All-In with Chamath, Jason, Sacks & Friedberg - E84: Markets update, crypto collapse, Russia/Ukraine endgame, state of the podcast

Episode Date: June 24, 2022

0:00 Besties discuss the one-month hiatus 7:03 Markets update: Fed decisions, goals, macro factors, root causes 32:19 Earnings estimate skepticism, labor force, job openings 47:17 How startups should think about the next 18-36 months 56:20 Crypto collapse, next shoe(s) to drop 1:08:41 Russia/Ukraine endgame, escalation, scrutinizing US alliances, sanctions failing 1:33:12 Will 2024 be Biden vs. Trump? Could it be DeSantis vs. Newsom? Follow the besties: https://twitter.com/chamath https://linktr.ee/calacanis https://twitter.com/DavidSacks https://twitter.com/friedberg Follow the pod: https://twitter.com/theallinpod https://linktr.ee/allinpodcast Intro Music Credit: https://rb.gy/tppkzl https://twitter.com/yung_spielburg Intro Video Credit: https://twitter.com/TheZachEffect Referenced in the show: https://www.google.com/finance/quote/SPY:NYSEARCA https://www.google.com/finance/quote/.DJI:INDEXDJX https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html https://www.longtermtrends.net/home-price-median-annual-income-ratio https://www.cnbc.com/2021/06/09/tc-energy-terminates-keystone-xl-pipeline-project.html https://www.reuters.com/business/energy/us-talks-with-allies-russian-oil-price-cap-says-yellen-2022-06-20/ https://www.xe.com/currencycharts/?from=RUB&to=USD&view=1Y https://www.wsj.com/articles/inflation-bls-price-checkers-who-determine-cpi-11652132333 https://www.chicagofed.org/research/dual-mandate/dual-mandate https://data.oecd.org/leadind/consumer-confidence-index-cci.htm https://www.rasmussenreports.com/public_content/politics/top_stories/right_direction_wrong_track_jun20 https://thehill.com/policy/finance/3525909-56-percent-in-new-poll-believe-us-is-in-recession/ https://www.linkedin.com/pulse/reducing-inflation-come-great-cost-stagflation-ray-dalio https://fred.stlouisfed.org/series/CIVPART https://tradingeconomics.com/united-states/job-offers https://www.socialcapital.com/ideas/2021-annual-letter https://techcrunch.com/2022/05/10/tiger-global-hit-by-17b-hedge-fund-losses-has-nearly-depleted-its-latest-vc-fund https://www.coinbase.com/price/bitcoin https://www.coinbase.com/price/ethereum https://www.coindesk.com/business/2022/06/17/three-arrows-capitalconfirms-heavy-losses-from-lunas-collapse-exploring-potential-options-report https://www.ft.com/content/19c27ae1-ae72-4668-b3a9-162adc27dffc https://decrypt.co/103489/solend-whale-108m-loan-nearly-crashed-solana https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-charged-first-ever-digital-asset-insider-trading-scheme https://www.ft.com/content/4e211784-83eb-49a2-ba39-8976345a88d5 https://www.washingtonpost.com/world/2022/06/10/ukraine-ammunition-donbas-russia/ https://www.americanpurpose.com/blog/fukuyama/why-ukraine-will-win/ https://www.bloomberg.com/news/articles/2022-03-02/london-listed-russian-stocks-erase-570-billion-in-two-weeks https://www.bloomberg.com/news/articles/2022-06-20/ruble-soars-to-seven-year-high-in-challenge-to-bank-of-russia https://www.cnbc.com/2022/06/23/russias-ruble-is-at-strongest-level-in-7-years-despite-sanctions.html https://www.wsj.com/articles/u-s-push-for-exceptions-in-europes-sanctions-on-russian-oil-gains-traction-11655913796 https://abcnews.go.com/International/wireStory/correction-germany-nuclear-shutdown-story-82051054 https://www.bloomberg.com/news/articles/2022-06-23/catl-unveils-ev-battery-with-one-charge-range-of-1-000-kms https://nymag.com/intelligencer/2022/06/why-ron-desantis-can-beat-trump-in-2024.html

Jake, you look a little grifty. You okay? Yeah me. I'm great. I'm great. You look half a million richer today What's it like to be half a million richer? Jake, you look like a failed hostage sticker Left it up boys left it up boys left it up boys When you see my other projects drop you're gonna be crying again, okay? I can't wait Why don't you take yes for an answer Jake J. Cal. I've taken it for an answer. Welcome to the all in podcast with three miserable rich bastards who pull up the ladder behind them. Do you want to explain why it took us a month to produce a new episode, J. Cal? What about it? Hold on a second, attorney. Let me give you guys the TLDR. J. Hal thought the Olin pod was his,

and then he realized it wasn't. No, if you guys wanna go, there we go, there I'm totally transparent. I request it, I request it to own 6% more of the Olin podcast. No, no, no, back up to the summit, back up to when you wanted to take the Olin show. No, back up before that,

where we do it. Oh my God, are we really doing this? Yeah, we're gonna do it. Okay, if you wanna do it, we do it. We can't talk about this for 45 minutes because what happened then? So boring, so boring. So plan the summit.

We plan the summit. J. Cal doesn't like how I was concerned about the summit and I bitched at him and I was negative to him. Finish the summit. J. Cal wants to kick me off the show. Yes. Brad Gersner, Bill Gurley would have higher ratings. They come to believe.

People think it was me and Jake Al getting into it, it wasn't. It was actually, it started with Freiburg and Jake Al getting into it. Jake Al wanted me off the show. All right. Do I get to explain the series of events right now? Do you want me off the show? True or false, Jake Al? I felt that if Freiburg wasn't enjoying his time here and was going to constantly

complain every week about every detail while the show is not good, there was always the option for him to maybe do half the shows and have Greg Garson or do half the shows or have Bill Gurley or rotate in. And so if he was going to be miserable all the time and worried about the show, I gave him the option to have somebody else take his spot. Did you or did you not say that this is your show? You're the leader and you wanted me off the show.

I never said that. I know what I say that. I don't need to say that. You said you could summarily replace any of us. Effectively you acted like we all worked for you. It's your show. Sax, I don't think Shroomat's replaceable, just for the record. So. That's true. He doesn't think Shroomot's replaceable just for the record. That's true. He does think that.

I do not think Shroomot's replaceable. Freiburg, I do think, I mean, I could pull up the Braggersen episode, I think, to have slightly more views. So, but people love you. So, we keep you. I can't tell my mom and my wife that he thought I was replaceable on the show. Guys, I would like to jump in by just summarizing this so that we can move on. So basically what happened was we had a agreement that it was 25% each

There was a moment where Jake Al believed that he deserved more We had to sort through a lot of the underlying issues that caused them to believe that we got to a good consensus We now have assigned agreement that governs how the show and other things around the show and offshoots of the show Will work we are 25% equal partners and now we can move on so enough for the bitching and other things around the show and offshoots of the show will work. We are 25% equal partners and now we can move on. So enough for the bitching, let's go. All good. And I love you all.

I love you all too. I love you all too. To be clear, my position, I do feel like this in this bout here was, if we're gonna make it into a media company, my request was, listen, I think I should have 10% more equity and I'll go to work every day and do the work, and you guys can just show up. You guys agree to that, and then you guys said you don't want to do it, and I said, okay, fine.

So here we are, we're back at square one. So let's just get to work. We just want to do a pod, and we just want to talk. There's not going to be any more summits. There's not going to be any business here. It's just a pod. I have other events I do. I have other pods I do.

If I want to get paid, I'll do them over there. And here, it's just a pod that you see every week. So let's get into it. Everybody wants to talk about markets. Oh, by the way, if you guys want your intros, that's 1% each. Intros go do it. Okay, those are 1% each. So when you guys are willing to pay me my 1% additional equity, you get the intros and when you want the all in summit 2023, that's another more. We're going to get a voice each week from J. Cal now. You're going to get it's going to be prorated monthly. It's going to be 0K.L. now. You're gonna get, it's gonna be pro-rated monthly. It's gonna be 0.8% equity per month, fasted.

I just think it's so fascinating that we went through all of this, you know, I don't know, storm and drawing or whatever, this like, your month of non-taping. And, you know, and this like, all this turmoil in our relationship, so you could get an extra 1% for us. 2% each, 31%. I believe I should, just so you know, and this like, all this turmoil in our relationship so you could get an extra one percent from us. Two percent each, 31.

I believe I should, just so you know, I do this for a living. And if I do extra work, I believe I should, and if you want me to be the de facto CEO of this, then I should get a little extra. Yeah, we don't want that. And you don't want that, so that's fine. That's fine. This is just gonna be a project, we do it every week.

And then all your griffs, whatever, you know, you're spinning out from the production board or whatever copycat app you're making, you can fucking do as a side griff. Here we go. Oh, do the intro. Step it going. Come on.

No, there's no interest. No interest. Introes are out. But what about hey everybody, hey everybody. I'll do a hey everybody, hey everybody on the house. Hey everybody, hey everybody, welcome to us. It's a freebie for you. Yeah, hey, it's free for you.

What? You're like your winner's ride. Rainman David Sack. And I said we open sources to the fans and they just go crazy with me. Love you guys, I just weed up with it. WBS, Queen of Kenwa. I'm going back to the video. Hey everybody, welcome to another episode of The All In Podcast. We're back for episode 84 with me of course, the Sultan of Science, the Prince of Panic

attacks, the Queen of Kenwa himself David Friedberg. How you doing buddy? Great to be here. Great to be here. All right. I missed you. can you feel the tension Yeah, there's no tension. There's no tension there. J. K. L. and I'll be hanging out tomorrow night We'll make it here guys resolved it. I'm cool. I'm cool. I'm cool. Freeber. I'm your dad. I'm dinner

I think we're he did buy me a wonderful dinner. Oh my lord after the Warriors game shout out to the Warriors all right, and of course With us is the rain man himself. David Sacks, how you doing, buddy? Good. You ready to go? Don't try to deflect this thing on to me. I was only tangentially involved.

It says the Goku spread 72 hours on. Oh, I heard the contract. You did write the contract. I wrote it every fair contract so that we can move forward. Yeah, and then you've proceeded to break it in the first 15 minutes by slandering me and disparaging me, but okay. Oh, come on. That was good for ratings. Good for ratings. Yes, either your meme was pretty great. He did the meme. The two buttons on the superhero try to fix. That was good. And I was like Jason. That was good. Making jokes, breaking the

breaking the non disparaging clause. And then of course, the dictator himself from some undisclosed location in a European city. I don't know if I'm allowed to say that. I'm of course the dictator himself from some undisclosed location in a European city. I don't know if I'm allowed to say that. Dr. Malthapali, Patia, welcome back boys episode. What's up boys? All right. Well, since we last convened, all the on. Yes, the all in summit is finished. All the episodes have been released, including Palmer lucky yesterday. And here we go, the markets are in complete turmoil,

spy down 20% year to date, douse down 17% year to date, as SACS has pointed out, that is not representative of what happened to growth stocks at the same time. And the May CPI went up and it was at 8.6. We also got the 75 basis point rate hike. Who wants to start here? Traumath, I mean, it's market. So maybe I'll just dump it to you first and then we'll go around the horn to sax and then free bird. Well, there's a lot to say. So bear with me for a second,

but the thing that you have to do before you talk about what is happening now, I think it's probably useful to go back and you have to really start at the end of the great financial crisis. And the reason is there was a bunch of people coming out of the GFC who confused what the US government and some European governments were doing. At the time, there was a huge financial contagion.

