The Wrath of Powell - Buried Alive with Vincent Daniel and Porter Collins - video Dailymotion

Bullish Studio

Guy, Dan and Danny are joined by Danny's "The Big Short" colleagues Vincent Daniel and Porter Collins to discuss Fed losing control (4:02), Guy nailing his S&P 500 price target (17:08), the writing on the wall for Tesla (19:44), the next move for energy stocks (25:40), why crypto could be one of the biggest bubbles we've ever seen (31:54), what investors should do now (39:30). Later, they take listener questions (48:39). recession

Transcript

00:00:00 Balance your trading strategy by adding futures. CME Group helps you manage risk

00:00:05 and capture opportunities in all market environments. Capitalize on around-the-

00:00:10 clock access to highly liquid global futures and options market across all

00:00:14 major asset classes. Just visit your online broker and get started. Plug into

00:00:19 valuable educational materials and trading tools and see what adding

00:00:23 futures can do for you at cmegroup.com/onthetape. iConnections is the

00:00:32 world's largest capital introduction platform in the alternative investment

00:00:35 industry. They bring the asset management community together through a membership

00:00:39 platform that lets allocators and managers meet and connect both

00:00:42 physically and virtually. Over 3,000 allocators and 600 managers are part of

00:00:48 the iConnections community overseeing nearly 48 trillion and 16 trillion in

00:00:53 assets respectively. iConnections first came to our attention in 2020 during the

00:00:57 first wave of the pandemic. That's when their first event, Funds for Food, became

00:01:02 the largest virtual cap intro event in history. To date they've donated nearly

00:01:06 two and a half million dollars to charities. They are also the people

00:01:09 behind the alternative investment industry's largest and most exciting in

00:01:13 person events. To find out more about iConnections events and members-only

00:01:17 platform visit iConnections.io. There's a word called kismet. Not quite sure what

00:01:24 it means but what I think it means is sometimes the stars align and Dan and

00:01:29 Danny as you know we book our guests months in advance and months ago we asked

00:01:35 Vinnie and Porter to come visit us here to do the podcast. Now it just so

00:01:40 coincides with all the things that both of those guys as well as Danny Moses

00:01:45 have been talking about ad nauseam. It's sort of the culmination of all these

00:01:50 things so it's amazing that they're with us today. I'll say this allow me this

00:01:55 indulgence and then we will open it up to the floor. HBO had a wonderful mini

00:02:00 series a few years ago the name of it was Chernobyl. I encourage you all to

00:02:05 watch it black and white wonderfully done and it was a six-part series and

00:02:10 the final episode took place in the control room of the nuclear reactor at

00:02:15 Chernobyl. They were running a test after midnight that night and there was one

00:02:20 guy in charge clearly he was the one making decisions but he had minions

00:02:24 around him and in order to do that test they needed to shut down the reactor so

00:02:30 they shut it down they ran their test and then they decided that he needed to

00:02:35 take the reactor they needed to bring it back up. So one by one this gentleman in

00:02:40 charge asked the minions to take out control rods and one by one they took

00:02:46 out the control rods waiting to get a reaction. They weren't relying upon their

00:02:51 eyes what they saw what they knew their experience they were just relying upon

00:02:57 and watching one certain thing and the reaction wasn't happening. One by one the

00:03:01 control rods come out until guess what they took out every control rod much to

00:03:08 the chagrin of a lot of those people but they did it anyway. What wound up

00:03:12 happening well guess what they actually got the reaction they were looking for

00:03:16 but what happened they weren't able to control that reaction subsequently you

00:03:20 had a meltdown. Guy why do you bring that up? Because these dipshits at the Federal

00:03:26 Reserve decided that in order to get the reaction they wanted in this case

00:03:30 inflation they were gonna remove every single effing control rod and guess what

00:03:36 happened I know Vinny knew this was gonna happen I know Porter knew this was

00:03:40 gonna happen I know Danny knew this was gonna happen they got the reaction they

00:03:44 wanted the reaction being inflation but guess what folks they can't effing

00:03:49 control it and that's what we learned this week Danny Moses. I think that it

00:03:54 was a six-part series I believe that part happened in episode one so just to

00:03:59 clarify I don't think I've been episode six but we are probably in episode two

00:04:03 or three here the Fed thing but I want to welcome Vinny and Porter in here

00:04:06 today and like when we had Chanos on here a couple months ago people added us

00:04:09 oh markets down you brought in Chanos the big shorts no we had that plan too

00:04:14 much in advance so for those out there we're gonna let you know we have bulls

00:04:17 coming on in months ahead and bears coming on months ahead and maybe you can

00:04:19 trade accordingly but this is a great place to start guys because we've talked

00:04:23 about this a long time we bore witness to the Fed printing money and what that

00:04:27 meant and now we're dealing with the draining and to me the most striking

00:04:30 thing about that press conference yesterday and I actually said going into

00:04:33 it that people would clam on to something that he would say that would

00:04:36 be deemed to be dovish it's not that he doesn't have control he has no effing

00:04:40 idea what's going on and so he could have done 50 75 or 100 it wouldn't

00:04:43 mattered the one comment he made to me that was most striking was that he

00:04:47 admitted he says I guess I'm gonna watch some financial conditions I'm watching

00:04:51 other things other than just unemployment but the guidance that they

00:04:54 gave the economic projections make no sense there's no softly and they try to

00:04:59 portray a softly so anyway with that I want to turn it over to you guys

00:05:02 welcoming to the show and get your initial thoughts on that out of the gate

00:05:05 Porter I didn't know guy was gonna use that reference but that was beautiful

00:05:09 wasn't that beautiful that's why they pay him the big bucks but it speaks to

00:05:12 and you know I want you guys to talk this is not about me but interesting we

00:05:16 had Richard Fisher on the show fast money earlier this week my statement to

00:05:20 him was the wealth gap in this country has never been wider you screwed people

00:05:25 on the way in effectively and those same people getting screwed on the way out I

00:05:28 put that that a Fed I'm not asking you to comment and then I said the following

00:05:32 I said it's not about being wrong if you watch fast money over the last 15 years

00:05:37 I'm wrong all the time I have no trouble with people being wrong what I have

00:05:42 problem with is hubris the hubris to beg for inflation and then to think that

00:05:47 once you get it you'll somehow be able to control it that's my biggest problem

00:05:52 he addressed it I think off-camera or affair he would have said something

00:05:56 different but that to me is the problem the fact that these assholes I'm

00:06:00 choosing that word thought they could somehow control something they have no

00:06:04 control over Porter so guy you said it correctly I mean they can't control this

00:06:09 right and the problem is is this world has never been more financialized and

00:06:13 we've put more and more debt into the system and I think that's where Vinnie

00:06:17 and I really have our expertise in the guts of the financial system you can

00:06:22 find a better tech guy or energy guy but in terms of financials and this is what

00:06:26 we're dealing with we're dealing with a balance sheet problem here that the Fed

00:06:30 has and they're gonna need to raise rates to control inflation and they're

00:06:36 powerless and the problem is is the last tech bubble they cut rates a lot and

00:06:41 there's no seatbelt right now they're driving and the cars crashing and you

00:06:46 got the Fed but then you have the BOJ uh-huh the Swiss National Bank race

00:06:50 right out of nowhere out of nowhere the ECB Boe it's everywhere that's the real

00:06:55 problem that's why I'm scared there's so much to go on right now but I'm gonna

00:06:59 start and say that I don't spend a lot of time looking at the dot plots I have

00:07:05 a lot of friends who just study it like mad relative to who cares the biggest

00:07:10 issue right now the way I see it is that the Fed is no longer the panacea for

00:07:16 markets it's not and I actually think it's a shame that policymakers are

00:07:21 sitting on their back and saying hey guys at the Fed you take care of this

00:07:26 inflation thing and the majority of the inflation that we have right now I think

00:07:30 everyone made a mistake using that word transitory that was completely incorrect

00:07:36 what they should have used was structural all the inflation issues we

00:07:40 have right now are structural so how are they trying to solve a structural issue

00:07:44 by taking away jobs by destroying demand I mean it's as stupid as stupid can be

00:07:50 it's the dumbest economic policy so the one thing please don't yell at me you

00:07:54 know how much I hate the Fed the Fed doesn't have a choice they follow the

00:07:58 rules and the laws of their boss and their boss is telling them to get

00:08:01 inflation down and I guarantee you when the Fed peeps go home and have a drink

00:08:07 they're yelling at their bosses saying what in the world do they want me to do

00:08:12 they want me to send this thing into a recession that's the last thing Powell

00:08:16 wants to do but it's the thing he has to do right now because that's his mandate

00:08:19 you're spot-on with this but you know they're begging for inflation for years

00:08:24 the inflation was right before their eyes if you were paying attention which

00:08:28 is the cheapest thing you can do it was right there the entire time they just

00:08:33 didn't acknowledge it now whether they chose not to acknowledge it or just

00:08:36 didn't see it I don't even know what's worse I happen to think not seeing it is

00:08:40 worth but they didn't acknowledge it either we were saying on fast money

00:08:43 Danny before we started the podcast if you just look beneath the surface

00:08:48 there's your inflation they just didn't have it in the places that they wanted

00:08:51 now it's rampant and to your point they're screwed so very interesting okay

00:08:57 so we're talking about their hiking into this thing they're hiking into 40 year

00:09:01 low back to pre pandemic unemployment they're hiking into the weirdest

00:09:05 inflationary environment we've been in in more than 40 years is what you're

00:09:09 not suggesting that they go easy now right I know you're not can't so they

