In their latest episode of the VALUE: After Hours Podcast, Bill Brewster, Jake Taylor, and Tobias Carlisle discuss:
- Chuck Akre On Recouping Bear Market Losses
- Ten Things That Derail Peter Leyden’s Future
- There’s Lots Of Cheap Stuff Out There
- When Is The Market Not Expensive?
- At The Bottom Your Time Horizon Shrinks To Zero
- There’s Always Somewhere In The Market To Invest
- The Economy Is Too Good Right Now
- William Ophuls – Why Civilizations Fail
- The EROI – Energy Return On Investment
- Cathie Wood On Disruptive Innovation
- Judgment Day Preacher Harold Camping
- The Fed Has One Foot On The Brake & One On The Accelerator
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:
Bill: Jackass could be like a really good– [crosstalk]
Tobias: Sounds like we’re going live.
Bill: Yeah, we are. Jackass could be a really good churn reducer.
Tobias: We’re 10 minutes early this week. It’s 10:20 AM on the West Coast, 1:30 PM on the East Coast. This is Value: After Hours. I’m Tobias Carlisle. I’m joined as always by Bill Brewster and Jake Taylor. What is happening, fellas?
Bill: We’re just discussing Paramount. They also got Mean Girls. Mean Girls, you can watch that over and over again. So, they got some stuff.
Jake: Yeah. We’re 10 minutes early to make up for all the times that we’ve been late. [laughs]
Bill: Well, actually, I’ve got to bounce 10 minutes early. So, that’s actually the reason.
Jake: Come on, Bill. I was trying to get us some extra credit here.
Jake: With the 10.
This Is A Wacky Market
Tobias: This is a wacky market, fellas. On Friday, I thought that there was a pretty good chance we’d go through my 20% year on year real bear market drawdown, [crosstalk]
Jake: Easy Bear? Build-A-Bear?
Tobias: Yeah, the Build-A-Bear.
Bill: We haven’t gotten there yet?
Tobias: No, it was close. Because last year, the market ramped from today through until the end of the year. I thought that would make it hard, because with the market going up, that means we have to rally commensurately to avoid a 20% bear at this point. But we’ve got off to a good start on Monday. We really came out of the gates strongly. [crosstalk]
Bill: There you go.
Jake: They don’t want you to be happy. I’m sorry.
Tobias: It’s a totally arbitrary–
Tobias: Yeah, it’s like Lucy with the football. It’s a totally arbitrary mark. There’s nothing magical about it at all. Just for–
Jake: For fun.
Tobias: Because it happens so infrequently. The thing is there have been 50 days since 1953 and the S&P 500.
Jake: Where value outperformed? Oh, sorry.[laughter]
Tobias: Yeah, you can’t miss those 50 days where it was one day below. And then, there have been like 12 weeks, and there have been just a handful of months, and then longer than that is vanishingly small, you know all those dates. It’s ’73 for the dotcom bust and GFC.
Tobias: If we go into it, it’s remarkable. It’s notable.
Jake: But we didn’t.
Tobias: No, we didn’t. I’ll let everybody know when it happens.
Jake: Oh, yeah. It’ll be– [crosstalk]
Tobias: I’ll send off that Ron Paul is happening flair.
Tobias: Everyone’s really happy.
Jake: Yeah, that one’s always funny.
Bill: Well, I’m in a bear market. So, I got that.
Jake: Personal bear.
Tobias: Russell 1000 got into it on Friday. And then, NASDAQ’s already in it. But the NASDAQ’s always looking like it’s going to go into it. It’s feast or famine in the NASDAQ.
Jake: Bill, what you got on tap for today?
Bill: I don’t know. LFG got taken out. Inflation Reduction Act, winner. We got good bank earnings. American Airlines is posting 13% revenue increases year over year, or they say they’re going to. The world may end soon but not yet. Bad for stocks. Got to sell everything.
Jake: I don’t think we’re going to say anything smarter than what you just said.
Tobias: Let me give a shoutout to– because we’ve got some good– I just like saying this place names. Halifax.
Jake: Where are they from?
Tobias: York in the UK, Braunschweig in Germany. Braunschweig.
Jake: It’s like a geography test every week.
Tobias: Better than invading the place to find out the name. We just get them to put their name in here.
Tobias: Seacoast, Lisbon. Lisbon, Portugal. Shoutout to the Portuguese. I’ve been loving a book on Portugal. It’s called Conquerors, something like that. “Wonder if there is any value investing in buying pro sports teams.” Yeah, there’s a Spanish investing group that invest in pro sports teams.
Jake: Broken-down sports teams?
Tobias: Well, they’re value investors in sports and they like to buy. They’d like to buy professional sports teams, the ones that are publicly traded. I think they’ve done pretty well.
Jake: Wow, that’s a real nice probably inequality play there, right?
Bill: Yeah, for sure.
Tobias: Because they just always do well?
Bill: No, it’s just rich people trading sardines.
Jake: Yeah, rich people [crosstalk] compete each other for ego.
Tobias: These are public companies. They have to trade on the fundamentals somewhat.
Tobias: Somewhat, somewhat.
Bill: No. No, they don’t.
Bill: They absolutely don’t.
Tobias: You’re not going to get $100 billion soccer team anytime soon. Maybe, I don’t know. [crosstalk]
Bill: Man, you, I guess, traded on some fundamentals. [crosstalk] I think you trade them on take-out value minus however long you think it’s going to take them out, plus some margin of safety and that’s how you price it. I don’t think you’re looking at cash flow.
Tobias: But you buy them when they’re beaten up on cash flow and then you sell them when they go on and win whatever league they’re in, because there’s a random number generator that eventually the number comes up. I know that because I supported this terrible rugby team in Brisbane.
Tobias: Reds finally got there after breaking my heart for years and years back to the bottom of the table and got worse.
Bill: The [unintelligible 00:05:09] would say differently, sir.
Jake: Ooh. Dynastic.
Tobias: Let’s see–
Tobias: I don’t think that history is going to be the defining factor there.
Tobias: It looks like it was TB all the way.
Bill: Oh, I don’t know. It’s [crosstalk] premature for that.
Jake: [laughs] It’s been in the league for 20 years. What are you, waiting to see what else he puts on his resume?
Bill: Well, Matt Cassel came in and did 13 and 3 there. So, it’s not as if like-
Jake: That’s fair.
Bill: -they haven’t won with another quarterback.
Tobias: I like his Twitter bio. It used to be family and football. And now, it’s just football.
Bill: Wow, that’s gangster. Poor time. Feel bad for him.
Tobias: Got to leave those kids too. It’s tough. I don’t know if I could do that.
Bill: Yeah. Well, I guess it depends how they were acting that week.
Tobias: Momentarily– [crosstalk]
Jake: Tell us you have young kids at home without telling us. [laughs]
Bill: Yeah, that’s right. I’ve had terrorists enter my bed the last two nights.
