The Stock Market Blues | Jack Farley & Max Wiethe on Tariff Uncertainty & Jobs Market Data
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The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough. Thank you. Let's close this door.

Normally, we're doing this around a big data bomb, whether it's a Fed day, jobs data. We did get jobs data today, but it's certainly not the big story of the week. We're looking at one of the worst weeks in the equity market since I don't know how long, but it's largely being driven by macro and government policy. So macro is back. Macro is king. So, Jack, what's your macro framework right now?

Let's see. Well, S&P is down 3.6% for the week. The dollar is also down 3.1%. I got to say, Max, on a relative basis, I'm bearish on the U.S. stock market and I'm bearish on the U.S. economy because of tariffs. I think that a tremendous amount of uncertainty that is being injected with these tariffs announcements and the way that they're being announced. And I think it's quite clear that the market doesn't like it. And

My read is that the President Trump and the Trump administration is quite keen on implementing these tariffs and implementing them in the way that President Trump wants to do, and that the stock market is of a secondary concern. Treasury Secretary Scott Besson, who I respect a great deal on CNBC this morning, he said quite literally that there is no Trump put. Basically, that

that he doesn't really care about the stock market and that he's watching the stock market, but that he doesn't really care about it. So I think the beatings will continue until morale improves. I'll also add a caveat. I'm a huge and have been a huge bull on the Chinese equity market, and I continue to expect to be. The caveat is that I think that it's going to be a very non-trending market. I think that

the market crashes on Thursday, it actually will be up on Friday. And actually, that's literally what happens. And if it crashes on Monday, it will be up on Tuesday. You have this real whipsaw effect. So it's very hard for macro traders who like to say, I'm bullish and I'm riding this trend because there is no trend. I mean, I think the trend will be down, but I think it will be very, very jagged and lots of wiggly lines. I'll explain what I mean. So last week, Trump said that

tariffs were going to be implemented on Monday and that, nope, it's basically too late for tariffs not to be implemented. The market did not like that at all. Then there's, oh, I think the automakers complained quite vigorously to President Trump and his team because there's like an auto part goes across the border many times before it goes into the car. And then say, oh, there's an exemption on autos from Canada and Mexico. And then what was it yesterday?

Commerce Secretary Howard Lutnick said, actually, the exemption is probably it's not just on cars. It's basically on everything that is USMCA compliant, the US-Mexico agreement.

And so basically tariffs are canceled. So now everything is going to go beyond that April 2nd date, not April 1st. Why not April 1st? Because April Fool's Day is bad luck, which I kind of agree with President Trump on. I actually do like the April 2nd date. But so there's just a tremendous amount of uncertainty. And when I say bad news, what the market perceives to be bad news about tariffs is announced. The market goes down. There is a backtracking or Trump is pulling back on that narrative a little bit. There's a

There's a reprieve, and then the ultimate, another tariff bomb, so to speak, is dropped. So that is my base case. I have relatively high conviction short term. Medium term, I have no idea. And I just think tariffs are...

My base case, I mean, most economists say this, is that they are bad for real growth. Either inflation will go up or growth will go down. So inflation-adjusted growth is going to be bad for that. Also think, Max, that the Trump administration is quite clear that it has certain goals that are non-economic. As economic analysts, journalists, reporters, podcasters, interviewers, we

Everything we talk about is economic and financial, but it's important to say that a lot of people don't care at all about economics and they have non-economic goals. For example, the Commerce Secretary, Howard Lutnick, when asked on Financial TV yesterday, what's it going to take for there to be a restoration of trade between the US and Canada, he specifically referred to fentanyl deaths. Maybe he and President Trump are totally right about that, but the CNBC journalists were kind of stunned because

Like it's an economic policy is not being based on an economic criteria. It's being based on a fundamentally non-economic criteria. So I think that if you only look at it through the lens of finance and economics, I think you're going to miss a few things. But yeah, broadly speaking, I'm bearish on the US market, massively bullish on China and bonds, I'll put them into too hard category.

Okay. Well, I want to flash back to the first Trump administration, because you're talking about this whipsaw, and it's something that we saw then too with the, at that time, it was the China trade war. And there's this concept in equity markets that

bull markets like to climb a wall of worry. And I really think about that time, people were pretty bearish on the trade wars. They believed that trade wars were going to be harmful to the market. And every single time Trump would tweet, it was, okay, trade wars are, we were close to a China trade deal. And the market was able to rally on these sort of successive things.

The inverse of that is the slope of hope. Everybody came into the Trump administration thinking this is going to be the big Trump bull market and he's not being serious about tariffs. That is still the hope that people have, that he's not going to be serious about tariffs and that you should take him figuratively and not literally. So everybody is thinking maybe that, oh, we have this wall of worry that we're going to climb. And the question I have is, is it maybe actually a slope of hope that we are going to slide down?

