E84: Markets update, crypto collapse, Russia/Ukraine endgame, state of the podcast
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You look a little drifty. You, okay.

yeah. Me, i'm great.

I'm great. You look half a million. Rr, today. What would like to be half a million?

Richard j, you look like a failed hostage .

taker left at our boys, left at our boys, left at our boys. When you see my other projects job, you're going to be crying again.

Okay.

want you yes for an answer? J.

i've taken for an answer. Welcome to the all in podcast, where three miserable, rich bastard, you pull up the latter behind them.

Do you want to explain why to us a month to produce new hopsage?

What told on a second?

A charney, let me give you guys mattel, the art.

k. col.

Thought the all in pod with his, and then he realize that wasn't.

No, if you guys want to go there, we go there. I'm totally transparent. I requested, I requested to own six percent more of the all in podcast.

No, no. Back up to the summit up.

My god, really .

doing this. Okay, if you .

want to do to many like how I was concerned about the sum, and I bitched at him and know I was negative to him, finish the summit jacal .

wants to .

kick me off the IT wasn't .

IT was actually sorry with freeze and jacot getting .

into K A.

I me off the show. Do I get to explain the series now to me off the show?

True, false. J.

K.

L.

I felt that IT a freeburg. If freeburg wasn't enjoying his time here and was going to constantly complain every week about every detail why the shows not good, there was always the option for him too. Maybe do half the shows and have bread garden, or do half the shows or have bill girlie rotate in. And so if he was going to be miserable all the time and worried about the show, I gave him the option to have somebody else take his spot.

Did you, did you not say that this is your show? You're the leader and you wanted me off the show?

I never said that .

I M A replace any of effective.

I all tax, I don't think traumatic replaceable.

just for the record. So it's true he does think that .

I do not think remotes replacement freeburg, I do think, I mean, I could pull up the black person and episodes. I think they .

have slightly more views. So but people love you.

so will keep you. My b my wife, I think I was replace, was we had an agreement that IT was twenty five percent teach. There was a moment where jack believed that he deserved more.

We had to sort through a lot of the underlying issues that cause them to believe that we got to a good consensus. We now have a signed agreement that governs how the show and other things around the show and offshoots of the show will work. We are twenty five percent equal partners, and now we can move on. So enough for the beijing.

Let's go. All good. And I love you all.

I love you all too.

I love you all too. To be clear, my position I I do feel like this this part here was if we're going to make you into a media company, my request was, listen, I think I know I should have ten percent more equity and i'll go to work every day, do the work and you guys can you show up, you guys agree to that and then you guys said, you don't want to do IT and I said, okay, fine. So here we are, our back at square one. So let just get to work.

Just A D just to talk.

There's not going to be any more summer is not going to be any business here. It's just a pod. I have other events.

I do have other pods. I do. If I want to get paid, i'll do them over there.

And here it's just a pod that you see every week. So let's get into IT. Everybody wants to talk about markets.

H, by the way, if you guys want your inro's, that's one percent each. And go do those are one percent each. So when you guys are willing to pay me my one percent additional equity, you get the intro. And when you want the all twenty, twenty three.

that's another going to get this could .

be per ready monthly going to a point eight percent equity per monthly.

I just think it's so fascinating that we went through all of this, you know, eda sterman drag, whatever this this life, a month of non taping, and, you know, and this, like all this turmoil and our relationships, so you could get extra one percent for us.

two percent each thirty. I believe I should. Just so, you know, I do this for a living. And if I do extra work, I believe I should. And if you want me to be the the defect of CEO of this, then I should get .

a little actual .

and you don't. So that's that's fine. This is just going to be a project we do in every week and then all your griffe, whatever you know, you are spinning up from the production board or whatever, copy, catch up your making. You can fuck you as as a cy grip. Here we go.

Do the inter going now there's no zero interest.

no interest.

Interests are out. what? What about? Hey, everybody. Hey, everybody.

i'll do. Hey, everybody on the house. Hey, everybody, everybody do everything for you. He is .

free for you.

Rain man, give.

We open sources to the .

fans and got.

Everybody, welcome to the episode. The all in podcast were back for episode eighty four with me, of course, the sultan of science, the principal ic, attacks the queen of kino himself, freeburg haydo and buddy. Great to be here. Great to be here.

Alright.

the 才 心。

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and I ll be hanging .

out tomorrow night if .

you guys resolved cool. R, I think what he did buy me a wonderful dinner. Oh my lord, after the words game, shut to the words, alright. And of course, with us is the rain man himself. They have a taxi.

somebody good, ready, ready to go. Don't try to flex this thing on to me. I was only ten gently involved.

says the guy who expect that .

was the contract. I was a very fair contract that we can .

move forward. Yeah, then you proceeded to break IT in the .

first fifty minutes by slander me.

And yes, I thought your meme was pretty great. He did not mean the two buns of the super here. And I was like Jason.

that good .

making jokes, breaking me, breaking the not disparage class. And then, of course, the dictator himself, uh from some undisclosed location in the european city. I don't know. I love to say that you want the pope's a welcome back.

Boys episode, boys.

right? Well, since we last convened all, yes, the all in summer is finished. All the episodes have been really including palmer lucky yesterday and here we go.

The markets are in complete turmoil. H spy down to twenty one percent year to date, down down seventeen percent year to date as sex. As pointed out, that is not representative of what happened to growth socks at the same time.

And um the myc P P I uh went up and IT was at eight point six. We also got to seventy five basis point rate hike. Who wants to start here to mathai? Its marked so we will just dump to you first and then they'll go around the horn.

two sacks and the freeing well, there's a lot to say. So um bear with me for a second. But um the thing that you have to do before you talk about what is happening now, I think it's probably useful to go back and you have to really start at the end of the great financial crisis.

And the reason is there is a bunch of people coming out, the G, F, C. Who confused what the U. S.

Government and some european governments were doing at the time. There is the risk of a huge financial contingent. And so the U. S.

Stepped in and the federal reserve started to use their baLance sheet to buy toxic assets, right? And the E, C, B did that, and I think japan did that as well. A bunch of banks that, I mean A A bunch of government.

And then there is a body of suda scientific c economists who coined this thing called modern monetary theory, which basically said, hey, you can keep printing money and introducing IT into the economy to smooth things out and to actually drive long term growth. And IT turns out that a bunch of government officials fell for IT. And if you fast for to twenty twenty two.

So fourteen years later, you know, governments around the world had printed something to the tune of about thirty thirty five thousand trillion dollars of money into the economy that should have never been there. So I think to remember, like we have not necessarily just been obviating true supply demand in the last six or eight months when we've been talking about a recession or inflation. We've been actually doing IT since two thousand and eight is just that it's been building up in the system.

So one of the things that we have to realized is that all of that money somehow needs to get destroyed in some way, shape or form. If the true economic equilibrium um is meant to be found, what is true supply, what is true demand? In the absence of government slashing money around trying to prop up things that should not be propped up or buying votes are all the grifters that these folks have engaged and in the last you know decade and half have to get on done.

So that's the background. So if you think about taking thirty trillion dollars out of the global economy, you know you're talking about almost you know I think it's eighty five trillion is the world GDP. So like you know, it's it's it's almost half of an entire years worth of global GDP.

It's gna take three years probably of the slow, meticulous, you know, running off of money, you know, not reintroducing new money. So that seems like work the beginning of the beginning of something that's gonna long and drawn out now that separate from and that separate from whether were in a recession or not, that's just the bare market that were in, right? And so you have to look at asset Prices today as a microcosm of a much larger trend that has to be about fake money, pushing asset Prices up and now taking all that fake money out and finding out what the real Price of something is.

And I just don't think that takes six months. So for all the people that were, you know, fingers cross hoping that this would be the end of the fed raises, seventy five were done with this. They're to raise seventy five more.

I just think that's not how was probably gonna beat. It's onna take you know twenty four, thirty six months that may mean the bottom doesn't happen for another eighteen months. 早点 去 吃 worn worn for a lot of choppy um market action .

sex three asset bubbles clearly all you know being impacted。 We had stocks looks like that story was pretty violent then we had crypt of this last two or three weeks have been absolutely insane in terms of that asset bubble and now record high inventory for homes. Record cells are now dipping below the average of the last twenty years, and we're seeing mortgage origination just absolutely get crushed.

Six percent mortgage just couple of months ago, I was two point x for some folks. So when you look at those three asset bubbles, do you buy to mates? Hey, we're going to see even more delicate these for another eighty months possibly. Or do you think we taking such crazy action? This has come down so violent that we're now bouncing along the bottom, bouncing along the bottom or eighteen months of more pain.

Well, the the stock mark is especially stocks may have taken the majority of the carnage, but you're right, there are other asset classes, and I think we're going to see the corners start to rotate into those.

So you're right, if you look at resents al real state now, the Prices are at the higher they've been relative to median income since something like two thousand and six, two thousand and seven before that sort of great real estate crash that precipitate the great or such in two thousand eight. So I think there are going to be more, more shoes to drop. I just want to build on to mostly about root causes.

Here a note freman. One said that there is nothing quite so permanent as a temporary government program. The temporary government program was quantitatively ing.

We had this great recession of two thousand eight that could have turned into depression. They broke the glass in case of emergency. They started this QE, which is basic, the government intervening to buy bonds in the market.