Tobias: Oh, yeah.
Jake: We got an earache going on. My sleep score on my sleep last night was 35%, which is, last I checked, failing. I failed at sleep.
Tobias: Yeah, I get sick kids. Yeah, there’s too many in the bed every night.
Jake: So then, I can’t go to sleep. So, I start reading. I go back in, this little fucker’s got his legs completely taking up my bed space. I was like, “What are you doing?”
Jake: Oh, yeah.
Tobias: Yeah, they sleep perpendicularly. [crosstalk]
Jake: Yeah. Feet in the back all night. You’re just having dreams that you’re falling off ledges. [laughs]
Tobias: What do you got on tap today, JT?
Jake: Well, nothing that interesting. I’m going to hit back into our– Last week, we talked about this great progression of 2025 to 2050. We teased it with some 10 possible derailers of progress.
Tobias: Oh, yeah.
Jake: We’ll run through those. And then, I also– [crosstalk]
Tobias: It’s much more on brand for us.
Jake and Bill: Yeah.
Bill: Get the ratings up.
Jake: Well, you got to get those– Yeah, those macro doom ratings with the 10. And then, so I’m going to supplement it with a little bit from this book called Immoderate Greatness: Why Civilizations Fail. So, that’ll be fun.
Jake: Then I’ll tie it all together with a fun little story about the world ending and we’ll see if we can-
Jake: -torture our way back into the market from all this– [crosstalk]
Bill: Shall I go get a drink now or should I wait, and then just get really drunk?
Jake: Yeah, I think you– [crosstalk]
Tobias: Do both.
Jake: I thought you were pre partying.
Bill: No, I can’t. Not today, but [crosstalk] got to make me depressed.
Tobias: I’ve got a quote from Cathie Wood.
Bill: Oh, good. I don’t get enough of these.
Tobias: I’m going to contrast that with– How do you say it? Charles Akre? Is it Akre or Ak-ri?
Tobias: Akre from the latest letter from Q3 2022 from the Focus Fund. Just to stick them side by side.
Jake: Shoutout to Chuck. I’m sure he’s one of the 10.
Tobias: Just to see. No doubt.
Bill: Do you think Chuck [crosstalk]
Tobias: He gets the transcript at least.
Bill: No, Chuck’s listening in real time. He’s retired.[laughter]
Jake: Yeah. Well, let’s kick it up.
Bill: We’ll start it out with Chuck and Cathie.
Cathie Wood On Disruptive Innovation
Tobias: All right. Let’s just do them one at a time. Cathie says, “Disruptive innovation is valued in the $7 trillion to $8 trillion dollar range.
Jake: What does that mean? All her stuff that she likes is $7 trillion dollar market cap?
Tobias: By 2030, we think that goes to $210 trillion. That’s a 30-fold increase. That doesn’t seem possible but look at what Tesla has done. Tesla is a microcosm of what’s going to happen.
Bill: Oh, my God, this is so fucking– This hurts my brain.[laughter]
Bill: Okay, let’s keep going.
Tobias: I think that’s prophetic. Tesla is a microcosm of what’s going to happen. We’ll see.
Chuck Akre On Recouping Bear Market Losses
This is Akre. He says, “Investors will only recoup bear market losses the same way those losses were incurred by owning equities. This truism has one caveat. Losses suffered in profitless and speculative story stocks may prove permanent in many cases.” Who we got?
Jake: Whoopsies. Choose your [crosstalk] Bill.
Tobias: Akre’s comment is– that is the case. If you go back to 2000, and this was one of the papers that I put out a few months ago, that I retweeted not that I wrote it myself. I forget who wrote it now, but they had the three buckets of– they had the profitless tech from 2010 declined 90% and then flatlined totally. And then, a second wave was the market-leading tech that also suffered the big decline and then the rest of the market followed. I’d say their prediction has turned out to be pretty much the case. That’s what we saw. We saw the market fall over after those other two went. So, that’s probably a reasonable description of what is going to happen. So, I think Akre’s probably right on the money.
Jake: It starts at the periphery, like the furthest storytelling, and works its way towards the actual real businesses eventually?
Tobias: Do you think that’s periphery? When the market’s running up, isn’t that ground zero? Isn’t that what everybody’s in, the speculative stuff?
Jake: I meant periphery as far as-
Tobias: Value? Profit?
Jake: -sustainability. Yeah, maybe some version of intrinsic– [crosstalk] I don’t know.
Tobias: More speculative. Yeah.
Jake: Or even time horizon might be the better way to frame it. As we work backwards from a multiple of revenue and then people start working on maybe EBITDA, and then they work to EBIT, and then they work to maybe net income, then they work to the balance sheet. And now, it’s cash, how long can this company survive?
Jake: We shall see how those horizons change over time and how the discounting becomes more hyperbolic.
Tobias: Do you think the tail might have been the letter to the Fed?
Bill: What? Cathie’s?
Jake: What do you guys think about that?
Bill: I don’t know.
Tobias: Well, here’s the thing.
Jake: Yes, you do, Bill. Come on.
Tobias: We’ve talked about this a little bit before and I’m as guilty of it as anybody. But when everything’s going against you, it does feel like it’s the Fed. It’s certainly not anything that you are doing. [laughs]
Jake: The Fed ate my homework.
Bill: This is what I think about the Fed. I wrote a little Twitter thread on this today. They have a dual mandate. You have employment and inflation.
Jake: Employment in econ PhDs? Is that what– [crosstalk]
Bill: No, shut up.
Jake: Okay. [laughs]
Bill: This is the dual mandate. Everybody bitches about these guys. We’ve been through COVID. The world has not ended. Our economy is too good. That’s the fundamental problem. Yes, we have inflation. They’re trying to break the back of inflation, because people smarter than me tell me that inflation is what takes down central banks. The employment picture has not cracked. Somebody’s out there screaming, “It’s lagging. It’s lagging.” I fucking get it. I know.
People are still traveling. Some labor is going back to normalized– I’ve heard anecdotally that people have gone from swinging hammers to back to serving dinners. That’s probably a decent thing. Yes, we are going to slow down housing. That’s the explicit goal here. But I don’t understand what they’re doing– Are they probably going to overdo it? Yes. Is it an imperfect institution? Yes. But they’re doing what they should do. So, Cathie, if you own shit that has a 30-year duration and all of a sudden, people hike interest rates on it, you’re going to get a drawdown. If you’re right, you’re going to be fine. So, let them do their job. They don’t care about your portfolio and be right. That’s what I think.
