The Compound and Friends - This Is What the Bottom Sounds Like

Episode Date: May 20, 2022

On episode 47 of The Compound and Friends, Dan McMurtrie joins Michael Batnick and Downtown Josh Brown to discuss dotcom 2.0, the next crypto crash, executive compensation, earnings estimates, and much more! This episode is brought to you by our friends at Masterworks. Visit https://masterworks.art/compound to skip the 10,000 person waitlist. See disclaimer at mw-art.co/x. 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

I really want to, I think my favorite thing in London, my two favorite things is the Churchill stuff underground, that museum, and Westminster Abbey is ridiculous. It might be the best tourist attraction in the world. That's on our list. Really? Holy shit, you have no idea. Better than Times Square? Dude, it rivals anything in New York for like history.

Anything in New York. So, like, history. Anything in New York. So, tequila in the coffee. No, don't do that. Oh, my God. That's the right day, right? Don't do that. Right week. Yeah.

Is this biotech? No, it's Muni Buns. Oh, my gosh. Do you guys have coffee out here? Yeah. I like them in a dime. Do we have have coffee out here? Yeah. Do we have coffee made? Yeah, let's make him the pour over.

Look at this. Look what we got. Not the pour over. Yo, guys. Sean, I'm not going. What is this new funky mic switch? Is this old or new? You didn't change anything.

No? My buttons. They're registering, but I don't know. Oh, I got it. Yo, yo, yo, yo. No, for real. Because this is way too low. This is the move. This is perfect.

Put my mic on! Did you hear it? What? Turn my mic on? Put my mic on! Is this going to be the third week in a row with the poopy clothes? It's got to be more than that. Are the ribbons too destructural?

Yes, don't touch it. Apparently. All right. That's Michael's idea. Let's switch out Chewbacca. Give me Darth Vader. We should do it based on what the market's doing that day. Down days, Vader.

Up days, Chewie. Let's not spill it. All right, thank you. I'm sorry. So when I texted Dan the other day, Che knows we autocorrected to Champs or Champ or something. Oh, yeah, yeah. He's like, who?

Who the f*** is Champ? Bruce Champ. Chanos is like, sorry I got stuck in Miami. Try to go easy on former Jim. You want me to come on as Jim Chanos? Just be short everything you're long. Are we giving up all the gains to the close?

You want to hear what this kid asked me today? Who? You. He said, do you wear white jeans? Josh definitely wears white jeans. You confirmed it. I said 100%, no hesitation. You know how majestic I look in white jeans

between Memorial Day and Memorial Day? No, because we were talking about old douches that go to nice restaurants in white jeans. With the flower shirt. And I was like, oh my God. I said to Chris, Josh is definitely a white jeans guy. And I said, you wear white jeans? He goes, yeah, I wear white jeans. Let me set the scene for you. Roslyn.

Exactly. We were talking about Roslyn. Yep. It's about 8 o'clock. Sun is still out. About to set. What shirt do you wear with the white jeans? Bro, I'll wear the dopest Versace t-shirt.

Stop. You don't do that. Stop. You're not that big of a douchebag. You the dopest Versace t-shirt stop you don't do that stop you don't have that bit of a douche bag you don't wear Versace t-shirt the t-shirt with the gold chain print

not actually a chain no I won't do that I know you don't wear Versace t-shirts I will show up at your wedding head to toe white denim stop

and what are you going to do about it you know how sexy white jeans are in like July on the north shore of the island do you have any idea I'm sexy white jeans are in like July on the North Shore of the island? Do you have any idea?

I'm, I'm, I'm, I'm learning white jeans or no. Next episode. Yeah. I don't know. That's the next episode topic.

Oh my God. I know we're wearing next episode. We might have an old white jeans episode this summer. So the past, yeah, the past like three episodes we've been talking about bank of America did like this really pretty chart quantifying the hourly changes in the S&P year to date. And people legitimately don't want to be long going into the weekend. It starts out okay.

And then Thursday afternoon, it starts to get blood red. And then Friday, forget about it. Oh, yeah. It's horrific. And it's Thursday afternoon. And once again, we're fading into the close. Not good, bro. Again?

Wait, we were solidly green when I sat down. Okay, well, now it's 3.30. It's a good thing we have tequila. It's a 3.30 dump. I went into a meeting yesterday, and my COO was in the meeting in the corner on his laptop. And he's making this face. And I'm like. What's he doing this?

He's like. He does this like head tilt thing. And then we're walking out. I just look back and I'm like, you guys want to bet a dollar how much the market's down? And he's just like, you don't want to know. And then we walk back in. I was like, oh, that's nice. It was not like 80 basis points or something last time I checked it.

And then it was down 400. 100. Yeah, 400. Yeah. You know the scene 80 basis points or something last time I checked it. And then it was down 400. 100. Yeah, 400. Yeah. You know the scene in a Lunkin Polly? Oh, yeah, yeah. Where Philip Zimmer Hoffman's in the comments room. Oh!

Well, he should do that head tilt because like a relatively young emerging hedge fund, COO is gone. Yeah. Like portfolio management is the only stable – is the only safe job in that environment. But you're not young anymore. Are you talking about their fund? No. I'm saying the COO, if somebody has got to go, if you have to lose a six-figure salary, COO is gone.

Hey, are you still an emerging manager or are you past that? Yeah. No. You're emerging for like three years, right? I guess. I'm still beyond inconsequential in terms of AUM. So I think it's an AUM thing. You're like the South Korea. I thought it was a number of years. Now I'm boutique inconsequential in terms of AUM. So I think it's an AUM thing. You're like the South Korea.

I thought it was a number of years. Now I'm boutique, I think. Yeah, it's one step up. What's your inception? Return since inception? No, no, no. Oh. Don't do that.

Date, date. When did you start? There's all kinds of legal reasons why you shouldn't say that. Yeah, August 2015. Oh, you're not emerging. That's what I said. Your boutique is right. Yeah, boutique, yeah. We'll go with that. Boutique is – We're like you're not your boutique is right yeah boutique yeah we'll go with that boutique is like a bed and breakfast the bottom winnie the pooh yeah you're

the you're the tuxedo winnie the pooh right the monocle the monocle winnie the pooh exactly um all right so what do you guys both still on coffee i'm making the turn this is like my fourth coffee of the day all right this is michael This is Michael's new favorite tequila. We had it at Hunt and Fish because they didn't have whatever we ordered. You ever have this? You open that with the custom knife? No. It's just plastic.

I open that with a cactus. It's good. I open it on the ledge. There we go. All right. We'll get into that in a little bit. John, how are we looking? I think we're looking good.

Yeah? We're looking good, John. John's going to Cannes next week for the film festival. Oh. Yeah, I'm leaving tonight. Wow. Is that France? Monaco?

Monaco? Where is that? Belgium? South France. South France? Based on my memory of the TV show Entourage, it's in France. That's awesome. You just did some films?

That's right. They did go to – they went to Cannes. It was probably a Cannes joke. Top Gun? Somewhere in there. Oh, no. Cannes. That's the place from Entourage, right?

That's how it's known? Yes. No Paul Thomas Anderson bullshit, right? Oh, I'm going to be seeing so much of that. He's seeing a movie with Woody Allen in it. No. He's still doing movies? Woody Harrelson.

Oh. You said Woody Allen. No, no, no. There's two Wood No. He's still doing movies? Woody Harrelson. Oh, you said Woody Allen. No, no, no. There's two Woodys. That's the wrong one. Very similar. Because I asked you, I go, isn't he canceled? And you're like, I don't know.

It's France. That didn't connect. Put my mic on. Oh, man. I should have spoken up. That's the problem is I don't speak up. Don't lie. All right. Shout out to Woody Allen.

Harrison, I think. I meant Woody Harrelson. Not shout out to Woody Allen. Harrison, I think. I meant Woody Harrelson. Not shout out to Woody Allen. We won't... Alright, let's go. Before I say any more stupid shit. 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. Hi, I'm Josh Brown. Did you know- Did you see this Keith Haring? Yeah. Keith Haring is the real thing. Wait, that's for sale on Masterworks? All right. Did you know that you could buy fractional shares

of a well-known work of art, and then when that art appreciates and gets sold, you actually can get a piece of the profit. Have you heard of Pablo Picasso? This piece, 17 million. I can't afford that. What's that piece called? This particular Pablo is the home a la pipe. I already have that. Is it a la pipe? Come on. What? It's not a la pipe. A la pipe. It might be a la pipe. I don't know.

That's not what's important. What's important is that Masterworks enables you to add a new asset class to your portfolio. You can own fractional shares of well-known art by well-known artists, and it's a pretty cool way to diversify. So go to masterworks.art slash compound to find out more. And see the important disclaimer at masterworks.io slash disclaimer. You're going to have an awesome show tonight. I'm so excited. We have tequila in the room.

Stocks closed green today. Modestly green. It's 3.30. Do you know what time it is? No. Wait, where are we going to close? The market's still going. Oh, but get this lead down.

I'll let you know. Keep going. Where's the 10-year? Just keep talking. Give me a read on the 10-year right now. That's not what people are here for. I honestly think that that matters more than anything that's going on in the stock market. 2.75? Yeah, it's good. Keep it down.

I'm making that up. I don't know. All right, Dan McMurtry is here. And if you're a fan of the show, then you are definitely a fan of Dan's. Dan is our, uh, Dan is here for a 21st time out of, uh, how many shows? 46? 47. Is this your fourth show? I have no idea. I think so.

It is. Dan is not in costume this time. Yes, he is. He's a hedge fund manager. Yeah, I'm dressing as a hedge fund manager. Good call. Do you know the origin of that vest? Why that's a hedge fund thing? I have no idea. You just do it because everyone else is doing it? Yeah, I'm dressing as a hedge fund manager. Good call. Do you know the origin of that vest? Why that's a hedge fund thing? I have no idea. You just do it because everyone else is doing it?

Yeah, it's just I just – Josh is going to tell you. I feel like I need a vest. Isn't it a point – SAC? Yeah, it's an SAC thing. It's a Stevie thing. He just cut the sleeves off one day? No. So he kept his trading room like 60 degrees because he wanted everybody alert.

Does that work? I swear to God. So the guys are wearing button-down shirts, and then it's like they need a layer. So that's where the vest – Makes sense. That's the origin of the vested hedge fund trader and or PM. I didn't know that.

So you're carrying on a very important tradition. There we go. Dan's the founder and CEO and portfolio manager of Tyrell Partners, New York-based hedge fund. I did this whole thing for you. Focusing on trends in supply chain, technology, healthcare, industrial, and consumer markets. Dan is a partner at Anchorless Bangladesh,

an early stage VC fund targeting the startup ecosystem in Bangladesh. Dan has a wealth of experience in financial markets, including analyst roles at Griffin Capital Management, BP, Nuveen Investments, the Center for the Study of Financial Regulation, Oppenheimer & Co., and Junhee Law Firm. Say more about that. What is that? I was at Notre Dame, and I had a weird opportunity to go live in China for like a year and a half. And I was trying to get an internship in China.

And so there's a guy at Notre Dame who knew a law partner at this M&A law firm in China. And so in China, things just work kind of differently. So their judiciary branch, their executive branch are not separate. So, you know, there's a lot of stories about kind of white guys getting defrauded in China. And what you'll find is if something bad happens to you in China, you can go to the court and the court actually will kind of give you a reasonable ruling. They're going to give you a very nice piece of paper and it says, you're absolutely right. They stole your stuff. That's really terrible. And you're like, hey, can I get like enforcement on this? And they're like, oh no, we don't do, you got to take that to the party.

