WEBVTT - Chanos & Company President Jim Chanos Talks China Tariffs 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.880 --> 0:00:10.240 I want to welcome now our Bloomberg Radio and YouTube 0:00:10.280 --> 0:00:12.800 audiences as we bring in our big guests this hour. 0:00:12.960 --> 0:00:15.080 My co anchor for The Clothes Remain Boss It joins 0:00:15.160 --> 0:00:17.680 us now as we sit down for an exclusive conversation 0:00:17.800 --> 0:00:21.560 with Jim Chainos, President and founder of Chinos and Company. Jim, 0:00:21.600 --> 0:00:22.200 welcome back. 0:00:22.360 --> 0:00:24.000 Oh good to be back. Thank you for having me. 0:00:24.239 --> 0:00:27.040 You are a born skeptic. Some might even say cynek. 0:00:27.360 --> 0:00:30.720 You've built your career on questioning conventional wisdom, what people, 0:00:30.880 --> 0:00:33.920 what companies say. So when it comes to expectations for 0:00:33.960 --> 0:00:37.040 trumpnomics and the market under Donald Trump, what is the 0:00:37.040 --> 0:00:38.440 crowd perhaps getting wrong? 0:00:38.479 --> 0:00:39.479 What are they not seeing? 0:00:40.600 --> 0:00:43.800 Well? I think that and I've been posting that. 0:00:43.920 --> 0:00:45.920 I think the budget cuts are going to be a 0:00:45.920 --> 0:00:48.600 lot harder than people think. I mean, we're going after 0:00:49.159 --> 0:00:53.440 kind of the low hanging fruit both practically and politically 0:00:53.520 --> 0:00:58.600 right now, like the USAID stuff. But this is is 0:00:58.640 --> 0:01:01.240 outrageous as some of the things that the Doche Committee 0:01:01.280 --> 0:01:03.160 is finding, and I agree that some of them are 0:01:03.480 --> 0:01:07.520 are pretty silly. I think that materially we're not really 0:01:07.520 --> 0:01:09.520 going to be able to do a lot until you 0:01:09.560 --> 0:01:14.680 get to kind of more serious items like medicare, medicaid, defense, 0:01:15.720 --> 0:01:16.520 the third reil. 0:01:16.840 --> 0:01:17.640 And yeah, the. 0:01:19.360 --> 0:01:21.920 Hot ticket third rail type stuff, and that's going to 0:01:21.959 --> 0:01:25.280 be much much tougher. And so I think we're still 0:01:25.319 --> 0:01:30.240 in the early parts of sort of political theater on Trumpanomics. 0:01:30.520 --> 0:01:32.600 And then of course we have the whole separate issue. 0:01:32.360 --> 0:01:34.960 Of tariffs, and that gets me to the next question. 0:01:35.000 --> 0:01:37.080 I mean, you look at Trump's policies overall, they're both 0:01:37.120 --> 0:01:40.600 populist and as you've described them, standard republican, but so 0:01:40.680 --> 0:01:43.319 far he's chosen to focus on trade war over say, 0:01:43.560 --> 0:01:46.800 cutting taxes. So what does this tell you about Trumpanomics 0:01:46.920 --> 0:01:50.480 in this second go round rather than the first attempt. 0:01:51.280 --> 0:01:53.880 Yeah, so, I mean, he obviously came right out of 0:01:53.920 --> 0:01:56.760 the gate with the tariffs over this past weekend that 0:01:56.800 --> 0:02:02.440 have been walked back temporarily, so it appears they're serious there. 0:02:02.880 --> 0:02:07.840 We'll see the fact that Mexico and Canada kind of 0:02:07.880 --> 0:02:09.320 agreed to do things that they had. 0:02:09.200 --> 0:02:11.520 Already agreed to do. I mean, Mexico had. 0:02:11.639 --> 0:02:14.359 Ten to fifteen thousand troops on its border going back 0:02:14.400 --> 0:02:17.320 to twenty seventeen, and a promise they made to Trump 0:02:17.440 --> 0:02:22.520 the first go around and reiterated with Biden. So again, 0:02:22.520 --> 0:02:25.679 how much is political theater, how much is real? We'll 0:02:25.680 --> 0:02:29.720 have to see China. The China tariffs I think obviously 0:02:29.800 --> 0:02:32.080 are a lot more serious and are worth watching. 