Gold, Crypto, the Debt Crisis, and How to Survive When the US Needs a Bailout

[00:00:04] So, one of my midlife realizations is [00:00:08] that people in my world, certainly me, [00:00:12] um, ascribe too much to ideology and too [00:00:16] little to money. The financial dynamics [00:00:18] of the world drive a lot more than we [00:00:21] acknowledge that they do. And we look at [00:00:22] things, we're like, "Oh, these people [00:00:23] believe this and these people believe [00:00:25] that and that's why they're fighting or [00:00:26] that's why they're allies or whatever. [00:00:29] But really, we should all remember that [00:00:31] the love of money is the root of all [00:00:32] evil and money really has a huge effect [00:00:35] on outcomes. But nobody says that. Uh [00:00:38] and I miss it so often. So you spent [00:00:40] your life in uh the money business [00:00:44] trading debt. Uh [00:00:48] tell us just just to start, but like [00:00:51] you worked in Ukraine. You traded [00:00:53] Ukrainian debt. What was that like? [00:00:55] >> I never worked in Ukraine. And I've been [00:00:58] to Ukraine on investor trip. Uh I have [00:01:01] traded Ukraine debt. I traded emerging [00:01:03] markets debt my whole life until May of [00:01:06] this year. I traded and sold it at a [00:01:09] bunch of bunch of different banks. Uh [00:01:11] London and New York. Ukraine was [00:01:13] certainly one of the uh [00:01:16] one of the instruments we traded traded [00:01:17] through the Russia crisis. Um [00:01:20] >> can can you explain just for the truly [00:01:23] ignorant me among them what what is [00:01:25] emerging markets debt? So emerging [00:01:27] markets debt uh originally the the asset [00:01:31] class grew out of the debt crisis of the [00:01:33] 1980s [00:01:35] uh when money center banks um were hung [00:01:38] with primarily which Latin America debt [00:01:41] um after the [00:01:43] uh after the 80s crisis um Nicholas [00:01:47] Brady Treasury Secretary at the time [00:01:48] came up with a plan called the Brady [00:01:50] plan to restructure the debt back it [00:01:52] with collateral US Treasury strips that [00:01:55] would make it more palatable to a [00:01:57] broader base of investors to get it off [00:01:58] the balance sheets of the money center [00:02:00] banks and to create a more of an [00:02:03] institutional uptake of the debt and [00:02:06] retail uptake of the debt. So, American [00:02:08] debt, American banks are left with loans [00:02:11] from other countries that those [00:02:13] countries can't repay. [00:02:14] >> Correct. [00:02:15] >> I'm just trying to put it in terms of [00:02:16] like I can understand. And so then the [00:02:18] Treasury Secretary basically says to [00:02:21] those banks, "We'll bail you out by [00:02:23] guaranteeing these loans with American [00:02:25] treasuries." Um, it's one way to put it. [00:02:29] Um, it's a way to clean the balance [00:02:31] sheet up and to create I think there are [00:02:34] two two impacts. When you clean up the [00:02:36] the bank's balance sheets, get it off [00:02:38] get it off their their sheet and create [00:02:41] a marketplace and a dynamic that allows [00:02:45] liquidity for this debt and then creates [00:02:47] a whole new uh marketplace and ability [00:02:51] to issue and clean up the the country's [00:02:53] mouth. So, you're doing good for the [00:02:55] banks and you're doing good for the [00:02:56] countries and theoretically doing good [00:02:58] for a whole new investor base. And that [00:03:01] started in the early 90s and I kind of [00:03:03] walked into Wall Street in the early 90s [00:03:05] out of college and and I just fell into [00:03:08] this market that was starting and really [00:03:10] boomed for a while. [00:03:12] >> And so what does that mean to attach a [00:03:15] treasury to foreign debt? Can you tell [00:03:17] us [00:03:18] >> uh layman's terms what that means to [00:03:20] treasury strips? What is that? [00:03:22] >> Treasury strips zero coupon bonds [00:03:24] effectively. uh it so you have [00:03:27] collateral you have risk-free collateral [00:03:30] uh that's attached to the bonds so that [00:03:32] to get investors who would obviously [00:03:35] wary of subinvestment grade emerging [00:03:38] market at that time was called less [00:03:40] developed countries LDC then it was then [00:03:43] it evolved into emerging markets debt [00:03:45] which actually is is sort of a misnomer [00:03:48] at this point because it it [00:03:50] characterizes almost everything outside [00:03:52] of G7 from right [00:03:54] >> single a debt to defaulted debt. So it [00:03:57] it it's grown over the last 30 years to [00:04:00] incorporate [00:04:01] sovereign debt debt of countries uh [00:04:04] primarily issued in in uh hard currency [00:04:07] dollars and euros down to investment [00:04:10] grade corporates uh government-owned [00:04:12] debt like um oil companies let's say [00:04:15] nationalized oil companies that would be [00:04:17] called quasi sovereigns uh down to [00:04:20] corporate debt all the way down to [00:04:21] defaulted debt. So it's all of credit [00:04:23] all credit products [00:04:26] when in a number of countries it's it's [00:04:28] ballooned but at the infancy it was [00:04:30] really a it was a evolving asset class [00:04:34] to got to clean up the balance sheets [00:04:36] and and open access back to lending to [00:04:38] these countries and instead of just [00:04:41] being relying on major money center [00:04:44] banks for loans that really sat on their [00:04:47] balance sheet weren't that liquid didn't [00:04:49] trade much let's open it up to a global [00:04:51] investor base create trade euro bonds, [00:04:54] put in your uh uh not necessarily put in [00:04:57] your 401k but put in your pension funds [00:04:59] and then hedge funds traded it and from [00:05:01] there it evolved from dollar debt into [00:05:03] the local currency debt became much more [00:05:06] fashionable uh so investors can buy [00:05:09] Turkish leer denominated debt or uh [00:05:12] Kenya shilling denominated debt um and [00:05:14] then obviously driven [00:05:16] >> you can buy Kenyan debt in Kenyan [00:05:18] currency [00:05:18] >> you can it's not that easy but the the [00:05:21] harder it is to trade, the more the [00:05:24] banks make money at uh trading it. So [00:05:27] it's uh certain countries are harder to [00:05:29] access than others. Let's say [00:05:30] >> so all so all of this debt originates [00:05:32] from the desire of countries to raise [00:05:35] money from the world. [00:05:36] >> Correct. [00:05:38] >> So if I'm Kenya and I want to, you know, [00:05:43] fund the operations of my government, I [00:05:46] issue bonds. [00:05:47] >> Yeah. You issue locally. uh issue local [00:05:50] bills to local banks primarily treasur [00:05:54] local bank treasuries. Uh foreign [00:05:57] investors can access that through [00:06:01] um you typically plain vanilla kind of [00:06:04] derivatives and they'll issue dollar [00:06:06] denominated euro bonds that are open to [00:06:09] the world to trade in dollars. [00:06:12] So if you're the Treasury Secretary [00:06:14] that's a huge power that you have. you [00:06:17] can bailing out other countries. [00:06:19] >> Certainly, I mean, I saw it my first job [00:06:24] uh for about a year. I was an analyst on [00:06:26] a trading desk and it like 6 months in [00:06:29] they gave me a trading book uh the [00:06:32] Mexico book. It was 1994 [00:06:34] and they gave it to me because I was a [00:06:36] kid and it was the safest book you could [00:06:38] you couldn't hurt yourself too much with [00:06:39] it. About 6 months after that, the [00:06:41] Mexican Peso crisis hit. So yeah, that [00:06:44] was Robert Rubin and friends. I lived [00:06:46] through that whole experience of the [00:06:48] >> What did they do? [00:06:49] >> What did who do [00:06:50] >> what did Reuben then Treasury Secretary [00:06:52] what did under Clinton what did he do [00:06:54] with the Mexico? [00:06:56] >> Well, what's interesting is [00:07:00] he I don't know if it's it's a it's a [00:07:03] function of just how the human brain [00:07:04] works and you you look back and you're [00:07:06] like, "Oh yeah, the we basically bailed [00:07:08] Mexico out and cleaned it up and [00:07:10] everything went on as it was." But you [00:07:12] forget as you're going through that [00:07:15] these things all take a lot longer. Your [00:07:17] memory shortens up, right? [00:07:18] >> Uh it took a lot longer and it took a [00:07:20] few gorounds. And what I learned through [00:07:22] that whole thing was cuz I went through [00:07:24] a bunch of these crises. There was the [00:07:26] 94 Mexican peso 97 the Asia crisis, [00:07:31] Thai, if you remember Taibot crisis and [00:07:33] Korea chai balls and all that. And then [00:07:35] 98 was Russia. [00:07:37] 2000 was Argentina peso crisis. and then [00:07:40] we had the, you know, GFC. So there's [00:07:42] there's roll there was a series of [00:07:43] rolling crises and all in like the first [00:07:46] 10 years of my career. So that [00:07:48] definitely [00:07:50] >> kind of wounds your ability to stay [00:07:52] perma bullish when uh you're you're [00:07:54] going through a bunch of rolling crises. [00:07:56] But um what I learned through these [00:07:58] series of crises [00:08:00] is that what you have to kind of start [00:08:03] with is the bazooka the to go with the [00:08:06] the moab of bailout. you have to go with [00:08:09] way more than the market thinks you need [00:08:11] cuz what in in the Mexican peso crisis [00:08:14] if my memory serves properly they kept [00:08:17] coming with not half measures but sort [00:08:19] of just enough and what they thought [00:08:21] would would bring back market stability [00:08:24] or market confidence and just enough [00:08:29] creates a bit of spike in confidence and [00:08:31] then start to start to panic again and [00:08:34] then come back again until finally they [00:08:36] come back with the the mega mega bazooka [00:08:38] swap lines, bailouts, all that sort of [00:08:41] stuff. So now at that was also early in [00:08:44] sort of the Washington consensus era of [00:08:46] foreign policy and there was uh I guess [00:08:50] my the macro point I would make or the [00:08:53] conclusion I'm reaching is this is a [00:08:55] huge feature of our foreign policy. [00:08:58] It is. And you know the IMF, it's funny. [00:09:01] I've been you mentioned Ukraine and the [00:09:03] the trip I went to Ukraine was an [00:09:05] investor trip and part of the purpose of [00:09:07] an investor trip is to go and to meet [00:09:08] with their finance ministry [00:09:12] um their debt liability people um meet [00:09:15] with banks, meet with locals, uh get an [00:09:19] assessment and you know go to you'd [00:09:22] always you always go to the IMF the IMF [00:09:25] there um and and ask what the likelihood [00:09:27] is of the next trunch being delivered. [00:09:30] And and you know, perhaps it's a bit [00:09:33] cynical, but 30 years of trade emerge [00:09:35] markets will make you pretty cynical. [00:09:37] But I'd always go into those meetings [00:09:38] and walk away from those meetings like [00:09:40] what are we talking about here? Of [00:09:41] course they're going to of course [00:09:42] they're going to disperse the next [00:09:43] trunch. That's what they're in the [00:09:44] business of doing. They're in the [00:09:46] business of lending money to these [00:09:49] countries because that's what they do [00:09:52] and that's where they make their money. [00:09:53] So, it's very rare that they won't um or [00:09:57] they don't unless it's a real sort of [00:10:00] turn your thumb up turn your turn your [00:10:02] nose up or thumb your nose at the IMF [00:10:04] and and uh [00:10:05] >> is the purpose of the IMF to bail out [00:10:08] >> mismanaged countries? [00:10:09] >> I think in simple terms, yes. I don't [00:10:11] think that's the I don't think that's [00:10:14] the most euphemistic way of putting it [00:10:16] or how they describe it, but [00:10:17] effectively, yes. I'd say backs stop or [00:10:20] keep them keep them afloat and to to [00:10:23] offer them uh guidance as to how to run [00:10:28] austerity programs and get themselves [00:10:30] back on the rails so that they can move [00:10:32] towards [00:10:33] prosperity, democracy, all this all [00:10:36] those sort of [laughter] things. [00:10:38] >> Does it work? [00:10:39] >> Uh typically no. [00:10:41] >> Why? [00:10:42] uh because one uh it's very politically [00:10:49] unpopular as a domestic politician to be [00:10:52] taking orders from any foreign power but [00:10:56] certainly uh the west and those orders [00:11:00] come with strict austerity because how [00:11:03] did they get themselves in those [00:11:04] problems in the first place right um a [00:11:06] certain distinct lack of austerity [00:11:08] >> living beyond their means [00:11:09] >> correct so you That's not that's not uh [00:11:15] that's not particular to emerging [00:11:17] markets countries. All sovereign all [00:11:18] sovereigns do that, right? Everyone in [00:11:20] the west is doing that as well now, [00:11:21] right? Um living beyond their means. Um [00:11:24] but some of us like the United States [00:11:26] are able to run what's called counter [00:11:29] cyclical monetary policy because we have [00:11:32] a reserve currency. So we have a special [00:11:36] privilege to be able to maybe be [00:11:38] somewhat more proflegate than others, [00:11:39] but the money runs out a lot faster in [00:11:42] emerging markets countries when you [00:11:43] can't finance your debt and you have a [00:11:45] dual crisis of both your currency [00:11:49] uh and your interest rates running out [00:11:52] of control. And at that point, you've [00:11:53] got no you got nowhere to go other than [00:11:55] to [00:11:57] uh your friends in DC um or in Brussels [00:12:00] and ask for the backs stop. But in [00:12:04] return for the backs stop, you need to [00:12:06] make some promises about how you're [00:12:07] going to conduct your business going [00:12:08] forward. And as you can imagine, cutting [00:12:11] expenses, [00:12:13] raising interest rates, slowing the [00:12:15] economy, uh doesn't generally get people [00:12:19] reelected. [00:12:20] Exactly. hate to brag, but we're pretty [00:12:23] confident this show is the most [00:12:25] vehemently pro- dog dog podcast you're [00:12:27] ever going to see. We can take or leave [00:12:30] some people, but dogs are [00:12:31] non-negotiable. They are the best. They [00:12:34] really are our best friends. And so, for [00:12:36] that reason, we're thrilled to have a [00:12:37] new partner called Dutch Pet. It's the [00:12:40] fastest growing pet teleaalth service. [00:12:42] Dutch.com is on a mission to create what [00:12:45] you need, what you actually need, [00:12:47] affordable quality veterinary care [00:12:49] anytime, no matter where you are. They [00:12:51] will get your dog or cat what you need [00:12:54] immediately. [00:12:55] It's offering an exclusive discount. [00:12:57] Dutch is for our listeners. You get 50 [00:12:59] bucks off your vet care per year. Visit [00:13:02] dutch.com/tucker [00:13:04] to learn more. Use the code Tucker for [00:13:05] $50 off. That is an unlimited vet visit. [00:13:10] $82 a year. 82 bucks a year. We actually [00:13:13] use this. Dutch has vets who can handle [00:13:16] any pet under any circumstance in a [00:13:20] 10-minute call. It's pretty amazing, [00:13:21] actually. You never have to leave your [00:13:22] house. You don't have to throw the dog [00:13:24] in the truck. No wasted time waiting for [00:13:26] appointments. No wasted money on clinics [00:13:28] or visit fees. Unlimited visits and [00:13:30] follow-ups for no extra cost. Plus, free [00:13:33] shipping on all products for up to five [00:13:35] pets. It sounds amazing. It couldn't be [00:13:38] real, but it actually is real. Visit [00:13:40] dutch.com/tucker [00:13:42] to learn more. Use the code Tucker for [00:13:43] 50 bucks off your veterinary care per [00:13:46] year. Your dogs, your cats, and your [00:13:49] wallet will thank you. So, you really [00:13:51] you've got a a democracy problem. These [00:13:54] countries overspend because they're [00:13:57] democracies and they're trying to meet [00:13:59] the demands of their voters and then [00:14:01] it's impossible to fix because their [00:14:04] democracies trying to meet the demands [00:14:05] of their voters. [00:14:07] >> Uh that's probably a little more [00:14:09] euphemistic than I would say. Yes, [00:14:11] that's one factor, but there are other [00:14:12] factors that play as well. [00:14:14] >> How many countries have been bailed out [00:14:16] by the United States over the past 30 [00:14:18] years that you're aware of? [00:14:19] >> Oh, I mean, there's hard bailouts and [00:14:22] soft bailouts, so I couldn't really put [00:14:25] a number on it. Like, how many are [00:14:28] running an IMF program right now? How [00:14:31] would have to be in the dozens? How many [00:14:33] like strict bailouts? [00:14:35] I I really don't know off the top of my [00:14:37] head. I mean, we can go through the we [00:14:40] can go through obviously Mexico, Argent, [00:14:43] excuse me, Argentina. Um, in the in the [00:14:46] in the Asian crisis, there were a whole [00:14:48] host of Asian countries that had to post [00:14:50] up. Um, so there's there's the hard [00:14:53] bailouts and then there's like the [00:14:55] softer bailouts of sort of coming back, [00:14:57] staying on the [00:15:00] staying on the the teat, so to speak. [00:15:02] Who makes money from this? [00:15:05] uh who makes money from this? So [00:15:10] the IMF theoretically makes money uh [00:15:14] from the interest on the loans, but it's [00:15:16] typically below market loans. So it's [00:15:18] it's not a real profit motive. Um banks [00:15:22] make money from this from facilitating [00:15:25] the debt, facil the trading of it, the [00:15:28] issuing of it, the fees of issuing of [00:15:29] it. Um investors make money. um from [00:15:35] higher interest rates obviously. Um and [00:15:39] then there's a subset of investors like [00:15:41] distressed debt investors that will um [00:15:46] buy a bunch of defaulted uh defaulted [00:15:49] paper, sit on it, and then do workouts. [00:15:51] Like the most the most [00:15:54] uh probably stark examples recently [00:15:57] would be Argentina. Um and uh you know [00:16:01] right now Ukraine will be pretty [00:16:04] significant one as well. See what the [00:16:06] workout is with that. [00:16:08] >> How what would you do with Ukraine as a [00:16:10] banker at this point? Like what's likely [00:16:12] to happen to Ukraine? not not on a [00:16:15] military level, but [00:16:16] >> Ukraine Ukraine's a is a different one [00:16:19] than say Argentina because it has at the [00:16:22] moment more of an geopolitical put so to [00:16:26] speak than [00:16:27] >> pick a random country like Bolivia or [00:16:29] Argentina. Although now under this [00:16:32] administration clearly there's more with [00:16:34] sort of Monroe Doctrine part two there's [00:16:36] there's more of a geopolitical put to [00:16:38] Argentina. But uh but Ukraine's a tricky [00:16:42] one because there are you obviously up [00:16:46] until recently you had the entire west [00:16:48] behind them right and there's you this [00:16:51] this week alone you've got um you got [00:16:54] Larry Frink Wickoff and Kushner over [00:16:56] there working on you know stage two [00:16:58] what's going to happen the peace process [00:17:00] but also the rebuild. So that's an it's [00:17:03] an odd one. And I think that's going to [00:17:05] be a combination of of public and [00:17:07] private uh because there'll be so much [00:17:10] rebuild to do and there'll be there'll [00:17:12] there'll be a lot of money to be made in [00:17:14] the rebuild. [00:17:15] >> What does a debt crisis look like? What [00:17:17] is a debt crisis? [00:17:20] >> Well, a debt crisis typically is not a [00:17:23] debt crisis alone. It it's accompanied [00:17:26] by a currency crisis. [00:17:29] uh the debt crisis, the external debt [00:17:32] and then a local market interest rate [00:17:34] crisis which is also dead in itself. So [00:17:36] the local local to local interest rates [00:17:39] will skyrocket at first to try to raise [00:17:42] interest rates to try to attract [00:17:45] uh money to the currency to stem the [00:17:47] route on the currency and that can work [00:17:49] up until a point till you lose control [00:17:51] of both. Um so what a debt crisis looks [00:17:54] like is [00:17:56] uh currency runaway currency devaluation [00:18:00] runaway higher interest rates which [00:18:02] clamps down the interest rates clamps [00:18:04] down any lending locally clamps down any [00:18:06] local growth creates defa defaults [00:18:10] um on domestic businesses [00:18:13] uh the currency running away depending [00:18:15] on the country but all countries it [00:18:18] causes inflation but uh countries that [00:18:22] rely eye on imports certainly even more, [00:18:24] right? Everything you're bringing in um [00:18:26] is going to cost far more in your local [00:18:29] currency. Um so it's really a spiral. Um [00:18:33] and then current typically what happens [00:18:35] is bonds will drop to a level that's [00:18:36] called recovery value. And recovery [00:18:39] value is effectively what uh is a term [00:18:42] really more from say the corporate [00:18:45] credit markets where if you were to [00:18:47] strip everything down and sell it for [00:18:49] parts, what could you get? you know what [00:18:51] could you get uh for the cash value? [00:18:55] >> So interest rates spike, bond values [00:19:00] drop, [00:19:00] >> collapse. Yes. [00:19:01] >> What does this have to do with debt? Why [00:19:02] is it described as a debt crisis? [00:19:05] >> Uh because no one can function without [00:19:08] borrowing. No one can function without [00:19:11] debt. So if you can't borrow, you can't [00:19:13] exist. [00:19:17] And there's no country that's not true [00:19:19] of. [00:19:20] >> Uh I mean there's there are countries [00:19:22] that don't necessarily need to borrow as [00:19:24] much as they do, but they still do. Uh [00:19:27] >> why? [00:19:28] >> Because one because they can uh cheaply. [00:19:33] Um I would argue the GCC countries um [00:19:38] don't necessarily need to borrow as much [00:19:40] as they have [00:19:40] >> the Gulf Persian Gulf countries, [00:19:42] >> but they have recently you know Saudi [00:19:44] for example because they're going on a [00:19:45] massive expansion [00:19:47] um to diversify themselves away from [00:19:52] their core business which is oil which [00:19:54] is actually [00:19:56] is actually a very wise thing to do [00:19:58] because if you look at um if you look at [00:20:02] countries countries historically. [00:20:03] Venezuela is probably the most extreme [00:20:05] example. Um [00:20:07] that had an oper there was a single A [00:20:09] rated country in the 80s. Um if you I [00:20:13] went there in the '90s. I mean gleaming [00:20:15] infrastructure like incredible highways, [00:20:18] >> beautiful hotels, amazing amazing place. [00:20:21] Uh and they never took the oil wealth [00:20:25] and diversified away from it in any [00:20:27] meaningful way. And then when you have [00:20:29] an oil shock and you've taken out too [00:20:31] much debt against the let's make up a [00:20:33] number $100 oil price and oil drops to [00:20:36] 30, you're all upside down. Um and so [00:20:41] that's what you know uh it's what NBS is [00:20:45] looking at for a multi-deade plan to [00:20:46] build you know build these cities [00:20:48] technology innovation centers and so [00:20:50] forth which is clearly learning from [00:20:53] from the past. Um [00:20:56] but uh [00:20:57] >> but they're borrowing to do that. [00:20:58] >> They're borrowing to do that. Yeah. But [00:21:00] they're borrowing at fairly cheap rates. [00:21:01] Um there's also a concept that you want [00:21:04] to borrow as a so the sovereign level to [00:21:07] set a benchmark against which your your [00:21:10] companies can borrow in international [00:21:12] markets. This will be the broader the [00:21:14] investor base theoretically the cheaper [00:21:16] the interest rate. So they'll set a [00:21:19] they'll set a benchmark level and then a [00:21:21] corporation can borrow at that rate plus [00:21:24] 20 basis points or 50 basis points. [00:21:27] >> Well, some Americans have become cut off [00:21:29] from the [music] things that once kept [00:21:30] us grounded. Our land, the skills that [00:21:33] tied our families to [music] nature. [00:21:34] >> Told you he's GETTING HIS NEXT SPOT. [00:21:36] >> And to remind us, we made a new six-part [00:21:38] series, American Game: Tales from [00:21:40] [music] the Wild. We follow the [00:21:42] sportsmen who are keeping these ancient [00:21:44] traditions alive. If we follow a formate [00:21:45] [music] navy seal into the mountains of [00:21:47] Texas, Donald Trump Jr. across the [00:21:49] ridges of Lai. [00:21:50] >> That's what we call from going from zero [00:21:52] to hero. [00:21:53] >> And wander with me through the quiet [00:21:55] woods of Maine. [00:21:56] >> I have just three dog commands. And then [00:21:59] as I direct the dogs, find the bird. [00:22:02] Find the bird. And then dead bird [00:22:03] [music] obviously, which I don't use as [00:22:05] much as I'd like to. [laughter] [00:22:08] >> We cast for steel head on the Dashuites [00:22:10] River in Oregon. [00:22:10] >> That the first one I've caught in a [00:22:11] while. Track mule deer in the Utah high [00:22:13] country. Spearfish in the waters off [00:22:15] Monttok chasing stripe bass and bluef [00:22:18] fin tuna. [00:22:18] >> See you on the other side. [00:22:19] >> It's called American Game Tales from the [00:22:21] Wild Outdoor [music] Series. Watch it at [00:22:23] tucker carlson.com. [00:22:28] >> So if every country's indebted, [00:22:32] I mean debt decreases your sovereignty, [00:22:34] your ability to make independent [00:22:36] decisions. [00:22:38] That's correct. Yeah. So if every [00:22:41] country is in debt then there are no [00:22:43] fully sovereign countries then right [00:22:46] can't just it's not no country is free [00:22:48] to do exactly what it thinks it should [00:22:50] do in its own interest they're all [00:22:52] connected [00:22:53] >> no uh and again back to the US I mean [00:22:57] theoretically we we are or were based on [00:23:00] the fact that we have the global reserve [00:23:02] currency but there is a limit to [00:23:04] everything at some point [00:23:06] >> so what's the limit for the United [00:23:10] It's hard to say um what the limit is. [00:23:13] The limit is what loses the global [00:23:16] reserve currency status, right? And as I [00:23:19] alluded to before, these things don't [00:23:21] happen quickly. They happen over a much [00:23:24] longer period of time than anyone would [00:23:26] think. Um [00:23:28] so [00:23:31] how do you you know in in simple terms [00:23:34] to me let's look at some global current [00:23:36] global reserve currencies [00:23:39] uh historically um [00:23:42] Dutch Gilder British pound US dollar [00:23:45] probably the most obvious examples in [00:23:47] relatively recent history and what did [00:23:49] they all have in common uh they ruled [00:23:52] the seas military dominance right and [00:23:54] you know you'll see memes online and [00:23:56] people what you know the pictures of [00:23:59] fleets of aircraft carriers in the Gulf [00:24:01] and displays of military power and [00:24:03] that's what backs my currency and that [00:24:05] you know that that is true. Um [00:24:08] but [00:24:10] you know at some point you got to ask [00:24:13] yourself a question like where you know [00:24:15] also what how did empires from Rome [00:24:19] uh to the Dutch to the Brits like [00:24:22] imperial overreach to an extent was what [00:24:24] undid them right and um [00:24:27] >> if we continue to [00:24:29] >> I mean what what concerns me what [00:24:32] concerns me longer term of the potential [00:24:33] to lose the the reserve status is if we [00:24:36] lose or military dominance. That's not [00:24:38] happening obviously tomorrow or the next [00:24:41] day. There's a few things that that [00:24:43] could obviously I mean you're more [00:24:45] versed than I am in in this whole notion [00:24:47] of modern day drone warfare, but that [00:24:49] certainly levels the playing field very [00:24:52] very quickly. Um you see what the what [00:24:54] the hoodies were able to do [00:24:57] >> uh with not so sophisticated and not [00:25:00] very expensive drone technology. So, but [00:25:04] that's you know that's that's the that's [00:25:06] pervy for for some military expert not [00:25:08] me. Um the other thing that concerns me [00:25:10] >> but the structure remains the same. So [00:25:13] the United States can continue being [00:25:15] indebted to the degree that it is [00:25:17] because it has the world's reserve [00:25:20] currency and it possesses that because [00:25:23] of its military dominance. [00:25:24] >> It does. But if yes I think what's a [00:25:28] very important what was a very important [00:25:30] moment [00:25:32] however was the seizing of the Russian [00:25:35] reserves at the beginning of the Russia [00:25:38] Ukraine conf. [00:25:39] >> I felt that [00:25:40] >> um and I think we'll look [00:25:42] >> can you tell us what happened just for [00:25:44] people. [00:25:44] >> Yeah. So quite simply uh the western [00:25:48] powers seized the Russian reserves that [00:25:50] were sitting in um in the New York Fed. [00:25:54] Uh I believe it's 300 billion is the [00:25:57] number that they seized and you know the [00:25:59] the euro Europeans still want to use [00:26:01] that for [00:26:03] uh