E84: Markets update, crypto collapse, Russia/Ukraine endgame, state of the podcast

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00:00:00 Speaker 1 

This how you look a little gritty. 

00:00:01 Speaker 1 

Feel OK? Yeah. Me? I’m. 

00:00:04 Speaker 1 

Great, I’m great. 

00:00:05 Speaker 2 

You look half a milli wrister today. 

00:00:07 Speaker 1 

What’s it like to be half a milli richer? 

00:00:09 Speaker 1 

Jason, you look like a failed hostage taker. 

00:00:13 Speaker 1 

Laugh it up, boy. 

00:00:14 Speaker 1 

Slap it up. 

00:00:15 Speaker 1 

Boys, laugh it up, boys. 

00:00:17 Speaker 1 

When you see my other projects drop. 

00:00:18 Speaker 3 

Oh my God. 

00:00:19 Speaker 1 

You’re going to be crying again, OK? 

00:00:21 Speaker 1 

My driveway. 

00:00:22 Speaker 2 

Why don’t you take the aspirin answer to account? 

00:00:24 Speaker 2 

I can’t listen. 

00:00:25 Speaker 1 

I’ve taken that for an answer. 

00:00:26 Speaker 1 

Welcome to the All in podcast with three miserable rich ******** and pull up. 

00:00:30 Speaker 1 

The ladder behind. 

00:00:32 Speaker 2 

Do you want to explain why it took us a month to produce here? 

00:00:36 Speaker 1 

What about a troll? 

00:00:37 Speaker 2 

In this interview. 

00:00:38 Speaker 1 

Hold on a second, attorney. 

00:00:40 Speaker 1 

Let me give you guys the TLDR. 

00:00:43 Speaker 1 

Cole thought the Owen pod with his. 

00:00:46 Speaker 1 

And then he realized it wasn’t. 

00:00:49 Speaker 1 

No, if you guys want to go there, we go there. I’m totally transparent. I requested, I requested to own 6% more of the all in podcast. 

00:00:57 Speaker 1 

No, no, no. 

00:00:58 Speaker 1 

Back up to the summit, back up to when you wanted. 

00:01:00 Speaker 1 

But no backup before that where? 

00:01:00 Speaker 1 

To kick. 

00:01:02 Speaker 1 

Oh my God, are we really doing this? 

00:01:03 Speaker 3 

This year. 

00:01:05 Speaker 1 

We’re going. 

00:01:06 Speaker 1 

OK, if we do it, we. 

00:01:07 Speaker 1 

Can talk about this for 45 minutes. 

00:01:09 Speaker 1 

Because what? 

00:01:09 Speaker 1 

And we planned this meant we planned the summit. 

00:01:13 Speaker 1 

Jaypal doesn’t like how I was concerned about the summit and I ditched at him and, you know, I was negative to him. 

00:01:18 Speaker 1 

It is the summit. 

00:01:20 Speaker 1 

Cole wants to kick me off. 

00:01:21 Speaker 1 

The show, yes. 

00:01:22 Speaker 1 

Brad Gartner, Bill Gurley would have. 

00:01:25 Speaker 1 

Here comes the boy, and here comes the boy. 

00:01:25 Speaker 2 

People thinking was mean and Jacob. 

00:01:27 Speaker 2 

Getting into it, it wasn’t. 

00:01:28 Speaker 2 

It was actually started with Freeburg and Jacob getting into it. 

00:01:31 Speaker 1 

It’s not want to be off. 

00:01:32 Speaker 1 

The show all right. How? 

00:01:34 Speaker 1 

Do I get to spend the series? 

00:01:35 Speaker 1 

You wanted me off. 

00:01:37 Speaker 1 

The show. 

00:01:39 Speaker 2 

True or false? 

00:01:40 Speaker 2 

J. Cole, I felt. 

00:01:44 Speaker 1 

If Freeburg if Freeburg wasn’t enjoying his time here and was going to constantly complain every week about every detail, while the show is not good. 

00:01:55 Speaker 1 

There was always the option for him to maybe do half the shows and have Brad Gardner to half. 

00:01:59 Speaker 1 

The shows or have built earlier rotate in. 

00:02:02 Speaker 1 

And so if he was going. 

00:02:03 Speaker 1 

To be miserable all. 

00:02:05 Speaker 1 

The time and worried about the show. 

00:02:07 Speaker 1 

I’d even be. 

00:02:08 Speaker 1 

Option to have somebody else take his spot. 

00:02:10 Speaker 1 

Did you or did you not say that this is your show? 

00:02:12 Speaker 1 

You’re the leader and you wanted me off the show. 

00:02:14 Speaker 1 

I never said that. 

00:02:15 Speaker 1 

Nor would I say that I don’t. 

00:02:17 Speaker 1 

Need you said. 

00:02:17 Speaker 2 

You could summarily replace any of us. 

00:02:19 Speaker 2 

Effectively, you. 

00:02:20 Speaker 2 

Acted like we all work for years, so. 

00:02:20 Speaker 1 

I never said that. No. 

00:02:22 Speaker 1 

I don’t fax. I don’t. 

00:02:23 Speaker 1 

Think so much replaceable just for the record so. 

00:02:28 Speaker 3 

Right. 

00:02:28 Speaker 1 

Taking someone professional framework, I do think, I mean I can pull up the back burner episodes. 

00:02:33 Speaker 1 

I think they have slightly more views so but people love you so we can. 

00:02:36 Speaker 1 

Also, my mom and my wife said he thought. 

00:02:38 Speaker 1 

I was replaceable. 

00:02:39 Speaker 1 

On the show guys, I was like jumping by. 

00:02:41 Speaker 1 

Just summarizing it so that we can move on. 

00:02:43 Speaker 1 

Then what happened was we had an agreement that it was 25% each. 

00:02:47 Speaker 1 

There was a. 

00:02:48 Speaker 1 

Moment where Jay Cole believed that he deserved more. 

00:02:51 Speaker 1 

We had to sort through a lot of the underlying issues that cause them to believe that we got to a good consensus. 

00:02:57 Speaker 1 

We now have a signed agreement that governs how the show and other things around the show and options of the show will work. We are 25% equal partners. 

00:03:07 Speaker 1 

And now we can move on. 

00:03:08 Speaker 1 

So, but enough for the pitching, let’s go. 

00:03:11 Speaker 1 

And I love you all. 

00:03:12 Speaker 1 

I love you. 

00:03:13 Speaker 1 

Listen, I love you also. 

00:03:14 Speaker 1 

To be clear, my position I do feel. 

00:03:16 Speaker 1 

Like the schedule? 

00:03:17 Speaker 1 

Was if we’re going to make it into a media. 

00:03:19 Speaker 1 

Company, my request was this and I think I own I could have 10% more equity and I’ll go to work every day and do the work and you guys can just show up. 

00:03:27 Speaker 1 

You guys agree to that and then you guys had said you don’t want to do it and I said. 

00:03:30 Speaker 1 

OK, fine. 

00:03:31 Speaker 1 

So here we are. 

00:03:32 Speaker 1 

We’re back at square one, so let’s just get to learn enough. 

00:03:34 Speaker 1 

To do a pod and we just. 

00:03:35 Speaker 1 

Want to talk? 

00:03:36 Speaker 1 

There’s not going to be. 

00:03:37 Speaker 1 

Any more subnets? 

00:03:37 Speaker 1 

There’s not going to. 

00:03:38 Speaker 1 

Be any business here. 

00:03:39 Speaker 1 

It’s just a pod. 

00:03:39 Speaker 1 

I have other events I. 

00:03:40 Speaker 1 

Do ever the pods I do. 

00:03:42 Speaker 1 

If I want to get paid, I’ll do them. 

00:03:44 Speaker 1 

Over there and here it’s just a pod that you see every week. 

00:03:47 Speaker 1 

So let’s get into it. 

00:03:48 Speaker 1 

Everybody wants to talk about markets. 

00:03:50 Speaker 1 

Oh, by the way, if you guys want your intros. 

00:03:51 Speaker 1 

That’s 1%. 

00:03:52 Speaker 1 

Each interval so brutal that those. 

00:03:54 Speaker 1 

Are 1% each. 

00:03:55 Speaker 1 

So when you guys are willing to pay me my 1% additional equity, you get the intros and when you want the all in summer 2023, that’s another. 

00:04:01 

We’re going to. 

00:04:01 Speaker 1 

Get an invoice each week, so now you’re going to get it could be prorated. 

00:04:04 Speaker 1 

Roughly, there will be a .8% equity per month president. 

00:04:08 Speaker 2 

I just say it’s so fascinating that we went through all of this, you know, I don’t know storming drawing or whatever this the slides here a month of non taping. 

00:04:16 Speaker 1 

Herman, wrong death. 

00:04:19 Speaker 2 

And you know, and this, like all this turmoil. 

00:04:22 Speaker 2 

In our relationships, you could get an extra 1%. 

00:04:25 Speaker 1 

From 2% each 31 people. 

00:04:26 Speaker 3 

Drive around. 

00:04:26 Speaker 1 

So I believe. 

00:04:27 Speaker 1 

I should just so you know I do. 

00:04:30 Speaker 1 

This for a 

00:04:30 Speaker 1 

Living and if I do extra work I believe I should. 

00:04:33 Speaker 1 

And if you want me to. 

00:04:35 Speaker 1 

Be the the defacto CEO of. 

00:04:36 Speaker 1 

This then I should get. 

00:04:37 Speaker 3 

A little action. 

00:04:37 Speaker 2 

Yeah, we don’t want that. 

00:04:38 Speaker 1 

And you don’t want that. 

00:04:39 Speaker 1 

So that’s why backfired. 

00:04:42 Speaker 1 

This is just going to. 

00:04:43 Speaker 1 

Be a project we. 

00:04:43 Speaker 1 

Do it every week and then all your. 

00:04:45 Speaker 1 

Chris, whatever. 

00:04:47 Speaker 1 

You know you’re spinning out from the production board or whatever copycat after making we’ve been ******* dude. 

00:04:55 Speaker 1 

As an outside gift, here we go. 

00:04:58 Speaker 1 

Come on, I’m not. 

00:04:59 Speaker 1 

There’s no 0 interest, no interest in cursor out. 

00:05:02 Speaker 1 

But what about, hey everybody, hey everybody. 

00:05:04 Speaker 1 

I’ll do it. 

00:05:05 Speaker 1 

Hey, everybody. 

00:05:05 Speaker 1 

Hey, everybody. 

00:05:06 Speaker 1 

Hey, everybody. 

00:05:21 Speaker 1 

Second, welcome to other episode of the podcast for Back for Episode 84 with Me, of course, the Sultan of Science, the Prince of Panic attacks, the Queen of Quinoa himself doing Freeburg pateron bud. 

00:05:41 Speaker 1 

Great to be here. 

00:05:42 Speaker 1 

Great to be here all weekend. 

00:05:50 Speaker 1 

I’ll be hanging out tomorrow night. 

00:05:51 Speaker 2 

When will make resolved. 

00:05:54 Speaker 1 

I hear about them dinner. 

00:05:57 Speaker 1 

I think that he did buy me a wonderful dinner. 

00:06:00 Speaker 1 

Oh my Lord, after the Warriors game show afterwards. 

00:06:03 Speaker 1 

And of course. 

00:06:04 Speaker 1 

With us is the Rain Man. 

00:06:06 Speaker 1 

Himself David sacks. 

00:06:07 Speaker 1 

Hayden money ready to go? 

00:06:10 Speaker 2 

Don’t try and deflect this thing onto me, I was only tangentially involved. 

00:06:14 

The God. 

00:06:15 Speaker 3 

But stepping through our. 

00:06:16 Speaker 1 

Oh, I did write the concept. 

00:06:17 Speaker 2 

Larger contract I wrote. 

00:06:18 Speaker 2 

Very fair contracts that we could move forward and fear. 

00:06:21 Speaker 1 

Yeah, I think you proceeded to break it in the 1st 15 minutes by slandering me and disparaging. 

00:06:25 Speaker 2 

Well, come on. 

00:06:26 Speaker 2 

That was just for ratings. 

00:06:28 Speaker 1 

Yeah, yeah. 

00:06:28 Speaker 1 

I bet your VM is pretty great. 

00:06:33 Speaker 1 

Travis Scott Travis. 

00:06:33 Speaker 1 

Jake and. 

00:06:36 Speaker 1 

Making jokes, breaking the, breaking the non disparagement clause and then of course the dictator himself. 

00:06:43 Speaker 1 

Uh from some undisclosed location in the European city. 

00:06:47 Speaker 1 

I don’t know if I’m allowed to say that it’s not part of a team. 

00:06:49 Speaker 1 

Welcome back, boys at work. 

00:06:52 Speaker 1 

All right, well, since we last. 

00:06:54 Speaker 1 

Well on the all in Summit is finished. 

00:06:58 Speaker 1 

All the episodes have been released, including Palmer Luckey yesterday and here we go. 

00:07:04 Speaker 1 

The markets are in complete turmoil. Spy down 21% year to date, Dow down 17% year to date. As Axis pointed out, that is not representative of what happened to growth. 

00:07:14 Speaker 1 

Stocks at the same time. 

00:07:16 Speaker 1 

And the May CPI went up and it was at 8.6, we also got the 75 basis point rate hike. 

00:07:26 Speaker 1 

Who wants to start here? 

00:07:27 Speaker 1 

Trim off in its markets? 

00:07:28 Speaker 1 

So maybe I’ll. 

00:07:29 Speaker 1 

Just dump it to you first and then we’ll go around the horn. 

00:07:31 Speaker 1 

To Saxon entry burn while there’s a lot to say, so bear with me for a second, but uhm. 

00:07:37 Speaker 1 

The thing that you have to do before you talk about what is happening now, I think it’s probably useful to go back. 

00:07:45 Speaker 1 

And you have to really start at the end of the great financial crisis. And the reason is there was a bunch of people coming out of the GFC who confused what the US government and some European governments were doing at the time. There was the risk of a huge financial contagion and so the US stepped in. 

00:08:06 Speaker 1 

And the Federal Reserve started to use their balance sheet to buy toxic assets, right? 

00:08:11 Speaker 1 

And the evening he had died, and I think she planted that as well and raised a bunch of banks is only about a bunch of governments in it. 

00:08:17 Speaker 1 

And then there was a body of pseudo scientific economists who coined this thing called modern monetary theory, which basically said, hey, you can keep printing money and introducing it into the economy to smooth things out and to actually drive long term growth. 

00:08:38 Speaker 1 

And it turns out that a bunch of government. 

00:08:40 Speaker 1 

Officials self worth. 

00:08:42 Speaker 1 

And if you Fast forward to 2022, so 14 years later, you know, governments around the world had printed something to the tune of about 3035 odd trillion dollars of money into the economy that should have never been there. 

00:08:59 Speaker 1 

So the thing to remember is like we have not necessarily just been obfuscating true supply demand in the last six or eight months when we’ve been talking about a recession or inflation. 

00:09:10 Speaker 1 

These are not doing it since 2008. It’s just that it’s. 

00:09:13 Speaker 1 

Been building up in the system. 

00:09:16 Speaker 1 

So one of the things that we have to realize is that all of that money somehow needs to get destroyed in some way, shape or form if the true economic equilibrium is meant to be found. 

00:09:27 Speaker 1 

What is true supply? What is true demand in the absence of government flashing money around, trying to prop up things that should not be propped up, or buying votes, or all the groups that seem folks have engaged in in the last, you know, decade and 1/2 have to get undone. So that’s the backup. So if you think about taking. 

00:09:47 Speaker 1 

$30 trillion out of the global economy, you know, you’re talking about almost, you know, I think it’s 85 trillion in the world GDP. So like, you know, it’s it’s it’s almost half of an entire year’s worth of global GDP. 

00:10:02 Speaker 1 

It’s going to take. 

00:10:03 Speaker 1 

Three years, probably, of the slow, meticulous, you know, running off of money, you know, not reintroducing new Marines. 

00:10:11 Speaker 1 

So it seems like was the beginning of the beginning of something that’s going to be long and drawn up now that’s separate from and that’s separate from whether we’re in a recession or not. 

00:10:18 Speaker 1 

That’s just the. 

00:10:19 Speaker 1 

Bear market that we’re in. 

00:10:21 Speaker 1 

Right. 

00:10:21 Speaker 1 

And so you have to look at asset prices today as a microcosm of a much larger trend that has to be about fake money pushing asset prices up. 

00:10:33 Speaker 1 

And now taking all that fake money out and finding out what the real price of something is. 

00:10:38 Speaker 1 

And I just don’t think that takes six months. 

00:10:40 Speaker 1 

So for all the people. 

00:10:41 Speaker 1 

That were, you know, fingers crossed, hoping that this would be the end of it. Side raises 75 were done with this. They’re going to raise 75 more. 

00:10:49 Speaker 1 

I think that’s not how it’s probably going to be. 

00:10:51 Speaker 1 

It’s going to take, you know. 

00:10:53 Speaker 1 

2436 months? That may mean the bottom doesn’t happen for another 18. 

00:10:59 Speaker 1 

Loving it there weren’t weren’t for a lot of choppy. 

00:11:02 Speaker 1 

Uhm, Market Action, Section 3, asset bubbles, clearly all, you know, being impacted. 

00:11:10 Speaker 1 

We had stocks. 

00:11:11 Speaker 1 

Looks like that story was pretty violent. 

00:11:13 Speaker 1 

Then then we have crypto. 

00:11:16 Speaker 1 

The last two or three weeks have been absolutely insane in terms of that asset bubble and now record high inventories for homes record. 

00:11:27 Speaker 1 

Uhm, sales are now dipping below the average of the last 20 years and. 

00:11:33 Speaker 1 

We’re seeing mortgage origination just absolutely get crushed, 6% mortgages. Just a couple of months ago it was two point X. 

00:11:41 Speaker 1 

For some folks. 

00:11:42 Speaker 1 

So when you look at those three asset bubbles you by schmatz, hey, we’re going to see even more deprecation news for another 18 months possibly or do you think we’ve. 

00:11:51 Speaker 1 

Taking such crazy action and this has come down so violently that we’re now bouncing along the bottom, bouncing along the bottom. 

00:11:57 Speaker 1 

Or 18 months. 

00:11:57 Speaker 1 

Of more pain. 

00:11:58 Speaker 2 

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

00:12:09 Speaker 2 

So you’re right if you look at. 

00:12:11 Speaker 2 

Residential real estate now the prices are at the highest they’ve been relative to median income since something like 2006, 2007 before that sort of great real estate crash that precipitated the Great Recession in 2008. 

