The Pomp Podcast - #1432 Adam Kobeissi | Bitcoin Is Going To Skyrocket After The Election

Episode Date: November 5, 2024

Adam Kobeissi is the founder of ‘The Kobeissi Letter.’ In this conversation, we break down the US economy, inflation, national debt, Warren Buffett stacking cash, why homes have become unaffordable, gold bitcoin, stocks, and where the market is going.  ======================= The Pomp Podcast is powered by BetOnline.ag, the premier crypto-friendly place to gamble on politics and sports, casino, poker and horse racing. BetOnline.ag gives you the ability to use Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto transaction fees, and processing is instantaneous and secure. Visit ⁠⁠⁠⁠⁠⁠https://promotions.betonline.ag/pomp⁠⁠⁠⁠⁠⁠ and use PROMO CODE: POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline.ag is available in nearly every country around the world, making it the top global gaming destination for crypto users. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on, guys? Today, I have a very special treat for you. I have Adam Kobasi. He is the founder of The Kobasi Letter and one of my favorite follows online. In this conversation,

we break down everything you need to know about the US economy, different assets, and where the market is going. That's right. Adam is here and we talk about everything from inflation, the national debt, why Warren Buffett is stacking $325 billion on his balance sheet, how come homes have become so unaffordable, what's going on with all the unrealized losses on the bank balance sheet, what he thinks about gold, Bitcoin, stocks, and much, much more. Adam brings tons of data, many, many unique insights. And I promise if you watch this entire episode, you are going to learn so much. So here is my conversation with Adam Kobasi. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast

are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. and do it all securely and anonymously with the highest deposit and withdrawal limits in the industry. If you want to get in on the action, do it the smart way with crypto at betonline.ag. Head to the website, sign up with promo code POMP100 to get 100% bonus on your crypto deposit today. If you go and you deposit, they'll give you 100% bonus if you use promo code POMP100.

Bet online. The game starts here. Betonline.ag. Go check them out today. All right. So I thought the best place to start this conversation is with inflation. Inflation feels like the single most important thing for the average family in America. That's the pain point for them. They see everything around them getting more expensive. How do you think about the aggregate inflation that has been created since 2020 in America? It's been wild. If you look at the data, if you had a dollar in your bank account in 2020, it's worth 75 cents today. The purchasing power is worth 75 cents. That's nearly unprecedented levels of inflation in modern times for the us um and what's crazy is we also have compounding

inflation so right now cpi is back down to 2.4 percent headline uh our core is at 3.3 but you're still building 2.4 and 3.3 on 25 from the last four years so i think uh inflation is still a major problem and that's why most people will tell you right now most americans will tell you we are are in a recession. They truly believe we're in a recession, over 50% according to recent polls. And it's going to be a problem for the Fed going forward. I think that's why I was pretty critical of the 50 basis point rate cut they did. I think now they're trying to backtrack, and I'm sure we'll talk about it. But inflation is definitely still a problem that we're dealing with here. So one of the things that I've railed on over and over and over again is this idea that

once prices go up, they don't come back down. So people always look at the inflation numbers coming down, but prices are staying elevated. When you look at inflation, do you have concerns about the methodology, about the calculation, about various kind of, you know, math that is going into this? Yeah. Well, the first thing you said is a key point. There's been this common misconception, I mean, not amongst investors, but amongst Main Street, that disinflation is deflation. They're completely different things. We still have rising prices, as you know. They're just rising at a slower pace. And if you look at actually certain categories going down to the math and all that certain categories of cpi inflation are actually way

higher than two percent or three percent or even four percent i mean look at vehicle insurance you've had like 17 inflation over the last year alone just in vehicle insurance that's something that has a material impact every single day on american families american people that makes inflation feel a lot higher than it really is so um i think certain categories are definitely starting to uh impact more food away from home inflation is around four percent eating out is a luxury it was a luxury now it's even more of a luxury even fast food is becoming unaffordable for unaffordable for a lot of people that's something we've been talking about um explain that why is fast food becoming well because going to your point so there's a concept of

inflation being entrenched in society and what does that mean it's when you have inflation for so long that wages go up and it makes it very difficult for prices to come back down right because how would you lower prices if your input costs are up and that's exactly what we've seen you're saying if you're mcdonald's and you're trying to run a business and you say hey i've got to pay my people more and so i was paying them 15 now i'm paying them 22 you can't bring the price on the menu down absolutely because your input cost has gone up too much and so you're stuck at higher prices on the menu that's exactly right and even the inputs of the actual food have gone up and the thing is you can't go tell your employees that

yeah okay the inflation rates back down to two percent yep we're bringing your wage from 22 to 17. no that's not how it works once wages go up even in 2008 when we had a period of deflation you really didn't see wages go down so it's it's it's and that was something the fed thought they could avoid for years and in 2022 they're saying you know inflation is transitory inflation transitory we have uh we're going to avoid entrenchment and then now it's the exact opposite wages aren't going to go back down input costs are not going to go back down and i actually think we're going to see above average inflation for a few years i think the fed's two percent target that is this golden level is going to be very hard to achieve, especially on a core basis

for a sustained period of time. Do you think that 2% target means anything or do you think that they'll change it? Like one of the things that we talked about for a while was like, do they just change it from two to three and claim victory and say, hey, now we're below our 3% target. And like that ends up being good enough. I think they had the chance to do that for years and they made it clear they're not. I mean, every single Fed meeting, the speculation going into it was, will the Fed raise their target? Will they even raise it to 2.1 or 2.2? They're not changing. it and it's like it's kind of like the golden rule for economists two percent inflation i can't remember where it started i think it was like some australian economist back in the day it was like

and and all of a sudden everyone kind of stuck to that rule uh i don't see them changing that and so if we stay at elevated levels i think that you see you know paul tudor jones stanley druck and miller many others talking about this uh kind of investment portfolio approach of going to uh gold bitcoin even i was surprised that paul tudor jones publicly said that he thinks the NASDAQ is being used as an inflation hedge. But just they seem to be very convinced that inflation will be higher than that 2% target for the foreseeable future. And that's your view as well? I 100% agree. And just think about it. We have rate cuts. It's very strange. Logically speaking, you have elevated inflation, but we're cutting rates at the fastest pace since 2008,

other than the 2020 over 0% rates overnight, effectively. It's just weird. It's like you're, and we also have an economy that has maximum employment. The Fed said it, Jerome Powell literally said it himself. Even 4.5% unemployment is maximum employment by economic definition of under 5%. So it's like we're cutting

as if we're in a recession or something, but the data doesn't suggest we are. Everyone's saying we're on track for a soft landing and inflation isn't at 2%, right? and it's it's you can say there's they're lagging indicators but it's it's just core inflation has been stubborn stubborn and i think we're going to see uh some more potential upside in inflation next year and so because we got that 50 basis point rate cut um but inflation is not down to two percent yeah core is definitely not down there um actually core is 50 plus higher than their

target and they're cutting um why do you think they did 50 basis points that's the that's the mystery i i it's i really think the fed looked at what happened okay there's two camps there's obviously the whole political camp which i'm not necessarily in that camp that you know biden's telling him to cut rates 50 and i think i really think powell has tried to operate as independently as possible is there political pressure or 100 could they have been a part of this 100 but i think the fed at a deeper level they looked at everything that happened since 2020 and they've always been late. So when they cut rates in March 2020, I mean, I guess you couldn't have been early on that because no one really knew it was happening, but they effectively were

playing catch up for a year. And then once they started raising rates, it went from inflation transitory to 10% inflation, and then they were behind the eight ball. So I think now they're saying, look, the Fed's greatest asset is not interest rates or QE or any of that, it's it's credibility, right? The market moves on what the Fed says. And I think they looked at what happened over the last few years and said, we don't want to lose our credibility or whatever credibility we have remaining. And the only thing that will really make us lose our credibility is moving away again. I argue differently. I think what would really make them lose credibility is inflation comes back yet again. And I do think it's going to come back. And I guess we'll see

how that goes. Do you think that Jerome Powell will still be around to deal with if inflation comes back? Or is he kind of saying to himself, hey, look, let me just get out of here with as close to a soft landing as possible. My reputation is pristine. People say, hey, he's the guy who clamped down on the inflation, got us back around 2%. See you later. I don't know. It's tough because he's also playing the political game if he's going to be around or not. So I think, and I wouldn't even say his reputation is pristine necessarily. I think he's- I was being generous.

