I'm 40 00:02:28,520 --> 00:02:32,000 Speaker 1: very excited about this conversation. Yeah, Well, as I mentioned 41 00:02:32,000 --> 00:02:35,360 Speaker 1: we have a sloppy behavior expert coming on, so um, 42 00:02:35,520 --> 00:02:37,960 Speaker 1: we're gonna be talking to John Hampton. He's the co 43 00:02:38,000 --> 00:02:41,800 Speaker 1: founder and chief investment officer over at Bronte Capital Management. 44 00:02:41,919 --> 00:02:45,400 Speaker 1: Also a previous Odd Thoughts guest, and a man who 45 00:02:45,440 --> 00:02:49,560 Speaker 1: was also early on a bunch of things. Um, but 46 00:02:49,919 --> 00:02:53,480 Speaker 1: top of mind is probably wire Card, Valiant and Gosh, 47 00:02:53,520 --> 00:02:57,240 Speaker 1: I remember Pontenegro way back in two thousand nine. That 48 00:02:57,320 --> 00:03:00,239 Speaker 1: was an interesting one. So um, John, welcome to the show. 49 00:03:00,280 --> 00:03:03,600 Speaker 1: Thanks so much for coming back on. Glad to be here. 50 00:03:04,200 --> 00:03:08,520 Speaker 1: I was going to correct Tracy's Warren Buffett quote. Warrant 51 00:03:08,520 --> 00:03:11,560 Speaker 1: said it's only when the tide goes out that you 52 00:03:11,680 --> 00:03:15,400 Speaker 1: see swimming naked, and it was wrong. The tide isn't 53 00:03:15,400 --> 00:03:18,080 Speaker 1: out at all. I mean, market all time highs and 54 00:03:18,120 --> 00:03:21,600 Speaker 1: we're already seeing people that are swimming naked. It's kind 55 00:03:21,639 --> 00:03:25,080 Speaker 1: of a bizarre market. As a sort of very big picture, 56 00:03:25,760 --> 00:03:28,560 Speaker 1: It's been an expensive ball market for a long time, 57 00:03:29,600 --> 00:03:32,440 Speaker 1: but the period from sort of the middle of November 58 00:03:32,480 --> 00:03:36,240 Speaker 1: to the middle of February was a bizarre retail media 59 00:03:36,560 --> 00:03:41,200 Speaker 1: where the most retailed stocks possible tech stocks that have 60 00:03:41,280 --> 00:03:46,560 Speaker 1: no technology, just flat frauds, penny stocks, etcetera, or went vertical. 61 00:03:47,040 --> 00:03:49,680 Speaker 1: We discovered in the middle of that that some very 62 00:03:49,680 --> 00:03:53,080 Speaker 1: big money was also playing in them. So Archigos ber 63 00:03:53,160 --> 00:03:56,360 Speaker 1: Sex is a company that several people have alleged the fraud. 64 00:03:56,480 --> 00:03:59,280 Speaker 1: I've not done the work myself, but the arguments put 65 00:03:59,280 --> 00:04:01,520 Speaker 1: out by both US and Block at Muddy Waters and 66 00:04:01,520 --> 00:04:05,800 Speaker 1: A Stevenson Yang and J Capital alleging that g X 67 00:04:05,880 --> 00:04:09,080 Speaker 1: is a fraud looked very, very convincing to me. And 68 00:04:09,120 --> 00:04:12,560 Speaker 1: despite that, the stock sort of doubled immediately. The good 69 00:04:12,600 --> 00:04:15,760 Speaker 1: shortcase came out and we now know that there was 70 00:04:16,800 --> 00:04:20,080 Speaker 1: retail money, just retail money on a different scale and 71 00:04:20,120 --> 00:04:24,520 Speaker 1: a different style at Archiegoss chasing that up. That pressure 72 00:04:24,800 --> 00:04:30,400 Speaker 1: has eased off lately, we're starting to see the nonsense 73 00:04:30,440 --> 00:04:33,720 Speaker 1: stocks falling and often quite falling quite far. And if 74 00:04:33,720 --> 00:04:36,800 Speaker 1: you don't look at the red chatboards now, you see 75 00:04:36,800 --> 00:04:38,960 Speaker 1: that they're full of other warr and Buffett quotes, g 76 00:04:39,360 --> 00:04:42,800 Speaker 1: quotes about buying when there's blood in the streets. And 77 00:04:42,880 --> 00:04:46,479 Speaker 1: it's almost comical at the moment that retail investors could 78 00:04:46,520 --> 00:04:49,000 Speaker 1: be talking about blood in the streets at exactly at 79 00:04:49,000 --> 00:04:51,479 Speaker 1: the same time as the market is literally hitting new 80 00:04:51,560 --> 00:04:54,920 Speaker 1: eyes on a daily basis. Well, that change has changed 81 00:04:55,080 --> 00:04:58,679 Speaker 1: my life because I short nonsense stocks, and shorting nonsense 82 00:04:58,680 --> 00:05:00,880 Speaker 1: stocks gave me the worst three or four months of 83 00:05:00,920 --> 00:05:05,159 Speaker 1: my career in the Leader over the Christmas period, and 84 00:05:05,200 --> 00:05:09,080 Speaker 1: it has suddenly become exceedingly nice. We're making money on 85 00:05:09,120 --> 00:05:11,400 Speaker 1: both sidebook at the moment, we're making money on loans 86 00:05:11,440 --> 00:05:15,000 Speaker 1: because we're long udernary stocks in the markets making new eyes, 87 00:05:15,040 --> 00:05:17,440 Speaker 1: and we're making money on shorts that the nonsense stocks 88 00:05:17,440 --> 00:05:20,560 Speaker 1: are deep lading. And I don't know how long this 89 00:05:20,600 --> 00:05:24,200 Speaker 1: will last, but it's extremely pleasant having been extremely unpleasant. 90 00:05:24,800 --> 00:05:27,960 Speaker 1: We should also talk about our friends at Greenfel, and 91 00:05:27,960 --> 00:05:30,840 Speaker 1: I don't want to link Greenfill and Archer got other 92 00:05:30,920 --> 00:05:34,360 Speaker 1: than to say that the symptoms of the extremely difficult market. 93 00:05:35,560 --> 00:05:40,320 Speaker 1: But I've heard lots of Donson said about green Sill, 94 00:05:40,440 --> 00:05:44,000 Speaker 1: so I might start here right. What would you say then, 95 00:05:44,120 --> 00:05:46,560 Speaker 1: is that when you say started green Cell, what is 96 00:05:46,920 --> 00:05:50,040 Speaker 1: what is your your big picture thought on them? The 97 00:05:50,200 --> 00:05:54,480 Speaker 1: big picture thought is that old stuff is new again. 98 00:05:55,200 --> 00:05:58,720 Speaker 1: But without even realizing what is what is radical and 99 00:05:58,720 --> 00:06:03,000 Speaker 1: what is new here. Trade finance has been in the 100 00:06:03,080 --> 00:06:07,280 Speaker 1: nineteenth century was an enormous business and being in Australian. 101 00:06:07,320 --> 00:06:11,320 Speaker 1: I'll talk about it parochially. You, as a wool farmer 102 00:06:11,400 --> 00:06:14,440 Speaker 1: in Australia or for that matter, of cotton farmer in America, 103 00:06:14,520 --> 00:06:18,320 Speaker 1: would be selling your stuff to the looms in the UK, 104 00:06:18,640 --> 00:06:25,320 Speaker 1: where industrialization meant that they just had last loom fabric factories. 105 00:06:26,279 --> 00:06:29,520 Speaker 1: And for an Australian selling well to the UK, it 106 00:06:29,640 --> 00:06:33,760 Speaker 1: was six months to deliberate and another sort of six 107 00:06:33,800 --> 00:06:36,680 Speaker 1: months before you've got the message back that it was delivered, 108 00:06:37,480 --> 00:06:40,679 Speaker 1: and the farmer couldn't wait a year to get paid. 109 00:06:40,720 --> 00:06:43,479 Speaker 1: In fact, it's completely unreasonable to expect them to wait 110 00:06:43,520 --> 00:06:47,480 Speaker 1: a year to get paid. If you were a American 111 00:06:47,520 --> 00:06:50,920 Speaker 1: cotton farmer, was less way less than a year, but 112 00:06:50,960 --> 00:06:53,839 Speaker 1: it was still an unreasonable amount of time. And so 113 00:06:54,880 --> 00:06:58,880 Speaker 1: what you would have is these multinational banks that would effectively, 114 00:06:59,800 --> 00:07:02,359 Speaker 1: by either cotton in America or the will in Australia, 115 00:07:03,000 --> 00:07:06,640 Speaker 1: you finance the purchase of it, finance delivery and it 116 00:07:06,640 --> 00:07:10,160 Speaker 1: would all be settled up over time. And there were 117 00:07:10,240 --> 00:07:14,360 Speaker 1: three great trade finance banks around the world, and they 118 00:07:14,360 --> 00:07:18,240 Speaker 1: all came actually unsurprisingly with the British Empire, two of 119 00:07:18,360 --> 00:07:21,680 Speaker 1: whose names you will know to this day, and one 120 00:07:21,720 --> 00:07:25,240 Speaker 1: of the who's name has been consigned to history. The 121 00:07:25,280 --> 00:07:27,480 Speaker 1: two that you'll knows to this day of Hong Kong 122 00:07:27,480 --> 00:07:31,960 Speaker 1: and Shanghai Bank and Standard Charted, and they're both big 123 00:07:32,000 --> 00:07:36,360 Speaker 1: Asian banks, with HSBC being a big global bank headquartered 124 00:07:36,360 --> 00:07:38,920 Speaker 1: in London, and the idea of the bank whose name 125 00:07:39,000 --> 00:07:42,320 Speaker 1: is Hong Kong and Shanghai Banks would be headquartered in London. 126 00:07:43,240 --> 00:07:45,840 Speaker 1: There's its origins to the fact there was a giant 127 00:07:45,840 --> 00:07:50,160 Speaker 1: trade finance bank. The one that you won't know was 128 00:07:50,200 --> 00:07:54,960 Speaker 1: a bank called English Scottish and Australian and English, Scottish 129 00:07:54,960 --> 00:07:58,119 Speaker 1: and Australian would have once been mentioned in the same 130 00:07:58,200 --> 00:08:02,560 Speaker 1: breath as HSBC or Standard Charted and up until ninety 131 00:08:02,680 --> 00:08:08,160 Speaker 1: two it was headquartered in London as well. In two 132 00:08:08,320 --> 00:08:10,760 Speaker 1: or three, I don't remember the year it moved its 133 00:08:10,760 --> 00:08:14,440 Speaker 1: headquarters from London to Australia, renamed itself A and Z 134 00:08:14,680 --> 00:08:17,280 Speaker 1: Bank and is now one of the big four Australian banks. 