VALUE: After Hours (S04 E022): Quality, Cotton-Eye Joe Market, Markets in TurmOIL! and Metal Detection

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In their latest episode of the VALUE: After Hours Podcast, Bill Brewster Jake Taylor, and Tobias Carlisle discuss:

  • We’re In A Cotton Eye Joe Market
  • Munger’s Win-Win-Win Investing Strategy
  • Separating High-Quality Businesses From Dog Shit
  • Hold Or Sell Before The Nut-Punch?
  • Investing Lessons From Metal Detecting
  • Markets in Turmoil
  • Here’s What Q4 Looks Like
  • Equities Going To Zero
  • Is Bitcoin A Fiat Currency?
  • Revisiting Quality Investing
  • Why Is Micro-Cap Investing So Tough
  • Druckenmiller Flips Anytime He Wants
  • The Reaper’s Coming For Microsoft & Google
  • Bag Holder Investing
  • There’s Only Two Types Of Information – Propaganda & Misinformation
  • Average Bear Market 289 Days
  • MicroStrategy Bitcoin Bet on the Verge of Turning
  • The Difficulty Of Selling Beer Into Emerging Markets

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: Going live. Here we go, here we go.

Bill: Oh.

Tobias: It’s Value: After Hours. I’m Tobias Carlisle joined as always by Jake Taylor and Bill Brewster. What’s happening, fellas? Anything interesting happening in the markets this week?

Bill: Equities are going to zero, bonds going to zero, oil going up.

Tobias: Oil going to infinity.

Jake: [laughs]

Bill: The oil and the dollar are in a race against each other to infinity and then everything else is going to zero.

Tobias: What is the significance of the dollar racing up? I see people talking about that a lot, but I don’t really know what that’s all about.

Bill: Well, if you are in an emerging market and your debt is paid in dollars, that’s not great. If you’re buying commodities in dollars, that’s also not great. So, other than the fact that emerging markets are getting a proper fucking nothing.

Jake: Yeah, that’s rough.

Bill: That’s not good. It’s very sad.

Jake: No. What time is it, Toby? Did you do the– Tell everyone on the worldwide?

Tobias: I forgot. It’s 10:30 AM on the West Coast.

Jake: Okay. I was waiting for the other shoe to drop there.

Tobias: Sorry. Let me just give a shoutout to– We’ve got Miami, Glenview, Nashville, Santa Monica, Texas, Dublin Ireland, Brandon, Ontario, Canada. Barcelona, what’s happening? South Dakota, North Dakota, Edinburgh, [crosstalk] Aussie and Liechtenstein, [crosstalk]

Jake: I’m repping Omaha this week. That’s where I’m broadcasting from.

Tobias: It’s from Warren’s spare bedroom.

Jake: Yeah, apparently. [chuckles] Needs a little bit more CapEx. Get it up to standards. Very– [crosstalk]

Bill: [crosstalk] spare bedroom is probably exactly what it looks like.

Jake: Yeah, probably is. [laughs]

Tobias: What’s on the agenda today, gents?

Jake: Well, I’ve got a little.. piece prepared that maybe…that it’s almost cliche, but it’s about use of metal detecting. So, we will see.

Bill: It’s about metal detecting?

Jake: Yeah.

Bill: Okay. Nice.

Tobias: I’ve got two. One is via Stephen Clapham, who’s my British forensic accounting mate.

Bill: Behind the balance sheet?

Tobias: Behind the balance sheet. He’s got a couple of nice papers on quality I just wanted to go through those.

Average Bear Market 289 Days

Tobias: The other one interesting tweet out of Zero Hedge about the quoting some Bank of America analysts, who said that the average bear market is about 289 days. They’ve come up with a date for the end of it October 2022.

Bill: Yeah, good. So, we got two-thirds of the move left.

Tobias: And then they say about 3,000 on SPY. I just thought it was funny, because it’s roughly– There’s no science to this and this is complete speculation but I just thought it was similar to that. I think that bear markets run about 18 months to two years. If you think about it as starting in February, last year, when all of the growth stuff started selling off, I get to roughly the same date like end of Q3, beginning of Q4 like, this is my best case scenario, and so there’s just paying until then.

Tobias: So, I’m just going to talk about that a little bit. What do you guys got?

Bill: Yeah.

Tobias: What do you got?

Bill: I don’t know what to do with positions that you own, though. I don’t know. Everything in me thinks that we could go– How I was talking about the melt up, I could see a meltdown in a very real way. I don’t know what you do with that information.

This Is A Real Bear Market

Tobias: Yeah. Well, I don’t know, nobody knows. I’m purely speculating, but it does feel this is more of a bear market than we’ve seen in 2016, 2018, 2020, 2022.

Bill: Oh, yeah. This is the real thing.

Tobias: This feels like the real thing.

Bill: Yeah, this is the real thing for sure.

Jake: What makes you feel differently than the other ones?

Tobias: It’s taking longer.

Bill: Yeah. No, one I think that it’s not a secret that we need bear markets. I do think it’s a natural part of how market–. But I think with the Fed tightening and fiscal monetary or fiscal policy getting tighter as well, and then you’ve got inflation, and potentially oil doesn’t stop ripping, and you’ve got food prices, I mean, God only knows where– I am certain, which means probably 51% degree of confidence-


Bill: -that emerging markets are going to have a recession, especially importing emerging markets, exporting emerging markets probably have a reasonably good go of it here.

Tobias: I think it’s funny that after a decade or plus of emerging markets getting hammered that they are back into this that– [crosstalk]

Bill: This is why I don’t really like emerging markets.

Jake: [laughs]

The Difficulty Of Selling Beer Into Emerging Markets

Bill: When I followed Bud or AB InBev, all I ever remember was like, “There’s always something in some emerging markets that screwing that company.” Always. I don’t care what year it is. There’re some markets that are just decimated. Throw that on top of brands that are losing relevance and it’s not a great combo.

Tobias: You mean that though in terms of their market, right? That’s there in terms of selling to?

Bill: Yeah.

Tobias: Why would it be a bit tough selling beer into an emerging market?

Bill: Well, there’s always commodity inflation that hits them or some economic weakness, and you’re fighting hyperinflation in some geography, and then you’ve got your debt payable in USD. It’s a mess.

Jake: Political risk.