00:09:12 can't so I guess my point is if you think about this the way they combated

00:09:16 the 2001 recession and the subsequent bear market and the implosion of the

00:09:21 dot-com and the post kind of y2k kind of hangover and all that sort of stuff is

00:09:25 yes Fed funds came down from 6% to 1% but they didn't expand the balance sheet

00:09:30 in a meaningful manner until the financial crisis and I know guy and I

00:09:34 differ on this in a way like I think tarp and all those other things that they

00:09:38 started small like 200 billion I mean these are now we're talking trillions

00:09:42 right so they avoid and guys gonna say to me well you can't prove a

00:09:45 counterfactual okay but we avoided a depression and a full global collapse of

00:09:51 our financial system so then we started adding hundreds of billions that got to

00:09:55 over trillions on the balance sheet right and then they kept it too easy for

00:09:59 too long and then we had pandemic happens black swan event and they throw

00:10:03 trillions of dollars in monetary and fiscal at that again avoiding a massive

00:10:08 credit situation globally that would have been a depression so this is where

00:10:12 we are I don't think it's as nefarious as like some people would think and I

00:10:17 know you're gonna talk I've never used that word nefarious I've never as a

00:10:20 matter of fact what I've said is history is littered with disastrous outcome born

00:10:25 of good intentions I don't think these are nefarious people at all I just think

00:10:28 they don't know what the F they're trying to accomplish Porter and I were

00:10:32 talking about this earlier today the one time that I could defend the feds

00:10:37 actions was during Kobe that's when policymakers force the entire country

00:10:43 down look I have a lot of issues of how they did it but I kind of get that's

00:10:47 what the Fed was there for what I have an issue with is you kept rates at zero

00:10:53 for 10 to 12 years what the fuck do you think was going to happen we don't have

00:10:59 a demand problem we have a supply problem right now I mean we're gonna

00:11:01 have a demand problem eventually if they were to do something dovish you would oil

00:11:05 would be at 150 so that's where their box in the other issue that I have a big

00:11:10 problem with how the Fed thinks that this quantitative tightening is equal to

00:11:16 a quarter point half a point that to your point Dan you just made hold on

00:11:20 that is their biggest miscalculation here's why it's not mathematical it's

00:11:24 behavioral why do I say that mortgage-backed securities why have

00:11:28 mortgages gone up so much relative to Treasuries because people anticipated

00:11:32 the Fed pulling liquidity from the mortgage market they're actually said

00:11:36 two months ago we're gonna outright sell mortgage-backed securities so it's the

00:11:39 front-running in a legal manner I should say from behavioral perspective of that

00:11:43 to think that that's a quarter or a half point it's crazy to know the Fed has

00:11:47 your back is priceless to know when they don't you can't put a number on it so

00:11:52 there is no mathematical equation and his Sally Field moment that's what he

00:11:55 had yesterday he had they like me he wanted to be like yesterday on that

00:11:59 press conference he tried to say things that whatever and people saw right

00:12:02 through it after you know 12 hours no you're spot-on so what forces them to

00:12:07 pivot again my opinion only but if the credit markets start to seize up they're

00:12:13 gonna be forced to pivot again if they make that pivot Vinny I will tell you

00:12:18 flat out that's gonna be the green light for commodities forget about crypto but

00:12:23 I also believe it's gonna be the green light for crypto but I'll tell you and I

00:12:27 think you agree with me Danny Moses that's when gold has its day so Vinny

00:12:31 talked to me about that potential happening well that's my big issue which

00:12:35 is okay let's fast forward a month or two and the Fed does something that gets

00:12:41 the second or third derivative thinkers to think that they pivoted and if that's

00:12:46 the case I'm with you that you are now going to be a more of an accommodative

00:12:50 risk on liquidity on environment and as a result eventually yeah first they'll

00:12:57 take up the beaten down Cathie Wood stocks but eventually the commodities

00:13:01 are gonna go up so I think and Porter can jump in here I think what you really

00:13:07 need is a complete regime shift that's my opinion I'll talk about it in a

00:13:11 little bit yes of course if the Fed pivots that all these stocks are gonna

00:13:14 go up and I think that's the opportunity to sell more because this is a cycle and

00:13:19 earnings revisions are just getting started and we're here at peak margins

00:13:23 and margins are going nothing but down revenues are going down and you still

00:13:29 have people buried alive in tech stocks in all this illiquid stuff and honestly

00:13:34 no one knows what to do and this is all just the reverse of what Bernanke talked

00:13:39 about I go back to the original explanation of QE he's trying to push

00:13:44 people out on the risk curve now the people who were buying triple-a at the

00:13:47 end it was not much to buy now the triple-a buyer can buy real assets at

00:13:52 real yields and he doesn't need to mess around with all this junk and when the

00:13:58 rug gets pulled and all this junk right you've seen IG issuance go to nothing it

00:14:02 really affects the liquidity and the wheels of finance and all this stuff and

00:14:07 people don't have a clue because it credit is such a weird thing and it's

00:14:10 the underlying growth of all this stuff and the rug is being pulled and so I

00:14:15 think that it's gonna be a slow-motion train wreck in terms of earnings so the

00:14:19 market kind of gets it but the people on the ground can't see it yet but come

00:14:24 this fall the economy is gonna be feel really bad and I think that's the

00:14:28 biggest issue so guy even before I knew you I know you're a pop culture guy

00:14:33 Porter just made a comment buried alive that comes from the wrath of Khan

00:14:39 Ricardo Montalban other than Fantasy Island his greatest moment how about the

00:14:43 Chrysler Baron commercials or Jerry will tell you that wrath of Khan is the best

00:14:48 picture Jerry Khan I mean Jerry Khan what wrath of Khan no you don't remember

00:14:52 the episode the Seinfeld episode yes I do but hang with me here buried alive I

00:14:56 know this is nuts I started thinking of the Barney song Vinnie what Barney song

00:15:01 would I be singing with baby bop and Barney would it be clean up this is

00:15:05 clean up clean up all that every this is the cleanup this is it bye-bye

00:15:10 Cathie Wood bye-bye Ross Gerber bye-bye Gary Black bye-bye all these people that

00:15:16 have been living in this world of pretend because we are in Barney world

00:15:19 of pretend is what it has been this is my rod I guess I'm gonna move right into

00:15:22 a bar I'm more when the levy breaks right now I mean big short theme song we

00:15:26 talked about this no but my point is that you want to know when I'll be

00:15:29 bullish this I think it was a question I'll answer later that came from a

00:15:31 listener or viewer on Twitter whatever when it's people when I see those things

00:15:36 go by when Cathie Wood files bankrupts when that arc shuts down when I see

00:15:40 people fully I know we're getting closer yes Vinnie I would just like to even see

00:15:44 outflows from our right she's a marketing genius by the way if I invent a

00:15:48 product and I'm gonna sell something I'm hiring her she'll be available to sell

00:15:51 something it's just unbelievable what he she has pulled these people anyway so

00:15:54 you made a comment about we'll see those stocks Cathie Wood stocks go up I mean

00:15:58 to me those are orphan stocks they're gone and we're gonna get into Tesla here

00:16:02 in a second but that's the stuff you need to see to know that you're near the

00:16:05 bottom the rational behavior and I will say one other thing about this market

00:16:08 which has perplexed me for several years to me it's about behavioral finance and

00:16:13 everything has been the opposite the most obvious things have worked from a

00:16:16 time of perspective nothing has made sense and I think I've said it from all

00:16:20 along the institutional community has underappreciated the power of the retail

00:16:23 community and underappreciated I always have how much capital the Fed was

00:16:29 providing into the markets but I mentioned before you can't quantify what

00:16:33 quantitative tightening takes away because of the pile in the pyramid that

00:16:36 comes on top of them knowing everybody it's not about nine trillion it's about

00:16:40 the trillions that are after that that knowing that they feel secure now it's

00:16:43 the opposite so it's not about the Fed unwinding the balance sheets about the

00:16:46 confidence that they're there so not only are they not there anymore they're

00:16:50 acting like morons and so combine that that's why we're dealing with a day

00:16:54 we're down 4% today and I got news for you there's no October 19th 1987 but

00:16:59 it's been happening over a course of a week or two we're down what is it near

00:17:03 10% probably in the last seven eight trading sessions between I think we had

00:17:07 a two or three or two right and the S&P is only down 23% from its all-time

00:17:11 highs and we go back to the time this is trial by fire for Powell in 2018 and we

00:17:16 talked about this a lot in q4 when the S&P went down 20% given everything the

00:17:22 cross currents the headwinds everything this can't be it listen I got to give

00:17:26 guy a lot of credit he never likes to toot his own horn a little bit

00:17:29 Nostradami Nostradami he's been saying based on math I want to put a 10-year

00:17:34 average PE of the S&P about 17 on basically I don't know 3 4% EPS growth

00:17:41 like we were all astounded that the 10 plus percent consensus estimate for S&P

00:17:47 earnings has not budged it's still about 10% you know it's a bit higher in some

00:17:51 areas or whatever so if you put let's say 5% you get to your 3750 you've been

00:17:56 calling the 3750 all year now you want to do 17 and maybe that's even high you

00:18:02 guys would say but on that's high good Vinny lower oh wait oh wait we're

00:18:06 playing a car sharks car sharks car sharks car lower Bob lower Bob right so

00:18:10 so 17 times 200 that gets you a 3400 that's your new Nostradami that's your

00:18:16 new target here 3400 on the downside but if you hear Vinny talk and you know