135 00:08:17,720 --> 00:08:22,520 Speaker 1: It also sold its operations in the Middle East in India, 136 00:08:22,640 --> 00:08:24,600 Speaker 1: so it used to own a giant in the Middle 137 00:08:24,600 --> 00:08:27,760 Speaker 1: East in India called Greenlands. But when I worked for 138 00:08:27,800 --> 00:08:31,680 Speaker 1: aand DEAD Bank, and this was in the late nineties 139 00:08:32,280 --> 00:08:35,360 Speaker 1: and Z banks still had the residual the giant trade 140 00:08:35,440 --> 00:08:39,640 Speaker 1: finance operation, and ZAID Bank alone amongst the Australian banks 141 00:08:39,679 --> 00:08:42,600 Speaker 1: had branches in over two hundred countries, which is pretty 142 00:08:42,600 --> 00:08:45,640 Speaker 1: well every country in the world. And that sort of 143 00:08:45,800 --> 00:08:50,280 Speaker 1: thing was the residual of a trade finance operation. Now, 144 00:08:50,320 --> 00:08:55,360 Speaker 1: with modern communications and but delivery at trade finance has 145 00:08:55,400 --> 00:08:59,360 Speaker 1: gone from being a very very big and very important 146 00:08:59,400 --> 00:09:02,599 Speaker 1: business to a small business. And the idea that a 147 00:09:02,960 --> 00:09:05,720 Speaker 1: SBC was at ore A and z was at a 148 00:09:05,800 --> 00:09:10,040 Speaker 1: car to trade finance business now looks a little bit absurd, 149 00:09:10,120 --> 00:09:13,280 Speaker 1: but that's what it once was, and now a typical 150 00:09:13,360 --> 00:09:17,800 Speaker 1: thing that might be involved in trade finances. I know 151 00:09:17,880 --> 00:09:22,719 Speaker 1: a guy who strips down cars for recycling. He has 152 00:09:22,760 --> 00:09:25,200 Speaker 1: a huge car yard at the outer part of Sydney 153 00:09:25,800 --> 00:09:28,720 Speaker 1: and one of the businesses is stripping down alternators, which 154 00:09:28,720 --> 00:09:31,040 Speaker 1: are a sort of electric spinning parts of the car, 155 00:09:31,040 --> 00:09:34,160 Speaker 1: and they contain about a kilo of copper, maybe a 156 00:09:34,240 --> 00:09:36,640 Speaker 1: kilo and a half, which is I guess five dollars 157 00:09:36,720 --> 00:09:39,040 Speaker 1: US worth of copper that somebody has to unwind it. 158 00:09:40,120 --> 00:09:42,800 Speaker 1: And the process is that the alternators get stripped down. 159 00:09:42,840 --> 00:09:46,680 Speaker 1: In Australia then shifts to a low wage country in 160 00:09:46,720 --> 00:09:50,040 Speaker 1: this case, probably Indonesia, but if it's the United States, 161 00:09:50,040 --> 00:09:55,240 Speaker 1: almost certainly Mexico. The things have disassembled, some are reconditioned, 162 00:09:55,520 --> 00:09:58,199 Speaker 1: some are just stripped down to their copper, and then 163 00:09:58,200 --> 00:10:00,480 Speaker 1: the copper is sent to smelters pro probably in a 164 00:10:00,520 --> 00:10:04,400 Speaker 1: country that has historically been tolerant of pollution, but these 165 00:10:04,480 --> 00:10:09,000 Speaker 1: days mostly China, and the process is shipping millions and 166 00:10:09,080 --> 00:10:12,520 Speaker 1: millions of dollars of copper around the world. Because the 167 00:10:12,559 --> 00:10:16,199 Speaker 1: people in the low wage countries can't afford to finance 168 00:10:16,240 --> 00:10:19,160 Speaker 1: those millions of dollars of copper. There's almost variably a 169 00:10:19,200 --> 00:10:22,640 Speaker 1: trade finance company in there. And the typical sort of 170 00:10:22,760 --> 00:10:29,120 Speaker 1: risk that you might be taking is the ultimately the 171 00:10:29,200 --> 00:10:31,760 Speaker 1: recycled bits of metal are going to be sent to 172 00:10:31,880 --> 00:10:36,480 Speaker 1: say thirty or forty different recycling yards in China, and 173 00:10:36,720 --> 00:10:39,960 Speaker 1: those recycling yards you've got a credit risk against them, 174 00:10:40,240 --> 00:10:43,760 Speaker 1: and you know the two ways of solving that that 175 00:10:43,840 --> 00:10:46,040 Speaker 1: they buy the copper upfront, or it's some kind of 176 00:10:46,080 --> 00:10:50,520 Speaker 1: cash on delivery system, and the alternative way of financing 177 00:10:50,520 --> 00:10:53,280 Speaker 1: it is that you have some kind of experts in 178 00:10:53,360 --> 00:10:56,960 Speaker 1: trade finance who knows that those Chinese that's are good 179 00:10:57,000 --> 00:11:01,120 Speaker 1: for it. And the idea that you have some experts 180 00:11:01,160 --> 00:11:05,480 Speaker 1: that knows which hundred and fifty Chinese recycling, Yeah, it's 181 00:11:05,480 --> 00:11:07,360 Speaker 1: are good for the money in the West is a 182 00:11:07,400 --> 00:11:13,040 Speaker 1: pretty difficult idea. And I'm not an expert in broad 183 00:11:13,080 --> 00:11:15,320 Speaker 1: detection in China, but I would have no way of 184 00:11:15,320 --> 00:11:20,360 Speaker 1: credit prossessing a hundred and fifty copy yards. Now there 185 00:11:20,360 --> 00:11:25,920 Speaker 1: are businesses ensuring this, and the classic business insuring this 186 00:11:26,200 --> 00:11:30,720 Speaker 1: is a French business could Boiler Hermes and I was 187 00:11:30,760 --> 00:11:33,320 Speaker 1: talking to a Frenchman who pronounced it Euler, so I'll 188 00:11:33,320 --> 00:11:36,560 Speaker 1: have to go with Youula. But Uler does sort of 189 00:11:36,559 --> 00:11:41,079 Speaker 1: trade finance ensure the insurance, and it's a pretty reputable 190 00:11:41,120 --> 00:11:43,440 Speaker 1: player and it's been around for a very long time, 191 00:11:43,520 --> 00:11:47,000 Speaker 1: but it's not an enormous business. And then along comes 192 00:11:47,440 --> 00:11:50,280 Speaker 1: other insurance companies wanting to get in on the act. 193 00:11:51,240 --> 00:11:54,839 Speaker 1: And I'm thinking of my local one Insurance Australia group 194 00:11:54,880 --> 00:11:58,560 Speaker 1: who did a joint venture with Tokio with a tide 195 00:11:58,720 --> 00:12:03,520 Speaker 1: broker in Australia. At they are ensuring this sort of stuff. 196 00:12:03,520 --> 00:12:06,200 Speaker 1: And the first time I actually came across them was 197 00:12:06,280 --> 00:12:08,840 Speaker 1: when they were ensuring a whole of copy yards in 198 00:12:09,000 --> 00:12:13,120 Speaker 1: China and they devolved simultaneously. So what what what was 199 00:12:13,200 --> 00:12:18,360 Speaker 1: really going on was that copper was being sold, and 200 00:12:18,360 --> 00:12:22,520 Speaker 1: it was metal recycling copper sort of alternative stuff being 201 00:12:22,559 --> 00:12:27,280 Speaker 1: sold to recycling companies in China who were taking delivery 202 00:12:27,280 --> 00:12:29,640 Speaker 1: and paying a little later. And it might have been 203 00:12:29,720 --> 00:12:33,000 Speaker 1: fifty million dollars of copper in a shipment, and suddenly 204 00:12:33,040 --> 00:12:35,800 Speaker 1: these guys ordered sort of three million and they're at 205 00:12:35,800 --> 00:12:39,080 Speaker 1: thirty of them. And I'm surprised if the scandal has 206 00:12:39,120 --> 00:12:41,600 Speaker 1: some sort of hit. But it's one of the bits 207 00:12:41,679 --> 00:12:49,640 Speaker 1: that sits inside this insurance chain on trade finance. Now 208 00:12:49,800 --> 00:12:53,839 Speaker 1: that insurance trade on trade finance included i AG, it 209 00:12:53,920 --> 00:12:58,760 Speaker 1: included Tokeyo and Marine is also included the Australian, the Australian, 210 00:12:58,840 --> 00:13:05,120 Speaker 1: but London based UM Greenfield. And the kindest way you 211 00:13:05,200 --> 00:13:08,559 Speaker 1: can say this is that they walked into a shrinking 212 00:13:08,600 --> 00:13:12,960 Speaker 1: business and they grew it like crazy where all the 213 00:13:13,000 --> 00:13:17,560 Speaker 1: counterparties are obscure. Now I'm an old sort of guy, 214 00:13:17,600 --> 00:13:20,240 Speaker 1: and the most scary thing in the world to invest 215 00:13:20,280 --> 00:13:25,080 Speaker 1: in is a fast growing financial because anybody can grow 216 00:13:25,080 --> 00:13:28,640 Speaker 1: a financial fast by just taking more risks. You want 217 00:13:28,640 --> 00:13:31,040 Speaker 1: to grow a sub fright financial fast, you just stand 218 00:13:31,080 --> 00:13:32,880 Speaker 1: up on the New York subway and say, does anyone 219 00:13:32,960 --> 00:13:35,640 Speaker 1: want to borrow a thousand dollars and waigh the money. 