And so the US stepped in and the Federal Reserve started to use their balance sheet to buy toxic assets, right? And the ECB did that, and I think Japan did that as well. Anyways, a bunch of banks did it. I mean, a bunch of governments did it. And then there was this body of pseudo-scientist, stiffic economists who coined this thing called modern monetary theory, which basically said, hey, you can keep printing money and introducing it into the economy to smooth things out and to actually drive long-term growth.

And it turns out that a bunch of government officials fell for it. And if you fast forward to 2022, so 14 years later, governments around the world had printed something to the tune of about $30, $35 trillion of money into the economy that should have never been there. So the thing to remember is like, we have not necessarily just been

obfuscating true supply demand in the last six or eight months when we've been talking about a recession or inflation. We've been actually doing it since 2008. It's just that it's been building up in the system. So one of the things that we have to realize is that all of that money somehow needs to get destroyed in some way, shape or form, if the true economic equilibrium

is meant to be found. What is true supply? What is true demand? In the absence of government sloshing money around trying to prop up things that should not be propped up or buying votes or all the griffs that these folks have engaged in in the last decade and a half have to get undone. So that's the backdrop. So if you think about taking $30 trillion

out of the global economy, you're talking about almost, I think it's 85 trillion is the world GDP. So it's almost half of an entire year's worth of global GDP. It's gonna take three years probably. Of the slow, meticulous, you know, running off of money, you know, not reintroducing new money. So it seems like worth the beginning of the beginning of something that's going to be long

and drawn out. Now that's separate from, and that's separate from whether we're in a recession or not. That's just the bare market that we're in, right? And so you have to look at asset prices today that were it. Right? And so you have to look at asset prices today as a microcosm of a much larger trend that has to be about fake money pushing asset prices up. And now taking all that fake money out and finding out what the real price of something is. And I just don't think that takes six months. So for all the people that were, you know, fingers crossed hoping that this would be the end of it. Fed raises 75 is 75, we're done with this. They're gonna raise 75 more. I just think that's not how it's probably gonna be. It's gonna take, you know, 24, 36 months. That may mean the bottom doesn't happen for another 18 months.

So I think it's a, we're in for a lot of choppy We're in for a lot of choppy market action. Sex, three asset bubbles, clearly all being impacted. We had stocks, looks like that story was pretty violent. Then we had crypto, the last two or three weeks have been absolutely insane in terms of that asset bubble. And now record high inventories for homes, record sales are now dipping below the average of the last 20 years. And we're seeing mortgage origination just absolutely

get crushed. 6% mortgages just a couple of months ago. It was 2.x for some folks. So when you look at those three asset bubbles, do you buy Chimads? Hey, we're going to see even more deprecation in these for another 18 months, possibly, or do you think we've taken such crazy action? This has come down so violently that we're now bouncing along the bottom, bouncing along the bottom or 18 months of more pain. Well, the stock market, especially

growth stocks, may have taken the majority of the carnage, but you're right, there are other asset classes, and I think we're going to see the carnage start to rotate into those. So you're right, if you look at residential real estate now, the prices are at the highest they've been relative to median income since something like 2006, 2007 before that sort of great real estate crash that precipitated the greater session of 2008. So I think they're arguing more shoes to drop. I just want to build on Jamas' point about root causes here.

Milton Friedman once said that there's nothing quite so permanent as a temporary government program. The temporary government program was quantitative easing. We had this great recession of 2008 that could have turned into a depression. They broke the glass in case of emergency. They started this QE, which is basically the government intervening to buy bonds in the market. They had never done that before and they loaded up their balance sheet.

The crazy thing is that program was still continuing until last year. Why? I mean, it was like on cruise control. And so last year it was continuing until last month, and countries like Europe are still doing it. Nine percent inflation in Europe, and they're still buying bonds. Right. So you go back to last year, the Fed bought 54% of the government's debt, despite the fact

that the economy was growing at like 5% GDP, that it was bouncing back really strongly from COVID, that you had the stock market at all time highs. And yet they were still intervening with this massive QE. And then when we got the surprise 5.1% inflation print last summer, they didn't stop QE till the end of Q1. So you're right, they kept basically printing money and it's still going on. And that's created massive distortions in the economy. Now, so the Fed, I would say, is the number one culprit here and J. Powell is the number one culprit, but the number two culprit is the Biden administration. And I think Biden did three things very early on in the first few months of his presidency to effectively tank his presidency. Number

one, he canceled our energy independence on his first day in office, canceling the Keystone pipeline and making it much harder to drill. And of course, energy inflations are one factor in this sort of overall inflation. Number two, he pushed through that last two trillion of stimulus on straight party lines, the ARP, the American Rescue Plan, after Larry Summers said, economists in his own party said, this is going to create inflation, don't do it. And then the third thing is, and no one really talks about this, is that Biden could have used diplomacy in 2021 to basically find an off ramp to this Ukraine crisis before it

turned into a full-fledged war. And if you listen to the economists, the international development economists, like Jeffrey Sachs, he basically says that Biden pulled his cabinet and said, listen, should we negotiate and compromise with the Russians? They all said no, and Biden handed down the order. We will not compromise with the Russians. So now we have this massive war in Ukraine that's fueling food and energy inflation. It's going to take his presidency. And I don't even think there was any debate.

No, we're not. But we are now. We are not. We may not be negotiating against Russia, but we're enabling them to print enormous surpluses, meaning I don't know if you guys saw, but there was an article today. Janet Yellen is traveling around basically convincing folks to not include Russian oil from a bunch of import bands so that these Russian oil tankers can be insured, why so that they can sell this oil to places like China and India, etc.

The rubles at a five-time, five-year high. The rubles at a five-year high. We push for all these sanctions. Europe gets on board and says, we're going to do it and we're going to take the lumps. And then we go around Europe and basically say, well, we kind of want to fight this proxy war, but at the same time, we want to try to fix inflation. And we didn't mean to cause this. And it's completely disorganized. What's happening? So if you had six minutes in the pool for men, sacks would blame Biden for the economy. You win.

Who do you blame? We started talking about quantitative easing starting in 2008. So that goes over goes over couple of presents and i guess the question i would have for you sacks is how much of the spending the free willing spending you know uh... you know was from the previous administration to the money is a bipartisan problem there's no question about it but what make sure that we point that out yeah for sure and republicans only seem to find their principles on spending with a democrat in the white house i totally get it

and i would like to see more fiscal responsibility regardless of which party is in power. And I'd like to see their Republicans be less hypocritical in their principles on this. But look, here's the thing, the economy was bouncing back strongly last year and Biden still pushed for this last two trillion of spending and then 1.2 trillion more in a structure. And then remember, the 4 trillion of build back better, we're managing safe them from themselves. Exactly.

What would that have looked like? Freeberg, you haven't spoken yet. Thoughts on, you know, this, these asset bubbles, I guess. And then the buying of the bonds seem completely unnecessary for some period of time. If we are acting as the 50% plus buyer of bonds, what kind of distortion does that create in the market?

Because if the government is competing against other people in the marketplace to buy those bonds, how could they possibly be price correctly? Let's just be very careful about our framing. There's the US Treasury, which issues bonds and raises capital on behalf of the US government for spending programs. Then there's the central bank, the Federal Reserve, and our central bank's job is to, number one, maintain liquidity in the capital markets

so that businesses can invest in growing their products and growing their businesses and the economy grows while not providing too much liquidity that you end up with inflationary effects. And inflationary effects means that there's too much money in the market and you see that money find its way into escalating prices on different assets. And the Fed's long-term goal, remember, is to provide a stated goal of Jerome Powell, in particular right now, this changes over time, but generally the intention of the federal reserve is to make liquidity, to make cash available to banks who ultimately make it available to businesses,

in such a way that there's enough cash in the system that the businesses grow and that people have capital to invest in growth while keeping inflation at 2%. So they're long-term target at 2% inflation. And it's also, correct me if I'm wrong, straight away. And making sure that there's enough cash to support economic growth. So remember, last year, you'll remember Stan Druckenmiller was very public about how insane it was

that the Federal Reserve was still buying bonds. So there's one way to introduce cash into the system is to make cash available as a loan to banks and then those banks use that money to loan to businesses and it makes its way through the economy. Another way is for the Federal Reserve to step in and actually buy bonds, freeing up the money that other people would be otherwise using to buy bonds to go and invest in other things. So they're effectively forcing liquidity into the market by taking bonds out of the market.

And last summer, or Q2 of last year, Drucket Miller was pounding the table saying, guys, the economic indicators on how quickly the markets are, or how quickly the economy is growing relative to how much inflation there is indicates that we should stop buying bonds and we should stop injecting liquidity into the markets. This makes no sense. It is nonsensical. And there was no strong point of view from the Fed at the time other than there was uncertainty about the bounce back from the recession from COVID.

There was uncertainty about what else was happening in the economy. And yada yada, but the numbers, the economic indicators were showing very clearly the economy is growing in a robust pace, low unemployment, and inflation is starting to pick up. Holy crap, it's time to cool it off. And the Fed made a judgment call, and their judgment call really kind of was to keep going. And then we end up in this massive runaway

inflationary problem, where if you keep too much liquidity in the system for too long, you have inflation, even if you have economic growth. And now by pulling the money out of the system super, super fast, we reduce the inflationary effects potentially, but we take the economy. Because now all this money coming out of the market means people are spending less and buying less and businesses have less to borrow the borrowing costs are high. And then that's the big vacuum.