00:18:20 magic man now you see me now you don't that's what's gonna happen with earnings

00:18:23 by the way well el diablo - you're gonna talk about 200 maybe on a 15 number and

00:18:30 then you could start seeing how this thing can escalate to the downside can

00:18:34 continue to cascade to the downside so you know what's funny and curious as to

00:18:38 what you guys people say you're un-american you're always negative

00:18:41 first of all fuck you and I'm saying that if you want to edit it out that's

00:18:44 fine I'm not I think I'm gonna leave that actually but second of all I think

00:18:48 the most American thing you can do is to try to point out that just sort of the

00:18:52 madness that's going on while people are sort of caught up in it so anyway that's

00:18:56 my mini rot anyway Porter please I'll use Danny's line people are like you're

00:19:00 always bearish I told my dad to sell stocks once I got that so everything

00:19:03 he's like poor you're always naked like I'm a realist that's Danny's line I have

00:19:07 to say like from our perspective Vinny and I like the first part of this has

00:19:11 been for us very easy because you think about us we've been through two crashes

00:19:16 for the dot-com and the 08 we run bearish anyway we go zero to bear faster

00:19:21 than Tesla we only read bearish books we only read bearish tweets and we only

00:19:27 have bearish friends so yes the first part if we had missed this tech crash we

00:19:32 would have really impaled ourselves so and then we luckily also had the

00:19:36 inflation call it alongside the only problem from here is and I said it on

00:19:41 another podcast this is that part of the market that gets bloody where you're

00:19:45 waiting for earnings to go down and some will some won't and people be squeezed

00:19:50 and all over the place and I think this is gonna be the hard part of the cycle

00:19:55 and there are stocks that we love and we were talking about and today we're like

00:19:59 I love the stock it's just not gonna go up it's frustrating but let's address

00:20:02 Tesla right now I know every podcast we talked about eight times but my boys are

00:20:07 here with me and there's been a lot of development you're feeling good you're

00:20:10 feeling good feeling I'm in a comfort zone that I can talk about it I will say

00:20:13 this Vinny and Porter remember this there was a time period during the

00:20:16 financial crisis actually said I probably said it every day so it went an

00:20:20 answered but if you're long new century credit home lenders countrywide at the

00:20:25 time you don't deserve to be a part of any shareholder lawsuit that comes your

00:20:29 way you should be expelled from ever owning a stock again for idiocy you

00:20:34 shouldn't have to because any moron could see what was on the wall anybody

00:20:37 could tell you that the CEOs were lying to you anyone could tell you that it was

00:20:40 there right in front of you so you have no right to invest at all I mean that

00:20:43 this should be relegated away from anyway we are now at that point with

00:20:46 Tesla I'm sorry but we are forget about valuation it's not evaluation oh this is

00:20:50 the handwriting that's on the wall it's not ghostwritten it's actually coming

00:20:54 out on the wall Larry Ellison leaving last week on a Friday night dirty not

00:20:58 being replaced either the three-for-one stock split I need Gary Black to tell me

00:21:02 no that's a positive I've done research on something whatever so Friday night

00:21:06 dirty's are Friday night dirty's that's why they come out on Friday nights I'll

00:21:08 get three days to go away okay people resigning from places whatever then

00:21:12 plain sight comes out with a report and the NHTSA comes out I'm setting the

00:21:16 table for you guys here these are fundamental issues with the company but

00:21:21 they're also potentially criminal issues with the company and the one thing I'll

00:21:25 turn over you guys in a second it stands out to me the most that's been found that

00:21:28 people just want to willfully ignore because Elon Musk can cure anything is

00:21:31 that the autopilot reaction that people only had a split second to put their

00:21:37 hands back on the wheel so that Tesla could say the way their software is

00:21:39 written it wasn't on autopilot when it happened there's a lot of things here I

00:21:43 just loaded onto you were there but again fundamentally I don't have to make

00:21:47 an argument it's a short but these other things are happening and so give me your

00:21:50 guys current opinion where you are what you think about Tesla here because at

00:21:54 this moment I'm short to stock everybody out there so yes I'm talking my book I

00:21:58 don't give a shit because this is the most short I've ever been in the name

00:22:02 right now and I said it to everyone I said it's a better short at 600 or 650

00:22:06 than it is at 900 and now we're seeing why so to me the one thing the Bulls have

00:22:12 on us is that we have yet to be able to prove that their tam math is wrong

00:22:18 you're going fundamental on no no and so as a result they've been able to cling

00:22:23 on to this demand thing for that car regardless of he's a crook regardless if

00:22:28 he's a charlatan what is he doing with Twitter the dogecoin the FSD everything

00:22:33 they said well guys he sells cars he and he lands rockets on moons I actually

00:22:38 think over the next six months he's gonna have a problem hitting his demand

00:22:41 targets he's definitely gonna have a hard time and they'll probably dismiss

00:22:45 it in 2q because of one-off issues but I think once that happens it's completely

00:22:50 alright so what did you guys make of the two weeks ago he said he has a super bad

00:22:54 feeling about the economy is that a soft guide speaking to this demand issue we

00:23:00 know that the China production is listen China demand is not going to be a thing

00:23:04 in my opinion but with their market share in China is a disaster right we

00:23:08 used to say on names like Tesla is right now he's getting out his cauldron

00:23:12 boiling water and he's about to create the greatest alchemy known to mankind to

00:23:18 make the quarter the guys master a bullshit gap and proforma adjusted so

00:23:23 he's gonna make the core I don't know how he's gonna do it but he's gonna do

00:23:25 it the real question is does he pivot on demand a little bit and if it does I

00:23:31 mean there's 300 to 400 bucks down just there and to me that's kind of what I

00:23:36 play for and on the bull case I'll come wood but I don't really see what people

00:23:41 are seeing anymore because the probability of that tam demand in 2030 X

00:23:46 just seems far-fetched so yeah I mean I need more than that boys I mean he might

00:23:52 be cooking books we know that the he's counting used car sales as new sales

00:23:55 whatever Vinny the metrics you're talking about where he makes quarters

00:23:58 may not be real but even if it is real I think your point is that it's expensive

00:24:02 on any metric but the whole thing is about him and his brand and he is the

00:24:05 brand so things that happen to him and the walls are caving he switched

00:24:09 political parties he'll do that Larry Ellison leaving is a big deal so Porter

00:24:13 we have this other podcast called ok computer and we have a lot of tech folks

00:24:16 every single podcast I'll ask a VC an operator a founder I really want to get

00:24:21 him on the record for why they think he's such a special entrepreneur and I

00:24:26 think it's really interesting people are scared to death in the tech universe to

00:24:30 say anything negative about him and so my take here is this in the 25 years

00:24:36 I've been in the business and we've all been in the business that same amount of

00:24:38 time guy another 25 years so but I've never seen a mania I've never seen a

00:24:44 meme stock I've never seen a cult leader as it really I've never seen it go the

00:24:49 opposite way and not over correct it just never happened so this has to

00:24:53 happen unless it's just so strange and also when you think about guy you were

00:24:57 calling that quarter that q1 print the immaculate quarter or something like

00:25:00 that I called it the immaculate quarter sorry that's okay you did and on the

00:25:05 show fast money that evening you quoted what I said was this is the quarter that

00:25:10 they just reported they being Tesla that if you've been bullish and Tesla for the

00:25:14 last three years you have absolutely been waiting for the stock closed that

00:25:18 day I think little north of $1,000 in the after hours are traded up to 1080

00:25:24 and we said folks just putting it out there this is probably as good as it

00:25:29 gets and you probably only have downside from here I will tell you not that I

00:25:35 particularly care but I got eviscerated on Twitter for saying that and now $400

00:25:42 later here we are yeah you know what they should do the only way that socks

00:25:45 getting to a thousand is a one for two stock split not a three for one stock

00:25:50 whatever they announced all right let's move on what Elon Musk was supposed to

00:25:53 solve which is the climate crisis of which he's now supporting people that

00:25:56 are anti you know who don't buy electric exactly so but that's nice let's talk

00:26:00 about energy because I have issues with people being morons people now coming

00:26:06 after the energy sector claiming oh we should tax your gains whatever you know

00:26:10 what let me just say I know guys can agree on me go after the airlines first

00:26:13 those ones get bailed out every time something shitty happens then they gouge

00:26:17 the consumer go after the airlines first let's just go with energy stocks here

00:26:20 because one of the questions that we're gonna front run now that we're gonna get

00:26:23 in part two we're gonna answer it now was about what do you think of energy

00:26:26 here and on a relative basis let me just set the table energy is certainly the

00:26:30 most attractive from a fundamental basis what can you own in this market well you

00:26:34 told me where oil was gonna be I could tell you how much energy you want to own

00:26:37 what are the best balance sheets out there right now probably energy on the

00:26:40 cash flows that they're producing relative so you guys have been on this

00:26:43 trade for well over a year probably two years at this point on energy and had

00:26:48 nothing to do is before Ukraine this was way before the supply so give us an

00:26:53 update on where you guys think about energy right now and all this political

00:26:55 rhetoric which now coming at them which I think will go by the wayside give us

00:26:59 your updated thoughts on that so go back to how we got in the trade I mean first

00:27:03 of all we looked at capital availability back to where the banks are lending

00:27:06 where they are not and so an oil company could not get a loan anywhere the

00:27:10 capital markets are shut out and so we got into it that way and then well

00:27:15 started going up cash flows were there and then yes did we get lucky with

00:27:19 Ukraine absolutely but here we are now and my fear in the short term is that it

