WEBVTT - John Hempton on Greensill, Archegos and What It's Like To Short Right Now 0:00:11.160 --> 0:00:14.560 Hello, and welcome to another episode of the All Thoughts Podcast. 0:00:14.640 --> 0:00:18.640 I'm Tracy Allaway and I'm Joe. Wise, isn't all Joe. 0:00:18.720 --> 0:00:23.119 I feel like it's been a pretty bumper year for 0:00:23.360 --> 0:00:27.440 financial frauds and scandal, And maybe bumper year isn't the 0:00:27.520 --> 0:00:28.760 right way to put it, but I feel like a 0:00:28.880 --> 0:00:31.440 bunch of them have sort of been coming to light 0:00:31.520 --> 0:00:34.640 over the past twelve months or so. Yeah, it's kind 0:00:34.640 --> 0:00:39.239 of a weird time because the stock stock indusseries as 0:00:39.440 --> 0:00:43.560 right now, they're all basically right at all time highs. 0:00:44.000 --> 0:00:45.959 But we've handled a lot of I don't know if 0:00:46.000 --> 0:00:49.800 like they're like per se frauds, but things going badly 0:00:50.159 --> 0:00:55.440 blow ups, companies collapsing, hedge funds losing a ton of money. 0:00:56.520 --> 0:00:59.120 It's kind of been a slightly weird time because things 0:00:59.120 --> 0:01:01.840 that you don't necessary certily expect at the top, or 0:01:01.880 --> 0:01:05.080 maybe you do. Basically a lot of things going south 0:01:05.480 --> 0:01:08.880 generally speaking. Yeah, I mean normally it's like that Warren 0:01:08.880 --> 0:01:11.280 Buffett quote where when the tide goes out, that's when 0:01:11.280 --> 0:01:14.600 you see people swimming naked. But the tide, by no means, 0:01:14.640 --> 0:01:16.840 has been going out lately. As you mentioned, we have 0:01:16.920 --> 0:01:20.839 stocks pretty close to all time highs, we have ample liquidity. 0:01:20.880 --> 0:01:25.040 It's a weird time for stresses in the financial system 0:01:25.080 --> 0:01:27.760 like this to be coming to light. And yet we've 0:01:27.800 --> 0:01:30.600 had quite a few. So most recently we had our 0:01:30.680 --> 0:01:36.520 Chagos losing billions of dollars. Before that, we had Green 0:01:36.680 --> 0:01:40.200 Sill blowing up, and then earlier we of course had 0:01:40.280 --> 0:01:43.600 wire card as well. So, um, you know the rule 0:01:43.600 --> 0:01:46.640 of three, we have three things happening. So we're going 0:01:46.680 --> 0:01:51.400 to talk about that today with really a fraud or 0:01:51.880 --> 0:01:57.680 scandal spotting extraordinaire. Yeah, I'm super excited about this. You know, 0:01:57.760 --> 0:02:00.440 it's kind of like, you know, the food thing is, 0:02:00.480 --> 0:02:02.920 we do seem to be like at the verge of 0:02:02.960 --> 0:02:05.800 what like people think are like people are feeling optimistic, 0:02:05.880 --> 0:02:10.040 Like growth expectations in the United States are like running 0:02:10.040 --> 0:02:13.480 sky high. Like people aren't negative. But what does seem 0:02:13.520 --> 0:02:17.079 to be clear is that, like after this incredible bill 0:02:17.200 --> 0:02:18.840 run and whether you want to define it by the 0:02:18.919 --> 0:02:22.640 last year or the last several years, there's just a 0:02:22.680 --> 0:02:26.320 lot of like sloppy behavior that's sort of coming up 0:02:26.360 --> 0:02:28.480 to the surface right now. Yeah, and so yes, I'm 0:02:28.520 --> 0:02:32.000 very excited about this conversation. Yeah, Well, as I mentioned 0:02:32.000 --> 0:02:35.360 we have a sloppy behavior expert coming on, so um, 0:02:35.520 --> 0:02:37.960 we're gonna be talking to John Hampton. He's the co 0:02:38.000 --> 0:02:41.800 founder and chief investment officer over at Bronte Capital Management. 