And then you go to the party and the party's kind of like, well, what's our interest in enforcing this? So if you're looking to do any sort of deal, you need to understand what the law says and also what the reality of the party is and interests, incentives, all this other stuff. So it was a really cool experience getting to see how that worked. I got to work on a couple big US corporates buying assets in China. And you can't technically own a lot of these things. So it's like technically a perpetuity lease. and it's just a lot of weird situations. The whole Chinese property market is 100-year leases. Right. Nobody owns property.

The party owns the property. Right. Well, the people own the property. Right. Which sounds a lot scarier than it is, right? Because you hear that and you go, that's absolute madness. But if the entire system is used to that, it does generally function as, you know, anything else would, but. Also, you're not going to own anything for a hundred years anyway. You can be dead.

Right. So, so why do you need to? So, but, you know, the risk is that kind of the tail scenarios. And if you're an outsider coming in, it's very, very risky and you don't want to go in there without, and so you hire a very expensive, nice law firm because they know the right people and they can tell you, they can give you the kind of the no bullshit answer on here's what's actually going on here. Here's what your actual exposures are, you know, independent of, it's kind of like you're looking at some of these, you know, this Twitter situation right now, and there's a certain legal interpretation.

And then it's kind of a practical reality of will the SEC step in something like that. We're seeing some of that in the United States right now, but in China, that's always been the case. I was going to say, don't you feel like that's the story of the last five years yeah where where people on twitter are outraged they're like oh did you see what they just did right and then it's like well what are you gonna really do about it and then a lot of things that we thought were laws turned out to just be norms and once you violate a norm and the initial shock wears off it's like yeah we, we just did that. We just drove a car through your house.

Speaking of norm, I hear there's like a Netflix special coming out. Yes. What? Norm. Oh, really? Yeah. Norm MacDonald apparently recorded a comedy special before he passed away. And he sat on it all this time?

No, apparently he did it like in the final weeks. And he did it alone in a room. And it's just him apparently saying whatever it is he wanted to say without repercussions. Can not wait. Here's what I really think. As if he was – like he was filtered already. He never cared. That's going to be good.

Yeah, but I mean I don't know. I'm already offended. I haven't even seen it. Right. I mean I just – yeah, I have no idea what he's going to say. But it's going to be weird. I have a feeling we're going to be fans of it. All right, good to know.

So where are we starting today? Are we starting with.com 2.0? Is this 2000 to 2002 all over again? I think it kind of is. I just think it's sped up. It's way faster. Yeah, it's- Everything is.

It's on a 5 or 10x clip, which is the way it's been. That's reasonable. I'd buy that. You know what the difference is though? Back then, interest rates were 7%. Right. And now we can't even handle 1% Fed funds rate. I mean that's a pretty scary situation.

Well, I kind of flip it around. Jim Chanos has a line where he says in 2000, there were a bunch of these companies that were $2 to $4 billion. And he made a ton of money in the short side. He's famous for Enron and these other guys, but what he'll say is there were all these other companies that were $2, $3, $4, maybe $5 billion. They went to $2 to $400 million. So they lost 90%, but they didn't start from $100 billion. Right, and now the same kind of concept stocks are $20, $30, $50, $100 billion. And so I just think the valuations, if you sort of scale adjust everything, it kind of makes sense. I mean, we were at a much higher level of absolute valuations for companies that were still – the companies were still kind of ideas from a business sense.

They hadn't really validated their economics. There are probably good reasons to think they could have, but they had yet to produce a dollar profit. And when you're dealing with a company where financially the valuation is all in the terminal value, it's all 10 years out plus profits, I mean, it's an opinion.

And so you're dealing with these crazy valuations. I think it kind of, I mean- Counterpoint, they have revenues this time. That is an improvement. These were business models. They were $4 billion business models, which I don't know which is worse. Well, I push back on the revenues thing because I do think there's a question of like how much money do they spend to get those revenues? And that's kind of the problem.

There's a lot of businesses that have $2 billion in revenue, but they spent $7 billion to get that. Does that really make sense? Here's what I think. The unwind is similar, right? Just the collapse is similar. And maybe that's where it ends. Mark Rubinstein, there's a few good counterpoints. Mark Rubinstein, I think this data is from the Luthold Group. The tech sector peaked at 34% of market cap in 2000, but it only contributed 8% of nominal GDP. This time around, it peaked at 27% and contributed to 18% of GDP. You know what the problem is with that though? What?

A lot of the companies that we're talking about are not classified as tech. So the semiconductors are, the software as a service companies are. I think they're reclassifying them. They're reclassifying Google. They're throwing in Amazon and Netflix. These are consumer discretionary or communication stocks. Here's some more good stuff. This is from Gavin Baker.

The trailing 12-month EPS for the largest tech companies. So Gavin Baker, just to set this up, is saying we're 21 months removed from peak big tech valuation, which is 2020. So we're 21 months removed. He said trailing 12-month EPS for the 10 largest tech stocks declined 73% in the 21 months post peak valuation in 2000. Trailing 12-month EPS for the 10 largest tech stocks today has grown 71% since peak valuations 21 months ago. So to approximate a 2000 style meltdown, earnings per share for the 10 largest tech stocks today would have to decline 73%, which is not going to happen. Last thing. So Gavin says this is

nothing like the year 2000 in terms of either valuations or bottom-up fundamentals. Last point, This is nothing like the year 2000 in terms of either valuations or bottom-up fundamentals. Last point, Y2K multiples would have taken the NASDAQ to a peak of over 30,000. Instead, it peaked at 16,000. What if he's looking at the wrong stocks? Take out the top 10 tech companies, and maybe it's probably more similar. So we're talking about Coinbase. Yeah, I agree with Gavin's point, but I think the way he's getting to it doesn't make a ton of sense. Why?

Yeah, I agree with Gavin's point, but I think the way he's getting to it doesn't make a ton of sense. Why? Because nobody's really – like in 2000, you're talking about Cisco, Microsoft, those companies at crazy valuations. We're not – Microsoft, Amazon, Facebook, Netflix has gotten – Those never got crazy. 25 times. These are not ludicrous. So the crazy was not there. It was one step below, which were still huge companies.

Mid-cap tech. Which were still giants. No, no, not even mid-cap. Large cap tech, not mega. Not mega. We didn't have that distinction back then. But think about like ServiceNow, Workday, CrowdStrike, which these were 40, 50 times sales. Here it is.

So Coinbase got to $75 billion market cap. It's now 14. Peloton got to 50. It's now five. Yeah. That right, here it is. So Coinbase got to $75 billion market cap. It's now 14. Peloton got to 50. It's now five. Yeah. That's dot-com shit. Yes. Yes.

That was, look, I, there's a lot of smart people who are losing a lot of money right now. And I don't think anybody wants, nobody wants to be like grave dancing or, you know, no mean to be, I'm not meaning to be disrespectful to anybody, but everything that's happening is exactly the predictable outcome that has happened since the beginning of time. There's nothing that's happening in any of these markets that is unpredictable. The commodity market, it's a classic capital cycle thing. We didn't invest for 10 years.

Now we don't have enough commodities. That's the day one outcome. You could predict the outcome, but not the moment it's going to matter. Right. And also the past there, I think what some people maybe miss is if you didn't play that game, it was incredibly hard to

survive the last five years. If you were different. I mean, even if you were a long-biased manager, if you weren't willing to participate in high multiple stocks, you underperformed so much that how did you stay in business? I know a lot of people writing really good letters who shut down their businesses.

What's his name at Horseman in London, the short seller? Russ, right? He shut down right at the top. It was brutal to make it through that period. And so like, you know, it's, it's, if you look at all the money managers that, and I think there was a chart last time I was on here about this, but it's kind of like an evolutionary process where if you don't have the right traits to survive in that environment, you die. But then if the environment changes, the guys who survive die. And I think that's just what's happening right now is yes, it's the obvious thing, but it's not like these people are still –

A really good example of somebody who refused to play the game and was able to survive, I think, on reputation and just people remembering. Right. This guy usually in the end ends up right. Carmen? No, David Einhorn. Yeah. He refused to play. He's definitely killing it this year.

But he kept a low profile. Right. Right? Like he wasn't out there screaming the fangs are overvalued. He stopped doing that. Well, he was in 2015. But I'm saying the last three years. During the pandemic, he was not on Twitter yelling at people about stock valuations.

He kept his head down. He stayed out of that game. And it looks as though once again, I don't know, maybe it's the fifth cycle. He's being vindicated. But you know what? It took so long to get here. But my point is there are not a lot of people of his stature that could have survived that. Based on reputation.

Well, yeah. And I think the thing is there's a pretty good number of money managers, fund managers, whatever, that have exceptional five-year records. There's maybe 10% of that number that have exceptional 10-year records. But then when you look and you get to people who have 20-year records, there's like no one. It's like 50 people ever, right? This is why. Because the exact thing that would allow you to survive the last five years will kill you in four months. Just over for you. And I mean, how many brilliant, I mean, all these guys have 50 50 iq points on everybody in this room put together and i mean their track records are impaired okay so so but

hold on here's another dimension to this a lot of this is where does your capital come from right and what expectations are you setting on that capital and very wisely a number of hedge funds 10 years ago started setting up reinsurance operations, which maybe is not powering the entirety of their hedge fund assets under management. But it's permanent capital. Permanent is the wrong word. It's coming in regardless of your performance because it's not coming from investors. It's coming from people paying premiums. You know who's done the best job of that? And people like to bag on him, but Bill Ackman.

Yeah, he did that. Is like the most improved player of his kind of like cohort, I guess, because he got tagged on Valiant. A few other things. He had just a rough period. He raised permanent capital in a vehicle that they can't ever take away from him. He stopped doing the things that weren't working. And then Bill's always had. What is he?

He has a publicly traded reinsurer in Amsterdam or something? It's like a closed-end fund. So you raise money. It's like a mutual fund, but you raise money once. When you're investing in a mutual fund, you're putting money in. New shares are being created. They're buying stuff for you. The closed-end fund, they just issue the shares.

Then it's a fixed pool of money, and people can trade the shares. But the capital is there. Right. The capital is locked up. So people can buy of like a company. People can buy or sell the shares based on perceived discount or premium to NAV. Right. But he has the capital to invest. Right. And it points, I think, that the discount to the assets was like 30 or 40 percent when people didn't have any faith that he was going to come back. But he didn't get any of the capital pulled from him. And the guy just continues to improve.

I mean, I'm incredibly impressed. And, you know, everybody was making fun that he made the Netflix investment and then he cut it. But I'm like, look, you're the best in the world at this. You're right 60, maybe 65 percent of the time if you're a god. You know what marks somebody that's not really in the business? A willingness to make fun of other people for having down positions. Right.

It's like, are you kidding me? Like, do you invest for a living and you're never wrong on anything you do? What are you saying? And Dan, to your point, 2014 Ackman would have held on. Well, he did. He did hold on.

He had multiple big positions move against him. Oh, no, no, no. 2014 Ackman right now would be in a 13D battle with Netflix and start calling the shots on what shows to make. Hey, you know what? Like starring in the show. Not only do I want two board seats, I want to be on the next season of Ozark. You know what's predictable in hindsight?

Actually, I think he'd be good in Ozark. I think he'd be great. Walmart and Target. Just this idea, like when that happened, I felt like such an idiot. Not that I short companies, but like these these are discount retailers for the most part. And of course- A little bit more discounted now, wouldn't you say?

Of course- Come on, John left. Of course- Heavily discounted retailers. Of course, they're going to have to absorb the inflation, right? And their margins

were going to have to get hit because they can only pass on so much cost. Right. Those are weird. Not a big shareholder. Walmart, Target. Yeah. Nobody owns those things. No, I mean, those are weird. Not a big shareholder. Walmart, Target. Yeah, nobody owns those things.