And look, I completely acknowledge he's had an incredibly difficult job. It's very hard to say if I was in his shoes, I would have done something vastly different than him in 2020, for example. No one knew it was happening. I mean, people were going out wearing gloves and leaving the groceries in the garage for 20 minutes before they came in to let the COVID wear off. So it's like it was an unprecedented time. So I acknowledge that. But I think maybe that is what he's thinking. He's thinking, you know what? We'll leave on a high note and we'll keep unemployment low. We'll keep all stocks keep going up because we're pivoting. But I don't think that's necessarily as primary driver so one of the things i've started to pay a lot of attention to um which

is hilarious because i was not a very good student in like high school um is the way the bureau of labor statistics calculates a lot of these different metrics and obviously inflation being the big one but jobs and many others um and so you know i've talked about it before but like this idea that inflation is calculated by sending physical people into physical grocery stores with tablets and saying like make sure you go find the exact baked beans with low sodium no salt whatever uh and then physically input the number into the tablet and just do that over and over and over again um that alone seems insane and like hey we should just have real-time data points like you know there's online grocery stores that'll just tell us what the price is

but okay fine that's how we collect the data the thing that seems to be maybe the most egregious in my opinion is this whole idea of substitution and so if something goes up too much in the basket of goods there's like ah people stop buying you know that baked beans and instead they'll buy corn or whatever like how do you look at some of these nuances of again you know each one we can kind of laugh about and point to but it does feel like the overall way the data is collected the methodology that's used the calculation of inflation it just seems like there's a lot left to be desired there 100 and that goes back to what i was saying with certain categories they have much higher inflation than than uh the headline numbers and those categories have a

much bigger impact but then and then you also get the you know on top of that you get to people that say yeah you know what the battle against inflation is over you know headline inflation minus housing and auto and and this and that and it's like what's left like oh it's inflation minus everything you need exactly it's kind of the same exact thing it's like everyone has their own core super core whatever you want to call it inflation but um look what you're saying is exactly right and in the best indicator of inflation is the sentiment of the general public i think i mean just look at every time you go to the grocery store or you turn on the tv and it's on the news there's something about someone talking about higher prices or they can't afford to pay their

rent or they can't afford this or that that's the best indicator i mean the data can be all golden but if the people are struggling i think that's what matters and uh the only thing that inflation has done is widen that wealth divide right the rich have gotten much richer the poor have gotten much poorer and everyone else in the middle kind of had to gravitate towards one another most of some gravity towards the bottom bottom end because that's just the way it was um and i really think it all started with that four trillion dollars of stimulus that was printed handed out um i remember going to like just my local mall for example in 2021 or 2020 late late 2020 and people were just lined up outside the gucci store the louis vuitton store i mean i'm talking like a line like

like you're at joe's pizza on broadway like that long of a line i'm like all right something someone's got to pay for this here. And look, inflation is, I always say this, the biggest involuntary tax in history. You're effectively handing out money that everyone feels like they got free money, but then they have to pay for it now for the next 10, 20 years, however long it takes for wages to catch up to inflation. And guess who's also paying for it? The federal government through net interest expense on federal debt, which is also skyrocketing. I have a story that I've never told publicly, but was my like warning bell that we were in really bad trouble, which is I can't remember if it was the end of 2020 or beginning of 2021, but my wife and I went to Puerto Rico and there was a friend that was down there. We were going to go. I had a meeting that I was going to, and then we were going to spend a couple of days. And I remember we got on the plane and we arrive. And when we got there, there was a ton of people who are very confused. And I remember looking around like, you know, okay, so they're not from Puerto Rico. They've obviously never been here before. Right. This is like first time tourist.

And so I just didn't think anything of it, whatever. What about my day? Went, go to the hotel. Hotel, I've said it a number of different times there. And the concierge made a comment about like the explosion of tourists. Wow. Okay, fine. Again, didn't really think anything of it.

It was like the first or second night, go out to dinner, go to a restaurant. And we're walking around and I wanted a pack of gum, right? And I just, whatever, I want a pack of gum. So we go into like, you know, whatever it was, a CVS, Duane Reade, whatever the store was. And there was a line of people who were buying, you know, just basically cheap beer, cheap alcohol, getting all kinds of snacks, like whatever they were all getting. And I remember standing there and the guy next to me who had on a ton of fake designer clothes, he had a chain, like the whole thing. And he asked the cashier, do you take the EBT cards? Oh, my God.

And I remember just like, it was like, so like perplexing to me, right. It's like, okay, we're in Puerto Rico. He's buying a bunch of stuff. He's got all the fake, you know, uh, kind of clothes and jewelry, whatever. And then he asked about the EBT card. And so I remember it was like, just so like groundbreaking to me of like, holy shit. Yeah. That went out, whatever, go back at night.

And I started like, you know, I'm on a computer, right. I'm like, what the hell is going on? Right. And, uh, and I joked that like, it was like my own personal, like big short moment. I remember when they're like, you know, like researching, like something's going on. I was like, holy shit. And so then I go downstairs, you know, in the morning and I ask, you know, the hotel people. I'm like, is there like a lot more people coming here?

But it was like, there's a ton of people. And so like what eventually ends up happening is the airlines were offering like $70 flights from places like Houston or Atlanta or like these major airports because just nobody was on the plane at first. So they drop all the prices. So now all of a sudden it's dirt cheap. The hotels had no tourists. So what do they do? They drop all the prices. So now it's like, you can basically go to Puerto Rico for a week and it's like, you

know, a thousand bucks. So naturally, a ton of people who otherwise wouldn't go, they're ready to go. Makes complete sense and good for them, right? They should be able to do that. Right. But then how are they at, like, how are they spending money? What are they doing and everything? And it was a ton of stimulus checks, like all this stuff.