Okay, hold on. Let me go to Chimath and then sex. I just want to say the rate in which we pull the money out, which has had to be really, really fast over the last few weeks, can cause a recession. And that's the biggest concern right now, is will that actually trigger a massive recession or not that everyone's watching? So Chimath, I guess, one of the things we need to clarify here is the actual mandate of the Fed. I was under this understanding that the Fed really was there to make sure of

maximum employment and that low interest loans were available and price stability. These are the stated goals for a long time. Not low interest rates. Capital is available for availability. Capital is available for availability. With Alibaba. Without exceeding inflation of 2%. That's okay. So maximum employment, price stability was also in the maximize-region-p growth because remember we can't ever pay our debt if our GDP is not growing. Okay. While minimizing, while keeping inflation below 2%. Trimoff, whatever point you want to make, feel free to make, but also I was just wanted to know from you, where did the Fed go wrong with their mandate if at all here? Because we do have maximum

employment right now, but we have at a control price stability. Look, here's the thing. You, I think we have to also be sensitive to the fact that the Fed operates on a certain class of data. And that data in the 21st century is pretty pathetic. Nick, you can probably find this, but there was an article. I think it was in the New York Times that really walked through how CPI is calculated. And it's a bunch of people that work for the government that walk around with iPads, building relationships

with local businesses and all these random places all around the country, and asking them to, you know, chitchat for 15 minutes and do these surveys. Now, you would have thought that in 2023 or 2022, what the government would have said to visa mastercard, American Express, all the payment rails, the banks and stripe is, send me a feed in the following structured way so that I can actually have an absolute precise sense of inflation because inflation really only occurs when a good or a service trades hands for money, right? And you calculate what did that thing trade at the day before and what is it trade for today? So you could get an absolute precise sense of it. Instead we do this

random sampling thing and it's active, humans, etc. So if you read this article your takeaway will be Oh my god, this is very rickety and it drives an enormous hammer that we use to try to manage the economy. That's the first thing. I think you need to buckle your seatbelt because the next three, four, five months of CPI will probably be very, very bad. Seven, eight, nine percent. Why? There are a handful of components that have gotten completely run away. Number one, the biggest one is rent. And so rent works on a three month lag. We're going to reintroduce what the true owner's equivalent rent is into CPI. So we can already forecast that CPI going up.

Oil is at 105 bucks a barrel. Russia is basically trying to break the back of Europe by now messing with their Nat gas supplies. The German energy minister yesterday said that if that happens, it could be a contagion equivalent to Lehman brothers with respect to energy. When you play all of these things out, what you have is unfortunately rampant, runaway costs that really have no mechanism to get back and check in the absence of some real governmental changes.

Our policy on this Ukraine-Russia war, how we intend to work or cooperate or fight with China, all of these things have to get solved. So in the absence of that, prices are going to continue to go up. And so what does the Fed do? How does it throw away what little credibility it has left when there's eight and nine percent inflation prints and saying, we think we're done for right now. You can't do that.

So they will overcorrect because there is just gonna be so much pressure for them to act. All roads, I think lead to lower equity prices and I think what David said astutely is, we've seen the first wave, but now it has to touch all these other areas. For example, we have gotten totally drunk on debt as a country. One of the most obvious places where we've been serving alcohol far too late into the night is in the financing of all these

private equity leverage biodes. Right? These are sketchy companies that are sort of like, you know, teetering on and solvency at times where private equity comes in, levers up the balance sheet with debt, they price it right to the edge of what's legally allowed or what's financeable, and then they go do it. But that's all assuming the economy continues to grow. And so if all of a sudden you have some recessionary forces or prices go up and earnings don't, you'll have a contagion in the debt markets. You could have a contagion in the commodity market. So we are dealing with some really

top-boundary conditions. I mean. Real estate. Most Americans have most of their network tied up in real estate. And if we see a 30 30% correction real estate, it could be a real problem, particularly with rising interest rates in ability to refinance. SACs, the dual mandate is hey, keep inflation 2% and then keep the unemployment rate reasonable. The unemployment rates amazing, with still so many jobs out there, even with these layoffs. In fact, one might argue we made too many jobs available to the point at which people maybe aren't working as much or just, you know, underworking and not taking advantage of these amazing jobs out there. Where do you see this going, SACs, now that we can't seem to get inflation under control and people are looking at their 401Ks,

they feel a lot poorer, but is the demand side gone yet? Have consumers decided I'm not going to buy the next house, I'm not going on this vacation. $6 gas makes no sense, $7 gas makes no sense. I'm not going to go on this weekend excursion, I'm staying home. Yeah, I mean, look, consumer confidence just had the biggest drop, I think, in 40 or 50 years. If you look at, like, right track, wrong track, polling for the country, only something like 24%

believes that the country is on the right track right now. If you poll people, are we in a recession? And they don't look at, like, you know, the quarter of her quarter growth, they just look at what they're feeling. 56% of the country says we're already in recession. It's about 70% of Republicans, about 50% Democrats. So the country is already hurting.

People are already feeling it. And this is going to- Is it psychological sacks where they actually making decisions now to spend less? No, I think it's both. I mean, you start with the real inflation and people feel it, and they also hear about it in the media, and then they start to adjust their decisions. And this is the problem with fixing. Yeah, this is a problem with fixing an inflation problem, is that it's based on expectations.

So once people start to expect inflation, then businesses have to start operating as if there's going to be inflation rate next year, so they have to start raising prices. And it's actually very hard to put the horse back in the barn. And this is why I think the Fed is probably more likely to overshoot on raising rates, is because if they really want to stop inflation now, they really have to slam on the brakes. And then that's going to lead to a recession. And if they don't, then we end up with like a chronic sort of stagflationary situation where you get lower

growth and inflation persists. So it's a bunch of bad options right now. And I think to the point freeberg is making earlier, you know, this redolio piece that he just published as a blog on LinkedIn, he said, look, what you want is a Fed that is alert at the wheel and gently applies the accelerator or the brakes based on what's happening. And instead what we had is the Fed was asleep at the wheel and gently applies the accelerator or the brakes based on what's happening. And instead what we had is the Fed was asleep at the wheel. They should have started reacting gently to inflation last summer. Instead, they waited nine months. And now they're slamming on the brakes. And this is a bunch of bad options. I think we are going to have a recession.

The way this unravels. Can I just make one suggestion? I wanna put this out there, because I sent it on our text, and anyone that's listening in DC, please think about how we can change the way the federal reserve operates, but it doesn't make sense to have humans with subjectivity applying their subjectivity to a set of, as Jamal pointed out, infrequent data that comes in chunks and comes in spurts,

and only having a mechanism of changing rates by 25% each month, or sorry, 25 basis points once a month. We should have continuous real-time monitoring of economic data and software or AI or some sort of informed set of models should then predict what inflation and economic growth rates will be as that data comes in, react in real time, and on a daily basis, we should be adjusting the overnight rate in a one basis point increment. So we can have the ability to more quickly, more efficiently, and in a higher resolution way.

And smooth it out. A smoother way and a higher resolution way make these adjustments. It's silly that we're still operating the way we did in a pre-digital age, as it is with a lot of industries and a lot of bureaucracy. But in this case, it's particularly prudent and it's becoming particularly important and relevant as we're seeing right now with the stack flation risk

that we're facing where we can have massive inflation and recession at the same time. Because if we had made smaller adjustments every day for a period of time as these economic data indicated that we should be making them more quickly, we would not be in this problem. And I don't think that having humans and their judgment should necessarily be the way we drive this thing. Yeah, but listen, we don't need that making daily adjustments. I don't think the Fed can fine tune an outcome like that.

I just think that they can't be asleep at the wheel for nine months. I mean, we should have AI running this friggin thing i mean what's the night i i don't actually don't think when you when you said that you know congress needs to somehow change that the way the fed does business actually think that the fed has the correct mandate which is the dual mandate of considering inflation an unemployment we shouldn't be basically junking that up by adding a bunch of mandates and actually the

administration has been trying to add mandates. They basically gave the Fed a mandate around climate change. They gave them a mandate around equity. Don't change the mandate. Don't change the mandate. Just keep me multivariable. This is complex.

The tools should change. Yeah. We really want to focus Fed, and I think the administration has been politicizing the Fed by giving them a bunch of mandates. That's how it looks. If you want to pursue those policies, do it in HHS, do it in the Interior Department. Don't basically confuse the Fed and make them pursue climate change or equity or what have you.

I mean, that is just bad, that is not their remit, right? Their remit is controlling inflation. I really think this just comes down to the fact that for nine months, they sat on their hands and ignored the inflation evidence. Remember this word transitory? You know, we heard so much last year about inflation being transitory. How do they know that? You know, why didn't they start rethinking this quantitative easing? The headline from the Wall Street Journal says it all, how the inflation rate is measured, 477 government workers at grocery stores. Yeah. Software should be taking data from different feeds and software can learn.

I don't agree with you. So what are the predictors of inflation and what are the predictors of growth and make a recommendation? I don't agree with you that it needs to be real time. In fact, I think it would do more harm than good. But I do think that we can know these things without sampling in such a porous way. And you know, you can work with private companies to give you the feed of data to allow you to do it. And now, you know, we're going to look, we've had a system of overcorrecting and undercorrecting for years. The problem is the stakes get higher and higher as the economy grows and becomes more complicated and

Interest and we have more leverage and we have more industries that are leveraged and more asset classes that are leverage like housing Because you know, this is such and by even a few points. You could tank everything I also want to tell you guys a quick story One of the most interesting canaries in the coal mine of all of this was two days ago and what happened to Facebook. And this sort of ties a lot of this stuff together in terms of like economics, inflation, asset prices, equities, tech. We should we can try to talk about non sort of, you know, big tech. But the everybody was saying, oh gosh, the market's going to rip on the open. We were closed for Juneteenth.

And then on Tuesday, the S&P was up like 250 basis points, 2.5%. And then as that was also up, call it maybe 300 basis points, roughly. But Facebook was down like 400 points, right? So it's a big spread. And why is that? And I was like, this makes no sense to me. What is going on with this price action? Everything was up, Apple was up, Google was up. And so I called around and you know, I was like, why is this happening? And this is the best explanation I got. When you look at who the incremental buyer is in the stock market, it tends to give you a sense of whether prices can go up or will continue to go down.

And the poorest informed buyer tends to be retail. And the most informed buyer tends to be these very large institutional hedge funds. Right, so there's a spectrum. And Facebook is an example of one of the of big tech that is poorly owned by retail. So it's mostly owned by smart money. And the case that smart money makes for owning Facebook is that it's got an extremely cheap price to earnings ratio. So you must own it. And what they said was that they, you know, looking at the tea leaves of consumer demand, what they actually re-under wrote was that actually it's not that the price to earnings was cheap, it's that the E in PE was just wrong. And if they pass through all of these increases in inflation and, you know, their earnings

expectations into Facebook, it's actually more like fair value at a lower price. That's why they sold it so much on a day where the market was up. Now, why is that important? Well, eventually you're going to touch all these other stocks as well that are going to go through earnings revisions in this recession. This is where I think Wall Street has done a very poor job on behalf of retail. If you look at the average estimates of earnings, you will be shocked to hear that Wall Street actually has this year being record earnings, next year earnings continue to go up.

How was that even possible? Well, if we're sitting here, how do you see, how do you see earnings continuing to go up into these prints like this, when you cannot pass through 80, 90% increases in energy and cogs and whatnot. How does that happen? I think what people would say is maybe they're gonna

lower their costs, and so with layoffs and lowering salaries and lowering spend on advertising, the E could go up if people start belt tightening and then we start having companies that are being run, you know, just more. You'll have to sell fewer things because there'll be fewer people with jobs to buy things. But we have 10 million job opening. So this is the weird thing about this recession is because we haven't let a lot of people

immigrate into the country. But is that what you think the consensus view on Wall Street is that basically a bunch of people get fired? And so that's why earnings continue to go up. Well, they stop hiring for two years in advance, right? Facebook said they were hiring for like 2024. They're hiring plans. We're looking out two years. So now if they go on a hiring freeze, maybe there's, you know, I'm going to give you a lot of theory. I'll give you the counterfactual. I think, well, it's pretty strong. Okay.

