All-In with Chamath, Jason, Sacks & Friedberg - E98: Big tech starts making cuts, Fed incompetency, global debt, Russia/Ukraine & more

Episode Date: October 1, 2022

0:00 Bestie intros! 1:36 Big tech starts making cuts, plus what this means for the broader economy and startups 31:09 Global debt numbers, Fed incompetency 54:06 RIP Coolio 1:00:30 Russia / Ukraine update 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.bloomberg.com/news/articles/2022-09-29/meta-announces-hiring-freeze-warns-employees-of-restructuring https://www.google.com/finance/quote/META:NASDAQ https://www.google.com/finance/quote/AAPL:NASDAQ https://www.google.com/finance/quote/GOOG:NASDAQ https://www.cnbc.com/2022/09/28/stanley-druckenmiller-sees-hard-landing-in-2023-with-a-possible-deeper-recession-than-many-expect.html https://www.google.com/finance/quote/NFLX:NASDAQ https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/if-youre-going-to-build-something-from-scratch-this-might-be-as-good-a-time-as-in-a-decade https://www.forbes.com/sites/jonathanponciano/2021/05/11/billionaire-investor-druckenmiller-blasts-feds-radical-stimulus-policy-warns-it-risks-stock-bubble-blowing-up https://www.cnbc.com/2022/09/28/cnbc-transcript-duquesne-family-office-chairman-ceo-stanley-druckenmiller-speaks-with-cnbcs-joe-kernen-live-during-the-cnbc-delivering-alpha-conference-today.html https://www.xe.com/currencycharts/?from=GBP&to=USD&view=1M https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm https://fred.stlouisfed.org/series/JTSJOL https://www.wsj.com/articles/a-nation-of-quitters-great-enabling-exodus-working-age-men-parents-stimulus-covid-quit-retirement-bohemian-videogame-11664112795 https://goop.com/subscribe https://www.reuters.com/world/putin-host-kremlin-ceremony-annexing-parts-ukraine-2022-09-29 https://www.reuters.com/world/europe/zelenskiy-says-ukraine-applying-nato-membership-2022-09-30 https://www.reuters.com/world/europe/qa-nord-stream-gas-sabotage-whos-being-blamed-why-2022-09-30 https://www.aa.com.tr/en/economy/former-polish-foreign-minister-thanks-us-for-damaging-nord-stream-pipeline/2696530 https://www.theamericanconservative.com/should-america-go-all-in-on-ukraine

Hey, everybody, welcome to episode 98 of the All in Podcast with us again. The Sultan of Science, the Queen of Kinwa, looks like he brought a trucker hat. What, what, what, are you getting jealous of the Monclerot or are you just not bathing in it? No, I need a hammer. I haven't had air gun like six weeks. I'm getting my hair cut this afternoon. Not going to make a difference. I think what Freeberg is trying to tell us is that he is the zodiac killer. It's long floppy note. All right, there he is, the unibar. All right, and Montclair sacks is here with his $400 Montclair hat.

And of course, the dictator himself. I asked Ron to cut my hair so that the white patch is more prominent. I think he did a good job. Do you add the white patch with coloring, or is it? No, it's natural. It's just there. It's just there. No one can look so odd if you were doing it on purpose.

It's super random. I like the way it looks. I like the way it looks. Jay Leno had a look like that. I'm about to go, by the way, you know this. In the fall, it truffle season. I like to grow it so that it's more wavy. White for white truffle season, got it. I needed to have a reset cut so that then we could grow it wavy

For the fall for truffle season. Listen to Moth the only thing less relevant to us than your casual sweaters is your Alright, second now is the hiring freeze and a reorg at meta. He also said meta will reduce headcount for the first time in its history. Metas headcount in 2023 will be smaller than it was this year. He called it the end of an era of rapid growth. This on top of Apple reporting and Apple got walloped in the market for the first time in forever. Apple pulled back iPhone production for the 14 after slower than anticipated demand.

As I mentioned on previous episodes, they've kind of done a gentleman's layoff similar to I think meta in that Apple said you have to be back in the office three days a week, a bunch of people quit. So you don't have to pay them, I guess huge packages when they quit that way. Google CEO Sundar Pichai also called down employees in July, as you guys all read, and he wrote, there are real concerns that our productivity as a whole is not where it needs to be. For the head count, we have Google, of course, 175,000 employees. So I guess the question I have for you is, are these the last hours to fall to Moth in this pullback that we've seen? These

are companies that don't need to do the layoffs. They have tons of cash. So they're obviously doing that to maintain earnings, one would, and to maybe send a signal to employees that they need to work harder. What's your read on this past week's shoes to drop? Well, it definitely is the end of an era. I think it is sort of like the end of this phase of big tech where you had this unfettered growth where these business models were largely unassailable. And they were really just fighting to grow

into their valuation and just generate more revenue to justify where they traded at. And now it's this next phase where they have to operate more like a cash cow business. And so it's an acknowledgement that the growth is tapering. It's an acknowledgement that they're going to trade on a pretty tight band in terms of multiple, which means that they have to manage expenses much more tightly, which means that they can't have a really broad based surface area in which to operate an experiment. You have to keep the experiments

small. You have to manage your expenses. You can't have employees basically run over the place. Management has to have a firm hand in dictating strategy and what people work on. So I think all of that signals that I actually, Jason, I don't think this is the end. I actually think it's the beginning because these companies Apple, Facebook, Google, because these companies, Apple, Facebook, Google, maybe a little bit Microsoft, are the most sensitive to valuation because they are the most widely held, right? These are the equivalent of US treasuries

in the equity markets. The safest, most predictable safe haven in times of stress if you wanna own big chunky cash flow generating businesses that are relatively unassailable, you couldn't pick four better businesses than those. And so the fact that they see enough in the horizon to say that we need to batten down the hatches should be a warning to everybody else. Freeberg is it as simple as this that they're moving from top line growth to bottom line and they're going to need to look at the expenses, which are read on this for Silicon Valley.

Well, I just want to zoom out for a second because I remember I started working in Silicon Valley in 2001. You guys are a little older than me, I think, but like we were right at the kind of year one of the .com implosion and all the fallout that happened from all the funding that happened from 97 to 99 in 2000. And so from 0.01 to 0.03, it was super deflationary. Everyone was cutting costs and all the money that had been raised was being pissed away or companies were liquidating and so on. And then starting in 2004

Which is actually when I joined Google but there was also this big movement starting 0304 of like what people called web 2 Then kind of new business models and new businesses started to emerge that seemed to have real traction in real legs And it was a different story and a much more rational story than what you saw leading up to kind of 2000, 2001. And it was around that time when Google started offering these crazy benefits, right? It was like, there's a gym and free food and all these amazing workplace. And suddenly everyone had to do that to keep up, right? Facebook obviously mimicked it, all the other big companies mimicked it. And then it became mainstay.

And they also raised compensation in the valley significantly because Google had really cracked the nut on how to extract value from the internet. And it really changed everything and Silicon Valley and changed everything in tech because suddenly every tech company, whether you were enterprise software or hardware or an internet e-commerce site, to be competitive and a higher-grade talent, you have to have the same sort of environment. High wages, great salaries, really share the value of your employees, gyms and free food and all this sort of stuff.

So it's the first time I think in a generation, since like 2003, 2004, that we're seeing things start to turn the other way, we're instead of adding more benefits, making things more attractive, giving more value to employees, we're really seeing the recession hit. These kind of leading indicators of how things are going to be in the valley. And as a result, I think we should expect to see a similar impact on compensation, on benefits, on value share, and on kind of perclivity to hire an opportunity to kind of jump

jobs and opportunities that we've all kind of taken for granted over the past 18 years. And this is going to be a real shock to a lot of people that work in tech. And a lot of people that have gotten used to the idea that every company offers great benefits. There's always another job to jump to, it'll pay you more. And that as that engine of growth that was really driven by these big companies, by Google, Facebook, Apple starts to slow. No one needs to compete with them anymore as much. And the compensation bands get tighter. And the option value gets tighter. And the free stuff gets tighter. So it's the end of an era. And I think it's a new world for tech and Silicon Valley. Sex, what are your thoughts here in terms of startups in relation to big tech maybe having these

austerity measures kick in and refocusing on profitability? The big takeaway here is just that nobody is safe and it's not just startups have to tighten their belts as these big companies too. And I think we're headed for a broad-based recession. That's what it seems like. You saw Dr. Miller's comments this week predicting a hard landing in 2023. No one's talking about soft landing anymore. In fact, I think we're all wondering who's flying the plane.