And so coming back from that trip, I was just like, I actually probably underestimated. I thought that it was going to be much shorter impact. I was like, this is crazy, but it's gonna be crazy. how much can $1,200 100% what was that 30 days the world was free back then like for a couple of months like I remember I even had to come to New York at one point for for work uh or I was flying in and out of New York and it was like 90 bucks like you said for a flight I'm like and it was like free upgrade to first class every time like you get the whole row in first class like they're like both sides of the plane like it's not even and then uh even I've had to fill

gas. It was like 99 cents. I'm like, I mean, this is great right now, but there's no way we're not going to pay for this in the future. And that's exactly when I started saying inflation is not transitory. Sometimes to make an investment or a prediction in the market, it's not that complicated. Just look around you sometimes. And that's like you said, you walked in that Duane Reade or whatever it was. And that's what I like to call like the top indicator. Dude, it was one of those moments where I just literally, and I was like hitting my wife on the leg. Like, do you see, like, this is the, this is the end result of like this stupidity that it's going on. And of course she's like, what? I don't, you know, she's like completely oblivious

as we go back. And I was just like, wow. But it didn't last for only 30 days or even 90 days. Like obviously inflation went to over 9% and we had this huge issue. One of the areas where I think that we've really seen this show up is in home affordability where, you know, I think some the numbers in like 2016 the u.s median home was like 280 000 uh in 2024 is like 430 000. how do families keep up it's insane if you look at um we put us a tweet about this recently if you look at uh home price appreciation versus wage growth since 2020 it's been double home prices doubled uh wage growth so that's one thing itself and is the way to think about that um it is twice is hard for someone to be able to buy a home yeah actually more because all interest rates have

almost tripled right so you actually have two factors you have you know obviously the income that you have that you make but also how expensive is it to finance that house and then it went from a 2.5 rate to seven to eight percent rate and so basically the price of the home the aggregate money that you need went up and then the cost of the money you need to borrow goes up exactly and your wages don't nearly keep up and so maybe it's three or four times more expensive that's what else went up your home insurance went up and your maintenance went up and your you're cutting your grass when everything went up so now uh i think the average homeowners for the first time paying almost 3 000 oh sorry home buyers paying almost 3 000 per month to buy a median price home in the

us just between mortgage and taxes and insurance uh do the math on that you're you know you're about 36 000 a year well what's the median income 80 000 for a household so on a post-tax basis you're paying over 50% of your income just on a home payment. What about, you know, you have two, three kids, you have cars, you have, you got to feed your family. I mean, at this point, it's like homeownership is the ultimate luxury. It's no longer even part of the quote unquote American dream, even renting too, by the way, people are paying over 2000 a month in rent on average now. So home affordability is abysmal right now. And really what's causing that is, well, number one, obviously inputs went up, lumber and everything that it takes to build a home.

But what about, you know, there's so many inputs that have gone into it. But I think one of the biggest thing is existing home sales are at 2010 levels right now because you have, and it's not even the individuals because you do have a lot of individuals that have a 2.5% mortgage rate and they don't want to move because you can't transfer your mortgage and you have to get a new mortgage and you have to pay 8%. That's one thing. But also you have so much investment activity that happened in the residential sector, especially. I mean, investors were buying single family homes like it was candy back in 2021, 2022 when rates were low because your cap rate was so high. Think about it. Your finance, there was a point when mortgage rates were like a third of the CPI

inflation. I mean, it was like almost arbitrage to take a loan. You're borrowing money at 2%, but it's depreciating at nine it's like it's free money right um so that kind of led to since the for for the first time since 05 right now existing home prices are actually higher than new home prices like that's the definition of broken think about think about you go to buy a new phone or something and like yep the used one is actually more than the new one it just doesn't make any sense that's how we are in the housing market right now uh and it's it's hard to see like it's We're not in a 2008 situation. It's hard to see a major crash happen. The question I get all the time is, what's it going to take for lower prices in the home market? Well, you need some sort of

external event that forces supply into the market because it's not a demand. Demand is at 1995 levels right now. Mortgage demand, no one's buying. Call your local mortgage banker or your local real estate agent. I guarantee they'll tell you they're not even closing a deal. But the problem is, even if they close one deal and there's only... If they close two deals and there's one house for sale, then it's still very competitive to get that one house. And we need supply to return for lower prices. That's either going to take a spike in unemployment to cause foreclosures or some sort of external event that rushes supply into the market. I'm not really seeing that happen right now, especially with rate cuts on the way. So I saw a data point that said,

it's a new all-time high 42 percent of americans have no mortgage on their home and i thought wow we're so fiscally responsible look at how great we've all been in paying all this off and then uh as the internet is great at doing somebody said no idiot it's because the boomers have been in their homes for more than 30 years and so they've just been paying it off and now finally a huge portion of the population has paid off their mortgages and so uh that number going up is really just an aging population more than anything else 100 and and not only is that the aging population is paid off, but the younger population is not buying because they can't afford it. So it's happening on both ends of the spectrum. And I mean, like you said, that's, it sounds like

at first sight, that sounds like the best possible thing. You know, oh, everyone owns a home. It's the grass is greener and we're good to go. But that's really not what it is. I think it's a tough time to be a millennial, right? I mean, millennials are even trying to find jobs now is becoming difficult with the labor market weakening. It's a tough time. Affordability is is bad all around the board right now and it's not improving and how much of the affordability is the inflation and the devaluation of the currency um combined with the fact that millennials are all trying to save rather than invest like one of the things i always say is you hinted at it earlier that you know inflation made the rich richer not because there's some evil billionaires that you

know are sitting behind some cloaked you know uh door or something and they're like hey here's the the way we're going to get rich. They just have investments and the investments go up in an inflationary environment. People who hold cash go down. And so it does feel like maybe more so than other generations. They were told, save, save your way to financial security, but actually they should be investing in. Exactly. Well, what you said is right. Even if you don't have to be that rich necessarily to hedge against inflation, like if you just own a house, if you owned a home 10 years ago, 20 years ago, that house is hedging against inflation because you can always if you want to move,

can sell that house and buy another house and they both theoretically appreciated um when you don't have any hard assets other than cash in your bank account and even then that's kind of questionable these days for most for a lot of people uh you're you're being left behind in an environment like this and that's exactly what's happening um and and also even look at the market right like the stock market has seen incredible appreciation that we're talking about an s p that's nearing 6 000. like i was looking at some clips of me on you know just like on cnbc or whatever a couple years ago and it was like S&P 3,200, I'm like, I thought that was like 2010 or something, but it was like two years ago, three years ago, not even that long ago.

And like you said, it's the rich people that are invested in these assets, not the people that are trying to build their life and have recently entered the workforce. It's tough. I don't really even know what the solution is because you're entering a situation where you're behind the eight ball. And also there's been talk of new home buyer credits and you know mortgages are being subsidized by the government keep in mind all that stuff is effectively a form of stimulus right there's no such thing as free lunch you can't hand out free money you can't hand out zero percent loans and expect no one to pay for it someone pays for everything and the fight the way to fight inflation is not necessarily more inflation right well it's

like the uh i see these programs so like hey we want to help first-time home buyers and so we're gonna give them twenty five thousand dollars for the down payment right but you're like okay so every home price is gonna go up twenty five thousand dollars exactly that's it that's how it goes the cost is always passed down it's never just someone says yeah they go to my heart i'm giving you this money and it's not going to have an impact so um you and your team have been very bullish on stocks throughout uh this year um you have been calling for s p 6000 um and you have largely been right how much of that is just like higher inflation environment stocks go up versus like analyzing earnings or specific companies in the s p like like kind of walk us through your

thesis as to why you've been such a bull in stocks so um one of the first things so so our our strat investment strategy that we try and kind of you know provide for our clients and and our people that read our work is to always kind of get ahead of the trend through two key variables one is the fundamental side of things and two is the technical side of things when we when i first started the kobasi ladder it was around 10 years ago technical analysis was viewed as like some witchcraft like Like if you were putting lines on a chart, everyone's like, what are you, what are you doing? Astrology for men.

