Разговор о долговой экономике США и рисках финансовой системы

so one of my midlife realizations is that people in my world certainly me um ascribe too much to ideology and too little to money the financial dynamics of the world drive a lot more than we acknowledge that they do and we look at things we're like oh these people believe this and these people believe that and that's why they're fighting or that's why they're allies or whatever but really we should all remember that the love of money is the root of all evil and money really has a huge effect on outcomes but nobody says that and i miss it so often so you spent your life in uh the money business trading debt uh tell us just just to start but like you worked in ukraine you traded ukrainian debt what was that like i never worked in ukraine i've been to ukraine on investor trip uh i have traded ukraine debt i traded emerging markets debt my whole life until may of this year i traded and sold it at a bunch of bunch of different banks uh london and new york ukraine was certainly one of the uh one of the instruments we traded traded through the russia crisis um can can you explain just for the truly ignorant me among them what what is emerging markets debt so emerging markets debt uh originally the the asset class grew out of the debt crisis the 1980s uh when money center banks um were hung with primarily much latin america debt um after the uh after the 80s crisis um nicholas brady treasury secretary of the time came up with a plan called the brady plan to restructure the debt back it with collateral u.s treasury strips that would make it more palatable to a broader base of investors to get it off the balance sheets of the money center banks and to create a more of an institutional uptake of the debt and retail uptake of the debt so american debt american banks are left with loans from other countries that those countries can't repay correct i'm just trying to put it in terms like i can understand and so then the treasury secretary basically says to those banks we'll bail you out by guaranteeing these loans with american treasuries um it's one way to put it um it's a way to clean the balance sheet up and to create i think there are two two impacts one you clean up the bank's balance sheets get it off get it off their their sheet and create a marketplace and a dynamic that allows liquidity for this debt and then creates a whole new uh marketplace and ability to issue and clean up the the country's balance so you're doing good for the banks and you're doing good for the countries and theoretically doing good for a whole new investor base and that started in the early 90s and i kind of walked into wall street in the early 90s out of college and and i just fell into this market that was starting and really boomed for a while and so what does that mean to attach a treasury to foreign debt can you tell us uh layman's terms what that means to treasury strips what is that treasury strips zero coupon bonds effectively uh it so you have collateral you have risk-free collateral uh that's attached to the bond so that to get investors who would obviously wary of sub-investment grade emerging market at that time was called less developed countries ldc then it was tended to evolve into emerging markets debt which actually is all it's sort of a misnomer at this point because it it characterizes almost everything outside of g7 from right single a debt to defaulted debt so it it it's grown over the last 30 years to incorporate sovereign debt debt debt of countries uh primarily issued in in uh hard currency dollars and euros down to investment grade corporates uh government-owned debt like um oil companies let's say nationalized oil companies that would be called quasi sovereigns uh down to corporate debt all the way down to defaulted debt so it's all of credit all credit products when in a number of countries it's ballooned but at the infancy it was really a it was a evolving asset class to kind of clean up the balance sheets and open access back to lending to these countries and instead of just being relied on major money center banks for loans that really sat on their balance sheet and weren't that liquid didn't trade much let's open it up to a global investor base create trade euro bonds put in your uh uh not necessarily putting your 401k but put in your pension funds and then hedge funds traded it and from there it evolved from dollar debt into the local currency debt became much more fashionable uh so investors can buy turk schleer denominated debt or uh kenyan shilling denominated debt um and then obviously driven by kenyan debt in kenyan currency you can it's not that easy but the the harder it is to trade the more the banks make money at uh trading it so it's uh certain countries are harder to access than others so all so all of this debt originates from the desire of countries to raise money from the world correct so if i'm kenya and i want to you know fund the operations of my government i issue bonds yep you issue locally uh issue local bills to local banks primarily trade local bank treasuries uh foreign investors can access that through um typically plain vanilla kind of derivatives and they'll issue dollar-denominated euro bonds that are open to the world to trade in dollars so if you're the treasury secretary that's a huge power that you have you can bailing out other countries certainly i mean i saw it my first job uh for about a year i was an analyst on a trading desk and it's like six months in they gave me a trading book uh the mexico book it was 1994 and they gave it to me because i was a kid and it was the safest book you could you couldn't hurt yourself too much with it about six months after that the mexican peso crisis hit so yeah that was robert rubin and friends i lived through that whole experience what did they do what did who do what did rubin then treasury secretary what did under clinton what did he do with the mexico well what's interesting is he i don't know if it's it's a it's a function of just how the human brain works and you you look back and you're like oh yeah the we basically bailed mexico out and cleaned it up and everything went on as it was but you forget as you're going through that these things all take a lot longer your memory shortens up right uh it took a lot longer and it took a few go rounds and what i learned through that whole thing was because i went through a bunch of these crises there was the 94 mexico peso 97 the asia crisis taibot and if you remember taibot crisis and korea chai balls and all that and then 98 was russia 2000 was argentina peso crisis and then we had the you know gfc so there's there's role there was a series of rolling crises uh all in like the first 10 years of my career so that definitely yeah kind of wounds your ability to stay perma bullish when uh you're you're going through a bunch of rolling crises but um what i learned through these series of crises is that what you have to kind of start with is the bazooka the to go with the the moab of bailout that you have to go with way more than the market thinks you need because what i in in the mexico peso crisis if my memory serves properly they kept coming with not half measures but sort of just enough of what they thought would would bring back market stability or market confidence and just enough creates a bit of spike in confidence and then start to start to panic again and then come back again until finally they come back with the the mega bazooka swap lines bailouts all that sort of stuff so now that was also early in sort of the washington consensus era foreign policy and there was uh i guess my the macro point i would make or the conclusion i'm reaching is this is a huge feature of our foreign policy it is and you know the imf it's funny i've been you mentioned ukraine and the the trip i went to ukraine was an investor trip and part of the purpose of an investor trip is to go and to meet with their finance ministry um their debt liability people um meet with banks meet with locals uh get an assessment and you know we go to you always you always go to the imf the imf there um and and ask what the likelihood is of the next tranche being delivered and and you know perhaps it's a bit cynical but 30 years of trade emerging markets will make it pretty cynical but i'd always go into those meetings and walk away from those meetings like what are we talking about here they of course they're gonna of course they're gonna disperse the next tranche that's what they're in the business of doing they're in the business of lending money to these countries because that's what they do and that's where they make their money so it's very rare that they won't um or they don't unless it's a real sort of turn your thumb up turn your turn your nose up or climb your nose at the imf and and uh is the purpose of the imf to bail out mismanaged countries i think it's simple terms yes i don't think that's the i don't think that's the most euphemistic way of putting it or how they describe it but effectively yes i'd say backstop or to keep them keep them afloat and to offer them uh guidance as to how to run austerity programs and get themselves back on the rails so that they can move towards prosperity democracy all this all those sorts of things does it work uh typically no why uh because one uh it's very politically unpopular as a domestic politician to be taking orders from any foreign power but certainly uh the west and those orders come with strict austerity because how did they get themselves in those problems in the first place right um a certain distinct lack of austerity living beyond their means correct so you know that's not that's not uh that's not particular to emerging markets countries all sovereign all sovereigns do that right everyone in the west is doing that as well now right um living beyond their means um but some of us like the united states are able to run what's called counter-cyclical monetary policy because we have a reserve currency so we have a special privilege to be able to maybe be somewhat more profligate than others but the money round runs out a lot faster in emerging markets countries when you can't finance your debt and you have a dual crisis of both your currency uh and your interest rates running out of control and at that point you've got enough you've got nowhere to go other than to uh your friends in dc uh or brussels and ask for the backstop but in return for the backstop you need to make some promises about how you're going to conduct your business going forward and as you can imagine cutting expenses raising interest rates slowing the economy uh doesn't generally get people reelected exactly hey to brag but we're pretty confident this show is the most vehemently pro-dog podcast you're