So I think we're headed for a pretty big recession and I'd just take it in a slightly different direction. I'm down here in LA. I had dinner at the other night with a friend who's a showrunner in Hollywood. And so a showrunner basically is like the head writer and they basically put together the writing team and the content for a show and then they saw them to networks. He said that like no one is buying anything anymore here. That last year, you had, there was tremendous activity and you saw

like the Game of Thrones guys, you know guys you know dnd they got like a three million dollar deal from netflix and shonda rinds got the deal they did yeah they got like the there a massive multi hundred million dollar deals being made last year and that was just for like future writing deals like netflix wasn't even buying libraries when they did those deals they were locking down talent for the next exactly so all of that has stopped. They were locking down talent for the next time. Yeah, exactly. So all of that has stopped. And the reason is that Netflix's stock has been hammered, right?

And only so they not have the capital to do those kinds of crazy deals anymore, but they know that Wall Street is watching them. And so fundamentally, they're questioning whether business model even works if they have to spend that much money on content. So then all of Netflix's competitors basically have stopped. So this whole like frothy environment that you had for In Hollywood last year, that's just over. The faucet's been turned off and it's not even turned off to a trickle.

It's just stopped. So you think that this massive asset bubble that we had last year was just in crypto and gross stocks. It's not. I think it actually trickled down into the real economy because Netflix is one of those gross stocks. The money then flowed into writers in Hollywood and then lots of other places. This is one small example, right? That this asset bubble wasn't purely just something that's going to be localized to crypto. It affects real people in the real economy. And

we are just beginning to see the unwind of that. Yeah, what's absolutely correct, I think, is people were more of us taking the head-free capital. They wanted to place more bets. And sure, why wouldn't you bet on the game with our own writers for the next decade? But looking at this is going to be fantastic for startups. I mean, the startups I've worked with over the last five years have been, they always come to me, oh, I got a developer, but this person's got three offers from, you know, Facebook, Google, and they're like, how do I land this person?

They got $300,000 a year offering a million dollars in RSUs. And basically founders had to say, no, I can't get that person. And so they got to get creative. And they would hire people, Ukraine, Uruguay, everywhere in between, to try to find developer talent and they had to get creative and they would hire people, Ukraine, Uruguay, everywhere in between to try to find developer talent and they had to get creative. Now, all of those people are not going to have for a job offer. So they're going to have no job offer. So they may have gotten laid off. And those crazy unrealistic out of school deals are going to be gone. And this means massive consolidation of talent. You look at the

startups community right now. Tons of companies are just going out of business. You look at the startups community right now, tons of companies are just going out of business, they're packing it in. Those people are going to go work at the other startups that are stronger. So whoever makes it out of this as a startup, this is how the cycle restarts is talent that consolidates on the winners. You'll be like taking the NBA and getting rid of the bottom, you know, 10 teams and just telling the best players there, move up to the other teams, and everybody else, you're out of the league. So I think this is an incredible setup for 2023, for startups to consolidate talent. So I'm actually excited to see us. It's another data point

that, again, I said it last week, I'll go out on a limb and predict my equivalent November fall predictions. Last fall, it was that the markets were going to poop the bed. My prediction now is that I think the markets are bottom in consolidating. Yep. 100% and this is the time I think to start nibbling and start getting ready to really rip the money in. And I think there's enough signals every day that kind of like tell me at least that on the margin. It's time because I think the markets do a reasonably good job of digesting news and then pricing the forward reality, right? Like today's

price is really everything we already know. And so the real guess is what's about to happen in the future. And from my perspective, I'm actually pretty starting to get a little constructive here. I think that when companies like Facebook really do this, and you know, like if you think about it one way, the financial markets have always had this thing that we have called a Fed put. What does that mean to put is essentially the right to sell something. And what market participants have always known for the last decade is that if things got very hairy, if there was uncertainty in the market, the Federal Reserve would, and they have, consistently stepped in to create a buyer of last resort.

And so it always eliminated that last part of true supply demand balance, because they would just come and say, don't worry. In many ways in tech, what the big tech companies were were that. You could never really find what the true market clearing price for an engineer was, or what the true amount of expenses you should spend on office space or free services. Because you always always had these companies, which was an escalating arms race. If one company had a massage, the next company had gyms in massage and physical therapist and the other company would have buses to take you to the gyms in massage and therapist

and the next company would have protein shakes that were fresh. You made, and it just kept escalating and escalating because the costs didn't matter. They wanted, if nothing else, to get that marginal engineer or product manager or business person to work at their company, which eliminated the risk that they would actually start something to disrupt them. Blocker strategy is very real. You should know that. Blocker strategy is very real. So when you take this big tech put out of the market, you will get true price discovery and you will find out what the real price should be

for this kind of an engineer, that kind of a product manager. You'll find out what are the real expenses you need to bear in order to build a real lasting business and you'll be able to sort through all of that stuff out. So I think it's a really good moment. And again, it's yet another indication to me that I think broadly speaking, the markets are now starting to stabilize. All the irrational behavior is starting to exit the system. The party is in the last few hours. Volumes going down, the alcohols being taken away. People are hanging around with a little bit of lights are coming on. They're like,

I've been here a little too long. And I think that that's a very healthy process for an economy. And I think that that's what's happening right now. So I'm constructive, I'm a little bullish, I'll go out on a limb. I think, you know, we could be 3% to 5% from the lows, but we're more near the lows than the highs. It certainly feels like the double bottoming out process was the bouncing along the bottom. And yeah, who knows how hard the landing is, but I think this is a great setup for startups and people who want to start companies. I don't know if you saw a girl who did a great

interview. That trended on the Twitter. You're just saying, this is the best time to start a company, and I have to agree with him. You're going to have talent available. Who are you competing against for buying ads? There's so many marketing opportunities available. The first thing to go in a down market like this is advertising and marketing. So and by the way, we will we will also relive what we have empirically known to be true and it's been it's been pretty well proven. The investments that one makes in this period will probably be the best for many many years to come because they'll have the most asymmetric upside. And that was true in 2008, 2009, and 2010.

It was true in, you know, 2002, 3 and 4. I mean, you're talking incredible companies, just in those two periods, think about this. Atlassian, Tesla, Uber, Google, Airbnb, Uber, Instagram, WhatsApp, incredible businesses that have created tremendous value. And so there are businesses that have been invested in for the first time in 2022 and will be invested in for the first time in 2023 and 24, which will be the leading winners of this next phase and this next leg up. And so the real opportunity is to find out who those companies are and get behind them, I think.

100% as I always tell people, fortunes are made in the down market. They're collected in the up market. Freiburg, what are your thoughts here in terms of the startup community or company builder and talent? Because that seems to be the piece that could be a silver lining on all of this maelstrom that we're going through. I mean, technology always marches forward. So there's always progress to be had and to be made. That's one universal truth about, it's weird that we call it an industry because a lot of

technology companies in Silicon Valley today don't sell technology to other companies which is how Silicon Valley started. Nowadays Silicon Valley is reinventing other industries by being technology led. And that is certainly still true because there are so many I hate using the term but undisrupted industries to pursue efficiency gains across and technology built in Silicon Valley can drive that. Now, when I say Silicon Valley, I don't mean the physical location anymore, and that's the confounding factor here, which is that there does seem to be this distribution opportunity that's also emerged at the same time where people are doing remote work and work from

home and distributed workforce models that seem to be highly effective. You guys talked about it last year and I don't think they ever had an office, right? I mean, don't most of the people work from home there? And I think that the success that's been seen in software companies that have operated that model also changes the calculus because not only are wages lower and therefore the cost of operating is lower, not needing a fancy expensive office in San Francisco is needed, but you can also access far more talent than you ever could before. You don't just need people to live in the Bay Area or New York or LA or wherever you're

operating from. So from a software perspective, this is an amazing time. I'll tell you there's a flip side to this, like in life sciences, real estate is more expensive than it's ever been right now in the Bay Area, to get lab space. There's a total dearth of space. So there's certain segments that I think are physical or niche.

