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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello, there are all thoughts listeners. You are about to

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Speaker 2: listen to a very special episode. This is a conversation

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Speaker 2: recorded live at our recent event in New York.

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Speaker 3: That's right, we had a live Odd Lots event on

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Speaker 3: June twenty sixth. We had tons of conversations. We're going

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Speaker 3: to be rolling them out in the days ahead, but

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Speaker 3: the first one we wanted to bring you was our

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Speaker 3: headliner for the night, Jim Chanos.

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Speaker 2: That's right, the famed short seller. He was there giving

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Speaker 2: us all his thoughts on the market right now, So

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Speaker 2: take a listen.

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Speaker 4: All right.

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Speaker 3: First question, our bitcoin treasury company is the stupidest thing

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Speaker 3: you've ever seen in your entire life.

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Speaker 4: You know, it's rarely, rarely that I have to increase

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Speaker 4: my personal security after a podcast, which I had to

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Speaker 4: do after your our last podcast together, when I send

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Speaker 4: some intemperate things about bitcoin treasury companies. Look, I mean, look,

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Speaker 4: here's the thing. I get people very agitated about this,

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Speaker 4: and they point out on just what a genius idea

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Speaker 4: this is, and I keep trying to point out to

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Speaker 4: them I'm doing the same thing that guys like Michael

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Speaker 4: Sailor are doing. I'm on the same side of the trade,

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Speaker 4: and I keep pointing out to my critics, you're on

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Speaker 4: the opposite side of that trade, and you don't want

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Speaker 4: to be on the opposite side of the trade. And

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Speaker 4: the bitcoin treasury paradox being that you are the one

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Speaker 4: buying the pieces of paper that have infinite supply so

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Speaker 4: that Michael Sailor and I can buy the digital asset

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Speaker 4: with the limiteds And it makes kind of no sense.

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Speaker 4: So what will inevitably happen is happening in that is

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Speaker 4: there's nothing proprietary here. This is just simply raising capital

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Speaker 4: to buy a financial asset, and other companies will do this.

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Speaker 4: And in fact, even since the podcast we last did,

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Speaker 4: I think the number of companies that have announced this

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Speaker 4: strategy is you know, scores more. I think there's over

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Speaker 4: one hundred in the US and over two hundred globally.

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Speaker 2: Now, so who's actually buying micro strategy because you know, I.

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Speaker 4: Thought everybody on my timeline.

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Speaker 2: Okay, but I thought once the spot ETFs, the spot

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Speaker 2: bitcoin ETFs came out, like this business model will go away,

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Speaker 2: and it hasn't.

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Speaker 4: No, because there's a wonderful sales job that's being done

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Speaker 4: about the fact that this is an economic engine in

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Speaker 4: and of itself, and so therefore terms like bitcoin yield

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Speaker 4: are used, and they've called them financial gibberish because they

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Speaker 4: are and in fact this will get armed away ultimately

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Speaker 4: by companies that will do this to try to capture

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Speaker 4: that spread. In the case of micro Strategy is substantial.

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Speaker 4: It's still fifty billion dollars something like that of the

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Speaker 4: difference between the value of the enterprise value of the

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Speaker 4: company and the value of their bitcoin holdings. But the

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Speaker 4: thing that really kind of shot me into orbit on

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Speaker 4: all this was when a sailor and others then said, well, no,

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Speaker 4: you can't really value us on an NAV basis and

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Speaker 4: so called m NAB multiple of NAV. You actually have

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Speaker 4: to also give us additional value for the amount of

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Speaker 4: profit that we make every quarter from the appreciation in

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Speaker 4: the asset. And I just pointed out, I said, well,

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Speaker 4: that's like saying, you know, my whole net worth is

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Speaker 4: in a house that's worth four hundred thousand dollars that

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Speaker 4: is now worth five hundred thousand dollars a year or

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Speaker 4: two later, And my net worth is not five hundred

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Speaker 4: thousand dollars now, it's two and a half million, because

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Speaker 4: it's the value of the house plus a multiple on

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Speaker 4: the increase in the profitability the asset. When you put

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Speaker 4: it that way, it sounds a little absurd. It is absurd.

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Speaker 4: There's like two hundred of them now right, it's over

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Speaker 4: two hundred globally. Yeah, that's wait.

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Speaker 2: I have one more question. Why did microst I have

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Speaker 2: to remember to call them strategy, but I can't bring

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Speaker 2: myself to do it. Why did they switch from issuing

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Speaker 2: the convertible debt to preferred shares?

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Speaker 4: Because he realized that as he began to issue more

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Speaker 4: and more common it was putting pressure on the premium.

