SPEAKER_01: You're seeing now the fresh summer collection of Laura Piana. This, Jason, is the thin summer gilet. Okay, beautiful cashmere. It's called like the King's cashmere or something. And then this is called a lovely yellow boating sweater. Anyways, I took Sax to my tailor and I took him to Laura Piana. And then at some point I just fucking lost him and then I haven't seen him since. So.
SPEAKER_03: You took him to your tailor and to Laura Piana. And to Laura Piana, yeah. Wow, great that the show remains accessible to the every man and woman. There's Sax.
SPEAKER_03: Yay! Yay! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Fuck yeah! Oh, look at you two, it's like twins! Oh my God, it's so perfect!
SPEAKER_02: Italy, he was the Sri Lankan dude. Wow, my Lord. Oh my God. Oh my God. Did you guys have an announcement today?
SPEAKER_03: Third announcement. Good to see everybody's focused on what matters. Okay everybody, welcome to All In episode 86, End of the World, except for these two douchebags.
SPEAKER_01: We thought it'd be really funny to find the exact same outfit at Laura Piana.
SPEAKER_00: I feel fully styled.
SPEAKER_01: What a great look.
SPEAKER_03: You guys look so good. It's like dumb and dumber in Italy. These are the things. You're going all in. Let your winner slide. Rain Man David Sattler.
SPEAKER_01: You're going all in. And it's said we open source it to the fans and they've just gone crazy with it. Love you guys. I'm the queen of quinoa. I'm going all in.
SPEAKER_03: Hey everybody, welcome to episode 86 of the All In podcast. We're not dead yet, still publishing. With us from Italy, the Rain Man and the Dictator in matching outfits. Gentlemen, how is Italy?
SPEAKER_01: It's fantastic.
SPEAKER_03: And also with us, the Sultan of Science himself, David Friedberg from an undisclosed conference somewhere, which we can't talk about. How you doing, buddy? I'm off the record this week. Off the record this week and a little hungover it seems. Yeah, ooh. You need a cup of coffee? You drinking a little scotch last night? Late night.
SPEAKER_02: A little scotch? I went scotch and beer and it was a late night.
SPEAKER_03: All right, everybody, we got a lot of news to get through. Let's just parse through some of the data because data has been coming in and the minutes from the June Fed are out. The key quote, significant risks that elevated inflation could become entrenched if the public began to question the resolve of the Fed. So they went from transient to now fearing entrenched. Jobs have slipped a little bit. This is something we've been talking about. But just to give some context here, we're still a historic number of job openings. We peaked in March, 11.9 million. In May, we dropped down to 11.3 and 11 million for six straight months. It's just extraordinary. If you look at this Fred chart, it's just astounding to think that this many jobs are available two for one in the United States. There are two jobs available for every one person who needs a job. And they're just absolutely stunning if you look at the- What do you think this is a precursor to? Dropping down dramatically in the white collar sector is what the data is showing.
SPEAKER_01: Or major wage inflation. I mean, that work clearly has to be done.
SPEAKER_01: And if you lay people off, the number of unemployed will go up. But at the end of the day, the thing that we know here is we have a structural unemployment problem, as you said, two openings for every person, which means those openings aren't paying enough for people to leave the sidelines and get on the field.
SPEAKER_00: Yeah, or- Or they've been incentivized to be on the sidelines. Exactly. You can wrap it up. Because these job openings might actually be indicative of the opposite of what the Fed is telling us. The Fed wants us to believe that they can just keep jacking up rates and then we're not gonna go into recession because we have all these open job wrecks. But what if we should see the labor market as really two separate markets? They're sort of white collar professionals. And you're seeing all of these tech companies that we're involved in slam on the brakes really quickly right now. So we're gonna see greater unemployment there. And then on the blue collar side, you have this issue of record low labor participation. Yeah. And so you still have inflation there because they can't fill all the jobs because there's all these like warped incentives around that.
SPEAKER_03: There are to just put a number on it, Sacks, we're 10% off the peak in terms of participation. And if those folks would participate, it would really fill a lot of these jobs.
SPEAKER_00: That would increase the production of goods and services that might take some of the pressure off inflation.
SPEAKER_03: And it would also increase monetary velocity, right, Sacks? People would spend the money they make, which then get us out of this mess possibly.
SPEAKER_00: I think part of the problem with the Fed's approach here is that it's assuming that if they just keep jacking up rates that will reduce demand and that will stop or slow down inflation. And there's some truth to that. However, I don't think this inflation is purely a problem of excess demand. I think there's also a supply problem, meaning that not enough goods and services are being produced. And the commodities, the inputs that we need to the production of goods and services, those prices are increased, they've been inflated. And that started well before the Ukraine war, but I think the Ukraine war has now exacerbated this problem with respect to energy and food.
SPEAKER_03: If you had seven minutes for your over under for Sacks to mention Ukraine, you took the under, you won. Well, I'm just mentioning it
SPEAKER_00: as a exacerbator of the situation.
SPEAKER_03: I think that's actually really good framing that it's an exacerbator. Yeah, I didn't start with this. Yeah, so if you look at the quits, let me just give you the quits number because this is really interesting. These are people who are actually quitting jobs. It's still at a record high. So this concept of the great resignation, we're still having over 4 million people quit their jobs every month. Free pandemic quits averaged under 3 million a month. And if you look at that chart, it's just staggering to think that in an economy that's going down, people are still quitting. Now, what is that indicative of? It's indicative of people believing that they can get another job. You don't quit your job if you don't think you can get another one, or you have some savings available, you want to Yolo, maybe, you know, spend a little free time going on vacation. Or there's a new economy emerging, right?
SPEAKER_02: I mean, one of the cases to be made is that the pandemic and the stimulus that followed created a staggering short shift in the types of jobs and the types of businesses that people use to make money. And, you know, a lot of people were able to shift to work from home. And when you shift to work from home, you have more flexibility and freedom to choose other jobs that you can now do from home. And people don't want to work in restaurants, they don't want to work in fast food. And if they can find another job, a gig-like or services-like or on-demand type job where they can have more freedom and flexibility and more earnings in their life, they'll make that choice. And this happens so quickly because of the shutdown, the lockdowns, and then the stimulus, the trillion dollars or $2 trillion that poured in, it created all these new opportunities and all these new incentives for new types of work. And the fact is the old economy, the old businesses, all the fast food restaurants and the coffee shops, they're sitting with half employment and they can't fill the jobs because that's, you know, that used to be a job that there was demand for and that's not the case. And I think that's what, by the way, I don't know if that necessarily reverts in the near term because I do think that there's been a substantial, almost permanent change in some of these sectors of the economy, not necessarily all, some will revert, but it leaves big gaps in parts of the economy and maybe fast food restaurants are not gonna be as cheap as they used to be because in order to get people to work there, you gotta charge more. And there's other parts of the economy, like services and selling stuff on Etsy and whatnot that are working for people.
SPEAKER_03: Let me just put a number on that and then hand it off to you, Sax, to just put a number on that. The jobs that fell the most, white collar, off 325,000 and manufacturing, 208,000, the jobs that are increasing the most, hospitality and retail. So exactly to your point, people feel more options, this whole thing was accelerated during the pandemic, Sax.
SPEAKER_00: Well, the question I wanted to ask, Freeberg, is do you actually think that these new options of work from home and remote work have actually made the economy more productive? This seems to me that obviously employees, if you give them the freedom over the decision of their trade-off between work and leisure and- No, it's made the economy more expensive.
SPEAKER_01: How so? If you take a big step back to the day before the lockdowns started, we had a normal functioning and economy that was growing by, call it, 2% a year. And the minute that we enforced these lockdowns, I actually think what we did was we started a supply-side recession. It's what Sax said earlier. So what does that mean? Let's just say you're a factory and you make wheels, okay? Just make something really simple. You were growing at 2% a year. Everything seemed hunky-dory. You had employees. It was fine. You used to sell your products, make 10, 15% profits. Everything was fine. And then the day after, the government said, you need to shut your factory down because we can't have people spending too much time close together because we need to get a handle on this pandemic. Okay, so you shut it down. And then for the next 12 or 18 months, what happens? That stuff sits idle. These people that used to work for you get two and a half trillion dollars put into their bank accounts. They spend their time doing other things. And then all of a sudden people say, okay, it's time to start the factory up again. People wanna buy wheels. And now all of a sudden you find that because everything all around the world was shut down, there's no rubber to make the wheels. There's no steel to make the axle. There's no people to put them all together. And so what happens? Well, prices go up because again, you gave everybody else two and a half trillion dollars. So they're like, well, I used to pay a dollar for your wheel. I'm willing to pay you $2 now. Just make the wheel, give it to me before you give it to somebody else. So that is like the classic definition of a supply side recession. There's another piece of that too, Chima. And sorry, just to finish the point. And the Fed basically confirmed this in the minutes that they just released today. Jason, can you just read the quote that you had in the notes?
SPEAKER_03: Well, the one up top, significant risks that elevate inflation should become entrenched if the public begins to question their resolve.