00:12:23 Speaker 3 

Right. 

00:12:25 Speaker 2 

So I think there are going to be more, more shoes to draw. 

00:12:28 Speaker 2 

I just want to build on tomorrow’s point about root cause this year. 

00:12:32 Speaker 2 

Milton Friedman once said that there’s nothing quite so permanent as a temporary government program. 

00:12:36 Speaker 2 

The temporary government program was quantitative easing. 

00:12:39 Speaker 2 

We had this Great Recession of 2008 that could have turned into depression. They broke the glass in case of emergency. 

00:12:45 Speaker 2 

They started this QE, which is basically the government intervening. 

00:12:49 Speaker 2 

To buy bonds in the market, they’ve. 

00:12:51 Speaker 2 

Never done that before. 

00:12:52 Speaker 2 

And they loaded up their balance sheet. 

00:12:54 Speaker 2 

The crazy thing is that program was still continuing until last year. 

00:12:58 Speaker 2 

I mean, it was like on cruise control and so last year the Fed. 

00:13:01 Speaker 1 

No, no, no, it. 

00:13:02 Speaker 1 

Was it was continued till last month and countries. 

00:13:05 Speaker 1 

Like Europe are still. 

00:13:06 Speaker 1 

Doing it 9% inflation. 

00:13:07 Speaker 3 

Right. 

00:13:08 Speaker 1 

In Europe and there still buying bonds. 

00:13:10 Speaker 2 

Right. So if you go back to last year, the Fed bought 54% of the government debt despite the fact that the economy was growing at like 5% GDP, that it was bouncing back really strongly from COVID that you had the stock market at all time highs and yet they were still intervening with this massive. 

00:13:28 Speaker 2 

Chewy and then when we. 

00:13:29 Speaker 2 

Got the surprise, 5.1%. 

00:13:31 Speaker 2 

Inflation print last summer. 

00:13:33 Speaker 1 

They didn’t start to equally in the. 

00:13:35 Speaker 2 

Q1 so you’re right, they kept basically printing money. 

00:13:39 Speaker 2 

And it’s still going on and that’s created massive distortions in the economy now. 

00:13:43 Speaker 2 

So that said, I would say is the number one culprit here. 

00:13:45 Speaker 2 

And Jane Powell is the number one culprit. 

00:13:48 Speaker 2 

But the number 2 culprit is the Biden administration. 

00:13:51 Speaker 2 

And I think Biden did three things very early on in. 

00:13:54 Speaker 2 

The first few. 

00:13:54 Speaker 2 

Months of his presidency to effectively take this Presidency. 

00:13:58 Speaker 2 

Number one, he canceled. 

00:13:59 Speaker 2 

Our energy independence on this first day in office, canceling the Keystone Pipeline, making it much harder to drill and of course energy inflations then one factor in this sort of overall inflation. 

00:14:09 Speaker 2 

And #2 he pushed through that last two trillion of stimulus on straight party lines, the AARP, the American rescue plan after Larry Summers fed economists in his own party, said the cynic. 

00:14:21 Speaker 2 

Grade distillation. Don’t do it. And then the third thing is, and no one really talks about this, is that Biden could have used diplomacy in 2021. 

00:14:30 Speaker 2 

To basically find an off ramp to this Ukraine crisis before it turned into a full-fledged war. And if you listen to the economists, the International Development economists like Jeffrey. 

00:14:41 Speaker 2 

He basically says that Biden pulled his cabinet, said listen, should we negotiate and compromise with the Russians? 

00:14:47 Speaker 2 

They all said no, and Biden handed down the order. 

00:14:50 Speaker 2 

We will not compromise with the Russians. 

00:14:52 Speaker 2 

So now we have this massive war in Ukraine that’s fueling food and energy inflation is going to take his Presidency, and I don’t even think it is. 

00:15:01 Speaker 2 

We debate it is happening about this. 

00:15:01 Speaker 1 

In other words, but we are now, we may not be integration in that Russia, but we’re enabling them to print enormous. 

00:15:05 Speaker 3 

People remain. 

00:15:09 Speaker 1 

Uh, surpluses, meaning? 

00:15:11 Speaker 1 

I don’t think I saw that there was an article today. 

00:15:14 Speaker 1 

Janet Yellen is traveling around. 

00:15:17 Speaker 1 

Basically, convincing folks to not include Russian oil from a bunch of import bans so that these Russian oil tankers can be insured. 

00:15:29 Speaker 1 

So that they can sell this oil to places like China and India, etc. 

00:15:33 Speaker 2 

So rubles out of five. 

00:15:34 Speaker 2 

Times 5 year high, the rules at a. 

00:15:36 Speaker 1 

Five year high, we push for all these sanctions. 

00:15:38 Speaker 1 

He’s worth guests on board and says we’re going to do it and we’re going to take the lump and then we go around Europe and basically say, well, we kind of want to. 

00:15:45 Speaker 1 

Fight this proxy war, but. 

00:15:46 Speaker 1 

At the same time, we want to try to fix inflation and we didn’t need to ’cause this and. 

00:15:51 Speaker 1 

Completely disorganized. What’s? 

00:15:53 Speaker 1 

Happened here. 

00:15:53 Speaker 1 

So if you have 6. 

00:15:54 Speaker 1 

Minutes in the pool. 

00:15:55 Speaker 1 

For 10 stacks. 

00:15:57 Speaker 1 

Of blame Biden for the economy. 

00:15:58 Speaker 1 

You win. 

00:15:59 Speaker 1 

Or where do you agree with you? 

00:16:01 

Well, I mean. 

00:16:01 Speaker 2 

Of course, the President of Child for both. 

00:16:01 Speaker 1 

I we thought we talked about quantitative easing starting in 2008 so that that goes over a couple of presents and I guess the question I would have previous taxes how much of the spending, the freewheeling spending you know was from the previous administration suggesting? 

00:16:14 Speaker 2 

Overspending is a bipartisan problem. 

00:16:16 Speaker 2 

There’s no. 

00:16:16 Speaker 2 

Question about it, but what made? 

00:16:17 Speaker 1 

I just want to. 

00:16:17 Speaker 1 

Make sure that we point that out, yeah. 

00:16:19 Speaker 2 

For sure, and Republicans always seem to find their principles on spending with his Democrat in. 

00:16:22 Speaker 2 

The White House. 

00:16:23 Speaker 2 

I totally get it. 

00:16:24 Speaker 2 

And I would like to see more fiscal responsibility regardless of which party is in power. 

00:16:29 Speaker 2 

And I’d like to see Republicans must be less center critical in their principles on this. 

00:16:33 Speaker 2 

But look proper. 

00:16:35 Speaker 2 

Here’s the thing, the economy was bouncing back strongly last year, and bines still pushed for his last two trillion in spending and then 1.2 trillion more on infrastructure. 

00:16:42 Speaker 1 

Got into that. 

00:16:44 Speaker 2 

And then remember, the four trillion build back better were managed by himself. 

00:16:46 Speaker 1 

American freight into that. 

00:16:49 Speaker 1 

What would what would that have looked like? 

00:16:51 Speaker 1 

A free break? 

00:16:52 Speaker 1 

You haven’t spoken yet? 

00:16:53 Speaker 1 

Thoughts on? 

00:16:55 Speaker 1 

You know this? 

00:16:57 Speaker 1 

These asset bubbles I guess, and then the buying of the bonds seem completely unnecessary for some period of time. 

00:17:03 Speaker 1 

If we are acting as the 50% plus buyer of bonds, what kind of distortion does that create in the market? 

00:17:10 Speaker 1 

Because if the government is competing against other people in. 

00:17:13 Speaker 1 

The marketplace to buy those bonds. 

00:17:15 Speaker 1 

How could they possibly be prideful? 

00:17:16 Speaker 1 

Reckless just be very careful about our framing, goes the US Treasury, which issues bonds and raises capital on behalf of the US government for spending programs. 

00:17:28 Speaker 1 

Then there’s the central bank, the Federal Reserve and our Central bank. Job is to #1 maintain liquidity in the capital market so that businesses can invest in growing their their products and growing their businesses, and the economy grows while not. 

00:17:48 Speaker 1 

Providing too much liquidity that you end up with inflationary effects and inflationary effects means that there’s too much money in the market and you see that money find its way into escalating prices on. 

00:17:58 Speaker 1 

Different, you know. 

00:18:00 Speaker 1 

Yes, and the Fed long term goal remember is to provide a stated goal of Jerome Powell in particular. 

00:18:08 Speaker 1 

Right now that changes over time. 

00:18:10 Speaker 1 

But generally, the intention of the Federal Reserve is to make liquidity to make cash available to banks, who ultimately make it available to businesses. 

00:18:20 Speaker 1 

In such a way that there’s enough cash in the system that the businesses grow and that people have capital to invest in growth while keeping inflation at 2% for their long term target of 2% inflation and it’s also correctly from wrong provers. Sure that. 

00:18:33 Speaker 1 

There’s an attach to support. 

00:18:36 Speaker 1 

Micro so remember, last year you’ll remember Stan Druckenmiller was very public about how insane it was that the Federal Reserve was still buying bonds. 

00:18:46 Speaker 1 

And so there’s one way to introduce cash into the system is to make caps available as a loan to banks. 

00:18:52 Speaker 1 

And then, you know, they use that money to loan to businesses and it makes its way through the economy. 

00:18:56 Speaker 1 

Another way is for the Federal Reserve to step in and actually buy bonds, freeing up the money that other people would be otherwise using to buy bonds to go and invest in other things. 

00:19:05 Speaker 1 

So they’re effectively forcing liquidity into the market by taking bonds out of the market. 

00:19:10 Speaker 1 

And last summer or two two of last year, Druckenmiller was pounding the table saying guys, the economic indicator on how quickly the markets are, or how quickly the economy is growing relative to how much inflation there is, indicates that we should stop buying bonds and we should stop injecting liquidity into the markets. 

00:19:28 Speaker 1 

This makes no sense. 

00:19:30 Speaker 1 

It is nonsensical and there was no strong POV from the Fed at the time, other than there was uncertainty about the bounce back from the recession, from COVID, there was uncertainty about what else was happening in the economy and yadda yadda. 

00:19:41 Speaker 1 

But the numbers, the economic indicators were showing very clearly. 

00:19:45 Speaker 1 

The economy is growing at a robust. 

00:19:47 Speaker 1 

Pace, low unemployment and inflation is starting to pick up. 

00:19:51 Speaker 1 

Holy crap. 

00:19:52 Speaker 1 

It’s time to cool it off. 

00:19:53 Speaker 1 

And the Fed made a judgment call. 

00:19:55 Speaker 1 

And their judgment call really kind of was to keep going. 

00:19:58 Speaker 1 

And then we end up in this massive runaway inflationary problem where if you keep too much liquidity in the system for too long, you have in place and even if you have economic growth, and now by pulling the money. 

00:20:07 Speaker 1 

Out of the system, super super fast. 

00:20:09 Speaker 1 

We reduce the inflationary effects potentially, but we take the economy ’cause now all this money coming out of the market means people are spending less and buying less than businesses have less to borrow, the borrowing costs are high and then that that’s that’s the big basket. 

00:20:22 Speaker 1 

Hold on, let me go to Sharma. 

00:20:24 Speaker 1 

I really want to go to rate. 

00:20:25 Speaker 1 

The rate at which we pull the money out, which has had to be really, really fast over the last few weeks, can cause a recession. 

00:20:31 Speaker 1 

And that’s the the biggest concern right now is will that actually trigger a massive recession or not that everyone watching so chamath, I guess act one of the things we need to clarify here is the actual mandate of. 

00:20:40 Speaker 1 

Fed my was under the understanding that the Fed really was there to make sure of maximum employment and that, you know, low interest loans were available and price stability. 

00:20:52 Speaker 1 

These are the skating goals for a long time. 

00:20:53 Speaker 1 

Interest rates, capital capitals, availability, autonomy to grow without without exceeding inflation of 2%. That’s OK. So maximum employment price stability was also in their rhythm. 

00:21:05 Speaker 1 

Growth ’cause. Remember, we can’t ever pay our debt if our GDP is not growing. OK while minimizing while keeping inflation below 2%. 

00:21:12 Speaker 1 

She wants whatever point you want to make, feel free to make. 

00:21:14 Speaker 1 

But also, I was just wanting to know from you, where did the Fed go wrong with their mandate, if at all, here? 

00:21:19 Speaker 1 

Because we do have National Employment right now, but. 

00:21:22 Speaker 1 

We have added. 

00:21:22 Speaker 1 

Control price stability. 

00:21:24 Speaker 1 

Let’s see. 

00:21:25 Speaker 1 

Here’s the thing. 

00:21:25 Speaker 1 

You you. 

00:21:26 Speaker 1 

I think we have to also be sensitive to the fact that the title operates on a certain. 

00:21:32 Speaker 1 

Class of data and that data in the 21st century is pretty pathetic. Makes you can probably find this, but there was an article, I think it was in the New York Times that really walked through how CPI is calculated. And it’s a bunch of people that work for the government that walk around with iPads. 

00:21:48 Speaker 1 

Building relationships with local businesses and all these random places all around the country and asking them to, you know, chit chat for 15 minutes. 

00:21:55 Speaker 1 

And do these surveys. 

00:21:57 Speaker 1 

Now you would have thought that in 2023 or 2022, what the government would have said to, you know, Visa, MasterCard, American Express, all the payment rails, the banks. 

00:22:08 Speaker 1 

And Stripe is sending a feed in the following structured way so that I can actually have an absolute precise sense of inflation. 

00:22:15 Speaker 1 

’cause inflation really only occurs when a good or service trace hands for money, right? 

00:22:20 Speaker 1 

And you calculate what the best thing trade at the day before and what is a trade for today so you could get an absolute precise sense of it. 

00:22:28 Speaker 1 

Instead, we do this random sampling thing and it’s faster. 

00:22:33 Speaker 1 

So if you read this article, your take away will be, Oh my God, this is very rickety and it drives an enormous hammer that we use to try to manage the economy. That’s the first. 

00:22:44 Speaker 1 

I think you need to buckle your seat belt because the next 3-4 or five months of CPI will probably be very, very bad. 

00:22:53 Speaker 1 

789 percent why? There are a handful of components that have gotten completely run away #1. The biggest one is rent, and so rents worked on a 3 month lag. 

00:23:04 Speaker 1 

We’re gonna reintroduce what the true owners equivalent rent is into CPI, so we can already forecast that CPI growing up. 

00:23:12 Speaker 1 

Oil was at a. 

00:23:12 Speaker 1 

105 bucks a barrel, Russia. 

00:23:14 Speaker 1 

Is basically trying. 

00:23:15 Speaker 1 

To break the back of Europe by now messing with their Nat gas supplies. 

00:23:20 Speaker 1 

The German Energy minister yesterday said that if that happens, it could be with contagion equivalent to Lehman Brother with respect to energy, when you play all of these things out. 

00:23:32 Speaker 1 

What you have is, unfortunately, rampant runaway costs. 

00:23:37 Speaker 1 

That really have no mechanism to get back in track in the absence of some real governmental changes or policy on this Ukraine, Russia war, you know how we intend to sort of work or cooperate or fight with China, all of these things have to get stalled. 

00:23:53 Speaker 1 

So in the absence of that, prices are going to continue to go up. 

00:23:57 Speaker 1 

And So what does the Fed do? How does it throw away what little credibility it has left when there’s eight and 9% inflation prints and saying regions were done for right now you can’t do that. So they will overcorrect because there is going to be so much pressure. 

00:24:17 Speaker 1 

For example asked. 

00:24:19 Speaker 1 

All roads I think lead to lower equity prices and I think what David said astutely is. 

00:24:27 Speaker 1 

We’ve seen the first ways, but. 

00:24:30 Speaker 1 

Now it has to. 

00:24:30 Speaker 1 

Touch all these other areas, for example. 

00:24:33 Speaker 1 

We have gotten totally drunk on debt as a country. 

00:24:36 Speaker 1 

One of the most obvious places where we’ve been serving alcohol far too late into the night isn’t the spinning of all these. 

00:24:46 Speaker 1 

Private equity leveraged buyouts. 

00:24:48 Speaker 1 

Prices are these are sketchy companies that are sort of like, you know, teetering on insolvency at times where private equity comes in, levers up the balance sheet with debt, they price it right to the edge of what’s legally allowed or what’s financeable, and then they go do it. 

00:25:06 Speaker 1 

But that’s all assuming the economy continues to grow. 

00:25:09 Speaker 1 

And so if all of a sudden you have some recessionary forces or prices go up in earnings, don’t. 

00:25:15 Speaker 1 

You’ll have, you know, a contagion in the debt markets. 

00:25:17 Speaker 1 

You could have a contagion in the commodity market. 

00:25:20 Speaker 1 

So we’re dealing with some really, really. 

00:25:23 Speaker 1 

Found reconditions. 

00:25:24 Speaker 1 

I mean most of most Americans have most of their networks hide up in real estate, and if we see a 3030% correct in a real estate, it could be a real problem, particularly with rising interest rates, inability to refinance. 

00:25:35 Speaker 1 

In fact, the dual mandate is he keeps inflation 2% and then keep the unemployment rate reasonable. The unemployment rates amazing with still so many jobs out there even with these layoffs in. 

00:25:45 Speaker 1 

Fact one might argue we made. 

00:25:48 Speaker 1 

Too many jobs available to the point at which people maybe aren’t working as much or just, you know, under working and not taking advantage of these amazing jobs out there. 

00:25:58 Speaker 1 

Where do you see this going fast now? 

00:26:00 Speaker 1 

Now that we can’t seem to get inflation under control, and people are looking at their 401K’s, they feel a lot poorer. 

00:26:08 Speaker 1 

But is the demand side gone yet? 

00:26:10 Speaker 1 

Have have consumers decided I’m not willing to buy the next house? 

00:26:14 Speaker 1 

I’m not going on this vacation. 

00:26:16 Speaker 1 

$6 gas makes no sense. $7.00 gas makes no sense. I’m not going. 

00:26:19 Speaker 1 

To go on this weekend. 

00:26:21 Speaker 1 

Excursion, I’m staying home. 

00:26:22 Speaker 2 

Yeah, I mean, like consumer confidence just had the biggest drop. 

00:26:25 Speaker 2 

I think in. 

00:26:26 Speaker 2 

40 or 50 years we if you look at like right track, Wrong track polling for the country, only something like 24% believe the country is on the right track. 

00:26:37 Speaker 2 

Right now if you pull people, are we in a recession and they don’t look at like you know the quarter over quarter growth? 