Yes. And as bad as uncertainty being injected into the market, the positive side of that is that uncertainty can be removed. For example, the endless recession fears of 2022 and 2023 and 2024, as long as those recession fears stayed high, every day that there wasn't a recession was actually good for the market because that worry was being removed from the market. And I actually, I am...

getting worried about US growth. I mean, it's not just me. I think many people in the market are worried about US growth. Bank stocks really took it on the chin over the past five days. And I think whatever good news Trump is able to do in terms of, Kevin Hassett today said $1.7 trillion is going to be announced. That is very, very long term. Think of the IRA deal, Inflation Reduction Act under Biden,

Those things are a very, very long thing. And I think there's still lots of factories going to be built over the next four years that were because of the IRA. I think that Masayoshi Son, investing all this money into America, whoever is president in 2029, that's going to help the economy in 2029. That's very, very long-term acting. But I think these tariffs will be disruptive in the very short term. I mean, I'm hearing as much as a car could cost $5,000 more in a week or two.

And I also think that the question is, is this tariffs going to be a one-time price adjustment or is it going to be actually inflationary? Treasury Secretary Besant said that there could be a one-time price adjustment and that the car will go from $15,000 to $70,000, but it will not continue to go up. It'll be a one-time price adjustment.

That's also important because if it is just a one-time price adjustment, it's in the central bank's playbook to look past one-time price adjustments because it's not a sustainable level of inflation. And it's kind of like the central bankers, the last thing that Jay Powell wants to do is to make the mistake that the European Central Bank made in 2008 when the price of oil went to 140 bucks and they raised interest rates into what was a financial depression, basically. Huge, huge mistake.

So, that is a question. I also think it's like, is the Fed so willing to look past the price hikes from tariffs and say, "Oh, they're not inflationary. It's a one-time price hike," given that they used that argument in 2021 and 2022, and the Fed was way too late to fight the inflation then? I don't know. Short term, the Fed seems relatively confident it's not going to cut in the March or the May meeting.

Powell spoke today, kind of a nothing burger, to be honest. He did refer to heightened uncertainty. And I think Powell, like everyone, is watching the dollar, is watching the stock market, the credit spreads. To be honest, I haven't looked at the credit spreads. I'm going to guess that they're widened marginally from extremely low levels. Yeah. I see credit spreads, like the ETF of just credit spreads, no duration is down 1.5%. So I don't know what that is on high yield spreads. So the

I think the market could go down a lot more. Am I making it clear, Max, that I'm bearish? Yes, you're making it very clear that you're bearish. And to your point about Powell talking about heightened uncertainty, he did add some clarity there that in periods of heightened uncertainty, they don't act as swiftly. They prefer to...

to be more deliberate in their decision making rather than acting quickly when they don't have that uncertainty. So if he's citing uncertainty and people are expecting a swift pivot, that's not really the tone we got from the talk today. But I do want to switch to equity market bearishness. There's sort of two schools of thought. One would be, okay, just broadly bearish on equity markets, whether you're reducing exposure, whether you're betting against the market.

But the other one would be tariff winners and losers. So the companies that are going to benefit from these tariffs, or at least are insulated from the effects of tariffs, and then the sectors that are going to be hit most hard. When you think about the parts of the economy that are going to be hit most hard by tariffs, obviously, auto is a huge one. It's part of the reason they were exempted for now from the Canada-Mexico tariffs, but

What are the sectors, the parts of the economy that you are most worried about that you're going to be watching to see whether these tariffs are going to have negative economic impacts sooner rather than later? Basically, everything that's a good and less less things that are services. So, for example, visa, you go to Mexico.

You go to Europe, you spend money or in America, you spend money. That's a service and that is not a tax. That is not going to be a tax. A tax is something that comes from another country that comes into America that you can hold in your hand or you exist in the physical world. So let's see. That's a lot of industrials. I suppose it's some materials as well. Some consumer discretionary, a lot of things that you buy retail and the like.

There are people who have long shorts, baskets. That's not really my thing. I'd say that that's kind of too hard. I would say that... What was I going to say? Oh, yeah, yeah. Three, two, one. I would say...

I'm like, for example, a company that I think is, could be hurt by it. And technically I actually am like longest company in very small size, but Pinduoduo, like they team, they own Timu. And I think they, a lot of their cross border business is, is in the United States on these really cheap goods that are, have been exempt from tariffs, even the current tariffs because they're day minimus because they're less than $800. And I've tried to figure out again, so uncertain, like,

are these, is the de minimis exemptions, are they back? It's really unclear, but I think if de minimis exemptions are there and there's retaliatory tariffs, I think Pinduoduo could suffer. Alibaba, for example, which full disclosure, I also own way, way bigger size. If the market goes down because Alibaba sucks because there's tariffs on China, less than 10% of Alibaba's business is from China to the United States. So on a fundamental basis, I'm not very concerned.

