WEBVTT - Lots More on Shohei Ohtani's $700 Million Contract 0:00:00.400 --> 0:00:03.840 Hello, and welcome to it. Jeez, my voice is totally shot. 0:00:04.760 --> 0:00:05.880 Oh my gosh, I know. 0:00:06.080 --> 0:00:07.480 Sorry my voice. 0:00:09.039 --> 0:00:10.200 Yeah, oh boy. 0:00:10.320 --> 0:00:12.440 So maybe I'll just let Tracy do all the talking. 0:00:13.000 --> 0:00:16.040 I'm glad we're doing a baseball episode on the day 0:00:16.040 --> 0:00:18.400 that you've lost your voice. 0:00:20.440 --> 0:00:27.440 I did a deadlift one two, Jimmy. Okay, uh barges. 0:00:27.640 --> 0:00:29.800 This isn't after school special, except. 0:00:29.400 --> 0:00:31.960 I've decided I'm going to base my entire personality going 0:00:31.960 --> 0:00:35.200 forward on campaigning for a strategic pork reserve in the US. 0:00:35.320 --> 0:00:37.040 Where's the best in posta? 0:00:37.200 --> 0:00:39.800 These are the important question? Is it robots taking over 0:00:39.800 --> 0:00:40.160 the world? 0:00:40.240 --> 0:00:40.400 No. 0:00:40.479 --> 0:00:43.360 I think that, like in a couple of years, the 0:00:43.440 --> 0:00:45.640 AI will do a really good job of making the 0:00:45.640 --> 0:00:48.879 odd launch podcast and people to say, I don't really 0:00:48.920 --> 0:00:50.800 need to listen to Joe and Tracy anymore. 0:00:51.000 --> 0:00:52.919 We do have the. 0:00:55.520 --> 0:00:58.320 Until then, this is lots more a weekly. 0:00:58.120 --> 0:01:00.160 Chat about whatever is on our mind. 0:01:00.320 --> 0:01:02.480 And we really do have the perfect guests. 0:01:05.640 --> 0:01:09.280 H Tracy, I'm sorry my voice sounds so terrible today. 0:01:09.880 --> 0:01:11.880 It's okay. It's not like it's a problem for a 0:01:11.880 --> 0:01:13.800 professional podcaster to lose their voice. 0:01:13.920 --> 0:01:17.320 It's not like my entire career in profession is entirely 0:01:17.360 --> 0:01:19.279 premised on my ability to speak. 0:01:19.440 --> 0:01:20.360 How was the show? 0:01:20.600 --> 0:01:24.280 Our band had our first show last night Skinny Dennis 0:01:24.280 --> 0:01:24.760 and Whisburg. 0:01:24.840 --> 0:01:25.480 It was very good. 0:01:25.560 --> 0:01:27.200 I guess I sang a little bit too hard, but 0:01:27.319 --> 0:01:29.000 I was for our first time. 0:01:29.800 --> 0:01:32.119 You know, Taylor Swift was doing this three hours a night. 0:01:32.240 --> 0:01:34.880 Well that's what I did, wondering, like, seriously, you need 0:01:34.920 --> 0:01:37.800 to do vocal exercises. Your voice is a muscle Joe. 0:01:37.800 --> 0:01:38.680 You have to practice. 0:01:38.720 --> 0:01:41.959 How the hell did she do that? I've felt about 0:01:41.959 --> 0:01:44.600 this and like, how did she look? Avoid like getting 0:01:44.600 --> 0:01:46.319 a flu? You know, it's like a whole year you 0:01:46.360 --> 0:01:49.480 get like sick, and like like it's it's honestly like 0:01:49.800 --> 0:01:51.520 the fact that she did that to her like blows 0:01:51.560 --> 0:01:51.920 my mind. 0:01:52.040 --> 0:01:54.280 Show. It sounds so painful listening to you. I hope 0:01:54.320 --> 0:01:54.800 you're okay. 0:01:55.400 --> 0:01:58.200 Well, how do you She almost didn't get to meet 0:01:58.240 --> 0:02:01.040 Travis Kelce because the first time he came to her concert, 0:02:01.120 --> 0:02:03.640 she was like, I can't meet at talk to anybody beforehand. 0:02:03.280 --> 0:02:07.040 Because I'm resting my voice. Do you think they just 0:02:07.120 --> 0:02:09.880 stared at each other from like across the room. 0:02:10.000 --> 0:02:13.560 As our producer Dash, I think for the well Dash 0:02:13.600 --> 0:02:15.920 has been on he's been on and we're also speaking 0:02:15.919 --> 0:02:20.000 to our friend in a Bloomberg opinion contributor and a 0:02:20.080 --> 0:02:23.600 fed watcher and sports watcher Connorson. 