SPEAKER_00: Jake, how you look a little grifty. You'll Okay, yeah, me. I'm
SPEAKER_02: great. I'm great. You look half a milli richer today. What's it like to be half a milli richer? Jake, how you look like a failed hostage taker?
SPEAKER_04: Laugh it up, boys. Laugh it up, boys. Laugh it up, boys. When you see my other projects drop, you're gonna be crying again. Okay, I can't wait. Why don't you take yes for an answer. Jake?
SPEAKER_05: Oh, I've taken it for an answer. Welcome to the all in podcast
SPEAKER_04: with three miserable rich bastards who pull up the ladder behind him.
SPEAKER_05: Do you want to explain why it took us a month to produce a new episode? JK? What about hold on a second, attorney. Let me give you guys
SPEAKER_02: the TLDR. JK thought the all in pod was his. And then he realized it wasn't. No, if you guys want to go there we go there. I'm
SPEAKER_04: totally transparent. I requested I requested to own 6% more of the all in podcast.
SPEAKER_02: No, no, no back up to the summit back up to when you wanted to kick me off the show back up before that where we Oh my god,
SPEAKER_00: are we really doing this? Yeah, we're gonna do it.
SPEAKER_02: Okay, if you want to do it, we do it. We can't talk about this for 45 minutes because what happened so boring. So plan the summer. We plan the summit. J Cal doesn't like how I was concerned about the summit and I bitched at him and you know, I was negative to him. Finish the summit. J Cal wants to kick me off the show. Yes, Brad Gerstner, Bill Gurley
SPEAKER_02: would have higher rate comes to blame. I think it was me and Jake out getting into it. It wasn't it
SPEAKER_05: was actually it started with freeberg and Jake out getting into it. Cal wanted me off the show. All right. I'll do I get to explain
SPEAKER_04: the series of events or no? Okay, wanted me off the show.
SPEAKER_05: True or false? J Cal.
SPEAKER_04: I felt that if freeberg if freeberg wasn't enjoying his time here, and was going to constantly complain every week about every detail why the show is not good. There was always the option for him to maybe do half the shows and have Brad Garson or do half the shows or have Bill Gurley or rotate in. And so if he was going to be miserable all the time and worried about the show, I gave him the option to have somebody else take his spot. Did you or did you not say that this is your show? You're the
SPEAKER_02: leader and you wanted me off the show. I never said that. And nor would I say that I don't need to say
SPEAKER_04: that you could summarily replace any of us effectively you acted
SPEAKER_05: like we all never said your show.
SPEAKER_04: Sax I don't think she must replaceable just for the record. So it's true. He does think that he did not replaceable
SPEAKER_04: freeberg I do think I mean, I pull up the brat Gerson or episodes I think they have slightly more views so but people love you so we can do Calto my mom and my wife that he
SPEAKER_02: thought I was replaceable on the show.
SPEAKER_00: Guys, I would like to jump in by just summarizing this so that we can move on. So basically what happened was we had an agreement that it was 25% each. There was a moment where J Cal believed that he deserved more, we had to sort through a lot of the underlying issues that caused him to believe that we got to a good consensus. We now have a signed agreement that governs how the show and other things around the show and offshoots of the show will work. We are 25% equal partners. And now we can move on. So enough of the bitching. Let's go.
SPEAKER_02: All good. And I love you all.
SPEAKER_00: I love you all too. I love you all too. To be clear, my position I do feel like this
SPEAKER_04: this out here was if we're going to make it into a media company. My request was, listen, I think I own I should have 10% more equity. And I'll go to work every day and do the work. And you guys can just show up. You guys agree to that. And then you guys said you don't want to do it. And I said, Okay, fine. So here we are, we're back at square one. So let's just get to work. I just want to do a pod. And we just want to talk. There's
SPEAKER_02: not going to be any more summits. There's not going to be
SPEAKER_04: any business here. It's just a pod. I have other events I do have other pods I do. If I want to get paid, I'll do them over there. And here, it's just a pod that you see every week. So let's get into it. Everybody wants to talk about marketing markets. Oh, by the way, if you guys want your intros, that's 1% each. intros go do it. Okay, those are 1% each. So when you guys are willing to pay me my 1% additional equity, you get the intros and when you want the all in summit 2023. That's another we're gonna get an invoice each week from J Cal now you're gonna get it's gonna be
SPEAKER_04: pro rated monthly, it's gonna be point 8% equity per month vested.
SPEAKER_05: I just think it's so fascinating that we went through all of this, you know, I don't know, storm and drawing or whatever this, this like your month of non taping. And you know, and this, like all this turmoil in our relationship, so you could get an extra 1% from us 2% each 31% I believe I should, just so
SPEAKER_04: you know, I do this for a living. And if I do extra work, I believe I should. And if you want me to be the de facto CEO of this, then I should get a little extra, we don't want that and you don't want that. So that's fine. That's fine. This is just going to be a project, we do it every week. And then all your grifts, whatever, you know, you're spinning out from the production board or whatever copycat app you're making, you can fucking do as an as a side grift. Here we go. Do the
SPEAKER_04: intro. Come on. Let's go. No, there's no zero interest. No interest. intros are out. But what about Hey, everybody. Hey,
SPEAKER_02: everybody. I'll do a Hey, everybody. Hey, everybody on the
SPEAKER_04: house. Hey, everybody. Hey, everybody. Welcome to us.
SPEAKER_03: And as I'm freebie for free for you. Rain Man David
SPEAKER_00: W.S.
SPEAKER_04: Hey, everybody, welcome to another episode of the all in podcast. We're back for Episode 84. With me, of course, the Sultan of Science, the Prince of panic attacks the queen of Kenwa himself, David Friedberg. How you doing, buddy? Great to be here. Great to be here. All right.
SPEAKER_01: Can you feel the tension? There's tension. There's still
SPEAKER_05: tension.
SPEAKER_02: JKL and I'll be hanging out tomorrow night. We'll make it
SPEAKER_05: you guys resolved it. I'm cool. I'm cool. Freeburg. I'm here. I
SPEAKER_04: bought dinner. I think we're good. He did buy me a wonderful dinner. Oh my lord. After the Warriors game. Shout out to the words. All right. And of course, with us is the rain man himself. David Sachs. Hey, nobody. Good. You ready to go? Don't try and
SPEAKER_05: deflect this thing on to me. I was only tangentially involved.
SPEAKER_03: Says the guy who spent 72 hours on contract. I wrote a very fair contract so that we can move
SPEAKER_05: forward. Yeah. And then you proceeded to break it in the
SPEAKER_04: first 15 minutes by slandering me and disparaging me but okay, come on. That was good for ratings. Good for ratings. Yes.
SPEAKER_03: I thought your name was pretty great. He did the meeting. The two buttons of the superhero. Good. And I was like, Jason, that was good. Making jokes,
SPEAKER_03: breaking the breaking the non disparaging clause. And then of
SPEAKER_04: course, the dictator himself from some undisclosed location in a European city. I don't know if I'm allowed to say that jamaat the polyhompetia. Welcome back boys. Episode. What's up, boys? All right. Well, since we last convened, get all the on. Yes, the all in summit is finished. All the episodes have been released, including Pomerolocky yesterday. And here we go. The markets are in complete turmoil, spy down 21% year to date downs down 17% year to date. As Sax has pointed out, that is not representative of what happened to growth stocks at the same time. And the May CPI went up and it was at 8.6. We also got to 75 basis point rate hike. Who wants to start here
SPEAKER_04: chamath? I mean, it's market. So maybe I'll just dump it to you first. And then we'll go around the horn to Sax and then freebird. Well, there's a lot to say. So bear with me for a second. But
SPEAKER_00: the thing that you have to do before you talk about what is happening now, I think it's probably useful to go back. And you have to really start at the end of the great financial crisis. And the reason is, there was a bunch of people coming out of the GFC, who confused what the US government and some European governments were doing. At the time, there was the risk of a huge financial contagion. And so the US stepped in, and the Federal Reserve started to use their balance sheet to buy toxic assets, right. And the ECB did that. And I think Japan did that as well. Anyways, a bunch of banks did it. I mean, a bunch of governments did it. And then there was this body of pseudo scientists, scientific economists who coined this thing called modern monetary theory, which basically said, hey, you can keep printing money, and introducing it into the economy to smooth things out and to actually drive long term growth. And it turns out that a bunch of government officials fell for it. And if you fast forward to 2022, so 14 years later, you know, governments around the world had printed some Something to the tune of about 3035 odd trillion dollars of money into the economy that should have never been there. So the thing to remember is like we have not necessarily just been obfuscating true supply demand in the last six or eight months when we've been talking about a recession or inflation. We've been actually doing it since 2008. It's just that it's been building up in the system. So one of the things that we have to realize is that all of that money somehow needs to get destroyed in some way, shape or form. If the true economic equilibrium is meant to be found, what is true supply, what is true demand in the absence of government sloshing money around, trying to prop up things that should not be propped up or buying votes or all the grifts that these folks have engaged in in the last decade and a half have to get undone. So that's the backdrop. So if you think about taking $30 trillion out of the global economy, you know, you're talking about almost, you know, I think it's 85 trillion is the world GDP. So like, you know, it's, it's, it's almost half of an entire year's worth of global GDP. It's going to take three years probably, of the slow meticulous, you know, running off of money, you know, not reintroducing new money. So it seems like we're at the beginning of the beginning of something that's going to be long and drawn out. Now that's separate from and that's separate from whether we're in a recession or not. That's just the bear market that we're in. Right. And so you have to look at asset prices today, as a microcosm of a much larger trend that has to be about fake money, pushing asset prices up. And now taking all that fake money out and finding out what the real price of something is. And I just don't think that takes six months. So for all the people that were, you know, fingers crossed, hoping that this would be the end of it, Fed raises 75, we're done with this, they're going to raise 75 more. I just think that's not how it's probably going to be, it's going to take, you know, 2436 months, that may mean the bottom doesn't happen for another 18 months. I think it's a word we're in for a lot of choppy market action, sex, three asset bubbles,
SPEAKER_04: clearly all, you know, being impacted, we had stocks, looks like that story was pretty violent. Then we had crypto this last two or three weeks have been absolutely insane in terms of that asset bubble. And now record high inventories for homes record. Sales are now dipping below the average of the last 20 years. And we're seeing mortgage origination just absolutely get crushed 6% mortgages just a couple of months ago, it was 2.x for some folks. So when you look at those three asset bubbles, do you buy chametz? Hey, we're gonna see even more deprecation these for another 18 months, possibly, or do you think we've taken such crazy action, this has come down so violently that we're now bouncing along the bottom bouncing along the bottom or 18 months of more pain? Well, the stock market, especially growth stocks may
SPEAKER_05: have taken the majority of the carnage. But you're right, there are other asset classes. And I think we're going to see the carnage start to rotate into those. So you're right, if you look at residential real estate, now, the prices are at the highest they've been relative to median income, since something like 2006 2007, before that sort of great real estate crash that precipitated the Great Recession of 2008. So I think there are going to be more more shoes to drop. I just want to build on to my point about root causes here. Milton Friedman once said that there's nothing quite so permanent as a temporary government program, the temporary government program was quantitative easing, we had this Great Recession of 2008, that could have turned into a depression, they broke the glass in case of emergency, they started this qe, which is basically the government intervening to buy bonds in the market, they had never done that before. And they loaded up their balance sheet. The crazy thing is that program was still continuing until last year. Why? I mean, it was like on cruise control. And so last year, it was it was it was continuing until last month. And countries like Europe are still doing it.