Tobias: I think whatever they do now– I think that probably hiking interest rates is the right thing to do at the moment. But the problem has been sown over the last 10 or 20 years and probably earlier than that, but particularly over the last 10 or 20 years, as we’ve just printed and kept interest rates pinned at zero. There’s just no possibility that zero interest rates– If you think about it from the perspective of a businessman, or businesswoman, businessperson, nobody’s going to take risk lending out money for no return. It just doesn’t happen in the real world. The only way you get that is if you’ve got somebody leaning heavily on the scale and controlling the money supply.
Bill: Yeah. [crosstalk]
Tobias: And that’s what creates all the silliness. It is, but I don’t like it.
Jake: Speculating on appreciation of bonds– [crosstalk]
Bill: But it doesn’t matter what you like. Your opinion matters as much as Cathie’s.
Tobias: I think it’s bad for society. That’s my problem with it.
Bill: Don’t play the game.
Tobias: Of course, I am. I’m going to survive in the game, whatever happens. I’m going to be okay. I’m not worried about me. I’m worried about the other 50% of the population who are below the median income.
Bill: Well, the good news is the people that were above the median locked in their payments on their houses when rates were low. And now, the people that are trying to come up get to buy houses at lower prices. So, we all win. You just can’t look at your– You can’t capitalize your wealth on your house and say, “Oh, I can go spend this.” Well, here’s a shocker. A house isn’t a trading asset.
Tobias: Plenty of people in California feel differently.
Jake: Yeah. He locked my way to riches.
Bill: Those people are going to get fucked.
Tobias: And in Vegas.
Bill: This isn’t a new story. It’s some form of an asset-liability mismatch. You incurred an asset that has a 20-year duration and you treated it as if it was a six-month asset. So, you’re screwed. Sucks. Next.
Tobias: But they’re sort of encouraged into it. When it happens systematically, they’re encouraged into it. It’s not like any individual who’s made a silly decision when it’s happening en masse. Somebody has created the conditions– [crosstalk]
Bill: I don’t know, dude.
Tobias: Created those conditions.
Bill: It’s greed.
Bill: The secondary, tertiary flipping markets. Look, I’m super long housing. I’m fine. I’m not losing any sleep over it. I’m losing sleep over my little kids, but not my investments. We’ll see. Maybe we actually do have to print our way out of this and real assets actually do–
Tobias: I think it’s the only way.
Bill: [crosstalk] housing works.
The Fed Has One Foot On The Brake & One On The Accelerator
Jake: [crosstalk] Russell Napier had a piece that’s been making the rounds.
Tobias: Burry tweeted it out too. Burry got there after you already saw it.
Jake: Yeah. He makes an interesting point that we probably don’t talk about enough, and that is that the Fed is the monetary half of the coin, but there’s a fiscal half of the coin as well that is what the government does. And trillion-dollar deficits, interest rates rising for government debt that has to be serviced, cost of living adjustments for retirees that the government is on the hook for, all of those things seem to be quite inflationary to me. It’s very stimulative. We could have the Fed backing off and raising rates, but then if you’re still running trillion-dollar deficits, if you’re forgiving student debt, all these things, I think are kept–
We’re driving around with the brakes on and jamming the gas pedal at the same time. The lack of coordination there to me seems silly. There should be more of a coordinated response. If we’re going to delude ourselves into thinking that we can control this “machine” that is the economy, then at least you would think that you would want to be on the same page.
Bill: I don’t know. [crosstalk] independent Fed. Imagine if Biden came in and replaced Jay Powell, because he was nominated under Trump. And then, his Fed official was keeping rates low, what people would say.
Jake: Yeah, who wouldn’t want to keep it low while you’re in the–
Bill: Yeah. That’s why Trump used to berate the Fed every day while he pumped the stock market, because he needed a bubble, his personal net worth. Anyway, I digress. Sorry for people that like him.
Tobias: Do you think the issue is the mandate? I think the dual mandate is silly. I think what the Fed should do, which is what it was set up to do, when you have bank runs, so that no individual bank is taken up– We can talk about the fact that all of these banks are insolvent all the time and that’s a problem.
Bill: They are not.
Tobias: They are.
Bill: They are not.
Tobias: Literally, if everybody shows up and asks for their money back on one day, that’s the definition.
Bill: Oh, well, that’s– [crosstalk]
Tobias: You can’t pay debts as and when they [unintelligible 00:18:50] you, you are bankrupt. But that’s not how we run the economy. We’ve decided for whatever reason that we’re going to run our banks this way. When you have a bank run, they should have a central bank that they all own that coordinates the liquidity between them to stop that thing from happening. So, everybody who lines about the door gets paid. That’s what it should do. Instead, we’ve given it employment and asset price stability, which nobody can control.
Jake: Climate change, throw that on there too?
Tobias: Yeah. These are things that the central bank can’t control and it’s silly to pretend that they can.
Jake: Capital should be readily available and very expensive.
Bill: I don’t know. I think they’ve done a good job over the last two years. Shoot me if you want. I think they kept rates low probably too long.
Jake: I think that that’s quite possible. I’m not sure I disagree with you, but it’s the 10 years before that where I take umbrage that they could have been making room to have more options and– [crosstalk]
Tobias: They’re trying to do it now. That’s what they’re trying to do. He’s trying to create a headspace now so that when we really get the flush, then they can pull the interest rates down. But if you look back at the experience of every other time that the market’s fallen over, they’ve done that close to the top honestly and the market’s then proceeded down for more than a year after that. So, what the Fed does in the chaos won’t make much difference.
Bill: Yeah. Well, we won’t have inflation, if the chaos ensues. So, they– [crosstalk]
Tobias: Well, we could. We’ll have both. We can have both.
Tobias: You can have CPI inflation.
Bill: China’s going to implode, man. The macro backdrop is not pretty right now.
Tobias: I saw that they didn’t always fit numbers.
Jake: Is that right?
Tobias: You can just not do that evidently.
Bill: Talking about invading Taiwan, shit is fucked up over there. That’s a scientific term.
Tobias: Yeah. I don’t know– [crosstalk]
Bill: [crosstalk] Where’s demand coming from in Europe?
Jake: Speaking of handicapping– [crosstalk]
Bill: Or the next 12 months.
Jake: Have you guys seen this 25% chance of nuclear engagement– ?
Bill: No, I don’t want talk about that.
Tobias: Is that the Minutes to Midnight thing? It’s always 30 seconds to midnight, 1 second to midnight.
Jake: You know what bothers me about that is, I couldn’t tell you what the odds are that my wife is going to make chicken for dinner tonight. And yet, you are–
Tobias: Yeah, 25%.
Jake: Yeah. You can come up with 25% in a– Somebody who’s got their finger hovering over the button and you somehow can untangle this whole convoluted geopolitical mess? Actually, I find it to be irresponsible actually to say those kinds of things.
Tobias: I agree.
Bill: Tim Dillon had a good podcast about this. I don’t know that I agree with what he said, but he had a funny podcast about it. Shocked me.
Jake: Is that right?