Why is that? There's lab space like a specific designation. You would mean there's a revolution in genomics that's totally transforming all of biology and human health and like science. What I'm saying is, do you need a certain type of location that's sanctioned for that? Yeah. Yeah, lab space is a certain kind of build out and it's not, you know, and so there's a certain amount of Square footage and it's being built out a lot around the Bay Area, but the thing about life sciences companies is You do have to operate physically because you're building something physical.

And so that is an industry that continues to remain very well funded and very competitive. And I think there's still tremendous value. And by the way, there's a lot of public companies to invest in, not on the primary basis, but that are tools companies that are benefiting greatly from the continued demand and growth in spending in that category. Sex, let's talk about competition. A lot of these large companies pursuing many different verticals we talked about, anti-competitive stuff, Lincoln, the bundling in the suite of products at Microsoft, other firms. Now you have all these being cut.

Death to the room, Bob. Death to the room. By the way, did you see that Elizabeth Warren of all the things she could send a letter to the FTC about, I guess, she sent a letter about the room, Bob. I mean, Senator Karen is just too much, man. I mean, there's a lot of other stuff going on, but you can let the room beslide.

The room slide? That's not important. Oh, you know, all the things that are going on right now in 2022, it's the room bug that gets on the, that gets, that's above the line. At this point, I mean, I'm not going to be able to, oh my god. We are just sleepwalking.

Oh my gosh. Sleepwalking. What is going on? No, there's a, there's a famous history of World War One called the sleepwalkers because that's basically what it felt like is they just sleptwalked their way to World War One. Basically what should have been a minor regional war, the Third Balkans war, that nobody should have cared about, nobody should have cared about this Frans Ferdinand guy, except for the

Austrian ones. Yeah, exactly. But the whole world basically got themselves invested in this thing. And it feels, and this is what we're worried about. We're worried about the room bot when the administration is sleepwalking its way into the next world war. Well, I do not want Amazon, okay,

to control my vacuum cleaner. I'm just gonna put that on the record, okay? Because what happens if they, know where the dirt is, they know which rooms are dirty. What happens if they get a hold of the room bot? I'll tell you what happens. The next thing is they're gonna go after Dyson, okay? Because what happens is they know where the dirt is. They know which rooms are dirty. What happens if they get a hold of the room? But I'll tell you what happens. The next thing is they're going to go after Dyson, okay? And then once they do that, they're going to put chips in these things. And all of a sudden, they're going to know exactly what Jason said. What are you eating? Where your dust bunnies are. Yeah, all of this stuff.

This must be stopped, Lena Cunow. No, but it stops at that. To the point of competition, Lina Cunow. No, but it's up to the point of competition. You're seeing cuts to all the non-core projects at these big companies. This is going to be great for startups, right? Like the idea that Facebook could focus on a fourth, fifth, sixth thing is going to go away, yeah? Well, look, you're right that great companies are built during downturns. PayPal was built largely during the downturn. The startup I created. PayPal was built largely during the downturn. The startup I created Yammer was built largely during the downturn. So listen, there's going to be opportunities. Innovation doesn't stop just because we're in a recession or depression.

But I got to tell you, unlike Jamoth, I'm having a hard time finding a silver lining right now. Part of it is the comments that Druckamiller just made, and he's been right about this stuff. We've been talking about his predictions for over a year on this podcast. He famously shorted the pound for George Soros. That was when his first thing started. Yes, since then, he's one of the most successful macro traders in the world. University respected, I think, deservedly. So, remember, he said that this was in mid-2021,

he said that the Fed was engaged in a radical monetary policy, because even though we were starting to get inflation, it was around 5% then, that they were still engaged in this bond buying program. They're still bought like 160 billion of bonds, and he is the first one waving the alarm bell, saying, what are they doing? Analysis predictions have come true.

I mean, we're in an inflationary spiral, and his prediction now is his central outlook is that the Dow Jones will be in the same place where it is today in 10 years. And he made the point that, yes, equity markets do go up in the long term, but how long term are you talking about? From roughly 1966 to 1982, the stock market was sideways. Japan had a lost decade as well, if this is not unprecedented. After an asset bubble. Right, and then from the Great Depression, it took until 1955 for the stock market to recover.

So, in the long run, the stock market will go up, but we could have a flat decade. This is his prediction, but he's very smart guy and And then on top of that that's not to say that you can't be one of the ones who make money during that period because lots of people do but We're in for I think a very tough economic period because of just this radical Expansionary fiscal monetary policy we've had basically the Fed and the administration printed last two administrations, but especially this one, printed $10 trillion over the last couple of years. And the hands over.

Just fact, I got a mass tax. Most of that was under Trump, but continue. No, it was not. 100% I'll pull it up in a second, but anyway, keep going. We had Biden basically kept digging this hole. We had the $2 trillion of American rescue plan, which we didn't need. We just had another $2 trillion of the infrastructure bill, the inflation reduction act. 500 billion for a student debt. Yeah, exactly. So Jason,

what are you talking about? And this was all after the emergency was over. But I think, I think that you guys are debating the wrong thing. I think that what Druck and Miller, I think by the way, just to be clear, both Druck and Miller and I can be right, which is he's commenting on the real world economy going into a recession. What I'm saying is that the stock market tends to be nine to 12 months ahead of where we are Nick, throw up that chart, please, that I asked you guys to share, just to give you guys a sense of what I mean by this. By the way, while you're doing that,

Jason, look, I will agree with you that a lot of this. Seven point. I'm just feeling I'm, I mean, he did seven point eight trillion. Listen, a lot of the stimulus. Not more than Biden, but fine. A lot of the stimulus happened under Trump. You're right because that's when basically COVID happened. I remember in that Q2 of 2020 quarter, the economy shrank at a 30% in your lives rate.

Everyone thought we're going to a great depression. And that's why they passed all the stimulus by huge bipartisan margins. Dr. Kimmel is best point is that this is all post-vaccine, right? Yeah. So look, and I think we can definitely go back and second guess what happened during the Trump administration. There's an old saying that many of the worst ideas are bipartisan. And so, you know, the spending that happened in 2020 was clearly bipartisan and maybe it went way too far. But in the last two years, like Drugs said, it was post-vaccine post-emergency and they kept spending. And it's not just the administration, it was the bond buying program of the Fed, where the economy was already fully back and they bought another

160 billion of bonds. Yeah, I think the thing is that, you know, I think Stan is a proven Republican. So maybe he is speaking a little bit of his book as well. I think it's fair to say that both Trump and Biden did not help, but overwhelmingly, I think where the where the problem stands is a central bank, that was the same through both of those administrations. And I think we should probably focus on them because you're right. What they did was excessive and what they essentially said is that if there is volatility beyond a certain amount and people cry uncle, we will not allow the markets to sort themselves out in an orderly way, we will step in.

And that's what, again, what we just talked about, the central bank put in this case, the federal interventions. And these interventions really pervert a market because you don't know what's going on. And that has huge ramifications in the real economy. So Nick, if you just throw up this chart, the thing that is really important here and what this chart shows is essentially all of the hiking cycles that we've gone through since 1983. So 83, 87, 94, 99, 0, 4, 15 in the current one. And here's what I just want to call out for you guys. What's incredible is that other than the one in 83, so this is sort of like, you know, that last big one, what we've seen is that the stock market has a tendency to immediately go to the conclusion very early on in a rate hiking cycle.

And now why is that important for normal folks listening to this thing? Well the reason why that's important is right now we're in month seven of a cycle. We obviously don't know how long it's going to be, but the odds are improving every day that we're near the end versus the beginning. And why that's important is, again, if you're thinking about when to buy equities, for example, this is a really instructive guide, because what it tells you is the closer we get to the end or more importantly, the closer we psychologically know that the end is coming, we start buying. And that's just a broad-based statement that has been true.

So what you see right now, I think, is really interesting, which is that despite all the bad information, oh my gosh, the Nord Stream pipeline blew up. Could it have been sabotage? Was it the CIA? Was it the Russians? Oh my gosh, big tech is slowing spending and firing people. China's in a coup. I don't know if you saw that rumor.