for rebuild so forth in Ukraine. Um [00:26:07] now not to get into who's right and [00:26:10] who's wrong in the Ukraine Russia [00:26:11] conflict. That's not that's not the [00:26:13] point of this. The point is it sets a [00:26:14] precedent [00:26:16] um that's a scary precedent that is your [00:26:20] money that sits in US treasuries or gold [00:26:23] in our [00:26:25] uh in our Federal Reserve is not safe if [00:26:29] you run a foul of the powers that be. So [00:26:33] there's a an a a very obvious and [00:26:35] natural reaction function to that which [00:26:37] is [00:26:40] powers like India, China and Russia [00:26:42] stop buying treasuries and start buying [00:26:44] gold though the gold call was certainly [00:26:48] we have inflationary you know [00:26:50] inflationary [00:26:51] pressures we can talk about but even [00:26:53] more to the point it seemed obvious at [00:26:55] that point that that's the trade it's [00:26:56] it's yes it's an inflationary h [00:26:58] >> I bought gold that month remember [00:27:00] >> yeah and I've done better than the stock [00:27:03] market's done. Well, it's funny if I the [00:27:07] move in gold this year, I won't get it [00:27:09] right off the top of my head, but it's [00:27:11] over the last 20 years, I think, now is [00:27:13] the gold's now beat the S&P. Now, when [00:27:16] you compare the two, [00:27:16] >> Yep. [00:27:17] >> it's really effectively just a [00:27:18] debasement trade. When you look at it, [00:27:20] >> what's a debasement trade? [00:27:21] >> Debasement trade is that the currency [00:27:24] that we the currency that we all use and [00:27:27] think about every day has been debased [00:27:29] against gold, right? the value of the [00:27:32] dollar. [00:27:33] I think oftentimes people look at the [00:27:35] the dollar is the dollar strong or the [00:27:37] dollar weak. And what people are looking [00:27:38] at is effectively the DXY, the dollar [00:27:41] index, and that's a basket of major [00:27:43] currencies or it's heavily weighted to [00:27:46] the major currencies, euro, yen, [00:27:49] Canadian dollar, Aussie dollar. And it's [00:27:52] really at this point kind of a [00:27:54] ridiculous comparison because all of [00:27:55] those countries are sort of in a basket [00:27:59] case with their debt issue and their [00:28:00] growth. Um, but if you look at the [00:28:02] dollar versus Bitcoin or if you look at [00:28:05] it versus gold over the last 10 years, [00:28:08] it's pretty clear that the currency's [00:28:10] been debased in those terms. So if you [00:28:12] look at it in that terms, the stock [00:28:14] market returns don't really actually [00:28:16] look quite as [00:28:19] uh as great as wonderful if you're [00:28:21] looking at in what a dollar uh would how [00:28:24] many how many dollars it took to buy a [00:28:26] ounce of gold 10 or 15 years ago versus [00:28:29] today. [00:28:31] And all of that you think or some of it [00:28:33] is downstream from the decision by the [00:28:36] Biden administration to freeze Russian [00:28:38] assets because that scared the crap out [00:28:39] of the rest of the world. I think the [00:28:41] gold move is for sure the dollar weak [00:28:43] the dollar weakness against gold. Yes. [00:28:46] Uh but there's also I mean I I think [00:28:51] the big move in I mean if you look at [00:28:57] if you look at what we did after the GFC [00:28:59] in terms of interest rates and [00:29:01] >> global financial crisis. [00:29:02] >> Yes. where what we did [00:29:05] bail out uh extraordinary measures [00:29:09] fiscal and monetary keeping interest [00:29:11] rates at zero uh emergency measures [00:29:15] keeping rates at zero that remained in [00:29:18] place for a good 10 year like I don't [00:29:20] know how you stayed emergency measures [00:29:23] at zero interest rates when the stock [00:29:26] market what quadruples over triples [00:29:29] quadruples over 10 years. Um, so [00:29:34] what I think why is that bad? All all [00:29:37] those investors got rich, everyone's [00:29:40] happy with their 401ks. Like why is that [00:29:42] bad? [00:29:43] >> Well, it's bad for a number of reasons. [00:29:48] One is [00:29:50] if you believe in a free market [00:29:52] capitalist system, you believe in the [00:29:54] the pricing mechanisms and the the free [00:29:57] market pricing is everything. [00:29:59] Uh the price of meat at the farmers [00:30:02] market is set by the free market. It's [00:30:04] willing willing buyers, willing sellers [00:30:05] at a fair price. Uh once you start to [00:30:09] put in price controls of the Soviet [00:30:11] Union, it's definitionally we don't have [00:30:13] free market capitalism. [00:30:15] At the core of [00:30:18] uh you know free market capital, the [00:30:20] price of money. So we artificially put [00:30:22] price controls on the price of money. [00:30:24] It's the way I look at it. we [00:30:25] artificially kept interest rates way too [00:30:27] low at zero when the market didn't [00:30:30] necessarily demand the conditions maybe [00:30:31] at the time certainly five years hence [00:30:35] 2015 I I don't I don't really see why we [00:30:38] needed to keep interest rates at zero [00:30:39] for that long so yes uh I think the [00:30:43] reason was in my opinion the reason were [00:30:45] the people at the Fed [00:30:47] the dozens and dozens of PhDs at the Fed [00:30:50] making these decisions probably to a man [00:30:54] to a [00:30:55] wrote their PhD on [00:30:58] uh the Great Depression and what the Fed [00:31:00] did wrong and that the the horrors of [00:31:03] deflation. So really the depression was [00:31:05] really a result of deflation, right? So [00:31:07] that's the greatest boogeyman of all. So [00:31:10] anything you can do to fight deflation. [00:31:12] Deflation is the real killer. Uh [00:31:15] especially when you have an excessive [00:31:18] debt load. [00:31:18] >> What I'm I'm I'm going to stick to the [00:31:21] dumbest possible questions. I hope I [00:31:22] don't offend you. What is deflation? [00:31:24] >> Deflation is prices going down. Uh what [00:31:29] you kind of want is a gentle inflation [00:31:32] to help [00:31:34] inflate away the debt uh to show a [00:31:38] gradual the benchmark the target Fed [00:31:40] target for a long long time has been 2% [00:31:42] inflation. They soft up that to three [00:31:46] recently and as you know just cut rates [00:31:48] this week even with core PC at 2.8. So [00:31:51] they've kind of abandoned that two 2% [00:31:54] target. But what I think in that time, [00:31:56] >> why wouldn't I want deflation? Because [00:31:58] that makes the value of my paycheck [00:32:01] higher. [00:32:02] >> It depends on [00:32:04] who I is. Who's who the I asking that [00:32:08] question is, [00:32:08] >> right? [00:32:09] >> So if you're you and your [00:32:13] wages are constant and you've paid off [00:32:15] your house, [00:32:18] uh [00:32:19] certainly deflation would be great. go [00:32:21] to the store every day and things are [00:32:22] cheaper. Um I mean there's deflation in [00:32:25] certain part certain sectors right they [00:32:27] for years there's been deflation in all [00:32:29] technological goods right you get a flat [00:32:30] screen TV for [00:32:32] >> 400 bucks um [00:32:35] >> so for you Tucker Carlson it would be [00:32:38] wonderful uh for the economy as a whole [00:32:41] that's really run on hyper financial [00:32:44] hyper financialization and debt uh if [00:32:48] you have a deflationary spiral you are [00:32:52] going to be left with a bunch of [00:32:54] defaulted debt. So where we are right [00:32:57] now, [00:32:58] you know, to pivot, I guess, to where we [00:33:02] are here with the US is [00:33:05] I think when this administration came [00:33:07] in, they they messaged pretty clearly [00:33:11] that the move was going to be away from [00:33:13] the Biden administration and more [00:33:15] towards [00:33:17] some austerity. there would be some tax [00:33:19] cuts but it would be offset with [00:33:21] spending cuts. Uh Doge, Elon, etc. [00:33:25] People got very excited about potential [00:33:28] potential cuts. Um [00:33:31] and then I don't know what happened [00:33:34] shortly into the administration, but [00:33:36] there was clearly a pivot that I didn't [00:33:38] see coming. Um and it was around the [00:33:40] time of the tariff [00:33:42] the tariff uh tantrum and the big sell [00:33:44] off in the stock market. But out of that [00:33:46] seemed to come that there was a shift [00:33:48] towards what people are now calling run [00:33:49] it hot which is forget about tamping [00:33:53] down spending little tax cut maybe we'll [00:33:56] take some slower growth but we'll reduce [00:33:58] the deficit for that'll be good for the [00:34:00] long term and instead let's let's just [00:34:03] run it both ways fiscal and monetary so [00:34:06] let's let's cut rates and let's uh let's [00:34:10] cut taxes and let's spend more and I [00:34:12] don't know what what happened or if that [00:34:15] There's always the plan, but or someone [00:34:16] saw uh under the hood and said, "Look, [00:34:19] the only way typically there's two ways [00:34:20] to get out of a debt problem. You grow [00:34:22] your way out or you inflate your way [00:34:23] out, [00:34:24] >> right?" [00:34:24] >> And it seems to me we're going all gas, [00:34:26] no brakes on both. Like, we'll just [00:34:28] we're going to we're going to grow and [00:34:31] we're going to we're going to let some [00:34:33] inflation go and that's the way we're [00:34:35] going to get out of this debt issue. And [00:34:37] I think Trump this week was saying, "I [00:34:39] could see 20 25% GDP growth." I mean, [00:34:42] that's that's a nice number, but that [00:34:44] would certainly help our certainly help [00:34:45] our uh deficit issues. Well, it wasn't [00:34:48] that long ago that many Americans [00:34:49] thought they were inherently safe from [00:34:51] the kinds of disasters you hear about [00:34:52] all the time in third world countries. A [00:34:54] total power loss, for example, or people [00:34:56] freezing to death in their own homes. [00:34:58] That could never happen here. Obviously, [00:35:00] it's America. [00:35:02] People are recalculating, unfortunately, [00:35:04] because they have no choice. The last [00:35:06] few years have taught us that. Remember [00:35:08] when the power grid in Texas failed in [00:35:10] the dead of winter? Yeah, it happened [00:35:13] and it could happen again. So, the [00:35:15] government is not actually as reliable [00:35:17] as you hoped they would be. And the [00:35:19] truth is the future is unforeseeable and [00:35:21] things do seem to be getting a little [00:35:23] squirly. So, if the grid does go down, [00:35:25] you need power you can trust. Last [00:35:28] Country Supply newest product is [00:35:29] designed for exactly that. The Grid [00:35:32] Doctor is a 3,300 watt battery backup [00:35:35] system that will power full-size [00:35:36] appliances, medical devices, and tools [00:35:39] with clean, reliable power. It's even [00:35:43] protected. That means it's shielded from [00:35:45] lightning, solar flares, or an actual [00:35:47] electromagnetic pulse event. There's no [00:35:50] gasoline, no noise, no emissions. You [00:35:51] just plug it in, charge it from the wall [00:35:54] from your vehicle or from the included [00:35:56] 200 W solar panel and keep going day [00:35:58] after day taking care of yourself and [00:36:00] the people you love is solely up to you. [00:36:02] And the amazing thing is with these new [00:36:04] batteries, we use one at home, by the [00:36:07] way, is they're super easy to use. [00:36:10] There's no inverter you need to figure [00:36:12] out on the front of it or anything like [00:36:13] that. There's like three buttons. It's [00:36:16] very easy and totally reliable. Highly [00:36:18] recommended. We literally use one, as I [00:36:20] said. Visit lastcountriesupp.com [00:36:24] to shop the grid doctor for power you [00:36:27] can trust this winter. Lastount [00:36:30] supply.com. [00:36:31] Have you ever seen any country try that? [00:36:35] >> Uh no [00:36:38] really in 35 years of watching [00:36:40] >> Oh 20 25% GDP. No. Uh [00:36:43] >> no. Have you ever seen any country [00:36:45] approach a debt crisis with that? [00:36:47] >> Sure. Sure. I mean Erdogan's probably [00:36:49] the most famous [00:36:51] um in Turkey. [00:36:53] >> Did it work? [00:36:54] >> No. [00:36:55] >> What happened? [00:36:57] um he tried to keep cutting rates into [00:37:00] an inflationary environment and it [00:37:03] and put pressure on the central bank to [00:37:05] cap rates but the the free market always [00:37:09] you know I think I always say you can [00:37:10] suspend the laws of of science of [00:37:13] physics of gravity of market economy for [00:37:17] a time but ultimately the gravity always [00:37:21] always works so and the free market [00:37:23] always always works um so no it didn't [00:37:26] work they have runaway inflation and um [00:37:29] extraordinarily high interest rates and [00:37:31] he's under been under a lot of pressure [00:37:33] domestically um for re-election [00:37:35] obviously. [00:37:36] >> So what's the right way to approach it? [00:37:40] >> Uh well [00:37:44] as uh I think was it Thomas Solo says [00:37:47] there are no solutions only trade-offs. [00:37:49] Uh there are no solutions when you're in [00:37:52] this situ when you're in this situation [00:37:55] of $37 trillion deficit. Um is that a [00:37:59] lot? Sounds like a big number to me. [00:38:02] [laughter] [00:38:03] I'm not even I'm not even sure how many [00:38:05] commas are in there. It's big number. Uh [00:38:08] it's hard. It's really hard to grasp. [00:38:11] Um I think you go back you started with [00:38:14] you know ideology [00:38:17] the answer is always going to depend to [00:38:18] an extent on what your ideology is and [00:38:20] what you're willing to sustain in terms [00:38:22] of pain short-term to long term. You [00:38:24] know for me I was more uh [00:38:28] I was more a proponent of what I thought [00:38:30] the plan was going to be which is um [00:38:34] some deficit cutting through spending [00:38:35] cuts. Um, and from what was coming out [00:38:39] of Doge early, it seemed like there was [00:38:40] plenty of fat 2 cut that would have been [00:38:43] politically rather popular, I think, [00:38:46] especially with the right PR uh guys [00:38:49] behind it. You know, guys were getting [00:38:51] out there every week and on Twitter and [00:38:53] going on podcast and talking about sort [00:38:55] of the absurdities they were finding. [00:38:56] Yeah, maybe maybe it's a drop in the [00:38:59] bucket overall, but I think um it was a [00:39:03] it was a worthwhile exercise to go with. [00:39:06] Um [00:39:08] I don't know. I know again I don't know. [00:39:11] I'm not on the inside so I don't see [00:39:12] what [00:39:13] >> could it be that there