Bill: I guess a lot of the emerging markets that they’re serving into, they don’t have deep enough capital markets for those guys to issue debt in local currency. So, you’re always trying to catch up against the dollar. In today’s environment, where a lot of their revenues are foreign and you’re trying to report in dollars and peg in dollars, who the hell knows.

Jake: I was told bitcoin solves this.

Bill: It used to. Turns out it was all just a liquidity trade.

MicroStrategy Bitcoin Bet on the Verge of Turning

Tobias: Speaking of bitcoin, MicroStrategy has some amount of their bitcoin holdings against a margin loan. I thought that the magic number there was like 2,100 on bitcoin. We went through that this morning. [crosstalk]

Bill: I think the fine print is he just needs to contribute some collateral. I don’t think this is a true collateral call.

Tobias: I saw some talk yesterday that they had shifted $45 million into some account. See, I didn’t have any context of that I don’t know what that’s relative to the holdings that could be virtually nothing.

Bill: I did see the clip that was playing yesterday where he’s like, “You should figure out a way to lever your house to buy Bitcoin and you should buy Bitcoin on my—” [crosstalk]

Tobias: That’s only few months ago. That one.

Bill: Yeah. I don’t know.

Jake: It’s terribly irresponsible.

The Reaper’s Coming For Microsoft & Google

Bill: Careful who you pray to. I feel I’m terribly irresponsible right now. I got this fucking Microsoft position. Even Berkshire like– Look, there’s a world where inflation is in great for Berkshire’s reinvestment opportunities. Those rails, they do require a lot of capital, the energy business does. You get some regulated returns. No doubt. But I don’t know, man. I don’t know what you do with these positions that you own for a while.

Tobias: I don’t think you can try to– [crosstalk]

Bill: Stock it up to the index winning again.

Tobias: I’ve looked at this as many [crosstalk] as I can think of. Yeah, since 20 years of looking at like, “How you can avoid?” They’re just not avoidable. There’s just no way to consistently get in and out. I think every time you put something on, you got to imagine that you’re going to ride it through a bear market until then you think about like, “What sort of stuff you want to run through a bear market?”

Bill: What I’ve mentally done is I’ve shifted Microsoft into a long duration bond allocation, which do I want to take long duration risk? I actually do. I long term short rates, but I can get there in multiple ways. None are great for the economy.

Tobias: I think you could get four or five of those top names. You buy them when a systemic weakness like so, when anytime Fear & Greed goes on the 20, you can probably buy those and you’ll be okay.

Bill: I’ll tell you what Amazon has actually gotten waxed. I think the Reaper is coming for Microsoft and Google.

Tobias: Well, I think the Reaper’s– Google seems to trade reasonably fairly valued to me. It doesn’t get that silly multiple one.

Bill: Here’s the thing. Advertising has a one and a half X beta to the economy. If you think that ad spend doesn’t come in in a recession, I’m going to tell you that, I think you’re a little disconnected from reality.

Tobias: I think that what has happened over the last 20 years is this has been a transition from the old.

Jake: Digital.

Tobias: Yeah, the transition from television to digital sort of masks a little bit because it was all growing so fast, but-

Bill: No doubt.

Tobias: – it’s probably getting closer to saturation. Now, so, it’ll be more pronounced this time around.

Bill: I think that’s right. You could still say that, “Oh, you’re going to take share or whatever.” Okay. But you’re not going to avoid a recession. Not at this kind of size. So, that’s said-

Tobias: That’s okay.

Bill: -I don’t even know if that is a fricking recession coming. I don’t even know what that means.

Tobias: Those recession indicators. by the time they come out and tell you that there’s a recession, they’re like, “We’re in recession.”

Jake: “We were in and we’re not now.”

Tobias: Yeah.

Jake: Sorry.

Tobias: Never up. Now, we could go.

Bill: Yeah.

Jake: Hope you enjoyed it.

Bag Holder Investing

Tobias: I think the inversion, it’s not the Cam Harvey inversion. It’s the 10:2 inversion, not the 10:3 inversion.

Bill: Yeah, it today got bad.

Tobias: I don’t know whether any of those are significant. I think someone told me it’s a funding, whatever. I don’t know. But it does seem to be a reasonably consistent indicator. I think it was April, but it inverted the 10:2, which would seem to suggest that real carnage– [crosstalk]

Jake: That’s the six months for what should put you in the year October.

Tobias: October, yeah.

Jake: It’s all lining up. [laughs]

Tobias: [laughs] There are a few things that are lining up for a gigantic bed-shitting around that period of time.

Bill: Jesus. Rates have just exploded over the last-

Tobias: And the 10 years– [crosstalk]

Bill: -14 days.

Tobias: I saw mortgage rates are over 6% now, too, which is like that’s the long run–

Jake: Like double.

Tobias: Yeah.

Jake: It’s wild huh.

Bill: Yeah.

Tobias: That’s a big move. That’s crazy.

Bill: I don’t know this. This doesn’t feel the most fun thing in the world to say, but I’m really glad that they’re actually doing this. I don’t think– [crosstalk]

Tobias: Pumping up the rates.

Bill: Yeah, I think putting a brake on housing when it’s going parabolic like it was is a good policy decision. Now, can you do it without breaking everything?

Jake: Whoa, Austrian.

Bill: I don’t know. Well, I don’t know that it’s necessarily Austrian.

Tobias: Investments [crosstalk]

Jake: Listen, anything that isn’t just like MMT full throttle pedal to the metal is now Austrian. [laughs]

Bill: Yeah, I don’t know.

Jake: Two camps.

Bill: It’s probably going to be slow.

Tobias: The problem is they call it austerity. Like Jake says, “You’re either just flooding the market with liquidity.” And everything that comes out of that is good, even though that’s what sets up the conditions for the big crash. Then they finally just go back to normalization or that’s austerity like anything– [crosstalk]

Jake: Yeah, how could you do that to us?

Tobias: Billions of dollars– [crosstalk]

Jake: Well, we’re still running multi trillion-dollar deficits, but how could you do that to us?

Tobias: We’re still in QE. We’re going to do QE at the same time with the QT somehow.

Bill: Some, some of what I think is a little misplaced. I do think we’ve been saying this for a while. I don’t think this is a new statement. I’ve seen a lot of calls for housing crashes and I just really don’t think that’s how the world manifests itself. I think the lack of mobility is the most probable outcome here.

Jake: Yeah.

Tobias: For humanity, for civilization, lower price. [crosstalk] Lower prices are better because it lets people get on the ladder.

Bill: Yeah.