SPEAKER_01: I think the point is that we were kind of in a supply side recession and now by raising rates to some crazy amount, the end of which we're still not sure about may actually then trigger the demand destruction to have a demand side recession. And so I don't know that we've lived in a modern point in time where both things have been true, right? There's been a principle of macroeconomics that everybody's always kind of debating, is this a supply side issue? Is it a demand side issue? We know that in COVID it was a supply side issue. We took all the supply out of the market. And now we're trying to figure out when we exhaust all of the money we've given people and we destroy demand and take the incentives for demand to go away, right? Consumer confidence is now starting to turn. What happens then? Well, we're gonna figure that out in the next six or nine months. But the thing is you have both that are true. It's not as if the supply side of the economy has been fixed. It's not as if everybody is running at 100% capacity. It's not as if all the supply chain issues have been worked out. So I don't know, I just think it's a very complicated situation.
SPEAKER_03: Yeah, it's a perfect pivot. And just to build on that, Chamath, the downstream effects, we always talk about the second order impact. Because people are not going to work anymore, downtown areas are dying. So office space, commercial real estate, Sax, you're in that so you can comment on what's happening. And then restaurants and commuting and all the stuff that was happening downtown San Francisco's downtown, let Mayor London Breed had a press conference and she's been tweeting, hey, we have to revitalize, you know, Soma in San Francisco. That's never gonna happen. That's off the table.
SPEAKER_02: It's like Biden tweeting, we got to drop gas prices. Yeah, I mean, we have complete incompetence, but we'll get to politics, Chamath.
SPEAKER_03: Sax, don't worry. We got plenty of politics for you. I'm just teeing it up. So there's your flop, gentlemen. But on San Francisco real estate,
SPEAKER_00: I read an amazing statistic today from like one of the major brokers. They said that by the end of the year, they're expecting 30 million square feet of office vacancy. 30 million. In San Francisco by the end of the year. San Francisco is tiny by the way.
SPEAKER_00: Because of sub leases and then tenants rolling off. So the first thing I did is I tried to Google what's the total square footage in San Francisco. And I think it's about 75 million of office space. Oh my, wow. So you're talking about 40% vacancy by the end of the year. I've never heard of such a thing, 40%.
SPEAKER_02: Let's be clear, San Francisco's fairly unique and a bit of an outlier in the circumstance because so much of it was tech heavy and so much of it went remote. And the city collapsed. And it all went remote. And it all got crime. But generally that's not the case. I mean, New York is apparently still pretty stable, right? And Miami's obviously doing well. LA often. But here's the piece that people
SPEAKER_00: aren't really thinking about. Which is the only reason it's stable is because tenants sign up for long term leases. And this is why it turns out that WeWork was a pretty bad business model is because if all your leases are month to month and you hit a recession, your revenue gets whammied. This is why landlords like long term leases with credit worthy tenants, they sign seven years, 10 years and so on. And letters of credit, right? Right. Putting your debt. So what that means though is that as these tenants start to roll their leases roll over the next few years, they don't need as much space because they've either gone remote or they're like hybrid now. And so they're thinking of their office less as a headquarters, whichever one needs to go to and more as like a coworking space their employees occasionally go to. So they're all reducing their footprints. This is why San Francisco keeps increasing its vacancy is that as more and more of these leases roll, there's just no need, they don't need as much space. So they're also downsizing. Now here's the problem. Here's the problem is that these buildings have debt on them, right? And that debt has what's called a debt service coverage ratio, DSCR. And basically you as a building owner become in default on your debt covenants. If your revenue from the building drops below a certain number, and here's the problem, all these new leases that get signed to the extent there are any, they're gonna be at a fraction of what the old leases were because this vacancy is gonna create a massively low market clearing price.
SPEAKER_03: Am I right to understand that they're not allowed to sign those leases because they're under it? So can the landlord take it as better than nothing or are they not allowed to take it?
SPEAKER_00: It's not that, it's just that the market clearing price is gonna be so much lower than their old leases that when they then look at the revenue from the building, and by the way, that building's gonna have a lot of vacancy on it now, they're just not gonna be able to hit their debt service coverage ratio. So they will be in default. What that means is I don't understand how in a place like downtown San Francisco, half the buildings don't end up getting owned by the banks. Well, the banks don't wanna own all these buildings, so there's gonna be a fire sale. But I don't know who the buyers are gonna be.
SPEAKER_03: I mean, they just have to convert it, right? I mean, that's the only thing, they gotta convert these to residential because we have a housing crisis still. That's the only way out. But that takes years and years.
SPEAKER_00: That takes years and years, and that's a repositioning play. First, you need the cooperation of the city government, which isn't gonna happen. Which is never gonna happen, yeah. Then you need developers to come in and have the capital to basically make all those changes. Again, it takes a long time, but think about the systemic risk from that, right? If you know that a huge chunk of the real estate in the commercial real estate in downtown San Francisco, which used to be blue chip, I mean, the most blue chip, right? Yes. Who are those financial institutions who own those assets because they are now toxic assets, and they will be revealed to be toxic assets as soon as the leases roll. Well, and then there are debt funds and banks as well, right? And so what are the cascading effects when those shoes start to drop?
SPEAKER_03: Yeah, okay. And so just to put a finer point also on the jobs, and that was our flop, net international migration has just plummeted. We're well under a million folks coming into the country. So the obvious solution to our employment issues is to recruit people from other countries, but let's go to the turn card. Yeah, there it is. We have just stopped letting people, Trump just absolutely closed the borders. As you can see, 2016, Biden also is in favor of closing the borders. It's also sentiment.
SPEAKER_01: It's like, you know, America is not the shining light on the hill it used to be. Not in the same way.
SPEAKER_03: We'd easily have three or four million people coming into the country if we wanted to, yeah.
SPEAKER_00: But we have three million people have come in just under Biden and illegal migration. Does that chart count illegal migration? No, this is legal.
SPEAKER_03: This is legal. Okay, well, so just make sure you count that
SPEAKER_00: because we've basically had a open border policy since Biden took over. If we didn't allow those workers in, what would happen?
SPEAKER_03: Okay, let's go to the turn card. Consumer confidence, conference boards, consumer confidence index in June fell to 98.7 from 103.2 in May. Expectation was 100. So it's under the expectation. The expectation index. So when you look at consumer confidence, there's two. Your confidence in the present situation, that's the blue on the chart. And then there's your expectations of the future. And what you see is a huge divergence there starting to happen. People are starting to look towards the future as negative, but they feel pretty good about today. And so, gentlemen, what do you think of this chart?
SPEAKER_01: It seems to me like this is sort of akin to what Sax was relaying about that founder at the COTU conference, which is like, he thinks everybody else is gonna roll up their sleeves and buckle down, but he has no intention of doing it. I think people are roughly the same way. And I think their behavior is, well, if things are gonna get hard, I'll deal with it in the future. But right now I have money in my pocket. And if you look at airlines and how many people are trying to travel, if you just look at the cost of a hotel room, if you look at what's happening this summer, it does not seem like people are slowing down or tapping the brakes in any way. Yeah.
SPEAKER_02: This is where I get concerned about credit because it's not coming from wage gains. The increased cost is there, the increased income is not. And we're seeing continued month after month increases in consumer credit balances. And that I think, this was the point I made a few episodes ago was I don't think people are gonna slow down how they're living and how they're spending. It's exactly what they did to Shelley. There's an inertia. There's a life cycle inertia.
SPEAKER_00: I don't know about that.
SPEAKER_01: I just think after two years of a lockdown, I do think that people are anxious to reestablish some amount of normalcy. And this is really the first summer where everybody writ large can be out and do the things that they were planning on doing. Last year was the head fake summer, yeah.
SPEAKER_01: Last year was a little bit of a head fake. And look, you have two years of pent up plans of 50th anniversaries and weddings and all of this stuff that's happening. And so I think people are really spending money.
SPEAKER_03: And if you look at it, the consumer is holding up amazingly. It's gotta be some combination of jobs, home prices and this inflation. But this is why there has not been a downtick in demand.
SPEAKER_01: I don't know why everybody thinks that there's been a downtick in demand. There was an article today-
SPEAKER_03: It's not showing up in the numbers yet. No, I think it is. I think it's just subtle. And it's just anecdotal and guessing. Very subtle. I'm not sure. There is a subtle- I actually disagree with you guys.
SPEAKER_00: I actually think that the economy is pivoting on a dime here and it's starting to show up subtly in the numbers. Here's some other data points. Consumer sentiment, biggest drop in consumer sentiment in 40 years, that was in the last month. Right track, wrong track polling, only 10% of the country thinks we're on the right track. If you poll people and ask, are we in a recession? Something like close to 60% of the country already thinks we're in a recession. There's a slight political tint to that. More Republicans than Democrats think we're in a recession. However, even roughly half of Democrats think we're in a recession. So I think- Those are all feelings, not behavior, though, Sax.
SPEAKER_03: We're looking at the data, not the sentiment. I think the behavior will catch up with the sentiment.
SPEAKER_00: Of course it will, yes. I think the behavior is pivoting. It's just that I think you have to dig beneath the surface and you have to look at things like retail, sales, things like that.
SPEAKER_01: I'm not sure, David, if you look back on all the number of times consumer sentiment has dipped, that the correlation to spending patterns is so uniformly predictive as we think. I mean, I think that there's a slight positive correlation, I remember, but I don't think it's like 0.75, 0.81. It's not that. So there's this weird preference falsification that happens when you get asked, what do you think is going to happen versus what do you do? And I think a lot of consumers, that's why they have, we know the data in America, like less than a month of savings or whatever those numbers are. Despite all of the sentiment analysis and all of this stuff, you would think that there'd be behavior change, but mostly people kind of just live in the moment. And that's partly because they don't have the structural support to save or other things. But the reality is that most folks, from what they say to what they behave, there is a gap.