00:27:24 got some hot money as it was the only thing working do I worry about the

00:27:29 stocks long term not really on the margin have we've been trimming some yes

00:27:34 our new favorite energy trade we've been there for a long time this is not a

00:27:39 recommendation to buy the stock in fact I don't want you to buy the stocks but

00:27:41 coal stocks Peabody yeah people love Peabody is that symbol BTU yeah it is

00:27:46 but I honestly don't want anyone to buy it but they're gonna return their market

00:27:50 cap in a year I don't care if energy goes up or down a little bit they were

00:27:54 completely shut out of the capital markets for a long time they want to put

00:27:57 these companies out of business whereas everyone else's cost of capital is going

00:28:01 up BTU is becoming debt-free net cash positive this quarter I mean that's a

00:28:06 big sea change and that's fundamental stuff that we like one of the questions

00:28:11 we always like to ask ourselves at Sea Wolf and now what is the next 10 20% in

00:28:16 the stock gun to head you think the next 20% is up or down and for the first time

00:28:20 in a while with regards to energy stocks the answer is about 50/50 and if you put

00:28:26 a real gun to my head I said give them what the Fed is doing and they're just

00:28:29 trying to destroy demand chances are energy stocks are going to be down 20%

00:28:33 and they've already corrected a reasonable amount but I still think they

00:28:37 might have more to go but on the long-term basis again this comes back to

00:28:41 my issue of structural we need more energy period we need to spend massive

00:28:48 amounts of capex on energy and what bothers me guy you get me going right

00:28:54 now with the Fed one of the biggest issues associated with what the Fed has

00:28:58 done over the last 14 years is the massive malinvestment that we have had

00:29:02 in the world do we need another data dog do we need anything associated with web

00:29:09 3.0 do we need anything associated with crypto the amount of money that has been

00:29:15 spent and invested in VC 30 40 50 billion it's all gone dust it's gone VC

00:29:23 was almost a trillion dollars last year it's gone the odd thing is what I'm

00:29:27 potentially maybe bullish on six months from now is a complete regime shift

00:29:33 where we shift from capital adversely invested in all this stupid crap that

00:29:39 they're gonna have to write down and put it into things that we actually need to

00:29:44 get true inflation expectations down now you're getting me wound up because I've

00:29:49 said this now for years amongst the many unintended or maybe intended

00:29:54 consequences of the Feds largesse is it made people lazy whether they thought

00:30:01 that was gonna happen or not that's what happened and the things that people

00:30:05 should have been investing in they stopped and it's just makes me crazy the

00:30:10 level of complacency out there and the level of laziness it made corporate

00:30:15 America lazy why because you know what we don't have to focus on our business

00:30:19 why because we can borrow money cheap we can buy back our stock our stocks go up

00:30:24 every day because stocks go up every day and now we're seeing the other side of

00:30:29 that now we're starting to learn that maybe these geniuses weren't in fact

00:30:32 geniuses and the level of bad investment Malin whatever word you want to use is

00:30:37 out there but he and I may be bears we're patriots we love America and we want

00:30:42 Intel investing all this capital to build fabs back in the US is a big deal

00:30:47 the global supply chain issues aren't going away and the fact that if we wanted

00:30:52 to have a secure supply chain more stuff is gonna have to be invested in America

00:30:57 is that inflationary yes it is but in terms of having real jobs having the

00:31:02 middle class having a real good paying jobs that's the stuff that needs to come

00:31:06 back and that's the stuff that needs to be invested in and we've for somehow

00:31:09 gotten away from all this stuff and so that's the stuff that would make me

00:31:13 bullish and I've been saying this for years but no one care yeah so the only

00:31:15 point I was gonna make and I know guy that you do not solely places on the

00:31:20 hands or the shoulders of the Fed I'm reading a friend of mine's book David

00:31:23 Gellis New York Times journalist it's an awesome book it's called the man who

00:31:26 broke capitalism how Jack Wells gutted the heartland and crushed the soul of

00:31:30 corporate America this happened well before QE so malinvestment corporate

00:31:34 bullshit this is well before quantitative easing you're actually

00:31:38 getting a little bit into the semi annual review we're writing right now

00:31:41 right which is this is a 40 year phase and I think the end of a 40 year cycle

00:31:47 so this has been going on for a long time the u.s. hegemonic unipolar tax

00:31:54 favorable to capital all that stuff I think there's a chance that all of it is

00:31:59 about to come to an end or the probability of a slight change in pivot

00:32:04 to something different than that is highly probable and that's what we're

00:32:08 interested in and that's what I'm getting more bullish on not now six

00:32:12 months from now that's some wage inflation there Vinny this next 30

00:32:14 seconds is brought to you by tequila comos and yo yo cristalino because I've

00:32:20 had about two of them since I've been standing here but I want to get your

00:32:23 thoughts Vinny and I would say two years ago you called crypto Ponzi scheme wait

00:32:27 on this podcast he called it the perfect pie he called it the perfect actually

00:32:31 they call the perfect and so congrats on that call but I've looked at these

00:32:34 tokens what do they call protocol protocol as a company so when I look at

00:32:39 a theory I might say oh it was 500 billion market cap well that makes sense

00:32:44 in this idiocy that exists in the Nasdaq stocks Oh Bitcoin was a 1.2 trillion

00:32:48 dollar whatever now they're obviously down a lot so I look at them like that

00:32:52 because the only way that I can remain sane about everything I need your guys

00:32:55 up to the crypto a lot of energy demand has gone into mining too much I know

00:33:00 people will say oh it's saving the world is that whatever I need your guys

00:33:03 updated thoughts on crypto here malinvestment too much energy we heard

00:33:08 someone speak who's built this huge it's like the fourth or fifth largest data

00:33:12 cloud provider who used to be a miner of crypto Porter's home state Texas

00:33:18 approximately eight to ten percent of their energy goes to mining crypto

00:33:23 that's bullshit what are we doing this stuff that I got into Danny and I didn't

00:33:28 do as much work as we did way back during the CDO's and how to short these

00:33:31 things right I wish I did but it's okay oh we've been short of yeah yes but the

00:33:36 publicly trade there was more to do yeah and that's right is this whole concept

00:33:40 the DeFi and DeFi is specialty finance it's wholesale funded finance our

00:33:45 wheelhouse as we went down that rabbit hole you started to realize the entire

00:33:49 thing was complete other bullshit all of it there was no use case and even when I

00:33:55 was thinking about a theorem as a potential replacement to visa and

00:33:58 MasterCard so let me get this straight you have a new payments vehicle that

00:34:03 costs more than visa charges more than visa unregulated right unregulated and

00:34:08 it's not as fast as visa and MasterCard so how in the world are you going to

00:34:12 replace something that is regulated with something that's unregulated that's

00:34:17 slower and more expensive what are we doing why are we wasting this money well

00:34:22 it goes back to the Winklevice don't stop believing I just saw their concert

00:34:25 online it was marvelous Porter give me a come on was Bitcoin an elegant thought

00:34:29 process yes we came up with 10,000 coins it turned into probably what will be one

00:34:37 of the greatest bubbles this world has ever seen I'll give the SEC credit for

00:34:41 something to not approve these lenders to not approve Gemini they did they said

00:34:45 f this this is a security you're not doing this they let him be on the way

00:34:49 so the irony is that everyone in crypto and just for everyone listening out here

00:34:52 I'll say this Vinny Porter I hated Bitcoin at a thousand so I'm the wrong

00:34:57 guy but I knew structurally this sector was gonna suck people in there would be

00:35:01 bad actors that have existed and it will remain cryptos here to stay in some form

00:35:05 blockchain it's here well I'm not and I'm not gonna defend it but we could

00:35:09 have been having this conversation in 2001 about internet over the last four

00:35:13 or five or six years in the malinvestment in the schemes and the

00:35:16 scammers and the this and whatever and I think it's important to have that sort

00:35:20 of context in a way because we have no idea it did turn into a two and a half

00:35:24 trillion dollar thing and to your guys point about VC there were some of the

00:35:28 largest VC web3 crypto focus things and recent did a four and a half billion

00:35:34 dollar fund Katie Hahn ex Andreessen did a one and a half these are all in the

00:35:38 last few months so actually that's the most bullish thing for crypto is that

00:35:44 those funds have been raised they're gonna be deployed and they're probably

00:35:47 gonna find some reasonable homes that come up with the next I don't know

00:35:50 trillion dollar protocol or company or something like that because guys 20

00:35:55 years ago nobody in their wildest dreams could have imagined that Amazon that

00:35:59 lost 90% of its equity value from its highs in 2000 to its lows in oh - at

00:36:04 some point was gonna be nearly a two trillion dollar company with a half a

00:36:07 trillion dollars in sales is that fair we could all dream that dream 20 years

00:36:11 out or no this is not 3d printing from seven years ago to be fair it's not our

00:36:16 skill set to be a visionary like that to see the opportunity that's not mine

00:36:20 either but I will say to date everything I've heard what they're doing none of it

00:36:27 goes through I haven't heard of you what if I push back and say that there's

00:36:31 probably some of the most genius things that might be able to fix traditional

00:36:35 finance in the wreckage of defy of 2022 hold on Dan let me just say some of the

00:36:40 smartest people I have ever met in my life are deep in the crypto we correct

00:36:45 so I know something's coming out of it I know that there will be applications

00:36:49 Dan I'd no question how to value them I have no idea if you want to equate it to

00:36:53 the dot-com crisis when you had trillions disappear guys going here we

00:36:56 know no no no I want I'm so I didn't mean to do that but I'll say this listen