They never done that before, and they loaded up their baLance sheet. The crazy thing is that program was still continuing until last year. why? I mean, he was like on cruise. So last IT was continue .

until last month. And countries like europe are still doing IT nine percent inflation in europe and they're still buying bonds.

right? So if you go back to last year, the fed bought fifty four percent of the government's dead despite the fact that the economy is growing like five percent GDP, that he was bouncing back really strongly from covet, that you had the stock market at all time highs. And yet they were still intervening with this massive QE.

And then when we got the surprised five point one percent inflation print last summer, they didn't stop to italy n of q one. So you're right, they kept basically printing money and is still going on. And that's create a master direction to the economy now.

So the fed, I would say, is the number and culprit here. And j pal is the number and culprit, but the number two culprit is the by administration. And I think biden did three things very early on in the first few months of his presidency to effectively tank his presence.

Cy, number one, he cancell LED our energy independence on his first day in office, cancer the keystone pipeline and making IT much harder to drill and of course, energy inflation than one factor in this sort of overall inflation. Number two, he pushed through that last two trillion of stimulus on strain party lines to the ARP the american rescue plan afford Larry summer, said economist in his own party, said this onna, create inflation, don't do IT. And then the third thing is, and no one really talks about this, is that biden could have used diplomacy in twenty twenty one to basically find an all fine to the ukraine crisis before IT turned into a full floods war.

And if you listen to the economist, the international development economist like Jeffery sax, he basically says that biden pulled his cabin, said, listen, should we negotiate and compromise with the russians? They also know and bite and handed down the order. We will not compromise with the russians. So now we have this massive warn ukraine that's fueling food and energy inflation. It's going to take his president even think there was any debate cabinet about this.

We may not be negotiating at russia, but we're enabling them to print enormous uh, surplus meaning I don't know if if you guys saw that there was an article today, Janet yelland is travelling around basically convincing folks to uh, not include russian oil from a bunch of import bans so that these russian oil tankers can be insured. Why so that they can sell this oil to places like china and india?

Set the rules is a high. The rules we push for all these sanctions.

Europe gets on board and says, we're going to do IT. We're going to take the lumps. And then we go around europe and basically say, well, we kind of want to fight this proxy war, but at the same time, we want to try to fix inflation, and we didn't mean to cause this. And it's completely disorganized. What's happening?

So if you had six minutes in the pool for when sacks would blame bite in for the economy, you win.

Who do you blame me?

You want to be quantitative easing starting in two thousand and ates. So that that goes over a couple of presence. And I guess the question I would have few sexes. How much of the spending the free wl expanding the was from the previous administration?

The thing is a by parsons problem. There's no question .

that for sure.

republicans only seem to find their principles on spending in the White house. I totally get IT, and I would like to see more fiscal responsibility regards of which party is empower. And I like to see the republicans be less emphatical in their principles on this.

But look part of here to think the economy was bouncing back strongly last year. And buying still push for this last two trillion of spending, and then one point two trillion more. And infrastructure. And then remember, the four trillion to build back Better were mentioned, say them for themselves.

I mean, what what would that have looked like? Free bag you have spoken to yet. Thoughts on, you know this this asset bubbles, I guess, and then the buying of the bond seem completely unnecessary for some period of time. If we are acting as the fifty percent plus buyer of bonds, what kind of distortion does that create in the market? Because if the government competing against other people in the marketplace to buy those bonds, how could they possibly be Priced record?

Let just be very careful about our framing. There's the U. S.

Treasury, which issues bonds and raises capital on behalf of the U. S government for spending programs. Then there's the central bank, the federal reserve. And our central bank's job is, number one, maintain liquidity in the capital markets so that businesses can invest in growing their their products and growing their businesses. And the economy grows while not providing too much liquidity that you end up with inflationary effects.

And inflationary effect means that there's too much money in the market and you see that money find its way into escalating Prices on different you know and the fed's the long term goal, remember, is to provide a stated goal of juran pal in particular right now with changes over time. But generally, the intention of the federal reserve is to make liquidity, to make cash available to banks who ultimately make IT available to businesses in such a way that there is enough cash in the system that the businesses grow and that people have capital to invest in growth while keeping inflation at two percent. So the long term targets two percent inflation.

And it's also cracked with .

for making sure that there's enough cash to support economic growth. So remember last year, you'll remember stand rock Miller was very public about how insane IT was that the federal reserve was still buying bonds. And so so there's one way to introduce cash into the system is to make cash available as alone to banks.

And banks use that money alone to business is and that makes IT to way through the economy. Another way is for the federal reserve to step in and actually buy bonds, freeing up the money that other people would be otherwise using to byblos to go and invest in other things. So they are effectively forcing liquidity into the market by taking bonds out of the market.

And last summer are two, two of last year, drug Miller was pounding the table saying, guys, the economic indicators on how quickly the markets, on how quickly the economy is growing relative to how much inflation there is, indicates that we should stop buying bonds and we should stop injecting liquidity to the markets. This makes no sense. IT is nonsensical.

And there was no strong point of view from the fed at the time. Other then there was uncertainty about the, the bounced back of the, from the recession from the, there was uncertainty about that, what else was happening in the economy and the the numbers the economic indicators were showing very clearly. The economy is growing in a robust pace.

Low unemployment and inflation is starting to pick up. Holly crap, it's time to cool IT off. And the fed made a judgment call. Their judgment call really kind of was to keep going.

And then we end up in massive run away inflationary problem, where if you keep too much liquidity in the system for too long, you have inflation even if you have economic growth. And now by pulling the money out of the system super, super fast, we reduce the inflationary effects potentially. But we take the economy because now all this money coming out of the market means people are spending less and buying less, and businesses have less to borrows.

The borrowing cost are high, and that's the big back timah and then sex. I just don't see what the rate at which we pulled the money out, which is how to be really, really fast over last few weeks can cause a recession. And that's the the biggest concern right now is will that actually trigger a massive recession or not that everyone is watching.

I guess, act. One of the things we need to clarify here is the actual Mandate of the fed. I was on this understanding that the fed really was they are to make sure of maximum employment and that you low interest loans were available and Price stability. These are that whether stated goals were a long time.

not low interest, its capitals of available economy to grow today without inflation of two percent.

that's okay. So maximum employment Price stability was also in the D P.

Growth because I remember we can't ever pay our dead if our GDP is not growing OK while minimizing while keeping inflation below two percent.

How about whatever what you want to make? Feel fair to make. But also, I was just wanted to know from you where did the fed go wrong with their Mandate, if at all, here because we do have maximum employment right now. We add control, Price stability OK.

Here's a thing, you, you, you I think we have to also be sensitive to the fact that the fed Operates on a certain classic data, and that data in the twenty first century is pretty pathetic. Um neck you can probably find this but there was an article, I think he was in the new york times that really walk through how CPI is calculated.

And it's a bunch of people that work for the government that walk around with ipads, building relationships with local businesses and all these random places all around the country and asking them to, you know, check chart for fifteen minutes. And due these surveys now, you would have thought that in twenty twenty three or twenty twenty two, what the government would have said to, you know, VISA, master card, american express, all the payment rails, the banks and stripe is send me a feed in the following structured ways that I can actually have an absolute precise sense of inflation. Because inflation really only occurs when A A good or a service trades hands for money, right? And you calculate, what did that thing trade at the day before, and what is the trade for today? So you could get an absolute precise sense of IT. Instead, we do this random sampling thing.

and it's human.

So if you read this article, you take away will be, oh my god, this is very rickety and IT drives an enormous hammer that we used to try to manage the economy. That's the first thing. I think you need to bucket your seat belt, because the next three, four, five months of C, P, I will probably be very, very bad.

Seven, eight, nine percent. why? There are a handful of components that have gotten completely run away.

Number one, the biggest one is rent. And so rent works on a three months lag. We're going to reintroduce what the true owners, equivalent renters, into CPI.

So we can already forecasts that C, P, I going up oil is at one hundred and five box of barrel. Russia has basically trying to break the back of europe by now messing with their net gas supplies. Um the german energy minister yesterday said that if that happens, IT could be a contagion equivalent to lemon brothers with respective of energy.

When you play all of these things out, what you have is unfortunately rampant runaway costs that really have no mechanism to get back in check in the absence of some real governmental changes or policy on this ukraine, russia war, you know how we intend to sort of, uh, work or CoOperate or fight with china, all of these things have to get solved. So the ability to that Prices are gone to continue to go up. And so what does the that do? How does IT throw away what little credibility IT has left when there's eight and nine percent inflation prints and saying we think we're done for right now, you can do that so they will overcorrect because there is gonna be so much pressure for them to act.

All roads, I think, lead to lower equity Prices. And I think what David attitude is, we've seen the first wave, but now he has to touch all these other areas. For example, we have gotten totally drunk on debt as a country, one of the most obvious places where we've been serving alcohol far too late into the night isn't the financing of all these private equity leverage BIOS?

These are these are sketchy companies that are sort of like, you know, tethering on insolence y at times where private equity comes in levels of the baLance sheet with debt, they Price IT right to the edge of what's legally allowed or what's financial and then they go do IT. But that's all assuming the economy continues to grow. And so all of a sudden you have some recessionary forces or Prices go up and earnings don't, you'll have you a contained in the debt markets. You could have a contagion in the commodity market. So we are dealing with some really um real bound recondition.

I think most americans, most of their net up. And if we see a thirty thirty percent correction in a real estate, that could be a real problem, particularly with rising interest .

in ability to refinance sex, the dual Mandate atas. He keep inflation two percent and then keep the unemployment rate reasonable, the unemployment rates amazing with still so many jobs out there, even with these layoff s in fact, one might argue we made too many jobs available to the point at which people maybe aren't working as much or just you know underworked um and not taking of range of these amazing jobs out there.