0:02:23.720 --> 0:02:26.520 Can I just say there's a supreme irony that the 0:02:26.600 --> 0:02:29.880 day we're talking about baseball, Joe has lost his voice. 0:02:30.360 --> 0:02:33.560 So apologies and advance to listeners. If I am forced 0:02:33.560 --> 0:02:36.600 to carry this episode, and I honestly know nothing about 0:02:36.600 --> 0:02:37.919 the topic, but I will do my best. 0:02:38.080 --> 0:02:40.280 But Tracy, you may not know much about baseball, but 0:02:40.360 --> 0:02:44.239 you understand that if a baseball player sends a seven 0:02:44.360 --> 0:02:47.800 hundred million dollar contract that stipulates that for like the 0:02:47.840 --> 0:02:51.359 first nine years they get paid two million dollars a year, 0:02:51.360 --> 0:02:53.359 and then for the next ten years or something, they 0:02:53.360 --> 0:02:55.360 get paid sixty eight million dollars a year, that's at 0:02:55.440 --> 0:02:57.760 least a financially interesting conversation. 0:02:57.919 --> 0:02:59.760 Yeah. I agree. The other thing I would like to 0:02:59.800 --> 0:03:03.840 say is before this week, and before this contract was signed, 0:03:04.200 --> 0:03:06.919 I had never heard of this particular player, which perhaps 0:03:06.960 --> 0:03:10.440 says something about the state of Major League baseball. 0:03:10.520 --> 0:03:12.320 I feel like you can sort of talk about this 0:03:12.400 --> 0:03:14.760 topic without having anything to do with baseball, which is 0:03:15.000 --> 0:03:17.000 what makes it kind of fun. It's like a seven 0:03:17.080 --> 0:03:20.120 hundred million dollar contract with weird money being deferred, and 0:03:20.280 --> 0:03:21.720 it's just a fun thing to talk about. 0:03:21.840 --> 0:03:24.839 But TRACE's point is really interesting, which is it's kind 0:03:24.840 --> 0:03:29.240 of wild to hear a seven hundred million dollar contract. 0:03:29.240 --> 0:03:31.240 For someone A lot of people haven't heard of. 0:03:31.200 --> 0:03:34.400 It, and in an industry that by many people's accounts, 0:03:34.440 --> 0:03:36.760 as like on scular to climents clearly not is like 0:03:37.240 --> 0:03:41.440 in the media in the public consciousness is NBA clear 0:03:41.600 --> 0:03:45.640 nothing like NFL? Where's this money coming from to pay 0:03:45.680 --> 0:03:47.160 someone seven hundred million dollars? 0:03:47.520 --> 0:03:51.040 TV dart rights deals, local TV money, season ticket money. 0:03:51.080 --> 0:03:53.920 There's a belief that he'll be a marketing machine for 0:03:53.960 --> 0:03:56.680 the Dodgers, and so they know when you're looking to 0:03:56.840 --> 0:03:58.720 sign a big contract, you can come up with ways 0:03:58.760 --> 0:04:00.840 to justify it, just like tech companies can come up 0:04:00.840 --> 0:04:03.840 with their tams and whatnot. People just come up with 0:04:03.880 --> 0:04:04.480 a way to do it. 0:04:04.680 --> 0:04:06.880 Wait, so we haven't actually said his name yet. It's 0:04:07.120 --> 0:04:10.960 shohe Atani who plays for the Dodgers. And Okay, so 0:04:11.080 --> 0:04:14.680 one basic question I have is I've I ask someone 0:04:14.720 --> 0:04:17.799 one of our colleagues, Dave Lika, before we started recording 0:04:17.800 --> 0:04:20.039 the show, like who is this guy and why should 0:04:20.040 --> 0:04:23.080 I care? And he started comparing him to Babe Ruth, 0:04:23.200 --> 0:04:26.400 and I at least know who Babe Ruth was, so like, 0:04:26.760 --> 0:04:29.520 what is the big deal about this guy? Like why 0:04:29.640 --> 0:04:33.280 is he ostensibly worth seven hundred million dollars even if 0:04:33.279 --> 0:04:35.200 it's being paid out on a deferred basis. 