00:26:43 Speaker 2 

They just looked at what they’re feeling. 56% of the country says we’re already in recession. It’s about 70% Republicans, about 50% Democrats. So the country is already hurting people already feeling it. 

00:26:54 Speaker 2 

And this Internet. 

00:26:55 Speaker 1 

Is it psychological facts or are they actually making decisions now to spend less? 

00:27:00 Speaker 2 

So I think it’s both. 

00:27:01 Speaker 2 

So I mean you start with the real inflation and people feel it and they also hear about it in the media and then they start to adjust their their decisions. 

00:27:09 Speaker 3 

It’s it’s reflexive seems. 

00:27:09 Speaker 2 

And this is the. 

00:27:09 Speaker 2 

Problem of fixing. 

00:27:11 Speaker 2 

Yeah, this is almost fixing an inflation problem is that is based. 

00:27:14 Speaker 2 

On expectations, but. 

00:27:15 Speaker 2 

Once you have such expect inflation, then businesses have to start operating this communication rate next year. 

00:27:21 Speaker 2 

So they have to start raising prices and it’s actually very hard to put the horse back in the barn and This is why I think the Fed is probably more likely to over. 

00:27:31 Speaker 2 

Shoot on raising rates is because if they really want to stop inflation now, they really have to frame on the brakes and then that’s gonna lead to a recession. 

00:27:39 Speaker 2 

And if they don’t, then we end up with like a chronic sort of stagflation, airy situation where you get lower growth and inflation persists. 

00:27:47 Speaker 2 

It’s a bunch of bad options right now. 

00:27:49 Speaker 2 

And I think to the. 

00:27:50 Speaker 2 

.3 burgers making it. 

00:27:51 Speaker 2 

Earlier you know this Ray Dalio piece that he’s published as a blog on LinkedIn? 

00:27:56 Speaker 2 

He said look what you want. 

00:27:57 Speaker 2 

Is a fed. 

00:27:58 Speaker 2 

That is alert at the wheel and gently applies the accelerator or the brakes based on what’s happening. 

00:28:05 Speaker 2 

And instead what we had is the thread was asleep at the wheel. 

00:28:09 Speaker 2 

They should have started reacting gently to inflation last summer. 

00:28:12 Speaker 2 

Instead, they waited nine months and now they’re slamming on the brakes. 

00:28:17 Speaker 2 

And this is a bunch of bad options. 

00:28:19 Speaker 2 

I think we, you know. 

00:28:20 Speaker 2 

We are going to have a recession. 

00:28:21 Speaker 1 

The way this one right? 

00:28:23 Speaker 1 

Here just make. 

00:28:23 Speaker 1 

One suggestion I want to put this out there ’cause. 

00:28:25 Speaker 1 

I sent it on our text tonight. 

00:28:27 Speaker 1 

Anyone that’s listening in, DT, please think about how we can change the way the Federal Reserve operates. 

00:28:35 Speaker 1 

But it doesn’t make sense to have humans with subjectivities applying their subjectivity to a set of, as Jamal pointed out, infrequent data that comes in chunks. 

00:28:46 Speaker 1 

It comes in spurts and only having a mechanism of changing rates by 25% each month or price 25 basis points once a month, we could have. 

00:28:55 Speaker 1 

Continuous real time monitoring of economic data. 

00:29:00 Speaker 1 

And software or AI or some sort of informed set of models should then predict what inflation and economic growth rates will be. 

00:29:08 Speaker 1 

As that data comes in react in real time. 

00:29:11 Speaker 1 

And on a. 

00:29:12 Speaker 1 

Daily basis, we should be adjusting the overnight rate in A1 basis point increments so we can have the ability to more quickly, more efficiently. 

00:29:20 Speaker 1 

And in a. 

00:29:21 Speaker 1 

And two way, a smoother way at a. 

00:29:22 Speaker 3 

Yes, smooth it out. 

00:29:24 Speaker 1 

Higher resolution when they use adjustments, it’s silly that we’re still operating the way we did in a pre. 

00:29:28 Speaker 1 

Digital age as it is with the. 

00:29:29 Speaker 1 

Lot of industries and a lot of bureaucracy, but in this case it’s particularly prudent and it’s becoming particularly important and relevant as we’re seeing right now with the stagflation risks that we’re facing will get massive inflation and recession at the same time because if we had named smaller adjustments every day for a period of time as these economic data indicated that we should be making them more. 

00:29:49 Speaker 1 

Quickly, we would not be in this problem, and I don’t think that having humans and their judgments should necessarily be. 

00:29:55 Speaker 2 

The way we drive your things. 

00:29:57 Speaker 2 

We don’t need them making daily adjustment. 

00:29:59 Speaker 2 

I don’t think the Fed can fine tune an outcome like. 

00:30:01 Speaker 2 

That I just think that they can’t. 

00:30:02 Speaker 2 

Be asleep at the wheel for nine months. 

00:30:03 Speaker 1 

I feel good. 

00:30:04 Speaker 1 

I mean, we should have AI running this pregnancy, I mean. 

00:30:06 Speaker 2 

Listen, I I don’t, I actually don’t think we when you said that, you know Congress needs to somehow change that the way the Fed does business. 

00:30:13 Speaker 2 

I actually think that the Fed has the correct mandate, which is the dual mandate of considering inflation and unemployment. 

00:30:20 Speaker 2 

We shouldn’t be basically junking that out by adding a bunch of mandates and actually administration. 

00:30:25 Speaker 2 

Has been trying to add mandates. 

00:30:27 Speaker 2 

They basically gave the Fed a mandate around climate change. 

00:30:30 Speaker 2 

They gave them a mandate around equity. 

00:30:30 Speaker 1 

Yeah, no, I agree. 

00:30:31 Speaker 1 

Don’t change. 

00:30:32 Speaker 1 

Change the mandate. 

00:30:33 Speaker 2 

They’re happy multi variable. 

00:30:33 Speaker 1 

Don’t take them in. 

00:30:36 Speaker 1 

Plus the tools the tools suggest, yeah, right. 

00:30:40 Speaker 2 

We really want to focus fed, and I think the administration has been politicizing the Fed by giving you a bunch of mandates. 

00:30:46 Speaker 2 

Look, if you want to pursue those. 

00:30:48 Speaker 2 

Policies do it. 

00:30:48 Speaker 2 

In a chase that stood in the. 

00:30:49 Speaker 2 

Interior Department don’t. 

00:30:51 Speaker 2 

Basically, confuse the Fed and make them. 

00:30:53 Speaker 2 

Pursue climate change. 

00:30:55 Speaker 2 

Or equity or what have you, I mean. 

00:30:56 Speaker 2 

Is this that that is not there read met? 

00:30:59 Speaker 2 

Right, so there were met is controlling inflation. 

00:31:02 Speaker 2 

I really think this just comes down to the fact that for nine months they sat on their hands and ignored the inflation evidence. 

00:31:08 Speaker 2 

Remember this word? 

00:31:09 Speaker 2 

You know, we heard so much last year about inflation being transitory. 

00:31:13 Speaker 2 

How did they know that? 

00:31:14 Speaker 2 

You know, why didn’t they start rethinking? 

00:31:17 Speaker 2 

This quantitative easing. 

00:31:18 Speaker 1 

The headline from the Wall Street Journal says at all how the inflation rate is measured 477 government workers. 

00:31:24 Speaker 1 

On grocery stores. 

00:31:25 Speaker 1 

Yeah, software should be taking data from different feeds, and software can learn more if you steal it. 

00:31:32 Speaker 1 

What are the predictors of inflation and? 

00:31:34 Speaker 1 

What are the predictors of growth? 

00:31:35 Speaker 1 

And make a recommendation. 

00:31:37 Speaker 1 

I don’t agree with you that it needs to be real time. 

00:31:39 Speaker 1 

In fact, I think it would do more harm than good. 

00:31:41 Speaker 1 

But I do think that we can know these things without tampering in such a porous way. 

00:31:47 Speaker 1 

And you know, you can work with private companies to give you the seed of data to allow you to do it. 

00:31:53 Speaker 1 

And now you know we’re going to. 

00:31:55 Speaker 1 

Look, we’ve had a system of over correcting and under correcting for years. 

00:32:00 Speaker 1 

The problem is the state gets higher and higher as the economy grows and becomes more complicated. 

00:32:05 Speaker 1 

And we have more leverage and we have more leverage and we have more industries that are leveraged and more assets classes that are leveraged like housing because you see here if you’re all. 

00:32:13 Speaker 1 

Even a few. 

00:32:15 Speaker 1 

Points you can thank everybody I. 

00:32:17 Speaker 1 

Also want to tell you guys a quick story. 

00:32:20 Speaker 1 

One of the most interesting Canaries in the coal mine of all of this was two days ago. 

00:32:25 Speaker 1 

And what happened to Facebook? 

00:32:30 Speaker 1 

And this sort of ties a lot of this stuff together in terms of like economics, inflation, asset prices, equities tax. 

00:32:37 Speaker 1 

Which means that we can try to talk about non sort of you know big text but the everybody was saying oh gosh the markets gonna rip on the open you know we. 

00:32:47 Speaker 1 

Were closed for Juneteenth. 

00:32:49 Speaker 1 

And then on Tuesday. 

00:32:50 Speaker 1 

The market, you know, the S&P was up like 250 basis points 2.5% and the NASDAQ was also up, you know, call it maybe trainer basis points roughly, but Facebook was down like 400 points, right? So it’s a big spread. 

00:33:04 Speaker 1 

And why is that? 

00:33:05 Speaker 1 

And I was like this. 

00:33:06 Speaker 1 

No sense to me. 

00:33:07 Speaker 1 

What is going on with this price ashes? 

00:33:08 Speaker 1 

Everything without Apple was up, Google was up, and so I called around and you know, I was like, why is this happening? 

00:33:15 Speaker 1 

And this is the best explanation I got. 

00:33:18 Speaker 1 

When you look at who the incremental buyer is in the stock market, it tends to give you a sense of whether prices can go up or will continue to go down. 

00:33:28 Speaker 1 

And the forced, informed buyer tends to be retailed and the most informed buyer tends to be these very large institutional hedge funds. 

00:33:39 Speaker 1 

Right. So there’s a spectrum. 

00:33:41 Speaker 1 

And Facebook is an example of one of the big tasks that is poorly owned by retail. 

00:33:48 Speaker 1 

So it’s mostly owned by smart money. 

00:33:51 Speaker 1 

And the case that smart money makes grown in Facebook is that it’s got an extremely cheap price to earnings ratio, so you must own it. 

00:34:00 Speaker 1 

And what they said was that they, you know, looking at the names of consumer demands, what they actually we underwrote was that act. 

00:34:08 Speaker 1 

The It’s not that the price to earnings were cheap, it’s that’s the E in PE was just wrong. 

00:34:14 Speaker 1 

And if they pass through all of these increases in inflation and you know, their earnings expectations into Facebook, it’s actually more like fair value at a lower price. 

00:34:23 Speaker 1 

That’s why they sold us so much on a day where the market was up. 

00:34:26 Speaker 1 

Now why? 

00:34:27 Speaker 1 

Is that important? Well. 

00:34:29 Speaker 1 

Eventually, you’re going to touch all these other thoughts as well that are gonna go through earnings revisions in this recession. 

00:34:35 Speaker 1 

This is where I think Wall Street is done. 

00:34:37 Speaker 1 

Is very poor job on behalf of retail. 

00:34:40 Speaker 1 

If you look at the average estimates of earnings, you will be shocked to hear that Wall Street actually has this year being record earnings next year. 

00:34:49 Speaker 1 

Earnings continue to go up. 

00:34:52 Speaker 1 

How is that possible? 

00:34:54 Speaker 1 

How is? How is the? 

00:34:55 Speaker 1 

Inflicted injury how can you see how? 

00:34:58 Speaker 1 

Do you see? 

00:34:59 Speaker 1 

Earnings continue to go up into these print prices. 

00:35:02 Speaker 1 

When you cannot. 

00:35:02 Speaker 1 

Pass through. 

00:35:04 Speaker 1 

You know, 8090% increases in energy and cogs and whatnot. How? 

00:35:09 Speaker 1 

Yeah I think the the what people would say is maybe they’re going to lower their costs and so with layoffs and and lowering salaries and lowering spend on advertising you know the earning the E could go up if people because start belt tightening and then we start having companies that are being run. 

00:35:26 Speaker 1 

You know, just more for the bottom you. 

00:35:29 Speaker 1 

Are you want you have to sell fewer things ’cause they’ll be fewer people with jobs to buy things. 

00:35:34 Speaker 1 

But we have 10 million job openings, so this is the weird thing about this recession is because we haven’t met a lot of people immigrate. 

00:35:39 Speaker 1 

Into the country but. 

00:35:41 Speaker 1 

It means that you have so many jobs. 

00:35:41 Speaker 3 

And is that? 

00:35:42 Speaker 1 

Is that what you think the consensus view on Wall Street is that basically a bunch of people get fired and so that’s why earnings continue to go up? 

00:35:46 Speaker 3 

I don’t know. 

00:35:49 Speaker 1 

Well, they stopped hiring for two years in advance, right? Facebook said they were hiring for like 2024. Their hiring plans were looking at. 

00:35:56 Speaker 1 

Two years. 

00:35:57 Speaker 1 

So now they go on a hiring freeze. 

00:35:59 Speaker 1 

Maybe there’s their number. 

00:36:00 

I’m going to give you like. 

00:36:01 Speaker 1 

I’ll give you the theory. 

00:36:02 Speaker 1 

I’ll give you the counterfactual. 

00:36:04 Speaker 1 

I think well since long, OK. And I think that earnings are going to go down this year and will definitely go down in 23. 

00:36:11 Speaker 1 

And so I think what probably happens is the entire world of equities needs to get repriced at a lower price and in that it’s going to put enormous pressure on these cash burning non profitable tech companies. 

00:36:25 Speaker 1 

Well that’s for sure. 

00:36:25 Speaker 1 

But in the ones that are profitable, Tomas, they’re aware of this. 

00:36:28 Speaker 1 

Facebook just canceled like two of their prototypes they were working on. 

00:36:31 Speaker 1 

To save money. 

00:36:32 Speaker 1 

So that pulled $10 billion into. 

00:36:34 Speaker 1 

You know, VR, I think they’re trying to make that number looks more smaller. 

00:36:39 Speaker 1 

What do you think? 

00:36:40 Speaker 2 

Well, I think. 

00:36:41 Speaker 2 

You bring up a really interesting point with the 10 million, you know, job openings and what now that that number is coming down really fast as companies close open racks and they basically freeze hiring. 

00:36:52 Speaker 2 

So that number is going to come down. 

00:36:53 Speaker 2 

Very very fast. But. 

00:36:55 Speaker 2 

One of the major contributors to inflation is. 

00:36:58 Speaker 2 

That the labor force participation has been very low. About millions of people left the labor force during COVID as a result of the stimulus checks and the freezing of rents and evictions, and left rents enough people to #1 expense. 

00:37:12 Speaker 2 

They don’t have to pay rent for a couple of years. 

00:37:14 Speaker 2 

A lot of them may not work or may not work as much. 

00:37:16 Speaker 2 

So we’ve had this problem. 

00:37:18 Speaker 2 

Where we really need about 2 million people to reenter the labor force, and if you describe inflation as too much money chasing too few goods, we need to increase production and productive capacity. 

00:37:31 

And when you. 

00:37:32 Speaker 2 

Have millions of people dropping out labor force. 

00:37:34 Speaker 2 

You’ve got less goods and services being produced by people. 

00:37:37 Speaker 2 

One, so just reducing the money supply is not going to get us out of this mess. 

00:37:42 Speaker 2 

We also need to improve productive capacity. 

00:37:46 Speaker 1 

Just to put a number on that, we peaked in the 1999 era, 67% of participation in labor force and then it’s pinned down in this low 6 and 6162 and it continues. 

00:37:58 Speaker 1 

Very low, but that is the solution here we. 

00:37:59 Speaker 1 

Get that 7%, that gap? 

00:38:02 Speaker 1 

You could. 

00:38:02 Speaker 2 

Attention is the demand side because if all you do is fix the demand side, what you’re doing is you’re killing the economy to reduce demand in order to bring it down prices. 

00:38:03 Speaker 1 

This evidence. 

00:38:11 Speaker 2 

That’s very painful. 

00:38:13 Speaker 2 

It’s all paint, but we also do is fix the supply side. 

00:38:16 Speaker 2 

You have to increase the availability of all the critical inputs into the economy. 

00:38:21 Speaker 2 

So Labor obviously is one of them. 

00:38:23 Speaker 2 

But also critical resources like energy, you know, oil, natural gas and so on. 

00:38:29 Speaker 2 

And that goes back to fixing. 

00:38:30 Speaker 2 

The supply chain, hopefully. 

00:38:31 Speaker 2 

Getting a resolution of the situation. 

00:38:33 Speaker 2 

In Ukraine, the war. 

00:38:35 Speaker 2 

So if we could fix those things. 

00:38:37 Speaker 2 

And some ways to improve. 

00:38:38 Speaker 2 

The economy without creating more pain. 

00:38:40 Speaker 1 

Freeburg if the prices of just daily living, of which transportation and housing and healthcare are now the top three, I believe. 

00:38:48 Speaker 1 

Groceries and health care and they have flip-flopped a couple times. You want decade. 

00:38:52 Speaker 1 

In terms of cost, if those things go? 

00:38:54 Speaker 1 

Uh, would that make people want to go back to work to pay for those things? 

00:38:58 Speaker 1 

Or does it create capitulation without moving in with my cousin? 

00:39:01 Speaker 1 

I’m going to lower my balance sheet. 

00:39:02 Speaker 1 

What is your prediction? 

00:39:03 Speaker 1 

There are more people going to go to work or do we still have this, you know, call it 10 million people in the. 

00:39:08 Speaker 1 

Country who just don’t want to go to. 

00:39:10 Speaker 1 

I’ve mentioned this in the past, but I think there’s more. 

00:39:14 Speaker 1 

There’s another kind of interesting outcome of this. 

00:39:16 Speaker 1 

We’ve had several months in a row of pretty significant increase in consumer credit. 

00:39:22 Speaker 1 

And I think the reason is things are getting more expensive. 

00:39:26 Speaker 1 

People generally do not like to reduce their spend on stuff or they’re living their lifestyle. 

00:39:34 Speaker 1 

Once you get used to a lifestyle like going out to dinner once a week or going to the movies every weekend and you create a budget and create makes a life experience around. 