0:02:32.360 --> 0:02:33.680 What's the economic risk? 0:02:34.800 --> 0:02:37.320 Well, the economic risk, I mean there's a couple of 0:02:37.760 --> 0:02:41.600 problems with the message, which is, well, we charge enough tariffs, 0:02:42.080 --> 0:02:44.959 we really can eliminate things like the income tax and 0:02:45.120 --> 0:02:47.840 a lot of other sort of broad promises. And the 0:02:47.880 --> 0:02:50.079 fact of the matter is, I mean tariffs I think 0:02:50.080 --> 0:02:53.640 brought in about eighty billion dollars last year, and so 0:02:53.960 --> 0:02:56.680 you know, in order for tariffs to replace the income tax, 0:02:56.720 --> 0:02:59.959 which is about two trillion of our four trillion revenues, 0:03:00.680 --> 0:03:01.919 you gotta have a lot of tariffs. 0:03:02.480 --> 0:03:05.080 So I don't think we're looking at that. 0:03:05.280 --> 0:03:09.080 I think the question is is this being used as 0:03:09.400 --> 0:03:13.680 a national security cudgel as well as an economic cudgel 0:03:13.800 --> 0:03:18.079 or is it strictly economics. Because they really believe they 0:03:18.080 --> 0:03:21.080 can raise a lot of money with tariffs, the numbers 0:03:21.160 --> 0:03:22.280 just kind of don't pencil out. 0:03:22.600 --> 0:03:23.239 I am curious. 0:03:23.280 --> 0:03:25.960 So when we talk about the potential overhang of this, 0:03:26.080 --> 0:03:28.120 I mean, I know, in fairness to the Trump administration. 0:03:28.120 --> 0:03:30.080 It's only been a couple of weeks here, but the 0:03:30.160 --> 0:03:33.119 idea that now Mexico and Canada have won a one 0:03:33.120 --> 0:03:37.120 month reprieve, at least for investors and economic watchers, that's 0:03:37.480 --> 0:03:40.800 another month of uncertainty. Do you think we'll get more 0:03:40.800 --> 0:03:44.320 of a concrete policy, meaning an actual resolution of some 0:03:44.440 --> 0:03:47.200 form or another that will at least provide some certainty to. 0:03:47.200 --> 0:03:48.600 The market with it the market likes it or not, 0:03:48.640 --> 0:03:49.600 that's all another conversation. 0:03:49.680 --> 0:03:50.360 Yeah, well, I. 0:03:50.280 --> 0:03:53.360 Think drama's part of the message remained. I mean, it 0:03:53.440 --> 0:03:56.280 wasn't the first administration. I don't see a whole lot 0:03:56.320 --> 0:03:59.360 different changing in this. I mean, the one thing you 0:03:59.440 --> 0:04:02.720 might might at least point out in the past administration 0:04:03.080 --> 0:04:05.160 for good or bad, I didn't have to, you know, 0:04:05.240 --> 0:04:08.480 check my my x feed first thing in the morning 0:04:08.560 --> 0:04:10.760 to see what was coming out of the White House overnight. 0:04:11.560 --> 0:04:13.680 And so you know, we're back to we're back to 0:04:15.120 --> 0:04:18.960 a much more volatile set of political you know, political 0:04:18.960 --> 0:04:22.440 pronouncements and streams and walk backs, and it's a little 0:04:22.480 --> 0:04:23.159 more uncertainty. 0:04:23.400 --> 0:04:26.040 Well, how much confidence do you have in the people 0:04:26.200 --> 0:04:28.680 around Trump? Because Trump himself, you know, he's just sort 0:04:28.720 --> 0:04:31.320 of this four text but there are some relatively competent 0:04:31.360 --> 0:04:35.320 people around him, including the Treasury Secretary, who you have 0:04:35.560 --> 0:04:38.640 some familiary with back when you were running Kinecolty Strange. 0:04:38.680 --> 0:04:40.520 He was one of your first analytics out there. 0:04:40.560 --> 0:04:42.640 He was my first So you liked him, then, do 0:04:42.680 --> 0:04:44.000 you still like him out I. 0:04:44.400 --> 0:04:45.840 Like Scott Passid an awful lot. 0:04:46.240 --> 0:04:48.960 We don't show the same politics, but he's a man 0:04:49.040 --> 0:04:53.359 of real character, and I think he was probably the 0:04:53.400 --> 0:04:57.080 best man for the job given the political arena. So 0:04:57.400 --> 0:04:59.520 I'm hoping he does well. I think he you know, 0:05:00.040 --> 0:05:02.520 he will do well, hopefully, and I know he has 0:05:02.560 --> 0:05:04.159 the country's best interest at heart. 