Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Well about I think about fifty to sixty percent of
Speaker 2: CI debt is held by the CNBS market, So that's
Speaker 2: an investor problem. That's not my problem, that's somebody else's problem.
Speaker 2: And then maybe forty percent is held by banks. Very
Speaker 2: little of that is held by large banks as a
Speaker 2: percentage of their of their assets. You know, some regional
Speaker 2: banks have significant risk, and it's a problem, but you
Speaker 2: know they're able to pull shtick, you know, as we
Speaker 2: always like to say, maybe there's a rolling loan catches
Speaker 2: no loss. I mean, they just roll it until they
Speaker 2: can't roll it anymore. So, you know, commercial real estate
Speaker 2: is a problem that's sort of glacial in that way.
Speaker 2: You know, they'll be restructurings. Banks will have issues, some
Speaker 2: regional banks, I mean, and I don't know if any
Speaker 2: regional banks will go under or not. But it's not
Speaker 2: a systemic It's not just not a systemic issue.
Speaker 3: If I think about the biggest problems facing us. Unfortunately,
Speaker 3: I know that you don't care that much about the
Speaker 3: federal deficit and debt. But how calm, like if we're
Speaker 3: billion dollars a month in servicing costs.
Speaker 2: I'm gonna take on my violin.
Speaker 3: Okay, but more than the military, okay, sometimes so can
Speaker 3: I can.
Speaker 2: I like to take a couple of Number one, I'm
Speaker 2: gonna I'm gonna put you in the camp of what
Speaker 2: I like to call the OI, the deficit crowd.
Speaker 3: Yes, I'm there, I'm ready, You're there, Me and Lisa.
Speaker 2: I'm not an economist, but I understand arguments, and literally
Speaker 2: every single word that people are uttering about the deficit
Speaker 2: today has been uttered by somebody for forty years now.
Speaker 2: In my business, being too early is being the equivalent
Speaker 2: of being wrong. But I've been he too early. I've
Speaker 2: been two years to early. I've been forty years too early.
Speaker 2: So clearly that it's more complicated than the deficit people
Speaker 2: like to say, you know, is there a point where
Speaker 2: it becomes an issue? Sure, but you know how you'll
Speaker 2: know instead of on a day like today where the
Speaker 2: ten year is down, how many basis points is it?
Speaker 2: Do just eleven? You'll walk in and it'll be up
Speaker 2: fifty and you'll say, oh, you're the deficit, and then
Speaker 2: it'll be relevant exactly.
Speaker 3: This is exactly the same as housing, right.
Speaker 2: You know, forty years forty years long time. It's really
Speaker 2: just a very, very long and the argument as to
Speaker 2: why I think it's just not that relevant. Excuse me
Speaker 2: my ear piece, you don't need you, is that it
Speaker 2: has to be that the fear about the deficit causes
Speaker 2: people to start to walk away from the dollar. That's
Speaker 2: the feedback loop. So let's think about that for a second.
Speaker 2: Why is the dollar the reserve currency of the world.
Speaker 2: It's actually very simple. Big money has to park its
Speaker 2: money somewhere, and they're only going to park it in
Speaker 2: the most liquid, safest bond market in the world, and
Speaker 2: that's the US government bond market. Until there's actual replacement,
Speaker 2: the US dollar will be the reserve currency of the world.
Speaker 2: And what you're talking about is just going to be academic.
Speaker 2: It's not China, it's not Europe. You know, no offense
Speaker 2: to all your crypto people, it's not going to be crypto.
Speaker 2: So until somebody can show up and show me some
Speaker 2: replacement for the US government bond market, I'm just not concerned.
Speaker 1: And it remains to be seen if that will happen
Speaker 1: in the next forty years. But before we get there,
Speaker 1: I do want to talk about the state of shorting.
Speaker 1: Of course, you were in the Big Short Steve Carell
Speaker 1: played you great movie, But it feels like this on.
Speaker 2: My tombstone already, by the way it's carved in.
Speaker 1: But in any case, it feels like the state of
Speaker 1: shorting in this market. This just feels like an environment
Speaker 1: where companies won't die. And you see these high valuation,
Speaker 1: high flying stocks, and it just feels like there's a
Speaker 1: lot of temptation out there to short. But how are
Speaker 1: you thinking about short selling?
Speaker 2: I don't shure it for clients at all. I short
Speaker 2: any bitty little bit for myself once in a while.
Speaker 2: I mean, what I would say to people is number one,
Speaker 2: a couple of rules about shorting. Shortening of stock purely
Speaker 2: because you think it's expensive is a death wish. You
Speaker 2: have to have a fundamental reason to be short of stock.
Speaker 2: You know, isn't vity expensive? I mean, yeah, it's expensive,
Speaker 2: but earnings have tripled, so you know, you could have
Speaker 2: made that argument a year or so ago and then
Speaker 2: earnings doubled or triple whatever they did. So look, I
Speaker 2: think the economy is fine. Is it slowing to a
Speaker 2: little bit? It sure, our delinquencies up a little bit
Speaker 2: in consumers, Okay, but there's no fundamental case to be
Speaker 2: massively short things. I mean, are other individual stories. Maybe
Speaker 2: you could short here and there. Sure, but but to
Speaker 2: go after you know, the market, I think it's insanity.
Speaker 3: But you know we have the DOJ going after short sellers.
Speaker 3: I mean, don't they serve an important person.
Speaker 2: To serve an important purpose. I don't understand whether the
Speaker 2: do goes after short sellers.
Speaker 1: The other thing to it, I believe you were one
Speaker 1: short Tesla for a certain amount of time too.
Speaker 2: What would the lessons learned there?
Speaker 1: Because you've seen so many people get squeezed on trying
Speaker 1: to short that stock in this market.
Speaker 2: I've been shortened, I haven't been shorted. It's a look
Speaker 2: you can. I think you get at times short tesla
Speaker 2: when the fundamentals are deteriorating, and then then people stop
Speaker 2: focusing on the fundamentals and they start talking about, you know,
Speaker 2: the dream of auto taxis or AI or whatever, and
Speaker 2: then then it becomes impossible. So Test is not a
Speaker 2: stock to be short long term at all.