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Speaker 4: So now the latest iteration is what we're going to

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Speaker 4: do this quasi equity security, quasi debt, preferred stock, and

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Speaker 4: then we can torque up, we can lever up the

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Speaker 4: balance sheet. Now this is a company who's selling point

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Speaker 4: a year ago was we're not going to lever because

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Speaker 4: we have this wonderful equity that we can issue at

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Speaker 4: a premium. And now they're saying, well, you know, if

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Speaker 4: maybe if it's trades above two x, will issue equity,

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Speaker 4: but if it's between one and two x, we'll do

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Speaker 4: preferred And then if it's below one times, we'll buy

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Speaker 4: back common and then what is Chaino's going to do,

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Speaker 4: to which I said, well, I'll be out of the

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Speaker 4: trade by then. You know, if it's at one time's

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Speaker 4: anav it's not a trade. So that's kind of the

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Speaker 4: latest game plan. But stay tuned. It'll change. I think

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Speaker 4: the narrative keeps changing. The other one is, of course

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Speaker 4: that micro strategy will be put in the S and

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Speaker 4: P five hundred and so that will be untold riches

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Speaker 4: for everyone that doesn't know that's going to happen.

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Speaker 3: We got to move off this topic because I just

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Speaker 3: find it so depressing, you know, like I read the

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Speaker 3: news and the like, oh, like, you know, some big

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Speaker 3: breakthrough with batteries and China is happening or whatever. And

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Speaker 3: then the big entrepreneurial innervation in the United States is

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Speaker 3: the two hundredth company that's borrowing money right, Like, it's

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Speaker 3: too bleak when you really think about it's too bleak

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Speaker 3: exact to contemplate. So on Tuesday or Wednesday morning, shares

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Speaker 3: in real estate companies fell after Amdani's victory. What's your

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Speaker 3: take on New York City real estate these days?

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Speaker 4: Well, I guess I'm glad I sold my apartment last year.

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Speaker 4: But look, I think a lot of people are surprised.

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Speaker 4: Clearly New York City real estate and commercial real estate

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Speaker 4: will be challenged if a lot of things happen that

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Speaker 4: the current front runner wants to happen. I think there's

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Speaker 4: a lot of restrictions that will be put in front

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Speaker 4: of making some of that stuff happen. But my friends

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Speaker 4: in New York City commercial real estate have said, really,

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Speaker 4: the regulatory framework, in the legislative framework in New York

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Speaker 4: and New York City has done nothing but get worse

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Speaker 4: over the last fifteen years. And I'm kind of stunned

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Speaker 4: that some of the publicly traded companies like Bornado and

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Speaker 4: sl Green still have the cap rates as low as

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Speaker 4: they do. I mean SLG we looked at yesterday and

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Speaker 4: it's cap rate is still five point two percent short.

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Speaker 4: We've been We've been short SOLG on and off for

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Speaker 4: a number of years, and we are again. And I

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Speaker 4: just I don't get the risk reward on a five

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Speaker 4: point two percent cap rate in New York City commercial

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Speaker 4: real estate right now. I think it should be seven

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Speaker 4: or eight, is right.

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Speaker 3: You can get four and a half percent by buying

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Speaker 3: your treasure, right, exactly.

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Speaker 4: Yeah, and so if you're buying it at five to

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Speaker 4: two year, and that's redaccounting. Reaccounting is also pretty pretty

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Speaker 4: squarely by the way, for a lot of reasons. You know,

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Speaker 4: they don't include overhead in the cap rate, and of

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Speaker 4: course there is real depreciation in some of this stuff.

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Speaker 4: There's maintenance capex in New York City, it's pretty high,

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Speaker 4: and that doesn't include any capex. So I don't get it.

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Speaker 4: I don't see rents going up here. I guess it

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Speaker 4: would be the easiest way, and that'd be the only

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Speaker 4: reason you'd be buying office buildings at a five cap

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Speaker 4: What about residential Yeah, I mean, you know it's weird.

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Speaker 4: I mean, your audience knows better than I do. I mean,

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Speaker 4: it's problematic in so many ways. There's not enough supply,

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Speaker 4: all kinds of weird regulations. Things are expensive, and you

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Speaker 4: can kind of see my mom Dommi's message resonated with

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Speaker 4: a lot of people. A lot of it has to

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Speaker 4: do with the cost of living here.

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Speaker 3: Have you been on the receiving end, I guess dialing

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Speaker 3: and you have the calls to gather capital for a challenger.

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Speaker 4: Well, I'm not in New Yorker anymore. But the answer

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Speaker 4: is yeah, but which receiving or calling? Receiving? I'm not calling,

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Speaker 4: but yeah, sure, and.

