Industry veterans, degenerate gamblers & besties Chamath Palihapitiya, Jason Calacanis, David Sacks & David Friedberg cover all things economic, tech, political, social & poker.
Sat, 01 Oct 2022 03:32
0:00 Bestie intros!
1:36 Big tech starts making cuts, plus what this means for the broader economy and startups
31:09 Global debt numbers, Fed incompetency
54:06 RIP Coolio
1:00:30 Russia / Ukraine update
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Hey, everybody, welcome to episode 98 of the All in Podcast with us again. The Sultan of Science, the Queen of Kinwa, looks like he brought a trucker hat. What, what, what, are you getting jealous of the Monclerot or are you just not bathing in it? No, I need a hammer. I haven't had air gun like six weeks. I'm getting my hair cut this afternoon. Not going to make a difference. I think what Freeberg is trying to tell us is that he is the zodiac killer. It's long been known. All right, there he is, the unibar. All right. And Monclerot sacks is here with his $400 Monclerot hat. And of course, the dictator himself. I asked Ron to cut my hair so that the white patch is more prominent. I think he did a good job. Do you add the white patch with coloring or is it? No, it's natural. It's just there. It's just there. No, you look so odd if you were doing it on purpose. It's super random. I like the way it looks. I like the way it looks. Jay Leno had a look like that. I'm about to go, by the way, you know this. In the fall, it truffle season. I like to grow it so that it's more wavy. White for white truffle season. Got it. I needed to have a reset cut so that then we could grow it wavy for the fall for truffle season. Listen to Matthew. The only thing less relevant to us than your casual sweaters is your f***ing haircut. What? Rainman David. We open source into the fans and they've just gone crazy with love you. All right, second now is the hiring freeze and a reorg at meta. He also said meta will reduce headcount for the first time in its history. This headcount in 2023 will be smaller than it was this year. He called it the end of an era of rapid growth. This on top of Apple reporting and Apple got walloped in the market for the first time in forever. Apple pull back iPhone production for the 14 after slower than anticipated demand. As I mentioned on previous episodes, they've kind of done a gentleman's layoff similar to I think meta in that Apple said you have to be back in the office three days a week. A bunch of people quit. So you don't have to pay them. I guess huge packages when they quit that way. Google CEO Sundar Pichai also called out employees in July as you guys all read. And he wrote there are real concerns that our productivity as a whole is not where it needs to be for the headcount. We have Google of course, 175,000 employees. So I guess the question I have for you is are these the last hours to fall to moth in this pullback that we've seen. These are companies that don't need to do the layoffs. They have tons of cash. So they're obviously doing that to maintain earnings. One would and to maybe send a signal to employees that they need to work harder. What would you read on these this past weeks shoes to drop? Well, definitely is the end of an era. I think it is sort of like the end of this phase of big tech where you had this unfettered growth where these business models were largely unassailable. And they were really just fighting to grow into their valuation and just generate more revenue to justify where they were they traded at. And now it's this next phase where they have to operate more like a cash cow business. And so it's an acknowledgement that the growth is tapering. It's an acknowledgement that they're going to trade on a pretty tight band in terms of multiple, which means that they have to manage expenses much more tightly, which means that they can't have. A really broad-based surface area in which to operate an experiment. You have to keep the experiment small. You have to manage your expenses. You can't have employees basically run over the place. Management has to have a firm hand in dictating strategy and what people work on. So I think all of that signals that I actually Jason, I don't think this is the end. I actually think it's the beginning because these companies, Apple, Facebook, Google, maybe a little bit Microsoft, are the most sensitive to valuation because they are the most wired, the held. These are the equivalent of US treasuries in the equity markets. The safest, most predictable safe haven in times of stress. If you want to own big chunky cash flow generating businesses that are relatively unassailable, you couldn't pick four better businesses than those. And so the fact that they see enough in the horizon to say that we need to batten down the hatches should be a warning to everybody else. Freeberg is it as simple as this that they're moving from top line growth to bottom line and they're going to need to look at the expenses, which are read on this for Silicon Valley. Well, I just want to zoom out for a second because I remember I started working in Silicon Valley in 2001. You guys are a little older than me, I think, but we were right at the year one of the dot com implosion and all the fallout that happened from all the funding that happened from 97 to 99 in 2000. And so from 0 1 to 03, it was super like deflationary. Everyone was cutting costs and all the money that had been raised was kind of being pissed away or companies were liquidating and so on. And then starting in 2004, which is actually when I joined Google, but there was also this big movement starting 0 304 of like what people called web to. Then kind of new business models and new businesses started to emerge that seemed to have real traction and real legs and it was a different story and a much more rational story than what you saw leading up to kind of 2000 2001. It was around that time when Google started offering these crazy benefits right it was like there's a gym and free food and all these amazing workplace and suddenly everyone had to do that to keep up right Facebook obviously mimicked it all the other big companies mimicked it and then it became mainstay and they also raised compensation in the valley significantly because Google had really cracked the nut on how to extract value from the internet. And it really changed everything and Silicon Valley and changed everything in tech because suddenly every tech company whether you are enterprise software or hardware or internet e-commerce site to be competitive and hire great talent you have to have the same sort of environment. And then the high wages, great salaries really share the value of your employees, you know, gyms and free food and all the sort of stuff. So it's the first time I think in a generation since like 2003 2004 that we're seeing things start to turn the other way we're instead of adding more benefits at you know making things more attractive giving more value to employees. And then really seeing the recession hit these kind of leading indicators of how things are going to be in the valley and as a result I think we should expect to see a similar impact on compensation on benefits on value share and on kind of perclivity to hire an opportunity to kind of jump jobs and you know opportunities that we've all kind of taken for granted over the past 18 years. And then this is going to be a real shock to a lot of people that work in tech and a lot of people that have gotten used to the idea that every company offers great benefits. There's always another job to jump to you that will pay you more and that as that engine of growth that was really driven by these big companies by Google Facebook Apple starts to slow. And then you can compete with them anymore as much and the compensation bands get tighter and the option value gets tighter and the free stuff gets tighter so it's the end of an era and I think it's a new world for tech and and Silicon Valley. Sex what are your thoughts here in terms of startups in relation to big tech maybe having these austerity measures kick in and a refocusing on profitability. And then the big way here is just that nobody is safe and it's not just startups have to you know tighten their belts is these big companies too and I think we're headed for a broad based recession. That's what it seems like you saw Dr. Miller's comments this week predicting a hard landing in 2023. No one's talking about soft landing anymore. In fact, I think we're all wondering who's flying the plane. So I think we're headed for a pretty big recession and I just take it in a slightly different direction. I'm down here in LA had dinner with the other night with a friend who's a showrunner in Hollywood. And so a showrunner basically is like the head writer and they basically put together the writing team and the you know the content for a show and then they saw them to networks. He said that like no one is buying anything anymore here that last year you had there's tremendous you know activity and you saw like the the game of Thrones guys you know D&D they got like a. 300 million dollar deal from Netflix and Shonda Ryan's got three million. Yeah they got like they were massive multi hundred million dollar deals being made last year and that was just for like future writing deals like Netflix wasn't even buying libraries when they did those deals. They were locking down talent for the next. Yeah exactly so all of that has stopped. And the reason is that Netflix's stock has been hammered right and only so they not have the capital to do those kinds of crazy deals anymore but they know that Wall Street is watching them. And so fundamentally they're questioning whether a business model even works if they have to spend that much money on content. So then all of Netflix's competitors basically have stopped so this whole like frothy environment