Preparing For A Real Credit Cycle | Danny Moses on Tariff Fatigue, Private Credit, Gold, Tarnishing of U.S. Brand, and Why Stocks Still Aren’t Cheap
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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.

Very pleased today to be speaking to Danny Moses, the host of the On The Tape podcast and of the Big Short fame. Danny was an investor with Steve Eisman, Vinnie Daniels, and Porter Collins. Danny, great to be speaking with you today. Welcome to Monetary Matters. Great to be here, Jack, and congratulations on all your success over the last few years in building this. Great job. Thank you. I really appreciate that. Danny, I want to start out by asking you,

It seems to me that the market only cares about tariffs, like anything that normally would be newsworthy, a hot inflation print, you know, a bank releasing horrible earnings or really good earnings that would normally move the market a little bit and get people talking about it.

No one cares. They only care about the US Trade Representative website and President Donald Trump's Truth Social account and his executive orders, all with regards to tariffs. Do I have that roughly right? And do you think the market is too obsessed with tariff talk? It's funny. I was just thinking about this this morning, and I think the tariffs have masked some of the other issues which we were already dealing with.

Iowa had been talking about kind of the doge cuts that have been going on even prior to the tariffs and the impact that would have in the private sector on its own. And I think that's going to take a while to pan out. But when you think about the reverberations and the shock to the system of private contractors, and listen, they can claim waste and fraud. Of course, there's waste and fraud in every company, every government, but I don't think it's the extent that we're being told. But anyway, if you're a company that was already dealing with doge cuts and contracts with the government, and you

and you also imported or exported goods in some fashion, you got double hit. So the extra uncertainty that tariffs has brought in already as people were readjusting to kind of the new norm,

I think is adding fuel to the fire. So I think the tariffs are a major issue, but it's somewhat of a sideshow since at the end of the day, you know, this has to get resolved because it's not sustainable. However, the lasting impact of the tariffs coming in is a damage to the fabric, I believe.

the credibility of the US as a business partner. And that I think is going to be with us for a while. If you look at a news event or an issue is going to impact the stock market, it's going to impact it in one of two ways. Profits are going to be higher or lower, and then the multiple on those profits is going to be higher or lower. Do you think tariffs are going to meaningfully move actually S&P earnings, corporate earnings, and then also on the multiple, which is a lot more finicky? Are tariffs going to have an impact on

earnings, 100%. And not only is it the actual tariff itself, it's the uncertainty surrounding the tariffs that makes people slow their businesses down.

So if you're a public CEO, you have to be smart right now. And if you were going to produce 100% of something, now you're going to produce 75% of it. You don't know what from a contract that you're signing, you know, plus 30 days, plus 60 days, plus 90 days with a customer, what that's going to look like. You know, contracts are being rewritten right now. New language.

But tariffs. So you get we're going to cost plus all these stuff. So the answer is it absolutely is going to have an impact on earnings because it's going to have an impact on how companies behave.

Multiple wise, you're asking the question, well, at the end of last year, we were trading at 23 times forward 2025 earnings. We all know that's historically high. It doesn't mean that the market's going to go down, but that's telling you that people believe the growth was going to remain, that Fed was going to cut rates, and we're going to grow into that multiple. I don't know where we sit right now on 2025 earnings on the S&P have come down

since the start of the year. I think we were around $270. I think we're below $250, but don't quote me on that. So you're asking me, you traded a high multiple when you think you're troughing, right? You traded a low multiple when you think you're peaking. It's a very weird situation.

dynamic dichotomy, if you want to say, in the market. It's a very weird dynamic in the market right now because I think the market itself, without going into stocks, is overvalued. I'm even more convinced of that from the fact that what I just mentioned, that the US as a trading partner, US as a market where people want to own dollars and they do that through investing in US equities, has been hurt. So I don't know what the number is going to look like, Jack, but we have yet to have a cycle since 2008, a real cycle. And we'll see what happens. But

you know when you have quantitative easing quantitative tightening acronyms that pop up from the government um all the time it's really hard to get through that so it's going to be a wild volatile period and my message to people is own quality and that's the stuff that you want to keep owning and you buy it on dips do not own junk do not own crap in this market that's what i would say is that advice for investing or advice for trading because they are two different things well i think if you're a retail investor and you don't want to panic

I keep saying don't chase the, you know, don't panic on the low and don't chase it on the high. If you own quality, you're gonna be fine over time. I know people run these investment screens. All right, give me companies that have no debt. Give me companies that are impacted by, that are not impacted by tariffs. And that's what I'm gonna focus on and own, right? That's a good approach to kind of look at it. If you really know what you own,

you're going to be okay over a period of time companies with high cash balances putting your macro hat on you know this is the time period where plumbing and i know you talk about it a lot on your show and you have a lot of smart people on you and i both had james aiken on who i think is one of the more astute uh people to speak with it's amazing when plumbing matters when the when the sink breaks or the faucet breaks and you got to go under the sink what what's happening it's overwhelming

But at the same time, it's something people have to understand. So that's where the trading side comes in. Why people should be paying attention to the yen. Why people should be paying attention to the yield curve, which people are asking now, why is it steepening so much? So if you can understand that and put the puzzle together, it can help you make better investment decisions

But a lot of the stuff, the macro is what's moving the market right now more than anything. And to your point, the micro will matter when we get through all this eventually and the smoke clears. But we're in a macro world right now, Jack.

And I think it is good advice for long-term investors, what James Aitken would call patient capital. There certainly are bargains and probably will continue to be bargains. And people can get them now at an attractive price that five, 10 years from now, they say, wow, what a deal, what a steal. But that doesn't mean that that stock won't be lower three to six months from now. And Danny, is there an aspect of

there some people are playing the wrong game they they think that the market is trading on valuations they think that the market cares about it's a quality stock it's a great stock how could this market be going down but really all the market cares about is tariffs that's right and but again if you believe if anyone believes then no one i think believes this um that these tariffs are going to either stay in place in any form or fashion that they're in then you're trading the end of the world because there's no point because it's just not a sustainable thing

I think, horrifyingly, the people that are in control right now, this is not a political statement. You would hope that there was more intellectual capital going on that really understood. And I really don't think that they do. And that's the problem here. So I think the people that say, oh, this is a great negotiating tool, this is...

They're underappreciating the damage that I just mentioned that it's doing. And it doesn't take much, right, to trigger some type of financial crisis. Meaning if the dollar drops to a level where it just creates, you know, an event, the yen strengthens to a level as a result of that that goes to an event.

or a hedge fund or a macro fund gets taken out. So those you can't control, right? Those things can just happen. So I'm more concerned about something, an exotic event occurring or something like that as a result of what's going on. But again,

Is there a method to the madness of these tariffs? Can people negotiate? I mean, the essence of it, everyone agrees with. Let's reshore jobs and bring jobs back. Okay. You went through generations of globalization. You can't just undo it on a poster board and say, this is what we're going to do and send that message. That's just not how things work. That's not how... Imagine a CEO of a company doing that. The stock would be down from...

stock would be down 80%, 85% if that's how you run your business. So I think we need to take a deep breath and really evaluate, but it's just too much noise that's being created in the markets. And that's not healthy for anybody. And it's destructive to people that want to trade their personal accounts. It's destructive to how CEOs of major corporations plan for two, they're planning for 2026 right now, right? Their 2025 plans were already set, which they're readjusting. And so employment and things like that. So it's having a massive impact.