No, I mean, those are weird. Wait, why are they weird? So there's this really weird thing happening. And part of it, keep in mind the last X number of weeks, you've had a lot of major investment operations winding down. People are having to act for reasons that are not fundamentally oriented. You know, they're like, we have to stay in business. We have to return capital. We have something going on. We can't, you know, they're not just sitting there doing calls and building models or whatever. And so what was weird was leading up into

Walmart and Target's print. You know, hedge funds will pay experts, people who work in the field, whether it's, you know, a distributor of products or something, say, hey, like, you know, hedge funds will pay experts, people who work in the field, whether it's, you know, a distributor of products or something. Say, hey, like, you know, how's business? What's going on? What's the inventory situation? Because the company can't tell you things, but other people in the world can. And it goes back to, like, if you ever read, like, Peter Lynch stuff. So leading up to those, those are two of the biggest, most important economically companies in the world.

Yeah. If you talk to anyone who worked around any of these companies, anyone, they were all like, the inventory situation is just ass backwards. We have a huge problem. There was a shortage in 2020, 2021. Then it slingshot back. There was too much. At the same time, it slingshot back.

Keep in mind, when Target and Walmart want to have clothes for the spring, they've got to order that in Q2, Q3 of the prior year. It takes time to make this stuff and ship it. And shipping has been hard. So you had to over-order and order in advance to handle all those problems. And so the exact time all that inventory finally shows up, that's exactly when the consumer rolls over. And so there's a lot of people who are like, oh, they mishandled the macro or they mishandled the supply chain. And I'm like, no, you've never worked in a real company. They did not have any good moves here. And you know what's not a move if you're on Target?

Not having stuff because your consumers will leave. Does Target have macro forecasters on there? Oh, yeah. I mean they have – well, not macro forecasters. They're not – but they do. Of course they do. Target has a hedge fund telling them when to order children's clothing from China. Well, I think that's a really good point.

Sometimes in business, there's no win. There is – how do we lose less? I think you lose less by overordering inventory and then discounting it later versus people come to the stores and you don't have anything to sell them. I can't imagine that being smarter. Let's get back to the dot-com shit. John, throw up this chart. Well, at one point on that, that's, that's what's going to happen. That's going to be the story of the next two years.

I think. What is? There are going to be companies who overextended themselves and they're going to get stung because there aren't a lot of good moves for a lot of businesses. Shutting down your business is not a good option. Yeah. We don't like the environment. We'll see you in six months.

Yeah, right. We're just, you know, you know, Chipotle is no longer open. We'll see you when checking prices come in. That doesn't work. You can't do that. You have to. And the reason customers trust certain companies is good times are bad. They provide the service and they provide it at a reasonable price. And sometimes that company has to take a margin hit and sometimes company has good margins. And over the next year or two, and this is what we're focusing on at work, there are a lot of companies that are set up where, yeah, they're going to take a profit hit for one quarter, six quarters, you know, I don't know yet. But they are going to take so much market share from mom and pops, from regionals, from worse capitalized other players that can't afford

to provide a good quality product to their customer. Does that, so isn't that in line with the shift that we're seeing in flows to dividend aristocrat ETFs and Vanguard's high yield stock? Like people are back to return of capital versus return on capital. And they're looking for dependable businesses that have been through cycles before. Yeah, I think, I don't think that's necessarily why they're doing it, but it has kind of the same effect. So they're ending up with companies that are going to naturally, you can go out and you can take market share. You guys could go out there and directly attack another RIA.

We never would. Or just start tweeting them into the ground or something. I don't know. Or you could be in a position where other people go under and their client's like, where do I go now? Yeah, right? And so it's a survival game. And the companies that have built out really strong cultures, culture's going to matter a lot. It mattered in 2020.

It's going to matter now again because if you freeze up in these periods, the company that has a bunch of scrappy 25-year-olds running around and saying, hey, there's an opportunity here. I can go test it. We don't need a lot of money. They're just going to run laps around you. So you guys are buying WeWork?

Oh, my God. Is that what you're saying? That's exactly what I'm saying, no. But I think there's a lot of companies right now where if you're a mom-and-pop investor, retail investor, you don't need to run out to buy these companies. You have time to actually go and look at them and do kind of a Peter Lynch type thing

and figure out, okay, and is this company going to be a winner over the next two years if times are lean? There's a weird thing happening right now where people are like, everyone's bearish and everyone's looking for a bottom. It's hard for those two things to be true. But I think what you said is

one of the silver linings of this moment is that there's no rush. In 2021, 2020 and 2021, stocks went up every day. There was a 5% pullback in each of those years post the COVID bottom in early. And that's why you're seeing that sentiment because the thing that I'm afraid of as a long, short hedge fund manager is the big up day because that's when my outperformance gets obliterated. The market goes off 5%. My fund is up 20 basis points because my shorts go up five times as much as my longs. But confidence evaporated. So don't you think we're now – are we in sell-the-rip mode?

No. So my point is you don't have to – when markets are trending higher, you can't think straight. You're just like, I can't believe I don't own this. I can't believe I'm not in this. Get me in it. Nobody's in a rush now. That's why you see a stock go down 40% one day and then the next day go down 5%.

So I keep saying that I'm waiting for a higher low to just get a quick trade on these growth stocks. But stocks are by definition in a downtrend. We're making higher lows, right? I mean, I'm sorry, we're making lowerrend. We're making higher lows, right? I mean, I'm sorry. We're making lower highs. Yeah. We're making lower highs.

Yeah. So there's – what's the rush? There isn't. It's just – we're in a downtrend. There isn't because now they're talking about – now they're talking about the possibility of earnings tipping negative in the back half of this year. Nobody that just started investing in the last 10 years has ever seen earnings falling and multiples falling at the same time. Nobody. That's a double negative.

Well, that's what happened in the dot-com bubble is both those things. So, John, throw up this truck. But also, like, you know, investing is not gambling, of course, but let's use some gambling terms for a second. Did you just f***ing wink while you said that? Do we have that on camera? I caught a wink. All right. But everybody's bankrolls are getting just jacked.

Everybody has their asset allocation plan, but their bonds are trading like biotechs. Their crypto is trading like crypto. The snozzberries taste like snozzberries. Can I tell you what happened this week, though? What's that? Last week, I think, I'm not saying bonds bottomed. I'm saying there was a bottom.

Josh keeps calling them bottom. Josh keeps calling them bottom in bonds. I'm really not. But a bottom. TLT ripped yesterday with the market crashing, and that was not happening in April. That was not happening in March. Look at this. Yeah, it's a bottom.

A bottom. It's a bottom. Not the bottom. it's not a bottom it might be it might be there's your uh higher low it might be no you're right you're right you're right you're right high those months all right yeah you're good all right we're looking at price to sales ratios is this price sales or forward yeah price sales uh forward forward revenue multiples for public software companies shit got so out of control what is that uh blue what is that light blue line 25 times fintech of course it is so all right i'm just looking at i'm just looking that's the biggest

bubble of all the bubbles right yes more than evs no what about sass yeah snowflake one because these are sat fintech is kind of sassy there's there's not going to be a business there for fintech there's no pot of gold at the end of the rainbow somebody in evs payment for waterflow what do you mean? Snowflake went from $180. It's still at $36, which is hilarious. Uber went from $9 to $2. I mean, all of these things. What did Peloton

do? God only knows. Peloton went from Peloton went from $20 to $1. Peloton went from $20 times sales to $1 so— Yo, Peloton went from 20 times sales to 1. Because sales are falling. Look, can we just stop for a minute and acknowledge that people bet that Americans like to exercise? Dude, I was against that. I was on that idea. I said name one successful exercise or fitness-related company in history.

One of my dad's best friends growing up sold exercise equipment. I watch him live this cycle. I've seen him go through like 15 of these and every time the product's awesome. It's really cool. It's the coolest thing you're doing it. Everybody gets it. And then they just,

they just, and they die overnight. It's the most, do you know, do you know the science of hitting? Yeah. He has a great, he has a great newsletter.

This is Peloton subs, you over your growth. To your guys' point, just dead. I went through this on TV once. I was just like, what are we saying here? Are we saying all of a sudden, like as a society, we're all going to be healthy? And we're like, because think about how many busts fit in. Nobody's saying that. Well, at the time.

But this is impressive. You don't understand. This is impressive. It's not a treadmill. It's a platform. You don't understand, right? So obviously growth flatlined. But come on.

They went from like zero to a lot. And I know it was all pandemic, obviously. Yeah, I was just – I was waiting to come over the top with that. But yeah. It was all pandemic. You can see exactly when people get locked in their homes and can't do anything else. If you squint, yeah. Right.

Bally's Total Fitness went bankrupt. Town Sports. Remember New York Sports Club? DC Sports. Every single one of these. The only exception so far seems to be Planet Fitness. Because it's $10 a month. Because it's like average Joes.

It's like no commitment at all. Planet Fitness' business model is explicitly, basically, we're going to sell you this lie that you're going to go to the gym and nobody goes. And nobody cancels. And you're going to love it. And nobody cancels because it's 10 bucks. Yeah, I think it's like 5,000 members per store or something. The number is crazy. The only day you can't go anywhere near there is January 1st.

Right. January 2nd. Yeah. Don't go anywhere near Planet Fitness January 2nd. Other than that, you're fine. They sell pizza in the locations. The reason why I think it's like there's no, to Josh's point, both of, you're fine. They sell pizza in locations. The reason why I think it's like there's no – to Josh's point, both of your guys' points, there's no urgency here.

Even though the market got killed, we're only starting to see the ramifications of all the inflation. We're only starting to see layoffs. It barely – it really hasn't even started yet. Let's throw – John, throw up this layoffs picking up chart. It is only – What is layoffs.fyi? Is that the new hot site? I keep seeing that referenced everywhere. FYI.

Layoffs.fyi. I don't know about that. Is the website. Okay. That FT is citing. Yeah. I think somebody put up, put that up as like a, we're going to track. Okay.

Yeah. Yeah. This is a startup tracker. We got, we got a Netflix laying off 150 people that was announced two days ago. This is not that. This is startups. Startups. This is But this is not that. This is startups. Startups. This is not Netflix.

Well, this is going to spike. Both Walmart and Amazon said on their calls that they're overstaffed. Wells Fargo too. Wells Fargo is cutting. But those are the number one and two employers in America. Amazon, yeah. So if they're overstaffed, what are the odds that we're going to see a labor market this tight two months from now? Not good. Not good.

Not good. So – which helps the Fed arguably. Right, right. And that's – So we're rooting for layoffs. Okay. This isn't weird at all. Yeah.

How many job openings are there? There's no way to have this conversation. 11 million. I know – No, there's just 11. That could get cut in half. Those could be artificial. College-educated unemployment, 2%.

We can't carry on like this. I've met a lot of these people who went to college. Dan, what do you think about Coinbase specifically and maybe just like brought a theme on their stock-based comp? John, throw up this chart. Like as somebody who's like actually like an investor. How bad do you want me to make your comment section?'s like actually like an investor, like what do you- How bad do you want me to make your comment section? Like when you see shit like this,

what do you think? Wait, let's- For the audience. All right, I got it. In Q3 2020, stock-based compensation for Coinbase was $16 million. And I think they had 1,500 employees around, something like that.

So now in the last 12 months, they hired 3,000 people as, not that they could have predicted this, but retail transactions fell 58 percent quarter over quarter, maybe year over year. Now in the last quarter, $352 million in stock-based comp. As an investor, what do you think? The mic is yours. I think there was a – The mic is yours. There was a rap banger in the early 2000s called It's Going Down.