that you had for in Hollywood last year that's just over the faucets been turned off and it's not even turned off to a trickle it's just stopped. So you think that this like massive asset bubble that we had last year was just in crypto and gross stocks it's not I think it actually trickle down into the real economy because Netflix is one of those gross stocks the money then flowed into writers in Hollywood and then lots of other places. This is one small example right that that this asset bubble wasn't purely just something that's going to be localized to crypto it affects real people in the real economy and we are just beginning to see the unwind of that. Yeah what's absolutely correct I think is people were more of us taking the head free capital they wanted to place more bets and sure why wouldn't you bet on the game with our own riders for the next decade but looking at this is going to be fantastic for startups I mean the startups I've worked with over the last five years have been they always come to me I got a developer but this person's got three offers from you know Facebook Google and they're like how do I land this person they got 300 thousand dollar a year offering a million dollars in RSUs and basically founders had to say no I can't get that person and so they got to get creative and they would hire people Ukraine, Uruguay everywhere in between to try to find developer talent and how to get creative now all of those people are not going to have for job offers are going to have no job offer so they may have gotten laid off and those crazy unrealistic out of school deals are going to be gone and this means massive consolidation of talent you look at the startups community right now tons of companies are just going out of business they're packing it in those people are going to go work at the other startups that are stronger so whoever makes it out of this as a startup this is how the cycle restarts is talent and consolidates on the winners who be like taking the NBA and getting rid of the bottom you know 10 teams and just telling the best players there move up to the other teams and everybody else you're out of the league so I think this is incredible set up for 2023 for startups to consolidate talent so I'm actually excited to see us it's another data point that again I said it last week I'll go out on a limb and predict my equivalent November fall predictions last fall it was at the markets were going to poop the bed my prediction now is that I think the markets are bottoming consolidating yep 100% and this is the time I think to start nibbling and start getting ready to really rip the money in and I think there's enough signals every day that kind of like tell me at least that on the margin it's time because I think the markets do a reasonably good job of digesting news and then pricing the forward reality right like today's price is really everything we already know and so the real guess is what's about to happen in the future and from my perspective I'm actually pretty starting to get a little constructive here I think that when when companies like Facebook really do this and you know like if you think about it one way the financial markets have always had this thing that we have called a fed put what does that mean to put is essentially the right to sell something and what market participants have always known for the last decade is that if things got very hairy if there was uncertainty in the market the federal reserve would and they have consistently stepped in to create a buyer of last resort and so it always eliminated that last part of true supply demand balance because they would just come and say don't worry in many ways in tech what the big tech companies were were that you know you could never really find what the true market clearing price for an engineer was or what the true amount of expenses you should spend on office space or you know free services because you always always had these companies which was an escalating arms race you know if one company had a massage the next company had gyms and massage and physical therapist and the other company would have buses to take you to the gyms and massage and therapists and the next company would have protein shakes that were fresh you made you know and it just kept escalating and escalating because the costs didn't matter and they wanted if nothing else to get that marginal engineer or product manager or business person to work at their company which eliminated the risk that they would actually start something to disrupt the blocker strategies very real so when you take this big tech put out of the market you will get true price discovery and you will find out what the real price should be for this kind of an engineer that kind of a product manager you'll find out what are the real expenses you need to bear in order to build a real lasting business and you'll be able to sort through all of that stuff out so I think it's a really good moment and again it's yet another indication to me that I think broadly speaking the markets are now starting to stabilize all the irrational behavior is starting to exit the system the party is in the last few hours volumes going down the alcohol has been taken away people are hanging around with a little bit of lights are coming on they're like I've been here a little too long and I think that that's a very healthy process for an economy and I think that that's what's happening right now so I'm constructive I'm a little bullish I'll go out on the line I think you know we could be three to 5% from the lows but we're more near the lows than the highs it certainly feels like the double bottoming out process was the bouncing along the bottom and who knows how hard the landing is but I think this is a great setup for startups and people who want to start companies I don't know if you saw a girl he did a great interview that trended on the Twitter and you're just saying this is the best time to start a company and I have to agree with him like you're going to have talent available and who are you competing against for buying it's like there's so many marketing opportunities available the first thing to go in the down market like this is advertising and marketing so and by the way we will we will also relive what we have empirically known to be true and it's been it's been pretty well proven the investments that one makes in this period will probably be the best for many many years to come because they'll have the most asymmetric upside and that was true in 2008 9 and 10 it was true in you know 2002 3 and 4 you I mean you're talking incredible companies just in those two periods think about this at Lassian Tesla Uber Google Airbnb Uber Instagram WhatsApp incredible businesses that have created tremendous value and so there are businesses that have been invested in for the first time in 2022 and will be invested in for the first time in 2023 and 24 which will be the leading winners of this next phase and this next leg up and so the real opportunities to find out who those companies are and get behind them I think 100% as I always tell people fortunes are made in the down market they're collected in the up market Freiburg what are your thoughts here in terms of the startup community or company builder and talent because that that seems to be the piece that could be a silver lining on all of this a mainstream that we're going through I mean technology always marches forward so there's always you know there's always progress to be to be had and to be made that's one universal truth about it's weird that we call it an industry because a lot of technology companies in Silicon Valley today don't sell technology to other companies which is how Silicon Valley started now it is Silicon Valley is reinventing other industries by being technology led and that is certainly still true because there are so many I hate using the term but undisrupted industries to pursue efficiency gains across and technology built in Silicon Valley can can can drive that now when I say Silicon Valley the physical location anymore and that's the confounding factor here which is that there does seem to be this distribution opportunity that's also emerged at the same time where people are doing remote work and work from home and distributed workforce models that seem to be highly effective you guys talked about it last year and I think that the success that's been seen in software companies that have operated that model also changes the calculus because not only are are wages a lower and therefore the cost of operating is lower not needing a fancy expensive office in San Francisco is needed but you can also access far more talent than you ever could before you don't just need people to live in the Bay Area or New York or L.A. or wherever you're operating from so from a software perspective this is an amazing time I'll tell you there's a flip side to this like in life sciences real estate is more expensive than it's ever been right now in the Bay Area to get lab space there's a total there's a total dirt of space so there's certain segments that I think are like a specific designation you know there's a revolution in genomics that's totally transforming all of biology and human health and what I think is like you need a certain type of location that's sanction for that yeah yeah lab space is a certain kind of build out and it's not you know so there's a certain amount of square footage and it's being built out a lot around the Bay Area but the thing about life sciences companies is you do have to operate physically because you're doing some you're building something physical and so that is an industry that continues to remain very well funded and very competitive and I think you know there's still tremendous value and by the way there's a lot of public companies to invest in not on the primary basis but