In this episode of the VALUE: After Hours Podcast, Jake Taylor, Corey Hoffstein, and Tobias Carlisle chat about:
- Possible Fallout From The Russia/Ukraine Conflict
- What Will The Fed Do Next?
- Risky v Safe Asset Fund Flows Near Top 100th Percentile
- Ragnarok v Fimbulwinter Markets
- Weird Markets, Weird Moves
- What Happens When A Nuclear Bomb Explodes
- Cathie Wood – Marketing Genius – Disruptive Innovation
- When Tech Becomes Violently Uncool!
- Target Potential Market Caps Are Nuts!
- Do Investors Really Pay Attention To What’s In Their 401K?
- Has The Fed Done A Good Job?
- LME Forced To Halt Nickel Trading And Cancel Deals
- We Should Have Entered Into A Recession In 2020
- Small-Cap Growth Is Cheap
- Nike v Allbirds
- Are Crocs Still Cool?
You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:
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Full Transcript
Tobias: We’re going live. You should have a notification. It is 10:30 AM on the West Coast, 1:30 PM on the East Coast. That means it’s time for Value: After Hours. The name makes no sense. I grant you that.
Jake: [laughs]
Tobias: Joined by my regular cohost, Jake Taylor, and special guest, Corey Hoffstein. How are you, Corey?
Corey: I’m brilliant at the moment. Thank you, Toby. I’m excited to be here. I really don’t know anything about value investing. So, I’m glad the show’s name is a lie.
Tobias: Either do we.
Jake: Well, yeah, you’re in good company, then, sir.
Corey: Excited to be here. Where am I?
Tobias: Yeah, let everybody know.
Corey: Currently living in Grand Cayman. [crosstalk] I was living in LA. Yeah, living in LA. COVID hit, so peace out. Wife and I moved to Grand Cayman.
Tobias: You and everybody else?
Jake: Oh, man.
Corey: Everyone thinks it’s a tax dodge. There’re no tax benefits being an American here. I just want to make that very clear. If anything– [crosstalk]
Tobias: [crosstalk] have state tax, right?
Corey: It’s worse. Well, because I was living in California, I don’t know if California will get– Let me get away that.
Tobias: Yeah, you got fish hooks in, they got the fish hooks in from California.
Corey: I haven’t spent a single day there. I’m pretty sure I’m paying full state taxes.
Jake: [laughs] Well, the good news is, all these losses will work. The joke’s on them.
Corey: That’s right. Exactly.
[laughter]Tobias: We got Scotland, Chapel Hill, Townsville. What time is it in Townsville? San Francisco, London, Hartwell. You got to find out, so I can give the Australian Eastern seaboard a shoutout.
Corey: You have got a real global audience here.
Tobias: Yeah, it’s fun.
Jake: One on every continent.
Tobias: Antarctica. Let me [crosstalk] you down.
Jake: Man, that would be good. If we got Antarctica, I would celebrate that.
Tobias: Fellas. there is some weird stuff going on in the markets that I feel almost every time I come on and say, there’s some weird stuff going on, I think it’d be weird if it wasn’t weird stuff going on. But I feel that this is a particularly weird time. If you’re not confused, you don’t know what’s going on. If you know what’s going on, you [crosstalk?
Jake: You don’t know what’s going on.
[laughter]Weird Markets, Weird Moves
Tobias: Good opportunity for us to chat to Corey, who is one of the smartest blokes across of all this stuff.
Corey: [unintelligible [00:02:22] faking it, Toby. That’s all.
Tobias: That’s all we need. That’s what we’re looking for. Handsome dudes who sound good. That’s what we’re looking for.
Jake: [laughs]
Tobias: What is going on, Corey? Can you can you let us know?
Corey: Yeah, I wish I knew. I actually wrote a note. It’s funny. This is perfectly timed, because I wrote a note to a bunch of my clients this morning. I basically said, in my opinion, not that my career has been that long, but the last 15 plus years, I have never been more confused about the macro picture than I am today.” Here’s a little list of things we got going on. You still have COVID. You still have latent stimulus impact, you still have supply chain issues, still have demand shock, you have inflation risk, quantitative tightening concerns, a war, economic sanctions.
Tobias: I love that how that comes out [crosstalk]
Jake: Yeah.
Corey: Yeah, well, I’m doing it chronologically. The financial system has become a weapon, you now have self-imposed supply shocks, Russia versus non-Russia commodity basis risk, China political risk, Euro dollar versus Euro renminbi risk in the system. That’s just what I could come up with off the top of my head.
Jake: That’s Tuesday.
Corey: Right, exactly.
Tobias: [laughs].
Jake: You left out Canadian oppression of rights and-
Corey: No, we’ve forgotten about that one– [crosstalk]
Jake: -civil unrest as the– Yeah, we moved on from that.
Corey: It’s wild. My big point– There’re points I was trying to make in this piece I wrote, but one of the big points was, when there’s a lot more clarity in the market, I think markets can price things in a lot more linear fashion. When the market all they cared about was, “Will the Fed hike or not hike?” Basically, rates move as probabilistic.
Tobias: Simpler times.
Corey: Yeah, simpler times as a probabilistic measure. We think the Feds going to hike 25 bips and rates move 20 bips, that is a sign of a high probability the Fed is going to hike. But when you have a more complex dynamic system, and the second and third order sort of events become lower probability, it means that every single event, even though, the outcome of that event has the same impact as it would have before, it becomes a lower probability. When that event potentially happens, the price movements become more violent. We’re just in this environment of like, “Until all this macro narrative shakes out, I just think you get very violent moves in unpredictable directions.”
Tobias: Look, on top of that, too, I think that the market has been expensive for a long time and looking for a reason. I think we get the 2018, 2019, 2020, all those big dips are as a result of we’re just– Things are expensive and the markets looking for reasons to sell off. It feels a little bit artificial with rates pinned as low as they are.
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We Should Have Entered Into A Recession In 2020
Corey: I don’t know who said it, but there was one comment I was reading on Twitter the other day that basically said, “We should have entered into a recession in 2020. We got bailed out. This is the reckoning of– All we did was push the recession out further and have made the picture much more complicated.” I just think we’ve been so trained over the last 15 years for these violent sell offs and snapback rallies. It’s a little cliche at this point, but I think the path of most pain is just that grind downward, right?
Tobias: That’s a classic bear market, where it just–
Jake: Yeah.