I think that's what's about to happen. No, I mean, they're in a very rough spot. I mean, they are in – crypto is in a really, really rough place because you've had kind of a branching out into the store of value type stuff. You've had the application-related stuff. Then you've got collectibles, other things like that. And then you've had DeFi. And I think DeFi's over. There could be a new Phoenix from the ashes here,

but a lot of this stuff were just straight up Ponzi schemes. You have Sam Bankman-Fried, who's the king, going on Joe Weissel podcast and just openly being like, oh yeah, it's a Ponzi scheme. You know how this ends. I couldn't believe, I still can't believe that. I admire the honesty.

You're talking about several of the major categories here getting completely obliterated. I think you're going to have to have not a crypto winner, a crypto nuclear winner, because there's so much nonsense. I mean, I always try to, I'm naturally very skeptical. And when I hear the pitches, I just like skin crawls. And so I'm like, all right, I have to listen to this because I'm going to have a bias and not listen. And then I go talk to these people and these people don't know anything about anything. What do you mean these people? Yeah. What do you mean these people? There's this meme of all these smart people go to work in crypto. Okay. Bullshit. Bullshit.

There's a lot of people who are like random middle managers at random companies. Yes, there's a small cohort of really elite coders, and they're running arbitrage operations and just ripping people's throats out, and they don't even know it. Right. There's some very sophisticated, really, really smart people

that's, you know, one quarter of 1% of the traders in this market. And then there's a bunch of people who don't know anything about anything. They don't know how computers work. They don't know how code works. They have no idea what the blockchain is. They don't know how, like,

they don't know how a bank account works. But they're flocking there because that's where the money is. Right. It's been free money. Yeah. You go in and it prints it. And then you get to join this cult of people that makes you feel very welcome if you're inside it

and not welcome if you're outside it. And they tell you you're smarter than everyone else. And they tell you that the whole world is a scam. And you know what? The world kind of is a scam because it's the thing called society where we're all like, we're all going to like- Yeah, we all agreed on the scam a long time ago. Right.

Yeah. Because it works. Right. And these things don't work. And I mean, I remember I was going to crypto conferences in 2015, 16. We've done this a couple, not to brag. And they've got bagel. There's no usable application.

There's nothing. And I'm tired of hearing about like all these smart people going in. There's absolutely nothing usable coming out of this space. Well, the usable stuff is for crypto people to do crypto things. Right.

But there's been an argument that that's how everything starts. Like in other words, if you went to a computing trade show in 1980, everybody there was building things for other computer enthusiasts. Steve Jobs had a booth, but nobody gave a shit what he was talking about. Because they were building things for themselves, which is how a lot of things do start. Yeah, I think there are people who are building very legitimate technology in the crypto space. But my point is that if you were to take

the top 100,000 posts about crypto on social media, there are maybe six that have to do with something that is legitimately technologically important. And the other thing I would say is when I talk to serious family offices, serious investors who are really trying to do the work, the things that they're investing in, I've never heard of in public from all these crypto people.

Like what? I don't think I'm allowed to say. Fair. But because they're all like- Cold fusion? Yeah, cold fusion, perpetual motion machines, that type of stuff. But there is so much capital that kind of has to be destroyed, and it's sucking up a ridiculous amount of resources.

I mean, it's incredibly damaging the environment. I think when you're looking at store of value, you're looking at some of-, you're looking at some of, I think NFTs in some form are going to exist. They're not going to be half a million dollars or a million dollars for these things. It's just not going to happen. But the major cohorts of this stuff

and the majority of the participants are going to zero. I think it's really messed up. I have a personal ethical issue with how many people, I had a friend from college who started this Facebook group where he was promoting people to go into crypto.

And it wasn't like Bitcoin. Promoting people to go into his coins? Well, I don't know what his relationship was, but it was all these kind of sketchy things I'd never heard of that didn't have serious developer bases and all this other stuff. And he got like 50,000 people in this group. And I was like. It was a lottery.

Well, I went and I posted and I said, hey. And he kept referencing me being like, my boy knows about finance and he likes this. And I'm like, it was a lottery. And well, I went and I posted, I said, Hey, um, and he kept like referencing me being like, my boy knows about finance and he likes this. And I'm like, hold on. Uh, we like had a beer once. He was photoshopping you into the t-shirt.

Something like that. Yeah. And I just went out and I posted, I said, Hey guys, like this stuff's really, really speculative. Please,

please, please only, only put money that you can afford to go to zero because understand that this stuff, 50% of the time at least, is going to zero. And also, if you're making a ton of money, take some off the table. Please. They blocked me from the group, and I got like 50 hate emails from people about how I was spreading FUD and trying to destroy all this stuff. You can't do that.

It's a party foul. Right. You can't make people think twice. This stuff doesn't work if somebody thinks twice. And what I mean by that is like when someone is like I'm building this thing, well, is it a bridge to nowhere? Is it a monorail into the side of a mountain? Or is this something that people really need that are not crypto people? The answer is always like, well, eventually we'll figure that part out.

And I accept that somebody will figure some things out. But I just don't have a tangible example. I had a debate with somebody ad hoc. Not my idea. I spoke at a young president's organization. You ever been to a YPO function? I actually went to one, yeah. Okay, so I went to one and I was the speaker.

And I made some comment like, somebody was like, do I allocate to crypto? And I was like, well, yeah, if you think somebody else is going to come buy it from you higher, then yes, it works. But if you think like it's doing anything in the economy, so far, no. And this kid flipped out because he's a crypto kid. So he's like, dude, the SWIFT system, banking system is being moved onto the blockchain. I'm like, oh, I missed that article in The Economist. When? And then of course, Barry Ritholtz is next to me.

He goes, yeah, I'm moving to Monaco. It's a lot of things that are going to happen, but they just haven't happened yet. I think when you see prices do what they've done, it makes a lot of people start to second guess. All right. So Dan's super bullish on crypto. We get it.

But in terms of – So we'll go to Coinbase for a second. Stock-based comp. What do you think? Right. So – one second. So my whole point is when you're looking at like a sector, right, sometimes what happens when you're looking at a sector is you find a business you really like. And then the thing just keeps going down. It gets obliterated, and you're like, what the hell is going on?

And what you miss, especially, and I remember when I was in college and I was looking at stocks, this is what happened. You miss is that it's the one good company among 500 terrible companies. So when those companies get obliterated, your stock's not going up, unless it gets bought out. Otherwise, it's dead. So I think crypto has that problem right now. There's too much dead weight. There's too much nonsense.

And there's a massive misallocation of resources, even if you were bullish on crypto. So I think that's really, really bad. And the number of participants, my point about the noise versus serious people is, the vast majority of participants, the retail traders, are the people that are going to get smoked.

And so I think they have a top-line issue in terms of number of customers and volume, just because their bank roles are getting obliterated. And so I think they have a top line issue in terms of number of customers and volume just because their bankrolls are getting obliterated. And those people don't come back. No. And Coinbase's financials were so good when it came public

because the margins for trading this stuff with retail people. It's like 300 bips, whatever it was. But it's an artifact of the pandemic. People had nothing to do with themselves other than trade things that they didn't understand. So even if you're bullish on crypto, you can't be bullish on crypto and then also think that the crowd is going to stay that naive. That's what Chat42069 thinks. Come on.

But come on. Like eventually, if this is really going to be its own ecosystem, then professionals are going to step in and you're not getting 20% on trades anymore. I know CTAs used to use this term. I don't know if other firms do it. They used to call it a round turn, like how much are you making on the guy going in and out of the trade. So they were making at one point north of 10%

plus whatever they were making on crossing the bid-ask spread. So these were insane profit margins on a lot of people who had nothing else to do. Now you have all of those drivers going against them. And then Citadel. And you have Citadel and FTX coming in. Right. Say goodbye to whatever your margins were. But no, it's interesting.

Everybody was saying that. And then it happened really quick. Right, right. That everybody was saying what? That the margins were going to get mushed. Yeah, so one thing I can say, I think, is that several of the smarter large money investors I know, I don't know, six, nine months ago,

I can't remember, time is a flat circle. I'm sitting there, what do you think of crypto? And they were like, well, we're going to back FTX and some similar things like that. And I'm like, well, what's the thesis? And they're like, oh, they're going to back FTX and some similar things like that. And I'm like, well, what's the thesis? And they're like, oh, they're just going to nuke Coinbase from orbit. Were you worried last week during the stablecoin run that this stuff had gotten big enough to be systemic? No.

And that it would be connected to the mainstream assets that you own for clients or whatever? Did you have that concern? If Bitcoin went to zero, would that have a ripple or a splash? Obviously. Come on. My fund is set up with a very explicit design where I'm saying, look, I buy things that have cash flow. I buy businesses where if they go down, the company will come out and will buy back a ton of stock.

Earnings will be higher next year. Relatively defensive, safe, like really boring. I only buy stocks that go up. So I'm with you. Yeah, I need to figure out how to do that. But so my stuff tends to be pretty volatile, but it tends to not be correlated with the market. And so it's, you know, for me, if the market just pukes 5% on a random day, it's usually a relatively good thing because I can come in and I go, okay, like, you know, it's an

opportunity for me. I think the fear was, what if we discover that JP Morgan's prop traders or, you know, Fidelity, somebody that's really systemically important, had a lot of leverage and or exposure to something that blew up and that would set off a chain reaction. Like that was the way people were talking that one day. We're five days removed from that. Crypto was $3 trillion or whatever the hell it was. No, it's 1.2. Fine.

It's much smaller now. How big was subprime? Now, I don't think this is as ingrained in the real financial system as mortgages but i'm saying like that that was the first time right that i think a lot of people really were forced to ask themselves am i in any way connected to one of these ponzi's that's blowing up yeah i i just didn't i just didn't see the potential for – I saw – I think there's a big correlation between – and you can kind of see it. There's a big correlation between like ARK

and the ARK-related stocks and the retail stocks and Ether and Bitcoin. Yeah, same owners in other words. Yeah, same owners, same traders. That stuff is pretty correlated. It tends to be stuff I'm short. Like, okay, it's fine for me. But there's no way that

you know uh a stable coin run by a lunatic uh is going to sink jp morgan what's your take on what's your take on this i i'm not on twitter so i didn't even know this person existed till last week so my opinion on this is not that important but i'm curious what, as an extremely online person, what's your take on Do Kwon? Is he a crook or just an asshole? Yes. Okay. I mean, there are – I feel like he lost his entire net worth in this, but what the hell do I know?

You're going to hear the same story like 50 times in the next six months where you're going to have people where a year ago they're saying i'm a coder of prodigious origin uh i'm a math genius i i can't even explain to you how smart what i'm doing is and then you're gonna play dumb and then they're gonna say oh i didn't realize that this is clearly mathematically a ponzi scheme yeah and uh it's a benevolent ponzi scheme right and see i think they need to put the system on trial. Again, yes, exactly. They need to explain why the dollar is the world's biggest Ponzi scheme followed by Social Security. Right. That's the only way out of this for some of these people. scheme and the dollar ponzi scheme is that the entity that backs the dollar can nuke our species

out of existence and the people behind the stable coins can tweet really mean things at you and it's it's it's similar okay a lot of ways so he's now apologizing to people i'm told on twitter off twitter he's calling people i think he right but allegedly there's been like 20 something suicides. I mean really real. Yeah, I don't want to make light of this. I don't want to make light of this at all. Part of me feels like it would be bullish for crypto if there were like some high-profile jailings.

Yes. Because that's really how you show that you have to be responsible with what you put out into the world. you show that you have to be responsible with what you put out into the world. I don't know anything about this particular case, but we really haven't seen high-profile crypto penalties like that. We've seen very low-level ICOs where people have gone to jail, but nobody knows who they are. One of the topics that has been popular on Twitter at different points is the issue around accredited investor rules.