are that are tools companies that are benefiting greatly from the continued demand and growth in spending in that category. So let's talk about competition you know a lot of talk you know of these large companies pursuing many different verticals we talked about anti competitive stuff in a con the bundling in the suite of products at Microsoft other firms now you have all these being cut death death to the room by the way did you see that Elizabeth Warren of all the things she could send a letter to the FTC about I guess she sent a letter about the room but I mean center of Karen is just too much man I mean there's a lot of other stuff going on but you can let the room but slide that's not important. You know all the things that are going on right now in 2022 it's the room but that gets on the gets that's above the line at this point on the level of my point that's sleepwalking oh my gosh walking what is going on there's a famous history of war one called the sleepwalkers because that's basically what it felt like is they just slept walk their way to war war one basically what should have been a minor regional war the third Balkans war that nobody should have cared about nobody should have cared about this Fransford and guy except for you know the Austrian and yeah exactly but the whole world basically got themselves invested in this thing. And it feel and this is what we're worried about we're worried about the room bought when the administration is sleepwalking its way to the next world war well I do not want Amazon okay to control my vacuum cleaner I'm just going to put that on the record okay because what happens if they know where the dirt is they know which rooms are dirty what happens if they get a hold the room but I'll tell you what happens the next thing is they're going to go after Dyson okay and then once they do that they're going to put chips in these things and all of a sudden they're going to know exactly what Jason said what are you eating your dust bunnies are yeah all of this stuff it's this must be stopped Lena come now no but it stops at the point of competition you you're seeing cuts to you know all the non-core projects at these big companies this is going to be great for startups right like the idea that Facebook could focus on you know fourth fifth sixth thing is going to go away yeah well look you're right that great companies are built during downturns paypal was built largely during the downturn the startup I created Yammer was built largely during a downturn so listen there's going to be opportunities innovation doesn't stop just because we're in a recession or depression but I got to tell you I unlike Jamal I'm having a hard time finding a silver lining right now part of it is the comments that are just made which and he's been right about this stuff we've been talking about his predictions for over a year on this podcast and he famously shorted the pound for George Soros that was when his first thing started yeah since then he's one of the most successful macro traders in the world and and you know university respected I think deservedly so remember he said that that this was in mid 2021 he said that the Fed was engaged in a radical Monterey policy because even though we were starting to get inflation it was around 5% then that they were still engaged in this bond buying program there's still bought like 160 billion of bonds and he is the first one waving the alarm bell saying what are they doing analysis predictions have come true I mean we're in a inflationary spiral and his prediction now is his central outlook is that the Dow Jones will be in the same place where it is today in 10 years and he made the point that yes equity markets do go up in the long term how long term you talking about from night from roughly 1966 to 1982 the stock market was sideways Japan had a lost decade as well if this is not unprecedented right after an asset bubble right and then from the great depression it took until 1955 for the stock market to recover so in the long run the stock market will go up but it could be you know we could have a flat decade or this is his prediction right but he's very smart guy and and then on top of that that's not to say that you can't be one of the ones who make money during that period because lots of people do but we're in for I think a very tough economic period because of just this radical expansionary fiscal monetary policy we've had basically the Fed and the administration printed last two administrations but especially this one printed $10 trillion over the last couple of years and the hands of that's actually most of that was on the Trump but continue no was not 100% I'll pull it up in a second but I keep going we had Biden basically kept digging this hole we had the two trillion dollars of American rescue plan which we didn't need we just had another two trillion of the infrastructure bill the inflation reduction act 500 billion for so a student that yeah exactly so Jason what are you talking about and this was all after the emergency was over but I think I think that you guys are debating the wrong thing I think that what drunken Miller I think by the way just to be clear both drunken Miller and I can be right which is he's commenting on the real world economy going into a recession what I'm saying is that the stock market tends to be nine to 12 months ahead of where we are Nick throw up that chart please that I asked you guys to share just to give you guys a sense of what I mean by this by the way while you're doing that jason look I will agree with you that a lot of this point I'm just feeling I'm he did 7.8 trillion listen a lot of the stimulus that Biden but fine a lot of the stimulus happened under Trump you're right because that's when basically the covid happened remember in the in that q2 of 2020 quarter the economy shrank at a 30% in your lives rate everyone thought we're going to a great depression and that's why they passed all the stimulus by huge bipartisan margins drunken Miller's best point is that this is all post vaccine right yeah so look and I think we can definitely go back and second guess what happened during the Trump administration there's an old saying that many of the worst ideas are bipartisan but and so you know the spending that happened in 2020 was clearly bipartisan and maybe it went way too far but in the last two years like drug said it was post vaccine post emergency and they kept spending and it's not just the administration it was the bond buying program of the Fed it was already fully back and they bought another 160 billion of bonds yeah I think I think the thing is that you know I think Stan is a proven Republican so maybe he is speaking a little bit of his book as well I think it's fair to say that both Trump and Biden did not help but overwhelmingly I think we're the where the problem stands is a central bank that was the same through both of those administrations and I think we should probably focus on them because you're right what they did was excessive and what they essentially said is that if there is volatility beyond a certain amount and people cry uncle we will not allow the markets to sort themselves out in an orderly way we will step in and that's what you know again what we just talked about the central bank put in this case the Fed interventions and these interventions really pervert a market because you don't know what's going on and that has huge ramifications in the real economy so Nick if you just throw up this chart the thing that is really important here and what this chart shows is essentially all of the hiking cycles that we've gone through since 1983 so 83 87 84 99 0 4 15 in the current one and here's what I just want to call out for you guys what's incredible is that other than the one in 83 so this is sort of like you know that last big one what we've seen is that the stock market has a tendency to immediately go to the conclusion very early on in a rate hiking cycle and now why is that important for normal folks listening to this thing well the reason why that's important is right now we're in month seven of a cycle we obviously don't know how long it's going to be but the odds are improving every day that were near the end versus the beginning and why that's important is again if you're thinking about when to you know buy these for example this is a really instructive guide because what it tells you is the closer we get to the end or more importantly the closer we psychologically know that the end is coming we start buying and that and that's just a broad base statement that has been true so you know what you see right now I think is really interesting which is that despite all the bad information oh my gosh the north stream pipeline blew up could have been sabotage was it the CIA was it the Russians oh my gosh big tech is slowing spending and firing people China's in a coup I don't know if you saw that rumor yeah how about something more benign you know the US you know us you want is really trading in a crazy way the US pound is going crazy despite all of that every time we trade down the market consolidates very quickly and we sort of like so I think we're forming a bottom I do think that Stan is right we are going to see a hard landing recession something will break in 2023 I hope it doesn't I hope it doesn't affect a lot of normal people but it's likely but at the same time to find hard landing as well I'll tell you in a second but at the same time I think what's happening is in the equity and financial markets we are consolidating a bottom because we're seeing through to that end state and this is where cheap equity gets bought so why is there a reason to sell now I think a lot of the people that are selling the smart money sellers that I talk to are essentially right now selling to book in capital losses capital losses to offset other