The Compound and Friends - Never Buy New Lows, Never Short New Highs

Episode Date: March 25, 2022

On episode 39 of The Compound & Friends, Michael Batnick, Nick Colas, and Downtown Josh Brown discuss: what it's like working for Steve Cohen, investor confidence, tighter financial conditions, bank stocks, quantum computing and crypto, driverless vehicles, and much more! Thanks to FTX for sponsoring this episode! Download the FTX App today and use referral code "compound" to earn free crypto on every trade over $10: https://apps.apple.com/us/app/ftx-crypto-exchange/id1095564685 Check out the latest in financial blogger fashion at: https://www.idontshop.com Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello. Hello, hello. I almost saw The Godfather last night. It's in the theater. Yeah? Yeah, I think it's the 50th anniversary. That's right. It's the 50th anniversary. But two hours and 55 minutes? What do you mean, you almost? I literally almost went to the theater. Why didn't you? What else are you doing?

The times didn't work out. But it's two hours and 55 minutes. It's long. I would do that, though. The problem is I don't have the three hours either. Oh, I have the three hours. I almost wish they would make it a two-parter and I'll come back a week later. That's like a long set. It is. I did that for Batman, the new Batman. It's three hours.

My kids did it. My son did it somehow. I don't know how he did it. It's long. It's long. I think i think i saw alice cooper yesterday where six avenue what do you mean walking out of makeup yeah and you recognized him yeah i guess he's distinctive he is yeah and i waved and he's just walking down the street you waved waved gave him a thumbs up smile give a thumbs up back I wonder how many people in a city block recognize him. I think it was

just me, I think. I once saw Lou Reed get out of a taxi, and I f***ing lost it. And I'm not even that big of a Lou Reed fan, but it's like, it's probably only a couple years before he died, but he's probably like one of the most iconic

New Yorkers of all time. Yeah. So seeing him get out of a yellow taxi in midtown is like surreal right and uh and i was just like oh my god that's that's because it's not my generation but then i realized oh that's lou reed that's why were you snapping at him yeah almost no i was with i was with shari and she doesn't know who the hell that is but I was like that's Lou Reed that's Lou Reed she's like alright

I don't know what that is I was like I accosted Christopher Russo Mad Dog in the the bathroom one time I remember that

I opened up I was in the Sirius XM building I opened up the door and there was Chris Russo and I let him know that it was Chris Russo in the bathroom

I literally I said I said it was jarring I opened up the, and I let him know that it was Chris Russo. In the bathroom. I literally, yeah. I said, it was jarring. I opened up the door and I said, holy shit, Chris Russo. Yeah. And he looked at me like, get the fuck away from me right now. Well, because also you're in his office.

That's the thing. You're not on the street. Like you're in the guy's place of business. Did not play it cool. I had the same experience with John Gotti. Oh, really? At the old beach. You said, holy shit, John Gotti?'s place of business yeah did not play cool i had the same experience with john gotti oh really at the old you said holy shit john gotti oh no i did not but i did see him uh share share a bathroom with him in the 80s at the old beach where i was gonna oh beach a on 40 where is that 46 it was the older one on 50 what is that beach it was a italian restaurant on 53rd between Madison and 5th.

It's better you saw him there than Sparks, I was going to say. Yeah, especially outside of Sparks. It's better that you went into him there. You ever get excited meeting a celebrity or not really? No, not really. You're a real New Yorker, that's why. Yeah, I was born and raised here. So I would see Lou Reed buying cigarettes pretty frequently. Be like a regular thing for you. Yeah, like, oh, there's Lou.

I was a real New Yorker for about 10 years. I lived on the Upper East Side, but I would still get excited when I saw celebrities. You know who we used to see almost every day? And my wife thought she was friends with her, but she wasn't. What's the girl from 90210?ri spelling so i think she lived around the corner from us and we would see her every day like in cvs and like my wife would wave to her always and she would wave back and i'm like you don't really know her she's like yeah but she doesn't know that and i forget that it's donna from 90210 i forget that i don't really know her either so for years they would

like just wave hi to each other there will never be another like teenage show like that it's just too it's not the same it's over well we're too old for no i know i'm just saying they will never like that it's over it exists but it's on youtube and it's reality it's people playing themselves tiktok they could i'm saying there can never be another 90210 that's a pity all right how are we doing on time because we're already at 90210 anecdotes Duncan just Duncan just flipped the hat backwards like and over the top

he did that one more one time a couple months ago look what he's doing now what is he doing oh I see he's got to put his eye up to the lens oh it's not just for aesthetics he's got to do it

he can't get to the camera with his put my mic on put my mic on speaking of Mad Dog oh John's not here I noticed

John's not here he's doing the whole thing I need coffee okay I got excited once Speaking of Mad Dog. Oh, John's not here. I know somebody's missing. He's doing the whole thing. I need coffee. Okay, I got excited once. Lee Iacocca and his wife and Henry Kravis and his wife. Okay, that's big. At table one at 21.

But that's a big deal for you because you were covering autos? Yeah. Or is this before that? Yeah, this was I had done some deals with him in 91. And this was like 92, 93. And just him and Henry just sitting down at this little table like they're college sophomores out with their dates we leaning in so you got excited what is that what did you were you ef hutting i get close thought twice about approaching the table because i had met him several times doing equity transactions for chrysler at 91 and the uh the

maitre d just did one of these things with the finger. And I was like, okay. Like, don't do that. Yeah. And I was like, totally understood. Right. Was he in – were they in the Chrysler building when he was around running the company? No. No, right?

No. The headquarters or the New York office was in the Pan Am building. So actually, I think I was at the first ever analyst meeting where management's regularly scheduled time with investors. And it was in right after Q4 earnings in 91, where they just done a huge equity offering. And somebody said, hey, why don't you actually invite the investors in who bought your deal and saved your company and walk them through the fourth quarter results. Okay. And so people came in, they flew in to sit down and it was in the old Sky Club at the Pan Am. So that's like investor day to this day.

Yeah, but it had never been done before in the 80s. You didn't have analyst meetings or analyst conference calls for earnings. There were no conference calls to speak of. So that's sort of the ancient history of how it started. It started because a bunch of cyclical companies issued a lot of stock in the downturn in 1991, and investors said, hey, we'd like a little bit more of a refresh than calling the IR after the stuff crosses the tape. Oh, so prior to that, there's no – it's not like a cultural thing that like, oh, you

listen every quarter to the conference call. No. No, it started – and even through the early 90s, like 91, 2, 3, and 4, more often than not, you got the press release off of PR Newswire and then you walked down to your office, ran the numbers real quick and then called the investor relations person or the CFO. To confirm your assumptions. And then you'd wait for them to call back. Yeah. And then after a while, if they liked you, they'd call you back quickly. If they didn't like you, they might not call you to the next day. Wow. And then you had to do the whole reason for the afternoon call on Wall Street was to

go over earnings that had come out during the day. Oh, so they weren't coming out after the close? No. They would just release it? After the close was a brand new thing that happened with tech in the mid to late 90s. Right, because they're West Coast companies. So after the close made more sense, were they going to wake up at four in the morning and put out results? It makes no sense to do that. Right.

Is this a true story? I don't know if I heard this or read this. I don't know if I heard this or read this. Lee Iacocca was having pizza from New York City, put on a private jet to arrive in Detroit in time for lunch. Is there any way on a regular basis? Absolutely. It is true. What pizza?

What pizza are you? You know, the rumor was it was Patsy's. The rumor was always it was Patsy's because that's where Sinatra, you know, theatra you know the patsies on 56 maybe that's what i heard then and don't forget that chrysler owned learjet okay i didn't know that from 86 to 80 or sorry gulfstream they own gulfstream so he was testing a prototype so it was you know they had planes sitting around. So we think it was Patsy's like the one on, where is that? 48th and 2nd Avenue? No, this was the Patsy's on 56 between 8th and 7th. Yeah, yeah, yeah.

But there's, as you know, a rolling debate in New York about which Patsy's Frank liked. Who's the real Patsy's? Sure. So that is true or could be true? Absolutely could be true. But not daily. That's a lot. I would not put anything past him because he also bought Maserati during that time.

Right. You know, he was famous for saving the company in the early 80s. Was he Elon-esque or was he more like, like he was a responsible manager, but he had like some flair. He wasn't all memes and like hilarious hijinks, right? He was a great crisis manager and a horrible, steady business manager. Got it. When the crisis came, he could rally the troops. He was the guy.

And in the early 80s, he saved Chrysler. He went to the government and got money. He ran his own ads. He developed the rebate program, which is sort of the scourge of the business to this day. But then when it got good again, he went out and bought private jet companies and Maserati and did a bunch of silly things.

He was a wartime guy that, like Churchill, they should have said, okay, thank you. And the funny thing was, when it came to the early 90s and the company blew up again, we told him, okay, you got to come to New York and pitch a big equity deal. He said, fine, but I'll only do the Waldorf Grand Ballroom, which seats like 700 people on like five tiers. He only plays the big rooms. In that respect, he was like Sinatra. Or Trump. Or why he only plays the big rooms in that respect he was like sinatra or trump or trump only play the big rooms don't play the small rooms ever okay and so we

said fine so we actually paid to have a bunch of prototypes flown in or trucked in put in the grand ballroom and he got up there and we sold the place out and the deal got done and he was fantastic yeah like you you heard a public speaker yep and just exuded confidence just like we're gonna get this done look at all these great new products and they were great and it was november 91 and we raised like 150 million dollars for the company which was like nothing but they needed it because the suppliers were not going to ship the final parts for the grand cherokee unless that money showed up in their bank account what is 91 yeah okay yeah first time we actually talked past the music.

Oh, we did talk through it? Are we rolling? Are we live? I just have to start the song again. We have to click though, right? Yeah, that's what I was waiting on. For the vocal track? Alright, let's click it up. Click it up, Duncan. Don't be shy. What do you think Nick has all day?

You think Michael has all day? Thank you. Alright. Two. Two. Episode. Duncan, you're like so shy. John would not be pleased with how this is going. Oh, my God. Are we ready to go?

Yes. All right. Welcome to The Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is sponsored by FTX. FTX was founded in 2019, which is wild.

Can't believe it's only been, what year is it, Duncan? It's 20, all right, three years? About. Sam Bankman, freed the founder, was on the Forbes list of the richest under 30. I don't even think he's 30. Actually, he can't be 30. It's under 30, right? It's under 30. That wouldn't probably mean he's 30 years old.

This year, we spoke today on the show about valuations with private companies getting compressed. Not FTX. FTX US raised $400 million at an $8 billion valuation.

