WEBVTT - Surveillance: Eisman Ends Bet Against Tesla 0:00:09.840 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.080 Bloomberg dot Com, and of course, on the Bloomberg Steve 0:00:28.160 --> 0:00:30.960 Weisman coming into the studio this morning, and the first 0:00:30.960 --> 0:00:32.959 thing he says to me, I've got a joke. It's 0:00:32.960 --> 0:00:35.559 about CEOs. We'll let me tell it. And I'm like, 0:00:35.920 --> 0:00:37.560 should we do this? At the top of the conversation. 0:00:37.600 --> 0:00:40.239 Should we do this? It's clean and it's good. So 0:00:40.240 --> 0:00:42.520 I'm gonna let Steve Weisman do his joke. Heisman Group 0:00:42.520 --> 0:00:46.320 Newberger Berman Sr. Portfolio Manager, Good morning to Steve. Morning. 0:00:46.440 --> 0:00:48.080 I didn't know you're a comedian as well, So let's 0:00:48.120 --> 0:00:49.720 talk about it. Give us the joke off the top. 0:00:49.760 --> 0:00:52.559 What is it? All right? So the joke is guy 0:00:52.600 --> 0:00:55.040 who comes the CEO of a company reports to work 0:00:55.080 --> 0:00:57.040 on the first day, has lunked with the old CEO, 0:00:57.120 --> 0:00:59.240 and the old CEO says, I got a gift for you. 0:01:00.040 --> 0:01:01.680 Is him a box? And then the box he opens it, 0:01:01.760 --> 0:01:04.000 there's three envelopes and then numbered one, two, and three. 0:01:04.040 --> 0:01:07.000 He says, don't open them until you have your first crisis. 0:01:07.040 --> 0:01:09.000 Then open up the first envelope. So he said, okay, 0:01:09.000 --> 0:01:12.320 he puts the box in a drawer. Three years go by, 0:01:12.360 --> 0:01:14.240 he's got his first crisis, doesn't know what to do. 0:01:14.360 --> 0:01:16.920 He remembers the envelope, so he opens up the first envelope. 0:01:16.920 --> 0:01:19.640 He reads it and it says, blame your predecessor, and 0:01:19.680 --> 0:01:24.000 he says genius. So he does it, and crisis averted. 0:01:24.640 --> 0:01:27.600 Believe me, we've all seen this. And then two more 0:01:27.680 --> 0:01:30.560 years go by there's another crisis. He was from the envelope. 0:01:30.560 --> 0:01:33.520 So he opens up the second envelope and it says, 0:01:33.880 --> 0:01:37.520 take a huge restructuring charge, and it goes genius, and 0:01:37.720 --> 0:01:40.600 he takes a huge restructuring charge and crisis averted. And 0:01:40.640 --> 0:01:43.560 another three years go by. It doesn't know what to 0:01:43.560 --> 0:01:45.760 do because it's another crisis. He opens up the third 0:01:45.840 --> 0:01:50.560 envelope and that says, prepare three envelopes. That is fantastic, 0:01:51.720 --> 0:01:57.160 all right? So who your trust to? The which of 0:01:57.200 --> 0:02:04.840 your lungs? Right? You know, Steve, because it really strikes 0:02:04.880 --> 0:02:06.440 close to home. How many times have you seen that 0:02:06.480 --> 0:02:08.880 We're all wondering at LEASA points now you're talking about 0:02:08.919 --> 0:02:13.200 which company that I'm not going to say, but you are. 0:02:13.400 --> 0:02:16.200 I will say that I saw New Burger, I saw 0:02:16.240 --> 0:02:17.679 a CEO of a company that I'm sure and I 0:02:17.720 --> 0:02:20.280 will mention it because it's not fair. And as I 0:02:20.320 --> 0:02:22.120 was and I was thinking, and as you see it 0:02:22.160 --> 0:02:24.360 was presenting it, it it wasn't a great presentation, thinking this 0:02:24.400 --> 0:02:27.800 guy could just really use the three ovel are we talking? 0:02:30.680 --> 0:02:33.639 Let's talk about Elon Musk. Shall we test high profile 0:02:33.720 --> 0:02:35.720 short for many people? Steve, it's a short that you 0:02:35.800 --> 0:02:38.280 had and no longer have. How are you thinking about 0:02:38.280 --> 0:02:40.119 the company at the moment? What made you cover the short? 0:02:40.120 --> 0:02:42.400 Other than just getting your face ripped off? Imagine if 0:02:42.400 --> 0:02:46.400 you're getting a couple of at night. Everybody has a 0:02:46.440 --> 0:02:49.560 threshold of pain. Mine's pretty high. But when you look 0:02:49.560 --> 0:02:52.880 at when the stock started to go crazy on look, 0:02:53.080 --> 0:02:55.040 it started to go crazy because the deliveries were better 0:02:55.040 --> 0:02:57.680 than expected. It's probably better to expected than I expected. 