I mean, I tell you that just in the past year, they laid off their their U.S. to business because it was not growing. It was not driving, driving growth for Alibaba.

They also have some stuff in the cloud that's over my head. I've been focusing on a concentrated basket of financial stocks in the US and China. And that's been going quite well. I guess the US bank stocks were down a little bit this year. But yeah, year to date, my personal portfolio, I'm up 29%. And over the past year, I'm up

92%. And I think that that is like, a lot a lot is like, number one, it has to be luck. If it wasn't luck, then I could do it every year, which obviously I can't. But I also think that it has been less macro driven and more driven by security selection. So backs when we did our last chat in December, we were both pretty bearish. And

I was actually feeling like, oh, shoot, we made a bad macro call because the market made a brief all-time high in February. Now it's, I guess, lower. But I think that there's a difference between being right and making money. In 2023...

I was actually right about the macro, that the banks were a buy, but I lost money in 2023 on some trades. And I think the opposite can be true now. You're actually wrong about the macro, but you make money because you do well in terms of trading.

Yeah. And so you're bullish on China. That's something you've been bullish on for a while. Something that is coming out more recently, though, is that Europe might be a safe haven. And it's largely driven by this idea that the decoupling from the U.S. is somewhat of a wake up call for the Europeans and that they are sort of

increasing their stimulus, reinvesting and invigorating their economies, realizing that this decoupling is moving forward much quicker than perhaps they had thought. I don't know what your European benchmark is, Jack, but I'm pretty sure it's doing better than the S&P 500 year to date at this point in time. Do you think this is just a flash in the pan? And do you think that this decoupling is what's driving it?

Yeah, so the European stock index up about 15% year to date where the S&P is down. The DAX is up 16%, 17% as well. And it's just every day this thing keeps on going up. And I think if you go back to October, the outperformance is even more stark against US markets. I think Germany and Europe in general, but Germany in particular, has been killed by China's somewhat mercantilist policies, very export-driven policies.

Germany produces cars, they produce machinery. China produces that way better and way cheaper. I don't want to offend any people in Germany by saying way better, but that's kind of the sense. And so German real GDP has been flat for about six years now. So it's a huge disaster. So anomaly has grown, but because of inflation, the real GDP has not grown. So it's been a huge disaster, but the DAX is actually up. And the DAX chart looks great going back to 1988. And the DAX...

during the bad economic performance of Germany has actually continued to go up. I think for two reasons. Number one, if you're invested in the DAX, you don't just have exposure to the German economy because Germany sells to the rest of Europe, which basically has no tariffs, has no tariffs, and to the US, which again, Trump may have tariffs against the EU. He says that the value-added tax VAT is like a tariff. To be honest, that's beyond my comprehension, but we'll see on April 2nd if those retaliatory tariffs against the EU get levied.

But and so the rest of the American economy has been strong. The DAX has been going up. So it's not just the fact that the German local economy has been weak. Then I think there is stimulus. The the European Union earlier this week

I'll give the context of President Zelenskyy not getting along very well with the President of America, Donald Trump, which is no secret. In that context, the EU lifted the spending ban where basically there's a fiscal pact between European nations where their deficit as a percentage of GDP can't exceed 3%.

They now say if you spend it on military, it doesn't count for that exemption. So you could actually spend way, way, way more money. And so European defense contractors, those stocks rally like crazy. But actually, with the rumored peace deal with Russian President Putin saying he's maybe open to a peace deal, a lot of German and European defense contracting stocks actually tanked today. But yeah, I guess when it comes to outperformance, it is strange, Max, because I would have thought that...

But US tariffs do hurt the rest of the world more than they hurt the US because the US is the consumer of last resort. And so much of what is created in the world is bought by Americans and so much corporate profits are in the United States. I think if you look at a German pharmaceutical company,

So much of the profits are from selling to the United States because it's a highly regulated, highly government paid for programs in terms of health care in Europe, mostly. Whereas in the U.S., companies can basically charge what they want. So I think that the U.S., the power of the U.S. consumer does give President Trump and America a lot of power. And this is one of the things I disagree with kind of the orthodox economic view on. But the market is kind of proving me wrong because Germany, Europe,

China are rallying like crazy and the American market is down while the dollar is going down against those other currencies. So yeah, maybe I'm wrong. Maybe these tariffs are as bad as the Brookings Institution says. I really don't know. I'm just interpreting what the market is saying and relaying it to people. And Max, I've had on a variety of views. I've had on Eric Wallerstein of your Denny Research. He said tariffs aren't going to be a no big deal. Johnny Matthews, macro trader, formerly of Brevin. He

he's very very worried about terrorists that they'll slow grow so i've had a variety of views but i just want people to know that like i take it very seriously to not let politics influence my economics and i also try and not have it be for the guests so like if someone is saying yeah these terrorists by trump are making me insanely bearish like they're not they're not just like liberals who hate trump and that's why it's clouding their view i just want to make things clear to my audience