00:39:41 Speaker 1 

That model around that, it’s very hard to say, OK, I gotta cut budget now and I got to reduce my life. 

00:39:46 Speaker 1 

I would rather say I’m gonna keep doing that at least. 

00:39:48 Speaker 1 

There’s some inertia out, some momentum to keep standing on the things that you’ve been spending. 

00:39:53 Speaker 1 

On and the way you do that. 

00:39:55 Speaker 1 

In a model where you don’t have as much income or you have less income and things are getting more expensive as you take on more debt. 

00:40:00 Speaker 1 

And so there is a little bit of a nervousness that I have had that people respond generally the consumer response to inflation and Tyra kind of a, uh shifting. 

00:40:16 Speaker 1 

At least some. 

00:40:17 Speaker 1 

Environment like this is not necessarily to cut. 

00:40:21 Speaker 1 

As quickly but take on more debt and keep keep buying and so I am a little nervous about that. 

00:40:26 Speaker 1 

But I do think obviously at some point everyone has to figure out ways to generate income. 

00:40:30 Speaker 1 

There have been a lot of these kind of ancillary markets that are typically the first example, these extra services markets where people you know have found other ways to make money side hustles. 

00:40:41 Speaker 1 

And whatnot. 

00:40:42 Speaker 1 

That may or may not be as robust as they have been historically, and so people may need to go back for more secure, stable income. 

00:40:51 Speaker 1 

And then these jobs get filled. 

00:40:53 Speaker 1 

I mean as we all know, there’s an opportunity and and this is the whole concept I think behind build back better. 

00:40:59 Speaker 1 

It’s not super thoughtful in terms of the approach, I think based on my understanding of where that money is supposed to go because it doesn’t create long term jobs, but there is. 

00:41:09 Speaker 1 

An opportunity to build. 

00:41:12 Speaker 1 

New manufacturing and new infrastructure jobs in the US right now that could enable a healthy transition here. But that legislation needs to be done smart. But it can’t be done with this. Like, hey, let’s build a bunch. 

00:41:22 Speaker 1 

Bridges and then a bunch of contractors make a bunch of money and no one has any long term jobs out of it. 

00:41:26 Speaker 1 

We’ve got to find ways to spend money on creating long term sustainable you? 

00:41:31 Speaker 1 

Know new industry here. 

00:41:33 Speaker 1 

Yeah, job openings, 11.4, it’s come down about 6:00 or 7%. So you know it’s going to be trailing, but it’s for sure we’re seeing it in our industry with the hiring freezes. 

00:41:43 Speaker 1 

That’s the, you know, we’re going to work through those open jobs. 

00:41:47 Speaker 1 

What are the chances that inflation gets under control in the next year? 

00:41:51 Speaker 1 

And should the sub go for like the 1% slam on the brakes, there was some talk about that obviously they. 

00:41:57 Speaker 1 

Because a lot of remember a lot of the elements that we were kind of saying, Oh my God, I can’t believe with climate crisis. So, you know, wheat is down, I think 30%, lumber is down 50%. 

00:42:09 Speaker 1 

Gas prices are coming down, so you know there are some of these, you know commodity spikes that we’ve experienced over the past couple of quarters, particularly recently that are really that have had a significant part of the fueling effect on the inflationary trickle down into ultimately end products and whatnot and those. 

00:42:29 Speaker 1 

Coming down, you know, there’s there’s a real question of how quickly that flows through the economy flows through to the price of goods. 

00:42:38 Speaker 1 

That that consumers ultimately end up paying for the gas prices right now are the biggest concerns, right? 

00:42:44 Speaker 1 

Like unless you can get gas prices under control, that always, always has a massive impact on spending on consumer spending, which provides a recessionary cycle. 

00:42:54 Speaker 1 

And so that if I’m the Biden administration, I’m first and foremost. 

00:42:58 Speaker 1 

I don’t care about the general inflationary indicators as much as I care about getting the price of gas down. 

00:43:02 Speaker 1 

That is a super, super critical number of subjects. 

00:43:05 Speaker 1 

Is this these gas prices going to change how Americans look at Rock RV by because it’s right here and last time we had that that people started looking at not buying SUV’s. 

00:43:16 Speaker 1 

Could have $7.00 gas. 

00:43:18 Speaker 1 

Oh, I see. There was a picture actually I created in California. There was a $7.11, yes. 

00:43:22 Speaker 1 

Broadly, we could have $7.00 gas all throughout the country. 

00:43:25 Speaker 3 

Bye, bye. 

00:43:27 Speaker 1 

But JSL, we remember, but the average automotive automobile in the US lasts for 12 years. That’s how often people change out their cars. 

00:43:35 Speaker 1 

So that’s 8% of the fleet being changed per year? Yep. And the interest rates for auto loans have spiked like crazy now with this change. 

00:43:42 Speaker 1 

In the Fed rates. 

00:43:43 Speaker 1 

And as a result, the delinquency on auto loan portfolio test spikes like crazy. 

00:43:49 Speaker 1 

And so, you know, yes, sure, theoretically people will think about buying an electric car, but most people aren’t thinking about that on average for five or six years from now. 

00:43:57 Speaker 1 

’cause, that’s the average of a 12 year. 

00:43:58 Speaker 1 

Cycle right by five years from now. 

00:44:00 Speaker 1 

Wait for all these toys and bikes need to. 

00:44:01 Speaker 1 

Get represents well. 

00:44:03 Speaker 1 

All these, actually. 

00:44:04 Speaker 1 

The wait for cars in the overpricing of cars has ended in the last two months. 

00:44:08 Speaker 1 

And there are multiple cars now in the market, 2530 K for A50 plus mile per gallon car. 

00:44:13 Speaker 1 

I think this is actually one of the Silver Linings coming out of this is people might actually stop buying as many STD’s or, you know, I think our average is in the low 20s right now in Europe is in the high 40s. The problem is like, you know, every other for miles per gallon. 

00:44:26 Speaker 1 

Part of the government. 

00:44:29 Speaker 1 

Acknowledges that you have to really ring, fence and protect consumers, right? 

00:44:34 Speaker 1 

Like if you look at the securities laws, they’re meant to protect them at all costs. 

00:44:38 Speaker 1 

And Jason, you know, you’ve been frustrated by some of the rules that haven’t changed, and when they change, they change so slowly. 

00:44:45 Speaker 1 

But the reason is because sometimes that we want people to make good decisions. 

00:44:49 Speaker 1 

And if, you know, give them a bunch of firepower, they’re just going to spend it. 

00:44:54 Speaker 1 

And you know, what we really did was we gave folks just a ton of money. 

00:45:00 Speaker 1 

And what did they do? 

00:45:01 Speaker 1 

They acted rationally. 

00:45:02 Speaker 1 

They spent it. 

00:45:04 Speaker 1 

Yeah, now we have to. 

00:45:05 Speaker 1 

Take it all back and that’s that’s. 

00:45:08 Speaker 1 

I don’t think. 

00:45:08 Speaker 1 

That’s going to be as easy or as simple as people think. 

00:45:13 Speaker 1 

What percentage of the money? 

00:45:14 Speaker 1 

Supply do you think is in excess right now? 

00:45:16 Speaker 1 

In the United States, so if I told you this. 

00:45:18 Speaker 1 

’cause I wrote. 

00:45:18 Speaker 1 

This in my annual letter, but it’s. 

00:45:19 Speaker 1 

It’s stunning that. 

00:45:20 Speaker 1 

You know. 

00:45:21 Speaker 1 

The reason the. 

00:45:21 Speaker 1 

Stock Market went up, dollar for dollar was. 

00:45:24 Speaker 1 

Asked, I said their growth in the M2 money supply. The correlation was .92. So for every dollar that’s that. That’s the sad printed, the stock market went up by $0.92. 

00:45:37 Speaker 1 

So, you know it stands. 

00:45:38 Speaker 1 

To reason that if the Fed is going to take 3 to $5 trillion of value out, then we have to rewrite the equity markets by three to $5 trillion at a minimum. 

00:45:47 Speaker 1 

And then you have to re rate and re baseline for earnings and so that’s probably another 20 or 30. 

00:45:52 Speaker 1 

Percent, but it’s. 

00:45:52 Speaker 1 

Again, yeah, let’s talk about the end game here, the race. 

00:45:56 Speaker 1 

Go up. 

00:45:56 Speaker 1 

People stop buying homes. 

00:45:58 Speaker 1 

People go back to work. 

00:46:00 Speaker 1 

And energy prices come back down because people are not. 

00:46:04 Speaker 2 

Buying as much. 

00:46:05 Speaker 1 

Of it. 

00:46:06 Speaker 1 

Spending goes down and people rebalance and that takes a year. 

00:46:09 Speaker 1 

The job openings could also disappear, by the way. 

00:46:11 Speaker 1 

I mean like. 

00:46:12 Speaker 1 

Going down 400,000 a month. 

00:46:14 Speaker 1 

You’re you’re assuming that all of a sudden like demand is stable, but it’s not necessarily stable and. 

00:46:20 Speaker 1 

And his demand contraction, yes, people get fired, but then also new job openings scenes, right? 

00:46:25 Speaker 1 

There’s fewer of them there. 

00:46:27 Speaker 1 

They’re more specific in the way that. 

00:46:29 Speaker 1 

Salaries go down, right? But that’s the idea. That’s the piece I’m waiting for that to me that would be. I don’t know if you guys have early warning signs, but the two early warning signs I have in my, you know, job of investing early stage companies is when people know $1000. 

00:46:43 Speaker 1 

If that hasn’t gone down by. 

00:46:46 Speaker 1 

Now then it travels up. 

00:46:46 Speaker 2 

There’s that’s a lagging indicator, right? 

00:46:49 Speaker 1 

But that would be, to me, capitulation. 

00:46:50 Speaker 1 

Salaries go down, or people instead of laying people off. 

00:46:53 Speaker 1 

That’s they do. 

00:46:55 Speaker 1 

A salary cuts out a company that is really hard to do right. 

00:46:58 Speaker 1 

That’s normally or liquid in some preferences and deals. 

00:46:58 Speaker 2 

Yeah, I don’t. 

00:46:59 Speaker 2 

I don’t think they do salaries. 

00:47:01 Speaker 2 

Right. 

00:47:02 Speaker 2 

I think the way the salaries come down is that startups freeze their hiring plans or they lay people off, and all of a sudden the war for talent subsides easier to hire people, and so there’s no need to keep raising up salaries. 

00:47:12 Speaker 1 

Are you Tina? 

00:47:14 Speaker 2 

Yeah, I think we’re seeing the beginning of. 

00:47:16 Speaker 2 

But I gotta tell you, I mean, I think that startups have not. 

00:47:20 Speaker 2 

Fully embraced or realized what’s what’s happening? 

00:47:23 Speaker 2 

I just got back from the coaches. 

00:47:26 Speaker 2 

Days this was an. 

00:47:27 Speaker 2 

Event that was hosted by Cocu you know, whose founders are sleep and Thomas Lafont. 

00:47:33 Speaker 2 

Very smart guys, very smart investors who’ve been public market sort of hedge fund investors for a long time, but also have a large central fund of these rotations that string. 

00:47:42 Speaker 2 

Some of the takeaways from that conference, some of the more vivid lines that stuck with me, is that one of the speakers said that? 

00:47:51 Speaker 2 

He said that when? 

00:47:52 Speaker 2 

It comes to runway for startups. 

00:47:54 Speaker 2 

Three to four years is the new two years, because if you just have two years of runway, you’re going to need to raise in a year and in a year from now. 

00:48:03 Speaker 2 

We’re getting over recession, they’re predicting their forecasting that capital availability is going to decline about 75%. The amount of money that’s venture money that’s available to ecosystem down by three. 

00:48:14 Speaker 2 

So if you try to raise in that environment either, you’re not gonna be able. 

00:48:18 Speaker 2 

To or investors? 

00:48:19 Speaker 2 

Are going to, you know, have all the leverage, you’re not going to get terms that you like? 

00:48:23 Speaker 2 

So they were recommending three to four years of runway. 

00:48:26 Speaker 2 

So that is not what I think a lot of companies are planning for it, right? 

00:48:28 Speaker 1 

That’s that’s just not even possible. 

00:48:31 Speaker 2 

The other thing that the other really doesn’t take away is that they did some polling of the startup founders who were in attendance. 

00:48:38 Speaker 2 

OK. 

00:48:39 Speaker 2 

And what the numbers basically showed is a is a contradiction. 

00:48:43 Speaker 2 

On the one hand, the founders sort of understood that intellectually that we’re headed into a downturn register assessment. 

00:48:50 Speaker 2 

And so the polling reflected that. 

00:48:52 Speaker 2 

On the other hand, if you ask the founders how they’re going to react to it, what are you going to do about it? 

00:48:56 Speaker 2 

Gonna try to head count or you going to accelerate your business? 

00:48:59 Speaker 2 

To be competitive, everybody said, well, we’re going to. 

00:49:01 Speaker 2 

Out accelerate our competitor. 

00:49:02 Speaker 2 

So everybody thought that there is the exception. 

00:49:05 Speaker 2 

In other words, everyone understood we’re headed for this massive recession. 

00:49:08 Speaker 2 

This can be really bad, but we’re going to be the one company that doesn’t need to cut rational grow. 

00:49:13 Speaker 2 

We’re going to accelerate during the downturn. 

00:49:14 Speaker 2 

So there was a real contradiction in how founders are interpreting this advice. 

00:49:20 Speaker 2 

And I have to tell you when I talk to founders. 

00:49:23 Speaker 2 

In our own portfolio, what I see is, you know, we’ve now done multiple meetings where you lay out what’s happening in the economy. 

00:49:29 Speaker 2 

And they get it. 

00:49:30 Speaker 2 

They under. 

00:49:30 Speaker 2 

Stand it. 

00:49:31 Speaker 2 

And when we do a board meeting, they’re like, OK, we’re gonna go look at our plan and we’re going to re-evaluate and we’re going to make major cuts were gonna bring out burn multiple down to, you know. 

00:49:39 Speaker 2 

The where it should be. 

00:49:40 Speaker 2 

But then you. 

00:49:41 Speaker 2 

Know when you check in with them a couple. 

00:49:42 Speaker 2 

Of months later and you’re. 

00:49:43 Speaker 2 

Like, where are you on the player? 

00:49:44 Speaker 1 

Haven’t take the medicine. 

00:49:45 Speaker 2 

It’s or or. 

00:49:47 Speaker 2 

The medicine is like a 10. 

00:49:48 Speaker 2 

Percent cut and I’m like, I it’s like 10% of performance. 

00:49:51 Speaker 1 

Yeah, like you should be doing every year anyway. 

00:49:52 Speaker 2 

Nothing for you. 

00:49:54 Speaker 3 

Yeah, you get. 

00:49:55 Speaker 2 

Rid of the the bottom because see. 

00:49:56 Speaker 2 

Performers you promote. 

00:49:57 Speaker 2 

The amps eager to see so. 

00:49:59 Speaker 2 

No one really wants to take. 

00:50:01 Speaker 2 

The medicine yet? And you? 

00:50:03 Speaker 2 

Know it’s a problem. 

00:50:04 Speaker 2 

Only Sequoia has this great chart called survival of the quickest that we should put up on the screen, and it shows 2 lines. 

00:50:10 Speaker 2 

One company is the one that takes the medicine right away. 

00:50:13 Speaker 2 

Brings her burn down to where? 

00:50:14 Speaker 2 

It should be and. 

00:50:15 Speaker 2 

Then they’re able to. 

00:50:16 Speaker 2 

Go from there and they really will out accelerate the competitors. 

00:50:19 

But then there’s the. 

00:50:20 Speaker 2 

Company that basically delays in ways. 

00:50:23 Speaker 2 

And what happens is by the time they finally get religion to make the cuts, it’s too late. 

00:50:28 Speaker 2 

Because even after they make. 

00:50:29 Speaker 2 

The cut they don’t have. 

00:50:30 Speaker 2 

Enough runway on the other sides. 

00:50:31 Speaker 1 

She’s here in the capital, yeah. 

00:50:32 Speaker 2 

They burn the capital and then they’re in a death spiral. So I think, you know, what companies need to think about is this is a 75% reduction. 

00:50:39 Speaker 2 

Imagine if you did $100 million round last year, right? If you go try to raise next year most recession, that $100 million round might look like a $25 million round. 

00:50:50 Speaker 2 

So imagine if you’re burning. 

00:50:52 Speaker 2 

An extra 25 to 50. 

00:50:53 Speaker 2 

Million more than you should be, according to. 

00:50:55 Speaker 2 

Your born multiple. 

00:50:56 Speaker 2 

You’re basically burning the Nets. 

00:50:57 Speaker 2 

Now forget about the fact that the last round gave you all this cushion. 

00:51:01 Speaker 2 

Think about how much of the next round you’re burning, and if you re or you’re thinking around that, it could lead to a. 

00:51:07 Speaker 1 

Change of behavior Hannah Crowley. 

00:51:10 Speaker 1 

I’m seeing people come back. 

00:51:13 Speaker 1 

From rounds where they were expecting 40 or $50 million in some cases, like with 250K in revenue, 500K in revenue, they were living in a 203 hundred times revenue kind of world. 

00:51:26 Speaker 1 

It was just. 

00:51:27 Speaker 1 

Insane. And you know they’re now coming back with $10 million caps, $15 million caps. 

00:51:33 Speaker 1 

On their notes. 

00:51:34 Speaker 1 

I was offered $100 million. 

00:51:39 Speaker 1 

Coming in. 

00:51:39 

Get to 65. 

00:51:40 Speaker 2 

And that’s the best property. 

00:51:42 Speaker 1 

That’s literally the best company in Gossipers and the best founders to bet on right of probably most private companies. 

00:51:48 Speaker 1 

You don’t like that valuation. What is that valuation 40, that’s 50% off I it’s it’s less of a judgment, but it’s just more an observation that we’re at the beginning of the beginning. 

00:51:59 Speaker 1 

I I couldn’t work the beginnings of the beginning, OK, for all of us that lived through 2000. 

00:52:06 Speaker 1 

This was four years of sheer health and grind. 

00:52:11 Speaker 1 

Now we have $30 trillion that we have to work through the economy. A recession we have to overcome, a war we need to end. 

00:52:19 Speaker 1 

And people all of a sudden assume that two or three rate hikes and five or six months of headlines are enough. 

00:52:26 Speaker 1 

And on the margin, maybe they’re right, but from my perspective, you know, it’s less a judgment on, but it’s just an observation that we’re at the. 