capital gains from this year a term that's called tax loss harvesting and so if you have gains through this year which some of us do this is the great moment to just sell the losers to book the loss to net it out so that you can minimize your taxes for next year that's probably I think where we are at and I think that's why they're still consolidated by so what is the hard landing Jason if I had to predict I think what David said is absolutely right you're going to see unemployment get to an awkward and uncomfortable number five six percent I think could be something that we see and I think you're going to see a lot more companies pull way back on their spend because demand is going to really modulate you know I'll give you a crazy example you know what happens to all the people in the United States that are on arm mortgages right adjustable rate mortgages when those things reset they're going to reset to 300 basis points higher their monthly payments are going are going to go nuclear it's already happened to about I had a family member call me about this and they're like what do I do so in the UK in the UK in the UK 40% of all mortgage dollars are interest only arms that will reset in January to around 4% 40% can you imagine how upside down the UK economy is going to be when people have to spend three and four times more to get their home and then people have to go to work so people who have not been participating are going to have those bills come in and they're going to have to go to work they're going to have to go to work yeah so freeberg what do you what do you think hard landing here and then what do you think 2023 looks like in that regard it's just looking pretty do you buy that we're bottoming out now is Jamatha's sort of hypothesizing I mean I'll tell you I was running some back of the envelope math you know how much debt there is in the world take a guess 200 couple hundred trillion 200 trillion about 300 trillion yeah that's debt road by governments businesses and households and if in response to the inflation which is response to fiscal stimulus which is a response to the entire economy of the world shutting down for a couple of months we end up raising rates from zero to 5% that's a 15 trillion dollars of annual debt service which is like 18% of global GDP like that the debt service alone what does that mean percent that means it for every dollar transacted no means nothing that no means you have your what does it mean like so what so I'm saying that there's a massive glee's happen that's going to happen right and so what ends up happening ultimately is because you could run this across local governments I think it means demand destruction I mean that households yeah thick no I'll tell you I'll tell you Jamatha what it means I'm sorry I'm sorry but it means nothing and I'll tell you why these people keep like you can print more money you print more money I'm sorry to be the bearer bad news but like it is not as if we have a law a constitutional law or it's not as if governments have collectively decided that you cannot have debt to GDP above a certain number that doesn't happen guys we passed a hundred under Obama and we've just kept printing money so whether we like it or not and I'm not saying I'm a fan of this or it's right we are kicking the can down the road and what we're doing is we're extending the maturities you know you'll eventually have hundred year government bonds okay just like you have like now you know multi decade long corporate bond we missed a chance for that we missed it because brilliant yelling actually said no to that when when rates were like near zero and we had the opportunity to refinance the US government debt using long term rates basically long term bonds and actually was Trump who you know crazy Trump who suggested let's basically shift the debt to a hundred year bonds and she said no so we value the dollar right so the problem is that we have all the short term debt and look at what just happened in the UK when Liz Truss tried to prop up the bond rates by basically intervening she was basically an inflationary policy to fight inflation the markets puked all over that and that's when they're the pound hit you know exactly there's only so you have to have a buyer of the debt right I think the Liz Truss thing is really actually a microcosm of how unfortunately western governments are working but I think there's a silver lining like she basically came in a day after she got elected and said okay guess what guys at the same time I'm going to massively cut taxes and I'm going to give you fiscal stimulus I'm going to cap your energy bills and I'm going to have these huge transfer payments from the government into the hands of British citizens I'm not going to comment on whether that's right or right right or wrong but the financial markets to your point David absolutely hated it and within a few days you basically saw the pound get crushed but then what did you see you saw the bank of England decide that financial stability was more important than financial viability meaning the things that she wanted to do were not viable so you could have let the financial markets sort this out which would have forced the prime minister to basically abandon the policy but instead the BOE said now we're an unlimited buyer of UK guilt which is the name of the UK bond and everything snapped back we're back to where we were before her speech and before the Chancellor of the X-Checker speech and so it says if nothing happened and that's what's so insane to me which is that even though the bank of England by the way in the next week or two we're going to raise rates 140 basis points 140 basis points almost double what the Fed has done the last three times they're doing both at the same time they're both raising rates and they're acting as a backstop for bad policy and this is what's wrong right now in the world we do not have a real check and balance so my point to freeberg is just that I'm like emotionally hung your side but the problem is with these folks keep getting bailed out David they're just going to keep doing this stuff and there's no end in sight well the the consumer doesn't get bailed out so that if you look at it on a microbasis instead of a macro basis you're correct these governments will just bail people out even if they make bad decisions as we're seeing but then the person who's variable interest mortgage just kicked in has $500 less a month in savings so they're now not going to buy an iPhone 14 they're not going to upgrade their car every six years they're going to do it every eight years and destruction that's happening is going to be quite severe and that's going to reduce money and then we rest our mark my words the federal reserve will intervene this is why I think we're in a bottoming process I think the the bleeding edge of the smart financial actors are actually on sex aside and freedberg side but then they're taking that next intellectual leap and saying okay well what happens when Apple basically says hey guys I'm going to have to fire 15% of my employees I think what happens is the Fed intervenes and I'm just using Apple as an example but there there is a threshold of demand destruction Jason I think you're right where we have the Fed put come back on the table and the market's just go bonkers so they instead of doing 75 basis points two or three times they're just going to be like 50 no no no no no no no no no they're going to they're going to get to four and a half very quickly and then this something's going to break like all these guys are saying I think they're right and then the Fed put comes back on the table and we'll have this we'll have the UK you know the UK thing happened in what six days ours will play out over six or nine months but it's going to play out the exact same way and freeberg's right you know we should have capped debt at you know 100% of GDP or less and sacks is right we should have issued 100 year bonds and zero rates when we had the chance we didn't do either so incompetence acts I mean there was no need to have rates this low for that long and it maybe they could just keep them at some average number instead of going down to zero or that spiking back up and just steering you know spitting the steering wheel you know so violently why don't we have some basic concept of maybe not having zero rates and keeping them at 2% or something reasonable so you have some dry powder well if you go back and listen to what the Fed said and drug makes this point they were all worried that they got there was an inflation print of years ago whereas at 1.7% and they all started panicking about not being at 2% so for a 0.3% move that they tried to engineer they open the floodgates okay and that's basically what happened and that's why he's so critical of it the other thing is the Fed remember the Fed said we're going to be data driven but then the data came in last summer we got that surprise 5.1% print and they dismiss it as transitory so they said they're going to be data driven but they weren't they they were dismissive now on what basis did they conclude transitory like what was the proof for that there was no proof that was a political consideration the administration and me and Yellen just big part of that immediately reacted to basically downplay the news I mean they PR did I mean they didn't want to admit that there was a problem they went from transitory to this is permanent to now six months but during and now we're at hard landing like right these people are not competent are they just not competent no I think they're really I think they are competent but I think that they're a little bit fighting with one hand tied behind their back I think if you had to take the other side sacks you know the problem is they have a very specific strain of data that they focus on and that data has all these weird