0:02:58.280 --> 0:03:01.840 But you know, you started to read things about how 0:03:01.960 --> 0:03:04.600 you know in two thousand thirty two the company will 0:03:04.639 --> 0:03:07.520 make you know three thousand dollars per share or whatever. 0:03:08.160 --> 0:03:10.079 You know that there's no way to argue against that 0:03:10.320 --> 0:03:13.240 because it's ten years from now or twenty years from now, 0:03:13.320 --> 0:03:15.679 So you know when when when the narrative of stock 0:03:15.720 --> 0:03:17.600 starts to become like that, the best thing to do 0:03:17.639 --> 0:03:19.960 is at least to walk away stave. Anyone that's familiar 0:03:19.960 --> 0:03:22.040 with your work nice. How much homework you do, how 0:03:22.080 --> 0:03:24.680 well thought out every single position is. This isn't just 0:03:24.760 --> 0:03:26.720 done on a whim. But are the lessons to be 0:03:26.800 --> 0:03:29.320 learned when there is a popular short like the Testlas 0:03:29.320 --> 0:03:31.799 short for someone like yourself. Is that a red flag? 0:03:31.880 --> 0:03:33.640 Is that something you want to get involved in? Is 0:03:33.680 --> 0:03:35.280 that something you walk away from at the moment and 0:03:35.360 --> 0:03:37.800 thinks I'm not I'm not. I'm not afraid of getting 0:03:37.800 --> 0:03:40.000 involved with shorts that are heavily shorted. I don't like 0:03:40.080 --> 0:03:44.080 the constructed entire short portfolio of heavily shorted stocks. But 0:03:44.120 --> 0:03:46.000 if if I really believe in something i'll get, I'll 0:03:46.040 --> 0:03:47.680 get involved with it. But you have to be careful. 0:03:47.920 --> 0:03:50.720 So you you're made famous by the big short, right, 0:03:51.120 --> 0:03:53.600 But as the era of short shorting kind of ended, 0:03:53.680 --> 0:03:56.680 and I'm wondering because another of your shorts, Zillo back 0:03:56.720 --> 0:03:59.760 in October, has searched, you know, more than six since then, 0:04:00.200 --> 0:04:02.840 and a lot of people are saying, perhaps the fundamentals 0:04:02.880 --> 0:04:06.320 are getting disconnected from the market action, or it's very 0:04:06.360 --> 0:04:09.480 it's just funny, my zillok. I'm still short, zilo um. 0:04:09.600 --> 0:04:11.600 It was. What's very strange about that short is that 0:04:11.640 --> 0:04:14.000 when they report third quarter numbers, you know, if you 0:04:14.040 --> 0:04:18.560 looked at it carefully, the fundamentals actually deteriorated, and yet 0:04:18.600 --> 0:04:21.440 the narrative was positive. So that does sometimes make a 0:04:21.480 --> 0:04:23.320 stock difficult. At least it race is a good point 0:04:23.320 --> 0:04:25.760 his state just how much the price action has become 0:04:25.800 --> 0:04:28.640 divorced from the fundamentals. As you point out, you look 0:04:28.640 --> 0:04:30.680 at the numbers coming out of Zelo and it justifies 0:04:30.720 --> 0:04:32.480 in your mind as shut. But then the price actually 0:04:32.480 --> 0:04:34.960 is just doing something completely. I'm willing to stick with 0:04:35.080 --> 0:04:38.680 something if I think the fundamentals are actually deteriorating or 0:04:38.680 --> 0:04:41.760 fundamentally deteriorating the problem with with the Tesla short was 0:04:41.800 --> 0:04:45.680 the fundamental start to improve and and you know then 0:04:45.800 --> 0:04:49.279 then all you are left with is evaluation short. And 0:04:49.360 --> 0:04:52.479 one rule I have is I'm never sure of stock 0:04:52.680 --> 0:04:55.200 just because of evaluation, because in an age of both 0:04:55.240 --> 0:04:59.800 of disruption and free money, it's a recipe for just 0:05:00.040 --> 0:05:01.560 That's where I want to go. I mean the card 0:05:01.680 --> 0:05:03.880 rule is short says you short alausy company in a 0:05:03.960 --> 0:05:07.200 lausy group and allowsy market. That's pretty easy to do. 0:05:07.680 --> 0:05:12.719 Right now, you've got a central bank strategy massively pushing 0:05:12.760 --> 0:05:15.880 against a short belief? Does does long short just walk 0:05:15.960 --> 0:05:19.560 away from short until Chairman Powell changes his tune. I 0:05:19.640 --> 0:05:21.760 still think you can be long short. I think you 0:05:21.800 --> 0:05:24.520 have to have a very long bias right now, which 0:05:24.520 --> 0:05:27.600 I do. I think you can be selectively short individual 0:05:27.720 --> 0:05:29.960 names like you know. For example, I'm short of stock 0:05:30.000 --> 0:05:33.800 called ad Talum, which is a ad Talum. It's a 0:05:33.800 --> 0:05:36.880 for profit education company. It used to be called Davy, 0:05:38.160 --> 0:05:40.720 but they sold the actual part of the company called 0:05:40.760 --> 0:05:44.920 Davray for a dollar plus assumption of debt, which tells 0:05:44.920 --> 0:05:52.040 you how much on what's left is a nursing school 0:05:52.600 --> 0:05:56.640 and a medical school. I have no ethical issues about 0:05:56.720 --> 0:05:58.719 what dev is doing, and the biggest part of the 0:05:58.720 --> 0:06:02.880 company is nursing And the short these is very simply 0:06:03.600 --> 0:06:05.520 is that over the last couple of years has been 0:06:05.560 --> 0:06:09.240 new entrance of nonprofit schools that are doing exactly the 0:06:09.279 --> 0:06:12.520 same thing as devirived for half the price. Two other 0:06:12.600 --> 0:06:17.120 names that come to mind regarding your positioning HSBC standard charted? Yes, 0:06:17.320 --> 0:06:20.039 what are things looking like right now for you? I'm 0:06:20.080 --> 0:06:22.800 still short though, and we connected those shorts more to 0:06:22.920 --> 0:06:24.440 China than we are to Brexit. How do you think 0:06:24.560 --> 0:06:27.400 this has got nothing to do with Brexit? Nothing? It's 0:06:27.480 --> 0:06:32.159 it's it's that HSBC is about, off the top of 0:06:32.160 --> 0:06:37.080 my head, Hong Kong UH standard charters like Hong Kong 0:06:37.760 --> 0:06:39.880 UM and Hong Kong's in a recession and so they'll 0:06:39.880 --> 0:06:43.840 have credit issues. Period. Have you ever been less short 0:06:44.480 --> 0:06:47.159 stocks though? I mean you're talking about specific names, but 0:06:47.600 --> 0:06:49.320 you said you know you are. You've got a very 0:06:49.360 --> 0:06:52.320 long bias, and so I'm wondering, you know, the sort 0:06:52.320 --> 0:06:55.239 of longs to short ratios sort of over that's about 0:06:55.240 --> 0:06:58.720 as long as I get. Okay, I'm about six at 0:06:58.800 --> 0:07:00.720 long right now, and that's as long as you get, 0:07:00.720 --> 0:07:02.680 as long as I can go. Okay, And how long 0:07:02.720 --> 0:07:07.000 have you been the longest you can go? Late last year? 0:07:08.720 --> 0:07:12.920 What's the biggest mistake rookies make? Shorting? There's a lot 0:07:12.920 --> 0:07:16.160 of people out there. They don't believe in the FED strategy. 0:07:16.200 --> 0:07:18.200 They believe the Fed's gonna make John. Are we modeling 0:07:18.240 --> 0:07:21.800 one or two ray cuts? Right? Now wonder two. Okay, Fine, 0:07:21.960 --> 0:07:25.160 someday that's gonna end, and everybody's gonna want to go, Okay, 0:07:25.160 --> 0:07:27.320 I'm gonna get back on the short band record. What's 0:07:27.360 --> 0:07:31.280 the rookie mistake in shorting? I think the mistake people 0:07:31.360 --> 0:07:35.560 make is that because they think that it's wrong for 0:07:35.640 --> 0:07:38.320 the FED to have a free money policy, therefore they 0:07:38.360 --> 0:07:43.280 should shortstocks. Is because you think the Feds wrong. So 0:07:43.320 --> 0:07:45.920 what they have the FED? That's something you could you 0:07:45.960 --> 0:07:49.000 could think, but so many people have struggled with this. 0:07:49.000 --> 0:07:55.440 One struggled this smart. You know, don't fight the FED? Well, 0:07:55.480 --> 0:07:58.360 but does that does that sort of change the equation 0:07:58.400 --> 0:08:00.920 for specific names too? Well? They would you would need 0:08:01.160 --> 0:08:02.920 if you were going to fight the FED. And look, 0:08:02.960 --> 0:08:05.280 I did fight the FED in two thousand and seven 0:08:05.280 --> 0:08:08.360 and eight, um, but what you what What you had 0:08:08.400 --> 0:08:11.400 then was deteriorating credit. So if you're going to fight 0:08:11.440 --> 0:08:14.640 the FED, you need deteriorating credit quality. The problem is 0:08:14.680 --> 0:08:18.760 that credit quality United States is perfect. There's no problems anywhere, 0:08:18.760 --> 0:08:21.080 which is why you like the US banks one reason. 