00:37:00 you guys have collectively forgotten more about Bitcoin crypto than I'll ever

00:37:05 know number one but what I have been pretty consistent about is I believe

00:37:09 Bitcoin was born out of this fear that central banks globally were running

00:37:15 amok fear fiat currencies blowing up and the Bitcoin ballers out there they never

00:37:21 saw a responsible central bank in their lives and it worked but it's no

00:37:27 coincidence that Bitcoin specifically topped out within a week or so of our

00:37:32 Federal Reserve pivoting in November of last year and the more hawkish this Fed

00:37:38 has become the lower Bitcoin has gone so in my world this Fed will pivot again at

00:37:45 some point because that's what they do to me and maybe I'm crazy but that will

00:37:50 be the green light not only for gold which we talked about but for Bitcoin am

00:37:55 I off my rocker Vinny no and I actually I pivot a lot on my thinking on this one

00:38:01 but I actually think of the crypto community and I'm including Bitcoin in

00:38:06 the other part of the crypto community which a lot I actually think Bitcoin is

00:38:09 the thing that I probably believe in the most the guts in the academic

00:38:14 perspective of Bitcoin what I'm having it struggling with is the other part of

00:38:20 it because I don't necessarily know why tokens and coins and you know which are

00:38:25 really equity at the end of the day is needed to create the technology that

00:38:30 we're talking about like you don't need that well it's a distributed technology

00:38:34 like the last 25 years of technology or more has just been very centralized web

00:38:39 3 seems like it's a meme right now but there will be a web 3 in in our world

00:38:43 and again we cover financials I know there's a dream to make financials

00:38:48 unregulated and decentralized keep dreaming yeah it's not but then going to

00:38:53 what if State Street in Bank of New York are so scared at t+3 going to t+0 we all

00:38:58 know and when you close on a mortgage and you buy a home and whatever hold on

00:39:02 I'm playing devil's advocate here on the blockchain so my point to Dan's point to

00:39:06 Mary what I'm saying is there are technology applications that will come

00:39:09 out of this that will be very efficient very good listen there's a reason that

00:39:13 every fortune 500 company said starting in I would say fourth quarter 2020 say

00:39:20 something that we're in crypto okay I get it Jamie Dimon was the most reluctant

00:39:24 and then he dope he must be killing himself now about the whole thing like I

00:39:27 can't believe I actually gave into this thing but they have to say we're

00:39:30 exploring for the share like they're saying the right things Porter me for

00:39:33 the record we'd liked Bitcoin as a concept then I think when Dogecoin

00:39:37 happened my eyes glazed over right in terms of this was a so clear it was a

00:39:42 pump-and-dump scheme by Elon and that's what we were like okay the alarm bells

00:39:46 are off and we got to do something here so yeah all right so we've heard a lot

00:39:49 of stuff and before we go into our next segment which will be taking questions

00:39:53 from Twitter universe Vinny I know you care and that's the one thing that you

00:39:58 Porter myself I'll share we want to help people it's not just about quote talking

00:40:02 our book we're passionate about this stuff in the market so Vinny speak now

00:40:06 and tell me what's on your mind so we get a lot on Twitter like you said is

00:40:09 what should we do and I know guy likes to set up a lot of pop culture analogies

00:40:13 and we're gonna try to channel my inner guy please and tell me what do all these

00:40:18 things these scenes and movies have in common Balboa in three in LA

00:40:27 clobber Lang in three in downtown South Chicago I'm not done yet

00:40:32 Demi Moore's one-armed push-ups in GI Jane Daniel son in Miyagi's backyard in

00:40:40 Karate Kid part one Luke Skywalker sorry Porter in the Dega bus system during the

00:40:45 Empire Strikes Back Christian Bale somewhere in the Himalayas or wherever

00:40:49 he was in Batman Begins and one of my favorite movies Christian Bale in his

00:40:54 house somewhere in American Psycho what do all those things have in common Wow I

00:41:00 mean I you that's such a pastiche you just gave me you help me out help me out

00:41:05 they're all training sessions yes it was the simplicity of just the try I thought

00:41:10 there was something like meta going on here they're all training sessions and

00:41:13 generally speaking all these training sessions happen without anyone seeing

00:41:17 other than the audience a way to get ready to fight a protagonist what I

00:41:23 think every investor should be doing right now is training because I think

00:41:27 the next three four months are going to be a crap show and volatility up down

00:41:30 I'm not even saying super bearish although I think the markets going down

00:41:34 but you're gonna have bear market rallies it's gonna be vicious and so

00:41:38 what I would want to do right now is train and study names and things you

00:41:43 want to do six months from now I think we might have the potential to have

00:41:48 enormous opportunities once this thing is over but you can't deploy it now and

00:41:53 I can't even tell you exactly where to look because I'm in training mode

00:41:56 myself but to me that's what you should be doing take your finger off the buy or

00:42:03 sell button and put your finger more on thematically where should I be looking

00:42:07 at after this thing is done so then I can make really outsized returns on a

00:42:12 thematic all right so here's one we all did a Twitter spaces last week it was a

00:42:16 Friday afternoon market was melting down in it melted down into Monday so we had

00:42:21 that follow-through we had a little bit of a bounce and now obviously today

00:42:24 Thursday into the close we have this kind of horrid day in the S&P down 3% 4%

00:42:28 the Nasdaq and Danny you had kind of suggested that next week could be really

00:42:33 nasty so my question to you Porter the bounces are getting more feeble and more

00:42:39 feeble Vinny you just mentioned bear market rallies they're gonna be vicious

00:42:42 into that March Fed meeting which was the first rate increase since 2018 we

00:42:49 bottomed the day before we ripped out of it 12 13 percent or something like that

00:42:54 and since then that drawdown from those highs in late March to those may lows

00:42:59 that we just made that was nasty that felt really bad and this bounce was

00:43:03 really bad so how do we get to that training point because to me the lessons

00:43:08 of the bear markets from the financial crisis and the dot-com was protracted

00:43:13 that was the point it was gonna wear you out and so I'm just curious what you're

00:43:17 thinking of because you want to keep selling rallies and it's really hard to

00:43:21 kind of think about what your time horizon is in the equity markets but you

00:43:25 gotta kind of start nibbling in I bought a bunch of stocks in May in tech I bought

00:43:30 some ETH last week I bought some more this week I was making money now I'm

00:43:33 losing money but you gotta kind of have a time horizon too right because you're

00:43:37 never gonna nail the bottom Vinny and I are getting more scared by the day and

00:43:41 we're scared because we've invested within this framework that the biggest

00:43:47 bubble out there is the sovereign debt bubble and you got to put it away at

00:43:50 sometimes you got to bring it back other times we're bringing it back now and

00:43:53 that's the part that scares me the most and for us to really get bullish I have

00:43:59 to check off a box saying like we're not gonna crash badly in terms of 10-year

00:44:04 Treasury is not gonna settle in at four and a half five percent if the ten-year

00:44:09 does settle in at four and a half to five percent that's a very different

00:44:13 regime than we're right now we have this little inflation burst now but I think

00:44:17 if you do demand destruction and you have these awful demographics in China

00:44:22 and Russia and Japan and all over the place and then you have the debt

00:44:28 deflation maybe we're in a different regime in a year or so and so I think we

00:44:33 have all these little ideas in our head of which way it could go and honestly we

00:44:37 don't know which way it's gonna go we're doing our best and we have probabilities

00:44:41 and stuff like that so we're not taking a lot of big swings on the long side for

00:44:45 now except for a gold but we still have our shorts on we're not taking our

00:44:49 shorts off and I haven't taken my shorts off the training mode that we're talking

00:44:52 about the upstarts the affirms this credit stuff that people thought was

00:44:56 something different a new regime we had seen this before we had seen the movie

00:45:00 we knew it was gonna happen and it came and we just had conviction that it was

00:45:04 gonna come and if you have conviction you stay in your names if you're able to

00:45:07 so well before we go to Q&A which is really important I think it's be a lot

00:45:11 of fun I'll say this when I hear Porter you Vinnie talk about now being scared I

00:45:18 hearken back to Danny Moses who was as bearish as he's been and then a few

00:45:23 months ago you said something that resonated with me then and it absolutely

00:45:27 stays with me now and hopefully folks you heard it as well

00:45:30 Danny said I've gone now from being bearish to being scared and that haunted

00:45:35 me then and now hearing you guys reinforce the same things you were

00:45:39 probably thinking at the time just makes me exactly that Danny the feds gonna cut

00:45:43 rates in 2022 no people that's not bullish at all it'll be bearish

00:45:50 they'll rally in first but yes they'll rally them first but why would they be

00:45:53 cutting rates everybody why would they be cutting rates because we're about to

00:45:56 enter a very slow period for the economy so I want to wrap it up with that before

00:45:59 we go to Q&A in case Dan plants one of these questions on me I want to be

00:46:03 really clear it would have to be an absolute economic calamity for the Fed

00:46:08 to be as aggressive as they have been to cut rates this year I'm just saying to

00:46:12 cut rates this year hold on Dan I got it so our football bets are gonna begin

00:46:15 soon this is so good we're gonna make a bet now right now because it's gonna be

00:46:22 nothing on what it's a six month bet because we're in June I'm saying the Fed

00:46:26 will cut rates in 2022 you think I'm I know you think I'm nuts you want to take

00:46:32 it even money yeah okay they're not cutting how much you name it five grand

00:46:36 five grand done this will be the one that's a great one by the way the odds