anomalies to it like you know they should look at rent data but the way that the rent data works is that you know you bleed it in one sixth a month over six months just as an odd example or like use car data only comes in a certain way so I think they're driving in the review mirror I think there is something to that I think it's simpler than this which is listen I think all politicians do this which is when they get bad news they want to spin it and they're going to delay acknowledging the bad news as long as possible so what happened last summer when the inflation started they all dismissed it it was all a talking point I mean every single one of them and here's the crazy thing is J pal he's the only Trump official who got reappointed by Biden by a huge majority how do you think that happened and when did it happen it happened at the end of May last summer so just when this inflation print came out and yell in the administration we're saying it was transitory that's when power is up for re nomination and he swept through the only Trump appointment to basically be re nominated without even a question by Biden why because he got on board the talking points he wasn't going to basically buck them at that time so he waited six months he bought into the talking points that was a hundred percent political I told you I read Paul it's a very compelling argument I read them it's really compelling it's really it's sad but compelling Sacchus should read the Paul Voker bookkeeping at it he basically says Reagan came to him off site where they knew they weren't recorded and told them do not raise rights so this idea that the Fed is independent like history now has shown us it is not like the there is massive political pressure on them I think especially at the time driving in the review mirror clearly the data they have is not great and then all this data is nuance you know jobs and this massive amount of jobs we've had in this country is because of you we have a new immigration policy we don't let people into this country we kick out PhDs that we trained and then housing we have I buyers buying this so to your point you're off I think a lot of the data has changed and they're they've got a bad data set they have a bad dashboard and they're driving with bad information they don't know their direction they don't know their speed perfectly if you went more fidelity on the data you're right if you went to a board of directors meeting for your company and said how's the business doing and the CEO says well you know well we're going to have data from six months ago and it's like okay I got that but what about like last week you would fire that CEO to your point Jason and these things are knowable today like there are businesses for example that are selling billions of dollars worth of like IOT sensors here and there energy sensors here everything is connected to the internet everything is automated everything is running in code you would think that the government would say there's a national level directive here to get this into some kind of a system that we can use because these decisions are becoming more and more important I think that would be a wonderful idea and a project and it would have huge value I'm in patent project for understanding the economy on a very granular level you invested in a start of at one point I remember I heard the pitch where they had people around the world taking pictures of food prices Africa, India, the United States, anywhere and then putting them into a database normalizing them so you could know the price of tomatoes or potatoes on a global basis and normalizing all that data they don't seem to have this data there they're talking about August data and it's not you know we're now in October it's a really odd situation I think our friend backer sir made this point which was that look in this last FOMC meeting the Fed raised their forecast for what the neutral industry would be from three and a half to four point six percent so in two months they raised their forecast by over a hundred basis points what is that based on like is there a model I assume there is a model I assume there's data so why don't they just open source that why don't they let the markets like see the model they're using so we have a little more predictability of course they always have the discretion to bucket or not follow it or whatever change it but like you know wouldn't that be a better approach is to like let us see the data and the models in real time as it's happening and then the community like like an open source project could actually like fork the model and actually create like better ones well to your point to your point like there's the the Fed is actually known as the gold standard of transparency so the IMF has kind of like a of you and how all these central banks act last week they actually excoriated and this is this is hurts me to say Canada because of their lack of transparency apparently Canada doesn't even put out minutes and so they're like hey Canada you you guys like you know Canadians are I mean the Canadian government at least like total moral virtue signolars but they don't value transparency apparently but to your point David there is a lot of opacity in these things that really determine how the real world works and the impacts to individual people are going to go and get ratcheted way up and nobody really knows what to expect even though the data is there sitting in plain sight I think two things can be true I think the Fed the process of setting central bank rates by the Federal Reserve should be reset I also think that it could be true that the Fed is not responsible for a lot of the conditions we're now facing we did have a bunch of policy decisions that the whole world got swept up in and seemed to accept as appropriate at the time when we shut the global economy down and there was some weird assumption or belief that fiscal policy would allow us to soft land or recover out of that and at the end of the day all that fiscal policy did and I remember I was speaking with a smart person at the time and he said all the Fed's going to do is they're just going to inflate everything and it's going to take a while and everything will inflate and that way everyone will feel good for a while but you can't just stop the spigot of capital moving goods moving and services moving for months on end and assume that the repercussions will not actually be felt extremely harshly and at some point things are going to come home to roost and that is what's happening there was no winning solution for the Fed or for any central banker in light of the policy decisions that were made to shut the global economy down when COVID began not to argue whether or not that was appropriate but that was simply a statement of fact I said it before and I don't understand if you were to take a first principle's point of view on this today and say hey let's create a central bank and how should it operate you would take all the data from into it from PayPal from Visa from Mastercard from the Internet you would take all of that data you would let the algorithms or the AI or the software figure out what is most predictive of certain inflationary recessionary totally and growth indicators and you would basically say look X percent growth X percent inflation solve for what the central banks interest rate should be and it should vary at a hundredths of a percent or a basis point every day and every day the rate is reset and the software resets it and to have some degree of human logic or oversight seems appropriate but to have a decision made in quarter percent increments once every couple of weeks seems kind of arcane so I think both things are true the Fed isn't necessarily fully responsible we all want to point fingers you know we can point fingers at the the the mania that swept over the entire world when we started our podcast and everyone was like what the hell is going on why are we locking down the world and this is nuts and it felt nuts and the response may or may not have been appropriate but at the end of the day there was a cost and the cost is going to be born for very likely a decade or more if we are able to get through it all a lost decade is a possibility and central banks have been rewritten so yeah well I think there's actually two original sins of the economic crisis we're in one is lockdowns you're right like that was a fiasco it didn't do anything to stop covid it was an economic disaster and then we overreacted to lockdowns by them printing all of this money both fiscally and through expansionist monetary policy so freeberg's right about that I but I think the other original sin here is the the QE and the ZERP right the zero interest rate policy that began in 2008 2009 we broke the glass we know we don't emergency totally and then it just became standard like it was on autopilot why did we keep printing why did the government keep buying it was a lot of sale event that became the mean this is the problem is that every time government is a bad idea I mean it's just yeah Milton Friedman once said there's nothing quite so permanent as a temporary government program how many times have we seen this every time the government's supposed to do something on a one-off emergency basis like ZERP it ends up becoming institutionalized we still have kids in schools in California wearing masks I mean that it's the same crazy thing that people cannot get off these programs the thing about ZERP which if you look back what really happened if you think about like how people live their lives every day what what if what has happened in our view of government and politicians it's really eroded since 2007 2008 right there's huge amounts of ranker nobody gets along everything tends to happen on partisan lines and the reason I think that that was allowed to happen or that accelerated is actually