That's only the US subsidiary. FTX International was at a $32 billion valuation. So needless to say, they're doing well. If you are looking to get access to crypto, NFTs, download the FTX US app, enter the promo code COMPOUND to get free crypto on every trade over $10. All right, we're here. We're ready to go. We have Nicholas Colas here with us today. And Nick, I would say that of all the guests that we've had since the beginning,

you've probably contributed the most notes to the doc. Without a doubt. So thank God God because it makes it makes our lives so much easier because we want to talk about stuff that we want to talk about

but we want to talk about stuff more importantly that you want to talk about so that really helps us a great deal so thank you for that

we're short John today Nicole is here Duncan is here Duncan how are you feeling? feeling good everything's good you running the show by yourself?

yeah yeah it's a little stressful but yeah I think you'll be okay. Yeah. All right. We got it. All right. Nicole, how are you? Good? You can give me a nod. I know you don't have a microphone. All right. Let me give you a proper intro, Nick. So you have been on Wall Street for 30 years, right? Give or take? Yeah, 31, 32. 31, 32 years. Okay. And we were just talking about this. You have worked in a whole range of different disciplines and professions on the street. M&A, IPO deals in the auto industry. You were a senior equity analyst at First Boston, which we know now as Credit Suisse. You were an analyst.

You were a portfolio manager at SAC Capital, reporting directly to Steve Cohen? Yep. Okay. We'll get into that a little bit later. You were a chief market strategist, and now you are director of research at Datatrack, which I have said frequently, publicly, I think is one of the best research publications out there. How long ago did you start Datatrack?

Four and a half years ago, my partner, Jessica Rae. Okay, you guys are, I think, among the top tier of people putting out your daily research. Yeah, thank you, yeah, daily. Yeah, for sure. And it's hedge funds, it's asset managers, it's RIAs, but then you told me it's CEOs, it's individual investors. I think you do a really good job

at making information interesting and making it relevant to a really wide group of people, which is what the whole thing is all about, right? Yeah, absolutely. We try to stage out all the content. It's three sections a day on markets, data, and disruption and try to make it both understandable but also interpretable into making money across a wide array of different skill sets and people with different experiences. Okay. And you are a lifelong New Yorker, unlike me, who was a temporary New Yorker and now bridge and tunnel. What neighborhood did you grow up in? Upper West Side, 103rd and West End Avenue.

From the word go through 18, went to undergrad around Philadelphia, Haverford College, came back to New York, worked here for three years, went to Chicago for B school and came back and I've been here ever since. All right. And are we making a comeback or what? What's the story? You know, a slow grinding comeback. Yeah. City's going to be different.

It's not going to be the same, but it could be good. Did you notice our train station parking lot is getting, was fuller yesterday than it's ever been? Yes. Like I had to park on the other side of hewlett yeah the people are coming back but they're just not going to come back every day that's right and that's just what it's going to be yeah but they are coming back yeah office occupancy according to castle systems is running about 38 in the city right now

so it's still quite low it's brutal if you're trying to sell lunch to to office workers you can't especially midtown yeah so what happens then? So what is the comeback? The comeback is around, I think, the entertainment that the city has to offer. Broadway, rice clubs, dining. I mean, weekend traffic is pretty much back to normal. It's the weekday traffic that's still quite weak. People will buy apartments here and live here, but they won't be going into the office as much as they used to. It's no longer a five-day-a-week thing. Now, the one exception I would say is when we get the next recession. And that's what I'm kind of thinking about in terms of when does office occupancy actually rise again? Because right now, the worker has all the power, both in wage

negotiations and how and where they work. That always changes in a recession. So you get a recession 6, 12, 18 months out, and employers get the power back in terms of greed. Interesting. I'm so glad you said that. It's so funny. When you hear like Goldman Sachs wants their people back, Morgan Stanley wants their people back, even those people could be like, you know what? I'm going to Silicon Valley, or I'm going to hedge fund. I'm going to buy side. I'm not doing that anymore. In a recession, it's like everybody sings for their supper again. It's like the boss wants you there, you show up there. I think that's

a really big part of it. So what do they do with all these office buildings in Midtown? Hudson Yards will be fine. Fire Dye will be fine. But what do we do here? That is the biggest struggle. And actually, this is better than up near where I live, like on Park and Madison. Park between 42nd and 59th is still extremely quiet. Because those guys are sitting in Connecticut. They're not coming back. Yeah. Well, they won't come back until there's a 10% round of layoffs. Can we convert these to condos? It's too much, right? Over time, yes. Like I used to work down at 1 Wall Street. That building right on the corner of- Those are all condos now. Exactly. That was the original the corner of- Those are all condos now.

Exactly. That was the original Bank of New York building, and it's now a condo. And those make more sense as condos because they have water views. Water views and relatively low ceilings and no ability to have a raised floor if you want that for technology. So it is a much better residential kind of setup. Okay. But that might not be, we don't need as much in Midtown. People don't want to live here. No, no. Right. Okay. You know, next door, the Bryant Park Hotel? Yep. That's going to be condos, luxury condos now. Won't be a hotel anymore. I guess that's something that started during the pandemic. I wonder what you think of like the hotel situation. That's a pretty ideal

setup because you have no possibility of having an obstructed view coming out of the north side of that building because it faces onto Bryant Park and Bryant Park will always be there. Yeah. So it's an ideal thing if you want to buy property because you know you'll always have

that sunlight and that view. Right. No one's going to put a building in front of it. Park in the 50s, that's never going to be residential. Well, Park north of 59th is residential. So just let it creep down five blocks. Don't say never.

I learned something. We'll get on to the real show in a second. I learned something interesting. You know the building on 6th Avenue, the Hippodrome? Yeah. Okay. Do you know why it's called that? Yeah.

You do. Nobody else knows. Why, why, why? You definitely do. There were not hippos there. No, the building that used to be there was named for the original horse race track, Hippodrome horse race track. Yeah. I don't think it was designed to be a horse racing track, but it was an homage to the original Roman building.

Bryant Park, before it was here, was like a lake. Oh. It was like a reservoir. And the Hippodrome, which is a couple of blocks south, was actually a horse track. Really? Not horse racing like we have today with thoroughbreds. Almost like a circus. Like horses racing camels and llama races and like rodeos.

Wild West guys would come and do Wild West like Buffalo Bill shit on 6th Avenue. Wow. So it really was for horses. It really, really was. Hippo is, is that Latin or Greek for horse? Yeah. Drome track. It was literally, we had a giant horse race facility outdoors on 6th Avenue.

Well, not to pound on this point, but just drive back to the markets. There used to be something called the New York Horse Exchange, set up in 1909, 1910 by J.P. Morgan, and it was the Winter Garden Theater. Oh, wow. So the Winter Garden Theater was the original New York Horse Exchange, and five years later it shut down because no one collected horses anymore. Right, because cars came along. So anyway, I think the moral of the story is never say never, and never count out New

Yorkers' ability to find something to do with the space that we have. All right. We're going to start the actual show. This maybe got a little bit too New York-centric. What are we doing with Gina Martin-Adams? So let's start with something that she tweeted. I thought it was interesting. She said, retail sentiment towards equities is now worse than any points of 2009. And what she's

measuring is the AAII, bold minus bear index, which is below where it was in March 2020, which is pretty wild. So she juxtaposes that against institutions, which meanwhile are buying the dip. So I think what we have going on with the individuals are a few things. One, individuals are, as we've seen, particularly sensitive to the inflation that just won't stop. And also, a lot of these people ostensibly are picking individual stocks, and the individual stocks that they're picking have gotten absolutely mangled. I think that's a good point. Like, why would retail sentiment get this pitch black? We're barely in a – we're not even in a bear market for the S&P. It has to be a function to some extent of the stocks they're buying.

So the stocks they're owning, they're not in a bear market. They're in, like, the dot-com bust. Yeah. That's right. So, look, if you overlay ARKK on the NASDAQ from 2000, March 2000 for the NASDAQ, ARKK FeB of last year, the two charts are exactly the same, like to within a couple of hundred basis points at any given point over the last 15, 16 months. So there is that kind of blow up going on. But I would say that keep in mind that money flows, mutual fund money flows have been positive into equities this year. The flows have been out of

bonds, into stocks, and into commodities like gold. And the flows have been net positive. And it's basically been a swap. People aren't adding anything to their 401ks on a net basis. They're selling their bonds. They're buying stock. And they're buying gold. And that's the trade. It's not a net add.

But they are cycling into stocks. Isn't that rational? But wait. But how weird is this? Because we were saying that rising rates were initially the impetus for stocks to fall. But now rates are rising so much that people are like, all right, F it. I got to sell my bonds. And what do you do when you sell your bonds? We were joking around about that. But I think that's, you have to do one or the other in a

retirement account. We haven't seen outflows out of bond funds in like ever? I want to say ever. And I've been looking at this data for 20 years. And I cannot recall this steady a drip of outflows. There was a massive flush in March of 2000, like $340 billion out of fixed income because people just panicked. Hey, wait a minute. Can I say, Josh, that maybe we were like 100% wrong on this? Because my suspicion was that there was going to be sort of a cap on how high rates can go because there's so much money that is desperate for a 10-year at 2%. And it looks like actually, I might have been exactly wrong. Yeah, the flows say we continue to have higher yields. But this is like one of the cardinal

rules of Wall Street. Money has to go somewhere. It doesn't evaporate. It'll evaporate like an 87 and evaporated. But aside from that, it goes somewhere. And it is going out of bonds and into stocks. And if you look at the weekly flows from the ICI, you see that it goes in on big dips. That's the dip buying. So we've never had outflows from bonds, but we've also never had a 30-year at 2.4% yield with inflation at eight. So if you're going to ask in what environment would we have outflows from bond funds, this would be it. Yes. Good point.

Pretty much the only thing you could think of. Yes. Short of maybe the treasury saying that they're not going to make payments. This would be the only other thing that could happen. You were talking about some behavioral stuff that you threw in the doc I wanted to get into. So working for Steve Cohen at SAC, we talked about that just before and meeting with the house shrink.

How often did you actually have to do that? And what do you think that did to either help you or what did you learn from that? Yeah, so just to set this up, the way everything worked at SAC was you were given a pool of money and your job was to make- Sorry, what years were you there?