0:04:35.640 --> 0:04:37.920 He's arguably better than Babe Ruth. Like it's the sort 0:04:37.960 --> 0:04:40.880 of thing that for people my age, you like baseball's kids, 0:04:41.440 --> 0:04:43.240 you would dream about. Wouldn't it be cool if there 0:04:43.279 --> 0:04:45.840 was a Babe Ruth? But he's like better than Babe 0:04:45.920 --> 0:04:48.240 Ruth because there was a time the summer when he 0:04:48.720 --> 0:04:52.119 was basically leading baseball in home runs and also almost 0:04:52.200 --> 0:04:55.040 leading as a pitcher in strikeouts, and it was just like, 0:04:55.040 --> 0:04:57.320 how is he doing this? Because it's not like there 0:04:57.400 --> 0:04:59.440 are other players who hit and pitch and they're kind 0:04:59.440 --> 0:05:02.000 of okay at both, Like he's the only one doing 0:05:02.040 --> 0:05:04.200 this and he was like the best at both parts, 0:05:04.200 --> 0:05:05.479 and it just doesn't make any sense. 0:05:06.080 --> 0:05:08.640 Tracy, I, No, you don't really pay that much attention 0:05:08.680 --> 0:05:11.680 to baseball, but that fact that he is like dominant 0:05:11.720 --> 0:05:14.320 on both sides, Like, were you familiar with how rare 0:05:14.360 --> 0:05:15.359 that is in baseball? 0:05:15.520 --> 0:05:18.359 Yeah, so I'm familiar with In baseball, people tend to 0:05:18.400 --> 0:05:22.600 do like one thing. Well, yeah, I watched Moneyball as well, 0:05:22.680 --> 0:05:25.880 so I kind of get it there. But yeah, okay, 0:05:25.880 --> 0:05:28.520 it's unusual to be able to hit a bunch of 0:05:28.520 --> 0:05:31.680 home runs, which I take it that's like what baseball 0:05:31.720 --> 0:05:36.320 audiences want nowadays, and be able to pitch really well, yeah. 0:05:36.120 --> 0:05:39.320 There's nobody else who does this. It's yeah, what. 0:05:39.240 --> 0:05:43.120 Is the net present value of otanious contract? Like, how 0:05:43.120 --> 0:05:45.320 do you like if you're like thinking about, okay, what 0:05:45.440 --> 0:05:48.600 is a contract worth that pays you know this? And 0:05:48.640 --> 0:05:53.120 what does it say about his own personal inflation expectations? 0:05:53.560 --> 0:05:55.200 And why does it structure this way? Just sort of 0:05:55.200 --> 0:05:56.200 give us like, wait, don't. 0:05:56.040 --> 0:05:58.560 The Dodgers get the interest because it's deferred? 0:05:58.640 --> 0:06:01.440 Yeah, just to walk the math as you've as you've 0:06:01.440 --> 0:06:02.120 modeled it out. 0:06:02.560 --> 0:06:05.240 Yeah, Like I had to obviously google this to prepare 0:06:05.240 --> 0:06:07.360 for the podcast. And it's funny because there are different 0:06:07.400 --> 0:06:10.919 discount rates applied depending on the way that it's being used. 0:06:11.360 --> 0:06:15.360 So baseball has this competitive balance tax, which is basically 0:06:15.360 --> 0:06:17.080 like every team as if they spend more than two 0:06:17.160 --> 0:06:20.400 hundred and forty million dollars, every additional payroll dollar above 0:06:20.440 --> 0:06:23.680 that is taxed and redistributed, and so for the purpose 0:06:23.720 --> 0:06:27.159 of that luxury tax, that discount being applied is four 0:06:27.200 --> 0:06:29.960 point four to three percent, which is based on some 0:06:30.120 --> 0:06:33.200 IRS code and the sort of bond yields as of 0:06:33.200 --> 0:06:34.200 October twenty three. 0:06:35.440 --> 0:06:38.280 But for the is there like a specific IRS baseball 0:06:38.279 --> 0:06:39.640 player clause or something. 0:06:39.680 --> 0:06:42.640 Oh my gosh, well it's for it's the the federal 0:06:42.760 --> 0:06:46.080 midterm rate as defined in Section twelve seventy four, Part 0:06:46.160 --> 0:06:47.480 D of the IRS. 0:06:47.720 --> 0:06:50.880 Please tell me you had to look this up before 0:06:50.920 --> 0:06:53.960 this conversation, right, like you didn't just know this? Okay. 0:06:54.279 --> 0:06:57.120 I think trade was a little show that a baseball 0:06:57.240 --> 0:06:58.960 topic would be good for on laws, but this is 0:06:59.040 --> 0:07:02.320 no weird now square down the middle. 