Exactly. But then I realized that market volume became increasingly automated. Actually more than half of all trades in the market today are placed by an algorithm. And a lot of those algorithms were trading off these technical levels. So in a way, technical analysis, it's like, it's power in numbers, right? More people that follow a certain level, the more strength that level will have. So one thing that we noticed going into 2024 was we were in a textbook technical uptrend starting from that October 27th, I believe of 2023 is when the market bottom and everyone was

calling for, you know, it's a dead cat balance and we're going, S&P is going to 2000 or whatever, you name it, it was going to it. But I said, you know what? I like this technical setup. And I think if you get ahead of a trend right now in a market that has a lot of money on the sidelines, a lot of people looking for bargains and especially tech, the tech sector was down massive. I mean, Nvidia was down like 70% at that time. Just think about that for a second. and Meta was trading like $80 back then. I was like, these stocks are bargains. I mean, at some point, there's too much fear in the market.

So that was one. Two, there was this whole notion that we're going to an election year. And I've literally been screaming this on Twitter and on every show I go on. Election years are good for the stock market. People don't realize this. So that was something that we did a lot of research going into 2023. If you look at the last 23 election years dating back to the 1920s, 83% of those election years ended with a positive return on the S&P 500. That's incredible.

If you only invested in election years for the last 100 years, you're doing great. I mean, you're not necessarily outperforming that benchmark, but you're doing fantastic. And then there was a whole narrative of, well, you know, if Trump wins, then it's going to be great. If the Democrats win, whoever it was, Biden and Kamala at the time, then it's going to crash. The market's going to crash. Well, if you look at the data, actually, in both cases, the market ends higher on average. In the case of Republican wins, it's around 15% average annual turn. In the case that the Democrats win, it's around 10%.

But either way, I was like, that's pretty good. And then on the fundamental side of things, I knew that this Fed pivot euphoria. So I think the point when I realized that this Fed pivot thing was going to just keep driving stocks higher, it was December 2023. And it was the strangest thing. Jerome Powell completely changed his tone. it was like two weeks before he said we're not even talking about rate cuts and nothing like it was a cnbc article and then literally two weeks later he's like uh yeah we're looking at

at least three rate cuts maybe more starting maybe in starting in january at one point there was eight rate cuts priced in it it was like wild and i said yeah when the market is this euphoric about uh the fed cutting interest rates we're not going to get bearish well because people aren't going to wait for them to cut and then no they're gonna invest and then wait for the cuts that's exactly right and you're seeing it right now the same thing is happening right now so and then there at the same time you had every headline in the world every headwind in the world sorry that could have brought stocks lower from wars to people saying earnings were going to decline to uh you know national u.s debt every you name it it was there but nothing was was impacting the

market so we we saw uh we made the thesis that risk appetite right now i think risk appetite right now is just about as strong as ever been in modern US history and for the market. And that's something that's not worth fighting. You have higher highs, higher lows, strong technical uptrend. You have a market that's literally looking for any reason to rally. We're up 40% over the last 12 months. If you look at, and I know I'm just spewing data here, but that's how I kind of think. If you look at every annual gain from annualized on a fiscal year basis. The last time we had a 40% year was in the 1950s, 1954, I think it was. We don't have a 40% year necessarily, but we have 40% LTM. That's insane. When you have that kind of euphoria,

obviously people are going to call it a bubble, but at the same time, you can make a lot of money in bubbles, even if it is a bubble. You can't afford to miss it. That's what I thought. Yeah. And here's the part that I think people don't realize. There's two things that I think have structurally changed in the stock market, which people who want to sound smart don't like or at least don't acknowledge. The first is the historical valuations of stocks did not take into account the need for investors to go and buy stocks as an inflation hedge. Absolutely. So there is some sort of monetary premium that's assigned to stocks today. I don't know if it's 1% or 10%, but there is some percent of you're going to have higher valuations because you don't

just have people buying based on the valuation. You also have people who just say, I need to get of dollars. And so I got to go into these assets. And so naturally you get that lift. The second thing that just blew my mind was I was pointing the PE ratio, the PE ratios doubled. Oh my God, it's so high. Whatever. The businesses are more profitable. Absolutely. The efficiency of the business has doubled as well. Look at Nvidia. Nvidia has gotten cheaper as it's gone up. It's like the explain why Nvidia is cheaper as it's actually going up. It's crazy that people miss this, but Nvidia's earnings, their EPS, their net income, even revenue, basically every metric they have,

has actually outpaced the appreciation of their stock price. So the multiples have actually gone down or stayed pretty flat. I think Ford PE is like 35 or in 30s at this point. And it was higher, I think, in 2021. It was higher when the stock was pre-split at like $200. And then you talk about people saying, oh, it's a Cisco or it's the Intel of the 90s and 2000 bubble. I mean, could it be a bubble? Yeah, absolutely. I'm never going to say there's no chance that a stock that's up 500,000% over whatever amount of time couldn't be a bubble.

Yeah. But at the same time, it's not the same situation. It's a different time. And I think the AI trend is also a real thing, whether people want to believe it or not. I mean, that's where investment is going. that's where capex is going um and going back to your point about u.s stocks too uh not only is it an inflation hedge but it's actually become a safe haven trade globally speaking so you've seen like yeah this is something we've put out a lot on twitter too

is you've seen a lot of uh global record inflows into u.s stocks over the last year or so and it's not even necessarily because everyone's so excited about u.s stocks just because there's they're a lot less excited about everything else i mean look at china china alone is they have five six quarters of deflation in a row first time since the 90s or that's happened uh europe's had a lot of volatility especially with you know the war in ukraine going on has disrupted a lot of supply chains there's prompted much higher inflation than the us for a period of time um and i think u.s stocks have become effectively a safe haven trade along with gold which i think which i've said is now the new global safe haven trade but stocks have become inflation heads safe haven

trade risky trade tech trade and everything else in between all in one it's like the complete package. And that's how markets are viewing it. And also, if you look at, think about it from an institutional side of things, if you're a fund manager or you're a wealth manager or anything that's really public side related, you can't afford to miss a rally when the market goes up 40% in 12 months, right? So those people are saying, I'm just going to keep riding the trend too. I'm going to keep reinvesting money into the market, reinvesting my dividends. And when the trend shifts, then we'll get bearish. And that's exactly what our review has been. And I do think see 6 000 by year end um and i'm sticking by that call so the other thing is uh are you playing for

the short term are you playing for the long term right if you said to me um will stocks be higher in 20 years yeah there's literally not a single thing you're going to tell me as of right now based on all the data that i've seen that is going to convince me that there's a 10 chance that they are not higher in 20 years right i mean it is just structurally you're going to devalue the dollar if the dollar gets devalued, the stocks are priced in dollars, we're going higher. If you're telling me stocks are lower in 20 years, U.S. stocks, and you're basically saying that the U.S. will have collapsed in 20 years, that's what you're calling for. And in every other situation, stocks should be higher. And I would even argue, even if the U.S. collapsed,

stocks are still going to be higher because like Venezuelan stock market or Argentinian stock market is usually the best form of stock market, right? Because hyperinflation inflates all the stock prices. Now, can you get out? There's a bunch of kind of caveats to it, right? but the reason why i use 20 years is because it's such an egregious amount of time in most people's mind that uh stocks are going higher that is the trend that has been the trend for 100 plus years is going to be the trend for the next 100 plus years uh what i think a lot of people start to think to themselves is like what about next month or next year and my position is always well if you think long term or you're invested long term younger especially