Jake: No.

Tobias: High prices going up all the time. You don’t like that?

Jake: Sorry. Boomers say that they need all their property inflated before they pass it on to the next generation.

Tobias: [laughs] Yeah, the bag holders, the bag-holder generation. There’s going to be someone that takes bid though. You can’t dump it all. It just doesn’t work that way.

Bill: Yeah, eventually, there’s got to be underlying cashflows to service things.

Jake: Meh, cash-out refi, homie.

Bill: That’s true.

Tobias: That’s all the economy talk right there.

Bill: Yeah, that’s true.

Jake: You got to get in with this new world.

Bill: Yeah. Well, there’s a part of me that understands the new world and a part of me that doesn’t. So, we’ll see. But it is interesting to see the store of value just be a liquidity trade at the end of the day.

Is Bitcoin A Fiat Currency?

Jake: Yeah. [chuckles] Well, let me ask you this. Did anybody buy bitcoin and they wanted it to sit at whatever, 40,000, whatever it was for a while there? To move I want it to be unit of account and I want it to be a store of value, and I don’t want it– No, everyone is buying it because they wanted to go to 500,000. There was nothing about storage, right? It was just speculative mania.

Bill: It’s not over to be fair. It could go up.

Jake: No, no. It could go up.

Bill: The issue that I have with the bitcoin thing that I’ve never been able to get over in my head is, they don’t like belief in the US government. They’re like, “I don’t trust US fiat or any fiat.” But you’re putting your faith in a math problem which is also fiat. It happens to have relevance because of some mass cultural adoption, but it’s a collective belief that’s not really backed up by something.

Tobias: I think what they’re saying though is, we don’t like the constant interference in the money supply.

Bill: Yeah.

Tobias: And we would rather have some sort of algorithmic rules-based method for determining. That’s what the Taylor rule was supposed to be in for US dollars for fiat currencies. The Taylor rule gives you these outputs that seemed to make a lot more sense to me anyways. I’m not a macroeconomics guy, but I look at what the numbers that spits out and I’m like, “I can understand how it gets there at least.” Whereas what the Fed actually does with its-

Jake: [unintelligible [00:15:40].

Tobias: -thousand PhDs. It has no bearing in reality to anything that I can see. I don’t think that any of them really understand what’s going on either.

Bill: Yeah, I have always– [crosstalk]

Tobias: [crosstalk] Fed president.

Bill: I’ve always been sympathetic to the idea of bitcoin. I do fundamentally like the idea. It resonates at a base level, but it’s still fiat. It’s just a belief in something. It just happens to be a different fiat in my head.

Tobias: Yeah.

Jake: Doesn’t fiat means by government decree.

Bill: Okay.

Tobias: Yeah.

Bill: Yeah, so, then it’s probably decree– [crosstalk]

Jake: If you are saying it’s a shared mythology that just like a piece of paper representing US dollar is then I would agree with that.

Bill: Yeah. Okay. There you go. Yes.

Tobias: The counter argument that would be all currency has always been whether it was conch shells or whatever it was. All currency is always just some shared representation, because in a modern economy, we can’t barter services for goods. That’s a nightmare. So, you need some representation of the value.

Bill: I can. I have no marketable skills in a terrible body. So, I have nothing to barter.

Tobias: [laughs] Manual labor. Gold at least. There’s no counterparty risk. You bury in the backyard a thousand years’ time, someone will dig it up, and it’ll still be worth something potentially.

Jake: Still worth one-man suit like one ounce.

Tobias: They’ve dug up when Great Britain was Roman. In recent times, they’ve dug up stores of value from– They do that all the time. They do a housing development, they find some guys stored a box full of gold coins, because he was trying to escape the barbarian hordes in Great Britain, some Roman. You can still spend. That’s probably worth more.

Hold Or Sell Before The Nut-Punch?

Bill: So, just before we move on from my therapy session, we’ve determined you just hold your positions and just get ready for the nut punch.

Tobias: Yeah.

Jake: Probably.

Bill: Okay.

Tobias: I think you don’t have any– [crosstalk]

Bill: Toby is selling calls.

Tobias: You want to have any leverage. You don’t want to have anything that’s unlimited downside. You don’t want to have any need to fund anything. You just want to have a little bit of cash. I think at some point, you’ll see some prices that it just so stupid. It’d be like a 2009 bottom where you like, cash trading for less than cash and you’re getting pretty close to that point.

Bill: And then you sell the stuff that you held through the nut punch-

Jake: Yeah. [laughs]

Bill: -to could buy that. At point are you selling is the question, are you just never selling.

Tobias: You’re selling back when—almost a year.

Jake: Six months ago, dummy. [laughs]

Bill: Yeah, I know.

Tobias: More than a year ago.

Jake: Whoa, I thought we all agreed on this never sell principle. And now, everybody’s selling their stuff and going against–

Tobias: Historically.

Jake: Yeah, we had a decree here.

Bill: For all the making fun of myself, I got my grandma pretty cashed up four months ago. That’s turned out to look like a pretty decent idea. So, I did manage risk in that way.

Jake: Did you get her boozed up first and then get her cashed up?

Bill: No, she can’t drink much anymore, man.

Jake: Oh, it’s too bad.

Bill: I guess, she’s lucid every day, but she had a really good Saturday. I guess, at the end of it, she just looked at the guy that helps her out and she’s like, “Robert, I want fucking drink.” He was like, “So, I gave her a drink.” I said, “Good. That’s what you should do in that scenario. Give her two.”

Jake: [laughs]

Bill: Anyway, I digress. All right, Toby, let’s hear your stuff.

Revisiting Quality Investing

Tobias: This is Stephen Clapham. He’s got the two works. It’s a Mundy. I don’t know how to say that, but Mundy Asset Management revisiting quality investing. It’s 100-page paper from last year. Not going to give you the whole thing, but they breakdown quality into four different quadrants and then they use two. Yeah, probably expected me to read the whole thing out. They break it down into four quadrants. Profitability, safety, earnings quality, and investment. So, I like that. Then they use two factors for each of the– [crosstalk]

Bill: What do you mean investment? Reinvestment?

Tobias: Well, I’ll give you that definitions and then– [crosstalk]

Bill: Just start reading the paper. We will fall asleep and view them.

Tobias: [laughs] Some of this might be useful.

Bill: Well, equities go to zero.