ever going to see we can take or leave some people but dogs are non-negotiable they are the best they really are our best friends and so for that reason we're 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dutch.com slash tucker to learn more use the code tucker for 50 bucks off your veterinary care per year your dogs your cats and your wallet will thank you so you really you've got a a democracy problem these countries overspend because they're democracies and they're trying to meet the demands of their voters and then it's impossible to fix because their democracy is trying to meet the demands their voters uh that's probably a little more euphemistic than i would say yes that's one factor but there are other factors at play as well how many countries have been bailed out by the united states over the past 30 years that you're aware of oh i mean there's hard bailouts and soft bailouts right so i couldn't really put a number on it like how many are running an imf program right now how it would have to be in the dozens how many like strict bailouts i really don't know off the top of my head i mean we can go through the we can go through obviously mexico argentina excuse me argentina um in the in the in the asian crisis there were a whole host asian countries that had to post up um so there's there's the hard bailouts and then there's like the softer bailouts are sort of coming back staying on the staying on the the teat so to speak who makes money from this uh who makes money from this so the imf theoretically makes money uh from the interest on the loans but it's typically below market loans so it's it's not a real profit motive um banks make money from this from facilitating the debt so the trading of it the issuing of it the fees of issuing of it um investors make money um from higher interest rates obviously um and then there's a subset of investors like distressed debt investors that will um buy a bunch of defaulted uh defaulted paper sit on it and then do workouts like the most the most um probably stark examples recently would be argentina um and uh you know right now ukraine will be pretty significant one as well see what the workout is with that how what would you do with ukraine as a banker at this point like what's likely to happen to ukraine not not on a military level but ukraine ukraine is a different one than say in argentina because it has at the moment more of a geopolitical put so to speak than pick a random country like bolivia or argentina although now under this administration clearly there's more with sort of monroe doctrine part two there's there's more of a geopolitical put to argentina but uh but ukraine's a tricky one because there are you obviously up until recently you had the entire west behind them right and there's this this week alone you've got um you got larry fink whitkoff and kushner over there working on you know stage two what's going to happen the peace process but also the rebuild so that's an it's an odd one i think that's going to be a combination of of public and private uh because there'll be so much rebuild to do and there'll be there'll there'll be a lot of money to be made in the rebuild what does a debt crisis look like what is a debt crisis well a debt crisis typically is not a debt crisis alone it's accompanied by a currency crisis uh the debt crisis the external debt and then a local market interest rate crisis which is also dead in itself so the local local t-bills local interest rates will skyrocket at first to try to raise interest rates to try to attract uh money to the currency to stem the route on the currency and that can work up until a point until you lose control of both um so what a debt crisis looks like is uh currency runaway currency devaluation runaway higher interest rates which clamps down the interest rates clamps down any lending locally clamps down any local growth creates the defaults um on domestic businesses uh the currency running away depending on the country but all countries it causes inflation but uh countries that rely on imports certainly even more right everything you're bringing in um is going to cost far more in your local currency um so it's really a spiral um and then current typically what happens is bonds will drop to a level that's called recovery value and recovery value is effectively what uh is a term more really more from i say the corporate credit markets where if you were to strip everything down and sell it for parts what could you get you know what could you get uh for the cash value so interest rates spike bond values drop collapse yes what does this have to do with debt why is it described as a debt crisis uh because no one could function without borrowing no one can function without debt so if you can't borrow you can't exist and there's no country that's not true of uh i mean there's there are countries that don't necessarily need to borrow as much as they do but they still do uh why because one because they can uh cheaply um i would argue the gcc countries um don't necessarily need to borrow as much as they have the gulf yeah gulf countries but they have recently you know saudi for example because they're going on a massive expansion um to diversify themselves away from their core business which is oil which is actually is actually a very wise thing to do because if you look at um if you look at countries historically venezuela is probably the most extreme example um that had an opera there's a single a rated country in the 80s um if you i went there in the 90s i'm gleaming infrastructure like incredible highways beautiful hotels amazing amazing place uh and they never took the oil wealth and diversified away from it in a meaningful way and then when you have an oil shock and you've taken out too much debt against the let's make up a number a hundred dollar oil price and oil drops to 30 you're all upside down um and so that's what you know uh that's what mbs is looking at for a multi-decade plan to build you know build these cities technology innovation centers and so forth which is clearly learning from from the past um but uh but they're borrowing to do that they're borrowing to do that yeah but they're borrowing at fairly cheap rates um there's also a concept that you want to borrow as a sovereign level to set a benchmark against which your con your companies can borrow in international markets this would be the broader the investor base theoretically the cheaper the interest rate so they'll set a they'll set a benchmark level and then a corporation can borrow at that rate plus 20 basis points or 50 basis points well some americans have become cut off from the things that once kept us grounded our land the skills that tied our families to nature told you he's getting his next spot and to remind us we made a new six-part series american game tales from the wild we follow the sportsmen who are keeping these ancient traditions alive we follow it forming a navy seal into the mountains of texas donald trump junior across the ridges of lanai that's what we call from going from zero to hero and wander with me through the quiet woods of maine i have just three dog commands and then as i direct the dogs find the bird find the bird and then dead bird obviously which i don't use as much as i'd like to we cast for steelhead on the deschutes river in oregon that's the first one i've caught in a while track mule deer in the utah high country spear fish in the waters off montauk chasing striped bass and bluefin tuna see you on the other side it's called american game tales from the wild outdoor series watch it at tuckercarlson.com so if every country's indebted i mean debt decreases your sovereignty your ability to make independent decisions that's correct yeah so if every country's in debt then there are no fully sovereign countries then right can't just it's not no country is free to do exactly what it thinks it should do in its own interest they're all connected no uh and again back to the u.s i mean theoretically we we are or were based on the fact that we have the global reserve currency but there is a limit to everything at some point so what's the limit for the united states it's hard to say um what the limit is the limit is what loses the global reserve currency status right and as i alluded to before these things don't happen quickly they happen over a much longer period of time than anyone would think um so how do you you know in in simple terms to me let's look at some global recurrent global reserve currencies uh historically um dutch gilder british pound us dollar probably the most obvious examples in relatively recent history and what did they all have in common uh they ruled the seas military dominance right and you know you'll see memes online and people are like what you know the pictures of fleets of aircraft carriers in the gulf and displays of military power and that's what backs my currency and that's you know that that is true um but you know at some point you got to ask yourself a question like where you know also what how did empires from rome uh to the dutch to the brits like imperial overreach to an extent was what undid them right and yeah if we continue to i mean what what concerns me what concerns me longer term of the potential to lose the reserve status is if we lose our military dominance that's not happening obviously tomorrow the next day there's a few things that are that could obviously i mean you're more versed than i am in in this whole notion of modern day drone warfare but that certainly levels the playing field very very quickly um you see what the what the hooties were able to do uh uh with not so sophisticated and not very expensive drone technology so but that's you know that's that's the that's purview for for some military expert not me um the other thing that concerns me the structure remains the same so the united states can continue being indebted to the degree that it is because it has the world's reserve currency and it possesses that because of its military dominance it does but if yes i think what's a very important was a very important moment however was the seizing of the russian reserves at the beginning of the russia ukraine i felt that um and i think well look can you tell us what happened just for people yeah so quite simply uh the western power seized the russian reserves that were sitting in um in the new york fed uh i believe it's 300 billion is the number that they seized and you know the the europeans still want to use that for uh for rebuild and so forth in ukraine um now not to get into who's right and who's wrong in the ukraine russia conflict that's not that's not the point of this the point is it sets a precedent um that's a scary precedent that is your money that sits in u.s treasuries or gold in our uh in