SPEAKER_00: 9% inflation in Europe, and they're still buying bonds, right. So you go back to last year, the Fed bought 54% of the
SPEAKER_05: government's debt, despite the fact that the economy was growing at like 5% GDP, that it was bouncing back really strongly from COVID, that you had the stock market at all time highs, and yet they were still intervening with this massive qe. And then when we got the surprise 5.1% inflation print, last summer, they didn't stop qe till the end of q1. So you're right, they kept basically printing money. And it's still going on. And that's created massive distortions in the economy now. So the Fed, I would say is the number one culprit here. And Jay Powell is the number one culprit. But the number two culprit is the Biden administration. And I think Biden did three things very early on in the first few months of his presidency to effectively tank his presidency. Number one, he canceled our energy independence on his first day in office, canceling the Keystone Pipeline and making it much harder to drill. And of course, energy inflation is the one factor in this sort of overall inflation. Number two, he pushed through that last 2 trillion of stimulus on straight party lines, the ARP, the American Rescue Plan, after Larry Summers said, economists in his own party said, this is going to create inflation, don't do it. And then the third thing is, and no one really talks about this is that Biden could have used diplomacy in 2021 to basically find an off ramp to this Ukraine crisis before it turned into a full fledged war. And if you listen to the economists, the international development economists, like Jeffrey Sachs, he basically says that Biden pulled his cabinet said, Listen, should we negotiate and compromise with the Russians? They all said no, and Biden handed down the order, we will not compromise with the Russians. So now we have this massive war in Ukraine that's fueling food and energy inflation is going to take his presidency. And I don't even think there was any debate about this. We may not be negotiating against Russia, but we're
SPEAKER_00: enabling them to print enormous surpluses, meaning I don't know if you guys saw but there was an article today, Janet Yellen is traveling around, basically convincing folks to not include Russian oil from a bunch of import bans so that these Russian oil tankers can be insured. Why so that they can sell this oil to places like China and India, etc. The ruble's at a five time five year high, the ruble's at a five
SPEAKER_05: year high, we push for all these sanctions, Europe gets on board
SPEAKER_00: and says, we're going to do it and we're going to take the lumps. And then we go around Europe and basically say, well, we kind of want to fight this proxy war. But at the same time, we want to try to fix inflation. And we didn't mean to cause this and it's completely disorganized what's happening. Okay, so if you had six minutes in the pool for when Sachs would
SPEAKER_04: blame Biden for the economy, you win. Who do you blame? quantitative easing starting in 2008. So that that goes over a couple of presidents. And I guess the question I would have for you, Sax is how much of the spending the free willing spending, you know, you know, was from the previous administration. It is a bipartisan problem. There's no question about it.
SPEAKER_05: But what I want to make sure that we point that out. Yeah, for sure. And Republicans only seem to find their
SPEAKER_05: principles on spending whether it's a Democrat in the White House, I totally get it. And I would like to see more fiscal responsibility, regardless of which party is in power. And I like to see the Republicans less be less hypocritical in their principles on this. But look, here's the thing, the economy was bouncing back strongly last year. And Biden still pushed for this last 2 trillion spending, and then 1.2 trillion more. And then remember the 4 trillion to build back better were mentioned say themselves exactly. I mean, what would if what would that have looked like? free
SPEAKER_04: break? You haven't spoken yet? Thoughts on? You know, this is these asset bubbles, I guess. And then the buying of the bond seemed completely unnecessary for some period of time, if we are acting as the 50% plus buyer of bonds, what kind of distortion does that create in the market? Because if the government's competing against other people in the marketplace to buy those bonds, how could they possibly be priced? Correct? Let's just be very careful about our framing.
SPEAKER_02: There's the US Treasury, which issues bonds and raises capital on behalf of the US government for spending programs. Then there's the central bank, the Federal Reserve, and our central bank's job is to number one, maintain liquidity in the capital markets, so that businesses can invest in growing and growing their their products and growing their businesses and the economy grows, while not providing too much liquidity, that you end up with inflationary effects. And inflationary effects means that there's too much money in the market, and you see that money find its way into escalating prices on different, you know, assets. And the Fed's long term goal, remember, is to provide a stated goal of Jerome Powell in particular right now this changes over time, but generally the intention of the Federal Reserve is to make liquidity to make cash available to banks who ultimately make it available to businesses in such a way that there's enough cash in the system that the businesses grow and that people have capital to invest in growth, while keeping inflation at 2%. So their long term target is 2% inflation. And it's also correct me if I'm wrong, making sure that there's enough cash to support economic growth. So remember, last year, you'll remember Stan Drucken, Miller was very public about how insane it was that the Federal Reserve was still buying bonds. And so there's one way to introduce cash into the system is to make cash available as a loan to banks. And then those, you know, banks use that money to loan to businesses, and it makes its way through the economy. Another way is for the Federal Reserve to step in and actually buy bonds, freeing up the money that other people would be otherwise using to buy bonds to go and invest in other things. So they're effectively forcing liquidity into the market by taking bonds out of the market. And last summer, or Q2 of last year, Druckenmiller was pounding the table saying, guys, the economic indicators on how quickly the markets are how quickly the economy is growing relative to how much inflation there is indicates that we should stop buying bonds and we should stop injecting liquidity into the markets. This makes no sense. It is nonsensical. And there was no strong point of view from the Fed at the time other than there was uncertainty about the bounce back of the from the recession from COVID. There was uncertainty about what else was happening in the economy, and yada yada, but the numbers, the economic indicators were showing very clearly, the economy is growing at a robust pace, low unemployment, and inflation is starting to pick up. Holy crap, it's time to cool it off. And the Fed made a judgment call and their judgment call really kind of was to keep going. And then we end up in this massive runaway inflationary problem where if you keep too much liquidity in the system for too long, you have inflation, even if you have economic growth. And now by pulling the money out of the system super, super fast, we reduce the inflationary effects potentially. But we take the economy because now all this money coming out of the market means people are spending less and buying less and businesses have less to borrow, the borrowing costs are high. And then that that's that's the big vacuum. Hold on, let me go to chamath and then sex. I just
SPEAKER_04: think the rate the rate at which we pull the money out, which has
SPEAKER_02: had to be really, really fast over the last few weeks can cause a recession. And that's the biggest concern right now is will that actually trigger a massive recession or not that everyone's watching? So tomorrow, I guess one of the things we need to clarify here
SPEAKER_04: is the actual mandate of the Fed. I was under the understanding that the Fed really was there to make sure of maximum employment and that, you know, low interest loans were available. And price stability. These are the were the stated goals for a long time, low interest rates, capital capital
SPEAKER_02: is available, availability to grow with moderate rates without exceeding inflation of 2%. That's okay. So maximum
SPEAKER_04: employment, price stability was also in the original growth,
SPEAKER_02: because remember, we can't ever pay our debt if our GDP is not growing, okay, while minimizing while keeping inflation below 2%.
SPEAKER_04: Chama whatever point you want to make, feel free to make. But also, I was just wanting to know from you, where did the Fed go wrong with their mandate, if at all here, because we do have maximum employment. We have out of control price stability.
SPEAKER_00: Look, here's the thing you I think we have to also be sensitive to the fact that the Fed operates on a certain class of data. And that data in the 21st century is pretty pathetic. Nick, you can probably find this but there was an article, I think it was in the New York Times, that really walked through how CPI is calculated. And it's a bunch of people that work for the government that walk around with iPads, building relationships with local businesses and all these random places all around the country, and asking them to, you know, chitchat for 15 minutes and do these surveys. Now, you would have thought that in 2023, or 2022, what the government would have said to, you know, Visa, MasterCard, American Express, all the payment rails, the banks and stripe is send me a feed in the following structured way so that I can actually have an absolute precise sense of inflation, because inflation really only occurs when a good or a service trades hands for money, right? And you calculate what did that thing trade at the day before? And what is the trade for today, so you could get an absolute precise sense of it. Instead, we do this random sampling thing and subject to humans, etc. So if you read this
SPEAKER_00: article, your takeaway will be, oh, my God, this is very rickety. And it drives an enormous hammer that we use to try to manage the economy. That's the first thing. I think you need to buckle your seatbelt, because the next three, four or five months of CPI will probably be very, very bad. 789% Why? There are a handful of components that have gotten completely runaway. Number one, the biggest one is rent. And so rent works on a three month lag, we're going to reintroduce what the true owners equivalent rent is into CPI. So we can already forecast that CPI going up. Oil is at 105 bucks a barrel. Russia is basically trying to break the back of Europe by now messing with their net gas supplies. The German energy minister yesterday said that if that happens, it could be a contagion equivalent to Lehman Brothers, with respect to energy. When you play all of these things out, what you have is unfortunately, rampant runaway costs that really have no mechanism to get back in check. In the absence of some real governmental changes, our policy on this Ukraine Russia war, you know, how we intend to sort of work or cooperate or fight with China, all of these things have to get solved. So in the absence of that, prices are going to continue to go up. And so what does the Fed do? How does it throw away what little credibility it has left when there's eight and 9% inflation prints, and saying we think we're done for right now, you can't do that. So they will overcorrect because there's just going to be so much pressure for them to act. All roads, I think lead to lower equity prices. And I think what David said astutely is we've seen the first wave, but now it has to touch all these other areas. For example, we have gotten totally drunk on debt as a country. One of the most obvious places where we've been serving alcohol far too late into the night, is in the financing of all these private equity leverage buyouts. Right? These are dangerous. These are sketchy companies that are sort of like, you know, teetering on insolvency at times, where private equity comes in, levers up the balance sheet with debt, they price it right to the edge of what's legally allowed, or what's financeable, and then they go do it. But that's all assuming the economy continues to grow. And so if all of a sudden you have some recessionary forces, or prices go up and earnings don't,
SPEAKER_00: you'll have, you know, a contagion in the debt markets, you could have a contagion in the commodity market. So we're dealing with some really real boundary conditions. I mean, real estate, most of most Americans have most of their
SPEAKER_02: net worth tied up in real estate. And if we see a 30 30% correction in real estate, it could be a real problem, particularly with rising interest rates, inability to refinance. Sax the dual mandate is he keep inflation 2%, and then keep the
SPEAKER_04: unemployment rate reasonable. The unemployment rates amazing with still so many jobs out there, even with these layoffs. In fact, one might argue we made too many jobs available to the point at which people maybe aren't working as much or just, you know, underworking and not taking advantage of these amazing jobs out there. Where do you see this going sacks now that we can't seem to get inflation under control, and people are looking at their 401ks they feel a lot poor, but is the demand side gone yet? Have consumers decided to recession? Have consumers decided, I'm not going to buy the next house? I'm not going on this vacation. $6 gas makes no sense. $7 gas makes no sense. I'm not going to go on this weekend. excursion. I'm staying home.