220 00:13:36,640 --> 00:13:39,040 Speaker 1: You have a very large loan book. Very fast, it 221 00:13:39,080 --> 00:13:44,560 Speaker 1: won't be very good, right, And essentially the kindest version 222 00:13:44,800 --> 00:13:48,079 Speaker 1: of this is this with the trade finance version of 223 00:13:48,160 --> 00:13:53,199 Speaker 1: the same. Now, at some point it went from being 224 00:13:53,880 --> 00:13:58,840 Speaker 1: the trade finance version of that to an unindoctorated pondsy 225 00:14:00,640 --> 00:14:05,760 Speaker 1: and I don't know what that point was. But if 226 00:14:05,760 --> 00:14:09,080 Speaker 1: you're a financial institution that has lost a lot of money, 227 00:14:10,480 --> 00:14:14,320 Speaker 1: there are two parts. One is to admit it and 228 00:14:14,400 --> 00:14:16,319 Speaker 1: the other one which has put the foot flap to 229 00:14:16,360 --> 00:14:22,640 Speaker 1: the floorboards and hope to grow backfast. And somewhere along 230 00:14:22,640 --> 00:14:27,680 Speaker 1: the line, Green Sill became that. And then there were 231 00:14:27,720 --> 00:14:31,640 Speaker 1: a bunch of people who needed money. And one of 232 00:14:31,640 --> 00:14:35,600 Speaker 1: the interesting things in this world is that the people 233 00:14:35,640 --> 00:14:40,720 Speaker 1: who really really really need money have the net of 234 00:14:40,880 --> 00:14:44,560 Speaker 1: finding the people who really really really need to lend it. Right. 235 00:14:44,680 --> 00:14:48,200 Speaker 1: So you know, if I were sitting down, if I 236 00:14:48,240 --> 00:14:50,600 Speaker 1: were sitting on the New York subway waving around, anyone 237 00:14:50,680 --> 00:14:54,840 Speaker 1: want to borrow a thousand dollars? I get a fair 238 00:14:54,880 --> 00:14:57,440 Speaker 1: few takers the first day, but by the fifth day, 239 00:14:57,800 --> 00:15:01,160 Speaker 1: what would be happening would be everybody who is a 240 00:15:01,240 --> 00:15:07,000 Speaker 1: completely desperate degenerate at my doorstep, right. And so somewhere 241 00:15:07,040 --> 00:15:09,320 Speaker 1: along the lines they went into they got to that 242 00:15:09,400 --> 00:15:13,840 Speaker 1: point and attracted the most degenerate gambler in the market. 243 00:15:14,480 --> 00:15:17,600 Speaker 1: And the most degenerate gambler in the market has blown up. Yes, 244 00:15:17,680 --> 00:15:20,840 Speaker 1: its name is soft Bank. John, Can I just press 245 00:15:20,880 --> 00:15:22,920 Speaker 1: you on one thing about soft Bank because I wanted 246 00:15:22,920 --> 00:15:25,480 Speaker 1: to ask you about this. So soft Bank's vision fund 247 00:15:25,640 --> 00:15:29,600 Speaker 1: invested in green Cell. And when you look at something 248 00:15:29,640 --> 00:15:32,760 Speaker 1: like green Cell, you know it's basically trade finance or 249 00:15:32,800 --> 00:15:36,200 Speaker 1: cash advance. It doesn't strike me as a company with 250 00:15:36,240 --> 00:15:41,760 Speaker 1: a particularly strong technology angle or pitch, Like, what exactly 251 00:15:41,800 --> 00:15:44,480 Speaker 1: do you think the attraction was there? Entirely honest, It 252 00:15:44,560 --> 00:15:48,240 Speaker 1: had no technology pitch, but it told everybody had had 253 00:15:48,240 --> 00:15:50,720 Speaker 1: a technology which, right, which is a good way of 254 00:15:50,800 --> 00:15:57,880 Speaker 1: raising money. Um, so specialty financed with like a tech valuation? Yes, yeah, 255 00:15:59,320 --> 00:16:02,000 Speaker 1: The way to get valuation for a bullshit insurer in 256 00:16:02,000 --> 00:16:05,480 Speaker 1: the US is to call it thinking. Right. There are 257 00:16:05,520 --> 00:16:09,600 Speaker 1: several fin techs bacts which are just completely bad bullshit 258 00:16:09,680 --> 00:16:14,520 Speaker 1: traditional insurers, but they are the most highly valued insurance 259 00:16:14,600 --> 00:16:19,600 Speaker 1: companies in the world. The way that you get a 260 00:16:19,680 --> 00:16:22,680 Speaker 1: high valuation for a junkie lender is to call it tech. 261 00:16:23,800 --> 00:16:26,960 Speaker 1: But that that would be the kind interpretation for soft banks, 262 00:16:27,040 --> 00:16:31,200 Speaker 1: but not kind interpretation for soft bank was that that 263 00:16:31,440 --> 00:16:37,640 Speaker 1: capital that was invested by soft bank in Greenfield leave 264 00:16:37,720 --> 00:16:40,080 Speaker 1: it up and then was invested by green sill in 265 00:16:40,160 --> 00:16:47,120 Speaker 1: soft bank entity. So there's a company for Viewing being 266 00:16:47,160 --> 00:16:52,000 Speaker 1: an example. And Viewing is a legitimates attempt at electro 267 00:16:52,160 --> 00:16:57,720 Speaker 1: chromatic pimmable windows. You have a skyscraper where when you 268 00:16:57,760 --> 00:17:00,280 Speaker 1: need a lot of heathen you you have we dont 269 00:17:00,320 --> 00:17:02,960 Speaker 1: being completely transparent, and when you don't need a lot 270 00:17:03,000 --> 00:17:06,080 Speaker 1: of heat in you make the windows quite dark because 271 00:17:06,119 --> 00:17:08,919 Speaker 1: the sun is shining on them. And we see that 272 00:17:08,960 --> 00:17:13,080 Speaker 1: with with chromatic glasses that you can do it much 273 00:17:13,160 --> 00:17:16,960 Speaker 1: much better if you make the windows in some sense 274 00:17:17,000 --> 00:17:22,320 Speaker 1: electro chromatic. There's a legitimate s g idea. But Viewing 275 00:17:22,560 --> 00:17:25,040 Speaker 1: was a soft bank company of the good reason I 276 00:17:25,080 --> 00:17:29,080 Speaker 1: suspect there was a legitimate tech idea, and to be 277 00:17:29,200 --> 00:17:33,800 Speaker 1: mild with a disaster. And if you go look at 278 00:17:33,920 --> 00:17:38,200 Speaker 1: glass door on Viewing and you go through the reviews 279 00:17:38,280 --> 00:17:41,080 Speaker 1: on Viewing in two thousand and eighteen. The reviews are 280 00:17:41,119 --> 00:17:44,880 Speaker 1: along the lines of, well, you know, on the plus side, 281 00:17:44,920 --> 00:17:47,879 Speaker 1: there's a lot of room in the cart. And Viewing 282 00:17:48,280 --> 00:17:53,960 Speaker 1: was absolutely a death store. It's cumulative revenue fifteen million stumulants, 283 00:17:53,960 --> 00:17:57,240 Speaker 1: spending hundreds and hundreds and it just didn't seem to 284 00:17:57,280 --> 00:17:59,919 Speaker 1: get traction. I don't know whether it didn't get traction 285 00:18:00,000 --> 00:18:02,840 Speaker 1: because the product doesn't work, or the product was badly 286 00:18:02,880 --> 00:18:07,080 Speaker 1: marketed the genuine or that the cost structures just didn't work. 287 00:18:07,160 --> 00:18:11,280 Speaker 1: I have no idea, right, but this thing was absolutely 288 00:18:11,359 --> 00:18:16,399 Speaker 1: clearly on the way out past and then Greenfield lenter 289 00:18:16,640 --> 00:18:20,560 Speaker 1: four hundred million dollars and called it trade finance. Now, 290 00:18:20,600 --> 00:18:23,600 Speaker 1: it can't be trade finance because Viewing hasn't sold anything, 291 00:18:23,640 --> 00:18:28,120 Speaker 1: so it's receivables to factor. It's just an unsecured lines 292 00:18:28,160 --> 00:18:33,880 Speaker 1: to a soft banking entity about four millions, which doesn't 293 00:18:33,920 --> 00:18:36,680 Speaker 1: make any sense. Now, in this case, there's a good 294 00:18:36,760 --> 00:18:39,399 Speaker 1: chance that soft baker might get the money back because 295 00:18:39,480 --> 00:18:43,119 Speaker 1: Viewing Viewing looks like it might be a bit better 296 00:18:44,000 --> 00:18:48,960 Speaker 1: now and it might get specked. But to pretend that 297 00:18:49,000 --> 00:18:51,920 Speaker 1: this was trade finance at the end, and that they 298 00:18:51,920 --> 00:18:54,879 Speaker 1: were provided and softmak must have known that this was 299 00:18:54,920 --> 00:18:58,160 Speaker 1: not technologically driven trade finances. They were lending the softmare 300 00:18:58,200 --> 00:19:03,120 Speaker 1: controlled entities. At the end, this was just a ponzi 301 00:19:03,880 --> 00:19:07,399 Speaker 1: that was taking money from any books end with whether 302 00:19:07,480 --> 00:19:12,160 Speaker 1: that anybody included somethingly or unknowingly, some bank would clearly 303 00:19:12,160 --> 00:19:32,160 Speaker 1: a beneficiary. So your contention is that you know what, 304 00:19:32,160 --> 00:19:36,480 Speaker 1: what was ostensibly some form of trade factoring just sorry, 305 00:19:36,760 --> 00:19:43,200 Speaker 1: trade finance just became sort of completely reckless lending to anyone. Well, 306 00:19:44,000 --> 00:19:47,520 Speaker 1: what did you like? This was Greenstell was a private company, 307 00:19:48,000 --> 00:19:51,280 Speaker 1: so what. But but you were early on along with 308 00:19:51,320 --> 00:19:53,760 Speaker 1: others and sort of I don't know, blowing the whistle 309 00:19:53,840 --> 00:19:57,119 Speaker 1: is the right term, but sort of calling out their practices. 310 00:19:57,480 --> 00:20:02,159 Speaker 1: What were the hints from the outside early on that 311 00:20:02,359 --> 00:20:05,800 Speaker 1: something was a mess. In this case, the idea that 312 00:20:05,880 --> 00:20:08,360 Speaker 1: trade finance could be ten x is because it used 313 00:20:08,400 --> 00:20:11,800 Speaker 1: to be. It is just an idea that flies in 314 00:20:11,840 --> 00:20:15,040 Speaker 1: the face of history. There's a very very good reason 315 00:20:15,119 --> 00:20:18,240 Speaker 1: why trade finances are shrinking business on d and fifty 316 00:20:18,280 --> 00:20:21,240 Speaker 1: year basis right, and the very very good reason is 317 00:20:21,359 --> 00:20:26,800 Speaker 1: better communications, better finance, and better transport. Right, all of 318 00:20:26,840 --> 00:20:29,720 Speaker 1: those and the bits that are left are the bits 319 00:20:29,760 --> 00:20:33,720 Speaker 1: that are by definition a little risky. Financing stuff sold 320 00:20:33,720 --> 00:20:37,320 Speaker 1: to retailers is risky. We know that because retailers default. 