Where do you see this going right now um that we can't seem to get inflation under control and people are looking at their for one case, they feel like poor. But is the demand side gone yet? Have consumers decided i'm not going to buy the next house.

I'm not calling on this vacation. Six dollar gas makes no sense. Seven doors gas makes no sense. I'm not going to go on this weekend excursion. I'm staying home.

yeah. I mean, look, consumer confidence just had the biggest drop. I think in forty or fifty years, if you look at like right track, wrong track polling for the country, only something like twenty four percent beliefs that the country's on the right track right now, if you pull people, are we in a recession and they don't look at like you know, the quarter or quarter growth, they just look at what they're feeling.

Fifty six percent of the country says were already in recession. It's about seventy percent of republicans, about fifty percent democrats. So the country is already hurting people, already feeling IT. And this is a psychological .

sacks where they actually making decisions. Now to spend.

I think, is both. I mean, you start with the real inflation. And people feel IT and they also hear about IT in the media and then they start to adjust their decisions.

And this is the problem fixing ah this a problem of fixing in inflation problem is that is based on expectations. So once people start to expect inflation, then businesses have to start Operating as if this common inflation rate next years. So they have to start raising Prices and is actually very hard to put the horse back in the barn.

And this is why I think the fed is probably more likely to overshoot on raising rates is because if they really want to stop inflation now, they really have to slam on the breaks and then that's going to lead to a recession. And if they don't, then we end up with like a chronic sort of stagflation ary situation where you get lower growth and inflation process. So it's a bunch of bad options right now.

And I think to the point freeburg is making earlier, you know, this radi o peace that he just published a blog and linked in, he said, look, what you want is a fed that is alert at the wheel and gently applies the accelerator or the brakes based on what's happening. Instead, what we had is the fed was asleep at the wheel. They should have start reacting gently to inflation last summer.

Instead, they waited nine months and now they're slammed on the brakes. And this is a bunch of other options. I think now we are gona have a .

recession the way.

Just make one suggestion. I want to put this out there. I sent IT on our test. And anyone that's listening in dc, please think about how we can change the way the federal reserve Operates. But IT doesn't make sense to have humans with subjectivity applying their objectivity to a set of a champ pointed out in frequent data that comes in chunks and comes in sports and only having a mechanism of changing rates by twenty five percent each month or is twenty five basis points once a month, we should have continuous real time monitoring of economic data.

And software or A I or some sort of informed set of models should then predict what inflation and economic groth rates will be as that data comes in, react in real time and on a daily basis. We should be adJusting the overnight rate in a one basis point incremental, so we can have the ability to more quickly, more efficiently and in a higher resolution is a smoothly way in a higher resolution. It's silly that we're still Operating the way we did in a predigital age as IT is with a lot of industries and a lot of bureaucracy.

But in this case, it's particularly prudent and it's becoming particularly important and relevant as we're seeing right now with the stagflation risk that we're facing. We're going of massive inflation and recession at the same time because if we had made smaller adjustments every day for a period of time as these economic data indicated that we should be making them more quickly, we would not be in this problem. And I don't think that having humans and their judgment should necessarily be the quit.

we drive, listen, we all need that making daily adjustments. I don't think the fed can fine tune and outcome like that. I just think that they can be asleep at the wheel .

for nine months A I running think I actually .

don't think when when you said that congress needs to somehow change that the way the fed does business, actually think that the fed has the correct Mandate, which is the dual Mandate of considering inflation and unemployment. We shouldn't be basically junking that up by adding a bunching of Mandates. And actually, administration has been trying .

to add Mandates. S they basically gave the fed of man, there are the two plex. The tools, the tools should change. Yeah, right.

We really want to focus fed. And I think the administration has been politicizing the fed by giving them a bunch of Mandates that if you want to pursue those policies, do IT in H A S, do IT in the interior department, don't basically confuse the fed and make them pursue climate change or equity, or what have you. I mean, that is just that part.

That is not their remit, right? Their mid is controlling inflation. I really think this just comes down to the fact that for nine months, they SAT on their hands. Ignore the inflation evidence.

Remember this word transitory? You know, we heard so much last year about inflation being transat. How do they know that? Why didn't they start rethinking this quantitative easing?

The headline from the wall street journal says at all how the inflation rate is measured. Four hundred and seventy seven government workers at grocery .

stores there software should be taking data from different feeds, and software can can learn. And what are the predictors of inflation and what are the predictors of growth and make a recommendation.

I don't agree with you that, that needs to be real time. In fact, I think I would do more harm than good, but I do think that we can know these things without sampling in such a poorest way. And you know, you can work with private companies to give you the feed of data to to allow you to do IT. And now, you know, we're going to look, we've had a system of overcorrecting. And under correcting for years, the problem is the states get higher and higher as the economy grows and becomes more complicated than in.

And we more leveraged and we have more leverage and we have more industries that are leveraged and more asset classes that are leverage, like housing. Because, I mean, this is touched by even a few points, you can change everything.

I also want to tell you guys a quick story. One of the most interesting canaries in the coal mine of all of this was two days ago. And what a happened to facebook and this sort of ties, a lot of this stuff together in terms of, like economics, inflation, asset Prices, equities, tech.

We should we then we can try to talk about none sort of, you know, big tech. But the everybody was saying, oh, gash. The markets gna rip on the open.

You know, we were closed for june teeth. And then on tuesday, the market, you know, the S M P, was up like two hundred fifty basis points, two point five percent. And the next that was also up to call IT. Maybe three interfaces points roughly.

But facebook was down like four hundred minutes, right? It's a big spread. And why is that? And I was like, this makes no sense to me what is going on with this Price action.

Everything was up. Apple was up. Google was up. And so I called around, and, you know, I was like, why is this happening? And this is the best explanation I got.

When you look at who the incremental buyer is in the stock market, IT tends to give you a sense of whether Prices can go up or will continue to go down. And the poorest informed buyer tends to be retail and the most informed buyer tends to be these very large institutional headaches, right? So there's a spectrum.

And uh, facebook is an example of one of the of big tech that is poorly owned by retail. So it's mostly owned by smart money. And the case that smart money makes owning facebook is that it's got an extremely cheap Price earnings ratio.

So you must own IT. And what they said was that they, you know, looking at the tea leaves of consumer demand, what they actually, ren rote, was that actually, it's not that the Price to earnings was cheap, it's that the e and P, E. Was just wrong.

And if they pass through all of these increases in inflation and their earnings expectations into facebook, it's actually more like fair value at a lower Price. That's why they sold IT so much on a day where the market was up. Now why is that important? Well, eventually you're going to touch all these other stocks as well that are gonna through earnings revisions in this recession.

This is where I think wall street is on a very poor job on behalf of retail. If you look at the average estimates of earnings, you will be shocked to hear that wall street actually has this year being record earnings. Next year, earnings continue to go up.

How possible if you how do you see how do you .

see earning continue to go up into these prints like this when you cannot pass through, you know, eighty ninety percent increases in energy and cogs? And I think .

what people would say is maybe they are going to lower their costs. And so with a off and and lowering salaries and lowering spend on advertising, you know the earning the e could go up if people people start bell tightening and then we start having companies that are being run. You know.

just more you will have to you have to sell fewer things because you'll be fewer people with jobs to buy things.

But we have ten million in job. And so this is the weird thing about this recession, is because we haven't let a lot of people immigrate into the country.

But IT, is that what you think? The consensus view on wall readers that basically a bunch of people get fired. And so that's why earnings continue to go up.

Well, they stop hiring for two years in events, right? Facebook said they were hiring for like for their hiring plans were looking at two years. So now they go on to hire ing freeze maybe r i'll give you the counter factual. I think .

what's wrong OK, and I think that earnings are going to go down this year and will definitely go down in twenty three. And so I think what probably happens is the entire world of equities needs to get reprise at a lower prize. And in that it's gonna enormous pressure on these cash burning non profitable tech companies. Well.

that's for sure. But in the ones that are profitable chh, they're aware of this. Facebook just cancelled like two of their prototypes they were working on on to save money so that hold ten billion dollars into you know, VR.

I think they're trying to make that number looks smaller. facts. What do you think?

Well, I think you're bring up a brilliant sting point with this, the ten million you know job openings. And now that that numbers coming down really fast as companies close open racks and they basically freeze hiring. So that numbers come down very, very fast.

But one of the major contributors to inflation is that the labor participation has been very low. About millions of people left the labor forced during covet as result of of the stimulus checks and the freezing of, uh, ranking evictions. I think you look rents than on people's number one expense.

If they don't have to pay rent for a couple of years, a lot of them may not work or may not work as much. So we've had this problem where we really need about two million people to reenter the labor force. And if you describe inflation as too much money chasing too few goods, we need to increase production and productive capacity.

And when you have millions of people dropping out the labor force, you've got less goods and services being produced that people want. So just reducing the money supply is not going to get us out of this mess. We also need to. Improve productive capacity.