who cares right just buy it when it's cheaper right like don't sell to then hope that there's some drop instead just go find more cash to put into the market what i always say is if you're if you have time in the market you want bear markets because you get bargains like imagine you can go buy nvidia right now for 50 a share and then you say oh that's great and pull it for five years i'll be back to 200 or whatever uh long-term investors should warrant pullbacks and they should capitalize on them uh short-term investors should obviously be more cognizant of what's what's happening and i think as you're saying if you're long-term oriented don't even be don't even check your account every every day right maybe check it every month just to see

how it's doing but you don't it's if long-term oriented the us is if you scroll out on the chart that's in 500 we're in an internal bull market even if you bought at the top before 2008 the worst recession in u.s history other than the great depression you're still up hundreds of percent in the s p 500 alone since that time you mentioned that gold is the global safe haven trade explain kind of how you guys are thinking about yeah so this is uh something else so we we got ahead of this gold rally and over the last few months kind of just started saying well this is interesting you have uh a market where gold doesn't necessarily perform that well as it's been but it's been incredibly hot and not only that over the last two months or a month and a

half bonds have crashed the 10-year note yield is at 4.3 percent and gold is still at now at 2800 pushing even higher. People are calling for 3,000. We could definitely see it. It's interesting. You have this massive divergence between gold and bonds. So if you ask any person that's been in the market for the last 20 years or 30 years, it was always, yeah, in times of uncertainty, people buy gold, they buy bonds. That's it. Simple. And maybe utilities. Now, no one wants to buy bonds because they don't know what the Fed's going to do. For all we know, we could have rate hikes coming back. I mean, we had 50 basis point rate cuts priced in a month ago. And now there's the odds of no cuts are being priced in. It's like no one wants exposure

to that kind of volatility. So they're selling bonds. And then you have geopolitical tensions everywhere. You have inflation. You have a lot of uncertainty. And then you have central banks buying thousands of tons of physical gold while calling for a soft landing. So it's like this this whole storm, it's like everybody is stocking up on gold, including the banks that themselves say we're not going into a recession. And it's rising with every reason to fall. Even the US dollar, by the way, the US dollar index, the DXY, is up like 5% over the last two months or so. And gold is still rising. It's insane. If you put a chart with gold bonds and the dollar, it's like gold just said, you know what? Have a good day. I'm going my own path.

like it's crazy so that um it's it's clear that people are flowing into gold and uh investment continues to flow into there regardless of what's happening and it's it really is the safe haven trade and i think there's just so much demand for the for the shiny metal that at this point it's not it's do you think it's a psychological change like people have psychologically said hey bonds are not safe anymore i need gold i i really yeah it could it could be and i also think with rates you know now that they even did a 50 basis point rate cut now you're getting 50 basis points less on treasury bonds and treasury bills and all even high yield savings accounts are paying less so now that gap between gold that's a zero yielding asset and a bond that's obviously not

zero yielding is narrowing so that's even proliferating it a little bit more um and i do think it is people are saying you know what let's stick to the basics right now let's get back into the things that are have more certainty and are less correlated with government less correlated with one specific currency more as a global currency, and gold is at the top of that list. What else is at the top of that list? Bitcoin. Gold and Bitcoin are not substitutes. They can both rise together, and we've seen that happen. Do you look at it as they're going to directionally trade together, gold and Bitcoin? I think so. I think Bitcoin differs from gold a little bit in that it is more correlated to risk appetite, whereas gold is a little

bit more inversely correlated and that uh we've seen bitcoin actually perform well in a market where where the s p is rising where risky assets are rising a lot of it because bitcoin is a risky asset um but i also think that you're compensated for that risk i mean look at the returns in bitcoin compared to gold it's not even doesn't it doesn't make a dent in the chart if you put them together um but at the same time they both have that aspect of being sheltered from government sheltered from one specific currency they're inflationary hedges they're uh finite in a way i guess um the interesting is the interesting is gold has a market cap that's 20 times out of bitcoins like bitcoin is so big but so small at the same exact time right now and uh do you think

those converge those two market caps i i absolutely think that gap closes and i think most people don't realize that it's you always look at something that's up like 50 000 or whatever it is and say oh yeah it's huge now i can't get in but then you look at when it goes up another twenty thousand percent and you say oh it was actually small back then but now it's huge and then it goes up again so it's huge and small is relative and i think gold on a um when you look at assets that are shielded against inflation and governments and centralization uh bitcoin's actually still pretty small which is which is funny and we've been calling for 100k bitcoin we'll probably see a million bitcoin at one at some point in my life um especially with inflation

So I really do think both assets can rise simultaneously. So when I first started looking at Bitcoin and gold, I think I had two different things. And one of them I changed my mind on. One was gold and Bitcoin would have this flippening. Gold's market cap would expand over, or I'm sorry, Bitcoin's market cap would expand over gold. My thought process was gold would be demonetized. And so you'd see that market cap shrink. Bitcoins would continue to expand and you would get some cross.

I think at the time gold was like $10, $11 trillion, and Bitcoin was like, I don't know, $600 billion, $700 billion. I've changed my mind now because the data basically says, no, no, no, hold on a second. Gold's going to keep going up. It's just Bitcoin's going to go up faster, right? And so they probably do cross at some point, but it may take longer. It's going to be at a much higher level. And so gold investors are going to do just as well as I think they thought that they were going to do. But the second thing that I find very interesting is that there seems to be a demographic difference in terms of most young people I talk to, they don't own gold and they're buying Bitcoin.

Most of the older guys that I talk to, they own a lot of gold and they're starting to kind of dip their toe with the Bitcoin. But the institutions are all run by older guys, right? It feels like that changes over the next 20, 30 years, obviously, right? And so how do you look at the relationship between these two assets, you know, 10, 15, 20 years from now? Do you think people still try to hold both or is there capital that would go into gold historically, but will kind of get siphoned off into Bitcoin? You know, what's funny on a side note is every time I go on, I go on a Charles Payne show

on Fox, I'm like the only person there that's like, that's young and bullish of gold. And he's always like, yeah, the youngest gold bull of all time. He's always making fun of me. I'm like, but I love Charles. He's great. But I think it's interesting. um definitely institutional investors are probably retail is a lot less likely to go buy gold like some guy buying bitcoin in his robin hood account or whatever is is going to be more prone to buying

a risky asset or something like crypto or ethereum or you name it than just going to buy a spot gold etf um at the same time i think that that that can change like you said especially as the young people start getting into the institutional side of things and also the only the other thing that's changing is regulation i think we've like five years ago everything was pointing towards the government striking down bitcoin now it's it's it's actually become a part of the campaign trail like you know candidates are speaking at bitcoin conferences and and um and criticism criticizing you know people who are who are not accepted accepting the technology and the the change that it's bringing so i think attitude and generally speaking is changing and i even think

the older investors are starting to view it. And what drives an institutional investor more than anything, it doesn't matter if it's purple, green, gold, you name it, it's returns. If something has good returns as a money manager, you can't ignore it. That's the reality. And I think, like you said, I mean, gold itself is not going to be some crazy performing asset that makes thousands of percents every five years, in my view. It might not even outperform the S&P 500. it i think it will keep rising but i think bitcoin is going to significantly outperform gold and it has and it will and it will continue to do so especially as we break out higher and more capital flows into it and then times and as we go into more economic uncertainty times with maybe more