And I think that earnings are gonna go down this year and we'll definitely go down in 23. And so I think what probably happens is the entire world of equities needs to get reprised at a lower price. And in that, it's gonna put enormous pressure on these cash burning non-profitable tech companies. Well, that's for sure, but in the ones

that are profitable, Jamoth, they're aware of this. Facebook just canceled like two of their prototypes. They were working on it to save money. So that whole $10 billion into VR, I think they're trying to make that number look smaller. Sax, what do you think? Well, I think you're bringing up a really interesting point with this, the 10 million job openings.

Now that number is coming down really fast as companies close open racks and they basically freeze hiring. So that number is going to come down very, very fast. But one of the major contributors to inflation is that the labor force participation has been very low. Millions of people left the labor force during COVID as a result of the stimulus checks and the freezing of rent and evictions. I mean, look, rents, the number one expense,

if they don't have to pay rent for a couple of years, a lot of them may not work or may not work as much. So we've had this problem where we really need about two million people to re-enter the labor force. And if you describe inflation as too much money chasing too few goods, we need to increase production and productive capacity. And when you have millions of people dropping out of the labor force, you've got less goods and services being produced that people want. So just reducing the money supply is not going to get us out of this mess. We

also need to improve productive capacity. Just to put a number on that, we peaked in the 1999 arrow at 67% of participational labor force, and then it's been down in the low 60, 61, 62, and it continues to be low. But that is the solution here. We get that 7%, that gap. You can't just fix the demand side because if all you do is fix the demand side, what you're doing is you're killing the economy to reduce demand in order to bring it down prices. That's very painful.

It's all pain. But what you also do is fix the supply side. You have to increase the availability of all the critical inputs into the economy. So labor obviously is one of them, but also critical resources like energy, oil, natural gas, and so on. And that goes back to fixing the supply chain, hopefully getting a resolution of the situation in Ukraine, the war.

So if we could fix those things, it's a way to improve the economy without creating more pain. Freeberg, if the prices of just daily living, of which transportation and housing and healthcare are now the top three, I believe, groceries and healthcare, I think I've flipped it a couple of times

in the last decade in terms of cost. If those things go up, would that make people want to go back to work to pay for those things, or does it create capitulation where people say, I'm moving in with my cousin, I'm gonna lower my balance sheet. What is your prediction there?

Are more people gonna go to work, or do we still have this, you know, call it 10 million people in the country who just don't wanna go to work? I've mentioned this in the past, but I think there's more, there's another kind of interesting outcome of this. We've had several months in a row

of pretty significant increase in consumer credit. And I think the reason is, things are getting more expensive. People generally do not like to reduce their spend on stuff or their living their lifestyle. Once you get used to a lifestyle like going out to dinner once a week or going to the movies every week and you create a budget, you create an experience around that, a model around that. It's very hard to say, okay, I got a cut budget now, and I got to reduce my life. I would rather say I'm going to keep doing that, or at least there's some inertia or some

momentum, to keep spending on the things that you've been spending on. And the way you do that in a model where you don't have as much income or you have less income and things are getting more expensive is you take on more debt. And so there is a little bit of a nervousness that I have had that people's response generally, the consumer response to inflation and to a kind of a shifting income environment like this, is not necessarily to cut as quickly but take on more debt and keep buying. So, I am a little nervous about that, but I do think, obviously, at some point, everyone has to figure out ways to generate income.

There have been a lot of these kind of ancillary markets that are typically the first to go, these extra services markets where people have found other ways to make money, side hustles, and whatnot, that may or may not be as robust as they have been historically. And so people may need to go back for more secure stable income. And these jobs get filled. I like, I mean, as we all know, there's an opportunity, and this is the whole concept, I think, behind Build Back Better. It's not super bot-full in terms of the approach,

I think, based on my understanding of where that money is supposed to go because it doesn't create long-term jobs, but there is an opportunity to build new manufacturing and new infrastructure jobs in the US right now that could enable a healthy transition here. But that legislation needs to be done smart. It can't be done with this. Like, hey, let's build a bunch of bridges and then a bunch of contractors make a bunch of money and no one has any let's build a bunch of bridges. And then a bunch of contractors make a bunch of money,

and no one has any long-term jobs out of it. We've got to find ways to spend money on creating long-term, sustainable, you know, new industry here. Yeah, and job openings 11.4. It's come down about six or seven percent. So, you know, it's gonna be traveling, but it's for sure we're seeing it in our industry with the hiring freezes.

That, you know, we're gonna work through those open jobs. What are the chances that inflation gets under control in the next year and should the Fed go for like the 1% slam on the brakes? There was some talk about that. Obviously, they went for 50%. We said we found it. Remember a lot of the elements that we were

kind of saying, oh my gosh, I can't believe the climate prices. So, wheat is down, I think 30%, lumber is down, 50%, gas prices are coming down. So there are some of these commodity spikes that we've experienced over the past couple of quarters, particularly recently, that have had a significant part of the fueling effect on the inflationary trickle

down into ultimately end products and whatnot. And those are coming down. There's a real question of how quickly that flows through the economy and flows through to the price of goods that consumers ultimately end up paying for. The gas prices right now are the biggest concern. Like unless you can get gas prices under control, that always, always has a massive impact on spending, on consumer spending, which drives a recessionary cycle. And so if I'm the Biden administration,

I'm first and foremost, I don't care about the general inflationary indicators as much as I care about getting the price of gas down. That is a super, super critical number to fix. Is this, are these gas prices going to change how Americans look at what car they buy? Because they're going to have worse. This is going to happen the last time we had that. They're going to get worse.

People started looking at not buying SUVs. We could have $7 gas. Oh, I see. There was a picture actually. I tweeted in California, there was a $7. There are no 11 cents gas. Broadly, broadly. We could have $7 gas all throughout the country.

But, Jay-Cowell, remember, the average automobile in the US lasts for 12 years. That's how often people change out their cars. So that's 8% of the fleet being changed per year. And the interest rates for auto loans have spiked like crazy now with this change in the fed rates. And as a result, the delinquency on auto loan portfolios has spiked like crazy. And so, you know, yes, sure, theoretically, people will think about buying an electric car. But most people aren't

thinking about that on average for five or six years from now, because that's the average of a 12 year cycle, right? Five years from now. Wait till all these peloton bikes need to get repossessed. Well, all these, actually, the wait for cars and the overpricing of cars has ended in the last two months. And there are multiple cars now in the market, 25, 30K, for a 50 plus mile per gallon car. I think this actually, one of the silver linings coming out

of this is people might actually stop buying as many SUVs or, I think, our average is in the low 20s right now and Europe's is in the high 40s. The problem is, every, for miles per gallon, part of the government, acknowledges that you have to really ring fence and protect consumers, right? Like if you look at the securities laws,

they're meant to protect them at all costs. And Jason, you've been frustrated by some of the rules that haven't changed, and when they change, they change so slowly. But the reason is because sometimes that you want people to make good decisions. And if you give them a bunch of firepower, they're just gonna spend it.

And what we really did was we gave folks just a ton of money. And what did they do? They acted rationally, they spent it. And now we have to take it all back. And I don't think that's going to be as easy or as simple as people think. What percentage of the money supply do you think is in excess right now in the United States? Well, look, I told you this because I wrote this in my annual letter, but it's stunning that, you know, the reason the stock market went up, dollar for dollar was actually tied to the growth in the M2 money supply. The correlation was 0.92. So for every dollar that the Fed

printed, the stock market went up by 92 cents. So it stands to reason that if the Fed is going to take three to five trillion dollars of value out, then we have to re-rate the equity markets by $3 to $5 trillion at a minimum. And then you have to re-rate and re-baseline for earnings. And so that's probably another 20 or 30%. Let's talk about the end game here. The rates go up, people stop buying homes, people go back to work, and energy prices come back down because people are not buying as much of it, spending

goes down and people rebalance and that takes a year. The job openings could also disappear by the way. They're going down 400,000 a month. Yeah, you're assuming that all of a sudden demand is stable, but it's not necessarily stable and in a demand contraction, yes, people get fired, but then also new job openings change, right? There's fewer of them.

They're more specific in the way that people will go down. That's the next piece. That's the piece I'm waiting for. To me, that would be, I don't know if you guys have early warning signs, but the two early warning signs I have in my job of investing in early stage companies is when people, what's the average salary for an engineer if that hasn't gone down by now, then it's a lagging indicator, right? Would that be to meet capitulation? Salaries go down or people, instead of laying people off, they do salary cuts out of company.

That is really hard to do, right? I don't think they do salary. More like when Asian preferences and deals. Right. I think the way the salaries come down is that startups freeze their hiring plans or they lay people off and now all of a sudden the war for talent subsides, these are the higher people and so there's no need to keep raising up salary. Are you seeing that?

Yeah, I think we're seeing the beginning of it, but I got to tell you, I mean, I think that startups have not fully embraced or realized what's happening. I just got back from the Co2 summit over the past couple of days. This was an event that was hosted by Co2, you know, whose founders are Philippe and Thomas LaFont. Very smart guys, very smart investors who've been public market sort of hedge fund investors for a long time, but also have a large venture fund to do growth stage investing. Some of the takeaways from that conference, some of the more vivid lines that stuck with me is that one of the speakers said that he said that when it comes to runway for startups, three to

four years is the new two years because if you just have two years of runway, you're going to need to raise in a year and in a year from now we're going to be in the Milvara session. They're predicting, they're forecasting that capital availability is going to decline about 75% the amount of money that's venture money that's available, the ecosystem, down by three quarters. So if you try to raise in that environment, either you're not going to be able to or investors are going to have all the leverage, you're not going to get terms that you like. So they were recommending three to four years of runway. So that is not what I think a lot of companies are. That's just not even possible. The other thing that the other really vivid takeaway

is that they did some polling of the start of founders who are in attendance, okay? And what the numbers basically showed is a contradiction. On the one hand, the founders sort of understood that intellectually, that we're headed into a downturn, we're headed to a recession. And so the polling reflected that. On the other hand, if you ask the founders how they're going to react to it, what are you going to do about it?

You're going to cut a head count, or you're going to accelerate your business to beat competitors. Everybody said, well, we're going to out accelerate our competitors. So everybody thought that there are the exception. In other words, everyone understood we're headed for this massive recession. It's going to be really bad.