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Speaker 3: Who are they saying who?

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Speaker 4: I'm not gonna I'm not gonna get into that. Those

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Speaker 4: are private conversations. I think I think they're all pretty

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Speaker 4: pretty silly at this point. Yeah, it was a good try, Jock.

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Speaker 2: Yeah, Okay, Well, since we mentioned the word bleak a

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Speaker 2: couple times in these conversations, now, is it bleak being

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Speaker 2: a short seller in the current market.

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Speaker 4: It's not a lot of fun, but it's never really

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Speaker 4: been fun. I mean, I started my original fun back

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Speaker 4: in eighty five that that was a thirteen hundred, so

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Speaker 4: it's pretty much. And you know, we started hedging back

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Speaker 4: in ninety six, so you know, it's always a slog.

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Speaker 4: It's never easiest. Why a lot of people don't do it.

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Speaker 4: On the other hand, the idiosyncratic opportunities most things fail,

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Speaker 4: as you know, and the idiosyncratic opportunities have probably never

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Speaker 4: been greater given the market we have now and with

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Speaker 4: things like bitcoin, treasury companies and all kinds of other things.

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Speaker 4: It's just are sort of head scratchers, and our function

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Speaker 4: of general animal spirits so there's a lot to do,

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Speaker 4: and I think that's the fun part of what I

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Speaker 4: do is there's a lot to do, and seemingly more

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Speaker 4: every year. But some of the stuff going on right

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Speaker 4: now is a bit of a head scratcher, and we

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Speaker 4: don't try to predict where the market's going. But the

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Speaker 4: animal spirits are definitely back.

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Speaker 3: You know, it's like several years ago, we're twenty twenty one.

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Speaker 3: People could have blamed ZERP. It's like, oh, it's because

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Speaker 3: the rates are at zero and that's why everyone's going crazy.

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Speaker 3: And I do think it's really interesting how much speculative

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Speaker 3: activity has persisted and the ZERP excuse does not hold

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Speaker 3: water anymore. So we got to find we got to

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Speaker 3: find something new. Speaking of idiosyncratic opportunities, one thing you've

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Speaker 3: been talking about a lot and multiple times on the

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Speaker 3: show is the data center Reach and Equinix. I think

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Speaker 3: just had two terrible days in a row. What's going

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Speaker 3: on with that? So these are the companies that have clouds,

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Speaker 3: but they're not like the hyperscalers, like what's there?

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Speaker 4: So I think the legacy data centers and there's only

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Speaker 4: a couple companies in the United States that really have

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Speaker 4: legacy data centers, there's equin X, there's Digital Realty, and

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Speaker 4: then there's a sort of the old colony capitals now

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Speaker 4: called Digital Bridge and they own these things sort of

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Speaker 4: in fund format. And when we took a look at

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Speaker 4: this with our partner back in twenty two, the idea

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Speaker 4: was pretty simple and we did not see the AI

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Speaker 4: explosion in mid twenty two, but the idea it was

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Speaker 4: a pretty crummy business then working on the cloud and

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Speaker 4: SaaS demand. But it became a really bad business with

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Speaker 4: the advent of AI because it just moved the hyperscalers

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Speaker 4: to invest more in state of the art data centers.

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Speaker 4: And these are older data centers that were short and

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Speaker 4: the idea being that the new GPU centric data centers

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Speaker 4: need liquid cooling, They basically need all the infrastructure ripped

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Speaker 4: out and replaced. And the business was not a high

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Speaker 4: return on capital business before this. It's getting even worse now.

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Speaker 4: And what equinec said yesterday at their analyst day was

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Speaker 4: that revenues were not going to quite be what people

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Speaker 4: thought they would be, but more ominously, capex was going

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Speaker 4: to keep increasing. And that's what we've been saying that

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Speaker 4: these are not like warehouses where you're just going to

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Speaker 4: collect a check. These are actually operating businesses where you

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Speaker 4: have to service the servers, you have to make sure

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Speaker 4: there's redundancy. It's just it's a business, a tech business,

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Speaker 4: and they're traded as reats, and that was kind of

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Speaker 4: the opportunity. That was the sort of dichotomy in valuation.