Jake: Oh, I got to say, I’m loving being on the other side of this transaction. [laughs]

Bill: All right, Toby, start reading. [sound] [laughter]

Tobias: I got to get myself one of those.

Jake: [laughs]

Tobias: Profitability is gross profit to the total assets and cashflow return on invested capital.

Bill: Yeah, that makes sense.

Tobias: Safety, long-term debt to equity, working capital to assets, those are good ones. They used two for each one.

Bill: More is better.

Tobias: Yeah, that’s the way. Investment asset growth just year on year and CapEx to sales as a measure of CapEx, I guess. And then earnings quality is accruals and they used to sloan accruals and cashflow accruals. Basically, they find that if you use the two metrics together, you get a better read on, because there’s a little bit of discretion, the construction of financial accounts and then try to compare apples to apples is tough.

So, they use a couple and basically, they find that some of these factors are better than others. They’re the ones that I’ve looked at these in the past. It’s a little bit messy. It’s not as clear as it could be. The profitability is a very strong factor. Anyway, the focus of all these things together, it does deliver a fair bit of alpha over time. I like it as a nice balance against value.

Let me just give you the names of the paper, so you can go and read this for yourselves. A Mundy Asset Management and then there’s another one about the persistence of returns, which is an Invesco study, which is not public yet, but it’s coming out anytime soon. Basically, same findings. Quality has its place. I think quality is a little beaten up now. So I’m sort of–

Jake: Feel good about that.

Separating High-Quality Businesses From Dog Shit

Tobias: Yeah, I don’t feel good about it so much. Jake and I were talking about this just before we came on. There are going to be some good names that come out of a very high growth. There’s new economy, not new economy, but you know what I mean, the better businesses that are everything that ran up over the last few years that people were, *You don’t have to worry about the valuation. Just look at the quality the business.” Clearly, I don’t agree with that but I do think that some of these are going to be very good businesses and you want some way of finding the ones that are the high-quality ones and ignoring the ones that are dogshit, and this is a good way of doing it, I think.

Then if you apply some value considerations to those, I think out of that basket of all those really good companies that everybody was chasing at a considerably lower valuation like down 90% which many of them are now. I tweeted this out the other day that the destruction at some of those names is just unbelievable. Apron, done about 98%. Apron is down 98%.

Bill: I don’t know that that was quality.

Tobias: That’s bullshit. That one, but I know some people are here, so I like to bring it up every now and again. The other one was Groupon. Not that that was of quality either, but that’s down about 97%, too. I wouldn’t touch either of those. But there are other things in there that are down 90%, they are high-quality businesses they’re probably worth taking a look at. I’m not going to tell you which ones they are. You can go and pick them up yourselves.

Bill: [whistles] [unintelligible [00:23:32] down to 80– Well, 78%.

Tobias: I like Shopify as a business. I don’t know where I want to buy it, but I do like it.

Bill: 520.66 on February 21, 2020. Today, on offer for 301.89. Going to zero, don’t bid yet.

Tobias: Shop?

Bill: Yep.

Tobias: What’s Shop worth?

Bill: Zero.

Jake: [laughs]

Tobias: I like Shop. If you like the distributed Amazon, I think that Shop’s a lot more. Now, Shop’s got a lot more incentives working for it than Amazon does. Because there’s every person who runs their own Shop is heavily incentivized to grow that little business, whereas Amazon has other problems going on. And then that thing we you got to each site, but it recognizes who you are, because you’ve previously shopped at Shopify. That’s incredibly powerful. I like Toby.

Bill: He just had an interesting– They just approved super voting shares for life for him.

Tobias: They can’t help themselves. What a shame.

Bill: Makes one [crosstalk] themselves.

Jake: [crosstalk] ESG.

Bill: Now, why would he ask for that now? That’s interesting.

Tobias: Why would you ask that now?

Bill: [crosstalk] knows.

Tobias: He’s worried that the valuation is going to get to a level where someone could bid for it. Yeah, Dropbox is a good one. Dropbox has got some religion.

Bill: Dropbox, it’s a zero, too. But let’s see.

Tobias: DBX has got free cashflow. So, DBX is– [crosstalk]

Bill: Yeah, it’s an equity. It’s a zero.

Jake: [laughs] That’s what we’ve established today?

Bill: Yes, equities are going to zero.

Tobias: If they go to zero, I’m going to buy a lot of them.

Jake: All the world’s equities.

Bill: Yeah. Well, we’ll see.

Tobias: Anyway, that’s my two cents. I think that– [crosstalk]

Bill: I wish I could tell you that I’d buy them, but I’ll probably have blown everything buying them on the way down that I too will be at zero trying to barter my body.

Tobias: Probably, one of the mistakes that– [crosstalk]

Jake: For sure. The Microsoft. [laughs]

Bill: Yeah. [laughs]

We’re In A Cotton Eye Joe Market

Tobias: JT, probably going to dump you in this too, mate, but we were momentum value guys and we got started off in this in the mid-2000s. I think if you look back at value versus growth, this is my simple way of doing it. When Jake wrote his 2014 paper about value being the worst opportunity spread in 25 years, we should have bought high-quality stuff then.

The other time to do it was in the early 2000s just after everything got sold off. So, I think that value is probably going to bounce out of that. We’ve got a junky terrible market coming up here for the next six to 12 months if we’re lucky. And then value is going to rip out the other side.

Then through that period of time, I think you want to be trying to find some of these better-quality businesses that you can get for not much, lots of upside optionality. Anyway– [crosstalk]

Jake: That’s when I feel everyone knows it’s going to suck for the next six months in which case, if everyone knows– [crosstalk]

Tobias: Not faded.

Jake: Oh, yeah. How is that going to come to– [crosstalk]

Bill: I don’t know that people are bearish enough. I think that saying– [crosstalk]

Jake: They’re voting with money as much in that way. Is that what, like they’re still pretty long equities.

Bill: You could say it’s going to be like a shitty market.

Jake: Guess who still has inflows. Maybe that’s the question.

Tobias: Does Ark’s still have inflows?

Jake: Last I saw, yeah.

Bill: Oh, good for them. They’re buying down.

Jake: Can you imagine the–?

Bill: Dollar cost average, I can’t imagine buying up, I can’t imagine buying down, I can’t imagine buying. It’s all a zero.

Jake: [laughs]

Bill: I do think we could go a lot lower, a lot because I just think we get–

Jake: Just got to get face ripping rallies, though, in the middle of that, right?

Bill: Yeah.