Tobias: You get 14, 15, 16, 17 rallies that gets sold to lower lows.
—
Ragnarok v Fimbulwinter Markets
Corey: Yeah. I feel I’m about to pull a Jake Taylor drop some knowledge, maybe. I don’t have anything [crosstalk]. But the letter I wrote was this idea of “Titan Norse mythology of Ragnarok” versus Fimbulwinter. I think probably people have heard of Ragnarok. It’s the big end of the world. The Gods versus I think it’s the giants that they fight. Anyway, the whole world ends up blowing up in Ragnarok and starting anew. People tend to be less aware though of this thing called Fimbulwinter, which is this never-ending winter that takes place before Ragnarok. It goes on for three seasons, they’re long, horribly cold years, they’re longer than normal, there’s no summer reprieve, it’s no end in sight, sunless days, bitterly cold.
I was saying the last couple of years, we’ve been really accustomed to Ragnarok-type sell offs. Very violent, very quick, and it rips the Band-Aid off, and I’m getting the sense that everyone just wants that to happen right now. They just want it to be over with. The path of pain is the Fimbulwinter, which is it’s 2000 to 2003 of just have to deal with a bouncy, downward-drifting markets.
Tobias: Even 2007 to 2009 was like that. It started in June, but by June 2008 nothing had happened, it was just flat.
Jake: Yeah, sideways.
Tobias: The real action was Q4-2008, Q1-2009. That was when you got the big waterfall sell offs.
Corey: I think the big difference for me, the way I’m looking at it is, a lot of the stuff over the last 15 years after 2008 to me was very technically driven. You look at each of the individual market sell offs and yeah, maybe there was a fundamental or economic catalysts, macroeconomic catalyst, narrative at least. But it seemed to me, you look at March 2020, a lot of that was endogenous market risk. We had vol sellers blowing up, you had all market dislocations, you had some vol issues in December 2018.
Today, when I look at market positioning, everyone’s already de-grossed. Everyone’s bought their put protection. There’s going to be some commodity people that blow up with these commodity moves. I don’t know whether that will have the spillover effects into the equity markets that ultimately take us down, but economic based sell offs almost by definition have to take longer, because you have to wait for the economic risks to play out. Unless Russia just decides to end the war, you have to wait for this thing to play out. You have to wait to see how long these sanctions are in place. How long those sanctions are in place, we are going to have impacts on commodity prices. You can’t rush that.
Jake: Yeah.
—
Tobias: I got a couple of good comments here that I want to read out. One was that, there’s a shoutout to Prince of Wales Island in Alaska. That might be the remotest place we’ve heard from so far. Yeah, Shane Warne passed away. That doesn’t mean much to most of the Americans on the list. But Warney– [crosstalk]
Jake: Yeah, how’d you feel about that? Were you crushed or what?
Tobias: He was young. He’s 52, went out in Thailand in Koh Samui or something like that. So, went out the way lived. He was a cricketer, bowler, bit of a party animal.
Jake: Apparently. [laughs]
Tobias: Yen Liow has closed his fund.
Jake: That is true.
Tobias: Have you heard that news?
Jake: Yeah.
Tobias: Do you know any of the reasoning around that? Had any other words?
Jake: I’ve heard rumors, but I think it’s just–
Tobias: All right, leave it alone.
Jake: Yeah, probably should, but I think just launched with a lot of money to start, and maybe the investor base at that point maybe wanted different results over a shorter period of time than what was delivered. So, it had to be re-jigger.
Tobias: Tough game.
Jake: Yeah, tough game.
Tobias: Oil was going parabolic over the last few weeks or so, but it seems to have sold off today with a– The whole lot of stuff is sold off with, and the tech and everything is relative. Any ideas on why that’s happening? Just that usual volatility mid sell off?
Jake: No idea. Honestly.
Corey: Yeah, a lot of day-to-day stuff, at least in my opinion, is just technical flow. Like, why is junky stuff rallying today relative to quality stuff? Well, hedge funds are typically long quality short junk, and if they need to de-gross their book, it means they need to sell their quality stuff and buy their junk. If the markets up, that means junk is going to outperform and quality is going to underperform. To me, a lot of the day-to-day is just covering noise.
Jake: Chair shuffling.
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LME Forced To Halt Nickel Trading And Cancel Deals
Corey: Yeah, just chair shuffling, and de-grossing, and that sort of stuff. You got to track it for a couple days to see if it’s meaningful. Every once in a while, I think there were potentially some squeezes happening in the commodities as they were making really extreme moves. Nickel being a perfect example. I don’t know if you guys saw the London Metal Exchange just cancelled all [crosstalk]
Tobias: Yeah. What’s that bet?
Jake: Yeah. How does that work? I find that to be–
Tobias: [crosstalk] the way you could do that.
Jake: Yeah. That happened in I think 2011 too. They just cancelled some orders that had come across that were way off and they’re like, “Well, that just didn’t happen.”
Corey: If two consenting adults get together.
Jake: [laughs] Could be two computers given– [crosstalk]
Tobias: [crosstalk] a nickel price.
Corey: And they come together and agree on a nickel price. I don’t know who the exchange is to say that those trades are busted.
Jake: Right.
Tobias: Is it one side asking for it to be busted, the losing side?
[crosstalk]Jake: Yeah. I didn’t like that.
Corey: [crosstalk] I did hear there was and this is just supposedly news, maybe a rumor. It’s always tough to tell with this stuff when it’s fresh. But I did hear there was a fund, I think out of Hong Kong that blew up on the nickel trade. So, it was a massive short squeeze for them trying to cover getting their margin calls. I don’t know whether the trades getting cancelled will save them.
Jake: Sorry, no tech backs.
Corey: Yeah.
Jake: [laughs]
Corey: Yeah. I don’t know. It does seem it brings into question the– I don’t know. How do you ever trade that exchange, again knowing that it could just be taken away from you at any time? How does that make a market?
Tobias: and Jake: Yeah.
Jake: Agreed.
Tobias: We’ve been fiddling around the edges of some things that I don’t think we should fill around the edges of which– for the last couple of decades, we’ve been doing some things that if we’re all going to pretend to play according to some rules then we’re going to enforce those rules all the time because there’s lots of unfair outcomes. I got a good question here. Is there a bigger–? Sorry.
Jake: No, I just say, you don’t want to– The whole system operates because of trust. If you take trust down, it gets way more expensive to do every single thing as a society. That’s on net very bad for us. So, you don’t want to like pull at the Jenga pieces of the trust tower, I don’t think.