Bill: I’m not even going to say it. You can listen to him. [crosstalk] The point was you are really going to amplify ourselves into nuclear war over like this? [crosstalk]
Tobias: Where does [crosstalk] fired up about it. All politics is domestic. They’re not talking to– All politics is domestic. It’s all about what’s going on at home, both sides.
Tobias: The US has lost nuclear weapons, and I would say the US is more responsible in tracking its nuclear weapons than almost any other country in the world but we don’t know where a lot of the nuclear weapons are. It’s inevitable that one gets blown up. It’s inevitable. It’s scary. They could do it over a heavily populated city just by blowing up– You can make it a dirty bomb by just blowing up the bomb and not actually setting it off in a nuclear– just spreading the nuclear waste all over the place. Awful. All right, fine.
Bill: Stimulative though. You’ve got to rebuild all the houses.
Tobias: That’s that broken window fallacy, mate. I’m not going to let that one in this podcast–[crosstalk]
Jake: All right, [crosstalk] man. Let’s just– [laughs]
Bill: I figured that would trigger you both.[laughter]
Bill: You’re welcome.
Tobias: Caleb Proctor says, “25% chance for nuclear showdown is high enough that I’d not come to work tomorrow.” I agree.
Jake: Oh, man.
Bill: Yeah, that’s not great.
Jake: Let’s get into my topic. We are too close to it already. So, it’ll be– [crosstalk]
Bill: Yeah, that works. It seems something that can derail the progress.
Ten Things That Derail Peter Leyden’s Future
Jake: All right. I’m going to bang through these 10 derailers of progress and then we’re going to get to the more fun part of the story. As you recall, this was from– oh, shoot, what was the guy’s name? Peter Leyden. And he had all this– I’m not going to call it magical thinking, but hopefully rosy scenarios that I think we’re all praying come about. But here’s what might derail that progress.
Number one, liberal democracies fail. Basically, we have a hard time effectively carrying out actual will of the majority, because of structural problems within our democracies that make it hard. We’re being divided and conquered a little bit by our political parties.
Quasi civil war. Number two, zealots on both sides. They get desperate and start talking about civil war and it leads into actual political violence. Maybe January 6th is a, I don’t know, somewhat of a precursor of that idea.
Tobias: Those three are basically the same thing, right? There’s just problems with democracy. Since democracy has existed, that’s been the case. I don’t think he’s wrong, but sometimes, I think that those things might be good things. But keep on going.
Jake: Number three, enforced groupthink. Zealots on the far left to cancel courtier too far, and stifle open debate, and then we end up with less of a pluralistic society. I think that’s– [crosstalk]
Tobias: What does pluralistic mean?
Jake: I think in this context, well articulated on multiple sides.
Bill: I’m going to take a shot at the right on this too. It’s not they’re super accepting of RINOs, for lack of a better term.
Tobias: Advocating a system in which two or more states, groups, principles, sources of authority coexist. Okay. Cool.
Jake: Yeah. Losing track of truth. Facts get more and more contested. People can’t communicate across parallel universes of media. That feels pretty real. Science starts to get jeopardized and politicized. That also feels a little real. Tech gets demonized. This might be-
Tobias: That’s true.
Jake: -a scapegoating of tech companies that might lead to less technological development over the next 25 years.
Jake: Genetics gets shut down.
Jake: Yeah, kind of a religious angle on that one. We’ve seen that before. Nuclear bomb explodes. So, I think we’ve already delved into that one enough.
Tobias: Yeah. I don’t think that ends up. But yeah, that’s a risk. I don’t know if it ends. I think we keep on going after that. We keep going afterwards.
Jake: I think their argument is that actually that would shut down nuclear energy research that we probably need, if we’re going to transition off of hydrocarbons, similar to what happened actually the first time around when we bombed Nagasaki. Desperate oil states. As we shift from carbon to cleaner energy, who knows what kind of gambles that they might take, if their access to power, which is oil, is being jeopardized?
Tobias: Just before you move on to that point, do you think that–? For geopolitical reasons, getting off oil, that seems to be one of the reasons where you get the oil, right? But then, if you need a whole lot of these rare earth minerals to jump into batteries, the fact that it’s rare, doesn’t it mean that it’s hard to find?
Jake: I think it’s not that they’re “hard to find.” It’s that they’re so diffused that you have to process a shit ton of materials to get them. So, they’re rare in the instance of a rock has a small amount of it. Actually, getting a concentrated enough amount to create these batteries or whatever it is you’re trying to build just takes a lot of energy to harness it and get it all into one place.
Tobias: Okay. So, they’re not abundant though? [laughs]
Jake: They are not abundant. They’re rare. [laughs] Balkanized world, tackling some of these global problems that we’ve been talking about is probably really complicated if we don’t have a globalized approach and uncoordinated localities arguing about things. China hot war. This is the last one on here. Just basically, China and the US battling each other would be detrimental to this great progress.
Tobias: I think everything except for that last one, we’ll probably overcome and still get there. But that last one, that’s civilization destroying if that happens.
William Ophuls – Why Civilizations Fail
Jake: Yeah. All right. Now let’s bang out Immoderate Greatness: Why Civilizations Fail by William Ophuls.
Tobias: I like it.
Jake: Yeah. It’s a nice little, short– Well, it’s actually pretty well articulated and well-reasoned first principles approach. Shoutout to my buddy, Mike McCoy, who gave me this book recommendation. Number one is ecological exhaustion. And this guy, François-René de Chateaubriand, I believe his name is said.
Tobias: Good name.
Jake: Yeah. He says, “Forests precede civilizations. Deserts follow them.” The idea was basically cities are effectively ecological parasites. They suck resources like matter and energy into them and away from the hinterlands around them, and they can only exist by exploiting the rural and natural periphery around them. It’s like a bacteria in a petri dish that expands until all the nutrients around it are exhausted and then it collapses. He’s a historian, actually, this William Ophuls. So, he’s looking at Rome, he’s looking at all these different civilizations that collapse and trying to find what’s the common framework. And it’s actually a physics approach to it.
Number two is exponential growth. We all understand this but he has a couple of examples that really help drive the point home. The first thing is that the amount required to achieve the next doubling in an exponential series, it always has to be slightly larger than the sum of all the previous growth combined. So, every double effectively requires everything before it plus a little bit more.
Tobias: Why does it require a little bit more?
Jake: That’s just the math of doubling.
Tobias: Doesn’t it just require the same amount as before–? [crosstalk]
Bill: It’s just the math, man. It’s the math.
Tobias: Doesn’t it just require– which is saying that that’s quite a lot. In order to double from here, we’ve just got to do everything that we’ve done through the entire history of civilization again, one more time.
Bill: What are we doubling?
Tobias: What are you interested in here–? [crosstalk]
Jake: Hopefully, GDP– [crosstalk]
Bill: I don’t know. Well, something I’d like to double.