SPEAKER_05: Yeah, I mean, look, consumer confidence just had the biggest drop, I think in 40 or 50 years. We if you look at like, right track, wrong track polling for the country, only something like 24% believes that the country is on the right track right now. If you look at people who are already in a recession, and they don't look at like, you know, the quarter over quarter growth, they just look at what they're feeling. 56% of the country says we're already in recession. It's about 70% Republicans, about 50% Democrats. So the country is already hurting people already feeling it. And this is
SPEAKER_04: psychological sacks, or are they actually making decisions now to
SPEAKER_05: spend less? No, I think it's both. I mean, you start with the real inflation and people feel it. And they also hear about it in the past. And they have to adjust their, their decisions. And this is the problem with fixing. Yeah, this is a problem with fixing an inflation problem is that it's based on expectations. So once people start to expect inflation, then businesses have to start operating as if there's gonna be an inflation rate next year. So they have to start raising prices. And it's actually very hard to put the horse back in the barn. And this is why I think the Fed is probably more likely to overshoot on raising rates is because if they really have to slam on the brakes, and then that's going to lead to recession. And if they don't, then we end up with like a chronic sort of stagflationary situation where you get lower growth and inflation persists. So it's a bunch of bad options right now. And I think to the point free burgers making earlier, you know, this Ray Dalio piece that he's published as a blog on LinkedIn, he said, Look, what you want is a Fed that is alert at the wheel, and gently applies the accelerator or the brakes based on what's happening. And instead, what we had is the Fed was asleep at the wheel, they should have started reacting gently to inflation last summer. Instead, they waited nine months, and now they're slamming on the brakes. And this is a bunch of bad options. I think we you know, we are going to have a recession, the way this unravels, make one suggestion, I want to put this out there because I sent it on
SPEAKER_02: our text and I anyone that's listening in DC, please think about how we can change the way the Federal Reserve operates. But it doesn't make sense to have humans with subjectivity, applying their subjectivity to a set of as Chamath pointed out, infrequent data that comes in chunks and comes in spurts, and only having a mechanism of changing rates by 25% each month, or sorry, 25 basis points once a month, we should have continuous real time monitoring of economic data. And software or AI or some sort of informed set of models should then predict what inflation and economic growth rates will be as that data comes in, react in real time. And on a daily basis, we should be adjusting the overnight rate in a one basis point increment. So we can have the ability to more quickly, more efficiently and in a higher resolution way, smooth it out a smoother way in a higher resolution way, make these adjustments. It's silly that we're still operating the way we did in a pre digital age, as it is with a lot of industries and a lot of bureaucracy. But in this case, it's particularly prudent and it's becoming particularly important and relevant, as we're seeing right now with the stagflation risk that we're facing, we're gonna have massive inflation and recession at the same time. Because if we had made smaller adjustments every day for a period of time, as these economic data indicated that we should be making them more quickly, we would not be in this problem. And I don't think that having humans and their judgment should necessarily be the way that we drive. Yeah, but listen, we don't need that making daily adjustments. I
SPEAKER_05: don't think the Fed can fine tune an outcome like that. I just think that they can't be asleep at the wheel for nine months. I mean, we should have AI running this friggin thing. I
SPEAKER_02: mean, what's listen, I actually don't think when you when you said that,
SPEAKER_05: you know, Congress needs to somehow change that the way the Fed does business, I actually think that the Fed has the correct mandate, which is the dual mandate of considering inflation and unemployment, we shouldn't be basically junking that up by adding a bunch of mandates. And actually, the administration has been trying to add mandates, they basically gave the Fed a mandate around climate change, they gave them a mandate around equity, don't change the mandate.
SPEAKER_02: multi variable complex, the tools, the tools should change.
SPEAKER_02: Yeah, right. We really want to focus Fed and I think the
SPEAKER_05: administration has been politicizing the Fed by giving them a bunch of mandates. Look, if you want to pursue those policies, do it in HHS, do it in the Interior Department. Don't don't basically confuse the Fed and make them pursue climate change or equity or what have you. I mean, that is just bad part. That is not their remit, right? Their remit is controlling inflation. I really think this just comes down to the fact that for nine months, they sat on their hands and ignored the inflation evidence. Remember this word transitory? You know, we heard so much last year about inflation being transitory. How did they know that? You know, why didn't they start rethinking this quantitative easing?
SPEAKER_00: The headline from the Wall Street Journal says it all how the inflation rate is measured 477 government workers at grocery stores. Yeah. software should be taking data from
SPEAKER_02: different feeds and software can learn I don't I don't agree with you. And what are the predictors of inflation? And what are the predictors of growth and make a recommendation? I don't agree
SPEAKER_00: with you that it needs to be real time. In fact, I think it would do more harm than good. But I do think that we can know these things without sampling in such a porous way. And you know, you can work with private companies to give you the feed of data to allow you to do it. And now, you know, we're going to look, we've had a system of over correcting and under correcting for years. The problem is the stakes get higher and higher as the economy grows and becomes more complicated. And we have more leverage. And we have more leverage. And we
SPEAKER_02: have more industries that are leveraged and more asset classes that are leveraged like housing. Because you're even a few points, you could take everything. I also want to tell
SPEAKER_00: you guys a quick story. One of the most interesting canaries in the coal mine of all of this was two days ago, and what happened to Facebook. And this sort of ties a lot of this stuff together in terms of like economics, inflation, asset prices, equities, tech, we should read them, we can try to talk about non sort of, you know, big tech. But the everybody was saying, Oh, gosh, the market's gonna rip on the open, you know, we were closed for Juneteenth. And then on Tuesday, the market, you know, the S&P was up like 250 basis points, 2.5%. And the NASDAQ was also up, you know, call it maybe 300 basis points, roughly. But Facebook was down like 400 points, right? So it's a big spread. And why is that? And I was like, this makes no sense to me, what is going on with this price action, everything was up, Apple was up, Google was up. And so I called around, and you know, I was like, why is this happening? And this is the best explanation I got. When you look at who the incremental buyer is, in the stock market, it tends to give you a sense of whether prices can go up, or will continue to go down. And the poorest informed buyer tends to be retail. And the most informed buyer tends to be these very large institutional hedge funds. Right? So there's a spectrum. And Facebook is an example of one of the big tech that is poorly owned by retail. So it's mostly owned by smart money. And the case that smart money makes for owning Facebook is that it's got an extremely cheap price to earnings ratio. So you must own it. And what they said was that they, you know, looking at the tea leaves of consumer demand, what they actually re underwrote was that actually, it's not that the price to earnings was cheap, it's that the E in PE was just wrong. And if they pass through all of these increases in inflation, and you know, their earnings expectations into Facebook, it's actually more like fair value at a lower price. That's why they sold it so much on a day where the market was up. Now, why is that important? Well, eventually, you're going to touch all these other stocks as well that are going to go through earnings revisions in this recession. This is where I think Wall Street has done a very poor job on behalf of retail. If you look at the average estimates of earnings, you will be shocked to hear that Wall Street actually has this year being record earnings next year earnings continuing to go up. How do you think possible? Well, how was that? How was it? If you're
SPEAKER_04: sitting here? How do you see how do you see earnings continuing
SPEAKER_00: to go up into these prints like this when you cannot pass through? You know, 80 90% increases in energy and cogs and whatnot? How does I think the the what people would say is
SPEAKER_04: maybe they're going to lower their costs. And so with layoffs and and lowering salaries and lowering spend on advertising, you know, the earning the E could go up if people because start belt tightening and then we start having companies that are being run, you know, just more, you'll have to sell fewer you'll have to sell fewer things because there'll be fewer people
SPEAKER_00: with jobs to buy things. But we have 10 million job openings. So
SPEAKER_04: this is the weird thing about this recession is because we haven't let a lot of people immigrate into the country. But is that is how many jobs is that what you think the consensus
SPEAKER_00: view on Wall Street is that basically a bunch of people get fired. And so that's why earnings continue to go up. Well, they stopped hiring for two years in advance, right?
SPEAKER_04: Facebook said they were hiring for like 2024. Their hiring plans were looking at two years. So now if they go on a hiring freeze, maybe there's, you know, and that's the number one cost. I'm just putting out a theory. I'll give you the counterfactual I think Wall Street's wrong.