00:46:41 you can get that in the market I know I know 80 to 1 I know I can get them and I

00:46:46 will when I set up my CME account sponsored by see me all right when we

00:46:49 come back we're gonna take Q&A from the Twitter world all right with CME group

00:46:54 micro futures and options you can get the same access and capital efficiencies

00:46:58 of the standard contracts with less upfront financial commitment diversify

00:47:02 your portfolio and add flexibility by trading CME group micro contracts in

00:47:07 crypto precious metals FX energy and equity indices learn more about what

00:47:12 adding futures can do for you at CME group.com slash micros I connections is

00:47:18 the world's largest capital introduction platform in the alternative investment

00:47:22 industry they bring the asset management community together through a membership

00:47:25 platform that lets allocators and managers meet and connect both

00:47:29 physically and virtually over 3,000 allocators and 600 managers are part of

00:47:34 the I connections community overseeing nearly 48 trillion and 16 trillion in

00:47:39 assets respectively I connections first came to our attention in 2020 during the

00:47:44 first wave of the pandemic that's when their first event funds for food became

00:47:48 the largest virtual cap intro event in history to date they've donated nearly

00:47:53 two and a half million dollars to charities they are also the people behind

00:47:56 the alternative investment industry's largest and most exciting in-person

00:47:59 events to find out more about I connections events and members only

00:48:03 platform visit I connections dot IO hey it's Dan here I'm excited to tell you

00:48:08 about a 1 billion dollar app that's disrupting the way people like you and

00:48:11 me invest it's called masterworks they offer investors access to an estimated

00:48:16 1.7 trillion dollar alternative asset that was once only accessible by the

00:48:20 ultra wealthy I'm talking about blue chip art blue chip art has seen price

00:48:25 appreciation that's outpaced the S&P 500 by a hundred and sixty four percent from

00:48:30 1995 to 2021 and the Wall Street Journal recently called it among the hottest

00:48:35 markets on earth it's no wonder the ultra-rich like Jeff Bezos recently sold

00:48:39 tons of Amazon stock and bought more art and now you can too with the art

00:48:43 investment app called masterworks dot IO join over 300,000 members for free on

00:48:48 masterworks dot IO just go to masterworks dot art slash tape that's

00:48:53 masterworks dot art slash tape see important disclosures at masterworks dot

00:48:58 IO slash disclaimer and we are back with my former partners Vincent Daniel and

00:49:05 Porter Collins it feels like a real Seawolf day yeah but we have some

00:49:09 questions that Porter had sent out to tweet this morning that he was going to

00:49:12 be on here and so we're gonna go through some questions Dan's gonna read them

00:49:15 yeah and we'll all get the opportunity to answer but I think these are more

00:49:18 directed to you so Dan fire away yeah there was a lot of great questions let's

00:49:21 look at this one from Twitter user at SPA VRI asks I'm gonna hit you Porter

00:49:29 right out of the gate here current conditions are most similar to 1929 1972

00:49:35 2000 or some other time well since I wasn't born in 29 or 72 I'm gonna go

00:49:42 with 2000 the problem is is that valuations this time were more expensive

00:49:49 than they were during the 2000 bubble and if you think about the 2000 bubble

00:49:52 interest rates were six and a half percent they cut rates to one and it

00:49:58 took two years for tech stocks to bottom this time we're raising rates stocks

00:50:05 were more expensive and there's nothing to come bail us out right there's no

00:50:10 housing market come bail us out the Fed certainly ain't bailing us out and so I

00:50:15 actually think this time it's much more dangerous than it was in 2000 here's one

00:50:20 for you Vinny actually the Fed raised in May of 2000 and so think about this and

00:50:26 putting this in some context in a way is that when they were raising they kind of

00:50:30 knew there was a little bit of an asset bubble whether we think it was more

00:50:34 expensive less expensive than now but they quickly pivoted and so from a Fed

00:50:38 funds that was above 6% that went down to one you know it took as Porter just

00:50:43 said years for that thing to shake out so is there a hint of 2007 8 9 wrapped

00:50:49 into that answer also I don't see 2007 8 and 9 at least for me and I'm probably

00:50:55 biased just simply because we've covered financials and that's our specialty and

00:50:59 so the regulated financials which I'm not saying I like they're not

00:51:03 necessarily in any trouble and quite frankly their capital is fine or

00:51:08 reasonably fine it feels more like a 2000 moment but let's rewind the clock

00:51:13 to 2000 as well they had their own stim moment not as big as the one we had in

00:51:18 kovat but it was if you remember why 2k and they flooded the system with

00:51:23 liquidity so they at that point in time with they were dealing with the tech

00:51:28 bubble and they were dealing with a one-time stim so that it is very similar

00:51:32 to what we see in 2000 in my opinion I want to add one thing to that to Porter's

00:51:37 comment on most similar to tech bubble of 2000 if we remember we all do on just

00:51:42 you know this is not NPR you could turn up the heat here a little bit all right

00:51:45 well I agree but one thing happened that we forgot about never no one ever

00:51:48 forgets about it but 9/11 occurred if we remember the economy was already

00:51:52 suffering you know things were bad the Fed came in because of 9/11 and cut 50

00:51:57 basis points six days later right because obviously and they're like we

00:52:00 always do in this country we rebound quickly and everybody kind of comes back

00:52:04 and prospers it added a lot more fuel it actually is what led one of the things

00:52:08 that actually led to the financial crisis to this mortgage market happening

00:52:12 it actually was you know they printed money well printed money they eased

00:52:15 monetary policy and it actually led into this next round which was 2004 2005 2006

00:52:22 and people always ask is it similar to 2008 I always think back we were looking

00:52:27 in five and six the stuff was already happening but one of the things that

00:52:30 happened was mortgages were pre paying financial product ingenuity was

00:52:34 occurring right and so credit looked better than it really was and that is

00:52:37 what's similar to what's now because the Fed was buying high yield paper all

00:52:41 right so and you guys have been on the pod a bunch over the last year and and

00:52:45 you have always made that distinction about 2007 8 and really how different

00:52:50 the situation is as it relates to banks why is it though that JP Morgan topped

00:52:56 out in late October of 2021 it's down 35% making new 52 week lows today as

00:53:04 we're speaking versus an S&P that's down 23% and here's a headline okay and guys

00:53:08 been flagging this Danny's been flagging this on the pod here's a headline just

00:53:11 hits Bloomberg US high-grade outflows reached 12 weeks longest streak on

00:53:15 record if you think about JP Morgan they're the biggest capital markets

00:53:19 provider and investment grade which is still having an okay year but it's goes

00:53:24 back to 2012 levels high yield we're looking at 2008 levels of issuance and

00:53:30 in terms of IPOs there's not gonna be another one for five years at this point

00:53:35 right they got all the crap out so just liquidity drain is done there's no more

00:53:42 liquidity come to the market even the feds pulling QT so this is why I went

00:53:47 from bearish just to do I would - bearish you can say Fonzie - yeah I'm

00:53:56 depressed because we're looking into like you know a second before Vinny

00:54:00 answers a question so the scene in the big short we literally went to the steps

00:54:04 of st. Patrick's Cathedral the world was ending we were watching it doesn't feel

00:54:07 that bad no but it's starting to feel as you said I said to Porter Vinay where

00:54:12 are you they're like we're in Bryant Park waiting for you today I'm like

00:54:14 where he goes what are you looking he goes looking at ghosts or what you said

00:54:18 because it feels like Vinny go ahead but so - I'll get to that in a second

00:54:21 staring at ghosts but that gets back to the point back in 08 no I Arnold

00:54:25 staring at ghosts that we talked about not yes similar but you go back to 08

00:54:30 no 9 we felt at the time and we actually were going to be proven right that the

00:54:37 banks were about five six days away from filing bankruptcy right like Morgan

00:54:43 Stanley and Goldman Sachs they weren't really close to filing BK and

00:54:47 restructuring I don't feel that right now so that's why I don't feel like

00:54:50 ATMs are not gonna open up on Monday no there's no systemic risk to the bank and

00:54:55 that so so I separate the Bitcoin ATMs that's different okay so we'll get to

00:55:00 that but the difference is is that I separate what JP Morgan stock did or has

00:55:06 done right now versus before versus the systemic feelings that I feel okay but

00:55:12 what about what Jamie Dimon was on their q1 conference call in mid-april and he

00:55:18 said a whole bunch of things and the stock rallied 10 15 percent and then by

00:55:23 May they had an analyst meeting he kind of tempered some of that enthusiasm a

00:55:28 little bit and then we got hit right with that kind of economic hurricane

00:55:32 coming so like are we listening to what he says when he's cautious and you know

00:55:37 that quarter answer this but I want to say think about this Walmart was caught

00:55:41 off guard Target was caught off guard these companies have analysts internal

00:55:45 that supposed to be able to predict all these things and didn't so Jamie Dimon

00:55:49 literally the markets were closing in real time which is we are first of all

00:55:52 they knew the capital market stuff was toast they knew that I'm talking about

00:55:56 I'm talking about just in general I'm talking about default what did Jamie

00:56:00 Diamond say two weeks ago on the follow-up to your to your point about

00:56:03 what he made when hurricane was coming he said hey FYI we're raining back

00:56:06 lending he said it we talked about this last week on the pod reporter go ahead

00:56:10 one of the problems now and the way I think about it is just so early and in

00:56:15 2008 was two years in the making we were shorting subprime in the summer of 2006

00:56:21 so it was a long process to get to 2008 and into bottom of 2009 just like a long