Jake: [laughs] The answer is GDP, if we want to grow out of a lot of these problems that we’re facing.
Bill: Ah, we restructure. That’s the most [crosstalk] thing ever.
Tobias: It’s striking how much that’s slowed. Sorry, keep it going. I did that Dan Rasmussen stuff where he was like 6.3 since the start of the data. It’s definitely not running anywhere near that at the moment.
Bill: We don’t have babies. No immigration.
Jake: Let’s drive this home with an actual example. Imagine that it’s 11 PM, and we put a single bacterium that divides once per minute into a bottle, and the bottle is sized so that it would be full of bacteria in exactly one hour. Okay. So, the first question is, when will it be half full?
Bill: An hour in?
Tobias: One doubling before.
Bill: No, wait, I got one hour?
Jake: It’s one hour. Right. It’s one hour– [crosstalk]
Tobias: How [crosstalk] it double?
Jake: Every minute, it doubles.
Tobias: A minute ago, it was half full.
Jake: Yeah. One minute to midnight, it’s half full and then at midnight, it’s completely full. Now imagine that we wave a magic wand and we make the bottle four times larger than it was, how much time have we gained?
Tobias: Two minutes.
Jake: Yeah, almost none. One minute after midnight, the bacteria will have the new bottle half full and one minute after that it’s completely full.
Bill: This reminds me of Buffett’s wealth.
Jake: It is. If the bottle is 32 times larger than our original size, that only buys us five minutes past midnight. The issue of exponential growth, if that’s what you’re trying to do is that eventually, it collapses under its own weight.
Bill: So, you’ve got to shrink to grow.
Jake: Well, that’s actually [crosstalk] take-
Bill: Shrink to grow.
Jake: -aways at the end.
Tobias: Most civilizations does seem to be– If we look at around the world at the moment, as countries get richer or as societies get richer, they tend to have fewer kids. So, they get to this maintenance level– a couple has a couple of kids basically. I don’t know if we’d doing that instinctively, doesn’t it seem to suggest that we get to this point, but that’s just replacement, right?
Bill: Then, we’ve got to stop eating cows, and go to fish, and then Jeremy Grantham will be a happy man.
Tobias: China’s got a demographic issue that’s unique to China. But China is about to start shrinking over the next decades as a result of the one child policy.
Bill: You’ve got some desperate kind of superpowers out there. Not great. Not great, Bob.
Tobias: Manu Sharma says, “Sounds like Malthusian broken warnings.” Yeah. That was always the argument. That food is consumed at a geometric rate, and we humans grow at a geometric rate, and we only expand food supply at an arithmetic rate. Have I got that around the right way?
Jake: Yeah, you’ve got the right way.
Bill: Big shoutout to Monsanto. Thank you for solving that, despite the fact that people don’t like you.
Tobias: That’s right. That’s right.
Bill: Yeah. Fucking people don’t think about what the world would be like without Monsanto. They just bitch about what it’s like with it.
The EROI – Energy Return On Investment
Jake: Speaking of food, number three, this idea, he calls expedited entropy. Basically, civilizations grow in population and appetite. And so, the demand for agricultural products is bound to increase as this is happening. But the natural state of land is basically incapable of meeting this demand. And so, external energy has to be added to boost the yields of that land. He says, “The quantity of energy consumed per unit of output rises higher. Industrialized agriculture is a biological machine that turns petroleum into calories at a ratio of approximately 10 to 1.”
Basically, we’ve talked about this on the show, we’re converting oil into food effectively all the time. But it’s 10 to 1 in his estimation. I’m not sure if [unintelligible [00:34:00] comes in at that same number. But the idea being that you’re requiring– [crosstalk]
Tobias: There is still some loss in the process, whatever [crosstalk] gets to. The ratio might be wrong, but it’s something like that. There’s a lot of loss in it.
Jake: Right. And so, he says you have to think about the energy return on investment, EROI. And that’s how much energy does it take to capture the useful energy that we actually use. It used to take the equivalent of one barrel of petroleum to obtain a hundred barrels of energy equivalent, because it was so easy to get out of the ground, it was so plentiful, it didn’t require any kind of heroic measures to get it. That ratio has declined now to 15 to 1.
Actually, this whole idea of peak oil is like a weird conversation, because it has nothing to do with the total quantity. That’s less important. What’s more important is the net available. So, you could have a billion barrels of oil, but if it took such herculean efforts that it required 500 million worth of energy to get them out, now you’re down at an EROI of only 2 to 1, and that’s the important number. Basically, there’s a tendency for civilizations to continue developing, despite the fact that they’re accumulating kind of a thermodynamic debt that has to at some point be paid off.
Bill: Sounds like a good argument for the Inflation Reduction Act.[laughter]
Bill: I’m not kidding.
Tobias: We do need to give that third mandate to the Fed, it turns out. [laughs]
Bill: I’m not kidding.
Jake: All right. Number four, excessive complexity. We’ve talked about this on the show as well when we talked about nuclear accidents, and how those come about, and normal accidents in Charles Perrault’s framework. But imagine a skilled juggler. They’re very good and they can handle 20 balls at a time. But what happens if you throw that 21st ball in? They start getting dropped. A complex civilization is basically like millions of individuals engaged in this massive mutual juggling act. And we saw how that broke down the complexity of all of our supply chains when you throw that ball of COVID into it.
Tobias: Well, if you shut it all down, it turns out that it’s hard to function.
Jake: Yeah. And it’s hard to get going again. It’s hard to get all the balls coordinated.
Tobias: Yeah. Don’t shut it all down at once is in my approach.
Jake: That’s a good– [crosstalk].
Jake: Problems that once were separate, they actually start to coalesce together in what they call a problematique. I’ve never heard that word before. It’s basically a nexus of problems that mutually aggravate each other. It’s like synergies.
Bill: How do I say this?
Bill: Problem with A-T-I-Q-U-E at the end of it.
Tobias: French problem.
Bill: I’m going to use that tonight.
Jake: Must be French problems.
Bill: Yeah, I’m going to use that tonight. Problematique.
Bill: That what’s the kids’ football team as. They just all suck.
Bill: They are a problematique.
Jake: It might be the coaching.
Bill: Hey now. It is.
Jake: Lastly, all these feedback loops that are operating in nonlinear fashions that lead to chaos, and we’ve talked about this before like systems that– They start to become impenetrable, less predictable, less manageable, because they start getting so complicated. No one can wrap their mind around all these interactions. Number five is moral decay. He breaks us up into ages. There’s the age of pioneers or conquest. That’s the early civilization. Then, things are working, and they move into commerce. And then, there’s affluence, and then intellect, and then finally, decadence. That’s what the moral decay eventually turns into.