global inflation that's even better for bitcoin and do you think that eventually central banks hold bitcoin as well you mentioned that they're really buying gold aggressively right now do you think that that's kind of the end game maybe eventually i think that we're still far away from that though i mean it's that would be like the ultimate the ultimate that's like the strategic bitcoin reserve too like those kind of things are uh they would be great to see but i still think we need we have some is that how we get the million dollar bitcoin price that i think that would be a big factor i think also uh just generally speaking i mean million dollar bitcoin let's just say you're talking about usd too right it's you bitcoin to usd will naturally keep even

if bitcoin never went up it will naturally keep rising just because the usd is going to always keep falling. A dollar from 100 years ago is worth like, what, $0.05 or something. So just that alone will keep pushing things higher. But I think it's going to go from both ends of the spectrum. You're going to see higher demand, higher prices, not just because of inflation, but because more people want to own the asset. Now, we mentioned bonds earlier. And one of the things that I keep saying is that people buying bonds is basically a sign of they didn't do the work. They're just on autopilot or they're dumb. Because it's very clear that if you think higher inflation environment, if you watch the dollar being devalued, bonds are absolutely getting

destroyed. And my favorite thing to point people to is just go look at TLT, right? I mean, it's down like 30, 40% in the last five years, right? And so is the 60-40 portfolio now completely obliterated? Or how should people think about some sort of bond allocation, especially in a bear market where we saw stocks and bonds go down together, right? And I think it kind of broke a lot of the models or the brains of people when that happens. I think there's been a lot of opportunity to trade bonds. TLC in particular, we've been trading it to both directions because you have seen some pretty large swings, like 10, 20% in both directions, which for bonds is pretty big. The 60-40 thing, it's almost like bonds are, you're not even really buying it to make a

return. You're just buying it because you want security. You want to know that you're going to have your money and you're at least going to hopefully be protected against inflation. and the other thing is too in the market like we have now money market funds are paying 4.5 to 5 percent those have also become a substitute for bonds in a way because they're way more liquid they're more it's it's it's a lot it's basically cash in your account um so i think that's the point right is like if those exist why would somebody go buy bonds yeah and i think it's a very traditional way of thinking especially the you took the average person that has a 401k right You start in an 80, 20 bonds, stocks to bonds, and then you go more towards 50, 50 as you

need retirement and then 70, 30 and this and that. I don't necessarily think that's dead, I think, because a lot of people will prioritize security over returns. Just, you know, if you're if you're institutional speaking or you're managing a fund, you think differently than someone that is has worked for 40 years and then they're going into retirement and they want to preserve capital. So I think that's where the demand for bonds comes. Is it something that I think young people should be investing in?

probably not over the long term. I mean, we just talked about how stocks will be higher 20 years from now. Just put your money in an index fund at that point. And if you don't want to tend to your investments, I definitely think you'll perform much better. Hearing you say this, basically my takeaway is that non-economic actors are buying bonds. I mean, it's kind of crazy, right? It's like the entire financial world is built on this concept that you have to be a non-economic actor to buy an asset, but still there's a lot of non-economic actors because they're optimizing for something else, which again, fine, no judgment and is right for them that, you know, they're at risk, appetite, whatever. But like essentially the entire

asset is being propped up by people who are not actually buying it for the reason that originally was perceived. Look, you know what the textbook example of this is, is Dave Ramsey, like his audience and nothing against him. Like I'm, I'm sure he does, he does great stuff. He's helped a lot of people, but I think I saw a clip of him. Like someone said, if I give you a billion for free right now as a loan, would you take it? He's like, absolutely not. And then they're like, but you can just put it in like treasury bills and make 5% a year. He's like, nope, no debt, nothing. And like, it's that mindset. And that even if you have an arbitrage opportunity in that hypothetical situation to avoid that for peace of mind and for security is more valuable than

making a few extra percentage points for some people. And that's, I think that's where bonds are kind of falling into play here. Yeah. That, um, that makes sense. Uh, if we go and we look at stocks, there's obviously a difference between the S&P, NASDAQ, and then kind of we can put a bucket of everything else. The NASDAQ has been exploding in value. I think it was up 50% last year, if I remember correctly. And what I find very interesting is both NASDAQ and then the tech sector of the S&P 500, they have both returned anywhere between call it 20 to 50% over the last year or two. That is better than almost all private, illiquid venture capital funds. The top 5% or whatever, they're going to outperform. They're going to do a great job.

But if you can get 30%, 40%, 50% in public markets with liquidity, there's a much harder argument for people to go and invest in alternatives. And so what are you all seeing there in terms of public allocations to tech versus maybe private? Yeah. Well, I mean, the NASDAQ has given even private equity firms a run on their money for the 20% IRR golden rule. You double your money in five years in PE and you have your funds doing great. Now you're doubling your money in two years in the NASDAQ and you don't have to do anything. You just buy an ETF and you don't pay any management fees either. But I also think that that comes with elevated levels of risk, obviously. The NASDAQ, even the S&P 500 has become incredibly concentrated in a few names. The top 10% of the S&P reflects

30, 40% of the index now. So those stocks are doing great. And I think as long as those stocks keep doing great, the index is going to do great. But there's also the flip side of that in that you're you're definitely taking on higher risk if those stocks go into a correction like look at what happened on august 5th for example with the whole japanese yen carry whatever you want to call a carry trade debacle which we actually bought by the way i bought on and in our research we posted a report for our subs saying we're buying today on august 5th because the young trade wasn't over and it's still not over and we can get into that if you want but uh that was a good example of how market concentration right now is kind of at dangerous levels. And that's definitely an

argument that a lot of bears will take, because the minute that you start seeing the AI trend fade or you start seeing earnings growth starts to slow and NVIDIA and Apple and Microsoft and Meta and you name it, then the market's going to stop returning what it's returning. So that's how you can kind of look at that. I just don't think that it's a smart decision to try and time the top on something like that. Because if you've tried to do that at any point over the last 12 months, not only have you lost, but you missed out on a generational run. And that run, I think, will continue, as I said. Now, you say that the yen trade is not over, which is very interesting, because I think people said, hey, this carry trade blew up. It hurt my stock portfolio.

You know, F the guys who were doing this. Why do you think it's not over? So, you know, that day was very interesting because a lot of the selling, I think, was retail driven and it came um like we posted a a note on twitter saying on x i keep calling twitter on x saying what is the carry trade it was just a thread and i think that thread got like 10 million like 5 million views or something crazy because no one even knew what was happening they were just selling because they saw the headlines and what happened was yeah the bank of japan they raised rates to slightly above zero percent out of negative territory for the first time in a long time and effectively what the carry trade was for anyone who doesn't know

you could you know you could capitalize on the difference between interest rates in japan and everywhere else so like while japan was cutting rates or they had negative rates we had 5.5 fed funds rate and there was a huge gap well now yeah the carry trade has scaled back as we cut rates and they raise rates but there's still a huge difference between their quarter their 25 basis point rate in our even if it goes down to four percent fed funds rate or 3.5 percent fed funds the carry trade is still happening so what my thesis was is this is just pure panic the carry trade is scaled back but it's definitely not gone and i only like a handful of people were kind of took this view and uh the s p 500 rebounded 10 in in a matter of days it wasn't it