99 to 01. Okay. Good years to be there. Good years to learn. Yeah. So your job was basically you got X dollars. Here's your pad. Make absolute returns. You can be long, you can be short, you can trade options, whatever you want, but you got to show a profit. And the ideal situation was a profit every single day. And the way they taught you was, okay, here's your initial pool of money, call it $10 million. Your job is to make $1,000 a day. Just like Buffett. You know, they viewed it as a craft, not a skill. Trading is a craft. And so your job was to make $1,000 a day. You do that for two weeks. Okay, now set your goal at $2,000. What do you mean by

that, a craft versus a skill? Like investing is a skill, profiting every day a little bit is like industry almost. It's a craft. It's like cooking. Okay. It's like cooking. Like your output is, here's the $1,000 I made today. Yes. And if you made it at 9.55, you shut down your pad and you work on the next day's trades. Okay. If you had three things up and two things down, and those two things down were threatening your $1,000 a day, you sold them that second. The overarching discipline was make your $1,000 a day. Once you got to that for two weeks, cool. Make $2,000 a day.

It's a pretty laid-back environment. You know, it was – I had been on Wall Street for over a decade when I sat there for the first time. And it was three linear feet of space, kind of like where I'm sitting right now, four screens, and Steve about 14 feet away. How did you get in there and why did you want to go? I covered the auto industry, which is a fantastic training ground for understanding macroeconomics and financial analysis. But it is a horribly structured industry with not very good managements, at least back then. It's better now, but it was horrible back then. This was GM in the 90s, losing market share every year.

To Toyota, Japanese. So after a decade of doing that, it was enough. And then I had a buddy who was also at First Boston who was going there. He said, come with me. And so we went. It was pretty much that straightforward. And it was just a new challenge and interesting thing to do. So you got there, you get your, Here's your pad. Here's your goal. $1,000 a day. Boom, boom, boom.

OK, now $2,000 a day. Boom, boom, boom. And you're by yourself. Yeah, you're sitting here. You have your own P&L. Yeah, you're sitting in a room with 40 other guys, but you're all doing the same job. And there's a little screen up in front of everybody's trading pad, a little box of a small CRT screen that shows you how everybody's doing that day. So you can see how you rank versus everybody else.

And it's moving? Tick by tick. Oh, my God. And everybody can see who's blowing up that day or who's doing well. And you know where you rank. So it's like a weird individual team sport. Yes. It's like Twitter, but with money instead of retweets.

Horrible, horrible nightmare. So every week you sat down with the house shrink. His name is Ari Kiev. And he's written a bunch of books. You can't buy them on Amazon, but they're on eBay. And he was a sports psychologist that Steve had hired to help traders understand how to trade better. And we began every session with, okay, tell me about all the things you did last week. Okay, what'd you buy?

Okay, I bought 10,000 GM at a quarter. Okay, why? Here's my catalyst. Okay, how did you feel when you started that trade? Like literally, how did your body feel? And for years, I thought this was just a typical shrink kind of question. Like, oh, how do you feel about that? Like a throwaway.

Yeah. Like, tell us about your childhood. And then I started reading about behavioral psychology more. And I realized that he was leveraging a very well-known concept. And it was really started with something called the Iowa Gambling Test, which is a very simple video game. You got a screen up with four decks of cards. And your job is to just pick from among the four decks of cards. And you get two points for every red card.

And you get a point subtracted for every black card. And you walk into the game thinking all four decks are the same, but they're not. Two are better than others, and you can win more points if you're just picking from the two good decks. So they strap you into like a stress measurement, like, you know, galvanic skin measurement. And they see that the subjects, after about 10 rounds, 10 picks, are beginning to feel stressed when they hover over a bad deck, but they keep clicking the deck. The bad one. The bad one, because their brain has not yet registered and accepted the fact that there's two bad decks and two good decks. Only after 40 or 50 rounds does the brain catch up to intuition. Okay. And that's what Ari was trying to get us to understand, is that if you

know what you're doing, your intuition is going to work faster than your brain. Oh, so the anxiety would start before the intellectual realization washed over them. This is why I'm anxious about this because it's a bad day. Nick, you wrote your body actually tells you what's right and wrong fast and your brain lets you accept it finally. That is fascinating. Yeah. And that is absolutely true.

And it's true in every feature of your life. This is why I think trading is fascinating as a hobby or a career or anything else. It is trading is like life. If you watch somebody trade for a day, you know more about them than their spouse. Could you substitute the word trading for gambling and have that be equally true? Yes. Okay. It's just the context in which you do it. It is how you manage risk and how quickly you accept that you're wrong. And how you respond.

And how you respond. I'm saying gambling, the connotation is i'm i'm uh doing something speculative or reckless investing in trading it's like no i'm wearing a tie you don't understand but i think even at a poker table blackjack uh craps whatever you see how somebody responds to winning and losing how their attitude is like if they're impossible to be around when things aren't going well for them, like all of that. You learn in two seconds. Yes, you do. It's all the same thing. So did you find value in your sessions with Dr. Ari?

Yeah, they were tremendously valuable. They were valuable for two reasons. First, to kind of create that positive feedback loop in your psychology so you understand why you do what you do. And it's not just in trading. It's also in every other part of your life. Okay. So what happened

after 2001 you just like okay i'm glad i did this but yeah it's a great it was a great way to make a lot of money but it was hugely stressful personally like like not the kind of lifestyle that you wanted to lead for longer than you did yeah how do you turn that off when you get home you don't yeah no i was trading japanese auto stocks at 2 in the morning and happy to do so. But he created that. So that's a self-imposed stress factory that he obviously enjoys. It's a different breed. Yeah, a different breed is sort of – it's a nice understatement.

Steve is, first of all, a genius. Yeah. Like solid level. Like, solidly. Like, batnik level? Or like, what are we talking about? Intelligence or like, control of his emotions? All of it. All of it.

And that's what's so amazing. Like, everything from little things, like, you know, he'll just have this intuition, like, why is this stock moving? And he'd likely stand up. Everybody in the room had a nickname, so I was Wheels because I covered the auto industry. So Wheels, why is GM down a point? And so the way I dealt with that was I just had a discipline of writing down every single catalyst that could affect every stock that I covered. And so I'd walk over my book.

It was a physical book, a big binder book. And say, OK, here's what's going on. GM's CFO is up at Fidelity today. And he had Mexican the night before because this broker took him out. I happen to know he hates Mexicans. He's guessing. So he's probably not very happy at these client meetings today,

and he probably is not really talking. That's the level of granularity that was expected, and it worked. It worked fantastically well, but it taught me, okay, stocks move for very particular reasons. There's always a reason. There's always a reason. There's always a reason.

And you may not know it, but there's a reason. Really? Yeah. You don't think there's any random walk on a day-to-day basis in any ticker? I think the minute you accept that as your paradigm, you begin to lose. So you could have a stock that starts the day down 4%, ends the day up 6%. No actual news hits the tape, but there's something going on that some people know. Yes.

Okay, I would buy that. Yes. I would believe that. And your job at SAC was to know that thing. Hold on, but both things are true because it's better for most people to believe it's random than to think that they can know why. But you guys might know why. Yeah. But so how do you disentangle the way a stock acts intraday from what the overall market is doing?

Isn't the answer for Steve sometimes somebody big is selling the ETF that the stock is in? And that's just what it is. It was simpler back then because this was pre-reg FD, pre-reg AC, pre-reg NMS. You had a very straight-up structure. On a New York Stock Exchange stock, you had a specialist and they made the book and they knew what was going on. It's much different now. You didn't, and you didn't have

the same algorithmic arbing. Now the right answer might just be that, hey, Procter & Gamble and Colgate are trading too far apart and there's 15 algos that trade 100-day trailing correlations and they're jamming them together. He doesn't want to hear that shit though.

No. Okay. So somebody is sitting at 0.72 telling him stories still about every stock in the book. No, he'll just hire the algo guys. Okay, got it. So he's always kept a step ahead by doing that. Yeah, I don't want to sound like a huge fan boy,

but yeah, he is the most influential. I saw the tattoo, so it's too late. He's the most influential person I've ever worked for. We'll get a shot at that for Instagram. Is he? Yeah. Okay. Just in terms of like a no excuses approach to thinking about the world.

Before we move on from him, what's the one thing most people don't know about Steve Cohen or SAC? Or what's the thing that people tend to get wrong from the outside looking in, people that have never been there or met him? He's very calm. Okay. So he's not throwing his keyboard when a trade doesn't work? No. Or when the feds are kicking the door down? He's very calm.

He's like Iceman? He's just process. Yeah. And that's sort of maybe what I took away more than anything is whatever you do, have a process and stick to it. And even if things are going wrong, stick to your process. Is that the kind of people that tend to work out there? Yeah.

Same demeanor? Yeah. So they don't have hotheads there. They don't have people that are passionate about stocks. Oh, they're all passionate, but- Competitive. You can't be emotional. Okay.

Like everybody yells. Steve yelled. I yelled. Everybody yelled at something about somebody at some point, just a stress relief. But the process is, what's your catalyst? What's your in? What's your out? What's your stop?

Okay. And that's like the way of life there because you can't survive without stops, without reasons for what you're doing. Yeah. And ultimately, it also taught me like that – and I heard this first from another trader, but it stuck with me. Prices lead fundamentals. Oh, I totally believe that. Not always, but it stuck with me. Prices lead fundamentals. Oh, I totally believe that. Not always, but it's a better general rule than not. If you're going to believe one thing.

So, okay, I love that. So you have a stock that's every day down a half a percent into earnings. Stock gives up like 11% into earnings. Which direction is the surprise more likely to be in? Yeah. I 100% believe that. So there's nothing random about that. That's some people being better informed than others.

Yeah, the way I internalize it is a basic rule. You never buy a new low, you never short a new high. Okay, I like that. You writing that stuff down? Ever. Yes? All right. Give me this Ryan Dietrich tweet.

Let me give it to you. It's right in front of you. You give it. No, but give it to me on screen so that it's in front of Nick. And give it. Give it. Give it, Duncan. This is crazy.

The S&P 500 hasn't had an update of less than 1% since February 16th. That is nine updates in a row of at least 1% gain or more. The last two times it did this, June 09, April 2020, not the worst times to be bullish. This is what bottoms look like, I guess. Like relentless 1% up days that don't let you in if you were too bearish. I don't want to believe it. Like just fundamentally, like I don't want to believe that- Well, you have a sample size of two. Yeah, but no, but dude, it matters. Like aggressive buying off of the lows, I think matters. It's, what do you think about this?

So this is supposed to be bullish? Well, I think it's supposed to just describe an atmosphere that's rare. Hold on. Here's another data point that jives with this. So this is from a guy named Sentiment Trader. He said that there's been five times in the history of the NASDAQ that we had back-to-back daily gains of 2.5% following a 52-week low. Four of those were at bottoms. The fifth was October 2008. So I guess the point is that aggressive buying after a washout is generally pretty bullish. Right. OK. So on the NASDAQ, I can see that because I just did the trailing 100-day and

200-day returns on value versus growth for the Russell and for the S&P. And it got to two standard deviation extremes on March 14th. Value outperforming. Yeah. Wow. So we are at two sigmas on value versus growth. So I'll buy the NASDAQ trade. I get that. This is harder. This is harder because, yeah, it's not a big sample size. And because the downdraft we have to think about is 2000 to 2002, which was a low vol grind that was just soul sucking. And it went on and on and on. I remember.