our federal reserve is not safe if you run afoul of the powers that be so there's an a very obvious and natural reaction function to that which is powers like india china and russia stop buying treasuries and start buying gold though the gold call was certainly we have inflationary you know inflationary pressures we can talk about but even more to the point it seemed obvious at that point that that's the trade it's it's yes it's an inflationary i bought gold that month remember yeah and i've done better than the stock market's done well it's funny if i it's a move in gold this year i won't get it right off the top of my head but it's over the last 20 years i think now is the gold's now beat the s p now when you compare the two yep it's really effectively just the debasement trade when you look at it what's the debasement trade basic trade is that the currency that we the currency that we all use and think about every day has been debased against gold right the value of the dollar i think oftentimes people look at the the dollar is the dollar strong or the dollar weak and what people are looking at is effectively the dxy the dollar index and that's a basket of major currencies or it's heavily weighted to the major currencies euro yen canadian dollar aussie dollar and it's really at this point kind of a ridiculous comparison because all of those countries are sort of in a basket case with their debt issue and their growth um but if you look at the dollar versus bitcoin or if you look at it versus gold over the last 10 years it's pretty clear that the currency's been debased in those terms so if you look at in that terms the stock market returns don't really actually look quite as uh as great is wonderful if you're looking at and what a dollar uh would how many how many dollars it took to buy an ounce of gold 10 or 15 years ago versus today and all of that you think or some of it is downstream from the decision by the bide administration to freeze russian assets because that scared the crap out of the rest of the world i think the gold move is for sure the dollar weak the dollar weakness against gold yes uh but but there's also i mean i i i think the big move in i mean if you look at if you look at what we did after the gfc in terms of interest rates and global financial crisis where what we did bail out uh extraordinary measures fiscal and monetary keeping interest rates at zero uh emergency measures keeping rates at zero that remained in place for a good 10 years like i don't know how how you stay at emergency measures at zero interest rates when the stock market would have quadruples over triples quadruples over 10 years um so what i think why is that bad all all those investors got rich everyone's happy with their 401ks like why is that bad well it's bad for a number of reasons one is if you believe in a free market capitalist system you believe in the the pricing mechanism the free market pricing is everything uh the price of meat at the farmer's market is set by the free market who is willing willing willing buyers willing sellers at a fair price uh once you start to put in price controls of the soviet union it's definitely we don't have free market capitalism at the core of uh you know free market caps is the price of money so we artificially put price controls on the price of money that's the way i look at it we artificially kept interest rates way too low at zero when the market didn't necessarily demand the conditions maybe at the time certainly five years hence 2015 i i don't i don't really see why we needed to keep interest rates at zero for that long so yes i think the reason why in my opinion the reason of the people at the fed the dozens and dozens of phds at the fed making these decisions probably to a man to a woman wrote their phd on the great depression and what the fed did wrong and that was the horrors of deflation so really the depression was really a result of deflation right so that's the greatest boogeyman of all so anything you can do to fight deflation deflation is the real killer uh especially when you have an excessive debt load what i'm i'm going to stick to the dumbest possible questions i hope i don't offend you what is deflation deflation deflation is prices going down uh what you kind of want is a gentle inflation to help inflate away the debt uh to show a gradual the benchmark the target fed target for a long long time has been two percent inflation they soft up that to three recently and as you know just cut rates this week even with core pc at 2.8 so they've kind of abandoned that two two percent target but what i think in that time why wouldn't i want deflation because that makes the value of my paycheck higher it depends on who i is who's who the i asking that question is right so if you're you and your wages are constant and you've paid off your house uh certainly deflation would be great go to the store every day and things are cheaper um i mean there's deflation certain parts certain sectors right they for years there's been deflation in all technological goods right you get a flat screen tv for 400 bucks yeah um so for you tucker carlson it would be wonderful uh for the economy as a whole that's really run on hyper financially hyper financialization and debt uh if you have a deflationary spiral you are going to be left with a bunch of defaulted debt so where we are right now you know to pivot i guess to where we are here with the us is i think when this administration came in they they messaged pretty clearly that the move was going to be away from the biden administration and more towards some austerity there would be some tax cuts but it'll be offset with spending cuts uh doge elon etc people got very excited about potential potential cuts um and then i don't know what happened shortly into the administration but there was clearly a pivot that i didn't see coming um and it was around the time of the tariff the tariff uh tantrum and the big sell-off in the stock market but out of that seemed to come that there was a shift towards what people are now calling run it hot which is forget about tamping down spending little tax cut maybe we'll take some slower growth but we'll reduce the deficit for that'll be good for the long term and instead let's let's just run it both ways fiscal and monetary so let's let's cut rates and let's uh let's cut taxes and let's spend more and i don't know what what happened or if that was always the plan but or someone saw under the hood and said look the only way typically there's two ways to get out of a debt problem you grow your way out or you inflate your way out right and it seems to me we're going all gas no brakes on both like we're just we're gonna we're gonna grow and we're gonna we're gonna let some inflation go and that's the way we're gonna get out of this debt issue and yeah i think trump this week was saying i could see 20-25 gdp growth i mean that's it's a nice number but that would certainly help our certainly help our uh deficit issues well wasn't that long ago that many americans thought they were inherently safe from the kinds of disasters you hear about all the time in third world countries a total power loss for example people freezing to death in their own homes that could never happen here obviously it's america people are recalculating unfortunately because they have no choice the last few years have taught us that remember when the power grid in texas failed in the dead of winter yeah it happened and it could happen again so the government is not actually as reliable as you hoped they would be and the truth is the future is unforeseeable and things do seem to be getting a little squirrely so if the grid does go down you need power you can trust last country supplies newest product is designed for exactly that the grid doctor is a 3300 watt battery backup system that will power full-size appliances medical devices and tools with clean reliable power it's even emp protected that means it's shielded from lightning solar flares or an actual electromagnetic pulse event there's no gasoline no noise no emissions you just plug it in charge it from the wall from your vehicle or from the included 200 watt solar panel and keep going day after day taking care of yourself and the people you 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ultimately the gravity always always works so and the free market always always works um so no it didn't work they have runaway inflation and um extraordinarily high interest rates and he's under been under a lot of pressure domestically um for reelection obviously so what's the right way to approach it uh well as uh i think was it thomas solo says there are no solutions only trade-offs yeah there are no solutions when you're in this situation when you're in this situation of 37 trillion dollar deficit um is that a lot it sounds like a big number to me i'm not even sure how many commas are in there it's a big number uh it's hard it's really hard to grasp but um i think you go back you started with you know ideology the answer is always going to depend to an extent on what your ideology is and what you're willing to sustain in terms of paying short term to long term and for me i was more uh i was more a proponent of what i thought the plan was going to be which is um some deficit cutting through spending cuts um and from what was coming out of doge early it seemed like there was plenty of fat to cut that would have been politically rather popular i think especially with the right pr uh guys behind it you know guys were getting out there every week and on twitter and going on podcasts and talking about sort of the absurdities they were finding now maybe maybe it's a drop in the bucket overall but i think um it was a it was a worthwhile exercise to go with um i don't know i you know again i don't know i'm not on the inside so i don't see what could it be there i mean so the idea always was that federal bureaucrats public servants as we call them were serving were serving and they were making less than their private sector counterparts and there was suffering involved but patriotism impelled them to do it so they did and now you look at the numbers and it's like no no no your your federal employee on average makes way more than your private sector 2x 2x so they're the most privileged people okay in the in the middle class and by far that doesn't count their gilded pension plans is it really 2x i think it's i think the number is average medium private sector family income is 70k i think it's 110 or 115 for for uh federal insane not including the benefits which are ridiculous work from home for five years um um but then you know of course the population of federal workers or federal contractors which are i mean there probably is many federal contractors no