—
Nike v Allbirds
Tobias: Yeah. That was what I was trying to say less eloquently. I’ve got a good question here. I’m just trying to scroll down. Sorry. “Is there a bigger dispersion amongst winners and losers in a very inflationary environment? Is Nike really supposed to be treated the same as Allbirds inability to deal with inflation? I think that’s a good question.
Jake: It is a good question. You get at pricing power, you get at brand, which is another way of saying stored up pricing power that you’ve built over time by taking less profit than what you delivered value to your customer. You get at–
Corey: Supply chain leverage.
Tobias and Jake: Yeah.
Tobias: That’s what I was thinking.
Jake: Yeah.
Tobias: I don’t know how Allbirds arranges its supply chains, but I imagined that they probably–
Jake: Can’t be as good as Nike, right?
Tobias: Well, there could be a little bit more asset– there’s other companies doing other stuff for them that they wouldn’t have brought in house. Nike’s probably doing all that stuff themselves makes it a little bit easier for them. I don’t know.
—
Corey: Let me complicate the question, because I think a lot of people would say, over the last decade, we’ve had monetary inflation, which has been a tailwind to the growth story versus now, suddenly, you have both real asset demand and supply driven inflation, which is a very different type of interest, which could hurt a lot of those growth stories. So, it’s like this interesting which type of inflation are we talking about here?
Tobias: Monetary inflation is, if we print a whole lot of money, that shows up in the higher cost of goods and services over time. The other type fiscal or whatever, I’m sorry, I missed what word you use. But that– [crosstalk]
Corey: Oh, I was just saying commodity supplying through-
Tobias: Supply and demand.
Corey: -demand.
Tobias: Why is that all of a sudden different? Because we’re cutting off supply. Well, we’ve got shipping issues and we’ve got a war going on.
Jake: Yeah.
Corey: Well, I think it probably has to do with– At least in theory, you would expect them to be connected, but the monetary inflation seemed to never emerge. It just like all that money that got printed through quantitative easing, if you want to call it money printing just seem to sit on corporate balance sheets. It never seemed to escape into consumer demand [crosstalk] prices.
Jake: Yeah, velocity dropped off a cliff.
Corey: Right. But it ultimately helped speculative growth companies, at least in theory, because money was cheap. You could raise a lot of money, debt was really cheap versus today, commodity prices, inputs of goods have definitively gone up. Whether that was ultimately a function of all that quantitative easing, or monetary policy over the last 15 years, or whether that’s from COVID demand shocks, Russia driven supply shocks is a different question. But one is much more to me immediate, there is no doubt the cost of goods has gone up today.
Jake: Yeah, and you can’t print more oil or print a supply chain.
Corey: Right.
Jake: Whereas maybe you could theoretically solve some of the more monetary inflation if you were able to suck–
Tobias: Stop printing.
Jake: We haven’t even done that yet, though. That’s a scary thing. It is this the balance sheet has still been expanding. It’s just slowed down. [laughs]
Tobias: What do you call that? It’s verbal austerity or something like that.
Jake: Insanity, I think, is the word.
Tobias: Verbal austerity, that was a word that we used to use.
Jake: Yeah.
Tobias: Verbal austerity.
—
What Will The Fed Do Next?
Corey: What do you guys think the Fed does? Do they become more dovish on hikes and more hawkish on the balance sheet? What do you think the path forward here is now that things got more complicated?
Tobias: I think their default setting is to print as much as they possibly can. The only reason that they were talking about doing anything was because inflation has been ripping. But now, they’ve got an excuse for inflation that’s got nothing to do with what the money that they’re printing. Now, they’re just back onto the– The print is going to run. I think that there might be some little– 25 basis point raise is meaningless and I’ll do a few of them probably just because it looks good. Then, in a few quarters, we’ll panic and we’ll reverse it all.
Jake: Put it back to zero.
Tobias: Put it back to zero.
Corey: Yeah, I would. The reason I asked is certainly, oil up in the short term is immediately inflationary by any measure. But long term, it seems to be deflationary because it creates negative economic growth shocks. Demand disappears, it is self corrects which is bad for earnings. So, the Fed, I don’t think wants to be hiking into that economic decline.
Tobias: It should have been hiking over the last few years, but they haven’t. Now, at the point of the cycle where you are right. Now, we should be lowering, because oil is going to do it. Oil is going to do what the hiking was going to do anyway. Oil is going to spike the bubble. Oil already has, I think.
Jake: Could be. Yeah, that was– [crosstalk]
Corey: Real bullish conversation today, boys.
Tobias: Yeah. Well, I think to be fair, I’m always pretty bearish.
Jake: [laughs] This isn’t new.
Tobias: Don’t come here for the sunshine.
Corey: All right, so maybe, by the way, I’ve just taken over as cohost.
Jake: Yeah.
Tobias: No, please. [crosstalk]
Corey: So, let me ask you this. What is the most bullish thing you can think of right now?
Tobias: Well, I like the fact that there are some names that I think– There’re some businesses that are too good for the price of the trading at the moment. I would prefer that the market get a little bit more beaten up, so you can swing through and hoover up some of those better names. Whenever there’s weakness in the market like this, I think it’s a great opportunity to upgrade the portfolio by some better quality at low prices.
Jake: My most bullish thing is looking longer term and saying that, humans, and ingenuity, and technology is going to help us have a better tomorrow. If anything, we probably needed a little bit of some hard times to increase our character and be a better version of ourselves [crosstalk] get there.
Tobias: Hard times make strong man.
Jake: Yeah, true. It can’t be easy and also get to that point where you need to be. I think long term, I’m incredibly bullish on humanity. Even the US, even some people seem to be a little bit– If you listen to Dalio at all, it sounds the US Empire is over, but I’m hopeful that we find ourselves again and go back to our roots a little bit as to what was important that got us here. Like trust, capitalism, democracy, free press, all those important things.
Tobias: I was watching Station Eleven. It’s post-apocalyptic a virus, a flu like virus kills most people. Then there are very little pockets of people around that– The episode that I got to last night, the kid, he downloads Wikipedia onto this little handheld computer, and he’s looking at the definition of capitalism, and he’s like, “Can we just delete it and pretend it didn’t happen?” Deluded.
Jake: Yikes.
—
Corey: All right, Toby, I want to go back to your point, though about upgrading the portfolio. Because you’re talking about these pockets of like and it’s really interesting. I don’t know if you follow New River Invest on Twitter.