Because as a fiduciary, you have to address it and deal with it. So to answer your question again, this obsession with tariffs is the right thing to do. But you have to ask yourself, where is it really going to end up and what damage, lasting damage might be done from just this exercise that we've gone through?

So you don't think that the advisors surrounding President Trump with regard to trade, so that's Howard Lutnick, who used to lead a Wall Street firm, Treasury Secretary Scott Besson, who worked for George Soros, helped him short the pound, helped him break the Bank of England. And then Steve Moran, who I've known and I have interviewed. And then Jameson Greer, who actually is the trade representative, but we almost never hear him speak. You don't think those people around him are aware of the

financial and economic implications or consequences of tariffs? Oh, they're aware of it. I think that every one of those people you just mentioned has a different type of agenda. Let's take Howard Lutnick out of that group for a second. Just take him completely out. Scott Besson is an experienced...

Wall Street money manager. He knows the game. He knows the people. He is the person that should talk the most sense. And I think Trump hopefully does listen to him. I think the obsession we currently have with the 10 year yields is backfiring.

I think the damage being done, like I just mentioned, of us as a trading partner, when the largest holders of our treasuries outside of the Federal Reserve are Japan, China, and basically the EU, you know, mix up the rest of it, that what does that mean? So 10-year yields went down for like a day, and then we've gone straight up effectively. Now we're hovering around, as we see here today, 4.3%.

Scott Besson's focused on the 10-year yields because he knows he has to issue a lot of paper. $8 or $9 trillion needs to be refinanced this year in our debt. We have $37 trillion. They're trying to pass tax cuts package, right? At the same time, trying to cut this waste and fraud or expense that other government, which I think actually on the revenue side might have a bigger hit than the offset of whatever, a couple hundred billion dollars you're going to try to save. So

I guess, Jack, you have a lot of chefs in the kitchen and they're all scared to go talk to the owner of the restaurant. And if you believe that one was going to cause the tenure yields to go down, then Scott Bessett would have gotten what he wanted. One would cause the Fed to actually start cutting rates. You would have gotten what you wanted. But again, the plumbing and the macro here is telling the market that it's wrong, that this policy is wrong and it's backfiring. So

Washington, the White House needs to start saving face. And they're now talking about, oh, we have multiple trade deal negotiations going on. I really hope that's the case and get it done. They need to rectify this quickly or something's going to break, in my opinion. So of course, they're smart people. I just don't think they're getting the right ear of the president or in the Oval Office. And I'm not going to claim to know any of that stuff. It's just I wish some of these people would just come out and say,

I don't agree with the way that we're handling this terror policy. It's damaging, but you're just not hearing that. You're not hearing that. And same thing goes for Congress. You hear a little bit stuff there. Oh, we're going to pass a bill that takes these powers away, but they bother. So again, this is not it doesn't matter which political party was in the White House at this moment. The policy is the policy that they're trying to put forward. And to me, again, you can't undo globalization that quickly without thinking that it's going to hit the U.S. consumer. And sure,

it's near-term inflationary i would argue that longer longer term it's deflationary because there's gonna be no demand for products and remember the us companies are the ones that created this meaning nike offshoring apple offshoring and the us consumer has benefited

If the whole structure of the tariff concept, these numbers where they came from, was completely flawed. So you started to deal with the flawed model and now you're trying to somehow figure out what it adds up to. It doesn't work. Now you're getting me all worked up about this. It's just I'm a math guy. The math is flawed. It's completely illogical how we got here. So we need to quickly undo this. And I think it will happen rather quickly here in the markets.

Tell us what is the flawed math and also what in the plumbing of the financial markets it's telling you. Are you just referring to lower stock market, higher credit spreads or what else? Well, the flawed math was that if you are importing or exporting to a particular country, you have a trading partner. And the population of that country by math is 95% less than what we have. And Nike decides to make sneakers in a particular place.

that we're gonna import from. You can't, of course you're gonna run a quote, trade imbalance with that country, but you don't take that number that we have, that we buy from versus what they buy from us, create a ratio and then divide by two.

because the goods part of the economy is less than 25%. It's the services side of the US economy that's so meaningful. And we run a service surplus with every single country in the world, basically, right? So what does that mean? Travel and leisure, financial services. And guess what's happening right now? United just told us that Canada bookings are down 9%. Europe bookings are down 6%. And by the way, that's with the Euro at 114, which has been stronger, really strong against the dollar. So the

The point here is that the knock-on effects of this are that we're using a bad ratio on the good side of the equation and we are damaging ourselves and it's going to show up in the services side of the equation and services has been what's carried this economy since COVID.

And so that part bothers me. What in the financial plumbing is indicating you that there's going to be an issue of tariffs? US treasuries. So, you know, either people think it's inflationary. Gold, which I love, which I've owned for years and years and years. That's telling you the debasing of the dollar. Dollar weakness is telling you it's not a great policy, even if that's what you want the end to be. Think about this. You're importing now with tariffs on and the dollar just got weaker.

So tell me how that's working out, obviously, for the US multinationals. And countries sell a lot to the US and now they have to deal with this. So is it one particular thing? No, it's a lot of things that I'm looking at. Credit spreads widened dramatically over the last few weeks. They maybe settled in here a little bit from where they kind of blew out. So while everyone was cheering the 10-year treasury yields coming down from 4.2 to 3.85, credit spreads were blowing out.

on a relative basis, right? So people out there, credit spreads is basically the difference in treasuries and other things out there like auto loan receivables, credit card receivables, corporate debt, high yield more than corporate debt. And that's, Jack, one thing I know not to front run any questions you were going to have. I think AA, single A, AAA corporate paper, the U.S.,

will be a great buy if we do get credit spreads blowing out. Their balance sheets are much better than U.S. government's. And I'd rather own paper if that can get to six and a half, seven and a half percent taxable than dealing and trying to figure out what a 10-year treasury is going to look like because you know these companies are in great shape. So people always say it's a stock picker's market. I think it's going to be a bond picker's market as well. But are we there? Yeah, I mean, credit spreads have blew out very quickly, but high yield spreads are still historically low. And yeah,

Yeah. I mean, what do you make for credit? I've seen reports of a very many period of days, eight days, nine days without there being new like leveraged loan issuance. And, you know, kind of basically you can hear if you were on a Wall Street trading floor, basically, you know, the sense is you could hear a pin drop because no one is doing any deals. Right. So I don't know if you think if you're saying that's a negative, it's certainly a negative if you can't unload paper or get

financing done and keep in mind also at the same time all the large private equity firms are figuring out a way to create another channel of distribution or liquidity and that's to retail and i've been around long enough to see when retail finally gets the opportunity to own something look out read that perspective and know exactly what you own so to answer your question the the plumbing is functioning at this time certainly as it relates to the market but things have gotten

cheaper and/or more volatile or risky if you want to look at it that way. And the really interesting thing is what I just mentioned about bond picking. You're right. You could have a situation where investment grade paper tightens relative to treasuries because the term premium that people need to own US treasuries versus the strong balance sheets of US corporates was what I just said. There's kind of a trade off there and people would rather own. So it's going to be a really interesting

dynamic going forward here but it is going to be the driver it's one of the key drivers of the markets for people that don't follow credit spreads and i i there's ways to do it the move index you can look at that is kind of the cart that always leads the horse in my opinion because it's such a financialized economy that people really need to understand that so and danny i often don't like the um you know dichotomy that's drawn between

Main Street versus Wall Street, because often I find that what Main Street deals with is just what Wall Street dealt with six months ago. Financial conditions tighten now in April. In October, people are going to feel, on Main Street, are going to feel the economic impact of that. But is that dichotomy accurate now? Because you said there could be a financial panic or something with the dollar weakening. And the dollar weakening is probably bad for dollar assets. And

therefore Wall Street. But is the dollar weakening? Is it not good for American manufacturing because it actually makes American exports more competitive? Although at the same time, it is bad for people who buy things from the rest of the world. So it is bad for consumers, but it does promote production in America, right? I guess. But listen, I think the wealth effect, and I've said this before, I always underestimated the impact of the markets going up like they have.

impact on spending. And it is the Wall Street or the top 10% of people that basically drive the US economy to your point.