0:05:04.320 --> 0:05:05.880 And you did see him, but you didn't actually get 0:05:05.880 --> 0:05:07.839 to talk to him about what he's doing right now. 0:05:08.000 --> 0:05:10.000 Well, I was able to see him and congratulate him 0:05:10.040 --> 0:05:14.160 after he got the nods, so he's got his hands full. 0:05:14.839 --> 0:05:17.800 You've described the last few years as the golden age 0:05:17.800 --> 0:05:21.000 of fraud, funny accounting, questionable behavior on the parts of 0:05:21.040 --> 0:05:24.680 investors of companies. How would you describe where we are now? 0:05:24.720 --> 0:05:27.520 Given that the lines between government and business are pretty 0:05:27.560 --> 0:05:30.479 much blurred, more intertwined than ever. You've got Elon Musk 0:05:30.560 --> 0:05:34.000 running dog, You've got the president selling his own meme coin. 0:05:34.320 --> 0:05:37.520 You've got regulators perhaps taking their hands off the wheel completely. 0:05:38.760 --> 0:05:42.800 Yeah, I'm hard pressed to think that we're going to 0:05:42.839 --> 0:05:46.320 see less of it in the near term. It sure 0:05:46.400 --> 0:05:49.640 seems like we're going to see more of it. Look, 0:05:50.320 --> 0:05:53.320 this is a cycle the likes of which I've never seen. 0:05:53.839 --> 0:05:56.279 And the willingness of people to believe things that just 0:05:56.320 --> 0:06:00.960 simply aren't true never stops to ceases to amaze me, 0:06:01.520 --> 0:06:07.000 particularly as a cycle carries on. And the willingness of 0:06:07.080 --> 0:06:11.440 management teams now to project way into the future and 0:06:11.480 --> 0:06:14.880 make all kinds of claims and promises I think is 0:06:14.920 --> 0:06:18.400 also sort of unprecedented. It's always been there, but it's 0:06:18.520 --> 0:06:19.239 greater now. 0:06:19.720 --> 0:06:19.919 You know. 0:06:20.279 --> 0:06:23.479 I've always said that bull markets place a premium on 0:06:23.600 --> 0:06:27.960 promises and bear markets discount reality. And right now there's 0:06:28.040 --> 0:06:30.239 lots of companies making lots of promises. 0:06:30.080 --> 0:06:32.480 Lots of promises, but what is the reality? And I mean, 0:06:32.480 --> 0:06:36.279 and to Scarlett's point, you have some conflicts of interest 0:06:36.360 --> 0:06:38.680 in some of the folks who are I don't know 0:06:38.680 --> 0:06:40.120 if they're in charge. I mean they would say they're 0:06:40.160 --> 0:06:42.320 not in charge, but certainly sort of leading the charge 0:06:42.800 --> 0:06:44.599 in sort of trying to sort of root out whatever 0:06:44.640 --> 0:06:47.000 they think could potentially be bogging. 0:06:46.720 --> 0:06:47.400 Us down here. 0:06:47.880 --> 0:06:50.719 If you're not a friend of Elon Musk or a 0:06:50.720 --> 0:06:53.279 friend of Trump, and you're running a company or an 0:06:53.320 --> 0:06:54.480 investment fund, should. 0:06:54.200 --> 0:06:54.760 You be worried? 0:06:54.839 --> 0:06:55.039 Yeah? 0:06:55.080 --> 0:06:55.960 I mean, I don't know. 0:06:56.040 --> 0:06:58.039 I don't know how personal it's all going to get 0:06:58.320 --> 0:07:03.120 to companies and individuals. But but I am concerned that 0:07:03.279 --> 0:07:08.240 we have this whole new new structure set up with 0:07:08.360 --> 0:07:10.920 people that are basically going in again. And if you 0:07:11.000 --> 0:07:15.000 read the President's executive order setting up the DOGE Committee, 0:07:15.000 --> 0:07:18.960 which was an existing committee, the US Digital Services Committee, 0:07:19.600 --> 0:07:24.160 it has no budgetary authority or even recommendations. It's it's 0:07:24.360 --> 0:07:28.880 set up as a technology in software consulting organizations. So 0:07:28.920 --> 0:07:32.200 obviously the bally Wick has expanded to be something much 0:07:32.240 --> 0:07:32.960 greater than that. 0:07:33.520 --> 0:07:35.160 And the question will be, you. 0:07:35.120 --> 0:07:37.760 Know, well, at some point a federal judge somewhere say 0:07:37.800 --> 0:07:40.480 wait a minute, you know this is you're going beyond 0:07:40.640 --> 0:07:44.000 your your purview, beyond your legal. 