because of ZERP because if you think about it if you had failed policy right and the economy was completely broken politicians would actually have to get together and try to solve the problem themselves and the last time they really did that was actually in the great financial crisis if you look at TARP and if you look at how all of these smart people actually had to get together in a bipartisan way to figure out how do we bail out America and prevent a banking crisis that was the last real effort that touched a lot of people but then David as you said on the heels of that we broke the glass and we've been fighting ever since and the peak of that fighting was basically Donald Trump getting elected and so I think like what it shows is that if you have these irrational central bankers that will are that are willing to constantly bail people out you will never get a high functioning government because policy is irrelevant good policy doesn't matter I think policy doesn't matter if any of it goes wrong the central banker will come in and bail us out well and the second and third order impact of these can become quite acute and just for people who heard the word ZERP like three times zero interest rate policy basically keeping interest rates very low very dangerous to do because you get shit like this like look at the number of unemployed people for job opening and if you just look at this like ratio this is the number of jobs per unemployed person it gets way out of whack and then if you look at this other chart just in terms of the total number of job openings we started we talked about this earlier in the pod hitting 11 million to burn that office crazy then what happens if you have too many jobs you don't let immigration you don't have a functioning immigration policy well then you get this great people quitting their jobs, quiet quitting and then the boomers saw their net worth go up so high because of their retirement accounts because of the stock market boom and because of the housing boom you had all these rich parents now who are bailing out their kids who refused to go to work and labor participation goes from 70% down to 62%. These are the unintended consequences of ZERP that now how do you get a generation to go back to work if their parents have a $2 million home and 3 million in stocks or a million dollar home million in stocks and that's what they're excited like we're going to break this we're going to get Google and Apple who have unlimited cash to do a riff those companies don't need to do a riff they're doing it because they have no choice now because they want to break the economy so hard boomers have 71 trillion in assets of a march I mean the wealth transfer that's going to occur between these two generations is crazy why would any US$1 million with a boomer parent even go to work if they've got a million US boomers have 71 trillion dollars in assets is that what you said? yeah that's the number I have here so an entire turn of global GDP in savings that's about one-seventh of the world's total assets it's just a lot of locked up wealth and this monetary policy was done by boomers 70 trillion controlled by 76.4 million people yeah so if you want to really talk about the you know the rich in a global context the rich are very specifically US boomers yeah that's one-seventh of the world's assets it's one-seventh of the world's assets it's controlled by 76 million people how much of it is their homes? I mean they were they were at Woodstock they you know they lived the best life in the best times they enjoyed the most of the peace dividend in the 80s in the 90s and the 2000s they are the ones that control everything it's pretty crazy it's I think it's less like Jeff Bezos and Gates and Musk it's boomers if you want to go and really zoom out and get it right it is boomers it's 1% of the global population that controls one-seventh of the global wealth and they're all in the US boomers hiding in plain sight US boomers there you are well once these housing prices decline and the stock market declines that number is going to shift and that really is what's fundamentally happening with the fiscal policy and the effects that's happening today it's having today which is a redistribution of that value because we're basically deflating all those assets now we're deflate the average boomer which is all assets and we're going to deflate real estate assets I mean if you just do the math on that back of the envelope boomers are worth a billion a million dollars each think about that every boomer is worth 900k a million something in that range 1.2 million I mean it's bonkers that's the average that's how much wealth they have bonkers you two are a boomer J.K. no we're J.K. we're J.K. we had the worst we had like we got really shafted it's like we grew up with flannel we have all the way to the win as Morisert a lannis Morisert no hold on just kidding I mean I need to smash him pumpkins I mean I know it's easy 93 was probably the best year in this industry smashing pumpkins ever did it for me Billy Corgan's voice was always really annoying rage against the machine can we do a quick shout out for Kulio sat to hear that he passed we're here for you yeah I mean it was really sad the guy was how old was he? I was two or three more than the babies his Kulio story from the pod when he said gangster's paradise I feel you yeah and then when I saw him at sacks his birthday last year I was like dude I love Kulio I mean I cannot tell you what a big fan I am what was the line you said to him you said I feel you I said I appreciate you and his ear I appreciate you we fly down for the birthday they you know they shuttle you on the cars from the plane to the house we get to the house and you know we're all waiting of course sacks is late two and a half hours there's no party we're all hanging out and starving but then we go into the party and then they have like Kulio shows up so we're like sitting down in dinner for course two all of a sudden pop comes out of the the woodwork Kulio I lose my shit I run up on the Kulio fan the dance fly grew up Kulio like is like high school jams man I mean that's like in the car cruising at this point I'm like seven to kilo watermelon the keyless and so I'm like oh my god no oh the dance floor you know jambana the Kulio I think Kulio thought I was sacks you know because he's like he's like oh two South African Jews you guys all look the same Kulio comes up starts high-fiving me and hugging me and I'm like what's on Kulio my god this is like a drink come true he's like hugging me his face is right next to my face I didn't know what to say and I like I'm I'm I've had a little bit of the Kula and I and I whisper in Kulio's ear I'm like oh no I appreciate I appreciate you I appreciate you I appreciate you I think I saw freeberg throw his panties on stage to it you are such what a nerd I didn't know what to say I mean what do you say when Kulio's face is it really you don't know what to say clearly clearly you don't know what to say yeah my team my my team and a TPB they had a they had a cameo made for me that Kulio sent in it was super heartfelt and awesome sacks posted it on the internet I think I retweeted it yeah retweeted it and it was uh I don't know man it was uh he was uh he was actually a super nice guy great guy and uh it was super sad it's your friend and neighborhood Kulio bra I'm out here on the golf course thinking about you I appreciate you man so I want to wish you a very very very happy birthday man you feel me I want you to drink good I want you to smoke good I want you to eat good I want you to have some fun bro go big do it right your day happy birthday man from Kulio Shagazoo man well all the stories are coming out now and not your experience was not unique he touched everybody he met literally he's college kids right genuine very kind like suit suit yeah super friendly and like you know and like wanted to ask about you I mean it's like a very like I could a big politician if you didn't become a music I'm using superstar he looked incredible he looked like he was 25 I mean he uh literally went to these college kids met him he went back to there like you know uh frat house he cooked them dinner and then he got a guitar out with them and he sang gangster paradise with them and he like August rated it with the crowd singing whatever he was he was a video of him in Dublin on the bar singing can I just say something to I've given the message uh before yeah before but like you know take care of your health yeah take care like there there there are these incredible drugs I just want to call out health as well if lipitor for example or crestor or these statins are not working for you there's this next generation kind of drug called the PCSK 9 inhibitor which essentially is uh effectively a gene therapy that's modeled after this very specific group of folks in the Nordic I believe who actually have effectively immunity against heart disease and so it's taken 20 years to refine this drug but this drug is a one to drug and you know there are versions of it now that are injectable you know once every six months or whatever so go and ask your doctor if you're not if statins don't work for you look at the PCSK 9 inhibitor and then separately after your 45 or so you should get a CT angiogram because these things are really important or you know a heart float where they actually inject a dye they characterize all your veins they give you a calcium score may not prevent this but at least if it's if it's something cardiac related you can get to the bottom of it and it's a noable thing nowadays yeah rest in power to our friend and uh yeah take care of yourselves your health and uh speaking of health shout out to Weneth Paltrow uh G-PAL uh who in her group newsletter pointed out that she loves the oil in pod and has to be honest she's obsessed with