But at the end of the day, it's also those people that employ the other 90%. So let's take Wall Street and just move that into corporate America, which I think is really what we're talking about. It's not just people on Wall Street. But when I hear politicians or people say it's time for Main Street to benefit and Wall Street can pay the price a little bit, at the end of the day, you can say that. But to me, the knock-on effects of that are not a positive at the end of the day. It's just not how we're structured.

I'm a capitalist, I'm an entrepreneur, eat what you kill. I love all of that. But at the end of the day, unfortunately, the way that we're structured here, I don't think that that formula works. And as a matter of fact, I actually think that Main Street gets hit more from this potentially. And what do I mean? I could go down a lot of rabbit holes here. But when you change regulation and you deregulate things, which

obviously certain things in the banking system needed to be pulled back, right? But when you start to think about getting rid of the CFPB, the Consumer Financial Protection Bureau, okay, how does that help Main Street? It destroys potential Main Street because now there's no credit protections, late fees, your credit card bills, payday lenders. Who's looking out for you? When you dismantle the SEC,

like you're doing in the Department of Justice to go after bad actors, potentially in fraud in the market. How does that benefit Main Street? So when you ask that question in terms of these policies, you've got to look at the thing holistically. And it's not just the policy of tariffs and all this stuff. It's the it's the policies in general. So net net what's bad for Wall Street, in my opinion.

and sometimes good for Wall Street is bad for Main Street. And it's really somebody saying, but back to the wealth effect comment. If the wealthy group or the wealthy sector in the US start to spend less,

how does that not impact Main Street? And Main Street doesn't own stocks. I shouldn't say that. People I think that you're referring to, they don't care about the stock market. So they didn't get the benefit of the way up. They're not gonna get hit on the way down. They didn't get the benefit of higher rates for savings. They don't get the lower. They've been kind of screwed all the way around. They really don't care. But at the end of the day, if you believe that, okay, maybe in a 20 to 30 year period,

more jobs can come back to a particular town, save it, fine. But people are very near-term oriented in terms of how they think. They're very reactionary. And so I don't buy that argument, Jack. And

Wall Street obviously has a lot of flaws in terms of, you know, back in 2008, which I can talk about till I'm blue in the face about using customer deposits and doing what they wanted with it and then getting away with it to a degree. And I never liked the pitting of Main Street versus Wall Street. But if you have integrity on Wall Street, you can be successful and I think help Main Street. So I don't want to go down that philosophical rabbit hole either. Yeah.

So yeah, a lot of cuts at the SEC and CFPB that have happened already. You think that will have negative consequences? I do. You could argue that's great for stock prices near term. You could make a lot of arguments that it's not going to hurt stocks. But I was talking specifically about investor protections. And if companies or there could be more Ponzi schemes out there that are in the private sector that you're unaware of, that you're just not going to get the protections that you need.

or the documentation, right? Or the information that you should be reading. And I've always said, I say this again, when an opportunity lands on your desk and it seems too good to be true, it is. And so ask yourself, so now it's gonna create a lot of self-policing. And so the answer to that question is it should scare people and professional investors

are always going to do the right thing and good CEOs are always going to do the right thing. But you have to be concerned that if there's accounting irregularities at a company, that it will be ignored potentially now for three or four years and eventually catch up with them on a new administration or change. And so, you know, buyer beware, I guess. And so,

again, Wall Street wins and potentially Main Street loses in exactly what I'm just talking about. What have you made of the bank earnings reports that have come out so far? I think exactly as expected. A lot of volatility is great for Wall Street banks because it creates earnings on their equity desks and potentially fixed income desks. But effectively, once you get through all that volatility, there's less fuel in the tank. And so there's less M&A.

There's less IPOs as a result of that because with high volatility comes lower asset prices. And so I think we got what we thought we would get. I think the Wall Street banks are still going to benefit from some of the

relaxation of the SLR, which is their ability to own treasuries without a large capital requirement. I've been talking about that for two years. So those things will start to happen. The ability to buy back stock and use their balance sheets, how they see fit without, I think that's going to happen. I think the risk in the banking system has been transferred into private equity a little bit, right? And some of these risk sharing agreements that they have, these synthetic risk transfers which have gone on. So the Wall Street banks, in my opinion, are as expected.

The regional banks, which are really coming out now, are interesting because the C&I loans, basically the loans to the middle America industrial companies, the credit's not great. It's not falling off a cliff yet, but this is one thing where people have concern. Commercial real estate somehow seems to be still okay and hanging in there, but

So real economy stuff on the net margin, not great, but not off of a cliff. And so things are fine. I think you will see a lot of M&A. We've talked in the small and mid cap banks. I think you will see that as part of the

regulatory stuff that's going on. So I'm looking at my big thing is consumer credit. And my former partner, Vincent Daniel, is the king. I call him every day when there's a credit event. I'm like, is that bad? Is that good? What's what's going on? So credit seems to be still OK, but we're not in a you know, we haven't really entered a recession or if we are, we haven't defined it yet. And so I think banks are on the margin might be a little under-reserved.

for potentially what could happen. But I think there's plenty amount of liquidity. I think the banks do nothing here, to be honest with you, Jack, just from an investment perspective. But to your point,

They are kind of the most important sector as far as how the markets are functioning and the health of the consumer. So we're still going through them, but net-net, I would say in line as expected. And tell us, you said the banks are a little under-reserved. So how banks take losses is they first book a loss as provision for credit losses. And then if the losses are greater, they have greater losses. But if the losses are not as big as they think, they actually can add that back into profit. Correct. And you still have to reserve it.

2021, yeah, money that went into reserve went out and it came out as profit because the losses weren't as big. I looked at Bank of America and just like the big banks really that have so far reported for the first quarter and they're

yeah the reserves struck me as not very big and so to me that seems benign but that revealed to me that i actually don't really understand the timing of uh of uh how they take reserves are they taking reserves for what they saw in that quarter or do they take reserves based off of forecasts like tariffs so it's it's really a managed process you can be have negative forecasts for

your outlook in the economy as a bank, you can have a positive, you can have a neutral. If you've given Wall Street guidance, Wall Street analyst guidance on your quarter and what you were going to report, you ask yourself a question, just human nature as a CEO, do I really need to tweak this down by two cents and take a higher reserve in the quarter?