0:07:02.120 --> 0:07:05.800 We're in the game. Yeah, So for the purpose of 0:07:05.800 --> 0:07:09.120 the luxury tax, it's worth forty six million dollars a year, okay. 0:07:09.800 --> 0:07:12.400 But I guess for the purpose of MLB regular payrolls 0:07:12.400 --> 0:07:15.120 there's a ten percent discount rate being applied, although I 0:07:15.120 --> 0:07:17.720 don't really know what it's like. Okay, who cares? Like, 0:07:17.760 --> 0:07:20.960 what does that mean? And the Dodgers have to set 0:07:20.960 --> 0:07:23.040 aside the money every year even though they're only paying 0:07:23.080 --> 0:07:24.920 in two million years they do have to set it aside, 0:07:24.960 --> 0:07:26.440 so you don't have to have any counterparty risk. 0:07:26.520 --> 0:07:29.160 I was wondering about that. So Otani does not need 0:07:29.240 --> 0:07:32.520 to be like buying credit default swaps against the Dodgers 0:07:32.640 --> 0:07:37.280 to protect against Like he's not facing any counterparty risk exactly. Okay, 0:07:37.280 --> 0:07:38.720 I was wondering about exactly this. 0:07:39.080 --> 0:07:41.160 Will he have to pay taxes on this in twenty 0:07:41.280 --> 0:07:43.160 thirty four. I don't know the answer to that. I'm 0:07:43.160 --> 0:07:45.000 sure lawyers will fight over it in the US or 0:07:45.080 --> 0:07:46.880 the state of California will try to get their money. 0:07:47.440 --> 0:07:49.840 But I don't know why he would agree to this, 0:07:49.880 --> 0:07:52.360 and that actually feels like a very Japanese thing to do. 0:07:52.640 --> 0:07:55.360 Not that you want to kind of dive into cultural tropes, 0:07:55.400 --> 0:07:57.920 but I just can't imagine any kind of American born 0:07:57.960 --> 0:07:58.800 person agreeing to this. 0:07:59.640 --> 0:08:02.400 I mean, it's still seven hundred million dollars. I guess 0:08:02.400 --> 0:08:04.440 it's how much is it in the interim? It's like 0:08:04.480 --> 0:08:05.160 two million a. 0:08:05.160 --> 0:08:07.960 Year two million a year, So he's getting twenty million 0:08:08.000 --> 0:08:10.240 dollars over the next ten years, which for baseball is 0:08:10.280 --> 0:08:13.160 not that much, and then he'll get six hundred and 0:08:13.160 --> 0:08:15.440 eighty million dollars in the following ten years. 0:08:15.600 --> 0:08:17.160 I mean, I do think a lot of people would 0:08:17.200 --> 0:08:20.960 be satisfied getting seven hundred million dollars overall, even if 0:08:21.000 --> 0:08:23.480 it was paid out on a sort of ten year basis. 0:08:23.560 --> 0:08:25.960 But I take the point that it's kind of structured weird. 0:08:26.200 --> 0:08:28.800 What did the Dodgers get out of this? So my 0:08:28.920 --> 0:08:33.240 understanding is that similar to football or soccer in Europe, 0:08:33.440 --> 0:08:35.800 there's like a cap on the amount of money that 0:08:35.840 --> 0:08:38.880 they can spend on players. And so presumably if they're 0:08:38.920 --> 0:08:41.920 not paying out hundreds of millions of dollars on a 0:08:42.040 --> 0:08:45.360 yearly basis to a star player, they have additional money 0:08:45.440 --> 0:08:47.680 that they can spend on other people. 0:08:48.360 --> 0:08:50.640 Right, so the headline number is seventy million, but for 0:08:50.679 --> 0:08:53.240 the purpose of that competitive balance tax, it's only forty 0:08:53.280 --> 0:08:55.559 six million, So it frees up twenty four million that 0:08:55.600 --> 0:08:56.720 they can spend on other players. 