But we're going to be the one company that doesn't need to cut. We're actually going to grow. We're going to accelerate during the downturn. So there was a real contradiction in how founders are interpreting this advice. And I have to tell you, when I talk to founders in our own portfolio, what I see is, we've now done multiple meetings where you lay out what's happening in the economy, and they get it, they understand it. And when we do a board meeting, they're like, okay, we're going to go look at our plan, and we're going to reevaluate, and we're going to make major cuts, we're going to bring

our burn multiple down to where it should be. But then, when you're checking with them a couple of months later, and you're like, where are you on the plan? I haven't taken the medicine. It's, or the medicine is like a 10% cut. And I'm like, guys, like 10% of performance review. Yeah. Like 10% of what you're doing every year anyway. Yeah, you get rid of the bottom, like the C performers, you promote the A's and B's, and

you get rid of the C's. So, no one really wants to take the medicine yet. And, you know, it's a problem. I mean, Sequoia has this great chart called survival of the quickest that we should put up on the screen. And it shows two lines. One company is the one that takes the medicine right away, brings their burn down to where it should be, and then they're able to grow from there.

And they really will out accelerate the competitors. But then there's the company that basically delays and waits. And what happens is by the time they finally get religion to make the cuts, it's too late because even after they make the cuts, they don't have enough runway on the other side. They burn the capital. They burn the capital and then they're in a desk spiral. So I think what companies need to think about is this is a 75% reduction. Imagine if you did $100 million around last year, right?

If you go try to raise next year in the most recession, that $100 million round might look like a $25 million round. So imagine if you're burning an extra $25 to $50 million more than you should be according to your burn multiple, you're basically burning the next round. Forget about the fact that the last round gave you all this cushion. Think about how much of the next round you're burning. And if you rear-earth thinking around that, it could lead to a change in behavior. Haneck, totally. I'm seeing people come back from rounds where they were expecting 40 or

50 million dollars. In some cases, like with 250K in revenue, 500K in revenue, they were living in a 200, 300 times revenue kind of world. It was just insane. And you know, they're now coming back with $10 million caps, $15 million caps on their notes. I was offered $100 million at a 50% discount and I said, call me when you get to 65. And that's the best company. That's literally the best company.

That's the best and the best founders to bet on, right? Of probably most private companies, it's them. You don't like that valuation, Jamal? What is that valuation? 40, 50% off? It's less of a judgment on, but it's just more an observation that we're at the beginning of the beginning. And again, we're at the beginning of the beginning.

Okay, for all of us that lived through the 2000, this was four years of sheer hell and aggrined. Now we have $30 trillion that we have to work through the economy, a recession we have to overcome, a war we need to end, and people all of a sudden assume that two or three rate hikes and five or six months of headlines are enough. And on the margin, maybe they're right, but from my perspective, you know,

it's less a judgment on, but it's just an observation that we're at the beginning of something that just fundamentally has to take some amount of time to work its way through the system. And so I don't understand why anybody would give up their liquidity in this moment right now. Why would I give up $100 million of cash in my bank account? I would not do that right now.

Does the cash gives you so much optionality. It's so much optionality. So you're going to be looking for distress and this is the thing. You have a huge amount of capital leaving the ecosystem, like we know Tiger is basically out. I mean, they were the, basically the default provider of growth stage capital over the last couple of years. So you have a lot of liquidity leaving the system

and then the liquidity that's in the system is waiting for distress. So you're right. And it, there's a quarter, I mean, like we talked about, there's a quarter trillion dollars of quote unquote, dry powder. I mean, I know Chimoff thinks that people are gonna give that money back, but there's never been as much

as they're not that much. They're not gonna, they're not gonna, they're not gonna, they're not gonna, they're not gonna give it back. I just, yeah know Chimoff thinks that people are gonna give that money back, but there's never been as much as they're not there's not that much a lot of that's deployed. They're not gonna give it back. I just deployed. Yeah, look at that tiger fund tiger raise a new 12 billion dollar fund that was announced in March and TechCrunch we covered it on the show a month ago. Yeah, TechCrunch on Oracle saying it was ready deployed in six months. So I wasn't on that show. Oh, that was the one where we would jk outtrider place you with brag or sooner. We should we should show weekly going forward instead of lovely might be better to keep up with these trends. Okay, so you're in. Jake, you made a good point there. Creets go back this for a second. You said the founders were they're still anchored on this world of two to three hundred times AR evaluations. Let me just

tell you where the new valuation levels are and this is obviously in flux. But I'm pretty sure the valuation levels are at 20 to 30 times the ARR. That's for a company that's growing three X-year over year. Three X-year over year. That's the best of the best. The reason that you get there. That's 10X next year's ARR. Yes, exactly. And the way that you get there is that if you look at the multiples for the best public SaaS companies that are like say a 40% grower like a snowflake. They're at 8x Yeah, so you know, so basically it's more credit for The higher growth rate, right, but they really have to have that 3x growth So you know if you're a founder think about the fact that when you try to go raise next year

Assuming you're the best of the best you'll get 20 to 30 times ARR. Now think about your spending, not last-rounds money. You're spending the next-rounds money. If you could just reorient your thinking that way, you'd burn a lot less money. Yeah. I literally had a deal in the 30 and 40 range, and angel investors who never, early stage, angel investors, seed funds that did not look at multiples are now asking me, because when I send a deal memo to 10,000 people for my syndicate, people hit reply.

People are hitting reply now and saying, I did the math on this, this is the multiple, this is this, this is the burn multiple, they're actually doing the math. So we all of a sudden have discipline that I have not seen in this investor class in the 10 years I've been doing it. So that is to me, one of the great, several linings here. I think people are going to do a better job with their personal balance sheets. They're

going to invest less in speculative stuff, and they're going to invest more in the actual builders who have discipline. So we're going to see this massive swing to discipline, and we're going to flush out all the people who don't have product market. Think about all those folks, like what's happened in the last six months. It's like they've been long, unprofitable tech. It's got smoked by 75 to 85%. They've been long crypto. That's gotten spoked by 65%. More. Yeah. I mean, if they weren't using a calculator, then they sure as hell should be using a calculator now to figure it out. No, I mean people, well, you think about it. There's a whole group of investors who have only known the up market. There's a whole group of founders who only know the growth market. If you're under 40 years old, you don't understand what you're about to experience.

And here we are. That's a perfect time to segue into crypto Bitcoin's price is down 71% From the all-time high 69k in November of 2021 bottomed out at 17,000 or so on June 18th the Ethereum price down 78% And if you look at the craziness since the last all-in episode, you know, this 3 AC 3-hour capital their crypto hedge fund that was letting people Basically loan out their crypto. They are basically closing a $10 billion crypto hedge fund at its peak. They're insolvent, according to the reports. Terrell Luna collapsed, the founders and employees of that company are not being allowed

to leave South Korea. It doesn't mean they're guilty, but it's certainly not looking good. And there is a whole situation with Solana and a company built on top of it, so lend, which is not Solana, it's an application built on top of it. I talked to Vinny Lingham, our friend earlier this week about it. They had a whale who had tried to loan out 100 million and they had to freeze their account because they've thought the downward pressure, since there's not many buyers in crypto right now, could collapse a lot. So thoughts on crypto writ large, what is this going to look like, Sachs over the next year

for crypto? I mean, it's like the dot-com crash all over again. I mean, basically, you had an extremely promising technology. I mean, it is a promising technology. Of course. And it is a future technology platform, but the price action got totally decoupled from the level of progress in the space.

And people were not valuing these things based on real customers, real usage, and real use cases, but it was became very speculative. And again, all of this was fueled by the excess liquidity that was pumped into the system. So, you know, we've said it before that crypto is like a liquidity sponge. It sucks up, and there's a lot of access liquidity. It sucks up that liquidity. But now that sponge is getting wrong out. And, you know, part of the problem is with the interest rates going up, you know, it's one thing when you have negative real interest rates, and you can't earn a return on your money,

then you start to get, you basically people start to push the envelope and invest in more and more speculative things. But as you can get a real return in, like they'll say, there's like a real risk for you rate, now there's alternatives for all that cash. And then you got the problem of leverage as well, which I think over the last few weeks, the crypto space was heavily over levered and a lot of people got marched and called and wiped out. That's the contagion that's occurred. People were levered up five, ten times there,

Bitcoin on these roads. Wait till these token sale things get litigated. I mean, the amount of... Oh, God. The amount of grift by so many of these venture firms in running these sketchy deals where they would put in some amount of money.

This is my understanding of the scam because it was explained to me. You put in a little bit of equity at some crazy price and then you get these tokens and apparently there's no, like, you can just sell these tokens day one. And so what happens is like you, you, you price the equity, but it's meaningless because really what you're getting is the right to get some amount of these tokens the price is crazy You sell it and then you just kind of walk away and apparently, you know, you do these deals where you just rinse and repeat this thing Well wait till that gets exposed. I mean that seems like a total the firm that did this the most is injuries and horror It's

Christix and I think was Considered like the best investor last year or the year before Because of all these token returns. I got a wonder when they go now that this people are losing money, that's when people start suing. I mean, what is it going to look like? If they were, what do you think their marks look like last year versus right now? I mean, and all these coins, like looking back in the review mirror and saying, hey, you bought all these coins, you flipped some number of coins. I mean, to your point, you're mouth like, what is the litigation path and the shadow

economy that was created? What is that? Well, there's an article. There's an article. And I think it was in Bloomberg about folks trying to figure out how to get a lawsuit filed against Binance. And the problem was that they didn't even know what entity to sue. It's not clear who owns what and what owns the other and who the ultimate look through ownership structure is. And it doesn't mean that Binance is guilty of

anything. But the article was just showing how there was a US investor who lost $1.2 million who wanted to file a lawsuit. And they have every right to do that. Couldn't even find the corporate entity to actually file this lawsuit against. So if that's what's happening in a trillion dollar market, there's a lot of pain. It's a lot of oversight that's that's that's free. Free part, what is this going to do to regulation and crypto at this point? Because crypto regulators now or regulators are going to just be looking at this going, wow, look at all the pain and suffering.

And when a local DA gets five or six of their people complaining, they'll lost money in Terralun or whatever it is. This is like the perfect opportunity for them to collect a pelt and get some crypto kid and you know, hold them responsible and get some great headlines. I mean, what do you think happens from this point forward in the crypto land? Well, you just said, okay, but what about regulation? I guess that's the next piece because all these entities, the SEC taking a very... The SEC last July or August

published this kind of initial opinion letter. But remember, there's also the CFTC. There's a bunch of regulatory authorities in the United States that have a longer process than government's XUS that have had a much more kind of stringent point of view that there's a lot of casino like gambling going on with these things. And that's it. There's no functional utility. There's not a it's not is it a security if there's no with these things and that's it. There's no functional utility. There's not a, it's not, is it a security? If there's no underlying business, if it's not a security, then it's just a bet on something. If it's a bet on something, it's gambling. It's, you know, obvious that if it's a security, it has to be governed by the SEC. If it's a future or commodity, it's a CFTC. And the problem is we need Congress

to pass some legislative framework that puts the puck in one side of the arena, a rink or the other. Yeah. And otherwise, otherwise all this gray is going to exist for a long time. And people, you know, if governments really hate it when retail investors lose money while watch out because they just had $2 trillion a month. In the US, we have a lot of other regulators that can prosecute cases like the DFS in New York.