Jack, I think the surprise from Europe's performance and the fact that maybe tariffs would hurt them more has to do with the fact that price matters. Like the US economy was supposed to be the strongest economy ever. And if that is what people are expecting and Europe has just been languishing and specifically European securities and equities have been languishing, then it's not that we aren't all feeling the pain. It's that

But the pain was already priced into Europe and it was not priced into the United States. And as well, if tariffs predominantly hurt the consumer, like that is what drives the U.S. economy forward is is the consumer. So I think that is potentially what we're seeing is is the effects of relative pricing and and the the reliance on the consumer here in the United States.

I think you're absolutely right. US consumption is a huge percentage of GDP. Of that consumption max, 68% is services, which basically not impacted by tariffs at all. 32% is goods. Of that 32%, 80% is domestic, so only 20% is imported. Of that 20%, only 16% is from Mexico, 13% from Canada and China, respectively. So it's only a single digit number of percentage points of GDP that the tariffs will impact.

So you can make the argument, oh, that's not a big deal. But number one, I think that the declines in that level of GDP will be substantial. And I also think that they could impact business confidence and consumer confidence in other areas and actually decline investment and consumption in other things. So in other words, you know...

Hiring a tutor is a service, not a good. And so it's not impacted at all by tariffs. But on the margin, if you're finding goods are more expensive or you're seeing a lot of headlines about how tariffs are, there's a lot of disruption, you might not hire a tutor for your kid or something. So that is the argument. I could also see, Max, that the economy...

does slow down marginally, but it does not go into a recession. I think real GDP for Q4 was 2.3%. And so if it goes to 1.5% or 1%, it doesn't have to enter a recession. So yeah, I think it's possible. Yields go down, stocks go down, but it doesn't enter a recession. And actually,

Trump sees the damage of tariffs and he reaches a deal, does art of the deal. And then it's the biggest bull market in history. A Reagan like moment, you know, let the bull loose earlier, like later this summer. That's that's definitely possible. And I would never say that that couldn't happen.

Okay. Now, what about jobs? We've been talking about tariffs and the effect of policy there. We did get jobs data non-farm payrolls today. They came in a little soft as well. We got some soft data from the ADP surveys earlier this week. People are concerned about the Doge job cuts too because the federal government employs a lot of people. What are you focused on when it comes to jobs data and determining that side? Because

especially as it relates to Fed policy, like there's a lot of uncertainty about inflation. Perhaps they have a bit more certainty about jobs data. Um,

What are you thinking there? So the jobs data that came out today, economists were expecting 160,000 payroll jobs to be added. The actual number was 151,000, not by much. So a miss, but not by much. Unemployment rate went from 4.0% to 4.13%. So a

close to 15, 14, 15 basis point increase in the unemployment rate. It was a bad report. And Max, here's the kicker. All of these Doge cuts did not really factor into the data. Federal government employment declined by 10,000 people. And I think that was mostly because of Doge. But total government employment actually went up by 21,000, excuse me, 11,000.

because state and local governments hired 21,000 people in total. And this is a point I've been making several times on Monetary Matters. I said it in my interview with Joseph Lang on tariffs, that the federal workforce is 2 million people. Sounds like a lot. The total state and local government employment is close to 20 million people. That's where all of the growth has been having. So if there's a tremendous amount of waste in the system, so much so that it will materially...

save a lot of money by making these cuts. I actually think it's not federal government employees. The math just isn't there. I think it is federal government paying contractors who are

employ people who technically work in the private sector, but they work for the private sector and they sell their services to the government at a very high price. And that's why the government spending is so high. So I actually think that the impact of Doge will be seen over the next coming job reports. And it won't just come from cuts to the federal government. I think also you can expect private payrolls to be weaker as well.

And by the way, if you are a doja poor, you would say, good. I think there's a tremendous amount of waste. I want the waste to be cut, not just in the federal workforce, but in people who are working for companies that have the US government as a client. Economically speaking, that will be interpreted by the stock market as bad. It will be interpreted by the bond market as bad for the economy. So bond prices up, yields down. That's just my base case. Again, leaving politics out of it, I think if the economy loses 100,000 jobs, the stock market is not going to be like, well,

it's part of Trump's long-term vision. So actually, we're going to get super bullish. The stock market will go down. I mean, maybe I could be wrong about that, but I don't think I am. Bond yields could go down as well. And maybe this is an argument. Trump and Scott Besant are not so concerned about the stock market. Even with the 8%, 9% for all-time highs we are in the S&P, it's still trading at an elevated valuation. That trade

that Scott Besson and Trump care about having the 10-year go down. So they actually are fine with a little bit of economic weakness so that the 10-year yield goes down so that it's more affordable for Americans. I'm based on that, of their exact words. I'm not evaluating the logic of that argument, but I think that they have said things that indicate that. Yeah, and speaking to Doge cuts, potentially of federal employees not making up a huge part of the stated goal of helping to balance the budget,