And it was nothing like 2009 or 2008 for that matter, which were much more cataclysmic downs and then backs up on fiscal policy and monetary policy. If you look at the bear market rallies from 2000 to 2002, and you think about what stocks were doing during those, where I remember stocks like JDS Uniphase being up 75 points in a day. And you were like, thank God. This is one of my favorite charts that I ever made. Nick, I got it right here.

So this is 2000 to 2002. This is the S&P 500. And these are all the S&P 500. Right. And these are all the bounces along the way. Yeah. 12% bounce, 7, 8, 19, 21, and 21. Get faked out so many times. All the way on route to a massive, massive climb.

So do you know where we are today on this? Where do you think we are? On like an ARKK, which ARKK looks just like the red line. Where do you think we are? I don't know. Where are we? Right there, right on that dip. Okay.

Right there on day count. So the fake out bounce. If this rolls over, it's going to hurt a lot. That rip was on the Fed cutting rates. And then we ended up with 9-11 and the Second Gulf War. Enron, WorldCom. There was like this whole litany of bad shit. We all agree that if this bounce fails,

it's going to get ugly quick. Yeah, because that bounce happened off the Fed cutting rates. Fed's not cutting rates. So that's the part that I have trouble squaring the circle. I have trouble accepting the balance because the Fed is hiking, obviously. Inflation is not slowing down.

Companies were already warning of forward guidance coming down, which is why they were getting killed in the first place. So there's all of these headwinds. We haven't even begun to digest higher commodity prices with consumers. And stocks are bouncing. So, OK, my rationale for this bounce in the last two weeks is one point. Positioning? VIX. OK. OK, so the VIX average for 1990 to now is 20. Standard deviation is 8. Okay? So 28, 36, 44, and 52 are 1, 2, 3, and 4 standard deviations.

The second standard deviation, the 36 level, is super significant. What was the VIX close on March 8th? North of 30. 36 and a half. I didn't realize that the VIX has come down like this. Yeah. That's what's happened. Eight days out of nine, we've been rallying.

Right. Because we got dramatically oversold, and we hit that two-standard deviation level. This is like a big part of the work for our clients. And we probably repeat it too much, but it's like, no, 36 VIX is super significant. Because if you don't rally on a 36 VIX hard- Something seriously is wrong. You are screwed. Yeah.

So it's worth betting that you will. You got to try. You got to take your shot at 36. Okay. So it worked. It worked. And VIX is nothing mean reverse. Sub 22.

Now it's sub 22. It doesn't really mean reverse. It oscillates. No, it does mean reverse. It literally mean reverts to 20 but. This is a huge but. When it doesn't? There are times. The VIX everybody thinks oscillates like a sine wave. It literally mean reverts to 20 but. This is a huge but. When it doesn't? There are times.

The VIX, everybody thinks, oscillates like a sine wave. It doesn't. Okay. It goes up and stays up. From 97 to 03, the VIX was consistently over 20 that entire period of time. It's a regime. It's a regime. Yes.

And from, I want to say, 07 to 13, for a whole range of factors, VIX got to 20 and always came back up. And then you have those long periods in between where the VIX can get to 10. 2017. Which was what we just came off of. It was 10 the whole time. We had a short bout last summer, fall, of a 16, 17 VIX. We didn't get to the 10 handles that we used to get. No, no.

I feel like 16, 17. 2017, the VIX was like 10, 9, 8, the entire desk. I used to work with an options desk at the old firm, and they were ready to blow their brains out for years. Do you remember the articles that Wall Street bonuses would be low this year because not enough volatility? Yeah. You would say, wait, now they want?

I thought they wanted, like what do people actually want? They want action. If you're a banker, you don't want volatility. If you're a trader, you want volatility. You need it. Okay. Bankers have higher ROIs than traders. Okay.

So now what? So now we've had the VIX collapse once again. Yep. We've had eight out of nine days of just relentless 1% rallies. By the way, another one today. Another one today. So what is the right way to think about this? Now there has to be follow through

even if it's a slower moving upside? To me, what I'm telling people is the minute the VIX gets to a 2.0 spot handle, sell. Okay. Because that's the VIX collapse and you got the benefit of that already. It's 21.6 right now. Right.

So 20 handle, 2.0 handle. So today's Thursday. Conceivably, we could have another really good day tomorrow that takes the VIX that low or it needs a little bit more time? It probably needs a little bit more time because we've had this very big rip and it's been very consistent. So it probably does tread water. This is what makes this market so hard because, okay, you know where we're heading in terms of monetary policy.

You know where we're heading in terms of inflation. You know what's happening with oil. The Fed is going to slam on the brakes deliberately now. However, if we walk in Monday morning and there's a ceasefire in Russia, Ukraine, S&P is up 5% that day. They'll go limit up. Yeah, I agree. That's why you can't get too bearish here because that's the thing that would make everybody all of a sudden say, you can't get bearish here. You couldn't get too bearish there. Yeah.

When everybody was bared up. Right. Well, all right. So, so hypothetically we get that ceasefire, which forget about the stock market. Obviously we all want that for the same reasons.

Like we want the killing the stop. Then you get the relief rally, but do you get new highs? Because you're still dealing with inflation. But we just got the rally. What if we sell on the ceasefire? I mean, I wouldn't bet on that, obviously, but like- No, no. You can certainly have a big-ass rally and you might get close to new highs for probably not a bad reason. And that is you got S&P net margins at 12%. Pre-pandemic, they were 9.10. With the tax cut in 17, they were 10.5. And now you're talking 12. And if you get a good economy with inflation pricing power, you can get to 12.5, 13% net margins. With oil and gas prices fading.

With oil and gas prices fading and perhaps a better consumer psychology going the back half of the year. And then all of a sudden, you're talking about 240, 250 on the S&P in terms of EPS. And gigantic buybacks. Gigantic buybacks because valuations are not linear with margins, right? You get a certain valuation at a 10% margin. And if you get an 11%, 12%, 13% margin, your valuations go logarithmic. Shit, I just got bullish. It's all marginal dollars. It's $340. Go put some longs on. I want to talk about this,

how to look at historical data and price charts. We debate this all the time. The point that, can I quote you? Yeah. To you? Maybe this is too general, but I spent a lot of time thinking about it. The S&P 500, for example,

has seen such large changes in sector weightings over the years that looking at prior returns is tricky. It's all we have, but I'm with you on this. Energy was 20% of the index in the 80s. Now it's 4%. CPI in 1974 was 25% food. Food is 13%. Sick. Wow.

Food is 13%. Sick. Wow. Food inflation was huge in the early 70s, 15%, which is as much why inflation was such a problem as energy. But some of the same problems now, but just looking at headline data, this is some of the stories. So we talk about this all the time. Is this chart related? This is. The unemployment chart?

Or no, that's something else? No, that's a pretty clean data series, actually. Okay. So tell us about why this is so important to you, because I think we're on the same page here. Yeah, so let's take the S&P, for example. So S&P 1980, after oil prices have run for a decade and energy company earnings are huge, is 20% of the S&P. So when you look at a long-term chart of the S&P or look at S&P returns, because the late 70s were fine for the

S&P. It was down, I think, 4% in 80. But it was in between two big rallies. And it was because the index was hedged against inflation. Because it was so oily. Because it was so oily. Right. And it's not the same way now. Why did I say that wrong? Because the oil stocks were so large. It was funny. It was oily. So a quick story. When I used to call on Fidelity all the time, they had a so large. It was funny. It was oily. So a quick story. When I used to call on Fidelity all the time, they had a chart room. This was pre-internet.

So if you wanted to show a bunch of charts to PMs, you literally set a room. And it was a room about three times the size of this room. And it was just every PM's favorite chart. And invariably, it was always the most favorite charts were- In Boston? Yeah. OK. I've heard of this room.

JC's told those about us. The percentage of the S&P that is every sector because the way PMs would trade them is to look at the band of where the weightings were and then try to pick off tops and bottoms. And energy, even in 2010, was 10% of the S&P. I remember. That's like three. And now it's just breaking four. Okay. So my bet on energy is just straightforward.

Like we need this stuff. We need these companies. They're going to make a lot of money. That is waiting is going to go up. That's probably, I think to me, in my mind, the easiest trade for the next two years. And they're not going to race into the fields with new drilling projects because they're actually, the CEOs are actually enjoying having profits. Yes. All of them.

Almost like a cabal. And also enjoying some social relevance that isn't just on the back of ESG criticism. Right now, they're a defensive asset. Like having our own supply of natural gas and oil is like- It's like having your own Air Force. It's like waving America's flag. I love this idea of looking at the historical data with a grain of sand because so much of this changed. It would be like comparing like John Moran to Bob Cousy. Like they're both playing the same game, but it's completely different.

Or another example, just really fast, housing inflation. Okay. So prior to 1983, the CPI measured housing inflation using interest rates. So the higher the interest rates were, the more housing inflation occurred. And that's why you got, and I have the numbers here, CPI peaked at 15% in March 1980. Three points of that was just interest rates going up 30% over the prior year. Because that's a cost. Right. So what did the BLS do? They changed it to the current owner's equivalent rent calculation in 1983. So you stopped imputing housing prices through interest rates, which is why you haven't seen housing inflation anywhere near as high as the early 80s, because it's a totally different calculation. Look at the CPI

chart, you wouldn't know that. Right. So that's apples to oranges, if you're trying to compare this era versus that era. Yeah, apples to bowling balls. It's nuts. Right. So what do we do prospectively if we say, okay, I want to incorporate historical data into how I allocate across sectors or my return assumptions if I'm doing financial planning. Like, it's evidence. I don't know how relevant all of the evidence is, but it's better than nothing. So what do you do about that? All right.

So the number one thing right now is a very basic issue. How much do corporate earnings hedge you against inflation? Let's say that you are going to have a period of high inflation. Versus stock prices, corporate earnings. Right. Are we saying the same thing or no? Tangent related. Because obviously stock prices can go up on the back of lower interest rates with earnings the same.

But on the other hand, if you don't have the interest rate story, you really have to have the earnings story. And that's the situation we're in right now. Yeah. There's a lot of work done. And I think it's largely true that in the 1970s, corporate earnings rose at the same pace of inflation. So owning stocks was a reasonable inflation hedge. Like you held your value from 1970 to 1980 owning the S&P. But now they're outpacing. Earnings are outpacing inflation. So far, yes. And because it's a different set of companies.