321 00:20:37,359 --> 00:20:40,800 Speaker 1: And if you look at oilers oilers results, oilers results 322 00:20:40,840 --> 00:20:45,000 Speaker 1: go up and down with retell, right, But the other things, 323 00:20:45,080 --> 00:20:48,720 Speaker 1: this whole sort of mental commodities change chain, where you're 324 00:20:48,800 --> 00:20:53,080 Speaker 1: financing to an unidentifiable company in China. The idea that 325 00:20:53,119 --> 00:20:56,400 Speaker 1: this could be a ten times bigger business was sort 326 00:20:56,400 --> 00:20:59,359 Speaker 1: of an asthma. I have to say that I'm completely 327 00:20:59,400 --> 00:21:04,719 Speaker 1: reliant here on. I became very reliant here on certain journalists, 328 00:21:05,080 --> 00:21:10,960 Speaker 1: the ft journalists, Twitter Handles, Bonde, Robert Smith, and more 329 00:21:11,000 --> 00:21:15,600 Speaker 1: importantly the Austry journalist, journalist Duncan Mayven and Don't even 330 00:21:15,680 --> 00:21:19,320 Speaker 1: sent me some questions about Insurance Australia Group, and I 331 00:21:19,359 --> 00:21:23,920 Speaker 1: put two and two together and realized that Insurance Australia 332 00:21:23,960 --> 00:21:27,840 Speaker 1: Group might be ensuring vast amounts of stuff on which 333 00:21:27,840 --> 00:21:32,320 Speaker 1: it was likely to default. And I sent a quick 334 00:21:32,440 --> 00:21:36,520 Speaker 1: about a page and a half letter to the local regulators. 335 00:21:36,520 --> 00:21:38,840 Speaker 1: And in this case, the local regulator is somebody who 336 00:21:38,920 --> 00:21:41,439 Speaker 1: used to sit five chairs away from me in the 337 00:21:41,480 --> 00:21:44,200 Speaker 1: Federal Treasury when I was a very junior employee in 338 00:21:44,240 --> 00:21:46,880 Speaker 1: the Federal treasure and he's now the sort of head 339 00:21:46,920 --> 00:21:51,400 Speaker 1: insurance regulator in Australia. So we sort of knew each other, 340 00:21:51,480 --> 00:21:55,639 Speaker 1: and I always I put an editor adversion letter on 341 00:21:55,760 --> 00:21:59,960 Speaker 1: my block. But to say that I called the whisk 342 00:22:00,000 --> 00:22:03,640 Speaker 1: and learn any real sense overstates my role. The real 343 00:22:03,800 --> 00:22:08,000 Speaker 1: the real whistle calls here were Duncan Duncan Maven Robert Smith, 344 00:22:08,160 --> 00:22:11,840 Speaker 1: who were both who were both fantastic journalists and certainly 345 00:22:11,840 --> 00:22:16,239 Speaker 1: worth subscribing to their papers for I looked at it 346 00:22:16,240 --> 00:22:18,600 Speaker 1: and knew they were right. And I knew they were 347 00:22:18,720 --> 00:22:22,919 Speaker 1: right because the idea of a very fast trade by trade, 348 00:22:23,160 --> 00:22:28,600 Speaker 1: fast growing trade finance company just didn't make any logical sense. Now, 349 00:22:28,920 --> 00:22:34,639 Speaker 1: the second one of these blow ups, um I didn't 350 00:22:34,640 --> 00:22:40,399 Speaker 1: mention Credit Swiss here, but Duncan Maven had certainly asked 351 00:22:40,400 --> 00:22:44,240 Speaker 1: several questions of Credit Swiss because Credit Swiss had this 352 00:22:44,520 --> 00:22:48,199 Speaker 1: fund that was buying all the green silk paper, and 353 00:22:48,200 --> 00:22:51,480 Speaker 1: it was selling the green silk paper to its clients 354 00:22:51,480 --> 00:22:53,439 Speaker 1: on the basis that it was double A rated and 355 00:22:53,480 --> 00:22:59,080 Speaker 1: insured and either it is insured or it's not and 356 00:22:59,480 --> 00:23:03,960 Speaker 1: it is ensure it. Then Insurance Australia Group and Copy 357 00:23:04,040 --> 00:23:07,320 Speaker 1: of Marine in some order are going to take billions 358 00:23:07,320 --> 00:23:11,480 Speaker 1: of dollars of losses, and if it's not ensured, then 359 00:23:11,520 --> 00:23:14,800 Speaker 1: at first glance, the clients that swiss are going to 360 00:23:14,840 --> 00:23:19,120 Speaker 1: take billions of dollars at losses. But we know from 361 00:23:19,160 --> 00:23:22,760 Speaker 1: the last cycle that if you miss self wrapped clients, 362 00:23:22,800 --> 00:23:27,560 Speaker 1: just straight out miss sell, then those losses will slip 363 00:23:27,640 --> 00:23:30,879 Speaker 1: back to you and you can pull out any of 364 00:23:30,960 --> 00:23:34,520 Speaker 1: the marketing documents to this fun It was absolutely clear 365 00:23:34,560 --> 00:23:38,119 Speaker 1: it was pitched to the investors as double A rated 366 00:23:38,160 --> 00:23:42,680 Speaker 1: insure it and as far as I can tell, there 367 00:23:42,760 --> 00:23:46,360 Speaker 1: was no due diligence done by credits with around those statements. 368 00:23:47,280 --> 00:23:51,480 Speaker 1: And it's absolutely clear to me the credits with if 369 00:23:51,520 --> 00:23:54,639 Speaker 1: it can't collect from the insurers, is going having to 370 00:23:54,640 --> 00:23:58,080 Speaker 1: pay the clients out there at the moment saying well 371 00:23:58,119 --> 00:24:01,600 Speaker 1: that the problems our clients problem, which is, you know, 372 00:24:01,920 --> 00:24:04,960 Speaker 1: a pretty self destructive thing to do, because you know, 373 00:24:05,000 --> 00:24:08,159 Speaker 1: if your credits with your pitch to the world is 374 00:24:08,200 --> 00:24:12,160 Speaker 1: that you know, we're a good home to say high 375 00:24:12,240 --> 00:24:17,359 Speaker 1: networth people too have as the sort of generalized financial advisor, 376 00:24:18,240 --> 00:24:20,520 Speaker 1: and then when the ship hits the band, okay, high 377 00:24:20,560 --> 00:24:23,280 Speaker 1: networth people were going to screw you. You know, Screwing 378 00:24:23,280 --> 00:24:25,720 Speaker 1: your clients is not a good business model anyway, and 379 00:24:25,720 --> 00:24:29,720 Speaker 1: that's probably enough to think that credits With his long 380 00:24:29,840 --> 00:24:35,719 Speaker 1: term structurally challenged. But they must know that those losses 381 00:24:35,720 --> 00:24:38,960 Speaker 1: are going to wind up with them. The second part 382 00:24:38,960 --> 00:24:41,680 Speaker 1: of that is, you know, there's never only one cop roach, 383 00:24:43,200 --> 00:24:47,520 Speaker 1: and we didn't know about Archie Goods. But I'm actually 384 00:24:47,600 --> 00:24:49,919 Speaker 1: chasing down and I'm not going to name it, another 385 00:24:50,080 --> 00:24:54,560 Speaker 1: very big European fraud where we think that Credits With 386 00:24:54,880 --> 00:24:58,600 Speaker 1: is going to have ten blow tend fig at the 387 00:24:58,720 --> 00:25:03,679 Speaker 1: loss is something and that bill your range and you know, 388 00:25:04,040 --> 00:25:07,720 Speaker 1: this multiple pop roach they had credit Swiss is kind 389 00:25:07,720 --> 00:25:10,840 Speaker 1: of amusing. I knew who built bang was because I 390 00:25:11,080 --> 00:25:14,800 Speaker 1: followed him before he had blown up, because he actually 391 00:25:14,840 --> 00:25:18,199 Speaker 1: owned some Chinese fluds that I was sure, and the 392 00:25:18,280 --> 00:25:21,720 Speaker 1: guy was always very aggressive there. But if you had 393 00:25:21,720 --> 00:25:24,800 Speaker 1: a diversified portfolio, some of which were frauds, but all 394 00:25:24,840 --> 00:25:27,440 Speaker 1: of which were in China, and you did this over 395 00:25:27,520 --> 00:25:30,600 Speaker 1: to since two thousand and eleven, he did all right 396 00:25:30,800 --> 00:25:34,000 Speaker 1: until you know, you doubled down and then doubled down again, 397 00:25:34,040 --> 00:25:37,240 Speaker 1: and then doubled down again on G S X. But 398 00:25:37,400 --> 00:25:41,119 Speaker 1: when he no longer took public money the sort of 399 00:25:41,400 --> 00:25:44,200 Speaker 1: strengths are taking public money, which is one of which 400 00:25:44,240 --> 00:25:46,600 Speaker 1: is that's pretty hard to be certain times leader, because 401 00:25:46,600 --> 00:25:50,040 Speaker 1: your planets don't trust you. Disappear and the guy turned 402 00:25:50,080 --> 00:25:54,160 Speaker 1: into a revealed himself to be a complete degenerate gambler. 