Uh, but we, we talked about it already. Like they do have non-economic policy goals and it's, it, the federal bureaucracy is the tool through which federal policy is often implemented. And I think they view it as a, as a clearing house to get their guys, people who are on board with their plans, which many of those plans, as you said, have non-economic goals. So, um,

Although the stated goal of Doge is to help balance the budget and cut government waste, there are certainly aspects of it that have non-economic goals. Absolutely. And Max, I think for hundreds of years, economists and finance-oriented people

have over-weighted the importance of finance and economics to non-finance and economic people and politicians. I'll give you an example. In 1913, the bankers said, I'm not worried about this little fighting in Europe. There's not enough money. The governments will run out of money. There's not enough gold to fund World War I. It will last two to three months, and then everyone will say, we ran out of gold reserves. Let's just make a deal and have a truce. So obviously, you know,

The World War I went on for five years, funded by money printing as well as tremendous borrowing from the United States. So I think that it's important for people to not just look at the economics because a lot of people have non-economic motives. And I would definitely include President Trump in that. Max, if it's okay with you, I just want to go back to the jobs data because I think broadly –

220,000 federal employees are basically temporary workers. And the Trump administration has said that nearly all of them are going to be let go. With other things, let's round that up to 300,000. I think that the job market could handle those amount of losses if it's meted out over the entire year. If it's specifically in the March number that will come out in April, that will be a disaster. But yeah, Doge is going to make the labor market weaker.

I think, Max, that

even though the labor market has been softening, the death of the labor market really has been over exaggerated by some of its worst critics. Max, because we did our last interview in December, I hinted at, I said, "Oh, on February 7th, there's going to be the January data." And this is the day that the recessionistas are going to have, this is their last chance to see if there's going to be a recession because there'd be a huge update based off of the census data. And

And with the birth death adjustment, and I can say, my compliment is that that did not happen. And again, so now I'm referring to the January jobs data that was released in February, not the February data that was released today. But the household jobs data was revised upward by 2 million people. Now, this is almost entirely because of immigration, as well as some other factors, but immigration. And so the non-farm payroll revision and the establishment survey

was revised down by 589,000. So the recessionists say, "I told you so. It was revised down by 589,000." But the household data was revised up by 2 million people, so nearly four times as many people. Ben Felix :

I do have to say it does lend some credence to the, I guess, conservative argument about there is a huge amount of immigration across the border, and that did lead to a higher number of employees. So if you're someone who only cares about GDP and growth, that was a good thing. But again, people have non-economic concerns, and I totally get that.

Yeah. So one thing I want to get into is the slowdown in private equity fundraising. That was something we got coming through the news flow this week. Obviously, private equity and large, really more so private credit has been just a massive growth industry over the last few years. But we saw, I think, the worst fundraising year ever. It might have even been a net loss of assets under management for private equity. Correct me if I'm wrong there. But what is driving that, Jack?

So private equity fundraising declined by 2%. And this does not refer to private credit, just the equity part. So buyouts, LBOs. And Max, this is a level of fundraising activity that has never been seen. Even during 2008, private equity still managed to raise money, maybe because the deals had already been kind of agreed upon. But yeah, I think it's pretty dire in the private equity fundraising side. Meanwhile, the grass could not be greener in the world of private credit because interest rates have stayed high.

Private credit yields are very high and the spread of private credit over high yield funds has gone down. So private credit funds have a tremendously high on paper returns that they can go to Harvard and Yale and say, hey, you gave us $5 billion in 2021. We've turned it into $6 billion.

Guess what? How about $10 billion? And Harvard says, yes. So private credit is a hugely hot area. Interestingly, actually, none of these stocks I own, but a lot of private credit behemoths, the general partner stocks that are trading, are down in the sell-off. So it might be interesting to take a look at that. Not that they're cheap by any means. But yeah, in terms of private equity, not credit, but private equity, the fundraising is down. And that could be a macro catalyst. It could be

because if the money stops flowing in, the valuations stop going down. Private equity companies, when they realize it, they sell a company. They either sell it to a strategic buyer, i.e. another company, they sell it to the market and the IPO, or they sell it to another private equity company. Increasingly so to other private equities. And private equity companies can't sell to other private equity companies if the music stops playing and there's no new money to play with. So dry powder is still technically high, but I do think that, you know, when...