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Speaker 4: So people added back to the depreciation as they do

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Speaker 4: with reats, and they value them amount a so called

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Speaker 4: FFO or AFFO, which is a cash flow metric. But

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Speaker 4: in fact, unlike warehouses, shopping centers to lesser extent office buildings,

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Speaker 4: the capex was real depreciation was a real expense. So

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Speaker 4: to give you an example with Equinex, yesterday they said

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Speaker 4: our capex is now going to bump up to between

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Speaker 4: four and five billion a year. Well, the problem is

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Speaker 4: that Ebit Davis year is expected to be four point

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Speaker 4: five billion, so all of that's going to go to capex,

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Speaker 4: meaning they're going to have to basically borrow or issue

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Speaker 4: equity to pay their interest and dividends. And that's just

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Speaker 4: the definition of a bad business. And it's a business

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Speaker 4: that's not growing very fast. So unlike other really true

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Speaker 4: AI companies which are growing twenty five thirty forty percent

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Speaker 4: a year. These guys are growing three percent, five percent,

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Speaker 4: six percent, sort of a GDP, So there's no growing

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Speaker 4: your way out of this, and so they're just really

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Speaker 4: bad businesses trading just nosebleed valuations.

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Speaker 2: On the topic of idiosyncratic opportunities, I got to ask

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Speaker 2: about Carvana because when my husband and I moved back

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Speaker 2: to the States in twenty twenty two, we bought a

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Speaker 2: used car through Carvana and that was a mistake because

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Speaker 2: it took us about six months to actually get the car,

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Speaker 2: and they lost all our paperwork and it was just

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Speaker 2: an absolute nightmare. And I thought at the time, this

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Speaker 2: is a company whose entire business model was basically built

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Speaker 2: on regulation, right, Like, that's what they're doing. And I thought,

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Speaker 2: they're not going to have a future if they are

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Speaker 2: this bad at it. And yet the stock is up.

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Speaker 4: It's yeah, well it's done a double round trip, right.

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Speaker 4: It crashed ninety nine percent and now it's up one

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Speaker 4: hundred x. So it's pretty interesting again. And the reason

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Speaker 4: it's interesting is that if you go through the numbers,

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Speaker 4: they are making more than one hundred percent of their

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Speaker 4: pre tax profit from gain on sale of loans, subprime

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Speaker 4: loans and gain on sale of equity stakes in other companies,

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Speaker 4: and you x those two out, they're losing money, and

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Speaker 4: they're losing money now, right after the rebound, after the

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Speaker 4: restructuring from twenty twenty two to twenty twenty three. And

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Speaker 4: this is a company that is being valued again as

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Speaker 4: a secular growth stock that saw its used car revenues

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Speaker 4: drop thirty percent between twenty twenty two and twenty twenty three,

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Speaker 4: So it's not necessarily a secular growth company. The accounting

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Speaker 4: is abysmal. And then what people are really missing is

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Speaker 4: that what's happening in subprime auto securitizations right now, and

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Speaker 4: you can track it on your Bloomberg Terminal delinquencies are

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Speaker 4: starting to skyrocket. Yeah.

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Speaker 2: We actually did an episode on those recently with Jim Egan.

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Speaker 4: Yeah. And so again, a huge amount of their profits

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Speaker 4: comes from selling generating paper from customers and then selling

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Speaker 4: it in the open market or to affiliates. And this

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Speaker 4: is a company that was spun out of a company

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Speaker 4: called Drivetime Finance, which is their affiliated finance company, which

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Speaker 4: was originally called Ugly Duckling in the late nineties, which

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Speaker 4: was run by the Currencyeo's father, and that company collapsed

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Speaker 4: in the first subprime blow up, which was not the GFC,

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Speaker 4: was actually in the late nineties in subprime auto credit

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Speaker 4: and consumer loans, and it didn't go bankrupt, but it

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Speaker 4: came close and he had to retract ructure. He bought it,

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Speaker 4: bought it in private, and then restructured it and renamed

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Speaker 4: it Drivetime Finance. But that's the genesis of Carvana. That's

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Speaker 4: it's DNA. It's basically a subprime finance you know, lead company,

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Speaker 4: if you will, And those companies should not trade at

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Speaker 4: forty and fifty times expected earnings, and they don't by

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Speaker 4: and large, the consumer finance companies, So it's an odd bird.

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Speaker 4: It's still heavily leveraged, and the stock is up a ton.

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Speaker 4: But what really got us interested again recently was the

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Speaker 4: vast amount of insider selling that has just started in

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Speaker 4: May and June in the company. If you go look

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Speaker 4: at the insider selling in the company, it is just

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Speaker 4: now a torrent of everybody selling like pretty much every day,

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Speaker 4: and we just don't think that's a good sign. Given

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Speaker 4: what's happening in the subprime securitization market.

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Speaker 3: One area of the financial ecosystem that you've been cynical

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Speaker 3: about in it goes cynical out for a long time

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Speaker 3: is the private equity and a lot of the private assets.