one ever says that but there are deloitte is a federal contractor right so there are so many of them now that we maybe have reached that tipping point where no administration can pivot against its own employees because they're voters maybe uh maybe but you know i'm sure you've alluded to many times like you can't have what is it seven of the ten top zip codes in the united states are all in sort of in and around washington dc i mean i went to you you grew up there i went to school there in the early 90s and i hadn't been back for 15 years i it's night and day it's gleaming gleaming office towers rose and rose i remember having an internship two blocks from the white house and you were passing you you had to pass sort of bombed out derelict buildings and now it's from the 1968 riots they never were rebuilt 1992 they were still there like literally two or three blocks from the white house i remember and uh it's crazy i mean it's um again flashes of roman empire right you just like you you go to you go to rome to collect your tribute and uh so i i don't know i don't know i i'm not as privy to that world as you are i don't know what people see when they get into office and realize that there's potentially no way there's no way around it um all our intentions are we're great but this is the way it's going to be i don't know what okay but you're also suggesting that this is not a solution that you can't spend your way out of a debt crisis i don't i haven't seen it done before uh right how much magic would that sense a very talented individual uh he's a lot of experience in markets very successful uh the right guy to have at the helm if he thinks this can be done i guess we don't have any choice but to see what how it plays out but um maybe that's the play the play is this is our only way out if they're you know people on both sides people i speak to people i knew in the markets friends of mine people whose opinion i respect on both sides of the aisle um the one thing we all agree on is that this is not a tenable situation um it's not some mmt elizabeth warren people were talking to this is like normal people that say like okay at this point we're kind of boxed at 37 38 trillion um so maybe that's the issue maybe we're so boxed that we got to run this experiment experiment because it's our only way out uh and hopefully growth kicks in but it doesn't you know it the growth the growth scenario the current growth scenario in the us is really hard to get your hands around um in one part because it's such a polarized economy people are calling it a k-shaped economy which i think is a pretty accurate term k-shaped meaning the the lower end is hurting and continues to hurt more and the upper end gains and continues to gain more and you know we've seen through throughout history that's not a tenable situation no it's actually what happened in venezuela it's how they got hugo chavez yeah it's a powder keg ultimately um so and it's also extraordinarily difficult to get a real handle on where the numbers are because we're not releasing any numbers right now because the government shutdown so um you know the feds flying blind to an extent you can rely on certain private sector indicators um that are kind of shockingly bad frankly when you look at uh consumer loan defaults credit card balances credit card the late credit card payments auto loan defaults um i think october was 185 000 announced private sector layoffs i think the worst since 08 so you have a situation where you've got a you know the u.s can the u.s economy is at 70 69 70 percent consumer led so if we're going to rely on the top 10 percent to continue to spend on you know gucci bags and trips to st bart's i i just don't know how sustainable that is when the lower end is you know swapping out uh new york strip for for pork loin and walmart numbers are great because middle and upper middle class is shifting from the publics to walmart shopping like everyone everyone's getting squeezed um so i don't know i don't know that the growth is there the growth can come maybe the growth can come with uh these tax cuts with industry cuts with uh certainly with deregulation will help um and all this promised uh foreign investment but uh there's a lack to all that so we'll see it does seem from a an ignorant outsider standpoint which is mine that there's an awful lot of emphasis on the public equities markets and like the stock markets the measure of how we're doing whether or not that's a good measure you know i don't know maybe not a perfect measure feels like to me but um how safe is the stock market in the united states as a place to put your money um i can tell this is an uncomfortable question be as diplomatic as you can be well it is the largest most liquid stock market in the world uh it does attract not just domestic savings but huge foreign investment uh for you know there's an expression that says money goes capital goes where it's treated best and we still do treat capital the best in this country um extraordinarily dynamic markets from you know venture cap to private equity to public markets and that's something we should all be very proud of and it helps you know grease the skids of global commerce and that's great uh there are some concerns clearly concerns about the value current valuation of the equity market and the structure the economic structure of the flows um so one there's a massive concentration risk um it was the fangs now it's the mag seven i think the the top 10 uh companies in s p 500 i think have accounted for something like 42 percent of the gains year to date um the big get bigger you had new nvidia at one point tipped over five trillion dollar market cap which is again a hard number to really get your head around at that point i think it was larger in market cap than every market in the world except for us and japan entire market cap of any other uh trade any index in the world um so wait bigger than the entire index of any country in the world yes bigger than the cumulative total the value of all the companies traded on those indexes on a random exchange yeah except for i believe us for sure and i think japan again i could be wrong but something in the in the in that saying that you get the idea what i'm so just one company dwarfed all all these economies that's right and that you know we we don't need to go into all sort of the price to book and price to sales and expectations of future revenue all that sort of thing uh you get into a market psychology event where stocks that go up continue to go up because people chase momentum i read something yesterday that the explosion in in options trading uh the volume options trade is now three and a half trillion a day which is larger than the entire market cap of the russell 2000 so 2000 like the 2000 mid small mid-sized companies 300 million to 2 billion market cap companies in the united states and that doubled i think from 2000 from 2022 and then doubled again so you've got an insane amount of leverage you've got margin debt at all time high may i ask what why is this significant that the options market is huge uh because it's not just the options mark's huge it's also the structure the options they've moved to zero day to expiry options so you could used to be weekly or monthly options and now it's one like same day options so the retail uh with the gamification sort of of yeah of so an option my understanding of an option is an option is a bet on in what direction in the direction in the direction with and you get an immense amount of leverage immense amount of leverage so how does that work how do i so let's say that you want to buy a call betting that nvidia is going to go up between now and the close uh and at the money nvidia call meaning let's say it's trading at uh 177 right now and you think it's going to go up and the price of the at the money the 177 call is till now to the end of day is 75 cents let's just say so you're betting that it's going to go up more than 75 cents if it goes up a dollar fifty you've doubled your money you're not just making 75 cents on 177 which would be whatever 31 percent you're making a hundred percent of your money so you're getting all you can lose is the premium the 75 cents you pay for that option but everything over 75 cents starts to run exponentially in terms of profitability so people are making an insane amount of money on uh in this run up on uh on options zero day options and they're doing it from their phone it's pretty easy with the that's not really investing though that's betting yeah that's gambling um but that's just one component of the structure of but it sounds like it's now a huge component it is a huge component but again with the gamification of you know uh crypto trading and and uh options trading and robin hood and with gambling you know uh draft kings and all that stuff it's sort of part of the culture and it all started in covert people at home with extra stimmy money and not much to do and the market was ripping and people got hooked on it and people keep doing it and generally people are doing quite well i think you know retail has done better than institutional largely speaking this year but the other part of the structure the market that's somewhat concerning is just this passive flow um so then there's a guy named mike green he should probably speak to who's done the best work on this and passive flow basically 401k if you put your money in every two weeks your money's automatically going to your 401k and it's you click to that it's auto invest if you go and you look at most companies 401k options uh their options and what to invest and then you break down each one of them basically every single equity option fund you have has the same high concentration in the same five stocks so you know apple microsoft and video so you don't know that necessarily you don't really know what you're buying or what percentage of the fund is in those but it's very highly weighted because the higher the market cap go higher waiting the higher the waiting goes and on and on and on so it's an auto it's just an automatic machine like underlying bid to the market that continues to the big the big get bigger and bigger and bigger and you can say okay what's wrong with that these are great companies they're multinational they have great business models that were low capital intensive and high margin and they're basically a lot of monopolies in their space okay well two things can happen if unemployment rises if you lose your job you're not putting your money in 401k if you lose your job and inflation keeps ripping you might have to withdraw from your 401k which creates a vicious cycle the other way then it's too much concentration and too much concentration and the structure of it is perpetuates it and then you add