I'm plenty reserved. I can do it next quarter. I'm not saying that's anything that's going on that is that, you know, it's not nefarious. I'm just saying it is a it's the one area to your point that you can kind of play with. And there's no there's no obvious call here that things are slowing dramatically yet in the economy. So as a bank, you can get away with it. It's not illegal. You can just say I'm more positive or I'm less negative. So I'm not going to reserve.

It is as a release factor to your point over the last few years, people thought that you think it was going to slow. Consumer was going to wane. So it didn't. So they released reserves and that is straight to the bottom line to your point. They took it, they took the pain and then they got the benefit of it.

We'll see what happens. Again, but these banks, the bigger banks are reserved fine. There's no issue from a liquidity perspective at these banks. It's more of an earnings game to your point. And so they got to play the game a little bit to set expectations on the street. I think there's a little bit of caution coming out of the banks on guidance. They're just saying they're getting a free pass on tariffs. It's uncertain what's going to happen. We're watching. So I think everyone's going to get a free pass if they increase credit reserves when we start to hear about these quarters in July, the second quarters when we start to hear about in July. So...

I think you got a lot of bank conferences coming up. I'd pay attention to that. There'll be a lot of one-liners. Jamie Dimon's never shy to share his opinion. So it's a game they play, but I think they're all doing it the right way.

all right and you said that some regional banks had some commercial and industrial weakness what are you seeing there and also are you seeing it in the non-performing the non-accrual the delinquencies how are they kind of uh representing that weakness in the accounting that you're paying attention to yeah it's nothing again it's nothing major but it's an uptick in all the things you just mentioned and when you have a numerator

you know and then you have the denominator when your loan growth slows on top it makes the ratio look worse because your ability to grow your loan portfolio if you were growing it and everything was performing then those non-performers wouldn't be as big that to me is the potential risk that you would see is a slowdown that would make optically um and then obviously it would actually occur losses start to happen so there's again there's nothing major but the trend is

isn't great. But again, I would say it's still in line, but just watch the trend on those NPAs, NPLs, modifications that we're going to see. And really, listen, it's the PE firms. This private credit that is not monitored by the Fed or Treasury, it's not in the system, is really hard to monitor. So

you don't know what's being modified right now in those worlds these are covenant light loans what does that mean the debt to ebitda coverages you know are not great these so again not saying that there's nothing nefarious going on but people need to realize the trillions of dollars sitting there of these similar loans that the the banks have right um and they share in some of that by the way the big banks uh with some of these loans so that's kind of the the elephant

through the mousehole situation that if you told me what's the one thing that could really unravel this market it may just be a slow slow moving problem that ends up occurring if it does occur at all it's private credit because we don't have a track of it same way during the financial crisis the leverage in the system was completely misunderstood the hundred times thousand times leverage was going even we didn't realize how big it was and how many areas off balance sheet this and you know um

SIVs, that's not this situation because it doesn't put the quote banks in danger.

but they are connected you know and to your point you made earlier we talked about credit spreads and clos that will have an impact and it will slow the economy down the inability to get quote this stuff off of balance sheets so something i'm watching there on the private credit side hey monetary matters listeners tariffs are shaking global markets and gold is responding hitting all-time highs as market uncertainty fuels a surge in demand for physical gold we're

The VanEck Merck Gold ETF, ticker OUNZ, is the only ETF that lets investors convert their shares into physical gold delivered directly to you. Now that's a standout feature. Visit vanek.com slash OUNZ Jack to learn more about OUNZ today. Please click the link in the description to view the OUNZ prospectus. Thanks for listening. Let's get back to today's interview.

what does, what happens to private credit in a slowdown? And could you have a fire sale event like you had in the great financial crisis? And also just explain to people kind of what private credit is and how it has grown so much as the risk has moved from the banks to the non-banks. Again, banks were,

Their hands were tied for a period of time, obviously, post-financial crisis on the things that they could do and the requirements, the capital they would have to have on their balance sheet to make these loans. So private credit is just a loan. It's just a fancy way of, it just sounds better. Private credit's a great word.

And Jack, the beauty of this is that these things don't get marked down. I mean, we've seen a couple of situations. Private credit is very broad, so I should narrow that down a little bit to your point. We saw it in real estate. These marks aren't happening. What did some of the big funds do? They closed their funds to redemptions. So you couldn't access it at the time. So

Well, what's the real market? What's the clearing price, so to speak? Well, we know it's probably much lower, but over time, maybe it can accrue back to that level. So basically, private credit replaced what the banks were already doing. And a lot of these guys came from the banks that set up all these funds. Again, nothing wrong with it. It's not done the wrong way.

but I think the obsession became asset gathering first. These private credit and PE firms worry about where we're going to put it second. But remember, they get paid to put that capital to work and go raise fund two, go raise fund three, go raise fund four. And my concern is,

you don't price these loans for a rainy day scenario. They're not priced that way. Like I mentioned before, they're covenant light, they're EBITDA, they're modified, like something they can do. They get free passes on certain things. They pick payment in kind instead of paying cash interest. And they charge, by the way, some of these private equity firms charge fees on the pick, which is not even cash pay. So without going into, it's just lending to companies is what it is. And these are sometimes

50 million, 100 million, 200 million, big loans that are out there. But I'd love to see how they're categorized by industry, by covenants, by so forth. And it's just hard to get that information. They give you some on the calls and so forth. And again, I want to be very clear. There's nothing nefarious or illegal going on with doing this. But I think it's a hard thing to track the same way it was in the mortgage meltdown. And so it's just lending, Jack. It's really no difference, but it's institutionalized lending.

And again, I think the incentives might be a little off because make money near term, deal with the pain longer term. That's an issue. And a hallmark of a financial crisis is in the banking system, long term risky assets, illiquid assets funded with short term deposits. You saw that firsthand in the great financial crisis. Do we really have that with private credit or is it Harvard gave Ari

Aries and Apollo money that's tied up for three, five, seven years. And they put a little bit of leverage on that by taking out loans that also were three, five, seven years. And then they're investing in risky assets. So it's, you know, the asset and the liability structure are matched. So you can't really have a bank run. The negative thing is the assets suffer tremendously and maybe they can't raise new money, but that's a slow drawn out thing that, you know, they really can just kick the can down the road and manage to see through it. What do you think?

call that a duration mismatch is what you just described and yes so i'll take that in two parts with the advent of etfs and using

these loans and putting them in ETFs, you are creating the ultimate duration mismatch, right? You have daily liquidity with seven-year paper or five-year paper. And if there's enough redemptions that come into the fund, then the fund itself needs to make up for, which there are all these type of things in their provisions. So that's one problem, open-ended funds that are catered to kind of closed-end type product. So you're saying that

There is a duration mismatch in the ETFs, which literally just happened over the past year. It's very new. Yeah. So that, and I'll give you an example. Let's say there's a massive default. When I say massive, a couple hundred million dollar type company default that hits the market.