Tobias: I do.
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Small-Cap Growth Is Cheap
Corey: But he posted something, I think it was yesterday or two days ago, where he was highlighting the different valuation ratios in the Morningstar style boxes. Interestingly, from a historical percentile basis, small cap growth was actually on a historical basis, one of the cheapest areas right now versus large value–
Tobias: Of what period?
Corey: Looking back going to, I think it was early 2000s. If you compared current earnings, I think as P/E-
Jake: P/Es usually, yeah.
Corey: -on a percentile versus historical going back to early 2000, I think it was. It was one of the lowest versus a large value I think was up at the 90th percentile. It’s been bid up pretty significantly. I’m starting to see that in sell side notes too like it was saying, people buying into commodity producers and all that stuff. The net positions are multiples higher than where they’ve been historically.
Jake: What do they do in that small cap value with all the money losers, though, to come up with an E for that?
Corey: Oh, small cap growth.
Jake: Well, that’s right. Small cap growth, but even more earning.
Corey: [crosstalk] where there’s probably more earning.
Jake: Yeah.
Corey: Yeah. I don’t know, that’s a good question. That’s a very good question.
Jake: You drop half of them that have no earnings and all of a sudden, it’s like, “Oh, this looks cheap.”
Corey: Yeah.
—
When Tech Becomes Violently Uncool!
Tobias: Yeah, I hadn’t noticed that honestly, I don’t know, because I still am trying to put it together bottom up, even though the process that I have. Yeah, I’m always surprised at some of the names that come in to hitting range for me, because I tend to be more conservative. I distinctly remember from 2000 and say 2003 until 2007, buying a whole lot of really cringy tech that– I’ve said this a few times, but this is what I think happens.
Tech becomes violently uncool. In some ways, the financial markets are fashion. If you have the wrong-colored jeans on, like, you buy a pair of jeans, three or four years later, you walk outside, it’s like they’re fluorescent yellow or something like that. The color of the dye has just changed so much that they just look terrible and the cut. The cut looks terrible relative.
Jake: Yeah.
Tobias: I think that that happens to stocks as well. These tech stocks that everybody fell in love with, the other side of that love is this hatred for them. They just become incredibly cringy. I think that’s a good opportunity to go and pick that stuff up. [crosstalk]
Corey: But there’s no way we’re there yet. You look at flows into Ark-
Tobias: Yeah, it is still positive.
Corey: -they had $850 million come in over the last month.
Tobias: People have been conditioned to buy the bid.
Jake: The buyers, right?
Tobias: and Jake: Yeah.
Corey: It’s wild.
Jake: Everything rockets back up the second like the golf ball is off the curve path, right?
Tobias: It hasn’t bounced. I don’t know where Ark is today, but it was still off pretty significantly this year after being off pretty significantly last year, particularly, from the peak last year.
Corey: Well, it’s down to pre-COVID highs. It’s on a full round trip.
Tobias: It’s interesting, isn’t it?
Jake: Lot of round trips.
Tobias: A lot of our stocks have done that. Yeah. Lot of those techy stocks have done that. It’s like the two years didn’t exist and I got to say, I don’t mind we can scrub those two years off the record books I care.
Jake: [laughs]
Tobias: Warren B, once again getting the last laugh.
Tobias: Yeah.
Jake: We couldn’t have ever expected it. I thought the world had passed him by for sure this time.
Tobias: It tends out he’s the world’s greatest tech investor, too. I do love that.
Jake: Yeah, [crosstalk] that’s dominating every style that there has been. He’s style bender for you to see.
Tobias: Yeah.
Corey: That’s where my question was going, though, Toby. I remember back, it was in 2016 and we talked about this on my podcast, where Apple just became a value stock. I was starting to question whether some of these small cap growth names were going to start appearing in deep value portfolios.
Tobias: Yeah, I think they will. I’ve got to rebounds coming up, so I can’t say too much. But yes, I’m like–
Jake: Licking your chops. [laughs]
Corey: You want me to upfront you?
[laughter]Corey: Do you want me to tell the names upfront?
Tobias: I’ve got one that I’ll talk about it after [unintelligible [00:26:06], but it’ll make people giggle. To the extent that anybody’s heard of this thing, but I remember this name from a little– Over the last decade, about five years ago, this name was very, very hot. I hadn’t seen it for a long time. When it popped up on my screen, I had a little giggle when it came through, particularly where it’s trading on a P/E about six or seven months. It’s pretty funny.
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Are Crocs Still Cool?
Jake: Are you buying Crocs, again? [laughs]
Tobias: Yeah, I did.
Corey: Crocs are in, man.
Tobias: Crocs is in the screen, too. Crocs is close. I don’t know if I can bring myself to do that, but I did see a few people calling on– Before Crocs had its recent run, there were people, who’re banging the table on the Crocs and I laughed at the time, but who knows. Crocs, it’s a cockroach or something. You can’t kill it. It just keeps on going. [crosstalk]
Corey: I remember going out this summer and all the– I went out for ice cream with my wife. All the little teenagers on dates were all wearing Crocs. I was like, “What is going on?”
Tobias: How funny?
Corey: Then I looked at the stock price and I was like, “Well, I guess they’re buying.”
Tobias: Yeah, how funny?
Jake: [laughs]
Tobias: That’s funny. My kids as I was walking into school yesterday, my six-year-old was like, “What is book face?” My eight-year-old then tried to explain him what book face was, which is Facebook. I was like, “That’s so funny.” They don’t even know what it is. What is book face?
Jake: Wouldn’t you like to live in that world or you didn’t even know what that was?
[laughter]Tobias: Yeah, that was pretty funny. JT, you want to do some veggies?
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What Happens When A Nuclear Bomb Explodes
Jake: Yeah, hopefully, this maybe ties in our conversation a little bit more. A little shoutout from somebody sent me this video on the Skype, @pk13 on Twitter. I don’t know whether to be offended or that this is an amazing thing that someone sent me a video to watch about a nuclear explosion and what that would be like if you were in it. But this video was put together by, I don’t know how to say this.
It’s some German word like Kurzgesagt or something like that. I don’t know. I totally was probably way off. But they make all these little animation videos. They do a lot of them about nature. They’re really cool, like, they’re super interesting. They’re well narrated. But they happen to team up with the Red Cross to do one about “What it would be if a nuclear bomb went off in a major city?”