Tobias: Yeah, we’re going to have a dozen dead cat bounces before this is all said and done.

Bill: You got to have enough to make everybody hate their lives and I don’t think we’re there yet.

Tobias: The bear market’s not over until everybody’s blown up long and short.

Bill: Yeah.

Tobias: I don’t know how it works, but you can’t be long or short through a bear market. You can’t make money on either side.

Jake: Where’s all the money go?

Tobias: I don’t know. Where did it come from?

Jake: Where did it come from or where did it go? [laughs]

Tobias: Cotton Eye Joe, I don’t know.

Jake: Yeah, it’s a Cotton Eye Joe market.

Tobias: [laughs]

Bill: And somehow, you may end up with taxable gains at the end of it all.

Tobias: That’s it.

Bill: Well, how the fuck that happened?

Tobias: You get all these short-term gains and you make no money. [laughs]

Bill: Yeah.

Jake: And how dumb would it be looking if we actually taxed non-transaction events like they were talking about?

Tobias: Oh, my God.

Jake: Then right now, you have to be cutting a check. What idiotic, whoever introduced that idea?

Bill: Well, tax receipts were at all-time highs, by the way.

Jake: Yeah. Smart.

Bill: Yeah.

Jake: In fairness, we were still mega deaf.

Tobias: JT, do you want to do your bit?

Investing Lessons From Metal Detecting

Jake: Yeah, let’s do that. This little segment comes, Credit to John Chu, who sent me a write up on it as he’s gotten into metal detecting and he thought it might be interesting. Me traveling, was busy, I didn’t have time to do as much as I normally do. So, I thought, “Hey, John, you’re in. We’re going to run with metal detecting.”

You guys know Buffett’s famous talking about going through the Moody’s Manual like a Geiger counter just running it over and looking for value. Thinking about metal detecting, not that dissimilar for Geiger counter. Apparently, metal detectors date back to the shooting of President James Garfield in July of 1881.

One of the bullets lodged inside his body and they couldn’t find it. Alexander Graham Bell shows up and he cobbles together this electromagnetic metal locating device that he called… whatever.

Tobias: What did he call it?

Jake: Induction balance.

Tobias: Metal detector. That’s– [crosstalk]

Jake: Yeah. As a–

Bill: You’re entering the matrix, so we may ask you a couple times to repeat yourself.

Jake: Oh, [crosstalk] this shit hotel Wi-Fi. Sorry.

Bill: It’s okay. I know Buffett doesn’t pay you for Wi-Fi.

Jake: Exactly. [laughs]

Bill: Getting the closet gimp.

Jake: The bullet wasn’t found and the President later died. But the Bell’s device did work correctly. He’s credited with coming up with the first electromagnetic metal detector.

Tobias: How do they know it worked?

Jake: I don’t know, it beeped.

Tobias: Didn’t find the bullet.

Jake: [laughs] Yeah.

Tobias: It’s in his body. We found the bullet. Well, thanks– [crosstalk]

Jake: It’d be somewhere. Yeah.

Tobias: Can you get higher resolution than that? No, we found it. It’s in this room with this.

Jake: One of the first things about a metal detector, how it works is that this important these equations that JC Maxwell put down, and we’re actually very, very intelligent, and yet they’re incredibly simple. What they show is that is this connection between electricity and magnetism. The power plant is basically a generator, which is like a big drum of copper wire.

When the wire rotates at high enough speed, you get this magnetic field and then electricity is induced in that field, and would then push through the wires. Then basically the reverse process is done with a motor at your house when you turn on your vacuum cleaner. There’s always magnetism, and there’s always electricity, and they go hand in hand. You can’t really separate them. How a metal detector actually works is that it has this battery on it and then…

electromagnetic field and it actually will activate a magnetism within metal, which then reads in a different part of it. It induces of magnetism to the metal and then just detects that magnetism. That’s how you end up with being able to see into the dirt using the electricity.

Typically, the higher frequency, you will be more sensitive to smaller targets and a lower frequency will go deeper, but you require more larger targets.

The first thing I thought about for that from an investing context was that the amount of time or work that you put into an idea and maybe, if you’re just doing a lot of little ideas of small targets, maybe you wouldn’t go as deep into it.

You’d be able to process a lot more of them. It’d be sort of a higher frequency of work. Whereas if you’re really digging deep into something for a big target, you’d be doing that on a lower frequency, because you just don’t have time to be researching a thousand things like that in super depth.

Bill: When you’re going that deep, should you also have the study of horse handicappers and the amount of information that they’re given like framed on your office or is it justified to go that deep?

Jake: [laughs]

Bill: It’s a real question for you. I’m interested in your take.

Jake: Oh, do we have to have that? I don’t know.

Bill: I just find it’s easy to when you’re going that deep to forget that study.

Jake: Yeah, that’s a good question. I think that there probably is some diminishing returns eventually on the amount of work. Where that is I think is really difficult to say. Maybe we’ll get into this a little bit more when we talk about the sensitivity of when you find something.

Bill: Can I ask you a follow up?

Jake: Shoot.

Bill: Would journalitic help? Do you think journal, where you think you may be hitting the law of diminishing returns and then–? I don’t know. The problem is, I don’t know how you get enough reps and isn’t huge, but I think that would be an interesting thing to start like journaling on the investment journey. Maybe I’m hitting the law of diminishing marginal returns.

Jake: For sure. Especially, if and when we build out the time tracking elements of it, where you can start to see– In my next marginal minute, is it better spent researching that idea that’s currently at, call it 60% and I want to push it to 80, and that’s where the sweet spot is or is it spent on finding the next new idea?

Where’s the return going to be maximized from? Eventually, you’ll be able to see like, “Wow, once I get past about 10 hours’ worth of work on an idea, let’s say, I’m starting to really run against diminishing returns there and I probably would be better off spending the next marginal minute working on a new idea or pushing another one that’s closer to that 10-hour mark.”

Bill: Or, having someone more junior search for this information rather than my time could be used in a higher and better use.

Jake: Right.

Bill: Huh, that’s interesting. All right. Sorry. I didn’t mean to break it up, but I do think it was a good tangent.