When money stops flowing into an asset class, that causes a whole bunch of problems. So it's just early stages. I mean, people have been worried about the blow up of private equity for five years. And I will say, looking at real estate, no one was really going to the office and interest rates went from 0% to 5%. Max, so many people were really bearish on commercial real estate. I did many interviews with very...

bearish folks. And by the way, they didn't just write a newsletter. They worked at some of the biggest insurance companies. But I think broadly speaking, actually, commercial real estate is held in there. And it's not because the asset class has done well. It's because the liability has done well. And I'll explain why that is that it's not funded on short-term money that people can just pull their money. This money is tied up for five, six, seven years. And you really can just kick the can down the road. So although I'd say I'm probably...

with a lack of low conviction view, I'm not very bearish on the private equity asset class. I'm also aware that the liability structure is very strong and the money is tied up. So I think that the odds that it causes a financial crisis as of 2008 in rapid order

is quite low, but it definitely could cause some hiccups. But the problem has been money not coming out, which is what private credit people are paying. They have payments they have to make to their creditors and that money comes back in and you can make distributions to your creditors

uh, to your LPs that way. So, you know, the big problem with private equity as much as yes, now we're seeing money not going in has been money not coming out. And that is one of the things people like about private credit and why it has been doing so well is that the money is coming out. People have to make their payments. Um, and so if we're not seeing defaults, which we're not seeing, people are making their payments and that means LPs are getting distributions.

I think you nailed it. What private equity investors or limited partners, LPs, what they care about is DPI, which is basically how much money has been distributed to them in dividends and returns based off of paid-in capital or PI. So five years ago, maybe a private equity LP would be said, oh, our multiple of invested capital is 16% over, you realize we're doing great. Now people say, I don't give a fuck about DPI.

you know, how much money we've made on paper. What have you paid me? What has actually been returned to me? And also, if you can't return the money to me, I can't give it back to you in inflows. You know, if you return the money to me, I'll give it back to you in terms of reinvestment. But I think that's part of the reason why new commitments and new fundraising hasn't happened is because the private equity companies haven't given the money back.

Yeah. So, Jack, let's let's turn it to what's going on here at Monetary Matters. You talked about some of the guests that you've had on recently. What about the guests that are coming up next?

I just spoke with Julian Brigden. I really, really like his view. Obviously, Max, you and I have known Julian for a long time. He's at MIT Partners. We knew him when we were at Real Vision. He is very bearish, not just on US stocks, but on the US dollar. Now, I would put currencies in the too hard category for me. It's just a little too hard for me to understand why currencies go up and down.

But Julian is very bearish on the dollar. And I think Julian has absolutely nailed it. Being bearish on the dollar and on the stocks at the same time, definitely not a consensus view. And it has worked marvelously over the past month. So this interview will come out on Saturday, March 8th, Max. And people can expect my interview with Julian to come out on Sunday, March 9th. So people should stay tuned for that. I'm also going to be interviewing someone from the alternative investment world. So we talked about...

private equity, I'm interviewing the head of the CAIA, Chartered Alternative Investment Analyst Association. And so I'll be able to ask him about the fundraising situation, as well as everything going out in private credit. Max, what about you? What do you have cooking with other people's money?

Yeah, I'm very excited for this week. I have an interview coming out with Moez Kassam. He is probably one of the best performing fund managers in Canada. I don't know what it is about Canada, but they don't seem to be the biggest in the sort of hedge fund world or there aren't a lot of big funds like you think about in New York.

despite the size of the Canadian banks relative. It's not quite there in the fund management industry. But Moes has built his fund, Anson Funds, to over $2 billion.

and really focused on some pretty interesting strategies. Like he likes to get into the sort of like hot, frothy areas of the market. He's known for his short selling. So a lot of times we're talking about the business side. We do get a little bit more into strategy, how he develops trading strategies, why he likes these areas. And so he traffics in a lot of the names that like actually retail investors love. He's on the other side of the Wall Street bets army most of the time. Not always going for the king of like, you know,

avoiding GME, but looking at the sort of also-rans of the meme stock world. And same thing for, like, the big, hot sector. So, you know, he's...

He's not going to pick a fight with Elon Musk and Tesla. But if you're trying to say that you're the next Tesla, you're going to show up on his radar. And depending upon how it looks, he might be betting against you. So I am very excited for that to come out. And actually, he's never done a podcast before. So for such a big, prominent fund manager, very excited to be the first one to come out there. And then as well, some of these things are coming a little bit later. I...