00:56:27 that process is the banks topped out in the summer of 2008 and I think now we're

00:56:33 just very early in the sign I mean the earnings estimates haven't even been

00:56:38 coming down yet and so I think we're all long way from bottoming in terms at

00:56:42 least in terms of time frame and earnings are going down S&P earnings are

00:56:47 going down and all over the place and we're just so early in that process just

00:56:52 you know that the stock market sniffs it out and it's sniffing it out currently

00:56:55 and that's what we're seeing just to be clear you said the banks topped out in

00:56:58 summer eight summer seven I know you know that I'm just saying yes I'm

00:57:02 looking at it right here so that was I felt Wells Fargo squeezing me yeah no

00:57:08 but but but that actually helps make your point even better that they topped

00:57:12 out no seven I mean there were there were plenty of people who saw the cycle

00:57:16 sort of ending I would say understanding the banks whether you trade them or not

00:57:19 whether that's your you know main sector is crucial to understanding why that is

00:57:24 because banks are natural fit into fixed income which this entire thing has been

00:57:29 led by the ease of credit the ability to leverage everything's everything looks

00:57:32 great when you don't have to really underwrite anything and that's really

00:57:35 what this is Vinny so we talk about it all the time now that we do things other

00:57:39 than financials the way we use financials is who are they or who are

00:57:44 they not providing liquidity to or for so you could easily just speak to the

00:57:49 management teams and saying you know where are you putting capital to work

00:57:52 where you put in capital work and generally it's been in two or three

00:57:55 places but when you see what we've seen which is probably one of the the most

00:57:59 rapid at least percentage rises in risk-free rates that we've seen in ages

00:58:04 it's natural that you're gonna see liquidity dry up and I guess Jamie

00:58:10 Diamond was a bit more rose-colored glasses in one cue hoping that it won't

00:58:15 be as bad as what he thought he was seeing I mean he's definitely the

00:58:19 smartest CEO in Bankland but you know sometimes you have to have a really

00:58:23 cynical view of the world like the Seawolf guys and we have to actually say

00:58:27 what he should be saying it's gonna be a crap show in a quarter but no CEO can

00:58:31 get on stage and tell the entire world particularly someone as important as

00:58:35 Jamie Diamond who says oh no no no guys what you're seeing now is bullshit this

00:58:39 is gonna be a crap show in a quarter or two battened hatches so can't say it the

00:58:43 question for these guys is where does JP Morgan go okay we've seen cycles I agree

00:58:48 it's we've talked about this on the show it's not as bad as 2008 the banks are

00:58:52 very well capitalized as a matter of fact probably to a fault will they

00:58:55 retrench sooner than they would have knowing that the world's gonna be

00:58:57 watching them so these things can trade towards book value there's a big

00:59:01 difference in tangible book value and overall book value so give us your

00:59:04 opinion when you look at the ROE they've been over earning right for a period of

00:59:08 time what it looks like in a normalized environment and where can people start

00:59:11 to look at something like JP Morgan and I'm putting you on the spot I don't even

00:59:14 know if you know the tangible book value off the top of your head of JP Morgan or

00:59:17 not we can look it up here real quick but to me it's something it's something

00:59:20 slightly over tangible book value and assuming X amount of losses but anyway

00:59:24 give us give us a guide I just think you got to see credit losses first you got

00:59:27 to experience the credit losses and kind of go through some of that and go

00:59:31 through some of the pain before you can say oh all the the decks are clear we're

00:59:36 not even anywhere close to this stuff and 99% of people in the market have

00:59:41 never seen a normal credit cycle you know we saw 2008 which is a mess but

00:59:46 like it just a normal old-fashioned credit cycle and we're so far away from

00:59:50 getting through that and towards all flushed out and when you flushed out

00:59:54 then you buy them that's how I think about it well in a normal credit cycle

00:59:57 so I actually saw this coming in today but just so you know the best performing

01:00:01 asset class in the global markets right now is China property stocks why they

01:00:05 haven't traded since March 30th they're performing great anyway yeah you know I

01:00:10 love any thoughts on that because it is credit I said hold on we talked about

01:00:14 this on this podcast for the last several months watch the banks that

01:00:16 aren't reserving and watch the banks that are JP Morgan is reserving but to

01:00:20 your point it's no longer a tailwind there's no releases coming but Vinnie

01:00:23 did change the accounting which is gonna make I was just about to get into that

01:00:27 so so there was there was a change in the accounting which makes the earning

01:00:31 stream significantly more cyclical so in times when boom times JP Morgan's gonna

01:00:36 look cheap just because they're over earning because they're releasing

01:00:40 reserves so we now look closer to tangible book as a backstop as they when

01:00:46 do you go long them when do you go short them and just look back in history so my

01:00:51 suggestion is when we would want to buy JP Morgan and again taking into account

01:00:54 you want to see the whites of the eyes of credit first but if it goes to a

01:00:58 discount to tangible book say 85% of tangible book 80% 90% of tangible book

01:01:03 that's when you could start looking at these things all right here's one from

01:01:06 Nick it's at n underscore Lowry what are some of the sectors that do well during

01:01:12 a recession it's a great question because I'm gonna turn it around in a

01:01:16 little bit what have you been adding to your lungs which is probably the best

01:01:19 question we do think that we're gonna go through a recession and the only thing

01:01:22 with that we've been adding is gold because eventually to us gold is the

01:01:27 report card on central banks and F and we always believe that central banks are

01:01:34 going to eventually get an F Blutarski so at some point and I don't know when

01:01:40 but at some point the Fed is going to have to shift to a more accommodative

01:01:44 stance and I think that's the time when gold should shine so we've been

01:01:48 accumulating a gold position even bigger than what we had because we think that

01:01:52 that it's really going to outperform and actually maybe absolutely perform over

01:01:57 the next six to nine months and I would say that our Spidey sense is that no

01:02:02 one's involved the crypto stole its thunder and it didn't do anything and

01:02:07 people didn't jump back in and now people are once again you know the

01:02:10 responses to the gold question we're like oh no gold's gonna have a liquidity

01:02:14 angle to it when everything goes down then you can buy gold maybe I don't know

01:02:19 that that's the thing is you know we've been committing physical gold some

01:02:22 miners our gold broker a little gold broker that we love but I just think that

01:02:27 the optionality is very good right if you just say 10% up 10% down I think

01:02:32 it's 10% up in gold prices here's interesting so we're probably in a

01:02:36 recession but I don't care what the definition of to negative GDP whatever

01:02:39 it gives a shit so normally in a recession you may be

01:02:42 starting at a place with higher rates were right so the point Porter made a

01:02:47 few minutes ago we're raising rates into research that's stagflation but that's

01:02:50 all another story so normally the stuff that you would own the playbook there is

01:02:54 no playbook for this cycle there's nothing we've ever seen anything that

01:02:58 looks like this it's not catastrophic but there is no set playbook I think you

01:03:02 want to own health care companies right to pay dividends right you can own drug

01:03:07 companies whether you like them or not to pay dividends things that consumers

01:03:09 staples a story look at the way Walmart's acting today I think Walmart's

01:03:13 up on the day I think it's still green today like names like that that trade it

01:03:16 yeah it's a team I get it it already because it already built it's telling

01:03:20 you what's all right that's that's nice Dan anyway that 52 week highs to 52 week

01:03:25 lows in a range of 30% I bring it up because obviously whatever Dan you know

01:03:30 what I wish I next question you know what I want to pay to be on the scene you

01:03:35 would have lost the best okay we literally would have gone to remember

01:03:37 the bet we had on Walmart when I lost lots of okay all right here's one here's

01:03:42 one from Andrew Wheeler at Boston Andrew good handle their Boston Andrew this one's

01:03:48 kind of he's basically saying you guys have been in bear mode me too but being

01:03:52 constructive what could possibly avoid the seemingly inevitable collapse what's

01:03:57 out there guys is there like a kind of cocktail out there that could kind of

01:04:00 turn the economic tide that could kind of make you know kind of I don't know

01:04:05 risk assets kind of look attractive we just had this conversation with our

01:04:09 friend Steven we had lunch with and we were talking about what could possibly

01:04:14 go right and and really muck the markets up and that's somehow Ukraine and Russia

01:04:22 come into a ceasefire because I think Danny's shaking his head is not gonna

01:04:26 happen I said what could go right but I think it would do a two to three week

01:04:31 algo really rip everything around and I think that's gonna that would be painful

01:04:36 for a lot of people so that's a possibility but the other thing is that

01:04:41 what I think a bull should be looking forward to is some sort of big calamity

01:04:44 right that makes the Fed go oh I need to stop hiking right let repo blow out

01:04:50 crisis and I think that's coming right there's something most definitely

01:04:53 something big is gonna break and I'm gonna break hard here and you just can't

01:04:57 have this kind of calamity happen at least that's been our experience Vinny

01:05:02 give me your thoughts here before before you yell at me after I try to be no I

01:05:06 listen I remotely I look for reasons to be bullish every day sure you do I did

01:05:10 and then I wake up the look the only thing I could do short-term bullish

01:05:14 long-term bullish start with the short-term bullish some form of Fed

01:05:19 accommodation is like as I said before I don't think that's a panacea the second

01:05:24 thing which is the bigger issue is a major major change in government policy

01:05:30 major and again that's remote at least it's remote now but things that could

01:05:37 actually be constructive that can alter inflation expectations would be a major

01:05:43 bullish point and right now to date don't yell at me Danny we haven't seen

01:05:46 any no what do you what like what anything like what what would you do if