Just to put a number on that, we picked in the nineteen and ninety nine era at sixty seven percent of participation labor force and then it's been down in the low sixty, sixty one, sixty two. And IT continues to be low, but that is the solution here. We get seven percent that gap um you can to make the demand side .

because if if all you do is fix the demand side, what you're doing is you're killing the economy to reduce demand in order to bring down Prices. That's very painful. It's all pain. But what you have do is fixed the supply side, you have to increase the availability of all the critical inputs in the economy. So labor obviously, is one of them, but also critical resources like energy, oil, natural gas and saw on and that goes back to fixing the supply chain, hopefully getting a resolution of the situation in ukraine in the war. Um so if we could fix those things as a way to improve the economy without creating more pain freeburg.

If the Prices of just daily living, of which transportation and housing and health care are now the top three, I leave a groceries and health care, I think, have flip lock a couple times in the last decade in terms of cost. If those things go up, would that make people want to go back to work to pay for those things? Or does IT create capital ation? What people say, I am moving in.

What my cousin, i'm going to lower my baLance sheet. what? What is your prediction? There are more people going to go to work? Or do we still have this, you know, call a ten million people in the country who just don't want to go to .

work as mention this in the past. But I think there's more there's another kind of interesting outcome of this. We've had several months in a row of pretty significant increase in consumer credit. And I think the reason is things are getting more expensive. People generally do not like to reduce their spend on stuff or they are living their lifestyle.

Once you get used to a lifestyle like going out to dinner once a week or going to the movies every week, and and you create a budget, you create this, a life experience around that, a model around that, it's very hard to say, okay, I gotta cut budget now, and I got ta reduce my life. I would rather sam, and to keep doing out, at least there some nura momentum to keep spending on the things that you've been spending on and the way you do that in a model where you don't have as much of income or you have less income and things are getting more expensive as you take on more debt. And so there is a little bit of a nervousness that I have had that people's response generally um uh the consumer response to inflation and uh to a um uh kind of a uh a shifting um income environment like this is not necessarily to cut as quickly but take on more debt and keep keep by.

And so I I am alone, nervous about that. But I do think obviously, at some point, everyone has to figure out ways to generate income. There have been a lot of these kind of ancilla markets that are typically the first to go.

These extra services markets where people you know have found other ways to make money, sight holes and not um that mayor may not be as robust as they have been historically um and so people may need to go back for more secure, stable income and and these jobs get filled you like. I mean, as we all know, there is an opportunity and this is the whole concept, I think behind build back Better. It's not super thought ful in terms of the approach um I think based on my understanding of where that money supposed to go because he doesn't create long term jobs.

But there is an opportunity to build a new manufacturing and new infrastructure jobs in the U. S. Right now that could enable A A healthy transition here. But that legislation is to be done smart IT IT can be done with this like, hey, let's build a bunch of bridges and then a bunch of contractors make a bunch of money and no one has any long term jobs out of IT. We've got to find ways to spend money on creating long term sustainable um know new .

industry here yeah job openings eleven point four it's come down about six or seven percent. So IT is going to be trading, but it's for sure we're seeing in in our industry with the hiring freezes that you we're going to work through those of jobs. What are the chances that inflation gets under control in the next year? And should the fed go for like the one percent slam on the brakes? There was some talk about .

that obviously. Remember a lot of the element said were um kind of saying, oh my god sh, I can't believe the climate Prices so you know weed is down. I think thirty percent number is down, fifty percent. Uh, gas Prices are coming down. So you know there are some of these um you know commodity Spikes that we've experienced over the past couple of quarters, uh, particularly recently, that are really that have had a significant part of the fueling effect on the inflationary uh trickle down into ultimately end products and and what not and those are coming down.

Um you know there's a real question of how quickly that flows through the economy, flows through to the Price of goods, uh that that consumers is ultimately in the pain for um the gas Prices right now are the biggest concern, right? Like unless you can get gas Prices under control, that always always has a massive impact on spending uh on consumer spending, which drives a recession ony cycle. Um and so if I am the bite administration and first and foremost, I don't care about the general inflationary indicators as much as I care by getting the Price of gas down, that is a super, super critical number .

of to fix is, is this this gas Prices is going to change. Americans look at what car they buy because there's work time. We had that people started looking at not buying suvs.

We could have seven dollar gas.

Oh, I there was a picture actually, uh, twist in california. There was a seven .

dollar and through.

But check out the, you remember of the average automobile tomomi in the U. S. Last for twelve years. That's how often people change out their cars. So that's eight percent of the fleet being changed per year year. And the interest rates for auto loans has Spiked like crazy now with the change in the feed rate. And as a result, the delinquent y on auto long portfolios has Spiked like crazy. And so yes, sure, theoretically, people will think about buying an electric car, but most people aren't thinking about that on average for five or six years from now because that's the average of a twelve cycle five years from now.

Wait to all these polar time. Bikes need to get reposited.

Well, all these actually the the wait for cars and the overpricing of cars has ended in the last two months. And there are a multiple Carters now on the market, twenty five thirty k for a fifty plus mile per gallon car. I think that's actually one of the civil lines coming out of this as people might actually stop buying as many S U V S are. You know, I think our averages in the low twenties right now, in your upe is in the high forties.

The problem is like you know .

every other for miles per gan.

part of the government acknowledges that you have to really ring fence and protect consumers, right? Like if you look at the security of laws, they're meant to protect them at all costs. Um and Jason, you know you've been frustrated by some of the rules that haven't changed and when they changed, they change so slowly.

But the reason is because sometimes that you want people to make good decisions and if you um you know give them a bunch of firepower, they're just gonna end IT. And you know what we really did was we gave folks just a ton of money and what did they do? They acted rationally. They spended IT. Now we have to take IT all back um and that's that's I don't think that's gonna as easy or as simple as people think what what percentage .

of the money employ you think is in access right now in the united tes?

Well, look, I told you this because I wrote this in my annual letter, but it's stunning that the reason the stock mark went up dollar for dollar, was actually tied to the growth in the m two money supply. The correlation was point nine two. So for every dollar that that the fed printed, the stock market went up by ninety two cents. So, you know, IT stands to reason that if the fed is going to take three to five trillion dollars of value out, then we have to relate the equity markets by three to five trillion dollars at a minimum, and then you have to rerate in rebasing ine for earnings. And so that's probably twenty or thirty, please.

No, let's talk about the n gaming. Er um the rates go up, people stop buying homes, people go back to work and, uh, energy Prices come back down because people are not buying as much of IT spending goes down and people rebaLance and that takes a year.

The job openings could also disappear, by the way. I mean.

like you're going two hundred thousand a month.

the assume that all the sudden demand is stable, but it's not necessarily demand. And in a demand contraction, yes, people get fired, but then also a new job openings change, right? There's fewer of them there. They're more specific in the way .

that people is go down. That's the that's the piece. I'm waiting for that to me. That would be I don't know if if you guys have early warning signs, but the two early warning signs, I have my you know uh uh, job of investing in old stage .

companies is when people but what's the .

average salary for .

engineering? The salaries go instead of laying people off sex, they do salary cuts at a company that is really hard to do that.

Yes, I don't think they .

and preferences deals right.

I think the way the salaries come down is that startups freeze that are hiring plans where they lay people off and always on the war for talent to hire people on those. No need to keep .

raising up.

Yeah, I think we're seeing the beginning of IT. But I got tell you, I mean, I think that startups have not fully embraced or or realized what what's happening. I just got back from the coach summer over the past couple of days.

This was an event that was hosted by koto, you know, whose founders are Philip and Thomas lefort very smart guy is very smart, and investors who've been public market through the hetch front investors for a long time, but also have a large venture fund to grow stage investing. Some of the take away from that conference, some of the more vivid lines that stuck with me. Is that one of the speaker said that he said that when he comes to runway for startups, three to four years is the new two years.

Because if you just have two years, a one way you're need to raise in a year and in a year from now, we're giving the world recession, they're predicting their forecasting the capital availability is going to decline about thirty five percent. The amount of money that venture money is available, the ecosystem dance by three quarters. So if you try to raise in that environment, either you're not coming able to or investors are going to have all the leverage.

You're not onna get terms that you like. So they were recommending three to four years of runway. So that is not what I think a lot of .

companies are playing for people.

The other thing that the other really vivid take away is that they did some polling of the start of founders who are in attendance. okay. And what the numbers basically showed is, is a contradiction. On the one hand, the founder sort of understood the collections that we're heading into a downturn. We're heading into a recession, and so the polling reflected that.

On the other hand, if you ask the founders how they are going react to IT, what are you gonna about going to cut a head count or you're going to accelerate your business to beat competence? Everybody said over gonna accelerate our competence. So everybody thought that there are the exception.

In other words, everyone understood, were headed for this massive recession that can be really bad, but we're going to the one company that doesn't need to cut were actually going to grow. We're going accelerate during the downturn. So there was a real contradiction in how founders are interpreting this advice.

And I have to tell you, when I talk to founders in our own portfolio, what I see is you we've now done mutio meetings where we lay out what's happening in the economy and they get IT, they understand IT. And when we do aboard me, they are like, okay, we're going to go look at our plan and were going to reevaluate and we're going to make major cuts, are going to bring our burn multiple down to you that where IT should be. But then when you check with them a couple of months later and you're like.

where are you on the plane?

Haven't in the medicine or the medicine is like a ten percent cut. And i'm like, guy, it's like ten percent of performance review yeah like temple .

doing every year .

anyway yeah you to the the bottom the c performers, you promote the a and b and go to the sea. So no one really wants to take the medicine yet. And you know it's a problem.

I me to court has this great chart called survival of the quickest that we should put up on the screen. And IT shows two lines. One company is the one that takes the medicine right away, brings their born down to where IT should be, and then they are able to grow from there.