SPEAKER_00: Okay. And I think that earnings are going to go down this year, and will definitely go down in 23. And so I think what probably happens is the entire world of equities needs to get reprised at a lower price. And in that, it's going to put enormous pressure on these cash burning non profitable tech companies. Well, that's for sure. But in the ones that are profitable,
SPEAKER_04: chumath, they're aware of this Facebook just canceled like two of their prototypes they were working on to save money. So that whole $10 billion into, you know, VR, I think they're trying to make that number look smaller, smaller. Sax, what do you think? Well, I think you're bringing up a really interesting point with
SPEAKER_05: this the 10 million, you know, job openings. And what now that that number is coming down really fast as companies close open racks, and they basically freeze hiring. So that number's going to come down very, very fast. But one of the major contributors to inflation is that the labor force participation has been very low, but millions of people left the labor force during COVID as a result of the stimulus checks and the freezing of rent and evictions. I mean, look, rents the number people's number one expense, if they don't have to pay rent for a couple of years, a lot of them may not work or may not work as much. So we've had this problem where we really need about 2 million people to re enter the labor force. And if you describe inflation as too much money chasing too few goods, we need to increase production and productive capacity. And when you have millions of people dropping out of the labor force, you've got less goods and services being produced that people want. So just reducing the money supply is not going to get us out of this mess. We also need to improve productive capacity. Just to put a number on that we peaked in the 1999 era at 67% of
SPEAKER_04: participation labor force, and then it's been down in the low 60s, 61 62. And it continues to be low. But that is the solution here, we get that 7% that gap, you could change the demand side, because if all you do is fix the demand side, what
SPEAKER_05: you're doing is you're killing the economy to reduce demand in order to bring down prices. That's very painful. It's all pain. But what you also have to do is fix the supply side, you have to increase the availability of all the critical inputs into the economy. So labor obviously is one of them, but also critical resources, like energy, you know, oil, natural gas, and so on. And that goes back to fixing the supply chain, hopefully getting a resolution of the situation in Ukraine, the war. So if we could fix those things, as a way to improve the economy without creating more pain, freeburg, if the prices of just daily living, of which
SPEAKER_04: transportation and housing and healthcare are now the top three, I believe, groceries and healthcare, I think have flip flopped a couple times in the last decade in terms of costs. If those things go up, would that make people want to go back to work to pay for those things? Or does it create capitulation where people say I'm moving in with my cousin, I'm going to lower my balance sheet? What is your prediction there? Are more people going to go to work? Or do we still have this, you know, call it 10 million people in the country who just don't want to go to work? I've mentioned this in the past, but I think there's more. There's another kind of
SPEAKER_02: interesting outcome of this week, we've had several months in a row of pretty significant increase in consumer credit. And I think the reason is, things are getting more expensive. People generally do not like to reduce their spend on stuff or they're living their lifestyle. Once you get used to a lifestyle like going out to dinner once a week or going to the movies every week, and you create a budget, you create an ex a life experience around that a model around that, it's very hard to say, okay, I got to cut budget now. And I got to reduce my life, I would rather say I'm going to keep doing that. Or at least there's some inertia or some momentum to keep spending on the things that you've been spending on. And the way you do that in a model where you don't have as much income or you have less income and things are getting more expensive as you take on more debt. And so there is a little bit of a nervousness that I have had, that people's response generally, the consumer response to inflation, and to a kind of a shifting income environment like this is not necessarily to cut as quickly but take on more debt and keep keep buying. And so I am a little nervous about that. But I do think obviously, at some point, everyone has to figure out ways to generate income, there have been a lot of these kind of ancillary markets that are typically the first to go these extra services markets where people, you know, have found other ways to make money side hustles and whatnot, that may or may not be as robust as they have been historically. And so people may need to go back for more secure, stable income. And these jobs get filled. I mean, as we all know, there's an opportunity and this is the whole concept, I think behind build back better. It's not super thoughtful in terms of the approach, I think, based on my understanding of where that money is supposed to go, because it doesn't create long term jobs. But there is an opportunity to build new manufacturing and new infrastructure jobs in the US right now, that could enable a healthy transition here. But that legislation needs to be done smart, it can't be done with this, like, hey, let's build a bunch of bridges. And then a bunch of contractors make a bunch of money, and no one has any long term jobs out of it. We've got to find ways to spend money on creating long term, sustainable, you know, new industry here. And job openings 11.4, it's come down about six or 7%. So, you
SPEAKER_04: know, it's going to be trailing, but it's for sure we're seeing it in our industry with the hiring freezes, that, you know, we're going to work through those open jobs, what are the chances that inflation gets under control in the next year? And should the Fed go for like the 1% slam on the brakes, there was some talk about that, obviously, they went for a lot of the remember a lot of the elements that we were, you know,
SPEAKER_02: kind of saying, Oh, my gosh, I can't believe the climate prices. So, you know, wheat is down, I think 30%, lumber is down 50%. Gas prices are coming down. So, you know, there are some of these, you know, commodity spikes that we've experienced over the past couple of quarters, particularly recently, that are really that have had a significant part of the fueling effect on the inflationary trickle down into ultimately end products and whatnot. As we've seen, you know, the inflationary cycle is going up and down and whatnot. And those are coming down. You know, there's a real question of how quickly that flows through the economy and flows through to the price of goods that consumers ultimately end up paying for. The gas prices right now are the biggest concern, right? Like unless you can get gas prices under control, that always always has a massive impact on spending on consumer spending, which drives a recessionary cycle. And so that is the most important thing. But foremost, I don't care about the general inflationary indicators as much as I care about getting the price of gas down. That is a super, super critical number to
SPEAKER_04: fix is this these gas prices going to change how Americans look at what car they buy because they're gonna get worse time we had that. They're gonna get worse people started looking at not buying SUVs we could have $7 gas. Oh, I said there was a
SPEAKER_04: picture actually, I tweeted in California, there was a $7 and broadly broadly, we could have $7 gas all throughout the country
SPEAKER_00: but J Cal the you remember the average automotive automobile in
SPEAKER_02: the US last for 12 years. That's how often people change out their cars. So that's 8% of the fleet being changed per year. Yep. And the interest rates for auto loans have spiked like crazy now with this change in the Fed rates. And as a result, the delinquency on auto loan portfolios has spiked like crazy. Yeah. And so you know, yes, sure, theoretically, people will think about buying an electric car. But most people aren't thinking about that on average for five or six years from now, because that's the average of a 12 year cycle, right? Five, five years from now, wait till all these
SPEAKER_00: Peloton bikes need to get repossessed. Well, all these
SPEAKER_04: actually the the the wait for cars and the overpricing of cars has ended in the last two months. And there are multiple cars now on the market 2530 k for a 50 plus mile per gallon car. I think this actually one of the silver linings coming out of this is people might actually stop buying as many SUVs or you know, I think our average is in the low 20s right now in Europe's is in the high 40s. The problem is like, you know, every other
SPEAKER_00: four miles per gallon, part of the government acknowledges that you have to really ring fence and protect consumers, right? Like if you look at the securities laws, they're meant to protect them at all costs. And Jason, you've you know, you've been frustrated by some of the rules that haven't changed. And when they change, they change so slowly. But the reason is because sometimes that you want people to make good decisions. And if you, you know, give them a bunch of firepower, they're just going to spend it. And, you know, what we really did was we gave folks just a ton of money. And what did they do? They acted rationally, they spent it. Yeah, now we have to take it all back. And that's, that's, I don't think that's going to be as easy or as simple as people think.
SPEAKER_04: What percentage of the money supply do you think is in excess right now in the United States? Well, look, I told you this because I wrote this in my annual
SPEAKER_00: letter, but it's stunning that, you know, the reason the stock market went up, dollar for dollar was actually tied to the growth in the M2 money supply, the correlation was point nine two. So for every dollar that the Fed printed, the stock market went up by 92 cents. So you know, it stands to reason that if the Fed is going to take three to $5 trillion of value out, then we have to rerate the equity markets by three to $5 trillion at a minimum. And then you have to rerate and rebaseline for earnings. And so that's probably another 20 or 30.
SPEAKER_04: Yeah, let's talk about the endgame here. The rates go up, people stop buying homes, people go back to work. And energy prices come back down because people are not buying as much of it. Spending goes down and people rebalance and that takes a year. The job openings could also disappear. By the way. I mean,
SPEAKER_00: like they're going down 400,000 a month is where you know, you're assuming that all of a sudden, like demand is stable, but it's not necessarily stable and it demanded and in a demand contraction. Yes, people get fired, but then also new job openings change, right? There's fewer of them. They're, they're more specific in the way that people salaries go down, right? That's the next go down. That's the piece I'm waiting for that.
SPEAKER_04: To me, that would be I don't know if you guys have early warning signs, but the two early warning signs I have in my, you know, job of investing in early stage companies is when people Well, what's the average salary for an engineer? If that hasn't
SPEAKER_00: gone down by now, then it's a lagging indicator, right?
SPEAKER_05: It's gonna be to me capitulation salaries go down or people
SPEAKER_04: instead of laying people off sacks. They do salary cuts at a company that is really hard to do, right? That's, yeah, I know. I don't think they do. So Asian preferences and deals, right? I think the way the salaries come down is that
SPEAKER_05: startups freeze their hiring plans where they lay people off and all of a sudden the war for talent subsides easier to hire people. And so there's no need to keep raising up. Are you seeing that?
SPEAKER_05: Yeah, I think we're seeing the beginning of it. But I gotta tell you, I mean, I think that startups have not fully embraced or realized what's happening. I just got back from the co2 summit over the past couple of days. This was an event that was hosted by co2, you know, whose founders are Philippe and Thomas Lafont, very smart guys, very smart investors who've been public market sort of hedge fund investors for a long time, but also have a large venture fund to do growth stage investing. Some of the takeaways from that conference, some of the more vivid lines that stuck with me is that one of the speakers said that he said that when it comes to runway for startups, three to four years is the new two years. Because if you just have two years of runway, you're going to need to raise in a year. And in a year from now, we're gonna be in the middle of a recession. They're predicting they're forecasting that capital availability is going to decline about 75%. The amount of money that's venture money that's available to the ecosystem down by three quarters. So if you try to raise in that environment, either you're not gonna be able to or investors are gonna, you know, have all the leverage, you're not going to get terms that you like. So they were recommending three to four years of runway. So that is not what I think a lot of companies are just not even possible. The other thing that the other really vivid takeaway is that they did some polling of the startup founders who are in attendance, okay. And what the numbers basically showed is a is a contradiction. On the one hand, the founders sort of understood that intellectually that we're headed into a downturn, we're headed to a recession. And so the polling reflected that on the other hand, if you ask the founders how they're going to react to it, what are you going to do about it, you're going to cut headcount, or you're going to accelerate your business to beat competitors, everybody said, Oh, we're going to out accelerate our competitors. So everybody thought that they're the exception. In other words, everyone understood we're headed for this massive recession, it's gonna be really bad. But we're going to be the one company that doesn't need to cut, we're actually going to grow, we're going to accelerate during the downturn. So there was a real contradiction in how founders are interpreting this advice. And I have to tell you, when I talk to founders in our own portfolio, what I see is, you know, we've now done multiple meetings where we lay out what's happening in the economy, and they get it, they understand it. And when we do a board meeting, they're like, Okay, we're gonna go look at our plan. And we're going to reevaluate, and we're going to make major cuts, we're going to bring our burn multiple down to your the where it should be. But then, you know, when you check in with them a couple of months later, and you're like, Where are you on the plan haven't taken the medicine? It's more the medicine is like a 10% cut. And I'm like, guys, like 10% of performance review. Yeah, like, doing every year anyway.
SPEAKER_04: Yeah, you get rid of the bottom, like the C performers, you
SPEAKER_05: promote the A's and B's and you get rid of the C. So no one really wants to take the medicine yet. And, you know, it's a problem. I mean, Sequoia has this great chart called survival of the quickest that we should put up on the screen. And it shows two lines. One company is the one that takes the medicine right away, brings their burn down to where it should be. And then they're able to grow from there. And they really will accelerate the competitors. But then there's the company that basically delays and waits. And what happens is, by the time they finally get religion to make the cuts, it's too late, because even after they make the cuts, they don't have enough runway on the other side, burn the capital, they burn the capital, and then they're in a death
SPEAKER_05: spiral. So I think you know what companies need to think about is this is a 75% reduction. Imagine if you did $100 million round last year, right? If you go try to raise next year, the most recession, that $100 million round might look like a $25 million round. So imagine if you're burning an extra 25 to 50 million more than you should be according to your burn multiple, you're basically burning the next round, forget about the fact that the last round gave you all this cushion. Think about how much of the next round you're burning. And if you rework your thinking around that, it could lead to a change in behavior. Anecdotally, I'm seeing people come back from rounds where
SPEAKER_04: they're expecting 40 or $50 million in some cases, like with 250k in revenue, 500k in revenue, they were living in a 200 300 times revenue kind of world. It was just insane. And, you know, they're now coming back with $10 million caps, $15 million caps on their notes. I was offered $100 million at a 50% discount. And I said, call
SPEAKER_00: me when you get to 65. And that's the best company. That's
SPEAKER_05: literally the best company. That's the best and the best
SPEAKER_04: founders to bet on right of probably most private companies is that valuation. What is that valuation 40 at 50% off? I it's
SPEAKER_00: less of a judgment on. But it's just more and more of a observation that we're at the beginning of the beginning. And again, we're at the beginning of the beginning. Okay, for all of us that lived through 2000, this was four years of sheer hell, and a grind. Now we have $30 trillion that we have to work through the economy, a recession we have to overcome a war we need to end. And people all of a sudden assume that two or three rate hikes, and five or six months of headlines are enough. And on the margin, maybe they're right. But from my perspective, you know, it's less a judgment on but it's just an observation that we're at the beginning of something that just fundamentally has to take some amount of time to work its way through the system. And so I don't understand why anybody would give up their liquidity in this moment right now. Why would you Why would I Why would I give up $100 million of cash in my bank account? I would not do that right now.