So what you really have to believe is, okay, are tech companies immune from inflation or do they have inflationary pricing power? Because like we were saying, in 80, it was energy, right? Oily, oily index. What if this time it's the reshoring and onshoring of like a whole host of cyclical things that we are no longer going to do outside of the United States. And it's all these factories now being built to make chips for the

auto industry, for example. And it's like, what if that's the new tailwind for corporate earnings? Those companies could theoretically get bigger in the S&P. I know they're not that big, the cyclicals. But it's a story that's got possibility, right? It does. Okay. It does. The offset is how much more does it cost? What is the-

But if you, okay, I agree. But who cares about the cost if we're spending it here? You care because let's say a car goes from costing 40 grand to 50 grand, just to pick numbers. But all being assembled by American workers. Right. Is it a net win? No, because demand for cars might decline.

Okay. So it's unsustainable. Actually, Nick, can I ask your opinion as a former auto analyst? What has been your stance on Tesla all these years? Fascinating company. I can back into why it should be worth a lot more than a traditional car company, just our reinvestment rates. So GM and Ford have to reinvest some portion of cash flows back into ICE. Tesla does not. And if we've learned one thing, it's the value of reinvestment

rates. And this has been true for the last 10 years. If you as a company have a high reinvestment rate because your thing is the new thing, your valuation is going to be a step function higher than the companies that have to reinvest cash flows and things that are not going to have that same competitive advantage. And they still are investing. And even though their future is electric, they still have no choice because they have the existing manufacturer. There are still 5,000 powertrain engineers working on internal combustion. Right. How many are there at Tesla? Zero.

Right. What else do you need to know? That's interesting. So the input cost is as important as the potential market share debate. To me, it's more just you're reinvesting cash flows in the right way. We've seen with tech stocks how much of a crazy valuation you can get if your reinvestment rate is extremely high. If you were advising Mary Barra or Ford, would you tell them, spin off the electric already, give it its own equity, have there be a legacy GM and then a GME

that's like, well, GME might be taken, that ticker. The old GME was Ross Perot's EDS letter stock on GM. Oh, really? Yeah. Okay. Would you advise them that they should continue what they're doing, which doesn't seem to be working valuation-wise, or do something more radical? So here's the thing.

They absolutely have to spin them off. And actually, a guy that I used to work with— These stocks are horrible, by the way. Yes. Ford and GM. Yes. Right, okay. So they absolutely have to spin them off. There actually a guy that I used to work with- These stocks are horrible, by the way. Yes. Ford and GM. Yes. Right, okay.

So they absolutely have to spin them off. There is no doubt about it. They will not spin them off until the next recession when they need the capital. So in that respect, Ford is better positioned because at least they're setting up the dual business structure to be able to accomplish that. I used to work with a guy named Daniel Ammon, who was an analyst, an investment banking analyst at First Boston. He became the CEO of GM Cruise. And he just got fired at the end of last year for pushing too hard for a spinoff.

He wanted Cruise to be standalone. Yeah. It would be worth so much more than it's worth inside of GM right now. The problem is the minute you do that, the valuation of the existing company goes down dramatically. The old co goes down dramatically. It's like paying one of those extraordinary dividends, special dividends. Right. Same thing.

So Ford is going about it the right way. They're setting up the dual structure. They're doing all the things they've got to do internal to the company. So if and when you get a recession, you can do a partial spin of the EV company and get the capital. Because the big issue is not so much corporate structure. It's how are you going to fund EV for the next decade? Well, Cruise is not EV. It's autonomous.

Correct. And they just bought out SoftBank's stake this week. Yeah. What does that mean to you? Is that like a very bullish signal of what they think Cruise is about to do or just cleaning up the books? It feels like cleaning up the books

because I think we all know AV is still some ways off. Yeah. Well, you would know better than anyone. Yeah, it's hard. We're going to talk about that stuff later. What's this chart? It looks like unemployment versus is this unemployment versus itself or versus

yeah, put this back. Nicole, put this back up, the Fred chart. So what are we showing? It's just so weird how low the unemployment rate is given where inflation is. What's the takeaway? Let's set this up. What is this telling us?

Yeah, so this is one of the things we do a lot of, which is look at these rates over multiple cycles to really understand where we're at. This is like headline unemployment rate. Straight up. Right. So the point here is just look at where the lows are for the 1970s, 1980s. Like people think of the 80s as a pretty good time in economic history in this country. Unemployment never broke 5%. To the downside.

To the downside. Yeah. In the 1980s, you got just there. In the 1990s, that was actually the hottest economy, the late 90s, early 2000s. I think we ever sustainably had that. What is that, 3% at the low? Yeah, just – Early 2000?

Yes. Like now. And with the highest? Yeah, just- Early 2000? Yes. Like now. And with the highest participation rates of labor of any time in history. But that's related to the age of the average worker. Yes. That's a demography story too. Yes, it is. That's my dad's generation being at their peak earnings years.

Yep. Okay. And then the point now is just look at how quickly we've come down. It's wild. And this is a very hot late cycle economy right now. I mean, this is sort of a simple way of expressing something I think we all know, but in a graphical form where you understand

it is really a special time. Last week, there were 189,000 unemployment claims, which is the lowest since 1969. Nice. When the workforce was half the size. Right, so how do you have a recession with less than sub-200,000? Things would have to get really bad for a long time

in order to cool off the labor market. Or am I wrong? No. Are 5 million open jobs going to disappear in a month? It seems very unlikely that we can cool this labor market off without a real recession. And that's exactly the problem. Which is your point.

Which is exactly the problem. Okay. Is that what you're showing here? Or you're just making the point that- No, this was just to put the frame around this very long-term record. This is where we're at. And if you think about where we're going to go from here, what's a recession? It's a decline in growth. But you're- Okay. So this is you.ell says he wants tighter financial conditions what exactly does that mean corporate spreads mortgage spreads stock prices what ultimately he wants to see fewer job openings good luck so wage inflation declines um but can that happen

without a recession never has before at least from these levels of inflation. So where does this leave us? Are we rooting for recession so that the Fed can do what they're trying to do? It's weird, right? It is weird. To be in this position. Look, on the one hand, your best case scenario is just get the stock market down 15%,

have your recession, clean this all up in six months, and then you're off to the races for the next 10 years. Reset. Because the Fed has done what they needed to do, and then you can go back to a more normal life. That is not what's happening now. What's happening now is you've got a Fed that is going to be pushing very hard and they want to see investment grade spreads up, high yield spreads up. They want to see mortgage spreads over 10 years up. They want everything to cost more. They want the cost of money to rise so that the

aggregate demand declines. They want less bank lending. But they can't say that because that's off message for the midterms, for example, is to say we're trying to materially impact the capital markets in a negative way. You can't really say that. No, and this is the hard part. Like you said, you have these 5 million job openings. They're not going to go away. So how do you convince corporate America to stop trying to hire every warm body? Robots. Is that where you're going?

All right. 10-2-year treasury yield spread. This collapsed faster than I thought it would. We're at a flat yield curve. It was steepening like a week ago, it feels like. Thank you. So is this going negative like this summer? Why is my phone going off?

Why won't it stop ringing? It's going to your phone, your computer, and your watch. So I've got it declined here. All right. So what's going on? You know, look, so why do we care about this chart? We care about this chart because this is like one of the most closely watched recession indicators on Wall Street. So is the 10-year minus two-year treasury yield spread? Right. Okay. Does this cause the recession or is it the signal that enough people think there's

going to be a recession? I've heard both. I think it's neither. I think it is a signal that the yield curve is sufficiently brittle that the next bad thing that happens pushes you into recession. Okay. Is it true or have you seen any data that people say banks borrow short, lend long, and so when the curve is inverted, there's no incentive for them to lend? In fact, it's the opposite. They're disincentivized to lend. Is there any data on that? And that's what causes the recession.

Yeah, and so it's tightening of credit. You don't believe that. Is there any data on that or is that just what causes the recession. Yeah, and so it's tightening of credit. You don't believe that. Is there any data on that, or is that just what we say? I think it's intuitively correct, so I think that's fine. But if you go back and look at the history, like – By the way, that was Campbell Harvey calling. So we'll pop him on speaker to refute whatever you tell us next. When you look at this chart, right?

Okay, so go to 1990. So yield curve is flat, right? Then Iraq invades Kuwait. Like, boom, there's your geopolitical event. Go to 2000, yield curve goes flat, right? Then you have dot com and 9-11 and Gulf War II. Then you go into the financial crisis. And every single time, what it's really telling you is the system is brittle. That's the way I interpret it. And the curve inverted right before the pandemic. Yeah, that's right.

The curve caused the pandemic. The curve inverted in the fall of 19, and everyone said, myself included, well, let's not be so hasty because X, Y, and Z. And then the pandemic was like, LOL, here's your recession. Would there have been a recession after the pandemic? Who the hell knows? How would we know? It's the same as with oil prices 100% gain year over year in WTI

creates a recession or it correlates with a recession It also correlates with this chart What's this US 30 year mortgage rate quarterly change What are we saying here? Mortgages are now 4.5% average mortgage.

That escalated quickly, as they say. Yeah. Okay. What are we looking at with this? All right. The risk here is pretty straightforward. You get a decline in house prices or the house prices stop going up at the rate they have been for the last year and you lose a little bit of wealth effect. The offset to rates is wage growth is still quite strong.

Employment is still quite strong. Don't we need home prices to come down or at least stop going up? Isn't this really unhealthy? If you look at the five years prior to 2019, home prices had not been growing very quickly. And if you look at the whole period from 2010 to 2019, the CAGRs are slower than most prior historical periods. So it's catch up?

There's a little bit of catch up. And what we really need, honestly, is more houses being built because the demand is going to be there. And again, we keep cycling back to the same endpoint, and that is, how do you bring down housing demand? It isn't with rates. It's with fewer people employed and a recession. But again, we're back to the demographics. There's like a lot of household formation and just people that want a house. So if you tell me a story where the mortgage rate knocks the average selling price down 5% or 6% or 10%,

I probably would say, okay, on balance, good for the economy. This chart is horrible. Because more people could afford to start their life. Is that the wrong way to think about it? That's the way I think about it, but you can't exclude employment from that calculus. Okay. So if it happens and you get a recession and you get, you know, all those job openings

get pulled and people- Then the demand will subside either way. Okay. Look at this chart from Redfin. The mortgage payment on median asking price is up 25%. I mean, this is nuts. Over what period of time? I'm guessing year over year.

But what this isn't even showing is like, how are people coming up with down payments anymore? Well, now you have to borrow even more money anyway. And then how big does the down payment have to be, you're saying? I just think so many people are getting priced out. I mean, not I think. I know it. Well, the answer is you're selling a house to buy a house.