0:08:57.120 --> 0:08:59.440 So he was on the Angels before, and the Angels 0:08:59.480 --> 0:09:01.640 might understand and he has like had amazing players, but 0:09:01.640 --> 0:09:05.319 we're somehow just terrible and not competitive. He presumably wants 0:09:05.360 --> 0:09:08.600 to win a World Series. How much more is this 0:09:08.640 --> 0:09:11.800 sort of like create the opportunity that the Doggers can 0:09:11.880 --> 0:09:16.960 spend enough to build a championship caliber team. Around him. 0:09:17.760 --> 0:09:20.520 Well, in theory, So the way that people think about, well, 0:09:20.520 --> 0:09:22.640 how much money should you spend on free agents is 0:09:22.720 --> 0:09:27.400 there's this baseball stat called wins above replacement or war 0:09:28.120 --> 0:09:30.880 And you know, obviously past performance is not indicative of 0:09:30.880 --> 0:09:33.520 a future, but in general, the thought is people will 0:09:33.520 --> 0:09:36.480 pay eight million dollars per war per year. That's sort 0:09:36.520 --> 0:09:39.720 of like the going rate for an expected win above replacement. 0:09:40.080 --> 0:09:42.120 So if you're saving twenty four million off the tax 0:09:42.240 --> 0:09:44.840 in theory that lets you buy three extra wins somewhere else, 0:09:45.440 --> 0:09:48.200 it's not that much, yeah, but it's it's small margins 0:09:48.200 --> 0:09:49.079 in baseball. 0:09:48.880 --> 0:09:53.319 Right, just on the deferred aspect of all of this. So, 0:09:54.040 --> 0:09:56.160 I mean, could you get to could you get to 0:09:56.160 --> 0:10:00.280 a state where like lots of baseball teams just start 0:10:00.520 --> 0:10:03.840 doing this and like start building up I guess, like 0:10:04.600 --> 0:10:08.160 their deferred liabilities in order to do these future deals 0:10:08.240 --> 0:10:09.880 or did you say the money is held in trust? 0:10:10.040 --> 0:10:10.720 I can't remember. 0:10:11.760 --> 0:10:13.440 It is held in trust. So I think for the 0:10:13.440 --> 0:10:15.560 purpose of the competitive balance tax you could do it. 0:10:15.640 --> 0:10:18.920 But yeah, from a team accounting standpoint, the money is 0:10:18.960 --> 0:10:21.199 still has to be set aside for him. They can't 0:10:21.200 --> 0:10:23.800 just kind of ride on that. Maybe they're earning interest, 0:10:23.800 --> 0:10:25.319 though I don't know if I think they are. 0:10:26.040 --> 0:10:28.320 I think the interest accrues to the Dodgers. But is 0:10:28.360 --> 0:10:31.960 there any future in which like this kind of contract 0:10:32.000 --> 0:10:35.400 could be replicated by other teams? Or is this such 0:10:35.520 --> 0:10:40.600 a one off, given you know, Otani's unusual abilities, and 0:10:40.640 --> 0:10:43.400 given just how weird the structure is and your point 0:10:43.400 --> 0:10:46.760 about like, who else would accept this in professional sports? 0:10:47.120 --> 0:10:50.679 Well, baseball obviously has a union, and there's nothing restricting 0:10:50.720 --> 0:10:53.040 this sort of deal in the current union deal. It's 0:10:53.040 --> 0:10:56.080 something that the players could revisit in the next deal. 0:10:56.080 --> 0:10:58.600 But yeah, right now, there's nothing stopping even a three 0:10:58.679 --> 0:11:00.840 hundred million dollar deal from being structure this way if 0:11:00.840 --> 0:11:11.040 the player and team agreed to it. 0:11:15.559 --> 0:11:18.440 So I mentioned obviously you know Otani thinks the dollar 0:11:18.559 --> 0:11:20.679 is going to be worth something, or you know that 0:11:20.720 --> 0:11:23.480 inflation isn't going to destroy the value of that when 0:11:23.640 --> 0:11:26.880 in ten years when the big balloon paymented. So, speaking 0:11:26.920 --> 0:11:31.599 of inflation, big week for the Fed. You sorry, that 0:11:31.679 --> 0:11:38.360 sound terrible. You've been on team March for a while now, 0:11:38.480 --> 0:11:40.240 and now the street is coming around to your view, 0:11:40.240 --> 0:11:40.760 it looks like. 0:11:41.160 --> 0:11:43.920 Yeah, so it's really interesting because I feel like and 0:11:43.960 --> 0:11:46.120 I talked to Neil dud and Tim Dewey. We have 0:11:46.160 --> 0:11:48.079 a little kind of group chat that we've been working 0:11:48.080 --> 0:11:50.760 on this for a while, and it's been very obvious 0:11:50.800 --> 0:11:52.240 to us that this is what was going to happen, 0:11:52.400 --> 0:11:55.720 But obviously the Street disagreed. And I don't feel like 0:11:56.080 --> 0:11:58.200 we have access to any data that nobody else does. 0:11:58.240 --> 0:12:01.000 And so I'm curious, from your perspective, why is it 0:12:01.040 --> 0:12:03.640 that something that seems so obvious to us was being 0:12:03.679 --> 0:12:07.040 fought by the Street and bank economists and people like that. 0:12:07.480 --> 0:12:09.320 Why was it so obvious to you in the first place? 