Then the last one, number six, is practical failure. That’s when the affairs are far from simple and morale is low, selfishness crowds out sacrifice, the interests of the masses and the elites diverge, and the elites themselves are divided into warring factions. Basically, planning becomes impossible in the long term. Expedient decisions abound. Investments in physical and social infrastructure create entrenched habits and patterns and institutions and ideologies. Basically, society becomes very brittle and it starts to break up. He says governments at that point usually trash their currency.
I’ll close this little section with the last thing he says. “It takes protracted hardship to convince people that the world to which they have been accustomed has changed irrevocably.” That is Immoderate Greatness and this last little bit, this is the more fun part. Here’s your dessert.
Judgment Day Preacher Harold Camping
Jake: Have you guys ever heard of Harold Camping before?
Tobias: No. Did he invent camping?
Bill: That’d be sweet. Did he make Camping World?
Jake: Founder of Camping World? No. [laughs]
Bill: Awesome. It makes sense.
Tobias: Sometimes, you’re just born to have to play a role– [crosstalk]
Tobias: Born to greatness.
Jake: Yeah. Harold Camping and the end of the world. Harold Camping was the president of the Christian Family Radio Network. And he predicted that the world would end on May 21st, 2011. Now spoiler alert, the world didn’t end then.
Tobias: He nailed it.
Jake: He through his reading of the Bible had teased out that it was going to be 7,000 years exactly after Noah’s Flood, which would have been 2011 in his– However, he figured that out. And of course, being the president of this radio network, he publicized this coming apocalypse. Lots of people were convinced and they donated their money and, in some cases, all their worldly possessions to fund this publicity campaign. There were billboards all around the world. They spent more than $100 million on marketing this.
Bill: So fucking stupid.
Jake: Believers quit their jobs, they sold their houses, they liquidated their savings all for this May 21st, 2011. Never mind the fact that he predicted the world’s going to end in 1994 at one time, but this time he really meant it, like the numbers are backing him up. Here’s where it gets interesting. Researchers set up tables outside of their gatherings while they were having these meetings about it and a few weeks before that May 21st deadline. And they talk to the faithful who are coming in and out and these researchers offered them $5 immediately today or some larger amount in a month, like post the apocalypse. And so, they said like, “Well, how much would we have to give you for you to forgo the $5 today? Is it $500, $5,000?”
They couldn’t entice any of them to give them money, to take the bigger payday later. That’s how much they believed that the world was really going to end. There was only one person who took them up on their offer. This was a guy who was dragged by his friend to the meeting and he’s like, “Yeah, I’ll take the $5,000 in the month, instead of $5 today.” It’s easy for us to poke fun at this now. Obviously– [crosstalk]
Bill: I would have poked fun at it then. I’ll poke fun at it again if somebody’s making a prediction– [crosstalk]
Tobias: There’s always a prediction– [crosstalk]
Bill: Yeah. Fuck these people.
Jake: All right. You could say how much rigor and logic did they use to really come to these conclusions. But I think that we’re all guilty of a Harold Camping situation in some aspect of our interpretation of the– [crosstalk]
Bill: Yeah, I own cable companies.
At The Bottom Your Time Horizon Shrinks To Zero
Jake: [laughs] I wonder if perhaps just getting smarter is just asking ourselves like, “Where’s our Harold Camping version what we’re not really thinking through as clearly? Where are we hyperbolically discounting?” It’s really rare that you get to see it up close in such a laboratory condition. People were believing that the world was ending. And so, their discount rate was insanely hyperbolic relative to normal conditions.
I wonder sometimes about– we’re talking about nuclear war, we’re talking about the end of the world. Is there a possible that some version of this happens in every bear market, where the economy is so scary, you want to take that dollar today, even though you know that it’s probably worth more in the future, but it’s too painful, maybe it’s not going to happen, too much fear. And therefore, you just punt on it, and you sell today, and you’re basically hyperbolically discounting similar to the Harold Camping situation?
Bill: Stocks are going to zero though. So, what do you think about that?
Jake: You’ve got to get you $5 right now and not $5,000 in a month.
Jake: That’s right. Then, you own all of the stocks. $5,000.
Tobias: That’s what happens though. That’s definitely what happens. People will sell out as this goes down or I guess, it’s going back up against it’s time to buy it. There’s a great tweet. I wish I could remember who sent it out. I have to track it down, but it was at the top, “Your time horizon expands to infinity when at the bottom.”
Jake: Shrinks to zero.
Tobias: Yeah, and I think that’s true.
Jake: It’s quite true.
Tobias: How do you resist that?
Jake: I don’t know. I’m the idiot that thinks things aren’t so bad. Crazy.
When Is The Market Not Expensive?
Tobias: The problem is it’s a very mixed bag and probably there’s some things that are getting materially better, because there was a logjam in many parts of the economy but we’re working through that logjam slowly, and we are going to get through that at some point midway through next year or the end of next year or something like that. We’re probably pretty much back to normal. But at the same time, probably the economy slowing a little bit, because there was all of that stimulus that went through had an effect on asset prices, and business, and a whole lot of stuff. It’s impossible to tease out what all of that implies, because it’s a such a mixed bag of stuff that’s going on. But having said that, I still think we’re kind of expensive given where interest rates are, plus all of that backdrop. Probably need–
Bill: Where do we need to be? 10 times, 8 times? When are we not expensive? When do people finally say we’re not expensive?
Tobias: We’re 27 times at the moment.
Jake: My homie, Rishi said yesterday, interest rates were at 6, when Buffett bought the Washington Post. I think Buffett said 40 times earnings would have been a rational price to pay. So, now, we’re at 4. Not every business is the Washington Post. A lot are very average. Where do stocks trade historically and where’s the S&P x FAANG?
Tobias: Well, stocks are traded at 16 and interest rates have settled at 6. And so, I guess, 16 is roughly the inverse of 6. I think that that’s probably how you get there. We’re currently at 19.4 on the single year. I’ll give you the Shiller in a moment if I can find it. Here we go. And Shiller is at 27.5, which probably speaks a little bit to how overclocked a lot of businesses. On a cyclical basis, we’re probably going to come back down a little bit here. I don’t know.
Bill: Yeah. I think what, Microsoft 12 times earnings cheap enough for people? 10, 8, 6? Where should Microsoft trade?
Jake: Here’s the thing though. When it does get down to that price, you’re not going to want to buy it then.
Bill: It’s not going to get down there.
Jake: There’s going to be something scary.
Tobias: It’s not going to get down– [crosstalk]
Bill: If it gets down there, I’d have no money left. I don’t even care.
Jake: [laughs] [crosstalk] Every stock will trade at under 10 times earnings at some point in its life.