0:07:43.800 --> 0:07:45.960 Does it undermine faith though in the system. I mean, 0:07:46.000 --> 0:07:48.360 particularly when I see people rooting around in the treasury system. 0:07:48.400 --> 0:07:50.440 I mean, we can talk about USAID and some of 0:07:50.480 --> 0:07:51.679 these other things, but the Treasury. 0:07:51.760 --> 0:07:53.400 I mean, we're talking about the background. 0:07:53.080 --> 0:07:53.320 Of our. 0:07:54.960 --> 0:07:55.360 Structure. 0:07:55.400 --> 0:07:58.960 Yeah, I mean we'll see, and we'll see to the 0:07:59.000 --> 0:08:04.000 extent when it goes beyond just you know, aerobic studies 0:08:04.040 --> 0:08:08.520 about shrimp and USAID and gets into social security and 0:08:09.120 --> 0:08:10.680 Medicare payments and things like that. 0:08:10.720 --> 0:08:11.680 They're really serious. 0:08:12.080 --> 0:08:14.000 And then I think you're going to see you're going 0:08:14.040 --> 0:08:16.360 to if there's any pushback, it's going to be pretty serious. 0:08:16.880 --> 0:08:19.160 I want to shift to our conversation now to the 0:08:19.240 --> 0:08:21.040 tariffs on China, which you said are going to be 0:08:21.160 --> 0:08:23.520 much more serious. The US began imposing an additional ten 0:08:23.560 --> 0:08:27.320 percent tariff on Chinese goods, and Beijing's response was targeted 0:08:27.360 --> 0:08:30.480 tariffs on about eighty products, which hardly seems like a 0:08:30.480 --> 0:08:31.720 proportional response. 0:08:32.320 --> 0:08:33.200 What does this reveal? 0:08:33.280 --> 0:08:35.920 Does this indicate that China has more to lose from 0:08:36.000 --> 0:08:38.000 a trade war with the US than the other way around. 0:08:38.679 --> 0:08:42.040 I mean, the argument for the administration is that they 0:08:42.040 --> 0:08:44.360 do right, that China has much more to lose. They're 0:08:44.440 --> 0:08:49.400 much more export driven country. We'll we'll have to see. 0:08:49.400 --> 0:08:51.760 I mean, I think China probably feels it was proportional, 0:08:52.280 --> 0:08:54.280 and we don't know what discussions are going on behind 0:08:54.320 --> 0:08:58.200 the scenes, So I think again, wait and see, but 0:08:58.600 --> 0:09:01.719 I think that ten percent isn't going to do it, 0:09:01.760 --> 0:09:04.040 by the way, I mean, getting back to our early 0:09:04.080 --> 0:09:07.079 conversation about the amount of tariffs you need to raise 0:09:07.080 --> 0:09:10.080 serious revenues. You know, you would have to raise them 0:09:10.240 --> 0:09:14.400 substantially on both China and EU, and we haven't seen 0:09:14.440 --> 0:09:19.000 that yet. So we'll have to see what exactly comes 0:09:19.200 --> 0:09:21.040 within thirty days sixty days. 0:09:21.400 --> 0:09:24.480 Does it escalate or does it cool off? 0:09:24.520 --> 0:09:27.720 And it was an early campaign promise that he's delivered 0:09:27.760 --> 0:09:29.680 on and now he's moved on to something else. 0:09:29.760 --> 0:09:31.600 But at the same time, this comes at a precarious 0:09:31.600 --> 0:09:34.080 time for China's economy. You've been warning for a long 0:09:34.120 --> 0:09:37.960 time about China's debt bubble and his broken economic model. 