01:05:49 you change of immigration policy okay right that would take I mean yes repeal

01:05:54 this open the Southern repeal the Jones Act open up tend but say constructing 10

01:05:59 to 15 uranium refineries and uranium utility plants I feel like we're playing

01:06:05 that pyramid game or in the circle and all nothing's turned around on the

01:06:08 correct things that make you bullish go okay and I'm doing all that ding ding

01:06:14 they're not gonna happen but you're asking me what what would get me bullish

01:06:18 that's what would get me bullish all right so Vinnie we're not gonna answer

01:06:21 any more about what could go right Danny we didn't want to put you up to say what

01:06:24 could go right it might be tough for you but one of our other co-hosts Ned

01:06:28 Michaels who hosts breaking even who's currently at the US Open right now who's

01:06:32 literally the gymnast to the rest of the world other than everyone the United

01:06:36 States so that's what he's doing who I will be with on Saturday when I go in

01:06:40 into the into the open and by the way I got there through a John Daly charity

01:06:45 event several months ago so I'm thrilled to be there it's gonna be a great

01:06:47 weekend he wanted to ask some questions about things okay so one of the questions

01:06:52 he asked was we already did this energy we addressed it gold yes we believe in

01:06:56 it Tesla short timeline always I'll answer that where does the S&P go so I

01:07:01 know guy had a theory and we talked about it earlier about you know 17 times

01:07:05 200 3400 but what do you guys think because I'll have my opinion in a second

01:07:09 you know I'll talk about in terms of where the multiple is on earnings but

01:07:14 the problem I have is that and listen this we've been talking about this for

01:07:18 over 10 years is the use of adjusted earnings what what is earnings and I

01:07:22 think that through this downdraft in tech they're gonna once again say hey

01:07:27 what's the cash flow not what's the adjusted earnings because they're backing

01:07:32 out stock based comp they're backing out stop right there for a second this is a

01:07:36 big issue it's a big issue stock based comp is a big issue it's a bigger issue

01:07:40 than people think and when they start to look coming center stage so they really

01:07:43 do so hold on Porter I'm going back to in a second then you talked about what

01:07:46 can be bullish on whatever that's gonna be stripped out going forward because

01:07:50 people will come after companies now for stock based comp what's the real number

01:07:54 sorry Porter go ahead and so you go back to why we like energy still here even

01:08:00 though they might go down a little bit but like the cash flows are there but

01:08:02 where does the SMP go because that's a small component of the SMP

01:08:05 unfortunately I mean it is so in a high inflationary environment the PE is

01:08:09 lower so you know I don't pick a number 20% lower then I'm gonna pay homage to

01:08:15 one of your other guests that come in here David Rosenberg yeah who didn't

01:08:19 think inflation was real but that's fine okay he's got an answer for Centeno on

01:08:23 that one yeah but in that regard yeah he believes still love him see he believe

01:08:29 I love him that the SMP can go to 3,000 to 3,200 that's my so so so I'm gonna

01:08:36 outsource that price target from him to me and that makes sense to me like

01:08:41 that's that's a big enough drop where I think you talk about then the equation

01:08:45 of inflation versus recession really and and deflation of people's wealth and

01:08:51 assets start to really start to equalize yep and that's where I think the Fed

01:08:54 sort of has to not cut I'm not sure if cut but definitely potentially pivot oh

01:09:01 you heard a few minutes ago I'm gonna win real companies at real prices at

01:09:04 that point you know as you're doing I'm gonna win another $5,000 from Dan

01:09:07 because they will cut and let me go to this because this is crucial so the next

01:09:11 question is about housing I've been saying on this podcast for three four

01:09:14 months housing has been the most rational sector it's been the only sector

01:09:19 that is priced in what was going to happen the XHP stocks the socks the

01:09:23 stocks sorry the stocks themselves there and to me you want to know what you can

01:09:27 own coming out of a cycle it's these stocks potentially if you can time it

01:09:30 right you're never gonna time it but that's not the question though I hope

01:09:33 that's not the question the question is what's gonna happen with housing here I

01:09:36 mean we're we're still way away from peak in mortgage rates I think so to me

01:09:40 on housing I think that the simple answer is I think home prices are going

01:09:45 to stop going up and potentially go down and we're talking five to ten percent

01:09:49 but I don't think to use that word it's a Steve Eisenman word calamity I don't

01:09:53 think it's gonna be a calamity but I think it's gonna be and I actually think

01:09:56 it's gonna be extremely healthy I believe Bill Pulte spoke about this

01:09:59 during the spaces yes which is it would actually be beneficial for the younger

01:10:05 generation to have lower home prices so they could actually afford the stuff

01:10:09 that they want to buy it's not the end of the world and I and I don't believe

01:10:13 it's gonna be the end of the world for the banking system either they're not as

01:10:17 levered as they were and then not even as levered to the housing market now on

01:10:21 the one hand that might be bad for BlackRock and Blackstone but that's a

01:10:25 different issue so I think the housing market's gonna be negative and this gets

01:10:30 back to a point that we were saying training right so one of the things we

01:10:32 are training are on the home builders just to give an example so if you look

01:10:36 at dr. Horton which is the creme de la creme that and probably told brothers of

01:10:40 the home builders and if you look at the range the historic range of Horton it

01:10:45 troughs at either 1.5 times tangible book value if we're not in a recession

01:10:50 or tangible book value if we are in a recession so we're not there yet but now

01:10:55 I know my guidelines of where I want to buy the best home builder when I think

01:11:00 it hits a certain valuation level getting back to S&P 3000 or 3200 where I

01:11:05 might go to you guys thinking back at Seawolf and saying guys Horton 90% of

01:11:09 book value we can't go wrong here now you guys will probably yell at me tell

01:11:13 me to go F myself but but it's probably a decent price where you could start

01:11:17 thinking about buying I go back to a complete misallocation of capital you

01:11:22 know post the GFC we didn't build any homes because the banks weren't lending

01:11:26 the three of us went out if we to get a construction loan to build a house they

01:11:30 wouldn't give it to us right now and so the supply of homes is not there that

01:11:35 said there was a lot of froth at the top and there was a lot of investors

01:11:39 speculation that said oh we're gonna keep speculating and the problem is the

01:11:44 on the investor side the cap rates that people assumed for the exit is now going

01:11:50 to be a lot higher than they thought it was and so that investor you know drum

01:11:56 beat which is driving the demand for housing which has been driving and and

01:12:00 so that I think that they clipped at that let me just for people out there

01:12:03 that don't know what a cap rate is so if you take the value of something what's

01:12:07 called a million dollars and you're charging rent of ten thousand dollars a

01:12:11 month which would be a hundred twenty thousand dollars on a million that'd be

01:12:15 a 12% cap rate we've been at three four five percent cap rates as you look at

01:12:20 those comparisons versus treasuries on risk-free yields as treasuries move

01:12:24 higher you're required to offer a higher return therefore if you're levered hang

01:12:31 with me here guys and commercial real estate and you're levering out at a cap

01:12:34 rate of three to four percent Vinny correct me if I'm wrong and you're two

01:12:37 to three times levered you have a real problem you have to readjust your

01:12:40 pricing so you can do one of two things you can raise your rent or you can

01:12:45 devalue your building either way you got to get cap rates to a normalized level

01:12:48 relative to what you can get risk-free in the market so it's a great place to

01:12:53 end and I think it's a great place to start to think about what the Fed has

01:12:56 created and has mass in terms of picking bonds picking stocks and that's where

01:13:01 we're gonna be and there's gonna be great opportunities in both and so

01:13:04 with that guys but it goes back to it sorry what one one quick here I was

01:13:09 wrapping it I sorry that's right but structural problem is that in the United

01:13:15 States the reference rate is a ten-year Treasury it's a benchmark on the US we

01:13:21 have huge structural deficit the Fed for now is doing QT and so there's not a lot

01:13:29 of real buyers of all this debt and this is the part that gets me bearish and

01:13:35 that's it like let's just wait a bit right let's just wait a bit and see how

01:13:39 housing shakes out when you know don't need to rush it you know we'll just wait

01:13:43 and see what happens right as we reprice interest rates higher that's what's

01:13:48 gonna happen so we're talking about pricing risk differently and that is the

01:13:53 how we wrap this up because it's the one thing for the last 13 years that we

01:13:56 haven't had to address is pricing risk and that's where we are so guys great to

01:14:00 be with you catac you know maybe fortunate or that it was a day like

01:14:05 today or unfortunate for some people that we got together today we will let

01:14:08 everybody know the next time we plan to get together so they can buy S&P puts

01:14:11 that expire because they have daily S&P puts now we can expire that day but

01:14:15 we'll have you guys back again it was great being with you guys great to be

01:14:18 with you thank you thanks once again to CME group for sponsoring this episode of

01:14:23 on the tape if you liked what you heard make sure you hit follow and leave us a

01:14:28 review it helps people find our show and we'd love hearing from you and we also

01:14:32 want to hear from you via email at on the tape at risk reversal comm anytime

01:14:38 of the day follow and connect with us on Twitter at on the tape pod and we'll see

01:14:43 you next time on the tape is a risk reversal media production this podcast

01:14:48 is for informational purposes only all opinions expressed by me Dan Nathan

01:14:53 guy Dami Danny Moses and any other participants are solely our opinions and

01:14:57 should not be relied upon for specific investment decisions

01:15:02 (whooshing)

The Wrath of Powell - Buried Alive with Vincent Daniel and Porter Collins

Category

Transcript

Recommended