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Speaker 3: And something that I've been talking to some people about

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Speaker 3: and you hear people talk about, is not so much

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Speaker 3: necessarily that the values have gone down, though probably in

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Speaker 3: many cases that they have, but that it's been a

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Speaker 3: long time since LPs, etc. Have gotten distributions, et cetera.

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Speaker 3: Whether it's venture at the venture level, the pe level.

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Speaker 3: How long can that go on where it's like people

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Speaker 3: are not getting.

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Speaker 4: Cash out, Yes, so before it becomes a real problem.

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Speaker 4: So I really kind of got much more interested in

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Speaker 4: this area serving on a couple of big investment committees

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Speaker 4: in Manhattan, and one of which had a really really

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Speaker 4: huge slug of our assets of this of this nonprofit

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Speaker 4: in privates, in private equity for the most part, a

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Speaker 4: little bit of venture, a little bit of real estate.

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Speaker 4: And what always struck me was that we spent a

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Speaker 4: lot of time talking about the market, talking about our managers,

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Speaker 4: talking about why hedge funds were terrible, and then we

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Speaker 4: get to the part about private and they say, well,

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Speaker 4: the returns are lagged by a quarter so you know,

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Speaker 4: here they are, and let's move on. And I started

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Speaker 4: looking at the numbers, and this is a fund that

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Speaker 4: had all the premier firms, the ones you all know,

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Speaker 4: and gee, stock market's doing awfully well, and we're kind

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Speaker 4: of doing ten percent eleven percent in terms of real

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Speaker 4: life perturns and then estimated IR which is problematic for

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Speaker 4: reasons a lot of your audience knows. And is it

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Speaker 4: just me or are we not understanding we're leveraged long

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Speaker 4: equity in these entities and yet we're underperforming the indices.

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Speaker 4: That was five six years ago, and I think that

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Speaker 4: that's only gotten worse since. And so I'm really beginning

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Speaker 4: to wonder. Private equity was considered a panacea for or

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Speaker 4: nonprofits and foundations endowments because basically, as my friend Cliff

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Speaker 4: Astd has said, it was volatility, you know, laundering if

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Speaker 4: you will, because no one ever showed you a big

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Speaker 4: down quarter. But now we're getting to a point where

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Speaker 4: a lot of these funds are really mature and the

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Speaker 4: actual returns themselves are not going to be mid teens

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Speaker 4: with low volatility. They're going to be high single digits,

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Speaker 4: low double digits. And we can look at the SMP

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Speaker 4: and say, Okay, you know I'm doing better in that,

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Speaker 4: and I'm liquid and I'm not paying fees, and so

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Speaker 4: I suspect that private equity and ultimately private credit are

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Speaker 4: going to be where hedge funds found themselves ten to

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Speaker 4: fifteen years ago, having to justify their existence after having

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Speaker 4: a pretty good run from the late nineties to the GFC.

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Speaker 4: I suspect that's where we are in private equity. It'll

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Speaker 4: still be a very lucrative business. But I just think

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Speaker 4: it's golden days are over where it was just a

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Speaker 4: free lunch of mid teen returns with no volatility.

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Speaker 2: Does anyone ever ask you what you're bullish on? Should

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Speaker 2: I ask?

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Speaker 4: Look, we're long equities, right, we're long stuff. A lot

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Speaker 4: of people in the audience are long Give us some example. Well,

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Speaker 4: I mean we're long indity, so we're long general corporate America.

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Speaker 4: I just, you know, I just hate the stuff. I'm short.

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Speaker 3: I think you're supposed to get emotional every once.

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Speaker 4: In a while. So's There's one other things though, I

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Speaker 4: do want to mention, and that is I was talking

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Speaker 4: to someone earlier today, and I think one of the

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Speaker 4: things underappreciated by investors, right, now in One of the

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Speaker 4: things that's been the most interesting to me is how

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Speaker 4: corporate profit margins have held up, which used to be

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Speaker 4: very mean reverting as you know. And the more work

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Speaker 4: we've done on this, the more we're kind of convinced

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Speaker 4: that the capital spending boom we're seeing due to tech

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Speaker 4: and specifically AI is is looking very much akin to

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Speaker 4: the global internet build out networking build out in the

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Speaker 4: late nineties. And the problem there, of course, is is

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Speaker 4: that if you buy my chips from Nvidio or you

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Speaker 4: were buying my networking equipment at Cisco and Lucent, that's

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Speaker 4: revenue for me and profit, but for you, it's a

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Speaker 4: capitalized expense, right, it's written off over time, and that

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Speaker 4: has a big, big boost until people pull their orders.