0:08:21.280 --> 0:08:24.840 But I only like the large banks. I think investing 0:08:24.880 --> 0:08:28.440 in anything outside of the large banks with very few exceptions, 0:08:28.480 --> 0:08:30.640 as a waste of time because they can't spend the 0:08:30.680 --> 0:08:35.320 money on acknowledging. Steve Icean, thank you so much from 0:08:35.320 --> 0:08:37.839 his appearances with Bloomberg saveillas today. I'm sure we'll write 0:08:37.840 --> 0:08:39.720 a whole bunch of we should cut that joke in theme. 0:08:39.760 --> 0:08:41.680 I was about to say, I play it a few times. 0:08:42.320 --> 0:08:45.880 I mean it was good. I did, like we should. 0:08:45.880 --> 0:08:48.359 We should play it when we talk about certain companies 0:08:48.559 --> 0:08:51.200 and what they're doing. You could play that joke for years. 0:08:51.559 --> 0:08:54.760 We will, I think happened. When are you going to 0:08:54.800 --> 0:08:57.880 tell us about which company you were talking about? Come on, no, 0:08:57.960 --> 0:09:12.400 I won't do it. Steve Issis at the Interview of 0:09:12.400 --> 0:09:15.800 the Day on these odd times in the markets will 0:09:15.800 --> 0:09:18.160 look short term, will look long term as well. In 0:09:18.240 --> 0:09:20.040 Paul Sweeney, we can do this to the gentleman, the 0:09:20.080 --> 0:09:23.199 only one we could speak to who actually knew fluidly 0:09:23.760 --> 0:09:28.400 how to use a bunker remo. Douglas Cast joined some 0:09:28.480 --> 0:09:32.079 series a few years ago, licking House at Putnam other 0:09:32.679 --> 0:09:37.920 venues looking at individual security selection. Doug Cast good morning, um, 0:09:37.960 --> 0:09:41.240 just to get to the perspective of a bunker remo 0:09:41.320 --> 0:09:43.679 from a few years ago. This, folks is pre Bloomberg 0:09:44.160 --> 0:09:48.520 is well have you ever seen a parabolic move of 0:09:48.559 --> 0:09:52.760 a company of the substance of Tesla. We've seen him, 0:09:52.800 --> 0:09:56.040 but have we really ever seen it with something is 0:09:56.280 --> 0:09:59.800 tangible as Tesla. Well, Tesla is almost a metaphor for 0:09:59.840 --> 0:10:03.040 the market um. The market caps a hundred forty five 0:10:03.160 --> 0:10:06.920 billion dollars. It's bigger than Costco. It's twice as big 0:10:06.960 --> 0:10:10.640 as Cat's, three times the size of GM, six times 0:10:10.640 --> 0:10:13.560 the size of Kellogg. When it is trading over eight 0:10:13.600 --> 0:10:16.400 hundred bucks. I think on Tuesday, fifty million shares of 0:10:16.480 --> 0:10:20.000 Tesla traded an average price of seven fifty. That equates 0:10:20.040 --> 0:10:23.120 to a nominal value of thirty five billion dollars, or 0:10:23.200 --> 0:10:27.560 one third it's market cap. Let's think about that. Tesla 0:10:27.600 --> 0:10:31.959 maybe the future and the company has obviously established first 0:10:31.960 --> 0:10:35.079 mover advantage in orders and batteries. But the share the 0:10:35.200 --> 0:10:39.320 dramatically overpriced and um, as you said, it's recent ascent 0:10:40.000 --> 0:10:44.360 radically eclipse his previous speculative urges of past cycles. Paul 0:10:44.360 --> 0:10:46.679 wants to jump in, but dutcasts quickly here, how are 0:10:46.679 --> 0:10:50.440 you a position this morning? And your trading accounts? You know, 0:10:51.120 --> 0:10:54.680 we talk a lot about price targets and whether we're 0:10:54.720 --> 0:10:58.120 bearish of bullish, and we don't spend enough time generally 0:10:58.160 --> 0:11:01.760 talking about conviction levels, and this is a period of 0:11:01.800 --> 0:11:05.679 time in which my conviction level is low. On the 0:11:05.760 --> 0:11:08.520 least few weeks, we've gotten the taste of a new 0:11:08.559 --> 0:11:11.760 regime of volatility, not only in Tesla but in the 0:11:11.800 --> 0:11:15.080 market as a whole. So all markets are not created equal. 