0:02:41.919 --> 0:02:45.400 Also a previous Odd Thoughts guest, and a man who 0:02:45.440 --> 0:02:49.560 was also early on a bunch of things. Um, but 0:02:49.919 --> 0:02:53.480 top of mind is probably wire Card, Valiant and Gosh, 0:02:53.520 --> 0:02:57.240 I remember Pontenegro way back in two thousand nine. That 0:02:57.320 --> 0:03:00.239 was an interesting one. So um, John, welcome to the show. 0:03:00.280 --> 0:03:03.600 Thanks so much for coming back on. Glad to be here. 0:03:04.200 --> 0:03:08.520 I was going to correct Tracy's Warren Buffett quote. Warrant 0:03:08.520 --> 0:03:11.560 said it's only when the tide goes out that you 0:03:11.680 --> 0:03:15.400 see swimming naked, and it was wrong. The tide isn't 0:03:15.400 --> 0:03:18.080 out at all. I mean, market all time highs and 0:03:18.120 --> 0:03:21.600 we're already seeing people that are swimming naked. It's kind 0:03:21.639 --> 0:03:25.080 of a bizarre market. As a sort of very big picture, 0:03:25.760 --> 0:03:28.560 It's been an expensive ball market for a long time, 0:03:29.600 --> 0:03:32.440 but the period from sort of the middle of November 0:03:32.480 --> 0:03:36.240 to the middle of February was a bizarre retail media 0:03:36.560 --> 0:03:41.200 where the most retailed stocks possible tech stocks that have 0:03:41.280 --> 0:03:46.560 no technology, just flat frauds, penny stocks, etcetera, or went vertical. 0:03:47.040 --> 0:03:49.680 We discovered in the middle of that that some very 0:03:49.680 --> 0:03:53.080 big money was also playing in them. So Archigos ber 0:03:53.160 --> 0:03:56.360 Sex is a company that several people have alleged the fraud. 0:03:56.480 --> 0:03:59.280 I've not done the work myself, but the arguments put 0:03:59.280 --> 0:04:01.520 out by both US and Block at Muddy Waters and 0:04:01.520 --> 0:04:05.800 A Stevenson Yang and J Capital alleging that g X 0:04:05.880 --> 0:04:09.080 is a fraud looked very, very convincing to me. And 0:04:09.120 --> 0:04:12.560 despite that, the stock sort of doubled immediately. The good 0:04:12.600 --> 0:04:15.760 shortcase came out and we now know that there was 0:04:16.800 --> 0:04:20.080 retail money, just retail money on a different scale and 0:04:20.120 --> 0:04:24.520 a different style at Archiegoss chasing that up. That pressure 0:04:24.800 --> 0:04:30.400 has eased off lately, we're starting to see the nonsense 0:04:30.440 --> 0:04:33.720 stocks falling and often quite falling quite far. And if 0:04:33.720 --> 0:04:36.800 you don't look at the red chatboards now, you see 0:04:36.800 --> 0:04:38.960 that they're full of other warr and Buffett quotes, g 0:04:39.360 --> 0:04:42.800 quotes about buying when there's blood in the streets. And 0:04:42.880 --> 0:04:46.479 it's almost comical at the moment that retail investors could 0:04:46.520 --> 0:04:49.000 be talking about blood in the streets at exactly at 0:04:49.000 --> 0:04:51.479 the same time as the market is literally hitting new 0:04:51.560 --> 0:04:54.920 eyes on a daily basis. Well, that change has changed 0:04:55.080 --> 0:04:58.679 my life because I short nonsense stocks, and shorting nonsense 0:04:58.680 --> 0:05:00.880 stocks gave me the worst three or four months of 0:05:00.920 --> 0:05:05.159 my career in the Leader over the Christmas period, and 0:05:05.200 --> 0:05:09.080 it has suddenly become exceedingly nice. We're making money on 0:05:09.120 --> 0:05:11.400 both sidebook at the moment, we're making money on loans 0:05:11.440 --> 0:05:15.000 because we're long udernary stocks in the markets making new eyes, 0:05:15.040 --> 0:05:17.440 and we're making money on shorts that the nonsense stocks 0:05:17.440 --> 0:05:20.560 are deep lading. And I don't know how long this 0:05:20.600 --> 0:05:24.200 will last, but it's extremely pleasant having been extremely unpleasant. 0:05:24.800 --> 0:05:27.960 We should also talk about our friends at Greenfel, and 0:05:27.960 --> 0:05:30.840 I don't want to link Greenfill and Archer got other 0:05:30.920 --> 0:05:34.360 than to say that the symptoms of the extremely difficult market. 0:05:35.560 --> 0:05:40.320 But I've heard lots of Donson said about green Sill, 0:05:40.440 --> 0:05:44.000 so I might start here right. What would you say then, 0:05:44.120 --> 0:05:46.560 is that when you say started green Cell, what is 0:05:46.920 --> 0:05:50.040 what is your your big picture thought on them? The 0:05:50.200 --> 0:05:54.480 big picture thought is that old stuff is new again. 0:05:55.200 --> 0:05:58.720 But without even realizing what is what is radical and 0:05:58.720 --> 0:06:03.000 what is new here. Trade finance has been in the 0:06:03.080 --> 0:06:07.280 nineteenth century was an enormous business and being in Australian. 