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Speaker 4: And that's what we saw up in two thousand and one,

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Speaker 4: two thousand and two that GDP dropped about one to

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Speaker 4: two percent in the recession of one to oh two.

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Speaker 4: Does anybody know what corporate profits did that? And that

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Speaker 4: was an investment driven recession. Consumers didn't feel it at all.

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Speaker 4: Earnings were down about forty five percent I think from

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Speaker 4: pete to trough. In the s and P they were

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Speaker 4: down about the same little bit more in the global

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Speaker 4: financial crisis, but of course GDP collapsed. So here's a

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Speaker 4: little interesting thought experiment right now in videos revenues are

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Speaker 4: about one half of one percent of US GDP about

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Speaker 4: one hundred and forty billion dollars, and our GDP is

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Speaker 4: about twenty nine trillion. Okay, anyone tell me what Cisco

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Speaker 4: and Lucent the two companies that you needed when building

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Speaker 4: out your internet network in ninety nine two thousand, So,

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Speaker 4: I mean, know what their combined revenues of percent of

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Speaker 4: GDP was in two thousand. No, using your phones, it

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Speaker 4: was a half a percent. It was it was roughly

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Speaker 4: fifty billion dollars total on GDP of ten trillion. So

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Speaker 4: those revenues stopped growing at some point shortly thereafter and

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Speaker 4: actually shrunk a little bit. So the investment boom we're

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Speaker 4: seeing right now we've seen before. And it's not just chips, right,

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Speaker 4: it's Caterpillar. It's people building the data centers, it's people

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Speaker 4: building new utilities. I mean, there is an ecosystem around

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Speaker 4: the AI boom that is considerable, as there was for

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Speaker 4: TMT back in ninety nine and two thousand, But it

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Speaker 4: is a risk year revenue stream because if people pull back,

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Speaker 4: they can pull back CAPEX very easily. Projects can get

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Speaker 4: put on hold for six months or nine months, and

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Speaker 4: that immediately shows up in disappointing revenues and earnings forecast

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Speaker 4: if it happens. We're not there yet, but that's one

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Speaker 4: of the risks out there that I think a lot

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Speaker 4: of people are under estimating.

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Speaker 3: So one of the reasons that we like talking to you,

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Speaker 3: and a consistent thing that I've noticed in the almost

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Speaker 3: ten years of doing this podcast, it's always you learn

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Speaker 3: a lot talking to people who are really steeped in accounting,

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Speaker 3: and that people who are knowledgeable about accounting just I

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Speaker 3: don't know, they seem to be have more interesting things

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Speaker 3: to say than a lot of other people. AI be

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Speaker 3: able to do accounting, some of these sort of understandings

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Speaker 3: of you know, whatever capitalized expenses, and like, is this

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Speaker 3: coming for the accounting well profession?

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Speaker 4: About coming for the accounting profession. That's a good question.

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Speaker 4: I think the AI that we've seen and used is

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Speaker 4: getting better and better at pulling numbers together and making

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Speaker 4: sense of them. It's not quite there yet. When I've

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Speaker 4: done it, I find lost and lots of errors. Not

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Speaker 4: so much in the numbers themselves, but the implications of

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Speaker 4: the numbers that AI is still not getting that great,

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Speaker 4: but it's going to, I think ultimately, And the question

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Speaker 4: will be for sort of tonight's conversation, and keeping in

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Speaker 4: the theme is where we made a lot of money

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Speaker 4: on the short side, idiosyncratically after dot Com from sort

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Speaker 4: of three to nine were in analog businesses that saw

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Speaker 4: their business digitize. So if you were selling an analog

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Speaker 4: product that became digital, you were in a lot of trouble.

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Speaker 4: Think like Kodak, buster of Yellow Pages, those kinds of businesses,

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Speaker 4: right it suddenly just didn't have to exist, and there's

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Speaker 4: going to be a raft of them post AI, and

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Speaker 4: people are already kind of starting to think that through.

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Speaker 4: But there will be industries that are collecting what I

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Speaker 4: call agency rents that will suddenly not be able to

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Speaker 4: collect those agency rents, and we're trying to keep an

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Speaker 4: eye on that. But I do think that the issue

432
00:25:26,400 --> 00:25:29,040
Speaker 4: isn't so much the quantitative numbers that AI will be

433
00:25:29,080 --> 00:25:32,200
Speaker 4: able to generate and give you ratios and things like that,

434
00:25:32,320 --> 00:25:34,479
Speaker 4: although Bloomberg does a pretty good job of that already, right,

435
00:25:34,480 --> 00:25:39,040
Speaker 4: I mean a databases, but interpreting it and We're not

436
00:25:39,160 --> 00:25:44,280
Speaker 4: there yet in terms of understanding what an increase in

437
00:25:44,400 --> 00:25:48,720
Speaker 4: receivables are three times revenues or increase in cost of

438
00:25:48,760 --> 00:25:51,720
Speaker 4: good soul relative to inventory. But it'll get there. It'll

439
00:25:51,720 --> 00:25:53,240
Speaker 4: get there within the next couple of years.