Jake: Yeah. No, I think it is. I think about it a lot for myself, too, limited amount of time and how do I best use that time, so that I get maximum efficiency out of what I’m capable of. Okay. The size, and shape, and the type of a buried object is obviously the bigger it is the easier it is to find. But also, the orientation of the object can really matter. If you have a coin that has turned on its side, it’s less likely to register than if it’s buried flat. That has me thinking about there are some financial statements that are just impenetrable, and really hard to figure out, and almost feel they’re a coin turned on their side. It’s almost impossible to try to figure out what’s going on there. And then, there’s other ones that are super — [crosstalk]

Tobias: [crosstalk]

Jake: [laughs] Toby, we criticize by category on this show.

Tobias: [laughs]

Jake: I agree. Then there’s other ones that are obviously like they make perfect sense. It’s easy to understand the business and they’re there for probably quite a bit easier to detect. Another thing that happens a lot is, knowing your location of where you’re digging, because this is what makes the beach such a good place to metal detectors that one, people lose stuff there often, and they’re for leisure typically, the sand will quickly cover it up and hide whatever it was, and then it’s easy to dig the sand when you actually go and find it. Whereas if you’re hunting in granite, one, it probably doesn’t get penetrate into the granite, so the person can find it easier. Two, it’s impossible to dig. Three, people may or may not be doing leisurely things there. So, I think that same mindset of where are you looking at places that you know that where you’re digging might matter more.

For instance, I think sometimes, really big banks, sometimes, their financials are opaque to me. Okay. That’d be like, gosh, it’s super hard to dig into this and actually understand what’s happening often or like Brookfield, like you said, Toby. It might be falling into that category. That’s just tough digging.

There’re other places where you’re digging is probably going to be easier.

Quick story. When I was probably 18, 19, in that age range, my dad and I would go to this place where on the river, the river rafters would stop at this rock that looks like a gorilla’s head, and they would climb up at the top of it, and jump in.

My dad and I would go and get scuba tanks, and we would go along the bottom of the river there, and just find all kinds of stuff. Like lots of change, tons of sunglasses, sometimes not a decent watch every once in a while. But it’s because people are doing things, they lose it, and then you get a chance to find it, and they’re not going to most likely go down to the bottom to go retrieve it.

I was thinking having that scuba advantage, the average person looking through might not have. That might be mental models of the world that lets you go places and understand things that others may be couldn’t understand. I bet there’s a bunch of tech people who are basically like the scuba divers of this story right now that I don’t have their skills. So, I can’t go mine the treasures that they can potentially in that particular area. Knowing where your scuba set is taking you is probably important. All of just another roundabout way of saying like circle of competence.

Tobias: It is probably a good argument for being able to go through incredibly complex financial statements like Brookfield’s and being able to– You got to conquer Brookfield once to figure out what those financial statements and then you just have to update your model, you probably okay. You got an advantage. The only thing is that it struck me that there’s a lot of really smart guys in Brookfield and I don’t know if I really want to compete with those guys. I think that just easier stuff, easier things to do to your point.

Jake: Yeah, I think that’s right. One of the problems when you’re metal detecting is that there’s just trash, there’re nails and just garbage buried all over the place. It will give you a false signal that there’s something there. The way to do that is to tune– You can tune the detector to avoid a certain frequency range or a certain profile of signal that it’s detecting. I think that we also could do that in our digging through ideas and just knowing like, “Okay, I’m not going to figure this one out. This is going to be too hard. I’m going to tune those frequencies out. I’m not even going to let those take up any of my bandwidth.” So, it’s just sticking to your spots, again, another way of saying it.

Munger’s Win-Win-Win Investing Strategy

Tobias: I tweeted this thing out this morning from Mohnish Pabrai about talking to Charlie Munger about one of the ideas that he had and his Credit Acceptance. He looked at it and he thought it looked really good. Now, charging lots of money for it. Charlie said, “No, I don’t like it, because I don’t like charging those high rates of insurance.”

He likes win-win-win. I think that more than anything else, I think that model is really useful that win-win-win as a discretionary approach to stuff because there’s lots of things out there where you got this long right tail of liability attached to it that may not manifest in any short enough timeframe to get an idea what it looks like normalized. But every now and again, and I think there are a few other like the credit card, Synchrony, and stuff like that.

Synchrony probably looks a lot better than– Synchrony is cheapish at the moment. It’s screens pretty cheaply but if it comes up in your screens, the risk is that you go into a nasty recession and nasty bear market and then who knows what it looks like. I know that they really care. I know that they look interesting and it does look really interesting. I haven’t decided, but I still think that there’s just too much risk in something like that. That’s the business model that slips to zero.

Jake: Yeah, probably, one of the better examples of that would have been for profit education five to 10 years ago, where boy, these guys were making a lot of money, but they are clearly not win-win for the whole ecosystem. The students are getting very questionable results, not translating to jobs like they say they’re going to, racking up a bunch of debt. It’s like anything.

Tobias: Not only the full-profit colleges.

Jake: Yeah. [laughs] Well, good point.

Bill: The only thing on something like Credit Acceptance and I don’t own it. I’ve been thinking about it actually a lot lately, but even people that I know that are financial analysts can’t quite figure out how they do what they do. I think the argument has merit that people like that have to exist in the system and that people that have fallen on hard times do deserve the opportunity to rebuild their credit and get a car.

If you shut down someone like them and you shut down people’s access to cars, yes, no doubt people get hurt through predatory lending. On the other hand, I think that– Oh, what’s up kids? on the other hand, I think that– Oh, what’s up old man?

Tobias: [laughs]

Bill: [chuckles] I think you actually do give people the chance to build back. I don’t know. The conversation that I had with Tyrone V. Ross really was one of those that changed how I looked at the situation.

Tobias: Yeah, I’m not saying shut them down. I’m just wondering– [crosstalk]

Bill: Yeah. No, I know you are not. I’m just saying.

Tobias: I haven’t– [crosstalk]

Bill: I’d be interested to have that follow up with Charlie.

There’s Only Two Types Of Information – Propaganda & Misinformation

Tobias: I saw someone just raise this here. I’ve got Meta in my portfolio at the moment. I think Meta is one of those ones that’s right on the cusp of, I don’t know, if it’s win-win-win.

Bill: I don’t know. Get out of here with this nonsense.

Tobias: [laughs] But I like Instagram. So, I use Instagram.

Bill: The problem with Meta is that people in general suck, and it introduces you to their brains and unfortunately a lot of them are sharing politics. If you walked down the street talking to everybody about politics, you probably hate 90% of the people that you met.

Tobias: [laughs]

Jake: That’s a good point.

Tobias: It’s the same problem that Twitter’s got, right?