Well, what I mentioned before is how do you extrapolate that default? What was the structure of that loan? What industry is it in? And what are the other assets that look like it? Because what Wall Street will do is it will immediately extrapolate that default and say, you know what? That's the new mark. And when we start to see things like that, that's when it becomes difficult.

much scarier or much more real in terms of what is the vulnerability potentially of these models that exist. And again, that can work its way through these ETFs. I mean, when you think about, remember that BKLN, the bank loan structure, that's a problem ETF in my opinion, in terms of how it's structured. Because to your point,

mismatch of kind of what's out there is providing daily liquidity for what should be a long-term loan just doesn't work. So fixed income ETFs in general to me are just not great vehicles at all. And I think people obsess with the HYG, but bring up the parts of the HYG. Look at it. There's a couple of names in there which make up the bulk. There's a couple of sectors in there which make up the bulk. So I don't know if it really gives you a true picture. I know it's what's used by funds to hedge out, quote, credit risk. These

None of these things are perfect vehicles, in my opinion. Yeah. And BKLN owns loans that are generally a high quality, that there is a market for that. I was speaking with a CLO trader, and he said that the middle market CLOs that are going into these ETFs now are significantly more illiquid than the high quality loans. Not only is it

it's lower quality loans or smaller middle market loans. And then it's private, so it's private credit. And then it's also the CLO structure as well. So there is a big gap.

difference yeah no it's it's real like i said i think people need to know what they own in this market and again back to my comment about the sec and who who's there to protect you but that is the etfs of private credit are very very small now like they're so well they're trying to grow right well they've made an effort so i there was a deal recently i guess apollo and state street got their product out there after a little back and forth um with the sec

Comments wise, but again, it's something that's it's to your point, it's just kind of beginning and it's definitely a sector or product that needs to be watched carefully. So if that the retail participation in private credit grew like a weed in five years and in 2030, we had this tariff potential economic growth.

issues, then that could be very, very negative outcomes could be possible. But what about now? Like if there is a financial crisis or economic crisis now, what happens to private credit given that only 1% of the private credit assets are in the ETFs and probably less than 1%? It's mostly Harvard, right?

Yeah, it's not about the ETFs in general. Like I said, when you've worked your way to the ETFs, that tells you that the demand is waning for the product or there's less places to put it. Again, we saw it with CDOs. We saw the insurance companies that were buying it. They went to every pension fund they could. They went everywhere they could. They went to funds to go buy it. They created structured notes around and all this stuff.

And so that's just a symptom of it is just ETFs. So don't let that confuse the real situation, what I'm really talking about, which would be a downturn in credit and markdowns potentially of some of these portfolios and how that would translate. So again, it's trillions and trillions of dollars that's not monitored. It's monitored, of course, by the fiduciaries that run these companies. They don't want these things to fail. All I'm saying is

It could be one of these things that cascades. I'm not saying it is, could cascade upon itself quickly if something happened, like I mentioned before, which is a large asset or a large loan. There's rumors in the marketplace. You know, there's needs for liquidity. And again, I don't understand all the structure of it.

from terms of lockup duration of these assets and all this stuff. So every fund is different. Every fund has started at a different time when they have to stop investing, have to start returning capital. We're probably a ways away from that, Jack. So I'm not trying to make a prediction on timing. And there's no tariff thing in 2030. I mean, to your point, we'll be well past all that stuff. But I think your point is that how will tariffs today impact the performance of some of these loans in the future? And again, I mentioned before about the new

numerator growth in general, take that and apply that to PE and private credit, which would be if the numerator slows and there's less things that you're lending to and the denominator

right? Start to shrink. That fraction of losses doesn't look as great. So you need the assets to keep growing. You need the assets to outgrow any underperformance potentially in how these things are behaving. Yeah. And I was kind of late to the party in terms of really understanding alternative assets. But last year, I was just kind of marveling at the huge inflows into the...

publicly traded stocks would report how much money they raise from their new LPs and it's boom, $20 billion fund, another $20 billion in this quarter. And if the Aries and Apollos of the world can continue to grow their AUM by $20 billion a quarter, it's probably a pretty successful story for them. But do you think that the tariff chaos

And not just the disruptions to trade, but the disruptions, potential disruptions to capital flows is going to drastically slow down those fundraising efforts. And might that have consequences on the credit market if there's no new dry powder? I think the fundraising, we were kind of slowing down already again. And I think, again, the ability to get to the retail community can extend that a little bit.

So I've already seen that. We've already seen that happening. And to your point, it was amazing or it has been amazing every quarter. What did you raise? What did you raise? Oh, ahead of expectations. KKR, ahead of expectations. Amazing. Great. Go out there and get it. If you're an institutional allocator and you're a pension fund, hospital system, insurance company looking at the stuff right now, what impact does tariffs have on there? A lot.

Because they're looking now at reallocating or just holding back or let's move a little bit more into T-bills for right now. So from a risky asset perspective, listen, the beauty of this sector has been there's no marks. Looks great.

looks great look at that return looks great till it doesn't and so i think any astute allocator right now would say to themselves just in general this isn't even for private credit or in general let's take a deep breath and assess where we are and let this thing play out this is why you're seeing the impact to the dollar this is why so it's

It's also foreign investors that come in and buy the stuff, too. Let's keep that in mind. Foreign banks that come in and allocate it, foreign insurance companies that want to do it. So it's creating a lot of havoc, Jack. But things I think from a fundraising perspective, we're starting to sell a little bit. And higher rates is the that's why higher rates is so crucial or lower rates is so crucial to keep the economy functioning. And that's what the obsession for the 10 year yield really is.

And those general partner stocks really fell out of bed after Liberation Day on April 2nd. If they fall further, if we have a bumpy ride in the markets, do you think that you might be getting involved in some of those names and finding value or is it too risky? No. Listen, they're permanent capital vehicles, a lot of them. So

they're going to make a fee regardless of performance. It's a level of management fee and performance fees that go on, right? That's the game. Realizations, lack of realizations. And the market's pretty astute, especially in those names. You can model those things actually pretty easily. As opaque as it might seem, it's not that difficult. So Wall Street analysts are pretty much on top of that sector because it's their world and they know it. So answer your question is they definitely got ahead of themselves from an evaluation perspective.

But this is where we asked before about the earnings so far that we've seen. If M&A slows down and IPO slows down, which was the hope coming into 2025 that those things would start to perform, that's a problem because they can't unload some of these assets or monetize some of these assets. So they are the quintessential macro financial way to watch the markets are these large private equity firms.

But again, they're safe, they're fine, and everything has its price. But I'm not buying them here, if that's what you're asking. How do you think about modeling those companies? You said it was opaque, but not that difficult. In my amateur attempt to understand these things, they're a lot, at least to me, a lot more complicated to banks. And even in 2008, 2009, it's possible for

PE firms to actually have negative revenue, I guess, because their realization is lower. I mean, that's just an accounting thing. But the earnings are never that high because whenever they have a successful year, the partners get a lot of money. So they always, well, I think they very frequently trade at a premium of price to earnings to the S&P. But so, yeah, how do you kind of establish and estimate value there? I think it's the return of capital.