0:12:09.800 --> 0:12:11.760 Just because the FED had talked about this view of 0:12:11.960 --> 0:12:15.080 as realized inflation came down, that means that real interest 0:12:15.160 --> 0:12:17.400 rates were going up, and so policy was getting more 0:12:17.440 --> 0:12:21.280 restrictive and eventually would make sense to make an adjustment 0:12:21.320 --> 0:12:23.800 to account for that. And to me, it was just 0:12:23.880 --> 0:12:25.640 this is what they told us they would do. But 0:12:25.720 --> 0:12:27.400 I felt like other people were coming up with their 0:12:27.400 --> 0:12:29.319 own views of what the FED should do rather than 0:12:29.360 --> 0:12:32.680 just listening to the stated fed reaction function from the Fed. 0:12:33.559 --> 0:12:37.800 I mean, I think that's that's basically what happened. The 0:12:37.840 --> 0:12:40.320 other thing, the other thing that I saw on Twitter, 0:12:40.360 --> 0:12:42.080 which was kind of shocking to me was a bunch 0:12:42.080 --> 0:12:46.040 of people talking about loose financial conditions and how because 0:12:46.080 --> 0:12:49.360 stocks are up so much, crypto is up, the FED 0:12:49.440 --> 0:12:52.319 has to cut and they weren't joking, I know, like 0:12:52.520 --> 0:12:55.080 Fed's got to cut has been a joke in the past, 0:12:55.720 --> 0:12:58.440 but that that always seems super weird to me, given 0:12:58.640 --> 0:13:02.240 that I know, we had old Cashcari on the show 0:13:02.360 --> 0:13:05.160 last year and he did push back against the rally 0:13:05.200 --> 0:13:08.560 in stocks at that particular time. But this is a 0:13:08.600 --> 0:13:13.240 totally different environment where inflation is falling and to Connor's point, 0:13:13.320 --> 0:13:16.720 like real rates are going up, So that just seemed 0:13:16.760 --> 0:13:18.719 like very strange to me that anyone would try to 0:13:18.760 --> 0:13:20.240 mount that particular argument. 0:13:20.720 --> 0:13:22.720 And I think people were holding on to FED speak 0:13:22.760 --> 0:13:25.400 from twelve eighteen months ago, which, to your point, reflected 0:13:25.440 --> 0:13:27.680 a very different environment. And yeah, like if it were 0:13:27.720 --> 0:13:31.080 August twenty twenty two, they weren't happy. But inflation has 0:13:31.120 --> 0:13:33.400 come down and it's not quite it too yet by 0:13:33.520 --> 0:13:36.360 some of their measures. But it's sort of in a way, 0:13:36.400 --> 0:13:40.480 it's like there was some reason for like loosening in 0:13:40.520 --> 0:13:43.040 FED speak just because inflation wasn't at five anymore, it 0:13:43.040 --> 0:13:43.840 had come down. 0:13:43.920 --> 0:13:46.440 Just to push back a little bit though, on this 0:13:46.600 --> 0:13:49.080 like idea of like real rates going up. I mean, 0:13:49.520 --> 0:13:52.280 it feels to me like there's sort of academic macro 0:13:52.559 --> 0:13:56.000 and then maybe real world macro. So what we're talking 0:13:56.000 --> 0:13:58.840 about here is real world macro. Oh, inflation is going down, 0:13:59.000 --> 0:14:03.160 rates starting the same, Therefore policy is getting tighter. Whereas 0:14:03.400 --> 0:14:08.240 my sense that academic macro looks more forward expectations of 0:14:08.280 --> 0:14:11.440 inflation rather than past and they say, well, look, we 0:14:11.559 --> 0:14:15.200 already knew that inflation was forecasted to be x. It's 0:14:15.360 --> 0:14:20.800 already taken into account. Therefore we're not getting implicitly tighter. 