Bill: Yeah.

Tobias: Twitter’s got a lot of drive by trolls and lots of silliness on it, too– [crosstalk]

Bill: Then you get into the disinformation thing, but disinformation has always been a thing and I’m not sure that if you centralize the distribution you actually reduce the disinformation. You just call disinformation information and that’s arguably even more dangerous. I don’t know. These are very freaking complicated problems. Very complicated.

Tobias: There’re two types of information. Well, there’s propaganda and disinformation. Disinformation is anything that’s not propaganda.

Bill: Yeah. The older I get, the more I’m starting to see life through that lens. It’s a bit cynical, but I think it’s not wrong.

Tobias: Do you think it’s cynical? I think it’s accurate.

Bill: Yeah. I think it assumes a little bit of the worst of how people use media, but I think that is actually reality. Like something that was interesting. When did Toby go on invested like the best? I don’t know. Two, three, four weeks ago.

Tobias: Who?

Bill: When did they have the vote on the super majority voting shares?

Tobias: Tobi Lütke?

Bill: Yeah.

Tobias: On investing– [crosstalk]

Bill: What’s next? It’s just one of these things of like, “Why?” I wonder when I see things happen. Why is this now and it’s just interesting when news follows.

Tobias: That was one of the best mental models or one of the best ideas. Oh, no, I’m blanking on his name. Epsilon Theory. Why I’m seeing this now?

Bill: Yeah. To be fair, if Tobi called me and was like, “Yo, I want to hold myself out on your show, so that you can get great PR.” I’d be like, “Yeah, I’m all for it.”

Jake: Whatever you want.

Bill: Yeah, that’s right.

Jake: Special four-hour segment.

Bill: Tell me about some ratings bro. Yeah, but it is real.

Tobias: Ah.

Druckenmiller Flips Anytime He Wants

Bill: Do you see Druckenmiller’s bearishness?

Tobias: To be fair, I love Druck.

Bill: [crosstalk] flip quick.

Tobias: I often agree with what Druck says. I saw that he came out and he was bearish. But I agree with Druck all the time. But as you say, he doesn’t necessarily trade the way he’s talking.

Bill: I think he probably does. I just think he flips quick and that’s uncomfortable for people. I think it will go on CNBC say one thing, and then change his mind two hours later, and not feel the need to update what he said at all.

Tobias: Does he move it around as much as that?

Bill: Well, I think he has high high turnover.

Tobias: The thing that I’ve heard him talk about that I think is attractive about macros. He’s like, “Distressed debt.” He’s like, “I haven’t touched distressed debt in a decade.” Then all of a sudden, I see some distressed debt opportunities and gone and pick up some of that. He’s just like wherever there’s–

Jake: Go anywhere.

Tobias: Yeah. Wherever there’s something interesting, that’s what he wants to do. I don’t know how much of the macro prognostication feeds in.

Jake: I did find it a little troubling though when he was talking about how he doesn’t have– There’s no analog for today in his historical models of what it looks like.

Bill: Dude from Goldman Sachs said the same thing at Bernstein.

Tobias: What’s so different from any other time that’s what they feel, aside from epic levels of government debt, fading empire, and all that sort of stuff?

Bill: Global pandemic and reopening. Man, there’s a lot of shit out there.

Tobias: Aside from that [crosstalk] and supply.

Bill: War in Ukraine, making commodities spike, or contributing to maybe not making. There’s a lot. Putin saying, he wants to put the Soviet Union back together out loud.

Jake: Really? Never heard that one.

Bill: That was the rumor that I heard.

Tobias: Yeah, he’s definitely said something like they want the Ukraine back.

Bill: Yeah. I was a little concerned that his verbiage extended beyond Ukraine.

Tobias: Well, that Soviet Union, yeah that definitely did. They just want the buffer states. Ah, it’s all nasty.

Jake: [laughs]

Bill: But I could be wrong. I get all my news on Facebook. [laughs]

Jake: Oh, full circle.

Markets in Turmoil

Tobias: Do you want to do some macro bullshitting?

Bill: Sure.

Tobias: So, let’s do Markets in Turmoil. Let’s see–

Bill: I prefer equities to zero to Markets in Turmoil, but I’m okay with calling it Markets in Turmoil.

Tobias: What do you think about Michael Green’s thesis that crack up boom and then the bust? At what point is that confirmed or invalidated?

Bill: I think once you see index selling, that’s I think the real test of– [crosstalk]

Tobias: Well, we’re down 20%. We’re official bear market now.

Bill: Yeah, that doesn’t count. What are the flows? I think there’s still net inflows, aren’t there?

Tobias: I don’t know.

Bill: Yeah, I think you’d need to see a couple of weeks of net outflows to test it because I think a lot of his theory is that in the bus, there’s going to be no liquidity under the market if people aren’t– If there’s not a bid on the index, there’s not enough individual value stock pickers out there to fight just the flow of money out. That’s interesting to me. That would not shock me if that’s the case.

Tobias: it is it that– [crosstalk]

Jake: Okay. Maybe I don’t understand what he was saying, but he’s talking about infinity type of up before. We didn’t get there.

Tobias: No.

Bill: We’re pretty. In the melt up, it was pretty high.

Jake: It’s high, but we didn’t get over Japan in ’89.

Tobias: We certainly didn’t get that the marginal share costs infinity.

Jake: Right.

Tobias: Then the moment after the marginal share costs infinity, the marginal share goes to zero. That’s the thing that I could never understand. It’s just the thing that a markets person. If you’re a market operator and what you care about is the movement in the stock price, then that appeals. But if you’re looking at these things as businesses, if they get really, really cheap, that’s the best thing that happens. I don’t care if they keep getting cheaper after that. If there’s a point where you’re buying it at like some, you’re getting some silly free cashflow yield, and it keeps on getting cheaper, and they’re buying back stock. What do I care?

Bill: Yeah, there you go.

Tobias: I’ll just keep on buying it forever– [crosstalk]

Bill: You got to be returning the capital to you and then I agree with your statement.

Tobias: I don’t think they even have to be returning the capital. I deliberately said free cashflow yield, not dividend yield there.

Bill: Yeah.

Tobias: If the free cashflow yield is–

Bill: But you said buying in the shares.

Tobias: Possibly, I did.

Bill: You did.

Tobias: You might have me there. But they don’t have to necessarily even be doing that. Let’s say, they’re reinvesting in the growing value, why do I care what happens with the share price?