0:11:16.360 --> 0:11:18.360 So Doug, and just on the Tesla, we're down about 0:11:18.360 --> 0:11:20.240 ten and a half percent here below eight hundreds. Of 0:11:20.240 --> 0:11:24.679 the volatility around Tesla shares continues. So, Doug, are you 0:11:24.760 --> 0:11:28.480 surprised at the resiliency in the equity markets in the 0:11:28.559 --> 0:11:31.000 face of I would say that you know the latest 0:11:31.040 --> 0:11:34.440 exogenous shock, which is the coronavirus and the impact that 0:11:34.600 --> 0:11:38.000 might have on global GDP. Are you surprising the resiliency 0:11:38.000 --> 0:11:42.760 the equity markets? I am not really. I'm certainly not 0:11:42.800 --> 0:11:46.839 surprised about the volatility, which I've been expecting. And I 0:11:47.240 --> 0:11:51.920 just think as we look at I think that the 0:11:51.960 --> 0:11:55.000 contour of the stock market is going to be importantly 0:11:55.000 --> 0:11:59.000 influenced in shape by both profits and politics, and I 0:11:59.040 --> 0:12:01.640 think we'll probably a lot of surprises in both ends. 0:12:02.600 --> 0:12:05.880 So do with with your loads of experience, how do 0:12:05.920 --> 0:12:10.000 you typically position yourself in an election year, particularly one 0:12:10.040 --> 0:12:15.720 which could be particularly contentious. Well, as I said, not 0:12:15.880 --> 0:12:20.520 all markets are creative equal. We shouldn't have conviction levels 0:12:21.080 --> 0:12:23.840 the same at all levels of the market, and the 0:12:23.880 --> 0:12:27.760 same applies to the election. Um, there's a great deal 0:12:27.800 --> 0:12:31.880 of uncertainty. Um. I think what I have learned is 0:12:31.960 --> 0:12:36.280 to expect the unexpected. Um. Just look at two thousand nineteen. 0:12:36.280 --> 0:12:39.439 No one looked for a rise in the SMP. No one. 0:12:39.720 --> 0:12:42.520 It was a universal view that interest rates, let's say 0:12:42.520 --> 0:12:43.880 the ten year was going to a three and a 0:12:43.920 --> 0:12:46.720 half percent yield, into the opposite occurred. So I think 0:12:46.720 --> 0:12:50.160 this year could be and out of the vix thinking 0:12:50.640 --> 0:12:55.440 and a mean reversion invaluation, stocks and profits. Doug cast 0:12:55.440 --> 0:12:58.199 for Partners will be with us a generous amount of 0:12:58.280 --> 0:13:00.920 time in this half hour. Doug, I've gotta go to 0:13:01.200 --> 0:13:03.440 what sticks out like a sore thumb and everybody you know, 0:13:03.480 --> 0:13:07.199 you're out on Twitter and you're the pin launch. Oh quiet, 0:13:07.240 --> 0:13:09.280 I don't want to go there, Doug. I mean I've 0:13:09.280 --> 0:13:14.120 been medicating that you've just given us a division title. Yes, Doug, 0:13:14.200 --> 0:13:16.560 I mean did Sandy call you up and just say 0:13:16.600 --> 0:13:19.760 this is the greatest things? Slice bread, Palmer said it 0:13:19.800 --> 0:13:21.800 was the stupidest deal he's ever heard. You give a 0:13:21.920 --> 0:13:28.240 franchise player unproven just because of a luxury tax. Okay, 0:13:28.240 --> 0:13:30.600 we're gonna rip up the scripture, folks. We gotta, we gotta, 0:13:30.600 --> 0:13:38.840 we gotta let the Red or the Knicks. Doug Cast Folks, Wisconsin, Florida, 0:13:38.920 --> 0:13:40.680 next to a guy named Palmer. He used to throw 0:13:40.720 --> 0:13:43.760 the orb for the Baltimore Orioles as well. We're honored 0:13:43.760 --> 0:13:45.800 to speak with Mr Palmer one day. One of my 0:13:46.120 --> 0:13:49.640 true heroes as a kid. Doug Cast. Jim Palmer says, 0:13:49.720 --> 0:13:52.920 this was a bad trade, awful trade. I'll get him 0:13:52.920 --> 0:13:55.079 on the phone next time I'm on you kill him. 0:13:55.679 --> 0:13:57.719 You just