There’s Always Somewhere In The Market To Invest
Bill: Yeah, maybe. I’m sure that’s true. If you think value is the place to go, if you can’t find something in the UK, if you can’t find something in the mortgage industry, if you can’t find something in the housing market, if you can’t find something in Europe, what are you doing? If you don’t think that and you think that quality businesses are the place to be, there’s some stuff that’s reasonable. I don’t know. I don’t know how cheap it needs to be for people to be like we can buy.
Tobias: I agree with all that. Forward returns have clearly gone up a huge amount as the market goes down. The yield is the inverse of the price. That’s the case. As we’ve gone down, the forward returns have got better and better. I just think we’ve been at such a high level relative to the underlying for such a long period of time that people have forgotten what a cheaper market looks like. I think we could find out again what it looks like, honestly.
There’s Lots Of Cheap Stuff Out There
Jake: What do you think about Einhorn–? He was talking about how there’s not anyone really left to look at the actual business fundamentals and buy based on that and there are very few people left. And to get a bid, it used to be that value guys, they were like a shock absorber, like a thermostat. You can only get so far down before the value guys would be like, “Okay, this is cheap enough for me to buy,” and therefore, it would recover from there. Whereas if that population was decimated for some ecological reason, perhaps low rates, how low does it have to go to create a whole new batch of value investors that want to come off the sidelines? I don’t know. It’s an interesting– [crosstalk]
Tobias: That’s the same argument.
Bill: Two times earnings.
Tobias: That’s the same argument that– [crosstalk]
Jake: Smart experiment.
Tobias: That’s Michael Green’s argument though. That’s what he says that value [crosstalk]
Jake: Does that say infinity or zero? Because I don’t understand the–
Bill: Two. Two is the answer.
Tobias: To be fair for Einhorn, what he was saying in that– Everybody grabbed the headline, where he says, “Value investing is not going to work anymore.” But the full quote, he was very positive about, he was like, “This is going to be great. We were paying nine times for things that we thought were cheap. And now, they’re at three times. This is a no-brainer. This is easy gain.” I did think it’s the– [crosstalk] there.
Whatever the subsequent return on the stock prices is, it’s almost irrelevant. You’re baking in your returns when you buy. You’re getting reinvestment and flows. That’s why we’re value guys. We’re looking at the fundamentals. We care about the fundamentals. Not the subsequent stock price performance. You’re getting all of that baked in when you buy. There are very good values out there right now, I do think, and the forward returns are higher than we’ve seen at any point since this podcast started. So, I’m very positive. I think in the short term though, there’s going to be a little bit of chaos. But I don’t invest on that basis either. To be fair, I throw all my money in the market when I get it, wherever it is.
Bill: I don’t. I have an emergency like, if I see risk, I will put this out and that’s not out. If I really think people are panicking, I’ll bet that money. And I’m not betting that money right now. But this is stupid conversation that people are having.
Tobias: Which one?
Bill: About where things are going, what the Fed’s doing, all this nonsense that is taking so much time and brain space. Look, at the end of the day, the biggest problem right now is the economy is too strong. I got to think there’s some stock that benefits that you can look into that there’s some carnage somewhere. God forbid, the Fed ever cuts rates again, the mortgage industry is going to have a massive bounce back. Do I own more anything mortgage related? No, fuck no, I wouldn’t touch that, but somebody might.
Bill: There’s something to do. I know it.
Tobias: I think there’s lots of stuff out there. There’s lots of cheap stuff out there.
Bill: Yeah. I don’t know. There’s nuclear war. It doesn’t matter much.
Tobias: It’d be a great buying opportunity.
Bill: Very stimulative.
The Economy Is Too Good Right Now
Jake: Super stimulative. Bill, when you say that the economy is too good right now, what does that mean?
Bill: It means that labor isn’t cracking, right?
Tobias: [crosstalk] the last one. You’ve seen that hope.
Bill: That’s what the Fed wants. I know. Look, I’m excited to read the advertising companies. Let’s see what the advertising companies are seeing. That it will– [crosstalk]
Jake: [crosstalk] canary in the coal mine.
Tobias: That’s right.
Bill: No, you would think advertising [crosstalk]. So, we’ll see.
Tobias: I think they do. There are a lot of layoffs going around though. Everybody, Meta, Google, Microsoft, Intel cutting a whole lot of people. Those are big numbers. When they cut, it is like thousands.
Jake: Twitter soon?
Tobias: [crosstalk] Twitter.
Bill: Yeah, Twitter doesn’t have a lot.
Tobias: Is Twitter still there? Still going?
Bill: Yeah, I don’t know. If people would stop spending, we’d have less inflation. Tourism, 33% price increases and people are spending money crazy.
Tobias: Year on year off a bear market. [crosstalk]
Bill: Even American is increasing revenue. American sucks.
Bill: Terrible operators. People still fly them. And it’s mostly discretionary. They haven’t even had the business return. That’s crazy.
Tobias: Russell Napier, do you want to talk about that article a little bit? Did you read that, Bill?
Bill: No. I follow Napier says. I’ll probably follow him.
Jake: Capex boom, that’s an interesting thesis.
Tobias: Yeah. Do you want to go with articulating what he said?
Jake: You would do that, wouldn’t you? [laughs]
Bill: Is he saying fiscal policy has the upper hand.
Jake: Central banks are neutered and it’s going to be governments that are going to be allocating capital via guarantees on loans to companies.
Jake: “Keep it off your balance sheet,” even though it’s really off– It’s a shadow balance sheet liability. Basically, government directing who gets money, and then that’s where the economy will morph, and there’ll be a big Capex boom, because of that like a greening of the economy effectively, I think, he’s mostly talking about. And that everyone’s going to be pretty happy about it in the short run, because it’s going to be very stimulative, and look like, “Hey, we’ve got all this money.” But then, it will turn out that a lot of that capital will have been misallocated into projects that probably should have never been funded, which history has got a pretty good track record on governments not being the best cap allocators. And then, you end up with stagflation later. He says, “Any calls for stagflation today are so premature and that you basically are a little oblivious to history. That’s going to take a while. But when it does come, then it’s going to be bad.”
Bill: Yeah. Well, take the [crosstalk].
Tobias: I got a good line, one of my favorite lines. Teddy Roosevelt once said that, “In terms of foreign policy, one should speak softly and carry a big stick. What does it tell you when central banks speak loudly? Perhaps, they’re not carrying a big stick anymore.”
Bill: Stop paying attention to the Fed.
Tobias: It’s funny, because I don’t think there’s a day that goes by when I don’t get some Fed president or– [crosstalk]
Tobias: Every day.
Jake: Every day.
Tobias: I really haven’t seen [unintelligible 00:53:44] collect them as they come through, but it’s amazing. Is that all they do, comment to the media? It seems that they’ve got different roles. It’s almost like they’re trialing thought balloons and they just want to see which one gets picked up. Some of them are really bearish, some of them are really bullish, some of them say interest rates are going up, some of them say interest rates are going down. There’s no consistency. They all vote consistently, but there’s no consistency in public comments.