SPEAKER_03: Yeah, and to your point, Sax, this is starting to catch up. We're seeing a slight downtick, and we'll go to real estate next. But if you look, I was doing some research on gasoline, because that's obviously where people are getting hit the most. The average household is now spending 5,000 a year on gasoline. That's almost double last year. So this is going to have an impact. It's going to catch up. But there's so many jobs available, and there's so many people unemployed, I think it's manageable. So to your point, Chamath, it feels like consumers can manage even this great headwind. Let me just put a point to it.
SPEAKER_02: I think the average per capita income in the US is about $38,000 a year. That works out to about $17.50 an hour, roughly. Think about a person with that level of earnings. The average household in the US has historically spent about a third on housing, about 13% on food, and about 16% on their car and their gas. And they only have about 12% left over for savings. So if that 13% on food has jumped by 30%, the 16% that they're spending on gas has jumped by 40% or 50%. And even if housing prices take up a little bit, all of a sudden, your savings are gone. And you're actually not saving. The gas has actually doubled, Freiburg.
SPEAKER_03: It's doubled the gas. By the way, it's worse than you say.
SPEAKER_01: No, it's worse than you say because you're using a per capita number.
SPEAKER_02: Yeah, yeah. But I think what I'm trying to highlight is that there is a distribution. There is a group of the United States, a small percentage of minority, that have earned good income and are having their 50th anniversary, like Chamath is talking about, taking their travel. And that shows up in the numbers. There's outside spending happening with a segment of the economy. And what Sachs is saying, I think, is right as well, which is that the majority of Americans are facing this really critical budget crisis where their personal spending levels are now exceeding their income levels. And there's a critical need for credit and for personal debt and spending to go down. And that's what's going to drive significant risk in the next couple of months and quarters and years is that the majority, some of the numbers will look good because there's a segment of the economy that is overspending. But the majority of the economy, as Sachs is saying, is probably turning on a dime. And I think both things can be true.
SPEAKER_01: Yeah, let me maybe tie a couple of these things together because I tend to agree with you. I think that we have been in a supply-side recession. That is what has caused inflation. We have to go through a process of taking all the excess money that's been put in out. And when you do that, we will destroy demand. And then that'll trigger a demand-side recession because people will- We will destroy asset values. And we will destroy asset values. So that's already that process. Asset values went real quick. That will happen second.
SPEAKER_02: So the balance sheets of that segment of the population that is overspending right now, once their balance sheets really take the hit and they take a hard look at what their savings are, they're going to cut spending.
SPEAKER_01: Right. But the point is, I think we're still firmly in that first phase. And I hate to be the bearer of bad news. But the reason why I think that we're still in the first part of this process is because people, broadly speaking, still have a lot of savings because of all the stimulus checks. There is still a lot of money. So how will we know, maybe is the better point, when all of that excess savings has been torn away from these people because of high prices? I suspect it's when Jason's first chart starts to close. So when people are more motivated to re-enter the workforce, I think that's a signal. Freeburg, your signal is another one, which is when credit delinquencies really start to spike. It's because people then tapped out their savings, then they tapped their credit cards, and then all of a sudden they become delinquent. When all of those things happen, you're probably now at a point where that first phase of the supply side issues are largely done. And now you get to the demand destruction. But all of those roads, unfortunately, lead to the same conclusion, which is equities get really under pressure. There is no scenario where there's a bid to equities. Why would you buy something that has lower earnings in the future? Or why would you buy something that has a lower discount rate for profits in the future? In this case, both are true.
SPEAKER_03: All right. Let's get to that because the piece we haven't got to, so here's the river card, is housing. Because people's homes are the majority of their wealth here in the United States. And that, I think, will be the true indicator. Tramath, to your point, labor participation certainly won. But when this hits housing, that's when we're going to know we're in the end game. The mortgage rate just hit 5.3%.
SPEAKER_01: Why do you say housing is the end game?
SPEAKER_03: Well, I think we haven't seen the collapse of housing prices yet. We're in a housing shortage. And historically, mortgages are still at the 30-year average. So let me just give you the statistics here. The mortgage rate is 5.3%. If you look at this chart from our childhood on, our parents in the 80s were paying 15%, 16%, 17% for their mortgages. We're well below the 50-year average, even with the rate hikes. And so the 50-year average for mortgages, the 30-year mortgage, is 7.77. So we're at 5.3%, well below that. But while this has been a very quick turnaround from 2.5% mortgages all the way up to 5.3%, home sales have started to show weakness. So to Saks' point, this is starting to show up in the numbers. But ever so much, we're down 6%, almost 7% year over year, and 3.5% month over month. But we're holding up historically. So for the last 10 years, we've been selling over 5 million homes a month, with the exception of the pandemic shutdown. And that's this next chart you're going to see here. And this is a really amazing chart I found, which is existing home sales versus a 30-year fixed rate mortgage. In our childhoods in the 80s, we're selling 2 or 3 million homes a year. As you see the rates, that's the orange line, come down massively from 17%. And then under 10%, housing starts to flip. People start flipping houses more and more often. But we're still at that 5 million. That number's got to drop down to probably 4. And then we would actually have some capitulation feedback from the panel.
SPEAKER_00: I mean, look, there's an old saying that a recession is when your neighbor loses his job, and a depression is when you lose your job. And the reality is we haven't had the big job losses yet. It's starting. We can start to see it in the number of open recs are getting closed. And then there were those job loss numbers that just came out, which were a little higher than expected. So the job losses are starting. But so far, it's really been the step prior to that, which is people are seeing their 401Ks get destroyed, stock market's down. They're seeing their wages get destroyed by inflation, food and gas prices being much higher. So there's a really good reason why people are so, sentiment is so negative out there. People feel poorer than they were before. And this could get worse, like you're saying, Jason, with their nest egg in their homes getting hit. I agree. That's the next shoe to drop, just like the commercial real estate is the next shoe to drop. But I think the really big question over the next six months is what sort of job losses do we see? Because that really is going to be the big determinant of how hard this recession hits.
SPEAKER_03: Yeah, I agree with you. And it doesn't look like if we're losing 300,000 jobs a month, it's going to take a long time for us to even to get to one for one jobs. And so this is a very weird recession. Honestly, I think you are right.
SPEAKER_01: But I think we're not even close to that. I just don't see where all of a sudden there are these writ large mass layoffs. For example, I would believe what you're saying if the headline in The Wall Street Journal said Walmart lays off 10,000 people, right? That's not what's happening. In fact, it's the exact opposite. Walmart's like, well, we seem to have record demand. We're raising prices. And every supplier will have to pay a gas tax and a supplier tax and deal with it. So I just think that you're going to be right in the end. I just think we're way too early in this process to get to that place where we're debating this. I don't see.
SPEAKER_00: So, Chamath, are you on board with the Ackman trade, basically? Ackman basically came out with that tweet storm a couple of days ago, basically saying that, listen, inflation is still the big problem, not recession. The economy's humming along. There's plenty of jobs. And we're going to have a persistent problem with inflation. I think he's kind of right and kind of wrong.
SPEAKER_01: I think that you can have inflation and a recession at the same time. This is what my point is. I think we have been in a supply-side recession, meaning the day of the pandemic, it's not as if demand stopped. It's not as if you and I, David, didn't want to go out or use DoorDash or take an Uber or watch a movie in a movie theater. We were not allowed. And so we found other ways in order to fulfill our demand. That's why Shopify did so well on behalf of the merchants that they served. That's why Robinhood did so well. That's why Fortnite did so well. We found other places to spend money. But what went away was the supply. And those incentives didn't come back, and they're still not back. That's why prices keep going up. This is the problem is the definition of a recession,
SPEAKER_03: right, Chamath? It's not the problem.
SPEAKER_01: It's just that most people don't understand that you can have a supply-side recession and a demand-side recession. They just manifest in different ways. So I think I think I think like I guess Ackman is roughly right in some ways. He's roughly not so right in some others. I think that we have an issue where we are going to transfer the supply-side issues that are driving inflation to average everyday consumers and their ability to buy things. I still think that the average everyday consumers desire to buy things is what it was from before, and on the margin is probably higher. I do think at some point it will start to change when prices get high enough, but I don't think we've reached that point of equilibrium yet. And the reason is because companies like the Walmarts of the world who see this demand on literally a real-time basis knows better than anybody else when and how much they can raise prices downstream into their supply chain. So when you see something like this in The Wall Street Journal, I would just encourage us all to say they must see that demand is the same or better. And so they're going to now push those price increases down to everybody else because now Walmart says, here is an opportunity for me to defend my earnings power. And this is why I think we're in this first inning of this. So I don't know whether Ackman is right or wrong, but I think we're in the early phases of a two-phase recession. And I don't know what that looks like because I've never lived through one of those. And I think in many ways it's the combination of the two. And it was largely because of government failure. Government failure and how we reacted to the pandemic, in hindsight, Sachs was right all along. We overreacted by shutting everything down. We probably could have kept some supply online by understanding masking early on. And then second, we exacerbated with failed government policy because we gave everybody trillions and trillions of dollars. And we entered the capital markets and perverted it with another 7 or 8 trillion more. And by the way, states are still talking about giving stimulus
SPEAKER_03: now in order to help people deal with inflation. So we are not learning. You can't pour fire. You can't lead on the fire.