know, you know it was you Just to 0:13:57.760 --> 0:14:01.960 face reality. One of the mark say, good morning one 0:14:02.040 --> 0:14:05.360 or six one FM Boston. I got my black arm, 0:14:05.400 --> 0:14:08.640 but trust me, Doug Kiss, I want to go to 0:14:08.760 --> 0:14:11.040 What's so different for you? Which is a five year, 0:14:11.160 --> 0:14:14.800 six year, ten year conviction on Amazon. Let's start with 0:14:14.840 --> 0:14:17.480 the idea. How rare is it for you to have 0:14:18.120 --> 0:14:22.080 a big company long term conviction like that? I think 0:14:22.080 --> 0:14:25.400 that Amazon will trade of five thousand a share by 0:14:26.800 --> 0:14:30.040 three um in the last ten years has only been 0:14:30.600 --> 0:14:36.640 two companies that have exceeded organic growth, Google and Amazon 0:14:37.560 --> 0:14:40.120 and their modest tom are just getting deeper and deeper. 0:14:40.920 --> 0:14:44.440 The concerned about regulatory reform and how would impact the 0:14:44.480 --> 0:14:48.080 p N l UH is no longer a factor, and 0:14:48.120 --> 0:14:51.480 their mode is getting deeper and deeper and more impenetrable. 0:14:52.520 --> 0:14:55.920 UM I said to you about six or nine months 0:14:55.920 --> 0:15:00.400 ago that I expected a hockey stick in earnings growth 0:15:01.000 --> 0:15:05.720 foreign excess ten greater in two thousand, twenty to twenty 0:15:05.720 --> 0:15:09.640 two than the consensus forecast for on the south side 0:15:09.640 --> 0:15:13.200 of with regard to earnings, and I suspect that they're 0:15:13.240 --> 0:15:16.920 about nine months ahead ahead of my timetable based upon 0:15:16.960 --> 0:15:19.360 the last quarter, which is two dollars to share better 0:15:19.360 --> 0:15:24.240 than expectations, and indeed estimates rose by the reason cast 0:15:24.280 --> 0:15:26.560 comes on. He says he knows I'm doing logarithms on 0:15:26.600 --> 0:15:29.400 the Bloomberg on what he's saying. These are outlandish phrases 0:15:29.440 --> 0:15:33.680 by Mr Cass, No, they're not. If you take the 0:15:33.720 --> 0:15:37.440 long term regression of Amazon, folks back to the horrific 0:15:37.520 --> 0:15:41.440 bottom of oh one, you get out to a Cassian 0:15:42.200 --> 0:15:47.320 four thousand eight, five thousand three at the end of 0:15:47.440 --> 0:15:53.240 twenty three. So Doug, this is important. Doug's outrageous called 0:15:53.240 --> 0:15:57.400 Paul Sweeney is the linear log regression of the stock. 0:15:57.480 --> 0:16:01.920 He's stating the obvious employees either loan in doing that. Interesting, Doug, 0:16:01.960 --> 0:16:05.680 I mean you brought the regulatory overhang for not just Amazon, 0:16:05.720 --> 0:16:08.120 but some of these other big technology companies like Facebook 0:16:08.120 --> 0:16:11.600 and and Google. This is an alphabet free studio, so 0:16:11.680 --> 0:16:14.560 we call it Google. So, but for Amazon in particular, Doug, 0:16:14.600 --> 0:16:20.720 why do you think the regulatory risk is not that material? Um? 0:16:20.760 --> 0:16:25.400 I think that the more regulation placed on Amazon, the 0:16:25.480 --> 0:16:30.360 more it will increase their mode and their market share. Um. 0:16:30.560 --> 0:16:33.800 They're such first mover advantage. Now no one's, no one's 0:16:33.880 --> 0:16:36.600 even in the same league as they are, so it 0:16:36.600 --> 0:16:40.520 would actually be self defeating. Interesting to see the stock. 0:16:40.600 --> 0:16:43.520 It's amazing that Jeff Baso so another two billion dollars 0:16:43.560 --> 0:16:45.640 worth the stock and the stock is up fifty dollars 0:16:45.680 --> 0:16:49.280 in the last in the last two days. Interesting. So 0:16:49.360 --> 0:16:54.160 the and by the way, Thomas Thomas, Yes, speaking of 0:16:54.200 --> 0:16:59.200 linear lag regression. I teachum Robert Schiller's course at the 0:16:59.280 --> 0:17:02.080 Yale School of Management that I actually spent three hours 0:17:02.120 --> 0:17:05.800 on that last year. This is important, folks, This is 0:17:05.840 --> 0:17:08.640 going to logs, Doug All of US, Paul Sweeney, Douglas Cass, 0:17:08.680 --> 0:17:11.919 and I remember when the Securities Exchange Commission was afraid 0:17:12.000 --> 0:17:15.040 to use logs publicly because they thought it would confuse 0:17:15.080 --> 0:17:17.760 the public. And yet this is what adults do in 0:17:17.800 --> 0:17:21.160 the market, because the core equation is an exponential function. 