And they really will. I accelerate the competitors, but then there's the company that basically delays and weight. And what happens is by the time they finally get religion to make the cuts is too late because even after they make the cuts, they don't have enough running away.

On the other side, they burn the capital. They burn the capital and then they're a despite al. So I think of what what companies seem to think about is this is seventy five percent reduction.

Imagine if you did a hundred million dollar around last year, right? If you go try to raise next year, most recession, that one hundred million doll round might look like a twenty five million dollars. So imagine if you're burning an extra twenty five to fifty million more than you should be according to your burn multiple, you're basically burning the next round. Forget about the fact of the last round gave you all this cussion think about how much of the next round you're burning and if you real, you're thinking around that IT could lead to .

a change in behavior hangover. Ally, i'm seeing people come back from rounds where they were expecting forty or fifty million dollars in some cases like with two hundred fifty k in revenue, five hundred and revenue they were living in a two hundred three hundred times revenue of world IT was just insane and um you know they are now coming back with ten million dollar caps, fifteen million doll caps on their notes .

I was offered one hundred million dollars at a fifty percent discount and I said.

call me when you get to sixty five .

and that's the best company. That's literally the best company. Fn, probably most private companies like .

evaluation to month. What is evaluation? Forty at fifty percent of .

its less of a judgment on, but it's just more observation that work at the beginning of the beginning and again, worth the beginning of the beginning. Okay, for all of us that lived through two thousand, this was four years of sheer hell and a grind. Now we have thirty trillion dollars that we have to work through the economy, a recession we have to overcome, a war we need to end.

And people all of a sudden assume that two or three rate hikes and five or six months of headlines or enough, and on the margin may be the right. But from my perspective, you know, it's less a judged on, but it's just an observation that were at the beginning of something that just fundamentally has to take some amount of time to work its way through the system. And so I don't understand why anybody would give up their liquidity in this moment right now.

Why would you? Why would I? Why would I give up a hundred million dollars of cash in my bank? I would not do that right now.

Does the cash the the cash gives you so much optionality, it's based so much optionality. So you're going to be looking for distress, and this is the thing. So you have a huge mental capital leaving the ecosystem like we know tiger is basically out.

I mean, they were the basically the defauts provider of prostate capital last couple of years. So you have a lot of liquidity leaving the system and then the liquidity that's in the system is waiting for distress. So you're right.

And there's a quarter I mean, like we talk about, there's a quarter trillion dollars of cotton code dry powder. I know I know him off things that people going to give that money back, but this is love.

They're going. Yeah.

look at that. That tiger fund.

Tiger raised a new twelve billion dollar fund that was announced march and tech ronge. We cover IT on the show a months ago. Now technics, an article was really deployed in six months.

so I wasn't on that show.

Oh, that was a one where, jack out, try to place you with black groser.

We are lovely. Might be Better to keep up with these friends.

O, J, J, how you made a good point that could go back this second. You said that founders were they're so anchored on this world of two to three hundred times A R. valuations.

Let me just tell you where the new valuation levels are. And this is obviously and flux, but i'm pretty sure the valuation levels are at twenty to thirty times A R. That's for a company that's growing three x year over year, three x year of a year. That's the best of the best. The reason how do .

you get the ten x next year?

Yes, yes, exactly. And the way that you get there is that if you look at like the the multiples for the best public companies, there are like say, a forty percent over like a snowflake. There are at a dex, so basic.

giving more credit for the higher growth.

They really have have three growth. You know, if you're a founder, think about the fact that when you try to go raise next year, assuming you're the best, the best you'll get two or three times air r now think about your spending not last rounds money. You're spending the next rounds of money if you get just real, your thinking that way you'd d burn a .

lot less money yeah the I literally had a deal, you know in the thirty and forty range and an Angel investors who d never early stage Angel investors seed funds that did not look at multiples are now asking me. Because when I sent a deal memo to ten thousand people for my syndicate, people hit reply. People are sitting reply now and saying, I did the math on this.

This is the multiple. This is this. This is the burn multiple. They're actually doing the math. So we all of sudden have discipline that I have not seen in this investor class in the ten years i've been doing IT. So that is to me, one of the great sevel linings here. I think people are going to do A A Better job with their personal baLance sheet, are going to invest less in specular stuff, and they are going to invest more in the actual builders who have discipline. So we're going to see this massive swing to discipline, and we're going to flush out all the people who don't think about .

all those folks like what's happened in the last six months. It's like they've been long unprofitable tech. It's got smoked by seventy five to eighty five percent. They've been long crypto. That's got ten spoke by six.

five more. I mean, if they weren't .

using a calculator, then they sure how should be using a calculator now to figure, I think people.

what you think about that there is a whole group of investors who have only known the up market. There's a whole group of founders who only in the the growth market, if you're only forty years old, you don't understand what you're about to experience. And here we are. Let's that's a perfect time to segway into cypher. Bitcoins Prices down seventy one percent uh from the all time high uh sixty nine k in november of twenty twenty one, bottom out at seventeen thousand or so on to the theory ams Price down seventy percent.

And if you look at the craziness since the list all in episode this three A C three hour capital, there are cypher hedged fund that was letting people uh basically loan out their crypto and they are basically closing a ten billion dollar um crypto hetch fund at its peak, they're insolvent. According to the reports, terro una collapsed. The founders and employees that company are not being allowed to leave south korea doesn't mean their guilty, but it's certainly not looking a good.

And um there is a whole situation with salona and a company built on top of its so land, which is not so long as an application built on top of an interactive and linger. My friend earlier this week about IT, they had a well who had um try to loan out a hundred million and they had to freeze their account because they've got the downed pressure. Since there is not many buyers in crypto right now quite collapse, alona so thought it's on corret a red large what is this gonna like sex?

Over the like the crash all over again. I mean, basically, you have an extremely promising technology. I mean, IT is a promising technology and IT is a future technology platform.

But the Price action got totally decoupled from the level of progress in the space. And people were not valuing these things based on real customers, real usage and real use cases. But that was became very speculative.

And again, all this was fuelled by the access liquid that was pumped into the system. So you've set up before the crypto is like a liquidity sponge. IT sucks up when there's a lot of excess liquidity. It's sucks up that liquidity.

But now that sponge is getting wrong out and you part of the promise with interest rates going up, you know it's one thing when you have negative real interest strates and and and you can earn return on your money, then you start to get you basically people start to push the envelope and investing more, more speculative things. But as you can get a real return in, like to say, there's like a real risk fy rate. Then now there's alternatives for all that cash. And then you've got the problem of leverage as well, which I think over the last few weeks, the curve to space was heavily over levered. And a lot of he'll got march and called and wipe down.

That's the contention that occurred. And people were levered up five, ten times there be going on .

this road til these token sale things get litigated. I mean, the amount got the amount of grip by some many of these venture firms in running these sketchy deals where they would put in some amount of money. This is my understanding of the scam because I was explained to me, you put in a little bit of vacuity at some crazy Price and then you get these tokens and apparently there's no like you can just sell these tokens day one.

And so what happens is like you Price the equity, but it's meaningless because really what you're getting is the right to get some amount of these tokens. The Price is crazy. You sell IT and then you just kind of walk away and apparently, you know, you do these deals where you just wins and repeat this thing. Well, we way that gets exposed mean, I M like a total.

the firm that did this, the most injuries and horowitz critic tics, and I think was considered like the best investor last year or the year before because of all these token returns. I got ta wonder when they go now that this people are losing money. That's when people started suing.

I mean, what is he gonna look like? If they were, what what do you think their Marks look like last universes right now? I mean, and all these coins, like looking back in the reviewer and saying, hey, you bought all these coins. You flip some number of coins. I mean, to your point from like what is the litigation path and the the shadow economy that was created?

What is an article article I think he was in bloomberg um about folks trying to figure out how to um a lawsuit filed against bints and the problem was that they didn't even know what entity to do. Um it's not clear who owns what know what owns the other and who the ultimate look through ownership structures is and um and IT doesn't mean that finance is guilty of anything, but the article was just you know showing how there is A U S.

Investors who lost one point two million dollars who wanted to file a lawsuit and they have every right to do that um couldn't even find the corporate ery to to actually file this laws' IT against. So if that's what's happening in a trillion dollar market, there's me a lot of it's a lot of oversight that's eber. What is this gonna to regulation .

and cypher at this point because crypto to regulators. Now regulators are going to just be looking at this going, wow, look, all the pain and suffering when a local da gets, you know, five or six of their people complaining they lost money in the luna, whatever is this is like the perfect opportunity for them to collect a pelt and get some cyp to kid and, you know, hold them responsible and get some great headlines. I mean, what what do you think happens from this point forward in .

the cyp to and what .

you just said OK do you have? But what about regulation? I guess that's the next best because .

all the entities taken a very the last july, August publish this kind of initial opinion letter. But remember, there is also the cfc. There's a bunch of regular authorities that have a longer process than government's X, U, S that have had a much more kind of string and point of view that there's a lot casino like gambling going on with these things.

And that's IT. There's no functional and utility. There's not it's not is IT a security?

If there's no underlying business? If it's not a security, then it's just a bet on something. It's a bet on something. It's gambling. It's you know obvious that .

if it's a security has to be governed by the I C, C. If it's a future commodity, it's cftc. And the problem is we need congress to pass some legislature framework that puts the park in one side of the of the a wrinkle.

the other yeah.

and on the wise. Otherwise all this gray is going to exist for a long time. And people, you know, if, if, if governments really hate IT, when retail investors lose money while watch up, because they just had two trillion .

dollars money in the us. We have a lot of other regulators that can prosecute cases like the D. F.