the personality is a little bit anybody want a handicap that listen let's be honest uh one doctor not you if that's what you're gonna say I've met her actually I've met her doctors say choose a delightful if you want if you want to live in the health after a meal the best thing to eat is a little dark chocolate hmm do you get your dark chocolate from goop do you have goop dark chocolate Jason I was trying to make a story where I am the dark chocolate where I'm saying that I am her favorite personality you fucking moron so your handicap in that you're her favorite she said she's obsessed with the personalities plural I'm gonna I'm gonna where does she rank her besties I need to know I'm gonna rank as Reaper oh really you think she's a Reaper right that makes that's on yeah okay then me then you okay I'll take it the fact that Weneth Paltrow even understands like who we are is a win in my book so I'll be number four on her list but uh G-PAL if you could rank the besties in your next newsletter that would be appreciated and we'll we'll take rank your besties Quentin Paltrow G-PAL all right if sacks you want some red meat you I saw you wrote a piece you want your red meat should we throw it to you yeah yeah well I mean I think we we need a Ukraine update because I mean we're talking about all the reasons that there could be a silver lining or the markets bottomed out I don't think you can know for sure that the markets are gonna bottom out unless you know that there's gonna be successful resolution of this Ukraine war at least a non-escalation of it and all the things that have happened in the last couple weeks have been on the road towards escalation exactly so in the last like just few days you've had Zelensky saying that they want to be admitted to NATO you've got Putin basically annexing or saying he's gonna annex the Don Bass and somebody we don't know who but according to Eradik Sikorsky who's the Polish foreign minister he think the US somebody blew up the Nord pipeline so what is the common denominator? Which Nord did they say was blown up was it one or two was this I think it's Nord one so it's the one that was actually like working what is the common denominator of all these things they're all eliminating key elements of what a peace deal would look like so everyone understands that a peace deal would require Zelensky to give up on NATO it would require Putin to make some compromises likely in the Don Bass and it would require the sanctions to be lifted and the energy flows to be turned back on well so now those things basically have been removed from the table or at least potentially that's what's happening so I don't see how you're gonna get a peace deal now and so if you remove all the off ramps what's left escalation? So it seems to me this thing's just gonna keep escalating. I thought you wrote a good piece in the American conservative should America go all in on Ukraine if you haven't read it it is 80% of rehash of what we've talked about here for the last year but there's 20% new in it I think and I thought what was interesting in terms of new stuff you put in the peace and it's a good summary of poker strategy versus what's going on here is that we've already proven you know if you if you did want to prove that Russia is not a threat with the exception of their nuclear we now have proven that they're really not going to be able to do a domino and go into all these different countries with the exception of obviously the threat of nuclear power so I thought that that was a point yeah what I was really responding to in that piece is the assertion by the media that Putin is bluffing how do they know that you know how do they know that like you know I think all of us understand poker pretty well and none of us ever would have the confidence to assert that we know exactly what cards are opponent holds in an any given hand and how exactly they'll play them what do we do what is smart players do we put our opponent on a range a range of possible hands of possibilities and then we evaluate what did their previous actions tell us what story are they telling through their previous actions well what story has Putin been telling this is not a guy who bluffs in my opinion or least that is not the story there's a chance he would pop off a tactical new it's a non-zero chance obviously if that if his life is on the line he is incentivized to use every weapon in his disposal to try and prevent his violent life isn't on the line here he can he can back out yeah but where's this thing headed if there's no compromise I think they you know I I'm going to stick with my original prediction that we wanted to ankle Putin we wanted to prove he didn't have you know as much strength as he did and we wanted to exhaust his resources so we could finally basically get him out of office at some point so I do think regime change via exhausting him and I think it seems to have worked we have exhausted you're agreeing with me I agree that we have exhausted his I mean he's proven he can't fight a ground war right I mean that's a pretty he's escalating now he's escalating you think he's just going to roll over he's not going to roll over he's going to escalate I think he but I think what we've proven haven't we is that he can't fight a ground war effectively he doesn't have the army he doesn't have the weapons compared to the west and he's been exhausted you know and I think his he's spent now the only thing he has left is what you're talking about is the new corruption literally no no well no there's there's more intermediate options first of all he's just called for the the mobilization of 300,000 more troops so that's going for everyone people are going to take the country yeah exactly look there's going to be very high cost on the Russian side yeah I could not assume that means that there's something in it for us so even with this you know the the description he's doing this draft he's doing forced draft I mean he is kind of redundant but this description or draft whatever you want to call it has proven that he doesn't even actually have the standing inside his own country people are leaving they're breaking they're looking about a break their arms like it's it's pretty dark I think you're making a lot of assumptions there just like the media who are saying that he is definitely bluffing what I'm saying is we cannot know that he's definitely bluffing no I'm with that the United States of America is blessed with being the most safe and secure country in the world and really in human history and the history is full of humans constantly being at war with each other so that is a really valuable thing that we have why are we so secure we're surrounded by gigantic oceans we have these gigantic motes in addition thanks to the wisdom of the Monroe doctrine for 200 years we have prevented any great powers from getting a foothold in the western hemisphere we are completely dominant here and no one could ever stage an invasion in the United States we only have one vulnerability just one ICBMs that's really it so what are we doing we are basically engaging in a proxy war with the person in the world who has the most ICBMs and we are basically putting ourselves on an escalatory path with him this would be like if Achilles had gone in front of the walls of Troy and basically taken off his armor and stuck his foot in the air and don't a little bullseye around his his heel that's what we're doing the other side of the world why would we do that why would we do that if they are the last real threat and they are the Achilles heel if we can they're not the last threat they're not the last threat we're never going to be out of threats okay well we got two major ones with ICBMs but anyway it looks like they were in the end game now what do you think happens here we're not in the end game we're on a path towards escalation because all the off-ramps have been removed that's my point and and and instead of saying instead of trying to find a diplomatic solution we first of all we keep removing off-ramps and then we we blithely disregard the threat to ourselves by saying he must be bluffing this is incredibly stupid the better question to ask is hold on a second the better question to ask is what's in it for us what's in it for the United States of America what is the vital interests that compels us to risk our security there isn't one this Donbass region hold on this Donbass region is the France Ferdinand of this situation it is not historically important to us we have invested in it all of this importance and we are potentially turning a regional war into a world war we are sleepwalking towards this unless somebody finds an off-ramp we are escalating our way into a much larger conflict that is my point and I don't see how anyone I don't see anyone should re-enter the markets with this geopolitical risk hanging over our heads yeah this is kind of like what I said a few weeks ago and JP Morgan put out a analyst report today saying that they were shifting from being you know call it roughly positive sort of like Chimass point earlier about being a little bit constructive in the markets right now and coming in and finding opportunities to buy to realizing that the sum of the portfolio of tail risks right now you know outweighs the upside that may arise from finding these low priced opportunities in the market and that seems to be the prevailing market sentiment right now is that there are too many of these moments that while each one of them is low probability the impact is of such high severity that the aggregate value expected value or expected loss of all of them is actually quite significant and that is heavily weighing on the market and so huge a lot of point I think and to the question earlier about market conditions one catalyst for upside in the market while there is fiscal strain and economic strain and