403 00:25:54,200 --> 00:25:57,959 Speaker 1: But I knew none of that, and the complete degenerate 404 00:25:58,040 --> 00:26:03,879 Speaker 1: gambler took likely diversified positions in controversial stock. Sleep at 405 00:26:03,880 --> 00:26:08,840 Speaker 1: six or seven comes Now. The problem is that if 406 00:26:08,880 --> 00:26:11,719 Speaker 1: you take if you buy controversial stock, can you're right, 407 00:26:11,760 --> 00:26:14,280 Speaker 1: you tend to make a lot of money. But it's 408 00:26:14,440 --> 00:26:16,919 Speaker 1: more than once that the crowd is going to be 409 00:26:17,000 --> 00:26:20,040 Speaker 1: right about a controversial stock. And the one that allegedly 410 00:26:20,040 --> 00:26:23,240 Speaker 1: did him in was Viacom. Via com at one level 411 00:26:23,359 --> 00:26:28,000 Speaker 1: is just a giant global old media business, like news 412 00:26:28,080 --> 00:26:32,359 Speaker 1: corps for that matter, like Disney, But it's probably a 413 00:26:32,400 --> 00:26:35,119 Speaker 1: more controversial one than the others because when you look 414 00:26:35,160 --> 00:26:39,919 Speaker 1: at Via Comms businesses, they scream out yesterday, right. The 415 00:26:39,960 --> 00:26:44,960 Speaker 1: movie studio doesn't, but CPSTV certainly does. My son is 416 00:26:45,000 --> 00:26:47,119 Speaker 1: twenty one and I haven't seen him watch Free to 417 00:26:47,160 --> 00:26:50,439 Speaker 1: Wear TV at all, and the last five years he 418 00:26:50,520 --> 00:26:53,439 Speaker 1: watches a lot of video, right, But it's almost all 419 00:26:53,520 --> 00:27:00,600 Speaker 1: nonlinear video. The second thing that they own is MTV Kelodeon, 420 00:27:01,400 --> 00:27:05,200 Speaker 1: and both of those look pretty challenged. Nickelodeon because our 421 00:27:05,200 --> 00:27:08,840 Speaker 1: friends at Netflix are spending billions of dollars on children's TV. 422 00:27:09,400 --> 00:27:12,760 Speaker 1: Children's TV is one of particularly young children's TV is 423 00:27:12,800 --> 00:27:17,439 Speaker 1: one of the ways that you guarantee loyalty. But you know, 424 00:27:17,600 --> 00:27:22,680 Speaker 1: music channels no longer seemed particularly constrained, and even their 425 00:27:22,680 --> 00:27:25,640 Speaker 1: biggest part of the movie Branchise, which is I think 426 00:27:25,720 --> 00:27:30,439 Speaker 1: James Bond, James Bond, feels a little bit tappy these days. 427 00:27:31,119 --> 00:27:33,280 Speaker 1: You know, I kind of like a James Bond film 428 00:27:33,359 --> 00:27:38,280 Speaker 1: that there's a dose sort of twenty century sexual cringe 429 00:27:38,320 --> 00:27:42,719 Speaker 1: about James Bond. Right, The jokes that were acceptable in 430 00:27:44,119 --> 00:27:48,720 Speaker 1: just aren't acceptable now. So that feels a little yesterday too, 431 00:27:48,760 --> 00:27:51,040 Speaker 1: And so sort of when I think of yesterday, I 432 00:27:51,119 --> 00:27:56,000 Speaker 1: think of via Com and buying massive stakes in what 433 00:27:56,080 --> 00:28:00,280 Speaker 1: should be a declining business doesn't look particularly sensible. Yeah, 434 00:28:00,480 --> 00:28:02,719 Speaker 1: just to jump in for a second, I mean, one 435 00:28:02,760 --> 00:28:06,240 Speaker 1: of the things that's actually really struck me is that 436 00:28:06,480 --> 00:28:10,840 Speaker 1: if you look at viacom chart, you obviously have the 437 00:28:10,880 --> 00:28:14,600 Speaker 1: big you're raised during the blow up, but it hasn't 438 00:28:14,640 --> 00:28:17,560 Speaker 1: bound back at all. In fact, it's it's it's sold 439 00:28:17,560 --> 00:28:20,919 Speaker 1: off further, even after everybody is sort of aware of 440 00:28:20,960 --> 00:28:24,040 Speaker 1: the block trades. But before we go on further, I 441 00:28:24,119 --> 00:28:26,800 Speaker 1: just want to ask to be clear, just for listeners. 442 00:28:27,640 --> 00:28:30,879 Speaker 1: I think you said you're are you short credit swis 443 00:28:30,960 --> 00:28:35,040 Speaker 1: or were you or are you still? I am a 444 00:28:35,080 --> 00:28:37,720 Speaker 1: short credit Swiss but I was short credit Swissing fairly 445 00:28:37,800 --> 00:28:40,440 Speaker 1: big quantity in the past, and I'm now short credit 446 00:28:40,480 --> 00:28:44,320 Speaker 1: Swissing very small quantity. So you can probably think of 447 00:28:44,440 --> 00:28:48,880 Speaker 1: me as a credit buyer. But bye bye to Kama. 448 00:28:49,680 --> 00:28:54,200 Speaker 1: Now even then you say Viacom, Viacom year to date 449 00:28:55,520 --> 00:28:59,360 Speaker 1: it's flat, right, Well, it's actually up. If I go 450 00:28:59,560 --> 00:29:02,640 Speaker 1: back to one January it was thirty six dollars sixty 451 00:29:02,720 --> 00:29:08,840 Speaker 1: it's currently right. The idea that you can you can 452 00:29:08,920 --> 00:29:13,600 Speaker 1: blow yourself up buying a stock that is flat year 453 00:29:13,640 --> 00:29:17,680 Speaker 1: to date on leverage is pretty astonishing. And the only 454 00:29:17,680 --> 00:29:21,240 Speaker 1: reason this was possible as that went from thirty six 455 00:29:21,400 --> 00:29:25,760 Speaker 1: to nine via the princely sum of about a hundred. 456 00:29:27,000 --> 00:29:29,480 Speaker 1: So he must have every time it went up, he 457 00:29:29,560 --> 00:29:34,680 Speaker 1: must have bought more. Now there's an old scam in 458 00:29:34,800 --> 00:29:38,040 Speaker 1: funds management, which is to buy a bunch of their 459 00:29:38,040 --> 00:29:42,360 Speaker 1: liquid stocks and walk them up by more of them, 460 00:29:42,400 --> 00:29:46,760 Speaker 1: and your performance is great. And so because your performance 461 00:29:46,840 --> 00:29:49,920 Speaker 1: is great, you buy more, and then you buy more 462 00:29:50,000 --> 00:29:51,920 Speaker 1: and they walk up a bit further and you're suddenly 463 00:29:51,920 --> 00:29:56,240 Speaker 1: the best performed manager in the world. And retail investors 464 00:29:56,240 --> 00:29:59,200 Speaker 1: are often not very sophisticated. Some money flows in and 465 00:29:59,200 --> 00:30:03,920 Speaker 1: eventually you're as a giant bag holder full of illiquid stocks. 466 00:30:04,800 --> 00:30:08,200 Speaker 1: And and that can be done elier, it can be 467 00:30:08,240 --> 00:30:12,520 Speaker 1: done accidentally by a deluded fund manager. And if I 468 00:30:12,560 --> 00:30:15,480 Speaker 1: think of the accidentally by a deluded fund manager, I 469 00:30:15,560 --> 00:30:18,360 Speaker 1: probably think of the great Woodford scandal in the UK, 470 00:30:18,720 --> 00:30:21,959 Speaker 1: where a lot of what was happening was there. And 471 00:30:22,000 --> 00:30:25,080 Speaker 1: if I actually think accidentally by a deluded fund manager, 472 00:30:25,120 --> 00:30:28,240 Speaker 1: I would think that ar Genetics Fund was an awful 473 00:30:28,760 --> 00:30:33,200 Speaker 1: lot like that to me, right, But the idea that 474 00:30:33,840 --> 00:30:36,920 Speaker 1: somebody that comes out of the Tiger Complex, you know 475 00:30:36,920 --> 00:30:39,480 Speaker 1: it was a protege of Julian Robertson, was you know, 476 00:30:39,600 --> 00:30:43,120 Speaker 1: this guy had he degree and he was doing the 477 00:30:43,320 --> 00:30:47,160 Speaker 1: scale that he was deluding himself on Viacom is a 478 00:30:47,280 --> 00:30:51,920 Speaker 1: pretty astonishing thing. It didn't surprise me that the lender 479 00:30:52,000 --> 00:30:54,680 Speaker 1: that lost the money here was Credit Swiss, but I 480 00:30:54,680 --> 00:30:56,800 Speaker 1: didn't know about it in advance. And part of the 481 00:30:56,840 --> 00:30:59,600 Speaker 1: reason why I am a cover of Credit Swist is 482 00:30:59,640 --> 00:31:03,000 Speaker 1: that when you get lucky, and I did get lucky here, 483 00:31:04,240 --> 00:31:07,320 Speaker 1: you've got to take some off the table. Now. We 484 00:31:07,440 --> 00:31:10,240 Speaker 1: got lucky because we didn't know that GOS was going 485 00:31:10,280 --> 00:31:14,120 Speaker 1: to happen. But we didn't know that. We looked in 486 00:31:14,240 --> 00:31:18,080 Speaker 1: several places and we found ship needed credits with and 487 00:31:18,120 --> 00:31:20,160 Speaker 1: if we can find it crunches, there are probably a 488 00:31:20,160 --> 00:31:23,560 Speaker 1: few more. So, just going back to the start of 489 00:31:23,560 --> 00:31:28,400 Speaker 1: this conversation, what is it about the current environment? We 490 00:31:28,400 --> 00:31:30,440 Speaker 1: were talking about it earlier. You know, you have stocks 491 00:31:30,680 --> 00:31:35,280 Speaker 1: at very high valuations, you have ample liquidity, the economy 492 00:31:35,320 --> 00:31:40,479 Speaker 1: is recovering. By most accounts, things should be going pretty 493 00:31:40,520 --> 00:31:44,440 Speaker 1: well for a lot of businesses. But like, what is 494 00:31:44,480 --> 00:31:47,640 Speaker 1: it in the environment that is making some of these 495 00:31:48,160 --> 00:31:53,200 Speaker 1: scandals come to fruition or that's showing up these latent 496 00:31:53,560 --> 00:31:58,720 Speaker 1: stresses in financial business models. I don't know. That's the 497 00:31:58,720 --> 00:32:02,360 Speaker 1: short end, the long end through. If I knew what 498 00:32:02,600 --> 00:32:08,520 Speaker 1: it was that turned the environment from unbridled uphoria back 499 00:32:08,640 --> 00:32:14,320 Speaker 1: to slight realism, I'd be the richest catch fund manager 500 00:32:14,360 --> 00:32:18,240 Speaker 1: in the world. I genuinely don't know. But while we 501 00:32:18,760 --> 00:32:23,800 Speaker 1: we have been through a period of complete unbridled mania 502 00:32:24,680 --> 00:32:30,360 Speaker 1: right the period November to February was complete Maine. And 503 00:32:30,600 --> 00:32:32,720 Speaker 1: at the end of such a period you can expect 504 00:32:32,720 --> 00:32:37,120 Speaker 1: a bunch of me We've had a ball market of 505 00:32:37,280 --> 00:32:41,400 Speaker 1: pretty enormous proportions with a little two months in direct. 