was the most free trade ever i mean it almost felt like arbitrage but it wasn't because obviously there's no such thing as arbitrage in a efficient market. But it's not over. And I think people realize that quickly. And it's no longer something that I think will really catalyze a big drop in stocks unless we have a major shift in interest rate policy. You mentioned efficient market. Do you think the market's efficient? I think it is. I think it's more efficient than it's ever been. Is there times when there are inefficiencies on like a microsecond basis when these quant funds, for example, are trading bid-ask spreads. And yeah, maybe a little bit. I think the market is efficient in that whatever data we have, right, as it's released is being priced in

as accurately and as quickly as ever before, especially because of the first thing I said in that 60% of market volume is automated. But that doesn't mean that efficient markets also don't mean that there isn't room to make money and that the way that markets are pricing something in is the way that's going to pan out in the future because there's new information every single day and the variables impact that new information are changing every single day so there's a lot of different variables but i think they're efficient in the sense that when news comes out or when some a new development happens it is priced in instantly these days and there's not really arbitrage on that anymore a place where there is no efficiency whatsoever is the job

numbers um we have seen uh massive revisions uh the famous you know 800 000 job uh revision down um we've got the most recent number of they created 12 000 jobs in october i'm on the side we had negative job growth they're going to revise it down um why are they so bad at counting i think a lot of people just want to understand like okay you call it this number and there's really actually a lot of people don't know this there's two revisions yes so you get kind of the initial number, you get the first revision, you get the final revision. They have wiped at least a million jobs over the last 12 months off. And now it's the point where when they come out with the number, anyone who's sophisticated is like, lie, like not true. Right. It's going to be lower.

Yeah. Is that just the new normal or what's going on? You know, what's interesting is, first of all, I kept saying we should just look at the jobs data on a one month flag, maybe now a two month flag because they're revising them twice every single time now. Even August was just revised lower. September was revised lower. Eight of the last 11 reports were revised lower, with one of those revised twice. It's the ultimate credibility loss in terms of the way the market looks at it. And I feel like the market isn't even trading on the headline number anymore. They're almost looking at their revisions more.

They're trading on... I don't even know what they're trading on the jobs report day anymore now because basically we go up any where are this what happens um it's i don't know it i something something needs to be investigated or something but when you talk about i mean i understand if there's a few thousand jobs here and there that are revised on an occasion but when you talk about millions of jobs that's insanity and then you also have i mean you also have the whole debate of is the is the way the numbers are being portrayed even accurate in the sense that you have record numbers of people working part-time jobs but then you also have maximum employment and low unemployment because maybe because people aren't looking for jobs because they're working three

part-time jobs and it's like i don't know it's it's the labor market is its own beast with so many different things to break down but i think everyone can agree including the fed deep down i really think they do agree with this even though they say we have maximum employment the way the headline numbers are portrayed right now is not reality that that's a hundred percent fact people are working multiple jobs wages have not kept up with inflation finding a job is harder than it was since you know the pandemic basically and uh people are just not generally not optimistic about the economy and i think that stems a lot from the labor market so that's probably why they started cutting my 50 basis points because deep down they know the labor market isn't as strong

as the data suggests one of the um things i think i could be okay with is to your point you know hey, we thought there was 400,000 jobs created. Actually, it was 395,000. Yeah, we'd like to be right the first time, but within some band of margin of error, understandable, and also 395 and 400,000 are pretty much the same thing. Again, yeah, there's difference, but not really in terms of what people are trying to use the data point for. We created jobs versus we lost jobs. That's a zero to one. That's a way bigger problem. Yeah. and uh it seems like that's the territory we're in now right right well the other thing is too

the 12 000 number it was impacted a lot by the hurricanes and all that but it's almost like i mean now everyone is saying oh yeah it's a hurricane month don't even look at the data i don't doesn't really matter what happened even if it goes negative it's hurricane hurricane i mean it's like at some point i get there was a hurricane i get there's a bunch of variables every single month but you're just i don't know did the hurricane hit the whole country i don't I don't know what's, apparently, apparently, apparently I had the BLS the hardest too. Yeah. I mean, but, but it is kind of like this it's like a black box, right? They call it these data points. Obviously they don't, they don't make a lot of sense. And your, your point about

the loss of credibility I think is, is really important. And there's a guy on Twitter who actually is very smart, but he has a habit of whenever I tweet, so I tweeted and I said, you know if I was a betting man, definitely we're going to get the negative job revision. uh and it's not gonna be positive and he was like you know uh uh silly tweet or something right and another tweet i had was something about like basically they've lost credibility and his point was uh look at all of the revisions for decades they've been doing this for a long time and my point back to him was not the revisions are actually not the problem it's the fact that everyone knows about the revisions now right true and they do nothing about it too yeah so it was

was like for a long period of time before pretty much before twitter right maybe there were some really high finance smart people whatever they were looking at the data for the most part people just read articles and so the number came out damn that's the number whatever move on now there's people like you like me like you know name the 20 000 other people on twitter who are yelling and screaming about this stuff uh who are like hey hold on a second here did you guys know that they're revising the numbers. And so it's like the cat's out of the bag. And the loss of credibility doesn't come from the fact of what they were doing. It comes from the fact that now everyone knows what they were doing. And it feels like along all of these data points in economics,

you're just seeing it happen over and over and over again. And so there's this team that's building a true flation and they're building an alternative inflation measurement. I've spent a lot of time talking to them and trying to understand what they're doing. And they're like, yeah, so we just use like real-time data. We just like hook into, oh, you want to know housing? Like we just hit Zillow and Redfin and apartments.com and all these things. And we don't look at what they're listed for. We look at like, what was the closed price changes of homes for sale or for rents in apartments getting rented? What a crazy idea, right? You look at the actual data. Wow. Instead of call people and say, what do you think you could rent your house for?

It's insane. And so it does feel like we're at this kind of intersection or this precipice of a new era in economic data, but it's going to be really hard to rip it out and use the new stuff. That's the other thing too. When we were talking about efficient markets, just X alone has changed access to information. I mean, these kinds of things that would be, you'd have to get through equity research or you'd have to pay Goldman Sachs a million dollars every year to get... It's like you can just go on Twitter right now and read on your feed, my feed, anyone's feed about what's happening real time much faster than anyone can get to it. But with a lot of people having very stunning accuracy, I will say there is some stuff that's

not very accurate, but we have community notes for that reason. But yeah, I think you're right. Awareness is just growing all around the board with anything market related. Let's talk about the banks. Obviously, we saw, I think, three of the five largest banking failures over the last two years or so. And I think there's a lot of people who are very worried. Balaji Srinivasan had the famous, you know, Bitcoin's going to a million dollars, I bet a million bucks on it. That didn't happen. But I think his point around like the bank's unrealized losses that brought a lot of attention

to it. If you go and you look at the charts, it looks real bad, right? The unrealized losses sitting on these bank balance sheets, worse in history. And you would think basically banks are going out of business. Their response is no one's going to hold them to maturity. Everything will be fine. Stop worrying. Where do you come out on kind of the solvency or the structure of the banking system?