And so the accredited investor rules basically say, they're misinterpreted. What they essentially say is, if you have over a certain amount of money, you're going to basically waive a lot of your protections. You're a big boy. You understand that this thing is levered or crazy or whatever. And there's an argument that they're ridiculous

and everybody should do whatever they want. And the commonly cited example is, well, gambling is legal, so why? And I agree with that sentiment. But the problem is the people who want this stuff repealed, the extent to which these guys have weaponized recruiting retail investors at this scale using social media and stuff like this, it's really unprecedented. There's different versions of it. It's existed for a long time. But I mean, you can go back and read Reminiscence of a Stock Operator,

and you read about the exact same thing that's happening in crypto happening in the 1880s. Well, Buffett did. The C-Weaponist, no, I'm only kidding. Right, you know. They've been doing, no, your point is very important. They've been doing this forever. They were selling fraudulent shares

in canals and railroads in the 1800s, and they used the newspapers, and they used telegraphs. They were selling penny stocks over the phone. John Law. But you could not reach 10 million people around the world with a 140-character tweet and literally recruit billions of dollars into a fraud up until three years ago. Yeah, and it wasn't nearly as controllable, and there's a bunch of other problems. And again, look, people want to speculate. That's not the issue. The issue is what happens every time is then something like what just happened happens. People kill themselves. People go broke. People starve. Terrible things happen. And then people

go bang on the doors of government. Where were you? And where were you? What the hell? Yeah. And you know, the joke is always that regulators are archaeologists, not detectives. And that's what we're seeing happening again. But, you know, to have it happen at the same time where everything else is melting down. I should question, though. Like a regulator can stop a traditional Wall Street fraud in progress and issue a cease and desist. They don't, but they could. No, they're – I've seen versions where they have – where they'll say three people just got robbed. Two of them complained to us. Right.

Oh, yeah. There are 20 ongoing customers who are not aware that this is a scam and we're going to put a stop to it right now. We're freezing bank accounts and we're putting out a – we're doing a press conference. Oh, they do a pretty good job of that stuff. I'm talking about the folks. How would you stop something like this in progress if you're a regulator? Congress hasn't even said you have jurisdiction over this. That's the problem.

It's a mess but but you know this one's a real mess because not only that but the amount of money that the crypto guys are putting into lobbying is immense yeah i mean there's hundreds of millions of dollars going to you know both parties now both parties and it there has to be regulation or this is going to end really horrifically they do seem to be calling for regulation the thing is they want to have a hand in helping to write it. Right. I think what's happening is you're seeing some players

get into these really dominant strategic positions. They're going to, let's say, theoretically just beat the shit out of Coinbase. And then once they're in kind of a pseudo-oligopolistic monopolist position, they go, okay, now we're ready for regulation. And then they're going to own the market. And it's really, really smart. But what is concerning and important is that we get to that point without a ton of people losing their life savings and

ending up in these horrible situations. This is less horrific news. So shipments of smartphones within China fell 40% year over year. And Apple is getting, for the first time in quite a while, Apple is getting the shit kicked out of it. And like, I feel like this has ramifications. I said that the market can't bottom until, until Apple and a couple of other stocks stop selling off. Apple just started selling off.

Yeah. Yeah. I know individual stocks can bottom, sectors can bottom, but the S&P can't like mathematically. It's a big, it's a big slice, right? I don't see a way where the S&P 500 stops going down and recovers while the FANG stocks lose another five multiple points. Dan, talk about this. Walmart got clocked again today, sort of target.

Modest Proposal tweeted, yesterday a 0.73 beta stock fell 12%. Today a 0.8 beta stock has fallen 25%. That is mildly disruptive to risk parameters. Yeah. Talk about this. I mean, I don't know what he said. It's basically obvious. But I mean, look.

It's blowing models up. Yeah, well, you're having a situation where- If you're looking for safety, you're overweight, low beta stocks, and they're acting like orc stocks. Well, you're just, you know, one of the things you're looking for safety, you're overweight, low beta stocks, and they're acting like ARK stocks. Well, one of the things you're going to do if you're running a risk model is you're going to take a stock or a market or whatever it is, and you're going to go through the historical data and you're going to see how volatile is this thing over different windows. You're going to check how it correlates. You're going to look at what the options did,

and what the old options did, what the new options did, all this other stuff. And you're going to try to figure out, okay, what does this thing normally do? And then what does this thing do under weirder scenarios, right? And so you're going to kind of try to- Stress test. Yeah, stress test and figure out what's going on. So what do we call this? And so this is just a non-stable kind of distribution. Like this is something where, and so basically the thing that makes people break the glass and go, holy shit, I'm out, is when you start to see things move way outside of your models really fast.

Because if something creeps, you can sort of tweak things. Nothing like this. But something gaps outside of your – and so this is like the first scene. So a consumer staple stock blowing up. So both of these, Walmart and Target, both of them in the same week had their worst day since 1987. Right. Literally Black Monday. Right.

In the same week. Yeah. Yeah. And this is like the first or second scene in Margin Call, if you guys remember the movie, right? So they're like, the guy figures out the model. Oh, he calls his boss. Yeah, he goes, what is this? Yeah.

And they go, and they go, and they go, what does this mean? And they're like, this is where it's supposed to be. And now it's here. And they're like, and that could happen. And they're like, no, it happened last this mean? And they're like, this is where it's supposed to be, and now it's here. And they're like, and that could happen? And they're like, no, it happened last week. And then they're like, oh, shit. And then it starts again. Paul Bettany is very concerned.

Right, yeah, exactly. Extremely British about it all. Yeah, and it's kind of like that. But part of what's happening right now in the market is, you know, the market, I think, if you're, especially if you're a retail investor, or even if you're, most people should think about the market as kind of being an amorphous sea of capital doing things. But it's not.

Most people don't know what the word amorphous means. It's just a big bucket of water and it's not important to pay attention to the individual water molecules or whatever. But it's not. It's actually discrete actors. It's individual firms, people, and it's pretty concentrated.

And so when you have a period like the last three or four weeks, you're having a lot of big funds that normally would step in when something's down 5% and buy some. Melvin. People that would provide liquidity is always the euphemism for it. Melvin being one. People like Doquan would normally step in and

save Walmart. Yes, right, yeah. But you're having a lot of the largest hedge funds, with the exception of the multi-managers, are down 30%, 40%, 50%, 60%. Well, they don't have any bankroll. They have no more bullets to put in the gun and shoot at stuff. They have to play to survive right now. And also, okay, you're down 60% and you own...

The thing is, a lot of these guys, they own like 9% of a company. So if they sell a share and that gets out in the market, people go, holy shit, Tiger's selling this. The bankroll is the companies themselves right now. Well, I'm just talking about in the market. Yeah, we're going to do a trillion one in buybacks in the next 12 months. Right. But not all companies are going to participate in that. Right, but the question is immediately after, let's say Target reports, who is there to step in and buy Target shares in this market environment?

Jeff Mackey. Jerome Powell. Literally just Jeff Mackey. Yeah. I mean, there's nobody I know who either people are not in a rush, as we were talking about, or they literally don't have the money. And even if they wanted to get the money, they might have to go, you know, if there's a headline there's, if there's a headline that like a tiger cub is selling one of their big holdings, that stock's going to get smashed. So they can't sell that to get cash to go to something else.

Do you think they want to lever up their portfolio? I was thinking of that. I thought it was funny. Not really funny. Tragically funny. You picture like, and you know, there's thousands of these guys out there. You picture like the guy who runs the family office for the family who founded – Walmart is a bad example because we know who they are. But just one of these companies that loses 30 percent a week and you're running the family office and the whole thing is reliant on the shares of that company not doing what they just did.

It's like, all right, I guess we're not going to have the picnic. I don't think we're going to do the Easter egg roll this year on the front lawn. Thankfully, I don't think most family offices are actively levered off of their stock, although a lot of tech people are. I think they mostly are. Well, speaking of leverage, John, can we throw up this options chart? Dan, Hide Not Slide did this thing on like option industry volumes. And this has to be that this has to be like moving shit we had we had a technical difficulty what is that oh yeah yeah no it's

i mean that not really option industry volume my point there is that the active manager is basically all in the penalty box right now and packed passive doesn't step in like when target goes down 20 percent in in the short term and they're not they can short term. And they can't buy back out of that. So in these shorter term windows, you have these crazy moves because people in my seat can't really play. So what is this? This is just overall trading volume by month of options? Yep.

I can't believe it peaked in January of 2021. Yeah, but so what? Look how high it still is compared to pre-pandemic. It's twice the size. It could be different types of options now than it was 18 months ago, though. No? It's not all just – it's not like just speculative buying options. That's what I mean.

That's the thing, right? This could be a lot of covered calls now. It's the same volume, but we don't have a breakdown of what kind of options activity. Yeah, I mean there's just – there's an enormous – i mean mike green talks about this a lot and there's uh there's a lot of cover calls etf strategies that now have 10 billion dollars yeah so all of this might like market structure stuff like it's not bullshit no no it's not bullshit also because think about how many algorithmic uh trades are being done at extremes pushing those extremes further and so when you see Target down 25%,

what does that do to these models, like literally? Well, I mean, the thing that a lot of quants are doing, right, is I think there's a lot of different types of quants that are doing a lot of different things. But I think there's some, there's intent ascribed to what quants are doing that isn't necessarily present in a lot of these. A lot of what these guys are doing is they're going,

okay, you guys care about this, what this business is. I don't give a shit about that. All right, let's talk about what the stock is. Okay, the stock's in the S&P 500. So every time somebody trades an S&P 500 future or an ETF or something like that, there's look through volume. Anytime somebody trades an option on that index or trades an option on the stock or trades an option on the sector ETF, there's all these other securities that anytime they trade, there's some butterfly effect impact on that stock. And so when you have a window, and so from time to time, that all of a sudden is going to massively overwhelm what anything else can do, especially because basically

you think about it, there's a bunch of people who are playing for different reasons. If the active guys go, I need to figure out what happened in this quarter, so we're not going to trade, and the passive guys don't have views, then you're left with all that stuff. And if there's a bunch of – you could go gamma or whatever. If there's a bunch of selling parts, there's no bids. You see a stock go up 5% on Monday, down 5% on Tuesday, up 5% on Wednesday.

You know – That's what Coinbase is doing right now. Yeah. You know intuitively there are no human beings passing judgment on that company. Right. That's all mechanics, all weird shit going on on both sides of the ball. And when you're an investor and you're logging into your Morgan Stanley account or whatever, you're watching that, there is a temptation to just be like, this is stupid. Why am I even doing this?

And I don't think we're fully there yet but i think that's the kind of thing that leads to capitulation it doesn't just have to be down stocks it could be that up and down pattern that seems random and meaningless and people just say i don't want anything to do with this this this is the scariest thing in markets right now is very few people who are trading right now have ever been through extended periods of pain and not even like it going down just every time it's been bad since you know 20 13 11 yeah it's been bad for like maybe six weeks max and then we just rip out and so everybody's been trained to double down by all the dips and we call that a martingale strategy around yeah there we go no no but you right. So now you can have bottoms and bounces that never get back to the high.

Right. And then they roll back over. Lower highs. Lower highs. That will – nothing will kill sentiment like that. Right. So now there's like guys like a lot of people you know. By the way, I'm about to kill myself.

I'm going to open this up. No, this is – Super embarrassed. There's a lot of people – We're going to get to the bullish stuff in a minute. Yeah. But there's a lot of people – No, we're not.

Who are around in 2000 where when they talk about trading they're gonna they say things like you know i'm gonna put some on i'm taking a little off here and there's young guys who are like what is this guy talking about like why would you do that and now it's like now people are like me you know what maybe the take half off thing like there's a reason why these chartists do all this stuff you know what i did in the last week you know what I did in the last week? You take a little off? Yeah, I bought nothing. I took the stocks that are down the most, that bounce the most, and I sold half. I have some big, huge

like, they're not big positions. They don't matter to me in real life, but they looked so horrendous at the lows, and then all of a sudden they went up 20%, 25%. So you know what we haven't seen yet? Earnings estimates coming down. And these have to get, look at these.