0:06:07.320 --> 0:06:11.320 I'll talk about it parochially. You, as a wool farmer 0:06:11.400 --> 0:06:14.440 in Australia or for that matter, of cotton farmer in America, 0:06:14.520 --> 0:06:18.320 would be selling your stuff to the looms in the UK, 0:06:18.640 --> 0:06:25.320 where industrialization meant that they just had last loom fabric factories. 0:06:26.279 --> 0:06:29.520 And for an Australian selling well to the UK, it 0:06:29.640 --> 0:06:33.760 was six months to deliberate and another sort of six 0:06:33.800 --> 0:06:36.680 months before you've got the message back that it was delivered, 0:06:37.480 --> 0:06:40.679 and the farmer couldn't wait a year to get paid. 0:06:40.720 --> 0:06:43.479 In fact, it's completely unreasonable to expect them to wait 0:06:43.520 --> 0:06:47.480 a year to get paid. If you were a American 0:06:47.520 --> 0:06:50.920 cotton farmer, was less way less than a year, but 0:06:50.960 --> 0:06:53.839 it was still an unreasonable amount of time. And so 0:06:54.880 --> 0:06:58.880 what you would have is these multinational banks that would effectively, 0:06:59.800 --> 0:07:02.359 by either cotton in America or the will in Australia, 0:07:03.000 --> 0:07:06.640 you finance the purchase of it, finance delivery and it 0:07:06.640 --> 0:07:10.160 would all be settled up over time. And there were 0:07:10.240 --> 0:07:14.360 three great trade finance banks around the world, and they 0:07:14.360 --> 0:07:18.240 all came actually unsurprisingly with the British Empire, two of 0:07:18.360 --> 0:07:21.680 whose names you will know to this day, and one 0:07:21.720 --> 0:07:25.240 of the who's name has been consigned to history. The 0:07:25.280 --> 0:07:27.480 two that you'll knows to this day of Hong Kong 0:07:27.480 --> 0:07:31.960 and Shanghai Bank and Standard Charted, and they're both big 0:07:32.000 --> 0:07:36.360 Asian banks, with HSBC being a big global bank headquartered 0:07:36.360 --> 0:07:38.920 in London, and the idea of the bank whose name 0:07:39.000 --> 0:07:42.320 is Hong Kong and Shanghai Banks would be headquartered in London. 0:07:43.240 --> 0:07:45.840 There's its origins to the fact there was a giant 0:07:45.840 --> 0:07:50.160 trade finance bank. The one that you won't know was 0:07:50.200 --> 0:07:54.960 a bank called English Scottish and Australian and English, Scottish 0:07:54.960 --> 0:07:58.119 and Australian would have once been mentioned in the same 0:07:58.200 --> 0:08:02.560 breath as HSBC or Standard Charted and up until ninety 0:08:02.680 --> 0:08:08.160 two it was headquartered in London as well. In two 0:08:08.320 --> 0:08:10.760 or three, I don't remember the year it moved its 0:08:10.760 --> 0:08:14.440 headquarters from London to Australia, renamed itself A and Z 0:08:14.680 --> 0:08:17.280 Bank and is now one of the big four Australian banks. 0:08:17.720 --> 0:08:22.520 It also sold its operations in the Middle East in India, 0:08:22.640 --> 0:08:24.600 so it used to own a giant in the Middle 0:08:24.600 --> 0:08:27.760 East in India called Greenlands. But when I worked for 0:08:27.800 --> 0:08:31.680 aand DEAD Bank, and this was in the late nineties 0:08:32.280 --> 0:08:35.360 and Z banks still had the residual the giant trade 0:08:35.440 --> 0:08:39.640 finance operation, and ZAID Bank alone amongst the Australian banks 0:08:39.679 --> 0:08:42.600 had branches in over two hundred countries, which is pretty 0:08:42.600 --> 0:08:45.640 well every country in the world. And that sort of 0:08:45.800 --> 0:08:50.280 thing was the residual of a trade finance operation. Now, 0:08:50.320 --> 0:08:55.360 with modern communications and but delivery at trade finance has 0:08:55.400 --> 0:08:59.360 gone from being a very very big and very important 0:08:59.400 --> 0:09:02.599 business to a small business. And the idea that a 0:09:02.960 --> 0:09:05.720 SBC was at ore A and z was at a 0:09:05.800 --> 0:09:10.040 car to trade finance business now looks a little bit absurd, 0:09:10.120 --> 0:09:13.280 but that's what it once was, and now a typical 0:09:13.360 --> 0:09:17.800 thing that might be involved in