0:09:38.320 --> 0:09:41.720 What does the imposition of turfs now an additional ten percent, 0:09:41.760 --> 0:09:44.520 but you know, perhaps going even higher mean for that 0:09:44.840 --> 0:09:45.840 long term. 0:09:45.800 --> 0:09:46.920 To be fine. Yeah, it doesn't. 0:09:46.960 --> 0:09:49.040 It doesn't help it, that's for sure, because I mean, 0:09:49.160 --> 0:09:56.160 China saw fewer reliance on net exports after twenty ten 0:09:56.200 --> 0:09:59.320 when we first put out our warning, and it's growing again. 0:10:00.000 --> 0:10:01.760 And part of that is due to the fact that 0:10:01.800 --> 0:10:06.280 the investment driven model that we've been crying wolf about forever, 0:10:07.240 --> 0:10:12.160 albeit correctly, is losing its impetus to continue to grow, 0:10:12.400 --> 0:10:16.200 and the banking system is still bloated. And we've seen 0:10:16.240 --> 0:10:19.880 now problems in the residential real estate area completely trickle 0:10:19.960 --> 0:10:24.440 down into the actual developers. So they've got a model 0:10:24.480 --> 0:10:29.760 that really now is facing kind of a crossroads with 0:10:29.800 --> 0:10:32.400 what they're going to do, and the US putting on 0:10:32.480 --> 0:10:36.160 major tariffs to one of their few thriving parts of 0:10:36.200 --> 0:10:39.960 the engine, the export manufacturing area isn't going to help, 0:10:40.160 --> 0:10:40.560 all right. 0:10:40.480 --> 0:10:43.200 A moment of reckoning them perhaps for China, Jim. We 0:10:43.240 --> 0:10:45.480 look at the market. It's now three months after the election. 0:10:45.600 --> 0:10:47.880 The S and P five hundred is up about four percent, 0:10:48.160 --> 0:10:51.520 just about a percent shy of as record high. Isn't 0:10:51.559 --> 0:10:54.240 it still just a big long trade right now? How 0:10:54.280 --> 0:10:56.760 significantly different is the market under Trump than it was 0:10:56.840 --> 0:10:57.400 under Biden? 0:10:58.520 --> 0:10:59.600 Well, I mean it did pretty well. 0:11:00.360 --> 0:11:03.360 It did pretty well under Trump Trump first go round too, 0:11:03.559 --> 0:11:08.000 So it's done pretty well under both administrations. And historically 0:11:08.040 --> 0:11:10.920 the equity markets have done better under democratic administrations than 0:11:11.000 --> 0:11:12.160 republic administrations. 0:11:12.480 --> 0:11:16.800 Everyone kind of forgets that, but it's. 0:11:16.120 --> 0:11:18.520 Hard pressed to see if you just look at the 0:11:18.520 --> 0:11:21.840 continuity of the last eight or nine years, or even 0:11:21.880 --> 0:11:25.440 going further back where where the elections were, because I mean, 0:11:25.960 --> 0:11:29.760 really they've the market's done pretty well under all administrations. 0:11:29.880 --> 0:11:33.000 And because it's done so well, there's little institutional appetite 0:11:33.120 --> 0:11:35.360 for short selling. And just over a year ago you 0:11:35.360 --> 0:11:38.080 converted her hedge fund into a family office and an 0:11:38.120 --> 0:11:41.720 advisory Because of that, we recently saw activists short seller 0:11:42.360 --> 0:11:46.000 Nate Anderson quit as well, shutting down Hindenberg Research. Is 0:11:46.040 --> 0:11:48.680 the traditional short selling strategy just dead now? 0:11:48.880 --> 0:11:49.080 Well? 0:11:49.120 --> 0:11:52.040 I mean, so there's two different models there that you've referenced, 0:11:52.040 --> 0:11:56.680 the sort of traditional model that we employed for better 0:11:56.720 --> 0:12:00.400 part of forty years, which was just simply putting on 0:12:00.480 --> 0:12:04.880 short positions hedged or unhedged for our clients who were 0:12:04.880 --> 0:12:08.079 looking for that exposure. And then there's the short activist model, 0:12:08.120 --> 0:12:12.920 which people like Nate and others have perfected or really 0:12:13.080 --> 0:12:15.600 done well with. And so I think it's almost two 0:12:15.600 --> 0:12:21.840 different questions. There is virtually very little appetite for a 0:12:21.880 --> 0:12:24.840 short oriented fund product. 