on the leverage of the option trading with the momentum that keeps this trade going and going and going to where you get to five trillion dollar market caps now there'll be a whole coterie of wall street analysts that will justify why five trillion makes sense because of this that and the other thing but i'm not i'm not sure what if they're of the five eight ten companies that have the bulk of the value the plurality of the value of the entire s&p if one or a couple of those companies dramatically reset in its value and its share price what would happen well you're seeing it i kind of right right now as we speak because the ai trade is starting to lose a little bit of favor there's trying to be some questioning uh on the ai trade um and the market can't continue to to trade up when it's trade up if one or two of the major components are are falling out of bed i mean this week it's it's been oracle and you know last i broadcom like took the market down nvidia is starting to uh to weigh a little bit so it's we're very tech sector heavy and the other the other thing that concerns me to an extent about not just for public markets but for private credit markets is that with this ai build out and this data center build out um obviously an extraordinarily capital intensive and what i was speaking about before uh about how a lot of these mag seven countries have companies had a great model of being capital light they're now becoming quite capital intensive it's not writing software it's building physical things exactly you're building physical things and you're spending you're borrowing a ton of money and this is what the problem with oracle is right now is they borrow a lot of money and uh they're they're borrowing a lot of money to build things and build things that depreciate in value over time right like a chip that you buy a lot of this a lot of the financing that's been going on too has been people have been using collateral these chips as collateral to borrow against so there's borrowing and borrowing but you're borrowing against a chip that naturally is going to be replaced by the next evolution of course so that's a bit of concern about the value of the the collateral and when that daisy chain on uh unwinds it could be ugly the other thing is that there's so much there's so much borrowing in the private credit markets for these hyperscalers and these data centers that it crowds out there's a finite amount of borrowing available right so it's crowding out borrowing and investing in other areas of the economy and that concentration risk concerns me to an extent as well and the different a lot of people have made the analogy to you know the 99-2000 tech bubble and you know the good news coming out of that down the line is that okay we all got hyped up on the internet and we got carried away with pets.com things like e-toys but the truth was in retrospect we weren't hyped up enough about the internet and what it would do and how it would change the world but there's still a cycle that comes along where there's the euphoric cycle and then the crash cycle uh and then on the back end of that you have the winners that survive like the amazons right that that you could have bought for practically nothing in 2002. um and then there were you know companies like the similar to me to this the hyperscale data center were the um where the fiber come to fiber companies like um global crossing uh worldcom right and those were bubbles that crashed uh but what were they doing they were laying fiber uh fiber cable for the internet which okay we had a malinvestment boom the companies crashed but the cables still exist and the cables are in use today and the cables were very valuable and the cables didn't depreciate because the cables have a useful purpose so that people are making the same argument now is like okay we may go through that cycle as well it's maybe get a little fork there'll be there'll be winners and losers out of this and it'll be fine down the road and ai's not going away i'm not here to disagree with that but there's a slightly different component where you you're building these things that aren't that could you know you're buying all these chips that could depreciate download it's not exactly the same tray no and the nature of technology is hard to forecast very hard to forecast yeah i mean so they were telling us six months ago that agi was right around the corner nobody thinks that anymore so for just for example and so all of these infrastructure bets are predicated on predictions about what the technology will require in 10 years the thing that we're really running up against we know that we don't you're exactly right and i think there's the worms turning a little bit on the efficiency a lot of these yes um and what they can and can't do and people say you know i i saved uh a half an hour or i saved an hour uh coding something but then it took me three hours to check to debug the work that the the actual uh you know clot or whatever did um but the real thing that we're going to run into is we don't have enough power we don't have an electric and we don't have water to to heat and cool all these things that's just point blank and even uh you know jensen and altman and those guys they'll tell you that and that's why they're going out and into dc and trying to make um you know trying to make trying to make the case that this is a critically important um industry that may need some government backing but even if you get that the fact of matter is the only way you can really power these things uh without spiking electricity bills another 300 percent and then creating a whole another political problem domestically is you need nuclear power and you know we can't we have plenty of natural gas that can work as a stopgap but you need nuclear power and it's a 10-year build-out minimum to get the nuclear power that you need so when do we hit the somewhere between there here in that 10 years we hit the wall in terms of our ability to to uh to get the electricity for these at this growth rate now will is this growth rate uh accurate projection maybe it's not and if it's not then we need to see a lot of these companies come off in value so also there are a lot of concerns about climate change yes oh just kidding that kind of ended quickly didn't it um yeah i haven't heard that phrase in months have you climate change no i did see i saw something about i saw something that nature had nature magazine had to revoke a paper they did a few years ago that said that uh climate catastrophe was going to create a economic catastrophe and that was all based on false premises i think they did yeah i think the new idea is we're going to have an economic catastrophe if we think about the climate catastrophe in any way notice larry finks not lecturing as much about the climate anymore climate climate in esg is not as fashionable as it as it was a couple years ago that's for sure so how did that like as a guy who has dealt in in markets like emerging debt it's pretty pure it's like a debt trading is like a pretty pure market right well pure is an interesting choice of words no i'm not saying unsullied it's pretty plain vanilla is that what you mean i mean like there's a willing seller willing buyer and but what i really mean is the price is uh an organic price it's like what people will pay correct so that is the definition of a market right well how do you get to the price correct so as someone who's spent his life in that world and who clearly you're clearly like committed to the idea of markets like you believe people should be able to decide what they're going to pay for something and what they're going to sell something for how do you explain esg uh i don't know that funnily enough i don't know that even the experts can actually define it and i'm i'm not um i'm not joking when i say that when i at my last job uh we would do a conference every summer in europe um for investors and we'd have a series of roundtable um topics and the one topic that was standing room only sold out every summer in europe was the esg without question um it seems the us has definitely faded faded quickly from that but europe still seems very uh very hooked in very hooked in and it's not faded there at all it's definitely a part of the investment process uh but what's fascinating is if you go to 20 clients in london and you talk about esg you will get a different answer from each esg specialist as to especially in emerging markets it's a very difficult thing to to work your way around the esg constraints when most of what emerging markets are based on are hard commodities uh and there's also obviously the governance component the g component it's not always maybe up to western standards with the g so they're with the g there a little light on the g the g the e's not great the s no one really knows what that means and the g is highly questionable so uh it's funny it's just it's there it's still i guess what i call a work in progress but just like conceptually the idea that factors that are not really relevant to your fiduciary responsibility which is to maximize returns for shareholders or something related to that like i don't know that's just it's just an interesting concept like how did that happen it's that my personal guilt as like an educated westerner supersedes your right to have me handle your money responsibly well it's straight government intervention is what it is um it's government it's it's government it's ideology if you are of that mindset where you believe in control economy uh it is the dream of all dreams to incorporate your ideological bent into the last thing that should be left alone which is the free market you now inculcate all of this ideology into every decision making process all the way down to setting the price of money which to me i know i'll run afoul of plenty of people on this but to me that that's a bridge too far um that's not the place for it but it's it's one in once in it's impossible to get out you know once once you call go into that's in that's involved in all the investment processes it's really hard to take it back out again so back to the ai infrastructure boom in the united states um if that slowed down or if people lost confidence in it are you concerned about a cascade effect on public markets uh in the short term yes the question is how quickly does the market rotate uh how do the rotation trade so we're starting to see that actually the last week or two you're starting to see like small caps really rally dow components really right old economy stuff really rally as tech is being soft so there's theoretically the way you can thread the needle there uh but with the concentration risk and with the size of just actual size of these companies it's gonna it's gonna uh it's