Yeah. How about something more benign? You know, the US, you know, US yuan is really trading in a crazy way. The US euro is trading in a crazy way. The US pound is going crazy a crazy way. The US pound is going crazy despite all of that. Every time we trade down, the market consolidates very quickly. And we sort of like, so I think we're forming a bottom. I do think that Stan is right. We are going to see a hard landing recession. Something will break in 2023. I hope it doesn't affect a lot of

normal people, but it's likely. But at the same time, I'll tell you in a second, but at the same time, I think what's happening is in the equity and financial markets, we are consolidating a bottom because we're seeing through to that end state. And this is where cheap equity gets bought. So why is there a reason to sell now? I think a lot of the people that are selling the smart money sellers that I talk to are essentially right now selling to book in capital losses to offset other capital gains from this year, a term that's called tax loss harvesting. And so if you have gains through this year, which some of us do, this is the great moment to just sell the losers, to book the loss, to net it out so that you can

minimize your taxes for next year. That's probably I think where we are at. And I think that's why they're still consolidated by. So what is the hard landing, Jason? If I had to predict, I think what David said is absolutely right, you're going to see unemployment get to an awkward and uncomfortable number. Five, six percent, I think could be something that we see. And I think you're going to see a lot more companies pull way back on their spend because demand is going to really modulate. Oh, you know, I'll give you a crazy example. You know, what happens to all the people in the United States that are on arm mortgages, adjustable rate mortgages? When those things reset, they're going to reset to 300 basis points higher.

Their monthly payments are going to go nuclear. It's already happened. I literally had a family member call me about this and they were like, what do I do? So in the UK, in the UK, 40% of all mortgage dollars are interest-only arms that will reset in January to around 4%. 40%. Can you imagine how upside down the UK economy is gonna be when people have to spend three

and four times more to keep their home? And then people have to go to work four times more to keep their home. And then people have to go to work. And so people who have not been participating are going to have those bills come in and they're going to have to go to work. They're going to have to go to work. Yeah. So, Freiburg, what do you think, hard landing here, and then what do you think 2023 looks

like in that regard? It's just looking pretty like, do you buy that we're bottoming out now? Is Jamatha sort of hypothesizing? I mean, I'll tell you, I was running some back of the envelope math. You know how much debt there is in the world? Take a guess. 200, couple hundred trillion.

200 trillion. About 300 trillion. Yeah. That's debt, road by governments, businesses, and households. And if in response to the inflation, which is response to fiscal stimulus, which is a response to the entire economy of the world shutting down for a couple of months. We end up raising rates from zero to 5%. That's $15 trillion of annual debt service, which is like 18% of global GDP.

Like the debt service alone. But what does that mean? That means that for every dollar transacted, it means nothing. It packs it. No, it means you have your... What does it mean? Like, so what? So I'm saying that there's a massive

squeeze hack that's going to happen, right? And so what ends up happening ultimately is, because you could run this across local governments. I think it means demand destruction. I mean, if you're dead, households, yeah, I'll tell you, I'll tell you what it means. I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry, but it means nothing. And I'll tell you why these people keep like, because you can print more money. You print more money. I'm sorry to be the bearer of bad news, but like, it is not as if we have a law, a constitutional

law, or it's not as if governments have collectively decided that you cannot have debt to GDP above a certain number. That doesn't happen, guys. We passed 100 under Obama, and we've just kept printing money. So whether we like it or not, and I'm not saying I'm a fan of this or it's right, we are kicking the can down the road. And what we're doing is we're extending the maturities. You know, you'll eventually have 100 year government bonds, okay? Just like you have like now, you know, multi decade long corporate bond. We missed a chance for that. We missed it. Because brilliant Yellen actually said no to that. When, when like near zero and we had the opportunity to refinance the US government debt using long-term rates, basically long-term bonds, and actually it

was Trump who, you know, crazy Trump who suggested let's basically shift the debt to 100-year bonds, and she said no. So we value the dollar, right? So the problem is that we have all this short-term debt, and look at what just happened in the UK when Liz Truss tried to prop up the bond rates by basically intervening. She was basically an inflationary policy to fight inflation. The market is puked all over that and that's when the pound hit. Exactly. You lose.

You have to have a buyer of the debt. I think the Liz Truss thing is really actually a microcosm of how unfortunately Western governments are working, but I think there's a silver lining. Like, she basically came in a day after she got elected and said, okay, guess what, guys, at the same time, I'm going to massively cut taxes and I'm going to give you fiscal stimulus. I'm going to cap your energy bills and I'm going to have these huge transfer payments from the government into the hands of British citizens. I'm not going to comment on whether that's right or right, right or wrong, but the financial markets to your point, David, absolutely hated it.

And within a few days, you basically saw the pound get crushed, but then what did you see? You saw the Bank of England decide that financial stability was more important than financial viability, meaning the things that she wanted to do were not viable. So you could have let the financial markets sort this out, which would have forced the Prime Minister to basically abandon the policy. But instead, the BoE said, now, we're an unlimited buyer of UK guilt, which is the name of the UK bond. And everything snapped back. We're back to where we were before her speech and before the chancellor of the ex-checker

speech. And so it's as if nothing happened. And that's what's so insane to me, which is that even though the bank of England, by the way, in the next week or two, are going to raise rates of 140 basis points, 140 basis points, almost double what the Fed has done the last three times. They're doing both at the same time. They're both raising rates and they're acting as a backstop for bad policy. And this is what's wrong right now in the world.

We do not have a real check and balance. And so my point to freeberg is just that I'm like emotionally hung your side, but the problem is with these folks keep getting bailed out, David, they're just going to keep doing this stuff and there's no end in sight. Well, and the consumer doesn't get bailed out. So that if you look at it on a microbasis, instead of a macro-basis, you're correct. These governments will just bail people out, even if they make bad decisions, as we're seeing. But then the person who's variable interest mortgage just kicked in has $500 less a month in savings. So they're now not going

to buy an iPhone 14. They're not going to upgrade their car every six years. They're going to do it every eight years. So the demand destruction that's happening is going to be quite severe and that's going to reduce mon... And then we rest and mark my words, the Federal Reserve will intervene. This is why I think we're in a bottoming process. I think the bleeding edge of the smart financial actors are actually on sexist side and freedbricks side, but then they're taking that next intellectual leap and saying, okay, well, what happens when Apple basically says, hey guys, I'm going to have to fire 15% of my employees. I think what happens is the Fed intervenes. And I'm just using Apple

as an example. But there is a threshold of demand destruction, Jason. I think you're right, where we have the Fed put come back on the table and the market just go bonkers. So instead of doing 75 basis points two or three times, they're just going to be like, you know, 50, no, no, no, no, no, no, no, no, no, they're going to get to four and a half very quickly. And then this something's going to break, like all these guys are saying, I think they're right. And then the Fed put comes back on the table and we'll have this, we'll have the UK, you know, the UK thing happened in what, six days. ours will play out over six or nine months, but it's going to play out the

exact same way. And freeberg's right, you know, we should have capped debt at, you know, 100% of GDP or less. And SACS is right. We should have capped debt at 100% of GDP or less. And Sachs is right, we should have issued 100-year bonds and zero rates when we had the chance. We didn't do either of those things. What is the set-zone component, Sachs? I mean, there was no need to have rates this low for that long. And maybe they could just keep them at some average number instead of going down to zero

or that spiking back up and just spitting the steering wheel so violently, why don't we have some basic concept of maybe not having zero rates and keeping them at 2% or something reasonable so you have some dry powder? Well, if you go back and listen to what the Fed said and Druck makes this point, they were all worried that there was an inflation print a few ago, whereas at 1.7 percent, and they all started panicking about not being at 2 percent. So for a 0.3 percent move that they tried to engineer, they opened the floodgates. Okay, and that's basically what happened. And that's why he's so critical of it.

The other thing is the Fed member of the Fed said, we're going to be data driven, but then the data came in last summer, we got that surprise 5.1% print and they dismiss it as transitory. So they said they're going to be data driven, but they weren't. They were dismissive. Now on what basis did they conclude transitory? Like, what was the proof for that? There was no proof.

That was a political consideration. The administration and Yellen, this big part of that, immediately reacted to basically downplay the news. I mean, they prided. I mean, they didn't want to admit that there was a problem. They went from transitory to, this is permanent to now. Six months, but during, and now we're at hard landing. Like, these people are not competent.