And that's how you estimate it because the partners only make money, well, except for the management fee, if investors make money. So they are aligned on that completely. And yes, of course, things are opaque and where they mark certain things. But I'm talking about from the big deals perspective that people watch from an M&A perspective, can a deal get done? The IPO that was going to happen to materialize for one of these companies.

the margin gives you a pretty good sense for where things sit from a fundraising perspective you got a pretty good sense for where things that it's not hard to find out you know that they went out to raise a 20 billion dollar fund and now they're closed which is indicate things are done so your point is a good one there's a lot of other things that are in there but in general those things like i said there's a management fee with permanent capital that you're going to have as far as an earning stream for the company that's one there's an asset

raising, which is obviously goes right into that formula, which is two. And then there's the realizations or return of capital. That's the wildcard. And so if that wildcard trades with the macro, that's how these stocks trade, period. But if the asset growth story slows, like I said, eventually, then you're really going to need realizations. And those two things don't normally go hand in hand. If asset growth slows, your realizations are probably going to slow because there's something wrong with the macro. So it's kind of a double whammy for those guys if you want to think of it that way.

You said return of capital. That makes me think of share repurchases. And here's a question for you, Danny. Is

you know if a stock if a company is buying back its own stock aggressively like for example apple you actually want it to trade at a discount like if apple is you know uh you're trading at 10 times earnings and it's deploying all of its earnings into share buybacks you know in 10 years the the stock you know there's going to be no shares left obviously the stock is price is going to go up um so you you kind of want it to be undervalued or have a low valuation

But if a company is, rather than buying back its own shares, is issuing shares, particularly to do deals and be acquisitive, then actually it's kind of good to have an overvalued or a richly valued stock. I've been looking at some of the gold royalty companies and actually they can issue stock if their stock is trading at a premium. I know Aries, Apollo, and in particular Blue Owl, for example, have been extremely acquisitive of

buying private equity business here, buying private credit, buying real estate business here and issuing that stock. So do you think that if these companies no longer have a richly valued stock, that that kind of process will slow down? So two things on that. What I'm talking about, realizations and return of capital as it relates to private equity, that's just distributable earnings is what I'm talking about. So that's how they're valued.

Buying back stock, if you're an Apple, whatever, to your point, do you want a cheap stock so you can buy back stock and that's your safety net?

Most stocks in the market aren't trading on that per se, but it is a nice thing to have on your balance sheet. As far as these PE companies using their equity to make large transaction, that's true in any industry M&A that you see is use your currency. And it always amazes me why more companies when they know they're overvalued to a degree, don't take the opportunity to use their stocks to make acquisitions or don't raise capital

and do a secondary offering. And I'm not gonna go into particular names, but it should take the opportunity to do that. And again, that's company by company, that's cost of capital question, that's a creative question. And you bring up a good point. These PE firms do have permanent currency in terms of being public, and they have the ability to take advantage of distressed situations. So the smart PE people will do very well

obviously in a distressed situation. Yes, their book gets marked down that they currently have, but the opportunity set arises to pick stuff up on the cheap. So these things are obviously virtuous cycle, obviously that can happen there or unvirtuous, if you want to look at it like that. But yes, so these things are now, these PE firms, and we've spent a lot of time on them, by the way, I didn't know we would even go down this road and I'm probably not the best person to go into it completely, but these are your new Wall Street firms.

to a degree they they are you know swimming in all the products and all the things and product ingenuity whether you like it or not things are coming so they're they're the behemoths here um so because they're not regulated by the same regulators that that regulate the banks that's just is what it is

Danny, let's talk about gold. You said you liked it. Well, it's a good time to have liked it. Gold is up well over 35% over the past year and just year to date, it is up over 20%. What do you think is going on here? Why are people flocking to gold and who is the next buyer? So anyone that knows me knows I've been in gold for over 10 years. I've been talking about it obviously for a while. And I know there's a lot of people that are new to it, which is great.

And there's a lot of crypto people which won't look at it and start with the fact that the idea of crypto or Bitcoin, I should say, the same framework is how people think about gold. Right. It's away from the markets. You don't have to depend on U.S. government. It's a, quote, hard currency. There's a finite amount of it, all those things. So let me just get that out of the way.

as far as what's making gold working is central banks around the world have been buying it physical gold china you can look at some of these numbers that's been the one thing and they're basically as my partner guy adami likes to say hedging their own incompetence in terms of what the central banks have done around the world so it's a hard currency versus a fiat currency um and gold traditionally

has traded when there was inflation in the US. That broke off years ago, I think. We haven't seen that correlation. We get it days at a time or a week at a time when it moves in certain levels. Or if the dollar goes down since gold is valued in dollars, that makes gold more valuable. You'll see gold shoot up on those type of days. But the real essence of it, Jack, to me is that geopolitical risk that's out there, right? Central banks' inability to print their way out of all these problems. So just again, fiat currencies,

The dollar is only as good as the F-16s and all the stuff that are behind it. If we're going to go into quantitative easing, it makes the dollar less valuable again and risk the balance sheet of the US. What can you own a hard asset? Gold. There's a consumer aspect of gold also, which is jewelry, right? There's actually a use for it up the above ground. I like to think of gold as a, I don't know where we are at this point. It's north of $25 trillion probably as an asset if you wanted to think about it as a category. And if I thought about it, that it's replacing gold.

some of these fiat currencies to world. So if you think the dollar is going to debase or become not the world's reserve currency, which I'm not saying, but on the margin, it has moved that direction. What's going to absorb that? It's gold. It's the proven commodity, hard commodity in the history of mankind. So I see it as a hedge.

I know it doesn't yield anything. So that's the other argument against it is, oh, it doesn't yield. Well, guess what? It's outperformed US treasuries on any metric over the last 10, 20, 30 years, whatever it might be, just 'cause appreciation on its own. So I think it's just volatility and gold sniffs things out. It's like the one thing people should watch. If you're a bull on the market or the stock market and you want things to just kind of calm down,

then you want to see gold move lower and it just, it's not happening. Gold is not, gold, every drop over the last few months has been a buying opportunity. I'm not saying people run out and buy it here, but I do think we're headed to 5,000, you know,

in a few years. I just don't see that going away. And you talked to Luke Roman and James Aiken, again, and some of these macro people who've been on it for a long time. Again, it's really a plumbing thing also. There are some other plumbing aspects to gold, but I think it's a hedge against the inefficiencies of the global financial system. And I don't see it going back down. I really don't. Yes. And I've seen some people, your former colleague Porter Collins, talk about how

various signs of not a huge percentage of retail participation or American investor institutional or retail participation. It really is maybe the People's Bank of China and Asian investors who are buying it. And if the People's Bank of China is buying it,

At $3,200, if it goes down to $2,900, they're probably not selling. They are stockpiling. So I think James Aiken referred to it at the very end of my interview as strong hands. It's not weak hands. And I feel like there's not a gold fever in the American investor community. Every post I see on Twitter is not talking about gold.

And I mean, very, very few of them. - I agree. I think when we saw the Bitcoin fever really accelerate was the advent of the ETFs for Bitcoin.

which in hindsight was probably one of the easiest trades uh in the last few years and it gave institutions the ability to hold it without having to worry about where to store their digital coins and they knew that fidelity and blackrock would be the custodian they'd be fine because they can deal with that versus trying to figure out someone just stole my digital wallet or whatever goes on there gold etfs have been around for a while i think they aren't structured well

I think when you have an open-ended fund that has to basically go out and then buy the hard currency itself or say that they have it, I think they use derivatives in order to express their ownership of it. I think that's what you've seen a lot have been in the futures market has been driving gold. You could argue that that's temporary. You could argue people get caught getting caught short.

because obviously you go out and meet the demand for the ETF and the creation, you have to go actually have the physical. So that dynamic. Your point, I made a point a few weeks ago, I was talking on a podcast about Newmont, NEM. It's the only gold miner that's in the S&P 500. And metals and mining in general is a very small part of the S&P 500. And the way to look at it is if you're a portfolio manager at Fidelity or Wellington, one of these big firms,

your job is to outperform the S&P 500. If that's what your index is, that's how you get paid. Your job within that is which sectors to overweight and underweight, which within the S&P 500, and then which stocks within those sectors to own.