0:17:21.240 --> 0:17:23.680 F E equals PV one plus out of the t 0:17:24.200 --> 0:17:27.880 Doug Cass, what's the biggest mistake in extrapolation people make? 0:17:27.960 --> 0:17:31.240 I mean, you're extrapolating out three weeks or three months 0:17:31.320 --> 0:17:34.640 or even up may I suggest five years with Amazon. 0:17:34.720 --> 0:17:43.439 What's the biggest extrapolation mistake investors make? I think, um, oddly, Um, 0:17:43.600 --> 0:17:49.880 the extrapolation of parabolic moves is a major trading an 0:17:49.920 --> 0:17:54.520 investment mistake. And I'm thinking obviously of Tesla. Um. You know, 0:17:54.600 --> 0:17:57.360 Tesla was has Tesla started the year at four under 0:17:57.359 --> 0:18:01.600 in eighteen dollars a share and traded to nine dollars. Now, 0:18:01.800 --> 0:18:04.520 Tesla is not going to automatically brush our teeth, and 0:18:04.720 --> 0:18:06.720 that it's not gonna walk our dog. That's not gonna 0:18:06.760 --> 0:18:09.440 heal the sick, it's not gonna cure the blind, it's 0:18:09.440 --> 0:18:12.159 not going to solve global warning warming it's not going 0:18:12.200 --> 0:18:16.600 to deliver world peace. Um. When you have parabolic moves 0:18:16.600 --> 0:18:21.199 and you extend that and traders by the relative strength, 0:18:21.720 --> 0:18:25.240 we have to remember that parabolic moves almost always returned 0:18:25.280 --> 0:18:27.600 to the point of breakout, and we're seeing that this morning. 0:18:28.680 --> 0:18:33.000 There's also another important lesson. It's not your question specifically, 0:18:33.800 --> 0:18:36.960 I see Tesla down another sixty dollars. It's an important 0:18:37.000 --> 0:18:42.120 lesson about short selling. UM. I, as a matter of practice, 0:18:42.400 --> 0:18:44.679 as you know, have as a basic tenant of my 0:18:44.760 --> 0:18:48.040 short selling, to avoid any stock with a large short 0:18:48.080 --> 0:18:52.720 interest relative to the average daily trading volume and or 0:18:53.280 --> 0:18:57.919 the float. For example, Tesla has twenty eight million shares short, 0:18:58.440 --> 0:19:01.119 a hundred and forty million share a float, which is 0:19:01.200 --> 0:19:05.080 really overstated because probably thirty million of that is in 0:19:05.200 --> 0:19:08.920 Ron Barron's hands and other law committed long term investor 0:19:09.040 --> 0:19:13.200 investors and cult members. So um that's a dangerous thing. 0:19:13.240 --> 0:19:17.320 And look I lived through Robert Wilson short Squeezeer Resorts International. 0:19:17.880 --> 0:19:20.800 I have the scars on my back shorting stocks at 0:19:20.840 --> 0:19:23.760 the dot cop dot com era a bit early. It 0:19:23.880 --> 0:19:26.879 worked out fine, but they show we're painful for a 0:19:26.960 --> 0:19:29.520 period of time. Doug Cass for the reason, of course 0:19:29.520 --> 0:19:32.320 in Florida, and uh is better than good. We protect 0:19:32.320 --> 0:19:34.320 the copyright of all of our guests. If you want 0:19:34.440 --> 0:19:48.880 Mr Casss literature, you know where to go for him. 0:19:48.960 --> 0:19:51.159 John Hudack with us, and this is important. There's a 0:19:51.200 --> 0:19:53.640 lot of punditry on politics and that. But who Deck 0:19:54.119 --> 0:19:56.919 is with Brookings. He's with their governance study group, and 0:19:56.960 --> 0:20:02.240 he takes very seriously the accesses of all this punditry 0:20:02.320 --> 0:20:04.879 and politics. He joins us. Now, John, you know we 0:20:04.960 --> 0:20:06.640 knew we were going to have you. That was before 0:20:07.359 --> 0:20:10.440 the Iowa blow up. I mean talk about a failed process. 