Are they just not competent? No, I think they're really, I think they are competent, but I think that they're a little bit fighting with one hand tied behind their back. I think if you had to take the other side sacks, you know, the problem is they have a very specific strain of data that they focus on. And that data has all these weird anomalies to it. Like, you know, they should look at rent data. But the way that the rent data works is that, you know, you bleed it in one-sixth a month over six months.

Just as an odd example, or use card data only comes in a certain way. So I think they're driving in the review mirror. I think there is something to that. I think it's simpler than this, which is listen, I think all politicians do this, which is when they get bad news, they want to spin it. And they're going to delay acknowledging the bad news as long as possible. So what happened last summer when the inflation started, they all dismissed it. It was all a talking point. I mean, every single one of them. And here's the crazy thing is, J. Powell. He's the only Trump official who got reappointed

by Biden by a huge majority. How do you think that happened? And when did it happen? It happened at the end of May last summer. So just when the inflation print came out and Yellen and the administration were saying it happened at the end of may last summer so just when this inflation print came out and yell in the administration were saying it was transitory that's when powers up for renomination and he swept through the only trump appointment to basically be re-nominated without even a question by by and why cuz he

got on board the talking points he wasn't gonna basically buck them at that time so he waited six. He bought into the talking points. That was 100% political. 100%. I told you, I read Paul. It's a very compelling argument. I read them very.

It's really compelling. It's really, it's sad, but compelling. Sacchus should read the Paul Voker book, keeping at it. He basically says Reagan came to him off site where they knew they weren't recorded and told him do not raise rates. So this idea that the Fed is independent, like history now has shown us, it is not.

Like there is massive political pressure on them. I think especially at the time. You're driving in the review mirror clearly. The data they have is not great. And then all this data is nuance. You know, jobs and this massive amount of jobs we've had in this country is because of, we have a new immigration policy, we don't let people into this country,

we kick out PhDs that we trained. And then housing, we have Ibuyers buying this. So to your point, Jamoff, I think a lot of the data has changed and they've got a bad data set. They have a bad dashboard and they're driving with bad information. They don't know their direction. They don't know their speed perfectly.

If you went more fidelity on the data. You're right. If you went to a board of directors meeting for your company and said, how's the business doing? And the CEO says, well, we're going to have data from six months ago. And it's like, OK, I got that. But what about last week?

You would fire that CEO to your point, Jason. And these things are knowable today. Like there are businesses, for example, that are selling billions of dollars worth of like IoT sensors here and there, energy sensors here, everything is connected to the internet. Everything is automated, everything is running in code. You would think that the government would say

there's a national level directive here to get this into some kind of a system that we can use because these decisions are becoming more and more important. I think that would be a wonderful idea and a project and it would have huge value. I'm in Hatton Project for understanding the economy on a very granular level. You invested in a start of it. At one point, I remember I heard the pitch where they had people around the world taking pictures of food prices, Africa, India, the United States, anywhere, and then putting them into a database, normalizing them. So you could know the price of tomatoes or potatoes on a global basis,

you know, and normalizing all that data. They don't seem to have this data there. They're talking about August data and it's not, you know, we're now in October. It's a really odd situation. I think, you I think our friend, backer, sir, made this point, which was that, look, in this last FOMC meeting, the Fed raised their forecast for what the neutral interest rate would be

from three and a half to 4.6%. So in two months, they raised their forecast by over a hundred basis points. What is that based on? Like, is there a model? I assume there is a model. I assume there's data. So why don't they just open source that?

Why don't they let the markets see the model they're using? So we have a little more predictability. Of course, they always have the discretion to bucket or not follow it or whatever or change it. But wouldn't that be a better approach is to let us see the data and the models in real time as it's happening. And then the community, like an open source project

could actually fork the model and actually create better ones. Well, to your point, to your point, the Fed is actually known as the gold standard of transparency, so the IMF has kind of a view on how all these central banks act. Last week, they actually excoriated, and this is, this hurts me, to say Canada, because of their lack of transparency.

Apparently, Canada doesn't even put out minutes. And so they're like, hey, Canada, you guys, like, you know, Canadians are, I mean, the Canadian government, at least, like, total moral virtue signolers, but they don't value transparency transparency apparently. But to your point, David, there is a lot of opacity in these things that really determine how the real world works and the impacts to individual people are going to go and get ratcheted way up.

And nobody really knows what to expect, even though the data is there sitting in plain site. I mean, two things can be true. I think the Fed, the process of setting central bank rates by the Federal Reserve should be reset. I also think that it could be true that the Fed is not responsible fully for a lot of the conditions we're now facing. We did have a bunch of policy decisions that the whole world got swept up in and seemed to accept as appropriate at the time when we shut the global economy down. And there was some weird assumption or belief that fiscal policy would allow us to soft land or recover out of that. And at the end of the day, all that fiscal policy did, and I remember I was speaking with a smart

person at the time and he said, all the feds going to do is they're just going to inflate everything. And it's going to take a while and everything will inflate and that way everyone will feel good for a while. But you can't just stop the spigot of capital moving goods moving and services moving for months on end and Assume that the repercussions will not actually be felt extremely harshly and at some point things are going to come home to roost And that is what's happening There was no winning solution for the Fed or for any central banker In light of the policy decisions that were made to shut the global economy down when COVID began.

Not to argue whether or not that was appropriate, but that was simply a statement of fact. I said it before and I don't understand if you were to take a first principle's point of view on this today and say, hey, let's create a central bank and how should it operate. You would take all the data from into it, from PayPal, from Visa, from MasterCard, from the internet. You would take all of that data. You would let the algorithms or the AI or the software figure out what is most predictive of certain inflationary recessionary, and growth indicators.

Totally. And you would basically say, look, X% growth, X percent inflation, solve for what the central bank's interest rate should be. And it should vary at a hundreds of a percent or a basis point every day. And every day the rate is reset and the software resets it. And to have, you know, some degree of human logic or oversight seems appropriate, but to have a decision made in quarter percent increments once every couple of weeks seems kind of arcane. So I think both things are true.

The Fed isn't necessarily fully responsible. We all want to point fingers. We can point fingers at the mania that swept over the entire world. When we started our podcast and everyone was like, what the hell is going on? Why aren't we locking down the world? And this is nuts. And it felt nuts. And the response may or may not have been appropriate. But at the end of the day, there was a cost and the cost is going to be born for very likely a decade or more if we are able to get through it all. A lost decade is a possibility. And central banks have been rewritten.

So yeah. Well, I think there's actually two original sins of the economic crisis we're in. One is lockdowns. You're right. That was a fiasco. It didn't do anything to stop COVID. It was an economic disaster. And then we overreacted to lockdowns by then printing all of this money,

both fiscally and through expansionist monetary policy. So, Freeberg's right about that. But I think the other original sin here is the QE and the ZERP, zirp right this your interest rate policy that began in two thousand eight two thousand nine we broke the glass we know we don't emergency and then it just became standard like it was on autopilot why did we keep printing why did the government keep buying it was a

long-tail event that became the mean that's the problem is that every time government that idea i mean it's just yeah milton freeman once said there's nothing quite so permanent as a temporary government program how many times we've seen this every time the government's supposed to do something on a one-off emergency basis like zirp it ends up becoming institutionalized we still have kids in schools in california wearing mass i mean that it's the same crazy thing that people cannot get off

these programs. The thing about Zurb, which if you look back, what really happened if you think about like how people live their lives every day, what if what has happened in our view of government and politicians? It's really eroded since 2007, 2008, right? There's huge amounts of ranker. Nobody gets along. Everything tends to happen on partisan lines. And the reason I think that that was allowed to happen or that accelerated is actually because of Zerp. Because if you think about it, if you had failed policy, right, and the economy was completely broken, politicians would actually have to get together and try to solve the problem themselves.