SPEAKER_05: Does the cash the caps, the cash gives you so much optionality, it's based so much optionality. So you're going to
SPEAKER_05: be looking for distress. And this is the thing. So you have a huge amount of capital leaving the ecosystem, like we know tiger is basically out. I mean, they were the basically the default provider of growth stage capital over the last couple of years. So you have a lot of liquidity leaving the system. And then the liquidity that's in the system is waiting for distress. So you're right.
SPEAKER_02: There's a quarter I mean, like we talked about, there's a quarter trillion dollars of quote, unquote, dry powder. I mean, I know Chamath thinks that people are gonna give that money back, but there's never been as much. A lot of that's deployed.
SPEAKER_00: They're not going to give it back. Yeah, look at that that tiger fund tiger raised a new $12
SPEAKER_05: billion fund that was announced in March. And TechCrunch we covered it on the show a month ago. Yeah, TechCrunch on article say it was already deployed in six months. So I wasn't on that show. Oh, that was the one where Jake, I'll try to replace you with Brad Gerson. We should we should show weekly going forward instead of monthly
SPEAKER_03: might be better to keep up with these trends. Okay, okay. You made a good point that creates go back to this for a
SPEAKER_05: second. You said the founders were they're still anchored on this world of two to 300 times ARR valuations. Let me just tell you where the new valuation levels are. And this is obviously in flux, but I'm pretty sure the valuation levels are at 20 to 30 times ARR. That's for a company that's growing three x year over year, three x year over year. That's the best of the best. The reason 10 x next year's ARR. Yes,
SPEAKER_05: exactly. And the way that you get there is that if you look at like, the multiples for like the best public SaaS companies that are like, say, a 40% grower, like a snowflake, they're at eight x. Yeah. So you know, so basically, giving more credit
SPEAKER_04: for the growth rate. Yeah, right. But they really have to
SPEAKER_05: have that three x growth. So, you know, if you're a founder, think about the fact that when you try to go raise next year, assuming you're the best of the best, you'll get 20 to 30 times ARR. Now think about your spending, not last rounds money you're spending the next rounds money. If you could just reorient your thinking that way, you'd burn a lot less money. Yeah, it the the I literally had a deal, you know, in the 30 and
SPEAKER_04: 40 range and angel investors who never early stage angel investors seed funds that did not look at multiples are now asking me because when I send a deal memo to 10,000 people for my syndicate, people hit reply, people are hitting reply now and saying, I did the math on this. This is the multiple This is this, this is the burn multiple, they're actually doing the math. So we all of a sudden have discipline that I have not seen in this investor class in the 10 years I've been doing it. So that is to me, one of the great silver linings here, I think people are going to do a better job with their personal balance sheets, they're going to invest less in speculative stuff, and they're going to invest more in the actual builders who have discipline. So we're going to see this massive swing to discipline. And we're going to flush out all the people who don't take out market. Think about all those folks, like
SPEAKER_00: what's happened in the last six months, it's like, they've been long, unprofitable tech, it's got smoked by 75 to 85%. They've been long crypto that's gotten spoked by 65%. More. Yeah. I mean, if they weren't using a calculator, then they sure as hell should be using a calculator now to figure it out. I mean, people, well, you think about it, there's a whole group
SPEAKER_04: of investors who have only known the up market, there's a whole group of founders who only in the growth market, if you're under 40 years old, you don't understand what you're about to experience. And here we are, let's that's a perfect time to segue into crypto bitcoins prices down 71% from the all time high 69 k in November of 2021 bottomed out at 17,000 or so on June 18, the theorems price down 78%. And if you look at the craziness since the last all in episode, you know, this three AC three arrow capital, they're a crypto hedge fund that was letting people basically loan out their crypto. They are basically closing a $10 billion crypto hedge fund at its peak. They're insolvent. According to the reports, Tara Luna collapsed, the founders and employees at that company are not being allowed to leave South Korea doesn't mean they're guilty, but it's certainly not looking good. And there is a whole situation with Solana and a company built on top of it. So lend, which is not Solana, it's an application built on top of it. I talked to Vinny Lingam, our friend earlier this week about it. They had a whale who had tried to loan out 100 million and they had to freeze their account because they thought the downward pressure since there's not many buyers in crypto right now could collapse Solana. So thoughts on crypto writ large, what is this going to look like sacks? Over the next year, crash all over again. I mean, basically,
SPEAKER_05: you had an extremely promising technology. I mean, it is a promising technology. It is a future, you know, technology platform, but the price action got totally decoupled from the level of progress in the space. And people were not valuing these things based on real customers, real usage and real use cases. But it was became, you know, very speculative. And again, all this was fueled by the excess liquidity that was pumped into the system. So you know, we've said it before that crypto is like a liquidity sponge. It sucks up and there's a lot of excess liquidity, it sucks up that liquidity. But now that sponge is getting rung out. And, you know, part of the problem is with interest rates going up, you know, it's one thing when you have negative real interest rates, and you can't earn a return on your money, then you start to get you basic people start to push the envelope and invest in more and more speculative things. But as you can get a real return in, like, let's say there's like a real risk free rate. Now there's alternatives for all that cash. And then you got the problem of leverage as well, which I think over the last few weeks, the crypto space was heavily over levered, and a lot of people got margin called and wiped out.
SPEAKER_04: That's the contagion that's occurred and people were levered up 510 times their Bitcoin on these road till these token sale
SPEAKER_00: things get litigated. I mean, the amount God the amount of grift by so many of these venture firms in running these sketchy deals where they would put in some amount of money. This is my understanding of the scam because it was explained to me, you put in a little bit of equity at some crazy price. And then you get these tokens. And apparently, there's no like, you can just sell these tokens day one. And so what happens is like, you you price the equity, but it's meaningless, because really what you're getting is the right to get some amount of these tokens. The price is crazy, you sell it, and then you just kind of walk away. And apparently, you know, you do these deals where you just rinse and repeat this thing. Well, wait, wait till that gets exposed. I mean, that seems like a term, the firm that did this the most is Andreessen Horowitz,
SPEAKER_04: Chris Dixon, I think was considered like the best investor last year or the year before, because of all these token returns. I gotta wonder when they go now that this people are losing money, that's when people start suing. I mean, what is it going to look like? If they were? What do you think their marks look like last year versus right now? I mean, and all these coins, like, looking back in the review mirror and saying, hey, you bought all these coins, you flip some number of coins. I mean, to your point, you're not like, what is the litigation path and the the shadow economy that was created? What is there's an article, there's an article, and I think
SPEAKER_00: it was in Bloomberg, about folks trying to figure out how to get a lawsuit filed against finance. And the problem was that they didn't even know what entity to sue. It's not clear who owns what and you know, what owns the other and who the ultimate look through ownership structure is. And, and it doesn't mean that Binance is guilty of anything. But the article was just, you know, showing how there was a US investor who lost $1.2 million, who wanted to file a lawsuit, and they have every right to do that, couldn't even find the corporate entity to to actually file this lawsuit against. So if that's what's happening in a trillion dollar market, there's gonna be a lot of pain free. It's, it's a lot of oversight. That's, that's that free free bird. What is this going to do to regulation and crypto at this
SPEAKER_04: point, because crypto regulators now are going to or regulators are going to just be looking at this going, wow, look at all the pain and suffering and when a local da gets, you know, five or six of their people complaining they lost money in Tarah Luna, whatever it is, this is like the perfect opportunity for them to collect a pelt and get some crypto kid and, you know, hold them responsible and get some great headlines. I mean, what do you what do you think happens from this point forward in the crypto land?
SPEAKER_02: What you just said, okay,
SPEAKER_04: but what about regulation? I guess that's the next piece because all these entities have taken a very the SEC last July
SPEAKER_02: or August published this kind of initial opinion letter. But remember, there's also the CFTC there's a bunch of regulatory authorities in the United States that have a longer process than governments ex us that have had a much more kind of stringent point of view that there's a lot of casino like gambling going on with these things. And that's it. There's no functional utility. There's not a it's not. Is it a security if there's no underlying business? If it's not a security, then it's just a bet on something. If it's a bet on something, it's gambling. It's, you know, obvious that if it's a security, it has to be governed
SPEAKER_00: by the SEC. If it's a future commodity, it's the CFTC. And the problem is we need Congress to pass some legislative framework that puts the puck in one side of the of the arena of rink or the other. Yeah. And otherwise, otherwise all this gray is going
SPEAKER_00: to exist for a long time. And people, you know, if governments really hate it, when retail investors lose money, well, watch out because they just had $2 trillion. In the US, we have
SPEAKER_02: a lot of other regulators that can prosecute cases like the DFS in New York. This is the Department of Financial Services. They are a pretty litigious prosecutorial group. I mean, they go after scams and people preying on consumers and retail investors in a very aggressive way. Often outside of the purview of the SEC, they often coordinate with the DOJ or the SEC in evaluating enforcement decisions, but they will prosecute. And, and I think that there's a, you know, as you said, a lot of opportunity when people have been grifted out of their money for politically motivated and, you know, people that generally have kind of the right point of view that are in a position to prosecute to go after the offenders. So you're right, there will be there will be a lot of action on this over the next couple of years. And then Chamath is right, the way it gets resolved is a congressional act. But by the way, I'll just point out in the year 2000, Congress passed what was called the Commodity Futures Modernization Act. And that CFMA was really meant to kind of, quote, bring commodities and futures into the digital age. And they started working on it in 1996. It took four years to get it done. Within four years, it was already out of date. And a lot of what was going on with respect to how exchanges operate and the types of contracts are being created. It was already missed. So, you know, the problem we have here is that by legislating the state of the market today, without creating enough flexibility in how enforcement action can be pursued and how things can be interpreted in the future, you could end up in a similar situation where people just find and run around. And the whole thing repeats itself in the next few years, because guess what? People will always want to gamble. And grifters will always want to grift. And so there will always be a way to try and scam people out of their money. Yeah, and that's just hey, oh, hey, oh,
SPEAKER_01: are you always gonna want to J Cal?