0:12:24.559 --> 0:12:25.520 Even if it's hedged. 0:12:26.760 --> 0:12:26.880 Now. 0:12:26.920 --> 0:12:28.480 A lot of that is the advent. 0:12:28.200 --> 0:12:31.720 Of the so called pod shops, the multimanager shops, which 0:12:31.760 --> 0:12:35.120 have done a pretty good job of delivering returns with 0:12:35.280 --> 0:12:38.240 very little net exposure, which is what the long short 0:12:38.280 --> 0:12:41.760 industry did for years and years and years. That changed 0:12:42.160 --> 0:12:46.600 the long short industry morphed into basically mostly long on 0:12:46.679 --> 0:12:51.439 the hedge fund side. But I think that I think 0:12:51.480 --> 0:12:55.720 there's always always a market for insurance, as I've said, 0:12:55.840 --> 0:12:58.839 and remember that good fundamental short. 0:12:58.559 --> 0:13:00.000 Positions allow you to be more long. 0:13:00.800 --> 0:13:03.080 That's always been the point that they allow you to 0:13:03.120 --> 0:13:04.080 finance your lungs. 0:13:04.400 --> 0:13:06.200 So for us, it was passive, right. 0:13:06.240 --> 0:13:09.640 We we bought the indices and had our short portfolio. 0:13:10.000 --> 0:13:13.319 And by the way, I mean Bloomberg has a wonderful 0:13:14.000 --> 0:13:17.720 short index and it's in the terminal, the Goldman Sachs 0:13:17.840 --> 0:13:21.480 Most Shorted Index. It's rebalanced monthly. If you looked at 0:13:21.480 --> 0:13:25.080 that since the Game Stop episode where everybody has basically 0:13:25.120 --> 0:13:29.080 said short selling is dead, you know, there's the risks 0:13:29.080 --> 0:13:33.480 are too high, and you simply shorted that index, bought 0:13:33.720 --> 0:13:36.520 bought the S and P or a related passive index 0:13:36.840 --> 0:13:42.840 rebalanced monthly. That return has been spectacular, and so so 0:13:43.000 --> 0:13:45.400 there's still alpha on the short side. 0:13:45.840 --> 0:13:47.480 It's just nobody thinks it's there anymore. 0:13:47.679 --> 0:13:49.640 That's on a more of an index level. What about 0:13:49.640 --> 0:13:50.760 on an individual. 0:13:50.400 --> 0:13:53.760 Well, no, that index is actually individual. 0:13:53.320 --> 0:13:57.680 Stocks, the most shorted stocks. It's a representative portfolio of 0:13:57.800 --> 0:14:00.600 very dicey companies, a lot of which we were short. 0:14:00.679 --> 0:14:02.360 Well what's the risk out there? I mean we talk 0:14:02.440 --> 0:14:03.760 about I mean, we've sort. 0:14:03.640 --> 0:14:05.320 Of written all these headlines about the demise, and. 0:14:05.320 --> 0:14:07.040 I know it's not completely you know, we talk about 0:14:07.200 --> 0:14:09.760 I mean short bias funds down like seventy percent since 0:14:09.840 --> 0:14:12.839 the financial crisis. But even activist campaigns, I thought last 0:14:12.920 --> 0:14:15.040 year was like a record low despite all the headlines 0:14:15.240 --> 0:14:17.040 that we got out all of these companies like Starboard 0:14:17.080 --> 0:14:18.800 and a few others, it was a record low year 0:14:18.800 --> 0:14:23.120 for activist campaigns. Is that a reflection of market dynamics 0:14:23.200 --> 0:14:26.520 or is that more reflection of public and political dynamics. 0:14:26.600 --> 0:14:28.800 Well, I think it's both. I mean, I remember, I 0:14:28.800 --> 0:14:30.200 mean the market. 0:14:29.840 --> 0:14:35.600 Prices are people's you know, facts, people's opinions based on facts, 0:14:36.160 --> 0:14:39.440 and so you know, people have gotten much more bullish 0:14:39.760 --> 0:14:44.680 over general political level, level of regulation, the promises that 0:14:44.760 --> 0:14:47.640 companies made. It we talked about earlier. So I mean 0:14:47.680 --> 0:14:50.040 these are all part of a bullmarket. I mean, it's 0:14:50.120 --> 0:14:53.240 just it's just the cycle has lasted a lot longer 0:14:53.280 --> 0:14:55.760 than a lot of people were thought, including me, But 0:14:56.480 --> 0:15:01.400 I think that that can change too. And and so 0:15:02.360 --> 0:15:06.480 the problem is is that price levels and the and 0:15:06.520 --> 0:15:08.680 where we are in that part of the cycle don't 0:15:08.720 --> 0:15:11.040 give you a good sense of timing. They do give 0:15:11.040 --> 0:15:12.960 you a good sense of how much risk you're taking 0:15:13.280 --> 0:15:14.520 should the timing change. 