S. In new york. Uh, this is the the department of financial services. They are a pretty litigious prosecutorial group. I mean, they go after scans, uh, people praying on consumers and retail investors in a very aggressive way uh often outside of the preview of the S C C, they often ordinary with the D O J or the S C C evaluating enforcement um decisions.

But they they will prosecute and and I think that there is a um you know as you said, uh, a lot of opportunity who when people have been gifted out of their money uh for politically motivated and you know people that generally have kind of the right point of view that are in a position to prosecute to go after uh, the offenders. So you're right, there will be there will be a lot of action on this over the next couple years and then check out this right. The way he gets resolved is a congressional act.

But by the way, I just point out in the year two thousand, congress passed what was called the commodity futures motor tizer act and that ffa was really meant to kind of, quote, bring commodities and futures into the digital age. And they started working on in nineteen ninety six and took four years to get done. Within four years, IT was already at a date and a lot of what was going on with respective to how exchanges Operate, the types of uh contracts are being created, IT was already missed.

So you know the problem we have here is that by legislating the state of the market today um without creating enough flexibility and how enforcement action can be pursued, how things can be interpreted in the future, you could end up in a similar situation where people just find and run around and the whole thing repeats itself in next years. Guess people will always want a gamble and grifters will always want a grip. And so there will always be a way to try to scan people out of their money.

Yeah, I .

maxi.

Everybody download call and you can get .

the time before you get um if .

you want a perfect example of this and this is just a lesson to founders out there. If you feel like you're in a grey area, you probably are. Um people were like o nfs, they're just trading college.

Ta, and it's not a big deal that somebody at open sea decided to front run the mark. Are they just potted trading car ahead of everybody else? Who cares? We know.

Who cares? IT turns out the southern district of new york cares, and they are a pretty serious group of people. Former employee of nf t marketplace open sea was charged in the first several digital asset insider trading scheme. So just because insider trading didn't exist as a concept for nfs before.

congratulation doesn't exist in crypto. I mean, if they want to really find, uh, the honeypot here, I mean, it's the worst kept secret in crypto how much insider trading is going on among the organizations that run the exchanges and their side pockets that they used to manage liquidity. I mean, this is the is the biggest thing that's been happening in crypto. If you are .

wondering why people are spending hundreds of thousands of dollars on a boy or whatever, there might have been some shani s going on here and I know.

but I just in it's it's not illegal. This is my understanding. It's not illegal to front run crypto trade.

So most of these organizations that, that run an exchange right compete for order flow, and they're able to just look at that order flow and then they front on the trade and they're on the other side of that. So they're always making money, and so they were making tens of billions of dollars. All these exchanges were yeah and .

then I I guess the question become sax. You know in terms of center and iteration, like how you interpret this stuff, there may not be a law on the books about front running nfs, but there are laws on the books about fraud and nf t and conspiracy to, we know, griff people out of their money. So this is all going to come crashing down.

And the discovery is going to southern district of new york. Actually.

any these exchanges are you be sure that in Price, if they go after.

forget nf, i'm saying coins cyp to, that's a huge market.

They are turning over these cards because you know how they like to work. They like to flip their way up to the top. But we're not talking about january six year. We're talking guess in the ukraine now hey H A little reference for you.

Um this another one hour and tending and we've .

kind of like broken the ice.

You you want to read your interest so you'd not been such a bitch.

I would I don't care. I don't care to. We just look forward. I think we all understand. I thought we were .

you said that you were work, shopping and intro. So do you want to do your intro at the end of this or not?

I'm not doing the interest now. I much track on interest. I I want to know .

I know it's not about .

the point that was a joke. I wanted to do interests. I didn't know coming into this how how sensitive people would be. And then sax is like I need to have in the contract of unsparing ing N D A. And i'm scared about the things I said.

So spy content needs by content.

Guy, you are .

the most concerned of .

all he didn't have in there.

I we didn't .

want that. I thought you would .

be more sense about accusing others of disparate ging .

you this whole show? Is you .

dispirited to an inter or not?

I don't have interest prepared. No, i'll do interest next. Epo de, I promise everybody.

I wanted to take the temperature of my best ties. I don't know. People are sense right now. You want me make .

a joke about braga. It's not all about our .

narcisa nonsense as four David teenage boys running a muck.

good. Something happened in the last week that I thinks pretty disconcerting. I mean, this intellection speaking, we all know that wars that go on and on, how a tendency to escalate, and there is an example of how this could happen over the past week.

Lithuania is now essentially stopping the flow of goods from the russian mainland to another part of russia called clinton grad, which is called in ob, lost its little area, but it's outside the russian mainland is basically between poland and lithuania. And so goods go by rail from the russian mainland to clinic grad. And theyve been stopping these goods because they say they're under E.

U. sanction. The problem is, listen, when you think about a sanction, a sanction is me not buying goods from you because I don't like what you're doing.

That's fair game. Everyone has a choice of who they wanted buy from. But this is not that. This is lithuanian deciding to stop goods going from russia to russia.

And so the russian say this is a book, ade, I think with some justification, and blockades are understood to be an active war. So you've got lithuania basically engaging in this active escalation against russia. We always .

thought that would be polite.

but right? exactly. And remember, lithuania's is a member of nato. Theyve an article five guarantee. Now think about the upside versus downside of this action. In terms from the western point of view, the upside is this has absolutely no impact on the outcome of the war.

This is not going to help anyone in ukraine to blockade clinic grad and prevent coal and building materials and steel, from which in clinic grants are any impact on the war. So there's zero upside to this from a military standpoint, but the downside is that you now have lithuanian and russia getting into IT. And if they get into a war, then we are instantly pulled in under article five, middle war three.

So this is the kind of dangerous escalation act that has no upside. Only downside for us. And my view wanted is that we have to tell, we have to instruct, Frankly, our treaty allies not to engage in these types of dangerous act, because there is a huge externality we can be pulled in.

This is very dangerous. And I just wonder if the administrations on top of this, did they give the Green light to lithuanians to do this, or where they called by surprise? And what is the reaction to acts like this? Ah you know what I worry is we're conducting foreign policy by virtue signals.

Were we to say who are the good guys and who are the bad guys and you know if the russians are the bad guys, lithuania are the good guys. So therefore this is okay. It's like playing cops and robbers on a global stage.

I think we should be asking the question, is the smart or is a dumb? Is this potential or is a reckless? Is this in our interest or is that not our interest? And I really GTA wonder about whose mining the store on .

this day, one hundred twenty and IT feels like this is just doesn't have an ended site.

Is there an ended site here?

What's the end? I mean, the parties, the two parties, the people in russia are suffering during this. The people in ukraine are being murdered, uh in ukraine are being murdered.

I mean how is the end at the and um engage the united states in a proxy war without our role explicit discussion number one. And the number two is then we pulled and we pressured europe to really draw a hard line, but then now are kind of working around IT so that the countries that suffer the most of europe now I think you're starting to see the tea leafs, though. Last week, there was a group of european leaders.

I think he was Michael drug, and I can't remember if he was the german chancer or not and one other person who went um to ukraine and if I had to bed I think the message was kind of like, alright listen like we need to find and organized the tone here um because there is you know according to europe uh a leman like situation in terms of economic contingent that could manifest over the next month so I think that the end game is probably some organized, negotiated the tune and ceasefire. Um I don't think anybody will be happy with IT, but I think by and large, russia is and has one you know meaning they have one economically. They are selling oil like it's not you know like it's going out of style.

It's just not selling IT to european, to america. Um you know there's selling IT to china, there's selling IT to africa. There's selling also about save one.

They're winning on the battlefield. There is an article in russian post. There was arcon the washington post in the last week or so and the washing poses basically the house organ of the washing establishment and the blob basically saying that hopes are dimming for ukraine on the bottle field.

The russians have now won twenty and twenty five percent of the country. They've won that eastern, that domus region. They've done IT with the help of russian separatists in ukraine. And the amazing thing this article was they were saying that the ukrainians were days away from running out of a ammunition despite the forty billion that we just appropriate to that.

Where did that money go? And conversely, they're saying russia having just unbelievable casualties and they're running out of weapons, and they are obviously out of cave now and they're in the dawn .

base mostly so that the russians, the right to listen, I said on this post.

said they're out of tanks, the trop. They're adjust to .

their strategy and they're they're learning. They're adapting to this new kind of warfare. This is metric warfare, where you can take out a tank with a drown, you know, but luck, you know, remember on this pot three ks s to the war, everybody who is in favor this proxy war was saying how great I was.

And they were saying he was going to lead to a new birth of freedom in the west, that I was strengthened our alliances. You had Francis fukuyama dict that we are going to win the war, and I would lead to this rebirth of freedom in the west. We should have known at that moment everything that for kiama basic predit.

the office always it's like negative .

one correlation now. And remember, I said three weeks in that we were potentially, I think, put made the mistake in the first three weeks of thinking this be a cake walk, but that we were making the mistake of thinking the next way to be a cake walk. And sure enough, here we are. Russia has now won the eastern .

part .

of the build on what you said. You, we engage in economic sanctions. And I was the first one to say, hey, this could really work, and this could be a road map for how to do IT.

And IT turned out this is the road map for how not to do IT. You can't, on the front doors say, hear these sanctions and then walk around the back door. And basically open the door for them.