0:20:10.520 --> 0:20:15.280 John Farrell mentioned it earlier. Is modern technology and voting, 0:20:15.480 --> 0:20:19.280 is it officially dead? Well, I don't think it's officially dead. 0:20:19.320 --> 0:20:21.160 You know, there's a lot of contractors out there who 0:20:21.200 --> 0:20:23.800 are looking to get party money, so I wouldn't declare 0:20:23.840 --> 0:20:26.399 it dead yet. But I think this is a lesson 0:20:26.480 --> 0:20:28.920 that a lot of Americans look at and they say, 0:20:29.080 --> 0:20:32.320 if our systems can get hacked by Russia, if our 0:20:32.359 --> 0:20:35.560 systems can sail. I think they look back to a 0:20:35.600 --> 0:20:39.040 paper ballot system or the old metal voting boots with 0:20:39.080 --> 0:20:41.320 the curtain and see that the good old thing. I 0:20:41.359 --> 0:20:43.240 mean John, I don't know what they do in England 0:20:43.320 --> 0:20:45.480 here the coolest thing You should go voting day and 0:20:45.520 --> 0:20:48.200 your father mother would pick you up and you could 0:20:48.280 --> 0:20:50.520 hit the little tabby things in the metal booth and 0:20:50.560 --> 0:20:53.400 the curtain closed. And did they have it? And when 0:20:53.440 --> 0:20:55.240 I used to vote in the UK, I just go 0:20:55.320 --> 0:20:57.480 and sign a piece of paper, just a little tick 0:20:57.640 --> 0:20:59.560 with a quill to the name. How did you do 0:20:59.640 --> 0:21:02.639 at least? Did you think you've got the wrong person here? 0:21:02.680 --> 0:21:04.159 I think it's Tom that used to turn up with 0:21:04.200 --> 0:21:08.760 a quill. Are you guys who really wound up to that? 0:21:09.160 --> 0:21:12.240 I will say if there were a little um levers 0:21:12.280 --> 0:21:17.520 that you pulled and then that big thing and we 0:21:17.560 --> 0:21:21.000 have a guest, John, are you John? Are we going 0:21:21.080 --> 0:21:24.640 back to that? You know, we're probably not going back 0:21:24.640 --> 0:21:27.199 to that. But I think the nostalgia around that and 0:21:27.320 --> 0:21:29.720 the security that people felt around that is going to 0:21:29.800 --> 0:21:34.920 make them furiously questioned. These new technological advances that people 0:21:34.960 --> 0:21:39.120 are promising will be flawless and secure, and I think 0:21:39.119 --> 0:21:41.520 it's going to be a serious conversation within the party 0:21:41.520 --> 0:21:44.560 about what what the future holds and what kind of 0:21:44.560 --> 0:21:49.399 backup systems in particular, will have to avoid chaos, Johns, 0:21:49.440 --> 0:21:52.960 at the end of the caucus. I would hope it's 0:21:53.000 --> 0:21:56.840 the end of the Iowa caucuses. I mean, these are outdated. 0:21:56.960 --> 0:22:02.800 They force a system in play where not everyone can participate. 0:22:03.040 --> 0:22:05.600 To see them on TV or to see them in person. 0:22:06.080 --> 0:22:09.359 Uh that they're foolish looking, and I think the party 0:22:09.440 --> 0:22:12.919 needs to recognize that this is not the direction of 0:22:12.960 --> 0:22:16.040 American politics right now, and it certainly shouldn't be its future. 0:22:16.119 --> 0:22:17.720 But a lot of criticism of the party in the 0:22:17.760 --> 0:22:19.560 last couple of days, for that matter, the last few 0:22:19.600 --> 0:22:21.720 months about how they order the states and who goes 0:22:21.800 --> 0:22:24.439 to vote first, whether you should do priorities and have 0:22:24.520 --> 0:22:26.560 no caucus anymore, Johnny, is there going to be a 0:22:26.600 --> 0:22:29.480 serious rethink at the very top of the party about 0:22:29.480 --> 0:22:31.679 how to achieve the best outcome, come up with the 0:22:31.720 --> 0:22:35.400 best candidate on a national level, and stop playing around 0:22:35.400 --> 0:22:38.159 in New Hampshire and Iowa. You know, it's not just 0:22:38.200 --> 0:22:40.639 the past few months that that criticism has been happening, 0:22:40.640 --> 0:22:43.359 and it's happened for both parties. I think if you 0:22:43.440 --> 0:22:46.280 asked me five or six years ago if that serious 0:22:46.320 --> 0:22:49.800 conversation was going to happen, I would say no. But 0:22:49.840 --> 0:22:53.440