SPEAKER_05: So you get what you're calling everybody download calling you
SPEAKER_01: can get the after
SPEAKER_04: before we pivot, if you want a perfect example of this, and this is just a lesson to founders out there. If you feel like you're in a gray area, you probably are. People were like, Oh, NFTs, you know, they're just trading cards, yada yada. And it's not a big deal that somebody at open sea decided to front run the market, or they just bought a trading card ahead of everybody else who cares? We know who cares. Turns out the
SPEAKER_04: Southern District of New York cares and they are pretty serious group of people. Former employee of NFT marketplace. OpenSea was charged in the first several digital asset insider trading scheme. So just because insider trading didn't exist as a concept for NFTs before. Congratulations doesn't exist in
SPEAKER_00: crypto. I mean, if they want to really find the honeypots here. I mean, it's the worst kept secret in crypto, how much insider trading is going on amongst the organizations that run the exchanges, and their side pockets that they use to manage liquidity. I mean, this is the it's the biggest thing that's been happening in crypto. If you're wondering why people
SPEAKER_04: were spending hundreds of thousands of dollars on a board ape or whatever, like, there might have been some shenanigans going on here. And I mean, no, but I, Jason, it's
SPEAKER_00: not it's not illegal. This is my understanding, though. It's not illegal to front run crypto trade. So most of these organizations that that run an exchange, right compete for order flow. And they're able to just look at that order flow. And then they front run the trade. And they're on the other side of that. So they're always making money. And so they were making 10s of billions of dollars. All these exchanges were. Yeah. And then I guess the question becomes sacks, you
SPEAKER_04: know, in terms of since you're an attorney, like how you interpret this stuff. If there may not be a law on the books about front running NFTs, but there are laws on the books about fraud and NFT and conspiracy to, you know, grift people out of their money. So this is all going to come crashing down and the discovery is going to the next the Southern District of New York actually subpoenaed any of these
SPEAKER_00: exchanges all hell would break loose. Oh, no, they are you can
SPEAKER_04: be sure that's in process. If they go after one NFT flipper. No, forget NFTs. I'm saying coins crypto, like a huge
SPEAKER_04: market, and they will they're turning over these cards because you know how they like to work. They like to flip their way up to the top person. But we're not talking about January 6 here. We're talking about gas in the Ukraine next. Oh, hey, ho. That's a little reference for you. Listen, now that we're now that we're now we're in 10 in and
SPEAKER_00: we've we've kind of like broken the ice and we're friends. I feel good. I feel like what you want to read you as a team again, you want to redo our intro so you're not being such a bitch. I don't care. I don't. Can we just move forward? I
SPEAKER_04: think we all understand. I thought I'd like to be recognized. You said you said that you were workshopping an
SPEAKER_00: intro. So do you want to do your intros at the end of this or not? I'm not doing the interest now I'm on strike on interest.
SPEAKER_04: No, I didn't. They were what it was. They wanted to be an extra
SPEAKER_05: point. No, I know. It's not about the point. That was a
SPEAKER_04: joke. I wanted to do intros. I didn't know coming into this, how sensitive people would be and then sax is like, I need to have in the contract of non disparaging NDA and I'm scared about the things I said so spike content needs to be took that out. You were the spy content guy. You're the most concerned. Oh, we have an agreement around that is a good rule.
SPEAKER_02: Non disparagement. He didn't want to have in there. I ended Oh, he didn't want to disparage you day and night. I mean, he's ready to be honest. I took it out because I thought you would
SPEAKER_05: be more sensitive about accusing others of disparaging you.
SPEAKER_04: This whole show is you disparaging me. You have an
SPEAKER_00: intro or not for I don't have interest prepared. No, I'll do
SPEAKER_04: interest next episode. I promise everybody I wanted to take the temperature of my besties. I don't know if people are sensitive right now. You want me to make a joke about Brad Gerson. We got real shit to talk about. Can we talk about Ukraine
SPEAKER_05: and war three. It's not all about our narcissistic nonsense
SPEAKER_04: as for David over teenage boys running amok. Go ahead. Something
SPEAKER_05: happened in the last week that I think is pretty disconcerting. I mean, just intellectually speaking, we all know that wars that go on and on have a tendency to escalate. And there was an example of how this could happen over the past week. Lithuania is now essentially stopping the flow of goods from the Russian mainland to another part of Russia called Kaliningrad, which is it's called an oblast. It's a little area, but it's outside the Russian mainland. It's basically between Poland and Lithuania. And so goods go by rail from the Russian mainland to Kaliningrad. And they've been stopping these goods because they say they're under EU sanction. The problem is, listen, when you think about a sanction, a sanction is me not buying goods from you because I don't like what you're doing. That's fair game. Everyone has a choice over who they want to buy from, but this is not that this is Lithuania deciding to stop goods going from Russia to Russia. And so the Russians say this is a blockade, I think with some justification and blockades are understood to be an act of war. So you've got Lithuania basically engaging in this act of escalation against Russia. We always thought it would be Poland, but it's right. Exactly.
SPEAKER_02: And remember, Lithuania is a member of NATO. So they have an
SPEAKER_05: Article Five guarantee. Now, think about the upside versus downside of this action. In terms of from the Western point of view, the upside is this has absolutely no impact on the outcome of the war. This is not going to help anyone in Ukraine to blockade Kaliningrad and prevent coal and building materials and steel from reaching Kaliningrad. That's not going to have any impact on the war. So there's zero upside to this from a military standpoint. But the downside is that you now have Lithuania and Russia getting into it. And if they get into a war, then we are instantly pulled in under Article Five or in middle war three. So this is the kind of dangerous escalatory act that has no upside only downside for us. And my view on it is that we have to tell we have to instruct, frankly, our treaty allies not to engage in these types of dangerous acts because there's a huge externality we can be pulled in. This is very dangerous. And I just wonder if the administration is on top of this. Did they give the green light to the Lithuanians to do this? Or were they caught by surprise? And what is the reaction to acts like this? You know, what I worry is that we're conducting foreign policy by virtue signaling, where we just say who are the good guys, and who are the bad guys. And you know, if the Russians are the bad guys, Lithuanians are the good guys. So therefore, this is okay. It's like playing cops and robbers on a global stage. I think we need to be asking the question, is this smart? Or is it dumb? Is this prudential? Or is it reckless? Is this in our interest? Or is it not in our interest? And, you know, I really got to wonder about who's mining the store on this day 120
SPEAKER_04: or 20. And it feels like this is just doesn't have an end in sight. Is there an end in sight here? What's the end? I mean,
SPEAKER_05: the want? Yeah, what are the two parties want at this point? I
SPEAKER_04: mean, the people in Russia are suffering during this. The people in the Ukraine are being murdered in Ukraine are being murdered. I mean, how does it end? The problem is that Biden
SPEAKER_00: engaged the United States in a proxy war without our real explicit discussion. Number one, and then number two is then we pulled and we pressured Europe to really draw a hard line, but then now are kind of working around it so that the countries that suffer the most are Europe. Now, I think you starting to see the tea leaves, though. Last week, there was a group of European leaders, I think it was Macron, Draghi. And I can't remember if it was the German Chancellor or not, and one other person who went to Ukraine. And if I had to bet, I think the message was kind of like, all right, listen, like, we need to find an organized detente here. Because there is, you know, according to Europe, a Lehman like situation in terms of economic contagion that could manifest over the next months. So I think that the endgame is probably some organized negotiated detente and ceasefire. I don't think anybody will be happy with it. But I think by and large, Russia is, and has one, you know, meaning they've won economically, they're selling oil, like it's not, you know, like, it's going out of style. It's just not selling it to Europe and to America. You know, they're selling it to China, they're selling it to Africa, they're selling India's fine with it,
SPEAKER_04: though. Well, also, trauma, they've won, they're winning on the
SPEAKER_05: battlefield, there was an article in the Washington Post, in the last week or so. And the Washington Post is basically the House organ of the Washington establishment and the blob, basically saying that hopes are dimming for Ukraine on the battlefield, the Russians have now won 20 to 25% of the country, they've won that Eastern that Donbass region, they've done it with the help of Russian separatists in Ukraine. And the amazing thing in this article was that they were saying that the Ukrainians were days away from running out of ammunition, despite the 40 billion that we just appropriated to that money go. And conversely, they're saying Russia is having just
SPEAKER_04: unbelievable casualties, and they're running out of weapons. And they are obviously out of Kiev now. And they're in the Donbass mostly. So I don't think anything the Russians the the so listen, I
SPEAKER_05: said on this pod, they said they're out of tanks, right? And then the troops
SPEAKER_04: already they've adjusted their strategy. And they've they're they're
SPEAKER_05: they're learning they're adapting to this new kind of warfare, this asymmetric warfare, where you can take out a tank with a drone, you know, but but look, you know, I remember on this pod three weeks into the war, everybody who was in favor of this proxy war was saying how great it was. And they were saying it was going to lead to a new birth of freedom in the West, that it was strengthening our alliances, you had Francis Fukuyama, predicting that we were going to win the war, and it would lead to this rebirth of freedom in the West, we should have known at that moment, everything that Fukuyama basically predicts the opposite always wrong. He's always always negative one correlation. Yeah. And remember, I said three weeks in that we were potentially, I think Putin made the mistake in the first three weeks of thinking this to be a cakewalk, but that we were making the mistake of thinking the next phase would be a cakewalk. And sure enough, here we are, Russia has now won the eastern part of the country, just to build on what you said, you know, we engage in economic
SPEAKER_00: sanctions. And I was the first one to say, hey, this could really work. And this could be a roadmap for how to do it. And it turned out, this is the roadmap for how not to do it. You can't on the front door, say here are these sanctions, and then walk around the back door, and basically open the door for them. These these sanctions were so porous as to be like Swiss cheese. We focused on virtue signaling acts like confiscating a plane or a boat or a house. But we didn't focus on the structural things we needed to actually, you know, make the mandate that we believe to be just to come to life. And so Russia has completely worked around it, their economy effectively, you know, is thriving. So what have we gained
SPEAKER_04: was a thriving? I mean, I don't know that thriving is how they would describe their economy right now. Yeah, I mentioned Jason, they're printing record rubles are five year high Jason,
SPEAKER_02: they're selling gas, they're selling phosphate, they're actually making a market and the prices have doubled and tripled in those commodities, because the flow has been restricted. So because the exact opposite of what we tried to do, and so
SPEAKER_00: by the way, I'll point I'll point out something that I
SPEAKER_02: pointed out in February, which was the biggest concern for me at the time, when we stopped allowing trading in the securities of Russian companies, we yanked away $400 billion of market cap that was held primarily by pension funds and retirement funds in the US and Europe and gave that value to Russia for free. We basically said, Here you go here, lolly securities were no longer allowed to trade in them. So guess what you guys can trade in them, you can have got they got all of their gas and energy and make nickel and mining for free. I think it's such a good point dollars for these companies. We ripped the stock out of retirement funds and we gave it to the Russians and said, Here you go, Putin, take all of these securities for free. Enjoy Oh, and by the way, because of our idiotic sanctions and the way we're employing them, the commodity prices are going to double and triple and all these companies are going to have record profits this year. Happy fucking birthday. The rubles up five x. It's not a five x but
SPEAKER_04: yeah, it's a great point because if Putin had retaliated against
SPEAKER_05: the West by nationalizing 400 billion of Western assets in Russia, everyone would have been up in arms. But we have to do that because we just gave him we gave the 400 billion totally I mean, how did this policy make sense? It's this policy of conducting you can Russian securities I'm I'm friggin BlackRock. I own a
SPEAKER_02: billion dollars of Russian securities, the US government just took it out of my portfolio that my clients own stakes in and gave it to the Russians for free. They're gone poof. Crazy.