I mean so the [00:39:15] idea always was that federal bureaucrats [00:39:19] public servants as we call them were [00:39:21] serving were serving and they were [00:39:24] making less than their private sector [00:39:25] counterparts and there was suffering [00:39:27] involved but patriotism impelled them to [00:39:30] do it so they did and now you look at [00:39:32] the numbers and it's like no no no no [00:39:34] your your federal employee on average [00:39:36] makes way more than your private sector [00:39:38] >> 2x [00:39:39] >> 2x so they're the most privileged [00:39:42] people, okay, in the in the middle class [00:39:45] and by far [00:39:48] >> that doesn't count their gilded pension [00:39:49] plans. [00:39:50] >> Is it really 2x? [00:39:51] >> I think it's I think the number is [00:39:54] average medium private sector family [00:39:57] income is 70k. I think it's 110 or 115 [00:40:00] for for uh federal [00:40:02] >> insane not including the benefits which [00:40:04] are ridiculous. [00:40:05] >> Work from home for 5 years. Um [00:40:09] but then you know of course the [00:40:11] population of federal workers or federal [00:40:14] contractors which are I mean there [00:40:15] probably as many federal contractors no [00:40:17] one ever says that but there are deote [00:40:19] is a federal contractor right so there [00:40:22] are so many of them now that we maybe [00:40:24] have reached that tipping point where no [00:40:28] administration can pivot against its own [00:40:30] employees because they're voters. Maybe [00:40:34] uh maybe but you know I'm sure you've [00:40:36] alluded to many times like you can't [00:40:38] have what is it seven of the 10 top zip [00:40:40] codes in in the United States are all in [00:40:44] sort of in and around Washington DC. I [00:40:46] mean I went to you grew up there. I went [00:40:48] to school there in the early 90s and I [00:40:51] hadn't been back for 15 years. I it's [00:40:55] night and day. It's a gleaming gleaming [00:40:58] office towers roads and rows. I remember [00:41:00] having an internship two blocks from the [00:41:01] White House and you were passing you you [00:41:03] had to pass sort of bombed out [00:41:06] >> derelic buildings and now it's just [00:41:08] >> from the 1968 riots. They never were [00:41:10] rebuilt. [00:41:11] >> 1992 they were still there like [00:41:13] literally two or three blocks from the [00:41:14] White House. [00:41:15] >> I remember. [00:41:15] >> And uh it's crazy. I mean it's um [00:41:19] again flashes of Roman Empire, right? [00:41:21] You just like you you go to you go go to [00:41:24] Rome to collect your tribute and so I I [00:41:28] don't know. I don't know. I I'm not as [00:41:31] privy to that world as you are. I don't [00:41:33] know what people see when they get into [00:41:36] office and realize that there's [00:41:38] potentially no way there's no way around [00:41:40] it. Um all our intentions are were [00:41:43] great, but this is the way it's going to [00:41:45] be. I don't know [00:41:47] >> what. Okay. But you're also suggesting [00:41:50] that this is not a solution, that you [00:41:52] can't spend your way out of a debt [00:41:54] crisis. [00:41:56] I don't I haven't seen it done before. [00:41:59] Um, [00:41:59] >> right. How much magic would that be? [00:42:01] >> The sense a very talented individual. [00:42:04] Uh, he's [clears throat] a lot of [00:42:07] experience in markets, very successful. [00:42:10] Uh, the right guy to have at the helm [00:42:14] if he thinks this can be done. I I guess [00:42:16] I we don't have any choice but to see [00:42:18] what how it plays out. But, um, maybe [00:42:22] that's the play. The play is this is our [00:42:24] only way out. there, you know, people on [00:42:26] both sides, people I speak to, people I [00:42:28] knew in the markets, friends of mine, [00:42:30] people whose opinion I respect on both [00:42:32] sides of the aisle. Um, [00:42:35] the one thing we all agree on is that [00:42:37] this is not a tenable situation. Um, [00:42:40] this is not some MMT, Elizabeth Warren [00:42:43] people we're talking to. This is like [00:42:45] normal people that say like, okay, at [00:42:48] this point we're kind of boxed at 37 38 [00:42:51] trillion. Um, so maybe that's the issue. [00:42:54] Maybe that we're so boxed that we got to [00:42:56] run this experiment experiment because [00:42:57] it's our only way out. Uh and hopefully [00:43:00] growth kicks in. But it doesn't, you [00:43:05] know, it the growth [00:43:08] the the growth scenario the current [00:43:10] growth scenario in the US is really hard [00:43:12] to get your hands around. Um in one part [00:43:16] because it's such a polarized economy. [00:43:19] People are calling it a K-shaped [00:43:21] economy, which I think is a pretty [00:43:22] accurate term. K-shaped meaning the the [00:43:26] lower end is hurting and continues to [00:43:29] hurt more and the upper end gains and [00:43:31] continues to gain more. And you know, [00:43:34] we've seen through throughout history. [00:43:36] That's not a tenable situation. It's [00:43:38] actually what happened in Venezuela. [00:43:39] It's how they got Hugo Chavez. [00:43:40] >> Yeah. It's a powder keg ultimately. Um [00:43:45] so and it's also extraordinarily [00:43:47] difficult to get a real handle on where [00:43:49] the numbers are because we're not [00:43:50] releasing any numbers right now because [00:43:52] of the government shutdown. So um you [00:43:54] know the Fed's flying blind to an [00:43:56] extent. You can rely on certain private [00:43:58] sector [00:43:59] indicators um that are kind of [00:44:02] shockingly bad frankly when you look at [00:44:05] uh consumer loan defaults, credit card [00:44:08] balances, credit card the late credit [00:44:10] card payments, auto loan defaults. Um I [00:44:14] think October was like 185,000 announced [00:44:18] private sector layoffs. I think the [00:44:19] worst since ' 08. So you have a [00:44:22] situation where you've got to, you know, [00:44:25] the the US cons the US economy is at 70% [00:44:28] 69 70% consumer le. So if we're going to [00:44:32] rely on the top 10% to continue to spend [00:44:36] on [00:44:37] I don't know Gucci bags and trips to St. [00:44:40] farts. I I just don't know how [00:44:43] sustainable that is when the lower end [00:44:46] is, [00:44:48] you know, swapping out [00:44:50] uh New York strip for for pork loin and [00:44:54] Walmart numbers are great because [00:44:56] middle and upper middle class is [00:44:58] shifting from the Publix to Walmart [00:45:01] shopping. Like everyone's getting [00:45:03] squeezed. Um so I don't know. I don't [00:45:06] know that the growth is there. The [00:45:08] growth can come. Maybe the growth can [00:45:09] come with [00:45:11] uh these tax cuts, with interest rate [00:45:13] cuts, with uh certainly with [00:45:16] deregulation will help um and all this [00:45:19] promised uh foreign investment. But u [00:45:22] there's a lack to all that. So we'll [00:45:24] see. It does seem from a an ignorant [00:45:27] outsider standpoint, which is mine, that [00:45:30] there's an awful lot of emphasis on the [00:45:33] public equities markets and like the [00:45:35] stock market's the measure of how we're [00:45:37] doing. Whether or not that's a good [00:45:39] measure, you know, I don't know. Maybe [00:45:41] not a perfect measure, it feels like to [00:45:43] me, but um how safe is the stock market [00:45:47] in the United States [00:45:49] as a place to put your money? [00:45:52] >> Um [00:45:54] I can tell this is an uncomfortable [00:45:56] question. Be as diplomatic as you can [00:45:58] be. [00:45:59] >> Well, [00:46:01] it is the largest, most liquid stock [00:46:04] market in the world. Uh it does attract [00:46:07] not just domestic savings but huge [00:46:10] foreign investment uh for you know [00:46:13] there's expression that says money goes [00:46:16] capital goes where it's treated best and [00:46:18] we still do treat capital the best in [00:46:20] this country. um extraordinarily dynamic [00:46:23] markets from you know venture cap to [00:46:26] private equity to public markets and [00:46:28] that's something we should all be very [00:46:31] proud of and it helps you know grease [00:46:33] the skids of global commerce and that's [00:46:34] great. Uh [00:46:37] there are some concerns [00:46:40] clearly concerns about the value current [00:46:42] valuation of the equity market and the [00:46:44] structure the equity structure of the [00:46:46] flows. [00:46:48] Um, so one, there's massive [00:46:51] concentration risk. Um, [00:46:54] it was the Fangs, now it's the MAG 7. I [00:46:57] think the the top 10 uh companies in S&P [00:47:02] 500, I think, have accounted for [00:47:04] something like 42% [00:47:06] of the gains year to date. Um, the big [00:47:09] get bigger. you you had new Nvidia at [00:47:12] one point tipped over $5 trillion [00:47:16] market cap which is again a hard number [00:47:19] to really get your head around. Um at [00:47:22] that point I think it was larger in [00:47:24] market cap than every market in the [00:47:26] world except for US and Japan entire [00:47:29] market cap of any other [00:47:32] uh trade any index in the world. Um so [00:47:37] >> wait bigger than the entire index of any [00:47:39] country in the world. Yes. Bigger than [00:47:42] the cumulative total of the value of all [00:47:43] the companies traded on those indexes [00:47:46] >> on a random exchange. Yeah. Except for I [00:47:49] believe [00:47:51] US for sure and I think Japan again I [00:47:53] could be wrong but something in the in [00:47:55] in that in that you get the idea what [00:47:57] >> so just it one company dwarfed all all [00:48:00] these economies. [00:48:01] >> That's right. And [00:48:04] that, [00:48:06] you know, we we don't need to go into [00:48:08] all sort of the price to book and price [00:48:10] to sales and expectations of future [00:48:12] revenue, all that sort of thing. Uh you [00:48:14] get into a market psychology event where [00:48:18] stocks that go up continue to go up [00:48:19] because people chase momentum. I read [00:48:22] something yesterday that the explosion [00:48:24] in in options trading [00:48:28] uh the volume options trade is now three [00:48:30] and a half trillion a day which is [00:48:33] larger than the entire market cap of the [00:48:35] Russell 2000. So 2000 like the 2,000 mid [00:48:40] small mid-size companies 300 million to [00:48:42] two billion market cap companies in the [00:48:44] United States and that [clears throat] [00:48:47] doubled I think from 20 from 20 to 22 [00:48:50] and then doubled again. So you've got an [00:48:53] insane amount of leverage. You've got [00:48:54] margin debt at alltime high. [00:48:55] >> May I ask what why is it significant in [00:48:58] the options market is huge? [00:48:59] >> Uh because it's not just the options [00:49:01] market's huge it's also the structure of [00:49:03] the options. They've moved to zero day [00:49:05] expiry options. So you could it used to [00:49:07] be weekly or monthly options and now [00:49:09] it's one like same day options. So the [00:49:11] retail uh the gamification sort of of [00:49:17] >> of [00:49:17] >> so an option my understanding of an [00:49:19] option is an option is a bet on in what [00:49:22] direction [00:49:22] >> in the direction with and you get an an [00:49:24] immense amount of leverage [00:49:26] immense amount of leverage. So [00:49:28] >> how does that work? How do I [00:49:30] >> So, let's say that you want to buy a [00:49:33] call, betting that Nvidia is going to go [00:49:36] up between now and the close. [00:49:39] Uh, an at the money Nvidia call, meaning [00:49:42] let's say it's trading at uh 177 right [00:49:46] now, and you think it's going to go up [00:49:48] and the price of the at the money, the [00:49:51] 177 call is till now to the end of day [00:49:54] is 75 cents, let's just say. So, you're [00:49:57] betting that it's going to go up more [00:49:58] than 75 cents. If it goes up a$150, [00:50:01] you've doubled your money. You're not [00:50:04] just making 75 cents on 177, which would [00:50:08] be whatever [00:50:10] third 1%. You're making 100% of your [00:50:13] money. So, you're getting all you can [00:50:15] lose is the premium, the 75 cents you [00:50:18] pay for that option, but everything over [00:50:22] 75 cents starts to run exponentially in [00:50:24] terms of profitability. So, people are [00:50:26] making an insane amount of money on uh [00:50:30] in this runup on uh on options, zero day [00:50:35] options, and they're doing it from their [00:50:36] phone. It's pretty easy with a [00:50:38] >> That's not really investing, though. [00:50:39] That's betting. [00:50:40] >> Yeah, that's gambling. Um but that's [00:50:43] just one component of the structure of [00:50:45] the [00:50:45] >> But it sounds like it's now a huge [00:50:46] component. It is a huge component but [00:50:48] again with the gamification of you know [00:50:51] uh crypto trading and and uh options [00:50:56] trading and Robin Hood and with gambling [00:50:59] you know uh draft kings and all that [00:51:00] stuff. It's sort of part of the culture [00:51:01] and it all started in co people at home [00:51:03] with extra stemi money and not much to [00:51:06] do and the market was ripping and people [00:51:08] got hooked on it and people are keep [00:51:09] doing it and generally people are doing [00:51:11] quite well. I think you know retail has [00:51:12] done better than institutional largely [00:51:14] speaking [00:51:16] this year. But the other part of the [00:51:18] structure of the market that's somewhat [00:51:19] concerning is just this passive flow. Um [00:51:22] so [00:51:25] then there's a guy named Mike Green who [00:51:26] you should probably speak to who's done [00:51:28] the best work on this. Um and passive [00:51:32] flow basically 401k if you put your [00:51:34] money in every two weeks your money's [00:51:36] automatically going to your 401k and [00:51:38] it's you click to that it's auto invest [00:51:41] if you go and you look at most companies [00:51:43] 401k options uh their options on what to [00:51:47] invest and then you break down each one [00:51:50] of them [00:51:53] basically every single equity option [00:51:55] fund you have has the same high [00:51:58] concentration in the same five stocks. [00:52:00] So, you know, Apple, Microsoft, Nvidia, [00:52:04] whatever. So, you don't know that [00:52:06] necessarily. You don't really know what [00:52:08] you're buying or what percentage of the [00:52:10] fund is in those, but it's very highly [00:52:12] weighted because the higher the market [00:52:14] cap go, the higher waiting, the higher [00:52:15] the waiting goes and on and on and on. [00:52:17] So, it's an auto, it's just an automatic [00:52:19] machine-like [00:52:21] underlying bid to the market that [00:52:24] continues to the big the big get bigger [00:52:26] and bigger