00:52:33 Speaker 1 

Beginning of something. 

00:52:35 Speaker 1 

That just fundamentally has to take. 

00:52:37 Speaker 1 

Some amount of time. 

00:52:38 Speaker 1 

To work at race through the system. 

00:52:39 Speaker 1 

And so I don’t understand why anybody would give up their liquidity in this moment right now. 

00:52:45 Speaker 1 

Why would you, why would I, why would I give up? 

00:52:47 Speaker 1 

$100 million of cash in my bank, here I. 

00:52:49 Speaker 1 

Would not do that risk. 

00:52:50 Speaker 2 

Does the cash, the casket, the cashier’s? 

00:52:52 Speaker 2 

You so much optionality, it’s basically. 

00:52:54 Speaker 1 

Tell Mike optionality. 

00:52:55 Speaker 2 

So you’re going to be looking for distress, and this is the thing. 

00:52:58 Speaker 2 

So you have. 

00:52:59 Speaker 2 

A huge amount of capital leading the ecosystem like we know Tiger is basically out. 

00:53:03 Speaker 2 

I mean they were the basically the default provider of growth stage capital in the last couple of years. 

00:53:08 Speaker 2 

So do you have a lot of liquidity leaving? 

00:53:11 Speaker 2 

Similar study that the new system is waiting. 

00:53:13 Speaker 2 

For distress, so you’re right. 

00:53:14 Speaker 3 

I don’t know. 

00:53:16 Speaker 1 

Does this quarter, I mean, like we talked about, there’s a quarter trillion dollars of quote UN quote dry powder. I mean, I know some. 

00:53:20 Speaker 1 

Of things that. 

00:53:21 Speaker 1 

People are going to give that money back, but. 

00:53:23 Speaker 3 

Seems like. 

00:53:27 Speaker 1 

They’re not going to give it back. 

00:53:28 Speaker 1 

Tyson support. Yeah, look. 

00:53:29 Speaker 2 

At that tiger Fund, Tiger raised a new $12 billion fund that was announced in March and TechCrunch. 

00:53:36 Speaker 2 

We covered it on the show a month ago. 

00:53:37 Speaker 2 

Yeah, check Russian article saying is already deployed in six months. 

00:53:41 Speaker 2 

So I. 

00:53:41 Speaker 1 

Wasn’t on that. 

00:53:42 Speaker 2 

Oh, that was the one where it works you, Jake. 

00:53:44 Speaker 2 

I’ll try to replace you with crackers. 

00:53:45 Speaker 1 

Michelle Weekly going forward. 

00:53:50 Speaker 1 

OK. 

00:53:50 Speaker 2 

That’s a good point. Sacrifices for a second. You said the founders were. They’re so anchored on. This world is 2 to 300 times error evaluations. 

00:53:59 Speaker 2 

We need to tell you where the new valuation levels are and this is obviously in flux, but I’m pretty sure the valuation levels are at 20 to 30 times they are. That’s where a company that’s growing 3X year over year. 

00:54:10 Speaker 2 

Over year. 

00:54:10 Speaker 2 

That’s the best. The best. 

00:54:12 Speaker 2 

The reason how you get there? 

00:54:12 Speaker 1 

So that’s like 10X next year? 

00:54:14 Speaker 1 

There, I said yes, exactly, and and. 

00:54:16 Speaker 2 

The way that you get there is that if you look at like. 

00:54:19 Speaker 2 

The the multiples for like the best public SaaS companies that are like, say, a 40% grower like a snowflake. 

00:54:26 Speaker 2 

Stare at 8X. 

00:54:27 Speaker 2 

So, you know, so basically it’s like. 

00:54:29 Speaker 1 

Give more credit for the higher growth. 

00:54:31 Speaker 2 

I rub he’s right. 

00:54:32 Speaker 1 

Rate, yes. 

00:54:33 Speaker 2 

But they really have to have that for export. 

00:54:35 Speaker 2 

So, you know, if you’re a founder, think about the fact that when you try to go raise next year, assuming you’re the best, the best you’ll get. 

00:54:43 Speaker 2 

20 to 30. 

00:54:43 Speaker 2 

Times there are. 

00:54:44 Speaker 2 

Now think about your spending, not last rounds money. 

00:54:48 Speaker 2 

You’re spending the next rounds money if you get just reorient your thinking. 

00:54:51 Speaker 2 

That way you’d burn a lot less. 

00:54:54 Speaker 1 

Yeah the I literally had a deal, you know, in the 30 and 40 range and and Angel investors who never early stage Angel investors seed funds that did not look at multiples are now asking me ’cause when I send a deal memo to 10,000 people from my syndicate people hit reply. People are hitting. 

00:55:14 Speaker 1 

Reply now and saying I did the math on this. 

00:55:16 Speaker 1 

This is the multiple, this is this, this is the burn multiple. 

00:55:19 Speaker 1 

They’re actually doing the math. 

00:55:20 Speaker 1 

So we all of a sudden have discipline that I have not seen in this investor class. 

00:55:25 Speaker 1 

In the 10 years I’ve been doing it so that. 

00:55:28 Speaker 1 

Is to me. 

00:55:29 Speaker 1 

One of the great Silver Linings here. 

00:55:31 Speaker 1 

I think people are going to do a better job with their personal balance sheets. 

00:55:34 Speaker 1 

They’re going to invest less and specular stuff and they’re going to invest more in the actual builders who have disciplines. 

00:55:41 Speaker 1 

So we’re going to see this massive swing to discipline and we’re going to flush out. 

00:55:46 Speaker 1 

All the people who don’t have product. 

00:55:46 Speaker 3 

I don’t know. 

00:55:47 Speaker 1 

Marketing could think about all those folks like what’s happened in the last six months. 

00:55:50 Speaker 1 

It’s like they’ve been long unprofitable. Texas got smoked by 75 to 85%. They’ve been long crypto. That’s gotten spoked by 65% more people. 

00:56:01 Speaker 1 

I mean, if they weren’t using a calculator, then they sure as hell should be using a calculator. 

00:56:06 Speaker 1 

And have it figured out. 

00:56:08 Speaker 1 

Well, you think about it, there’s a whole group of investors who have only known the up market. 

00:56:12 Speaker 1 

There’s a whole group of founders who only another growth market. 

00:56:14 Speaker 1 

If you’re under 40 years old, you don’t understand what you’re about to experience. 

00:56:19 Speaker 1 

And here we are. Let’s let the perfect I’m just struggling into crypto bitcoins price is down 71% from the all time high 69 K in November of 2021. Bottomed out at 17,000 or so on June 18th. Experience price down 78. 

00:56:37 Speaker 1 

And if you look at the craziness since they last fall in episode, you know, this three AC, three our capital there, a crypto hedge fund that was letting people basically loan out their crypto. 

00:56:48 Speaker 1 

They are basically closing a $10 billion crypto hedge funds at its peak. They’re insolvent, according to the reports. 

00:56:57 Speaker 1 

Terra Luna collapsed. 

00:56:59 Speaker 1 

The founders and employees of that company are not being allowed to leave. 

00:57:02 Speaker 1 

S Teresa doesn’t mean they’re guilty, but it’s certainly not looking good. 

00:57:07 Speaker 1 

And then there is a whole situation with Solana and a company built on top of it, so lend, which is not salon, it’s an application built on top of it. 

00:57:16 Speaker 1 

I talked to Vinny Lingham affirmed earlier this. 

00:57:18 Speaker 1 

Week about it. 

00:57:19 Speaker 1 

They had a whale. 

00:57:20 Speaker 1 

Had tried to loan out 100 million and they had to freeze their account because they brought the downward pressure since there’s not many. 

00:57:28 Speaker 1 

Buyers in crypto right now to collapse, Alana. 

00:57:30 Speaker 1 

So thoughts on crypto writ large? 

00:57:33 Speaker 1 

What is this going to look like? 

00:57:35 Speaker 1 

Over the next year, her craft. 

00:57:36 Speaker 2 

I mean it’s like the.com crash all over again. I mean basically you have an extremely promising technology. I mean it is a promising technology and it is a future, you know technology platform, but the. 

00:57:38 Speaker 3 

Yeah, yeah. 

00:57:48 Speaker 2 

Price action got totally decoupled from the level of progress in the space and people were not. 

00:57:54 Speaker 2 

Valuing these things. 

00:57:55 Speaker 2 

Based on real customers, real usage in real use cases. 

00:57:58 Speaker 2 

But it was became, you know, very speculative. 

00:58:00 Speaker 2 

And again, all this was fueled by the access for query that was pumped into the system. 

00:58:05 Speaker 2 

So you’ve said it before that crypto is like a liquidity sponge. 

00:58:09 Speaker 2 

It sucks up and there’s a lot of excess liquidity. 

00:58:11 Speaker 2 

It sucks up that liquidity, but now that sponge is getting long out. 

00:58:15 Speaker 2 

And you know, part of the problem is with interest rates going up. 

00:58:19 Speaker 2 

You know, it’s one thing when you have negative real interest rates. 

00:58:22 Speaker 2 

And you can turn or return on your money. 

00:58:25 Speaker 2 

Then you start to get you. 

00:58:26 Speaker 2 

Basically, people start to push the envelope and invest in more and more speculative things. 

00:58:30 Speaker 2 

But as you can get a real return in, like they’ll say, there’s like a real risk free rate. 

00:58:36 Speaker 2 

Now there’s alternatives for all that cash and then you’ve got the problem of leverage as well, which I. 

00:58:41 Speaker 2 

Think over the last few weeks. 

00:58:42 Speaker 2 

The crypto space is heavily over levered and a lot of people got margin calls. 

00:58:46 Speaker 1 

And wiped out. That’s the contagion that’s occurred and people were levered up 510 times their Bitcoin on these rose token sale. Things get litigated. I mean the amount, the amount of grift by so many of these venture firms in running these. 

00:59:02 Speaker 1 

Sketchy deals where they would put in some anonymous. 

00:59:06 Speaker 1 

This is my understanding of the scams ’cause it was explained to. 

00:59:08 Speaker 1 

Be you put in. 

00:59:09 Speaker 1 

A little bit of equity at some crazy price. 

00:59:12 Speaker 1 

And then you get these tokens, and apparently there’s no like, you can just sell these tokens day one. 

00:59:17 Speaker 1 

And So what happens is, like you you price the equity, but it’s meaningless because really what you’re getting is the right to get some amount. 

00:59:23 Speaker 1 

Of these tokens. 

00:59:25 Speaker 1 

The price is crazy. 

00:59:26 Speaker 1 

You sell it and then use this kind of walk away and apparently, you know, you do these deals where you just rinse and. 

00:59:31 Speaker 1 

Repeat this thing. 

00:59:33 Speaker 1 

Wait, the wake of ashes exposed and it seems like the firm, the firm that did this the most injuries and Horowitz. 

00:59:35 Speaker 2 

I mean, Colonel. 

00:59:40 Speaker 1 

Chris Dixon, I think, was considered like the best investor last year or the year before because of all these token returns. 

00:59:47 Speaker 1 

I I gotta wonder when they go. 

00:59:50 Speaker 1 

Now that this. 

00:59:51 Speaker 1 

People are losing money with us when people start suing. 

00:59:54 Speaker 1 

I mean, what is it going to look like if they were? 

00:59:57 Speaker 1 

What do you think their marks look like that here versus right now? 

01:00:02 Speaker 1 

I mean, and all these coins, like looking back in the rear view mirror and saying, hey, you bought all these coins, you flipped some number of coins, I mean. 

01:00:11 Speaker 1 

To your point some of like what is the litigation path and? 

01:00:14 Speaker 1 

The shadow economy that was created on. 

01:00:17 Speaker 1 

There’s an. 

01:00:17 Speaker 3 

Your level. 

01:00:18 Speaker 1 

Article in I think it was in Bloomberg about folks trying to figure out how to get uh. 

01:00:25 Speaker 1 

A lawsuit filed against finance. 

01:00:28 Speaker 1 

The problem was that they didn’t even know what entity to do. 

01:00:32 Speaker 1 

It’s not clear who owns what, and you know what owns the other and who the ultimate look through ownership structure is. 

01:00:39 Speaker 1 

And and it doesn’t mean that finance is guilty or anything, but the article was just, you know, showing how there was a US investors who lost 1.2 million. 

01:00:47 Speaker 1 

Dollars who wanted to file a lawsuit, then they have every right to do that. 

01:00:51 Speaker 1 

Couldn’t even find the corporate entity to actually file this lawsuit against. 

01:00:56 Speaker 1 

So if that’s what’s happening in a trillion dollar market, there’s a lot of pain. 

01:01:02 Speaker 1 

It’s it’s a lot of oversight that’s that’s what is this going to do to regulation in crypto at this point because crypto regulators now or regulators are going to just be looking at this going wild with all the pain and suffering and when a. 

01:01:14 Speaker 1 

Local VA. 

01:01:17 Speaker 1 

Yes, you know. 

01:01:19 Speaker 1 

Five or six? 

01:01:19 Speaker 1 

Of their people complaining they lost money in Terra Luna or whatever it is. 

01:01:23 Speaker 1 

This is like the perfect opportunity for them to collect a pelt and get some crypto kid and, you know, hold them responsible and get some great headlines. 

01:01:31 Speaker 1 

What do you think happens from this point forward in the crypto land? 

01:01:35 Speaker 1 

What you just said, OK. 

01:01:38 Speaker 1 

But what about regulation? 

01:01:39 Speaker 1 

I guess that’s the next piece ’cause all of these entities have taken a. 

01:01:42 Speaker 2 

Let’s see. 

01:01:43 Speaker 1 

The SEC last July or August published this kind of initial opinion letter. 

01:01:48 Speaker 1 

But remember, there’s also the CFTC. 

01:01:50 Speaker 1 

There’s a bunch of regulatory authorities in the United States. 

01:01:53 Speaker 1 

That have a longer process than government excuse that have had a much more kind of stringent point of view that there’s a lot of casino like gambling going on with these things and that’s it. 

01:02:02 Speaker 1 

There’s no functional utility. 

01:02:04 Speaker 1 

There’s not, it’s not visited securities. 

01:02:06 Speaker 1 

If there’s no underlying business, if it’s not a security that it’s just a bet on something. 

01:02:10 Speaker 1 

If it’s a bet on something, it’s gambling. 

01:02:12 Speaker 1 

It’s, you know, obvious that. 

01:02:14 Speaker 1 

If it’s a security, it has to be governed by the SEC. 

01:02:17 Speaker 1 

If it’s a future or commodity, it’s the CFTC. 

01:02:20 Speaker 1 

And the problem is, we need Congress to pass some legislative framework that puts the puck in one side of the arena or drink or the other. 

01:02:30 Speaker 1 

And otherwise, otherwise all this Gray is going to exist for a long time, and people, you know, if if governments really hate it when retail investors lose money, will watch out because they just had $2 trillion in money sources. 

01:02:42 Speaker 1 

Have a lot of other regulators that can prosecute cases like the DFS in New York. 

01:02:48 Speaker 1 

This is the Department of Financial Services. 

01:02:51 Speaker 1 

They are a pretty litigious prosecutorial group. 

01:02:55 Speaker 1 

I mean, they go after scams and people praying on consumers and retail investors in a very aggressive way. 

01:03:02 Speaker 1 

Often outside of the purview of the FCC. 

01:03:04 Speaker 1 

They often coordinate with the DOJ or the FTC and evaluating enforcement. 

01:03:09 Speaker 1 

Decisions, but they they will prosecute and and I think that there is a uh. 

01:03:15 Speaker 3 

You know as. 

01:03:15 Speaker 1 

You said a lot of opportunities when people have been grifting out of their money. 

01:03:21 Speaker 1 

For politically motivated and you know people that generally have kind of the right point of view that are in. 

01:03:27 Speaker 1 

A position to prosecute, to go after. 

01:03:29 Speaker 1 

The offenders. 

01:03:31 Speaker 1 

So you’re right, there will be, there will be a lot of action on this over the next couple of years. 

01:03:35 Speaker 1 

And then Shamatha is right, the way it gets resolved is a congressional act. 

01:03:39 Speaker 1 

But by the way, I’ll just point out in the year 2000, Congress passed, which is called the Commodity Futures Modernization Act, and that’s the FMA was really meant to kind of, quote, bring commodities and futures. 

01:03:50 Speaker 1 

Into the digital age. When they started working on it in 1996, it took four years to get it done. 

01:03:54 Speaker 1 

Within four years it was already out of date and a lot of what was going on with respect to how exchanges operate in the types of contracts of. 

01:04:01 Speaker 1 

Being created, they was already missed, so, you know, the problem we have here is that by legislating the state of the market today. 

01:04:09 Speaker 1 

Without creating enough flexibility in how enforcement action can be procured and how things can be interpreted in the future, you could end up in a similar situation where people could find and run around and the whole thing repeats itself the next year. 

01:04:20 Speaker 1 

So just what? 

01:04:21 Speaker 1 

People will always want to gamble and grifters will always want to grip, and so there will always be a way in crime scared people. 

01:04:27 Speaker 1 

Out of their money, yeah. 

01:04:28 Speaker 1 

That’s just. 

01:04:30 

Hello there. 

01:04:31 Speaker 1 

So by the way, are you? 

01:04:33 Speaker 2 

As always, I want to take out. 

01:04:35 Speaker 1 

Well, everybody down. 

01:04:38 Speaker 1 

Will now be. 

01:04:38 Speaker 3 

Calling you get the answer gender. 

01:04:41 Speaker 1 

Jason before he said it. 

01:04:43 Speaker 1 

If you want a perfect example of this, and this is just a lesson to founders out there, if you feel like you’re in a Gray area, you probably are. 

01:04:51 Speaker 1 

People were like, oh, you know, they’re just trading cards, yadda yadda. 

01:04:56 Speaker 1 

And it’s not a big deal that somebody had open C decided to front run the market or they just bought a trading card ahead of everybody else and cares. 

01:05:03 Speaker 1 

You know, who cares? 

01:05:05 Speaker 1 

It turns out the Southern District of New York shares, and they are pretty serious group of people. 

01:05:10 Speaker 1 

Former employee of NFT Marketplace Open C was charged in the first several digital asset insider trading scheme. 

01:05:17 Speaker 1 

So just because insider trading didn’t exist as a concept for NFT before, congratulations. 

01:05:25 Speaker 1 

In crypto, I mean if they want to really. 

01:05:28 Speaker 1 

I’m behind in parts here. 

01:05:30 Speaker 1 

I mean it’s the worst kept secret in crypto. 