Now, it’s a little bit jarring and I talked to Toby about this before I decided whether I was going to do this segment or not, because I was like, “Is this too ,much too negative, too dark?” But I think there are some things we can pull from this over and above just the awesome and I use that in the more like “I am full of awe” at what the power of this is not awesome, like that’s cool. So, hopefully, no one gets offended by this and if they do, I’m very sorry. I pray that we don’t actually have to see this in our lifetimes. But it does feel a little bit like this might be– I don’t know if you guys remember when you were a kid, but I remember having nuclear bomb drills like you had to get under the desk and maybe I’m dating myself a little bit there, but–
Tobias: Didn’t do that in Australia. No.
Corey: Yeah.
Jake: You guys are too far away. No one gives a shit about what’s happening there. You’re too young and you’re too from another planet. In the US, we had nuclear bomb drills when I was little. But they went away by the time I was probably six or seven, and then, I don’t know, I guess, when the Soviet Union collapsed, we didn’t worry about it anymore. But it [crosstalk]
Tobias: As if hiding under your desk was going to save you.
Jake: I know. It’s ridiculous, right? As you know, it’s just such immense levels of energy that are released in one of these things. It’s ungodly. But what happens is, there’s this intense wave of light, heat, pressure, and radiation that just instantly explodes out. In Phase 1, which is less than one second worth, like, in a millisecond, basically, there’s this ball of plasma that’s hotter than the sun that instantly just pops out two kilometers across. If you are anything that is in that two kilometers it’s basically vaporized. It’s putting water onto a hot skillet, you know how it just like sizzles and then it’s gone. That’s what happens. All that soil, and water, and construction material, cars, people get just vaporized into less than dust, instantly, and then carried upwards, and that’s what the mushroom cloud is, right?
Tobias: Except for the people hiding under their desks, they’re all completely safe.
Jake: Yeah, then you’re safe. [laughs]
Tobias: The people in the crash position in planes, when the plane crashes, they just bounce through the wreckage.
Jake: Yeah.
Corey: Wait, can you say that? Sorry. The plasma bubble, the two-kilometer plasma bubble, the mushroom cloud is actually from the vaporization of all this stuff caught up in the plasma bubble?
Jake: Right.
Corey: It’s horrifying.
Jake: It mixes with the radioactive material and mushroom cloud that comes up then eventually, that’s what fallout is, is all of that stuff, when it’s up in the atmosphere starts sticking back together and becoming dust particles, and then it will eventually rain this toxic death from above. But what that happens a little bit later. We’ll get to that. But before that, in that first millisecond, if you happen to be looking in the direction of this, you will be blinded for at least a few hours. You will not be able to see anything. It’s that bright of a flash. There’s a thermal pulse then will go out 13 kilometers. So, that ends up being 500 square kilometers, if you do the math on that. Radius of 13 kilometers that basically if anything is combustible, it will be ignited. It’s basically a fire storm. Your clothes, your hair, your skin, your car paint, wood, anything that is combustible will just basically catch on fire within 13 kilometers from here because it’s just so hot.
Then Phase 2 is the next couple of seconds after that millisecond that just happened. That heat then also creates this compression of air that is expanding and pushes out. It’s basically faster than hurricane winds that blow through and just shove everything away. Most buildings are just ground down to the base from this windstorm. Naturally, the shockwave will lessen as it expands. But by the time it gets out there, I think it’s 175 square kilometers will basically just be instantly collapsed as if a hurricane had happened. That mushroom cloud then, also, because it pulls up, it actually pulls in fresh air from all around the surrounding area and so it’d be tons of oxygen actually mixing in. It’d be like putting a hairdryer onto the fire. Everything will just– even the fires will be even worse because of this oxygen that’s being pulled in from the mushroom cloud moving up.
Then Phase 3 is the hours and days after this happens. A nuclear explosion is effectively every natural disaster that we know happening simultaneously. It’s an earthquake, it’s a fire, it’s a tornado, and then of course, the radiation part of it as if you had a nuclear plant that melted down. After this, a black radiation rain will fall down from this cloud after it coalesces. Basically, every breath that you take within that area is going to be poisoned for you, you’re internalizing radiation. Anything you get on your skin is problem.
Tobias: I’m laughing a little bit, because the comments are pretty funny. Phase 3 is when the Fed cuts rates? [laughs]
Jake: [laughs] Well, so, that’s the next thing is that, no government wants to tell you this, but there is no infrastructure to mitigate this disaster. Every hospital in your area is going to be leveled or every neighboring hospital from any city is going to be overrun. We just do not have the capabilities for this. You are on your own basically which is scary. Then as time plays on, more and more people, more and more the survivors will succumb to cancers like leukemia, because of the radiation that they absorbed.
There’s no nation on earth that has any real mitigation plan for this. All of this stuff is scary and the video is meant to be scary, because it wants to push the agenda of like, we need to all as a species band together and say, “We have to disarm all these and make an agreement for everyone that it’s such a horrific outcome that we shouldn’t have these.” I think that’s a pretty noble vision, actually. I would like to see us walk that back. I’m very skeptical that will happen.
All right, so, all of that said, I thought maybe it’d be interesting to connect it back to our previous conversations. One of the things that’s happened in Russia is that, something that you may have owned just got vaporized. It was almost like that was that millisecond that in the very beginning of it that just exploded, that just disappeared, it doesn’t exist anymore. I read somewhere that the, I think the Kentucky pension system owned a decent chunk of, I don’t know how you say it, I don’t know how you say it, it’s Spur Bank.
Corey: Yeah, it wasn’t true.
Jake: It wasn’t true? Okay.
Corey: No, that was a rumor. They actually did a whole press release being like, “No, we don’t.”
Jake: Corey, don’t ruin my story.
Corey: Sorry. Sorry to bring facts into it.
Jake: Your facts. I’m sure someone was holding the bag there somehow.
Corey: Yeah, there’s a fund called H2O that basically blew themselves up for the 14th time, because they were way overweight Russia.
Jake: [laughs] Okay. We have this initial Phase 1, which I think we’ve just maybe lived through a little bit. But now, there’s Phase 2 of sanctions and all this other stuff that’s interconnected. I’m not sure we really know where all the radiation is going to be happening, the interconnected second and third order effects are, who’s going to get leukemia from this? I think it obviously plays out on a much longer timeline than a nuclear explosion, but that issue of like, it’s vaporized and now, we have to pick up the pieces and what are the next losses that happen because of that. I don’t think we’re done with this is what I’m saying and that we probably need to be mindful that we’re in the middle of something.