And the last time they really did that was actually in the great financial crisis. If you look at TARP and if you look at how all of these smart people actually had to get together in a bipartisan way to figure out how do we bail out America and prevent a banking crisis, that was the last real effort that touched a lot of people. But then David, as you said, on the heels of that, we broke the glass and we've been fighting ever since. And the peak of that fighting was basically Donald Trump getting elected. And so I think like what it shows is that if you have

these irrational central bankers that are willing to constantly bail people out, you will never get a high functioning government because policy is irrelevant. Good policy doesn't matter.. Good policy doesn't matter. I think policy doesn't matter. If any of it goes wrong, the central banker will come in and bail us out. The second and third order impact of these can become quite acute. Just for people who heard the word syrup three times, zero interest rate policy, basically

keeping interest rates very low, very dangerous to do because you get shit like this. Like look at the number of unemployed people for job opening. And if you just look at this like ratio, this is the number of jobs per unemployed person, it gets way out of whack. And then if you look at this other chart just in terms of the total number of job openings,

we started, we talked about this earlier in the pod, hitting 11 million to burn that office crazy. Then what happens if you have too many jobs, you don't let immigration, you don't have a functioning immigration policy. Well, then you get this great, people quitting their jobs, quiet quitting, and then the boomers saw their net worth go up so high

because of their retirement accounts because of the stock market boom, then the boomers saw their net worth go up so high because of their retirement accounts because of the stock market boom and because of the housing boom. You had all these rich parents now who are bailing out their kids who refused to go to work and labor participation goes from 70% down to 62%. These are the unintended consequences of Zerp that now, how do you get a generation to go back to work

if their parents have a $2 million home and $3 million in stocks or a $1 million home, million in stocks. Yeah, they break the economy. And that's what they're doing. Now they're like, we're gonna break this. We're gonna get Google and Apple who have unlimited cash to do a riff.

Those companies don't need to do a riff. They're doing it because they have no choice now because they want to choice now because they want to break the economy so hard. Boomers have 71 trillion in assets of a march. I mean, the wealth transfer that's going to occur between these two generations is crazy. Why would any US$1 millennial with a boomer parent even go to work if they've got a million US boomers have $71 trillion in assets, is that what you said?

Yeah, that's the number I have here or so. An entire turn of global GDP in savings. That's about 1 seventh of the world's total assets. It's just a lot of locked up wealth. And this monetary policy was done by boomers. 70 trillion controlled by 76.4 million people. Yeah. So if you want to really talk about the rich know the rich in a global context the rich are very

Specifically you as boomers. Yeah, that's one seventh of the world's One seventh of the world's assets. It's controlled by 76 million people. How much of it is their homes? I mean they were they were at Woodstock They you know they lived the best life and the best times they enjoyed At Woodstock, they lived the best life and the best times. They enjoyed the most of the peace dividend in the 80s and the 90s and the 2000s. They are the ones that control everything. It's pretty crazy. It's, I think it's less like Jeff Bezos and Gates and Musk.

It's boomers. If you want to go and really zoom out and get it right, it's boomers. If you want to go and really zoom out and get it right, it is boomers. It's 1% of the global population that controls 1 7th of the global wealth. And they're all in the United States. You ask boomers hiding in plain sight. You as boomers, there you are.

Well, once these housing prices decline and the stock market declines, that number is going to shift. And that really is what's fundamentally happening with the fiscal policy and the effects that's happening today. It's having today, which is a redistribution of that value because we're basically deflating all those assets now.

We're going to deflate the average boomer which all assets and we're going to deflate realist data assets. I mean, if you just do the math on that back in the envelope, these boomers are worth a billion, a million dollars each. Like think about that. Like every boomer is worth a billion, a million dollars each. Like, think about that. Like every boomer is worth 900K, a million something in that range. 1.2 million.

I mean, it's bonkers. That's the average. That's how much wealth they have. Bonkers. You two are a boomer, Jacob. No, we're Gen X. We're Gen X, clearly. Yeah, we had the worst, we had like, we got really shafted.

It's like, we grew up with flannel. We have the whole channel. We have the Lannis Morissette. A Lannis Morissette. No, hold on, she's kidding. Hold on, hold on. I need to get in. Smashing pumpkins, I mean, I know it's easy.

I need to get in. 93 was probably the best here ever. Smashing pumpkins ever did it for me. Billy Corgan's voice was always, ah! Yeah, really annoying. Rage against the machine. Can we do a quick shout out for Kulio? Sad to hear that he passed.

We're here for you. Yeah, I mean, it was really sad. The guy was, how old was he? 50s. Were you a big fan of Kulios? I love Kulios. You two have a few more than 90s. His Kulio story from the pod when he said,

Gangsters Paradise. I feel you. Yeah, and then when I saw him at sax's birthday last year. I was like dude I love coolio. I mean I cannot tell you what a big fan I am. What was the line you said to him? You said I feel you I said I appreciate you and his ear appreciate you. I appreciate you We fly down for the birthday They you know they shuttle you on the cars from the plane to the house. We get to the house and we're all waiting.

Of course, the act is late, two and a half hours. There was no party. We're all hanging out and starving. But then we go into the party and then they have like, Kulio shows up. So we're sitting down in dinner for course two. All of a sudden, Pop comes out of the woodwork Kulio. I lose my shit. I run up on the Kulio fan. The dance floor. I grew up Kulio is like high school

Jans man. I mean, that's like in the car cruising. And at this point, I'm like seven to Kila, watermelon to Kila's dance. I'm like, oh my god. I'm not trying to frame it. No. No, I'm not going to dance floor. You know, Janet has to cool yo. I think cool yo thought I was sacks, you know, cause he's like, yeah, he's like, oh, two South African Jews, you guys all look the same. Cool yo comes up, starts hyfiving me and hugging me. And I'm like, what's up, cool yo, my god,

this is like a drink come true. He's like, hugging me, his face is right next to my face. I didn't know what to say. And I like, I'm, I'm, I've had a little bit of tequila. And I, and I whisper in cool yo's say. And I like, I'm, I'm, I've had a little bit of tequila. And I, and I whisper in Kulio's ear. I'm like, I appreciate you. I didn't say it. Oh my God.

Oh my God. It's a sin. I'm like, I appreciate you. I appreciate you. I appreciate you. Wow. I've been you Kulio. Oh my God.

Oh my God. I think I saw Freeberg throw his panties on stage too. I think I saw Freeberg throw his panties on stage to it Such what a nerd Yeah, my team my team and a tpb they had a they had a cameo made for me of that cool yo sent in it was super heartfelt and awesome Sacks posted it on the internet. I think Yeah, we tweeted it. Yeah, we tweeteded it and it was, I don't know man, he was actually a super nice guy, great guy and it was super sad.

Yo, Dave, it's your friend and neighborhood, Kudio, bro. I'm out here on the golf course thinking about you. I appreciate you man. So I want to wish you a very very very happy birthday man You feel me? I want you to drink good. I want you to smoke good. I want you to eat good. I want you to have some fun bro Go big Do it right Your dad happy birthday man from coolio shotgun zoom man Well all the stories are coming out now and not your experience was not unique. He touched everybody he met.

Literally, these college kids were like... He was very kind, like, super friendly and like, you know, and like wanted to ask about you. I mean, it's like a very like, I could have been a politician if he didn't become a music superstar. And I come to know that he looked incredible. like I could have been a politician if he didn't become a music super star. And I come to his he looked incredible. He looked like he was 25. I mean, he literally went to these college kids met him.

He went back to their like, you know, uh, uh, frat house. He cooked them dinner and then he got a guitar out with them. And he sang gangster paradise with them. And he like, August rated it with the crowd singing whatever he was the list of that's what there was a video of him in Dublin on the bar singing can I just say something to I've given the message Before yeah before but like you know take care of your health. Yeah take care like

There there there are these incredible drugs. I just want to call out health as well. If lipitor for example or crestore or these statins are not working for you, there's this next generation kind of drug called the PCSK9 inhibitor, which essentially is effectively a gene therapy that's modeled after this very specific group of folks in the Nordic, I believe, who actually have effectively immunity against heart disease. And so it's taken 20 years to refine this drug, but this drug is a one-to-drug. There are versions of it now that are injectable, once every six months or whatever. So go and ask your doctor.

If you're not, if statins don't work for you, look at the PCSK9 inhibitor. And then separately, after your 45 or so, you should get a CT angiogram because these things are really important or a heart float where they actually inject a dye, they characterize all your veins, they give you a calcium score. It may not prevent this, but at least if it's something cardiac related, you can get to the bottom of it and it's a no-able thing nowadays.