01:05:33 Speaker 1 

How much insider trading is going on amongst the organizations that run the exchanges and their side pockets that they use to manage liquidity? 

01:05:43 Speaker 1 

I mean this is the, it’s the biggest thing that’s been happening in crypto. 

01:05:48 Speaker 1 

If you’re wondering why people were spending hundreds of thousands of dollars on a Board 8 or whatever. 

01:05:52 Speaker 1 

Early there might have been some shenanigans going on here. 

01:05:56 Speaker 1 

For every project and it’s not, it’s not a legal. 

01:05:59 Speaker 1 

This is my understanding that it’s not illegal. 

01:06:00 Speaker 1 

To frontline crypto trades. 

01:06:01 Speaker 1 

So most of these organizations that that run an exchange rights compete for order flow and they’re able to just look at that order flow and then they start run the trade and they’re on the other side of that. 

01:06:12 Speaker 1 

So they’re always making money and so they were. 

01:06:14 Speaker 1 

Making 10s of billions of. 

01:06:16 Speaker 1 

No, all these exchanges were. 

01:06:19 Speaker 1 

And then I guess the question becomes, sax, you know, in terms of since you’re an attorney, like how you interpret this stuff there? 

01:06:26 Speaker 1 

There may not be a law on the books about front running and fees, but there are laws on the books about fraud and NFT and conspiracy to, you know, correct people out of their money. 

01:06:36 Speaker 1 

So this is all going to come. 

01:06:37 Speaker 1 

Crashing down and the discovery is going to do next lesson. 

01:06:41 Speaker 1 

This company worth asking subpoenaed any of these exchanges or. 

01:06:44 Speaker 1 

Never break loose. 

01:06:44 Speaker 1 

Oh no they are and you can be sure that’s in process. 

01:06:47 Speaker 1 

If they go after one FT flipper they probably. 

01:06:49 Speaker 1 

Anything I’m saying. 

01:06:51 Speaker 1 

I don’t use crypto. 

01:06:54 Speaker 1 

Use market and they will. 

01:06:55 Speaker 1 

They’re turning over these cards is, you know how they like to work. 

01:06:58 Speaker 1 

They’re like to flip their way up to the top person. 

01:07:01 Speaker 1 

But we’re not talking about January 6 year, we’re talking about gas in the Ukraine next. 

01:07:05 Speaker 1 

Hey ho, a little reference for you. 

01:07:10 Speaker 1 

This is not another word. 

01:07:11 Speaker 1 

Another one hour in 10 weeks. 

01:07:12 Speaker 1 

We kind of like broken the ice and work with friends since. 

01:07:15 Speaker 1 

We want again. 

01:07:16 Speaker 1 

Plan that you want to redo our intro. 

01:07:19 Speaker 1 

So you’re not being such a ***** 

01:07:22 Speaker 1 

I don’t care. I don’t. 

01:07:23 Speaker 2 

No, I don’t think. 

01:07:24 Speaker 1 

Care if we just move forward? 

01:07:25 Speaker 2 

I think it’s. 

01:07:26 Speaker 1 

I think we all. 

01:07:27 Speaker 1 

I thought you wrote in it, so you said. 

01:07:29 Speaker 1 

You said that you were workshopping an intro, so do you want to do your intros at the end of this or not? 

01:07:34 Speaker 1 

I’m not doing it right now, I’m. 

01:07:36 Speaker 1 

To be intros. 

01:07:36 Speaker 1 

So they were they were meaning is what it was they. 

01:07:38 Speaker 2 

Were getting shaders and. 

01:07:39 Speaker 2 

Extra points. 

01:07:40 Speaker 2 

He needs extra time. 

01:07:41 Speaker 1 

No, I know it’s. 

01:07:41 Speaker 2 

To do the intros. 

01:07:41 Speaker 1 

Not about the point. 

01:07:42 Speaker 1 

That was a joke, I. 

01:07:43 Speaker 1 

Wanted to do. 

01:07:45 Speaker 1 

I didn’t know coming into this how sensitive people would be. 

01:07:49 Speaker 1 

And then Sax is like, I need to have them a contract with run disparaging NBA and I’m scared about the things I said. 

01:07:55 Speaker 2 

Rather than. 

01:07:57 Speaker 1 

So Spike content needs to be a bit. 

01:07:57 Speaker 2 

No, I I. 

01:07:58 Speaker 2 

Actually took that out. 

01:07:59 Speaker 1 

You were the fight content guy. 

01:07:59 Speaker 2 

I took that out. 

01:08:01 Speaker 1 

You’re the most concerned about by constant but quite larger. 

01:08:02 Speaker 2 

Oh well, yeah. No, no. 

01:08:03 Speaker 2 

We no, we have an agreement around that. 

01:08:04 Speaker 1 

Bigger is a good rule, non disparagement. 

01:08:06 Speaker 1 

He didn’t want to. 

01:08:08 Speaker 1 

I understand he wants to have clean way to disparage you day and night. 

01:08:08 Speaker 1 

Could not. 

01:08:09 Speaker 2 

So I took it out. 

01:08:12 Speaker 1 

I mean, he’s ready to go. 

01:08:12 Speaker 2 

To be honest, I took it out because I thought you would be more sensitive about accusing others of disparaging you. 

01:08:18 Speaker 1 

Much this whole show is disparaging. 

01:08:21 Speaker 1 

Have an intro or not? 

01:08:22 Speaker 1 

I don’t have interests prepared. 

01:08:24 Speaker 1 

No, I’ll do interest next episode, I promise everybody. 

01:08:26 Speaker 1 

I wanted to take the temperature of my besties. 

01:08:28 Speaker 1 

I don’t know if people are sensitive right now. 

01:08:30 Speaker 1 

You want me to? 

01:08:30 Speaker 1 

Make a joke about. 

01:08:31 Speaker 1 

Brad Gerstner Industrial at all. 

01:08:31 Speaker 2 

We’re not real shift to talk about we. 

01:08:33 Speaker 1 

In fact, yeah. 

01:08:33 Speaker 2 

Talk about Ukraine and Lords breeze. 

01:08:35 Speaker 1 

It’s not all about our narcissistic nonsense as four teenagers. 

01:08:38 Speaker 1 

David running. 

01:08:41 Speaker 2 

Go ahead. 

01:08:42 Speaker 2 

Somebody happened in the last week that I think is pretty disconcerting. 

01:08:45 Speaker 2 

I mean just intellectually speaking we all know that wars that go on and on how to tendency to escalate and there is an example of how this could happen over the past week. 

01:08:54 Speaker 2 

Lithuania is now essentially stopping the flow of goods from the Russian. 

01:09:01 Speaker 2 

Maine went to another part of Russia called Collision Grad, which is called a noob last. 

01:09:06 Speaker 2 

It’s the little. 

01:09:07 Speaker 2 

Area, but it’s. 

01:09:07 Speaker 2 

Outside the Russian. 

01:09:08 Speaker 2 

Mainland is basically between Poland and Lithuania. 

01:09:12 Speaker 2 

And so goods go by rail from the Russian England trick Leningrad, and they’ve been stopping these goods because they say they’re under EU sanctions. 

01:09:22 Speaker 2 

The problem is listen when you think about a. 

01:09:24 Speaker 2 

Sanction of sanction is me. 

01:09:27 Speaker 2 

Not buying goods from you, so I don’t like what you’re doing. 

01:09:30 Speaker 2 

That’s fair game. 

01:09:31 Speaker 2 

Everyone has a choice. 

01:09:32 Speaker 2 

Over who they want to buy from. 

01:09:34 Speaker 2 

But this is not that. 

01:09:35 Speaker 2 

This is Lithuania deciding to stop goods going from Russia to Russia. 

01:09:41 Speaker 2 

And so the Russians say this is a blockade, I think, with some justification, and blockades are understood to be an act of war. 

01:09:48 Speaker 2 

So you’ve got Lithuania. 

01:09:50 Speaker 2 

Basically engaging in this active escalation against Russia. 

01:09:54 Speaker 1 

We always thought it would be Poland. 

01:09:56 Speaker 1 

But it’s instantaneous. 

01:09:56 Speaker 2 

Right, exactly. 

01:09:57 Speaker 2 

And remember, Lithuania is a member of NATO save an Article 5 guarantee. 

01:10:02 Speaker 2 

Now think about the upside versus downside of this action in terms of from the western point of view, the upside is this has absolutely no impact on the. 

01:10:12 Speaker 2 

Outcome of the war. 

01:10:13 Speaker 2 

This is not going to help anyone in the Ukraine to blockade, to live in grad and prevent colon building materials and steal permission slimming grounds and have any impact on the war. 

01:10:24 Speaker 2 

So there’s zero. 

01:10:25 Speaker 2 

Upside to this from a military standpoint, but the downside is that you now have Lithuanian Russia getting into it. 

01:10:33 Speaker 2 

And if they get into a war, then we are instantly pulled in under Article 5 or in Middle War three. 

01:10:40 Speaker 2 

So this is the kind of dangerous escalatory act that has no upside, only downside. 

01:10:45 Speaker 2 

And my view on it is that we have to tell, Rooster instructs frankly our Treaty allies not to engage in these types of dangerous acts because there’s a huge externality we can be pulled in. 

01:10:57 Speaker 2 

This is very dangerous and I just wonder if the administration is on top of this. 

01:11:02 Speaker 2 

Did they give the green light? 

01:11:04 Speaker 2 

Should Lithuanians to do this or were they caught by surprise? 

01:11:08 Speaker 2 

And what is their reaction to acts like this? 

01:11:10 Speaker 2 

You know what I worry is that we’re conducting foreign policy by virtue signaling. 

01:11:14 Speaker 2 

When we just. 

01:11:14 Speaker 2 

Say, who are the good guys and who are the bad guys? 

01:11:17 Speaker 2 

And you know if the Russians are the bad guys with winning sort of good guys. 

01:11:21 Speaker 2 

So therefore this is OK. 

01:11:23 Speaker 2 

It’s like playing cops and robbers on a global stage. 

01:11:25 Speaker 2 

I even leave you asking the question, is this smart or is it dumb? 

01:11:29 Speaker 2 

Is this prudential? 

01:11:31 Speaker 2 

Or is it reckless? 

01:11:32 Speaker 2 

Is this in our interests or is it not in our interests? 

01:11:35 Speaker 2 

And, you know, I really gotta wonder. 

01:11:39 Speaker 2 

About who’s mining before? 

01:11:40 Speaker 2 

On this. 

01:11:41 Speaker 1 

Day 120 and it feels like this is just doesn’t have an end insight. Is there an end insight here? 

01:11:48 Speaker 2 

What’s the end? 

01:11:49 Speaker 2 

I mean the. 

01:11:50 Speaker 1 

I mean, what are the two parties want these little the two parties want at? 

01:11:50 Speaker 2 

The idea is negotiation. 

01:11:53 Speaker 1 

This point I. 

01:11:54 Speaker 1 

Mean the people in Russia are suffering during this? 

01:11:57 Speaker 1 

The people in Ukraine are being murdered, in Ukraine are being murdered. 

01:12:00 Speaker 1 

I mean, how does it end at this point? 

01:12:02 Speaker 1 

Engaged the United States in a proxy war. 

01:12:06 Speaker 1 

Or without our real explicit discussion, number one. And then #2 is then we told and we pressured Europe to really draw a hard line, but they now are kind of working around it so that the countries are suffer the most are Europe now at least he’s starting to see the TV though. 

01:12:24 Speaker 3 

Right. 

01:12:26 Speaker 1 

Last week. 

01:12:27 Speaker 1 

There was a group of European leaders and it gives macro draggy and I can’t remember who’s the German Chancellor or not, and one other person who went to Ukraine. 

01:12:40 Speaker 1 

And if I had to bet, I think the message was kind of like, alright, listen, like we need to find and organize. 

01:12:47 Speaker 1 

The talks here. 

01:12:49 Speaker 1 

Because there is, you know, according to Europe, a Lehman like situation in terms of economic contagion that could manifest over the next month. 

01:13:00 Speaker 1 

So I think that the end game is probably some organized, negotiated detente and ceasefire. 

01:13:09 Speaker 1 

I don’t think anybody will be happy with it, but I think by and large, Russia is. 

01:13:14 Speaker 1 

And has one in the meaning they run economically, they’re selling oil like it’s not, you know, if it’s going out of style, it’s just not selling it to Europe into America. 

01:13:25 Speaker 1 

You know, they’re selling it to China this morning, to Africa, to scientists in England. 

01:13:28 Speaker 1 

It, though still technically. 

01:13:30 Speaker 2 

Well, also chamade phase one, they’re winning on the battlefield. 

01:13:32 Speaker 2 

There was an article in the Washington Post. 

01:13:34 Speaker 2 

There was an article in the Washington Post in the last week or so. 

01:13:37 Speaker 2 

And the Washington Post is basically the house organ of the Washington establishment and the The BLOB basically saying that hopes are dimming for Ukraine on the battlefield. The Russians have now 120 or 25. 

01:13:50 Speaker 2 

For in the country they’ve won that Eastern, that Donbass region, they’ve done it with a. 

01:13:54 Speaker 2 

Help of Russian separatists in Ukraine and there is the amazing thing this article was that they were. 

01:14:00 Speaker 2 

Saying that the. 

01:14:01 Speaker 2 

Ukrainians were days away from running out. 

01:14:03 Speaker 2 

Of ammunition despite the 40. 

01:14:04 Speaker 2 

Billion that we just appropriated to them where did? 

01:14:06 Speaker 2 

That money go. 

01:14:07 Speaker 1 

And conversely there saying Russia is having just unbelievable casualties and they’re running out of weapons and they are obviously out of Kiev now and they’re in the Donbass mostly. 

01:14:17 Speaker 1 

So it’s exactly like both. 

01:14:18 Speaker 2 

No, I don’t think the Russians or. 

01:14:19 Speaker 2 

Any other anything. 

01:14:20 Speaker 2 

The Russians, the. 

01:14:23 Speaker 2 

I I said on this part. 

01:14:24 Speaker 1 

Well, they said they’re out of tanks, right? 

01:14:25 Speaker 1 

There and then the truth will mean. 

01:14:27 Speaker 2 

Well, they they’ve adjusted their strategy and they’ve, they’re, they’re, they’re learning, they’re adapting to this new kind of warfare, this asymmetric warfare where you can take out a tank with a drone, you know? 

01:14:37 Speaker 2 

But but look, you know, I remember on the spot treatment of the war, everybody who is in favor of this proxy war was saying how? 

01:14:44 Speaker 2 

Great. It was. 

01:14:45 Speaker 2 

And they were saying it was going to lead to a new birth of freedom in the West, that it was strengthening our alliances. 

01:14:50 Speaker 2 

You had Francis Fukuyama predicting that we are going to win the war and it would lead to this rebirth of freedom in the West. 

01:14:56 Speaker 2 

We should have known at that moment everything that PCR. 

01:14:59 Speaker 2 

Basically predicts the options which is over such -, 1 correlation. 

01:15:01 Speaker 1 

The only one he’s only. 

01:15:04 Speaker 1 

Yeah, and. 

01:15:05 Speaker 2 

Remember I said three weeks in that we were potentially, I think, two major mistakes in the first resourcing this to be a cakewalk, but that we weren’t making the mistake of thinking the next phase should be a cakewalk. 

01:15:14 Speaker 2 

And sure enough, here we are. 

01:15:16 Speaker 2 

Russia has now won the eastern part of this country. 

01:15:18 Speaker 1 

Probably just to. 

01:15:19 Speaker 1 

Build on what you. 

01:15:20 Speaker 1 

Said you know. 

01:15:21 Speaker 1 

We engaged in economic sanctions and I was the first one to. 

01:15:24 Speaker 1 

Say hey, this could really work and this could be a road map for how to do it. 

01:15:27 Speaker 1 

And it turns out this is the road map for how not to do it. 

01:15:30 Speaker 1 

Impact on the front door or stay here, then sanctions and then walk around the back door and basically open the doors for them. 

01:15:36 Speaker 1 

These these sanctions were soaked. 

01:15:38 Speaker 1 

Florist has to be like Swiss cheese. 

01:15:40 Speaker 1 

We focus on virtue signaling acts like confiscating. 

01:15:44 Speaker 1 

A planning or a boat? 

01:15:46 Speaker 1 

Or a house. 

01:15:47 Speaker 1 

But we didn’t focus on the structural things. 

01:15:49 Speaker 1 

We needed to actually, you know, make the mandate that we believe to be just to come to life. 

01:15:55 Speaker 1 

And so Russia completely worked around it. 

01:15:57 Speaker 1 

Their economy effectively, you know, is thriving. 

01:16:02 Speaker 1 

So what have we given the? 

01:16:04 Speaker 1 

And I don’t know that surprising is how they would describe their economy. 

01:16:07 Speaker 1 

Right now, it seems they’re printing record surpluses. 

01:16:11 Speaker 2 

The rubles out of five year high. 

01:16:12 Speaker 1 

Jason, who’s selling gas, they’re selling phosphates. 

01:16:15 Speaker 1 

They’re actually making a market and the prices have doubled and tripled in those commodities because the flow has been restricted, so because there’s recursive. 

01:16:22 Speaker 1 

Opposite of what we tried to. 

01:16:24 Speaker 1 

And by the way, I’ll point out, I’ll point out something that I pointed out in February, which was the biggest concern for me at the time when we stopped allowance trading in the securities of Russian company. 

01:16:34 Speaker 1 

We yanked away $400 billion of market cap that was held primarily by pension funds and retirement funds in EU. 

01:16:42 Speaker 1 

S and Europe. 

01:16:43 Speaker 1 

And gave that value to Russia for free. 

01:16:46 Speaker 1 

We basically said, here you go here, long securities were no longer allowed to play to them. 

01:16:50 Speaker 1 

So guess what? 

01:16:51 Speaker 1 

You guys can trade. 

01:16:52 Speaker 2 

In them and then. 

01:16:53 Speaker 1 

You can. 

01:16:53 Speaker 1 

Got they got all of their gas and energy and mcnicholl and mining company across all three. 

01:16:58 Speaker 2 

At this point. 

01:17:00 Speaker 1 

$0.00 for these sweet move them. We ripped the stock out of retirement funds and we gave it to the Russians and. 

01:17:01 Speaker 3 

The company. 

01:17:07 Speaker 2 

Said. Here you go, Putin. 

01:17:08 Speaker 1 

Take all of these securities for free. 

01:17:11 Speaker 1 

Oh, and by the way, because of our idiotic sanctions or the way we’re employing them, the commodity prices are going to double and triple and all these companies are going to have record profits. 