This is the Department of Financial Services. They are a pretty litigious prosecutorial group. I mean, they go after scams and people praying on consumers and retail investors in a very aggressive way, often outside of the purview of the SEC, they often coordinate with the DOJ or the SEC in evaluating enforcement decisions, but they will prosecute. I think that there's a, as you said, a lot of opportunity when people have been grifted out of their money for politically motivated and people that generally have the right point of view that are in a position to prosecute to go after the offenders.

So you're right. There will be a lot of action on this over the next couple of years. And then, Jamat is right. The way it gets resolved is a Congressional Act. But by the way, I'll just point out, in the year 2000, Congress passed what was called the Commodity Futures Modernization Act. And that CFMA was really meant to kind of, quote, bring commodities and futures into the digital age.

And they started working on it in 1996. It took four years to get it done. Within four years, it was already out of date. And a lot of what was going on with respect to how exchanges operate and the types of contracts are being created, it was already missed. So, you know, the problem we have here is that by legislating the state of the market today, without creating enough flexibility in how enforcement action

can be pursued and how things can be interpreted in the future, you could end up in a similar situation where people just find end run around and the whole thing repeats itself in the next few years. Because guess what? People will always want to gamble and grifters will always want to grift. And so there will always be a way to try and scam people out of their money.

Yeah, and that's just hell. Hey, oh, Jacob's always going to want a j-cal. Oh, you get it. You get it. You get it. Hey, everybody, download call and you can get the after-gen contests.

Before you pivot, if you want a perfect example of this, and this is just a lesson to founders out there, if you feel like you're in a gray area, you probably are, people were like, oh, NFTs, they're just trading cards, Yada Yada, and it's not a big deal that somebody at OpenC decided to front-run the market, oh, they just bought a trading card ahead of everybody else.

Who cares? Well, you know who cares? Turns out the Southern District of New York cares, and they are a pretty serious group of people. Former employee of NFT marketplace OpenC was charged in the first several digital asset insider trading scheme. So just because insider trading didn't exist as a concept for NFTs before. Congratulations. Congratulations. It doesn't exist in crypto.

I mean, if they want to really find the honeypots here, I mean, it's the worst kept secret in crypto, how much insider trading is going on amongst the organizations that run the exchanges and their side pockets that they use to manage liquidity. I mean, this is the, it's the biggest thing that's been happening in crypto. If you're wondering why people were spending

hundreds of thousands of dollars on a board ape or whatever, like there might have been some shenanigans going on here. And I mean, no, but Jason, it's not, it's not illegal, this is my understanding though, it's not illegal to front-run crypto trade. So most of these organizations that run in exchange compete for order flow and they're able to just look at that order flow and then they front-run the trade and they're on the other side of that.

They're always making money. They were making tens of billions of dollars. All these exchanges were. Then the question becomes, in terms of an attorney like how you interpret this stuff There may not be a law on the books about front-running NFTs But there are laws on the books about fraud and NFT and conspiracy to you know Gryft people out of their money. So this is all gonna come crashing down and the discovery The southern district of New York actually subpoenaed any of these exchanges all how would break loose?

Oh, no, they are. You can be sure that's in process. If they go after one NFT flipper, they forget NFTs. I'm saying coins crypto. Of course. That's the huge market. And they will, they're turning over these cards because you know how they like to work. They like to flip their way up to the top person.

But we're not talking about January 6th here. We're talking about gas in the Ukraine next. Ew. Hey, ho. That's a little reference for you. Um, listen, now that we're, now that we're an hour and 10 in and we've, we've kind of like broken the ice and we're friends again. I feel good. I feel like what you want to do. We're playing as a team again. You, you, you want to redo our intros so you're not being such a bitch? I don't care. I don't care. Can we just move forward? I think we all understand. I like to be

recognized. You said that you were workshopping an intro. So do you want to do your intros at the end of this or not? I'm not doing the intros. Now I'm much like on intros. They were me. They wanted to. The extra point. No, no, it's not about the point. That was a joke. I wanted to do interest. I didn't know coming into this. How sensitive people would be. And then sacks is like, I need to have in the contract, but not the spiraging NDA and I'm scared about the things I said. So spike content needs to be actually took that out. You were the spike content guy. You're the most concerned. Oh, we have a good is a good rule. Non disparagement. He didn the most concerned about my content. No, we haven't agreement on that. Is a good rule? Non-dispareagement, he didn't want to have in there. Oh, he didn't want to.

He wants to have to remain to disparage you day and night. I mean, he's already taken it out. To be honest, I took it out because I thought you would be more sensitive about accusing others of disparaging you. I, my, this whole show is you disparaging me, that. Do you have an intro or not? I don't have interest prepared.

No, I'll do interest next episode. I promise everybody. I wanted to take the temperature of my besties. I don't have interest prepared. No, I'll do interest next episode. I promise everybody I wanted to take the temperature of my besties. I don't know if people are sensitive right now. You want me to make a joke about Bragg Gersner in the real shit to talk about. We took on Ukraine and World War III. It's not all about our narcissistic nonsense

as for David over to teenage boys running a mock. Go ahead. Something happened in the last week that I think is pretty disconcerting. I mean, just intellectually speaking, we all know that wars that go on and on have a tendency to escalate. And there was an example of how this could happen over the past week. Lithuania is now essentially stopping the flow of goods from the Russian mainland to another part of Russia called Clinton grad, which is it's called an oblast. It's a little area, but it's outside the Russian mainland.

It's basically between Poland and Lithuania. And so goods go by rail from the Russian mainland to Clinton grad, and they've been stopping these goods because they say they're under EU sanction. The problem is, listen, when you think about a sanction, a sanction is me not buying goods from you, because I don't like what you're doing. That's fair game. Everyone has a choice over who they want to buy from. But this is not that. This is Lithuania deciding to stop goods going from Russia to Russia. And so the Russians say this is a blockade, I think with some justification, and blockades

are understood to be an act of war. So you've got Lithuania basically engaging in this act of escalation against Russia. We always thought it would be Poland, but it's really... Right, exactly. And remember Lithuania is a member of NATO, so they have an article 5, Guarante. Now think about the upside versus downside of this action. In terms of from the western point of view, the upside is this has absolutely no impact on the outcome of the war.

This is not going to help anyone in Ukraine to blockade Kaliningrad and prevent coal and building materials and steel from reaching Kaliningrad. It's not going to have any impact on the war. So there's zero upside to this from a military standpoint, but the downside is that you now have Lithuanian Russia getting into it, and if they get into a war, then we are instantly pulled in under Article five or in the middle of war three.

So this is the kind of dangerous escalatory act that has no upside, only downside for us. And my view on it is that we have to tell, we have to instruct, frankly, our treaty allies not to engage in these types of dangerous acts because there's a huge externality. We could be pulled in. This is very dangerous. And I just wonder if the administration is on top of this. Did they give the green light to Lithuanians to do this

or were they caught by surprise? And what is the reaction to acts like this? You know, what I worry is that we're conducting foreign policy by virtue signaling, where we just say, who are the good guys and who are the bad guys? And you know, if the Russians are the bad guys, Lithuanians are the good guys, so therefore this is okay. It's like playing cops and robbers on a global stage.

I think we need to be asking the question, is this smart or is it dumb? Is this prudential or is it reckless? Is this in our interest or is it not in our interest? And, you know, I really got a wonder about who's mining the store on this. Day 120, and it feels this is just doesn't have an ended site. Is there an ended site here? What's the end? I mean, the end is what do the two parties want at this point? I mean, the people in Russia are suffering during this. The people in the Ukraine are being murdered in Ukraine

are being murdered. I mean, how does it end at this point? Is that Biden engaged the United States in a proxy war without our real or being murdered, I mean, how does it end? At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time.

At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time.

At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time. At the same time suffer the most are Europe. Now, I think you're starting to see the tea leaves, though. Last week, there was a group of European leaders. I think it was Macron, Draghi.

And I can't remember if it was the German Chancellor or not, and one other person who went to Ukraine. And if I had to bet, I think the message was kind of like, all right, listen, we need to find an organized detent here because there is, you know, according to Europe a Lehman-like situation in terms of economic contagion that could manifest over the next months. So I think that the end game is probably some

organized negotiated detent and ceasefire. I don't think anybody will be happy with it but I think by and large Russia is and has won You know meaning they've won economically. They're selling oil like it's not you know like it's going out of style It's just not selling it to Europe and to America You know, they're selling it to China. They're selling it to Africa. They're selling it to China. It's fine with it. They'll take some. Well, also, Chimasev won. They're winning on the battlefield. There was an article in the Washington Post. There was an article in the Washington Post in the last week or so.

And the Washington Post is basically the House organ of the Washington establishment and the the blob, basically saying that hopes are dimming for Ukraine on the battlefield. The Russians have now won 20 to 25% of the country. They've won that Eastern, that Donbass region. They've done it with the help of Russian separatists in Ukraine. And the amazing thing this article was that they were saying

that the Ukrainians were days away from running out of ammunition, despite the 40 billion that we just appropriated to them, where did that money go? And then, conversely, they're saying Russia is having just unbelievable casualties and they're running out of weapons. And they are obviously out of Kiev now and they're in the Donbass mostly. So I don't think there's a right. I don't think there's a right. Anything.

The Russians, the Russians, so listen, I said on this pod, they, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, this proxy war was saying how great it was, and they were saying it was going to lead to a new birth of freedom in the West, that it was strengthening our alliances, you had Francis Fukuyama predicting that we were going to win the war, and it would lead to this rebirth of freedom in the West. We should have known at that moment everything that Fukuyama basically predicts the opposite of the world.

He's always wrong. He's always wrong. He's like negative one correlation. Yeah. And remember, I said three weeks in that we were potentially, I think Putin made the mistake in the first three weeks of thinking this would be a cake walk, but that we were making the mistake of thinking the next phase would be a cake walk. And sure enough, here we are. Russia has now won the Eastern part of the country. Just to build on what you said, you know, we engage in economic sanctions. And I was the first one to say, hey, this could really work. And this could be a roadmap for how to do it.

And it turned out, this is the roadmap for how not to do it. You can't, on the front door, say, hear these sanctions and then walk around the back door and basically open the door for them. These sanctions were so porous as to be like Swiss cheese. We focused on virtue signaling acts like confiscating a plane or a boat or a house, but we didn't focus on the structural things we needed to actually make the mandate that we believe to be just to come to life. And so Russia has completely worked around it. Their economy effectively

is thriving. So what have we gained? I was it thriving? I mean, I don't know that thriving is how they would describe their economy right now. I mentioned this in the same record. The rubles are far higher, Jason. They're selling gas, they're selling phosphate, they're actually making a market and the prices have doubled and tripled in those commodities because the flow has been restricted.