SPEAKER_01: If I had to basically put what we are all saying into a neat little bow, I would say there needs to be a multi-phased economic correction, one that corrects the supply that we took out of the market during the pandemic, one that corrects for all the excess money, and then one that corrects for demand. That's a lot of stuff we have to do. So the more misguided government policy we have, the farther away from finding that equilibrium point we're going to be, the longer it's going to take, the more damage it's going to be. So, Sax, the Fed is obviously, it's pretty much consensus
SPEAKER_03: they're going to do another 0.75 basis points later this month. Could be 50 basis points. Who knows? There seems to be a couple of people saying that that might happen. If that does happen and it feels like inflation is starting to top out, do you think inflation starts to turn? Or do you think we're still going to see prices go up? Because it does feel like it was starting to bounce along the ceiling. What do you think is going to happen if the 0.75 happens?
SPEAKER_00: You're seeing the market rally today in the last few days, especially growth stocks, because of this idea that the Fed is tackling inflation, they're raising rates, and the market is looking out six months and seeing the possibility of recession. And they believe that is going to bring down demand and bring down prices. And it could. What I just described would be a soft landing. I just am skeptical there's going to be a soft landing because of what Chamath is saying, which is this is a multi-part problem. And until we fix the supply side, I don't think that merely reducing demand is going to get us out of this.
SPEAKER_01: I really agree with you.
SPEAKER_02: It's a production problem. It's a demand problem. And it's also, as we just talked about a few minutes ago, an employment problem, because the businesses that need to grow, that need to generate revenue cannot get the businesses that are dependent on people to do service jobs cannot get those jobs filled. And so they cannot grow their revenue, cannot make their profits. And there's a trickling effect in the economy of that, what we talked about, that kind of job shift, that job market shift that's happened. So all three. And so all three are just this dislocation that's happened. Totally right. And it's unclear. Someone very smart I was talking to yesterday,
SPEAKER_02: who is a former member of an administration, said there's literally no way to predict. Because if you think about the complexity of throwing three rocks in a pond, how do those three rocks interact? And how do the ripples interact is really what we're trying to predict. And it's very hard to do.
SPEAKER_01: I mean, if you translate this into the markets for one second, I think what we've done since November of 21, and Nick, you should play this clip, because not to say, we didn't see this coming. But we really did. We pointed to one of our friends and a person, somebody else that we kind of know, Bezos and Elon, and we said, when the two smartest capital allocators in the world start divesting, they clearly understand and see things that the rest of us should pay attention to. And to ignore it seems reckless or you're- Let's play the clip.
SPEAKER_03: And we'll be back in 30 seconds after the clip.
SPEAKER_01: The two most important founders of our generation, the two smartest people who have really consistently won, Elon Musk and Jeff Bezos, have collectively sold more than $11 billion of their holdings this year alone. And if you can't take all of that and decide for yourself what's right for you and your family, you're doing yourself a disservice. I think it's important for me to never sort of like be forced to tell folks whether I'm buying or selling, although I'm willing to do it in moments where I think it's important. But I think it's really important to understand the context. And so I think like these folks that like think derisively about individuals who are managing risk, I think it's really naive. And I think it creates a lot of missed opportunity for them as well. If the smartest people in the world are now selling their core holdings that they told you they would never sell and you are not reconsidering your position on things, you're either much smarter than them or you're being really, really reckless. That was November. And at that moment, I started a bunch of things in process, which we can talk about at the end, but I also sold a bunch of stuff. You sold the warrior's position. I started a process at that point and I sold a piece in December and then I just sold the last piece this week. But then I sold a big piece of SoFi in that moment. But the point was more the following, which is since that clip to today, what we've gone through is a massive re-rating of the discount factor of these companies, assuming nothing else changes, right? That's all we've done. We've not questioned whether earnings can change. All we said is, okay, well, now we're gonna take the discount rate up, which means the value of this company is less than it used to be. That's all we've done through all of this wealth destruction that's happened since November. But now the second shoe has to drop, which is if you believe that after the supply side issues are resolved, you go through a demand destruction phase, the earnings of these companies are in real trouble. And Jason, you posted something, I think about the social media companies and ad rates. Advertising is gonna get hit, right?
SPEAKER_03: So one of the first things to go into recession is advertising. If you're gonna belt tighten at a company, where can you do it? Well, you lay off employees, but you can't get out of your leases, as we talked about in real estate, but you can cut your spending on marketing. And so right now it's looking pretty bleak for Facebook because of the headwinds they have. So the earnings could drop, which means the price to earnings ratio could be totally flipped if the earnings are not real. Right, the earnings are suppressed. Well, we talked about that over the last few weeks,
SPEAKER_01: which is every time the market rallied, oddly Facebook would be stagnant or trade off. And when I called people on Wall Street, what they said was because we think this is the company that has the most pressure on earnings. I don't know if that's true or not, but they took every opportunity in rallies to trim their position in Facebook. Now, if that's true, you have to remind yourself, that is one of the 10 best companies in the entire world. And so if you're gonna go and question the earnings power of one of the 10 best companies in the world, you may wanna consider the earnings power of every other company that's not Facebook.
SPEAKER_03: There are some unique things to the Facebook story. They are facing a unique disruptive moment with Apple, anchoring their ability to target users. Supposedly Google might follow suit with that, which would be super anti-competitive and also the surging TikTok taking market share for them. There's some good news in energy, which will then dovetail into politics and into this farming situation, Friedberg. Turkish government claims it just discovered almost 700 million metric tons of rare earth minerals. It's 15 times China's reserve, if this is true. You guys probably know we use about 150,000 metric tons. A year right now, that's gonna double by 2030. This is something like 4,000 years at the current demand. And this would put them far beyond anybody else's. Chamath, you've got investments in this space. I don't know if you've been tracking this news. Thoughts on another massive discovery of rare earths. What did you guys just have dinner? Dinner or surf, what do you guys?
SPEAKER_01: No, Nat's the best. She brought us panini. What, you got a little pasta? Well, show me. There's an incredible restaurant here in Milan called De Santis, which makes the best paninis you've ever tasted.
SPEAKER_00: Is this a harbinger of the future? De Santis, what could be more perfect than that?
SPEAKER_03: Oh, the De Santis panini.
SPEAKER_00: Here you go. This is the Oracle.
SPEAKER_02: Sacks with a subliminal influence. Absolutely. So good.
SPEAKER_00: This is what's gonna get us out of this situation, De Santis. Oh, yeah.
SPEAKER_03: All right, Chamath, just quickly on the rare earths. If this is actually true, what would this do? And have you been tracking the situation? Because it does seem there's some truth to it, yeah.
SPEAKER_01: I think it's important to just take a step back and kind of look at this thing with not like complete skepticism, but just a little skepticism. It's not surprising that there's additional deposits all around the world. Meaning we've always said rare earths are not particularly that rare. It's just the question is, which of the 17 rare earth elements, at what grade, meaning at what percent concentration does it exist, and then really importantly, at what cost to extract it economically? Yeah. So meaning there's a ton of underdeveloped rare earth assets in Canada, the US, Africa, Australia, Brazil. They're just underdeveloped because when you put all of these factors together, it's really tough. So the government release says they're gonna process like 570,000 tons of ore. That'll produce around 10,000 kilotons per year of rare earths. That implies sort of a 1.75 to 2% grade. It's fine. So there's just a lot more work. I would just sort of say it's really directionally great. A lot more work needs to be done. And more importantly, they need to release enough of this detail so folks like us and others can actually diligence it to tell you more accurately. But the press release was exciting.
SPEAKER_03: Freeberg, this reminds me a little bit of the peak oil head fake we had 15 years ago. Everybody basically said, we're not gonna find more oil. Here's what's left of oil. And then Norway is like, yeah, we just found more oil than existed previously and it's been pulled out. And the whole concept that the world's gonna run out of oil is now gone. So Freeberg, what is happening in science that we just can't predict what resources are available?
SPEAKER_02: We know very little about what's inside below a certain depth of the crust of the earth. So there's some estimates, but we're always surprised. And we know very little about the distribution of those elements in the crust of the earth and below the crust of the earth. Mining's an incredible industry. I don't know the state of the art in engineering and mining very well. But from a pure geophysics point of view, by some estimates, we have 10 billion years of energy reserves below the crust of the earth that we can access in the form of nuclear reserves, geothermal power, and that's excluding some of the potential of some of these elements and what they can do in building a more sustainable energy economy. So why is people so pessimistic
SPEAKER_03: when we keep surprising ourselves with more resources?
SPEAKER_02: Anyone wants a great book? None of you guys were at the dinner that I did a few weeks ago where we had Steven Pinkner come for dinner. Read his book, Enlightenment Now. Or you could watch one of his videos on YouTube where he's got all 60 slides. And he highlights, humans have a tendency to focus on the risks and the concerns and the downsides. And we miss the incredible optimism that is apparent as we actually look at the data of what's happening with our species and what we're doing on our planet. We have every reason to be optimistic. We have fewer wars than we've ever had. Murder rate per capita is the lowest than it ever been. Longevity's increasing, health is increasing. Everything's increasing. And I think that the same is true in terms of scientific breakthroughs, discovery and engineering our way to a more sustainable energy and food future.