Bill: Oh, I don’t know, man. You can get yourself in some trap capital type agency costs things.

Tobias: The Motley Fool used to run this ad for years, and years, and years.

Bill: I’m big on this.

Tobias: The Motley Fool used to say, “You could have bought Tootsie Roll or you could have bought IBM, and IBM was always expensive and Tootsie Roll was always cheap.” If you looked at that over decades, you made so much more money out of Tootsie Roll, because you’re buying it cheaply as it progressed along.

You participate along with the business. With IBM, it was so expensive, you could just never get enough of it to make a meaningful difference. I would rather that things are cheaper than more expensive. Even if they stay cheap, I think you make more money that way.

Bill: We got to have management teams that you trust in my opinion. Because otherwise, I just think that you get into these things where people pay themselves and they’re flying around in a jet. The cash is just illusory. It’s in some glass box that you get in 20 years.

Tobias: Yeah, I agree with that.

Bill: Theoretically, I don’t like those.

Tobias: Yeah, that’s fair. I’m assuming that this is a management team who you’re. If we just went through all the management team, so we’re just ripping people off. There’re a lot of those guys out there and you don’t want to be anywhere near those things.

Why Is Micro-Cap Investing So Tough

Bill: Yeah, I was having a discussion with a micro-cap guy and he’s like, “A lot of people like micro caps because they’re cheap.” But I would argue that a lot of micro caps deserve to be cheap because the management team is behind the micro caps.

Tobias: Well, they’re just not as experienced. They don’t have the resources. As a group, they’re lower quality businesses then mid cap and large cap. You can see that reflect in the returns on equity. You can see that reflect in lots of different ways. The valuations, they’re worth less.

Even now, where they’re really, really cheap, I still think the expected returns from small and micro. This is ignoring the multiple. The small and micro right now is as cheap as it has been in the last 20 or 30 years, where in 2009 low, 2000 low kind of cheapness for small and micro.

Even so, if you’re just ignoring the multiple movement, because at some point, these multiples are going to expand and they’re going to do really well. But the businesses, if you didn’t get that multiple expansion, the businesses aren’t going to do as well as mid cap and large cap because they are better quality businesses.

You just got to pay a premium for those two that might reflect the high quality. There might be comparable opportunities at this point. Maybe even mid cap is a little bit better, I think. That’s my rough view of it at the moment.

Bill: Yeah. I think that’s probably right.

Jake: Sounds reasonable.

Tobias: Probably, you could go through the small and micro and dig out the things that are really good. I was wondering like, “Why is something still small and micro after all this time?” If it’s been out there and it’s doing really good stuff, why isn’t it got bigger? It’s either got some problem with the markets just not that big.

Bill: That’s the Beshore quote. “No business is small because it wants to be.”

Tobias: Brent Beshore?

Bill: Yeah.

Tobias: Smart man.

Bill: Has a decent amount of experience in small business.

Tobias: Has tough businesses. I just got momentum in them, you got to wake up every day, rebuild the plan. It’s not like mid cap and large cap that they just keep going.

Jake: It’s a knife fight every day.

Tobias: Yeah. As Buffett says, he just about getting any [unintelligible [00:54:33] into run those ones and there’s going to be okay. That’s why they get paid the big bucks to run those big ones because you got to get to Davos. You got to look good in a suit, go shake– [crosstalk]

Bill: Yeah.

Tobias: Give a good speech.

Jake: Kiss babies.

Tobias: All the hard stuff.

Bill: Good baby kissing.

Here’s What Q4 Looks Like

Tobias: What do you guys think about the prospects for the market bottoming in that Q4 range?

Bill: I think we can go a lot lower than people think. That’s what I think. I think down 30 or 40 would not shock me from here. Maybe even 50%. I don’t see why that would be shocking anybody.

Tobias: Yeah, I think fair value is 2,200, 2,300 something like that.
Jake: That’s 40% from here, right?

Tobias: That’s 40% from here. Then there’s no reason why it stops at fair value. It did in 2009. Seemed to get down to fair value and just bounce off fair value.

Bill: Yeah, know after everything breaks, rates are going back down to zero. So, get ready for that. But everything may break.

Tobias: That assumes that inflation is under control by that point.

Bill: Yeah, I don’t know. Yeah, I don’t know. I don’t know that there’s any law that mandates that rates have to be higher than inflation. If you have no economic growth, why the rates need to be high? There’s no law that mandates the bondholders must get paid more than inflation. You just may get your value eroded. There’s a real chance for instance, really shitty environment for a long time for capital.

Tobias: There’s no law, but as– [crosstalk]

Jake: Aaw of common sense.

Tobias: Yeah. As a debt investor, you want to be able to get back your principal.

Jake: Real positive.

Tobias: Yeah.

Bill: Yeah, maybe, I don’t know. I don’t know what inflation is if we go bust. But if there’s not much, but oil is the only thing that’s running. Say that we have a bust but oil is up at $180. I don’t know. Are rate set off of oil?

Tobias: Rates are set from what the Central Bank does, I think. That’s part of the reason that where we are. [crosstalk] Because we’re not fault. If we just applied the Taylor rule, I think we’d be in a better position and we probably don’t need the building full of PhDs then.

Bill: Yeah. I guess, all I’m thinking is there’s a scenario where–

Jake: A slide roll.

Tobias: I’ll give him a three, eight, six. 386. You can have a 386. Remember that? The 486, oh, it’s a Pentium. It’s really fast.

Bill: Yeah, I don’t know. I think the scenario that I’m envisioning, it would be hard to think that demand is going to be really high. I don’t think stocks go down 40% and life looks like it looks.

Tobias: Ah, most people won’t even notice it. Life goes on. It’s not people– [crosstalk]

Bill: When they get laid off, they’ll notice.

Tobias: Well, that’s not a market thing [crosstalk].

Bill: An economy thing.

Tobias: That’s an economy thing.

Bill: I think this is all very reflexive, which is why I think this way.

Tobias: There’s a lot of people being let go at the moment.

Bill: Yeah, it may just be starting.

Tobias: Yeah. [crosstalk]

Bill: That’s how you crush demand.

Tobias: That’s a tune you had to end it. Yeah, no, I think that’s what oil does as well and it just crushes demand and then we’ve reset. Off we go. The Feds about a thousand basis points behind the curve. 50 or 75, not going to matter much.

Bill: Equities to zero. [sound]

Tobias: [laughs]

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