So because of the exact opposite of what we tried to do. And by the way, I'll point out something that I pointed out in February, which was the biggest concern for me at the time. When we stopped allowing trading in the securities of Russian companies, we yanked away $400 billion of market cap that was held primarily by pension funds

and retirement funds in the US and Europe and gave that value to Russia for free. We basically said, here you go, here are all these securities, we're no longer allowed to trade in them. So guess what? You guys can trade in them. You can have them. They got all of their gas and energy and nickel and mining companies for free.

I think it's such a good point. It's such a good point. For these companies, we gave them, we ripped the stock out of retirement funds and we gave it to the Russians and said, here you go, Putin, take all of these securities for free, enjoy, oh, and by the way, because of our idiotic sanctions and the way we're employing them, the commodity prices are gonna double and triple and all these companies

are gonna have record profits this year. Happy fucking birthday, the Ruble's up 5x. It's not a 5x, but yeah, okay. It's a great point because if Putin had retaliated against the West by nationalizing 400 billion of Western assets in Russia, everyone would have been up in arms. But he didn't even have to do that because we just gave him the 400 billion. Totally. I mean, how did this policy make sense? It's this policy of conducting again, again,

the country of foreign- You can't say it in Russian securities. I'm friggin' BlackRock, I own a billion dollars of Russian securities. The US government just' BlackRock, I own a billion dollars of Russian securities. The US government just took it out of my portfolio that my clients own stakes in and gave it to the Russians for free. They're gone, poof. Crazy.

I think, listen, I think we've got like a two level problem on this Ukraine war one is that our policy has made sense. We should have been using diplomacy last year to avoid it. We had all these false hopes around strengthening the West and the Western Alliance by allowing this war to happen. We then, instead of trying to shut it down through a negotiated settlement, we try to use as a proxy war to weaken Putin instead, it's done the opposite. So there's a whole series of policy failures here, but there's another deeper level to the failure which is the personnel who are implementing these policies the washing establishment the blob who've been

out of both parties the the sort of you you need party who've been implementing these policies there has been no dissent within the washing establishment the only guy who really spoke up in a decisive way was John Mirschimer the professor of international relations from the university Chicago and he was treated as a pariah by the blob in the washing establishment woke up in a decisive way was John Mirsheimer the professor of international relations from university Chicago and he was treated as a pariah by the blob in the Washington establishment everything he predicted has come true. He predicted years ago. He predicted the US was leading Ukraine down the Primrose path and the result was that Ukraine

was going to get wrecked and so it has. Can I just read the first paragraph of this Bloomberg article that I just posted, Russia's current account surplus more than tripled in the first four months of the year, to 95,000,000,000. The price is triple. The central bank said, as price is surge,

fraud, oil and gas imports and imports plunged under the weight of sanctions. Well, if you're a Putin and you're looking at this, you're like, wow, maybe I should be under sanctions more often. Totally. What country should I invade next? Because this, you're like, wow, maybe I should be under sanctions more often. Totally, you know, what country should I invade next? Because this is- All the sanctions were was a restriction on the free market.

And when you restricted the free market, you basically created a spike in price, but the market, his market could still operate with a narrower set of trading partners. He is selling energy to certain trading partners, he's selling phosphates, he's making money, they are exporting product, and they're making more because certain people can't buy and they've got to go drive the price up elsewhere. So not only did our sanctions package not work and not only is the treasurer, treasurer,

treasurer, treasurer, sorry, flailing around now trying to find even more backdoors, we actually opened a very dangerous precedent, which is now we allowed oil to settle in currencies that are not just the United States dollar. And now, Russia and China are trading and settling in C&Y. That's not good for us. This is not how you preserve the integrity of the reserve currency of America. I don't understand the EU of cutting all of their energy and then becoming dependent on

Russia, then creating a ban and sanctions. But then they made a carve out that oil delivered by pipeline. Janet Yellen has been negotiating this carve out. We have been enabling Russia to sell. We know the EU passed this legislation. Jason, look in the Wall Street Journal today, the article is here. I'm reading the CMBC right now about it, like the EU passed this landmark sanctions package

in May, but they also allowed the stuff that's coming by pipeline for some reason to be a carve out. If the EU wants to contain Putin from invading countries on their doorstep, they gotta actually become energy independent. That's the beginning and end of this. It is not popular. And this is the problem with popular. What's not popular?

It's not popular to have energy independent. Nuclear was not popular. And so the politicians, the legislators responded in a short-sighted way to the popular opinion of the day. And this is the challenge. Absolutely. Yeah. Huge mistake on German's part.

They closed three nuclear reactors. The popular sentiment in Europe got highly affected by these environmental groups. Exactly. That's my point. But in the US, I think the people of the country want us to be energy independent. For sure. And it's elite opinion that brought into these foolish ideas

that basically we should cancel energy independence, we should cancel the Keystone pipeline. It's job number one. We should cancel new drilling. America should be a net energy exporter. 100%. Job number one is to be energy independent. And job number two is to move

to a new evidence. But look at Biden now. There's another piece to this. You gotta do this in sequence. He came in. He said that he was gonna make the Saudis a pariah on the world stage. Remember this? Now he's going hat in the hand to them to try and get them to produce more ill or the price. So what was the point of this foreign policy? It was contradictory. He canceled his energy independence. He basically insults the solidities on which we're even more dependent for oil.

And then he basically refuses to engage in diplomacy on Ukraine. These policies are contradictory. Even if your goal was to basically isolate the Russians, you would then want to improve our relationship where Saudi and you'd want to produce more of our own oil. 100%. Yeah, you overplayed his hand for sure. I mean, you can't not have heat in the winter in Germany and the Germans are completely

eaten. That's coming, by the way. You think things are bad right now, wait until winter. It's going to be interesting. And then that's only an increased Putin's leverage. And that's when you're gonna see a real fracture in the Western Alliance. This idea that Ukraine strengthened the Western Alliance, I think you will start to see the fractures

coming to the winter. National, Germany's gotta put those in the slow march of nationalism will continue. And this will be another catalyzing event. Turn your nukes back on. And I also think that, you know, thinking about the Western Alliance I also think that, you know, thinking about the Western Alliance,

I think that, you know, countries like Germany and France are really gonna question US leadership when they have basically a huge economic recession and they're wondering how they're gonna heat their homes in the winter. But I think in the US, it's time to reevaluate some of the alliances

that we've gotten ourselves in. Again, with this Lithuania situation, do you really think that Lithuania would be basically poking that big Russian bear if they didn't have the US standing behind them as a bodyguard? No way. They would be much more circumspect and potential. And the fact of the matter is that these Eastern European countries, the Baltic countries, and Poland, they have enmities, they have friction with Russia going back hundreds of years, and these guys basically, they have very provocative attitudes towards Russia, and our alliance with them can draw us in. So we have to really keep a close lid on that. We do not want them making

moves on their own, because we could get drawn into a world war here. Yeah, and by the way, to your point, SACS, also, you know, there continues to be escalating issues with debt and concerns about debt repayment across the EU. And while Germany is, you know, looking to the US for support and worried about energy prices, they're gonna end up having to foot the bill to support a bunch of these EU member nations that are facing

debt crises. And we'll continue to face significant debt crises over the years ahead. I mean, Greece made a payment recently, but Greece's debt to GDP is still over 200%. Italy is at 155%. Portugal is at 134%. I mean, the numbers are pretty significant. That has rates you saw today. You know, it was, the spread on Italian debt has spiked over the last couple of weeks.

Right. Bridgewater basically is big. Germany's got another freaking crisis to fight now. Yeah. And I think you're right. The Western alliance is more than just a military at this point. There's this, you know, do I really want to be the economic savior over and over again of my smaller member states?

And guess who's going to benefit in all of this China? Like, they're going to look at this fracturing. They're going to be like, great. But just speaking of China for a second, you know, we talk and we blow V8 about our desire of energy independence. talk on we we blow V8 about our desire for energy independence and you know we exclude Tesla from you know any sort of major meaningful legislation we trumpet you know these companies that are just completely woefully behind in building energy independence. We think about like a gas tax holiday

but as like kind of like a you you know, something that still needs an act of Congress to pass, even though Congress has said they have absolutely no intention of passing it. Meanwhile, we keep losing our footing to China. Just today, C-A-T-L, which is one of the largest battery manufacturers, announced a pretty meaningful improvement in their, you know, 3.0 battery design. These guys are now building batteries that can go with 1000 kilometers. In both of the major compositions that really matter, NMC and LFP, and I just

look at these things and I'm like, wow, we cannot actually get capacity funded to build domestic battery capability, because we're too busy, kind of basically virtue signaling on things that don't matter. And in return, nothing happens. China continues to lap us. It's really a bad state of affairs. We are in a very odd period in terms of government effectiveness. If you think about China's foreign policy, how have they lost out by not being part of all's foreign policy, how have they lost

out by not being part of all these conflicts? How have they lost out exactly? They're buying prices of oil that were nine months ago to 18 months ago. And so there not only has Russia's output price been capped, but that's okay. China's input cost has been capped and so they don't suffer the same rate of inflation that the rest of us to so to your point David You know our quote unquote, you know exclusionary sanctions were ineffective. They were porous and we allowed our largest competitive Friendomy if you will to basically be able to you know drive their entire economy at 30% to 40% of the discount to what we have to pay to do the same. Right, when China goes abroad, they go abroad in search of economic resources

and economic development. That's the point of Belt and Road. They don't insert themselves in these middle of these conflicts that they don't understand. They were never involved in the Middle East. They were never involved in policing Middle East, they were never involved in policing, you know, all these different countries. That has cost us a fortune. And now the bill is finally coming due in the form of this inflation.

We are going to have some former and other of austerity in this country. And it's partly because of this highly militarized foreign policy, in which we have sent ourselves abroad to be the world's policeman. We can no longer afford to do that. Can I make a generalization in SACU React and tell me if this is true or not? If you have a country that has existed in some way, shape, or form, you know, the borders could be blurry, but roughly, for hundreds and hundreds of years, and in some cases thousands of years, where internally, the population of that country views themselves in a great

way. They don't feel like their country is a meaningless nothing country. Any attempt to economically humiliate such a country tends to have failed in the past and will continue to fail. And there tends to be other countries who view it as one of these things where, well, if them, then why not us? And then they sort of, you know, in a backhanded way, support everybody. So we end up in this odd situation where we are picking fights we cannot win. Totally.

And the consequences for us are economically really damaging. Right. Absolutely. And then the consequences for everybody else to stay on the sidelines is like economic prosperity. That doesn't make any sense. Right. Let's take to Europe. To your experience.

To your experience. To your experience. To your experience. To your experience. To your experience. To your experience. To your experience. To your experience.