SPEAKER_03: This is one of the great things about having you as a friend, Friedberg, is your relentless optimism and your actual cool comp collective lack of anxiety. In other amazing news, the EU Parliament has flipped again. Greta Thunberg is completely tilted. We talked about the virtue signaling EU Parliament and Germany turning off their nuclear power plants and just securing the bag for Putin. The EU Parliament flipped, and they are now saying, these virtue signaling knuckleheads, they came to the census, and now they believe nuclear is green. Also green, according to the EU Parliament, is natural gas. So this to me feels like the beginning of the end for Putin and Saudi Arabia. If you look at the US becoming a net exporter of energy, it's quite possible the EU could become that as well, if they actually, and this is a big if, if they actually start building nuclear.
SPEAKER_02: It could be the beginning of the end of what some people are calling the woke green movement. And- That's certainly over. This realization that to transition to the next, beyond the carbon economy is gonna require continuing to invest in and support the carbon economy until those alternative solutions emerge and to have dual track investing. And I think that that's what we're seeing around the world in the United States, in Europe now, and Europe has always been farther, way farther left than the United States in taking this point of view. And I think now this has been a wake up call for everyone.
SPEAKER_03: And all it took was just a little bit of $6 gasoline and for people to personally suffer, for them to change their virtue signaling nonsense. Yeah, this is markets at work.
SPEAKER_02: Yeah, I mean literally educating the public,
SPEAKER_03: would you rather be beholden to Putin, or would you rather have nukes?
SPEAKER_00: They pivoted from banning energy production to banning food production. Should we talk about the Netherlands thing? We're about to get there, we're about to get there.
SPEAKER_01: So on the energy side, I did in the group chat, just a little breakdown on the math. I think it may be interesting for people to understand. But today, globally around the world, every single country in the world that is involved in the oil business is able to produce exactly 1 million more barrels per day than we need. So let's assume that we need 100 million barrels of oil a day as a world to continue to do everything we wanna do. We produce 101 million. So we're right on the knife's edge.
SPEAKER_01: By August, we're gonna go through a capacity increase in OPEC+, which is OPEC+, Russia, et cetera. Saudi Arabia is gonna go from 10 million barrels a day to 11 million barrels. So not a huge increase. Russia is thought to be able to cut production, if they feel pressure, up to 5 million barrels a day without having any impact to their economy. So JP Morgan, I think, and Credit Suisse, they did this sensitivity analysis. And here's what they found. They found that if Russia were to cut 3 million barrels of oil, so we would go from being oversupplied by 1 million to undersupplied by 2, the price of oil would go to about $180 a barrel. If they cut 5 million, so the threshold at which their economy doesn't really get that impacted, the price of oil could go as high as $380 a barrel. While you would say, okay, well, we just need to pump more oil from other places. And this is the problem in all of these rules that have existed for so long. The capacity doesn't exist, right? We were destroying supply. Governments all around the world were making it very difficult to generate the supply of nuclear, to generate the supply of oil, and to generate the supply of Nat gas. So Saudi Arabia says, we can get to 12 million. Well, guess what? They can only start the work in 2024. They'll be done in 2027. Yeah. So to your point, all of a sudden we realized, wait, we needed these bridge fuels all along. Yeah. How did we allow all of this supply destruction to happen? And now we need to unwind it. It's gonna be a very complicated process. And if any of these things happen, if Russia decides to play hardball against Europe or America, we better hope that it's a mild winter because very quickly you can go from plus 1 million barrels to minus two in a heartbeat.
SPEAKER_03: Yeah. And America's gonna start- And the last point on this, Saudi Arabia, you'd think, okay,
SPEAKER_01: well, Saudi Arabia is gonna go from 10 to 11, so that's good. They have been at 11 million for some total of eight weeks in their entire lifetime.
SPEAKER_03: If we look at this, I mean, Americans also buying 20 to 25 mile per gallon cars, that's got to end too. And so personal responsibility is part of this. The really interesting thing is China already has this plan. Their nuclear strategy with the Belt and Road Initiative is to put 30 nuclear reactors in countries outside of China that they're trying to have influence in. And they're building 30 nukes right now. They got 150 planned. So China's just ultimately savvy and thinking big here about energy independence and we need to follow them. Anybody have anything else on the energy situation before we go to the farming situation?
SPEAKER_02: Let's get to the farming situation.
SPEAKER_03: Okay, so Dutch farmers are in revolt after a new proposed law to cut emissions. On Tuesday, Dutch lawmakers voted on proposals to slash emissions of pollutants like nitrogen oxide and ammonia. They're targeting a 50% cut nationwide by 2030. Livestock produces these emissions. So the plan will likely force Dutch farmers to cut their livestock herds or stop working altogether. Farmers protested. They put their tractors outside buildings. They dumped fertilizer. 40,000 farmers gathered last week in the Central Netherlands Agricultural Heartland to protest these plans. And this caused- The government started shooting at them. They got shot. Yeah, these tractors were doing some pretty gnarly things and stopping traffic and I guess it got heated. And there were some shots were fired.
SPEAKER_00: What were they? No, wait, the government fired shots. The protesters were unarmed as far as what I read.
SPEAKER_03: But supposedly they were doing some dangerous maneuvers.
SPEAKER_00: Were they honking their horns? Is that why they got shot at? No, no, no, no, I think they were using the-
SPEAKER_00: No, no, it's okay. It's okay for the police to shoot working class protesters if they're honking their horns, right? I'm not approving anybody.
SPEAKER_03: I think they were threatening the safety of- This is the other side of the story, Sax. Listen, neither of us were there, but according to the sources, they were using the tractors to threaten the police, like physical bodily harm. And that's why they unloaded. We don't know all the details. It'll come out, but- That sounds proportionate.
SPEAKER_03: I mean, if you had a tractor coming at you to kill you and you're a police officer, I think it is proportionate to unload. Okay, so let's talk about the science of it. Science boy, let's go. Wait, is it like the scene in Austin Powers
SPEAKER_01: where there's a steamroller coming towards Austin? Yes, it's like, no!
SPEAKER_00: Exactly, I was just thinking that. Jason's like, oh, they're using the tractor as a weapon. It's like, really? I was- JKL doesn't have a position on this. You were not there, I was not there. I'm just telling you what was reported.
SPEAKER_03: He's reporting the report. I'm reporting what's reported. And nobody knows if those reports are true. So I think, look, I think it's worth just highlighting,
SPEAKER_02: because this is a really important, this is the first time we've seen government action of this scale and the resulting kind of rebound effect on something that's really important. Humans use roughly between two and 6% of our energy on earth every year to make ammonia. Ammonia is the primary fertilizer we use to fertilize our crops around the world. And if not for the invention of the Haber-Bosch process, which you can read about in the book, The Alchemy of Air, and the creation of ammonia as a synthetic fertilizer, humans would all have starved in the mid 20th century. It's an incredible technology breakthrough. What we've learned over the years, however, is that when ammonia sits on the ground for too long, it volatilizes, and it basically binds with oxygen and turns into nitrous oxide and goes into the atmosphere. Nitrous oxide is 300 times more potent as a greenhouse gas than CO2. It lasts longer and it absorbs more heat. So there has long been concern about the overuse of fertilizer and the overproduction of ammonia that just sits on the ground for too long that ultimately creates this incredible greenhouse gas effect. And so there has been talk in the United States under the Obama administration, under multiple EPAs. There was a Supreme Court ruling a few weeks ago that started to touch on whether or not the EPA has regulatory authority here to actually regulate the use of ammonia. Farmers generally put a lot of ammonia on the ground because they get higher yields out of their crop. The problem is if that ammonia sits there for too long, it turns into a greenhouse gas. And so regulating ammonia and regulating this nitrous oxide emission has been at the forefront of the green movement, at the forefront of climate change as one of the ways to manage and reduce the effects of global warming from human and industry. And now, the Dutch government has come out and started to do some of this regulation. It's a little bit off because it comes from cows and we're seeing what happens. Chamath.
SPEAKER_01: Freebruch, can we finally admit that it's the vegans fault now?
SPEAKER_02: Well, at this point actually, Oh, is that a yes?
SPEAKER_02: No, the ammonia production in the Netherlands is from the cows. It's from cows. Just so you guys know, the Netherlands is the world's third largest dairy exporter. They export $3 billion a year of milk to the rest of the world, to other countries. And so they have all these cows that are like densely packed and they're peeing everywhere and that pee is ammonia and it's causing all of these problems. The other problem with ammonia, so if you guys look at the United States, corn farmers farm in the Midwest. When it rains, the ammonia on their fields goes into the streams, goes into the Mississippi River and goes into the Gulf of Mexico. In the Gulf of Mexico, there is a massive hypoxic zone. There are no fish, they're all dead because when ammonia ends up in the water, it kills life. And so there's this green algae, no fish and everything dies. And so that's what the Dutch are trying to regulate. And the EU generally has been trying to regulate is the removal of excess ammonia in ag production and in meat production.
SPEAKER_01: Again, I still hear though that if we ate less vegetables, this wouldn't be a problem. Not correct.
SPEAKER_03: Not correct.
SPEAKER_02: Most of the production of ammonia is used to make animal feed, which is used to feed animals to make beef, which is a terrible decision.