506 00:32:42,400 --> 00:32:46,680 Speaker 1: If I look back, two thousand left stocks were objectively 507 00:32:46,760 --> 00:32:48,880 Speaker 1: cheap and people were scared as there are a bit. 508 00:32:51,000 --> 00:32:55,040 Speaker 1: By two thousand and fifteen, stocked ceased to being objectively 509 00:32:55,160 --> 00:32:58,840 Speaker 1: cheap as you could make a case for, and then 510 00:32:58,880 --> 00:33:05,520 Speaker 1: they continued going. The period over Glass Christmas was a 511 00:33:05,680 --> 00:33:12,480 Speaker 1: period where the Reddit crowd took complete nonsense to the moon, 512 00:33:14,280 --> 00:33:17,640 Speaker 1: and that Reddit crowd taking complete nonsense to the moon 513 00:33:17,720 --> 00:33:20,600 Speaker 1: turned out not just a bit the Reddit crowd, but 514 00:33:20,880 --> 00:33:24,760 Speaker 1: certain aggressive funds like Archegos who decided to play along 515 00:33:24,800 --> 00:33:32,280 Speaker 1: with it. That's always seeing at the moment, in some sense, 516 00:33:33,320 --> 00:33:35,320 Speaker 1: is a few little blow ups at the edge of 517 00:33:35,360 --> 00:33:41,360 Speaker 1: there's going to be fifteen or twenty archegos out there. 518 00:33:41,400 --> 00:33:43,680 Speaker 1: There's going to be a bunch of really stupid stuff 519 00:33:43,720 --> 00:33:45,720 Speaker 1: out there that blows up, and we're going to think, 520 00:33:46,160 --> 00:33:49,480 Speaker 1: how the hell were we that stupid? But to be honest, 521 00:33:49,520 --> 00:33:52,400 Speaker 1: I don't think it. I mean, it's barely started, and 522 00:33:52,760 --> 00:33:57,800 Speaker 1: I don't think there's any particular reason why January was 523 00:33:57,840 --> 00:34:02,760 Speaker 1: so good for nonsense and March was so add the nonsense. Right, 524 00:34:03,040 --> 00:34:07,160 Speaker 1: it's just what happens. I genuinely have no idea. But 525 00:34:07,360 --> 00:34:12,239 Speaker 1: you think stuff like Archie goes more is coming, not 526 00:34:12,440 --> 00:34:17,759 Speaker 1: necessarily that scalpers say, but more blow ups are coming. Yeah, 527 00:34:18,080 --> 00:34:23,400 Speaker 1: it's not possible to have a ballmarket of the scale 528 00:34:23,520 --> 00:34:28,800 Speaker 1: that we've had and not have some some people running 529 00:34:28,840 --> 00:34:35,040 Speaker 1: around with no clothes. Who thinks they're they're wearing God's finery? Right, 530 00:34:35,200 --> 00:34:39,759 Speaker 1: it's just the emperors are going to get exposed. I 531 00:34:39,800 --> 00:34:42,520 Speaker 1: wish I knew who that all they, who they all were? 532 00:34:42,680 --> 00:34:46,640 Speaker 1: I know who a few are, right, and surprising number 533 00:34:46,719 --> 00:34:49,080 Speaker 1: of times when I know who the emperor wearing no 534 00:34:49,280 --> 00:34:54,920 Speaker 1: closes the lended to their emperor's credits with um. There's 535 00:34:54,960 --> 00:34:57,640 Speaker 1: probably a good reason why it's credit switched too. And 536 00:34:57,760 --> 00:34:59,600 Speaker 1: the last time you had me on the podcast that 537 00:35:00,160 --> 00:35:03,880 Speaker 1: about European banking margins and how the banking marches are terrible. 538 00:35:04,560 --> 00:35:07,040 Speaker 1: But the Swiss banks have had another big problem, which 539 00:35:07,080 --> 00:35:09,000 Speaker 1: is that once upon a time they had a very 540 00:35:09,080 --> 00:35:13,400 Speaker 1: large competitive advantage, and the very large competitive advantage with 541 00:35:13,520 --> 00:35:18,800 Speaker 1: syncresy and secrecy got taken away from them. They're almost 542 00:35:18,840 --> 00:35:22,560 Speaker 1: definitionally the Swiss banks are just not just a shadow 543 00:35:22,560 --> 00:35:25,000 Speaker 1: of what they used to right there is much smaller 544 00:35:25,000 --> 00:35:31,200 Speaker 1: business and their core business has compressed margins too, and 545 00:35:31,800 --> 00:35:35,080 Speaker 1: the Swiss establishment. They want to blame the previous CEO 546 00:35:35,239 --> 00:35:38,799 Speaker 1: who clearly wasn't of the Swiss establishment, but in fact 547 00:35:38,840 --> 00:35:42,000 Speaker 1: I think that's just missing the point. The real problem 548 00:35:42,120 --> 00:35:45,600 Speaker 1: is that this bank is a shadow of its former self. 549 00:35:45,600 --> 00:35:51,080 Speaker 1: Its revenue opportunities have disappeared, and it's a very large organization. 550 00:35:51,120 --> 00:35:55,600 Speaker 1: And the very large organization financial revenue opportunities disappeared will 551 00:35:55,680 --> 00:35:58,320 Speaker 1: solved for the lack of revenue by taking more risks. 552 00:36:00,080 --> 00:36:03,560 Speaker 1: And that's why they wound up sidling up to an 553 00:36:03,560 --> 00:36:11,319 Speaker 1: obvious Ponti artists like lex S Greenfield. Why they decided 554 00:36:11,440 --> 00:36:16,040 Speaker 1: that lending money to somebody who had previously run a 555 00:36:16,200 --> 00:36:20,880 Speaker 1: criminal funds management organization and lending it not on small 556 00:36:20,920 --> 00:36:25,680 Speaker 1: scale but billions and billions and billions of dollars, it 557 00:36:25,840 --> 00:36:28,879 Speaker 1: was worth it because they had a need. They had 558 00:36:28,880 --> 00:36:31,440 Speaker 1: a need to lend just like lex S Greenfield had 559 00:36:31,440 --> 00:36:33,480 Speaker 1: a need to put his foot flat to the floorboard 560 00:36:33,520 --> 00:36:36,680 Speaker 1: when when his business wasn't doing very well. So you 561 00:36:36,680 --> 00:36:41,200 Speaker 1: know you asked why, now, well you know why in general, 562 00:36:41,320 --> 00:36:44,360 Speaker 1: which is the credits with his less of the business 563 00:36:44,360 --> 00:36:48,799 Speaker 1: and so at length. And that's going to be a 564 00:36:48,840 --> 00:36:52,600 Speaker 1: particular European problem and the frauds that I'm following in 565 00:36:52,680 --> 00:36:57,279 Speaker 1: Germany which show not going to name has been an 566 00:36:57,320 --> 00:37:01,480 Speaker 1: extremely big borrower from thanks that feel they have a 567 00:37:01,560 --> 00:37:05,759 Speaker 1: neat to lend and make aspect um. I should just 568 00:37:05,800 --> 00:37:08,520 Speaker 1: mention here that when we first wrote about your short 569 00:37:08,560 --> 00:37:11,280 Speaker 1: position in credits, we did ask the bank for comment 570 00:37:11,520 --> 00:37:15,600 Speaker 1: and they declined to do so. Um, but we'll follow 571 00:37:15,680 --> 00:37:21,000 Speaker 1: up with them again. John, you also mentioned our investment 572 00:37:21,200 --> 00:37:24,319 Speaker 1: very briefly. What's your take there because you were sort 573 00:37:24,320 --> 00:37:26,360 Speaker 1: of talking about them in the context of this idea 574 00:37:26,440 --> 00:37:29,200 Speaker 1: that you could be buying a liquid stocks and pushing 575 00:37:29,200 --> 00:37:32,279 Speaker 1: the price up and sort of generating your own momentum. 576 00:37:32,360 --> 00:37:34,160 Speaker 1: Is that what you think is going on with some 577 00:37:34,239 --> 00:37:39,440 Speaker 1: work funds. It's most obvious with the auction if you 578 00:37:39,440 --> 00:37:42,799 Speaker 1: have a look at the auction fund, A very very 579 00:37:42,880 --> 00:37:45,800 Speaker 1: large number of the companies in as a reverse mergence 580 00:37:45,880 --> 00:37:50,880 Speaker 1: of moderate liquidity, about eight or nine of which we 581 00:37:50,920 --> 00:37:56,400 Speaker 1: would regard as natural shows. And when it started getting 582 00:37:56,440 --> 00:38:00,640 Speaker 1: out closed, it started selling or reduced in the size 583 00:38:00,680 --> 00:38:03,719 Speaker 1: of its position in REGENERAAL and Regenera On is a 584 00:38:03,840 --> 00:38:06,799 Speaker 1: biopic of the highest quality in the world, but it's 585 00:38:06,880 --> 00:38:12,280 Speaker 1: highly liquid to buy more of these companies are under pressure. 586 00:38:13,160 --> 00:38:15,520 Speaker 1: And if you look at the way that the ARC 587 00:38:15,680 --> 00:38:19,080 Speaker 1: Main Fund has behaved, it's done the same thing but 588 00:38:19,160 --> 00:38:24,200 Speaker 1: with Tesla, but not on the same scape. So they 589 00:38:24,280 --> 00:38:30,280 Speaker 1: have sold relatively good fans like Google to buy controversial 590 00:38:30,360 --> 00:38:34,600 Speaker 1: names like Tesla as Tesla got weaker. Now the Genetics 591 00:38:34,680 --> 00:38:39,160 Speaker 1: Fund looks to me like a mass exercise in marking 592 00:38:40,360 --> 00:38:45,640 Speaker 1: the Main Fund much much lesser. Right, the Main Fund 593 00:38:46,480 --> 00:38:49,520 Speaker 1: makes some sense to me. The Genetics Fund makes no 594 00:38:49,640 --> 00:38:52,360 Speaker 1: sense to me. And the Genetics Stund is an area 595 00:38:52,400 --> 00:38:55,360 Speaker 1: over which we have considerable expertise. And I should disclose 596 00:38:55,440 --> 00:38:59,400 Speaker 1: here that we both we own end like Regenera, and 597 00:38:59,440 --> 00:39:02,279 Speaker 1: we're short a few names. So it was sort of 598 00:39:02,760 --> 00:39:05,640 Speaker 1: amusing to us what watching them sell Regenera On to 599 00:39:05,680 --> 00:39:10,040 Speaker 1: buy the names were short. But yeah, the Genetics Fund 600 00:39:10,120 --> 00:39:12,600 Speaker 1: is The Genetics Fund is a very large punt holding 601 00:39:12,680 --> 00:39:33,520 Speaker 1: love to be liquid position and it's head flood. John. 602 00:39:33,920 --> 00:39:36,279 Speaker 1: I'm sure Tracy is going to be really annoyed with 603 00:39:36,360 --> 00:39:38,400 Speaker 1: me because I bring this up every once in a while. 