And gold has been negligible in terms of how it would move the compensation or matter. So to answer your question, I think you've seen Newmont rally here rather substantially over the last few weeks. I think it's probably an institutional allocation and people are waking up. But the funny thing is that these gold miners aren't great businesses. And so you can't really model them from an asset value perspective that they are. So I stick with like PHYS, which is the Sprott

uh closed-end fund um supposedly they have the physical already allocated it's closed end um and things like that and maybe i own a couple physical maybe people on bars but you're right i want gold i want gold 95 percent of people do it in the gld they probably trade it they don't they don't own it over a long period of time there's small fees associated with it um but you know again um a lot of ways to express it costco's selling gold bars

that's been increasing but you're right not the fever so i don't think we're near the fever pitch yet i think we're talking about it as a fever pitch um but i don't think we're there yet it's not expressed itself so

Yeah, I got to say that this episode is probably going to be sponsored by a VanEck product that is an ETF where they can offer you physical gold if you write for them. You're a Catholic sponsor. Nice job, Jack. VanEck has got a product. And while I was also talking about VanEck, they also have a Bitcoin ETF. So people should check that out. So how are you thinking about this overall market? I mean, you think...

Long term will be fine, but short term, there will be volatility. People on TV who have fancy jobs at big firms, they always say, oh, I expect volatility. That's their way of saying that they think the market's going to go down, I think, but they don't want to say that. Yeah, I'm pretty bearish, again, on the overall market, like I mentioned before, just in general on the multiple of the United States. I've thought about the United States as a stock itself.

and then everything else that's inside of it. So that obviously I think makes me a little bit bearish because I think the reset of how people view our policies and how that can impact the companies that have to follow those rules

you know, uncertainty creates lower valuation and higher volatility. That is what it is. I don't see that diminishing, even if we get through the tariffs anytime soon, because of the unpredictability of some of these policies. You wake up and a certain product could be banned or we're not doing business again with another country because they did something wrong to us or we're trying to get something out of them. It's just that's going to make valuations go lower. I think that I mentioned before, I think you can own quality in this. I just think I think owning

you know, broad markets per se isn't the best way to do it. I think owning individual companies and stock picking has been coming back in vogue here over the last few years. And you may sit on some value traps for a period of time in certain industries. Listen, I like the energy sector. You know, there's certain sectors that I like and the price of oil,

if it goes to 40 or 45, we got bigger issues than worrying about energy stocks that are trading at nine PEs, right? So energy stocks aren't sexy, but I like stuff that's not sexy in the market. So I'm concerned again about the debasement of the dollar, what we've done to our kind of the

security of the United States as an investment vehicle. And so I just can't get bullish on that. And certainly, I don't think there were anywhere near valuations that would get me to be bullish in general. Listen, it's always hard to find that. People say, oh, I'm going to buy the market when it gets to X. Well, when it goes down to X, what do people do? They're like, no, no, no. It feels horrible, right? So it takes a lot of discipline. And having stop losses or limits in where you're

I want to be optimistic, Jack, that we'll obviously get through it. We have to. We always do. But I think we're going to go through a rough period here. And I think we watch in the macro and the plumbing, we watch certain indicators. There may be a sense of problems or not problems. And sometimes they're false flags for a problem. Sometimes the false sense of security, just because 10-year yields go down, doesn't mean everything's great. You got to look at all the other things that go with it that we talked about before. And so-

a lot of moving parts here jack you can't just unwind you know since 2008 the markets have been manipulated and i say that tongue-in-cheek by you know quantitative qe1 qe2 qeq qe3 qe4 get ready for qe5 it's coming um and so how do you does that mean all asset prices go up maybe um you know maybe that gives people but again that's to me that's a band-aid and the bigger problem is our debt issue that we have

We're not going to, we have big problems here. We're not just going to fix $37 trillion of debt here with these policies that are being instituted, in my opinion. Danny, I think that a lot of market participants here and certainly some audience members may have some tariff fatigue. So I'm really glad that we have talked about some non-tariff issues in the financial markets.

But I think what I'm hearing from you is that your bearish outlook is mostly informed by tariffs, as well as Doge, which you mentioned. But earlier, you said that longer term, there's no way these tariffs can hold in place. They will reach a deal. Just tell us about your thought process there. Why do you say that? And what happens if the tariffs are more permanent?

Well, then you're trading the end of the world as far as the US economic stock market. As far as stock market goes, you can't. That's just not going to happen. But I'm not saying that it's tariffs that also is necessarily making me overly bearish. I've been already cautious just in terms of valuations in the market that

estimates were too high coming into 2025. I mean, the largest 19 out of 19 macro strategists had an average of like 6,500 on the S&P. When you get like that, you'd rather see it the other way, by the way, for people out there. You'd rather see people get overly bearish. So you can't function in this unknown tariff world. So whether it's an act of Congress that streamlines and figures it out and can

take power away from the president to do those things? I don't know what's going to end up happening. But in the meantime, Jack, my thing is that you are creating a situation again, where as a trustworthy trading partner, what does that mean? And Europe's not going to wait around. China's going to step in. So the structural changes may be happening all around us. So again, uncertainty and volatility were not priced into this market at 23 times.

and i'm not saying you could have predicted that these tariffs that they would have done this poster board experiment that they did but the fact that they did it and are kind of still playing around with it you know weeks later is unsettling and so you know t-bills gold and you know energy stocks and gambling stocks online gambling they're not affected by tariffs they'll be affected by the economy if it tanks but you that's why certain sectors you're seeing that i can mention before screens that are being run of

companies and sectors that don't have to, quote, deal with it. But at the same time, I think from an evaluation perspective of

being a US domiciled equity, they do. They are going to feel it. And what about foreign stocks? So some investors are saying, "Oh, let's check out these European stocks. Let's check out these Chinese stocks." Those stocks definitely are down less than the American market. What is your view there? Yeah, Europe's not cheap, but again, they're going to restructure themselves if they follow through on all the things we're talking about in terms of defense and spending and things like so. That market's run, listen,

two months ago no one owned china no one owned europe everyone owned the us so you're just seeing dollars leave and go to other places and expressing that when you have to start to deal with fundamentals and what you own in europe and in china you know you at you you buy first and ask questions later will we get there you know i don't know so i haven't done enough work in terms of valuation but we're talking about delisting china shares here

who knows what China is going to do to US companies that are over there. So it's just, again, this is the problem that we're dealing with is the uncertainty. But again, if you want quality in Europe, you're going to be fine. And so I haven't done enough work over there, bottom up, Jack, on some of those names. But from a macro perspective, that was, I'm not going to say an obvious trade, but again, Porter and Vinnie were talking about buying China

two and a half months ago just on the fact that no one was looking at it um and no one looking at something can be powerful when people start looking at it to a degree so danny tell us just about the timing of market panics you're going back to 2008 uh perhaps dot com uh 2020 which was a lot shorter but i feel like myself included danny super stressed out going into liberation day but i think