gonna be a drag on the overall market as a whole best case scenario one of the reasons the stock market is my theory is so big is because it's the easiest and as you said most liquid way to park your money with some hope of return and i don't really think americans are encouraged to think of other ways i just have always noticed that absolutely and uh as as an emerging markets guy who's been able to look into other other countries frontier markets etc and how they look at it there there's always from if you're an argentine or a brazilian or turk you're you're always looking outside of your domestic economy domestic market for opportunities um and we really don't too much no and it's so easy to participate in the public markets in the united states as you said you can do it on your phone you can make bets on market movements from your phone which is just like seems like it might have unintended consequences there's yeah crosses the line from as you said from investing to straight gambling but okay so it's ease of use is like the key to any scale i think sure but that was amazon that was that was yeah there's a lot of there's a lot of there's a lot of applications to that uh well yes yeah yeah that's true yes yeah well that's by the way why tobacco use went absolutely crazy as soon as someone figured out an automatic rolling machine for cigarettes people used to have to smoke pipes cigars take snuff up their nose the second you made it super easy to burn tobacco the whole world became addicted to it makes a lot of sense right and that's what the stock market is in the united states from my perspective so but if you're trying to be a little more creative or hedge a little bit your future your family's security where else do you put your money uh again it depends on you know who you are net worth etc let's say you have an extra 100 grand what would you what would be a good call well the problem is the the great obvious trades run a lot already right gold and silver's already a run a ton so long-term investing let's try to look at stuff the ideal cross of um you know what sort of fairly valued or cheap or distressed or out of favor that people haven't really cottoned on to because you see a trend that's about to emerge right right now we're in full-throated recognition of the debasement trade and silver's breaking out for not for that reason but also there's a notion that there may not be uh as much physical silver out there as derivatives has been written against so there's been a bit of a bit of a squeeze going on two weeks ago that the chicago mercantile exchange shut down for a cooling issue overnight uh just as silver was spiking um which was kind of convenient um so there's some some technicals in that market uh wait so you think it's possible there's more paper against silver than there is silver yeah so yes they're definitely more derivatives written against all commodities than exist but no one ever asks not no one but typically if you're an investor you don't ask for physical delivery of the commodity i do i know you do i do you do and i'm gonna find out where that stuff's buried too um so you don't typically ask for the physical delivery of it when you're trading in in tens and hundreds of millions of derivatives against you cash settle your derivative against mine cash settle the loser pays the winner and you move on um so where do you go uh at this point given where valuations are i think um i think you go abroad uh you look at multiples on u.s stock market where we were trading historically um extremely high p-e ratios for the index on historical basis and very high against uh foreign markets i think what this administration's doing in latin america particularly as i mentioned earlier sort of monroe doctrine too there's clearly a movement of foot to uh to stabilize region and to partner with those that are critical to us i would imagine that open up a ton of investment and growth there um there are plenty of latin american countries that offer uh pretty cheap historical p ratios so i think it's probably time to diversify a little bit out of the u.s and diversify out of tech heavy stuff um that's where i would go simply um i think you still have to own some some gold and silver just have to own some but just not as much as you you wanted three years ago given how far it's run so but you're basically making a pitch for the venezuelan stock market uh not specifically but there may be a there may be a catalyst coming there that could create create a big move one way or the other it seems in the next in the next couple weeks what about real estate land real estate land for sure that's why i asked like it depends on who you are um i think productive agricultural real estate anywhere is always a good investment sort of disaster hedge um but yes land as a whole yes um i don't think i'd want to be rushing into blue cities uh and paying high interest rates and taking out a bunch of debt on uh on overpriced uh co-ops in new york city necessarily what about buying a 70s era office building on sixth avenue in midtown new york uh if you can convert it to residential perhaps and get a lot of tax breaks i want i may want to see uh may want to see what our friend mom donny says the first couple weeks so you made the point that for a bunch of different reasons ukraine war but other structural reasons we are on the path to losing our privilege as the holders of the global reserve currency at some point right well because all empires are yes right so we know that the question is when does that happen and what replaces it and my read is as of now there's no obvious like national replace we're not going to like adopt the british pound or the euro or the yen or the ruble uh but instead gold is the stop gap as it has so often been but crypto seems like the next global reserve currency is that fair to say um yes yes yes i mean i would say this there's they're kind of i think people bundle together the notion of like blockchain and cryptocurrencies and what i'd say i can't necessarily make a pure prognostication on any one particular crypto um i mean it's been a phenomenal exercise and wonderful to see is sort of like a adhering to austrian economics yeah to see to see the experiment work um i don't think we want to get into like the the dynamics of individual cryptos i think you know at some point probably bitcoin as a crypto will be usurped just by sort of a better technology um but put that aside what to me unequivocally and the next venture i'm going into um is related to blockchain is blockchain is uh is here and is not going to going away whatsoever and blockchain is going to transform um the financial services industry pretty much every everything we do financially transaction wise um and fortunately we have the wind at our backs with this administration and dave sachs and genius act etc uh and nobody nobody who maybe was somewhat skeptical three four years ago is at all i mean uh larry fink and as an example is i think he continues to say all assets are going to be tokenized uh just this week dtcc said all all assets are going to be be tokenized and put on the chain and that's going to remove a lot of little frictions in the system um extra costs that don't need and extra time lags that don't need to exist um so the cryptocurrencies like cryptocurrencies exist with the layer of the blockchain you can't have crypto without the blockchain but the two are somewhat distinct so a couple questions one uh is it safe i mean it's reliant on electricity yes but so is uh so is every and i guess mentioned the cme went dark right and the other day um chicago right so um the nasdaq shut down right um everything we do is reliant on except for you coming over in your golf cart with a bag of gold coins for me is is uh is relying on energy to that extent is it safe is it hackable uh the theory you know one of the theories being proposed uh the bitcoin i'm not really sure if this is you know bitcoin's had a pretty decent drop from high 120s to around 90 um you know part of the part of the thing being floated is that with quantum computing making the leaps that it's making that bitcoin might be able to be hacked at some point um perhaps um but again i'll put that separate to the blockchain i the blockchain uh deeply encrypted safe uh these are the rails on which everything's gonna run okay will it eliminate corruption um or curtail it i think i mean because it's kind of i think the question coming from you is is a funny question because you know that nothing will ever eradicate corruption in the humans unless it changes the human art right now of course uh yes it should eliminate corruption because what it's what what the blockchain is going to do what it does is it creates a permanent electronic unenaccable ledger so right think about something as basic as like title insurance i don't know if you've ever had to deal with that but first of all like why do we need to pay have i ever deal with that yeah i pay constantly okay so why like it's it's an absurd notion right there's a title you own the title you put it on the blockchain it's there forever and i buy my house from you the title gets transferred to me it's registered on the box the transactions there now it's mine it's there forever we don't need to pay a couple grand or whatever sorry one of my best friends runs a title company in maryland uh but you know he's my age so he's probably almost done anyway um but uh that's just an example like why do we need to pay five grand for title insurance i just sold a house in westchester and i found out that there was from two owners ago there was like according to the paperwork there was a 650 000 mortgage still on the property and that never got expunged but the the tie the brokers just kind of waved it back and forth and everyone just kind of stamped it like that stuff that's just an example that everyone can kind of uh relate to but also like why we'll be able to send money uh immediately you uh with no you know if i send money to you you'll immediately get the money get the get the care get the interest on it why should i be paying 30 to send a wire from jp morgan like that's pure 30 of margin like all that kind of little stuff and um so the company that that i'm start it's going to be starting with jan jan one is called liquidity.io and we um we have one of only six a fully registered licensed alternative trading systems which is a trading system that's going to be able to trade all these tokenized and financial assets and what we want to do is help democratize the financial markets and tokenize uh all kinds of assets but we're working with our with our backer just made some acquisitions with a couple of uh consumer loan businesses auto loans and uh manufactured homes mobile homes for example like