SPEAKER_01: You could feed it olives. As we know, olives tastes delicious when they're- I'm sure the cow's eating a lot of olives. The issue here that the regulators hit the brakes too hard
SPEAKER_03: on these farmers and they should have maybe had a more gradual landing for them? Well, this is my point,
SPEAKER_02: is it's been talked about for a long time. And in the US, there's just no way a law is gonna pass because the US Senate is controlled primarily by rural states, which are ag heavy. So you see a lot of, you don't see a lot of bills that hurt farmers get passed in the United States because the Senate is controlled by farmers that are elect, sorry, senators that are elected by farmer, by big farming communities and farming states. And so, it's been hard to get a regulation like this passed where folks have tried to and talked about doing it. Around the world, however, in a place like the Netherlands and the EU, where, as I mentioned before, they're far more progressive and have this very kind of green hat on, they're starting to take this sort of climate change action as they're calling it. And that climate change action does have the ramifications of destroying- By the way, one of the things they said is we expect, and this will destroy the livelihoods of many dairy farmers in the Netherlands. That was horrible. By the way, look, all kidding aside- They said that directly, by the way. And the dairy farmers are like, F you, you're not destroying our business for climate change. I have a specific question though,
SPEAKER_01: which is, has there not been some efforts to engineer how these plants themselves absorb nitrogen? That's great, Jamal.
SPEAKER_02: I have three businesses on that. Totally right. Technology is gonna solve this problem. I'm super optimistic on that. There are microbes that are being used to coat seed. Those microbes can pull nitrogen out of the atmosphere directly, so you don't need ammonia. So you use far less ammonia. There's a couple of companies that are doing this really effectively. They're growing like crazy. They're doing really well. There are other projects and there's very simple solutions. My last company, we had a product called nitrogen advisor, where we basically told farmers, instead of dumping all the fertilizer at the start of the season, you paste it out. So the fertilizer doesn't sit there and volatilize. There's all these solutions that technology allows from software to bioengineering to these microbial solutions. And so we're definitely, I think, gonna resolve this. But meanwhile, these governments are in a frenzy to solve the climate change problem. And they're gonna start to pass these laws that really hurt the livelihoods of ag producers.
SPEAKER_01: How do you guys think something like this happens? Because typically you would expect when a government is about to pass something like this, there's sort of like a pretty fulsome review and all sides are brought together and there's working groups and all of this stuff. And at some point you would talk to some scientists, at other points you would talk to economists, at other points you talk to the people who'd be directly affected like the farmers. Is it that the virtue signaling around sustainability and climate change is just so high that people just turn off their brains? Or what is actually happening here?
SPEAKER_00: I think what's going on is you got a bunch of technocratic bureaucrats in Brussels who don't know anything about farming or these people who live in the Netherlands who've been doing this for generations, and they sit there in Brussels and they make up these completely arbitrary guidelines and requirements. 50% by 2030, those are suspiciously round numbers, okay? And then some other authoritarian technocrat in the Netherlands then says, well, we gotta implement this. And they pass some crazy law and they don't even think about the impact on these farmers. Why? Because they're deplorables. I mean, it's complete class bias. It's just like the Canadian truckers. They don't think about these people. They don't factor into their equation. They don't know how they live. And so that's what's going on here. And so you've got this global elite of technocrats who are willing to use authoritarian tactics. They're appropriating their farms. They're taking them away. That's why they're up in arms.
SPEAKER_01: I see the rest of it, which you're not saying. It's not just technocrats. It's the actual global elite writ large have wrapped themselves around this sustainability blanket. And they believe that that word justifies all kinds of bad unscientific enumerate policies.
SPEAKER_00: Right, and by the way, they've just woken up on energy, right? They had just banned energy production in Europe. They didn't realize, oh, wait a second, this is making us dependent on Russia and authoritarians. Well, what is the other big export of Ukraine? It's food. So they got smart on energy and now they're about to repeat their same dumb mistake of basically prohibiting this area where they have an enormous natural advantage, which is food production. So, you know, it's like they just keep making the same mistake over and over again. And by the way, let me ask you a question. By the way, look, I'm not gonna question you on the science free bird, but here's what I would say is I think there's a tendency on the part of these technocrats to think that the science is a lot more bulletproof than it actually is. That is certainly what we saw with COVID is we had these same sort of global elitists, these technocrats who claimed to be health experts. They made up all these lockdown rules that we talked about at the beginning of the show. And what they do, they tend to-
SPEAKER_02: No, this isn't speculative, but I will agree with you- They're willing to use
SPEAKER_00: heavy handed authoritarian tactics. And I just don't believe that the science of this, especially this 50% by 2030, why is that the guideline? Who can prove that those are the exact right numbers? And they're willing to use any tactics necessary to implement their crazy rules.
SPEAKER_02: Let me ask you a question, Sax. Let's assume that there's a technology transition possible, that there are solutions that could be used. I highlighted a few of them. They just cost money, they require some investment. And creating this distortion in the market by saying you can't release 50% of the ammonia that you've been releasing, forces a technological shift that otherwise would have taken longer in the market. Do you agree that there may be a scenario here whereby governments can and should intervene? And I'm not making the case personally, I'm just trying to highlight for you that I think this is where folks are coming from, that there are alternative ways to make the dairy, there are alternative ways to feed the cows, or to produce the stuff.
SPEAKER_00: Here's where I think you're going with that, which could make sense, which is, okay, you're saying there is a pollution externality here being created by the farmers. Well, we need to basically internalize the externality, we need to capture the cost of that. So what you could do is gradually introduce some sort of permit system, or tradable permit system, right, where that would incentivize the creation of these technologies that you're talking about. You wanna do it gradually so you don't destroy the livelihoods of these farmers who've been doing it for generations. So that would probably be the approach you'd wanna take. I agree with you. And by the way, I think that is what is gonna happen
SPEAKER_02: around the world, is that that sort of cap and trade or taxation system is gonna get slowly rolled out for a lot of these externality costs in production and industry and agriculture particularly, because there are technological alternatives, and it will incentivize the switch to those alternatives because the alternatives will cost less than the taxes. Sax, based on what you're saying,
SPEAKER_03: is one of the problems here that these technocrats, these professional politicians, they don't actually have great strategic, thoughtful, real world experience to do planning, looking at Germany, their inability to see the writing on the wall of what building a gas pipeline from Russia to Germany and shutting down nukes would do. It just seems like over and over, they're just really bad strategic thinkers combined with this- I think you're wrong.
SPEAKER_01: No, Jason, they are influenced by these cultural elites who they wanna carry favor with. It's groupthink, it's a lot of groupthink going on.
SPEAKER_00: That's my second piece. Yeah, behind the groupthink is a class bias, right? They only associate with other members of the professional class who have, basically, graduate degrees. They don't even interact with these farmers, just like the legislators making COVID rules, the health experts never interact with Canadian truckers. So there's a huge amount of class prejudice saying that these people just don't matter. We can force them to obey our rules, and if they don't like it, we'll confiscate their farms. And by the way, the rest of you, you're gonna have to learn to eat bugs or tofu or tempeh or recycled excrement or whatever. How is the De Santis?
SPEAKER_03: What was your De Santis? Was the De Santis bursciutto? What did you have on there? Was it some mutterel? I had a roast beef.
SPEAKER_00: That's a beautiful roast beef. Beautiful roast beef by De Santis.
SPEAKER_03: Brought to you by De Santis. It's gonna become a meme after this episode. I had bursciutto conchos. Is the best market campaign ever. He's a lock for president.
SPEAKER_01: Jake, I had prosciutto cotto with brie, white truffle cream and lemon. I mean- Did you have the white truffle on it? That's like a plus, what's that? Bro, this is eight euros. No, it's like eight euros. Eight euros? Yeah, yeah. Bring some back, bring some back.
SPEAKER_03: Wait, I wanna say something about this.
SPEAKER_00: I hope the Democrats embrace this agenda wholeheartedly because if we get all the voters who wanna eat roast beef, I'm pretty sure that's a super majority in this country.
SPEAKER_01: The way to solve this, Freeburg, is with the right economic incentives. There's no reason why the Dutch government had to go and basically put thousands of farmers out of business. Instead, what they could have done is actually created the tax incentive that allowed farmers to adopt some of these bleeding edge technologies when they were probably too expensive to make it economically equivalent. I mean, by the way, that is not a newfangled idea. This is not genius talk here. So the reason why they don't do the obvious simple thing is class bias. It is exactly what David said. It is the influence of people who look, hold on, who look down on these people, okay, and who believe that they are more virtuous because of their desire to defend climate change.
SPEAKER_03: There's also a pragmatic piece of this. This reminds me of the coal debates we had. There are 62,000 coal miners in this country. Like, this is a small number of people who were impacted. We could just basically give them severance and a soft landing instead of this craziness. Or let them continue to do their job
SPEAKER_01: and egress off naturally. The economic free market will manage it on its own. And instead, what you could do is actually greenlight nuclear, subsidize some of these more adventurous ways in which you can extract and refine LNG. But my point is, this is where it's a real head scratcher why politicians don't do this. And I think the only thing that I can come up with is that they are overly influenced by these cultural elites with their perspectives that do judge very harshly what they believe to be right and what they believe to be wrong.