0:15:14.600 --> 0:15:16.160 It feels like there's a lot of risk in this 0:15:16.280 --> 0:15:19.000 market right now. When you look at public market valuations, 0:15:19.040 --> 0:15:21.920 whether on an index level or an individual stock level, 0:15:22.440 --> 0:15:26.360 valuations are high. You look in technology, you go deeper 0:15:26.360 --> 0:15:28.920 into AI, the valuations are even higher. 0:15:29.240 --> 0:15:32.040 Can you make a case there is a bubble out there? 0:15:32.080 --> 0:15:34.800 And the speculation is there remain not quite as where it 0:15:34.880 --> 0:15:37.080 was in twenty twenty one, which is the most speculative 0:15:37.120 --> 0:15:37.720 market I've. 0:15:37.560 --> 0:15:38.880 Seen, but it's getting back there. 0:15:38.920 --> 0:15:42.720 I mean the speculation and meme coins and again or 0:15:42.960 --> 0:15:44.280 just people are floating these. 0:15:44.320 --> 0:15:46.240 So you did not buy the Malania coin as much. 0:15:46.120 --> 0:15:48.360 As I didn't buy the un round coin that was 0:15:48.360 --> 0:15:49.760 floated yesterday. 0:15:49.320 --> 0:15:53.360 By the way, So yeah, so there you go. 0:15:54.120 --> 0:15:56.720 So I think that that, yeah, these are all signs 0:15:56.760 --> 0:15:59.360 and what we haven't seen yet which we saw in 0:15:59.400 --> 0:16:02.840 twenty twenty But I suspect we will see soon. Is 0:16:02.840 --> 0:16:05.720 a lot of issuance. As I've always said that Wall 0:16:05.720 --> 0:16:07.880 Street has a printing press too, just like the fat 0:16:08.680 --> 0:16:11.360 and once that printing press goes and everybody gets filled, 0:16:11.880 --> 0:16:14.760 generally you end up with some heavier weather, as we 0:16:14.800 --> 0:16:15.960 did in twenty twenty two. 0:16:16.400 --> 0:16:18.600 I haven't seen it yet. I suspect we will. 0:16:18.920 --> 0:16:20.640 I want to get your thoughts on deep Seek, the 0:16:20.680 --> 0:16:23.800 revelation of deep Seek and it's technological breakthrough a cheaper, 0:16:23.920 --> 0:16:26.920 more efficient AI model. Does it help answer the question 0:16:27.040 --> 0:16:28.480 of whether we're in an AI bubble? 0:16:29.120 --> 0:16:31.360 Well, what I pointed out when it came out, and 0:16:31.400 --> 0:16:34.480 I know nothing about LM models or any of that, 0:16:34.560 --> 0:16:38.000 which one is better is it underscores the risks of 0:16:38.040 --> 0:16:41.680 disruptive technology. And that is, when you are betting on 0:16:41.760 --> 0:16:46.280 disruptive technology, you have to always consider the risk that 0:16:46.280 --> 0:16:49.800 that technology will be disrupted itself by a better mouse trap. 0:16:50.200 --> 0:16:51.320 The kid in the garage. 0:16:51.400 --> 0:16:56.200 You know, we can talk about all of the possible risks, 0:16:56.240 --> 0:17:00.000 and that's something coming out of left field that I think, 0:17:00.400 --> 0:17:02.840 you know, can change the argument. So I think that's 0:17:02.880 --> 0:17:06.600 what deep Seek underscored was that wait a minute, maybe 0:17:06.640 --> 0:17:07.480 there's a way to. 0:17:07.480 --> 0:17:11.240 Do AI with less cap x, less chips. 0:17:11.480 --> 0:17:16.360 You know, cheaper, and nobody had kind of really considered 0:17:16.359 --> 0:17:18.640 that until Deep Seek. Now I don't know that deep 0:17:18.680 --> 0:17:22.920 seac it dethrones the other models. It's beyond my pay grade, 0:17:23.320 --> 0:17:28.639 but it does underscore the risks of paying multiples of 0:17:28.720 --> 0:17:31.160 revenue that are historically considered you. 0:17:31.119 --> 0:17:33.080 Know, egregious. 