I had the expectation, oh, okay, once Liberation Day happens, the market is going to maybe go down, but it will be a relief that it's over. We know there's certainty. Even if it's bad, it's certainty. As soon as I saw that chart, I said, wow, unless I'm misunderstanding this, this is going to

to collapse global trade. There's been some moderations to that now, but I feel like then the moderations are, oh, it's a 90-day moderation, then we'll figure it out. So you keep on thinking, oh, this will end on date XYZ. And then they say, actually, no, it's date XYZ plus 30 days or 30, 90 days. It doesn't end. So just you talk about, maybe going back to the great financial crisis, just about what it's like of, were people in March 2008 saying,

oh, wow, okay, financial crisis is over. I mean, Bear Stearns has figured out, right? Yeah, well, you bring up a great point. So it was amazing to us, at least we saw 2005, there were things happening, but really things started happening in 2006, 2007, obviously, and still, I mean, Fannie and Freddie. And then Lehman Day, I think, was the big one when people realized, okay, we have a real situation. But to your point, the writing had already been on the wall, whether people wanted to believe it

that it was gonna happen. And let's keep in mind, you talk about self-preservation. Wall Street doesn't want it to go. So they're gonna do everything they can at that time period to make sure that it's still humming. And so stuff that was obvious to us took a while. And I felt like it was the Lehman event that was kind of the final nail that went on. This, and then back to the .com, there were signs. I always talk about the JDS Uniphase quarter in July of 2020.

Remember the NASDAQ reached a high in March of 2000. I don't even want to ask how old you were, Jack, at that point. And then kind of retreats and started to make its way back. We already knew the writing was on the wall kind of in the spring of 2000, but it was JDS Uniphase's quarter where they guided up, made an acquisition, the stock went down, that you kind of knew that the asset prices were full. And then the rest, obviously when this thing unwinds, you get your quests and your lucents and all those things that happen. This...

Again, just so we can put this to bed after this quote structural change in how we're running trade policy, economic policy, potentially as we see it here today, Powell looks like he's gonna be on the way out. I joked with you last night, you and I were texting and he's like, "What is something you wanna talk about?" I'm like, "Powell might've just given his last speech." And we'll see, but those are not good things. And so this is a slow moving thing to your point, but professional money managers,

have to manage money in the markets, to your point. They can't just go to cash and have no choice. So they have to stay active. And I think we're going to see a situation where the allocations go to, we're already seeing it, so I'm not, staples and much more names that are defensive. And I think we'll continue to see that sector rotation within the S&P. So hopefully it can stay within the U.S. markets to a degree and then reallocate itself later as these things get figured out. But again,

I'm not optimistic in terms of the overall valuation of the market. Danny, final question is the counter bull case.

The fact that everyone is bearish, is that enough to be bullish? And I think there was a Bank of America fund manager survey showing that fund managers were the most bearish they've been in 30 years or over 30 years. Why is that not a sign, Danny, that people, you know, this terror stuff is going to be bad, but it's overpriced into the market. And actually there are compelling opportunities now because there's no one left to become bearish because everyone else is, you know, agrees with us. Those are always great indicators near term of sentiment.

Relative strength index, the RSI is good. Peter Bookvar does a great job of pointing out the bull bear greed

index, panic, fear, all those things. Those are great near-term indicators. And I think those are for near-term buying opportunities and near-term selling opportunities for the most part. Because as you know, those things change in days or a week. And so your point, when everyone is on the bearish side, of course, I don't think we're near anybody, everybody on the bearish side at this point, just in general, the stuff that you're seeing out there. I care about one thing and one thing only. I want to see

this quarter, right? So we're just in the beginning of first quarter earnings report of what the CEOs that are watching in real time that have better graphs than any of us have on what's going on. And it's gonna give people a better, I think reference point and then they'll become either more bearish or potentially more bullish.

jack everything has its price so if you told we've gone from what 6100 we hit 4850 we're sitting here around i don't know 53 5400 on the s p think about that volatility and of course at 6100 was everybody bullish of course at 4 800 50 at 4850 midday with sure a little bit lagging um you know it's interesting if you can get access to and talk to the prime brokers

One thing we haven't talked about is leverage in the system on the equity side, which you've seen on some of the pod shops, whether it's a millennium, Baleozis, whatever it might be. And these are running at six, seven, eight times leverage. So really all we've seen is the leverage has come down when volatility spikes, the prime brokers will tell, hey guys,

your VAR's not where it should be, turn it down. So they take their volume, they take the leverage down from eight to seven to six. That's what you've seen. You know, a lot of what you've seen in the market. And because of the way that the algos trade and the market trades, a lot of trades that replicate that. So to your point, you get a lot of follow on and knock on. I don't see these companies turning that leverage back up anytime soon. So that, and obviously they're more long oriented in terms of the nets, long versus short. So when you take

obviously this leverage down that means your net sellers of the market um but again you bring up a point you know some of these etfs and i know some of your sponsors run etfs and i'm a big fan of how they offer liquidity and the ability to express a theme but some of these etfs out there are constructed in a way that when you when you sell one and you just dump it there's pieces in there that either didn't belong in there thematically have a different type of of

structure or strategy than these other companies and you get an opportunity to buy them. So to your point, I think you take advantage of mass selling to a degree in the markets and everyone in the rustle going along with it at the same time. So again, a bottom up market pays to do the work in this type of environment. And so again, it's what makes a market. I'm not that optimistic near term. I hope we get through this and calmer heads prevail and we can see some type of

clarification or bring back kind of our premium valuation to the world. Danny, thanks so much for coming on Monetary Matters. People can find you on Twitter at DMoses34. People watching Monetary Matters can find it on YouTube. Please like and subscribe. Also leave a rating and review whether you listen on Apple Podcasts, Spotify, or another podcast app. Danny, just tell us where can people find your podcast on the tape? And also, what's the Twitter handle for on tape?

It's at On The Tape Pod, the On The Tape Podcast with Danny Moses. It's on Spotify. It's on Apple. It's on YouTube. So like you said, I'm at DMoses34 on X. I kind of try to do the Instagram TikTok thing for like a day. I'm kind of out there, but I kind of I feel too much pressure to like post things. So kind of stop that. But yeah, you can find it on X and you can find it on YouTube and Spotify and Apple. Weekly comes out on Wednesday mornings.

Yeah. And hey, by the way, while we're pitching the Big Short podcast, is it true Steve Eisman's got a podcast? He does. It's called The Eisman Playbook. And he has three or four episodes, I think, that are out there. Porter Vinny and myself sat down with him a couple of weeks ago. It was a lot of fun. Just felt like we were sitting in a room, which I guess is what you kind of want when you're doing an interview or a podcast. And so, yeah, Steve's out there. I just saw him interview a

Moffitt Nathanson was on there and he's had a couple of Washington strategists on there. So yeah, Steve has launched a podcast. I got to check that out. And yeah, everyone should listen to your show on the tape and obviously, you know, listen to Monetary Matters every single day. All right. Thank you again, Danny. And thanks everyone for listening. Thank you, Jack. Thank you. Just close the door.