I have been interviewing a lot of equity managers. I mean, it's just, obviously I'm mostly an equity investor. I think most individual investors invest in stocks, but you know, this is monetary matters. We talk about macro a lot. So I wanted to get a macro fund manager on to talk about what it's like to, to run a macro fund and to launch a macro fund and try and build that up. And so I found this really interesting fund out of Argentina, um, that actually the former, I believe a finance minister there, uh,

um, is, is the, the principal. Um, and they also have like a lot of heavyweights, like former head of Pemex in Mexico is also part of the fund. So really, really smart credential guys that done super well. Um,

And so that interview is filming later in March and is going to come out towards the end of the month. But that'll be sort of like my first macro manager. They're not like a huge, like multi-billion dollar macro fund, but they've scaled up pretty nicely in their early years. So I'm excited to talk a little bit about macro trading with people who definitely know what they're talking about. And as well, I'll ask a little bit about Argentina. Argentina has been on people's radar a lot, obviously, with Melee.

So, you know, he's not part of that administration, but definitely knows what is going on there more than your average bear. So very excited about that.

Yeah, Max, I'm excited for both those interviews, particularly the one with Moaz. I really do not want to have built an electric vehicle company that is competing against Tesla to be the next Tesla. Like all of those companies are down 80, 90, 95 percent and tough, very, very tough business.

I think, Max, when it comes to Argentina, you've been a bear on Argentina, haven't you? And that has actually worked out beautifully. Everyone has been bragging about how much money they've made being long Argentina. And it has gone up tremendously over the past two to three years. But the Argentine market is actually down quite significantly over the past two months. Tell us what motivated your bearish view of Argentina. Max

So I, like Moez, part of the reason I'm so excited about the interview is that we have similar sort of tendencies when it comes to the types of trades we like to take. And I love things that have strong fundamental stories, especially ones that are value-based, because I think that there are so many forces and factors that drive the returns of assets. And oftentimes people who are focused on value

think that it is the fundamentals entirely that drive the performance of things. And oftentimes there are like four or five other factors and the idiosyncratic,

fundamentals make up like 20%, 25% of the return of something. And they think it's a hundred percent. And they look at an asset that's done really, really well. And they say, oh my God, like the market is finally starting to see what I see. And they are re-rating this asset. The value that has been there, that has been, it'd been underlying is finally going to be crystallized. And for the large part, like that is somewhat true in Argentina.

I just think that like, I love those situations because all it takes is like a little bit of a hiccup and all of the hot money. Because just because it's a value stock doesn't mean it's not a momentum stock also, or it's being driven by macro forces. And when you get macro uncertainty, it doesn't matter whether things are doing better. There's just more uncertainty. And so you've got just global macro uncertainty up.

You've got just, you know, when you get sell-offs like this, almost anything that has had strong momentum, it's hard to maintain that through these periods. So when I am a little bit uncertain, when I'm looking for equity market weakness, I try and find like the areas that have shown a lot of strength recently. And similarly, I don't want to go after the king. So like,

When the last time we talked, I was talking about Palantir. Like it probably would have been a better bet to go to be bearish on Palantir versus Argentina over this period since I've had on the trade, which truthfully has only been like a couple of weeks and it is relatively small for me. It's just something that I've been watching. Um, and you know,

I was just too scared to go after Palantir. And look, you did get an idiosyncratic event there with Alex Karp announcing the over $1 billion stock sale. But then you do have the uncertainty around government spending, specifically for defense. Like, yes, Doge is coming in and they're focusing on employees and they're focusing on what they believe to be just like really egregious waste. But if Trump wants to balance the budget, if they really want to do that, like,

It's going to have to be somewhat in defense. And if the bull case for your company is that you're going to take a large share of defense spending and defense spending is going to be cut, it's going to be hard to keep that growth story alive until...

It really shows up in the numbers. So I've been bearish on Argentina. I'm not saying that Argentina isn't going to economically come out in a better place because of the policies of Miele than they were before. That's not at all what I'm trying to say, that it's headed for economic ruin. I just love momentum unwinds, and that has been one hell of a momentum trade.

Yes, and it has a huge, huge amount of momentum to the upside. So the Argentina ETF is down, I guess, from January only 9%. I was looking at the big oil company YPF, which is down like 27%. But with no knowledge whatsoever, it's actually funny how little I know about Argentina. But just based on what you described, yeah, I think it is a little overhyped. Palantir, the valuation, and what your real point is, Max, is that valuation matters.

and what things are priced for matters. If you buy a Chinese company with a price earnings ratio of three, if things don't go horribly wrong, you probably will be okay. If you buy a company with a price to earnings ratio of 50,

Look, it has a price-to-earnings ratio of 50, probably because it's a high-quality company that has delivered solid earnings growth and good governance and the like. But it has to continue to do really, really well. Palantir's trailing price-to-sales ratio, price-to-sales, is 72. And people say, oh, well, Jack, you've talked about NVIDIA, and NVIDIA is so overpriced. Okay, well, NVIDIA's price-to-sales ratio is, what, 40? And it tripled its revenue. It's a giant company. It tripled its revenue from...