growth strain there is also this geopolitical strain in the market if one or more of these things starts to resolve I think that weight starts to come off the markets and you can see yeah look I can see the market taking off like a rocket if Ukraine gets resolved and I do think you're right it's all fat tail risk that's about to be resolved I think that can potentially be the political motivation here which is that enough people like Chimass and you start making the calls to your representatives pointing out how strained the market is because of the tension in the region right now that maybe there is some path to resolution that becomes more active rather than passive because of that this may be a little controversial so we can talk about it but I think that the markets would have reacted much much more negatively to a nuclear incident three months ago then now and may not even react as much as we may think it was three months from now but what do you mean by nuclear incident you mean a new goes off or just a threat you're saying if Putin blows up a new the the markets may not react that much I think that the markets are basically ring fencing Russia Ukraine risk in terms of currency instability but that's sort of now gone away we've ring fence the energy risk because it looks like energy reserves in Europe are actually going to be pretty meaningful they're going to spend whatever it takes so all of the second and third order effects it would be a humanitarian crisis which would be horrendous okay but the markets don't whether we like it or not react to humanitarian crises they react to the second and third order economic impacts of those things and if you actually try to think about what the second and third order economic impacts are you're seeing many of those things get solved and so what it would be it would be a highly isolating effect it would be a humanitarian atrocity he would be completely cornered from a from a worldwide perspective the the the monetary and fiscal implications of that may not be as meaningfully disruptive today as they would have been three months ago that's what I'm saying well I want to actually clarify I like freeberg's analysis of the fat tail risk because I I'm not saying it's likely that this conflict goes nuclear but I don't need there to be a high likelihood in order for me to be very concerned about it because of how disastrous an outcome that would be so if you're doing an expected value analysis it's really hard to analyze the expected value or negative value of a of a low probability disastrous event right that's a classic fat tail risk I do think that if the markets think they have priced in the effect of this war then I think that's an argument for a lot of downside to this market because it seems to me that we're on a one way ratchet here all the off ramps for us a piece or a diplomatic solution have been systematically taken away and all that's left are potential escalations so no I hear you but how do those translate those escalations to outside of those two countries and into economic terms for the rest of the world oh my gosh well I mean if the war spreads here I'll give you a couple of scenarios I mean well here's one I think we're disassuming that China's going to stay out of it imagine if you're China and you're watching what's happening and you're worried that actually Russia could lose this war so badly that it emboldens hawks in America who want to target China next you know who are basically on this global struggle against autocracy you're going to look at that and go wait a second is it really in our interests for Putin and Russia to be completely toppled by this global struggle against autocracy it seems to me they could enter the Russian side not militarily but in terms of support so they would have an incentive again not to lose an ally and then by the same token I think the Russians could lash out I don't think they're going to go nuclear right away but I think they could pull a grozny I mean don't you think that it's fine with that here well when you know in the Chechen war when Russia was losing they just rubbled grozny I mean they basically leveled to the ground so I mean Putin doesn't do anything like that yet but if he's facing defeat isn't that something that would be on the esk the Tory latter is to basically start leveling Ukrainian cities destroy the infrastructure all is I and then what is the response to the west you know I know I know because the west may say you know what that's unacceptable to I agree no no I look I'm not debating how bad all of these things are I'm just asking the question what are the second and third order economic impacts because the market doesn't reflect human atrocities we may want to to but it just doesn't do a good job of that it does do a reasonable job of reflecting a discounted set of events in the future related to economic events and impacts and all I'm saying is that you know the most obvious impacts of this war have been to currencies to commodities and to energy and the world has had six or seven months to reroute what they've needed to roughly solve a large percentage of those problems it doesn't take the fact that this is a bad war and it should end I'm not saying any of that right right no I look you make you make a good point which is that look the market discounts cash flow so how do the cash flows get impacted you may be right that valuation multiples have gotten close to correction but I think the thing that we don't really know is what earnings and profits and revenues are going to look like next year and part of that is about the hard landing right like how inflated are all these companies revenues and earnings because of what I hear you I hear you but this is why that chart is so important every other time except in 1983 in modern history so the modern history that we have all lived says that the stock market bottoms in the first third of a process and so if you think that this process ends in 24 that's a roughly 24 month process 21 month process we're in month seven we're in the power alley of what would map to the last six or seven patterns of behavior yeah I mean I I guess you may end up being right about this prediction I guess what I'm saying is that I personally would not want to enter the market until some of these fat tail risks are taken off the table yeah well talking about nibbling in the market for second I'm not saying they're likely I'm just saying yeah and obviously none of us want this to happen I'm just asking a very specific question which is and making an observation which is I wonder how the markets would react and I I don't see it being down a thousand points and that may be wrong but by the way they would certainly be shocking to see that yeah the diversity of views that you guys all share I think really represents the market there there is no view to you too you have a view dude I'm like what the fuck wow I mean what is your view you're your view that we're okay we're about to just go through the toilet like what is your view from an equity markets point of view or just in general yeah like to equity markets your temperature how do you feel like how do you feel yeah I'm worried about money not moving what does it mean money not moving I'm really anxious about invested dollars everyone seems I think I mentioned a while ago that dollars were kind of locked up in March and then I went to this conference and people were like yeah we're losing up and making a plan again in July because the market was kind of turning back up and now equity markets are turning down bond markets have turned down interest rates have spiked and there's a bunch of these currency problems so I'm very nervous about the flow of capital which I remember happening in08 and I remember happening when we were all joking over text when covid happened and we're like hey the market can only go down 10% a day for so many days in a row and everyone was kind of like you know Chimoff was talking about wearing jeans instead of he's like I can just wear the same pair of jeans for the rest of my life that's true demand destruction when he said that like I'm out the jeans from like I was at me feels yeah yeah he's like I don't need fancy clothes I can just wear the same clothes I have to go in your storage locker clothes out right that was the old one for Chimoff and L'Orepiana on sale rent the rent Chimoff the CEO the CEO Laura Piana did send me a note after that podcast he's like is everything okay the great the GDG the way the the fresh the the I will tell you guys the biggest indicator of economic health is the rate of rotation of Chimoff's closet because that is it's big that he's like you know what I can take this season off I'll just wear a last summer's season I would get I would guess that the rate of rotation of Chimoff's closet is probably predictive of IPO market no I mean you know what I was I was there last week rotating in I'm rotating in so maybe that's a good sign the economy's not to be again I'm ready to take some companies public no no I'm buying I'm buying stocks because I was at Chimoff last week and it was supposed to be black truffles and then he jumped the fence all of a sudden white truffles over my shoulder boom boom boom boom boom boom I was like chef chef chef what's that image of chef chef chef chef chef all right listen for the dictator the Prince of panic attacks the Sultan of science the Queen of Keen Wahem so go see the Kevin Hart show if you're in San Francisco or San Francisco he's hilarious and for Montclair ambassador David Sacks the dictator himself I am the world's greatest moderator we'll see you on episode 99 love you guys love you guys oh we should all just get a room and just have one big huge or two because they're all just like this like sexual tension but we just need to release that out what your that be what your year of feet