To your experience. To your experience. To your experience. To your experience. To your experience. risk that this dictator is going to attack more countries. So if you're living in Eastern Europe, you might have a different view of it. You might very much accept and want some help from NATO and other folks who... But you're not getting that help. That's the problem with that. That's the sad part of buttocks. If it's poorly executed, it's not working at this point in time. Yeah, I mean, it's about... Well, if you look at the EU, as an entity, they have almost the same GDP and output as the US. If you compare them to Russia, their economy, their GDP is 10 times greater than Russia.

They are rich. They can afford to allocate a few percent of their GDP, of their government budget to defense. They should be able to defend themselves. They really should. This idea that we have to go over to Europe and bankrupt ourselves to defend themselves, they really should. And so this idea that we have to go over to Europe and bankrupt ourselves to defend rich Europeans, they should be picking up 100% of the cost of that, 100%. I don't know why we're paying for rich Europeans when our country is massively in debt. Why aren't we passing the bill to them for that?

of them for that. Yeah, we're absolutely. Yeah, do we have to spend that much money to do that? No. And then obviously the worst in the Middle East were. Let me pick up on this world's policeman idea. What kind of policing works the best? Community policing when the policemen are from the neighborhood and they know all the players, they understand the subtlety of the area. The U.S. has made itself the world's policeman. We parachute into areas that we don't understand. We did it in the Middle East. It was very ineffective. What we should do is let the regions deal

with the problems themselves first. And we should be the policeman of last resort, not first resort. Let the Europeans take the lead. They should be paying for their own defense. We could still have NATO, but they should be paying for it. They should be the first responders. And if they can't handle it, then we can back them up. But this idea that we need to be on the bleeding edge of all these conflicts, banker, bankrupting ourselves, it's a foolish idea. Energy independence is a solution to all of this. We wouldn't have to deal with these despots if we didn't, if we had energy independence. We're getting circles run around us by China,

Jason, on the innovations front. Circles run around us by China on the innovation front. Example, I just told you, the CATL battery that they just announced today, it's incredible. Yeah, I mean battery technologies, we have a lot going on there as well. I mean, it seems like the battery technology issue has been solved for EVs for some time now. I mean, if an EV can go 200 miles and we can build them at scale, which seems like we're on the precipice of, we're going to be good. You don't need more than 200 miles on average. It's just a luxury every mile after that Given how fast superchargers are working. So just practically speaking 95% of Americans will do just fine with a

Electric car that does 200 mile range and the other 5% can do a hybrid or can still burn oil We just need to get more we have to be more serious about the miles per gallon right now. We are just absolutely to be more serious about the Miles Per Galen. Right now, we are just absolutely abhorrent in our use of fuel in this country. It's just crazy that we have low 20 Miles Per Galen as our average when other countries are 30, 40, 50, you know, or 30 and 40. It's because we like our, you know, seven-seat suburbans, which is ridiculous because 99 out of a hundred missions in that suburban are done with one or two people in it. The fact that our ubers, you know, and our lifts or whatever, are coming with giant suburban,

it's with one person and it is just, I have a Fiat E500 here, like a little mini living. Oh, it's incredible. Yeah, it's incredible. I mean, this is the path. If we can just, if you just think about it, if we were to double our miles per gallon, there are cars right now that are were to double our miles per gallon, there are cars right now

that are doing 50, 55 miles per gallon. We really have to be more punitive in terms of taxing the bond. Give me the forecast, Jake, what's gonna happen with Biden? Oh, okay, so I guess. Give me your score card, give me your grade, how's he doing?

For Biden? Oh, it's disastrous. I mean, I think the only thing more disastrous than Biden would be having Trump do a second, third and fourth term. 100%. So play it out. Play it out. Well, I don't think he's gonna run again.

I think they're gonna have to. You don't think Biden's gonna run again? I think they're, I think between then and now if the economy keeps going the way it's going, he would be a lame duck and impossible. And I think he might say, you know what, I'm gonna retire to spend time with my kids and my golden years. And they might convince him that him running again is a really bad idea.

And Kamala Harris is a disaster as well. She hasn't proven anything in the years. Who would the Dems put up? Jake, as a Democrat, who would you want to have put up? I think it's going to be DeSantis versus Newsom in 24. Yeah, I, um, but, sorry, explain that. Okay, so, well, which part of it? Newsom or DeSantis?

Newsom, how does Newsom get the nod? Okay, here, so Newsom has a very weak challenger in California. It's a plus or two, but can you tell me when? Hold on, so he's going to handle the win re-election in California. He's already, no, he's not even campaigning for re-election in California. He's, he's already campaigning to be present. The thing that he did that was politically smart. And I say that's not as a fan of Newsom, but this is someone who's analyzing the politics of it, is that he went on true social

and he based to basic counter Republican lies. And so he's positioning himself as a fighter for progressive values. And the reason why that's going to be flattering to the Democratic base is that when the Democrats lose big in November, they're going to have, there's going to be a reckoning. And they're going to have to understand why they lost. And the fact of the matter is that it elogs, never blamed themselves or their agenda, they are going to say that it was not communicated well and that we needed a, basically, a better communicator who was a fighter. And so they will basically pin the blame even more on Biden. And so Newsom is positioning himself

as that sort of Democratic progressive fighter. If you go back, remember when Michael Avinati, like they were, you know, progressive were talking about him as a presidential candidate for a brief minute, they swooned over him. Why? Anybody go to jail?

Yes, he's in jail right now. He has a total grifter. He's got a total grifter. A total grifter's comeback, but you got to remember, seeing, he's in jail right now. It's a total grifter. It's a total grifter, scumbag. But you got to remember seeing that. He had him on there every day because he was a fighter. Jake got his name in the funniest way Boswai remembered a poker game when like Helmuth said

he had no numbers on it. Jake got what's this guy's name, say his name? Michael Avanati. I don't know how to pronounce it. I never met these sucks. I'm about to bang about a boom. I'm Michael Avanati, right? He's a it. I never met these sex. I'm not a big, but a boom, I'm Michael Havidali. Right. Is a disaster.

It's an interesting concept. Yeah. Sex, can you, giving the devs will give you some of the nod? Can he actually win in some of these, these middle states? Well, you got to remember, this is true for both parties, that the general electorate does not pick the candidates. The parties pick the candidates. And the base of the party picks the candidates.

They want someone that can win Pennsylvania. They want someone that can win Florida. Yeah, but yes and no. So if you remember, when Bill Clinton pulled the Democratic Party back to the center in 1992 and the whole Democratic leadership council and they really remade the Democratic Party, at that time is a more centralist party. They had just come off three disastrous presidential elections. So Reagan and 80 and 84 and then Herbert Walker Bush in 88.

So it took three big losses for them to rethink. I don't think progressives are going to rethink their agenda based on one midterm loss, even though I think it's going to be gargantuan later this year. So, I think they need more losses to really reevaluate their agenda. I mean, look, the activists in the party are deeply invested in their agenda. They're not going to give it up. They're going to blame it on a communication problem.

They're going to say, let's find a new messenger and Newsom will seem like a younger, fresh face. So, I think that's how it could happen. And if you look at the Democratic ban, you'll also say, can he also, who else they got to see? You also got, I mean, the booty is Warren. I mean, a booty judge in AOC, if they want to go full, like crazy left would be, and then if they want to go moderate, that's not, that doesn't win an election. You got to find somebody can win the elections.

I agree. But it's going to be about some of the election. I agree. I agree. But it's going to be about to turn out. New semester governor of a big state, which is, as of now, $100 million, $100 billion surplus looks good for him. So, I mean, Gavin. It's a scenario.

It's a scenario. But look, I think the Republican's. The Republican's will of Republicans field Trump after January 6th. And I think the answer is no. And it's too shameful, right? To do that. I think that, look, I think Trump's problem

is you won't stop talking about the last election. And I think elections are always about the future. And the Republicans ultimately get an nominated candidate who represents the future. And I think- No Republicans want him as going out there trying to steal an election again. No Republicans want that.

If you look at straw poll, okay, if you look at straw polls, okay, if you look at straw polling, Dessances now is beating Trump in straw polls in the Republican party. Jonathan Chate, who is a pretty smart liberal, definitely not a Republican, but he's sometimes has very smart observations. Remember the whole zero COVID thing.

Anyway, he has an article just today talking about how Dessantis has now eclipsed Trump within the Republican base. And if you look at the numbers within, if you pull Fox News viewers, and likely Republican primary voters, DeSantis is up a couple of points in the straw polls, but among Fox News viewers, he's up like 10 to 14 points. So in other words, the Republican base, the activists who are the influencers, they already have moved from Trump to the Santas. No, they love him. Yeah. Yeah.

So I think the fifth, the Santas runs, he's going to run, he's going to win a landslide. This is why I say it's the Santas versus Newsom, I think. But look, it could be the Santas versus Biden. It could even be Trump versus Newsom. I think the configurations that win for their Republicans, I think if Biden's on the ticket, I think any Republican wins. I think if it's Dessantis versus Newsom, I think Dessantis wins. I think, however, and this is sort of the nightmare scenario, I think it was something like a Newsom versus Trump. I think Republicans could lose that just because, you know, the people, people, people,

people think about the future. They, they, they want that they don't want to be reminded of the past. And so I think there's no more. Also, his insane and deranged. You can't, you can't have to try to stay on the world's running for president. No more. Yeah. I think, all right, nothing against the office in 75 years. All would be good for me. All right. This has been a. 75 years old would be good for me. All right. This has been a very long episode.

Well, yeah. We'll, we'll, we'll, we'll, we'll, we'll, we'll get it back down to 45 minutes. All right. Everybody's amazing. I love you guys. It's really nice to be on anywhere. Everybody relax. We're back.

I'm not going anywhere. You're going to need a wrecking ball to take me out of here. You want to get rid of your, Jake. We don't want to get rid of you, but wrecking ball to take me out of here. You're going to send him the natural bar. Jacob, we don't want to get rid of you, but now all we need is three out of four boats. So, all right, go ahead. Vote me off. We never wanted to get rid of you, Jacob,

but we knew we had to do certain things to get you to act right. Oh my gosh. Oh my gosh. Jacob brought a knife to a gunfight. He came to negotiate. You guys don't want to be in Australia. He came to negotiate you guys go You're cheap to give me two points that's fine. Jacob came to negotiate the treaty was failure and he left with half a snickers bar You guys don't get no more intros for you

In summit no more By the way, I'm about to get on a call with our lawyers. We're gonna get the account set up get all the money transferred from to call with our lawyers. We're gonna get the account set up. Get all the money transferred from you. Good luck with that. Good luck with that money. That's long gone. I put that on the Warriors. I tripled it. We're good. Alright everybody we'll see you next time. Love you boys. Bye. Bye. Let your winners ride Rainman David We open source it to the fans and they've just gone crazy with Besties are gone, go dirty That's my dog taking a wish to drive away So, wait a minute, I'll get it Oh, man, my ham is the actual meat We should all just get a room and just have one big hug or two Because they're all just like this sexual tension that we just need to release them out

What, you're the big, what, you're the pure beast We need to get mergies organized. I'm doing all this! I'm doing all this!