Tobias: Have we seen any blow ups?
Jake: Less than you would expect.
Tobias: [crosstalk] Yeah.
Jake: Where’s the long-term capital management right now getting blown up, because of a Ruble issue last time?
Tobias: Yeah. You heard anything like that, Corey?
—
Possible Fallout From The Russia/Ukraine Conflict
Corey: No. I’ve heard of commodity spaces where it would be right now. Equity markets, no one had a tremendous amount of exposure to Russia as far as I know, and they’ve been so isolated over the last 20 years that I don’t think anyone would dare have the type of Ruble exposure that you saw in the 90s. I just think it’s a different regime situation. I did hear rumors of again certain firms having too much Russia equity exposure or certain firms having commodity issues right now, but I haven’t heard on really serious knock-on events yet.
Tobias: Yeah. What does that indicator we will get this morning, JT that it hasn’t really spiked up much? That was the-
Jake: Oh, the high yield spread?
Tobias: The high yield spread. Yeah, that hasn’t moved.
Corey: You have seen CDS of like a bunch of European banks start to really pick up.
Jake: Yeah, that’s interesting, isn’t it? Because they probably had a little more Russia exposure. They might be in that second 13-kilometer radius.
Corey: Yeah. By the way, Russia, just clear that they were banning the export of all products and raw materials until December 31st.
Tobias: December 31st?
Corey: Yep. It went from a supply side deciding we were going to do an economic sanction to now actually, the demand side deciding an economic sanction to the supply side has basically said, they’ve given us the middle finger and said, “Even if you want it, we’re not giving it to you.” Now, it seems to me that’s cutting off your nose despite your face when you need those exports economically, but we’ll see how it plays out. Maybe a negotiation technique.
Jake: Yeah.
Corey: I agree with you, Jake, in terms of the– I’ll tie this back to what I said earlier, the initial drop is the Ragnarok. That’s the chaos. But the fallout here is this prolonged, we need to wait to see how these economic risks play out. There’s this future event risk, and we don’t know when it’s going to happen, and we don’t know what it’s going to be. We just know there’s this amorphous event risk out there.
It’s realizing slowly and in lumps over time and the market needs to digest what the implications are. I think that’s why you’re seeing the markets down 12%, 13%, or at least the S&P is year to date. It’s knocked down 40 or 50, because there’s nothing that says it should be yet, but you could see that going lower, and you’re getting days, like, today that the market was down 80 bips. I think when we started the show, the market was up 150 and then I just checked and it’s flat again.
Jake: [laughs]
Tobias: Is it really?
Corey: Yeah.
Jake: No one knows what they are doing.
Corey: It’s all over the place. I think you’re spot on. It’s really hard to digest all this complicated second and third order stuff, because it’s not clear what the macro– [crosstalk]
Jake: Who’s in the blast radius?
Corey: Yeah. It’s also not clear like what the second order effects are. When you’re dealing with someone like Putin, when he’s just going to decide to say, “You know what? We’re not even going to give you the supply. We’re cutting you off. You don’t want it, fine. We’re cutting you off.”
Jake: Yeah.
Tobias: I’m breaking up with you, first.
Jake: Yeah.
Corey: Yeah, exactly.
Tobias: Pre-emptive breakup.
Corey: Sorry, Toby.
Tobias: I was just going to say the world has gone on its funny direction over the last few years, where now, you can’t have China as your sole source of supply, at least for manufactured goods and that you can’t have Russia as your supplier for whatever it is wheat and oil. What does that do to the shape of the world? Do we have this world that just breaks into two, where there’s China, Russia, or I don’t know, Iran, or whoever else is on that side, Western world on the other side? Does it go back to a quasi-cold war or something different–? [crosstalk]
Corey: Does it strengthen the dollar or weaken the dollar as the reserve currency? Does this help China or ultimately hurt China?
Tobias: They’ve got to be considering another reserve currency. I don’t know. They’ve got to be considering. China and Russia won’t put up with that, will they? They’ll have to create their own.
Corey: Well, I’d say, Russia comes out of this.
Tobias: [laughs]
Corey: I think they risk very real hyperinflation economic collapse scenario, if this drags on longer. To me– [crosstalk]
Jake: Who? US or Russia?
Corey: Russia, for sure. Look, I’m by no means a macro expert. I’m by no means a war expert. It seems to me Russia has not committed the forces to Ukraine that they could have that would have just been a clean sweep. I think if Russia wants to take Ukraine, at least the way the US took Afghanistan. I don’t know if they can hold Ukraine in the long term, but I think they could have taken Ukraine pretty easily. It seems weird to me that they just are slowly meandering their way in. Maybe it was to try to reduce the blowback, but to me, the economic sanctions killed them from an economic perspective. You’ve seen what’s happened with the Ruble and they’re having bankrupts.
Tobias: They must have worked through all these issues before they kicked the whole thing off, mustn’t they. They must have thought this is the likely response.
Corey: Whose they?
Tobias: I mean Russia is literally just Putin deciding– [crosstalk]
Corey: Right. Who is saying no to Putin?
Jake: [laughs]
Tobias: I don’t know how it works.
Jake: Yeah.
Tobias: I just thought to think through a few scenarios, just go on the back of a napkin, you just figure out what’s going to happen.
Jake: Yeah. Just like play a game of risk together and– [laughs]
Corey: But let me ask you guys this, because, okay, so Ukraine gets invaded, and all of a sudden, you don’t have access to your bank. If you’re an investor, you don’t have access to markets anymore. You may not even have access to cryptocurrency at that point. It made me think a lot about in a true catastrophe situation, what is your reserve asset? People might say, food, clothing, ammo, maybe gold, maybe gold coins that you carry around. A part of that where my thinking went was, “If you live in the Ukraine and Russia is on your doorstep, and you think that is an existential risk to your safety, how much of your assets do you keep in exposures like that?” Because you need to.
Because, there is this risk that you might have to flee one day versus in the US, I have never in my life considered the fact that my exchange could shut down and all of my net worth that’s invested in stocks could become unavailable to me. I haven’t once considered that, and I wonder how many American investors ever have, and what a luxury it is for us to be able to continue to invest in productive risk assets, and what that does for our economy versus the potential tax in other economies where they don’t have that luxury. They can’t commit the same amount of capital, because they have to reserve some in some hedge.