Yeah, rest in power to our friend. Yeah, take care of yourselves, your health. Speaking of health, shout out to Weneth Paltrow, G-PAL, who, in her group newsletter, pointed out that she loves the all-in pod and has to be honest She's obsessed with the personality is a little bit Anybody want a handicap that listen, let's be honest One You if that's what you're gonna say I'm better actually I'm better doctors say choose a delightful if you want it

If you want to live in the health after a meal the best thing to eat is a little dark chocolate Hmm do you get your dark chocolate from Goop? Do you have Goop dark chocolate? Jason, I was trying to make a story where I am the dark chocolate. Where I'm saying that I am her favorite personality you fucking moron. So you're handicapping that you're her favorite.

She said she's obsessed with the personalities plural. I'm gonna, I'm gonna, where did she rank her besties? I need to know. I'm gonna rank as Reaper. Oh really? You think that makes that's on yeah okay. Then me then you okay I'll take it. The fact that Gwen of Paltrow even understands

like who we are is a win in my book so I'll be number four on her list but G-Powell if you could rank the besties in your next newsletter that would be appreciated and And we'll take rank your besties, quenched out. Jeepowl. All right. If Sack, you want some red meat, you, I saw you wrote a piece, you want your red meat? Should we throw it to you? Yeah. Yeah. All right. Well, I mean, I think we, we need a Ukraine update because I mean, we're talking about all the reasons that there could be a silver lining or the markets bottomed out.

I don't think you can know for sure that the markets are going to bottom out unless you know that there's going to be a successful resolution of this Ukraine war, at least a non-escalation of it. And all the things that have happened in the last couple of weeks have been on the road towards escalation. That's cool, isn't it? Exactly. So in the last like just few days, you've

had Zelensky saying that they want to be admitted to NATO. You've got Putin, basically annexing or saying he's going to annex the Donbass. And somebody we don't know who, but according to Eradik Sikorsky who's the Polish foreign minister, he thanked the US. Somebody blew up the Nord pipeline. So what is the common denominator? Which Nord did they say was blown up? Was it one or two? Was it one? I think it's Nord one.

Huh. So it was the one that was actually like working. What is the common denominator of all these things? They're all eliminating key elements of what a peace deal would look like. So everyone understands that a peace deal would require Zelensky to give up on NATO. It would require Putin to make some compromises likely in the Donbass.

And it would require the sanctions to be lifted and the energy flow to be turned back on. Well, so now those things basically have been removed from the table, or at least potentially that's what's happening. So I don't see how you're going to get a peace deal now. And so if you remove all the off ramps, what's left? Escalation. So it seems to me this thing is going to keep escalating. I thought you wrote a good piece in the American conservative, should America go all in on Ukraine? If you haven't read it, it is 80% of rehash of what we've talked about here for the last year. But there's 20% new in it, I think. And I thought what was interesting in terms of new stuff you put in the piece, and it's a good

summary of poker strategy versus what's going on here, is that we've already proven, if you did want to prove that Russia is not a threat with the exception of their nuclear, we now have proven that they're really not going to be able to do a domino and go into all these different countries with the exception of obviously the threat of nuclear power. So I thought that was a point. Well, what I was really responding to in that piece is the assertion by the media that Putin is bluffing. How do they know that?

How do they know that? I think all of us understand poker pretty well. And none of us ever would have the confidence to assert that we know exactly what cards are opponent holds in any given hand and how exactly they'll play them. What do we do? What does smart players do? We put our opponent on a range, a range of possible hands, of possibilities. And then we evaluate what did their previous actions tell us? What story are they telling through their previous actions? Well, what story has Putin been telling?

This is not a guy who bluffs, in my opinion, or at least that is not the story for the state. So you think there's a chance he would pop off a tactical nuke? It's a non-zero chance, obviously. I think if that, if his life is on the line, he is incentivized to use every weapon in his disposal to try and prevent his violent arms. Well, his life isn't on the line here.

He can back out. Yeah, but where's this thing headed if there's no compromise? I think they, you know, I'm gonna stick with my original prediction that we wanted to ankle-putent. We wanted to prove he didn't have, you know, as much strength as he did, and we wanted to exhaust his resources so we could finally

Basically get him out of office at some point so I do think regime change via exhausting him and I think it seems to have worked we have exhaust And you're agreeing with me. I agree that we have exhausted his I mean he's proven he can't fight a ground war right? I mean that's a pretty He's escalating now. He's escalating. You think he's just gonna roll over. He's not he can't fight a ground war, right? I mean, that's a pretty... Well, no, he's escalating now. He's escalating. You think he's just going to roll over? He's not going to roll over. He's going to escalate.

I think what we've proven, haven't we, is that he can't fight a ground war effectively. He doesn't have the army. He doesn't have the weapons compared to the West, and he's been exhausted. I think he's spent now. The only thing he has left is what you're talking about is the new option literally no no well no there's there's more intermediate options first of all he's just called for the the mobilization of 300,000 more troops so that's going for one people are in the country yeah exactly look there's gonna be very high cost on the Russian side yeah, I'm gonna be very high cost on the Russian side I would not assume that means that there's something in it for us.

Even with this, you know, the the conscription he's doing, this draft, he's doing forced draft. I mean, he is kind of redundant, but this conscription or draft, whatever you want to call it, has proven that he doesn't even actually have the standing inside his own country. People are leaving. They're breaking, they're looking about a break their arms. Like it's, it's pretty dark. I think you're making a lot of assumptions there, just like the media who are saying

that he is definitely bluffing. What I'm saying is we cannot know that he's definitely bluffing. Listen, the United States of America is blessed with being the most safe and secure country in the world and really in human history. And the history is full of humans constantly being at war with each other.

So that is a really valuable thing that we have. Why are we so secure? We're surrounded by gigantic oceans. We have these gigantic motes. In addition, thanks to the wisdom of the Monroe doctrine, for 200 years, we have prevented any great powers from getting a foothold in the Western Hemisphere. We are completely dominant here.

And no one could ever stage an invasion of the United States. We only have one vulnerability, just one, ICBMs. That's really it. So what are we doing? We are basically engaging in a proxy war with the person in the world who has the most ICBMs, and we are basically putting ourselves on an escalatory path with him.

This would be like if Achilles had gone in front of the walls of Troy and basically taken off his armor and stuck his foot in the air and drawn a little bullseye around his heel, that is what we're doing. Or the other side of this. Why would we do that? Why would we do that? Or if they are the last real threat

and they are the Achilles heel, if we can... They're not the last threat. They're not the last threat. They're not the last threat. We're never going to be out of threats, okay? Well, we got two major ones with ICBMs, but anyway, it looks like we're in the end game. Now, what do you think happens here? We're not in the end game. We're on a path towards escalation because all the off-ramps have been removed.

That's my point. And instead of saying, instead of trying to find a diplomatic solution, first of all, we keep removing off-. And then we, we blindly disregard the threat to ourselves by saying he must be bluffing. This is incredibly stupid. The better question to ask is, hold on a second, the better question to ask is what's in it for us? What's in it for the United States of America? What is the vital interest that compels us to risk our security? There isn't one. This Donbass region, hold on, this Donbass region is the france ferdinand of this situation.

It is not historically important to us. We have invested in it, all of this importance. And we are potentially turning a regional war into a world war. We are sleepwalking towards this. Unless somebody finds an off ramp, we are escalating our way into a much larger conflict. That is my point.

And I don't see how anyone, I don't see anyone should reenter the markets with this geopolitical risk hanging over our heads. Yeah, this is kind of like what I said a few weeks ago and JP Morgan put out an analyst report today saying that they were shifting from being, you know, call it roughly positive, sort of like Chamosk point earlier about being a little bit constructive in the markets right now

and coming in and finding opportunities to buy to realizing that the sum of the portfolio of tail risks right now, you know, outweighs the upside that may arise from finding these low priced opportunities in the market. And that seems to be the prevailing market sentiment right now, is that there are too many of these moments that, while each one of them is low probability, the impact is of such high severity, that the aggregate value, expected value or expected loss of all of them, is actually quite significant, and that is heavily weighing on the market.