Look at the consensus analyst estimates. Yeah, I'm going to say no. Well, hold on. They're saying consensus analyst estimate as of April 30th for the S&P 500 earnings this year was $275. I'll take the under on that a little bit. I mean, these have to come down. Now, the good news is, to the extent that there is good news, we got HSBC cutting their S&P 500 year-end target

to $44.50 from $4,900. We have Deutsche coming out from $47.50 down from $50, $250. Every major Wall Street strategist is now a 35% chance of recession. We got it. Cheers. Yeah, right? We got it. Every one of them.

So you're telling me there's a chance. We have to get analysts saying, you know what? Maybe Apple, maybe we're going to cut it to a hold. It's coming. It's all starting. I actually do have a bullish take

whenever it's appropriate to take us out of the tailspin. Here's my bullish take. That would be good. Here's my bullish take. So why is everyone bearish? Why are sentiment indicators literally through the floor? Mostly because of this show.

Because everybody knows a recession is coming. We're not getting blindsided. Everybody sees the train and we're standing on the track. And so hopefully, like the bullish case is, the monster is never as scary as you think it is in the movies. And so we're front running the anticipation of it being really bad. Okay. And if it's not as bad as we think it is,

that could be a nice setup. Why are you jinxing us like this? It's going to be the scariest monster of all time. Do you have a date you're calling the recession? The reason everyone is casually saying recession is because nobody is insecure about their job. Everyone knows they can get a new job tomorrow. Nobody hears about – normal people don't know the stats that we just cited before, 11 million open jobs. No, but they feel themselves getting poorer every time they go to Walmart.

But wait a minute. But they're not worried about their employment. I don't think – that's why I think people are like, yeah, there's going to be a recession later this year. First of all, a lot of small businesses are rooting for one because quite frankly, they can't get supplies. They can't get this. They can't hire people. Really dumb to root for one if you are a small business. I agree.

Yeah, I know what you mean. I agree but I talk to construction guys, landscaping guys. They're like, I can't take it anymore. I talk to construction guys. I do. Yeah, okay. I talk to construction guys. I do. Yeah, okay. I really do. Yeah, name one.

You've actually used them in your home. Kevin? Yeah. You don't talk to Kevin. Dude, I talk to Kevin all the time. And by the way, and by the way, think about somebody that can't hire people and they have to continue to spend more

for everything that they have to purchase. Wouldn't they want – not a recession. Wouldn't they want like a stop to the upward trend? They want a stop. What's bullish? Let's get bullish. OK. Let's talk about – so we're in this weird place where bad might be good.

That's what I'm trying to say, but you're laughing. Literally bad might be good. Bad might be good here. OK. So let's first – let's first go darker. Okay, the doomsday scenario is we have like a 1970s-style inflation, and we try to hike rates, and it doesn't do anything. And like the dollar collapses. That's doomsday, yeah.

And it gets – and then probably worse things happen. But that's the really bad thing. In the past – 35% chance. Yeah, you know, put it on running. One in three. The good thing, perversely, is in the past when there have been attempts to tighten financial conditions, you have not seen anywhere near as fast of a response in the economy as we're seeing right now.

We're tightening. We're tightening. I mean Bank of America put out a great credit card data panel where it showed basically year-over-year comps going from plus 15 to kind of minus 2 across like 17 different sectors. Freight prices are down. Computer chip prices are down. It's kind of sector by sector you're going on there,

and things are coming in. Now, it's not yet happening for gasoline, obviously, and that's one that really messes with people's heads because they've been kind of trained to think it's – Or wages. Right, wages. But what we're seeing now is we're seeing the beginning of a loosening of the labor market. And so in a weird way, like the things that sort of led inflation on the way up are already rolling or rolled over.

Used cars, all these other things coming in. And, yeah, they're not down that much. rolling are rolled over, used cars, all these other things coming in. And yeah, they're not down that much. But if things continue as they're going right now, we could get out of this inflation problem, which is the reason we need Titan, which is the reason everything needs to cool off. We're choosing to put the patient in a coma here because otherwise the patient is going to get a fever and die. So you don't have to wait.

You don't have to wait every month for a CPI report. Right. You just watch commodities every day. Oh, it's a keep going. It's a keep going yeah so and and there's this weird dynamic right now where government the the official economic data that's coming out has all sorts of weird different lags and so there's going to be some scaring the shit out of people processes as different data comes in or out of that and also there's going to be all this weird comparative stuff happening. But you also got to remember, the market always bottoms six, nine months before the recession is fully clear. So we're going into a period where I think we're seeing deceleration.

I think we're going to continue to see that. We do have a shortage in commodities. But we could see the kind of real-time inflation data come off a lot faster than people think, particularly if the economy keeps decelerating like this. And right now there's this weird place where everybody's kind of trying to talk about, you know, next year is going to be super rough. I think we're tightening very quickly. I think everything's coming off really, really quickly.

I think there's a scenario on the table where by the time we get to sometime in Q3, Q4, you're starting to see a lot of things kind of rebalance, unfortunately, because the economy slowed down. But the second this inflation thing is in a runaway train, then we're kind of done with this. Here's the problem, though. It's the mix shift of it. Yeah. Because it's not going to happen in rents and it's not going to happen in wages.

Wages will stop going up, but they're not going back down the way used cars have. Like used car prices could roll over. Wage growth doesn't roll over. It sticks. That's number one, and that's a really big part of this whole thing. And the real estate shortage, the rental prices, again, that's the kind of thing that tends to stick. Arguably, it's a bullish argument for REITs. They pass along costs, and the costs stay up.

The concern is, you know, the question is, are we talking about absolute price level? Are we talking about rate of change? We're talking about rate of change. Right. But politicians are talking about absolute price level. Can you believe the price of this? Can you believe the price of that? That confusion is where a lot of the risk of policy mistakes comes in, I think. When people talk about inflation, a lot of these policies, they're not talking about the same thing at all. That's right. Gas at $5 is not a big problem if it stays at $5. If it's $5.50 next month, $6, $6.50, $7, that's a problem. Because when people start seeing that every time they go out of their house, they go, holy shit, this is never going to stop. I got to pull spending back.

And then you end up in this really nasty- But you also have these side shows that are not relevant economically but culturally right extremely important like baby formula right and this is being used as a against joe biden joe biden robbed your baby of formula right his policies um that's a side show the price or scarcity of baby formula is not an input to CPI. It's not important, but it's really important to the mindset and sentiment. It's extremely important because that's the context that people think they're waking up to the world in each morning, a world where their niece can't get baby formula. That dominates their thinking. And I think enough of that kind of mass sentiment is now weighing on everything from stock prices to you name it.

Well, the market, as we know, the market will bottom with horrific news. Yes. And it will rally on even less horrific news, but still horrific news. Let's pause for a second. All right. We just had a global pandemic that humanity just collectively just took on the jaw, walked through, and then won the fight and the knockout. And now we're paying for it a little bit. I still think the trade is good. Great trade.

I think you take it all day. Yep. The problems we're dealing with right now. What? You take the inflation for only having lost a million Americans. Yeah. I mean, we could have done better. Well, this is a result of stimulus and monetary policy.

If we did nothing. Information at the time. Right. Right. And that's another thing. Although we did go too far. Josh, we were just talking about this the other day. The stimulus package in March 21, that one point whatever trillion dollars it was, that was a bit much.

Almost entirely political. Yeah. No economic reason for that. Practical. I think given information at the time, practical constraints and all of that. The pandemic response was appropriate. Yeah, right. I mean I think –

$1.3 trillion in March of 21 with the NASDAQ at a record high. Yeah, that one was ridiculous. What are we doing? But my point is I think the problems we're dealing with right now, by and large, with the exception of commodities where we have a – we need to – I don't really think it's ESG. I think it's more that returns were horrible and people lost so much money in oil and gas and other stuff that ESG kind of gave them a great excuse to not invest in that. Underinvest. But we have to like –

If Russia didn't invade Ukraine at the end of February – That would have really helped. Would the inflation – would the transitory inflation have been a little bit more transitory? Would the Fed have looked smarter? I think we still – yes. I think we'd be in a better position. Oil was 70? We'd still have a big problem.

It would have just been more of a frog-boiling, slow-burn thing. So Putin really did win when you think about it. Oh, my gosh. I'm just saying. I just think that when you look at the problem set we're dealing with right now, every problem we're dealing with is a problem that humanity has solved many times. It's not necessarily fun. Sometimes it takes a while. We're going to solve all of these problems.

And so the main point, I realize I've been super bearish and critical on this, and I try not to be most of the time. But there isn't a rush. You have a time right now to go research, make a plan. This is the time to be a long-term investor and to think five or ten years out. Not when stocks are at 50 times sales. Could not agree more. Right?

And I got so sick of hearing that where everybody's like, my biggest mistakes are errors of omission and da-da-da. No, shut up. That's nonsense. It's ridiculous. What, oh, the stock I didn't buy that doubled? Yeah, that was everybody saying, you know, my biggest mistake as an investor is I didn't – You missed Solana. I missed that.

I sold too early. I'm like – You know what's bullish? You know what's bullish? No. 20 – the exogenous shock is never – right? This is a normal market cycle. Yes.

We know we're working our way through the cycle. There's a playbook for this. Right. We know how this goes. We will go out of it. You can literally – there are books written on exactly how this went there's pretty reliable options you can you just got to ignore the doomsday the dollar is not collapsing like we're not this is the truism always you you can buy the missiles no you must tune out the most hysterical most extreme version of things. And the people who make their money propagating those scenarios.

That's a truism at all times. Whoever is the most extreme is the most dangerous to your mental health. There will be people saying the market's going to zero. Right, and it's not. And this is all going to pass. And the reality is right now if you spend the next if you spend the summer all right summer things generally tend to calm down a little bit uh it doesn't mean things are going up but make a plan have a view on what you actually want to own for the next five or ten years

you're going to get some great prices and one of these i always tell people when they're asking me like hey god should i do my you know brokerage account or whatever i'm like we're in the company do my brokerage account you know i have'm like, we're in the companies. I have a bunch of people call me and they're like, hey, I'm friends with your sister and I want to do stocks. I heard you're a hedge fund manager. What do you think of Intel? Yeah, or like, hey, I'm thinking of getting into algorithmic trading.

I'm like, first of all, you're not a coder. But you've got to pick your asset allocation, pick your stocks, pick your buy levels. If you think you're going to decide a good buy price in the moment, no. You've got to go through, do the work right now, pick your price levels. Have a time horizon.

And have a rich family. And be born into a real estate billionaire family. My friend texted me yesterday, I know you don't love giving advice, but I got an email from my advisor. He wants to buy Nvidia, Amazon, and Shopify. Market is yesterday. I know you don't love giving advice, but I got an email from my advisor. He wants to buy NVIDIA, Amazon, and Shopify. Bye, bye, bye. Market is wild, I know.

I was never being a narcissist, but I wanted to get your take. Hey, do you care about executive comp and pay packages? Do you think that's a silver lining? Let me set this up. This is kind of a big story. I actually have a take. I don't want to hear it. Intel executive comp package rejected.

Gelsinger is the new CEO. He just took over in February of 2021. So, of course, he received a compensation package worth $179 million last year. Yes, before taxes. Which makes perfect – that's true. Right. The compensation included a million in salary, 1.75 million in bonus, and then 140 million in stock awards, and then another 30 million in option awards, which I wouldn't take that job for a dollar

less, to be honest. How about Jamie Dimon? They slapped him down. Well, wait, back to Intel. In 2021, 16 companies had executive pay packages rejected by shareholders, so almost none. Now, all of a sudden- That's going up. New hot trend, trend alert.