and bigger. And you could [00:52:27] say, okay, what's wrong with that? These [00:52:29] are great companies. They're [00:52:30] multinational. [00:52:32] They have great business models that [00:52:34] were low capital intensive and high [00:52:36] margin. And they're basically a lot of [00:52:38] them are monopolies in their space. [00:52:41] Okay. Well, two things can happen. [00:52:44] If unemployment rises, [00:52:48] if you lose your job, you're not putting [00:52:49] your money in your 401k. If you lose [00:52:51] your job and inflation keeps ripping, [00:52:55] you might have to withdraw from your [00:52:57] 401k which creates a vicious cycle the [00:53:01] other way. [00:53:02] >> It's too much concentration in two [00:53:04] people. [00:53:05] >> Too much concentration and the structure [00:53:07] of it is perpetuates it and then you add [00:53:10] on the leverage of the option trading [00:53:12] with the momentum that keeps this trade [00:53:14] going and going and going to where you [00:53:16] get to $5 trillion market caps. Now, [00:53:19] there'll be a whole codery of Wall [00:53:21] Street analysts that will justify why 5 [00:53:24] trillion makes sense because of this, [00:53:25] that, and the other thing. But, um, [00:53:30] I'm not I'm not sure what if there of [00:53:33] the five, eight, 10 companies that have [00:53:37] the bulk of the value, the plurality, [00:53:39] the value of the entire S&P. If one of [00:53:43] or a couple of those companies [00:53:44] dramatically reset in its value and its [00:53:48] share price, what would happen? [00:53:49] >> Well, you're seeing it kind of right [00:53:51] right now as we speak as the AI trade is [00:53:54] starting to lose a little bit of favor. [00:53:55] There's starting to be some questioning [00:53:58] uh on the AI trade. Um [00:54:02] and the market can't continue to to [00:54:06] trade up when it's trade up if one or [00:54:08] two of the major components are are [00:54:10] falling out of bed. I mean this week [00:54:11] it's it's been Oracle and you know last [00:54:15] night Broadcom like took the market [00:54:17] down. Nvidia is starting to uh to weigh [00:54:20] a little bit. So it's we're very tech [00:54:22] sector heavy. And the other the other [00:54:25] thing that concerns me to an extent [00:54:27] about not just for public markets but [00:54:29] for private credit markets is that with [00:54:32] this AI buildout and this data center [00:54:34] buildout um obviously an extraordinarily [00:54:38] capital intensive and what I was [00:54:39] speaking about before uh about how a lot [00:54:42] of these mag seven countries had [00:54:43] companies had a a great model of being [00:54:47] capital-l like they're now becoming [00:54:48] quite capital intensive. It's not [00:54:50] writing software. It's building physical [00:54:52] things. [00:54:52] >> Exactly. You're building physical things [00:54:55] and you're spending you're borrowing a [00:54:57] ton of money. This is what the problem [00:54:58] with Oracle is right now is they borrow [00:55:00] to borrow a lot of money and now they're [00:55:02] they're borrowing a lot of money to [00:55:04] build things and build things that [00:55:09] depreciate in value over time, right? [00:55:11] Like a chip that you buy. A lot of this [00:55:14] a lot of the financing that's been going [00:55:16] on too has been people have been using [00:55:17] collateral these chips as collateral to [00:55:19] borrow against. So there's borrowing and [00:55:21] borrowing and borrowing but you're [00:55:22] borrowing against a chip that naturally [00:55:25] is going to be replaced by the next [00:55:27] evolution [00:55:28] >> of course. [00:55:29] >> So that's a bit of concern about the [00:55:31] value of the collateral and when that [00:55:33] daisy chain uh unwinds it could be ugly. [00:55:36] The other thing is that there's so much [00:55:39] there's so much borrowing in the private [00:55:41] credit markets for these hyperscalers [00:55:44] and these data centers that it crowds [00:55:45] out there's a finite amount of borrowing [00:55:49] available right so it's crowding out [00:55:51] borrowing and investing in other areas [00:55:53] of the economy and that concentration [00:55:56] risk concerns me to an extent as well [00:56:00] and the different a lot of people have [00:56:01] made the analogy to you know the 992000 [00:56:05] tech bubble [00:56:07] And you know, the good news coming out [00:56:09] of that down the line is that, okay, we [00:56:13] all got hyped up on the internet and we [00:56:16] got carried away with pets.com and [00:56:18] things like that. [00:56:19] >> Your choice, [00:56:21] >> but the truth was in retrospect, we [00:56:23] weren't hyped up enough about the [00:56:25] internet and what it would do and how it [00:56:27] would change the world. But there's [00:56:29] still a cycle that comes along where [00:56:30] there's the euphoric cycle and then the [00:56:34] crash cycle. [00:56:36] Uh and then on the back end of that you [00:56:39] have the winners that survive like the [00:56:40] Amazons, right? That that you could have [00:56:43] bought for practically nothing in 2002. [00:56:46] Um and then there were you know [00:56:48] companies like the similar to me to this [00:56:50] the hypers scale data center were the um [00:56:55] were the fiber the fiber companies like [00:56:57] um global crossing [00:57:00] uh worldcom right and those were bubbles [00:57:02] that crashed. Uh but what were they [00:57:05] doing? They were laying fiber uh fiber [00:57:08] cable for the internet which okay we had [00:57:13] a malinvestment boom the companies [00:57:16] crashed but the cables still exist and [00:57:18] the cables are in use today and the [00:57:20] cables were very valuable and the cables [00:57:21] didn't depreciate because the cables [00:57:24] have a useful purpose. [00:57:26] So the people are making the same [00:57:27] argument now is like okay we may go [00:57:29] through that cycle as well it's maybe [00:57:31] get a little fork there'll be there'll [00:57:32] be winners and losers out of this and [00:57:34] it'll be fine down the road and AI is [00:57:36] not going away. I'm not here to disagree [00:57:38] with that but there's a slightly [00:57:41] different component where you [00:57:45] you're building these things that aren't [00:57:47] that could you know you're buying all [00:57:49] these chips that could depreciate down. [00:57:51] It's not exactly the same trade. No. And [00:57:54] the nature of technology is hard to [00:57:57] forecast. Very hard to forecast. Yeah. I [00:58:00] mean, so they were telling us six months [00:58:02] ago that AGI was right around the [00:58:03] corner. Nobody thinks that anymore. So [00:58:06] for just for example, and so all of [00:58:08] these infrastructure bets are predicated [00:58:10] on predictions about what the technology [00:58:13] will require in 10 years. [00:58:16] >> The thing that we're really running up [00:58:17] against [00:58:18] >> we we don't. You're exactly right. And I [00:58:20] think there's the worm's turning a [00:58:23] little bit on the efficiency of a lot of [00:58:24] these. [00:58:25] >> Yes. Um and what they can and can't do. [00:58:28] And people say, you know, I I saved uh a [00:58:32] half an hour or I saved an hour uh [00:58:35] coding something, but then it took me [00:58:37] three hours to check to debug the work [00:58:39] that the the actual uh you know, claude [00:58:42] or whatever did. Um but the real thing [00:58:45] that we're going to run into is we don't [00:58:48] have enough power. we don't have an [00:58:49] electric and we don't have enough water [00:58:51] to to heat and cool all these things. [00:58:54] That's just point blank. And even uh you [00:58:57] know Jensen and Alman and those guys, [00:58:58] they'll tell you that and that's why [00:59:00] they're going hand in hand to DC and [00:59:02] trying to make um you know trying to [00:59:05] make trying to make the case that this [00:59:06] is a critically important um industry [00:59:09] that may need some government backing. [00:59:11] But even if you get that, the fact of [00:59:13] the matter is the only way you can [00:59:16] really power these things uh without [00:59:19] spiking electricity bills another 300% [00:59:22] and then creating a whole another [00:59:23] political problem domestically is you [00:59:26] need nuclear power. And you know we can [00:59:29] we have plenty of natural gas that can [00:59:30] work as a stop gap, but you need nuclear [00:59:32] power and it's a 10-year buildout [00:59:34] minimum to get the nuclear power that [00:59:36] you need. So when do we hit the [00:59:39] somewhere between there here and that 10 [00:59:41] years we hit the wall in terms of our [00:59:44] ability to to uh to get the electricity [00:59:48] for these at this growth rate. Now will [00:59:51] is this growth rate [00:59:53] uh accurate projection? Maybe it's not [00:59:56] and if it's not then we need to see a [00:59:59] lot of these companies come off in [01:00:00] value. So [01:00:01] >> also there a lot of concerns about [01:00:03] climate change. [01:00:04] >> Yes. [01:00:05] >> Oh just kidding. [01:00:06] That kind of ended quickly, didn't it? [01:00:09] >> Um, yeah. It seems [01:00:10] >> I haven't heard that phrase in months. [01:00:12] Have you? [01:00:13] >> Climate change. No, I did see I saw [01:00:15] something about I saw something that [01:00:17] Nature had Nature magazine had to re [01:00:22] revoke a [01:00:24] paper they did a few years ago that said [01:00:26] that [01:00:28] uh climate catastrophe was going to [01:00:31] create a economic catastrophe. And that [01:00:34] was all based on false premises. I think [01:00:36] they really [01:00:36] >> Yeah. I think the new idea is we're [01:00:38] going to have an economic catastrophe if [01:00:40] we think about the climate catastrophe [01:00:42] in any way. [laughter] [01:00:44] I noticed Larry Fin not lecturing as [01:00:46] much about the climate anymore. [01:00:48] >> Climate climate and ESG is not as [01:00:50] fashionable as it as it was a couple [01:00:51] years ago. That's for sure. So, how did [01:00:53] that like as a guy who has dealt in [01:00:56] markets like emerging debt pretty pure [01:01:00] it's like a debt trading is like a [01:01:02] pretty pure market, right? [01:01:05] Well, [laughter] [01:01:08] pure is an interesting choice of words. [01:01:12] No, I'm not saying unsullied. It's [01:01:14] pretty plain vanilla if that what you [01:01:15] mean. [01:01:16] >> I mean, like there's a willing seller, [01:01:18] willing buyer. [01:01:18] >> Yeah. And but what I really mean is the [01:01:21] price is uh an organic price. It's like [01:01:25] what people will pay. [01:01:26] >> Correct. [01:01:26] >> So that is the definition of a market, [01:01:28] right? But how do you get to the price? [01:01:29] >> Correct. [01:01:31] >> So as someone who's spent his life in [01:01:34] that world and who clearly you're [01:01:36] clearly like committed to the idea of [01:01:39] markets, like you believe people should [01:01:41] be able to decide what they're going to [01:01:42] pay for something and what they're going [01:01:43] to sell something for. [01:01:45] How do you explain ESG? [01:01:48] Uh, I don't know that, [01:01:52] funnily enough, I don't know that even [01:01:54] the experts can actually define it. And [01:01:56] I'm I'm not [01:01:59] um I'm not joking when I say that. when [01:02:02] I at my last job uh we would do a [01:02:06] conference every summer in Europe um for [01:02:08] investors and we'd have uh a series of [01:02:12] roundt um topics and the one topic that [01:02:16] was standing room only sold out every [01:02:19] summer in Europe was the ESG without [01:02:21] question. Um it seems the US has [01:02:25] definitely faded faded quickly from that [01:02:27] but Europe still seems very [01:02:30] uh very hooked in very hooked in it. [01:02:33] It's not faded there at all. It's [01:02:35] definitely a part of the investment [01:02:36] process. Uh but what's fascinating is if [01:02:39] you go to 20 clients in London and you [01:02:43] talk about ESG, you will get a different [01:02:45] answer from each ESG specialist as to [01:02:49] and especially in emerging markets. It's [01:02:51] a very difficult thing to to [01:02:56] work your way around the ESG constraints [01:02:59] when most of what emerging markets are [01:03:02] based on are hard commodities. Uh and [01:03:07] there's also obviously the governance [01:03:08] component. The G component is not always [01:03:12] maybe up to western standards with the [01:03:14] G. So they're with the G there a little [01:03:17] light on the G. [01:03:18] >> The G the E is not great. the S, no one [01:03:21] really knows what that means. And the G [01:03:22] is highly questionable. So, uh, it's [01:03:26] funny. It's just, it's there. It's [01:03:30] still, I guess, what I call a work in [01:03:32] progress, but just like conceptually, [01:03:36] the idea that factors that are not [01:03:39] really relevant to your fiduciary [01:03:42] responsibility, which is to maximize [01:03:44] returns for shareholders or something [01:03:47] related to that, like [01:03:50] I don't know. That's just a It's just an [01:03:52] interesting concept. Like, how did that [01:03:54] happen? [01:03:56] >> It's [01:03:57] that my personal guilt as like an [01:04:01] educated westerner supersedes your right [01:04:04] to have me handle your money [01:04:06] responsibly. [01:04:07] >> Well, it's straight government [01:04:10] intervention is what it is. Um, it's [01:04:13] government. It's It's government. It's [01:04:16] ideology. [01:04:18] If you are of that mindset where you [01:04:21] believe in control economy, [01:04:24] uh it is the dream of all dreams to [01:04:30] incorporate your ideological bent into [01:04:34] the last thing that should be left [01:04:35] alone, which is the free market. you now [01:04:39] inculcate all of this ideology into [01:04:42] every decision-m process all the way [01:04:44] down to the setting the price of money [01:04:47] which to me I know I'll run a foul of [01:04:50] plenty of people on this but to me that [01:04:52] that's a bridge too far um that's not [01:04:55] the place for it [01:04:57] but it's it's one in once in it's [01:05:01] impossible to get out you know once once [01:05:04] you go into [01:05:07] that's in that's that's involved in all [01:05:09] the investment processes. It's really [01:05:11] hard to to take it back out again. [01:05:14] So, back to the AI infrastructure boom [01:05:17] in the United States. [01:05:19] >> Yeah. [01:05:19] >> Um if that slowed down or if people lost [01:05:23] confidence in it, [01:05:26] are you concerned about a cascade effect [01:05:28] on public markets? [01:05:31] >> Uh in the short term, yes. [01:05:34] The question is how quickly does the [01:05:36] market rotate? Uh how do the rotation [01:05:39] trade? So