there's a great story these two young guys in dallas uh they're working at jp morgan and with their fourth bonus they said we're not we're gonna we're not gonna blow it this time let's buy some rental property and they couldn't find any rental property they're in dallas so they just cold called like 250 mobile home uh parks and they found one put in 50 grand turned around it was a six million dollar trade uh they were going to do a bigger one and what they realized they were better off doing was revolutionizing the lending business for mobile homes uh because guess who the biggest player in that is was warren buffett so uh great business obviously high margin business but what i didn't learn until recently is that there is no refi on a mobile home and there is no lending available on a secondary purchase so if i take out a loan for my mobile home and then want to sell it to you you can't get a loan you have to buy for cash and if rates go down from eight to four i can't refinance it so they're going to with their business and tokenization they're going to eradicate all kinds of costs which and create these two separate markets which is a solution to is a partial solution to the home affordability crisis like that's something everyone can get upon how does this new technology figure into like monetary policy like wow that's a great question so um you familiar with stable coins yeah i am but will you describe what they are sure so stable coins let's think about it this way in simple terms say crypto like a like a bitcoin is sort of a flee free floating currency the market dictates the stable coin is more like a pegged currency so pegged to fiat in this case uh like tether circle they're pegged to the us dollar and try to keep it stable at parity one-to-one uh so what they are is and there are national currencies like this there are countries like the bahamas or whatever just pegged one-to-one exactly um yeah panama's dollarized steven hankey was a big dollarization component um they tried to do it in argentina it didn't work um hong kong's got a dollar peg um so so the stable coins they um they try to keep parity with the dollar and they are back theoretically backed by um treasury bills so money comes in the money gets invested in treasury bills one for one you're backed by triple a rated short dated no risk uh but it become these become a conduit for all these transactions uh on the chain automatic through these so it could go through go through the uh the stable coin and into other things from there as a sort of a conduit now that's all good and well as long as they we're sure that those stable coins are taking dollar for dollar investing in what they say they are without a lag or without moving too far away from that um tether at the moment it seems to be diversifying away from strict t-bills and they've been moving into gold which is working for now but you know yet to be determined how that works out so does that make does all this make the u.s dollar stronger or weaker oh i'm sorry yeah so the good that creates a uh natural bid for our treasury bills which is a great thing for percent and friends because that creates a whole new uh demand vehicle for our treasury debt on the stable coins um and what these stable coins do allow for again a lot of emerging markets uh participants is allows them to quickly access dollars and um and avoid depreciation risk in their own country so you're getting a lot of foreign foreign money into stable coins that will be bid for t-bills which should hopefully help with our our funding hmm is there any way for the u.s government to use stable coins as a weapon in the way the biden administration used russian assets at the new york fed as a weapon i don't know i don't know um i imagine there is uh i don't know what that mechanism would be and i don't think i mean in the russia reserve instance it was a bilateral seizure this would be a seizure of untold amounts of investors right you're seizing that i'm not sure what the what the purpose would be other than just right stealing the money well we've seen that before true what do we know about global gold reserves since it's such a huge component now what we know we don't know everything that we know because it's not fully transparent but what we do know is the direction of travel which is massive increases particularly uh from india china russia that doesn't seem to be abating at any time that means they're importing gold that means they're buying gold and there has been a lot of movement of physical gold uh particularly over the summer but the movement appeared to be more from the london vaults back to united states rather than elsewhere uh but we don't know we don't have complete clarity on any of that stuff how and why how so if you're gonna have an ancient commodity that's like a huge part of the global system economic system how can you not have transparency maybe i'm answering my own question i saw you look at me like i'm an idiot i saw you answer i saw you answer it before you finished the sentence in other words if it's so important why are people being honest about it because it's so important that's why it's totally weird that the chinese wouldn't tell us exactly how much they have in the vaults yeah um yeah there's no reason they should or would or have to i guess my question also you don't actually show your hand on how much you're accumulating as you're trying to accumulate an asset oh is that true well yeah typically it's typically i'm learning a lot about markets from you that's great that's great so i told you i promised you stupid questions i know i said there are no stupid questions but i was wrong so um okay then let me reframe the question this way if we got somehow full transparency on gold global gold reserves where they are who has gold how much would we be shocked is there a big spread between i think so i mean reality we we still don't have the audit of for nox that we were supposed to get a few months ago so really yeah you might be shocked about that too i don't know right you think for mox nox just has a lot more gold than they're telling us they may have 10 times more i don't know i really don't i don't i don't want to speculate i mean i like to speculate but i don't want to speculate on that uh-huh i'm guessing if there is a spread between perception and reality it's it's to the negative but what do i know not sure there's talk about revaluing the gold as well uh what does that mean that means if you automatically re revalue our gold reserves to market we automatically have a higher effective capital base that should make us more uh credit worthy for lack of a better term so gold now um the u.s reserves are valued at like under 100 bucks an ounce something like that something crazy right i'm not sure exactly but but i mean that's like 1933 levels or something right and and of course gold is over four grand an ounce so like why would we continue to value our own gold reserves thousands of dollars below what they're actually worth i have no idea that's weird though right it is yeah especially when every other metric in the county we have cost of living adjustments based on the cpi basket i don't i don't know that's a so how much um just to go back to your uh career trajectory in emerging markets debt yes sir how much uh chicanery is there in that business like so if you know you're dealing with emerging markets so some of those are like you know solid transparent well-governed countries and some of them are nigeria right what's that like well i would say there's two components in the emerging markets trading business there's the the trading thereof in sort of the big money centers like hong kong london in new york and then there's the domestic stuff that happens now i could say in terms of chicanery there's a clear 80 bc line at the global financial crisis on how we conducted business across the street and all products pre-gfc post gfc and all i could say was a lot more fun pre-gfc was it fun it was a lot of fun it was as much it was as fun as you could have having a job really job what was so fun about it um every day was different uh you're on a trading floor everyone every every day is different you had a front seat uh you have a front seat and you're participating in global events every day uh mark's moving up moving down you're working with like a truly diverse bunch of people from all walks of life that are as close probably to merit meritocracy on trading floors you could get and it was very clear what the motivator was uh it was making as much money as you could every single day and uh there was nowhere to hide from that so as a young person uh it couldn't be a better learning experience because every day at the end of the day there's a number next to your name and whether it was through your good luck bad luck hard work whatever the number doesn't lie and that's the number and it's just a great way to learn and to have to face yourself and improve upon yourself and uh you know the trading floor was guys you know like phds from princeton to guys that dropped out of college and we were all kind of in it as a team it was really fun and uh what were the personality traits that allowed people to be successful like what's the perfect profile of a trader you know it's funny i found that the best traders and there's there's investors and there's traders right uh different it's a different mindset the best traders i find were guys like to think we thought more in two dimensions so if you thought in three dimensions you could out think you're you could outsmart yourself way too much the what ifs and oh but uh and if you're in one dimension you're just not at the iq level to function so the two dimension that kind of took the factors of play uh saw what the trend was took it at face value didn't overthink it went with it and wasn't too much had enough risk appetite but wasn't too much of a uh cowboy i guess would be the perfect trader that i saw the the worst you're describing my dogs yes the worst traders i i saw uh were oftentimes the smartest people really yeah because they just overthink just overthink your way you over trade it you overthink it uh you're always looking at the uh you're always looking at the but this and that and i have all this information either analysis paralysis and or talking yourself out of a good trade how did it change after the financial crisis um we were egregiously uh over-regulated uh from all from all sides um did that make market safer for retail investors i don't think so yeah because the picture you painted over the last hour and a half is not one of like impregnable safety no let me just say that i mean there's obviously a lot of unintended consequences from the excess regulation but um it just you know it's funny i out on