These these sanctions were so poor as as to be like swiss cheese. We focused on virtue signaling, acts like confiscating a plane or a boat or a house. But we didn't focus on the structural things we needed to actually um you know make the Mandate that we believe to be just to come to life.

And so russia completely worked around IT their economy effectively. You know it's thriving. So what have .

we gained? I was a thriving.

I mean.

I don't know that thriving is how they would describe.

They're selling fos fate. They're actually making a market and the Prices have doubled and tripled .

in those commodities because .

the flow has been restricted in february, which IT is concerned for me. At the time when we stopped allowing trading in the security of russian companies, we yanked away four hundred billion dollars of market cap that was held primarily by pension funds and retirement funds in the U. S.

And europe, and gave that value to russia for free. We basically said, here you go here. All these security were no longer like to pray in them.

So guess what? You guys can train them. You, they got, they got all of their gas and energy and nickle and money for free.

A good dog.

These companies, we give them. We ripped the stock out of retirement funds, and we gave IT to the russians and said, here you go, put, take all of these security for free. Enjoy on, by the way, because of our idiotic sanctions in the way we are employing them, the commodity Prices are going to db and triple, and all these companies are going to have record profits this year. Happy fuck in birthday. The rubles up five ex.

It's not up five ex. But yeah.

it's a great point because if putin have retaliated against the west by nationalizing foreign billion of western assets in russia, everyone would have been up in arms. But people do. You have to do that because we just gave him we have four billion. And I mean, how did this policy make sense? It's this policy .

of conducting, again, in russian black rock. I own a billion dollars of russian security. The U. S. Government just took IT out of my portfolio that my clients ts own stakes in and gave IT to the russians for free. They are going .

on proof crazy. I think.

Listen, I think we've got like a two level problem on this ukraine war. One is our policy has a made sense. We should have been using to policy last year to avoid that. We had all these false hopes around strength, the west, the western alliance, by allowing this world to happen, we then instead trying to shut IT down through a negotiated settlement. We tried to use as a proxy war to a weaken, instead is done the opposite.

So there's a whole series of policy failures here, but there's another deeper level to the failure, which is the personnel who are implementing these policies, the washing establishment, the blood who've been of both parties, the sort of uni party who've been implementing these policies. There has been no decent within the washington establishment. The only guy who really spoke up in a decisive way was john mr.

Shermer, the professor of internal relations from universities chicago. And he was treated as a para by the blog in the washing establishment. Everything he predicted has come true.

He said he predicted the U. S.

Was leading ukraine e down the premier's path and the result was that ukraine was gna get reck. And so IT has can I just read the .

first paragraph of this bloomberg g article that I just post that russia current account surplus more than tripled in the first four months of the year .

to notify eight.

eight billion, the central bank said, as Prices surge for and gas imports and imports plunge under the weight of sanctions. Well, you know, if you're put and you're looking at this, you're like, well, maybe I should be under sanctions more often totally. You.

what country should I date next? Because this is sanctions. All the sanctions were was a restriction on the free market.

And you, the free market, you basically created a Spike in Price. But the market, his market could still Operate with a narrow or set of trading partners. He is selling energy to certain trading partners.

He is selling foss fate. He is making money. They are exporting product and they're making more because certain people can buy and theyve got .

to go drive the Price up elsewhere. So not not only did our sanctions package not work, and not only is the treasurer treasury, sorry, filing around now trying to find even more back doors, we actually opened the very dangerous president, which is now we allowed oil to settle in currencies that are not just the united states dollar, and now russia and china trading and settling in CNY. That's not good for us. This is not how you preserve the energy of the reserve currency of america.

I I don't understand the eu. Of cutting all of their energy and then becoming dependent on russia, then creating a ban and sanctions. But then they made a carve out that oil delivered by pipelines.

And yellow has been negotiating this car out. We have been enabling russia to sell.

One of the eu passed this legislation. Just look.

look at the wind y journal today.

the article reading the cmc right now about IT, like the E, U, passes lamor sanctions package in may. But they also allowed the stuff that's coming by pipeline, for some reason, to be a car void. If the E.

U. Wants to contain putin from invading countries on their doorstep. They gotta actually become energy independent. That's the the beginning .

and end of not popular. And this is the problem with.

it's not popular.

It's not popular to continue to to to have energy independent. Nuclear was not popular. And so the politicians, the legislators responded in a short sited way to the popular opinion of the day.

And this is the child. Absolutely huge mistake on germans part. They close three .

nuclear react, popular. Eype got highly affected by these.

But exactly my point.

But in the U. S, I think the people of the country wants to be energy independent. And it's elite ite opinion that brought into these foolish ideas that basically we should cancel energy independence, which can cancel the keystone pipeline, cancel new drilling. AmErica should be a net energy exporter .

hundred percent. Job number one is to be energy independent, and job number two is to move toward looking.

Now there's another piece .

to sequence.

He came in. He said that he was going to make the saudis a para on the world stage. Remember now he's going hat and enter them to try and get them to produce more to Laura, the Price.

So what was the point of this foreign policy? IT was contractors. He cancels her energy independence. He basically insult, assault, assaults on which were even more dependent for oil. And then he basically refuses to engage in diplomacy on ukraine. These policies are contractor, even if your goal was to basically isolate the russians, you would then want to improve our relationship. Hundred was sai, and you'd want to produce more of our oil.

Hundred percent? Yeah, you, you, you overplay his hand for sure. I mean, you have, you can't not have heat in the winter in germany, and the germans .

got back on, you think things are bad right now. Wait until winter. And then that's only in reed button leverage. And that's when you're going to see a real in the western alliance, this idea that ukraine strengthened the western alliance, I think you will start to .

see the fractures of this winter .

and will continue. This will be another idealizing event.

Turn your news back on. And and and I also think that you thinking about the western alliance, I think that countries like games and france are really, in a question, U. S.

Leadership when they have basically a huge economic recession and they're wondering how they're going to heat their homes in the winter. But I think in the us, is time to reevaluate some the alliances that we've got ourselves in. Again, with this lizio anna, a situation, do you really think that lithuania would be basically poking that big russian bear if they didn't have the U. S.

And behind them as a body guard? No way they would be much more circumspect and potential. And and the fact the matter is that these eastern european countries, the ballot countries and poland, they have enmities.

They are friction with russia going back hundreds of years. And these guys, basically, they have very provocative attitudes towards russia, and our alliance with them can draw us in. So we have to really keep a close lid on that. We do not want them making moves on their own um because we could get drawn into a world war here.

Yeah and by the way, to your point, sacks also you know there continues to be escalating issues with debt and concerns about debt repayment across the eu. And while germany is you know looking to the us for support and worried about energy Prices, they're going to end up having to foot the bill to support a bunch of these E U um uh member nations that are facing death crisis and will continue to face significant that crisis over the years ahead.

I mean, greece made a payment recently, but greece is uh, that the GDP still over two hundred percent. Italy at one hundred and fifty five percent. Portugals at one hundred and thirty four percent.

I mean the numbers are, uh, pretty good thing. That is right. The spread on italian debt is Spike over the last couple weeks.

Bridge water basically biggest. What I got another frequent crisis to fight now. And I think you're right, the west alliance is more than just, uh, military at this point.

There's this. You do I really want to be the economic savior over and over again of my smaller member states. And guess he's gona benefit in all of this. China, they're gonna look at this for actually, and they're going to be like.

great. Just speaking, speaking of china for a second, you know, we talk and we we blow we hate about our desire energy independence. And you know we exclude tesla from you know any sort of major meaningful legislation. We trump IT, you know these companies that are just completely willfully behind uh, in building energy independence.

Um we think about like a gas tax holiday, but as like kind of like a you know something that we still needs an act of congress to pass even though congress is said they have absolutely no intention of passing IT. Meanwhile, we keep losing our footing to china. Just today, catl, which is one of the largest battery manufacturer, announced a pre meaningful improvement in there.

You know three points are a baty design. These guys are now building batteries. I can go a thousand kilometers um in both of the major you know um uh compositions that really matter.

N M C and L P ian and I just look at these things and i'm like, well, we cannot actually get capacity funded to domestic battery capability because we're too busy kind of basically virtual signal on things that don't matter. Um and in return, nothing happens. China continues to lap us.

We uh. It's really it's a really bad state of affairs. We are a we are in a very odd period in terms of government. Effectively.

if you think about china's foreign policy, how have they lost out by not being part of all these conflicts? Have they lost out exactly?

They are buying Prices of oil that were nine months ago to eighteen months ago. And so there not only has russia's output Price bin cap, but that's okay. China's input cost has been capped, and so they don't suffer the same rate of inflation that the rest of us do.

So to your point, David, you know how our quota, quote, you know, exclusionary sanctions were in effective. They were poorest. And we allowed our largest competitive friend of me, if you will, to basically be able to, you know, drive their entire economy, add thirty to forty percent of the, uh, uh, discount to what we have to pay to do the same, right?

When china goes abroad, they go abroad in search of economic resources and economic development. That's the point of belt road. They don't insert themselves in the middle of these conflicts that they don't understand.

They were never involved in the medal east. They were never involved in like policing in all these different countries. That has cost us a fortune.

And now the bill is finally coming due. In the former, this inflation, we are going to have some former another of austerity in this country. And it's partly because of this highly military foreign policy in which we have set ourselves abroad to be the world's policemen. We can no longer afford to do that.