0:14:20.880 --> 0:14:24.440 Do you sense that's sort of like that being the divide. 0:14:24.880 --> 0:14:27.520 I think so, And like to be clear, I don't 0:14:27.560 --> 0:14:30.840 necessarily agree with the framework they're using, but it's sort 0:14:30.840 --> 0:14:32.680 of like my job is to figure out what framework 0:14:32.720 --> 0:14:34.560 are they using? Right, this is what they've told us 0:14:34.560 --> 0:14:35.920 they're going to do, and so it's our job to 0:14:35.920 --> 0:14:36.480 figure it out. 0:14:37.240 --> 0:14:40.440 Were you surprised at all by how dubvish the meeting 0:14:40.560 --> 0:14:45.200 actually was, because I mean I guess consensus, well, consensus 0:14:45.320 --> 0:14:48.240 was like very one way going into this, but I 0:14:48.240 --> 0:14:50.720 think it's still kind of surprised on the dubbish side, 0:14:51.080 --> 0:14:52.840 and for what it's worth, I thought I thought they 0:14:52.880 --> 0:14:54.440 would lean slightly more hawkish. 0:14:54.480 --> 0:14:57.920 But I thought the statement and the SEP would be 0:14:57.920 --> 0:15:00.600 more hawkish just because it's more of a bureaucratic sort 0:15:00.640 --> 0:15:03.400 of deliverable that everybody has to sign off on. There's 0:15:03.400 --> 0:15:05.720 probably some lags in that, but the PAL would use 0:15:05.720 --> 0:15:08.760 the press conference to kind of reorient people into this, 0:15:09.080 --> 0:15:11.360 you know, maybe cut in march type framework, but the 0:15:11.400 --> 0:15:13.720 fact that you know, the median dot for twenty twenty 0:15:13.760 --> 0:15:16.720 four suggested three cuts. And then they had adjusted their 0:15:16.720 --> 0:15:19.960 core PC forecast for twenty twenty three to a number 0:15:20.000 --> 0:15:21.560 that you really have to be in the nitty gritty 0:15:21.560 --> 0:15:23.440 and focused on it almost day by day to get there, 0:15:23.800 --> 0:15:26.440 suggested that you know, the committee got there a lot 0:15:26.480 --> 0:15:28.080 sooner than than certainly I expected. 0:15:29.080 --> 0:15:31.760 The NASDAK is now forty one percent on the year, 0:15:31.800 --> 0:15:36.440 which is pretty wild. That's a consane year, five hundred 0:15:36.880 --> 0:15:42.160 up nearly twenty three percent. Dow Jones at all time highs. Like, 0:15:43.800 --> 0:15:46.400 I don't know, cliche is as good as it gets, 0:15:46.440 --> 0:15:49.400 but like what is the upside from here? Is usually 0:15:49.400 --> 0:15:50.920 like you know, what are you what are you looking 0:15:50.960 --> 0:15:53.640 for for the next putting on your investor cap what 0:15:53.680 --> 0:15:54.160 do you what? 0:15:54.160 --> 0:15:54.440 What do you? 0:15:54.440 --> 0:15:57.040 What are you watching for in twenty twenty four? 0:15:57.280 --> 0:15:58.880 Yeah, So I'm actually working out a column on this 0:15:59.000 --> 0:16:02.040 right now, because it's like the stock market's expecting this 0:16:02.200 --> 0:16:05.040 boom driven by right sensitive cyclical things, and then the 0:16:05.080 --> 0:16:08.840 bond markets expecting six cuts in twenty twenty four, and 0:16:08.880 --> 0:16:12.680 it's like, is that an internally consistent dynamic? And my 0:16:12.720 --> 0:16:15.240 gut is no, But it's sort of like it kind 0:16:15.240 --> 0:16:17.720 of makes sense today, but when you put yourself in 0:16:17.720 --> 0:16:19.640 the shoes of how will things feel in the middle 0:16:19.640 --> 0:16:21.600 of the next year when they've already maybe cut a 0:16:21.640 --> 0:16:24.560 few times and housings taking off, well, they still want 0:16:24.560 --> 0:16:26.240 to cut three more times with more to come in 0:16:26.280 --> 0:16:29.720 twenty twenty five. I don't know if that'll be the conclusion, 0:16:29.800 --> 0:16:32.040 but it's sort of people are off side, and so 0:16:32.160 --> 0:16:34.240 they have to buy bonds and buy stocks, and it's 0:16:34.280 --> 0:16:37.520 mid December and everyone's just kind of running around with 0:16:37.560 --> 0:16:38.440 their heads cut off for now. 0:16:38.640 --> 0:16:43.560 Tracy Kri Regional Bank ETF up thirty eighties. Yeah, since 0:16:43.640 --> 0:16:44.760 October twenty fifth. 