SPEAKER_05: I think Listen, I think we've got like a two level problem on this Ukraine war. One is that our policy hasn't made sense. We should have been using diplomacy last year to avoid it. This we had all these false hopes around strengthening the West and the Western Alliance by allowing this war to happen. We then instead of trying to shut it down through a negotiated settlement we try to use as a proxy war to weaken Putin. Instead, it's done the opposite. So there's a whole series of policy failures here. But there's another deeper level to the failure, which is the personnel who are implementing these policies, the Washington establishment, the blob, who've been both parties, the sort of uni party who've been implementing these policies. There has been no dissent within the Washington establishment. The only guy who really spoke up in a decisive way was john Mirchimer, the professor of international relations from University of Chicago. And he was treated as a pariah by the blob in the Washington establishment. Everything he predicted has come true. He said years ago years ago, he predicted the US was leading Ukraine down the primrose path. And the result was that Ukraine was going to get wrecked. And so it has can I just read the first paragraph of this Bloomberg
SPEAKER_00: article that I just posted Russia's current account surplus more than tripled in the first four months of the year. The central bank said as prices surge for oil and gas imports and imports plunged under the weight of sanctions. Well, you know, if you're Putin, and you're looking at this, you're like, wow, maybe I should be under sanctions more often. Totally, you know, what country should I invade next, because this is sanctions, all that sanctions were, was a
SPEAKER_02: restriction on the free market. And when you restricted the free market, you basically created a spike in price, but the market his market could still operate with a narrower set of trading partners. He is selling energy to certain trading partners, he's selling phosphates, he's making money, they are exporting product and they're making more because certain people can't buy and they've got to go drive the price up elsewhere. So not not
SPEAKER_00: only did our sanctions package not work, and not only is the Treasury, Treasury, Treasury, Treasury, sorry, flailing around now trying to find even more backdoors, we actually opened a very dangerous precedent, which is now we allowed oil to settle in currencies that are not just the United States dollar. And now Russia and China are trading and settling in CNY. That's not good for us. This is not how you preserve the economy of the reserve currency of America. I don't understand
SPEAKER_04: the EU of cutting all of their energy and then becoming dependent on Russia, then creating a ban and sanctions, but then they made a carve out that oil delivered by pipeline and it yellin has been negotiating this carve out we
SPEAKER_00: have been enabling Russia to sell. We know the EU passed
SPEAKER_04: this legislation. Jason look look in the Wall Street Journal
SPEAKER_00: today the articles are reading the CNBC right now about it
SPEAKER_04: like the EU passes landmark sanctions package in May but they also allowed the stuff that's coming by pipeline for some reason to be a carve out if the EU wants to contain Putin from invading countries on their doorstep. They got to actually become energy independent. That's the beginning and end of this not popular. And this is the problem with populism. It's
SPEAKER_02: not popular. It's not popular to continue to have to have energy independent nuclear was not popular. And so the politicians the legislators responded in a short sighted way to the popular opinion of the day. And this is the challenge. Absolutely. Yeah, huge mistake on Germans part. They close three nuclear
SPEAKER_04: reactors. sentiment in Europe got highly affected by these
SPEAKER_05: environmental groups. Exactly. That's my point. But in the US, I think the people of the country want us to be energy independent. And it's elite opinion that bought into these foolish ideas that basically we should cancel energy independence, we should cancel the Keystone pipeline jobs on new drilling. America should be a net energy exporter 100% job number one is to be energy independent. And job number two
SPEAKER_04: is to move to renewable. Now I met there's another piece to
SPEAKER_05: this sequence. So when he came in, he said that he was going to
SPEAKER_05: make the Saudis a pariah on the world stage. Remember this? Now he's going hat in hand to them to try and get them to produce more or lower the price. So what was the point of this foreign policy? It was contradictory. He cancels their energy independence. He basically insults the salt the Saudis on which were even more dependent for oil. And then he basically refuses to engage in diplomacy on Ukraine. These policies are contradictory. Even if your goal was to basically isolate the Russians, you would then want to improve our relationship 100% Saudi, and you'd want to produce more of our own oil. 100% Yeah,
SPEAKER_04: you you overplayed his hand for sure. I mean, you can't not have heat in the winter in Germany and the Germans complex coming coming by the way that's coming you think things are bad right
SPEAKER_05: now wait until winter. And then that's only an increased Putin's leverage. And that's when you're gonna see a real fracture in the Western Alliance. This idea that Ukraine strengthen the Western Alliance, I think you will start to see the fractures could go this winter. National Germany's got to put those new slow march
SPEAKER_02: of nationalism will continue and this will be another catalyzing event for your nukes back on. And I also think that you're
SPEAKER_05: thinking about the Western Alliance, I think that you know countries like Germany and France are really going to question us leadership when they have basically a huge economic recession and they're wondering how they're going to heat their homes in the winter. But I think in the US is time to reevaluate some of the alliances that we've gotten ourselves in again, with this Lithuania situation. Do you really think that Lithuania would be basically poking that big Russian bear? If they didn't have the US standing behind them as a bodyguard? No way they would be much more circumspect and prudential. And the and the fact of the matter is that these Eastern European countries, the Baltic countries, and Poland, they have enmities, they have friction with Russia going back hundreds of years. And these guys basically, they have very provocative attitudes towards Russia, and our alliance with them can draw us in. So we have to really keep a close lid on that. We do not want them making moves on their own. Because we could get drawn into a world war year. Yeah. And by the way, to your point, Sacks, also, you
SPEAKER_02: know, there continues to be escalating issues with debt and concerns about debt repayment across the EU. And while Germany is, you know, looking to the US for support and worried about energy prices, they're going to end up having to foot the bill to support a bunch of these EU member nations that are facing debt crises and will continue to face significant debt crises over the years ahead. I mean, Greece made a payment recently, but Greece is debt to GDP still over 200%. Italy's at 155%. Portugal's at 134%. I mean, the numbers are pretty significant that has rates you saw today. You know, it was the spread on
SPEAKER_02: it. Italian debt has spiked over the last couple of weeks by Bridgewater basically, Germany's got another friggin crisis to fight now. And I think you're right, the the Western Alliance is more than just a military at this point. There's this, you know, do I really want to be the economic savior over and over again, of my smaller member states, and guess who's going to benefit in all of this China, like, they're gonna look at this
SPEAKER_02: fracturing, and they're gonna be like, great, by the way, just speaking of speaking of China for a second, you know, we talk
SPEAKER_00: and we bloviate about our desire for energy independence. And, you know, we exclude Tesla from, you know, any sort of major meaningful legislation, we trumpet, you know, these companies that are just completely woefully behind in building energy independence. We think about like a gas tax holiday, but as like, kind of like a, you know, something that still needs an act of Congress to pass, even though Congress has said they have absolutely no intention of passing it. Meanwhile, we keep losing our footing to China just today. CATL, which is one of the largest battery manufacturers announced a pretty meaningful improvement in their, you know, 3.0 battery design, these guys are now building batteries that can go 1000 kilometers in both of the major, you know, compositions that really matter, NMC and LFP. And I just look at these things. And I'm like, wow, we cannot actually get capacity funded to build domestic battery capability. Because we're too busy, kind of basically virtue signaling on things that don't matter. And in return, nothing happens, China continues to lap us we it's really it's a really bad state of affairs. We are, we are in a very odd period in terms of government effectiveness.
SPEAKER_05: If you think about China's foreign policy, how have they lost out by not being part of all these conflicts? How have they lost out?
SPEAKER_00: They're buying prices of oil that were nine months ago to 18 months ago. And so they're not only has Russia's output price been capped, but that's okay. China's input cost has been capped. And so they don't suffer the same rate of inflation that the rest of us do. So to your point, David, you know, our quote unquote, you know, exclusionary sanctions were ineffective, they were porous, and we allowed our largest competitive frenemy, if you will, to basically be able to, you know, drive their entire economy at 30 to 40% of the a discount to what we have to pay to do the same.
SPEAKER_05: When when China goes abroad, they go abroad in search of economic resources and economic development. That's the point of Belt and Road. They don't insert themselves in these middle of these conflicts that they don't understand. They were never involved in the Middle East. They were never involved in like policing, you know, all these different countries that has cost us a fortune. And now the bill is finally coming to you in the form of this inflation, we are going to have some form or another of austerity in this country. And it's partly because of this highly militarized foreign policy in which we have sent ourselves abroad to be the world's policeman, we can no longer afford to do that.
SPEAKER_00: Can I make a generalization such you react and tell me if this is true or not. If you have a country that has existed in some way, shape or form, you know, the the borders could be blurry, but roughly for hundreds and hundreds of years, and in some cases, thousands of years, where internally, the population of that country views themselves, you know, in a great way, they don't feel like their country is a meaningless nothing country. Any attempt to economically humiliate such a country tends to have failed in the past and will continue to fail. And there tends to be other countries who view it as one of these things where well, if them then why not us and then they sort of, you know, in a in a backhanded way support everybody. So we end up in this odd situation where we are picking fights we cannot win. Totally. And and the consequences for us are economically really damaging. Right. And the consequences for
SPEAKER_00: everybody else to stay on the sidelines is like economic prosperity. That doesn't make any sense. Right. You're afraid that Russia is going to roll over more
SPEAKER_04: countries and that you have this existential risk that this dictator is going to attack more countries. So okay, living in Eastern Europe, you might have a different view of it. Yeah. So very much accept and want some help from, you know, NATO and other folks who you're not getting that help. That's the
SPEAKER_05:
SPEAKER_00: problem with that. That's the sad part about I mean, if it's poorly executed, it's not working at this point in time.
SPEAKER_04: Yeah, I mean, it's well, Jake, if you look at the EU, okay, as an entity, they
SPEAKER_05: have almost the same GDP and output as the US. And if you compare them to Russia, their economy, their their GDP is 10 times greater than Russia, they are rich, they can afford to allocate a few percent of their GDP of their government budget to defense, they should defend themselves, they really should. And so this idea that we have to go over to Europe, and bankrupt ourselves to defend rich Europeans, they should be picking up 100% of the cost of that 100%. I don't know why we're paying for rich Europeans, when our country is massively in debt. Why aren't we passing the bill to them for that?