So you've got capital. You've got equity. I'm saying new buyers. New buyers or no. I mean, you have to rely on one of the mortgages willing to get 3% or 5% down payment. Right. So home prices were up 20% year over year at their peak.

That works in favor of the retiring boomer who bought their last, sold their last house. And now they're going into a community. They're maybe renting there, but they're maybe moving in with a adult child, but they're not buying the next house. If you're in, you're good. If you're in a house, you're good. Right. For people trying to get in one for the first time, it's brutal. Yep. Okay. Bank stocks. What do we think about the financials rally seems to have petered out when the curve steepening stopped and started to flatten.

Yeah. So banks don't want rising rates, period. They want rising rates with a steepening curve. Is that the right conclusion to draw from that? Yeah, but I also think it's tied into this whole growth value rotation. Value just got so overbought. Banks are all value stocks. And banks are all value stocks. So I do like financials, but I think we got way overextended in value generally. So speaking of correlation, so the chart that we're looking at is the KRE, which is regional banks divided by the S&P 500 with the 10-year. And they generally move pretty closely and they've started to

diverge. Until last week. Yeah. I think it's more of a value. Where's money going? Just value got overbought. Yeah. I mean, we seem to have hit a turning point in value versus growth in the last week. And you can kind of tell a story about the next move. If we start worrying more about a recession, then where do you cycle to? You cycle back to reliable growth. And if you look at all the big tech, like look at NVIDIA today.

Yeah. Like NVIDIA was one of the only two stocks among the big tech that had been lagging the S and P everything else has been working. I think up 10% today. Holy shit. That's NVIDIA. And that's because they had the GTC. And this is Nick. This is a Russell 2000 today. Holy shit. That's Nvidia. They had the GTC conference. And this is, Nick, this is

Russell 2000 value divided by growth. Pretty significant pullback. Because it was a two standard deviation move. That's super significant. Why is that the level? It just so happens to be where it gets super extended? Yeah, if you look at long term charts of most financial data, and we do this for

everything we can. One-stranded deviation is almost always noise. Two sigmas begins to be like a real signal. And it's not just like, oh, the market magically reverts. Every algo on the street does this math every tick of the day. I remember you were doing a lot of the VIX of sectors. Yeah. You're still doing that work?

Yeah, we did it for tech recently. Okay. And interestingly. What did you find? Tech is not as volatile as it was historically relative to S&P. It was like a tech VIX versus like the VIX of just the- Why is that? Because these companies are now

cash machines. Yes. They were seen as defensive at one point I think last year. They might be again. People were saying- Apple and Amazon could be defensive stocks again. You might have said is Apple safer than bonds. You might have said it. Yeah.

I probably did say it. Just look at their cash. How much of that market cap is bonds? Apple was the ultimate safe haven this year so far, right? And okay. So among – Among tech. Among tech.

So Apple is beating – Look at that run for Apple. Right. And that's the value growth rotation. And that's the value growth rotation. The inverse of the value growth rotation. That low is March 14th. It's not in the dock. Any thoughts on Berkshire being an absolute horse this year?

I mean, that stock has been miraculous, even relative to- By the way, you look at Berkshire, you don't even know that there's anything going on in the market. You think bull market. What is that about? They just have so much cash and insurance premiums are inherently a good inflation. And haven't they been the biggest beneficiary of the value rotation? Yeah. But if you're thinking about what's the safest thing, it's the Apple of non-tech stocks.

And they own a ton of Apple. And they own it. So you get both. Right. We want to talk about crypto with you. You were saying that you were the first guy on Wall Street to write about crypto with you you you were saying that you were the first guy on wall street to write about crypto like as a strategist yeah okay where were you writing that crypto at convergex okay and bullish yeah you were yeah why it's a cool technology when

did you write about it first like 13 i want to say like august 2013 holy shit okay and i got the most random guys coming into my office after I started writing about it because I would get quoted about it. And I met people like, oh, I started mining this in 11 and 12. Like the weirdest people. Dudes with like shorts and flip-flops would come into my office. Like this was a button-down brokerage firm. Yeah.

And just want to talk about what they were doing. And I just thought it basically had one thing. Distributed technology that wasn't hackable. And to this day, Bitcoin's never been hacked. You can hack an exchange. They haven't hacked the blockchain yet. Right, right. And that's what is an unhackable technology worth?

Are there any others? No. If man makes something, man can unmake it. Right it right other than this how can that be true the code is is too complex to hack it's because you don't have you like a 51 attack would be like the most logical way to go about it and even then you can't figure out how to create a powerful enough algorithm to solve back to back to back google Google's quantum computing isn't a threat to encrypted blockchains? I've always thought the way you know the first quantum computers lit up is because Bitcoin goes to zero.

Okay. That's super bullish. So that's how you'll know that quantum computing is real. So do we think that they're wasting a trillion dollars on nothing or it is real? Quantum or Bitcoin? No. Quantum. They're in a lab right now. it's in their other bet segment nobody's asking for any roi on this right it's uh minus 40

degrees in the lab so that their shit can work this is like ones and zeros that can change into zeros and ones or halves or quarters or sixteenths. All right. Forget about understanding the computing part. I never will. But if people are saying, like, this is the thing that could unmake blockchains because of how powerful and how quickly it can run calculations, shouldn't we pay attention to that?

Or is it too far away to be worried? It seems to be too far away to be worried. He doesn't seem worried. Quantum is super – the reason Google – Sorry, complacent about quantum computing. The reason Google and Microsoft and everybody else is going after quantum is because you have to try. Because if there is an answer and you develop it, that's your next trillion dollars market cap. What is the promise of quantum?

Is it like we cure cancer by hitting enter and it basically searches every piece of data we have and tells us the answer to it? It's just yet. Look, I mean Moore's Law has been running pretty much nonstop since 1965. Yeah. It's slowing down. We're getting to a physical limitation on how fast a chip can run. We're in nano now. What else can you do?

We're getting to the point where atoms can jump circuits in a chip and create an error rate. So we need the next thing. I think I've been following you on some social media, and you've been showing the NASDAQ returns after bear markets. And that is all very valid, but Moore's Law was running hot and heavy during all those periods. Yeah. You can't rely on that jump in productivity anymore. Right. So yeah, when you double the power of something for the same dollar every two years for 50 years, you're going to get those kind of returns.

Embarrassed again. Embarrassed again. So quantum computing is almost defensive. It's not a luxury. If they don't figure this out, then what? Then eventually Moore's law slows down or stops and you're reliant. Look, and I think that's why the metaverse is so important. Because if you're designing, if you're thinking about technology for the next 20 years, you can't have Moore's law as your backstop. You have to now think about how you create scarce commodities where you used to just basically throw everything out there for free.

And the metaverse is ultimately like how do you lock up space in a virtual world that creates its own value and cash flows? How do you? By creating a metaverse where you say, okay – Like he's going to tell you. Yeah. I mean at some basic level, it's like, okay, if you have a stadium where there's a show going to go on, you sell the concessionaire spots. Okay.

So it's going to mimic the real world, how scarcity works, the metaverse. And it's just going to take 15, 20 years before mass acceptance that it's going to mimic the real world, how scarcity works, the metaverse. And it's just going to take 15, 20 years before mass acceptance that it's real. And you need at least one or two more flips of Moore's law to create the processing power to have VR actually be combined. Well, that's what I was going to say because when I saw Zuckerberg's announcement of the metaverse, it looked like Blue's Clues. It looked like a children's show. Yeah. Nobody's going to pay for that. Nope.

Or hang out there nope uh with him riding a cartoon skateboard it's just not gonna happen uh all right let's let's keep it moving would you get into a driverless waymo you believe as a everything that you know from the automotive industry and their capabilities and their hype machine. We know that they're running these things now in some cities, mostly cities with perfectly perpendicular grids like Glendale, Arizona or whatever. It doesn't rain. It doesn't snow.

Yeah. So it would be a little bit more challenging outside of your office or mine. Yeah. But what should we think as shareholders of, let's say, Alphabet, which owns Waymo, or Tesla shareholders? How real is autonomous vehicle? Real in terms of a five-year payback? How real in terms of that's something that we're going to be doing? I went out to a dinner.

I had a bottle of wine. I probably shouldn't drive home. I also don't want to get involved with an Uber. My car will drive me home and I'm good. Can I look forward to that in the next few years? No. Okay. That's very depressing to me. Why? The auto

companies seem to think that we can or they want us to believe that. They thought so five years ago. This is a very long promise. This is a much bigger challenge than anybody wants to admit is the bottom line. It is very hard. Because of all the variables? Yes.

Okay. And they also need to have the chips on the machine. You can't do this from the cloud because you can't react fast enough. The machine can't react fast enough. There was a hope that 5G would allow you to do some distributed computing on this challenge. But 5G coverage is not very ubiquitous, and it's still a hard thing to do. So, yes, it would be much easier to have it all be native to the car, like all the chips and all the software running in the car. For the last four weeks, outside my building on 57th Street in Manhattan, I have seen a Waymo van driving around collecting data.

But there's somebody in it. Yeah, they're here. It's a safety driver. They're literally here on the data collection mode. So all they're doing is having a dude drive around New York City all day long collecting data. Where does he stop? Where are the risks? Why did he stop when that blurry brown thing started to run in front of him?

And so they're collecting the data and trying. New York is the hardest use case for self-driving, I think, in the US because New Yorkers are such that if they see a self-driving car, they will step right in front of it. Oh, yeah. A day to hit me.

Yeah. Go ahead. What are you going to do? I saw, what's his name, John Voight pushing Dustin Hoffman in the wheelchair. Yes. I'm walking here. Right?

What was that? I never saw that movie. Is that Urban Cowboy? You never saw that? No. Watch it. I'm walking here. Right? What was that? I never saw that movie. Urban Cowboy? You never saw that? No. Watch it. Midnight Cowboy.

Midnight Cowboy. It's not that good. That's a great scene. All right, so that's what makes it so challenging is not the technology, but the environment. Yes. And we are a war-like people in New York. Yes. We almost want the confrontation

so we can tell people that it happened. Hey, you get hit by a Google car, it's 10 million bucks in your pocket. Yeah. Arizona, they'll wait on the curb for a walk sign. Even in LA. Yeah, we don't do that shit. People are always amazed when they see me do that, just wander across lanes of traffic. And I'm always amazed that they're amazed. So if you had to make a financial bet on Waymo, Cruise, or Tesla, understanding that they're buried within bigger companies,

but who do you think has an advantage or is it too soon to know? You know, I think GM has done a lot of good work. I think Cruise actually is pretty far along. How they monetize it, no idea. How they get the value out, no idea. It's locked inside the company. Tesla is going to live and die on the next couple million EVs sold in this country, and they'll sell them, and that'll be fine.