trade finances. I know 0:09:17.880 --> 0:09:22.719 a guy who strips down cars for recycling. He has 0:09:22.760 --> 0:09:25.200 a huge car yard at the outer part of Sydney 0:09:25.800 --> 0:09:28.720 and one of the businesses is stripping down alternators, which 0:09:28.720 --> 0:09:31.040 are a sort of electric spinning parts of the car, 0:09:31.040 --> 0:09:34.160 and they contain about a kilo of copper, maybe a 0:09:34.240 --> 0:09:36.640 kilo and a half, which is I guess five dollars 0:09:36.720 --> 0:09:39.040 US worth of copper that somebody has to unwind it. 0:09:40.120 --> 0:09:42.800 And the process is that the alternators get stripped down. 0:09:42.840 --> 0:09:46.680 In Australia then shifts to a low wage country in 0:09:46.720 --> 0:09:50.040 this case, probably Indonesia, but if it's the United States, 0:09:50.040 --> 0:09:55.240 almost certainly Mexico. The things have disassembled, some are reconditioned, 0:09:55.520 --> 0:09:58.199 some are just stripped down to their copper, and then 0:09:58.200 --> 0:10:00.480 the copper is sent to smelters pro probably in a 0:10:00.520 --> 0:10:04.400 country that has historically been tolerant of pollution, but these 0:10:04.480 --> 0:10:09.000 days mostly China, and the process is shipping millions and 0:10:09.080 --> 0:10:12.520 millions of dollars of copper around the world. Because the 0:10:12.559 --> 0:10:16.199 people in the low wage countries can't afford to finance 0:10:16.240 --> 0:10:19.160 those millions of dollars of copper. There's almost variably a 0:10:19.200 --> 0:10:22.640 trade finance company in there. And the typical sort of 0:10:22.760 --> 0:10:29.120 risk that you might be taking is the ultimately the 0:10:29.200 --> 0:10:31.760 recycled bits of metal are going to be sent to 0:10:31.880 --> 0:10:36.480 say thirty or forty different recycling yards in China, and 0:10:36.720 --> 0:10:39.960 those recycling yards you've got a credit risk against them, 0:10:40.240 --> 0:10:43.760 and you know the two ways of solving that that 0:10:43.840 --> 0:10:46.040 they buy the copper upfront, or it's some kind of 0:10:46.080 --> 0:10:50.520 cash on delivery system, and the alternative way of financing 0:10:50.520 --> 0:10:53.280 it is that you have some kind of experts in 0:10:53.360 --> 0:10:56.960 trade finance who knows that those Chinese that's are good 0:10:57.000 --> 0:11:01.120 for it. And the idea that you have some experts 0:11:01.160 --> 0:11:05.480 that knows which hundred and fifty Chinese recycling, Yeah, it's 0:11:05.480 --> 0:11:07.360 are good for the money in the West is a 0:11:07.400 --> 0:11:13.040 pretty difficult idea. And I'm not an expert in broad 0:11:13.080 --> 0:11:15.320 detection in China, but I would have no way of 0:11:15.320 --> 0:11:20.360 credit prossessing a hundred and fifty copy yards. Now there 0:11:20.360 --> 0:11:25.920 are businesses ensuring this, and the classic business insuring this 0:11:26.200 --> 0:11:30.720 is a French business could Boiler Hermes and I was 0:11:30.760 --> 0:11:33.320 talking to a Frenchman who pronounced it Euler, so I'll 0:11:33.320 --> 0:11:36.560 have to go with Youula. But Uler does sort of 0:11:36.559 --> 0:11:41.079 trade finance ensure the insurance, and it's a pretty reputable 0:11:41.120 --> 0:11:43.440 player and it's been around for a very long time, 0:11:43.520 --> 0:11:47.000 but it's not an enormous business. And then along comes 0:11:47.440 --> 0:11:50.280 other insurance companies wanting to get in on the act. 0:11:51.240 --> 0:11:54.839 And I'm thinking of my local one Insurance Australia group 0:11:54.880 --> 0:11:58.560 who did a joint venture with Tokio with a tide 0:11:58.720 --> 0:12:03.520 broker in Australia. At they are ensuring this sort of stuff. 