2023 to 2022, fiscal year 2024 to 2023, Palantir's revenue is up 36%, and revenue growth will continue to grow up. But in order for something to have a price-to-sales ratio of 72, I think your revenue should be going up by five times a year. And that's probably what things trade out in the venture capital markets, which I have very little experience with. But yeah, 72 price-to-sales ratio, only growing at 36%, seems quite rich to me. And Max, I think

You were right to be cautious about shorting Palantir. I think you and I were both psychologically short Palantir, but we didn't short Palantir because it's just the hottest stock. And you don't want to be the guy who's shorting the thing that is just going up every day. I think shorting NVIDIA would have been a really, really bad trade over the past two years. But I don't know, Max, what do you think about Palantir right now? Now that it has been dethroned, it's down 30%, still ridiculously overvalued, in my opinion. What do you think about shorting it right now?

Again, I'm just not going to touch it. I just don't have any edge there. I'm not a big fund. I don't need the liquidity of a big stock like Palantir to get exposure. And so I'm going to go play in my zone of smaller companies that less people are following and that have more retail focus. That's really what I like.

But on the thing about valuation mattering, like I agree that valuation matters. I'm just saying that when valuations re-rate, it's not always because everyone in the market has agreed that this thing should be re-rated here. It's because people believe that it's going to get to there.

And that doesn't mean it's going to stay there forever. That when something goes from a PE of five to a PE of 10 and it re-rates, that is not because every single person who is willing to pay a PE of seven or a PE of eight or nine all the way up to the top at 10 believes that it's really worth that. It's because they believe it's going to get to 10 or get to 12 or whatever. And when that momentum slows, they don't care that...

that it's back down at seven and it was at nine a month ago. They were in it for a trade. And so it's just something that I noticed with value-focused investors is they just don't really think about the other market participants who don't think about things in the same framework that they do.

Yes, Max, I kind of agree with value investors who trash Bitcoin for saying, oh, it's just a greater fool theory. You find buy Bitcoin at $10,000 so you can find someone to sell it to at $20,000. They'll sell to someone for $100,000 and the like. But really in the long term of things, like

Ultimately, if you bought Costco at $0.10 in 1980, you can now sell it to someone for $900 because the earnings have gone up in the fundamental story, but you are going to be selling to someone. And the ultimate return of assets is the company gets liquidated or it pays dividends. Even a repurchase is basically a greater fool theory. It's just the company is buying it for

from you. I also think, yeah, Max, when it comes to valuation, I mean, saying, oh, this bank stock trades at 14 times earnings and S&P has earnings of 20. So this company is cheap. I think that's a mugs game. I like buying like highly distressed things. And I also think that oftentimes things that trade at a premium are justified. But yeah, that valuation does matter. And also, as a company outperforms expectations,

its earnings will go up more than expected, and then its multiple will go up, and that's a double factor. And then what you're describing, the psychological factor of people say, oh, the earnings can go up even more. The multiple can go up even more. You get like a triple power, so it's like one plus one equals 10. But that can work in reverse as well. Don't go up by as much as expected.

then the multiple will go down. Then people have bearish fears as well. So I think that's why markets go to extremes, highs and lows, even though admittedly, we have not had a lot of extreme lows in our adult lifetimes. Max, I'll also say, Max, my bearishness right now

is mostly for macro and mostly because of Trump tariffs headlines. It's not a deep fundamental bearishness. Like my last time of being bearish was in 2022. There I was in the market saying, I'm bearish on this company. This company is a fraud. This company is a fraud. This company went public at a ridiculous valuation. It doesn't have a... It's never made a penny of revenue. It's basically a science project gone wrong. And like those stocks would go to zero in a few months. My bearishness now is nowhere close to that. It's just like, I actually like the companies in the market. And I don't really like...

I can't, it's hard for me to identify scam companies that have IPO'd. Um, you know, Palantir I think is very overvalued and it certainly has a promotional CEO, but you know, it is, it is a real company. Um, so I think I'd like to draw a line between my bearishness, you know, but in 2022, when I think like it was a true bubble now, I don't think it's a bubble, but I'm, I'm just bearish for macro reasons. All right. Well, why don't we leave it there, Jack? And you know what? We both don't do a good enough job of this, which is, uh,

telling everybody who's listening to like, to subscribe, to find us on either Apple or Spotify. Sign up to get downloads so that we show up on your phone, on your computer every week as we publish and leave us a review because it really helps both of our shows, whether it's other people's money you like or it's monetary matters, wherever you watch or listen, like, subscribe, leave us a comment, even if it's a negative comment. We want to hear. So thank you so much. Leave a negative comment. Thank you so much. Also, so I got...

Thanks, Max, and thanks to everyone for watching.