As far as a technology that changes the world, it's too far off. It doesn't exist yet? No. Okay. And it's too soon to know who might have it. Doesn't a company like NVIDIA and maybe AMD, to a lesser extent, win no matter what? Yes. Because GPUs are going to be so important to this?

Yes, absolutely. So that's probably being reflected in these market caps. Particularly in a case where Moore's Law is not working that well. So to make up for Moore's Law not running as fast, you have to specialize the chips. Specialize chips, higher margins. And you need nonlinear – you need distributed processing. That would be helpful. Right.

Okay. or you need distributed processing. That would be helpful. Right. Okay. If Waymo called you and said, we want you to be part of a test, you're going to have the car take you to work every day for the next month and just observe.

Would you do it? Sure. You'd feel safe, just not in New York City. Actually, in New York, it's safer because you don't go that fast. Oh, that's interesting. Carnegie Mellon has a lot of these autonomous vehicles, programs, and Pittsburgh is a horrible city to drive around because it's all the bridges and rivers and it snows.

But if they're trying things out there, you're saying like theoretically New York should be easier because – Yeah, there's no highways. It's a grid and you're driving slowly. Okay. because... Yeah, there's no highways. It's a grid, and you're driving slowly. Right. Okay. Sean added this. Search interest in electric cars versus price of gas. Yeah.

Is there a signal in this? There must be, right? Yes. Yes, there is. There is. What do you do with this? This is maybe the one best shot. Okay, so EVs are super interesting

because they are a very different product from ICE vehicles, right? And so my existential question is, are we going to have 3 million Americans walk into car dealerships in 60 months time and buy an EV? Because that is a big jump. If oil is above 100, the answer is probably

yes. Yes. What percentage of cars are EVs in the United States right now? Less than 10. As a percentage of the total fleet or sales? Whatever. So as a percentage of the total fleet, one. But new sales, what are we new sales? Are we at five yet? Yeah, I think we're at five.

But up from zero a few years ago. Yes. Five percent? Yeah. The question is, but there's a lot more. It's capacity constraints. There's a lot more coming. So the question is, are you going to get too many Americans to walk in and buy an EV?

100%. Yeah. I don't know whose EV they'll buy. I really doubt it. Wait, why do you doubt it? You don't think so? I think $4.50 a gallon at the pump is enough. So I'm a car salesman, and you walk in.

And you say, hey, I want to buy it. I'm thinking of buying an EV, but I'm here to check out your internal combustion vehicles. And I say, OK, so here's the thing. You're out driving for the day on Sunday, and you go a lot further than you expect. And so your car is down to like a 5% charge. You've got 30 miles left on the car. You plug it in. You go to sleep. One in the morning, your wife wakes up. She's super sick. You've got to get her to the hospital right away. The hospital is 35 miles away. Car is not charged. Car is not charged. Are you seriously going to risk your family's life because you want a cool EV?

Doesn't everybody have the charger in the garage though? What if it's not fully charged? Do you need a fully charged car to get to the hospital 10 miles away? Do you want to risk it? Well, what percentage of families are two household cars? Because you could have one. Anybody who works two jobs, which is basically all working households. So what if you got 50% of households to do that? What if you get half the household?

Right. So you got one car out of two. That's what I'm saying. That works okay. But I'm saying that there's a very easy pushback to say, are we really going to have that faster transition? Okay, so another thing. Okay, you want to buy an EV.

Cool. What's your resale value going to be in five years? The battery is going to be maybe last seven. After five years, that battery is integral to the car. Are you seriously thinking that car is going to be worth as much as the car I'm going to sell you as an ICE vehicle? Oh. I'm leasing. Okay.

So if you're leasing, then I'm going to impute. Cadillac Lyric. I'm going to lease a Lyric. Then I've got to impute a 40% residual on a 36-month, 39-month lease. Yeah, I acknowledge I'm not getting a good deal. I don't care. And so you're going to pay $1,500 to $1,700 for a $100,000 car on a lease. Fine. You might. Most won't. Yeah. Okay. There's not a big market for that. Okay. Now, the other thing is the dealer networks, Ford and GM, legacy dealer networks. Those guys don't want to sell electric cars.

No, they don't. And there's very little service contract value for doing that. There's a whole host of reasons that they don't want that. So you're going to have humans standing in the way of this just based on their own incentives, right? Yeah, a lot of that you know the product will be excellent i have no doubt these products are going to be great can you move two million units a year i don't know what about charging stations like are they around do they exist around here you just hit like the most important topic they're so hard to find so my

garage i have a car in new york and York, and my garage has one charging station. One dock for everyone's Tesla. Yeah. So alternatively, if you just got a lot more charging stations, and the US is way behind on this. So if you can get a lot more charging stations running everywhere, parking lots on the street in New York, if you can get there, you got a much better shot. How long does it take to charge a car, even just so that you can get back on the road versus filling up and taking gas? An hour. Oh, an hour? Half an hour. I mean, it really depends

on what level of charge you've got. Volkswagen's got some technology that goes much faster. But that's a huge pain in the ass. So I've heard the other way around though. As 300-mile capacity starts to become industry standard, the lack of charging stations becomes less and less important

because how many people are driving 300 miles in a day? It's very, very rare. Most people are driving five miles to drop the kid off at school or two miles to their job. Now, the average commute in the US is roughly 35 minutes and roughly 25 miles each way. Okay, so you can go a week without charging your car. Well- You wouldn't, but you could.

Right. You could. But this is a question mark. I get the math, but car buyers are very conservative people by and large because they're risking a lot of capital. This is the second biggest purchase somebody makes in their life after their house. And they've got to do it every three or four years. And so they're pretty risk averse. Right. And so- They have to get that right. They have to get it right. You have to get it right on how much it costs you.

You have to get it right on what's the out. Okay. So I'm not saying it's not going to happen, but to me, this is the one question that people aren't asking enough. Is demand going to be there? So we're all assuming if they build it, the demand is there, but it might not be that way.

And the auto industry has got 100 years of history of misjudging consumer demand. Yeah. Without a doubt. Absolutely. We wanted to go into just the food shock. It's so depressing. I think it's going to get better

very quickly. Just my own guess. But that all depends on the war. Do I have that right? Like, I know it's not going to go back to where it was, but I don't think it's going to be making extreme highs every month. Let's hope not.

Well, they grow more wheat. Like, eventually it can't. Isn't that... Doesn't that exist? It sort of comes down to, like, okay, not to be like inside it, but like, okay, Ukraine is a big producer of grains. It's the fifth globally. Right? Yeah.

So, okay. So how's planting season going in the Ukraine? They're going to miss it. So that's not in the price though? These prices are vertical. No, the issue is more second and third order effects. What does it do to social unrest in third world countries basically? Okay.

You're right. Super depressing. Let's not even go there. I wanted to ask you about the SEC's climate change proposal. So let me set this up. We don't have to spend a ton of time on this, but I was curious about your take. The SEC voted yesterday on sweeping rule changes that will require public companies to disclose climate-related risks and greenhouse gas emissions. Though many report some of this data, no mandatory standard exists, making it hard for investors to compare data across companies.

Gary Gensler said there is an efficiency that comes from standardization. Is this about protecting the end investor? Or is this about trying to get rid of behaviors we don't like from corporate America by punishing them with the need to file even more information? What do you think is going on here? So I think it all comes down to any investment process or approach that's going to grow in the 21st century has to be quantitative in nature. If you have to have humans doing it, it won't scale. And that's why Larry Fink is so aggressively for ESG, because it is a pathway to maintaining engagement with a new bunch of customers, but it has to come quantitatively. So the SEC is doing their part to try

to force the quantitative reporting so it can then be done quantitatively and algorithmically. So having a standard that if you use X amount of fossil fuels running your company in the course of one quarter, there's a number that we assign to that. Yes. And then investors can compare different companies' numbers on a ranked – how useful would that be for investors? I think if it's an important thing for you as an investor, then you like it. Okay. So it's not about you're not going to generate alpha by figuring out which companies are good at ESG. No.

But if you as a money manager have an ESG product that runs rigorously across these new disclosures. And you'd rather quantify than not. You're going to get more AUM than somebody who doesn't. All right. Do you think they're overreaching at all with this stuff, or is this just where the puck is going and they should be doing that? I don't know. I think of the entire focus of all that I do is just how do you make money in markets.

Right. I don't know how ESG helps. That seems like more of an academic debate. I think it's an important social debate. Social debate. What do we want to have? Should it be handled by the SEC versus Congress? I don't know.

I kind of think Congress should probably do it. Howard Marks and Larry Fink this week both wrote – Larry Fink wrote to BlackRock shareholders, stakeholders. Marks wrote his memo. The theme of both is the end of globalization. This is Larry Fink. this is Larry Fink Russia's aggression in Ukraine and its subsequent decoupling from the global economy is going to prompt companies and

governments worldwide to re-evaluate their dependencies re-analyze their manufacturing and assembly footprints something that COVID had already spurred many to start doing I actually think the start of this was really the tariffs and then COVID and now the

invasion of Ukraine. It almost seems like dominoes falling. It's a breakdown of trust. Like if you could just get turned off from the global economy, that's a big risk. So we're going to have basically two global economies in blocks. and psychopaths who don't give a shit about ESG or human life versus, I guess, 30-some-odd mostly Western companies that are really trying to harmonize society with corporations and two competing economic systems that it's like a global – it's like another Cold War. Is that where this is going or are these guys kind of overplaying recent history?

The way I think about it is does it matter to making money in markets? Well, it could. And the reason it could is because it creates amplified volatility like we have from 97 to 03 or from 07 through 13 and you just don't get a return. Like the S&P went nowhere for five years both times, and we're around for both of them. So it's just not old history. Do we get another period like that? And so far, the answer is no. But we could tip into yes. And that's the only reason geopolitics like this matter to an investor, is are we going to get five years of stagnant returns like we've had twice in the last 30 years? Now, why would this cause stagnant returns? Because companies

in the US that are counting on, let's say, emerging markets for some part of their revenue or earnings have to start canceling those plans. Or cheaper labor. No, it's all just margins. It's just ROI. Just margins, okay. It's stock markets live and die by ROE. So if you're going to tell me you've got to produce it all internally, ROE goes from 15% to 12%. Valuations go from 20 times to 15 times. It's just math. Once something like this gets going to the extent that it has, it's not going to reverse. Or what would cause it to reverse?