0:12:03.520 --> 0:12:06.200 And the first time I actually came across them was 0:12:06.280 --> 0:12:08.840 when they were ensuring a whole of copy yards in 0:12:09.000 --> 0:12:13.120 China and they devolved simultaneously. So what what what was 0:12:13.200 --> 0:12:18.360 really going on was that copper was being sold, and 0:12:18.360 --> 0:12:22.520 it was metal recycling copper sort of alternative stuff being 0:12:22.559 --> 0:12:27.280 sold to recycling companies in China who were taking delivery 0:12:27.280 --> 0:12:29.640 and paying a little later. And it might have been 0:12:29.720 --> 0:12:33.000 fifty million dollars of copper in a shipment, and suddenly 0:12:33.040 --> 0:12:35.800 these guys ordered sort of three million and they're at 0:12:35.800 --> 0:12:39.080 thirty of them. And I'm surprised if the scandal has 0:12:39.120 --> 0:12:41.600 some sort of hit. But it's one of the bits 0:12:41.679 --> 0:12:49.640 that sits inside this insurance chain on trade finance. Now 0:12:49.800 --> 0:12:53.839 that insurance trade on trade finance included i AG, it 0:12:53.920 --> 0:12:58.760 included Tokeyo and Marine is also included the Australian, the Australian, 0:12:58.840 --> 0:13:05.120 but London based UM Greenfield. And the kindest way you 0:13:05.200 --> 0:13:08.559 can say this is that they walked into a shrinking 0:13:08.600 --> 0:13:12.960 business and they grew it like crazy where all the 0:13:13.000 --> 0:13:17.560 counterparties are obscure. Now I'm an old sort of guy, 0:13:17.600 --> 0:13:20.240 and the most scary thing in the world to invest 0:13:20.280 --> 0:13:25.080 in is a fast growing financial because anybody can grow 0:13:25.080 --> 0:13:28.640 a financial fast by just taking more risks. You want 0:13:28.640 --> 0:13:31.040 to grow a sub fright financial fast, you just stand 0:13:31.080 --> 0:13:32.880 up on the New York subway and say, does anyone 0:13:32.960 --> 0:13:35.640 want to borrow a thousand dollars and waigh the money. 0:13:36.640 --> 0:13:39.040 You have a very large loan book. Very fast, it 0:13:39.080 --> 0:13:44.560 won't be very good, right, And essentially the kindest version 0:13:44.800 --> 0:13:48.079 of this is this with the trade finance version of 0:13:48.160 --> 0:13:53.199 the same. Now, at some point it went from being 0:13:53.880 --> 0:13:58.840 the trade finance version of that to an unindoctorated pondsy 0:14:00.640 --> 0:14:05.760 and I don't know what that point was. But if 0:14:05.760 --> 0:14:09.080 you're a financial institution that has lost a lot of money, 0:14:10.480 --> 0:14:14.320 there are two parts. One is to admit it and 0:14:14.400 --> 0:14:16.319 the other one which has put the foot flap to 0:14:16.360 --> 0:14:22.640 the floorboards and hope to grow backfast. And somewhere along 0:14:22.640 --> 0:14:27.680 the line, Green Sill became that. And then there were 0:14:27.720 --> 0:14:31.640 a bunch of people who needed money. And one of 0:14:31.640 --> 0:14:35.600 the interesting things in this world is that the people 0:14:35.640 --> 0:14:40.720 who really really really need money have the net of 0:14:40.880 --> 0:14:44.560 finding the people who really really really need to lend it. Right. 0:14:44.680 --> 0:14:48.200 So you know, if I were sitting down, if I 0:14:48.240 --> 0:14:50.600 were sitting on the New York subway waving around, anyone 0:14:50.680 --> 0:14:54.840 want to borrow a thousand dollars? I get a fair 0:14:54.880 --> 0:14:57.440 few takers the first day, but by the fifth day, 0:14:57.800 --> 0:15:01.160 what would be happening would be everybody who is a 0:15:01.240 --> 0:15:07.000 completely desperate degenerate at my doorstep, right. And so somewhere 0:15:07.040 --> 0:15:09.320 along the lines they went into they got to that 0:15:09.400 --> 0:15:13.840 point and attracted the most degenerate gambler in the market. 0:15:14.480 --> 0:15:17.600 And the most degenerate gambler in the market has blown up. Yes, 0:15:17.680 --> 0:15:20.840 its name is soft Bank. John, Can I just press 0:15:20.880 --> 0:15:22.920 you on one thing about soft Bank because I wanted 0:15:22.920 --> 0:15:25.480 to ask you about this. So soft Bank's vision fund 0:15:25.640 --> 0:15:29.600 invested in green Cell. And when you look at something 0:15:29.640 --> 0:15:32.760 like green Cell, you know it's basically trade finance or 0:15:32.800 --> 0:15:36.200 cash advance. It doesn't strike me as a company with 0:15:36.240 --> 0:15:41.760 a particularly strong technology angle or pitch, Like, what exactly 0:15:41.800 --> 0:15:44.480 do you think the attraction