Political Leaders Kick The Can Down The Road
Jake: Well, this is the part that really frustrates me with our lack of a backbone from our political leaders is that, we jeopardize a lot of those things that we take for granted by taking the really easy decision today, and kicking the can down the road for tomorrow, and making it someone else’s problem. I will readily admit that that is a probable outcome of any democracy with a short-term limit, where it’s like, “Hey, that’s going to be the next guy’s problem. I’m just going to try to get reelected and I know my time here. I have to just get my little things done and then the really tough decisions are for someone else.” But you can’t just keep doing that over and over again, till you get– Now, you’re left with only hard decisions.
To me, it’s very frustrating to have such weak leaders that wouldn’t– Paul Volcker is not walking into the Marriner Eccles building anytime soon. That guy’s not there anymore. That’s frustrating to me, because I feel we had something pretty special and we could still, but we jeopardize it because of a lack of will really and leadership.
—
Has The Fed Done A Good Job?
Tobias: My sentiments to agree with that, but there are plenty of talking heads on television, who will tell you that the Fed’s been doing a great job. I’ve realized not necessarily just talking about the Fed there, but they would say, “Look at the stock market’s essentially at all-time highs.”
Jake: Why is that considered winning, though? That’s– [laughs]
Tobias: Well, there’s lots of venture capital being deployed. There’s lots of venture capital out there. The US has created a lot of these. There’s really every other stock market in the world, essentially, probably, other than China looks, they’re basically Australia or Canada, they’re heavily–
Jake: Resources.
Tobias: Yeah, heavily basic materials. Then there’s a big chunk of banks and financials, and there’s really not much else than consumer discretionary. Whereas the US produces huge amounts of consumer discretionary stocks, which are the things that really seem to be the only difference between the US stock market and the rest of the world. That’s why the US stock markets been so successful ever. It’s not necessarily the Fed that’s doing it at all, but there’s some condition and some attitudinal something in the American psyche or something in the institutions that’s created that.
Jake: Yeah, I’m sympathetic to the argument that we could overclock the system by having really loose monetary and maybe you explore the frontier of technology faster in an overclock system by having cheap money chasing it around. It’s an interesting idea. I know that you have pay for it though– [crosstalk]
Tobias: Maybe it’s a singularity. Maybe we are approaching the singularity.
Jake: It could be in which case none of this matters.
Tobias: I think it’s Keynes. I don’t know if he actually says in the general theory. I can’t remember where this comes from. But there’s a great line from him where he says, he said in, “29 and the crash, basically, you should be fully invested in all of these names and you shouldn’t be selling out, because if I’m wrong and it goes to zero, then it’s not going to matter. If it recovers, then you–” [crosstalk]
Jake: I’m niche bitch. Is that what he said?
Tobias: Words that effect.
Jake: Yeah.
Tobias: I think that’s right.
Jake: Yeah.
Tobias: I think we’re very far into volatility here, though.
Jake: It’s Pascal’s wager for markets.
Tobias: Something like that. Yeah.
Jake: Yeah.
—
Risky v Safe Asset Fund Flows Near Top 100th Percentile
Tobias: I don’t think we’re far into the volatility. If this is a mega bear, who knows? It could be. That’s a possibility. It’s not necessarily either. It could easily just bounce from here and we get back to normal. But if it is, then probably don’t want to shoot you what to. That’s the problem, you’re stuck in this– You should be roughly fully invested now in all the good names and then proceed down another 20% or 30% just wear it all the way down.
Corey: Well, here’s a little stat for you guys, because I like to talk numbers. This comes from Goldman Sachs. What you’re seeing right now to that point, Toby, you don’t think the volatility is over is that talk is cheap right now. You look at all the indicators that would people measure sentiment and they’re incredibly bearish right now.
Tobias: Yeah.
Corey: That’s normally an indicator that we’re near the bottom, but what you’re not seeing is flow slowdown or turning negative– [crosstalk]
Jake: The back of the talk.
Corey: If you look at risky versus safe asset flow over the last four weeks, it’s still in the top hundred percentile since 2007.
Jake: Wow.
Corey: You look at global equity flow over the last 12 months, it’s near the top hundred percentile and global equity flow over the last three months. It’s near the top hundred percentile since 2007. You still just have a tremendous amount of money. To the point I made earlier about Ark raising $850 million, the flow is still into risky assets. I think that’s because not to say this is not a blaming on retail, but long only investors that are unlevered, they don’t get blown up. They just slowly capitulate on a rolling basis, right?
Tobias: Yeah.
Corey: They can keep buying in and buying in. Again, Ark is round tripped. Its net lost investors’ money on a dollar weighted basis, but people continue to pile in, because they believe in the thesis. I’m not saying it’s right or wrong on what they do. But what you are seeing from a behavioral perspective is the sentiment and what people’s actions are could not be further apart or perhaps people think, “Oh, I know the thing to do when sentiments low it’s to buy.”
Jake: Yeah.
Corey: Now it’s the game theory of like, “Oh, no, everyone knows to do that. So, it can’t be the bottom.”
Jake: Yeah.
Tobias: Well, I talk about a little bit with the Fear & Greed index. I always think it’s an arbitrary construction of that index. That’s why someone was chipping me for saying it’s a nonsense index.
Jake: [laughs]
Tobias: It is a nonsense index, but in a short-term basis, it’s it has seemed to be reasonably predictive of the short-term bottoms. Because when it goes below 20, that seems to be a good time to buy. But I always put the caveat on that we don’t know what it looks like through a 2007, 2008, 2009 type scenario, because the index starts in 2010 and we haven’t had a mega bear since 2010. So, we don’t really know what happens to that sentiment. I would love to know. Does it go negative? I’ve got no idea.
Jake: Yeah, that’s the thing, it’s calibrated on. You get down to below 20, but that 20 on a more historical adjusted basis is 80. [laughs]
Tobias: Do you think it’s something like the Michael Green thesis, Corey to that flow thing that you’re talking about before where basically, there’s so much passive flow?
Jake: Yeah. How does indexing fit into all this?
Corey: Yeah, I’m not Michael Green. I can only speculate. Yeah, I don’t know. I will tell you, again, a lot of sell side notes that have come out in the last couple of weeks are talking about quarter end rebalancing, where you’re probably going to see selling down of bonds, and buying of equities, and target date strategies, and global target risk portfolios that knocks into equities that are held within the index versus not during those rebalance periods. You tend to see in equities within the index outperform equities outside the index. So, there are some like short-term knock-on effects of that stuff, but I think– [crosstalk] Have we seen that recently?