we're starting to see that [01:05:42] actually the last week or two you're [01:05:43] starting to see like small caps really [01:05:46] rally, Dow components really rally, old [01:05:49] economy stuff really rally as tech is [01:05:51] being soft. So there's theoretically a [01:05:54] way you can thread the needle there. Uh [01:05:58] but with the concentration risk and with [01:06:01] the size of just actual size of these [01:06:04] companies, it's going to it's going to [01:06:07] uh it's going to be a drag on the [01:06:09] overall market as a whole. best case [01:06:11] scenario. One of the reasons the stock [01:06:13] market is my theory is so big is because [01:06:17] it's the easiest and as you said most [01:06:18] liquid way to park your money with some [01:06:21] hope of return and I don't really think [01:06:25] Americans are encouraged to think of [01:06:26] other ways. I just have always noticed [01:06:28] that. [01:06:29] >> Absolutely. And uh as as an emerging [01:06:33] markets guy who's been able to look into [01:06:37] other other countries, frontier markets, [01:06:39] etc., and how they look at it there. [01:06:41] There's always from if you're an [01:06:43] Argentine or a Brazilian or a Turk, [01:06:46] you're you're always looking outside of [01:06:49] your domestic economy, domestic market [01:06:51] for opportunities. [01:06:52] >> Um, and we really don't too much. No. [01:06:57] And it's so easy to participate in the [01:06:59] public markets in the United States. As [01:07:01] you said, you can do it on your phone. [01:07:02] You can make bets on market movements [01:07:04] from your phone which is just like seems [01:07:07] like it might have unintended [01:07:08] consequences maybe [01:07:09] >> there. Yeah. Crosses the line from as [01:07:11] you said from investing to straight [01:07:13] gambling but okay. So it's ease of use [01:07:17] is like the key to any scale I think. [01:07:20] >> Sure. [01:07:21] >> That was Amazon. [01:07:22] >> That was that was Yeah. There's a lot of [01:07:24] there's [laughter] a lot of there's a [01:07:25] lot of applications to that. [01:07:26] >> Uh well yes. Yeah. [01:07:28] >> Yeah. [01:07:30] >> That's true. [01:07:31] >> Yes. Yeah. Well, that's by the way why [01:07:34] tobacco use went absolutely crazy as [01:07:36] soon as someone figured out an automatic [01:07:38] rolling machine for cigarettes. People [01:07:39] used to have to smoke pipes, cigars, [01:07:41] take stuff up their nose. The second you [01:07:43] made it super easy to burn tobacco, the [01:07:45] whole world became addicted to it. [01:07:47] >> Makes a lot of sense, [01:07:48] >> right? And that's what the stock market [01:07:50] is in the United States from my [01:07:51] perspective. So, but if you're trying to [01:07:54] be a little more creative or hedge a [01:07:55] little bit your future, your family [01:07:58] security, where else do you put your [01:08:00] money? [01:08:01] >> Uh, again, it depends on, you know, who [01:08:05] you are, net worth, etc. [01:08:07] >> Let's say you have an extra 100 grand. [01:08:08] What would you what would be a good [01:08:10] call? [01:08:10] >> Well, the problem is the the great [01:08:13] obvious trades run a lot already, right? [01:08:16] Gold and silver's already run a ton. So, [01:08:20] long-term investing is try to look at [01:08:22] stuff the ideal cross of [01:08:25] um you know what sort of fairly valued [01:08:28] or cheap or distressed or out of favor [01:08:30] that people haven't really caught on to [01:08:32] because you see a trend that's about to [01:08:34] emerge. [01:08:34] >> Right. Right now, we're in fullthroated [01:08:37] recognition of the debasement trade and [01:08:39] [snorts] [01:08:40] silver's breaking out for not for that [01:08:43] reason, but also [01:08:45] there's a a notion that there may not be [01:08:49] uh as much physical silver out there as [01:08:52] derivatives been written against. So, [01:08:54] it's there's been a bit of a bit of a [01:08:57] squeeze going on. two weeks ago that the [01:09:00] Chicago Merkantile Exchange shut down [01:09:03] for a cooling issue overnight uh just as [01:09:08] silver was spiking um which was kind of [01:09:10] convenient. Um so there's some some [01:09:13] technicals in that market. Uh [01:09:15] >> wait, so you think it's possible there's [01:09:17] more paper against silver than there is [01:09:19] silver? [01:09:20] >> Yes. So [01:09:23] yes, there definitely more derivatives [01:09:24] written against all commodities than [01:09:26] exist. But no one ever asks, not no one. [01:09:29] But typically, if you're an investor, [01:09:31] you don't ask for physical delivery of [01:09:33] the commodity. [01:09:35] >> I do. I know you do. [01:09:36] >> I [laughter] do. [01:09:36] >> I know you do. And I'm going to find out [01:09:38] where that stuff's buried, too. [01:09:40] >> Um, so you don't typically ask for the [01:09:43] physical delivery of it when you're [01:09:44] trading in in tens and hundreds of [01:09:46] millions of dollars of derivatives [01:09:47] against. you cash settle your derivative [01:09:50] against mine. Cash settle the the loser [01:09:53] pays the winner and you move on. Um so [01:09:56] where do you go uh at this point given [01:09:58] where valuations are? I think um I think [01:10:02] you go abroad. Uh you look at multiples [01:10:06] on US stock market where we were trading [01:10:08] historically um [01:10:11] extremely high PE ratios for the index [01:10:13] on historical basis and very high [01:10:15] against uh foreign markets. I think what [01:10:18] this administration's doing in Latin [01:10:20] America particularly as I mentioned [01:10:23] earlier sort of Monroe Doctrine too [01:10:25] there's clearly a movement of foot to [01:10:28] uh to stabilize the region and to [01:10:30] partner with those that are critical to [01:10:32] us. I would imagine that'll open up a [01:10:34] ton of investment and growth there. Um [01:10:37] there plenty of Latin American countries [01:10:39] that offer uh pretty cheap historical PE [01:10:42] ratios. So, I think it's probably time [01:10:44] to diversify a little bit out of the US [01:10:46] and diversify out of tech heavy stuff. [01:10:48] Um, [01:10:51] that's where I would go simply. Um, I [01:10:53] think you still have to own some some [01:10:56] gold and silver. Just have to own some, [01:10:57] but just not as much as you you wanted [01:10:59] three years ago given how far it's run. [01:11:02] >> So, but you're basically making a pitch [01:11:04] for the Venezuelan stock market. uh not [01:11:06] specifically, but there may be a there [01:11:09] may be a catalyst coming there that [01:11:10] could create create a big move one way [01:11:12] or the other it seems in the next in the [01:11:14] next couple weeks. [01:11:15] >> What about real estate land? [01:11:17] >> Real estate land for sure. That's why I [01:11:19] asked like depends on who you are. Um I [01:11:22] think productive agricultural real [01:11:24] estate anywhere is always a good [01:11:26] investment. Sort of a disaster hedge. Um [01:11:29] but yes, land as a whole, yes. Um, I [01:11:32] don't think I'd want to be rushing into [01:11:36] blue cities, uh, and paying high [01:11:40] interest rates and taking out a bunch of [01:11:41] debt on, uh, on overpriced, uh, co-ops [01:11:46] in New York City necessarily. [01:11:47] >> What about buying a 70s era office [01:11:51] building on 6th Avenue in Midtown New [01:11:53] York? [01:11:54] uh if you can convert it to residential [01:11:56] perhaps and get a lot of tax breaks but [01:11:59] I [laughter] I want I may want to see uh [01:12:02] may want to see what our friend M Donnie [01:12:03] says the first couple weeks. [laughter] [01:12:07] So you made the point that for a bunch [01:12:09] of different reasons, Ukraine war, but [01:12:11] other structural reasons, [01:12:14] we are on the path to losing our [01:12:17] privilege as the holders of the global [01:12:19] reserve currency. So at some point, [01:12:22] right? Well, because all empires are. [01:12:23] Yes. Right. So we know that. The [01:12:25] question is when does that happen and [01:12:27] what replaces it? And [01:12:30] my read is as of now there's no obvious [01:12:33] like national. We're not going to like [01:12:35] adopt the British pound or the euro or [01:12:37] the yen or [01:12:39] the ruble. Uh but instead gold is the [01:12:44] stop gap as it has so often been. But [01:12:47] crypto seems like the next global [01:12:50] reserve currency. Is that fair to say? [01:12:54] Um [01:12:57] yes. [01:12:59] Yes. I mean I would say this. There's [01:13:02] they're kind of I think people bundle [01:13:05] together the notion of like blockchain [01:13:09] and cryptocurrencies and what I'd say I [01:13:12] can't necessarily make a pure [01:13:14] prognostication on any one particular [01:13:16] crypto. [01:13:18] Um I mean it's been a phenomenal [01:13:22] exercise and wonderful to see is sort of [01:13:24] like a adherent to Austrian economics to [01:13:28] see to see the experiment work. Um I [01:13:31] don't think we want to get into like the [01:13:33] the dynamics of indiv individual [01:13:35] cryptos. I think you know at some point [01:13:38] probably Bitcoin as a crypto will be [01:13:42] usurped just by sort of a better [01:13:46] technology. Um but put that aside. uh [01:13:51] what to me unequivocally and the next [01:13:55] venture I'm going into um it's related [01:13:57] to blockchain is blockchain is uh is [01:14:02] here and is not going going away [01:14:04] whatsoever and blockchain is going to [01:14:07] transform um the financial services [01:14:10] industry pretty much every everything we [01:14:13] do financially transaction wise um and [01:14:18] fortunately we have the wind our backs [01:14:20] of this administration and David Sachs [01:14:22] and Genius Act etc. Uh and nobody [01:14:28] nobody [01:14:29] who maybe was somewhat skeptical 3 four [01:14:33] years ago is it all. I mean uh Larry [01:14:35] Frink and as an example was I think he [01:14:38] continues to say all assets are going to [01:14:40] be tokenized. Uh I think just this week [01:14:42] DTCC said all all assets are going to be [01:14:46] be tokenized and put on the chain and [01:14:47] that's going to remove a lot of little [01:14:51] frictions in the system. um extra costs [01:14:53] that don't need and extra time lags that [01:14:56] don't need to exist. Um so the [01:14:58] cryptocurrencies like cryptocurrencies [01:15:01] exist with the layer of the blockchain. [01:15:03] You can't have crypto without the [01:15:05] blockchain, but the two are somewhat [01:15:07] distinct. [01:15:09] So a couple questions. One, uh is it [01:15:16] safe? [01:15:17] I mean, it's reliant on electricity. [01:15:19] >> Yes. But so is [01:15:23] uh so is every like I mentioned the CME [01:15:26] went dark right the other day. Um [01:15:29] >> Chicago [01:15:31] um the NASDAQ shut down right um [01:15:35] everything we do is reliant on except [01:15:37] for you coming over in your golf cart [01:15:40] with a bag of gold coins for me is is uh [01:15:45] is relying on energy to that extent. Is [01:15:48] it safe? Is it hackable? Uh [01:15:53] the theory, you know, one of the [01:15:54] theories being proposed [01:15:57] of a Bitcoin, I'm not really sure if [01:16:00] this is, you know, Bitcoin's had a [01:16:02] pretty decent drop from high 120s to [01:16:05] around 90. Um, you know, part of part of [01:16:09] the thing being floated is that with [01:16:11] quantum computing making the leaps that [01:16:13] it's making that Bitcoin might be able [01:16:15] to be hacked at some point. Um perhaps [01:16:19] um but again I'll put that separate to [01:16:22] the blockchain. I the blockchain [01:16:25] uh deeply encrypted [01:16:28] safe uh these are the rails on which [01:16:31] everything's going to run. [01:16:33] >> Okay. Will it eliminate corruption [01:16:38] >> um [01:16:40] or curtail it? I think [01:16:43] >> I mean because it's kind of [01:16:44] >> I think the question coming from you is [01:16:47] is a funny question because you know [01:16:48] that nothing will ever eradicate [01:16:50] corruption from the human [01:16:51] >> unless it changes the human art, right? [01:16:52] No, of course. [01:16:54] >> Uh yes, it should eliminate corruption [01:16:56] because what it's what what the [01:16:57] blockchain's going to do what it does is [01:16:59] it creates a permanent electronic [01:17:02] unhackable ledger. So [01:17:05] >> think about something as basic as like [01:17:07] title insurance. I don't know if you've [01:17:10] ever had to deal with that, but first of [01:17:11] all, like why do we need to pay? [01:17:13] >> Have I ever had to deal with that? Yeah, [01:17:15] I pay constantly for [01:17:16] >> insurance. So why like it's an it's an [01:17:19] absurd notion, right? There's a title. [01:17:22] You own the title. You put it on the [01:17:24] blockchain. It's there forever and I buy [01:17:27] my house from you. The title gets [01:17:29] transferred to me. It's registered on [01:17:31] the blockchain. The transactions there [01:17:32] now. It's mine. It's there forever. We [01:17:34] don't need to pay a couple grand or [01:17:36] whatever. Sorry. One of my best friends [01:17:38] runs a title company in Maryland. Uh but [01:17:42] you know, he's my age, so he's probably [01:17:43] almost done anyway. Um but uh that's [01:17:47] just an example like why do we need to [01:17:48] pay five grand for title insurance? I I [01:17:50] just sold a house in Westchester and I [01:17:53] found out that there was from two owners [01:17:56] ago there was like that according to the [01:17:59] paperwork there was a $650,000 mortgage [01:18:01] still on the property and that never got [01:18:03] expuned. But the the t the brokers just [01:18:06] kind of waved it back and forth and [01:18:08] everyone just kind of stamped it. Like [01:18:09] that stuff that's just an example I [01:18:12] think that everyone can kind of uh [01:18:15] relate to. But also like why we'll be [01:18:17] able to send money uh immediately with [01:18:21] no, you know, if I send money to you, [01:18:24] you'll immediately get the money, get [01:18:25] the get the care, get the interest on [01:18:27] it. Why should I be paying $30 to send a [01:18:30] wire from JP Morgan? like that's pure [01:18:34] $30 of margin like all that kind of [01:18:36] little stuff. And um so the company that [01:18:39] that I'm start going to be starting with [01:18:42] gen one is called liquidity.io and we [01:18:47] um we have one of only six fully [01:18:50] registered licensed alternative trading [01:18:52] systems which is a trading system that's [01:18:54] going to be able to trade all these [01:18:55] tokenized financial assets. And what we [01:18:58] want to do is help democratize the [01:19:01] financial markets and tokenize uh all [01:19:05] kinds of assets. But we're working with [01:19:08] our with our backer just made some [01:19:09] acquisitions with a couple of uh [01:19:11] consumer loan businesses, auto loans in [01:19:14] uh manufactured homes, mobile homes for [01:19:16] example. Like there's a great story. [01:19:18] these two young guys in Dallas. Uh [01:19:20] they're working at JP Morgan and with [01:19:23] their fourth bonus, they said, "We're [01:19:25] not we're going to we're not going to [01:19:26] blow it this time. Let's buy some rental [01:19:28] property." And they couldn't find any [01:19:29] rental property. They were in Dallas. [01:19:31] So, they just cold called like 250 [01:19:33] mobile home uh parks and they found one, [01:19:36] put in 50 grand, turned around, was a $6 [01:19:39] million trade. Uh they were going to do [01:19:43] a bigger one. And what they realized [01:19:44] they were better off doing was [01:19:46] revolutionizing the lending business for [01:19:50] mobile homes. Uh cuz guess who the [01:19:54] biggest player in that is was Warren [01:19:56] Buffett. So uh great business obviously [01:19:59] high margin business. But what I didn't [01:20:01] learn until recently is that there is no [01:20:04] refi on a mobile home and there is no [01:20:07] lending available on a secondary [01:20:10] purchase. So, if I take out a loan for [01:20:13] my mobile home and then want to sell it [01:20:14] to you, you can't get a loan. You have [01:20:16] to buy it for cash. And if rates go down [01:20:19] from 8 to 4, I can't refinance it. So, [01:20:22] they're going to with their business and [01:20:26] tokenization, they're going to eradicate [01:20:27] all kinds of costs, which and create [01:20:30] these two separate markets, which is a [01:20:32] solution to is a partial solution to the [01:20:35] home affordability crisis. Like, that's [01:20:37] something everyone can get by. How does [01:20:39] this new technology figure into [01:20:43] like monetary policy like [01:20:46] >> Wow, that's a great question. So, [01:20:49] um you familiar with the stable coins? [01:20:51] >> Yeah, I am. But will you describe what [01:20:53] they are? [01:20:53] >> Sure. So, stable coins, think about it [01:20:57] this way [01:20:59] in simple terms. Say a crypto like a [01:21:01] like a Bitcoin is sort of a fle free [01:21:04] floating currency. the the market [01:21:06] dictates a stable coin is more like a [01:21:08] pegged currency. So pegged to fiat in [01:21:11] this case uh like tether circle they're [01:21:16] pegged to the US dollar and try to keep [01:21:18] it stable at par one one [01:21:21] >> uh so what they are is a [01:21:24] >> and there are national currencies like [01:21:26] this there are countries like the [01:21:27] Bahamas or whatever they're just pegged [01:21:29] one to one [01:21:29] >> exactly um [01:21:32] yeah Panama's dollarized Stephen Hanky [01:21:34] was a big dollarization component um [01:21:37] they tried to do it in Argentina didn't [01:21:39] work. Um, Hong Kong's got a dollar peg. [01:21:43] Um, so [01:21:46] the stable coins they um they try to [01:21:51] keep parody with the dollar and they are [01:21:53] back theoretically backed by [01:21:56] um treasury bills. So [01:21:59] money comes in, the money gets invested [01:22:01] in treasury bills one for one. You're [01:22:04] backed by AAA rated shortdated, no risk. [01:22:08] Uh but it become these become a conduit [01:22:11] for all these transactions [01:22:13] uh on the chain automatic through these. [01:22:16] So it could go through go through the uh [01:22:19] the stable coin and into other things [01:22:21] from there as a sort of a conduit. Now, [01:22:24] that's all good and well as long as they [01:22:27] we're sure that those stable coins are [01:22:30] taking dollar for dollar investing in [01:22:32] what they say they are without a lag or [01:22:34] without moving too far away from that. [01:22:37] Um, Tether at the moment seems to be [01:22:39] diversifying away from strict TOS and [01:22:42] they've been moving into gold which is [01:22:44] working for now but you know yet to be [01:22:46] determined how that works out. [01:22:48] So does that make does all of this make [01:22:51] the US dollar stronger or weaker? [01:22:53] >> Oh, I'm sorry. Yeah. So the good that [01:22:55] creates a [01:22:58] uh natural bid for our treasury bills [01:23:02] which is a great thing for Bent and [01:23:06] friends because that creates a whole new [01:23:09] uh demand vehicle for our treasury debt [01:23:13] on the stable coins. Um and what these [01:23:16] stable coins do allow for again a lot of [01:23:17] emerging markets uh participants is [01:23:19] allows them to quickly access dollars [01:23:22] and um and avoid the depreciation risk [01:23:26] in their own country. So you're getting [01:23:28] a lot of foreign foreign money into [01:23:30] stable coins that will be bid for T [01:23:33] bills which should hopefully help with [01:23:34] our our funding. Hm. Is there any way [01:23:39] for the US government to use stable [01:23:42] coins as a weapon in the way the B [01:23:43] administration used Russian assets at [01:23:46] the New York Fed as a weapon? [01:23:49] I don't know. I don't know. Um I imagine [01:23:53] there is [01:23:56] uh I don't know what that mechanism [01:23:58] would be and I don't think I mean in the [01:24:01] Russia reserve instance it was a [01:24:04] bilateral seizure. This would be a [01:24:08] seizure of untold amounts of investors. [01:24:13] Right. You're seizing that. I'm not sure [01:24:15] what the what the purpose would be other [01:24:17] than just right stealing the money. [01:24:20] Well, we've seen that before. [01:24:22] >> True. [01:24:23] >> What do we know about global gold [01:24:25] reserves since it's such a huge [01:24:27] component now? [01:24:29] >> What we know, we don't know everything [01:24:32] that we know cuz it's not fully [01:24:33] transparent. But what we do know is the [01:24:36] direction of travel which is massive [01:24:39] increases particularly [01:24:42] uh from India, China, Russia that [01:24:46] doesn't seem to be abating at any time. [01:24:48] That means they're importing gold. [01:24:50] >> Uh that means they're buying gold and [01:24:52] there has been a lot of movement of [01:24:54] physical gold uh particularly over the [01:24:57] summer but the movement appeared to be [01:24:59] more from the London vaults back to the [01:25:01] United States rather than elsewhere. Uh [01:25:04] but we don't know we don't have complete [01:25:07] clarity on any of that stuff. How and [01:25:10] why? How? So if you're going to have an [01:25:14] ancient commodity that's like a huge [01:25:16] part of the global system, economic [01:25:19] system, how can you not have [01:25:22] transparency? [01:25:23] Maybe I'm answering my own question. [01:25:25] >> I saw [01:25:26] >> you look at me like I'm an idiot. [01:25:27] >> I saw you [laughter] answer I saw you [01:25:29] answer it before you finished the [01:25:30] sentence. [01:25:30] >> In other words, if it's so important, [01:25:32] why aren't people being honest about it? [01:25:34] [laughter] [01:25:35] >> Because it's so important. That's why [01:25:37] weird that the Chinese wouldn't tell us [01:25:38] exactly how much bullion they have in [01:25:40] the vaults. Yeah. Um, yeah, there's no [01:25:44] reason they should or would or have to. [01:25:48] >> I guess my question [01:25:49] >> also, you don't actually show your hand [01:25:50] on how much you're accumulating as [01:25:52] you're trying to accumulate an asset. [01:25:54] >> Oh, is that true? [01:25:55] >> Well, yeah, typically. [laughter] [01:25:57] >> Typically, I'm learning a lot about [01:25:59] markets from you. [01:26:00] >> That's great. [laughter] [01:26:03] >> So, I told you I promised you stupid [01:26:05] questions. [01:26:05] >> I know. I said there are no stupid [01:26:06] questions, but I was wrong. [01:26:08] >> [laughter] [01:26:09] >> So [01:26:11] um okay then let me reframe the question [01:26:14] this way. [01:26:16] If we got somehow [01:26:19] full transparency on gold global gold [01:26:22] reserves where they are who has gold how [01:26:24] much [01:26:26] would we be shocked is there a big [01:26:28] spread between perception reality [01:26:31] >> we we still don't have the audit of Fort [01:26:34] Knox that we were supposed to get a few [01:26:36] months ago. So, you know, [01:26:38] >> really, [01:26:39] >> yeah, you might be shocked about that, [01:26:40] too. I don't know. I So, [01:26:42] >> you think for Mox Noxious has a lot more [01:26:44] gold than they're telling us? [01:26:45] >> They may have 10 times more. [laughter] [01:26:48] >> I don't know. I really don't I don't I [01:26:51] don't want to speculate. I mean, I like [01:26:53] to speculate, but I don't want to [01:26:54] speculate on that. [01:26:55] >> Uh-huh. I'm guessing if there is a [01:26:58] spread between perception and reality, [01:26:59] it's it's to the negative, but what do I [01:27:02] know? [01:27:02] >> Not sure. There's talk about revaluing [01:27:04] the gold as well. U What does that mean? [01:27:07] That means [01:27:09] if you automatically re revalue our gold [01:27:11] reserves to market, we automatically [01:27:16] have a higher effective capital base. [01:27:18] That should make us more [01:27:20] uh creditw worthy for lack of a better [01:27:22] term. [01:27:24] So gold now um the US reserves are [01:27:28] valued at like under 100 bucks an ounce, [01:27:30] something like that. Something crazy, [01:27:31] right? I'm not sure exactly what, [01:27:33] >> but but I mean that's like 1933 levels [01:27:35] or something, right? And and of course, [01:27:38] gold is over four grand an ounce. So [01:27:39] like why would we continue to value our [01:27:42] own gold reserves thousands of dollars [01:27:45] below what they're actually worth? [01:27:46] >> I have no idea. [01:27:47] >> That's weird though, right? [01:27:49] >> It is. Yeah. Especially when every other [01:27:51] metric and the kind, you know, we have [01:27:53] cost of living adjustments based on the [01:27:55] CPI basket. I don't I don't know. That's [01:27:58] so so how much um just to go back to [01:28:02] your uh career trajectory in emerging [01:28:04] markets debt? [01:28:05] >> Yes sir. [01:28:07] >> How much uh chainery is there in that [01:28:09] business? Like so if [01:28:12] you know you're dealing with emerging [01:28:15] markets so some of those are like you [01:28:16] know solid transparent well-governed [01:28:18] countries and some of them are Nigeria [01:28:21] right? What's that like? [01:28:24] Well, [01:28:27] I would say there's two components in [01:28:30] the emerging markets trading business. [01:28:31] There's the the trading thereof in sort [01:28:34] of the big money centers like Hong Kong, [01:28:37] London, and New York. And then there's [01:28:39] the domestic stuff that happens. Now I [01:28:42] could say in terms of chainery there's a [01:28:45] clear [01:28:47] 80 BC line at the global financial [01:28:49] crisis on how we conducted business [01:28:51] across the street in all products pre [01:28:54] glo preg prefc post GFC and all I can [01:28:58] say it was a lot more fun pref [01:29:01] >> it was a lot of fun it was as much it [01:29:03] was as fun as you could have having a [01:29:05] job [01:29:07] >> really [01:29:07] >> job [01:29:08] >> what was so fun about it [01:29:10] >> um every day was different. Uh you're on [01:29:13] a trading floor. Everyone every every [01:29:16] day is different. You have a front seat. [01:29:18] Uh you have a front seat and you're [01:29:20] participating in global events every [01:29:24] day. Uh markets moving up, moving down. [01:29:27] You're working with like a truly diverse [01:29:31] bunch of people from all walks of life [01:29:33] that are as close probably to mecracy on [01:29:36] trading floor as you could get. and it [01:29:39] was very clear what the motivator was. [01:29:41] Uh [01:29:42] it was making as much money as he could [01:29:44] every single day and [01:29:47] uh there was nowhere to hide from that. [01:29:50] So as a young person [01:29:54] uh there couldn't be a better learning [01:29:56] experience because every day at the end [01:29:58] of the day there was a number next to [01:29:59] your name and whether it was [01:30:02] through your good luck, bad luck, hard [01:30:04] work, whatever the number doesn't lie [01:30:08] and that's the number and it's just a [01:30:10] great way to learn and to have to face [01:30:13] yourself and improve upon yourself and [01:30:16] uh you know training floor was guys you [01:30:18] know like PhDs from Princeton to guys [01:30:20] that dropped out of college and we were [01:30:23] all kind of in it as a team. It was [01:30:24] really fun. And uh [01:30:26] >> what were the personality [01:30:28] traits that allowed people to be [01:30:30] successful? Like what's the perfect [01:30:32] profile of a trader? [01:30:34] >> You know what's funny? I found that the [01:30:37] best traders there's there's investors [01:30:40] and there's traders, right? Uh different [01:30:43] it's a different mindset. The best [01:30:45] traders I find were guys like to think [01:30:48] with thought more in two dimensions. So [01:30:50] if you thought in three dimensions, you [01:30:52] could outthink your you could outsmart [01:30:54] yourself way too much. The what ifs and [01:30:56] oh but uh and if you're in one [01:30:59] dimension, you're just not at the IQ [01:31:01] level to function. So the two dimension [01:31:03] that kind of took the factors of play uh [01:31:08] saw what the trend was took it at face [01:31:11] value didn't overthink it went with it [01:31:14] and wasn't too much had enough risk [01:31:18] appetite but wasn't too much of a a [01:31:22] cowboy I guess would be the perfect [01:31:24] trader I saw the the worst [01:31:25] >> you're describing my dogs. [01:31:27] >> Yes. The worst traders I I saw [01:31:31] uh were oftentimes the smartest people. [01:31:34] >> Really? [01:31:34] >> Yeah. [01:31:36] >> Because they just overthink it. [01:31:37] >> Just overthink your way. You overtrade [01:31:38] it. You overthink it. Uh you're always [01:31:40] looking at the [01:31:43] you're always looking but this and that [01:31:45] and I have all this information analysis [01:31:48] paralysis andor [01:31:50] talking yourself out of a good trade. [01:31:52] >> How did it change after the financial [01:31:54] crisis? Um [01:31:58] we were [01:32:00] egregiously [01:32:02] uh overregulated [01:32:04] from all from all sides. Um did that [01:32:07] make markets safer for retail investors? [01:32:10] >> I don't think so. [laughter] [01:32:11] >> Uh because the picture you painted over [01:32:14] the last hour and a half is not one of [01:32:17] like impregnable safety. No, [01:32:19] >> let me just say that. I mean there's [01:32:20] obviously a lot of unintended consequ [01:32:23] consequences from the excess regulation [01:32:26] but um it just you know it's funny I on [01:32:31] Wall Street I think we were actually at [01:32:33] the vanguard of hyper regul hyper [01:32:36] regulation hyper monitoring I mean they [01:32:40] were [01:32:42] monitoring every Bloomberg chat every [01:32:45] email every phone call uh everything was [01:32:48] taped [01:32:49] Then they ran alos against it for [01:32:51] keywords. [01:32:52] Um [01:32:55] you just like way more scrutiny and [01:32:57] everything. [01:32:57] >> So you lived in the panopticon before [01:32:59] everyone else. [01:32:59] >> Yeah, I did. And I and I think [01:33:04] there's also, you know, a lot of [01:33:08] going back to the global financial [01:33:09] crisis is such a seminal moment in this [01:33:11] country in a lot of ways because it [01:33:13] actually we made this deal with the [01:33:15] devil and I, you know, I I I'm a [01:33:18] beneficiary of the bailout. I worked at [01:33:19] a big bank that got bailed out and and [01:33:23] uh [01:33:24] I make no I I I won't uh I'll never deny [01:33:28] that. But in doing so, we we let the [01:33:33] Trojan horse in and we married the [01:33:35] government effectively and we they came [01:33:38] in and they basically wrote our [01:33:40] policies. They wrote our policies for us [01:33:42] and uh from HR policies to recruiting [01:33:46] policies to [01:33:48] uh you know all the regulation um and [01:33:51] the stuff that I saw from a distance in [01:33:55] terms of sort of arbitrary [01:33:59] uh fining uh for violations was [01:34:04] kind of gangster like and I saw a lot of [01:34:07] good people sort of thrown on the [01:34:08] funeral p sacrificed um just just tossed [01:34:12] out like let's you know this guy were [01:34:14] this guy was in violation these guys [01:34:17] weren't but they were on the same [01:34:18] Bloomberg chat so let's let's give like [01:34:21] 10 bodies everyone's fired everyone's [01:34:23] career's over it was it was a that was a [01:34:25] bad that was a bad time it was a bad [01:34:28] time and so everyone started trading [01:34:29] scared people tried trading scared and [01:34:31] it lost the the joy and it lost the [01:34:33] >> but famously none of the you know the [01:34:36] CEO the executive level seemed pretty [01:34:39] insulated from punishment. [01:34:41] >> Yes. Um, you know, if I were going to [01:34:45] give [01:34:47] if I were going to give a more sort of [01:34:50] generous take on it, you know, the CEOs [01:34:55] really didn't have much of a choice in [01:34:57] some regard. It was like, look, here's [01:34:59] the deal. You could keep your job and [01:35:02] keep making $25 million a year. Uh or if [01:35:07] you agree to this fine for mortgage back [01:35:11] securities or whatever liore rigging or [01:35:14] whatever it is, this this arbitrary [01:35:16] number, you can keep your job and you [01:35:19] can keep your salary or you can get [01:35:24] fired and the next guy will agree to it. [01:35:26] So like and they kept it a and they had [01:35:29] to be they had to be in goodstead with [01:35:33] the government or the fines and the [01:35:35] regulation would just come and come and [01:35:36] come come. But once you get bailed out, [01:35:40] once you ask for the bailout, they own [01:35:42] you and that's what happened. [01:35:44] >> That always is what happened. They made [01:35:45] the deal. [01:35:46] >> Yeah. And it was like the tobacco [01:35:47] companies, right? Like they kept the [01:35:49] tobacco companies alive just long enough [01:35:51] to keep bleeding them for fees. Like [01:35:53] then they figured out there was just [01:35:54] there was money there to to take and [01:35:58] uh they just kept coming back about [01:36:01] >> Yeah. And the country did not get [01:36:02] healthier. Life expectancy went down. [01:36:05] And if I can just be honest, I don't [01:36:06] think the quality of the cigarettes [01:36:07] improved at all. [01:36:09] >> No, I'm serious. If you smoke a sort of [01:36:12] presettlement Marbor Red, not that they [01:36:14] exist anymore, or a current one, it's [01:36:16] like it's not even the same product. [01:36:18] >> I was a pre-settlement guy. I quit. [01:36:20] >> Yeah. Oh, me too. I'm just I'm just [01:36:22] saying I've heard that. So, no, I don't [01:36:25] really think anyone won except for [01:36:26] politicians, [01:36:27] >> right? [01:36:28] >> I don't think there a lot of lung cancer [01:36:29] patients [01:36:30] >> a lot of nice new regulatory buildings [01:36:32] were built. And I think also one of the [01:36:35] great stories that hasn't really been [01:36:37] maybe this was for you. One of the great [01:36:39] stories that should be investigated is [01:36:42] where did the [01:36:44] proceeds from all those post GFC fines [01:36:48] go? because I saw some stuff in around [01:36:50] the time that was kind of staggering as [01:36:53] to where it went. Now obviously it went [01:36:54] back into [01:36:56] building more of the regulatory bodies [01:36:58] like more uh SEC regular whatever. Um [01:37:02] but [01:37:04] I I think some of the money uh flowed to [01:37:08] some very [01:37:11] uh specific political organizations. [01:37:14] >> There's no question about it. Um it went [01:37:17] to the swamp. Meanwhile, the whole [01:37:19] pretext for this, the justification for [01:37:21] doing this was I I lived here then. I [01:37:24] had to sell my house that year. So, I I [01:37:26] was a victim of all this too, even [01:37:27] though I never participated in it. But, [01:37:29] um I lost my job along with a lot of [01:37:31] other people. And just cuz the economy [01:37:34] contracted, so people lost their jobs, [01:37:36] >> right? [01:37:37] >> Including those with four children. Um [01:37:40] but the justification was, which I [01:37:42] wasn't against, it was like these people [01:37:44] are totally reckless. Like they're [01:37:45] completely reckless. It's like what is a [01:37:47] mortgage mortgage back security? What's [01:37:48] a derivative? And like no one outside [01:37:50] your world never heard of any of that. [01:37:52] It's like I thought when I you know [01:37:53] signed up for a mortgage like the bank I [01:37:55] signed with held the mortgage. Like we [01:37:57] had no idea they sold the mortgage. Like [01:37:59] most people didn't know. Again there's a [01:38:02] lot of ignorance including in my house [01:38:04] about this stuff. And so the idea was [01:38:05] like this is crazy and we need to rein [01:38:08] it in. [01:38:08] >> You've just described the quote gamifica [01:38:11] gamification [laughter] of [01:38:13] >> Yeah. of markets and it's like that [01:38:16] doesn't seem like a decrease in [01:38:17] recklessness. [01:38:18] >> Well, it actually reminds me something [01:38:20] for the part of the previous [01:38:22] conversation which is you know people [01:38:24] say you never know when you're when [01:38:25] you're in a bubble until it's over and [01:38:27] that's entirely incorrect. I mean I've [01:38:30] been through a bunch and we all knew [01:38:32] like we all Oh yeah, we just didn't know [01:38:34] when it was going to end. I mean [01:38:37] >> like give me an example. [01:38:38] >> People were talking about the the bubble [01:38:39] in '05. [01:38:41] No, if you fought it in ' 05, you were [01:38:43] out of a job pretty quickly. Like it [01:38:45] went on for a long time. I could tell [01:38:48] you the reason I want to bring it up is [01:38:51] again the the perilous to today is in [01:38:53] you know so in ' 07 I had been on [01:38:55] trading bonds for whatever 13 14 years. [01:38:59] So not the smartest guy, not the most [01:39:01] quantitative guy, but been around enough [01:39:03] to trade enough stuff to understand kind [01:39:04] of how stuff works and all this stuff [01:39:07] they're coming through with like CDO [01:39:09] squared and CLO and like synthetic this [01:39:12] and that and like I didn't really [01:39:14] understand it. I didn't have to trade [01:39:15] it, but like I didn't really understand [01:39:18] it. I didn't really want to get into it [01:39:20] because I didn't need to. But it's just [01:39:22] it's thinking if if I'm already in the [01:39:24] whatever percent of financial experts [01:39:27] just by nature of where I sit every day [01:39:30] and it doesn't smell right to me. [01:39:33] >> Yeah. [01:39:33] >> Something's not right. Um [01:39:35] >> and you trade Nigerian death. [01:39:37] >> Right. [laughter] So [01:39:38] >> Right. Right. Right. So yeah, I'm taking [01:39:41] derivatives on Bulgaria and stuff. So [01:39:43] like Yeah. Yes. But [laughter] and if [01:39:46] you're if you're taking derivative as a [01:39:48] mugg area, but you're like this is too [01:39:50] much for me. [01:39:51] >> I It's just like how many acronyms? [01:39:53] Also, I'm just I'm I'm substantially [01:39:57] averse to any acronym. And then when you [01:39:59] when you take the acronym and square it, [01:40:00] you know, you're in trouble. [01:40:01] >> [laughter] [01:40:02] >> But then this this latest goround the [01:40:04] last couple months with all this [01:40:06] circular financing and hype with all the [01:40:10] AI companies and every day you know [01:40:14] somebody's buying chips from somebody [01:40:17] who's going to lend the money to buy the [01:40:19] chips to invest in the scaler who's [01:40:20] going to do this like four every day [01:40:22] four companies are you're like dude I [01:40:25] suppose I could figure that out if I sat [01:40:27] down and really tried to But it gives me [01:40:32] a headache just even thinking about it. [01:40:33] And clearly it smacks of some kind of it [01:40:37] smacks of desperation or something. [01:40:39] That's just my my gut is just having you [01:40:41] know the sniff having been around a long [01:40:43] [laughter] time. It's like dude if it [01:40:45] doesn't smell right it it just it [01:40:46] doesn't smell. [01:40:47] >> Don't put it in your mouth. [01:40:48] >> Right. Right. [01:40:51] >> So you remember thinking like what about [01:40:53] the tech bubble in 99 2000? Did you [01:40:56] think? [01:40:57] >> Oh, I got blown out per in personal [01:40:59] training trying to short that in like [01:41:01] the fall of 99 among a lot of other [01:41:04] people. Yeah. I mean, everybody Yeah. [01:41:06] Oh, I've hilarious. hilar. And that's I [01:41:08] was with my wife [01:41:11] uh in March of 2000 [01:41:14] at a dinner at a lunch with a guy who [01:41:18] was chairman of a major [01:41:22] uh major broker dealer, famous famous [01:41:26] broker dealer. And we're she's 30 at the [01:41:30] time, never invested in anything. And [01:41:34] we're sitting next to him. He's like, [01:41:35] "So, what do you" She's like, "Oh, I've [01:41:37] been day trading stocks." He's like, [01:41:41] "Explain that. What do you mean you've [01:41:43] been day trading?" She's like, "Oh, [01:41:44] yeah. I just buy whatever IPOs. I just [01:41:47] if it comes out, I buy it." Do you [01:41:48] remember that in 2000 all the friend [01:41:50] everything just went up? Like, she's [01:41:51] like, "Yeah, I just I just buy it and [01:41:53] then I sell it. [01:41:54] >> It's awesome." [laughter] [01:41:56] >> And I saw I saw his eyes just go like [01:41:58] this. And that was like that was like [01:42:00] the that was like the Joe Kennedy shoe [01:42:02] shine moment. I mean it was literally [01:42:05] like February or something. I think it [01:42:06] was probably within probably two [01:42:08] >> No, it's when your housekeeper is [01:42:09] investing in condos in Clark County, [01:42:11] Nevada that you were like, I think maybe [01:42:13] this is overheated [laughter] [01:42:16] >> just a little bit. [01:42:17] >> No, for real. [01:42:18] >> Or you get your Uber D Uber divers like [01:42:20] trade crypto on [01:42:22] >> completely. [01:42:23] >> Yeah. Whenever people are going hard on [01:42:25] like Cape Coral, Florida real estate who [01:42:28] don't know anything about real, not [01:42:29] against Cape Coral, but you know what I [01:42:30] mean? It's like and those were the [01:42:32] hardest hit zip codes. [01:42:34] >> Yeah. So you think [laughter] [01:42:37] it's pretty obvious is what you're [01:42:38] saying. I just it's [01:42:41] it feel they there are [01:42:44] it's sort of like the uh Russian dis [01:42:49] sort of like the letter that they wrote [01:42:52] uh about the Hunter Biden laptop. It has [01:42:54] all the hallmarks [01:42:57] of Russian [laughter] disinformation. [01:42:59] It has all the hallmarks of uh a late [01:43:03] stage rally. Let's say that. [01:43:04] >> Yeah. Well, you're very diplomatic. I [01:43:07] have to say though, just like with the [01:43:08] baseline fact that you've spent your [01:43:10] life trading emerging markets, debt, I [01:43:13] think if you're uncomfortable with [01:43:14] something, it's fair for the rest of us [01:43:15] to be uncomfortable with it. Appreciate [01:43:16] that. Yeah. Last question. You've uh [01:43:20] been through all these [01:43:23] bubbles and bursts and debt crises and [01:43:26] bailouts and at the at the end of every [01:43:29] story is the United States or US aligned [01:43:32] institutions like the IMF coming in and [01:43:34] kind of saving the day. Is that if [01:43:36] that's that's a thread that runs through [01:43:38] all these? [01:43:38] >> Yeah, I in simple terms. Sure. I only [01:43:41] deal in simple terms, Coleman. Um, [01:43:45] but what happens if that happens to the [01:43:47] bails out the right? [laughter] [01:43:50] >> Who bails the balor? Uh, nobody. [01:43:56] >> Okay. So then what happens? [01:43:59] I don't [01:44:01] I don't think [laughter] [01:44:03] hope you bought that uh that [01:44:04] agricultural land in Brazil at that [01:44:06] point. Uh so then what happens? I don't [01:44:09] think we're I don't think we get to that [01:44:10] point anytime soon. Um [01:44:15] as [01:44:15] >> but just theoretically [01:44:16] >> as we mentioned before, you know, there [01:44:19] is no there's no alternative right now, [01:44:22] right? Um, [01:44:25] people still, as bad as it could get in [01:44:28] the States, like we're still the [01:44:30] cleanest dirty shirt in the pile for the [01:44:32] time being, right? We still have this [01:44:34] free and open markets where capital [01:44:36] flows and gets treated well. There's [01:44:39] time. There's still time to course [01:44:41] correct. Um, I'm not willing to go to [01:44:44] who bails out who bails out the Baylor. [01:44:46] I just I'm not willing to go there yet. [01:44:50] [laughter] [01:44:50] >> I'm not willing to go there. We'll we'll [01:44:52] be all right. We're still still the [01:44:54] United States of America and we've got a [01:44:56] lot I mean this administration's got a [01:44:58] lot of mental firepower and a lot of [01:44:59] experience. [01:45:01] We still got time. [01:45:03] >> Coleman Church, ladies and gentlemen, [01:45:04] thank you. [01:45:05] >> Thank you so much.