Yeah. A democratic election in Russia? LOL. A democratic election in China? Well, let's put it this way. How will we know when it's starting to happen? What do you mean? Like what single signal are you going to use

to decide this is now an important issue? Well, I gave you three that tell you it's all going the wrong direction. And I'll give you one that says it's irrelevant. Okay. Apple. Go on. Say more.

Right? So where's Apple big? Apple's big in China, right? The minute this all begins to touch Apple's ecosystem, I'll take it seriously. Meaning that they can't sell as much there or they can't manufacture as much there? I'm bullish again. Wait, no. It changed my mind three times in this episode.

Now you're bullish? Okay. Congratulations on that. Facebook's never been in China. Google's never been in China. Apple is that one thing. It's why it's China. Google's never been in China. Apple is that one thing. It's why it's the biggest market cap company in the world. It spans the gap between East and West, between autocrat and democratic.

It is the one ubiquitous thing. That's a more important signal than McDonald's leaving Russia. Yes. Like dollar-wise, it's so much bigger. It's Apple. Okay. That's a good thing for us to keep an eye on. Are you hopeful that we don't get to that point?

Or do you not really have a strong opinion one way or the other? It goes back to what we were talking about at the top. The way Steve taught me is you watch the tape. The tape tells you the truth. So if you start seeing Apple downtrending in an otherwise decent tape and there doesn't seem to be any news, one conclusion that you might be able to draw is sales are slowing, but another one might be, uh-oh, this geopolitical stuff might be having an impact. And Apple's been a rock star all year.

Yeah. Tim Cook is very good at keeping everybody happy with Apple. It's Tim Apple. Yeah, he's been fantastic. Fantastic. All right. Did you have fun today? We're going gonna do some favorites

but do you feel like we covered a lot of stuff huge what did we miss what did we miss I know I asked you a million questions but this is all stuff

I wanted to learn from you today what haven't we what haven't we talked about that we should this is meaty this is good stuff have we got

we got to everything right yeah okay have you brought us any favorites today any books that you I know you're reading probably five books at a time yeah okay what have you brought us any favorites today any books that you i know you're reading probably five books at a time yeah okay what what should we know about that we don't know about oh god the book you got to read is the silk roads by peter frankopan is it new no it's been

out for a while it's in paperback okay why it is this amazing restructuring of the human historical narrative around central asia and how all the different things that we've learned as individual nation-state histories all tie together through Central Asia, all the way from China, the old Silk Roads, all the way from China to the old Ottoman Empire. And you can understand history much more completely by looking at it from that region

versus just French history or English history or U.S. history. Because that's almost like a conduit between all of the cultures. Exactly. Is it over or under 400 pages? That's like my line in the sand. Well over. Oh, well over.

But it is. It's like J.R.R. Tolkien wrote it. It is well worth it. Well worth it. 2017. All right, so it's in paperback now? Yeah. Who's the author?

Holy shit, 672. I have a sense of it. What? I was expecting worse. Frank Gapan. Like who is he? Why does he have this? Oxford historian.

Okay, and you like it? God, it's so good. It's the best history book I've read in 20 years. You're kidding me. Wow, all right. What was the best history book you had read prior to this? Probably Gombrich's History of Art. Is there any book that you've read more than once?

Sure. There are. Oh, yeah. that you've read more than once? Sure. There are. Oh, yeah. What have you read more than once? Oh, golly. Michael's seen The Godfather a lot.

Does that count? What would you say is the most re-readable thing? Oh, probably Sherlock Holmes stories for me. Okay. I've read those probably a hundred times each.

So for entertainment, what's your favorite Sherlock Holmes story? Oh, Scandal and Bohemia. Why? It was the first one of the short story series. And it really is the only one of the few that actually personalizes the Holmes character

into something more than just this automaton of logic. Yeah, yeah, yeah. So, oh, he like suffers in the book or- He actually sort of has anything, he engages with a woman, which is very uncommon for his character in a way of, of submission and respect.

I prefer tomorrow. Never does. That's a good, that's a good one. Lesser known Sherlock Holmes. All right, Michael, what's your,

what's your favorite? Okay. Jackie McMullen has a new podcast on the book of basketball podcast on the history of the game. The icons, I think it's called icons. She'd started with Bill Russell and Will Chamberlain. And the second one

Was Julia Serving So She's always great On the Bill Simmons Podcast It's great Are you a Basketball guy

Sports guy Not so much Not Like literally Somebody asked me On some Some TV thing Recently like

Who do you like In the Super Bowl I had no idea Who was playing Yeah You were rooting For Dr. Dre Okay

Alright so maybe Skip Jackie McMullin's podcast. What about F1? You're a car person. Huge F1 fan. Okay. Should I watch that thing on Netflix? Yeah, you've got to watch Drive to Survive.

I keep skipping through it saying Duncan wants me to watch this. Nicole's nodding her head. You've got to watch it. You've watched it? Everyone loves that. Yeah, we're both F1 fans. John's an F1 fan. What do you like about F1?

I mean, obviously the cars. Is that enough? Going to Monaco. Okay. Have you been to that? Many times. Okay. What's that like?

I want to go. It is the craziest show you will ever see in your life. And it's only gotten crazier in the last decade. Crazy in terms of like the money that's there, the spectacle? Everything. Everything. Okay. It is an alternative universe.

You don't need the metaverse if you go to Monaco. How much of the race can you see from, like, it's not even, is it about just being in the scene? Yeah, basically you get on the grandstand facing the swimming pool. The whole Monaco Harbor is right in front of you. All the yachts, the cars come by for like three seconds, but they have TV screens all over this track.

So for the time that you're not seeing the car go by you can watch the tv and see the whole race what time of year is that may that's iron man 2 takes place in in monaco and that's f1 right yep okay all right so i'll watch the thing on netflix probably i don't think i'm gonna get there anytime soon um maybe someday uh you like stand-up comedy at all a little bit you do not nick's not nick's not big into it who are you watching the two they're new ish they're not that new earthquake is new so this guy was like uh dave chapelle's mentor it's earthquake a person yeah hilarious hilarious gigantic guy on what uh i think it's not there's both on netflix he's one of these comics that i don't

even think writes jokes the minute he starts talking you just start laughing okay and you can't like catch your breath i don't think i know this guy it's about this is about a 30 minute special and it's just relentless like you have to pause it to catch your breath he's one of the most entertaining people i've ever seen the The other one is Aziz Ansari. Do you know who that is? Vaguely. Yeah. So he kind of got canceled, and this is his comeback.

And he didn't really get canceled for doing anything so terrible. He went on a bad date with a woman, and she, like, wrote an article about it. And she didn't accuse him of anything, just, like, detailing excruciatingly how bad the date was but it was during this period of time where it didn't matter the severity of what you did you were harvey weinstein so he kind of had to go away and he came back and the best part of this special is his take on the internet and your phone and being trapped in a different algorithm from your friends.

And it's almost like living in an alternative universe. And I thought it was very cerebral for a standup, but it's still funny. Like it still works. And he actually has a flip phone now. Did you ever see that? Yeah. He's like, he pulls his phone out. He says, this isn't a prop.

This is my phone. But how does he get on Instagram? I have no apps. No Instagram. He has no social media. He said, the only problem is when I'm going to go somewhere, I have to write down the directions. That's my only issue with the flip phone. I mean, that right there.

Yeah. It's great. Very funny. Highly recommend the new Aziz. And he does it at the Cellar. And they have footage of him as an 18-year-old getting on stage at the Cellar prior to becoming famous. Anyway, all right. That's what I got.

I'm so glad you came. Thank you so much. Thank you. We took the liberty of booking you for next week also. So you'll be back on Thursday? Okay. You've got to have a lot of fun. I made him laugh.

You've got to have a lot of smart things to say, though. So start working on that. Good job, Duncan, working solo today. Not really solo. With Nicole. Shout out to Nicole. I didn't mean it that way. Working without John.

Right. Yeah. I should put. We miss John. Yeah. All right. Any announcements I'm supposed to make at the end of the show? So we have this week's review from the podcast.

Let's do it. Is that another bad one? No. Last week's wasn't bad. Last week's was good. So this one's from Bl the podcast. Let's do it. Is that another bad one? No, last week's wasn't bad. Last week's was good. So this one's from Blondie to Right, and the subject is One Stop Shopping. If you want an entertaining and highly knowledgeable podcast,

this is it. Josh, Michael, Duncan, and their castmates distill the week brilliantly into one podcast that makes you laugh uncontrollably while getting a handle on the markets, current happenings, what movies to watch, and even where to find the best burgers. Super smart and unassuming, you will come away happier and more connected and aware

of your world. Oh my God. So glad to have the opportunity to listen. Thanks, guys. I'm tearing up. Nick, is this the most Trumpian way to end the podcast possible? To have people read encomiums to the show? We're trying to give the viewers credit for doing a really nice thing, which is leaving reviews.

Speaking of algorithms, it's like one of the only things that matter is if people review your show. It's the only way other people will ever discover it. Until quantum computers. Who wrote that? Blondie to write. Okay. What are we sending her? We'll send her a sticker.

I feel like she gets more than that Okay We can send her whatever Yeah Okay Wrap this up Alright That was very nice

Thank you so much for your review If you haven't reviewed the show yet I don't really know what your story is It takes like 30 seconds And we need it So go do that Thanks to Nick Nicholas Colas

Let's make sure everybody knows How to subscribe To your research The landing page Tell people where to go how to subscribe to your research, the landing page. Tell people where to go. Yep, just go to datatreckresearch.com, and there's a free two-week trial box right on the front page. Perfect. So free for two weeks. And if you don't love it, you don't love it, but you probably will.

So datatreckresearch.com? That's us. All right. And where can people follow you outside of the research product? Twitter, DatatrekMB. What is it, Datatrek? MB for morning briefing. Morning briefing.

Just search on Datatrek, T-R-E-K, on Twitter, and we're there. How often are you tweeting? Oh, many times a day. Jessica does that. Okay. Does she reply to anybody? Sure. Okay.

Do you guys get any valuable stuff back from the Twitter interaction or is it more just broadcasting? It's just broadcasting our thoughts and a little soundbite through the day. We just try to keep it very tight and very informative. So a few tweets a day, get out of there. Next day, start over. Yep. Okay. So follow Nicholas Kolas and Jessica's work at datatrekresearch.com and datatrekmb on Twitter.

And we would love to have you back sometime soon. Love to be here. Thank you so much for coming. This has been awesome. Thank you. I feel like Michael and I learned a lot. This was so good. Nicole knew everything that you said, but all right.

All right, let's take us out of here. Thanks for the reviews, and we'll see you guys next week. That was so good. I think that was a good rough draft. We're going to turn on the machines now.