was there? Entirely honest, It 0:15:44.560 --> 0:15:48.240 had no technology pitch, but it told everybody had had 0:15:48.240 --> 0:15:50.720 a technology which, right, which is a good way of 0:15:50.800 --> 0:15:57.880 raising money. Um, so specialty financed with like a tech valuation? Yes, yeah, 0:15:59.320 --> 0:16:02.000 The way to get valuation for a bullshit insurer in 0:16:02.000 --> 0:16:05.480 the US is to call it thinking. Right. There are 0:16:05.520 --> 0:16:09.600 several fin techs bacts which are just completely bad bullshit 0:16:09.680 --> 0:16:14.520 traditional insurers, but they are the most highly valued insurance 0:16:14.600 --> 0:16:19.600 companies in the world. The way that you get a 0:16:19.680 --> 0:16:22.680 high valuation for a junkie lender is to call it tech. 0:16:23.800 --> 0:16:26.960 But that that would be the kind interpretation for soft banks, 0:16:27.040 --> 0:16:31.200 but not kind interpretation for soft bank was that that 0:16:31.440 --> 0:16:37.640 capital that was invested by soft bank in Greenfield leave 0:16:37.720 --> 0:16:40.080 it up and then was invested by green sill in 0:16:40.160 --> 0:16:47.120 soft bank entity. So there's a company for Viewing being 0:16:47.160 --> 0:16:52.000 an example. And Viewing is a legitimates attempt at electro 0:16:52.160 --> 0:16:57.720 chromatic pimmable windows. You have a skyscraper where when you 0:16:57.760 --> 0:17:00.280 need a lot of heathen you you have we dont 0:17:00.320 --> 0:17:02.960 being completely transparent, and when you don't need a lot 0:17:03.000 --> 0:17:06.080 of heat in you make the windows quite dark because 0:17:06.119 --> 0:17:08.919 the sun is shining on them. And we see that 0:17:08.960 --> 0:17:13.080 with with chromatic glasses that you can do it much 0:17:13.160 --> 0:17:16.960 much better if you make the windows in some sense 0:17:17.000 --> 0:17:22.320 electro chromatic. There's a legitimate s g idea. But Viewing 0:17:22.560 --> 0:17:25.040 was a soft bank company of the good reason I 0:17:25.080 --> 0:17:29.080 suspect there was a legitimate tech idea, and to be 0:17:29.200 --> 0:17:33.800 mild with a disaster. And if you go look at 0:17:33.920 --> 0:17:38.200 glass door on Viewing and you go through the reviews 0:17:38.280 --> 0:17:41.080 on Viewing in two thousand and eighteen. The reviews are 0:17:41.119 --> 0:17:44.880 along the lines of, well, you know, on the plus side, 0:17:44.920 --> 0:17:47.879 there's a lot of room in the cart. And Viewing 0:17:48.280 --> 0:17:53.960 was absolutely a death store. It's cumulative revenue fifteen million stumulants, 0:17:53.960 --> 0:17:57.240 spending hundreds and hundreds and it just didn't seem to 0:17:57.280 --> 0:17:59.919 get traction. I don't know whether it didn't get traction 0:18:00.000 --> 0:18:02.840 because the product doesn't work, or the product was badly 0:18:02.880 --> 0:18:07.080 marketed the genuine or that the cost structures just didn't work. 0:18:07.160 --> 0:18:11.280 I have no idea, right, but this thing was absolutely 0:18:11.359 --> 0:18:16.399 clearly on the way out past and then Greenfield lenter 0:18:16.640 --> 0:18:20.560 four hundred million dollars and called it trade finance. Now, 0:18:20.600 --> 0:18:23.600 it can't be trade finance because Viewing hasn't sold anything, 0:18:23.640 --> 0:18:28.120 so it's receivables to factor. It's just an unsecured lines 0:18:28.160 --> 0:18:33.880 to a soft banking entity about four millions, which doesn't 0:18:33.920 --> 0:18:36.680 make any sense. Now, in this case, there's a good 0:18:36.760 --> 0:18:39.399 chance that soft baker might get the money back because 0:18:39.480 --> 0:18:43.119 Viewing Viewing looks like it might be a bit better 0:18:44.000 --> 0:18:48.960 now and it might get specked. But to pretend that 0:18:49.000 --> 0:18:51.920 this was trade finance at the end, and that they 0:18:51.920 --> 0:18:54.879 were provided and softmak must have known that this was 0:18:54.920 --> 0:18:58.160 not technologically driven trade finances. They were lending the softmare 0:18:58.200 --> 0:19:03.120 controlled entities. At the end, this was just a ponzi 0:19:03.880 --> 0:19:07.399 that was taking money from any books end with whether 0:19:07.480 --> 0:19:12.160 that anybody included somethingly or unknowingly, some bank would clearly 0:19:12.160 --> 0:19:32.160 a beneficiary. So your contention is that you know what, 0:19:32.160 --> 0:19:36.480 what was ostensibly some form of trade factoring just sorry, 0:19:36.760 --> 0:19:43.200 trade finance just became sort of completely reckless lending to anyone. Well, 0:19:44.000 --> 0:19:47.520 what did you like? This was Greenstell was a private company, 0:19:48.000 --> 0:19:51.280 so what. But but you were early on along with 0:19:51.320 --> 0:19:53.760 others and sort of I don't know, blowing the whistle 0:19:53.840 --> 0:19:57.119 is the right term, but sort of calling out their practices. 0:19:57.480 --> 0:20:02.159 What were the hints from the outside early on that 0:20:02.359 --> 0:20:05.800 something was a mess. In this case, the idea that 0:20:05.880 --> 0:20:08.360 trade finance could be ten x is because it used 0:20:08.400 --> 0:20:11.800 to be. It is just an idea that flies in 0:20:11.840 --> 0:20:15.040 the face of history. There's a very very good reason 0:20:15.119 --> 0:20:18.240 why trade finances are shrinking business on d and fifty 0:20:18.280 --> 0:20:21.240 year basis right, and the very very good reason is 0:20:21.359 --> 0:20:26.800 better communications, better finance, and better transport. Right, all of 0:20:26.840 --> 0:20:29.720 those and the bits that are left are the bits 0:20:29.760 --> 0:20:33.720 that are by definition a little risky. Financing stuff sold 0:20:33.720 --> 0:20:37.320 to retailers is risky. We know that because retailers default. 0:20:37.359 --> 0:20:40.800 And if you look at oilers oilers results, oilers results 0:20:40.840 --> 0:20:45.000 go up and down with retell, right, But the other things, 0:20:45.080 --> 0:20:48.720 this whole sort of mental commodities change chain, where you're 0:20:48.800 --> 0:20:53.080 financing to an unidentifiable company in China. The idea that 0:20:53.119 --> 0:20:56.400 this could be a ten times bigger business was sort 0:20:56.400 --> 0:20:59.359 of an asthma. I have to say that I'm completely 0:20:59.400 --> 0:21:04.719 reliant here on. I became very reliant here on certain journalists, 0:21:05.080 --> 0:21:10.960 the ft journalists, Twitter Handles, Bonde, Robert Smith, and more 0:21:11.000 --> 0:21:15.600 importantly the Austry journalist, journalist Duncan Mayven and Don't even 0:21:15.680 --> 0:21:19.320 sent me some questions about Insurance Australia Group, and I 0:21:19.359 --> 0:21:23.920 put two and two together and realized that Insurance Australia 0:21:23.960 --> 0:21:27.840 Group might be ensuring vast amounts of stuff on which 0:21:27.840 --> 0:21:32.320 it was likely to default. And I sent a quick 0:21:32.440 --> 0:21:36.520 about a page and a half letter to the local regulators. 0:21:36.520 --> 0:21:38.840 And in this case, the local regulator is somebody who 0:21:38.920 --> 0:21:41.439 used to sit five chairs away from me in the 0:21:41.480 --> 0:21:44.200 Federal Treasury when I was a very junior employee in 0:21:44.240 --> 0:21:46.880 the Federal treasure and he's now the sort of head 0:21:46.920 --> 0:21:51.400 insurance regulator in Australia. So we sort of knew each other, 0:21:51.480 --> 0:21:55.639 and I always I put an editor adversion letter on 0:21:55.760 --> 0:21:59.960 my block. But to say that I called the whisk 0:22:00.000 --> 0:22:03.640 and learn any real sense overstates my role. The real 0:22:03.800 --> 0:22:08.000 the real whistle calls here were Duncan Duncan Maven Robert Smith, 0:22:08.160 --> 0:22:11.840 who were both who were both fantastic journalists and certainly 0:22:11.840 --> 0:22:16.239 worth subscribing to their papers for I looked at it 0:22:16.240 --> 0:22:18.600 and knew they were right. And I knew they were 0:22:18.720 --> 0:22:22.919 right because the idea of a very fast trade by trade, 0:22:23.160 --> 0:22:28.600 fast growing trade finance company just didn't make any logical sense. Now, 0:22:28.920 --> 0:22:34.639 the second one of these blow ups, um I didn't 0:22:34.640 --> 