And so, Qtimaaf's point, I think, and to the question earlier about market conditions, one catalyst for upside in the market, while there is fiscal strain and economic strain and growth strain, there is also this geopolitical strain in the market. If one or more of these things starts to resolve, I think that weight starts to come off the markets. And you can see the market taking off like a rocket if Ukraine gets resolved. And I do think you're right. It's all fat-tailed risk. That can. It's about to be resolved.

I think that can potentially be the political motivation here, which is that enough people like Jamoth and you start making the calls to your representatives pointing out how strained the market is because of the tension in the region right now that maybe there is some path to resolution that becomes more active rather than passive. Because of that. This may be a little controversial, so we can talk about it, but I think that the markets would have reacted much, much more negatively to a nuclear incident three months ago than now and may not even react

as much as we may think it was three months from now. But what do you mean by nuclear incident? You mean a newco's off or just a threat? You would say if Putin blows up in New York, the markets may not react that much? I think that the markets are basically ring fencing Russia Ukraine risk in terms of currency instability, but that's sort of now gone away. We've ring fenced the energy risk because it looks like energy reserves in Europe are actually going to be pretty meaningful. They're going to spend whatever it takes. So all of the second and third order effects, it would be a humanitarian crisis which would be horrendous. Okay? But the markets don't, whether we like it or not, react to humanitarian crises.

They react to the second and third-order economic impacts of those things. And if you actually try to think about what the second and third order economic impacts are, you're seeing many of those things get solved. And so what it would be, it would be a highly isolating effect, it would be a humanitarian atrocity. He would be completely cornered from a worldwide perspective. The monetary and fiscal implications of that may not be as meaningfully disruptive today, as they would have been three months ago. That's what I'm saying. Well, one thing I actually clarify, I like Freeberg's analysis of the fat tail risk because

I'm not saying it's likely that this conflict goes nuclear, but I don't need there to be a high likelihood in order for me to be very concerned about it because of how disastrous an outcome that would be. So if you're doing an expected value analysis, it's really hard to analyze the expected value or negative value of a low probability disastrous event, right? That's a classic fat tail risk. I do think that if the markets think they have priced in the effect of this war, then I think that's an argument for a lot of downside to this market, because it seems to me that we're on a one-way ratchet here, all the off-ramps for a peace or a diplomatic solution have been systematically taken away, and all that's left are potential

escalations. So... No, I hear you, but how do those translate those escalations to outside of those two countries and into economic terms for the rest of the world? Oh my gosh. Well, I mean, if the war spreads, I'll give you a couple of scenarios. I mean, well, here's one. I think we're disassuming that China is going to stay out of it. Imagine if you're China and you're watching what's happening and you're worried that actually Russia could lose this war so badly that it emboldens Hawks in America who want to target China next, you know, who are basically on this global struggle against

autocracy. You're going to look at that and go wait a second. Is it really in our interest for Putin and Russia to be completely toppled by this global struggle against autocracy. It seems to me they could enter the Russian side, not militarily, but in terms of support. So they would have an incentive, again, not to lose an ally. And then by the same token, I think the Russians could lash out. I don't think they're going to go nuclear right away, but I think they could pull a grozny i mean do you think that it's not your

expel well when you know in the chetian war when russia was losing that is rubbled grozny i mean they basically leveled to the ground so i mean pune doesn't do anything like that yet but if he's facing defeat isn't that something that would be on the escalatory ladder is ladder is to basically start leveling Ukrainian cities destroyed key infrastructure All is I and then what is the response of the west? Yeah, I know I know I know west may say you know what that's unacceptable to us

I agree no no I look I'm not debating how bad all of these things are I'm just asking the question What are the second and third order economic impacts? Because the market doesn't reflect human atrocities. We may want to, but it just doesn't do a good job of that. It does do a reasonable job of reflecting a discounted set of events in the future related to economic events and impacts. And all I'm saying is that, you know, the most obvious impacts of this war have been to currencies, to commodities, and to energy.

And the world has had six or seven months to reroute what they've needed to roughly solve a large percentage of those problems. It doesn't take the fact that this is a bad war and it should end. I'm not saying any of it. Right, right. No, look, you make a good point,

which is that look, the market discounts cash flows. So how do the cash flows get impacted? You may be right that valuation multiples have gotten close to correction. But I think the thing that we don't really know is what earnings and profits and revenues are going to look like next year. And part of that is about the hard landing, right? Like how inflated are all these companies, revenues, and earnings because of what happened? I hear you, but this is why that chart is so important.

Every other time except in 1983 in modern history. So the modern history that we have all lived, says that the stock market bottoms in the first third of a process. So if you think that this process ends in 24, that's a roughly 24 month process, 21 month process, we're in month seven, we're in the power alley of what would map to the last six or seven patterns of behavior?

Yeah, I mean, I guess you may end up being right about this prediction. I guess what I'm saying is that I personally would not wanna enter the market until some of these fat tail risks are taken off the table. Yeah. Well, talking about nibbling in the market for a second. I'm not saying they're likely. I'm just saying that.

I'm not my own sense. And obviously, none of us want this to happen. I'm just asking a very specific question, which is, and making an observation, which is, I wonder how the markets would react. And I don't see it being down a thousand points. And that may be wrong, but by the way, they would certainly be shocking to just see that. Yeah. The diversity of views that you guys all share, I think really represents the market. What do you do? You too, you have a view.

Dude, I'm like, what the fuck? Wow. I mean, what is your view. What is your view? You're at your view that we're okay. We're about to just go through the toilet. Like, what is your view? From an equity markets point of view? Or just in general, yeah, like equity markets, your temperature, how do you feel?

Like, how do you feel? Yeah, I'm worried about money not moving. What does it mean? Money not moving. I'm really anxious about invested dollars. Everyone seems, I think I mentioned a while ago that dollars were kind of locked up in March and then I went to this conference and people were like,

yeah, we're loosening up and making a plan again in July because the market was kind of turning back up and now equity markets are turning down. Bond markets have turned down. Interest rates have spiked and there's a bunch of these currency problems. So I'm very nervous about the flow of capital, which I remember happening in08, and I remember happening when we were all joking over text when COVID happened and we're like, hey, the market can only go down 10%

a day for so many days in a row. And everyone was kind of like, you know, Jamal was talking about wearing jeans instead of, he's like, I can just wore the same pair of jeans for the rest of my life. It's something. That's true demand destruction. When he started, he said that. You're like, I'm out the jeans from, he was at me, Phil. Yeah.

Yeah, he's like, I don't need fancy clothes. I can just wear the same clothes I have. He's going in your storage locker, pull those clothes out, right? That was the old one for Chimoff. That's a lot of Piano on sale. Ret the, rent Chimoff. Yeah, the CEO, the CEO of Lorepiana did send me a note

after that podcast. He's like, is everything okay? Yeah, the CEO, the CEO of Lurpeon, it did send me a note after that podcast. He's like, is everything okay? The rate, the GDP, the rate of Lurpeon, the fresh, the fresh,

the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh,

the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, the fresh, Take this season off. I'll just wear a last summer's season. I would get I would get the rate of rotation of Chimoff's closet is probably predictive of IPO market. No, you know what? I was I was there less we rotating in I'm rotating in so maybe that's a good The economy is not to read it again. I'm ready to take some companies. Publix. No, no, I'm buying I'm buying stocks because I was at Chimoff last week and it was supposed to be black truffles and then he jumped the fence all of a sudden white truffles over my shoulder

Boom boom boom boom boom boom. I was like chef chef chef. What's that? He's my chef chef chef chef chef chef. All right, listen, for the dictator, the Prince of Panic attacks, the Sultan of science, the Queen of Keen, why him so? Go see the Kevin Hart show if you're in San Francisco or San Francisco. He's got in San Francisco or San Francisco. He's hilarious and for Montclair, Ambassador David Sacks, the dictator himself.

I am the world's greatest moderator and we'll see you on episode 99. Love you guys. Love you guys. Winners ride Rainman David And it said we open source it to the fans and they've just gone crazy with I'm you. I'm sweet I'm going What? What? What?

What? What? Besties are gone. Go through This is my dog. Take it in. I wish you drive away. So, wait a minute. Oh, man, my hamster will meet me at the place.

We should all just get a room and just have one big hug or two. Because they're all just like this sexual tension, but we just need to release that out. What, you're the bee. What, you're a bee. Be your bee. What? We need to get my cheese I'm doing all this!

I'm doing all this!