wall street i think we were actually at the vanguard of hyper regulation hyper monitoring i mean they were monitoring every bloomberg chat every email every phone call uh everything was taped then they ran algos against it for keywords um you just like way more scrutiny and everything lived in the panopticon before everyone else yeah i did and i and i think there's also you know a lot of going back to the global financial crisis is such a seminal moment in this country in a lot of ways because it actually we made this deal with the devil and i you know i i i'm a beneficiary to bail out i worked at a big bank that got bailed out and and uh i will make no i i i won't uh i'll never deny that but in doing so we we let the trojan horse in and we married the the government effectively and we they came in and they basically wrote our policies they wrote our policies for us and uh from hr policies to recruiting policies to uh you know all the regulation um and the stuff that i saw from a distance in terms of sort of arbitrary uh fining uh for violations was kind of gangster-like and i saw a lot of good people sort of thrown on the funeral pyre sacrificed um just just tossed out like oh let's you know this guy this guy was in violation these guys weren't but they were on the same bloomberg chat so let's let's give like 10 bodies everyone's fired everyone's career's over it was it was a that was a bad that was a bad time it's a bad time and so everyone started trading scared people started trading scared and it lost the the joy and it lost the but famously none of the you know the ceo the executive level seemed pretty insulated from punishment yes um you know if i were gonna give if i were gonna give a more sort of generous take on it you know the ceos really didn't have much of a choice in some regard it was like look here's a deal you could keep your job and keep making 25 million dollars a year uh or if you agree to this fine for mortgage-backed securities or whatever libor rigging or whatever it is this this arbitrary number you could keep your job and you can keep your salary or you can get fired and the next guy will agree to it so like and they kept it a full and they had to be they had to be in good stead with the government or the fines and the regulation would just come and come come and come come but once you get bailed out once you ask for the bailout they own you and that's what happened it always is what happened they made the deal yeah and it was like the tobacco companies right like they kept the tobacco companies alive just long enough to keep bleeding them for fees like then they figured out there was just there was money there to to take and uh they just kept coming back about yeah and the country did not get healthier life expectancy went down and if i can just be honest i don't think the quality of the cigarettes improved at all no i'm serious if you smoke a sort of pre-settlement marlboro red not that they exist anymore or a current one it's like it's not even the same product i was a pre-settlement guy i quit yeah oh me too i'm just i'm just saying i've heard that so no i don't really think anyone won except for politicians right i don't think a lot of lung cancer patients well a lot of nice new regulatory buildings were built and i think also one of the great stories that hasn't really been maybe this was for you one of the great stories that should be investigated is where did the proceeds from all those post-gfc fines go because i saw some stuff in around the time that was kind of staggering as to where it went now obviously it went back into building more of the regulatory bodies like more uh sec regular whatever um but i i think some of the money uh flowed to some very uh specific political organizations there's no question about it um it went to the swamp meanwhile the whole pretext for this the justification for doing this was i i lived here then i just saw my house that year so i i was a victim of all this too even though i never participated in it but um i lost my job along with a lot of other people and just because the economy contracted so people lost their jobs right including those with four children um but the justification was which i wasn't against it was like these people are totally reckless like they're completely reckless like what is a mortgage mortgage-backed security what's a derivative and like no one outside your world has ever heard of any of that it's like i thought when i you know signed up for a mortgage like the bank i signed with held the mortgage like we we had no idea they sold the mortgage like most people didn't know again there's a lot of ignorance including in my house about this stuff and so the idea was like this is crazy and we need to reign it in you've just described the quote gamification gamification of yeah well markets and it's like that doesn't seem like a decrease in recklessness it actually reminds me something the for the part of the previous conversation which is you know people say you never know when you're when you're in a bubble until it's over yeah and that's entirely incorrect i mean i've been through a bunch and we all know like we all really oh yeah we just didn't know when it was gonna end i mean like you mean example people were talking about the bubble in 05 no if you fought it in 05 you were out of a job pretty quickly like it went on for a long time i could tell you the the reason i want to bring it up is again the the parallels to today is in you know so in 07 i had been on trading bonds for whatever 13 14 years so not the smartest guy not the most quantitative guy but been around enough to trade enough stuff to understand kind of how stuff works and all this stuff they're coming through with like cdo squared and clo the and like synthetic this and that and like i didn't really understand it i didn't have to trade it but like i didn't really understand it i don't really want to get into it because i didn't need to but it's just it's thinking if if i'm already in the whatever percent of financial experts just by nature of where i sit every day and it doesn't smell right to me yeah something's not right um and you trade nigerian debt right so right right right so yeah i'm taking credit derivatives on bulgaria and stuff so like yeah yes but and if you're yeah you're taking derivatives of mulgaria but you're like this is too much for me it's just like how many acronyms also i'm just i'm i'm substantially averse to any acronym and then when you when you take the acronym and square it you know you're in trouble but but then this this latest go around the last couple months with all this circular financing and hype with all the ai companies and every day you know somebody's buying chips from somebody who's going to lend the money to buy the chips to invest in the scaler who's going to do this like for every day four companies are you're like dude i suppose i could figure that out if i sat down and really tried to but it gives me a headache just even thinking about it and clearly it smacks of some kind of it smacks of desperation or something that's just my my gut is just having you know the sniff haven't been around a long time it's like dude if it doesn't smell right it's just it doesn't don't put it in your mouth right right so you remember thinking like what about the tech bubble in 99 2000 did you think oh i got blown out pertin personal training trying to short that like the fall of 99 a lot of other people yeah i mean everybody yeah oh i've hilarious hilarious and that's i was with my wife uh in march of 2000 at a dinner at a lunch with a guy who was chairman of a major uh major broker dealer famous famous broker dealer and where she's 30 at the time never invested in anything and we're sitting next to him he's like so what are you she's like oh i've been day trading stocks he's like explain that what do you mean you've been day trading she's like oh yeah i just buy whatever ipos i just if it comes out i buy it do you remember that in 2000 all the ipos right and everything just went up like she's like yeah i just i just buy it and then i sell it it's awesome and i saw i saw his eyes just go like this and then that was like that was like the that was like the joe kennedy shoeshine moment i mean it was literally like february or something i think it was probably within probably two no it's when your housekeeper is investing in condos in clark county nevada that you were like i think maybe this is overheated just a little bit no for real or you get your uber dial uber divers like trade crypto completely yeah whenever people are going hard on like cape coral florida real estate who don't know anything about real it's not against cape coral but you know what i mean yes and those were the hardest hit zip codes yeah so you think it's pretty obvious is what you're saying i just it's it feel they there are sort of like the uh russian just sort of like the letter that they wrote uh about the hunter biden laptop it has all the hallmarks of russian disinformation it has all the hallmarks of uh yeah late stage rally let's say that yeah well you're very diplomatic i have to say though just like with the baseline fact that you spent your life trading emerging markets debt i think if you're uncomfortable with something it's fair for the rest of us to be uncomfortable with it appreciate that uh yeah last question you've uh been through all these bubbles and bursts and debt crises and bailouts and at the at the end of every story is the united states or u.s aligned institutions like the imf coming in and kind of saving the day is that if that's that's the thread that runs through all these yeah in simple terms sure i only deal in simple terms coleman um but what happens if that happens who bails out the bailer right who bails the bailer uh nobody okay so then what happens i don't i don't think i hope you bought that uh that agricultural land in brazil at that point uh so then what happens i don't think we i don't think we get to that point anytime soon um but just theoretically as we mentioned before you know there is no there's no alternative right now right um people still as bad as it could get in the states like we're still the cleanest dirty shirt in the pile for the time being right we still have this free and open markets where capital flows and gets treated well there's time there's still time to course correct um i'm not willing to go to who bails out who bails out the bailer i just i i'm not willing to go there i'm not willing to go there we'll we'll be all right we're still still the united states of america and we've got a lot i mean this administration's got a lot of mental firepower and a lot of experience we still got time coleman church ladies and gentlemen thank you thank you thank you so much