Almost none. Now, all of a sudden, new hot trend, trend alert. Only 31% of investors backed Jamie Dimon making, what, $50 million? John, throw up this chart. So 70%— We're looking at shareholder support at J.P. Morgan. What's AGMs? Annual General Meeting. Okay, since 2009.

Next chart, please. So they basically rubber stamp this every year. It's 90% approval. This year, it's 30% approval for that pay package. So he might only make like $40 million, which I don't know what you expect this guy to do. But all right. What's your take here? I'm a fan of Jamie's.

So am I. I'm a shareholder. I would him the money by the way right i mean one of the things that we the way we look at it is we look at how the executive team and really the whole team is being compensated relative to the elements in the business they can control and so if i like that i like right. And so if you are happened to be the CEO of a penny stock, like copper miner, and copper prices are going nuts. And you're like, I deserve to get call options on the stock. No, like, I'm sorry. That just doesn't make any sense. Because you didn't you nothing you're doing that is driving that. Yeah, but I took the risk in going into the copper mining industry. Don't I get something for that?

You know, you probably just were dumb. But if you took the job, there are certain areas where somebody comes in. So what we look at a lot of times when you have a company that we think has been mismanaged and then you have a really good manager comes in. And sometimes what they're saying is, I'm going to fix this company. We're going to do all this other stuff.

And I think copper is about to go on a run. And as my pay, I don't want a lot of cash comp, but I want to get super paid on stock if the stock works. And they're calling their shot. And I love situations like that. I'm not aligned with management. Management is aligned and also making a very explicit bet that my thesis is the same as his.

We're all super aligned. I like that. For large corporates, some of these guys actually are adding a lot of value, actually the only person that can do what they can do. I don't have a strong view on any of those individuals. It is ridiculous for everybody to come out now and be offended by the comp. But they only care when they are losing money, which is my point. Perhaps this is a silver lining for shareholders generally that somebody is now paying attention to this. But they would only pay attention in a down market.

In a bull market, everybody is making money. Nobody is looking at what anyone else is doing, right? Yeah, I mean just as an example, like when I go talk to management teams, one of the questions i ask is what is your capital allocation plan so you guys have profits coming from the business what are you going to do with the money how do you think about that do you have like a formula do you have a what how does that work and i'll tell you like 80 plus percent of public listed companies have nothing nothing not even a stock answer that they can give you it It's, well, we consider a lot of – bullshit. Nothing.

And so when I look at that, I'm like, all right, none of these institutional shareholders that have all this voting power, none of these people are going in and forcing just like basic accountability, basic blocking, attacking, basic planning, which is why when there's these market crises, you see these companies make these horrible decisions. Because they didn't have a plan going in and then they freak out at the bottom. And so, yeah, I mean, these people are probably being overpaid, but I think it's a little bit of just like a ridiculous theater show for shareholders, certain shareholder groups to be like, and now we're protecting shareholders. I'm like, no, you should have had a conversation about how the money was being invested before they lost it.

It's like, you know, it's like arresting the guy who just burned the entire neighborhood down. And it's like, well, maybe you should have had a conversation about how the money was being invested before they lost it. It's like arresting the guy who just burned the entire neighborhood down. It's like, well, maybe you should have arrested him as the first person. There's also some shade in Freud, and there's also some like, well, I'm losing money too, so you should share in the losses with me. You shouldn't get paid $180 million to run Intel. Given that, I'm not up on Intel anymore. I think that's just human nature. It's very much human nature, but you would just hope that,

again, all these people on the investing side and also on the corporate side, they're getting paid a lot of money, allegedly, for expertise, skill, etc. You would hope that all these people have basic plans, basic procedures that actually make sense, that actually hold up under scrutiny, so that even if they're getting paid a little more in a down year, they go, look, we know

that this business will have down years. It's in the budget. This is what we planned for. This is the five-year. This is how this works. It's consistent. And I know there are CEOs who are still getting paid a lot of money who are not being held over the coals by their shareholders.

Again, I'm not commenting on those people. But there's just, you know, Intel's been a not great situation. It's not performed for a couple of decades. Right. And with Intel, well, they've also just gotten crushed by several other people. And they look like they're the disrupted company right now. I am Jay. Taiwan Semi. Everyone's eating their lunch.

Oh, my God. Look, if I was on any of those compensation committees and the guy took the job right now, I'd go, okay, look, you're taking a really, really rough job and we're super willing to get you crazy rich. But you're going to have to actually deliver before you get that. Also, you're taking a really tough job, but you're taking it at the bottom. Right. The whole thing should be, if you pull this off on a five-year basis as defined by blank, then yeah, you're going to probably get a few hundred million dollars because it meant you probably produced tens of billions for other people. Fair. We'll make you generationally wealthy for that.

But the idea that during the attempt you should get paid that much, no. I think that's ridiculous. Here's an advance on all the great things you're going to do. Here's an advance on saving the world. I just feel like there can't just be one person who would do that job and their price is $180. Take it or leave it. It just doesn't sound like the way the real world works. You need a lot of consultants to make it so that that seems normal. normal well i mean and part of it is because i don't know that there's the same thing like there's similar thing with uh marissa mayer at yahoo and stuff like that where yeah that was i don't really know that she had any i don't know that she had a shot of saving that thing

no and so it almost seemed like the pay package to her where they were like look your career is going to be over she has star power though yeah your career is going to be over but you're going to look great in the esquireire piece. That'd be fair. I have no idea, right? I don't have a super strong opinion on that. I just think generally executive compensation needs to be improved. It needs to be tied into operations, capital allocation. And the shareholders need to stop doing this, like,

oh, we don't care, now we care thing. And it's really disruptive. Also, there's a very finite amount of actual shareholders. Right. Because if you own this in ETF, you don't care who gets paid what. And most people that own individual stocks, if you look over the decades, their holding period has declined. Look at this chart of Intel divided by the semis.

Not great. That's not great. No. It's probably the worst in the whole group. the semis. Not great. That's not great. No. That's probably the worst in the whole group. Last thing we're going to do before we get out of here. How bullshitty is ESG

on the scale of one to Elon Musk is a god? They removed Tesla? I don't understand. Elon Musk is now actively tweeting that ESG is the quote the devil incarnate. No he didn't.ate is a little theatrical.

No, it's an outrageous scam is what he's saying. Isn't it an outrageous scam or just like an old-school, old-fashioned scam? Or is it really great for the environment? I'm just kidding. I think he also mentioned that Exxon is a top ten by this ranking. Elon's take is that ESG is – so he actually missed what the – Because Tesla was kicked out of the S&P 500. They probably got kicked out for the G, right?

They wrote a – well, they wrote a blog post, of course. S&P did a TikTok explaining that there were like racial incidents that they don't feel have been fully corrected and whatever um but elon's point is out of all the public companies they've probably advanced the ball more for for clean energy true than any company in history fair no right i think that's fair i don't think gm uh ford all these other companies are doing as much with EVs if not for the success of Tesla. No way. No way. But so he actually missed the real reason why it's a scam.

The real reason why it's a scam is it's the S&P 480 with quadruple the basis point fee. Oh, yeah. We're removing a few stocks and we're going to charge four times the amount for basically – that's the scammy aspect of ESG. But what he's basically saying is this is about furthering the leftist agenda and there's probably a lot more emphasis behind closed doors on the S part, the social part. Yeah. I've – We want you to now dance through those landmines that i've set up thank you close everyone's mic please i want i want dan to have the floor here right so um the

vc fund at gliss bangladesh that i'm a gp at um and my good friend rahat uh is a lead partner on he lives in dhaka bangladesh and he's helping people in a frontier market. That's not ESG, that's impact investing. That's the real thing. Well, yeah, so we're mixing up terms, right? And so we had this idea where we're like, okay, we're going to go to one of the poorest countries on the planet. There's a lot of smart people. We're going to help them build healthcare for the country.

Oh, healthcare. And all this other stuff, right? And then we started having conversations with some ESG-related entities. And so I had to get up the curve on how all that worked. And it's a blanket term that means very different things. For example, US ESG versus EU ESG.

In Europe, they're serious about it. Totally different thing. The Europeans are not playing games with this. There's so much paperwork. Oh my gosh. But in America, I think it's a particularly dangerous concept in the United States

because of the political Twitter weird media morass where it's just too dangerous about becoming really arbitrary. And, you know, and there's also just weird agency costs and like timeline asymmetries. So, you know, do we want to, as a society, not use as much fossil fuels? Yes. Is it smart to not invest in metals and fossil fuel production? No. We're learning that now. We're learning that the really hard way, right?

And there's a dangerous externality problem here. And the other thing is like, I just- Grantham talks a lot about that. It's like this well-meaning thing where we've starved vital industries and crushed employment in vital industries. And we've lost a lot of know-how and a lot of technical capability by under-investing.

Yeah, and also, you know, not only that, but, you know, it contributes to this. I mean, I think one of the saddest things in our society right now is how willing everybody is to demonize large groups of people. If you're a white guy who does blue-collar work, if somebody sees a picture – I could tweet a picture of a random guy who's like a carpenter in West Virginia and I could be like – Trump voter. Yeah, people are going to rip that guy apart.

And these are people just trying to make a living. And it could be any other demographic as well. F*** that guy. Right. And I just think it's very dangerous to apply moral judgments to things which are clearly vital to the functioning of the economy. I think you should use policy stuff to incentivize and to create like a glide path for us to move off of this, onto that. But this attempt to like kind of choke things out and demonize this or help this, it's just not productive.

The bigger problem is when you try to put a layer in, like ESG, you go, okay, we already have all this compliance, and we have all this weighting stuff, liquidity stuff, how we're distributing the product, all this kind of costs that go in there. And then when you insert this ESG layer, you're adding another layer of intermediaries who – it's not that they're not qualified to invest. It's that there's just too much to know. And so they're making decisions where they have a very, very narrow perspective. And they're even within the narrow – they're looking at it from one very specific set of guidelines.

And so they're kind of overcorrecting because they're going from nobody's considering these issues to only considering those issues and only considering them from a single perspective. And so I think it's a very admirable and good thing and I would note that a lot of the best companies of all time actually do incorporate a good amount of this. There are some very well-known ESG – I don't think they refer to themselves this way.

Right. But there are some very well-known hedge funds. Sustainable investing and things like that. What's the guy, Blue something or other? He's very much at the forefront of that. I'm blanking on his name. I know you're talking about him. Yeah, but he's very well-respected because he's running a hedge fund based on a code he may it may not get the stamp

of approval from x y index but he's basically saying like right these are the types of things i will and won't do and his investors want that right and it might cost basis points of return or it might be additive depending on what's in favor in the market what's interesting is there's actually people who have the exact opposite perspective, which is there are businesses where if you withdraw capital from them, they will go out of business. And so you, by not investing, are actually harming that thing that you think is evil. But there's other businesses like cigarettes, for example, that have so much cash flow coming off of them that they certainly don't need investor capital.

But somebody has to own those securities, as long as it's legal. And so there's a different perspective actually, which is, and I think this actually makes some sense in a weird way, which is if you're like a charitable foundation or you're somebody trying to make the world a better place, it almost makes sense to buy sin stocks because you're actively rerouting the cash flows from those things.

Take the profits and put them somewhere else. Put them into something that's good. You can weaponize the bad thing to fight the good thing. And that's something that – Buy all trade off on the blockchain. I get it. Look, we have a small percentage of clients who are very committed to not having a single cent that they make going to things that they don't agree with. And our job as wealth managers is to respect that and find solutions.