SPEAKER_03: Can we take a victory lap here in the United States that we're energy independent and that we're food independent? Can we take that victory lap here? For how much longer, Jason? No. Well, I think we now need to think, instead of just being independent, I think our mission should be surplus. Jason, our president canceled the Keystone Pipeline.
SPEAKER_01: He canceled a bunch of exploration permits in the Gulf. Again, we are one bad winter away from all of a sudden being in the same situation as everybody else. So it's not as solved- We're not one bad, we're not one.
SPEAKER_03: Freeberg, where are we in terms of our independence?
SPEAKER_00: J. Cal, we are the number one ag exporter in the world. And by the way, under a different president just a couple of years ago, we were the number one energy exporter in the world. The fact of the matter is, when it comes to food and energy, we have the greatest natural resources and we should be developing that.
SPEAKER_03: We should be moving, but no, Sax, my point is, what if the United States took a philosophy of not just being independent, but being even like a stronger surplus to the point of like building- J. Cal, the market's worked that out. We are, we're working it out.
SPEAKER_02: The market's working it out and we're taking, we just need to- Feels like we could do better. It feels like we do even better. I mean, the issue with nuclear power, as you know, is the regulatory costs. So, it's $10 billion in 30 years to get a- Let's move to the lightning round. No, I just want to show you guys the Monmouth poll, which I think is worth highlighting. We didn't talk about it, but the Monmouth poll that was published a few days ago, which is a June, 2022 poll, the number one concern that America, the number one thing Americans are concerned about, Nick, you could put the chart, the table in the show notes, 33% care about inflation, 15% care about gas prices, 9% care about the economy, 6% care about everyday bills and groceries. You know, you add that up, that's the vast majority of what people are concerned about and all the way down at the bottom of the table is climate change at 1%. Yeah, absolutely. So, I think it just speaks to the point about, you know, there is, and by the way, I'm not advocating that this is the right position, but I will say that there is a huge distinction or discrepancy between what the average American is worried about and, you know, where political leaders are trying to carry us forward. I'm not sure what the right answer is, but there's definitely a disconnect. And I think it's being played out in this Netherlands situation right now.
SPEAKER_01: One point for you on that as well. Nick, I put this article in the chat, but the top ESG fund manager in Europe of 2022, they released their results and the guy was up like almost 16%. And he disclosed what he owns. And he turns out that he owns Conoco, Valero and Exxon. And according to the ESG rules that these folks have passed, this qualifies as an ESG fund because he doesn't own weapons, porn and oil sands. But it allows all these people to walk around thinking that their investments are tied up in things that are actually clean. So it's not true. So the point is that there are these structural lies that have been baked into the system that they are supported by very shoddy accounting or rules or science. And if we're really gonna fix this problem, I think you have to go and inspect these things and call them out. But like all of this ESG investing, which perpetuates by the way, perhaps why these governments just have no clue what's going on, sit on top of all of these lies. There's nothing ESG about Conoco and Exxon per se. It's ridiculous. Let's just call it for what it is. This guy's a good fund manager. It's like, he's a good fund manager. He did well in a period where everybody else was down. Let's just celebrate that and not tell all these.
SPEAKER_02: It had a good marketing spin for a while. So, you know. No, but it's not just marketing.
SPEAKER_01: It allows people to believe that there's a solution that is being affected. That is not true. That's the part about it that's- That is super nefarious.
SPEAKER_03: Yeah, okay. Listen, we moved science up cause science got a short shrift last week. What is a lightning round?
SPEAKER_02: What is that?
SPEAKER_03: I just wanted to, things that were small that weren't like full segments. My concept here was to just put things at the end of the show that we missed. But what I did this time was- I'll give you a shout out.
SPEAKER_02: You're doing a great job moderating today, by the way. Thank you.
SPEAKER_03: Put a couple extra hours in.
SPEAKER_00: By the way, I think Freeburg made a really interesting point a minute ago about- About me being a great moderator?
SPEAKER_00: No, not that. Okay. About the polling, the Monmouth polling, where if you look at what voters care about and what the elites and the elected politicians care about, there's a huge divergence. Huge divergence. That's clearly what happened in Holland, right? You got these Dutch farmers. Their livelihoods are being taken away by people in Brussels who don't even understand what they do. I mean, people want to make a living.
SPEAKER_03: It's pretty simple.
SPEAKER_00: But this is why you're seeing populist nationalist uprisings in all these countries is you've got a crowd of people who go to Davos and make policy and they're completely disconnected. They're completely disconnected from the real concern of the electorate. Look at Bojo.
SPEAKER_01: Bojo just got booted today. Why? Ultimately at the root cause is he was throwing COVID parties when he was telling, the same thing that everybody nailed Gavin Newsom for, this guy just got booted out as prime minister of the United Kingdom. They think they're better than everybody. They're hypocrites
SPEAKER_03: and they're incompetent at their jobs. Let's call it what it is. The association is you try and do what you believe
SPEAKER_02: to be best for everyone, but it's not what's best for you. And I think that that's the point, like fixing climate change, stopping COVID. I got to do X, Y, and Z for everyone, but I still want to fly in a private jet and I still want to go to a COVID party, to a dinner party. Exactly. A super spreader.
SPEAKER_00: This is why I think Biden is very unpopular. I mean, look, he's at- Hold on, hold on. Let me tee it up for you.
SPEAKER_03: Hold on, let me see everything. Okay, so we moved. I'm going to tee it up here. I'm going to tee up. Okay, well, let me just- No, let me just explain it. It's a lot easier if I do that. Hold on. Let me give you the alley-oop. Here comes the alley-oop. I don't need the alley-oop. I got the ball. Let me do two sentences. It's two sentences. Please, I have a good joke. Just let me do it. All right, so all of the Friedberg stans were breaking my chops that Chamath was cackling and laughing during a science segment and we rushed him. So I moved science up. So to the Friedberg stans, please stand down. Now we go to Biden derangement syndrome segment at the end of the show. Joe Biden's cognitive decline is becoming the topic. Sax, have at it.
SPEAKER_00: Well, listen, if you call this Biden derangement syndrome, 62% of the country has Biden derangement syndrome- Absolutely, just like we all did for Trump.
SPEAKER_00: Biden's poll numbers are down to something like 38%. It's a historic low for this point in time of a presidency. But look, what the point I was trying to make was I think that Biden's problems flow from this dynamic we're talking about, which is he campaigned as Scranton Joe. He was a working class hero who was going to give us a return to normalcy. And what has he done? He's basically implemented every wacky idea of the progressive left. He basically is representing that part of the party that is completely disconnected from the ordinary desires of the working class. And what are people concerned about right now? Food and energy prices. What is Biden concerned? Well, first of all, he's blaming it on mom and pop gas stations. Even Jeff Bezos had to respond to that. That tweet was insane.
SPEAKER_03: Yeah, so just to queue up the tweet, my message, this is Biden's tweet, my message to the companies running gas stations and selling and setting prices at the pump is simple. This is a time of war and global peril. Bring down the price you are charging at the pump to reflect the cost you're paying for the product and do it now. And then- They're almost all small business franchises. Which is absurd. And that's just not how the economy works. Do you think that they look at a Chevron
SPEAKER_01: and think it's owned by Chevron? They cannot be- Who's tweeting for Biden? Some millennial with a couple of master's degrees and 400,000 dead is rage tweeting from the White House. Is the strategy to make him look incompetent?
SPEAKER_03: I mean, I am forever thankful for Joe Biden to getting Trump out before he took a third or fourth term. It would take an eight second Google search
SPEAKER_01: to know that less than 10% of the gas stations in America are owned by these corporates.
SPEAKER_03: Well, here's Bezos' tweet. These are mom and pop businesses.
SPEAKER_01: This is insanity. It's a lot of immigrants. It's a lot of South Asians. This is why it's very sensitive to me. These gas stations, they are mom and pop owned.
SPEAKER_00: A lot of them are owned by immigrants and this is their small slice of the American dream. And Biden comes along and he's saying, you're doing too well. I mean, these people, their profit margin's like 2%. 2%. 2%. My buddy's family, by the way,
SPEAKER_02: owns a bunch of gas stations in the Bay Area. And he told me they make no money on gas. They make all their money selling cigarettes and soda. That's it, that's the whole business. It's a way to get people into a convenience store.
SPEAKER_03: Here's my thought. I think I'm gonna state it right here. Bezos is gonna run for president in 2024. This is why he retired. What? This is why he's giving money away. I will bet anything against that. Okay, listen, give me odds. 12 to one, 15 to one. Okay, well, you'll see. I think he's playing legacy games. He's playing legacy games. No. Why else would he become a shit poster on Twitter? Ouch, inflation is far too important. That wasn't even a shit post.
SPEAKER_02:
SPEAKER_01: Well, anyway, he's Bezos after dark. He doesn't have to run a company anymore.
SPEAKER_03: He's Bezos after dark. That wasn't even a shit post.
SPEAKER_01: That was kind of like- He was outraged by the financial illiteracy this year. Financial stupidity.
SPEAKER_00: And what is motivating- The lack of economic understanding.
SPEAKER_03: To take on the president. There's no upside there. He's not taking a fight.
SPEAKER_01: Jake, it's just calling out something that on its face, that tweet, it was not written by Joe Biden. So let's not pin the blame on him. But that office and that strategy is clearly broken because it is run by someone at a minimum who's enumerate and who's clearly financially illiterate, who doesn't know how to Google anything. Because that's the only way you could write something that insipid. Biden should fire whoever it is that wrote that tweet.