01:17:18 Speaker 1 

Mr Happy bugging birthday, the rubles on 5X it’s not a. 

01:17:22 Speaker 1 

5X but yeah. 

01:17:23 Speaker 2 

It’s a great point, because if Putin had retaliated against the West by nationalizing 400 billion of Western assets in Russia, everyone had been up in arms. 

01:17:32 Speaker 2 

But he didn’t have to do that. 

01:17:33 Speaker 2 

Because we just gave him, we gave it. 

01:17:35 Speaker 2 

400 million. 

01:17:36 Speaker 2 

I mean, how did this policy make sense? 

01:17:38 Speaker 2 

Is the policy of conductive? 

01:17:39 Speaker 2 

Ink again in 2004. 

01:17:39 Speaker 1 

You cannot create the Russian securities. I’m up. I’m freaking blacklock. I own a billion dollars of wrestling securities. the US government took it out of My Portfolio that my clients own stakes in and gave it to the Russians for free. They’re gone proof. 

01:17:54 Speaker 2 

Crazy, I think. Listen, I think we’ve got like A2 level problem on this Ukraine War One is that our policy hasn’t made sense. 

01:18:01 Speaker 2 

We should have been using diplomacy last year to avoid it, but we had all. 

01:18:04 Speaker 2 

These false hopes. 

01:18:06 Speaker 2 

Around strengthening the West and the Western Alliance by allowing this war to happen we then instead. 

01:18:10 Speaker 2 

Of trying to. 

01:18:11 Speaker 2 

Shut it down through a negotiated settlement, we. 

01:18:13 Speaker 2 

Try to use this. 

01:18:14 Speaker 2 

Proxy war to reach improvement. 

01:18:16 Speaker 2 

Instead, it’s done the opposite. 

01:18:18 Speaker 2 

So there’s a whole series of policy failures here. 

01:18:20 Speaker 2 

But there’s another deeper level to this area, which is the personnel who are implementing these policies. 

01:18:26 Speaker 2 

Uh, washing establishments of blobs. 

01:18:28 Speaker 2 

Who’ve been out? 

01:18:29 Speaker 2 

Both parties that this sort of you. 

01:18:32 Speaker 2 

The party who’s been implementing these policies. 

01:18:35 Speaker 2 

There has been no dissent within the Washington establishment. 

01:18:38 Speaker 2 

The only guy who really spoke up in a decisive way with John Mearsheimer, the professor of international relations from USC Chicago. 

01:18:46 Speaker 2 

And he was treated as a. 

01:18:47 Speaker 2 

Pariah by the BLOB in the Washington establishment. 

01:18:50 Speaker 2 

Everything he predicted has come true. 

01:18:52 Speaker 1 

Yeah, he predicted this years, years ago. 

01:18:52 Speaker 2 

Who says it? 

01:18:54 Speaker 2 

Predicted the US. 

01:18:55 Speaker 2 

Was leading Ukraine down the primrose. 

01:18:56 Speaker 2 

Path and the result was that Ukraine was going to. 

01:18:58 Speaker 2 

Get wrecked, and so it has. 

01:19:01 Speaker 1 

Can I just read the first paragraph of this Bloomberg article that I just posted? 

01:19:05 Speaker 1 

Brushes current account surplus more than triple. 

01:19:08 Speaker 1 

In the first four months of the year, to 95.8 zillion this program except at Price and 3rd bullet boiling gas imports and imports plunge under the weight of sanctions as well. 

01:19:19 Speaker 1 

You know if you. 

01:19:19 Speaker 1 

Are proof. 

01:19:19 Speaker 1 

Then you’re looking at socialized. 

01:19:21 Speaker 1 

Well, maybe they. 

01:19:21 Speaker 1 

Should be under sanctions more often, you know, what country should I engage all. 

01:19:26 Speaker 1 

That’s all that changes, all that sanctions. 

01:19:28 Speaker 1 

Work was a restriction on the free market and when you restricted the free. 

01:19:32 Speaker 1 

Market he basically created a spike in price, but the market his market could still operate with a narrower set of trading partners. 

01:19:38 Speaker 1 

He is selling energy to certain trading partners, he’s selling phosphates, he is making money, they are exporting product and they’re making more because certain people can’t buy and they’ve got to go grab the price up elsewhere. 

01:19:48 Speaker 1 

So not, not only did our sanctions package not work and not only is the Treasury. 

01:19:52 Speaker 1 

Treasurer first Treasury price flailing around, now trying to find even more backdoors, we actually opened a very dangerous precedent, which is now we allowed oil to settle in currencies that are not just the United States dollar. 

01:20:07 Speaker 1 

And now Russia insider trading and settling in team wise, that’s not good for us. 

01:20:12 Speaker 1 

This is not how you preserve the integrity of the reserve currency of America. 

01:20:13 Speaker 1 

I don’t understand the. 

01:20:16 Speaker 1 

EU of. 

01:20:17 Speaker 1 

Cutting all of their energy and then becoming dependent on Russia, then creating a ban and sanctions. 

01:20:24 Speaker 1 

But then they made a carve out that oil delivered by. 

01:20:27 Speaker 1 

Pipeline and Yellen has been negotiating this. 

01:20:29 Speaker 1 

How about we have been enabling Russia to sell weed in viewcast this like Mouse says. 

01:20:32 Speaker 3 

For the. 

01:20:35 Speaker 1 

Look, look in the Wall Street Journal today the. 

01:20:37 Speaker 1 

I’m reading the CNBC right now about it. 

01:20:39 Speaker 1 

Like the EU passes landmark sanctions package in May, but they also are. 

01:20:44 Speaker 1 

Allowed the stuff that’s coming by pipeline for some reason to be a car value. 

01:20:48 Speaker 1 

If the EU wants to contain Putin from invading countries on their doorstep, they gotta actually become energy independent. 

01:20:55 Speaker 1 

That’s the the beginning. 

01:20:56 Speaker 1 

Is not popular, and this is the problem with populism. 

01:21:00 Speaker 1 

A killer? 

01:21:01 Speaker 1 

It’s not popular to continue to have to to have energy independence. 

01:21:05 Speaker 1 

Nuclear was not popular and so the politicians, the legislators responded in a short sighted way to the popular opinion of the day. 

01:21:13 Speaker 1 

And this is the. 

01:21:14 Speaker 1 

Challenge totally huge mistake on German. 

01:21:16 Speaker 1 

Part they closed three nuclear. 

01:21:18 Speaker 2 

Reactions yes, women in Europe got highly affected. 

01:21:20 Speaker 2 

By these environmental groups, yeah. 

01:21:21 Speaker 1 

Exactly, that’s my point. 

01:21:23 Speaker 2 

But in the US? 

01:21:24 Speaker 2 

I think the people of the country want us to be energy. 

01:21:26 Speaker 2 

Independent and in. 

01:21:26 Speaker 1 

Trust preferred. 

01:21:28 Speaker 2 

Its elite opinion that bought into these foolish ideas that basically we should cancel energy independence, we should cancel the firm pipelines which have cancelled new drilling. 

01:21:37 Speaker 1 

Job number one. 

01:21:39 Speaker 2 

America should be a net energy exporter. 

01:21:41 Speaker 1 

100%, but job number one is to be energy independent and job number 2 is to move to renewable. 

01:21:47 Speaker 2 

But look at Fighter now. 

01:21:48 Speaker 2 

I’m not. 

01:21:48 Speaker 2 

Here’s another. 

01:21:49 Speaker 2 

Piece of this, right? 

01:21:49 Speaker 1 

You got to do this in sequence. 

01:21:50 Speaker 2 

So keep coming to. 

01:21:51 Speaker 2 

See him in. 

01:21:52 Speaker 2 

He said that he was going to make the Saudis a pariah on the world stage, remember? 

01:21:58 Speaker 2 

Now he’s feeling hat in hand to them to try and get them to pretty smaller or lower the. 

01:22:03 Speaker 2 

So what was the point of this? 

01:22:04 Speaker 2 

Foreign policy it. 

01:22:05 Speaker 2 

It was contradictory. 

01:22:07 Speaker 2 

He cancelled their energy independence. 

01:22:08 Speaker 2 

He basically insults to solve the Saudis on which were even more dependent for oil, and then he basically refuses to engage in the former champion Saints. 

01:22:17 Speaker 2 

These policies are contradictory, even if your goal was to basically isolate the Russians. 

01:22:22 Speaker 2 

You would then want to improve our relationship 100% body and you want to produce more of our own oil. 

01:22:28 Speaker 1 

100% yeah. You you you overplayed his hand, for sure. I mean, you. You can’t. 

01:22:34 Speaker 1 

Not have. 

01:22:35 Speaker 1 

Uh, heat in the winter in Germany and the Germans got completely stable. 

01:22:39 Speaker 2 

That’s coming, by the way. 

01:22:40 Speaker 2 

That’s something you think things are bad right now. 

01:22:42 Speaker 2 

Wait until winter and then that’s only an increased. 

01:22:45 Speaker 2 

Putin’s leverage? 

01:22:46 Speaker 2 

And that’s when you’re. 

01:22:47 Speaker 2 

Going to see a real fracture in the Western Alliance, this idea that Ukraine strengthened the Western alliance. 

01:22:52 Speaker 2 

I think you will start to see the fractures come this winter. 

01:22:54 Speaker 1 

Could go either one Germany now for. 

01:22:55 Speaker 1 

So this is the slow the slow March of nationalism will continue. 

01:22:59 Speaker 1 

And this will be another cataloging about turn your news back on Germany. 

01:23:02 Speaker 2 

And and I also think that, you know, thinking about the Western Alliance, I think that, you know countries like Germany and France are really going to question the US leadership. 

01:23:10 Speaker 2 

When they have basically a huge economic recession and they’re wondering how they’re going to heat their homes in the winter. 

01:23:16 Speaker 2 

But I think in the US is time to re-evaluate from the alliances that we’ve gotten ourselves in again, with this Lithuania situation, do you really think that Lithuania will be basically poking that big Russian bear if they did that? 

01:23:30 Speaker 2 

The US standing behind them as a. 

01:23:31 Speaker 2 

Bodyguard? No way they. 

01:23:33 Speaker 2 

Would be much more circumspect and prudential, and the the fact the matter is that these Eastern European countries, the Baltic countries and Poland. 

01:23:41 Speaker 2 

They have embassies. 

01:23:43 Speaker 2 

They have friction with Russia going back hundreds of years. 

01:23:46 Speaker 2 

And these guys, basically they have very provocative attitudes towards Russia and our alliance with them can draw us in. 

01:23:56 Speaker 2 

So we have to really keep a close lid on that. 

01:24:00 Speaker 2 

We do not want them making moves on their own because we could get drawn into a World War. 

01:24:06 Speaker 1 

Here, yeah, and by the way, here points that fact. 

01:24:09 Speaker 1 

Also, you know, there continues to be. 

01:24:12 Speaker 1 

Escalating issues with debts and concerns about debt repayments across the euro and while Germany is, you know, looking to the US for supports and worried about energy crisis, they’re going to end up. 

01:24:24 Speaker 1 

Having to foot the bill. 

01:24:25 Speaker 1 

To support a bunch of these EU member nations that are facing debt crises and will continue to think significant debt. 

01:24:33 Speaker 1 

Crises over the years ahead I mean, Greece made. 

01:24:34 Speaker 1 

A payment recently. 

01:24:35 Speaker 1 

But Greece is the deputy DP, still over 200%. 

01:24:39 Speaker 1 

Italy is at 155%, Portugal’s at 134%. I mean the numbers are pretty significant and as ****** signs. 

01:24:47 Speaker 1 

You know it. 

01:24:48 Speaker 1 

Yeah, the the spread on Italian debt is spiked over the last couple weeks, like Bridgewater. 

01:24:54 Speaker 1 

Basically, take a. 

01:24:55 Speaker 1 

Germany. Germany’s got another freaking crisis to fight now, and I think we’re right the the Western Alliance is more than just a military at this point. 

01:25:03 Speaker 1 

There’s this, you know, do I really want to be the economic savior over and over again of my smaller Member States and guess who’s going to benefit? 

01:25:12 Speaker 1 

All of this China like we’re going to. 

01:25:14 Speaker 1 

Look at this fraction, because they’re. 

01:25:16 Speaker 1 

Going to be like, great. 

01:25:17 Speaker 1 

Finding a lot at China for a second. 

01:25:19 Speaker 1 

You know, we talk and we bloviate about our desire for energy independence and, you know, we exclude Tesla from, you know, any sort of major, meaningful legislation we compass. 

01:25:32 Speaker 1 

You know, these companies that are just completely, woefully behind in building energy independence. 

01:25:38 Speaker 1 

We think about like a gas tax holiday, but as like kind of like a, you know, something that still needs an act of Congress to pass, even though Congress has said they have absolutely no intention of passing it. 

01:25:50 Speaker 1 

Meanwhile, we keep losing our footing to China. Just today, Cfle, which is one of the largest battery manufacturers, announced a pretty meaningful improvement in their, you know, 3.0 battery designs. 

01:26:04 Speaker 1 

These guys are now building batteries that can. 

01:26:05 Speaker 1 

Go 1000. 

01:26:06 Speaker 1 

Kilometres in, in both of the major, you know. 

01:26:11 Speaker 1 

Competitions that really matter in NC and LP and I just look. 

01:26:15 Speaker 1 

At these things. 

01:26:16 Speaker 1 

And I’m like. 

01:26:17 Speaker 1 

Wow, we cannot have to get capacity funded to build domestic battery capability. 

01:26:23 Speaker 1 

Because we’re too busy, kind of basically virtue signalling on things that don’t matter and in return nothing happens. 

01:26:30 Speaker 1 

China continues to lap us. 

01:26:32 Speaker 1 

We it’s it’s really, it’s really sad state of affairs we are, we are in a very odd period in terms of government effectiveness. 

01:26:41 Speaker 2 

If you think about China’s foreign policy, how have they lost out by not being part of all these conflicts? How they lost out, exactly. 

01:26:48 Speaker 1 

We haven’t. 

01:26:49 Speaker 1 

They adapt their buying prices of oil. 

01:26:53 Speaker 1 

That were nine months ago to 18 months ago and so there not only has Russia output price been capped, but that’s OK. 

01:27:01 Speaker 1 

China input costs has been capped and so they don’t suffer the same rate of inflation that the rest of us do. So to your point, David, you know our quote UN quote, you know, exclusionary sanctions. 

01:27:13 Speaker 1 

Were ineffective, they were porous, and we allowed our largest competitive friendly, if you will, to basically be able to obtain or drive their entire economy at 30 to 40% of a discount to. 

01:27:27 Speaker 1 

What we have to pay? 

01:27:28 Speaker 2 

Right. 

01:27:29 Speaker 2 

When when China goes abroad, they go abroad in search of economic resources and economic development. 

01:27:34 Speaker 2 

That’s the point of belt and Rd. 

01:27:36 Speaker 2 

They don’t insert themselves in the middle of these conflicts, but they don’t understand. 

01:27:41 Speaker 2 

They were never involved in the Middle East, they were never involved in, like policing in all these different. 

01:27:47 Speaker 2 

Countries that has cost. 

01:27:48 Speaker 2 

Of the fortune. 

01:27:50 Speaker 2 

And now the bill is finally coming due in the form of this inflation. 

01:27:53 Speaker 2 

We are going to have some form or another of austerity in this. 

01:27:56 Speaker 2 

Country. And it’s partly because of this highly militarized foreign policy in which we have spent ourselves abroad to be the world’s policeman. 

01:28:04 Speaker 2 

We can no longer afford to do. 

01:28:05 Speaker 1 

That make a generalization. 

01:28:07 Speaker 1 

In fact you react and tell me if this is true or not. 

01:28:10 Speaker 1 

If you have a country that has existed in some way, shape or form, you know the borders could be blurry, but roughly. 

01:28:17 Speaker 1 

For hundreds and hundreds of years and in some cases thousands of years where internally. 

01:28:24 Speaker 1 

The population of that country views themselves. 

01:28:28 Speaker 1 

You know, in a great way they they they don’t feel like their country is a meaningless nothing country. 

01:28:34 Speaker 1 

Any attempt to economically similarly use such a country tends to have failed in the past and will continue to fill. 

01:28:43 Speaker 1 

And there tends to be. 

01:28:46 Speaker 1 

Other countries who view it as one of these things were, well, if then, then why not us? 

01:28:51 Speaker 1 

And then they sort of, you know, in, in a backhanded way, support everybody so we end up in this odd situation where we are picking fights you cannot list. 

01:29:00 Speaker 1 

And and the consequences for us are economically really damaging. 

01:29:05 Speaker 3 

Right, absolutely. 

01:29:05 Speaker 1 

And then the consequences for everybody else to stay on the sidelines is like economic prosperity. 

01:29:11 Speaker 1 

That doesn’t make any sense. 

01:29:13 Speaker 3 

Right. 

01:29:14 Speaker 1 

Let your danger up and you’re afraid that Russia is going to roll over more countries and that you have this existential risk that this dictator is willing to attack more countries. 

01:29:14 Speaker 2 

He used to use it. 

01:29:24 Speaker 1 

So if we’re living in Eastern Europe, you might have a different view. 

01:29:24 Speaker 3 

OK, well. 

01:29:26 Speaker 1 

Of it we might very much accept and want some help from, you know, NATO and other folks. 

01:29:27 Speaker 2 

Yeah, so. 

01:29:32 Speaker 1 

But you’re not getting that help. 

01:29:33 Speaker 1 

That’s the problem with that. 

01:29:34 Speaker 1 

That’s the sad part about all of this season. 

01:29:36 Speaker 1 

It’s not working at this point in time, yeah, I mean it’s a. 

01:29:39 Speaker 2 

Well, J. Cole. 

01:29:39 Speaker 1 

Valid criticism, yeah. 

01:29:40 Speaker 2 

If you look at the EU, OK as an entity, they have almost the same GDP and output as the US and if you compare them to Russia, their economy, their GDP is 10 times greater than Russia. They are rich. 

01:29:53 Speaker 2 

They can afford to allocate a few percent of their GDP of their government budget to defence. 

01:29:59 Speaker 2 

They surely defend themselves. 

01:30:00 Speaker 2 

They really should. And so this idea that we have to go over to Europe and bankrupt ourselves to defend rich Europeans, they should be picking up 100% of the costs of that 100%. I don’t know why. 

01:30:13 Speaker 2 

We’re paying for rich Europeans when our country is massively in debt. 