Can I make a generalize? You react and tell me if this is true, not if you have a country that is existed in some way, shape or form. You know, the the borders could be blurry, but roughly for hundreds and hundreds of years, and in some cases, thousands of years, where internally the population of that country view themselves in a great way.

They, they, they don't feel like their country is a meaningless, nothing country. Any attempt to economically humiliate such a country tends to have failed, and the past will continue to fail. And there tends to be other countries who view IT as one of these things were.

Well, if then, then why not us? And then they sort of you in in a back candidate, support everybody. So we end up in this odd situation where we are picking fights. We cannot win and and the consequences for us are economically really damaging, and the consequences for everybody else to stay on the sidelines is like economic prosperity. That doesn't make any sense.

And that russia is going to roll over more countries, and that you have this existent al risk, that this dictator is going to attack more countries. So so if you're living in eastern europe, you might have a different view of IT. You might very much accept and want some help from you know nato and other folks who but .

you're not getting that help. That's the problem with that. The sad part of bottle and .

if it's poorly excuse, is not working at this point in time. Yeah, I mean, if you .

look at the E, U, okay, as an ended, they have almost the same GDP and output as the U. S. And if you compare them to russia, their economy, their GDP, is ten times greater than russia.

They are rich. They can afford to allocate a few percent of their GDP of their government budget to defense. They sure to defend themselves. They really should.

And so this idea that we have to go over to europe and bankrupt ourselves to defend rich europeans, they were picking up a hundred percent of the cost of that, a hundred percent. I don't know why we're paying for rich europeans when our country is massively in debt. Why are we passing the bill .

of them for that where absolutely um yeah do we have to spend that much money to to do that no. And then obviously the wars in the midst east .

were me pick up the post policeman idea, what kind of policing works? The best community policing when the policeman are from the neighborhood and they know all the players, they understand the subtlety of the the area. exactly.

The U. S. Has made itself the world's policemen.

We parish into areas that we don't understand. We did in the middle east. IT was very effective.

What we should do is let the regions deal with the problems themselves first. And we should be the policeman of last resort, not first resort. Let the europeans take the lee.

They should paying for their own defense. We could still have nato, but they be paying for IT. They should be the first responders. And if they can't handle IT, then we can back them up. But this idea that we need to be on the bleeding edge of all these conflicts and bankrupting ourselves, it's a foolish idea.

Energy independence is a solution to all of this. We wouldn't have to deal with these despots if we didn't. If we had energy independent.

We're getting we're getting circles run around us by china, Jason, on the innovation front.

circles found out by china the innovation front example.

I just told you the catl battery that they just announce today, it's incredible.

I mean, battery technologies is we have a lot going on there as well. I mean, IT seems like the battery technology issue has been solved for evs for some time now. I mean, if the E V can to go two hundred miles and we can build them at scale, which seems like we're on the precipice of um we're going to be good.

You don't need more than two hundred miles on average. It's just a luxury every mile after that given how fast super charges are working. So just practically speaking, ninety five percent of americans will do just fine with a electric r that does two hundred more range and the other five percent can do a hybrid or console burn oil.

We just need to get more. We have to be more serious about the miles per gallon right now. We are just absolutely abhorrent in our use of fuel in this country. It's just crazy that we have load twenty miles per down. And as our average when other countries are thirty, forty, fifty, one hundred.

thirty and forty, because we like our, you know, seven seats suburbans.

which is ridiculous because ninety nine out of one hundred missions in that suburban are done with one or two people in IT. The fact that are uber now in our lives. So whatever are coming with .

giant suburbs with one person and IT is just I I have a fia e five hundred year .

a we just if you just think about if if we were to double our miles spare gallon, there are cars right now. They are doing fifty, fifty five miles per gallon. We really have to be more punitive, uh, in terms of talking to give me the forecast .

jacal what's going to happen with biden?

Oh, okay.

so I can give me your, give me your score card, give me your grade. How you doing .

for biden? disastrous. I mean, I think the only thing, more disaster. And biden would be having trump to a second, third and fourth term.

hundred percent so. So played up, played up.

Why don't think he's going to run again? I think they're going to have, you don't know, going to run again. I think there I think between then and now of the economy keeps going in the way it's going.

He would be a lame duck and impossible. And I think he might say, you know what, i'm going to retire to spend time with my kids and my golden years. And they might convince him that him running again is a really bad idea. And come la haris, a disaster as well. SHE has improved .

anything in the, yeah, who would the debs put up? j. Jack, as a democrat, who would you .

want to have put up this? This first .

is newsom and .

twenty four.

Yeah, I but puts explain that.

Okay, so but which part of the?

Okay here. So newsome has a very weak chAllenger in california, a plus thirty devastate hold on, says the hold, says gonna handle win reelection in california. He's already my campaigning for reelection in california.

He's already campaign be the thing that he did that was politically smart. And I say that's not a fan of news. Sympathetic someone is analyzing the politics of IT is that he went on truth, social and he to basic counter republican lies.

And so he's positioning himself as a fighter for progressive values. And the reason why this can be flattering to the democratic base is that when the democrats lose big in november, they're going to have there's going to be a reckoning, and they're going have to understand why they lost. And the fact the matter is that idiot gues never blame themselves or their agenda.

They are going to say that I was not communicated well and that we needed a basically a Better communicator who was a fighter. And so the'd basically pin the blame even more on biden. And so newsom is positioning himself as that sort of democratic progressive fighter.

If you go back member, when Michael hanoi, like they were progressive, talking about him as a president candidate for a brief minute, they slowed over him. Why jail? yes. He's in jail.

right? Yes, I was .

a total grip. The .

country name, in the funniest way, paused by Rivera poker game when, like, help me, city had no numbers on a jacka.

What's this guy's name? Says they, Michael levana.

I don't know how I never .

got these being a woman.

Mics a disaster. I an interesting concept.

Yeah, sex, can you giving the dance will give you some the knock. Can he actually win in some of these these middle states?

Well, you got to remember this is true. But part is the general elector does not pick the candidates. The parties .

pick the candidate .

in the base of the party, pick up a man democratic party back to the center in one nine hundred ninety two. And the whole democratic leaders council, and they really remade the democratic party at that time, is a more centrist party. They had just come off three disastrous presentin elections so raging and eighty and eighty four and then her ver Walker bush in uh in eight eight.

So you know IT took three big losses for them to rethink. I don't think progressives are going to rethink their agenda, you know, based on one mid term loss, even though I think it's going to be gargantuan later this year. So I think they need more losses to really reevaluate their agenda.

Mean, look, the activists in the party are deeply invested in their agenda that there is not going to give IT up. They're na blame me on a communication problem. They're going to say, let's find a new messenger and newsome seem like a Younger, fresh face so I think that's how could happen. And if you .

look at the democratic bench.

he who is that .

to be a boot gedge in A O C, if they want to go full like crazy, left would be. And then .

if they want to go .

motoring, that doesn't. You got a, which is as a .

hundred million, hundred million doll surplus looks good for him. So yeah, I mean.

Gavin, it's a scenario is a scenario. But I look, I think .

is will republicans field trump after january six?

And I I think the answer is no. And it's .

shameful right to do that.

I think that look, I think trump's problem, as you want to stop talking about the last election, and I think elections are always about the future, and the republicans ultimately nominate a canada who represents the future.

no republicans want as going out there trying to steal an .

election again. No, look, you look at straw polls. Okay, if you look at straw polling um the senses now is beating trump and strapped in the republican party Johnson shape, who is a pretty smart liberal, defensive, not republican, but he sometimes as very smart observations remember the whole zero copy thing anyway, he's in an article just today talking about how scientists has now eclipsed trump within the republican base. And if you look at the numbers at within and if you pull fox news viewers and likely republican primary voters, the senses is up a couple of points in the straw poles but among fox news viewers he's up like ten to fourteen points. So in other words, the republican base, the activists who are the influencers, they already have .

moved .

from the .

slip the a landslide. This is why I sense .

to senses verses a new some, I think. But look, IT could be the sensus for suited IT could even be trump versus newsome. I think the configurations that win for the republicans, I think if buyers on the ticket, I think any republican wins, I think if it's decentest versus newsome, I think stances wins.

I think, however, and this is sort of the nightman scenario, I think it's something like a new sivers s trump. I think republicans could lose that just because, you know, the people, people, people think about the future they want, they don't be reminded of the past. And so I think there's .

this there no more.

Also inane r have running .

for president.

No, great, I think. right? nothing.

Inst twenty five years .

old will be good for me.

right? This been a very long episode.

Well, we concerning how much sax is gona Spike, we'll get IT back down to forty five minutes. Everybody y's amazing. A lot of life, not not anywhere.

Everybody backs or back, not going in anywhere. You going to need a wrecking ball to take me out here. You nature.

you don't get .

ready to you. But now all, we need three out of four votes.

We never .

wants to get rid you j out, but we knew we had to do certain things to get you to act right.

Oh my gosh. J, L brought a, brought a knife to a gunfight. He came to the goal, guys to give me two points that he came to the go. The left with, have a it's fine.

it's fine. You guys don't get no more interests for you, but I no or all in summer.

no more in back our payment. By the way, i'm the bad thing to call with our lawyers are going to get the account set up.

get all the money transferred from.

like with that money that's long gone. I put that on the warriors, so tripled for good. Everybody will see you next time.

your.

Winter, man.

We open sources to the fans and .

just got crazy.

Should all just get a room, just one big huge org because.

Special .

release get.

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