Bill: That’s where we are. We see how the sausage is made and everything now. There’s no privacy anywhere. There’s no expectation for it.
Tobias: The sausage is made so haphazardly, so chaotically, I don’t know if I want to eat those sausages anymore.
Bill: Well, it’s always been this way.
Tobias: Not that I have– [crosstalk]
Bill: You just didn’t know it.
Tobias: That’s right. Everybody’s speculated that this is what happened.
Jake: Ignorance is bliss. I should have– [crosstalk]
Bill: [laughter] Yeah, this isn’t like, I don’t think this is new. I just think there’s a thousand distribution mechanisms now and everybody can say what they think. I’m on a podcast. Who the hell am I?
Jake: Plug me back into the matrix. [laughs]
Tobias: Do you run a podcast?
Jake: Want to come back as someone important like a podcaster.[laughter]
Bill: Please, a YouTube influencer.
Tobias: Influencer. Is there a worst insult really? There’s nothing that anybody can say to you that’s worse than that.
Jake: How dare you, sir?
Bill: Yeah, [crosstalk] aspirational goal, man.
Tobias: Hit us with some questions.
Jake: We will barely answer them.
Bill: If you read the banks, consumer balances are hanging in there. They’re probably going to come down. I don’t know. I’m kind of making jokes about American, but they’re saying like– I don’t think earnings have officially been released. I don’t know if it was a prerelease or whatever. But they’re saying business travel is not even back and revenues are up 13% on 10% fewer flights. People are eating these costs and they continue to spend. So, I don’t know how bad is it. Because somebody’s going to say, “Well, it’s just not bad yet, Brewster. You don’t understand how bad it’s going to be.” Well, I’ve been hearing that since Omicron came and I’ve been hearing that we’re going to kick the can down the road-
Tobias: Hasn’t that been [unintelligible 00:56:01] for a while?
Bill: -the whole time. It feels I’m just living Groundhog Day. Maybe I don’t know. Maybe I don’t know how it feels to have something hell unfold over 18 months.
Tobias: We’ve seen some stuff since this podcast has been alive. We started out 2019. We’ve seen the COVID crash.
Jake: The world was a kinder, gentler place. [laughs]
Tobias: Nah, it wasn’t. We saw the COVID crash and we saw that monster sugar rush run where everybody was in the markets. And now, we’ve seen where we’re in one of the worst drawdowns– [crosstalk]
Jake: [crosstalk] JPEGs to each other.
Tobias: [laughs] We’re in one of the worst– [crosstalk]
Bill: I’m still going to buy one of those.
Jake: Did you get a Bored Ape yet? [crosstalk]
Bill: No. No, no, no, I said I’m going to buy a really cheap or really expensive. I’m waiting for really cheap.
Tobias: Are you tracking that market?
Tobias: Because I heard that you can get them for $70 something now. That’s about the price– [crosstalk]
Bill: Ah, 70 bucks, getting closer.
Bill: I wouldn’t mind $5.
Tobias: You can afford $70.
Jake: Taking the family to Chipotle is a $70 adventure, but the Bored Ape thing is not worth the–
Bill: I don’t know, I still think that community’s probably got cool stuff going on. I’m not trying to shit on them. But I don’t want to spend $70 on them.
Tobias: They got a– I don’t know– [crosstalk]
Jake: Which were this close when it was $25,000. [laughs]
Bill: No, I wasn’t.
Tobias: Whichever group investigates the securities of– I forget who it is. I don’t know if it was the New York Attorney General, or if it was the SEC, or who went after this– [crosstalk]
Jake: No, we don’t have anybody in that role.
Tobias: The sheriff has sent them a letter anyway asking them for–
Jake: For what?
Tobias: I don’t know what, a response I guess to show why it’s not securities offering.
Bill: Oh, I think it probably is, right?
Jake: That’s the past.
Bill: Tech, bro.
Jake: This is the future.
Bill: Tech, bro.
Tobias: it’s funny how they — [crosstalk]
Jake: Well, we don’t need regulations.
Tobias: It’s weird how they go after this stuff so far after the fact. Where were these guys a year ago when this stuff was at the absolute roaring peak? That was about a year ago, that stuff was– Where were they then? Why are they doing it now? Everybody’s already busted on that stuff.
Tobias: Everybody’s already lost their money.
Jake: The barn already burned down. The horse is gone.
Tobias: There’s no horse.
Bill: Well, you don’t want it to happen– [crosstalk]
Tobias: There was never any horse.
Jake: It’s an interesting– That same thing happens with stocks too, right? It completely melts down, and then they come in and look for the bodies that are– [crosstalk]
Tobias: Is it because you’ve got damages then? You can show the damages? But then, as the regulator, shouldn’t they be front running that stuff? They’ve blocked that bitcoin ETF for so long. It’s strange to me for whatever reason that’s the thing that hangs them up. There’s so many worse ETFs out there.
Bill: Yeah, it’s kind of weird.
Tobias: You can speculate on bitcoin all you want in any [crosstalk] cap.
Bill: But not an ETF.
Tobias: But not through an ETF wrapper.
Bill: Yeah, that does make sense. The derivative is the security. That’s wild.
Bill: Well, I think we solved the world’s problems, gents.
Jake: It’s all going to– [crosstalk]
Bill: Certainly identified some of them.
Jake: We’ve done two polar opposites. Last week, it was great nets and progress. And this week, it was calamity. Where are you falling on the spectrum now?
Bill: Hell is coming.
Tobias: I’m very, very positive on humanity, the Western world, and the future. I think given the trend in technology and most things, we’re always gradually getting better. Every single point– [crosstalk]
Jake: Easy to say when you can bug out to Australia.
Tobias: Well, Australia has got its own problems. And those flights to Australia, I had to give five pints of blood to get those tickets to Australia.
Jake: No, but when you get there, your dollar is going to be so strong that you’re going to– [crosstalk]
Tobias: Yeah, first time ever. Not bring a penny.
Jake: A mutual friend of ours who is Australian said that you’re going to be coming back in December and you’re going to be like a conquering returning king with your strong dollar just murdering everybody in Australia.
Tobias: I would love it, because I’ve been back there when it was the other way around when the US dollar was 50 cents to the dollar Aussie and Australia is expensive. They tend to pay a living wage to people who work in cafes. So, everything’s $30– [crosstalk]
Jake: $30 dollar cappuccino. $30 [unintelligible 01:00:23].
Tobias: [crosstalk] I don’t know. Yeah. Flat– that’s right.
Tobias: Dude, I got to bounce, but my answer is as long as we realize that we are not each other’s enemy, I’m pretty positive. If we don’t get past some of this political nonsense, then I’m less positive.
Tobias: Let’s call it. Thanks, fellas. This was fun. We’ll be back at the–
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