yeah well you know tell it to svb that no one's gonna no one's gonna sell the securities and they're gonna hold them in maturity because that's what they thought too until the run on their bank started and they had to sell these securities overnight for pennies on the dollar so i think a lot of banks uh bought a bunch of bonds treasury bonds you name it and these these securities back when rates were low thinking that we're going to stay in a low rate environment for a long time because inflation was transitory according to the fed and that's not what happened and now we have five six hundred billion maybe more of unrealized losses on banks balance sheets which by the way a lot of those are on small banks regional banks that also hold 70 percent

of commercial real estate debt with these commercial real estate if you look at commercial real estate i mean honestly it gives 2008 a run for its money that's how bad it's been for office buildings for example there's office buildings down the street from us here in manhattan that are basically given given away for free just because people want someone to take the bank know off their hands because they can't generate any revenue they can't rent out these properties there's work from home is grown so the you have the small banks that are uh burdened by these these series of debt they had these unrealized secure uh losses on their balance sheet and then you have this commercial the the regional bank crisis that it ended but it

didn't really end no one really knows what's going on with them their stock prices really haven't been doing that well they're still kind of like at regional bank crisis levels so i think Yeah, we're golden if nothing happens, but that's a big F. If status quo remains the way it is, so all these securities mature, then I think, yeah, you're good. That's a big F. So I'm not here calling for a bank collapse, but I also am not here saying that we're in a perfect world. Do you think the banks could do anything to change the situation? Obviously, they've got all these different programs they can pull capital from. They tell everyone, hey, it's okay. Everything's good. Right. You know, the famous SVB called all the customers

on a call and said, like, don't worry. And everyone was like, I'm worried. Right. Like, what do you think the basic is? The worst thing your bank can do is like call you in the middle of crisis because you're like, wait, why are they calling me now? But it's tough to say they can do anything because someone has to take on that burden. And you had the bank term funding program, which was the Fed's response to the regional bank crisis. It definitely helped. Was it like a bail out kind of disguise in a way. Yeah. I mean, no one wanted to say the word bailout. If you said the word bailout in 2022, I mean, you're unfollowed, hated on, blocked, muted, you name it, because it's like PTSD from 2008. You can't have a bailout. No way. We're taxpayers going to pay

for it. But yeah, when you're also lending money to banks at very free rates, someone's paying for it. Right. So now that that expired, that definitely exposed them to more risks. But I think the FDIC and the Fed have made it clear that they kind of are the backstop for these banks that take risks that are, you know, they're taking a risk when they're buying these securities that now have unrealized losses. They're effectively hedging against that risk, the Fed and the FDIC, which is a dangerous precedent to send. And also look at their response. This is the other thing. So when you saw the first bank collapse, it was kind of like, yeah, we're going to bail them out a way that's not a bailout and everyone's going to be made whole and then hopefully you know they

can just continue going on and no no transformative acquisition really needs to happen just you just kind of have to get the fire under control and then the next bank collapse happens and then the fed the fdic says well this time we're not going to step in until they really do collapse but then the next one happened they said well when they do collapse then we're going to kind of stuff and we're just going to let jp morgan buy them and now all the big banks say wait i'm not going to buy out any failing bank i'm just going to wait till they fail and get all the assets for pennies on the dollar like first republic or whatever you know bank signature signature whatever's next and this is like the best like jamie diamond is having a field day

with these bank classes because not only does everyone move their money to the large banks during the crisis he also buys out these small banks for basically free actually i think they're getting paid for some of them almost because they're getting subsidized so now you have that precedent that yep small banks take all the risk you want in the case that you fail yeah we'll probably just find some sort of way to backstop you and then jamie diamond will just come by you guys anyways and then all the executives you probably won't even be investigated it's you're good to go that's very dangerous precedent i think it's very dangerous i also um think that whenever you have uh fear dominating a market you get like really wacky ideas there's a guy who i won't name

um who said to me he goes i can predict the next bank that's going to fail and i said how he goes they all start with the letter s and so he said you know silver gate svb signature and then when when first republic went down he's like oh my theory is you know like negated but i do think that like you know in these moments it's kind of like why is this happening there's very you know uh kind of obvious subjective things you look at like the unrealized losses the bank runs etc but then there is this kind of overlay of regulatory slash political you know signature bank i think is a good example barney frank sits on the board he comes out and he's like dude they basically took this bank out back shot it and like there was no reason we were solvent when they did

that yeah um and so i think that again creates some uncertainty for investors to try to navigate when you're like hey i can't just like look at the balance sheets i can't look at you know a spreadsheet and determine whether this is good or bad because there's this like qualitative thing that is going to play into it which is nearly impossible to predict i agree and also we talk about x a lot the one thing that i will say x has proliferated is the rise of conspiracy conspiracy theories man i mean you name it signature bank and all these there was a theory there for everything So, yeah, it's no longer just look at the balance sheet. There's a bunch of theories.

There's a bunch of different variables. Crypto is even playing into that. It's interesting. It's a crazy time to be an investor. Another balance sheet that everyone's talking about is Warren Buffett. He's got $325 billion of cash on his balance sheet. He's been selling Apple stock very aggressively. He's been selling Bank of America.

And most people, I think kind of the like elementary explanation is like he obviously thinks the market downturn is coming. and he's going to just stock cash and he's going to make some big acquisition. The maybe more advanced argument, which I saw people talking about over the weekend, is I think it was last year during the annual meeting, he was asked on that day, they announced they had sold some Apple shares. He was asked about it by a shareholder and he talked about businesses and kind of what they're going to hold, not hold and all stuff. But at the very end, he talked about the fact that the corporate tax rate, which Berkshire

pays it's 21 he previously has been higher maybe it will go higher again and so why do you think he's trimming these positions and is it a tax thing is it uh you know uh investment kind of um yeah you know uh decision in terms of what he thinks about the business so uh the first the the tax point is 100 a fact he stated that i think it was in may actually at his annual meeting or one of his quarterly results um he basically said we have a 20 21 long-term capital gains it's it's actually correct yeah corporate tax but that corporate tax is going to go to uh 28 potentially under biden or harris at the time it was biden at the time and um people were he was saying well why not realize those gains now and pay less tax and maybe you won't you might not

even outperform that increase in the tax rate uh over the next year or so or whatnot so that was one part of it. And then I also think he likes the fact that you can get, look at his balance sheet. They have $280 billion of treasury bills. And we were just talking about this, but he loves bonds right now because you're getting a free return. And it's not necessarily that he's even thinks that that return is so great. It's more that it's better than losing if the market goes down or taking uncertainty, taking risk and uncertainty in a time when there is a lot of risk uncertainty. He owns more treasuries than the Fed, than the Fed itself, almost 100 billion more, which is insane. But the thing that didn't get as much attention that if you really read into

the report, it said, you know, we're halting buybacks until Warren Buffett himself sees the intrinsic value of our stock, Berkshire Hathaway, is below the share price. And then you step back and say, wait, is he short his own stock? Like, is he really saying that his stock price is too high because that's effectively what that means. So that's when I started thinking, well, maybe he is starting to err to the side that markets are a little bit overvalued here. If not even his own stock, they want to buy back anymore. And they only did, I mean, a couple hundred million of buybacks last quarter. Previous quarters, it was like 2 billion each. So he's been tapering down the buybacks with, I don't know, it's interesting. I think he wants to leave possibilities open,

but he also still does have a massively net long position, even in Apple. I think they're around 70 billion now so it's not like he's like all out i think he's just kind of scaling back a little bit and rightfully so after such a hot run i am i keep coming back to this idea that uh with 325 billion dollars in cash like you like i think he's called elephant hunting yeah right like you got to go make a really big acquisition um and it's unclear what they could buy yeah you know there's been a bunch of talk of different you know companies whatever but he's only got you know