But then we have clients that are kind of on the fence. They get the arguments against putting money into things, but they also want returns and they don't feel that strongly. So for those people, the right answer is, well, you're giving to philanthropic causes and maybe it's the environment or maybe it's, but take the money and then try to make a difference with the money rather than trying to make a difference with your investment posture, if that makes sense. Well, because the point is you're not going to make a difference with your investment posture, and that's, I think, the underlying problem. So I don't think there's universal agreement on that.

I do think that in Europe especially. Oh, in Europe it's a very different thing. So I think that there are people who really do think that with their investment posture, withholding money from some industries or giving double to others, that they are going to make a difference. I'm a big believer that you absolutely can drive change by adding capital. But not by withholding it. Look, guns, cigarettes, oil. Someone's going to do it. Not someone's going to do it.

There's so much cash just coming off of the existing – they don't need – I mean what is Altria's dividend yield right now, 10%? We broke a record in gun sales last year right they're not starved for capital right these guys are not and they're paying it these are all over like six seven percent dividend yielders right now so the idea that by not buying those stocks you're going to somehow like harm the gun industry i'm like no it's just not going to happen um yeah ultra seven percent so yeah adding adding capital i think absolutely works and so a of the European institutions, things like that, they're being very intelligent about what problem are we trying to solve, what's missing, how do we do that.

They're not spending a lot of time. They will say that you can't participate in, we don't want you to fund a venture-backed company that is like a cigarette distributor. We're not interested in funding the expansion of that industry. But they're really focused on how can we actually drive positive change. Let's say Duncan comes to you and he's a huge family office. And he says, I want you to create a version of your portfolio just for us.

We're going to give you enough capital that it'll be worth the paperwork. But you cannot put my money into the following five sub-industry groups for any reason. You'd probably take the money and figure out a way to do it. All day. So I think most people would. Right. Okay. So it's here to stay.

Yeah. Okay. Elon Musk probably is having a lot of fun with that argument. But I think he's genuinely pissed that he's not being recognized by the people who claim they love the environment. I think there's a little bit of rage there, and I get it. Yeah, I – Same. I think even if you agree with every criticism that's ever been lobbied against Elon –

You can't take away from him that he's advanced the ball it's also just i don't understand it as a political move because that's a thing that's gonna be a fight oh right you're not like saying procter and gamble it's not esg anymore which and they're gonna privately send you a letter and say we're very displeased like you're gonna get at a big fight and And, you know, I don't understand it. That's the most interesting argument, talking about like, all right, somebody breaks the law, whatever, now what? This thing's going to end up in a Delaware chancery court.

Imagine the officials that serve on that court in Delaware. They're going to enforce him having to buy Twitter. Right. And then what happens? He says, okay, I see the judgment of the court. No. Does anybody working for a bankruptcy – for an M&A panel in a court in Delaware want to personally tell him that he has to follow through with this transaction? Probably it's not going to be the best week of your life. life i my my take on the twitter situation uh is that you know and matt matt levine has always been

this like great sort of like post-modern nihilistic take on finance that is really great great writer but now like the world has come to him and it's kind of weird it's it's kind of like if a comedian you know comedian goes from being like a commentator to being like a – being a – A prophet. A prophet, yeah. And – Matt Levine is like famous. Matt Levine is like feeling – he's like one with the flow of the universe right now, which is really scary. No, but he gets it. Tell me what the rule is.

Okay, so what? Right. But I think the difference is right now that stuff always happens when it's like one rule or two rule or it's – there's always people on the edges playing games and he's – I'm really weirded out by this situation because now you're in a situation where there is a lot of liability for a lot of people in a lot of different ways. Multiple states, multiple different types of cases. This thing has to get clean like pretty fast or – Well, there's no rule of law. Yeah. And so the Twitter deal spread in a lot of ways is kind of like a proxy on the rule of

law because there's a lot of opinions out here, but he waived his right to diligence. He's openly admitted that he was aware of whatever bot problem he's making up. The bot disclosure has been in the things the whole time. Yeah. He signed the merger agreement. He has the financing. What is any merger agreement worth if this doesn't get enforced? And not only that, if the board doesn't sue him to force performance, all of them are

going to get hammered for this. And I don't know if D&O Insurance will cover this. I don't know. They'll get sued into the Stone Age by shareholders because the stock will collapse to 20. You know what I'm shocked? I'm shocked that, and we might walk out of here and open up the news and see this happen. I'm shocked that a Carl Icahn or a David Tepper or somebody like that hasn't swung in, bought 6%. And just said, hey, close this or I'm going to bury all of you.

Ain't going to be Tepper, but. I mean, no, he's busy. It could be. It could happen. You just need another billionaire who's a little bored who doesn't mind spending legal fees. You hear that, Carl? I know you listen each week. All right.

Listen, we've kept you long enough. Let's do favorites and then let's crush this bottle of Vignejo. It's been quite a month. Michael, why don't you start? I'm going to triple down on Barry. It's so good. Do you watch Barry? I love Barry.

Is it the best? I mean, no, Hank is the best. I watched the first season at Michael, no, Hank is the best. I watched the first season at Michael's face-off, and it was great. Mr. Cousineau? Oh, my. It just keeps getting better, too. It keeps getting better. I f***ing love that show.

I'm going to stay with it. All right. I did talk to Duncan's advice, so I'm going to my first ever F1 event. What? Yeah. Hold on. Hold on. I got invited by a friend of mine who's very plugged in, like high up at Formula One. And I'm going to Austin, Texas in June.

And I'm told I'm sitting in the Sports Illustrated section. So I'm at the 12th turn. What are you going? I don't know what any of these things mean. What are you going? Awesome. I'm taking sprinkles. We're going in June to Austin, Texas. That's awesome. No, October. That's big. So I'm at the 12th turn or something. I don't know what any of these things mean. What are you going? Awesome. I'm taking sprinkles.

We're going in June to Austin, Texas. No, October. That's big. Excuse me. That's big. Yeah. So I'm told Green Day performs one night. Ed Sheeran performs the other night. They make a whole thing out of it.

It's a big deal. I thought it was favorites. It's not a f***ing deal, right? It's a big brag. Yeah. What's going on? So let me get to the favorites part. Let me get to the favorites part let me get to the favorites part i know i don't i don't do like status games like that it's it's genuinely

somebody i want to spend time with and he invited this out um i started watching the show on netflix to prepare for this because i don't want to be the only idiot right like in the grandstand or on the paddock like what is what you know where am i what what happens next right so i started watching what's the netflix show drive to survive awesome show yeah no like i'm not even an f1 fan i'm like now a fan of three different drivers i watched the first i watched the first season so ricardi ricardo yeah yeah that that guy's a stud. What's the guy that crashed his car because he wanted to win the qualifier or whatever? Luka Doncic? Young kid.

He completely wrecked his shit. It doesn't matter. Yeah, I'm not sure. It doesn't matter. I'm totally into the show now. I'm going to finish all four seasons. Awesome. I think it's one of the best things on Netflix.

Cool. That's quite a bad face. You were a hater. I don't think I hated it. No, you were a hater. I don't think I hated it. No, you were a hater. Run it back, run it back. Well, I think what I said was- I know what you said.

Watching cars run around a track for hours is like watching flies. I think is what I said. So it just seemed very pointless to me. But now I'm personally invested in the driver's stories. That's cool. Oh, it's enough out of you. And I really want to see Green Day.

All right. What's your favorite? Besides hiatus tequila. That's cool. Oh, that's enough out of you. And I really want to see Green Day. All right. What's your favorite? Besides hiatus tequila. I just went. Oh, you went. Okay, so I'm going to do a plug. So some very good friends of mine just opened a theater company, and they're doing a show in downtown Brooklyn.

It's called The Verge. I'll put some stuff in the URL. Is it based on the Twitter account? No. No, no, no, no. What kind of a theater? Okay, so it's a it's a it's a half show half escape room which sounds like really weird so basically you go you you've been invited to the reading of a will for a rich guy that you don't know and you're like why have i

been invited so you show up they give you a glass of wine you go i love this to take mushrooms before you're like part of the show i wouldn't do that yes part of the show i love this stuff okay so it's called immersive theater. Yeah. Yeah. So there's only 10 seats. You're sitting around a table. You get a glass of wine.

The lawyer comes in, starts going through the reading of the will and the procedures. And then slowly you realize that you are a part of the show. So you think you're an audience member. Right. But they write you into the show. It's kind of a choose your own adventure thing. So based on what people in the room do, there's like a bunch of different endings. And it'll go all sorts of different ways. It can go super into the show. It's kind of a choose your own adventure thing. Based on what people in the room do, there's a bunch of different endings and it'll go all sorts of different ways.

It can go super off the rails and there's a bunch of different stuff there. So it's called The Verge. Why is it called that? That's the name of the theater? One of the characters' name is Virgil. That sounds awesome. It's some of my really good friends. They wrote it. It's great.

You get a drink. You get a snack. There's some puzzles. Sounds like a real trip. How long does it last? Is it like a couple hours? It's like a 90-minute thing. How many people are at each show? 10. That's it?

Yeah. Okay, because you can't make 50 people part of the show. Right, because everybody has to be able to talk to each other. What part of Brooklyn? Downtown Brooklyn right next to DeKalb Market, if you know where that is. So you sat through the show? Yeah. Okay. Did you win? I think I won. I where that is. So you sat through the show? Yeah. Okay.

Did you win? I think I won. I think I won. Did you escape? I don't know. I convinced – there's a point in the show where you have to form a – let's call it a jury. Do they have an ESG version? Yeah.

Is there an ESG version of the show? Actually, there is a point in the show where you basically have to make an ESG call. I don't want to give away the thing. Don't give anything away. Okay. It's called The Verge. How do you buy tickets on the internet? Yeah, I'll put the link in the description.

It's produced by Uncle Mike Productions. So if you Google The Verge, Uncle Mike Productions, you'll see it. Tickets are $65. You get a glass of wine, hour and a half long show. I hate to tell you, we just sold out the rest of the year for the show. That's great. It's like 10 seats, so if three people buy seats, they're sold out. I'm telling you, we just sold out the rest of the year. All right, that sounds great. It's like 10 seats, so if three people buy a seat, they're sold out. I'm telling you, we just sold out

the rest of the year. Alright, that sounds cool. I love that kind of stuff. Special thanks to Dan McMurtry coming through on short notice. Did you have fun today? Oh yeah, I'm really apologizing to everybody who's listening to the really bullish and optimistic things we had to say. No, dude, this show sounds like

this is what a bottom sounds like, this show. Honestly, this show sounds very bottom. This is a capit sounds like, this show. Yeah. Honestly, this show sounds very bottom. This is a capitulatory show. Notice I didn't say short anything. Yeah. You know, I just said. Never short. You know.

No, I think we got the point across that if you're an investor, this is the time that you're thinking about three years from now, five years from now. I think we got that across in a very depressing way. It's tough back to basics. It's all about back to basics right now. So we're going to Kima tonight?

You like Greek food? He's not coming. I got to hop. Oh, you're out? All right. You're going to miss that. C'est la vie. Yeah.

Next time. All right. My man, you killed it on the show today. We appreciate it. Everybody follow Dan on Twitter, at SuperMugatu. I thought you said add zero hudge. Where else can we follow you?

That's it. That's the whole thing? No, yeah. All right. Shout to Duncan. Shout to John. Thanks, guys. Great job today.

Thanks to Hiatus Tequila, Michael Batnick, Nicole. You crushed it. Thanks to everybody for listening. We will see you guys next week. I apologize for the suicide supernature. It's a very bottomy show. I'm actually more bullish after having done this

than I've been in quite some time. Can you offer to do another band with Susie? Yeah. Oh, B-E-A-R? Yeah. Sure, why not?