SPEAKER_00: 100%. Biden is looking for scapegoats, okay? His popularity is at historic lows. The right track, wrong track numbers are at historic lows. He's looking for anyone to blame. And he's been going through a whole sequence. And the Putin price hike wasn't working. He couldn't even say it right. So now they're looking for anyone else. Remember, Elizabeth Warren did something similar when they had food inflation. They started blaming the meat packing industry or whatever. Look, this is not how these industries work, but they are looking for someone to blame for their own mismanagement of the economy. And Biden baked this cake last year. We've discussed this before. He canceled energy independence, his first day in office. And then moreover, look, on this Ukraine situation, if you knew you were gonna take this tough with Putin approach, Jason, that I know you support, okay? But if you knew a proxy war was coming or you're willing to let one happen, you would wanna basically create an energy glut, not an energy shortage. You would wanna basically maximize the amount of American production and you would not wanna alienate the Saudis. So what is Biden doing now? He's going over Saudi Arabia, hat in hand, totally humiliating, to beg for forgiveness for last year, ostracizing them and calling them pariahs. So they had no, hold on a second. They had no grand strategy. If they wanted to pursue a tough on Russia strategy, they should have maximized energy production. Instead, they didn't even think about it. They didn't even think about it. And now we've got energy inflation.
SPEAKER_03: I agree with you there. It also, I will say is notable. I think the Democrats are actually now, I think they're quietly pushing the Joe Biden cognitive decline so that they can field a different candidate. What do you mean quietly?
SPEAKER_01: How do you allow a governor, a sitting governor, to run ads in a different state against the presumed Republican nominee, unless it's ordained?
SPEAKER_03: Well, I'm saying the cognitive decline thing. I think they're obviously not gonna come out and say that. I don't think this is happening surreptitiously.
SPEAKER_03: Okay, here's the tweet from Bezos, just so people hear it. Ouch, inflation is far too important a problem for the White House to keep making statements like this. It's either straight ahead misdirection or a deep misunderstanding of basic market dynamics. This is a very strong statement and the point I was trying to make before is, why would Bezos, why would Bezos at this time, why would he take on the administration? Why would he do that? I think it's important
SPEAKER_01: for Biden to take control of his communication strategy and to reclaim more of the center going into the midterms. I think a lot of this content, the naming, the shaming, the blaming, tends to be more of the playbook from the far progressive left. And I think that there's probably too many people that have infiltrated the White House from those ranks and I think he needs to close ranks a little bit more. And so I don't think he wrote this, okay? And I don't think he would have wrote it if he was given a chance. So it's clearly something is breaking between what is being discussed as a team and then what is being executed on the ground. Sax.
SPEAKER_00: Look, Biden's staff, the wrong claim's been with him for years. They reflect his desires. I think this is classic Biden. If you look at his career in the Senate, he's a grandstander. He always liked to basically scapegoat and demonize. This is a playbook. He may not have written the tweet, but he certainly endorsed it. And he's given speeches now where he's calling out this scapegoat and that scapegoat for basically the energy prices, which are totally his fault. He could have had a better strategy around this. DeSantis versus Bezos, you heard it here first. On the Bezos thing, hold on a second. Jason, you're not taking into account, this is actually the second time that Bezos has tweeted about inflation. I am taking that into account, yeah.
SPEAKER_00: Okay, that was back in May. He called out the administration. So it's on this particular issue, I think he feels strongly about this issue. And I think he's looking at what the administration is doing and just saying, this is a level of political stupidity and financial illiteracy that I just cannot stand. And by the way, who is Jeff Bezos? Bezos is a very liberal guy. He's an outspoken critic of Trump and he owns a very liberal media house at the Washington Post. So I think this is a reflection that Biden has even lost the Jeff Bezos of the world. And he's trying to spin it as a good thing as if we don't need these billionaires. But if you're losing Jeff Bezos, you're losing a lot of people in the center, probably the entire center. I would follow the breadcrumbs.
SPEAKER_03: He bought the Washington Post, he bought the largest house in DC, and now he's taking on the administration. I think it's a clear path that he wants to run. You could at mention me on Twitter if you disagree. I'll tell you a funny story to end.
SPEAKER_01: After the sale of the Warriors completed and I tweeted this thing out, it was really beautiful. Dre sent a beautiful text to me. So did David Lee. And then I got one text message from Phil Hellmuth saying, I dispute how much credit you've given me, I expected more. Wow.
SPEAKER_03: So seven seconds to Phil. Again, it only took seven seconds. And then he called, and then he called,
SPEAKER_01: I showed Sax the text right. It's an unbelievable text. Sax can testify to it. And then he's like- He lost his mind again? He lost his mind. He said basically like, he took the credit that I gave him and wanted to throw it out the window. He thought I really tried to fuck him over. And then he said, I'm going to block you for a week, but then changed his mind. I'll just tell him you'll buy him into the big game
SPEAKER_03: or something and he'll be fine. No, he didn't want money. He just wanted more credit.
SPEAKER_00: More credit. He wanted more credit. Tell him you'll stake him.
SPEAKER_03: Cause he did introduce you to the deal. Is that correct story? Is it true? He made half a billion dollars and he staged it for 10k.
SPEAKER_02: Hold on. Is it true?
SPEAKER_03: Is it true that Phil Hellmuth introduced you to the deal? Yes or no?
SPEAKER_01: He introduced me to Joe Lacombe. Got it. So if not for Phil,
SPEAKER_03: you probably would not have made that trade.
SPEAKER_01: I don't know. It's unclear. 50, 50 maybe? No, they had bankers and I was using Allen and company. So I mean, do you, there's not a lot of people running around in that moment, trying to write a 10% ticket. I'm asking you,
SPEAKER_03: does he deserve any credit for you buying your stake in the Warriors?
SPEAKER_01: In fact, and I thought I gave him an appropriate amount of credit.
SPEAKER_00: Yeah. The term off tweet stormed. It was like, it was Phil Peter teal and like one other, Oh, and then Lake up Lake up. Yeah. And it's like better company.
SPEAKER_03: He couldn't find himself in like, it's the best he's ever been, except when he was with Michael Jordan and Jay Z. But other than that, this was the best Phil's ever done. I mean, you know, when I get, did you see, he made it to the second.
SPEAKER_01: When I get my fourth ring, I'm going to take a picture like Michael with the four rings, but it,
SPEAKER_00: But in the interest of peace, maybe you should just think Phil right now.
SPEAKER_03: Oh, I have a great idea to tell Phil.
SPEAKER_01: Freeburg, look at Freeburg laughing. He's the only one that got that joke. Did you get that joke?
SPEAKER_02: I was wondering if I should tell you to cut it or not. I don't know. I think it's good. Here's a great one. You know how Phil gives away his bracelets away.
SPEAKER_03: I think it's a funny joke. You know how Phil gives his bracelets away as like a recognition. You don't have to do this, but pretend that you're giving, since you have four rings, that you wanted to thank the other three besties on the show and that you're keeping one ring for yourself and giving us the other three rings as a thank you for all the support we've given you.
SPEAKER_02: All the support for the warriors. For the warriors that we gave you
SPEAKER_03: and all the council we gave you over the years. This will put him on Megatone that he should have gotten one of the four rings.
SPEAKER_01: Super tilt. It's the greatest April Fool's joke.
SPEAKER_03: Actually that reminds me,
SPEAKER_00: Phil's next ring is going to me, so I can't say anything critical. No bracelet. Yeah, bracelet. His next bracelet is going to me, so I can't say anything critical. You know what you're going to do? You're going to take that bracelet. Whenever I said critical, cut it out. I guarantee you, Sax takes the bracelet
SPEAKER_03: and loses it in the first three days and never wears it. It doesn't care. Totally. Right in the garbage. Doesn't care. Never talks about it again. All right, everybody, we're back. The team is playing. Professional, Chris Ball again. Point God is back. We'll see you on episode 87. We're going to make it to 100. I feel like we can make it to 100. Yes! We're going to make it. The vibe is back. The vibe is back. I love you guys. It's a shit show in the text, but it's great here. I got to say, I love hanging. I love hanging out with Saxy Poot like live and physical.
SPEAKER_01: He's a fucking little, he's very, ooh, you just want to take him. I love him. He's good live. He's good live. He's great. He's so good live. He's really good. He's really, really good. He's an asshole.
SPEAKER_02: Last time I hung out live with him, he had an IV hooked up and he was recovering from the night before.
SPEAKER_03: Sax on an IV. Basically on an IV now. That's how bad it's gotten for him. Sax, you look terrible. Can you please get some sun and just maybe eat one less sandwich? I got you. How many DeSantises did you have?
SPEAKER_01: I had two.
SPEAKER_03: No, but you can afford two. You're in great shape. I mean, Sax, maybe a half a DeSantis. Maybe you should have a half a DeSantis. I think I'm going to put you on a half a DeSantis. We'll see you all next time on the All In. Love you guys. Bye bye.
SPEAKER_01: Bye bye. Bye bye.
SPEAKER_00: ["I'm Going All In"] Besties are gone. Cold 13. This is my dog taking a notice in your driveway. Oh, man. We should all just get a room and just have one big huge orgy because they're all just useless. It's like sexual tension, but they just need to release them out. ["I'm Going All In"]