0:17:33.240 --> 0:17:37.000 And now we have companies routinely trading at twenty thirty 0:17:37.040 --> 0:17:39.879 forty times revenues. Yeah, so that gives you an idea 0:17:39.880 --> 0:17:42.080 of the risk those in those businesses. 0:17:42.440 --> 0:17:44.320 I look at Palinger and how well it's done, and 0:17:44.640 --> 0:17:47.199 it's talk about untamed organic growth. So at least when 0:17:47.240 --> 0:17:49.240 it comes to big tech and AI, this threat of 0:17:49.240 --> 0:17:52.680 disruptive technology, do you see any evidence that institutional investors 0:17:52.920 --> 0:17:56.199 maybe have an appetite to start hedging or looking to 0:17:56.280 --> 0:17:58.320 protect against them those positions. 0:17:57.920 --> 0:18:01.439 Well, they should by seeing it yet, but they should. 0:18:02.720 --> 0:18:05.679 And as I said, and the other thing I'll just 0:18:05.720 --> 0:18:09.600 mention about disruptive technology is in the up phase of it, 0:18:09.640 --> 0:18:11.760 as we saw in the late nineties when the Internet, 0:18:11.800 --> 0:18:15.800 which was certainly a disruptive technology. Everything is a positive 0:18:16.160 --> 0:18:20.040 The Internet will affect all things positively, and in fact, 0:18:20.040 --> 0:18:24.360 what we found and what I and my clients made 0:18:24.359 --> 0:18:28.440 a lot of money on from two thousand and twenty 0:18:28.600 --> 0:18:32.720 ten was how many businesses got unfortunately disrupted by the Internet, 0:18:32.880 --> 0:18:35.959 how many businesses went away. And I suspect that's going 0:18:36.000 --> 0:18:38.159 to be the same thing in AI that not a 0:18:38.200 --> 0:18:40.720 lot of people are talking about yet. I mean, AI 0:18:41.560 --> 0:18:44.680 is a very revolutionary technology and will be benefiting lots 0:18:44.680 --> 0:18:48.160 of things and hopefully humanity, but by definition it will 0:18:48.160 --> 0:18:49.959 put a lot of business models out of business. 0:18:50.200 --> 0:18:52.160 Yeah, and it's already We're always starting to hear talk 0:18:52.160 --> 0:18:54.440 about that. I was interested in how so many people 0:18:54.440 --> 0:18:57.359 were dismissive of deep Seek and its founders. I know 0:18:57.359 --> 0:18:59.080 there are a lot of questions about exactly what they 0:18:59.080 --> 0:19:01.040 did and how they paid for but we saw that 0:19:01.080 --> 0:19:04.800 same dismissiveness back during the computer era when that was 0:19:04.800 --> 0:19:07.119 coming up, and of course during the dot com bubble 0:19:07.160 --> 0:19:08.960 what led up to the dot com bubble. A lot 0:19:08.960 --> 0:19:11.680 of the giants today, I mean people scoffed that Jeff 0:19:11.680 --> 0:19:14.639 Bezos and Amazon. People scoffed at what Apple and Steve 0:19:14.720 --> 0:19:15.680 Jobs were doing. 0:19:15.960 --> 0:19:20.560 Right, And again those companies had had. 0:19:21.880 --> 0:19:24.040 Big valuations in the up part of the cycle. 0:19:24.280 --> 0:19:27.280 But what everybody forgets about Amazon, for example, is the 0:19:27.280 --> 0:19:31.440 two ninety plus percent declines that had you two, three 0:19:31.520 --> 0:19:36.080 and seven eight along the way, and for me to 0:19:36.119 --> 0:19:38.280 tell investors, well, that's fine, but by the way, when 0:19:38.280 --> 0:19:40.200 you're down ninety five percent, tell me if you're still 0:19:40.200 --> 0:19:43.040 holding and adding to the position number one. 0:19:42.920 --> 0:19:43.400 Number two. 0:19:44.280 --> 0:19:47.800 We then forget about the America onlines, the yahoos, the 0:19:47.920 --> 0:19:50.560 ask jeeves, the businesses that I. 0:19:50.480 --> 0:19:52.560