Tobias: Well, one of the simplest indicators, I think, is just the equal weight index versus the market cap float adjusted weight that the index that we all know and love.
Corey: This is more like S&P 500 versus Russell 1000. Like, a lot more target date stuff includes the S&P 500 versus the Russell 1000.
Tobias: Okay.
Jake: Not equal weight within. Yeah, to your point, “Is it all going to large cap flow? Is it helping sustain large cap?” I don’t know. I think it’s an interesting question of like, as a nation, we have turned the market into a savings vehicle every two weeks with 401(k) plans. Does that change the dynamics of where things were in the 2000s? Consider the fact that in the 2000s, target date funds were a sub $10 billion industry and now, they’re close to $3 trillion.
Jake: Jesus. It’s good marketing? [laughs]
Corey: How does that change dynamics of the world, where you’re now literally forced savings is flow into the market supporting equities?
Jake: With demographic glide path built in.
Corey: Right.
—
Do Investors Really Pay Attention To What’s In Their 401K?
Tobias: I think it’s an interesting example of what Michael Green is talking about that, historically, equal weight has tended to outperform the market cap float adjusted weight version of these indexes. For the reason that equal weight a proxy for value, they’re buying more of the cheaper things and less of the more expensive things just by being equally weighted across all of them. For a long time over the last– historically equal weight has outperformed, but for the last few years, the other ones have outperformed equal weight pretty consistently. But I think that that might have turned around roughly about the same time value started working. Do you guys know off the top of your head if that’s still the case?
Jake: I don’t. I do think that human nature hasn’t changed, though. If there’s enough pain quotationally, even in your target date fund, if it’s going down, and it keeps going down, and going down, then people will capitulate even with the best laid plans of financial advisors of not punching out. Human nature is kind of inviolable.
Tobias: I don’t think people pay as much attention to it. Most people don’t pay as much attention to it as we. They’re not looking as often as we are. They get an update once a year, at the end of the year and it tells them how they’ve done. When I was working, that was what I used to get an update for my retirement funds. This is how much money you lost this year. Great.
Jake: [laughs]
Corey: It actually raises to me an interesting question about delayed wealth effect. Do you tend to see, okay, the wealth effect? If the market goes down 30%, and people hoping their end of year–
Jake: Like these echoes.
Corey: Knock on into their spending for the next six months.
Jake: Yeah, it’s a good question. Probably true, it has to be, right?
—
Cathie Wood – Marketing Genius – Disruptive Innovation
Tobias: I can’t find it amazing that Ark is so relentlessly bought.
Jake: [laughs] [crosstalk]
Jake: it’s the future, Toby. Come on. This is–
Corey: You know what? Listen, I as the non-value investor, I will defend Ark. Not from an investment perspective, but she has built a brilliant business.
Tobias: I agree with that.
Corey: I say this over and over. Investment management is different than asset management. Asset management is a distribution game. She has built a brilliant brand, she’s adopted social media, she’s a terrific evangelist, I don’t care if you will agree with her methodology or not, you cannot disagree that she’s built a pretty brilliant business.
Tobias: I agree with that. I’ve said that lots of times. I’m hugely impressed by Cathie. The thing that she’s built in such a short period of time and for lots of other reasons, because it’s tough to do that what she has done. But every other famous stock market peak has had that mutual fund or brand that was the go-go mutual fund of the day. It was Janus funds in 2,000 and it was literally the go-go years like Gerald Tsai. Every single time they’ve been washed away and they were unable to come back. Here she is. She’s was down 50 plus percent last year, down 40% this year so far and could recover at any point here. But the flows have been positive.
To your point, Corey, the business is incredible. That may be the right thing to do. That may be exactly the right thing to do to keep on buying if the thesis is sound. But people don’t usually do the right thing.
Corey: No, that has been the surprising part is people normally, you expect the shiny object performance chasing. Though in my experience, what tends to happen is, a fun hits it really big, it invites more flows, it starts to underperform, and half the money goes out. Typically, enough people go, they don’t want to admit they’re wrong, because selling is an admission, you’re wrong.
Jake: Yeah.
Corey: But you don’t tend to see the doubling down. That’s what’s been really impressive here. I think part of it is, people are committed to the story. There is a class of investors who truly believe in this disruptive innovation thesis. Whether they think the valuations are right or wrong, they might think they’re far more attractive now than they were two years ago. So why wouldn’t you pile more money if you are–? [crosstalk]
Tobias: Well, they’ll get back. Yeah. [laughs] [crosstalk] years ago.
Corey: A 15-year investor in this thesis.
Jake: I hope that that’s the case and I hope that she’s right, actually. Because I want to live in the world that she’s describing. I just also know that it’s really hard to predict what the eventual supply of all these things will be, what the competitive dynamics for these companies are, which means like, what’s the profit pool look like– [crosstalk]
—
Target Potential Market Caps Are Nuts!
Corey: Well, here’s a stat for you, Jake. I saw someone went through all the analyst reports and added up the target earnings.
Jake: [crosstalk] TAMs.
Corey: It wasn’t the TAM. It was the target potential market cap of all these companies that they were investing in. The sum of all their market caps was larger than the entire US market cap currently is. It was like, “Okay.” There is a speed limit here you have to adhere to.
Tobias: [laughs] But having said that, if someone had pointed out, not even that long ago, 10 years ago, 12 years ago, if they had said, it’ll be FAANG or Fat Man, or whatever the-
Jake: Acronym.
Tobias: -acronym which you want to use for that is. But that’ll be the big chunk of the index. That would have been quite hard to believe too, I think at the time.
Corey: Yeah, there’s a difference between big chunk of the index and larger than the entire west market cap– [crosstalk]
Tobias: We’re talking about 25% of– I get that it’s not quite on the same level, but stranger things have happened. I don’t know.
Jake: [laughs] I’ll take the other one, though.
Tobias: Maybe nothing that’s strange has ever happened. That might be a big call. That’s time, fellas.
Jake: It could happen, but it’s not the way to bet. [laughs]
Tobias: You’re saying there’s a chance.
Jake: Yeah.
Tobias: That was fun. Thanks, Corey. You did great job.
Corey: Thank you, guys. I appreciate the time.
Jake: Corey–
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