604 00:39:38,440 --> 00:39:41,520 Speaker 1: But you know when you you mentioned that period like 605 00:39:41,640 --> 00:39:44,879 Speaker 1: kind of like from December through the middle of February 606 00:39:44,880 --> 00:39:48,440 Speaker 1: where things just went absolutely ballistic, And that's when I 607 00:39:48,520 --> 00:39:51,560 Speaker 1: noticed that, like the fuel cell companies we actually talked 608 00:39:51,560 --> 00:39:54,880 Speaker 1: about when we talked when we had our ARC episode, 609 00:39:55,200 --> 00:39:57,960 Speaker 1: they went absolutely nuts. And for me, like I remember 610 00:39:58,000 --> 00:39:59,960 Speaker 1: them because those all went nuts in the late ninety 611 00:40:00,120 --> 00:40:03,279 Speaker 1: and then collapsed. Do you fit like you know all 612 00:40:03,320 --> 00:40:08,960 Speaker 1: the all of these like electric vehicle battery SPACs, fuel 613 00:40:09,040 --> 00:40:15,640 Speaker 1: cell companies, charging companies, and so forth. Do you see 614 00:40:15,760 --> 00:40:19,399 Speaker 1: much there or as as in your view as most 615 00:40:19,400 --> 00:40:22,080 Speaker 1: of this joke. I'm not going to name I'm not 616 00:40:22,120 --> 00:40:27,720 Speaker 1: going to name names, but we're short about a dozen 617 00:40:27,800 --> 00:40:31,400 Speaker 1: different names that looked a little like that. Now, the 618 00:40:31,440 --> 00:40:35,239 Speaker 1: only one I will name is Nicola, and Nicola had 619 00:40:35,239 --> 00:40:41,040 Speaker 1: an extremely competent shortcase written on it, whereupon the stock doubled. Now, 620 00:40:41,040 --> 00:40:44,560 Speaker 1: as of today, the stock is trading twenties below the 621 00:40:44,640 --> 00:40:51,040 Speaker 1: extremely competent shortcase. But that's a sort of extreme version 622 00:40:51,120 --> 00:40:54,879 Speaker 1: of the retail mania. As far as anyone can tell, 623 00:40:55,600 --> 00:40:59,920 Speaker 1: Nicola has none nothing worth happening except billions of mark 624 00:41:00,200 --> 00:41:02,440 Speaker 1: cap and a good bid in their stock. You were 625 00:41:02,440 --> 00:41:05,200 Speaker 1: talking about the fuel cell companies that will once big, 626 00:41:05,400 --> 00:41:09,680 Speaker 1: and the obvious name there is plug Power, and plug 627 00:41:09,800 --> 00:41:12,719 Speaker 1: plug Power is a very hot stock in the dot 628 00:41:12,760 --> 00:41:16,200 Speaker 1: com era. Here was going to be the future, and 629 00:41:16,360 --> 00:41:19,000 Speaker 1: I guess you know it's still the future. Maybe it 630 00:41:19,040 --> 00:41:22,719 Speaker 1: always will be right. But the thing that amazes me 631 00:41:22,800 --> 00:41:26,000 Speaker 1: about plug Power is the share a count. I've just 632 00:41:26,040 --> 00:41:29,279 Speaker 1: pulled up the numbers, so I'm going to read you 633 00:41:29,520 --> 00:41:35,800 Speaker 1: share accounts going back to two thousand dishes, and it's 634 00:41:35,840 --> 00:41:40,160 Speaker 1: a remarkable series. Four point three million, five million, five 635 00:41:40,160 --> 00:41:43,920 Speaker 1: point one seven point to seven point three eight point five, 636 00:41:44,120 --> 00:41:48,080 Speaker 1: eight point six, eight point seven, twelve point seven, twelve 637 00:41:48,120 --> 00:41:53,399 Speaker 1: point nine point two, twenty two point seven, thirty eight 638 00:41:53,440 --> 00:41:56,759 Speaker 1: point to a hundred and six point one hundred and 639 00:41:56,800 --> 00:42:03,240 Speaker 1: seventies three hundred hundred and eighty one million, eight billion, 640 00:42:04,000 --> 00:42:08,839 Speaker 1: three hundred and three million, four hundred billions. That share 641 00:42:08,840 --> 00:42:11,480 Speaker 1: account is the sort of share account pattern that you 642 00:42:11,640 --> 00:42:16,480 Speaker 1: see with a multiple reverse merger, dilusive penny stuff. It's 643 00:42:16,480 --> 00:42:18,440 Speaker 1: not the sort of thing that you see in it's 644 00:42:18,480 --> 00:42:22,120 Speaker 1: been a company that had relatively recently sixty billion of 645 00:42:22,160 --> 00:42:26,200 Speaker 1: market cabin was raising money in billion dollars, right, So yes, 646 00:42:26,320 --> 00:42:30,200 Speaker 1: you you your name is plug Power is to me astonishing. 647 00:42:30,840 --> 00:42:33,760 Speaker 1: It's certainly a technology of the future that may always 648 00:42:33,840 --> 00:42:38,960 Speaker 1: be one right, But it's astonishing to me that a 649 00:42:39,000 --> 00:42:43,359 Speaker 1: company with six d and twenty nine employees has has 650 00:42:43,480 --> 00:42:47,560 Speaker 1: both needed to and managed to raise money on that 651 00:42:47,600 --> 00:42:51,360 Speaker 1: sort of escape. Just in general, what is the environment 652 00:42:51,400 --> 00:42:56,719 Speaker 1: like right now for identifying shorts and also monetizing them 653 00:42:56,960 --> 00:42:59,040 Speaker 1: plus six or eight months, I would have said that 654 00:42:59,120 --> 00:43:03,080 Speaker 1: the ideal the environment of identifying shorts was like shooting 655 00:43:03,120 --> 00:43:06,400 Speaker 1: fish in a barrel. It was so easy to find 656 00:43:06,640 --> 00:43:10,600 Speaker 1: a piece of overpriced nonsense. The only problems are until 657 00:43:11,480 --> 00:43:15,520 Speaker 1: mid devery the fish shot that right, you know you 658 00:43:15,560 --> 00:43:19,120 Speaker 1: would you would short the most obvious fraught and it 659 00:43:19,120 --> 00:43:22,280 Speaker 1: would double or triple in your face. The fishes stop 660 00:43:22,320 --> 00:43:28,600 Speaker 1: shooting back. So the environment has been distinctly better from 661 00:43:28,600 --> 00:43:34,760 Speaker 1: my perspective. I'm well aware that retailer forty millions accounts 662 00:43:34,840 --> 00:43:39,680 Speaker 1: in the period post pandemic, and you know, some people 663 00:43:39,680 --> 00:43:42,839 Speaker 1: have got a taste for gambling on the fish might 664 00:43:42,880 --> 00:43:47,600 Speaker 1: shoot back again. But the identification thing is dead easy. 665 00:43:48,160 --> 00:43:52,239 Speaker 1: The managing the book is incredibly hard. And almost all 666 00:43:52,280 --> 00:43:56,719 Speaker 1: of my fellow short sellers have had an extremely rough 667 00:43:56,840 --> 00:43:59,480 Speaker 1: year because they were very good at the identification. They 668 00:43:59,480 --> 00:44:01,680 Speaker 1: thought this money for jam and then they lost a 669 00:44:01,680 --> 00:44:05,600 Speaker 1: lot of money. So, just on this notion of retail 670 00:44:06,080 --> 00:44:09,759 Speaker 1: getting more interested in stocks and maybe participating in them 671 00:44:09,760 --> 00:44:13,680 Speaker 1: in a very speculative way, has that changed the way 672 00:44:14,160 --> 00:44:17,080 Speaker 1: you invest at all? Or do you think it's going 673 00:44:17,160 --> 00:44:21,359 Speaker 1: to change the way the hedge fund industry operates. Well, 674 00:44:22,400 --> 00:44:24,560 Speaker 1: there are certain things that I've done that I didn't 675 00:44:24,560 --> 00:44:28,560 Speaker 1: even imagine, one of which, for instance, is we have 676 00:44:28,760 --> 00:44:31,600 Speaker 1: had to calculate an estimate of the game in every 677 00:44:31,640 --> 00:44:34,359 Speaker 1: stock in the stock market. The reason is that we 678 00:44:35,320 --> 00:44:40,319 Speaker 1: became there in January, but then very very intensely, every 679 00:44:40,440 --> 00:44:45,080 Speaker 1: of the risk of gam e squated. And the idea 680 00:44:45,160 --> 00:44:48,120 Speaker 1: that a small number of options could drive a stop 681 00:44:48,160 --> 00:44:52,279 Speaker 1: to the moon and that retails could be persuaded to game, 682 00:44:52,800 --> 00:44:57,120 Speaker 1: and the idea that the most active option contract in 683 00:44:57,120 --> 00:45:00,480 Speaker 1: America one day, I think, was an eight hundred dollars 684 00:45:00,560 --> 00:45:07,440 Speaker 1: short dated game stock coll is so absurd. But we 685 00:45:07,480 --> 00:45:09,440 Speaker 1: had to live in a world that looked like that. 686 00:45:09,600 --> 00:45:13,640 Speaker 1: So the amount that we needed to tighten up our 687 00:45:13,719 --> 00:45:19,120 Speaker 1: risk management was remarkable. Now that it's that much tighter, 688 00:45:20,680 --> 00:45:22,840 Speaker 1: my guess is that it's not going to get loosened 689 00:45:22,880 --> 00:45:27,640 Speaker 1: doctor very much once and twice shy. We didn't lose 690 00:45:27,719 --> 00:45:30,600 Speaker 1: meaningfully large amounts of money, but it was still an 691 00:45:30,640 --> 00:45:35,040 Speaker 1: extremely unpleasant period. We were underforming like crazy, and the 692 00:45:35,080 --> 00:45:37,040 Speaker 1: best thing I could say is that all my competitors 693 00:45:37,080 --> 00:45:40,880 Speaker 1: were going out of business and we were right. But 694 00:45:41,000 --> 00:45:43,360 Speaker 1: that should make life easier for us in the future. 