01:30:18 Speaker 2 

Why aren’t? 

01:30:19 Speaker 2 

We passing the bill to them for that. 

01:30:21 Speaker 1 

Yeah, we’re absolutely. 

01:30:27 Speaker 1 

Do we have to spend that much money to do that? 

01:30:31 Speaker 1 

And then obviously the worst Middle East were. 

01:30:33 Speaker 2 

We pick up. 

01:30:34 Speaker 1 

This is awesome. 

01:30:34 Speaker 2 

Before policemen idea, what kind of recent works the? 

01:30:37 Speaker 2 

Best community policing. 

01:30:38 Speaker 2 

When the policemen are from the neighborhood and they know all the players, they understand the subtlety of the of the area. 

01:30:44 Speaker 2 

Actually, the US has made itself the world police when we parachute into areas that we don’t understand. We did in the Middle East. 

01:30:51 Speaker 2 

It was very ineffective. 

01:30:53 Speaker 2 

What we should do is let the regions deal with the problems themselves 1st, and we should be the policemen of last resort, not the first resort. 

01:31:02 Speaker 2 

Let the Europeans take the lead, they should train for their own defense. 

01:31:06 Speaker 2 

Yeah, we could still have NATO, but they should be paying for it. 

01:31:08 Speaker 2 

They should be the first responders and if they can’t handle it. 

01:31:12 Speaker 2 

Then we can back them up. 

01:31:13 Speaker 2 

But this idea that we need to be on the bleeding edge of. 

01:31:16 Speaker 2 

All these conflicts. 

01:31:17 Speaker 2 

Banks are bankrupting ourselves. 

01:31:19 Speaker 2 

It’s a foolish idea. 

01:31:21 Speaker 1 

Energy independence is the solution to all of this. 

01:31:23 Speaker 1 

We wouldn’t have to deal with these despots if we didn’t, if we had energy independence for Africa. 

01:31:28 Speaker 1 

Getting circles run around us by China Jason under innovations front. 

01:31:34 Speaker 1 

Circles run around by China on the innovation front. 

01:31:39 Speaker 1 

I just noticed this DHL battery that they just announced today that it’s incredible. 

01:31:44 Speaker 1 

Yeah, the battery technologies, we have a lot going on there as well. 

01:31:47 Speaker 1 

I mean, it seems like the battery technology. 

01:31:51 Speaker 1 

Issue has been solved for reviews for some time now, and if anybody can go 200 miles and we can build the next scale, which seems like we’re on the precipice of, we’re going to be good. 

01:32:01 Speaker 1 

You don’t need more than 200 miles on average. It’s just a luxury every mile after that, given how fast superchargers are working. So just practically speaking, 95% of Americans will be just fine with. 

01:32:12 Speaker 1 

An electric car that does 200 mile range and the other 5% can do a hybrid or controlled burning oil. 

01:32:18 Speaker 1 

We need to get more. 

01:32:19 Speaker 1 

We have to be more serious about the MPG. 

01:32:21 Speaker 1 

Right now we are just absolutely. 

01:32:26 Speaker 1 

Abhorent in our use of fuel in this country, it’s just crazy that we have low 20 miles per gallon as our average when other countries are 304050, you know, 130 and 40 at high level. 

01:32:36 Speaker 1 

You know, seven seats suburbs, which is ridiculous because 99 out of 100 missions in that suburban are done with one or two people in it. The fact that our rules. 

01:32:46 Speaker 1 

There’s, you know, in our lists or whatever are coming with Giant Suburbans with one. 

01:32:50 Speaker 1 

Person and it. 

01:32:50 Speaker 1 

Is just the I have a Fiat E 500 years. 

01:32:54 Speaker 1 

A little. 

01:32:54 Speaker 1 

Oh, it’s incredible. 

01:32:56 Speaker 1 

I mean, yeah, I mean, This is why, I mean, this is the path as we can just when you think about it, if we were to double our MPG, there are cars right now that are doing 50. 

01:33:06 Speaker 1 

55 miles per gallon, we really have to be more punitive in terms of tax rates and on that list. 

01:33:11 Speaker 1 

What’s going to happen with Biden? 

01:33:16 Speaker 1 

Oh, OK. 

01:33:17 Speaker 1 

Engineer, give me your scorecard, junior. Greg, how’s he doing for Biden? Started this disastrous. I mean, I think the only thing more disastrous than Biden would be having Trump to a second, third, and fourth term, 100%. 

01:33:30 Speaker 1 

So play it out later. 

01:33:32 Speaker 1 

Well, I don’t think he’s going to run again, I. 

01:33:33 Speaker 1 

Think they’re going to have to provide anything again? 

01:33:36 Speaker 1 

I think they’re I think between then and now, if the economy keeps going the way it’s going, he would be a lame duck and impossible. 

01:33:42 Speaker 1 

And I think he might say, you know what? 

01:33:44 Speaker 1 

I’m gonna retire to spend time. 

01:33:45 Speaker 1 

With my kids. 

01:33:45 Speaker 1 

Or my golden years and they might convince him that him running again is a really bad idea and Kamala Harris is a disaster as well. 

01:33:52 Speaker 1 

She hasn’t proven anything in the first few years. 

01:33:54 Speaker 1 

Would then put up JJ Cole as a Democrat. Who would you want to? 

01:33:58 Speaker 2 

Have put up I think can beat the Sanchez versus news within 24. 

01:34:02 

I yeah, I. 

01:34:03 Speaker 1 

Both. Sorry, explain that. 

01:34:05 Speaker 2 

OK, so which part of it do? 

01:34:07 Speaker 2 

Some more expensive. 

01:34:08 Speaker 1 

You said how did, how did you can? 

01:34:09 Speaker 2 

Get the noise OK here, so Newsome has a very weak challenger in California for plus 37. 

01:34:15 Speaker 2 

Say hold on. 

01:34:15 Speaker 1 

Any win? 

01:34:16 Speaker 2 

Hold on. 

01:34:17 Speaker 2 

So he’s gonna handily win reelection in California? 

01:34:19 Speaker 2 

He’s already not even campaigning for reelection in California. 

01:34:23 Speaker 2 

He’s already campaigning to be president. 

01:34:24 Speaker 2 

The thing that he did that was totally smart and. 

01:34:26 Speaker 2 

I say that not. 

01:34:27 Speaker 2 

A fan of nuisance is someone is analyzing the politic. 

01:34:30 Speaker 2 

But is that he went on true social and he based to basically counter your Republican lies, and so he’s positioning himself as a fighter for progressive values. 

01:34:41 Speaker 2 

And the reason why that’s going to be flattering to the democratic base is that when the Democrats lose big in November, they’re going to have to be a reckoning. 

01:34:50 Speaker 2 

And they have to. 

01:34:51 Speaker 2 

Understand why they lost, and the fact of the matter is that ideologues never blame themselves or their agenda. 

01:34:57 Speaker 2 

They are going to say that it was not communicated well and that we needed a basically a better communicator who was a fighter. 

01:35:04 Speaker 2 

And so they will basically pin the. 

01:35:05 Speaker 2 

Blame even more on. 

01:35:06 Speaker 2 

Biden. And so Newsome is. 

01:35:07 Speaker 2 

Positioning himself as that sort of democratic progressive fighter. 

01:35:12 Speaker 2 

If you go back, remember when Michael Avenatti like they were, you know, progressively talking about him as a presidential candidate for a brief. 

01:35:19 Speaker 2 

Minute, they swooned. 

01:35:19 Speaker 2 

Over him? Why? 

01:35:20 Speaker 1 

You go to jail? 

01:35:21 Speaker 1 

Yes, he’s in jail, right? 

01:35:23 Speaker 2 

So the total gross will come back. 

01:35:25 Speaker 2 

But you gotta remember, CNN had him. 

01:35:28 Speaker 2 

On there every day because he was a fighter. 

01:35:32 Speaker 1 

The funniest? 

01:35:32 Speaker 1 

Play pause by members of poker game and like how he said he had known. 

01:35:35 Speaker 1 

Arizona Jacob, what’s this guy? 

01:35:36 Speaker 1 

‘s name facing Michael Avenatti. 

01:35:40 Speaker 1 

I never refused. 

01:35:44 Speaker 1 

Uh, it’s a disaster. 

01:35:46 Speaker 1 

I’ve finished the same concept. 

01:35:48 Speaker 1 

Yeah, exactly giving. 

01:35:50 Speaker 1 

The gems will. 

01:35:51 Speaker 1 

Give you some the nod. 

01:35:52 Speaker 1 

Can you actually win in some of these? 

01:35:53 Speaker 1 

From these middle states. 

01:35:56 Speaker 2 

Well, you don’t remember this is true. 

01:35:58 Speaker 2 

For both. 

01:35:59 Speaker 2 

Party is that the general electorate does not pick the candidates. 

01:36:02 Speaker 2 

The parties pick the candidates in the face of the. 

01:36:03 Speaker 1 

Right. 

01:36:04 Speaker 2 

Party picked to kill it. 

01:36:05 Speaker 1 

And they want to have a winner. 

01:36:06 Speaker 1 

They want someone who can win Pennsylvania. 

01:36:07 Speaker 1 

They want someone who. 

01:36:08 Speaker 1 

Can win Florida or they want someone. 

01:36:08 Speaker 2 

Yeah, but yes or no. So if you remember when when Bill Clinton told the Democratic Party back to the center in 1992 and we had the whole Democratic Leadership Council and they really remade the Democratic Party at that time as a more centrist party. 

01:36:11 Speaker 1 

Gather info in Florida, huh? 

01:36:22 Speaker 2 

They had just come off 3 disastrous presidential elections. So Reagan in 80 and 84 and then Herbert Walker Bush in in 88. 

01:36:32 Speaker 2 

So, you know, they took three. 

01:36:34 Speaker 2 

Big losses for them to rethink. 

01:36:36 Speaker 2 

I don’t think progressives are going to rethink their agenda, you know, based on one midterm loss. 

01:36:42 Speaker 2 

Even though I think it’s going to be gargantuan later this year. 

01:36:46 Speaker 2 

So I think they need more losses to really re-evaluate their agenda. 

01:36:49 Speaker 2 

I mean, look, the activists in the party are deeply invested. 

01:36:53 Speaker 2 

In their agenda, they’re just not going to give it up. 

01:36:55 Speaker 2 

They’re going to blame it on a communications problem. 

01:36:58 Speaker 2 

They’re going to say let’s find a new messenger, and Newsome will seem like. 

01:37:01 Speaker 2 

A younger, fresh face. 

01:37:05 Speaker 2 

So I think that’s how it could happen and. 

01:37:06 Speaker 2 

If you look at. 

01:37:07 Speaker 2 

The Democratic Bench show up with us. 

01:37:07 Speaker 1 

So he could also say. 

01:37:08 Speaker 1 

Can he also? 

01:37:09 Speaker 1 

Who else I? 

01:37:10 Speaker 1 

Gotta finish working through the show, I mean. 

01:37:10 Speaker 2 

We also got everything else warm. 

01:37:11 Speaker 1 

Buddha judge well idea Buddha. 

01:37:14 Speaker 1 

Judge your nails, see if they want to go full like crazy. 

01:37:17 Speaker 1 

Left would be and then if they want to go more moderate. 

01:37:20 Speaker 1 

That’s not that doesn’t win an election. 

01:37:21 Speaker 1 

You gotta find somebody can win the election. 

01:37:23 Speaker 1 

I agree, I agree. 

01:37:24 Speaker 1 

But it’s going to be about turn out. 

01:37:25 Speaker 2 

Governor of a big stadium, which is as of now. 

01:37:28 Speaker 1 

And 100 million, $100 billion surplus looks good for him. 

01:37:32 Speaker 1 

So yeah, I. 

01:37:33 Speaker 2 

Mean, Gavin. 

01:37:35 Speaker 2 

It’s a scenario. 

01:37:35 Speaker 2 

It’s a scenario. 

01:37:36 Speaker 2 

But look, I think Republican. 

01:37:37 Speaker 1 

The big question is, Will Republicans field Trump after January? 

01:37:42 Speaker 1 

6 and. 

01:37:42 Speaker 2 

I I do answer is no and. 

01:37:45 Speaker 1 

It’s too shameful right to do. 

01:37:45 Speaker 2 

I think. 

01:37:47 Speaker 2 

That I think that. Look, I think Trump’s problem is you won’t stop talking about the last election. And I think elections are always about the future. 

01:37:55 Speaker 2 

And the Republicans also gonna nominate a candidate who represents the future and I think. 

01:37:58 Speaker 1 

No Republicans want him as going out there trying to steal an election. 

01:38:03 Speaker 2 

Look, if you look, if you look at, if you look at straw polls, OK, look at Shaw polling. 

01:38:03 Speaker 1 

No Republicans want. 

01:38:04 Speaker 3 

That on their hands. 

01:38:08 Speaker 2 

The census now is beating Trump in straw polls in the Republican Party. 

01:38:13 Speaker 2 

Jonathan Chait, who is a pretty smart liberal, definitely not a Republican, but he’s sometimes there’s very smart observations. 

01:38:19 Speaker 2 

Remember the whole 0 so this thing? 

01:38:20 Speaker 2 

Anyway, here’s an article just today talking about how. 

01:38:23 Speaker 2 

Disantis has now eclipsed front within the Republican base, and if you look at the numbers that within if you if you pull Fox News viewers and likely Republican primary voters. 

01:38:34 Speaker 2 

This answer is off a couple of points in the salt polls, but among Fox News viewers, he’s up like 10 to 14 points. 

01:38:41 Speaker 2 

So, in other words, the Republican base, the activists who are the influencers, they already have moved. 

01:38:48 Speaker 2 

From Trump’s advances. 

01:38:49 Speaker 3 

Yeah, they love them. 

01:38:50 Speaker 3 

So I mean. 

01:38:50 Speaker 2 

I don’t feel this is the worst. 

01:38:51 Speaker 1 

If he’s gonna run, he’s going to win. 

01:38:55 Speaker 1 

A landslide. 

01:38:57 Speaker 2 

His wife said that Sanchez versus Newsome, I think. 

01:39:00 Speaker 2 

But look, it could be dispensers for Biden. 

01:39:02 Speaker 2 

It could even be Trump versus Newsome. 

01:39:04 Speaker 2 

I think the configurations that win for Republicans, I think that binds on the ticket. 

01:39:08 Speaker 2 

I think any Republican wins. 

01:39:10 Speaker 2 

I think if it’s DeSantis versus news from I think DeSantis wins. 

01:39:14 Speaker 2 

I think however, and this is sort of the nightmare. 

01:39:17 Speaker 2 

Mario, I think with something like a Newsome versus Trump, I think Republicans could lose that just because. 

01:39:23 Speaker 2 

You know. 

01:39:24 Speaker 2 

For sure people people are think about the. 

01:39:26 Speaker 2 

Future they they want that, they. 

01:39:28 Speaker 2 

Don’t be reminded of the past and. 

01:39:31 Speaker 2 

So I think there’s this. 

01:39:32 Speaker 1 

This also the path is insane and drain and trying a little. 

01:39:35 Speaker 1 

Week I. 

01:39:38 Speaker 1 

Running for president? 

01:39:39 Speaker 3 

No more training all. 

01:39:39 Speaker 1 

So that would be great. 

01:39:41 Speaker 1 

I think nothing. 

01:39:42 

Right. 

01:39:43 Speaker 1 

Five years old would be good for me. 

01:39:45 

Alright, this is gonna this. 

01:39:46 Speaker 1 

Is been a very long episode. Well yeah, well considering how much that fax is going to spike, we’ll get it back down to 45 minutes. Alright? Everybody is amazing up. So we’re back. We’re not going anywhere. Everybody glad we’re back. 

01:39:56 Speaker 3 

Us for Max or brass. 

01:39:59 Speaker 1 

I’m not going anywhere. 

01:39:59 Speaker 2 

Six hours left. 

01:40:01 Speaker 1 

You’re gonna need a Wrecking Ball to Take Me Out of here. 

01:40:03 Speaker 2 

We never wanted to get rid of your J. 

01:40:03 Speaker 1 

You can send in the next door guard, take out. 

01:40:06 Speaker 1 

We don’t want. 

01:40:06 Speaker 1 

To get rid of you, but now all we. 

01:40:07 Speaker 1 

Need is for the full boat, so sorry, hold me off. 

01:40:10 Speaker 2 

We we never wanted to get rid of you, J. 

01:40:12 Speaker 2 

Cole, but we knew we had to do certain things to get you to act like God. 

01:40:15 Speaker 1 

Oh my. 

01:40:17 Speaker 3 

My hair crossed. 

01:40:18 Speaker 1 

J. Cole Bronner. 

01:40:20 Speaker 1 

Brought a nice well done price. 

01:40:21 Speaker 1 

He came to negotiate. 

01:40:23 Speaker 1 

New guys. 

01:40:24 Speaker 1 

So what? 

01:40:26 Speaker 3 

Right. 

01:40:26 Speaker 1 

Give me two points, that’s fine. 

01:40:28 Speaker 1 

Just starting to negotiate the. 

01:40:29 Speaker 1 

Treaty of Australian glass with half of tankers bar. 

01:40:33 Speaker 1 

It’s fine. 

01:40:34 Speaker 1 

You guys don’t get no more interest for you? 

01:40:35 Speaker 1 

That’s all inside, no more. 

01:40:38 Speaker 1 

To hold back on payment. 

01:40:39 Speaker 1 

By the way, I’m about to get on a call with our lawyers. 

01:40:41 Speaker 1 

We’re going to get the account set up, get all the money transferred from your stomach, like with that invoice is. 

01:40:44 Speaker 2 

Yum Yum Yum Yum Yum Yum. 

01:40:46 Speaker 1 

Good luck with that money back on God. 

01:40:49 Speaker 1 

I put that on the. 

01:40:50 Speaker 1 

Warriors, so triple this pretty good bye everybody. 

01:40:53 Speaker 1 

See you next time. 

01:40:55 Speaker 3 

Second, let your winters live. 

01:41:02 Speaker 3 

Wayne and David. 

01:41:03 Speaker 3 

Second, it says open source. 

01:41:20 Speaker 3 

Her parents. 

01:41:22 Speaker 1 

And my dog. 

01:41:30 Speaker 1 

We should all get better run and just have one big Georgie. 

01:41:33 Speaker 1 

But they’re also like this, like the sexual tension, but they. 

01:41:36 Speaker 1 

Just need to release that house. 

01:41:38 

You are there. 

01:41:41 Speaker 2 

Your feet. 

01:41:42 Speaker 2 

Right.