0:22:40.399 mention Credit Swiss here, but Duncan Maven had certainly asked 0:22:40.400 --> 0:22:44.240 several questions of Credit Swiss because Credit Swiss had this 0:22:44.520 --> 0:22:48.199 fund that was buying all the green silk paper, and 0:22:48.200 --> 0:22:51.480 it was selling the green silk paper to its clients 0:22:51.480 --> 0:22:53.439 on the basis that it was double A rated and 0:22:53.480 --> 0:22:59.080 insured and either it is insured or it's not and 0:22:59.480 --> 0:23:03.960 it is ensure it. Then Insurance Australia Group and Copy 0:23:04.040 --> 0:23:07.320 of Marine in some order are going to take billions 0:23:07.320 --> 0:23:11.480 of dollars of losses, and if it's not ensured, then 0:23:11.520 --> 0:23:14.800 at first glance, the clients that swiss are going to 0:23:14.840 --> 0:23:19.120 take billions of dollars at losses. But we know from 0:23:19.160 --> 0:23:22.760 the last cycle that if you miss self wrapped clients, 0:23:22.800 --> 0:23:27.560 just straight out miss sell, then those losses will slip 0:23:27.640 --> 0:23:30.879 back to you and you can pull out any of 0:23:30.960 --> 0:23:34.520 the marketing documents to this fun It was absolutely clear 0:23:34.560 --> 0:23:38.119 it was pitched to the investors as double A rated 0:23:38.160 --> 0:23:42.680 insure it and as far as I can tell, there 0:23:42.760 --> 0:23:46.360 was no due diligence done by credits with around those statements. 0:23:47.280 --> 0:23:51.480 And it's absolutely clear to me the credits with if 0:23:51.520 --> 0:23:54.639 it can't collect from the insurers, is going having to 0:23:54.640 --> 0:23:58.080 pay the clients out there at the moment saying well 0:23:58.119 --> 0:24:01.600 that the problems our clients problem, which is, you know, 0:24:01.920 --> 0:24:04.960 a pretty self destructive thing to do, because you know, 0:24:05.000 --> 0:24:08.159 if your credits with your pitch to the world is 0:24:08.200 --> 0:24:12.160 that you know, we're a good home to say high 0:24:12.240 --> 0:24:17.359 networth people too have as the sort of generalized financial advisor, 0:24:18.240 --> 0:24:20.520 and then when the ship hits the band, okay, high 0:24:20.560 --> 0:24:23.280 networth people were going to screw you. You know, Screwing 0:24:23.280 --> 0:24:25.720 your clients is not a good business model anyway, and 0:24:25.720 --> 0:24:29.720 that's probably enough to think that credits With his long 0:24:29.840 --> 0:24:35.719 term structurally challenged. But they must know that those losses 0:24:35.720 --> 0:24:38.960 are going to wind up with them. The second part 0:24:38.960 --> 0:24:41.680 of that is, you know, there's never only one cop roach, 0:24:43.200 --> 0:24:47.520 and we didn't know about Archie Goods. But I'm actually 0:24:47.600 --> 0:24:49.919 chasing down and I'm not going to name it, another 0:24:50.080 --> 0:24:54.560 very big European fraud where we think that Credits With 0:24:54.880 --> 0:24:58.600 is going to have ten blow tend fig at the 0:24:58.720 --> 0:25:03.679 loss is something and that bill your range and you know, 0:25:04.040 --> 0:25:07.720 this multiple pop roach they had credit Swiss is kind 0:25:07.720 --> 0:25:10.840 of amusing. I knew who built bang was because I 0:25:11.080 --> 0:25:14.800 followed him before he had blown up, because he actually 0:25:14.840 --> 0:25:18.199 owned some Chinese fluds that I was sure, and the 0:25:18.280 --> 0:25:21.720 guy was always very aggressive there. But if you had 0:25:21.720 --> 0:25:24.800 a diversified portfolio, some of which were frauds, but all 0:25:24.840 --> 0:25:27.440 of which were in China, and you did this over 0:25:27.520 --> 0:25:30.600 to since two thousand and eleven, he did all right 0:25:30.800 --> 0:25:34.000 until you know, you doubled down and then doubled down again, 0:25:34.040 --> 0:25:37.240 and then doubled down again on G S X. But 0:25:37.400 --> 0:25:41.119 when he no longer took public money the sort of 0:25:41.400 --> 0:25:44.200 strengths are taking public money, which is one of which 0:25:44.240 --> 0:25:46.600 is that's pretty hard to be certain times leader, because 0:25:46.600 --> 0:25:50.040