440
00:25:53,560 --> 00:25:55,320
Speaker 2: So one of the things I always wanted to ask

441
00:25:55,359 --> 00:25:58,320
Speaker 2: you is how you think about, I guess the timeframes

442
00:25:58,440 --> 00:26:00,320
Speaker 2: of some of your short bets, because it's it seems

443
00:26:00,359 --> 00:26:02,320
Speaker 2: to me like, you know, we can sit here and

444
00:26:02,400 --> 00:26:06,320
Speaker 2: talk about how crazy cap rates are for office buildings

445
00:26:06,320 --> 00:26:10,480
Speaker 2: in New York and subprime loans and Carvana and how

446
00:26:10,600 --> 00:26:12,320
Speaker 2: stupid bitcoin treasury.

447
00:26:11,960 --> 00:26:13,920
Speaker 3: Companies are climbing car sales at Tesla.

448
00:26:14,320 --> 00:26:18,040
Speaker 2: That's right, and yet you know, the key to all

449
00:26:18,080 --> 00:26:20,040
Speaker 2: of this, to making the money on it, is actually

450
00:26:20,040 --> 00:26:22,600
Speaker 2: calling what the catalyst is going to be and when

451
00:26:22,640 --> 00:26:23,840
Speaker 2: the stock eventually falls.

452
00:26:23,920 --> 00:26:27,160
Speaker 4: Yeah, after forty years, I've kind of figured out that

453
00:26:27,160 --> 00:26:33,440
Speaker 4: the catalysts are really evident pretty much in hindsight, that

454
00:26:33,600 --> 00:26:36,679
Speaker 4: if the catalysts were that obvious, it would be priced

455
00:26:36,720 --> 00:26:39,959
Speaker 4: into the stock. And so you can look for signposts

456
00:26:40,000 --> 00:26:43,080
Speaker 4: a long the world, but they're just that. Now there's

457
00:26:43,080 --> 00:26:45,720
Speaker 4: some that are better than others. You know, a massive

458
00:26:45,720 --> 00:26:49,000
Speaker 4: increase in insider selling and executives leaving has always been

459
00:26:49,040 --> 00:26:52,359
Speaker 4: a good one. For the most part. It's probabilistic. But

460
00:26:52,920 --> 00:26:56,600
Speaker 4: I think that timing is you know, always like say,

461
00:26:56,720 --> 00:26:58,600
Speaker 4: you know, only short the stocks that go down. If

462
00:26:58,600 --> 00:27:02,200
Speaker 4: they don't go down, don't short them. And it's hard,

463
00:27:02,440 --> 00:27:07,320
Speaker 4: and it's why being hedged pretty much systematically to us

464
00:27:07,359 --> 00:27:09,879
Speaker 4: made a lot of sense for the last thirty years

465
00:27:10,480 --> 00:27:12,000
Speaker 4: and say, okay, we're going to take the market out

466
00:27:12,000 --> 00:27:14,000
Speaker 4: of what we're doing and we're going to just try

467
00:27:14,000 --> 00:27:18,239
Speaker 4: to isolate the datias andcratic attributes of our shorts. And

468
00:27:18,280 --> 00:27:21,200
Speaker 4: even then, I mean, stuff you would think would bring

469
00:27:21,320 --> 00:27:24,679
Speaker 4: a lower valuation out of common sense, you know, doesn't

470
00:27:24,680 --> 00:27:27,399
Speaker 4: happen in a brilliant bull markets and in fact can

471
00:27:27,400 --> 00:27:30,160
Speaker 4: be a negative factor. You know, the worse the company,

472
00:27:30,359 --> 00:27:32,560
Speaker 4: the more it goes up. So you have to be

473
00:27:32,920 --> 00:27:36,200
Speaker 4: willing to understand that concept as well. But again it's

474
00:27:36,320 --> 00:27:39,400
Speaker 4: it's it's funny. You know, Equine's coming out of the blue.