695 00:45:44,640 --> 00:45:47,879 Speaker 1: But a lot of the risks that we thought were 696 00:45:47,960 --> 00:45:52,520 Speaker 1: theoretical turned out to not be just theoretical. They turned 697 00:45:52,520 --> 00:45:59,400 Speaker 1: out the absolute thing effects and the idea of a 698 00:45:59,520 --> 00:46:03,000 Speaker 1: Portfoli elio that looks like four and a half times 699 00:46:03,080 --> 00:46:06,279 Speaker 1: leave it long short all the same trade are and 700 00:46:06,600 --> 00:46:09,520 Speaker 1: the particular trade I'm thinking of that case is the 701 00:46:09,560 --> 00:46:12,600 Speaker 1: blot Can trade, which was long the future short parts. 702 00:46:12,760 --> 00:46:16,760 Speaker 1: So you're long booking dot Com and Google and Apple, 703 00:46:16,840 --> 00:46:20,720 Speaker 1: and your short BlackBerry and research most BlackBerry. You're short 704 00:46:21,520 --> 00:46:26,400 Speaker 1: retailers like game Stock at Billard's, your short that landlords 705 00:46:26,440 --> 00:46:30,719 Speaker 1: like Massteri and there. I said, you're short by part 706 00:46:30,719 --> 00:46:34,560 Speaker 1: of the problem because Bacom looks like the past as well. 707 00:46:35,520 --> 00:46:39,120 Speaker 1: That trade, which you know I would normally associate with 708 00:46:39,760 --> 00:46:42,799 Speaker 1: geniuses like Druck and Miller, the trade the great trade. 709 00:46:42,880 --> 00:46:45,520 Speaker 1: Just don't leave it five times, right, because if you 710 00:46:45,600 --> 00:46:48,840 Speaker 1: leave it five times and the retail crowd cap cotton 711 00:46:48,920 --> 00:46:52,200 Speaker 1: on your debt. Alright, I actually like the trade. I 712 00:46:52,239 --> 00:46:54,920 Speaker 1: just don't like it on the scale of stuff. Do 713 00:46:54,960 --> 00:46:59,360 Speaker 1: you feel like the retail from the whole reddit everything 714 00:46:59,800 --> 00:47:05,920 Speaker 1: the insane, aggressive, almost weaponized. Some people put it called buying. 715 00:47:06,680 --> 00:47:10,040 Speaker 1: Do you feel comfortable that there was that peaked some 716 00:47:10,120 --> 00:47:14,439 Speaker 1: point in Q one? I think it peaked. I don't 717 00:47:14,480 --> 00:47:17,279 Speaker 1: feel comfortable that that peak is permanent, and we're not 718 00:47:17,320 --> 00:47:19,319 Speaker 1: going to manage the book on the basis that that 719 00:47:19,400 --> 00:47:23,440 Speaker 1: peak is permanent. Right. You asked how it's changed his 720 00:47:23,600 --> 00:47:29,600 Speaker 1: stunt management. Well, you know, it's scared, right, and I'm 721 00:47:29,600 --> 00:47:32,759 Speaker 1: going to stay scared because they always do. But yeah, 722 00:47:32,840 --> 00:47:35,279 Speaker 1: it has peaked. Whether it's a peak is permanent, I 723 00:47:35,360 --> 00:47:39,799 Speaker 1: have no idea whatsoever. Gambling was stunt, right, So it's 724 00:47:39,840 --> 00:47:43,080 Speaker 1: always a possibility that people decide that gambling is done again. 725 00:47:43,200 --> 00:47:46,000 Speaker 1: Do it only even grant the scale? I tried. I 726 00:47:46,080 --> 00:47:48,080 Speaker 1: tried not to get try to work out how to 727 00:47:48,120 --> 00:47:51,400 Speaker 1: manage my risks. But you know, I've got to be 728 00:47:51,440 --> 00:47:56,080 Speaker 1: aware that there are non rational actors there who's whose 729 00:47:56,120 --> 00:47:59,160 Speaker 1: goal isn't to make money. Their goal is well maybe 730 00:47:59,200 --> 00:48:01,759 Speaker 1: they tell you that to make money and the big 731 00:48:01,800 --> 00:48:07,480 Speaker 1: goal is just the gamble. Well, John, it's always great 732 00:48:07,520 --> 00:48:10,319 Speaker 1: having you on. Thank you so much for for coming 733 00:48:10,320 --> 00:48:13,160 Speaker 1: on another episode. That was great, John, Thank you so 734 00:48:13,239 --> 00:48:33,680 Speaker 1: much for coming up. Good pleasure. Thank you. So it's 735 00:48:33,719 --> 00:48:37,000 Speaker 1: always a pleasure talking to John. I mean, he has 736 00:48:37,040 --> 00:48:39,760 Speaker 1: such a great track record when it comes to spotting 737 00:48:39,920 --> 00:48:43,959 Speaker 1: inconsistencies in financial models, and I always find it really 738 00:48:43,960 --> 00:48:47,720 Speaker 1: interesting listening um to the way he thinks about taking 739 00:48:47,719 --> 00:48:51,719 Speaker 1: on short positions and how he comes to those conclusions. Um. 740 00:48:51,719 --> 00:48:54,040 Speaker 1: But one of the things that's that struck me there 741 00:48:54,120 --> 00:48:57,680 Speaker 1: is just this idea that I mean, it was kind 742 00:48:57,680 --> 00:48:59,759 Speaker 1: of amazing to listen to him say that he had 743 00:48:59,800 --> 00:49:03,280 Speaker 1: to you Gamma squeeze analysis on all their short positions 744 00:49:03,320 --> 00:49:06,640 Speaker 1: because of what happened to game Stop in January, and 745 00:49:06,760 --> 00:49:10,680 Speaker 1: in that way, game Stop and retail participation really is 746 00:49:10,840 --> 00:49:14,200 Speaker 1: kind of changing the way the market and the hedge 747 00:49:14,200 --> 00:49:18,360 Speaker 1: fund industry is working. Yeah, it might end up be 748 00:49:18,800 --> 00:49:21,560 Speaker 1: that the Game stop story was like just like some 749 00:49:21,680 --> 00:49:25,080 Speaker 1: sort of like true peak of the mania, Like if 750 00:49:25,120 --> 00:49:28,040 Speaker 1: you look at um on the terminal, like if you 751 00:49:28,040 --> 00:49:33,320 Speaker 1: look at like call option volume, other market volume measures 752 00:49:33,360 --> 00:49:37,399 Speaker 1: things like that, it basically is like right around when 753 00:49:37,480 --> 00:49:40,880 Speaker 1: game stop happened, and a bunch of other things, and 754 00:49:40,960 --> 00:49:42,759 Speaker 1: so you know, like you know, the market still at 755 00:49:42,800 --> 00:49:45,319 Speaker 1: all time highs and people are still gambling on all 756 00:49:45,400 --> 00:49:47,680 Speaker 1: kinds of things. But it could end up being that 757 00:49:47,760 --> 00:49:51,200 Speaker 1: a lot of the charts that's sort of like really 758 00:49:51,280 --> 00:49:55,600 Speaker 1: captured that moment, like we're really right around the game stop. Yeah, 759 00:49:55,640 --> 00:49:59,160 Speaker 1: but it's opened the door right to this kind of behavior, 760 00:49:59,320 --> 00:50:01,680 Speaker 1: Like it's created of a possibility that I don't think 761 00:50:01,719 --> 00:50:04,319 Speaker 1: people thought was actually there before, which is that you 762 00:50:04,360 --> 00:50:09,240 Speaker 1: could force a squeeze with tactical call buyings and things 763 00:50:09,280 --> 00:50:12,480 Speaker 1: like that that would be massively painful for anyone out 764 00:50:12,520 --> 00:50:15,040 Speaker 1: there with a short position. That was pretty wild just 765 00:50:15,120 --> 00:50:18,320 Speaker 1: in general, though, Like I love like hearing how John 766 00:50:18,920 --> 00:50:23,640 Speaker 1: thinks about everything, and just like the degree to which 767 00:50:23,680 --> 00:50:26,880 Speaker 1: he sort of like understand the sort of the basic 768 00:50:27,080 --> 00:50:29,920 Speaker 1: of like business models, or hearing him talk about like 769 00:50:30,280 --> 00:50:35,000 Speaker 1: the history of trading finance and why it emerged when 770 00:50:35,040 --> 00:50:38,359 Speaker 1: you when you go talk about green Sill and he says, well, 771 00:50:38,480 --> 00:50:40,360 Speaker 1: we have to look back to trade finance over a 772 00:50:40,440 --> 00:50:43,759 Speaker 1: hundred years ago. Like that's such a great beginning to 773 00:50:43,920 --> 00:50:47,920 Speaker 1: your conversation. Yeah, it makes sense, like this idea that 774 00:50:47,960 --> 00:50:51,520 Speaker 1: like essentially it's solved a sort of like information gap, 775 00:50:52,520 --> 00:50:54,640 Speaker 1: and that in a world in which like you sort 776 00:50:54,680 --> 00:50:58,120 Speaker 1: of know your counterparties and you have good information and everything, like, 777 00:50:58,600 --> 00:51:02,480 Speaker 1: it shouldn't be like a rapidly like super you know, 778 00:51:02,560 --> 00:51:05,719 Speaker 1: super big business. It's like a pretty good uh, an 779 00:51:05,719 --> 00:51:08,959 Speaker 1: interesting sign or an interesting tell. Yeah, for sure. Shall 780 00:51:08,960 --> 00:51:12,080 Speaker 1: we leave it there? Yeah, let's leave it there. All right. 781 00:51:12,360 --> 00:51:15,240 Speaker 1: This has been another episode of the Odd Thoughts podcast. 782 00:51:15,320 --> 00:51:18,080 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 783 00:51:18,080 --> 00:51:21,319 Speaker 1: Tracy Alloway and I'm Joe wi Isn't All. You can 784 00:51:21,360 --> 00:51:24,719 Speaker 1: follow me on Twitter at the Stalwart. And you can 785 00:51:24,800 --> 00:51:28,000 Speaker 1: follow our guests John Hampton on Twitter. He's at John 786 00:51:28,120 --> 00:51:33,160 Speaker 1: Underscore Hampton. Follow our producer Laura Carlson, She's at Laura M. Carlson. 787 00:51:33,480 --> 00:51:37,480 Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today, 788 00:51:37,920 --> 00:51:40,560 Speaker 1: and check out all of our podcasts at Bloomberg under 789 00:51:40,600 --> 00:52:00,880 Speaker 1: the handle at Podcasts. Thanks for listening to