SPEAKER_04: Yeah, we're absolutely. Yeah. Do we have to spend that much money to do that? No. And then obviously, the wars in the Middle East were me pick up on this policeman idea, what kind of policing
SPEAKER_05: works the best community policing, when the policemen are from the neighborhood, and they know all the players, they understand the subtlety of the boots on the ground area. Exactly. The US has made itself the world's policeman, we parachute into areas that we don't understand we did in the Middle East. It was very ineffective. What we should do is let the regions deal with the problems themselves first. And we should be the policeman of last resort, not first resort. Let the Europeans take the lead, they should be paying for their own defense. We could still have NATO, but they should be paying for it. They should be the first responders. And if they can't handle it, then we can back them up. But this idea that we need to be on the bleeding edge of all these conflicts, banker bankrupting ourselves. It's a foolish idea. Energy independence is a solution to all of this. We
SPEAKER_04: wouldn't have to deal with these despots if we didn't, if we had energy independence. So we're getting we're getting circles run around us by China, Jason on the innovations front.
SPEAKER_04: circles run around by China on the innovation front. Example. I
SPEAKER_00: just told you the CTL battery that they just announced today. Yeah, it's incredible. Yeah, I mean, battery technologies, we
SPEAKER_04: have a lot going on there as well. I mean, it seems like battery technology issue has been solved for EVs for some time now. I mean, if an EV can go 200 miles, and we can build them at scale, which seems like we're on the precipice of we're going to be good. You don't need more than 200 miles on average. It's just a luxury every mile after that, given how fast superchargers are working. So just practically speaking 95% of Americans will do just fine with a electric car that does 200 mile range, and the other 5% can do a hybrid or can still burn oil, we just need to get more, we have to be more serious about the miles per gallon right now we are just absolutely abhorrent in our use of fuel in this country. It's just crazy that we have low 20 miles per gallon as our average when other countries are 30 4050 you know, or 30 and 40. Because we like our you know, seven seat suburban, which is ridiculous because 99 out of
SPEAKER_04: 100 missions in that suburban are done with one or two people in it. The fact that our Ubers, you know, in our lives or whatever are coming with giant suburbans with one person in it is just I have a I have a Fiat E 500 here like a little mini
SPEAKER_00: Oh, it's incredible. Yeah, it's incredible. I mean, yeah, this is why I mean, this is the path if we can just if you just think
SPEAKER_04: about it, if we were to double our miles per gallon, there are cars right now that are doing 5055 miles per gallon. We really have to be more punitive in terms of tax. Give me the forecast. Jake out what's going to happen with Biden?
SPEAKER_00: Oh, okay. So I guess give me your give me your scorecard.
SPEAKER_04: Give me your grade. How's he doing? For Biden? Oh, it's
SPEAKER_00: disastrous. I mean, I think the only thing more disastrous than
SPEAKER_04: Biden would be having Trump do a second, third and fourth term. 100% so but so play it out played up. Well, I don't think he's gonna run again. I think they're gonna have you don't think Biden's gonna run again? I think they're I think between then and now if the economy keeps going the way it's going, he would be a lame duck and impossible. And I think he might say, you know what, I'm gonna retire to spend time with my kids and my golden years. And they might convince him that him running again is a really bad idea. And Kamala Harris is a disaster as well. She hasn't proven anything in the past two years. Yeah, who would the dems put up? J. Cal J. Cal as a
SPEAKER_02: Democrat, who would you want to have put up? I think it's gonna be DeSantis versus Newsome in 24. I Yeah, I
SPEAKER_00: put sorry, explain that. Okay, so but which part of it do summer
SPEAKER_05: DeSantis? Okay, so Newsome has a very weak challenger in California. It's a
SPEAKER_02: plus 30. But hold on. So he's gonna handily win reelection in
SPEAKER_05: California. He's already now he's not even campaigning for reelection in California. He's he's already campaigning to be president. The thing that he did that was politically smart and I say this not as a fan of Newsome, but this is someone who's analyzing the politics of it, is that he went on true social, and he basically counter your Republican lies. And so he is positioning himself as a fighter for progressive values. And the reason why that's gonna be flattering to the Democratic base is that when the Democrats lose big in November, they're gonna have there's going to be a reckoning. And they're gonna have to understand why they lost. And the fact of the matter is that ideologues never blamed themselves or their agenda, they are going to say that it was not communicated well, and that we needed a basically a better conversation. And that's why they're going to say that it was not communicated well, and that we needed a basically a better communicator who was a fighter. And so they will basically pin the blame even more on Biden. And so Newsome is positioning himself as that sort of Democratic progressive fighter. If you go back, remember when Michael Avenatti like they were, you know, progressive are talking about him as a presidential candidate for a brief minute, they swooned over him. Why are you jail? Yes, he's in jail right now. It's a total grifter scumbag, total grifter scumbag. And then on there every day because he was a fighter.
SPEAKER_03:
SPEAKER_00: Jake has his name in the funniest way possible. I remember a poker game when like Hellmuth said he had no numbers on the J. Cal. What's this guy's name? Say his name. Michael
SPEAKER_04: Avenatti. I don't know how to pronounce it. I never met the you sucks.
SPEAKER_05: But a boom. I'm Michael Avenatti.
SPEAKER_04: Is a disaster. I it's an interesting concept. Yeah.
SPEAKER_02: That's can you giving the Dems will give Newsome the nod. Can he actually win in some of these? These middle states?
SPEAKER_05: You gotta remember this is true for both parties that the general electorate does not pick the candidates, the parties pick the candidates and the base of the party picks the winner.
SPEAKER_02: They want someone that can win Pennsylvania, they want someone that can win Florida. But yes and no. So if you remember, when when when Bill
SPEAKER_05: Clinton pulled the Democratic Party back to the center in 1992, and the whole Democratic Leadership Council, and they really remade the Democratic Party at that time as a more centrist party, they had just come off three disastrous presidential elections. So Reagan in 80 and 84, and then Herbert Walker Bush in in 88. So, you know, it took three big losses for them to rethink, I don't think progressives are going to rethink their agenda, you know, based on one midterm loss, even though I think it's going to be gargantuan later this year. So I think they need more losses to really reevaluate their agenda. I mean, look, the activists in the party are deeply invested in their agenda, they're just not going to give it up, they're going to blame it on a communication problem, they're going to say, let's find a new messenger. And Newsom will seem like a younger fresh face. So I think that's
SPEAKER_05: how it could happen. And if you look at the Democratic bench, you can also say can he also who else they got to see?
SPEAKER_04: Usually, I'll say, Warren,
SPEAKER_04: Buttigieg and AOC, if they want to go full, like crazy left would be and then if they want to go more moderate, that's not
SPEAKER_02: that doesn't win an election. You got to find someone that can win the election. Governor of a big state, which is as
SPEAKER_05: a million dollar, hundred billion dollar surplus looks
SPEAKER_04: good for him. So yeah, I mean, Gavin, it's a scenario. It's a scenario. But look, I think the
SPEAKER_05: question is, will Republicans field Trump after January 6? And
SPEAKER_04: I, I think the answer is no. And it's too shameful, right to do
SPEAKER_05: that. I think that, look, I think Trump's problem is you won't stop talking about the last election. And I think elections are always about the future. And the Republicans ultimately going to nominate a candidate who represents the future. And I think Republicans want him as going out there
SPEAKER_04: trying to steal an election again. No, look, if you look at straw polls, okay, if you look at straw polling, DeSantis now
SPEAKER_05: is beating Trump in straw polls in the Republican Party. Jonathan Chape, who is a pretty smart liberal, definitely not a Republican, but he's sometimes has very smart observations. Remember the whole zero COVID thing. Anyway, he has an article just today, talking about how DeSantis has now eclipsed Trump within the Republican base. And if you look at the numbers within if you if you poll Fox News viewers, and likely Republican primary voters, DeSantis is up a couple of points in the straw polls, but among Fox News viewers, he's up like 10 to 14 points. So in other words, the Republican base, the activists who are the influencers, they already have moved from Trump to DeSantis. No, they love him. Yeah, yeah. So I
SPEAKER_04: think the feel the fear that DeSantis runs, he's gonna run,
SPEAKER_00: he's gonna win a landslide. This is why I say it's DeSantis
SPEAKER_05: versus Newsome, I think, but look, it could be DeSantis versus Biden, it could even be Trump versus Newsome. I think the configurations that win for the Republicans, I think if Biden's on the ticket, I think any Republican wins. I think if it's DeSantis versus Newsome, I think DeSantis wins, I think, however, and this is sort of the nightmare scenario, I think it's something like a Newsome versus Trump. I think Republicans could lose that just because, you know, the people are they people people are thinking about the future they they they want that they don't be reminded of the past. And so I think there's no more also the past is insane and deranged.
SPEAKER_04: You can't you can't have trying to see the year olds running for
SPEAKER_00: president. No, that would be great. Yes. Yeah. I think
SPEAKER_04: nothing against 75 years old would be good for me. All right.
SPEAKER_02: This has been a this has been a very long episode. Well, yeah,
SPEAKER_04: well, considering how much Saks is going to spike, we'll get it back down to 45 minutes. All right, everybody's amazing. I love you guys. It's really nice to be anywhere. Everybody relax. We're back. I'm not going anywhere. You're gonna need a
SPEAKER_04: wrecking ball to take me out of here. You're gonna get rid of your J. Cal. J. Cal, we don't want to get rid of you. But now
SPEAKER_00: all we need is three out of four votes. So vote me. We never wanted to get rid of you, Jake out. But we
SPEAKER_05: knew we had to do certain things to get you to act right. Oh my
SPEAKER_00: gosh. Well, here. Jake out brought a knife to a gunfight. He's going to negotiate. You guys don't want to give me two
SPEAKER_04: points. That's Jake. Jake out came to negotiate the Treaty of
SPEAKER_00: Westphalia and he left with half a Snickers bar. It's fine. It's
SPEAKER_04: fine. You guys don't get no more interest for you. That's actually all in summit. No more in the whole backyard payment. By the way, I'm about to get on a call with our
SPEAKER_02: lawyers. We're gonna get the account set up. Get all the money transferred from you.
SPEAKER_04: Good luck with that money. That's long gone. I put that on
SPEAKER_03: the Warriors tripled it for good. Alright, everybody. We'll
SPEAKER_04: see you next time on the all love you boys.
SPEAKER_05: Let your winners ride. Rain Man David Sasse. We open source it to the fans and they've just gone crazy with it. Love you. I'm the queen of Kenoah. Let your winners ride. Besties are gone. That is my dog taking a nice near driveway. Oh man. My haberdasher will meet me at a place. We should all just get together. We should all just get together. It's like this like sexual tension, but they just need to release. We should all just get a room and just have one big huge because they're all just useless. It's like this like sexual tension, but they just need to release. Let your beat be wet. We need to get merch. Besties are back. I'm going all in. I'm going all in.