475
00:27:39,520 --> 00:27:41,879
Speaker 4: Just to use the example, we've had tonight and stocked

476
00:27:41,920 --> 00:27:45,240
Speaker 4: on twenty percent in two days. I mean, everything it's

477
00:27:45,280 --> 00:27:48,600
Speaker 4: said an analyst day was known to anybody who was

478
00:27:48,640 --> 00:27:51,320
Speaker 4: paying attention. But yet they came out and said it

479
00:27:51,400 --> 00:27:54,520
Speaker 4: and everybody went, oh wow. Ouch.

480
00:27:54,760 --> 00:27:57,480
Speaker 3: Speaking of executive departures, I think there was another one

481
00:27:57,520 --> 00:28:00,000
Speaker 3: today at Tesla, someone who is like, I think, pretty

482
00:28:00,080 --> 00:28:02,720
Speaker 3: close to Elon or somebody been there for a Brillian time.

483
00:28:02,920 --> 00:28:06,159
Speaker 4: Do you have a Nobody cares? Nobody cares? Do you

484
00:28:06,200 --> 00:28:08,800
Speaker 4: have a Tesla thought of the name? Nobody cares, that's

485
00:28:08,800 --> 00:28:11,560
Speaker 4: my thought. Nobody cares. Yeah, you could. You know, you

486
00:28:11,560 --> 00:28:14,600
Speaker 4: could see Elon, you know, robbing a Brinks truck with

487
00:28:14,640 --> 00:28:20,280
Speaker 4: a mask or whatever's Elon. You know, I'm sure they're

488
00:28:20,320 --> 00:28:22,800
Speaker 4: going to have a new business of robbing Brinks trucks

489
00:28:22,840 --> 00:28:24,840
Speaker 4: and you know, we'll put a we'll put a trillion

490
00:28:24,960 --> 00:28:27,680
Speaker 4: valuation on it. I've given up trying to figure out

491
00:28:28,080 --> 00:28:31,640
Speaker 4: what people think about about executive departures at that company.

492
00:28:31,680 --> 00:28:35,880
Speaker 4: I mean, their car sales are plummeting, their cash flows plummeting,

493
00:28:36,400 --> 00:28:38,240
Speaker 4: you know, all the metrics that you would look as

494
00:28:38,280 --> 00:28:43,280
Speaker 4: security analysts. But it's a unique animal where people say, oh, well,

495
00:28:43,320 --> 00:28:46,080
Speaker 4: of course, yes, but you know, Rosie the robot is

496
00:28:46,120 --> 00:28:47,640
Speaker 4: going to serve me my breakfast and it's going to

497
00:28:47,680 --> 00:28:50,520
Speaker 4: have Tesla trademark on it, so you know it's worth

498
00:28:50,520 --> 00:28:54,800
Speaker 4: a trillion dollars, So there's always one stock and every

499
00:28:54,840 --> 00:28:59,360
Speaker 4: bull market that has that at least that imprimiture of

500
00:28:59,480 --> 00:29:02,560
Speaker 4: right of I call it hopes and dreams. Everyone can

501
00:29:02,720 --> 00:29:07,000
Speaker 4: can really project their hopes and dreams onto that company

502
00:29:07,000 --> 00:29:10,320
Speaker 4: and then value it any way they want. And Cisco

503
00:29:10,480 --> 00:29:13,400
Speaker 4: was that company, by the way in ninety nine. And

504
00:29:13,440 --> 00:29:18,800
Speaker 4: it's undoubtedly Tesla because companies are actually executing in some

505
00:29:18,840 --> 00:29:22,000
Speaker 4: of these fantastic areas of the future, like Nvidia and

506
00:29:22,040 --> 00:29:26,800
Speaker 4: others traded a discount to Tesla and they're actually doing things.

507
00:29:27,360 --> 00:29:30,280
Speaker 4: You know, he's just talking about doing things, but it

508
00:29:30,840 --> 00:29:33,280
Speaker 4: doesn't matter at least not yet. To get to your timing.

509
00:29:33,040 --> 00:29:36,840
Speaker 3: Question, Jim Chandos, thank you so much. Always a thrill

510
00:29:36,960 --> 00:29:37,400
Speaker 3: to Cheveril.

511
00:29:39,200 --> 00:29:42,200
Speaker 4: Thanks guys Khan.

512
00:29:54,680 --> 00:29:57,160
Speaker 2: This has been another episode of the All Thoughts podcast.

513
00:29:57,280 --> 00:30:00,600
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy and.

514
00:30:00,600 --> 00:30:03,400
Speaker 3: I'm Jill Wisenthal. You can follow me at the Stalwart.

515
00:30:03,720 --> 00:30:07,040
Speaker 3: Follow our guest Jim Chanos, He's at Real Jim Chanos.

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517
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