0:16:44.840 --> 0:16:48.200 Yeah, and contrast that with what was going on in March, right, 0:16:48.240 --> 0:16:51.600 like so many things have happened this year that I 0:16:51.640 --> 0:16:53.600 think we kind of forget about the banking crisis in 0:16:53.640 --> 0:16:56.400 March now. But Connor, you mentioned the bond market and 0:16:56.440 --> 0:16:59.680 what it's forecasting, and I always come back to this 0:16:59.840 --> 0:17:05.919 idea that like, maybe maybe the economic information that you 0:17:05.960 --> 0:17:09.200 can pull out of the bond market isn't as useful 0:17:09.320 --> 0:17:11.600 or as accurate as it used to be, because there 0:17:11.600 --> 0:17:14.480 are all these different reasons that people hold bonds now, 0:17:14.920 --> 0:17:18.080 especially big players like banks, you know, they have to 0:17:18.080 --> 0:17:21.639 hold bonds for regulatory capital, reasons, for liquidity buffers and 0:17:21.640 --> 0:17:24.800 things like that, and I often wonder if that's sort 0:17:24.840 --> 0:17:26.760 of skewing the data. 0:17:26.840 --> 0:17:29.560 And I think in March, like you know, there was 0:17:29.600 --> 0:17:32.200 that moment where Powell was sort of suggesting they could 0:17:32.240 --> 0:17:34.560 hike fifty basis points at one meeting and then maybe 0:17:34.600 --> 0:17:36.560 fifty at the next, and people were positioned for that, 0:17:37.040 --> 0:17:39.800 and then Silicon Valley bank field failed, and it's like 0:17:39.800 --> 0:17:42.000 everybody who had made those bets on the hikes had 0:17:42.000 --> 0:17:44.760 to cover just because from a risk management standpoint, and 0:17:44.840 --> 0:17:47.760 so flexively just push shields way way down. And then 0:17:47.800 --> 0:17:49.359 people like us who are trying to say, well, the 0:17:49.359 --> 0:17:52.639 bond market's now pricing cuts in August, well sort of, 0:17:52.680 --> 0:17:55.000 but it's also just people had to make this positioning 0:17:55.040 --> 0:17:57.280 move and then once the positions were clear, then the 0:17:57.320 --> 0:17:59.280 data could take over again. And I almost wonder if 0:17:59.280 --> 0:18:00.000 we're doing that right now. 0:18:00.240 --> 0:18:02.920 Yeah, speaking of we're in one of those environments where 0:18:03.000 --> 0:18:04.560 like you just look at charts and you say, like, oh, 0:18:04.600 --> 0:18:07.879 we're so back. Vornado the realty Trust of one hundred 0:18:07.880 --> 0:18:10.840 and sixty percent since and this is like New York 0:18:10.880 --> 0:18:13.480 real estate, so you know, talking about New York office 0:18:13.480 --> 0:18:17.680 real estate of one hundred and sixty percent since May twelfth, 0:18:18.119 --> 0:18:21.679 and up another eight percent today. So every chart we 0:18:21.720 --> 0:18:23.320 pull up is just like, we are so back. 0:18:23.520 --> 0:18:26.119 You know. How I know that we're back. I heard 0:18:27.080 --> 0:18:30.360 a trader slash investor that I know last weekend went 0:18:30.400 --> 0:18:34.840 to not just one, but two gentlemen's clubs to celebrate 0:18:35.040 --> 0:18:35.880 twenty twenty. 0:18:35.640 --> 0:18:37.520 Two gentlemen's clubs, which is. 0:18:37.480 --> 0:18:40.960 Like a blast from maybe like two thousand seven. 0:18:41.160 --> 0:18:44.560 Yeah, wow, we really are we We've really put the 0:18:44.680 --> 0:18:45.440 zerpiera bon. 0:18:45.480 --> 0:18:48.320 But I also think one of the weird things about 0:18:48.359 --> 0:18:51.000